Global Ship Lease, Inc. (GSL) Q1 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Global Ship Lease First Quarter 2015 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. And now I introduce your host for today’s conference, Ian Webber, Chief Executive Officer of Global Ship Lease. Please go ahead, sir.

Thank you very much. Good morning, everybody, and thank you for joining us this morning. I hope that you’ve been able to look at the earnings release that we issued earlier today and also been able to access the slides that accompany this call. As usual, slides 1 and 2 remind you that today’s call may include forward-looking statements that are based on current expectations and assumptions and are, by their nature, inherently uncertain and outside control of the company. Actual results may differ materially from these forward-looking statements due to many factors, including those described in the Safe Harbor section of the slide presentation. We also draw your attention to the Risk Factors section of our most recent Annual Report Form 20-F, which is for 2014 and was filed with the SEC earlier this month on April 21, 2015. You can access this via our website or via the SEC’s. All of our statements today are qualified by these and other disclosures in our reports filed with the SEC. We do not undertake any duty to update forward-looking statements. For reconciliations of the non-GAAP financial measures to which we will refer during this call to the most directly comparable measures calculated and presented in accordance with GAAP, you should refer to the earnings release that we issued this morning, which is also available at our website. I’ll start today’s call by reviewing first quarter highlights, followed by an overview of our fleet and of our growth strategy. After some comments on the container shipping industry overall and the vessel acquisition environment, I’ll turn the call over to Susan for her comments on our financials. Then, after some brief concluding remarks, we would be pleased to take your questions. Slide 3 shows our highlights for the quarter. We continue to execute our strategy of generating stable, predictable cash flows from our mainly long-term fixed rate time charters with high quality counterparties. In the quarter, we earned revenues of just under $38 million, net income just positive at $24,000 and adjusted EBITDA of $23.6 million. Most importantly, we completed the acquisition of the OOCL Qingdao on March 11, 2015, as we discussed on the previous call. This vessel was immediately chartered back to OOCL for between 36 and 39 months at a gross rate of $34,500 per day. This acquisition, as did the OOCL Tianjin in October last year, added between $38 million and $41 million to our contracted revenue, and that’s a further $9.4 million to our annual EBITDA. This represents an increase of approximately 10% from our Q4 EBITDA run rate and over 20% from our Q3 2004 EBITDA run rate. It also deepens our relationship with OOCL, a leading liner company. Turning to Slide 4, you can see our path to a dividend which we meaningfully advance to in the quarter with the acquisition of our second 8,100 TEU vessel. This acquisition incidentally, and we’ll come back to it, ticked all of the boxes in respect of our near term strategy. Having substantially increased our EBITDA generating capacity, we are in striking distance of our goal of exceeding the fixed charge coverage ratio which is set out in our bond indenture and governs our ability to pay a dividend, that all within striking distance of our goal of unlocking our dividend paying capacity. I’d also like to emphasize that the relevant hurdle is being able to consistently pass this test overtime. As a test applies each time, we wish to consider causes dividend. However, our revenue streams are largely locked in place from the long term charters that we have on 17 of our 19 vessels. And costs are, to a large degree, stable. So we’ve got good forward visibility on our cash flows and our financials generally, allowing us to take a waveform view on the development - of a likely development of the fixed charge coverage ratio. To pass the test, compared to today, we need additional EBITDA, so further additions to our fleet; or reduced fixed charges, basically lower interest costs. Or, of course, a combination of the two. Looking now at the first quarter overall, you can see on Slide 5 our financial results in the context of over the past five years. As previously, because we focus primarily on long term fixed rate time charters with high quality counterparties, our revenue has remained consistent. And given that our operating costs remain reasonably stable, overall, our operating income and EBITDA are largely consistent and unchanged from quarter to quarter. Outside the effect of additions and drydockings, we have reduced our revenue temporarily, as you know. And this stability in our earnings is irrespective of the stock market which experiences significant volatility or continued depression which you can see at the top of the slide. This consistency in our operations and our results is also attributable to our focus on operational performance and maintaining a high quality fleet that enables us to maximize vessel utilization, which again reached 99% for the first quarter with a missing, if you want to look at it that way, 1% primarily related to nine days of a planned regulatory drydocking for the OOCL Tianjin, plus three days of general unplanned offhire. With the Tianjin’s 10-year drydocking completed early in the first quarter, we have no further regulatory drydocking schedule for 2015 and we look forward to having full benefits of earnings for both the Tianjin and the Qingdao in our fleet for the remainder of 2015 and beyond. On Slide 6, we show our fleet and charter portfolio, including the two OOCL vessels, most recently the Qingdao which began its charter some seven weeks ago. As of March 31, 2015, the weighted average age of our fleet was approximately 11 years out of an economic life of 30 and our weighted average remaining contract term was 5.8 years, excluding the two 4,100 TEU vessels which operate on short term contracts. This contract coverage of 5.8 years gives us the extensive forward visibility on cash flows which I mentioned earlier. Overall, our contracted revenue stream as of the end of March is approximately $873 million, including the contribution from the Qingdao. We have no charter explorations until late 2017, other than the 4,100 TEU vessels, Aquarius and Orion, which operate in the spot market. We are well insulated from volatility in the overall container ship charter market. On Orion and Aquarius, their charters will most likely expire at the end of the redelivery ranges, June and July respectively this year. Their charters are currently under spot market rates and we would expect our charter to retain the vessels as long as possible. To this point, it’s encouraging that charter rates for this asset class have recovered significantly in the past few months. And I’ll come back to this shortly. From the stable foundation, we continue to pursue our growth strategy which is set out on Slide 7. First, we look to maintain strong contract coverage for our fleet with high quality counterparties, primarily on longer term fixed rate time charters. Second, we continue to see counter [ph] opportunities to diversify our portfolio of top tier charters to complement our strong relationship with CMA CGM. Our ability to establish and then expand relationships with both Sea Consortium and OOCL has proven that this part is available to us. And we believe that further diversification primarily through additional charter attached acquisitions with high quality container liner companies as a counterparty is an important component of our continuing strategy. First, we continuously evaluate opportunities that exist to enhance our capital structure, accessing multiple non-dilutive sources of capital and using such capital to immediately fund accretive growth. In this way, we gain strategic and financial flexibility whilst creating real value for our shareholders. Finally, we are focused on allocating capital in a value-maximizing manner. By identifying and acting on attractive immediately-accretive acquisition opportunities, we’ve expanded our contracted revenue base and thus our ability to support a consistent dividend for our shareholders in due course. By growing our EBITDA generating capacity by more than 20% since Q3 2014 through our two recent acquisitions, we made great progress towards consistently and securely passing that fixed charge coverage ratio test during 2015 in order to unlock our dividend-paying capacity. As with all dividend declarations, however, the specific timing and size of the dividend will be determined by the board at the time. Turning to Slide 8, you can see an outline of the two recent vessel acquisitions which were essentially on the same terms. The only appreciable difference is in the purchase prices which take account of the one-year age difference between the Qingdao and the Tianjin - Tianjin, $55 million, Qingdao $53.6 million. I point to these acquisitions not just as a recap of what we’ve accomplished but also to illustrate the types of immediately accretive charter-attached opportunities that have existed and we continue to believe still exists in the marketplace for a lessor like us with a good reputation and demonstrated access to capital. These two vessels both commenced their charters back to OOCL immediately on delivery, earning $34,500 a day and jointly increasing our annual EBITDA by approximately $18.8 million. This is equivalent to a free cash flow yield of 17% and an EBITDA increase of well over 20%, as I’ve already mentioned, since third quarter 2014. We’re delighted to have completed these transactions and have advanced on our strategic goal of growing our fleet, diversifying our charter portfolio with top tier liner companies, increasing our cash flow and net income on an immediate basis which brings us closer to being able to pay a dividend. And we continue to work hard to identify further growth opportunities. Turning to Slide 9, this supports the thesis for our investments in 8,100 TEU vessels as we’ve discussed before. So I won’t spend a great deal of time on it. But it does show that this asset class, which includes 8,100 TEU vessels, are being deployed throughout the world’s container trade in systems on an ever increasing basis which gives us considerable comfort that these vessels should have good reemployment opportunities when their initial charters come to an end. Slides 10 and 11 show an update on the supply-demand data which continues to be encouraging. Bear in mind that the nominal capacity of the container fleet must increase, all things equal, at a greater rate than demand increases due to the need to add capacity based on the growth of the nominally larger volumes carried on the lead or dominant leg of each trade length. So status quo, you would expect supply growth to exceed demand growth. With current estimates of almost equal supply and demand growth for 2014 and a similar view for 2015 and a substantial excess of demand growth forecast for 2016, when incidentally shipyards are generally full, so it’s going to be difficult to add new orders for delivery in that year. The industry looks to be turning a corner in dealing with the structural oversupply inherited from the massive order book existing end 2008 through 2009 and which was exposed by the demand collapse in the same period 2008 and through 2009, exacerbated by the much reduced compared to previously annual demand growth rates ever since. Slide 11 looks at the differences between the arterial trades, the main east, west trades, notably Asia, Europe and the Trans-Pacific. And illustrates, as we’ve discussed before, the medium-sized and smaller trades represent the bulk of global container trade 70% or so and that these trades, which are generally served on medium-sized and smaller ships which is the focus of our own fleet, have grown and are forecast to grow at reasonable rates. The order book for this special class, mid-sized and smaller ships, is modest. It’s around 9% of standing capacity due to the scarce capital that exists being directed towards strategic investments in super large container ships to drive economies of scale for the operators. This, the small order book, combined with high levels of scrapping which, although down in Q1 2015 on 2004 run rate, continue to be reasonably high, may lead to fleet contraction in these vessel passes in the near term. This, combined with reasonable demand growth, should introduce tension into the pricing dynamic, driving spot charter rates up. Now, we’ve been saying this for a while and it’s great to see that there has been some real improvements in the spot market for charter rates of this type of assets almost double compared to a year ago. And that improvement appears to be continuing. You can see this on Page 12 actually, Slide 12, the charter index, the red line for mid-sized ships and smaller shows a very positive and definite uptick toward the end. Incidentally, the idle fleet continues to remain low at under 2%. While we’re on Slide 12, despite the improvement in the time charter index, freight rates continue to be volatile, particularly in Asia and Europe where freight rates are suffering especially at the moment. Fortunately for carriers, they continue to benefit from lower bunker prices which significantly offsets the pressure on their top line revenue. Slide 13 shows the same time charter index movement, the red line, ticking up towards the end and also shows the secondhand asset values have edged up, too. They remain low by historic standards but they’re off the bottom. Notwithstanding this modest increase in secondhand prices, we continue to believe that there are good investment opportunities for Global Ship Lease going forward. Let me now hand over to Susan for her commentary on our financials.

Thank you, Ian. Please turn to Slide 15 for a summary of our financial results for the three months ended March 31, 2015. We generated revenue of $37.7 million during the first quarter, up approximately $3.7 million from revenue of $34 million in the comparative 2014 period. This increase in revenue is mainly due to the addition of OOCL Tianjin from October last year and also OOCL Qingdao from March 11, 2015, each with a daily charter rate of $34,500. With 12 days offhire in the three months ended March 31, 2015, of which nine days worth of scheduled drydocking, utilization was 99.3%. In the comparable quarter of 2014, there were only five days unscheduled offhire, giving utilization of 99.7%. Vessel operating expenses were $12.4 million for the three-month period, up from prior period primarily due to a 7.3% increase in ownership days with the addition of the OOCL Tianjin and OOCL Qingdao to our fleet. Our average cost per ownership day in the first quarter of this year were $7,581 compared to $7,538 for the same period last year, up $43 or 0.6%. Interest expense for the three months ended March 31, 2015 was $11.9 million. And this includes interest on the notes and the drawings under our $40 million revolving credit facility, the amortization of the third financing cost and original issue discount, the commitment fee on the revolving credit facility prior to its being fully utilized to partly finance the purchase of the Qingdao. Our derivative hedging instruments were all terminated on March 19, 2014 and have no effect on the results of this quarter. Net income available for common shareholders for the first quarter was $24,000. Normalized net income adjusted for non-cash items for the three months ended March 31, 2015 was $24,000, the same as the reported net income available for common shareholders for the quarter. The normalized net income for the comparable prior year period was $2.9 million. Slide 16 shows our balance sheet. And key items here as of the end of the quarter include cash at $18.7 million, total assets of $915.5 million, of which $880.9 million is vessels, including our latest addition to the fleet, Qingdao, from early March. The long term debt of $455.1 million includes the $40 million drawn under our revolving credit facility during the quarter, and shareholders’ equity of $438.2 million. The next slide, Slide 17, shows our cash flows. And the main items to mention here are the net cash provided by operating activities of $1.9 million in the first quarter. And cash used in investing activities was $55.7 million, including the purchase of OOCL Qingdao and drydocking costs. I would now like to turn the call back to Ian for closing remarks.

Thank you, Susan. Before taking your questions, I’d like to briefly summarize our key strengths and our value creation strategy. This is on Slide 18. First, by successfully executing two immediately accretive sale and leaseback transactions with OOCL, exactly of the nature we were talking about throughout 2014 and before, we’ve increased our contracted revenue by $75 million to $82 million basis the new three-year charters, and expanded our annual EBITDA-generating capacity by almost $19 million, an increase of well over 20% from the third quarter 2014 run rate. Second, excluding the two 4,100 TEU vessels which were in the spot market have been just fully contracted through late 2017, with contracted revenue of $870 million and a weighted average remain in contract duration of 5.8 years as of the end of March. From this strong foundation, we have the forward visibility and insulation from market volatility that enables us to continue to execute on our growth strategy as well as stable cash flows to support in due cost dividend for our shareholders. Third, we have a strong and stable capital structure to support our growth strategy, with no refinancing obligations until 2019 when our secured notes are due. From April 2016, however, we have the option of calling those notes in whole or in part, providing us with the opportunity to manage our interest cost and thus, fixed charges. Finally, we believe that our strategy and financial flexibility positions us well to pursue additional acquisition opportunities in this time of continuingly low asset values. Having completed two such acquisitions, we believe that similarly attractive acquisition opportunities exist for medium size ships and smaller. And in evaluating such opportunities, we’ll continue to be disciplined to ensure that such an action, additional acquisitions, furthers our strategic initiatives by being immediately creative involving a high quality counterparty on a multiyear contract benefiting from the supportive supply-demand dynamics over the medium term for midsize and smaller vessels. It’s critical that acquisitions enhance our earning power so that we can securely and consistently pass the fixed charge coverage ratio test. We’ll remain disciplined in our approach to acquisitions. We continue to advance on all of these initiatives and we’re highly focused on passing the fixed charge test during 2015 and putting our board into a position to confidently initiate a meaningful and sustainable dividend for our common shareholders. With that, I’d like to hand back to the operator who can explain the Q&A process.

Thank you. [Operator Instructions] Our first question comes from Mark Suarez of Euro Pacific Capital. Your line is open.

Good morning, Ian and Susan. Thanks for taking my questions here.

Hi, Mark.

If I’m looking at my estimates, and if you consider the two latest transactions, it seems to be that you’re very near the fixed charge coverage ratio here of 2.25, if not at that point. I am wondering if the tender offer then becomes - it goes through successfully, do you even need an additional vessel acquisition to sort of reinstate dividends in the near-term? What are your thoughts around that?

Yes, thanks. As I said in the remarks, we’re not there yet. Absolutely, definitively, we have not passed the fixed charge coverage ratio as has in the indenture. But we’re very close. We need either more EBITDA and assure a similar acquisition or acquisitions to provide the same source of metrics as the two that we completed, either of them, not together, would take us securely pass the fixed charge coverage test. On the tender offer, yes, just to remind folks on the call, we have an obligation - this is the shorthand version. We have an obligation to offer to buy back $20 million worth of bonds once a year. That offer was made about 10 days ago on April 21 and closes on May the 20th. The offer is priced at $1.02. The bonds are currently trading at $1.04 or a little above. So logically, it’s unlikely but the tender offer is taken up. But I guess you’ll never know, individual holders will have individual imperatives. Hypothetically, if was taken up then yes, but that fixed charge coverage ratio is well within reach. But just to remind you, what I said before on the call and I said previously, we need to have a degree of confidence that we will continue to pass that test. It needs to be passed every time we award a dividend. The last thing we want to do is pay a dividend because we passed the test numerically and then have to turn this off the following quarter because we failed the test. The board will need to take a view on the likelihoods of continuing to pass the test for 12 to 18 months or whatever time window we think is appropriate. And again, to reinforce the point, we’re greatly assisted in that forward view by our business model, having 17 or our 19 vessels on long-term contracts with known charter rates through until the end of 2017. And the cost space, which fluctuates a little from quarter-to-quarter, but which is by in large stable. And we also when know when drydockings are going to be. So we can factor in the effect of those going forward as well.

Got you. And thanks for the answer. And sort of my follow-up to that, actually you touched upon it, the term sustained basis, I’m getting the sense that you may actually need a third acquisition to sort of beyond the Seaside and provide yourself some cushion to reinstate dividend. Would that be a fair assessment?

But we have a degree of control over fixed charges come April next year, Mark. We can call the bonds - and I referred to this in the prepared remarks - we can call the bonds in whole or in parts come April 2016. And therefore, to a degree, we can manage our interest cost which is another lever that we can pull. So I know it doesn’t directly answer your question, yes, lower interest costs and yes, additionally the dock [ph] acquisitions will increase our degree of confidence. But with the following wins, we can pass the test either by additional growth or by managing interest cost. But that said, our strong preference is for additional growth. That’s what our business is set up to do.

Okay. And so on that additional growth, would similar transactions such as the OCL [ph] for the OOCL vessels, would that make sense over the 6 to 12 months? Is that sort of the total transaction in terms of vessel size and employment terms that you’re looking for?

Well, yes, another one of these ships would be great. But we’re not looking just the 8,100 TEU vessels with OOCL. That would just be too narrow. Our acquisition criteria remain as they always had which is midsize and smaller. We wouldn’t want to go too small. So we’re really looking at sort of our [ph] 3,000 TEU up to 8,500 TEU. We would look at very interesting transactions outside those parameters. We’re looking for quality counterparties. And we’re looking for charters of a reasonable tender [ph], three years or more. And we’re also looking for some decent financial returns both from free cash flow yield basis and an overall IRR basis. So we continue to look broadly for acquisition opportunities that meet our criteria.

Okay. Well, thanks. I’ll get back in the queue. And thanks for the time.

Thank you.

Thank you. Our next question comes from Katja Jancic of Sidoti & Company. Your line is open.

Hi. Thank you for taking my call. Ian, can you talk a little bit about your expectations in regards to the two vessels that are currently on the spot market?

Sure, Katja. One charter runs through to June the 3rd, maximum. And the other runs through to July 17, maximum. And because the current charter rate is 8,000 for one vessel and 8,400 or so for the other, are below current spot rates, we would expect the charter to keep the vessels as long as possible. When they come after renewal, we haven’t had redelivery notice as yet. But when they do come up for expiry, then we have the three options that have always remained available to us on the ships or indeed any others that are coming up for charter expiration. First, we could agree terms with the existing charter, if that’s possible. That’s a very efficient of going forward because you’ve got a guarantee of no downtime, no idle time between charters and you’ve got no repositioning costs. But it might not be possible. They may not want them. We may not be able to agree to their request [ph]. Second, if the existing charter doesn’t want vessels, then we have the option of putting them out to the broader market. And third, if we can’t agree terms with any charter, and we are unsure that we will be able to agree terms in the near-term, then we always have the option to dispose of the vessels. And that’s where we are with Orion and Aquarius today with more than a month to go before the first expiry. The serious discussions haven’t really commenced.

At what point until you see more serious discussion about it?

I would imagine over that we would begin to get a feel over the next couple of weeks.

Okay. Now regarding 2016, do you have a number of drydockings planned?

Five.

Five? Okay. Thank you. That’s all for me.

Thank you.

Thank you.

Our next question comes from Charles Rupinski of Global Hunter. Your line is open.

Hello Ian and Susan, thank you very much for taking the questions.

Hi, Charles.

I’m actually - most of my questions have been answered. But I just want to get a feel for your view on the market. This would reflect on what happens with the - you’ve given very good color on the market. But just curious if this would reflect potentially what would happen this summer with your two vessels in the spot market as well as any acquisitions you may be making. Just curious, what I’m hearing is that shippers are, due to the West Coast port situation, that shippers are getting nervous even though the strike is over, and using the U.S. Landbridge or the North American Landbridge to move to the East Coast. There’s actually reallocation of routes. And the question I had is, do you view this might, for medium size vessels, be something that has some legs even beyond whatever congestion there might have been at the beginning of the year that this is just something where shippers are going to be thinking differently about how they route vessels through the canals?

The short answer to your question is yes. There’s no doubt that the labor disputes on the West Coast which caused the congestion, which led to the sucking up of available capacity, has contributed to the significant improvement in charter rates for midsize and smaller vessels. That combined with the upsizing late 2014 of some service particularly in West Africa. And I think we talked about it maybe in the last time or the time before that relatively small increase in demand for ships from congestion, for example, has led to quite potential increases in charter rates. That illustrates the fact that the supply-demand balance is in quite tight tension, if you think of serious question [ph]. Now, going forward with a very limited order book for this type of vessel and ships of this size are being deployed in the larger trade lanes or in aggregate the largest trade lanes of the world which grow most resiliently and robustly, combined with continuing concerns about labor disputes all over [ph]. I think the West Coast strike is sort of technically over, but I don’t think they’ve agreed terms for the long-term. So there’s always a risk.

Yes.

But we’ll be looking at deploying vessels in different ways. And it may be that we’ve got a sustained increase in demand for these ships.

Very well. That’s very helpful. I appreciate your thoughts.

Thank you. [Operator Instructions] Our next question comes from Zack Pancratz of DePrince, Race & Zollo. Your line is open.

Hello, Ian.

Hi, Zack.

Congrats on a good quarter.

Thank you.

I want to get your thoughts around the tender assuming that that doesn’t go through, the $20 million on your balance sheet gets unlocked. Is it fair to say that you guys has something in the queue or lined up with a liner for a pretty immediate sale and lease back? Or how should we view the timing on you pursuing your next acquisition?

Well, I can’t speculate on timing. But you’re right, there is a sort of plan B here. If a tender offer isn’t taken, that $20 million is available for us to invest. We have one unencumbered ship today that Tianjin has no debt on her. If we’re looking at a further acquisition, that vessel or vessels won’t have any debt either. So we’ve got some assets that we can lever, which combined with the $20 million from the excess cash flow offer, combined with internally generated cash give us a reasonable chunk of capital to deploy quite quickly if the opportunity is there.

Okay. And looking at your two spot vessels and judging by the context index, rates are almost double to where you guys have been today, if the opportunity presents itself to recharter those, what would you be looking for from a length standpoint? Would you guys look to charter them on an extended period or would you stay with the 12 to 18-month charter length?

I think more than likely, it will be shorter than 12 to 18 months, 6 to 12 months maybe. It’s a fact that when the market - when the cycle seems to be turning, folk get a little bit nervous about the duration they want as an owner, particularly, you want to have an opportunity of further increasing charter rates if the market continues to improve. A 12 or 18 months charter would take us through to the end of 2016. It’s our view if that early 2016 or through the rest of ’15 and ’16 we continue to see rate improvements, then we would want to take advantage of it.

Okay. So by you doing a 6 to 12-month charter, you’re implying that you think rates are going to go higher from here?

Well, if we do, yes.

Okay. And just from a EBITDA standpoint, I mean if we were just to assume that rates were in the 16,000 range for these vessels like the context is implying today, I mean we’re talking about $4 million incremental to EBITDA, is that fair?

Well, mathematically, I’m sure you’re correct. I haven’t checked your numbers. But that index as with the time charter index as with the rates that you read about from how owners and are going to clock [ph] than everybody else. For modern Panamax units, fuel efficient, higher rate or capacity, around on Aquarius, 18, 19 years old. And for their class, I’m relatively low rate or capacity. We wouldn’t be able to earn the same rent as the index implies. But for sure, they are worth more in the charter market than the current rates that they’re earning.

Right. So what I’m getting at is given that those two are coming up for recharter, I mean for you to acquire another vessel, you really don’t need something similar to two [ph] that you did with OOCL from an EBITDA accretion standpoint to get to that fixed charge coverage ratio due to the recharting of these spot vessels. Something smaller and something smaller than --

You’re kind of right. But the fixed charge coverage ratio takes last 12 month’s EBITDA as the base adjusted pro forma for acquisitions or disposals or undisposals.

Right.

If we start earning serious money on the run, on Aquarius from say the first of July this year, we would have to wait until the first year for doing 2016 before we’ve got the 12 months record of that profit contribution to that ratio. It’s very useful to have, it’s very useful to have. But unfortunately, we can’t pro forma, sort of forward earnings, right, for existing ships.

Right. Okay. And then kind of an industry question on the idle capacity that is why we’re below from 2% and I think that from what I’m seeing out there, it’s that 2% that it still idle is very likely to ever come back to the market due to the age of the assets that are idle. And their operating capability is so - looking at that 2% where, is it fair to say that there is very limited. I mean the supply that is out there that could potentially come back on the market is a lot less than that?

That’s possible. It very much depends on what happens to the spot rates. If spot rates improve significantly, then owners, if these idle ships are in cold layout or even hot layout, then they’ll reactivated. If there isn’t a sustained increase in spot rates, then you’re probably right, it’s unlikely that those ships will ever come back into the active markets. And owners eventually will give up and have to scrap them.

Okay. That’s all I have. And we look forward to the coming quarters.

Thank you.

Thank you. Our next question comes from Arnaud Martel of Royal London. Your line is open.

Hi there. Thanks for taking my question. I’ve actually got a couple of questions related to your liquidity position. First one is related to the revolver. Can you confirm that it’s fully drawn as of today?

Yes, that is correct.

Okay. And second one is could you just give us a bit of clarity on the working capital swings in the first quarter which is somehow different from last year’s pattern?

It will be different from last year’s pattern because in Q1 last year, we’ve only just issued the bond.

Okay.

So that structure changed dramatically around mid-March 2014. So that’s one reason. And depending on which quarter you’re looking at, working capital is either positive or negative because we have semiannual interest on the bond which is $21 million.

Okay. So purely looking at the account payables on your Page 17, that’s what you’re referring to?

Yes.

Okay, okay. That’s good. Thanks a lot.

Thank you. I’m not showing any further questions in queue. I’d like to turn the call back over to Ian Webber for any further remarks.