Eagle Bulk Shipping Inc. yesterday announced its results for the fourth quarter and fiscal year ended December 31, 2008. Sophocles N. Zoullas, Chairman and Chief Executive Officer, commented, ``We are very pleased we maintained profitability in the fourth quarter and generated steady cash flow in challenging global markets. This performance underscores the relative stability of the Supramax asset class amid unprecedented market conditions, as well as managements conservative chartering strategy, which now includes increased contract coverage of 74% for 2009.

Mr. Zoullas continued, ``The Company also took proactive, strategic steps during the fourth quarter to reduce capital expenditures and increase liquidity - actions which strengthened the Companys operating profile amid industry volatility. Going forward, we believe Eagle Bulks demonstrated ability to adapt to changing market conditions while maintaining operational excellence positions the Company to generate long-term value for shareholders.

Results for the three months ended December 31, 2008 and 2007

For the fourth quarter of 2008, the Company reported net income of $9,159,252 or $0.20 per share, based on a weighted average of 46,915,087 diluted shares outstanding. Net income included one-time write-offs of deferred financing and other costs aggregating $5,972,589 relating to amendments to the Companys debt and newbuilding program. Excluding these non-cash charges, net income for the quarter was $15,131,841 or $0.32 per share.

In the comparable fourth quarter of 2007, the Company reported net income of $16,329,603 or $0.35 per share, based on a weighted average of 46,948,385 diluted shares outstanding.

All of the Companys revenues were earned from time charters. Gross revenues in the quarter ended December 31, 2008 were $62,410,576, an increase of 64% from the $37,990,223 recorded in the comparable quarter in 2007. Net revenues during the quarter ended December 31, 2008 were $59,962,501 compared to $35,612,521 in the quarter ended December 31, 2007, an increase of 68% primarily due to the operation of a larger fleet and an increase in daily time charter rates. Net revenues recorded in the 2008 quarter include non-cash amortization of fair value below contract value of time charters acquired of $535,487, compared to a non-cash charge of $500,000 recorded in the 2007 quarter which relates to the fair value above contract value of time charters acquired. Brokerage commissions incurred on revenues earned were $2,983,561 and $1,877,702 in the fourth quarters of 2008 and 2007, respectively.

Total operating expenses increased to $43,539,354 in the quarter ended December 31, 2008 from $18,234,292 recorded in the comparable quarter in 2007. The increase was due to higher vessel operating expenses, vessel depreciation and amortization expenses and general and administrative expenses related to operation of a larger fleet. General and administrative expenses in 2008 were impacted primarily by cash and non-cash compensation (performance-based compensation and amortization of restricted stock awards) to the officers and staff, and by administrative costs associated with operating a larger fleet, including the extensive newbuilding program.

EBITDA, adjusted for exceptional items under the terms of the Companys credit agreement, increased by 20% to $33,474,374 for the fourth quarter of 2008, from $27,889,885 for the fourth quarter of 2007. (Please see below for a reconciliation of EBITDA to net income).

Results for the years ended December 31, 2008 and 2007

For the year ended December 31, 2008, the Company reported net income of $61,632,809 or $1.31 per share, based on a weighted average of 46,888,788 diluted shares outstanding. Net income included one-time write-offs of deferred financing and other costs aggregating $5,972,589 relating to amendments to the Companys debt and newbuilding program. Excluding these non-cash charges, net income for the year was $67,605,398 or $1.44 per share.

In the comparable year ended December 31, 2007, the Company reported net income of $52,243,981 or $1.24 per share, based on a weighted average of 42,195,561 diluted shares outstanding.

All of the Companys revenues were earned from Time Charters. Gross revenues for the year ended December 31, 2008 were $194,253,142, an increase of 43% from the $135,412,594 recorded in 2007. Net revenues for the year ended December 31, 2008 were $185,424,949 compared to $124,814,804 for 2007, an increase of 49% primarily due to the operation of a larger fleet and an increase in daily time charter rates. Net revenues in 2008 include non-cash amortization of the fair value below contract value of time charters acquired of $799,540, compared to a net non-cash charge of $3,740,000 recorded in 2007 which relates to the fair value above and below contract value of time charters acquired. Brokerage commissions incurred on revenues earned were $9,627,733 and $6,857,790 in 2008 and 2007, respectively.

Total operating expenses in 2008 increased to $108,669,180 from $64,483,104 in 2007. The increase in expenses is attributable to a larger fleet size in operation for 2008 which increased ownership days to 7,229 days in 2008 from 6,166 days in 2007, and increases in costs for crew, insurance and lubricants. Expenses were also impacted by higher general and administrative expenses primarily in cash and non-cash compensation (performance-based compensation and amortization of restricted stock awards) to the officers and staff, and by administrative costs associated with operating a larger fleet, including the extensive newbuilding program.

EBITDA, adjusted for exceptional items under the terms of the Companys credit agreement, increased by 28% to $127,683,156 in 2008, from $99,417,510 in 2007. (Please see below for a reconciliation of EBITDA to net income).

Newbuilding Program

In 2007, the Company had entered into a 35 vessel newbuilding program, which includes 30 vessels to be constructed in China and 5 vessels in Japan. The Chinese contracts and the associated time charters were acquired from a privately held company. In 2008, the Company took delivery of its first two Chinese built newbuilding vessels and a Japanese built vessel.

In December 2008, the Company amended its vessel newbuilding program in China by converting the firm construction contracts on eight charter-free vessels into options. All of the contract deposits on these option vessels, representing approximately $47 million, were redirected as progress payments towards vessels being constructed for delivery in 2009. The Company also deferred delivery of a vessel, THRUSH, from September 2009 to November 2010. These changes in the newbuilding program resulted in a reduction of the Companys capital expenditure program by a total of $363 million. The carrying value of the advanced payments in connection with the acquisition of the construction contracts and the cost of the eight newly converted shipbuilding contract options were in excess of the fair value of the eight options, and as such, the Company recorded an impairment charge of $3,882,888 to write-off the carrying value of the vessel contracts converted into options.

As of December 31, 2008, the Company had outstanding contracts for the construction of 20 vessels in China and 4 vessels in Japan, deliveries of which are scheduled between 2009 and 2011. The Company has recorded advances of $411,063,011 towards the construction cost of these 24 vessels. These costs include capitalized interest on debt drawn for the progress payments, insurance, legal, and technical supervision costs. (Table below provides anticipated delivery dates on the newbuilding fleet).

The contracts for vessel construction in China are US dollar based. However, the contracts for vessel construction in Japan are yen based, and the Company had entered into foreign exchange swaps to hedge foreign currency risks to its vessel newbuilding contracts in Japan. At December 31, 2008, the Company had outstanding foreign currency swap contracts for notional amounts aggregating 8.6 billion Japanese yen swapped into the equivalent of $80,378,030. The Company records the fair value of the currency swaps as an asset or liability in its financial statements and the effective portion of the currency swap is recorded in accumulated other comprehensive income. In February 2009, the Company settled its outstanding foreign currency swaps contracts at a gain aggregating $13,673,774. These gains will offset the cost of the vessels upon their delivery from the Japanese shipyard in 2009-2010.

Liquidity and Capital Resources

Net cash provided by operating activities during the years ended December 31, 2008 and 2007 was $109,535,918 and $82,889,373, respectively. The increase was primarily due to cash generated from the operation of the fleet for 7,229 operating days in 2008 compared to 6,166 operating days in 2007.

Net cash used in investing activities during 2008, was $336,657,686. Investing activities during 2008 primarily reflected the purchase of the GOLDENEYE and REDWING, which were delivered in the second and third quarter of 2008, respectively, and advances for the newbuilding vessel construction program.

Net cash provided by financing activities during 2008 was $83,426,938. The Company borrowed $192,358,513 from its revolving credit facility which was used to partly fund the REDWING and fund the advances for the construction of newbuilding vessels, three of which, WREN, WOODSTAR and CROWNED EAGLE delivered during the year. In 2008, the Company also paid $93,592,906 in dividends.

As of December 31, 2008, the cash balance was $9,208,862 compared to a cash balance of $152,903,692 at December 31, 2007. In addition, $11,500,000 in cash deposits are maintained with the Companys lender for loan compliance purposes and this amount is recorded in Restricted Cash on the balance sheet as of December 31, 2008. Also recorded in Restricted Cash is an amount of $276,056 which is collateralizing a letter of credit relating to the Companys office lease.

At December 31, 2008, the Company had outstanding debt of $789,601,403. In December 2008, the Company agreed with its lenders to amend its $1.6 billion revolving credit facility to $1.35 billion and adjusted certain debt covenants. The requirement for the Company to maintain a minimum security value of its fleet, which is now an aggregate of the market value of the vessels in its operating fleet and the deposits on its newbuilding contracts, that secure its obligations under the revolving credit facility has been reduced from 130% to 100% of the aggregate principal amount of debt outstanding under the facility. Future dividend payments will be based on the Company maintaining a minimum security value of 130%. The Minimum Net Worth requirement has been reduced from $300 million to $75 million for next year and is subject to annual review thereafter. The amended facility will bear interest at the rate of 1.75% over LIBOR, and the Company will also pay on a quarterly basis a commitment fee of 0.30% per annum on the undrawn portion of the facility. The amended facility will be available in full until July 2012, following which it will reduce to a balloon of $717.2 million at maturity in July 2017. The facility also provides the Company with the ability to borrow up to $20,000,000 for working capital purposes. In December 2008, commencing with the fourth quarter of 2008, the board of directors of the Company has determined to suspend the payment of a dividend to stockholders in order to increase cash flow, optimize financial flexibility and enhance internal growth.