DryShips, Inc. (NASDAQ: DRYS) has been one of the day trader’s dreamboat stocks, and no pun is intended. You can hardly go a day where there is not a $1.00 change in either direction. Now this morning the company is showing some numbers which might worry even the most bullish.
DryShips is cutting its cap-ex spending to save on costs, which will beviewed positively. But the bomb comes in the form of it suspending itsdividend as of Q4-2008.
On the cap-ex cut, it is cutting three Capesize newbuildings, and hascanceled the acquisition of nine Capesize vessels. DryShips hasagreed to transfer its interests in the owning companies of threeCapesize newbuildings to a non-affiliated entityto reduce its aggregate obligations by $364 million inexchange for a total consideration of $116.4 million.
DryShips agreed to purchase nine Capesize drybulk carriers in Octoberfor $1.17 billion, consisting of 19.4 million shares of common stockand the assumption of an aggregate of $478.3 million in debt and futurecommitments.
The company is noting, as previously mentioned, that it suspended thedividend in light of the lower freight rate environment. That policywill be assessed from time to time.
The company’s guidance is also coming out, although this preliminarydata from last quarter. It sees TCE revenue at $184.2 million to $208.7million and sees non-GAAP earnings at $0.63 to $0.71 EPS. It expects anet loss after items of -$6.89 EPS to -$7.81 EPS. The estimates forthis last quarter were $226.6 million in revenue and $1.29 EPS, so themiss is going to be significant.
The reason for the huge difference in GAAP losses versus non-GAAP isnot just options and other items. It is from a $177 million unrealizedmark-to-market interest rate swap loss, prior ship cancellations, andprovisions for disposal of newbuildings.
Keep in mind that this is one of the most volatile stocks that canswing wildly in any direction. To prove this, shares are down a sharp17% at $11.90 in very active pre-market trading (760,000 shares as of8:51 AM EST).
To show how volatile the stock is, its 52-week trading range is $3.04 to north of $116.00.
Jon C. Ogg
January 22, 2009