Historically freight rates and asset values are closely correlated and, as one would expect, vessel values have dropped significantly during the last several quarters. As a result of these adverse market conditions, as of September 30, 2012, we were not in compliance with some covenants in our loan agreements. We are currently in advanced discussions with our lenders to clear these issues. Whilst a mutually agreeable solution is being sought, our Board of Directors has decided to suspend the payment of dividend on the Company's common stock.
Our medium-term outlook for the dry bulk industry is turning positive as we move past this year's imbalanced supply growth. While demand for dry bulk commodities from major developing countries continues its growth for the foreseeable future, we expect the market to start improving due to the reduced orderbook, increased scrapping, slow steaming and the lack of bank financing."
Simos Spyrou, Chief Financial Officer of Star Bulk, commented: "As a result of the low freight rates and low asset values, we performed an impairment test as of September 30, 2012. We determined that the book values of the total fleet of our Supramax vessels and our oldest Capesize vessel were not recoverable as of September 30, 2012 and thus a non-cash impairment loss of $303.2 million was recognized. We believe that our book values, following the impairment, provide a better estimation of the current values of our assets consistent with market conditions.
On the income statement side, we have continued to successfully implement our cost optimization strategy. Our general and administrative expenses were $2.0 million for the quarter ended September 30, 2012 compared to $3.0 million in the same period of 2011. This reduction was achieved while our average number of employees increased by 14%.
Our operating expenses for the quarter ended September 30, 2012 were $6.3 million, 4% lower than the same period of 2011. This reduction was achieved while our fleet expanded by 12%. Specifically, average daily operating expenses per vessel were $4,878 for the quarter ended September 30, 2012, compared to $5,682 for the same period of 2011, a reduction of 14%, despite an increase in our average size of vessels operated during the period."
Fleet Profile (As of November 30, 2012)
Vessel Name Type DWT Year Built------------- -------------- --------- ----------Star Aurora Capesize 171,199 2000Star Big Capesize 168,404 1996Star Borealis Capesize 179,678 2011Star Mega Capesize 170,631 1994Star Polaris Capesize 179,546 2011Star Sigma Capesize 184,403 1991Star Cosmo Supramax 52,247 2005Star Delta Supramax 52,434 2000Star Epsilon Supramax 52,402 2001Star Gamma Supramax 53,098 2002Star Kappa Supramax 52,055 2001Star Omicron Supramax 53,489 2005Star Theta Supramax 52,425 2003Star Zeta Supramax 52,994 2003Total 14 1,475,005
Third Quarter 2012 and 2011 Results
For the quarter ended September 30, 2012, total voyage revenues amounted to $18.3 million compared to $26.2 million for the quarter ended September 30, 2011, a reduction of 30%. This decrease was mainly due to lower charter rates for some of our vessels due to the decline in the dry bulk charter market. In addition, voyage revenues for the quarter ended September 30, 2012 included a deduction of $1.6 million associated with the amortization of fair value of above market acquired time charters, attached to vessels acquired in the quarter ended September 30, 2011, which time charters are amortized over the remaining period of the time charters. For the quarter ended September 30, 2011 this deduction was $0.8 million. Voyage revenues were also negatively affected by the main engine damage of the Star Polaris, which resulted to an off hire period of 92 days and a loss of revenue of $1.5 million.