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Success has been redefined. Companies exposed to industrial commerce have been catapulted from the luxury of reporting industrial-scale profits to the necessity of proclaiming their long-term viability.
Under these refined criteria for success, one might say that Excel Maritime Carriers (NYSE: EXM ) excelled in the fourth quarter of 2008. Issuing unaudited results some four months after the quarter's close, Excel revealed a $329.2 million quarterly loss that would certainly have been deemed a failure under any normal economic environment.
Making allowances for huge writedowns, which included $335 million in goodwill from the purchase of Quintana Maritime last year, $40 million in impaired currency swaps, and $15.6 million surrendered to a cancelled vessel purchase, it appears that investors in this water-logged sector are peering past losses as long as revenue streams remain intact. Excel's shares surged nearly 20% when the market opened.
Like its competitor DryShips (Nasdaq: DRYS ) , Excel Maritime is treading water within an ocean of debt ... about $1.3 billion in this case. Excel was engaged in some aggressive expansion just as the sector spiked to new peaks and then sank like the Titanic. The company grew its fleet capacity by 187% year over year by the end of 2008, but that resulting cargo of debt had this Fool concerned even before the summer correction became a merciless free fall.
Excel began to ease investors' concerns last week, by announcing waivers on debt covenants that remove some risk of default. Logically, the dividend was suspended in February. With this earnings release, however, Excel also addressed concerns over recent reports of clients reneging on time charter contracts, which had the potential to set a game-changing precedent within the sector.
Excel reported recovering all fees owed by one delinquent client, while compromising with another by cutting the daily rate in half while adding some conciliatory provisions. With several high-quality clients like BHP Billiton (NYSE: BHP ) and Bunge (NYSE: BG ) utilizing Excel's fleet, I see little risk of a pandemic of such contract delinquencies. On the other hand, the reality of contract renegotiations bridging some of the gap between lofty charter rates and horrific spot-market rates is beginning to rear its outlook-adjusting head.
With the precise timing of meaningful demand recovery among dry bulk commodities remaining anyone's guess, I still consider Diana Shipping (NYSE: DSX ) and Navios Maritime Holdings (NYSE: NM ) best-equipped to ride out the storm, but the risks to Excel's viability, at least, appear to be waning.