Unconsolidated Entities

9 Months Ended

Sep. 30, 2011

Note 4. Unconsolidated Entities

In 2003, we acquired for $3,479,000 a 50% investment in Dry Bulk Cape Holding Inc. (“Dry Bulk”), which as of December 31, 2010, owned 100% of subsidiary companies owning two Capesize Bulk Carriers and two Handymax Bulk Carrier Newbuildings on order for delivery in 2012. Historically, we have accounted for this investment under the equity method and our share of earnings or losses has been reported in our consolidated statements of operations, net of taxes. On March 25, 2011, we acquired 100% ownership of Dry Bulk. Following the acquisition, Dry Bulk's results are no longer accounted for under the equity method. For further information on this acquisition, see Note 5 below.

Our portion of earnings of Dry Bulk for the first three months of 2011, recorded under the equity method, was $1.3 million, net of taxes of $0. For the nine months ended September 30, 2010, our portions of earnings of Dry Bulk was $5.0 million, net of taxes of $4.0 million. Historically, we did not provide for income taxes related to our earnings from Dry Bulk as a result of the U. S. tax law in effect prior to 2010. This tax law expired effective January 1, 2010, resulting in income taxes being applicable to our earnings from Dry Bulk during the first three quarters of 2010. After Congress eliminated the need for a tax provision on these amounts in late 2010, we reversed our 2010 provision for taxes in the fourth quarter of 2010.

During the first quarter of 2011 we received a $750,000 cash dividend distribution from Dry Bulk prior to acquiring full ownership of it on March 25, 2011 and a $2.3 million cash dividend distribution in the first nine months of 2010.

The unaudited condensed results of operations of Dry Bulk through March 25, 2011, when we acquired 100% of its stock included operating revenues of $4.8 million, operating income of $2.9 million, and net income of $2.6 million. Summarized below are the unaudited condensed results of operations of Dry Bulk for the three months ended September 30, 2010 and nine months ended September 30, 2010:

	Three Months Ended September 30,		Nine Months Ended September 30,
(Amounts in Thousands)	2010	2010
Operating Revenues	$6,407	$22,320
Operating Income	$4,432	$16,031
Net Income	$4,225	$17,602

In December 2009, we acquired for $6.25 million a 25% investment in Oslo Bulk AS (“Oslo Bulk”) which in 2008, contracted to build eight new Mini Bulkers. All of the Mini-Bulkers have been delivered and deployed as of July 2011. During 2010, we invested an additional $3.9 million in Tony Bulkers Pte Ltd. (“Tony Bulkers”), an affiliate of Oslo Bulk AS, for our 25% share of the installment payments for two additional new Mini-Bulkers, both of which have been delivered and deployed as of July 2011. We paid approximately $1.7 million in January 2011 for our remaining share of installment payments associated with these two Mini-Bulkers. These investments are accounted for under the equity method and our share of earnings or losses is reported in our consolidated statements of operations, net of taxes. All ten of these Mini-Bulkers are managed by an affiliate of Oslo Bulk. Our portion of the aggregate earnings of Oslo Bulk, which included final 2010 income adjustments of $143,000, was a loss of $1.3 million for the nine months ended September 30, 2011, largely due to initial positioning voyages on the newly delivered vessels and lower than expected average charter rates. Also included in the Oslo Bulk results was a negative mark-to-market adjustment of $603,000 on an ineffective interest rate swap contract. Our portion of the earnings of our remaining investments in unconsolidated entities was a loss of $159,000.

- Definition

The entire disclosure for equity investment, or group of investments, for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20 percent of the voting stock and the investment is accounted for using the equity method, and the reasons why it is.

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