UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2012
OR
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-51442
GENCO SHIPPING & TRADING LIMITED
(Exact name of registrant as specified in its charter)
Republic of the Marshall Islands |
|
98-043-9758 |
(State or other jurisdiction of |
|
(I.R.S. Employer |
incorporation or organization) |
|
Identification No.) |
299 Park Avenue, 12th Floor, New York, New York 10171
(Address of principal executive offices) (Zip Code)
(646) 443-8550
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o |
|
Accelerated filer x |
|
|
|
Non-accelerated filer o |
|
Smaller reporting company o |
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares outstanding of each of the issuers classes of common stock, as of May 10, 2012: Common stock, $0.01 per share 43,807,598 shares.
Genco Shipping & Trading Limited
Genco Shipping & Trading Limited
Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011
(U.S. Dollars in thousands, except for share and per share data)
(Unaudited)
|
|
March 31, 2012 |
|
December 31, |
| ||
Assets |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
246,683 |
|
$ |
227,968 |
|
Due from charterers, net of a reserve of $951 and $906, respectively |
|
11,239 |
|
13,688 |
| ||
Prepaid expenses and other current assets |
|
20,587 |
|
17,709 |
| ||
Total current assets |
|
278,509 |
|
259,365 |
| ||
|
|
|
|
|
| ||
Noncurrent assets: |
|
|
|
|
| ||
Vessels, net of accumulated depreciation of $497,485 and $464,518, respectively |
|
2,761,813 |
|
2,794,860 |
| ||
Deferred drydock, net of accumulated amortization of $9,038 and $11,111, respectively |
|
9,764 |
|
6,934 |
| ||
Other assets, net of accumulated amortization of $8,729 and $7,749, respectively |
|
16,887 |
|
17,795 |
| ||
Fixed assets, net of accumulated depreciation and amortization of $2,621 and $2,422, respectively |
|
5,490 |
|
5,591 |
| ||
Other noncurrent assets |
|
514 |
|
514 |
| ||
Restricted cash |
|
9,750 |
|
9,750 |
| ||
Investments |
|
32,282 |
|
24,468 |
| ||
Total noncurrent assets |
|
2,836,500 |
|
2,859,912 |
| ||
|
|
|
|
|
| ||
Total assets |
|
$ |
3,115,009 |
|
$ |
3,119,277 |
|
|
|
|
|
|
| ||
Liabilities and Equity |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable and accrued expenses |
|
$ |
24,463 |
|
$ |
30,712 |
|
Current portion of long-term debt |
|
220,772 |
|
185,077 |
| ||
Deferred revenue |
|
3,693 |
|
4,227 |
| ||
Current portion of lease obligations |
|
682 |
|
|
| ||
Fair value of derivative instruments |
|
1,738 |
|
1,686 |
| ||
Total current liabilities |
|
251,348 |
|
221,702 |
| ||
Noncurrent liabilities: |
|
|
|
|
| ||
Long-term lease obligations |
|
1,539 |
|
1,823 |
| ||
Time charters acquired |
|
978 |
|
1,164 |
| ||
Fair value of derivative instruments |
|
20,822 |
|
23,654 |
| ||
Convertible senior note payable |
|
107,471 |
|
106,381 |
| ||
Long-term debt |
|
1,347,741 |
|
1,402,935 |
| ||
Total noncurrent liabilities |
|
1,478,551 |
|
1,535,957 |
| ||
|
|
|
|
|
| ||
Total liabilities |
|
1,729,899 |
|
1,757,659 |
| ||
|
|
|
|
|
| ||
Commitments and contingencies |
|
|
|
|
| ||
|
|
|
|
|
| ||
Equity: |
|
|
|
|
| ||
Genco Shipping & Trading Limited shareholders equity: |
|
|
|
|
| ||
Common stock, par value $0.01; 100,000,000 shares authorized; issued and outstanding 43,807,598 and 36,307,598 shares at March 31, 2012 and December 31, 2011, respectively |
|
438 |
|
363 |
| ||
Additional paid-in capital |
|
860,365 |
|
809,443 |
| ||
Accumulated other comprehensive loss |
|
(6,982 |
) |
(17,549 |
) | ||
Retained earnings |
|
326,258 |
|
359,349 |
| ||
Total Genco Shipping & Trading Limited shareholders equity |
|
1,180,079 |
|
1,151,606 |
| ||
Noncontrolling interest |
|
205,031 |
|
210,012 |
| ||
Total equity |
|
1,385,110 |
|
1,361,618 |
| ||
|
|
|
|
|
| ||
Total liabilities and equity |
|
$ |
3,115,009 |
|
$ |
3,119,277 |
|
See accompanying notes to condensed consolidated financial statements.
Genco Shipping & Trading Limited
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2012 and 2011
(U.S. Dollars in Thousands, Except for Earnings Per Share and Share Data)
(Unaudited)
|
|
For the Three Months |
| ||||
|
|
2012 |
|
2011 |
| ||
Revenues: |
|
|
|
|
| ||
Voyage revenues |
|
$ |
59,025 |
|
$ |
100,619 |
|
Service revenues |
|
819 |
|
810 |
| ||
|
|
|
|
|
| ||
Total revenues |
|
59,844 |
|
101,429 |
| ||
|
|
|
|
|
| ||
Operating expenses: |
|
|
|
|
| ||
Voyage expenses |
|
1,410 |
|
968 |
| ||
Vessel operating expenses |
|
27,834 |
|
24,795 |
| ||
General, administrative, and management fees |
|
8,696 |
|
8,851 |
| ||
Depreciation and amortization |
|
34,425 |
|
33,081 |
| ||
|
|
|
|
|
| ||
Total operating expenses |
|
72,365 |
|
67,695 |
| ||
|
|
|
|
|
| ||
Operating (loss) income |
|
(12,521 |
) |
33,734 |
| ||
|
|
|
|
|
| ||
Other (expense) income: |
|
|
|
|
| ||
Other expense |
|
(16 |
) |
(55 |
) | ||
Interest income |
|
155 |
|
172 |
| ||
Interest expense |
|
(23,730 |
) |
(21,321 |
) | ||
|
|
|
|
|
| ||
Other expense |
|
(23,591 |
) |
(21,204 |
) | ||
|
|
|
|
|
| ||
(Loss) income before income taxes |
|
(36,112 |
) |
12,530 |
| ||
Income tax expense |
|
(271 |
) |
(359 |
) | ||
|
|
|
|
|
| ||
Net (loss) income |
|
(36,383 |
) |
12,171 |
| ||
Less: Net loss attributable to noncontrolling interest |
|
(3,312 |
) |
(1,255 |
) | ||
Net (loss) income attributable to Genco Shipping & Trading Limited |
|
$ |
(33,071 |
) |
$ |
13,426 |
|
|
|
|
|
|
| ||
Net (loss) income per share-basic |
|
$ |
(0.87 |
) |
$ |
0.38 |
|
Net (loss) income per share-diluted |
|
$ |
(0.87 |
) |
$ |
0.38 |
|
Weighted average common shares outstanding-basic |
|
38,090,590 |
|
35,142,110 |
| ||
Weighted average common shares outstanding-diluted |
|
38,090,590 |
|
35,218,699 |
| ||
Dividends declared per share |
|
$ |
|
|
$ |
|
|
See accompanying notes to condensed consolidated financial statements.
Genco Shipping & Trading Limited
Condensed Consolidated Statements of Comprehensive (Loss) Income
For the Three Months Ended March 31, 2012 and 2011
(U.S. Dollars in Thousands)
(Unaudited)
|
|
For the Three Months Ended |
| ||||
|
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
Net (loss) income |
|
$ |
(36,383 |
) |
$ |
12,171 |
|
|
|
|
|
|
| ||
Change in unrealized gain on investments |
|
7,814 |
|
430 |
| ||
Unrealized gain on cash flow hedges, net |
|
2,753 |
|
7,205 |
| ||
Other Comprehensive income |
|
10,567 |
|
7,635 |
| ||
|
|
|
|
|
| ||
Comprehensive (loss) income |
|
(25,816 |
) |
19,806 |
| ||
Less: Comprehensive loss attributable to noncontrolling interest |
|
(3,312 |
) |
(1,255 |
) | ||
Comprehensive (loss) income attributable to Genco Shipping & Trading Limited |
|
$ |
(22,504 |
) |
$ |
21,061 |
|
See accompanying notes to condensed consolidated financial statements.
Genco Shipping & Trading Limited
Condensed Consolidated Statements of Equity
For the Three Months Ended March 31, 2012 and 2011
(U.S. Dollars in Thousands)
(Unaudited)
|
|
Common |
|
Additional |
|
Accumulated |
|
Retained |
|
Genco |
|
Noncontrolling |
|
Total Equity |
| |||||||
Balance January 1, 2012 |
|
$ |
363 |
|
$ |
809,443 |
|
$ |
(17,549 |
) |
$ |
359,349 |
|
$ |
1,151,606 |
|
$ |
210,012 |
|
$ |
1,361,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net loss |
|
|
|
|
|
|
|
(33,071 |
) |
(33,071 |
) |
(3,312 |
) |
(36,383 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Change in unrealized gain on investments |
|
|
|
|
|
7,814 |
|
|
|
7,814 |
|
|
|
7,814 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Unrealized gain on cash flow hedges, net |
|
|
|
|
|
2,753 |
|
|
|
2,753 |
|
|
|
2,753 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Issuance of 7,500,000 shares of common stock |
|
75 |
|
49,795 |
|
|
|
|
|
49,870 |
|
|
|
49,870 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Nonvested stock amortization |
|
|
|
1,078 |
|
|
|
|
|
1,078 |
|
572 |
|
1,650 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Cash dividends paid by Baltic Trading Limited |
|
|
|
|
|
|
|
(20 |
) |
(20 |
) |
(2,192 |
) |
(2,212 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Vesting of restricted shares issued by Baltic Trading Limited |
|
|
|
49 |
|
|
|
|
|
49 |
|
(49 |
) |
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance March 31, 2012 |
|
$ |
438 |
|
$ |
860,365 |
|
$ |
(6,982 |
) |
$ |
326,258 |
|
$ |
1,180,079 |
|
$ |
205,031 |
|
$ |
1,385,110 |
|
|
|
Common |
|
Additional |
|
Accumulated |
|
Retained |
|
Genco |
|
Noncontrolling |
|
Total Equity |
| |||||||
Balance January 1, 2011 |
|
$ |
359 |
|
$ |
803,778 |
|
$ |
(5,210 |
) |
$ |
334,022 |
|
$ |
1,132,949 |
|
$ |
215,204 |
|
$ |
1,348,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net income (loss) |
|
|
|
|
|
|
|
13,426 |
|
13,426 |
|
(1,255 |
) |
12,171 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Change in unrealized gain on investments |
|
|
|
|
|
430 |
|
|
|
430 |
|
|
|
430 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Unrealized gain on cash flow hedges, net |
|
|
|
|
|
7,205 |
|
|
|
7,205 |
|
|
|
7,205 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Nonvested stock amortization |
|
|
|
1,494 |
|
|
|
|
|
1,494 |
|
945 |
|
2,439 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Cash dividends paid by Baltic Trading Limited |
|
|
|
|
|
|
|
(26 |
) |
(26 |
) |
(2,846 |
) |
(2,872 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Vesting of restricted shares issued by Baltic Trading Limited |
|
|
|
37 |
|
|
|
|
|
37 |
|
(37 |
) |
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance March 31, 2011 |
|
$ |
359 |
|
$ |
805,309 |
|
$ |
2,425 |
|
$ |
347,422 |
|
$ |
1,155,515 |
|
$ |
212,011 |
|
$ |
1,367,526 |
|
See accompanying notes to condensed consolidated financial statements.
Genco Shipping & Trading Limited
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011
(U.S. Dollars in Thousands)
(Unaudited)
|
|
For the Three Months |
| ||||
|
|
2012 |
|
2011 |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net (loss) income |
|
$ |
(36,383 |
) |
$ |
12,171 |
|
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
|
34,425 |
|
33,081 |
| ||
Amortization of deferred financing costs |
|
980 |
|
778 |
| ||
Amortization of time charters acquired |
|
(186 |
) |
(473 |
) | ||
Amortization of discount on Convertible Senior Notes |
|
1,090 |
|
967 |
| ||
Unrealized gain on derivative instruments |
|
(27 |
) |
(13 |
) | ||
Amortization of nonvested stock compensation expense |
|
1,650 |
|
2,439 |
| ||
Change in assets and liabilities: |
|
|
|
|
| ||
Decrease in due from charterers |
|
2,449 |
|
1,115 |
| ||
Increase in prepaid expenses and other current assets |
|
(2,878 |
) |
(2,374 |
) | ||
Increase in other noncurrent assets |
|
|
|
(514 |
) | ||
Decrease in accounts payable and accrued expenses |
|
(4,987 |
) |
(2,965 |
) | ||
Decrease in deferred revenue |
|
(534 |
) |
(3,372 |
) | ||
Increase (decrease) in lease obligations |
|
398 |
|
(13 |
) | ||
Deferred drydock costs incurred |
|
(3,966 |
) |
(675 |
) | ||
|
|
|
|
|
| ||
Net cash (used in) provided by operating activities |
|
(7,969 |
) |
40,152 |
| ||
Cash flows from investing activities: |
|
|
|
|
| ||
Purchase of vessels |
|
(319 |
) |
(35,130 |
) | ||
Deposits on vessels |
|
|
|
(78 |
) | ||
Purchase of other fixed assets |
|
(1,228 |
) |
(66 |
) | ||
Changes in deposits of restricted cash |
|
|
|
(750 |
) | ||
|
|
|
|
|
| ||
Net cash used in investing activities |
|
(1,547 |
) |
(36,024 |
) | ||
Cash flows from financing activities: |
|
|
|
|
| ||
Repayments on the 2007 Credit Facility |
|
(12,500 |
) |
(12,500 |
) | ||
Repayments on the $100 Million Term Loan Facility |
|
(1,924 |
) |
(770 |
) | ||
Proceeds from the $253 Million Term Loan Facility |
|
|
|
21,500 |
| ||
Repayments on the $253 Million Term Loan Facility |
|
(5,075 |
) |
(4,691 |
) | ||
Proceeds from issuance of common stock |
|
50,721 |
|
|
| ||
Payment of common stock issuance costs |
|
(632 |
) |
|
| ||
Payment of Convertible Senior Notes issuance costs |
|
|
|
(51 |
) | ||
Payment of dividend by subsidiary |
|
(2,212 |
) |
(2,873 |
) | ||
Payment of deferred financing costs |
|
(147 |
) |
(154 |
) | ||
|
|
|
|
|
| ||
Net cash provided by financing activities |
|
28,231 |
|
461 |
| ||
|
|
|
|
|
| ||
Net increase in cash and cash equivalents |
|
18,715 |
|
4,589 |
| ||
|
|
|
|
|
| ||
Cash and cash equivalents at beginning of period |
|
227,968 |
|
270,877 |
| ||
Cash and cash equivalents at end of period |
|
$ |
246,683 |
|
$ |
275,466 |
|
See accompanying notes to condensed consolidated financial statements.
Genco Shipping & Trading Limited
(U.S. Dollars in Thousands, Except Per Share and Share Data)
Notes to Condensed Consolidated Financial Statements (unaudited)
1 - GENERAL INFORMATION
The accompanying condensed consolidated financial statements include the accounts of Genco Shipping & Trading Limited (GS&T), its wholly-owned subsidiaries, and its subsidiary, Baltic Trading Limited (collectively, the Company). The Company is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels. GS&T is incorporated under the laws of the Marshall Islands and as of March 31, 2012, is the sole owner of all of the outstanding shares of the following subsidiaries: Genco Ship Management LLC; Genco Investments LLC; Genco Management (USA) Limited; and the ship-owning subsidiaries as set forth below.
Below is the list of GS&Ts wholly owned ship-owning subsidiaries as of March 31, 2012:
Wholly Owned Subsidiaries |
|
Vessels Acquired |
|
Dwt |
|
Delivery Date |
|
Year Built |
|
|
|
|
|
|
|
|
|
Genco Reliance Limited |
|
Genco Reliance |
|
29,952 |
|
12/6/04 |
|
1999 |
Genco Vigour Limited |
|
Genco Vigour |
|
73,941 |
|
12/15/04 |
|
1999 |
Genco Explorer Limited |
|
Genco Explorer |
|
29,952 |
|
12/17/04 |
|
1999 |
Genco Carrier Limited |
|
Genco Carrier |
|
47,180 |
|
12/28/04 |
|
1998 |
Genco Sugar Limited |
|
Genco Sugar |
|
29,952 |
|
12/30/04 |
|
1998 |
Genco Pioneer Limited |
|
Genco Pioneer |
|
29,952 |
|
1/4/05 |
|
1999 |
Genco Progress Limited |
|
Genco Progress |
|
29,952 |
|
1/12/05 |
|
1999 |
Genco Wisdom Limited |
|
Genco Wisdom |
|
47,180 |
|
1/13/05 |
|
1997 |
Genco Success Limited |
|
Genco Success |
|
47,186 |
|
1/31/05 |
|
1997 |
Genco Beauty Limited |
|
Genco Beauty |
|
73,941 |
|
2/7/05 |
|
1999 |
Genco Knight Limited |
|
Genco Knight |
|
73,941 |
|
2/16/05 |
|
1999 |
Genco Leader Limited |
|
Genco Leader |
|
73,941 |
|
2/16/05 |
|
1999 |
Genco Marine Limited |
|
Genco Marine |
|
45,222 |
|
3/29/05 |
|
1996 |
Genco Prosperity Limited |
|
Genco Prosperity |
|
47,180 |
|
4/4/05 |
|
1997 |
Genco Muse Limited |
|
Genco Muse |
|
48,913 |
|
10/14/05 |
|
2001 |
Genco Acheron Limited |
|
Genco Acheron |
|
72,495 |
|
11/7/06 |
|
1999 |
Genco Surprise Limited |
|
Genco Surprise |
|
72,495 |
|
11/17/06 |
|
1998 |
Genco Augustus Limited |
|
Genco Augustus |
|
180,151 |
|
8/17/07 |
|
2007 |
Genco Tiberius Limited |
|
Genco Tiberius |
|
175,874 |
|
8/28/07 |
|
2007 |
Genco London Limited |
|
Genco London |
|
177,833 |
|
9/28/07 |
|
2007 |
Genco Titus Limited |
|
Genco Titus |
|
177,729 |
|
11/15/07 |
|
2007 |
Genco Challenger Limited |
|
Genco Challenger |
|
28,428 |
|
12/14/07 |
|
2003 |
Genco Charger Limited |
|
Genco Charger |
|
28,398 |
|
12/14/07 |
|
2005 |
Genco Warrior Limited |
|
Genco Warrior |
|
55,435 |
|
12/17/07 |
|
2005 |
Genco Predator Limited |
|
Genco Predator |
|
55,407 |
|
12/20/07 |
|
2005 |
Genco Hunter Limited |
|
Genco Hunter |
|
58,729 |
|
12/20/07 |
|
2007 |
Genco Champion Limited |
|
Genco Champion |
|
28,445 |
|
1/2/08 |
|
2006 |
Genco Constantine Limited |
|
Genco Constantine |
|
180,183 |
|
2/21/08 |
|
2008 |
Genco Raptor LLC |
|
Genco Raptor |
|
76,499 |
|
6/23/08 |
|
2007 |
Genco Cavalier LLC |
|
Genco Cavalier |
|
53,617 |
|
7/17/08 |
|
2007 |
Genco Thunder LLC |
|
Genco Thunder |
|
76,588 |
|
9/25/08 |
|
2007 |
Genco Hadrian Limited |
|
Genco Hadrian |
|
169,694 |
|
12/29/08 |
|
2008 |
Genco Commodus Limited |
|
Genco Commodus |
|
169,025 |
|
7/22/09 |
|
2009 |
Genco Maximus Limited |
|
Genco Maximus |
|
169,025 |
|
9/18/09 |
|
2009 |
Genco Claudius Limited |
|
Genco Claudius |
|
169,025 |
|
12/30/09 |
|
2010 |
Genco Bay Limited |
|
Genco Bay |
|
34,296 |
|
8/24/10 |
|
2010 |
Genco Ocean Limited |
|
Genco Ocean |
|
34,409 |
|
7/26/10 |
|
2010 |
Genco Avra Limited |
|
Genco Avra |
|
34,391 |
|
5/12/11 |
|
2011 |
Genco Mare Limited |
|
Genco Mare |
|
34,428 |
|
7/20/11 |
|
2011 |
Genco Spirit Limited |
|
Genco Spirit |
|
34,432 |
|
11/10/11 |
|
2011 |
Genco Aquitaine Limited |
|
Genco Aquitaine |
|
57,981 |
|
8/18/10 |
|
2009 |
Genco Ardennes Limited |
|
Genco Ardennes |
|
57,981 |
|
8/31/10 |
|
2009 |
Genco Auvergne Limited |
|
Genco Auvergne |
|
57,981 |
|
8/16/10 |
|
2009 |
Genco Bourgogne Limited |
|
Genco Bourgogne |
|
57,981 |
|
8/24/10 |
|
2010 |
Genco Brittany Limited |
|
Genco Brittany |
|
57,981 |
|
9/23/10 |
|
2010 |
Genco Languedoc Limited |
|
Genco Languedoc |
|
57,981 |
|
9/29/10 |
|
2010 |
Genco Loire Limited |
|
Genco Loire |
|
53,416 |
|
8/4/10 |
|
2009 |
Genco Lorraine Limited |
|
Genco Lorraine |
|
53,416 |
|
7/29/10 |
|
2009 |
Genco Normandy Limited |
|
Genco Normandy |
|
53,596 |
|
8/10/10 |
|
2007 |
Genco Picardy Limited |
|
Genco Picardy |
|
55,257 |
|
8/16/10 |
|
2005 |
Genco Provence Limited |
|
Genco Provence |
|
55,317 |
|
8/23/10 |
|
2004 |
Genco Pyrenees Limited |
|
Genco Pyrenees |
|
57,981 |
|
8/10/10 |
|
2010 |
Genco Rhone Limited |
|
Genco Rhone |
|
58,018 |
|
3/29/11 |
|
2011 |
Baltic Trading Limited (Baltic Trading) was a wholly-owned indirect subsidiary of GS&T until Baltic Trading completed its initial public offering, or IPO, on March 15, 2010. As of March 31, 2012, GS&Ts wholly-owned subsidiary Genco Investments LLC owned 5,699,088 shares of Baltic Tradings Class B Stock, which represented a 25.11% ownership interest in Baltic Trading and 83.41% of the aggregate voting power of Baltic Tradings outstanding shares of voting stock. Additionally, pursuant to the subscription agreement between Genco Investments LLC and Baltic Trading, for so long as GS&T directly or indirectly holds at least 10% of the aggregate number of outstanding shares of Baltic Tradings common stock and Class B stock, Genco Investments LLC will be entitled to receive an additional number of shares of Baltic Tradings Class B stock equal to 2% of the number of common shares issued in the future, other than shares issued under Baltic Tradings 2010 Equity Incentive Plan.
Below is the list of Baltic Tradings wholly owned ship-owning subsidiaries as of March 31, 2012:
Baltic Tradings Wholly Owned |
|
Vessel |
|
Dwt |
|
Delivery Date |
|
Year |
|
|
|
|
|
|
|
|
|
|
|
Baltic Leopard Limited |
|
Baltic Leopard |
|
53,447 |
|
4/8/10 |
|
2009 |
|
Baltic Panther Limited |
|
Baltic Panther |
|
53,351 |
|
4/29/10 |
|
2009 |
|
Baltic Cougar Limited |
|
Baltic Cougar |
|
53,432 |
|
5/28/10 |
|
2009 |
|
Baltic Jaguar Limited |
|
Baltic Jaguar |
|
53,474 |
|
5/14/10 |
|
2009 |
|
Baltic Bear Limited |
|
Baltic Bear |
|
177,717 |
|
5/14/10 |
|
2010 |
|
Baltic Wolf Limited |
|
Baltic Wolf |
|
177,752 |
|
10/14/10 |
|
2010 |
|
Baltic Wind Limited |
|
Baltic Wind |
|
34,409 |
|
8/4/10 |
|
2009 |
|
Baltic Cove Limited |
|
Baltic Cove |
|
34,403 |
|
8/23/10 |
|
2010 |
|
Baltic Breeze Limited |
|
Baltic Breeze |
|
34,386 |
|
10/12/10 |
|
2010 |
|
The Company provides technical services for drybulk vessels purchased by Maritime Equity Partners LLC (MEP), which is managed by a company owned by Peter C. Georgiopoulos, Chairman of the Board of Directors of GS&T. These services include oversight of crew management, insurance, drydocking, ship operations and financial statement preparation, but do not include chartering services. The services are provided for a fee of $750 per ship per day plus reimbursement of out-of-pocket costs and will be provided for an initial term of one year. MEP has the right to cancel provision of services on 60 days notice with payment of a one-year termination fee upon a change in control of the Company. The Company may terminate provision of the services at any time on 60 days notice. Peter C. Georgiopoulos, the Companys Chairman of the Board, is a minority investor in MEP, and affiliates of Oaktree Capital Management, L.P., of which Stephen A. Kaplan, a director of the Company, is a principal, are majority investors in MEP.
On February 28, 2012, the Company closed on an equity offering of 7,500,000 shares of common stock at an offering price of $7.10 per share. The Company received net proceeds of $49,870 after deducting underwriters fees and expenses.
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), which include the accounts of GS&T, its wholly-owned subsidiaries and Baltic Trading, a subsidiary in which the Company owns a majority of the voting interests and exercises control. All intercompany accounts and transactions have been eliminated in consolidation.
Basis of presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the Securities and Exchange Commission (the SEC). In the opinion of management of the Company, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and operating results have been included in the statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Companys annual report on Form 10-K for the year ended December 31, 2011 (the 2011 10-K). The results of operations for the period ended March 31, 2012 are not necessarily indicative of the operating results for the full year.
Vessels, net
Vessels, net is stated at cost less accumulated depreciation. Included in vessel costs are acquisition costs directly attributable to the acquisition of a vessel and expenditures made to prepare the vessel for its initial voyage. The Company also capitalizes interest costs for a vessel under construction as a cost which is directly attributable to the acquisition of a vessel. Vessels are depreciated on a straight-line basis over their estimated useful lives, determined to be 25 years from the date of initial delivery from the shipyard. Depreciation expense for vessels for the three months ended March 31, 2012 and 2011 was $33,091 and $31,424, respectively.
Depreciation expense is calculated based on cost less the estimated residual scrap value. The costs of significant replacements, renewals and betterments are capitalized and depreciated over the shorter of the vessels remaining estimated useful life or the estimated life of the renewal or betterment. Undepreciated cost of any asset component being replaced that was acquired after the initial vessel purchase is written off as a component of vessel operating expense. Expenditures for routine maintenance and repairs are expensed as incurred. Scrap value is estimated by the Company by taking the estimated scrap value of $245/lwt times the weight of the ship in lightweight tons (lwt).
Deferred revenue
Deferred revenue primarily relates to cash received from charterers prior to it being earned. These amounts are recognized as income when earned. Additionally, deferred revenue includes estimated customer claims mainly due to time charter performance issues. As of March 31, 2012 and December 31, 2011, the Company had an accrual of $751 and $762, respectively, related to these estimated customer claims.
Voyage expense recognition
In time charters, spot market-related time charters and pool agreements, operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. There are certain other non-specified voyage expenses such as commissions which are typically borne by the Company. At the inception of a time charter, the Company records the difference between the cost of bunker fuel delivered by the terminating charterer and the bunker fuel sold to the new charterer as a gain or loss within voyage expenses. These differences in bunkers resulted in net gains of $720 and $357 during the three months ended March 31, 2012 and 2011, respectively.
Noncontrolling interest
Net loss attributable to noncontrolling interest during the three months ended March 31, 2012 and 2011 reflects the noncontrolling interests share of the net loss of Baltic Trading, a subsidiary of the Company, which owns and employs drybulk vessels in the spot market or on spot market-related time charters. The spot market represents immediate chartering of a vessel, usually for single voyages. At March 31, 2012 and December 31, 2011, the noncontrolling interest held a 74.89% economic interest in Baltic Trading while only holding 16.59% of voting power.
Income taxes
Pursuant to certain agreements, GS&T technically and commercially manages vessels for Baltic Trading, as well as provides technical management of vessels for MEP in exchange for specified fees for these services provided. These services are performed by Genco Management (USA) Limited (Genco (USA)), which has elected to be taxed as a corporation for United States federal income tax purposes. As such, Genco (USA) is subject to United States federal income tax on its worldwide net income, including the net income derived from providing these services. Genco (USA) has entered into a cost-sharing agreement with the Company and Genco Ship Management LLC, collectively Manco, pursuant to which Genco (USA) agrees to reimburse Manco for the costs incurred by Genco (USA) for the use of Mancos personnel and services in connection with the provision of the services for both Baltic Trading and MEPs vessels.
Total revenue earned for these services during the three months ended March 31, 2012 and 2011 was $1,514 and $1,539, respectively, of which $695 and $729, respectively, eliminated upon consolidation. After allocation of certain expenses, there was taxable income of $593 associated with these activities for the three months ended March 31, 2012. This resulted in estimated tax expense of $264 for the three months ended March 31, 2012. After allocation of certain expenses, there was taxable income of $697 associated with these activities for the three months ended March 31, 2011. This resulted in income tax expense of $364 for the three months ended March 31, 2011.
Baltic Trading is subject to income tax on its United States source income. During the three months ended March 31, 2012 and 2011, Baltic Trading had United States operations which resulted in United States source income of $366 and $1,063, respectively. Baltic Tradings United States income tax expense for the three months ended March 31, 2012 was $7. Baltic Tradings estimated United Sates income tax benefit for the three months ended March 31, 2011 was $5.
Recent accounting pronouncements
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (Topic 820) Fair Value Measurement (ASU 2011-04), to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This standard was effective for interim and annual periods beginning after December 15, 2011 and is applied on a prospective basis. The Company has adopted ASU 2011-04 and the impact of adoption is not material to the Companys condensed consolidated financial statements.
In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220), Presentation of Comprehensive Income (ASU 2011-05), to require an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. The standard does not change the items which must be reported for other comprehensive income, how such items are measured or when they must be reclassified to net income. This standard was effective for interim and annual periods beginning after December 15, 2011 and was to be applied retrospectively. The FASB has deferred the requirement to present reclassification adjustments for each component of accumulate other comprehensive income in both net income and other comprehensive income. Companies are required to either present amounts reclassified out of other comprehensive income on the face of the financial statements or disclose those amounts in the notes to the financial statements. During the deferral period, there is no requirement to separately present or disclose the reclassification adjustments into net income. The effective date of this deferral will be consistent with the effective date of ASU 2011-05. The Company has adopted ASU 2011-05 and disclosed comprehensive income in our condensed consolidated statements of comprehensive (loss) income. This guidance only affects financial statement presentation and has no impact on its consolidated results of operations, financial position and cash flows.
3 - SEGMENT INFORMATION
The Company determines its operating segments based on the information utilized by the chief operating decision maker to assess performance. Based on this information, the Company has two operating segments, GS&T and Baltic Trading. Both GS&T and Baltic Trading are engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels. GS&T seeks to deploy its vessels on time charters, spot market-related time charters or in vessel pools trading in the spot market and Baltic Trading seeks to deploy its vessel charters in the spot market, which represents immediate chartering of a vessel, usually for single voyages, or employing vessels on spot market-related time charters. Segment results are evaluated based on net income. The accounting policies applied to the reportable segments are the same as those used in the preparation of the Companys condensed consolidated financial statements.
The following table presents a reconciliation of total voyage revenue from external (third party) customers for the Companys two operating segments to total consolidated voyage revenue from external customers for the Company for the three months ended March 31, 2012 and 2011.
|
|
For the three months ended |
| ||||
|
|
2012 |
|
2011 |
| ||
Voyage Revenue from External Customers |
|
|
|
|
| ||
GS&T |
|
$ |
52,731 |
|
$ |
91,076 |
|
Baltic Trading |
|
6,294 |
|
9,543 |
| ||
Total operating segments |
|
59,025 |
|
100,619 |
| ||
Eliminating revenue |
|
|
|
|
| ||
Total consolidated voyage revenue from external customers |
|
$ |
59,025 |
|
$ |
100,619 |
|
The following table presents a reconciliation of total intersegment revenue, which eliminates upon consolidation, for the Companys two operating segments for the three months ended March 31, 2012 and 2011. The intersegment revenue noted in the following table represents revenue earned by GS&T pursuant to the management agreement entered into with Baltic Trading, which includes commercial service fees, technical service fees and sale and purchase fees, if any.
|
|
For the three months ended |
| ||||
|
|
2012 |
|
2011 |
| ||
Intersegment revenue |
|
|
|
|
| ||
GS&T |
|
$ |
695 |
|
$ |
729 |
|
Baltic Trading |
|
|
|
|
| ||
Total operating segments |
|
695 |
|
729 |
| ||
Eliminating revenue |
|
(695 |
) |
(729 |
) | ||
Total consolidated intersegment revenue |
|
$ |
|
|
$ |
|
|
The following table presents a reconciliation of total net (loss) income for the Companys two operating segments to total consolidated net (loss) income for the three months ended March 31, 2012 and 2011. The eliminating net loss (income) noted in the following table consists of the elimination of intercompany transactions between GS&T and Baltic Trading, as well as dividends received by GS&T from Baltic Trading for its Class B shares of Baltic Trading.
|
|
For the three months ended |
| ||||
|
|
2012 |
|
2011 |
| ||
Net (loss) income |
|
|
|
|
| ||
GS&T |
|
$ |
(31,224 |
) |
$ |
14,795 |
|
Baltic Trading |
|
(4,456 |
) |
(1,694 |
) | ||
Total operating segments |
|
(35,680 |
) |
13,101 |
| ||
Eliminating net loss (income) |
|
703 |
|
(930 |
) | ||
Total consolidated net (loss) income |
|
$ |
(36,383 |
) |
$ |
12,171 |
|
The following table presents a reconciliation of total assets for the Companys two operating segments to total consolidated assets as of March 31, 2012 and December 31, 2011. The eliminating assets noted in the following table consist of the elimination of intercompany transactions resulting from the capitalization of fees paid to GS&T by Baltic Trading as vessel assets, including related accumulated depreciation, as well as the outstanding receivable balance due to GS&T from Baltic Trading as of March 31, 2012 and December 31, 2011.
|
|
March 31, 2012 |
|
December 31, |
| ||
Total assets |
|
|
|
|
| ||
GS&T |
|
$ |
2,740,562 |
|
$ |
2,737,988 |
|
Baltic Trading |
|
378,036 |
|
384,955 |
| ||
Total operating segments |
|
3,118,598 |
|
3,122,943 |
| ||
Eliminating assets |
|
(3,589 |
) |
(3,666 |
) | ||
Total consolidated assets |
|
$ |
3,115,009 |
|
$ |
3,119,277 |
|
4 - CASH FLOW INFORMATION
As of March 31, 2012 and December 31, 2011, the Company had five and eight interest rate swaps, respectively, which are described and discussed in Note 11 Interest Rate Swap Agreements. The fair value of all five of the swaps is in a liability position of $22,560, $1,738 of which was classified within current liabilities, as of March 31, 2012. At December 31, 2011, the eight swaps were in a liability position of $25,340, $1,686 of which was classified within current liabilities.
For the three months ended March 31, 2012, the Company had non-cash investing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in accounts payable and accrued expenses consisting of $226 for the purchase of vessels and $428 for the purchase of other fixed assets. Additionally, for the three months ended March 31, 2012, the Company had non-cash financing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in accounts payable and accrued expenses consisting of $30 associated with deferred financing fees and $219 associated with common stock issuance costs related to the equity offering completed on February 28, 2012.
For the three months ended March 31, 2011, the Company had non-cash investing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in accounts payable and accrued expenses consisting of $2,267 for the purchase of vessels, $28 associated with deposits on vessels and $113 for the purchase of other fixed assets. Additionally, for the three months ended March 31, 2011, the Company had non-cash financing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in accounts payable and accrued expenses consisting of $86 associated with deferred financing fees.
Also, for the three months ended March 31, 2011, the Company had non-cash investing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in prepaid expenses and other current assets as of March 31, 2011 consisting of $23 interest receivable associated with deposits on vessels and $5 associated with the purchase of vessels.
For the three months ended March 31, 2011, the Company made a reclassification of $3,625 from deposits on vessels to vessels, net of accumulated depreciation, due to the completion of the purchase of the Genco Rhone.
During the three months ended March 31, 2012 and 2011, cash paid for interest, net of amounts capitalized and including bond coupon interest paid, was $25,559 and $22,041, respectively.
During the three months ended March 31, 2012 and 2011, cash paid for estimated income taxes was $134 and $195, respectively.
5 - VESSEL ACQUISITIONS AND DISPOSITIONS
On March 29, 2011, GS&T took delivery of the Genco Rhone, a 58,000 dwt Supramax vessel, which was purchased from Bourbon S.A. (Bourbon) pursuant to the Master Agreement dated June 24, 2010 between GS&T and Bourbon. The Genco Rhone is the last of 13 vessels to be acquired and retained by GS&T under such agreements. GS&T paid a total purchase price of approximately $35.7 million for the Genco Rhone which was financed with available cash, including proceeds from its concurrent offerings of common stock and 5.00% Convertible Senior Notes due August 15, 2015, which were completed on July 27, 2010. The Company drew down from the $253 million term loan facility to refund $21.5 million associated with the purchase of the Genco Rhone on March 30, 2011.
On May 12, 2011, July 20, 2011 and November 10, 2011, GS&T took delivery of the Genco Avra, Genco Mare and Genco Spirit, respectively. These vessels are approximately 34,400 dwt Handysize newbuildings which were purchased from companies within the Metrostar group of companies pursuant to the agreement dated June 3, 2010 to acquire five Handysize vessels. These three vessels were the last vessels delivered pursuant to the aforementioned agreement. GS&T utilized available cash of $29.8 million, as well as $60.0 million under its $100 million term loan facility, to pay the remaining balance of $89.8 million.
Refer to Note 1 General Information for a listing of the vessel delivery dates for the vessel acquisitions discussed herein.
The Genco Avra and Genco Spirit had existing below market time charters at the time of acquisition. GS&T recorded a liability for time charters acquired of $372 during the second quarter of 2011 upon the delivery of the Genco Avra to its charterer and $205 during the fourth quarter of 2011 upon the delivery of the Genco Spirit to its charterer. Below market time charters, including those acquired during previous periods, were amortized as an increase to voyage revenue in the amount of $186 and $473 for the three months ended March 31, 2012 and 2011, respectively.
Capitalized interest expense associated with newbuilding contracts for the three months ended March 31, 2012 and 2011 was $0 and $79, respectively.
6 - INVESTMENTS
The Company holds an investment in the capital stock of Jinhui Shipping and Transportation Limited (Jinhui). Jinhui is a drybulk shipping owner and operator focused on the Supramax segment of drybulk shipping. This investment is designated as Available For Sale (AFS) and is reported at fair value, with unrealized gains and losses recorded in shareholders equity as a component of accumulated other comprehensive loss (AOCI). At March 31, 2012 and December 31, 2011, the Company held 16,335,100 shares of Jinhui capital stock which is recorded at its fair value of $32,282 and $24,468, respectively, based on the closing price on March 30, 2012 and December 30, 2011, respectively.
The Company reviews the investment in Jinhui for other than temporary impairment on a quarterly basis. There were no impairment charges recognized for the three months ended March 31, 2012 and 2011.
The unrealized gain on the Jinhui capital stock remains a component of AOCI, since this investment is designated as an AFS security.
Refer to Note 12 Accumulated Other Comprehensive Loss for a breakdown of the components of AOCI.
7 NET (LOSS) INCOME PER COMMON SHARE
The computation of basic net (loss) income per share is based on the weighted-average number of common shares outstanding during the year. The computation of diluted net loss (income) per share assumes the vesting of nonvested stock awards (refer to Note 20 Nonvested Stock Awards), for which the assumed proceeds upon vesting are deemed to be the amount of compensation cost attributable to future services and are not yet recognized using the treasury stock method, to the extent dilutive. Of the 936,787 nonvested shares outstanding at March 31, 2012 (refer to Note 20 Nonvested Stock Awards), all are anti-dilutive. The Companys diluted net (loss) income per share will also reflect the assumed conversion under the Companys convertible debt if the impact is dilutive under the if converted method. The impact of the shares convertible under the Companys convertible notes is excluded from the computation of diluted net (loss) income per share when interest expense per common share obtainable upon conversion is greater than basic earnings per share.
The components of the denominator for the calculation of basic net (loss) income per share and diluted net (loss) income per share are as follows:
|
|
Three Months Ended |
| ||
|
|
2012 |
|
2011 |
|
|
|
|
|
|
|
Common shares outstanding, basic: |
|
|
|
|
|
Weighted-average common shares outstanding, basic |
|
38,090,590 |
|
35,142,110 |
|
|
|
|
|
|
|
Common shares outstanding, diluted: |
|
|
|
|
|
Weighted-average common shares outstanding, basic |
|
38,090,590 |
|
35,142,110 |
|
|
|
|
|
|
|
Dilutive effect of convertible notes |
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of restricted stock awards |
|
|
|
76,589 |
|
|
|
|
|
|
|
Weighted-average common shares outstanding, diluted |
|
38,090,590 |
|
35,218,699 |
|
The following table sets forth a reconciliation of the net (loss) income attributable to GS&T and the net (loss) income attributable to GS&T for diluted earnings per share under the if-converted method:
|
|
Three Months Ended |
| ||||
|
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
Net (loss) income attributable to GS&T |
|
$ |
(33,071 |
) |
$ |
13,426 |
|
|
|
|
|
|
| ||
Interest expense related to convertible notes, if dilutive |
|
|
|
|
| ||
|
|
|
|
|
| ||
Net (loss) income attributable to GS&T for the computation of diluted net (loss) income per share |
|
$ |
(33,071 |
) |
$ |
13,426 |
|
8 - RELATED PARTY TRANSACTIONS
The following represent related party transactions reflected in these condensed consolidated financial statements:
The Company makes available employees performing internal audit services to General Maritime Corporation (GMC), where the Companys Chairman, Peter C. Georgiopoulos, also serves as Chairman of the Board. For the three months ended March 31, 2012 and 2011, the Company invoiced $48 and $46, respectively, to GMC, which includes time associated with such internal audit services. Additionally, during the three months ended March 31, 2012 and 2011, the Company incurred travel and other expenditures totaling $4 and $157, respectively, reimbursable to GMC or its service provider. At March 31, 2012, the amount due to the Company from GMC was $128, of which $90 was reserved for pursuant to GMCs bankruptcy proceedings. At December 31, 2011, the amount due to the Company from GMC was $114, of which $90 was reserved for pursuant to GMCs bankruptcy proceedings.
During the three months ended March 31, 2012 and 2011, the Company incurred legal services (primarily in connection with vessel acquisitions) aggregating $3 and $13, respectively, from Constantine Georgiopoulos, the father of Peter C. Georgiopoulos, Chairman of the Board. At March 31, 2012 and December 31, 2011, $3 and $29, respectively, was outstanding to Constantine Georgiopoulos.
During the three months ended March 31, 2012 and 2011, the Company utilized the services of North Star Maritime, Inc. (NSM) which is owned and operated by one of GS&Ts directors, Rear Admiral Robert C. North, USCG (ret.). NSM, a marine industry consulting firm, specializes in international and domestic maritime safety, security and environmental protection issues. NSM billed $0 and $2 for services rendered during the three months ended March 31, 2012 and 2011. There are no amounts due to NSM at March 31, 2012 and December 31, 2011.
GS&T and Baltic Trading have entered into agreements with Aegean Marine Petroleum Network, Inc. (Aegean) to purchase lubricating oils for certain vessels in their fleets. Peter C. Georgiopoulos, Chairman of the Board of the Company, is Chairman of the Board of Aegean. During the three months ended March 31, 2012 and 2011, Aegean supplied lubricating oils to the Companys vessels aggregating $499 and $463, respectively. At March 31, 2012 and December 31, 2011, $190 and $408 remained outstanding, respectively.
During the three months ended March 31, 2012 and 2011, the Company invoiced MEP for technical services provided and expenses paid on MEPs behalf aggregating $846 and $839, respectively. MEP is managed by a company owned by Peter C. Georgiopoulos, Chairman of the Board. At March 31, 2012 and December 31, 2011, $9 and $7, respectively, was due to the Company from MEP. Total service revenue earned by the Company for technical service provided to MEP for the three months ended March 31, 2012 and 2011 was $819 and $810, respectively.
9 - LONG-TERM DEBT
Long-term debt consists of the following:
|
|
March 31, 2012 |
|
December 31, 2011 |
| ||
|
|
|
|
|
| ||
2007 Credit Facility |
|
$ |
1,162,000 |
|
$ |
1,174,500 |
|
$100 Million Term Loan Facility |
|
88,945 |
|
90,869 |
| ||
$253 Million Term Loan Facility |
|
216,318 |
|
221,393 |
| ||
2010 Baltic Trading Credit Facility |
|
101,250 |
|
101,250 |
| ||
Less: Current portion |
|
(220,772 |
) |
(185,077 |
) | ||
|
|
|
|
|
| ||
Long-term debt |
|
$ |
1,347,741 |
|
$ |
1,402,935 |
|
2007 Credit Facility
On July 20, 2007, the Company entered into a credit facility with DnB NOR Bank ASA (as amended, the 2007 Credit Facility). The maximum amount that may be borrowed under the 2007 Credit Facility at March 31, 2012 is $1,162,000. As of March 31, 2012, the Company has utilized its maximum borrowing capacity under the 2007 Credit Facility.
The collateral maintenance financial covenant, maximum leverage ratio covenant and minimum permitted consolidated interest ratio covenants are currently waived and the Companys cash dividends and share repurchases have been suspended until the collateral maintenance financial covenant can be satisfied. The total amount of the 2007 Credit Facility is subject to quarterly reductions of $12,500 which began on March 31, 2009 and ended on March 31, 2012 and is subject to quarterly reductions of $48,195 beginning June 30, 2012 and thereafter until the maturity date, July 20, 2017. A final payment of $149,905 will be due on the maturity date.
Pursuant to the amendment to the 2007 Credit Facility which was entered into on December 21, 2011, the Company was subject to a facility fee of 2.0% per annum on the average daily outstanding principal amount of the loans outstanding, payable quarterly in arrears, which was subject to a reduction to 1.0% if the Company consummated an equity offering resulting in an aggregate amount of $50,000 of gross proceeds. On February 28, 2012, the Company completed an equity offering of 7,500,000 shares which resulted in gross proceeds of $53,250. As such, effective February 28, 2012, the facility fee was reduced to 1.0%.
As of March 31, 2012, the Company believes it is in compliance with all of the financial covenants under its 2007 Credit Facility, as amended.
At March 31, 2012, there were no letters of credit issued under the 2007 Credit Facility.
$100 Million Term Loan Facility
On August 12, 2010, the Company entered into the $100,000 secured term loan facility ($100 Million Term Loan Facility). As of March 31, 2012, the Company has utilized its maximum borrowing capacity as $100,000 of drawdowns have been made. The Company has used the $100 Million Term Loan Facility to fund or refund the Company a portion of the purchase price of the acquisition of five vessels from companies within the Metrostar group of companies. As of March 31, 2012, there was no availability under the $100 Million Term Loan Facility.
Pursuant to the amendment to the $100 Million Term Loan Facility that was entered into on December 21, 2011, the maximum leverage ratio covenant and the minimum permitted consolidated interest ratio covenant are currently waived.
As of March 31, 2012, the Company believes it is in compliance with all of the financial covenants under the $100 Million Term Loan Facility, as amended.
$253 Million Term Loan Facility
On August 20, 2010, the Company entered into the $253,000 senior secured term loan facility ($253 Million Term Loan Facility). As of March 31, 2012, the company has utilized its maximum borrowing capacity as $253,000 of drawdowns have been made to fund or refund to the Company a portion of the purchase price of the 13 vessels purchased from Bourbon SA during the third quarter of 2010 and first quarter of 2011. As of March 31, 2012, there was no availability under the $253 Million Term Loan Facility.
Pursuant to the amendment to the $253 Million Term Loan Facility that was entered into on December 21, 2011, the maximum leverage ratio covenant and the minimum permitted consolidated interest ratio covenant are currently waived.
As of March 31, 2012, the Company believes it is in compliance with all of the financial covenants under the $253 Million Term Loan Facility, as amended.
2010 Baltic Trading Credit Facility
On April 16, 2010, Baltic Trading entered into a $100,000 senior secured revolving credit facility with Nordea Bank Finland plc, acting through its New York branch (as amended, the 2010 Baltic Trading Credit Facility). An amendment to the 2010 Baltic Trading Credit Facility was entered into by Baltic Trading effective November 30, 2010. Among other things, this amendment increased the commitment amount of the 2010 Baltic Trading Credit Facility from $100,000 to $150,000. As of March 31, 2012, total available working capital borrowings were $23,500 as $1,500 was drawn down during 2010 for working capital purposes. As of March 31, 2012, $38,750 remained available under the 2010 Credit Facility as the total commitment was reduced to $140,000 on November 30, 2011.
As of March 31, 2012, the Company believes Baltic Trading is in compliance with all of the financial covenants under the 2010 Baltic Trading Credit Facility.
Interest rates
The following tables sets forth the effective interest rate associated with the interest expense for the Companys debt facilities noted above, including the rate differential between the pay fixed, receive variable rate on the interest rate swap agreements that were in effect (refer to Note 11 Interest Rate Swap Agreements), combined, the cost associated with unused commitment fees as well as the facility fee for the 2007 Credit Facility which was reduced from 2.0% to 1.0% on February 28, 2012 as noted above. Additionally, it includes the range of interest rates on the debt, excluding the impact of swaps and unused commitment fees:
|
|
Three months ended March 31, |
| ||
|
|
2012 |
|
2011 |
|
Effective Interest Rate |
|
5.05 |
% |
4.46 |
% |
Range of Interest Rates (excluding impact of swaps and unused commitment fees) |
|
3.24% to 4.63 |
% |
2.31% to 3.31 |
% |
10 CONVERTIBLE SENIOR NOTES
The Company issued $125,000 of 5.0% Convertible Senior Notes on July 27, 2010 (the 2010 Notes). The Indenture includes customary agreements and covenants by the Company, including with respect to events of default.
The following tables provide additional information about the Companys 2010 Notes:
|
|
March 31, 2012 |
|
December 31, |
| ||
Carrying amount of the equity component (additional paid-in capital) |
|
$ |
24,375 |
|
$ |
24,375 |
|
Principal amount of the 2010 Notes |
|
125,000 |
|
125,000 |
| ||
Unamortized discount of the liability component |
|
17,529 |
|
18,619 |
| ||
Net carrying amount of the liability component |
|
107,471 |
|
106,381 |
| ||
|
|
Three Months Ended |
| ||||
|
|
2012 |
|
2011 |
| ||
Effective interest rate on liability component |
|
9.9 |
% |
9.9 |
% | ||
Cash interest expense recognized |
|
$ |
1,562 |
|
$ |
1,531 |
|
Non-cash interest expense recognized |
|
1,091 |
|
967 |
| ||
Deferred financing cost amortization recognized as interest expense |
|
179 |
|
177 |
| ||
The remaining period over which the unamortized discount will be recognized is 3.4 years. As of March 31, 2012, the if-converted value of the 2010 Notes does not exceed their principal amount.
Due to the 2015 maturity of the 2010 Notes and the Companys intent to hold the 2010 Notes until maturity, the 2010 Notes have been classified as a noncurrent liability on the condensed consolidated balance sheet as of March 31, 2012 and December 31, 2011.
11 - INTEREST RATE SWAP AGREEMENTS
As of March 31, 2012 and December 31, 2011, the Company had five and eight interest rate swap agreements outstanding, respectively, with DnB NOR Bank ASA to manage interest costs and the risk associated with changing interest rates related to the Companys 2007 Credit Facility. The total notional principal amount of the swaps at March 31, 2012 and December 31, 2011 was $356,233 and $606,233, respectively, and the swaps have specified rates and durations.
The following table summarizes the interest rate swaps designated as cash flow hedges that were in place as of March 31, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
March 31, 2012 |
|
December 31, |
| ||
Interest Rate Swap Detail |
|
Notional |
|
Notional |
| ||||||||
Trade |
|
Fixed |
|
Start Date |
|
End date |
|
Amount |
|
Amount |
| ||
Date |
|
Rate |
|
of Swap |
|
of Swap |
|
Outstanding |
|
Outstanding |
| ||
9/6/05 |
|
4.485 |
% |
9/14/05 |
|
7/29/15 |
|
$ |
106,233 |
|
$ |
106,233 |
|
3/29/06 |
|
5.25 |
% |
1/2/07 |
|
1/1/14 |
|
50,000 |
|
50,000 |
| ||
3/24/06 |
|
5.075 |
% |
1/2/08 |
|
1/2/13 |
|
50,000 |
|
50,000 |
| ||
8/9/07 |
|
5.07 |
% |
1/2/08 |
|
1/3/12 |
|
|
|
100,000 |
| ||
8/16/07 |
|
4.985 |
% |
3/31/08 |
|
3/31/12 |
|
|
|
50,000 |
| ||
8/16/07 |
|
5.04 |
% |
3/31/08 |
|
3/31/12 |
|
|
|
100,000 |
| ||
1/9/09 |
|
2.05 |
% |
1/22/09 |
|
1/22/14 |
|
100,000 |
|
100,000 |
| ||
2/11/09 |
|
2.45 |
% |
2/23/09 |
|
2/23/14 |
|
50,000 |
|
50,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
$ |
356,233 |
|
$ |
606,233 |
|
The following table summarizes the derivative asset and liability balances at March 31, 2012 and December 31, 2011:
|
|
Asset Derivatives |
|
Liability Derivatives |
| ||||||||||||
|
|
Balance |
|
Fair Value |
|
Balance |
|
Fair Value |
| ||||||||
|
|
Sheet |
|
March 31, |
|
December |
|
Sheet |
|
March 31, |
|
December |
| ||||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate contracts |
|
Fair value of derivative instruments (Current Assets) |
|
$ |
|
|
$ |
|
|
Fair value of derivative instruments (Current Liabilities) |
|
$ |
1,738 |
|
$ |
1,686 |
|
Interest rate contracts |
|
Fair value of derivative instruments (Noncurrent Assets) |
|
|
|
|
|
Fair value of derivative instruments (Noncurrent Liabilities) |
|
20,822 |
|
23,654 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
22,560 |
|
25,340 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Derivatives |
|
|
|
$ |
|
|
$ |
|
|
|
|
$ |
22,560 |
|
$ |
25,340 |
|
The following tables present the impact of derivative instruments and their location within the Condensed Consolidated Statement of Operations:
The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations
For the Three-Month Period Ended March 31, 2012
Derivatives in Cash |
|
Amount of |
|
Location of |
|
Amount of |
|
Location of |
|
Amount of |
| |||
Relationships |
|
2012 |
|
Portion) |
|
2012 |
|
Portion) |
|
2012 |
| |||
Interest rate contracts |
|
$ |
(1,779 |
) |
Interest Expense |
|
$ |
(4,532 |
) |
Other Income (Expense) |
|
$ |
27 |
|
The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations
For the Three-Month Period Ended March 31, 2011
Derivatives in Cash |
|
Amount of |
|
Location of |
|
Amount of |
|
Location of |
|
Amount of |
| |||
Relationships |
|
2011 |
|
Portion) |
|
2011 |
|
Portion) |
|
2011 |
| |||
Interest rate contracts |
|
$ |
(107 |
) |
Interest Expense |
|
$ |
(7,311 |
) |
Other Income (Expense) |
|
$ |
13 |
|
At March 31, 2012, ($10,754) of AOCI is expected to be reclassified into interest expense over the next 12 months associated with interest rate derivatives.
The Company is required to provide collateral in the form of vessel assets to support the interest rate swap agreements, excluding vessel assets of Baltic Trading. At March 31, 2012, the Companys 35 vessels mortgaged under the 2007 Credit Facility served as collateral in the aggregate amount of $100,000.
12 - ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of AOCI included in the accompanying condensed consolidated balance sheets consist of net unrealized gain (loss) on cash flow hedges and net unrealized gain (loss) from investments in Jinhui stock as of March 31, 2012 and December 31, 2011.
|
|
Net Unrealized |
|
Unrealized |
|
AOCI |
| |||
AOCI January 1, 2012 |
|
$ |
(25,245 |
) |
$ |
7,696 |
|
$ |
(17,549 |
) |
Change in unrealized gain on investments |
|
|
|
7,814 |
|
7,814 |
| |||
Unrealized gain on cash flow hedges |
|
2,753 |
|
|
|
2,753 |
| |||
AOCI March 31, 2012 |
|
$ |
(22,492 |
) |
$ |
15,510 |
|
$ |
(6,982 |
) |
13 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values and carrying values of the Companys financial instruments at March 31, 2012 and December 31, 2011 which are required to be disclosed at fair value, but not recorded at fair value, are noted below.
|
|
March 31, 2012 |
|
December 31, 2011 |
| ||||||||
|
|
Carrying |
|
Fair Value |
|
Carrying |
|
Fair Value |
| ||||
Cash and cash equivalents |
|
$ |
246,683 |
|
$ |
246,683 |
|
$ |
227,968 |
|
$ |
227,968 |
|
Restricted cash |
|
9,750 |
|
9,750 |
|
9,750 |
|
9,750 |
| ||||
Floating rate debt |
|
1,568,513 |
|
1,568,513 |
|
1,588,012 |
|
1,588,012 |
| ||||
2010 Notes |
|
107,471 |
|
85,000 |
|
106,381 |
|
80,000 |
| ||||
The fair value of the investments is based on quoted market rates. The fair value of the floating rate debt under the 2007 Credit Facility, $100 Million Term Loan Facility, $253 Million Term Loan Facility and the 2010 Baltic Trading Credit Facility are based on managements estimate of rates the Company could obtain for similar debt of the same remaining maturities. Additionally, the Company considers its creditworthiness in determining the fair value of floating rate debt under the credit facilities. The carrying value approximates the fair market value for these floating rate loans. The fair value of the convertible senior notes payable represents the market value based on recent transactions of the 2010 Notes at March 31, 2012 and December 31, 2011 without bifurcating the value of the conversion option. The fair value of the interest rate swaps is the estimated amount the Company would receive to terminate the swap agreements at the reporting date, taking into account current interest rates and the creditworthiness of both the swap counterparty and the Company. The carrying amounts of the Companys other financial instruments at March 31, 2012 and December 31, 2011 (principally Due from charterers and Accounts payable and accrued expenses), approximate fair values because of the relatively short maturity of these instruments.
The Accounting Standards Codification Subtopic 820-10, Fair Value Measurements & Disclosures (ASC 820-10), applies to all assets and liabilities that are being measured and reported on a fair value basis. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumption (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgement. The three levels are defined as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than those include in Level 1. For example, quoted prices for similar assets or liabilites in active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3: Unobservable inputs reflecting managements own assumptions about the inputs used in pricing the asset or liability.
As of March 31, 2012 and December 31, 2011, the fair values of the Companys financial assets and liabilities are categorized as follows:
|
|
March 31, 2012 |
| |||||||
|
|
Total |
|
Quoted |
|
Significant |
| |||
Investments |
|
$ |
32,282 |
|
$ |
32,282 |
|
$ |
|
|
Derivative instruments liability position |
|
22,560 |
|
|
|
22,560 |
| |||
|
|
December 31, 2011 |
| |||||||
|
|
Total |
|
Quoted |
|
Significant |
| |||
Investments |
|
$ |
24,468 |
|
$ |
24,468 |
|
$ |
|
|
Derivative instruments liability position |
|
25,340 |
|
|
|
25,340 |
| |||
The Company holds an investment in the capital stock of Jinhui, which is classified as a long-term investment. The stock of Jinhui is publicly traded on the Oslo Stock Exchange and is considered a Level 1 item. The Companys interest rate derivative instruments are pay-fixed, receive-variable interest rate swaps based on LIBOR. The Company has elected to use the income approach to value the derivatives, using observable Level 2 market inputs at measurement date and standard valuation techniques to convert future amounts to a single present amount assuming that participants are motivated, but not compelled to transact. Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR for the first two years) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR cash and swap rates and credit risk at commonly quoted intervals). Mid-market pricing is used as a practical expedient for fair value measurements. Refer to Note 11 Interest Rate Swap Agreements for further information regarding the Companys interest rate swap agreements. ASC 820-10 states that the fair value measurement of an asset or liability must reflect the nonperformance risk of the entity and the counterparty. Therefore, the impact of the counterpartys creditworthiness when in an asset position and the Companys creditworthiness when in a liability position has also been factored into the fair value measurement of the derivative instruments in an asset or liability position and did not have a material impact on the fair value of these derivative instruments. As of March 31, 2012, both the counterparty and the Company are expected to continue to perform under the contractual terms of the instruments. Cash and cash equivalents and restricted cash are considered Level 1 items as they represent liquid assets with short-term maturities. Floating rate debt is considered to be a Level 2 item as the Company considers the estimate of rates it could obtain for similar debt. The 2010 Notes are publicly traded in the over-the-counter market; however they are not considered to be actively traded. As such, the 2010 Notes are considered to be a Level 2 item.
14 - PREPAID EXPENSES AND OTHER CURRENT AND NONCURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
|
|
March 31, 2012 |
|
December |
| ||
Lubricant inventory, fuel oil and diesel oil inventory and other stores |
|
$ |
12,230 |
|
$ |
10,376 |
|
Prepaid items |
|
5,913 |
|
5,514 |
| ||
Insurance receivable |
|
1,065 |
|
1,025 |
| ||
Other |
|
1,379 |
|
794 |
| ||
Total prepaid expenses and other current assets |
|
$ |
20,587 |
|
$ |
17,709 |
|
Other noncurrent assets in the amount of $514 at March 31, 2012 and December 31, 2011 represent the security deposit related to the operating lease entered into effective April 4, 2011. Refer to Note 19 Commitments and Contingencies for further information related to the lease agreement.
15 - OTHER ASSETS, NET
Other assets consist of deferred financing costs, which include fees, commissions and legal expenses associated with securing loan facilities and other debt offerings and amending existing loan facilities. Total net deferred financing costs consist of the following as of March 31, 2012 and December 31, 2011:
|
|
March 31, 2012 |
|
December |
| ||
|
|
|
|
|
| ||
2007 Credit Facility |
|
$ |
13,231 |
|
$ |
13,189 |
|
$100 Million Term Loan Facility |
|
1,594 |
|
1,578 |
| ||
$253 Million Term Loan Facility |
|
4,127 |
|
4,113 |
| ||
2010 Notes |
|
3,637 |
|
3,637 |
| ||
2010 Baltic Trading Credit Facility |
|
3,027 |
|
3,027 |
| ||
Total deferred financing costs |
|
25,616 |
|
25,544 |
| ||
Less: accumulated amortization |
|
8,729 |
|
7,749 |
| ||
Total |
|
$ |
16,887 |
|
$ |
17,795 |
|
Amortization expense for deferred financing costs for the three months ended March 31, 2012 and 2011 was $980 and $778, respectively. This amortization expense is recorded as a component of interest expense in the Condensed Consolidated Statements of Operations.
16 - FIXED ASSETS
Fixed assets consist of the following:
|
|
March 31, 2012 |
|
December |
| ||
Fixed assets, at cost: |
|
|
|
|
| ||
Vessel equipment |
|
$ |
2,723 |
|
$ |
2,720 |
|
Leasehold improvements |
|
3,752 |
|
3,664 |
| ||
Furniture and fixtures |
|
997 |
|
997 |
| ||
Computer equipment |
|
639 |
|
632 |
| ||
|
|
8,111 |
|
8,013 |
| ||
Less: accumulated depreciation and amortization |
|
2,621 |
|
2,422 |
| ||
Total |
|
$ |
5,490 |
|
$ |
5,591 |
|
Depreciation and amortization expense for fixed assets for the three months ended March 31, 2012 and 2011 was $198 and $121, respectively.
17 ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
|
|
March 31, 2012 |
|
December |
| ||
Accounts payable |
|
$ |
5,094 |
|
$ |
5,047 |
|
Accrued general and administrative expenses |
|
7,867 |
|
14,275 |
| ||
Accrued vessel operating expenses |
|
11,502 |
|
11,390 |
| ||
Total |
|
$ |
24,463 |
|
$ |
30,712 |
|
18 - REVENUE FROM TIME CHARTERS
Total voyage revenue earned on time charters, including revenue earned in vessel pools and spot market-related time charters, for the three months ended March 31, 2012 and 2011 was $59,025 and $100,619, respectively. Included in revenues for the three months ended March 31, 2012 and 2011 was profit sharing revenue of $0 and $93, respectively. Future minimum time charter revenue, based on vessels committed to noncancelable time charter contracts as of April 28, 2012 is expected to be $45,578 for the remainder of 2012, $7,847 during 2013 and $3,020 during 2014, assuming off-hire due to any scheduled drydocking and that no additional off-hire time is incurred. For most drydockings, the Company assumes twenty days of offhire. Future minimum revenue excludes revenue earned for the five vessels currently in pool arrangements, vessels that are currently on or will be on spot market-related time charters, as spot rates cannot be estimated, as well as profit sharing revenue.
19 - COMMITMENTS AND CONTINGENCIES
In September 2005, the Company entered into a 15-year lease for office space in New York, New York for which there was a free rental period from September 1, 2005 to July 31, 2006. On January 6, 2012, the Company ceased the use of this space and as such has recorded, during the three months ended March 31, 2012, net rent expense of $399, representing the present value of the Companys estimated remaining rent expense for the duration of the lease after taking into account estimated future sublease income and deferred rent on the facility. The current and long-term lease obligations related to this lease agreement are recorded in the condensed consolidated balance sheet at March 31, 2012 in Current portion of lease obligations and Long-term lease obligations, respectively. Rent expense under this lease for the three months ended March 31, 2011 was $117.
Future minimum rental payments on the above lease for the next five years and thereafter are as follows: $388 for the remainder of 2012, $518 annually for 2013 through 2015, $529 for 2016, and a total of $2,522 for the remaining term of the lease.
Effective April 4, 2011, the Company entered into a seven-year sub-sublease agreement for additional office space in New York, New York. The term of the sub-sublease commenced June 1, 2011, with a free base rental period until October 31, 2011.
Following the expiration of the free base rental period, the monthly base rental payments will be $82 per month until May 31, 2015 and thereafter will be $90 per month until the end of the seven-year term. Pursuant to the sub-sublease agreement, the sublessor is obligated to contribute $472 toward the cost of the Companys alterations to the sub-subleased office space. The Company has also entered into a direct lease with the over-landlord of such office space that will commence immediately upon the expiration of such sub-sublease agreement, for a term covering the period from May 1, 2018 to September 30, 2025; the direct lease provides for a free base rental period from May 1, 2018 to September 30, 2018. Following the expiration of the free base rental period, the monthly base rental payments will be $186 per month from October 1, 2018 to April 30, 2023 and $204 per month from May 1, 2023 to September 30, 2025. For accounting purposes, the sub-sublease agreement and direct lease agreement with the landlord constitutes one lease agreement. As a result of the straight-line rent calculation generated by the free rent period and the tenant work credit, the monthly straight-line rental expense for the term of the entire lease from June 1, 2011 to September 30, 2025 will be $130. The Company had a long-term lease obligation at March 31, 2012 and December 31, 2011 of $1,361 and $1,217, respectively. Rent expense pertaining to this new lease for the three months ended March 31, 2012 and 2011 was $390 and $0, respectively.
Future minimum rental payments on the above lease for the next five years and thereafter are as follows: $736 for the remainder of 2012, $982 annually for 2013 through 2014, $1,037 for 2015, $1,076 for 2016 and a total of $17,582 for the remaining term of the lease.
20 - NONVESTED STOCK AWARDS
The table below summarizes the Companys nonvested stock awards for the three months ended March 31, 2012 under the Genco Shipping & Trading Limited 2005 Equity Incentive Plan (the GS&T Plan):
|
|
Number of |
|
Weighted |
| |
Outstanding at January 1, 2012 |
|
936,787 |
|
$ |
14.06 |
|
Granted |
|
|
|
|
| |
Vested |
|
|
|
|
| |
Forfeited |
|
|
|
|
| |
|
|
|
|
|
| |
Outstanding at March 31, 2012 |
|
936,787 |
|
$ |
14.06 |
|
There were no shares that vested under the GS&T Plan during the three months ended March 31, 2012 and 2011.
For the three months ended March 31, 2012 and 2011, the Company recognized nonvested stock amortization expense for the GS&T Plan, which is included in general, administrative and management fees, as follows:
|
|
Three Months Ended |
| ||||
|
|
2012 |
|
2011 |
| ||
General, administrative and management fees |
|
$ |
1,078 |
|
$ |
1,494 |
|
The fair value of nonvested stock at the grant date is equal to the closing stock price on that date. The Company is amortizing these grants over the applicable vesting periods, net of anticipated forfeitures. As of March 31, 2012, unrecognized compensation cost of $6,893 related to nonvested stock will be recognized over a weighted-average period of 3.42 years.
The following table presents a summary of Baltic Tradings nonvested stock awards for the three months ended March 31, 2012 under the Baltic Trading Limited 2010 Equity Incentive Plan (the Baltic Trading Plan):
|
|
Number of Baltic |
|
Weighted |
| |
Outstanding at January 1, 2012 |
|
545,750 |
|
$ |
11.60 |
|
Granted |
|
|
|
|
| |
Vested |
|
(116,500 |
) |
14.00 |
| |
Forfeited |
|
|
|
|
| |
|
|
|
|
|
| |
Outstanding at March 31, 2012 |
|
429,250 |
|
$ |
10.95 |
|
The total fair value of shares that vested under the Baltic Trading Plan during the three months ended March 31, 2012 and 2011 was $457 and $1,131, respectively. The total fair value is calculated as the number of shares vested during the period multiplied by the fair value on the vesting date.
For the three months ended March 31, 2012 and 2011, the Company recognized nonvested stock amortization expense for the Baltic Trading Plan, which is included in general, administrative and management fees, as follows:
|
|
Three Months Ended |
| ||||
|
|
2012 |
|
2011 |
| ||
General, administrative and management fees |
|
$ |
572 |
|
$ |
945 |
|
The Company is amortizing Baltic Tradings grants over the applicable vesting periods, net of anticipated forfeitures. As of March 31, 2012, unrecognized compensation cost of $2,190 related to nonvested stock will be recognized over a weighted-average period of 2.43 years.
21 - SHARE REPURCHASE PROGRAM
Since the inception of its share repurchase program through March 31, 2012, the Company has repurchased and retired 278,300 shares of its common stock for $11,500. Currently, the terms of the 2007 Credit Facility require the Company to suspend all share repurchases until the Company can represent that it is in a position to again satisfy the collateral maintenance covenant. No share repurchases were made during the three months ended March 31, 2012 and 2011.
22 - LEGAL PROCEEDINGS
From time to time, the Company may be subject to legal proceedings and claims in the ordinary course of its business, principally personal injury and property casualty claims. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. The Company is not aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a material effect on the Company, its financial condition, results of operations or cash flows.
23 - SUBSEQUENT EVENTS
On April 26, 2012, Baltic Trading declared a dividend of $0.05 per share to be paid on or about May 17, 2012 to shareholders of record as of May 10, 2012. The aggregate amount of the dividend is expected to be approximately $1.1 million, of which approximately $0.9 million will be paid to minority shareholders, which Baltic Trading anticipates will be funded from cash on hand at the time payment is to be made.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements use words such as anticipate, estimate, expect, project, intend, plan, believe, and other words and terms of similar meaning in connection with a discussion of potential future events, circumstances or future operating or financial performance. These forward-looking statements are based on managements current expectations and observations. Included among the factors that, in our view, could cause actual results to differ materially from the forward looking statements contained in this report are the following: (i) declines in demand or rates in the drybulk shipping industry; (ii) prolonged weakness in drybulk shipping rates; (iii) changes in the supply of or demand for drybulk products, generally or in particular regions; (iv) changes in the supply of drybulk carriers including newbuilding of vessels or lower than anticipated scrapping of older vessels; (v) changes in rules and regulations applicable to the cargo industry, including, without limitation, legislation adopted by international organizations or by individual countries and actions taken by regulatory authorities; (vi) increases in costs and expenses including but not limited to: crew wages, insurance, provisions, repairs, maintenance and general and administrative expenses; (vii) whether our insurance arrangements are adequate; (viii) changes in general domestic and international political conditions; (ix) acts of war, terrorism, or piracy; (x) changes in the condition of the our vessels or applicable maintenance or regulatory standards (which may affect, among other things, our anticipated drydocking or maintenance and repair costs) and unanticipated drydock expenditures; (xi) the number of offhire days needed to complete repairs on vessels and the timing and amount of any reimbursement by our insurance carriers for insurance claims including offhire days; (xii) our acquisition or disposition of vessels; (xiii) the completion of definitive documentation with respect to time charters; (xiv) charterers compliance with the terms of
their charters in the current market environment; and other factors listed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2011 and subsequent reports on Form 8-K and Form 10-Q.
The following managements discussion and analysis should be read in conjunction with our historical consolidated financial statements and the related notes included in this Form 10-Q.
General
We are a Marshall Islands company that transports iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes through the ownership and operation of drybulk carrier vessels. Excluding vessels of Baltic Trading Limited (Baltic Trading), as of May 10, 2012, our fleet consisted of nine Capesize, eight Panamax, 17 Supramax, six Handymax and 13 Handysize drybulk carriers, with an aggregate carrying capacity of approximately 3,810,000 dwt, and the average age of our fleet was approximately 7.0 years, as compared to the average age for the world fleet of approximately 11 years for the drybulk shipping segments in which we compete. We seek to deploy our vessels on time charters, spot market-related time charters or in vessel pools trading in the spot market, to reputable charterers, including Cargill International S.A., Pacific Basin Chartering Ltd., Trafigura Beheer B.V., Swissmarine Services S.A., Klaveness Chartering and LB/IVS Pool, in which Lauritzen Bulkers A/S acts as the pool manager. The majority of the vessels in our current fleet are presently engaged under time charter and spot market-related time charter contracts that expire (assuming the option periods in the time charters are not exercised) between May 2012 and May 2015.
In addition, as of May 10, 2012, Baltic Tradings fleet consisted of two Capesize, four Supramax and three Handysize drybulk carriers with an aggregate carrying capacity of approximately 672,000 dwt.
See pages 29 - 33 for a table of all vessels that have been delivered to us, including Baltic Tradings vessels.
Depending on market conditions, we intend to acquire additional modern, high-quality drybulk carriers through timely and selective acquisitions of vessels in a manner that is accretive to our cash flow. We expect to fund acquisitions of additional vessels using cash reserves set aside for this purpose or additional borrowings and may consider additional debt or equity financing alternatives from time to time.
Our management team and our other employees are responsible for the commercial and strategic management of our fleet. Commercial management includes the negotiation of charters for vessels, managing the mix of various types of charters, such as time charters, voyage charters and spot market-related time charters, and monitoring the performance of our vessels under their charters. Strategic management includes locating, purchasing, financing and selling vessels. We currently contract with three independent technical managers to provide technical management of our fleet at a lower cost than we believe would be possible in-house. Technical management involves the day-to-day management of vessels, including performing routine maintenance, attending to vessel operations and arranging for crews and supplies. Members of our New York City-based management team oversee the activities of our independent technical managers.
From time to time in the current global economic environment, our charterers with long-term time charters may request to renegotiate the terms of our charters with them. As a general matter, we do not agree to make changes to the terms of our charters in response to such requests. The failure of any charterer to meet its obligations under our long-term time charters could have an adverse effect on our results of operations.
Baltic Trading, formerly a wholly-owned subsidiary of the Company, completed its IPO on March 15, 2010. As of March 31, 2012, the Companys wholly-owned subsidiary Genco Investments LLC owned 5,699,088 shares of Baltic Tradings Class B Stock, which represents a 25.11% ownership interest in Baltic Trading at March 31, 2012 and 83.41% of the aggregate voting power of Baltic Tradings outstanding shares of voting stock. Baltic Trading is consolidated with the Company, as we control a majority of the voting interest in Baltic Trading. Managements discussion and analysis of the Companys results of operations and financial condition in this section includes the results of Baltic Trading.
We entered into a long-term management agreement (the Management Agreement) with Baltic Trading pursuant to which we apply our expertise and experience in the drybulk industry to provide Baltic Trading with commercial, technical, administrative and strategic services. The Management Agreement is for an initial term of approximately 15 years and will automatically renew for additional five-year periods unless terminated in accordance with its terms. Baltic Trading will pay us for the services we provide it as well as reimburse us for our costs and expenses incurred in providing certain of these services. Management fee income we earn from the Management Agreement net of any allocated shared expenses, such as salary, office expenses and other general and administrative fees, will be taxable to us. Upon consolidation with Baltic Trading, any management fee income earned will be eliminated for financial reporting purposes.
We provide technical services for drybulk vessels purchased by Maritime Equity Partners LLC (MEP) under an agency agreement between us and MEP. These services include oversight of crew management, insurance, drydocking, ship operations and financial statement preparation, but do not include chartering services. The services are provided for a fee of $750 per ship per day plus reimbursement of out-of-pocket costs and will be provided for an initial term of one year. MEP has the right to cancel provision of services on 60 days notice with payment of a one-year termination fee upon a change of our control. We may terminate provision of the services at any time on 60 days notice. Peter C. Georgiopoulos, our Chairman of the Board of Directors, is a minority investor in MEP, and affiliates of Oaktree Capital Management, L.P., of which Stephen A. Kaplan, one of our directors, is a principal, are majority investors in MEP. This arrangement was approved by an independent committee of our Board of Directors.
During January 2011, the Genco Success, a 1997-built Handymax vessel, was on charter to Korea Line Corporation (KLC) when KLC filed for a rehabilitation application. We estimate that we have a claim of approximately $0.8 million against KLC related primarily to unpaid revenue earned prior to re-delivery of the vessel. If a rehabilitation plan is approved by the South Korean courts and it is determined that we will receive a cash settlement for our outstanding claim, any amounts due from KLC will be recorded once the collectibility of the receivable has been assessed and the amount has been deemed collectible.
Factors Affecting Our Results of Operations