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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 was incorporated on September 27, 2004 under the laws of the Marshall Islands and as of September 30, 2010 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 September 30, 2010:
(1) On December 30, 2009, the Company took delivery of the Genco Claudius. However, the vessel has been designated by Lloyds Register of Shipping as having been built in 2010. (2) Dates for vessels being delivered in the future are estimates based on guidance received from the sellers and the respective shipyards. (3) Built dates for vessels delivering in the future are estimates based on guidance received from the sellers and respective shipyards.
Baltic Trading Limited (Baltic Trading), formerly a wholly-owned indirect subsidiary of GS&T at December 31, 2009, completed its initial public offering, or IPO, on March 15, 2010. As of September 30, 2010, GS&Ts wholly-owned subsidiary Genco Investments LLC owned 5,699,088 shares of Baltic Tradings Class B Stock, which represented a 25.35% ownership interest in Baltic Trading and 83.59% 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 September 30, 2010:
The Company provides technical services for drybulk vessels purchased by Maritime Equity Partners (MEP), which is managed by an affiliate of Peter C. Georgiopoulos, Chairman of the Board of Directors. These services include oversight of crew management, insurance, drydocking, ship operations and financial statement preparation. They 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 is a minority investor, 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. This arrangement was approved by an independent committee of the Companys Board of Directors.
On July 27, 2010, the Company closed on an equity offering of 3,593,750 shares of common stock (with the exercise of the underwriters over-allotment option) at an offering price of $16.00 per share. The Company received net proceeds of $54,882 after deducting underwriters fees and expenses. This offering was done concurrently with the issuance of $125,000 aggregate principal amount (with the exercise of the underwriters over-allotment option) of the 5.00% Convertible Senior Notes due August 15, 2015. Refer to Note 10 Convertible Senior Notes for further information. |
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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 Genco Shipping & Trading Limited, 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 unaudited 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. Interim results are not necessarily indicative of results for a full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Companys consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2009 (the 2009 10-K).
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 September 30, 2010 and December 31, 2009, the Company had an accrual of $1,605 and $959, respectively, related to these estimated customer claims.
Concentration of credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk are amounts due from charterers, cash and cash equivalents, deposits on vessels and interest rate swap agreements. With respect to amounts due from charterers, the Company attempts to limit its credit risk by performing ongoing credit evaluations and, when deemed necessary, requires letters of credit, guarantees or collateral. During the three months ended September 30, 2010 and 2009, the Company earned 100% of its revenues from twenty-four and eighteen customers, respectively. Additionally, the Company earned 100% of its revenues from twenty-seven and twenty-two customers for the nine months ended September 30, 2010 and 2009, respectively. Management does not believe significant risk exists in connection with the Companys concentrations of credit at September 30, 2010 and December 31, 2009.
For the three months ended September 30, 2010, there were two customers that individually accounted for more than 10% of revenues, Cargill International S.A. and Pacific Basin Chartering Ltd., which represented 28.53% and 13.18% of revenues, respectively. For the three months ended September 30, 2009, there were two customers that individually accounted for more than 10% of revenues, Cargill International S.A. and Pacific Basin Chartering Ltd., which represented 30.43% and 12.40% of revenues, respectively.
For the nine months ended September 30, 2010, there were two customers that individually accounted for more than 10% of revenues, Cargill International S.A. and Pacific Basin Chartering Ltd., which represented 28.32% and 12.15% of revenues, respectively. For the nine months ended September 30, 2009, there were two customers that individually accounted for more than 10% of revenues, Cargill International S.A. and Pacific Basin Chartering Ltd., which represented 30.41% and 14.33% of revenue, respectively.
At September 30, 2010, the Company maintains all of its cash and cash equivalents with four financial institutions. None of the Companys cash and cash equivalent balances are covered by insurance in the event of default by these financial institutions.
Deposits on vessels are held in escrow accounts maintained by DnB NOR Bank ASA. None of the deposits on vessel balances are covered by insurance in the event of default by this financial institution.
At September 30, 2010, the Company has ten interest rate swap agreements with DnB NOR Bank ASA to manage interest costs and the risk associated with changing interest rates related to the Companys credit facility with DnB NOR Bank ASA. None of the interest rate swap agreements are covered by insurance in the event of default by this financial institution.
Derivative financial instruments
Interest rate risk management
The Company is exposed to the impact of interest rate changes. The Companys objective is to manage the impact of interest rate changes on its earnings and cash flow in relation to borrowings primarily for the purpose of acquiring drybulk vessels. These borrowings are subject to a variable borrowing rate. The Company uses pay-fixed receive-variable interest rate swaps to manage future interest costs and the risk associated with changing interest rate obligations. These swaps are designated as cash flow hedges of future variable rate interest payments and are tested for effectiveness on a quarterly basis. Refer to Note 11 Interest Rate Swap Agreements for further information regarding the interest rate swaps held by the Company.
The differential to be paid or received for the effectively hedged portion of any swap agreement is recognized as an adjustment to interest expense as incurred. Additionally, the changes in value for the portion of the swaps that are effectively hedging future interest payments are reflected as a component of accumulated other comprehensive (deficit) income (AOCI).
For the interest rate swaps that are not designated as an effective hedge, the change in the value and the rate differential to be paid or received is recognized as other (expense) income and is listed as a component of other (expense) income in the Condensed Consolidated Statements of Operations.
Noncontrolling interests
Net income attributable to noncontrolling interests during the three and nine months ended September 30, 2010 reflects noncontrolling interests share of the income 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 September 30, 2010, the noncontrolling interest held a 74.65% economic interest in Baltic Trading while only holding 16.41% of voting power.
Income taxes
Pursuant to certain agreements, the Company 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. The Company has reflected the tax liability in accounts payable and accrued expenses.
Baltic Trading is subject to income tax on its United States source income. During the three and nine months ended September 30 2010, Baltic Trading had United States operations which resulted in United States source income of $1,439 during the three and nine months ended September 30, 2010. As such, Baltic Tradings estimated United States income tax liability is $29 at September 30, 2010 and has been reflected in accounts payable and accrued expenses. |
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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 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 consolidated financial statements. Information about the Companys reportable segments for the three and nine months ended September 30, 2010 and 2009 are as follows:
The following table presents a reconciliation of total revenue from external customers for the Companys two operating segments to total consolidated revenue from external customers for the Company for the three and nine months ended September 30, 2010 and 2009.
The following table presents a reconciliation of total intersegment revenue, which eliminates upon consolidation, for the Companys two operating segments for the three and nine months ended September 30, 2010 and 2009. 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.
The following table presents a reconciliation of total net income for the Companys two operating segments to total consolidated net income for the three and nine months ended September 30, 2010 and 2009. The eliminating net income noted in the following table consists of the elimination of intercompany transactions resulting from revenue earned by GS&T and expenses incurred by Baltic Trading pursuant to the management agreement between the two companies as well as dividends received by GS&T from Baltic Trading for its Class B shares of Baltic Trading.
The following table presents a reconciliation of total assets for the Companys two operating segments to total consolidated net assets as of September 30, 2010 and December 31, 2009. The eliminating assets noted in the following table consists of the elimination of intercompany transactions resulting from the capitalization of fees paid to GS&T by Baltic Trading as vessel assets as well as the outstanding receivable balance due to GS&T from Baltic Trading as of September 30, 2010.
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4 - CASH FLOW INFORMATION
As of September 30, 2010, the Company had ten interest rate swaps, which are described and discussed in Note 11 Interest Rate Swap Agreements. The fair value of all ten of the swaps is in a liability position of $54,363, $432 of which is a current liability, as of September 30, 2010. At December 31, 2009, eight swaps were in a liability position of $44,139 and two swaps were in an asset position of $2,108.
For the nine months ended September 30, 2010, 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 $5,526 for the purchase of vessels, $121 associated with deposits on vessels and $29 for the purchase of other fixed assets. Additionally, for the nine months ended September 30, 2010, 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 $1,087 associated with deferred financing fees, $35 associated with common stock issuance costs related to the initial public offering of Baltic Trading and $322 associated with issuance costs related to the concurrent stock offering and issuance of Convertible Senior Notes completed on July 27, 2010. Also, for the nine months ended September 30, 2010, 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 September 30, 2010 consisting of $37 interest receivable associated with deposits on vessels and ($27) associated with the purchase of vessels. For the nine months ended September 30, 2009, 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 $513 for the purchase of vessels, $70 associated with deposits on vessels and $297 for the purchase of other fixed assets. Additionally, for the nine months ended September 30, 2009, 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 consisting of $130 associated with deposits on vessels.
For the nine months ended September 30, 2009, the Company made a reclassification of $60,454 from deposits on vessels to vessels, net of accumulated depreciation, due to the completion of the purchase of the Genco Commodus and Genco Maximus.
During the nine months ended September 30, 2010 and 2009, cash paid for interest, net of amounts capitalized, was $45,639 and $42,101, respectively.
On March 5, 2010, the Board of Directors approved a grant of 75,000 shares of nonvested common stock to Peter Georgiopoulos, Chairman of the Board. The fair value of such nonvested stock was $1,718. Additionally, on May 13, 2010, the Company made grants of nonvested common stock under the Genco Shipping & Trading Limited 2005 Equity Incentive Plan in the amount of 15,000 shares to directors of the Company. The fair value of such nonvested stock was $331.
On July 24, 2009, the Company made grants of nonvested common stock under the Genco Shipping and Trading Limited 2005 Equity Incentive Plan in the amount of 15,000 shares to directors of the Company. The fair value of such nonvested stock was $374. |
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5 - VESSEL ACQUISITIONS AND DISPOSITIONS
On June 24, 2010, GS&T executed a Master Agreement with Bourbon SA (Bourbon) under which GS&T is to purchase sixteen drybulk vessels, including two newbuildings, for an aggregate price of $545,000. Total vessel deposits of $54,500 were made during the second quarter of 2010. The remaining purchases are subject to the completion of customary additional documentation and closing conditions, and the transfer to GS&T of time charters attached to certain of the vessels is subject to the charterers consent. Additionally, upon the delivery of each vessel, GS&T records a commission due to its financial advisor equivalent to 1% of the purchase price of the vessel and which is included as a component of the vessel asset. GS&T intends to retain thirteen of the sixteen vessels, twelve of which were delivered to GS&T in the third quarter of 2010, with the remaining vessel scheduled to be delivered in the first quarter of 2011. Refer to Note 1 General Information for a listing of the vessels delivered during the third quarter of 2010. GS&T has determined not to retain three of the sixteen vessels, including one newbuilding. Therefore, upon delivery of these vessels, one of which was delivered during the third quarter of 2010 and two of which were delivered during the fourth quarter of 2010 (refer to Note 24 Subsequent Events), GS&T immediately resold them upon delivery based on GS&Ts aggregate purchase price of approximately $105,000 to MEP, a related party. GS&T has entered into definitive agreements with MEP for this purpose. An independent committee of the Companys Board of Directors reviewed and approved this transaction. One of the vessels was sold to MEP during the third quarter of 2010 for $36,562, which included the 1% commission fee noted above. GS&T has financed the acquisition of these vessels, excluding the MEP vessels, using bank debt for approximately 60% of the purchase price, cash on hand, and 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. (Refer to Note 10 Convertible Senior Notes for further details.)
On June 3, 2010, GS&T entered into an agreement to purchase five Handysize drybulk vessels, including four newbuildings, from companies within the Metrostar group of companies for an aggregate purchase price of $166,250. Total vessel deposits of $16,625 were made during the second quarter of 2010. The remaining purchases are subject to the completion of customary documentation and closing conditions. Two of the vessels were delivered during the third quarter of 2010. The Genco Ocean, a newbuilding Handysize vessel, was delivered on July 26, 2010 and the Genco Bay, a 2010 built Handysize vessel, was delivered on August 24, 2010. The remaining three vessels are expected to be delivered to the Company between March 2011 and September 2011. Four of the five vessels are secured on long term time charters, each of which includes a minimum and maximum base rate as well as profit-sharing components, with Cargill International S.A. The remaining vessel is secured on a spot market-related time charter with Cargill International S.A. at a rate based on 115% of the average of the daily rates of the Baltic Handysize Index (BHSI), an index published by The Baltic Exchange. GS&T plans to finance the acquisition of these vessels using operating cash as well as the $100,000 secured term loan facility which was entered into on August 12, 2010 and proceeds from its recent concurrent offerings of common stock and convertible notes. Refer to Note 10 Convertible Senior Notes.
On June 3, 2010, Baltic Trading entered into an agreement to purchase three Handysize drybulk vessels, including one newbuilding, from companies within the Metrostar group of companies for an aggregate purchase price of $99,750. Total vessel deposits of $9,975 were made during the second quarter of 2010. Two of the vessels were delivered during August 2010. The Baltic Wind, a 2009 built Handysize vessel , was delivered on August 4, 2010 and the Baltic Cove, a 2010 built Handysize vessel, was delivered on August 23, 2010. The remaining vessel, the Baltic Breeze, a newbuilding, was delivered during the fourth quarter of 2010 on October 12, 2010. All three vessels are secured on spot market-related time charters with Cargill International S.A. at a rate based on 115% of the average of the daily rates of the BHSI. Refer to Note 24 Subsequent Events.
On February 19, 2010, Baltic Trading entered into agreements with subsidiaries of an unaffiliated third-party seller to purchase four 2009 built Supramax drybulk vessels for an aggregate price of $140,000. Total vessel deposits of $14,000 were made during the first quarter of 2010 and the remaining payment of $126,000 was made upon delivery of the vessels during the second quarter of 2010. These four vessels, the Baltic Leopard, Baltic Panther, Baltic Cougar, and Baltic Jaguar, were delivered during the second quarter of 2010.
On February 22, 2010, Baltic Trading also entered into agreements with subsidiaries of another unaffiliated third-party seller to purchase two Capesize drybulk vessels for an aggregate price of $144,200. The Baltic Wolf was delivered on October 14, 2010 and the Baltic Bear was delivered on May 14, 2010. Total vessel deposits of $21,540 were made during the first quarter of 2010 and the remaining payment for the Baltic Bear of $65,700 and the Baltic Wolf of $56,960 were made upon delivery of the vessels during the second quarter and fourth quarter of 2010, respectively. Refer to Note 24 Subsequent Events.
Refer to Note 1 General Information for a listing of the vessels for which GS&T and Baltic Trading have entered into agreements to purchase as noted herein.
Two of the Supramax vessels acquired from Bourbon and two of the Handysize vessels acquired from Metrostar during the third quarter of 2010 by GS&T had existing below market time charters at the time of the acquisition. GS&T recorded a liability for time charter acquired of $2,146 which is being amortized as an increase to voyage revenues during the remaining term of each respective time charter. Below market time charters, including those acquired during previous periods, were amortized as an increase to revenue in the amount of $1,457 and $4,813 for the three months ended September 30, 2010 and 2009, respectively. Below market time charters acquired were amortized as an increase to revenue in the amounts of $3,893 and $14,282, respectively, for the nine months ended September 30, 2010 and 2009.
Capitalized interest expense associated with newbuilding contracts for the three months ended September 30, 2010 and 2009 was $204 and $331, respectively. Capitalized interest expense associated with newbuilding contracts for the nine months ended September 30, 2010 and 2009 was $349 and $1,317, respectively. |
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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 AOCI. At September 30, 2010 and December 31, 2009, the Company held 16,335,100 shares of Jinhui capital stock which is recorded at its fair value of $63,653 and $72,181, respectively, based on the closing price on September 30, 2010 and December 30, 2009 (the last trading date on the Oslo exchange in 2009) of 22.90 NOK and 25.60 NOK, 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 and nine months ended September 30, 2010 and 2009.
The unrealized currency translation 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 (Deficit) Income for a breakdown of the components of AOCI. |
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7 - EARNINGS PER COMMON SHARE
The computation of basic earnings per share is based on the weighted average number of common shares outstanding during the year. The computation of diluted earnings per share assumes the vesting of nonvested stock awards (refer to Note 21 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 512,000 nonvested shares outstanding at September 30, 2010 (refer to Note 21 Nonvested Stock Awards), 170,000 shares are anti-dilutive. The Companys diluted earnings 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 convertible debt is excluded from the computation of diluted earnings 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 earnings per share and diluted earnings per share are as follows:
The following table sets forth a reconciliation of the net income attributable to GS&T and the net income attributable to GS&T for diluted earnings per share under the if-converted method:
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8 - RELATED PARTY TRANSACTIONS
The following are related party transactions not disclosed elsewhere 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 nine months ended September 30, 2010 and 2009, the Company invoiced $106 and $98, respectively, to GMC, which includes time associated with such internal audit services as well as office expenses during the nine months ended September 30, 2009. Additionally, during the nine months ended September 30, 2010 and 2009, the Company incurred travel and other related expenditures totaling $170 and $124, respectively, reimbursable to GMC or its service provider. At September 30, 2010 and December 31, 2009, the amount due to the Company from GMC was $17 and $41, respectively.
During the nine months ended September 30, 2010 and 2009, the Company incurred legal services aggregating $326 and $37, respectively, from Constantine Georgiopoulos, the father of Peter C. Georgiopoulos, Chairman of the Board. At September 30, 2010 and December 31, 2009, $282 and $3, respectively, were outstanding to Constantine Georgiopoulos.
During the nine months ended September 30, 2010, 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 $8 for services rendered during the nine months ended September 30, 2010. There are no amounts due to NSM at September 30, 2010 and December 31, 2009.
During 2009 and 2010, GS&T and Baltic Trading 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 nine months ended September 30, 2010 and 2009, Aegean supplied lubricating oils to the Companys vessels aggregating $852 and $0, respectively. At September 30, 2010 and December 31, 2009, $83 and $226 remained outstanding, respectively.
During the nine months ended September 30, 2010, the Company invoiced MEP for technical services provided and expenses paid on MEPs behalf aggregating $37,354. This amount included the purchase of a Bourbon vessel on MEPs behalf. MEP is managed by an affiliate of Peter C. Georgiopoulos, Chairman of the Board. At September 30, 2010 and December 31, 2009, $38 and $0, respectively was due to the Company from MEP. |
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9 - LONG-TERM DEBT
Long-term debt consists of the following:
2007 Credit Facility
On July 20, 2007, the Company entered into a credit facility with DnB Nor Bank ASA (the 2007 Credit Facility) for the purpose of acquiring nine new Capesize vessels and refinancing the Companys prior credit facility which it had entered into as of July 29, 2005 (the 2005 Credit Facility) and short-term line of credit facility entered into as of May 3, 2007 (the Short-Term Line). DnB Nor Bank ASA is also Mandated Lead Arranger, Bookrunner, and Administrative Agent. The Company has used borrowings under the 2007 Credit Facility to repay amounts outstanding under the Companys previous credit facilities, which have been terminated. The maximum amount that may be borrowed under the 2007 Credit Facility at September 30, 2010 is $1,289,500. As of September 30, 2010, the Company has utilized its maximum borrowing capacity under the 2007 Credit Facility.
The collateral maintenance financial covenant is currently waived and the Companys cash dividends and share repurchases have been suspended until this covenant can be satisfied. The Companys borrowings bear interest at the London Interbank Offered Rate (LIBOR) plus an applicable margin of 2.00% per annum. A commitment fee of 0.70% per annum is payable on the unused daily portion of the 2007 Credit Facility.
The significant covenants in the 2007 Credit Facility have been disclosed in the 2009 10-K. As of September 30, 2010, the Company believes it is in compliance with all of the financial covenants under its 2007 Credit Facility, as amended, with the exception of the collateral maintenance financial covenant, which has been waived as discussed above.
At September 30, 2010, there were no letters of credit issued under the 2007 Credit Facility.
The following table sets forth the repayment of the outstanding debt of $1,289,500 at September 30, 2010 under the 2007 Credit Facility, as amended:
$100 Million Term Loan Facility
On August 12, 2010, the Company entered into a $100,000 secured term loan facility ($100 Million Term Loan Facility). Crédit Agricole Corporate and Investment Bank, who is also acting as Agent and Security Trustee; and Crédit Industriel et Commercial; and Skandinaviska Enskilda Banken AB (publ) are the lenders under the facility. The Company has used or intends to use the $100 Million Term Loan Facility to fund or refund to the Company a portion of the purchase price of the acquisition of five vessels from companies within the Metrostar group of companies (Refer to Note 5 Vessel Acquisitions and Dispositions). Under the terms of the facility, the $100 Million Term Loan Facility will be drawn down in five equal tranches of $20,000 each, with one tranche per vessel. The $100 Million Term Loan Facility has a final maturity date of seven years from the date of the first drawdown, or August 17, 2017, and borrowings under the facility bear interest at LIBOR for an interest period of one, three or six months (as elected by the Company), plus 3.00% per annum. A commitment fee of 1.35% is payable on the undrawn committed amount of the $100 Million Term Loan Facility, which began accruing on August 12, 2010. Borrowings are to be repaid quarterly, with the outstanding principal amortized on a 13-year profile, with any outstanding amount under the $100 Million Term Loan Facility to be paid in full on the final maturity date. Repaid amounts are no longer available and cannot be reborrowed. Borrowings under the $100 Million Term Loan Facility are secured by liens on the five Metrostar vessels purchased by GS&T and other related assets. Certain of the Companys wholly-owned ship-owning subsidiaries, each of which own or will own one of the five Metrostar vessels, will act as guarantors under the $100 Million Term Loan Facility.
As of September 30, 2010, two drawdowns of $20,000 each had been made for the deliveries of the Genco Ocean and Genco Bay. These drawdowns were made on August 17, 2010 and August 23, 2010, respectively. During the three and nine months ended September 30, 2010, total required repayments of $351 were made. As of September 30, 2010, total availability under the $100 Million Term Loan Facility was $60,000.
The $100 Million Term Loan Facility requires the Company to comply with a number of covenants, including financial covenants related to leverage, consolidated net worth, interest coverage and dividends; minimum working capital requirements; collateral maintenance requirements; and other covenants, most of which are in principle and calculation similar to the Companys covenants under the existing 2007 Credit Facility, except for the minimum cash requirement, which is $750 per mortgaged vessel under this facility. The $100 Million Term Loan Facility includes usual and customary events of default and remedies for facilities of this nature. Availability of each tranche of the $100 Million Term Loan Facility is subject to our acquisition of each of the five vessels from Metrostar and other conditions and documentation relating to the collateral securing the credit facility.
The Company believes it is in compliance with all of the financial covenants under the $100 Million Term Loan Facility as of September 30, 2010.
The following table sets forth the repayment of the outstanding debt of $39,649 at September 30, 2010 under the $100 Million Term Loan Facility:
$253 Million Term Loan Facility
On August 20, 2010, the Company entered into a $253,000 senior secured term loan facility ($253 Million Term Loan Facility). BNP Paribas; Crédit Agricole Corporate and Investment Bank; DVB Bank SE; Deutsche Bank AG Filiale Deutschlandgeschäft, who is also acting as Security Agent and Bookrunner; and Skandinaviska Enskilda Banken AB (publ) are Lenders and Mandated Lead Arrangers under the facility. Deutsche Bank Luxembourg S.A. is acting as Agent under the facility, and Deutsche Bank AG and all of the Lenders other than Deutsche Bank AG Filiale Deutschlandgeschäft are acting as Swap Providers under the facility. The Company has used or intends to use the $253 Million Term Loan Facility to fund a portion of the purchase price of the acquisition of thirteen vessels from affiliates of Bourbon. Under the terms of the facility, the $253 Million Term Loan Facility will be drawn down in thirteen tranches in amounts based on the particular vessel being acquired, with one tranche per vessel. The $253 Million Term Loan Facility has a maturity date of August 14, 2015 and borrowings under the $253 Million Term Loan Facility bear interest, as elected by the Company, at LIBOR for an interest period of three or six months, plus 3.00% per annum. A commitment fee of 1.25% is payable on the undrawn committed amount of the $253 Million Term Loan Facility, which began accruing on August 20, 2010. Borrowings are to be repaid quarterly with outstanding principal amortized on a per vessel basis and any outstanding amount under the $253 Million Term Loan Facility to be paid in full on the maturity date. Repaid amounts are no longer available and cannot be reborrowed. Borrowings under the $253 Million Term Loan Facility are secured by liens on the Bourbon vessels and other related assets. Certain of the Companys wholly-owned ship-owning subsidiaries, each of which owns or will own one of the Bourbon vessels, will act as guarantors under the credit facility.
As of September 30, 2010, total drawdowns of $231,500 have been made under the $253 Million Term Loan Facility to fund or refund to the Company a portion of the purchase price of the twelve Bourbon vessels delivered during the third quarter of 2010. Refer to Note 5 Vessel Acquisitions and Dispositions for a listing of the vessels delivered. As of September 30, 2010, total availability under the $253 Million Term Loan Facility was $21,500.
The $253 Million Term Loan Facility requires the Company to comply with a number of covenants, including financial covenants related to leverage, consolidated net worth, liquidity and interest coverage; dividends; collateral maintenance requirements; and other covenants, most of which are in principle and calculation similar to our covenants under the existing 2007 Credit Facility, except for the minimum cash requirement, which is $750 per mortgaged vessel under this facility. As of September 30, 2010, the Company had deposited $9,000 that has been reflected as restricted cash at September 30, 2010. Restricted cash will be released only if the underlying collateral is sold or disposed of. The $253 Million Term Loan Facility includes usual and customary events of default and remedies for facilities of this nature. Availability of each tranche of the $253 Million Term Loan Facility will be subject to the delivery of each vessel from Bourbon and other conditions and documentation relating to the collateral securing the $253 Million Term Loan Facility.
The Company believes it is in compliance with all of the financial covenants under the $253 Million Term Loan Facility as of September 30, 2010.
The following table sets forth the repayment of the outstanding debt of $231,500 at September 30, 2010 under the $253 Million Term Loan Facility:
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 (the 2010 Baltic Trading Credit Facility). The 2010 Baltic Trading Credit Facility matures on April 16, 2014, and borrowings under the facility bear interest at LIBOR plus an applicable margin of 3.25% per annum. A commitment fee of 1.25% per annum is payable on the unused daily portion of the 2010 Baltic Trading Credit Facility, which began accruing on March 18, 2010 under the terms of the commitment letter entered into on February 25, 2010. In connection with the commitment letter, Baltic Trading paid an upfront fee of $313. Additionally, upon executing the 2010 Baltic Trading Credit Facility, Baltic Trading paid the remaining upfront fee of $938, for total fees of $1,250. Of the total facility amount of $100,000, $25,000 is available for working capital purposes. As of September 30, 2010, total available working capital borrowings were $15,025 as $9,975 was drawn down during the nine months ended September 30, 2010. As of September 30, 2010, $30,175 remained available under the 2010 Credit Facility as two draw downs of $29,925 each were made during the third quarter of 2010 to fund the purchase of the Baltic Wind and Baltic Cove. Refer to Note 5 Vessel Acquisitions and Dispositions for further information regarding these vessel deposits and acquisitions.
Baltic Trading intends to use the 2010 Baltic Trading Credit Facility primarily for bridge financing for future vessel acquisitions. Borrowings, except those for working capital purposes, are to be repaid with proceeds from Baltic Tradings follow-on equity offerings or otherwise within twelve months from drawdown. Borrowings not repaid within such twelve months will be converted into term loans and repaid in equal monthly installments over the subsequent twelve-month period. All amounts outstanding, including borrowings for working capital, must be repaid in full on the 2010 Baltic Trading Credit Facilitys maturity date.
Borrowings under the 2010 Baltic Trading Credit Facility are secured by liens on Baltic Tradings initial vessels and other related assets. Borrowings under the facility are subject to the delivery of security documents with respect to Baltic Tradings initial vessels. Alternatively, Baltic Trading could provide cash collateral equal to $225,000 minus the aggregate purchase price of Baltic Tradings first five vessels delivered if Baltic Trading wishes to draw down on the 2010 Baltic Trading Credit Facility while awaiting delivery of the Capesize vessel expected to be delivered during the fourth quarter of 2010. As of September 30, 2010, the Company had provided cash collateral in the amount of $12,000 in order to invoke this option. This amount has been reflected as restricted cash at September 30, 2010. This cash collateral was released to the seller of the Baltic Wolf once it was delivered on October 14, 2010. and the Baltic Wolf was concurrently made subject to a lien under the 2010 Baltic Trading Credit Facility. Refer to Note 24 Subsequent Events for further information. Baltic Tradings subsidiaries owning the initial vessels act as guarantors under the 2010 Baltic Trading Credit Facility.
All amounts owing under the 2010 Baltic Trading Credit Facility are also secured by the following:
· cross-collateralized first priority mortgages of each of Baltic Tradings initial vessels;
· an assignment of any and all earnings of Baltic Tradings initial vessels; and
· an assignment of all insurance on the mortgaged vessels.
The 2010 Baltic Trading Credit Facility requires Baltic Trading to comply with a number of covenants, including financial covenants related to liquidity, consolidated net worth, and collateral maintenance; delivery of quarterly and annual financial statements and annual projections; maintaining adequate insurances; compliance with laws (including environmental); compliance with ERISA; maintenance of flag and class of Baltic Tradings initial vessels; restrictions on consolidations, mergers or sales of assets; restrictions on changes in the Manager of Baltic Tradings initial vessels (or acceptable replacement vessels); limitations on changes to the Management Agreement between Baltic Trading and GS&T; limitations on liens; limitations on additional indebtedness; restrictions on paying dividends; restrictions on transactions with affiliates; and other customary covenants.
The 2010 Baltic Trading Credit Facility includes the following financial covenants which apply to Baltic Trading and its subsidiaries on a consolidated basis and are measured at the end of each fiscal quarter beginning with March 31, 2010, except for the minimum cash covenant, which began being measured at June 30, 2010:
· Cash and cash equivalents plus the undrawn amount available for working capital under the facility must not be less than $750 per vessel for all vessels in Baltic Tradings fleet.
· Consolidated net worth must be greater than (i) 75% of the net proceeds of the IPO of Baltic Tradings stock, plus (ii) the $75,000 equity contribution from GS&T plus (iii) 50% of the value of any subsequent primary equity offerings of Baltic Trading.
· The aggregate fair market value of the mortgaged vessels must at all times be at least 160% of the aggregate outstanding principal amount under the 2010 Baltic Trading Credit Facility. However, if any borrowings, other than working capital borrowings, are not repaid with 12 months of the drawdown thereof, then the aggregate fair market value of the mortgaged vessels must at all times be at least 200% of the aggregate outstanding principal amount under the 2010 Baltic Trading Credit Facility.
Under the 2010 Baltic Trading Credit Facility, Baltic Trading is not permitted to make loans to GS&T or Genco Investments LLC if an event of default existed at the time of the loan or could be reasonably expected to result therefrom. In addition, Baltic Trading would not be permitted under the facility to declare or pay dividends to its shareholders (including Genco Investments LLC) if an event of default existed at the time of payment or would be caused thereby. As of September 30, 2010, to remain in compliance with a net worth covenant in the facility, Baltic Trading needs to maintain a net worth of $232,796 after the payment of any dividends.
The Company believes it is in compliance with all of the financial covenants under the 2010 Baltic Trading Credit Facility as of September 30, 2010.
The following table sets forth the repayment of the outstanding debt of $69,825 at September 30, 2010 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, and the cost associated with unused commitment fees. Additionally, it includes the range of interest rates on the debt, excluding the impact of swaps and unused commitment fees:
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10 CONVERTIBLE SENIOR NOTES
The Company issued $125,000 of 5.0% Convertible Senior Notes on July 27, 2010 (the Notes). The Notes mature on August 15, 2015 and are convertible into shares of the Companys common stock at a conversion rate of approximately 51.0204 shares of common stock per (in whole dollars) $1,000 principal amount of the Notes (equivalent to an initial conversion price of $19.60 per share, representing a 22.5% conversion premium over the concurrent offering price of $16.00 per share of the Companys common stock on July 21, 2010), subject to adjustment, based on the occurrence of certain events, including, but not limited to, (i) the issuance of certain dividends on our common stock, (ii) the issuance of certain rights, options or warrants, (iii) the effectuation of share splits or combinations, (iv) certain distributions of property and (v) certain issuer tender or exchange offers as described in the Indenture, with the amount due on conversion payable in shares, cash, or a combination thereof at the Companys discretion. The total underlying shares of the Notes are 6,377,551 shares of common stock. Since the Company can settle a conversion of the notes with shares, cash, or a combination thereof at its discretion, the Company allocated the convertible debt proceeds between the liability component and the embedded conversion option (i.e., the equity component). The liability component of the debt instrument is accreted to par value using the effective interest method over the remaining life of the debt. This amortization is reported as a component of interest expense. The equity component is not subsequently revalued as long as it continues to qualify for equity treatment.
Upon issuance, the Company estimated the fair value of the liability component of the Notes, assuming a 10% non-convertible borrowing rate, to be $100,724 and the fair value of the conversion option. The difference between the fair value and the principal amount of the Notes was $24,276. This amount was recorded as a debt discount and as an increase to additional paid-in capital as of the issuance date and the Company proportionately allocated approximately $867 of issuance costs against this equity component. The issuance cost allocated to the liability component of $3,574 along with the debt discount is being amortized to interest expense over the approximate 5 year period to the maturity of the Notes on August 15, 2015 resulting in additional interest expense in future periods. The issuance cost allocated to the liability component has been recorded as deferred financing costs, refer to Note 15 Other Assets, net.
The Notes were issued pursuant to an indenture, dated as of July 27, 2010 (the Base Indenture), by and between the Company and The Bank of New York Mellon, as trustee (the Trustee), supplemented by the First Supplemental Indenture dated as of June 27, 2010, by and between the Company and the Trustee (the Supplemental Indenture, and together with the Base Indenture, the Indenture). The Notes are represented by a global security, executed by the Company, in the form attached to the Supplemental Indenture.
Interest is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2011. The Notes will mature on August 15, 2015, subject to earlier repurchase or conversion upon the occurrence of certain events. Holders may convert their Notes before February 15, 2015, only in certain circumstances determined by (i) the market price of the Companys common stock, (ii) the trading price of the Notes, or (iii) the occurrence of specified corporate events. The Notes are subject to repurchase by the Company at the option of the holders following a fundamental change, as defined in the Indenture, including, but not limited to, (i) certain ownership changes, (ii) certain recapitalizations, mergers and dispositions, (iii) approval of any plan or proposal for the liquidation, or dissolution of our company, and (iv) our common stock ceasing to be listed on any of the New York Stock Exchange or the Nasdaq Global Select Market, any of their respective successors or any other U.S. national securities exchange, at a price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest up to the fundamental change repurchase date. After February 15, 2015, holders may convert their Notes at any time thereafter until the second scheduled trading day preceding maturity.
The Indenture includes customary agreements and covenants by the Company, including with respect to events of default. The Company believes it is in compliance with all of the financial covenants under the Indenture as of September 30, 2010.
The following tables provide additional information about the Companys Notes.
The remaining period over which the unamortized discount will be recognized is 4.9 years. As of September 30, 2010, the if-converted value of the Notes does not exceed their principal amount.
The Notes have been classified as a noncurrent liability on the consolidated balance sheet as of September 30, 2010 because the Company can settle the principal amount of the notes with shares, cash, or a combination thereof at its discretion. |
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11 - INTEREST RATE SWAP AGREEMENTS
The Company has ten interest rate swap agreements with DnB NOR Bank ASA to manage interest costs and the risk associated with changing interest rates related to the Companys 2007 Credit Facility, which were outstanding at September 30, 2010 and December 31, 2009. The total notional principal amount of the swaps at September 30, 2010 was $756,233 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 September 30, 2010 and December 31, 2009:
The following table summarizes the derivative asset and liability balances at September 30, 2010 and December 31, 2009:
The following tables present the impact of derivative instruments and their location within the unaudited Condensed Consolidated Statement of Operations:
The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations For the Three Month Period Ended September 30, 2010
The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations For the Three Month Period Ended September 30, 2009
The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations For the Nine Month Period Ended September 30, 2010
The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations For the Nine Month Period Ended September 30, 2009
At September 30, 2010, ($28,411) 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 September 30, 3010, the Companys thirty-five vessels mortgaged under the 2007 Credit Facility served as collateral in the aggregate amount of $100,000. |
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12 - ACCUMULATED OTHER COMPREHENSIVE (DEFICIT) INCOME
The components of AOCI included in the accompanying condensed consolidated balance sheets consist of net unrealized gain (loss) on cash flow hedges, net unrealized gain (loss) from investments, and cumulative currency translation adjustments on the investment in Jinhui stock as of September 30, 2010 and December 31, 2009.
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13 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Companys financial instruments, except for the Notes, which are equal to such instruments carrying values at September 30, 2010 and December 31, 2009, are as follows:
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 estimated based on current rates offered to the Company 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 of the Notes at September 30, 2010 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 Accounting Standards Codification subtopic 820-10, Fair Value Measurements & Disclosures (ASC 820-10) (formerly SFAS No. 157, Fair Value Measurements), 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 guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data.
The following table summarizes the valuation of our investments and financial instruments by the above pricing levels as of the valuation dates listed:
The Company held an investment of $0 and $75,057 in the JPMorgan US Dollar Liquidity Fund Institutional at September 30, 2010 and December 31, 2009, respectively. The JPMorgan US Dollar Liquidity Fund Institutional is a money market fund which invests its assets in high quality transferable short term US Dollar denominated fixed and floating rate debt securities and has a portfolio with a weighted average investment maturity not to exceed sixty days. The value of this fund is publicly available and is considered a Level 1 item. 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 Notes are publicly traded in the over-the-counter market; as the value is publicly available, the Notes are therefore 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 September 30, 2010, both the counterparty and the Company are expected to continue to perform under the contractual terms of the instruments. |
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14 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
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15 - OTHER ASSETS, NET
Other assets, net consist of the following:
(i) Deferred financing costs, which include fees, commissions and legal expenses associated with securing loan facilities and other debt offerings. These costs are amortized over the life of the related debt, and are included in interest expense. As of September 30, 2010, the Company has deferred financing fees associated with the 2007 Credit Facility, the $100 Million Term Loan Facility, the $253 Million Term Loan Facility, the debt portion of the Notes and the 2010 Baltic Trading Credit Facility. (Refer to Note 9 Long-Term Debt and Note 10 Convertible Senior Notes) Total net deferred financing costs consist of the following as of September 30, 2010 and December 31, 2009:
Amortization expense for deferred financing costs for the three months ended September 30, 2010 and 2009 was $589 and $270, respectively. Amortization expense for deferred financing costs for the nine months ended September 30, 2010 and 2009 was $1,191 and $767, respectively.
(ii) Deferred registration costs include costs associated with preparing Baltic Trading for a public offering. These costs, which existed as of December 31, 2009, were offset against proceeds received from the initial public offering, which was completed on March 15, 2010. The Company has deferred registration costs of $0 and $834 at September 30, 2010 and December 31, 2009, respectively. |
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16 - FIXED ASSETS
Fixed assets consist of the following:
Depreciation and amortization expense for fixed assets for the three months ended September 30, 2010 and 2009 was $129 and $115, respectively. Depreciation and amortization expense for fixed assets for the nine months ended September 30, 2010 and 2009 was $372 and $299, respectively. |
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17 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
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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 September 30, 2010 and 2009 was $117,558 and $92,949, respectively, and for the nine months ended September 30, 2010 and 2009 was $317,576 and $283,301, respectively. Included in revenues for the three months ended September 30, 2010 and 2009 was profit sharing revenue of $244 and $524, respectively, and for the nine months ended September 30, 2010 and 2009, profit sharing revenue was $309 and $1,647, respectively. Future minimum time charter revenue, based on vessels committed to noncancelable time charter contracts as of November 3, 2010 is expected to be $97,882 for the remaining quarter of 2010, $166,061 during 2011, $48,866 during 2012 and $1,674 during 2013, 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, namely the Genco Explorer, Genco Pioneer, Genco Progress, Genco Reliance, and Genco Sugar, as pool rates cannot be estimated. Additionally, future minimum revenue excludes revenue to be earned for the Companys vessels that are on spot market-related time charters, as spot rates cannot be estimated, namely the Baltic Bear, Baltic Cougar, Baltic Cove, Baltic Jaguar, Baltic Leopard, Baltic Panther, Baltic Wind, Baltic Breeze and Baltic Wolf. |
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19 - LEASE PAYMENTS
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. The monthly straight-line rental expense from September 1, 2005 to August 31, 2020 is $39. As a result of the straight-line rent calculation generated by the free rent period and the tenant work credit, the Company had a deferred rent credit at September 30, 2010 and December 31, 2009 of $670 and $687, respectively. Rent expense for the three months ended September 30, 2010 and 2009 was $117 for each respective period. Rent expense for the nine months ended September 30, 2010 and 2009 was $350 for each respective period.
Future minimum rental payments on the above lease for the next five years and thereafter are as follows: $129 for the remainder of 2010, $518 annually for 2011 through 2014 and a total of $3,097 for the remaining term of the lease. |
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20 - SAVINGS PLAN
In August 2005, the Company established a 401(k) plan which is available to full-time employees who meet the plans eligibility requirements. This 401(k) plan is a defined contribution plan, which permits employees to make contributions up to maximum percentage and dollar limits allowable by IRS Code Sections 401(k), 402(g), 404 and 415 with the Company matching up to the first six percent of each employees salary on a dollar-for-dollar basis. The matching contribution vests immediately. For the three months ended September 30, 2010 and 2009, the Companys matching contribution to the 401(k) plan was $47 and $31, respectively, and for the nine months ended September 30, 2010 and 2009, the Companys matching contribution to the 401(k) plan was $146 and $116, respectively. |
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21 - NONVESTED STOCK AWARDS
On July 12, 2005, the Companys board of directors approved the Genco Shipping & Trading Limited 2005 Equity Incentive Plan (the GS&T Plan). Under this plan, the Companys board of directors, the compensation committee, or another designated committee of the board of directors may grant a variety of stock-based incentive awards to employees, directors and consultants whom the compensation committee (or other committee of the board of directors) believes are key to the Companys success. Awards may consist of incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, nonvested stock, unrestricted stock and performance shares. The aggregate number of shares of common stock available for award under the GS&T Plan is 2,000,000 shares.
Grants of nonvested common stock to executives and employees vest ratably on each of the four anniversaries of the determined vesting date. Grants of nonvested common stock to directors vest the earlier of the first anniversary of the grant date or the date of the next annual shareholders meeting, which are typically held during May. Grants of nonvested common stock to the Companys Chairman, Peter C. Georgiopoulos, which are not granted as part of grants made to all directors vest ratably on each of the ten anniversaries of the vesting date.
The following table presents a summary of the Companys nonvested stock awards for the nine months ended September 30, 2010 under the GS&T Plan:
The total fair value of shares that vested under the GS&T Plan during the nine months ended September 30, 2010 and 2009 was $331 and $263, respectively.
For the three and nine months ended September 30, 2010 and 2009, the Company recognized nonvested stock amortization expense for the GS&T Plan, which is included in general, administrative and management fees, as follows:
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 September 30, 2010, unrecognized compensation cost related to nonvested stock will be recognized over a weighted average period of 4.75 years.
On March 3, 2010, Baltic Tradings board of directors approved the Baltic Trading Limited 2010 Equity Incentive Plan (the Baltic Trading Plan). Under the Baltic Trading Plan, Baltic Tradings board of directors, the compensation committee, or another designated committee of the board of directors may grant a variety of stock-based incentive awards to officers, directors, and executive, managerial, administrative and professional employees of and consultants to Baltic Trading or the Company whom the compensation committee (or other committee of the board of directors) believes are key to Baltic Tradings success. Awards may consist of restricted stock, restricted stock units, stock options, stock appreciation rights and other stock or cash-based awards. The aggregate number of shares of common stock available for award under the Baltic Trading Plan is 2,000,000 common shares.
Grants of restricted stock to Peter Georgiopoulos, Chairman of the Board of Baltic Trading, and John Wobensmith, President and Chief Financial Officer of Baltic Trading, made in connection with Baltic Tradings IPO vest ratably on each of the first four anniversaries of March 15, 2010. Grants of restricted common stock to Baltic Tradings directors made following Baltic Tradings IPO (which exclude the foregoing grant to Mr. Georgiopoulos) vest the earlier of the first anniversary of the grant date or the date of Baltic Tradings next annual shareholders meeting, which is expected to be held in May 2011.
The following table presents a summary of Baltic Tradings nonvested stock awards for the nine months ended September 30, 2010 under the Baltic Trading Plan:
The total fair value of shares that vested under the Baltic Trading Plan during the nine months ended September 30, 2010 and 2009 was $0 during both periods.
For the three and nine months ended September 30, 2010, the Company recognized nonvested stock amortization expense for the Baltic Trading Plan, which is included in general, administrative and management fees, as follows:
The Company is amortizing Baltic Tradings grants over the applicable vesting periods, net of anticipated forfeitures. As of September 30, 2010, unrecognized compensation cost related to nonvested stock will be recognized over a weighted average period of 3.38 years. |
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22 - SHARE REPURCHASE PROGRAM
On February 13, 2008, the Companys board of directors approved a share repurchase program for up to a total of $50,000 of the Companys common stock. Share repurchases will be made from time to time for cash in open market transactions at prevailing market prices or in privately negotiated transactions. The timing and amount of purchases under the program will be determined by management based upon market conditions and other factors. Purchases may be made pursuant to a program adopted under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the Exchange Act). The program does not require the Company to purchase any specific number or amount of shares and may be suspended or reinstated at any time in the Companys discretion and without notice. Repurchases will be subject to restrictions under the 2007 Credit Facility. 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. Refer to Note 9 Long-Term Debt.
Since the inception of the share repurchase program through September 30, 2010, the Company repurchased and retired 278,300 shares of its common stock for $11,500. No repurchases were made during the three and nine months ended September 30, 2010 and 2009. |
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23 - 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 adverse effect on the Company, its financial condition, results of operations or cash flows. |
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24 - SUBSEQUENT EVENTS
On October 12, 2010, Baltic Trading took delivery of the Baltic Breeze, a 34,386 dwt Handysize newbuilding, from a company within the Metrostar group of companies. Baltic Trading utilized the 2010 Baltic Trading Credit Facility to pay the remaining balance of $29,925 for the Baltic Breeze.
On October 14, 2010, Baltic Trading took delivery of the Baltic Wolf, a 177,752 dwt Capesize newbuilding, from Oceanways Trust Ltd. and other unaffiliated third party vessel owners. The Baltic Wolf is the final vessel of Baltic Tradings initial fleet of six vessels. Baltic Trading utilized cash on hand, including restricted cash, to pay the remaining balance of $56,960 for the Baltic Wolf.
On November 3, 2010, Baltic Trading announced a dividend of $0.16 per share to be paid on or about November 25, 2010 to shareholders of record as of November 15, 2010. The aggregate amount of the dividend is expected to be approximately $3,596, which Baltic Trading anticipates will be funded from cash on hand at the time payment is to be made.
On November 2, 2010 Baltic Trading entered into a commitment letter with Nordea Bank Finland plc, acting through its New York branch, and Skandinaviska Enskilda Banken AB to amend the 2010 Baltic Trading Credit Facility. Under the terms of the amended 2010 Baltic Trading Credit Facility, the commitment amount will increase to $150,000 from $100,000, and the amounts borrowed will bear interest at LIBOR plus a margin of 3.00% as compared to 3.25% currently. The term of the 2010 Credit Facility will be extended to six years from the currently remaining 3.5 years and the repayment structure will be modified to provide for eleven semi-annual commitment reductions of $5,000 each with a balloon payment at the end of the facility. The amendment is subject to definitive documentation.
On October 22, 2010 and November 4, 2010, the Company took delivery of two Bourbon vessels that were subsequently sold to MEP. The Company paid a total of $62,370 for the remaining aggregate purchase price of these vessels. These vessels were then sold to MEP for an aggregate purchase price of $69,993, which included the entire purchase price of the vessels as well as the 1% fee payable to the Companys third-party financial advisor. |
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