GENCO SHIPPING & TRADING LTD, 10-K filed on 3/10/2011
Annual Report
Consolidated Balance Sheets (USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
Current assets:
 
 
Cash and cash equivalents
$ 270,877 
$ 188,267 
Restricted cash
 
17,500 
Due from charterers, net
8,794 
2,117 
Prepaid expenses and other current assets
14,010 
10,184 
Total current assets
293,681 
218,068 
Noncurrent assets:
 
 
Vessels, net of accumulated depreciation of $334,502 and $224,706, respectively
2,783,810 
2,023,506 
Deposits on vessels
13,718 
 
Deferred drydock, net of accumulated amortization of $9,044 and $4,384, respectively
8,538 
10,153 
Other assets, net of accumulated amortization of $4,561 and $2,585, respectively
16,937 
8,328 
Fixed assets, net of accumulated depreciation and amortization of $2,041 and $1,554, respectively
2,310 
2,458 
Restricted cash
9,000 
 
Fair value of derivative instruments
 
2,108 
Investments
54,714 
72,181 
Total noncurrent assets
2,889,027 
2,118,734 
Total assets
3,182,708 
2,336,802 
Current liabilities:
 
 
Accounts payable and accrued expenses
31,790 
18,609 
Current portion of long term debt
71,841 
50,000 
Deferred revenue
9,974 
10,404 
Fair value of derivative instruments
4,417 
 
Total current liabilities
118,022 
79,013 
Noncurrent liabilities:
 
 
Deferred revenue
392 
2,427 
Deferred rent credit
657 
687 
Time charters acquired
2,197 
4,611 
Fair value of derivative instruments
38,880 
44,139 
Convertible senior note payable
102,309 
 
Long term debt
1,572,098 
1,277,000 
Total noncurrent liabilities
1,716,533 
1,328,864 
Total liabilities
1,834,555 
1,407,877 
Commitments and contingencies
 
 
Genco Shipping & Trading Limited shareholders' equity:
 
 
Common stock, par value $0.01; 100,000,000 shares authorized; issued and outstanding 35,951,198 and 31,842,798 shares at December 31, 2010 and December 31, 2009, respectively
359 
318 
Additional paid-in capital
803,778 
722,198 
Accumulated other comprehensive (loss) income
(5,210)
13,589 
Retained earnings
334,022 
192,820 
Total Genco Shipping & Trading shareholders' equity
1,132,949 
928,925 
Noncontrolling interest
215,204 
 
Total equity
1,348,153 
928,925 
Total liabilities and equity
$ 3,182,708 
$ 2,336,802 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data
Dec. 31, 2010
Dec. 31, 2009
Consolidated Balance Sheets
 
 
Vessels, accumulated depreciation
$ 334,502 
$ 224,706 
Deferred drydock, accumulated amortization
9,044 
4,384 
Other assets, accumulated amortization
4,561 
2,585 
Fixed assets, accumulated depreciation and amortization
2,041 
1,554 
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Common stock, shares authorized (in shares)
100,000,000 
100,000,000 
Common stock, shares issued (in shares)
35,951,198 
31,842,798 
Common stock, shares outstanding (in shares)
35,951,198 
31,842,798 
Consolidated Statements of Operations (USD $)
In Thousands, except Share data
Year Ended
Dec. 31,
2010
2009
2008
Revenues:
 
 
 
Voyage revenues
$ 447,438 
$ 379,531 
$ 405,370 
Service revenues
1,249 
 
 
Total revenues
448,687 
379,531 
405,370 
Operating expenses:
 
 
 
Voyage expenses
4,467 
5,024 
5,116 
Vessel operating expenses
78,976 
57,311 
47,130 
General, administrative and management fees
29,081 
18,554 
19,814 
Depreciation and amortization
115,663 
88,150 
71,395 
Loss on forfeiture of vessel deposits
 
 
53,765 
Gain on sale of vessel
 
 
(26,227)
Other operating income
(791)
 
 
Total operating expenses
227,396 
169,039 
170,993 
Operating income
221,291 
210,492 
234,377 
Other (expense) income:
 
 
 
Other expense
(77)
(312)
(74)
Impairment of investment
 
 
(103,892)
Interest income
685 
240 
1,757 
Interest expense
(72,650)
(61,796)
(52,589)
Income from investments
 
 
7,001 
Other expense, net
(72,042)
(61,868)
(147,797)
Income before income taxes
149,249 
148,624 
86,580 
Income tax expense
(1,840)
 
 
Net income
147,409 
148,624 
86,580 
Less: Net income attributable to noncontrolling interest
6,166 
 
 
Net income attributable to Genco Shipping & Trading Limited
141,243 
148,624 
86,580 
Earnings per share-basic (in dollars per share)
4.28 
4.75 
2.86 
Earnings per share-diluted (in dollars per share)
$ 4.07 
$ 4.73 
$ 2.84 
Weighted average common shares outstanding-basic (in shares)
32,987,449 
31,295,212 
30,290,016 
Weighted average common shares outstanding-diluted (in shares)
35,891,373 
31,445,063 
30,452,850 
Dividends declared per share (in dollars per share)
 
 
3.85 
Consolidated Statements of Equity (USD $)
In Thousands
Genco Shipping & Trading Limited Shareholders' Equity
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive (Loss) Income
Noncontrolling Interest
Total
Balance at Dec. 31, 2007
622,185 
290 
523,002 
79,876 
19,017 
 
622,185 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
 
Net income
86,580 
 
 
86,580 
 
 
86,580 
Change in unrealized gain (loss) on investments
(40,085)
 
 
 
(40,085)
 
(40,085)
Unrealized (loss) gain on cash flow hedges, net
(44,946)
 
 
 
(44,946)
 
(44,946)
Cash dividends paid ($3.85 per share)
(117,109)
 
 
(117,109)
 
 
(117,109)
Issuance of 3,593,750 and 2,702,669 shares of common stock in 2010 and 2008 respectively
195,442 
27 
195,415 
 
 
 
195,442 
Issuance of 514,650, 133,250 and 322,500 shares of nonvested stock in 2010, 2009 and 2008 respectively
 
(3)
 
 
 
 
Acquisition and retirement of 281,430 shares of common stock
(11,542)
(3)
(6,388)
(5,151)
 
 
(11,542)
Nonvested stock amortization
5,953 
 
5,953 
 
 
 
5,953 
Balance at Dec. 31, 2008
696,478 
317 
717,979 
44,196 
(66,014)
 
696,478 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
 
Net income
148,624 
 
 
148,624 
 
 
148,624 
Change in unrealized gain (loss) on investments
55,408 
 
 
 
55,408 
 
55,408 
Unrealized (loss) gain on cash flow hedges, net
24,195 
 
 
 
24,195 
 
24,195 
Issuance of 514,650, 133,250 and 322,500 shares of nonvested stock in 2010, 2009 and 2008 respectively
 
(1)
 
 
 
 
Nonvested stock amortization
4,220 
 
4,220 
 
 
 
4,220 
Balance at Dec. 31, 2009
928,925 
318 
722,198 
192,820 
13,589 
 
928,925 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
 
Net income
141,243 
 
 
141,243 
 
6,166 
147,409 
Change in unrealized gain (loss) on investments
(17,466)
 
 
 
(17,466)
 
(17,466)
Unrealized (loss) gain on cash flow hedges, net
(1,333)
 
 
 
(1,333)
 
(1,333)
Issuance of 3,593,750 and 2,702,669 shares of common stock in 2010 and 2008 respectively
54,882 
36 
54,846 
 
 
 
54,882 
Issuance of convertible senior notes
23,457 
 
23,457 
 
 
 
23,457 
Issuance of 514,650, 133,250 and 322,500 shares of nonvested stock in 2010, 2009 and 2008 respectively
 
(5)
 
 
 
 
Nonvested stock amortization
4,327 
 
4,327 
 
 
2,892 
7,219 
Cash dividends paid by Baltic Trading Limited
(41)
 
 
(41)
 
(5,329)
(5,370)
Issuance of common stock of Baltic Trading Limited
(1,045)
 
(1,045)
 
 
211,475 
210,430 
Balance at Dec. 31, 2010
$ 1,132,949 
$ 359 
$ 803,778 
$ 334,022 
$ (5,210)
$ 215,204 
$ 1,348,153 
Consolidated Statements of Equity (Parenthetical)
Year Ended
Dec. 31,
2010
2009
2008
Consolidated Statements of Equity
 
 
 
Cash dividends, per share (in dollars per share)
 
 
3.85 
Issuance of common stock
3,593,750 
 
2,702,669 
Issuance of nonvested stock
514,650 
133,250 
322,500 
Acquisition and retirement of common stock
 
 
281,430 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
2008
Net income
$ 147,409 
$ 148,624 
$ 86,580 
Change in unrealized gain on investments
(17,466)
55,408 
(40,085)
Unrealized (loss) gain on cash flow hedges, net
(1,333)
24,195 
(44,946)
Comprehensive income
128,610 
228,227 
1,549 
Less: Comprehensive income attributable to noncontrolling interests
6,166 
 
 
Comprehensive income attributable to Genco Shipping & Trading Limited
$ 122,444 
$ 228,227 
$ 1,549 
Consolidated Statements of Cash Flows (USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
2008
Cash flows from operating activities:
 
 
 
Net income
$ 147,409 
$ 148,624 
$ 86,580 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
115,663 
88,150 
71,395 
Amortization of deferred financing costs
1,967 
1,037 
4,915 
Amortization of time charters acquired
(4,560)
(18,975)
(22,447)
Amortization of discount on Convertible Senior Notes
1,684 
 
 
Realized gain on forward currency contracts
 
 
(13,691)
Impairment of investment
 
 
103,892 
Unrealized (gain) loss on derivative instruments
(66)
288 
(46)
Unrealized loss on hedged investment
 
 
15,361 
Unrealized gain on forward currency contract
 
 
(1,448)
Realized income on investments
 
 
(7,001)
Amortization of nonvested stock compensation expense
7,219 
4,220 
5,953 
Gain on sale of vessel
 
 
(26,227)
Loss on forfeiture of vessel deposits
 
 
53,765 
Change in assets and liabilities:
 
 
 
(Increase) decrease in due from charterers
(6,677)
180 
46 
Increase in prepaid expenses and other current assets
(3,804)
(236)
(3,063)
Increase in accounts payable and accrued expenses
10,048 
874 
2,514 
(Decrease) increase in deferred revenue
(2,465)
177 
3,284 
Decrease in deferred rent credit
(30)
(19)
(19)
Deferred drydock costs incurred
(3,708)
(4,591)
(6,347)
Net cash provided by operating activities
262,680 
219,729 
267,416 
Cash flows from investing activities:
 
 
 
Purchase of vessels
(971,203)
(287,637)
(510,345)
Deposits on vessels
(13,702)
 
(3,489)
Purchase of investments
 
 
(10,290)
Proceeds from forward currency contracts, net
 
 
13,723 
Realized income on investments
 
 
7,001 
Changes in deposits of restricted cash
8,500 
(17,500)
 
Proceeds from sale of vessels
106,555 
 
43,084 
Payments on forfeiture of vessel deposits
 
 
(53,765)
Purchase of other fixed assets
(380)
(1,073)
(207)
Net cash used in investing activities
(870,230)
(306,210)
(514,288)
Cash flows from financing activities:
 
 
 
Proceeds from the 2007 Credit Facility
 
166,200 
558,300 
Repayments on the 2007 Credit Facility
(50,000)
(12,500)
(321,000)
Proceeds from the $100 Million Term Loan Facility
40,000 
 
 
Repayments on the $100 Million Term Loan Facility
(1,120)
 
 
Proceeds from the $253 Million Term Loan Facility
231,500 
 
 
Repayments on the $253 Million Term Loan Facility
(4,691)
 
 
Proceeds from the 2010 Baltic Trading Credit Facility
101,250 
 
 
Proceeds from issuance of common stock
55,200 
 
195,812 
Payment of common stock issuance costs
(318)
 
(370)
Proceeds from issuance of Convertible Senior Notes
125,000 
 
 
Payment of Convertible Senior Notes issuance costs
(867)
 
 
Proceeds from issuance of common stock by subsidiary
214,508 
 
 
Payment of subsidiary common stock issuance costs
(3,721)
 
 
Payment of deferred financing costs and deferred registration costs
(11,212)
(3,908)
(3,759)
Payment of dividend by subsidiary
(5,369)
 
 
Cash dividends paid
 
 
(117,109)
Payments to acquire and retire common stock
 
 
(11,542)
Net cash provided by financing activities
690,160 
149,792 
300,332 
Net increase in cash and cash equivalents
82,610 
63,311 
53,460 
Cash and cash equivalents at beginning of year
188,267 
124,956 
71,496 
Cash and cash equivalents at end of year
$ 270,877 
$ 188,267 
$ 124,956 
GENERAL INFORMATION
GENERAL INFORMATION

1 - GENERAL INFORMATION

 

The accompanying 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 December 31, 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.

 

At December 31, 2010, 2009 and 2008, GS&T’s fleet consisted of 49, 35 and 32 vessels, respectively.

 

Below is the list of GS&T’s wholly owned ship-owning subsidiaries as of December 31, 2010:

 

Wholly Owned Subsidiaries

 

Vessels Acquired

 

Dwt

 

Date Delivered

 

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 (1)

 

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

 

35,000

 

Q2 2011 (2)

 

2011 (3)

 

Genco Mare Limited

 

Genco Mare

 

35,000

 

Q2 2011 (2)

 

2011 (3)

 

Genco Spirit Limited

 

Genco Spirit

 

35,000

 

Q4 2011 (2)

 

2011 (3)

 

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

 

57,981

 

Q1 2011 (2)

 

2011 (3)

 

 

(1) On December 30, 2009, the Company took delivery of the Genco Claudius. However, the vessel has been designated by Lloyd’s 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.

 

During October 2009, Baltic Trading Limited (“Baltic Trading”) filed a registration statement on Form S-1 with the SEC.  Baltic Trading was incorporated in October 2009 in the Marshall Islands for the purpose of conducting a shipping business focused on the drybulk industry spot market.  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 December 31, 2010, GS&T’s wholly-owned subsidiary Genco Investments LLC owned 5,699,088 shares of Baltic Trading’s Class B Stock, which represented a 25.24% ownership interest in Baltic Trading and 83.51% of the aggregate voting power of Baltic Trading’s 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 Trading’s common stock and Class B stock, Genco Investments LLC will be entitled to receive an additional number of shares of Baltic Trading’s Class B stock equal to 2% of the number of common shares issued in the future, other than shares issued under Baltic Trading’s 2010 Equity Incentive Plan.

 

Below is the list of Baltic Trading’s wholly owned ship-owning subsidiaries as of December 31, 2010:

 

Baltic Trading’s Wholly Owned
Subsidiaries

 

Vessel

 

Dwt

 

Date Delivered

 

Year
Built

 

 

 

 

 

 

 

 

 

 

 

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 (“MEP”), which is managed by a company owned by Peter C. Georgiopoulos, Chairman of the Board of Directors.  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 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.

 

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.

 

On March 10, 2008, Fleet Acquisition LLC distributed 2,512,532 shares of the Company’s common stock to OCM Fleet Acquisition LLC, as a member thereof, pursuant to an agreement among Fleet Acquisition LLC’s members.  In connection with this distribution, Mr. Georgiopoulos became the sole member of the Management Committee of Fleet Acquisition LLC, which currently retains 443,606 shares of the Company’s common stock of which Mr. Georgiopoulos may be deemed to be the beneficial owner.  As a result of the foregoing transaction in addition to grants of nonvested shares made to Mr. Georgiopoulos, Mr. Georgiopoulos may be deemed to beneficially own 12.50% of the Company’s common stock (including shares held through Fleet Acquisition LLC) at December 31, 2010.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of consolidation

 

The accompanying 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.

 

Business geographics

 

The Company’s vessels regularly move between countries in international waters, over hundreds of trade routes and, as a result, the disclosure of geographic information is impracticable.

 

Vessel acquisitions

 

When the Company enters into an acquisition transaction, it determines whether the acquisition transaction was the purchase of an asset or a business based on the facts and circumstances of the transaction.  As is customary in the shipping industry, the purchase of a vessel is normally treated as a purchase of an asset as the historical operating data for the vessel is not reviewed nor is material to the Company’s decision to make such acquisition.

 

When a vessel is acquired with an existing time charter, the Company allocates the purchase price to the vessel and the time charter based on, among other things, vessel market valuations and the present value (using an interest rate which reflects the risks associated with the acquired charters) of the difference between (i) the contractual amounts to be paid pursuant to the charter terms and (ii) management’s estimate of the fair market charter rate, measured over a period equal to the remaining term of the charter.  The capitalized above-market (assets) and below-market (liabilities) charters are amortized as a reduction or increase, respectively, to revenues over the remaining term of the charter.

 

Segment reporting

 

The Company has two operating segments, GS&T and Baltic Trading, which are both engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels.  Refer to Note 3 — Segment Information for further information.

 

Revenue and voyage expense recognition

 

Since the Company’s inception, revenues have been generated from time charter agreements, pool agreements and spot market-related time charters.  A time charter involves placing a vessel at the charterer’s disposal for a set period of time during which the charterer may use the vessel in return for the payment by the charterer of a specified daily hire rate.  In time charters, 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.  Spot market-related time charters are the same as other time charter agreements, except the time charter rates are variable and are based on a percentage of the average daily rates as published by The Baltic Dry Index.

 

The Company records time charter revenues over the term of the charter as service is provided.  Revenues are recognized on a straight-line basis as the average revenue over the term of the respective time charter agreement.  The Company recognizes voyage expenses when incurred.

 

Three of the Company’s vessels, the Genco Constantine, Genco Titus and Genco Hadrian, are chartered under time charters which include a profit-sharing element.  Under these charter agreements, the Company receives a fixed rate of $52,750, $45,000 and $65,000 per day, respectively, and an additional profit-sharing payment.  The profit-sharing between the Company and the respective charterer for each 15-day period is calculated by taking the average over that period of the published Baltic Cape Index of the four time charter routes as reflected in daily reports.  If such average is more than the base rate payable under the charter, the excess amount is allocable 50% to the Company and 50% to the charterer.  The profit sharing amount due to the Company is net of a 3.75% commission.  Profit sharing revenue is recorded when the average of the published Baltic Cape Index for the four time charter routes is available for the entire 15-day period, which is when the profit sharing revenue is fixed and determinable.

 

Two of the Company’s vessels, the Genco Ocean and Genco Bay, are chartered under spot market-related time charters which include a profit-sharing element.  Under these charter agreements, the rate for the spot market-related time charter is linked with a floor of $8,500 and a ceiling of $13,500 daily with a 50% profit sharing arrangement to apply to any amount above the ceiling.  The rate is based on 115% of the average of the daily rates of the Baltic Handysize Index as reflected in daily reports.

 

At December 31, 2010, five of the Company’s vessels are in vessel pools.  The Genco Explorer, Genco Pioneer, Genco Progress, Genco Reliance and Genco Sugar entered the Lauritzen Pool during August 2009.   Vessel pools, such as the Lauritzen Pool, provide cost-effective commercial management activities for a group of similar class vessels.  The pool arrangement provides the benefits of a large-scale operation, and chartering efficiencies that might not be available to smaller fleets.  Under the pool arrangement, the vessels operate under a time charter agreement whereby the cost of bunkers and port expenses are borne by the pool and operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel.  Since the members of the pool share in the revenue generated by the entire group of vessels in the pool, and the pool operates in the spot market, the revenue earned by these vessels is subject to the fluctuations of the spot market.  The Company recognizes revenue from these pool arrangements based on its portion of the net distributions reported by the relevant pool.

 

Other operating income

 

During the years ended December 31, 2010, 2009 and 2008, the Company recorded other operating income of $791, $0 and $0 respectively.  Other operating income recorded during the year ended December 31, 2010 consists of $585 related to the first installment due on December 30, 2010 from Samsun Logix Corporation (“Samsun”) pursuant to the rehabilitation plan which was approved by the South Korean courts.  Refer to Note 19 — Commitments and Contingencies for further information regarding the bankruptcy settlement with Samsun.  Additionally, other operating income consists of $206 related to a payment received from the seller of the Baltic Cougar as a result of the late delivery of the vessel to Baltic Trading.

 

Due from charterers, net

 

Due from charterers, net includes accounts receivable from charters, net of the provision for doubtful accounts.  At each balance sheet date, the Company provides for the provision based on a review of all outstanding charter receivables.  Included in the standard time charter contracts with the Company’s customers are certain performance parameters which if not met, can result in customer claims.  As of December 31, 2010 and 2009, the Company had a reserve of $592 and $171, respectively, against due from charterers balance and an additional accrual of $689 and $959, respectively, in deferred revenue, each of which is primarily associated with estimated customer claims against the Company including vessel performance issues under time charter agreements.

 

Revenue is based on contracted charterparties.   However, there is always the possibility of dispute over terms and payment of hires and freights.  In particular, disagreements may arise concerning the responsibility of lost time and revenue.  Accordingly, the Company periodically assesses the recoverability of amounts outstanding and estimates a provision if there is a possibility of non-recoverability.  The Company believes its provisions to be reasonable based on information available.

 

Vessel operating expenses

 

Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, and other miscellaneous expenses.  Vessel operating expenses are recognized when incurred.

 

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 years ended December 31, 2010, 2009 and 2008 was $109,839, $84,326, and $69,050, 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 vessel’s 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 cost of steel times the weight of the ship noted in lightweight tons (lwt).  At December 31, 2010 and 2009, the Company estimated the residual value of vessels to be $175/lwt.

 

Fixed assets, net

 

Fixed assets, net are stated at cost less accumulated depreciation and amortization.  Depreciation and amortization are based on a straight line basis over the estimated useful life of the specific asset placed in service.  The following table is used in determining the typical estimated useful lives:

 

Description

 

Useful lives

 

 

 

 

 

Leasehold improvements

 

Lesser of the useful life of the asset or life of the lease

 

Furniture, fixtures & other equipment

 

5 years

 

Vessel equipment

 

2-15 years

 

Computer equipment

 

3 years

 

 

Depreciation and amortization expense for fixed assets for the years ended December 31, 2010, 2009 and 2008 was $501, $414, and $418, respectively.

 

Deferred drydocking costs

 

The Company’s vessels are required to be drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels are operating.  The Company defers the costs associated with the drydockings as they occur and amortizes these costs on a straight-line basis over the period between drydockings.  Costs deferred as part of a vessel’s drydocking include actual costs incurred at the drydocking yard; cost of travel, lodging and subsistence of personnel sent to the drydocking site to supervise; and the cost of hiring a third party to oversee the drydocking.  If the vessel is drydocked earlier than originally anticipated, any remaining deferred drydock costs that have not been amortized are expensed at the beginning of the next drydock.  Amortization expense for drydocking for the years ended December 31, 2010, 2009 and 2008 was $5,324, $3,410, and $1,927, respectively.  All other costs incurred during drydocking are expensed as incurred.

 

Impairment of long-lived assets

 

The Company follows the Accounting Standards Codification (“ASC”) Subtopic 360-10, “Property, Plant and Equipment” (“ASC 360-10”), which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts.  If indicators of impairment are present, the Company performs an analysis of the anticipated undiscounted future net cash flows of the related long-lived assets.  If the carrying value of the related asset exceeds the undiscounted cash flows, the carrying value is reduced to its fair value.  Various factors including anticipated future charter rates, estimated scrap values, future drydocking costs and estimated vessel operating costs are included in this analysis.

 

For the years ended December 31, 2010, 2009 and 2008, no impairment charges were recorded on the Company’s long-lived assets.

 

Deferred financing costs

 

Deferred financing costs, included in other assets, consist of fees, commissions and legal expenses associated with obtaining loan facilities.  These costs are amortized over the life of the related debt and are included in interest expense.

 

Cash and cash equivalents

 

The Company considers highly liquid investments such as money market funds and certificates of deposit with an original maturity of three months or less to be cash equivalents.

 

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 income (“AOCI”).  The Company classifies the investment as a current or noncurrent asset based on the Company’s intent to hold the investment at each reporting date. Effective August 16, 2007, the Company elected hedge accounting for forward currency contracts in place associated with the cost basis of the Jinhui shares, and therefore the unrealized currency gain or loss associated with the cost basis in the Jinhui shares was reflected in the income statement as other expense to offset the gain or loss associated with these forward currency contracts.  On October 10, 2008, the Company elected to discontinue the purchase of forward currency contracts associated with Jinhui by entering into an offsetting trade that closed the previously opened currency contract, thereby eliminating the hedge on Jinhui.  The cost of securities when sold is based on the specific identification method.  Realized gains and losses on the sale of these securities are reflected in the consolidated statement of operations in other expense.  Additionally, the realized gain or loss on the forward currency contracts is reflected in the Consolidated Statement of Cash Flows as an investing activity and is reflected in the caption Payments on forward currency contracts, net.

 

Investments are reviewed quarterly to identify possible other-than-temporary impairment in accordance with ASC Subtopic 320-10, “Investments — Debt and Equity Securities” (“ASC 320-10”).  When evaluating its investments, the Company reviews factors such as the length of time and extent to which fair value has been below the cost basis, the financial condition of the issuer, the underlying net asset value of the issuers assets and liabilities, and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in market value.  Should the decline in the value of any investment be deemed to be other-than-temporary, the investment basis would be written down to fair market value, and the write-down would be recorded to earnings as a loss.  Refer to Note 6 — Investments.

 

Income taxes

 

Pursuant to Section 883 of the U.S. Internal Revenue Code of 1986 as amended (the “Code”), qualified income derived from the international operations of ships is excluded from gross income and exempt from U.S. federal income tax if a company engaged in the international operation of ships meets certain requirements.  Among other things, in order to qualify, the Company must be incorporated in a country which grants an equivalent exemption to U.S. corporations and must satisfy certain qualified ownership requirements.

 

GS&T is incorporated in the Marshall Islands.  Pursuant to the income tax laws of the Marshall Islands, GS&T is not subject to Marshall Islands income tax.  The Marshall Islands has been officially recognized by the Internal Revenue Service as a qualified foreign country that currently grants the requisite equivalent exemption from tax.  GS&T is not taxable in any other jurisdiction, with the exception of Genco Management (USA) Limited as noted below.

 

Based on the publicly traded requirement of the Section 883 regulations, GS&T believes that it qualified for exemption from income tax on income derived from the international operations of ships for 2010, 2009 and 2008.  In order to meet the publicly traded requirement, GS&T’s stock must be treated as being primarily and regularly traded for more than half the days of any such year.  Under the Section 883 regulations, GS&T’s qualification for the publicly traded requirement may be jeopardized if shareholders of the Company’s common stock that own five percent or more of the Company’s stock (“5% shareholders”) own, in the aggregate, 50% or more of the Company’s common stock for more than half the days of the year.  Management believes that during 2010, 2009 and 2008, the combined ownership of its 5% shareholders did not equal 50% or more of its common stock for more than half the days of 2010, 2009 and 2008, as applicable.

 

If GS&T does not qualify for the exemption from tax under Section 883, it would be subject to a 4% tax on the gross “shipping income” (without the allowance for any deductions) that is treated as derived from sources within the United States or “United States source shipping income.” For these purposes, “shipping income” means any income that is derived from the use of vessels, from the hiring or leasing of vessels for use, or from the performance of services directly related to those uses; and “United States source shipping income” includes 50% of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States.

 

Baltic Trading is also incorporated in the Marshall Islands.  However, Baltic Trading did not qualify for an exemption under Section 883 upon consummation of its IPO because it did not satisfy the publicly traded requirement as described above.  Since Baltic Trading’s IPO was completed on March 15, 2010, the Company has indirectly owned shares of Baltic Trading’s Class B Stock which has provided the Company with over 50% of the combined voting power of all classes of Baltic Trading’s voting stock.  As such, Baltic Trading is subject to income tax on its United States source income.  During the year ended December 31, 2010, Baltic Trading had United States operations which resulted in United States source income of $2,541.  Baltic Trading’s estimated United States income tax expense for the year ended December 31, 2010 was $78, of which $38 was outstanding at December 31, 2010 which has been reflected in accounts payable and accrued expenses.

 

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 Manco’s personnel and services in connection with the provision of the services for both Baltic Trading and MEP’s vessels.  Total revenue earned for these services during the year ended December 31, 2010 was $6,739, of which $5,490 eliminated upon consolidation.  After allocation of certain expenses, there was taxable income of $3,913 associated with these activities for the year ended December 31, 2010.  This resulted in estimated tax expense of $1,762 for the year ended December 31, 2010.

 

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.

 

Comprehensive income

 

The Company follows ASC Subtopic 220-10, “Comprehensive Income” (“ASC 220-10”), which establishes standards for reporting and displaying comprehensive income and its components in financial statements.  Comprehensive income is comprised of net income and amounts related to the Company’s interest rate swaps accounted for as hedges, as well as unrealized gains or losses associated with the Company’s investments.

 

Nonvested stock awards

 

The Company follows ASC Subtopic 718-10, “Compensation — Stock Compensation” (“ASC 718-10”) for nonvested stock issued under its equity incentive plan.  Stock-based compensation costs from nonvested stock have been classified as a component of additional paid-in capital.

 

Accounting estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant estimates include vessel valuations, the valuation of amounts due from charterers, performance claims, residual value of vessels, useful life of vessels and the fair value of derivative instruments.  Actual results could differ from those estimates.

 

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.  The Company earned 100% of revenues from 33 customers in 2010, 23 customers in 2009 and 22 customers in 2008.  Management does not believe significant risk exists in connection with the Company’s concentrations of credit at December 31, 2010 and 2009.

 

For the year ended December 31, 2010 there were two customers that individually accounted for more than 10% of voyage revenues, Cargill International S.A. and Pacific Basin Chartering Ltd., which represented 29.26% and 11.43% of voyage revenues, respectively.  For the year ended December 31, 2009, there were two customers that individually accounted for more than 10% of voyage revenues, Cargill International S.A. and Pacific Basin Chartering Ltd., which represented 30.77% and 13.61% of voyage revenues, respectively.  For the year ended December 31, 2008, there were two customers that individually accounted for more than 10% of voyage revenues, Cargill International S.A. and Pacific Basin Chartering Ltd., which represented 27.79% and 14.64% of voyage revenues, respectively.

 

At December 31, 2010, the Company maintains all of its cash and cash equivalents with four financial institutions.  None of the Company’s cash and cash equivalent balances is 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 December 31, 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 2007 Credit Facility.  None of the interest rate swap agreements are covered by insurance in the event of default by this financial institution.

 

Fair value of financial instruments

 

The estimated fair values of the Company’s financial instruments such as amounts due to / due from charterers, accounts payable and long-term debt approximate their individual carrying amounts as of December 31, 2010 and December 31, 2009 due to their short-term maturity or the variable-rate nature of the respective borrowings under the credit facilities.

 

The fair value of the interest rate swaps is the estimated amount the Company would receive or have to pay in order to terminate these agreements at the reporting date, taking into account current interest rates and the creditworthiness of the counterparty for assets and creditworthiness of the Company for liabilities.  See Note 13 - Fair Value of Financial Instruments for additional disclosure on the fair values of long term debt, convertible senior notes, derivative instruments, and AFS securities.

 

Derivative financial instruments

 

Interest rate risk management

 

The Company is exposed to the impact of interest rate changes.  The Company’s 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 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 Consolidated Statements of Operations.

 

Currency risk management

 

The Company currently holds an investment in Jinhui shares that are traded on the Oslo Stock Exchange.   The Company utilized foreign currency forward contracts to protect its original investment from changing exchange rates through October 10, 2008 when the use of these contracts was discontinued due to the decline in the underlying value of Jinhui.  Refer to Note 6 — Investments for further information.

SEGMENT INFORMATION
SEGMENT INFORMATION

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 Company’s consolidated financial statements.  Information about the Company’s reportable segments for the years ended December 31, 2010, 2009 and 2008 are as follows:

 

The following table presents a reconciliation of total revenue from external customers for the Company’s two operating segments to total consolidated revenue from external customers for the Company for the years ended December 31, 2010, 2009 and 2008.

 

 

 

For the years ended December 31,

 

 

 

2010

 

2009

 

2008

 

Revenue from External Customers

 

 

 

 

 

 

 

GS&T

 

$

421,618

 

$

379,531

 

$

405,370

 

Baltic Trading

 

32,559

 

 

 

Total operating segments

 

454,177

 

379,531

 

405,370

 

Eliminating revenue

 

(5,490

)

 

 

Total consolidated revenue from external customers

 

$

448,687

 

$

379,531

 

$

405,370

 

 

The following table presents a reconciliation of total intersegment revenue, which eliminates upon consolidation, for the Company’s two operating segments for the years ended December 31, 2010, 2009 and 2008.  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.

 

 

 

For the years ended December 31,

 

 

 

2010

 

2009

 

2008

 

Intersegment revenue

 

 

 

 

 

 

 

GS&T

 

$

5,490

 

$

 

$

 

Baltic Trading

 

 

 

 

Total operating segments

 

5,490

 

 

 

Eliminating revenue

 

(5,490

)

 

 

Total consolidated intersegment revenue

 

$

 

$

 

$

 

 

The following table presents a reconciliation of total depreciation and amortization expense for the Company’s two operating segments to total consolidated depreciation and amortization expense for the years ended December 31, 2010, 2009 and 2008.  The eliminating depreciation and amortization expense noted in the following table consists of the elimination of intercompany transactions resulting from the depreciation expense associated with the 1% purchase fee due to GS&T from Baltic Trading pursuant to the Management Agreement.  The 1% purchase fee is capitalized as part of vessel assets by Baltic Trading and is depreciated over the remaining life of the vessel, therefore the associated depreciation expense is eliminated upon consolidation.

 

 

 

For the years ended December 31,

 

 

 

2010

 

2009

 

2008

 

Depreciation and amortization

 

 

 

 

 

 

 

GS&T

 

$

108,381

 

$

88,150

 

$

71,395

 

Baltic Trading

 

7,359

 

 

 

Total operating segments

 

115,740

 

88,150

 

71,395

 

Eliminating depreciation and amortization

 

(77

)

 

 

Total consolidated depreciation and amortization

 

$

115,663

 

$

88,150

 

$

71,395

 

 

The following table presents a reconciliation of total interest expense for the Company’s two operating segments to total consolidated interest expense for the years ended December 31, 2010, 2009 and 2008.  There is no eliminating interest expense as the interest incurred by each operating segment is related to each operating segment’s own debt facilities.

 

 

 

For the years ended December 31,

 

 

 

2010

 

2009

 

2008

 

Interest expense

 

 

 

 

 

 

 

GS&T

 

$

70,495

 

$

61,796

 

$

52,589

 

Baltic Trading

 

2,155

 

 

 

Total operating segments

 

72,650

 

61,796

 

52,589

 

Eliminating interest expense

 

 

 

 

Total consolidated interest expense

 

$

72,650

 

$

61,796

 

$

52,589

 

 

The following table presents a reconciliation of total net income for the Company’s two operating segments to total consolidated net income for the years ended December 31, 2010, 2009 and 2008.  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.

 

 

 

For the years ended December 31,

 

 

 

2010

 

2009

 

2008

 

Net income

 

 

 

 

 

 

 

GS&T

 

$

144,679

 

$

148,624

 

$

86,580

 

Baltic Trading

 

8,322

 

 

 

Total operating segments

 

153,001

 

148,624

 

86,580

 

Eliminating net income

 

(5,592

)

 

 

Total consolidated net income

 

$

147,409

 

$

148,624

 

$

86,580

 

 

The following table presents a reconciliation of total assets for the Company’s two operating segments to total consolidated net assets as of December 31, 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 December 31, 2010.

 

 

 

December 31,
2010

 

December 31,
2009

 

Total assets

 

 

 

 

 

GS&T

 

$

2,792,056

 

$

2,336,802

 

Baltic Trading

 

396,154

 

 

Total operating segments

 

3,188,210

 

2,336,802

 

Eliminating assets

 

(5,502

)

 

Total consolidated assets

 

$

3,182,708

 

$

2,336,802

 

 

The following table presents a reconciliation of total expenditures for vessel purchases, including vessel deposits, for the Company’s two operating segments to total consolidated expenditures for vessel purchases, including vessel deposits, for the years ended December 31, 2010, 2009 and 2008.   The eliminating expenditures for vessels noted in the following table consists primarily of the elimination of the 1% purchase fees due to GS&T from Baltic Trading pursuant to the Management Agreement which were paid by Baltic Trading to GS&T as of December 31, 2010.

 

 

 

For the years ended December 31,

 

 

 

2010

 

2009

 

2008

 

Expenditures for vessels

 

 

 

 

 

 

 

GS&T

 

$

597,908

 

$

287,637

 

$

513,834

 

Baltic Trading

 

389,758

 

 

 

Total operating segments

 

987,666

 

287,637

 

513,834

 

Eliminating expenditures for vessels

 

(2,761

)

 

 

Total consolidated expenditures for vessels

 

$

984,905

 

$

287,637

 

$

513,834

 

 

CASH FLOW INFORMATION
CASH FLOW INFORMATION

4 - CASH FLOW INFORMATION

 

As of December 31, 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 $43,297, $4,417 of which is a current liability, as of December 31, 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 year ended December 31, 2010, the Company had non-cash investing activities not included in the Consolidated Statement of Cash Flows for items included in accounts payable and accrued expenses consisting of $3,979 for the purchase of vessels, $38 associated with deposits on vessels and $60 for the purchase of other fixed assets.  Additionally, for the year ended December 31, 2010, the Company had non-cash financing activities not included in the Consolidated Statement of Cash Flows for items included in accounts payable and accrued expenses consisting of $204 associated with deferred financing fees, $51 associated with issuance costs related to the concurrent stock offering and issuance of Convertible Senior Notes completed on July 27, 2010 and  $1 associated with dividend payments due to Peter Georgiopoulos, Chairman of the Board of Directors.  Also, for the year ended December 31, 2010, the Company had non-cash investing activities not included in the Consolidated Statement of Cash Flows for items included in prepaid expenses and other current assets as of December 31, 2010 consisting of $22 interest receivable associated with deposits on vessels.

 

For the year ended December 31, 2009, the Company had non-cash investing activities not included in the Consolidated Statement of Cash Flows for items included in accounts payable and accrued expenses consisting of $630 for the purchase of vessels and $87 for the purchase of other fixed assets.  Additionally, for the year ended December 31, 2009, the Company had non-cash financing activities not included in the Consolidated Statement of Cash Flows for items included in accounts payable and accrued expenses consisting of $483 associated with deferred registration costs for Baltic Trading.

 

For the year ended December 31, 2009, the Company made a non-cash reclassification of $90,555 from deposits on vessels to vessels due to the completion of the purchases of the Genco Commodus, Genco Maximus and Genco Claudius.  For the year ended December 31, 2008, the Company made a non-cash reclassification of $60,128 from deposits on vessels to vessels due to the completion of the purchases of the Genco Champion, Genco Constantine and Genco Hadrian.  No such reclassifications were made during the year ended December 31, 2010.

 

For the year ended December 31, 2008, the Company had non-cash investing activities not included in the Consolidated Statement of Cash Flows for items included in accounts payable and accrued expenses consisting of $473 for the purchase of vessels and $337 associated with deposits on vessels.  Additionally, for the year ended December 31, 2008, the Company had items in prepaid expenses and other current assets consisting of $3,524 which had reduced the deposits on vessels.

 

During the years ended December 31, 2010, 2009 and 2008, cash paid for interest, net of amounts capitalized, was $64,281, $58,188, and $47,885 respectively.

 

During the years ended December 31, 2010, 2009 and 2008, cash paid for estimated income taxes was $1,995, $0, and $0 respectively.

 

On March 5, 2010 and December 21, 2010, the Board of Directors approved grants of 75,000 and 200,000 shares, respectively, of nonvested common stock to Peter Georgiopoulos, Chairman of the Board.  The fair value of such nonvested stock was $1,718 and $2,930, respectively.  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.  Lastly, on December 21, 2010, the Company granted nonvested stock to certain employees.  The fair value of such nonvested stock was $3,291.

 

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.  On December 27, 2009, the Company granted nonvested stock to certain employees.  The fair value of such nonvested stock was $2,648.

 

On January 10, 2008 and December 24, 2008 the Board of Directors approved grants of 100,000 and 75,000 shares, respectively, of nonvested common stock to Peter Georgiopoulos, Chairman of the Board.  The fair value of such nonvested stock was $4,191 and $905, respectively.  Additionally, on February 13, 2008 and July 24, 2008 the Company made grants of nonvested common stock under the Genco Shipping & Trading Limited 2005 Equity Incentive Plan in the amount of 12,500 and 15,000 shares, respectively, to directors of the Company.  The fair value of such nonvested stock was $689 and $938, respectively.  Lastly, on December 24, 2008 the Company granted nonvested stock to certain employees.  The fair value of such nonvested stock was $1,448.

 

On March 10, 2010, 358,000 and 108,000 shares of Baltic Trading’s nonvested common stock were granted to Peter Georgiopoulos, Chairman of the Board, and John Wobensmith, Baltic Trading’s President and Chief Financial Officer, respectively, which were approved by the Board of Directors on such date.  The fair value of such nonvested stock was $6,524 based on the IPO price of $14.00 per share.  Both of these grants of nonvested common stock will vest ratably in four annual installments commencing on the first anniversary of the closing of the Company’s IPO, March 15, 2010.  Additionally, on March 15, 2010, the Company made grants of nonvested common stock in the amount of 12,500 shares to directors of the Company.  The fair value of such nonvested stock was $175 based on the IPO price of $14.00 per share.  These grants will vest the earlier of the first anniversary of the grant date or the date of the next annual shareholders’ meeting, which is expected to be held in May 2011.  Lastly, on December 24, 2010, 80,000 and 25,000 shares of nonvested common stock were granted to Peter Georgiopoulos and John Wobensmith, respectively, which were approved by the Board of Directors on such date.  The fair value of such nonvested stock was $1,118.  Both of these grants of nonvested common stock will vest ratably on each of the four anniversaries of November 15, 2011.  All of the aforementioned grants of nonvested common stock were made under the Baltic Trading Limited 2010 Equity Incentive Plan.

 

VESSEL ACQUISITIONS AND DISPOSITIONS
VESSEL ACQUISITIONS AND DISPOSITIONS

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 16 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.  There is only one remaining vessel to purchase which is subject to the completion of customary additional documentation and closing conditions.  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 retain13 of the 16 vessels, 12 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 vessel delivery dates.  GS&T has elected not to retain three of the 16 vessels, including one newbuilding.  Therefore, upon delivery of these vessels during the year ended December 31, 2010, GS&T immediately resold them upon delivery based on GS&T’s aggregate purchase price of approximately $106,555 to MEP, a related party, including the 1% commission fee noted above.  GS&T entered into definitive agreements with MEP for this purpose.  One of the vessels was sold to MEP during the third quarter of 2010 for $36,562 and two of the vessels were sold to MEP during the fourth quarter of 2010 for a total of $69,993, each of 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 Management Corporation group of companies (“Metrostar”) 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 May and November 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 Dry Index.  GS&T plans to finance the acquisition of the remaining 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 Metrostar 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.

 

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.

 

During 2009, the Company completed the acquisition of the Genco Commodus, Genco Maximus and Genco Claudius, respectively.  In July 2007, the Company entered into an agreement to acquire nine Capesize vessels from Metrostar for a net purchase price of $1,111,000, consisting of the value of the vessels and the liability for the below market time charter contracts acquired.  The Company completed the acquisition of these vessels during 2009.

 

On June 16, 2008 the Company agreed to acquire six drybulk newbuildings from Lambert Navigation Ltd., Northville Navigation Ltd., Providence Navigation Ltd., and Primebulk Navigation Ltd., for an aggregate purchase price of $530,000.  On November 3, 2008, the Company agreed to cancel the acquisition of these six drybulk newbuildings.  As part of the agreement, the selling group retained the deposits totaling $53,000 plus the interest earned on such deposits for the six vessels, comprised of three Capesize and three Handysize vessels.  This transaction resulted in a charge in the fourth quarter of 2008 to the Company’s income statement of $53,765 related to the forfeiture of these deposits.  This amount included $53,213, which was recorded in Deposits on vessels and included net capitalized interest, approximately $546 of interest income receivable which was recorded as part of Prepaid expenses and other current assets, and $6 of other expenses.  Additionally, on May 9, 2008, the Company agreed to acquire three 2007 built vessels, consisting of two Panamax vessels and one Supramax vessel, from Bocimar International N.V. and Delphis N.V. for an aggregate purchase price of approximately $257,000 which were all acquired during 2008.

 

On February 26, 2008, the Company completed the sale of the Genco Trader.  The Company realized a net gain of approximately $26,227 and had net proceeds of $43,084 from the sale of the vessel in the first quarter of 2008.  The Company had previously reached an agreement, on October 2, 2007, to sell the Genco Trader, a 1990-built Panamax vessel, to SW Shipping Co., Ltd. for $44,000 less a 2% brokerage commission payable to a third party.

 

On January 2, 2008, the Company completed the acquisition of the Genco Champion, the last vessel acquired from affiliates of Evalend Shipping Co. S.A.  On August 10 and August 13, 2007, the Company had agreed to acquire six drybulk vessels (three Supramax and three Handysize) from affiliates of Evalend Shipping Co. S.A. for a net purchase price of $336,000, consisting of the value of the vessels and the liability for the below market time charter contract acquired.  The Company completed the acquisition of all six of the vessels, the Genco Champion, Genco Predator, Genco Warrior, Genco Hunter, Genco Charger, and Genco Challenger, during 2008.

 

On October 2, 2007, the Company reached an agreement to sell the Genco Trader, a 1990-built Panamax vessel, to SW Shipping Co., Ltd for $44,000 less a 2% brokerage commission payable to a third party.  The Company recorded a net gain of $26,227 from the sale of the vessel in the first quarter of 2008.

 

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 acquisitions.  During the year ended December 31, 2010, GS&T recorded a liability for time charters acquired of $2,146 which is being amortized as an increase to voyage revenues during the remaining term of each respective time charter.  There were no vessels acquired during the year ended December 31, 2009 that had existing time charters.  Below market time charters, including those acquired during previous years, were amortized as an increase in revenue in the amount of $4,560, $18,975 and $22,447 for the years ended December 31, 2010, 2009 and 2008, respectively.  The remaining unamortized fair market value of time charter acquired at December 31, 2010 and December 31, 2009 is $2,197 and $4,611, respectively.  This balance will be amortized into revenue over a weighted average period of 1.57 years and will be amortized as follows: $1,519 for 2011, $544 for 2012 and $134 for 2013.  The 2008 amortization amount includes the accelerated amortization of the unamortized fair market value of the time charter acquired related to the Genco Cavalier as a result of the charterer of the vessel going bankrupt.

 

Capitalized interest expense associated with newbuilding contracts for the years ended December 31, 2010, 2009 and 2008 was $446, $1,473 and $5,778, respectively.

 

INVESTMENTS
INVESTMENTS

6 —INVESTMENTS

 

The Company holds an investment in the capital stock of Jinhui.  Jinhui is a drybulk shipping owner and operator focused on the Supramax segment of drybulk shipping.  This investment is designated as AFS and is reported at fair value, with unrealized gains and losses recorded in shareholders’ equity as a component of AOCI.  At December 31, 2010 and December 31, 2009, the Company held 16,335,100 shares of Jinhui capital stock which is recorded at its fair value of $54,714 and $72,181, respectively, based on the closing price on December 30, 2010 and December 30, 2009.

 

During the fourth quarter of 2008, the Company reviewed the investment in Jinhui for indicators of other-than-temporary impairment in accordance with ASC 320-10.  Based on this review, the Company deemed the investment in Jinhui to be other-than-temporarily impaired as of December 31, 2008 due to the severity of the decline in its market value versus its cost basis.  As a result, during the fourth quarter of 2008, the Company recorded a $103,892 impairment charge.  As a result of the other-than-temporary impairment, the new cost basis of this investment is approximately $1.03 per share, the value of the investment at December 31, 2008.  The Company reviews the investment in Jinhui for impairment on a quarterly basis.  There were no impairment charges recognized during the years ended December 31, 2010 and 2009.

 

The unrealized gain for 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) Income for a breakdown of the components of AOCI.

 

During 2008 the gain (loss) associated with the use of short-term forward currency contracts held during the year which were accounted for as fair value hedges is included as a component of other (expense) income and is offset by a reclassification from AOCI for the hedged portion of the currency gain (loss) on investment.

EARNINGS PER SHARE
EARNINGS PER SHARE

7 - EARNINGS PER 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 809,087 nonvested shares outstanding at December 31, 2010 (refer to Note 21 — Nonvested Stock Awards), 562,150 shares are anti-dilutive.  The Company’s diluted earnings per share will also reflect the assumed conversion under the Company’s 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:

 

 

 

Years Ended December 31,

 

 

 

2010

 

2009

 

2008

 

 

 

 

 

 

 

 

 

Common shares outstanding, basic:

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic

 

32,987,449

 

31,295,212

 

30,290,016

 

 

 

 

 

 

 

 

 

Common shares outstanding, diluted:

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic

 

32,987,449

 

31,295,212

 

30,290,016

 

 

 

 

 

 

 

 

 

Dilutive effect of convertible notes

 

2,760,693

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of restricted stock awards

 

143,231

 

149,851

 

162,834

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, diluted

 

35,891,373

 

31,445,063

 

30,452,850

 

 

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:

 

 

 

Years Ended December 31,

 

 

 

2010

 

2009

 

2008

 

 

 

 

 

 

 

 

 

Net income attributable to GS&T

 

$

141,243

 

$

148,624

 

$

86,580

 

 

 

 

 

 

 

 

 

Interest expense related to convertible notes

 

4,657

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to GS&T for the computation of diluted earnings per share

 

$

145,900

 

$

148,624

 

$

86,580

 

 

RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS

8 - RELATED PARTY TRANSACTIONS

 

The following are related party transactions not disclosed elsewhere in these consolidated financial statements:

 

The Company makes available employees performing internal audit services to General Maritime Corporation (“GMC”), where the Company’s Chairman, Peter C. Georgiopoulos, also serves as Chairman of the Board.  For the years ended December 31, 2010, 2009 and 2008, the Company invoiced $200, $162 and $175, respectively, to GMC which includes time associated with such internal audit services.  During 2009, the amount invoiced of $162 included $4 of office expenses.  Additionally, during the years ended December 31, 2010, 2009 and 2008, the Company incurred travel and other related expenditures totaling $336, $139 and $337, respectively, reimbursable to GMC or its service provider.  For the year ended December 31, 2010, 2009 and 2008 approximately $0, $0 and $9 of these travel expenditures were paid from the gross proceeds received from the May 2008 equity offering and as such were included in the determination of net proceeds.  At December 31, 2010, the amount due to GMC from the Company was $74.  At December 31, 2009, the amount due to the Company from GMC was $41.

 

During the years ended December 31, 2010, 2009 and 2008, the Company incurred legal services (primarily in connection with vessel acquisitions) aggregating $390, $80, and $99, respectively, from Constantine Georgiopoulos, the father of Peter C. Georgiopoulos, Chairman of the Board.  At December 31, 2010 and 2009, $234 and $3, respectively, was outstanding to Constantine Georgiopoulos.

 

During the year ended December 31, 2010, the Company utilized the services of North Star Maritime, Inc. (“NSM”) which is owned and operated by one of GS&T’s 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 $12 for services rendered during the year ended December 31, 2010.  There were no services rendered from NSM during 2009 and 2008.  There are no amounts due to NSM at December 31, 2010 and 2009.

 

During 2009 and 2010, GS&T and Baltic Trading, respectively, entered into agreements with Aegean Marine Petroleum Network, Inc. (“Aegean”) to purchase lubricating oils for certain vessels in the their fleets.  Peter C. Georgiopoulos, Chairman of the Board of the Company, is Chairman of the Board of Aegean.  During the years ended December 31, 2010 and 2009, Aegean supplied lubricating oils to the Company’s vessels aggregating $1,457 and $230, respectively.  At December 31, 2010 and 2009, $302 and $226 remained outstanding, respectively.  There were no purchases of lubricating oils made from Aegean during 2008.

 

During the year ended December 31, 2010, the Company invoiced MEP for technical services provided and expenses paid on MEP’s behalf aggregating $108,982.  This amount also included the purchase of three Bourbon vessels on MEP’s behalf (Refer to Note 5 — Vessel Acquisitions and Dispositions).  MEP is managed by a company owned by Peter C. Georgiopoulos, Chairman of the Board.  At December 31, 2010 and 2009, $57 and $0, respectively, was due to the Company from MEP.  Total service revenue earned by the Company for technical services provided to MEP for the year ended December 31, 2010 was $1,249.

LONG-TERM DEBT
LONG-TERM DEBT

9 - LONG-TERM DEBT

 

Long-term debt consists of the following:

 

 

 

December 31, 2010

 

December 31, 2009

 

 

 

 

 

 

 

2007 Credit Facility

 

$

1,277,000

 

$

1,327,000

 

$100 Million Term Loan Facility

 

38,880

 

 

$253 Million Term Loan Facility

 

226,809

 

 

2010 Baltic Trading Credit Facility

 

101,250

 

 

Less: Current portion

 

(71,841

)

(50,000

)

 

 

 

 

 

 

Long-term debt

 

$

1,572,098

 

$

1,277,000

 

 

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 Capesize vessels and refinancing the Company’s existing 2005 Credit Facility and 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 2005 Credit Facility and the Short-Term Line, and these two facilities have accordingly been terminated.  As of December 31, 2010 and 2009, $1,277,000 and $1,327,000 was outstanding under the 2007 Credit Facility.  The maximum amount that may be borrowed under the 2007 Credit Facility at December 31, 2010 is $1,277,000.  As of December 31, 2010, the Company has utilized its maximum borrowing capacity under the 2007 Credit Facility.

 

On January 26, 2009, the Company entered into an amendment to the 2007 Credit Facility (the “2009 Amendment”) which implemented the following modifications to the terms of the 2007 Credit Facility:

 

·                        Compliance with the existing collateral maintenance financial covenant was waived effective for the year ended December 31, 2008 and until the Company can represent that it is in compliance with all of its financial covenants and is otherwise able to pay a dividend and purchase or redeem shares of common stock under the terms of the Credit Facility in effect before the 2009 Amendment.  With the exception of the collateral maintenance financial covenant, the Company believes that it is in compliance with its financial covenants under the 2007 Credit Facility.  The Company’s cash dividends and share repurchases were suspended until the Company can represent that it is in a position to again satisfy the collateral maintenance covenant.

 

·                        The total amount of the 2007 Credit Facility is subject to quarterly reductions of $12,500 beginning March 31, 2009 through March 31, 2012 and quarterly reductions of $48,195 beginning July 20, 2012 and thereafter until the maturity date.  A final payment of $250,600 will be due on the maturity date.

 

·                        The Applicable Margin to be added to the London Interbank Offered Rate to calculate the rate at which the Company’s borrowings bear interest is 2.00% per annum (the “Applicable Margin”).

 

·                        The commitment commission payable to each lender is 0.70% per annum of the daily average unutilized commitment of such lender.

 

Amounts borrowed and repaid under the 2007 Credit Facility may be reborrowed if available under the 2007 Credit Facility.  The 2007 Credit Facility has a maturity date of July 20, 2017.

 

Loans made under the 2007 Credit Facility may be and have been used for the following:

 

·                  up to 100% of the en bloc purchase price of $1,111,000 for nine modern drybulk Capesize vessels, which the Company has agreed to purchase from Metrostar;

 

·                  repayment of amounts previously outstanding under the Company’s 2005 Credit Facility, or $206,233;

 

·                  the repayment of amounts previously outstanding under the Company’s Short-Term Line, or $77,000;

 

·                      possible acquisitions of additional drybulk carriers between 25,000 and 180,000 dwt that are up to ten years of age at the time of delivery and not more than 18 years of age at the time of maturity of the credit facility;

 

·                      up to $50,000 of working capital; and

 

·                      the issuance of up to $50,000 of standby letters of credit.  At December 31, 2010 and 2009, there were no letters of credit issued under the 2007 Credit Facility.

 

All amounts owing under the 2007 Credit Facility are secured by the following:

 

·      cross-collateralized first priority mortgages on 35 of the Company’s existing vessels and any new vessels financed with the 2007 Credit Facility;

 

·      an assignment of any and all earnings of the mortgaged vessels;

 

·      an assignment of all insurances on the mortgaged vessels;

 

·      a first priority perfected security interest in all of the shares of Jinhui owned by the Company;

 

·      an assignment of the shipbuilding contracts and an assignment of the shipbuilder’s refund guarantees meeting the Administrative Agent’s criteria for any additional newbuildings financed under the 2007 Credit Facility; and

 

·      a first priority pledge of the Company’s ownership interests in each subsidiary guarantor.

 

The Company has completed a pledge of its ownership interests in the subsidiary guarantors that own the nine Capesize vessels acquired.  The other collateral described above was pledged, as required, within 30 days of the effective date of the 2007 Credit Facility.

 

The Company’s borrowings under the 2007 Credit Facility bear interest at the London Interbank Offered Rate (“LIBOR”) for an interest period elected by the Company of one, three, or six months, or longer if available, plus the Applicable Margin which was 0.85% per annum.  Effective January 26, 2009, due to the 2009 Amendment, the Applicable Margin increased to 2.00%.  In addition to other fees payable by the Company in connection with the 2007 Credit Facility, the Company paid a commitment fee at a rate of 0.20% per annum of the daily average unutilized commitment of each lender under the facility until September 30, 2007, and 0.25% thereafter.  Effective January 26, 2009, due to the 2009 Amendment, the rate increased to 0.70% per annum of the daily average unutilized commitment of such lender.

 

The 2007 Credit Facility includes the following financial covenants which apply to the Company and its subsidiaries on a consolidated basis and are measured at the end of each fiscal quarter beginning with June 30, 2007:

 

·                        The leverage covenant requires the maximum average net debt to EBITDA ratio to be no greater than  5.5:1.0.

 

·        Cash and cash equivalents must not be less than $500 per mortgaged vessel.

 

·                        The ratio of EBITDA to interest expense, on a rolling last four-quarter basis, must be no less than 2.0:1.0.

 

·                        After July 20, 2007, consolidated net worth, as defined in the 2007 Credit Facility, must be no less than $263,300 plus 80% of the value of the any new equity issuances of the Company from June 30, 2007.  Based on the equity offerings completed in October 2007 and May 2008, consolidated net worth must be no less than $590,750.

 

·                        The aggregate fair market value of the mortgaged vessels must at all times be at least 130% of the aggregate outstanding principal amount under the credit facility plus all letters of credit outstanding; the Company has a 30 day remedy period to post additional collateral or reduce the amount of the revolving loans and/or letters of credit outstanding.  This covenant was waived effective for the year ended December 31, 2008 and indefinitely until the Company can represent that it is in compliance with all of its financial covenants as per the 2009 Amendment as described above.

 

As of December 31, 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.

 

On June 18, 2008, the Company entered into an amendment to the 2007 Credit Facility allowing the Company to prepay vessel deposits to give the Company flexibility in refinancing potential vessel acquisitions.

 

Due to refinancing of the 2007 Credit Facility as a result of entering into the 2009 Amendment, the Company incurred a non-cash write-off of unamortized deferred financing costs in the amount of $1,921 associated with capitalized costs related to prior amendments and this charge was reflected in interest expense in the fourth quarter of 2008.

 

The following table sets forth the repayment of the outstanding debt of $1,277,000 at December 31, 2010 under the 2007 Credit Facility, as amended:

 

Period Ending December 31,

 

Total

 

 

 

 

 

2011

 

$

50,000

 

2012

 

108,890

 

2013

 

192,780

 

2014

 

192,780

 

2015

 

192,780

 

Thereafter

 

539,770

 

Total debt

 

$

1,277,000

 

 

$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, which 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 Metrostar (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 Company’s 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 December 31, 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 year ended December 31, 2010, total required repayments of $1,120 were made.  As of December 31, 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 Company’s 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 the 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 December 31, 2010.

 

The following table sets forth the repayment of the outstanding debt of $38,880 at December 31, 2010 under the $100 Million Term Loan Facility:

 

Period Ending December 31,

 

Total

 

 

 

 

 

2011

 

$

3,077

 

2012

 

3,077

 

2013

 

3,077

 

2014

 

3,077

 

2015

 

3,077

 

Thereafter

 

23,495

 

Total debt

 

$

38,880

 

 

$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 13 vessels from affiliates of Bourbon.  Under the terms of the facility, the $253 Million Term Loan Facility will be drawn down in 13 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 Company’s 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 December 31, 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 12 Bourbon vessels delivered during the third quarter of 2010.  Refer to Note 5 — Vessel Acquisitions and Dispositions for a listing of the vessels delivered.  Total required debt repayments of $4,691 were made during the year ended December 31, 2010.  As of December 31, 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 December 31, 2010, the Company had deposited $9,000 that has been reflected as restricted cash at December 31, 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 December 31, 2010.

 

The following table sets forth the repayment of the outstanding debt of $226,809 at December 31, 2010 under the $253 Million Term Loan Facility:

 

Period Ending December 31,

 

Total

 

 

 

 

 

2011

 

$

18,764

 

2012

 

18,764

 

2013

 

18,764

 

2014

 

18,764

 

2015

 

151,753

 

Total debt

 

$

226,809

 

 

2008 Term Facility

 

On September 4, 2008, the Company executed a Credit Agreement and other definitive documentation for its $320 million credit facility (the “2008 Term Facility”).   The 2008 Term Facility was underwritten by Nordea Bank Finland Plc, New York Branch, who served as Administrative Agent, Bookrunner, and Collateral Agent; Bayerische Hypo- und Vereinsbank AG, who served as Bookrunner; DnB NOR Bank ASA; Sumitomo Mitsui Banking Corporation, acting through its Brussels Branch; and Deutsche Schiffsbank Akteingesellschaft.  DnB NOR Bank ASA underwrote the Company’s existing 2007 Credit Facility and served under that facility as Administrative Agent and Collateral Agent.

 

Under the 2008 Term Facility, subject to the conditions set forth in the Credit Agreement, the Company was able to borrow an amount up to $320 million.  Amounts borrowed and repaid under the 2008 Term Facility could not be reborrowed.  The 2008 Term Facility had a maturity date on the earlier of the fifth anniversary of the initial borrowing date under the facility or December 31, 2013.

 

Loans made under the 2008 Term Facility were able to be used to fund or refund to the Company the acquisition costs of six drybulk newbuildings, consisting of three Capesize and three Handysize vessels, which the Company agreed on June 16, 2008 to acquire from Lambert Navigation Ltd., Northville Navigation Ltd., Providence Navigation Ltd., and Prime Bulk Navigation Ltd.

 

The terms of the 2008 Term Facility provide that it was to be cancelled upon a cancellation of the acquisition contracts for the six vessels described above.  As such, the 2008 Term Facility was cancelled effective November 4, 2008 upon the cancellation of the acquisition of six drybulk newbuildings from Lambert Navigation Ltd., Northville Navigation Ltd., Providence Navigation Ltd., and Primebulk Navigation Ltd., for an aggregate purchase price of $530,000.  Cancellation of the facility resulted in a charge in the fourth quarter of 2008 to interest expense of $2,191 associated with unamortized deferred financing costs.

 

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”) An amendment to the 2010 Baltic Trading Credit Facility was entered into by Baltic Trading effective November 30, 2010.  This amendment increased the commitment amount of the 2010 Baltic Trading Credit Facility from $100,000 to $150,000 and amounts borrowed will bear interest at LIBOR plus a margin of 3.00% as compared to 3.25% under the original facility.  The term of the 2010 Baltic Trading Credit Facility was extended to six years from the previous 3.5 years and will now mature on November 30, 2016 as compared to April 16, 2014 previously.  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 entered on February 25, 2010, Baltic Trading paid an upfront fee of $313.  Additionally, upon executing the original 2010 Baltic Trading Credit Facility, Baltic Trading paid the remaining upfront fee of $938, for total fees of $1,250.  In connection with the amendment to the 2010 Credit Facility effective November 30, 2010, Baltic Trading paid an upfront fee of $1,350.  Of the total facility amount of $150,000, $25,000 is available for working capital purposes.  As of December 31, 2010, total available working capital borrowings were $23,500 as $1,500 was drawn down during the year ended December 31, 2010 for working capital purposes.  As of December 31, 2010, $48,750 remained available under the 2010 Credit Facility as total drawdowns of $101,250 were made to fund the purchase of the Baltic Wind, Baltic Cove and Baltic Breeze.  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.  Pursuant to the amended 2010 Baltic Trading Credit Facility, the total commitment of $150,000 will be reduced in 11 consecutive semi-annual reductions of $5,000 commencing on the six month anniversary of the effective date, or May 31, 2011.  On the maturity date, November 30, 2016, the total commitment will reduce to zero and all borrowing must be repaid in full by Baltic Trading.

 

Borrowings under the 2010 Baltic Trading Credit Facility are secured by liens on Baltic Trading’s initial vessels and other related assets.   Borrowings under the facility are subject to the delivery of security documents with respect to Baltic Trading’s initial vessels.  Baltic Trading’s 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 Trading’s initial vessels;

 

·                        an assignment of any and all earnings of Baltic Trading’s 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 Trading’s initial vessels; restrictions on consolidations, mergers or sales of assets; restrictions on changes in the Manager of Baltic Trading’s 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 amended 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:

 

·                        Cash and cash equivalents plus the undrawn amount available for working capital under the facility must not be less than $5,000 during the first year following the amendment, or until November 30, 2011.  Beginning December 1, 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 Trading’s fleet.

 

·                        Consolidated net worth must not be less than (i) $232,796 plus (ii) 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 140% 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 there from.  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 December 31, 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 December 31, 2010.

 

The following table sets forth the repayment of the outstanding debt of $101,250 at December 31, 2010 under the 2010 Baltic Trading Credit Facility:

 

Period Ending December 31,

 

Total

 

 

 

 

 

2011

 

$

 

2012

 

 

2013

 

 

2014

 

 

2015

 

1,250

 

Thereafter

 

100,000

 

 

 

 

 

Total debt

 

$

101,250

 

 

Interest rates

 

The following table sets forth the effective interest rate associated with the interest expense for the Company’s 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:

 

 

 

Year ended December 31,

 

 

 

2010

 

2009

 

2008

 

Effective interest rate

 

4.64

%

5.12

%

5.24

%

Range of interest rates (excluding impact of swaps and unused commitment fees)

 

2.25% to 3.60

%

1.23% to 5.56

%

1.35% to 6.10

%

 

Letter of credit

 

In conjunction with the Company entering into a long-term office space lease (See Note 19 - Commitments and Contingencies), the Company was required to provide a letter of credit to the landlord in lieu of a security deposit.  As of September 21, 2005, the Company obtained an annually renewable unsecured letter of credit with DnB NOR Bank.  The letter of credit outstanding as of December 31, 2010 and 2009 was $300 and $333, respectively, at a fee of 1% per annum.  The letter of credit is cancelable on each renewal date provided the landlord is given 150 days minimum notice.

 

CONVERTIBLE SENIOR NOTES
CONVERTIBLE SENIOR NOTES

10 — CONVERTIBLE SENIOR NOTES

 

The Company issued $125,000 of 5.0% Convertible Senior Notes on July 27, 2010 (the “2010 Notes”).  The 2010 Notes mature on August 15, 2015 and are convertible into shares of the Company’s common stock at a conversion rate of approximately 51.0204 shares of common stock per (in whole dollars) $1,000 principal amount of the 2010 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 Company’s 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 Company’s discretion.   The total underlying shares of the 2010 Notes are 6,377,551 shares of common stock.  Since the Company can settle a conversion of the 2010 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 being accreted to par value using the effective interest method over the remaining life of the debt. This accretion 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 2010 Notes, assuming a 10% non-convertible borrowing rate, to be $100,625 and the fair value of the conversion option to be $24,375. 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 $918 of issuance costs against this equity component. The issuance costs allocated to the liability component of $3,637 along with the debt discount is being amortized to interest expense over the approximate 5 year period to the maturity of the 2010 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 2010 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 2010 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 2010 Notes will mature on August 15, 2015, subject to earlier repurchase or conversion upon the occurrence of certain events. Holders may convert their 2010 Notes before February 15, 2015, only in certain circumstances determined by (i) the market price of the Company’s common stock, (ii) the trading price of the 2010 Notes, or (iii) the occurrence of specified corporate events.  The 2010 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 the Company, and (iv) the Company’s 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 2010 Notes plus accrued and unpaid interest up to the fundamental change repurchase date.  After February 15, 2015, holders may convert their 2010 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 following tables provide additional information about the Company’s 2010 Notes.

 

 

 

December 31, 2010

 

Carrying amount of the equity component (additional paid-in capital)

 

$

24,375

 

Principal amount of the 2010 Notes

 

125,000

 

Unamortized discount of the liability component

 

22,691

 

Net carrying amount of the liability component

 

102,309

 

 

 

 

For the year ended
December 31, 2010

 

Effective interest rate on liability component

 

9.9

%

Cash interest expense recognized

 

$

2,662

 

Non-cash interest expense recognized

 

1,684

 

Non-cash deferred financing costs recognized as interest expense

 

311

 

 

The remaining period over which the unamortized discount will be recognized is 4.6 years. As of December 31, 2010, the if-converted value of the 2010 Notes does not exceed their principal amount.

 

The 2010 Notes have been classified as a noncurrent liability on the consolidated balance sheet as of December 31, 2010 because the Company can settle the principal amount of the 2010 Notes with shares, cash, or a combination thereof at its discretion.

 

INTEREST RATE SWAP AGREEMENTS
INTEREST RATE SWAP AGREEMENTS

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 Company’s 2007 Credit Facility, which were outstanding at December 31, 2010 and 2009.  The total notional principal amount of the swaps at December 31, 2010 and 2009 is $756,233 and the swaps have specified rates and durations.

 

The following table summarizes the interest rate swaps designated as cash flow hedges that are in place as of December 31, 2010 and 2009:

 

Interest Rate Swap Detail

 

December 31,
2010

 

December 31,
2009

 

Trade
Date

 

Fixed
Rate

 

Start Date
of Swap

 

End date
of Swap

 

Notional
Amount
Outstanding

 

Notional
Amount
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

 

7/31/07

 

5.115

%

11/30/07

 

11/30/11

 

100,000

 

100,000

 

8/9/07

 

5.07

%

1/2/08

 

1/3/12

 

100,000

 

100,000

 

8/16/07

 

4.985

%

3/31/08

 

3/31/12

 

50,000

 

50,000

 

8/16/07

 

5.04

%

3/31/08

 

3/31/12

 

100,000

 

100,000

 

1/22/08

 

2.89

%

2/1/08

 

2/1/11

 

50,000

 

50,000

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

756,233

 

$

756,233

 

 

The differential to be paid or received for these swap agreements are recognized as an adjustment to interest expense as incurred.  The Company is currently utilizing cash flow hedge accounting for these swaps whereby the effective portion of the change in value of the swaps is reflected as a component of AOCI.  The ineffective portion is recognized as other expense, which is a component of other (expense) income.

 

The interest expense pertaining to the interest rate swaps for the years ended December 31, 2010, 2009 and 2008 was $30,204, $28,585 and 9,470, respectively.

 

The swap agreements, with effective dates prior to December 31, 2010, synthetically convert variable rate debt to fixed rate debt at the fixed interest rate of the swap plus the Applicable Margin, as defined in the “2007 Credit Facility” section above in Note 9 — Long-Term Debt.

 

The following table summarizes the derivative asset and liability balances at December 31, 2010 and 2009:

 

 

 

Asset Derivatives

 

Liability Derivatives

 

 

 

Balance

 

Fair Value

 

Balance

 

Fair Value

 

 

 

Sheet
Location

 

December 31,
2010

 

December
31, 2009

 

Sheet
Location

 

December 31,
2010

 

December
31, 2009

 

Derivatives designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

Fair value of derivative instruments (Current Assets)

 

$

 

$

 

Fair value of derivative instruments (Current Liabilities)

 

$

4,417

 

$

 

Interest rate contracts

 

Fair value of derivative instruments (Noncurrent Assets)

 

 

2,108

 

Fair value of derivative instruments (Noncurrent Liabilities)

 

38,880

 

44,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total derivatives designated as hedging instruments

 

 

 

$

 

$

2,108

 

 

 

$

43,297

 

$

44,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Derivatives

 

 

 

$

 

$

2,108

 

 

 

$

43,297

 

$

44,139

 

 

The following tables present the impact of derivative instruments and their location within the Consolidated Statement of Operations:

 

The Effect of Derivative Instruments on the Consolidated Statement of Operations

For the Year Ended December 31, 2010

 

Derivatives in Cash
Flow Hedging

 

Amount of
Gain (Loss)
Recognized
in AOCI on
Derivative
(Effective
Portion)

 

Location of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective

 

Amount of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective
Portion)

 

Location of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective

 

Amount of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion)

 

Relationships

 

2010

 

Portion)

 

2010

 

Portion)

 

2010

 

Interest rate contracts

 

$

(31,536

)

Interest Expense

 

$

(30,204

)

Other Income (Expense)

 

$

66

 

 

The Effect of Derivative Instruments on the Consolidated Statement of Operations

For the Year Ended December 31, 2009

 

Derivatives in Cash
Flow Hedging

 

Amount of
Gain (Loss)
Recognized
in AOCI on
Derivative
(Effective
Portion)

 

Location of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective

 

Amount of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective
Portion)

 

Location of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective

 

Amount of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion)

 

Relationships

 

2009

 

Portion)

 

2009

 

Portion)

 

2009

 

Interest rate contracts

 

$

(4,390

)

Interest Expense

 

$

(28,585

)

Other Income (Expense)

 

$

(288

)

 

Hedge ineffectiveness associated with the interest rate swaps resulted in other (expense) income of $98 for the year ended December 31, 2008.

 

At December 31, 2010, ($27,516) of AOCI is expected to be reclassified into interest expense over the next 12 months associated with interest rate swaps.

 

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 December 31, 2010, the Company’s 35 vessels mortgaged under the 2007 Credit Facility served as collateral in the aggregate amount of $100,000.

 

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

12 — ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

 

The components of AOCI included in the accompanying 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 December 31, 2010 and 2009.

 

 

 

AOCI

 

Net Unrealized
Gain (loss) on
Cash Flow
Hedges

 

Unrealized
Gain (Loss)
on
Investments

 

AOCI — January 1, 2009

 

$

(66,014

)

$

(66,014

)

$

 

Change in unrealized gain on investments

 

55,408

 

 

 

55,408

 

Unrealized gain on cash flow hedges

 

24,195

 

24,195

 

 

 

AOCI — December 31, 2009

 

13,589

 

(41,819

)

55,408

 

Change in unrealized gain on investments

 

(17,466

)

 

 

(17,466

)

Unrealized loss on cash flow hedges

 

(1,333

)

(1,333

)

 

 

AOCI — December 31, 2010

 

$

(5,210

)

$

(43,152

)

$

37,942

 

 

FAIR VALUE OF FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS

13 - FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The carrying values of the Company’s financial instruments at December 31, 2010 and 2009 are noted below. All carrying values estimate the instrument’s fair values with the exception of the 2010 Notes. The carrying value of the 2010 Notes does not include the conversion option and includes the accretion of interest since the inception of the 2010 Notes.

 

 

 

December 31,
2010

 

December 31,
2009

 

Cash and cash equivalents

 

$

270,877

 

$

188,267

 

Restricted cash

 

9,000

 

17,500

 

Investments

 

54,714

 

72,181

 

Floating rate debt

 

1,643,939

 

1,327,000

 

2010 Notes

 

102,309

 

 

Derivative instruments — asset position

 

 

2,108

 

Derivative instruments — liability position

 

43,297

 

44,139

 

 

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 the 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 2010 Notes at December 31, 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”), 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 will 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 the Company’s investments and financial instruments by the above pricing levels as of the valuation dates listed:

 

 

 

December 31, 2010

 

 

 

Total

 

Quoted
market
prices in
active
markets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Cash equivalents

 

$

 

$

 

$

 

Investments

 

54,714

 

54,714

 

 

2010 Notes

 

129,531

 

 

129,531

 

Derivative instruments — liability position

 

43,297

 

 

43,297

 

 

 

 

December 31, 2009

 

 

 

Total

 

Quoted
market
prices in
active
markets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Cash equivalents

 

$

75,057

 

$

75,057

 

$

 

Investments

 

72,181

 

72,181

 

 

Derivative instruments — asset position

 

2,108

 

 

2,108

 

Derivative instruments — liability position

 

44,139

 

 

44,139

 

 

The Company had an investment of $0 and $75,057 in the JPMorgan US Dollar Liquidity Fund Institutional at December 31, 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 USD-denominated fixed and floating rate debt securities and has a portfolio with a weighted average investment maturity not to exceed 60 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 2010 Notes are publicly traded in the over-the-counter market, however, they are not considered to be actively traded.  As such, the 2010 Note has been classified as a Level 2 Item.  The Company’s 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 expectations 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 four 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 Company’s 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 counterparty’s creditworthiness when in an asset position and the Company’s creditworthiness when in a liability position have 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 December 31, 2010, both the counterparty and the Company are expected to continue to perform under the contractual terms of the instruments.

 

PREPAID EXPENSES AND OTHER CURRENT ASSETS
PREPAID EXPENSES AND OTHER CURRENT ASSETS

14 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consist of the following:

 

 

 

December
31, 2010

 

December
31, 2009

 

Lubricant inventory and other stores

 

$

7,445

 

$

3,971

 

Prepaid items

 

4,693

 

3,086

 

Insurance Receivable

 

1,257

 

1,408

 

Other

 

615

 

1,719

 

Total

 

$

14,010

 

$

10,184

 

 

OTHER ASSETS, NET
OTHER ASSETS, NET

15 — OTHER ASSETS, NET

 

Other assets 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 December 31, 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 2010 Notes and the 2010 Baltic Trading Credit Facility.  (Refer to Note 9 — Long-Term Debt and Note 10 — Convertible Senior Notes)  As of December 31, 2009, there were deferred financing fees associated only with the 2007 Credit Facility as the other loan facilities and debt offerings occurred during the year ended December 31, 2010.

 

Total net deferred financing costs consist of the following as of December 31, 2010 and 2009:

 

 

 

December
31, 2010

 

December
31, 2009

 

 

 

 

 

 

 

2007 Credit Facility

 

$

10,074

 

$

10,079

 

$100 Million Term Loan Facility

 

1,318

 

 

$253 Million Term Loan Facility

 

3,529

 

 

2010 Notes

 

3,637

 

 

2010 Baltic Trading Credit Facility

 

2,940

 

 

Total deferred financing costs

 

21,498

 

10,079

 

Less: accumulated amortization

 

4,561

 

2,585

 

Total

 

$

16,937

 

$

7,494

 

 

During the fourth quarter of 2008, the cancellation of the 2008 Term Facility resulted in a write-off of the unamortized deferred financing costs of $2,191 to interest expense.  Additionally, during the fourth quarter of 2008, the refinancing of the 2007 Credit Facility due to the 2009 Amendment resulted in a write-off of a portion of the unamortized deferred financing costs of $1,921 to interest expense.  There were no write-offs of deferred financing fees during the years ended December 31, 2010 and 2009.

 

(ii) Deferred registration costs, which includes 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 December 31, 2010 and 2009, respectively.

 

FIXED ASSETS
FIXED ASSETS

16 - FIXED ASSETS

 

Fixed assets consist of the following:

 

 

 

December
31, 2010

 

December
31, 2009

 

Fixed assets:

 

 

 

 

 

Vessel equipment

 

$

2,386

 

$

2,118

 

Leasehold improvements

 

1,146

 

1,146

 

Furniture and fixtures

 

347

 

347

 

Computer equipment

 

472

 

401

 

Total cost

 

4,351

 

4,012

 

Less: accumulated depreciation and amortization

 

2,041

 

1,554

 

Total

 

$

2,310

 

$

2,458

 

 

ACCOUNTS PAYABLE AND ACCRUED EXPENSES
ACCOUNTS PAYABLE AND ACCRUED EXPENSES

17 — ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consist of the following:

 

 

 

December
31, 2010

 

December
31, 2009

 

Accounts payable

 

$

6,454

 

$

3,171

 

Accrued general and administrative expenses

 

14,166

 

8,409

 

Accrued vessel operating expenses

 

11,170

 

7,029

 

Total

 

$

31,790

 

$

18,609

 

 

REVENUE FROM TIME CHARTERS
REVENUE FROM TIME CHARTERS

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 years ended December 31, 2010, 2009 and 2008 was $447,438, $379,531, and $405,370 respectively.  Included in revenue for the year ended December 31, 2009 is $442 received from loss of hire insurance associated with unscheduled off-hire associated with the Genco Hunter.  Included in revenues for the year ended December 31, 2008 is $176 and $1,248 received from loss of hire insurance associated with unscheduled off-hire associated with the Genco Trader and Genco Hunter, respectively.  Additionally, included in revenues for the years ended December 31, 2010, 2009 and 2008 was $574, $2,600 and $22,829 of profit sharing revenue.   At December 31, 2010, future minimum time charter revenue, based on vessels committed to noncancelable time charter contracts as of January 25, 2011 is expected to be $173,332 during 2011, $49,881 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 20 days of offhire.   Additionally, 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 Company’s vessels that are or will be on spot market-related time charters, as spot rates cannot be estimated, namely the nine Baltic Trading vessels as well as Genco Augustus, Genco Auvergne, Genco Brittany, Genco Challenger, Genco Charger, Genco Knight, Genco Languedoc, Genco Leader, Genco Maximus, Genco Picardy, Genco Success, Genco Surprise, Genco Thunder, Genco Vigour, and Genco Warrior.

COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES

19 - COMMITMENTS AND CONTINGENCIES

 

In September 2005, the Company entered into a 15-year lease for office space in New York, New York.  The monthly rental is as follows:  Free rent from September 1, 2005 to July 31, 2006, $40 per month from August 1, 2006 to August 31, 2010, $43 per month from September 1, 2010 to August 31, 2015, and $46 per month from September 1, 2015 to August 31, 2020.  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 has a deferred rent credit at December 31, 2010 and 2009 of $657 and $687, respectively.  The Company has the option to extend the lease for a period of five years from September 1, 2020 to August 31, 2025.  The rent for the renewal period will be based on the prevailing market rate for the six months prior to the commencement date of the extension term.  Rent expense was $467 for each of the years ended December 31, 2010, 2009 and 2008.

 

Future minimum rental payments on the above lease for the next five years and thereafter are as follows: $518 for 2011 through 2014, $529 for 2015 and a total of $2,568 for the remaining term of the lease.

 

During the beginning of 2009, the Genco Cavalier, a 2007-built Supramax vessel, was on charter to Samsun when Samsun filed for the equivalent of bankruptcy protection in South Korea, otherwise referred to as a rehabilitation application.  On February 5, 2010, the rehabilitation plan submitted by Samsun was approved by the South Korean courts.  As part of the rehabilitation process, the Company’s claim of $17,212 will be settled in the following manner; 34%, or $5,852, will be paid in cash in annual installments on December 30th of each year from 2010 through 2019 ranging in percentages from eight to 17; the remaining 66%, or $11,360, was converted to Samsun shares at a specified value per share.  On December 30, 2010, a total payment was due from Samsun in the amount of $585 which represents ten percent of the total $5,852 approved cash settlement.  This amount has been recorded as other operating income.

SAVINGS PLAN
SAVINGS PLAN

20 - SAVINGS PLAN

 

In August 2005, the Company established a 401(k) plan which is available to full-time employees who meet the plan’s 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 employee’s salary on a dollar-for-dollar basis.  The matching contribution vests immediately.  For the years ended December 31, 2010, 2009 and 2008, the Company’s matching contributions to this plan were $242, $177 and $166, respectively.

 

NONVESTED STOCK AWARDS
NONVESTED STOCK AWARDS

21- NONVESTED STOCK AWARDS

 

On July 12, 2005, the Company’s Board of Directors approved the Genco Shipping and Trading Limited 2005 Equity Incentive Plan (the “GS&T Plan”).  Under this plan, the Company’s 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 who the compensation committee (or other committee or the Board of Directors) believes are key to the Company’s 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 Company’s Chairman, Peter C. Georgiopoulos, that are not granted as part of grants made to all directors, excluding the grant made on December 21, 2010, vest ratably on each of the ten anniversaries of the vesting date.

 

The table below summarizes the Company’s nonvested stock awards for the three years ended December 31, 2010 under the GS&T Plan:

 

 

 

Year Ended December 31,

 

 

 

2010

 

2009

 

2008

 

 

 

Number
of Shares

 

Weighted
Average
Grant Date
Price

 

Number of
Shares

 

Weighted
Average
Grant Date
Price

 

Number of
Shares

 

Weighted
Average
Grant Date
Price

 

Outstanding at January 1

 

437,000

 

$

25.86

 

449,066

 

$

27.96

 

231,881

 

$

34.32

 

Granted

 

514,650

 

16.07

 

133,250

 

22.68

 

322,500

 

25.34

 

Vested

 

(142,563

)

27.16

 

(145,316

)

29.42

 

(105,316

)

33.93

 

Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31

 

809,087

 

$

19.40

 

437,000

 

$

25.86

 

449,066

 

$

27.96

 

 

The total fair value of shares that vested under the GS&T Plan during the years ended December 31, 2010, 2009 and 2008 was $2,414, $3,467 and $3,614, respectively.

 

For the years ended December 31, 2010, 2009 and 2008, the Company recognized nonvested stock amortization expense for the GS&T Plan, which is included in general, administrative and management fees, as follows:

 

 

 

Year Ended December 31,

 

 

 

2010

 

2009

 

2008

 

General, administrative and management fees

 

$

4,327

 

$

4,220

 

$

5,953

 

 

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 December 31, 2010, unrecognized compensation cost of $11,252 related to nonvested stock will be recognized over a weighted average period of 4.44 years.

 

On March 3, 2010, Baltic Trading’s Board of Directors approved the Baltic Trading Limited 2010 Equity Incentive Plan (the “Baltic Trading Plan”).  Under the Baltic Trading Plan, Baltic Trading’s 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 Trading’s 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 Trading’s IPO vest ratably on each of the first four anniversaries of March 15, 2010.  Grants of restricted common stock to Baltic Trading’s directors made following Baltic Trading’s 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 Trading’s next annual shareholders’ meeting, which is expected to be held in May 2011.  Grants of restricted stock made to executives and the Chairman of the Board not in connection with the Company’s IPO vest ratably on each of the first four anniversaries of the determined vesting date.

 

The following table presents a summary of Baltic Trading’s nonvested stock awards for the year ended December 31, 2010 under the Baltic Trading Plan:

 

 

 

Number of
Baltic Trading
Common
Shares

 

Weighted
Average Grant
Date Price

 

Outstanding at January 1, 2010

 

 

$

 

Granted

 

583,500

 

13.40

 

Vested

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2010

 

583,500

 

$

13.40

 

 

No shares under the Baltic Trading Plan vested during the year ended December 31, 2010.

 

For the year ended December 31, 2010, the Company recognized nonvested stock amortization expense for the Baltic Trading Plan, which is included in general, administrative and management fees, in the amount of $2,892.

 

The Company is amortizing Baltic Trading’s grants over the applicable vesting periods, net of anticipated forfeitures.  As of December 31, 2010, unrecognized compensation cost of $4,926 related to nonvested stock will be recognized over a weighted average period of 3.26 years.

SHARE REPURCHASE PROGRAM
SHARE REPURCHASE PROGRAM

22 — SHARE REPURCHASE PROGRAM

 

On February 13, 2008, the Company’s Board of Directors approved a share repurchase program for up to a total of $50,000 of the Company’s 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.  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 Company’s discretion and without notice.  Repurchases will be subject to restrictions under the 2007 Credit Facility.  The 2007 Credit Facility was amended as of February 13, 2008 to permit the share repurchase program and provide that the dollar amount of shares repurchased is counted toward the maximum dollar amount of dividends that may be paid in any fiscal quarter.  Subsequently, on January 26, 2009, the Company entered into the 2009 Amendment which amended the 2007 Credit Facility to 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 December 31, 2010, the Company repurchased and retired 278,300 shares of its common stock for $11,500.  An additional 3,130 shares of common stock were repurchased from employees for $41 during 2008 pursuant to the Company’s Equity Incentive Plan rather than the share repurchase program.  No share repurchases were made during the years ended December 31, 2010 and 2009.

LEGAL PROCEEDINGS
LEGAL PROCEEDINGS

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.

UNAUDITED QUARTERLY RESULTS OF OPERATIONS
UNAUDITED QUARTERLY RESULTS OF OPERATIONS

24 — UNAUDITED QUARTERLY RESULTS OF OPERATIONS

 

In the opinion of the Company’s management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation have been included on a quarterly basis.

 

 

 

2010 Quarter Ended

 

2009 Quarter Ended

 

 

 

Mar 31

 

Jun 30

 

Sept 30

 

Dec. 31

 

Mar 31

 

Jun 30

 

Sept 30

 

Dec. 31

 

 

 

(In thousands, except per share amounts)

 

Revenues

 

$

94,681

 

$

105,337

 

$

118,020

 

$

130,649

 

$

96,650

 

$

93,701

 

$

92,949

 

$

96,231

 

Operating income

 

48,426

 

54,942

 

57,834

 

60,089

 

55,148

 

53,252

 

50,224

 

51,868

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

33,101

 

38,658

 

38,105

 

37,545

 

41,241

 

37,617

 

34,271

 

35,495

 

Net income (loss) attributable to noncontrolling interest

 

(349

)

1,899

 

1,878

 

2,738

 

 

 

 

 

Net income attributable to Genco Shipping & Trading Limited

 

33,450

 

36,759

 

36,227

 

34,807

 

41,241

 

37,617

 

34,271

 

35,495

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - Basic

 

$

1.07

 

$

1.17

 

$

1.07

 

$

0.99

 

$

1.32

 

$

1.20

 

$

1.10

 

$

1.13

 

Earnings per share - Diluted

 

$

1.06

 

$

1.16

 

$

0.99

 

$

0.90

 

$

1.32

 

$

1.20

 

$

1.09

 

$

1.13

 

Dividends declared and paid per share 

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

Weighted average common shares outstanding - Basic

 

31,406

 

31,414

 

33,999

 

35,080

 

31,260

 

31,268

 

31,296

 

31,355

 

Weighted average common shares outstanding - Diluted

 

31,543

 

31,563

 

38,719

 

41,599

 

31,351

 

31,435

 

31,473

 

31,519

 

 

SUBSEQUENT EVENTS
SUBSEQUENT EVENTS

25 - SUBSEQUENT EVENTS

 

On February 17, 2011, Baltic Trading Limited declared a dividend of $0.17 per share to be paid on or about March 14, 2011 to shareholders of record as of March 7, 2011.  The aggregate amount of the dividend is expected to be approximately $3.8 million, of which approximately $2.9 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.

 

During January 2011, the Genco Success, a 1997-built Handymax vessel, was on charter to Korea Line Corporation (“KLC”) when KLC filed for the equivalency of bankruptcy protection in South Korea, otherwise referred to as a rehabilitation application.  At December 31, 2010, the Company has limited exposure as a result of the bankruptcy protection filing by KLC.  The vessel was redelivered to the Company by KLC on January 29, 2011.  The Company estimates that it has a claim of approximately $1.1 million against KLC related primarily to unpaid revenue earned in 2011 prior to re-delivery of the vessel.  If a rehabilitation plan is approved by the South Korean courts and it is determined that the Company will receive a cash settlement for its outstanding claim, any amounts due from KLC will be recorded once the collectability of the receivable has been assessed and the amount has been deemed collectible.

Document and Entity Information
In Millions, except Share data
Year Ended
Dec. 31, 2010
Mar. 04, 2011
Jun. 30, 2010
Document and Entity Information
 
 
 
Entity Registrant Name
GENCO SHIPPING & TRADING LTD 
 
 
Entity Central Index Key
0001326200 
 
 
Document Type
10-K 
 
 
Document Period End Date
2010-12-31 
 
 
Amendment Flag
FALSE 
 
 
Current Fiscal Year End Date
12/31 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Public Float
 
 
387 
Entity Common Stock, Shares Outstanding
 
35,951,198 
 
Document Fiscal Year Focus
2010 
 
 
Document Fiscal Period Focus
FY