GENCO SHIPPING & TRADING LTD, 10-Q filed on 5/9/2018
Quarterly Report
v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
May 09, 2018
Document and Entity Information    
Entity Registrant Name GENCO SHIPPING & TRADING LTD  
Entity Central Index Key 0001326200  
Document Type 10-Q  
Document Period End Date Mar. 31, 2018  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   34,532,004
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q1  
v3.8.0.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 172,775 $ 174,479
Restricted cash 5,447 7,234
Due from charterers, net of a reserve of $272 and $246, respectively 13,286 12,855
Prepaid expenses and other current assets 9,878 7,338
Inventories 19,894 15,333
Total current assets 221,280 217,239
Noncurrent assets:    
Vessels, net of accumulated depreciation of $199,511 and $213,431, respectively 1,195,115 1,265,577
Deferred drydock, net of accumulated amortization of $10,065 and $9,540 respectively 12,242 13,382
Fixed assets, net of accumulated depreciation and amortization of $1,019 and $1,003, respectively 953 1,014
Other noncurrent assets   514
Restricted cash 22,977 23,233
Total noncurrent assets 1,231,287 1,303,720
Total assets 1,452,567 1,520,959
Current liabilities:    
Accounts payable and accrued expenses 24,339 23,230
Current portion of long-term debt 24,308 24,497
Deferred revenue 5,104 4,722
Total current liabilities: 53,751 52,449
Noncurrent liabilities:    
Long-term lease obligations 2,768 2,588
Long-term debt, net of deferred financing costs of $8,459 and $9,032, respectively 477,000 490,895
Total noncurrent liabilities 479,768 493,483
Total liabilities 533,519 545,932
Commitments and contingencies
Equity:    
Common stock, par value $0.01; 500,000,000 shares authorized; issued and outstanding 34,532,004 shares at March 31, 2018 and December 31, 2017 345 345
Additional paid-in capital 1,628,848 1,628,355
Retained deficit (710,145) (653,673)
Total equity 919,048 975,027
Total liabilities and equity $ 1,452,567 $ 1,520,959
v3.8.0.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Current Assets:    
Due from charterers, reserve $ 272 $ 246
Noncurrent assets:    
Vessels, accumulated depreciation 199,511 213,431
Deferred drydock, accumulated amortization 10,065 9,540
Fixed assets, accumulated depreciation and amortization 1,019 1,003
Deferred financing costs, noncurrent $ 8,459 $ 9,032
Genco Shipping & Trading Limited shareholders' equity:    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 500,000,000 500,000,000
Common stock, shares issued (in shares) 34,532,004 34,532,004
Common stock, shares outstanding (in shares) 34,532,004 34,532,004
v3.8.0.1
Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Revenues:    
Revenues $ 76,916 $ 38,249
Operating expenses:    
Voyage expenses 21,093 3,241
Vessel operating expenses 23,767 24,884
General and administrative expenses (inclusive of nonvested stock amortization expense of $493 and $711, respectively) 5,218 4,909
Technical management fees 1,948 1,981
Depreciation and amortization 16,886 18,173
Impairment of vessel assets 56,402 0
Gain on sale of vessels 0 (6,369)
Total operating expenses 125,314 46,819
Operating loss (48,398) (8,570)
Other (expense) income:    
Other expense (85) (65)
Interest income 794 173
Interest expense (8,124) (7,138)
Other expense (7,415) (7,030)
Loss before income taxes (55,813) (15,600)
Net loss $ (55,813) $ (15,600)
Net loss per share-basic $ (1.61) $ (0.47)
Net loss per share-diluted $ (1.61) $ (0.47)
Weighted average common shares outstanding - Basic (in shares) 34,577,990 33,495,738
Weighted average common shares outstanding - diluted 34,577,990 33,495,738
Voyage    
Revenues:    
Revenues $ 76,916 $ 38,249
v3.8.0.1
Consolidated Statements of Operations (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Consolidated Statements of Operations    
Nonvested stock amortization expenses $ 493 $ 711
v3.8.0.1
Consolidated Statements of Comprehensive Loss - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Consolidated Statements of Comprehensive Loss    
Net loss $ (55,813) $ (15,600)
Other comprehensive income 0 0
Comprehensive loss $ (55,813) $ (15,600)
v3.8.0.1
Consolidated Statements of Equity - USD ($)
$ in Thousands
Series A Preferred Stock
Preferred Stock
Common Stock
Additional Paid-in Capital
Retained Earnings
Total
Balance at the beginning at Dec. 31, 2016 $ 120,789 $ 74 $ 1,503,784 $ (594,948) $ 1,029,699
Increase (Decrease) in Shareholders' Equity          
Net loss       (15,600) (15,600)
Conversion of 27,061,856 shares of Series A Preferred Stock $ (120,789) 270 120,519    
Nonvested stock amortization     711   711
Balance at the end at Mar. 31, 2017   344 1,625,014 (610,548) 1,014,810
Balance at the beginning at Dec. 31, 2017         975,027
Balance at the beginning at Dec. 31, 2017   345 1,628,355 (654,332) 974,368
Increase (Decrease) in Shareholders' Equity          
Net loss       (55,813) (55,813)
Nonvested stock amortization     493   493
Balance at the end at Mar. 31, 2018   $ 345 $ 1,628,848 $ (710,145) $ 919,048
v3.8.0.1
Consolidated Statements of Equity (Parenthetical) - shares
3 Months Ended
Jan. 04, 2017
Mar. 31, 2017
Series A Preferred Stock    
Conversion of shares (in shares) 27,061,856 27,061,856
v3.8.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Cash flows from operating activities:    
Net loss $ (55,813) $ (15,600)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:    
Depreciation and amortization 16,886 18,173
Amortization of deferred financing costs 573 573
PIK interest, net   1,503
Amortization of nonvested stock compensation expense 493 711
Impairment of vessel assets 56,402 0
Gain on sale of vessels 0 (6,369)
Insurance proceeds for protection and indemnity claims 68 180
Insurance proceeds for loss of hire claims   21
Change in assets and liabilities:    
(Increase) decrease in due from charterers (1,079) 1,313
Increase in prepaid expenses and other current assets (3,740) (2,650)
(Increase) decrease in inventories (4,561) 1,382
Decrease in other noncurrent assets 514  
Increase (decrease) in accounts payable and accrued expenses 1,094 (3,184)
(Decrease) increase in deferred revenue (110) 28
Increase in lease obligations 180 180
Deferred drydock costs incurred (1,446) (2,828)
Net cash provided by (used in) operating activities 9,461 (6,567)
Cash flows from investing activities:    
Purchase of vessels, including deposits   (35)
Purchase of other fixed assets (158) (21)
Net proceeds from sale of vessels   12,597
Insurance proceeds for hull and machinery claims 1,607 584
Net cash provided by investing activities 1,449 13,125
Cash flows from financing activities:    
Payment of Series A Preferred Stock issuance costs   (950)
Net cash used in financing activities (14,657) (1,731)
Net (decrease) increase in cash, cash equivalents and restricted cash (3,747) 4,827
Cash, cash equivalents and restricted cash at beginning of period 204,946 169,068
Cash, cash equivalents and restricted cash at end of period 201,199 173,895
Secured Debt | $400 Million Credit Facility    
Cash flows from financing activities:    
Repayments on Term Loan Facility (11,434) (100)
Line of Credit Facility | $98 Million Credit Facility    
Cash flows from financing activities:    
Repayments of Credit Facility $ (2,542) $ 0
v3.8.0.1
Consolidated Statements of Cash Flows (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Nov. 10, 2016
Nov. 04, 2015
$400 Million Credit Facility | Secured Debt        
Maximum borrowing capacity $ 400,000 $ 400,000 $ 400,000  
$98 Million Credit Facility | Line of Credit Facility        
Maximum borrowing capacity $ 98,000 $ 98,000   $ 98,000
v3.8.0.1
GENERAL INFORMATION
3 Months Ended
Mar. 31, 2018
GENERAL INFORMATION  
GENERAL INFORMATION

Genco Shipping & Trading Limited

(U.S. Dollars in Thousands, Except Per Share and Share Data)

Notes to Condensed Consolidated Financial Statements (unaudited)

 

1 - GENERAL INFORMATION

 

The accompanying condensed consolidated financial statements include the accounts of Genco Shipping & Trading Limited (“GS&T”) and its direct and indirect wholly-owned subsidiaries (collectively, the “Company”). The Company is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels. GS&T is incorporated under the laws of the Marshall Islands, and as of March 31, 2018, is the direct or indirect owner of all of the outstanding shares or limited liability company interests of the following subsidiaries: Genco Ship Management LLC; Genco Investments LLC; Genco RE Investments LLC; Genco Shipping Pte. Ltd.; Genco Shipping A/S; Baltic Trading Limited; and the ship-owning subsidiaries as set forth below under “Other General Information.”  As of March 31, 2018, Genco Ship Management LLC is the sole owner of all of the outstanding limited liability company interests of Genco Management (USA) LLC (“Genco (USA)”).

 

On November 15, 2016, the Company entered into stock purchase agreements (the “Purchase Agreements”) effective as of October 4, 2016 with funds or related entities managed Centerbridge Partners, L.P. or its affiliates (“Centerbridge”), Strategic Value Partners, LLC (“SVP”) and Apollo Global Management, LLC (“Apollo”).  Pursuant to the Purchase Agreements, the Company completed the private placement of 27,061,856 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) which included 25,773,196 shares at a price per share of $4.85 and an additional 1,288,660 shares issued as a commitment fee on a pro rata basis.  The Company received net proceeds of $120,789 after deducting placement agents’ fees and expenses.  On January 4, 2017, the Company’s shareholders approved at a Special Meeting of Shareholders the issuance of up to 27,061,856 shares of common stock of the Company upon the conversion of shares of the Series A Preferred Stock, par value $0.01 per share, which were purchased by certain investors in a private placement (the “Conversion Proposal”).  As a result of shareholder approval of the Conversion Proposal, all outstanding 27,061,856 shares of Series A Preferred Stock were automatically and mandatorily converted into 27,061,856 shares of common stock of the Company on January 4, 2017.

 

Other General Information

 

Below is the list of the Company’s wholly owned ship-owning subsidiaries as of March 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

Wholly Owned Subsidiaries

    

Vessel Acquired

    

Dwt

    

Delivery Date

    

Year Built

 

 

 

 

 

 

 

 

 

 

 

Genco Vigour Limited

 

Genco Vigour

 

73,941

 

12/15/04

 

1999

 

Genco Explorer Limited

 

Genco Explorer

 

29,952

 

12/17/04

 

1999

 

Genco Progress Limited

 

Genco Progress

 

29,952

 

1/12/05

 

1999

 

Genco Beauty Limited

 

Genco Beauty

 

73,941

 

2/7/05

 

1999

 

Genco Knight Limited

 

Genco Knight

 

73,941

 

2/16/05

 

1999

 

Genco Muse Limited

 

Genco Muse

 

48,913

 

10/14/05

 

2001

 

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

 

169,025

 

12/29/08

 

2008

 

Genco Commodus Limited

 

Genco Commodus

 

169,098

 

7/22/09

 

2009

 

Genco Maximus Limited

 

Genco Maximus

 

169,025

 

9/18/09

 

2009

 

Genco Claudius Limited

 

Genco Claudius

 

169,001

 

12/30/09

 

2010

 

Genco Bay Limited

 

Genco Bay

 

34,296

 

8/24/10

 

2010

 

Genco Ocean Limited

 

Genco Ocean

 

34,409

 

7/26/10

 

2010

 

Genco Avra Limited

 

Genco Avra

 

34,391

 

5/12/11

 

2011

 

Genco Mare Limited

 

Genco Mare

 

34,428

 

7/20/11

 

2011

 

Genco Spirit Limited

 

Genco Spirit

 

34,432

 

11/10/11

 

2011

 

Genco Aquitaine Limited

 

Genco Aquitaine

 

57,981

 

8/18/10

 

2009

 

Genco Ardennes Limited

 

Genco Ardennes

 

58,018

 

8/31/10

 

2009

 

Genco Auvergne Limited

 

Genco Auvergne

 

58,020

 

8/16/10

 

2009

 

Genco Bourgogne Limited

 

Genco Bourgogne

 

58,018

 

8/24/10

 

2010

 

Genco Brittany Limited

 

Genco Brittany

 

58,018

 

9/23/10

 

2010

 

Genco Languedoc Limited

 

Genco Languedoc

 

58,018

 

9/29/10

 

2010

 

Genco Loire Limited

 

Genco Loire

 

53,430

 

8/4/10

 

2009

 

Genco Lorraine Limited

 

Genco Lorraine

 

53,417

 

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

 

58,018

 

8/10/10

 

2010

 

Genco Rhone Limited

 

Genco Rhone

 

58,018

 

3/29/11

 

2011

 

Baltic Lion Limited

 

Baltic Lion

 

179,185

 

4/8/15

(1)

2012

 

Baltic Tiger Limited

 

Genco Tiger

 

179,185

 

4/8/15

(1)

2011

 

Baltic Leopard Limited

 

Baltic Leopard

 

53,446

 

4/8/10

(2)

2009

 

Baltic Panther Limited

 

Baltic Panther

 

53,350

 

4/29/10

(2)

2009

 

Baltic Cougar Limited

 

Baltic Cougar

 

53,432

 

5/28/10

(2)

2009

 

Baltic Jaguar Limited

 

Baltic Jaguar

 

53,473

 

5/14/10

(2)

2009

 

Baltic Bear Limited

 

Baltic Bear

 

177,717

 

5/14/10

(2)

2010

 

Baltic Wolf Limited

 

Baltic Wolf

 

177,752

 

10/14/10

(2)

2010

 

Baltic Wind Limited

 

Baltic Wind

 

34,408

 

8/4/10

(2)

2009

 

Baltic Cove Limited

 

Baltic Cove

 

34,403

 

8/23/10

(2)

2010

 

Baltic Breeze Limited

 

Baltic Breeze

 

34,386

 

10/12/10

(2)

2010

 

Baltic Fox Limited

 

Baltic Fox

 

31,883

 

9/6/13

(2)

2010

 

Baltic Hare Limited

 

Baltic Hare

 

31,887

 

9/5/13

(2)

2009

 

Baltic Hornet Limited

 

Baltic Hornet

 

63,574

 

10/29/14

(2)

2014

 

Baltic Wasp Limited

 

Baltic Wasp

 

63,389

 

1/2/15

(2)

2015

 

Baltic Scorpion Limited

 

Baltic Scorpion

 

63,462

 

8/6/15

 

2015

 

Baltic Mantis Limited

 

Baltic Mantis

 

63,470

 

10/9/15

 

2015

 


(1)

The delivery date for these vessels represents the date that the vessel was purchased from Baltic Trading Limited (“Baltic Trading”).

(2)

The delivery date for these vessels represents the date that the vessel was delivered to Baltic Trading.

v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Mar. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of consolidation

 

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which includes the accounts of GS&T and its direct and indirect wholly-owned subsidiaries, including Baltic Trading.  All intercompany accounts and transactions have been eliminated in consolidation.

 

Basis of presentation

 

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”).  In the opinion of management of the Company, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and operating results have been included in the statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.  These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2017 (the “2017 10-K”).  The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the operating results to be expected for the year ending December 31, 2018.

 

Segment reporting

 

The Company reports financial information and evaluates its operations by charter revenues and not by the length of ship employment for its customers, i.e., spot or time charters.  Each of the Company’s vessels serve the same type of customer, have similar operations and maintenance requirements, operate in the same regulatory environment, and are subject to similar economic characteristics. Based on this, the Company has determined that it operates in one reportable segment which is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels. 

 

Restricted cash

 

Current and non-current restricted cash includes cash that is restricted pursuant to our credit facilities, refer to Note 7 — Debt.  The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same amounts shown in the Condensed Consolidated Statements of Cash Flows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

March 31,

 

December 31, 

 

 

    

2018

    

2017

 

2017

 

2016

 

Cash and cash equivalents

 

$

172,775

 

$

174,479

 

$

138,873

 

$

133,400

 

Restricted cash - current

 

 

5,447

 

 

7,234

 

 

7,871

 

 

8,242

 

Restricted cash - noncurrent

 

 

22,977

 

 

23,233

 

 

27,151

 

 

27,426

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

201,199

 

$

204,946

 

$

173,895

 

$

169,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

Inventories consists of consumable bunkers and lubricants, which are stated at the lower of cost or market value, if required.  During the three months ended March 31, 2018, the Company opted to break out these inventory assets that were previously classified as Prepaid expenses and other current assets into its own financial statement line item in the Condensed Consolidated Balance Sheets to provide a greater level of detail in the face of the financial statements.  Inventories have been increasing as the result of the employment of vessels on spot market voyage charters, which result in higher bunker inventories. This change was made retrospectively for comparability purposes, and there was no effect on the Total current assets as of March 31, 2018 and December 31, 2017 in the Condensed Consolidated Balance Sheets.

 

Vessels, net

 

Vessels, net is stated at cost less accumulated depreciation. Included in vessel costs are acquisition costs directly attributable to the acquisition of a vessel and expenditures made to prepare the vessel for its initial voyage. The Company also capitalizes interest costs for a vessel under construction as a cost which is directly attributable to the acquisition of a vessel. Vessels are depreciated on a straight-line basis over their estimated useful lives, determined to be 25 years from the date of initial delivery from the shipyard. Depreciation expense for vessels for the three months ended March 31, 2018 and 2017 was $15,673 and $16,706, 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 estimated scrap value of $310 per lightweight ton (“lwt”) times the weight of the ship noted in lwt.  

 

Deferred revenue

 

Deferred revenue primarily relates to cash received from charterers prior to it being earned. These amounts are recognized as income when earned. Additionally, deferred revenue includes estimated customer claims mainly due to time charter performance issues. As of March 31, 2018 and December 31, 2017, the Company had an accrual of $457 and $327, respectively, related to these estimated customer claims.

 

Revenue recognition

 

Since the Company’s inception, revenues have been generated from time charter agreements, spot market voyage charters, 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, including any ballast bonus payments received pursuant to the time charter agreement.  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 (“BDI”).  Voyage revenues also include the sale of bunkers consumed during short-term time charters pursuant to the terms of the time charter agreement.

 

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 records spot market-related time charter revenues over the term of the charter as service is provided based on the rate determined based on the BDI for each respective billing period.  As such, the revenue earned by the Company’s vessels that are on spot market-related time charters is subject to fluctuations of the spot market. 

 

Under pool arrangements, 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 less voyage expenses 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, which represents the net voyage revenue of the pool after voyage expenses and pool manager fees.

 

Pursuant to the new revenue recognition guidance as disclosed in Note 12 Voyage Revenue, which was adopted during the three months ended March 31, 2018, revenue for spot market voyage charters is now recognized ratably over the total transit time of each voyage, which commences at the time the vessel arrives at the loading port and ends at the time the discharge of cargo is completed at the discharge port.

 

Voyage expense recognition

 

In time charters, spot market-related time charters and pool agreements, operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. These expenses are borne by the Company during spot market voyage charters.  As such, there are significantly higher voyage expenses for spot market voyage charters as compared to time charters, spot market-related time charters and pool agreements.  Refer to Note 12 — Voyage Revenue for further discussion of the accounting for fuel expenses for spot market voyage charters as a result of the new revenue recognition guidance adopted during the three months ended March 31, 2018.  There are certain other non-specified voyage expenses, such as commissions, which are typically borne by the Company. At the inception of a time charter, the Company records the difference between the cost of bunker fuel delivered by the terminating charterer and the bunker fuel sold to the new charterer as a gain or loss within voyage expenses. Additionally, the Company records lower of cost or market adjustments to re-value the bunker fuel on a quarterly basis, as required.  These differences in bunkers, including any lower of cost or market adjustments, resulted in a net gain (loss) of $855 and ($504) during the three months ended March 31, 2018 and 2017, respectively.  Additionally, voyage expenses include the cost of bunkers consumed during short-term time charters pursuant to the terms of the time charter agreement.

 

United States Gross Transportation Tax

 

The Company did not qualify for the Section 883 exemption during the year ended December 31, 2017 and believes that it will not qualify for the Section 883 exemption during the year ended December 31, 2018.  In the absence of the exemption, 50% of the Company’s gross shipping income attributable to transportation beginning or ending in the U.S. (but not both beginning and ending in the U.S.) will be subject to a 4% tax without allowance for deductions (the “U.S. gross transportation tax”).  During the three months ended March 31, 2018 and 2017, the Company has recorded estimated U.S. gross transportation tax of $213 and $36, respectively, which has been recorded in Voyage expenses in the Condensed Consolidated Statements of Operation.  

 

Impairment of vessel assets

 

During the three months ended March 31, 2018 and 2017, the Company recorded $56,402 and $0, respectively, related to the impairment of vessel assets in accordance with Accounting Standards Codification (“ASC”) 360 — “Property, Plant and Equipment” (“ASC 360”). 

 

On February 27, 2018, the Board of Directors determined to dispose of the Company’s following nine vessels; the Genco Cavalier, the Genco Loire, the Genco Lorraine, the Genco Muse, the Genco Normandy, the Baltic Cougar, the Baltic Jaguar, the Baltic Leopard and the Baltic Panther, at times and on terms to be determined in the future.  Given this decision, and that the estimated future undiscounted cash flows for each of these older vessels did not exceed the net book value for each vessel, we have adjusted the values of these older vessels to their respective fair market values during the three months ended March 31, 2018.  This resulted in an impairment loss of $56,402 during the three months ended March 31, 2018.

Gain on sale of vessels

 

During the three months ended March 31, 2018 and 2017, the Company recorded a net gain of $0 and $6,369, respectively, related to the sale of vessels.  The net gain of $6,369 recorded during the three months ended March 31, 2017 related primarily to the sale of the Genco Wisdom, the Genco Reliance, the Genco Carrier and the Genco Success.  

 

Recent accounting pronouncements

 

In May 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-09, “Compensation – Stock Compensation (Topic 718), Scope of Modification Account” (“ASU 2017-09”).  This ASU provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification account.  This ASU is effective for fiscal years beginning after December 15, 2017, and for interim periods within those years and early adoption is permitted.  ASU 2017-09 must be applied prospectively to an award modified on or after the adoption date.  The Company adopted ASU 2017-09 during the first quarter of 2018 and there was no effect on its consolidated financial statements.

 

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”).  This ASU adds or clarifies the guidance in ASC 230 – Statement of Cash Flows regarding the classification and presentation of restricted cash in the statement of cash flows.  ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flow.  This ASU is effective for fiscal years beginning after December 15, 2017, and for interim periods within those years and early adoption is permitted.  ASU 2016-18 must be adopted retrospectively.  The Company early adopted ASU 2016-18 during the fourth quarter of 2017. The retrospective application of ASU 2016-18 resulted in restricted cash being reclassified as a component of cash, cash equivalents and restricted cash in the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017.

 

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230):  Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”).  This ASU adds or clarifies the guidance in ASC 230 – Statement of Cash Flows regarding the classification of certain cash receipts and payments in the statement of cash flows.  This ASU is effective for fiscal years beginning after December 15, 2017, and for interim periods within those years and early adoption is permitted.  This ASU shall be applied retrospectively to all periods presented, but may be applied prospectively from the earliest date practicable if retrospective application would be impracticable.  The Company adopted ASU 2016-15 during the first quarter of 2018.  The retrospective application of ASU 2016-15 resulted in insurance proceeds for protection and indemnity claims and loss of hire claims to be separately disclosed in the cash flows from operating activities and resulted in insurance proceeds for hull and machinery claims to be separately disclosed in the cash flows from investing activities.  These amounts were previously recorded in the cash flows from operating activities as the change in prepaid expenses and other current assets.  Additionally, as part of ASU 2016-15, any cash payments for debt prepayment or debt extinguishment costs (including third-party costs, premiums paid and other fees paid to lenders) must be classified as cash outflows for financing activities.  Lastly, for any debt instruments that contain interest payable in-kind, any cash payments attributable to the payment of in-kind interest will be classified as cash outflows for operating activities.  Refer to the Condensed Consolidated Statements of Cash Flows.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which replaces the existing guidance in ASC 840 – Leases.  This ASU requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases.  Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability for leases with lease terms of more than twelve months. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset and for operating leases, the lessee would recognize a straight-line total lease expense.  Accounting by lessors will remain largely unchanged from current U.S. GAAP.  The requirements of this standard include an increase in required disclosures.  This ASU is effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years.  Lessees and lessors will be required to apply the new standard at the beginning of the earliest period presented in the financial statements in which they first apply the new guidance, using a modified retrospective transition method. The requirements of this standard include a significant increase in required disclosures. The Company is currently evaluating the impact of this adoption on its consolidated financial statements and related disclosures. 

 

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). This ASU will require that equity investments be measured at fair value with changes in fair value recognized in net income (loss). ASU 2016-01 will be effective for annual periods beginning after December 15, 2017, and interim periods within those years. The Company adopted ASU 2016-01 during the first quarter of 2018 and there was no impact on the Company’s consolidated financial statements as the Company currently does not have any equity investments.

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle is that a company should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, and shall be applied either retrospectively to each period presented or as a cumulative effect adjustment as of the date of adoption (the “modified retrospective transition method”). In May 2016 and, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers - Narrow Scope Improvements and Practical Expedients.” This update provides further guidance on applying collectability criterion to assess whether the contract is valid and represents a substantive transaction on the basis whether a customer has the ability and intention to pay the promised consideration.  The requirements of this standard include an increase in required disclosures.  The Company adopted ASU 2014-09 during the first quarter of 2018 using the modified retrospective transition method applied to those spot market voyage charter contracts which were not completed as of January 1, 2018. Upon adoption, the Company recognized the cumulative effect of adopting this guidance as an adjustment to its opening balance of retained earnings as of January 1, 2018. Prior periods were not retrospectively adjusted. The adoption of ASU 2014-09 did not have a financial impact on the recognition of revenue generated from time charter agreements, spot market-related time charters and pool agreements. Refer to Note 12 Voyage Revenue for further discussion of the financial impact on the Company’s consolidated financial statements.

 

v3.8.0.1
CASH FLOW INFORMATION
3 Months Ended
Mar. 31, 2018
CASH FLOW INFORMATION  
CASH FLOW INFORMATION

3 - CASH FLOW INFORMATION

 

For the three months ended March 31, 2018, the Company had non-cash investing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $64 for the Purchase of other fixed assets. 

 

For the three months ended March 31, 2017, the Company had non-cash investing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $1 for the Purchase of vessels, including deposits, $31 for the Purchase of other fixed assets and $41 for the Net proceeds from sale of vessels.  Additionally, for the three months ended March 31, 2017, the Company had non-cash investing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $153 associated with the Payment of Series A Preferred Stock issuance costs.

 

During the three months ended March 31, 2018 and 2017, cash paid for interest was $7,530 and $6,728, respectively.

 

During the three months ended March 31, 2018 and 2017, there was no cash paid for estimated income taxes.

 

On February 27, 2018, the Company issued 37,346 restricted stock units and options to purchase 122,608 shares of the Company’s stock at an exercise price of $13.69 to certain individuals.  The fair value of these restricted stock units and stock options were $512 and $926, respectively. 

 

On May 17, 2017, the Company issued 25,197 restricted stock units to certain members of the Board of Directors.  The aggregate fair value of these restricted stock units was $255. 

 

On March 23, 2017, the Company issued 292,398 restricted stock units and options to purchase 133,000 shares of the Company’s stock at an exercise price of $11.13 per share to John C. Wobensmith, Chief Executive Officer and President. The fair value of these restricted stock units and stock options were $3,254 and $853, respectively. 

 

Refer to Note 14 — Stock-Based Compensation for further information regarding the aforementioned grants.   

v3.8.0.1
VESSEL ACQUISITIONS AND DISPOSITIONS
3 Months Ended
Mar. 31, 2018
VESSEL ACQUISITIONS AND DISPOSITIONS  
VESSEL ACQUISITIONS AND DISPOSITIONS

4 - VESSEL ACQUISITIONS AND DISPOSITIONS

 

On December 19, 2016, the Board of Directors unanimously approved selling the Genco Prosperity, a 1997-built Handymax vessel, and on December 21, 2016, the Company reached an agreement to sell the Genco Prosperity to a third party for $3,050 less a 3.5% broker commission payable to a third party.  The sale was completed on May 16, 2017.

 

On December 5, 2016, the Board of Directors unanimously approved selling the Genco Success, a 1997-built Handymax vessel, and on December 15, 2016, the Company reached an agreement to sell the Genco Success to a third party for $2,800 less a 3.0% broker commission payable to a third party.  The sale was completed on March 19, 2017. 

 

During January 2017, the Board of Directors unanimously approved selling the Genco Carrier, a 1998-built Handymax vessel, and on January 25, 2017, the Company reached an agreement to sell the Genco Carrier to a third party for $3,560 less a $92 broker commission payable to a third party.  The sale was completed on February 16, 2017. 

 

During January 2017, the Board of Directors unanimously approved selling the Genco Reliance, a 1999-built Handysize vessel, and on January 12, 2017, the Company reached an agreement to sell the Genco Reliance to a third party for $3,500 less a 3.5% broker commission payable to a third party.  The sale was completed on February 9, 2017.

 

On December 19, 2016, the Board of Directors unanimously approved selling the Genco Wisdom, a 1997-built Handymax vessel. On December 21, 2016, the Company reached an agreement to sell the Genco Wisdom to a third party for $3,250 less a 3.5% broker commission payable to a third party.  The sale was completed on January 9, 2017.

 

Refer to Note 1 — General Information for a listing of the delivery dates for the vessels in the Company’s fleet.

v3.8.0.1
NET LOSS PER SHARE
3 Months Ended
Mar. 31, 2018
NET LOSS PER SHARE  
NET LOSS PER SHARE

5 - NET LOSS PER SHARE

 

The computation of basic net loss per share is based on the weighted-average number of common shares outstanding during the reporting period. The computation of diluted net loss per share assumes the vesting of nonvested stock awards and the exercise of stock options (refer to Note 14 — Stock-Based Compensation), 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 264,367 and 381,924 nonvested shares outstanding, including RSUs, and the 255,608 and 133,000 stock options outstanding at March 31, 2018 and 2017, respectively, (refer to Note 14 — Stock-Based Compensation), all are anti-dilutive. The Company’s diluted net loss per share will also reflect the assumed conversion of the equity warrants issued when the Company emerged from bankruptcy on July 9, 2014 (the “Effective Date”) and MIP Warrants issued by the Company (refer to Note 14 — Stock-Based Compensation) if the impact is dilutive under the treasury stock method.  The equity warrants have a 7-year term which commenced on the day following the Effective Date and are exercisable for one tenth of a share of the Company’s common stock.  Of the 0 and 713,122 of unvested MIP Warrants outstanding at March 31, 2018 and 2017, respectively, and 3,936,761 of equity warrants outstanding at March 31, 2018 and 2017, all are anti-dilutive. 

 

The components of the denominator for the calculation of basic and diluted net loss per share are as follows:

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

 

March 31, 

 

 

    

2018

    

2017

 

 

 

 

 

 

 

Common shares outstanding, basic:

 

 

 

 

 

Weighted-average common shares outstanding, basic 

 

34,577,990

 

33,495,738

 

 

 

 

 

 

 

Common shares outstanding, diluted:

 

 

 

 

 

Weighted-average common shares outstanding, basic 

 

34,577,990

 

33,495,738

 

 

 

 

 

 

 

Dilutive effect of warrants 

 

 —

 

 —

 

 

 

 

 

 

 

Dilutive effect of stock options

 

 —

 

 —

 

 

 

 

 

 

 

Dilutive effect of restricted stock awards 

 

 —

 

 —

 

 

 

 

 

 

 

Weighted-average common shares outstanding, diluted 

 

34,577,990

 

33,495,738

 

 

v3.8.0.1
RELATED PARTY TRANSACTIONS
3 Months Ended
Mar. 31, 2018
RELATED PARTY TRANSACTIONS  
RELATED PARTY TRANSACTIONS

6 - RELATED PARTY TRANSACTIONS

 

During the three months ended March 31, 2018 and 2017, the Company did not identify any related party transactions.  

 

 

v3.8.0.1
DEBT
3 Months Ended
Mar. 31, 2018
DEBT  
DEBT

7 – DEBT

 

Long-term debt, net consists of the following:

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

    

2018

    

2017

 

Principal amount 

 

$

504,426

 

$

519,083

 

PIK interest

 

 

5,341

 

 

5,341

 

Less:  Unamortized debt financing costs 

 

 

(8,459)

 

 

(9,032)

 

Less: Current portion 

 

 

(24,308)

 

 

(24,497)

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

$

477,000

 

$

490,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2018

 

December 31, 2017

 

 

 

 

 

Unamortized

 

 

 

Unamortized

 

 

 

 

 

Debt Financing

 

 

 

Debt Financing

 

 

 

Principal

 

Cost

 

Principal

 

Cost

 

$400 Million Credit Facility

 

$

388,166

 

$

5,929

 

$

399,600

 

$

6,332

 

$98 Million Credit Facility

 

 

91,397

 

 

1,247

 

 

93,939

 

 

1,370

 

2014 Term Loan Facilities

 

 

24,863

 

 

1,283

 

 

25,544

 

 

1,330

 

PIK interest

 

 

5,341

 

 

 —

 

 

5,341

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt

 

$

509,767

 

$

8,459

 

$

524,424

 

$

9,032

 

 

As of March 31, 2018 and December 31, 2017,  $8,459 and $9,032 of deferred financing costs, respectively, were presented as a direct deduction within the outstanding debt balance in the Company’s Condensed Consolidated Balance Sheet. Amortization expense for deferred financing costs was $573 and $573 for the three months ended March 31, 2018 and 2017, respectively.  This amortization expense is recorded as a component of Interest expense in the Condensed Consolidated Statements of Operations.

 

$400 Million Credit Facility

On November 10, 2016, the Company entered into a senior secured term loan facility, the $400 Million Credit Facility, in an aggregate principal amount of up to $400,000 with Nordea Bank Finland plc, New York Branch, Skandinaviska Enskilda Banken AB (publ), DVB Bank SE, ABN AMRO Capital USA LLC, Crédit Agricole Corporate and Investment Bank, Deutsche Bank AG Filiale Deutschlandgeschäft, Crédit Industriel et Commercial and BNP Paribas.  On November 15, 2016, the proceeds under the $400 Million Credit Facility were used to refinance six of the Company’s prior credit facilities. The $400 Million Credit Facility is collateralized by 45 of the Company’s vessels and at December 31, 2016, required the Company to sell five remaining unencumbered vessels, which were sold during the year ended December 31, 2017.  Refer to Note 4 — Vessel Acquisitions and Dispositions.

 

On November 14, 2016, the Company borrowed the maximum available amount of $400,000.  As of March 31, 2018, there was no availability under the $400 Million Credit Facility.  Total debt repayments of $11,434 and $100 were made during the three months ended March 31, 2018 and 2017, respectively, under the $400 Million Credit Facility.  As of March 31, 2018 and December 31, 2017, the total outstanding net debt balance, including PIK interest as defined below, was $387,578 and $398,609, respectively.

 

The $400 Million Credit Facility has a final maturity date of November 15, 2021, and the principal borrowed under the facility will bear interest at the London Interbank Offered Rate (“LIBOR”) for an interest period of three months plus a margin of 3.75%.  The Company has the option to pay 1.50% of such rate in-kind (“PIK interest”) through December 31, 2018, of which will be payable on the maturity date of the facility.  The Company opted to make the PIK interest election through September 29, 2017 and as of March 31, 2018 and December 31, 2017, has recorded $5,341 of PIK interest which has been recorded in Long-term debt in the Condensed Consolidated Balance Sheet.  The $400 Million Credit Facility originally had scheduled amortization payments of (i) $100 per quarter through December 31, 2018, (ii) $7,610 per quarter from March 31, 2019 through December 31, 2020, (iii) $18,571 per quarter from March 31, 2021 through September 30, 2021 and (iv) $282,605 upon final maturity on November 15, 2021, which did not include PIK interest.  Pursuant to the credit facility agreement, upon the payment of any excess cash flow to the lenders (see below), the scheduled repayments shall be adjusted to reflect the reduction of future amortization amounts.   

 

There is no collateral maintenance testing for the $400 Million Credit Facility prior to June 30, 2018.  Thereafter, there will be required collateral maintenance testing with a gradually increasing threshold calculated as the value of the collateral under the facility as a percentage of the loan outstanding as follows: 105% from June 30, 2018 to December 30, 2018, 115% from December 31, 2018 to December 30, 2020 and 135% thereafter. 

 

The $400 Million Credit Facility requires the Company to comply with a number of covenants substantially similar to those in the Company’s other credit facilities, including financial covenants related to debt to total book capitalization, minimum working capital, minimum liquidity, and dividends; collateral maintenance requirements (as described above); and other customary covenants.  The Company is required to maintain a ratio of total indebtedness to total capitalization of not greater than 0.70 to 1.00 at all times.  Minimum working capital as defined in the $400 Million Credit Facility is not to be less than $0 at all times.  The $400 Million Credit Facility has minimum liquidity requirements at all times for all vessels in its fleet of (i) $250 per vessel to and including December 31, 2018, (ii) $400 per vessel from January 1, 2019 to and including December 31, 2019 and (iii) $700 per vessel from January 1, 2020 and thereafter. The Company is prohibited from paying dividends without lender consent through December 31, 2020.  The Company may establish non-recourse subsidiaries to incur indebtedness or make investments, but it will be restricted from incurring indebtedness or making investments (other than through non-recourse subsidiaries).  Excess cash from the collateralized vessels under the $400 Million Credit Facility are subject to a cash sweep.  The cash flow sweep is 100% of excess cash flow through December 31, 2018, 75% through December 31, 2020 and the lesser of 50% of excess cash flow or an amount that would reflect a 15-year average vessel age repayment profile thereafter; provided no prepayment under the cash sweep is required from the first $10,000 in aggregate of the prepayments otherwise required under the cash sweep.  During the three months ended March 31, 2018, the Company repaid $11,334 for the excess cash flow sweep based on the cash balance at December 31, 2017.  As of March 31, 2018, the excess cash flow sweep was $4,094 and this amount will be due to the lender within 45 days of the end of the reporting period.  As such, it had been included in the current portion of the outstanding debt for this facility.

 

At March 31, 2018 and December 31, 2017, the Company has deposited $10,949 and $11,180, respectively, that has been reflected as noncurrent restricted cash which represents restricted pledged liquidity amounts pursuant to the $400 Million Credit Facility and $124 and $0, respectively, that has been reflected as current restricted cash. 

 

As of March 31, 2018, the Company believed it was in compliance with all of the financial covenants under the $400 Million Credit Facility.

 

$98 Million Credit Facility

 

On November 4, 2015, thirteen of the Company’s wholly-owned subsidiaries entered into a Facility Agreement, by and among such subsidiaries as borrowers (collectively, the “Borrowers”); Genco Holdings Limited, a newly formed direct subsidiary of Genco of which the Borrowers are direct subsidiaries (“Holdco”); certain funds managed or advised by Hayfin Capital Management, Breakwater Capital Ltd, or their nominee, as lenders; and Hayfin Services LLP, as agent and security agent (the “$98 Million Credit Facility”).

 

The Borrowers borrowed the maximum available amount of $98,271 under the facility on November 10, 2015. As of March 31, 2018, there was no availability under the $98 Million Credit Facility.  Total debt repayments of $2,542 and $0 were made during the three months ended March 31, 2018 and 2017, respectively, under the $98 Million Credit Facility.  As of March 31, 2018 and December 31, 2017, the total outstanding net debt balance was $90,150 and $92,569, respectively.

 

Borrowings under the facility are available for working capital purposes.  The facility has a final maturity date of September 30, 2020, and the principal borrowed under the facility will bear interest at LIBOR for an interest period of three months plus a margin of 6.125% per annum.  The facility has no fixed amortization payments for the first two years and fixed amortization payments of $2,500 per quarter thereafter.  To the extent the value of the collateral under the facility is 182% or less of the loan amount outstanding, the Borrowers are to prepay the loan from earnings received from operation of the thirteen collateral vessels after deduction of the following amounts:  costs, fees, expenses, interest, and fixed principal repayments under the facility; operating expenses relating to the thirteen vessels; and the Borrowers’ pro rata share of general and administrative expenses based on the number of vessels they own.

 

The Facility Agreement requires the Borrowers and, in certain cases, the Company and Holdco to comply with a number of covenants substantially similar to those in the other credit facilities of Genco and its subsidiaries, including financial covenants related to maximum leverage, minimum consolidated net worth, minimum liquidity, and dividends; collateral maintenance requirements; and other customary covenants. The Company is prohibited from paying dividends under this facility until December 31, 2018. Following December 31, 2018, the amount of dividends the Company may pay is limited based on the amount of the repayment of at least $25 million of the loan under such facility, as well as the ratio of the value of vessels and certain other collateral pledged under such facility.  The Facility Agreement includes usual and customary events of default and remedies for facilities of this nature.

 

Borrowings under the facility are secured by first priority mortgage on the vessels owned by the Borrowers, namely the Genco Constantine, the Genco Augustus, the Genco London, the Genco Titus, the Genco Tiberius, the Genco Hadrian, the Genco Knight, the Genco Beauty, the Genco Vigour, the Genco Predator, the Genco Cavalier, the Genco Champion, and the Genco Charger, and related collateral.  Pursuant to the Facility Agreement and a separate Guarantee executed by the Company, the Company and Holdco are acting as guarantors of the obligations of the Borrowers and each other under the Facility Agreement and its related documentation.

 

On November 15, 2016, the Company entered into an Amending and Restating Agreement which amended and restated the credit agreements and the guarantee for the $98 Million Credit Facility (the “Restated $98 Million Credit Facility”).  The Restated $98 Million Credit Facility provides for the following: reductions in the minimum liquidity requirements consistent with the $400 Million Credit Facility, except the minimum liquidity amount for the collateral vessels under this facility is $750 per vessel, which is reflected as restricted cash; netting of certain amounts against the measurements of the collateral maintenance covenant, which remains in place with a 140% value to loan threshold; a portion of amounts required to be maintained under the minimum liquidity covenant for this facility may, under certain circumstances, be used to prepay the facility to maintain compliance with the collateral maintenance covenant; elimination of the original maximum leverage ratio and minimum net worth covenants; and restrictions on incurring indebtedness, making investments (other than through non-recourse subsidiaries) or paying dividends, similar to those provided for in the $400 Million Credit Facility.  The minimum working capital and the total indebtedness to total capitalization are the same as the $400 Million Credit Facility. 

 

As of March 31, 2018 and December 31, 2017, the Company had deposited $5,323 and $7,234, respectively, that has been reflected as current restricted cash.  As of March 31, 2018 and December 31, 2017, the Company had deposited $11,713 and $11,738, respectively, that has been reflected as noncurrent restricted cash.  These amounts include certain restricted deposits associated with the Debt Service Account, Capex Account and minimum liquidity amount as defined in the $98 Million Credit Facility.

 

As of March 31, 2018, the Company believed it was in compliance with all of the financial covenants under the Restated $98 Million Credit Facility.

 

2014 Term Loan Facilities

 

On October 8, 2014, Baltic Trading and its wholly-owned subsidiaries, Baltic Hornet Limited and Baltic Wasp Limited, each entered into a loan agreement and related documentation for a credit facility in a principal amount of up to $16,800 with ABN AMRO Capital USA LLC and its affiliates (the “2014 Term Loan Facilities”) to partially finance the newbuilding Ultramax vessel that each subsidiary acquired, namely the Baltic Hornet and Baltic Wasp, respectively.  Amounts borrowed under the 2014 Term Loan Facilities may not be reborrowed.  The 2014 Term Loan Facilities have a ten-year term, and the facility amount is to be the lowest of 60% of the delivered cost per vessel, $16,800 per vessel, and 60% of the fair market value of each vessel at delivery.  The 2014 Term Loan Facilities are insured by the China Export & Credit Insurance Corporation (Sinosure) in order to cover political and commercial risks for 95% of the outstanding principal plus interest, which was recorded in deferred financing fees.  Borrowings under the 2014 Term Loan Facilities bear interest at the three or six-month LIBOR rate plus an applicable margin of 2.50% per annum.  Borrowings are to be repaid in 20 equal consecutive semi-annual installments of 1/24 of the facility amount plus a balloon payment of 1/6 of the facility amount at final maturity.  Principal repayments commenced six months after the actual delivery date for each respective vessel.

 

Borrowings under the 2014 Term Loan Facilities are secured by liens on the vessels acquired with borrowings under these facilities, namely the Baltic Hornet and Baltic Wasp, and other related assets. The Company guarantees the obligations of the Baltic Hornet and Baltic Wasp under the 2014 Term Loan Facilities.

 

As of March 31, 2018, the Company had utilized its maximum borrowing capacity, and there was no further availability. Total debt repayments of $681 were made during the three months ended March 31, 2018 and 2017 under the 2014 Term Loan Facilities.  At March 31, 2018 and December 31, 2017, the total outstanding net debt balance was $23,580 and $24,214, respectively. 

 

On November 15, 2016, the Company entered into Supplemental Agreements with lenders under our 2014 Term Loan Facilities which, among other things, amended the Company’s collateral maintenance covenants under the 2014 Term Loan Facilities to provide that such covenants will not be tested through December 30, 2017 and the minimum collateral value to loan ratio will be 100% from December 31, 2017, 105% from June 30, 2018, 115% from December 31, 2018 and 135% from December 31, 2019.  These Supplemental Agreements also provided for certain other amendments to the 2014 Term Loan Facilities, which included reductions in the minimum liquidity requirements consistent with the $400 Million Credit Facility and restrictions on incurring indebtedness, making investments (other than through non-recourse subsidiaries) or paying dividends, similar to the $400 Million Credit Facility. Additionally, the minimum working capital required is the same as under the $400 Million Credit Facility.  Lastly, the maximum leverage requirement is equivalent to the debt to total capitalization requirement in the $400 Million Credit Facility.

 

As of March 31, 2018, the Company believed it was in compliance with all of the financial covenants under the 2014 Term Loan Facilities.

 

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 cost associated with unused commitment fees, if applicable. The following table also includes the range of interest rates on the debt, excluding the impact of unused commitment fees, if applicable:

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

    

2018

 

  

2017

 

Effective Interest Rate 

 

5.83

%  

  

5.01

%  

Range of Interest Rates (excluding unused commitment fees) 

 

3.83 % to 8.43

%  

  

3.36 % to 7.27

%  

 

v3.8.0.1
FAIR VALUE OF FINANCIAL INSTRUMENTS
3 Months Ended
Mar. 31, 2018
FAIR VALUE OF FINANCIAL INSTRUMENTS  
FAIR VALUE OF FINANCIAL INSTRUMENTS

8 - FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The fair values and carrying values of the Company’s financial instruments at March 31, 2018 and December 31, 2017 which are required to be disclosed at fair value, but not recorded at fair value, are noted below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2018

 

December 31, 2017

 

 

    

Carrying

    

 

 

    

Carrying

    

 

 

 

 

    

Value

    

Fair Value

    

Value

    

Fair Value

 

Cash and cash equivalents

 

$

172,775

 

$

172,775

 

$

174,479

 

$

174,479

 

Restricted cash

 

 

28,424

 

 

28,424

 

 

30,467

 

 

30,467

 

Floating rate debt

 

 

509,767

 

 

509,767

 

 

524,424

 

 

524,424

 

 

The carrying value of the borrowings under the $400 Million Credit Facility, $98 Million Credit Facility and the 2014 Term Loan Facilities approximate their fair value due to the variable interest nature thereof as each of these credit facilities represent floating rate loans.  Refer to Note 7 — Debt for further information regarding the Company’s credit facilities.  The carrying amounts of the Company’s other financial instruments at March 31, 2018 and December 31, 2017 (principally Due from charterers and Accounts payable and accrued expenses) approximate fair values because of the relatively short maturity of these instruments.

 

ASC Subtopic 820-10, “Fair Value Measurements & Disclosures” (“ASC 820-10”), applies to all assets and liabilities that are being measured and reported on a fair value basis.  This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumption (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 requires significant management judgment. The three levels are defined as follows:

 

·

Level 1—Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these instruments does not entail a significant degree of judgment.

 

·

Level 2—Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

 

·

Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

Cash and cash equivalents and restricted cash are considered Level 1 items as they represent liquid assets with short-term maturities. Floating rate debt is considered to be a Level 2 item as the Company considers the estimate of rates it could obtain for similar debt or based upon transactions amongst third parties. Nonrecurring fair value measurements include vessel impairment assessments completed during the interim period and at year-end as determined based on third-party quotes, which are Level 2 inputs.  During the three months ended March 31, 2018, the vessels assets for nine of the Company’s vessels were written down as part of the impairment recorded during the three months ended March 31, 2018.  Refer to “Impairment of vessel assets” section in Note 2 — Summary of Significant Accounting Policies.  The Company did not have any Level 3 financial assets or liabilities as of March 31, 2018 and December 31, 2017.

 

v3.8.0.1
PREPAID EXPENSES AND OTHER CURRENT ASSETS
3 Months Ended
Mar. 31, 2018
PREPAID EXPENSES AND OTHER CURRENT ASSETS  
PREPAID EXPENSES AND OTHER CURRENT ASSETS

9 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consist of the following:

 

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

    

2018

    

2017

 

Vessel stores

 

$

691

 

$

642

 

Capitalized contract costs

 

 

483

 

 

 —

 

Prepaid items

 

 

3,880

 

 

1,452

 

Insurance receivable

 

 

2,618

 

 

3,498

 

Other

 

 

2,206

 

 

1,746

 

Total prepaid expenses and other current assets

 

$

9,878

 

$

7,338

 

 

v3.8.0.1
FIXED ASSETS
3 Months Ended
Mar. 31, 2018
FIXED ASSETS  
FIXED ASSETS

10 - FIXED ASSETS

 

Fixed assets, net consists of the following:

 

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

    

2018

    

2017

 

Fixed assets, at cost:

 

 

 

 

 

 

 

Vessel equipment

 

$

1,330

 

$

1,375

 

Furniture and fixtures

 

 

462

 

 

462

 

Computer equipment

 

 

180

 

 

180

 

Total costs

 

 

1,972

 

 

2,017

 

Less: accumulated depreciation and amortization

 

 

(1,019)

 

 

(1,003)

 

Total fixed assets, net

 

$

953

 

$

1,014

 

 

Depreciation and amortization expense for fixed assets for the three months ended March 31, 2018 and 2017 was $71 and $68, respectively. 

v3.8.0.1
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
3 Months Ended
Mar. 31, 2018
ACCOUNTS PAYABLE AND ACCRUED EXPENSES.  
ACCOUNTS PAYABLE AND ACCRUED EXPENSES

11 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consist of the following:

 

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

    

2018

    

2017

 

Accounts payable

 

$

12,004

 

$

9,863

 

Accrued general and administrative expenses

 

 

1,780

 

 

2,978

 

Accrued vessel operating expenses

 

 

10,555

 

 

10,389

 

Total accounts payable and accrued expenses

 

$

24,339

 

$

23,230

 

 

v3.8.0.1
VOYAGE REVENUE
3 Months Ended
Mar. 31, 2018
VOYAGE REVENUE  
VOYAGE REVENUE

12 – VOYAGE REVENUE

 

Total voyage revenue includes revenue earned on fixed rate time charters, spot market voyage charters, spot market-related time charters and vessel pools, as well as the sale of bunkers consumed during short-term time charters.  For the three months ended March 31, 2018 and 2017, the Company earned $76,916 and $38,249 of voyage revenue, respectively. Included in voyage revenue for the three months ended March 31, 2018 and 2017 was $0 and $1,383 of net profit sharing revenue, respectively. 

 

On January 1, 2018 the Company adopted the revenue recognition guidance under ASU 2014-09 (refer to Note 2 Summary of Significant Accounting Policies) using the modified retrospective method applied to contracts that were not completed as of January 1, 2018.  The financial results for reporting periods beginning after January 1, 2018 are presented under the new guidance, while prior period amounts are not adjusted and will be continued to be reported under previous guidance. 

 

As a result of the adoption of the new revenue recognition guidance on January 1, 2018, the Company recorded a net increase to the opening retained deficit of $659 for the cumulative impact of adopting the new guidance.  The impact related primarily to the change in accounting for spot market voyage charters.  Prior to the adoption of the new guidance, revenue for spot market voyage charters was recognized ratably over the total transit time of the voyage, which previously commenced the latter of when the vessel departed from its last discharge port and when an agreement was entered into with the charterer, and ended at the time the discharge of cargo was completed at the discharge port.  As a result of the adoption of the new guidance, revenue for spot market voyage charters is now being recognized ratably over the total transit time of the voyage which now begins when the vessel arrives at the loading port and ends at the time the discharge of cargo is completed at the discharge port.  Additionally, the Company has identified that the contract fulfillment costs of spot market voyage charters consist primarily of the fuel consumption that is incurred by the Company from the latter of the end of the previous vessel employment and the contract date until the arrival at the loading port.  The fuel consumption during this period is capitalized and recorded in Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheet and is amortized ratably over the total transit time of the voyage from arrival at the loading port until the vessel departs from the discharge port and expensed as part of Voyage Expenses.  Refer also to Note 9 Prepaid Expenses and Other Current and Noncurrent Assets.