GENCO SHIPPING & TRADING LTD, 10-Q filed on 11/7/2018
Quarterly Report
v3.10.0.1
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2018
Nov. 07, 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 Sep. 30, 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   41,644,470
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q3  
v3.10.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 165,724 $ 174,479
Restricted cash   7,234
Due from charterers, net of a reserve of $515 and $246, respectively 18,536 12,855
Prepaid expenses and other current assets 10,072 7,338
Inventories 29,980 15,333
Vessels held for sale 12,996  
Total current assets 237,308 217,239
Noncurrent assets:    
Vessels, net of accumulated depreciation of $229,559 and $213,431, respectively 1,382,428 1,265,577
Deferred drydock, net of accumulated amortization of $12,366 and $9,540 respectively 10,728 13,382
Fixed assets, net of accumulated depreciation and amortization of $1,177 and $1,003, respectively 1,495 1,014
Other noncurrent assets   514
Restricted cash 315 23,233
Total noncurrent assets 1,394,966 1,303,720
Total assets 1,632,274 1,520,959
Current liabilities:    
Accounts payable and accrued expenses 33,084 23,230
Current portion of long-term debt 66,320 24,497
Deferred revenue 10,231 4,722
Total current liabilities: 109,635 52,449
Noncurrent liabilities:    
Long-term lease obligations 3,576 2,588
Long-term debt, net of deferred financing costs of $17,200 and $9,032, respectively 484,480 490,895
Total noncurrent liabilities 488,056 493,483
Total liabilities 597,691 545,932
Commitments and contingencies
Equity:    
Common stock, par value $0.01; 500,000,000 shares authorized; 41,547,004 and 34,532,004 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively 415 345
Additional paid-in capital 1,739,724 1,628,355
Retained deficit (705,556) (653,673)
Total equity 1,034,583 975,027
Total liabilities and equity $ 1,632,274 $ 1,520,959
v3.10.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Current Assets:    
Due from charterers, reserve $ 515 $ 246
Noncurrent assets:    
Vessels, accumulated depreciation 229,559 213,431
Deferred drydock, accumulated amortization 12,366 9,540
Fixed assets, accumulated depreciation and amortization 1,177 1,003
Deferred financing costs, noncurrent $ 17,200 $ 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) 41,547,004 34,532,004
Common stock, shares outstanding (in shares) 41,547,004 34,532,004
v3.10.0.1
Condensed Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Revenues:        
Revenues $ 92,263 $ 51,161 $ 255,336 $ 134,780
Operating expenses:        
Voyage expenses 31,475 5,550 78,551 9,743
Vessel operating expenses 25,155 25,131 72,642 73,867
Charter hire expenses 723   1,231  
General and administrative expenses (inclusive of nonvested stock amortization expense of $644, $1,255, $1,776 and $3,536, respectively) 5,033 5,889 16,761 16,550
Technical management fees 2,028 1,883 5,926 5,735
Depreciation and amortization 17,269 17,836 50,605 54,194
Impairment of vessel assets 0 18,654 56,586 21,993
Gain on sale of vessels (1,509) 0 (1,509) (7,712)
Total operating expenses 80,174 74,943 280,793 174,370
Operating income (loss) 12,089 (23,782) (25,457) (39,590)
Other (expense) income:        
Other income (expense) 213 (37) 272 (152)
Interest income 1,062 494 2,743 1,006
Interest expense (7,656) (7,857) (24,249) (22,559)
Loss on debt extinguishment 0   (4,533)  
Other expense (6,381) (7,400) (25,767) (21,705)
Income (loss) before income taxes 5,708 (31,182) (51,224) (61,295)
Net income (loss) $ 5,708 $ (31,182) $ (51,224) $ (61,295)
Net earnings (loss) per share-basic $ 0.14 $ (0.90) $ (1.37) $ (1.80)
Net earnings (loss) per share-diluted $ 0.14 $ (0.90) $ (1.37) $ (1.80)
Weighted average common shares outstanding - Basic (in shares) 41,618,187 34,469,998 37,263,200 34,135,736
Weighted average common shares outstanding - diluted 41,821,008 34,469,998 37,263,200 34,135,736
Voyage        
Revenues:        
Revenues $ 92,263 $ 51,161 $ 255,336 $ 134,780
v3.10.0.1
Condensed Consolidated Statements of Operations (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Condensed Consolidated Statements of Operations        
Nonvested stock amortization expenses $ 644 $ 1,255 $ 1,776 $ 3,536
v3.10.0.1
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Consolidated Statements of Comprehensive Income (Loss)        
Net income (loss) $ 5,708 $ (31,182) $ (51,224) $ (61,295)
Other comprehensive income 0 0 0 0
Comprehensive income (loss) $ 5,708 $ (31,182) $ (51,224) $ (61,295)
v3.10.0.1
Condensed 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       (61,295) (61,295)
Conversion of 27,061,856 shares of Series A Preferred Stock $ (120,789) 270 120,519    
Nonvested stock amortization     3,536   3,536
Balance at the end at Sep. 30, 2017   344 1,627,839 (656,243) 971,940
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       (51,224) (51,224)
Issuance of 7,015,000 shares of common stock   70 109,593   109,663
Nonvested stock amortization     1,776   1,776
Balance at the end at Sep. 30, 2018   $ 415 $ 1,739,724 $ (705,556) $ 1,034,583
v3.10.0.1
Condensed Consolidated Statements of Equity (Parenthetical)
9 Months Ended
Sep. 30, 2017
shares
Issuance of shares of RSUs (in shares) 18,234
Series A Preferred Stock | Preferred Stock  
Conversion of shares (in shares) 27,061,856
v3.10.0.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Cash flows from operating activities:    
Net loss $ (51,224) $ (61,295)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization 50,605 54,194
Amortization of deferred financing costs 2,110 1,739
PIK interest, net   4,575
Payment of PIK interest (5,341) 0
Amortization of nonvested stock compensation expense 1,776 3,536
Impairment of vessel assets 56,586 21,993
Gain on sale of vessels (1,509) (7,712)
Loss on debt extinguishment 4,533  
Insurance proceeds for protection and indemnity claims 268 478
Insurance proceeds for loss of hire claims 58 1,781
Change in assets and liabilities:    
Increase in due from charterers (6,329) (495)
Increase in prepaid expenses and other current assets (5,966) (8,001)
Increase in inventories (14,647) (1,837)
Decrease in other noncurrent assets 514  
Increase in accounts payable and accrued expenses 8,169 766
Increase in deferred revenue 5,017 1,144
Increase in lease obligations 988 540
Deferred drydock costs incurred (2,233) (7,685)
Net cash provided by operating activities 43,375 3,721
Cash flows from investing activities:    
Purchase of vessels, including deposits (239,695) (252)
Purchase of other fixed assets (888) (198)
Net proceeds from sale of vessels 10,626 15,513
Insurance proceeds for hull and machinery claims 3,466 718
Net cash (used in) provided by investing activities (226,491) 15,781
Cash flows from financing activities:    
Payment of debt extinguishment costs (2,962)  
Proceeds from issuance of common stock 110,249  
Payment of common stock issuance costs (496)  
Payment of Series A Preferred Stock issuance costs   (1,103)
Payment of deferred financing costs (11,499)  
Net cash provided by (used in) financing activities 144,209 (3,465)
Net (decrease) increase in cash, cash equivalents and restricted cash (38,907) 16,037
Cash, cash equivalents and restricted cash at beginning of period 204,946 169,068
Cash, cash equivalents and restricted cash at end of period 166,039 185,105
Secured Debt | $108 Million Credit Facility    
Cash flows from financing activities:    
Proceeds from credit facility 108,000  
Repayment of secured debt 0  
Secured Debt | $460 Million Credit Facility    
Cash flows from financing activities:    
Proceeds from credit facility 460,000  
Repayment of secured debt 0 0
Secured Debt | $400 Million Credit Facility    
Adjustments to reconcile net loss to net cash provided by operating activities:    
Payment of PIK interest (5,341)  
Cash flows from financing activities:    
Repayment of secured debt (399,600) (300)
Secured Debt | 2014 Term Loan Facilities    
Cash flows from financing activities:    
Repayment of secured debt (25,544) (2,062)
Line of Credit Facility | $98 Million Credit Facility    
Cash flows from financing activities:    
Repayments of Credit Facility $ (93,939) $ 0
v3.10.0.1
Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2018
Aug. 14, 2018
May 31, 2018
Dec. 31, 2017
Nov. 10, 2016
Nov. 04, 2015
Secured Debt | $108 Million Credit Facility            
Maximum borrowing capacity $ 108,000 $ 108,000        
Secured Debt | $460 Million Credit Facility            
Maximum borrowing capacity 460,000   $ 460,000      
Secured Debt | $400 Million Credit Facility            
Maximum borrowing capacity 400,000     $ 400,000 $ 400,000  
Line of Credit Facility | $98 Million Credit Facility            
Maximum borrowing capacity $ 98,000     $ 98,000   $ 98,000
v3.10.0.1
GENERAL INFORMATION
9 Months Ended
Sep. 30, 2018
GENERAL INFORMATION  
GENERAL INFORMATION

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 September 30, 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 (“Baltic Trading”); and the ship-owning subsidiaries as set forth below under “Other General Information.” 

 

On June 19, 2018, the Company closed an equity offering of 7,015,000 shares of common stock at an offering price of $16.50 per share.  The Company received net proceeds of $109,663 after deducting underwriters’ discounts and commissions and other expenses. 

 

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 by 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 September 30, 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 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 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

(3)

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

 

Genco Weatherly Limited

 

Genco Weatherly

 

61,556

 

7/26/18

 

2014

 

Genco Columbia Limited

 

Genco Columbia

 

60,294

 

9/10/18

 

2016

 

Genco Endeavour Limited

 

Genco Endeavour

 

181,060

 

8/15/18

 

2015

 

Genco Resolute Limited

 

Genco Resolute

 

181,060

 

8/14/18

 

2015

 

Genco Defender Limited

 

Genco Defender

 

180,021

 

9/6/18

 

2016

 

Genco Liberty Limited

 

Genco Liberty

 

180,032

 

9/11/18

 

2016

 

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.

(2)

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

(3)

The Genco Cavalier was sold on October 16, 2018.  Refer to Note 16 Subsequent Events.

 

v3.10.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Sep. 30, 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 and nine months ended September 30, 2018 are not necessarily indicative of the operating results to be expected for the year ending December 31, 2018.

 

The preparation of financial statements in conformity with U.S. GAAP 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, if any.  Actual results could differ from those estimates.

 

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

September 30, 

 

December 31, 

 

 

    

2018

    

2017

 

2017

 

2016

 

Cash and cash equivalents

 

$

165,724

 

$

174,479

 

$

152,511

 

$

133,400

 

Restricted cash - current

 

 

 —

 

 

7,234

 

 

8,593

 

 

8,242

 

Restricted cash - noncurrent

 

 

315

 

 

23,233

 

 

24,001

 

 

27,426

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

166,039

 

$

204,946

 

$

185,105

 

$

169,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

Inventories consists of consumable bunkers and lubricants, which are stated at the lower of cost and net realizable 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 September 30, 2018 and December 31, 2017 in the Condensed Consolidated Balance Sheets and the Condensed Consolidated Statements of Cash Flows.

 

Vessels held for sale

 

On June 27, 2018 and August 30, 2018, the Company reached agreements to sell the Genco Explorer and the Genco Cavalier, respectively, and these vessel assets have been classified as held for sale in the Condensed Consolidated Balance Sheet as of September 30, 2018.  Refer to Note 4 Vessel Acquisitions and Dispositions for details of the agreements.

 

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 September 30, 2018 and 2017 was $16,013 and $16,575, respectively.  Depreciation expense for vessels for the nine months ended September 30, 2018 and 2017 was $46,933 and $50,173, 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 September 30, 2018 and December 31, 2017, the Company had an accrual of $409 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 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 first quarter of 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 first quarter of 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 and net realizable value adjustments to re-value the bunker fuel on a quarterly basis, as required.  These differences in bunkers, including any lower of cost and net realizable value adjustments, resulted in a net gain of $1,020 and $269 during the three months ended September 30, 2018 and 2017, respectively, and $2,909 and $1,205 during the nine months ended September 30, 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 for the year ended December 31, 2017 and believes that it will not qualify for the Section 883 exemption for 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”).  The Company has recorded estimated U.S. gross transportation tax of $186 and $149 during the three months ended September 30, 2018 and 2017, respectively, and $566 and $246 during the nine months ended September 30, 2018 and 2017, respectively.  U.S. gross transportation tax has been recorded in Voyage expenses in the Condensed Consolidated Statements of Operation.  

 

Charter hire expenses

 

During the second quarter of 2018, the Company began chartering-in third-party vessels.  The costs to charter-in these vessels, which primarily include the daily charter hire rate net of commissions, are recorded as Charter hire expenses.

 

Impairment of vessel assets

 

During the three months ended September 30, 2018 and 2017, the Company recorded $0 and $18,654, respectively, related to the impairment of vessel assets in accordance with Accounting Standards Codification (“ASC”) 360 — “Property, Plant and Equipment” (“ASC 360”).  Additionally, during the nine months ended September 30, 2018 and 2017, the Company recorded $56,586 and $21,993, respectively, related to the impairment of vessel assets in accordance with ASC 360.

 

On July 24, 2018, the Company entered into an agreement to sell the Genco Surprise, a 1998-built Panamax vessel, for $5,300 less a 3.0% broker commission payable to a third party.  As the anticipated undiscounted cash flows, including the net sales price, did not exceed the net book value of the vessel as of June 30, 2018, the vessel value for the Genco Surprise was adjusted to its net sales price of $5,141 as of June 30, 2018.  This resulted in an impairment loss of $184 during the nine months ended September 30, 2018.  Refer to Note 4 Vessel Acquisitions and Dispositions for further detail regarding the sale.

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 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 nine months ended September 30, 2018.

On August 4, 2017, the Board of Directors determined to dispose of the Company’s vessels built in 1999, namely the Genco Beauty, the Genco Explorer, the Genco Knight, the Genco Progress and the Genco Vigour, 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 September 30, 2017.  This resulted in an impairment loss of $18,654 during the three and nine months ended September 30, 2017.

At June 30, 2017, the Company determined that the sum of the estimated undiscounted future cash flows attributable to the Genco Surprise did not exceed the carrying value of the vessel at June 30, 2017 and reduced the carrying value of the Genco Surprise, a 1998-built Panamax vessel, to its fair market value as of June 30, 2017.  This resulted in an impairment loss of $3,339 during the nine months ended September 30, 2017. 

 

Gain on sale of vessels

 

During the three and nine months ended September 30, 2018, the Company recorded a net gain of $1,509 related to the sale of vessels.  The net gain of $1,509 recorded during the three and nine months ended September 30, 2018 related primarily to the sale of the Genco Progress and Genco Surprise.

 

During the three and nine months ended September 30, 2017, the Company recorded a net gain of $0 and $7,712, respectively, related to the sale of vessels.  The net gain of $7,712 recorded during the nine months ended September 30, 2017 related primarily to the sale of the Genco Wisdom, the Genco Reliance, the Genco Carrier, the Genco Success and the Genco Prosperity.  

 

Loss on debt extinguishment

 

During the three and nine months ended September 30, 2018, the Company recorded $0 and $4,533, respectively, related to the loss on the extinguishment of debt in accordance with ASC 470-50 “Debt – Modifications and Extinguishments” (“ASC 470-50”). This loss was recognized as a result of the refinancing of the $400 Million Credit Facility, the $98 Million Credit Facility and the 2014 Term Loan Facilities with the $460 Million Credit Facility on June 5, 2018 as described in Note 7 Debt.

 

Recent accounting pronouncements

 

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, “Disclosure Framework: Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-03”),” which change the disclosure requirements for fair value measurements by removing, adding, and modifying certain disclosures. This ASU is effective for fiscal years beginning after December 15, 2019, and for interim periods within that year.  Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU.  The Company is currently evaluating the impact of this adoption on its consolidated financial statements and related disclosures. 

 

In May 2017, the FASB issued 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 accounting.  This ASU is effective for fiscal years beginning after December 15, 2017, and for interim periods within that year 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 nine months ended September 30, 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.  There were no cash payments for in-kind interest during the nine months ended September 30, 2017.  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 requires that equity investments be measured at fair value with changes in fair value recognized in net income (loss). ASU 2016-01 is 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” or “ASC 606”), 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. ASC 606 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”). The Company adopted ASC 606 during the first quarter of 2018 using the modified retrospective transition method applied to all contracts and determined that the only impact was to spot market voyage charter contracts that 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 ASC 606 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.

 

v3.10.0.1
CASH FLOW INFORMATION
9 Months Ended
Sep. 30, 2018
CASH FLOW INFORMATION  
CASH FLOW INFORMATION

3 - CASH FLOW INFORMATION

 

For the nine months ended September 30, 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 $1,000 for the Purchase of vessels, including deposits, $253 for the Net proceeds from sale of vessels and $34 for the Purchase of other fixed assets.  For the nine months ended September 30, 2018, the Company had non-cash financing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $350 for the Payment of deferred financing fees and $90 for the Payment of common stock issuance costs.  

 

For the nine months ended September 30, 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 $9 for the Purchase of vessels, including deposits, and $56 for the Purchase of other fixed assets.

 

During the nine months ended September 30, 2018 and 2017, cash paid for interest was $20,623 and $17,837, respectively, excluding the PIK interest paid as a result of the refinancing of the $400 Million Credit Facility.  Refer to Note 7 — Debt.

 

During the nine months ended September 30, 2018 and 2017, there was no cash paid for estimated income taxes.

 

On May 15, 2018, the Company issued 14,268 restricted stock units to certain members of the Board of Directors.  The aggregate fair value of these restricted stock units was $255.

 

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.

 

The Company adopted ASU 2016-15 during the first quarter of 2018 as noted in Note 2 — Summary of Significant Accounting Policies. The retrospective application of ASU 2016-15 resulted in insurance proceeds for protection and indemnity claims and loss of hire claims for the nine months ended September 30, 2017 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 expense and other current assets.  The cash flow information for the nine months ended September 30, 2017 has been updated to reflect the adoption of ASU 2016-15 as presented in the table below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Reported

 

As Adjusted

 

 

 

 

 

September 30, 

 

September 30, 

 

Effect of

 

 

    

2017

    

2017

 

Change

 

Cash Flow Data:

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities (1)

 

$

4,439

 

$

3,721

 

$

718

 

Net cash provided by investing activities (1)

 

 

15,063

 

 

15,781

 

 

(718)

 


(1)

Insurance proceeds reclassified from operating activities to investing activities as a result of the Company’s adoption of ASU 2016-15 for the nine months ended September 30, 2017 was $718.

  

v3.10.0.1
VESSEL ACQUISITIONS AND DISPOSITIONS
9 Months Ended
Sep. 30, 2018
VESSEL ACQUISITIONS AND DISPOSITIONS  
VESSEL ACQUISITIONS AND DISPOSITIONS

4 - VESSEL ACQUISITIONS AND DISPOSITIONS

 

Vessel Acquisitions

 

On June 6, 2018, the Company entered into an agreement for the en bloc purchase of four drybulk vessels, including two Capesize drybulk vessels and two Ultramax drybulk vessels for approximately $141,000.  Each vessel was built with a fuel-saving “eco” engine.  The Genco Resolute, a 2015-built Capesize vessel, was delivered on August 14, 2018 and the Genco Endeavour, a 2015-built Capesize vessel, was delivered on August 15, 2018.  The Genco Weatherly, a 2014-built Ultramax vessel, was delivered on July 26, 2018 and the Genco Columbia, a 2016-built Ultramax vessel, was delivered on September 10, 2018. The Company utilized a combination of cash on hand and proceeds from the $108 Million Credit Facility to finance the purchase.

 

On July 12, 2018, the Company entered into agreements to purchase two 2016-built Capesize drybulk vessels for an aggregate purchase price of $98,000.  The Genco Defender was delivered on September 6, 2018 and the Genco Liberty was delivered on September 11, 2018. The Company utilized a combination of cash on hand and proceeds from the $108 Million Credit Facility to finance the purchase.

 

Vessel Dispositions

 

On August 30, 2018, the Company entered into an agreement to sell the Genco Cavalier, a 2007-built Supramax vessel, to a third party for $10,000 less a 2.5% broker commission payable to a third party.  The sale was completed on October 16, 2018.  The vessel assets have been classified as held for sale in the Condensed Consolidated Balance Sheet as of September 30, 2018.  The Genco Cavalier served as collateral under the $460 Million Credit Facility.  Refer to Note 16 — Subsequent Events for further information.

 

On July 24, 2018, the Company entered into an agreement to sell the Genco Surprise, a 1998-built Panamax vessel, to a third party.  On August 7, 2018, the Company completed the sale of the Genco Surprise.  Refer to Note 2 —  Summary of Significant Accounting Policies regarding the impairment recorded for this vessel during the nine months ended September 30, 2018.

 

On June 27, 2018, the Company reached agreements to sell the Genco Explorer and the Genco Progress, both 1999-built Handysize vessels, to a third party for $5,600 each less a 3.0% broker commission payable to a third party.  The sale of the Genco Progress was completed on September 13, 2018 and the sale of the Genco Explorer is expected to be completed during the fourth quarter of 2018. The sale of the Genco Explorer is subject to completion of definitive documentation and customary conditions.  The vessel assets for the Genco Explorer have been classified as held for sale in the Condensed Consolidated Balance Sheet as of September 30, 2018. 

 

The Genco Surprise, the Genco Explorer and the Genco Progress do not serve as collateral under any of the Company’s credit facilities; therefore the Company is not required to pay down any indebtedness with the proceeds from the sales. 

 

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.

v3.10.0.1
NET EARNINGS (LOSS) PER SHARE
9 Months Ended
Sep. 30, 2018
NET EARNINGS (LOSS) PER SHARE  
NET EARNINGS (LOSS) PER SHARE

5 - NET EARNINGS (LOSS) PER SHARE

 

The computation of basic net earnings (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.  There were no anti-dilutive stock options, restricted stock or restricted stock units excluded from the computation of diluted net earnings per share during the three months ended September 30, 2018.  There were 253,438 shares of restricted stock and restricted stock units and 255,608 stock options excluded from the computation of diluted net loss per share during the nine months ended September 30, 2018 because they were anti-dilutive.  There were 331,200 shares of restricted stock and restricted stock units and 133,000 stock options excluded from the computation of diluted net loss per share during the three and nine months ended September 30, 2017.  (refer to Note 14 — Stock-Based Compensation)  The Company’s diluted net earnings (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.  There were 0 unvested MIP Warrants and 3,936,761 of equity warrants excluded from the computation of diluted net earnings (loss) per share during the three and nine months ended September 30, 2018 and 2017 because they were anti-dilutive. 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

 

September 30, 

 

September 30, 

 

 

 

2018

    

2017

    

2018

    

2017

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding, basic:

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic 

 

41,618,187

 

34,469,998

 

37,263,200

 

34,135,736

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding, diluted:

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic 

 

41,618,187

 

34,469,998

 

37,263,200

 

34,135,736

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of warrants 

 

 —

 

 —

 

 —

 

 —

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of stock options

 

31,965

 

 —

 

 —

 

 —

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of restricted stock awards 

 

170,856

 

 —

 

 —

 

 —

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, diluted 

 

41,821,008

 

34,469,998

 

37,263,200

 

34,135,736

 

 

v3.10.0.1
RELATED PARTY TRANSACTIONS
9 Months Ended
Sep. 30, 2018
RELATED PARTY TRANSACTIONS  
RELATED PARTY TRANSACTIONS

6 - RELATED PARTY TRANSACTIONS

 

During the three and nine months ended September 30, 2018 and 2017, the Company did not identify any related party transactions.  

 

v3.10.0.1
DEBT
9 Months Ended
Sep. 30, 2018
DEBT  
DEBT

7 – DEBT

 

Long-term debt, net consists of the following:

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

 

    

2018

    

2017

 

Principal amount 

 

$

568,000

 

$

519,083

 

PIK interest

 

 

 —

 

 

5,341

 

Less:  Unamortized debt financing costs 

 

 

(17,200)

 

 

(9,032)

 

Less: Current portion 

 

 

(66,320)

 

 

(24,497)

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

$

484,480

 

$

490,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2018

 

December 31, 2017

 

 

 

 

 

Unamortized

 

 

 

Unamortized

 

 

 

 

 

Debt Financing

 

 

 

Debt Financing

 

 

 

Principal

 

Cost

 

Principal

 

Cost

 

$460 Million Credit Facility

 

$

460,000

 

$

15,248

 

$

 —

 

$

 —

 

$108 Million Credit Facility

 

 

108,000

 

 

1,952

 

 

 —

 

 

 —

 

$400 Million Credit Facility

 

 

 —

 

 

 —

 

 

399,600

 

 

6,332

 

$98 Million Credit Facility

 

 

 —

 

 

 —

 

 

93,939

 

 

1,370

 

2014 Term Loan Facilities

 

 

 —

 

 

 —

 

 

25,544

 

 

1,330

 

PIK interest

 

 

 —

 

 

 —

 

 

5,341

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt

 

$

568,000

 

$

17,200

 

$

524,424

 

$

9,032

 

 

As of September 30, 2018 and December 31, 2017,  $17,200 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 $871 and $586 for the three months ended September 30, 2018 and 2017, respectively, and $2,110 and $1,739 for the nine months ended September 30, 2018 and 2017, respectively.  This amortization expense is recorded as a component of Interest expense in the Condensed Consolidated Statements of Operations.

 

Effective June 5, 2018, the portion of the unamortized deferred financing costs for the $400 Million Credit Facility and 2014 Term Loan Facilities that was identified as a debt modification, rather than an extinguishment of debt, is being amortized over the life of the $460 Million Credit Facility in accordance with ASC 470-50.

 

$108 Million Credit Facility

 

On August 14, 2018, the Company entered into a five-year senior secured credit facility (the “$108 Million Credit Facility”) with Crédit Agricole Corporate & Investment Bank (“CACIB”), as Structurer and Bookrunner, CACIB and Skandinaviska Enskilda Banken AB (Publ) as Mandate Lead Arrangers, CACIB as Administrative Agent and as Security Agent, and the other lenders party thereto from time to time.  The Company has used proceeds from the $108 Million Credit Facility to finance a portion of the purchase price for the six vessels, including four Capesize Vessels and two Ultramax vessels, which were delivered to the Company during the three months ended September 30, 2018 (refer to Note 4 —  Vessel Acquisitions and Dispositions).  These six vessels also serve as collateral under the $108 Million Credit Facility.  The Company drew down a total of $108,000 during the three months ended September 30, 2018, which represents 45% of the appraised value of the six vessels.

 

As of September 30, 2018, there was no availability under the $108 Million Credit Facility.  Total debt repayments of $0 were made during the three and nine months ended September 30, 2018 under the $108 Million Credit Facility.  As of September 30, 2018 and December 31, 2017, the total outstanding net debt balance was $106,048 and $0, respectively.

 

The $108 Million Credit Facility provides for the following key terms:

 

·

The final maturity date of the $108 Million Credit Facility is August 14, 2023.

 

·

Borrowings under the $108 Million Credit Facility bear interest at London Interbank Offered Rate (“LIBOR”) plus 2.50% through September 30, 2019 and LIBOR plus a range of 2.25% to 2.75% thereafter, dependent upon the Company’s ratio of total net indebtedness to the last twelve months EBITDA.

 

·

Scheduled amortization payments under the $108 Million Credit Facility reflect a repayment profile whereby the facility shall have been repaid to nil when the average vessel aged of the collateral vessels reaches 20 years.  Based on this, the required repayments are $1,580 per quarter commencing on December 31, 2018, with a final balloon payment on the maturity date.

 

·

Mandatory prepayments are to be applied to remaining amortization payments pro rata, while voluntary prepayments are to be applied to remaining amortization payments in order of maturity.

 

·

Dividends may be paid subject to customary conditions and a limitation of 50% of consolidated net income for the quarter preceding such dividend payment if the collateral maintenance test ratio is 200% or less for such quarter.

 

·

Acquisitions and additional indebtedness are allowed subject to compliance with financial covenants (including a collateral maintenance test) and other customary conditions.

 

·

Key financial covenants are substantially similar to those under the Company’s $460 Million Credit Facility and include:

 

·

minimum liquidity, with unrestricted cash and cash equivalents to equal or exceed the greater of $30,000 and 7.5% of total indebtedness;

 

·

minimum working capital, with consolidated current assets (excluding restricted cash) minus consolidated current liabilities (excluding the current portion of long-term indebtedness) to be not less than zero;

 

·

debt to capitalization, with the ratio of total indebtedness to total capitalization to be not more than 70%; and

 

·

collateral maintenance, with the aggregate appraised value of collateral vessels to be at least 135% of the principal amount of the loan outstanding under the $108 Million Credit Facility.

 

As of September 30, 2018, the Company believed it was in compliance with all of the financial covenants under the $108 Million Credit Facility.

   

$460 Million Credit Facility

On May 31, 2018, the Company entered into a five-year senior secured credit facility for an aggregate amount of up to $460,000 (the “$460 Million Credit Facility”) with Nordea Bank AB (publ), New York Branch (“Nordea”), as Administrative Agent and Security Agenty, the various lenders party thereto, and Nordea, Skandinaviska Enskilda Banken AB (publ), ABN AMRO Capital USA LLC, DVB Bank SE, Crédit Agricole Corporate & Investment Bank, and Danish Ship Finance A/S as Bookrunners and Mandated Lead Arrangers.  Deutsche Bank AG Filiale Deutschlandgeschäft, and CTBC Bank Co. Ltd. are Co-Arrangers under the $460 Million Credit Facility.  On June 5, 2018, proceeds of $460,000 under the $460 Million Credit Facility were used, together with cash on hand, to refinance all of the Company’s existing credit facilities (the $400 Million Credit Facility, $98 Million Credit Facility and 2014 Term Loan Facilities. as defined below) into one facility, and pay down the debt on seven of the Company’s oldest vessels, which have been identified for sale. 

 

As of September 30, 2018, there was no availability under the $460 Million Credit Facility.  Total debt repayments of $0 were made during the three and nine months ended September 30, 2018 and 2017, respectively, under the $460 Million Credit Facility.  As of September 30, 2018 and December 31, 2017, the total outstanding net debt balance was $444,752 and $0, respectively.

 

The $460 Million Credit Facility provides for the following key terms:

 

·

The final maturity date of the $460 Million Credit Facility is May 31, 2023.

 

·

Borrowings under the $460 Million Credit Facility bear interest at LIBOR plus 3.25% through December 31, 2018 and LIBOR plus a range of 3.00% and 3.50% thereafter, dependent upon the Company’s ratio of total net indebtedness to the last twelve months EBITDA.  Scheduled amortization payments are $15,000 per quarter commencing on December 31, 2018, with a final payment of $190,000 due on the maturity date.

 

·

Scheduled amortization payments may be recalculated upon the Company’s request based on changes in collateral vessels, prepayments of the loan made as a result of a collateral vessel disposition as part of the Company’s fleet renewal program, or voluntary prepayments, subject in each case to a minimum repayment profile under which the loan will be repaid to nil when the average age of the vessels serving as collateral from time to time reaches 17 years.  Mandatory prepayments are applied to remaining amortization payments pro rata, while voluntary prepayments are applied to remaining amortization payments in order of maturity.

 

·

Acquisitions and additional indebtedness are allowed subject to compliance with financial covenants, a collateral maintenance test, and other customary conditions.

 

·

Dividends may be paid after December 31, 2018 (or potentially earlier if the Company elects to change the date of its first amortization payment due December 31, 2018 to an earlier date) subject to customary conditions and a limitation of 50% of consolidated net income for the quarter preceding such dividend payment if the collateral maintenance test ratio is 200% or less for such quarter.

 

·

Collateral vessels can be sold or disposed of without prepayment of the loan if a replacement vessel or vessels meeting certain requirements are included as collateral within 120 days of such sale or disposition.  In addition:

 

·

we must be in compliance with the collateral maintenance test;

 

·

the replacement vessels must become collateral for the loan; and either

 

·

the replacement vessels must have an equal or greater appraised value that the collateral vessels for which they are substituted, or

 

·

ratio of the aggregate appraised value of the collateral vessels (including replacement vessels) to the outstanding loan amount after the collateral disposition (accounting for any prepayments of the loan by the time the replacement vessels become collateral vessels) must equal or exceed the aggregate appraised value of the collateral vessels to the outstanding loan before the collateral disposition.

 

·

Key financial covenants include:

 

·

minimum liquidity, with unrestricted cash and cash equivalents to equal or exceed the greater of $30,000 and 7.5% of total indebtedness (no restricted cash is required);

 

·

minimum working capital, with consolidated current assets (excluding restricted cash) minus consolidated current liabilities (excluding the current portion of long-term indebtedness) to be not less than zero;

 

·

debt to capitalization, with the ratio of total indebtedness to total capitalization to be not more than 70%; and

 

·

collateral maintenance, with the aggregate appraised value of collateral vessels to be at least 135% of the principal amount of the loan outstanding under the $460 Million Credit Facility.

 

·

Collateral includes the current vessels in the Company’s fleet other than the seven oldest vessels in the fleet which have been identified for sale, collateral vessel earnings and insurance, and time charters in excess of 24 months in respect of the collateral vessels.

 

As of September 30, 2018, the Company believed it was in compliance with all of the financial covenants under the $460 Million Credit Facility.

   

$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 was 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. 

 

The $400 Million Credit Facility had a maturity date of November 15, 2021, and the principal borrowed under the facility bore interest at the LIBOR for an interest period of three months plus a margin of 3.75%.  The Company had the option to pay 1.50% of such rate in-kind (“PIK interest”) through December 31, 2018, of which was payable on the maturity date of the facility.  The Company opted to make the PIK interest election through September 29, 2017 and as of September 30, 2018 and December 31, 2017, had recorded $0 and $5,341 of PIK interest which was recorded in Long-term debt in the Condensed Consolidated Balance Sheet as of December 31, 2017.  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 were adjusted to reflect the reduction of future amortization amounts.   

 

There was no collateral maintenance testing for the $400 Million Credit Facility prior to June 30, 2018.  Thereafter, there was to 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 required 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 was 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 was not to be less than $0 at all times.  The $400 Million Credit Facility had 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 was prohibited from paying dividends without lender consent through December 31, 2020.  The Company was able establish non-recourse subsidiaries to incur indebtedness or make investments, but it was 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 was subject to a cash sweep.  The cash flow sweep was 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 was required from the first $10,000 in aggregate of the prepayments otherwise required under the cash sweep.  During the three and nine months ended September 30, 2018, the Company repaid $0 and $15,428, respectively, for the excess cash flow sweep.

 

At September 30, 2018 and December 31, 2017, the Company had deposited $0 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.

 

Total debt repayments of $0 and $100 were made during the three months ended September 30, 2018 and 2017, respectively, and total debt repayments of $404,941 (which includes $5,341 of PIK interest) and $300 were made during the nine months ended September 30, 2018 and 2017, respectively, under the $400 Million Credit Facility. 

 

On June 5, 2018, the $400 Million Credit Facility was refinanced with the $460 Million Credit Facility; refer to the “$460 Million Credit Facility” section above.  As of September 30, 2018 and December 31, 2017, the total outstanding net debt balance, including PIK interest as defined below, was $0 and $398,609, respectively.

 

$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 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.

 

Borrowings under the facility were available for working capital purposes.  The facility had a final maturity date of September 30, 2020, and the principal borrowed under the facility bore interest at LIBOR for an interest period of three months plus a margin of 6.125% per annum.  The facility had 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 was 182% or less of the loan amount outstanding, the Borrowers were 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 owned.

 

The Facility Agreement required 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 was prohibited from paying dividends under this facility until December 31, 2018. Following December 31, 2018, the amount of dividends the Company could pay was limited based on the amount of the repayment of at least $25,000 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 included usual and customary events of default and remedies for facilities of this nature.

 

Borrowings under the facility were 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 were 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 provided 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 was $750 per vessel, which was reflected as restricted cash; netting of certain amounts against the measurements of the collateral maintenance covenant, which remained 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, have been 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;