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GOLDEN OCEAN GROUP LTD.
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By: /s/ Per Heiberg
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Date: May 13, 2016
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Name: Per Heiberg
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Title: Principal Financial Officer
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(in thousands, except per share data)
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Golden Ocean, full year 2015 as reported
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Former Golden
Ocean,
Q1 2015,
IFRS IASB
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Selected
US GAAP
Adjustments
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Note –
2(A) |
Pro Forma
Adjustments
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Note –
2(B) |
Pro Forma
Combined
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Operating revenues
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||||||||||||||||||||||||||||
Time charter revenue
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$
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85,960
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24,544
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—
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(6,703
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)
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(1
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)
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103,801
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Voyage charter revenue
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102,972
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16,672
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—
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—
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119,644
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|||||||||||||||||||||||
Other income
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1,306
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396
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—
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(134
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)
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(2
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)
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1,568
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||||||||||||||||||||
Total operating revenues
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190,238
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41,612
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—
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(6,837
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)
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225,013
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Loss on sale of assets and amortization of deferred gains
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(10,788
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)
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—
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—
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—
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(10,788
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)
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Operating expenses
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Voyage expenses and commissions
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78,099
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11,561
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—
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(134
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)
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(2
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)
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89,526
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Ship operating expenses
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83,022
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15,874
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—
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—
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98,896
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Charter hire expenses
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30,719
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7,378
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—
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(168
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)
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(3
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)
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37,929
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||||||||||||||||||||
Administrative expenses
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12,469
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1,728
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(567
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)
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(4
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)
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13,630
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Depreciation
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52,728
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11,624
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(845
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)
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(2
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(2,920
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)
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(5
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60,587
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Provision for uncollectible receivables
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4,729
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—
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—
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—
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4,729
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Impairment loss on vessels and newbuildings
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152,597
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—
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—
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—
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152,597
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Total operating expenses
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414,363
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48,165
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(845
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)
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(3,789
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)
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457,894
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Other losses, net
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—
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(2,155
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)
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2,155
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(1
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)
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—
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—
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Net operating loss
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(234,913
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)
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(8,708
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)
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3,000
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(3,048
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)
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(243,669
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)
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Interest income
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849
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256
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—
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—
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1,105
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Interest expense
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(28,270
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)
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(9,852
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)
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1,705
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(2
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(1,283
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)
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(6
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)
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(37,700
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)
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Loss on derivatives
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(6,939
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)
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(1,719
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)
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(2,292
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)
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(1
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)
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—
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(10,950
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)
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Equity results from associated companies, including impairment
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(5,033
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)
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—
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(855
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)
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(1) and (2
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(48
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)
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(7
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)
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(5,936
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)
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Impairment loss on marketable securities
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(23,323
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)
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—
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—
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—
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(23,323
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)
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Bargain purchase gain arising on consolidation
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78,876
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—
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—
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(78,876
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)
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(8
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)
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—
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Other financial items
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(1,897
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)
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(70
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)
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557
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(1
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(75
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)
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(9
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)
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(1,485
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)
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Loss before income taxes
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(220,650
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)
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(20,093
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)
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2,115
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(2
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(83,330
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)
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(321,958
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)
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Income taxes
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(189
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—
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—
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—
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(189
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)
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Net loss
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$
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(220,839
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)
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(20,093
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)
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2,115
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(83,330
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)
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(322,147
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)
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Weighted-average number of common shares outstanding
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Basic and diluted
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151,217
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166,578
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Net loss per common share
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Basic and diluted
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$
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(1.46
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)
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(1.93
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)
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(amounts in thousands US$)
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Reclassifications(1)
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Adjustments(2)
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Total
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Depreciation
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—
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845
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845
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Other losses, net
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2,155
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—
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2,155
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Net operating loss
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2,155
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845
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3,000
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Interest expense
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—
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1,705
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1,705
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Loss on derivatives
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(2,292
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)
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—
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(2,292
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)
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Equity results from associated companies
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(420
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)
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(435
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)
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(855
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)
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Other financial items
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557
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—
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557
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Net earnings
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—
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2,115
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2,115
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· | Depreciation – has been reduced to reflect the reversal of depreciation expense recorded by the Former Golden Ocean in respect of previously capitalized dry dock costs, which are expensed as incurred by Golden Ocean. |
· | Interest expense - has been adjusted to reflect the fact that the Former Golden Ocean bi-furcated the convertible loan and the conversion option and recorded an equity element under IFRS whereas there would be no bifurcation of this equity element under U.S. GAAP. This resulted in the IFRS interest expense being $1.7 million higher than it would have been under U.S. GAAP. Golden Ocean has applied a straight-line amortization method for this element since this approximates the effective interest rate method. |
· | Equity results from associated companies – has been adjusted to reflect the fact that a 50% owned equity investee of the Former Golden Ocean capitalized dry docking costs as a separate component of the carrying value of its vessel and amortized this cost over its estimated useful life. Such costs are expensed as incurred by Golden Ocean and so dry docking costs, which have been capitalized in the period have been expensed and the amortization relating to dry docking costs has been reversed. |
1. | Time charter revenue – The fair value of favorable time charter-out contracts recognized as part of the purchase price allocation are being amortized on a straight line basis over the length of those contracts, except for a contract of affreightment which will be amortized to reflect when the economic benefit of the contract is received, for which the remaining contract lengths range from 10 months to 7.5 years, and amortization of $6.7 million has been recorded in the three months ended March 31, 2015. |
2. | Other income and voyage expenses and commissions – the Former Golden Ocean was the manager of Golden Ocean's dry bulk vessels and received a management fee equal to 1.25% of the gross freights earned by these vessels. This management fee has been eliminated from the combined pro forma statement of operations. |
3. | Charter hire expense – The fair value of unfavorable time charter-in contracts recognized as part of the purchase price allocation are being amortized on a straight line basis over the length of those contracts and amortization of $0.2 million has been recorded in the three months ended March 31, 2015. |
4. | Administration expenses – Legal and professional charges of $0.6 million incurred in connection with the merger have been excluded as they will not have a continuing impact on the consolidated results. |
5. | Depreciation – This adjustment comprises two elements: |
i. | The depreciation expense for owned vessels for the period has been reduced by $2.2 million as a consequence of the fair value adjustment to the carrying balance of vessels, for which the remaining estimated useful lives range from 7.5 years to 24 years, as part of the purchase price allocation, and |
ii. | The depreciation expense related to two vessels held under capital lease has been reduced by $0.7 million as a consequence of the fair value adjustment to the carrying balance of vessels held under capital lease as part of the purchase price allocation. The estimated useful lives of the capital lease assets were reconsidered in connection with the purchase price allocation adjustment. The estimated useful lives of the capital lease assets range from approximately two to six years. |
6. | Interest expense – This adjustment comprises four elements; |
i. | The interest expense related to the convertible bond has been increased by $2.3 million to reflect the effective interest based on an assessment of the fair value of the convertible bond. Management determined that the fair value of the $200.0 million convertible loan was $161.2 million based on the quoted trading price for the bond on March 31, 2015. The Company does not believe that the nominal interest rate on the convertible loan changed in its fair valuation and has calculated the additional interest expense in the three months ended March 31, 2015 to be $2.3 million based on the amortization of the difference in the fair valuation of the principal amount. |
ii. | Deferred charges relating to the convertible bond were eliminated and reflected in the fair value assessment of the bond. The Former Golden Ocean has recognized $0.1 million as amortization expense in connection with these deferred charges and so this amount is included as a reduction to interest expense. |
iii. | The interest expense related to two vessels held under capital lease has been reduced by $0.8 million as a consequence of the fair value adjustment related to the lease obligations as part of the purchase price allocation. The average implicit rate in these two leases has been reduced from approximately 8.5% to 7%. |
iv. | Deferred charges relating to the Former Golden Ocean's long-term debt, excluding the convertible bond, were eliminated and reflected in the fair value assessment of the debt. The Former Golden Ocean has recognized $0.1 million as amortization expense in connection with these deferred charges and so this amount is included as a reduction to interest expense. |
7 | Income from associated companies – The share of results from associated companies has been adjusted as a consequence of the purchase price allocation to investment in associated companies. |
8. | Bargain purchase gain - This is the bargain purchase gain that was recorded at the time of the merger on March 31, 2015 and is the amount by which the aggregate fair value of the assets acquired and the liabilities assumed exceeded the value of the consideration. |
9. | Other financial items – This adjustment comprises the amortization of a deferred gain arising on the sale-leaseback of a vessel which has been valued as $0. |
(number of shares in thousands)
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Golden
Ocean
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Former
Golden Ocean
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Pro Forma
Combined
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Basic and diluted
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151,217
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15,361
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166,578
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