Leases

9 Months Ended

Sep. 30, 2022

Time charter-in contracts

The Company has time charter-in contracts for Ultramax vessels which are greater than 12 months as of the lease commencement date. A description of each of these contracts is below:

(i) The Company entered into an agreement effective April 28, 2017, to charter-in a 61,400 dwt, 2013 built Japanese vessel for approximately four years with options for two additional years. The hire rate for the first four years is $12,800 per day

and the hire rate for the first optional year is $13,800 per day and $14,300 per day for the second optional year. In addition, the Company’s fair value below contract value of time charters acquired of $1.8 million as of December 31, 2018, which related to the unamortized value of a prior charter with the same counterparty that had been recorded at the time of the Company’s emergence from bankruptcy, was offset against the corresponding right of use asset on this lease as of January 1, 2019. On July 8, 2021, the Company exercised its option to extend the charter for another year at a hire rate of $13,800 per day and accordingly, the Company increased the lease liability and the corresponding right-of-use asset by $5.0 million to reflect the extended lease term. The discount rate utilized in the measurement of the lease liability and the corresponding right-of-use asset based on the Company's implied credit rating and the yield curve for debt as of July 8, 2021 was 1.36%. On June 16, 2022, the Company exercised its option to extend the charter for another year at a hire rate of $14,300 per day and accordingly, the Company increased the lease liability and the corresponding right-of-use asset by $5.1 million to reflect the extended lease term. The discount rate utilized in the measurement of the lease liability and the corresponding right-of-use asset based on the Company's implied credit rating and the yield curve for debt as of June 16, 2022 was 7.15%.

(ii) On May 4, 2018, the Company entered into an agreement to charter-in a 61,425 dwt 2013 built Ultramax vessel for three years with an option for an additional two years. The hire rate for the first three years is $12,700 per day and $13,750 per day for the first year option and $14,750 per day for the second year option. The Company took delivery of the vessel in the third quarter of 2018. During the second quarter of 2021, the Company decided to extend the lease term to its maximum redelivery date allowed under the charter party. Additionally, on June 28, 2021, the Company exercised its option to extend the charter for another year until October 19, 2022 at a hire rate of $13,750 per day and accordingly, the Company increased the lease liability and the corresponding right-of-use asset by $5.8 million to reflect the extended lease term. The discount rate utilized in the measurement of the lease liability and the corresponding right-of-use asset based on the Company's implied credit rating and the yield curve for debt as of June 28, 2021 was 1.34%. On September 15, 2022, the Company exercised its option to further extend the charter for eleven months at a hire rate of $14,750 per day and accordingly, the Company increased the lease liability and the corresponding right-of-use asset by $4.5 million to reflect the extended lease term. The discount rate utilized in the measurement of the lease liability and the corresponding right-of-use asset based on the Company's implied credit rating and the yield curve for debt as of September 15, 2022 was 6.54%.

(iii) On December 9, 2018, the Company entered into an agreement to charter-in a 62,487 dwt 2016 built Ultramax vessel for two years. The hire rate for the vessel until March 2020 was $14,250 per day and $15,250 per day thereafter. The Company took delivery of the vessel in the fourth quarter of 2018. On December 25, 2019, the Company renegotiated the lease terms for another year at a hire rate of $11,600 per day and accordingly, the Company increased its lease liability and the corresponding right-of-use asset by $4.5 million. During the first quarter of 2021, the Company decided to extend the lease term to its maximum redelivery date allowed under the charter party and accordingly, the Company increased its lease liability and the corresponding right-of-use asset by $1.0 million to reflect the change in lease term from minimum redelivery date to maximum redelivery date allowed under the charter party. On May 4, 2021, the Company exercised its option to extend the charter for another year until July 31, 2022 at a hire rate of $12,600 per day and accordingly, the Company increased the lease liability and the corresponding right-of-use asset by $4.3 million to reflect the extended lease term. The discount rate utilized in the measurement of the lease liability and the corresponding right-of-use asset based on the Company's implied credit rating and the yield curve for debt as of May 4, 2021 was 1.38%. On March 17, 2022, the Company further extended the lease to a minimum period of ten months and maximum period of twelve months with an option to further extend the lease for an additional minimum period of ten months and maximum period of twelve months and accordingly, the Company increased the lease liability and the corresponding right-of-use asset by $6.9 million to reflect the extended lease term. The discount rate utilized in the measurement of the lease liability and the corresponding right-of-use asset based on the Company's implied credit rating and the yield curve for debt as of March 17, 2022 was 4.48%.

(iv) On December 22, 2020, the Company entered into an agreement to charter-in a 63,634 dwt 2021 built Ultramax vessel for twelve months with an option for an additional three months at a hire rate of $5,900 per day plus 57% of the BSI 58 average of 10 time charter routes as published by the Baltic Exchange each business day. Additionally, following the initial fifteen month period the Company has an additional option to extend for a period of eleven to thirteen months at an increased rate of $6,500 per day with no change in the rest of the terms. Also, the Company shall share the scrubber benefit with the owners 50% calculated as the price differential between the high sulfur and low sulfur fuel oil based on actual bunker consumption during the lease period. On July 7, 2021, the Company took delivery of the vessel and recorded $9.1 million as lease liability and corresponding right-of-use asset. The discount rate utilized in the measurement of the lease liability and the corresponding right-of-use asset based on the Company's implied credit rating and the yield curve for debt as of July 7, 2021 was 1.33%. On May 17, 2022, the Company exercised its option to extend the charter for 11 months at a hire rate of $6,500 per day plus 57% of the BSI 58 average of 10 time charter routes as published by the Baltic Exchange each business day and accordingly, the Company increased the lease liability and the corresponding right-of-use asset by $7.5 million to reflect the extended lease term. The discount rate utilized in the measurement of the lease liability and the corresponding right-of-use asset based on the Company's

implied credit rating and the yield curve for debt as of May 17, 2022 was 5.825%.

(v) On September 6, 2021, the Company entered into an agreement to charter-in a 2021 built Ultramax vessel for a period of a minimum of twelve months and a maximum of fifteen months at a hire rate of $11,250 per day plus 57.5% of the BSI 58 average of 10 time charter routes published by the Baltic Exchange each business day. The Company has the option to extend the lease term for another year, during which time the fixed hire rate decreases to $10,750 per day with no change to the remaining terms. On May 17, 2022, the Company took delivery of the vessel and recorded $9.7 million as a lease liability and corresponding right-of-use asset. The discount rate utilized in the measurement of the lease liability and the corresponding right-of-use asset based on the Company's implied credit rating and the yield curve for debt as of May 17, 2022 was 5.825%.

Office leases

On October 15, 2015, the Company entered into a commercial lease agreement as a sublessee for office space in Stamford, Connecticut. The lease is effective from January 2016 through June 2023, with an average annual rent of $0.4 million. The lease is secured by cash collateral of $0.1 million which is recorded as Restricted cash - noncurrent in the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021. On September 30, 2022, the Company entered into a lease agreement as the principal tenant to lease the existing office space. The lease is effective from July 1, 2023 through December 31, 2028, with an average annual rent of $0.5 million. The Company recognized a lease liability and corresponding right-of-use asset of $2.2 million. The discount rate utilized in the measurement of the lease liability and the corresponding right-of-use asset based on the Company's implied credit rating as of September 30, 2022 was 8.97%.

In November 2018, the Company entered into an office lease agreement in Singapore, which was initially set to expire in October 2021, with an average annual rent of $0.3 million. On August 17, 2021, the Company renewed the lease on the existing office space for an additional 5 years with an average annual rent of $0.4 million and accordingly, the Company increased the lease liability and the corresponding right-of-use asset by $1.3 million to reflect the extended lease term. The discount rate utilized in the measurement of the lease liability and the corresponding right-of-use asset based on the Company's implied credit rating as of August 17, 2021 was 3.09%. Additionally, the Company entered into a new lease agreement for an additional office space in Singapore for 4.9 years beginning in the second quarter of 2022 with an average annual rent of $0.2 million. On February 15, 2022, the Company took possession of the additional office space and accordingly, the Company recognized a lease liability and corresponding right-of-use asset of $0.5 million. The discount rate utilized in the measurement of lease liability and the corresponding right-of-use asset based on the Company's implied credit rating and the yield curve for debt as of February 15, 2022 was 5.7%.

The Company determined the three office leases to be operating leases and recorded the lease expense as part of General and administrative expenses in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021.

Operating lease right-of-use assets and lease liabilities as of September 30, 2022 and December 31, 2021 are as follows:


Description	Location in Balance Sheet	September 30, 2022 (1)		December 31, 2021 (1)
Noncurrent assets:		(In thousands)
Chartered-in contracts greater than 12 months	Operating lease right-of-use assets	$	30,281	$	15,039
Office leases	Operating lease right-of-use assets	4,087		1,978
Operating lease right-of-use assets		$	34,368	$	17,017

Liabilities:
Chartered-in contracts greater than 12 months	Current portion of operating lease liabilities	$	29,989	$	15,039
Office leases	Current portion of operating lease liabilities	753		689
Lease liabilities - current portion		$	30,742	$	15,728

Chartered-in contracts greater than 12 months	Noncurrent portion of operating lease liabilities	$	293	$	—
Office leases	Noncurrent portion of operating lease liabilities	3,333		1,282
Lease liabilities - noncurrent portion		$	3,626	$	1,282

(1) The Operating lease right-of-use assets and Operating lease liabilities represent the present value of lease payments for the remaining term of the lease. The discount rates used ranged from 1.33% to 8.97%. The weighted average discount rate used to calculate the lease liability as of September 30, 2022 and December 31, 2021 was 5.9% and 1.7%, respectively.

The table below presents the components of the Company’s lease expenses and sublease income on a gross basis earned from chartered-in contracts greater than 12 months for the three and nine months ended September 30, 2022 and 2021:


(In thousands)		Three Months Ended				Nine Months Ended
Description	Location in Statement of Operations	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Lease expense for chartered-in contracts less than 12 months	Charter hire expenses	$	11,759	$	5,857	$	43,317	$	13,512
Lease expense for chartered-in contracts greater than 12 months	Charter hire expenses	8,013		4,867		20,451		11,862
	Total charter hire expenses	$	19,772	$	10,724	$	63,768	$	25,374

Lease expense for office leases	General and administrative expenses	$	216	$	189	$	625	$	465

Sublease income from chartered-in contracts greater than 12 months *	Revenues, net	$	8,402	$	7,550	$	25,072	$	14,303

* The sublease income represents only time charter revenue earned on time charter-in contracts with terms more than 12 months. There is additional revenue earned from voyage charters on the same chartered-in contracts which is recorded in Revenues, net in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021.

The cash paid for operating leases with terms greater than 12 months was $8.2 million and $21.1 million for the three and nine months ended September 30, 2022, respectively.

The cash paid for operating leases with terms greater than 12 months was $5.4 million and $12.2 million for the three and nine months ended September 30, 2021, respectively.

During the nine months ended September 30, 2022 and 2021, the Company obtained operating lease right-of-use assets of $39.0 million and $22.5 million, respectively, in exchange for operating lease liabilities.

The weighted average remaining lease term on our operating lease contracts greater than 12 months as of September 30, 2022 was 14.8 months.

The table below provides the total amount of remaining lease payments on an undiscounted basis on our chartered-in contracts and office leases greater than 12 months as of September 30, 2022:


Supplemental Disclosure Information	Chartered-in contracts greater than 12 months		Office leases		Total Operating leases
(In thousands)

Year:
Three months ending December 31, 2022	$	9,306	$	216	$	9,522
2023	21,651		869		22,520
2024	—		874		874
2025	—		871		871
2026	—		871		871
2027	—		574		574
2028	—		500		500
	$	30,957	$	4,775	$	35,732

Present value of lease liability:
Lease liabilities - short term	$	29,989	$	753	$	30,742
Lease liabilities - long term	293		3,333		3,626
Total lease liabilities	$	30,282	$	4,086	$	34,368

Discount based on incremental borrowing rate	$	675	$	689	$	1,364