UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
Republic of the | ||
(State or other jurisdiction of | (I.R.S. Employer |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of exchange on which registered |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Accelerated filer ◻ | Non-accelerated filer ◻ | Smaller reporting company | ||||||
Emerging growth company |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ⌧ No ◻
The number of shares outstanding of each of the issuer’s classes of common stock, as of May 3, 2023: Common stock, par value $0.01 per share —
Genco Shipping & Trading Limited
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Website Information
We intend to use our website, www.GencoShipping.com, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in our website’s Investor section. Accordingly, investors should monitor the Investor portion of our website, in addition to following our press releases, filings with the U.S. Securities and Exchange Commission (the “SEC”), public conference calls, and webcasts. To subscribe to our e-mail alert service, please submit your e-mail address at the Investor Relations Home page of the Investor section of our website. The information contained in, or that may be accessed through, our website is not incorporated by reference into or a part of this document or any other report or document we file with or furnish to the SEC, and any references to our website are intended to be inactive textual references only.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Genco Shipping & Trading Limited
Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022
(U.S. Dollars in thousands, except for share and per share data)
(Unaudited)
March 31, | December 31, | ||||||
| 2023 |
| 2022 |
| |||
|
|
| |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | | $ | | |||
Restricted cash |
| |
| | |||
Due from charterers, net of a reserve of $ |
| |
| | |||
Prepaid expenses and other current assets | | | |||||
Inventories | | | |||||
Fair value of derivative instruments | | | |||||
Total current assets |
| |
| | |||
Noncurrent assets: | |||||||
Vessels, net of accumulated depreciation of $ |
| |
| | |||
Deferred drydock, net of accumulated amortization of $ |
| |
| | |||
Fixed assets, net of accumulated depreciation and amortization of $ |
| |
| | |||
Operating lease right-of-use assets |
| |
| | |||
Restricted cash |
| |
| | |||
Fair value of derivative instruments |
| — |
| | |||
Total noncurrent assets |
| |
| | |||
Total assets | $ | | $ | | |||
Liabilities and Equity | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | | $ | | |||
Deferred revenue |
| |
| | |||
Current operating lease liabilities | | | |||||
Total current liabilities: |
| |
| | |||
Noncurrent liabilities: | |||||||
Long-term operating lease liabilities | | | |||||
Long-term debt, net of deferred financing costs of $ | | | |||||
Total noncurrent liabilities |
| |
| | |||
Total liabilities |
| |
| | |||
Commitments and contingencies | |||||||
Equity: | |||||||
Common stock, par value $ | | | |||||
Additional paid-in capital | | | |||||
Accumulated other comprehensive income |
| |
| | |||
Accumulated deficit |
| ( |
| ( | |||
Total Genco Shipping & Trading Limited shareholders’ equity |
| |
| | |||
Noncontrolling interest |
| |
| | |||
Total equity |
| |
| | |||
Total liabilities and equity | $ | | $ | |
See accompanying notes to Condensed Consolidated Financial Statements.
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Genco Shipping & Trading Limited
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022
(U.S. Dollars in Thousands, Except for Earnings Per Share and Share Data)
(Unaudited)
For the Three Months Ended | |||||||
March 31, | |||||||
| 2023 |
| 2022 |
| |||
Revenues: | |||||||
Voyage revenues | $ | | $ | | |||
Total revenues | |
| | ||||
Operating expenses: | |||||||
Voyage expenses | |
| | ||||
Vessel operating expenses | |
| | ||||
Charter hire expenses | | | |||||
General and administrative expenses (inclusive of nonvested stock amortization expense of $ | |
| | ||||
Technical management fees | | | |||||
Depreciation and amortization | |
| | ||||
Total operating expenses | |
| | ||||
Operating income | |
| | ||||
Other income (expense): | |||||||
Other (expense) income | ( |
| | ||||
Interest income | |
| | ||||
Interest expense | ( | ( | |||||
Other expense, net | ( |
| ( | ||||
Net income | | | |||||
Less: Net income attributable to noncontrolling interest | |
| | ||||
Net income attributable to Genco Shipping & Trading Limited | $ | | $ | | |||
Earnings per share-basic | $ | | $ | | |||
Earnings per share-diluted | $ | | $ | | |||
Weighted average common shares outstanding-basic | |
| | ||||
Weighted average common shares outstanding-diluted | |
| |
See accompanying notes to Condensed Consolidated Financial Statements.
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Genco Shipping & Trading Limited
Condensed Consolidated Statements of Comprehensive Income
For the Three Months Ended March 31, 2023 and 2022
(U.S. Dollars in Thousands)
(Unaudited)
For the Three Months Ended | |||||||
March 31, | |||||||
| 2023 |
| 2022 |
| |||
Net income | $ | |
| $ | | ||
Other comprehensive (loss) income | ( |
| | ||||
Comprehensive income | $ | | $ | | |||
Less: Comprehensive income attributable to noncontrolling interest | | | |||||
Comprehensive income attributable to Genco Shipping & Trading Limited | $ | |
| $ | |
See accompanying notes to Condensed Consolidated Financial Statements.
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Genco Shipping & Trading Limited
Condensed Consolidated Statements of Equity
For the Three Months Ended March 31, 2023 and 2022
(U.S. Dollars in Thousands)
Genco | ||||||||||||||||||||||
Shipping & | ||||||||||||||||||||||
Accumulated | Trading | |||||||||||||||||||||
Additional | Other | Limited | ||||||||||||||||||||
Common | Paid-in | Comprehensive | Accumulated | Shareholders' | Noncontrolling | |||||||||||||||||
| Stock |
| Capital |
| Income |
| Deficit |
| Equity |
| Interest |
| Total Equity | |||||||||
Balance — January 1, 2023 | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | | ||||||||
Net income | | | | |||||||||||||||||||
Other comprehensive loss | ( | ( | ( | |||||||||||||||||||
Issuance of shares due to vesting of RSUs and exercise of options | | ( | — | — | ||||||||||||||||||
Cash dividends declared ($ | ( | ( | ( | |||||||||||||||||||
Nonvested stock amortization | | | | |||||||||||||||||||
Balance — March 31, 2023 | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | | ||||||||
Genco | ||||||||||||||||||||||
Shipping & | ||||||||||||||||||||||
Accumulated | Trading | |||||||||||||||||||||
Additional | Other | Limited | ||||||||||||||||||||
Common | Paid-in | Comprehensive | Accumulated | Shareholders' | Noncontrolling | |||||||||||||||||
| Stock |
| Capital |
| Income |
| Deficit |
| Equity |
| Interest |
| Total Equity | |||||||||
Balance — January 1, 2022 | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | | ||||||||
Net income | | | | |||||||||||||||||||
Other comprehensive income | | | | |||||||||||||||||||
Issuance of shares due to vesting of RSUs and exercise of options | | ( | — | — | ||||||||||||||||||
Cash dividends declared ($ | ( | ( | ( | |||||||||||||||||||
Nonvested stock amortization | | | | |||||||||||||||||||
Balance — March 31, 2022 | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | |
See accompanying notes to Condensed Consolidated Financial Statements.
7
Genco Shipping & Trading Limited
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022
(U.S. Dollars in Thousands)
(Unaudited)
For the Three Months Ended | |||||||
March 31, | |||||||
| 2023 |
| 2022 |
| |||
Cash flows from operating activities: | |||||||
Net income |
| $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | |
| | ||||
Amortization of deferred financing costs | |
| | ||||
Right-of-use asset amortization | | | |||||
Amortization of nonvested stock compensation expense | |
| | ||||
Amortization of premium on derivative | | | |||||
Insurance proceeds for protection and indemnity claims | | | |||||
Change in assets and liabilities: | |||||||
Decrease in due from charterers | |
| | ||||
Increase in prepaid expenses and other current assets | ( |
| ( | ||||
(Increase) decrease in inventories | ( | | |||||
Decrease in accounts payable and accrued expenses | ( |
| ( | ||||
Increase in deferred revenue | |
| | ||||
Decrease in operating lease liabilities | ( | ( | |||||
Deferred drydock costs incurred | ( |
| ( | ||||
Net cash provided by operating activities | |
| | ||||
Cash flows from investing activities: | |||||||
Purchase of vessels and ballast water treatment systems, including deposits | ( |
| ( | ||||
Purchase of other fixed assets | ( |
| ( | ||||
Insurance proceeds for hull and machinery claims | | — | |||||
Net cash used in investing activities | ( |
| ( | ||||
Cash flows from financing activities: | |||||||
Repayments on the $450 Million Credit Facility | ( | ( | |||||
Cash dividends paid | ( | ( | |||||
Payment of deferred financing costs | — |
| ( | ||||
Net cash used in financing activities | ( |
| ( | ||||
Net decrease in cash, cash equivalents and restricted cash | ( |
| ( | ||||
Cash, cash equivalents and restricted cash at beginning of period | |
| | ||||
Cash, cash equivalents and restricted cash at end of period |
| $ | | $ | |
See accompanying notes to Condensed Consolidated Financial Statements.
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Genco Shipping & Trading Limited
(U.S. Dollars in Thousands, Except Per Share and Share Data)
Notes to Condensed Consolidated Financial Statements (unaudited)
1 - GENERAL INFORMATION
The accompanying Condensed Consolidated Financial Statements include the accounts of Genco Shipping & Trading Limited (“GS&T”) and its direct and indirect 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 and operates in
As of March 31, 2023, the Company’s fleet consisted of
During September 2021, the Company and Synergy Marine Pte. Ltd. (“Synergy”), a third party, formed a joint venture, GS Shipmanagement Pte. Ltd. (“GSSM”). GSSM is owned
Management has determined that GSSM qualifies as a variable interest entity, and, when aggregating the variable interest held by the Company and Synergy, the Company is the primary beneficiary as the Company has the ability to direct the activities that most significantly impact GSSM’s economic performance. Accordingly, the Company consolidates GSSM.
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
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”), and the rules and regulations of the SEC that apply to interim financial statements, including the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the disclosures and footnotes normally included in complete consolidated financial statements prepared in conformity with U.S. GAAP. They should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2022 Annual Report on Form 10-K, filed with the SEC on February 22, 2023 (the “2022 10-K”). The accompanying Condensed Consolidated Financial Statements include the accounts of GS&T and its direct and indirect wholly-owned subsidiaries and GSSM. All intercompany accounts and transactions have been eliminated in consolidation.
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. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the operating results to be expected for the year ending December 31, 2023.
Use of estimates
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, residual value of vessels, useful life of vessels, the fair value of time charters acquired, and the fair value of derivative instruments, if any. Actual results could differ from those estimates.
9
Cash, cash equivalents and restricted cash
The Company considers highly liquid investments, such as money market funds and certificates of deposit with an original maturity of three months or less at the time of purchase to be cash equivalents. Current and non-current restricted cash includes cash that is restricted pursuant to our credit facilities. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same amounts shown in the Condensed Consolidated Statements of Cash Flows:
March 31, | December 31, | ||||||
| 2023 |
| 2022 |
| |||
Cash and cash equivalents |
| $ | |
| $ | | |
Restricted cash - current | | | |||||
Restricted cash - noncurrent |
| |
| | |||
Cash, cash equivalents and restricted cash |
| $ | |
| $ | | |
Bunker swap and forward fuel purchase agreements
From time to time, the Company may enter into fuel hedge agreements with the objective of reducing the risk of the effect of changing fuel prices. The Company has entered into bunker swap agreements and forward fuel purchase agreements. The Company’s bunker swap agreements and forward fuel purchase agreements do not qualify for hedge accounting treatment; therefore, any unrealized or realized gains and losses are recorded in the Condensed Consolidated Statements of Operations. Derivatives are Level 2 instruments in the fair value hierarchy.
During the three months ended March 31, 2023 and 2022, the Company recorded $
The total fair value of the bunker swap agreements and forward fuel purchase agreements in an asset position as of March 31, 2023 and December 31, 2022 is $
Voyage expense recognition
In time charters and spot market-related time charters, operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. 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 and spot market-related time charters. 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 for certain time charter agreements where the inventory is subject to gains and losses. These differences in bunkers, including any lower of cost and net realizable value adjustments, resulted in a net (loss) gain of ($
10
3 - CASH FLOW INFORMATION
For the three months ended March 31, 2023, 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 $
For the three months ended March 31, 2022, 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 $
During the three months ended March 31, 2023 and 2022, cash paid for interest, net of amounts capitalized, was $
During the three months ended March 31, 2023 and 2022, any cash paid for income taxes was insignificant.
During the three months ended March 31, 2022, the Company reclassified $
On February 21, 2023, the Company issued
On February 23, 2022, the Company issued
Refer to Note 13 — Stock-Based Compensation for further information regarding the aforementioned restricted stock issuances.
Supplemental Condensed Consolidated Cash Flow information related to leases is as follows:
For the Three Months Ended | |||||||
March 31, | |||||||
2023 | 2022 | ||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||
Operating cash flows from operating leases | $ | | $ | |
4 - VESSEL ACQUISITIONS AND DISPOSITIONS
Vessel Acquisitions
On May 18, 2021, the Company entered into agreements to acquire
11
Capitalized interest expense associated with these newbuilding contracts for the three months ended March 31, 2023 and 2022 was $
Vessel Dispositions
As of March 31, 2023 and December 31, 2022, the Company recorded $
5 – EARNINGS PER SHARE
The computation of basic earnings per share is based on the weighted-average number of common shares outstanding during the reporting period. The computation of diluted earnings per share assumes the vesting of nonvested stock awards and the exercise of stock options (refer to Note 13 — 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.
The components of the denominator for the calculation of basic and diluted earnings per share are as follows:
For the Three Months Ended | |||||
March 31, | |||||
| 2023 |
| 2022 |
| |
Common shares outstanding, basic: | |||||
Weighted-average common shares outstanding, basic | |
| | ||
Common shares outstanding, diluted: | |||||
Weighted-average common shares outstanding, basic | |
| | ||
Dilutive effect of stock options | | | |||
Dilutive effect of restricted stock units | |
| | ||
Weighted-average common shares outstanding, diluted | |
| |
6 – RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2023 and 2022, the Company did not have any related party transactions.
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7 – DEBT
Long-term debt, net consists of the following:
March 31, | December 31, | ||||||
| 2023 |
| 2022 |
| |||
Principal amount |
| $ | |
| $ | | |
Less: Unamortized deferred financing costs |
| ( |
| ( | |||
Less: Current portion |
| — |
| — | |||
Long-term debt, net |
| $ | |
| $ | |
$
On August 3, 2021, the Company entered into the $
As of March 31, 2023, there was $
As of March 31, 2023, the Company was in compliance with all of the financial covenants under the $450 Million Credit Facility.
Interest rates
The following table sets forth the effective interest rate associated with the interest expense for the Company’s debt facilities noted above, including the cost associated with unused commitment fees, if applicable. The following table also includes the range of interest rates on the debt, excluding the impact of unused commitment fees, if applicable:
For the Three Months Ended | |||||
March 31, | |||||
2023 | 2022 | ||||
Effective Interest Rate | | % | | % | |
Range of Interest Rates (excluding unused commitment fees) | % | | % |
8 – DERIVATIVE INSTRUMENTS
The Company is exposed to interest rate risk on its floating rate debt. As of March 31, 2023, the Company had
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During the second quarter of 2022, based on the total outstanding debt under the $450 Million Credit Facility being below the total notional amount of the interest rate cap agreements, a portion of one of the interest rate cap agreements was dedesignated as a hedge. Subsequent gains and losses resulting from valuation adjustments on the dedesignated portion of the cap are recorded within interest expense. As the forecasted interest payments hedged are not remote of occurring, the amounts in AOCI as of the date of dedesignation will be recognized over the remaining original hedge period. During the three months ended March 31, 2023, the Company recorded a loss of $
The following table summarizes the interest rate cap agreements in place as of March 31, 2023.
Interest Rate Cap Detail | Notional Amount Outstanding | |||||||||
March 31, | ||||||||||
Trade date | Cap Rate | Start Date | End Date |
| 2023 | |||||
March 25, 2021 | | % | April 29, 2021 | March 28, 2024 | $ | | ||||
July 29, 2020 | | % | July 31, 2020 | December 29, 2023 | | |||||
$ | |
The Company records the fair value of the interest rate caps as Fair value of derivative instruments in the current and non-current asset section on its Condensed Consolidated Balance Sheets. The Company has elected to use the income approach to value the interest rate derivatives using observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single present amount (discounted) reflecting current market expectations about those future amounts. Level 2 inputs for derivative valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR cash and swap rates, implied volatility, basis swap adjustments, and credit risk at commonly quoted intervals). Mid-market pricing is used as a practical expedient for most fair value measurements.
The Company recorded a $
The Effect of Fair Value and Cash Flow Hedge Accounting on the Statements of Operations | |||||||
For the Three Months Ended March 31, | |||||||
2023 |
| 2022 |
| ||||
Interest Expense | Interest Expense | ||||||
Total amounts of income and expense line items presented in the statements of operations in which the effects of fair value or cash flow hedges are recorded | $ | | $ | | |||
The effects of fair value and cash flow hedging | |||||||
Gain or (loss) on cash flow hedging relationships in Subtopic 815-20: | |||||||
Interest contracts: | |||||||
Amount of gain or (loss) reclassified from AOCI to income | $ | ( | $ | — | |||
Premium excluded and recognized on an amortized basis | | | |||||
Amount of gain or (loss) reclassified from AOCI to income as a result that a forecasted transaction is no longer probable of occurring | — | — |
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The following table shows the interest rate cap assets as of March 31, 2023 and December 31, 2022:
March 31, | December 31, | ||||||||
Balance Sheet Location | 2023 | 2022 | |||||||
Derivatives designated as hedging instruments | |||||||||
Interest rate caps | Fair value of derivative instruments - current | $ | | $ | | ||||
Interest rate caps | Fair value of derivative instruments - noncurrent | $ | — | $ | | ||||
Derivatives not designated as hedging instruments | |||||||||
Interest rate caps | Fair value of derivative instruments - current | $ | | $ | | ||||
Interest rate caps | Fair value of derivative instruments - noncurrent | $ | — | $ | |
The components of AOCI included in the accompanying Condensed Consolidated Balance Sheet consists of net unrealized gains on cash flow hedges as of March 31, 2023.
AOCI — January 1, 2023 | $ | | ||
Amount recognized in OCI on derivative, intrinsic |
| ( | ||
Amount recognized in OCI on derivative, excluded |
| | ||
Amount reclassified from OCI into income |
| — | ||
AOCI — March 31, 2023 | $ | |
9 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values and carrying values of the Company’s financial instruments as of March 31, 2023 and December 31, 2022 which are required to be disclosed at fair value, but not recorded at fair value, are noted below.
March 31, 2023 | December 31, 2022 | ||||||||||||
| Carrying |
|
| Carrying |
|
| |||||||
| Value |
| Fair Value |
| Value |
| Fair Value |
| |||||
Cash and cash equivalents | $ | | $ | | $ | | $ | | |||||
Restricted cash |
| |
| |
| |
| | |||||
Principal amount of floating rate debt |
| |
| |
| |
| |
The carrying value of the borrowings under the $450 Million Credit Facility as of March 31, 2023 and December 31, 2022, which excludes the impact of deferred financing costs, approximate their fair value due to the variable interest nature thereof as this credit facility represents a floating rate loan. The carrying amounts of the Company’s other financial instruments as of March 31, 2023 and December 31, 2022 (principally Due from charterers and Accounts payable and accrued expenses) approximate fair values because of the relatively short maturity of these instruments.
ASC Subtopic 820-10, “Fair Value Measurements & Disclosures” (“ASC 820-10”), applies to all assets and liabilities that are being measured and reported on a fair value basis. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumption (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 requires significant management judgment. The three levels are defined as follows:
15
● | Level 1—Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these instruments does not entail a significant degree of judgment. |
● | Level 2—Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. |
● | Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
Cash and cash equivalents and restricted cash are considered Level 1 items, as they represent liquid assets with short-term maturities. Floating rate debt is considered to be a Level 2 item, as the Company considers the estimate of rates it could obtain for similar debt or based upon transactions amongst third parties. Interest rate cap agreements, bunker swap agreements and forward fuel purchase agreements are considered to be Level 2 items. Refer to Note 8 — Derivative Instruments and Note 2 — Summary of Significant Accounting Policies, respectively, for further information. Nonrecurring fair value measurements include vessel impairment assessments completed during the interim period and at year-end as determined based on third-party quotes, which are based on various data points, including comparable sales of similar vessels, which are Level 2 inputs. There was
The fair value determination for the operating lease right-of-use assets was based on third party quotes, which is considered a Level 2 input. Nonrecurring fair value measurements may include impairment tests of the Company’s operating lease right-of-use assets if there are indicators of impairments. During the three months ended March 31, 2023 and 2022, there were
The Company did not have any Level 3 financial assets or liabilities as of March 31, 2023 and December 31, 2022.
10 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
| March 31, |
| December 31, | ||||
| 2023 |
| 2022 |
| |||
Accounts payable | $ | | $ | | |||
Accrued general and administrative expenses |
| |
| | |||
Accrued vessel operating expenses |
| |
| | |||
Total accounts payable and accrued expenses | $ | | $ | |
11 – VOYAGE REVENUES
Total voyage revenues include revenue earned on fixed rate time charters, spot market voyage charters and spot market-related time charters, as well as the sale of bunkers consumed during short-term time charters. For the three months ended March 31, 2023 and 2022, the Company earned $
16
Total voyage revenues recognized in the Condensed Consolidated Statements of Operations includes the following:
For the Three Months Ended | |||||||
March 31, | |||||||
| 2023 |
| 2022 | ||||
Lease revenue | $ | | $ | | |||
Spot market voyage revenue | | | |||||
Total voyage revenues | $ | | $ | |
12 – LEASES
On June 14, 2019, the Company entered into a sublease agreement for a portion of the leased space for its main office in New York, New York that commenced on July 26, 2019 and will end on September 29, 2025. There was $
The Company charters in third-party vessels and the Company is the lessee in these agreements under ASC 842. The Company has elected the practical expedient under ASC 842 to not recognize right-of-use assets and lease liabilities for short-term leases. During the three months ended March 31, 2023 and 2022, all charter-in agreements for third-party vessels were less than twelve months and considered short-term leases.
13 – STOCK-BASED COMPENSATION
2015 Equity Incentive Plan
Stock Options
The following table summarizes the stock option activity for the three months ended March 31, 2023:
Weighted | Weighted | ||||||||||
Number | Average | Average | |||||||||
of | Exercise | Fair | |||||||||
| Options |
| Price |
| Value |
| |||||
Outstanding as of January 1, 2023 |
| |
| $ | | $ | | ||||
Granted |
| — | — | — | |||||||
Exercised |
| ( | | | |||||||
Forfeited |
| — | — | — | |||||||
Outstanding as of March 31, 2023 |
| |
| $ | | $ | | ||||
Exercisable as of March 31, 2023 |
| |
| $ | | $ | |
17
The following table summarizes certain information about the options outstanding as of March 31, 2023:
Options Outstanding and Unvested, | Options Outstanding and Exercisable, | |||||||||||||||
March 31, 2023 | March 31, 2023 | |||||||||||||||
Weighted | Weighted |
| Weighted | |||||||||||||
Average |
| Weighted | Average | Weighted | Average | |||||||||||
Exercise Price of |
| Average | Remaining | Average | Remaining | |||||||||||
Outstanding | Number of | Exercise | Contractual | Number of | Exercise | Contractual | ||||||||||
Options |
| Options |
| Price |
| Life |
| Options |
| Price |
| Life |
| |||
$ | |
| | $ | | | $ | |
As of March 31, 2023 and December 31, 2022, a total of
The unamortized stock-based compensation balance of $
For the three months ended March 31, 2023 and 2022, the Company recognized amortization expense of the fair value of its stock options, which is included in General and administrative expenses, as follows:
For the Three Months Ended | |||||||
March 31, | |||||||
2023 |
| 2022 |
| ||||
General and administrative expenses | $ | | $ | |
Restricted Stock Units
The Company has issued restricted stock units (“RSUs”) under the 2015 Plan to certain members of the Board of Directors and certain executives and employees of the Company, which represent the right to receive a share of common stock, or in the sole discretion of the Company’s Compensation Committee, the value of a share of common stock on the date that the RSU vests. As of March 31, 2023 and December 31, 2022,
The RSUs that have been issued to certain members of the Board of Directors generally vest on the date of the annual shareholders meeting of the Company following the date of the grant. In lieu of cash dividends issued for vested and nonvested shares held by certain members of the Board of Directors, the Company will grant additional vested and nonvested RSUs, respectively, which are calculated by dividing the amount of the dividend by the closing price per share of the Company’s common stock on the dividend payment date and will have the same terms as other RSUs issued to members of the Board of Directors. The RSUs that have been issued to other individuals vest ratably on each of the or
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Weighted | ||||||
Number of | Average Grant | |||||
| RSUs | Date Price | ||||
Outstanding as of January 1, 2023 | | $ | | |||
Granted | | | ||||
Vested | ( | | ||||
Forfeited | — | — | ||||
Outstanding as of March 31, 2023 | | $ | |
The total fair value of the RSUs that vested during the three months ended March 31, 2023 and 2022 was $
The following table summarizes certain information of the RSUs unvested and vested as of March 31, 2023:
Unvested RSUs | Vested RSUs | ||||||||||
March 31, 2023 | March 31, 2023 | ||||||||||
Weighted | |||||||||||
Weighted | Average | Weighted | |||||||||
Average | Remaining | Average | |||||||||
Number of | Grant Date | Contractual | Number of | Grant Date | |||||||
RSUs |
| Price |
| Life |
| RSUs |
| Price |
| ||
| $ | | | $ | |
The Company is amortizing these grants over the applicable vesting periods, net of anticipated forfeitures. As of March 31, 2023, unrecognized compensation cost of $
For the three months ended March 31, 2023 and 2022, the Company recognized nonvested stock amortization expense for the RSUs, which is included in General and administrative expenses as follows:
For the Three Months Ended | |||||||
March 31, | |||||||
| 2023 |
| 2022 |
| |||
General and administrative expenses | $ | | $ | |
14 – LEGAL PROCEEDINGS
On December 14, 2022, a sub-charterer of the Genco Constellation asserted a claim for monetary losses in connection with alleged delays of the loading of their cargo, short loading, or both at the port of Longkou, China. Hizone Group Co. Ltd (“Hizone”) had sub-chartered the vessel from SCM Cooperation Limited, which had subchartered the vessel from BG Shipping Co. Limited, which in turn had chartered the vessel from us. A dispute arose due to the need to restow the cargo to ensure the safety of the crew and the vessel. Following the vessel’s arrival at Tema Harbour in Ghana, Hizone petitioned the Superior Court of Judicature to have the vessel arrested in connection with a claim alleging damages. The petition was granted on December 14, 2022 and although Genco offered security to release the vessel shortly thereafter, the vessel was only released at the end of February 2023. Moreover, Hizone petitioned the Superior Court of Judicature to have the vessel arrested again on February 2, 2023 on an allegedly different claim. The vessel was not generating revenue while it was subject to arrest. The Company believes that these claims are without merit and has valid defenses against them and is vigorously defending them while continuing to seek reimbursement of damages arising from the arrest of the vessel, including the recovery of lost revenue while arrested and reimbursement of legal fees. The Company obtained security from BG Shipping Co. Limited and is in the process of arbitration proceedings.
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From time to time, the Company may be subject to other legal proceedings and claims in the ordinary course of its business, principally personal injury and property casualty claims. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. The Company is not aware of any such legal proceedings or claims that it believes will have, individually or in the aggregate, a material effect on the Company, its financial condition, results of operations or cash flows.
15 – SUBSEQUENT EVENTS
On April 3, 2023, the Company made a voluntary debt repayment of $
On April 3, 2023, the Company’s Board of Directors awarded a grant of
On April 14, 2023, the Company’s Board of Directors awarded grants of
On May 3, 2023, the Company announced a regular quarterly dividend of $
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
This report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements use words such as “anticipate,” “budget”, “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with a discussion of potential future events, circumstances or future operating or financial performance. These forward-looking statements are based on our management’s current expectations and observations. Included among the factors that, in our view, could cause actual results to differ materially from the forward looking statements contained in this report are the following: (i) declines or sustained weakness in demand in the drybulk shipping industry; (ii) weakness or declines in drybulk shipping rates; (iii) changes in the supply of or demand for drybulk products, generally or in particular regions; (iv) changes in the supply of drybulk carriers including newbuilding of vessels or lower than anticipated scrapping of older vessels; (v) changes in rules and regulations applicable to the cargo industry, including, without limitation, legislation adopted by international organizations or by individual countries and actions taken by regulatory authorities; (vi) increases in costs and expenses including but not limited to: crew wages, insurance, provisions, lube oil, bunkers, repairs, maintenance, general and administrative expenses, and management fee expenses; (vii) whether our insurance arrangements are adequate; (viii) changes in general domestic and international political conditions; (ix) acts of war, terrorism, or piracy, including without limitation the ongoing war in Ukraine; (x) changes in the condition of the Company’s vessels or applicable maintenance or regulatory standards (which may affect, among other things, our anticipated drydocking or maintenance and repair costs) and unanticipated drydock expenditures; (xi) the Company’s acquisition or disposition of vessels; (xii) the amount of offhire time needed to complete maintenance, repairs, and installation of equipment to comply with applicable regulations on vessels and the timing and amount of any reimbursement by our insurance carriers for insurance claims, including offhire days; (xiii) the completion of definitive documentation with respect to charters; (xiv) charterers’ compliance with the terms of their charters in the current market environment; (xv) the extent to which our operating results are affected by weakness in market conditions and freight and charter rates; (xvi) our ability to maintain contracts that are critical to our operation, to obtain and maintain acceptable terms with our vendors, customers and service providers and to retain key executives, managers and employees; (xvii) completion of documentation for vessel transactions and the performance of the terms thereof by buyers or sellers of vessels and us; (xviii) the relative cost and availability of low sulfur and high sulfur fuel, worldwide compliance with sulfur emissions regulations that took effect on January 1, 2020 and our ability to realize the economic benefits or recover the cost of the scrubbers we have installed; (xix) our financial results for the year ending December 31, 2023 and other factors relating to determination of the tax treatment of dividends we have declared; (xx) the financial results we achieve for each quarter that apply to the formula under our new dividend policy, including without limitation the actual amounts earned by our vessels and the amounts of various expenses we incur, as a significant decrease in such earnings or a significant increase in such expenses may affect our ability to carry out our new value strategy; (xxi) the exercise of the discretion of our Board regarding the declaration of dividends, including without limitation the amount that our Board determines to set aside for reserves under our dividend policy; (xxii) the duration and impact of the COVID-19 novel coronavirus epidemic, which may negatively affect general global and regional economic conditions, our ability to charter our vessels at all and the rates at which are able to do so; our ability to call on or depart from ports on a timely basis or at all; our ability to crew, maintain, and repair our vessels, including without limitation the impact diversion of our vessels to perform crew rotations may have on our revenues, expenses, and ability to consummate vessel sales, expense and disruption to our operations that may arise from the inability to rotate crews on schedule, and delay and added expense we may incur in rotating crews in the current environment; our ability to staff and maintain our headquarters and administrative operations; sources of cash and liquidity; our ability to sell vessels in the secondary market, including without limitation the compliance of purchasers and us with the terms of vessel sale contracts, and the prices at which vessels are sold; and other factors relevant to our business described from time to time in our filings with the Securities and Exchange Commission; and (xxiii) other factors listed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent reports on Form 8-K and Form 10-Q. Our ability to pay dividends in any period will depend upon various factors, including the limitations under any credit agreements to which we may be a party, applicable provisions of Marshall Islands law and the final determination by the Board of Directors each quarter after its review of our financial performance, market developments, and the best interests of the
21
Company and its shareholders. The timing and amount of dividends, if any, could also be affected by factors affecting cash flows, results of operations, required capital expenditures, or reserves. As a result, the amount of dividends actually paid may vary. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
The following management’s discussion and analysis should be read in conjunction with our historical consolidated financial statements and the related notes included in this Form 10-Q.
General
We are a New York City-based company incorporated in the Marshall Islands that transports iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes through the ownership and operation of drybulk carrier vessels. Our fleet currently consists of 44 drybulk vessels, including 17 Capesize drybulk carriers, 15 Ultramax drybulk carriers and twelve Supramax drybulk carriers, with an aggregate carrying capacity of approximately 4,635,000 deadweight tons (“dwt”) and an average age of approximately 11.2 years. We seek to deploy our vessels on time charters, spot market voyage charters, spot market-related time charters or in vessel pools trading in the spot market, to reputable charterers.
See pages 30 – 31 for a table of our current fleet.
Genco’s approach towards fleet composition is to own a high-quality fleet of vessels that focuses on Capesize, Ultramax and Supramax vessels. Capesize vessels represent our major bulk vessel category and the other vessel classes, including Ultramax and Supramax vessels, represent our minor bulk vessel category. Our major bulk vessels are primarily used to transport iron ore and coal, while our minor bulk vessels are primarily used to transport grains, steel products and other drybulk cargoes such as cement, scrap, fertilizer, bauxite, nickel ore, salt and sugar. This approach of owning ships that transport both major and minor bulk commodities provide us with exposure to a wide range of drybulk trade flows. We employ an active commercial strategy which consists of a global team located in the U.S., Copenhagen and Singapore. Overall, we utilize a portfolio approach to revenue generation through a combination of short-term, spot market employment as well as opportunistically booking longer term fixed-rate coverage. Our fleet deployment strategy is currently weighted towards short-term fixtures, which provides us with optionality on our sizeable fleet. However, depending on market conditions, we may seek to enter into additional longer term time charter contracts or contracts of affreightment. In addition to both short and long-term time charters, we fix our vessels on spot market voyage charters as well as spot market-related time charters depending on market conditions and management’s outlook.
Drawing on one of the strongest balance sheets in the drybulk industry, in April 2021 we announced a new comprehensive value strategy. This strategy is centered on three key pillars: compelling dividends, financial deleveraging and growth. During 2021, we executed this strategy by paying down $203 million of debt while expanding our core Ultramax fleet. Additionally, during 2022 and the first quarter of 2023, we have paid down an additional $83.8 million of debt, bringing our debt outstanding to $162.3 million, a 64% reduction from January 1, 2021. These actions have enabled us to further reduce our cash flow breakeven rate positioning us to pay sizeable quarterly dividends across diverse market environments. To support this strategy, in August 2021, we closed on a new $450 Million Credit Facility which we used to refinance our prior credit facilities, thereby increasing flexibility, improving key terms and lowering our cash flow breakeven rates. Within this facility is a significant revolving credit facility that we can utilize, of which $210.0 million is undrawn at March 31, 2023. The first quarterly dividend under our value strategy was paid during the first quarter of 2022 based on the financial results from the fourth quarter of 2021. Since the fourth quarter of 2021 though the first quarter of 2023, we have declared cumulative dividends under our value strategy of $3.39 per share.
In line with our value strategy, we will continue to focus on the following specific priorities for the remainder of 2023:
● | Pay attractive dividends to shareholders; |
● | Continue to pay down debt through voluntary prepayments from a combination of cash flow generation and cash on our balance sheet; and |
● | Opportunistically grow the fleet on a low levered basis |
22
IMO 2023 Compliance
In 2021, Genco initiated a comprehensive plan to comply with upcoming IMO regulations in 2023, namely the Energy Efficiency Existing Ship Index (“EEXI”) and the Carbon Intensity Indicator (“CII”) metrics, which call for a reduction in vessel greenhouse gas emissions. These metrics are intended to assess and measure the energy efficiency of all ships and these new regulations set required attainment values, with the goal of reducing the carbon intensity of international shipping.
We have invested and plan to continue to invest in energy conservation programs to install various energy-saving devices, or ESDs, high performance paint systems, upgrade propellers among other initiatives on select vessels in our fleet. We began installing these ESDs on certain ships that entered drydocking in 2022, and we will continue to invest in our fleet.
COVID-19
In March 2020, the World Health Organization (the “WHO”) declared the outbreak of a novel coronavirus strain, or COVID-19, to be a pandemic. The COVID-19 pandemic has had widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. Over the course of the pandemic, governments implemented measures in an effort to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, working from home, supply chain logistical changes, and closure of non-essential businesses. This led to a significant slowdown in overall economic activity levels globally and a decline in demand for certain of the raw materials that our vessels transport.
Drybulk shipping rates, and therefore our voyage revenues, depend to a significant degree on global economic activity levels and specifically, economic activity in China. As the world’s second largest economy, China is the largest importer of drybulk commodities globally, which drives demand for iron ore, coal and other cargoes we carry. In 2022, various regions in China experienced additional waves of COVID-19 outbreaks for which the government chose to reinstate lockdown measures as part of the country’s “zero tolerance” policy. This has resulted in a reduction in demand for steel products and other commodities we carry, as well as continued disruptions throughout the supply chain. As a result, China’s 2022 GDP growth target of around 5.5% was missed as the country’s GDP grew by 3%. Towards the end of 2022, the Chinese government began its pivot from its restrictive COVID policies, announcing various easing measures as well as support for the property sector. For 2023, the Chinese government has established a GDP growth target of around 5% while implementing various stimulus measures and pro-growth policies.
The outlook for China and the rest of the world remains uncertain and depends in part on the path of COVID-19 and measures taken by governments around the world in response to it. In 2021, spot rates for Capesize and Supramax vessels reached levels not seen since 2010, and these firm levels, particularly for Supramax vessels, continued into the first half of 2022 despite various seasonal factors. During the second half of 2022, rates declined from highs seen earlier in the year as China’s COVID-related lockdown measures intensified. After a seasonal decline in freight rates during the first quarter of 2023, Capesize and Supramax spot earnings began to rebound in March 2023 partially driven by China’s economic reopening. Global vaccination rates, vaccine effectiveness, and the onset of variants could impact the sustainability of any recovery in addition to drybulk specific seasonality described in further detail below.
As our vessels trade commodities globally, we have taken measures to safeguard our crew and work toward preventing the spread of COVID-19 or any transmissible disease. Genco enacts crew changes where permitted by regulations of the ports and of the country of origin of the mariners, in addition to strict protocols that safeguard our crews against COVID-19 exposure. Crew rotations have been steadily improving as port and travel restrictions globally have reduced. We continue to actively promote the health and safety of both on and off signing crew members.
The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including the duration and scope of the pandemic; governmental, business, and individuals’ actions in response to the pandemic; and the impact on economic activity, including the possibility of recession or financial market instability.
23
IMO 2020 Compliance
On October 27, 2016, the Marine Environment Protection Committee (“MEPC”) of the International Maritime Organization (“IMO”) announced the ratification of regulations mandating reduction in sulfur emissions from 3.5% currently to 0.5% as of the beginning of 2020 rather than pushing the deadline back to 2025. Accordingly, ships now have to reduce sulfur emissions, for which the principal solutions are the use of exhaust gas cleaning systems (“scrubbers”) or buying fuel with low sulfur content. If a vessel is not retrofitted with a scrubber, it will need to use low sulfur fuel, which is currently more expensive than standard marine fuel containing 3.5% sulfur content. Following an increase in fuel prices during 2021 coming off of 2020 lows, there was a further increase in fuel prices during the first half of 2022 due to oil supply disruptions as a result of the war in Ukraine. The price of fuel began to lower during the second half of 2022 and is expected to continue to decline during 2023.
In order to comply with regulations mandating a reduction in sulfur emissions from 3.5% to 0.5% as of the beginning of 2020, we have installed exhaust gas cleaning systems (“scrubbers”) on our 17 Capesize vessels. We will continue to evaluate all options to comply with IMO regulations. Our fuel costs and fuel inventories may increase as a result of these sulfur emission regulations. Low sulfur fuel is more expensive than standard marine fuel containing 3.5% sulfur content and may become more expensive or difficult to obtain as a result of increased demand. If the cost differential between low sulfur fuel and high sulfur fuel is significantly higher than anticipated, or if low sulfur fuel is not available at ports on certain trading routes, it may not be feasible or competitive to operate vessels on certain trading routes without installing scrubbers or without incurring deviation time to obtain compliant fuel. Conversely, if the cost differential between low sulfur fuel and high sulfur fuel is significantly lower than anticipated, or if regulations are passed negatively impacting the use of open-loop scrubbers, we may not realize the economic benefits or recover the cost of the scrubbers we have installed. In addition, a number of countries have imposed restrictions on the discharge of wash water from open loop scrubbers within their port limits. While there are no restrictions on using open loop scrubbers outside of port limits, any changes in these regulations or more stringent standards globally could impact the use of open loop scrubbers going forward.
Vessel Sales and Acquisitions
On May 18, 2021, we entered into agreements to acquire two 2022-built 61,000 dwt newbuilding Ultramax vessels from Dalian Cosco KHI Ship Engineering Co. Ltd. for a purchase price of $29.2 million each, which were renamed the Genco Mary and the Genco Laddey. The vessels were delivered on January 6, 2022, and we used cash on hand to finance the purchase.
We will continue to seek opportunities to renew our fleet going forward.
Our Operations
We report financial information and evaluate our operations by charter revenues and not by the length of ship employment for our customers, i.e., spot or time charters. Each of our vessels serves the same type of customer, has similar operations and maintenance requirements, operates in the same regulatory environment, and is subject to similar economic characteristics. Based on this, we have determined that we operate in one reportable segment in which we are engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels.
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Our management team and our other employees are responsible for the commercial and strategic management of our fleet. Commercial management includes the negotiation of charters for vessels, managing the mix of various types of charters, such as time charters, spot market voyage charters and spot market-related time charters, and monitoring the performance of our vessels under their charters. Strategic management includes locating, purchasing, financing and selling vessels. Technical management involves the day-to-day management of vessels, including performing routine maintenance, attending to vessel operations and arranging for crews and supplies. In September 2021, we entered into a joint venture named GS Shipmanagement Pte. Ltd. (“GSSM”) with Synergy Marine Pte. Ltd. (“Synergy”), one of our previous technical managers. GSSM currently provides the technical management to all 44 vessels in our fleet. GSSM aims to provide a unique and differentiated service to the management of our vessels. We expect this joint venture to increase visibility and control over our vessel operations, augment fleet-wide fuel efficiency to lower our carbon footprint through an advanced data platform and potentially provide vessel operating expense savings over time. Members of our New York City-based management team oversee the activities of GSSM.
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Factors Affecting Our Results of Operations
We believe that the following table reflects important measures for analyzing trends in our results of operations. The table reflects our ownership days, chartered-in days, available days, operating days, fleet utilization, TCE rates and daily vessel operating expenses for the three months ended March 31, 2023 and 2022 on a consolidated basis.
For the Three Months Ended |
| |||||||||||
March 31, | Increase |
| ||||||||||
| 2023 |
| 2022 |
| (Decrease) |
| % Change |
| ||||
Fleet Data: |
| |||||||||||
Ownership days (1) | ||||||||||||
Capesize |
| 1,530.0 | 1,530.0 | — |
| — | % | |||||
Ultramax |
| 1,350.0 | 1,339.9 | 10.1 |
| 0.8 | % | |||||
Supramax |
| 1,080.0 | 1,080.0 | — |
| — | % | |||||
Total |
| 3,960.0 | 3,949.9 | 10.1 |
| 0.3 | % | |||||
Chartered-in days (2) | ||||||||||||
Capesize | — | — | — | — | % | |||||||
Ultramax | 189.5 | 190.3 | (0.8) | (0.4) | % | |||||||
Supramax | 46.2 | 120.7 | (74.5) |
| (61.7) | % | ||||||
Total | 235.7 | 311.0 | (75.3) | (24.2) | % | |||||||
Available days (owned & chartered-in fleet) (3) | ||||||||||||
Capesize |
| 1,440.7 | 1,502.0 | (61.3) |
| (4.1) | % | |||||
Ultramax |
| 1,534.5 | 1,452.0 | 82.5 |
| 5.7 | % | |||||
Supramax |
| 1,089.1 | 1,123.8 | (34.7) |
| (3.1) | % | |||||
Total |
| 4,064.3 | 4,077.8 | (13.5) |
| (0.3) | % | |||||
Available days (owned fleet) (4) | ||||||||||||
Capesize | 1,440.7 | 1,502.0 | (61.3) |
| (4.1) | % | ||||||
Ultramax | 1,345.0 | 1,261.7 | 83.3 |
| 6.6 | % | ||||||
Supramax | 1,042.9 | 1,003.1 | 39.8 |
| 4.0 | % | ||||||
Total | 3,828.6 | 3,766.8 | 61.8 |
| 1.6 | % | ||||||
Operating days (5) | ||||||||||||
Capesize |
| 1,434.1 | 1,458.3 | (24.2) |
| (1.7) | % | |||||
Ultramax |
| 1,473.2 | 1,433.8 | 39.4 |
| 2.7 | % | |||||
Supramax |
| 1,072.0 | 1,071.6 | 0.4 |
| 0.0 | % | |||||
Total |
| 3,979.3 | 3,963.7 | 15.6 |
| 0.4 | % | |||||
Fleet utilization (6) | ||||||||||||
Capesize |
| 98.6 | % | 96.5 | % | 2.1 | % | 2.2 | % | |||
Ultramax |
| 95.7 | % | 95.0 | % | 0.7 | % | 0.7 | % | |||
Supramax |
| 95.4 | % | 90.8 | % | 4.6 | % | 5.1 | % | |||
Fleet average |
| 96.6 | % | 94.4 | % | 2.2 | % | 2.3 | % |
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For the Three Months Ended | ||||||||||||
March 31, | Increase | |||||||||||
| 2023 |
| 2022 |
| (Decrease) |
| % Change |
| ||||
Average Daily Results: | ||||||||||||
Time Charter Equivalent (7) | ||||||||||||
Capesize | $ | 15,929 | $ | 24,627 | $ | (8,698) |
| (35.3) | % | |||
Ultramax |
| 14,890 |
| 25,449 |
| (10,559) |
| (41.5) | % | |||
Supramax |
| 10,010 |
| 21,577 |
| (11,567) |
| (53.6) | % | |||
Fleet average |
| 13,947 |
| 24,093 |
| (10,146) |
| (42.1) | % | |||
Major bulk vessels | 15,929 | 24,627 | (8,698) | (35.3) | % | |||||||
Minor bulk vessels | 12,752 | 23,739 | (10,987) | (46.3) | % | |||||||
Daily vessel operating expenses (8) | ||||||||||||
Capesize | $ | 6,571 | $ | 6,616 | $ | (45) |
| (0.7) | % | |||
Ultramax |
| 5,559 |
| 6,115 |
| (556) |
| (9.1) | % | |||
Supramax |
| 6,329 |
| 8,028 |
| (1,699) |
| (21.2) | % | |||
Fleet average |
| 6,160 |
| 6,839 |
| (679) |
| (9.9) | % |
Definitions
In order to understand our discussion of our results of operations, it is important to understand the meaning of the following terms used in our analysis and the factors that influence our results of operations.
(1) Ownership days. We define ownership days as the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.
(2) Chartered-in days. We define chartered-in days as the aggregate number of days in a period during which we chartered-in third-party vessels.
(3) Available days (owned and chartered-in fleet). We define available days as the number of our ownership days and chartered-in days less the aggregate number of days that our vessels are off-hire due to familiarization upon acquisition, repairs or repairs under guarantee, vessel upgrades or special surveys. Companies in the shipping industry generally use available days to measure the number of days in a period during which vessels should be capable of generating revenues.
(4) Available days (owned fleet). We define available days for the owned fleet as available days less chartered-in days.
(5) Operating days. We define operating days as the number of our total available days in a period less the aggregate number of days that our vessels are off-hire due to unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
(6) Fleet utilization. We calculate fleet utilization as the number of our operating days during a period divided by the number of ownership days plus chartered-in days less drydocking days.
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(7) Time charter equivalent. We define time charter equivalent (“TCE”) rates as our voyage revenues less voyage expenses, charter-hire expenses and realized gains or losses on fuel hedges, divided by the number of the available days of our owned fleet during the period. TCE rate is a common shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charterhire rates for vessels on voyage charters are generally not expressed in per-day amounts while charterhire rates for vessels on time charters generally are expressed in such amounts.
Entire Fleet | Major Bulk | Minor Bulk |
| |||||||||||||||||
For the Three Months Ended | For the Three Months Ended | For the Three Months Ended | ||||||||||||||||||
March 31, | March 31, | March 31, | ||||||||||||||||||
| 2023 |
| 2022 | 2023 |
| 2022 | 2023 |
| 2022 |
| ||||||||||
Voyage revenues (in thousands) | $ | 94,391 | $ | 136,227 | $ | 39,620 | $ | 54,359 | $ | 54,771 | $ | 81,868 | ||||||||
Voyage expenses (in thousands) |
| 37,435 |
| 38,464 |
| 16,670 |
| 17,369 |
| 20,765 |
| 21,095 | ||||||||
Charter hire expenses (in thousands) | 3,664 | 7,638 | — | — | 3,664 | 7,638 | ||||||||||||||
Realized gain on fuel hedges (in thousands) | 108 | 629 | — | — | 108 | 629 | ||||||||||||||
| 53,400 |
| 90,754 |
| 22,950 |
| 36,990 |
| 30,450 |
| 53,764 | |||||||||
Total available days for owned fleet |
| 3,829 |
| 3,767 |
| 1,441 | 1,502 |
| 2,388 |
| 2,265 | |||||||||
Total TCE rate | $ | 13,947 | $ | 24,093 | $ | 15,929 | $ | 24,627 | $ | 12,752 | $ | 23,739 |
(8) Daily vessel operating expenses. We define daily vessel operating expenses to include crew wages and related costs, the cost of insurance expenses relating to repairs and maintenance (excluding drydocking), the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses. Daily vessel operating expenses are calculated by dividing vessel operating expenses by ownership days for the relevant period.
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Operating Data
The following tables represent the operating data for the three months ended March 31, 2023 and 2022 on a consolidated basis.
For the Three Months Ended |
| |||||||||||
March 31, |
| |||||||||||
| 2023 |
| 2022 |
| Change |
| % Change |
| ||||
(U.S. dollars in thousands, except for per share amounts) |
| |||||||||||
Revenue: | ||||||||||||
Voyage revenues |
| $ | 94,391 |
| $ | 136,227 |
| $ | (41,836) |
| (30.7) | % |
Total revenues |
| 94,391 |
| 136,227 |
| (41,836) |
| (30.7) | % | |||
Operating Expenses: | ||||||||||||
Voyage expenses |
| 37,435 |
| 38,464 |
| (1,029) |
| (2.7) | % | |||
Vessel operating expenses |
| 24,393 |
| 27,013 |
| (2,620) |
| (9.7) | % | |||
Charter hire expenses | 3,664 | 7,638 | (3,974) | (52.0) | % | |||||||
General and administrative expenses (inclusive of nonvested stock amortization expense of $1,559 and $690, respectively) |
| 7,750 |
| 6,043 |
| 1,707 |
| 28.2 | % | |||
Technical management fees | 762 | 917 | (155) | (16.9) | % | |||||||
Depreciation and amortization |
| 15,944 |
| 14,059 |
| 1,885 |
| 13.4 | % | |||
Total operating expenses |
| 89,948 |
| 94,134 |
| (4,186) |
| (4.4) | % | |||
Operating income |
| 4,443 |
| 42,093 |
| (37,650) |
| (89.4) | % | |||
Other expense, net |
| (1,583) |
| (228) |
| (1,355) |
| 594.3 | % | |||
Net income | $ | 2,860 | $ | 41,865 | $ | (39,005) |
| (93.2) | % | |||
Less: Net income attributable to noncontrolling interest |
| 226 |
| 176 |
| 50 |
| 28.4 | % | |||
Net income attributable to Genco Shipping & Trading Limited |
| $ | 2,634 |
| $ | 41,689 |
| $ | (39,055) |
| (93.7) | % |
Earnings per share - basic |
| $ | 0.06 |
| $ | 0.99 | $ | (0.93) |
| (93.9) | % | |
Earnings per share - diluted |
| $ | 0.06 |
| $ | 0.97 | $ | (0.91) |
| (93.8) | % | |
Weighted average common shares outstanding - basic |
| 42,632,059 |
| 42,166,106 |
| 465,953 |
| 1.1 | % | |||
Weighted average common shares outstanding - diluted |
| 43,097,362 |
| 42,867,349 |
| 230,013 |
| 0.5 | % | |||
EBITDA (1) |
| $ | 19,837 |
| $ | 57,973 |
| $ | (38,136) |
| (65.8) | % |
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(1) | EBITDA represents net income attributable to Genco Shipping & Trading Limited plus net interest expense, taxes and depreciation and amortization. EBITDA is included because it is used by management and certain investors as a measure of operating performance. EBITDA is used by analysts in the shipping industry as a common performance measure to compare results across peers. Our management uses EBITDA as a performance measure in our consolidated internal financial statements, and it is presented for review at our board meetings. We believe that EBITDA is useful to investors as the shipping industry is capital intensive which often results in significant depreciation and cost of financing. EBITDA presents investors with a measure in addition to net income to evaluate our performance prior to these costs. EBITDA is not an item recognized by U.S. GAAP (i.e., non-GAAP measure) and should not be considered as an alternative to net income, operating income or any other indicator of a company’s operating performance required by U.S. GAAP. EBITDA is not a measure of liquidity or cash flows as shown in our Condensed Consolidated Statements of Cash Flows. The definition of EBITDA used here may not be comparable to that used by other companies. The following table demonstrates our calculation of EBITDA and provides a reconciliation of EBITDA to net income attributable to Genco Shipping & Trading Limited for each of the periods presented above: |
| For the Three Months Ended |
| |||||
| March 31, |
| |||||
| 2023 |
| 2022 |
| |||
Net income attributable to Genco Shipping & Trading Limited | $ | 2,634 |
| $ | 41,689 | ||
Net interest expense |
| 1,259 |
| 2,225 | |||
Income tax expense |
| — |
| — | |||
Depreciation and amortization |
| 15,944 |
| 14,059 | |||
EBITDA (1) | $ | 19,837 |
| $ | 57,973 |
Results of Operations
The following tables set forth information about the current employment of the vessels in our fleet as of May 2, 2023:
| Year |
| Charter |
| |||
---|---|---|---|---|---|---|---|
Vessel |
| Built |
| Expiration(1) |
| Cash Daily Rate(2) |
|
Capesize Vessels | |||||||
Genco Augustus |
| 2007 |
| May 2023 |
| $14,000 | |
Genco Tiberius |
| 2007 |
| May 2023 |
| Voyage | |
Genco London |
| 2007 |
| July 2023 | $20,000 | ||
Genco Titus |
| 2007 |
| July 2023 | Voyage | ||
Genco Constantine |
| 2008 |
| June 2023 | Voyage | ||
Genco Hadrian |
| 2008 |
| May 2023 | $14,500 | ||
Genco Commodus |
| 2009 |
| May 2023 | Voyage | ||
Genco Maximus |
| 2009 |
| September 2023 | $27,500 | ||
Genco Claudius |
| 2010 |
| May 2023 | Voyage | ||
Genco Tiger |
| 2011 |
| July 2023 | Voyage | ||
Genco Lion |
| 2012 |
| May 2023 | $20,000 | ||
Baltic Bear |
| 2010 |
| May 2023 | Voyage | ||
Baltic Wolf |
| 2010 |
| June 2023 | $30,250 | ||
Genco Resolute | 2015 | February 2024 | 127% of BCI | ||||
Genco Endeavour | 2015 | January 2024 | 127% of BCI | ||||
Genco Defender | 2016 | April 2024 | 125% of BCI | ||||
Genco Liberty | 2016 | April 2023 | Voyage | ||||
Ultramax Vessels | |||||||
Baltic Hornet |
| 2014 |
| May 2023 | $24,000 | ||
Baltic Wasp |
| 2015 |
| June 2023 | $25,500 | ||
Baltic Scorpion |
| 2015 |
| June 2023 | $13,500 |
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| Year |
| Charter |
| |||
---|---|---|---|---|---|---|---|
Vessel |
| Built |
| Expiration(1) |
| Cash Daily Rate(2) |
|
Baltic Mantis |
| 2015 |
| June 2023 | $20,650 | ||
Genco Weatherly | 2014 | May 2023 | $20,000 | ||||
Genco Columbia | 2016 | May 2023 | $20,500 | ||||
Genco Magic | 2014 | June 2023 | Voyage | ||||
Genco Vigilant | 2015 | June 2023 | $19,000 | ||||
Genco Freedom | 2015 | June 2023 | $14,000 | ||||
Genco Enterprise | 2016 | June 2023 | $17,500 | ||||
Genco Constellation | 2017 | June 2023 | $21,000 | ||||
Genco Madeleine | 2014 | May 2023 | $14,000 | ||||
Genco Mayflower | 2017 | June 2023 | $20,000 | ||||
Genco Mary | 2022 | May 2023 | $15,000 | ||||
Genco Laddey | 2022 | June 2023 | $20,500 | ||||
Supramax Vessels | |||||||
Genco Predator |
| 2005 |
| May 2023 | $5,250 | ||
Genco Warrior |
| 2005 |
| April 2023 | Voyage | ||
Genco Hunter |
| 2007 |
| July 2023 | $11,000 | ||
Genco Aquitaine |
| 2009 |
| May 2023 | $12,750 | ||
Genco Ardennes |
| 2009 |
| May 2023 | Voyage | ||
Genco Auvergne |
| 2009 |
| May 2023 | Voyage | ||
Genco Bourgogne |
| 2010 |
| May 2023 | $13,750 | ||
Genco Brittany |
| 2010 |
| June 2023 | Voyage | ||
Genco Languedoc |
| 2010 |
| May 2023 | $14,750 | ||
Genco Picardy |
| 2005 |
| July 2023 | $23,100 | ||
Genco Pyrenees |
| 2010 |
| May 2023 | Voyage | ||
Genco Rhone |
| 2011 |
| May 2023 | Voyage |
(1) | The charter expiration dates presented represent the earliest dates that our charters may be terminated in the ordinary course. Under the terms of certain contracts, the charterer is entitled to extend the time charter from two to four months in order to complete the vessel's final voyage plus any time the vessel has been off-hire. |
(2) | Time charter rates presented are the gross daily charterhire rates before third-party brokerage commission generally ranging from 1.25% to 6.25%. In a time charter, the charterer is responsible for voyage expenses such as bunkers, port expenses, agents’ fees and canal dues. |
Three months ended March 31, 2023 compared to the three months ended March 31, 2022
VOYAGE REVENUES-
For the three months ended March 31, 2023, voyage revenues decreased by $41.8 million, or 30.7%, to $94.4 million as compared to $136.2 million for the three months ended March 31, 2022. The decrease in voyage revenues was primarily due to lower rates earned by our major and minor bulk vessels. In the first quarter of 2023, spot freight rates softened due to various seasonal factors including the timing of the Chinese New Year, timing of frontloaded newbuilding deliveries, as well as a decline in cargo volumes due to maintenance and poor weather conditions in various export regions. Towards the end of the first quarter of 2023, the freight market began to strengthen, driven by the subsiding of a portion of these factors as well as China’s continued economic reopening.
The average TCE rate of our overall fleet decreased 42.1% to $13,947 a day during the first quarter of 2023 from $24,093 a day during the first quarter of 2022. The TCE for our major bulk vessels decreased by 35.3% from $24,627 a day during the first quarter of 2022 to $15,929 a day during the first quarter of 2023. This decrease was primarily a result of lower rates achieved by our Capesize vessels. The TCE for our minor bulk vessels decreased by 46.3% from $23,739 a day during the first quarter of 2022 to $12,752 a day during the first quarter of 2023 primarily a result of lower rates achieved by our Supramax vessels.
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Fleet utilization increased from 94.4% during the first quarter of 2022 to 96.6% during the first quarter of 2023 primarily due to additional repair periods for our Supramax vessels during the first quarter of 2022.
VOYAGE EXPENSES-
In time charters and spot market-related time charters, operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. These expenses are borne by the Company during spot market voyage charters. There are certain other non-specified voyage expenses such as commissions, which are typically borne by us. Voyage expenses include port and canal charges, fuel (bunker) expenses and brokerage commissions payable to unaffiliated third parties. Port and canal charges and bunker expenses primarily increase in periods during which vessels are employed on spot market voyage charters because these expenses are for the account of the vessel owner. At the inception of a time charter, we record 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. Voyage expenses also include the cost of bunkers consumed during short-term time charters pursuant to the terms of the time charter agreement. Additionally, we may record lower of cost and net realizable value adjustments to re-value the bunker fuel on a quarterly basis for certain time charter agreements where the inventory is subject to gains and losses. Refer to Note 2 — Summary of Significant Accounting Policies in our Condensed Consolidated Financial Statements.
Voyage expenses were $37.4 million and $38.5 million during the three months ended March 31, 2023 and 2022, respectively. This decrease was primarily due to lower bunker consumption for our major bulk vessels.
VESSEL OPERATING EXPENSES-
Vessel operating expenses decreased by $2.6 million from $27.0 million during the three months ended March 31, 2022 to $24.4 million during the three months ended March 31, 2023. The decrease was primarily due to lower COVID-19 related expenses.
Average daily vessel operating expenses (“DVOE”) for our fleet decreased to $6,160 per vessel per day for the three months ended March 31, 2023 from $6,839 per day for the three months ended March 31, 2022. The decrease in daily vessel operating expense was primarily due to lower COVID-19 related expenses, as well as reduced repair and maintenance costs. We experienced those higher costs last year as we completed the transition of vessels to our new technical management joint venture through the first half of 2022. We believe daily vessel operating expenses are best measured for comparative purposes over a 12-month period in order to take into account all of the expenses that each vessel in our fleet will incur over a full year of operation. Our actual daily vessel operating expenses per vessel for the three months ended March 31, 2023 were $90 below the first quarter 2023 budget of $6,250 per vessel per day.
Based on estimates provided by GSSM, our DVOE budget for the second quarter of 2023 is $6,250 per vessel per day on a fleet-wide basis, which includes an estimated amount for COVID-19 related expenses. For the remainder of 2023, we expect our DVOE budget to be $5,990 per vessel per day. We expect higher costs during the second quarter of 2022 due to the timing of crew changes and the timing of the purchase of stores and spare parts. We anticipate such costs will decrease over the course of the year. The potential impacts of the war in Ukraine and COVID-19 are unpredictable, and the actual amount of our DVOE could be higher or lower than budgeted as a result.
COVID-19 restrictions with regard to crew rotations have previously resulted in increased crew related costs due to travel and port restrictions and could do so in the future. The timing of crew rotations depends on the duration and severity of COVID-19 in countries from which our crews are sourced as well as any restrictions in place at ports in which our vessels call. As a result, crew rotations may lead to deviation time of our vessels as well as unbudgeted expenses due to testing, personal protective equipment, quarantine periods, higher than normal travel expenses due to increased airfare costs, and crew bonuses to retain the existing crew during rotation delays.
32
Our vessel operating expenses increase to the extent our fleet expands. Other factors beyond our control, some of which may affect the shipping industry in general, including, for instance, developments relating to market prices for crewing, lubes, and insurance, may also cause these expenses to increase. The impact of COVID-19 could result in potential shortages or a lack of access to required spare parts for the operation of our vessels, potential delays in any unscheduled repairs, deviations for crew changes or increased costs to successfully execute a crew change, which could lead to business disruptions and delays. Crew costs on our vessels could increase in the future due to higher wages, the potential impact of the war in Ukraine and COVID-19 restrictions.
CHARTER HIRE EXPENSES-
Charter hire expenses decreased by $4.0 million from $7.6 million during the three months ended March 31, 2022 to $3.7 million during the three months ended March 31, 2023. The decrease was primarily due to lower charter-in hire rates as well as a decrease in chartered-in days.
GENERAL AND ADMINISTRATIVE EXPENSES-
We incur general and administrative expenses that relate to our onshore non-vessel-related activities. Our general and administrative expenses include our payroll expenses, including those relating to our executive officers, operating lease expense, legal, auditing and other professional expenses. General and administrative expenses include nonvested stock amortization expense which represent the amortization of stock-based compensation that has been issued to our Directors and employees pursuant to the 2015 Equity Incentive Plan. Refer to Note 13 — Stock-Based Compensation in our Condensed Consolidated Financial Statements. General and administrative expenses also include legal and professional fees associated with our credit facilities, which are not capitalizable to deferred financing costs. We also incur general and administrative expenses for our overseas offices located in Singapore and Copenhagen.
For the three months ended March 31, 2023 and 2022, general and administrative expenses were $7.8 million and $6.0 million, respectively. The increase was primarily due to higher nonvested stock amortization expense as well as higher legal and professional fees.
TECHNICAL MANAGEMENT FEES-
Technical management fees include the direct costs incurred by GSSM for the technical management of the vessels under its management. Additionally, prior to the transfer of our vessels to GSSM for technical management, we incurred management fees payable to third party technical management companies for the day-to-day management of our vessels, including performing routine maintenance, attending to vessel operations and arranging for crews and supplies. Technical management fees did not fluctuate significantly and were $0.8 million and $0.9 million during the three months ended March 31, 2023 and 2022, respectively.
DEPRECIATION AND AMORTIZATION-
Depreciation and amortization expense increased by $1.9 million to $15.9 million during the three months ended March 31, 2023 as compared to $14.1 million during the three months ended March 31, 2022. This increase was primarily due to an increase in drydocking amortization expense for the major bulk vessels that completed their respective drydockings during the second quarter of 2022 through the first quarter of 2023.
OTHER INCOME (EXPENSE)-
NET INTEREST EXPENSE –
Net interest expense decreased by $1.0 million from $2.2 million during the three months ended March 31, 2022 to $1.3 million during the three months ended March 31, 2023. Net interest expense during the three months ended March 31, 2023 and 2022 consisted primarily of interest expense under our credit facilities and amortization of deferred financing costs for those facilities. This decrease was primarily due to higher interest income earned on our time deposits.
33
OTHER (EXPENSE) INCOME –
Other (expense) income fluctuated by $2.3 million from $2.0 million of other income during the three months ended March 31, 2022 to $0.3 million of other expense during the three months ended March 31, 2023. The fluctuation was primarily due to a change in the realized and unrealized gains (losses) related to our bunker swap and forward fuel purchase agreements as a result of the decreasing prices of fuel during the first quarter of 2023.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash flow from operations, cash on hand, equity offerings and credit facility borrowings. We currently use our funds primarily for the acquisition of vessels, fleet renewal, drydocking for our vessels, payment of dividends, debt repayments and satisfying working capital requirements as may be needed to support our business. Our ability to continue to meet our liquidity needs is subject to and will be affected by cash utilized in operations, the economic or business environment in which we operate, shipping industry conditions, the financial condition of our customers, vendors and service providers, our ability to comply with the financial and other covenants of our indebtedness, and other factors.
We believe, given our current cash holdings, if drybulk shipping rates do not decline significantly from current levels, our capital resources, including cash anticipated to be generated within the year, are sufficient to fund our operations for at least the next twelve months. Such resources include unrestricted cash and cash equivalents of $44.4 million as of March 31, 2023 in addition to the $210.0 million availability under the revolver of the $450 Million Credit Facility as of March 31, 2023, which compares to a minimum liquidity requirement under our credit facility of approximately $22 million as of the date of this report. Given anticipated capital expenditures related to drydockings and fuel efficiency upgrade costs of $8.9 million and $23.4 million during the remainder of 2023 and 2024, respectively, as well as any quarterly dividend payments, we anticipate to continue to have significant cash expenditures. Refer to “Capital Expenditures” below for further details. However, if market conditions were to worsen significantly due to the war in Ukraine, COVID-19, or other causes, then our cash resources may decline to a level that may put at risk our ability to pay dividends per our capital allocation strategy or at all. Throughout 2022 and the first quarter of 2023, the Company made a total of $83.8 million of voluntary debt prepayments, resulting in a reduced cash flow breakeven rate from previous levels. Of that amount, there were five $8.8 million quarterly repayments that represented the previously announced quarterly debt reduction payment as part of our plan to reduce our debt. These amounts were deducted from operating cash flows in each of our quarterly 2022 and first quarter 2023 dividend payment calculation. The remainder of the debt we paid down included $40.0 million which was prepaid to optimize our working capital management, using our revolver to keep funds available while saving interest expense. Currently, there are no mandatory debt repayments until we must repay $162.3 million in 2026. Although we do not have any mandatory debt repayments until 2026, we intend to continue to pay down debt on a voluntary basis with a medium term goal of zero net debt.
As of March 31, 2023, the $450 Million Credit Facility contained collateral maintenance covenants that require the aggregate appraised value of collateral vessels to be at least 140% of the principal amount of the loan outstanding under such facility. If the values of our vessels were to decline as a result of COVID-19 or otherwise, we may not satisfy this collateral maintenance requirement. If we do not satisfy the collateral maintenance requirement, we will need to post additional collateral or prepay outstanding loans to bring us back into compliance, or we will need to seek waivers, which may not be available or may be subject to conditions.
34
In the future, we may require capital to fund acquisitions or to improve or support our ongoing operations and debt structure, particularly in light of economic conditions resulting from the ongoing COVID-19 pandemic. We may from time to time seek to raise additional capital through equity or debt offerings, selling vessels or other assets, pursuing strategic opportunities, or otherwise. We may also from time to time seek to incur additional debt financing from private or public sector sources, refinance our indebtedness or obtain waivers or modifications to our credit agreements to obtain more favorable terms, enhance flexibility in conducting our business, or otherwise. We may also seek to manage our interest rate exposure through hedging transactions. We may seek to accomplish any of these independently or in conjunction with one or more of these actions. However, if market conditions are unfavorable, we may be unable to accomplish any of the foregoing on acceptable terms or at all.
On November 8, 2022, we entered into an agreement with the lenders under the $450 Million Credit Facility to extend the 360-day period for which we may set aside net proceeds from the sale of the Genco Provence to finance a qualifying replacement vessel until October 28, 2023.
As of March 31, 2023, we were in compliance with all financial covenants under the $450 Million Credit facility.
Dividends
We disclosed on April 19, 2021 that, on management’s recommendation, our Board of Directors adopted a new quarterly dividend policy for dividends payable which commenced in the first quarter of 2022 in respect of our financial results for the fourth quarter of 2021. Under the quarterly dividend policy, the amount available for quarterly dividends is to be calculated based on the following formula:
Operating cash flow
Less: Debt repayments
Less: Capital expenditures for drydocking
Less: Reserve
Cash flow distributable as dividends
The amount of dividends payable under the foregoing formula for each quarter of the year will be determined on a quarterly basis.
For purposes of the foregoing calculation, operating cash flow is defined as voyage revenue less voyage expenses, charter hire expenses, realized gains or losses on fuel hedges, vessel operating expenses, general and administrative expenses other than non-cash restricted stock expenses, technical management fees, and interest expense other than non-cash deferred financing costs. Anticipated uses for the reserve include, but are not limited to, vessel acquisitions, debt repayments, and general corporate purposes. In order to set aside funds for these purposes, the reserve will be set on a quarterly basis in the discretion of our Board and is anticipated to be based on future quarterly debt repayments and interest expense.
On May 3, 2023, we announced a quarterly dividend of $0.15 per share. Our quarterly dividend policy and declaration and payment of dividends are subject to legally available funds, compliance with applicable law and contractual obligations (including our credit facilities) and our Board’s determination that each declaration and payment is at that time in the best interests of the Company and its shareholders after its review of our financial performance.
In connection with our new dividend policy, we have paid down additional indebtedness under our credit facilities and utilized the $450 Million Credit Facility to refinance our two prior credit facilities as noted above.
35
The declaration and payment of any dividend or any stock repurchase is subject to the discretion of our Board of Directors. Our Board of Directors and management continue to closely monitor market developments together with the evaluation of our quarterly dividend policy in the current market environment. The principal business factors that our Board of Directors expects to consider when determining the timing and amount of dividend payments or stock repurchases include our earnings, financial condition, and cash requirements at the time. Marshall Islands law generally prohibits the declaration and payment of dividends or stock repurchases other than from surplus. Marshall Islands law also prohibits the declaration and payment of dividends or stock repurchases while a company is insolvent or would be rendered insolvent by the payment of such a dividend or such a stock repurchase. Heightened economic uncertainty and the potential for renewed drybulk market weakness as a result of the war in Ukraine or the COVID-19 pandemic and economic conditions related to these events may result in our suspension, reduction, or termination of future quarterly dividends.
U.S. Federal Income Tax Treatment of Dividends
U.S. Holders
For purposes of this discussion, the term "U.S. Holder" means a beneficial owner of our common stock that is, for U.S. federal income tax purposes, (i) an individual U.S. citizen or resident, (ii) a corporation that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia, or any other U.S. entity taxable as a corporation, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust if either (x) a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (y) the trust has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person. If a partnership, or an entity treated for U.S. federal income tax purposes as a partnership, such as a limited liability company, holds common stock, the tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership. If you are a partner in such a partnership holding our common stock, you are encouraged to consult your tax advisor. A beneficial owner of our common stock (other than a partnership) that is not a U.S. Holder is referred to below as a "Non-U.S. Holder."
Subject to the discussion of passive foreign investment company (PFIC) status on pages 35 – 36 in the 2022 10-K, any distributions made by us to a U.S. Holder with respect to our common shares generally will constitute dividends to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of those earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder's tax basis in our common shares (determined on a share-by-share basis), and thereafter as capital gain. U.S. Holders that own at least 10% of our shares may be able to claim a dividends-received-deduction and should consult their tax advisors.
Dividends paid on our common shares to a U.S. Holder who is an individual, trust or estate, or a "non-corporate U.S. Holder," will generally be treated as "qualified dividend income" that is taxable to such non-corporate U.S. Holder at preferential tax rates, provided that (1) our common shares are readily tradable on an established securities market in the United States (such as the NYSE, on which our common shares are traded); (2) we are not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (which we do not believe we have been, are, or will be); (3) the non-corporate U.S. Holder's holding period of our common shares includes more than 60 days in the 121-day period beginning 60 days before the date on which our common shares becomes ex-dividend; and (4) the non-corporate U.S. Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. A non-corporate U.S. Holder will be able to take qualified dividend income into account in determining its deductible investment interest (which is generally limited to its net investment income) only if it elects to do so; in such case, the dividend will be taxed at ordinary income rates. Non-corporate U.S. Holders also may be required to pay a 3.8% surtax on all or part of such holder's "net investment income," which includes, among other items, dividends on our shares, subject to certain limitations and exceptions. Investors are encouraged to consult their own tax advisors regarding the effect, if any, of this surtax on their ownership of our shares.
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Amounts taxable as dividends generally will be treated as passive income from sources outside the U.S. However, if (a) we are 50% or more owned, by vote or value, by U.S. Holders and (b) at least 10% of our earnings and profits are attributable to sources within the U.S., then for foreign tax credit purposes, a portion of our dividends would be treated as derived from sources within the U.S. With respect to any dividend paid for any taxable year, the U.S. source ratio of our dividends for foreign tax credit purposes would be equal to the portion of our earnings and profits from sources within the U.S. for such taxable year divided by the total amount of our earnings and profits for such taxable year. The rules related to U.S. foreign tax credits are complex and U.S. Holders should consult their tax advisors to determine whether and to what extent a credit would be available.
Special rules may apply to any "extraordinary dividend" — generally, a dividend in an amount which is equal to or in excess of 10% of a shareholder's adjusted basis (or fair market value in certain circumstances) in a share of our common shares — paid by us. If we pay an "extraordinary dividend" on our common shares that is treated as "qualified dividend income", then any loss derived by a non-corporate U.S. Holder from the sale or exchange of such common shares will be treated as long-term capital loss to the extent of such dividend.
Tax Consequences if We Are a Passive Foreign Investment Company
As discussed in “U.S. tax authorities could treat us as a “passive foreign investment company,” which could have adverse U.S. federal income tax consequences to U.S. shareholders” in Item 1.A Risk Factors in our 2022 10-K, a foreign corporation generally will be treated as a PFIC for U.S. federal income tax purposes if, after applying certain look through rules, either (1) at least 75% of its gross income for any taxable year consists of “passive income” or (2) at least 50% of the average value or adjusted bases of its assets (determined on a quarterly basis) produce or are held for the production of passive income, i.e., “passive assets.” As discussed above, we do not believe that our past or existing operations would cause, or would have caused, us to be deemed a PFIC with respect to any taxable year. No assurance can be given that the IRS or a court of law will accept our position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, there can be no assurance that we will not become a PFIC in any future taxable year because the PFIC test is an annual test, there are uncertainties in the application of the PFIC rules, and although we intend to manage our business so as to avoid PFIC status to the extent consistent with our other business goals, there could be changes in the nature and extent of our operations in future taxable years.
If we were to be treated as a PFIC for any taxable year in which a U.S. Holder owns shares of our common stock (and regardless of whether we remain a PFIC for subsequent taxable years), the tax consequences to such a U.S. holder upon the receipt of distributions in respect of such shares that are treated as “excess distributions” would differ from those described above. In general, an excess distribution is the amount of distributions received during a taxable year that exceed 125% of the average amount of distributions received by a U.S. Holder in respect of the common shares during the preceding three taxable years, or if shorter, during the U.S. Holder’s holding period prior to the taxable year of the distribution. The distributions that are excess distributions would be allocated ratably over the U.S. Holder’s holding period for the common shares. The amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we were a PFIC would be taxed as ordinary income. The amount allocated to each of the other taxable years would be subject to tax at the highest marginal rate in effect for the U.S. Holder for that taxable year, and an interest charge for the deemed deferral benefit would be imposed on the resulting tax allocated to such other taxable years. The tax liability with respect to the amount allocated to taxable years prior to the year of the distribution cannot be offset by net operating losses. As an alternative to such tax treatment, a U.S. Holder may make a “qualified electing fund” election or “mark to market” election, to the extent available, in which event different rules would apply. The U.S. federal income tax consequences to a U.S. Holder if we were to be classified as a PFIC are complex. A U.S. Holder should consult with his or her own advisor with regard to those consequences, as well as with regard to whether he or she is eligible to and should make either of the elections described above.
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Non-U.S. Holders
Non-U.S. Holders generally will not be subject to U.S. federal income tax on dividends received from us on our common shares unless the income is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States (“effectively connected income”) (and, if an applicable income tax treaty so provides, the dividends are attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.). Effectively connected income (or, if an income tax treaty applies, income attributable to a permanent establishment maintained in the U.S.) generally will be subject to regular U.S. federal income tax in the same manner discussed above relating to taxation of U.S. Holders. In addition, earnings and profits of a corporate Non-U.S. Holder that are attributable to such income, as determined after allowance for certain adjustments, may be subject to an additional branch profits tax at a rate of 30%, or at a lower rate as may be specified by an applicable income tax treaty. Non-U.S. Holders may be subject to tax in jurisdictions other than the United States on dividends received from us on our common shares.
Dividends paid on our common shares to a non-corporate U.S. Holder may be subject to U.S. federal backup withholding tax if the non-corporate U.S. Holder:
● | fails to provide us with an accurate taxpayer identification number; |
● | is notified by the IRS that they have become subject to backup withholding because they previously failed to report all interest and dividends required to be shown on their federal income tax returns; or |
● | fails to comply with applicable certification requirements |
A holder that is not a U.S. Holder or a partnership may be subject to U.S. federal backup withholding with respect to such dividends unless the holder certifies that it is a non-U.S. person, under penalties of perjury, or otherwise establishes an exemption therefrom. Backup withholding tax is not an additional tax. Holders generally may obtain a refund of any amounts withheld under backup withholding rules that exceed their income tax liability by timely filing a refund claim with the IRS.
You are encouraged to consult your own tax advisor concerning the overall tax consequences arising in your own particular situation under U.S. federal, state, local, or foreign law from the payment of dividends on our common stock.
Cash Flows
Net cash provided by operating activities for the three months ended March 31, 2023 and 2022 was $19.6 million and $52.6 million, respectively. This decrease in cash provided by operating activities was primarily due to lower rates earned by our major and minor bulk vessels and changes in working capital. Additionally, there was an increase in drydocking costs incurred during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.
Net cash used in investing activities for the three months ended March 31, 2023 and 2022 was $2.9 million and $47.0 million, respectively. This decrease was primarily due to a $43.5 million decrease in the purchase of vessels primarily as a result of the purchase of two Ultramax vessels that delivered during the first quarter of 2022.
Net cash used in financing activities during the three months ended March 31, 2023 and 2022 was $30.4 million and $77.1 million, respectively. The decrease is primarily due to the additional $40.0 million debt repayment made under the $450 Million Credit Facility during the first quarter of 2022. Additionally, there was a $6.6 million decrease in the payment of dividends during the three months ended March 31, 2023 as compared to March 31, 2022.
Credit Facilities
On August 3, 2021, we entered into the $450 Million Credit Facility. Refer to Note 7 — Debt of our Condensed Consolidated Financial Statements for further details.
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Interest Rate Swap and Cap Agreements, Forward Freight Agreements and Currency Swap Agreements
At March 31, 2023, we had two interest rate cap agreements to manage interest costs and the risk associated with changing interest rates. Such agreements cap the borrowing rate on our variable debt to provide a hedge against the risk of rising rates. At March 31, 2023, the total notional principal amount of the interest rate cap agreements is $150.0 million.
Refer to the table in Note 8 — Derivative instruments of our Condensed Consolidated Financial Statements which summarizes the interest rate cap agreements in place as of March 31, 2023.
As part of our business strategy, we may enter into interest rate swap agreements to manage interest costs and the risk associated with changing interest rates. In determining the fair value of interest rate derivatives, we consider the creditworthiness of both the counterparty and ourselves, which has not changed significantly and has no effect on the valuation. Valuations prior to any adjustments for credit risk would be validated by comparison with counterparty valuations. Amounts would not and should not be identical due to the different modeling assumptions. Any material differences would be investigated.
As part of our business strategy, we may enter into arrangements commonly known as forward freight agreements, or FFAs, to hedge and manage our exposure to the charter market risks relating to the deployment of our vessels. Generally, these arrangements would bind us and each counterparty in the arrangement to buy or sell a specified tonnage freighting commitment “forward” at an agreed time and price and for a particular route. Upon settlement, if the contracted charter rate is less than the average of the rates (as reported by an identified index) for the specified route and period, the seller of the FFA is required to pay the buyer an amount equal to the difference between the contracted rate and the settlement rate multiplied by the number of days in the specific period. Conversely, if the contracted rate is greater than the settlement rate, the buyer is required to pay the seller the settlement sum. Although FFAs can be entered into for a variety of purposes, including for hedging, as an option, for trading, or for arbitrage, if we decided to enter into FFAs, our objective would be to hedge and manage market risks as part of our commercial management. It is not currently our intention to enter into FFAs to generate a stream of income independent of the revenues we derive from the operation of our fleet of vessels. If we determine to enter into FFAs, we may reduce our exposure to any declines in our results from operations due to weak market conditions or downturns, but may also limit our ability to benefit economically during periods of strong demand in the market. We have not entered into any FFAs as of March 31, 2023 and December 31, 2022.
Capital Expenditures
We make capital expenditures from time to time in connection with our vessel acquisitions. Our fleet currently consists of 44 drybulk vessels, including 17 Capesize drybulk carriers, 15 Ultramax drybulk carriers and twelve Supramax drybulk carriers.
As previously announced, we have implemented a fuel efficiency upgrade program for certain of our vessels in an effort to generate fuel savings and increase the future earnings potential for these vessels. The upgrades have been successfully installed during previous drydockings.
In addition to acquisitions that we may undertake in future periods, we will incur additional expenditures due to special surveys and drydockings for our fleet. Furthermore, we plan to upgrade a portion of our fleet with energy saving devices and apply high performance paint systems to our vessels in order to reduce fuel consumption and emissions.
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We estimate our drydocking costs, including capitalized costs incurred during drydocking related to vessel assets and vessel equipment, ballast water treatments system (“BWTS”) costs, fuel efficiency upgrades and scheduled off-hire days for our fleet through 2024 to be:
Year |
| Estimated Drydocking | Estimated BWTS |
| Estimated Fuel Efficiency Upgrade Costs | Estimated Off-hire |
| |||||
(U.S. dollars in millions) |
| |||||||||||
April 1 - December 31, 2023 | $ | 5.3 | $ | 0.2 | $ | 3.4 | 139 | |||||
2024 | $ | 19.4 | $ | — | $ | 4.0 | 385 |
The costs reflected are estimates based on drydocking our vessels in China. Actual costs will vary based on various factors, including where the drydockings are actually performed. We expect to fund these costs with cash on hand. These costs do not include drydock expense items that are reflected in vessel operating expenses.
Actual length of drydocking will vary based on the condition of the vessel, yard schedules and other factors. Higher repairs and maintenance expense during drydocking for vessels which are over 15 years old typically result in a higher number of off-hire days depending on the condition of the vessel.
During the three months ended March 31, 2023 and 2022, we incurred a total of $4.1 million and $1.7 million of drydocking costs, respectively, excluding costs incurred during drydocking that were capitalized to vessel assets or vessel equipment.
We completed the drydocking of one of our vessels during the three months ended March 31, 2023, which began during the fourth quarter of 2022. We estimate that four of our vessels will be drydocked during the remainder of 2023 and 13 of our vessels will be drydocked during 2024.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Inflation
Inflation has only a moderate effect on our expenses given current economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase our operating, voyage, general and administrative, and financing costs.
CRITICAL ACCOUNTING POLICIES
Except as described below, there have been no changes or updates to our critical accounting policies as disclosed in the 2022 10-K.
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Vessels and Depreciation
We record the value of our vessels at their cost (which includes acquisition costs directly attributable to the vessel and expenditures made to prepare the vessel for its initial voyage) less accumulated depreciation. We depreciate our drybulk vessels on a straight-line basis over their estimated useful lives, estimated to be 25 years from the date of initial delivery from the shipyard. Depreciation is based on cost less the estimated residual scrap value of $400/lwt based on the 15-year average scrap value of steel. An increase in the residual value of the vessels will decrease the annual depreciation charge over the remaining useful life of the vessels. Similarly, an increase in the useful life of a drybulk vessel would also decrease the annual depreciation charge. Comparatively, a decrease in the useful life of a drybulk vessel or in its residual value would have the effect of increasing the annual depreciation charge. However, when regulations place limitations over the ability of a vessel to trade on a worldwide basis, we will adjust the vessel’s useful life to end at the date such regulations preclude such vessel’s further commercial use.
The carrying value of each of our vessels does not represent the fair market value of such vessel or the amount we could obtain if we were to sell any of our vessels, which could be more or less. Under U.S. GAAP, we would not record a loss if the fair market value of a vessel (excluding its charter) is below our carrying value unless and until we determine to sell that vessel or the vessel is impaired as discussed in the 2022 10-K.
Under our credit facility, we regularly submit to the lenders valuations of our vessels on an individual charter free basis in order to evidence our compliance with the collateral maintenance covenants under our bank credit facility. Such a valuation is not necessarily the same as the amount any vessel may bring upon sale, which may be more or less, and should not be relied upon as such. We were in compliance with the collateral maintenance covenant under our $450 Million Credit Facility as of March 31, 2023. We obtained valuations for all of the vessels in our fleet pursuant to the terms of the $450 Million Credit Facility. In the chart below, we list each of our vessels, the year it was built, the year we acquired it, and its carrying value at March 31, 2023 and December 31, 2022. Vessels have been grouped according to their collateralized status as of March 31, 2023 and does not include any vessels held for sale or held for exchange.
We compare the carrying value of our vessels with the vessel valuations obtained for covenant compliance purposes to determine whether an indicator of impairment is present. As of March 31, 2023 and December 31, 2022, 11 of our Capesize vessels and 17 of our vessels, including 16 Capesize vessels and one of our Ultramax vessels, respectively, had carrying values that exceeded their vessel valuations, which is an indicator of impairment. However, based on an analysis of the anticipated undiscounted future net cash flows to be derived from each of these vessels as described in the 2022 10-K, there were no impairment losses incurred during the three months ended March 31, 2023 and 2022.
The amount by which the carrying value at March 31, 2023 of 11 of our Capesize vessels exceeded the valuation of such vessels for covenant compliance purposes ranged, on an individual vessel basis, from $6.0 million to $8.4 million per vessel, and $80.2 million on an aggregate fleet basis. The amount by which the carrying value at December 31, 2022 of 16 of our Capesize vessels and one of our Ultramax vessels exceeded the valuation of such vessels for covenant compliance purposes ranged, on an individual vessel basis, from $0.1 million to $11.9 million per vessel, and $130.0 million on an aggregate fleet basis. The average amount by which the carrying value of these vessels exceeded the valuation of such vessels for covenant compliance purposes was $7.3 million at March 31, 2023 and $7.6 million as of December 31, 2022. However, neither such valuation nor the carrying value in the table below reflects the value of long-term time charters, if any, related to some of our vessels.
Carrying Value (U.S. |
| ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
dollars in |
| ||||||||||
thousands) as of |
| ||||||||||
|
| Year |
| March 31, |
| December 31, |
| ||||
Vessels |
| Year Built |
| Acquired |
| 2023 |
| 2022 |
| ||
$450 Million Credit Facility | |||||||||||
Genco Commodus |
| 2009 |
| 2009 | $ | 32,733 | $ | 33,227 | |||
Genco Maximus |
| 2009 |
| 2009 |
| 32,788 |
| 33,275 | |||
Genco Claudius | 2010 |
| 2009 |
| 34,344 |
| 34,850 | ||||
Baltic Bear |
| 2010 |
| 2010 | 34,192 | 34,682 |
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Carrying Value (U.S. |
| ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
dollars in |
| ||||||||||
thousands) as of |
| ||||||||||
|
| Year |
| March 31, |
| December 31, |
| ||||
Vessels |
| Year Built |
| Acquired |
| 2023 |
| 2022 |
| ||
Baltic Wolf |
| 2010 |
| 2010 |
| 34,524 |
| 35,004 | |||
Genco Lion |
| 2012 |
| 2013 |
| 29,532 |
| 29,853 | |||
Genco Tiger | 2011 | 2013 | 27,894 | 28,207 | |||||||
Baltic Scorpion |
| 2015 |
| 2015 |
| 22,200 |
| 22,448 | |||
Baltic Mantis |
| 2015 |
| 2015 |
| 22,440 |
| 22,689 | |||
Genco Hunter |
| 2007 |
| 2007 |
| 7,674 |
| 7,769 | |||
Genco Warrior |
| 2005 |
| 2007 |
| 6,401 |
| 6,501 | |||
Genco Aquitaine |
| 2009 |
| 2010 |
| 8,189 |
| 8,254 | |||
Genco Ardennes |
| 2009 |
| 2010 |
| 8,194 |
| 8,258 | |||
Genco Auvergne |
| 2009 |
| 2010 |
| 8,211 |
| 8,270 | |||
Genco Bourgogne |
| 2010 |
| 2010 |
| 8,852 |
| 8,943 | |||
Genco Brittany |
| 2010 |
| 2010 |
| 8,857 |
| 8,931 | |||
Genco Languedoc |
| 2010 |
| 2010 |
| 8,859 |
| 8,932 | |||
Genco Picardy |
| 2005 |
| 2010 |
| 6,842 |
| 6,899 | |||
Genco Pyrenees |
| 2010 |
| 2010 |
| 8,905 |
| 8,979 | |||
Genco Rhone |
| 2011 |
| 2011 |
| 10,112 |
| 10,203 | |||
Genco Constantine |
| 2008 |
| 2008 |
| 31,051 |
| 31,638 | |||
Genco Augustus |
| 2007 |
| 2007 |
| 28,762 |
| 29,321 | |||
Genco London |
| 2007 |
| 2007 |
| 28,718 |
| 29,181 | |||
Genco Titus |
| 2007 |
| 2007 |
| 29,339 |
| 29,823 | |||
Genco Tiberius |
| 2007 |
| 2007 |
| 28,834 |
| 29,455 | |||
Genco Hadrian |
| 2008 |
| 2008 |
| 31,136 |
| 31,623 | |||
Genco Predator |
| 2005 |
| 2007 |
| 6,745 |
| 6,816 | |||
Baltic Hornet |
| 2014 |
| 2014 |
| 20,819 |
| 21,058 | |||
Baltic Wasp |
| 2015 |
| 2015 |
| 21,061 |
| 21,300 | |||
Genco Endeavour | 2015 | 2018 |
| 40,109 |
| 40,498 | |||||
Genco Resolute | 2015 | 2018 |
| 40,452 |
| 40,852 | |||||
Genco Columbia | 2016 | 2018 |
| 23,226 |
| 23,480 | |||||
Genco Weatherly | 2014 | 2018 |
| 18,727 |
| 18,939 | |||||
Genco Liberty | 2016 | 2018 |
| 43,493 |
| 43,942 | |||||
Genco Defender | 2016 | 2018 |
| 43,544 |
| 43,964 | |||||
Genco Magic | 2014 | 2020 | 13,744 | 13,872 | |||||||
Genco Vigilant | 2015 | 2021 | 14,767 | 14,901 | |||||||
Genco Freedom | 2015 | 2021 | 14,858 | 14,996 | |||||||
Genco Enterprise | 2016 | 2021 | 19,604 | 19,806 | |||||||
TOTAL | $ | 860,732 | $ | 871,639 | |||||||
Unencumbered | |||||||||||
Genco Madeleine | 2014 | 2021 | 21,997 | 22,253 | |||||||
Genco Constellation | 2017 | 2021 | 24,658 | 24,897 | |||||||
Genco Mayflower | 2017 | 2021 | 25,063 | 25,328 | |||||||
Genco Laddey |
| 2022 |
| 2022 |
| 29,076 |
| 29,326 | |||
Genco Mary |
| 2022 |
| 2022 |
| 29,117 |
| 29,367 | |||
$ | 129,911 | $ | 131,171 | ||||||||
Consolidated Total | $ | 990,643 | $ | 1,002,810 |
If we were to sell a vessel or hold a vessel for sale, and the carrying value of the vessel were to exceed its fair market value, we would record a loss in the amount of the difference. Refer to Note 2 — Summary of Significant Accounting Policies and Note 4 — Vessel Acquisitions and Dispositions in our Condensed Consolidated Financial Statements for information regarding the sale of vessel assets.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate risk
We are exposed to the impact of interest rate changes. Our objective is to manage the impact of interest rate changes on our earnings and cash flow in relation to our borrowings. We held two interest rate cap agreements as of March 31, 2023 to manage future interest costs and the risk associated with changing interest rates. The total notional amount of the caps at March 31, 2023 is $150.0 million and the caps have specified rates and durations. Refer to Note 8 — Derivative Instruments of our Condensed Consolidated Financial Statements, which summarizes the interest rate caps in place as of March 31, 2023.
The interest rate cap agreements cap the borrowing rate on our variable debt to provide a hedge against the risk of rising rates.
The total asset associated with the caps at March 31, 2023 is $5.0 million which has been classified as a current asset on the balance sheet. As of March 31, 2023, the Company has accumulated other comprehensive income (“AOCI”) of $4.9 million related to the interest rate cap agreements. At March 31, 2023, $4.9 million of AOCI is expected to be reclassified into income over the next 12 months associated with interest rate derivatives.
We are subject to market risks relating to changes in LIBOR rates because we have significant amounts of floating rate debt outstanding. During the three months ended March 31, 2023 and 2022, we were subject to interest rates of one-month or three-month LIBOR plus 2.15% on the outstanding debt under our $450 Million Credit Facility.
A 1% increase in LIBOR would result in an increase of $0.4 million in interest expense for the three months ended March 31, 2023.
From time to time, the Company may consider derivative financial instruments such as swaps and caps or other means to protect itself against interest rate fluctuations.
Derivative financial instruments
As part of our business strategy, we may enter into interest rate swaps or interest rate cap agreements to manage interest costs and the risk associated with changing interest rates. As of March 31, 2023, we held two interest rate cap agreements to manage interest costs and the risk associated with changing interest rates. The total notional amount of the caps at March 31, 2023 is $150.0 million and the caps have specified rates and durations. Refer to Note 8 — Derivative Instruments of our condensed consolidated financial statements which summarizes the interest rate caps in place as of March 31, 2023.
The two interest rate cap agreements were initially designated and qualified as cash flow hedges. The premium paid is recognized in income on a rational basis, and all changes in the value of the caps are deferred in AOCI and are subsequently reclassified into Interest expense in the period when the hedged interest affects earnings.
During the second quarter of 2022, based on the total outstanding debt under the $450 Million Credit Facility being below the total notional amount of the interest rate cap agreements, a portion of one of the interest rate cap agreements was dedesignated as a cash flow hedge. Subsequent gains and losses resulting from valuation adjustments on the dedesignated portion of the cap are recorded within interest expense. As the forecasted interest payments hedged are not remote of occurring, the amounts in AOCI as of the date of dedesignation will be released over the remaining original hedge period.
Refer to “Interest rate risk” section above for further information regarding interest rate swap agreements.
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We have entered into bunker swap and forward fuel purchase agreements with the objective of reducing the risk of the effect of changing fuel prices. Our bunker swap and forward fuel purchase agreements do not qualify for hedge accounting treatment; therefore, any unrealized or realized gains or losses are recognized as other income (expense). Refer to the “Bunker swap and forward fuel purchase agreements” section of Note 2 — Summary of Significant Accounting Policies for further information.
Currency and exchange rates risk
The majority of transactions in the international shipping industry are denominated in U.S. Dollars. Virtually all of our revenues and most of our operating costs are in U.S. Dollars. We incur certain operating expenses in currencies other than the U.S. dollar, and the foreign exchange risk associated with these operating expenses is immaterial.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our Chief Executive Officer and President and our Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and President and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed in the 2022 10-K, Hizone Group Co. Ltd, a sub-subcharterer of the Genco Constellation, asserted commercial claims that resulted in the arrest of the vessel in Ghana. The vessel was released at the end of February 2023. The Company believes that these claims are without merit and has valid defenses against them and is vigorously defending them while continuing to seek reimbursement of damages arising from the arrest of the vessel, including the recovery of lost revenue while arrested and reimbursement of legal fees. The Company obtained security from BG Shipping Co. Limited, the charterer of the vessel, and is in the process of arbitration proceedings.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the 2022 10-K, which could materially affect our business, financial condition or future results. Below is an update to the risk factor entitled, “Acts of war, terrorist attacks and other acts of violence or war may have an adverse effect on our business,”:
Since the Black Sea Grain Initiative was established on July 27, 2022 to allow for the export of grain from Ukrainian ports while the war in Ukraine continues, a total of approximately 29 million metric tons of grain has been exported from three Ukrainian ports under this agreement, of which over 75% has been corn and wheat cargoes. However, the agreement is set to expire on May 18, 2023, and Russia is indicating that it will not agree to extend the deal. Future prospects for Ukrainian grain shipments and the impact on drybulk markets for the shipment of grain and other cargoes remain unpredictable. Failure to renew the agreement or the continuation or worsening of the war in
44
Ukraine could have an adverse impact on our business, financial condition, and results of operations, and ability to pay dividends.
ITEM 5. OTHER INFORMATION
On May 3, 2023, Apostolos Zafolias, the Company’s Chief Financial Officer and Executive Vice President, Finance and the Company entered into a separation agreement containing the terms described in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 17, 2023, which terms are incorporated into this Item 5 by reference. The description of the separation agreement is qualified in its entirety by reference to the separation agreement, which is filed as Exhibit 10.2 to this report and also incorporated into this Item 5 by reference.
ITEM 6. EXHIBITS
The Exhibit Index attached to this report is incorporated into this Item 16 by reference.
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EXHIBIT INDEX
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101 | The following materials from Genco Shipping & Trading Limited’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 (Unaudited), (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (Unaudited), (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2023 and 2022 (Unaudited), (iv) Condensed Consolidated Statements of Equity for the three months ended March 31, 2023 and 2022 (Unaudited), (v) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (Unaudited), and (vi) Notes to Condensed Consolidated Financial Statements (Unaudited).(*) | ||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | ||
(*) | Filed with this report. | |
(1) | Incorporated by reference to Genco Shipping & Trading Limited’s Report on Form 8-K, filed with the Securities and Exchange Commission on July 15, 2014. | |
(2) | Incorporated by reference to Genco Shipping & Trading Limited’s Report on Form 8-K, filed with the Securities and Exchange Commission on July 17, 2015. | |
(3) | Incorporated by reference to Genco Shipping & Trading Limited’s Report on Form 8-K, filed with the Securities and Exchange Commission on April 15, 2016. | |
(4) | Incorporated by reference to Genco Shipping & Trading Limited’s Report on Form 8-K, filed with the Securities and Exchange Commission on July 7, 2016. | |
(5) | Incorporated by reference to Genco Shipping & Trading Limited’s Report on Form 8-K, filed with the Securities and Exchange Commission on January 4, 2017. | |
(6) | Incorporated by reference to Genco Shipping & Trading Limited’s Report on Form 8-K, filed with the Securities and Exchange Commission on July 15, 2020. | |
(7) | Incorporated by reference to Genco Shipping & Trading Limited’s Report on Form 8-K, filed with the Securities and Exchange Commission on May 31, 2021. | |
(8) | Incorporated by reference to Genco Shipping & Trading Limited’s Report on Form 8-K, filed with the Securities and Exchange Commission on November 15, 2016. | |
(9) | Incorporated by reference to Genco Shipping & Trading Limited’s Report on Form 8-K, filed with the Securities and Exchange Commission on June 5, 2018. | |
(10) | Incorporated by reference to Genco Shipping & Trading Limited’s Report on Form 8-K, filed with the Securities and Exchange Commission on January 11, 2021. | |
(11) | Incorporated by reference to Genco Shipping & Trading Limited’s Report on Form 8-K, filed with the Securities and Exchange Commission on March 31, 2023. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GENCO SHIPPING & TRADING LIMITED | ||||
DATE: May 3, 2023 | By: | /s/ John C. Wobensmith | ||
John C. Wobensmith | ||||
Chief Executive Officer and President | ||||
(Principal Executive Officer) | ||||
DATE: May 3, 2023 | By: | /s/ Apostolos Zafolias | ||
Apostolos Zafolias | ||||
Chief Financial Officer | ||||
(Principal Financial Officer) |
48
Exhibit 10.1
GENCO SHIPPING & TRADING LIMITED
299 PARK AVENUE, 12TH FLOOR
NEW YORK, NEW YORK 10171
646-443-8550
March 2, 2023
Mr. Robert Hughes
XXXXXXXXXXX
XXXXXXXXXXX
Dear Rob:
This letter agreement confirms the terms of the termination of your employment with Genco Shipping & Trading Limited. For purposes of this letter agreement, the “Company” refers to Genco Shipping & Trading Limited, its past and present parents, subsidiaries, affiliates and divisions, and their respective past and present officers, directors, agents, employees, members, managers, partners, stockholders, predecessors, successors and assigns, in both their individual and corporate capacities.
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-3-
Information does not include any information that is available to the general public or is generally known in the Company’s industry other than as a result of a disclosure in violation of this agreement. Confidential Information may be in any medium or form, including, without limitation, physical documents, computer files or disks, video and audio recordings, and oral communications. Except as provided in accordance with paragraph 12 below, you agree that you will not directly or indirectly use or disclose to any person, firm, or entity any such Confidential Information.
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agencies. These agencies have the authority to carry out their statutory duties by investigating the charge, issuing a determination, or taking any other action authorized under the statutes such agencies enforce. You retain the right to participate in any such action, provided that you hereby waive any right that you otherwise would have to recover monetary damages in connection with any charge, complaint, or lawsuit filed by you or by anyone else on your behalf. You retain the right to communicate with the EEOC and comparable state or local agencies and such communication can be initiated by you or in response to a communication from any such agency, and is not limited by any obligation contained in this Agreement.
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available to the Company upon reasonable notice for interviews and factual investigations; appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process; volunteering to the Company pertinent information; and turning over all relevant documents which are or may come into your possession (in each case including without limitation with respect to any Claims). You understand that in the event the Company asks for your cooperation in accordance with this provision, the Company will reimburse you solely for reasonable out-of-pocket expenses incurred by you in connection with such cooperation upon your timely submission of appropriate documentation.
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New York, and you and the Company each consent and submit to the jurisdiction such courts for any such action.
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Please indicate your acceptance of the terms of this letter agreement by countersigning below and returning this letter agreement to me.
Very truly yours,
GENCO SHIPPING & TRADING LIMITED
/s/ John C. Wobensmith
John C. Wobensmith
Chief Executive Officer and President
Agreed and Accepted:
/s/ Robert E. Hughes 05 Mar 2023
Robert HughesDate
Reference Clause 2(c) – Should the Company deem necessary to extend consulting services beyond 31 Dec 2023, these negotiations must be finalized no later than 15 Dec 2023
/s/ REH /s/ JCW
Reference Clause 2(d) – I formally elect for COBRA coverage
/s/ REH /s/ JCW
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Exhibit 10.2
GENCO SHIPPING & TRADING LIMITED
299 PARK AVENUE, 12TH FLOOR
NEW YORK, NEW YORK 10171
646-443-8550
May 3, 2023
Mr. Apostolos Zafolias
XXX XX
XXX XX
Dear Apostolos:
This letter agreement confirms the terms of the termination of your employment with Genco Shipping & Trading Limited. For purposes of this letter agreement, the “Company” refers to Genco Shipping & Trading Limited, its past and present parents, subsidiaries, affiliates and divisions, and their respective past and present officers, directors, agents, employees, members, managers, partners, stockholders, predecessors, successors and assigns, in both their individual and corporate capacities.
1.Your employment with the Company is terminated effective June 16, 2023 (the “Termination Date”). Except as specifically provided in this letter agreement, all existing employment agreements between you and the Company, whether oral or written, are hereby terminated. You agree that this letter agreement supersedes any such agreements between you and the Company. As of the Termination Date, your position as an officer of the Company and as an officer, director, manager, or similar position with any of its subsidiaries, including without limitation Chief Financial Officer and Executive Vice President, Finance of the Company, shall Terminate. From today through the Termination Date, in addition to your regular duties, you shall provide transition and other assistance as instructed by the Company.
2.In full consideration for your promises, covenants and agreements set forth herein, provided that you timely execute, deliver to the Company, and do not revoke this letter agreement and are at all times in compliance with your obligations under this letter agreement, the Company agrees:
(a)Of the Restricted Stock Units granted to you by the Company pursuant to the Genco Shipping & Trading Limited Amended and Restated 2015 Equity Incentive Plan (as amended from time to time, the “Plan”) that are due to vest in February 2024, 8,294 of such Restricted Stock Units shall vest on September 22, 2023, and the remaining 8,294 of such Restricted Stock Units shall vest on December 31, 2023, subject to your continued service as a consultant on the applicable date. All Options to purchase shares of common stock of the Company granted to you under the Plan that are due to vest in February 2024 shall become fully vested on September 22, 2023, subject to your continued service as a consultant on the
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applicable date. All Options to purchase shares of common stock of the Company granted to you under the Plan that are already vested as of the Effective Date or that vest in accordance with the preceding sentence shall be exercisable through March 31, 2024 and, to the extent not exercised, shall be forfeited and of no further force or effect as of 11:59 p.m. on March 31, 2024. As of the date hereof, you have 16,588 unvested Restricted Stock Units that are due to vest in February 2024, 3,849 unvested Options that are due to vest in February 2024, and 56,068 vested, unexercised Options. In all other respects, the terms applicable to any Restricted Stock Units and Options granted to you by the Company shall be subject to the Plan and applicable award agreements, including without limitation payment of related dividend equivalents in connection with vesting of Restricted Stock Units as described above forfeiture of any unvested Restricted Stock Units other than those vesting as described above and any related dividend equivalents.
(b)Provided that you execute on or after the Termination Date and on or before June 23, 2023 the General Release attached as Exhibit A, and do not timely revoke the General Release as permitted thereunder, the Company shall engage you to provide consulting services for the period from the Termination Date through December 31, 2023. In such capacity, you shall perform only those services requested by the Company and shall not have any authority to bind the Company in any respect. In respect of such services, the Company shall make payments in the total amount of $150,000, less all applicable withholdings for federal, state and local income taxes, Social Security, and all other customary withholdings, in equal bi-weekly installments in accordance with the Company’s standard payroll practices following the tenth business day after the Effective Date through December 31, 2023.
3.Regardless of whether you execute this letter agreement, the Company shall pay you any accrued, but unpaid, base salary for services rendered through the Termination Date and any vacation you have accrued but not used as of the Termination Date, in accordance with the Company’s policies. Such payments shall be subject to all applicable withholdings for federal, state and local income taxes, Social Security, and all other customary withholdings. You will be receiving a separate letter concerning COBRA continuation for medical, dental, and vision benefits.
4.Except as provided in paragraphs 2 and 3 of this letter agreement, you shall not be entitled to any sum of money or benefits from the Company, including without limitation, any bonus award under the Company’s Annual Incentive Plan for any term of service. You understand that the sum of money and benefits specified in paragraph 2 are being offered to you in exchange for your waiver of rights and claims specified in paragraph 6 below and that you would not otherwise be entitled to these payments or benefits.
5.You represent that you do not have any claim, action, or proceeding pending against the Company, and that you have not at any time asserted any claim of discrimination or harassment in connection with your employment by the Company.
6.Except as necessary to enforce the terms of this letter agreement, and in exchange for and in consideration of the promises, covenants and agreements set forth herein, you hereby release the Company to the maximum extent permitted by law from any and all manner of claims, demands, causes of action, obligations, damages, or liabilities whatsoever of every kind and nature, at law or in equity, known or unknown, and whether or not discoverable,
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which you have or may have for any period prior to your execution of this letter agreement, including, but not limited to, claims for breach of contract or wrongful discharge, claims for additional compensation, claims for severance pay, claims of defamation or any other tort, claims for unpaid wages or commissions or bonuses or vacation days, claims arising under any federal, state or local labor laws, the New York Labor Law, claims of discrimination under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Family Medical Leave Act, the Older Workers Benefit Protection Act, the Equal Pay Act, the Worker Adjustment and Retraining Notification Act, the Uniform Services Employment and Re-employment Rights Act, the New York State Human Rights Law, the discrimination or retaliation provisions of the New York State Workers' Compensation Law, New York State Executive Law, New York Equal Pay Law, New York Civil Rights Law, and New York Worker Adjustment and Retraining Notification Act, the New York City Human Rights Law, each as amended, or any other federal, state or local laws, claims arising under the Employee Retirement Income Security Act of 1974, and any claim for attorneys’ fees or costs. Notwithstanding the foregoing, the provisions of this paragraph are subject to the provisions of paragraph 12 below.
7.You acknowledge that, upon receipt of the amounts referenced in paragraph 3 above, you will have received all compensation due to you for work performed for the Company. You also acknowledge that you have not at any time asserted and you do not have and never had a claim of sexual harassment, discrimination, or retaliation in connection with your employment by the Company.
8.You acknowledge that as a result of and in connection with your employment with the Company, you have come into possession of proprietary and confidential information relating to the business practices, charterers or other customers, personnel, and financial information of the Company (“Confidential Information”), including but not limited to information concerning (i) past, present or prospective charterers or other customers, including details of their particular requirements; (ii) financial information regarding the Company; (iii) sales, marketing and business strategies and tactics; (iv) current activities and current and future plans; and (v) other confidential information used by, or useful to, the Company and known to you by reason of your employment by the Company; provided that such Confidential Information does not include any information that is available to the general public or is generally known in the Company’s industry other than as a result of a disclosure in violation of this letter agreement. Confidential Information may be in any medium or form, including, without limitation, physical documents, computer files or disks, video and audio recordings, and oral communications. Except as provided in accordance with paragraph 12 below, you agree that you will not directly or indirectly use or disclose to any person, firm, or entity any such Confidential Information.
9.You agree to deliver to the Company all equipment, documents, and other materials (whether or not such equipment, documents, and other materials constitute or contain confidential information) obtained in the course of your employment (including all copies of such documents and other materials), and further agree not to retain any copies of any such equipment, documents, and materials. For purposes hereof, “documents and other materials” means all correspondence, memoranda, files, manuals, books, lists, financial, operating or marketing records, magnetic, optical, or electronic or other media or equipment of any kind
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which may be in your possession, under your control or accessible to you. Notwithstanding the foregoing, you may retain the most recent Company phone furnished to you, provided that (a) the Company will cease to provide phone service to you on the Termination Date and (b) you will allow the Company to copy all business contracts related to the Company and erase all Company data from the phone on the Termination Date.
10.It is a material condition of this letter agreement that, except as permitted pursuant to paragraph 12 below, you agree that you will not make or publish any statement (orally, electronically, or in writing), or instigate, assist or participate in the making or publication of any statement, which would or could libel, slander or disparage (whether or not such disparagement legally constitutes libel or slander) or expose to hatred, contempt or ridicule (a) the Company; (b) any of its services, affairs or operations; or (c) any of its past or present directors, officers, employees, members, managers, partners, or agents.
11.You agree that you will not knowingly encourage, counsel, assist, or cooperate with BG Shipping Co. Limited, World Achieve Holdings, Hizone Group Co. Ltd, SMC Cooperation Limited, and Sentuo Oil Refinery Limited or any of their affiliates, or any attorneys or counsel thereof, in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any such party against any the Company or its affiliates (“Claims”) unless under a subpoena or other court order to do so. You agree both to immediately notify the Company upon receipt of any such subpoena or court order, and to furnish, within three (3) business days of its receipt, a copy of such subpoena or other court order. If approached by any such person or entity for counsel, assistance, or cooperation in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints against the Company, you shall state no more than that you cannot provide counsel, assistance, or cooperation.
12.Notwithstanding any provision of this letter agreement, you are authorized to make disclosures as permitted under this paragraph 12. To the extent a provision of any other agreement or policy related to your employment with the Company is in conflict with the provisions of this paragraph 12, the provisions of this paragraph 12 shall control.
(a)Nothing in this letter agreement limits in any way your right or ability to file a charge or claim of discrimination with, or from speaking with, the U.S. Equal Employment Opportunity Commission, the National Labor Relations Board, the New York State Division of Human Rights, the New York City Commission on Human Rights, or comparable state or local agencies. These agencies have the authority to carry out their statutory duties by investigating the charge, issuing a determination, or taking any other action authorized under the statutes such agencies enforce. You retain the right to participate in any such action, provided that you hereby waive any right that you otherwise would have to recover monetary damages in connection with any charge, complaint, or lawsuit filed by you or by anyone else on your behalf. You retain the right to communicate with the EEOC and comparable state or local agencies and such communication can be initiated by you or in response to a communication from any such agency, and is not limited by any obligation contained in this letter agreement.
(b)Nothing in this letter agreement prohibits or restricts you from reporting possible violations of federal, state, or local law or regulation to, or discussing any such
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possible violations with, any governmental agency or entity or self-regulatory organization, including by initiating communications directly with, responding to any inquiry from, or providing testimony before any federal, state, or local regulatory authority or agency or self-regulatory organization, including without limitation the Securities and Exchange Commission and the Occupational Safety and Health Administration, or making any other disclosures that are protected by the whistleblower provisions of any federal, state, or local law or regulation.
(c)You are hereby notified in accordance with the Defend Trade Secrets Act of 2016 that you will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, in each case solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. You are further notified that if you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclose the Company’s trade secrets to your attorney and use the trade secret information in the court proceeding if you file any document containing the trade secret under seal and do not disclose the trade secret except pursuant to court order.
(d)Nothing in this letter agreement shall prevent you from (i) making any disclosure of information required by law, including providing truthful testimony if required to do so by court order or legal process or complying with a subpoena issued to you, provided, however, that you shall notify the Company within two business days of receiving any such order, process, or subpoena to the extent permitted by law; (ii) initiating, cooperating, assisting, testifying, or participating or assisting in any investigation or proceeding conducted by any federal, state, or local regulatory or law enforcement agency or legislative body, any self-regulatory organization, or the Company’s legal, compliance, or human resources officers; (iii) making disclosures to an attorney retained by you; (iv) filing or disclosing any facts necessary to receive unemployment insurance, Medicaid, or other public benefits; or (v) as necessary in the course of any legal, arbitral, or regulatory proceeding between you and the Company Releasees provided you file the relevant documents or information under seal and do not disclose such documents or information except pursuant to a court or arbitrator order.
13.You agree to make yourself reasonably available to and cooperate reasonably with the Company in any administrative, regulatory, or judicial proceeding or internal investigation. You understand and agree that your reasonable cooperation would include, but not be limited to, making yourself available to the Company upon reasonable notice for interviews and factual investigations; appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process; volunteering to the Company pertinent information; and turning over all relevant documents which are or may come into your possession (in each case including without limitation with respect to any Claims). You understand that in the event the Company asks for your cooperation in accordance with this provision, the Company will reimburse you solely for reasonable out-of-pocket expenses incurred by you in connection with such cooperation upon your timely submission of appropriate documentation.
14.[Intentionally omitted.]
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15.If you breach any provision of this letter agreement, including without limitation any of the provisions regarding your performance of transitional services, confidentiality, or nondisparagement, then in addition to any other remedies the Company may have at law or in equity, the Company’s obligations under paragraph 2 above shall cease immediately.
16.In executing this letter agreement, neither you nor the Company admits any liability or wrongdoing, and the considerations exchanged herein do not constitute an admission of any liability, error, contract violation, or violation of any federal, state, or local law, or regulation.
17.This letter agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.
18.The unenforceability or invalidity of any provision or provisions of this letter agreement shall not render any other provision or provisions hereof unenforceable or invalid.
19.This letter agreement constitutes the entire agreement between you and the Company and cannot be altered except in a writing signed by both you and the Company. You acknowledge that you entered into this letter agreement voluntarily, that you fully understand all of its provisions, and that no representations were made to induce execution of this letter agreement that are not expressly contained herein.
20.This letter agreement shall be governed by and construed (both as to validity and performance) and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed wholly within such jurisdiction, without regard to the principles of conflicts of law or where the parties are located at the time a dispute arises. Any action concerning any dispute arising out of or relating to this letter agreement or your employment by the Company must be brought in a court situated in the City, County and State of New York, and you and the Company each consent and submit to the jurisdiction such courts for any such action.
21.This letter agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Facsimile or electronically transmitted signatures shall be treated as original signatures for all purposes.
22.In conformity with the Older Workers Benefits Protection Act (“OWBPA”):
(a)You are hereby advised to consult with an attorney prior to executing this letter agreement. You acknowledge that you have been afforded an opportunity to consult with the attorneys of your choice prior to executing this letter agreement.
(b)You acknowledge that this letter agreement is written in a manner calculated to be understood by you and that you understand the terms of this letter agreement.
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(c)You acknowledge that this letter agreement is a knowing and voluntary waiver and release of any and all claims described in paragraph 6 that you might have including, but not limited to, any such claims arising under the Age Discrimination in Employment Act of 1967, as amended (“ADEA”).
(d)You acknowledge that you have not waived any claim under the ADEA that may arise after the date you execute this letter agreement.
(e)You acknowledge that the consideration you will receive in exchange for this letter agreement (i.e., the payments and benefits set forth in paragraph 2) is something of value to which you are not already entitled.
(f)You have been provided 21 days to consider this letter agreement and seven-days to revoke following execution of this letter agreement, per the terms of paragraphs 22 and 23 of this letter agreement.
23.You are hereby notified that you will be given twenty-one (21) days from your receipt of this letter agreement to consider this letter agreement. You are further notified that the countersigned copy of this letter agreement shall be returned to the undersigned (by email or otherwise) so that it is received on or before the end of this 21-day period. You must countersign and return this letter agreement no later than the end of this 21-day period or the offer embodied in this letter agreement shall be deemed withdrawn.
24.It is agreed and understood that you will have a period of seven (7) days following your execution of this letter agreement in which to revoke your consent, and that such revocation will be effective only if received in writing by the undersigned (by email or otherwise) on or before the expiration of this seven (7) day period. This letter agreement will not become effective or enforceable until the revocation period has expired. The first business day following the expiration of the revocation period shall be the “Effective Date” of this letter agreement, and this letter agreement shall not be binding or enforceable until such date.
Please indicate your acceptance of the terms of this letter agreement by countersigning below and returning this letter agreement to me.
| Very truly yours, |
| |
| GENCO SHIPPING & TRADING LIMITED |
| |
| /s/ John C. Wobensmith |
| John C. Wobensmith |
| Chief Executive Officer and President |
Agreed and Accepted: | |
| |
/s/ Apostolos Zafolias |
| May 3, 2023 |
Apostolos Zafolias | | Date |
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EXHIBIT A
GENERAL RELEASE
(to be executed on or after June 16, 2023
and on or before June 23, 2023)
I, Apostolos Zafolias, except as necessary to enforce the terms of this General Release, and in exchange for and in consideration of the promises, covenants and agreements set forth herein, hereby release Genco Shipping & Trading Limited, its past and present parents, subsidiaries, affiliates and divisions, and their respective past and present officers, directors, agents, employees, members, managers, partners, stockholders, predecessors, successors and assigns, in both their individual and corporate capacities (collectively, the “Company”), to the maximum extent permitted by law from any and all manner of claims, demands, causes of action, obligations, damages, or liabilities whatsoever of every kind and nature, at law or in equity, known or unknown, and whether or not discoverable, which I have or may have for any period prior to my execution of this General Release, including, but not limited to, claims for breach of contract or wrongful discharge, claims for additional compensation, claims for severance pay, claims of defamation or any other tort, claims for unpaid wages or commissions or bonuses or vacation days, claims arising under any federal, state or local labor laws, the New York Labor Law, claims of discrimination under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Family Medical Leave Act, the Older Workers Benefit Protection Act, the Equal Pay Act, the Worker Adjustment and Retraining Notification Act, the Uniform Services Employment and Re-employment Rights Act, the New York State Human Rights Law, the discrimination or retaliation provisions of the New York State Workers’ Compensation Law, New York State Executive Law, New York Equal Pay Law, New York Civil Rights Law, and New York Worker Adjustment and Retraining Notification Act, the New York City Human Rights Law, each as amended, or any other federal, state or local laws, claims arising under the Employee Retirement Income Security Act of 1974, and any claim for attorneys’ fees or costs. Nothing in this General Release shall modify or release my rights under the letter agreement between me and the Company dated April 19, 2023 (the “letter agreement”).
I understand that nothing in this General Release limits in any way my right or ability to file a charge or claim of discrimination with, or from speaking with, the U.S. Equal Employment Opportunity Commission, the National Labor Relations Board, the New York State Division of Human Rights, the New York City Commission on Human Rights, or comparable state or local agencies. These agencies have the authority to carry out their statutory duties by investigating the charge, issuing a determination, or taking any other action authorized under the statutes such agencies enforce. I retain the right to participate in any such action, provided that I hereby waive any right that I otherwise would have to recover monetary damages in connection with any charge, complaint, or lawsuit filed by me or by anyone else on my behalf. I retain the right to communicate with the EEOC and comparable state or local agencies and such communication can be initiated by me or in response to a communication from any such agency, and is not limited by any obligation contained in this General Release.
I have been advised to consult with an attorney prior to executing this General Release. I acknowledge that I have been afforded an opportunity to consult with the attorneys of my choice prior to executing this General Release.
I acknowledge that I have had more than twenty-one (21) days from my receipt of this to consider this General Release and that, to be eligible to receive the consideration provided under paragraph 2(b) of the letter agreement, it must be executed on or after June 16, 2023 and on or before June 23, 2023.
I understand that I will have a period of seven (7) days following my execution of this General Release in which to revoke my consent, and that such revocation will be effective only if received in writing by John C. Wobensmith (by email or otherwise) on or before the expiration of this seven (7) day period. This General Release will not become effective or enforceable until the revocation period has expired. The first business day following the expiration of the revocation period shall be the “Effective Date” of this General Release, and this General Release shall not be binding or enforceable until such date.
|
| |
Apostolos Zafolias | | Date |
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Exhibit 31.1
CERTIFICATION
I, John C. Wobensmith, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 of Genco Shipping & Trading Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ John C. Wobensmith |
| Name: John C. Wobensmith |
Date: May 3, 2023 | Title: Chief Executive Officer and President |
Exhibit 31.2
CERTIFICATION
I, Apostolos Zafolias, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 of Genco Shipping & Trading Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ Apostolos Zafolias |
| Name: Apostolos Zafolias |
Date: May 3, 2023 | Title: Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with Genco Shipping & Trading Limited’s (the “Company”) quarterly report on Form 10-Q for the quarter ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Executive Officer and President of the Company, hereby certifies pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 3, 2023 | /s/ John C. Wobensmith |
| Name: John C. Wobensmith |
| Title: Chief Executive Officer and President |
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with Genco Shipping & Trading Limited’s (the “Company”) quarterly report on Form 10-Q for the quarter ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 3, 2023 | /s/ Apostolos Zafolias |
| Name: Apostolos Zafolias |
| Title: Chief Financial Officer |
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Current Assets: | ||
Due from charterers, reserve | $ 2,157 | $ 2,141 |
Noncurrent assets: | ||
Vessels, accumulated depreciation | 315,639 | 303,098 |
Deferred drydock, accumulated amortization | 17,377 | 15,456 |
Fixed assets, accumulated depreciation and amortization | 6,887 | 6,254 |
Deferred financing costs, noncurrent | $ 5,661 | $ 6,079 |
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) | 42,507,748 | 42,327,181 |
Common stock, shares outstanding (in shares) | 42,507,748 | 42,327,181 |
Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2023 |
Mar. 31, 2022 |
|
Consolidated Statements of Operations | ||
Nonvested stock amortization expense | $ 1,559 | $ 690 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2023 |
Mar. 31, 2022 |
|
Consolidated Statements of Comprehensive Income | ||
Net income | $ 2,860 | $ 41,865 |
Other comprehensive (loss) income | (1,628) | 3,293 |
Comprehensive income | 1,232 | 45,158 |
Less: Comprehensive income attributable to noncontrolling interest | 226 | 176 |
Comprehensive income attributable to Genco Shipping & Trading Limited | $ 1,006 | $ 44,982 |
Consolidated Statements of Equity - USD ($) $ in Thousands |
Genco Shipping & Trading Limited Shareholders' Equity |
Common Stock |
Additional Paid-in Capital |
Accumulated Other Comprehensive Income |
Accumulated Deficit |
Noncontrolling Interest |
Total |
---|---|---|---|---|---|---|---|
Balance at Dec. 31, 2021 | $ 916,587 | $ 419 | $ 1,702,166 | $ 825 | $ (786,823) | $ 88 | $ 916,675 |
Increase (Decrease) in Shareholders' Equity | |||||||
Net income | 41,689 | 41,689 | 176 | 41,865 | |||
Other comprehensive (loss) income | 3,293 | 3,293 | 3,293 | ||||
Issuance of shares due to vesting of RSUs and exercise of options | 2 | (2) | |||||
Cash dividends declared | (28,454) | (28,454) | (28,454) | ||||
Nonvested stock amortization | 690 | 690 | 690 | ||||
Balance at Mar. 31, 2022 | 933,805 | 421 | 1,674,400 | 4,118 | (745,134) | 264 | 934,069 |
Balance at Dec. 31, 2022 | 967,433 | 423 | 1,588,777 | 6,480 | (628,247) | 876 | 968,309 |
Increase (Decrease) in Shareholders' Equity | |||||||
Net income | 2,634 | 2,634 | 226 | 2,860 | |||
Other comprehensive (loss) income | (1,628) | (1,628) | (1,628) | ||||
Issuance of shares due to vesting of RSUs and exercise of options | 2 | (2) | |||||
Cash dividends declared | (21,516) | (21,516) | (21,516) | ||||
Nonvested stock amortization | 1,559 | 1,559 | 1,559 | ||||
Balance at Mar. 31, 2023 | $ 948,482 | $ 425 | $ 1,568,818 | $ 4,852 | $ (625,613) | $ 1,102 | $ 949,584 |
Consolidated Statements of Equity (Parenthetical) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Consolidated Statements of Equity | ||
Dividends declared per share | $ 0.50 | $ 0.67 |
GENERAL INFORMATION |
3 Months Ended |
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Mar. 31, 2023 | |
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 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 and operates in one business segment. As of March 31, 2023, the Company’s fleet consisted of 44 drybulk vessels, including 17 Capesize drybulk carriers, 15 Ultramax drybulk carriers and twelve Supramax drybulk carriers, with an aggregate carrying capacity of approximately 4,635,000 dwt and an average age of approximately 11.1 years. During September 2021, the Company and Synergy Marine Pte. Ltd. (“Synergy”), a third party, formed a joint venture, GS Shipmanagement Pte. Ltd. (“GSSM”). GSSM is owned 50% by the Company and 50% by Synergy as of March 31, 2023 and December 31, 2022, and was formed to provide ship management services to the Company’s vessels. As of March 31, 2023 and December 31, 2022, the cumulative investments GSSM received from the Company and Synergy totaled $50 and $50, respectively, which were used for expenditures directly related to the operations of GSSM. Management has determined that GSSM qualifies as a variable interest entity, and, when aggregating the variable interest held by the Company and Synergy, the Company is the primary beneficiary as the Company has the ability to direct the activities that most significantly impact GSSM’s economic performance. Accordingly, the Company consolidates GSSM. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation 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”), and the rules and regulations of the SEC that apply to interim financial statements, including the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the disclosures and footnotes normally included in complete consolidated financial statements prepared in conformity with U.S. GAAP. They should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2022 Annual Report on Form 10-K, filed with the SEC on February 22, 2023 (the “2022 10-K”). The accompanying Condensed Consolidated Financial Statements include the accounts of GS&T and its direct and indirect wholly-owned subsidiaries and GSSM. All intercompany accounts and transactions have been eliminated in consolidation. 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. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the operating results to be expected for the year ending December 31, 2023. Use of estimates 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, residual value of vessels, useful life of vessels, the fair value of time charters acquired, and the fair value of derivative instruments, if any. Actual results could differ from those estimates. Cash, cash equivalents and restricted cash The Company considers highly liquid investments, such as money market funds and certificates of deposit with an original maturity of three months or less at the time of purchase to be cash equivalents. Current and non-current restricted cash includes cash that is restricted pursuant to our credit facilities. 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:
Bunker swap and forward fuel purchase agreements From time to time, the Company may enter into fuel hedge agreements with the objective of reducing the risk of the effect of changing fuel prices. The Company has entered into bunker swap agreements and forward fuel purchase agreements. The Company’s bunker swap agreements and forward fuel purchase agreements do not qualify for hedge accounting treatment; therefore, any unrealized or realized gains and losses are recorded in the Condensed Consolidated Statements of Operations. Derivatives are Level 2 instruments in the fair value hierarchy. During the three months ended March 31, 2023 and 2022, the Company recorded $108 and $629 of realized gains in other (expense) income, respectively. During the three months ended March 31, 2023 and 2022, the Company recorded ($42) and $1,439 of unrealized (losses) gains in other (expense) income, respectively. The total fair value of the bunker swap agreements and forward fuel purchase agreements in an asset position as of March 31, 2023 and December 31, 2022 is $54 and $168, respectively, and are recorded in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets. The total fair value of the bunker swap agreements and forward fuel purchase agreements in a liability position as of March 31, 2023 and December 31, 2022 is $0 and $71, respectively, and are recorded in accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets. Voyage expense recognition In time charters and spot market-related time charters, operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. 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 and spot market-related time charters. 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 for certain time charter agreements where the inventory is subject to gains and losses. These differences in bunkers, including any lower of cost and net realizable value adjustments, resulted in a net (loss) gain of ($371) and $2,004 during the three months ended March 31, 2023 and 2022, respectively. Additionally, voyage expenses include the cost of bunkers consumed during short-term time charters pursuant to the terms of the time charter agreement.
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CASH FLOW INFORMATION |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||
CASH FLOW INFORMATION | |||||||||||||||||||||||||||||||||||||||||||||||||
CASH FLOW INFORMATION | 3 - CASH FLOW INFORMATION For the three months ended March 31, 2023, 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 $766 for the Purchase of vessels and ballast water treatment systems, including deposits, and $553 for the Purchase of other fixed assets. For the three months ended March 31, 2023, 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 expense consisting of $906 for Cash dividends payable. For the three months ended March 31, 2022, 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 $615 for the Purchase of vessels and ballast water treatment systems, including deposits, and $716 for the Purchase of other fixed assets. For the three months ended March 31, 2022, 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 expense consisting of $322 for Cash dividends payable. During the three months ended March 31, 2023 and 2022, cash paid for interest, net of amounts capitalized, was $3,331 and $1,793, respectively, which was offset by $1,827 and $0 received as result of the interest rate cap agreements, respectively. During the three months ended March 31, 2023 and 2022, any cash paid for income taxes was insignificant. During the three months ended March 31, 2022, the Company reclassified $18,543 from Deposits on vessels to Vessels, net of accumulated depreciation upon the delivery of the Genco Mary and the Genco Laddey. Refer to Note 4 — Vessel Acquisitions and Dispositions. On February 21, 2023, the Company issued 68,758 restricted stock units to certain individuals. The aggregate fair value of these restricted stock units was $1,250. On February 23, 2022, the Company issued 201,934 restricted stock units to certain individuals. The aggregate fair value of these restricted stock units was $3,950. Refer to Note 13 — Stock-Based Compensation for further information regarding the aforementioned restricted stock issuances. Supplemental Condensed Consolidated Cash Flow information related to leases is as follows:
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VESSEL ACQUISITIONS AND DISPOSITIONS |
3 Months Ended |
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Mar. 31, 2023 | |
VESSEL ACQUISITIONS AND DISPOSITIONS | |
VESSEL ACQUISITIONS AND DISPOSITIONS | 4 - VESSEL ACQUISITIONS AND DISPOSITIONS Vessel Acquisitions On May 18, 2021, the Company entered into agreements to acquire two 2022-built 61,000 dwt newbuilding Ultramax vessels from Dalian Cosco KHI Ship Engineering Co. Ltd. for a purchase price of $29,170 each, that were renamed the Genco Mary and the Genco Laddey. The vessels were delivered to the Company on January 6, 2022. The remaining purchase price of $40,838 was paid during the three months ended March 31, 2022 upon delivery of the vessels. Capitalized interest expense associated with these newbuilding contracts for the three months ended March 31, 2023 and 2022 was $0 and $5, respectively. Vessel Dispositions As of March 31, 2023 and December 31, 2022, the Company recorded $5,643 of current restricted cash in the Condensed Consolidated Balance Sheets, representing the net proceeds from the sale of the Genco Provence on November 2, 2021 which served as collateral under the $450 Million Credit Facility. Pursuant to the $450 Million Credit Facility, the net proceeds received from the sale remained classified as restricted cash for 360 days following the sale date. That amount can be used towards the financing of replacement vessels meeting certain requirements and added as collateral under the facility. If such a replacement vessel is not added as collateral within such period, the Company will be required to use the proceeds as a loan prepayment. On November 8, 2022, the Company entered into an agreement with the lenders under the $450 Million Credit Facility to extend this period with regard to net proceeds from the sale of the Genco Provence until October 28, 2023. |
EARNINGS PER SHARE |
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EARNINGS PER SHARE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | 5 – EARNINGS PER SHARE The computation of basic earnings per share is based on the weighted-average number of common shares outstanding during the reporting period. The computation of diluted earnings per share assumes the vesting of nonvested stock awards and the exercise of stock options (refer to Note 13 — 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. The components of the denominator for the calculation of basic and diluted earnings per share are as follows:
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RELATED PARTY TRANSACTIONS |
3 Months Ended |
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Mar. 31, 2023 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | 6 – RELATED PARTY TRANSACTIONS During the three months ended March 31, 2023 and 2022, the Company did not have any related party transactions.
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DEBT |
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DEBT | 7 – DEBT Long-term debt, net consists of the following:
$450 Million Credit Facility On August 3, 2021, the Company entered into the $450 Million Credit Facility, a five-year senior secured credit facility which is allocated between an up to $150,000 term loan facility and an up to $300,000 revolving credit facility which was used to refinance the Company’s two prior credit facilities. As of March 31, 2023, there was $209,960 of availability under the $450 Million Credit Facility. Total debt repayments of $8,750 and $48,750 were made during the three months ended March 31, 2023 and 2022, respectively, under the $450 Million Credit Facility. As of March 31, 2023, the Company was in compliance with all of the financial covenants under the $450 Million Credit Facility.
Interest rates The following table sets forth the effective interest rate associated with the interest expense for the Company’s debt facilities noted above, including the cost associated with unused commitment fees, if applicable. The following table also includes the range of interest rates on the debt, excluding the impact of unused commitment fees, if applicable:
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DERIVATIVE INSTRUMENTS |
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DERIVATIVE INSTRUMENTS | 8 – DERIVATIVE INSTRUMENTS The Company is exposed to interest rate risk on its floating rate debt. As of March 31, 2023, the Company had two interest rate cap agreements outstanding to manage interest costs and the risk associated with variable interest rates. The two interest rate cap agreements were initially designated and qualified as cash flow hedges. The premium paid is recognized in income on a rational basis, and all changes in the value of the caps are deferred in Accumulated other comprehensive income (“AOCI”) and are subsequently reclassified into Interest expense in the period when the hedged interest affects earnings. One of our $50,000 interest rate cap agreements expired on March 10, 2023. During the second quarter of 2022, based on the total outstanding debt under the $450 Million Credit Facility being below the total notional amount of the interest rate cap agreements, a portion of one of the interest rate cap agreements was dedesignated as a hedge. Subsequent gains and losses resulting from valuation adjustments on the dedesignated portion of the cap are recorded within interest expense. As the forecasted interest payments hedged are not remote of occurring, the amounts in AOCI as of the date of dedesignation will be recognized over the remaining original hedge period. During the three months ended March 31, 2023, the Company recorded a loss of $20 in interest expense for the portion of the interest rate caps not designated as a hedging instrument. The following table summarizes the interest rate cap agreements in place as of March 31, 2023.
The Company records the fair value of the interest rate caps as Fair value of derivative instruments in the current and non-current asset section on its Condensed Consolidated Balance Sheets. The Company has elected to use the income approach to value the interest rate derivatives using observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single present amount (discounted) reflecting current market expectations about those future amounts. Level 2 inputs for derivative valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR cash and swap rates, implied volatility, basis swap adjustments, and credit risk at commonly quoted intervals). Mid-market pricing is used as a practical expedient for most fair value measurements. The Company recorded a $1,628 unrealized loss for the three months ended March 31, 2023 in AOCI. The estimated income that is currently recorded in AOCI as of March 31, 2023 that is expected to be reclassified into earnings within the next twelve months is $4,852.
The following table shows the interest rate cap assets as of March 31, 2023 and December 31, 2022:
The components of AOCI included in the accompanying Condensed Consolidated Balance Sheet consists of net unrealized gains on cash flow hedges as of March 31, 2023.
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FAIR VALUE OF FINANCIAL INSTRUMENTS |
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FAIR VALUE OF FINANCIAL INSTRUMENTS | 9 – FAIR VALUE OF FINANCIAL INSTRUMENTS The fair values and carrying values of the Company’s financial instruments as of March 31, 2023 and December 31, 2022 which are required to be disclosed at fair value, but not recorded at fair value, are noted below.
The carrying value of the borrowings under the $450 Million Credit Facility as of March 31, 2023 and December 31, 2022, which excludes the impact of deferred financing costs, approximate their fair value due to the variable interest nature thereof as this credit facility represents a floating rate loan. The carrying amounts of the Company’s other financial instruments as of March 31, 2023 and December 31, 2022 (principally Due from charterers and Accounts payable and accrued expenses) approximate fair values because of the relatively short maturity of these instruments. ASC Subtopic 820-10, “Fair Value Measurements & Disclosures” (“ASC 820-10”), applies to all assets and liabilities that are being measured and reported on a fair value basis. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumption (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 requires significant management judgment. The three levels are defined as follows:
Cash and cash equivalents and restricted cash are considered Level 1 items, as they represent liquid assets with short-term maturities. Floating rate debt is considered to be a Level 2 item, as the Company considers the estimate of rates it could obtain for similar debt or based upon transactions amongst third parties. Interest rate cap agreements, bunker swap agreements and forward fuel purchase agreements are considered to be Level 2 items. Refer to Note 8 — Derivative Instruments and Note 2 — Summary of Significant Accounting Policies, respectively, for further information. Nonrecurring fair value measurements include vessel impairment assessments completed during the interim period and at year-end as determined based on third-party quotes, which are based on various data points, including comparable sales of similar vessels, which are Level 2 inputs. There was no vessel impairment recorded during the three months ended March 31, 2023 and 2022. The fair value determination for the operating lease right-of-use assets was based on third party quotes, which is considered a Level 2 input. Nonrecurring fair value measurements may include impairment tests of the Company’s operating lease right-of-use assets if there are indicators of impairments. During the three months ended March 31, 2023 and 2022, there were no indicators of impairment of the operating lease right-of-use assets. The Company did not have any Level 3 financial assets or liabilities as of March 31, 2023 and December 31, 2022. |
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ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 10 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of the following:
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VOYAGE REVENUES | 11 – VOYAGE REVENUES Total voyage revenues include revenue earned on fixed rate time charters, spot market voyage charters and spot market-related time charters, as well as the sale of bunkers consumed during short-term time charters. For the three months ended March 31, 2023 and 2022, the Company earned $94,391 and $136,227 of voyage revenues, respectively. Total voyage revenues recognized in the Condensed Consolidated Statements of Operations includes the following:
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LEASES |
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LEASES | 12 – LEASES On June 14, 2019, the Company entered into a sublease agreement for a portion of the leased space for its main office in New York, New York that commenced on July 26, 2019 and will end on September 29, 2025. There was $306 of sublease income recorded during the three months ended March 31, 2023 and 2022. Sublease income is recorded net with the total operating lease costs in General and administrative expenses in the Condensed Consolidated Statements of Operations. The Company charters in third-party vessels and the Company is the lessee in these agreements under ASC 842. The Company has elected the practical expedient under ASC 842 to not recognize right-of-use assets and lease liabilities for short-term leases. During the three months ended March 31, 2023 and 2022, all charter-in agreements for third-party vessels were less than twelve months and considered short-term leases. |
STOCK-BASED COMPENSATION |
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STOCK-BASED COMPENSATION | 13 – STOCK-BASED COMPENSATION 2015 Equity Incentive Plan Stock Options The following table summarizes the stock option activity for the three months ended March 31, 2023:
The following table summarizes certain information about the options outstanding as of March 31, 2023:
As of March 31, 2023 and December 31, 2022, a total of 401,136 and 415,227 stock options were outstanding, respectively. The unamortized stock-based compensation balance of $47 as of March 31, 2023 is expected to be expensed $39 and $8 during the remainder of 2023 and during the year ending December 31, 2024, respectively. For the three months ended March 31, 2023 and 2022, the Company recognized amortization expense of the fair value of its stock options, which is included in General and administrative expenses, as follows:
Restricted Stock Units The Company has issued restricted stock units (“RSUs”) under the 2015 Plan to certain members of the Board of Directors and certain executives and employees of the Company, which represent the right to receive a share of common stock, or in the sole discretion of the Company’s Compensation Committee, the value of a share of common stock on the date that the RSU vests. As of March 31, 2023 and December 31, 2022, 784,467 and 612,300 shares of the Company’s common stock were outstanding in respect of the RSUs, respectively. Such shares will only be issued in respect of vested RSUs issued to directors when the director’s service with the Company as a director terminates. Such shares of common stock will only be issued to executives and employees when their RSUs vest under the terms of their grant agreements and the amended 2015 Plan. The RSUs that have been issued to certain members of the Board of Directors generally vest on the date of the annual shareholders meeting of the Company following the date of the grant. In lieu of cash dividends issued for vested and nonvested shares held by certain members of the Board of Directors, the Company will grant additional vested and nonvested RSUs, respectively, which are calculated by dividing the amount of the dividend by the closing price per share of the Company’s common stock on the dividend payment date and will have the same terms as other RSUs issued to members of the Board of Directors. The RSUs that have been issued to other individuals vest ratably on each of the or five year anniversaries of the determined vesting date. The table below summarizes the Company’s unvested RSUs for the three months ended March 31, 2023:
The total fair value of the RSUs that vested during the three months ended March 31, 2023 and 2022 was $3,369 and $2,655, respectively. The total fair value is calculated as the number of shares vested during the period multiplied by the fair value on the vesting date. The following table summarizes certain information of the RSUs unvested and vested as of March 31, 2023:
The Company is amortizing these grants over the applicable vesting periods, net of anticipated forfeitures. As of March 31, 2023, unrecognized compensation cost of $6,578 related to RSUs will be recognized over a weighted-average period of 3.54 years. For the three months ended March 31, 2023 and 2022, the Company recognized nonvested stock amortization expense for the RSUs, which is included in General and administrative expenses as follows:
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LEGAL PROCEEDINGS |
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LEGAL PROCEEDINGS | 14 – LEGAL PROCEEDINGS On December 14, 2022, a sub-charterer of the Genco Constellation asserted a claim for monetary losses in connection with alleged delays of the loading of their cargo, short loading, or both at the port of Longkou, China. Hizone Group Co. Ltd (“Hizone”) had sub-chartered the vessel from SCM Cooperation Limited, which had subchartered the vessel from BG Shipping Co. Limited, which in turn had chartered the vessel from us. A dispute arose due to the need to restow the cargo to ensure the safety of the crew and the vessel. Following the vessel’s arrival at Tema Harbour in Ghana, Hizone petitioned the Superior Court of Judicature to have the vessel arrested in connection with a claim alleging damages. The petition was granted on December 14, 2022 and although Genco offered security to release the vessel shortly thereafter, the vessel was only released at the end of February 2023. Moreover, Hizone petitioned the Superior Court of Judicature to have the vessel arrested again on February 2, 2023 on an allegedly different claim. The vessel was not generating revenue while it was subject to arrest. The Company believes that these claims are without merit and has valid defenses against them and is vigorously defending them while continuing to seek reimbursement of damages arising from the arrest of the vessel, including the recovery of lost revenue while arrested and reimbursement of legal fees. The Company obtained security from BG Shipping Co. Limited and is in the process of arbitration proceedings. From time to time, the Company may be subject to other legal proceedings and claims in the ordinary course of its business, principally personal injury and property casualty claims. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. The Company is not aware of any such legal proceedings or claims that it believes will have, individually or in the aggregate, a material effect on the Company, its financial condition, results of operations or cash flows. |
SUBSEQUENT EVENTS |
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SUBSEQUENT EVENTS | 15 – SUBSEQUENT EVENTS On April 3, 2023, the Company made a voluntary debt repayment of $8,750 under the $450 Million Credit Facility. On April 3, 2023, the Company’s Board of Directors awarded a grant of 1,630 RSUs to an individual under the 2015 Plan. On April 14, 2023, the Company’s Board of Directors awarded grants of 75,920 RSUs to certain individuals under the 2015 Plan. The awards generally vest ratably on each of the three year anniversaries of February 23, 2023. Additionally, on April 14, 2023, the Company’s Board of Directors awarded grants of 75,920 performance based restricted stock units (“PRSUs”) to certain individuals that are contingent upon the Company’s relative total shareholder return and return on invested capital for a three-year performance period ending December 31, 2025. The PRSUs, if earned, will vest during the first quarter of 2026. On May 3, 2023, the Company announced a regular quarterly dividend of $0.15 per share to be paid on or about May 23, 2023 to shareholders of record as of May 16, 2023. The aggregate amount of the dividend is expected to be approximately $6.5 million, which the Company anticipates will be funded from cash on hand at the time the payment is to be made.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Basis of presentation | Basis of presentation 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”), and the rules and regulations of the SEC that apply to interim financial statements, including the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the disclosures and footnotes normally included in complete consolidated financial statements prepared in conformity with U.S. GAAP. They should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2022 Annual Report on Form 10-K, filed with the SEC on February 22, 2023 (the “2022 10-K”). The accompanying Condensed Consolidated Financial Statements include the accounts of GS&T and its direct and indirect wholly-owned subsidiaries and GSSM. All intercompany accounts and transactions have been eliminated in consolidation. 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. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the operating results to be expected for the year ending December 31, 2023.
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Accounting estimates | Use of estimates 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, residual value of vessels, useful life of vessels, the fair value of time charters acquired, and the fair value of derivative instruments, if any. Actual results could differ from those estimates.
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Cash, cash equivalents and restricted cash | Cash, cash equivalents and restricted cash The Company considers highly liquid investments, such as money market funds and certificates of deposit with an original maturity of three months or less at the time of purchase to be cash equivalents. Current and non-current restricted cash includes cash that is restricted pursuant to our credit facilities. 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:
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Bunker swaps and forward fuel purchase agreements | Bunker swap and forward fuel purchase agreements From time to time, the Company may enter into fuel hedge agreements with the objective of reducing the risk of the effect of changing fuel prices. The Company has entered into bunker swap agreements and forward fuel purchase agreements. The Company’s bunker swap agreements and forward fuel purchase agreements do not qualify for hedge accounting treatment; therefore, any unrealized or realized gains and losses are recorded in the Condensed Consolidated Statements of Operations. Derivatives are Level 2 instruments in the fair value hierarchy. During the three months ended March 31, 2023 and 2022, the Company recorded $108 and $629 of realized gains in other (expense) income, respectively. During the three months ended March 31, 2023 and 2022, the Company recorded ($42) and $1,439 of unrealized (losses) gains in other (expense) income, respectively. The total fair value of the bunker swap agreements and forward fuel purchase agreements in an asset position as of March 31, 2023 and December 31, 2022 is $54 and $168, respectively, and are recorded in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets. The total fair value of the bunker swap agreements and forward fuel purchase agreements in a liability position as of March 31, 2023 and December 31, 2022 is $0 and $71, respectively, and are recorded in accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets.
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Voyage expense recognition | Voyage expense recognition In time charters and spot market-related time charters, operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. 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 and spot market-related time charters. 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 for certain time charter agreements where the inventory is subject to gains and losses. These differences in bunkers, including any lower of cost and net realizable value adjustments, resulted in a net (loss) gain of ($371) and $2,004 during the three months ended March 31, 2023 and 2022, respectively. Additionally, voyage expenses include the cost of bunkers consumed during short-term time charters pursuant to the terms of the time charter agreement. |
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CASH FLOW INFORMATION (Tables) |
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Schedule of cash flow information related to operating leases |
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EARNINGS PER SHARE (Tables) |
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DEBT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of Long-term debt |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of effective interest rate and the range of interest rates on the debt |
|
DERIVATIVE INSTRUMENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of interest cap agreements |
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Schedule of the effect of fair value and cash flow hedge accounting on the statement of operations |
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||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of interest rate cap assets |
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Components of AOCI included in the accompanying condensed consolidated balance sheet |
|
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair values and carrying values of the Company's financial instruments |
|
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCOUNTS PAYABLE AND ACCRUED EXPENSES. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accounts payable and accrued expenses |
|
VOYAGE REVENUES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
VOYAGE REVENUES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of voyage revenue |
|
STOCK-BASED COMPENSATION (Tables) - 2015 EIP Plan |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of nonvested stock amortization expense |
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Schedule of stock option activity |
The following table summarizes certain information about the options outstanding as of March 31, 2023:
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Restricted Stock Units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of nonvested stock amortization expense |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of nonvested restricted stock units |
The total fair value of the RSUs that vested during the three months ended March 31, 2023 and 2022 was $3,369 and $2,655, respectively. The total fair value is calculated as the number of shares vested during the period multiplied by the fair value on the vesting date. The following table summarizes certain information of the RSUs unvested and vested as of March 31, 2023:
|
GENERAL INFORMATION (Details) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2023
USD ($)
item
t
segment
|
Dec. 31, 2022
USD ($)
|
|
Segment reporting | ||
Number of Reportable Segments | segment | 1 | |
Drybulk Vessels | ||
Segment reporting | ||
Number of vessels in fleet | 44 | |
Capacity of vessels | t | 4,635,000 | |
Average age of vessels | 11 years 1 month 6 days | |
Capesize Drybulk Carriers | ||
Segment reporting | ||
Number of vessels in fleet | 17 | |
Ultramax Vessels | ||
Segment reporting | ||
Number of vessels in fleet | 15 | |
Supramax Vessels | ||
Segment reporting | ||
Number of vessels in fleet | 12 | |
GSSM | Variable Interest Entity | ||
Segment reporting | ||
Ownership percentage | 50.00% | 50.00% |
Investments used directly for operations | $ | $ 50 | $ 50 |
GSSM | Synergy | ||
Segment reporting | ||
Ownership by synergy | 50.00% | 50.00% |
Investments used directly for operations | $ | $ 50 | $ 50 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cash, cash equivalents and restricted cash (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|---|---|
Restricted Cash | ||||
Cash and cash equivalents | $ 44,439 | $ 58,142 | ||
Restricted cash - current | 5,643 | 5,643 | ||
Restricted cash - noncurrent | 315 | 315 | ||
Cash, cash equivalents and restricted cash | $ 50,397 | $ 64,100 | $ 49,071 | $ 120,531 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Bunker swaps and Forward Purchase Agreements (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Summary of Significant Accounting Policies | |||
Fair value of derivative instruments | $ 5,048 | $ 6,312 | |
Prepaid expenses and other current assets | Bunker Swap and Forward Fuel Purchase Agreements | |||
Summary of Significant Accounting Policies | |||
Fair value of derivative instruments | 54 | 168 | |
Accounts payable and accrued expenses | Bunker Swap and Forward Fuel Purchase Agreements | |||
Summary of Significant Accounting Policies | |||
Fair value of liability position | 0 | $ 71 | |
Other income (expense) | Bunker Swap and Forward Fuel Purchase Agreements | |||
Summary of Significant Accounting Policies | |||
Realized gains | 108 | $ 629 | |
Unrealized (losses) gains | $ (42) | $ 1,439 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Voyage expense recognition (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Voyage expense recognition | ||
Net (loss) gain on purchase and sale of bunker fuel and net realizable value adjustments | $ (371) | $ 2,004 |
CASH FLOW INFORMATION - Non-cash (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Non-cash investing and financing activities | ||
Reclassification from deposits on vessels to vessels, net of accumulated depreciation | $ 18,543 | |
Cash paid for interest | $ 3,331 | 1,793 |
Cash received from settlement of interest cap agreements | 1,827 | 0 |
Accounts payable and accrued expenses | ||
Non-cash investing and financing activities | ||
Purchases of vessels and ballast water treatment systems | 766 | 615 |
Purchase of other fixed assets | 553 | 716 |
Non-cash financing activities cash dividends payable | $ 906 | $ 322 |
CASH FLOW INFORMATION - Stock-Based Compensation (Details) - 2015 EIP Plan - Restricted Stock Units - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Feb. 21, 2023 |
Feb. 23, 2022 |
Mar. 31, 2023 |
|
Non-cash investing and financing activities | |||
Granted (in shares) | 68,758 | 201,934 | 76,425 |
Aggregate fair value | $ 1,250 | $ 3,950 |
CASH FLOW INFORMATION - Lease payments (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 557 | $ 557 |
VESSEL ACQUISITIONS AND DISPOSITIONS (Details) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2023
USD ($)
|
Mar. 31, 2022
USD ($)
|
Dec. 31, 2022
USD ($)
|
May 18, 2021
USD ($)
item
|
|
VESSEL ACQUISITIONS | ||||
Restricted cash, current | $ 5,643 | $ 5,643 | ||
Secured Debt | $450 Million Credit Facility | ||||
VESSEL ACQUISITIONS | ||||
Restricted Cash, Current | $ 5,643 | $ 5,643 | ||
Period for which sales proceeds from vessels will remain as restricted cash | 360 days | |||
Collateral vessel replacement period | 360 days | |||
Agreement To Purchase Ultramax Newbuild Vessels | Genco Mary and Genco Laddey | ||||
VESSEL ACQUISITIONS | ||||
Number of vessels purchased under option to be acquired per purchase agreement | item | 2 | |||
Capacity of vessels | item | 61,000 | |||
Purchase price per vessel | $ 29,170 | |||
Remaining purchase price of vessels paid | $ 40,838 | |||
Capitalized interest associated with new building contracts | $ 0 | $ 5 |
EARNINGS PER SHARE (Details) - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Common shares outstanding, basic: | ||
Weighted average common shares outstanding, basic | 42,632,059 | 42,166,106 |
Common shares outstanding, diluted: | ||
Weighted average common shares outstanding, basic | 42,632,059 | 42,166,106 |
Weighted-average common shares outstanding, diluted | 43,097,362 | 42,867,349 |
Stock Options | ||
Common shares outstanding, diluted: | ||
Dilutive effect of share based arrangements | 214,611 | 440,550 |
Restricted Stock Units | ||
Common shares outstanding, diluted: | ||
Dilutive effect of share based arrangements | 250,692 | 260,693 |
RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
RELATED PARTY TRANSACTIONS | ||
Related party transactions | $ 0 | $ 0 |
DEBT - Components of Long-term Debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
DEBT | ||
Principal amount | $ 162,250 | $ 171,000 |
Less: Unamortized deferred financing costs | (5,661) | (6,079) |
Long-term debt, net | $ 156,589 | $ 164,921 |
DEBT - 450 Million Credit Facility (Details) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Aug. 03, 2021
USD ($)
facility
|
Mar. 31, 2023
USD ($)
|
Mar. 31, 2022
USD ($)
|
|
Debt | |||
Repayment of secured debt | $ 8,750 | $ 48,750 | |
$450 Million Credit Facility | Secured Debt | |||
Debt | |||
Maximum borrowing capacity | $ 450,000 | 450,000 | |
Term of facilities | 5 years | ||
Number of prior credit facilities refinanced into one facility | facility | 2 | ||
Remaining borrowing capacity | 209,960 | ||
Repayment of secured debt | $ 8,750 | $ 48,750 | |
Revolving credit facility | Secured Debt | |||
Debt | |||
Maximum borrowing capacity | $ 300,000 | ||
Term loan facility | Secured Debt | |||
Debt | |||
Maximum borrowing capacity | $ 150,000 |
DEBT - Interest Rates (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Interest rates on debt | ||
Effective Interest Rate (as a percent) | 7.76% | 2.99% |
Minimum | ||
Interest rates on debt | ||
Range of interest rates (excluding unused commitment fees) | 6.43% | 2.26% |
Maximum | ||
Interest rates on debt | ||
Range of interest rates (excluding unused commitment fees) | 7.00% | 2.61% |
DERIVATIVE INSTRUMENTS - Fair Value and Cash Flow Hedge (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
DERIVATIVE INSTRUMENTS | ||
Total amounts of income and expense line items presented in the statement of operations in which the effects of fair value or cash flow hedges are recorded | $ 2,029 | $ 2,242 |
Gain or (loss) on cash flow hedging relationships in Subtopic 815-20: | ||
Interest contracts: Amount of gain or (loss) reclassified from AOCI to income | (1,724) | |
Interest contracts: Premium excluded and recognized on an amortized basis | $ 39 | $ 43 |
DERIVATIVE INSTRUMENTS - Interest Rate Cap Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Fair value of derivative instruments - current | $ 5,048 | $ 6,312 |
Fair value of derivative instruments - noncurrent | 423 | |
Interest Rate Cap | Derivatives designated as hedging instruments | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Fair value of derivative instruments - current | 4,855 | 6,112 |
Fair value of derivative instruments - noncurrent | 381 | |
Interest Rate Cap | Derivatives not designated as hedging instruments | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Fair value of derivative instruments - current | $ 193 | 200 |
Fair value of derivative instruments - noncurrent | $ 42 |
DERIVATIVE INSTRUMENTS - AOCI (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
DERIVATIVE INSTRUMENTS | |
Balance at the beginning of the period | $ 6,480 |
Amount recognized in OCI on derivative, intrinsic | (1,822) |
Amount recognized in OCI on derivative, excluded | 194 |
Balance at the end of the period | $ 4,852 |
FAIR VALUE OF FINANCIAL INSTRUMENTS - RECURRING (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Fair value of financial instruments | ||
Principal amount of floating rate debt | $ 162,250 | $ 171,000 |
Carrying Value | ||
Fair value of financial instruments | ||
Cash and cash equivalents | 44,439 | 58,142 |
Restricted cash | 5,958 | 5,958 |
Principal amount of floating rate debt | 162,250 | 171,000 |
Fair value | ||
Fair value of financial instruments | ||
Cash and cash equivalents | 44,439 | 58,142 |
Restricted cash | 5,958 | 5,958 |
Principal amount of floating rate debt | $ 162,250 | $ 171,000 |
FAIR VALUE OF FINANCIAL INSTRUMENTS - NONRECURRING (Details) - Fair Value, Measurements, Nonrecurring - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Fair value of financial instruments | |||
Impairment of vessel assets | $ 0 | $ 0 | |
Impairment of operating lease right of use asset | 0 | $ 0 | |
Level 3 | |||
Fair value of financial instruments | |||
Financial assets | 0 | $ 0 | |
Financial liabilities | $ 0 | $ 0 |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
ACCOUNTS PAYABLE AND ACCRUED EXPENSES. | ||
Accounts payable | $ 14,595 | $ 16,162 |
Accrued general and administrative expenses | 2,642 | 6,171 |
Accrued vessel operating expenses | 9,738 | 7,142 |
Total accounts payable and accrued expenses | $ 26,975 | $ 29,475 |
VOYAGE REVENUES (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Income statement | ||
Total revenues | $ 94,391 | $ 136,227 |
Voyage | ||
Income statement | ||
Lease revenue | 36,967 | 55,804 |
Spot market voyage revenue | 57,424 | 80,423 |
Total revenues | $ 94,391 | $ 136,227 |
LEASES - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
LEASES | ||
Sublease income | $ 306 | $ 306 |
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