Company Quick10K Filing
Eagle Bulk Shipping
Price5.00 EPS-0
Shares71 P/E-88
MCap357 P/FCF19
Net Debt348 EBIT18
TEV706 TEV/EBIT40
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-12
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-06
10-Q 2019-03-31 Filed 2019-05-08
10-K 2018-12-31 Filed 2019-03-13
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-12
10-Q 2017-09-30 Filed 2017-11-03
10-Q 2017-06-30 Filed 2017-08-08
10-Q 2017-03-31 Filed 2017-05-09
10-K 2016-12-31 Filed 2017-03-31
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-03-31
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-14
10-Q 2015-03-31 Filed 2015-05-15
10-K 2014-12-31 Filed 2015-04-02
10-Q 2014-09-30 Filed 2014-11-14
10-Q 2014-06-30 Filed 2014-08-14
10-Q 2014-03-31 Filed 2014-05-15
10-K 2013-12-31 Filed 2014-03-31
10-Q 2013-09-30 Filed 2013-11-14
10-Q 2013-06-30 Filed 2013-08-12
10-Q 2013-03-31 Filed 2013-05-15
10-K 2012-12-31 Filed 2013-04-01
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-10
10-K 2011-12-31 Filed 2012-03-15
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-05
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-03-04
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-03-05
8-K 2020-06-24
8-K 2020-06-19
8-K 2020-06-09
8-K 2020-05-08
8-K 2020-05-07
8-K 2020-04-28
8-K 2020-03-27
8-K 2020-03-05
8-K 2020-03-04
8-K 2020-01-27
8-K 2019-11-07
8-K 2019-11-06
8-K 2019-10-07
8-K 2019-08-29
8-K 2019-08-02
8-K 2019-07-30
8-K 2019-07-29
8-K 2019-07-25
8-K 2019-07-24
8-K 2019-06-28
8-K 2019-06-07
8-K 2019-05-08
8-K 2019-05-07
8-K 2019-04-29
8-K 2019-03-29
8-K 2019-03-06
8-K 2019-03-05
8-K 2019-01-31
8-K 2019-01-23
8-K 2019-01-22
8-K 2018-12-27
8-K 2018-11-20
8-K 2018-11-07
8-K 2018-11-06
8-K 2018-11-06
8-K 2018-10-23
8-K 2018-10-02
8-K 2018-09-04
8-K 2018-08-08
8-K 2018-08-07
8-K 2018-06-08
8-K 2018-05-14
8-K 2018-05-10
8-K 2018-05-09
8-K 2018-04-27
8-K 2018-03-30
8-K 2018-03-29
8-K 2018-03-06
8-K 2018-03-05
8-K 2018-03-01
8-K 2018-02-28
8-K 2018-02-13
8-K 2018-01-03

EGLE 10Q Quarterly Report

Part I: Financial Information
Note 1. Basis of Presentation and General Information
Note 2. Recent Accounting Pronouncements
Note 3. Vessels
Note 4. Debt
Note 5. Derivative Instruments
Note 6. Fair Value Measurements
Note 7. Commitments and Contingencies
Note 8. Net (Loss)/Income per Common Share
Note 9. Stock Incentive Plans
Note 10. Cash, Cash Equivalents, and Restricted Cash
Note 11. Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part Ii: Other Information
Item 1 - Legal Proceedings
Item 1A - Risk Factors
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
Item 3 - Defaults Upon Senior Securities
Item 4 - Mine Safety Disclosures
Item 5 - Other Information
Item 6 - Exhibits
EX-10.1 executedsecondamendment-.htm
EX-31.1 a2020q110-qexhibit311.htm
EX-31.2 a2020q110-qexhibit312.htm
EX-32.1 a2020q110-qexhibit321.htm
EX-32.2 a2020q110-qexhbit322.htm

Eagle Bulk Shipping Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1.81.41.10.70.40.02012201420172020
Assets, Equity
0.10.0-0.0-0.1-0.1-0.22012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
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 001-33831
EAGLE BULK SHIPPING INC.
(Exact name of Registrant as specified in its charter)
Republic of the Marshall Islands98-0453513
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
300 First Stamford Place, 5th floor
Stamford, Connecticut 06902
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (203) 276-8100

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareEGLEThe Nasdaq Stock Market LLC
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.
Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).



Yes
No
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.
Large accelerated filer  ☐
Accelerated filer
 
Non-Accelerated filer
Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided 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
No
 ☒
Number of shares of registrant’s common stock outstanding as of May 8, 2020: 76,749,822
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 ☐












TABLE OF CONTENTS

Page
PART IFINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS (Unaudited)
ITEM 2.
ITEM 3.
ITEM 4.
PART IIOTHER INFORMATION
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
SIGNATURES




CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the "Quarterly Report on Form 10-Q") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbor provided for under these sections. These statements may include words such as “believe,” “estimate,” “project,” “intend,” “expect,” “plan,” “anticipate,” and similar expressions in connection with any discussion of the timing or nature of future operating or financial performance or other events. Forward-looking statements reflect management’s current expectations and observations with respect to future events and financial performance.
         Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected, or implied by those forward-looking statements. The principal factors that affect our financial position, results of operations and cash flows include, charter market rates, which have declined significantly from historic highs, periods of charter hire, vessel operating expenses and voyage costs, which are incurred primarily in U.S. dollars, depreciation expenses, which are a function of the cost of our vessels, significant vessel improvement costs and our vessels' estimated useful lives, and financing costs related to our indebtedness. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors which could include the following: (i) changes in demand in the drybulk market, including, without limitation, changes in production of, or demand for, commodities and bulk cargoes, generally or in particular regions; (ii) greater than anticipated levels of drybulk vessel newbuilding orders or lower than anticipated rates of drybulk vessel scrapping; (iii) changes in rules and regulations applicable to the drybulk industry, including, without limitation, legislation adopted by international bodies or organizations such as the International Maritime Organization and the European Union (the “EU”) or by individual countries; (iv) actions taken by regulatory authorities including without limitation the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”); (v) changes in trading patterns significantly impacting overall drybulk tonnage requirements; (vi) changes in the typical seasonal variations in drybulk charter rates; (vii) changes in the cost of other modes of bulk commodity transportation; (viii) changes in general domestic and international political conditions; (ix) changes in the condition of the Company's vessels or applicable maintenance or regulatory standards (which may affect, among other things, our anticipated dry docking costs); (x) significant deterioration in charter hire rates from current levels or the inability of the Company to achieve its cost-cutting measures; (xi) the duration and impact of the novel coronavirus ("COVID-19") pandemic; (xii) the relative cost and availability of low and high sulfur fuel oil; (xiii) our ability to realize the economic benefits or recover the cost of the scrubbers we have installed; (xiv) any legal proceedings which we may be involved from time to time; and other factors listed from time to time in our filings with the Securities and Exchange Commission (the “SEC”). This discussion also includes statistical data regarding world drybulk fleet and order book and fleet age. We generated some of this data internally, and some were obtained from independent industry publications and reports that we believe to be reliable sources. We have not independently verified this data nor sought the consent of any organizations to refer to their reports in this Quarterly Report on Form 10-Q. We disclaim any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.



PART I: FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019
(Unaudited)
(in U.S. dollars except share and per share data)

March 31, 2020December 31, 2019
ASSETS:
Current assets:
Cash and cash equivalents$69,229,926  $53,583,898  
Restricted cash - current2,917,885  5,471,470  
Accounts receivable, net of a reserve of $2,760,679 and $2,472,345, respectively
18,155,336  19,982,871  
Prepaid expenses4,019,234  4,631,416  
Inventories15,360,834  15,824,278  
Derivative asset and other current assets14,753,326  1,039,430  
Total current assets124,436,541  100,533,363  
Noncurrent assets: 
Vessels and vessel improvements, at cost, net of accumulated depreciation of $163,508,323 and $153,029,544, respectively
858,807,828  835,959,084  
Operating lease right-of-use assets 17,185,019  20,410,037  
Other fixed assets, net of accumulated depreciation of $920,296 and $832,541, respectively
690,558  740,654  
Restricted cash - noncurrent74,917  74,917  
Deferred drydock costs, net20,772,193  17,495,270  
Deferred financing costs - Super Senior Facility  166,111  
Advance for scrubbers and ballast water systems and other assets 4,500,971  26,707,700  
Total noncurrent assets902,031,486  901,553,773  
Total assets$1,026,468,027  $1,002,087,136  
LIABILITIES & STOCKHOLDERS' EQUITY 
Current liabilities: 
Accounts payable$10,239,878  $13,483,397  
Accrued interest7,797,292  5,321,089  
Other accrued liabilities17,346,898  28,996,836  
Fair value of derivative instruments - current3,314,556  756,229  
Current portion of operating lease liabilities 13,346,261  13,255,978  
Unearned charter hire revenue3,232,360  4,692,259  
Current portion of long-term debt37,194,297  35,709,394  
Total current liabilities92,471,542  102,215,182  
Noncurrent liabilities:
Norwegian Bond Debt, net of debt discount and debt issuance costs176,221,096  175,867,310  
Super Senior Facility, net of debt issuance costs2,355,465    
New Ultraco Debt Facility, net of debt issuance costs134,313,009  141,396,770  
Revolver loan under New Ultraco Debt Facility45,000,000    
Convertible Bond Debt, net of debt discount and debt issuance costs 93,730,654  92,803,144  
Fair value of derivative instruments - non current177,008    
Operating lease liabilities 4,821,044  8,301,793  
Total noncurrent liabilities456,618,276  418,369,017  
Total liabilities549,089,818  520,584,199  
Commitments and contingencies
Stockholders' equity: 
Preferred stock, $.01 par value, 25,000,000 shares authorized, none issued as of March 31, 2020 and December 31, 2019
    
Common stock, $0.01 par value, 700,000,000 shares authorized, 71,939,885 and 71,502,206 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively
719,399  715,022  
Additional paid-in capital917,532,791  917,862,269  
Accumulated deficit(440,602,113) (437,074,354) 
Accumulated other comprehensive loss(271,868)   
Total stockholders' equity477,378,209  481,502,937  
Total liabilities and stockholders' equity$1,026,468,027  $1,002,087,136  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
F-2


EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019
(Unaudited)
(in U.S. dollars except share and per share data)


Three Months Ended
March 31, 2020March 31, 2019
Revenues, net $74,378,319  $77,389,597  
Voyage expenses26,564,358  25,906,140  
Vessel expenses23,700,109  20,093,706  
Charter hire expenses6,040,939  11,491,906  
Depreciation and amortization12,466,483  9,407,108  
General and administrative expenses7,961,072  8,409,919  
Gain on sale of vessels   (4,106,547) 
Total operating expenses76,732,961  71,202,232  
Operating (loss)/income(2,354,642) 6,187,365  
Interest expense9,191,815  6,762,003  
Interest income(156,857) (434,318) 
Loss on debt extinguishment   2,268,452  
Realized and unrealized (gain)/loss on derivative instruments, net(7,861,841) (2,438,255) 
Total other expense, net1,173,117  6,157,882  
Net (loss)/income$(3,527,759) $29,483  
Weighted average shares outstanding:
Basic71,869,152  71,283,301  
Diluted71,869,152  72,070,868  
Per share amounts:
Basic net (loss)/income$(0.05) $  
Diluted net (loss)/income$(0.05) $  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-3


EAGLE BULK SHIPPING INC. AND SUBSIDIARIES


Condensed Consolidated Statements of Comprehensive (loss)/income
For the Three Months Ended March 31, 2020 and 2019
(Unaudited)

Three Months Ended
March 31, 2020March 31, 2019
Net (loss)/income $(3,527,759) $29,483  
Other comprehensive loss
Net unrealized loss on cash flow hedges(271,868)   
Comprehensive (loss)/income $(3,799,627) $29,483  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
F-4


EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity
For the Three Months Ended March 31, 2020 and 2019
(Unaudited)
(in U.S. dollars except share and per share data)

Common
Stock
Common
Stock
Amount
Additional
Paid-in
Capital
Accumulated DeficitAccumulated other comprehensive lossTotal Stockholders’
Equity
Balance at December 31, 201971,502,206  $715,022  $917,862,269  $(437,074,354) $  $481,502,937  
Net loss—  —  (3,527,759) —  (3,527,759) 
Issuance of shares due to vesting of restricted shares 437,679  4,377  (4,377) —  —  —  
Unrealized loss on cash flow hedges—  —  —  —  (271,868) (271,868) 
Cash used to settle net share equity awards—  —  (1,161,301) —  —  (1,161,301) 
Stock-based compensation —  —  836,200  —  —  836,200  
Balance at March 31, 202071,939,885  $719,399  $917,532,791  $(440,602,113) $(271,868) $477,378,209  



Common
Stock
Common
Stock
Amount
Additional
Paid-in
Capital
Accumulated DeficitTotal Stockholders’
Equity
Balance at December 31, 201871,055,400  $710,555  $894,272,533  $(415,377,239) $479,605,849  
Net income—  —  —  29,483  29,483  
Issuance of shares due to vesting of restricted shares293,011  2,929  (2,929) —  —  
Cash used to settle net share equity awards—  —  (877,161) —  (877,161) 
Stock-based compensation—  —  1,445,469  —  1,445,469  
Balance at March 31, 201971,348,411  $713,484  $894,837,912  $(415,347,756) $480,203,640  



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
F-5


EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019
(Unaudited)
Three Months Ended
March 31, 2020March 31, 2019
Cash flows from operating activities:
Net (loss)/income$(3,527,759) $29,483  
Adjustments to reconcile net (loss)/income to net cash provided by operating activities:
Depreciation10,566,534  8,168,411  
Amortization of operating lease right-of-use assets3,225,018  3,271,111  
Amortization of deferred drydocking costs1,899,949  1,238,698  
Amortization of debt discount and debt issuance costs1,503,866  503,716  
Loss on debt extinguishment   2,268,452  
Gain on sale of vessels  (4,106,547) 
Net unrealized gain on fair value of derivatives(7,157,801) (2,958,154) 
Stock-based compensation expense836,200  1,445,469  
Drydocking expenditures(5,176,872) (2,527,553) 
Changes in operating assets and liabilities:
Accounts payable(3,427,047) 1,467,508  
Accounts receivable (2,020,325) 810,103  
Accrued interest2,476,203  5,255,356  
Inventories463,444  2,999,999  
Operating lease liabilities short and long-term(3,390,466) (3,643,179) 
Derivative asset, other current and non-current assets(4,092,628) 1,084,257  
Other accrued liabilities and other non-current liabilities(3,755,411) (2,306,786) 
Prepaid expenses612,182  694,789  
Unearned revenue(1,459,899) (1,753,257) 
Net cash (used in)/provided by operating activities(12,424,812) 11,941,876  
Cash flows from investing activities:
Purchase of vessel and vessel improvements(466,556) (18,465,609) 
Purchase of scrubbers and ballast water systems(18,087,278) (11,244,778) 
Proceeds from hull and machinery insurance claims3,569,901    
Proceeds from sale of vessels  12,820,557  
Purchase of other fixed assets(37,659) (23,924) 
Net cash used in investing activities(15,021,592) (16,913,754) 
Cash flows from financing activities:
Repayment of revolver loan under New First Lien Facility  (5,000,000) 
Proceeds from the revolver loan under New First Lien Facility  5,000,000  
Repayment of Original Ultraco Debt Facility  (82,600,000) 
Proceeds from New Ultraco Debt Facility  153,440,000  
Repayment of term loan under New Ultraco Debt Facility(5,813,671)   
Proceeds from revolver facility under New Ultraco Debt Facility45,000,000    
Proceeds from Super Senior Facility2,500,000    
Repayment of New First Lien Facility - term loan  (60,000,000) 
Debt issuance costs paid to lenders on New Ultraco Debt Facility  (3,156,250) 
Cash used to settle net share equity awards(1,161,301) (877,161) 
F-6


Other financing costs 13,819    
Net cash provided by financing activities40,538,847  6,806,589  
Net increase in cash, cash equivalents and Restricted cash13,092,443  1,834,711  
Cash, cash equivalents and Restricted cash at beginning of period59,130,285  78,163,638  
Cash, cash equivalents and Restricted cash at end of period$72,222,728  $79,998,349  
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest$5,211,746  $901,516  
Accruals for scrubbers and ballast water treatment systems included in Accounts payable and Other accrued liabilities$8,669,169  $4,749,057  
Accruals for debt issuance costs included in Other accrued liabilities$  $300,000  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
F-7


EAGLE BULK SHIPPING INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Basis of Presentation and General Information
The accompanying condensed consolidated financial statements include the accounts of Eagle Bulk Shipping Inc. and its wholly-owned subsidiaries (collectively, the “Company,” “we,” “our” or similar terms). The Company is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership, charter and operation of drybulk vessels. The Company’s fleet is comprised of Supramax and Ultramax drybulk carriers and the Company operates its business in one business segment.
As of March 31, 2020, the Company owned and operated a modern fleet of 50 oceangoing vessels, including 30 Supramax and 20 Ultramax vessels with a combined carrying capacity of 2,946,188 deadweight tonnage ("dwt") and an average age of approximately 8.9 years. Additionally, the Company charters-in three Ultramax vessels for periods ranging between one to two years, and also charters-in vessels on a short term basis for a period less than 12 months.
For the three months ended March 31, 2020 and 2019, the Company’s charterers did not individually account for more than 10% of the Company’s gross charter revenue during those periods.
The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), and the rules and regulations of the SEC that apply to interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes normally included in 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 2019 Annual Report on Form 10-K, filed with the SEC on March 12, 2020.
The accompanying condensed consolidated financial statements are unaudited and include all adjustments (consisting of normal recurring adjustments) that management considers necessary for a fair presentation of its condensed consolidated financial position and results of operations for the interim periods presented.
The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the entire year.
On March 11, 2020, the World Health Organization declared the recent novel coronavirus (“COVID-19”) outbreak a pandemic. In response to the pandemic, many countries, ports and organizations, including those where the Company conducts a large part of its operations, have implemented measures to combat the pandemic, such as quarantines and travel restrictions. Such measures have caused and will likely continue to cause severe trade disruptions. The extent to which COVID-19 will impact the Company's results of operations and financial condition, including possible vessel impairments, will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the virus and the actions to contain or treat its impact, among others. Accordingly, an estimate of the impact cannot be made at this time.

As of January 1, 2020, we adopted ASU No. 2016-13, "Financial Instruments—Credit Losses" ("ASU 2016-13"). ASU 2016-13 amends the current financial instrument impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The adoption of the accounting standard did not have any material impact on our condensed consolidated financial statements.

The preparation of condensed consolidated 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 disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates and assumptions of the Company are residual value of vessels, the useful lives of vessels, the value of stock-based compensation, estimated losses on our trade receivables, fair value of Convertible Bond Debt (as defined below) and its equity component, fair value of right-of-use assets and lease liabilities and the fair value of derivatives. Actual results could differ from those estimates.

Note 2. Recent Accounting Pronouncements



F-8



Leases

        On January 1, 2019, the Company adopted Accounting Standards Update 2016-02, "Leases", ("ASC 842"). ASC 842 revises the accounting for leases. Under the new lease standard, lessees are required to recognize a right-of-use asset and a lease liability for substantially all leases. The new lease standard will continue to classify leases as either financing or operating, with classification affecting the pattern of expense recognition. The accounting applied by a lessor under the new guidance will be substantially equivalent to current lease accounting guidance.

        The following are the type of contracts that fall under ASC 842:

Time charter out contracts
        
        In a time charter contract, the vessel is hired by the charterer for a specified period of time in exchange for consideration which is based on a daily hire rate. The charterer has the full discretion over the ports visited, shipping routes and vessel speed. The contract/charter party generally provides typical warranties regarding the speed and performance of the vessel. The charter party generally has some owner protective restrictions such that the vessel is sent only to safe ports by the charterer, subject always to compliance with applicable sanction laws, and carry only lawful or non-hazardous cargo. In a time charter contract, the Company is responsible for all the costs incurred for running the vessel such as crew costs, vessel insurance, repairs and maintenance and lubes. The charterer bears the voyage related costs such as bunker expenses, port charges and canal tolls during the hire period. The performance obligations in a time charter contract are satisfied over the term of the contract beginning when the vessel is delivered to the charterer until it is redelivered back to the Company. The charterer generally pays the charter hire in advance of the upcoming contract period. The Company determined that all time charter contracts are considered operating leases and therefore fall under the scope of ASC 842 because: (i) the vessel is an identifiable asset; (ii) the Company does not have substantive substitution rights; and (iii) the charterer has the right to control the use of the vessel during the term of the contract and derives the economic benefits from such use.

        The transition guidance associated with ASC 842 allows for certain practical expedients to the lessors. The Company elected not to separate the lease and non-lease components included in the time charter revenue because the pattern of revenue recognition for the lease and non-lease components (included in the daily hire rate) is the same. The daily hire rate represents the hire rate for a bare boat charter as well as the compensation for expenses incurred running the vessel such as crewing expense, repairs, insurance, maintenance and lubes. Both the lease and non-lease components are earned by passage of time.

        The adoption of ASC 842 did not materially impact our accounting for time charter out contracts. The revenue generated from time charter out contracts is recognized on a straight-line basis over the term of the respective time charter agreements, which are recorded as part of revenues, net in our Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019.

Time charter-in contracts

        The Company charters in vessels to supplement our own fleet and employs them both on time charters and voyage charters. The time charter-in contracts range in lease terms from 30 days to 2 years. The Company elected the practical expedient of ASC 842 that allows for time charter-in contracts with an initial lease term of less than 12 months to be excluded from the operating lease right-of-use assets and lease liabilities recognized on our Condensed Consolidated Balance Sheet as of January 1, 2019. The Company recognized the operating lease right-of-use assets and the corresponding lease liabilities on the Condensed Consolidated Balance sheet for time charter-in contracts greater than 12 months on the date of adoption of ASC 842. The Company will continue to recognize the lease payments for all operating leases as charter hire expenses on the condensed consolidated statements of operations on a straight-line basis over the lease term.

        Under ASC 842, leases are classified as either finance or operating arrangements, with such classification affecting the pattern and classification of expense recognition in an entity's income statement. For operating leases, ASC 842 requires recognition in an entity’s income statement of a single lease expense, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Right-of-use assets represent a right to use an underlying asset for the lease term and the related lease liability represents an obligation to make lease payments pursuant to the contractual terms of the lease agreement.

        At lease commencement, a lessee must develop a discount rate to calculate the present value of the lease payments so that it can determine lease classification and measure the lease liability. When determining the discount rate to be used at lease commencement, a lessee must use the rate implicit in the lease unless that rate cannot be readily determined. When the rate
F-9


implicit in the lease cannot be readily determined, the lessee should use its incremental borrowing rate. The incremental borrowing rate is the rate that reflects the interest a lessee would have to pay to borrow funds on a collateralized basis over a similar term and in a similar economic environment. The Company determined that the time charter-in contracts do not contain an implicit borrowing rate. Therefore, the Company arrived at the incremental borrowing rate by determining the Company's implied credit rating and the yield curve for debt as of January 1, 2019. The Company then interpolated the yield curve to determine the incremental borrowing rate for each lease based on the remaining lease term on the specific lease. Based on the above methodology, the Company's incremental borrowing rates ranged from 5.05% to 6.08% for the five lease contracts for which the Company recorded operating lease right-of-use assets and corresponding lease liabilities.

        The Company has time charter-in contracts for three Ultramax vessels which are greater than 12 months as of the date of adoption of ASC 842. A brief description of each of these contracts is below:

        (i) The Company entered into an agreement effective April 28, 2017, to charter-in a 61,400 dwt, 2013 built Japanese vessel for approximately four years with options for two additional years. The hire rate for the first four years is $12,800 per day and the hire rate for the first optional year is $13,800 per day and $14,300 per day for the second optional year. The Company determined that it will not exercise the existing options under this contract and therefore the options are not included in the calculation of the operating lease right-of-use asset. In addition, the Company’s fair value below contract value of time charters acquired of $1.8 million as of December 31, 2018, which related to the unamortized value of a prior charter with the same counterparty that had been recorded at the time of the Company’s emergence from bankruptcy, was offset against the corresponding right of use asset on this lease as of January 1, 2019.
        (ii) On May 4, 2018, the Company entered into an agreement to charter-in a 61,425 dwt 2013 built Ultramax vessel for three years with an option for an additional two years. The hire rate for the first three years is $12,700 per day and $13,750 per day for the first year option and $14,750 per day for the second year option. The Company took delivery of the vessel in the third quarter of 2018. The Company determined that it will not exercise the existing options under this contract and therefore the options are not included in the calculation of the operating lease right-of-use asset.
        (iii) On December 9, 2018, the Company entered into an agreement to charter-in a 62,487 dwt 2016 built Ultramax vessel for two years. The hire rate for the vessel until March 2020 is $14,250 per day and $15,250 per day thereafter. The Company took delivery of the vessel in the fourth quarter of 2018. The Company elected not to exercise the existing options under this contract and therefore the options are not included in the calculation of the operating lease right-of-use asset. On December 25, 2019, the Company renegotiated the lease terms for another year at a hire rate of $11,600 per day. The Company accounted for this as a lease modification on December 25, 2019 and increased its lease liability and right-of-use asset on its consolidated balance sheet as of December 31, 2019 by $4.5 million.
Office leases

        On October 15, 2015, the Company entered into a new commercial lease agreement as a subtenant for office space in Stamford, Connecticut. The lease is effective from January 2016 through June 2023, with an average annual rent of $0.4 million. The lease is secured by a cash collateral of $74,917 which is recorded as restricted cash in the accompanying condensed consolidated balance sheets. In November 2018, the Company entered into a lease office agreement in Singapore, which expires in October 2021, with an average annual rent of $0.3 million. The Company determined the two office leases to be operating leases and recorded the lease expense as part of General and administrative expenses in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019.
Lease Disclosures Under ASC 842
The objective of the disclosure requirements under ASC 842 is to enable users of an entity’s financial statements to assess the amount, timing, and uncertainty of cash flows arising from lease arrangements. In addition to the supplemental qualitative leasing disclosures included above, below are quantitative disclosures that are intended to meet the stated objective of ASC 842.

Operating lease right-of-use assets and lease liabilities as of March 31, 2020 and December 31, 2019 are as follows:

F-10


DescriptionLocation in Balance Sheet
March 31, 2020 (1)
December 31, 2019 (1)
Assets:
Chartered-in contracts greater than 12 monthsOperating lease right-of-use assets$15,370,956  $18,442,965  
Office leasesOperating lease right-of-use assets1,814,063  1,967,072  
$17,185,019  $20,410,037  
Liabilities:
Chartered-in contracts greater than 12 monthsCurrent portion of operating lease liabilities$12,700,708  $12,622,524  
Office leasesCurrent portion of operating lease liabilities645,553  633,454  
Lease liabilities - current portion$13,346,261  $13,255,978  
Chartered-in contracts greater than 12 monthsOperating lease liabilities$3,659,302  $6,974,943  
Office leasesOperating lease liabilities1,161,742  1,326,850  
Lease liabilities - long term$4,821,044  $8,301,793  


(1) The Operating lease right-of-use assets and Operating lease liabilities represent the present value of lease payments for the remaining term of the lease. The discount rate used ranged from 5.05% to 6.08%. The weighted average discount rate used to calculate the lease liability was 5.50%.

The table below presents the components of the Company’s lease expenses and sub-lease income on a gross basis earned from chartered-in contracts greater than 12 months for the three months ended March 31, 2020 and 2019.

Three Months Ended
DescriptionLocation in Statement of Operations
March 31, 2020
March 31, 2019
Lease expense for chartered-in contracts less than 12 monthsCharter hire expenses$2,748,414  $8,360,743  
Lease expense for chartered-in contracts greater than 12 monthsCharter hire expenses3,292,525  3,131,163  
$6,040,939  $11,491,906  
Lease expense for office leasesGeneral and administrative expenses181,412  178,000  
Sub lease income from chartered-in contracts greater than 12 months *Revenues, net$3,997,224  $3,082,752  

* The sub-lease income represents only time charter revenue earned on the chartered-in contracts greater than 12 months. There is additional revenue earned from voyage charters on the same chartered-in contracts which is recorded in Revenues, net in our Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019.

The cash paid for operating leases with terms greater than 12 months is $3.6 million and $3.7 million for the three months ended March 31, 2020 and 2019, respectively.

The Company did not enter into any operating leases greater than 12 months for the three months ended March 31, 2020.

The weighted average remaining lease term on our chartered-in contracts greater than 12 months is 17.5 months.

The table below provides the total amount of lease payments on an undiscounted basis on our chartered-in contracts and office leases greater than 12 months as of March 31, 2020:

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YearChartered-in contracts greater than 12 monthsOffice leases Total Operating leases
Discount rate upon adoption5.37 %5.80 %5.48 %
Nine months ending December 31, 2020$9,826,451  $552,462  $10,378,913  
20216,982,810  700,256  7,683,066  
2022  483,048  483,048  
2023  244,878  244,878  
$16,809,261  $1,980,644  $18,789,905  
Present value of lease liability$16,360,010  $1,807,295  $18,167,305  
Lease liabilities - short term$12,700,708  $645,553  $13,346,261  
Lease liabilities - long term3,659,302  1,161,742  4,821,044  
Total lease liabilities$16,360,010  $1,807,295  $18,167,305  
Discount based on incremental borrowing rate$449,251  $173,349  $622,600  

Revenue recognition

Voyage charters
In a voyage charter contract, the charterer hires the vessel to transport a specific agreed-upon cargo for a single voyage, which may contain multiple load ports and discharge ports. The consideration in such a contract is determined on the basis of a freight rate per metric ton of cargo carried or occasionally on a lump sum basis. The charter party generally has a minimum amount of cargo. The charterer is liable for any short loading of cargo or "dead" freight. The voyage contract generally has standard payment terms of 95% freight paid within three days after completion of loading. The voyage charter party generally has a "demurrage" or "despatch" clause. As per this clause, the charterer reimburses the Company for any delays that exceed the agreed to laytime at the ports visited, with the amounts recorded as demurrage revenue. Conversely, the charterer is given credit if the loading/discharging activities happen within the allowed laytime which is known as despatch and results in a reduction of revenue. In a voyage charter contract, the performance obligations begin to be satisfied once the vessel begins loading the cargo. The Company determined that its voyage charter contracts consist of a single performance obligation of transporting the cargo within a specified time period. Therefore, the performance obligation is met evenly as the voyage progresses, and the revenue is recognized on a straight-line basis over the voyage days from the commencement of the loading of cargo to completion of discharge.
The voyage contracts are considered service contracts which fall under the provisions of ASC 606 because the Company, as the shipowner, retains control over the operations of the vessel such as directing the routes taken or the vessel speed. The voyage contracts generally have variable consideration in the form of demurrage or despatch. The amount of revenue earned as demurrage or despatch paid by the Company for the three months ended March 31, 2020 and 2019 was $1.9 million and $3.7 million, respectively.
        The following table shows the revenues earned from time charters and voyage charters for the three months ended March 31, 2020 and 2019:
Three Months Ended
March 31, 2020March 31, 2019
Time charters$27,830,475  $27,504,191  
Voyage charters46,547,844  49,885,406  
$74,378,319  $77,389,597  
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Contract costs
In a voyage charter contract, the Company bears all voyage related costs such as fuel costs, port charges and canal tolls. These costs are considered contract fulfillment costs because the costs are direct costs related to the performance of the contract and are expected to be recovered. The costs incurred during the period prior to commencement of loading the cargo, primarily bunkers, are deferred as they represent setup costs and recorded as a current asset and are amortized on a straight-line basis as the related performance obligations are satisfied. As of March 31, 2020, the Company recognized $0.6 million of deferred costs which represents bunker expenses and charter-hire expenses incurred prior to commencement of loading. These costs, are recorded in Other current assets on the Condensed Consolidated Balance Sheet.
Financial Instruments - Credit Losses
On January 1, 2020, the Company adopted ASC 2016-13, "Financial Instruments - Credit Losses" ("ASC 326"). The accounting standard amends the current financial instrument impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. Under the new guidance, an entity recognizes as an allowance its estimate of lifetime expected credit losses will result in more timely recognition of such losses. The Company adopted the accounting standard using the prospective transition approach as of January 1, 2020. The cumulative effect upon adoption was not material to our condensed consolidated financial statements.
The adoption of ASC 326 primarily impacted our trade receivables recorded on our Condensed Consolidated Balance Sheet as of March 31, 2020. The Company maintains an allowance for credit losses for expected uncollectable accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as voyage expense in the Condensed Consolidated Statements of Operations as of March 31, 2020 and 2019. Upon adoption of ASC 326, the Company assessed collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considered historical collectability based on past due status and made judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company also considered customer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. For the three months ended March 31, 2020, our assessment considered business and market disruptions caused by COVID-19 and estimates of expected emerging credit and collectability trends. The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict causing variability and volatility that may have a material impact on our allowance for credit losses in future periods. The allowance for credit losses on accounts receivable was $