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.
Large 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 4, 2022: 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, 2022 and December 31, 2021
(U.S. Dollars in thousands, except for share and per share data)
(Unaudited)
March 31, | December 31, | ||||||
| 2022 |
| 2021 |
| |||
|
|
| |||||
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 $ |
| |
| | |||
Deposits on vessels |
| — |
| | |||
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 (Note 13) | |||||||
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, 2022 and 2021
(U.S. Dollars in Thousands, Except for Earnings Per Share and Share Data)
(Unaudited)
For the Three Months Ended | |||||||
March 31, | |||||||
| 2022 |
| 2021 |
| |||
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 | |
| | ||||
Loss on sale of vessels | — | | |||||
Total operating expenses | |
| | ||||
Operating income | |
| | ||||
Other income (expense): | |||||||
Other 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 | $ | | $ | | |||
Net earnings per share-basic | $ | | $ | | |||
Net 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, 2022 and 2021
(U.S. Dollars in Thousands)
(Unaudited)
For the Three Months Ended | |||||||
March 31, | |||||||
| 2022 |
| 2021 |
| |||
Net income | $ | |
| $ | | ||
Other comprehensive 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, 2022 and 2021
(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, 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 | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | | ||||||||
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, 2021 | $ | | $ | | $ | — | $ | ( | $ | | $ | — | $ | | ||||||||
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, 2021 | $ | | $ | | $ | | $ | ( | $ | | $ | — | $ | | ||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
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Genco Shipping & Trading Limited
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021
(U.S. Dollars in Thousands)
(Unaudited)
For the Three Months Ended | |||||||
March 31, | |||||||
| 2022 |
| 2021 |
| |||
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 | |
| | ||||
Loss on sale of vessels | — |
| | ||||
Amortization of premium on derivative | | | |||||
Interest rate cap premium payment | — | ( | |||||
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 | ( |
| ( | ||||
Decrease (increase) in inventories | | ( | |||||
(Decrease) increase in accounts payable and accrued expenses | ( |
| | ||||
Increase (decrease) 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 scrubbers (capitalized in Vessels) | — | ( | |||||
Purchase of other fixed assets | ( |
| ( | ||||
Net proceeds from sale of vessels | — | | |||||
Insurance proceeds for hull and machinery claims | — | | |||||
Net cash (used in) provided by investing activities | ( |
| | ||||
Cash flows from financing activities: | |||||||
Repayments on the $450 Million Credit Facility | ( | — | |||||
Repayments on the $133 Million Credit Facility | — | ( | |||||
Repayments on the $495 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
At March 31, 2022, 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.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus strain, or COVID-19, to be a pandemic. The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. Over the course of the pandemic, governments have 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.
At present, it is not possible to ascertain any future impact of COVID-19 on the Company’s operational and financial performance, which may take some time to materialize and may not be fully reflected in the results for 2022. However, an increase in the severity or duration or a resurgence of the COVID-19 pandemic, any potential variants and the timing of wide-scale vaccine distribution could have a material adverse effect on the Company’s business, results of operations, cash flows, financial condition, the carrying value of the Company’s assets, the fair values of the Company’s vessels, and the Company’s ability to pay dividends.
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), 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 2021 Annual Report on Form 10-K, filed with the SEC on February 24, 2022. 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.
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Basis of presentation
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management of the Company, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and operating results have been included in the statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2021 (the “2021 10-K”). The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the operating results to be expected for the year ending December 31, 2022.
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:
March 31, | December 31, | ||||||
| 2022 |
| 2021 |
| |||
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, 2022 and 2021, the Company recorded $
10
as of March 31, 2022 and December 31, 2021 is $
Vessels, net
Vessels, net is stated at cost less accumulated depreciation. Included in vessel costs are acquisition costs directly attributable to the acquisition of a vessel and expenditures made to prepare the vessel for its initial voyage. The Company also capitalizes interest costs for a vessel under construction as a cost that is directly attributable to the acquisition of a vessel. Vessels are depreciated on a straight-line basis over their estimated useful lives, determined to be
Depreciation expense is calculated based on cost less the estimated residual scrap value. The costs of significant replacements, renewals and betterments are capitalized and depreciated over the shorter of the vessel’s remaining estimated useful life or the estimated life of the renewal or betterment. Undepreciated cost of any asset component being replaced that was acquired after the initial vessel purchase is written off as a component of vessel operating expense. Expenditures for routine maintenance and repairs are expensed as incurred. Scrap value is estimated by the Company by taking the cost of steel times the weight of the ship noted in lightweight tons (lwt). Effective January 1, 2022, the Company increased the estimated scrap value of the vessels from $
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. Refer to Note 11 — Voyage Revenues for further discussion of the accounting for fuel expenses for spot market voyage 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 gain of $
Technical management fees
Technical management fees include the direct costs, including operating 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
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day-to-day management of our vessels, including performing routine maintenance, attending to vessel operation and arranging for crews and supplies.
Loss on sale of vessels
During the three months ended March 31, 2021, the Company recorded a net loss of $
Recent accounting pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”)” which provides temporary optional expedients and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848) – Scope (“ASU 2021-01”),” which permits entities to apply optional expedients in Topic 848 to derivative instruments modified because of discounting transition resulting from reference rate reform. ASU 2020-04 became effective upon issuance and may be applied prospectively to contract modification made on or before December 31, 2022. ASU 2021-01 became effective upon issuance and may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or prospectively for contract modification made on or before December 31, 2022. The Company has evaluated the impact of the adoption of ASU 2020-04 and ASU 2021-01 and has determined that there is no effect on its Condensed Consolidated Financial Statements and related disclosures.
3 - CASH FLOW INFORMATION
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 $
For the three months ended March 31, 2021, 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, 2022 and 2021, cash paid for interest, net of amounts capitalized, was $
During the three months ended March 31, 2022 and 2021, there was
During the three months ended March 31, 2022, the Company reclassified $
12
During the three months ended March 31, 2021, the Company reclassified $
On February 23, 2022, the Company issued
On February 23, 2021, the Company issued
Refer to Note 14 — Stock-Based Compensation for further information regarding the aforementioned grants.
Supplemental Condensed Consolidated Cash Flow information related to leases is as follows:
For the Three Months Ended | |||||||
March 31, | |||||||
2022 | 2021 |
| |||||
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
Capitalized interest expense associated with these newbuilding contracts for the three months ended March 31, 2022 and 2021 was $
Vessel Exchange
On December 17, 2020, the Company entered into an agreement to acquire
Vessel Dispositions
As of March 31, 2022 and December 31, 2021, the Company recorded $
13
requirements and added as collateral under the facility. If such a replacement vessel is not added as collateral within such
During November 2020, the Company entered into agreements to sell the Baltic Cougar, the Baltic Hare and the Baltic Panther. The sale of the Baltic Hare, the Baltic Panther and the Baltic Cougar were completed on January 15, 2021, January 4, 2021 and February 24, 2021, respectively.
Refer to the “Loss on sale of vessels” section in Note 2 — Summary of Significant Accounting Policies for discussion of the net loss on sale of vessels recorded during the three months ended March 31, 2022 and 2021.
5 – NET EARNINGS PER SHARE
The computation of basic net earnings per share is based on the weighted-average number of common shares outstanding during the reporting period. The computation of diluted net earnings per share assumes the vesting of nonvested stock awards and the exercise of stock options (refer to Note 14 — Stock-Based Compensation), for which the assumed proceeds upon vesting are deemed to be the amount of compensation cost attributable to future services and are not yet recognized using the treasury stock method, to the extent dilutive. There were
The components of the denominator for the calculation of basic and diluted net earnings per share are as follows:
For the Three Months Ended | |||||
March 31, | |||||
| 2022 |
| 2021 |
| |
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 | | | |||