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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
⌧ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2023
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 001-33393
GENCO SHIPPING & TRADING LIMITED
(Exact name of registrant as specified in its charter)
Republic of the Marshall Islands |
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98-0439758 |
(State or other jurisdiction of |
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(I.R.S. Employer |
299 Park Avenue, 12th Floor, New York, New York 10171
(Address of principal executive offices) (Zip Code)
(646) 443-8550
(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 |
Common stock, par value $0.01 per share |
GNK |
New York Stock Exchange (NYSE) |
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 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). 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 ⌧ |
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Accelerated filer ◻ |
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Non-accelerated filer ◻ |
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Smaller reporting company ☐ |
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Emerging growth company ◻ |
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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 ☐ No ⌧
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 November 8, 2023: Common stock, par value $0.01 per share — 42,538,665 shares.
Genco Shipping & Trading Limited
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Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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50 |
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2
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.
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Genco Shipping & Trading Limited
Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022
(U.S. Dollars in thousands, except for share and per share data)
(Unaudited)
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September 30, |
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December 31, |
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2023 |
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2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
46,259 |
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$ |
58,142 |
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Restricted cash |
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5,643 |
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5,643 |
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Due from charterers, net of a reserve of $2,516 and $2,141, respectively |
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19,522 |
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25,333 |
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Prepaid expenses and other current assets |
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10,162 |
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8,399 |
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Inventories |
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27,567 |
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21,601 |
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Fair value of derivative instruments |
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2,369 |
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6,312 |
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Total current assets |
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111,522 |
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125,430 |
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Noncurrent assets: |
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Vessels, net of accumulated depreciation of $284,693 and $303,098, respectively |
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939,749 |
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1,002,810 |
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Deferred drydock, net of accumulated amortization of $19,431 and $15,456 respectively |
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32,982 |
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32,254 |
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Fixed assets, net of accumulated depreciation and amortization of $7,430 and $6,254, respectively |
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7,435 |
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8,556 |
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Operating lease right-of-use assets |
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2,994 |
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4,078 |
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Restricted cash |
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315 |
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315 |
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Fair value of derivative instruments |
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— |
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423 |
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Total noncurrent assets |
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983,475 |
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1,048,436 |
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Total assets |
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$ |
1,094,997 |
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$ |
1,173,866 |
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Liabilities and Equity |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
27,428 |
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$ |
29,475 |
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Deferred revenue |
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6,534 |
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4,958 |
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Current operating lease liabilities |
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2,266 |
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2,107 |
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Total current liabilities: |
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36,228 |
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36,540 |
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Noncurrent liabilities: |
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Long-term operating lease liabilities |
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2,386 |
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4,096 |
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Long-term debt, net of deferred financing costs of $4,756 and $6,079, respectively |
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139,994 |
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164,921 |
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Total noncurrent liabilities |
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142,380 |
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169,017 |
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Total liabilities |
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178,608 |
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205,557 |
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Commitments and contingencies |
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Equity: |
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Common stock, par value $0.01; 500,000,000 shares authorized; 42,536,983 and 42,327,181 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively |
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425 |
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423 |
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Additional paid-in capital |
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1,558,541 |
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1,588,777 |
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Accumulated other comprehensive income |
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2,257 |
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6,480 |
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Accumulated deficit |
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(646,055) |
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(628,247) |
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Total Genco Shipping & Trading Limited shareholders’ equity |
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915,168 |
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967,433 |
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Noncontrolling interest |
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1,221 |
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876 |
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Total equity |
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916,389 |
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968,309 |
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Total liabilities and equity |
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$ |
1,094,997 |
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$ |
1,173,866 |
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See accompanying notes to Condensed Consolidated Financial Statements.
4
Genco Shipping & Trading Limited
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022
(U.S. Dollars in Thousands, Except for Earnings Per Share and Share Data)
(Unaudited)
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For the Three Months Ended |
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For the Nine Months Ended |
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September 30, |
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September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenues: |
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Voyage revenues |
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$ |
83,361 |
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$ |
135,970 |
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$ |
268,309 |
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$ |
409,961 |
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Total revenues |
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83,361 |
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135,970 |
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268,309 |
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409,961 |
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Operating expenses: |
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Voyage expenses |
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34,256 |
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39,496 |
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100,522 |
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110,420 |
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Vessel operating expenses |
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24,746 |
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22,090 |
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71,725 |
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78,567 |
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Charter hire expenses |
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2,026 |
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6,952 |
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6,731 |
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19,633 |
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General and administrative expenses (inclusive of nonvested stock amortization expense of $1,397, $840, $4,175 and $2,356, respectively) |
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6,585 |
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5,911 |
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21,267 |
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18,334 |
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Technical management fees |
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973 |
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761 |
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3,084 |
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2,378 |
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Depreciation and amortization |
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17,026 |
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15,582 |
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49,762 |
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44,162 |
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Impairment of vessel assets |
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28,102 |
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— |
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28,102 |
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— |
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Total operating expenses |
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113,714 |
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90,792 |
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281,193 |
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273,494 |
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Operating (loss) income |
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(30,353) |
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45,178 |
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(12,884) |
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136,467 |
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Other income (expense): |
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Other (expense) income |
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(100) |
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(2,146) |
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(298) |
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617 |
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Interest income |
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588 |
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292 |
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1,877 |
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377 |
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Interest expense |
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(1,999) |
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(2,276) |
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(6,158) |
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(6,923) |
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Other expense, net |
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(1,511) |
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(4,130) |
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(4,579) |
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(5,929) |
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Net (loss) income |
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$ |
(31,864) |
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$ |
41,048 |
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(17,463) |
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130,538 |
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Less: Net income attributable to noncontrolling interest |
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140 |
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220 |
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|
345 |
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|
639 |
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Net (loss) income attributable to Genco Shipping & Trading Limited |
|
$ |
(32,004) |
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$ |
40,828 |
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$ |
(17,808) |
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$ |
129,899 |
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Net (loss) earnings per share-basic |
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$ |
(0.75) |
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$ |
0.96 |
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$ |
(0.42) |
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$ |
3.07 |
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Net (loss) earnings per share-diluted |
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$ |
(0.75) |
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$ |
0.95 |
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$ |
(0.42) |
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$ |
3.03 |
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Weighted average common shares outstanding-basic |
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42,816,045 |
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42,529,865 |
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42,745,681 |
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42,361,797 |
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Weighted average common shares outstanding-diluted |
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42,816,045 |
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42,881,541 |
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42,745,681 |
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42,915,240 |
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See accompanying notes to Condensed Consolidated Financial Statements.
5
Genco Shipping & Trading Limited
Condensed Consolidated Statements of Comprehensive (Loss) Income
For the Three and Nine Months Ended September 30, 2023 and 2022
(U.S. Dollars in Thousands)
(Unaudited)
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For the Three Months Ended |
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For the Nine Months Ended |
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September 30, |
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September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Net (loss) income |
|
$ |
(31,864) |
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$ |
41,048 |
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$ |
(17,463) |
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$ |
130,538 |
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Other comprehensive (loss) income |
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(1,602) |
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1,488 |
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(4,223) |
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|
6,280 |
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Comprehensive (loss) income |
|
$ |
(33,466) |
|
$ |
42,536 |
|
$ |
(21,686) |
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$ |
136,818 |
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Less: Comprehensive income attributable to noncontrolling interest |
|
|
140 |
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|
220 |
|
|
345 |
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|
639 |
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Comprehensive (loss) income attributable to Genco Shipping & Trading Limited |
|
$ |
(33,606) |
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$ |
42,316 |
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$ |
(22,031) |
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$ |
136,179 |
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See accompanying notes to Condensed Consolidated Financial Statements.
6
Genco Shipping & Trading Limited
Condensed Consolidated Statements of Equity
For the Three and Nine Months Ended September 30, 2023 and 2022
(U.S. Dollars in Thousands)
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Genco |
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Shipping & |
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Accumulated |
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Trading |
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Additional |
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Other |
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Limited |
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Common |
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Paid-in |
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Comprehensive |
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Accumulated |
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Shareholders' |
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Noncontrolling |
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Stock |
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Capital |
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Income |
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Deficit |
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Equity |
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Interest |
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Total Equity |
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Balance — January 1, 2023 |
|
$ |
423 |
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$ |
1,588,777 |
|
$ |
6,480 |
|
$ |
(628,247) |
|
$ |
967,433 |
|
$ |
876 |
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$ |
968,309 |
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Net income |
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2,634 |
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2,634 |
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|
226 |
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2,860 |
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Other comprehensive loss |
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(1,628) |
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(1,628) |
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(1,628) |
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Issuance of shares due to vesting of RSUs and exercise of options |
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2 |
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(2) |
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— |
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— |
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Cash dividends declared ($0.50 per share) |
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(21,516) |
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(21,516) |
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(21,516) |
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Nonvested stock amortization |
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1,559 |
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|
1,559 |
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1,559 |
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Balance — March 31, 2023 |
|
$ |
425 |
|
$ |
1,568,818 |
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$ |
4,852 |
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$ |
(625,613) |
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$ |
948,482 |
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$ |
1,102 |
|
$ |
949,584 |
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Net income (loss) |
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|
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|
|
|
|
|
|
11,562 |
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|
11,562 |
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(21) |
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11,541 |
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Other comprehensive loss |
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(993) |
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(993) |
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(993) |
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Issuance of shares due to vesting of RSUs and exercise of options, net of forfeitures |
|
|
— |
|
|
— |
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— |
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— |
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Cash dividends declared ($0.15 per share) |
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|
|
(6,406) |
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|
|
|
|
|
|
(6,406) |
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|
|
|
(6,406) |
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|
Nonvested stock amortization |
|
|
|
|
|
1,219 |
|
|
|
|
|
|
|
|
1,219 |
|
|
|
|
|
1,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — June 30, 2023 |
|
$ |
425 |
|
$ |
1,563,631 |
|
$ |
3,859 |
|
$ |
(614,051) |
|
$ |
953,864 |
|
$ |
1,081 |
|
$ |
954,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
|
|
|
|
|
|
|
|
|
(32,004) |
|
|
(32,004) |
|
|
140 |
|
|
(31,864) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
(1,602) |
|
|
|
|
|
(1,602) |
|
|
|
|
|
(1,602) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares due to vesting of RSUs |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared ($0.15 per share) |
|
|
|
|
|
(6,487) |
|
|
|
|
|
|
|
|
(6,487) |
|
|
|
|
|
(6,487) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested stock amortization |
|
|
|
|
|
1,397 |
|
|
|
|
|
|
|
|
1,397 |
|
|
|
|
|
1,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — September 30, 2023 |
|
$ |
425 |
|
$ |
1,558,541 |
|
$ |
2,257 |
|
$ |
(646,055) |
|
$ |
915,168 |
|
$ |
1,221 |
|
$ |
916,389 |
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
$ |
419 |
|
$ |
1,702,166 |
|
$ |
825 |
|
$ |
(786,823) |
|
$ |
916,587 |
|
$ |
88 |
|
$ |
916,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
41,689 |
|
|
41,689 |
|
|
176 |
|
|
41,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
3,293 |
|
|
|
|
|
3,293 |
|
|
|
|
|
3,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares due to vesting of RSUs and exercise of options |
|
|
2 |
|
|
(2) |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared ($0.67 per share) |
|
|
|
|
|
(28,454) |
|
|
|
|
|
|
|
|
(28,454) |
|
|
|
|
|
(28,454) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested stock amortization |
|
|
|
|
|
690 |
|
|
|
|
|
|
|
|
690 |
|
|
|
|
|
690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — March 31, 2022 |
|
$ |
421 |
|
$ |
1,674,400 |
|
$ |
4,118 |
|
$ |
(745,134) |
|
$ |
933,805 |
|
$ |
264 |
|
$ |
934,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
47,382 |
|
|
47,382 |
|
|
243 |
|
|
47,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
1,499 |
|
|
|
|
|
1,499 |
|
|
|
|
|
1,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares due to vesting of RSUs and exercise of options |
|
|
2 |
|
|
(2) |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared ($0.79 per share) |
|
|
|
|
|
(33,560) |
|
|
|
|
|
|
|
|
(33,560) |
|
|
|
|
|
(33,560) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested stock amortization |
|
|
|
|
|
826 |
|
|
|
|
|
|
|
|
826 |
|
|
|
|
|
826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — June 30, 2022 |
|
$ |
423 |
|
$ |
1,641,664 |
|
$ |
5,617 |
|
$ |
(697,752) |
|
$ |
949,952 |
|
$ |
507 |
|
$ |
950,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
40,828 |
|
|
40,828 |
|
|
220 |
|
|
41,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
1,488 |
|
|
|
|
|
1,488 |
|
|
|
|
|
1,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares due to exercise of options |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared ($0.50 per share) |
|
|
|
|
|
(21,319) |
|
|
|
|
|
|
|
|
(21,319) |
|
|
|
|
|
(21,319) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested stock amortization |
|
|
|
|
|
840 |
|
|
|
|
|
|
|
|
840 |
|
|
|
|
|
840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — September 30, 2022 |
|
$ |
423 |
|
$ |
1,621,185 |
|
$ |
7,105 |
|
$ |
(656,924) |
|
$ |
971,789 |
|
$ |
727 |
|
$ |
972,516 |
|
See accompanying notes to Condensed Consolidated Financial Statements.
8
Genco Shipping & Trading Limited
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022
(U.S. Dollars in Thousands)
(Unaudited)
|
|
For the Nine Months Ended |
|
||||
|
|
September 30, |
|
||||
|
|
2023 |
|
2022 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(17,463) |
|
$ |
130,538 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
49,762 |
|
|
44,162 |
|
Amortization of deferred financing costs |
|
|
1,323 |
|
|
1,268 |
|
Right-of-use asset amortization |
|
|
1,084 |
|
|
1,060 |
|
Amortization of nonvested stock compensation expense |
|
|
4,175 |
|
|
2,356 |
|
Impairment of vessel assets |
|
|
28,102 |
|
|
— |
|
Amortization of premium on derivatives |
|
|
143 |
|
|
63 |
|
Insurance proceeds for protection and indemnity claims |
|
|
252 |
|
|
709 |
|
Insurance proceeds for loss of hire claims |
|
|
506 |
|
|
— |
|
Change in assets and liabilities: |
|
|
|
|
|
|
|
Decrease (increase) in due from charterers |
|
|
5,811 |
|
|
(5,750) |
|
Increase in prepaid expenses and other current assets |
|
|
(4,882) |
|
|
(1,421) |
|
Increase in inventories |
|
|
(5,966) |
|
|
(7,618) |
|
Increase in accounts payable and accrued expenses |
|
|
24 |
|
|
7,344 |
|
Increase in deferred revenue |
|
|
1,576 |
|
|
4,383 |
|
Decrease in operating lease liabilities |
|
|
(1,551) |
|
|
(1,384) |
|
Deferred drydock costs incurred |
|
|
(10,730) |
|
|
(22,262) |
|
Net cash provided by operating activities |
|
|
52,166 |
|
|
153,448 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Purchase of vessels and ballast water treatment systems, including deposits |
|
|
(3,485) |
|
|
(50,879) |
|
Purchase of other fixed assets |
|
|
(2,169) |
|
|
(2,929) |
|
Insurance proceeds for hull and machinery claims |
|
|
2,361 |
|
|
293 |
|
Net cash used in investing activities |
|
|
(3,293) |
|
|
(53,515) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Repayments on the $450 Million Credit Facility |
|
|
(26,250) |
|
|
(66,250) |
|
Cash dividends paid |
|
|
(34,506) |
|
|
(82,713) |
|
Payment of deferred financing costs |
|
|
— |
|
|
(11) |
|
Net cash used in financing activities |
|
|
(60,756) |
|
|
(148,974) |
|
|
|
|
|
|
|
|
|
Net decrease in cash, cash equivalents and restricted cash |
|
|
(11,883) |
|
|
(49,041) |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
64,100 |
|
|
120,531 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
52,217 |
|
$ |
71,490 |
|
See accompanying notes to Condensed Consolidated Financial Statements.
9
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 vessels and operates in one business segment.
As of September 30, 2023, the Company’s fleet consisted of 44 drybulk vessels, including 17 Capesize drybulk vessels, 15 Ultramax drybulk vessels and twelve Supramax drybulk vessels, with an aggregate carrying capacity of approximately 4,635,000 dwt and an average age of approximately 11.6 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 September 30, 2023 and December 31, 2022, and was formed to provide ship management services to the Company’s vessels. As of September 30, 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.
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 and nine months ended September 30, 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, impairment of vessels, 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.
10
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:
|
|
September 30, |
|
December 31, |
|
||
|
|
2023 |
|
2022 |
|
||
Cash and cash equivalents |
|
$ |
46,259 |
|
$ |
58,142 |
|
Restricted cash – current |
|
|
5,643 |
|
|
5,643 |
|
Restricted cash – noncurrent |
|
|
315 |
|
|
315 |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash |
|
$ |
52,217 |
|
$ |
64,100 |
|
|
|
|
|
|
|
|
|
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 September 30, 2023 and 2022, the Company recorded $164 and $326 of realized gains in other (expense) income, respectively. During the three months ended September 30, 2023 and 2022, the Company recorded ($15) and ($1,871) of unrealized losses in other (expense) income, respectively.
During the nine months ended September 30, 2023 and 2022, the Company recorded $245 and $1,622 of realized gains in other (expense) income, respectively. During the nine months ended September 30, 2023 and 2022, the Company recorded ($95) and ($112) of unrealized losses 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 September 30, 2023 and December 31, 2022 is $11 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 September 30, 2023 and December 31, 2022 is $9 and $71, respectively, and are recorded in accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets.
Impairment of vessel assets
During the three and nine months ended September 30, 2023, the Company recorded $28,102 related to the impairment of vessel assets in accordance with Accounting Standards Codification (“ASC”) 360 — “Property, Plant and Equipment” (“ASC 360”). During the three and nine months ended September 30, 2022, the Company did not incur any impairment of vessel assets in accordance with ASC 360.
The Company is currently considering the acquisition of modern, high specification Capesize vessels and management continues to evaluate other acquisition opportunities in the market. In order to partially fund the potential purchase of these modern vessels, management has begun to evaluate the sale of its older and smaller Capesize vessels that will be scheduled for their third special survey in 2024, as part of strategic fleet renewal. Such review led management to assess its probability weighted undiscounted cash flows for such vessels, and this resulted in the Company recording such impairment charges in the third quarter of 2023.
11
On September 30, 2023, the Company determined that the expected estimated future undiscounted cash flows for three of its Capesize vessels, the Genco Claudius, Genco Commodus and Genco Maximus, did not exceed the net book value of these vessels as of September 30, 2023. This resulted in an impairment loss of $28,102 during the three and nine months ended September 30, 2023.
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 gain (loss) of $552 and ($4) during the three months ended September 30, 2023 and 2022, respectively, and ($89) and $4,421 during the nine months ended September 30, 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.
3 – CASH FLOW INFORMATION
For the nine months ended September 30, 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 $1,233 for the Purchase of vessels and ballast water treatment systems, including deposits, and $365 for the Purchase of other fixed assets. For the nine months ended September 30, 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 $959 for Cash dividends payable.
For the nine months ended September 30, 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 $2,989 for the Purchase of vessels and ballast water treatment systems, including deposits, and $740 for the Purchase of other fixed assets. For the nine months ended September 30, 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 $777 for Cash dividends payable. Additionally, for the nine months ended September 30, 2022, the Company had non-cash investing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Prepaid expenses and other current assets consisting of $463 for the Purchase of vessels and ballast water treatment systems, including deposits.
During the nine months ended September 30, 2023 and 2022, cash paid for interest, net of amounts capitalized, was $9,835 and $6,264, respectively, which was offset by $5,192 and $621 received as result of the interest rate cap agreements, respectively.
During the nine months ended September 30, 2023 and 2022, any cash paid for income taxes was insignificant.
During the nine months ended September 30, 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 June 16, 2023, the Company granted 3,917 restricted stock units and 3,917 performance-based restricted stock units to an individual. The aggregate fair value of these restricted stock units and performance-based restricted stock units was $56 and $64, respectively.
12
On May 16, 2023, the Company granted 43,729 restricted stock units to certain members of the Board of Directors. The aggregate fair value of these restricted stock units was $600.
On April 14, 2023, the Company granted 75,920 restricted stock units and 75,920 performance-based restricted stock units to certain individuals. The aggregate fair value of these restricted stock units and performance-based restricted stock units was $1,237 and $1,451, respectively.
On April 3, 2023, the Company granted 1,630 restricted stock units to an individual. The aggregate fair value of these restricted stock units was $25.
On March 10, 2023, the Company granted 2,948 restricted stock units to an individual. The aggregate fair value of these restricted stock units was $50.
On February 21, 2023, the Company granted 68,758 restricted stock units to certain individuals. The aggregate fair value of these restricted stock units was $1,250.
On May 16, 2022, the Company granted 27,331 restricted stock units to certain members of the Board of Directors. The aggregate fair value of these restricted stock units was $600.
On February 23, 2022, the Company granted 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:
|
|
For the Nine Months Ended |
|
||||
|
|
September 30, |
|
||||
|
|
2023 |
|
2022 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
Operating cash flows from operating leases |
|
$ |
1,765 |
|
$ |
1,672 |
|
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.
There was no capitalized interest expense associated with these newbuilding contracts during the three months ended September 30, 2023 and 2022. During the nine months ended September 30, 2023 and 2022, capitalized interest expense was $0 and $5, respectively.
Vessel Dispositions
As of September 30, 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.
13
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 360-day 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. Furthermore, on October 16, 2023, the Company entered into an agreement with the lenders to further extend this period until January 26, 2024. Refer also to Note 15 — Subsequent Events.
5 – NET (LOSS) EARNINGS PER SHARE
The computation of basic net (loss) earnings per share is based on the weighted-average number of common shares outstanding during the reporting period. The computation of diluted net (loss) 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.
There were 154,460 stock options, 38,255 performance based restricted stock units and 145,555 restricted stock units excluded from the computation of diluted net loss per share during the three months ended September 30, 2023 because they were anti-dilutive (refer to Note 13 — Stock-Based Compensation). There were 179,536 stock options, 31,129 performance based restricted stock units and 172,472 restricted stock units excluded from the computation of diluted net loss per share during the nine months ended September 30, 2023 because they were anti-dilutive (refer to Note 13 — Stock-Based Compensation).
The components of the denominator for the calculation of basic and diluted earnings per share are as follows:
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
|
||||
|
|
September 30, |
|
September 30, |
|
||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding, basic: |
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding, basic |
|
42,816,045 |
|
42,529,865 |
|
42,745,681 |
|
42,361,797 |
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding, diluted: |
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding, basic |
|
42,816,045 |
|
42,529,865 |
|
42,745,681 |
|
42,361,797 |
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options |
|
— |
|
223,998 |
|
— |
|
359,249 |
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of performance based restricted stock units |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of restricted stock units |
|
— |
|
127,678 |
|
— |
|
194,194 |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding, diluted |
|
42,816,045 |
|
42,881,541 |
|
42,745,681 |
|
42,915,240 |
|
6 – RELATED PARTY TRANSACTIONS
During the three and nine months ended September 30, 2023 and 2022, the Company did not have any related party transactions.
14
7 – DEBT
Long-term debt, net consists of the following:
|
|
September 30, |
|
December 31, |
|
||
|
|
2023 |
|
2022 |
|
||
Principal amount |
|
$ |
144,750 |
|
$ |
171,000 |
|
Less: Unamortized deferred financing costs |
|
|
(4,756) |
|
|
(6,079) |
|
Less: Current portion |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
Long-term debt, net |
|
$ |
139,994 |
|
$ |
164,921 |
|
$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.
On May 30, 2023, the Company entered into an amendment to the $450 Million Credit Facility to transition from the use of the London Inter-Bank Offered Rate (“LIBOR”) to calculate interest to the Secured Overnight Financing Rate (“SOFR”) effective June 30, 2023. Borrowings began bearing interest at SOFR plus the applicable margin effective June 30, 2023.
As of September 30, 2023, there was $198,770 of availability under the $450 Million Credit Facility. Total debt repayments of $8,750 were made during the three months ended September 30, 2023 and 2022 under the $450 Million Credit Facility. Total debt repayments of $26,250 and $66,250 were made during the nine months ended September 30, 2023 and 2022, respectively, under the $450 Million Credit Facility.
As of September 30, 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 effective interest rate below does not include the effect of any interest rate cap agreements. 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 |
|
For the Nine Months Ended |
||||||
|
|
September 30, |
|
September 30, |
||||||
|
|
2023 |
|
2022 |
|
|
2023 |
|
2022 |
|
Effective Interest Rate |
|
8.71 |
% |
5.34 |
% |
|
8.27 |
% |
4.01 |
% |
Range of Interest Rates (excluding unused commitment fees) |
|
7.31 % to 7.58 |
% |
3.82 % to 5.27 |
% |
|
6.43 % to 7.58 |
% |
2.26 % to 5.27 |
% |
8 – DERIVATIVE INSTRUMENTS
The Company is exposed to interest rate risk on its floating rate debt. As of September 30, 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 fair 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.
15
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 September 30, 2023 and 2022, the Company recorded a loss (gain) of $24 and ($88), respectively, in interest expense for the portion of the interest rate caps not designated as a hedging instrument. During the nine months ended September 30, 2023 and 2022, the Company recorded a loss (gain) of $35 and ($77), respectively, 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 September 30, 2023.
Interest Rate Cap Detail |
|
|
Notional Amount Outstanding |
|||||||
|
|
|
|
|
|
|
|
|
|
September 30, |
Trade date |
|
Cap Rate |
|
Start Date |
|
End Date |
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
March 25, 2021 |
|
0.75 |
% |
|
April 29, 2021 |
|
March 28, 2024 |
|
$ |
50,000 |
July 29, 2020 |
|
0.64 |
% |
|
July 31, 2020 |
|
December 29, 2023 |
|
|
100,000 |
|
|
|
|
|
|
|
|
|
$ |
150,000 |
The Company records the fair value of the interest rate caps as Fair value of derivative instruments in the current and non-current asset sections 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 SOFR 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 valuation of the interest rate caps was transitioned to the use of SOFR rates on June 30, 2023 upon the transition of the calculation of the interest expense under Company’s debt from LIBOR to SOFR (see Note 7 — Debt).
The Company recorded a $4,223 unrealized loss for the nine months ended September 30, 2023 in AOCI. The estimated income that is currently recorded in AOCI as of September 30, 2023 that is expected to be reclassified into earnings within the next twelve months is $2,257.
16
The Effect of Fair Value and Cash Flow Hedge Accounting on the Statements of Operations |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
|
|
Interest Expense |
|
Interest Expense |
|
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 |
|
$ |
1,999 |
|
$ |
2,276 |
|
$ |
6,158 |
|
$ |
6,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
$ |
(1,770) |
|
$ |
(626) |
|
$ |
(5,111) |
|
$ |
(676) |
|
Premium excluded and recognized on an amortized basis |
|
|
35 |
|
|
41 |
|
|
109 |
|
|
139 |
|
Amount of gain or (loss) reclassified from AOCI to income as a result that a forecasted transaction is no longer probable of occurring |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
The following table shows the interest rate cap assets as of September 30, 2023 and December 31, 2022:
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
Balance Sheet Location |
|
|
2023 |
|
|
2022 |
|
Derivatives designated as hedging instruments |
|
||||||||
Interest rate caps |
|
Fair value of derivative instruments - current |
|
$ |
2,250 |
|
$ |
6,112 |
|
|
|
|
|
|
|
|
|
|
|
Interest rate caps |
|
Fair value of derivative instruments - noncurrent |
|
$ |
— |
|
$ |
381 |
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments |
|
||||||||
Interest rate caps |
|
Fair value of derivative instruments - current |
|
$ |
119 |
|
$ |
200 |
|
|
|
|
|
|
|
|
|
|
|
Interest rate caps |
|
Fair value of derivative instruments - noncurrent |
|
$ |
— |
|
$ |
42 |
|
17
The components of AOCI included in the accompanying Condensed Consolidated Balance Sheet consists of net unrealized losses on cash flow hedges as of September 30, 2023.
AOCI — January 1, 2023 |
|
$ |
6,480 |
|
|
|
|
|
|
Amount recognized in OCI on derivative, intrinsic |
|
|
(4,502) |
|
Amount recognized in OCI on derivative, excluded |
|
|
279 |
|
Amount reclassified from OCI into income |
|
|
— |
|
|
|
|
|
|
AOCI — September 30, 2023 |
|
$ |
2,257 |
|
9 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values and carrying values of the Company’s financial instruments as of September 30, 2023 and December 31, 2022 which are required to be disclosed at fair value, but not recorded at fair value, are noted below.
|
|
September 30, 2023 |
|
December 31, 2022 |
|
||||||||
|
|
Carrying |
|
|
|
|
Carrying |
|
|
|
|
||
|
|
Value |
|
Fair Value |
|
Value |
|
Fair Value |
|
||||
Cash and cash equivalents |
|
$ |
46,259 |
|
$ |
46,259 |
|
$ |
58,142 |
|
$ |
58,142 |
|
Restricted cash |
|
|
5,958 |
|
|
5,958 |
|
|
5,958 |
|
|
5,958 |
|
Principal amount of floating rate debt |
|
|
144,750 |
|
|
144,750 |
|
|
171,000 |
|
|
171,000 |
|
The carrying value of the borrowings under the $450 Million Credit Facility as of September 30, 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 September 30, 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:
| ● | 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.
18
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. During the three and nine months ended September 30, 2023, the vessel assets for three of the Company’s vessels were written down as part of the impairment recorded during the period. There was no vessel impairment recorded during the three and nine months ended September 30, 2022. Refer to the “Impairment of vessel assets” section in Note 2 — Summary of Significant Accounting Policies.
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 and nine months ended September 30, 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 September 30, 2023 and December 31, 2022.
10 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
|
|
September 30, |
|
December 31, |
|
||
|
|
2023 |
|
2022 |
|
||
Accounts payable |
|
$ |
10,759 |
|
$ |
16,162 |
|
Accrued general and administrative expenses |
|
|
5,507 |
|
|
6,171 |
|
Accrued vessel operating expenses |
|
|
11,162 |
|
|
7,142 |
|
Total accounts payable and accrued expenses |
|
$ |
27,428 |
|
$ |
29,475 |
|
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 September 30, 2023 and 2022, the Company earned $83,361 and $135,970 of voyage revenues, respectively. For the nine months ended September 30, 2023 and 2022, the Company earned $268,309 and $409,961, respectively.
Total voyage revenues recognized in the Condensed Consolidated Statements of Operations includes the following:
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
Lease revenue |
|
$ |
27,905 |
|
$ |
59,634 |
|
$ |
109,798 |
|
$ |
178,191 |
|
Spot market voyage revenue |
|
|
55,456 |
|
|
76,336 |
|
|
158,511 |
|
|
231,770 |
|
Total voyage revenues |
|
$ |
83,361 |
|
$ |
135,970 |
|
$ |
268,309 |
|
$ |
409,961 |
|
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 September 30, 2023 and 2022 and $918 of sublease income recorded during the nine months ended September 30, 2023 and 2022.
19
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 and nine months ended September 30, 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 nine months ended September 30, 2023:
|
|
|
|
Weighted |
|
Weighted |
|
|
|
||
|
|
Number |
|
Average |
|
Average |
|
|
|
||
|
|
of |
|
Exercise |
|
Fair |
|
|
|
||
|
|
Options |
|
Price |
|
Value |
|
|
|
||
Outstanding as of January 1, 2023 |
|
415,227 |
|
$ |
7.91 |
|
$ |
2.78 |
|
|
|
Granted |
|
— |
|
|
— |
|
|
— |
|
|
|
Exercised |
|
(47,037) |
|
|
7.70 |
|
|
2.53 |
|
|
|
Forfeited |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of September 30, 2023 |
|
368,190 |
|
$ |
7.93 |
|
$ |
2.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of September 30, 2023 |
|
335,729 |
|
$ |
7.74 |
|
$ |
2.67 |
|
|
|
The following table summarizes certain information about the options outstanding as of September 30, 2023:
|
|
|
Options Outstanding and Unvested, |
|
Options Outstanding and Exercisable, |
|
||||||||||
|
|
|
September 30, 2023 |
|
September 30, 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 |
|
|||
$ |
7.93 |
|
32,461 |
|
$ |
9.91 |
|
3.40 |
|
335,729 |
|
$ |
7.74 |
|
2.50 |
|
As of September 30, 2023 and December 31, 2022, a total of 368,190 and 415,227 stock options were outstanding, respectively.
The unamortized stock-based compensation balance of $19 as of September 30, 2023 is expected to be expensed $12 and $7 during the remainder of 2023 and during the year ending December 31, 2024, respectively.
For the three and nine months ended September 30, 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:
20
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
General and administrative expenses |
|
$ |
13 |
|
$ |
55 |
|
$ |
71 |
|
$ |
223 |
|
Restricted Stock Units
The Company has granted 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 September 30, 2023 and December 31, 2022, 798,904 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 to 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 in equal installments on each of the anniversaries of the determined vesting date, over the three or five year vesting periods, as applicable.
The table below summarizes the Company’s unvested RSUs for the nine months ended September 30, 2023:
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
Number of |
|
Average Grant |
|
|
|
|
RSUs |
|
Date Price |
|
|
Outstanding as of January 1, 2023 |
|
641,972 |
|
$ |
15.74 |
|
Granted |
|
211,441 |
|
|
16.27 |
|
Vested |
|
(230,842) |
|
|
14.35 |
|
Forfeited |
|
(49,322) |
|
|
16.42 |
|
|
|
|
|
|
|
|
Outstanding as of September 30, 2023 |
|
573,249 |
|
$ |
16.43 |
|
The total fair value of the RSUs that vested during the nine months ended September 30, 2023 and 2022 was $4,075 and $3,837, 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 September 30, 2023:
Unvested RSUs |
|
Vested RSUs |
|
||||||||
September 30, 2023 |
|
September 30, 2023 |
|
||||||||
|
|
|
|
Weighted |
|
|
|
|
|
||
|
|
Weighted |
|
Average |
|
|
|
Weighted |
|
||
|
|
Average |
|
Remaining |
|
|
|
Average |
|
||
Number of |
|
Grant Date |
|
Contractual |
|
Number of |
|
Grant Date |
|
||
RSUs |
|
Price |
|
Life |
|
RSUs |
|
Price |
|
||
573,249 |
|
$ |
16.43 |
|
1.61 |
|
288,158 |
|
$ |
12.35 |
|
21
The Company is amortizing these grants over the applicable vesting periods, net of anticipated forfeitures. As of September 30, 2023, unrecognized compensation cost of $5,406 related to RSUs will be recognized over a weighted-average period of 1.61 years.
For the three and nine months ended September 30, 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 |
|
For the Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
General and administrative expenses |
|
$ |
1,243 |
|
$ |
785 |
|
$ |
3,848 |
|
$ |
2,133 |
|
Performance-Based Restricted Stock Units
The Company has granted performance-based restricted stock units (“PRSUs”) under the 2015 Plan to certain employees of the Company, some of which are contingent upon the Company’s relative total shareholder return (“TSR”) and some of which are contingent upon the Company’s return on invested capital (”ROIC”) for a three-year performance period ending December 31, 2025.
The TSR is calculated based on the Company’s total shareholder return compared to that of certain peer companies specified in the award agreements over the performance period and is calculated based on the change in the average daily closing stock price over a 20 trading-day period from the beginning to the end of the performance period, including reinvested dividends. The total quantity of PRSUs eligible to vest under these awards range from zero to 200% of the target based on actual relative TSR performance during the performance period. The grant date fair value of the TSR awards was estimated using a Monte Carlo simulation model. Compensation for these awards, which are subject to market conditions, is being amortized over the service period.
The grant date fair value of the ROIC awards was estimated using the closing share price of the Company’s stock on the date of grant. The total quantity of PRSUs eligible to vest under these awards range from zero to 200% of the target based on actual ROIC performance during the performance period. As such ROIC awards are subject to performance conditions and compensation cost is recognized over the service period based on the amount of awards that the Company believes is probable that will vest. To the extent the Company’s estimate changes, the Company will recognize a cumulative catch up in subsequent reporting periods.
The PRSUs, if earned, will ordinarily vest during the first quarter of 2026 and the recipient will receive a share of common stock for each earned PRSU. If 100% of the target metric is achieved, the recipient will earn 100% of the target amount of the PRSUs originally granted, which would amount to 79,838 PRSUs. However, based on actual performance, the number of PRSUs earned will change based on the ranges described above. As of September 30, 2023, unrecognized compensation cost of $1,259 related to PRSUs will be recognized over a weighted-average period of 2.25 years.
Significant inputs used in the estimation of the fair value of these awards granted during the three and nine months ended September 30, 2023 are as follows:
Significant Input |
|
September 30, 2023 |
|
Closing share price of our common stock |
|
$14.36 to $16.30 |
|
Risk-free rate of return |
|
3.81% to 4.38% |
|
Expected volatility of our common stock |
|
53.38% to 54.53% |
|
Holding period discount |
|
0% |
|
Simulation term (in years) |
|
2.54 to 2.72 |
|
Range of target |
|
0% to 200% |
|
22
For the three and nine months ended September 30, 2023 and 2022, the Company recognized nonvested stock amortization expense for the PRSUs, which is included in General and administrative expenses as follows:
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
General and administrative expenses |
|
$ |
141 |
|
$ |
— |
|
$ |
256 |
|
$ |
— |
|
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 Corporation 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 proceeding with arbitration.
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 October 10, 2023, the Company entered into an agreement to acquire a 2016-built 181,000 dwt Capesize vessel to be renamed the Genco Ranger for a purchase price of $43,100. The vessel is expected to be delivered during mid-November 2023, and the Company intends to use a combination of cash on hand and the draw down on the revolving credit facility as noted below to finance the purchase. On October 23, 2023, the Company paid a deposit of $4,320, which is being held in an escrow account until the Company takes delivery of the vessel.
On October 16, 2023, the Company entered into an agreement with the lenders under the $450 Million Credit Facility to further extend the period that the net proceeds received from the sale of the Genco Provence may be held as restricted cash to finance a qualifying replacement vessel until January 26, 2024. The restricted cash is expected to be released upon the delivery of the Genco Ranger during the fourth quarter of 2023.
On November 6, 2023, the Company drew down $35,000 under the revolver of the $450 Million Credit Facility to partially fund the anticipated acquisition of the Genco Ranger.
On November 8, 2023, the Company announced a regular quarterly dividend of $0.15 per share to be paid on or about November 30, 2023 to shareholders of record as of November 22, 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.
In the fourth quarter of 2023, the Company entered into a commitment letter to amend, extend and upsize its existing $450 Million Credit Facility. The amended structure consists of a $500,000 revolving credit facility, which can be utilized to support growth of the Company’s asset base, as well as for general corporate purposes (the “$500 Million Revolver”). The $500 Million Revolver is subject to definitive documentation, potential changes in terms, the possibility that it may not be entered into, and fulfillment of customary conditions precedent.
23
The $500 Million Revolver is expected to close during the fourth quarter of 2023.
24
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 and the Israel-Hamas war; (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; (xxiii) the completion of definitive documentation for, potential changes in terms to, our entry into, and fulfillment of conditions precedent under our proposed $500 million credit facility; and (xxiv) 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 Company and its shareholders.
25
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 vessels. Our fleet currently consists of 44 drybulk vessels, including 17 Capesize, 15 Ultramax and twelve Supramax vessels, with an aggregate carrying capacity of approximately 4,635,000 deadweight tons (“dwt”) and an average age of approximately 11.7 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 34 – 35 for a table of our current fleet.
Our approach towards fleet composition is to own a high-quality fleet of vessels focused on Capesize, Ultramax and Supramax vessels. Capesize vessels represent our major bulk vessel category while Ultramax and Supramax vessels represent our minor bulk vessel category. Our major bulk vessels are primarily used to transport iron ore, coal and bauxite, while our minor bulk vessels are primarily used to transport grains, steel products and other drybulk cargoes such as cement, scrap, fertilizer, 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.
Our approach to capital allocation through the implementation of our value strategy in April 2021 focuses on three key factors:
| ● | Compelling dividends |
| ● | Financial deleveraging, and |
| ● | Accretive growth of our fleet |
Since 2021, we have executed this strategy by paying down $304.5 million of debt as of September 30, 2023 while expanding our core Ultramax fleet. This has resulted in a debt balance of $144.8 million as of September 30, 2023, a 68% reduction from January 1, 2021 levels. These actions have enabled us to further reduce our cash flow breakeven rate positioning us to pay sizeable quarterly dividends across diverse market environments. In addition to the $52.2 million of cash on our balance sheet as of September 30, 2023, we have undrawn revolver availability of $198.8 million, bringing our total liquidity to $251.0 million providing us with significant financial flexibility. Furthermore, since the fourth quarter of 2021 through the third quarter of 2023, we have declared cumulative dividends under our value strategy of $3.69 per share.
26
IMO 2023 Compliance
In 2021, Genco initiated a comprehensive plan to comply with upcoming International Maritime Organization (“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 plan to continue to invest in our fleet.
IMO 2030 to 2050 Guidelines
During the week of July 3, 2023, the Marine Environment Protection Committee, a sub-committee of the IMO, met in London focusing on medium to long term decarbonization targets for the shipping industry. New targets for greenhouse gas emissions reductions as compared to 2008 levels are below which are to be reviewed every five years:
| ● | 2030: 20% reduction while striving for 30% |
| ● | 2040: 70% reduction while striving for 80% |
| ● | 2050: net zero at or around 2050 |
Vessel Sales and Acquisitions
On October 10, 2023, we entered into an agreement to acquire a 2016-built 181,000 dwt Capesize vessel for a purchase price of $43.1 million, to be renamed the Genco Ranger. The vessel is expected to be delivered during mid-November 2023 and we intend to use cash on hand and draw down a portion of our revolving credit facility 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.
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 current fleet. We expect this joint venture to continue 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.
27
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 and nine months ended September 30, 2023 and 2022 on a consolidated basis.
|
|
For the Three Months Ended |
|
|
|
|
|
|
||||
|
|
September 30, |
|
Increase |
|
|
|
|||||
|
|
2023 |
|
2022 |
|
(Decrease) |
|
% Change |
|
|||
Fleet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
Ownership days (1) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
|
1,564.0 |
|
|
1,564.0 |
|
|
— |
|
— |
% |
Ultramax |
|
|
1,380.0 |
|
|
1,380.0 |
|
|
— |
|
— |
% |
Supramax |
|
|
1,104.0 |
|
|
1,104.0 |
|
|
— |
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
4,048.0 |
|
|
4,048.0 |
|
|
— |
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Chartered-in days (2) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
|
— |
|
|
— |
|
|
— |
|
— |
% |
Ultramax |
|
|
91.1 |
|
|
114.3 |
|
|
(23.2) |
|
(20.3) |
% |
Supramax |
|
|
55.0 |
|
|
187.9 |
|
|
(132.9) |
|
(70.7) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
146.1 |
|
|
302.2 |
|
|
(156.1) |
|
(51.7) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Available days (owned & chartered-in fleet) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
|
1,556.9 |
|
|
1,354.7 |
|
|
202.2 |
|
14.9 |
% |
Ultramax |
|
|
1,459.2 |
|
|
1,480.1 |
|
|
(20.9) |
|
(1.4) |
% |
Supramax |
|
|
1,040.3 |
|
|
1,270.8 |
|
|
(230.5) |
|
(18.1) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
4,056.4 |
|
|
4,105.6 |
|
|
(49.2) |
|
(1.2) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Available days (owned fleet) (4) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
|
1,556.9 |
|
|
1,354.7 |
|
|
202.2 |
|
14.9 |
% |
Ultramax |
|
|
1,368.1 |
|
|
1,365.8 |
|
|
2.3 |
|
0.2 |
% |
Supramax |
|
|
985.3 |
|
|
1,082.9 |
|
|
(97.6) |
|
(9.0) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,910.3 |
|
|
3,803.4 |
|
|
106.9 |
|
2.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating days (5) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
|
1,550.1 |
|
|
1,334.9 |
|
|
215.2 |
|
16.1 |
% |
Ultramax |
|
|
1,426.2 |
|
|
1,465.8 |
|
|
(39.6) |
|
(2.7) |
% |
Supramax |
|
|
1,029.2 |
|
|
1,247.0 |
|
|
(217.8) |
|
(17.5) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
4,005.5 |
|
|
4,047.7 |
|
|
(42.2) |
|
(1.0) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fleet utilization (6) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
|
99.1 |
% |
|
97.4 |
% |
|
1.7 |
% |
1.7 |
% |
Ultramax |
|
|
96.9 |
% |
|
98.8 |
% |
|
(1.9) |
% |
(1.9) |
% |
Supramax |
|
|
96.7 |
% |
|
96.5 |
% |
|
0.2 |
% |
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fleet average |
|
|
97.7 |
% |
|
97.6 |
% |
|
0.1 |
% |
0.1 |
% |
28
|
|
For the Three Months Ended |
|
|
|
|
|
|
||||
|
|
September 30, |
|
Increase |
|
|
|
|||||
|
|
2023 |
|
2022 |
|
(Decrease) |
|
% Change |
|
|||
Average Daily Results: |
|
|
|
|
|
|
|
|
|
|
|
|
Time Charter Equivalent (7) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
$ |
15,424 |
|
$ |
19,233 |
|
$ |
(3,809) |
|
(19.8) |
% |
Ultramax |
|
|
10,317 |
|
|
27,295 |
|
|
(16,978) |
|
(62.2) |
% |
Supramax |
|
|
9,251 |
|
|
24,486 |
|
|
(15,235) |
|
(62.2) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fleet average |
|
|
12,082 |
|
|
23,624 |
|
|
(11,542) |
|
(48.9) |
% |
Major bulk vessels |
|
|
15,424 |
|
|
19,233 |
|
|
(3,809) |
|
(19.8) |
% |
Minor bulk vessels |
|
|
10,296 |
|
|
26,052 |
|
|
(15,756) |
|
(60.5) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily vessel operating expenses (8) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
$ |
6,236 |
|
$ |
5,329 |
|
$ |
907 |
|
17.0 |
% |
Ultramax |
|
|
5,576 |
|
|
5,294 |
|
|
282 |
|
5.3 |
% |
Supramax |
|
|
6,603 |
|
|
5,887 |
|
|
716 |
|
12.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fleet average |
|
|
6,113 |
|
|
5,457 |
|
|
656 |
|
12.0 |
% |
|
|
For the Nine Months Ended |
|
|
|
|
|
|
||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
September 30, |
|
Increase |
|
|
|
|||||
|
|
2023 |
|
2022 |
|
(Decrease) |
|
% Change |
|
|||
Fleet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
Ownership days (1) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
|
4,641.0 |
|
|
4,641.0 |
|
|
— |
|
— |
% |
Ultramax |
|
|
4,095.0 |
|
|
4,084.9 |
|
|
10.1 |
|
0.2 |
% |
Supramax |
|
|
3,276.0 |
|
|
3,276.0 |
|
|
— |
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
12,012.0 |
|
|
12,001.9 |
|
|
10.1 |
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Chartered-in days (2) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
|
— |
|
|
— |
|
|
— |
|
— |
% |
Ultramax |
|
|
330.8 |
|
|
304.5 |
|
|
26.3 |
|
8.6 |
% |
Supramax |
|
|
120.9 |
|
|
454.2 |
|
|
(333.3) |
|
(73.4) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
451.7 |
|
|
758.7 |
|
|
(307.0) |
|
(40.5) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Available days (owned & chartered-in fleet) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
|
4,542.1 |
|
|
3,965.1 |
|
|
577.0 |
|
14.6 |
% |
Ultramax |
|
|
4,400.5 |
|
|
4,272.5 |
|
|
128.0 |
|
3.0 |
% |
Supramax |
|
|
3,151.6 |
|
|
3,594.3 |
|
|
(442.7) |
|
(12.3) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
12,094.2 |
|
|
11,831.9 |
|
|
262.3 |
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Available days (owned fleet) (4) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
|
4,542.1 |
|
|
3,965.1 |
|
|
577.0 |
|
14.6 |
% |
Ultramax |
|
|
4,069.7 |
|
|
3,968.0 |
|
|
101.7 |
|
2.6 |
% |
Supramax |
|
|
3,030.6 |
|
|
3,140.1 |
|
|
(109.5) |
|
(3.5) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
11,642.4 |
|
|
11,073.2 |
|
|
569.2 |
|
5.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating days (5) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
|
4,513.6 |
|
|
3,886.4 |
|
|
627.2 |
|
16.1 |
% |
Ultramax |
|
|
4,280.4 |
|
|
4,227.1 |
|
|
53.3 |
|
1.3 |
% |
Supramax |
|
|
3,105.1 |
|
|
3,494.9 |
|
|
(389.8) |
|
(11.2) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
11,899.1 |
|
|
11,608.4 |
|
|
290.7 |
|
2.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fleet utilization (6) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
|
98.9 |
% |
|
97.0 |
% |
|
1.9 |
% |
2.0 |
% |
29
|
|
For the Nine Months Ended |
|
|
|
|
|
|
||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
September 30, |
|
Increase |
|
|
|
|||||
|
|
2023 |
|
2022 |
|
(Decrease) |
|
% Change |
|
|||
Ultramax |
|
|
96.7 |
% |
|
97.4 |
% |
|
(0.7) |
% |
(0.7) |
% |
Supramax |
|
|
96.0 |
% |
|
94.2 |
% |
|
1.8 |
% |
1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fleet average |
|
|
97.3 |
% |
|
96.3 |
% |
|
1.0 |
% |
1.0 |
% |
|
|
For the Nine Months Ended |
|
|
|
|
|
|
||||
|
|
September 30, |
|
Increase |
|
|
|
|||||
|
|
2023 |
|
2022 |
|
(Decrease) |
|
% Change |
|
|||
Average Daily Results: |
|
|
|
|
|
|
|
|
|
|
|
|
Time Charter Equivalent (7) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
$ |
16,954 |
|
$ |
23,457 |
|
$ |
(6,503) |
|
(27.7) |
% |
Ultramax |
|
|
12,962 |
|
|
27,308 |
|
|
(14,346) |
|
(52.5) |
% |
Supramax |
|
|
10,412 |
|
|
25,526 |
|
|
(15,114) |
|
(59.2) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fleet average |
|
|
13,855 |
|
|
25,425 |
|
|
(11,570) |
|
(45.5) |
% |
Major bulk vessels |
|
|
16,954 |
|
|
23,457 |
|
|
(6,503) |
|
(27.7) |
% |
Minor bulk vessels |
|
|
11,872 |
|
|
26,522 |
|
|
(14,650) |
|
(55.2) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily vessel operating expenses (8) |
|
|
|
|
|
|
|
|
|
|
|
|
Capesize |
|
$ |
6,243 |
|
$ |
6,249 |
|
$ |
(6) |
|
(0.1) |
% |
Ultramax |
|
|
5,437 |
|
|
5,707 |
|
|
(270) |
|
(4.7) |
% |
Supramax |
|
|
6,305 |
|
|
8,017 |
|
|
(1,712) |
|
(21.4) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fleet average |
|
|
5,971 |
|
|
6,545 |
|
|
(574) |
|
(8.8) |
% |
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.
30
(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 |
|
|
||||||||||||
|
|
September 30, |
|
September 30, |
|
September 30, |
|
|
||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
||||||
Voyage revenues (in thousands) |
|
$ |
83,361 |
|
$ |
135,970 |
|
$ |
44,690 |
|
$ |
42,011 |
|
$ |
38,671 |
|
$ |
93,959 |
|
|
Voyage expenses (in thousands) |
|
|
34,256 |
|
|
39,496 |
|
|
20,677 |
|
|
15,957 |
|
|
12,579 |
|
|
23,539 |
|
|
Charter hire expenses (in thousands) |
|
|
2,026 |
|
|
6,952 |
|
|
— |
|
|
— |
|
|
2,026 |
|
|
6,952 |
|
|
Realized gain on fuel hedges (in thousands) |
|
|
164 |
|
|
326 |
|
|
— |
|
|
— |
|
|
164 |
|
|
326 |
|
|
|
|
|
47,243 |
|
|
89,848 |
|
|
24,013 |
|
|
26,054 |
|
|
24,230 |
|
|
63,794 |
|
|
Total available days for owned fleet |
|
|
3,910 |
|
|
3,803 |
|
|
1,557 |
|
|
1,355 |
|
|
2,353 |
|
|
2,449 |
|
|
Total TCE rate |
|
$ |
12,082 |
|
$ |
23,624 |
|
$ |
15,424 |
|
$ |
19,233 |
|
$ |
10,296 |
|
$ |
26,052 |
|
|
|
|
Entire Fleet |
|
Major Bulk |
|
Minor Bulk |
|
|
||||||||||||
|
|
For the Nine Months Ended |
|
For the Nine Months Ended |
|
For the Nine Months Ended |
|
|
||||||||||||
|
|
September 30, |
|
September 30, |
|
September 30, |
|
|
||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
||||||
Voyage revenues (in thousands) |
|
$ |
268,309 |
|
$ |
409,961 |
|
$ |
128,042 |
|
$ |
139,710 |
|
$ |
140,267 |
|
$ |
270,251 |
|
|
Voyage expenses (in thousands) |
|
|
100,522 |
|
|
110,420 |
|
|
51,035 |
|
|
46,702 |
|
|
49,487 |
|
|
63,718 |
|
|
Charter hire expenses (in thousands) |
|
|
6,731 |
|
|
19,633 |
|
|
— |
|
|
— |
|
|
6,731 |
|
|
19,633 |
|
|
Realized gain on fuel hedges (in thousands) |
|
|
245 |
|
|
1,622 |
|
|
— |
|
|
— |
|
|
245 |
|
|
1,622 |
|
|
|
|
|
161,301 |
|
|
281,530 |
|
|
77,007 |
|
|
93,008 |
|
|
84,294 |
|
|
188,522 |
|
|
Total available days for owned fleet |
|
|
11,642 |
|
|
11,073 |
|
|
4,542 |
|
|
3,965 |
|
|
7,100 |
|
|
7,108 |
|
|
Total TCE rate |
|
$ |
13,855 |
|
$ |
25,425 |
|
$ |
16,954 |
|
$ |
23,457 |
|
$ |
11,872 |
|
$ |
26,522 |
|
|
(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.
31
Operating Data
The following tables represent the operating data for the three and nine months ended September 30, 2023 and 2022 on a consolidated basis.
|
|
For the Three Months Ended |
|
|
|
|
|
|
||||
|
|
September 30, |
|
|
|
|
|
|
||||
|
|
2023 |
|
2022 |
|
Change |
|
% Change |
|
|||
|
|
(U.S. dollars in thousands, except for per share amounts) |
|
|||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Voyage revenues |
|
$ |
83,361 |
|
$ |
135,970 |
|
$ |
(52,609) |
|
(38.7) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
83,361 |
|
|
135,970 |
|
|
(52,609) |
|
(38.7) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Voyage expenses |
|
|
34,256 |
|
|
39,496 |
|
|
(5,240) |
|
(13.3) |
% |
Vessel operating expenses |
|
|
24,746 |
|
|
22,090 |
|
|
2,656 |
|
12.0 |
% |
Charter hire expenses |
|
|
2,026 |
|
|
6,952 |
|
|
(4,926) |
|
(70.9) |
% |
General and administrative expenses (inclusive of nonvested stock amortization expense of $1,397 and $840, respectively) |
|
|
6,585 |
|
|
5,911 |
|
|
674 |
|
11.4 |
% |
Technical management fees |
|
|
973 |
|
|
761 |
|
|
212 |
|
27.9 |
% |
Depreciation and amortization |
|
|
17,026 |
|
|
15,582 |
|
|
1,444 |
|
9.3 |
% |
Impairment of vessel assets |
|
|
28,102 |
|
|
— |
|
|
28,102 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
113,714 |
|
|
90,792 |
|
|
22,922 |
|
25.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(30,353) |
|
|
45,178 |
|
|
(75,531) |
|
(167.2) |
% |
Other expense, net |
|
|
(1,511) |
|
|
(4,130) |
|
|
2,619 |
|
(63.4) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(31,864) |
|
$ |
41,048 |
|
$ |
(72,912) |
|
(177.6) |
% |
Less: Net income attributable to noncontrolling interest |
|
|
140 |
|
|
220 |
|
|
(80) |
|
(36.4) |
% |
Net (loss) income attributable to Genco Shipping & Trading Limited |
|
$ |
(32,004) |
|
$ |
40,828 |
|
$ |
(72,832) |
|
(178.4) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings per share - basic |
|
$ |
(0.75) |
|
$ |
0.96 |
|
$ |
(1.71) |
|
(178.1) |
% |
Net (loss) earnings per share - diluted |
|
$ |
(0.75) |
|
$ |
0.95 |
|
$ |
(1.70) |
|
(178.9) |
% |
Weighted average common shares outstanding - basic |
|
|
42,816,045 |
|
|
42,529,865 |
|
|
286,180 |
|
0.7 |
% |
Weighted average common shares outstanding - diluted |
|
|
42,816,045 |
|
|
42,881,541 |
|
|
(65,496) |
|
(0.2) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (1) |
|
$ |
(13,567) |
|
$ |
58,394 |
|
$ |
(71,961) |
|
(123.2) |
% |
32
|
|
For the Nine Months Ended |
|
|
|
|
|
|
||||
|
|
September 30, |
|
|
|
|
|
|
||||
|
|
2023 |
|
2022 |
|
Change |
|
% Change |
|
|||
|
|
(U.S. dollars in thousands, except for per share amounts) |
|
|||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Voyage revenues |
|
$ |
268,309 |
|
$ |
409,961 |
|
$ |
(141,652) |
|
(34.6) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
268,309 |
|
|
409,961 |
|
|
(141,652) |
|
(34.6) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Voyage expenses |
|
|
100,522 |
|
|
110,420 |
|
|
(9,898) |
|
(9.0) |
% |
Vessel operating expenses |
|
|
71,725 |
|
|
78,567 |
|
|
(6,842) |
|
(8.7) |
% |
Charter hire expenses |
|
|
6,731 |
|
|
19,633 |
|
|
(12,902) |
|
(65.7) |
% |
General and administrative expenses (inclusive of nonvested stock amortization expense of $4,175 and $2,356, respectively) |
|
|
21,267 |
|
|
18,334 |
|
|
2,933 |
|
16.0 |
% |
Technical management fees |
|
|
3,084 |
|
|
2,378 |
|
|
706 |
|
29.7 |
% |
Depreciation and amortization |
|
|
49,762 |
|
|
44,162 |
|
|
5,600 |
|
12.7 |
% |
Impairment of vessel assets |
|
|
28,102 |
|
|
— |
|
|
28,102 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
281,193 |
|
|
273,494 |
|
|
7,699 |
|
2.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(12,884) |
|
|
136,467 |
|
|
(149,351) |
|
(109.4) |
% |
Other expense |
|
|
(4,579) |
|
|
(5,929) |
|
|
1,350 |
|
(22.8) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(17,463) |
|
$ |
130,538 |
|
$ |
(148,001) |
|
(113.4) |
% |
Less: Net income attributable to noncontrolling interest |
|
|
345 |
|
|
639 |
|
|
(294) |
|
(46.0) |
% |
Net (loss) income attributable to Genco Shipping & Trading Limited |
|
$ |
(17,808) |
|
$ |
129,899 |
|
$ |
(147,707) |
|
(113.7) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings per share - basic |
|
$ |
(0.42) |
|
$ |
3.07 |
|
|
(3.49) |
|
(113.7) |
% |
Net (loss) earnings per share - diluted |
|
$ |
(0.42) |
|
$ |
3.03 |
|
|
(3.45) |
|
(113.9) |
% |
Weighted average common shares outstanding - basic |
|
|
42,745,681 |
|
|
42,361,797 |
|
|
383,884 |
|
0.9 |
% |
Weighted average common shares outstanding - diluted |
|
|
42,745,681 |
|
|
42,915,240 |
|
|
(169,559) |
|
(0.4) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (1) |
|
$ |
36,235 |
|
$ |
180,607 |
|
$ |
(144,372) |
|
(79.9) |
% |
33
| (1) | EBITDA represents net (loss) 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 |
|
For the Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
Net (loss) income attributable to Genco Shipping & Trading Limited |
|
$ |
(32,004) |
|
$ |
40,828 |
|
$ |
(17,808) |
|
$ |
129,899 |
|
Net interest expense |
|
|
1,411 |
|
|
1,984 |
|
|
4,281 |
|
|
6,546 |
|
Income tax expense |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Depreciation and amortization |
|
|
17,026 |
|
|
15,582 |
|
|
49,762 |
|
|
44,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (1) |
|
$ |
(13,567) |
|
$ |
58,394 |
|
$ |
36,235 |
|
$ |
180,607 |
|
Results of Operations
The following table sets forth information about the most recent employment of the vessels in our fleet as of November 8, 2023:
|
|
Year |
|
Charter |
|
|
|
|---|---|---|---|---|---|---|---|
Vessel |
|
Built |
|
Expiration(1) |
|
Cash Daily Rate(2) |
|
|
|
|
|
|
|
|
|
Capesize Vessels |
|
|
|
|
|
|
|
Genco Augustus |
|
2007 |
|
December 2023 |
|
Voyage |
|
Genco Tiberius |
|
2007 |
|
November 2023 |
|
Voyage |
|
Genco London |
|
2007 |
|
December 2023 |
|
Voyage |
|
Genco Titus |
|
2007 |
|
November 2023 |
|
Voyage |
|
Genco Constantine |
|
2008 |
|
December 2023 |
|
Voyage |
|
Genco Hadrian |
|
2008 |
|
January 2024 |
|
$26,000 |
|
Genco Commodus |
|
2009 |
|
November 2023 |
|
Voyage |
|
Genco Maximus |
|
2009 |
|
November 2023 |
|
Voyage |
|
Genco Claudius |
|
2010 |
|
November 2023 |
|
Voyage |
|
Genco Tiger |
|
2011 |
|
November 2023 |
|
Voyage |
|
Genco Lion |
|
2012 |
|
November 2023 |
|
Voyage |
|
Baltic Bear |
|
2010 |
|
November 2023 |
|
Voyage |
|
Baltic Wolf |
|
2010 |
|
November 2023 |
|
Voyage |
|
Genco Resolute |
|
2015 |
|
February 2024 |
|
127% of BCI (3) |
|
Genco Endeavour |
|
2015 |
|
January 2024 |
|
127% of BCI (3) |
|
Genco Defender |
|
2016 |
|
April 2024 |
|
125% of BCI (3) |
|
Genco Liberty |
|
2016 |
|
November 2023 |
|
Voyage |
|
|
|
|
|
|
|
|
|
Ultramax Vessels |
|
|
|
|
|
|
|
Baltic Hornet |
|
2014 |
|
December 2023 |
|
Voyage |
|
Baltic Wasp |
|
2015 |
|
November 2023 |
|
$19,000 |
|
34
|
|
Year |
|
Charter |
|
|
|
|---|---|---|---|---|---|---|---|
Vessel |
|
Built |
|
Expiration(1) |
|
Cash Daily Rate(2) |
|
|
|
|
|
|
|
|
|
Baltic Scorpion |
|
2015 |
|
December 2023 |
|
Voyage |
|
Baltic Mantis |
|
2015 |
|
December 2023 |
|
Voyage |
|
Genco Weatherly |
|
2014 |
|
January 2024 |
|
$17,750 |
|
Genco Columbia |
|
2016 |
|
November 2023 |
|
$30,000 |
|
Genco Magic |
|
2014 |
|
December 2023 |
|
$19,500 |
|
Genco Vigilant |
|
2015 |
|
December 2023 |
|
$9,500 |
|
Genco Freedom |
|
2015 |
|
December 2023 |
|
$23,000 |
|
Genco Enterprise |
|
2016 |
|
December 2023 |
|
$18,000 |
|
Genco Constellation |
|
2017 |
|
March 2024 |
|
$16,000 |
|
Genco Madeleine |
|
2014 |
|
March 2024 |
|
$16,000 |
|
Genco Mayflower |
|
2017 |
|
December 2023 |
|
Voyage |
|
Genco Mary |
|
2022 |
|
November 2023 |
|
$16,000 |
|
Genco Laddey |
|
2022 |
|
December 2023 |
|
$8,500 |
|
|
|
|
|
|
|
|
|
Supramax Vessels |
|
|
|
|
|
|
|
Genco Predator |
|
2005 |
|
December 2023 |
|
$10,250 |
|
Genco Warrior |
|
2005 |
|
January 2024 |
|
$10,000 |
|
Genco Hunter |
|
2007 |
|
November 2023 |
|
Voyage |
|
Genco Aquitaine |
|
2009 |
|
December 2023 |
|
$6,000 |
|
Genco Ardennes |
|
2009 |
|
November 2023 |
|
$18,000 |
|
Genco Auvergne |
|
2009 |
|
November 2023 |
|
Voyage |
|
Genco Bourgogne |
|
2010 |
|
March 2024 |
|
$15,000 |
|
Genco Brittany |
|
2010 |
|
December 2023 |
|
Voyage |
|
Genco Languedoc |
|
2010 |
|
November 2023 |
|
$17,000 |
|
Genco Picardy |
|
2005 |
|
November 2023 |
|
$12,000 |
|
Genco Pyrenees |
|
2010 |
|
November 2023 |
|
$15,850 |
|
Genco Rhone |
|
2011 |
|
December 2023 |
|
$9,000 |
|
| (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. |
| (3) | BCI is the Baltic Capesize Index |
Three months ended September 30, 2023 compared to the three months ended September 30, 2022
VOYAGE REVENUES-
For the three months ended September 30, 2023, voyage revenues decreased by $52.6 million, or 38.7%, to $83.4 million as compared to $136.0 million for the three months ended September 30, 2022. The decrease in voyage revenues was primarily due to lower rates earned by our minor and major bulk vessels. In the third quarter of 2023, spot freight rates came under pressure as firm iron ore and coal volumes into China were offset by a reduction of demand in developed nations which coincided with an easing of global port congestion from previously high levels increasing effective drybulk vessel supply. In the fourth quarter to date, freight rates have increased relative to third quarter levels, including having reached year-to-date highs in October led by seasonally strong cargo flows and an uptick in congestion.
The average TCE rate of our overall fleet decreased 48.9% to $12,082 a day during the third quarter of 2023 from $23,624 a day during the third quarter of 2022. The TCE for our major bulk vessels decreased by 19.8% from $19,233 a day during the third quarter of 2022 to $15,424 a day during the third quarter of 2023. This decrease was primarily a result of lower rates achieved by our Capesize vessels partially offset by an increase in available days due to scheduled drydockings during the third quarter of 2022.
35
The TCE for our minor bulk vessels decreased by 60.5% from $26,052 a day during the third quarter of 2022 to $10,296 a day during the third quarter of 2023 primarily a result of lower rates achieved by our Supramax and Ultramax vessels.
Fleet utilization increased marginally from 97.6% during the third quarter of 2022 to 97.7% during the third quarter of 2023.
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 $34.3 million and $39.5 million during the three months ended September 30, 2023 and 2022, respectively. This decrease was primarily due to lower bunker consumption for our minor bulk vessels and third-party chartered-in vessels, as well as decreased fuel prices during the third quarter of 2023 as compared to the same period during 2022.
VESSEL OPERATING EXPENSES-
Vessel operating expenses increased by $2.7 million from $22.1 million during the three months ended September 30, 2022 to $24.7 million during the three months ended September 30, 2023. The increase was primarily due to the timing of the purchase of stores and spare parts, higher insurance costs and higher crew costs due to the timing of crew changes. These increases were partially offset by the absence of COVID-19 related expenses.
Average daily vessel operating expenses (“DVOE”) for our fleet increased to $6,113 per vessel per day for the three months ended September 30, 2023 from $5,457 per day for the three months ended September 30, 2022. The increase in daily vessel operating expense was primarily due to the timing of the purchase of stores and spare parts, higher insurance costs and higher crew costs due to the timing of crew changes. These increases were partially offset by lower COVID-19 related expenses. 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.
The potential impact of the war in Ukraine and the Israel-Hamas war are unpredictable, and the actual amount of our DVOE could be higher or lower than budgeted as a result.
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. Crew costs on our vessels could increase in the future due to higher wages as a result of the potential impact of the war in Ukraine, the Israel-Hamas war and COVID-19 restrictions.
36
CHARTER HIRE EXPENSES-
Charter hire expenses decreased by $4.9 million from $7.0 million during the three months ended September 30, 2022 to $2.0 million during the three months ended September 30, 2023. The decrease was primarily due to a decrease in chartered-in days, as well as a decrease in hire rates.
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 September 30, 2023 and 2022, general and administrative expenses were $6.6 million and $5.9 million, respectively. The increase was primarily due to higher nonvested stock amortization expense.
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 were $1.0 million and $0.8 million during the three months ended September 30, 2023 and 2022, respectively, with the variance due to timing of expenses during the year.
DEPRECIATION AND AMORTIZATION-
Depreciation and amortization expense increased by $1.4 million to $17.0 million during the three months ended September 30, 2023 as compared to $15.6 million during the three months ended September 30, 2022. This increase was primarily due to an increase in drydocking amortization expense for certain vessels that completed their respective drydockings during the third quarter of 2022 through the second quarter of 2023.
IMPAIRMENT OF VESSEL ASSETS-
During the three months ended September 30, 2023, we recorded $28.1 million of impairment of vessel assets. This represented impairment for three of our Capesize vessels. There was no vessel impairment recorded during the three months ended September 30, 2022. Refer to Note 2 — Summary of Significant Accounting Policies in our Condensed Consolidated Financial Statements for further information regarding the impairment of these vessels.
OTHER INCOME (EXPENSE)-
INTEREST EXPENSE –
Interest expense decreased by $0.3 million from $2.3 million during the three months ended September 30, 2022 to $2.0 million during the three months ended September 30, 2023. Interest expense during the three months ended September 30, 2023 and 2022 consisted primarily of interest expense under our credit facilities and amortization of deferred financing costs for those facilities. The decrease was primarily as a result of lower outstanding debt and settlement payments received under our interest rate cap agreements partially offset by higher interest rates.
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INTEREST INCOME –
Interest income increased by $0.3 million from $0.3 million during the three months ended September 30, 2022 to $0.6 million during the three months ended September 30, 2023 primarily due to higher interest income earned on our cash and cash equivalents.
OTHER (EXPENSE) INCOME –
Other expense decreased by $2.0 million from $2.1 million during the three months ended September 30, 2022 to $0.1 million during the three months ended September 30, 2023. The decrease 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 less outstanding contracts and the fluctuation in fuel prices.
Nine months ended September 30, 2023 compared to the nine months ended September 30, 2022
VOYAGE REVENUES-
For the nine months ended September 30, 2023, voyage revenues decreased by $141.7 million, or 34.6%, to $268.3 million as compared to $410.0 million for the nine months ended September 30, 2022. The decrease in voyage revenues was primarily due to lower rates earned by our minor and major bulk vessels. Refer to the discussion above included under the section “Three months ended September 30, 2023 compared to the three months ended September 30, 2022 – Voyage Revenues” for further information.
The average TCE rate of our overall fleet decreased 45.5% to $13,855 a day during the nine months ended September 30, 2023 from $25,425 a day during the nine months ended September 30, 2022. The TCE for our major bulk vessels decreased by 27.7% from $23,457 a day during the nine months ended September 30, 2022 to $16,954 a day during the nine months ended September 30, 2023. This decrease was primarily a result of lower rates achieved by our Capesize vessels partially offset by an increase in available days due to additional scheduled drydockings during the first nine months of 2022 as compared to the same period during 2023. The TCE for our minor bulk vessels decreased by 55.2% from $26,522 a day during the nine months ended September 30, 2022 to $11,872 a day during the nine months ended September 30, 2023 primarily a result of lower rates achieved by our Ultramax and Supramax vessels.
Fleet utilization increased from 96.3% during the nine months ended September 30, 2022 to 97.3% during the nine months ended September 30, 2023 primarily due to less offhire periods for our Capesize vessels.
VOYAGE EXPENSES-
Voyage expenses were $100.5 million and $110.4 million during the nine months ended September 30, 2023 and 2022, respectively. This decrease was primarily due to lower bunker consumption for our minor bulk vessels and third-party chartered-in vessels, as well as decreased fuel prices during the nine months ended September 30, 2023 as compared to the same period during 2022.
VESSEL OPERATING EXPENSES-
Vessel operating expenses decreased by $6.8 million from $78.6 million during the nine months ended September 30, 2022 to $71.7 million during the nine months ended September 30, 2023. The decrease was primarily due to an absence of COVID-19 related expenses, as well as a decrease in the purchase of stores and spare parts in addition to lower repair and maintenance costs. These decreases were partially offset by higher crew costs due to the timing of crew changes.
DVOE for our fleet decreased to $5,971 per vessel per day for the nine months ended September 30, 2023 from $6,545 per day for the nine months ended September 30, 2022. The decrease in daily vessel operating expense was primarily due to lower COVID-19 related expenses, a decrease in the purchase of stores and spare parts, as well as reduced repair and maintenance costs.
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These decreases were partially offset by higher crew costs due to the timing of crew changes. We experienced 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.
CHARTER HIRE EXPENSES-
Charter hire expenses decreased by $12.9 million from $19.6 million during the nine months ended September 30, 2022 to $6.7 million during the nine months ended September 30, 2023. The decrease was primarily due to a decrease in chartered-in days, as well as a decrease in hire rates during the nine months ended September 30, 2023 as compared to the same period during 2022.
GENERAL AND ADMINISTRATIVE EXPENSES-
For the nine months ended September 30, 2023 and 2022, general and administrative expenses were $21.3 million and $18.3 million, respectively. The increase was primarily due to an increase in nonvested stock amortization expense as well as higher legal and professional fees.
TECHNICAL MANAGEMENT FEES-
Technical management fees were $3.1 million and $2.4 million during the nine months ended September 30, 2023 and 2022, respectively, with the variance due to an increase in general and administrative expenses incurred by GSSM during the year.
DEPRECIATION AND AMORTIZATION-
Depreciation and amortization expense increased by $5.6 million from $44.2 million during the nine months ended September 30, 2022 to $49.8 million during the nine months ended September 30, 2023. 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.
IMPAIRMENT OF VESSEL ASSETS-
During the nine months ended September 30, 2023, we recorded $28.1 million of impairment of vessel assets. This represented impairment for three of our Capesize vessels. There was no vessel impairment recorded during the nine months ended September 30, 2022. Refer to Note 2 — Summary of Significant Accounting Policies in our Condensed Consolidated Financial Statements for further information regarding the impairment of these vessels.
OTHER INCOME (EXPENSE)-
INTEREST EXPENSE –
Interest expense decreased by $0.7 million from $6.9 million during the nine months ended September 30, 2022 to $6.2 million during the nine months ended September 30, 2023. The decrease was primarily as a result of lower outstanding debt and settlement payments received under our interest rate cap agreements partially offset by higher interest rates.
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INTEREST INCOME –
Interest income increased by $1.5 million from $0.4 million during the nine months ended September 30, 2022 to $1.9 million during the nine months ended September 30, 2023 primarily due to higher interest income earned on our cash and cash equivalents.
OTHER (EXPENSE) INCOME –
Other (expense) income fluctuated by $0.9 million from $0.6 million of other income during the nine months ended September 30, 2022 to $0.3 million of other expense during the nine months ended September 30, 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 primarily as a result of less outstanding contracts and the fluctuation in fuel prices.
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 $46.3 million as of September 30, 2023 in addition to the $198.8 million availability under the revolver of the $450 Million Credit Facility as of September 30, 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 $0.4 million and $26.3 million during the remainder of 2023 and 2024, respectively, as well as any quarterly dividend payments, we anticipate continuing 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, the Israel-Hamas war, 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 nine months ended September 30, 2023, the Company made a total of $101.3 million of voluntary debt prepayments, resulting in a reduced cash flow breakeven rate from previous levels. Of that amount, there were seven $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, second and third 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. As of September 30, 2023, there are no mandatory debt repayments until we must repay $144.8 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 September 30, 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.
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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 war in Ukraine, the Israel-Hamas war, and the trajectory of China’s economic reopening. 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.
In the fourth quarter of 2023, we entered into a commitment letter to amend, extend and upsize our existing $450 Million Credit Facility. The amended structure consists of a $500 million revolving credit facility, which can be utilized to support growth of our asset base as well as general corporate purposes (the “$500 Million Revolver”). Key terms of the $500 Million Revolver are as follows:
| ● | Maximum loan capacity will increase to $500 million from $344 million currently, an increase of $156 million or 46%. |
| ● | The entire facility will consist of a revolving credit facility. |
| ● | Borrowings will bear interest of 1.85% to 2.15% plus the Secured Overnight Financing Rate (SOFR), based on our ratio of total net indebtedness to EBITDA. |
| ● | The interest rate of our borrowings may be further increased or decreased by a margin of up to 0.05% based on our performance regarding emissions targets. |
| ● | The maturity date will be extended from August 2026 to November 2028. |
| ● | Repayment profile of 20 years with total quarterly commitment reductions of approximately $15 million per quarter. |
| ● | Key covenants will remain substantially the same as those in our existing credit facility. |
| ● | The Company may declare and pay dividends and other distributions so long as, at the time of declaration, (1) no event of default has occurred and is continuing or would occur as a result of the declaration and (2) the Company is in pro forma compliance with its financial covenants after giving effect to the dividend. |
| ● | Collateral package will include our 44-vessel fleet as well as the Genco Ranger, upon its expected delivery in November 2023. |
| ● | Commitment fees are 40% of the applicable interest rate margin for unutilized commitments. |
Lenders of the $500 Million Revolver include reputable international shipping banks that are both existing and new lenders to Genco. The amended facility is subject to definitive documentation, potential changes in terms, the possibility that it may not be entered into, and fulfillment of customary conditions precedent. The amended facility is expected to close in the fourth quarter of 2023.
In the fourth quarter of 2023, we drew down $35 million under our existing revolver to partially fund the anticipated acquisition of the Genco Ranger, a 2016-built Capesize vessel. Assuming the closing of the $500 Million Revolver and the aforementioned revolver drawdown, we anticipate pro forma debt outstanding to be $179.8 million and undrawn revolver availability to be $320.3 million.
On May 30, 2023, we entered into an amendment to the $450 Million Credit Facility to transition from the use of the London Inter-Bank Offered Rate (“LIBOR”) to calculate interest to the Secured Overnight Financing Rate (“SOFR”) effective June 30, 2023.
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Borrowings will bear interest at SOFR plus the applicable margin effective June 30, 2023.
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 as restricted cash to finance a qualifying replacement vessel until October 28, 2023. Further, on October 16, 2023, we entered into an agreement with the lenders to further extend this period until January 26, 2024. The restricted cash is expected to be released upon the delivery of the Genco Ranger during the fourth quarter of 2023.
As of September 30, 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: Capital expenditures for drydocking
Less: Voluntary quarterly 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 voluntary quarterly reserve include, but are not limited to, vessel acquisitions, debt prepayments and repayments, and general corporate purposes. In order to set aside funds for these purposes, the voluntary 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 November 8, 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 comprehensive value strategy, we have paid down additional indebtedness under our credit facilities and utilized the $450 Million Credit Facility to refinance our two prior credit facilities.
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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, the Israel-Hamas war, or COVID-19 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 nine months ended September 30, 2023 and 2022 was $52.2 million and $153.4 million, respectively. This decrease in cash provided by operating activities was primarily due to lower rates earned by our minor and major bulk vessels and changes in working capital. These decreases were partially offset by a decrease in drydocking costs incurred during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.
Net cash used in investing activities for the nine months ended September 30, 2023 and 2022 was $3.3 million and $53.5 million, respectively. This decrease was primarily due to a $47.4 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. There was also a $2.1 million increase in insurance proceeds for hull and machinery claims for our vessels.
Net cash used in financing activities during the nine months ended September 30, 2023 and 2022 was $60.8 million and $149.0 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 $48.2 million decrease in the payment of dividends during the nine months ended September 30, 2023 as compared to the same period during 2022.
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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. In the fourth quarter of 2023, we entered into a commitment letter to amend, extend and upsize our existing $450 Million Credit Facility. The amended structure consists of a $500 million revolving credit facility.
Interest Rate Swap and Cap Agreements, Forward Freight Agreements and Currency Swap Agreements
At September 30, 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 September 30, 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 September 30, 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 September 30, 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, 15 Ultramax and twelve Supramax vessels.
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 treatment systems (“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) |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1 - December 31, 2023 |
|
$ |
— |
|
$ |
— |
|
$ |
0.4 |
|
— |
|
2024 |
|
$ |
21.8 |
|
$ |
0.5 |
|
$ |
4.0 |
|
390 |
|
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 nine months ended September 30, 2023 and 2022, we incurred a total of $10.7 million and $22.3 million of drydocking costs, respectively, excluding costs incurred during drydocking that were capitalized to vessel assets or vessel equipment.
We completed the drydocking of five of our vessels during the nine months ended September 30, 2023, one of which began during the fourth quarter of 2022. We estimate that none 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.
47
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/lightweight ton (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.
During the three and nine months ended September 30, 2023, we recorded losses of $28.1 million related to the impairment of vessel assets. There were no impairment losses incurred during the three and nine months ended September 30, 2022. During the three and nine months ended September 30, 2023, we recorded an impairment loss for three of our Capesize vessels (the Genco Claudius, the Genco Commodus and the Genco Maximus). Refer to Note 2 — Summary of Significant Accounting Policies in our Condensed Consolidated Financial Statements for further information regarding the impairment recorded during the three and nine months ended September 30, 2023.
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 September 30, 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 September 30, 2023 and December 31, 2022. Vessels have been grouped according to their collateralized status as of September 30, 2023 and does not include any vessels held for sale or held for exchange. The carrying value at September 30, 2023 of our three aforementioned Capesize vessels reflect the impairment loss recorded during the three and nine months ended September 30, 2023.
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 September 30, 2023 and December 31, 2022, eight 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 recorded for these vessels incurred during the three and nine months ended September 30, 2023 and 2022.
The amount by which the carrying value at September 30, 2023 of eight of our Capesize vessels exceeded the valuation of such vessels for covenant compliance purposes ranged, on an individual vessel basis, from $6.8 million to $9.4 million per vessel, and $65.4 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 $8.2 million at September 30, 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.
48
|
|
|
|
|
|
Carrying Value (U.S. |
|
||||
|
|
|
|
|
|
dollars in |
|
||||
|
|
|
|
|
|
thousands) as of |
|
||||
|
|
|
|
Year |
|
September 30, |
|
December 31, |
|
||
Vessels |
|
Year Built |
|
Acquired |
|
2023 |
|
2022 |
|
||
$450 Million Credit Facility |
|
|
|
|
|
|
|
|
|
|
|
Genco Commodus |
|
2009 |
|
2009 |
|
$ |
22,625 |
|
$ |
33,227 |
|
Genco Maximus |
|
2009 |
|
2009 |
|
|
22,625 |
|
|
33,275 |
|
Genco Claudius |
|
2010 |
|
2009 |
|
|
24,375 |
|
|
34,850 |
|
Baltic Bear |
|
2010 |
|
2010 |
|
|
33,220 |
|
|
34,682 |
|
Baltic Wolf |
|
2010 |
|
2010 |
|
|
33,574 |
|
|
35,004 |
|
Genco Lion |
|
2012 |
|
2013 |
|
|
28,858 |
|
|
29,853 |
|
Genco Tiger |
|
2011 |
|
2013 |
|
|
27,258 |
|
|
28,207 |
|
Baltic Scorpion |
|
2015 |
|
2015 |
|
|
21,694 |
|
|
22,448 |
|
Baltic Mantis |
|
2015 |
|
2015 |
|
|
21,933 |
|
|
22,689 |
|
Genco Hunter |
|
2007 |
|
2007 |
|
|
7,676 |
|
|
7,769 |
|
Genco Warrior |
|
2005 |
|
2007 |
|
|
6,320 |
|
|
6,501 |
|
Genco Aquitaine |
|
2009 |
|
2010 |
|
|
8,032 |
|
|
8,254 |
|
Genco Ardennes |
|
2009 |
|
2010 |
|
|
8,033 |
|
|
8,258 |
|
Genco Auvergne |
|
2009 |
|
2010 |
|
|
8,056 |
|
|
8,270 |
|
Genco Bourgogne |
|
2010 |
|
2010 |
|
|
8,662 |
|
|
8,943 |
|
Genco Brittany |
|
2010 |
|
2010 |
|
|
8,685 |
|
|
8,931 |
|
Genco Languedoc |
|
2010 |
|
2010 |
|
|
8,680 |
|
|
8,932 |
|
Genco Picardy |
|
2005 |
|
2010 |
|
|
7,088 |
|
|
6,899 |
|
Genco Pyrenees |
|
2010 |
|
2010 |
|
|
8,719 |
|
|
8,979 |
|
Genco Rhone |
|
2011 |
|
2011 |
|
|
9,906 |
|
|
10,203 |
|
Genco Constantine |
|
2008 |
|
2008 |
|
|
29,945 |
|
|
31,638 |
|
Genco Augustus |
|
2007 |
|
2007 |
|
|
27,625 |
|
|
29,321 |
|
Genco London |
|
2007 |
|
2007 |
|
|
27,782 |
|
|
29,181 |
|
Genco Titus |
|
2007 |
|
2007 |
|
|
28,349 |
|
|
29,823 |
|
Genco Tiberius |
|
2007 |
|
2007 |
|
|
27,700 |
|
|
29,455 |
|
Genco Hadrian |
|
2008 |
|
2008 |
|
|
30,172 |
|
|
31,623 |
|
Genco Predator |
|
2005 |
|
2007 |
|
|
7,011 |
|
|
6,816 |
|
Baltic Hornet |
|
2014 |
|
2014 |
|
|
20,330 |
|
|
21,058 |
|
Baltic Wasp |
|
2015 |
|
2015 |
|
|
20,572 |
|
|
21,300 |
|
Genco Endeavour |
|
2015 |
|
2018 |
|
|
39,393 |
|
|
40,498 |
|
Genco Resolute |
|
2015 |
|
2018 |
|
|
39,606 |
|
|
40,852 |
|
Genco Columbia |
|
2016 |
|
2018 |
|
|
22,719 |
|
|
23,480 |
|
Genco Weatherly |
|
2014 |
|
2018 |
|
|
18,288 |
|
|
18,939 |
|
Genco Liberty |
|
2016 |
|
2018 |
|
|
42,610 |
|
|
43,942 |
|
Genco Defender |
|
2016 |
|
2018 |
|
|
42,627 |
|
|
43,964 |
|
Genco Magic |
|
2014 |
|
2020 |
|
|
13,463 |
|
|
13,872 |
|
Genco Vigilant |
|
2015 |
|
2021 |
|
|
14,472 |
|
|
14,901 |
|
Genco Freedom |
|
2015 |
|
2021 |
|
|
14,559 |
|
|
14,996 |
|
Genco Enterprise |
|
2016 |
|
2021 |
|
|
19,200 |
|
|
19,806 |
|
TOTAL |
|
|
|
|
|
$ |
812,442 |
|
$ |
871,639 |
|
Unencumbered |
|
|
|
|
|
|
|
|
|
|
|
Genco Madeleine |
|
2014 |
|
2021 |
|
|
21,473 |
|
|
22,253 |
|
Genco Constellation |
|
2017 |
|
2021 |
|
|
24,140 |
|
|
24,897 |
|
Genco Mayflower |
|
2017 |
|
2021 |
|
|
24,523 |
|
|
25,328 |
|
Genco Laddey |
|
2022 |
|
2022 |
|
|
28,567 |
|
|
29,326 |
|
Genco Mary |
|
2022 |
|
2022 |
|
|
28,604 |
|
|
29,367 |
|
|
|
|
|
|
|
$ |
127,307 |
|
$ |
131,171 |
|
Consolidated Total |
|
|
|
|
|
$ |
939,749 |
|
$ |
1,002,810 |
|
49
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.
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 September 30, 2023 to manage future interest costs and the risk associated with changing interest rates. The total notional amount of the caps at September 30, 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 September 30, 2023. The interest rate caps expire during December 2023 and March 2024.
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 September 30, 2023 is $2.4 million which has been classified as a current asset on the condensed consolidated balance sheet. As of September 30, 2023, the Company has accumulated other comprehensive income (“AOCI”) of $2.3 million related to the interest rate cap agreements. At September 30, 2023, $2.3 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 and SOFR rates because we have significant amounts of floating rate debt outstanding. During the three and nine months ended September 30, 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 until June 30, 2023. Effective June 30, 2023, we transitioned from the use of LIBOR to SOFR rates. Additionally, on August 3, 2023, the applicable margin under our $450 Million Credit Facility was reduced from 2.15% to 2.10% pursuant to the sustainability link term of the facility.
A 1% increase in LIBOR or SOFR would result in an increase of $1.2 million in interest expense for the nine months ended September 30, 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 September 30, 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 September 30, 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 September 30, 2023.
50
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.
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 (expense) income. 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 Securities Exchange Act of 1934, as amended (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 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,”:
51
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 33 million metric tons of grain were exported from three Ukrainian ports under this agreement, of which nearly 80% has been corn and wheat cargoes. However, Russia exited the agreement in July 2023. Since Russia’s exit from the deal, several attacks have occurred at various ports and facilities, damaging machinery and grain stockpiles. Furthermore, Ukraine has established its own corridor to export the country’s agricultural products outside of the Black Sea Grain Initiative. Overall, volumes along these routes have been low and reports have suggested vessel activity has decreased recently due to Russian threats. Ukraine has been using the corridor in an attempt to revive its seaborne exports without Russia’s approval. Future prospects for Ukrainian grain shipments and the impact on drybulk markets for the shipment of grain and other cargoes remain unpredictable. Failure to reinstate the agreement or the continuation or worsening of the war in Ukraine could have an adverse impact on our business, financial condition, results of operations, and ability to pay dividends.
In addition, on October 7, 2023, the Palestinian Sunni Islamist group Hamas led surprise attacks against Israel from the Gaza Strip by land, sea, and air, reportedly killing more than 1,400 Israelis and other nationals and taking a number of hostages. In response, Israel’s cabinet formally declared war on Hamas, and Israel has commenced military operations against Hamas in Gaza. The impacts of the Israel-Hamas war on the global economy, including commodity pricing and demand, among other factors, are currently unknown. The continuation or worsening of the Israel-Hamas war could have an adverse impact on our business, financial condition, results of operations, and ability to pay dividends.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Arrangements
On September 15, 2023, Jesper Christensen, our Chief Commercial Officer adopted a Rule 10b5-1 sales plan (a “10b5-1 Plan”). Subsequently, on September 16, 2023, John C. Wobensmith, our Chief Executive Officer and President, and Peter Allen, our Chief Financial Officer also adopted 10b5-1 Plans. The 10b5-1 Plans are intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The 10b5-1 Plans provide for the sale of a portion of the number of shares of our common stock that may be issuable in settlement of RSUs and PRSUs previously awarded to these executive officers in order to satisfy such executive officers’ related tax obligations. The maximum number of shares of our common stock that may be sold under the 10b5-1 Plans are 154,295 for Mr. Wobensmith, 36,120 for Mr. Allen, and 63,320 for Mr. Christensen. Each 10b5-1 Plan terminates on the earliest of August 23, 2028, completion of the sale of the foregoing shares of common stock according to the terms of the plan, and the relevant officer’s termination of the plan.
Disclosure in Lieu of Form 8-K
The following information is being provided in this Item 5 in lieu of being provided on a Current Report on Form 8-K under Item 5.02:
On November 7, 2023, our Board of Directors adopted, based on the recommendation of the Compensation Committee of the Board, the Genco Shipping & Trading Limited Policy for the Recovery of Erroneously Awarded Compensation (the “Policy”) in order to comply with Section 10D of the Exchange Act, Rule 10D-1 promulgated under the Exchange Act, and the listing standards of the New York Stock Exchange adopted pursuant thereto. The Board has designated the Compensation Committee of the Board as the administrator of the Policy.
The Policy provides for the mandatory recovery of erroneously awarded incentive-based compensation from current and former executive officers of the Company as defined in Rule 10D-1 in the event that the Company is required to prepare an accounting restatement. The recovery of such compensation applies regardless of whether any such executive officer engaged in misconduct or otherwise caused or contributed to the requirement of an accounting restatement. Under the Policy, the Company may recoup from such executive officers erroneously awarded incentive-based compensation received within a lookback period of the three completed fiscal years preceding the date on which the Company is required to prepare an accounting restatement.
52
The foregoing description of the Policy does not purport to be complete and is qualified in its entirety by reference to the full text of the Policy, a copy of which is filed as Exhibit 10.1 to this report and is incorporated herein by reference.
ITEM 6. EXHIBITS
The Exhibit Index attached to this report is incorporated into this Item 6 by reference.
53
EXHIBIT INDEX
54
101 |
|
The following materials from Genco Shipping & Trading Limited’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 (Unaudited), (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (Unaudited), (iii) Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and nine months ended September 30, 2023 and 2022 (Unaudited), (iv) Condensed Consolidated Statements of Equity for the three and nine months ended September 30, 2023 and 2022 (Unaudited), (v) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 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. |
|
|
|
|
(12) |
Incorporated by reference to Genco Shipping & Trading Limited’s Report on Form 10-Q, filed with the Securities and Exchange Commission on May 3, 2023. |
|
55
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: November 8, 2023 |
By: |
/s/ John C. Wobensmith |
|
|
|
John C. Wobensmith |
||
|
|
Chief Executive Officer and President |
||
|
|
(Principal Executive Officer) |
||
|
|
|
||
|
|
|
||
|
DATE: November 8, 2023 |
By: |
/s/ Peter Allen |
|
|
|
Peter Allen |
||
|
|
Chief Financial Officer |
||
|
|
(Principal Financial Officer) |
||
56
Exhibit 10.1
GENCO SHIPPING & TRADING LIMITED
POLICY FOR THE RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
(adopted as of November 7, 2023)
| 1. | Overview. In accordance with the applicable rules of The New York Stock Exchange Listed Company Manual (the “NYSE Rules”), Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10D-1 promulgated thereunder (“Rule 10D-1”), the Board of Directors (the “Board”) of Genco Shipping & Trading Limited (the “Company”) has adopted this Policy for the Recovery of Erroneously Awarded Compensation (this “Policy”) to provide for the recovery of erroneously awarded Incentive-Based Compensation from Executive Officers. Certain capitalized terms used in this Policy shall have the respective meanings set forth in Section 3 below. |
| 2. | Administration. Except as specifically set forth herein, this Policy shall be administered by the Compensation Committee (if composed entirely of independent directors ) or a majority of the independent directors serving on the board (the “Administrator”). The Administrator is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate or advisable for the administration of this Policy. Any determinations made by the Administrator shall be final and binding on all affected individuals and need not be uniform with respect to each individual covered by the Policy. In the administration of this Policy, the Administrator is authorized and directed to consult with the full Board or such other committees of the Board, such as the Audit Committee or the Compensation Committee, as may be necessary or appropriate as to matters within the scope of such other committee’s responsibility and authority. Subject to any limitation at applicable law, the Administrator may authorize and empower any officer or employee of the Company to take any and all actions necessary or appropriate to carry out the purpose and intent of this Policy (other than with respect to any recovery under this Policy involving such officer or employee). |
| 3. | Definitions. For purposes of this Policy, the following capitalized terms have the respective meanings set forth below: |
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| 4. | Recovery of Erroneously Awarded Compensation |
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| 5. | Disclosure Requirements. The Company shall make all disclosures with respect to this Policy in accordance with the requirements of the Federal securities laws and SEC rules, including disclosure required by the applicable SEC filings. |
| 6. | Indemnification Prohibited. The Company shall not be permitted to insure or indemnify any Executive Officer against (i) the loss of any Erroneously Awarded Compensation that is repaid, returned or recovered pursuant to the terms of this Policy or (ii) any claims relating to the Company’s enforcement of its rights under this Policy. In addition, the Company shall not enter into any agreement that exempts any Incentive-Based Compensation that is granted, paid or awarded to an Executive Officer from the application of this Policy or that waives the Company’s right to recovery of any Erroneously Awarded Compensation, and this Policy shall supersede any such agreement (whether entered into before, on or after the effective date of this Policy). |
| 7. | Administration and Interpretation. This Policy shall be administered by the Administrator, and any determinations made by the Administrator shall be final and binding on all affected individuals. The Administrator is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy and for the Company’s compliance with NYSE Rules, Section 10D, Rule 10D-1 and any other applicable law, regulation, rule or interpretation of the SEC or the NYSE promulgated or issued in connection therewith. |
| 8. | Amendment and Termination. The Administrator may amend or terminate this Policy from time to time in its discretion and shall amend this Policy as it deems necessary. Notwithstanding anything in this Section 8 to the contrary, no amendment or termination of this Policy shall be effective if such amendment or termination would (after taking into account any actions taken by the Company contemporaneously with such amendment or termination) cause the Company to violate any Federal securities laws, SEC rule, or NYSE rule. |
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| 9. | Other Recovery Rights. This Policy shall be binding and enforceable against all Executive Officers and, to the extent required by applicable law or guidance from the SEC or NYSE, their beneficiaries, heirs, executors, administrators or other legal representatives. The Administrator intends this Policy to be applied to the fullest extent required by applicable law. Any employment agreement, equity award agreement, compensatory plan or any other agreement or arrangement with an Executive Officer shall be deemed to include, as a condition to the grant of any benefit thereunder, an agreement by the Executive Officer to abide by the terms of this Policy. Any right of recovery under this Policy is in addition to, and not in lieu of, any other remedies or rights of recovery that may be available to the Company under applicable law, regulation or rule or pursuant to the terms of any policy of the Company or any provision in any employment agreement, equity award agreement, compensatory plan, agreement or other arrangement. If any provision of this Policy is determined to be unenforceable or invalid under any applicable law, such provision will be applied to the maximum extent permitted by applicable law and shall automatically be deemed amended in a manner consistent with its objectives to the extent necessary to conform to any limitations required under applicable law. |
| 10. | Agreement to Policy by Executive Officers. Each Executive Officer shall be required to sign and return to the Company the Attestation and Acknowledgment of Policy for the Recovery of Erroneously Awarded Compensation (“Acknowledgement”) in the form attached hereto as Appendix A pursuant to which such Executive Officer will agree to be bound by the terms and comply with this Policy. For the avoidance of doubt, each Executive Officer will be fully bound by, and must comply with, the Policy, whether or not such Executive Officer has executed and returned such Acknowledgment to the Company. |
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Appendix A
ATTESTATION AND ACKNOWLEDGEMENT OF POLICY FOR THE RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
By my signature below, I acknowledge and agree that:
| ● | I have received and read the attached Policy for the Recovery of Erroneously Awarded Compensation (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Policy”). |
| ● | I hereby agree to abide by all of the terms of the Policy both during and after my employment with the Company, including, without limitation, by promptly repaying or returning any Erroneously Awarded Compensation to the Company as determined in accordance with the Policy. |
| ● | In the event of any inconsistency between the Policy and the terms of any employment agreement to which I am a party, or the terms of any compensation plan, program or agreement under which any compensation has been granted, awarded, earned or paid, the terms of the Policy shall govern. |
Signature:
Print Name:
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 September 30, 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.
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/s/ John C. Wobensmith |
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Name: John C. Wobensmith |
Date: November 8, 2023 |
Title: Chief Executive Officer and President |
Exhibit 31.2
CERTIFICATION
I, Peter Allen, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 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.
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/s/ Peter Allen |
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Name: Peter Allen |
Date: November 8, 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 September 30, 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: November 8, 2023 |
/s/ John C. Wobensmith |
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Name: John C. Wobensmith |
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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 September 30, 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: November 8, 2023 |
/s/ Peter Allen |
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Name: Peter Allen |
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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.