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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2015

 

OR

 

o         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

 

98-043-9758

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

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)

 


 

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 x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

The number of shares outstanding of each of the issuer’s classes of common stock, as of November 13, 2015: Common stock, $0.01 per share — 72,898,234 shares.

 

 

 



Table of Contents

 

Genco Shipping & Trading Limited

 

 

 

Page

 

 

 

PART I — FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (unaudited)

 

 

 

 

 

a)             Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014

1

 

 

 

 

b)             Condensed Consolidated Statements of Operations

2

 

 

 

 

c)              Condensed Consolidated Statements of Comprehensive Loss

4

 

 

 

 

d)             Condensed Consolidated Statements of Equity

5

 

 

 

 

e)              Condensed Consolidated Statements of Cash Flows

6

 

 

 

 

f)               Notes to Condensed Consolidated Financial Statements

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

44

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

72

 

 

 

Item 4.

Controls and Procedures

74

 

 

 

PART II —OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

75

 

 

 

Item 6.

Exhibits

75

 

i



Table of Contents

 

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, SEC filings, 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.

 

ii



Table of Contents

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Genco Shipping & Trading Limited

Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014

(U.S. Dollars in thousands, except for share and per share data)

(Unaudited)

 

 

 

Successor

 

Successor

 

 

 

September 30,
2015

 

December 31,
2014

(restated)

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

44,478

 

$

83,414

 

Restricted cash

 

9,750

 

9,750

 

Due from charterers, net of a reserve of $1,217 and $1,588, respectively

 

14,139

 

14,739

 

Prepaid expenses and other current assets

 

22,505

 

22,423

 

Total current assets

 

90,872

 

130,326

 

 

 

 

 

 

 

Noncurrent assets:

 

 

 

 

 

Vessels, net of accumulated depreciation of $90,104 and $36,258, respectively

 

1,501,714

 

1,532,843

 

Deposits on vessels

 

10,183

 

25,593

 

Deferred drydock, net of accumulated amortization of $2,196 and $330, respectively

 

14,656

 

6,234

 

Deferred financing costs, net of accumulated amortization of $2,417 and $729, respectively

 

10,948

 

10,271

 

Fixed assets, net of accumulated depreciation and amortization of $319 and $119, respectively

 

1,115

 

701

 

Other noncurrent assets

 

514

 

514

 

Restricted cash

 

315

 

19,945

 

Investments

 

17,900

 

26,486

 

Total noncurrent assets

 

1,557,345

 

1,622,587

 

Total assets

 

$

1,648,217

 

$

1,752,913

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and accrued expenses

 

$

33,899

 

$

28,217

 

Current portion of long-term debt

 

44,242

 

34,324

 

Deferred revenue

 

1,016

 

1,397

 

Total current liabilities

 

79,157

 

63,938

 

 

 

 

 

 

 

Noncurrent liabilities:

 

 

 

 

 

Long-term lease obligations

 

969

 

390

 

Long-term debt

 

418,036

 

395,811

 

Total noncurrent liabilities

 

419,005

 

396,201

 

Total liabilities

 

498,162

 

460,139

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

Equity:

 

 

 

 

 

Genco Shipping & Trading Limited shareholders’ equity:

 

 

 

 

 

Successor Company common stock, par value $0.01; 250,000,000 shares authorized; issued and outstanding 72,898,234 and 61,541,389 shares at September 30, 2015 and December 31, 2014, respectively

 

728

 

615

 

Successor Company additional paid-in capital

 

1,477,035

 

1,251,197

 

Accumulated other comprehensive loss

 

(17

)

(25,317

)

Retained deficit

 

(327,691

)

(182,294

)

Total Genco Shipping & Trading Limited shareholders’ equity

 

1,150,055

 

1,044,201

 

Noncontrolling interest

 

 

248,573

 

Total equity

 

1,150,055

 

1,292,774

 

Total liabilities and equity

 

$

1,648,217

 

$

1,752,913

 

 

See accompanying notes to condensed consolidated financial statements.

 

1



Table of Contents

 

Genco Shipping & Trading Limited

Condensed Consolidated Statements of Operations

(U.S. Dollars in Thousands, Except for Earnings Per Share and Share Data)

(Unaudited)

 

 

 

Successor

 

 

Predecessor

 

 

 

Three Months
Ended
September 30,
2015

 

Period from
July 9 to
September 30,
2014

 

 

Period from
July 1 to
July 9,
2014
(restated)

 

Revenues:

 

 

 

 

 

 

 

 

Voyage revenues

 

$

49,167

 

$

43,943

 

 

$

4,034

 

Service revenues

 

828

 

756

 

 

72

 

 

 

 

 

 

 

 

 

 

Total revenues

 

49,995

 

44,699

 

 

4,106

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Voyage expenses

 

6,638

 

2,335

 

 

200

 

Vessel operating expenses

 

31,544

 

27,248

 

 

2,902

 

General, administrative and management fees

 

26,983

 

15,492

 

 

6,147

 

Depreciation and amortization

 

20,124

 

17,356

 

 

3,213

 

Other operating income

 

 

(296

)

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

85,289

 

62,135

 

 

12,462

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(35,294

)

(17,436

)

 

(8,356

)

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

Impairment of investment

 

(32,536

)

 

 

 

Other (expense) income

 

(653

)

7

 

 

1

 

Interest income

 

22

 

19

 

 

 

Interest expense

 

(4,876

)

(3,592

)

 

(1,529

)

 

 

 

 

 

 

 

 

 

Other expense

 

(38,043

)

(3,566

)

 

(1,528

)

 

 

 

 

 

 

 

 

 

Loss before reorganization items, net

 

(73,337

)

(21,002

)

 

(9,884

)

Reorganization items, net

 

(174

)

(1,167

)

 

(895,534

)

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(73,511

)

(22,169

)

 

(905,418

)

Income tax expense

 

(292

)

(393

)

 

(38

)

 

 

 

 

 

 

 

 

 

Net loss

 

(73,803

)

(22,562

)

 

(905,456

)

Less: Net loss attributable to noncontrolling interest

 

(7,178

)

(4,272

)

 

(53,935

)

Net loss attributable to Genco Shipping & Trading Limited

 

$

(66,625

)

$

(18,290

)

 

$

(851,521

)

 

 

 

 

 

 

 

 

 

Net loss per share-basic

 

$

(0.95

)

$

(0.30

)

 

$

(19.54

)

Net loss per share-diluted

 

$

(0.95

)

$

(0.30

)

 

$

(19.54

)

Weighted average common shares outstanding-basic

 

69,824,338

 

60,299,766

 

 

43,568,942

 

Weighted average common shares outstanding-diluted

 

69,824,338

 

60,299,766

 

 

43,568,942

 

Dividends declared per share

 

$

 

$

 

 

$

 

 

See accompanying notes to condensed consolidated financial statements.

 

2



Table of Contents

 

Genco Shipping & Trading Limited

Condensed Consolidated Statements of Operations

(U.S. Dollars in Thousands, Except for Earnings Per Share and Share Data)

(Unaudited)

 

 

 

Successor

 

 

Predecessor

 

 

 

Nine Months
Ended
September 30,
2015

 

Period from
July 9 to
September 30,
2014

 

 

Period from
January 1 to
July 9,
2014
(restated)

 

Revenues:

 

 

 

 

 

 

 

 

Voyage revenues

 

$

116,548

 

$

43,943

 

 

$

118,759

 

Service revenues

 

2,457

 

756

 

 

1,701

 

 

 

 

 

 

 

 

 

 

Total revenues

 

119,005

 

44,699

 

 

120,460

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Voyage expenses

 

14,775

 

2,335

 

 

4,140

 

Vessel operating expenses

 

90,143

 

27,248

 

 

64,670

 

General, administrative and management fees

 

73,798

 

15,492

 

 

31,371

 

Depreciation and amortization

 

58,933

 

17,356

 

 

75,952

 

Other operating income

 

 

(296

)

 

 

Impairment of vessel assets

 

35,396

 

 

 

 

Loss on sale of vessels

 

1,210

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

274,255

 

62,135

 

 

176,133

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(155,250

)

(17,436

)

 

(55,673

)

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

Impairment of investment

 

(32,536

)

 

 

 

Other (expense) income

 

(707

)

7

 

 

(106

)

Interest income

 

71

 

19

 

 

45

 

Interest expense

 

(13,887

)

(3,592

)

 

(41,061

)

 

 

 

 

 

 

 

 

 

Other expense

 

(47,059

)

(3,566

)

 

(41,122

)

 

 

 

 

 

 

 

 

 

Loss before reorganization items, net

 

(202,309

)

(21,002

)

 

(96,795

)

Reorganization items, net

 

(1,006

)

(1,167

)

 

(915,640

)

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(203,315

)

(22,169

)

 

(1,012,435

)

Income tax expense

 

(1,553

)

(393

)

 

(815

)

 

 

 

 

 

 

 

 

 

Net loss

 

(204,868

)

(22,562

)

 

(1,013,250

)

Less: Net loss attributable to noncontrolling interest

 

(59,471

)

(4,272

)

 

(62,101

)

Net loss attributable to Genco Shipping & Trading Limited

 

$

(145,397

)

$

(18,290

)

 

$

(951,149

)

 

 

 

 

 

 

 

 

 

Net loss per share-basic

 

$

(2.29

)

$

(0.30

)

 

$

(21.83

)

Net loss per share-diluted

 

$

(2.29

)

$

(0.30

)

 

$

(21.83

)

Weighted average common shares outstanding-basic

 

63,615,181

 

60,299,766

 

 

43,568,942

 

Weighted average common shares outstanding-diluted

 

63,615,181

 

60,299,766

 

 

43,568,942

 

Dividends declared per share

 

$

 

$

 

 

$

 

 

See accompanying notes to condensed consolidated financial statements.

 

3



Table of Contents

 

Genco Shipping & Trading Limited

Condensed Consolidated Statements of Comprehensive Loss

(U.S. Dollars in Thousands)

(Unaudited)

 

 

 

Successor

 

 

Predecessor

 

 

 

Three Months
Ended

September 30,
2015

 

Period from
July 9 to
September 30,
2014

 

 

Period from
July 1 to
July 9,
2014
(restated)

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(73,803

)

$

(22,562

)

 

$

(905,456

)

 

 

 

 

 

 

 

 

 

Change in unrealized gain (loss) on investments

 

26,343

 

(13,341

)

 

2,186

 

Unrealized gain on cash flow hedges, net

 

 

 

 

95

 

Other comprehensive income (loss)

 

26,343

 

(13,341

)

 

2,281

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

(47,460

)

(35,903

)

 

(903,175

)

Less: Comprehensive loss attributable to noncontrolling interest

 

(7,178

)

(4,272

)

 

(53,935

)

Comprehensive loss attributable to Genco Shipping & Trading Limited

 

$

(40,282

)

$

(31,631

)

 

$

(849,240

)

 

 

 

Successor

 

 

Predecessor

 

 

 

Nine Months
Ended

September 30,
2015

 

Period from
July 9 to
September 30,
2014

 

 

Period from
January 1 to
July 9,
2014
(restated)

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(204,868

)

$

(22,562

)

 

$

(1,013,250

)

 

 

 

 

 

 

 

 

 

Change in unrealized gain (loss) on investments

 

25,300

 

(13,341

)

 

(25,766

)

Unrealized gain on cash flow hedges, net

 

 

 

 

2,401

 

Other comprehensive income (loss)

 

25,300

 

(13,341

)

 

(23,365

)

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

(179,568

)

(35,903

)

 

(1,036,615

)

Less: Comprehensive loss attributable to noncontrolling interest

 

(59,471

)

(4,272

)

 

(62,101

)

Comprehensive loss attributable to Genco Shipping & Trading Limited

 

$

(120,097

)

$

(31,631

)

 

$

(974,514

)

 

See accompanying notes to condensed consolidated financial statements.

 

4



Table of Contents

 

Genco Shipping & Trading Limited

Condensed Consolidated Statements of Equity

(U.S. Dollars in Thousands)

(Unaudited)

 

 

 

Common
Stock

 

Additional
Paid-in
Capital

 

Accumulated
Other
Comprehensive
(Loss)
Income

 

Retained
(Deficit)
Earnings

 

Genco
Shipping &
Trading
Limited
Shareholders’
Equity

 

Noncontrolling
Interest

 

Total Equity

 

Balance — January 1, 2015 (Successor)

 

$

615

 

$

1,251,197

 

$

(25,317

)

$

(182,294

)

$

1,044,201

 

$

248,573

 

$

1,292,774

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

(145,397

)

(145,397

)

(59,471

)

(204,868

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

25,300

 

 

 

25,300

 

 

25,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Settlement of non-accredited Note holders

 

 

 

(414

)

 

 

 

 

(414

)

 

(414

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity effect of purchase of entities under common control

 

 

 

590

 

 

 

 

 

590

 

 

590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 11,287,132 shares to Baltic Trading shareholders

 

113

 

(113

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Elimination of non-controlling interest due to Merger

 

 

 

194,375

 

 

 

 

 

194,375

 

(194,375

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonvested stock amortization

 

 

 

31,400

 

 

 

 

 

31,400

 

5,273

 

36,673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — September 30, 2015 (Successor)

 

$

728

 

$

1,477,035

 

$

(17

)

$

(327,691

)

$

1,150,055

 

$

 

$

1,150,055

 

 

 

 

Common
Stock

 

Additional
Paid-in
Capital

 

Accumulated
Other
Comprehensive
(Loss)
Income

 

Retained
(Deficit)
Earnings

(restated)

 

Genco
Shipping &
Trading
Limited
Shareholders’
Equity

(restated)

 

Noncontrolling
Interest

(restated)

 

Total Equity
(restated)

 

Balance — January 1, 2014 (Predecessor)

 

$

445

 

$

846,658

 

$

53,722

 

$

66,644

 

$

967,469

 

$

341,336

 

$

1,308,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

(951,149

)

(951,149

)

(62,101

)

(1,013,250

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on investments

 

 

 

 

 

(25,766

)

 

 

(25,766

)

 

(25,766

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on cash flow hedges, net

 

 

 

 

 

2,401

 

 

 

2,401

 

 

2,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonvested stock amortization

 

 

 

2,403

 

 

 

 

 

2,403

 

1,949

 

4,352

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid by Baltic Trading Limited

 

 

 

(5

)

 

 

 

 

(5

)

(2,041

)

(2,046

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of restricted shares issued by Baltic Trading Limited

 

 

 

74

 

 

 

 

 

74

 

(74

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal — July 9, 2014 (Predecessor)

 

$

445

 

$

849,130

 

$

30,357

 

$

(884,505

)

$

(4,573

)

$

279,069

 

$

274,496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fresh-start adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancellation of Predecessor common stock and accumulated deficit

 

(445

)

(849,130

)

 

 

884,505

 

34,930

 

 

34,930

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Elimination of Predecessor accumulated other comprehensive income

 

 

 

 

 

(30,357

)

 

 

(30,357

)

 

(30,357

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of new equity interest in connection with emergence from Chapter 11, including the $100 Million Rights Offering — 60,299,757 shares

 

603

 

1,232,397

 

 

 

 

 

1,233,000

 

 

1,233,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — July 9, 2014 (Successor)

 

$

603

 

$

1,232,397

 

$

 

$

 

$

1,233,000

 

$

279,069

 

$

1,512,069

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

(18,290

)

(18,290

)

(4,272

)

(22,562

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on investments

 

 

 

 

 

(13,341

)

 

 

(13,341

)

 

(13,341

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 1,110,600 shares of nonvested stock

 

11

 

(11

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonvested stock amortization

 

 

 

7,054

 

 

 

 

 

7,054

 

818

 

7,872

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid by Baltic Trading Limited

 

 

 

(1

)

 

 

 

 

(1

)

(511

)

(512

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — September 30, 2014 (Successor)

 

$

614

 

$

1,239,439

 

$

(13,341

)

$

(18,290

)

$

1,208,422

 

$

275,104

 

$

1,483,526

 

 

See accompanying notes to condensed consolidated financial statements.

 

5



Table of Contents

 

Genco Shipping & Trading Limited

Condensed Consolidated Statements of Cash Flows

(U.S. Dollars in Thousands)

(Unaudited)

 

 

 

Successor

 

 

Predecessor

 

 

 

For the Nine
Months Ended
September 30,
2015

 

Period from
July 9 to
September 30,
2014

 

 

Period from
January 1 to
July 9,
2014

(restated)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(204,868

)

$

(22,562

)

 

$

(1,013,250

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Non-cash reorganization items and fresh-start reporting adjustments, net

 

 

 

 

880,408

 

Depreciation and amortization

 

58,933

 

17,356

 

 

75,952

 

Amortization of deferred financing costs

 

1,688

 

384

 

 

4,461

 

Amortization of time charters acquired

 

 

434

 

 

(68

)

Amortization of discount on Convertible Senior Notes

 

 

 

 

1,592

 

Interest expense related to the de-designation of the interest rate swap

 

 

 

 

1,048

 

Amortization of nonvested stock compensation expense

 

36,673

 

7,872

 

 

4,352

 

Impairment of vessel assets

 

35,396

 

 

 

 

Loss on disposal of vessels

 

900

 

 

 

 

Impairment of investment

 

32,536

 

 

 

 

Realized loss on sale of investment

 

662

 

 

 

 

Change in assets and liabilities:

 

 

 

 

 

 

 

 

Decrease (increase) in due from charterers

 

600

 

(2,400

)

 

1,047

 

(Increase) decrease in prepaid expenses and other current assets

 

(89

)

5,519

 

 

(11,735

)

Increase (decrease) in accounts payable and accrued expenses

 

8,266

 

(27,998

)

 

32,534

 

Decrease in deferred revenue

 

(381

)

(104

)

 

(600

)

Increase in lease obligations

 

579

 

186

 

 

195

 

Deferred drydock costs incurred

 

(10,288

)

(2,977

)

 

(9,253

)

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

(39,393

)

(24,290

)

 

(33,317

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of vessels, including deposits

 

(46,129

)

(918

)

 

(29,995

)

Purchase of other fixed assets

 

(586

)

(30

)

 

(415

)

Sale of AFS securities

 

688

 

 

 

 

Changes in deposits of restricted cash

 

19,630

 

125

 

 

(125

)

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

(26,397

)

(823

)

 

(30,535

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Repayments on the $100 Million Term Loan Facility

 

(5,769

)

(1,923

)

 

(3,846

)

Repayments on the $253 Million Term Loan Facility

 

(16,875

)

 

 

(10,150

)

Proceeds from the 2015 Revolving Credit Facility

 

35,000

 

 

 

 

Repayments on the $44 Million Term Loan Facility

 

(2,063

)

(688

)

 

(1,375

)

Proceeds from the $148 Million Credit Facility

 

131,500

 

 

 

 

Repayments on the $148 Million Credit Facility

 

(4,894

)

 

 

 

Repayments on the 2010 Credit Facility

 

(102,250

)

 

 

 

Repayments on the $22 Million Term Loan Facility

 

(1,125

)

(375

)

 

(750

)

Repayments on the 2014 Term Loan Facilities

 

(1,381

)

 

 

 

Payment of dividend by subsidiary

 

 

(512

)

 

(2,046

)

Cash settlement of non-accredited Note holders

 

(748

)

(375

)

 

 

Proceeds from Rights Offering

 

 

 

 

100,000

 

Payment of common stock issuance costs by subsidiary

 

 

 

 

(111

)

Payment of deferred financing costs

 

(4,541

)

(471

)

 

(4,515

)

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

26,854

 

(4,344

)

 

77,207

 

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(38,936

)

(29,457

)

 

13,355

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

83,414

 

136,077

 

 

122,722

 

Cash and cash equivalents at end of period

 

$

44,478

 

$

106,620

 

 

$

136,077

 

 

See accompanying notes to condensed consolidated financial statements.

 

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Table of Contents

 

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”), its wholly-owned subsidiaries, and its wholly-owned indirect subsidiary, Baltic Trading Limited (collectively, the “Company”). The Company is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels. GS&T is incorporated under the laws of the Marshall Islands and as of September 30, 2015, is the sole owner of all of the outstanding shares of the following subsidiaries: Genco Ship Management LLC; Genco Investments LLC; Genco RE Investments LLC; and the ship-owning subsidiaries as set forth below.  As of September 30, 2015, Genco Ship Management LLC is the sole owner of all of the outstanding shares of Genco Management (USA) Limited.

 

Bankruptcy Filing

 

On April 21, 2014 (the “Petition Date”), GS&T and its subsidiaries other than Baltic Trading Limited (“Baltic Trading”) and its subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). The Debtors continued to operate their businesses in the ordinary course as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Through the Chapter 11 Cases, the Debtors implemented a Prepackaged Plan of Reorganization of the Debtors Pursuant to Chapter 11 of the Bankruptcy Code (the “Prepack Plan”) for which the Company solicited votes from certain classes of its creditors prior to commencement of the Chapter 11 Cases in accordance with the Restructuring Support Agreement that the Debtors entered into with certain of its creditors on April 3, 2014.  The Company subsequently emerged from bankruptcy on July 9, 2014 (the “Effective Date”).  Refer to the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2014, as amended, for further detail regarding the bankruptcy filing.

 

Merger Agreement with Baltic Trading

 

On April 7, 2015, the Company entered into a definitive merger agreement with Baltic Trading under which the Company acquired Baltic Trading in a stock-for-stock transaction (the “Merger”).  Under the terms of the agreement, Baltic Trading became an indirect wholly-owned subsidiary of the Company, and Baltic Trading shareholders (other than the Company and its subsidiaries) received 0.216 shares of the Company’s common stock for each share of Baltic Trading’s common stock they owned at closing, with fractional shares settled in cash.  Upon consummation of the transaction on July 17, 2015, the Company’s shareholders owned approximately 84.5% of the combined company, and former Baltic Trading’s shareholders (other than the Company and its subsidiaries) owned approximately 15.5% of the combined company.  Shares of Baltic Trading’s Class B stock (all of which were owned by the Company) were canceled in the Merger.  The Company’s common stock began trading on the New York Stock Exchange after consummation of the transaction on July 20, 2015.The Boards of Directors of both the Company and Baltic Trading established independent special committees to review the transaction and negotiate the terms on behalf of their respective companies.  Both independent special committees unanimously approved the transaction.  The Boards of Directors of both companies approved the Merger by unanimous vote of directors present and voting, with Peter C. Georgiopoulos, Chairman of the Board of each company, recused for the vote.  The Merger was approved on July 17, 2015 at the 2015 Annual Meeting of Shareholders (the “Annual Meeting”).

 

Prior to the completion of the Merger, the Company prepared its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and consolidated the operations of Baltic Trading. The Baltic Trading common shares that the Company acquired in the Merger were previously recognized as a noncontrolling interest in the condensed consolidated financial statements of the Company. Under U.S. GAAP, changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary are considered equity transactions (i.e. transactions with owners in their capacity as owners) with any difference between the amount by which the noncontrolling interest is adjusted and the fair value of the consideration paid attributed to the equity of the parent. Accordingly, any difference between the fair value of the Company’s common shares issued in exchange for Baltic Trading common shares pursuant to the Merger is reflected as an adjustment to the equity in the Company. No gain or loss has been recognized in the Company’s Condensed Consolidated Statement of Comprehensive Income (Loss) upon completion of the transaction.

 

Acquisition of Baltic Lion and Baltic Tiger

 

Additionally, on April 7, 2015, the Company entered into an agreement under which the Company acquired all of the shares of two single-purpose vessel owning entities that were wholly owned by Baltic Trading, each of which owns one Capesize drybulk vessel, specifically the Baltic Lion and Baltic Tiger, for an aggregate purchase price of $68,500, subject to reduction for $40,563 of outstanding first-mortgage debt of such single-purpose entities that is to be guaranteed by the Company.  For further details, refer to

 

7



Table of Contents

 

the “Impairment of vessel assets” Section in Note 2 — Summary of Significant Accounting Policies.  These transactions, which closed on April 8, 2015, were accounted for pursuant to accounting guidance under ASC 805, “Business Combinations”, for transactions amongst entities under common control.  Accordingly, the difference between the cash paid to Baltic Trading and the Company’s carrying value of the Baltic Lion and Baltic Tiger as of the closing date of $590 is reflected as an adjustment to Additional paid-in capital in the Condensed Consolidated Statements of Equity during the nine months ended September 30, 2015.  The independent special committees of both companies’ Boards of Directors reviewed and approved these transactions.

 

Financial Statement Presentation

 

Upon the Company’s emergence from the Chapter 11 Cases on July 9, 2014, the Company adopted fresh-start reporting in accordance with provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 852, “Reorganizations” (“ASC 852”).  Upon adoption of fresh-start reporting, the Company’s assets and liabilities were recorded at their value as of the fresh-start reporting date.  The fair values of the Company’s assets and liabilities in conformance with ASC 805, “Business Combinations,” as of that date differed materially from the recorded values of its assets and liabilities as reflected in its historical consolidated financial statements.  In addition, the Company’s adoption of fresh-start reporting may materially affect its results of operations following the fresh-start reporting dates, as the Company will have a new basis in its assets and liabilities.  Consequently, the Company’s historical financial statements may not be reliable indicators of its financial condition and results of operations for any period after it adopted fresh-start reporting.  As a result of the adoption of fresh-start reporting, the Company’s consolidated balance sheets and consolidated statements of operations subsequent to July 9, 2014 will not be comparable in many respects to our consolidated balance sheets and consolidated statements of operations prior to July 9, 2014.  References to “Successor Company” refer to the Company after July 9, 2014, after giving effect to the application of fresh-start reporting.  References to “Predecessor Company” refer to the Company prior to July 9, 2014.

 

Under ASC 852, fresh-start reporting is required upon emergence from Chapter 11 if (i) the value of the assets of the emerging entity immediately before the date of confirmation is less than the total of all post-petition liabilities and allowed claims; and (ii) holders of existing voting shares immediately before confirmation receive less than 50% of the voting shares of the emerging entity.  Accordingly, the Company qualified for and adopted fresh-start reporting as of the Effective Date. Adopting fresh-start reporting results in a new reporting entity with no beginning retained earnings or deficit. The cancellation of all existing shares outstanding on the Effective Date and issuance of new shares of the reorganized entity caused a related change of control of the Company under ASC 852.

 

The following fresh-start balance sheet illustrates the financial effects on the Company of the implementation of the Plan and the adoption of fresh-start reporting.  This fresh-start balance sheet reflects the effect of the completion of the transactions included in the Plan, including the issuance of equity and the settlement of old indebtedness.

 

The effects of the Plan and fresh-start reporting on the Company’s consolidated balance sheet (as restated) are as follows:

 

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Table of Contents

 

 

 

Fresh-Start Adjustments

 

 

 

Predecessor
July 9,
2014

 

Debt Discharge
and Equity
Issuance (a)
(restated)

 

Reinstatement
of
Liabilities (b)

 

Revaluation of
Assets and
Liabilities (c)
(restated)

 

Successor
July 9,
2014

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

48,551

 

$

87,526

 

$

 

$

 

$

136,077

 

Restricted cash

 

9,975

 

 

 

 

9,975

 

Due from charterers, net

 

13,194

 

 

 

 

13,194

 

Prepaid expenses and other current assets

 

30,800

 

 

 

(41

)

30,759

 

Time charters acquired

 

 

 

 

450

 

450

 

Total current assets

 

102,520

 

87,526

 

 

409

 

190,455

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent assets:

 

 

 

 

 

 

 

 

 

 

 

Vessels, net

 

2,604,731

 

 

 

(1,065,882

)

1,538,849

 

Deposits on vessels

 

28,658

 

 

 

2,317

 

30,975

 

Deferred drydock, net

 

16,584

 

 

 

(16,396

)

188

 

Deferred financing costs, net

 

18,953

 

(11,893

)

 

 

7,060

 

Fixed assets, net

 

4,053

 

 

 

(3,443

)

610

 

Other noncurrent assets

 

514

 

 

 

 

514

 

Restricted cash

 

300

 

 

 

 

300

 

Investments

 

51,804

 

 

 

 

51,804

 

Goodwill

 

 

 

 

166,067

 

166,067

 

Total noncurrent assets

 

2,725,597

 

(11,893

)

 

(917,337

)

1,796,367

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

2,828,117

 

$

75,633

 

$

 

$

(916,928

)

$

1,986,822

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilities not subject to compromise:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

60,333

 

$

(1,086

)

$

6,478

 

$

 

$

65,725

 

Current portion of long-term debt

 

4,250

 

 

27,992

 

 

32,242

 

Deferred revenue

 

997

 

 

 

 

997

 

Time charters acquired

 

16

 

 

 

(16

)

 

Total current liabilities not subject to compromise

 

65,596

 

(1,086

)

34,470

 

(16

)

98,964

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent liabilities not subject to compromise:

 

 

 

 

 

 

 

 

 

 

 

Long-term lease obligations

 

2,670

 

 

 

(2,670

)

 

Long-term debt

 

161,500

 

 

214,289

 

 

375,789

 

Total noncurrent liabilities not subject to compromises

 

164,170

 

 

214,289

 

(2,670

)

375,789

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities subject to compromise

 

1,443,446

 

(1,194,687

)

(248,759

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

1,673,212

 

(1,195,773

)

 

(2,686

)

474,753

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

Genco Shipping & Trading Limited shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

Predecessor Common stock

 

445

 

(445

)

 

 

 

Predecessor Additional paid-in capital

 

849,130

 

(849,130

)

 

 

 

Successor Common stock

 

 

603

 

 

 

603

 

Successor Additional paid-in capital

 

 

1,232,397

 

 

 

1,232,397

 

Accumulated other comprehensive income

 

30,357

 

(30,357

)

 

 

 

Retained (deficit) earnings

 

(57,463

)

918,338

 

 

(860,875

)

 

Total Genco Shipping & Trading Limited shareholders’ equity

 

822,469

 

1,271,406

 

 

(860,875

)

1,233,000

 

Noncontrolling interest

 

332,436

 

 

 

(53,367

)

279,069

 

Total equity

 

1,154,905

 

1,271,406

 

 

(914,242

)

1,512,069

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

 

$

2,828,117

 

$

75,633

 

$

 

$

(916,928

)

$

1,986,822

 

 


(a)         Debt Discharge and Equity Issuance — This column reflects the following adjustments pursuant to the Plan:

 

1.              Items comprising the net gain on settlement of liabilities subject to compromise in exchange for equity issuance — see Note 18.

 

9



Table of Contents

 

 

 

Predecessor

 

 

 

Period from
January 1 to
July 9,
2014

 

Discharge of the outstanding debt under the 2007 Credit Facility

 

$

1,055,912

 

Discharge of the long-term interest payable due pursuant to the 2007 Credit Facility

 

13,199

 

Discharge of the 2010 Notes liability

 

117,473

 

Discharge of coupon interest on the 2010 Notes liability

 

1,105

 

The elimination of deferred financing fees associated with the discharged obligations

 

(15,383

)

The elimination of accumulated other comprehensive income related to interest rate swaps associated with the discharged obligations

 

(4,574

)

Issuance of Successor common stock

 

(1,133,900

)

Net gain on the discharge of Predecessor liabilities related to liabilities subject to compromise and associated issuance of Successor equity

 

$

33,832

 

 

10



Table of Contents

 

2.                    Other items associated with the settlement of liabilities subject to compromise:

 

·                  The payment of interest expense accrued up to the Effective Date of $1,772, $59 and $156 for the 2007 Credit Facility, the $100 Million Term Loan Facility and the $253 Million Term Loan Facility, respectively.

 

·                  The pay down on the Effective Date of $1,923 and $5,075 for the $100 Million Term Loan Facility and $253 Million Term Loan Facility, respectively, which were due on the Effective Date as they were not paid during the pendency of the Chapter 11 Cases.

 

·                  The payment of deferred financing fees of $3,490 for the Amended and Restated $100 Million and $253 Million Term Loan Facilities.

 

3.                    The reclassification to retained (deficit) earnings of $34,931 related to the gain associated with the Company’s investments.

 

4.              The reclassification of $900 of initial equity to accounts payable that represents the estimated amount of the notes discharged that will be paid in cash to non-accredited investors.

 

5.              The reclassification to retained (deficit) earnings of the Predecessor common stock of $445 and Predecessor additional paid in capital of $849,130.

 

6.                    Receipt of the proceeds of the $100,000 rights offering pursuant to the Plan.

 

(b)         Reinstatement of Liabilities — This column reflects the reinstatement of the remaining Liabilities subject to compromise for the Predecessor Company which were not already adjusted in the Debt Discharge and Equity Issuance column.  It includes the following adjustments:

 

·                  The reclassification of the debt outstanding under the Amended and Restated $100 Million Term Loan Facility.  This includes $7,692 of current long-term debt and $63,946 of long-term debt.

 

·                  The reclassification of the debt outstanding under the Amended and Restated $253 Million Term Loan Facility.  This includes $20,300 of current long-term debt and $150,343 of long-term debt.

 

·                  The reinstatement of $5,622 related to the termination of the interest rate swap agreement with DNB Bank ASA.

 

·                  The reinstatement of the $815 lease obligation.

 

·                  The reinstatement of $41 of pre-petition accounts payable due to vendors in the United States.

 

(c)          Revaluation of Assets and Liabilities — Fresh-start reporting adjustments are made to reflect asset values at their estimated fair value, including:

 

·                  Adjustment of $179 to prepaid amounts for the Predecessor Company.

 

·                  Adjustment to reflect the fair value of time charters acquired of $434.

 

·                  Adjustment of $1,083,404 to reflect the fair value of vessel assets, vessel deposits, drydocking assets and other fixed assets as of the Effective Date.  The portion of the asset revaluation associated with Baltic Trading’s noncontrolling interest in the amount of $74,355 was reflected as a reduction of noncontrolling interest.

 

·                  Adjustment of $2,670 to reflect the fair value of the Company’s current lease agreement, which was previously recorded as long-term lease obligations.  As of the Effective Date, the lease agreement has been valued at below market; therefore, we have recorded in “Prepaid expenses and other current assets” an asset of $138, which will be amortized over the remaining life of the lease agreement.

 

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·                  Goodwill in the amount of $166,067 was recognized, which represents the portion of the total reorganization value that was not attributed to specific tangible or identifiable intangible assets.  The portion of the goodwill recognized in relation to Baltic Trading noncontrolling interest in the amount of $24,022 was reflected as an increase in noncontrolling interest.  A summary of the allocation of the reorganization value to the fair value of the Successor Company net assets, including goodwill, is as follows:

 

 

 

 

 

Total

 

Reorganization Value

 

 

 

 

 

Value of shares issued to pre-petition claimants

 

$

1,133,000

 

 

 

Proceeds of rights offering

 

100,000

 

$

1,233,000

 

Estimated fair value of debt

 

 

 

 

 

Current portion of long-term debt

 

32,242

 

 

 

Long term debt

 

375,789

 

408,031

 

Estimated fair value of non-debt liabilities

 

 

 

 

 

Deferred revenue

 

997

 

 

 

Accounts payable and accrued expenses

 

65,725

 

66,722

 

 

 

 

 

 

 

Noncontrolling interest

 

 

 

279,069

 

 

 

 

 

 

 

Reorganization value of assets

 

 

 

1,986,822

 

 

 

 

 

 

 

Estimated fair value of assets (excluding goodwill) (a)

 

 

 

(1,820,755

)

 

 

 

 

 

 

Reorganization value of assets in excess of fair value — goodwill (b)

 

 

 

$

166,067

 

 


(a)                    Estimated fair value of assets (excluding goodwill) consists of:

 

Total current assets

 

$

190,455

 

Vessels, net

 

1,538,849

 

Deposits on vessels

 

30,975

 

Deferred drydock, net

 

188

 

Deferred financing costs, net

 

7,060

 

Fixed assets, net

 

610

 

Other noncurrent assets

 

514

 

Restricted cash

 

300

 

Investments

 

51,804

 

Total assets excluding goodwill

 

$

1,820,755

 

 

(b)                     The goodwill recognized by the Predecessor Company during the period from January 1 to July 9, 2014 was subsequently deemed impaired during the three months ended December 31, 2014.

 

·                  The total reduction of $53,367 in noncontrolling interest is due to the adjustment of the fair value of the noncontrolling interest derived from the Baltic Trading asset revaluation and goodwill described above and an additional revaluation adjustment of $3,034. The revalued noncontrolling interest was determined based on a relative fair value allocation of Baltic Trading’s estimated equity value as July 8, 2014, which multiplied the percentage of Baltic Trading’s equity ownership attributable to non-controlling interests by the estimated equity value of Baltic Trading as of such date. The estimated equity value of Baltic Trading as of such date was determined by multiplying the closing price of Baltic Trading’s publicly traded common stock by the total number of shares of Baltic Trading’s common stock and Class B stock outstanding on July 8, 2014.

 

Other General Information

 

Baltic Trading was a wholly-owned indirect subsidiary of GS&T until Baltic Trading completed its initial public offering, or IPO, on March 15, 2010.  As of December 31, 2014, Genco Investments LLC owned 6,356,471 shares of Baltic Trading’s Class B Stock, which represented a 10.85% ownership interest in Baltic Trading and 64.60% of the aggregate voting power of Baltic Trading’s outstanding shares of voting stock.  As a result of the Merger, Baltic Trading once again became a wholly-owned indirect subsidiary of GS&T.

 

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Below is the list of the Company’s wholly owned ship-owning subsidiaries as of September 30, 2015: