FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2016

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

001-34228

GENER8 MARITIME, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (212) 763-5600

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 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 ☒ No ☐

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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether 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 Section 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 14, 2016:

Common Stock, par value $0.01 per share 82,681,711 shares

GENER8 MARITIME, INC. AND SUBSIDIARIES

INDEX

Website Information

We intend to use our website, www.gener8maritime.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 Relations section. Accordingly, investors should monitor the Investor Relations 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 click the “Investor Alerts” link in the Investor Relations section of our website and submit your email address. 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.

PART 1: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

GENER8 MARITIME, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF

SEPTEMBER 30, 2016 AND DECEMBER 31, 2015

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

See notes to condensed consolidated financial statements.

GENER8 MARITIME, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

(UNAUDITED)

See notes to condensed consolidated financial statements.

GENER8 MARITIME, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) / INCOME 

FOR THE three AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(DOLLARS IN THOUSANDS)

(UNAUDITED)

See notes to condensed consolidated financial statements.

GENER8 MARITIME, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016

(DOLLARS IN THOUSANDS)

(UNAUDITED)

See notes to condensed consolidated financial statements.

GENER8 MARITIME, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(DOLLARS IN THOUSANDS)

See Note 2 for supplementary information of noncash items.

See notes to condensed consolidated financial statements.

GENER8 MARITIME, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS—Incorporated on August 1, 2008, under the Laws of Republic of the Marshall Islands, Gener8 Maritime, Inc. (formerly named General Maritime Corporation) and its wholly-owned subsidiaries (collectively, the “Company”) provide international transportation services of seaborne crude oil and petroleum products. The Company’s owned fleet at September 30, 2016 consisted of 37 tankers in operation (20 Very Large Crude Carriers (“VLCCs”), 11 Suezmax tankers, four Aframax tankers, two Panamax tankers), and six newbuilding VLCCs under construction. The Company operates its business in one business segment, which is the transportation of international seaborne crude oil and petroleum products.

On May 7, 2015, the Company consummated a merger (“2015 merger”) pursuant to an agreement between Gener8 Maritime Acquisition, Inc., a wholly owned subsidiary of the Company, Navig8 Crude Tankers, Inc. and the equity holders’ representatives named therein. As a result of the merger, Gener8 Maritime Subsidiary Inc. (formerly known as Navig8 Crude Tankers, Inc.) became a wholly owned subsidiary of the Company, and the Company’s name was changed from General Maritime Corporation to Gener8 Maritime, Inc. The Company followed the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Pursuant to this, the Company accounted for the 2015 merger as an asset acquisition. For more details see Note 6, 2015 MERGER, in our 2015 Annual Report on Form 10-K.

The Company’s vessels are primarily available for employment in commercial pools, or for charter on a spot voyage or time charter basis.

The Company is party to certain commercial pooling arrangements. Commercial pools are designed to provide for effective chartering and commercial management of similar vessels that are combined into a single fleet to improve customer service, increase vessel utilization and capture cost efficiencies.

The Company employs all of its VLCC, Suezmax and Aframax vessels in Navig8 Group commercial crude tanker pools including the VL8 Pool, the Suez8 Pool and the V8 Pool. In 2015, the Company’s VLCC, Suezmax, Aframax and newbuilding owning subsidiaries entered into pool agreements with the pool managers VL8 Pool Inc. and V8 Pool Inc., subsidiaries of Navig8 Limited, the beneficial owner of over 4% of the Company’s outstanding common shares as of September 30, 2016. See Note 14, Related Party Transactions, for a description of the pool arrangements with these related parties. 

BASIS OF PRESENTATION—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. 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 financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s financial statements for the year ended December 31, 2015, which provides a more complete understanding of our accounting policies. The results of operations for the current and prior periods are not necessarily indicative of the operating results for the full year. The financial statements of the Company have been prepared on the accrual basis of accounting and presented in United States Dollars (USD or $) which is the functional currency of the Company. A summary of the significant accounting policies followed in the preparation of the accompanying unaudited interim financial statements, which conform to accounting principles generally accepted in the United States of America, were included in our 2015 Annual Report on Form 10-K. Except for the following new policies presented below, all accounting policies remained unchanged.

INTEREST RATE RISK MANAGEMENT—The Company is exposed to interest rate risk through its variable rate credit facilities. The Company uses interest rate swaps, under which the Company pays a fixed rate in exchange for receiving a variable rate, to achieve a fixed rate of interest on the hedged portion of its debt in order to increase the ability of the Company to forecast interest expense. The objective of these swaps is to help to protect the Company

against changes in borrowing rates on the current credit facilities and any replacement floating rate LIBOR credit facility. Upon execution of the swaps, the Company designated the hedges as cash flow hedges of benchmark interest rate risk under FASB ASC 815, Derivatives and Hedging, and the Company has established effectiveness testing and measurement processes. Changes in the fair value of the interest rate swaps are recorded as assets or liabilities, and effective gains/losses are captured in a component of accumulated other comprehensive income (“OCI”) until reclassified to interest expense when the hedged variable rate interest expenses are incurred. The Company elected to classify settlement payments as operating activities within the statement of cash flow. See Note 11, Financial Instruments, additional disclosures on the Company’s interest rate swaps.

GOODWILL—We follow the provisions of FASB ASC 350-20-35, Intangibles—Goodwill and Other. This statement requires that goodwill and intangible assets with indefinite lives be tested for impairment at least annually or when there is a triggering event and written down with a charge to operations when the carrying amount of the reporting unit that includes goodwill exceeds the estimated fair value of the reporting unit. If the carrying value of the goodwill exceeds the reporting unit’s implied goodwill, such excess must be written off. Change in vessel values between November 30, 2015, the Company’s last annual impairment test date, and September 30, 2016, indicated circumstances changed that would more likely than not reduce the fair value of each reporting unit below its carrying amount. At September 30, 2016 and in accordance with ASC 350-20-35, the Company considered the continued decline in the fair value of the Company’s fleet independent valuations to be an indicator for goodwill impairment testing at the interim period. Accordingly, at September 30, 2016, goodwill was tested for potential impairment. As a result of the goodwill impairment test performed, it was determined that the carrying value for each reporting unit was higher than its fair value and therefore goodwill was fully impaired, which resulted in a write-off at September 30, 2016 of $23.3 million. Additionally, during both the three and nine months ended September 30, 2016, the Company recorded a $3.0 million goodwill write-off associated with the sale of the Genmar Victory and Genmar Vision, which were sold in August 2016.

RECENT ACCOUNTING PRONOUNCEMENTS—In April 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-10—Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. ASU No. 2016-10 suggests guidance for stakeholders on identifying performance obligations and licenses in customer contracts. In May 2014, the FASB issued ASU No. 2014‑09, Revenue from Contracts with Customers. The core principle is that a company should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014‑09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, and shall be applied either retrospectively to each period presented or as a cumulative‑effect adjustment as of the date of adoption. The Company is evaluating the potential impact of this standard update on its consolidated financial statements and related disclosure. 

In March 2016, the FASB issued ASU 2016-09—Compensation-Stock Compensation (Topic 718). This update affects all entities that issue share-based payment awards to their employees, and involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liability and classification on the statement of cash flows. An entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the effect of adoption on its consolidated financial statements and related disclosure.

In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 is intended to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In order to meet that objective, the new standard requires recognition of the assets and liabilities that arise from leases. A lessee will be required to recognize on the balance sheet the assets and liabilities for leases with lease terms of more than 12 months. The new standard is effective for public companies for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. The Company is currently evaluating the effect that adopting this standard will have on its financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13-Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU require the measurement of all expected credit losses for financial assets, which include trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance in this ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted for interim and annual periods beginning after December 15, 2018. The Company is currently evaluating this ASU and any potential impacts the adoption of this ASU will have on our consolidated financial statements revised guidance for the accounting and reporting of financial instruments.

In August 2016, the FASB issued ASU 2016-15-Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if retrospective application would be impracticable. The Company is currently evaluating the effect that adopting this standard will have on its consolidated financial statements and related disclosures.

2. CASH FLOW INFORMATION

The Company excluded from cash flows from investing and financing activities in the condensed consolidated statements of cash flows items included in accounts payable and accrued expenses for accrued milestone and supervision payments of $9.6 million and $106.0 million for the period ended September 30, 2016 and December 31, 2015, respectively. Capitalized interest amounted to $24.3 million for the nine months ended September 30, 2016, of which $8.8 million has not been paid out as of September 30, 2016 (which is included in long‑term debt in the condensed consolidated balance sheet). Capitalized interest amounted to $23.9 million for the nine months ended September 30, 2015.

3. INCOME / (LOSS) PER COMMON SHARE

The computation of basic income / (loss) per share is based on the weighted-average number of common shares outstanding during the period. The computation of diluted earnings / (loss) per share assumes the exercise of all dilutive stock options using the treasury stock method and the lapsing of restrictions on unvested restricted stock awards, for which the assumed proceeds upon lapsing the restrictions are deemed to be the amount of compensation cost attributable to future services and not yet recognized using the treasury stock method, to the extent dilutive.

The reconciliation of basic to diluted income / (loss) per common share was as follows (in thousands, except per share amounts):

On May 7, 2015, all shares of Class A Common Stock and Class B Common Stock were converted on a one-to-one basis to a single class of common stock. As a result of the conversion in 2015, and since both Class A Common

Stock and Class B Common Stock had equal rights to earnings and losses, the 2016 and 2015 presentations of net income per share combine Class A Common Stock, Class B Common Stock and new common stock. Options to purchase 343,662 shares of Class A Common Stock were excluded from the above calculation for the three and nine months ended September 30, 2015, because the impact is anti-dilutive. Options to purchase 309,296 shares of common stock were excluded from the above calculation for the three and nine months ended September 30, 2015 and 2016, because the impact is anti-dilutive. Warrants to purchase 1,431,520 shares (1,600,000 warrants converted at 0.8947 shares) of common stock were excluded from the above calculation for the three and nine months ended September 30, 2015, because the warrant agreement expired on March 31, 2016. Options to purchase 13,420 shares of common stock were also excluded from the above calculation for the three and nine months ended September 30, 2016, because certain market conditions have not been met.

Additionally, on June 24, 2015, in connection with the pricing of the Company’s IPO, the Company granted members of management restricted stock units (“RSUs”) of the Company’s common stock pursuant to the Company’s amended 2012 Equity Incentive Plan. The remaining RSUs will generally vest in tranches on December 1, 2016, December 1, 2017 and December 1, 2018, subject for each increment to employment with the Company through the applicable vesting date for such increment.

On September 9, 2016 (“Grant Date”), in accordance with the Company’s amended 2012 Equity Incentive Plan, the Company granted certain non-employee directors RSUs. The RSUs will generally vest on the earlier of (a) the date of the Company’s next annual meeting of shareholders and (b) the first anniversary of the Grant Date, subject to the director’s continued service with the Company through the applicable vesting date.

The RSUs granted in June 2015 and September 2016 were excluded in determining the diluted net income / (loss) per share for the three and nine months ended September 30, 2016, because the impact is anti-dilutive.

4. DELIVERY AND DISPOSAL OF VESSELS

Delivery of Vessels

During the nine months ended September 30, 2016, the Company took delivery of the following 2016-built VLCC newbuildings. Upon delivery, all of these vessels entered into the VL8 Pool. The Company has made all shipyard installment payments, and there is no outstanding payable balance in respect of each vessel.

Disposal of Vessels

On December 30, 2015, the Company entered into an agreement to sell the 2004-built Handymax tanker Gener8 Consul for $17.5 million, gross proceeds. As of December 31, 2015, the Gener8 Consul was classified as held for sale. On February 17, 2016, the sale was completed.

On July 22, 2016 the Company entered into an agreement for the sale of the 2001-built VLCC tanker Genmar Vision for $28.0 million, gross proceeds. On August 5, 2016 the sale was finalized and the Company recorded a net loss of approximately $3.2 million, which is included in Loss on vessel disposal, net on the condensed consolidated statement of operations. The Company used the net proceeds to repay approximately $19.4 million of the related portion of the senior secured debt outstanding under the Refinancing Facility associated with the vessel.

On August 8, 2016 the Company entered into an agreement for the sale of the 2001-built VLCC tanker Genmar Victory for $29.0 million, gross proceeds. On August 25, 2016 the sale was finalized and the Company recorded a net loss of $7.3 million, which is included in Loss on vessel disposal, net on the condensed consolidated statement of operations. The Company used the net proceeds to repay $19.4 million of the related portion of the senior secured debt outstanding under the Refinancing Facility associated with the vessel.

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following (dollars in thousands):

The escrow deposit amount represents the loan proceeds due to the Company upon delivery of the Gener8 Apollo, which were received upon delivery of the vessel in January 2016. Insurance claims receivable consists substantially of payments made by the Company for repairs of vessels that the Company expects, pursuant to the terms of the insurance agreements, to recover from the carrier within one year, net of deductibles which have been expensed. As of September 30, 2016 and December 31, 2015, the portion of insurance claims receivable not expected to be collected within one year of $0.5 million and $0.8 million, respectively, is included in Other assets (non-current) on the condensed consolidated balance sheets. Other primarily represents advances to our third‑party technical managers.

6. VESSELS UNDER CONSTRUCTION

Vessels under construction represents the cost of acquiring contracts to build vessels, installments paid to shipyards, certain other payments made to third parties and interest costs incurred during the construction of vessels (until the vessel is substantially complete and ready for its intended use).

Vessels under construction consist of the following (dollars in thousands):

In March 2014, the Company acquired seven newbuilding contracts for VLCC tankers from Scorpio Tankers Inc. (the “2014 Acquired VLCC Newbuildings”) in a stock purchase transaction (“SPV Stock Purchase”). Additionally,  the Company acquired 14 newbuilding contracts for VLCC tankers from Navig8 Crude in connection with the 2015 merger (the “2015 Acquired VLCC Newbuildings,” and together with the 2014 Acquired VLCC Newbuildings, the “Acquired VLCC Newbuildings”).

During the three months ended September 30, 2016 and in accordance with its newbuilding contract, the Company took delivery of Gener8 Oceanus, the last of the 2014 Acquired VLCC Newbuildings to be delivered. See Note 4, DELIVERY AND DISPOSAL OF VESSELS, for deliveries during the nine months ended September 30, 2016.

During the three months ended September 30, 2016 and in accordance with their newbuilding contracts, three of the 2015 Acquired VLCC Newbuildings were delivered to the Company. See Note 4, DELIVERY AND DISPOSAL OF VESSELS, for deliveries during the nine months ended September 30, 2016. As of September 30, 2016, six additional 2015 Acquired VLCC Newbuildings are scheduled to be delivered during the remaining period of 2016 and early 2017.

7. GOODWILL

FASB ASC 350-20-35 provides guidance for impairment testing of goodwill, which is not amortized. Other than goodwill, the Company does not have any other intangible assets that are not amortized. Goodwill is tested for impairment using a two-step process that begins with an estimation of the fair value of the Company’s reporting units. The first step is a screen for potential impairment and the second step measures the amount of impairment, if any. The first step involves a comparison of the estimated fair value of a reporting unit with its carrying amount. If the estimated fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is considered unimpaired.

Conversely, if the carrying amount of the reporting unit exceeds its estimated fair value, the second step is performed to measure the amount of impairment, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined by allocating the estimated fair value of the reporting unit to the estimated fair value of its existing assets and liabilities in a manner similar to a purchase price allocation. The unallocated portion of the estimated fair value of the reporting unit is the implied fair value of goodwill. If the implied fair value of goodwill is less than the carrying amount, an impairment loss, equivalent to the difference, is recorded as a reduction of goodwill and a charge to operating expense.

Change in vessel values between November 30, 2015, the Company’s last annual impairment test date, and September 30, 2016, indicated circumstances changed that would more likely than not reduce the fair value of each reporting unit below its carrying amount. At September 30, 2016 and in accordance with ASC 350-20-35, the Company considered the continued decline in the fair value of the Company’s fleet independent valuations to be an indicators for goodwill impairment testing as of September 30, 2016. Accordingly, at September 30, 2016, goodwill was tested for potential impairment. As a result of the goodwill impairment test performed, it was determined that the carrying value for each reporting unit was higher than its fair value and therefore goodwill was fully impaired, which resulted in a write-off at September 30, 2016 of $23.3 million. Additionally, during both the three and nine months ended September 30, 2016, the Company recorded a $3.0 million goodwill write-off associated with the sales of Genmar Victory and Genmar Vision, which were sold in August 2016.

8. OTHER NON-CURRENT ASSETS

Other non-current assets consist of the following (dollars in thousands):

As of December 31, 2015, escrow deposits primarily represented the final installment payments for Gener8 Apollo. Subsequent to the delivery of Gener8 Apollo in January 2016, the related amount was transferred to vessels.

9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following (dollars in thousands):