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 March 31, 2010

 

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 000-51442

 


 

GENCO SHIPPING & TRADING LIMITED

(Exact name of registrant as specified in its charter)

 

Republic of the Marshall Islands
(State or other jurisdiction of
incorporation or organization)

 

98-043-9758
(I.R.S. Employer
Identification No.)

 

299 Park Avenue, 20th 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 o 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 x

Accelerated filer o

 

 

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company o

 

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 May 10, 2010:

Common stock, $0.01 per share — 31,917,798 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 March 31, 2010 and December 31, 2009

2

 

 

 

 

 

b)

Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2010 and 2009

3

 

 

 

 

 

c)

Condensed Consolidated Statements of Equity for the Three Months ended March 31, 2010 and 2009

4

 

 

 

 

 

d)

Condensed Consolidated Statements of Comprehensive Income for the Three Months ended March 31, 2010 and 2009

5

 

 

 

 

 

e)

Condensed Consolidated Statements of Cash Flow for the Three Months ended March 31, 2010 and 2009

6

 

 

 

 

 

f)

Notes to Condensed Consolidated Financial Statements for the Three Months ended March 31, 2010 and 2009

7

 

 

 

 

Item 2.

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

23

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

 

 

 

 

Item 4.

Controls and Procedures

38

 

 

 

 

 

 

PART II OTHER INFORMATION

 

 

 

 

 

Item 1.

Legal Proceedings

39

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

39

 

 

 

 

Item 6.

Exhibits

40

 

1



Table of Contents

 

Genco Shipping & Trading Limited

Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009

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

(Unaudited)

 

 

 

March 31, 2010

 

December 31,
2009

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

405,483

 

$

188,267

 

Restricted cash

 

17,500

 

17,500

 

Due from charterers, net of a reserve of $287 and $171, respectively

 

2,430

 

2,117

 

Prepaid expenses and other current assets

 

11,642

 

10,184

 

Total current assets

 

437,055

 

218,068

 

 

 

 

 

 

 

Noncurrent assets:

 

 

 

 

 

Vessels, net of accumulated depreciation of $248,218 and $224,706, respectively

 

2,000,180

 

2,023,506

 

Deposits on vessels

 

35,674

 

 

Deferred drydock, net of accumulated depreciation of $4,891 and $4,384, respectively

 

10,556

 

10,153

 

Other assets, net of accumulated amortization of $2,849 and $2,585, respectively

 

7,601

 

8,328

 

Fixed assets, net of accumulated depreciation and amortization of $1,672 and $1,554, respectively

 

2,418

 

2,458

 

Fair value of derivative instruments

 

372

 

2,108

 

Investments

 

76,423

 

72,181

 

Total noncurrent assets

 

2,133,224

 

2,118,734

 

 

 

 

 

 

 

Total assets

 

$

2,570,279

 

$

2,336,802

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and accrued expenses

 

$

20,142

 

$

18,609

 

Current portion of long term debt

 

50,000

 

50,000

 

Fair value of derivative instruments

 

1,020

 

 

Deferred revenue

 

9,217

 

10,404

 

Total current liabilities

 

80,379

 

79,013

 

 

 

 

 

 

 

Noncurrent liabilities:

 

 

 

 

 

Deferred revenue

 

2,221

 

2,427

 

Deferred rent credit

 

682

 

687

 

Fair market value of time charters acquired

 

3,278

 

4,611

 

Fair value of derivative instruments

 

45,062

 

44,139

 

Long-term debt

 

1,264,500

 

1,277,000

 

Total noncurrent liabilities

 

1,315,743

 

1,328,864

 

 

 

 

 

 

 

Total liabilities

 

1,396,122

 

1,407,877

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Genco Shipping & Trading Limited shareholders’ equity:

 

 

 

 

 

Common stock, par value $0.01; 100,000,000 shares authorized; issued and outstanding 31,917,798 and 31,842,798 shares at March 31, 2010 and December 31, 2009, respectively

 

319

 

318

 

Paid-in capital

 

720,667

 

722,198

 

Accumulated other comprehensive income

 

14,131

 

13,589

 

Retained earnings

 

226,270

 

192,820

 

Total Genco Shipping & Trading Limited shareholders’ equity

 

961,387

 

928,925

 

Noncontrolling interest

 

212,770

 

 

Total equity

 

1,174,157

 

928,925

 

 

 

 

 

 

 

Total liabilities and equity

 

$

2,570,279

 

$

2,336,802

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

2



Table of Contents

 

Genco Shipping & Trading Limited

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009

(U.S. Dollars in Thousands, Except for Earnings per share and share data)

(Unaudited)

 

 

 

For the Three Months
Ended March 31,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

Revenues

 

$

94,681

 

$

96,650

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Voyage expenses

 

737

 

1,579

 

Vessel operating expenses

 

14,887

 

14,202

 

General, administrative and management fees

 

5,797

 

4,772

 

Depreciation and amortization

 

24,834

 

20,949

 

 

 

 

 

 

 

Total operating expenses

 

46,255

 

41,502

 

 

 

 

 

 

 

Operating income

 

48,426

 

55,148

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

Other income

 

29

 

18

 

Interest income

 

76

 

23

 

Interest expense

 

(15,430

)

(13,948

)

 

 

 

 

 

 

Other expense

 

(15,325

)

(13,907

)

 

 

 

 

 

 

Net income

 

33,101

 

41,241

 

Less: Net loss attributable to noncontrolling interest

 

(349

)

 

Net income attributable to Genco Shipping & Trading Limited

 

$

33,450

 

$

41,241

 

 

 

 

 

 

 

Earnings per share-basic

 

$

1.07

 

$

1.32

 

Earnings per share-diluted

 

$

1.06

 

$

1.32

 

Weighted average common shares outstanding-basic

 

31,405,798

 

31,260,482

 

Weighted average common shares outstanding-diluted

 

31,543,465

 

31,351,390

 

Dividends declared per share

 

$

 

$

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

3



Table of Contents

 

Genco Shipping & Trading Limited
Condensed Consolidated Statement of Equity

For the Three Months Ended March 31, 2010 and March 31, 2009

(U.S. Dollars in Thousands)

(Unaudited)

 

 

 

Common
Stock

 

Paid in
Capital

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
Income

 

Genco
Shipping &
Trading
Limited
Shareholders’
Equity

 

Noncontrolling
Interest

 

Total Equity

 

Balance — January 1, 2010

 

$

318

 

$

722,198

 

$

192,820

 

$

13,589

 

$

928,925

 

$

 

$

928,925

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

33,450

 

 

 

33,450

 

(349

)

33,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gain on investments

 

 

 

 

 

 

 

5,168

 

5,168

 

 

 

5,168

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in currency translation gain on investments

 

 

 

 

 

 

 

(925

)

(925

)

 

 

(925

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on cash flow hedges, net

 

 

 

 

 

 

 

(3,701

)

(3,701

)

 

 

(3,701

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 75,000 shares of nonvested stock

 

1

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonvested stock amortization

 

 

 

1,111

 

 

 

 

 

1,111

 

144

 

1,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock of Baltic Trading Limited

 

 

 

(1,071

)

 

 

 

 

(1,071

)

211,405

 

210,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of issuance of Baltic Trading Limited stock-based compensation

 

 

 

(1,570

)

 

 

 

 

(1,570

)

1,570

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — March 31, 2010

 

$

319

 

$

720,667

 

$

226,270

 

$

14,131

 

$

961,387

 

$

212,770

 

$

1,174,157

 

 

 

 

Common
Stock

 

Paid in
Capital

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
Deficit

 

Genco
Shipping &
Trading
Limited
Shareholders’ Equity

 

Noncontrolling
Interest

 

Total Equity

 

Balance — January 1, 2009

 

$

317

 

$

717,979

 

$

44,196

 

$

(66,014

)

$

696,478

 

$

 

$

696,478

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

41,241

 

 

 

41,241

 

 

 

41,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gain on investments

 

 

 

 

 

 

 

5,544

 

5,544

 

 

 

5,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in currency translation gain on investments

 

 

 

 

 

 

 

719

 

719

 

 

 

719

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on cash flow hedges, net

 

 

 

 

 

 

 

4,281

 

4,281

 

 

 

4,281

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonvested stock amortization

 

 

 

1,232

 

 

 

 

 

1,232

 

 

 

1,232

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — March 31, 2009

 

$

317

 

$

719,211

 

$

85,437

 

$

(55,470

)

$

749,495

 

$

 

$

749,495

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4



Table of Contents

 

Genco Shipping & Trading Limited

Condensed Consolidated Statements of Comprehensive Income

For the Three Months Ended March 31, 2010 and 2009
(U.S. Dollars in Thousands)

 

(Unaudited)

 

 

 

For the Three Months
Ended March 31,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

Net income

 

$

33,101

 

$

41,241

 

Change in unrealized gain on investments

 

5,168

 

5,544

 

Change in currency translation gain on investments

 

(925

)

719

 

Unrealized (loss) gain on cash flow hedges, net

 

(3,701

)

4,281

 

Comprehensive income

 

33,643

 

51,785

 

Less: Comprehensive loss attributable to noncontrolling interests

 

(349

)

 

Comprehensive income attributable to Genco Shipping & Trading Limited

 

$

33,992

 

$

51,785

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

5



Table of Contents

 

Genco Shipping & Trading Limited

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009

(U.S. Dollars in Thousands)

(Unaudited)

 

 

 

For the Three Months
Ended March 31,

 

 

 

2010

 

2009

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

33,101

 

$

41,241

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

24,834

 

20,949

 

Amortization of deferred financing costs

 

264

 

230

 

Amortization of fair market value of time charterers acquired

 

(1,333

)

(4,708

)

Unrealized (gain) loss on derivative instruments

 

(21

)

4

 

Amortization of nonvested stock compensation expense

 

1,255

 

1,232

 

Change in assets and liabilities:

 

 

 

 

 

(Increase) decrease in due from charterers

 

(313

)

1,150

 

Increase in prepaid expenses and other current assets

 

(1,458

)

(3,236

)

Increase in accounts payable and accrued expenses

 

1,636

 

885

 

Decrease in deferred revenue

 

(1,393

)

(1,419

)

Decrease in deferred rent credit

 

(5

)

(5

)

Deferred drydock costs incurred

 

(1,574

)

(837

)

 

 

 

 

 

 

Net cash provided by operating activities

 

54,993

 

55,486

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchase of vessels

 

(745

)

(473

)

Deposits on vessels

 

(35,578

)

(695

)

Purchase of other fixed assets

 

(96

)

(45

)

 

 

 

 

 

 

Net cash used in investing activities

 

(36,419

)

(1,213

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Repayments on the 2007 Credit Facility

 

(12,500

)

 

Proceeds from issuance of common stock by subsidiary

 

214,508

 

 

Payments of subsidiary common stock issuance costs

 

(3,053

)

 

Payment of deferred financing costs

 

(313

)

(3,444

)

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

198,642

 

(3,444

)

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

217,216

 

50,829

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

188,267

 

124,956

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

405,483

 

$

175,785

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6



Table of Contents

 

Genco Shipping & Trading Limited

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

 

Notes to Condensed Consolidated Financial Statements for the Three Months Ended March 31, 2010 and 2009 (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 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 was incorporated on September 27, 2004 under the laws of the Marshall Islands and as of March 31, 2010, is the sole owner of all of the outstanding shares of the following subsidiaries: Genco Ship Management LLC; Genco Investments LLC; and the ship-owning subsidiaries as set forth below.

 

Below is the list of the Company’s wholly owned ship-owning subsidiaries as of March 31, 2010:

 

Wholly Owned Subsidiaries

 

Vessels Acquired

 

Dwt

 

Date Delivered

 

Year Built

 

 

 

 

 

 

 

 

 

 

 

Genco Reliance Limited

 

Genco Reliance

 

29,952

 

12/6/04

 

1999

 

Genco Vigour Limited

 

Genco Vigour

 

73,941

 

12/15/04

 

1999

 

Genco Explorer Limited

 

Genco Explorer

 

29,952

 

12/17/04

 

1999

 

Genco Carrier Limited

 

Genco Carrier

 

47,180

 

12/28/04

 

1998

 

Genco Sugar Limited

 

Genco Sugar

 

29,952

 

12/30/04

 

1998

 

Genco Pioneer Limited

 

Genco Pioneer

 

29,952

 

1/4/05

 

1999

 

Genco Progress Limited

 

Genco Progress

 

29,952

 

1/12/05

 

1999

 

Genco Wisdom Limited

 

Genco Wisdom

 

47,180

 

1/13/05

 

1997

 

Genco Success Limited

 

Genco Success

 

47,186

 

1/31/05

 

1997

 

Genco Beauty Limited

 

Genco Beauty

 

73,941

 

2/7/05

 

1999

 

Genco Knight Limited

 

Genco Knight

 

73,941

 

2/16/05

 

1999

 

Genco Leader Limited

 

Genco Leader

 

73,941

 

2/16/05

 

1999

 

Genco Marine Limited

 

Genco Marine

 

45,222

 

3/29/05

 

1996

 

Genco Prosperity Limited

 

Genco Prosperity

 

47,180

 

4/4/05

 

1997

 

Genco Muse Limited

 

Genco Muse

 

48,913

 

10/14/05

 

2001

 

Genco Acheron Limited

 

Genco Acheron

 

72,495

 

11/7/06

 

1999

 

Genco Surprise Limited

 

Genco Surprise

 

72,495

 

11/17/06

 

1998

 

Genco Augustus Limited

 

Genco Augustus

 

180,151

 

8/17/07

 

2007

 

Genco Tiberius Limited

 

Genco Tiberius

 

175,874

 

8/28/07

 

2007

 

Genco London Limited

 

Genco London

 

177,833

 

9/28/07

 

2007

 

Genco Titus Limited

 

Genco Titus

 

177,729

 

11/15/07

 

2007

 

Genco Challenger Limited

 

Genco Challenger

 

28,428

 

12/14/07

 

2003

 

Genco Charger Limited

 

Genco Charger

 

28,398

 

12/14/07

 

2005

 

Genco Warrior Limited

 

Genco Warrior

 

55,435

 

12/17/07

 

2005

 

Genco Predator Limited

 

Genco Predator

 

55,407

 

12/20/07

 

2005

 

Genco Hunter Limited

 

Genco Hunter

 

58,729

 

12/20/07

 

2007

 

Genco Champion Limited

 

Genco Champion

 

28,445

 

1/2/08

 

2006

 

Genco Constantine Limited

 

Genco Constantine

 

180,183

 

2/21/08

 

2008

 

Genco Raptor LLC

 

Genco Raptor

 

76,499

 

6/23/08

 

2007

 

Genco Cavalier LLC

 

Genco Cavalier

 

53,617

 

7/17/08

 

2007

 

Genco Thunder LLC

 

Genco Thunder

 

76,588

 

9/25/08

 

2007

 

Genco Hadrian Limited

 

Genco Hadrian

 

169,694

 

12/29/08

 

2008

 

Genco Commodus Limited

 

Genco Commodus

 

169,025

 

7/22/09

 

2009

 

Genco Maximus Limited

 

Genco Maximus

 

169,025

 

9/18/09

 

2009

 

Genco Claudius Limited

 

Genco Claudius

 

169,025

 

12/30/09

 

2010 (1)

 

 


(1) On December 30, 2009, the Company took delivery of the Genco Claudius.  However, the vessel has been designated by Lloyd’s Register of Shipping as having been built in 2010.

 

7



Table of Contents

 

Baltic Trading Limited (“Baltic Trading”), formerly a wholly-owned indirect subsidiary of GS&T at December 31, 2009, completed its initial public offering, or IPO, on March 15, 2010.  As of March 31, 2010, GS&T indirectly owned 5,699,088 shares of Baltic Trading’s Class B Stock, which represents a 25.35% ownership interest in Baltic Trading at March 31, 2010 and 83.59% of the aggregate voting power of Baltic Trading’s outstanding shares of voting stock.  Additionally, pursuant to the subscription agreement between Genco Investments LLC and Baltic Trading, for so long as Genco Investments LLC directly or indirectly holds at least 10% of the aggregate number of outstanding shares of  Baltic Trading’s common stock and Class B stock, Genco Investments LLC will be entitled to receive an additional number of shares of  Baltic Trading’s Class B stock equal to 2% of the number of common shares issued in the future, other than shares issued under Baltic Trading’s 2010 Equity Incentive Plan.

 

Below is the list of Baltic Trading’s wholly owned ship-owning subsidiaries as of March 31, 2010:

 

Baltic Trading’s Wholly Owned
Subsidiaries

 

Vessel

 

Dwt

 

Delivery Date (1)

 

Year
Built

 

 

 

 

 

 

 

 

 

 

 

Baltic Leopard Limited

 

Baltic Leopard

 

53,000

 

April 2010

 

2009

 

Baltic Panther Limited

 

Baltic Panther

 

53,000

 

April 2010

 

2009

 

Baltic Cougar Limited

 

Baltic Cougar

 

53,000

 

May 2010

 

2009

 

Baltic Jaguar Limited

 

Baltic Jaguar

 

53,000

 

May 2010

 

2009

 

Baltic Bear Limited

 

Baltic Bear

 

177,000

 

May 2010

 

2010 (2)

 

Baltic Wolf Limited

 

Baltic Wolf

 

177,000

 

October 2010

 

2010 (2)

 

 


(1) Dates for vessels being delivered in the future are estimates based on guidance received from the sellers and the respective shipyards.  Baltic Trading took delivery of the Baltic Leopard on April 8, 2010 and the Baltic Panther on April 29, 2010.

(2) Built dates for vessels delivering in the future are estimates based on guidance received from the sellers and respective shipyards.

 

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of consolidation

 

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which include the accounts of Genco Shipping & Trading Limited, its wholly owned subsidiaries and Baltic Trading, a subsidiary in which the Company owns a majority of the voting interests and exercises control.  All intercompany accounts and transactions have been eliminated in consolidation.

 

Basis of presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”).  In the opinion of management of the Company, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and operating results have been included in the statements. Interim results are not necessarily indicative of results for a full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2009 (the “2009 10-K”).

 

Deferred revenue

 

Deferred revenue primarily relates to cash received from charterers prior to it being earned. These amounts are recognized as income when earned.  Additionally, deferred revenue includes estimated customer claims mainly

 

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due to time charter performance issues.  As of March 31, 2010 and December 31, 2009, the Company had an accrual of $992 and $959, respectively, related to these estimated customer claims.

 

Concentration of credit risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk are amounts due from charterers and cash and cash equivalents. With respect to amounts due from charterers, the Company attempts to limit its credit risk by performing ongoing credit evaluations and, when deemed necessary, requires letters of credit, guarantees or collateral.  During both the three months ended March 31, 2010 and 2009, the Company earned 100% of its revenues from nineteen customers.  Management does not believe significant risk exists in connection with the Company’s concentrations of credit at March 31, 2010 and December 31, 2009.

 

For the three months ended March 31, 2010, there were two customers that individually accounted for more than 10% of revenues, Cargill International S.A. and Pacific Basin Chartering Ltd., which represented 28.83% and 11.02% of revenues, respectively.  For the three months ended March 31, 2009, there were two customers that individually accounted for more than 10% of revenues, Cargill International S.A. and Pacific Basin Chartering Ltd., which represented 29.50% and 15.36% of revenues, respectively.

 

The Company maintains all of its cash and cash equivalents with two financial institutions.  None of the Company’s cash and cash equivalent balances are covered by insurance in the event of default by these financial institutions.

 

Derivative financial instruments

 

Interest rate risk management

 

The Company is exposed to the impact of interest rate changes.  The Company’s objective is to manage the impact of interest rate changes on its earnings and cash flow in relation to borrowings primarily for the purpose of acquiring drybulk vessels.  These borrowings are subject to a variable borrowing rate.  The Company uses pay-fixed receive-variable interest rate swaps to manage future interest costs and the risk associated with changing interest rate obligations.  These swaps are designated as cash flow hedges of future variable rate interest payments and are tested for effectiveness on a quarterly basis.

 

The differential to be paid or received for the effectively hedged portion of any swap agreement is recognized as an adjustment to interest expense as incurred.  Additionally, the changes in value for the portion of the swaps that are effectively hedging future interest payments are reflected as a component of accumulated other comprehensive income (“AOCI”).

 

For the interest rate swaps that are not designated as an effective hedge, the change in the value and the rate differential to be paid or received is recognized as other (expense) income and is listed as a component of other (expense) income.

 

Noncontrolling interests

 

Net loss attributable to noncontrolling interests during the three months ended March 31, 2010 reflects noncontrolling interests’ share of the loss of Baltic Trading, a subsidiary of the Company, which owns and employs drybulk vessels in the spot market or on spot market-related time charters.  The spot market represents immediate chartering of a vessel, usually for single voyages.  At March 31, 2010, noncontrolling interests held a 74.65% economic interest in Baltic Trading while only holding 16.41% of voting power.

 

3 - CASH FLOW INFORMATION

 

As of March 31, 2010, the Company had ten interest rate swaps, and these swaps are described and discussed in Note 9 — Interest Rate Swap Agreements. The fair value of nine of the swaps is in a liability position of $46,082, $1,020 of which is a current liability, and one of the swaps is in an asset position of $372 as of March 31, 2010.  At December 31, 2009, eight swaps were in a liability position of $44,139 and two swaps were in an asset position of $2,108.

 

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For the three months ended March 31, 2010, 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 $105 for the purchase of vessels, $96 associated with deposits on vessels and $68 for the purchase of other fixed assets.  Additionally, for the three months ended March 31, 2010, 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 expenses consisting of $64 associated with deferred financing fees and $763 associated with common stock issuance costs related to the initial public offering of Baltic Trading.  For the three months ended March 31, 2009, 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 $359 for the purchase of vessels, $279 associated with deposits on vessels and $157 for the purchase of other fixed assets.  For the three months ended March 31, 2009, the Company also had non-cash financing activities not included in the Condensed Consolidated Statement of Cash Flows for items in accounts payable and accrued expenses consisting of $107 associated with deferred financing fees.  Additionally, for the three months ended March 31, 2009, 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 $176 which reduced the deposits on vessels.

 

During the three months ended March 31, 2010 and 2009, cash paid for interest, net of amounts capitalized, was $13,213 and $12,639, respectively.

 

4 - VESSEL ACQUISITIONS AND DISPOSITIONS

 

Below market time charters acquired were amortized as a net increase to revenue in the amount of $1,333 and $4,708 for the three months ended March 31, 2010 and 2009, respectively.

 

Capitalized interest expense associated with newbuilding contracts for the three months ended March 31, 2010 and 2009 was $0 and $458, respectively.

 

On February 19, 2010, Baltic Trading entered into agreements with subsidiaries of an unaffiliated third-party seller to purchase four 2009 built Supramax drybulk vessels for an aggregate price of $140,000.  On February 22, 2010, Baltic Trading also entered into agreements with subsidiaries of another unaffiliated third-party seller to purchase two Capesize drybulk vessels for an aggregate price of $144,200.  These Capesize vessels are in the process of being built.  The purchases are subject to customary documentation and closing conditions.  Following the execution of these agreements, Baltic Trading paid cumulative deposits totaling $35,540 to the aforementioned unaffiliated parties.  Baltic Trading intends to finance these vessels using proceeds from its initial public offering and $75,000 in capital contributed from GS&T.  Refer to Note 1 — General Information for a listing of the vessels for which Baltic Trading has entered into agreements to purchase.

 

5 —INVESTMENTS

 

The Company holds an investment in the capital stock of Jinhui Shipping and Transportation Limited (“Jinhui”).  Jinhui is a drybulk shipping owner and operator focused on the Supramax segment of drybulk shipping.  This investment is designated as Available For Sale (“AFS”) and is reported at fair value, with unrealized gains and losses recorded in shareholders’ equity as a component of AOCI.  At March 31, 2010 and December 31, 2009, the Company held 16,335,100 shares of Jinhui capital stock which is recorded at its fair value of $76,423 and $72,181, respectively, based on the closing price on March 31, 2010 and December 30, 2009 (the last trading date on the Oslo exchange in 2009) of 27.80 NOK and 25.60 NOK, respectively.

 

The Company reviews the investment in Jinhui for other than temporary impairment on a quarterly basis.  There were no impairment charges recognized for the three months ended March 31, 2010 and March 31, 2009.

 

The unrealized currency translation gain on the Jinhui capital stock remains a component of AOCI since this investment is designated as an AFS security.

 

Refer to Note 10 — Accumulated Other Comprehensive Income for a breakdown of the components of AOCI.

 

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6 - EARNINGS PER COMMON SHARE

 

The computation of basic earnings per share is based on the weighted average number of common shares outstanding during the year. The computation of diluted earnings per share assumes the vesting of nonvested stock awards (see Note 19 — Nonvested Stock Awards), 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.  Of the 512,000 nonvested shares outstanding at March 31, 2010 (see Note 19 — Nonvested Stock Awards), 374,333 shares are anti-dilutive.

 

The components of the denominator for the calculation of basic earnings per share and diluted earnings per share are as follows:

 

 

 

Three Months Ended
March 31,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

Common shares outstanding, basic:

 

 

 

 

 

Weighted average common shares outstanding, basic

 

31,405,798

 

31,260,482

 

 

 

 

 

 

 

Common shares outstanding, diluted:

 

 

 

 

 

Weighted average common shares outstanding, basic

 

31,405,798

 

31,260,482

 

 

 

 

 

 

 

Dilutive effect of restricted stock awards

 

137,667

 

90,908

 

 

 

 

 

 

 

Weighted average common shares outstanding, diluted

 

31,543,465

 

31,351,390

 

 

7 - RELATED PARTY TRANSACTIONS

 

The following are related party transactions not disclosed elsewhere in these condensed consolidated financial statements:

 

The Company makes available an employee performing internal audit services to General Maritime Corporation (“GMC”), where the Company’s Chairman, Peter C. Georgiopoulos, also serves as Chairman of the Board.   For the three months ended March 31, 2010 and 2009, the Company invoiced $35 and $35, respectively, to GMC, which includes time associated with such internal audit services.  Additionally, during the three months ended March 31, 2010 and 2009, the Company incurred travel and other related expenditures totaling $135 and $65, respectively, reimbursable to GMC or its service provider.   At March 31, 2010 and December 31, 2009, the amount due to the Company from GMC was $6 and $41, respectively.

 

During the three months ended March 31, 2010 and 2009, the Company incurred legal services aggregating $44 and $5, respectively, from Constantine Georgiopoulos, the father of Peter C. Georgiopoulos, Chairman of the Board.  At March 31, 2010 and December 31, 2009, $47 and $3, respectively, were outstanding to Constantine Georgiopoulos.

 

During 2009, the Company entered into an agreement with Aegean Marine Petroleum Network, Inc. (“Aegean”) to purchase lubricating oils for certain vessels in the Company’s fleet.  Peter C. Georgiopoulos, Chairman of the Board, is Chairman of the Board of Aegean.  During the three months ended March 31, 2010 and 2009, Aegean supplied lubricating oils to the Company’s vessels aggregating $208 and $0, respectively.  At March 31, 2010 and December 31, 2009, $135 and $226 remained outstanding, respectively.

 

8 - LONG-TERM DEBT

 

Long-term debt consists of the following:

 

 

 

March 31, 2010

 

December 31, 2009

 

 

 

 

 

 

 

Outstanding total debt

 

$

1,314,500

 

$

1,327,000

 

Less: Current portion

 

(50,000

)

(50,000

)

 

 

 

 

 

 

Long-term debt

 

$

1,264,500

 

$

1,277,000

 

 

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2007 Credit Facility

 

On July 20, 2007, the Company entered into a credit facility with DnB Nor Bank ASA (the “2007 Credit Facility”) for the purpose of acquiring nine new Capesize vessels and refinancing the Company’s prior credit facility which it had entered into as of July 29, 2005 (the “2005 Credit Facility”) and short-term line of credit facility entered into as of May 3, 2007 (the “Short-Term Line”).  DnB Nor Bank ASA is also Mandated Lead Arranger, Bookrunner, and Administrative Agent. The Company has used borrowings under the 2007 Credit Facility to repay amounts outstanding under the Company’s previous credit facilities, which have been terminated.  The maximum amount that may be borrowed under the 2007 Credit Facility at March 31, 2010 is $1,314,500.  As of March 31, 2010, the Company has utilized its maximum borrowing capacity under the 2007 Credit Facility.

 

The collateral maintenance financial covenant is currently waived and the Company’s cash dividends and share repurchases have been suspended until this covenant can be satisfied.  The Company’s borrowings bear interest at the London Interbank Offered Rate (“LIBOR”) plus an applicable margin of 2.00% per annum.  A commitment fee of 0.70% per annum is payable on the unused daily portion of the 2007 Credit Facility.

 

The significant covenants in the 2007 Credit Facility have been disclosed in the 2009 10-K.  As of March 31, 2010, the Company believes it is in compliance with all of the financial covenants under its 2007 Credit Facility, as amended, with the exception of the collateral maintenance financial covenant, which has been waived as discussed above.

 

The Company has recorded $17,500 of restricted cash, or $500 per vessel, as a current asset at March 31, 2010.  Since the Company has utilized its maximum borrowing capacity under the 2007 Credit Facility at March 31, 2010, the Company was required to hold this balance at March 31, 2010 to comply with the minimum cash balance covenant under its 2007 Credit Facility, as amended.

 

At March 31, 2010, there were no letters of credit issued under the 2007 Credit Facility.

 

The following table sets forth the repayment of the outstanding debt of $1,314,500 at March 31, 2010 under the 2007 Credit Facility, as amended:

 

Period Ending December 31,

 

Total

 

 

 

 

 

2010 (April 1, 2010 – December 31, 2010)

 

$

37,500

 

2011

 

50,000

 

2012

 

108,890

 

2013

 

192,780

 

2014

 

192,780

 

Thereafter

 

732,550

 

Total long-term debt

 

$

1,314,500

 

 

2010 Baltic Trading Credit Facility

 

On April 16, 2010, Baltic Trading entered into a $100,000 senior secured revolving credit facility with Nordea Bank Finland plc, acting through its New York branch (the “2010 Baltic Trading Credit Facility”).  The 2010 Baltic Trading Credit Facility matures on April 16, 2014, and borrowings under the facility bear interest at LIBOR plus an applicable margin of 3.25% per annum.  A commitment fee of 1.25% per annum is payable on the unused daily portion of the 2010 Baltic Trading Credit Facility which began accruing on March 18, 2010 under the terms of the commitment letter entered into on February 25, 2010.  In connection with the commitment letter, Baltic Trading paid an upfront fee of $313.  Additionally, upon executing the 2010 Baltic Trading Credit Facility, Baltic Trading paid the remaining upfront fee of $938, for total fees of $1,250.

 

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Baltic Trading intends to use the 2010 Baltic Trading Credit Facility primarily for bridge financing for future vessel acquisitions.  In addition, under this facility, borrowings of up to $25,000 of the 2010 Baltic Trading Credit Facility are available for working capital purposes.  Borrowings, except those for working capital purposes, are to be repaid with proceeds from Baltic Trading’s follow-on equity offerings or otherwise within twelve months from drawdown.  Borrowings not repaid within such twelve months will be converted into term loans and repaid in equal monthly installments over the subsequent twelve-month period.  All amounts outstanding must be repaid in full on the 2010 Baltic Trading Credit Facility’s maturity date.

 

Borrowings under the 2010 Baltic Trading Credit Facility will be secured by liens on Baltic Trading’s initial vessels, once delivered (and any acceptable replacement vessels), and other related assets.   Borrowings under the facility are subject to the delivery of security documents with respect to Baltic Trading’s initial vessels.  Alternatively, Baltic Trading may provide cash collateral equal to $225,000 minus the aggregate purchase price of Baltic Trading’s first five vessels expected to be delivered if Baltic Trading wishes to draw down on the 2010 Baltic Trading Credit Facility while awaiting delivery of the Capesize vessel expected to be delivered in October 2010.  This cash collateral would be released or forwarded to the seller of the vessel once such vessel is delivered and concurrently made subject to a lien under the 2010 Baltic Trading Credit Facility.  Baltic Trading’s subsidiaries owning the initial vessels will act as guarantors under the 2010 Baltic Trading Credit Facility.

 

All amounts owing under the 2010 Baltic Trading Credit Facility are also secured by the following:

 

·                  cross-collateralized first priority mortgages of each of Baltic Trading’s initial vessels;

 

·                  an assignment of any and all earnings of Baltic Trading’s vessels; and

 

·                  an assignment of all insurance on the mortgaged vessels.

 

The 2010 Baltic Trading Credit Facility requires Baltic Trading to comply with a number of covenants, including financial covenants related to liquidity, consolidated net worth, and collateral maintenance; delivery of quarterly and annual financial statements and annual projections; maintaining adequate insurances; compliance with laws (including environmental); compliance with ERISA; maintenance of flag and class of Baltic Trading’s initial vessels; restrictions on consolidations, mergers or sales of assets; restrictions on changes in the Manager of Baltic Trading’s initial vessels (or acceptable replacement vessels); limitations on changes to the Management Agreement between Baltic Trading and GS&T; limitations on liens; limitations on additional indebtedness; restrictions on paying dividends; restrictions on transactions with affiliates; and other customary covenants.

 

The 2010 Baltic Trading Credit Facility includes the following financial covenants which apply to Baltic Trading and its subsidiaries on a consolidated basis and are measured at the end of each fiscal quarter beginning with March 31, 2010, except for the minimum cash covenant, which is to be tested starting June 30, 2010:

 

·                  Cash and cash equivalents plus the undrawn amount available for working capital under the facility must not be less than $750 per vessel.

 

·                  Consolidated net worth must be greater than (i) 75% of the net proceeds of the IPO of Baltic Trading’s stock, plus (ii) the $75,000 equity contribution from GS&T plus (iii) 50% of the value of any subsequent primary equity offerings of Baltic Trading.

 

·                  The aggregate fair market value of the mortgaged vessels must at all times be at least 160% of the aggregate outstanding principal amount under the 2010 Baltic Trading Credit Facility.  However, if any borrowings, other than working capital borrowings, are not repaid with 12 months of the drawdown thereof, then the aggregate fair market value of the mortgaged vessels must at all times be at least 200% of the aggregate outstanding principal amount under the 2010 Baltic Trading Credit Facility.

 

Under the 2010 Baltic Trading Credit Facility, Baltic Trading is not permitted to make loans to GS&T or Genco Investments LLC if an event of default existed at the time of the loan or could be reasonably expected to result therefrom.  In addition, Baltic Trading would not be permitted under the facility to declare or pay dividends to its shareholders (including Genco Investments LLC) if an event of default existed at the time of payment or

 

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would be caused thereby.  As of March 31, 2010, to remain in compliance with a net worth covenant in the facility, Baltic Trading would need to maintain a net worth of $232,752 after the payment of any dividends.

 

The Company believes it is in compliance with all of the financial covenants under the 2010 Baltic Trading Credit Facility as of March 31, 2010.

 

Interest rates

 

The following tables sets forth the effective interest rate associated with the interest expense for the Company’s debt facilities, including the rate differential between the pay fixed receive variable rate on the interest rate swap agreements that were in effect (refer to Note 9 — Interest Rate Swap Agreements), combined, and the cost associated with unused commitment fees.  Additionally, it includes the range of interest rates on the debt, excluding the impact of swaps and unused commitment fees:

 

 

 

Three months ended March 31,

 

 

 

2010

 

2009

 

Effective Interest Rate

 

4.61%

 

5.06%

 

Range of Interest Rates (excluding impact of swaps and unused commitment fees)

 

2.25% to 2.31%

 

1.23% to 5.56%

 

 

9 — INTEREST RATE SWAP AGREEMENTS

 

The Company has entered into eleven interest rate swap agreements with DnB NOR Bank to manage interest costs and the risk associated with changing interest rates related to our 2007 Credit Facility, ten of which were outstanding at March 31, 2010. The total notional principal amount of the swaps at March 31, 2010 was $756,233 and the swaps have specified rates and durations.

 

The following table summarizes the interest rate swaps designated as cash flow hedges that were in place as of March 31, 2010 and December 31, 2009:

 

Interest Rate Swap Detail

 

March 31,
2010

 

December 31,
2009

 

Trade
Date

 

Fixed
Rate

 

Start Date
of Swap

 

End date
of Swap

 

Notional
Amount
Outstanding

 

Notional
Amount
Outstanding

 

9/6/05

 

4.485

%

9/14/05

 

7/29/15

 

$

106,233

 

$

106,233

 

3/29/06

 

5.25

%

1/2/07

 

1/1/14

 

50,000

 

50,000

 

3/24/06

 

5.075

%

1/2/08

 

1/2/13

 

50,000

 

50,000

 

7/31/07

 

5.115

%

11/30/07

 

11/30/11

 

100,000

 

100,000

 

8/9/07

 

5.07

%

1/2/08

 

1/3/12

 

100,000

 

100,000

 

8/16/07

 

4.985

%

3/31/08

 

3/31/12

 

50,000

 

50,000

 

8/16/07

 

5.04

%

3/31/08

 

3/31/12

 

100,000

 

100,000

 

1/22/08

 

2.89

%

2/1/08

 

2/1/11

 

50,000

 

50,000

 

1/9/09

 

2.05

%

1/22/09

 

1/22/14

 

100,000

 

100,000

 

2/11/09

 

2.45

%

2/23/09

 

2/23/14

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

756,233

 

$

756,233

 

 

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The following table summarizes the derivative asset and liability balances at March 31, 2010 and December 31, 2009:

 

 

 

Asset Derivatives

 

Liability Derivatives

 

 

 

Balance

 

Fair Value

 

Balance

 

Fair Value

 

 

 

Sheet
Location

 

March 31,
2010

 

December
31, 2009

 

Sheet
Location

 

March 31,
2010

 

December
31, 2009

 

Derivatives designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

Fair value of derivative instruments (Current Assets)

 

$

 

$

 

Fair value of derivative instruments (Current Liabilities)

 

$

1,020

 

$

 

Interest rate contracts

 

Fair value of derivative instruments (Noncurrent Assets)

 

372

 

2,108

 

Fair value of derivative instruments (Noncurrent Liabilities)

 

45,062

 

44,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total derivatives designated as hedging instruments

 

$

372

 

$

2,108

 

 

 

$

46,082

 

$

44,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Derivatives

 

 

 

$

372

 

$

2,108

 

 

 

$

46,082

 

$

44,139

 

 

The following tables present the impact of derivative instruments and their location within the unaudited Condensed Consolidated Statement of Operations:

 

The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations

For the Three Month Period Ended March 31, 2010

 

Derivatives in Cash
Flow Hedging

 

Amount of
Gain (Loss)
Recognized
in AOCI on
Derivative
(Effective
Portion)

 

Location of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective

 

Amount of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective
Portion)

 

Location of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective

 

Amount of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion)

 

Relationships

 

2010

 

Portion)

 

2010

 

Portion)

 

2010

 

Interest rate contracts

 

$

(11,311

)

Interest Expense

 

$

(7,610

)

Other Income
(Expense)

 

$

21

 

 

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The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations

For the Three Month Period Ended March 31, 2009

 

Derivatives in Cash
Flow Hedging

 

Amount of
Gain (Loss)
Recognized
in AOCI on
Derivative
(Effective
Portion)

 

Location of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective

 

Amount of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective
Portion)

 

Location of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective

 

Amount of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion)

 

Relationships

 

2009

 

Portion)

 

2009

 

Portion)

 

2009

 

Interest rate contracts

 

$

(1,332

)

Interest Expense

 

$

(5,613

)

Other Income
(Expense)

 

$

(4

)

 

At March 31, 2010, ($28,009) of other comprehensive income is expected to be reclassified into interest expense over the next 12 months associated with interest rate derivatives.

 

The Company is required to provide collateral in the form of vessel assets to support the interest rate swap agreements, excluding vessel assets of Baltic Trading.  Each of the Company’s thirty-five vessels, excluding Baltic Trading’s vessels, serves as collateral in the aggregate amount of $100,000.

 

10 — ACCUMULATED OTHER COMPREHENSIVE INCOME

 

The components of AOCI included in the accompanying condensed consolidated balance sheets consist of net unrealized gain (loss) on cash flow hedges, net unrealized gain (loss) from investments, and cumulative translation adjustments on the investment in Jinhui stock as of March 31, 2010 and December 31, 2009.

 

 

 

AOCI

 

Net Unrealized
Loss on Cash
Flow Hedges

 

Unrealized
Gain on
Investments

 

Currency
Translation
Gain (Loss)
on
Investments

 

AOCI – January 1, 2010

 

$

13,589

 

$

(41,819

)

$

43,364

 

$

12,044

 

Unrealized gain on investments

 

5,168

 

 

 

5,168

 

 

 

Translation loss on investments

 

(925

)

 

 

 

 

(925

)

Unrealized loss on cash flow hedges

 

(3,701

)

(3,701

)

 

 

 

 

AOCI – March 31, 2010

 

$

14,131

 

$

(45,520

)

$

48,532

 

$

11,119

 

 

11 - FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The estimated fair values of the Company’s financial instruments, which are equal to such instrument’s carrying values at March 31, 2010 and December 31, 2009, are as follows:

 

 

 

March 31,
2010

 

December 31,
2009

 

Cash and cash equivalents

 

$

405,483

 

$

188,267

 

Restricted cash

 

17,500

 

17,500

 

Investments

 

76,423

 

72,181

 

Floating rate debt

 

1,314,500

 

1,327,000

 

Derivative instruments – asset position

 

372

 

2,108

 

Derivative instruments – liability position

 

46,082

 

44,139

 

 

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The fair value of the investments is based on quoted market rates.  The fair value of the 2007 Credit Facility is estimated based on current rates offered to the Company for similar debt of the same remaining maturities.  Additionally, the Company considers its creditworthiness in determining the fair value of the revolving credit facility.  The carrying value approximates the fair market value for the floating rate loans.  The fair value of the interest rate swaps is the estimated amount the Company would receive to terminate the swap agreements at the reporting date, taking into account current interest rates and the creditworthiness of both the swap counterparty and the Company.

 

The Accounting Standards Codification subtopic 820-10, “Fair Value Measurements & Disclosures” (“ASC 820-10”) (formerly SFAS No. 157, “Fair Value Measurements”) 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 guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

 

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

 

The following table summarizes the valuation of our investments and financial instruments by the above pricing levels as of the valuation dates listed:

 

 

 

March 31, 2010

 

 

 

Total

 

Quoted
market
prices in
active
markets
(Level 1)

 

Significant
Other
Observable
Inputs

(Level 2)

 

Cash equivalents

 

$

 

$

 

$

 

Investments

 

76,423

 

76,423

 

 

Derivative instruments – asset position

 

372

 

 

372

 

Derivative instruments – liability position

 

46,082

 

 

46,082

 

 

 

 

December 31, 2009

 

 

 

Total

 

Quoted
market
prices in
active
markets
(Level 1)

 

Significant
Other
Observable
Inputs

(Level 2)

 

Cash equivalents

 

$

75,057

 

$

75,057

 

$

 

Investments

 

72,181

 

72,181

 

 

Derivative instruments – asset position

 

2,108

 

 

2,108

 

Derivative instruments – liability position

 

44,139

 

 

44,139

 

 

The Company had an investment of $0 and $75,057 in the JPMorgan US Dollar Liquidity Fund Institutional at March 31, 2010 and December 31, 2009, respectively.  The JPMorgan US Dollar Liquidity Fund Institutional is a money market fund which invests its assets in high quality transferable short term US Dollar

 

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denominated fixed and floating rate debt securities and has a portfolio with a weighted average investment maturity not to exceed sixty days.  The value of this fund is publicly available and is considered a Level 1 item.  The Company holds an investment in the capital stock of Jinhui, which is classified as a long-term investment.  The stock of Jinhui is publicly traded on the Oslo Stock Exchange and is considered a Level 1 item.  The Company’s interest rate derivative instruments are pay-fixed, receive-variable interest rate swaps based on LIBOR.  The Company has elected to use the income approach to value the derivatives, using observable Level 2 market inputs at measurement date and standard valuation techniques to convert future amounts to a single present amount assuming that participants are motivated, but not compelled to transact.  Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR for the first two years) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR cash and swap rates and credit risk at commonly quoted intervals).  Mid-market pricing is used as a practical expedient for fair value measurements.  Refer to Note 9 — Interest Rate Swap Agreements for further information regarding the Company’s interest rate swap agreements.  ASC 820-10 states that the fair value measurement of an asset or liability must reflect the nonperformance risk of the entity and the counterparty. Therefore, the impact of the counterparty’s creditworthiness when in an asset position and the Company’s creditworthiness when in a liability position has also been factored into the fair value measurement of the derivative instruments in an asset or liability position and did not have a material impact on the fair value of these derivative instruments.  As of March 31, 2010, both the counterparty and the Company are expected to continue to perform under the contractual terms of the instruments.

 

12 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consist of the following:

 

 

 

March
31, 2010

 

December
31, 2009

 

Lubricant inventory and other stores

 

$

4,088

 

$

3,971

 

Prepaid items

 

4,945

 

3,086

 

Insurance receivable

 

1,370

 

1,408

 

Other

 

1,239

 

1,719

 

Total

 

$

11,642

 

$

10,184

 

 

13 — OTHER ASSETS, NET

 

Other assets, net consist of the following:

 

(i)  Deferred financing costs, which include fees, commissions and legal expenses associated with securing loan facilities.  These costs are amortized over the life of the related debt, and are included in interest expense.  The Company had unamortized deferred financing costs of $7,601 and $7,494 at March 31, 2010 and December 31, 2009, respectively.  The December 31, 2009 deferred financing costs consist entirely of fees associated with the 2007 Credit Facility; however, the March 31, 2010 deferred financing costs consists of $7,225 of fees related to the 2007 Credit Facility and $376 of fees related to Baltic Trading’s 2010 Baltic Trading Credit Facility.  The $376 of fees associated with the 2010 Baltic Trading Credit Facility will be amortized beginning April 16, 2010 when the credit agreement was signed.  Refer to Note 22 — Subsequent Events for further information. Accumulated amortization of deferred financing costs related to the 2007 Credit Facility as of March 31, 2010 and December 31, 2009 was $2,849 and $2,585, respectively.   The Company has incurred deferred financing costs of $10,074 in total for the existing 2007 Credit Facility and $376 in total for the 2010 Baltic Trading Credit Facility.  Amortization expense for deferred financing costs for the three months ended March 31, 2010 and 2009 was $264 and $230, respectively.

 

(ii) Deferred registration costs include costs associated with preparing Baltic Trading for a public offering.  These costs, which existed as of December 31, 2009, were offset against proceeds received from the initial public offering which was completed on March 15, 2010.  The Company has deferred registration costs of $0 and $834 at March 31, 2010 and December 31, 2009, respectively.

 

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14 - FIXED ASSETS

 

Fixed assets consist of the following:

 

 

 

March
31, 2010

 

December
31, 2009

 

Fixed assets:

 

 

 

 

 

Vessel equipment

 

$

2,164

 

$

2,118

 

Leasehold improvements

 

1,146

 

1,146

 

Furniture and fixtures

 

347

 

347

 

Computer equipment

 

433

 

401

 

Total cost

 

4,090

 

4,012

 

Less: accumulated depreciation and amortization

 

1,672

 

1,554

 

Total

 

$

2,418

 

$

2,458

 

 

Depreciation and amortization expense for fixed assets for the three months ended March 31, 2010 and 2009 was $118 and $82, respectively.

 

15 — ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consist of the following:

 

 

 

March
31, 2010

 

December
31, 2009

 

Accounts payable

 

$

3,248

 

$

3,171

 

Accrued general and administrative expenses

 

11,128

 

8,409

 

Accrued vessel operating expenses

 

5,766

 

7,029

 

 

 

 

 

 

 

Total

 

$

20,142

 

$

18,609

 

 

16 - REVENUE FROM TIME CHARTERS

 

Total revenue earned on time charters, including revenue earned in vessel pools, for the three months ended March 31, 2010 and 2009 was $94,681 and $96,650, respectively.  Included in revenues for the three months ended March 31, 2010 and 2009 was $0 and $0 of profit sharing revenue, respectively.  Future minimum time charter revenue, based on vessels committed to noncancelable time charter contracts as of April 27, 2010 is expected to be $218,241 for the remaining three quarters of 2010, $99,279 during 2011 and $35,570 during 2012, assuming off-hire due to any scheduled drydocking and that no additional off-hire time is incurred.  For most drydockings, the Company assumes twenty days of offhire.  Future minimum revenue excludes revenue earned for the six vessels currently in pool arrangements, namely the Genco Predator, Genco Explorer, Genco Pioneer, Genco Progress, Genco Reliance, and Genco Sugar, as pool rates cannot be estimated.  Additionally, future minimum revenue excludes revenue to be earned for Baltic Trading’s vessels, as these vessels will be on spot market-related time charters and spot rates cannot be estimated.

 

17 - LEASE PAYMENTS

 

In September 2005, the Company entered into a 15-year lease for office space in New York, New York for which there was a free rental period from September 1, 2005 to July 31, 2006.  The monthly straight-line rental expense from September 1, 2005 to August 31, 2020 is $39.  As a result of the straight-line rent calculation generated by the free rent period and the tenant work credit, the Company had a deferred rent credit at March 31, 2010 and December 31, 2009 of $682 and $687, respectively.  Rent expense for the three months ended March 31, 2010 and 2009 was $117 for each respective period.

 

Future minimum rental payments on the above lease for the next five years and thereafter are as follows: $375 for the remainder of 2010, $518 annually for 2011 through 2014 and a total of $3,097 for the remaining term of the lease.

 

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18 - SAVINGS PLAN

 

In August 2005, the Company established a 401(k) plan which is available to full-time employees who meet the plan’s eligibility requirements.  This 401(k) plan is a defined contribution plan, which permits employees to make contributions up to maximum percentage and dollar limits allowable by IRS Code Sections 401(k), 402(g), 404 and 415 with the Company matching up to the first six percent of each employee’s salary on a dollar-for-dollar basis.  The matching contribution vests immediately.  For the three months ended March 31, 2010 and 2009, the Company’s matching contribution to the Plan was $57 and $53, respectively.

 

19- NONVESTED STOCK AWARDS

 

On July 12, 2005, the Company’s board of directors approved the Genco Shipping & Trading Limited 2005 Equity Incentive Plan (the “GS&T Plan”).  Under this plan, the Company’s board of directors, the compensation committee, or another designated committee of the board of directors may grant a variety of stock-based incentive awards to employees, directors and consultants whom the compensation committee (or other committee of the board of directors) believes are key to the Company’s success.  Awards may consist of incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, nonvested stock, unrestricted stock and performance shares.  The aggregate number of shares of common stock available for award under the GS&T Plan is 2,000,000 shares.

 

Grants of nonvested common stock to executives and employees vest ratably on each of the four anniversaries of the determined vesting date.  Grants of nonvested common stock to directors vest the earlier of the first anniversary of the grant date or the date of the next annual shareholders’ meeting, which are typically held during May.  Grants of nonvested common stock to the Company’s Chairman, Peter C. Georgiopoulos, which are not granted as part of grants made to all directors vest ratably on each of the ten anniversaries of the vesting date.

 

The following table presents a summary of the Company’s nonvested stock awards for the three months ended March 31, 2010 under the GS&T Plan:

 

 

 

Number of
Shares

 

Weighted
Average Grant
Date Price

 

Outstanding at January 1, 2010

 

437,000

 

$

25.86

 

Granted

 

75,000

 

22.90

 

Vested

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2010

 

512,000

 

$

25.43

 

 

The total fair value of shares that vested under the GS&T Plan during the three months ended March 31, 2010 and 2009 was $0 during both periods.

 

For the three months ended March 31, 2010 and 2009, the Company recognized nonvested stock amortization expense for the GS&T Plan, which is included in general, administrative and management fees, as follows:

 

 

 

Three Months Ended
March 31,

 

 

 

2010

 

2009

 

General, administrative and management fees

 

$

1,044

 

$

1,232

 

 

The fair value of nonvested stock at the grant date is equal to the closing stock price on that date.  The Company is amortizing these grants over the applicable vesting periods, net of anticipated forfeitures.  As of March 31, 2010, unrecognized compensation cost related to nonvested stock will be recognized over a weighted average period of 5.22 years.

 

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On March 3, 2010, Baltic Trading’s board of directors approved the Baltic Trading Limited 2010 Equity Incentive Plan (the “Baltic Trading Plan”).  Under the Baltic Trading Plan, Baltic Trading’s board of directors, the compensation committee, or another designated committee of the board of directors may grant a variety of stock-based incentive awards to officers, directors, and executive, managerial, administrative and professional employees of and consultants to Baltic Trading or the Company whom the compensation committee (or other committee of the board of directors) believes are key to Baltic Trading’s success.  Awards may consist of restricted stock, restricted stock units, stock options, stock appreciation rights and other stock or cash-based awards.  The aggregate number of shares of common stock available for award under the Baltic Trading Plan is 2,000,000 common shares.

 

Grants of restricted stock to Peter Georgiopoulos, Chairman of the Board of Baltic Trading, and John Wobensmith, President and Chief Financial Officer of Baltic Trading, made in connection with Baltic Trading’s IPO vest ratably on each of the first four anniversaries of March 15, 2010.  Grants of restricted common stock to Baltic Trading’s directors made following Baltic Trading’s IPO (which exclude the foregoing grant to Mr. Georgiopoulos) vest the earlier of the first anniversary of the grant date or the date of Baltic Trading’s next annual shareholders’ meeting, which is expected to be held in May 2011.

 

The following table presents a summary of Baltic Trading’s nonvested stock awards for the three months ended March 31, 2010 under the Baltic Trading Plan:

 

 

 

Number of
Common
Shares

 

Weighted
Average Grant
Date Price

 

Outstanding at January 1, 2010

 

 

$

 

Granted

 

478,500

 

14.00

 

Vested

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2010

 

478,500

 

$

14.00

 

 

The total fair value of shares that vested under the Baltic Trading Plan during the three months ended March 31, 2010 and 2009 was $0 during both periods.

 

For the three months ended March 31, 2010, the Company recognized nonvested stock amortization expense for the Baltic Trading Plan, which is included in general, administrative and management fees, as follows:

 

 

 

Three Months Ended
March 31,

 

 

 

2010

 

2009

 

General, administrative and management fees

 

$

211

 

$

 

 

The Company is amortizing Baltic Trading’s grants over the applicable vesting periods, net of anticipated forfeitures.  As of March 31, 2010, unrecognized compensation cost related to nonvested stock will be recognized over a weighted average period of 3.88 years.

 

20 — SHARE REPURCHASE PROGRAM

 

On February 13, 2008, our board of directors approved a share repurchase program for up to a total of $50,000 of the Company’s common stock.  Share repurchases will be made from time to time for cash in open market transactions at prevailing market prices or in privately negotiated transactions.  The timing and amount of purchases under the program will be determined by management based upon market conditions and other factors.  Purchases may be made pursuant to a program adopted under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  The program does not require the Company to purchase any specific number or amount of shares and may be suspended or reinstated at any time in the Company’s discretion and without notice.  Repurchases will be subject to restrictions under the 2007 Credit Facility.  Currently, the terms of

 

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the 2007 Credit Facility require the Company to suspend all share repurchases until the Company can represent that it is in a position to again satisfy the collateral maintenance covenant.  Refer to Note 8 — Long-Term Debt.

 

Since the inception of the share repurchase program through March 31, 2010, the Company repurchased and retired 278,300 shares of its common stock for $11,500.  No repurchases were made during the three months ended March 31, 2010 and 2009.

 

21 - LEGAL PROCEEDINGS

 

From time to time the Company may be subject to 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 legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on the Company, its financial condition, results of operations or cash flows.

 

22 — SUBSEQUENT EVENTS

 

On April 8, 2010 and April 29, 2010, Baltic Trading took delivery of the Baltic Leopard and Baltic Panther, both 53,000 dwt Supramax vessels built in 2009.  Baltic Trading paid $63,000,000, representing ninety percent of the remaining purchase price of these two vessels.

 

On April 16, 2010, Baltic Trading executed a credit agreement and other definitive documentation for the 2010 Baltic Trading Credit Facility.  The 2010 Baltic Trading Credit Facility is underwritten by Nordea Bank Finland plc, acting through its New York branch.  See Note 8 — Long-Term Debt for a further description of the 2010 Baltic Trading Credit Facility.

 

In April 2010, an independent committee of the Board of Directors of the Company agreed in principle that the Company would provide technical services for a group of nine drybulk vessels which a company managed by an affiliate of Peter C. Georgiopoulos has agreed to buy.  These services will include oversight of crew management, insurance, drydocking, ship operations and financial statement preparation.  They will not include chartering services.  The services will be provided for a fee of $750 per ship per day plus reimbursement of out-of-pocket costs and will be provided for an initial term of one year.  The recipient company will have the right to cancel provision of services on 60 days’ notice with payment of a one-year termination fee or without fee upon a Company change of control.  The Company may terminate provision of the services at any time on 60 days’ notice. Mr. Georgiopoulos is a minority investor, and affiliates of Oaktree Capital Management, L.P., of which Stephen A.Kaplan is a principal, are majority investors in the recipient company.  The purchase of these vessels was reviewed by an independent committee of the Company’s Board of Directors, which declined to pursue the transaction on behalf of the Company. Neither Mr. Georgiopoulos nor Mr. Kaplan participated in the committee review.  The arrangement is subject to definitive documentation.

 

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Table of Contents

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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,” “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 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) changes in demand or rates in the drybulk shipping industry; (ii) changes in the supply of or demand for drybulk products, generally or in particular regions; (iii) changes in the supply of drybulk carriers including newbuilding of vessels or lower than anticipated scrapping of older vessels; (iv) 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; (v) increases in costs and expenses including but not limited to: crew wages, insurance, provisions, repairs, maintenance and general and administrative expenses; (vi) the adequacy of our insurance arrangements; (vii) changes in general domestic and international political conditions; (viii) changes in the condition of the our 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; (ix) the number of offhire days needed to complete repairs on vessels and the timing and amount of any reimbursement by our insurance carriers for insurance claims including offhire days; (x) our acquisition or disposition of vessels; (xi) the completion of definitive documentation with respect to time charters; (xii) charterers’ compliance with the terms of their charters in the current market environment; and 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, 2009 and subsequent reports on Form 8-K and Form 10-Q.

 

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 Marshall Islands company incorporated on September 27, 2004 to transport iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes through the ownership and operation of drybulk carrier vessels.  Excluding vessels of Baltic Trading Limited (“Baltic Trading”), as of May 3, 2010, our fleet consisted of nine Capesize, eight Panamax, four Supramax, six Handymax and eight Handysize drybulk carriers, with an aggregate carrying capacity of approximately 2,903,000 dwt, and the average age of our fleet was approximately 7.2 years, as compared to the average age for the world fleet of approximately 15 years for the drybulk shipping segments in which we compete.  We seek to deploy our vessels on time charters, or in vessel pools trading in the spot market, to reputable charterers, including Lauritzen Bulkers A/S or LB/IVS Pool, in which Lauritzen Bulkers A/S acts as the pool manager (collectively, “Lauritzen Bulkers”), Cargill International S.A., Pacific Basin Chartering Ltd., COSCO Bulk Carriers Co., Ltd., and Hyundai Merchant Marine Co. Ltd.  The majority of the vessels in our current fleet are presently engaged under time charter contracts that expire (assuming the option periods in the time charters are not exercised) between May 2010 and October 2012.

 

In addition, after the delivery of four vessels expected in May and October 2010, our subsidiary Baltic Trading will own a fleet of six drybulk vessels, consisting of two Capesize and four Supramax vessels with an aggregate carrying capacity of approximately 566,000 dwt.  Baltic Trading currently operates a fleet of two Supramax vessels delivered in April 2010.

 

See pages 28-29 for a table of all vessels currently in our fleet, excluding Baltic Trading’s vessels.

 

We intend to continue to grow our fleet through timely and selective acquisitions of vessels in a manner that is accretive to our cash flow. In connection with the acquisitions and deliveries made in 2007, 2008 and 2009 and our growth strategy, we negotiated the 2007 Credit Facility that we have used to acquire 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 and voyage charters, and monitoring the performance of our

 

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vessels under their charters. Strategic management includes locating, purchasing, financing and selling vessels. We currently contract with two independent technical managers to provide technical management of our fleet at a lower cost than we believe would be possible in-house. Technical management involves the day-to-day management of vessels, including performing routine maintenance, attending to vessel operations and arranging for crews and supplies. Members of our New York City-based management team oversee the activities of our independent technical managers.

 

From time to time in the current global economic environment, our charterers with long-term time charters may request to renegotiate the terms of our charters with them.  As a general matter, we do not agree to make changes to the terms of our charters in response to such requests.  The failure of any charterer to meet its obligations under our long-term time charters could have an adverse effect on our results of operations.

 

Baltic Trading, formerly a wholly-owned subsidiary of the Company at December 31, 2009, completed its initial public offering on March 15, 2010.  As of March 31, 2010, the Company owned, directly or indirectly, 5,699,088 shares of Baltic Trading’s Class B Stock, which represents a 25.35% ownership interest in Baltic Trading at March 31, 2010 and 83.59% of the aggregate voting power of Baltic Trading’s outstanding shares of voting stock.  Baltic Trading is consolidated with the Company as we control a majority of the voting interest in Baltic Trading.  Management’s discussion and analysis of the Company’s results of operations and financial condition in this section includes consideration of Baltic Trading.

 

We entered into a long-term management agreement (the “Management Agreement”) with Baltic Trading pursuant to which we will apply our expertise and experience in the drybulk industry to provide Baltic Trading with commercial, technical, administrative and strategic services.  The Management Agreement is for an initial term of approximately fifteen years and will automatically renew for additional five-year periods unless terminated in accordance with its terms.  Baltic Trading will pay us for the services we provide it as well as reimburse us for our costs and expenses incurred in providing certain of these services.  Management fee income we earn from the Management Agreement net of any allocated shared expenses, such as salary, office expenses and other general and administrative fees, will be taxable to us.  Upon consolidation with Baltic Trading, any management fee income earned will be eliminated for financial reporting purposes.  For the quarter ended March 31, 2010, there were no commercial, technical or administrative and strategic service fees as these fees are earned upon delivery and/or operation of Baltic Trading’s vessels, which did not begin being delivered until the second quarter of 2010.

 

In April 2010, an independent committee of the Board of Directors of the Company agreed in principle that the Company would provide technical services for a group of nine drybulk vessels which a company managed by an affiliate of Peter C. Georgiopoulos has agreed to buy.  These services will include oversight of crew management, insurance, drydocking, ship operations and financial statement preparation.  They will not include chartering services.  The services will be provided for a fee of $750 per ship per day plus reimbursement of out-of-pocket costs and will be provided for an initial term of one year.  The recipient company will have the right to cancel provision of services on 60 days’ notice with payment of a one-year termination fee or without fee upon a Company change of control.  The Company may terminate provision of the services at any time on 60 days’ notice. Mr. Georgiopoulos is a minority investor, and affiliates of Oaktree Capital Management, L.P., of which Stephen A.Kaplan is a principal, are majority investors in the recipient company.  The purchase of these vessels was reviewed by an independent committee of the Company’s Board of Directors, which declined to pursue the transaction on behalf of the Company. Neither Mr. Georgiopoulos nor Mr. Kaplan participated in the committee review.  The arrangement is subject to definitive documentation.

 

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, available days, operating days, fleet utilization, TCE rates and daily vessel operating expenses for the three months ended March 31, 2010 and 2009.

 

 

 

For the three months ended March 31,

 

Increase

 

 

 

 

 

2010

 

2009

 

(Decrease)

 

% Change

 

Fleet Data:

 

 

 

 

 

 

 

 

 

Ownership days (1)

 

 

 

 

 

 

 

 

 

Capesize

 

810.0

 

540.0

 

270.0

 

50.0

%

Panamax

 

720.0

 

720.0

 

 

 

Supramax

 

360.0

 

360.0

 

 

 

Handymax

 

540.0

 

540.0

 

 

 

Handysize

 

720.0

 

720.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

3,150.0

 

2,880.0

 

270.0

 

9.4

%

 

 

 

 

 

 

 

 

 

 

Available days (2)

 

 

 

 

 

 

 

 

 

Capesize

 

794.8

 

540.0

 

254.8

 

47.2

%

Panamax

 

720.0

 

720.0

 

 

 

Supramax

 

348.6

 

360.0

 

(11.4

)

(3.2

)%

Handymax

 

526.1

 

523.4

 

2.7

 

0.5

%

Handysize

 

716.2

 

720.0

 

(3.8

)

(0.5

)%

 

 

 

 

 

 

 

 

 

 

Total

 

3,105.7

 

2,863.4

 

242.3

 

8.5

%

 

 

 

 

 

 

 

 

 

 

Operating days (3)

 

 

 

 

 

 

 

 

 

Capesize

 

794.8

 

540.0

 

254.8

 

47.2

%

Panamax

 

717.4

 

695.5

 

21.9

 

3.1

%

Supramax

 

347.7

 

344.2

 

3.5

 

1.0

%

Handymax

 

516.7

 

518.4

 

(1.7

)

(0.3

)%

Handysize

 

716.2

 

718.2

 

(2.0

)

(0.3

)%

 

 

 

 

 

 

 

 

 

 

Total

 

3,092.8

 

2,816.3

 

276.5

 

9.8

%

 

 

 

 

 

 

 

 

 

 

Fleet utilization (4)

 

 

 

 

 

 

 

 

 

Capesize

 

100.0

%

100.0

%

 

 

Panamax

 

99.6

%

96.6

%

3.0

%

3.1

%

Supramax

 

99.7

%

95.6

%

4.1

%

4.3

%

Handymax

 

98.2

%

99.0

%

(0.8

)%

(0.8

)%

Handysize

 

100.0

%

99.8

%

0.2

%

0.2

%

Fleet average

 

99.6

%

98.4

%

1.2

%

1.2

%

 

24



Table of Contents

 

 

 

For the three months ended March 31,

 

Increase

 

 

 

 

 

2010

 

2009

 

(Decrease)

 

% Change

 

 

 

(U.S. dollars)

 

 

 

 

 

Average Daily Results:

 

 

 

 

 

 

 

 

 

Time Charter Equivalent (5)

 

 

 

 

 

 

 

 

 

Capesize

 

$

45,332

 

$

58,238

 

$

(12,906

)

(22.2

)%

Panamax

 

30,086

 

29,784

 

302

 

1.0

%

Supramax

 

24,591

 

30,654

 

(6,063

)

(19.8

)%

Handymax

 

29,796

 

31,968

 

(2,172

)

(6.8

)%

Handysize

 

18,960

 

20,016

 

(1,056

)

(5.3

)%

 

 

 

 

 

 

 

 

 

 

Fleet average

 

30,248

 

33,203

 

(2,955

)

(8.9

)%

 

 

 

 

 

 

 

 

 

 

Daily vessel operating expenses (6)

 

 

 

 

 

 

 

 

 

Capesize

 

$

5,498

 

$

5,179

 

$

319

 

6.2

%

Panamax

 

4,500

 

5,531

 

(1,031

)

(18.6

)%

Supramax

 

4,618

 

4,908

 

(290

)

(5.9

)%

Handymax

 

4,716

 

4,720