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 June 30, 2013
OR
|
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-34648
BALTIC TRADING LIMITED
(Exact name of registrant as specified in its charter)
|
Republic of the Marshall Islands |
|
98-0637837 |
|
(State or other jurisdiction of |
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(I.R.S. Employer |
299 Park Avenue, 12th Floor, New York, New York 10171
(Address of principal executive offices) (Zip Code)
(646) 443-8550
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o |
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Accelerated filer x |
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Non-accelerated filer o |
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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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 August 9, 2013: common stock, $0.01 per share — 23,779,896 shares and Class B stock, $0.01 per share — 5,827,471 shares.
We intend to use our website, www.BalticTrading.com, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in our website’s Investor Relations section. Accordingly, investors should monitor the Investor Relations portion of our website, in addition to following our press releases, SEC filings, public conference calls, and webcasts. To subscribe to our e-mail alert service, please click the “Receive E-mail Alerts” link in the Investor Relations section of our website and submit your email address. The information contained in, or that may be accessed through, our website is not incorporated by reference into or a part of this document or any other report or document we file with or furnish to the SEC, and any references to our website are intended to be inactive textual references only.
Baltic Trading Limited
Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012
(U.S. Dollars in Thousands, Except for Share and Per Share Data)
(Unaudited)
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June 30, 2013 |
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December 31, |
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Assets |
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Current assets: |
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|
|
|
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Cash and cash equivalents |
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$ |
23,732 |
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$ |
3,280 |
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Due from charterers, net of a reserve of $125 and $154, respectively |
|
1,232 |
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945 |
| ||
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Prepaid expenses and other current assets |
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3,380 |
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2,892 |
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Total current assets |
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28,344 |
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7,117 |
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|
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|
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Noncurrent assets: |
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Vessels, net of accumulated depreciation of $44,225 and $36,906, respectively |
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348,100 |
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355,418 |
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Fixed assets, net of accumulated depreciation of $41 and $36, respectively |
|
66 |
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12 |
| ||
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Deferred financing costs, net of accumulated amortization of $1,435 and $1,204, respectively |
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1,592 |
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1,823 |
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Total noncurrent assets |
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349,758 |
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357,253 |
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Total assets |
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$ |
378,102 |
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$ |
364,370 |
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Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
2,663 |
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$ |
2,163 |
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Deferred revenue |
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292 |
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261 |
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Due to Parent |
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29 |
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34 |
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Total current liabilities |
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2,984 |
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2,458 |
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Noncurrent liabilities: |
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Long-term debt |
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102,250 |
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101,250 |
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Total noncurrent liabilities: |
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102,250 |
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101,250 |
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Total liabilities |
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105,234 |
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103,708 |
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Commitments and contingencies |
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Shareholders’ equity: |
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Common stock, par value $0.01; 500,000,000 shares authorized; issued and outstanding 23,779,896 and 17,300,999 shares at June 30, 2013 and December 31, 2012, respectively |
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238 |
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173 |
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Class B stock, par value $0.01; 100,000,000 shares authorized; issued and outstanding 5,827,471and 5,699,088 at June 30, 2013 and December 31, 2012, respectively |
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58 |
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57 |
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Additional paid-in capital |
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299,097 |
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277,249 |
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Accumulated deficit |
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(26,525 |
) |
(16,817 |
) | ||
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Total shareholders’ equity |
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272,868 |
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260,662 |
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Total liabilities and shareholders’ equity |
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$ |
378,102 |
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$ |
364,370 |
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See accompanying notes to condensed consolidated financial statements.
Baltic Trading Limited
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2013 and 2012
(U.S. Dollars in thousands, Except for Per Share Data)
(Unaudited)
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|
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For the Three Months |
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For the Six Months |
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2013 |
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2012 |
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2013 |
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2012 |
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Revenues |
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$ |
6,379 |
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$ |
7,603 |
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$ |
12,365 |
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$ |
13,897 |
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Operating expenses: |
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Voyage expenses |
|
157 |
|
379 |
|
738 |
|
432 |
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Voyage expenses to Parent |
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82 |
|
97 |
|
155 |
|
178 |
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Vessel operating expenses |
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4,248 |
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4,270 |
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8,113 |
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8,192 |
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General, administrative, and technical management fees |
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1,184 |
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1,146 |
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2,475 |
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2,456 |
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Management fees to Parent |
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614 |
|
614 |
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1,222 |
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1,229 |
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Depreciation |
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3,682 |
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3,683 |
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7,325 |
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7,367 |
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Total operating expenses |
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9,967 |
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10,189 |
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20,028 |
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19,854 |
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Operating loss |
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(3,588 |
) |
(2,586 |
) |
(7,663 |
) |
(5,957 |
) | ||||
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Other (expense) income: |
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Other (expense) income |
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(3 |
) |
1 |
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4 |
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(7 |
) | ||||
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Interest income |
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2 |
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1 |
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3 |
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3 |
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Interest expense |
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(1,023 |
) |
(1,062 |
) |
(2,039 |
) |
(2,138 |
) | ||||
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Other expense, net |
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(1,024 |
) |
(1,060 |
) |
(2,032 |
) |
(2,142 |
) | ||||
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Loss before income taxes |
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(4,612 |
) |
(3,646 |
) |
(9,695 |
) |
(8,099 |
) | ||||
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Income tax expense |
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(13 |
) |
(15 |
) |
(13 |
) |
(22 |
) | ||||
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Net loss |
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$ |
(4,625 |
) |
$ |
(3,661 |
) |
$ |
(9,708 |
) |
$ |
(8,121 |
) |
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Net loss per share of common and Class B Stock: |
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Net loss per share-basic |
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$ |
(0.19 |
) |
$ |
(0.16 |
) |
$ |
(0.41 |
) |
$ |
(0.37 |
) |
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Net loss per share-diluted |
|
$ |
(0.19 |
) |
$ |
(0.16 |
) |
$ |
(0.41 |
) |
$ |
(0.37 |
) |
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Dividends declared and paid per share of common and Class B Stock |
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$ |
0.01 |
|
$ |
0.05 |
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$ |
0.02 |
|
$ |
0.18 |
|
See accompanying notes to condensed consolidated financial statements.
Baltic Trading Limited
Condensed Consolidated Statements of Shareholders’ Equity
For the Six Months Ended June 30, 2013 and 2012
(U.S. Dollars in Thousands, Except for Share and Per Share Data)
(Unaudited)
|
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Common |
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Class B |
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Additional |
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(Accumulated |
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Total |
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Balance — January 1, 2013 |
|
$ |
173 |
|
$ |
57 |
|
$ |
277,249 |
|
$ |
(16,817 |
) |
$ |
260,662 |
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|
|
|
|
|
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Net loss |
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|
|
|
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|
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(9,708 |
) |
(9,708 |
) | |||||
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|
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|
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|
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|
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Cash dividends paid ($0.02 per share) |
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|
|
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(460 |
) |
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|
(460 |
) | |||||
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Issuance of 6,419,217 shares of common stock |
|
64 |
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|
21,495 |
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21,559 |
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Issuance of 128,383 shares of Class B stock |
|
|
|
1 |
|
(1 |
) |
|
|
— |
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Issuance of 59,680 shares of nonvested common stock |
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1 |
|
|
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(1 |
) |
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|
— |
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|
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Nonvested stock amortization |
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|
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|
815 |
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|
815 |
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|
|
|
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|
|
|
|
|
|
|
| |||||
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Balance — June 30, 2013 |
|
$ |
238 |
|
$ |
58 |
|
$ |
299,097 |
|
$ |
(26,525 |
) |
$ |
272,868 |
|
|
|
|
Common |
|
Class B |
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Additional |
|
(Accumulated |
|
Total |
| |||||
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Balance — January 1, 2012 |
|
$ |
170 |
|
$ |
57 |
|
$ |
280,923 |
|
$ |
453 |
|
$ |
281,603 |
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|
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|
|
|
|
|
|
|
|
|
|
| |||||
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Net loss |
|
|
|
|
|
|
|
(8,121 |
) |
(8,121 |
) | |||||
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|
|
|
|
|
|
|
|
|
|
|
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Cash dividends paid ($0.18 per share) |
|
|
|
|
|
(4,086 |
) |
|
|
(4,086 |
) | |||||
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|
|
|
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|
|
|
|
|
|
|
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Issuance of 12,500 shares of nonvested common stock |
|
— |
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|
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— |
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|
|
— |
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|
|
|
|
|
|
|
|
|
|
|
| |||||
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Nonvested stock amortization |
|
|
|
|
|
974 |
|
|
|
974 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
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Balance — June 30, 2012 |
|
$ |
170 |
|
$ |
57 |
|
$ |
277,811 |
|
$ |
(7,668 |
) |
$ |
270,370 |
|
See accompanying notes to condensed consolidated financial statements.
Baltic Trading Limited
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012
(U.S. Dollars in Thousands)
(Unaudited)
|
|
|
For the Six Months Ended June 30, |
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|
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2013 |
|
2012 |
| ||
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Cash flows from operating activities: |
|
|
|
|
| ||
|
Net loss |
|
$ |
(9,708 |
) |
$ |
(8,121 |
) |
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
| ||
|
Depreciation |
|
7,325 |
|
7,367 |
| ||
|
Amortization of deferred financing costs |
|
231 |
|
232 |
| ||
|
Amortization of nonvested stock compensation expense |
|
815 |
|
974 |
| ||
|
Change in assets and liabilities: |
|
|
|
|
| ||
|
Increase in due from charterers |
|
(287 |
) |
(336 |
) | ||
|
Increase in prepaid expenses and other current assets |
|
(488 |
) |
(181 |
) | ||
|
Increase in accounts payable and accrued expenses |
|
238 |
|
292 |
| ||
|
Decrease in due to Parent |
|
(5 |
) |
(11 |
) | ||
|
Increase (decrease) in deferred revenue |
|
31 |
|
(2 |
) | ||
|
|
|
|
|
|
| ||
|
Net cash (used in) provided by operating activities |
|
(1,848 |
) |
214 |
| ||
|
|
|
|
|
|
| ||
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Cash flows from investing activities: |
|
|
|
|
| ||
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Purchase of fixed assets |
|
(61 |
) |
(5 |
) | ||
|
|
|
|
|
|
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Net cash used in investing activities |
|
(61 |
) |
(5 |
) | ||
|
|
|
|
|
|
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Cash flows from financing activities: |
|
|
|
|
| ||
|
Proceeds from the 2010 Credit Facility |
|
1,000 |
|
— |
| ||
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Proceeds from issuance of common stock |
|
21,838 |
|
— |
| ||
|
Payment of common stock issuance costs |
|
(17 |
) |
— |
| ||
|
Cash dividends paid |
|
(460 |
) |
(4,086 |
) | ||
|
|
|
|
|
|
| ||
|
Net cash provided by (used in) financing activities |
|
22,361 |
|
(4,086 |
) | ||
|
|
|
|
|
|
| ||
|
Net increase (decrease) in cash and cash equivalents |
|
20,452 |
|
(3,877 |
) | ||
|
|
|
|
|
|
| ||
|
Cash and cash equivalents at beginning of period |
|
3,280 |
|
8,300 |
| ||
|
|
|
|
|
|
| ||
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Cash and cash equivalents at end of period |
|
$ |
23,732 |
|
$ |
4,423 |
|
See accompanying notes to condensed consolidated financial statements.
Baltic Trading Limited
Notes to Condensed Consolidated Financial Statements (unaudited)
(U.S. Dollars in Thousands, Except Per Share and Share Data)
1 - GENERAL INFORMATION
The accompanying condensed consolidated financial statements include the accounts of Baltic Trading Limited (“Baltic Trading”) and its wholly-owned subsidiaries (collectively, the “Company”). The Company was formed to own and employ drybulk vessels in the spot market. The spot market represents immediate chartering of a vessel, usually for single voyages, or employing vessels on spot market-related time charters. Baltic Trading was formed on October 6, 2009 (the “inception date”), under the laws of the Republic of the Marshall Islands.
At June 30, 2013, the Company was the sole owner of all of the outstanding shares of the following ship-owning subsidiaries as set forth below:
|
Wholly Owned |
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Vessels |
|
Dwt |
|
Delivery Date |
|
Year |
|
|
|
|
|
|
|
|
|
|
|
Baltic Leopard Limited |
|
Baltic Leopard |
|
53,447 |
|
April 8, 2010 |
|
2009 |
|
Baltic Panther Limited |
|
Baltic Panther |
|
53,351 |
|
April 29, 2010 |
|
2009 |
|
Baltic Cougar Limited |
|
Baltic Cougar |
|
53,432 |
|
May 28, 2010 |
|
2009 |
|
Baltic Jaguar Limited |
|
Baltic Jaguar |
|
53,474 |
|
May 14, 2010 |
|
2009 |
|
Baltic Bear Limited |
|
Baltic Bear |
|
177,717 |
|
May 14, 2010 |
|
2010 |
|
Baltic Wolf Limited |
|
Baltic Wolf |
|
177,752 |
|
October 14, 2010 |
|
2010 |
|
Baltic Wind Limited |
|
Baltic Wind |
|
34,409 |
|
August 4, 2010 |
|
2009 |
|
Baltic Cove Limited |
|
Baltic Cove |
|
34,403 |
|
August 23, 2010 |
|
2010 |
|
Baltic Breeze Limited |
|
Baltic Breeze |
|
34,386 |
|
October 12, 2010 |
|
2010 |
|
Baltic Fox Limited |
|
Baltic Fox |
|
31,883 |
|
Q3 2013 (1) |
|
2010 |
|
Baltic Hare Limited |
|
Baltic Hare |
|
31,887 |
|
Q3 2013 (1) |
|
2009 |
(1) Delivery dates for vessels being delivered in the future are estimates based on guidance received from the sellers.
On May 28, 2013, the Company closed on an equity offering of 6,419,217 shares of common stock at an offering price of $3.60 per share. The Company received net proceeds of $21,559 after deducting underwriters’ fees and expenses. Additionally, pursuant to the subscription agreement between the Company and Genco, for so long as Genco directly or indirectly holds at least 10% of the aggregate number of outstanding shares of the Company’s common stock and Class B stock, Genco will be entitled to receive at no cost an additional number of shares of Class B stock equal to 2% of the number of common shares issued, other than shares issued under the Company’s 2010 Equity Incentive Plan. As a result of this equity offering, Genco was issued 128,383 of Class B stock, which represents 2% of the number of common shares issued.
As of June 30, 2013 and December 31, 2012, Genco Shipping & Trading Limited’s (“Genco” or “Parent”) ownership of 5,827,471 and 5,699,088 shares, respectively, of the Company’s Class B stock represented a 19.68% and 24.78% ownership interest in the Company, respectively, and 78.61% and 83.17% of the aggregate voting power of the Company’s outstanding shares of voting stock, respectively. Pursuant to an amendment to Genco’s $1.4 billion credit facility entered into on August 1, 2012, all of the Company’s Class B stock is pledged as security for Genco’s obligations under such facility.
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 includes the accounts of Baltic Trading and its wholly-owned ship-owning subsidiaries. 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 regulation of the Securities and Exchange Commission (the “SEC”). In the opinion of management of the Company, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and operating results have been included in the statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 10-K”). The results of operations for the three and six month periods ended June 30, 2013 and 2012 are not necessarily indicative of the operating results for the full year.
Vessels, net
Vessels, net is stated at cost less accumulated depreciation. Included in vessel costs are acquisition costs directly attributable to the acquisition of a vessel and expenditures made to prepare the vessel for its initial voyage. The Company also capitalizes interest costs for a vessel under construction as a cost which is directly attributable to the acquisition of a vessel. Vessels are depreciated on a straight-line basis over their estimated useful lives, determined to be 25 years from the date of initial delivery from the shipyard. Depreciation expense for vessels for the three months ended June 30, 2013 and 2012 was $3,680 and $3,679, respectively. Depreciation expense for vessels for the six months ended June 30, 2013 and 2012 was $7,319 and $7,359, respectively.
Depreciation expense is calculated based on cost less the estimated residual scrap value. The costs of significant replacements, renewals and betterments are capitalized and depreciated over the shorter of the vessel’s remaining estimated useful life or the estimated life of the renewal or betterment. Undepreciated cost of any asset component being replaced that was acquired after the initial vessel purchase is written off as a component of vessel operating expense. Expenditures for routine maintenance and repairs are expensed as incurred. Scrap value is estimated by the Company by taking the estimated scrap value of $245/lwt multiplied by the weight of the ship in lightweight tons (lwt).
Income taxes
The Company is incorporated in the Marshall Islands. Pursuant to the income tax laws of the Marshall Islands, the Company is not subject to Marshall Islands income tax. During the three months ended June 30, 2013 and 2012, the Company had United States operations which resulted in United States source income of $639 and $755, respectively. The Company’s estimated United States income tax expense for the three months ended June 30, 2013 and 2012 was $13 and $15, respectively. Additionally, during the six months ended June 30, 2013 and 2012, the Company had United States operations which resulted in United States source income of $639 and $1,121, respectively. The Company’s estimated United States income tax expense for the six months ended June 30, 2013 and 2012 was $13 and $22, respectively.
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 due to time charter performance issues. As of June 30, 2013 and December 31, 2012, the Company had an accrual of $17 and $7, respectively, related to these estimated customer claims.
Voyage expense recognition
In spot market-related time charters and time charters, operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. There are certain other non-specified voyage expenses such as commissions which are typically borne by the Company. At the inception of a spot market-related time charter or time charter, the Company records the difference between the cost of bunker fuel delivered by the terminating charterer and the bunker fuel sold to the new charterer as a gain or loss within voyage expenses. These differences in bunkers resulted in net gains (losses) of ($2) and $73 during the three months ended June 30, 2013 and 2012, respectively, and $9 and $73 during the six months ended June 30, 2013 and 2012, respectively. Additionally, voyage expenses include the cost of bunkers consumed during short-term time charters pursuant to the terms of the time charter agreement.
3 - CASH FLOW INFORMATION
For the six months ended June 30, 2013, 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 of $262 for the payment of common stock issuance costs.
For the six months ended June 30, 2012, the Company did not have any non-cash investing or financing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in accounts payable and accrued expenses.
During the six months ended June 30, 2013 and 2012, cash paid for interest was $1,788 and $1,907 respectively.
During the six months ended June 30, 2013 and 2012, cash paid for estimated income taxes was $12 and $12, respectively.
On May 16, 2013, the Company made grants of nonvested common stock in the amount of 59,680 shares in the aggregate to directors of the Company. The fair value of such nonvested stock was $225.
On May 17, 2012, the Company made grants of nonvested common stock in the amount of 12,500 shares in the aggregate to directors of the Company. The fair value of such nonvested stock was $48. The shares vested on May 16, 2013.
4 - NET LOSS PER COMMON AND CLASS B SHARE
The computation of net loss per share of common stock and Class B shares is in accordance with the Accounting Standards Codification (“ASC”) 260 — “Earnings Per Share” (“ASC 260”), using the two-class method. Under these provisions, basic net loss per share is computed using the weighted-average number of common shares and Class B shares outstanding during the year, except that it does not include nonvested stock awards subject to repurchase or cancellation. Diluted net loss per share is computed using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of nonvested stock awards (see Note 13 — Nonvested Stock Awards) for the common shares, for which the assumed proceeds upon vesting 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. Of the 557,429 nonvested shares outstanding at June 30, 2013 (see Note 13 — Nonvested Stock Awards), all are anti-dilutive. The computation of the diluted net loss per share of common stock assumes the conversion of Class B shares, while the diluted net loss per share of Class B stock does not assume the conversion of those shares.
The following table sets forth the computation of basic and diluted net loss per share of common stock and Class B stock:
|
|
|
For the |
| ||||
|
|
|
Common |
|
Class B |
| ||
|
Basic net loss per share: |
|
|
|
|
| ||
|
Numerator: |
|
|
|
|
| ||
|
Allocation of loss |
|
$ |
(3,559 |
) |
$ |
(1,066 |
) |
|
|
|
|
|
|
| ||
|
Denominator: |
|
|
|
|
| ||
|
Weighted-average shares outstanding, basic |
|
19,176,913 |
|
5,747,055 |
| ||
|
|
|
|
|
|
| ||
|
Basic net loss per share |
|
$ |
(0.19 |
) |
$ |
(0.19 |
) |
|
|
|
|
|
|
| ||
|
Diluted net loss per share: |
|
|
|
|
| ||
|
Numerator: |
|
|
|
|
| ||
|
Allocation of loss |
|
$ |
(3,559 |
) |
$ |
(1,066 |
) |
|
Reallocation of undistributed loss as a result of conversion of Class B to common shares |
|
(1,123 |
) |
— |
| ||
|
Reallocation of dividends paid as a result of conversion of Class B to common shares |
|
57 |
|
— |
| ||
|
Allocation of loss |
|
$ |
(4,625 |
) |
$ |
(1,066 |
) |
|
|
|
|
|
|
| ||
|
Denominator: |
|
|
|
|
| ||
|
Weighted-average shares outstanding used in basic computation |
|
19,176,913 |
|
5,747,055 |
| ||
|
Add: |
|
|
|
|
| ||
|
Conversion of Class B to common shares |
|
5,747,055 |
|
— |
| ||
|
|
|
|
|
|
| ||
|
Weighted-average shares outstanding, diluted |
|
24,923,968 |
|
5,747,055 |
| ||
|
|
|
|
|
|
| ||
|
Diluted net loss per share |
|
$ |
(0.19 |
) |
$ |
(0.19 |
) |
|
|
|
For the |
| ||||
|
|
|
Common |
|
Class B |
| ||
|
Basic net loss per share: |
|
|
|
|
| ||
|
Numerator: |
|
|
|
|
| ||
|
Allocation of loss |
|
$ |
(2,725 |
) |
$ |
(936 |
) |
|
|
|
|
|
|
| ||
|
Denominator: |
|
|
|
|
| ||
|
Weighted-average shares outstanding, basic |
|
16,577,931 |
|
5,699,088 |
| ||
|
|
|
|
|
|
| ||
|
Basic net loss per share |
|
$ |
(0.16 |
) |
$ |
(0.16 |
) |
|
|
|
|
|
|
| ||
|
Diluted net loss per share: |
|
|
|
|
| ||
|
Numerator: |
|
|
|
|
| ||
|
Allocation of loss |
|
$ |
(2,725 |
) |
$ |
(936 |
) |
|
Reallocation of undistributed loss as a result of conversion of Class B to common shares |
|
(1,221 |
) |
— |
| ||
|
Reallocation of dividends paid as a result of conversion of Class B to common shares |
|
285 |
|
— |
| ||
|
Allocation of loss |
|
$ |
(3,661 |
) |
$ |
(936 |
) |
|
|
|
|
|
|
| ||
|
Denominator: |
|
|
|
|
| ||
|
Weighted-average shares outstanding used in basic computation |
|
16,577,931 |
|
5,699,088 |
| ||
|
Add: |
|
|
|
|
| ||
|
Conversion of Class B to common shares |
|
5,699,088 |
|
— |
| ||
|
|
|
|
|
|
| ||
|
Weighted-average shares outstanding, diluted |
|
22,277,019 |
|
5,699,088 |
| ||
|
|
|
|
|
|
| ||
|
Diluted net loss per share |
|
$ |
(0.16 |
) |
$ |
(0.16 |
) |
|
|
|
For the Six Months Ended June 30, 2013 |
| ||||
|
|
|
Common |
|
Class B |
| ||
|
Basic net loss per share: |
|
|
|
|
| ||
|
Numerator: |
|
|
|
|
| ||
|
Allocation of loss |
|
$ |
(7,358 |
) |
$ |
(2,350 |
) |
|
|
|
|
|
|
| ||
|
Denominator: |
|
|
|
|
| ||
|
Weighted-average shares outstanding, basic |
|
17,924,791 |
|
5,723,204 |
| ||
|
|
|
|
|
|
| ||
|
Basic net loss per share |
|
$ |
(0.41 |
) |
$ |
(0.41 |
) |
|
|
|
|
|
|
| ||
|
Diluted net loss per share: |
|
|
|
|
| ||
|
Numerator: |
|
|
|
|
| ||
|
Allocation of loss |
|
$ |
(7,358 |
) |
$ |
(2,350 |
) |
|
Reallocation of undistributed loss as a result of conversion of Class B to common shares |
|
(2,464 |
) |
— |
| ||
|
Reallocation of dividends paid as a result of conversion of Class B to common shares |
|
114 |
|
— |
| ||
|
Allocation of loss |
|
$ |
(9,708 |
) |
$ |
(2,350 |
) |
|
|
|
|
|
|
| ||
|
Denominator: |
|
|
|
|
| ||
|
Weighted-average shares outstanding used in basic computation |
|
17,924,791 |
|
5,723,204 |
| ||
|
Add: |
|
|
|
|
| ||
|
Conversion of Class B to common shares |
|
5,723,204 |
|
— |
| ||
|
|
|
|
|
|
| ||
|
Weighted-average shares outstanding, diluted |
|
23,647,995 |
|
5,723,204 |
| ||
|
|
|
|
|
|
| ||
|
Diluted net loss per share |
|
$ |
(0.41 |
) |
$ |
(0.41 |
) |
|
|
|
Six Months Ended June 30, 2012 |
| ||||
|
|
|
Common |
|
Class B |
| ||
|
Basic net loss per share: |
|
|
|
|
| ||
|
Numerator: |
|
|
|
|
| ||
|
Allocation of loss |
|
$ |
(6,039 |
) |
$ |
(2,082 |
) |
|
|
|
|
|
|
| ||
|
Denominator: |
|
|
|
|
| ||
|
Weighted-average shares outstanding, basic |
|
16,527,473 |
|
5,699,088 |
| ||
|
|
|
|
|
|
| ||
|
Basic net loss per share |
|
$ |
(0.37 |
) |
$ |
(0.37 |
) |
|
|
|
|
|
|
| ||
|
Diluted net loss per share: |
|
|
|
|
| ||
|
Numerator: |
|
|
|
|
| ||
|
Allocation of loss |
|
$ |
(6,039 |
) |
$ |
(2,082 |
) |
|
Reallocation of undistributed loss as a result of conversion of Class B to common shares |
|
(3,108 |
) |
— |
| ||
|
Reallocation of dividends paid as a result of conversion of Class B to common shares |
|
1,026 |
|
— |
| ||
|
Allocation of loss |
|
$ |
(8,121 |
) |
$ |
(2,082 |
) |
|
|
|
|
|
|
| ||
|
Denominator: |
|
|
|
|
| ||
|
Weighted-average shares outstanding used in basic computation |
|
16,527,473 |
|
5,699,088 |
| ||
|
Add: |
|
|
|
|
| ||
|
Conversion of Class B to common shares |
|
5,699,088 |
|
— |
| ||
|
|
|
|
|
|
| ||
|
Weighted-average shares outstanding, diluted |
|
22,226,561 |
|
5,699,088 |
| ||
|
|
|
|
|
|
| ||
|
Diluted net loss per share |
|
$ |
(0.37 |
) |
$ |
(0.37 |
) |
5 - RELATED PARTY TRANSACTIONS
The following include related party transactions not disclosed elsewhere in these condensed consolidated financial statements. Due to Parent, Voyage expenses to Parent and Management fees to Parent have been disclosed above in these condensed consolidated financial statements.
During the six months ended June 30, 2013 and 2012, the Company incurred legal services aggregating $7 and $0, respectively, from Constantine Georgiopoulos, the father of Peter C. Georgiopoulos, Chairman of the Board. At June 30, 2013 and December 31, 2012, $7 and $0, respectively, was outstanding to Constantine Georgiopoulos.
During 2010, 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 of the Company, is also the Chairman of the Board of Aegean. During the six months ended June 30, 2013 and 2012, Aegean supplied lubricating oils to the Company’s vessels aggregating $204 and $320, respectively. At June 30, 2013 and December 31, 2012, $30 and $83 remained outstanding to Aegean, respectively.
During the six months ended June 30, 2013 and 2012, the Company incurred other expenses totaling $0 and $1, respectively, reimbursable to General Maritime Corporation (“GMC”), where the Company’s Chairman, Peter C. Georgiopoulos, also serves as Chairman of the Board of GMC. At June 30, 2013 and December 31, 2012, the amount due to GMC from the Company was $0.
The Company receives internal audit services from employees of Genco, the Company’s Parent. For the six months ended June 30, 2013 and 2012, the Company incurred internal audit service fees of $14 and $22, respectively, which are reimbursable to Genco pursuant to the Management Agreement (Refer to Note 15 — Commitments and Contingencies for further information regarding the Management Agreement). At June 30, 2013 and December 31, 2012, the amount due to Genco from the Company was $7 and $18, respectively, for such services and is included in due to Parent.
During the six months ended June 30, 2013 and 2012, Genco, the Company’s parent, incurred costs of $40 and $20 on the Company’s behalf to be reimbursed to Genco pursuant to the Management Agreement. At June 30, 2013, the amount due to Genco from the Company was $1. At December 31, 2012, the amount due to the Company from Genco was $7 and was a reduction in due to Parent.
Genco also provides the Company with commercial, technical, administrative and strategic services pursuant to the Management Agreement. During the six months ended June 30, 2013 and 2012, the Company incurred costs of $1,376 and $1,407 pursuant to the Management Agreement. At June 30, 2013, the amount due to Genco of $21 consisted of commercial service fees and is included in due to Parent. At December 31, 2012, the amount due to Genco of $23 consisted of commercial service fees and is included in due to Parent.
6 - DEBT
On April 16, 2010, the Company entered into a $100,000 senior secured revolving credit facility with Nordea Bank Finland plc, acting through its New York branch (as amended, the “2010 Credit Facility”). The Company entered into an amendment to this facility effective November 30, 2010 which, among other things, increased the commitment amount from $100,000 to $150,000. The total available working capital borrowings of $25,000 are subject to the total remaining availability under the 2010 Credit Facility. Pursuant to the amended 2010 Credit Facility, the total commitment of $150,000 will be reduced in 11 consecutive semi-annual reductions of $5,000 which commenced on the six month anniversary of the effective date, or May 31, 2011. On the maturity date, November 30, 2016, the total commitment will reduce to zero and all borrowings must be repaid in full. As of June 30, 2013, $22,750 remained available under the 2010 Credit Facility, as the total commitment under this facility was reduced to $125,000 on May 31, 2013. Of the $22,750 available under the 2010 Credit Facility, $22,500 was available for working capital borrowings as $1,500 was drawn down during 2010 and $1,000 was drawn down on May 9, 2013 for working capital purposes.
As of June 30, 2013, the Company believes it is in compliance with all of the financial covenants under the 2010 Credit Facility.
The following table sets forth the repayment of the outstanding debt of $102,250 at June 30, 2013 under the 2010 Credit Facility:
|
Period Ending December 31, |
|
Total |
| |
|
|
|
|
| |
|
2013 (July 1, 2013 — December 31, 2013) |
|
$ |
— |
|
|
2014 |
|
— |
| |
|
2015 |
|
2,250 |
| |
|
2016 |
|
100,000 |
| |
|
|
|
|
| |
|
Total debt |
|
$ |
102,250 |
|
Interest rates
The following table sets forth the effective interest rate associated with the interest expense for the 2010 Credit Facility, excluding the cost associated with unused commitment fees. Additionally, it includes the range of interest rates on the debt, excluding the impact of unused commitment fees:
|
|
|
For the Three Months Ended June 30, |
|
For the Six Months Ended June 30, |
| ||||
|
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
|
Effective Interest Rate (excluding impact of unused commitment fees) |
|
3.20 |
% |
3.24 |
% |
3.20 |
% |
3.25 |
% |
|
Range of Interest Rates (excluding impact of unused commitment fees) |
|
3.19% to 3.20 |
% |
3.24% to 3.25 |
% |
3.19% to 3.21 |
% |
3.24% to 3.30 |
% |
7 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values and carrying values of the Company’s financial instruments at June 30, 2013 and December 31, 2012 which are required to be disclosed at fair value, but not recorded at fair value, are as follows:
|
|
|
June 30, 2013 |
|
December 31, 2012 | |||||||||
|
|
|
Carrying |
|
Fair Value |
|
Carrying |
|
Fair Value |
| ||||
|
Cash and cash equivalents |
|
$ |
23,732 |
|
$ |
23,732 |
|
$ |
3,280 |
|
$ |
3,280 |
|
|
Floating rate debt |
|
102,250 |
|
102,250 |
|
101,250 |
|
101,250 |
| ||||
The fair value of floating rate debt under the 2010 Credit Facility is based on management’s estimate of rates the Company could obtain for similar debt of the same remaining maturities. Additionally, the Company considers its creditworthiness in determining the fair value of the floating rate debt under the revolving credit facility. The carrying value approximates the fair market value for this floating rate loan. The carrying amounts of the Company’s other financial instruments at June 30, 2013 and December 31, 2012 (principally Due from charterers and Accounts payable and accrued expenses), approximate fair values because of the relatively short maturity of these instruments.
The Accounting Standards Codification Subtopic 820-10, “Fair Value Measurements & Disclosures” (“ASC 820-10”), applies to all assets and liabilities that are being measured and reported on a fair value basis. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:
· Level 1—Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these instruments does not entail a significant degree of judgment.
· Level 2—Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
· Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Cash and cash equivalents is considered a Level 1 item as it represents liquid assets with short-term maturities. Floating rate debt is considered to be a Level 2 item as the Company considers the estimate of rates it could obtain for similar debt. The Company did not have any Level 3 financial assets or liabilities during the six months ended June 30, 2013 and 2012.
8 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
|
|
|
June 30, 2013 |
|
December 31, |
| ||
|
Lubricant inventory, fuel oil and diesel oil inventory and other stores |
|
$ |
2,070 |
|
$ |
1,767 |
|
|
Prepaid items |
|
1,033 |
|
861 |
| ||
|
Insurance receivable |
|
78 |
|
126 |
| ||
|
Other |
|
199 |
|
138 |
| ||
|
Total |
|
$ |
3,380 |
|
$ |
2,892 |
|
9 - DEFERRED FINANCING COSTS
Deferred financing costs include fees, commissions and legal expenses associated with securing loan facilities and amending existing loan facilities. These costs are being amortized over the life of the related loan facility, and are included in interest expense.
The Company has unamortized deferred financing costs of $1,592 and $1,823 at June 30, 2013 and December 31, 2012, respectively, associated with the 2010 Credit Facility. Accumulated amortization of deferred financing costs as of June 30, 2013 and December 31, 2012 was $1,435 and $1,204, respectively. The Company has incurred deferred financing costs of $3,027 for the existing 2010 Credit Facility as of June 30, 2013 and December 31, 2012, which includes fees incurred in order to negotiate the amendment to the 2010 Credit Facility. Amortization expense of deferred financing costs for the three months ended June 30, 2013 and 2012 was $116 and $116, respectively. Amortization expense of deferred financing costs for the six months ended June 30, 2013 and 2012 was $231 and $232, respectively.
10 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
|
|
|
June 30, 2013 |
|
December 31, |
| ||
|
Accounts payable |
|
$ |
676 |
|
$ |
430 |
|
|
Accrued vessel operating expenses |
|
1,746 |
|
1,622 |
| ||
|
Accrued general and administrative expenses |
|
241 |
|
111 |
| ||
|
|
|
|
|
|
| ||
|
Total |
|
$ |
2,663 |
|
$ |
2,163 |
|
11 - FIXED ASSETS
Fixed assets consist of the following:
|
|
|
June 30, 2013 |
|
December 31, |
| ||
|
Fixed assets, at cost: |
|
|
|
|
| ||
|
Computer equipment |
|
$ |
43 |
|
$ |
43 |
|
|
Vessel equipment |
|
64 |
|
5 |
| ||
|
Total cost |
|
107 |
|
48 |
| ||
|
Less: accumulated depreciation |
|
41 |
|
36 |
| ||
|
Total |
|
$ |
66 |
|
$ |
12 |
|
Depreciation expense for fixed assets for the three months ended June 30, 2013 and 2012 was $2 and $4, respectively. Depreciation expense for fixed assets for the six months ended June 30, 2013 and 2012 was $5 and $8, respectively.
12 - REVENUE FROM SPOT MARKET-RELATED TIME CHARTERS
Total revenue earned on spot market-related time charters and the short-term time charters, as well as the sale of bunker consumed during short-term time charters, during the three months ended June 30, 2013 and 2012 was $6,379 and $7,603, respectively. Total revenue earned on spot market-related time charters and the short-term time charters, as well as the sale of bunker consumed during short-term time charters, during the six months ended June 30, 2013 and 2012 was $12,365 and $13,897, respectively. Future minimum time charter revenue based on the Baltic Cougar and Baltic Panther, which are committed to noncancelable short-term time charters as of June 30, 2013, is expected to be $424 for the remainder of 2013. Future minimum time charter revenue for the remaining vessels cannot be estimated as these vessels are currently on spot market-related time charters, and future spot rates cannot be estimated. The spot market-related time charters that the Company’s vessels (excluding the Baltic Hare and Baltic Fox) are currently employed on have estimated expiration dates that range from August 2013 to February 2015.
13 - NONVESTED STOCK AWARDS
The following table presents a summary of the Company’s nonvested stock awards for the six months ended June 30, 2013:
|
|
|
Number of |
|
Weighted |
| |
|
Outstanding at January 1, 2013 |
|
664,249 |
|
$ |
7.70 |
|
|
Granted |
|
59,680 |
|
3.77 |
| |
|
Vested |
|
(166,500 |
) |
10.76 |
| |
|
Forfeited |
|
— |
|
— |
| |
|
|
|
|
|
|
| |
|
Outstanding at June 30, 2013 |
|
557,429 |
|
$ |
6.37 |
|
The total fair value of shares that vested under the Plan during the six months ended June 30, 2013 and 2012 was $643 and $505, respectively. The total fair value is calculated as the number of shares vested during the period multiplied by the fair value on the vesting date.
For the three and six months ended June 30, 2013 and 2012, the Company recognized nonvested stock amortization expense for the Plan, which is included in general, administrative and technical management fees, as follows:
|
|
|
For the Three Months Ended |
|
For the Six Months Ended |
| ||||||||
|
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
General, administrative and technical management fees |
|
$ |
351 |
|
$ |
402 |
|
$ |
815 |
|
$ |
974 |
|
The Company is amortizing these grants over the applicable vesting periods, net of anticipated forfeitures. As of June 30, 2013, unrecognized future compensation cost of $1,306 related to nonvested stock will be recognized over a weighted-average period of 2.22 years.
14 - 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 effect on the Company, its financial condition, results of operations or cash flows.
15 - COMMITMENTS AND CONTINGENCIES
Genco, the Company’s parent, provides the Company with commercial, technical, administrative and strategic services necessary to support the Company’s business pursuant to the Company’s Management Agreement with Genco. If the Company terminates the agreement without cause, or if Genco terminates the agreement for the Company’s material breach or change of control, the Company must make a termination payment to Genco in a single lump sum within 30 days of the termination date. The termination payment is generally calculated as five times the average annual management fees payable to Genco for the last five completed years of the term of the Management Agreement, or such lesser number of years as may have been completed at the time of termination. As of June 30, 2013, the termination payment that would be due to Genco is approximately $19,816. Refer to Note 5 — Related Party Transactions for any costs incurred during the six months ended June 30, 2013 and 2012 pursuant to the Management Agreement.
16 - SUBSEQUENT EVENTS
On July 2, 2013, the Company entered into agreements to purchase a 2010 built, 31,883 dwt Handysize drybulk vessel and a 2009 built, 31,887 dwt Handysize drybulk vessel from subsidiaries of Clipper Group for an aggregate purchase price of $41,000. The purchases are subject to completion of customary additional documentation and closing conditions. The vessels are expected to be delivered to the Company by the end of the third quarter of 2013. The Company intends to fund a portion of the purchase price of the vessels using proceeds from its registered follow-on common stock offering completed on May 28, 2013. For the remainder of the purchase price, the Company has obtained a commitment for approximately $20,000 of commercial bank financing from a global lending institution, which is subject to definitive loan documentation. Under the terms of the commitment, the credit facility is to be repaid in 24 quarterly repayment installments of approximately $375 each, the first of which is payable three months after the latest vessel delivery date, and a balloon payment of approximately $13,000 payable concurrently with the last repayment installment. Interest on borrowings will be payable at the three-month LIBOR rate plus a margin of 3.35%.
On July 30, 2013, the Company declared a dividend of $0.01 per share to be paid on or about August 22, 2013 to shareholders of record as of August 15, 2013. The aggregate amount of the dividend is expected to be approximately $296, which the Company anticipates will be funded from cash on hand at the time payment is to be made.
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) declines in demand or rates in the drybulk shipping industry; (ii) prolonged weakness in drybulk shipping rates; (iii) changes in the supply of or demand for drybulk products, generally or in particular regions; (iv) changes in the supply of drybulk carriers, including newbuilding of vessels or lower than anticipated scrapping of older vessels; (v) changes in rules and regulations applicable to the cargo industry, including, without limitation, legislation adopted by international organizations or by individual countries and actions taken by regulatory authorities; (vi) increases in costs and expenses including but not limited to: crew wages, insurance, provisions, lube oil, bunkers, repairs, maintenance and general, administrative and management fee expenses; (vii) whether our insurance arrangements are adequate; (viii) changes in general domestic and international political conditions; (ix) acts of war, terrorism, or piracy; (x) changes in the condition of 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; (xi) the amount of offhire time needed to complete repairs on vessels and the timing and amount of any reimbursement by our insurance carriers for insurance claims, including offhire days; (xii) our acquisition or
disposition of vessels; (xiii) our ability to leverage Genco’s relationships in the shipping industry; (xiv) the completion of definitive documentation with respect to charters; (xv) charterers’ compliance with the terms of their charters in the current market environment; (xvi) the fulfillment of the closing conditions under, or the execution of additional documentation for, the Company’s agreements to acquire vessels; and (xvii) completion of definitive documentation for and funding of financing for the vessel acquisitions on acceptable terms; 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, 2012 and subsequent reports on Form 8-K and Form 10-Q. Our ability to pay dividends in any period will depend upon various factors, including the limitations under any credit agreements to which we may be a party, applicable provisions of Marshall Islands law and the final determination by the Board of Directors each quarter after its review of our financial performance. The timing and amount of dividends, if any, could also be affected by factors affecting cash flows, results of operations, required capital expenditures, or reserves. As a result, the amount of dividends actually paid may vary. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
The following management’s discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes included in this Form 10-Q.
General
We are a New York City-based company incorporated in October 2009 in the Marshall Islands to conduct a shipping business focused on the drybulk industry spot market. We were formed by Genco Shipping & Trading Limited (NYSE: GNK) (“Genco”), an international drybulk shipping company that also serves as our Manager. Our fleet currently consists of two Capesize vessels, four Supramax vessels and three Handysize vessels with an aggregate carrying capacity of approximately 672,000 dwt and the average age of our fleet is approximately 3.6 years, as compared to the average age for the world fleet of approximately 10 years for the drybulk shipping segments in which we compete. Our fleet contains three groups of sister ships, which are vessels of virtually identical sizes and specifications. We believe that maintaining a fleet that includes sister ships reduces costs by creating economies of scale in the maintenance, supply and crewing of our vessels.
On July 2, 2013, the Company entered into agreements to purchase a 2010-built, 31,883 dwt Handysize drybulk vessel and a 2009-built, 31,887 dwt Handysize drybulk vessel from subsidiaries of Clipper Group for an aggregate purchase price of $41,000 to be renamed the Baltic Fox and the Baltic Hare, respectively. The purchases are subject to completion of customary additional documentation and closing conditions. The vessels are expected to be delivered to the Company by the end of the third quarter of 2013. After expected deliver of these two Handysize vessels, we will own 11 drybulk vessels consisting of two Capesize, four Supramax and five Handysize vessels with a total carrying capacity of approximately 736,000 dwt. The Company intends to fund a portion of the purchase price of the vessels using proceeds from its registered follow-on common stock offering completed on May 28, 2013. For the remainder of the purchase price, the Company has obtained a commitment for approximately $20,000 of commercial bank financing from a global lending institution, which is subject to definitive loan documentation. The credit facility is to be repaid in 24 quarterly repayment installments of approximately $375 each, the first of which is payable three months after the latest vessel delivery date, and a balloon payment of approximately $13,000 payable concurrently with the last repayment installment. Interest on borrowings will be payable at the three-month LIBOR rate plus a margin of 3.35%.
We seek to leverage the expertise of Genco and its management to pursue growth opportunities in the drybulk shipping spot market. To pursue these opportunities, we operate a fleet of drybulk ships that transport iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes. We currently operate all of our vessels on spot market-related time charters or short-term time charters. We may also consider operating vessels in the spot market directly or in vessel pools based on our view of market conditions. We have financed our fleet with equity capital and our 2010 Credit Facility. We aim to grow our fleet through timely and selective acquisitions of vessels. We expect to fund acquisitions of additional vessels using equity and debt financing. We intend to distribute to our shareholders on a quarterly basis all of our net income less cash expenditures for capital items related to our fleet, other than vessel acquisitions and related expenses, plus non-cash compensation, during the previous quarter, subject to any additional reserves our Board of Directors may from time to time determine are required for the prudent conduct of our business, as further described below under “Dividend Policy.” We have declared dividends for the past six quarters even though the application of the formula in our policy would not have resulted in a dividend, although we may not continue to do so.
Refer to page 19 for a table of all vessels that have been or are expected to be delivered to us.
Our operations are managed, under the supervision of our Board of Directors, by Genco as our Manager. We entered into a long-term management agreement (the “Management Agreement”) pursuant to which our Manager and its affiliates apply their expertise and experience in the drybulk industry to provide us 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. We pay our Manager fees for the services it provides us as well as reimburse our Manager for its costs and expenses incurred in providing certain of these services.
On May 28, 2013, we closed an equity offering of 6,419,217 shares of common stock at an offering price of $3.60 per share. We received net proceeds of $21,559 after deducting underwriters’ fees and expenses. Additionally, pursuant to the Management Agreement, for so long as Genco directly or indirectly holds at least 10% of the aggregate number of outstanding shares of our common stock and Class B stock, Genco will be entitled to receive at no cost an additional number of shares of Class B stock equal to 2% of the number of common shares issued, other than shares issued under the our 2010 Equity Incentive Plan. As a result of this equity offering, Genco was issued 128,383 of Class B stock, which represents 2% of the number of common shares issued.
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, Time Charter Equivalent (“TCE”) rates and daily vessel operating expenses for the three and six months ended June 30, 2013 and 2012.
|
|
|
For the Three Months Ended June 30, |
|
Increase |
|
|
| |||||
|
|
|
2013 |
|
2012 |
|
(Decrease) |
|
% Change |
| |||
|
Fleet Data: |
|
|
|
|
|
|
|
|
| |||
|
Ownership days (1) |
|
|
|
|
|
|
|
|
| |||
|
Capesize |
|
182.0 |
|
182.0 |
|
— |
|
— |
| |||
|
Supramax |
|
364.0 |
|
364.0 |
|
— |
|
— |
| |||
|
Handysize |
|
273.0 |
|
273.0 |
|
— |
|
— |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Total |
|
819.0 |
|
819.0 |
|
— |
|
— |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Available days (2) |
|
|
|
|
|
|
|
|
| |||
|
Capesize |
|
182.0 |
|
182.0 |
|
— |
|
— |
| |||
|
Supramax |
|
358.6 |
|
354.7 |
|
3.9 |
|
1.1 |
% | |||
|
Handysize |
|
273.0 |
|
273.0 |
|
— |
|
— |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Total |
|
813.6 |
|
809.7 |
|
3.9 |
|
0.5 |
% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Operating days (3) |
|
|
|
|
|
|
|
|
| |||
|
Capesize |
|
182.0 |
|
182.0 |
|
— |
|
— |
| |||
|
Supramax |
|
358.6 |
|
347.2 |
|
11.4 |
|
3.3 |
% | |||
|
Handysize |
|
271.5 |
|
273.0 |
|
(1.5 |
) |
(0.5 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Total |
|
812.1 |
|
802.2 |
|
9.9 |
|
1.2 |
% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Fleet utilization (4) |
|
|
|
|
|
|
|
|
| |||
|
Capesize |
|
100.0 |
% |
100.0 |
% |
— |
|
— |
| |||
|
Supramax |
|
100.0 |
% |
97.9 |
% |
2.1 |
% |
2.1 |
% | |||
|
Handysize |
|
99.5 |
% |
100.0 |
% |
(0.5 |
)% |
(0.5 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Fleet average |
|
99.8 |
% |
99.1 |
% |
0.7 |
% |
0.7 |
% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Average Daily Results: |
|
|
|
|
|
|
|
|
| |||
|
Time Charter Equivalent (5) |
|
|
|
|
|
|
|
|
| |||
|
Capesize |
|
$ |
5,967 |
|
$ |
5,918 |
|
$ |
49 |
|
0.8 |
% |
|
Supramax |
|
7,645 |
|
9,759 |
|
(2,114 |
) |
(21.7 |
)% | |||
|
Handysize |
|
8,473 |
|
9,480 |
|
(1,007 |
) |
(10.6 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Fleet average |
|
7,548 |
|
8,802 |
|
(1,254 |
) |
(14.2 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Daily vessel operating expenses (6) |
|
|
|
|
|
|
|
|
| |||
|
Capesize |
|
$ |
5,503 |
|
$ |
4,952 |
|
$ |
551 |
|
11.1 |
% |
|
Supramax |
|
5,370 |
|
5,505 |
|
(135 |
) |
(2.5 |
)% | |||
|
Handysize |
|
4,733 |
|
5,001 |
|
(268 |
) |
(5.4 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Fleet average |
|
5,187 |
|
5,214 |
|
(27 |
) |
(0.5 |
)% | |||
|
|
|
For the Six Months Ended June 30, |
|
Increase |
|
|
| |||||
|
|
|
2013 |
|
2012 |
|
(Decrease) |
|
% Change |
| |||
|
Fleet Data: |
|
|
|
|
|
|
|
|
| |||
|
Ownership days (1) |
|
|
|
|
|
|
|
|
| |||
|
Capesize |
|
362.0 |
|
364.0 |
|
(2.0 |
) |
(0.5 |
)% | |||
|
Supramax |
|
724.0 |
|
728.0 |
|
(4.0 |
) |
(0.5 |
)% | |||
|
Handysize |
|
543.0 |
|
546.0 |
|
(3.0 |
) |
(0.5 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Total |
|
1,629.0 |
|
1,638.0 |
|
(9.0 |
) |
(0.5 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Available days (2) |
|
|
|
|
|
|
|
|
| |||
|
Capesize |
|
362.0 |
|
364.0 |
|
(2.0 |
) |
(0.5 |
)% | |||
|
Supramax |
|
706.1 |
|
718.7 |
|
(12.6 |
) |
(1.8 |
)% | |||
|
Handysize |
|
543.0 |
|
546.0 |
|
(3.0 |
) |
(0.5 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Total |
|
1,611.1 |
|
1,628.7 |
|
(17.6 |
) |
(1.1 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Operating days (3) |
|
|
|
|
|
|
|
|
| |||
|
Capesize |
|
362.0 |
|
364.0 |
|
(2.0 |
) |
(0.5 |
)% | |||
|
Supramax |
|
705.7 |
|
708.3 |
|
(2.6 |
) |
(0.4 |
)% | |||
|
Handysize |
|
541.5 |
|
544.4 |
|
(2.9 |
) |
(0.5 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Total |
|
1,609.2 |
|
1,616.7 |
|
(7.5 |
) |
(0.5 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Fleet utilization (4) |
|
|
|
|
|
|
|
|
| |||
|
Capesize |
|
100.0 |
% |
100.0 |
% |
— |
|
— |
| |||
|
Supramax |
|
99.9 |
% |
98.6 |
% |
1.3 |
% |
1.3 |
% | |||
|
Handysize |
|
99.7 |
% |
99.7 |
% |
— |
|
— |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Fleet average |
|
99.9 |
% |
99.3 |
% |
0.6 |
% |
0.6 |
% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Average Daily Results: |
|
|
|
|
|
|
|
|
| |||
|
Time Charter Equivalent (5) |
|
|
|
|
|
|
|
|
| |||
|
Capesize |
|
$ |
5,950 |
|
$ |
6,238 |
|
$ |
(288 |
) |
(4.6 |
)% |
|
Supramax |
|
7,183 |
|
8,852 |
|
(1,669 |
) |
(18.9 |
)% | |||
|
Handysize |
|
7,821 |
|
8,524 |
|
(703 |
) |
(8.2 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Fleet average |
|
7,121 |
|
8,158 |
|
(1,037 |
) |
(12.7 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Daily vessel operating expenses (6) |
|
|
|
|
|
|
|
|
| |||
|
Capesize |
|
$ |
5,458 |
|
$ |
5,047 |
|
$ |
411 |
|
8.1 |
% |
|
Supramax |
|
5,090 |
|
5,277 |
|
(187 |
) |
(3.5 |
)% | |||
|
Handysize |
|
4,516 |
|
4,603 |
|
(87 |
) |
(1.9 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Fleet average |
|
4,980 |
|
5,001 |
|
(21 |
) |
(0.4 |
)% | |||
Definitions
In order to understand our discussion of our results of operations, it is important to understand the meaning of the following terms used in our analysis and the factors that influence our results of operations.
(1) Ownership days. We define ownership days as the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.
(2) Available days. We define available days as the number of our ownership days less the aggregate number of days that our vessels are off-hire due to scheduled repairs or repairs under guarantee, vessel upgrades or special surveys and the aggregate amount of time that we spend positioning our vessels between time charters. Companies in the shipping industry generally use available days to measure the number of days in a period during which vessels should be capable of generating revenues.
(3) Operating days. We define operating days as the number of our available days in a period less the aggregate number of days that our vessels are off-hire due to unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
(4) Fleet utilization. We calculate fleet utilization by dividing the number of our operating days during a period by the number of our available days during the period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the number of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning.
(5) TCE rates. We define TCE rates as net voyage revenue (voyage revenues less voyage expenses (including voyage expenses to Parent)) divided by the number of our available days during the period, which is consistent with industry standards. TCE rate is a common shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charterhire rates for vessels on voyage charters are generally not expressed in per-day amounts while charterhire rates for vessels on time charters generally are expressed in such amounts.
|
|
|
For the Three Months Ended |
|
For the Six Months Ended |
| ||||||||
|
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Voyage revenues (in thousands) |
|
$ |
6,379 |
|
$ |
7,603 |
|
$ |
12,365 |
|
$ |
13,897 |
|
|
Voyage expenses (in thousands) |
|
157 |
|
379 |
|
738 |
|
432 |
| ||||
|
Voyage expenses to Parent (in thousands) |
|
82 |
|
97 |
|
155 |
|
178 |
| ||||
|
|
|
$ |
6,140 |
|
$ |
7,127 |
|
11,472 |
|
$ |
13,287 |
| |
|
Total available days |
|
813.6 |
|
809.7 |
|
1,611.1 |
|
1,628.7 |
| ||||
|
Total TCE rate |
|
$ |
7,548 |
|
$ |
8,802 |
|
$ |
7,121 |
|
$ |
8,158 |
|
(6) Daily vessel operating expenses. We define daily vessel operating expenses (“DVOE”) as vessel operating expenses divided by ownership days for the period. Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance (excluding drydocking), the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses.
Operating Data
The following discusses our financial results for the three and six months ended June 30, 2013 and 2012:
|
|
|
For the Three Months Ended June 30, |
|
|
|
|
| |||||
|
|
|
2013 |
|
2012 |
|
Change |
|
% Change |
| |||
|
|
|
(U.S. dollars in thousands, except for per share amounts) |
|
|
| |||||||
|
Revenues |
|
$ |
6,379 |
|
$ |
7,603 |
|
$ |
(1,224 |
) |
(16.1 |
)% |
|
|
|
|
|
|
|
|
|
|
| |||
|
Operating Expenses: |
|
|
|
|
|
|
|
|
| |||
|
Voyage expenses |
|
157 |
|
379 |
|
(222 |
) |
(58.6 |
)% | |||
|
Voyage expenses to Parent |
|
82 |
|
97 |
|
(15 |
) |
(15.5 |
)% | |||
|
Vessel operating expenses |
|
4,248 |
|
4,270 |
|
(22 |
) |
(0.5 |
)% | |||
|
General, administrative and technical management fees |
|
1,184 |
|
1,146 |
|
38 |
|
3.3 |
% | |||
|
Management fees to Parent |
|
614 |
|
614 |
|
— |
|
— |
| |||
|
Depreciation |
|
3,682 |
|
3,683 |
|
(1 |
) |
— |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Total operating expenses |
|
9,967 |
|
10,189 |
|
(222 |
) |
(2.2 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Operating loss |
|
(3,588 |
) |
(2,586 |
) |
(1,002 |
) |
38.7 |
% | |||
|
Other expense |
|
(1,024 |
) |
(1,060 |
) |
36 |
|
(3.4 |
)% | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Loss before income taxes |
|
(4,612 |
) |
(3,646 |
) |
(966 |
) |
26.5 |
% | |||
|
Income tax expense |
|
(13 |
) |
(15 |
) |
2 |
|
(13.3 |
)% | |||
|
Net loss |
|
$ |
(4,625 |
) |
$ |
(3,661 |
) |
$ |
(964 |
) |
26.3 |
% |
|
Net loss per share of common and Class B Stock: |
|
|
|
|
|
|
|
|
| |||
|
Net loss per share - basic |
|
$ |
(0.19 |
) |
$ |
(0.16 |
) |
$ |
(0.03 |
) |
18.8 |
% |
|
Net loss per share - diluted |
|
$ |
(0.19 |
) |
$ |
(0.16 |
) |
$ |
(0.03 |
) |
18.8 |
% |
|
Dividends declared and paid per share |
|
$ |
0.01 |
|
$ |
0.05 |
|
$ |
(0.04 |
) |
(80.0 |
)% |
|
|
|
|
|
|
|
|
|
|
| |||
|
EBITDA (1) |
|
$ |
91 |
|
$ |
1,098 |
|
$ |
(1,007 |
) |
(91.7 |
)% |
|
|
|
For the Six Months Ended June 30, |
|
|
|
|
| |||||
|
|
|
2013 |
|
2012 |
|
Change |
|
% Change |
| |||
|
|
|
(U.S. dollars in thousands, except for per share amounts) |
|
|
| |||||||
|
Revenues |
|
$ |
12,365 |
|
$ |
13,897 |
|
$ |
(1,532 |
) |
(11.0 |
)% |
|
|
|
|
|
|
|
|
|
|
| |||
|
Operating Expenses: |
|
|
|
|
|
|
|
|
| |||
|
Voyage expenses |
|
738 |
|
432 |
|
306 |
|
70.8 |
% | |||
|
Voyage expenses to Parent |
|
155 |
|
178 |
|
(23 |
||||||