Genco reports net loss of USD 194.9m in 2015

Peter Georgiopoulos

Genco Shipping & Trading Limited (GNK) reported its financial results for the three and twelve months ended December 31, 2015.

The following financial review discusses the results for the three and twelve months ended December 31, 2015 and December 31, 2014.

Fourth Quarter 2015 and Year-to-Date Highlights

Recorded a net loss attributable to Genco Shipping & Trading Limited of $49.5 million for the fourth quarter of 2015
Basic and diluted loss per share of $0.69;

Completed the funding of a $98 million secured loan facility with funds associated with Hayfin Capital Management and Breakwater Capital Ltd. on November 10, 2015
The facility has a term of approximately five years and no fixed amortization payments for the first two years;

Took delivery of the Baltic Mantis, the final newbuilding Ultramax vessel to be delivered to the Company under Baltic Trading’s previously announced agreements with Yangfan Group Co., Ltd., on October 9, 2015;
Reached an agreement to charter the vessel at a rate based on 115% of the Baltic Supramax Index for 14 to 18.5 months.

Financial Review: 2015 Fourth Quarter

The Company recorded a net loss attributable to Genco Shipping & Trading Limited for the fourth quarter of 2015 of $49.5 million, or $0.69 basic and diluted net loss per share. Comparatively, for the three months ended December 31, 2014, the Company recorded a net loss of $164.0 million, or $2.72 basic and diluted net loss per share.

John C. Wobensmith, President, commented, “Against the backdrop of a challenging drybulk market, we took steps to strengthen our liquidity position and increase our operating efficiency. After the merger with Baltic Trading, we created a stronger global competitor in the drybulk industry with a modern fleet that seeks to adhere to the highest operational standards. During the year, we also drew upon our increased scale to reduce our direct vessel operating expenses on a per vessel basis, and entered into new loan facilities under favorable terms enhancing the Company’s liquidity position by $158 million.”

The Company’s revenues decreased to $35.0 million for the three months ended December 31, 2015, compared to $55.7 million for the three months ended December 31, 2014. The decrease was primarily due to lower spot market rates achieved by the majority of the vessels in our fleet during the fourth quarter of 2015 versus the same period last year marginally offset by the increase in the size of our fleet following the delivery of three Ultramax newbuilding vessels.

The average daily time charter equivalent, or TCE, rates obtained by the Company’s fleet was $4,711 per day for the three months ended December 31, 2015 as compared to $8,310 for the three months ended December 31, 2014. The decrease in TCE was primarily due to lower spot rates achieved by the vessels in our fleet during the fourth quarter of 2015 versus the fourth quarter of 2014. During the fourth quarter of 2015, the Baltic Dry Index came under considerable pressure, which included reaching a then all-time low of 471 on December 16, 2015. The primary drivers behind the decline were fewer coal shipments to China, which more than offset the positive quarter-over-quarter growth of iron ore imports, together with persistent fleet growth. Excess vessel supply has continued to weigh on the drybulk market through the first two months of 2016 as newbuilding vessel deliveries have surged in line with historical seasonality, leading to considerable fleet growth despite the strong pace of vessel demolitions. Furthermore, cargo disruptions as well as the onset of the Chinese New Year have both been negative contributors to the current freight rate environment.

Total operating expenses were $72.6 million for the three months ended December 31, 2015 compared $241.5 million for the three months ended December 31, 2014. During the three months ended December 31, 2015, we determined that the future undiscounted cash flows did not exceed the net book value for the Genco Marine. As such, a $4.5 million impairment loss was recorded in order to adjust the value of the Genco Marine to its fair market value as of December 31, 2015. During the three months ended December 31, 2014, a goodwill impairment of $166.1 million was recognized, which represents the portion of the total reorganization value that was not attributed to specific tangible or identifiable intangible assets. Vessel operating expenses were $31.9 million for the three months ended December 31, 2015 and $29.7 million for the three months ended December 31, 2014. This was primarily due to the increase in the size of our fleet as well as higher expenses related to the purchase of spare parts. General, administrative and technical management expenses were $10.1 million for the fourth quarter of 2015 compared to $21.4 million for the fourth quarter of 2014, primarily due to a decrease in compensation expenses. Included in general, administrative and technical management expenses for the three months ended December 31, 2015 and the three months ended December 31, 2014, are non-cash compensation expenses of $5.5 million and $12.5 million, respectively, arising from awards under the 2014 Management Incentive Plan. Depreciation and amortization expenses increased to $20.6 million for the three months ended December 31, 2015 from $19.4 million for the three months ended December 31, 2014, primarily due to the increase in the size of our fleet.

Daily vessel operating expenses, or DVOE, were $4,954 per vessel per day for the fourth quarter of 2015 compared to $4,840 per vessel per day for the same quarter in 2014 predominantly due to higher expenses related to the timing of the purchase of spare parts. Our DVOE for the year ended 2015 was $4,870 per vessel per day versus $5,035 for 2014, which based on the 2015 ownership days, represents savings of over $4.0 million for the year. We believe daily vessel operating expenses are best measured for comparative purposes over a 12‑month period in order to take into account all of the expenses that each vessel in our fleet will incur over a full year of operation. Based on estimates provided by our technical managers and management’s views, our DVOE budget for 2016 is $4,820 per vessel per day on a weighted average basis for the entire year.

Apostolos Zafolias, Chief Financial Officer, commented, “During the fourth quarter, we continued to enhance Genco’s liquidity position and entered into a $98 million five-year loan facility with favorable terms. In total, we entered into $158 million in new loan facilities for the year in an effort to strengthen the Company’s balance sheet.”

Financial Review: Twelve Months 2015

The Company recorded a net loss attributable to Genco Shipping & Trading Limited of $194.9 million or $2.96 basic and diluted net loss per share for the twelve months ended December 31, 2015. This was a decrease in net loss of $938.5 million compared to the twelve months ended December 31, 2014. Net loss for the twelve months ended December 31, 2014 included the effect of reorganization items for the Predecessor Company. As of July 9, 2014, upon the completion of the Company’s restructuring, Genco adopted and applied fresh-start reporting provisions to its financial statements. As a result of the adoption of fresh-start reporting, the Company’s consolidated balance sheets and consolidated statements of operations subsequent to July 9, 2014 will not be comparable in many respects to our consolidated balance sheets and consolidated statements of operations prior to July 9, 2014. Revenues decreased by $66.9 million to $154.0 million for the twelve months ended December 31, 2015 compared to the twelve months ended December 31, 2014 due to lower spot market rates achieved by the majority of our vessels partially offset by the increase in the size of our fleet. TCE rates obtained by the Company decreased to $5,445 per day for the twelve months ended December 31, 2015 from $8,785 per day for the twelve months ended December 31, 2014, due to lower rates achieved by the majority of the vessels in our fleet as well as higher voyage expenses. Total operating expenses, excluding non-cash vessel impairment charges totaling $39.9 million relating to the sale of the Baltic Tiger and the Baltic Lion in April 2015 and the revaluation of the Genco Marine to fair market value as of December 31, 2015, were $306.9 million for the twelve months ended December 31, 2015, $6.8 million less than total operating expenses for the twelve months ended December 31, 2014 after excluding $166.1 million related to a goodwill impairment charge. Daily vessel operating expenses per vessel were $4,870 versus $5,035 in the comparative periods due to lower insurance, stores and maintenance related expenses.

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