Genco, the largest U.S. headquartered drybulk shipowner focused on the global transportation of commodities, reported its financial results for the three months and six months ended June 30, 2021.
The following financial review discusses the results for the three months and six months ended June 30, 2021 and June 30, 2020.
Second Quarter 2021 and Year-to-Date Highlights
- As part of Genco’s comprehensive value strategy announced in April 2021, we have taken the following steps in the year-to-date:
- Entered into an agreement for a new $450 million credit facility (the “$450 Million Credit Facility”) to refinance our existing $495 Million Credit Facility and $133 Million Credit Facility, which provides additional flexibility for capital allocation, lowers our cash flow breakeven rate, and improves key terms
- New facility consists of a $150 million term loan and a revolving line of up to $300 million that can be used for acquisitions and general corporate purposes
- Agreed to acquire an additional three modern, fuel efficient Ultramax vessels in July 2021, bringing our total to six Ultramaxes we have agreed to acquire since April 2021
- Repaid $82.2 million of debt during the first half of 2021, or 18% of the beginning year debt balance
- Expect to close the refinancing of our credit facilities by the end of August and continue to pay down debt under the new facility’s revolver through the end of the year, advancing towards our goal of 20% net LTV by year end
- Fixed three Ultramax vessels on period time charters for approximately two years each at rates between $23,375 and $25,500 per day
- Genco increased its regular quarterly cash dividend to $0.10 per share for the second quarter of 2021
- Payable on or about August 25, 2021 to all shareholders of record as of August 17, 2021
- We have now declared cumulative dividends totaling $0.905 per share over the last eight quarters
- Genco is targeting Q4 2021 results for its anticipated first dividend under its new corporate strategy, which would be payable in Q1 2022
- We recorded net income of $32.0 million for the second quarter of 2021
- Basic and diluted earnings per share of $0.76 and $0.75, respectively
- Represents our highest quarterly earnings per share result since 2010
- Voyage revenues totaled $121.0 million and net revenue1 (voyage revenues minus voyage expenses and charter hire expenses) totaled $76.0 million during Q2 2021
- Our average daily fleet-wide time charter equivalent, or TCE1, for Q2 2021 was $21,137, marking our highest quarterly TCE since Q4 2010
- We estimate our TCE to date for Q3 2021 to be $27,599 for 71% owned fleet available days, based on current fixtures
- Recorded adjusted EBITDA of $50.2 million during Q2 20211
- During the first half of 2021, adjusted EBITDA totaled $70.9 million nearly identical to our full year 2020 adjusted EBITDA of $71.8 million
- Maintained a strong financial position with $161.2 million of cash, including $44.9 million of restricted cash, as of June 30, 2021
- During the third quarter, we plan to establish a new joint venture, GS Shipmanagement Pte. Ltd., with The Synergy Group (“Synergy”) for the technical management of our fleet, which aims to unlock further value for shareholders through its differentiated approach to ship management
- Entered into an initial framework to jointly study the feasibility of ammonia as an alternative marine fuel alongside various participants across the maritime value chain
- Ranked #1 out of 52 other public shipping companies in the Webber Research 2021 ESG scorecard
- We have agreed to sell our oldest vessel, the Genco Provence (2004-built Supramax) which we expect to deliver to the buyer by October 2021
John C. Wobensmith, Chief Executive Officer, commented, “The second quarter of 2021 was a transformative period for Genco, highlighted by the execution of several key initiatives under our comprehensive value strategy, focused on dividends, deleveraging and growth. We are pleased with the significant progress we are making working towards paying the first dividend under this strategy, while continuing to pay dividends to shareholders under our current policy.”
Mr. Wobensmith continued, “The foundation of our value strategy, which was announced in April, is our strong balance sheet and capital structure. Our recently agreed upon global credit facility refinancing further enhances Genco’s capital structure, providing additional flexibility, reducing our cash flow breakeven rates to industry lows, and supporting sustainability of quarterly dividends through diverse market environments. Additionally, we continued to opportunistically expand our fleet at a unique point in the cycle, seeking to capture the disconnect between decade high freight rates and asset values that have yet to catch up, which has resulted in compelling return on capital opportunities. In terms of our operating performance, our second quarter results represent our highest EPS and TCE since 2010, while our current fixtures for the third quarter to date point to further improvements. Looking ahead, the near-term market dynamics are highly supportive, and we continue to believe that the constrained overall supply picture for the next several years will provide a low baseline for demand growth to have to exceed in order to move freight rates higher.”
1 We believe the non-GAAP measure presented provides investors with a means of better evaluating and understanding the Company’s operating performance. Please see Summary Consolidated Financial and Other Data below for a further reconciliation.
Credit Facility Refinancing
On August 3, 2021, as a key step of our comprehensive value strategy, we entered into the $450 Million Credit Facility, which consists of a 5-year term loan portion together with a sizeable revolver that can be used for growth. We intend to use the $450 Million Credit Facility for a global refinancing of our previous two credit facilities. This new debt structure will provide improved capital allocation flexibility and significantly reduce our cash flow breakeven rate, which, combined with the strength of our balance sheet provides a solid foundation for the implementation of our value strategy. The $450 Million Credit Facility provides for a revolving line of up to $300 million which can be used for acquisitions and general corporate purposes. Based on current market conditions and management’s estimates, we are targeting debt outstanding at December 31, 2021 to be approximately $250 million following targeted voluntary debt paydowns totaling approximately $117 million in the second half of this year.2 Importantly, if we make these targeted paydowns, we will have no mandatory debt amortization payments until December 2025, or later if we make additional voluntary paydowns. Regardless of this favorable mandatory amortization schedule, we plan to continue to voluntarily pay down our debt with the medium term objective of reducing our net debt to zero.
Key terms of the $450 Million Credit Facility are as follows:
- Competitive pricing of LIBOR+ 2.15% to LIBOR+ 2.75% basis a net debt to EBITDA measurement which may be further decreased or increased based on our performance regarding emissions targets
- Quarterly revolver commitment reductions of $11.7 million per quarter followed by a balloon of $215.6 million
- Favorable covenant package including a minimum liquidity covenant requiring our unrestricted cash and cash equivalents to be the greater of $500,000 per vessel or 5% of total indebtedness, while unused revolver commitments can be used against this measurement
- Other customary financial covenants, including a minimum collateral maintenance covenant at 140%, a minimum working capital covenant of not less than zero, and a debt to capitalization covenant of no more than 70%
- Vessel replacement feature whereby collateral vessels can be sold or disposed of without prepayment of the loan if a replacement vessel or vessels meeting certain requirements are included as collateral within 360 days of such sale or disposition
- No restrictions on dividends other than customary event of default and pro forma financial covenant compliance provisions
Importantly, five of our vessels to be acquired will remain unencumbered and not pledged as collateral for this new facility. This will provide Genco with further flexibility and optionality on a go-forward basis.
As of June 30, 2021, Genco had $367.0 million of debt outstanding, gross of unamortized deferred financing costs. During the first half of 2021, Genco paid down a total of $82.2 million of debt including a prepayment of its scrubber and revolving credit facilities. In July 2021, we paid down an additional $9.4 million of debt. Borrowings under the new credit facility are subject to customary closing conditions.
2 Target paydown is based on management’s estimate of expenses and capital expenditures through the end of the year and net revenues based on current fixtures to date, rates under the current forward freight agreement (FFA) curve less 10% and adjusted for the size and specifications of the vessels in our fleet, including vessels under contract from their expected delivery dates, as well as assumed premiums for our scrubber-fitted vessels. We have applied sensitivity to the current FFA curve in using it as an illustrative assumed rate as more conservative than using the unmodified rate. This is not a prediction of rates. Actual rates will vary.
Comprehensive Value Strategy Update
Genco’s comprehensive value strategy is centered on low financial leverage, paying quarterly cash dividends to shareholders based on cash flows after debt service less a reserve, and growth of the Company’s asset base. We believe this strategy will be a key differentiator for the Company and drive shareholder value over the long-term.
Drawing on one of the strongest balance sheets in the industry, Genco has utilized a phased in approach to further reduce its debt and refinance its current credit facilities in order to lower its cash flow breakeven levels and position the Company to pay a sizeable quarterly dividend across diverse market environments. We maintain significant flexibility to grow the fleet through accretive vessel acquisitions. Genco is targeting Q4 2021 results for its anticipated first dividend under its new corporate strategy, which would be payable in Q1 2022.
In implementing this strategy, the Company has taken the following measures to date:
- Deleveraging: paid down $82.2 million of debt during the first six months of 2021, or approximately 18% of our outstanding debt
- Refinancing: entered into a new global credit facility to increase flexibility, improve key terms and lower cash flow breakeven rates
- Growth: agreed to acquire six modern, fuel efficient Ultramaxes since April 2021
- Securing revenue: opportunistically fixed various period time charterers to secure cash flows and de-risk recent acquisitions
Vessel | Type | Rate | Duration | Min Expiration | |
Genco Liberty | Capesize | $ | 31,000 | 10-13 months | Feb-22 |
Baltic Bear | Capesize | $ | 32,000 | 10-14 months | Mar-22 |
Genco Vigilant | Ultramax | $ | 17,750 | 11-13 months | Sep-22 |
Genco Freedom | Ultramax | $ | 23,375 | 20-23 months | Mar-23 |
Baltic Hornet | Ultramax | $ | 24,000 | 20-23 months | Apr-23 |
Baltic Wasp | Ultramax | $ | 25,500 | 23-25 months | Jun-23 |
For the second quarter of 2021, Genco declared a cash dividend of $0.10 per share. This represents an increase of $0.05 per share compared to the previous quarter. Our quarterly dividend policy and declaration and payment of dividends are subject to legally available funds, compliance with applicable law and contractual obligations (including our credit facilities) and the Board of Directors’ determination that each declaration and payment is at the time in the best interests of the Company and its shareholders after its review of our financial performance.
Technical Management Joint Venture
During the third quarter, we plan to establish a new joint venture, GS Shipmanagement Pte. Ltd., owned 50% by Genco and 50% by The Synergy Group to be the new technical manager of our fleet. We expect the creation of this newly formed joint venture will accomplish the following:
- Increase visibility and control over vessel operations
- Increase fleet-wide fuel efficiency to lower our carbon footprint through an advanced data platform
- Unlock potential vessel operating expense savings
- Provide a unique and differentiated service to the management of our vessels
Genco currently has eight vessels under the technical management of Synergy, all of which will be transferred to the joint venture in the near term. For the balance of the fleet, notice of withdrawal has been provided to our two other existing ship managers Anglo-Eastern and Wallem Shipmanagement, and we plan to transition technical management of all of our vessels to the joint venture during the next three to five months. Synergy, headquartered in Singapore, provides technical management services to over 375 vessels of all vessel types including drybulk vessels, tankers, LNG vessels, container ships and car carriers with offices in 12 countries and ship routes all over the globe. Synergy’s vast experience across different sectors of shipping, reputation for excellence in all areas of ship management, and focus on innovation as well as sustainability provide strong building blocks for a mutually beneficial partnership.
Genco’s active commercial operating platform and fleet deployment strategy
Overall, we utilize a portfolio approach towards revenue generation through a combination of short-term, spot market employment as well as opportunistically booking longer term coverage. Our fleet deployment strategy currently remains weighted towards short-term fixtures, which provide us with optionality on our sizeable fleet. Our barbell approach towards fleet composition enables Genco to gain exposure to both the major and minor bulk commodities with a fleet whose cargoes carried align with global commodity trade flows. This approach continues to serve us well given the upside experienced in major bulk rates together with the continued improvement and relative stability of minor bulk rates.
Based on current fixtures to date, we estimate the following to be our TCE to date for the third quarter of 2021 on a load-to-discharge basis. Actual rates for the third quarter will vary based upon future fixtures. We have approximately ten Capesize vessels coming open in the coming weeks during this strong market, of which we plan to ballast select vessels to the Atlantic basin.
- Capesize: $31,304 for 66% of the owned available Q3 2021 days
- Ultramax and Supramax: $25,273 for 75% of the owned available Q3 2021 days
- Fleet average: $27,599 for 71% of the owned available Q3 2021 days
Our second quarter of 2021 TCE results by class are listed below.
- Capesize: $23,760
- Ultramax and Supramax: $19,215
- Fleet average: $21,137
Our second quarter TCE represents a 73% increase relative to Q1 2021. Furthermore, our estimated Q3 TCE based on current fixtures is 31% higher than Q2, highlighting our opportunistic and mostly spot oriented approach to fixture activity to capture a rising market. During the second and third quarters, we have selectively booked period time charter coverage for approximately one to two years on two Capesizes and four Ultramax vessels. We view these fixtures as part of our portfolio approach to fixture activity and prudent to take advantage of in the current firm freight rate environment. Specifically, the three Ultramax time charters for two years each were booked to de-risk the purchase of the three Ultramax vessels we agreed to purchase in July 2021 and are expected to result in an unlevered cash-on-cash return of approximately 50% over the two year period.
Fleet Update
Since April 2021, the Company has entered agreements to purchase six modern, fuel efficient Ultramax vessels including our most recent acquisition of three vessels agreed upon in July 2021. We expect to take delivery of these vessels between August 2021 and January 2022. Since December 2020, we have grown our core Ultramax fleet by nine vessels to a total of 15 vessels as we continue to modernize and expand our fleet at an attractive point in the drybulk cycle. A summary of our Ultramax acquisitions since Q2 2021 is below:
Vessel | DWT | Yard Built | Year Built | Expected delivery | T/C Rate | Min Expiration | Max Expiration | ||
Genco Enterprise | 63,997 | Yangfan | 2016 | Aug-21 | |||||
Genco Madeleine | 63,166 | Dayang | 2014 | Aug-21 | $ | 11,200 | Aug-21 | Oct-21 | |
Genco Constellation | 63,310 | Chengxi | 2017 | Aug-21 | $ | 12,500 | Aug-21 | Oct-21 | |
Genco Mayflower | 63,371 | Chengxi | 2017 | Aug-21 | $ | 11,500 | Sep-21 | Nov-21 | |
Genco Mary | 61,000 | DACKS | 2022 | Jan-22 | |||||
Genco Laddey | 61,000 | DACKS | 2022 | Jan-22 |
During the second quarter of 2021, we paid $21.6 million in advances for certain agreed upon vessels. For the third quarter of 2021, we anticipate paying $87.2 million to complete the acquisition of four vessels. Furthermore, in the first quarter of 2022, we expect to pay the remaining $40.8 million to acquire the two DACKS vessels above.
Regarding vessel divestitures, in July 2021 we delivered the Genco Lorraine, a 2009-built 53,000 dwt Supramax, to the new owner. We have also agreed to sell the Genco Provence, the oldest vessel in our fleet, for gross proceeds of $13.25 million. With this sale, we will also avoid drydocking capex scheduled for 2022 of approximately $0.8 million. We expect delivery to occur in the fourth quarter of 2021.
Financial Review: 2021 Second Quarter
The Company recorded net income for the second quarter of 2021 of $32.0 million, or $0.76 and $0.75 basic and diluted earnings per share, respectively. Comparatively, for the three months ended June 30, 2020, the Company recorded a net loss of $18.2 million, or $0.43 basic and diluted net loss per share. Net income for the three months ended June 30, 2021, includes a loss on sale of vessels of $0.02 million.
The Company’s revenues increased to $121.0 million for the three months ended June 30, 2021, as compared to $74.2 million recorded for the three months ended June 30, 2020, primarily due higher rates achieved by both our major and minor bulk vessels, as well as our third party time chartered-in vessels, which was partially offset by the operation of fewer vessels in our fleet. The average daily time charter equivalent, or TCE, rates obtained by the Company’s fleet was $21,137 per day for the three months ended June 30, 2021 as compared to $6,693 per day for the three months ended June 30, 2020. During the second quarter of 2021, drybulk freight rates reached multi-year highs led by increased global economic activity, recovering steel production and augmented demand for drybulk commodities in China as well as the rest of the world. These demand catalysts have been met by limited net fleet growth due to the historically low orderbook as a percentage of the fleet.
Voyage expenses were $36.7 million for the three months ended June 30, 2021 compared to $41.7 million during the prior year period. This decrease was primarily attributable to the operation of fewer vessels in our fleet, partially offset by an increase in bunker consumption. Vessel operating expenses decreased to $18.8 million for the three months ended June 30, 2021 from $21.1 million for the three months ended June 30, 2020, primarily due to fewer owned vessels during the second quarter of 2021 as compared to the second quarter of 2020, partially offset by COVID-19 related expenditures and higher crew related and spare expenses. General and administrative expenses increased to $5.9 million for the second quarter of 2021 compared to $5.5 million for the second quarter of 2020, primarily due to higher legal and professional fees. Depreciation and amortization expenses decreased to $13.8 million for the three months ended June 30, 2021 from $15.9 million for the three months ended June 30, 2020, primarily due to a decrease in depreciation for vessels that were sold during the second half of 2020 and the first half of 2021, as well as a decrease in depreciation for certain vessels in our fleet that were impaired during 2020. These decreases were partially offset by an increase in depreciation expense for the three vessels acquired during Q4 2020 and Q1 2021.
Daily vessel operating expenses, or DVOE, amounted to $5,151 per vessel per day for the second quarter of 2021 compared to $4,366 per vessel per day for the second quarter of 2020. This increase is primarily attributable to COVID-19 related expenditures and higher crew related expenses, as well as higher spares and stores related expenditures. 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, our DVOE budget for 2021 is $5,000 per vessel per day on a fleet-wide basis reflecting the larger weighting of our fleet towards Capesize vessels following the sales of smaller Supramax and Handysize vessels as well as an anticipated increase in COVID-19 related expenses. The potential impacts of COVID-19 are beyond our control and are difficult to predict due to uncertainties surrounding the pandemic.
Apostolos Zafolias, Chief Financial Officer, commented, “We are pleased to have entered into a new credit agreement for the global refinancing of our previous credit facilities on favorable terms and appreciate the strong support of our leading bank group. By further strengthening our capital structure, we expect to significantly increase our flexibility for both paying sizeable dividends to shareholders and opportunistically growing our fleet through accretive vessel acquisitions, consistent with our track record. Moreover, we expect our new credit facility to markedly reduce our cash flow breakeven rate, which will further strengthen our industry leading balance sheet. Going forward, we will remain focused on ensuring the strength of our balance sheet through continuing to pay down debt with a medium-term objective of reducing our net debt to zero.”
Financial Review: Six Months 2021
The Company recorded net income of $34.0 million or $0.81 and $0.80 basic and diluted net earnings per share for the six months ended June 30, 2021, respectively. This compares to a net loss of $138.6 million or $3.31 basic and diluted net loss per share for the six months ended June 30, 2020. Net income for the six months ended June 30, 2021 includes a $0.7 million loss on sale of vessels. Net loss for the six months ended June 30, 2020 includes $112.8 million in non-cash vessel impairment charges and a $0.5 million loss on sale of vessels. Revenues increased to $208.6 million for the six months ended June 30, 2021 compared to $172.5 million for the six months ended June 30, 2020, primarily due to higher rates achieved by our fleet as well as our third party time chartered-on vessels, which was partially offset by the operation of fewer vessels in our fleet. Voyage expenses decreased to $71.8 million for the six months ended June 30, 2021 from $90.1 million for the same period in 2020. TCE rates obtained by the Company increased to $16,508 per day for the six months ended June 30, 2021 from $8,251 per day for the six months ended June 30, 2020. Total operating expenses for the six months ended June 30, 2021 and 2020 were $166.0 million and $299.1 million, respectively. Total operating expenses include a loss on sale of vessels of $0.7 million for the six months ending June 30, 2021. For the six months ended June 30, 2020, total operating expenses include $112.8 million in non-cash vessel impairment charges, as well as a loss on sale of vessels of $0.5 million for the six months ending June 30, 2020. General and administrative expenses for the six months ended June 30, 2021 increased to $12.0 million as compared to the $11.2 million in the same period of 2020, due to higher legal and professional fees. DVOE was $5,015 for the year-to-date period in 2021 versus $4,390 in 2020. The increase in daily vessel operating expense was predominantly due to COVID-19 related expenditures and higher crew related expenses, as well higher spares related expenditures. Due to COVID-19 restrictions last year, we were unable to perform our regularly scheduled crew changes, resulting in an abnormally low DVOE for the first half of 2020. EBITDA for the six months ended June 30, 2021 amounted to $70.1 million compared to $(93.5) million during the prior period. During the six months of 2021 and 2020, EBITDA included non-cash impairment charges and gains and losses on sale of vessels as mentioned above. Excluding these items, our adjusted EBITDA would have amounted to $70.9 million and $19.8 million, for the respective periods.
Liquidity and Capital Resources
Cash Flow
Net cash provided by operating activities for the six months ended June 30, 2021 was $62.6 million as compared to net cash used in operating activities of $9.0 million for the six months ended June 30, 2020. This increase in cash provided by operating activities was primarily due to higher rates achieved by our major and minor bulk vessels, changes in working capital, as well as a decrease in drydocking related expenditures and interest expense.
Net cash provided by investing activities for the six months ended June 30, 2021 was $4.2 million as compared to net cash used in investing activities of $0.6 million for the six months ended June 30, 2020. This fluctuation was primarily due to an increase in net proceeds from the sale of vessels during the first half of 2021 as compared to the first half of 2020, as well as a decrease in scrubber related expenditures. These fluctuations were partially offset by an increase in deposits made on three Ultramax vessels that we entered into agreements to purchase during the second quarter of 2021.
Net cash used in financing activities during the six months ended June 30, 2021 and 2020 was $85.2 million and $9.8 million, respectively. The increase was primarily due to an increase in repayments of $45.6 million under the $495 Million Credit Facility and the $133 Million Credit Facility. During the first half of 2021, we made a $21.2 million repayment of the revolver under the $133 Million Credit Facility, and we made a $20.0 million repayment of the scrubber tranche under the $495 Million Credit Facility. Additionally, this increase in net cash used in financing activities was due to the $24.0 million drawdown and $11.3 million drawdown on the $133 Million Credit Facility and the $495 Million Credit Facility, respectively, during the first half of 2020. These increases were partially offset by a $5.1 million decrease in the payment of dividends during the first half of 2021 as compared to the first half of 2020.
Capital Expenditures
We make capital expenditures from time to time in connection with vessel acquisitions. As of August 4, 2021, Genco Shipping & Trading Limited’s fleet consists of 17 Capesize, nine Ultramax and 13 Supramax vessels with an aggregate capacity of approximately 4,314,000 dwt and an average age of 10.6 years.
In addition to acquisitions that we may undertake, we will incur additional capital expenditures due to special surveys and drydockings. Furthermore, we plan to upgrade a portion of our fleet with energy saving devices and apply high performance paint systems to our vessels in order to reduce fuel consumption and emissions. We estimate our capital expenditures related to drydocking, including capitalized costs incurred during drydocking related to vessel assets and vessel equipment, ballast water treatment system costs, fuel efficiency upgrades and scheduled off-hire days for our fleet for the balance of 2021 and 2022 to be:
Q3 2021 | Q4 2021 | 2022 | |
Estimated Drydock Costs (1) | $1.5 million | $5.0 million | $8.0 million |
Estimated BWTS Costs (2) | $0.2 million | $2.4 million | $4.0 million |
Estimated Fuel Efficiency Upgrade Costs (3) | $0.2 million | $4.6 million | $4.7 million |
Estimated Offhire Days (4) | 40 | 110 | 210 |
(1) Estimates are based on our budgeted cost of drydocking our vessels in China. Actual costs will vary based on various factors, including where the drydockings are actually performed. We expect to fund these costs with cash on hand. These costs do not include drydock expense items that are reflected in vessel operating expenses. Estimated drydocking costs for 2022 exclude the $0.8 million in relation to the agreed upon sale of the Genco Provence.
(2) Estimated costs associated with the installation of ballast water treatment systems is expected to be funded with cash on hand.
(3) Estimated costs associated with the installation of fuel efficiency upgrades are expected to be funded with cash on hand.
(4) Actual length will vary based on the condition of the vessel, yard schedules and other factors. The estimated offhire days per sector scheduled for Q3 2021 consists of 20 days for Ultramaxes and 20 days for Supramaxes. Estimated offhire days for 2022 exclude days related to the Genco Provence due to the vessel’s agreed upon sale.
Summary Consolidated Financial and Other Data
The following table summarizes Genco Shipping & Trading Limited’s selected consolidated financial and other data for the periods indicated below.
Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | ||||||||||||||||
(Dollars in thousands, except share and per share data) | (Dollars in thousands, except share and per share data) | ||||||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||||
INCOME STATEMENT DATA: | |||||||||||||||||||
Revenues: | |||||||||||||||||||
Voyage revenues | $ | 121,008 | $ | 74,206 | $ | 208,599 | $ | 172,542 | |||||||||||
Total revenues | 121,008 | 74,206 | 208,599 | 172,542 | |||||||||||||||
Operating expenses: | |||||||||||||||||||
Voyage expenses | 36,702 | 41,695 | 71,775 | 90,063 | |||||||||||||||
Vessel operating expenses | 18,789 | 21,058 | 37,834 | 42,871 | |||||||||||||||
Charter hire expenses | 8,325 | 1,432 | 13,761 | 4,507 | |||||||||||||||
General and administrative expenses (inclusive of nonvested stock amortization | 5,854 | 5,471 | 11,957 | 11,238 | |||||||||||||||
expense of $0.6 million, $0.5 million, $1.1 million and $1.0 million , respectively) | |||||||||||||||||||
Technical management fees | 1,305 | 1,724 | 2,769 | 3,578 | |||||||||||||||
Depreciation and amortization | 13,769 | 15,930 | 27,209 | 33,504 | |||||||||||||||
Impairment of vessel assets | – | – | – | 112,814 | |||||||||||||||
Loss on sale of vessels | 15 | – | 735 | 486 | |||||||||||||||
Total operating expenses | 84,759 | 87,310 | 166,040 | 299,061 | |||||||||||||||
Operating income (loss) | 36,249 | (13,104 | ) | 42,559 | (126,519 | ) | |||||||||||||
Other income (expense): | |||||||||||||||||||
Other income (expense) | 210 | 120 | 356 | (464 | ) | ||||||||||||||
Interest income | 48 | 253 | 119 | 847 | |||||||||||||||
Interest expense | (4,470 | ) | (5,473 | ) | (9,012 | ) | (12,418 | ) | |||||||||||
Other expense, net | (4,212 | ) | (5,100 | ) | (8,537 | ) | (12,035 | ) | |||||||||||
Net income (loss) | $ | 32,037 | $ | (18,204 | ) | $ | 34,022 | $ | (138,554 | ) | |||||||||
Net earnings (loss) per share – basic | $ | 0.76 | $ | (0.43 | ) | $ | 0.81 | $ | (3.31 | ) | |||||||||
Net earnings (loss) per share – diluted | $ | 0.75 | $ | (0.43 | ) | $ | 0.80 | $ | (3.31 | ) | |||||||||
Weighted average common shares outstanding – basic | 42,071,019 | 41,900,901 | 42,022,669 | 41,883,629 | |||||||||||||||
Weighted average common shares outstanding – diluted | 42,612,132 | 41,900,901 | 42,445,184 | 41,883,629 | |||||||||||||||
June 30, 2021 | December 31, 2020 | ||||||||||||||||||
BALANCE SHEET DATA (Dollars in thousands): | (unaudited) | ||||||||||||||||||
Assets | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 116,280 | $ | 143,872 | |||||||||||||||
Restricted cash | 44,606 | 35,492 | |||||||||||||||||
Due from charterers, net | 13,912 | 12,991 | |||||||||||||||||
Prepaid expenses and other current assets | 11,057 | 10,856 | |||||||||||||||||
Inventories | 26,441 | 21,583 | |||||||||||||||||
Vessels held for sale | 7,798 | 22,408 | |||||||||||||||||
Total current assets | 220,094 | 247,202 | |||||||||||||||||
Noncurrent assets: | |||||||||||||||||||
Vessels, net of accumulated depreciation of $228,014 and $204,201, respectively | 913,829 | 919,114 | |||||||||||||||||
Deposits on vessels | 21,638 | – | |||||||||||||||||
Vessels held for exchange | – | 38,214 | |||||||||||||||||
Deferred drydock, net | 13,956 | 14,689 | |||||||||||||||||
Fixed assets, net | 5,877 | 6,393 | |||||||||||||||||
Operating lease right-of-use assets | 6,192 | 6,882 | |||||||||||||||||
Restricted cash | 315 | 315 | |||||||||||||||||
Fair value of derivative instruments | 564 | – | |||||||||||||||||
Total noncurrent assets | 962,371 | 985,607 | |||||||||||||||||
Total assets | $ | 1,182,465 | $ | 1,232,809 | |||||||||||||||
Liabilities and Equity | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Accounts payable and accrued expenses | $ | 27,256 | $ | 22,793 | |||||||||||||||
Current portion of long-term debt | 55,920 | 80,642 | |||||||||||||||||
Deferred revenue | 9,375 | 8,421 | |||||||||||||||||
Current operating lease liabilities | 1,811 | 1,765 | |||||||||||||||||
Total current liabilities | 94,362 | 113,621 | |||||||||||||||||
Noncurrent liabilities | |||||||||||||||||||
Long-term operating lease liabilities | 7,144 | 8,061 | |||||||||||||||||
Contract liability | – | 7,200 | |||||||||||||||||
Long-term debt, net of deferred financing costs of $7,418 and $9,653, respectively | 303,687 | 358,933 | |||||||||||||||||
Total noncurrent liabilities | 310,831 | 374,194 | |||||||||||||||||
Total liabilities | 405,193 | 487,815 | |||||||||||||||||
Commitments and contingencies | |||||||||||||||||||
Equity: | |||||||||||||||||||
Common stock | 419 | 418 | |||||||||||||||||
Additional paid-in capital | 1,711,523 | 1,713,406 | |||||||||||||||||
Accumulated other comprehensive income | 138 | – | |||||||||||||||||
Accumulated deficit | (934,808 | ) | (968,830 | ) | |||||||||||||||
Total equity | 777,272 | 744,994 | |||||||||||||||||
Total liabilities and equity | $ | 1,182,465 | $ | 1,232,809 | |||||||||||||||
Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | ||||||||||||||||||
STATEMENT OF CASH FLOWS (Dollars in thousands): | (unaudited) | ||||||||||||||||||
Cash flows from operating activities | |||||||||||||||||||
Net income (loss) | $ | 34,022 | $ | (138,554 | ) | ||||||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||||||||||
Depreciation and amortization | 27,209 | 33,504 | |||||||||||||||||
Amortization of deferred financing costs | 2,235 | 1,909 | |||||||||||||||||
Right-of-use asset amortization | 690 | 676 | |||||||||||||||||
Amortization of nonvested stock compensation expense | 1,073 | 957 | |||||||||||||||||
Impairment of vessel assets | – | 112,814 | |||||||||||||||||
Loss on sale of vessels | 735 | 486 | |||||||||||||||||
Amortization of premium on derivative | 111 | – | |||||||||||||||||
Interest rate cap premium payment | (240 | ) | – | ||||||||||||||||
Insurance proceeds for protection and indemnity claims | 101 | 278 | |||||||||||||||||
Insurance proceeds for loss of hire claims | – | 78 | |||||||||||||||||
Change in assets and liabilities: | |||||||||||||||||||
(Increase) decrease in due from charterers | (921 | ) | 331 | ||||||||||||||||
(Increase) decrease in prepaid expenses and other current assets | (894 | ) | 504 | ||||||||||||||||
(Increase) decrease in inventories | (4,858 | ) | 4,174 | ||||||||||||||||
Increase (decrease) in accounts payable and accrued expenses | 5,028 | (17,454 | ) | ||||||||||||||||
Increase (decrease) in deferred revenue | 954 | (2,259 | ) | ||||||||||||||||
Decrease in operating lease liabilities | (871 | ) | (828 | ) | |||||||||||||||
Deferred drydock costs incurred | (1,822 | ) | (5,593 | ) | |||||||||||||||
Net cash provided by (used in) operating activities | 62,552 | (8,977 | ) | ||||||||||||||||
Cash flows from investing activities | |||||||||||||||||||
Purchase of vessels and ballast water treatment systems, including deposits | (24,678 | ) | (2,275 | ) | |||||||||||||||
Purchase of scrubbers (capitalized in Vessels) | (126 | ) | (10,839 | ) | |||||||||||||||
Purchase of other fixed assets | (431 | ) | (2,716 | ) | |||||||||||||||
Net proceeds from sale of vessels | 29,096 | 14,726 | |||||||||||||||||
Insurance proceeds for hull and machinery claims | 295 | 484 | |||||||||||||||||
Net cash provided by (used in) investing activities | 4,156 | (620 | ) | ||||||||||||||||
Cash flows from financing activities | |||||||||||||||||||
Proceeds from the $133 Million Credit Facility | – | 24,000 | |||||||||||||||||
Repayments on the $133 Million Credit Facility | (24,320 | ) | (3,280 | ) | |||||||||||||||
Proceeds from the $495 Million Credit Facility | – | 11,250 | |||||||||||||||||
Repayments on the $495 Million Credit Facility | (57,883 | ) | (33,321 | ) | |||||||||||||||
Cash dividends paid | (2,983 | ) | (8,126 | ) | |||||||||||||||
Payment of deferred financing costs | – | (283 | ) | ||||||||||||||||
Net cash used in financing activities | (85,186 | ) | (9,760 | ) | |||||||||||||||
Net decrease in cash, cash equivalents and restricted cash | (18,478 | ) | (19,357 | ) | |||||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | 179,679 | 162,249 | |||||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | 161,201 | $ | 142,892 | |||||||||||||||
Three Months Ended June 30, 2021 | |||||||||||||||||||
Adjusted Net Income Reconciliation | (unaudited) | ||||||||||||||||||
Net income | $ | 32,037 | |||||||||||||||||
+ | Loss on sale of vessels | 15 | |||||||||||||||||
Adjusted net income | $ | 32,052 | |||||||||||||||||
Adjusted net earnings per share – basic | $ | 0.76 | |||||||||||||||||
Adjusted net earnings per share – diluted | $ | 0.75 | |||||||||||||||||
Weighted average common shares outstanding – basic | 42,071,019 | ||||||||||||||||||
Weighted average common shares outstanding – diluted | 42,612,132 | ||||||||||||||||||
Weighted average common shares outstanding – basic as per financial statements | 42,071,019 | ||||||||||||||||||
Dilutive effect of stock options | 340,072 | ||||||||||||||||||
Dilutive effect of restricted stock units | 201,041 | ||||||||||||||||||
Weighted average common shares outstanding – diluted as adjusted | 42,612,132 | ||||||||||||||||||
Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | ||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||
EBITDA Reconciliation: | (unaudited) | (unaudited) | |||||||||||||||||
Net income (loss) | $ | 32,037 | $ | (18,204 | ) | $ | 34,022 | $ | (138,554 | ) | |||||||||
+ | Net interest expense | 4,422 | 5,220 | 8,893 | 11,571 | ||||||||||||||
+ | Depreciation and amortization | 13,769 | 15,930 | 27,209 | 33,504 | ||||||||||||||
EBITDA(1) | $ | 50,228 | $ | 2,946 | $ | 70,124 | $ | (93,479 | ) | ||||||||||
+ | Impairment of vessel assets | – | – | – | 112,814 | ||||||||||||||
+ | Loss on sale of vessels | 15 | – | 735 | 486 | ||||||||||||||
Adjusted EBITDA | $ | 50,243 | $ | 2,946 | $ | 70,859 | $ | 19,821 | |||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | ||||||||||||||||
FLEET DATA: | (unaudited) | (unaudited) | |||||||||||||||||
Total number of vessels at end of period | 40 | 53 | 40 | 53 | |||||||||||||||
Average number of vessels (2) | 40.1 | 53.0 | 41.7 | 53.7 | |||||||||||||||
Total ownership days for fleet (3) | 3,647 | 4,823 | 7,544 | 9,765 | |||||||||||||||
Total chartered-in days (4) | 446 | 248 | 787 | 671 | |||||||||||||||
Total available days for fleet (5) | 4,041 | 4,892 | 8,242 | 10,121 | |||||||||||||||
Total available days for owned fleet (6) | 3,595 | 4,643 | 7,455 | 9,450 | |||||||||||||||
Total operating days for fleet (7) | 3,998 | 4,827 | 8,120 | 9,951 | |||||||||||||||
Fleet utilization (8) | 98.3 | % | 97.8 | % | 98.1 | % | 97.8 | % | |||||||||||
AVERAGE DAILY RESULTS: | |||||||||||||||||||
Time charter equivalent (9) | $ | 21,137 | $ | 6,693 | $ | 16,508 | $ | 8,251 | |||||||||||
Daily vessel operating expenses per vessel (10) | 5,151 | 4,366 | 5,015 | 4,390 | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | ||||||||||||||||
FLEET DATA: | (unaudited) | (unaudited) | |||||||||||||||||
Ownership days | |||||||||||||||||||
Capesize | 1,547.0 | 1,547.0 | 3,077.0 | 3,094.0 | |||||||||||||||
Panamax | – | – | – | 64.8 | |||||||||||||||
Ultramax | 819.0 | 546.0 | 1,550.8 | 1,092.0 | |||||||||||||||
Supramax | 1,281.5 | 1,820.0 | 2,689.2 | 3,640.0 | |||||||||||||||
Handymax | – | – | – | – | |||||||||||||||
Handysize | – | 910.0 | 227.5 | 1,874.7 | |||||||||||||||
Total | 3,647.5 | 4,823.0 | 7,544.5 | 9,765.5 | |||||||||||||||
Chartered-in days | |||||||||||||||||||
Capesize | – | – | – | – | |||||||||||||||
Panamax | – | – | – | – | |||||||||||||||
Ultramax | 111.7 | 114.2 | 344.2 | 292.5 | |||||||||||||||
Supramax | 334.2 | 98.7 | 442.5 | 302.8 | |||||||||||||||
Handymax | – | – | – | 14.5 | |||||||||||||||
Handysize | – | 35.6 | – | 60.7 | |||||||||||||||
Total | 445.9 | 248.5 | 786.7 | 670.6 | |||||||||||||||
Available days (owned & chartered-in fleet) | |||||||||||||||||||
Capesize | 1,514.4 | 1,530.1 | 3,020.0 | 3,058.4 | |||||||||||||||
Panamax | – | – | – | 64.4 | |||||||||||||||
Ultramax | 930.7 | 637.2 | 1,886.4 | 1,305.6 | |||||||||||||||
Supramax | 1,595.6 | 1,782.0 | 3,107.7 | 3,753.0 | |||||||||||||||
Handymax | – | – | – | 14.5 | |||||||||||||||
Handysize | – | 942.5 | 227.5 | 1,924.6 | |||||||||||||||
Total | 4,040.7 | 4,891.8 | 8,241.6 | 10,120.5 | |||||||||||||||
Available days (owned fleet) | |||||||||||||||||||
Capesize | 1,514.4 | 1,530.1 | 3,020.0 | 3,058.4 | |||||||||||||||
Panamax | – | – | – | 64.4 | |||||||||||||||
Ultramax | 819.0 | 523.0 | 1,542.2 | 1,013.1 | |||||||||||||||
Supramax | 1,261.4 | 1,683.3 | 2,665.2 | 3,450.2 | |||||||||||||||
Handymax | – | – | – | – | |||||||||||||||
Handysize | – | 906.9 | 227.5 | 1,863.9 | |||||||||||||||
Total | 3,594.8 | 4,643.3 | 7,454.9 | 9,450.0 | |||||||||||||||
Operating days | |||||||||||||||||||
Capesize | 1,505.6 | 1,529.6 | 3,004.8 | 3,057.8 | |||||||||||||||
Panamax | – | – | – | 60.1 | |||||||||||||||
Ultramax | 923.3 | 635.6 | 1,874.0 | 1,303.3 | |||||||||||||||
Supramax | 1,568.6 | 1,765.2 | 3,050.3 | 3,707.8 | |||||||||||||||
Handymax | – | – | – | 14.5 | |||||||||||||||
Handysize | – | 896.7 | 191.3 | 1,807.1 | |||||||||||||||
Total | 3,997.5 | 4,827.1 | 8,120.4 | 9,950.6 | |||||||||||||||
Fleet utilization | |||||||||||||||||||
Capesize | 99.1 | % | 98.9 | % | 99.3 | % | 99.4 | % | |||||||||||
Panamax | – | – | – | 92.7 | % | ||||||||||||||
Ultramax | 99.2 | % | 99.7 | % | 98.9 | % | 99.8 | % | |||||||||||
Supramax | 97.1 | % | 97.7 | % | 97.4 | % | 98.1 | % | |||||||||||
Handymax | – | – | – | 100.0 | % | ||||||||||||||
Handysize | – | 94.8 | % | 84.1 | % | 93.4 | % | ||||||||||||
Fleet average | 98.3 | % | 97.8 | % | 98.1 | % | 97.8 | % | |||||||||||
Average Daily Results: | |||||||||||||||||||
Time Charter Equivalent | |||||||||||||||||||
Capesize | $ | 23,760 | $ | 9,466 | $ | 18,692 | $ | 13,062 | |||||||||||
Panamax | – | – | – | 5,256 | |||||||||||||||
Ultramax | 19,524 | 7,848 | 15,331 | 7,973 | |||||||||||||||
Supramax | 19,027 | 5,301 | 15,480 | 5,911 | |||||||||||||||
Handymax | – | – | – | – | |||||||||||||||
Handysize | – | 3,952 | 8,008 | 4,867 | |||||||||||||||
Fleet average | 21,137 | 6,693 | 16,508 | 8,251 | |||||||||||||||
Daily vessel operating expenses | |||||||||||||||||||
Capesize | $ | 5,461 | $ | 5,049 | $ | 5,335 | $ | 4,968 | |||||||||||
Panamax | – | – | – | 3,338 | |||||||||||||||
Ultramax | 4,684 | 3,829 | 4,820 | 4,233 | |||||||||||||||
Supramax | 4,966 | 4,190 | 4,714 | 4,200 | |||||||||||||||
Handymax | – | – | – | – | |||||||||||||||
Handysize | – | 3,864 | 5,541 | 3,874 | |||||||||||||||
Fleet average | 5,151 | 4,366 | 5,015 | 4,390 | |||||||||||||||
1) EBITDA represents net income (loss) plus net interest expense, taxes, and depreciation and amortization. EBITDA is included because it is used by management and certain investors as a measure of operating performance. EBITDA is used by analysts in the shipping industry as a common performance measure to compare results across peers. Our management uses EBITDA as a performance measure in consolidating internal financial statements and it is presented for review at our board meetings. We believe that EBITDA is useful to investors as the shipping industry is capital intensive which often results in significant depreciation and cost of financing. EBITDA presents investors with a measure in addition to net income to evaluate our performance prior to these costs. EBITDA is not an item recognized by U.S. GAAP (i.e. non-GAAP measure) and should not be considered as an alternative to net income, operating income or any other indicator of a company’s operating performance required by U.S. GAAP. EBITDA is not a measure of liquidity or cash flows as shown in our consolidated statement of cash flows. The definition of EBITDA used here may not be comparable to that used by other companies.
2) Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was part of our fleet during the period divided by the number of calendar days in that period.
3) 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.
4) We define chartered-in days as the aggregate number of days in a period during which we chartered-in third-party vessels.
5) We define available days as the number of our ownership days and chartered-in days less the aggregate number of days that our vessels are off-hire due to familiarization upon acquisition, repairs or repairs under guarantee, vessel upgrades or special surveys. 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.
6) We define available days for the owned fleet as available days less chartered-in days.
7) We define operating days as the number of our total available days in a period less the aggregate number of days that the 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.
8) We calculate fleet utilization as the number of our operating days during a period divided by the number of ownership days plus chartered-in days less drydocking days.
9) We define TCE rates as our voyage revenues less voyage expenses and charter hire expenses, divided by the number of the available days of our owned fleet during the period. 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. Our estimated TCE for the third quarter of 2021 is based on fixtures booked to date. Actual results may vary based on the actual duration of voyages and other factors. Accordingly, we are unable to provide, without unreasonable efforts, a reconciliation of estimated TCE for the third quarter to the most comparable financial measures presented in accordance with GAAP.
Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | ||||||||||||||||
Total Fleet | (unaudited) | (unaudited) | |||||||||||||||||
Voyage revenues (in thousands) | $ | 121,008 | $ | 74,206 | $ | 208,599 | $ | 172,542 | |||||||||||
Voyage expenses (in thousands) | 36,702 | 41,695 | 71,775 | 90,063 | |||||||||||||||
Charter hire expenses (in thousands) | 8,325 | 1,432 | 13,761 | 4,507 | |||||||||||||||
75,981 | 31,079 | 123,063 | 77,972 | ||||||||||||||||
Total available days for owned fleet | 3,595 | 4,643 | 7,455 | 9,450 | |||||||||||||||
Total TCE rate | $ | 21,137 | $ | 6,693 | $ | 16,508 | $ | 8,251 | |||||||||||
10) We define daily vessel operating expenses to 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. Daily vessel operating expenses are calculated by dividing vessel operating expenses by ownership days for the relevant period.