Genco Shipping & Trading Limited
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Genco Shipping & Trading Limited 2019 Annual Report 2019 Financial & Corporate Information Selected Consolidated Financial and Other Data ................................................................................................................. 1 Management’s Discussion and Analysis of Financial Condition and Results of Operations ............................................... 3 Quantitative and Qualitative Disclosures about Market Risk ............................................................................................ 27 Consolidated Balance Sheets ............................................................................................................................................. 28 Consolidated Statements of Operations ............................................................................................................................. 29 Consolidated Statements of Comprehensive Loss ............................................................................................................. 30 Consolidated Statements of Equity .................................................................................................................................... 31 Consolidated Statements of Cash Flows ............................................................................................................................ 32 Notes to Consolidated Financial Statements ...................................................................................................................... 34 Management Report on Internal Control over Financial Reporting ................................................................................... 72 Reports of Independent Registered Public Accounting Firm ............................................................................................. 73 Market Information, Holders and Dividends ..................................................................................................................... 75 The contents of this 2019 Annual Report have been excerpted from our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 27, 2020 (the “Form 10-K”). Such contents speak only as of the date of the Form 10-K. For updated information, please refer to our subsequent filings with the SEC, including our reports on Form 10-Q and Form 8-K. [This page intentionally left blank] SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA For the Years Ended December 31, 2019 2018 2017 2016 2015 Income Statement Data: (U.S. dollars in thousands except for share and per share amounts) Revenues: Voyage revenues $ 389,496 $ 367,522 $ 209,698 $ 133,246 $ 150,784 Service revenues — — — 2,340 3,175 Total revenues $ 389,496 $ 367,522 $ 209,698 $ 135,586 $ 153,959 Operating Expenses: Voyage expenses 173,043 114,855 25,321 13,227 20,257 Vessel operating expenses 96,209 97,427 98,086 113,636 122,008 Charter hire expenses 16,179 1,534 — — — General and administrative expenses (inclusive of nonvested stock amortization expense of $2,057, $2,231, $4,053, $20,680 and $42,136, respectively) (3) 24,516 23,141 22,190 45,174 74,941 Technical management fees (3) 7,567 8,000 7,659 8,932 8,961 Depreciation and amortization 72,824 68,976 71,776 76,330 79,556 Other operating income — — — (960) — Impairment of vessel assets 27,393 56,586 21,993 69,278 39,893 Loss (gain) on sale of vessels 168 (3,513) (7,712) (3,555) 1,210 Total operating expenses 417,899 367,006 239,313 322,062 346,826 Operating (loss) income (28,403) 516 (29,615) (186,476) (192,867) Other expense (27,582) (33,456) (29,110) (30,300) (58,595) Loss before reorganization items, net (55,985) (32,940) (58,725) (216,776) (251,462) Reorganization items, net — — — (272) (1,085) Net loss before income taxes (55,985) (32,940) (58,725) (217,048) (252,547) Income tax expense — — — (709) (1,821) Net loss (55,985) (32,940) (58,725) (217,757) (254,368) Less: Net loss attributable to noncontrolling interest — — — — (59,471) Net loss attributable to Genco Shipping & Trading Limited $ (55,985) $ (32,940) $ (58,725) $ (217,757) $ (194,897) Net loss per share - basic (1) $ (1.34) $ (0.86) $ (1.71) $ (30.03) $ (29.61) Net loss per share - diluted (1) $ (1.34) $ (0.86) $ (1.71) $ (30.03) $ (29.61) Weighted average common shares outstanding - Basic (1) 41,762,893 38,382,599 34,242,631 7,251,231 6,583,163 Weighted average common shares outstanding - Diluted (1) 41,762,893 38,382,599 34,242,631 7,251,231 6,583,163 For the Years Ended December 31, 2019 2018 2017 2016 2015 Balance Sheet Data: (U.S. dollars in thousands, at end of period) Cash, including restricted cash $ 162,249 $ 202,761 $ 204,946 $ 169,068 140,889 Total assets (2) 1,528,892 1,627,470 1,520,959 1,568,960 1,714,663 Total debt (current and long-term, including notes payable, net of deferred financing costs) (2) 482,730 535,148 515,392 513,020 579,023 Total equity 978,428 1,053,307 975,027 1,029,699 1,105,966 Other Data: (U.S. dollars in thousands) Net cash provided by (used in) operating activities (6) $ 59,526 $ 65,907 $ 24,071 $ (52,307) (57,500) Net cash (used in) provided by investing activities (5) (6) (22,849) (195,375) 17,405 25,051 (65,240) Net cash (used in) provided by financing activities (77,189) 127,283 (5,598) 55,435 150,520 EBITDA (4) $ 44,699 $ 65,326 $ 41,997 $ (112,469) (93,598) 1 (1) On July 7, 2016, we completed a one-for-ten reverse stock split with no change in par value per share. The authorized shares of the common stock were not adjusted. All common share and per share amounts of the Company prior to July 7, 2016 have retroactively adjusted to reflect the reverse stock split. (2) In the first quarter of 2016, the Company adopted Accounting Standards Update (“ASU”) 2015-03 where certain deferred financing costs that were previously presented as a non-current asset were reclassified from non-current assets to a reduction of current and long-term debt. (3) During the year ended December 31, 2016, we opted to break out expenses previously classified as General, administrative and management fees into two separate categories to provide a greater level of detail of the underlying expenses. These fees were broken out into General and administrative expenses and Technical management fees. This change was made retrospectively for comparability purposes and there was no effect on the Net Loss for the years ended December 31, 2019, 2018, 2017, 2016 and 2015. (4) EBITDA represents net loss attributable to Genco Shipping & Trading Limited 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 our consolidated 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 Statements of Cash Flows. The definition of EBITDA used here may not be comparable to that used by other companies. The following table demonstrates our calculation of EBITDA and provides a reconciliation of EBITDA to net loss attributable to Genco Shipping & Trading Limited for each of the periods presented above: For the Years Ended December 31, 2019 2018 2017 2016 2015 Net loss attributable to Genco Shipping & Trading Limited $ (55,985) $ (32,940) $ (58,725) $ (217,757) $ (194,897) Net interest expense 27,860 29,290 28,946 28,249 19,922 Income tax expense — — — 709 1,821 Depreciation and amortization 72,824 68,976 71,776 76,330 79,556 EBITDA (4) $ 44,699 $ 65,326 $ 41,997 $ (112,469) $ (93,598) (5) In the first quarter of 2017, the Company adopted ASU 2016-18, which requires the Company to show the changes in the total cash, cash equivalents and restricted cash in the statement of cash flows. Changes in restricted cash were previously recorded as an investing cash inflow or outflow. The adoption of ASU 2016-18 resulted in a change in net cash (used in) provided by investing activities of $15.9 million and ($9.9) million during the years ended December 31, 2016 and December 31, 2015, respectively. (6) In the first quarter of 2018, the Company adopted ASU 2016-15, which resulted in insurance proceeds for protection and indemnity claims and loss of hire claims to be separately disclosed in the cash flows from operating activities and resulted in insurance proceeds for hull and machinery claims to be separately disclosed in the cash flows from investing activities. Additionally, as part of ASU 2016-15, any cash payments for debt prepayment or debt extinguishment costs (including third party costs, premiums paid and other fees paid to lenders) must be classified as cash outflows for financing activities. Lastly, for any debt instruments that contain interest payable in-kind, any cash payments attributable to the payment of in-kind interest will be classified as cash