Time-Charters at Favorable Rates Contribute to Strong Results
Closes $450 Million Credit Facility; Positions Company for Future Growth
NEW YORK, NY--(MARKET WIRE)--Aug 17, 2005 -- Genco Shipping and Trading Limited (NasdaqNM:GSTL - ) today reported its financial results for the three months and six months ended June 30, 2005.
The following financial review presents the results for the three months and six months ended June 30, 2005 and for the three months ended March 31, 2005. Since the Company began operations on December 6, 2004, comparable historical data for the three months and six months ended June 30, 2005 is unavailable.
Year to Date Highlights
- Net income was $15.6 million for the three months ended June 30, 2005 and $27.0 million for the six months ended June 30, 2005.
- We took delivery of the Genco Prosperity and the Genco Trader, increasing fleet to 16 vessels with carrying capacity of approximately 790,000 dwt.
- We completed a $247 million Initial Public Offering on July 22, 2005.
- We entered into a new $450 million credit facility, providing an undrawn capacity of $344 million to fund future acquisitions in July 2005.
Financial Review: 2005 Second Quarter
The Company had net income of $15.6 million, or $1.16 earnings per share and $0.62 pro forma earnings per share for the three months ended June 30, 2005. Pro forma earnings per share gives effect to the additional shares issued and sold in connection to the Company's initial public offering as described in note (1) of the "Summary Consolidated Financial and Other Data." Comparatively, for the three months ended March 31, 2005 net income was $11.4 million, or $0.84 earnings per share and $0.45 pro forma earnings per share. The increase in net income was primarily attributable to the delivery of the final two vessels under our original fleet purchase agreement and a full quarter of operations for the eight vessels delivered during the quarter ended March 31, 2005.
Robert Gerald Buchanan, President, commented, "During the first half of 2005, Genco achieved significant milestones that position the Company well for the future. Among our accomplishments, we completed the acquisition and integration of 16 modern drybulk vessels. We also signed the majority of our vessels on time charters, with rates above the current environment. Finally, we completed a successful $247 million initial public offering in July of 2005. Genco intends to draw upon its modern fleet and strong industry relationships to take advantage of the favorable long-term supply and demand imbalance for drybulk ships. At the same time, we will focus on making accretive acquisitions aimed at consolidating a fragmented industry and solidifying Genco's leadership position."
Operating income increased to $19.4 million for the three months ended June 30, 2005 compared to $13.9 million for the three months ended March 31, 2005. EBITDA for the three months ended June 30, 2005 was $25.1 million compared to $17.9 million for the period ended March 31, 2005 (please see "Summary Consolidated Financial and Other Data" for a reconciliation of net income to EBITDA).
The average daily time charter equivalent, or TCE, rates obtained by the Company's fleet increased by 3.6% to $21,648 per day for the three months ended June 30, 2005 compared to $20,904 for the three months ended March 31, 2005.
Total operating expenses increased to $11.5 million for the three months ended June 30, 2005 from $7.5 million for the three-month period ended March 31, 2005, as a result of operating a larger fleet. Vessel operating expenses were $3.4 million for the three months ended June 30, 2005 compared to $2.0 million for the three-month period ended March 31, 2005. General and administrative costs increased to $0.9 million from $0.3 million during the comparative periods due to the expansion of our fleet. Management fees for the three months ended June 30, 2005 increased to $0.5 million compared to $0.3 million for the three months ended March 31, 2005, primarily due to a full quarter of operations for the eight vessels delivered during the quarter ended March 31, 2005.
Daily vessel operating expenses rose to $2,465 per vessel day during the second quarter of 2005 from $2,042 for the previous quarter this year. This increase is primarily due to two factors. First, the Genco Trader, a Panamax vessel that we received delivery of during the second quarter, has higher operating costs than Handymax and Handysize vessels, due to the larger size of the vessel. Second, the longer operating period for the fourteen vessels delivered through March 31, 2005.
Financial Review: Six Months Ended June 30, 2005
Net income was $27.0 million or $2.00 earnings per share and $1.07 pro forma earnings per share (see note (1) of the "Summary Consolidated Financial and Other Data") for the six months ended June 30, 2005. Voyage revenues were $52.3 million and EBITDA was $43.0 million for the six months ended June 30, 2005. TCE rates obtained by the Company's fleet for the six months ended June 30, 2005 were $21,339 per day.
Daily direct vessel operating expenses for the six months ended June 30, 2005 were $2,289.
Liquidity and Capital Resources
Cash Flow
Net cash provided by operating activities for the six-month period ended June 30, 2005 was $38.5 million. Net cash from operating activities was primarily a result of recorded net income of $27.0 million and depreciation charges of $9.7 million. Net cash used in investing activities was $232.5 million and related solely to the acquisition of ten additional vessels during 2005. Net cash provided by financing activities was $212.8 million and consisted primarily of $231.2 million in proceeds from our original credit facility and a further equity contribution of $2.7 million used to finance the acquisition of ten additional vessels. These events were off-set by a scheduled $20.6 million debt payment under our original credit facility on June 1, 2005.
Capital Expenditures
We make capital expenditures from time to time in connection with vessel acquisitions. Our recent vessel acquisitions consist of our fleet of five Panamax drybulk carriers, six Handymax drybulk carriers and five Handysize drybulk carriers.
In addition to acquisitions that we may undertake in future periods, we will incur additional capital expenditures due to special surveys and drydockings for our fleet. Upon the delivery of the Genco Trader, in June 2005, the Company incurred a deferred drydocking cost associated with the preparation of the vessel for its initial charter. We estimate our drydocking costs for our fleet through 2007 to be:
2005 2006 2007
Q3 Q4
---------- ---------- ---------- ----------
Estimated Costs $ 280,000 $ - $1,710,000 $2,130,000
Estimated Offhire Days (1) 20 0 140 160
(1) Estimated at 20 days per drydocking per vessel
Summary Consolidated Financial and Other Data
The following table summarizes Genco Shipping and Trading Limited's selected consolidated financial and other data for the periods indicated below.
Three Months Ended Six Months Ended
June 30, 2005 June 30, 2005
------------- -------------
(Dollars in thousands,
except share data)
(unaudited)
INCOME STATEMENT DATA:
Revenues $ 30,950 $ 52,349
Operating expenses:
Voyage expenses 1,020 1,910
Vessel operating expenses 3,417 5,432
General and administrative expenses 933 1,193
Management fees 478 809
Depreciation 5,670 9,651
--------- ---------
Total operating expenses 11,518 18,995
--------- ---------
Operating income 19,432 33,354
--------- ---------
Interest income (expense):
Interest income 183 266
Interest expense (3,998) (6,618)
--------- ---------
Net interest expense $ (3,815) $ (6,352)
--------- ---------
Net income 15,617 27,002
========= =========
Earnings per share $ 1.16 $ 2.00
========= =========
Weighted average shares
outstanding, thousands 13,500 13,500
========= =========
Proforma earnings per share (1) $ 0.62 $ 1.07
========= =========
Proforma weighted average shares
outstanding, thousands (1) 25,260 25,260
========= =========
June 2005 December 2004
BALANCE SHEET DATA: --------- -------------
(unaudited)
Cash $ 26,222 $ 7,431
Current assets, including cash 28,951 8,529
Total assets 445,166 201,628
Current liabilities, including
current portion of long-term debt 84,346 24,048
Current portion of long-term debt 82,500 23,203
Total long-term debt,
including current portion 336,375 125,766
Shareholders' equity 103,081 73,374
Six Months Ended June 30, 2005
------------------------------
(unaudited)
Net cash provided by operating activities $ 38,470
Net cash (used) by investing activities (232,479)
Net cash provided by financing activities 212,800
EBITDA (2) 43,005
Three Months Ended Six Months Ended
June 30, 2005 June 30, 2005
------------- -------------
FLEET DATA:
Total number of vessels at end of period 16 16
Average number of vessels (3) 15.4 13.1
Total ownership days for fleet (4) 1,386 2,373
Total available days for fleet (5) 1,383 2,364
Total operating days for fleet (6) 1,372 2,346
Fleet utilization (7) 99.2% 99.2%
AVERAGE DAILY RESULTS:
Time charter equivalent (8) $ 21,648 $ 21,339
Daily vessel operating expenses
per vessel (9) 2,465 2,289
Three Months Ended Six Months Ended
June 30, 2005 June 30, 2005
------------- -------------
(Dollars in thousands)
EBITDA Reconciliation:
Net Income $ 15,617 $ 27,002
+ Net interest expense 3,815 6,352
+ Depreciation 5,670 9,651
EBITDA 25,102 43,005
(1) For purposes of this pro forma calculation 25,260,000 shares of common
stock have been considered issued and outstanding.
(2) EBITDA represents net income plus net interest expense, income tax
expense, 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
monthly internal financial statements and it is presented for review at
our board meetings. EBITDA is also used by our lenders in certain loan
covenants. For these reasons, we believe that EBITDA is a useful
measure to present to our investors. EBITDA is not an item recognized
by U.S. GAAP 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 source 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.
(3) Average number of vessels is the number of vessels that constituted our
fleet for the relevant period, as a 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.
(4) 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.
(5) 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.
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 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.
(7) 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.
(8) We define TCE rates as our revenues (net of voyage expenses) 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.
(9) 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.
Genco Shipping and Trading Limited's Fleet
As of June 30, 2005, Genco Shipping and Trading Limited's fleet consisted of five Panamax, six Handymax and five Handysize drybulk carriers, with a total carrying capacity of approximately 790,000 deadweight tons, or dwt. The average age of the Company's fleet as of June 30, 2005 was 8.3 years.
Fourteen of the sixteen vessels in our fleet are on long-term time charters with an average remaining life of 1.4 years as of June 30, 2005.
2005
Vessel Vessel Expiration Current Time
Type Date (1) Charter Rates (2)
-- --------------- --------- --------------- -----------------
1 Genco Beauty Panamax February 2007 $29,000
2 Genco Knight Panamax January 2007 $29,000
3 Genco Leader Panamax - Spot
4 Genco Trader Panamax - Spot
5 Genco Vigour Panamax December 2006 $29,000
6 Genco Explorer Handysize August 2006 $17,250
7 Genco Glory Handysize December 2006 $18,250
8 Genco Pioneer Handysize September 2006 $17,250
9 Genco Progress Handysize September 2006 $17,250
10 Genco Reliance Handysize August 2006 $17,250
11 Genco Sugar Handysize August 2006 $17,250
12 Genco Carrier Handymax December 2006 $24,000
13 Genco Marine Handymax March 2007 $26,000 (3)
14 Genco Prosperity Handymax March 2007 $23,000
15 Genco Success Handymax January 2007 $23,850
16 Genco Wisdom Handymax January 2007 $24,000
(1) The dates presented on this table represent the earliest dates
that our charters may be terminated. Except with respect to the
Genco Trader and Genco Leader charters, under the terms of the
contracts, charterers are entitled to extend time charters from
two to four months in order to complete the vessel's final
voyage plus any time the vessel has been off-hire.
(2) Time charter rates presented are the gross daily charterhire
rates before the payments of brokerage commissions ranging
from 1.25% to 5% to unaffiliated third parties. In a time
charter, the charterer is responsible for voyage expenses
such as bunkers, port expenses, agents' fees and canal dues.
(3) The time charter rate is $26,000 until March 2006 and $18,000
thereafter.
New Credit Facility
On July 29, 2005, subsequent to the initial public offering, the Company entered into a new credit facility dated July 15, 2005. The new credit facility is with a syndicate of commercial lenders consisting of Nordea Bank Finland Plc, New York Branch, DnB NOR Bank ASA, New York Branch and Citigroup Global Markets Limited. The credit facility has been used to refinance our indebtedness, and will be used in the future to acquire additional vessels and for working capital requirements. Under the terms of our new credit facility, borrowings in the amount of $106.2 million were used to repay indebtedness under our original credit facility. After our initial borrowings under the new credit facility, $343.8 million remains available to fund future vessel acquisitions, and we may borrow up to $20.0 million of the $343.8 million for working capital purposes.
Interest on the amounts drawn is payable at the rate of 0.95% per annum over LIBOR until the fifth anniversary of the closing of
the new credit
facility and 1.00% per annum over LIBOR thereafter. We are
also obligated
to pay a commitment fee equal to 0.375% per annum on any
undrawn amounts
available under the facility.
The new credit facility has a term of ten years. The facility
permits
borrowings up to 65% of the value of the vessels that secure
our
obligations under the new credit facility up to the facility
limit,
provided that conditions to drawdown are satisfied. The
facility limit is
$450 million for a period of six years. Thereafter, the
facility limit is
reduced by an amount equal to 8.125% of the total commitment,
semi-annually
over a period of four years and is reduced to $0 on the
tenth anniversary.
John C. Wobensmith, Chief Financial Officer, commented,
"We are pleased to
have entered into this $450 million facility and appreciate
the support we
received from leading financial institutions. The favorable
terms of the
facility provide an advantage for Genco as the Company seeks
to further
expand its fleet size and earnings. Drawing upon our significant
financial
flexibility, we will actively pursue accretive opportunities
that meet
strict financial criteria and create long-term shareholder
value. We are
also positioned to create value through our dividend policy.
Based on our
operations for the third quarter, we expect to declare a
$0.54 dividend by
November 2005."
Dividend Policy
Our dividend policy is to declare quarterly distributions
to shareholders
by each February, May, August and November commencing in
November, 2005,
substantially equal to our available cash from operations
during the
previous quarter, less cash expenses for that quarter (principally
vessel
operating expenses and debt service) and any reserves our
board of
directors determines we should maintain. These reserves
may cover, among
other things, drydocking, repairs, claims, liabilities and
other
obligations, interest expense and debt amortization, acquisitions
of
additional assets and working capital. While we cannot assure
you that we
will do so, and subject to the limitations set forth below,
we expect to
declare a dividend per share of $0.54 by November 2005 (based
on our actual
results of operations for the third quarter of 2005).
The declaration and payment of any dividend will be subject
to the
discretion of our board of directors. The timing and amount
of dividend
payments will depend on our earnings, financial condition,
cash
requirements and availability, fleet renewal and expansion,
restrictions in
our loan agreements, the provisions of Marshall Islands
law affecting the
payment of distributions to shareholders and other factors.
Our board of
directors may review and amend our dividend policy from
time to time in
light of our plans for future growth and other factors.
Election of New Board Member
The Company also announced today that Harry A. Perrin has
been elected to
the Company's Board of Directors. Mr. Perrin will serve
as Chairman of the
Audit Committee.
Peter C. Georgiopoulos, Chairman of the Board, stated, "We
are delighted to
welcome Harry to the Board. Harry brings a broad range of
experience in
accounting, finance and strategic planning."
Mr. Perrin is currently the co-head of the Restructuring
Business of Petrie
Parkman & Co., Inc. Prior to joining Petrie Parkman
in 2001, Mr. Perrin
was a partner for ten years in the business finance and
restructuring group
of the Houston office of the law firm of Weil Gotshal &
Manges. Mr. Perrin
is a Certified Public Accountant. He holds a Bachelor of
Business
Administration in Accounting from the University of Texas
and a J.D. from
the University of Houston. Prior to attending law school,
Mr. Perrin
worked in the audit department of the Dallas office of Touche
Ross & Co.
About Genco Shipping and Trading Limited
Genco Shipping and Trading Limited transports iron ore,
coal, grain, steel
products and other drybulk cargoes along worldwide shipping
routes. Genco
Shipping and Trading Limited currently owns a fleet of 16
drybulk carriers,
consisting of five Panamax, six Handymax and five Handysize
vessels, with a
carrying capacity of approximately 790,000 dwt.
Conference Call Announcement
Genco Shipping and Trading Limited announced that it will
hold a conference
call on August 18, 2005 at 8:30 a.m. Eastern Time to discuss
its 2005
second quarter financial results. The conference call and
a presentation
will be simultaneously webcast and will be available on
the Company's
website, www.GencoShipping.com.
To access the conference call, dial (866)
770-7146 and enter passcode 96910853. A replay of the conference
call can
also be accessed until August 31, 2005, by dialing (888)
286-8010 and
entering the passcode 71424578. The Company intends to place
additional
materials related to the earnings announcement, including
a slide
presentation, on its website prior to the conference call.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995
This press release contains forward-looking statements made
pursuant to the
safe harbor provisions of the Private Securities Litigation
Reform Act of
1995. These forward-looking statements are based on management's
current
expectations and observations. Included among the factors
that, in our
view, could cause actual results to differ materially from
the
forward-looking statements contained in this report are
the following: (i)
changes in demand or rates in the drybulk shipping industry;
(ii) changes
in the supply of or demand for drybulk products, generally
or in particular
regions; (iii) changes in the supply of drybulk carriers
including
newbuilding of vessels or lower than anticipated scrapping
of older
vessels; (iv) changes in rules and regulations applicable
to the cargo
industry, including, without limitation, legislation adopted
by
international organizations or by individual countries and
actions taken by
regulatory authorities; (v) increases in costs and expenses
including but
not limited to: crew wages, insurance, provisions, repairs,
maintenance and
general and administrative expenses; (vi) the adequacy of
our insurance
arrangements; (vii) changes in general domestic and international
political
conditions; (viii) changes in the condition of the Company's
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; and other factors
listed from time
to time in our public filings with the Securities and Exchange
Commission
including, without limitation, the Registration Statement
on Form S-1, as
amended, for our initial public offering (See Registration
Statement No.
333-124718). Our ability to pay dividends in any period
will depend upon
factors including the limitations under our loan agreements,
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.