Thursday, February 26, 2009
Genco Shipping & Trading Limited Announces Fourth Quarter 2008 Financial Results
Thursday, 26 February 2009
Genco Shipping & Trading Limited yesterday reported its financial results for the three and twelve months ended December 31, 2008. The following financial review discusses the results for the three and twelve months ended December 31, 2008 and December 31, 2007. Fourth Quarter 2008 and Year-to-Date Highlights • Excluding a $159.7 million loss for unusual events as described in the financial review section below, recorded net income of $48.4 million, or $1.55 basic and diluted earnings per share for the fourth quarter;
• Recorded a net loss of $111.3 million, or $3.56 basic and diluted loss per share for the fourth quarter;
• Amended the $1.4 billion revolving credit facility to waive the collateral maintenance requirement until such time that Genco is in a position to satisfy the covenant and other conditions previously announced;
• Took delivery of the Genco Hadrian and delivered the vessel to Cargill International S.A. for the commencement of a 4 year time charter contract at $65,000 per day with a 50 percent index-based profit sharing component; and
• Negotiated the cancellation of the previously announced acquisition of six drybulk newbuilding vessels with an aggregate purchase price of $530 million and repaid $53 million in related debt.
Financial Review: 2008 Fourth quarter
Excluding the $159.7 million loss from unusual events, the Company recorded net income of $48.4 million, or $1.55 basic and diluted earnings per share for the three months ended December 31, 2008. Specifically, the Company deemed its investment in Jinhui Shipping and Transportation Limited to be other-than-temporarily impaired as of December 31, 2008 due to the severity of the decline in its market value versus its cost basis. As a result, during the fourth quarter of 2008, the Company recorded a $103.9 million impairment charge as other expense in the Consolidated Statement of Operations. Prior to recording this impairment, the Company reflected any gains or losses associated with this investment as a component of other comprehensive income in equity. We also realized a $53.8 million charge to operating expenses related to the forfeiture of the 10% deposit from the cancellation of the six vessel acquisition, a $2.2 million write-off of deferred financing fees associated with the cancellation of our $320 million credit facility, and a $1.9 million write-off of deferred financing fees related to the amendment to the $1.4 billion revolving credit facility. These events were slightly offset by a $2.0 million gain associated with our forward currency contracts. Including these unusual events, the Company recorded a net loss for the fourth quarter of 2008 of $111.3 million, or a $3.56 basic and diluted loss per share.
EBITDA was $(74.4) million for the three months ended December 31, 2008 versus $76.6 million for the three months ended December 31, 2007. Excluding the $159.7 million loss from unusual events, EBITDA would have been $85.4 million.
Robert Gerald Buchanan, President, commented, "During the fourth quarter and full year 2008, Genco posted strong operating results by drawing upon the Company's significant time charter coverage with high-quality charterers. Management worked diligently in signing a total of six contracts under favorable terms during the first half of 2008, providing Genco with significant protection against a volatile rate environment. Our past success in securing a large portion of our fleet on favorable contracts with a diverse group of leading multi-national companies has strengthened the Company's considerable contracted revenue streams. With approximately 64% of our fleet's available days secured on contracts for the remainder of 2009 and 41% in 2010, Genco remains well positioned to deliver stable results for the benefit of shareholders. With a growing modern and diverse fleet, the Company is also in a strong position to continue to deliver first-rate service to world-class charterers."
Genco Shipping & Trading Limited revenues increased 55% to $101.6 million for the three months ended December 31, 2008 versus $65.7 million for the three months ended December 31, 2007, due to the operation of a larger fleet and higher charter rates for our vessels.
The average daily time charter equivalent, or TCE, rates obtained by the Company's fleet increased 13.4% to $35,304 per day for the three months ended December 31, 2008 compared to $31,140 for the three months ended December 31, 2007. The increase in TCE rates was due to higher charter rates achieved in the fourth quarter of 2008 versus the fourth quarter of 2007 for two of the Panamax vessels, six of the Supramax and Handymax vessels, and two of the Handysize vessels in our current fleet. Furthermore, higher TCE rates were achieved in the fourth quarter of 2008 versus the same period last year due to the operation of one additional Capesize vessel acquired as part of the Metrostar acquisition and the operation of two more Panamax vessels acquired as part of the Bocimar acquisition. This was partially offset by lower revenues from our profit sharing agreements on our Capesize vessels.
Total operating expenses increased to $93.9 million for the three months ended December 31, 2008 from $0.5 million for the three-month period ended December 31, 2007 due to higher vessel operating expenses, general and administrative expenses and depreciation and amortization related to the operation of a larger fleet. Total operating expenses for the fourth quarter of 2008 included a $53.8 million charge related to the forfeiture of the 10% deposit from the cancellation of the six vessel acquisition. Total operating expenses for the same period in 2007 included a $23.5 million gain from the sale of the Genco Commander. Vessel operating expenses were $13.5 million for the fourth quarter of 2008 compared to $8.1 million for the same period last year. The increase in vessel operating expenses was due to the operation of a larger fleet, higher crewing, and insurance expenses, as well as the operation of more Capesize vessels for the fourth quarter of 2008 versus the same period last year. We expect our vessel operating expenses, which generally represent variable costs, to further increase as a result of the expansion of our fleet and higher crewing expenses.
Depreciation and amortization expenses increased to $19.9 million for the fourth quarter of 2008 from $11.6 million for the fourth quarter of 2007 related to the growth of our fleet. General and administrative expenses increased to $4.1 million from $3.0 million during the comparative periods due to costs associated with higher employee non-cash compensation and other employee related costs. Management fees were $0.7 million for the three months ended December 31, 2008 and $0.5 million for the three months ended December 31, 2007, respectively, and relate to fees paid to our independent technical managers.
Daily vessel operating expenses grew to $4,734 per vessel per day during the fourth quarter of 2008 from $3,824 for the same quarter last year as a result of higher crew and insurance expenses. We believe daily vessel operating expenses are best measured for comparative purposes over a 12month 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. For the full years ended December 31, 2008 and 2007, the average daily vessel operating expenses for our fleet were $4,400 and $3,716 respectively. Based on estimates provided by our technical managers and management's expectations, we expect our 2009 DVOE budget to be $5,350 per vessel per day on a weighted basis. As previously announced, the increased budget reflects the anticipated increased cost for crewing, insurance and lube oil expenses, as well as the operation of a greater number of Capesize vessels.
John C. Wobensmith, Chief Financial Officer, commented, "During the fourth quarter and year to date, Genco implemented proactive measures to increase the Company's financial flexibility and strengthen its leadership position. Specifically, we made the prudent decision to cancel the acquisition of six drybulk vessels during the fourth quarter as market conditions contracted. We also amended our $1.4 billion credit facility under favorable terms that provide significant benefits for Genco. Specifically, the collateral maintenance covenant has been waived, ensuring that we will not be affected by the current volatility in asset values. In addition, we have maintained the ability to borrow the undrawn portion of the loan during the waiver period. Management remains committed to utilizing our strong liquidity to seek opportunities to take advantage of the current market weakness in the drybulk industry. In pursuing future growth, we will continue to adhere to a strict set of return criteria related to earnings and cash flow accretion as well as return on capital hurdles."
Financial Review: Twelve months 2008
Net income was $86.6 million, or $2.86 basic and $2.84 diluted earnings per share for the twelve months ended December 31, 2008 compared to $106.8 million, or $4.08 basic and $4.06 diluted earnings per share for the twelve months ended December 31, 2007. The Company deemed its investment in Jinhui Shipping and Transportation Limited to be other-than-temporarily impaired as of December 31, 2008 due to the severity of the decline in its market value versus its cost basis. Prior to recording this impairment, the Company reflected any gains or losses associated with this investment as a component of other comprehensive income in equity. As a result, during the fourth quarter of 2008, the Company recorded a $103.9 million impairment charge in its Consolidated Statement of Operations. The Company also recorded a $53.8 million charge related to the forfeiture of the 10% deposit from the cancellation of the six vessel acquisition, a $26.3 million gain from the sale of the Genco Trader and $7.0 million of income received from its investment in stock of Jinhui Shipping and Transportation Limited. Revenues increased 119% to $405.4 million for the twelve months ended December 31, 2008 compared to $185.4 million for the twelve months ended December 31, 2007. EBITDA was $208.8 million for the twelve months ended December 31, 2008 versus $164.2 million for the twelve months ended December 31, 2007. TCE rates obtained by the Company increased to $37,824 per day for the twelve months ended December 31, 2008 from $24,650 for the same period in 2007. Total operating expenses were $171.0 million for the twelve months ended December 31, 2008 compared to $54.3 million for the twelve months ended December 31, 2007, and daily vessel operating expenses per vessel were $4,400 versus $3,716 for the comparative periods.
On January 26, 2009 the Company announced that it had entered into an agreement with DnB NOR Bank ASA and Bank of Scotland PLC as the lead arrangers to amend its $1.4 billion credit facility. Under terms of the amended ten-year $1.4 billion facility, the collateral maintenance requirement is waived until such time that Genco is in a position to satisfy the requirement as well as continue to comply with all other covenants and certain other conditions previously announced. Genco continues to be able to borrow the undrawn portion of the loan during the waiver period. Amounts borrowed under the amended facility begin to reduce on March 31, 2009 at $12.5 million per quarter and will bear interest at LIBOR plus 2.00%.
The Company also announced that, under the terms of the amended credit facility, its cash dividends and its share repurchases will be suspended, effective immediately. Genco will be able to reinstate its cash dividends and share repurchases once the Company can represent that it is in a position to again satisfy the collateral maintenance covenant. The amendment to the credit facility places no further restrictions on uses of the Company's cash.
Source: Genco Shipping & Trading
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