Genco Shipping & Trading Q1 2010 Results

Tuesday, May 04, 2010

Genco Shipping & Trading Limited (NYSE:GNK) reported its financial results for the three months ended March 31, 2010. The following financial review discusses the results for the three months ended March 31, 2010 and March 31, 2009.

First Quarter 2010 and Year-to-Date Highlights:
  --  Recorded net income of $33.5 million, or $1.07 basic and $1.06 diluted earnings per share attributable to Genco's shareholders for the first quarter;
  --  Signed one year time charter agreements for two Capesize, two Panamax, two Supramax, and two Handymax vessels;
  --  Genco Claudius, a 2010 built Capesize vessel, with Cargill International S.A. for approximately 10.5 to 13.5 months at $36,000 per day
   --  Genco Augustus, a 2007 built Capesize vessel, with Cargill International S.A. for approximately 10.5 to 12.5 months at $39,000 per day
  --  Genco Knight, a 1999 built Panamax vessel, with Swissmarine Services S.A. for approximately 11 to 13.5 months at $25,000 per day
  --  Genco Vigour, a 1999 built Panamax vessel, with Global Maritime Investments Ltd. for approximately 11 to 13.5 months at $24,000 per day
  --  Genco Hunter, a 2007 built Supramax vessel, with Pacific Basin Chartering Ltd. for approximately 11 to 13.5 months at $21,750 per day
  --  Genco Predator, a 2005 built Supramax vessel, with Pacific Basin Chartering Ltd. for approximately 11 to 13.5 months at $22,500 per day
  --  Genco Muse, a 2001 built Handymax vessel, with Global Maritime Investments Ltd. for approximately 10.5 to 13.5 months at $17,750  per day
      --  Genco Marine, a 1996 built Handymax vessel, with STX Panocean for approximately 11 to 13.5 months at $20,000 per day
  --  Completed Baltic Trading Limited's IPO, raising net proceeds of $210.3 million.

Financial Review: 2010 First Quarter
The Company recorded net income for the first quarter of 2010 of $33.5 million, or $1.07 basic and $1.06 diluted earnings per share attributable to Genco shareholders. Comparatively, for the three months ended March 31, 2009, our net income was $41.2 million or $1.32 basic and diluted earnings per share.

EBITDA was $73.6 million for the three months ended March 31, 2010 versus $76.1 million for the three months ended March 31, 2009.

Robert Gerald Buchanan, President, commented, "During the first quarter of 2010, Genco delivered strong results for shareholders as management continues to execute the Company's time charter strategy. Consistent with our approach to capitalize on a rising freight rate environment, we secured a total of eight vessels on attractive time charters with high credit quality counterparties in the first quarter and year to date. Currently, excluding Baltic Trading Limited's fleet, we have approximately 67% of our fleet's available days locked away on time charters for the remainder of 2010. As we remain focused on further expanding our sizeable contracted revenue streams, we plan to continue to provide our world-class customers with service that meets or exceeds the highest industry standards."

Genco Shipping & Trading Limited's revenues decreased 2.0% to $94.7 million for the three months ended March 31, 2010 versus $96.7 million for the three months ended March 31, 2009 due to lower charter rates achieved for some of our vessels offset by the increase in the size of our fleet.

The average daily time charter equivalent, or TCE, rates obtained by the Company's fleet decreased 8.9% to $30,248 per day for the three months ended March 31, 2010 compared to $33,203 per day for the three months ended March 31, 2009. The decrease in TCE rates resulted from lower charter rates achieved in the first quarter of 2010 versus the first quarter of 2009 for nineteen of the vessels in our fleet offset by higher charter rates for thirteen of the vessels in our fleet.

Total operating expenses increased to $46.3 million for the three months ended March 31, 2010 from $41.5 million for the three month period ended March 31, 2009. Higher vessel operating expenses, general, administrative and management fees and depreciation and amortization were recorded in the 2010 period related to the operation of a larger fleet. Vessel operating expenses were $14.9 million for the first quarter of 2010 compared to $14.2 million for the same period last year. The increase in vessel operating expenses was due to the operation of a larger fleet and higher expenses related to repairs for the first quarter of 2010 versus the same period last year.

Depreciation and amortization expenses increased to $24.8 million for the first quarter of 2010 from $20.9 million for the first quarter of 2009 as a result of the growth of our fleet. General, administrative and management fees increased to $5.8 million from $4.8 million during the comparative periods due to costs associated with Baltic Trading Limited as well as slightly higher management fees.

Daily vessel operating expenses, or DVOE, decreased to $4,726 per vessel per day during the first quarter of 2009 from $4,931 for the same quarter last year due to lower costs associated with insurance and stores and supplies, offset by higher repair costs. Daily vessel operating expenses year to date have been below budget due to the timing of purchases of spare parts, as well as lower than anticipated crew and insurance costs. 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. Based on estimates provided by our technical managers and management's expectations, our 2010 DVOE budget, excluding Baltic Trading's vessels, is $5,350 per vessel per day on a weighted average basis.

John C. Wobensmith, Chief Financial Officer, commented, "During the first quarter, Genco maintained its focus on strengthening its financial position, readying the Company for future growth. As we continue to generate sizeable cash flows from our modern, high-quality fleet, management remains committed to actively consolidating the drybulk industry as we have consistently done in the past. In seeking to capitalize on attractive acquisition opportunities that further strengthen Genco's industry leadership and expand the Company's earnings power, we will maintain our prudent approach by adhering to a strict set of return criteria related to earnings and cash flow accretion as well as return on capital hurdles."

Liquidity and Capital Resources
Cash Flow
Net cash provided by operating activities for the three months ended March 31, 2010 and 2009 was $55.0 million and $55.5 million, respectively. The slight decrease in cash provided by operating activities was primarily due to changes in cash flows related to operating activities surrounding due from charters, prepaid expenses, accounts payable and deferred drydocking costs incurred.

Net cash used in investing activities for the three months ended March 31, 2010 and 2009 was $36.4 million and $1.2 million, respectively. The increase was primarily due to more cash used for deposits on vessels relating to the purchase of Baltic Trading's initial fleet. For the three months ended March 31, 2010, cash used in investing activities primarily related to the deposit on vessels in the amount of $35.6 million. For the three months ended March 31, 2009, cash used in investing activities primarily related to deposits on vessels to be acquired of $0.7 million.

Net cash provided by (used in) financing activities was $198.6 million during the three months ended March 31, 2010 as compared to $(3.4) million during the three months ended March 31, 2009. The $202.1 million increase in net cash provided by financing activities was primarily due to the proceeds from the issuance of common stock in the amount of $214.5 million from the initial public offering for Baltic Trading Limited that was completed on March 15, 2010. Cash provided by financing activities was also offset by the $12.5 million repayment of debt under the 2007 Credit Facility, $3.1 million for payments of common stock issuance costs, and $0.3 million of deferred financing costs. For the same period last year, net cash used in financing activities consisted of a $3.4 million payment of deferred financing costs.

Capital Expenditures
We make capital expenditures from time to time in connection with vessel acquisitions. We currently own a fleet of 35 drybulk vessels, consisting of nine Capesize, eight Panamax, four Supramax, six Handymax and eight Handysize vessels, with an aggregate carrying capacity of approximately 2,903,000 dwt. In addition, after the delivery of four vessels expected in May and October 2010, our subsidiary Baltic Trading Limited will own a fleet of six drybulk vessels, consisting of two Capesize and four Supramax vessels with an aggregate carrying capacity of approximately 566,000 dwt.

In addition to acquisitions that we may undertake in future periods, we will incur additional expenditures due to special surveys and drydockings for our fleet. We estimate that two of our vessels will be drydocked in the second quarter of 2010 and an additional four vessels will be drydocked in the remainder of 2010. We further anticipate that eight of our vessels will be drydocked in 2011.

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