General Maritime Q2 & Six Months Results
General Maritime Corporation (NYSE:GMR) reported its financial results for the three and six months ended June 30, 2010.
Financial Review: Second Quarter 2010
The company recorded a net loss of $14.3 million or $0.25 basic and $0.25 diluted loss per share for the three months ended June 30, 2010 compared to net income of $7.3 million or $0.13 basic and $0.13 diluted earnings per share for the three months ended June 30, 2009. The decrease in net income was primarily the result of an 18.1% decrease in TCE to $22,633 per day for the three months ended June 30, 2010 compared to $27,649 per day for the prior year period, as well as an $11.2 million increase in net interest expense to $19.0 million for the three months ended June 30, 2010 compared to $7.8 million for the prior year period.
John Tavlarios, President of General Maritime Corporation, commented, "During the second quarter of 2010 and year-to-date, we entered into several important value-creating transactions, positioning the company to grow its modern fleet, increase its earnings power and strengthen its balance sheet. With our agreement to acquire seven double-hull tankers, we capitalized on attractive asset values and expect to expand our fleet by approximately 50% on a tonnage basis and further improve our age profile. With a flexible deployment strategy, a diverse service offering and an increased presence in the favorable VLCC market, we have positioned the Company to take advantage of future tanker rate increases while achieving a level of stability in our results. As we focus on integrating the newly acquired vessels into the Company, we will continue to concentrate on providing leading international charterers with service that meets the highest operational standards."
Net voyage revenue, which is gross voyage revenues minus voyage expenses unique to a specific voyage (including port, canal and fuel costs), decreased 13.8% to $61.0 million for the three months ended June 30, 2010 compared to $70.8 million for the three months ended June 30, 2009. This was primarily due to an increase in voyage expenses from $9.4 million for the three months ended June 30, 2009, to $30.4 million for the three months ended June 30, 2010. This increase in voyage expenses were due to higher bunker costs as well as an increase in percentage of spot market operating days for the second quarter 2010, compared to the prior year period. EBITDA for the three months ended June 30, 2010 decreased 27% to $27.0 million compared to $37.0 million for the prior year period (please see below for a reconciliation of EBITDA to net income). As of June 30, 2010 the Company's net debt (calculated as total long term debt less cash) was $842.6 million.
Total vessel operating expenses, which are direct vessel operating expenses and general and administrative expenses, increased 1.3% from $33.2 million for the three months ended June 30, 2009 to $33.7 million for the three months ended June 30, 2010. Total vessel operating expenses is a measurement of the company's total expenses associated with operating its vessels. Daily direct vessel operating expenses increased by 2.9% to $8,602 for the quarter ended June 30, 2010 compared to $8,359 for the prior year period. This increase was primarily due to increased costs on the VLCC vessels as well as certain Handymax and Panamax vessels whose fixed fee contracts from the prior year period expired, subjecting them to higher current market costs. Additionally, daily vessel operating expenses on certain vessels still on fixed fee contracts from the Arlington acquisition experienced annual contractual fee increases.
General and administrative costs decreased by 2.5% to $9.4 million for the quarter ended June 30, 2010 compared to $9.7 million for the prior year period. Contributing to this reduction was a decrease in personnel costs in our New York office and in operating costs of our Portugal office resulting primarily from an appreciation of the U.S. Dollar against the Euro.
Financial Review: First Half 2010
Net loss was $23.4 million or $0.41 basic and $0.41 diluted loss per share, for the six months ended June 30, 2010 compared to net income of $26.2 million, or $0.48 basic and $0.47 diluted earnings per share, for the six months ended June 30, 2009. Net voyage revenues decreased 17.4% to $126.9 million for the six months ended June 30, 2010 compared to $153.7 million for the six months ended June 30, 2009. EBITDA decreased 31% to $59.1 million for the six months ended June 30, 2010 compared to $85.7 million for the six months ended June 30, 2009. TCE rates obtained by the Company's fleet decreased 19.7% to $23,479 per day for the six months ended June 30, 2010 from $29,227 for the prior year period. Total vessel operating expenses decreased 0.4% to $67.7 million for the six months ended June 30, 2010 from $68.0 million for the prior year period, and daily direct vessel operating expenses increased 4.2% to $8,648 for the six month period ended June 30, 2010 from $8,299 from the prior year period.
As of July 28, 2010, General Maritime Corporation's fleet was comprised of 32 wholly owned tankers, consisting of 3 VLCC, 11 Suezmax, 12 Aframax, 2 Panamax, and 4 Products tankers, with a total carrying capacity of approximately 4.2 million deadweight tons, or dwt. The average age of the company's fleet as of June 30, 2010 by dwt was 10.1 years compared to 9.1 years as of June 30, 2009.
As of July 28, 2010, General Maritime has 14 out of 32 vessels on time charters comprised of five Aframax, one Suezmax, two Panamax, four Handymax and two VLCC tankers. There are options to extend charters on two of the vessels, and a profit sharing arrangement on two vessels during its option period.
The company's primary area of operation is the Atlantic basin. The Company also currently has vessels employed in the Black Sea and Far East to take advantage of market opportunities and to position vessels in anticipation of drydockings.
On June 6, 2010, General Maritime Corporation announced it had agreed to acquire seven modern double hull tankers from subsidiaries of Metrostar Management Corporation. The fleet to be acquired consists of five VLCC tankers built between 2002 and 2010 and two Suezmax newbuilding tankers to be delivered in 2010 and 2011.
On June 17, 2010, General Maritime Corporation announced it had priced 30.6 million shares in a follow-on offering with gross proceeds of $206.6 million. The company announced that it intends to use the net proceeds, from the offering, of approximately $195.6 million to finance a portion of the total purchase price for the announced vessel acquisitions. Additionally, the company has entered into a senior secured credit facility Nordea Bank Finland plc and DnB NOR Bank ASA that the Company intends to use to finance 60% of the acquisition purchase price.
In the second quarter, the company paid a 10% deposit in connection with the vessel acquisitions totaling $62 million. As of July 28, 2010, the company has taken delivery of one vessel, the Genmar Zeus, with the delivery occurring on July 2, 2010. Of the remaining 6 vessels, 2 are scheduled for delivery in August 2010, 3 in Q4 2010 and 1 in April 2011.
Q2 2010 Dividend Announcement
The company announced that its Board of Directors has adopted a new dividend policy under which the company intends to declare quarterly dividends with a target amount per share of $0.08 based on the current number of shares outstanding. The declaration of dividends and their amount, if any, will depend upon the results of the Company and the determination of the Board of Directors.
The company's Board of Directors declared a Q2 2010 quarterly dividend of $0.08 per share payable on or about September 3, 2010 to shareholders of record as of August 20, 2010. Including the Q2 2010 dividend, General Maritime has declared cumulative quarterly and special dividends of $21.95 per share.
Jeff Pribor, Chief Financial Officer of General Maritime Corporation, commented, "During the second quarter of 2010 and year-to-date period, we continued to receive strong support from both leading shipping banks and the equity capital markets, enabling the company to successfully finance our fleet expansion in a timely manner. We are also pleased to have deleveraged the company's balance sheet during a time when we significantly increased the size of our fleet. We enter the second half of 2010 with considerable financial flexibility and remain committed to opportunistically implementing our long-term growth strategy as we continue to distribute quarterly dividends to shareholders."