GENCO SHIPPING & TRADING LTD - Quarter Report: 2016 March (Form 10-Q)

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2016

 

OR

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from           to

 

Commission file number 001-33393

 

 

GENCO SHIPPING & TRADING LIMITED

(Exact name of registrant as specified in its charter)

 

 

299 Park Avenue, 12th Floor, New York, New York 10171

(Address of principal executive offices) (Zip Code)

 

(646) 443-8550

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

The number of shares outstanding of each of the issuer’s classes of common stock, as of May 10, 2016: Common stock, $0.01 per share — 73,544,994 shares.

 

 

Table of Contents

 

Genco Shipping & Trading Limited

 

			Page
	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	a)	Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015	1
	b)	Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2016 and 2015	2
	c)	Condensed Consolidated Statements of Comprehensive Loss for the Three Months ended March 31, 2016 and 2015	3
	d)	Condensed Consolidated Statements of Equity for the Three Months ended March 31, 2016 and 2015	4
	e)	Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2016 and 2015	5
	f)	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		53
Item 4.	Controls and Procedures		54
	PART II —OTHER INFORMATION
Item 1A.	Risk Factors		55
Item 6.	Exhibits		55

 

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Website Information

 

We intend to use our website, www.GencoShipping.com, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in our website’s Investor section. Accordingly, investors should monitor the Investor portion of our website, in addition to following our press releases, SEC filings, public conference calls, and webcasts. To subscribe to our e-mail alert service, please submit your e-mail address at the Investor Relations Home page of the Investor section of our website. The information contained in, or that may be accessed through, our website is not incorporated by reference into or a part of this document or any other report or document we file with or furnish to the SEC, and any references to our website are intended to be inactive textual references only.

 

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PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Genco Shipping & Trading Limited

Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015

(U.S. Dollars in thousands, except for share and per share data)

(Unaudited)

 

		March 31, 2016			December 31, 2015
Assets
Current assets:
Cash and cash equivalents		$	75,604		$	121,074
Restricted cash		19,500			19,500
Due from charterers, net of a reserve of $213 and $429, respectively		8,373			10,586
Prepaid expenses and other current assets		20,492			21,369
Total current assets		123,969			172,529
Noncurrent assets:
Vessels, net of accumulated depreciation of $127,067 and $107,998, respectively		1,487,506			1,508,221
Deferred drydock, net of accumulated amortization of $4,316 and $3,207, respectively		15,099			16,177
Deferred financing costs, net of accumulated amortization of $935 and $734, respectively		3,093			3,294
Fixed assets, net of accumulated depreciation and amortization of $500 and $404, respectively		1,269			1,286
Other noncurrent assets		514			514
Restricted cash		315			315
Investments		12,334			12,327
Total noncurrent assets		1,520,130			1,542,134
Total assets		$	1,644,099		$	1,714,663
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses		$	22,939		$	27,467
Current portion of long-term debt, net of deferred financing costs of $8,883 and $9,411, respectively		561,097			579,023
Deferred revenue		906			1,058
Total current liabilities		584,942			607,548
Noncurrent liabilities:
Long-term lease obligations		1,329			1,149
Total noncurrent liabilities		1,329			1,149
Total liabilities		586,271			608,697
Commitments and contingencies
Equity:
Common stock, par value $0.01; 250,000,000 shares authorized; issued and outstanding 73,544,994 and 72,898,234 shares at March 31, 2016 and December 31, 2015, respectively		735			728
Additional paid-in capital		1,487,929			1,482,450
Accumulated other comprehensive income (loss)		838			(21		)
Retained deficit		(431,674		)	(377,191		)
Total equity		1,057,828			1,105,966
Total liabilities and equity		$	1,644,099		$	1,714,663

 

See accompanying notes to condensed consolidated financial statements.

 

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Genco Shipping & Trading Limited

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2016 and 2015

(U.S. Dollars in Thousands, Except for Earnings Per Share and Share Data)

(Unaudited)

 

		For the Three Months Ended March 31,
		2016			2015
Revenues:
Voyage revenues		$	20,131		$	33,609
Service revenues		811			810
Total revenues		20,942			34,419
Operating expenses:
Voyage expenses		3,896			4,380
Vessel operating expenses		29,127			28,672
General, administrative and management fees		12,855			20,324
Depreciation and amortization		20,339			19,410
Impairment of vessel assets		1,685			35,396
Total operating expenses		67,902			108,182
Operating loss		(46,960		)	(73,763		)
Other (expense) income:
Other (expense) income		(125		)	11
Interest income		62			24
Interest expense		(7,113		)	(4,324		)
Other expense		(7,176		)	(4,289		)
Loss before reorganization items, net		(54,136		)	(78,052		)
Reorganization items, net		(94		)	(520		)
Loss before income taxes		(54,230		)	(78,572		)
Income tax expense		(253		)	(543		)
Net loss		(54,483		)	(79,115		)
Less: Net loss attributable to noncontrolling interest		—			(40,673		)
Net loss attributable to Genco Shipping & Trading Limited		$	(54,483	)	$	(38,442	)
Net loss per share-basic		$	(0.75	)	$	(0.64	)
Net loss per share-diluted		$	(0.75	)	$	(0.64	)
Weighted average common shares outstanding-basic		72,187,954			60,430,789
Weighted average common shares outstanding-diluted		72,187,954			60,430,789

 

See accompanying notes to condensed consolidated financial statements.

 

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Genco Shipping & Trading Limited

Condensed Consolidated Statements of Comprehensive Loss

For the Three Months Ended March 31, 2016 and 2015

(U.S. Dollars in Thousands)

(Unaudited)

 

		For the Three Months Ended March 31,
		2016			2015
Net loss		$	(54,483	)	$	(79,115	)
Other comprehensive income		859			2,359
Comprehensive loss		(53,624		)	(76,756		)
Less: Comprehensive loss attributable to noncontrolling interest		—			(40,673		)
Comprehensive loss attributable to Genco Shipping & Trading Limited		$	(53,624	)	$	(36,083	)

 

See accompanying notes to condensed consolidated financial statements.

 

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Genco Shipping & Trading Limited

Condensed Consolidated Statements of Equity

For the Three Months Ended March 31, 2016 and 2015

(U.S. Dollars in Thousands)

(Unaudited)

 

		Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive (Loss) Income			Retained Deficit			Genco Shipping & Trading Limited Shareholders’ Equity			Noncontrolling Interest			Total Equity
Balance — January 1, 2016		$	728		$	1,482,450		$	(21	)	$	(377,191	)	$	1,105,966		$	—		$	1,105,966
Net loss											(54,483		)	(54,483		)	—			(54,483		)
Other comprehensive income								859						859			—			859
Issuance of 612,444 shares of nonvested stock		6			(6		)							—			—			—
Issuance of 31,380 shares of vested RSUs		1			(1		)							—			—			—
Nonvested stock amortization					5,486									5,486			—			5,486
Balance — March 31, 2016		$	735		$	1,487,929		$	838		$	(431,674	)	$	1,057,828		$	—		$	1,057,828

 

		Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive (Loss) Income			Retained Deficit			Genco Shipping & Trading Limited Shareholders’ Equity			Noncontrolling Interest			Total Equity
Balance — January 1, 2015		$	615		$	1,251,197		$	(25,317	)	$	(182,294	)	$	1,044,201		$	248,573		$	1,292,774
Net loss											(38,442		)	(38,442		)	(40,673		)	(79,115		)
Other comprehensive income								2,359						2,359			—			2,359
Settlement of non-accredited Note holders					(414		)							(414		)	—			(414		)
Nonvested stock amortization					11,544									11,544			816			12,360
Balance — March 31, 2015		$	615		$	1,262,327		$	(22,958	)	$	(220,736	)	$	1,019,248		$	208,716		$	1,227,964

 

See accompanying notes to condensed consolidated financial statements.

 

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Genco Shipping & Trading Limited

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015

(U.S. Dollars in Thousands)

(Unaudited)

 

		For the Three Months Ended March 31,
		2016			2015
Cash flows from operating activities:
Net loss		$	(54,483	)	$	(79,115	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		20,339			19,410
Amortization of deferred financing costs		729			487
Amortization of nonvested stock compensation expense		5,486			12,360
Impairment of vessel assets		1,685			35,396
Realized loss on sale of investment		73			—
Change in assets and liabilities:
Decrease in due from charterers		2,213			2,373
Decrease (increase) in prepaid expenses and other current assets		811			(3,504		)
(Decrease) increase in accounts payable and accrued expenses		(4,154		)	3,163
(Decrease) increase in deferred revenue		(152		)	440
Increase in lease obligations		180			203
Deferred drydock costs incurred		(31		)	(3,533		)
Net cash used in operating activities		(27,304		)	(12,320		)
Cash flows from investing activities:
Purchase of vessels, including deposits		(279		)	(24,104		)
Purchase of other fixed assets		(191		)	(56		)
Sale of AFS securities		859			—
Changes in deposits of restricted cash		—			19,645
Net cash provided by (used in) investing activities		389			(4,515		)
Cash flows from financing activities:
Repayments on the $100 Million Term Loan Facility		(1,923		)	(1,923		)
Repayments on the $253 Million Term Loan Facility		(10,150		)	(5,292		)
Repayments on the 2015 Revolving Credit Facility		(1,641		)	—
Repayments on the $44 Million Term Loan Facility		(687		)	(687		)
Proceeds from the $148 Million Credit Facility		—			115,000
Repayments on the $148 Million Credit Facility		(2,997		)	—
Repayments on the 2010 Credit Facility		—			(102,250		)
Repayments on the $22 Million Term Loan Facility		(375		)	(375		)
Repayments on the 2014 Term Loan Facilities		(681		)	—
Cash settlement of non-accredited Note holders		(101		)	(49		)
Payment of deferred financing costs		—			(2,220		)
Net cash (used in) provided by financing activities		(18,555		)	2,204
Net decrease in cash and cash equivalents		(45,470		)	(14,631		)
Cash and cash equivalents at beginning of period		121,074			83,414
Cash and cash equivalents at end of period		$	75,604		$	68,783

 

See accompanying notes to condensed consolidated financial statements.

 

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Genco Shipping & Trading Limited

(U.S. Dollars in Thousands, Except Per Share and Share Data)

Notes to Condensed Consolidated Financial Statements (unaudited)

 

1 - GENERAL INFORMATION

 

The accompanying condensed consolidated financial statements include the accounts of Genco Shipping & Trading Limited (“GS&T”) and its direct and indirect wholly-owned subsidiaries including Baltic Trading Limited (collectively, the “Company”). The Company is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels. GS&T is incorporated under the laws of the Marshall Islands and as of March 31, 2016, is the sole owner of all of the outstanding shares of the following subsidiaries: Genco Ship Management LLC; Genco Investments LLC; Genco RE Investments LLC; and the ship-owning subsidiaries as set forth below.  As of March 31, 2016, Genco Ship Management LLC is the sole owner of all of the outstanding shares of Genco Management (USA) Limited.

 

Liquidity, Going Concern, and Reclassification of Debt to Current

 

Persistent weak drybulk industry conditions and historically low charter rates have negatively impacted the Company’s results of operations, cash flows, and liquidity and may continue to do so in the future. The negative impact on the Company’s liquidity, together with a continued decline in vessel values, presents difficulties for remaining in compliance with its credit facility covenants relating to minimum cash, leverage ratios, and collateral maintenance (refer to Note 8 — Debt), which could potentially result in defaults and acceleration of the repayment of its outstanding indebtedness.  These factors, as well as recurring losses from operations and negative working capital, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared on the basis of accounting principles applicable to a going concern, which contemplates the realization of assets and extinguishment of liabilities in the normal course of business. The Company’s ability to continue as a going concern is contingent upon, among other things, its ability to: (i) develop and successfully implement a plan to address these factors, which may include refinancing the Company’s existing credit agreements, or obtaining further waivers or modifications to its credit agreements from its lenders, or raising additional capital through selling assets (including vessels), reducing or delaying capital expenditures, or pursuing other options that may be available to the Company which may include pursuing strategic opportunities and equity or debt offerings or potentially seeking protection in a Chapter 11 proceeding;  (ii) return to profitability, (iii) generate sufficient cash flow from operations, (iv) remain in compliance with its credit facility covenants, as the same may be modified, and (v) obtain financing sources to meet the Company’s future obligations. The realization of the Company’s assets and the satisfaction of its liabilities are subject to uncertainty.  The accompanying condensed consolidated financial statements do not include any direct adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern, except in regards to the classification of outstanding indebtedness as described below.

 

In addition, for purposes of preparing financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), the Company is required to disclose if it is in compliance with covenants under all of its eight credit facilities on a quarterly basis.  At March 31, 2016, the Company was not in compliance with the collateral maintenance covenants under the 2014 Term Loan Facilities and the $148 Million Credit Facility.  Such noncompliance does not currently constitute an event of default under any of our credit agreements and is subject to cure or waiver within the applicable grace period.  The Company has entered into short-term waivers with its lenders for grace periods following non-compliance until May 31, 2016 under the $100 Million Term Loan Facility, $253 Million Term Loan Facility, the 2015 Revolving Credit Facility and the $148 Million Credit Facility.  See Note 8 — Debt for the defined terms we use for each facility, a description of each facility and the detailed information surrounding the specific shortfall and applicable cure.  Additionally, each of the Company’s credit facilities contain cross default provisions that could be triggered by the Company’s failure to satisfy or waive its collateral maintenance covenants, if such failure is not cured or waived within the applicable grace period.  Given the foregoing noncompliance, the existence of the cross default provisions, and the absence of any current solution which would cure the noncompliance for at least the next 12 months, the Company has determined that it should classify its outstanding indebtedness as a current liability as of March 31, 2016 and December 31, 2015.

 

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Merger Agreement with Baltic Trading

 

On April 7, 2015, the Company entered into a definitive merger agreement with Baltic Trading Limited (“Baltic Trading”) under which the Company acquired Baltic Trading in a stock-for-stock transaction (the “Merger”).  Under the terms of the agreement, Baltic Trading became an indirect wholly-owned subsidiary of the Company, and Baltic Trading shareholders (other than the Company and its subsidiaries) received 0.216 shares of the Company’s common stock for each share of Baltic Trading’s common stock they owned at closing, with fractional shares to be settled in cash.  Upon consummation of the transaction on July 17, 2015, the Company’s shareholders owned approximately 84.5% of the combined company, and Baltic Trading’s shareholders (other than the Company and its subsidiaries) owned approximately 15.5% of the combined company.  Shares of Baltic Trading’s Class B stock (all of which are owned by the Company) were canceled in the Merger.  The Company’s common stock began trading on the New York Stock Exchange after consummation of the transaction on July 20, 2015.  The Boards of Directors of both the Company and Baltic Trading established independent special committees to review the transaction and negotiate the terms on behalf of their respective companies.  Both independent special committees unanimously approved the transaction.  The Boards of Directors of both companies approved the Merger by a unanimous vote of directors present and voting, with Peter C. Georgiopoulos, Chairman of the Board of each company, recused for the vote. The Merger was approved on July 17, 2015 at the 2015 Annual Meeting of Shareholders (the “Annual Meeting”).

 

Prior to the completion of the Merger, the Company prepared its condensed consolidated financial statements in accordance with U.S. GAAP and consolidated the operations of Baltic Trading. The Baltic Trading common shares that the Company acquired in the Merger were previously recognized as a noncontrolling interest in the consolidated financial statements of the Company. Under U.S. GAAP, changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary are considered equity transactions (i.e. transactions with owners in their capacity as owners) with any difference between the amount by which the noncontrolling interest is adjusted and the fair value of the consideration paid attributed to the equity of the parent. Accordingly, any difference between the fair value of the Company’s common shares issued in exchange for Baltic Trading common shares pursuant to the Merger was reflected as an adjustment to the equity in the Company. No gain or loss has been recognized in the Company’s Condensed Consolidated Statement of Comprehensive Loss upon completion of the transaction.

 

Acquisition of Baltic Lion and Baltic Tiger

 

Additionally, on April 7, 2015, the Company entered into an agreement under which the Company acquired all of the shares of two single-purpose vessel owning entities that were wholly owned by Baltic Trading, each of which owned one Capesize drybulk vessel, specifically the Baltic Lion and Baltic Tiger, for an aggregate purchase price of $68,500, subject to reduction for $40,563 of outstanding first-mortgage debt of such single-purpose entities that was guaranteed by the Company.  For further details, refer to the “Impairment of vessel assets” Section in Note 2 — Summary of Significant Accounting Policies.  These transactions, which closed on April 8, 2015, will be accounted for pursuant to accounting guidance under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, “Business Combinations” (“ASC 805”), for transactions amongst entities under common control.  Accordingly, the difference between the cash paid to Baltic Trading and the Company’s carrying value of the Baltic Lion and Baltic Tiger as of the closing date of $590 was reflected as an adjustment to Additional paid-in capital in the Condensed Consolidated Statement of Equity when the sale was completed on April 7, 2015.  The independent special committees of both companies’ Boards of Directors reviewed and approved these transactions.

 

Other General Information

 

Below is the list of the Company’s wholly owned ship-owning subsidiaries as of March 31, 2016:

 

Wholly Owned Subsidiaries		Vessel Acquired		Dwt		Delivery Date		Year Built
Genco Reliance Limited		Genco Reliance		29,952		12/6/04		1999
Genco Vigour Limited		Genco Vigour		73,941		12/15/04		1999
Genco Explorer Limited		Genco Explorer		29,952		12/17/04		1999
Genco Carrier Limited		Genco Carrier		47,180		12/28/04		1998
Genco Sugar Limited		Genco Sugar		29,952		12/30/04		1998
Genco Pioneer Limited		Genco Pioneer		29,952		1/4/05		1999
Genco Progress Limited		Genco Progress		29,952		1/12/05		1999
Genco Wisdom Limited		Genco Wisdom		47,180		1/13/05		1997
Genco Success Limited		Genco Success		47,186		1/31/05		1997
Genco Beauty Limited		Genco Beauty		73,941		2/7/05		1999
Genco Knight Limited		Genco Knight		73,941		2/16/05		1999
Genco Leader Limited		Genco Leader		73,941		2/16/05		1999
Genco Marine Limited		Genco Marine		45,222		3/29/05		1996
Genco Prosperity Limited		Genco Prosperity		47,180		4/4/05		1997

 

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Wholly Owned Subsidiaries		Vessel Acquired		Dwt		Delivery Date		Year Built
Genco Muse Limited		Genco Muse		48,913		10/14/05		2001
Genco Acheron Limited		Genco Acheron		72,495		11/7/06		1999
Genco Surprise Limited		Genco Surprise		72,495		11/17/06		1998
Genco Augustus Limited		Genco Augustus		180,151		8/17/07		2007
Genco Tiberius Limited		Genco Tiberius		175,874		8/28/07		2007
Genco London Limited		Genco London		177,833		9/28/07		2007
Genco Titus Limited		Genco Titus		177,729		11/15/07		2007
Genco Challenger Limited		Genco Challenger		28,428		12/14/07		2003
Genco Charger Limited		Genco Charger		28,398		12/14/07		2005
Genco Warrior Limited		Genco Warrior		55,435		12/17/07		2005
Genco Predator Limited		Genco Predator		55,407		12/20/07		2005
Genco Hunter Limited		Genco Hunter		58,729		12/20/07		2007
Genco Champion Limited		Genco Champion		28,445		1/2/08		2006
Genco Constantine Limited		Genco Constantine		180,183		2/21/08		2008
Genco Raptor LLC		Genco Raptor		76,499		6/23/08		2007
Genco Cavalier LLC		Genco Cavalier		53,617		7/17/08		2007
Genco Thunder LLC		Genco Thunder		76,588		9/25/08		2007
Genco Hadrian Limited		Genco Hadrian		169,694		12/29/08		2008
Genco Commodus Limited		Genco Commodus		169,025		7/22/09		2009
Genco Maximus Limited		Genco Maximus		169,025		9/18/09		2009
Genco Claudius Limited		Genco Claudius		169,025		12/30/09		2010
Genco Bay Limited		Genco Bay		34,296		8/24/10		2010
Genco Ocean Limited		Genco Ocean		34,409		7/26/10		2010
Genco Avra Limited		Genco Avra		34,391		5/12/11		2011
Genco Mare Limited		Genco Mare		34,428		7/20/11		2011
Genco Spirit Limited		Genco Spirit		34,432		11/10/11		2011
Genco Aquitaine Limited		Genco Aquitaine		57,981		8/18/10		2009
Genco Ardennes Limited		Genco Ardennes		57,981		8/31/10		2009
Genco Auvergne Limited		Genco Auvergne		57,981		8/16/10		2009
Genco Bourgogne Limited		Genco Bourgogne		57,981		8/24/10		2010
Genco Brittany Limited		Genco Brittany		57,981		9/23/10		2010
Genco Languedoc Limited		Genco Languedoc		57,981		9/29/10		2010
Genco Loire Limited		Genco Loire		53,416		8/4/10		2009
Genco Lorraine Limited		Genco Lorraine		53,416		7/29/10		2009
Genco Normandy Limited		Genco Normandy		53,596		8/10/10		2007
Genco Picardy Limited		Genco Picardy		55,257		8/16/10		2005
Genco Provence Limited		Genco Provence		55,317		8/23/10		2004
Genco Pyrenees Limited		Genco Pyrenees		57,981		8/10/10		2010
Genco Rhone Limited		Genco Rhone		58,018		3/29/11		2011
Baltic Lion Limited		Baltic Lion		179,185		4/8/15 (1)		2012
Baltic Tiger Limited		Genco Tiger		179,185		4/8/15 (1)		2011
Baltic Leopard Limited		Baltic Leopard		53,447		4/8/10 (2)		2009
Baltic Panther Limited		Baltic Panther		53,351		4/29/10 (2)		2009
Baltic Cougar Limited		Baltic Cougar		53,432		5/28/10 (2)		2009
Baltic Jaguar Limited		Baltic Jaguar		53,474		5/14/10 (2)		2009
Baltic Bear Limited		Baltic Bear		177,717		5/14/10 (2)		2010
Baltic Wolf Limited		Baltic Wolf		177,752		10/14/10 (2)		2010
Baltic Wind Limited		Baltic Wind		34,409		8/4/10 (2)		2009
Baltic Cove Limited		Baltic Cove		34,403		8/23/10 (2)		2010
Baltic Breeze Limited		Baltic Breeze		34,386		10/12/10 (2)		2010
Baltic Fox Limited		Baltic Fox		31,883		9/6/13 (2)		2010
Baltic Hare Limited		Baltic Hare		31,887		9/5/13 (2)		2009
Baltic Hornet Limited		Baltic Hornet		63,574		10/29/14 (2)		2014
Baltic Wasp Limited		Baltic Wasp		63,389		1/2/15 (2)		2015
Baltic Scorpion Limited		Baltic Scorpion		63,462		8/6/15		2015
Baltic Mantis Limited		Baltic Mantis		63,470		10/9/15		2015

 

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(1)         The delivery date for these vessels represents the date that the vessel was purchased from Baltic Trading.

(2)         The delivery date for these vessels represents the date that the vessel was delivered to Baltic Trading.

 

The Company provides technical services for drybulk vessels purchased by Maritime Equity Partners (“MEP”). Peter C. Georgiopoulos, Chairman of the Board of Directors of GS&T, is a director of and has a minority interest in MEP.  These services include oversight of crew management, insurance, drydocking, ship operations and financial statement preparation, but do not include chartering services.  The services were initially provided for a fee of $750 per ship per day plus reimbursement of out-of-pocket costs and were provided for an initial term of one year.  MEP has the right to cancel provision of services on 60 days’ notice with payment of a one-year termination fee upon a change in control of the Company.  The Company may terminate provision of the services at any time on 60 days’ notice.  On September 30, 2015, under the oversight of an independent committee of our Board of Directors, Genco Management (USA) Limited and MEP entered into certain agreements under which MEP paid $2,178 of the amount of service fees in arrears (of which $261 was paid in 2016 by the new owners of five of the MEP vessels sold in January 2016 as described below) and the daily service fee was reduced from $750 to $650 per day effective on October 1, 2015. During January 2016, five of MEP’s vessels were sold to third-parties and the agency agreement was deemed terminated upon the sale of these vessels.  Based upon the September 30, 2015 agreement, termination fees were due in the amount of $296 which was assumed by the new owners of the five MEP vessels that were sold and has been paid in full during February 2016.  Refer to Note 7 — Related Party Transactions for amounts due to or from MEP as of March 31, 2016 and December 31, 2015.

 

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of consolidation

 

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP which includes the accounts of GS&T and its direct and indirect wholly-owned subsidiaries, including Baltic Trading.  All intercompany accounts and transactions have been eliminated in consolidation.

 

Basis of presentation

 

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”).  In the opinion of management of the Company, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and operating results have been included in the statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.  These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2015 (the “2015 10-K”).  The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the operating results to be expected for the year ending December 31, 2016.

 

Segment reporting

 

The Company reports financial information and evaluates its operations by charter revenues and not by the length of ship employment for its customers, i.e., spot or time charters. Each of the Company’s vessels serve the same type of customer, have similar operations and maintenance requirements, operate in the same regulatory environment, and are subject to similar economic characteristics. Based on this, the Company has determined that it operates in one reportable segment, after the effective date of the Merger on July 17, 2015, which is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels. Prior to the Merger, the Company had two reportable operating segments, GS&T and Baltic Trading.

 

Vessels, net

 

Vessels, net is stated at cost less accumulated depreciation. Included in vessel costs are acquisition costs directly attributable to the acquisition of a vessel and expenditures made to prepare the vessel for its initial voyage. The Company also capitalizes interest costs for a vessel under construction as a cost which is directly attributable to the acquisition of a vessel. Vessels are depreciated on a straight-line basis over their estimated useful lives, determined to be 25 years from the date of initial delivery from the shipyard. Depreciation expense for vessels for the three months ended March 31, 2016 and 2015 was $19,134 and $18,967, respectively.

 

Depreciation expense is calculated based on cost less the estimated residual scrap value. The costs of significant replacements, renewals and betterments are capitalized and depreciated over the shorter of the vessel’s remaining estimated useful life or the estimated life of the renewal or betterment. Undepreciated cost of any asset component being replaced that was acquired after

 

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the initial vessel purchase is written off as a component of vessel operating expense. Expenditures for routine maintenance and repairs are expensed as incurred. Scrap value is estimated by the Company by taking the estimated scrap value of $310 per lightweight ton (“lwt”) times the weight of the ship noted in lwt.

 

Deferred revenue

 

Deferred revenue primarily relates to cash received from charterers prior to it being earned. These amounts are recognized as income when earned. Additionally, deferred revenue includes estimated customer claims mainly due to time charter performance issues. As of March 31, 2016 and December 31, 2015, the Company had an accrual of $307 and $498, respectively, related to these estimated customer claims.

 

Voyage expense recognition

 

In time charters, spot market-related time charters and pool agreements, operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. There are certain other non-specified voyage expenses, such as commissions, which are typically borne by the Company. At the inception of a time charter, the Company records the difference between the cost of bunker fuel delivered by the terminating charterer and the bunker fuel sold to the new charterer as a gain or loss within voyage expenses. Additionally, the Company records lower of cost or market adjustments to re-value the bunker fuel on a quarterly basis.  These differences in bunkers, including lower of cost or market adjustments, resulted in a net loss of $2,297 and $2,292 during the three months ended March 31, 2016 and 2015, respectively.  Additionally, voyage expenses include the cost of bunkers consumed during short-term time charters pursuant to the terms of the time charter agreement.

 

Impairment of vessel assets

 

During the three months ended March 31, 2016 and 2015, the Company recorded $1,685 and $35,396, respectively, related to the impairment of vessel assets in accordance with ASC 360 — “Property, Plant and Equipment” (“ASC 360”).  At March 31, 2016, the Company determined that the scrapping of the Genco Marine was more likely than not based on discussions with the Company’s Board of Directors.  Additionally, at March 31, 2015, the Company determined that the sale of the Baltic Lion and Baltic Tiger was more likely than not based on Baltic Trading’s expressed consideration to divest of those vessels.  Therefore, at both March 31, 2016 and March 31, 2015, the time utilized to determine the recoverability of the carrying value of the vessel asset was significantly reduced.  After determining that the sum of the estimated undiscounted future cash flows attributable to the Genco Marine did not exceed the carrying value of the vessel at March 31, 2016, the Company reduced the carrying value of the Genco Marine to its net realizable value, which was based on the expected proceeds from scrapping the vessel.  This resulted in an impairment loss of $1,685 during the three months ended March 31, 2016.  On April 5, 2016, the Board of Directors unanimously approved the consent to scrap the Genco Marine.  Similarly, after determining that the sum of the estimated undiscounted future cash flows attributable to the Baltic Lion and Baltic Tiger would not exceed the carrying value of the respective vessels at March 31, 2015, the Company reduced the carrying value of both vessels to their estimated fair value, which was determined primarily based on appraisals and third-party broker quotes. This resulted in an impairment loss of $35,396 during the three months ended March 31, 2015. On April 8, 2015, the Baltic Lion and Baltic Tiger entities were sold to GS&T.   Refer to Note 1 — General Information for details pertaining to the sale of these entities.

 

Noncontrolling interest

 

Net loss attributable to noncontrolling interest during the three months ended March 31, 2015 of $40,673 reflects the noncontrolling interest’s share of the net loss of the Company’s subsidiary, Baltic Trading, prior to the Merger on July 17, 2015, which owned and employed drybulk vessels in the spot market, in vessel pools or on spot market-related time charters.  The spot market represents immediate chartering of a vessel, usually for single voyages.  Refer to Note 1— General Information for details pertaining to the Merger.

 

Investments

 

The Company holds an investment in the capital stock of Jinhui Shipping and Transportation Limited (“Jinhui”) and in Korea Line Corporation (“KLC”). Jinhui is a drybulk shipping owner and operator focused on the Supramax segment of drybulk shipping. KLC is a marine transportation service company which operates a fleet of carriers which includes carriers for iron ore, liquefied natural gas and tankers for oil and petroleum products. The investments in Jinhui and KLC have been designated as Available For Sale (“AFS”) and are reported at fair value, with unrealized gains and losses recorded in equity as a component of accumulated other comprehensive income (loss) (“AOCI”). The Company classifies the investments as current or noncurrent assets based on the Company’s intent to hold the investments at each reporting date.

 

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Investments are reviewed quarterly to identify possible other-than-temporary impairment in accordance with ASC Subtopic 320-10, “Investments — Debt and Equity Securities” (“ASC 320-10”). When evaluating its investments, the Company reviews factors such as the length of time and extent to which fair value has been below the cost basis, the financial condition of the issuer, the underlying net asset value of the issuer’s assets and liabilities, and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in market value. Should the decline in the value of any investment be deemed to be other-than-temporary, the investment basis would be written down to fair market value, and the write-down would be recorded to earnings as a loss. Refer to Note 5 — Investments.

 

Income taxes

 

Pursuant to certain agreements, GS&T technically and commercially managed vessels for Baltic Trading until the Merger, as well as provides technical management of vessels for MEP in exchange for specified fees for these services provided.  These services are performed by Genco Management (USA) Limited (“Genco (USA)”), which has elected to be taxed as a corporation for United States federal income tax purposes.  As such, Genco (USA) is subject to United States federal income tax on its worldwide net income, including the net income derived from providing these services.  Genco (USA) has entered into a cost-sharing agreement with the Company and Genco Ship Management LLC, collectively Manco, pursuant to which Genco (USA) agrees to reimburse Manco for the costs incurred by Genco (USA) for the use of Manco’s personnel and services in connection with the provision of the services for both Baltic Trading and MEP’s vessels.

 

Total revenue earned by the Company for these services during the three months ended March 31, 2016 was $811 of which $0 eliminated upon consolidation.  After allocation of certain expenses, there was taxable income of $563 associated with these activities for the three months ended March 31, 2016.  This resulted in estimated tax expense of $253 for the three months ended March 31, 2016. Total revenue earned by the Company for these services during the three months ended March 31, 2015 was $2,189 of which $1,379 eliminated upon consolidation.  After allocation of certain expenses, there was taxable income of $1,198 associated with these activities for the three months ended March 31, 2015.  This resulted in estimated tax expense of $520 for the three months ended March 31, 2015.

 

Prior to the Merger, Baltic Trading was subject to income tax on its United States source income.  However, as a result of the Merger, Baltic Trading should qualify for the Section 883 exemption of the U.S. Internal Revenue Code of 1986 (as amended) in 2016 and in future taxable years as long as GS&T qualifies for the Section 883 exemption.  As such, during the three months ended March 31, 2016, there was no United States income tax recorded for Baltic Trading.  During the three months ended March 31, 2015, Baltic Trading had United States operations that resulted in United States source income of $587 and United States income tax expense of $23.

 

Recent accounting pronouncements

 

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842),” which replaces the existing guidance in ASC 840 — Leases.  This ASU requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases.  Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense.  This ASU is effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years.  Lessees and lessors will be required to apply the new standard at the beginning of the earliest period presented in the financial statements in which they first apply the new guidance, using a modified retrospective transition method. The requirements of this standard include a significant increase in required disclosures. The Company is currently evaluating the impact of this adoption on its consolidated financial statements.

 

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). This ASU will require that equity investments are measured at fair value with changes in fair value recognized in net income (loss). ASU 2016-01 will be effective for annual periods beginning after December 15, 2017, and interim periods within those years. Earlier adoption is permitted. The Company is currently evaluating the impact of this adoption on its consolidated financial statements.

 

In August 2015, the FASB issued ASU No. 2015-15 (“ASU 2015-15”), which amends presentation and disclosure requirements outlined in ASU 2015-03, “Interest-Imputation of Interest (ASC Subtopic 835-30):  Simplifying the Presentation of Debt Issuance Costs,” (“ASU 2015-03”) by clarifying guidance for debt issuance costs related to line of credit arrangements by acknowledging the statement by SEC staff that it would not object to presentation of debt issuance costs related to a line of credit arrangement as an asset, and amortizing them ratably over the term of the line of credit arrangement, regardless of whether there were any borrowings outstanding under the agreement. Issued in April 2015, ASU 2015-03 required debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts.  Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as deferred charge assets, separate from the related debt liability. ASU 2015-03 does not change the recognition and measurement requirements for debt issuance costs. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and early adoption is permitted. The Company had adopted ASU 2015-03 during the three months ended March 31, 2016 on a retrospective basis.  Refer to Note 8 — Debt.

 

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In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle is that a company should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, and shall be applied either retrospectively to each period presented or as a cumulative effect adjustment as of the date of adoption.  On July 9, 2015, the FASB voted to defer the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date.  The FASB also permitted early adoption of the standard, but not before the original effective date of December 15, 2016.  The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

 

3 - CASH FLOW INFORMATION

 

For the three months ended March 31, 2016, the Company had non-cash investing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $75 for the Purchase of vessels, including deposits and $9 for the Purchase of other fixed assets.  Lastly, during the three months ended March 31, 2016, the Company had non-cash investing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Prepaid expenses and other current assets consisting of $68 associated with the Sale of AFS securities.

 

Professional fees and trustee fees in the amount of $94 were recognized by the Company in Reorganization items, net for the three months ended March 31, 2016 (refer to Note 16).  During this period, $51 of professional fees and trustee fees were paid through March 31, 2016 and $91 is included in Accounts payable and accrued expenses as of March 31, 2016.

 

For the three months ended March 31, 2015, the Company had non-cash investing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $402 for the Purchase of vessels, including deposits and $98 for the Purchase of other fixed assets.  Additionally, for the three months ended March 31, 2015, the Company had non-cash financing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $247 associated with the Payment of deferred financing fees. Lastly, for the three months ended March 31, 2015, the Company had non-cash financing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $414 associated with the Cash settlement of non-accredited Note holders.  During the three months ended March 31, 2015, the Company increased the estimated amount of non-accredited holders of the Convertible Senior Notes, which was discharged on July 9, 2014 when the Company emerged from bankruptcy (the “Effective Date”), that are expected to be settled in cash versus settled with common shares.

 

Professional fees and trustee fees in the amount of $520 were recognized by the Company in Reorganization items, net for the three months ended March 31, 2015 (refer to Note 16).  During this period, $709 of professional fees and trustee fees were paid through March 31, 2015 and $124 is included in Accounts payable and accrued expenses as of March 31, 2015.

 

During the three months ended March 31, 2015, the Company made a reclassification of $9,694 from Deposits on vessels to Vessels, net of accumulated depreciation, due to the completion of the purchase of Baltic Wasp. No such reclassifications were made during the three months ended March 31, 2016.

 

During the three months ended March 31, 2016 and 2015, cash paid for interest, net of amounts capitalized, was $6,712 and $3,203, respectively.

 

During the three months ended March 31, 2016 and 2015, cash paid for estimated income taxes was $222 and $454, respectively.

 

On February 17, 2016, the Company granted 408,163 and 204,081 shares of nonvested stock under the 2015 Equity Incentive Plan to Peter C. Georgiopoulos, Chairman of the Board of Directors, and John Wobensmith, President, respectively.  The grant date fair value of such nonvested stock was $318.  Refer to Note 18 — Stock-Based Compensation.

 

4 - VESSEL ACQUISITIONS

 

On November 13, 2013, Baltic Trading entered into agreements to purchase up to four 64,000 dwt Ultramax newbuilding drybulk vessels from Yangfan Group Co., Ltd. for a purchase price of $28,000 per vessel, or up to $112,000 in the aggregate.  Baltic Trading agreed to purchase two such vessels, which have been renamed the Baltic Hornet and Baltic Wasp, and obtained an option to

 

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purchase up to two additional such vessels for the same purchase price, which Baltic Trading exercised on January 8, 2014. These vessels were renamed the Baltic Mantis and the Baltic Scorpion.  The first of these vessels, the Baltic Hornet, was delivered to Baltic Trading on October 29, 2014.  The Baltic Wasp was delivered to Baltic Trading on January 2, 2015.  The Baltic Scorpion and the Baltic Mantis were delivered to the Company on August 6, 2015 and October 9, 2015, respectively. As of March 31, 2016 and December 31, 2015, deposits on vessels were $0.  The Company has utilized a combination of cash on hand, cash flow from operations as well as debt, including the $148 Million Credit Facility and the 20014 Term Loan Facilities as described in Note 8 — Debt, to fully finance the acquisition of these Ultramax newbuilding drybulk vessels.  On December 30, 2014, Baltic Trading paid $19,645 for the final payment due for the Baltic Wasp which was classified as noncurrent Restricted Cash in the Condensed Consolidated Balance Sheets as of December 31, 2014 as the payment was held in an escrow account and was released to the seller when the vessel was delivered to Baltic Trading on January 2, 2015.

 

Refer to Note 1 — General Information for a listing of the delivery dates for the vessels in the Company’s fleet.

 

Capitalized interest expense associated with the newbuilding contracts entered into by Baltic Trading for the three months ended March 31, 2016 and 2015 was $0 and $124, respectively.

 

5 - INVESTMENTS

 

The Company holds an investment in the capital stock of Jinhui and the stock of KLC.  Jinhui is a drybulk shipping owner and operator focused on the Supramax segment of drybulk shipping.  KLC is a marine transportation service company which operates a fleet of carriers which includes carriers for iron ore, liquefied natural gas and tankers for oil and petroleum products.  These investments are designated as AFS and are reported at fair value, with unrealized gains and losses recorded in equity as a component of AOCI.  At March 31, 2016 and December 31, 2015, the Company held 14,614,283 and 15,706,825 shares of Jinhui capital stock, respectively, which is recorded at its fair value of $12,284 and $12,273, respectively, based on the last closing price during each respective quarter on March 31, 2016 and December 30, 2015, respectively.  At March 31, 2016 and December 31, 2015, the Company held 3,355 shares of KLC stock which is recorded at its fair value of $50 and $54, respectively, based on the last closing price during each respective quarter on March 31, 2016 and December 30, 2015.

 

The Company reviews the investment in Jinhui for indicators of other-than-temporary impairment in accordance with ASC 320-10. Based on the Company’s review, it deemed the investment in Jinhui to be other-than-temporarily impaired as of September 30, 2015 and December 31, 2015 due to the duration and severity of the decline in its market value versus its cost basis and the absence of the intent and ability to recover the initial carrying value of the investment. As a result, the Company recorded an impairment charge in the Condensed Consolidated Statement of Operations of $37,877 during the year ended December 31, 2015.  The Company will continue to review its investments in Jinhui and KLC for impairment on a quarterly basis. There were no impairment charges during the three months ended March 31, 2016 or 2015. The Company’s investment in Jinhui is a Level 1 item under the fair value hierarchy, refer to Note 10 — Fair Value of Financial Instruments.

 

The unrealized gain (losses) on the Jinhui capital stock and KLC stock are a component of AOCI since these investments are designated as AFS securities.  As part of fresh-start reporting, the Company revised its cost basis for its investments in Jinhui and KLC based on their fair values on the Effective Date.  As a result of the other-than-temporary impairment of the investment in Jinhui, the cost basis for the investment in Jinhui is based on its fair value as of December 31, 2015.

 

Refer to Note 9 — Accumulated Other Comprehensive Income (Loss) for a breakdown of the components of AOCI, including the effects of any sales of Jinhui shares and other-than-temporary impairment of the investment in Jinhui.

 

6 — NET LOSS PER COMMON SHARE

 

The computation of basic net loss per share is based on the weighted-average number of common shares outstanding during the reporting period. The computation of diluted net loss per share assumes the vesting of nonvested stock awards (refer to Note 18 — Stock-Based Compensation), for which the assumed proceeds upon vesting are deemed to be the amount of compensation cost attributable to future services and are not yet recognized using the treasury stock method, to the extent dilutive.  Of the 1,352,644 nonvested shares outstanding at March 31, 2016 (refer to Note 18 — Stock-Based Compensation), all are anti-dilutive. Of the 5,704,974 of MIP Warrants and 3,936,761 of equity warrants outstanding at March 31, 2016, all are anti-dilutive. The Company’s diluted net loss per share will also reflect the assumed conversion of the equity warrants issued on the Effective Date and MIP Warrants issued by the Company (refer to Note 18 — Stock-Based Compensation) if the impact is dilutive under the treasury stock method.

 

The components of the denominator for the calculation of basic and diluted net loss per share are as follows:

 

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		For the Three Month Ended March 31,
		2016		2015
Common shares outstanding, basic:
Weighted-average common shares outstanding, basic		72,187,954		60,430,789
Common shares outstanding, diluted:
Weighted-average common shares outstanding, basic		72,187,954		60,430,789
Dilutive effect of warrants		—		—
Dilutive effect of restricted stock awards		—		—
Weighted-average common shares outstanding, diluted		72,187,954		60,430,789

 

7 - RELATED PARTY TRANSACTIONS

 

The following represent related party transactions reflected in these condensed consolidated financial statements:

 

The Company incurred travel and other office related expenditures from Gener8 Maritime, Inc. (“Gener8”), where the Company’s Chairman, Peter C. Georgiopoulos, also serves as Chairman of the Board.  During the three months ended March 31, 2016 and 2015, the Company incurred travel and other office related expenditures totaling $24 and $30, respectively, reimbursable to Gener8 or its service provider.  At March 31, 2016 and December 31, 2015, the amount due to Gener8 from the Company was $8 and $8, respectively.

 

During the three months ended March 31, 2016 and 2015, the Company incurred legal services (primarily in connection with vessel acquisitions) aggregating $0 and $8, respectively, from Constantine Georgiopoulos, the father of Peter C. Georgiopoulos, Chairman of the Board.  At March 31, 2016 and December 31, 2015, the amount due to Constantine Georgiopoulos was $11 and $11, respectively.

 

The Company has entered into agreements with Aegean Marine Petroleum Network, Inc. (“Aegean”) to purchase lubricating oils for certain vessels in its fleet.  Peter C. Georgiopoulos, Chairman of the Board of the Company, is Chairman of the Board of Aegean.  During the three months ended March 31, 2016 and 2015, Aegean supplied lubricating oils to the Company’s vessels aggregating $443 and $343, respectively.  At March 31, 2016 and December 31, 2015, $274 and $219 remained outstanding, respectively.

 

During the three months ended March 31, 2016 and 2015, the Company invoiced MEP for technical services provided, including termination fees, and expenses paid on MEP’s behalf aggregating $812 and $818, respectively.  Peter C. Georgiopoulos, Chairman of the Board, is a director of and has a minority interest in MEP.  At March 31, 2016, $22 was due to MEP from the Company.  At December 31, 2015, $603 was due to the Company from MEP.  Total service revenue earned by the Company, including termination fees, for technical service provided to MEP for the three months ended March 31, 2016 and 2015 was $811 and $810, respectively.

 

8 - DEBT

 

Long-term debt consists of the following:

 

		March 31, 2016			December 31, 2015
Principal amount		$	569,980		$	588,434
Less: Unamortized debt issuance costs		(8,883		)	(9,411		)
Less: Current portion		(561,097		)	(579,023		)
Long-term debt		$	—		$	—

 

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