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Genco Shipping & Trading (GNK) - 2021 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements (unaudited) This section presents Genco Shipping & Trading Limited's unaudited condensed consolidated financial statements for Q3 and the first nine months of 2021, including balance sheets, statements of operations, comprehensive income, equity, and cash flows, along with detailed explanatory notes Notes to Condensed Consolidated Financial Statements%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies and specific financial statement items, covering business operations, COVID-19 impact, fleet renewal, debt refinancing, derivative instruments, and a post-quarter dividend declaration - As of September 30, 2021, the Company's fleet consisted of 43 drybulk vessels with an aggregate capacity of approximately 4,568,600 dwt29 - In September 2021, the Company formed a 50/50 joint venture, GS Shipmanagement Pte. Ltd. ("GSSM"), with Synergy Marine to provide ship management services to the Company's vessels, and GSSM is consolidated into the Company's financial statements3031 - The company recorded a loss on debt extinguishment of $4.4 million in Q3 2021 due to the refinancing of the $495 Million and $133 Million Credit Facilities with a new $450 Million Credit Facility57 - No vessel impairment was recorded in the three and nine months ended September 30, 2021, in contrast to significant impairments of $21.9 million and $134.7 million in the same periods of 2020, respectively46 - The company is actively renewing its fleet, acquiring several modern Ultramax vessels and disposing of older Supramax and Handysize vessels during 2021727678 - Subsequent to the quarter end, on November 3, 2021, the company declared a quarterly dividend of $0.15 per share, and on November 2, 2021, it completed the sale of the Genco Provence for $13.25 million140141 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, fleet strategy, and market conditions, highlighting a significant turnaround in 2021 driven by high drybulk freight rates and a new value strategy focused on debt reduction and quarterly dividends General and Strategy Genco operates a fleet focused on Capesize, Ultramax, and Supramax vessels, employing a portfolio approach to chartering, and in April 2021, launched a new comprehensive value strategy prioritizing debt reduction and a sizeable quarterly dividend - The company's fleet focuses on Capesize, Ultramax, and Supramax vessels, having disposed of its last Handysize vessel in February 2021148 - A new comprehensive value strategy was announced in April 2021, prioritizing debt reduction and the payment of a sizeable quarterly dividend, with the first such dividend anticipated for Q4 2021 results (payable in Q1 2022)149 Results of Operations The company's financial results dramatically improved in Q3 and the first nine months of 2021, driven by significantly increased Time Charter Equivalent (TCE) rates across all vessel classes and the absence of substantial vessel impairment charges seen in 2020 Financial Performance Comparison (Q3 2021 vs Q3 2020) | Metric | Q3 2021 | Q3 2020 | Change | | :--- | :--- | :--- | :--- | | Voyage Revenues | $155.3M | $87.5M | +77.4% | | Net Income (Loss) | $57.1M | ($21.1M) | +$78.2M | | EPS (Diluted) | $1.34 | ($0.50) | +$1.84 | | EBITDA | $75.3M | $0.013M | +$75.2M | Time Charter Equivalent (TCE) Rate Comparison (Q3 2021 vs Q3 2020) | Vessel Class | Q3 2021 Daily Rate | Q3 2020 Daily Rate | % Change | | :--- | :--- | :--- | :--- | | Fleet Average | $29,287 | $11,456 | +155.6% | | Capesize | $30,809 | $16,287 | +89.2% | | Ultramax | $23,271 | $10,965 | +112.2% | | Supramax | $31,996 | $9,523 | +236.0% | - Average daily vessel operating expenses increased to $5,833 in Q3 2021 from $4,961 in Q3 2020, primarily due to higher crew expenses related to COVID-19 disruptions and a larger weighting of Capesize vessels in the fleet200 Liquidity and Capital Resources The company's liquidity is primarily derived from operations and credit facilities, with $80.2 million in cash and $137.5 million available under its new $450 Million Credit Facility as of September 30, 2021, deemed sufficient for the next twelve months, alongside a new dividend policy and planned capital expenditures for 2022 - As of September 30, 2021, the company had $80.2 million in unrestricted cash and cash equivalents and $137.5 million available under its revolving credit facility236 - A new quarterly dividend policy was adopted, with the dividend calculated as: Operating cash flow - Debt repayments - Capex for drydocking - Reserve241 Estimated Future Capital Expenditures (2021-2022) | Period | Est. Drydocking Cost | Est. BWTS Cost | Est. Fuel Efficiency Upgrade Costs | Est. Off-hire Days | | :--- | :--- | :--- | :--- | :--- | | Q4 2021 | $2.2M | $0.6M | $0.2M | 60 | | 2022 | $12.3M | $6.1M | $8.6M | 300 | - Net cash from operating activities for the first nine months of 2021 was $135.0 million, a significant increase from $16.0 million in the same period of 2020, driven by higher charter rates259 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk on its floating-rate debt, managed by $200 million in interest rate cap agreements, with currency exchange risk considered immaterial - The company is exposed to interest rate risk on its floating-rate debt, and as of September 30, 2021, it held three interest rate cap agreements with a total notional amount of $200.0 million to hedge this risk295300 - A 1% increase in LIBOR would result in an estimated increase of $3.0 million in interest expense for the nine months ended September 30, 2021299 - Currency exchange rate risk is deemed immaterial as most revenues and operating costs are in U.S. Dollars303304 Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period305 - No changes in internal control over financial reporting occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls306 PART II —OTHER INFORMATION Risk Factors This section updates existing risk factors, highlighting potential adverse impacts from new tax legislation, including proposed 15% minimum taxes in the U.S. and globally, and notes heightened geopolitical risks from rising U.S.-China tensions that could disrupt shipping routes and markets - The company's tax position could be adversely affected by proposed legislative changes, including a potential 15% minimum corporate tax in the U.S. and a new OECD framework for a 15% global minimum tax rate for multinational enterprises307308 - Geopolitical risks are heightened due to rising tensions between the U.S. and China, particularly concerning Taiwan and trade restrictions, which could interfere with shipping routes and disrupt markets309 Exhibits This section indexes all exhibits filed with the quarterly report, including the new $450 Million Credit Agreement and certifications from the Chief Executive Officer and Chief Financial Officer - The exhibits include the US$450 Million Credit Agreement dated August 3, 2021, which is a key document for the company's recent refinancing313 - Certifications from the CEO and CFO pursuant to the Securities Exchange Act of 1934 and U.S.C. Section 1350 are filed with the report313