The Company disclosed the following information today on updated estimated breakeven rates for the quarterly period ending June 30, 2018, which take into account entering into the New Credit Facility. The information in this Item 7.01 is based on preliminary estimates for such period and is subject to change:
Daily Expenses by Category
(1)
|
Free Cash Flow
(2)
|
Net Income
|
Direct Vessel Operating
(3)
|
$4,440
|
$4,440
|
General and Administrative Expenses
(4)
|
1,014
|
1,197
|
Technical Management Fees
(5)
|
357
|
357
|
Drydocking
(6)
|
156
|
-
|
Interest Expense
(7)
|
1,434
|
1,553
|
Fixed Debt Repayments
(8)
|
128
|
-
|
Depreciation
(9)
|
-
|
3,096
|
Daily Expense
(10)
|
$7,529
|
$10,643
|
Number of Vessels
|
60.00
|
60.00
|
(1)
|
Estimated daily expenses are presented for illustrative purposes.
|
(2)
|
Free Cash Flow is defined as net income plus depreciation less capital expenditures, primarily vessel drydockings, plus other non-cash items, namely nonvested stock amortization and deferred financing costs, less fixed debt repayments. However, this does not include any adjustment for accounts payable and accrued expenses incurred in the ordinary course of business. We consider Free Cash Flow to be an important indicator of our ability to service debt.
|
(3)
|
Direct Vessel Operating Expenses are based on management’s estimates and budgets submitted by our technical managers. We believe DVOE are best measured for comparative purposes over a 12-month period.
|
(4)
|
General & Administrative Expenses are based on a budget set forth at the beginning of the year. Actual results may vary. Included in the above are expenses associated with the debt refinancing under the $460 million facility that are currently estimated to be approximately $1.0 million and remain subject to change based on actual results.
|
(5)
|
Management Fees are based on the contracted monthly rate per vessel for the technical management of our fleet.
|
(6)
|
Drydocking expenses represent estimated drydocking expenditures for Q2 2018.
|
(7)
|
Interest expense is based on our debt level as of March 31, 2018 less scheduled debt repayments in Q2 2018 under our credit facilities and does not assume that we exercise our option to PIK 150 bps of the 375 bps margin under our $400 Million Credit Facility. Deferred financing costs are included in calculating net income interest expense. Interest expense is calculated based on an assumed LIBOR rate under our credit facilities plus the facilities’ respective margins. Figures presented reflect the funding of the new $460 million facility in June 2018. Figures presented do not include a loss on debt extinguishment totaling approximately $4.5 million anticipated to be recorded in Q2 2018 associated with the debt refinancing.
|
(8)
|
Genco’s fixed debt repayments for Q2 2018 aggregate to $0.7 million. Fixed debt repayments exclude $4.1 million paid down under the $400 Million Credit Facility in May 2018 from cash flow from operations in Q1 2018 and the balance of the debt pay down to $460 million of debt outstanding in June 2018.
|
(9)
|
Depreciation is based on cost less estimated residual value and amortization of drydocking costs. Depreciation expense utilizes a residual scrap rate of $310 per LWT.
|
(10)
|
The amounts shown will vary based on actual results.
|
Limitation on Incorporation by Reference
The information in this Item 7.01 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that Section, nor shall such information be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as otherwise stated in such filing.
“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995
This report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements use words such as “anticipate,” “budget,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with a discussion of potential future events, circumstances or future operating or financial performance. These forward-looking statements are based on our management’s current expectations and observations. Included among the factors that, in our view, could cause actual results to differ materially from the forward looking statements contained in this report are the following: (i) declines or sustained weakness in demand in the drybulk shipping industry; (ii) continuation of weakness or declines in drybulk shipping rates; (iii) changes in the supply of or demand for drybulk products, generally or in particular regions; (iv) changes in the supply of drybulk carriers including newbuilding of vessels or lower than anticipated scrapping of older vessels; (v) changes in rules and regulations applicable to the cargo industry, including, without limitation, legislation adopted by international organizations or by individual countries and actions taken by regulatory authorities; (vi) increases in
costs and expenses including but not limited to: crew wages, insurance, provisions, lube oil, bunkers, repairs, maintenance, general and administrative expenses, and management fee expenses; (vii) whether our insurance arrangements are adequate; (viii) changes in general domestic and international political conditions; (ix) acts of war, terrorism, or piracy; (x) changes in the condition of the Company’s vessels or applicable maintenance or regulatory standards (which may affect, among other things, our anticipated drydocking or maintenance and repair costs) and unanticipated drydock expenditures; (xi) the Company’s acquisition or disposition of vessels; (xii) the amount of offhire time needed to complete repairs on vessels and the timing and amount of any reimbursement by our insurance carriers for insurance claims, including offhire days; (xiii) the completion of definitive documentation with respect to charters; (xiv) charterers’ compliance with the terms of their charters in the current market environment; (xv) the extent to which our operating results continue to be affected by weakness in market conditions and freight and charter rates; (xvi) our ability to maintain contracts that are critical to our operation, to obtain and maintain acceptable terms with our vendors, customers and service providers and to retain key executives, managers and employees; (xvii) the actual amount of the loss on debt extinguishment that we record
for the quarter ended June 30, 2018; and other factors listed from time to time in our public filings with the Securities and Exchange Commission including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2017 and our subsequent reports on Form 10-Q and Form 8-K.
Our ability to pay dividends in any period will depend upon various factors, including the limitations under any credit agreements to which we may be a party, applicable provisions of Marshall Islands law and the final determination by our board of directors each quarter after its review of our financial performance. The timing and amount of dividends, if any, could also be affected by factors affecting cash flows, results of operations, required capital expenditures, or reserves. As a result, the amount of dividends actually paid may vary. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.