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Genco Shipping & Trading Limited Announces Fourth Quarter 2011 Financial Results

Wednesday, 22 February 2012 | 00:00
Genco Shipping & Trading Limited yesterday reported its financial results for the three and twelve months ended December 31, 2011.The following financial review discusses the results for the three months and years ended December 31, 2011 and December 31, 2010.Financial Review: 2011 Fourth Quarter. The Company recorded net income attributable to Genco for the fourth quarter of 2011 of $0.3 million, or $0.01 basic and diluted earnings per share. Comparatively, for the three months ended December 31, 2010, net income attributable to Genco was $34.8 million, or $0.99 basic and $0.90 diluted earnings per share.
EBITDA was $57.3 million for the three months ended December 31, 2011 versus $91.9 million for the three months ended December 31, 2010.
Robert Gerald Buchanan, President, commented, "During the fourth quarter, we maintained an opportunistic time charter approach while further expanding the Company's high-quality fleet. Specifically, we completed the acquisition of five Handysize vessels that we entered into in 2010 with the delivery of the Genco Spirit. As we continue to expand Genco's leading brand as an owner and operator of modern tonnage, this vessel commenced a long-term spot market-related time charter with a top counterparty. Consistent with our strategy, we continue to employ a majority of our vessels on contracts that preserve the ability to benefit from future rate increases while delivering service that meets the highest industry standards for our leading customers."
Genco's voyage revenues decreased to $96.3 million for the three months ended December 31, 2011 versus $129.9 million for the three months ended December 31, 2010, mainly due to lower charter rates achieved by the majority of our vessels and partially 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 to $16,805 per day for the three months ended December 31, 2011 compared to $24,303 per day for the three months ended December 31, 2010. The decrease in TCE rates resulted from lower charter rates achieved in the fourth quarter of 2011 versus the same period in 2010 for the majority of the vessels in our fleet. The return of iron ore and coal cargoes during the second half of the year benefited earnings on our vessels that trade on spot-market related charters. Capesize rates for the quarter peaked in December, followed by relative weakness in the last two weeks of the year.
Total operating expenses increased to $73.2 million for the three months ended December 31, 2011 from $70.6 million for the three-month period ended December 31, 2010. Vessel operating expenses were $29.1 million for the fourth quarter of 2011 compared to $26.5 million for the same period in 2010. The increase in vessel operating expenses was primarily due to the operation of a larger fleet and higher crew related expenses, partially offset by lower expenses related to stores and supplies and lube consumption for the fourth quarter of 2011 versus the same period in 2010.
Depreciation and amortization expenses increased to $34.7 million for the fourth quarter of 2011 from $34.6 million for the fourth quarter of 2010 as a result of the growth of our fleet offset by a decrease in depreciation due to a change in estimated residual scrap value as described below. For the year beginning January 1, 2011, the Company revised its estimated residual scrap value from $175 per lightweight ton to $245 per lightweight ton, which had the impact of decreasing depreciation expense by $0.6 million for the three months ended December 31, 2011. The change in residual scrap value will only affect depreciation on a prospective basis. General, administrative and management fees decreased to $8.0 million in the fourth quarter of 2011 from $8.8 million in the fourth quarter of 2010, primarily due to lower employee compensation, partially offset by higher office-related expenses and higher third-party management fees due to the growth of our fleet.
Daily vessel operating expenses, or DVOE, increased to $5,142 per vessel per day during the fourth quarter of 2011 as compared to $4,990 per vessel per day for the fourth quarter of 2010 mainly due to higher crew and maintenance related expenses offset by lower lube consumption and expenses related to stores and supplies. 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 DVOE budget for 2012 is $5,200 per vessel per day on a weighted average basis for the 53 vessels in our fleet.
John C. Wobensmith, Chief Financial Officer, commented, "Genco ended 2011 with a sizeable cash balance of $229.4 million, enhancing the Company's ability to operate in a challenging drybulk market. Consistent with our objective to strengthen the Company's financial position, we entered into agreements during the fourth quarter to amend our three credit facilities under favorable terms. Specifically, both the maximum leverage ratio covenant and the interest coverage ratio covenant have been waived for each facility through and including the quarter ending March 31, 2013. A new covenant has also been introduced for the same period relating to the Company's leverage. In connection with these agreements, we prepaid an aggregate of $62.5 million in principal loan amounts. The continued support of our lending group serves as a core differentiator for our Company and underscores Genco's industry leadership as we remain committed to a strong financial foundation for the benefit of shareholders."
Financial Review: Full Year 2011
Net income attributable to Genco was $25.4 million or $0.72 basic and diluted earnings per share for the year ended December 31, 2011, compared to $141.2 million or $4.28 basic and $4.07 diluted earnings per share for the year ended December 31, 2010. Voyage revenues decreased to $388.9 million for the year ended December 31, 2011 compared to $447.4 million for the year ended December 31, 2010. EBITDA was $249.1 million for the year ended December 31, 2011 versus $330.7 million for the year ended December 31, 2010. TCE rates obtained by the Company decreased to $17,644 per day for the year ended December 31, 2011 from $27,419 per day for the year ended December 31, 2010, mainly due to lower rates achieved for our vessels in 2011 as compared to the year before as well as the operation of smaller class vessels that were acquired throughout the year for Genco. Total operating expenses were $279.6 million for the year ended December 31, 2011 compared to $227.4 million for the year ended December 31, 2010, and daily vessel operating expenses per vessel were $4,819 in 2011 versus $4,852 in 2010.
Genco Shipping & Trading Limited's Fleet
Genco Shipping & Trading Limited transports iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes. Excluding Baltic Trading's vessels, we own a fleet of 53 drybulk vessels, consisting of nine Capesize, eight Panamax, 17 Supramax, six Handymax and 13 Handysize vessels, with an aggregate carrying capacity of approximately 3,810,000 dwt. In addition, our subsidiary Baltic Trading Limited currently owns a fleet of nine drybulk vessels, consisting of two Capesize, four Supramax, and three Handysize vessels.
Our current fleet, other than Baltic Trading's vessels, contains ten groups of sister ships, which are vessels of virtually identical sizes and specifications. We believe that maintaining a fleet that includes sister ships reduces costs by creating economies of scale in the maintenance, supply and crewing of our vessels. As of February 21, 2012, the average age of our fleet was 6.8 years, as compared to the average age for the world fleet of approximately 12 years for the drybulk shipping segments in which we compete.
Source: Genco Shipping & Trading Limited
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