Gener8 Maritime, Inc., a leading U.S.-based provider of international seaborne crude oil transportation services, announced its financial results for the three months ended March 31, 2017.

Highlights

Recorded net income of $26.9 million, or $0.32 basic and diluted earnings per share, for the three months ended March 31, 2017, compared to $60.9 million, or $0.74 basic and diluted earnings per share for the same period in the prior year. Recorded adjusted net income of $38.5 million, or $0.46 basic and diluted adjusted earnings per share, for the three months ended March 31, 2017, compared to $64.8 million or $0.78 basic and diluted earnings per share for the same period in the prior year.

Increased vessel operating days by 24.4% to 3,510 in the three months ended March 31, 2017 compared to 2,822 in the same period in the prior year. Increased full fleet “ECO” operating days to 49% in the three months ended March 31, 2017, compared to 20% in the same period in the prior year.

Took delivery of two “ECO” newbuilding VLCCs, the Gener8 Hector and the Gener8 Ethos during the three months ended March 31, 2017.

Sold the 2003-built VLCC tanker Gener8 Ulysses in February 2017 for net proceeds of $10.2 million after prepaying $20.0 million of associated debt.

Entered into a series of transactions subsequent to the end of the quarter that are expected to increase cash on the balance sheet by more than $82 million. These include:

Modified the Company’s interest rate swap agreements, which resulted in aggregate net cash proceeds of $18.2 million in April 2017.

Entered into agreements to sell two 2016-built VLCCs, the Gener8 Noble and the Gener8 Theseus, for expected combined gross proceeds of $162 million and expected net cash increase of $61.5 million following prepayment of debt and the release of working capital from the pool.

Entered into agreement to sell the 2002-built Aframax tanker Gener8 Daphne prior to the vessel’s special survey.

“We are pleased that our “ECO” vessels continue to earn a demonstrable premium. This is a significant competitive advantage for us, particularly as the market enters a somewhat weaker rate environment amplified by growth in the size of the global fleet,” said Peter Georgiopoulos, Chairman and Chief Executive Officer of Gener8 Maritime. “Subsequent to the end of the quarter, we made a series of important decisions to provide us significant flexibility to manage our business.

The resulting stronger financial platform will serve as a buffer through any extended market downturn and also allow us to be opportunistic going forward. Importantly, we were able to improve our financial profile without diluting our shareholders. In the meantime, following the completion of our newbuilding program expected in the third quarter and assuming no further changes to our fleet, the DWT-weighted average age of our fleet will be 4.9 years, and our VLCCs will have an average age of just 2.7 years, giving us the youngest and most modern VLCC fleet among our public company peers. This is significant as we believe the modernity of our fleet will contribute to competitive operating expenses and ultimately to our profitability.”

Leo Vrondissis, Chief Financial Officer, added, “Our balance sheet was strengthened during the first quarter, primarily as a result of solid operating results and the sale of the 2003-built Gener8 Ulysses, which resulted in net proceeds of $10.2 million. Subsequent to the first quarter we are expecting to add cash to the balance sheet through a series of transactions which include the re-couponing of our interest rate swaps and entering into agreements to sell three of our vessels which are expected to, on a combined basis, add more than $82 million of cash to our balance sheet.”

First Quarter 2017 Results Summary

The Company recorded net income for the three months ended March 31, 2017 of $26.9 million, or $0.32 basic and diluted earnings per share, compared to net income of $60.9 million, or $0.74 basic and diluted earnings per share, for the prior year period.

Adjusted net income was $38.5 million, or $0.46 basic and diluted adjusted earnings per share, for the three months ended March 31, 2017, compared to adjusted net income of $64.8 million, or $0.78 basic and diluted adjusted income per share, for the prior year period.

Adjusted EBITDA for the three months ended March 31, 2017 was $86.0 million, compared to $87.7 million for the prior year period. Please refer to the tables at the end of this press release for a reconciliation of adjusted net income and adjusted EBITDA to net income.

The average daily spot TCE rates obtained by the Company’s VLCC fleet, including its vessels that were deployed in the Navig8 pools, were $43,143 for the three months ended March 31, 2017. During the three months ended March 31, 2017, the Company’s “ECO” VLCC fleet earned an average daily TCE of $43,965, and the Company’s non-“ECO” VLCC fleet earned an average daily TCE of $39,343. The average daily TCE rate obtained by the Company on a full-fleet basis was $34,493 during the three months ended March 31, 2017, compared to $43,119 for the prior year period.

Net voyage revenue was $121.1 million for the three months ended March 31, 2017, substantially unchanged as compared to $121.7 million in the prior year period. A decrease in average daily fleet TCE rate resulted in a decrease in net voyage revenue of approximately $24.3 million for the three months ended March 31, 2017 compared to the prior year period. The decrease in net voyage revenues was partially offset by an increase in the Company’s vessel operating days by 688 days, or 24.4%, to 3,510 days, compared to 2,822 days for prior year period. The increase in the Company’s vessel operating days resulted in an increase in net voyage revenue of approximately $23.7 million for the three months ended March 31, 2017 compared to the prior year period. The increase in the Company’s vessel operating days was primarily the result of the deployment of 12 additional VLCC newbuilding vessels since the end of the prior year period.

Direct vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, and maintenance and repairs, increased by $4.3 million, or 17.3%, to $28.8 million for the three months ended March 31, 2017 compared to $24.5 million for the prior year period. The increase in direct vessel operating expenses was primarily due to the increase by 8.8 vessels, or by 28.8%, in the average size of the Company’s fleet to 39.5 vessels for the three months ended March 31, 2017, as compared to 30.7 vessels for the prior year period. The increase in direct vessel operating expenses was partially offset by a decrease in daily direct vessel operating expenses per vessel of $701, or 8.0%, to $8,081 per day for the three months ended March 31, 2017 compared to $8,782 per day for the prior year period, primarily as a result of lower operating costs, including crew cost, repair and maintenance and other costs, associated with the Company’s newly delivered vessels.

Navig8 charterhire expenses of $6.0 thousand for the three months ended March 31, 2017 comprised of profit share adjustments related to the profit share plan for Nave Quasar, a vessel chartered-in by Gener8 Maritime Subsidiary Inc. (formerly known as Navig8 Crude Tankers, Inc.), which became our subsidiary as a result of the 2015 merger. We had $3.3 million of Navig8 charterhire expenses for the prior year period. The time charter under which this vessel had been chartered-in expired, and the vessel was redelivered to its owner, in March 2016.

General and administrative expenses increased by $0.3 million, or 4.2%, to $8.4 million during the three months ended March 31, 2017 compared to $8.1 million for the prior year period. The increase was primarily due to a net increase in the stock-based compensation expense of $0.6 million during the three months ended March 31, 2017 compared to the prior year period, partially offset by a decrease of $0.3 million in legal expense and other professional fees, primarily associated with the Company’s refinancing activities as well as other matters that occurred in the prior year period.

Depreciation and amortization expenses increased by $10.2 million, or 58.4%, to $27.7 million during the three months ended March 31, 2017 compared to $17.5 million for the prior year period. Depreciation of vessel costs increased by $10.4 million, or 66.7%, to $26.0 million during the three months ended March 31, 2017 compared to $15.6 million for the prior year period. This increase was primarily due to an increase in the Company’s fleet size compared to the prior year period.

Loss on disposal of vessels, net increased by $9.7 million during the three months ended March 31, 2017 compared to $0.1 million for the prior year period, as the Gener8 Daphne and the Gener8 Elektra were moved to assets held for sale.

Net interest expense increased by $12.8 million to $20.1 million for the three months ended March 31, 2017 compared to $7.3 million for the prior year period. The increase was primarily attributable to the decrease in capitalized interest of $8.4 million, or 85.7%, to $1.4 million compared to $9.8 million for the prior year period related to the capitalization of interest expense associated with vessels under construction as a result of the funding of the acquisition of the Company’s VLCC newbuildings. Capitalized interest results in a reduction of interest expense, net. The Company does not capitalize interest expense associated with the funding of the Company’s VLCC newbuildings after delivery of the vessels. Contributing to the increase in interest expense, net during the three months ended March 31, 2017, was an increase in interest expense associated with the Company’s credit facilities of $4.0 million, or 48.6%, to $12.4 million compared to $8.4 million for the prior year period due to the increase in outstanding borrowings under the Company’s credit facilities and senior notes. The Company’s outstanding borrowings under its credit facilities and senior notes were $1.6 billion and $1.2 billion as of March 31, 2017 and 2016, respectively. In addition, in May 2016, the Company entered into six interest rate swap transactions that effectively fix the interest rate on a portion of its outstanding variable rate debt to a range of fixed rates. During the three months ended March 31, 2017, the Company recorded $0.8 million related to interest rate swaps settlements as interest expense, net.

Also contributing to the increase in interest expense, net was an increases in amortization of deferred financing costs of $0.7 million, or 30.0%, to $3.2 million for the three months ended March 31, 2017 compared to $2.4 million for the prior year period. These increases in interest expense, net was partially offset by a decrease in commitment fees of $1.6 million, or 85.7% to $0.3 million for the three months ended March 31, 2017 compared to $1.9 million for prior year period.

The Company incurred these additional deferred financing costs and commitment fees in connection with its entry into the refinancing credit facility, which refinanced its former senior secured credit facilities, and the Amended Sinosure Credit Facility and the Korean Export Credit Facility, which it has used to fund a portion of the installment payments due under the its VLCC newbuildings contracts.

During the three months ended March 31, 2017, the Company’s interest rate swap agreements were highly effective; the Company recognized $0.7 million of earnings, as other (expense) income, net, related to the impact of its interest rate swap agreements.

As of March 31, 2017, the Company’s cash balance was $143.4 million, compared to $94.7 million as of December 31, 2016. As of March 31, 2017, the Company’s total debt was $1.6 billion and net debt was $1.4 billion.

As of March 31, 2017, there were 82,960,194 shares of the Company’s common stock outstanding.

Reconciliation Tables

EBITDA represents net income (loss) plus net interest expense and depreciation and amortization. Adjusted EBITDA represents EBITDA adjusted to exclude the items set forth in the table below, which represent certain non-cash, one-time and other items that the Company’s believes are not indicative of the ongoing performance of its core operations. Adjusted Net Income represents Net Income adjusted to exclude the same non-cash, one-time and other items, as well as commitment fees. EBITDA, Adjusted EBITDA and Adjusted Net Income are included in this presentation because they are used by management and certain investors as measures of operating performance. EBITDA, Adjusted EBITDA and Adjusted Net Income are used by analysts in the shipping industry as common performance measures to compare results across peers. EBITDA, Adjusted EBITDA and Adjusted Net Income are not items recognized by accounting principles generally accepted in the United States of America (“GAAP”), and should not be considered in isolation or used as alternatives to net income, operating income, cash flow from operating activity or any other indicator of the Company’s operating performance or liquidity required by GAAP. The Company’s presentation of EBITDA, Adjusted EBITDA and Adjusted Net Income is intended to supplement investors’ understanding of its operating performance by providing information regarding its ongoing performance that exclude items the Company believes do not directly affect its core operations and enhancing the comparability of its ongoing performance across periods. The Company presents Adjusted EBITDA and Adjusted Net Income in addition to EBITDA and Net Income because Adjusted EBITDA and Adjusted Net Income eliminate the impact of additional non-cash, one-time and other items not associated with the ongoing performance of its core operations, including charges associated with stock-based compensation, gains and losses on the sale of vessels and costs associated with its financing activities, that the Company believes further reduce the comparability of the ongoing performance of its core operations across periods. The Company’s management considers EBITDA, Adjusted EBITDA and Adjusted Net Income to be useful to investors because such performance measures provide information regarding the profitability of its core operations and facilitate comparison of its operating performance to the operating performance of the Company’s peers. Additionally, the Company’s management uses EBITDA, Adjusted EBITDA and Adjusted Net Income as performance measures and they are also presented for review at the Company’s board meetings. While the Company believes these measures are useful to investors, the definitions of EBITDA, Adjusted EBITDA and Adjusted Net Income used here may not be comparable to similar measures used by other companies. In addition, these definitions are also not the same as the definition of EBITDA, Adjusted EBITDA and Adjusted Net Income used in the financial covenants in the Company’s debt instruments.

Please see below for a reconciliation of the following adjusted amounts to Net Income (dollars in thousands)

(1) Non-cash G&A expenses, excluding stock-based compensation expense, include accounts receivable reserves (including revenue offsets), amortization of lease assets that were recorded in connection with fresh start accounting and amortization of straight line rent expense.

Net debt represents total debt less cash, discounts and deferred financing costs. Net debt is included is this presentation because it is used by management and certain investors as a measure of the Company’s overall liquidity, financial flexibility and leverage. Furthermore, certain investors, creditors, and credit analysts monitor the Company’s net debt as part of their assessments of its business. Net debt is not recognized by GAAP, and should not be considered in isolation or used as alternatives financial condition or liquidity required by GAAP. In particular, the Company typically needs a portion of its cash for purposes other than debt reduction. The deduction of these items from total debt in the calculation of net debt should thus not be understood to mean that any of these items are available exclusively for debt reduction at any given time.

Long-term debt reconciliation table

Please see below for a reconciliation of the following adjusted amounts to long-term debt (dollars in thousands)

Full Report

Source: Gener8 Maritime