Gener8 Maritime, Inc. Announces Second Quarter 2017 Financial Results

NEW YORK, Aug. 1, 2017 /PRNewswire/ -- Gener8 Maritime, Inc. (NYSE: GNRT) ("Gener8 Maritime" or the "Company"), a leading U.S.-based provider of international seaborne crude oil transportation services, today announced its financial results for the three months and six ended June 30, 2017.

Highlights

• Including a non-cash loss of $67.9 million due to ships held for sale, recorded net loss of $82.5 million, or $0.99 basic and diluted loss per share, for the three months ended June 30, 2017, compared to net income of $38.0 million, or $0.46 basic and diluted earnings per share for the same period in the prior year. 
• Recorded adjusted net loss of $8.9 million, or $0.11 basic and diluted adjusted loss per share, for the three months ended June 30, 2017, compared to adjusted net income of $42.0 million or $0.51 basic and diluted adjusted earnings per share for the same period in the prior year.
• Increased vessel operating days by 18.0% to 3,352 in the three months ended June 30, 2017 compared to 2,841 in the same period in the prior year.  Increased full fleet "ECO" operating days to 54.2% in the three months ended June 30, 2017, compared to 30.8% in the same period in the prior year. 
• Entered into a series of transactions that are expected to increase cash on the balance sheet by more than $87 million and reduce total indebtedness by approximately $144 million.  These include:
• Modified the Company's interest rate swap agreements, resulting in aggregate net cash proceeds of $18.2 million in April 2017.
• Sold the following vessels for net cash proceeds of $65.4 million after debt repayment of $119.7 million:
• A 2002-built Aframax (Gener8 Daphne), two 2016-built VLCCs (Gener8 Noble and Gener8 Theseus), and a 2002-built Suezmax (Gener8 Orion).
• Entered into agreements in July 2017 to sell the following vessels for expected net cash proceeds of $3.4 million after debt repayment of $24.1 million:
• Two 1999-built Suezmax tankers, Gener8 Horn and Gener8 Phoenix, for demolition prior to the vessels' special surveys, and the 2002-built Aframax Gener8 Elektra

"We continue to take important steps to strengthen our platform and balance sheet" said Peter Georgiopoulos, Chairman and Chief Executive Officer of Gener8 Maritime. "In this seasonally weaker rate environment, we remain focused on maximizing our financial flexibility in order to manage our business for the near- and long-term.  We continue to dispose of older vessels, streamlining our fleet and focusing on high quality tonnage with the best return profile.  This strengthens our competitive position in the market. We believe the strategy we are pursuing is prudent and reflects our approach to managing our balance sheet and market exposure."

Leo Vrondissis, Chief Financial Officer, added, "Our balance sheet is expected to be further strengthened during the second quarter, by our agreeing to transactions that are expected to provide over $87.0 million of additional liquidity. The sales of our older vessels have also been timely, as several have come before the vessels' 2017 special surveys, which according to budgeted amounts will preserve an additional $18 million of liquidity."

Fleet Performance

The average TCE rates earned by Gener8 Maritime's vessels are detailed below:

Second Quarter 2017 Results Summary 

The Company recorded net loss for the three months ended June 30, 2017 of $82.5 million, or $0.99 basic and diluted loss per share, compared to net income of $38.0 million, or $0.46 basic and diluted earnings per share, for the prior year period.

Adjusted net loss was $8.9 million, or $0.11 basic and diluted adjusted loss per share, for the three months ended June 30, 2017, compared to adjusted net income of $42.0 million, or $0.51 basic and diluted adjusted earnings per share, for the prior year period.

Adjusted EBITDA for the three months ended June 30, 2017 was $38.2 million, compared to $71.0 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 rate obtained by the Company's VLCC fleet, including its vessels that were deployed in the Navig8 pools, was $26,961 for the three months ended June 30, 2017. During the three months ended June 30, 2017, the Company's "ECO" VLCC fleet earned an average daily TCE rate of $27,920, and the Company's non-"ECO" VLCC fleet earned an average daily TCE rate of $20,670.  The average daily TCE rate obtained by the Company on a full-fleet basis was $21,713 during the three months ended June 30, 2017, compared to $35,825 for the prior year period. 

Net voyage revenues decreased by $29.0 million, or 28.5%, to $72.8 million for the three months ended June 30, 2017 compared to $101.8 million dollars for the prior year period. The decrease in net voyage revenues was primarily attributable to the decrease in the Company's average daily fleet TCE rate by $14,112, or 39.4%, to $21,713 for the three months ended June 30, 2017 compared to $35,825 for the prior year period.  The decrease in the Company's average daily fleet TCE rate resulted in a decrease in net voyage revenue of approximately $40.1 million during the three months ended June 30, 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 of 512 days, or 18.0%, to 3,352 days, for the three months ended June 30, 2017 compared to 2,841 days for the prior year period.  The increase in the Company's vessel operating days resulted in an increase in net voyage revenue of approximately $11.1 million for the three months ended June 30, 2017 compared to the prior year period. The increase in the Company's vessel operating days was primarily the result of the deployment of 9 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 for owned vessels increased by $2.4 million, or 9.2%, to $27.9 million for the three months ended June 30, 2017 compared to $25.5 million for the prior year period. The increase was primarily due to increases in the Company's average fleet size to 39.2 vessels for the three months ended June 30, 2017 from 33.4 vessels for the prior year period and associated increases in crew costs and other costs.  The increase in direct vessel operating expenses was partially offset by a decrease in daily direct vessel operating expenses per vessel of $601, or 7.1%, to $7,807 per day for the three months ended June 30, 2017 compared to $8,408 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.

General and administrative expenses increased by $2.6 million, or 37.0%, to $9.6 million for the three months ended June 30, 2017, compared to $7.0 million in the prior year period. During the three months ended June 30, 2017, we recorded as general and administrative expenses a write-off of assets of $1.5 million and litigation loss of $0.4 million, both of which are related to a May 2017 arbitration tribunal decision regarding a 2013 charter dispute submitted by a vessel owning subsidiary of the Company.

Depreciation and amortization increased by $6.7 million, or 33.8%, to $26.7 million for the three months ended June 30, 2017 compared to $20.0 million for the prior year period. The increase in depreciation and amortization was primarily due to an increase in vessel depreciation of $6.7 million, or 37.3%, to $25.0 million for the three months ended June 30, 2017 compared to $18.3 million in the prior year period. The increase in vessel depreciation was primarily due to an increase in the Company's fleet size during the three months ended June 30, 2017 compared to the prior year period.

Loss on disposal of vessels, net increased by $68.6 million, to $67.9 million for the three months ended June 30, 2017 compared to a gain of $0.7 million for the prior year period. The increase in loss on disposal of vessels, net was primarily due to non-cash losses associated with the disposal of vessels and certain vessel equipment of $66.8 million related to the potential sale of the Gener8 Noble and Gener8 Theseus, which were moved to assets held for sale, and the sale of the Gener8 Orion, which was completed in June 2017.

Net interest expense increased by $10.0 million to $20.4 million for the three months ended June 30, 2017 compared to $10.4 million for the prior year period.  The increase was primarily attributable to the decrease in capitalized interest of $7.0 million, or 89.1%, to $0.8 million for the three months ended June 30, 2017 compared to $7.8 million in 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. Also contributing to the increase during the three months ended June 30, 2017, was an increase in interest expense associated with the Company's senior secured credit facilities of $3.5 million, or 37.4%, to $12.8 million compared to $9.3 in the prior year period due to an increase in the Company's outstanding borrowings under its senior secured credit facilities and senior notes, which totaled $1.6 billion and $1.3 billion as of June 30, 2017 and 2016, respectively.  The increase in net interest expense was partially offset by a reduction in net interest expense of $1.1 million related to the modification of the interest rate swaps agreements that were entered into on April 10, 2017, which included changes to the notional amounts, maturity dates, and an increase in the fixed rates payable under the interest rate swaps.

During the three months ended June 30, 2017, the Company's interest rate swap agreements were ineffective, and the Company recorded $2.8 million of expenses related to the impact of the interest rate swap agreements.

As of June 30, 2017, the Company's cash balance was $160.1 million, compared to $94.7 million as of December 31, 2016. As of June 30, 2017, the Company's total debt was $1.6 billion and net debt was $1.4 billion.

As of June 30, 2017, there were 82,988,946 shares of the Company's common stock outstanding. 

Gener8 Maritime Fleet Profile (as of July 31, 2017)

Financial Information

Consolidated Statements of Operations for the Three and Six Months ended June 30, 2017

Selected Balance Sheet Data

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. During the three and six months ended June 30, 2017 we included in Adjusted EBITDA Loss on litigation due to a May 2017 arbitration tribunal decision regarding a 2013 charter dispute submitted by a vessel owning subsidiary of the Company.

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

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)

Net Voyage Revenue & Operating Days Reconciliation Tables

Conference Call Information

A conference call to discuss the results will be held today, August 1, 2017 at 8:00 a.m. ET. The conference call can be accessed live by dialing 1-844-802-2435, or for international callers, 1-412-317-5128, and requesting to be joined into the Gener8 Maritime call.  A replay will be available at 11:00 a.m. ET and can be accessed by dialing 1-877-344-7529 or for international callers, 1-412-317-0088. The pass code for the replay is 10110903. The replay will be available until August 8, 2017.

A live webcast of the conference call will also be available under the Investor Relations section at www.gener8maritime.com. The Company plans to place additional materials related to the earnings announcement, including a slide presentation, on its website prior to the conference call.

About Gener8 Maritime
As of July 31, 2017, Gener8 Maritime has a fleet of 39 wholly-owned vessels comprised of 25 VLCCs, including one newbuilding, 9 Suezmaxes, three Aframaxes, and two Panamax tankers.  On a fully-delivered basis, Gener8 Maritime's fleet has a total carrying capacity of approximately 9.4 million deadweight tons ("DWT") and an average age of approximately 4.5 years on a DWT basis. Gener8 Maritime is incorporated under the laws of the Marshall Islands and headquartered in New York.

Website Information
The Company intends to use its website, www.gener8maritime.com, as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Such disclosures will be included in its website's Investor Relations section. Accordingly, investors should monitor the Investor Relations portion of the Company's website, in addition to following its press releases, filings with the Securities and Exchange Commission (the "SEC"), public conference calls, and webcasts. To subscribe to the Company's e-mail alert service, please click the "Investor Alerts" link in the Investors section of the Company's website and submit your email address. The information contained in, or that may be accessed through, the Company's website is not incorporated by reference into or a part of this document or any other report or document the Company files with or furnish to the SEC, and any references to the Company's website are intended to be inactive textual references only.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This press release contains forward-looking statements, made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not historical facts and are based on management's current beliefs, expectations, estimates and projections about future events, many of which, by their nature, are inherently uncertain and beyond the Company's control. Included among the factors that, in the Company's view, could cause actual results to differ materially from the forward looking statements contained in this press release are the following: (i) loss or reduction in business from the significant customers of the Company's or of the commercial pools in which the Company participates; (ii) changes in the values of the Company's vessels, newbuildings or other assets; (iii) the failure of the Company's significant customers, shipyards, pool managers or technical managers to perform their obligations owed to the Company; (iv) the loss or material downtime of significant vendors and service providers; (v) the Company's failure, or the failure of the commercial managers of any pools in which the Company's vessels participate, to successfully implement a profitable chartering strategy; (vi) termination or change in the nature of the Company's relationship with any of the commercial pools in which it participates; (vii) changes in demand for the Company's services; (viii) a material decline or prolonged weakness in rates in the tanker market; (ix) changes in production of or demand for oil and petroleum products, generally or in particular regions; (x) greater than anticipated levels of tanker newbuilding orders or lower than anticipated rates of tanker scrapping; (xi) adverse weather and natural disasters, acts of piracy, terrorist attacks and international hostilities and instability; (xii) changes in rules and regulations applicable to the tanker industry, including, without limitation, legislation adopted by international organizations such as the International Maritime Organization and the European Union or by individual countries; (xiii) actions taken by regulatory authorities; (xiv) actions by the courts, the U.S. Coast Guard, the U.S. Department of Justice or other governmental authorities and the results of the legal proceedings to which the Company or any of its vessels may be subject; (xv) changes in trading patterns significantly impacting overall tanker tonnage requirements; (xvi) any non-compliance with the U.S. Foreign Corrupt Practices Act of 1977 or other applicable regulations relating to bribery; (xvii) the highly cyclical nature of the oil-shipping industry; (xviii) changes in the typical seasonal variations in tanker charter rates; (xix) changes in the cost of other modes of oil transportation; (xx) changes in oil transportation technology; (xxi) increases in costs including without limitation: crew wages, insurance, provisions, repairs and maintenance; (xxii) changes in general political conditions; (xxiii) the adequacy of insurance to cover the Company's losses, including in connection with maritime accidents or spill events; (xxiv) changes in the condition of the Company's vessels or applicable maintenance or regulatory standards (which may affect, among other things, the Company's anticipated drydocking or maintenance and repair costs); (xxv) changes in the itineraries of the Company's vessels; (xxvi) adverse changes in foreign currency exchange rates affecting the Company's expenses; (xxvii) the fulfillment of the closing conditions under, or the execution of customary additional documentation for, the Company's agreements to acquire or sell vessels and borrow under its existing financing arrangements; (xxviii) the effect of the Company's indebtedness on its ability to finance operations, pursue desirable business operations and successfully run its business in the future; (xxix) financial market conditions; (xxx) sourcing, completion and funding of financing on acceptable terms; (xxxi) the Company's ability to generate sufficient cash to service its indebtedness and comply with the covenants and conditions under the Company's debt obligations; (xxxii) the impact of electing to take advantage of certain exemptions applicable to emerging growth companies; and (xxxiii) other factors listed from time to time in the Company's filings with SEC, including, without limitation, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and its subsequent reports on Form 10-Q and Form 8-K. Accordingly the reader is cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

SOURCE Gener8 Maritime, Inc.