General Maritime Corporation Announces First Quarter 2011 Financial Results

NEW YORK, May 10, 2011 /PRNewswire/ -- General Maritime Corporation (NYSE: GMR) today reported its financial results for the three months ended March 31, 2011.

Financial Review:  2011 First Quarter

Excluding the $3.3 million non-cash loss relating to the disposal of vessels and vessel equipment as well as the $1.8 million impairment of goodwill and $0.1 million other income, the Company recorded a net loss of $26.5 million or $0.31 basic and $0.31 diluted loss per share for the three months ended March 31, 2011, compared to net loss of $9.3 million or $0.17 basic and $0.17 diluted loss per share for the three months ended March 31, 2010, excluding $0.2 million in other income and gain in disposal of vessel or vessel equipment from that period.  This increased loss was primarily due to a decrease in our net voyage revenue compared to the prior year period, as well as increased direct vessel operating expenses and net interest expense relating to the addition of the seven vessels acquired from Metrostar vessels.

Net loss for the three months ending March 31, 2011 was $31.5 million or $0.36 basic and diluted loss per share compared to a net loss of $9.1 million or $0.16 basic and diluted loss per share from the prior year period.  

John P. Tavlarios, President of General Maritime Corporation, commented, "During the first quarter and year-to-date, we took important steps to bolster the Company's future prospects.  First, we completed the previously announced refinancing initiatives, strengthening our balance sheet and capital structure.  Second, we continued to successfully implement our flexible fleet deployment strategy, positioning the Company to both achieve a level of stability in its results and capitalize on future rate increases.  Finally, we completed the seven-vessel Metrostar acquisition enabling the company to expand both the size of our fleet and future earnings potential, while broadening and diversifying our service offerings to customers.  In addition, the completion of the acquisition combined with our fleet modernization efforts, enabled General Maritime to reduce the weighted average age of its fleet by approximately two years, while growing overall tonnage capacity by 37 percent."

Net voyage revenue, which is gross voyage revenues minus voyage expenses unique to a specific voyage (including port, canal and fuel costs), decreased by $6.9 million or 10% to $59.0 million for the three months ended March 31, 2011 compared to $65.9 million for the three months ended March 31, 2010. This was primarily due to an increase in voyage expenses from $31.7 million for the three months ending March 31, 2010, to $44.0 million for the three months ending March 31, 2011.  This increase in voyage expenses was primarily due to higher bunker costs as well as an increase in percentage of spot market operating days for the first quarter 2011, compared to the prior year period.  Excluding the non-cash items mentioned above as well as restricted stock compensation (a non-cash portion of general and administrative expense), EBITDA for the three months ended March 31, 2011 was $20.8 million compared to $34.1 million for the three months ended March 31, 2010. Please see below for a reconciliation of EBITDA to net loss. Net cash provided by operating activities was $24.5 million for the three months ended March 31, 2011 compared to $20.0 million for the prior year period. As of March 31, 2011, the Company's net debt (calculated as total long term debt, including current portion, less cash) was $1,254.5 million.

The average daily time charter equivalent, or TCE, rates obtained by the Company's fleet decreased by 18% to $19,833 per day for the three months ended March 31, 2011 compared to $24,321 for the prior year period. The Company's average daily rates for vessels on spot charters decreased by 24% to $19,673 for the three months ended March 31, 2011 compared to $25,911 for the prior year period.

Daily direct vessel operating expenses increased 6% to $9,244 for the quarter ended March 31, 2011 compared to $8,696 for the prior year period. This increase was primarily due to the growth of the fleet from the prior year period consisting of 5 VLCC and 2 Suezmax vessels which have higher per day costs than the prior fleet average.  

General and administrative costs decreased by 10% to $8.8 million for the quarter ended March 31, 2011 compared to $9.7 million for the prior year period. This decrease is primarily due to a reduction in personnel costs which were slightly offset by an increase in professional fees that were incurred during the quarter associated with the sale and sale-leaseback transactions involving seven vessels.

Summary Consolidated Financial and Other Data

The following table summarizes General Maritime Corporation's selected consolidated financial and other data for the three months ended March 31, 2011 and 2010 as well as selected consolidated balance sheet data as of March 31, 2011 and December 31, 2010.  Attached to this press release is an Appendix, which contains additional financial, operational and other data for the three months ended March 31, 2011 and 2010.

General Maritime Corporation's Fleet

As of March 31, 2011, General Maritime Corporation's fleet was comprised of 31 wholly-owned tankers, consisting of 7 VLCC, 11 Suezmax, 10 Aframax, 2 Panamax and 1 Products tankers, with a total carrying capacity of approximately 5.1 million deadweight tons, or dwt. The average age of the Company's fleet as of March 31, 2011, weighted by dwt was 8.2 years compared to 9.9 years as of March 31, 2010. Additionally, General Maritime has chartered-in 3 products tankers with purchase options. As of March 31, 2011, including the chartered-in vessels, the total controlled DWT was 5.2 million.

Subsequently to the end of the first quarter, the Company sold 1 Aframax vessel and took delivery of the final Metrostar Suezmax vessel.  The total controlled DWT of General Maritime is currently 5.3 million.  

The table below outlines the employment of the Company's fleet with respect to vessels employed under time charter contracts having terms of more than six months.

Bank Financing and Oaktree Investment

On May 9, 2011, General Maritime announced that it had successfully completed its previously announced refinancing plan. Specifically, General Maritime completed the syndication of an amendment of its 2005 revolving credit facility of $550 million and a $200 million payment-in-kind toggle floating rate secured loan with an affiliate of Oaktree Capital Management L.P. ("Oaktree"). Together, the Oaktree credit facility and the amended revolving credit facility are expected to enable the Company to improve its liquidity and operational flexibility, while reducing its near-term cash requirements. The Oaktree agreement was reached after an extensive process, overseen by an independent committee of the Board and its financial and legal advisors, designed to generate options that would allow the Company to significantly improve its financial flexibility while preserving shareholder equity.

Consistent with our previous announcement, the amended facility provides for an extended maturity as well as changes to certain provisions including financial covenants and amortization schedule.  Nordea Bank Finland plc, DnB NOR and HSH Nordbank AG acted as the lead arrangers of the facility.  

The amended facility has a cash flow sweep of amounts in excess of $100 million (taking into account outstanding borrowing capacity) for the first two years and quarterly fixed amortization for years three through five. The facility matures in 2016 and pays an interest rate of LIBOR +400 or +375 based on its leverage ratio.  The facility's covenants include a minimum cash balance, a maximum leverage ratio, a minimum interest coverage ratio (beginning in 2013), a collateral maintenance covenant, a restriction on voluntary prepayment of the Oaktree credit facility, a requirement that interest under the Oaktree credit facility be paid-in-kind and other customary covenants.

The Company used $115.8 million of the $200 million proceeds from the Oaktree credit facility to repay debt on the 2005 credit facility, used $25 million to repay debt on the 2010 credit facility and will use a portion of the proceeds for working capital purposes. The Oaktree credit facility matures in 2018, outside the Company's other scheduled debt maturities.  Interest on the Oaktree credit facility will pay-in-kind or in cash at the Company's option.  There is no amortization on the Oaktree credit facility.

As part of the investment by Oaktree's affiliate, the Company issued Warrants to purchase up to 19.9% of our outstanding common stock (measured immediately prior to closing), at an initial exercise price of $0.01 per share.  

The Company also amended its 2010 Credit Facility to conform to the aforementioned covenants, security and guaranty arrangements set forth under the newly amended and restated $550 million revolving credit facility.

The Oaktree credit facility and the bank refinancing are designed to increase the Company's liquidity and operational flexibility while lowering its near-term debt commitments and allow it to reduce near-term pressures from a challenging tanker market.  The excess cash flow sweep is designed to eliminate the semi-annual step-downs that existed in the 2005 revolving credit facility and the Oaktree credit facility provides the Company with capital which has no amortization or mandatory cash interest requirements until its maturity in 2018.  

Jeffrey D. Pribor, Chief Financial Officer, commented, "We are pleased to have completed the $200 million Oaktree investment and the amendment and extension of our $550 million 2005 credit facility. Together, these important transactions are expected to enable the Company to improve its liquidity and operational flexibility, while reducing its near-term cash requirements. Specifically, we refinanced our existing 2005 credit facility under favorable terms and ahead of the $600 million balloon maturity in October 2012. In addition, the Oaktree investment provides capital with no amortization or mandatory cash interest requirements until its maturity in 2018. We appreciate the strong support we continue to receive from both the capital markets and our banking syndicate, underscoring our industry leadership and strong future prospects."

Equity Offering

On March 31, 2011, General Maritime announced it had successfully priced a registered follow-on offering of 23 million shares of common stock at a price of $2.00 per share. The net proceeds to the Company after the initial offering were $43.5 million. Subsequently, the Company announced that the underwriters had fully exercised their over-allotment option to purchase an additional 3.5 million shares. The total net proceeds including the over-allotment were $50 million. The offering, including the over-allotment, closed on April 8, 2011.

Vessel Sales and Bridge Loan Repayment

On January 18, 2011, the Company announced that it had agreed to sell and lease-back the Genmar Concord, Stena Concept and Stena Contest for total net proceeds of $61.7 million.  Under the agreement, the vessels will be chartered back to the Company for $6,500 per day for the first 2 years and $10,000 for the next 5 years.

The Company has options to repurchase the vessels for $24 million per vessel at the end of year two of the charter period, $21 million per vessel at the end of year three of the charter period, $19.5 million per vessel at the end of year four of the charter period, $18 million per vessel at the end of year five of the charter period, $16.5 million per vessel at the end of year six of the charter period, and $15 million per vessel at the end of year seven of the charter period.

The transaction was completed by February 10, 2011.  Upon the completion of the final sale, the Company repaid the $22.8 million Bridge Loan.  

Pursuant to its plan to monetize older assets, the Company has sold the Genmar Princess ('91 Aframax), the Genmar Gulf ('91 Suezmax), the Genmar Constantine ('92 Aframax) and the Genmar Progress ('91 Aframax).  Total net proceeds from these sales are approximately $33.6 million, all of which has gone to repay debt under the 2005 revolving credit facility.  Taking into account these sales on a pro forma basis, the average age of the fleet as of December 31, 2010 decreased from 8.6 to 7.7 years old.

Additionally, the Company successfully took delivery of the Genmar Spartiate, a Suezmax newbuild, on April 12, 2011.  The Company funded the remaining purchase price (after having paid a 10% deposit in June 2010), with $22.8 million from the proceeds from the equity offering mentioned above and $45.6 million from borrowing under its 2010 Credit Facility.

About General Maritime Corporation

General Maritime Corporation is a leading crude and products tanker company serving principally within the Atlantic basin, which includes ports in the Caribbean, South and Central America, the United States, West Africa, the Mediterranean, Europe and the North Sea. General Maritime also currently operates tankers in other regions including the Black Sea and Far East. General Maritime owns a fully double-hull fleet of 31 tankers - seven VLCC, nine Aframax, twelve Suezmax tankers, two Panamax and one product tanker - with a total carrying capacity of approximately 5.2 million dwt. The Company also has three Product tankers that are chartered-in with options to purchase the vessels. The Company controls tonnage totaling 5.3 million dwt, including the owned fleet and the chartered-in fleet.  

Conference Call Announcement

General Maritime Corporation announced that it will hold a conference call on Wednesday, May 11, 2011 at 8:30 a.m. Eastern Daylight Savings Time to discuss its 2011 first quarter financial results. To access the conference call, dial (913) 312-1398 and enter the passcode 9206809. A replay of the conference call can also be accessed until May 25, 2011 by dialing (888) 203-1112 for U.S. callers and (719) 457-0820 for international callers, and entering the passcode 9206809. The conference call will also be simultaneously webcast and will be available on the Company's website, www.GeneralMaritimeCorp.com. The Company intends to place additional materials related to the earnings announcement, including a slide presentation, on its website prior to the conference call.

"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. These forward-looking statements are based on management's current expectations and observations. 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: loss or reduction in business from the Company's significant customers; the failure of the Company's significant customers to perform their obligations owed to us; changes in demand; a material decline in rates in the tanker market; changes in production of or demand for oil and petroleum products, generally or in particular regions; greater than anticipated levels of tanker newbuilding orders or lower than anticipated rates of tanker scrapping; 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; actions taken by regulatory authorities; 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; changes in trading patterns significantly impacting overall tanker tonnage requirements; changes in the typical seasonal variations in tanker charter rates; changes in the cost of other modes of oil transportation; changes in oil transportation technology; increases in costs including without limitation: crew wages, insurance, provisions, repairs and maintenance; changes in general domestic and international political conditions; 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); changes in the itineraries of the Company's vessels; adverse changes in foreign currency exchange rates affecting the Company's expenses; financial market conditions; and other factors listed from time to time in the Company's filings with the Securities and Exchange Commission, including, without limitation, its Annual Report on Form 10-K for the year ended December 31, 2010 and its subsequent reports on Form 10-Q and Form 8-K.  

EBITDA represents net income plus net interest expense and depreciation and amortization.  EBITDA is included because it is used by management and certain investors as a measure of operating performance.  EBITDA is used by analysts in the shipping industry as a common performance measure to compare results across peers.  Management of the Company uses EBITDA as a performance measure in consolidating monthly internal financial statements and is presented for review at our board meetings.  The Company believes that EBITDA is useful to investors as the shipping industry is capital intensive which often brings significant cost of financing.  EBITDA is not an item recognized by GAAP, and should not be considered as an alternative to net income, operating income or any other indicator of a company's operating performance required by GAAP. The definition of EBITDA used here may not be comparable to that used by other companies.

Management believes that these measures enhance the understanding of the effect of net loss and EBITDA on the Company's liquidity.

SOURCE General Maritime Corporation