Gener8 Maritime, Inc. Announces Fourth Quarter 2017 Financial Results

NEW YORK, March 14, 2018 /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 twelve months ended December 31, 2017.

Highlights

• Recorded net loss of $45.4 million, or $0.55 basic and diluted loss per share, for the three months ended December 31, 2017, compared to a net income of $5.8 million, or $0.07 basic and diluted income per share for the same period in the prior year.
• Recorded adjusted net loss of $18.6 million, or $0.22 basic and diluted adjusted loss per share, for the three months ended December 31, 2017, compared to adjusted net income of $20.1 million or $0.24 basic and diluted adjusted income per share for the same period in the prior year.
• Increased full fleet "ECO" operating days to 65.1% in the three months ended December 31, 2017, compared to 43.4% in the same period in the prior year.
• Sold a 2003-built Aframax (Gener8 Pericles), a 2000-built Suezmax (Gener8 Argus), a 2002-built VLCC (Gener8 Poseidon), and a 2010-built VLCC (Gener8 Zeus) for net cash proceeds of $33.2 million after debt repayment of $63.8 million and release of working capital from the Navig8 pools.
• Entered into an Agreement and Plan or Merger with Euronav NV and Euronav MI Inc., a wholly-owned subsidiary of Euronav NV.

Merger Agreement

On December 20, 2017, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Euronav NV and Euronav MI Inc., a wholly-owned subsidiary of Euronav NV ("Merger Sub"). Pursuant to the Merger Agreement, among other things, Merger Sub will merge with and into the Company, with the Company continuing its corporate existence as the surviving corporation and as a wholly-owned subsidiary of Euronav NV (which transactions we refer to as the "Merger").

At the effective time of the Merger, each common share, par value $0.01 per share, of Gener8 (the "Gener8 common shares"), issued and outstanding immediately prior to such time (other than certain Gener8 common shares that will be canceled as set forth in the Merger Agreement), will be canceled and automatically converted into the right to receive 0.7272 of an ordinary share, no par value per share, of Euronav in the manner described in the Merger Agreement.

The completion of the Merger is subject to the satisfaction or waiver of a number of conditions as set forth in the Merger Agreement, including, among others, the approval of the Merger Agreement by holders of a majority of the outstanding Gener8 common shares. There can be no assurance as to when these conditions will be satisfied or waived, if at all, or that other events will not intervene to delay or result in the failure to complete the Merger. Each party's obligation to complete the Merger is also subject to the accuracy of the representations and warranties of the other party (subject to certain qualifications and exceptions) and the performance in all material respects of the other party's covenants under the Merger Agreement.

In connection with the entry into the Merger Agreement, Euronav and certain significant holders (the "Covered Shareholders") of Gener8 common shares have entered into a Shareholder Support and Voting Agreement (the "Voting Agreement"). The Voting Agreement requires the Covered Shareholders, representing approximately 42% of the issued and outstanding shares of Gener8 to (i) appear (in person or by proxy) at any meeting of the shareholders convened for the purpose of approving the Merger and the Merger Agreement (the "Special Meeting") and (ii) so long as neither the transaction advisory committee of the Gener8 board of directors (the "Gener8 Transaction Committee") nor the Gener8 board of directors has made an Adverse Recommendation Change (as defined in the Merger Agreement), vote the Covered Shares in favor of the Merger Agreement and the transactions contemplated thereby, including the Merger, and against any action that would reasonably be expected to impede the Merger or result in a breach of the Merger Agreement or the Voting Agreement. If either the Gener8 Transaction Committee or the Gener8 board of directors does make an Adverse Recommendation Change, then the Covered Shareholders are each required to vote 50% of their respective Covered Shares in favor of the Merger Agreement and the transactions contemplated thereby, including the Merger, and may vote their remaining Covered Shares in any manner they determine.

In addition, at the request (and expense) of Euronav, certain Gener8 shareholders (the "Proxy Shareholders") have agreed to grant an irrevocable proxy (the "Proxies") to a representative of an affiliate of such Proxy Shareholders whereby, subject to the terms and conditions in the Proxies, such representative has the authority to direct the vote of Gener8 common shares owned by the Proxy Shareholders, representing in the aggregate approximately 6% of the issued and outstanding shares of Gener8, at the Special Meeting. In addition, the Proxy Shareholders have agreed, among other things, not to transfer or dispose any of their Gener8 common shares during the term of the Proxies unless the transferee agrees to be bound thereby.

For more information about the Merger, see the Company's Current Report on Form 8-K, filed on December 22, 2017.

Fleet Performance

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

Fourth Quarter 2017 Results Summary 

The Company recorded net loss for the three months ended December 31, 2017 of $45.4 million, or $0.55 basic and diluted loss per share, compared to net income of $5.8 million, or $0.07 basic and diluted income per share, for the prior year period.

Adjusted net loss was $18.6 million, or $0.22 basic and diluted adjusted loss per share, for the three months ended December 31, 2017, compared to adjusted net income of $20.1 million, or $0.24 basic and diluted adjusted income per share, for the prior year period. Please refer to the tables at the end of this press release for a reconciliation of Net loss to Net loss, adjusted.

Adjusted EBITDA for the three months ended December 31, 2017 was $25.0 million, compared to $64.3 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 $23,752 for the three months ended December 31, 2017. During the three months ended December 31, 2017, the Company's "ECO" VLCC fleet earned an average daily TCE rate of $24,385 and the Company's non-"ECO" VLCC fleet earned an average daily TCE rate of $18,907.  The average daily TCE rate obtained by the Company on a full-fleet basis was $21,104 during the three months ended December 31, 2017, compared to $28,190 for the prior year period. 

Net voyage revenues, which are voyage revenues minus voyage expenses, decreased by $43.2 million, or 43.4%, to $56.4 million for the three months ended December 31, 2017 compared to $99.6 million for the prior year period.  The decrease in net voyage revenues was primarily due to the decrease in the Company's average daily fleet TCE rate by $7,086, or 25.1%, to $21,104 for the three months ended December 31, 2017 compared to $28,190 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 $25.0 million during the three months ended December 31, 2017 compared to the prior year period.  Also contributing to the decrease in net voyage revenues was a 24.4% decrease in vessel operating days to 2,671 for the three months ended December 31, 2017 compared to 3,533 for the prior year period. The decrease in vessel operating days resulted in a decrease in net voyage revenue of approximately $18.2 million.  

Direct vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, and maintenance and repairs for owned vessels decreased by $6.1 million, or 20.1%, to $24.2 million for the three months ended December 31, 2017 compared to $30.3 million for the prior year period. The decrease was primarily due to the decrease in crew costs of $3.4 million, or 22%, and the decrease in insurance expense of $0.6 million, or 15%, compared to the prior year period. The decrease in crew costs and insurance expense was primarily due to a decrease in our average fleet size to 31.5 vessels for the three months ended December 31, 2017 from 38.6 vessels for the prior year period.

General and administrative expenses increased by $3.2 million, or 57.1%, to $8.8 million for the three months ended December 31, 2017, compared to $5.6 million in the prior year period. This increase was primarily due to an increase of $1.9 million in professional and legal fees compared to the prior year period, primarily related to the Merger.

Depreciation and amortization decreased by $2.8 million, or 10.3%, to $23.8 million for the three months ended December 31, 2017 compared to $26.6 million for the prior year period. The decrease in depreciation and amortization was primarily due to a decrease in vessel depreciation of $1.7 million, or 6.9%, to $23.1 million for the three months ended December 31, 2017 compared to $24.8 million in the prior year period.

Loss on disposal of vessels, net increased by $11.2 million, or 80.0%, to $25.2 million for the three months ended December 31, 2017 compared to a loss of $14.0 million for the prior year period. The loss on disposal of vessels, net during the three months ended December 31, 2017, was primarily related to sales of the Gener8 Argus and Gener8 Zeus.

Net interest expense increased by $1.4 million, or 8.0%, to $19.7 million for the three months ended December 31, 2017 compared to $18.3 million for the prior year period.  The increase was primarily attributable to a decrease in capitalization of interest expense to $0 for three months ended December 31, 2017 compared to $3.3 million for the prior year period. The capitalized interest expense in the prior year period was associated with vessels under construction as a result of the funding of the acquisition of our VLCC newbuildings.  Capitalized interest results in a reduction of interest expense, net.  We do not capitalize interest expense associated with the funding of our VLCC newbuildings after delivery of the vessels. Partially offsetting this increase was a decrease of $1.2 million in commitment fees and an increase of $0.4 million in interest income due to a higher cash balance.

As of December 31, 2017, the Company's cash balance was $200.5 million, compared to $94.7 million as of December 31, 2016. As of December 31, 2017, the Company's total debt was $1.4 billion and net debt was $1.1 billion. Please refer to the tables at the end of this press release for a reconciliation of net debt to total debt.

As of December 31, 2017, there were 83,267,426 shares of the Company's common stock outstanding. 

Full Year 2017 Results Summary

The Company recorded net loss for the twelve months ended December 31, 2017 of $168.5 million, or $2.03 basic and diluted loss per share, compared to net income of $67.3 million, or $0.81 basic and diluted income per share, for the prior year period.

Adjusted net loss was $20.9 million, or $0.25 basic and diluted adjusted loss per share, for the twelve months ended December 31, 2017, compared to adjusted net income of $124.8 million, or $1.51 basic and diluted adjusted income per share, for the prior year period.

Adjusted EBITDA for the twelve months ended December 31, 2017 was $165.2 million, compared to $256.5 million for the prior year period.

The average daily spot TCE rate obtained by the Company's VLCC fleet, including its vessels that were deployed in the Navig8 pools, was $28,329 for the twelve months ended December 31, 2017. During the twelve months ended December 31, 2017, the Company's "ECO" VLCC fleet earned an average daily TCE rate of $29,094 and the Company's non-"ECO" VLCC fleet earned an average daily TCE rate of $23,909.  The average daily TCE rate obtained by the Company on a full-fleet basis was $23,755 during the twelve months ended December 31, 2017, compared to $31,745 for the prior year period. 

Net voyage revenues decreased by $93.8 million, or 23.9%, to $298.4 million for the twelve months ended December 31, 2017 compared to $392.1 million for the prior year period.   The decrease in net voyage revenues was primarily attributable to a decrease in our average daily fleet TCE rate by $7,990, or 25.2%, to $23,755 for the twelve months ended December 31, 2017, compared to $31,745 for the prior year period primarily due to the decrease in rates in the spot charter market. The decrease in average daily fleet TCE rate resulted in a decrease in net voyage revenue of approximately $98.7 million during the twelve months ended December 31, 2017 compared to the prior year period. The decrease in net voyage revenues was partially offset by an increase in our fleet operating days by 208 days, or 1.7% to 12,561 days for the twelve months ended December 31, 2017 compared to 12,353 days for the prior year period due to improved utilization of our VLCC vessels in the Navig8 pools. The increase in our vessel operating days resulted in an increase in net voyage revenue of approximately $4.9 million during the twelve months ended December 31, 2017 compared to the prior year period.

Direct vessel operating expenses was $107.4 million for the twelve months ended December 31, 2017, or substantially flat as compared to $107.3 million for the prior year period. An increase in crew costs and surveys expenses of $2.9 million for the twelve months ended December 31, 2017 compared to the prior year period was partially offset by a $2.8 million decrease in overall direct vessel operating expenses for the twelve months ended December 31, 2017 compared to the prior year period due to the sale of 12 vessels during the twelve months ended December 31, 2017. Daily direct operating expenses per vessel decreased by $379, or 4.5%, to $8,079 per day, compared to $8,458 per day for the prior year period, primarily related to an increase in our calendar days of 606 days, or 4.8%, to 13,293 days compared to 12,687 days in the prior year period, which was due to an increase in our average fleet size during fiscal 2017.

General and administrative expenses increased by $6.0 million, or 21.5%, to $33.8 million for the twelve months ended December 31, 2017 compared to $27.8 million for the prior year period. This increase was primarily due to an increase of $2.1 million in professional and legal fees, primarily related to the Merger. Also contributing to the increase were a $1.5 million write-off of assets, litigation loss of $0.4 million and a $1.4 million increase in employee bonuses for the twelve months ended December 31, 2017 compared to the prior year period. Additionally, during fiscal 2017 we recorded $1.3 million of compensation expenses related the issuance of 525,000 options granted on January 5, 2017.

Depreciation and amortization increased by $16.8 million, or 19.2%, to $104.0 million for the twelve months ended December 31, 2017 compared to $87.2 million for the prior year period. This increase in depreciation and amortization was primarily due to an increase in depreciation of vessels of $18.5 million, or 23.4%, to $97.6 million during twelve months ended December 31, 2017, as a result of new vessel deliveries, compared to $79.1 million for the prior year period. The increase in depreciation and amortization was partially offset by a decrease in amortization of dry dock costs of $1.5 million, or 20.6%, to $5.7 million, due to sale of older vessels, compared to $7.2 million for the prior year period.

Losses on disposal of vessels, net increased for the twelve months ended December 31, 2017 by $115.7 million, or 478.6%, to $139.8 million compared to $24.2 million for the prior year period, primarily due to losses on the sale of 12 vessels during the twelve months ended December 31, 2017.

Net interest expense increased by $33.1 million, or 66.8% to $82.8 million for the twelve months ended December 31, 2017 compared to $49.6 million for the prior year period. The increase was primarily attributable to the decrease in capitalized interest of $24.4 million, or 88.5%, to $3.2 million compared to $27.6 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 our VLCC newbuildings. Also contributing to the increase in interest expense, net during the twelve months ended December 31, 2017, was an increase in amortization of loan fees of $3.6 million, of which $2.6 million was related to the write-off of debt financing costs associated with the sales of the Gener8 Noble and Gener8 Theseus.

Other income (expense), net increased by $0.3 million, or 38.5% to $0.9 million for the twelve months ended December 31, 2017 compared to $0.6 million for the prior year period. During the year ended December 31, 2017 and 2016, we recognized $0.5 million and $0.7 million, respectively of earnings, as other income (expense), net, related to the impact of our interest rate swap agreements, entered in fiscal 2016 and amended in 2017.

Gener8 Maritime Fleet Profile (as of March 14, 2018) 

Financial Information

Consolidated Statements of Operations for the Three and Twelve Months Ended December 31, 2017 and 2016