GNK US Equity☆

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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General

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The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand our results of operations and financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and notes thereto included in Item 8 – Financial Statements and Supplementary Data.

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The MD&A generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on February 24, 2022.

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We are a Marshall Islands company that transports iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes through the ownership and operation of drybulk carrier vessels. Our fleet currently consists of 44 drybulk carriers, including 17 Capesize drybulk carriers, 15 Ultramax drybulk carriers, and twelve Supramax drybulk carriers with an aggregate carrying capacity of approximately 4,636,000 deadweight tons (“dwt”). The average age of our current fleet is approximately 11.0 years. We seek to deploy our vessels on time charters, spot market voyage charters, spot market-related time charters or in vessel pools trading in the spot market, to reputable charterers. The majority of the vessels in our current fleet are presently engaged under time charter, spot market voyage charters and spot market-related time charters that expire (assuming the option periods in the time charters are not exercised) between February 2023 and February 2024.

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See pages 5 – 6 for a table of our current fleet.

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IMO 2023 Compliance

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In 2021, Genco initiated a comprehensive plan to comply with upcoming IMO regulations in 2023, namely the Energy Efficiency Existing Ship Index (“EEXI”) and the Carbon Intensity Indicator (“CII”) metrics, which call for a reduction in vessel greenhouse gas emissions. These metrics are intended to assess and measure the energy efficiency of all ships and these new regulations set required attainment values, with the goal of reducing the carbon intensity of international shipping.

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We have invested and plan to continue to invest in energy conservation programs to install various energy-saving devices, or ESDs, high performance paint systems, upgrade propellers among other initiatives on select vessels in our fleet. We began installing these ESDs on certain ships that entered drydocking in 2022.

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These requirements are discussed above under “Item 1 - Environmental and Other Regulations – Air Emissions.”

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COVID-19

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In March 2020, the World Health Organization (the “WHO”) declared the outbreak of a novel coronavirus strain, or COVID-19, to be a pandemic. The COVID-19 pandemic has had widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. Over the course of the pandemic, governments have implemented measures in an effort to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, working from home, supply chain logistical changes, and

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closure of non-essential businesses. This led to a significant slowdown in overall economic activity levels globally and a decline in demand for certain of the raw materials that our vessels transport.

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Drybulk shipping rates, and therefore our voyage revenues, depend to a significant degree on global economic activity levels and specifically, economic activity in China. As the world’s second largest economy, China is the largest importer of drybulk commodities globally, which drives demand for iron ore, coal and other cargoes we carry. In 2022, various regions in China have experienced additional waves of COVID-19 outbreaks for which the government chose to reinstate lockdown measures as part of the country’s “zero tolerance” policy. This has resulted in a reduction in demand for steel products and other commodities we carry, as well as continued disruptions throughout the supply chain. As a result, China’s 2022 GDP growth target of around 5.5% was missed as the country’s GDP grew by 3%. Towards the end of 2022, the Chinese government began its pivot from its restricted COVID policies, announcing various easing measures as well as support for the property sector.

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In 2022, our vessel operating expenses continued to be affected by higher than anticipated costs related to COVID-19 disruptions. The impact of COVID-19 on both our revenues and operating expenses remains highly dependent on the trajectory of COVID-19, potential variants, governmental policies as well as vaccine distribution and efficacy, which remains uncertain.

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The outlook for China and the rest of the world remains uncertain and depends in part on the path of COVID-19 and measures taken by governments around the world in response to it. In 2021, spot rates for Capesize and Supramax vessels reached levels not seen since 2010, and these firm levels, particularly for Supramax vessels, continued into the first half of 2022 despite various seasonal factors. During the second half of 2022, rates declined from highs seen earlier in the year as China’s COVID-related lockdown measures intensified. Global vaccination rates, vaccine effectiveness, and the onset of variants could impact the sustainability of any recovery in addition to drybulk specific seasonality described in further detail below.

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As our vessels trade commodities globally, we have taken measures to safeguard our crew and work toward preventing the spread of COVID-19 or any transmittable disease. Genco enacts crew changes where permitted by regulations of the ports and of the country of origin of the mariners, in addition to strict protocols that safeguard our crews against COVID-19 exposure. Crew rotations have been steadily improving as port and travel restrictions globally have reduced. We continue to actively promote the health and safety of both on and off signing crew members.

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The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including the duration and scope of the pandemic; governmental, business, and individuals’ actions in response to the pandemic; and the impact on economic activity, including the possibility of recession or financial market instability.

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IMO 2020 Compliance

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On October 27, 2016, the Marine Environment Protection Committee (“MEPC”) of the International Maritime Organization (“IMO”) announced the ratification of regulations mandating reduction in sulfur emissions from 3.5% currently to 0.5% as of the beginning of 2020 rather than pushing the deadline back to 2025. Accordingly, ships now have to reduce sulfur emissions, for which the principal solutions are the use of exhaust gas cleaning systems (“scrubbers”) or buying fuel with low sulfur content. If a vessel is not retrofitted with a scrubber, it will need to use low sulfur fuel, which is currently more expensive than standard marine fuel containing 3.5% sulfur content. Following an increase in fuel prices during 2021 coming off of 2020 lows, there was a further increase in fuel prices during the first half of 2022 due to oil supply disruptions as a result of the war in Ukraine. The price of fuel began to lower during the second half of 2022 and is expected to continue to decline during 2023.

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In order to comply with regulations mandating a reduction in sulfur emissions from 3.5% to 0.5% as of the beginning of 2020, we have installed exhaust gas cleaning systems (“scrubbers”) on our 17 Capesize vessels. We will continue to evaluate all options to comply with IMO regulations. Our fuel costs and fuel inventories may increase as a result of these sulfur emission regulations. Low sulfur fuel is more expensive than standard marine fuel containing 3.5% sulfur content and may become more expensive or difficult to obtain as a result of increased demand. If the cost differential between low sulfur fuel and high sulfur fuel is significantly higher than anticipated, or if low sulfur fuel is

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not available at ports on certain trading routes, it may not be feasible or competitive to operate vessels on certain trading routes without installing scrubbers or without incurring deviation time to obtain compliant fuel. Conversely, if the cost differential between low sulfur fuel and high sulfur fuel is significantly lower than anticipated, or if regulations are passed negatively impacting the use of open-loop scrubbers, we may not realize the economic benefits or recover the cost of the scrubbers we have installed. In addition, a number of countries have imposed restrictions on the discharge of wash water from open loop scrubbers within their port limits. While there are no restrictions on using open loop scrubbers outside of port limits, any changes in these regulations or more stringent standards globally could impact the use of open loop scrubbers going forward.

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Vessel Sales and Acquisitions

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On July 2, 2021, we entered into an agreement to purchase two 2017-built, 63,000 dwt Ultramax vessels for a purchase price of $24.6 million each, which were renamed the Genco Mayflower and the Genco Constellation, and one 2014-built, 63,000 dwt Ultramax vessel for a purchase price of $21.9 million, which was renamed the Genco Madeleine. The Genco Mayflower, the Genco Constellation and the Genco Madeleine were delivered on August 24, 2021, September 3, 2021 and August 23, 2021, respectively and we used cash on hand to finance the purchases.

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On May 18, 2021, we entered into agreements to acquire two 2022-built 61,000 dwt newbuilding Ultramax vessels from Dalian Cosco KHI Ship Engineering Co. Ltd. for a purchase price of $29.2 million each, which were renamed the Genco Mary and the Genco Laddey. The vessels were delivered on January 6, 2022, and we used cash on hand to finance the purchases.

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On April 20, 2021, we entered into an agreement to purchase a 2016-built, 64,000 dwt Ultramax vessel for a purchase price of $20.2 million, to be renamed the Genco Enterprise. The vessel was delivered on August 23, 2021 and we used cash on hand to finance the purchase.

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On December 17, 2020, we entered into an agreement to acquire three modern, eco Ultramax vessels in exchange for six of our older Handysize vessels. The Genco Magic, a 2014-built Ultramax vessel, and the Genco Vigilant and the Genco Freedom, both 2015-built Ultramax vessels, were delivered to the Company on December 23, 2020, January 28, 2021 and February 20, 2021, respectively. We delivered the Genco Ocean, the Baltic Cove and Baltic Fox, all 2010-built Handysize vessels, and the Genco Spirit, the Genco Avra and the Genco Mare, all 2011-built Handysize vessels, on December 29, 2020, January 30, 2021, February 2, 2021, February 15, 2021, February 21, 2021 and February 24, 2021, respectively.

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During 2021, we completed the sale of five Supramax vessels and six Handysize vessels, which includes five of the Handysize vessels in the exchange described above.

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We will continue to seek opportunities to renew our fleet going forward.

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Factors Affecting Our Results of Operations

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We believe that the following table reflects important measures for analyzing trends in our results of operations. The table reflects our ownership days, chartered-in days, available days, operating days, fleet utilization, TCE rates and daily vessel operating expenses for the years ended December 31, 2022 and 2021 on a consolidated basis.

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ For the Year Ended ​ ​ ​ ​ ​ ​

​ ​ December 31, ​ Increase ​ ​ ​

Fleet Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Ownership days (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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Chartered-in days (2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Capesize ​ ​ — ​ ​ — ​ ​ — ​ ​ — %

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Available days (owned & chartered-in fleet) (3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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Available days (owned fleet) (4) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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Operating days (5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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Fleet utilization (6) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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Fleet average ​ 96.5 % ​ 97.9 % ​ (1.4) % ​ (1.4) %

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ For the Year Ended ​ ​ ​ ​ ​ ​

​ ​ December 31, ​ Increase ​ ​ ​

Average Daily Results: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Time Charter Equivalent (7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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Daily vessel operating expenses (8) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Entire Fleet ​ Major Bulk ​ Minor Bulk ​ ​

​ ​ For the Year Ended ​ For the Year Ended ​ For the Year Ended ​ ​

​ ​ December 31, ​ December 31, ​ December 31, ​ ​

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Operating Data

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The following tables represent the operating data and certain balance sheet and other data as of and for the years ended December 31, 2022 and 2021 on a consolidated basis.

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​ ​ For the Years Ended December 31, ​ ​ ​ ​ ​

Income Statement Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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Operating Expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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Earnings per share-basic ​ $ 3.74 ​ $ 4.33 ​ $ (0.59) (13.6) %

Earnings per share-diluted ​ $ 3.70 ​ $ 4.27 ​ $ (0.57) (13.3) %

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​ ​ For the Years Ended December 31, ​ ​ ​ ​ ​

Balance Sheet Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(U.S. Dollars in thousands, at end of period) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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Other Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(U.S. Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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​ For the Year Ended

​ December 31,

Income tax expense ​ — ​ — ​

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Results of Operations

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VOYAGE REVENUES-

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Our revenues are driven primarily by the number of vessels in our fleet, the number of days during which our vessels operate, the type of fixture our vessels are chartered on (spot market voyage charters or fixed rate time charters), and the amount of daily charterhire or freight rates that our vessels earn, that, in turn, are affected by a number of factors, including:

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● the duration of our charters;

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● our decisions relating to vessel acquisitions and disposals;

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● the amount of time that we spend positioning our vessels;

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● the amount of time that our vessels spend in drydock undergoing repairs;

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● maintenance and upgrade work;

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● the age, condition and specifications of our vessels;

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● levels of supply and demand in the drybulk shipping industry; and

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● other factors affecting spot market charter rates for drybulk carriers.

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During 2022, voyage revenues decreased by $10.2 million, or 1.9%, to $536.9 million as compared to $547.1 million during 2021. The decrease in voyage revenues was primarily due to lower revenue earned by our major bulk vessels primarily as a result of a decrease in available days due to scheduled drydockings, partially offset by higher rates achieved by our minor bulk vessels. During 2022, the drybulk freight market was firm with the Baltic Capesize Index and the Baltic Supramax Index, as published by the Baltic Exchange, averaging $16,177 and $22,152 per day, respectively. These levels, while strong from a historical perspective, were a decline on a year-over-year basis relative to 2021. This was primarily due to a softening freight rate environment in the second half of 2022 driven by lockdowns in

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China relating to the country’s COVID-19 policy, an unwinding of port congestion, lackluster Brazilian iron ore exports, as well as challenges due to macroeconomic conditions as a result of Russia’s war in Ukraine.

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On February 24, 2022, Russia invaded Ukraine leading to a war and a humanitarian crisis. The impact to date on the drybulk market has been a redirection of cargo flows particularly for coal and grain shipments lengthening ton miles in certain instances. Future developments regarding Russia’s war in Ukraine, as well as China in relation to the country’s COVID-19 response measures, could continue to affect the drybulk industry and our business in an unpredictable manner.

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Currently, the freight market is experiencing a seasonally softer period in the first quarter of 2023 as a result of the timing of Chinese New Year, lower cargo shipments due to weather related disruptions and scheduled maintenance in certain export origins as well as the timing of newbuilding vessel deliveries.

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The average Time Charter Equivalent, or TCE rate of our overall fleet decreased by 2.4% to $23,824 a day during 2022 from $24,402 a day during 2021. The TCE for our major bulk vessels decreased by 17.6% from $27,293 a day during 2021 to $22,492 a day during 2022. This decrease was primarily a result of lower rates achieved by our Capesize vessels. The TCE for our minor bulk vessels increased by 9.8% from $22,397 a day during 2021 to $24,585 a day during 2022 primarily a result of higher rates achieved by our Ultramax and Supramax vessels.

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For 2022 and 2021, we had ownership days of 16,049.9 days and 15,176.5 days, respectively. The increase in ownership days was due to the delivery of six Ultramax vessels during the second half of 2021 and the first quarter of 2020, partially offset by the sale of eleven Supramax and Handysize vessels during 2021. Fleet utilization decreased from 97.9% during 2021 to 96.5% during 2022 primarily due to additional offhire and repair periods for our Supramax vessels, in addition to scheduled drydocking for some of our Capesize vessels.

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Please see pages 7 - 8 for a table that sets forth information about the current employment of the vessels in our fleet.

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Please refer to Item 3. Legal Proceedings for a discussion of claims regarding the Genco Constellation.

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VOYAGE EXPENSES-

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In time charters and spot market-related time charters, operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. These expenses are borne by the Company during spot market voyage charters. There are certain other non-specified voyage expenses such as commissions which are typically borne by us. Voyage expenses include port and canal charges, fuel (bunker) expenses and brokerage commissions payable to unaffiliated third parties. Port and canal charges and bunker expenses primarily increase in periods during which vessels are employed on spot market voyage charters because these expenses are for the account of the vessel owner. At the inception of a time charter, we record the difference between the cost of bunker fuel delivered by the terminating charterer and the bunker fuel sold to the new charterer as a gain or loss within voyage expenses. Voyage expenses also include the cost of bunkers consumed during short-term time charters pursuant to the terms of the time charter agreement. Additionally, we may record lower of cost and net realizable value adjustments to re-value the bunker fuel on a quarterly basis for certain time charter agreements where the inventory is subject to gains and losses. Refer to Note 2 — Summary of Significant Accounting Policies in our Consolidated Financial Statements.

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Voyage expenses were $153.9 million and $146.2 million during 2022 and 2021, respectively. This increase was primarily due to higher bunker expenses partially offset by a decrease in certain costs incurred related to our spot market voyages.

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VESSEL OPERATING EXPENSES-

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Vessel operating expenses increased by $17.4 million from $82.1 million during 2021 to $99.5 million during 2022. This increase was primarily due to higher crew expenses as a result of increased crew wages and the timing of crew changes. Higher repair and maintenance costs on certain vessels, and to a lesser degree, the increase in the purchase

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of initial stores and spare parts, also contributed to this increase. Higher insurance and lube oil costs also contributed to this increase. We completed the transition of our crews during the second quarter of 2022 which resulted in higher crew expenses during 2022 overall. Additionally, we experienced higher repair and maintenance costs on certain vessels, as well as an increase in the purchase of initial stores and spare parts as we completed the transition of vessels to our new technical management joint venture GSSM during 2022. We have replenished our vessels’ stores and spare parts after our joint venture took over the technical management of our fleet. Given the foregoing, we expect our operating expenses to stabilize during 2023.

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Average daily vessel operating expenses (“DVOE”) for our fleet increased to $6,197 per vessel per day during 2022 from $5,409 per vessel per day during 2021. The increase in daily vessel operating expenses was primarily due to higher crew related expenses. As we completed the transition of vessels to GSSM through the first half of 2022, higher repair and maintenance costs on certain vessels, and, to a lesser degree, an increase in the purchase of initial stores and spare parts and general inflationary pressures, also contributed to this increase. We believe daily vessel operating expenses are best measured for comparative purposes over a 12-month 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.

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COVID-19 restrictions with regard to crew rotations have previously resulted in increased crew related costs due to travel and port restrictions and could do so in the future. The timing of crew rotations depends on the duration and severity of COVID-19 in countries from which our crews are sourced as well as any restrictions in place at ports in which our vessels call. As a result, crew rotations continue to lead to deviation time of our vessels as well as unbudgeted expenses due to testing, personal protective equipment, quarantine periods, higher than normal travel expenses due to increased airfare costs, and crew bonuses to retain the existing crew during rotation delays.

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Our vessel operating expenses increase to the extent our fleet expands. Other factors beyond our control, some of which may affect the shipping industry in general, including, for instance, developments relating to market prices for crewing, lubes, and insurance, may also cause these expenses to increase. The impact of COVID-19 could result in potential shortages or a lack of access to required spare parts for the operation of our vessels, potential delays in any unscheduled repairs, deviations for crew changes or increased costs to successfully execute a crew change, which could lead to business disruptions and delays. Crew costs on our vessels could increase in the future due to higher wages, the potential impact of COVID-19 restrictions and the war in Ukraine.

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Based on estimates provided by GSSM, our DVOE budget for the first quarter of 2023 is $6,250 per vessel per day on a fleet-wide basis, which includes an estimated amount for COVID-19 related expenses. For the full year of 2023, we expect our DVOE budget to be $5,990 per vessel per day. The higher expense levels anticipated during the first quarter of 2023 are primarily due to the timing of crew changes and the purchase of spares and stores. The potential impacts of COVID-19 and the war in Ukraine are unpredictable, and the actual amount of our DVOE could be higher or lower than budgeted as a result.

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CHARTER HIRE EXPENSES-

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Charter hire expenses decreased by $9.2 million from $36.4 million during 2021 to $27.1 million during 2022. The decrease was primarily due to a decrease in chartered-in days during 2022 as compared to 2021.

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GENERAL AND ADMINISTRATIVE EXPENSES-

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We incur general and administrative expenses which relate to our onshore non-vessel-related activities. Our general and administrative expenses include our payroll expenses, including those relating to our executive officers, operating lease expense, legal, auditing and other professional expenses. General and administrative expenses include nonvested stock amortization expense which represents the amortization of stock-based compensation that has been issued to our Directors and employees pursuant to the 2015 Equity Incentive Plan. Refer to Note 17 — Stock-Based Compensation in our Consolidated Financial Statements. General and administrative expenses also include legal and professional fees associated with our credit facilities, which are not capitalizable to deferred financing costs. We also incur general and administrative expenses for our overseas offices located in Singapore and Copenhagen.

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General and administrative expenses increased by $1.3 million from $24.5 million during 2021 to $25.7 million during 2022. The increase was primarily due to higher nonvested stock amortization expense.

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TECHNICAL MANAGEMENT FEES-

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Technical management fees include the direct costs incurred by GSSM for the technical management of the vessels under its management. Additionally, prior to the transfer of our vessels to GSSM for technical management, we incurred management fees payable to third party technical management companies for the day-to-day management of our vessels, including performing routine maintenance, attending to vessel operations and arranging for crews and supplies.

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Technical management fees were $3.3 million and $5.6 million during 2022 and 2021, respectively. The decrease was primarily due to the savings realized by transferring the management of the vessels in our fleet to GSSM during the second half of 2021 and in 2022.

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DEPRECIATION AND AMORTIZATION-

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We depreciate the cost of our vessels on a straight-line basis over the expected useful life of each vessel. Depreciation is based on the cost of the vessel less its estimated residual value. We estimate the useful life of our vessels to be 25 years. Effective January 1, 2022, the Company increased the estimated scrap value of the vessels from $310 per lwt to $400 per lwt prospectively based on the average of the 15-year average scrap value of steel.

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Depreciation and amortization expenses increased by $4.0 million from $56.2 million during 2021 to $60.2 million during 2022. This increase was primarily due to an increase in drydocking amortization expense for the major and minor bulk vessels that completed their drydockings during 2022. Additionally, there was an increase in the deprecation related to our vessel assets due to the delivery of six Ultramax vessels during the second half of 2021 and the first quarter of 2022, partially offset by a $4.6 million decrease in depreciation due to the increase in the estimated scrap value of the vessels from $310 per lwt to $400 per lwt effective January 1, 2022. Refer to Note 2 — Summary of Significant Accounting Policies in our Consolidated Financial Statements for further information regarding the increase in the scrap value.

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GAIN ON SALE OF VESSELS-

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During 2021, we recorded a $4.9 million net gain on sale of vessels related primarily to the sale of the Genco Provence, partially offset by net losses related to the sale of the Baltic Panther, the Baltic Hare, the Baltic Cougar, the Baltic Leopard and the Genco Lorraine, as well as net losses associated with the exchange of the Baltic Cove, the Baltic Fox, the Genco Spirit, the Genco Avra and the Genco Mare. There were no vessel sales during 2022.

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OTHER INCOME (EXPENSE)-

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NET INTEREST EXPENSE-

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Net interest expense decreased by $7.2 million to $8.1 million during 2022 as compared to $15.2 million during 2021. Net interest expense during the years ended December 31, 2022 and 2021 consisted primarily of interest expense under our credit facilities and amortization of deferred financing costs for those facilities. The decrease was primarily due a decrease in interest expense due to a decrease in the average outstanding debt partially offset by higher interest rates. Additionally, the decrease in interest expense was due to settlement payments received for our interest rate cap agreements. Lastly, there was a decrease in the amortization of deferred financing costs due to the refinancing of our credit facilities on August 31, 2021. Refer to Note 7 — Debt in the Consolidated Financial Statements for information regarding our credit facilities.

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LOSS ON DEBT EXTINGUISHMENT –

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During the year ended December 31, 2021, we recorded a $4.4 million loss on debt extinguishment as a result of the refinancing of our $495 Million Credit Facility and $133 Million Credit Facility with the $450 Million Credit

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Facility on August 31, 2021. Refer to Note 7 — Debt in the Consolidated Financial Statements for information regarding our credit facilities.

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NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST –

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During 2022 and 2021, net income attributable to noncontrolling interest was $0.8 million and $0.04 million, respectively, which is associated with the net income attributable to the noncontrolling interest of GSSM, which was formed during September 2021.

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LIQUIDITY AND CAPITAL RESOURCES

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Our primary sources of liquidity are cash flow from operations, cash on hand, equity offerings and credit facility borrowings. We currently use our funds primarily for the acquisition of vessels, fleet renewal, drydocking for our vessels, payment of dividends, debt repayments and satisfying working capital requirements as may be needed to support our business. Our ability to continue to meet our liquidity needs is subject to and will be affected by cash utilized in operations, the economic or business environment in which we operate, shipping industry conditions, the financial condition of our customers, vendors and service providers, our ability to comply with the financial and other covenants of our indebtedness, and other factors.

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We believe, given our current cash holdings, if drybulk shipping rates do not decline significantly from current levels, our capital resources, including cash anticipated to be generated within the year, are sufficient to fund our operations for at least the next twelve months. Such resources include unrestricted cash and cash equivalents of $58.1 million as of December 31, 2022 in addition to the $212.9 million availability under the revolver of the $450 Million Credit Facility as of December 31, 2022, which compares to a minimum liquidity requirement under our credit facility of approximately $22 million as of the date of this report. Given anticipated capital expenditures related to drydockings and the installation of ballast water treatment systems (“BWTS”) and fuel efficiency upgrade costs of $12.1 million and $23.4 million during 2023 and 2024, respectively, as well as any quarterly dividend payments, we anticipate to continue to have significant cash expenditures. Refer to “Capital Expenditures” below for further details. However, if market conditions were to worsen significantly due to COVID-19, the war in Ukraine, or other causes, then our cash resources may decline to a level that may put at risk our ability to pay dividends per our capital allocation strategy or at all. Throughout 2022, the Company made a total of $75.0 million of voluntary debt prepayments, resulting in a reduced cash flow breakeven rate from previous levels. Of that amount, there were four $8.8 million quarterly repayments that represented the previously announced quarterly debt reduction payment as part of our plan to reduce our debt. These amounts were deducted from operating cash flows in each of our quarterly 2022 dividend payment calculation. The remainder of the debt we paid down included $40.0 million which was prepaid to optimize our working capital management, using our revolver to keep funds available while saving interest expense. Currently, there are no mandatory debt repayments until we must repay $171.0 million in 2026. Although we do not have any mandatory debt repayments until 2026, we intend to continue to pay down debt on a voluntary basis with a medium term goal of zero net debt.

As of December 31, 2022, the $450 Million Credit Facility contained collateral maintenance covenants that require the aggregate appraised value of collateral vessels to be at least 140% of the principal amount of the loan outstanding under such facility. If the values of our vessels were to decline as a result of COVID-19 or otherwise, we may not satisfy this collateral maintenance requirement. If we do not satisfy the collateral maintenance requirement, we will need to post additional collateral or prepay outstanding loans to bring us back into compliance, or we will need to seek waivers, which may not be available or may be subject to conditions.

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In the future, we may require capital to fund acquisitions or to improve or support our ongoing operations and debt structure, particularly in light of economic conditions resulting from the ongoing COVID-19 pandemic. We may from time to time seek to raise additional capital through equity or debt offerings, selling vessels or other assets, pursuing strategic opportunities, or otherwise. We may also from time to time seek to incur additional debt financing from private or public sector sources, refinance our indebtedness or obtain waivers or modifications to our credit agreements to obtain more favorable terms, enhance flexibility in conducting our business, or otherwise. We may also seek to manage our interest rate exposure through hedging transactions. We may seek to accomplish any of these

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independently or in conjunction with one or more of these actions. However, if market conditions are unfavorable, we may be unable to accomplish any of the foregoing on acceptable terms or at all.

​

We entered into the $450 Million Credit Facility on August 3, 2021. Proceeds from the $450 Million Credit Facility were used to refinance our $495 Million Credit Facility and our $133 Million Credit Facility on August 31, 2021. Refer to Note 7 — Debt in our Consolidated Financial Statements for further details regarding the terms of the $450 Million Credit Facility, which information is incorporated herein by reference.

​

On November 8, 2022, we entered into an agreement with the lenders under the $450 Million Credit Facility to extend the 360-day period for which we may set aside net proceeds from the sale of the Genco Provence to finance a qualifying replacement vessel until October 28, 2023. Refer to Note 7 — Debt.

​

As of December 31, 2022, we were in compliance with all financial covenants under the $450 Million Credit facility.

​

Dividends

​

We disclosed on April 19, 2021 that, on management’s recommendation, our Board of Directors adopted a new quarterly dividend policy for dividends payable which commenced in the first quarter of 2022 in respect of our financial results for the fourth quarter of 2021. Under the new quarterly dividend policy, the amount available for quarterly dividends is to be calculated based on the following formula:

​

Operating cash flow

Less: Debt repayments

Less: Capital expenditures for drydocking

Less: Reserve

Cash flow distributable as dividends

​

The amount of dividends payable under the foregoing formula for each quarter of the year will be determined on a quarterly basis.

​

For purposes of the foregoing calculation, operating cash flow is defined as voyage revenue less voyage expenses, charter hire expenses, vessel operating expenses, general and administrative expenses other than non-cash restricted stock expenses, technical management fees, and interest expense other than non-cash deferred financing costs. Anticipated uses for the reserve include, but are not limited to, vessel acquisitions, debt repayments, and general corporate purposes. In order to set aside funds for these purposes, the reserve will be set on a quarterly basis in the discretion of our Board and is anticipated to be based on future quarterly debt repayments and interest expense.

​

On February 22, 2023, our Board declared a quarterly dividend of $0.50 per share. Our quarterly dividend policy and declaration and payment of dividends are subject to legally available funds, compliance with applicable law and contractual obligations (including our credit facility) and our Board’s determination that each declaration and payment is at that time in the best interests of the Company and its shareholders after its review of our financial performance.

​

In connection with our new dividend policy, we have paid down additional indebtedness under our credit facilities and utilized the $450 Million Credit Facility to refinance our two prior credit facilities as noted above.

​

The declaration and payment of any dividend or any stock repurchase is subject to the discretion of our Board of Directors. Our Board of Directors and management continue to closely monitor market developments together with the evaluation of our quarterly dividend policy in the current market environment. The principal business factors that our Board of Directors expects to consider when determining the timing and amount of dividend payments or stock repurchases include our earnings, financial condition, and cash requirements at the time. Marshall Islands law generally prohibits the declaration and payment of dividends or stock repurchases other than from surplus. Marshall Islands law also prohibits the declaration and payment of dividends or stock repurchases while a company is insolvent or would be

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rendered insolvent by the payment of such a dividend or such a stock repurchase. Heightened economic uncertainty and the potential for renewed drybulk market weakness as a result of the COVID-19 pandemic or the war in Ukraine and related economic conditions may result in our suspension, reduction, or termination of future quarterly dividends.

​

U.S. Federal Income Tax Treatment of Dividends

​

U.S. Holders

​

For purposes of this discussion, the term “U.S. Holder” means a beneficial owner of our common stock that is, for U.S. federal income tax purposes, (i) an individual U.S. citizen or resident, (ii) a corporation that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia, or any other U.S. entity taxable as a corporation, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust if either (x) a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (y) the trust has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person. If a partnership, or an entity treated for U.S. federal income tax purposes as a partnership, such as a limited liability company, holds common stock, the tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership. If you are a partner in such a partnership holding our common stock, you are encouraged to consult your tax advisor. A beneficial owner of our common stock (other than a partnership) that is not a U.S. Holder is referred to below as a “Non-U.S. Holder.”

​

Subject to the discussion of passive foreign investment company (PFIC) status on pages 35 - 36 of this report, any distributions made by us to a U.S. Holder with respect to our common shares generally will constitute dividends to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of those earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder’s tax basis in our common shares (determined on a share-by-share basis), and thereafter as capital gain. U.S. Holders that own at least 10% of our shares may be able to claim a dividends-received-deduction and should consult their tax advisors.

​

Dividends paid on our common shares to a U.S. Holder who is an individual, trust or estate, or a “non-corporate U.S. Holder,” will generally be treated as “qualified dividend income” that is taxable to such non-corporate U.S. Holder at preferential tax rates, provided that (1) our common shares are readily tradable on an established securities market in the United States (such as the NYSE, on which our common shares are traded); (2) we are not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (which we do not believe we have been, are, or will be); (3) the non-corporate U.S. Holder’s holding period of our common shares includes more than 60 days in the 121-day period beginning 60 days before the date on which our common shares becomes ex-dividend; and (4) the non-corporate U.S. Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. A non-corporate U.S. Holder will be able to take qualified dividend income into account in determining its deductible investment interest (which is generally limited to its net investment income) only if it elects to do so; in such case, the dividend will be taxed at ordinary income rates. Non-corporate U.S. Holders also may be required to pay a 3.8% surtax on all or part of such holder’s “net investment income,” which includes, among other items, dividends on our shares, subject to certain limitations and exceptions. Investors are encouraged to consult their own tax advisors regarding the effect, if any, of this surtax on their ownership of our shares.

​

Amounts taxable as dividends generally will be treated as passive income from sources outside the U.S. However, if (a) we are 50% or more owned, by vote or value, by U.S. Holders and (b) at least 10% of our earnings and profits are attributable to sources within the U.S., then for foreign tax credit purposes, a portion of our dividends would be treated as derived from sources within the U.S. With respect to any dividend paid for any taxable year, the U.S. source ratio of our dividends for foreign tax credit purposes would be equal to the portion of our earnings and profits from sources within the U.S. for such taxable year divided by the total amount of our earnings and profits for such taxable year. The rules related to U.S. foreign tax credits are complex and U.S. Holders should consult their tax advisors to determine whether and to what extent a credit would be available.

Special rules may apply to any “extraordinary dividend” — generally, a dividend in an amount which is equal to or in excess of 10% of a shareholder’s adjusted basis (or fair market value in certain circumstances) in a share of our

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common shares — paid by us. If we pay an “extraordinary dividend” on our common shares that is treated as “qualified dividend income”, then any loss derived by a non-corporate U.S. Holder from the sale or exchange of such common shares will be treated as long-term capital loss to the extent of such dividend.

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Tax Consequences if We Are a Passive Foreign Investment Company

​

As discussed in “U.S. tax authorities could treat us as a ‘passive foreign investment company,’ which could have adverse U.S. federal income tax consequences to U.S. shareholders” in Item 1.A Risk Factors in this report, a foreign corporation generally will be treated as a PFIC for U.S. federal income tax purposes if, after applying certain look through rules, either (1) at least 75% of its gross income for any taxable year consists of “passive income” or (2) at least 50% of the average value or adjusted bases of its assets (determined on a quarterly basis) produce or are held for the production of passive income, i.e., “passive assets.” As discussed above, we do not believe that our past or existing operations would cause, or would have caused, us to be deemed a PFIC with respect to any taxable year. No assurance can be given that the IRS or a court of law will accept our position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, there can be no assurance that we will not become a PFIC in any future taxable year because the PFIC test is an annual test, there are uncertainties in the application of the PFIC rules, and although we intend to manage our business so as to avoid PFIC status to the extent consistent with our other business goals, there could be changes in the nature and extent of our operations in future taxable years.

​

If we were to be treated as a PFIC for any taxable year in which a U.S. Holder owns shares of our common stock (and regardless of whether we remain a PFIC for subsequent taxable years), the tax consequences to such a U.S. holder upon the receipt of distributions in respect of such shares that are treated as “excess distributions” would differ from those described above. In general, an excess distribution is the amount of distributions received during a taxable year that exceed 125% of the average amount of distributions received by a U.S. Holder in respect of the common shares during the preceding three taxable years, or if shorter, during the U.S. Holder’s holding period prior to the taxable year of the distribution. The distributions that are excess distributions would be allocated ratably over the U.S. Holder’s holding period for the common shares. The amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we were a PFIC would be taxed as ordinary income. The amount allocated to each of the other taxable years would be subject to tax at the highest marginal rate in effect for the U.S. Holder for that taxable year, and an interest charge for the deemed deferral benefit would be imposed on the resulting tax allocated to such other taxable years. The tax liability with respect to the amount allocated to taxable years prior to the year of the distribution cannot be offset by net operating losses. As an alternative to such tax treatment, a U.S. Holder may make a “qualified electing fund” election or “mark to market” election, to the extent available, in which event different rules would apply. The U.S. federal income tax consequences to a U.S. Holder if we were to be classified as a PFIC are complex. A U.S. Holder should consult with his or her own advisor with regard to those consequences, as well as with regard to whether he or she is eligible to and should make either of the elections described above.

​

Non-U.S. Holders

​

Non-U.S. Holders generally will not be subject to U.S. federal income tax on dividends received from us on our common shares unless the income is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States (“effectively connected income”) (and, if an applicable income tax treaty so provides, the dividends are attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.). Effectively connected income (or, if an income tax treaty applies, income attributable to a permanent establishment maintained in the U.S.) generally will be subject to regular U.S. federal income tax in the same manner discussed above relating to taxation of U.S. Holders. In addition, earnings and profits of a corporate Non-U.S. Holder that are attributable to such income, as determined after allowance for certain adjustments, may be subject to an additional branch profits tax at a rate of 30%, or at a lower rate as may be specified by an applicable income tax treaty. Non-U.S. Holders may be subject to tax in jurisdictions other than the United States on dividends received from us on our common shares.

Dividends paid on our common shares to a non-corporate U.S. Holder may be subject to U.S. federal backup withholding tax if the non-corporate U.S. Holder:

​

● fails to provide us with an accurate taxpayer identification number;

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● fails to comply with applicable certification requirements

​

A holder that is not a U.S. Holder or a partnership may be subject to U.S. federal backup withholding with respect to such dividends unless the holder certifies that it is a non-U.S. person, under penalties of perjury, or otherwise establishes an exemption therefrom. Backup withholding tax is not an additional tax. Holders generally may obtain a refund of any amounts withheld under backup withholding rules that exceed their income tax liability by timely filing a refund claim with the IRS.

​

You are encouraged to consult your own tax advisor concerning the overall tax consequences arising in your own particular situation under U.S. federal, state, local, or foreign law from the payment of dividends on our common stock.

​

Cash Flows

​

Net cash provided by operating activities for the years ended December 31, 2022 and 2021 was $189.3 million and $231.1 million, respectively. This decrease in cash provided by operating activities was primarily due to lower revenue earned by our major bulk vessels partially offset by higher rates achieved by our minor bulk vessels, changes in working capital, as well as an increase in drydocking costs incurred. These decreases in cash provided by operating activities were partially offset by lower interest expense.

​

Net cash used in investing activities during the years ended December 31, 2022 and 2021 was $55.0 million and $67.6 million, respectively. The decrease was primarily due to a $63.2 million decrease in the purchase of vessels. The purchase of vessels during 2022 is primarily a result of the delivery of two Ultramax vessels that were delivered during the first quarter of 2022, as well as fuel efficiency upgrade vessel asset additions for certain vessels in our fleet. The purchase of vessels during 2021 primarily included the purchase price of four Ultramax vessels which delivered during the third quarter of 2021, as well as deposits made for the two aforementioned Ultramax vessels that delivered during the first quarter of 2022. This decrease was partially offset by a $49.5 million decrease in net proceeds from the sale of vessels as there were no vessels sold during 2022.

​

Net cash used in financing activities during the years ended December 31, 2022 and 2021 was $190.7 million and $222.7 million, respectively. The decrease was primarily due to the refinancing of our prior credit facilities with the $450 Million Credit Facility on August 31, 2021. During 2022, the decrease in total net cash used in financing activities related to our credit facilities was $128.2 million as compared to 2021. Additionally, there was a $6.0 million decrease in deferred financing costs paid in relation to the $450 Million Credit Facility during 2022 as compared to 2021. These decreases were partially offset by a $102.3 million increase in the payment of dividends during 2022 as compared to 2021.

​

Credit Facilities

​

On August 3, 2021, we entered into the $450 Million Credit Facility, which we used to refinance the existing debt outstanding under the $495 Million Credit Facility and the $133 Million Credit Facility as of August 31, 2021. Refer to Note 7 — Debt of our Consolidated Financial Statements for further details.

​

Interest Rate Swap Agreements, Forward Freight Agreements and Currency Swap Agreements

​

At December 31, 2022, we had three interest rate cap agreements to manage interest costs and the risk associated with changing interest rates. Such agreements cap the borrowing rate on our variable debt to provide a hedge against the risk of rising rates. At December 31, 2022, the total notional principal amount of the interest rate cap agreements was $200.0 million.

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Refer to the table in Note 8 — Derivative instruments of our Consolidated Financial Statements which summarizes the interest rate cap agreements in place as of December 31, 2022.

​

As part of our business strategy, we may enter into interest rate swap agreements to manage interest costs and the risk associated with changing interest rates. In determining the fair value of interest rate derivatives, we consider the creditworthiness of both the counterparty and ourselves, which has not changed significantly and has no effect on the valuation. Valuations prior to any adjustments for credit risk would be validated by comparison with counterparty valuations. Amounts would not and should not be identical due to the different modeling assumptions. Any material differences would be investigated.

​

As part of our business strategy, we may also enter into arrangements commonly known as forward freight agreements, or FFAs, to hedge and manage our exposure to the charter market risks relating to the deployment of our vessels. Generally, these arrangements would bind us and each counterparty in the arrangement to buy or sell a specified tonnage freighting commitment “forward” at an agreed time and price and for a particular route. Upon settlement, if the contracted charter rate is less than the average of the rates (as reported by an identified index) for the specified route and period, the seller of the FFA is required to pay the buyer an amount equal to the difference between the contracted rate and the settlement rate multiplied by the number of days in the specific period. Conversely, if the contracted rate is greater than the settlement rate, the buyer is required to pay the seller the settlement sum. Although FFAs can be entered into for a variety of purposes, including for hedging, as an option, for trading or for arbitrage, if we decided to enter into FFAs, our objective would be to hedge and manage market risks as part of our commercial management. It is not currently our intention to enter into FFAs to generate a stream of income independent of the revenues we derive from the operation of our fleet of vessels. If we determine to enter into FFAs, we may reduce our exposure to any declines in our results from operations due to weak market conditions or downturns, but may also limit our ability to benefit economically during periods of strong demand in the market. We have not entered into any FFAs as of December 31, 2022 and 2021.

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Interest Rates

​

The effective interest rate for the years ended December 31, 2022 and 2021 include interest rates associated with the interest expense for our various credit facilities including the following: the $450 Million Credit Facility, as well as the $133 Million Credit Facility and the $495 Million Credit Facility (until these facilities were refinanced with the $450 Million Credit Facility on August 31, 2021).

​

The effective interest rate for the aforementioned credit facilities, including the cost associated with unused commitment fees, if applicable, was 4.63% and 3.22% during 2022 and 2021, respectively. The interest rate on the debt, excluding unused commitment fees, ranged from 2.26% to 6.54% and 2.24% to 3.48% during 2022 and 2021, respectively.

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Capital Expenditures

​

We make capital expenditures from time to time in connection with our vessel acquisitions. Our fleet currently consists of 44 drybulk vessels, including 17 Capesize drybulk carriers, 15 Ultramax drybulk carriers and twelve Supramax drybulk carriers.

​

As previously announced, we have implemented a fuel efficiency upgrade program for certain of our vessels in an effort to generate fuel savings and increase the future earnings potential for these vessels. The upgrades have been successfully installed during previous drydockings.

​

Under U.S. Federal law and 33 CFR, Part 151, Subpart D, U.S. approved BWTS will be required to be installed in all vessels at the first out of water drydocking after January 1, 2016 if these vessels are to discharge ballast water inside 12 nautical miles of the coast of the U.S. U.S. authorities did not approve ballast water treatment systems until December 2016. Therefore, the U.S. Coast Guard (“USCG”) has granted us extensions for our vessels with 2016 drydocking deadlines until January 1, 2018; however, an alternative management system (“AMS”) may be installed in lieu. For example, in February 2015, the USCG added Bawat to the list of ballast water treatment systems that received AMS acceptance. An AMS is valid for five years from the date of required compliance with ballast water discharge

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standards, by which time it must be replaced by an approved system unless the AMS itself achieves approval. Furthermore, we received extensions for vessels drydocking in 2016 that allowed for further extensions to the vessels’ next scheduled drydockings in year 2021 and 2022. Additionally, for our vessels that were scheduled to drydock in 2017 and 2018, the USCG has granted an extension that enables us to defer installation to the next scheduled out of water drydocking. Any newbuilding vessels that we acquire will have a USCG approved system or at least an AMS installed when the vessel is being built.

In addition, on September 8, 2016, the Ballast Water Management (“BWM”) Convention was ratified and had an original effective date of September 8, 2017. However, on July 7, 2017, the effective date of the BWM Convention was extended two years to September 8, 2019 for existing ships. This requires vessels to have a BWTS installed to coincide with the vessels’ next International Oil Pollution Prevention Certificate (“IOPP”) renewal survey after September 8, 2019. In order for a vessel to trade in U.S. waters, it must be compliant with the installation date as required by the USCG as outlined above.

Furthermore, under our comprehensive IMO 2023 compliance plan, we intend to install energy saving devices and apply high performance paint systems in order to reduce fuel consumption and emissions among other key initiatives, on select vessels. We plan to undertake most, if not all, of these initiatives while our vessels undergo their regularly scheduled drydocking. These estimated expenditures are included in the table below.

​

During the second half of 2018, we entered into agreements for the purchase of BWTS for 36 of our vessels. During 2022, we completed the installation of BWTS on nine of our vessels. Additionally, during 2020 and 2019, we completed the installation of BWTS on nine and 17 of our vessels, respectively. There were no BWTS installations completed during 2021. Eleven of these vessels have since been sold. We anticipate that we will complete the installation of BWTS on one remaining vessel during the first quarter of 2023. We intend to fund the remaining BWTS purchase price and installation fees using cash on hand.

Under maritime regulations that went into effect January 1, 2020, our vessels were required to reduce sulfur emissions, for which the principal solutions are the use of scrubbers or buying fuel with low sulfur content. We have completed the installation of scrubbers on our 17 Capesize vessels, 16 of which were completed as of December 31, 2019 and the last one of which was completed on January 17, 2020. The remainder of our vessels are consuming VLSFO. The costs for the scrubber equipment and installation was capitalized and depreciated over the remainder of the life of the vessel. This does not include any lost revenue associated with offhire days due to the installation of the scrubbers.

​

In addition to acquisitions that we may undertake in future periods, we will incur additional expenditures due to special surveys and drydockings for our fleet. Furthermore, we plan to upgrade a portion of our fleet with energy saving devices and apply high performance paint systems in order to reduce fuel consumption and emissions.

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We estimate our capitalized drydocking costs, including capitalized costs incurred during drydocking related to vessel assets and vessel equipment, BWTS costs, fuel efficiency upgrades and scheduled off-hire days for our fleet through 2024 to be:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ (U.S. dollars in millions) ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

The costs reflected are estimates based on drydocking our vessels in China. Actual costs will vary based on various factors, including where the drydockings are actually performed. We expect to fund these costs with cash on hand. These costs do not include drydock expense items that are reflected in vessel operating expenses.

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Actual length of drydocking will vary based on the condition of the vessel, yard schedules and other factors. Higher repairs and maintenance expenses during drydocking for vessels which are over 15 years old typically result in a higher number of off-hire days depending on the condition of the vessel.

​

During 2022 and 2021, we incurred a total of $25.8 million and $4.9 million of drydocking costs, respectively, excluding costs incurred during drydocking that were capitalized to vessel assets or vessel equipment.

​

We completed the drydockings for 13 of our vessels, of which three began during the further quarter of 2021 and did not complete until the first quarter of 2022. One of our vessels completed part of its drydocking during 2022 and is not expected to complete the entire drydocking requirements until the first quarter of 2023. In addition to this one vessel, we estimate that four of our vessels will be drydocked during 2023 and 13 of our vessels will be drydocked during 2024.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

​

The discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions.

​

Critical accounting policies are those that reflect significant judgments of uncertainties and potentially result in materially different results under different assumptions and conditions. We have described below what we believe are our most critical accounting policies, because they generally involve a comparatively higher degree of judgment in their application. For an additional description of our significant accounting policies, see Note 2 to our Consolidated Financial Statements included in this report.

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Vessels and Depreciation

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We record the value of our vessels at their cost (which includes acquisition costs directly attributable to the vessel and expenditures made to prepare the vessel for its initial voyage) less accumulated depreciation. We depreciate our drybulk vessels on a straight-line basis over their estimated useful lives, estimated to be 25 years from the date of initial delivery from the shipyard. Depreciation is based on cost less the estimated residual scrap value of $400/lwt based on the 15-year average scrap value of steel. Effective January 1, 2022, we increased the estimated scrap value of the vessels from $310 per lwt to $400 per lwt prospectively based on the 15-year average scrap value of steel. This change resulted in a decrease in the annual depreciation charge over the remaining useful life of the vessels. Similarly, an increase in the useful life of a drybulk vessel would also decrease the annual depreciation charge. Comparatively, a decrease in the useful life of a drybulk vessel or in its residual value would have the effect of increasing the annual depreciation charge. However, when regulations place limitations over the ability of a vessel to trade on a worldwide basis, we will adjust the vessel’s useful life to end at the date such regulations preclude such vessel’s further commercial use.

​

The carrying value of each of our vessels does not represent the fair market value of such vessel or the amount we could obtain if we were to sell any of our vessels, which could be more or less. Under U.S. GAAP, we would not record a loss if the fair market value of a vessel (excluding its charter) is below our carrying value unless and until we determine to sell that vessel or the vessel is impaired as discussed below under the heading “Impairment of long-lived assets.”

​

There were no impairment losses during the years ended December 31, 2022 and 2021.

​

Under our credit facility, we regularly submit to the lenders valuations of our vessels on an individual charter free basis in order to evidence our compliance with the collateral maintenance covenants under our bank credit facility. Such a valuation is not necessarily the same as the amount any vessel may bring upon sale, which may be more or less, and should not be relied upon as such. We were in compliance with the collateral maintenance covenant under

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our $450 Million Credit Facility as of December 31, 2022. Refer to Note 7 — Debt in our Consolidated Financial Statements for additional information. We obtained valuations for all of the vessels in our fleet pursuant to the terms of the $450 Million Credit Facility. In the chart below, we list each of our vessels, the year it was built, the year we acquired it, and its carrying value as of December 31, 2022 and 2021. Vessels have been grouped according to their collateralized status as of December 31, 2022 and does not include any vessels held for sale or held for exchange.

​

As of December 31, 2022, the vessel valuations of all of our vessels for covenant compliance purposes under our credit facility as of the most recent compliance testing date were higher than their carrying values as December 31, 2022, with the exception of 16 of our Capesize vessels and one of our Ultramax vessels. As of December 31, 2021, the vessel valuations of all of our vessels for covenant compliance purposes under our credit facility as of the most recent compliance testing date were higher than their carrying values at December 31, 2021, with the exception of eleven of our Capesize vessels.

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The amount by which the carrying value at December 31, 2022 of 16 of our Capesize vessels and one of our Ultramax vessels exceeded the valuation of such vessels for covenant compliances ranged, on an individual vessel basis, from $0.1 million to $11.9 million per vessel, and $130.0 million on an aggregate fleet basis. Comparatively, the amount by which the carrying value at December 31, 2021 of eleven of our Capesize vessels exceeded the valuation of such vessels for covenant compliances ranged, on an individual vessel basis, from $4.3 million to $7.0 million per vessel, and $62.7 million on an aggregate fleet basis. The average amount by which the carrying value of these vessels exceeded the valuation of such vessels for covenant compliance purposes was $7.6 million and $5.7 million as of December 31, 2022 and 2021, respectively. However, neither such valuation nor the carrying value in the table below reflects the value of long-term time charters, if any, related to some of our vessels.

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​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ Carrying Value (U.S.

​ ​ ​ ​ ​ ​ dollars in

​ ​ ​ ​ ​ ​ thousands) as of

​ ​ Year December 31, December 31,

$450 Million Credit Facility ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Unencumbered ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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If we were to sell a vessel or hold a vessel for sale, and the carrying value of the vessel were to exceed its fair market value, net of commission, we would record a loss in the amount of the difference. Refer to Note 2 — Summary of Significant Accounting Policies and Note 4 — Vessel Acquisitions and Dispositions in our Consolidated Financial Statements for information regarding the sale of vessel assets.

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Deferred drydocking costs

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Our vessels are required to be drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels are operating. We defer the costs associated with drydockings as they occur and amortize these costs on a straight-line basis over the period between drydockings. Deferred drydocking costs include actual costs incurred at the drydock yard; cost of travel, lodging and subsistence of our personnel sent to the drydocking site to supervise; and the cost of hiring a third party to oversee the drydocking. We believe that these criteria are consistent with U.S. GAAP guidelines and industry practice and that our policy of deferral reflects the economics and market values of the vessels. Costs that are not related to drydocking, including routine maintenance and repairs, are expensed as incurred. If the vessel is drydocked earlier than originally anticipated, any remaining deferred drydock costs that have not been amortized are expensed at the end of the drydock.

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Impairment of long-lived assets

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We follow the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) subtopic 360-10, “Property, Plant and Equipment” (“ASC 360-10”) which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. If indicators of impairment are present, we perform an analysis of the anticipated undiscounted future net cash flows to be derived from the related long-lived assets.

​

Although rates have been strong on a relative basis in 2021 and 2022, the drybulk charter market has been volatile in recent years. Shipping rates for key drybulk routes increased during 2021 after a decline in 2020 which was principally as a result of the global economic slowdown caused by the COVID-19 pandemic. Rates in 2022 continued to exhibit strength, particularly early in the year, before various factors described earlier led to a softening rate environment during the second half of the year.

​

When indicators of impairment are present and our estimate of future undiscounted cash flows for any vessel is lower than the vessel’s carrying value, the carrying value is written down, by recording a charge to operations, to the vessel’s fair market value if the fair market value is lower than the vessel’s carrying value.

​

We determined that as of December 31, 2022, the future income streams expected to be earned by such vessels over their remaining operating lives and upon disposal on an undiscounted basis would be sufficient to recover their carrying values. As of December 31, 2022, only the Capesize and certain of the Ultramax vessels had indicators of impairment and the estimated future undiscounted cash flows for those Capesize and Ultramax vessels exceeded each of those vessels’ carrying values by a margin of approximately 29% to 116% of the carrying value. Our vessels remain fully utilized and have a relatively long average remaining useful life of approximately 14 years in which to recover sufficient cash flows on an undiscounted basis to recover their carrying values as of December 31, 2022. Management will continue to monitor developments in charter rates in the markets in which it participates with respect to the expectation of future rates over an extended period of time that are utilized in the analyses.

​

In developing estimates of future undiscounted cash flows, we make assumptions and estimates about the vessels’ future performance, with the significant assumptions being related to charter rates, fleet utilization, vessels’ operating expenses, vessels’ capital expenditures and drydocking requirements, vessels’ residual value and the estimated remaining useful life of each vessel. The assumptions used to develop estimates of future undiscounted cash flows are based on historical trends. Specifically, we utilize the rates currently in effect for the duration of their current time charters or spot market voyage charters, without assuming additional profit sharing. For periods of time where our vessels are not fixed on time charters or spot market voyage charters, we utilize an estimated daily time charter equivalent for our vessels’ unfixed days based on the most recent ten year historical one-year time charter average. In addition, we consider the current market rate environment and, if necessary, adjust our estimates of undiscounted cash

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flows to reflect the current rate environment. It is reasonably possible that the estimate of undiscounted cash flows may change in the future due to changes in current rates which could adversely affect the average rates being utilized and could result in impairment of certain of our older vessels. It is also reasonably possible that vessels that were not subject to impairment testing during 2022 because there was no indicator of impairment could be subject to such testing in the future.

​

Of the inputs that the Company uses for its impairment analysis, future charter rates are the most significant and most volatile. Based on the sensitivity analysis performed by the Company, the Company would record impairment on its vessels for time charter declines from their most recent ten-year historical one-year time charter averages as follows:

​

​ ​ ​ ​ ​ ​

​ ​ Percentage Decline from Ten-Year

​ ​ Historical One-Year Time Charter

​ ​ Average at Which Point Impairment

​ ​ Would be Recorded

​ As of As of

​ ​ December 31, ​ December 31,

Ultramax (1) (9.5) % N/A ​

Supramax (2) N/A ​ N/A ​

​

For our impairment analysis, we utilize the ten-year historical one-year time charter average, as well as considering the current rate environment, to project future charter rates, which we believe appropriately takes into account the volatility and highs and lows of the shipping cycle.

​

Our time charter equivalent (TCE) rates for our fiscal years ended December 31, 2022 and 2021, respectively, were above the ten-year historical one-year time charter average as of such dates as follows:

​

​ ​ ​ ​ ​ ​

​ ​ TCE Rates as Compared with Ten-

​ ​ Year Historical One-Year Time

​ ​ Charter Average

​ ​ (as percentage above)

​ ​ For the Years Ended December 31,

​

​

The projected net operating cash flows are determined by considering the future voyage revenues from existing time charters for the fixed fleet days and an estimated daily time charter equivalent for the unfixed days over the estimated remaining life of the vessel, assumed to be 25 years from the delivery of the vessel from the shipyard, reduced by brokerage and address commissions, expected outflows for vessels’ maintenance and vessel operating expenses (including planned drydocking and special survey expenditures) and required capital expenditures adjusted annually for inflation, assuming fleet utilization of 98%. The salvage value used in the impairment test is estimated to be $400 per light weight ton, consistent with our vessels’ depreciation policy discussed above.

​

Although we believe that the assumptions used to evaluate potential impairment are reasonable and appropriate, such assumptions are highly subjective. There can be no assurance as to how long charter rates and vessel values will remain at their currently low levels or whether they will improve by any significant degree. Charter rates may remain at

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depressed levels for a prolonged period of time, which could adversely affect our revenue and profitability, and future assessments of vessel impairment.

​

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

​

Interest rate risk

​

We are exposed to the impact of interest rate changes. Our objective is to manage the impact of interest rate changes on our earnings and cash flow in relation to our borrowings. We held three interest rate cap agreements as of December 31, 2022 to manage future interest costs and the risk associated with changing interest rates. The total notional amount of the caps at December 31, 2022 is $200.0 million and the caps have specified rates and durations. Refer to Note 8 — Derivative Instruments of our Consolidated Financial Statements, which summarizes the interest rate caps in place as of December 31, 2022.

​

The interest rate cap agreements cap the borrowing rate on our variable debt to provide a hedge against the risk of rising rates.

​

The total asset associated with the caps at December 31, 2022 is $6.7 million, of which $6.3 million has been classified as a current asset and $0.4 million has been classified as a noncurrent asset on the balance sheet. As of December 31, 2022, the Company has accumulated other comprehensive income (“AOCI”) of $6.5 million related to the interest rate cap agreements. At December 31, 2022, $6.1 million of AOCI is expected to be reclassified into income over the next 12 months associated with interest rate derivatives.

​

We are subject to market risks relating to changes in LIBOR rates because we have significant amounts of floating rate debt outstanding. During the years ended December 31, 2022 and 2021, we were subject to the following interest rates on the outstanding debt under our credit facilities (refer to Note 7 — Debt in our Consolidated Financial Statements for effective dates and termination dates for our credit facilities outlined below):

​

● $450 Million Credit Facility

​

​

● $133 Million Credit Facility

​

​

​

● $495 Million Credit Facility

​

​

​

A 1% increase in LIBOR would have resulted in an increase of $2.0 million in interest expense for the year ended December 31, 2022.

​

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From time to time, the Company may consider derivative financial instruments such as swaps and caps or other means to protect itself against interest rate fluctuations.

​

Derivative financial instruments

​

As part of our business strategy, we may enter into interest rate swap agreements or interest rate cap agreements to manage interest costs and the risk associated with changing interest rates. As of December 31, 2022, we held three interest rate cap agreements to manage interest costs and the risk associated with changing interest rates. The total notional amount of the caps at December 31, 2022 is $200.0 million and the caps have specified rates and durations. Refer to Note 8 — Derivative Instruments of our Consolidated Financial Statements which summarizes the interest rate caps in place as of December 31, 2022.

The three interest rate cap agreements were initially designated and qualified as cash flow hedges. The premium paid is recognized in income on a rational basis, and all changes in the value of the caps are deferred in AOCI and are subsequently reclassified into Interest expense in the period when the hedged interest affects earnings.

​

During the second quarter of 2022, based on the total outstanding debt under the $450 Million Credit Facility being below the total notional amount of the interest rate cap agreements, a portion of one of the interest rate cap agreements was dedesignated as a cash flow hedge. Subsequent gains and losses resulting from valuation adjustments on the dedesignated portion of the cap are recorded within interest expense. As the forecasted interest payments hedged are not remote of occurring, the amounts in AOCI as of the date of dedesignation will be released over the remaining original hedge period.

​

Refer to the “Interest rate risk” section above for further information regarding interest rate swap agreements.

​

We have entered into bunker swap and forward fuel purchase agreements with the objective of reducing the risk of the effect of changing fuel prices. Our bunker swap and forward fuel purchase agreements do not qualify for hedge accounting treatment; therefore, any unrealized or realized gains or losses are recognized as other income (expense). Refer to the “Bunker swap and forward fuel purchase agreements” section of Note 2 — Summary of Significant Accounting Policies for further information.

​

Currency and exchange rate risk

​

The majority of transactions in the international shipping industry are denominated in U.S. Dollars. Virtually all of our revenues and most of our operating costs are in U.S. Dollars. We incur certain operating expenses in currencies other than the U.S. Dollar, and the foreign exchange risk associated with these operating expenses is immaterial.

​

​

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

​

Genco Shipping & Trading Limited

Consolidated Financial Statements

Index to Consolidated Financial Statements

​

​ ​

​ ​ Page

​ ​ ​

a) Report of Independent Registered Public Accounting Firm (PCAOB ID 34) F-2

​ ​ ​

b) Consolidated Balance Sheets as of December 31, 2022 and 2021 F-5

​ ​ ​

c) Consolidated Statements of Operations F-6

​ ​ ​

d) Consolidated Statements of Comprehensive Income (Loss) F-7

​ ​ ​

e) Consolidated Statements of Equity F-8

​ ​ ​

f) Consolidated Statements of Cash Flows F-9

​ ​ ​

g) Notes to Consolidated Financial Statements F-11

​

​

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

​

To the shareholders and the Board of Directors of

Genco Shipping & Trading Limited

​

​

Opinion on the Financial Statements

​

We have audited the accompanying consolidated balance sheets of Genco Shipping & Trading Limited and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.