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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934.
FOR THE PERIOD FROM ________ TO __________
COMMISSION FILE NUMBER
001-16531
----------------------
GENERAL MARITIME CORPORATION
-----------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
REPUBLIC OF THE MARSHALL ISLANDS 06-159-7083
---------------------------------- -------------------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
35 WEST 56TH STREET NEW YORK, NY 10019
---------------------------------- --------------
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 763-5600
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INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |_| No |X|
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF AUGUST 13, 2001:
--------------
Common Stock, par value $0.01 per share 36,999,780 shares
<Page>
GENERAL MARITIME CORPORATION AND SUBSIDIARIES
INDEX
PART I: FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 2001
(unaudited) and December 31, 2000 3
Consolidated Statements of Operations
(unaudited) for the three months and six months
ended June 30, 2001 and 2000. 4
Consolidated Statement of Shareholders' Equity
for the (unaudited) six months ended June 30, 2001
and as of December 31, 2000 5
Consolidated Statements of Cash Flows (unaudited)
for the six months ended June 30, 2001 and 2000 6
Notes to Consolidated Financial Statements (unaudited) 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 23
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 24
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 24
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 26
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 26
ITEM 5. OTHER INFORMATION 26
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 26
SIGNATURES 29
<Page>
ITEM 1. FINANCIAL STATEMENTS
GENERAL MARITIME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
(UNAUDITED)
----------- ------------
ASSETS
CURRENT ASSETS:
Cash $ 74,272 $ 23,523
Restricted cash -- 149
Due from charterers 7,944 9,601
Prepaid expenses and other current assets 5,266 4,657
-------- --------
Total current assets 87,482 37,930
-------- --------
NONCURRENT ASSETS:
Vessels, net of accumulated depreciation
of $72,738 and $59,884, respectively 558,350 392,230
Other fixed assets, net 969 974
Deferred drydock costs 7,960 5,416
Deferred financing costs 5,947 1,651
Due from charterers 847 721
Deposits on vessels held in escrow 55,649 --
Goodwill 6,007 --
Other assets 856 --
-------- --------
Total noncurrent assets 636,585 400,992
-------- --------
TOTAL ASSETS $724,067 $438,922
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 9,384 $ 6,701
Accrued interest 576 2,129
Current portion of long-term debt 59,468 33,050
-------- --------
Total current liabilities 69,428 41,880
-------- --------
NONCURRENT LIABILITIES:
Deferred voyage revenue 1,306 1,397
Long-term debt 170,955 208,735
-------- --------
Total noncurrent liabilities 172,261 210,132
-------- --------
Total liabilities 241,689 252,012
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $0.01 par value per share
Authorized 75,000,000; Issued and outstanding
36,999,780 and 21,432,056 shares at June 30,
2001 and December 31, 2000, respectively 370 215
Paid-in capital 421,343 157,584
Retained earnings 60,665 29,111
Accumulated other comprehensive income -- --
-------- --------
Total shareholders' equity 482,378 186,910
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $724,067 $438,922
-------- --------
</Table>
See notes to consolidated financial statements.
3
<Page>
GENERAL MARITIME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<Table>
<Caption>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------
VOYAGE REVENUES:
Voyage revenues $ 40,837 $ 25,523 $ 88,879 $ 48,289
OPERATING EXPENSES:
Voyage expenses 8,367 5,167 15,371 9,950
Direct vessel expenses 7,106 4,954 13,915 10,080
General and administrative 1,736 1,157 3,135 2,221
Depreciation and amortization 7,507 5,622 14,388 11,012
-------- -------- -------- --------
Total operating expenses 24,716 16,900 46,809 33,263
-------- -------- -------- --------
OPERATING INCOME 16,121 8,623 42,070 15,026
-------- -------- -------- --------
OTHER EXPENSE:
Interest expense-net (3,318) (4,416) (7,510) (8,807)
Other-net (1,822) 0 (1,822) 0
-------- -------- -------- --------
Net other expense (5,140) (4,416) (9,332) (8,807)
-------- -------- -------- --------
Income before extraordinary expense 10,981 4,207 32,738 6,219
Extraordinary expense (1,184) 0 (1,184) 0
-------- -------- -------- --------
Net income $ 9,797 $ 4,207 $ 31,554 $ 6,219
======== ======== ======== ========
Basic and diluted earnings per common share:
Income before extraordinary expense $ 0.45 $ 0.22 $ 1.42 $ 0.36
Net income $ 0.40 $ 0.22 $ 1.37 $ 0.36
Weighted average shares outstanding 24,532,441 18,803,847 23,000,758 17,259,679
</Table>
See notes to consolidated financial statements.
4
<Page>
GENERAL MARITIME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR
THE (UNAUDITED) SIX MONTHS ENDED JUNE 30, 2001 AND AS
OF DECEMBER 31, 2000
(IN THOUSANDS)
<Table>
<Caption>
Accumulated
Other Comprehensive
Common Paid-in Retained Comprehensive Income
Stock Capital Earnings Loss (Loss) Total
-------- --------- --------- ------------- -------------- --------
Balance as of December 31, 2000 $ 215 $ 157,584 $ 29,111 $ 0 $ 0 $186,910
Comprehensive income:
Net income 31,554 0 31,554 31,554
Cumulative effect of change in
Accounting principle (SFAS 133) (662) (662) (662)
Realized loss on termination of swaps 662 662 662
--------
Comprehensive income $ 31,554
========
Sale of common stock 80 127,970 128,050
Common stock issued to acquire assets 75 135,789 135,864
-------- --------- --------- ------- --------
Balance at June 30, 2001 (unaudited) $ 370 $ 421,343 $ 60,665 $ 0 $482,378
-------- --------- --------- ------- --------
</Table>
See notes to consolidated financial statements
5
<Page>
GENERAL MARITIME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
FOR THE SIX MONTHS
ENDED JUNE 30,
---------------------
2001 2000
--------- --------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income $ 31,554 $ 6,219
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary expense 1,184 0
Depreciation and amortization 14,388 11,012
Noncash interest expense contributed to capital 0 250
Changes in assets and liabilities:
Decrease (increase) in due from charterers 3,403 (161)
Decrease (increase) in prepaid expenses and other assets 450 (1,425)
Decrease in accounts payable and accrued expenses (597) (2,051)
(Decrease) increase in deferred voyage revenue (91) 2,983
Deferred drydock costs incurred (3,583) (1,047)
--------- --------
Net cash provided by operating activities 46,708 15,780
--------- --------
CASH FLOWS USED BY INVESTING ACTIVITIES:
Purchase of vessels (31,210) (57,000)
Cash paid on deposit of vessels (24,279) (8,633)
Purchase of other fixed assets (73) (76)
Additions to vessels 0 (179)
Acquisition of business net of cash received (5,392) 0
--------- --------
Net cash used by investing activities (60,954) (65,888)
--------- --------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Long-term debt borrowings 230,423 51,238
Principal payments on long-term debt (287,649) (7,900)
Payments for debt issue costs (5,978) (774)
Proceeds from issuance of common stock 128,050 0
Capital contributions from shareholders 0 15,500
Decrease in restricted cash 149 1,145
Change in loan with shareholder 0 254
--------- --------
Net cash provided by financing activities 64,995 59,463
--------- --------
Net increase in cash 50,749 9,355
Cash, beginning of year 23,523 6,842
--------- --------
Cash, end of period $ 74,272 $ 16,197
========= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 9,881 $ 9,196
========= ========
Supplemental schedule of noncash financing activities:
Note payable and interest payable to shareholder
Contributed to capital $ 0 $ 15,250
--------- --------
</Table>
See notes to consolidated financial statements.
6
<Page>
GENERAL MARITIME CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - General Maritime Corporation (the "Company") is a provider
of international transportation services of seaborne crude oil within the
Atlantic Basin. The Company's fleet is comprised of both Aframax and Suezmax
tankers. Most of the Company's vessels are currently operating in the Atlantic
Basin, which consists primarily of ports in the Caribbean, South and Central
America, the United States, Western Africa and the North Sea. The Company
operates its business in one business segment, which is the transportation of
international seaborne crude oil.
The Company's vessels are primarily available for charter on a voyage or time
basis. Under a voyage charter, the operator of a vessel agrees to provide the
vessel for the transport of specific goods between specific ports in return for
the payment of an agreed upon freight per ton of cargo or, alternatively, for a
specified total amount. All operating and specified voyage costs are for the
owner's account. A single voyage charter is often referred to as a "spot market"
charter. Vessels in the spot market may also spend time idle as they await a
charter.
A time charter involves the placing of a vessel at the charterer's disposal for
a set period of time during which the charterer may use the vessel in return for
the payment by the charterer of a specified daily or monthly hire rate. In time
charters, operating costs such as for 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.
Voyage and time charters are available for varying periods, ranging from a
single trip to a long-term arrangement, to commercial firms (such as oil
companies) and governmental agencies (both foreign and domestic) on a worldwide
basis. In general, vessels operating on time charter contracts can yield lower
profit margins than vessels operating in the spot market but provide predictable
cash flows and stable voyage revenues in the event of a decline in tanker rates.
Vessels operating in the spot market generate revenues that are less predictable
but may enable the company to capture increased profit margins during
improvements in tanker rates. Ship charter rates are affected by world
economics, international events, weather conditions, strikes, governmental
policies, supply and demand and many other factors beyond the control of the
Company.
RECAPITALIZATION PLAN - Prior to the Company's recapitalization, which was
completed as to 14 of the Company's vessels on June 12, 2001 and is described
below, these 14 vessels were owned directly or indirectly by various limited
partnerships. The managing general partners of the limited partnerships were
various companies wholly owned by Peter C. Georgiopoulos, Chairman and Chief
Executive Officer of the Company. The commercial operations for all of these
vessels were conducted by the old General Maritime Corporation, a Subchapter S
Corporation also wholly owned by Peter C. Georgiopoulos.
As part of the Company's recapitalization, Peter C. Georgiopoulos transferred
the equity interests in the old General Maritime Corporation to the Company
along with the general partnership interests in the vessel owning limited
partnerships in exchange for equity interests in the Company.
In addition, each vessel owner entered into an agreement with the Company with
respect to the recapitalization. Pursuant to these agreements, the vessel owners
delivered the entire equity interest in each vessel to the Company. In exchange,
the Company issued to each vessel owner shares of common stock of the Company.
Accordingly, the financial statements have been prepared as if the
recapitalization had occurred at February 1, 1997, representing the commencement
of operations of the old General Maritime Corporation. It is accounted for in a
manner similar to a pooling of interests as all of the equity interests
delivered in the recapitalization are under common control. The financial
information included herein does not necessarily reflect the consolidated
results of operations, financial position, changes in shareholders' equity and
cash flows of the Company as if the Company operated as a legal consolidated
entity for the periods presented.
For the purposes of determining the number of shares outstanding with respect to
the accompanying financial statements, the Company used the initial public
offering price of $18.00 per share. Under the terms of the Recapitalization Plan
there are certain provisions, which may require a post-closing reallocation of
issued shares between the respective limited partners. This potential
post-closing reallocation is not expected to result in a material change to the
outstanding shares in any of the periods presented.
BASIS OF PRESENTATION - The accompanying unaudited consolidated financial
statements have been prepared in accordance with the instructions to Form 10-Q
and, therefore, do not include all information and footnotes necessary for a
fair presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. However, in the
opinion of the management of the Company, all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of financial
position and operating results have been included in the statements. Interim
results are not necessarily indicative of results for a full year. Reference is
made to the December 31, 2000 consolidated
7
<Page>
financial statements of General Maritime Corporation contained in the
Registration Statement on Form S-1 filed on November 13, 2000, as amended for
additional information. Certain reclassifications have been made for consistent
presentation.
BUSINESS GEOGRAPHICS - Non-U.S. operations accounted for 100% of revenues and
net income. Vessels regularly move between countries in international waters,
primarily the Atlantic Basin, over hundreds of trade routes. It is therefore
impractical to assign revenues or earnings from the transportation of
international seaborne crude oil products by geographical area.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include the accounts of General Maritime Corporation and its wholly owned
subsidiaries. All intercompany accounts and transactions have been eliminated on
consolidation.
REVENUE AND EXPENSE RECOGNITION - Revenue and expense recognition policies for
voyage and time charter agreements are as follows:
VOYAGE CHARTERS - Voyage revenues, voyage expenses and direct vessel expenses
relating to voyage or spot market charters are recognized on a pro rata basis
based on the relative transit time in each period. Voyage expenses primarily
include only those specific costs which are borne by the Company in connection
with voyage charters which would otherwise have been borne by the charterer
under time charter agreements. These expenses principally consist of fuel and
port charges. Demurrage income represents payments by the charterer to the
vessel owner when loading and discharging time exceed the stipulated time in the
voyage charter. Demurrage income is recognized in accordance with the provisions
of the respective charter agreements and the circumstances under which demurrage
claims arise. Demurrage income was not material in any of the periods presented.
TIME CHARTERS - Revenue from time charters are recognized on a straight-line
basis over the term of the respective time charter agreement. Direct vessel
expenses are recognized when incurred.
RESTRICTED CASH - Certain of the Company's subsidiaries are required to make
monthly transfers into separate bank accounts to be used to pay interest and
principal on their senior and junior loan facilities.
INCOME TAXES - As noted in the description of the recapitalization plan in Note
1, the Company was comprised of various limited partnerships, which owned the
respective vessels, and the old General Maritime Corporation, which was a
Subchapter S Corporation. As a result, no provision for federal income tax for
prior years is included in the financial statements of the Company. The various
limited partnerships were generally treated as partnerships for US federal
income tax purposes and, accordingly, pursuant to section 701 of the Internal
Revenue Code were not subject to federal income taxes. The Subchapter S
Corporation was also not subject to federal income taxes: however, it was
subject to various state and local taxes which were not material for any of the
periods presented.
The Company is a Marshall Islands corporation. Pursuant to various tax treaties
and pursuant to the U.S. Internal Revenue Code, the Company does not believe its
operations prospectively will be subject to income taxes in the United States.
DEFERRED REVENUE - Deferred revenue primarily relates to cash received from
charterers prior to it being earned. These amounts are recognized as income in
the appropriate future periods.
COMPREHENSIVE INCOME--Comprehensive income is comprised of net income less
charges related to the adoption of SFAS No. 133.
ACCOUNTING ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
EARNINGS PER SHARE - Basic earnings/(loss) per share are computed by dividing
net income/(loss) by the weighted average number of common shares outstanding
during the year. Diluted income/(loss) per share reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised.. Options to purchase common stock have been excluded form the
calculation of earnings per share because the application of the treasury stock
method would make their inclusion antidilutive.
INTEREST RATE RISK MANAGEMENT - The Company is exposed to the impact of interest
rate changes. The Company's objective is to manage the impact of interest rate
changes on earnings and cash flows of its borrowings. The Company may use
interest rate swaps to manage net exposure to interest rate changes related to
its borrowings and to lower its overall borrowing costs. Significant interest
rate risk management instruments held by the Company during the six months ended
June 30, 2001 and 2000 included pay-fixed swaps. As of June 30, 2001, the
Company is not party to any derivative financial instruments.
8
<Page>
RECENT ACCOUNTING PRONOUNCEMENTS - Effective January 1, 2001, the Company
adopted Statement of Financial Standards ("SFAS") No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS 133"), and its
corresponding amendments under SFAS No. 138. SFAS 133 requires the Company to
measure all derivatives, including certain derivatives embedded in other
contracts, at fair value and to recognize them in the Consolidated Balance Sheet
as an asset or liability, depending on the Company's rights or obligations under
the applicable derivative contract. For derivatives designated as fair value
hedges in the fair value of both the derivative instrument and the hedged item
are recorded in earnings. For derivatives designated as cash flow hedges, the
effective portions of changes in fair value of the derivative are reported in
the other comprehensive income ("OCI") and are subsequently reclassified into
earnings when the hedged item affects earnings. Changes in fair value of
derivative instruments not designated as hedging instruments and ineffective
portions of hedges are recognized in earnings in the current period. The
adoption of SFAS 133 as of January 1, 2001 did not have a material impact on the
Company's results of operations or financial position. The Company recognized a
charge to OCI of $662 as a result of cumulative effect in accounting change in
relation to the adoption of SFAS No. 133. During June 2001, the Company
terminated its interest rate swap agreements, which resulted in the reversal of
the entire OCI balance. Pursuant to the termination of these interest rate swap
agreements, the Company made an aggregate cash payment of approximately $1,822
to counterparties. This amount is included in the statement of operations as a
component of other expense. As of June 30, 2001, the Company is not party to any
derivative financial instruments.
During July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets."
SFAS No. 141 requires the use of the purchase method of accounting for all
business combinations initiated after June 30, 2001. Additionally, this
statmenet further clarifies the criteria for recognition of intangible assets
separately from goodwill for all business combinations completed after June 30,
2001, as well as requires additional disclosures for business combinations.
SFAS No. 142 requires that goodwill and certain intangible assets acquired after
June 30, 2001 no longer be subject to amortization over their estimated useful
lives. Beginning on January 1, 2002, amortization of all other goodwill and
certain intangible assets will no longer be permitted and the Company will be
required to assess these assets for impairment annually, or more frequently if
circumstances indicate a potential impairment. Furthermore, this statement
provides specific guidance for testing goodwill and certain intangible assets
for impairment. Transition-related impairment losses, if any, which result from
the initial assessment of goodwill and certain intangible assets would be
recognized by the Company as a cumulative effect of accounting change on January
1, 2002. The Company is currently evaluating the impact of the adoption of this
standard on its financial position and results of operations.
2. ACQUISITIONS
As part of the Company's recapitalization, the Company acquired Universal
Overseas Tankers, Ltd. ("UOT"), a Greek company providing technical management
services exclusively to the Company, for $6,032, subject to adjustment. The
purchase price was comprised of cash of $5,429 and note payable to sellers of
$603. The Company recorded goodwill of $6,007, which reflected the excess of
purchase price over fair value of net assets acquired. The acquisition was
accounted for as a purchase and results of operations have been included in the
consolidated financial statements from the date of acquisition. Pro forma net
assets and results of operations of this acquisition had the acquisition
occurred at the beginning of 2001 are not material and accordingly, have not
been provided. Results of UOT's operations for the period from January 1, 2001
through June 12, 2001 are not significant to the Company's operations for the
six months ended June 30, 2001.
Prior to the acquisition, the Company paid management fees to UOT of $533 and
$171 for the six-month periods ended June 30, 2001 and 2000, respectively.
On June 15, 2001, in accordance with the Company's recapitalization, the Company
purchased five vessels for an aggregate purchase price of approximately $147,600
and also purchased certain other assets. Consideration in this transaction
consisted of approximately 5,805,000 shares of common stock at an initial public
offering price of $18.00 per share, subject to post closing adjustment, and the
assumption of indebtedness. The shares of common stock were issued at the
initial public offering price of $18.00 per share. These shares are subject to
adjustment as described in the various acquisition agreements associated with
these vessels.
On June 15, 2001, the Company made payments aggregating $27,400 of cash and
placed 1,742,770 shares of common stock, subject to post closing adjustment,
valued at $31,370 in escrow as a deposit on 10 vessels. The Company took
delivery of one of these vessels at a cost of $31,210 on June 27, 2001.
9
<Page>
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<Table>
<Caption>
JUNE 30, December 31,
2001 2000
(UNAUDITED)
----------- ------------
Accounts payable $ 6,476 $ 2,367
Accrued expenses 2,328 1,334
Accrued time charter termination costs 580 3,000
-------- --------
Total $ 9,384 $ 6,701
-------- --------
</Table>
4. LONG-TERM DEBT
Long-term debt consists of the following:
<Table>
<Caption>
JUNE 30, December 31,
2001 2000
(UNAUDITED)
----------- ------------
Senior loans $ 0 $223,437
Junior loans 0 18,348
Term loans 213,468 0
Reolving credit facilities 16,955 0
-------- --------
230,423 241,785
Less current portion 59,468 33,050
-------- --------
Long-term debt $170,955 $208,735
-------- --------
</Table>
At the time of the Company's recapitalization, the Company's subsidiaries were
party to 12 loan facilities with aggregate outstanding principal balances of
approximately $217,850. Interest rates under these loan facilities were adjusted
quarterly and ranged from 1.125% to 3.0% above the London Interbank Offered Rate
("LIBOR").
Interest rates for the six months ended June 30, 2001 ranged from 6.0% to 8.8%
and from 7.9% to 10.0% under the senior and junior loan facilities,
respectively. Interest rates during the six months ended June 30, 2000 ranged
from 7.2% to 8.6% and 9.1% to 9.3% under the senior and junior loan facilities,
respectively.
On June 15, 2001, all 12 loan facilities were fully repaid, $70,100 from the
proceeds of the Company's Initial Public Offering and the remainder with
borrowings made a new credit facility (the "First Credit Facility"). The Company
wrote off the unamortized deferred loan costs aggregating $1,184 associated with
those facilities as an extraordinary expense.
The First Credit Facility is comprised of a $200,000 term loan and a $100,000
revolving loan. The First Credit Facility maturity date is June 15, 2006. The
term loan is repayable in quarterly installments. The principal of the revolving
loan is payable at maturity. The First Credit Facility bears interest at LIBOR
plus 1.5%. The Company must pay a fee of 0.625% per annum on the unused portion
of the revolving loan on a quarterly basis. As of June 30, 2001, the Company had
$200,000 outstanding on the term loan and $11,100 outstanding on the revolving
loan. The Company's obligations under the First Credit Facility are secured by
20 vessels, of which 19 were owned by the Company as of June 30, 2001 and one of
which was acquired on July 2, 2001 with an aggregate carrying value at June 30,
2001 of approximately $536,000.
On June 27, 2001, the Company entered into an additional credit facility (the
"Second Credit Facility") consisting of a $115,000 term loan and a $50,000
revolving loan. The Second Credit Facility maturity date is June 27, 2006. The
term loan is repayable in quarterly installments. The principal of the revolving
loan is payable at maturity. The Second Credit Facility bears interest at LIBOR
plus 1.5%. The Company must pay a fee of 0.625% per annum on the unused portion
of the revolving loan on a quarterly basis. As of June 30, 2001, the Company had
$13,468 outstanding on the term loan and $5,855 outstanding on the revolving
loan. The Company's obligations under the Second Credit facility agreements are
secured by one vessel owned as of
10
<Page>
June 30, 2001 with a carrying value of approximately $31,210, six vessels the
Company acquired since June 30, 2001 and two vessels which the Company has
agreements to acquire.
Interest expense under all of the Company's credit facilities was $3,777 and
$4,643 for the three months ended June 30 2001 and 2000, respectively, for the
six months ended June 30, 2001 and 2000, interest expense was $8,328 and $9,146,
respectively.
The terms and conditions of the First and Second Credit Facilities require
compliance with certain restrictive covenants, which the Company feels are
consistent with loan facilities incurred by other shipping companies. Under the
credit facilities, the Company is required to maintain certain ratios such as:
vessel market value to loan outstanding, EBITDA to net interest expense and to
maintain minimum levels of working capital.
Based on borrowings as of June 30, 2001 aggregate maturities without any
mandatory prepayments, under the First Credit Facility and Second Credit
Facility are the following:
<Table>
<Caption>
First Credit Second credit
Facility Facility Total
------------ ------------- ---------
YEAR ENDING DECEMBER 31,
2001 (July 1, 2001 - December 31, 2001) $ 23,000 $13,468 $ 36,468
2002 46,000 0 46,000
2003 41,000 0 41,000
2004 36,000 0 36,000
2005 36,000 0 36,000
2006 29,100 5,855 34,955
-------- ------- --------
$211,100 $19,323 $230,423
-------- ------- --------
</Table>
The Company had entered into interest rate swap agreements to manage interest
costs and the risk associated with changing interest rates. The Company had
outstanding ten interest rate swap agreements with foreign banks at December 31,
2000. These agreements effectively fixed the Company's interest rate exposure on
its senior and junior loan facilities, which are based on LIBOR to fixed rates
ranging from 6.2% to 7.0%. The differential to be paid or received was
recognized as an adjustment to interest expense as incurred.
In June 2001, the Company terminated all of its interest rate swap agreements
pursuant to the repayment of the loan facilities which these interest rate swap
agreements hedged by paying the counterparties an aggregate amount of $1,822.
This termination has been recorded in the statement of operations as other
expense.
Interest expense pertaining to interest rate swaps for the six months
ended June 30, 2001 and 2000 was $303 and $16, respectively.
5. COMMITMENTS AND CONTINGENCIES
The Company had contracts outstanding with Universe Tankships (Delaware) Inc.
and Universe Tankships (Bermuda) Inc. for technical management of its vessels.
The remaining commitments under the contracts were approximately $137 and $137,
respectively at June 30. 2001.
General Maritime Corporation and certain subsidiaries are defendants in various
actions arising from shipping operations. It is the Company's policy to accrue
for amounts related to legal matters if it is probable that a liability has been
incurred and an amount is reasonably estimable. Although the ultimate
disposition of legal proceedings cannot be predicted with certainty, the
Company's management believes that the outcome of any claim which is pending or
threatened, either individually or as a combined basis, will not have a material
adverse effect on the consolidated financial condition of the Company.
6. RELATED PARTY TRANSACTIONS
The following are related party transactions not disclosed elsewhere in these
financial statements:
The Company rents office space as its principal executive offices in a building
currently leased by GenMar Realty LLC, a company wholly owned by Peter C.
Georgiopoulos, the Chairman and Chief Executive Officer of the Company. There is
no lease agreement between the Company and GenMar Realty LLC. The Company
currently pays an occupancy fee on a month to month basis. For the six months
ended June 30, 2001, the Company expensed $330 for occupancy fees, of which $306
represents unpaid occupancy fees and is included in accrued expenses at June 30,
2001.
11
<Page>
7. STOCK OPTION PLAN
On June 10, 2001, the Company adopted the General Maritime Corporation 2001
Stock Incentive Plan. Under this plan the Company's compensation committee,
another designated committee of the board of directors or the board of
directors, may grant a variety of stock based incentive awards to employees,
directors and consultants whom the compensation committee (or other committee or
the board of directors) believes are key to the Company's success. The
compensation committee may award incentive stock options, nonqualified stock
options, stock appreciation rights, dividend equivalent rights, restricted
stock, unrestricted stock and performance shares.
The aggregate number of shares of common stock available for award under the
2001 Stock Incentive Plan is 2,900,000 shares. As of June 30, 2001, the Company
granted incentive stock options and nonqualified stock options to purchase
860,000 shares of common stock at an exercise price of $18 per share under the
provisions of the 2001 Stock Incentive Plan. These options expire in 10 years.
Options to purchase 110,000 shares of common stock vested immediately on June
12, 2001, the date of the grant. 25% of the remaining 750,000 options will vest
on each of the first four anniversaries of the grant date. All options granted
under this plan will vest upon a change of control, as defined. These options
will be incentive stock options to the extent allowable under the Internal
Revenue Code.
The Company follows the provisions of APB 25 to account for its stock option
plan. The fair value of the options were determined on the date of grant using a
Black-Scholes option pricing model. These options were valued based on the
following assumptions: an estimated life of five years, volatility of 55%, risk
free interest rate of 5.5%, and no dividend yield. The fair value of the 860,000
options to purchase common stock granted on June 12, 2001 is $8.43 per share.
Had compensation cost for the Company's stock option plans been determined based
on the fair value at the grant dates for awards under those plans consistent
with the methods recommended by SFAS No. 123, the Company's net income and net
income per share for the three and six month periods ended June 30, 2001, would
have been stated at the pro forma amounts indicated below:
<Table>
<Caption>
Three months
ended Six months ended
June 30, 2001 June 30, 2001
------------- ----------------
Net income:
As reported $9,797 $31,554
Pro forma 8,733 30,490
Basic and diluted earnings per share (as reported):
Income before extraordinary loss $0.45 $1.42
Net income $0.40 $1.37
Basic and diluted earnings per share (pro forma):
Income before extraordinary loss $0.40 $1.38
Net income $0.36 $1.33
</Table>
8. SUBSEQUENT EVENTS
Subsequent to June 30, 2001, the Company took delivery of seven Aframax
tankers for an aggregate purchase price of approximately $195,596. Payment for
these vessels consisted of the release of cash in escrow deposits aggregating
$18,435 and the release of common shares, subject to post closing adjustment,
valued at $31,370 as well as additional cash payments of $36,226 and from
borrowings under the Company's Second Credit Facility of $109,495.
12
<Page>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
forward looking statements are based on management's current expectations and
observations. Included among the factors that, in the Company's view, could
cause actual results to differ materially from the forward looking statements
contained in this report are the following: changes in demand in the tanker
market, including, without limitation, changes in production of or demand for
oil and petroleum products, generally or in particular regions, greater than
anticipated levels of tanker newbuilding orders or lower than anticipated rates
of tanker scrapping; changes in rules and regulations applicable to the tanker
industry, including, without limitation, legislation adopted by international
organizations such as the International Maritime Organization and the European
Union or by individual countries; actions taken by regulatory authorities;
changes in trading patterns significantly impacting overall tanker tonnage
requirements; changes in the typical seasonal variations in tanker charter
rates; changes in the cost of other modes of oil transportation; changes in oil
transportation technology; changes in general domestic and international
political conditions; changes in the condition of the Company's vessels or
applicable maintenance or regulatory standards (which may affect, among other
things, our anticipated dry docking costs); and other factors listed from time
to time in its filings with the Securities and Exchange Commission, including,
without limitation, its Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on November 13, 2000, as amended. The
closings of the vessel acquisitions scheduled to occur prior to September 2001
are subject to the terms and conditions of the related acquisition agreement,
forms of which were filed as an exhibit to the Company's Registration Statement
on Form S-1.
The following is a discussion of the Company's financial condition and results
of operations for the three months ended June 30, 2001 and 2000, and for the six
months ended June 30, 2001 and 2000. You should consider the foregoing when
reviewing the consolidated financial statements and this discussion. You should
read this section together with the consolidated financial statements including
the notes to those financial statements for the periods mentioned above.
13
<Page>
RESULTS OF OPERATIONS
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
INCOME STATEMENT DATA
(Dollars in thousands, except per share data)
VOYAGE REVENUES
Voyage revenues $ 40,837 $ 25,523 $ 88,879 $ 48,289
OPERATING EXPENSES
Voyage expenses 8,367 5,167 15,371 9,950
Direct vessel expenses 7,106 4,954 13,915 10,080
General and administrative expenses 1,736 1,157 3,135 2,221
Depreciation and amortization 7,507 5,622 14,388 11,012
----------- ----------- ----------- -----------
Total operating expenses 24,716 16,900 46,809 33,263
----------- ----------- ----------- -----------
Operating income 16,121 8,623 42,070 15,026
----------- ----------- ----------- -----------
Net interest expense 3,318 4,416 7,510 8,807
Other expense 1,822 -- 1,822 --
Income before extraordinary expense 10,981 4,207 32,738 6,219
Extraordinary expense 1,184 -- 1,184 --
----------- ----------- ----------- -----------
NET INCOME $ 9,797 $ 4,207 $ 31,554 $ 6,219
=========== =========== =========== ===========
Basic and diluted earnings per share:
Income before extraordinary expense $ 0.45 $ 0.22 $ 1.42 $ 0.36
Extraordinary expense $ (0.05) $ -- $ (0.05) $ --
----------- ----------- ----------- -----------
Net income $ 0.40 $ 0.22 $ 1.37 $ 0.36
=========== =========== =========== ===========
Weighted average shares outstanding 24,532,441 18,803,847 23,000,758 17,259,679
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
----------- ------------
BALANCE SHEET DATA at end of period
(Dollars in thousands)
Cash $ 74,272 $ 23,523
Total assets 724,067 438,922
Total long-term debt 230,423 241,785
Weighted average long-term debt 226,591 233,010
Shareholders' equity 482,378 186,910
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
OTHER FINANCIAL DATA
(Dollars in thousands)
Adjusted EBITDA (1) $ 23,628 $ 14,245 $ 56,458 $ 26,038
Net cash provided by operating activities 19,654 9,351 46,708 15,780
Net cash used in investing activities (60,939) (65,689) (60,954) (65,888)
Net cash provided by financing activities 83,976 64,027 64,995 59,463
Capital expenditures
Vessel purchases, including deposits (55,489) (65,633) (55,489) (65,633)
Drydocking (3,415) (817) (3,582) (1,047)
</Table>
(1) Adjusted EBITDA represents net voyage revenues less direct vessel expenses
and general and administrative expenses. Adjusted EBITDA is included
because it is used by certain investors to measure a company's financial
performance. Adjusted EBITDA is not an item recognized by GAAP, and should
not be considered as an alternative to net income or any other indicator
of the Company's performance required by GAAP. The definition of Adjusted
EBITDA used here may not be comparable to that used by other companies.
For discussion and analysis purposes only, the Company evaluates performance
using net voyage revenues. Net voyage revenues are voyage revenues minus voyage
expenses. Voyage expenses primarily consist of commissions and port, canal and
fuel costs that are unique to a particular voyage, which would otherwise be paid
by a charterer under a time charter. The Company believes that presenting voyage
revenues, net of voyage expenses, neutralizes the variability created by unique
costs associated with particular voyages or the deployment of vessels on time
charter or on the spot market and presents a more accurate representation of the
revenues generated by our vessels.
Margin analysis for the indicated items as a percentage of net voyage revenues
for three months ended June 30, 2001 and 2000, and the six months ended June 30,
2001 and 2000 is set forth in the table below.
14
<Page>
INCOME STATEMENT MARGIN ANALYSIS
(% of Net Voyage Revenues)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ------------------------
2001 2000 2001 2000
---- ---- ---- ----
Net voyage revenues (1) 100% 100% 100% 100%
Operating expenses
Direct vessel expenses 21.9% 24.3% 18.9% 26.3%
General and administrative expenses 5.3% 5.7% 4.3% 5.8%
Depreciation and amortization 23.1% 27.6% 19.6% 28.7%
---- ---- ---- ----
Total operating expenses 50.3% 57.6% 42.8% 60.8%
---- ---- ---- ----
Operating income 49.7% 42.4% 57.2% 39.2%
Net interest expense 10.2% 21.7% 10.2% 23.0%
Other expense 5.6% 0.0% 2.5% 0.0%
Income before extraordinary expense 33.8% 20.7% 44.5% 16.2%
Extraordinary expense 3.6% 0.0% 1.6% 0.0%
---- ---- ---- ----
Net income 30.2% 20.7% 42.9% 16.2%
==== ==== ==== ====
Adjusted EBITDA (2) 72.8% 70.0% 76.8% 67.9%
</Table>
(1) Net voyage revenues are voyage revenues minus voyage expenses. Voyage
expenses primarily consist of commissions and port, canal and fuel costs
that are unique to a particular voyage, which would otherwise be paid by a
charterer under a time charter.
(2) Adjusted EBITDA represents net voyage revenues less direct vessel expenses
and general and administrative expenses. Adjusted EBITDA is included
because it is used by certain investors to measure a company's financial
performance. Adjusted EBITDA is not an item recognized by GAAP, and should
not be considered as an alternative to net income or any other indicator
of the Company's performance required by GAAP. The definition of Adjusted
EBITDA used here may not be comparable to that used by other companies.
Corporate income and expenses, which include general and administrative,
depreciation and net interest expenses, that are not directly attributable to a
vessel are allocated to vessels on a pro rata basis.
"Same Fleet" data consists of financial and operational data only from those
vessels that were part of the Company's fleet for both complete periods under
comparison. Management believes that this presentation facilitates a more
accurate analysis of operational and financial performance between periods. Same
Fleet data is provided for comparison of the periods for the three months ended
June 30, 2001 and 2000, and the six months ended June 30, 2001 and 2000. The
vessels which comprise the Same Fleet for periods not directly compared are not
necessarily the same, as a result, comparison of Same Fleet data provided for
periods which are not directly compared in the table below will not yield
meaningful results.
SAME FLEET ANALYSIS
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2001 2000 2001 2000
------ ------ ------ ------
INCOME STATEMENT DATA
(dollars in thousands)
Net voyage revenues 25,001 19,629 55,064 37,612
Direct vessel expenses 5,259 4,790 10,400 9,915
INCOME STATEMENT MARGIN ANALYSIS
(% of net voyage revenues)
Direct vessel expenses 21.0% 24.4% 18.9% 26.4%
Adjusted EBITDA 74.2% 70.2% 76.9% 68.0%
OTHER FINANCIAL DATA
(dollars in thousands)
Adjusted EBITDA 18,549 13,779 42,364 25,572
FLEET DATA
Weighted average number of vessels 11.0 11.0 11.0 11.0
Total calendar days for fleet 1,001 1,001 1,991 2,002
Total voyage days for fleet 930 969 1,909 1,970
Total time charter days for fleet 386 473 891 967
Total spot market days for fleet 544 496 1,018 1,003
Capacity utilization 92.9% 96.8% 95.9% 98.4%
AVERAGE DAILY RESULTS
TCE 26,883 20,257 28,850 19,100
Direct vessel expenses 5,250 4,800 5,200 4,950
Adjusted EBITDA 18,550 13,750 21,300 12,750
</Table>
15
<Page>
THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
2000
VOYAGE REVENUES - Voyage revenues increased by approximately $15.3 million, or
60.0%, to approximately $40.8 million for the three months ended June 30, 2001
compared to approximately $25.5 million for the three months ended June 30,
2000. This increase is primarily due to changes in tanker rates, the increase in
the number of vessels in our fleet and the mix of deployment of our vessels
operating on time charter contracts or in the spot market.
VOYAGE EXPENSES - Voyage expenses increased approximately $3.2 million, or
61.9%, to approximately $8.4 million for the three months ended June 30, 2001
compared to approximately $5.2 million for the three months ended June 30, 2000.
This increase is primarily due to the increase in the number of vessel of our
fleet as well as the mix of deployment of our vessel operating on time charter
contracts or in the spot market.
NET VOYAGE REVENUES - Net voyage revenues increased by approximately $12.1
million, or 59.5%, to approximately $32.5 million for the three months ended
June 30, 2001 compared to approximately $20.4 million for the three months ended
June 30, 2000. This increase is primarily due to changes in tanker rates and the
overall growth of the fleet. The total increase in our net voyage revenues of
approximately $12.1 million resulted from an increase of approximately $5.4
million in our Same Fleet revenues, approximately $0.9 million from vessels that
were part of the fleet during a portion of the three months ended June 30, 2000
and as a result are not considered Same Fleet, and approximately $5.8 million
from our acquisition of seven vessels subsequent to June 30, 2000. We acquired
the GENMAR SPARTIATE in July 2000, the GENMAR ALEXANDRA, GENMAR HECTOR, GENMAR
PERICLES, KENTUCKY, WEST VIRGINIA AND GENMAR SPIRIT in June 2001. The average
size of our fleet as a weighted average number of vessels increased 41.3% to
16.6 vessels for the three months ended June 30, 2001 compared to 11.7 vessels
for the three months ended June 30, 2000. Net voyage revenues are voyage
revenues minus voyage expenses.
On an Overall Fleet Basis:
o Average daily time charter equivalent rate per vessel increased by
approximately $6,600, or 32.4%, to approximately $27,000 for the
three months ended June 30, 2001 ($25,200 Aframax, $31,650 Suezmax)
compared to approximately $20,400 for the three months ended June
30, 2000 ($19,900 Aframax, $22,700 Suezmax). The rates for the three
months ended June 30, 2001 were lower than those for the three
months ended March 31, 2001 and have remained lower since June 30,
2001, reflecting a softening of the tanker market in which the
Company competes.
o Approximately $9.2 million, or 28.3%, of net voyage revenue was
generated by time charter contracts ($9.2 million Aframax, $0.0
Suezmax) and approximately $23.3 million, or 71.7%, was generated in
the spot market ($12.4 million Aframax, $10.9 million Suezmax) for
the three months ended June 30, 2001, compared to approximately $7.5
million, or 37.0%, of our net voyage revenue generated by time
charter contracts ($5.4 million Aframax, $2.1 million Suezmax), and
approximately $12.8 million, or 63.0%, generated in the spot market
($10.9 million Aframax, $1.9 million Suezmax) for the three months
ended June 30, 2000.
o Vessels operated an aggregate of 396 days, or 33.0%, on time charter
contracts (396 days Aframax, 0 days Suezmax) and 805 days or 67.0%,
in the spot market (460 days Aframax, 345 days Suezmax) for the
three months ended June 30, 2001, compared to 473 days, or 47.3%, on
time charter contracts (364 days Aframax, 109 days Suezmax) and 526
days, or 52.7%, in the spot market (455 days Aframax, 71 days
Suezmax) for the three months ended June 30, 2000.
o Average daily time charter rates were approximately $23,200 for the
three months ended June 30, 2001 ($23,200 Aframax, Suezmax vessels
did not operate on time charters during this period) compared to
average daily time charter rates of approximately $15,950 for the
three months ended June 30, 2000 ($14,850 Aframax, $19,600 Suezmax).
This increase is due to the expiration of some time charter
contracts and the introduction of new contracts that reflect the
time charter rates prevalent at that time.
o Average daily spot rates were approximately $28,900 for the three
months ended June 30, 2001 ($26,850 Aframax, $31,650 Suezmax),
compared to average daily spot rates of approximately $24,400 for
the three months ended June 30, 2000 ($23,950 Aframax, $27,500
Suezmax). This increase is the result of an overall improvement in
tanker rates for the three months ended June 30, 2001 compared to
the tanker market for the three months ended June 30, 2000.
Of the Company's net voyage revenues for the three months ended June 30, 2001,
of approximately $32.5 million, approximately $25.0 million was attributable to
its Same Fleet. Same Fleet for the three months ending June 30, 2001 and 2000
consisted of 11 vessels, nine Aframax vessels and two Suezmax vessels. Same
Fleet net voyage revenues increased by approximately $5.4 million, or 27.4%, to
approximately $25.0 million for the three months ended June 30, 2001 compared to
approximately $19.6 million for the three months ended June 30, 2000. This
increase is attributable to changes in spot and time charter tanker rates for
the three months ended June 30, 2001 compared to those for the three months
ended June 30, 2000.
On a Same Fleet Basis:
o Average daily time charter equivalent rate per vessel increased by
approximately $6,650, or 32.7%, to approximately $26,900 for the
three months ended June 30, 2001 ($25,600 Aframax, $33,550 Suezmax)
compared to approximately $20,250 for the three months ended June
30, 2000 ($19,850 Aframax, $22,400 Suezmax).
16
<Page>
o Approximately $8.9 million, or 35.5%, of net voyage revenue was
generated by time charter contracts ($8.9 million Aframax, $0.0
Suezmax) and approximately $16.1 million, or 64.5%, was generated in
the spot market ($11.2 million Aframax, $5.0 million Suezmax) for
the three months ended June 30, 2001, compared to approximately $7.5
million, or 38.4%, of our net voyage revenue generated by time
charter contracts ($5.4 million Aframax, $2.1 million Suezmax), and
approximately $12.1 million, or 61.6%, generated in the spot market
($10.9 million Aframax, $1.2 million Suezmax) for the three months
ended June 30, 2000.
o Vessels operated an aggregate of 386 days, or 41.5%, on time charter
contracts (386 days Aframax, 0 days Suezmax) and 544 days or 58.5%,
in the spot market (396 days Aframax, 148 days Suezmax) for the
three months ended June 30, 2001, compared to 473 days, or 48.8%, on
time charter contracts (364 days Aframax, 109 days Suezmax) and 496
days, or 51.2%, in the spot market (455 days Aframax, 41 days
Suezmax) for the three months ended June 30, 2000.
o Average daily time charter rates were approximately $23,000 for the
three months ended June 30, 2001 ($23,000 Aframax, Suezmax vessels
did not operate on time charters during this period) compared to
average daily time charter rates of approximately $15,950 for the
three months ended June 30, 2000 ($14,850 Aframax, $19,600 Suezmax).
This increase is due to the expiration of some time charter
contracts and the introduction of new contracts that reflect the
time charter rates prevalent at that time.
o Average daily spot rates were approximately $29,650 for the three
months ended June 30, 2001 ($28,150 Aframax, $33,550 Suezmax),
compared to average daily spot rates of approximately $24,400 for
the three months ended June 30, 2000 ($23,900 Aframax, $29,800
Suezmax). This increase is the result of an overall improvement in
tanker rates for the three months ended June 30, 2001 compared to
the tanker market for the three months ended June 30, 2000.
DIRECT VESSEL EXPENSES - Direct vessel expenses, which include crew costs,
provisions, deck and engine stores, lubricating oil, insurance, maintenance and
repairs increased by approximately $2.1 million, or 43.4% to approximately $7.1
million for the three months ended June 30, 2001 compared to approximately $5.0
million for the three months ended June 30, 2000. This increase is primarily due
to the growth of the fleet including providing newly acquired vessels with
initial provisions and stores. On a daily basis, direct vessel expenses per
vessel per day increased by approximately $500 to approximately $5,250 for the
three months ended June 30, 2001 ($4,900 Aframax, $5,850 Suezmax) compared to
approximately $4,750 for the three months ended June 30, 2000 ($4,400 Aframax,
$6,100 Suezmax). Same Fleet direct vessel expenses increased $0.5 million, or
9.4%, to approximately $5.3 million for the three months ended June 30, 2001
compared to $4.8 million the three months ended June 30, 2000. On a daily basis
Same Fleet direct vessel expenses per vessel per day increased, approximately
$450 to approximately $5,250 ($5,100 Aframax, $5,950 Suezmax) compared to
approximately $4,800 ($4,400 Aframax, $6,450 Suezmax) for the three months ended
June 30, 2000.
GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses
increased by approximately $0.5 million, or 50.0%, to approximately $1.7 million
for the three months ended June 30, 2001 compared to approximately $1.2 million
for the three months ended June 30, 2000. This increase is primarily due to an
increase in payroll expenses reflecting the increase in the number of personnel
in connection with the growth of the fleet for three months ended June 30, 2001
compared to the three months ended June 30, 2000. Daily general and
administrative expenses increased approximately $200 or 18.2% to $1,300 for the
three months ended June 30, 2001 compared to $1,100 for the three months ended
June 30, 2000.
DEPRECIATION AND AMORTIZATION - Depreciation and amortization, which includes
depreciation of vessels as well as amortization of dry docking and special
survey costs and loan fees, increased by approximately $1.9 million, or 33.5%,
to $7.5 million for the three months ended June 30, 2001 compared to
approximately $5.6 million for the three months ended June 30, 2000. This
increase is primarily due to the growth of the fleet as well as an additional
amortization of approximately $0.4 million in dry docking costs for the three
months ended June 30, 2000 compared to the three months ended June 30, 2000.
NET INTEREST EXPENSE - net interest expense decreased by approximately $1.1
million, or 24.9%, to approximately $3.3 million for the three months ended June
30, 2001 compared to approximately $4.4 million for the three months ended June
30, 2000. This decrease is primarily the result of lower interest rates
associated with the Company's variable interest rate debt.
OTHER EXPENSE - The Company incurred a non-recurring expense of approximately
$1.8 million relating to the termination of interest rate swap agreements
associated with certain prior loans during the three months ended June 30, 2001.
No such expenses occurred during the three months ended June 30, 2000.
EXTRAORDINARY EXPENSE - The Company incurred an extraordinary expense of $1.2
million related to the write off of remaining CAPITALIZED loan costs associated
with existing loans to the Company, which were refinanced during the three
months ended June 30, 2001. No such expenses occurred during the three months
ended June 30, 2000.
NET INCOME - Net income was approximately $9.8 million for the three months
ended June 30, 2001 compared to a net income of approximately $4.2 million for
the three months ended June 30, 2000.
17
<Page>
SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2000
VOYAGE REVENUES - Voyage revenues increased by approximately $40.6 million, or
84.1%, to approximately $88.9 million for the six months ended June 30, 2001
compared to approximately $48.3 million for the six months ended June 30, 2000.
This increase is primarily due to changes in tanker rates, the increase in the
number of vessels in our fleet and the mix of deployment of our vessels
operating on time charter contracts or in the spot market.
VOYAGE EXPENSES - Voyage expenses increased approximately $5.4 million, or
54.5%, to approximately $15.4 million for the six months ended June 30, 2001
compared to approximately $10.0 million for the six months ended June 30, 2000.
This increase is primarily due to the increase in the number of vessel of our
fleet as well as the mix of deployment of our vessel operating on time charter
contracts or in the spot market.
NET VOYAGE REVENUES - Net voyage revenues increased by approximately $35.2
million, or 91.7%, to approximately $73.5 million for the six months ended June
30, 2001 compared to approximately $38.3 million for the six months ended June
30, 2000. This increase is primarily due to changes in tanker rates and the
overall growth of the fleet. The total increase in net voyage revenues of
approximately $35.2 million resulted from an increase of approximately $17.5
million in Same Fleet revenues, approximately $3.9 million from vessels that
were part of the fleet during a portion of the six months ended June 30, 2000
and as a result were not considered Same Fleet, and approximately $13.8 million
from the acquisition of seven vessels subsequent to June 30, 2000. We acquired
the GENMAR SPARTIATE in July 2000, the GENMAR ALEXANDRA, GENMAR HECTOR, GENMAR
PERICLES, KENTUCKY, WEST VIRGINIA AND GENMAR SPIRIT in June 2001. The average
size of the fleet as a weighted average number of vessels increased 41.3% to
16.6 vessels for the three months ended June 30, 2001 compared to 11.7 vessels
for the three months ended June 30, 2000.
On an Overall Fleet Basis:
o Average daily time charter equivalent rate per vessel increased by
approximately $10,900, or 56.9%, to approximately $30,050 for the
six months ended June 30, 2001 ($28,800 Aframax, $32,700 Suezmax)
compared to approximately $19,150 for the six months ended June 30,
2000 ($18,450 Aframax, $22,350 Suezmax).
o Approximately $23.4 million, or 31.8%, of net voyage revenue was
generated by time charter contracts ($21.0 million Aframax, $2.4
Suezmax) and approximately $50.1 million, or 68.2%, was generated in
the spot market ($26.8 million Aframax, $23.3 million Suezmax) for
the six months ended June 30, 2001, compared to approximately $16.4
million, or 42.9%, of net voyage revenue generated by time charter
contracts ($10.3 million Aframax, $6.1 million Suezmax), and
approximately $21.9 million, or 57.1%, generated in the spot market
($19.9 million Aframax, $1.9 million Suezmax) for the six months
ended June 30, 2000.
o Vessels operated an aggregate of 901 days, or 36.8%, on time charter
contracts (804 days Aframax, 97 days Suezmax) and 1,545 days or
63.2%, in the spot market (854 days Aframax, 691 days Suezmax) for
the six months ended June 30, 2001, compared to 967 days, or 48.4%,
on time charter contracts (676 days Aframax, 291 days Suezmax) and
1,033 days, or 51.6%, in the spot market (962 days Aframax, 71 days
Suezmax) for the six months ended June 30, 2000.
o Average daily time charter rates were approximately $25,950 for the
six months ended June 30, 2001 ($26,100 Aframax, $24,850 Suezmax)
compared to average daily time charter rates of approximately
$17,000 for the six months ended June 30, 2000 ($15,250 Aframax,
$21,150 Suezmax). This increase is due to the expiration of some
time charter contracts and the introduction of new contracts that
reflect the time charter rates prevalent at that time.
o Average daily spot rates were approximately $32,450 for the six
months ended June 30, 2001 ($31,350 Aframax, $33,800 Suezmax),
compared to average daily spot rates of approximately $21,200 for
the six months ended June 30, 2000 ($20,750 Aframax, $27,500
Suezmax). This increase is the result of an overall improvement in
tanker rates for the six months ended June 30, 2001 compared to the
tanker market for the six months ended June 30, 2000.
Of the Company's net voyage revenues of approximately $73.5 million,
approximately $55.1 million was attributable to the Same Fleet. Our Same Fleet
for the six months ending June 30, 2001 and 2000 consisted of 11 vessels, nine
Aframax vessels and two Suezmax vessels. Same Fleet net voyage revenues
increased by approximately $17.5 million, or 46.4%, to approximately $55.1
million for the six months ended June 30, 2001 compared to approximately $37.6
million for the six months ended June 30, 2000. This increase is attributable to
changes in spot and time charter tanker rates for the six months ended June 30,
2001 compared to those for the six months ended June 30, 2000.
On a Same Fleet Basis:
o Average daily time charter equivalent rate per vessel increased by
approximately $9,750, or 51.0%, to approximately $28,850 for the six
months ended June 30, 2001 ($29,200 Aframax, $27,150 Suezmax)
compared to approximately $19,100 for the six months ended June 30,
2000 ($18,450 Aframax, $22,200 Suezmax).
o Approximately $23.1 million, or 41.9%, of net voyage revenue was
generated by time charter contracts ($20.7 million Aframax, $2.4
Suezmax) and approximately $32.0 million, or 58.1%, was generated in
the spot market ($25.6 million
18
<Page>
Aframax, $6.4 million Suezmax) for the six months ended June 30,
2001, compared to approximately $16.4 million, or 43.7%, of net
voyage revenue generated by time charter contracts ($10.3 million
Aframax, $6.1 million Suezmax), and approximately $21.2 million, or
56.3%, generated in the spot market ($20.0 million Aframax, $1.2
million Suezmax) for the six months ended June 30, 2000.
o Vessels operated an aggregate of 891 days, or 46.7%, on time charter
contracts (794 days Aframax, 97 days Suezmax) and 1,018 days or
53.3%, in the spot market (790 days Aframax, 228 days Suezmax) for
the six months ended June 30, 2001, compared to 967 days, or 49.1%,
on time charter contracts (676 days Aframax, 291 days Suezmax) and
1,003 days, or 50.9%, in the spot market (962 days Aframax, 41 days
Suezmax) for the six months ended June 30, 2000.
o Average daily time charter rates were approximately $25,900 for the
six months ended June 30, 2001 ($26,050 Aframax, $24,850 Suezmax)
compared to average daily time charter rates of approximately
$17,000 for the six months ended June 30, 2000 ($15,250 Aframax,
$21,150 Suezmax). This increase is due to the expiration of some
time charter contracts and the introduction of new contracts that
reflect the time charter rates prevalent at that time.
o Average daily spot rates were approximately $31,400 for the six
months ended June 30, 2001 ($32,350 Aframax, $28,150 Suezmax),
compared to average daily spot rates of approximately $31,100 for
the six months ended June 30, 2000 ($27,000 Aframax, $29,800
Suezmax). This increase is the result of an overall improvement in
tanker rates for the six months ended June 30, 2001 compared to the
tanker market for the six months ended June 30, 2000.
DIRECT VESSEL EXPENSES - Direct vessel expenses, which include crew costs,
provisions, deck and engine stores, lubricating oil, insurance, maintenance and
repairs increased by approximately $3.8 million, or 38.0% to approximately $13.9
million for the six months ended June 30, 2001 compared to approximately $10.1
million for the six months ended June 30, 2000. This increase is primarily due
to the growth of the fleet including providing newly acquired vessels with
initial provisions and stores. On a daily basis, direct vessel expenses per
vessel per day increased by approximately $350 to approximately $5,300 for the
six months ended June 30, 2001 ($5,000 Aframax, $5,950 Suezmax) compared to
approximately $4,950 for the six months ended June 30, 2000 ($4,650 Aframax,
$6,100 Suezmax). Same Fleet direct vessel expenses increased $0.5 million, or
5.0%, to approximately $10.4 million for the six months ended June 30, 2001
compared to $9.9 million the six months ended June 30, 2000. On a daily basis
Same Fleet direct vessel expenses per vessel per day increased approximately
$250 to approximately $5,200 ($5,100 Aframax, $5,850 Suezmax) compared to
approximately $4,950 ($4,650 Aframax, $6,300 Suezmax) for the three months ended
June 30, 2000.
GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses
increased by approximately $0.9 million, or 41.2%, to approximately $3.1 million
for the six months ended June 30, 2001 compared to approximately $2.2 million
for the six months ended June 30, 2000. This increase is primarily due to an
increase in payroll expenses reflecting the increase in the number of our
personnel in connection with the growth of the fleet for six months ended June
30, 2001 compared to the three months ended June 30, 2000. Daily general and
administrative expenses increased approximately $100 or 9.1% to $1,200 for the
six months ended June 30, 2001 compared to $1,100 for the six months ended June
30, 2000.
DEPRECIATION AND AMORTIZATION - Depreciation and amortization, which includes
depreciation of vessels as well as amortization of dry docking and special
survey costs and loan fees, increased by approximately $3.4 million, or 30.7%,
to $14.4 million for the six months ended June 30, 2001 compared to
approximately $11.0 million for the six months ended June 30, 2000.
NET INTEREST EXPENSE - Net interest expense decreased by approximately $1.3
million, or 14.7%, to approximately $7.5 million for the six months ended June
30, 2001 compared to approximately $8.8 million for the six months ended June
30, 2000. This decrease is primarily the result of lower interest rates
associated with the Company's variable interest rate debt.
OTHER EXPENSE - The Company incurred a non-recurring expense of approximately
$1.8 million relating to the termination of interest rate swap agreements
associated with certain prior loans during the six months ended June 30, 2001.
No such expenses occurred during the six months ended June 30, 2000.
EXTRAORDINARY EXPENSE - The Company incurred an extraordinary expense of $1.2
million related to the write off of remaining capitalized loan costs associated
with existing loans to the Company, which were refinanced during the six months
ended June 30, 2001. No such expenses occurred during the six months ended June
30, 2000.
NET INCOME - net income was approximately $31.6 million for the six months ended
June 30, 2001 compared to a net income of approximately $6.2 million for the six
months ended June 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Since the Company's formation, the principal source of funds has been equity
financings, cash flows from operating activities and long-term borrowings. The
principal use of funds has been capital expenditures to establish and grow the
fleet, maintain the quality of vessels, comply with international shipping
standards and environmental laws and regulations, fund working capital
requirements and make principal repayments on outstanding loan facilities. The
Company expects to rely upon operating cash flows as well as long-term
borrowings, and future offerings to implement the Company's growth plan. The
Company believes, that its cash flows from
operating activities, and long-term borrowings will be sufficient to
19
<Page>
meet its liquidity needs for the next 12 months. On June 12, 2001, the Company
completed its initial public offering, which resulted in net proceeds of
approximately $128.0 million. These proceeds were primarily used to partially
repay existing indebtedness of approximately $70.1 million and to partially
finance certain vessel acquisitions of approximately $30.0 million.
The Company's practice has been to acquire vessels using a combination of funds
received from equity investors and bank debt secured by mortgages on the
vessels, as well as shares of the Company's common stock. From its inception in
February 1997 through December 31, 2000, the Company acquired 14 vessels for an
aggregate amount of approximately $452.1 million, which was financed by
approximately $327.6 million in bank debt with the balance financed through
equity contributions. Subsequent to the initial public offering, the Company
acquired six vessels for cash and shares of the Company's common stock. The
Company's business is capital intensive and its future success will depend on
its ability to maintain a high-quality fleet through the acquisition of newer
vessels and the selective sale of older vessels. These acquisitions will be
principally subject to management's expectation of future market conditions as
well as its ability to acquire vessels on favorable terms.
Cash increased to approximately $74.3 million as of June 30, 2001 compared to
approximately $23.5 million as of December 31, 2000. Working capital is current
assets minus current liabilities, including the current portion of long-term
debt. Working capital was approximately $18.0 million as of June 30, 2001,
compared to a working capital deficit of approximately $4.0 million as of
December 31, 2000. The current portion of long-term debt included in our current
liabilities was approximately $59.5 million as of June 30, 2001 and
approximately $33.1 million as of December 31, 2000. We believe that our future
cash flows will satisfy our working capital needs.
Adjusted EBITDA, as defined in note 2 to the "Income Statement Margin Analysis"
table above increased by approximately $30.4 million, or 117%, to approximately
$56.4 million for the six months ended June 30, 2001 from approximately $26.0
million for the six months ended June 30, 2000, this increase is primarily due
to the growth of the fleet as well as improvements in tanker rates for the six
months ended June 30, 2001 compared to the six months ended June 30, 2000. On a
daily basis, Adjusted EBITDA per vessel increased by approximately $8,900, or
69.8%, to approximately $21,650 for the six months ended June 30, 2001 from
approximately $12,750 for the six months ended June 30, 2000. Same Fleet
Adjusted EBITDA increased by approximately $16.8 million, or 65.7%, to
approximately $42.4 million for the six months ended June 30, 2001 from
approximately $25.6 million for the six months ended June 30, 2000. Same Fleet
daily Adjusted EBITDA increased to approximately $21,300 from approximately
$12,750 for the same periods.
In June 2001, the Company closed on two credit facilities, the first ("First")
on June 15, 2001 and the second ("Second") on June 27, 2001. A portion of each
of the facilities was used to refinance existing debt, pay transaction costs or
acquire vessels. The Company anticipates that a portion of the remaining
available funds under the two facilities will be used for future acquisitions
and general corporate purposes. Each loan facility is comprised of a term loan
and a revolving loan. The terms and conditions of the credit facilities require
compliance with certain restrictive covenants. Under the financial covenants of
each of the credit facilities, the Company is required to maintain certain
ratios such as: vessel market value to loans outstanding, EBITDA to net interest
expense and to maintain minimum levels of working capital. Under the general
covenants, subject to certain exceptions, the Company and its subsidiaries are
not permitted to pay dividends.
The First credit facility is a $300 million facility, comprised of a $200
million term loan and a $100 million revolving loan, which has a five-year
maturity and is to be secured by 20 vessels, one of which was delivered in July
2001. The Second facility is a $165 million facility comprised of a $115 million
term loan and a $50 million revolving loan, which has a five-year maturity and
is to be secured by nine vessels, one of which was acquired in June 2001, six of
which were acquired in July and August 2001, and two of which have not yet been
but are anticipated to be acquired prior to September 2001. Each term loan
requires quarterly principal repayments. The principal of each revolving loan is
payable upon maturity. Both the term loans and the revolving loans bear interest
at a rate of 1.5% over LIBOR payable on the outstanding principal amount. The
Company is required to pay a fee for the unused portion of each of the revolving
loans on a quarterly basis.
Our scheduled principal repayments for each of the term loans under our First
and Second credit facilities are as follows, assuming full draw down following
all of the anticipated acquisitions:
<Table>
<Caption>
Principal Payments (dollars in millions)
----------------------------------------------------------------
Total
First Second Principal
Year Facility Facility Repayments
----------------------------------------------------------------
2001 23.0 13.5 36.5
2002 46.0 27.0 73.0
2003 41.0 21.5 62.5
2004 36.0 16.0 52.0
2005 36.0 16.0 52.0
2006 18.0 21.0 39.0
----------------------------------------------------------------
</Table>
In addition to vessel acquisition, other major capital expenditures include
funding the Company's maintenance program of regularly scheduled dry docking
necessary to preserve the quality of our vessels as well as to comply with
international shipping standards and environmental laws and regulations.
Although the Company has some flexibility regarding the timing of its dry
docking, the costs are
20
<Page>
relatively predictable. Management anticipates that vessels that are younger
than 15 years are to be dry docked every five years, while vessels 15 years or
older are to be dry docked every 2.5 years. The estimated dry docking costs for
the Company's anticipated 29-vessel fleet through 2005 are as follows. (The two
tables below reflect the 29-vessel fleet including two vessels that the Company
has agreements to acquire, subject to the terms and conditions of the
acquisition agreements) but has not taken delivery as of August 13, 2001.)
<Table>
<Caption>
Estimated Dry Docking Costs (dollars in millions)
---------------------------------------------------
Anticipated
29
Vessel
Year Fleet
---------------------------------------------------
2001 3.8
2002 7.3
2003 6.3
2004 8.2
2005 6.9
</Table>
The table below indicates the estimated dry docking schedule through 2005 for
the Company's anticipated 29 vessel fleet. Each dry docking is estimated to
require approximately 30 days. In addition to the incurrence of costs described
above, a dry docking results in off hire time for a vessel. Off hire time
includes the actual time the vessel is in the shipyard as well as ballast time
to the ship yard from the port of last discharge.
<Table>
<Caption>
---------------------------------------------
Anticipated
29 Vessel
Fleet
---------------------------------------------
2001
Aframax 2
Suezmax 2
2002
Aframax 11
Suezmax 1
2003
Aframax 5
Suezmax 2
2004
Aframax 10
Suezmax 3
2005
Aframax 10
Suezmax 2
</Table>
The ability to meet this maintenance schedule will depend on our ability to
generate sufficient cash flows from operations or to secure additional
financing.
Net cash provided by operating activities increased 196% to approximately $46.7
million for the six months ended June 30, 2001, compared to approximately $15.8
million for the six months ended June 30, 2000. This increase is primarily
attributable to the increase in net income.
Net cash used in investing activities decreased to approximately $61.0 million
for the six months ended June 30, 2001 compared to approximately $65.9 million
for the six months ended June 30, 2000. This decrease is primarily due to the
issuance of common stock to acquire vessels during the six months ended June 30,
2001 while during the six months ended June 30, 2000 all capital expenditures
were made with cash.
Net cash provided by financing activities was approximately $65.0 million for
the six months ended June 30, 2001 compared to approximately $59.5 million
provided by financing activities for the six months ended June 30, 2000. The
increase in cash provided by financing activity relates to the following:
o Net proceeds from borrowings under long-term debt were approximately
$230.4 million for the six months ended June 30, 2000, compared to
$51.2 million during the six months ended June 30, 2001.
o Principal repayments of long-term debt were approximately $287.6
million for the six months ended June 30, 2001 compared to
approximately $7.9 million for the six months ended June 30, 2000.
This change is the result of refinancing the Company's prior loans
as well as the repayment of loans associated with five vessels,
which the Company acquired.
o Proceeds from the issuance of common stock in the Company's initial
public offering were $128.0 million during the six months ended June
30, 2001, compared to capital contributions from shareholders of
approximately $15.5 million during the six months ended June 30,
2000.
21
<Page>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
INTEREST RATE RISK
The Company is exposed to various market risks, including changes in interest
rates. The exposure to interest rate risk relates primarily to the Company's
debt. At June 30, 2001, the Company had $230.4 million compared to $241.8
million at December 31, 2000 of floating rate debt with margins over LIBOR
ranging from 1.125% to 3.0%.
Until their termination in June 2001, the Company used interest rate swaps to
manage the impact of interest rate changes on earnings and cash flows. The
differential to be paid or received under these swap agreements was accrued as
interest rates change and was recognized as an adjustment to interest expense.
As of December 31, 2000, the Company had entered into interest rate swap
agreements having an aggregate notional amount of $85.5 million, which
effectively fixed LIBOR on a like amount of principal at rates ranging from 6.2%
to 7.0%. In June 2001, the Company terminated its interest rate swap agreements
in connection with its refinancing. Increases in LIBOR would increase our
interest expense to the extent it affects the $230.4 million floating rate debt
at June 30, 2001. A one percent increase in LIBOR would increase interest
expense by $2.3 million per year from June 30, 2001.
FOREIGN EXCHANGE RATE RISK
The international tanker industry's functional currency is the U.S. dollar. As
virtually all of our revenues and most of our operating costs are in U.S.
dollars, we believe that our exposure to foreign exchange risk is insignificant.
22
<Page>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Except as set forth below, General Maritime Corporation, a corporation
organized under the laws of the Republic of the Marshall Islands (the
"Company"), is not aware of any legal proceedings or claims involving it. From
time to time in the future, the Company may be subject to legal proceedings and
claims in the ordinary course of business, principally personal injury and
property casualty claims. Those claims, even if lacking merit, could result in
the expenditure of significant financial and managerial resources.
The Company time chartered one of its vessels, the HARRIET, to an
affiliate of OMl Corporation in September 1997, for a period of four years and
30 days. Under the charter, the Company had the right to cancel the balance of
the charter at any time after its second anniversary date upon 90 days' written
notice with a payment of $1.0 million to the charterer. On October 2, 2000, the
Company gave notice to the charterer that this option was being exercised, with
redelivery to take place on February 2, 2001. The charterer asserted that the
vessel would not have to be redelivered until February 24, 2001, which would
permit it time to conduct an additional voyage. In January, 2001, the charterer
indicated that it was not possible to complete a laden voyage by the February 2,
2001 date that the Company had indicated. The charterer demanded arbitration
and, under protest, redelivered the vessel to the Company on January 14, 2001.
Because it was unable to complete its next anticipated voyage under the charter,
the charterer has alleged that it is entitled damages in the amount of
$1,942,533, exclusive of interest and costs, although proof of those damages has
not yet been provided. The Company believes that the charterer's anticipatory
breach of the charter has damaged it. The parties agreed to arbitration in the
State of New York and nominated a sole arbitrator. The parties have exchanged
correspondence expressing differing views of the law and the facts of the matter
and have made various settlement offers. To date, no hearings have been held
before the arbitrator. A tentative hearing date has been set for early October
2001.
On March 14, 2001, the GENMAR HECTOR experienced severe weather while
unloading at the BP Amoco Co. terminal in Texas City, Texas. As a result of
heavy winds, the vessel became separated from the terminal. The terminal's
loading arms were damaged and there was a discharge of approximately 200 to 300
barrels of oil. The U.S. Coast Guard has determined that this oil originated
from the terminal and that BP Amoco is the responsible party for the discharge
under the Oil Pollution Act of 1990, although BP Amoco retains a right of
contribution against the vessel. The protection and indemnity association for
this vessel, which provides insurance coverage for such incidents, issued a
letter to BP Amoco Co. guaranteeing the payment of up to $1.5 million for any
damages for which this vessel may be found liable. Since that time, additional
claims have been asserted for damage resulting from the spill, but these claims
are well within insurance limits and the Company does not expect any additional
claims to approach those limits. Accordingly, the Company believes that this
incident will have no material affect on the value of the GENMAR HECTOR or on
its results of operations following the acquisition of this vessel.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) CHANGES IN SECURITIES.
In connection with the Company's recapitalization, the Company issued
on June 12, 2001, an aggregate of 29,000,000 shares of its common stock to an
escrow agent for equity holders of certain affiliated limited partnerships which
owned 14 vessels, equity holders of five special purpose entities which owned
five vessels, the sole equity holder the old General Maritime Corporation and
the owners of three vessels it had agreements to acquire following the closing
of the Company's initial public offering which it has since acquired. These
shares were issued on the basis described in the section entitled
"Recapitalization and Acquisitions" of the prospectus to which the Company's
Registration Statement on Form S-1 initially filed with the Securities and
Exchange Commission on November 13, 2001, as amended, relates and the foregoing
transactions are described in greater detail in that section.
23
<Page>
Prior to the completion of the Company's initial public offering, it issued
options to purchase 860,000 shares of common stock at the initial public
offering price per share. The terms of these options are described in the
section of the Company's initial public offering prospectus entitled "Management
- - Stock Incentive Plan." As of June 30, 2001, none of the options had been
exercised.
The issuances of the above securities were considered to be exempt
from registration under the Securities Act in reliance on Section 4(2) of the
Securities Act and, in two instances, Regulation S promulgated under the
Securities Act. The issuances of shares of common stock in connection with the
Company's recapitalization were considered to be exempt from registration under
the Securities Act as transactions by an issuer not involving a public offering
or, with respect to issuances of shares in exchange for two of the vessels the
Company acquired after the closing of the Company's initial public offering,
transactions occurring outside the United States. The issuances of options to
purchase shares of common stock prior to completion of the Company's initial
public offering were considered to be exempt from registration under the
Securities Act in reliance on Section 4(2). The recipients of common stock in
each of these transactions represented their intention to acquire the securities
for investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in these transactions. All recipients
either received adequate information about the Company or had access, through
employment or other relationships, to such information.
(b) USE OF PROCEEDS. On June 15, 2001, the Company closed the initial
public offering of 8,000,000 shares of its common stock, par value $0.01 per
share. The shares of common stock sold in the initial public offering were
registered under the Securities Act of 1933, as amended, on a Registration
Statement on Form S-1 (Registration No. 333-49814) that was declared effective
by the Securities and Exchange Commission on June 12, 2001 (the "Registration
Statement"). The 8,000,000 shares of common stock offered under the Registration
Statement were sold at a price of $18.00 per share and an aggregate offering
price of $144,000,000. The Company granted the underwriters of the offering a
30-day option to purchase up to 1,200,000 additional shares of its common stock
at the initial public offering price to cover over-allotments, if any, which
option was not exercised. The managing underwriters of the Company's initial
public offering were Lehman Brothers, Inc., ABN AMRO Rothschild LLC and
Jefferies & Company Inc.
The net proceeds to the Company from the sale of the 8,000,000 shares
of its common stock in its initial public offering were approximately $128.0
million, after deducting approximately $10.1 million which was paid to the
underwriters as underwriting discounts and commissions and approximately $5.9
million which was used to pay offering expenses, printing fees, listing fees,
filing fees, accounting fees and legal fees incurred in connection with the
Company's initial public offering. As of June 30, 2001, of the net proceeds the
Company received in connection with its initial public offering:
o Approximately $70.1 million was used to reduce the Company's
outstanding borrowings under the loan facilities of the Company's
predecessors, some members of which are directors and officers of
the Company or own 10% or more of the Company's common stock. See
sections captioned "Recapitalization and Acquisitions" and "Certain
Relationships and Related Transactions" in the Registration
Statement.
o Approximately $30.0 million was used as partial payment for one of
the vessels that the Company, at the time of its initial public
offering, had an agreement to acquire after the closing of such
offering (collectively, the "Post-Closing Vessels"), and as deposits
for six of the Post-Closing Vessels.
o Approximately $5.4 million was used as partial payment for United
Overseas Tankers Ltd., a technical management corporation located in
Piraeus, Greece.
o Approximately $17.5 million was held in a deposit account pending
use for the closing of
24
<Page>
the acquisition of four of the Post-Closing Vessels, which occurred
in July 2001, one vessel for which the Company's chief executive
officer, who is also a director of the Company, was entitled to
receive a percentage of the increase in the value of the owner's
interest in the vessel. See sections captioned "Recapitalization and
Acquisitions" and "Certain Relationships and Related Transactions"
in the Registration Statement.
The Company currently anticipates using approximately $0.8 million of the
remaining net proceeds as payment for the remaining portion of the purchase
price of United Overseas Tankers Ltd. The Company currently intends to use the
remainder of the net proceeds for general corporate purposes. The Company will
retain broad discretion in the allocation of the remaining net proceeds.
Except as otherwise note above in this Item 2, none of the payments made
with the proceeds from the Company's initial public offering were direct or
indirect payments to directors, officers, general partners of the issuer or
their associates, to persons owning 10 percent or more of any class of equity
securities of the issuer or to affiliates of the issuer.
(c) WORKING CAPITAL RESTRICTIONS. A description of working capital
restrictions and other limitations on payment of dividends are set forth in Item
2 of Part I of this Form 10-Q.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 5. OTHER INFORMATION.
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: (1)
2.1 Plan of Recapitalization. (2)
2.2 Contribution Agreement, dated May 25, 2001, among General
Maritime Ship Holdings Ltd., Ajax Limited Partnership, the
limited partners of Ajax Limited Partnership, Genmar Ajax
Ltd., Peter C. Georgiopoulos, Genmar Ajax Corporation and GMC
Administration Ltd. (4)
2.3 Contribution Agreement, dated May 25, 2001, among General
Maritime Ship Holdings, Ltd., Ajax II, L.P., the limited
partners of Ajax II, L.P., Ajax II LLC, Peter C.
Georgiopoulos, Genmar Ajax II Corporation and GMC
Administration Ltd. (4)
2.4 Contribution Agreement, dated May 25, 2001, among General
Maritime Ship Holdings Ltd., Ajax II, L.P., the limited
partners of Boss, L.P., Genmar Boss Ltd., Peter C.
Georgiopoulos, Genmar Boss Corporation and GMC Administration
Ltd. (4)
2.5 Contribution Agreement, dated May 25, 2001, among General
Maritime Ship Holdings Ltd., General Maritime I, L.P., the
limited partners of General Maritime I, L.P., General Maritime
I Corporation, Peter C. Georgiopoulos, Genmar Maritime I
Corporation and GMC Administration Ltd., and amendment
thereto. (2)
2.6 Contribution Agreement, dated May 25, 2001, among General
Maritime Ship Holdings
25
<Page>
Ltd., General Maritime II, L.P., the limited partners of
General Maritime II, L.P., General Maritime II Corporation,
Peter C. Georgiopoulos, Genmar Maritime II Corporation and GMC
Administration Ltd. (4)
2.7 Contribution Agreement, dated May 25, 2001, among General
Maritime Ship Holdings Ltd., Harriet, L.P., the limited
partners of Harriet, L.P., General Maritime III Corporation,
Peter C. Georgiopoulos, Genmar Harriet Corporation and GMC
Administration Ltd. (4)
2.8 Contribution Agreement, dated May 25, 2001, among General
Maritime Ship Holdings Ltd., and Pacific Tankship, L.P., the
limited partners of Pacific Tankship, L.P., Genmar Pacific
Ltd., Peter C. Georgiopoulos, Genmar Pacific Corporation and
GMC Administration Ltd. (4)
2.9 Contribution Agreement, dated May 25, 2001, among General
Maritime Ship Holdings Ltd., Genmar Alexandra, LLC Genmar II,
LLC, Equili Company, L.P., Equili Company, LLC, Equili Company
II, L.P. and Equili Company II, LLC. (4)
2.10 Vessel Contribution Agreement, dated April 26, 2001, between
General Maritime Ship Holdings Ltd. and Blystad Shipholding
Inc., Liberia. (4)
2.11 Memorandum of Agreement, dated April 26, 2001, between Blystad
Shipholding Inc., Liberia and General Maritime Ship Holdings
Ltd. (4)
2.12 Memorandum of Agreement, dated April 26, 2001, between Blystad
Shipholding Inc., Liberia and General Maritime Ship Holdings
Ltd. (4)
2.13 Vessel Contribution Agreement, dated May 25, 2001, between
General Maritime Ship Holdings Ltd. and KS Stavanger Prince.
(4)
2.14 Memorandum of Agreement, dated May 4, 2001, between KS
Stavanger Prince and General Maritime Ship Holdings Ltd. (4)
2.15 Letter Agreement, dated May 25, 2001, between General Maritime
Ship Holdings, Ltd. and Peter C. Georgiopoulos relating to the
acquisition of the old Maritime Corporation. (4)
3.1 Amended and Restated Articles of Incorporation of General
Maritime Ship Holdings Ltd. (2)
3.2 Articles of Amendment to Amended and Restated Articles of
Incorporation, changing name from General Maritime Ship
Holdings Ltd. to General Maritime Corporation. (2)
3.3 Amended and Restated By-Laws of General Maritime Ship Holdings
Ltd. (2)
4.1 Form of Common Stock Certificate of General Maritime
Corporation. (3)
4.2 Form of Registration Rights Agreement. (4)
10.1 Form of $300,000,000 Credit Agreement, dated June __, 2001,
among General Maritime Corporation, Christiania Bank og
KreditKasse ASA, New York Branch and various Lenders. (3)
10.2 Form of First Preferred Ship Mortgage on Marshall Islands Flag
Vessel, related to $300,000,000 Credit Agreement. (2)
10.3 Form of First Preferred Ship Mortgage on Liberian Flag Vessel,
related to $300,000,000 Credit Agreement. (2)
26
<Page>
10.4 Form of Deed of Covenants to accompany a First Preferred
Statutory Mortgage on Malta Flag Vessel, related to
$300,000,000 Credit Agreement. (2)
10.5 Form of Deed of Covenants to accompany a First Preferred
Statutory Mortgage on Norwegian Flag Vessel, related to
$300,000,000 Credit Agreement. (2)
10.6 Form of Insurance Assignment, related to $300,000,000 Credit
Agreement. (2)
10.7 Form of Earnings Assignment, related to $300,000,000 Credit
Agreement. (2)
10.8 Form of Master Vessel and Collateral Trust Agreement, related
to $300,000,000 Credit Agreement. (2)
10.9 Form of Subsidiaries Guaranty, related to $300,000,000 Credit
Agreement. (2)
10.10 Form of Pledge and Security Agreement, related to $300,000,000
Credit Agreement. (2)
10.11 $165,000,000 Credit Agreement dated June 27, 2001 among
General Maritime Corporation, Christiania Bank og KreditKasse
ASA, New York Branch and various Lenders.
10.12 Form of Insurance Assignment, related to $165,000,000 Credit
Agreement.
10.13 Form of Earnings Assignment, related to $165,000,000 Credit
Agreement.
10.14 Form of Subsidiaries Guaranty, related to $165,000,000 Credit
Agreement.
10.15 Form of Pledge and Security Agreement, related to $165,000,000
Credit Agreement.
10.16 Form of Master Vessel and Collateral Trust Agreement, related
to $165,000,000 Credit Agreement.
10.17 Form of First Preferred Ship Mortgage on Marshall Islands Flag
Vessel, related to $165,000,000 Credit Agreement.
10.18 Form of First Preferred Ship Mortgage on Liberian Flag Vessel,
related to $165,000,000 Credit Agreement.
10.19 Form of Deed of Covenants to accompany a First Preferred
Statutory Mortgage on Malta Flag Vessel, related to
$165,000,000 Credit Agreement.
- ----------
(1) Unless otherwise noted, each exhibit is filed herewith.
(2) Incorporated by reference to Amendment No. 5 to the Company's Registration
Statement on Form S-1, filed with the Securities and Exchange Commission
on June 12, 2001.
(3) Incorporated by reference to Amendment No. 4 to the Company's Registration
Statement on Form S-1, filed with the Securities and Exchange Commission
on June 6, 2001.
(4) Incorporated by reference to Amendment No. 3 to the Company's Registration
Statement on Form S-1, filed with the Securities and Exchange Commission
on May 25, 2001.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended
June 30, 2001.
27
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, its duly authorized officer and principal financial officer.
GENERAL MARITIME CORPORATION
(Registrant)
Date: AUGUST 14, 2001 By: /s/ Peter C. Georgiopoulos
---------------- ------------------------------------
Peter C. Georgiopoulos
Chairman and Chief Executive Officer
(Duly Authorized Officer)
Date: AUGUST 14, 2001 By: /s/ James C. Christodoulou
--------------- ------------------------------------
James C. Christodoulou
Vice President, Chief Financial
Officer and Secretary
(Principal Financial Officer)
28
<Page>
INDEX TO EXHIBITS
<Table>
<Caption>
(A) EXHIBIT
NUMBER DESCRIPTION (1)
- ------------------- ---------------------------------------------------------------------------------------
2.1 Plan of Recapitalization. (2)
2.2 Contribution Agreement, dated May 25, 2001, among General Maritime Ship Holdings Ltd.,
Ajax Limited Partnership, the limited partners of Ajax Limited Partnership, Genmar Ajax
Ltd., Peter C. Georgiopoulos, Genmar Ajax Corporation and GMC Administration Ltd. (4)
2.3 Contribution Agreement, dated May 25, 2001, among General Maritime Ship Holdings, Ltd.,
Ajax II, L.P., the limited partners of Ajax II, L.P., Ajax II LLC, Peter C.
Georgiopoulos, Genmar Ajax II Corporation and GMC Administration Ltd. (4)
2.4 Contribution Agreement, dated May 25, 2001, among General Maritime Ship Holdings Ltd.,
Ajax II, L.P., the limited partners of Boss, L.P., Genmar Boss Ltd., Peter C.
Georgiopoulos, Genmar Boss Corporation and GMC Administration Ltd. (4)
2.5 Contribution Agreement, dated May 25, 2001, among General Maritime Ship Holdings Ltd.,
General Maritime I, L.P., the limited partners of General Maritime I, L.P., General
Maritime I Corporation, Peter C. Georgiopoulos, Genmar Maritime I Corporation and GMC
Administration Ltd., and amendment thereto. (2)
2.6 Contribution Agreement, dated May 25, 2001, among General Maritime Ship Holdings Ltd.,
General Maritime II, L.P., the limited partners of General Maritime II, L.P., General
Maritime II Corporation, Peter C. Georgiopoulos, Genmar Maritime II Corporation and GMC
Administration Ltd. (4)
2.7 Contribution Agreement, dated May 25, 2001, among General Maritime Ship Holdings Ltd.,
Harriet, L.P., the limited partners of Harriet, L.P., General Maritime III Corporation,
Peter C. Georgiopoulos, Genmar Harriet Corporation and GMC Administration Ltd. (4)
2.8 Contribution Agreement, dated May 25, 2001, among General Maritime Ship Holdings Ltd.,
and Pacific Tankship, L.P., the limited partners of Pacific Tankship, L.P., Genmar
Pacific Ltd., Peter C. Georgiopoulos, Genmar Pacific Corporation and GMC Administration
Ltd. (4)
2.9 Contribution Agreement, dated May 25, 2001, among General Maritime Ship Holdings Ltd.,
Genmar Alexandra, LLC Genmar II, LLC, Equili Company, L.P., Equili Company, LLC, Equili
Company II, L.P. and Equili Company II, LLC. (4)
2.10 Vessel Contribution Agreement, dated April 26, 2001, between General Maritime Ship
Holdings Ltd. and Blystad Shipholding Inc., Liberia. (4)
2.11 Memorandum of Agreement, dated April 26, 2001, between Blystad Shipholding Inc.,
Liberia and General Maritime Ship Holdings Ltd. (4)
</Table>
29
<Page>
<Table>
2.12 Memorandum of Agreement, dated April 26, 2001, between Blystad Shipholding Inc.,
Liberia and General Maritime Ship Holdings Ltd. (4)
2.13 Vessel Contribution Agreement, dated May 25, 2001, between General Maritime Ship
Holdings Ltd. and KS Stavanger Prince. (4)
2.14 Memorandum of Agreement, dated May 4, 2001, between KS Stavanger Prince and General
Maritime Ship Holdings Ltd. (4)
2.15 Letter Agreement, dated May 25, 2001, between General Maritime Ship Holdings, Ltd. and
Peter C. Georgiopoulos relating to the acquisition of the old Maritime Corporation. (4)
3.1 Amended and Restated Articles of Incorporation of General Maritime Ship Holdings Ltd.
(2)
3.2 Articles of Amendment to Amended and Restated Articles of Incorporation, changing name
from General Maritime Ship Holdings Ltd. to General Maritime Corporation. (2)
3.3 Amended and Restated By-Laws of General Maritime Ship Holdings Ltd. (2)
4.1 Form of Common Stock Certificate of General Maritime Corporation. (3)
4.2 Form of Registration Rights Agreement. (4)
10.1 Form of $300,000,000 Credit Agreement, dated June __, 2001, among General Maritime Corporation,
Christiania Bank og KreditKasse ASA, New York Branch and various Lenders. (3)
10.2 Form of First Preferred Ship Mortgage on Marshall Islands Flag Vessel, related to
$300,000,000 Credit Agreement. (2)
10.3 Form of First Preferred Ship Mortgage on Liberian Flag Vessel, related to $300,000,000
Credit Agreement. (2)
10.4 Form of Deed of Covenants to accompany a First Preferred Statutory Mortgage on Malta
Flag Vessel, related to $300,000,000 Credit Agreement. (2)
10.5 Form of Deed of Covenants to accompany a First Preferred Statutory Mortgage on
Norwegian Flag Vessel, related to $300,000,000 Credit Agreement. (2)
10.6 Form of Insurance Assignment, related to $300,000,000 Credit Agreement. (2)
10.7 Form of Earnings Assignment, related to $300,000,000 Credit Agreement. (2)
10.8 Form of Master Vessel and Collateral Trust Agreement, related to $300,000,000 Credit
Agreement. (2)
10.9 Form of Subsidiaries Guaranty, related to $300,000,000 Credit Agreement. (2)
10.10 Form of Pledge and Security Agreement, related to $300,000,000 Credit Agreement. (2)
10.11 $165,000,000 Credit Agreement, dated June 27, 2001, among General Maritime Corporation,
Christiania Bank og KreditKasse ASA, New York Branch and various Lenders.
10.12 Form of Insurance Assignment, related to $165,000,000 Credit Agreement.
</Table>
30
<Page>
<Table>
10.13 Form of Earnings Assignment, related to $165,000,000 Credit Agreement.
10.14 Form of Subsidiaries Guaranty, related to $165,000,000 Credit Agreement.
10.15 Form of Pledge and Security Agreement, related to $165,000,000 Credit Agreement.
10.16 Form of Master Vessel and Collateral Trust Agreement, related to $165,000,000 Credit
Agreement.
10.17 Form of First Preferred Ship Mortgage on Marshall Islands Flag Vessel, related to
$165,000,000 Credit Agreement.
10.18 Form of First Preferred Ship Mortgage on Liberian Flag Vessel, related to $165,000,000
Credit Agreement.
10.19 Form of Deed of Covenants to accompany a First Preferred Statutory Mortgage on Malta
Flag Vessel, related to $165,000,000 Credit Agreement.
</Table>
(1) Unless otherwise noted, each exhibit is filed herewith.
(2) Incorporated by reference to Amendment No. 5 to the Company's Registration
Statement on Form S-1, filed with the Securities and Exchange Commission
on June 12, 2001.
(3) Incorporated by reference to Amendment No. 4 to the Company's Registration
Statement on Form S-1, filed with the Securities and Exchange Commission
on June 6, 2001.
(4) Incorporated by reference to Amendment No. 3 to the Company's Registration
Statement on Form S-1, filed with the Securities and Exchange Commission
on May 25, 2001.
31