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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended
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Sep. 30, 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which include the accounts of GS&T, its wholly-owned subsidiaries and Baltic Trading, a subsidiary in which the Company owns a majority of the voting interests and exercises control. All intercompany accounts and transactions have been eliminated in consolidation. Basis of presentation The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management of the Company, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and operating results have been included in the statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2013 (the “2013 10-K”). The results of operations for the periods January 1, 2014 through July 9, 2014 for the Predecessor Company and July 9, 2014 through September 30, 2014 for the Successor Company are not necessarily indicative of the operating results to be expected for the year ending December 31, 2014. Vessels, net Vessels, net is stated at cost less accumulated depreciation. Included in vessel costs are acquisition costs directly attributable to the acquisition of a vessel and expenditures made to prepare the vessel for its initial voyage. The Company also capitalizes interest costs for a vessel under construction as a cost which is directly attributable to the acquisition of a vessel. Vessels are depreciated on a straight-line basis over their estimated useful lives, determined to be 25 years from the date of initial delivery from the shipyard. Depreciation expense for vessels for the period from July 9 to September 30, 2014 for the Successor Company was $17,221. Depreciation expense for vessels for the period from July 1 to July 9, 2014 and from January 1 to July 9, 2014 for the Predecessor Company was $3,039 and $71,756, respectively. Depreciation expense for vessels for the three and nine months ended September 30, 2013 for the Predecessor Company was $33,591 and $99,432, respectively. Depreciation expense is calculated based on cost less the estimated residual scrap value. The costs of significant replacements, renewals and betterments are capitalized and depreciated over the shorter of the vessel’s remaining estimated useful life or the estimated life of the renewal or betterment. Undepreciated cost of any asset component being replaced that was acquired after the initial vessel purchase is written off as a component of vessel operating expense. Expenditures for routine maintenance and repairs are expensed as incurred. Scrap value is estimated by the Company by taking the cost of steel times the weight of the ship noted in lightweight tons (lwt). Effective July 9, 2014, on the Effective Date, the Company increased the estimated scrap value of the vessels from $245 per lwt to $310 per lwt prospectively based on the 15-year average scrap value of steel. The change in the estimated scrap value will result in a decrease in depreciation expense over the remaining life of the vessel assets. During the period from July 9 to September 30, 2014, the increase in the estimated scrap value resulted in a decrease in depreciation expense of $735 for the Successor Company. The decrease in depreciation expense resulted in a $0.02 change to the basic and diluted net loss per share during the period from July 9 to September 30, 2014. The basic and diluted net loss per share would have been ($0.32) per share if there was no change in the estimated scrap value. Deferred revenue Deferred revenue includes cash received from charterers prior to it being earned. These amounts are recognized as voyage revenue when earned. Additionally, deferred revenue includes estimated customer claims mainly due to time charter performance issues. As of September 30, 2014 and December 31, 2013, the Company had an accrual of $587 and $536, respectively, related to these estimated customer claims. Voyage expense recognition In time charters, spot market-related time charters and pool agreements, operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. There are certain other non-specified voyage expenses, such as commissions, which are typically borne by the Company. At the inception of a time charter, the Company records the difference between the cost of bunker fuel delivered by the terminating charterer and the bunker fuel sold to the new charterer as a gain or loss within voyage expenses. These differences in bunkers related in a net (gain) loss of ($36) during the period from July 9 to September 30, 2014 for the Successor Company. During the period from July 1 to July 9, 2014 and from January 1 to July 9, 2014, the Predecessor Company recorded net (gains) losses of ($3) and ($252), respectively. During the three and nine months ended September 30, 2013, the Predecessor Company recorded net (gains) losses of $296 and ($47), respectively. Additionally, voyage expenses include the cost of bunkers consumed during short-term time charters pursuant to the terms of the time charter agreement. Noncontrolling interest Net loss attributable to noncontrolling interest during the periods from July 9 to September 30, 2014 for the Successor Company was $4,272. Net loss attributable to noncontrolling interest during the period from July 1 to July 9, 2014 and from January 1 to July 9, 2014 for the Predecessor Company was $568 and $8,734. Lastly, net loss attributable to noncontrolling interest during the three and nine months ended September 30, 2013 for the Predecessor Company was $1,942 and $9,300, respectively. The aforementioned amounts reflect the noncontrolling interest’s share of the net loss of Baltic Trading, a subsidiary of the Company, which owns and employs drybulk vessels in the spot market, in vessel pools or on spot market-related time charters. The spot market represents immediate chartering of a vessel, usually for single voyages. At September 30, 2014, the noncontrolling interest held an 88.96% economic interest in Baltic Trading while only holding 34.94% of the voting power. At December 31, 2013, the noncontrolling interest held an 88.95% economic interest in Baltic Trading while only holding 34.92% of the voting power. Income taxes Pursuant to certain agreements, GS&T technically and commercially manages vessels for Baltic Trading, as well as provides technical management of vessels for MEP in exchange for specified fees for these services provided. These services are performed by Genco Management (USA) Limited (“Genco (USA)”), which has elected to be taxed as a corporation for United States federal income tax purposes. As such, Genco (USA) is subject to United States federal income tax on its worldwide net income, including the net income derived from providing these services. Genco (USA) has entered into a cost-sharing agreement with the Company and Genco Ship Management LLC, collectively Manco, pursuant to which Genco (USA) agrees to reimburse Manco for the costs incurred by Genco (USA) for the use of Manco’s personnel and services in connection with the provision of the services for both Baltic Trading and MEP’s vessels. Total revenue earned for these services by the Successor Company during the period from July 9 to September 30, 2014 was $1,692, of which $936 eliminated upon consolidation. After allocation of certain expenses, there was taxable income of $847 associated with these activities for the period from July 9 to September 30, 2014. This resulted in estimated tax expense of $381 for the Successor Company for the period from July 9 to September 30, 2014. Total revenue earned for these services by the Predecessor Company during the period from July 1 to July 9, 2014 and for the period from January 1 to July 9, 2014 was $160 and $3,857, respectively, of which $89 and $2,156, respectively, were eliminated upon consolidation. After allocation of certain expenses, there was taxable income of $73 associated with these activities for the period from July 1 to July 9, 2014. This resulted in estimated income tax expense of $36 for the period from July 1 to July 9, 2014. After allocation of certain expenses, there was taxable income of $1,723 associated with these activities for the period from January 1 to July 9, 2014. This resulted in income tax expense of $776 for the period from January 1 to July 9, 2014. Total revenue earned for these services by the Predecessor Company during the three and nine months ended September 30, 2013 was $2,010 and $5,015, respectively, of which $772 and $2,148, respectively, were eliminated upon consolidation. After allocation of certain expenses, there was taxable income of $1,045 associated with these activities for the three months ended September 30, 2013. This resulted in estimated income tax expense of $471 for the three month period ended September 30, 2013. After allocation of certain expenses, there was taxable income of $2,262 associated with these activities for the nine months ended September 30, 2013. This resulted in income tax expense of $975 for the nine months ended September 30, 2013. Baltic Trading is subject to income tax on its United States source income. During the period from July 9 to September 30, 2014, Baltic Trading had United States operations which resulted in United States source income of $588. Baltic Trading’s estimated United States income tax expense for the period from July 9 to September 30, 2014 was $12. During the period from July 1 to July 9, 2014 and for the period from January 1 to July 9, 2014, Baltic Trading had United States operations which resulted in United States source income of $101 and $1,930, respectively. Baltic Trading’s United States income tax expense for the period from July 1 to July 9, 2014 and for the period from January 1 to July 9, 2014 was $2 and $39, respectively. During the three and nine months ended September 30, 2013, Baltic Trading had United States operations which resulted in United States source income of $420 and $1,059, respectively. Baltic Trading’s United States income tax expense for the three and nine months ended September 30, 2013 was $8 and $22, respectively. Other operating income During the period from July 9 to September 30, 2014, the Successor Company recorded other operating income of $296. Other operating income consisted of $296 related to the third installment which was due on December 30, 2012 from Samsun Logix Corporation (“Samsun”) pursuant to the rehabilitation plan which was approved by the South Korean courts. Refer to Note 21 —Commitments and Contingencies for further information regarding the bankruptcy settlements with Samsun. Stock-based Compensation The Company follows ASC Subtopic 718-10, Compensation — Stock Compensation (“ASC 718-10”), for nonvested stock issued under its equity incentive plans. Stock-based compensation costs from nonvested stock have been classified as a component of additional paid-in capital. Recent accounting pronouncements In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle is that a company should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, and shall be applied either retrospectively to each period presented or as a cumulative effect adjustment as of the date of adoption. The Company is evaluating the potential impact of this adoption on its condensed consolidated financial statements.

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- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References No definition available. + Details
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