International Seaways, Inc. [INSW] Filings

10-Q 1 insw-20220331x10q.htm 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-37836-1

INTERNATIONAL SEAWAYS, INC.

(Exact name of registrant as specified in its charter)


Marshall Islands		98-0467117
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

600 Third Avenue, 39^th Floor, New York, New York		10016
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 212-578-1600

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 Exchange Act of 1934 during 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 ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ☐	Accelerated filer ☒	Emerging growth company ☐

Non-accelerated filer ☐	Smaller reporting company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock (no par value)	INSW	New York Stock Exchange
8.5% Senior Notes due 2023	INSW - PA	New York Stock Exchange

Former name, former address and former fiscal year, if changed since last report

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date. The number of shares outstanding of the issuer’s common stock as of May 2, 2022: common stock, no par value 49,660,837 shares.

INTERNATIONAL SEAWAYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
DOLLARS IN THOUSANDS
(UNAUDITED)


	March 31, 2022		December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	74,553	$	97,883
Voyage receivables, net of allowance for credit losses of $27 and $31
including unbilled receivables of $113,633 and $100,137		120,465		107,096
Other receivables		7,368		5,651
Inventories		2,335		2,110
Prepaid expenses and other current assets		16,558		11,759
Current portion of derivative asset		2,061		—
Vessels held for sale		23,148		—
Total Current Assets		246,488		224,499
Restricted cash		1,051		1,050
Vessels and other property, less accumulated depreciation of $266,771 and $249,336		1,773,264		1,802,850
Vessels construction in progress		60,034		49,291
Deferred drydock expenditures, net		60,473		55,753
Operating lease right-of-use assets		23,425		23,168
Investments in and advances to affiliated companies		183,361		180,331
Long-term derivative asset		5,959		1,296
Time charter contracts acquired, net		502		842
Other assets		12,036		7,700
Total Assets	$	2,366,593	$	2,346,780

LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities	$	56,116	$	44,964
Current portion of operating lease liabilities		10,767		8,393
Current installments of long-term debt		178,391		178,715
Current portion of derivative liability		—		2,539
Total Current Liabilities		245,274		234,611
Long-term operating lease liabilities		10,814		12,522
Long-term debt		943,032		926,270
Long-term derivative liability		—		757
Other liabilities		2,023		2,288
Total Liabilities		1,201,143		1,176,448

Commitments and contingencies

Equity:
Capital - 100,000,000 no par value shares authorized; 49,641,506 and 49,612,019
shares issued and outstanding		1,588,606		1,591,446
Accumulated deficit		(422,339)		(409,338)
		1,166,267		1,182,108
Accumulated other comprehensive loss		(1,401)		(12,360)
Total equity before noncontrolling interests		1,164,866		1,169,748
Noncontrolling interests		584		584
Total Equity		1,165,450		1,170,332
Total Liabilities and Equity	$	2,366,593	$	2,346,780

See notes to condensed consolidated financial statements

INTERNATIONAL SEAWAYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
(UNAUDITED)


	Three Months Ended March 31,
		2022		2021
Shipping Revenues:
Pool revenues, including $23,271 and $17,247
from companies accounted for by the equity method	$	83,762	$	24,659
Time and bareboat charter revenues		6,175		14,698
Voyage charter revenues		11,545		7,399
		101,482		46,756

Operating Expenses:
Voyage expenses		3,507		1,587
Vessel expenses		60,317		26,327
Charter hire expenses		7,309		5,741
Depreciation and amortization		27,000		16,754
General and administrative		10,166		8,181
Third-party debt modification fees		187		—
(Gain)/loss on disposal of vessels and other assets, net of impairments		(1,376)		11
Total operating expenses		107,110		58,601
Loss from vessel operations		(5,628)		(11,845)
Equity in income of affiliated companies		5,597		5,468
Operating loss		(31)		(6,377)
Other (expense)/income		(226)		292
Loss before interest expense and income taxes		(257)		(6,085)
Interest expense		(12,740)		(7,280)
Loss before income taxes		(12,997)		(13,365)
Income tax provision		(4)		—
Net loss attributable to the Company	$	(13,001)	$	(13,365)

Weighted Average Number of Common Shares Outstanding:
Basic and diluted		49,571,337		28,023,815

Per Share Amounts:
Basic and diluted net loss per share	$	(0.26)	$	(0.48)

See notes to condensed consolidated financial statements

INTERNATIONAL SEAWAYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
DOLLARS IN THOUSANDS
(UNAUDITED)


	Three Months Ended March 31,
		2022		2021
Net loss	$	(13,001)	$	(13,365)
Other comprehensive income/(loss), net of tax:
Net change in unrealized losses on cash flow hedges		10,762		10,283
Defined benefit pension and other postretirement benefit plans:
Net change in unrecognized prior service costs		26		(8)
Net change in unrecognized actuarial losses		171		(56)
Other comprehensive income, net of tax		10,959		10,219
Comprehensive loss attributable to the Company	$	(2,042)	$	(3,146)

See notes to condensed consolidated financial statements

INTERNATIONAL SEAWAYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
DOLLARS IN THOUSANDS
(UNAUDITED)


	Three Months Ended March 31,
		2022		2021
Cash Flows from Operating Activities:
Net loss	$	(13,001)	$	(13,365)
Items included in net loss not affecting cash flows:
Depreciation and amortization		27,000		16,754
Loss on write-down of vessels and other assets		1,697		—
Amortization of debt discount and other deferred financing costs		855		540
Amortization of time charter hire contracts acquired		340		—
Deferred financing costs write-off		133		—
Stock compensation		1,108		1,037
Earnings of affiliated companies		(5,597)		(5,468)
Write-off of registration statement costs		—		694
Other – net		580		425
Items included in net loss related to investing and financing activities:
(Gain)/loss on disposal of vessels and other assets, net		(3,073)		11
Cash distributions from affiliated companies		2,250		2,825
Payments for drydocking		(17,570)		(8,594)
Insurance claims proceeds related to vessel operations		954		528
Changes in operating assets and liabilities:
Increase in receivables		(13,369)		(2,740)
Decrease in deferred revenue		—		(2,995)
Net change in inventories, prepaid expenses and other current assets, accounts
payable, accrued expenses and other current and long-term liabilities		(2,088)		(10,658)
Net cash used in operating activities		(19,781)		(21,006)
Cash Flows from Investing Activities:
Expenditures for vessels and vessel improvements		(37,989)		(3,281)
Proceeds from disposal of vessels and other property, net		24,257		(11)
Expenditures for other property		(390)		(179)
Investments in and advances to affiliated companies, net		(527)		54
Net cash used in investing activities		(14,649)		(3,417)
Cash Flows from Financing Activities:
Extinguishment of debt		(10,981)		—
Payments on debt		(35,284)		(15,371)
Proceeds from sale and leaseback financing, net of issuance and deferred financing costs		20,401		—
Payments on sale and leaseback financing		(9,085)		—
Borrowings on revolving credit facilities		50,000		—
Cash payments on derivatives containing other-than-insignificant financing element		—		(1,312)
Cash dividends paid		(2,980)		(1,681)
Cash paid to tax authority upon vesting of stock-based compensation		(970)		(489)
Net cash provided by/(used in) financing activities		11,101		(18,853)
Net decrease in cash, cash equivalents and restricted cash		(23,329)		(43,276)
Cash, cash equivalents and restricted cash at beginning of year		98,933		215,677
Cash, cash equivalents and restricted cash at end of period	$	75,604	$	172,401

See notes to condensed consolidated financial statements

INTERNATIONAL SEAWAYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
DOLLARS IN THOUSANDS
(UNAUDITED)


					Accumulated
					Other
			Accumulated		Comprehensive		Noncontrolling
	Capital		Deficit		Loss		Interests		Total
For the three months ended
Balance at January 1, 2022	$	1,591,446	$	(409,338)	$	(12,360)	$	584	$	1,170,332
Net loss		—		(13,001)		—		—		(13,001)
Other comprehensive income		—		—		10,959		—		10,959
Dividends declared		(2,978)		—		—		—		(2,978)
Forfeitures of vested restricted stock awards		(970)		—		—		—		(970)
Compensation relating to restricted stock awards		296		—		—		—		296
Compensation relating to restricted stock units awards		501		—		—		—		501
Compensation relating to stock option awards		311		—		—		—		311
Balance at March 31, 2022	$	1,588,606	$	(422,339)	$	(1,401)	$	584	$	1,165,450

Balance at January 1, 2021	$	1,280,501	$	(275,846)	$	(32,613)		—	$	972,042
Net loss		—		(13,365)		—		—		(13,365)
Other comprehensive income		—		—		10,219		—		10,219
Dividends declared		(1,681)		—		—		—		(1,681)
Forfeitures of vested restricted stock awards		(489)		—		—		—		(489)
Compensation relating to restricted stock awards		202		—		—		—		202
Compensation relating to restricted stock units awards		542		—		—		—		542
Compensation relating to stock option awards		293		—		—		—		293
Balance at March 31, 2021	$	1,279,368	$	(289,211)	$	(22,394)	$	—	$	967,763

See notes to condensed consolidated financial statements

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1 — Basis of Presentation:

The accompanying unaudited condensed consolidated financial statements include the accounts of International Seaways, Inc. (“INSW”), a Marshall Islands corporation, and its wholly owned subsidiaries. Unless the context indicates otherwise, references to “INSW”, the “Company”, “we”, “us” or “our”, refer to International Seaways, Inc. and its subsidiaries. As of March 31, 2022, the Company’s operating fleet consisted of 84 wholly-owned, finance leased or bareboat chartered-in and time-chartered-in oceangoing vessels, including two vessels in which the Company has interests through its joint ventures, engaged primarily in the transportation of crude oil and refined petroleum products in the International Flag trade through its wholly owned subsidiaries. In addition to its operating fleet, three dual-fuel LNG-powered VLCC newbuilds are scheduled for delivery to the Company in the first quarter of 2023, bringing the total operating and newbuild fleet to 87 vessels as of March 31, 2022. Subsequent to March 31, 2022, the Company sold and delivered two Panamaxes and a Handysize product carrier to buyers (see Note 6, “Vessels”).

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and notes required by generally accepted accounting principles in the United States. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles in the United States for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

All intercompany balances and transactions within INSW have been eliminated. Investments in 50% or less owned affiliated companies, in which INSW exercises significant influence, are accounted for by the equity method.

Note 2 — Merger Transaction:

Completion of Merger Transaction

On July 16, 2021 (the “Effective Time”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated as of March 30, 2021, by and among INSW, Diamond S Shipping Inc., a Republic of the Marshall Islands corporation (“Diamond S”), and Dispatch Transaction Sub, Inc., a Republic of the Marshall Islands corporation and wholly-owned subsidiary of INSW (“Merger Sub”), Merger Sub merged with and into Diamond S (the “Merger”), with Diamond S surviving such merger as a wholly owned subsidiary of INSW. Immediately following the Effective Time, the Company contributed all of the outstanding stock of Diamond S to International Seaways Operating Corporation, a direct wholly-owned subsidiary of the Company.

At the Effective Time, each common share of Diamond S (the “Diamond S Common Shares”) issued and outstanding immediately prior to the Effective Time (excluding Diamond S Common Shares owned by Diamond S, the Company, Merger Sub or any of their respective direct or indirect wholly-owned subsidiaries) was cancelled in exchange for the right to receive 0.55375 of a share of common stock of the Company (the “INSW Common Stock”) and cash payable in respect of fractional shares. The aforementioned 0.55375 exchange ratio set forth in the Merger Agreement resulted in the issuance of 22,536,647 shares of INSW Common Stock, with the pre-Merger INSW shareholders and the former Diamond S shareholders owning approximately 55.75% and 44.25%, respectively, of the 50,674,393 issued and outstanding common stock of the Company immediately following the Effective Time.

As provided for under the terms of the Merger Agreement, on July 15, 2021, prior to the Effective Time, INSW paid a special dividend to its shareholders of record as of July 14, 2021 in an aggregate amount equal to $31.5 million ($1.12 per share).

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 3 — Significant Accounting Policies:

For a description of all of the Company’s material accounting policies, see Note 2, “Summary of Significant Accounting Policies,” to the Company’s consolidated financial statements as of and for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K. The following is a summary of any changes or updates to the Company’s critical accounting policies for the current period:

Cash, cash equivalents and restricted cash — Interest-bearing deposits that are highly liquid investments and have a maturity of three months or less when purchased are included in cash and cash equivalents. Restricted cash of $1.1 million as of March 31, 2022 and December 31, 2021 represents legally restricted cash relating to the Company’s Macquarie Credit Facility (See Note 10, “Debt”). Such facilities stipulate that cash accounts be maintained which are limited in their use to pay expenses related to drydocking the vessels and servicing the debt facilities.

Concentration of Credit Risk — The allowance for credit losses is recognized as an allowance or contra-asset and reflects our best estimate of probable losses inherent in the voyage receivables balance. Activity for allowance for credit losses is summarized as follows:


(Dollars in thousands)		Allowance for Credit Losses - Voyage Receivables
Balance at December 31, 2021	$	31
Reversal of expected credit losses		(4)
Balance at March 31, 2022	$	27

We are also exposed to credit losses from off-balance sheet exposures related to guarantees of joint venture debt. See Note 7, “Equity Method Investments,” for more information on these off-balance sheet exposures.

During the three months ended March 31, 2022 and 2021, the Company did not have any individual customers who accounted for 10% or more of its revenues apart from the pools in which it participates. The pools in which the Company participates accounted in aggregate for 94% and 93% of consolidated voyage receivables at March 31, 2022 and December 31, 2021, respectively.

Deferred finance charges — Finance charges, excluding original issue discount, incurred in the arrangement and/or amendments resulting in the modification of debt are deferred and amortized to interest expense on either an effective interest method or straight-line basis over the term of the related debt. Unamortized deferred finance charges of $4.4 million and $3.7 million relating to the $390 Million Facility Revolving Loan and BoComm Lease Financing (See Note 10, “Debt”) as of March 31, 2022 and December 31, 2021, respectively, are included in other assets in the accompanying condensed consolidated balance sheets. Unamortized deferred financing charges of $9.6 million and $9.9 million relating to the Company’s outstanding debt facilities as of March 31, 2022 and December 31, 2021, respectively, are included in long-term debt in the accompanying condensed consolidated balance sheets. Interest expense relating to the amortization of deferred financing charges amounted to $0.6 million and $0.5 million for the three months ended March 31, 2022 and 2021, respectively.

Vessels construction in progress — Interest costs are capitalized to vessels during the period that vessels are under construction. Interest capitalized during the three months ended March 31, 2022 totaled $0.7 million.

Time Charter Contracts Acquired — The Company’s intangible assets consist of charter-out contracts with contractual rates in excess of fair market charter rates that were acquired as part of the Merger. These assets are amortized on a straight-line basis as a reduction of time charter revenues over the remaining term of such charters. For the three months ended March 31, 2022, amortization totaled $0.3 million.

Recently Issued Accounting Standards — In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (ASC 848),

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

which provides relief for companies preparing for discontinuation of interest rates such as LIBOR. A contract modification is eligible to apply the optional relief to account for the modifications as a continuation of the existing contracts without additional analysis and consider embedded features to be clearly and closely related to the host contract without reassessment, if all of the following criteria are met: (1) contract references a rate that will be discontinued; (2) modified terms directly replace (or have potential to replace) this reference rate; and (3) changes to any other terms that change (or have potential to change) amount and timing of cash flows must be related to replacement of the reference rate. In addition, this guidance provides relief from certain hedge accounting requirements. Hedge accounting may continue uninterrupted when critical terms change due to reference rate reform. For cash flow hedges, entities can (1) disregard potential discontinuation of a referenced interest rate when assessing whether a hedged forecasted interest payment is probable; (2) continue hedge accounting upon a change in the hedged risk as long as the hedge is still highly effective; (3) assess effectiveness of the hedge relationship in ways that essentially disregards a potential mismatch in the variable rate indices between the hedging instrument and the hedged item; and (4) disregard the requirement that individual hedged transactions must share the same risk exposure for hedges of portfolios of forecasted transactions that reference a rate affected by reference rate reform. Relief provided by this ASU is optional and expires December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (ASC 848) to refine the scope of ASC 848 and to clarify some of its guidance. The Company has determined that its primary exposure to LIBOR is in relation to its floating rate debt facilities and the interest rate derivatives to which it is a party. On November 30, 2020, the benchmark administrator for the U.S. Dollar (“USD”) LIBOR announced a proposal to extend the publication of the most commonly used USD LIBOR settings until June 30, 2023. In light of this proposal, in an interagency statement, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued guidance, strongly encouraging banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. Only in limited circumstances will it be appropriate for banks to enter into new contracts referencing USD LIBOR after December 31, 2021. The principal objective, and result, of these actions appears to be that legacy USD LIBOR-based instruments (i.e., those maturing after December 31, 2021) may continue to use USD LIBOR as a reference rate through June 30, 2023, without undermining the regulators’ determination that LIBOR should not be available for any other purpose. On January 25, 2021, the International Swaps and Derivatives Association, Inc. (“ISDA”), published new fallback provisions for derivatives linked to key interbank offered rates (“IBOR”) which will be incorporated into all new derivatives contracts that reference ISDA’s standard interest rate derivatives definitions. Such fallback provisions will also be included in legacy non-cleared derivatives if the counterparties have bilaterally agreed to include them or both have adhered to the IBOR fallback protocol. The Company has engaged and will continue to engage in discussions with its lending banks and the counterparties to its interest rate derivative contracts in advance of the June 30, 2023 sunset date for the USD LIBOR reference rate settings used in its agreements to evaluate the Company’s options. Based on information available today, the Company’s current view is that the Secured Overnight Financing Rate (“SOFR”) will be the alternative reference rate that the Company’s LIBOR-based agreements will transition to as the sunset date draws closer.

Note 4 — Earnings per Common Share:

Basic earnings per common share is computed by dividing earnings, after the deduction of dividends and undistributed earnings allocated to participating securities, by the weighted average number of common shares outstanding during the period.

The computation of diluted earnings per share assumes the issuance of common stock for all potentially dilutive stock options and restricted stock units not classified as participating securities. Participating securities are defined by ASC 260, Earnings Per Share, as unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents and are included in the computation of earnings per share pursuant to the two-class method.

Weighted average shares of unvested restricted common stock considered to be participating securities totaled 87,117 and 51,087 for the three months ended March 31, 2022 and 2021, respectively. Such participating securities are allocated a portion of income, but not losses under the two-class method. As of March 31, 2022, there were 196,473 shares of restricted stock units and 811,906 stock options outstanding and considered to be potentially dilutive securities.

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Reconciliations of the numerator of the basic and diluted earnings per share computations are as follows:


	Three Months Ended March 31,
(Dollars in thousands)		2022		2021
Net (loss)/income attributable to the Company allocated to:
Common Stockholders	$	(13,006)	$	(13,368)
Participating securities		5		3
	$	(13,001)	$	(13,365)

For the three months ended March 31, 2022 and 2021 earnings per share calculations, there were no dilutive equity awards outstanding. Awards of 1,026,418 and 944,477 for the three months ended March 31, 2022 and 2021, respectively, were not included in the computation of diluted earnings per share because inclusion of these awards would be anti-dilutive.

Note 5 — Business and Segment Reporting:

The Company has two reportable segments: Crude Tankers and Product Carriers. The Company’s investments in and equity in income of the joint ventures with two floating storage and offloading service vessels are included in the Crude Tankers Segment. Adjusted income/(loss) from vessel operations for segment purposes is defined as income/(loss) from vessel operations before general and administrative expenses, third-party debt modification fees and loss/(gain) on disposal of vessels and other property, including impairments. The accounting policies followed by the reportable segments are the same as those followed in the preparation of the Company’s condensed consolidated financial statements.

Information about the Company’s reportable segments as of and for the three months ended March 31, 2022 and 2021 follows:


	Crude		Product
(Dollars in thousands)	Tankers		Carriers		Other		Totals
Three months ended March 31, 2022:
Shipping revenues	$	39,610	$	61,872	$	—	$	101,482
Time charter equivalent revenues		36,475		61,500		—		97,975
Depreciation and amortization		15,152		11,841		7		27,000
Loss/(gain) on disposal of vessels and other assets, including impairments		1,843		(3,219)		—		(1,376)
Adjusted income/(loss) from vessel operations		(5,842)		9,198		(7)		3,349
Equity in income of affiliated companies		5,597		—		—		5,597
Investments in and advances to affiliated companies at March 31, 2022		160,298		23,063		—		183,361
Adjusted total assets at March 31, 2022		1,465,035		803,077		—		2,268,112
Expenditures for vessels and vessel improvements		14,608		23,381		—		37,989
Payments for drydocking		7,660		9,910		—		17,570

Three months ended March 31, 2021:
Shipping revenues	$	37,510	$	9,246	$	—	$	46,756
Time charter equivalent revenues		35,950		9,219		—		45,169
Depreciation and amortization		13,003		3,728		23		16,754
Loss on disposal of vessels and other assets		11		—		—		11
Adjusted loss from vessel operations		(957)		(2,673)		(23)		(3,653)
Equity in income of affiliated companies		5,468		—		—		5,468
Investments in and advances to affiliated companies at March 31, 2021		137,361		7,409		—		144,770
Adjusted total assets at March 31, 2021		1,115,421		255,220		—		1,370,641
Expenditures for vessels and vessel improvements		2,666		615		—		3,281
Payments for drydocking		3,088		5,506		—		8,594

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Reconciliations of time charter equivalent (“TCE”) revenues of the segments to shipping revenues as reported in the condensed statements of operations follow:


	Three Months Ended March 31,
(Dollars in thousands)		2022		2021
Time charter equivalent revenues	$	97,975	$	45,169
Add: Voyage expenses		3,507		1,587
Shipping revenues	$	101,482	$	46,756

Consistent with general practice in the shipping industry, the Company uses time charter equivalent revenues, which represent shipping revenues less voyage expenses, as a measure to compare revenue generated from a voyage charter to revenue generated from a time charter. Time charter equivalent revenues, a non-GAAP measure, provide additional meaningful information in conjunction with shipping revenues, the most directly comparable GAAP measure, because it assists Company management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance.

Reconciliations of adjusted income/(loss) from vessel operations of the segments to loss before income taxes, as reported in the condensed consolidated statements of operations follow:


	Three Months Ended March 31,
(Dollars in thousands)		2022		2021
Total adjusted income/(loss) from vessel operations of all segments	$	3,349	$	(3,653)
General and administrative expenses		(10,166)		(8,181)
Third-party debt modification fees		(187)		—
Gain/(loss) on disposal of vessels and other assets, including impairments		1,376		(11)
Consolidated loss from vessel operations		(5,628)		(11,845)
Equity in income of affiliated companies		5,597		5,468
Other (expense)/income		(226)		292
Interest expense		(12,740)		(7,280)
Loss before income taxes	$	(12,997)	$	(13,365)

Reconciliations of total assets of the segments to amounts included in the condensed consolidated balance sheets follow:


(Dollars in thousands)	March 31, 2022		March 31, 2021
Adjusted total assets of all segments	$	2,268,112	$	1,370,641
Corporate unrestricted cash and cash equivalents		74,553		156,178
Restricted cash		1,051		16,223
Other unallocated amounts		22,877		9,010
Consolidated total assets	$	2,366,593	$	1,552,052

Note 6 — Vessels:

Impairment of Vessels and Other Property

The Company gave consideration as to whether events or changes in circumstances had occurred since December 31, 2021, that could indicate that the carrying amounts of the vessels in the Company’s fleet may not be recoverable. During the quarter ended March 31, 2022, the Company concluded that the contracted sales of one 2004-built Panamax and one 2006-built Handysize product carrier resulted in the recognition of held for sale impairments charges aggregating $1.2 million.

In addition, the Company concluded that the subsequent execution of a memorandum of agreement in April 2022 for the sale of a 2006-built Handysize product carrier constituted an impairment triggering event. In developing estimates of undiscounted future cash

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

flows for performing Step 1 of the impairment test as of March 31, 2022, a 100% probability was attributed to the Handysize product carrier being sold before the end of its useful life. The carrying value for the product carrier was determined to be unrecoverable in the Step 1 test. In estimating the fair value of the vessel for the purposes of Step 2 of the impairment test, the Company considered the market approach by using the sale price per the memorandum of agreement. Based on the test performed, an impairment charge of $0.5 million was recorded on the 2006-built Handysize product carrier to write-down its carrying value to its estimated fair value at March 31, 2022.

The Company also recognized an aggregate loss of approximately $0.7 million during the quarter ended March 31, 2022, related to the cost to terminate the purchase and installation contracts for ballast water treatment systems on three of the Company’s MRs that were sold during 2021.

Vessel Acquisitions and Construction Commitments

In January 2022, the Company entered into memoranda of agreements for the sale of a 2010-built MR for a sale price of $16.5 million and the purchase of a 2011-built LR1 for a purchase price of $19.5 million with the same counterparty. The LR1 was delivered into our niche commercial pool, Panamax International. The Company closed both transactions during the first quarter of 2022, with a net cash outflow of $3.0 million representing the difference in value between the two vessels. The LR1 vessel replaced the MR as collateral under the $525 Million Credit Facility with no further mandatory principal repayment required.

On March 11, 2021, the Company entered into agreements to construct three dual-fuel LNG-powered VLCCs at Daewoo Shipbuilding and Marine Engineering’s shipyard. The VLCCs will be able to burn LNG in their power plant, which will significantly reduce greenhouse gas emissions. Upon delivery to the Company in the first quarter of 2023, the vessels will be employed on seven-year time charter contracts with an oil major – Shell. The total construction cost for the vessels is approximately $290.0 million, which will be paid for through a combination of cash on hand and funds drawn from the BoComm Lease Financing (See Note 10, “Debt”). Accumulated expenditures of $60.0 million and $49.3 million (including capitalized interest costs of $1.3 million and $0.6 million) are included in vessels construction in progress in the accompanying condensed consolidated balance sheet as of March 31, 2022 and December 31, 2021, respectively. The remaining commitments on the contracts for the construction of these vessels as of March 31, 2022 was $230.6 million, of which the BoComm Lease Financing is expected to provide additional funding of $230.4 million over the course of the construction and delivery of the three vessels.

Disposal/Sales of Vessels

As discussed above, during the quarter ended March 31, 2022, the Company delivered a 2010-built MR to buyers and recognized an aggregate gain of $4.6 million. Also, during the quarter ended March 31, 2022, the Company entered into memoranda of agreements for the sales of one 2002-built Panamax, one 2004-built Panamax and one 2006-built Handysize product carrier, which were delivered to the buyers in April 2022. Costs to sell (mainly bunker consumption costs) totaling $0.8 million were recognized during the quarter for these three vessels, which were classified as vessels held for sale as of March 31, 2022.

In addition, in April 2022, the Company entered into memoranda of agreements for the sale of its three remaining 2006-built Handysize product carriers and one 2008-built MR, which are expected to be delivered to their buyers during the second quarter of 2022.

Note 7 — Equity Method Investments:

Investments in affiliated companies include joint ventures accounted for using the equity method. As of March 31, 2022, the Company had a 50% interest in two joint ventures - TI Africa Limited (“TI Africa”) and TI Asia Limited (“TI Asia”), which operate two Floating Storage and Offloading Service vessels that were converted from two ULCCs (collectively the “FSO Joint Venture”).

The FSO Joint Venture is a party to a number of contracts: (a) the FSO Joint Venture is an obligor pursuant to a guarantee facility agreement dated as of July 14, 2017, by and among, the FSO Joint Venture, ING Belgium NV/SA, as issuing bank, and Euronav and INSW, as guarantors (the “Guarantee Facility”); (b) the FSO Joint Venture is party to two service contracts with NOC (the “NOC

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Service Contracts”) and (c) the FSO Joint Venture is a borrower under a $220 million secured credit facility by and among TI Africa and TI Asia, as joint and several borrowers, ABN AMRO Bank N.V. and ING Belgium SA/NV, as Lenders, Mandated Lead Arrangers and Swap Banks, and ING Bank N.V., as Agent and as Security Trustee. INSW severally guarantees the obligations of the FSO Joint Venture pursuant to the Guarantee Facility.

The FSO Joint Venture drew down on a $220 million credit facility in April 2018. The Company provided a guarantee for the $110 million FSO Term Loan portion of the facility, which has an interest rate of LIBOR plus two percent and amortizes through July 2022 and September 2022. INSW’s guarantee of the FSO Term Loan has financial covenants that provide (i) INSW’s Liquid Assets shall not be less than the higher of $50 million and 5% of Total Indebtedness of INSW, (ii) INSW shall have Cash of at least $30 million and (iii) INSW shall be in compliance with the Loan to Value Test (as such capitalized terms are defined in the Company guarantee). As of March 31, 2022, the maximum aggregate potential amount of future payments (undiscounted) that INSW could be required to make in relation to its equity method investees secured bank debt and interest rate swap obligations was $13.3 million and the carrying value of the Company’s guaranty in the accompanying condensed consolidated balance sheet was nil.

Investments in and advances to affiliated companies as reflected in the accompanying condensed consolidated balance sheet as of March 31, 2022 consisted of: FSO Joint Venture of $145.1 million and Other of $38.3 million, which primarily relates to working capital deposits that the Company maintains with commercial pools in which it participates.

A condensed summary of the results of operations of the joint ventures follows:


	Three Months Ended March 31,
(Dollars in thousands)		2022		2021
Shipping revenues	$	25,887	$	25,846
Ship operating expenses		(14,292)		(13,931)
Income from vessel operations		11,595		11,915
Interest expense		(543)		(1,212)
Income tax provision		(1,029)		(993)
Net income	$	10,023	$	9,710

Note 8 — Variable Interest Entities (“VIEs”):

Consolidated VIEs

Diamond Anglo Ship Management Pte. Ltd. — Diamond Anglo Ship Management Pte. Ltd. (“DASM”) was formed in January 2018 by Diamond S and Anglo Eastern Investment Holdings Ltd. (“AE Holdings”), a third-party, to provide ship management services to some of Diamond S’ vessels. DASM is owned 51% by the Company and 49% by AE Holdings. AE Holdings does not participate in the income or equity of DASM. The Company is considered to be the primary beneficiary of DASM as the Company has the ability to direct the activities that most significantly impact the DASM’s economic performance. The results of operations and balance sheets of DASM are included in the accompanying condensed consolidated financial statements.

Unconsolidated VIEs

As of March 31, 2022, all of the six commercial pools in which the Company participates and the two FSO joint ventures were determined to be VIEs for which the Company is not considered a primary beneficiary.

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following table presents the carrying amounts of assets and liabilities in the condensed consolidated balance sheet related to the unconsolidated VIEs as of March 31, 2022:


(Dollars in thousands)	Condensed Consolidated Balance Sheet
Investments in Affiliated Companies	$	181,960

In accordance with accounting guidance, the Company evaluated its maximum exposure to loss related to these unconsolidated VIEs by assuming a complete loss of the Company’s investment in these VIEs. The table below compares the Company’s liability in the condensed consolidated balance sheet to the maximum exposure to loss at March 31, 2022:


(Dollars in thousands)		Condensed Consolidated Balance Sheet	Maximum Exposure to Loss
Other Liabilities	$	–	$	195,271

In addition, as of March 31, 2022, the Company had approximately $106.9 million of trade receivables from the pools that were determined to be a VIE. These trade receivables, which are included in voyage receivables in the accompanying condensed consolidated balance sheet, have been excluded from the above tables and the calculation of INSW’s maximum exposure to loss. The Company does not record the maximum exposure to loss as a liability because it does not believe that such a loss is probable of occurring as of March 31, 2022.

Note 9 — Fair Value of Financial Instruments, Derivatives and Fair Value Disclosures:

The estimated fair values of the Company’s financial instruments, other than derivatives that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows:


(Dollars in thousands)	March 31, 2022		December 31, 2021		Fair Value Level
Cash and cash equivalents⁽¹⁾	$	75,604	$	98,933		Level 1
$390 Million Facility Term Loan

International Seaways, Inc. [INSW] Filings

International Seaways, Inc. [INSW-PA] Filings