INTERNATIONAL SEAWAYS, INC. FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10Q contains forward looking statements. Such forward-looking statements represent the Company's reasonable expectation with respect to future events or circumstances based on various factors and are subject to various risks and uncertainties and assumptions relating to the Company's operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors, many of which are beyond the control of the Company, that could cause the Company's actual results to differ materially from those indicated in these statements. Undue reliance should not be placed on any forward-looking statements and consideration should be given to the following factors when reviewing any such statement. Such factors include, but are not limited to: · the highly cyclical nature of INSW's industry; · fluctuations in the market value of vessels;
· declines in charter rates, including spot charter rates or other market
deterioration;
· an increase in the supply of vessels without a commensurate increase in demand;
· the impact of adverse weather and natural disasters;
· the adequacy of INSW's insurance to cover its losses, including in connection
with maritime accidents or spill events;
· constraints on capital availability;
· changing economic, political and governmental conditions in
and/or abroad and general conditions in the oil and natural gas industry;
· the impact of changes in fuel prices, particularly with regard to IMO 2020;
· acts of piracy on ocean-going vessels; · terrorist attacks and international hostilities and instability;
· the impact of public health threats and outbreaks of other highly communicable
diseases, including the effects of the current COVID-19 pandemic;
· the effect of the Company's indebtedness on its ability to finance operations,
pursue desirable business opportunities and successfully run its business in
the future;
· the Company's ability to generate sufficient cash to service its indebtedness
and to comply with debt covenants;
· the Company's ability to make capital expenditures to expand the number of
vessels in its fleet, and to maintain all of its vessels and to comply with
existing and new regulatory standards;
· the availability and cost of third-party service providers for technical and
commercial management of the Company's fleet;
· fluctuations in the contributions of the Company's joint ventures to its
profits and losses;
· the Company's ability to renew its time charters when they expire or to enter
into new time charters;
· termination or change in the nature of the Company's relationship with any of
the commercial pools in which it participates and the ability of such
commercial pools to pursue a profitable chartering strategy;
· competition within the Company's industry and INSW's ability to compete
effectively for charters with companies with greater resources;
· the loss of a large customer or significant business relationship;
· the Company's ability to realize benefits from its past acquisitions or
acquisitions or other strategic transactions it may make in the future;
· increasing operating costs and capital expenses as the Company's vessels age,
including increases due to limited shipbuilder warranties or the consolidation
of suppliers;
· the Company's ability to replace its operating leases on favorable terms, or at
all;
· changes in credit risk with respect to the Company's counterparties on
contracts;
· the failure of contract counterparties to meet their obligations;
· the impact of the discontinuance of LIBOR after 2021 on interest rates of our
debt that reference LIBOR;
· the Company's ability to attract, retain and motivate key employees;
· work stoppages or other labor disruptions by employees of INSW or other
companies in related industries;
· unexpected drydock costs;
30
INTERNATIONAL SEAWAYS, INC. · the potential for technological innovation to reduce the value of the Company's
vessels and charter income derived therefrom;
· the impact of an interruption in or failure of the Company's information
technology and communication systems upon the Company's ability to operate;
· seasonal variations in INSW's revenues;
· government requisition of the Company's vessels during a period of war or
emergency;
· the Company's compliance with complex laws, regulations and in particular,
environmental laws and regulations, including those relating to ballast water
treatment and the emission of greenhouse gases and air contaminants, including
from marine engines;
· any non-compliance with the
applicable regulations relating to bribery or corruption;
· the impact of litigation, government inquiries and investigations;
· governmental claims against the Company;
· the arrest of INSW's vessels by maritime claimants;
· changes in laws, treaties or regulations, including those relating to
environmental and security matters; and
· changes in worldwide trading conditions, including the impact of tariffs and
other restrictions on trade and the impact that Brexit might have on global
trading parties.
The Company assumes no obligation to update or revise any forward-looking
statements. Forward-looking statements in this Quarterly Report on Form 10Q and
written and oral forward-looking statements attributable to the Company or its
representatives after the date of this Quarterly Report on Form 10Q are
qualified in their entirety by the cautionary statement contained in this
paragraph and in other reports hereafter filed by the Company with the
Securities and Exchange Commission .
General:
We are a provider of ocean transportation services for crude oil and refined
petroleum products. We operate our vessels in the International Flag market. Our
business includes two reportable segments: Crude Tankers and Product Carriers.
For the three months ended March 31, 2020 and 2019, we derived 74% and 77%,
respectively, of our TCE revenues from our Crude Tankers segment. Revenues from
our Product Carriers segment constituted the balance of our TCE revenues in the
2020 and 2019 periods.
As of March 31, 2020 , we owned or operated an International Flag fleet of 40
vessels aggregating 6.9 million deadweight tons ("dwt"), including four vessels
that have been chartered-in under operating leases for durations exceeding one
year at inception. Our fleet includes VLCC, Suezmax, Aframax and Panamax crude
tankers and LR1, LR2 and MR product carriers. Through joint ventures, we had
ownership interests in two FSO service vessels (the "JV Vessels").
The Company's revenues are highly sensitive to patterns of supply and demand for
vessels of the size and design configurations owned and operated by the Company
and the trades in which those vessels operate. Rates for the transportation of
crude oil and refined petroleum products from which the Company earns a
substantial majority of its revenues are determined by market forces such as the
supply and demand for oil, the distance that cargoes must be transported, and
the number of vessels expected to be available at the time such cargoes need to
be transported. The demand for oil shipments is significantly affected by the
state of the global economy, levels of U.S. domestic and international
production and OPEC exports. The number of vessels is affected by newbuilding
deliveries and by the removal of existing vessels from service, principally
through storage, scrappings or conversions. The Company's revenues are also
affected by its vessel employment strategy, which seeks to achieve the optimal
mix of spot (voyage charter) and long-term (time or bareboat charter) charters.
Because shipping revenues and voyage expenses are significantly affected by the
mix between voyage charters and time charters, the Company measures the
performance of its fleet of vessels based on TCE revenues. Management makes
economic decisions based on anticipated TCE rates and evaluates financial
performance based on TCE rates achieved. In order to take advantage of market
conditions and optimize economic performance, management employs the majority of
the Company's LR1 Product carriers, which currently participate in the Panamax
International pool, in the transportation of crude oil cargoes. Other than the
JV Vessels, our revenues are derived predominantly from spot market voyage
charters and our vessels are predominantly employed in the spot market via
market-leading commercial pools. We derived approximately 93% and 94% of our
total TCE revenues in the spot market for the three months ended March 31, 2020
and 2019, respectively.
31
INTERNATIONAL SEAWAYS, INC.
The following is a discussion and analysis of our financial condition as of
March 31, 2020 and results of operations for the three month periods ended March
31, 2020 and 2019. You should consider the foregoing when reviewing the
condensed consolidated financial statements and this discussion and analysis.
You should read this section together with the condensed consolidated financial
statements, including the notes thereto. This Quarterly Report on Form 10-Q
includes industry data and forecasts that we have prepared based, in part, on
information obtained from industry publications and surveys. Third-party
industry publications, surveys and forecasts generally state that the
information contained therein has been obtained from sources believed to be
reliable. In addition, certain statements regarding our market position in this
report are based on information derived from internal market studies and
research reports. Unless we state otherwise, statements about the Company's
relative competitive position in this report are based on our management's
beliefs, internal studies and management's knowledge of industry trends.
All dollar amounts are in thousands, except daily dollar amounts and per share amounts.
Operations and Oil Tanker Markets:
The International Energy Agency ("IEA") estimates global oil consumption for the first quarter of 2020 at 93.3 million barrels per day ("b/d"), a decrease of 5.6 million b/d, or 5.7%, over the same quarter in 2019. The estimate for global oil consumption for 2020 is 90.5 million b/d, a decrease of 9.3% over 2019.OECD demand in 2020 is estimated to decrease by 12.0% to 41.9 million b/d, while non-OECD demand is estimated to decrease by 6.9% to 48.6 million b/d. Global oil production in the first quarter of 2020 was 100.4 million b/d, a decrease of 0.1% from the first quarter of 2019.OPEC crude oil production averaged 28.3 million b/d in the first quarter of 2020, a decrease of 0.8 million b/d from the fourth quarter of 2019, and a decrease of 2.2 million b/d from the first quarter of 2019. Non-OPEC production increased by 2.2 million b/d to 66.7 million b/d in the first quarter of 2020 compared with the first quarter of 2019. Oil production in theU.S. in the first quarter of 2020 was flat compared to the fourth quarter of 2019 at 12.7 million b/d, but was 0.8 million b/d higher than in the first quarter of 2019.U.S. refinery throughput increased by 0.8 million b/d to 16.9 million b/d in the first quarter of 2020 compared with the fourth quarter of 2019.U.S. crude oil imports in the first quarter of 2020 decreased by 1.1 million b/d to 6.4 million b/d compared with the first quarter of 2019, with imports fromOPEC countries declining by 1.4 million b/d and imports from non-OPEC countries increasing by 0.3 million b/d.China's crude oil imports in March of 2020 were at 10.3 million b/d compared with an average of 10.5 million b/d for the first two months of the year. Average first quarter imports of 10.4 million b/d represents a 5% year over year increase. During the first quarter of 2020, the tanker fleet of vessels over 10,000 deadweight tons ("dwt") increased, net of scrappings, by 6.3 million dwt as the crude fleet increased by 4.8 million dwt, with VLCCs, Suezmaxes and Aframaxes growing by 3.3, 0.9 and 0.6 million dwt, respectively. The product carrier fleet expanded by 1.5 million dwt with LR1s and MRs increasing by 0.2 and 1.3 million dwt, respectively. Year over year, the size of the tanker fleet increased by 26.2 million dwt with the largest increases in the VLCC, Aframax and MR sectors, while Suezmaxes and LR1s saw only modest growth in fleet size. During the first quarter of 2020, the tanker orderbook decreased by 4.1 million dwt overall. The crude tanker orderbook declined by 2.7 million dwt, with the Suezmax orderbook growing by 0.6 million dwt, while both VLCC and Aframax orderbooks declined by 3.1 and 0.2 million dwt, respectively. The product tanker orderbook declined by 1.4 million dwt with LR1s declining by 0.1 million dwt and MRs declining by 1.3 million dwt. The decrease in the tanker orderbook reflects the delivery of newbuildings during the first quarter and little new ordering activity. Year over year, the total tanker orderbook declined by 10.7 million dwt, with VLCCs, LR1s and MRs declining by 12.4, 0.7 and 2.8 million dwt, respectively. The Suezmax and Aframax orderbooks grew by 3.9 and 1.3 million dwt, respectively, during the period. This general decline appears, at least to some extent, to be driven by shipowners reluctance to invest capital in current technology while the shipping industry is targeting substantial reductions in carbon emissions, as well as general economic concerns surrounding the novel coronavirus (COVID-19) outbreak. 32INTERNATIONAL SEAWAYS, INC. Crude tanker rates in the first quarter of 2020 began strong on the heels of IMO 2020 implementation and strong demand, subsequently declined with increased fears of demand destruction related to COVID-19, but ultimately finished the quarter very strong as a result of OPEC+ failing to agree on production cuts. The effects of this were twofold. First,Saudi Arabia's decision to actually increase production created an increased demand for tankers while at the same time the collapse of oil prices created an oil contango and thus an increased demand for floating storage. In the second quarter thus far, tanker rates have been highly volatile but have held onto the increases seen at the end of the first quarter. Despite the OPEC+ agreement in earlyApril 2020 to cut production substantially beginning in May/June 2020 , the total oil to be produced is still substantially in excess of global demand. This excess production and the resulting continued need for tankers as floating storage, coupled with increased delays in offloading cargoes as shore-based storage fills up, has maintained a robust tanker rate environment. When supply and demand eventually come back into balance, this could have negative repercussions for tankers as vessels previously used for floating storage are released back into a market where the oil held in inventory will supplant oil tanker transportation demand. See Item 1A, Risk Factors - The current pandemic involving the novel coronavirus (COVID-19) has adversely affected the Company's business, operations and financial results, and will likely continue to do so.
Update on Critical Accounting Policies:
The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted inthe United States , which require the Company to make estimates in the application of its accounting policies based on the best assumptions, judgments and opinions of management. 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 endedDecember 31, 2019 included in the Company's Annual Report on Form 10K. See Note 2, "Significant Accounting Policies," to the accompanying condensed consolidated financial statements for any changes or updates to the Company's critical accounting policies for the current period.
Results from Vessel Operations:
During the first quarter of 2020, income from vessel operations increased by$34,025 to$53,349 from$19,324 in the first quarter of 2019. Such increase resulted principally from higher TCE revenues, a lower provision for credit losses, and lower charter hire expenses, which was due to fewer chartered-in vessels in the Crude Tankers Lightering business. The increase in TCE revenues in the first three months of 2020 of$25,702 , or 27%, to$119,731 from$94,029 in the corresponding period of the prior year primarily reflects higher average daily rates across INSW's fleet sectors (driven by the market events described above under Operations and Oil Tanker Markets), which accounted for an increase of approximately$44,747 . Such increase was partially offset by fewer revenue days in the current quarter in the VLCC fleet due in large part to vessels being off-hire while undergoing scrubber installations, and a lower volume of activity in the Crude Tankers Lightering business, which accounted for offsetting decreases in TCE revenue of$10,649 and$8,519 , respectively. See Note 4, "Business and Segment Reporting," to the accompanying condensed consolidated financial statements for additional information on the Company's segments, including equity in income of affiliated companies and reconciliations of (i) time charter equivalent revenues to shipping revenues and (ii) adjusted income from vessel operations for the segments to income before income taxes, as reported in the condensed consolidated statements of operations. 33 INTERNATIONAL SEAWAYS, INC. Crude Tankers Three Months Ended March 31, 2020 2019 TCE revenues$ 88,854 $ 72,586 Vessel expenses (25,167) (22,265) Charter hire expenses (5,493) (12,482) Depreciation and amortization (14,245)
(14,477)
Adjusted income from vessel operations (a)$ 43,949 $ 23,362 Average daily TCE rate$ 43,663 $ 28,566 Average number of owned vessels (b) 24.3 25.0
Average number of vessels chartered-in under operating leases
2.5 5.4
Number of revenue days: (c) 2,035 2,541
Number of ship-operating days: (d) Owned vessels 2,212
2,250
Vessels bareboat chartered-in under operating leases 182 180 Vessels time chartered-in under operating leases (e) 44 87 Vessels spot chartered-in under operating leases (e) - 214
--------------------------------------------------------------------------------
(a) Adjusted income from vessel operations by segment is before general and
administrative expenses, provision for credit losses, third-party debtmodification fees, and gain on disposal of vessels and other property.
(b) The average is calculated to reflect the addition and disposal of vessels
during the period.
(c) Revenue days represent ship-operating days less days that vessels were not
available for employment due to repairs, drydock or lay-up. Revenue days are
weighted to reflect the Company's interest in chartered-in vessels.(d) Ship-operating days represent calendar days.
(e) The Company's Crude Tankers Lightering business time chartered-in one vessel
and spot chartered-in 14 vessels under operating leases at various points
during the three-month period ended
lightering jobs. Only one vessel was time chartered-in for a portion of the
three-month period ended March 31, 2020 .
The following table provides a breakdown of TCE rates achieved for the three
months ended March 31, 2020 and 2019, between spot and fixed earnings and the
related revenue days. The information in these tables is based, in part, on
information provided by the commercial pools in which the segment's vessels
participate and excludes commercial pool fees/commissions averaging
approximately $784 and $716 per day for the three months ended March 31, 2020
and 2019, respectively, as well as activity in the Crude Tankers Lightering
business and revenue and revenue days for which recoveries were recorded by the
Company under its loss of hire insurance policies.
2020 2019
Spot Earnings Fixed Earnings Spot Earnings Fixed EarningsThree Months EndedMarch 31 , VLCC: Average rate$ 63,754 $ -$ 31,993 $ - Revenue days 793 - 1,134 - Suezmax: Average rate$ 42,836 $ -$ 28,935 $ - Revenue days 182 - 180 - Aframax: Average rate$ 31,649 $ -$ 20,905 $ - Revenue days 361 - 398 - Panamax: Average rate$ 42,071 $ 15,900 $ 17,558 $ 12,313 Revenue days 91 539 73 445 34
INTERNATIONAL SEAWAYS, INC.
During the first quarter of 2020, TCE revenues for the Crude Tankers segment
increased by $16,268 , or 22%, to $88,854 from $72,586 in the first quarter of
2019, principally as a result of significantly higher average blended rates in
the VLCC, Suezmax, Aframax, and Panamax sectors aggregating approximately
$34,672 . The increased rates in the VLCC fleet accounted for $24,271 of this
total rates-based increase. As discussed in the "Operations and Oil Tanker
Markets" section above, the very strong rate environment during the latter
portion of the first quarter of 2020 was due in large part to increased oil
production and a growth in demand for floating storage. As and when oil demand
increases and achieves a balance with oil supply, the need for floating storage
will likely decline, which would negatively impact the demand for oil tankers.
The extent to which this increase in oil demand, particularly if it is met from
excess crude inventories that were built up during the period of oil demand
destruction, will negatively impact the tanker rate environment will depend on
the timing and magnitude of the oil demand recoveries in the various parts of
the world.
Partially offsetting the increase in TCE revenues was the impact of (i) a
341-day decrease in VLCC revenue days aggregating $10,649 , and (ii) a $8,519
decrease in revenue in the Crude Tankers Lightering business during the current
quarter. The net decrease in VLCC days was primarily the result of 354 more
drydock, repair and other off-hire days in the current year, of which 301 days
related to days VLCCs were out of service to have scrubbers installed, and 53
days related to the detention of the Seaways Mulan by Indonesian authorities (as
discussed in Note 9, "Debt," to the accompanying condensed consolidated
financial statements). To date, the Company has completed the scrubber
installations on five of its modern VLCCs. The Company expects approximately 88
off-hire days in the second quarter of 2020, as it completes the scrubber
installations on two more of its modern VLCCs in China . The scrubber
installations on its final three modern VLCCs have been rescheduled to 2021 in
order to take advantage of current strong market conditions and to align with
the natural drydocking dates for the vessels. The expected off-hire days could
be subject to further change due to the impacts that COVID-19 may continue to
have on international travel and movement of personnel and other scheduling
changes.
Vessel expenses increased by $2,902 to $25,167 in the first quarter of 2020 from
$22,265 in the first quarter of 2019. The VLCC fleet accounted for $2,886 of the
total increase, and such increase reflects technical management transition costs
incurred in the current quarter, off-hire fuel costs of the Seaways Mulan under
detention as discussed above, along with an increase in drydock deviation costs
of $962 . Charter hire expenses decreased by $6,989 to $5,493 in the current
quarter from $12,482 in the prior year's quarter. The primary driver of the
decrease was a significant decrease in spot and short-term time chartered-in
vessels in the Crude Tankers Lightering business as a result of decreased levels
of full-service lightering activity in the first quarter of 2020, due to a
robust Aframax market that made spot chartering-in vessels for full service jobs
challenging and a decline in crude imports and exports out of the U.S. Gulf.
Excluding depreciation and amortization, the provision for credit losses and
general and administrative expenses, operating income for the Crude Tankers
Lightering business was $2,296 for the first quarter of 2020 and $4,194 for the
first quarter of 2019. The decrease in the current year's operating income as
compared to the prior year's quarter primarily reflects a lower volume of
lightering activity in the current year as noted above. In the current quarter,
89 service support only lighterings were performed, as compared to 27 full
service and 82 service support only lighterings in the prior year's quarter.
Product Carriers Three Months Ended March 31,
2020 2019
TCE revenues $ 30,877 $ 21,443
Vessel expenses (7,788) (8,264)
Charter hire expenses (4,738) (4,703)
Depreciation and amortization (3,998) (4,418)
Adjusted income from vessel operations$ 14,353 $ 4,058 Average daily TCE rate$ 26,873 $ 16,257 Average number of owned vessels 9.5 11.0
Average number of vessels chartered-in under operating leases
3.7 4.0
Number of revenue days 1,149 1,319
Number of ship-operating days:
Owned vessels 861 990
Vessels time chartered-in under operating leases 341 360
35
INTERNATIONAL SEAWAYS, INC.
The following table provides a breakdown of TCE rates achieved for the three
months ended March 31, 2020 and 2019, between spot and fixed earnings and the
related revenue days. The information in these tables is based, in part, on
information provided by the commercial pools in which the segment's vessels
participate and excludes commercial pool fees/commissions averaging
approximately $542 and $483 per day for the three months ended March 31, 2020
and 2019, respectively, as well as revenue and revenue days for which recoveries
were recorded by the Company under its loss of hire insurance policies.
2020 2019
Spot Earnings Fixed Earnings Spot Earnings Fixed Earnings
Three Months Ended March 31 ,
LR2:
Average rate $ 28,799 $ - $ 22,090 $ -
Revenue days 91 - 90 -
LR1(1):
Average rate $ 38,644 $ - $ 24,017 $ -
Revenue days 487 - 339 -
MR:
Average rate $ 20,719 $ - $ 13,462 $ -
Revenue days 571 - 889 -
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(1) During the 2020 and 2019 periods, with the exception of a 2009-built LR1
purchased by the Company in
refined oil product cargoes, each of the Company's LR1s participated in the
During the first quarter of 2020 TCE revenues for the Product Carriers segment increased by$9,434 , or 44%, to$30,877 from$21,443 in the first quarter of 2019. Period-over-period increases in average daily blended rates earned by all Product Carrier fleet sectors accounted for an increase in TCE revenues of approximately$10,075 . Serving to partially offset such increase was a$640 decline in TCE revenue arising from the net impact of (i) a 318-day decrease in MR revenue days in the current period, resulting primarily from the sales of two 2004-built MRs between June andJuly 2019 , the redelivery of one time chartered-in MR to its owner during the third quarter of 2019, and the effective termination and redeliveries of two time chartered-in MRs inMarch 2020 prior to the scheduled expiry of their respective charter parties due to the vessels being arrested by a third-party and the vessel owners no longer being able to perform their obligations under the time charter agreements, partially offset by (ii) a 148-day increase in LR1 revenue days in the current period primarily driven by the commencement of a two-year time charter-in of a 2006-built LR1 inAugust 2019 , and the purchase of a 2009-built LR1 that was delivered inFebruary 2020 . The decreases in vessel expenses and depreciation and amortization during the first quarter of 2020 compared to the first quarter of 2019 were primarily due to the sales of MRs discussed above, partially offset by the LR1 purchase discussed above. Charter hire expenses increased marginally by$35 to$4,738 in the first quarter of 2020 from$4,703 in the first quarter of 2019 as a result of the entry into the LR1 charter-in noted above, which was offset almost in its entirety by decreases due to the MR redeliveries described above.
General and Administrative Expenses:
During the first quarter of 2020, general and administrative expenses increased by$661 to$7,434 from$6,773 in the first quarter of 2019. The primary driver for such increase was an approximately$703 increase in compensation and benefits costs, of which$445 relates to non-cash stock compensation.
Equity in Income of Affiliated Companies:
During the first quarter of 2020, equity in income of affiliated companies decreased by$2,959 to$5,111 from$8,070 in the first quarter of 2019. This decrease was principally attributable to the sale of the Company's interest in the LNG joint venture in October 36INTERNATIONAL SEAWAYS, INC. 2019. The LNG joint venture contributed to$3,300 in earnings during the first quarter of 2019. This decrease was partially offset by increases in earnings from the two FSO joint ventures of$300 , which was primarily attributable to a decrease in interest expense due to lower average outstanding debt balances in the current quarter. Other (Expense)/Income: Other expense was$13,432 for the three months endedMarch 31, 2020 compared with other income of$1,036 for the three months endedMarch 31, 2019 . The current period expense includes a prepayment fee of$992 related to the repurchase of the 10.75% Subordinated Notes and a write-off of$12,501 of unamortized original issue discount and deferred financing costs associated with the payoff of the 2017 Term Loan, the ABN Term Loan Facility, and repurchase of the 10.75% Subordinated Notes, which were treated as extinguishments. Other (expense)/income also includes interest income on cash balances and net actuarial gains and currency gains or losses associated with the retirement benefit obligation in theUnited Kingdom . Interest Expense: Interest expense was$12,009 and$17,533 for the three months endedMarch 31, 2020 and 2019, respectively. Interest expense decreased as a result of lower average outstanding debt balances in the current quarter compared to the first quarter of 2019, principally attributable to$110,000 in principal prepayments on the 2017 Term Loan Facility during 2019 and the use of cash in theJanuary 2020 refinancing, lower average interest rates on the refinanced portion of debt entered into by the Company during the first quarter of 2020, and lower average LIBOR rates during the first quarter of 2020 compared with the first quarter of 2019. See Note 9, "Debt," in the accompanying condensed consolidated financial statements for further information on the Company's debt facilities. Taxes: As ofMarch 31, 2020 , the Company believes it will qualify for an exemption fromU.S. federal income taxes under Section 883 of theU.S. Internal Revenue Code of 1986, as amended (the "Code") andU.S. Treasury Department regulations for the 2020 calendar year, so long as less than 50 percent of the total value of the Company's stock is held by one or more shareholders who own 5% or more of the Company's stock for more than half of the days of 2020. There can be no assurance at this time that INSW will qualify for the Section 883 exemption during or beyond calendar year 2020. Should the Company not qualify for the exemption in the future, INSW will be subject toU.S. federal taxation of 4% of itsU.S. source shipping income on a gross basis without the benefit of deductions. Shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in theU.S. will be considered to be 50% derived from sources within theUnited States. Shipping income attributable to transportation that both begins and ends in theU.S. would be considered to be 100% derived from sources withinthe United States , but INSW does not and cannot engage in transportation that gives rise to such income. EBITDA and Adjusted EBITDA: EBITDA represents net income/(loss) before interest expense, income taxes and depreciation and amortization expense. Adjusted EBITDA consists of EBITDA adjusted for the impact of certain items that we do not consider indicative of our ongoing operating performance. EBITDA and Adjusted EBITDA are presented to provide investors with meaningful additional information that management uses to monitor ongoing operating results and evaluate trends over comparative periods. EBITDA and Adjusted EBITDA do not represent, and should not be considered a substitute for, net income or cash flows from operations determined in accordance with GAAP. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of our results reported under GAAP. Some of the limitations are:
· EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future
requirements for capital expenditures or contractual commitments;
· EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for,
our working capital needs; and
· EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or
the cash requirements necessary to service interest or principal payments, on
our debt.
37
INTERNATIONAL SEAWAYS, INC.
While EBITDA and Adjusted EBITDA are frequently used by companies as a measure
of operating results and performance, neither of those items as prepared by the
Company is necessarily comparable to other similarly titled captions of other
companies due to differences in methods of calculation.
The following table reconciles net loss, as reflected in the condensed consolidated statements of operations, to EBITDA and Adjusted EBITDA:
Three Months Ended March 31,
2020 2019
Net income $ 33,019 $ 10,897
Income tax provision - -
Interest expense 12,009 17,533
Depreciation and amortization 18,267 18,929
EBITDA 63,295
47,359
Third-party debt modification fees 232
30
Gain on disposal of vessels and other property (2,804)
(48)
Write-off of deferred financing costs 12,501
-
Loss on extinguishment of debt 992 - Adjusted EBITDA $ 74,216$ 47,341
Liquidity and Sources of Capital:
Our business is capital intensive. Our ability to successfully implement our strategy is dependent on the continued availability of capital on attractive terms. In addition, our ability to successfully operate our business to meet near-term and long-term debt repayment obligations is dependent on maintaining sufficient liquidity. Liquidity Working capital atMarch 31, 2020 andDecember 31, 2019 was approximately$83,000 and$73,000 , respectively. Current assets are highly liquid, consisting principally of cash, interest-bearing deposits and receivables. The Company's total cash decreased by$39,916 during the three months endedMarch 31, 2020 . This decrease reflects$29,122 in expenditures for vessels and other property,$382,699 related to extinguishment of the Company's 2017 Term Loan Facility, ABN Term Loan Facility and 10.75% Subordinated Notes, scheduled principal amortization for the Company's debt facilities totaling$30,895 , which included a$20,000 repayment of the outstanding balance under the Core Revolving Facility that was initially drawn down in connection with theJanuary 2020 refinancing, cash dividend of$1,729 , and$10,012 in repurchases of common stock. Such cash outflows were partially offset by cash provided by operating activities of$38,318 , issuance of debt, net of issuance and deferred financing costs of$362,989 , and proceeds from disposal of vessels and other property of$13,601 . Our cash and cash equivalents balances generally exceedFederal Deposit Insurance Corporation insured limits. We place our cash and cash equivalents in what we believe to be credit-worthy financial institutions. In addition, certain of our money market accounts invest inU.S. Treasury securities or other obligations issued or guaranteed by theU.S. government or its agencies, floating rate and variable demand notes ofU.S. and foreign corporations, commercial paper rated in the highest category byMoody's Investor Services andStandard & Poor's , certificates of deposit and time deposits, asset-backed securities, and repurchase agreements. As ofMarch 31, 2020 , we had total liquidity on a consolidated basis of$150,327 comprised of$110,327 of cash (including$17,029 of restricted cash) and$40,000 of undrawn revolver capacity. Restricted cash of$17,029 as ofMarch 31, 2020 represents legally restricted cash relating to the Sinosure Credit Facility which stipulates that cash accounts be maintained which are limited in their use to pay expenses related to servicing the debt facility. 38INTERNATIONAL SEAWAYS, INC.
As of
Sources, Uses and Management of Capital
We have maintained a strong balance sheet which has allowed us to take advantage of attractive strategic opportunities during the low end of the tanker cycle and we have maintained what we believe to be a reasonable financial leverage for the current point in the tanker cycle and one of the lowest loan to value profiles in the public company shipping sector. In addition to future operating cash flows, our other future sources of funds are proceeds from issuances of equity securities, additional borrowings as permitted under our loan agreements and proceeds from the opportunistic sales of our vessels. Our current uses of funds are to fund working capital requirements, maintain the quality of our vessels, purchase vessels, comply with international shipping standards and environmental laws and regulations, repurchase our outstanding shares and repay or repurchase our outstanding loan facilities. The following is a summary of the significant capital allocation activities the Company executed during the first quarter of 2020 and sources of capital the Company has at its disposal for future use as well as the Company's current commitments for future uses of capital: OnJanuary 23, 2020 ,International Seaways, Inc. ,International Seaways Operating Corporation (the "Borrower") and certain of their subsidiaries entered into a credit agreement (the "Credit Agreement") comprising$390,000 of secured debt facilities (the "2020 Debt Facilities") with Nordea Bank Abp,New York Branch ("Nordea"),ABN AMRO Capital USA LLC ("ABN"), CréditAgricole Corporate & Investment Bank ,DNB Capital LLC and Skandinaviska Enskilda Banken AB (PUBL), or their respective affiliates, as mandated lead arrangers and bookrunners, andBNP Paribas and Danish Ship Finance A/S, as lead arrangers. Nordea is acting as administrative agent, collateral agent and security trustee under the Credit Agreement, and ABN is acting as sustainability coordinator. The proceeds from the draw down on the 2020 Debt Facilities onJanuary 28, 2020 were primarily used to (i) repay the$331,519 outstanding principal balance under the 2017 Debt Facilities due 2022 and the$23,248 outstanding principal balance under the ABN Term Loan Facility due 2023, and (ii) to repurchase the$27,931 outstanding principal amount of the Company's 10.75% subordinated notes due 2023 issued pursuant to an indenture datedJune 13, 2018 withGLAS Trust Company LLC , as trustee, as amended. The 2020 Debt Facilities consist of (i) a five-year senior secured term loan facility in an aggregate principal amount of$300,000 (the "Core Term Loan Facility"); (ii) a five-year revolving credit facility in an aggregate principal amount of$40,000 (the "Core Revolving Facility"); and (iii) a senior secured term loan credit facility with a maturity date ofJune 30, 2022 in an aggregate principal amount of$50,000 (the "Transition Term Loan Facility"). The Core Term Loan Facility contains an uncommitted accordion feature whereby, for a period of up to 18 months following the closing date, the amount of the loan thereunder may be increased up to an additional$100,000 for the acquisition of Additional Vessels, subject to certain conditions. The Core Term Loan Facility amortizes in 19 quarterly installments of approximately$9,476 commencingJune 30, 2020 and matures onJanuary 23, 2025 , with a balloon payment of approximately$120,000 due at maturity. The Core Revolving Facility also matures onJanuary 23, 2025 . The Transition Term Loan Facility amortizes in 10 quarterly installments of$5,000 commencingMarch 31, 2020 and matures onJune 30, 2022 . The maturity dates for the 2020 Debt Facilities are subject to acceleration upon the occurrence of certain events as described in the Credit Agreement. The 2020 Debt Facilities will reduce annual interest expense by approximately$15,000 , by lowering our average interest rates on the refinanced portion of our debt by 350 basis points, and our overall average interest rates by 200 basis points.
On
OnMarch 12, 2020 , the Company entered into a Side Letter agreement with the 2020 Debt Facilities lenders relating to the mortgage for the Seaways Mulan, a 2002-built VLCC that has been detained by the Indonesian authorities sinceFebruary 8, 2020 pending the completion of their investigation of a claim that the vessel had illegally anchored in Indonesian territorial waters while awaiting orders for its next voyage. The mortgage requires the vessel owner to secure the release of a vessel that has been arrested or taken into 39INTERNATIONAL SEAWAYS, INC. custody under color of legal authority within 30 days of the initial detention of such vessel and grants the vessel owner an additional 30 days thereafter to cure the non-release of the vessel before being considered to be in default under the terms of the Credit Agreement. Although a process to obtain release of the vessel was and remains ongoing, the vessel had been in the custody of the Indonesian authorities for more than 30 days. If the vessel's detention was not cured or waived byApril 8, 2020 , the Company would be in default under the terms of the Credit Agreement. Accordingly, pursuant to the terms of the Side Letter agreement, the Lenders granted the Company an additional 60 days from the initial arrest date to secure the release of the Seaways Mulan from arrest by the Indonesian authorities byMay 8, 2020 after which the Company would have an additional 30 days (i.e., throughJune 7, 2020 ) to cure the non-release of the vessel before being considered to be in default under the terms of the Credit Agreement. If the release of the Seaways Mulan does not occur byJune 7, 2020 , then byJune 7, 2020 the Company can either effectively pay off the proportional amount of the loan outstanding under the Transition Term Loan Facility applicable to the Seaways Mulan or have received an additional waiver from the lender group.
See Note 9, "Debt," to the accompanying condensed consolidated financial statements for further details on the refinancing transaction and the terms of the 2020 Debt Facilities.
InJanuary 2020 , the Company sold and delivered a 2002-built Aframax for net proceeds of$12,211 . In addition, inMarch 2020 , the Company received a non-refundable deposit of$1,355 pursuant to the memorandum of agreement for the sale of a 2001-built Aframax, which is now expected to be delivered to its buyer during the third quarter of 2020.
On
InFebruary 2020 , the Company took delivery of a 2009built LR1 pursuant to a memorandum of agreement entered into inDecember 2019 for a purchase price of$18,750 , of which 10% was previously paid in 2019. Pursuant to the Company's$30,000 stock repurchase program expiring onMarch 5, 2021 , duringMarch 2020 , the Company repurchased and retired 490,592 shares of its common stock in open-market purchases at an average price of$20.41 per share, for a total cost of$10,012 . The Company is party to an Equity Distribution Agreement (the "Distribution Agreement") withEvercore Group L.L.C. andJefferies LLC , as our sales agents, relating to the common shares of the Company. In accordance with the terms of the Distribution Agreement, we may offer and sell common shares having an aggregate offering price of up to$25,000 from time to time through the sales agents. The sales agents are not required to sell any specific number or dollar amount of our common shares but will use their commercially reasonable efforts, as our agents and subject to the terms of the Distribution Agreement, to sell the common shares offered, as instructed by us. We intend to use the net proceeds of this offering, after deducting the sales agents' commissions and our offering expenses, for general corporate purposes. This may include, among other things, additions to working capital, repayment or refinancing of existing indebtedness or other corporate obligations, financing of capital expenditures and acquisitions and investment in existing and future projects. As ofMarch 31, 2020 , the Company has neither sold or undertaken to sell any shares pursuant to the Distribution Agreement As ofMarch 31, 2020 , the Company has remaining contractual commitments for the purchase and installation of scrubbers on seven of its 10 modern VLCCs. To date, scrubber installations have been completed on five of our modern VLCCs and installations on two additional VLCCs are scheduled for completion during the second quarter of 2020. The Company also has outstanding contractual commitments for the purchase and installation of ballast water treatment systems on 16 vessels with an option for the purchase and installation of one additional ballast water treatment system. As ofMarch 31, 2020 , the Company's aggregate purchase commitments for vessel betterments are approximately$22,977 (see Aggregate Contractual Obligations Table below). The overall commitments could increase by approximately$2,100 if the remaining option for an additional ballast water treatment system unit is exercised. Such option expiresDecember 2020 . These systems are intended to be funded with available liquidity and proceeds from the sales of vessels. 40INTERNATIONAL SEAWAYS, INC. Outlook We currently believe that the second and third quarters of 2020 will likely be a stronger rate environment for tankers than 2021 due to excess crude supply and the resulting need for seaborne storage of crude oil and products. Accordingly, we are shifting the scrubber installations on three of our modern VLCCs to 2021, aligning such installations with their natural drydocking dates. Further, postponement of these installations will help alleviate current challenges being faced as a result of extensive travel restrictions instituted in response to the COVID-19 pandemic. As discussed in the Operations and Oil Tanker Markets section above, in the second quarter thus far, tanker rates have been highly volatile but have held on to the increases seen at the end of the first quarter. Despite the OPEC+ agreement in earlyApril 2020 to substantially cut production beginning in May/June 2020 , the total oil to be produced is still substantially in excess of global demand. This excess production and the resulting need for tankers as floating storage coupled with increased delays in offloading cargoes as shore-based storage fills up, has maintained a robust tanker rate environment. This implies significant cash generation in the near term. When supply and demand eventually come back into balance, this could have negative repercussions for tankers as the oil held in inventory will supplant oil tanker transportation demand. In an effort to take advantage of the dynamic oil tanker markets and reduce risk, we have opportunistically locked in four of our VLCCs on time charters for periods ranging from seven months to 36 months at current high rates with major oil producing and trading companies. We believe our balance sheet coupled with the time charter coverage noted above positions us to generate sufficient cash to support our operations over the next twelve months as we continue to advance our disciplined capital allocation strategy and provides us with flexibility to continue pursuing potential strategic opportunities that may arise within the diverse sectors in which we operate.
Off-Balance Sheet Arrangements
As of
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 ofJuly 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 Service Contracts'') and (c) the FSO Joint Venture is a borrower under a$220,000 secured credit facility by and among TI Africa and TI Asia, as joint and several borrowers, ABN AMRO Bank N.V. andING 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$220,000 credit facility inApril 2018 . The Company provided a guarantee for the$110,000 FSO Term Loan portion of the facility, which amortizes over the remaining terms of the NOC Service Contracts, which expire inJuly 2022 andSeptember 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$50,000 and 5% of Total Indebtedness of INSW, (ii) INSW shall have Cash of at least$30,000 and (iii) INSW is in compliance with the Loan to Value Test (as such capitalized terms are defined in the Company guarantee). As ofMarch 31, 2020 , 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$65,648 and the carrying value of the Company's guaranty in the accompanying condensed consolidated balance sheets was$192 . In addition, and pursuant to an agreement between INSW and the trustees of theOSG Ship Management (UK) Ltd. Retirement Benefits Plan (the ''Scheme''), INSW guarantees the obligations ofINSW Ship Management UK Ltd. , a subsidiary of INSW, to make payments to the Scheme. 41INTERNATIONAL SEAWAYS, INC.
Aggregate Contractual Obligations
A summary of the Company's long-term contractual obligations as ofMarch 31, 2020 follows: Beyond 2020 2021 2022 2023 2024 2024 Total Core Term Loan Facility - floating rate(1)$ 40,665 $ 49,192 $ 47,558 $ 45,869 $ 44,255 $ 120,300 $ 347,839 Transition Term Loan Facility - floating rate(2) 16,378 21,026 10,171 - - - 47,575 Sinosure Credit Facility - floating rate(3) 26,999 35,035 33,897 32,758 31,643 164,925 325,257 8.5% Senior Notes - fixed rate 1,594 2,125 2,125 26,063 - - 31,907 Operating lease obligations(4) Bareboat Charter-ins 4,730 6,278 6,278 4,532 - - 21,818 Time Charter-ins 6,313 4,660 - - - - 10,973 Office and other space 874 838 173 178 178 - 2,241 Vessel betterment commitments(5) 22,510 349 118 - - - 22,977 Other(6) 1,102 225 - - - - 1,327 Total$ 121,165 $ 119,728 $ 100,320 $ 109,400 $ 76,076 $ 285,225 $ 811,914
--------------------------------------------------------------------------------
(1) Amounts shown include contractual interest obligations of floating rate debt
estimated based on the applicable margin for the Core Term Loan Facility of
2.60% through
stated in the related floating-to-fixed interest rate swap of 1.97% for the
below under Risk Management) and (ii) the effective three-month LIBOR rate of
1.80% as of January 28, 2020 for the remaining outstanding balance.(2) Amounts shown include contractual interest obligations of floating rate debt
estimated based on the applicable margin for the Transition Term Loan
Facility of 3.50% plus (i) the effective LIBOR rates for the next three
quarterly principal payments of 1.45%, 1.07%, and 1.02%, respectively, and
(ii) the effective three-month LIBOR rate of 1.00% for the remaining
outstanding balance.
(3) Amounts shown include contractual interest obligations of floating rate debt
estimated based on the applicable margin for the Sinosure Credit Facility of
2.00% plus (i) the fixed rate stated in the related floating-to-fixed
interest rate swap of 2.76% through the maturity date of
described below under Risk Management), or (ii) the effective three-month
LIBOR rate of 1.20% as of
date.
(4) As of March 31, 2020 , the Company had charter-in commitments for fourvessels and one workboat employed in the Crude Tankers Lightering business on
leases that are accounted for as operating leases. Certain of these leases
provide the Company with various renewal and purchase options. The future
minimum commitments for time charters-in have been reduced to reflect
estimated days that the vessels will not be available for employment due to
drydock and any days paid for in advance. The full amounts due under bareboat
charter-ins, office and other space leases, and lease component of the
amounts due under long term time charter-ins are discounted and reflected on
the Company's consolidated condensed balance sheet as lease liabilities with
corresponding right of use asset balances.
(5) Represents the Company's commitments for the purchase and installation of
ballast water treatment systems on 16 vessels, and the purchase and
installation of scrubbers on seven of its VLCC tankers. The decision in April
2020 to defer the scrubber installations on three VLCCs until 2021 will move
approximately
the Company is party to an agreement granting INSW the option to purchase an
additional ballast water treatment system for installation before December
2020. If exercised, such option could increase the Company's commitments by
approximately
(6) Represents the Company's commitments for its share of charter hire payments
due pursuant to a 12-month profit share agreement entered into in March 2020 .
42
INTERNATIONAL SEAWAYS, INC.
Risk Management:
The Company is exposed to market risk from changes in interest rates, which
could impact its results of operations and financial condition. The Company
manages this exposure to market risk through its regular operating and financing
activities and, when deemed appropriate, through the use of derivative financial
instruments. To manage its interest rate risk in a cost-effective manner, the
Company, from time-to-time, enters into interest rate swap or cap agreements, in
which it agrees to exchange various combinations of fixed and variable interest
rates based on agreed upon notional amounts or to receive payments if floating
interest rates rise above a specified cap rate. The Company uses such derivative
financial instruments as risk management tools and not for speculative or
trading purposes. In addition, derivative financial instruments are entered into
with a diversified group of major financial institutions in order to manage
exposure to nonperformance on such instruments by the counterparties.
The Company uses interest rate caps, collars and swaps for the management of
interest rate risk exposure associated with changes in LIBOR interest rate
payments due on its credit facilities. In connection with its entry into the
Core Term Loan Facility on January 28, 2020 , the Company, in a cashless
transaction, converted the $350,000 notional interest rate collar into an
amortizing $250,000 notional pay-fixed, receive-three-month LIBOR interest rate
swap subject to a 0% floor. The term of the new hedging arrangement was extended
to coincide with the maturity of the Core Term Loan Facility of January 23, 2025
at a fixed rate of 1.97%. The interest rate swap agreement was re-designated
and qualifies as a cash flow hedge and contains no leverage features. Changes
in the fair value of the interest rate collar prior to the re-designation on
January 28, 2020 recorded through earnings during the first quarter of 2020
totaled a loss of $1,271 .
On April 16, 2020 , the Company entered into an interest rate swap agreement with
a major financial institution covering a notional amount of $25,000 of the Core
Term Loan Facility that effectively converts the Company's interest rate
exposure from a three-month LIBOR floating rate to a fixed rate of 0.50% through
the maturity date of January 23, 2025 , effective June 30, 2020 . The interest
rate swap agreement, which contains no leverage features, qualifies as a cash
flow hedge and will be designated as such.
The Company is also party to a floating-to-fixed interest rate swap agreement
with a major financial institution covering the balance outstanding under the
Sinosure Credit Facility that effectively converts the Company's interest rate
exposure from a floating rate based on three-month LIBOR to a fixed rate of
2.76% through the termination date of March 21, 2025 . The interest rate swap
agreement is designated and qualifies as a cash flow hedge and contains no
leverage features.
In light of the expected discontinuation of the use of LIBOR after December 31,
2021 , the Company performed an assessment of the risks associated with the
expected transition to an alternative reference rate and 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. Through a review of
the Company's debt agreements and interest rate derivative contracts the Company
believes there are adequate provisions within such agreements that provide
guidance on how the Company and its counterparties under such agreements will
address what happens when LIBOR is no longer available. The Company believes
that as the 2021 sunset date draws closer, all parties will have greater clarity
on the predominant alternative reference rate in effect that will be used going
forward.
Available Information
The Company makes available free of charge through its internet website,
www.intlseas.com, its Annual Report on Form 10K, quarterly reports on
Form 10Q, current reports on Form 8K and amendments to these reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as soon as reasonably practicable after
the Company electronically files such material with, or furnishes it to, the
Securities and Exchange Commission .
The public may also read and copy any materials the Company files with the SEC
at the SEC's Public Reference Room at 100 F Street, N.E. Washington D.C . 20549
(information on the operation of the Public Reference Room is available by
calling the SEC at 1800SEC0330). The SEC also maintains a web site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC at https://www.sec.gov.
43
INTERNATIONAL SEAWAYS, INC.
The Company also makes available on its website, its corporate governance
guidelines, its Code of Business Conduct and Ethics, insider trading policy,
anti-bribery and corruption policy and charters of the Audit Committee, the
Human Resources and Compensation Committee and the Corporate Governance and Risk
Assessment Committee of the Board of Directors. The Company is required to
disclose any amendment to a provision of its Code of Business Conduct and
Ethics. The Company intends to use its website as a method of disseminating this
disclosure, as permitted by applicable SEC rules. Any such disclosure will be
posted to the Company website within four business days following the date of
any such amendment. Neither our website nor the information contained on that
site, or connected to that site, is incorporated by reference into this
Quarterly Report on Form 10Q.
Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10Q, an
evaluation was performed under the supervision and with the participation of the
Company's management, including the Chief Executive Officer ("CEO") and Chief
Financial Officer ("CFO"), of the effectiveness of the design and operation of
the Company's disclosure controls and procedures as defined in
Rules 13a15(e) and 15d15(e) under the Exchange Act. Based on that evaluation,
the Company's management, including the CEO and CFO, concluded that the
Company's current disclosure controls and procedures were effective as of March
31, 2020 to ensure that information required to be disclosed by the Company in
the reports the Company files or submits under the Exchange Act is (i) recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms and (ii) accumulated and
communicated to the Company's management, including the CEO and CFO, as
appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in the Company's internal control over financial reporting during the three months endingMarch 31, 2020 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 44INTERNATIONAL SEAWAYS, INC.
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