INTERNATIONAL SEAWAYS, INC. FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q 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 possibility that costs or difficulties related to the integration of INSW's
and Diamond S' operations will be greater than expected;
? the risk that stockholder litigation in connection with the Merger may result
in significant costs of defense, indemnification and liability;
? the risk that the anticipated tax treatment of the Merger is not obtained;
? transaction costs related to the Merger;
? 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;
? 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;
37
INTERNATIONAL SEAWAYS, INC. ? 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 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;
? 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, including governing tax laws, treaties or regulations,
including those relating to environmental and security matters; and
? changes in worldwide trading conditions, including the impact of tariffs, trade
sanctions, boycotts and other restrictions on trade. The Company assumes no obligation to update or revise any forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q and written and oral forward-looking statements attributable to the Company or its representatives after the date of this Quarterly Report on Form 10-Q are qualified in their entirety by the cautionary statement contained in this paragraph and in other reports hereafter filed by the Company with theSecurities and Exchange Commission . INTRODUCTION This Management's Discussion and Analysis, which should be read in conjunction with our accompanying condensed consolidated financial statements, provides a discussion and analysis of our business, current developments, financial condition, cash flows and results of operations. It is organized as follows:
General. This section provides a general description of our business, which we
? believe is important in understanding the results of our operations, financial
condition and potential future trends.
Operations & Oil Tanker Markets. This section provides an overview of industry
? operations and dynamics that have an impact on the Company's financial position
and results of operations.
38
INTERNATIONAL SEAWAYS, INC. Critical Accounting Estimates and Policies. This section identifies any updates
? to those accounting policies that are considered important to our results of
operations and financial condition, require significant judgment and involve
significant management estimates.
Results from Vessel Operations. This section provides an analysis of our
? results of operations presented on a business segment basis. In addition, a
brief description of significant transactions and other items that affect the
comparability of the results is provided, if applicable.
Liquidity and Sources of Capital. This section provides an analysis of our cash
flows, outstanding debt and commitments. Included in the analysis of our
? outstanding debt is a discussion of the amount of financial capacity available
to fund our ongoing operations and future commitments as well as a discussion
of the Company's planned and/or already executed capital allocation activities.
General: We are a provider of ocean transportation services for crude oil and refined petroleum products. We operate our fleet of VLCC, Suezmax, Aframax and Panamax crude tankers and LR1, LR2, MR and Handysize product carriers in the International Flag market. Our business includes two reportable segments: Crude Tankers and Product Carriers. For the three and nine months endedSeptember 30, 2021 , we derived 48% and 63%, respectively, of our TCE revenues from our Crude Tankers segment, compared with 85% and 79%, respectively, for the three and nine months endedSeptember 30, 2020 . Revenues from our Product Carriers segment constituted the balance of our TCE revenues in the 2021 and 2020 periods.
Completion of Merger Transaction
As described in Note 2, "Merger Transaction," to the accompanying condensed consolidated financial statements, onJuly 16, 2021 pursuant to the Merger Agreement dated as ofMarch 30, 2021 , the Company completed a stock-for-stock merger with Diamond S. As ofSeptember 30, 2021 , the Company operated a fleet of 89 vessels, consisting of 53 product carriers and 36 crude tankers with an aggregate carrying capacity of approximately 9.8 million deadweight tons ("dwt"), including two vessels that have been chartered-in under operating leases for durations exceeding one year at inception, two FSO service vessels in which we have ownership interests through joint venture partnerships, and two Suezmaxes owned through another joint venture. In addition to our operating fleet of 89 vessels, three dual-fuel LNG VLCC newbuilds are scheduled for delivery to the Company in the first quarter of 2023, bringing the total operating and newbuild fleet to 92 vessels. Subsequent toSeptember 30, 2021 , the Company chartered in an LR1 for a minimum period of 18-months. 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 ofU.S. domestic and international production andOPEC exports. The number of vessels is affected by newbuilding deliveries and by the removal of existing vessels from service, principally through storage, recycling 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 all of the Company's LR1 product carriers, which currently participate in the Panamax International pool, in the transportation of crude oil cargoes. 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 80% and 76% of our total TCE revenues in the spot market for the three and nine months endedSeptember 30, 2021 , respectively, compared with 67% and 81% for the three and nine months endedSeptember 30 ,
2020, respectively.
39
INTERNATIONAL SEAWAYS, INC. The following is a discussion and analysis of our financial condition as ofSeptember 30, 2021 and results of operations for the three and nine months endedSeptember 30, 2021 and 2020. 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.
Operations and Oil Tanker Markets:
The International Energy Agency ("IEA") estimates global oil consumption for the third quarter of 2021 at 97.8 million barrels per day ("b/d"), up 6.2% from the same quarter in 2020. The estimate for global oil consumption for 2021 is 96.3 million b/d, an increase of 6.1% over 2020.OECD demand in 2021 is estimated to increase by 6.0% to 44.5 million b/d, while non-OECD demand is estimated to increase by 6.1% to 51.8 million b/d. Global oil production in the third quarter of 2021 was 96.3 million b/d, an increase of 6.0% from the third quarter of 2020.OPEC crude oil production averaged 26.9 million b/d in the third quarter of 2021, an increase of 1.4 million b/d from the second quarter of 2021, and an increase of 3.1 million b/d from the third quarter of 2020. Non-OPEC production increased by 2.2 million b/d to 64.1 million b/d in the third quarter of 2021 compared with the third quarter of 2020. Oil production in theU.S. in the third quarter of 2021 increased by 0.9% to 11.3 million b/d compared to the second quarter of 2021 and by 3.4%
from the third quarter of 2020.U.S. refinery throughput increased by 0.9 million b/d to 16.5 million b/d in the third quarter of 2021 compared with the second quarter of 2021.U.S. crude oil imports in the third quarter of 2021 increased by 0.5 million b/d to 6.4 million b/d compared with the third quarter of 2020, with imports fromOPEC countries remaining flat and imports from non-OPEC countries increasing by 0.5 million b/d.
As a result of rising oil demand outpacing production of crude oil and refined products and significant increases in current prices of crude oil, global inventories were drawn down during the third quarter of 2021 to below the average over the last five years. Total commercial stocks in theOECD have declined by approximately 30 million barrels in the two months endingAugust 2021 , the most recent available combined inventory data. Large draws in total inventories have negatively impacted current tanker market earnings. During the third quarter of 2021, the tanker fleet of vessels over 10,000 dwt decreased, net of vessels recycled, by 0.2 million dwt as the crude fleet decreased by 0.5 million dwt, with VLCCs and Suezmaxes declining by 0.8 and 0.4 million dwt, respectively and Aframaxes growing by 0.7 million dwt. The product carrier fleet increased by 0.3 million dwt. Year-over-year, the size of the tanker fleet increased by 12.3 million dwt with the VLCCs, Suezmaxes, Aframaxes and MRs increasing by 5.1 million dwt, 3.0 million dwt, 2.2 million dwt and 2.1 million dwt, respectively. The LR1/Panamax fleet remained flat. During the third quarter of 2021, the tanker orderbook declined by 3.8 million dwt overall. The crude tanker orderbook decreased by 2.4 million dwt, with decreases in the VLCC, Suezmax and Aframax sectors of 1.3 million dwt, 0.2 million dwt and 1.0 million dwt, respectively. The product carrier orderbook decreased by 1.4 million dwt with LR1s declining by 0.1 million dwt and MRs declining by 1.2 million dwt. Year-over-year, the total tanker orderbook increased by 0.4 million dwt, with VLCCs increasing by 3.4 million dwt and all other sector orderbooks declining. 40INTERNATIONAL SEAWAYS, INC.
After a weak first half of 2021, crude tanker rates remained under pressure and all tanker types operated at or below industry average cash breakeven levels on benchmark routes during the third quarter of 2021. So far in the fourth quarter of 2021, rates in all segments continue to be weak. The 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. See Item 1A, Risk Factors in ourDecember 31, 2020 Form 10-K - 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 Estimates and 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, 2020 included in the Company's Annual Report on Form 10-K. See Note 3, "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 third quarter of 2021, results from vessel operations decreased by$79.6 million to a loss of$62.8 million from income of$16.8 million in the third quarter of 2020. Such decrease resulted principally from$47.0 million of one-time merger and integration related costs incurred in the current quarter related to the Company's Merger with Diamond S, and increased vessel expenses, which were not sufficiently covered with a corresponding increase in TCE revenues despite having a larger post-Merger fleet, partially offset by a net increase of$21.9 million in the third quarter of 2021 compared with the third quarter of 2020 in gain on the disposal of vessels. The decrease in TCE revenues in the third quarter of 2021 of$21.0 million , or 22%, to$73.0 million from$94.0 million in the corresponding quarter of the prior year primarily reflects lower average daily rates across the majority of INSW's fleet sectors, which accounted for a decrease of approximately$64.6 million . Partially offsetting this rates-based decline were significant days-based increases in the Suezmax and MR fleets, which reflected the growth in the vessel count in these fleets that resulted from the Merger. During the first nine months of 2021, income from vessel operations decreased by$230.2 million to a loss of$92.1 million from income of$138.1 million in the first nine months of 2020. The primary drivers of the decrease were consistent with those described above in the quarter-over-quarter analysis. The decrease in TCE revenues in the first nine months of 2021 of$186.2 million , or 53%, to$162.9 million from$349.1 million in the corresponding period of the prior year primarily reflects lower average daily rates across all of INSW's fleet sectors, which accounted for a rates-based decrease of approximately$221.0 million . Also contributing to the decrease was a decline in revenue days in the VLCC fleet principally due to the sales of three older VLCCs betweenNovember 2020 andJuly 2021 . Partially offsetting these declines were days-based increases in the Suezmax and MR fleets, as described above. See Note 5, "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. 41INTERNATIONAL SEAWAYS, INC. Crude Tankers Three
Months Ended
2021 2020 2021 2020 TCE revenues $ 34,771 $ 79,799 $ 101,817 $ 274,543 Vessel expenses (24,384) (24,276) (65,327) (73,256) Charter hire expenses (4,106) (4,692) (12,182) (14,655) Depreciation and amortization (15,963) (14,864) (42,005) (43,841) Adjusted (loss)/income from vessel operations (a) $
(9,682) $ 35,967
$ 12,845 $ 36,010 $ 15,710 $ 43,066 Average number of owned vessels (b)
30.5 24.0 24.2 24.1
Average number of vessels chartered-in under operating leases 2.0 2.0 2.0 2.2
Number of revenue days: (c) 2,707 2,216 6,481 6,375
Number of ship-operating days: (d)
Owned vessels 2,810 2,208 6,611 6,604
Vessels bareboat chartered-in under operating leases 184 184 546 548
Vessels time chartered-in under operating leases (e) - - - 44
(a) Adjusted income/(loss) from vessel operations by segment is before general
and administrative expenses, reversal of expected credit losses, third-party
debt modification fees, merger and integration related costs and gain/(loss)
on disposal of vessels and other property, including impairments.
(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
under an operating lease for a portion of the nine-month period ended
Tankers Lightering business during the three and nine months ended September
30, 2021 .
42
INTERNATIONAL SEAWAYS, INC.
The following tables provide a breakdown of TCE rates achieved for the three and
nine months ended September 30, 2021 and 2020, between spot and fixed earnings
and the related revenue days. The information in this table 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 $667 and $646 per day for the three and nine months ended
September 30, 2021 , respectively, and $635 and $744 per day for the three and
nine months ended September 30, 2020 , 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.
2021 2020
Spot Earnings Fixed Earnings Spot Earnings Fixed Earnings
Three Months Ended September 30 ,
VLCC:
Average rate $ 10,686 $ 43,893 $ 35,740 $ 73,399
Revenue days 761 92 810 362
Suezmax (1):
Average rate $ 10,650 $ 26,604 $ 28,246 $ -
Revenue days 748 90 180 -
Aframax:
Average rate $ 11,361 $ 25,746 $ 10,860 $ -
Revenue days 276 76 368 -
Panamax:
Average rate $ 9,755 $ 11,054 $ 15,508 $ 15,790
Revenue days 151 264 118 269
Nine Months Ended September 30 ,
VLCC:
Average rate $ 13,345 $ 45,517 $ 56,459 $ 70,772
Revenue days 2,170 338 2,322 623
Suezmax (1):
Average rate $ 12,189 $ 26,604 $ 40,028 $ -
Revenue days 1,110 90 541 -
Aframax:
Average rate $ 10,554 $ 25,746 $ 24,107 -
Revenue days 812 76 1,063 $ -
Panamax:
Average rate $ 12,812 $ 11,046 $ 29,508 $ 16,021
Revenue days 332 1,303 300 1,348
(1) During the three months ended
Company through the Merger were employed on transitional voyages in the spot
market prior to delivering to Penfield Maritime's Suezmax Pool . These
transitional voyages are excluded from the tables above.
43
INTERNATIONAL SEAWAYS, INC.
During the third quarter of 2021, TCE revenues for the Crude Tankers segment
decreased by $45.0 million , or 56%, to $34.8 million from $79.8 million in the
third quarter of 2020, principally as a result of significantly lower average
blended rates in the VLCC, Suezmax and Panamax sectors aggregating approximately
$50.0 million . Commencing from the latter part of the second quarter of 2020,
principally as the result of the impact of the COVID-19 pandemic, oil production
has declined. This development, which negatively impacted the demand for oil
tankers during the second half of 2020, continued through the first three
quarters of 2021. The extent to which the current COVID-19 related market
conditions will continue to negatively impact the tanker rate environment will
depend on (i) the extent to which oil demand is met from excess crude
inventories that were built up during the period of oil demand destruction, (ii)
the timing and magnitude of oil demand recoveries in the various parts of the
world and (iii) the levels of oil production during such periods.
Also contributing to the decline in TCE revenues was (i) a $19.6 million
days-based decline in VLCC revenue which reflects 429 fewer revenue days in the
current quarter, driven by the sales of older vessels discussed above, and (ii)
a $1.0 million decrease in revenue in the Crude Tankers Lightering business in
the current quarter. Partially offsetting the decreases to TCE revenues was a
$25.1 million days-based increase in the Suezmax fleet, which reflects an
incremental 908 revenue days in the current quarter arising from the Company's
acquisition of 13 Suezmaxes as a part of its Merger with Diamond S. The revenue
days in the Aframax fleet during the current quarter decreased marginally as
compared to the third quarter of 2020, as the impact of the acquisition of one
Aframax as a part of the Merger was offset by the Company's sale of a 2001-built
Aframax in November 2020 .
Vessel expenses increased by $0.1 million to $24.4 million in the third quarter
of 2021 from $24.3 million in the third quarter of 2020. Such increase reflects
an approximately $7.8 million increase in the Suezmax fleet due to the additions
to the fleet described above. This increase was substantively offset by (i) a
$2.7 million reduction in the VLCC fleet principally relating to the vessel
sales discussed above and (ii) a $2.7 million reduction in the Panamax fleet
that reflects the sales of a 2002-built and a 2003-built Panamax during August
2021 , and a reduction of $1.0 million in drydock deviation costs from what was
incurred in the prior year's quarter. Charter hire expenses decreased by $0.6
million to $4.1 million from $4.7 million in the third quarter of 2020.
Depreciation and amortization increased by $1.1 million to $16.0 million in the
current quarter from $14.9 million in the prior year's quarter. Such increase
resulted from the additions to the Suezmax and Aframax fleets noted above, along
with the impacts of scrubber installations and drydockings performed during 2020
and 2021. These increases were offset to a large extent by the vessel sales
noted above and impairment charges recorded in December 2020 .
Excluding depreciation and amortization, the reversal of expected credit losses
and general and administrative expenses, operating income for the Crude Tankers
Lightering business was $1.2 million for the third quarter of 2021 compared to
$1.0 million for the third quarter of 2020.
During the first nine months of 2021, TCE revenues for the Crude Tankers segment
decreased by $172.7 million or 63%, to $101.8 million from $274.5 million in the
first nine months of 2020, principally as a result of the market factors
described above which resulted in significantly lower average blended rates
across all the Crude Tankers sectors aggregating approximately $166.6 million .
Also contributing to the decrease was an aggregate 722-day decrease in VLCC and
Aframax revenue days, which had the effect of decreasing TCE revenues by $35.6
million and was driven by the vessel sales described above along with the
additional impact of the sale of a 2002-built Aframax in January 2020 , partially
offset by 125 fewer offhire days in the current year's period. The reduction in
current period offhire days was principally driven by fewer VLCC out-of-service
days for scrubber installations in the current period. Serving to partially
offset such declines were the Suezmaxes and Aframax added to the Company's fleet
as a result of the Merger, as noted above.
Vessel expenses decreased by $7.9 million to $65.3 million in the nine months
ended September 30, 2021 from $73.2 million in the corresponding period of 2020.
The primary driver of the net decrease were the vessel sales referred to above.
Charter hire expenses decreased by $2.5 million to $12.2 million from $14.7
million in the prior year's period. Consistent with the quarter-over-quarter
comparison noted above, such decrease related to a reduction in short-term time
chartered-in vessels in the Crude Tankers Lightering business as a result of
lower anticipated lightering activity levels in the current year's period.
Depreciation and amortization decreased by $1.8 million to $42.0 million in the
current period from $43.8 million in the prior year's period. The drivers of
such decline were the vessel sales and 2020 impairment charges discussed above.
44
INTERNATIONAL SEAWAYS, INC.
Excluding depreciation and amortization, the reversal of expected credit losses
and general and administrative expenses, operating income for the Crude Tankers
Lightering business was $3.6 million for the first nine months of 2021 and $5.5
million for the first nine months of 2020. The decrease in the current period's
operating income as compared to the prior year's period primarily reflects lower
levels of lightering activity in the current period. During the current year's
period, 253 service support only lighterings were performed, as compared to 290
service support only lighterings in the prior year's period. Additionally,
during the prior year's period the Crude Tankers Lightering business utilized
its chartered-in Aframaxes on three spot voyages.
Product Carriers
Three
Months Ended
2021 2020 2021 2020
TCE revenues $ 38,197 $ 14,233 $ 61,038 $ 74,509
Vessel expenses (33,790) (7,226) (47,050) (21,483)
Charter hire expenses (1,573) (1,749) (5,102) (9,558)
Depreciation and amortization (9,828) (4,127) (17,578) (12,250)
Adjusted income/(loss) from vessel operations $ (6,994) $ 1,131 $ (8,692) $ 31,218 Average daily TCE rate
$ 9,448 $ 14,009 $ 10,267 $ 22,716 Average number of owned vessels
47.3 10.0 22.6 9.8
Average number of vessels chartered-in under operating leases 1.3 1.3 1.3 2.4
Number of revenue days 4,043 1,016 5,945 3,280
Number of ship-operating days:
Owned vessels 4,354 920 6,164 2,691
Vessels time chartered-in under operating leases 124 115 368 648
45
INTERNATIONAL SEAWAYS, INC.
The following tables provide a breakdown of TCE rates achieved for the three and
nine months ended September 30, 2021 and 2020, between spot and fixed earnings
and the related revenue days. The information in this table 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 $610 and $618 per day for the three and nine months ended
September 30, 2021 , and $681 and $606 per day for the three and nine months
ended September 30, 2020 , respectively, as well as revenue and revenue days for
which recoveries were recorded by the Company under its loss of hire insurance
policies.
2021 2020
Spot Earnings Fixed Earnings Spot Earnings Fixed Earnings
Three Months Ended September 30 ,
LR2:
Average rate $ - $ 17,797 $ 21,505 $ -
Revenue days - 92 92 -
LR1(1):
Average rate $ 12,476 $ - $ 14,900 $ -
Revenue days 523 - 534 -
MR(2):
Average rate $ 10,000 $ 15,730 $ 14,368 $ -
Revenue days 2,668 124 390 -
Handy:
Average rate $ 6,311 $ - $ - $ -
Revenue days 319 - - -
Nine Months Ended September 30 ,
LR2:
Average rate $ - $ 17,787 $ 29,724 $ -
Revenue days - 273 274 -
LR1(1):
Average rate $ 13,634 $ - $ 27,835 $ -
Revenue days 1,438 - 1,567 -
MR(2):
Average rate $ 9,797 $ 15,730 $ 17,898 $ -
Revenue days 3,453 124 1,440 -
Handy:
Average rate $ 6,311 $ - $ - $ -
Revenue days 319 - - -
(1) During the 2021 and 2020 periods, each of the Company's LR1s participated in
the
(2) During the three months ended
through the Merger were employed on transitional voyages in the spot market
prior to delivering to pools. These transitional voyages are excluded from
the tables above.
During the third quarter of 2021, TCE revenues for the Product Carriers segment
increased by $24.0 million , or 168%, to $38.2 million from $14.2 million in the
third quarter of 2020. In conjunction with the Merger, the Company acquired 44
MRs. The Company subsequently sold seven of the MRs during the third quarter of
2021. The net effect of these transactions was the driver of a 2,719-day
increase in MR revenue days during the current year's quarter, which contributed
a $37.0 million days-based increase in TCE revenues. The Company also acquired
six Handysize vessels in the Merger, which contributed a total of $1.6 million
in TCE revenues during the period. Partially offsetting such increases were
period-over-period decreases in average daily blended rates earned by the MR and
LR1 fleet sectors, which accounted for a rates-based decrease in TCE revenues of
approximately $14.7 million .
46
INTERNATIONAL SEAWAYS, INC.
Vessel expenses increased by $26.6 million to $33.8 million in the third quarter
of 2021 from $7.2 million in the third quarter of 2020. Such increase reflects
increases of approximately $22.8 million and $5.1 million in the MR and
Handysize fleets, respectively, primarily driven by the additions to the fleet
described above. Depreciation and amortization increased by $5.7 million to $9.8
million in the current quarter from $4.1 million in the prior year's quarter.
Such increase resulted primarily from the additions to the MR and Handysize
fleets noted above.
During the first nine months of 2021, TCE revenues for the Product Carriers
segment decreased by $13.5 million to $61.0 million from $74.5 million in the
first nine months of 2020. Approximately $54.3 million of such decrease was
attributable to decreases in the average daily blended rates earned across all
Product Carrier fleets. Also contributing to the decline in TCE revenues was a
$2.9 million days-based decrease in the LR1 fleet that resulted principally from
150 more drydock days in the current year's period, partially offset by $0.5
million in loss of hire proceeds received in the first quarter of 2021 and the
impact of the purchase of a 2009-built LR1 that was delivered to the Company in
February 2020 . Serving to further offset the above net decreases was a $42.2
million days-based increase in the MR fleet and TCE revenues for the Handysize
fleet of $1.6 million , each of which was driven by the Merger.
The $4.5 million decrease in charter hire expenses during the nine months ended
September 30, 2021 compared to the same period of 2020 was due to the redelivery
of three time chartered in MRs to their owners between March and July 2020 . The
drivers of the increases in vessel expenses and depreciation and amortization as
compared to the prior year's period are consistent with those described in the
quarter-over-quarter discussion above.
General and Administrative Expenses:
During the third quarter of 2021, general and administrative expenses increased by$0.8 million to$8.2 million from$7.4 million in the third quarter of 2020. The primary drivers for such increase were related to the Merger and comprised of (i) increased rental costs of$0.3 million relating to the legacy office space of Diamond S, which will not be a recurring cost as the lease for such office space was terminated effectiveSeptember 30, 2021 , (ii) increased insurance costs resulting from the Merger of$0.4 million , and (iii) increased communications and technology expenses of$0.2 million . For the nine months endedSeptember 30, 2021 , general and administrative expenses increased by$1.7 million to$23.2 million from$21.5 million for the same period in 2020. The primary drivers for such increase were consistent with those described in the quarter-over-quarter discussion above. Also contributing to the increase was the recognition during the first quarter of 2021 of$0.7 million of previously deferred costs related to the Company's filing of a Form S-3 registration statement inOctober 2018 , as the Company determined it to be probable that securities would not be issued under such registration statement prior to its expiry inOctober 2021 . Other Income/(Expense):
For the nine months endedSeptember 30, 2021 other income was$0.4 million compared with other expense of$13.5 million for the nine months endedSeptember 30, 2020 . The nine months endedSeptember 30, 2020 includes a prepayment fee of$1.0 million related to the repurchase of the 10.75% Subordinated Notes and a write-off of$12.5 million 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 during the first quarter of 2020, which were treated as extinguishments, and prepayment fees of$0.2 million and a write-off of$0.6 million of unamortized deferred financing costs associated with the payoff of the Transition Term Loan Facility inAugust 2020 , which was treated as an extinguishment. Other income/(expense) for both periods also includes net actuarial gains and currency gains or losses associated with the retirement benefit obligation in theUnited Kingdom . Interest Expense: Interest expense was$10.6 million and$8.0 million for the three months endedSeptember 30, 2021 and 2020, respectively. The quarter-over-quarter increase is primarily attributable to$3.8 million interest expense of the Amended and
Restated$525 Million 47INTERNATIONAL SEAWAYS, INC. Credit Agreement, Amended and Restated$360 Million Credit Agreement and the$66 Million Credit Facility that were assumed in connection with the Merger, partially offset by the impact of the$40.0 million payoff of the$390 Million Facility Transition Term Loan inAugust 2020 and regular quarterly principal repayments. Interest expense decreased by$4.0 million in the nine months endedSeptember 30, 2021 to$24.9 million compared to$28.9 million for the nine months endedSeptember 30, 2020 , as a result of lower average outstanding debt balances in the current year period compared to the 2020 period, which included the aforementioned impact of the$40.0 million payoff of the$390 Million Facility Transition Term Loan, and the use of cash in theJanuary 2020 refinancing to reduce outstanding debt balances. In addition, lower average margins and 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 nine months of 2021 compared with the corresponding periods of 2020, contributed to the decreases in interest expense in the current year periods. See Note 10, "Debt," in the accompanying condensed consolidated financial statements for further information on the Company's debt facilities. Taxes:
The Company qualifies 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 2021 calendar year as less than 50 percent of the total value of the Company's stock has been held by one or more shareholders who own 5% or more of the Company's stock for more than half of the days of 2021. There can be no assurance at this time that INSW will continue to qualify for the Section 883 exemption beyond calendar year 2021. Should the Company not qualify for the exemption in the future, INSW will be subject toU.S. federal income 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.
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.
48
INTERNATIONAL SEAWAYS, INC. The following table reconciles net income/(loss), as reflected in the condensed consolidated statements of operations, to EBITDA and Adjusted EBITDA:
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2021 2020 2021 2020
Net (loss)/income $ (67,878) $ 13,981 $ (100,026) $ 111,358
Income tax provision 35 - 36 1
Interest expense 10,639 7,999 24,925 28,889Depreciation and amortization
25,806 19,014 59,639 56,161
Noncontrolling interests (312) - (312) -
EBITDA (31,710) 40,994 (15,738) 196,409Amortization of time charter contracts acquired 1,743 - 1,743 - Third-party debt modification fees 26 - 26 232 Merger and integration related costs 47,079 - 47,560 - (Gain)/loss on disposal of vessels and other property, net of impairments (9,104) 12,834 (5,088) 14,164 Write-off of deferred financing costs - 572 - 13,073 Loss on extinguishment of debt
- 181 - 1,195
Adjusted EBITDA $ 8,034 $ 54,581 $ 28,503 $ 225,073 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 atSeptember 30, 2021 andDecember 31, 2020 was approximately negative$52.0 million and positive$148.0 million , respectively. Current liabilities include current installments of long-term debt of$220.8 million and$61.5 million atSeptember 30, 2021 andDecember 31, 2020 , respectively. Such amounts are excluded from the definition of current liabilities for purposes of the working capital covenant in the Company's debt facilities. Current assets are highly liquid, consisting principally of cash, interest-bearing deposits and receivables.
The Company's total cash decreased by$83.1 million during the nine months endedSeptember 30, 2021 . This decrease reflects cash used in operating activities of$49.0 million ,$44.7 million in expenditures for vessels and other property including transaction costs incurred and paid by the Company in connection with the Merger and construction costs for three dual-fuel LNG VLCCs,$6.9 million net working capital deposits made to commercial pools in which the Company's vessels operate, scheduled principal amortization for the Company's debt facilities totaling$112.4 million ,$14.2 million in net repayments on revolving credit facilities,$4.0 million in cash settlement payments on derivatives containing other-than-insignificant financing elements, and cash dividends of$37.9 million . Such cash outflows were partially offset by proceeds from disposal of vessels and other property of$113.5 million , proceeds from issuance of debt, net of issuance and deferred financing costs of$19.5 million , and cash acquired, net of equity issuance costs related to merger of$54.2 million . Our cash and cash equivalents balance 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. 49INTERNATIONAL SEAWAYS, INC.
As of
Restricted cash of$23.7 million as ofSeptember 30, 2021 represents legally restricted cash relating to the Sinosure Credit Facility, the $66Million Credit Facility, and the Macquarie Credit Facility. 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. As ofSeptember 30, 2021 , we had total debt outstanding (net of original issue discount and deferred financing costs) of$1,108.4 million and net debt to total capitalization (including noncontrolling interests) of 44.0%, compared with 24.8% atDecember 31, 2020 . The Company was not in compliance with the consolidated interest expense coverage ratio financial covenant contained in the Company's debt facilities for the Test Date ending onSeptember 30, 2021 . As described below, we completed alternative financing on the six VLCCs that collateralized the Sinosure Credit Facility and simultaneously prepaid and terminated the Sinosure Credit Facility in order to both increase liquidity and remedy the covenant noncompliance that existed for the Test Date ending onSeptember 30, 2021 .
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 prudent financial leverage for the current point in the tanker cycle. 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, repay or repurchase our outstanding loan facilities, pay a regular quarterly cash dividend, and repurchase shares of our common stock from time-to-time. The following is a summary of the significant capital allocation activities the Company executed during the first nine months of 2021 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: OnMarch 11, 2021 , the Company entered into agreements to construct three dual-fuel LNG 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 - at a rate that consists of a floor rate plus profit sharing. The total construction cost for the vessels will be approximately$290 million , which will be paid for through a combination of long-term financing and cash on hand. Accumulated expenditures totaling$29.4 million have been made in connection with the construction contracts as ofSeptember 30, 2021 . The Company currently has a financing commitment from a financial institution covering approximately 85% of the vessel construction costs. Such commitment is subject to finalization of definitive documents, and other customary conditions for similar transactions. We expect to execute and close on the financing during the fourth quarter of 2021. During the nine months endedSeptember 30, 2021 , the Company's Board of Directors declared and paid regular quarterly cash dividends of$0.06 per share. The Company's Board of Directors declared a regular quarterly cash dividend of$0.06 per share of common stock onNovember 8, 2021 . The dividend will be paid onDecember 23, 2021 to shareholders of record as ofDecember 9, 2021 . During the nine months endedSeptember 30, 2021 , the Company sold and delivered a 2002-built VLCC, a 2002-built Panamax, a 2003-built Panamax, and seven MRs acquired as part of the Merger, which were built between 2006 and 2009, for net proceeds of$113.5 million . The sale and delivery of the seven MRs during the three months endedSeptember 30, 2021 reduced the number of vessels collateralizing the Amended and Restated$525 Million Credit Agreement and the Amended and Restated$360 Million Credit Agreement to 34 and 21 vessels, respectively, and also resulted in a permanent reduction of the drawdown availability under the$525 50INTERNATIONAL SEAWAYS, INC. Million Facility Revolving Loan and the$360 Million Facility Revolving Loan of$5.8 million and$8.4 million , respectively. As ofSeptember 30, 2021 , both of these revolving facilities were fully drawn. Also, as a result of these vessel sales, total quarterly principal amortization under the Amended and Restated$525 Million Credit Agreement and the Amended and Restated $360Million Credit Agreement has decreased from$30.9 million to$28.2 million per quarter. In addition, the Company entered into memoranda of agreements for the sale of three additional 2002-built Panamaxes and one 2007-built Handysize product carrier acquired as part of the Merger for aggregate gross proceeds of approximately$29.0 million . One of the Panamaxes was delivered to its buyer inNovember 2021 , and the other three vessels are expected to be delivered to buyers by the end of the fourth quarter of 2021. As described above, the Merger (see Note 2, "Merger Transaction," to the accompanying condensed consolidated financial statements) with Diamond S became effective onJuly 16, 2021 and resulted in the acquisition of 64 vessels and their associated assets and liabilities in exchange for the issuance of 22,536,647 shares of INSW Common Stock. The Company paid a$31.5 million special dividend onJuly 15, 2021 to INSW shareholders of record as ofJuly 14, 2021 prior to the Merger. OnSeptember 30, 2021 , the Company,Seaways Shipping II Corporation , a wholly owned subsidiary of the Company, and ACG Guarantor's three subsidiaries (the "Borrowers") executed a credit agreement for a$20.0 million term loan facility withMacquarie Bank Limited ,London Branch, as lender, facility agent and security agent (the "Macquarie Credit Facility"). The Macquarie Credit Facility is comprised of three loans, each secured by a first lien on one of three LR1s owned by the Company, along with their respective earnings, insurances and certain other assets, as well as certain additional assets of the Company's subsidiaries. The facility bears interest at LIBOR plus a margin of 3.825%. The loan amortizes in quarterly installments varying in amount between$0.5 million to$0.9 million commencingDecember 31, 2021 , and matures onMarch 31, 2025 , with a balloon payment of approximately$11.7 million due at maturity. The maturity date for the loan is subject to acceleration upon the occurrence of certain events as described in the credit agreement. The Macquarie Credit Facility is guaranteed by the Company andSeaways Shipping II Corporation . The full$20.0 million was drawn down onSeptember 30, 2021 . OnOctober 26, 2021 , the Company entered into lease financing arrangements with Ocean Yield ASA for the sale and leaseback of the six VLCCs that collateralized the Sinosure Credit Facility, for a net sale price of$374.6 million in total, which represents 90% of the fair value of the six VLCCs. The proceeds of the sale will be recognized as a financing obligation. This refinancing generated incremental liquidity of approximately$150 million for the Company. The proceeds from the transactions, which were received onNovember 8, 2021 , were used to prepay the$228.4 million outstanding loan balance under theSinosure Credit Facility, with the balance intended for general corporate purposes. Under these lease financing arrangements, each of the six VLCCs is subject to a 10-year bareboat charter with purchase options exercisable commencing at the end of the fourth year and purchase obligations at the end of the 10-year term. Charter hire under the arrangement is comprised of a fixed monthly repayment amount of$2.4 million plus a variable interest component calculated based on three-month LIBOR plus a margin of 4.05%. The terms and conditions, including financial covenants, of the arrangements are in-line with those of the Company's existing debt facilities. The Company is in the process of dissolvingNT Suez Holdco LLC and taking full ownership of one of the two Suezmaxes owned by the joint venture. In conjunction with such process, the Company is refinancing its half of the $66Million Credit Facility on a long-term basis. The entire remaining outstanding principal amount of the$66 Million Credit Facility is reflected as a current liability in the accompanying condensed balance sheet as ofSeptember 30, 2021 . This refinancing is also expected to result in the release of the Company's share of restricted cash attributable to this facility. The dissolution and refinancing are expected to be completed before the scheduledNovember 18, 2021 maturity of the$66 Million Credit Facility. As ofSeptember 30, 2021 , the Company has vessel construction commitments for the three dual-fuel LNG VLCCs discussed above. The Company also has contractual commitments for the purchase and installation of ballast water treatment systems on 25 vessels. The Company's aggregate purchase commitments for vessel construction and betterments as ofSeptember 30, 2021 , are presented in the Aggregate Contractual Obligations Table below. 51INTERNATIONAL SEAWAYS, INC. Outlook The first nine months of 2021 has proven to be a weaker rate environment for tankers than the same period in 2020 although we continue to expect that oil supply and demand will start to come back into balance during the first half of 2022, creating a market rebound when worldwide demand for oil increases. Oil demand has increased considerably since the onset of the COVID-19 pandemic. With strong economic growth and high vaccination rates, oil demand is expected to continue to grow. With expected growth in demand, during the third quarter of 2021 OPEC+ announced plans to steadily raise production. Diminishing oil stocks and increased oil supply should increase tanker demand and strengthen freight markets. We believe our balance sheet positions us to support our operations over the next twelve months as we continue to advance our disciplined capital allocation strategy and execute on various liquidity raising measures in the remainder
of 2021.
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 million 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 million credit facility inApril 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 throughJuly 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 million and 5% of Total Indebtedness of INSW, (ii) INSW shall have Cash of at least$30 million and (iii) INSW shall be compliance with the Loan to Value Test (as such capitalized terms are defined in the Company guarantee). As ofSeptember 30, 2021 , 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$26.6 million and the carrying value of the Company's guaranty in the accompanying condensed consolidated balance sheets was nil.
In addition, and pursuant to an agreement between INSW and the trustees of the
52
INTERNATIONAL SEAWAYS, INC. Aggregate Contractual Obligations
A summary of the Company's long-term contractual obligations as ofSeptember 30, 2021 follows: Beyond (Dollars in thousands) 2021 2022 2023 2024 2025 2025 Total$390 Million Facility Term Loan - floating rate(1)$ 12,015 $ 47,099 $ 45,498 $ 43,969 $ 120,284 $ -$ 268,865 Sinosure Credit Facility - floating rate(2)(10) 8,405$ 32,996 $ 31,957 $ 30,939 $ 29,878 $ 138,325 272,500 8.5% Senior Notes - fixed rate 531$ 2,125 $ 26,062 $ - $ - $ - 28,718$525 Million Facility Term Loan - floating rate(3) 19,753$ 77,741 $ 75,674 $ 73,488 $ - $ - 246,656$525 Million Facility Revolving Loan - floating rate(3) 982$ 3,847 $ 3,847 $ 147,955 $ - $ - 156,631$360 Million Facility Term Loan - floating rate(4) 11,132$ 43,818 $ 42,666 $ 39,259 $ - $ - 136,875$360 Million Facility Revolving Loan - floating rate(4) 329$ 1,257 $ 1,257 $ 44,857 $ - $ - 47,700$66 Million Credit Facility - floating rate(5) 44,330 $ - $ - $ - $ - $ - 44,330 Macquarie Credit Facility - floating rate(6) 727$ 3,132 $ 3,104 $ 2,547 $ 12,682 $ - 22,192 Operating lease obligations(7) Bareboat Charter-ins 1,582 6,278 4,532 - - - 12,392 Time Charter-ins 506 649 - - - - 1,155 Office and other space 68 273 229 773 998 7,932 10,273 Vessel and vessel betterment commitments(8) 19,134 89,306 173,099 164 - - 281,703 Merger related costs(9) 5,427 - -
- - - 5,427 Total$ 124,921 $ 308,521 $ 407,925 $ 383,951 $ 163,842 $ 146,257 $ 1,535,417
(1) Amounts shown include contractual interest obligations of floating rate debt
estimated based on the applicable margin for the
Loan of 2.60%, plus (i) the fixed rate stated in the related
floating-to-fixed interest rate swap of 1.97% for the
amount and 0.50% for the
rate swaps and (ii) the effective three-month LIBOR rate of 0.13% as of
(2) 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 2.35% through the maturity date of
or (ii) the effective three-month LIBOR rate of 0.12% as of
2021 for periods after the swap maturity date.
(3) Amounts shown include contractual interest obligations of floating rate debt
estimated based on the applicable margin for the Amended and Restated
Million Credit Agreement assumed as part of the Merger of 2.50%, plus (i) the
average fixed rates stated in the related floating-to-fixed interest rate
swaps of 0.54% for the
covered by the interest rate swaps and (ii) the effective three-month LIBOR
rate of 0.13% as of
(4) Amounts shown include contractual interest obligations of floating rate debt
estimated based on the applicable margin for the Amended and Restated
Million Credit Agreement assumed as part of the Merger of 2.65%, plus the
effective three-month LIBOR rate of 0.13% as of
(5) Amounts shown include contractual interest obligations of floating rate debt
estimated based on the applicable margin for the
assumed as part of the Merger of 3.25%, plus the effective three-month LIBOR
rate of 0.11% as of
(6) Amounts shown include contractual interest obligations of floating rate debt
estimated based on the applicable margin for the Macquarie Credit Facility of
3.825%, plus the effective three-month LIBOR rate of 0.13% as of September
30, 2021.
(7) As of
vessels and one workboat employed in the Crude Tankers Lightering business on
leases that are accounted for as operating leases. The full amounts due under
bareboat charter-ins,
53
INTERNATIONAL SEAWAYS, INC. 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.
(8) Represents the Company's commitments for the purchase and installation of
ballast water treatment systems on 25 vessels and the construction of three
dual-fuel LNG VLCCs.
(9) Amounts shown include contractual obligations for professional and consulting
fees related to the Merger.
(10) As discussed above, the Company entered into sale and leaseback agreements
on the six VLCCs that collateralized the Sinosure Credit Facility and paid
off the
Facility on
bareboat charter with purchase options exercisable commencing at the end of
the fourth year and purchase obligations at the end of the 10-year term.
Charter hire under the arrangement is comprised of a fixed monthly repayment
amount of
on three-month LIBOR plus a margin of 4.05%.
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, collar 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 swaps for the management of interest rate risk exposure associated with changes in LIBOR interest rate payments due on its credit facilities.
Available Information The Company makes available free of charge through its internet website, www.intlseas.com, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K 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, theSecurities and Exchange Commission . The public may also read and copy any materials the Company files with theSEC at theSEC's Public Reference Room at 100 F Street,N.E. Washington D.C . 20549 (information on the operation of thePublic Reference Room is available by calling theSEC at 1-800-SEC -0330). TheSEC also maintains a web site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with theSEC at https://www.sec.gov. 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, theHuman Resources and Compensation Committee and theCorporate 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 applicableSEC 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 10-Q. 54INTERNATIONAL SEAWAYS, INC.
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