International Seaways Reports Second Quarter 2021 Results

International Seaways, Inc. (NYSE: INSW) (the “Company” or “INSW”), one of the largest tanker companies worldwide providing energy transportation services for crude oil and petroleum products, today reported results for the second quarter of 2021.

Highlights

  • Subsequent to the end of the quarter, INSW completed the previously announced merger with Diamond S Shipping Inc. (NYSE: DSSI), creating the largest U.S.-listed diversified tanker company. The transaction significantly enhances INSW’s scale in both the core crude and product markets and will generate approximately $32 million in cost and revenue synergies, expected to be realized within 2022.
  • Immediately prior to the closing of the merger, INSW returned capital to shareholders through a dividend of $31.5 million, or $1.12 per share.
  • Net loss for the second quarter was $18.8 million, or $0.67 per diluted share, compared to net income of $64.4 million, or $2.24 per diluted share, in the second quarter of 2020. Net loss for the current quarter reflects the impact of the disposal of vessels, including impairments, and merger related charges aggregating $4.5 million. Net loss excluding these items was $14.3 million, or $0.51 per diluted share.
  • Cash(A) was $133.6 million as of June 30, 2021; total liquidity was $173.6 million, including $40 million of undrawn revolver capacity, compared to $255.7 million as of December 31, 2020.
  • Paid a regular quarterly cash dividend of $0.06 per share in June 2021.
  • Has enacted a post-merger asset optimization program which has resulted in:
    • The sale of a 2002-built VLCC which, delivered to buyers in the third quarter, and agreed to sell four 2002/2003-built Panamaxes, as well as agreeing to sell seven MRs acquired in the merger.
    • A full fleet review where INSW is continually exploring the sale of its least efficient or otherwise non-core assets

“During the second quarter, Seaways maintained an unrelenting focus on strengthening our industry position and enhancing our ability to create long-term value for stakeholders,” said Lois K. Zabrocky, International Seaways’ President and CEO. “We are excited to have completed our transformational and highly accretive merger with Diamond S last month, solidifying Seaways’ status as an industry bellwether with enhanced scale, capabilities and significant financial strength. With a diversified 100-vessel fleet of crude and product tankers that provides considerable operating leverage, we are poised to benefit from positive long-term industry fundamentals, as well as near-term developments, notably recovering global oil demand, continued inventory destocking, and increased OPEC production.”

Ms. Zabrocky continued, “Our strategic focus remains on achieving the highest operational standards, executing our disciplined and balanced approach to capital allocation and preserving our financial strength, while concentrating on achieving the considerable economies of scale that have been made possible by the merger. By combining two leading U.S.-based tanker owners with first-rate teams and high-quality fleets, we have further strengthened our commitment to operational excellence, sustainability and meeting the evolving needs of leading energy companies. As we move forward, we will also continue to prioritize returning capital to shareholders, as highlighted by our recent merger-related $31.5 million, or $1.12 per share, special dividend, our regular quarterly dividend, as well as our outstanding $50 million share repurchase authorization. Of note, we have now paid over $70 million to shareholders since 2020 in the form of stock buybacks and dividends.”

Jeff Pribor, the Company’s CFO, added, “Our completed merger is highly accretive to earnings and cash flow, and we continue to expect cost synergies in excess of $23 million and revenue synergies of $9 million to be fully realizable within 2022. Importantly, our significant pro forma cash and liquidity positions, as well as our overall balance sheet strength and ongoing support from our industry leading banking group, will continue to serve us well in a challenging rate environment.”

Second Quarter 2021 Results

Net loss for the second quarter of 2021 was $18.8 million, or $0.67 per diluted share, compared to net income of $64.4 million, or $2.24 per diluted share, for the second quarter of 2020. The decline in the second quarter of 2021 results primarily reflects significantly lower TCE revenues(B), which was partially offset by lower vessel expenses, depreciation and amortization, charter hire expenses and interest expense. Net loss for the first half of 2021 was $32.1 million, or $1.15 per diluted share, compared to net income of $97.4 million, or $3.35 per share, for the first half of 2020.

Consolidated TCE revenues for the second quarter were $44.7 million, compared to $135.3 million for the second quarter of 2020. Shipping revenues for the second quarter were $46.3 million, compared to $139.7 million for the second quarter of 2020. Consolidated TCE revenues for the first half of 2021 were $89.9 million, compared to $255.0 million for the first half of 2020. Shipping revenues for the first half of 2021 were $93.1 million compared to $265.1 million for the first half of 2020.

Adjusted EBITDA(C) for the second quarter was $9.8 million, compared to $96.3 million for the second quarter of 2020. Adjusted EBITDA was $20.5 million for the first half of 2021, compared to $170.5 million for the first half of 2020.

Crude Tankers

TCE revenues for the Crude Tankers segment were $31.1 million for the second quarter compared to $105.9 million for the second quarter of 2020. $54.8 million of this decrease primarily resulted from the impact of lower average rates in the VLCC, Suezmax, Aframax and Panamax sectors, with average spot earnings declining to approximately $13,700, $18,500, $8,600 and $16,500 per day, respectively. Also contributing to the decrease in TCE revenues was the impact of a 238-day reduction in VLCC revenue days, aggregating $16.5 million; a $2.0 million days-related decline in the Aframax fleet as a result of the sale of an older Aframax in 2020; and a $1.2 million decrease in revenue in the Lightering business in the second quarter. Shipping revenues for the Crude Tankers segment were $32.5 million for second quarter of 2021 compared to $110.4 million for the second quarter of 2020. TCE revenues for the Crude Tankers segment were $67.0 million for the first half of 2021, compared to $194.7 million for the first half of 2020. Shipping revenues for the Crude Tankers segment were $70.1 million for the first half of 2021, compared to $204.1 million for the first half of 2020.

Product Carriers

TCE revenues for the Product Carriers segment were $13.6 million for the second quarter, compared to $29.4 million for the second quarter of 2020. The decrease is primarily attributable to lower period-over-period average daily blended rates earned by the LR2, LR1 and MR fleets, which accounted for a decrease in TCE revenues of approximately $14.4 million. Average spot rates fell during the second quarter of 2021 to approximately $15,300 and $10,600, respectively, for the LR1 and MR fleets. In addition, fewer revenue days in the MR fleet during the second quarter due to the redelivery of a time chartered-in MR to its owner in July 2020 contributed an aggregate decrease in TCE revenues of approximately $1.3 million. Shipping revenues for the Product Carriers segment were $13.8 million for the second quarter of 2021, compared to $29.3 million for the second quarter of 2020. TCE revenues for the Product Carriers segment were $22.8 million for the first half of 2021, compared to $60.3 million for the first half of 2020. Shipping revenues for the Product Carriers segment were $23.0 million for the first half of 2021, compared to $61.0 million for the first half of 2020.

Completed Merger with Diamond S Shipping

Subsequent to the end of the second quarter, the Company completed its previously announced merger with Diamond S Shipping Inc. (“Diamond S”). The Company expects to achieve cost synergies in excess of $23 million and revenue synergies of $9 million, which are expected to be fully realizable within 2022. International Seaways is now the second largest U.S.-listed tanker company by vessel count with approximately 100 vessels and the third largest by deadweight tons (“dwt”), aggregating approximately 11.0 million dwt.

In accordance with the terms of the Merger Agreement, which was approved by INSW and Diamond S shareholders at their respective special meetings held on July 13, 2021, pre-merger INSW shareholders own approximately 55.75% of the equity of the combined company and former Diamond S stockholders own approximately 44.25%. On July 15, 2021, pre-merger INSW shareholders of record as of July 14, 2021, received a special dividend of $1.12 per share.

Vessel Sales

During the second quarter of 2021, the Company agreed to sell a 2002-built VLCC, a 2002-built Panamax and a 2003-built Panamax. The 2002-built VLCC delivered to its buyer in the third quarter of 2021. Additionally, the Company agreed to sell two additional 2002-built Panamaxes in July 2021, which are expected to deliver in the third and fourth quarter of 2021.

In addition, the Company agreed to sell seven MRs acquired in the Merger. Four of the MRs have delivered to the buyers and the balance are expected to be delivered during the third quarter of 2021.

The twelve vessels sold are expected to provide aggregate net proceeds of approximately $75 million after the repayment of debt.

Payment of Regular Cash Dividend

The Company’s Board of Directors declared a regular quarterly dividend of $0.06 per share of common stock on July 28, 2021. The dividend will be paid on September 23, 2021 to shareholders of record at the close of business on September 9, 2021.

Conference Call

The Company will host a conference call to discuss its second quarter 2021 results at 10:00 a.m. Eastern Time (“ET”) on Monday, August 9, 2021. To access the call, participants should dial (855) 940-9471 for domestic callers and (412) 317-5211 for international callers. Please dial in ten minutes prior to the start of the call. A live webcast of the conference call will be available from the Investor Relations section of the Company’s website at https://www.intlseas.com.

An audio replay of the conference call will be available until August 16, 2021 by dialing (877) 344-7529 for domestic callers and (412) 317-0088 for international callers, and entering Conference ID 10159011.

About International Seaways, Inc.

International Seaways, Inc. (NYSE: INSW) is one of the largest tanker companies worldwide providing energy transportation services for crude oil and petroleum products in International Flag markets. International Seaways owns and operates a fleet of 97 vessels, including 13 VLCCs (including three newbuildings), 15 Suezmaxes, five Aframaxes/LR2s, 12 Panamaxes/LR1s, 44 MR tankers and six Handy tankers. Through joint ventures, it has ownership interests in two floating storage and offloading service vessels. International Seaways has an experienced team committed to the very best operating practices and the highest levels of customer service and operational efficiency. International Seaways is headquartered in New York City, NY. Additional information is available at https://www.intlseas.com.

Forward-Looking Statements

This release contains forward-looking statements. In addition, the Company may make or approve certain statements in future filings with the U.S. Securities and Exchange Commission (SEC), in press releases, or in oral or written presentations by representatives of the Company. All statements other than statements of historical facts should be considered forward-looking statements. These matters or statements may relate to the Company’s merger with Diamond S and plans to issue dividends, its prospects, including statements regarding vessel acquisitions, expected synergies, trends in the tanker markets, and possibilities of strategic alliances and investments. Forward-looking statements are based on the Company’s current plans, estimates and projections, and are subject to change based on a number of factors. Investors should carefully consider the risk factors outlined in more detail in the Annual Report on Form 10-K for 2020 for the Company, the Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, the Company’s Amended Registration Statement on Form S-4 dated June 3, 2021, and in similar sections of other filings made by the Company with the SEC from time to time. The Company assumes no obligation to update or revise any forward-looking statements. Forward-looking statements and written and oral forward-looking statements attributable to the Company or its representatives after the date of this release are qualified in their entirety by the cautionary statements contained in this paragraph and in other reports previously or hereafter filed by the Company with the SEC.

Category: Earnings

Consolidated Statements of Operations

($ in thousands, except per share amounts)

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Shipping Revenues:

Pool revenues

$

26,455

$

100,059

$

51,114

$

201,268

Time and bareboat charter revenues

11,714

26,655

26,412

35,259

Voyage charter revenues

8,135

13,011

15,534

28,535

Total Shipping Revenues

46,304

139,725

93,060

265,062

Operating Expenses:

Voyage expenses

1,586

4,436

3,173

10,042

Vessel expenses

27,877

30,278

54,204

63,238

Charter hire expenses

5,863

7,540

11,604

17,771

Depreciation and amortization

17,079

18,880

33,833

37,147

General and administrative

6,829

6,694

14,969

14,128

Provision for credit losses, net

2

(129)

43

(67)

Third-party debt modification fees

-

-

-

232

Merger and integration related costs

481

-

481

-

Loss on disposal of vessels and other property,
including impairments

4,005

4,134

4,016

1,330

Total operating expenses

63,722

71,833

122,323

143,821

(Loss)/income from vessel operations

(17,418)

67,892

(29,263)

121,241

Equity in income of affiliated companies

5,375

5,205

10,843

10,316

Operating (loss)/income

(12,043)

73,097

(18,420)

131,557

Other income/(expense)

267

143

559

(13,289)

(Loss)/income before interest expense and income taxes

(11,776)

73,240

(17,861)

118,268

Interest expense

(7,006)

(8,881)

(14,286)

(20,890)

(Loss)/income before income taxes

(18,782)

64,359

(32,147)

97,378

Income tax provision

(1)

(1)

(1)

(1)

Net (loss)/Income

$

(18,783)

$

64,358

$

(32,148)

$

97,377

Weighted Average Number of Common Shares Outstanding:

Basic

28,051,946

28,469,969

28,031,184

28,812,299

Diluted

28,051,946

28,639,780

28,031,184

28,989,146

Per Share Amounts:

Basic net (loss)/income per share

$

(0.67)

$

2.26

$

(1.15)

$

3.37

Diluted net (loss)/income per share

$

(0.67)

$

2.24

$

(1.15)

$

3.35

Consolidated Balance Sheets

($ in thousands)

June 30,

December 31,

2021

2020

(Unaudited)

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

117,391

$

199,390

Voyage receivables

50,981

43,362

Other receivables

6,324

4,479

Inventories

2,103

3,601

Prepaid expenses and other current assets

6,365

6,002

Vessels held for sale

29,146

-

Total Current Assets

212,310

256,834

Restricted Cash

16,173

16,287

Vessels and other property, less accumulated depreciation

1,055,747

1,108,214

Vessels construction in progress

14,606

-

Deferred drydock expenditures, net

39,405

36,334

Total Vessels, Deferred Drydock and Other Property

1,109,758

1,144,548

Operating lease right-of-use assets

16,999

21,588

Investments in and advances to affiliated companies

149,580

141,924

Long-term derivative assets

6,526

2,129

Other assets

7,519

3,229

Total Assets

$

1,518,865

$

1,586,539

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable, accrued expenses and other current liabilities

$

29,453

$

34,425

Current portion of operating lease liabilities

7,226

8,867

Current installments of long-term debt

61,483

61,483

Current portion of derivative liabilities

3,950

4,121

Total Current Liabilities

102,112

108,896

Long-term operating lease liabilities

7,541

10,253

Long-term debt

444,566

474,332

Long-term derivative liabilities

3,782

6,155

Other liabilities

13,410

14,861

Total Liabilities

571,411

614,497

Equity:

Total Equity

947,454

972,042

Total Liabilities and Equity

$

1,518,865

$

1,586,539

Consolidated Statements of Cash Flows

($ in thousands)

Six Months Ended June 30,

2021

2020

(Unaudited)

(Unaudited)

Cash Flows from Operating Activities:

Net (loss)/income

$

(32,148)

$

97,377

Items included in net (loss)/income not affecting cash flows:

Depreciation and amortization

33,833

37,147

Loss on write-down of vessels and other assets

3,497

5,469

Amortization of debt discount and other deferred financing costs

1,077

1,708

Deferred financing costs write-off

-

12,501

Stock compensation

2,263

2,503

Earnings of affiliated companies

(10,843)

(10,209)

Change in fair value of interest rate collar recorded through earnings

-

1,271

Write-off of registration statement costs

694

-

Other – net

831

512

Items included in net (loss)/income related to investing and financing activities:

Loss/(gain) on disposal of vessels and other property, net

519

(4,139)

Loss on extinguishment of debt

-

1,014

Cash distributions from affiliated companies

3,625

5,250

Payments for drydocking

(14,720)

(12,513)

Insurance claims proceeds related to vessel operations

710

570

Changes in operating assets and liabilities

(11,856)

(10,771)

Net cash (used in)/provided by operating activities

(22,518)

127,690

Cash Flows from Investing Activities:

Expenditures for vessels and vessel improvements

(24,130)

(40,949)

Proceeds from disposal of vessels and other property, net

3,431

13,578

Expenditures for other property

(271)

(348)

Investments in and advances to affiliated companies, net

(95)

(46)

Net cash used in investing activities

(21,065)

(27,765)

Cash Flows from Financing Activities:

Issuance of debt, net of issuance costs

(49)

362,989

Extinguishment of debt

-

(382,699)

Payments on debt

(30,742)

(51,266)

Cash payments on derivatives containing other-than-insignificant financing element

(2,623)

-

Common stock issuance costs

(717)

(122)

Repurchases of common stock

-

(29,997)

Cash dividends paid

(3,369)

(3,412)

Cash paid to tax authority upon vesting of stock-based compensation

(1,030)

(1,200)

Net cash used in financing activities

(38,530)

(105,707)

Net decrease in cash, cash equivalents and restricted cash

(82,113)

(5,782)

Cash, cash equivalents and restricted cash at beginning of year

215,677

150,243

Cash, cash equivalents and restricted cash at end of period

$

133,564

$

144,461

Spot and Fixed TCE Rates Achieved and Revenue Days

The following tables provides a breakdown of TCE rates achieved for spot and fixed charters and the related revenue days for the three months ended June 30, 2021 and the comparable period of 2020. Revenue days in the quarter ended June 30, 2021 totaled 2,846 compared with 3,241 in the prior year quarter. A summary fleet list by vessel class can be found later in this press release. The information in these tables excludes commercial pool fees/commissions averaging approximately $641 and $719 per day for the three months ended June 30, 2021 and 2020, respectively.

Three Months Ended June 30, 2021

Three Months Ended June 30, 2020

Spot

Fixed

Total

Spot

Fixed

Total

Crude Tankers

VLCC

Average TCE Rate

$

13,684

$

43,877

$

71,747

$

67,214

Number of Revenue Days

651

91

742

719

261

980

Suezmax

Average TCE Rate

$

18,485

$

-

$

48,989

$

-

Number of Revenue Days

182

-

182

180

-

180

Aframax

Average TCE Rate

$

8,589

$

-

$

30,559

$

-

Number of Revenue Days

266

-

266

334

-

334

Panamax

Average TCE Rate

$

16,535

$

11,396

$

35,049

$

16,258

Number of Revenue Days

91

523

614

91

540

631

Total Crude Tankers Revenue Days

1,190

614

1,804

1,324

801

2,125

Product Carriers

LR2

Average TCE Rate

$

-

$

17,784

$

38,933

$

-

Number of Revenue Days

-

91

91

91

-

91

LR1

Average TCE Rate

$

15,291

$

-

$

30,851

$

-

Number of Revenue Days

541

-

541

545

-

545

MR

Average TCE Rate

$

10,627

$

-

$

17,168

$

-

Number of Revenue Days

410

-

410

480

-

480

Total Product Carriers Revenue Days

951

91

1,042

1,116

-

1,116

Total Revenue Days

2,141

705

2,846

2,440

801

3,241

Revenue days in the above tables exclude days related to full service lighterings and days for which recoveries were recorded under the Company’s loss of hire insurance policies.

Fleet Information

As of August 9, 2021, INSW’s fleet totaled 97 vessels, including 3 newbuilds and 94 operating vessels, of which 92 were owned, 2 were chartered in, and 2 FSOs were held through joint ventures.

Vessels Owned

Vessels Chartered-in

Total at August 1, 2021

Vessel Type

Number

Weighted
by
Ownership

Number

Weighted
by
Ownership

Total Vessels

Vessels
Weighted
by
Ownership

Total Dwt

Operating Fleet

FSO

2

1.0

-

-

2

1.0

864,046

VLCC

10

10.0

-

-

10

10.0

3,012,171

Suezmax

15

15.0

-

-

15

15.0

2,381,911

Aframax

2

2.0

2

2.0

4

4.0

452,375

Panamax

7

7.0

-

-

7

7.0

487,365

Crude Tankers

36

35.0

2

2.0

38

37.0

7,197,868

LR2

1

1.0

-

-

1

1.0

112,691

LR1

5

5.0

-

-

5

5.0

372,705

MR

44

44.0

-

-

44

44.0

2,206,626

Handy

6

6.0

-

-

6

6.0

220,450

Product Carriers

56

56.0

-

-

56

56.0

2,912,472

Total Operating Fleet

92

91.0

2

2.0

94

93.0

10,110,340

Newbuild Fleet

VLCC

3

3.0

-

-

3

3.0

900,000

Total Newbuild Fleet

3

3.0

-

-

3

3.0

900,000

Total Operating and
Newbuild Fleet

95

94.0

2

2.0

97

96.0

11,010,340

Reconciliation to Non-GAAP Financial Information

The Company believes that, in addition to conventional measures prepared in accordance with GAAP, the following non-GAAP measures may provide certain investors with additional information that will better enable them to evaluate the Company’s performance. Accordingly, these non-GAAP measures are intended to provide supplemental information, and should not be considered in isolation or as a substitute for measures of performance prepared with GAAP.

(A)Total Cash

June 30,

December 31,

($ in thousands)

2021

2020

Cash and cash equivalents

$

117,391

$

199,390

Restricted cash

16,173

16,287

Total Cash

$

133,564

$

215,677

(B)Time Charter Equivalent (TCE) Revenues

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

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

2021

2020

2021

2020

Time charter equivalent revenues

$

44,718

$

135,289

$

89,887

$

255,020

Add: Voyage expenses

1,586

4,436

3,173

10,042

Shipping revenues

$

46,304

$

139,725

$

93,060

$

265,062

(C)EBITDA and Adjusted EBITDA

EBITDA represents net (loss)/income 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 do not represent, and should not be a substitute for, net income or cash flows from operations as determined in accordance with GAAP. Some of the limitations are: (i) EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; (ii) EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; and (iii) 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 as a measure of operating results and performance, neither of them is necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. The following table reconciles net (loss)/income as reflected in the condensed consolidated statements of operations, to EBITDA and Adjusted EBITDA:

Three Months
Ended June 30,

Six Months Ended
June 30,

($ in thousands)

2021

2020

2021

2020

Net (loss)/income

$

(18,783)

$

64,358

$

(32,148)

$

97,377

Income tax provision

1

1

1

1

Interest expense

7,006

8,881

14,286

20,890

Depreciation and amortization

17,079

18,880

33,833

37,147

EBITDA

5,303

92,120

15,972

155,415

Third-party debt modification fees

-

-

-

232

Merger and integration related costs

481

-

481

-

Loss on disposal of vessels and other property, including impairments

4,005

4,134

4,016

1,330

Write-off of deferred financing costs

-

-

-

12,501

Loss on extinguishment of debt

-

21

-

1,014

Adjusted EBITDA

$

9,789

$

96,275

$

20,469

$

170,492

Contacts:

Investor Relations & Media Contact:
David Siever, International Seaways, Inc.
(212) 578-1635
dsiever@intlseas.com

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