International Seaways(INSW) - 2020 Q2 - Quarterly Report

Part I - Financial Information Item 1. Financial Statements The company reported a significant profit turnaround in H1 2020 driven by increased shipping revenues Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Assets | $1,758,956 | $1,753,501 | | Cash and cash equivalents | $128,063 | $89,671 | | Vessels and other property, net | $1,287,478 | $1,292,516 | | Total Liabilities | $686,903 | $731,208 | | Long-term debt | $523,414 | $590,745 | | Total Equity | $1,072,053 | $1,022,293 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Shipping Revenues | $265,062 | $170,884 | | Income from vessel operations | $121,241 | $11,390 | | Net Income/(Loss) | $97,377 | ($5,626) | | Basic Net Income/(Loss) per Share | $3.37 | ($0.19) | | Diluted Net Income/(Loss) per Share | $3.35 | ($0.19) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $127,690 | $43,778 | | Net cash (used in)/provided by investing activities | ($27,765) | $9,139 | | Net cash used in financing activities | ($105,707) | ($20,269) | | Net (decrease)/increase in cash | ($5,782) | $32,648 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, segment performance, debt refinancing, and other key financial events - The company adopted ASC 326 (Financial Instruments – Credit Losses) on January 1, 2020, which did not have a material impact on the consolidated financial statements[26] - As of June 30, 2020, the company had a 50% interest in two joint ventures (TI Africa and TI Asia) operating two Floating Storage and Offloading (FSO) vessels[46][47][48] - The company recorded a pre-tax impairment charge of $5.5 million on a 2002-built VLCC vessel during the second quarter of 2020[43][61] - In January 2020, the company completed a major refinancing, entering into $390 million of new secured debt facilities[65][69] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses strong H1 2020 results from a favorable tanker market and key strategic financial actions Operations and Oil Tanker Markets Q2 2020 saw strong tanker rates due to oil oversupply and floating storage demand, which later declined - Global oil consumption in Q2 2020 was estimated at 82.9 million b/d, a 16.5% decrease from Q2 2019, due to the impact of COVID-19[136] - Crude tanker rates in Q2 2020 were initially strong due to a breakdown of OPEC/Russia production cuts and a strong contango market driving demand for floating storage[145] Results of Operations TCE revenues surged 117% in Q2 2020, driving a significant increase in income from vessel operations TCE Revenue Performance (in thousands) | Metric | Q2 2020 | Q2 2019 | Change | | :--- | :--- | :--- | :--- | | Total TCE Revenues | $135,289 | $62,487 | +117% | | Crude Tankers TCE | $105,890 | $45,653 | +132% | | Product Carriers TCE | $29,399 | $16,834 | +75% | Crude Tankers Average Daily TCE Rate | Vessel Type | Q2 2020 Spot Rate | Q2 2019 Spot Rate | | :--- | :--- | :--- | | VLCC | $71,747 | $20,038 | | Suezmax | $48,989 | $20,772 | | Aframax | $30,559 | $13,540 | - Equity in income of affiliated companies decreased to $5.2 million in Q2 2020 from $8.0 million in Q2 2019, primarily due to the sale of the company's interest in an LNG joint venture[178] - Interest expense decreased by $8.5 million in Q2 2020 compared to Q2 2019, a result of lower average debt balances and lower average LIBOR rates[181] EBITDA and Adjusted EBITDA Adjusted EBITDA increased substantially to $96.3 million in Q2 2020, reflecting strong operational performance Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net income/(loss) | $64,358 | ($16,523) | | EBITDA | $92,120 | $19,738 | | Adjusted EBITDA | $96,275 | $21,286 | Liquidity and Capital Resources The company maintained strong liquidity, executed a major debt refinancing, and completed its share repurchase program - As of June 30, 2020, the company had total liquidity of $184.5 million, comprising cash and undrawn revolver capacity[190] - The January 2020 debt refinancing is expected to reduce annual cash interest expense by approximately $15.0 million[199] - The company completed its $30.0 million stock repurchase program in H1 2020 and the Board authorized a new $30.0 million program in August 2020[206] - The company has aggregate purchase commitments of approximately $13.1 million for vessel betterments, including scrubbers and ballast water treatment systems[210][221] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company actively manages interest rate risk using derivative instruments and is prepared for the LIBOR transition - In January 2020, the company converted a $350 million notional interest rate collar into an amortizing $250 million notional interest rate swap, fixing the rate at 1.97%[224] - In April 2020, the company entered into a new $25 million notional interest rate swap, fixing the rate at 0.50% through January 2025[225] - The company believes its debt and derivative agreements have adequate provisions to address the discontinuation of LIBOR after 2021[227] Item 4. Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective - Management concluded that disclosure controls and procedures were effective as of June 30, 2020[232] - No material changes to internal control over financial reporting were identified during the three months ended June 30, 2020[233] Part II - Other Information Item 1. Legal Proceedings Wrongful death lawsuits from a 2017 incident were dismissed, with no other material legal proceedings noted - Wrongful death lawsuits related to a 2017 Galveston accident were dismissed with prejudice against the company's subsidiary on May 14, 2020[120][235] Item 1A. Risk Factors No material changes to risk factors were reported from previous disclosures in the 2019 Form 10-K and Q1 2020 10-Q - There have been no material changes in risk factors from those previously disclosed in the 2019 Form 10-K and the Q1 2020 Form 10-Q[238] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company completed its $30 million stock repurchase program during the second quarter of 2020 - In Q2 2020, the company repurchased 926,700 shares of its common stock for $20.0 million, completing its $30 million stock repurchase program[239]