International Seaways(INSW) - 2024 Q4 - Annual Report

PART I Business International Seaways, Inc. (INSW) provides global ocean transportation for crude oil and petroleum products, operating a fleet of 78 vessels and achieving strong financial results in 2024 Our Business and 2024 in Review INSW operates a fleet of 78 vessels for crude oil and petroleum products, achieving its second-best annual financial results in 2024 with $1.0 billion in shipping revenues and $583.3 million in Adjusted EBITDA - As of December 31, 2024, INSW operated a fleet of 78 vessels, with six additional dual-fuel ready LR1 newbuilds on order for delivery through Q3 2026[56] 2024 Financial Highlights | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Shipping Revenues | $1.0 billion | - | | TCE Revenues | $0.9 billion | - | | Income from Vessel Operations | $455.2 million | $615.4 million | | Adjusted EBITDA | $583.3 million | $723.8 million | | Total Liquidity (Year-End) | $632.2 million | $601.2 million | | Capital Returned to Shareholders | $309.4 million | - | Our Strategy The company's strategy focuses on safe and efficient fleet operations, active market management, disciplined capital allocation, and a strong commitment to sustainability and governance - Primary objectives include maintaining safe operations, actively managing the fleet, maximizing cash flows through a mix of spot and time charters, and executing a disciplined capital allocation strategy[65] - The company sold three older MRs for approximately $72 million and purchased six modern MRs for $232 million, also contracting for six new dual-fuel ready LR1s for approximately $359 million[68] - INSW is committed to sustainability, aligning with TCFD and SASB standards, implementing a Fleet Decarbonization Project, constructing dual-fuel vessels, and participating in industry groups to promote diversity[73][77][82] Fleet Operations As of December 31, 2024, INSW operated a fleet of 78 vessels across Crude Tankers and Product Carriers segments, utilizing a hybrid operating model with 86% of 2024 TCE revenues from the spot market Fleet Summary as of December 31, 2024 | Vessel Type | Vessels Owned | Vessels Chartered-in | Total Number | Total Dwt | | :--- | :--- | :--- | :--- | :--- | | Crude Tankers | 21 | 9 | 30 | 6,424,701 | | VLCC | 4 | 9 | 13 | 3,910,572 | | Suezmax | 13 | 0 | 13 | 2,061,754 | | Aframax | 4 | 0 | 4 | 452,375 | | Product Carriers | 42 | 6 | 48 | 2,660,299 | | LR2 | 1 | 0 | 1 | 112,691 | | LR1 | 6 | 2 | 8 | 596,092 | | MR | 35 | 4 | 39 | 1,951,516 | | Total Operating Fleet | 63 | 15 | 78 | 9,085,000 | | Newbuild Fleet (LR1) | 6 | 0 | 6 | 441,600 | - The company utilizes a hybrid operating model, employing third-party managed pools for spot market charters and in-house experts for commercial and technical oversight[90] - Voyage charters (spot market) constituted 86% of aggregate TCE revenues in 2024, a decrease from 91% in 2023, with time charters accounting for the remaining 14%[96][99] Human Capital Management and Employees As of December 31, 2024, INSW employed 2,824 people, focusing on talent development, diversity, and robust safety and health management systems Employee Composition as of December 31, 2024 | Category | Female | Male | Total | | :--- | :--- | :--- | :--- | | Shoreside Employees | 26 | 41 | 67 | | Seafarers | 3 | 2,754 | 2,757 | | Total Employees | 29 | 2,795 | 2,824 | - The company is a founding member of the Global Maritime Forum's All Aboard Alliance, an initiative fostering a diverse workforce and enhancing career opportunities for women in the maritime industry[111] Environmental and Security Matters Relating to Bulk Shipping The company's operations are subject to extensive environmental and security regulations, including GHG emissions, ballast water, air emissions, oil pollution liability, and vessel security, requiring substantial compliance expenditures - The EU has included maritime shipping in its Emissions Trading Scheme (ETS), requiring a phased surrender of allowances for verified emissions: 40% for 2024, 70% for 2025, and 100% for 2026[126] - The company is subject to the U.S. Oil Pollution Act of 1990 (OPA 90), imposing strict and potentially unlimited liability for oil spills in U.S. waters, requiring financial responsibility evidence[155][156][159] - Vessel security is governed by the U.S. Maritime Transportation Security Act (MTSA) and the International Ship and Port Facilities Security Code (ISPS Code), requiring approved vessel security plans and certifications, which all INSW vessels comply with[180][183] Inspection by Classification Societies Oceangoing vessels must be certified by Classification Societies, requiring regular surveys including Annual, Intermediate (2.5 years), and Class Renewal (5 years) to maintain compliance with established rules and international conventions - Vessels must undergo regular surveys to maintain class certification, including Annual Surveys, Intermediate Surveys (every 2.5 years), and Class Renewal (Special) Surveys (every 5 years)[185][190] Insurance The company maintains comprehensive fleet insurance, including Protection and Indemnity (P&I) for pollution liability up to $1.0 billion, marine hull and machinery, war risk, and loss of hire coverage - The company carries Protection and Indemnity (P&I) insurance coverage for pollution of $1.0 billion per occurrence on every vessel in its fleet[191] - Marine hull and machinery and war risk insurance covers each vessel up to at least its fair market value, with deductibles ranging from $0.125 million to $0.250 million per incident[192] Income Taxation of the Company INSW, incorporated in the Marshall Islands, was exempt from U.S. income tax on U.S. source shipping income in 2024 under Section 883, though future qualification is not guaranteed and could result in a 4% gross tax - INSW, incorporated in the Marshall Islands, is not subject to income tax there and was exempt from U.S. federal tax on its U.S. source shipping income in 2024 under Section 883 of the Code, though future qualification is not assured[194][197] - If the company fails to qualify for the Section 883 exemption, it will be subject to a 4% U.S. federal income tax on its U.S. source shipping income on a gross basis, without deductions[198] Risk Factors The company faces significant risks from the cyclical shipping industry, including volatile charter rates, substantial indebtedness, reliance on third parties, geopolitical instability, complex environmental regulations, and common stock market volatility - Industry Risks: The highly cyclical tanker industry leads to volatile charter rates and vessel values, potentially affecting earnings, cash flow, and debt covenant compliance; in 2024, 86% of TCE revenues were from the spot market[204][209] - Company Risks: The company has significant indebtedness of $688 million as of December 31, 2024, potentially limiting financing and business opportunities, and relies on third-party providers for fleet management[207][242][254] - Regulatory & Geopolitical Risks: Operations are subject to complex environmental laws, such as GHG emissions and OPA 90, potentially requiring significant capital expenditures, while geopolitical events like the war in Ukraine and Red Sea attacks can disrupt trade and increase costs[206][236][292] Unresolved Staff Comments There are no unresolved staff comments - None[326] Cybersecurity The company maintains a comprehensive cybersecurity program based on NIST and CIS frameworks, employing a defense-in-depth strategy, overseen by the CISO and Board committee, with no material incidents in the last three fiscal years - The company's cybersecurity program is based on the National Institute of Standard and Technology (NIST) Cybersecurity Framework and the Center for Internet Security Critical Security Controls (CIS)[332] - Oversight is provided by the Corporate Governance and Risk Assessment Committee of the Board, which receives regular updates from the Chief Information Security Officer (CISO)[344] - The company has not experienced any material information security breaches in the last three fiscal years, with related expenses remaining immaterial[338] Properties The company leases approximately 13,100 square feet for its New York headquarters, with its primary operating properties being its fleet of 78 vessels - The company leases approximately 13,100 square feet for its New York headquarters, and its primary properties consist of its fleet of 78 vessels[345] Legal Proceedings The company is involved in various legal proceedings, including a commercial dispute from July 2023 involving a vessel arrest and a $25 million security claim, with the outcome currently unpredictable - In July 2023, a vessel was arrested in a commercial dispute, with arresting parties seeking approximately $25 million in security, and the arbitration outcome remains uncertain[690] Mine Safety Disclosures This item is not applicable to the company - Not applicable[346] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE, with 2024 dividends totaling $5.77 per share and $25.0 million in stock repurchases, leaving $50.0 million authorized for future repurchases 2024 Dividend Payments | Declaration Date | Payment Date | Regular Dividend/Share | Supplemental Dividend/Share | Total Paid | | :--- | :--- | :--- | :--- | :--- | | Feb 28, 2024 | Mar 28, 2024 | $0.12 | $1.20 | $64.7 million | | May 7, 2024 | Jun 26, 2024 | $0.12 | $1.63 | $86.9 million | | Aug 6, 2024 | Sep 25, 2024 | $0.12 | $1.38 | $73.8 million | | Nov 6, 2024 | Dec 27, 2024 | $0.12 | $1.08 | $59.0 million | Stock Repurchase Summary | Year | Total Shares Repurchased | Average Price/Share | Total Cost | | :--- | :--- | :--- | :--- | | 2024 | 501,646 | $49.81 | $25.0 million | | 2023 | 366,483 | $38.03 | $13.9 million | | 2022 | 687,740 | $29.08 | $20.0 million | - As of December 31, 2024, the company had $50.0 million remaining under its stock repurchase program, expiring on December 31, 2025[352] Management's Discussion and Analysis of Financial Condition and Results of Operations In 2024, income from vessel operations decreased to $455.2 million due to lower TCE revenues, despite geopolitical events supporting ton-mile demand, while the company maintained strong liquidity and executed strategic capital allocation Operations and Oil Tanker Markets Global oil consumption in Q4 2024 was estimated at 104.0 million b/d, with geopolitical events increasing ton-mile demand and supporting tanker rates above breakeven levels despite fleet growth - The IEA estimates global oil consumption for Q4 2024 at 104.0 million barrels per day (b/d), a 1.5% increase from Q4 2023, with the 2025 forecast also at 104.0 million b/d[377] - The tanker orderbook increased by 45.2 million dwt year-over-year, with significant increases across VLCC, Suezmax, Aframax, and LR1/Panamax sectors[383] Results from Vessel Operations Income from vessel operations decreased by $160.2 million to $455.2 million in 2024, primarily due to lower TCE revenues across both Crude Tankers and Product Carriers segments, alongside increased vessel expenses and depreciation Crude Tankers Segment Performance | (in thousands, except daily rates) | 2024 | 2023 | | :--- | :--- | :--- | | TCE revenues | $437,095 | $512,220 | | Vessel expenses | $130,107 | $115,708 | | Adjusted income from vessel operations | $211,678 | $307,764 | | Average daily TCE rate | $41,345 | $49,619 | Product Carriers Segment Performance | (in thousands, except daily rates) | 2024 | 2023 | | :--- | :--- | :--- | | TCE revenues | $496,008 | $543,299 | | Vessel expenses | $145,554 | $143,831 | | Adjusted income from vessel operations | $266,485 | $319,775 | | Average daily TCE rate | $31,846 | $33,518 | - General and administrative expenses increased by $5.1 million to $52.6 million in 2024, primarily due to higher compensation costs, legal fees, and IT spending[409] EBITDA and Adjusted EBITDA The company uses non-GAAP measures EBITDA and Adjusted EBITDA to monitor operating results, with 2024 figures of $614.8 million and $583.3 million respectively, primarily decreasing due to lower net income Reconciliation of Net Income to Adjusted EBITDA | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net income | $416,724 | $556,446 | | Income tax (benefit)/provision | (1,084) | 3,878 | | Interest expense | 49,703 | 65,759 | | Depreciation and amortization | 149,440 | 129,038 | | EBITDA | $614,783 | $755,121 | | Adjustments | (31,470) | (31,357) | | Adjusted EBITDA | $583,313 | $723,764 | Liquidity and Sources of Capital As of December 31, 2024, the company maintained strong liquidity of $632.2 million, driven by operating cash flow and strategic debt refinancing, resulting in a net debt-to-total capitalization ratio of 22.2% - Total liquidity was $632.2 million as of December 31, 2024, comprising $157.5 million of cash and $474.7 million of undrawn revolver capacity[422] - The company amended and extended its $750 Million Credit Facility into a new $500 Million Revolving Credit Facility, extending maturity to 2030, eliminating $19.5 million in mandatory quarterly repayments, and reducing the interest margin by over 85 basis points[434][435] Aggregate Contractual Obligations as of December 31, 2024 | (in thousands) | 2025 | 2026 | 2027 | Beyond 2027 | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Debt & Lease Financing | $84,215 | $81,487 | $80,009 | $417,882 | $663,593 | | Operating Lease Obligations | $19,711 | $3,676 | $1,077 | $5,832 | $30,296 | | Vessel & Betterment Commitments | $138,483 | $188,480 | $0 | $0 | $326,963 | | Total | $242,409 | $273,643 | $81,086 | $423,714 | $1,020,852 | Critical Accounting Estimates and Policies The company's critical accounting policies involve significant judgment, particularly in estimating vessel useful lives (25 years) and salvage values ($300 per lightweight ton) for depreciation, and in complex vessel impairment testing based on future cash flow assumptions - Vessels are depreciated over an estimated useful life of 25 years to an estimated salvage value of $300 per lightweight ton[453][455] - Vessel impairment is assessed when indicators are present, with the recoverability test comparing carrying amount to undiscounted future cash flows estimated using assumptions about future charter rates, operating expenses, and vessel utilization[458][459] Quantitative and Qualitative Disclosures about Market Risk The company manages market risks from interest rates, currency, and fuel prices, utilizing interest rate swaps for variable debt and scrubbers on 12 vessels for fuel cost savings - The company manages interest rate risk on its variable-rate debt using interest rate swaps, which as of December 31, 2024, covered the entire $144.6 million outstanding on the $500 Million Revolving Credit Facility and $83.6 million of the Ocean Yield Lease Financing[445][449] - Fuel price volatility is managed by scrubbers installed on 10 VLCCs and two Suezmaxes, resulting in approximately $6,500 per day in lower bunker costs per VLCC during 2024[448] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2022-2024, including Balance Sheets, Statements of Operations, Comprehensive Income, Cash Flows, and Changes in Equity, along with notes and the independent auditor's report Consolidated Statement of Operations Highlights | (in thousands) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Shipping Revenues | $951,613 | $1,071,775 | $864,665 | | Total operating expenses | $496,388 | $456,344 | $422,011 | | Income from vessel operations | $455,225 | $615,431 | $442,654 | | Interest expense | ($49,703) | ($65,759) | ($57,721) | | Net income | $416,724 | $556,446 | $387,891 | | Diluted net income per share | $8.38 | $11.25 | $7.77 | Consolidated Balance Sheet Highlights | (in thousands) | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $157,506 | $126,760 | | Vessels and other property, net | $2,050,211 | $1,914,426 | | Total Assets | $2,636,397 | $2,521,819 | | Current installments of long-term debt | $50,054 | $127,447 | | Long-term debt, net | $638,353 | $595,229 | | Total Liabilities | $780,349 | $805,062 | | Total Equity | $1,856,048 | $1,716,757 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants on accounting and financial disclosure - None[713] Controls and Procedures As of December 31, 2024, management, including the CEO and CFO, concluded that the company's disclosure controls and internal control over financial reporting were effective, with no material changes in Q4 2024 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures and its internal control over financial reporting were effective as of December 31, 2024[714][716] Other Information During the fourth quarter of 2024, no directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements - No directors or executive officers adopted or terminated Rule 10b5-1 trading plans in the fourth quarter of 2024[719] PART III Directors, Executive Officers and Corporate Governance This section details the company's executive officers and corporate governance policies, including the Code of Business Conduct and Ethics, with additional information incorporated by reference from the 2025 Proxy Statement Executive Officers | Name | Age | Position(s) Held | | :--- | :--- | :--- | | Lois K. Zabrocky | 55 | President and Chief Executive Officer and Director | | Jeffrey D. Pribor | 67 | Chief Financial Officer and Senior Vice President | | James D. Small III | 56 | Chief Administrative Officer, SVP, Secretary & General Counsel | | Derek Solon | 48 | Senior Vice President and Chief Commercial Officer | | William Nugent | 56 | SVP and Chief Technical and Sustainability Officer | | Adewale O. Oshodi | 45 | Vice President and Controller | | Debra Grillo | 57 | Treasurer | - The Company has adopted a Code of Business Conduct and Ethics, an Insider Trading Policy, an Anti-Bribery and Corruption Policy, and an Incentive Compensation Recoupment Policy, all available on its website[732][733] Executive Compensation Information regarding executive compensation is incorporated by reference from the company's definitive Proxy Statement for its 2025 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive Proxy Statement[735][739] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section provides information on the company's equity compensation plans as of December 31, 2024, with other security ownership details incorporated by reference from the 2025 Proxy Statement Equity Compensation Plan Information as of December 31, 2024 | Plan Category | Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 174,417 | $19.93 | 480,101 | Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive Proxy Statement for its 2025 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive Proxy Statement[738][739] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's definitive Proxy Statement for its 2025 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive Proxy Statement[739] PART IV Exhibits, Financial Statement Schedules This section lists the financial statements and exhibits filed with the report, noting the omission of schedules as not applicable, and includes key corporate documents - The consolidated financial statements of the Company are filed in response to Item 8, with all schedules omitted as they are not applicable or required[742] Form 10-K Summary No Form 10-K summary is provided - None[749]