Teekay Tankers .(TNK) - 2025 Q1 - Quarterly Report

PART I: FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2025 Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Teekay Tankers Ltd. for the three months ended March 31, 2025, and 2024, including statements of income, balance sheets, cash flows, and changes in equity, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial items Unaudited Consolidated Statements of Income The company reported a significant decrease in net income for Q1 2025 to $76.0 million from $148.9 million in Q1 2024, primarily due to lower total revenues, despite an increase in gain on asset sales Unaudited Consolidated Statements of Income | Metric | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | Change (%) | | :----------------------- | :-------------------- | :-------------------- | :--------- | | Total revenues | 231,639 | 368,286 | -37.1% | | Income from operations | 74,406 | 144,639 | -48.5% | | Net income | 76,032 | 148,875 | -48.9% | | Basic earnings per share | $2.20 | $4.35 | -49.4% | | Diluted earnings per share | $2.19 | $4.30 | -49.1% | | Cash dividends declared | $0.25 | $0.25 | 0.0% | - Voyage charter revenues decreased significantly from $328.9 million in Q1 2024 to $192.6 million in Q1 2025[7] - Gain on sale and write-down of assets increased to $38.2 million in Q1 2025 from $11.6 million in Q1 2024[7] Unaudited Consolidated Balance Sheets Total assets increased slightly to $2.02 billion as of March 31, 2025, from $1.97 billion at December 31, 2024, driven by a substantial increase in cash and cash equivalents and assets held for sale, partially offset by a decrease in vessels and equipment Unaudited Consolidated Balance Sheets | Metric | March 31, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change (%) | | :-------------------------- | :--------------------------- | :---------------------------- | :--------- | | Total current assets | 943,585 | 747,941 | 26.2% | | Vessels and equipment (net) | 1,028,274 | 1,184,271 | -13.2% | | Total assets | 2,023,225 | 1,973,968 | 2.5% | | Total current liabilities | 117,219 | 132,042 | -11.2% | | Total liabilities | 199,006 | 217,418 | -8.4% | | Total equity | 1,824,219 | 1,756,550 | 3.9% | - Cash and cash equivalents increased significantly from $511.9 million at Dec 31, 2024, to $675.4 million at March 31, 2025[9] - Assets held for sale increased to $48.6 million at March 31, 2025, from zero at Dec 31, 2024[9] Unaudited Consolidated Statements of Cash Flows Net cash flow from operating activities decreased substantially in Q1 2025 to $57.6 million from $134.1 million in Q1 2024, while net cash flow from investing activities saw a significant increase to $111.9 million, primarily due to higher proceeds from vessel sales Unaudited Consolidated Statements of Cash Flows | Metric | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | Change ($ thousands) | | :-------------------------------------- | :-------------------- | :-------------------- | :------------------- | | Net operating cash flow | 57,624 | 134,139 | (76,515) | | Net financing cash flow | (8,527) | (148,032) | 139,505 | | Net investing cash flow | 111,880 | 22,855 | 89,025 | | Increase in cash, cash equivalents and restricted cash | 160,977 | 8,962 | 152,015 | - Proceeds from sale of vessels increased from $23.4 million in Q1 2024 to $120.8 million in Q1 2025[11] - Prepayment of obligations related to finance leases was zero in Q1 2025, compared to $137.0 million in Q1 2024[11] Unaudited Consolidated Statements of Changes in Equity Total equity increased to $1.82 billion as of March 31, 2025, from $1.76 billion at December 31, 2024, primarily driven by net income of $76.0 million, partially offset by dividends declared Unaudited Consolidated Statements of Changes in Equity | Metric | March 31, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------- | :--------------------------- | :---------------------------- | | Balance as at period start | 1,756,550 | 1,550,157 (Dec 31, 2023) | | Net income | 76,032 | 148,875 (Q1 2024) | | Dividends declared | (8,626) | (8,623) (Q1 2024) | | Equity-based compensation | 263 | 3,334 (Q1 2024) | | Balance as at period end | 1,824,219 | 1,693,764 (March 31, 2024) | - Accumulated surplus increased from $447.1 million at Dec 31, 2024, to $514.5 million at March 31, 2025[13] Notes to the Unaudited Consolidated Financial Statements This section provides detailed explanations and disclosures for the unaudited consolidated financial statements, covering accounting policies, recent pronouncements, acquisitions, revenue breakdown, segment performance, intangible assets, liabilities, debt, leases, fair value measurements, equity, related party transactions, asset sales, other expenses, income taxes, earnings per share, cash flow details, commitments, and subsequent events 1. Basis of Presentation The interim consolidated financial statements are prepared in accordance with US GAAP, consolidating Teekay Tankers Ltd., its subsidiaries, equity-accounted joint venture, and Entities under Common Control, with interim results not necessarily indicative of a full fiscal year - Financial statements are prepared in accordance with US GAAP and include Teekay Tankers Ltd., its wholly-owned subsidiaries, equity-accounted joint venture, and Entities under Common Control[15] - Interim results are not necessarily indicative of a full fiscal year[16] 2. Recent Accounting Pronouncements The company will adopt ASU 2023-09 (Improvements to Income Tax Disclosures) in 2025 and ASU 2024-03 (Expense Disaggregation Disclosures) in 2027, both of which are expected to result in additional disclosures in the consolidated financial statements - ASU 2023-09 (Improvements to Income Tax Disclosures) is effective for annual periods beginning after December 15, 2024, and is expected to result in additional disclosure for income tax reporting[17] - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for annual periods beginning after December 15, 2026, requiring disclosure of specified information about certain costs and expenses[18][20] 3. Acquisition of Entities under Common Control On December 31, 2024, Teekay Tankers acquired Teekay Corporation's Australian operations and management service companies for a net consideration of $92.2 million, leading to retroactive adjustment of prior period financial statements and increasing Q1 2024 net income by $4.1 million - Acquired Teekay's Australian operations and management service companies on December 31, 2024, for a net consideration of $92.2 million[19] - The acquisition was accounted for as a business acquisition between entities under common control, resulting in retroactive adjustment of prior period financial statements[19][21][22] - The transaction increased the company's net income for the three months ended March 31, 2024, by $4.1 million and revenues by $30.0 million[24] 4. Revenue The company's total revenues decreased by 37.1% to $231.6 million in Q1 2025 from $368.3 million in Q1 2024, primarily due to a significant drop in voyage charter revenues for Suezmax and Aframax/LR2 tankers - The company's primary source of revenue is from chartering its vessels (Suezmax, Aframax, LR2 tankers) and providing operational and maintenance marine services[25] Revenue by Type | Revenue Type | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | Change (%) | | :----------------------- | :-------------------- | :-------------------- | :--------- | | Voyage charter revenues | 192,643 | 328,941 | -41.4% | | Time-charter revenues | 6,314 | 5,123 | 23.2% | | Other revenues | 32,682 | 34,222 | -4.5% | | Total revenues | 231,639 | 368,286 | -37.1% | - Minimum scheduled future revenues from time charters as at March 31, 2025, were approximately $8.2 million for the remainder of 2025 and $24.8 million for 2026-2028[29] 5. Segment Reporting The company operates in two segments: Tankers and Marine Services, both of which experienced a decline in income from operations in Q1 2025, reflecting overall market conditions and operational changes - The company has two operating segments: Tankers (vessel operations, STS support services) and Marine Services (operational and maintenance marine services, management services)[31] Income from Operations by Segment | Metric (Income from operations) | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | Change (%) | | :------------------------------ | :-------------------- | :-------------------- | :--------- | | Tankers | 71,312 | 139,241 | -48.8% | | Marine Services and Other | 3,094 | 5,398 | -42.7% | | Total Income from operations | 74,406 | 144,639 | -48.5% | - Total assets for the Tankers segment were $1.30 billion at March 31, 2025, down from $1.42 billion at December 31, 2024[34] 6. Intangible Assets The company acquired $10.0 million in EU Allowances (EUAs) by March 31, 2025, for EU ETS requirements, with $6.0 million classified as current assets for 2024 emissions and $4.0 million as non-current for 2025 emissions - Acquired $10.0 million in EU Allowances (EUAs) for European Union Emissions Trading System (EU ETS) requirements by March 31, 2025[36] - $6.0 million of EUAs are presented as other current assets (2024 emissions), and $4.0 million as non-current (2025 emissions)[36] - Customer relationships have a carrying amount of $0.2 million at March 31, 2025, and are being amortized over a weighted average period of 10 years[37] 7. Accrued Liabilities and Other Long-Term Liabilities Total accrued liabilities decreased to $64.5 million at March 31, 2025, from $75.7 million at December 31, 2024, mainly due to lower payroll and benefits, while the total obligation related to EU ETS increased to $8.8 million Accrued Liabilities | Accrued Liabilities | March 31, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :------------------ | :--------------------------- | :---------------------------- | | Voyage and vessel | 34,015 | 36,665 | | Payroll and benefits | 22,646 | 30,213 | | Obligation related to EU ETS | 6,037 | 6,588 | | Total | 64,455 | 75,668 | - The total obligation related to EU ETS increased to $8.8 million at March 31, 2025 ($6.0 million current, $2.7 million long-term)[40] - Other long-term liabilities include a freight tax provision of $39.2 million and an office lease liability of $8.4 million[41] 8. Long-Term Debt The company has one undrawn revolving credit facility (2023 Revolver) of $254.0 million, maturing in May 2029, which is collateralized by 19 vessels and requires maintaining minimum liquidity and hull coverage ratio, with the company in compliance with all covenants as of March 31, 2025 - The 2023 Revolver provides for aggregate borrowings of up to $254.0 million, which was fully undrawn as of March 31, 2025[42] - The facility matures in May 2029, and interest payments are based on SOFR plus a margin of 2.00% (6.3% at March 31, 2025)[42][44] - The company was in compliance with all covenants, including minimum liquidity and hull coverage ratio, as of March 31, 2025[43] 9. Operating Leases The company charters-in vessels from other owners under time charter-in and bareboat-in contracts, typically for fixed periods, with minimum commitments of approximately $29.5 million for the remainder of 2025 and $50.5 million for 2026-2029 - The company charters-in vessels under time charter-in and bareboat-in contracts, typically for fixed periods with fixed daily hire rates[45] Minimum Commitments for Chartered-in Vessels | Year | Minimum Commitments ($ millions) | | :--- | :------------------------------- | | 2025 (remainder) | 29.5 | | 2026 | 21.1 | | 2027 | 13.5 | | 2028 | 8.5 | | 2029 | 7.4 | 10. Fair Value Measurements The company measures certain assets and liabilities at fair value, including cash, marketable securities, and EU ETS obligations (Level 1 hierarchy), while operating lease right-of-use assets are measured non-recurringly at Level 2 - Cash, cash equivalents, restricted cash, and marketable securities are measured at fair value using Level 1 inputs[49] - The obligation related to EU ETS is measured at fair value using Level 1 inputs, totaling $8.8 million at March 31, 2025[49][52] - Operating lease right-of-use assets are measured at fair value on a non-recurring basis using Level 2 inputs, valued at $6.7 million at March 31, 2025[49] 11. Share Capital and Equity-Based Compensation The company has authorized 100 million preference shares, 485 million Class A common shares, and 100 million Class B common shares, with 29.8 million Class A and 4.6 million Class B common shares outstanding as of March 31, 2025 - As of March 31, 2025, 29.8 million Class A common shares (one vote per share) and 4.6 million Class B common shares (five votes per share) were issued and outstanding[53] - The company recognized $0.2 million in expenses related to restricted stock units in Q1 2025, a decrease from $0.6 million in Q1 2024[54] 12. Related Party Transactions The company engages in transactions with Teekay and its affiliates, including paying a transaction fee for vessel sales and receiving management fees, with services provided by the Manager to the company eliminated on consolidation following the December 31, 2024 acquisition - The company pays a 1.0% transaction fee to Teekay upon the sale of certain vessels, amounting to $0.7 million in Q1 2025[55][57] - The company received $0.5 million in management fee revenues from Teekay in Q1 2025[55] - Prior to the December 31, 2024 acquisition, strategic and administrative service fees from Entities under Common Control were $11.4 million in Q1 2024[55] 13. Vessel Sales and Write-down of Assets In Q1 2025, the company completed the sales of four tankers for $120.5 million, recognizing an aggregate gain of $39.0 million, and agreed to sell two Suezmax tankers for $62.0 million, while recording a write-down of $0.8 million on operating lease right-of-use assets - Completed sales of two Aframax/LR2 tankers and two Suezmax tankers in Q1 2025 for $120.5 million, resulting in an aggregate gain of $39.0 million[56] - Agreed to sell two Suezmax tankers for $62.0 million, classified as held for sale as at March 31, 2025[56] - Recorded a write-down of $0.8 million on operating lease right-of-use assets in Q1 2025 due to a reduction in prevailing charter rates[59] 14. Other Expense Other expense increased significantly to $4.2 million in Q1 2025 from $0.8 million in Q1 2024, primarily due to an unrealized loss on marketable securities of $4.7 million, partially offset by a foreign exchange gain Other Expense Components | Component | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | Change ($ thousands) | | :---------------- | :-------------------- | :-------------------- | :------------------- | | Foreign exchange gain | 431 | 614 | (183) | | Other expense | (4,589) | (1,373) | (3,216) | | Total | (4,158) | (759) | (3,399) | - Q1 2025 other expense includes a $4.7 million unrealized loss on marketable securities[60] - Q1 2024 other expense included $1.4 million related to premiums paid for the repurchase of vessels under sale-leaseback arrangements[61] 15. Income Tax Recovery Income tax recovery decreased to $0.5 million in Q1 2025 from $2.8 million in Q1 2024, while the freight tax provision decreased to $39.2 million at March 31, 2025, primarily due to decreases related to the expiry of the limitation period Income Tax Recovery | Component | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | Change ($ thousands) | | :------------------ | :-------------------- | :-------------------- | :------------------- | | Current | 424 | 3,001 | (2,577) | | Deferred | 46 | (154) | 200 | | Total Recovery | 470 | 2,847 | (2,377) | - The freight tax provision decreased from $41.4 million at January 1, 2025, to $39.2 million at March 31, 2025, partly due to a $3.8 million decrease from the expiry of the limitation period[62] 16. Earnings Per Share Basic EPS decreased to $2.20 in Q1 2025 from $4.35 in Q1 2024, reflecting the lower net income, with diluted EPS also seeing a similar decline Earnings Per Share | Metric | Q1 2025 | Q1 2024 | Change (%) | | :----------------- | :------ | :------ | :--------- | | Net income | $76,032 | $148,875 | -48.9% | | Basic EPS | $2.20 | $4.35 | -49.4% | | Diluted EPS | $2.19 | $4.30 | -49.1% | - Weighted-average basic common shares outstanding increased slightly to 34.48 million in Q1 2025 from 34.26 million in Q1 2024[64] 17. Supplemental Cash Flow Information Total cash, cash equivalents, and restricted cash increased to $676.5 million at March 31, 2025, from $515.6 million at December 31, 2024, with restricted cash maintained for purposes such as forward freight agreements and acquiring EUAs Cash, Cash Equivalents and Restricted Cash | Metric | March 31, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------------- | :--------------------------- | :---------------------------- | | Cash and cash equivalents | 675,420 | 511,888 | | Restricted cash – current | 1,118 | 3,673 | | Total cash, cash equivalents and restricted cash | 676,538 | 515,561 | - Restricted cash deposits are maintained for forward freight agreements and for acquiring EUAs[66] 18. Commitments and Contingencies The company expects to have sufficient liquidity for the next year, committed to acquire one Aframax/LR2 tanker for $63.0 million, and is involved in ordinary course legal proceedings not expected to have a material effect on its financial position - Management estimates sufficient liquidity to meet minimum requirements and continue as a going concern for at least one year[68] - Signed an agreement in February 2025 to acquire one 2019-built Aframax/LR2 tanker for $63.0 million, with a $6.3 million deposit placed in escrow[69] - The company believes any adverse outcome of existing legal claims would not have a material effect on its financial position, considering insurance coverage[70] 19. Subsequent Events In April and May 2025, the company completed the sales of two Suezmax tankers for a total of $62.0 million, and in May 2025, the Board of Directors declared a fixed quarterly cash dividend of $0.25 per outstanding common share and a special cash dividend of $1.00 per common share - Completed the sales of two Suezmax tankers in April and May 2025 for a total price of $62.0 million[74] - In May 2025, the Board declared a fixed quarterly cash dividend of $0.25 per common share and a special cash dividend of $1.00 per common share[74] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2025, compared to the same period in 2024, covering business overview, significant developments, operating results, liquidity, critical accounting estimates, non-GAAP measures, and forward-looking statements OVERVIEW Teekay Tankers' primary business involves owning and operating crude oil and product tankers, utilizing a chartering strategy that balances spot market opportunities with fixed-rate contracts, with a fleet of 45 vessels as of March 31, 2025 - The primary business is to own and operate crude oil and product tankers, employing a chartering strategy that seeks to capture upside in the spot market while reducing downside risks with fixed-rate time charters[77] Teekay Tankers Fleet as of March 31, 2025 | Fleet Type | Owned Vessels | Chartered-in Vessels | Total | | :------------------------- | :------------ | :------------------- | :---- | | Fixed-rate: | | | | | Aframax Tanker / LR2 Product Tanker | 1 | — | 1 | | Total Fixed-Rate Fleet | 1 | — | 1 | | Spot-rate: | | | | | Suezmax Tankers | 22 | 1 | 23 | | Aframax Tankers / LR2 Product Tankers | 14 | 3 | 17 | | VLCC Tanker | 1 | — | 1 | | Total Spot Fleet | 37 | 4 | 41 | | STS Support and Bunker Tanker Vessels | — | 3 | 3 | | Total Teekay Tankers Fleet | 38 | 7 | 45 | SIGNIFICANT DEVELOPMENTS IN 2025 Key developments in Q1 2025 include new U.S. tariffs on Chinese-built ships, the sale of six tankers for $182.5 million, the acquisition of one Aframax/LR2 tanker for $63.0 million, and the declaration of a special cash dividend of $1.00 per common share - New U.S. port docking fees will apply to Chinese-built ships starting October 2025, potentially disrupting the competitive landscape within the tanker industry[81] - During Q1 2025, the company entered into agreements to sell four Suezmax tankers and two Aframax/LR2 tankers for a total of $182.5 million[82] - In February 2025, the company signed an agreement to acquire one 2019-built Aframax/LR2 tanker for $63.0 million, with delivery expected in Q2 2025[83] - In May 2025, the Board of Directors declared a special cash dividend of $1.00 per common share[85] RESULTS OF OPERATIONS Consolidated income from operations decreased significantly in Q1 2025, primarily due to lower spot TCE rates and fleet reductions in the Tankers segment, despite gains from asset sales, while other consolidated results show reduced interest expense but increased other expenses due to unrealized losses Summary (Consolidated) Consolidated income from operations decreased by 48.5% to $74.4 million in Q1 2025 from $144.6 million in Q1 2024, primarily driven by lower average realized spot TCE rates and fleet reductions, partially offset by an increased gain on asset sales - Consolidated income from operations decreased by $70.2 million (48.5%) to $74.4 million for the three months ended March 31, 2025[89] - The decrease was primarily due to a $74.7 million reduction from lower overall average realized spot TCE rates and a $14.4 million decrease from vessel sales and $7.9 million from redeliveries of chartered-in tankers[93] - The decrease was partially offset by a $27.4 million increase due to higher gains on sales of four tankers in Q1 2025 compared to one in Q1 2024[92] Tankers - Operating Results The Tankers segment's income from operations decreased by 48.8% to $71.3 million in Q1 2025, primarily due to a 47.9% decrease in net revenues driven by lower average realized spot rates and fleet reductions Tankers Segment Operating Results | Metric (Tankers Segment) | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | % Change | | :----------------------- | :-------------------- | :-------------------- | :------- | | Revenues | 202,504 | 338,343 | (40.1)% | | Net revenues | 115,637 | 221,812 | (47.9)% | | Income from operations | 71,312 | 139,241 | (48.8)% | | Gain on sale and write down of assets | 38,163 | 11,601 | 229.0% | - Net revenues decreased by $106.2 million primarily due to a $74.7 million decrease from lower average realized spot rates and a $29.6 million net decrease from vessel sales and redeliveries[99] - Vessel operating expenses decreased by $1.8 million due to vessel sales and lower ship management costs, partially offset by higher repair and maintenance expenditures[98][100] Tanker Market Mid-size crude tanker spot rates improved in Q1 2025, driven by rising oil production, increased tonne-miles due to sanctions, and tightening fleet supply, with a positive near-term outlook but complex medium-term demand due to geopolitical uncertainties and trade tariffs - Mid-size crude tanker spot rates improved during Q1 2025, reaching the highest level since Q1 2024, supported by rising oil production and increased tonne-miles[105] - Near-term freight markets are expected to remain well-supported by elevated tonne-miles and continued tightening of fleet supply due to sanctions[106] - The medium-term demand outlook is highly complex due to trade tariffs, geopolitical landscape (Ukraine war, Red Sea attacks, U.S. protectionism), and downward adjustments in global oil demand forecasts[108][109] - The pace of tanker newbuild orders has slowed, and an aging tanker fleet combined with full shipyard capacity through 2027 suggests continued low levels of tanker fleet growth over the medium term[110] Tankers - Fleet and TCE Rates As of March 31, 2025, the company owned 37 double-hulled oil and product tankers and time chartered-in 7 vessels, with average TCE per revenue day for voyage-charter contracts significantly decreasing in Q1 2025 compared to Q1 2024 for both Suezmax and Aframax/LR2 tankers - As at March 31, 2025, the company owned 37 double-hulled oil and product tankers and time chartered-in three Aframax/LR2 tankers, one Suezmax tanker, one bunker tanker, and two STS support vessels[112] Average TCE per Revenue Day for Voyage-charter Contracts | Vessel Type (Voyage-charter) | Q1 2025 Average TCE per Revenue Day ($) | Q1 2024 Average TCE per Revenue Day ($) | Change (%) | | :--------------------------- | :-------------------------------------- | :-------------------------------------- | :--------- | | Suezmax | 26,765 | 47,349 | -43.4% | | Aframax / LR2 | 27,846 | 48,754 | -42.9% | - Total TCE revenues for voyage-charter contracts decreased from $211.6 million in Q1 2024 to $104.6 million in Q1 2025[113][115] Marine Services and Other - Operating Results Income from operations for the Marine Services and Other segment decreased by 42.7% to $3.1 million in Q1 2025, primarily due to reduced management services provided to Teekay, higher crewing-related expenditures, and a decrease in vessels under management Marine Services Operating Results | Metric (Marine Services) | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | % Change | | :----------------------- | :-------------------- | :-------------------- | :------- | | Revenues | 29,135 | 29,943 | (2.7)% | | Income from operations | 3,094 | 5,398 | (42.7)% | - The decrease in income from operations was primarily due to a reduced level of management services provided to Teekay and lower results from operational and maintenance marine services in Australia[121] Other Consolidated Operating Results Interest expense decreased significantly by 84.1% in Q1 2025 due to the repurchase of finance lease obligations, while other expense surged by 447.8% primarily due to an unrealized loss on marketable securities Other Consolidated Operating Results | Metric | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | % Change | | :------------------ | :-------------------- | :-------------------- | :------- | | Interest expense | (773) | (4,867) | (84.1)% | | Interest income | 5,857 | 5,647 | 3.7% | | Other expense | (4,158) | (759) | 447.8% | | Income tax recovery | 470 | 2,847 | (83.5)% | - Interest expense decreased primarily due to the repurchase of eight Suezmax tankers previously held under sale-leaseback arrangements during Q1 2024[123] - Other expense increased primarily due to an unrealized loss on marketable securities of $4.7 million recognized in Q1 2025[125] LIQUIDITY AND CAPITAL RESOURCES The company generates cash primarily from chartering vessels and marine services, with its liquidity position improving significantly in Q1 2025, driven by vessel sales and operating cash flow, and expects to have sufficient liquidity for the next year to fund fleet renewal Sources and Uses of Capital The company generates cash flows primarily from chartering vessels and marine services, with volatility influenced by the cyclical tanker industry and spot market exposure, and plans to fund operations and potential vessel acquisitions through bank borrowings, lease or equity financings, and vessel sales - Cash flows are generated primarily from chartering vessels and marine services, with volatility from short-term charters and spot market operations[127] - Primary sources of cash are long-term bank borrowings, lease or equity financings, and proceeds from vessel sales[128] - Primary uses of cash include operating expenses, dry-docking expenditures, dividend payments, debt servicing costs, and potential vessel acquisitions[130] Cash Flows Net operating cash flow decreased by $76.5 million in Q1 2025 due to lower operating earnings, while net financing cash flow improved significantly by $139.5 million due to reduced finance lease repayments, and net investing cash flow increased by $89.0 million, driven by higher proceeds from vessel sales Cash Flow Summary | Cash Flow Type | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | Change ($ thousands) | | :------------------------------ | :-------------------- | :-------------------- | :------------------- | | Net cash flow provided by operating activities | 57,624 | 134,139 | (76,515) | | Net cash flow used for financing activities | (8,527) | (148,032) | 139,505 | | Net cash flow provided by investing activities | 111,880 | 22,855 | 89,025 | - Net operating cash flow decreased primarily due to lower operating earnings resulting from reduced average realized spot tanker rates and fleet reductions[132] - Net financing cash flow improved due to a $142.2 million decrease in cash outflows from reduced prepayments and scheduled repayments on finance lease obligations[133] - Net investing cash flow increased due to $97.4 million higher net proceeds received from the sale of four tankers in Q1 2025[136] Liquidity Total consolidated liquidity increased by $163.5 million to $929.4 million at March 31, 2025, primarily from vessel sales and net operating cash inflow, with the company anticipating sufficient liquidity for the next 12 months to fund fleet renewal using cash on hand, the undrawn revolving credit facility, and new financing arrangements - Total consolidated liquidity, including cash, cash equivalents, and undrawn credit facility, increased by $163.5 million to $929.4 million at March 31, 2025[139] - Primary sources of liquidity are cash and cash equivalents, net operating cash flow, and the undrawn $254.0 million 2023 Revolver[137][141] - The company anticipates sufficient liquidity for at least the one-year period following the report date and expects to fund fleet renewal using cash on hand, the undrawn revolving credit facility, and new financing arrangements[140][141] Contractual Obligations | Contractual Obligation | Total ($ millions) | 12 Months Following March 31, 2025 ($ millions) | Remainder of 2026 ($ millions) | 2027 ($ millions) | 2028 ($ millions) | 2029 ($ millions) | | :--------------------- | :----------------- | :---------------------------------------------- | :----------------------------- | :---------------- | :---------------- | :---------------- | | Chartered-in vessels (operating leases) | 80.0 | 34.9 | 15.7 | 13.5 | 8.5 | 7.4 | CRITICAL ACCOUNTING ESTIMATES The company's consolidated financial statements are prepared using management's best assumptions, judgments, and estimates, which are regularly reviewed, with no significant changes to these critical accounting estimates for the three months ended March 31, 2025 - The company prepares its consolidated financial statements in accordance with GAAP, requiring management to make estimates and assumptions[144] - There have been no significant changes to critical accounting estimates and assumptions for the three months ended March 31, 2025[144] NON-GAAP FINANCIAL MEASURE The company uses "Net Revenues," a non-GAAP financial measure, to compare revenues from voyage and time charters by including voyage expenses, providing more meaningful information for operating decisions and widely used in the shipping industry for performance comparison - "Net revenues" is a non-GAAP financial measure defined as income or loss from operations before vessel operating expenses, charter hire expenses, depreciation and amortization, general and administrative expenses, gain or loss on sale and write-down of assets, and restructuring charges[145] - This measure is used to equate revenues generated from voyage charters to revenues generated from time charters, providing more meaningful information for operating decisions[145] - Net revenues for the Tankers segment were $115.6 million for Q1 2025, compared to $221.8 million for Q1 2024[146] FORWARD-LOOKING STATEMENTS This report contains forward-looking statements regarding future events, operations, performance, and financial condition, including market fundamentals, tanker rates, vessel acquisitions, geopolitical impacts, and liquidity, which involve known and unknown risks and uncertainties where actual results may differ materially from expectations - The report contains forward-looking statements concerning future events and the company's operations, performance, and financial condition, including market fundamentals, tanker rates, and vessel acquisitions[147][148] - These statements involve known and unknown risks and are based upon assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond the company's control[147] PART II: OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other disclosures Item 1 – Legal Proceedings The company reported no legal proceedings for the period - No legal proceedings to report[150] Item 1A – Risk Factors Readers are directed to consider the risk factors discussed in Part I, "Item 3 – Key Information - Risk Factors" in the company's Annual Report on Form 20-F for the year ended December 31, 2024, as these could materially affect the business, financial condition, or results of operations - Readers should carefully consider the risk factors discussed in Part I, "Item 3 – Key Information - Risk Factors" in the Annual Report on Form 20-F for the year ended December 31, 2024[151] Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds for the period - No unregistered sales of equity securities and use of proceeds to report[152] Item 3 – Defaults Upon Senior Securities The company reported no defaults upon senior securities for the period - No defaults upon senior securities to report[152] Item 4 – Mine Safety Disclosures This item is not applicable to the company - Not applicable[152] Item 5 – Other Information This item is not applicable to the company - Not applicable[152] Item 6 – Exhibits This item is not applicable to the company - Not applicable[152] SIGNATURES The report was duly signed on May 9, 2025, by Brody Speers, Chief Financial Officer (Principal Financial and Accounting Officer) of Teekay Tankers Ltd., affirming compliance with the Securities Exchange Act of 1934 - The report was signed by Brody Speers, Chief Financial Officer (Principal Financial and Accounting Officer) of Teekay Tankers Ltd., on May 9, 2025[158]