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LEASES
6 Months Ended
Jun. 30, 2020
LEASES [Abstract]  
LEASES

Note 14 — Leases:

As permitted under ASC 842, the Company has elected not to apply the provisions of ASC 842 to short term leases, which include: (i) tanker vessels chartered-in where the duration of the charter was one year or less at inception; (ii) workboats employed in the Crude Tankers Lightering business which are cancellable upon 180 days' notice; and (iii) short term leases of office and other space.

Contracts under which the Company is a Lessee

The Company currently has two major categories of leases - chartered-in vessels and leased office and other space. The expenses recognized during the three and six months ended June 30, 2020 and 2019 for the lease component of these leases are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

2020

2019

2020

2019

Operating lease cost

Vessel assets

Charter hire expenses

$

2,977

$

3,432

$

6,705

$

7,089

Office and other space

General and administrative

257

249

506

498

Voyage expenses

42

42

84

84

Short-term lease cost

Vessel assets (1)

Charter hire expenses

1,126

2,719

2,926

4,946

Office and other space

General and administrative

29

29

58

Voyage expenses

26

52

Vessel expenses

3

8

Total lease cost

$

4,402

$

6,500

$

10,250

$

12,735

(1)Excludes vessels spot chartered-in under operating leases and employed in the Crude Tankers Lightering business for periods of less than one month each, totaling $0.1 million and $0.2 million for the three and six months ended June 30, 2020, respectively, compared with $1.8 million and $8.4 million for the three and six months ended June 30, 2019, respectively, including both lease and non-lease components.

Supplemental cash flow information related to leases was as follows:

Six Months Ended June 30,

(Dollars in thousands)

2020

2019

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows used for operating leases

$

7,295

$

7,596

Supplemental balance sheet information related to leases was as follows:

(Dollars in thousands)

June 30, 2020

December 31, 2019

Operating lease right-of-use assets

$

26,386

$

33,718

Current portion of operating lease liabilities

$

(10,411)

$

(12,958)

Long-term operating lease liabilities

(13,504)

(17,953)

Total operating lease liabilities

$

(23,915)

$

(30,911)

Weighted average remaining lease term - operating leases

3.10 years

3.24 years

Weighted average discount rate - operating leases

7.19%

7.16%

1. Charters-in of vessel assets:

During March 2020, two 2007-built MRs time chartered-in by the Company were arrested by a third party due to a legal dispute between said party and the ultimate owners of the vessels. As a result of the arrests, the entity that chartered these vessels to INSW was no longer able to perform its obligations under the time charter agreements and effectively terminated the time charter agreements. Accordingly, the Company derecognized lease liabilities and right of use assets associated with these agreements.

As of June 30, 2020, INSW had commitments to charter in one MR, two Aframaxes, one LR1 and one workboat employed in the Crude Tankers Lightering business. All of the charters-in, of which the two Aframaxes are bareboat charters with expiry dates ranging from December 2023 to March 2024 and the others are time charters with expiry dates ranging from July 2020 to August 2021, are accounted for as operating leases. Upon its expiry in July 2020, the Company redelivered the MR to its owner. The Company’s bareboat charters contain purchase options commencing in the first quarter of 2021. As of June 30, 2020, the Company has determined that the purchase options are not yet reasonably certain of being exercised. Lease liabilities related to time charters-in vessels exclude estimated days that the vessels will not be available for employment due to drydock because the Company does not pay charter hire when time chartered-in vessels are not available for its use.

Payments of lease liabilities and related number of operating days under these operating leases as of June 30, 2020 are as follows:

Bareboat Charters-in:

(Dollars in thousands)

Amount

Operating Days

2020

$

3,165

368

2021

6,278

730

2022

6,278

730

2023

4,532

556

Total lease payments

20,253

2,384

less imputed interest

(2,229)

Total operating lease liabilities

$

18,024

Time Charters-in:

(Dollars in thousands)

Amount

Operating Days

2020

$

1,783

368

2021

2,170

408

Total lease payments (lease component only)

3,953

776

less imputed interest

(142)

Total operating lease liabilities

$

3,811

2. Office and other space:

The Company has operating leases for offices and lightering workboat dock space. These leases have expiry dates ranging from August 2021 to December 2024. The lease for the workboat dock space contains renewal options executable by the Company for periods through December 2027. We have determined that the options through December 2024 are reasonably certain to be executed by the Company, and accordingly are included in the lease liability and right of use asset calculations for such lease.

Payments of lease liabilities for office and other space as of June 30, 2020 are as follows:

(Dollars in thousands)

Amount

2020

$

623

2021

936

2022

273

2023

229

2024

178

Total lease payments

2,239

less imputed interest

(159)

Total operating lease liabilities

$

2,080

Contracts under which the Company is a Lessor

See Note 13, “Revenue,” for discussion on the Company’s revenues from operating leases accounted for under ASC 842.

The future minimum revenues, before reduction for brokerage commissions, expected to be received on non-cancelable time charters for six Panamaxes and four VLCCs and the related revenue days as of June 30, 2020 are as follows:

(Dollars in thousands)

Amount

Revenue Days

2020

$

51,815

1,057

2021

20,139

431

2022

16,425

365

2023

3,195

71

Future minimum revenues

$

91,574

1,924

Future minimum revenues do not include (i) the Company’s share of time charters entered into by the pools in which it participates, and (ii) the Company’s share of time charters entered into by the joint ventures, which the Company accounts for under the equity method. Revenues from a time charter are not generally received when a vessel is off-hire, including time required for normal periodic maintenance of the vessel. In arriving at the minimum future charter revenues, an estimated time off-hire to perform periodic maintenance on each vessel has been deducted, although there is no assurance that such estimate will be reflective of the actual off-hire in the future.