0001558370-23-008199.txt : 20230505 0001558370-23-008199.hdr.sgml : 20230505 20230505080557 ACCESSION NUMBER: 0001558370-23-008199 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 89 CONFORMED PERIOD OF REPORT: 20230331 FILED AS OF DATE: 20230505 DATE AS OF CHANGE: 20230505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: International Seaways, Inc. CENTRAL INDEX KEY: 0001679049 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 980467117 STATE OF INCORPORATION: 1T FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-37836 FILM NUMBER: 23891368 BUSINESS ADDRESS: STREET 1: 600 THIRD AVENUE STREET 2: 39TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2129534100 MAIL ADDRESS: STREET 1: 600 THIRD AVENUE STREET 2: 39TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 FORMER COMPANY: FORMER CONFORMED NAME: OSG International, INC DATE OF NAME CHANGE: 20160707 10-Q 1 insw-20230331x10q.htm 10-Q
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to         

Commission File Number        1-37836-1       

INTERNATIONAL SEAWAYS, INC.

(Exact name of registrant as specified in its charter)

Marshall Islands

    

98-0467117

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

600 Third Avenue, 39th Floor, New York, New York

10016

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: 212-578-1600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Emerging growth company

Non-accelerated filer

Smaller reporting company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No  

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock (no par value)

INSW

New York Stock Exchange

Rights to Purchase Common Stock

N/A

New York Stock Exchange

Former name, former address and former fiscal year, if changed since last report

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date. The number of shares outstanding of the issuer’s common stock as of May 5, 2023: common stock, no par value 49,229,944 shares.

INTERNATIONAL SEAWAYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
DOLLARS IN THOUSANDS
(UNAUDITED)

March 31, 2023

    

December 31, 2022

ASSETS

Current Assets:

Cash and cash equivalents

$

156,220

$

243,744

Short-term investments

105,000

80,000

Restricted cash

18,329

Voyage receivables, net of allowance for credit losses of $123 and $261

including unbilled receivables of $238,212 and $279,567

248,029

289,775

Other receivables

11,559

12,583

Inventories

698

531

Prepaid expenses and other current assets

16,491

8,995

Current portion of derivative asset

6,274

6,987

Total Current Assets

562,600

642,615

Vessels and other property, less accumulated depreciation of $353,314 and $331,903

1,775,653

1,680,010

Vessels construction in progress

85,662

123,940

Deferred drydock expenditures, net

72,874

65,611

Operating lease right-of-use assets

7,085

8,471

Finance lease right-of-use assets

22,001

44,391

Pool working capital deposits

34,076

35,593

Long-term derivative asset

2,138

4,662

Other assets

9,441

10,041

Total Assets

$

2,571,530

$

2,615,334

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable, accrued expenses and other current liabilities

$

53,197

$

51,069

Current portion of operating lease liabilities

430

1,596

Current portion of finance lease liabilities

18,326

41,870

Current installments of long-term debt

155,525

162,854

Total Current Liabilities

227,478

257,389

Long-term operating lease liabilities

7,738

7,740

Long-term debt

777,154

860,578

Other liabilities

1,877

1,875

Total Liabilities

1,014,247

1,127,582

Commitments and contingencies

Equity:

Capital - 100,000,000 no par value shares authorized; 49,171,314 and 49,120,648

shares issued and outstanding

1,501,516

1,502,235

Retained earnings/(accumulated deficit)

52,865

(21,447)

1,554,381

1,480,788

Accumulated other comprehensive income

2,902

6,964

Total Equity

1,557,283

1,487,752

Total Liabilities and Equity

$

2,571,530

$

2,615,334

See notes to condensed consolidated financial statements

1

INTERNATIONAL SEAWAYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
(UNAUDITED)

Three Months Ended March 31,

2023

2022

Shipping Revenues:

Pool revenues, including $91,707 and $23,271

from companies accounted for by the equity method

$

259,578

$

83,762

Time charter revenues

13,150

6,175

Voyage charter revenues

14,402

11,545

287,130

101,482

Operating Expenses:

Voyage expenses

3,810

3,507

Vessel expenses

58,769

60,317

Charter hire expenses

8,800

7,309

Depreciation and amortization

29,548

27,000

General and administrative

11,246

10,166

Third-party debt modification fees

407

187

Gain on disposal of vessels and other assets, net of impairments

(10,748)

(1,376)

Total operating expenses

101,832

107,110

Income/(loss) from vessel operations

185,298

(5,628)

Equity in results of affiliated companies

5,597

Operating income/(loss)

185,298

(31)

Other income/(expense)

4,281

(226)

Income/(loss) before interest expense and income taxes

189,579

(257)

Interest expense

(16,947)

(12,740)

Income/(loss) before income taxes

172,632

(12,997)

Income tax benefit/(provision)

1

(4)

Net income/(loss)

$

172,633

$

(13,001)

Weighted Average Number of Common Shares Outstanding:

Basic

49,138,613

49,571,337

Diluted

49,646,331

49,571,337

Per Share Amounts:

Basic net income/(loss) per share

$

3.51

$

(0.26)

Diluted net income/(loss) per share

$

3.47

$

(0.26)

See notes to condensed consolidated financial statements

2

INTERNATIONAL SEAWAYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
DOLLARS IN THOUSANDS
(UNAUDITED)

Three Months Ended March 31,

2023

2022

Net income/(loss)

$

172,633

$

(13,001)

Other comprehensive income/(loss), net of tax:

Net change in unrealized income/(losses) on cash flow hedges

(3,838)

10,762

Defined benefit pension and other postretirement benefit plans:

Net change in unrecognized prior service costs

(30)

26

Net change in unrecognized actuarial losses

(194)

171

Other comprehensive (loss)/income, net of tax

(4,062)

10,959

Comprehensive income/(loss)

$

168,571

$

(2,042)

See notes to condensed consolidated financial statements

3

INTERNATIONAL SEAWAYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
DOLLARS IN THOUSANDS
(UNAUDITED)

Three Months Ended March 31,

2023

2022

Cash Flows from Operating Activities:

Net income/(loss)

$

172,633

$

(13,001)

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

Depreciation and amortization

29,548

27,000

Loss on write-down of vessels and other assets

1,697

Amortization of debt discount and other deferred financing costs

1,556

855

Amortization of time charter hire contracts acquired

340

Deferred financing costs write-off

166

133

Stock compensation

1,900

1,108

Equity in results of affiliated companies

20

(5,597)

Other – net

(823)

580

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

Gain on disposal of vessels and other assets, net

(10,748)

(3,073)

Cash distributions from affiliated companies

2,250

Payments for drydocking

(12,978)

(17,570)

Insurance claims proceeds related to vessel operations

950

954

Changes in operating assets and liabilities:

Decrease/(increase) in receivables

41,746

(13,369)

Decrease in deferred revenue

(260)

Net change in inventories, prepaid expenses and other current assets, accounts

payable, accrued expenses and other current and long-term liabilities

(2,888)

(2,088)

Net cash provided by/(used in) operating activities

220,822

(19,781)

Cash Flows from Investing Activities:

Expenditures for vessels, vessel improvements and vessels under construction

(66,722)

(37,989)

Proceeds from disposal of vessels and other property, net

20,021

24,257

Expenditures for other property

(524)

(390)

Investments in short-term time deposits

(90,000)

Proceeds from maturities of short-term time deposits

65,000

Pool working capital deposits

(527)

Net cash used in investing activities

(72,225)

(14,649)

Cash Flows from Financing Activities:

Repayments of debt

(137,449)

(46,265)

Proceeds from sale and leaseback financing, net of issuance and deferred financing costs

55,722

20,401

Payments on sale and leaseback financing and finance lease

(34,619)

(9,085)

Payments of deferred financing costs

(514)

Borrowings on revolving credit facilities

50,000

Cash dividends paid

(98,313)

(2,980)

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

(2,619)

(970)

Net cash (used in)/provided by financing activities

(217,792)

11,101

Net decrease in cash, cash equivalents and restricted cash

(69,195)

(23,329)

Cash, cash equivalents and restricted cash at beginning of year

243,744

98,933

Cash, cash equivalents and restricted cash at end of period

$

174,549

$

75,604

See notes to condensed consolidated financial statements

4

INTERNATIONAL SEAWAYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
DOLLARS IN THOUSANDS
(UNAUDITED)

Retained

Accumulated

Earnings /

Other

(Accumulated

Comprehensive

Noncontrolling

Capital

Deficit)

Income/(loss)

Interests

Total

For the three months ended

Balance at January 1, 2023

$

1,502,235

$

(21,447)

$

6,964

$

$

1,487,752

Net income

172,633

172,633

Other comprehensive loss

(4,062)

(4,062)

Dividends declared

(98,321)

(98,321)

Forfeitures of vested restricted stock awards and exercised stock options

(2,619)

(2,619)

Compensation relating to restricted stock awards

268

268

Compensation relating to restricted stock units awards

1,412

1,412

Compensation relating to stock option awards

220

220

Balance at March 31, 2023

$

1,501,516

$

52,865

$

2,902

$

$

1,557,283

Balance at January 1, 2022

$

1,591,446

$

(409,338)

$

(12,360)

$

584

$

1,170,332

Net loss

(13,001)

(13,001)

Other comprehensive income

10,959

10,959

Dividends declared

(2,978)

(2,978)

Forfeitures of vested restricted stock awards

(970)

(970)

Compensation relating to restricted stock awards

296

296

Compensation relating to restricted stock units awards

501

501

Compensation relating to stock option awards

311

311

Balance at March 31, 2022

$

1,588,606

$

(422,339)

$

(1,401)

$

584

$

1,165,450

See notes to condensed consolidated financial statements

5

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1 — Basis of Presentation:

The accompanying unaudited condensed consolidated financial statements include the accounts of International Seaways, Inc. (“INSW”), a Marshall Islands corporation, and its wholly owned subsidiaries. Unless the context indicates otherwise, references to “INSW”, the “Company”, “we”, “us” or “our”, refer to International Seaways, Inc. and its subsidiaries. As of March 31, 2023, the Company’s operating fleet consisted of 74 wholly-owned, finance leased or bareboat chartered-in and time-chartered-in oceangoing vessels, engaged primarily in the transportation of crude oil and refined petroleum products in the International Flag trade through its wholly owned subsidiaries. In addition to its operating fleet of 74 vessels, two dual-fuel LNG VLCC newbuilds are scheduled for delivery to the Company during the second quarter of 2023, bringing the total operating and newbuild fleet to 76 vessels as of March 31, 2023.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and notes required by generally accepted accounting principles in the United States. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results have been included. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

The condensed consolidated balance sheet as of December 31, 2022 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles in the United States for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

All intercompany balances and transactions within INSW have been eliminated. Investments in 50% or less owned affiliated companies, in which INSW exercises significant influence, are accounted for by the equity method.

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the condensed consolidated balance sheet for the fiscal year ended December 31, 2022 to reclassify $0.8 million from Pool working capital deposits (previously captioned as Investments in and advances to affiliated companies) to Other assets.

Note 2 — Significant Accounting Policies:

For a description of all of the Company’s material accounting policies, see Note 2, “Summary of Significant Accounting Policies,” to the Company’s consolidated financial statements as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K. The following is a summary of any changes or updates to the Company’s critical accounting policies for the current period:

Cash, cash equivalents and restricted cash Interest-bearing deposits that are highly liquid investments and have a maturity of three months or less when purchased are included in cash and cash equivalents. Current restricted cash of $18.3 million as of March 31, 2023 represents cash held in escrow related to the Company’s exercise of its option to purchase a bareboat chartered-in 2009-built Aframax, which closed in early April 2023.

Short-term investments - Short-term investments consist of time deposits with original maturities of between 91 and 364 days.

Concentration of Credit Risk The allowance for credit losses is recognized as an allowance or contra-asset and reflects our best estimate of probable losses inherent in the voyage receivables balance. Activity for allowance for credit losses is summarized as follows:

6

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(Dollars in thousands)

Allowance for Credit Losses -
Voyage Receivables

Balance at December 31, 2022

$

261

Reversal of expected credit losses

(138)

Balance at March 31, 2023

$

123

During the three months ended March 31, 2023 and 2022, the Company did not have any individual customers who accounted for 10% or more of its revenues apart from the pools in which it participates. The pools in which the Company participates accounted in aggregate for 96% of consolidated voyage receivables at both March 31, 2023 and December 31, 2022, respectively.

Deferred finance charges Finance charges, excluding original issue discount, incurred in the arrangement and/or amendments resulting in the modification of debt are deferred and amortized to interest expense on either an effective interest method or straight-line basis over the term of the related debt. Unamortized deferred finance charges of $6.3 million and $6.9 million relating to the $750 Million Facility Revolving Loan and BoComm Lease Financing (See Note 10, “Debt”) as of March 31, 2023 and December 31, 2022, respectively, are included in other assets in the accompanying condensed consolidated balance sheets. Unamortized deferred financing charges of $13.7 million and $13.4 million as of March 31, 2023 and December 31, 2022, respectively, relating to the Company’s outstanding debt facilities, are included in long-term debt in the consolidated balance sheets.

Interest expense relating to the amortization of deferred financing charges amounted to $1.3 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively.

Vessels construction in progress — Interest costs are capitalized to vessels during the period that vessels are under construction. Interest capitalized totaled $1.7 million and $0.7 million during the three months ended March 31, 2023 and 2022, respectively.

Recently Issued Accounting Standards — The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification is the sole source of authoritative GAAP other than United States Securities and Exchange Commission ("SEC') issued rules and regulations that apply only to SEC registrants. The FASB issues Accounting Standards Updates ("ASU") to communicate changes to the codification. The Company considered the applicability and impact of all ASUs issued during the quarter ended March 31, 2023 and determined that they were either not applicable or not expected to have a material impact on the Company’s consolidated financial statements.

Note 3 — Earnings per Common Share:

Basic earnings per common share is computed by dividing earnings, after the deduction of dividends and undistributed earnings allocated to participating securities, by the weighted average number of common shares outstanding during the period.

The computation of diluted earnings per share assumes the issuance of common stock for all potentially dilutive stock options and restricted stock units not classified as participating securities. Participating securities are defined by ASC 260, Earnings Per Share, as unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents and are included in the computation of earnings per share pursuant to the two-class method.

Weighted average shares of unvested restricted common stock considered to be participating securities totaled 48,890 and 87,117 for the three months ended March 31, 2023 and 2022, respectively. Such participating securities are allocated a portion of income, but not losses under the two-class method. As of March 31, 2023, there were 637,223 shares of restricted stock units and 257,310 stock options outstanding and considered to be potentially dilutive securities.

7

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Reconciliations of the numerator of the basic and diluted earnings per share computations are as follows:

Three Months Ended March 31,

(Dollars in thousands)

2023

2022

Net income/(loss) allocated to:

Common Stockholders

$

172,466

$

(13,006)

Participating securities

167

5

$

172,633

$

(13,001)

For the three months ended March 31, 2023 earnings per share calculations, there was 507,718 dilutive equity awards outstanding. For the three months ended March 31, 2022 earnings per share calculations, there was no dilutive equity awards outstanding. Awards of 852,546 and 1,026,418 for the three months ended March 31, 2023 and 2022, respectively, were not included in the computation of diluted earnings per share because inclusion of these awards would be anti-dilutive.

Note 4 — Business and Segment Reporting:

The Company has two reportable segments: Crude Tankers and Product Carriers. Adjusted income/(loss) from vessel operations for segment purposes is defined as income/(loss) from vessel operations before general and administrative expenses, third-party debt modification fees and loss/(gain) on disposal of vessels and assets, net of impairments. The accounting policies followed by the reportable segments are the same as those followed in the preparation of the Company’s condensed consolidated financial statements.

Information about the Company’s reportable segments as of and for the three months ended March 31, 2023 and 2022 follows:

Crude

Product

(Dollars in thousands)

Tankers

Carriers

Other

Totals

Three months ended March 31, 2023:

Shipping revenues

$

132,411

$

154,719

$

$

287,130

Time charter equivalent revenues

129,285

154,035

283,320

Depreciation and amortization

17,226

12,294

28

29,548

Gain on disposal of vessels and other assets

(10,748)

(10,748)

Adjusted income/(loss) from vessel operations

84,541

101,690

(28)

186,203

Adjusted total assets at March 31, 2023

1,455,356

809,251

2,264,607

Expenditures for vessels and vessel improvements

65,728

994

66,722

Payments for drydocking

2,128

10,850

12,978

Three months ended March 31, 2022:

Shipping revenues

$

39,610

$

61,872

$

$

101,482

Time charter equivalent revenues

36,475

61,500

97,975

Depreciation and amortization

15,152

11,841

7

27,000

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

1,843

(3,219)

(1,376)

Adjusted (loss)/income from vessel operations

(5,842)

9,198

(7)

3,349

Equity in results of affiliated companies

5,597

5,597

Investments in and advances to affiliated companies at March 31, 2022

160,298

23,063

183,361

Adjusted total assets at March 31, 2022

1,465,035

803,077

2,268,112

Expenditures for vessels and vessel improvements

14,608

23,381

37,989

Payments for drydocking

7,660

9,910

17,570

8

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Reconciliations of time charter equivalent (“TCE”) revenues of the segments to shipping revenues as reported in the condensed statements of operations follow:

Three Months Ended March 31,

(Dollars in thousands)

2023

2022

Time charter equivalent revenues

$

283,320

$

97,975

Add: Voyage expenses

3,810

3,507

Shipping revenues

$

287,130

$

101,482

Consistent with general practice in the shipping industry, the Company uses time charter equivalent revenues, which represent 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, provide 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.

Reconciliations of total adjusted income from vessel operations of the segments to income/(loss) before income taxes, as reported in the condensed consolidated statements of operations follow:

Three Months Ended March 31,

(Dollars in thousands)

2023

2022

Total adjusted income from vessel operations of all segments

$

186,203

$

3,349

General and administrative expenses

(11,246)

(10,166)

Third-party debt modification fees

(407)

(187)

Gain on disposal of vessels and other assets, net of impairments

10,748

1,376

Consolidated income/(loss) from vessel operations

185,298

(5,628)

Equity in results of affiliated companies

5,597

Other income/(expense)

4,281

(226)

Interest expense

(16,947)

(12,740)

Income/(loss) before income taxes

$

172,632

$

(12,997)

Reconciliations of total assets of the segments to amounts included in the condensed consolidated balance sheets follow:

(Dollars in thousands)

March 31, 2023

March 31, 2022

Adjusted total assets of all segments

$

2,264,607

$

2,268,112

Corporate unrestricted cash and cash equivalents

156,220

74,553

Restricted cash

18,329

1,051

Short-term investments

105,000

Other unallocated amounts

27,374

22,877

Consolidated total assets

$

2,571,530

$

2,366,593

Note 5 — Vessels:

Impairment of Vessels and Other Property

During the three months ended March 31, 2023, the Company gave consideration as to whether events or changes in circumstances had occurred since December 31, 2022, that could indicate that the carrying amounts of the vessels in the Company’s fleet may not be recoverable. The Company determined that none of the vessels in the Company’s fleet met held-for-sale criteria as of March 31, 2023 and no held-for-use impairment indicators existed for the Company’s vessels as of March 31, 2023.

9

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The Company recognized a loss of approximately $0.2 million during the quarter ended March 31, 2023, related to the cost to terminate the purchase and installation contract for a ballast water treatment system on a vessel that was sold.

Vessel Acquisitions and Construction Commitments

On March 7, 2023, the first of Company’s three newbuild dual-fuel LNG VLCCs was delivered by the shipyard and shortly thereafter commenced its employment under a seven-year time charter contract with an oil major. The remaining commitments on the contracts for the construction of other two VLCCs as of March 31, 2023 was $115.2 million, which will be primarily funded by the BoComm Lease Financing (See Note 8, “Debt”).

The second of the Company’s three newbuild dual-fuel LNG VLCC was delivered to the Company on April 11, 2023 and the third VLCC is expected to deliver before the end of the second quarter of 2023.

In December 2022 the Company tendered notice of its intention to exercise its options to purchase two 2009-built Aframaxes that it had been bareboat chartering-in. The aggregate purchase price for the two vessels was $43.0 million. On March 30, 2023, the Company completed the purchase of one of the two Aframaxes. The purchase of the second of the two vessels closed in early April 2023.

Disposal/Sales of Vessels

During the quarter ended March 31, 2023, the Company delivered a 2008-built MR to the buyer and recognized a gain of $10.9 million.

Note 6 — Variable Interest Entities (“VIEs”):

Unconsolidated VIEs

As of March 31, 2023, all of the six commercial pools in which the Company participates were determined to be VIEs for which the Company is not considered a primary beneficiary.

The following table presents the carrying amounts of assets and liabilities in the condensed consolidated balance sheet related to the unconsolidated VIEs as of March 31, 2023:

(Dollars in thousands)

Condensed
Consolidated Balance Sheet

Pool working capital deposits

$

34,076

In accordance with accounting guidance, the Company evaluated its maximum exposure to loss related to these unconsolidated VIEs by assuming a complete loss of the Company’s investment in these VIEs. The table below compares the Company’s liability in the condensed consolidated balance sheet to the maximum exposure to loss at March 31, 2023:

(Dollars in thousands)

Condensed
Consolidated Balance Sheet

Maximum Exposure to
Loss

Other Liabilities

$

$

34,076

In addition, as of March 31, 2023, the Company had approximately $236.6 million of trade receivables from the pools that were determined to be a VIE. These trade receivables, which are included in voyage receivables in the accompanying condensed consolidated balance sheet, have been excluded from the above tables and the calculation of INSW’s maximum exposure to loss. The Company does not record the maximum exposure to loss as a liability because it does not believe that such a loss is probable of occurring as of March 31, 2023.

10

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 7 — Fair Value of Financial Instruments, Derivatives and Fair Value Disclosures:

The estimated fair values of the Company’s financial instruments, other than derivatives that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows:

(Dollars in thousands)

March 31, 2023

December 31, 2022

Fair Value Level

Cash and cash equivalents (1)

$

174,549

$

243,744

Level 1

Short-term investments (2)

105,000

80,000

Level 1

$750 Million Facility Term Loan (3)

(356,637)

(493,565)

Level 2

ING Credit Facility (3)

(22,396)

(22,917)

Level 2

Ocean Yield Lease Financing (3)

(333,906)

(341,106)

Level 2

BoComm Lease Financing (4)

(113,783)

(63,598)

Level 2

Toshin Lease Financing (4)

(14,586)

(14,744)

Level 2

Hyuga Lease Financing (4)

(14,585)

(14,853)

Level 2

COSCO Lease Financing (3)

(46,479)

(47,732)

Level 2

Kaiyo Lease Financing (4)

(13,414)

(13,797)

Level 2

Kaisha Lease Financing (4)

(13,508)

(13,704)

Level 2

(1)Includes current restricted cash of $18.3 million at March 31, 2023.
(2)Short-term investments consist of time deposits with original maturities of between 91 and 180 days.
(3)Floating rate debt – the fair value of floating rate debt has been determined using level 2 inputs and is considered to be equal to the carrying value since it bears a variable interest rate, which is reset every three months.
(4)Fixed rate debt – the fair value of fixed rate debt has been determined using level 2 inputs by discounting the expected cash flows of the outstanding debt.

Derivatives

In May 2022, in connection with the refinancing of its $390 Million Facility Term Loan and $525 Million Facility Term Loan, the Company terminated all of its existing in-the-money LIBOR based interest swaps with an aggregate notional amount of approximately $358.6 million and received net cash proceeds of approximately $9.6 million. As of March 31, 2023, approximately $3.8 million of the gain is expected to amortize out of accumulated other comprehensive income to earnings over the next 12 months.

Also, as of March 31, 2023, approximately $1.9 million of the loss with regards to the hybrid instrument associated with the Sinosure Credit Facility that was terminated in November 2021, is expected to amortize out of accumulated other comprehensive income to earnings over the next 12 months.

On June 2, 2022, the Company entered into amortizing interest rate swap agreements covering a notional amount of $475 million of the $750 Million Facility Term Loan with major financial institutions participating in such facility that effectively converts the Company’s interest rate exposure from a three-month SOFR floating rate to a fixed rate of 2.84% through the maturity date of February 22, 2027, effective August 22, 2022. The interest rate swap agreements, which contain no leverage features, are designated and qualify as cash flow hedges.

11

INTERNATIONAL SEAWAYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Derivatives are recorded on a net basis by counterparty when a legal right of offset exists. The Company had the following amounts recorded on a net basis by transaction in the accompanying unaudited condensed consolidated balance sheets related to the Company’s use of derivatives as of March 31, 2023 and December 31, 2022:

(Dollars in thousands)

Current portion of derivative asset

Long-term derivative
assets

Current portion of derivative liabilities

Long-term derivative
liabilities

Other
receivables

March 31, 2023:

Derivatives designated as hedging instruments:

Interest rate swaps

$

6,274

$

2,138

$

$

$

768

Total

$

6,274

$

2,138

$

$

$

768

December 31, 2022:

Derivatives designated as hedging instruments:

Interest rate swaps

$

6,987

$

4,662

$

$

$

547

Total

$

6,987

$

4,662

$

$

$

547

The following tables present information with respect to gains and losses on derivative positions reflected in the condensed consolidated statements of operations or in the condensed consolidated statements of comprehensive income.

The effect of cash flow hedging relationships recognized in other comprehensive income/(loss) excluding amounts reclassified from accumulated other comprehensive income/(loss), including hedges of equity method investees, for the three months ended March 31, 2023 and 2022 follows:

Three Months Ended March 31,

(Dollars in thousands)

2023

2022

Derivatives designated as hedging instruments:

Interest rate swaps

$

(1,454)

$

9,058

Total other comprehensive (loss)/income

$

(1,454)

$

9,058

The effect of cash flow hedging relationships on the condensed consolidated statement of operations is presented excluding hedges of equity method investees. The effect of the Company’s cash flow hedging relationships on the condensed consolidated statement of operations for the three months ended March 31, 2023 and 2022 follows:

Three Months Ended March 31,

(Dollars in thousands)

2023

2022

Derivatives designated as hedging instruments:

Interest rate swaps

$

(1,782)

$

992

Discontinued hedging instruments:

Interest rate swap

(