International Seaways Reports First Quarter 2019 Results

NEW YORK–(BUSINESS WIRE)–International Seaways, Inc. (NYSE: INSW) (the “Company” or “INSW”), one
of the largest tanker companies worldwide providing energy
transportation services for crude oil and petroleum products in
International Flag markets, today reported results for the first quarter
2019.

Highlights

  • Net income for the first quarter was $10.9 million, or $0.37 per
    share, compared to a net loss of $29.3 million, or $1.01 per share, in
    the first quarter of 2018.
  • Time charter equivalent (TCE) revenues(A) for the first
    quarter were $94.0 million, compared to $48.8 million in the first
    quarter of 2018.
  • Adjusted EBITDA(B) for the first quarter was $47.3 million,
    compared to $6.5 million in the same period of 2018.
  • Cash(C) was $137.2 million as of March 31, 2019; total
    liquidity was $187.2 million, including $50.0 million undrawn revolver.

During the first quarter, we generated strong cash flow and earnings,
as our significant operating leverage to a strengthening market enabled
International Seaways to take advantage of a rate environment that was
favorable for the majority of the quarter,” said Lois K. Zabrocky,
International Seaways’ president and CEO. “We also further strengthened
our balance sheet during the quarter, increasing total liquidity to
$187.2 million, $19.5 million higher than at December 31, 2018, and
$46.0 million higher than one year ago.”

Ms. Zabrocky continued, “With a sizeable fleet and significant upside to
a market recovery in the crude and product tanker sectors, we remain
well positioned to capitalize on supportive long-term tanker
fundamentals, driven by strong and sustained global oil demand,
increasing US gulf exports and a manageable order book. We also continue
to expect to benefit from incremental demand for both our crude and
product tankers as a result of IMO 2020 low sulfur regulations, which we
believe will begin to impact the market in the second half of the year.
Along with these positive developments, our disciplined capital
allocation strategy, strong corporate governance standards and
commitment to provide safe, reliable service to our energy customers
puts us in an excellent position to create lasting shareholder value
going forward.”

First Quarter 2019 Results

Net income for the first quarter of 2019 was $10.9 million, or $0.37 per
diluted share, compared to a net loss of $29.3 million, or $1.01 per
diluted share, in the first quarter of 2018. The increased net income in
the first quarter of 2019 primarily reflects higher TCE revenues, lower
vessel expenses and a $6.6 million decrease in losses on disposal of
vessels and other property. These positive factors were partially offset
by a $1.3 million provision for credit losses in the Company’s
Lightering business, a $5.9 million increase in interest expense and an
increase in charter hire expenses, principally attributable to increased
activity in the Company’s Lightering business.

Consolidated TCE revenues for the first quarter of 2019 were $94.0
million, compared to $48.8 million in the first quarter of 2018.
Shipping revenues for the first quarter of 2019 were $101.9 million,
compared to $52.0 million in the first quarter of 2018.

The increase in interest expense in the first quarter of 2019 compared
to the first quarter of 2018 was primarily attributable to the impact of
debt facilities entered into by the Company during the second quarter of
2018 in connection with the completion of the acquisition of six VLCCs
from Euronav NV, and higher average interest rates under the Company’s
2017 Credit Agreement.

Adjusted EBITDA was $47.3 million for the quarter, compared to $6.5
million in the first quarter of 2018, principally driven by higher daily
rates across all the Company’s fleet sectors.

Crude Tankers

TCE revenues for the Crude Tankers segment were $72.6 million for the
quarter compared to $29.2 million in the first quarter of 2018. This
increase primarily resulted from the impact of higher average blended
rates in the VLCC, Suezmax, Aframax and Panamax sectors, with spots
rates climbing to approximately $32,000, $28,900, $20,900 and $17,600
per day, respectively, increasing TCE revenues by approximately $28.8
million in the aggregate compared to the first quarter of 2018.
Increased activity in the Crude Tankers Lightering business generated an
additional TCE revenue increase of $13.1 million. In addition, the
impact of increased revenue days in the VLCC sector accounted for an
increase of $5.2 million and reflected the acquisitions of one
2015-built and five 2016-built VLCCs, which were delivered to the
Company in June 2018, partially offset by the disposals of two older
VLCCs in 2018. The balance of the increase was substantially
attributable to higher activity in the Company’s Lightering business in
the 2019 quarter compared with the first quarter of 2018. Partially
offsetting the TCE revenue increases was a $3.8 million decrease in TCE
revenues due to a 355-day reduction in Aframax and Panamax revenue days,
which was driven primarily by the sale of two 2001-built Aframaxes and a
2002-built Panamax in 2018. Shipping revenues for the Crude Tankers
segment were $80.4 million for the quarter compared to $32.4 million in
the first quarter of 2018.

Excluding depreciation and amortization, the provision for credit losses
and general and administrative expenses, operating income for the Crude
Tankers Lightering business was $4.2 million for the first quarter of
2019 compared to $0.1 million for the first quarter of 2018 and $4.2
million for the fourth quarter of 2018. The increase in the current
quarter’s operating income as compared to prior year’s period primarily
reflects a higher volume of full service and service support only
lighterings in the current period. Increased U.S. exports will likely
continue to require transshipment during 2019, regardless of the
eventuality of any deep-water terminals. Because of the increased level
of activity in the Crude Tankers Lightering business over the last three
quarters and positive near-term prospects, the Company withdrew a
2002-built Aframax from the pool in which it was operating in March 2019
and is now employing it in the Lightering business.

Product Carriers

TCE revenues for the Product Carriers segment were $21.4 million for the
quarter, compared to $19.6 million in the first quarter of 2018. This
increase primarily resulted from the impact of higher average daily
blended rates earned by the LR1, LR2 and MR fleets, with spot rates
rising to approximately $24,000, $22,100 and $13,500 per day,
respectively, increasing TCE revenues by approximately $7.1 million in
the aggregate compared to the first quarter of 2018. This was partially
offset by the impact of a decline in revenue days in the MR sector
accounting for $5.1 million, arising primarily as a result of the sales
of five older MRs in 2018 and the redelivery of two MRs to their owners
during the second quarter of 2018 at the expiry of their respective
bareboat charters. Shipping revenues for the Product Carriers segment
were $21.5 million for the quarter, compared to $19.6 million in the
first quarter of 2018.

Share Repurchase Reauthorization

On March 5, 2019, the Company’s Board of Directors reauthorized the
Company’s $30 million share repurchase program for a 24-month period.
The amount and timing of any repurchases made under the stock repurchase
program will depend on a variety of factors, including market conditions
and available liquidity. The stock repurchase program does not obligate
the Company to repurchase any dollar amount or number of shares of
common stock and the program may be suspended or discontinued at any
time.

Conference Call

The Company will host a conference call to discuss its first quarter
2019 results at 9:00 a.m. Eastern Time (“ET”) on Thursday, May 9, 2019.

To access the call, participants should dial (855) 940-9471 for domestic
callers and (412) 317-5211 for international callers. Please dial in ten
minutes prior to the start of the call.

A live webcast of the conference call will be available from the
Investor Relations section of the Company’s website at http://www.intlseas.com.

An audio replay of the conference call will be available starting at
12:00 p.m. ET on Thursday, May 9, 2019 through 11:59 p.m. ET on
Thursday, May 16, 2019 by dialing (877) 344-7529 for domestic callers
and (412) 317-0088 for international callers, and entering Access Code
10131143.

About International Seaways, Inc.

International Seaways, Inc. (NYSE: INSW) is one of the largest tanker
companies worldwide providing energy transportation services for crude
oil and petroleum products in International Flag markets. International
Seaways owns and operates a fleet of 48 vessels as of December 31, 2018,
including 13 VLCCs, two Suezmaxes, six Aframaxes/LR2s, 11 Panamaxes/LR1s
and 10 MR tankers. Through joint ventures, it has ownership interests in
four liquefied natural gas carriers and two floating storage and
offloading service vessels. International Seaways has an experienced
team committed to the very best operating practices and the highest
levels of customer service and operational efficiency. International
Seaways is headquartered in New York City, NY. Additional information is
available at www.intlseas.com.

Forward-Looking Statements

This release contains forward-looking statements. In addition, the
Company may make or approve certain statements in future filings with
the Securities and Exchange Commission (SEC), in press releases, or in
oral or written presentations by representatives of the Company. All
statements other than statements of historical facts should be
considered forward-looking statements. These matters or statements may
relate to the Company’s plans to issue dividends, its prospects,
including statements regarding vessel acquisitions, trends in the tanker
markets, and possibilities of strategic alliances and investments.
Forward-looking statements are based on the Company’s current plans,
estimates and projections, and are subject to change based on a number
of factors. Investors should carefully consider the risk factors
outlined in more detail in the Annual Report on Form 10-K for 2018 for
the Company, the Quarterly Report on Form 10-Q for the quarter ending
March 31, 2019, and in similar sections of other filings made by the
Company with the SEC from time to time. The Company assumes no
obligation to update or revise any forward-looking statements.
Forward-looking statements and written and oral forward-looking
statements attributable to the Company or its representatives after the
date of this release are qualified in their entirety by the cautionary
statements contained in this paragraph and in other reports previously
or hereafter filed by the Company with the SEC.

   
 
Consolidated Statements of Operations
($ in thousands, except per share amounts)
Three Months Ended
  March 31,
  2019   2018
(Unaudited) (Unaudited)
Shipping Revenues:
Pool revenues $ 67,637 $ 35,514
Time and bareboat charter revenues 5,520 7,913
Voyage charter revenues   28,717   8,551
Total Shipping Revenues   101,874   51,978
 
Operating Expenses:
Voyage expenses 7,845 3,177
Vessel expenses 30,538 36,658
Charter hire expenses 17,185 8,623
Depreciation and amortization 18,929 17,624
General and administrative 6,773 6,029
Provision for credit losses 1,298
Third-party debt modification fees 30
(Gain)/loss on disposal of vessels and other property   (48)   6,573
Total operating expenses   82,550   78,684
Income/(loss) from vessel operations 19,324 (26,706)
Equity in income of affiliated companies   8,070   8,340
Operating income/(loss) 27,394 (18,366)
Other income   1,036   679
Income/(loss) before interest expense and income taxes 28,430 (17,687)
Interest expense   (17,533)   (11,621)
Income/(loss) before income taxes 10,897 (29,308)
Income tax provision     (8)
Net income/(loss) $ 10,897 $ (29,316)
 
Weighted Average Number of Common Shares Outstanding:
Basic 29,181,233 29,106,180
Diluted 29,223,187 29,106,180
 
Per Share Amounts:
Basic and diluted net income/(loss) per share $ 0.37 $ (1.01)
   
 
Consolidated Balance Sheets
($ in thousands)
March 31, December 31,
  2019   2018
(Unaudited) (Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 79,537 $ 58,313
Voyage receivables 95,818 94,623
Other receivables 3,872 5,246
Inventories 4,122 3,066
Prepaid expenses and other current assets 9,008 5,912
Current portion of derivative asset   151   460
Total Current Assets 192,508 167,620
 
Restricted Cash 57,618 59,331
Vessels and other property, less accumulated depreciation 1,320,642 1,330,795
Deferred drydock expenditures, net   19,114   16,773
Total Vessels, Deferred Drydock and Other Property   1,339,756   1,347,568
Investments in and advances to affiliated companies 267,518 268,322
Long-term derivative asset 104 704
Operating lease right-of-use assets 30,570
Other assets   2,996   5,056
Total Assets $ 1,891,070 $ 1,848,601
 
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities $ 33,234 $ 23,008
Current portion of operating lease liabilities 8,348
Current installments of long-term debt 57,680 51,555
Current portion of derivative liability   1,188   707
Total Current Liabilities 100,450 75,270
Long-term operating lease liabilities 19,512
Long-term debt 747,955 759,112
Long-term derivative liability 2,862 1,922
Other liabilities   2,304   2,442
Total Liabilities 873,083 838,746
 
Equity:
Total Equity   1,017,987   1,009,855
Total Liabilities and Equity $ 1,891,070 $ 1,848,601

On January 1, 2019, the Company adopted the provisions of ASU 2016-02, Leases
(ASC 842), using the modified retrospective transition approach.
Accordingly, the condensed consolidated balance sheet as of March 31,
2019 reflects right of use assets of $30,570 and corresponding lease
liabilities aggregating $27,860. The adoption of this new standard did
not have an impact on our lease expenses for the three months ended
March 31, 2019.

   
 
Consolidated Statements of Cash Flows
($ in thousands)
  Three Months Ended March 31,
  2019   2018
(Unaudited) (Unaudited)
Cash Flows from Operating Activities:
Net Income/(loss) $ 10,897 $ (29,316)
Items included in net income/(loss) not affecting cash flows:
Depreciation and amortization 18,929 17,624
Amortization of debt discount and other deferred financing costs 1,765 1,250
Stock compensation, non-cash 761 629
Earnings of affiliated companies (8,452) (8,425)
Other – net 36
Items included in net income/(loss) related to investing and
financing activities:
(Gain)/loss on disposal of vessels and other property, net (48) 6,573
Cash distributions from affiliated companies 2,050 6,212
Payments for drydocking (4,438) (1,249)
Insurance claims proceeds related to vessel operations 555 1,061
Changes in operating assets and liabilities   1,936   1,187
Net cash provided by/(used in) operating activities   23,991   (4,454)
Cash Flows from Investing Activities:
Expenditures for vessels and vessel improvements (2,962) (1,911)
Proceeds from disposal of vessels and other property, net (82) 57,430
Expenditures for other property (208) (126)
Investments in and advances to affiliated companies, net 478 869
Repayments of advances from affiliated companies   5,450   2,488
Net cash provided by/(used in) investing activities   2,676   58,750
Cash Flows from Financing Activities:
Payments on debt (6,764) (33,438)
Cash paid to tax authority upon vesting of stock-based compensation (149) (278)
Other – net   (243)  
Net cash used in financing activities   (7,156)   (33,716)
Net increase in cash, cash equivalents and restricted cash 19,511 20,580
Cash, cash equivalents and restricted cash at beginning of year   117,644   70,606
Cash, cash equivalents and restricted cash at end of period $ 137,155 $ 91,186

Spot and Fixed TCE Rates Achieved and Revenue Days

The following tables provides a breakdown of TCE rates achieved for spot
and fixed charters and the related revenue days for the three months
ended March 31, 2019 and the comparable period of 2018. Revenue days in
the quarter ended March 31, 2019 totaled 3,548 compared with 4,066 in
the prior year quarter. A summary fleet list by vessel class can be
found later in this press release. The information in these tables
excludes commercial pool fees/commissions averaging approximately $617
and $571 per day for the three months ended March 31, 2019 and 2018,
respectively.

               
 
  Three Months Ended March 31, 2019   Three Months Ended March 31, 2018
      Spot     Fixed     Total     Spot     Fixed     Total
Crude Tankers                                    
ULCC
Average TCE Rate $ $ $ $
Number of Revenue Days 90 90
VLCC
Average TCE Rate $ 31,993 $ $ 12,926 $ 13,085
Number of Revenue Days 1,134 1,134 617 89 706
Suezmax
Average TCE Rate $ 28,935 $ $ 14,927 $
Number of Revenue Days 180 180 180 180
Aframax
Average TCE Rate $ 20,905 $ $ 9,955 $
Number of Revenue Days 398 398 554 554
Panamax
Average TCE Rate $ 17,558 $ 12,313 $ 12,691 $ 11,562
Number of Revenue Days     73     445     518     180     537     717
Total Crude Tankers Revenue Days     1,785     445     2,230     1,621     626     2,247
Product Carriers                                    
LR2
Average TCE Rate $ 22,090 $ $ 13,911 $
Number of Revenue Days 90 90 90 90
LR1
Average TCE Rate $ 24,017 $ $ 11,639 $
Number of Revenue Days 339 339 354 354
MR
Average TCE Rate $ 13,462 $ $ 11,235 $ 5,294
Number of Revenue Days     889         889     1,285     90     1,375
Total Product Carriers Revenue Days     1,318         1,318     1,729     90     1,819
Total Revenue Days     3,103     445     3,548     3,350     716     4,066

Revenue days in the above table exclude days related to full service
lighterings and days for which recoveries were recorded under the
Company’s loss of hire insurance policies.

Fleet Information

As of March 31, 2019, INSW’s owned and operated 48 vessels, 36 of which
were owned, 6 of which were chartered in, and 6 were held through joint
venture partnerships (2 FSO and 4 LNG vessels)

             
 
Vessels Owned Vessels Chartered-in Total at March 31, 2019
Vessel Type Number

Weighted
by
Ownership

Number

Weighted
by
Ownership

Total
Vessels

Vessels
Weighted
by
Ownership

Total Dwt
Operating Fleet              
FSO 2 1.0 2 1.0 864,046
VLCC 13 13.0 13 13.0 3,950,110
Suezmax 2 2.0 2 2.0 316,864
Aframax 3 3.0 2 2.0 5 5.0 562,943
Panamax 7 7.0 7 7.0 487,490
Crude Tankers 27 26.0 2 2.0 29 28.0 6,181,453
 
LR2 1 1.00 1 1.0 109,999
LR1 4 4.00 4 4.0 297,710
MR 6 6.00 4 4.0 10 10.0 498,471
Product Carriers 11 11.00 4 4.0 15 15.0 906,180
               

Total Crude Tanker &
Product Carrier
Operating
Fleet

38 37.0 6 6.0 44 43.0 7,087,633
LNG Fleet 4 2.0 4 2.0 864,800 cbm
7,087,633
and
Total Operating Fleet   42   39.0   6   6.0   48   45.0   864,800 cbm

Reconciliation to Non-GAAP Financial Information

The Company believes that, in addition to conventional measures prepared
in accordance with GAAP, the following non-GAAP measures may provide
certain investors with additional information that will better enable
them to evaluate the Company’s performance. Accordingly, these non-GAAP
measures are intended to provide supplemental information, and should
not be considered in isolation or as a substitute for measures of
performance prepared with GAAP.

(A) Time Charter Equivalent (TCE) Revenues

Consistent with general practice in the shipping industry, the Company
uses TCE revenues, which represents 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, provides 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. Reconciliation of TCE revenues
of the segments to shipping revenues as reported in the consolidated
statements of operations follow:

   
 
Three Months Ended March 31,
($ in thousands)   2019   2018
Time charter equivalent revenues $ 94,029 $ 48,801
Add: Voyage expenses   7,845   3,177
Shipping revenues $ 101,874 $ 51,978

(B) EBITDA and Adjusted EBITDA

EBITDA represents net (loss)/income before interest expense, income
taxes and depreciation and amortization expense. Adjusted EBITDA
consists of EBITDA adjusted for the impact of certain items that we do
not consider indicative of our ongoing operating performance. EBITDA and
Adjusted EBITDA do not represent, and should not be a substitute for,
net income or cash flows from operations as determined in accordance
with GAAP. Some of the limitations are: (i) EBITDA and Adjusted EBITDA
do not reflect our cash expenditures, or future requirements for capital
expenditures or contractual commitments; (ii) EBITDA and Adjusted EBITDA
do not reflect changes in, or cash requirements for, our working capital
needs; and (iii) EBITDA and Adjusted EBITDA do not reflect the
significant interest expense, or the cash requirements necessary to
service interest or principal payments, on our debt. While EBITDA and
Adjusted EBITDA are frequently used as a measure of operating results
and performance, neither of them is necessarily comparable to other
similarly titled captions of other companies due to differences in
methods of calculation. The following table reconciles net income/(loss)
as reflected in the consolidated statements of operations, to EBITDA and
Adjusted EBITDA:

   
 
  Three Months Ended March 31,
($ in thousands)   2019     2018  
Net income/(loss) $ 10,897 $ (29,316 )
Income tax provision 8
Interest expense 17,533 11,621
Depreciation and amortization   18,929     17,624  
EBITDA 47,359 (63 )
Third-party debt modification fees and costs
associated with repurchase of debt 30
(Gain(/loss on disposal of vessels and other property   (48 )   6,573  
Adjusted EBITDA $ 47,341   $ 6,510  

(C) Total Cash

 
 
March 31, December 31,
($ in thousands)   2019   2018
Cash and cash equivalents $ 79,537 $ 58,313
Restricted cash   57,618   59,331
Total Cash $ 137,155 $ 117,644

Contacts

Investor Relations & Media Contact:
David Siever,
International Seaways, Inc.
(212) 578-1635
[email protected]

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