International Seaways Reports Fourth Quarter and Full Year 2016 Results

NEW YORK--()--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 fourth quarter and full year 2016.

Highlights

  • Successfully completed the spin-off from its former parent company, Overseas Shipholding Group, Inc.
  • Time charter equivalent (TCE) revenues(A) for the fourth quarter and full year 2016 were $82.2 million and $385.0 million, down 31% and 19%, respectively, compared with the same periods in 2015.
  • Net loss for the fourth quarter was $57.8 million, or $1.98 per diluted share, compared with net income of $37.6 million, or $1.29 per diluted share for the fourth quarter 2015. The decrease reflects the impact of impairment charges of $60.1 million recorded in the fourth quarter 2016.
  • Net loss for the full year 2016 was $18.2 million, or $0.62 per diluted share, compared with net income of $173.2 million, or $5.94 per diluted share for the full year 2015.
  • Adjusted EBITDA(B) for the fourth quarter and full year 2016 were $37.5 million and $222.0 million, down 47% and 26%, respectively, from $71.1 million and $299.2 million in the same periods in 2015.
  • Total cash(C) was $92.0 million as of December 31, 2016.
  • Received a letter of award related to a five-year contract for its FSO joint ventures.

“We are pleased to have successfully completed the separation of International Seaways from OSG and to begin our journey as an independent public company,” said Lois K. Zabrocky, International Seaways’ president and CEO. “During the quarter, we also received a letter of award on a five-year contract for our FSO joint ventures, and we continue with negotiations on that project.”

Ms. Zabrocky continued, “Looking forward, International Seaways has a diversified 55 vessel fleet positioned to optimize revenue through a balanced mix of contracted cash flows and spot market upside. Our lean and scalable model and low break-evens along with our strong financial position allow us to navigate through the volatility in the tanker cycle while providing significant operating leverage to take advantage of a market recovery. While we expect the year ahead to present a number of challenges, I am confident in the solid foundation we have built and the measures we continue to take to create a platform for success. We have a strong set of assets and capabilities along with the right people and strategies to effectively execute and drive shareholder value.”

Fourth Quarter 2016 Results

Consolidated TCE revenues for the fourth quarter of 2016 were $82.2 million, a decrease of $37.6 million, or 31%, compared with the fourth quarter of 2015. Shipping revenues for the fourth quarter of 2016 were $85.8 million, a decrease of $39.2 million compared with the fourth quarter of 2015.

Operating loss for the quarter was $47.8 million, compared to operating income of $49.9 million for the fourth quarter of 2015. The decrease reflects the impact of impairment charges of $60.1 million recorded in the current quarter, $5.6 million of separation and transition costs and the decline in TCE revenues referred to above.

Net loss for the fourth quarter of 2016 was $57.8 million, or $1.98 per diluted share, compared with net income of $37.6 million, or $1.29 per diluted share in the fourth quarter of 2015.

Adjusted EBITDA was $37.5 million for the quarter, a decrease of $33.5 million compared with the fourth quarter of 2015, driven by lower daily rates.

International Crude Tankers

TCE revenues for the International Crude Tankers segment were $54.1 million for the quarter, down 36% compared with the fourth quarter of 2015. This decrease was primarily due to a decline in VLCC and Aframax rates, with spot rates declining to $32,100 and $15,100 per day, respectively, resulting in a $29.2 million decline in TCE revenues. Shipping revenues for the International Crude Tankers segment were $58.8 million for the quarter, down 34% compared with the fourth quarter 2015.

International Product Carriers

TCE revenues for the International Product Carriers segment were $27.5 million for the quarter, down 23% compared with the fourth quarter of 2015. This decrease was primarily due to a decline in MR spot rates, with spot rates declining to $10,800 per day. The decline in blended MR rates resulted in an $11.7 million decline in TCE revenues. This decrease was partially offset by increased revenue days in the LR1 and MR fleets due to fewer drydock and repair days, which accounted for a $3.9 million increase in TCE revenues. Shipping revenues for the International Product Carriers segment were $27.0 million for the quarter, down 25% compared with the fourth quarter 2015.

Full Year 2016 Results

Consolidated TCE revenues for the full year 2016 were $385.0 million, a decrease of $90.7 million, or 19%, compared with the full year 2015. Shipping revenues for the full year 2016 were $398.3 million, a decrease of $99.3 million compared with the full year 2015.

Operating income for the full year 2016 was $22.8 million, compared to operating income of $221.9 million for the full year 2015. The decrease reflects the impact of impairment charges of $109.7 million, $9.0 million of separation and transition costs and the decline in TCE revenues referred to above, partially offset by a decrease in general and administrative expenses of $9.9 million in 2016.

Net loss for the full year 2016 was $18.2 million, or $0.62 per diluted share, compared with net income of $173.2 million, or $5.94 per diluted share in the full year 2015.

Adjusted EBITDA was $222.0 million for the full year 2016, a decrease of $77.2 million compared with the full year 2015, driven by lower daily rates.

International Crude Tankers

TCE revenues for the International Crude Tankers segment were $258.2 million for the full year 2016, down 15% compared with the full year 2015. This decrease was primarily due to a decline in VLCC and Aframax rates, with spot rates declining to $42,000 and $21,300 per day, respectively, resulting in a $65.3 million decline in TCE revenues. This decrease was partially offset by increased revenue days in the VLCC and Aframax fleets due to fewer drydock and repair days, which accounted for a $11.6 million increase in TCE revenues, along with a $5.2 million increase in revenue resulting from the Company’s ULCC being taken out of lay-up in the first quarter of 2015. Shipping revenues for the International Crude Tankers segment were $271.8 million for the full year 2016, down 16% compared with the full year 2015.

International Product Carriers

TCE revenues for the International Product Carriers segment were $126.3 million for the full year 2016, down 26% compared with the full year 2015. This decrease was primarily due to a decline in MR spot rates, with spot rates declining to $13,100 per day. The decline in blended MR rates resulted in a $41.3 million decline in TCE revenues. Also contributing was a decrease in revenue days in the MR fleet due to the sale of a 1998-built MR in July 2015 as well as the redelivery of an MR to its owners at the expiry of its time charter in March 2015. Shipping revenues for the International Product Carriers segment were $126.6 million for the full year 2016, down 27% compared with the full year 2015.

Conference Call

The Company will host a conference call to discuss its fourth quarter and full year 2016 results at 9:00 a.m. Eastern Time (“ET”) on Wednesday, March 29, 2017.

To access the call, participants should dial (888) 317-6016 for domestic callers and (412) 317-6016 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 11:00 a.m. ET on Wednesday, March 29, 2017 through 10:59 p.m. ET on Wednesday, April 5, 2017 by dialing (877) 344-7529 for domestic callers and (412) 317-0088 for international callers, and entering Access Code 10103560.

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 55 vessels, including one ULCC, eight VLCCs, eight Aframaxes/LR2s, 12 Panamaxes/LR1s and 20 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 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 the Company 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.

A, B, CReconciliations of these non-GAAP financial measures are included in the financial tables attached to this press release starting on Page 10.
 
       

Consolidated Statements of Operations

($ in thousands, except per share amounts)

 
Three Months Ended December 31, Fiscal Year Ended December 31,
2016         2015     2016         2015  

Shipping Revenues:

(unaudited) (unaudited)

 

 

Pool revenues $46,108 $ 93,060 $ 246,196 $ 360,218
Time and bareboat charter revenues 21,129 11,838 95,484 52,092
Voyage charter revenues 18,573     20,072     56,639     85,324  
Total Shipping Revenues 85,810     124,970     398,319     497,634  
Operating Expenses:
Voyage expenses 3,595 5,114 13,274 21,844
Vessel expenses 37,005 39,382 141,944 143,925
Charter hire expenses 10,989 10,366 37,411 36,802
Depreciation and amortization 19,403 21,196 79,885 81,653
General and administrative 7,975 9,356 31,618 41,516
Technical management transition costs - - - 39
Separation and transition costs 5,618 - 9,043 -
(Gain)/Loss on disposal of vessels and other property,

including impairments

29,734     (55 )   79,203     (4,459 )
Total Operating Expenses 114,319     85,359     392,378     321,320  
Income/(Loss) from vessel operations (28,509 ) 39,611 5,941 176,314
Equity in income of affiliated companies (19,244 )   10,333     16,849     45,559  
Operating income/(loss) (47,753 ) 49,944 22,790 221,873
Other (expense)/income 37     1     (966 )   66  
Income/(loss) before interest expense, reorganization items

and income taxes

(47,716 ) 49,945 21,824 221,939
Interest expense (9,525 )   (10,934 )   (39,476 )   (42,970 )
Income/(loss) before reorganization items

and income taxes

(57,241 ) 39,011 (17,652 ) 178,969
Reorganization items, net (233 )   (1,151 )   (131 )   (5,659 )
Income/(loss) before income taxes (57,474 ) 37,860 (17,783 ) 173,310
Income tax benefit/(expense) (283 )   (254 )   (440 )   (140 )
Net Income/(Loss) $(57,757 ) $ 37,606   $ (18,223 ) $ 173,170  
 
Weighted Average Number of Common Shares Outstanding:
Basic 29,159,792 29,157,387 29,157,992 29,157,387
Diluted 29,159,792 29,157,387 29,157,992 29,157,387

Per Share Amounts:

Basic and diluted net income/(loss) per share

$(1.98

)

$

1.29

$

(0.62

)

$

5.94

 
       

Consolidated Balance Sheets

($ in thousands)

 
December 31,

2016

    December 31,

2015

ASSETS
Current Assets:
Cash and cash equivalents $ 92,001 $ 308,858
Voyage receivables 66,918 74,951
Other receivables 5,302 4,464
Inventories 1,338 3,396
Prepaid expenses and other current assets   5,350       5,067
Total Current Assets   170,909       396,736
Restricted cash – non current1 -

 

8,989
Vessels and other property, less accumulated depreciation 1,100,050 1,240,411
Deferred drydock expenditures, net   30,557       37,075
Total Vessels, Deferred Drydock and Other Property   1,130,607       1,277,486
 
Investments in and advances to affiliated companies 358,681 344,891
Other assets   2,324       1,848
Total Assets $ 1,662,521     $ 2,029,950
 
 
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities $ 38,237 $ 30,783
Payable to OSG 683 11,350
Current installments of long-term debt   6,183       6,284
Total Current Liabilities 45,103 48,417
 
Long-term debt 433,468 588,938
Other liabilities   4,438       8,809
Total Liabilities 483,009 646,164
Equity:
Total Equity   1,179,512       1,383,786
Total Liabilities and Equity $ 1,662,521     $ 2,029,950
 
   

Consolidated Statements of Cash Flows

($ in thousands)

 
Fiscal Year Ended December 31,

 

  2016         2015  
   
Cash Flows from Operating Activities:
Net income/(loss) $ (18,223 ) $ 173,170
Items included in net income/(loss) not affecting cash flows:
Depreciation and amortization 79,885 81,653
Loss on write-down of vessels and fixed assets 79,242 -
Amortization of debt discount and other deferred financing costs 6,643 5,835
Deferred financing costs write-off 5,097 -
Direct and allocated stock compensation, non-cash 2,841 2,811
Undistributed earnings of affiliated companies (17,816 ) (38,666 )
Allocated reorganization items, non-cash 131 5,659
Other – net 517 (41 )
Items included in net income/(loss) related to investing and financing activities:
Gain on disposal of vessels and other property – net (39 ) (4,459 )
Allocated general and administrative expenses recorded as capital contributions 1,146 954
Discount on repurchase of debt (3,755 ) -
Payments for drydocking (9,258 ) (20,728 )
Deferred financing costs paid for loan modification (8,273 ) (5,545 )
Changes in other operating assets and liabilities   (1,370 )       22,096  
Net cash provided by operating activities   116,768         222,739  
Cash Flows from Investing Activities:
Decrease in restricted cash 8,989 61,104
Expenditures for vessels and vessel improvement (1,988 ) (964 )
Proceeds from disposal of vessels and other property - 17,058
Expenditures for other property (907 ) -
Investments in and advances to affiliated companies (987 ) (153 )
Repayments of advances from affiliated companies 18,500 37,500
Other – net   -         (382 )
Net cash provided by investing activities   23,607         114,163  
Cash Flows from Financing Activities:
Payments on debt, including adequate protection payments (90,065 ) (6,284 )
Extinguishment of debt (65,167 ) -
Dividend payments to OSG   (202,000 )       (200,000 )
Net cash used in financing activities   (357,232 )       (206,284 )
Net increase/(decrease) in cash and cash equivalents (216,857 ) 130,618
Cash and cash equivalents at beginning of year   308,858         178,240  
Cash and cash equivalents at end of period $ 92,001       $ 308,858  
 

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 and fiscal year ended December 31, 2016 and the comparable periods of 2015. Revenue days in the quarter ended December 31, 2016 totaled 4,354 compared with 4,113 in the prior year quarter. Revenue days in the fiscal year ended December 31, 2016 totaled 17,420 compared with 17,192 in the prior year. A summary fleet list by vessel class can be found later in this press release.

       
Three Months Ended December 31, 2016 Three Months Ended December 31, 2015
      Spot     Fixed     Total     Spot     Fixed     Total
International Crude Tankers                                    
ULCC                
Average TCE Rate $ $ 44,850 $ $ 39,000
Number of Revenue Days 92 92 92 92
VLCC
Average TCE Rate $ 32,108 $ 41,577 $ 60,340 $
Number of Revenue Days 606 91 697 701 701
Aframax
Average TCE Rate $ 15,098 $ $ 34,032 $
Number of Revenue Days 603 603 625 625
Panamax
Average TCE Rate $ 13,485 $ 21,126 $ 22,560 $ 17,455
Number of Revenue Days   457       274     731       383       293     676
Total Intl. Crude Tankers Revenue Days       1,666       457     2,123       1,709       385     2,094
International Product Carriers                                
LR2
Average TCE Rate $ 16,679 $ $ 27,576 $
Number of Revenue Days 92 92 92 92
LR1
Average TCE Rate $ 15,015 $ 21,062 $ 26,718 $ 16,779
Number of Revenue Days 92 236 328 54 143 197
MR
Average TCE Rate $ 10,824 $ 11,540 $ 18,099 $ 5,294
Number of Revenue Days       1,627       184     1,811       1,638       92     1,730
Total Intl. Product Carriers Revenue Days       1,811       420     2,231       1,784       235     2,019
TOTAL REVENUE DAYS       3,477       877     4,354       3,493       620     4,113
 
       
Fiscal Year Ended December 31, 2016     Fiscal Year Ended December 31, 2015
      Spot     Fixed     Total     Spot     Fixed     Total
International Crude Tankers                                    
ULCC                
Average TCE Rate $ $ 43,613 $ $ 39,000
Number of Revenue Days 366 366 275 275
VLCC
Average TCE Rate $ 41,994 $ 40,737 $ 54,591
Number of Revenue Days 2,226 624 2,850 2,672 2,672
Aframax
Average TCE Rate $ 21,345 $ $ 34,042 $
Number of Revenue Days 2,508 2,508 2,439 2,439
Panamax
Average TCE Rate $ 19,006 $ 21,094 $ 25,226 $ 15,462
Number of Revenue Days   1,726       1,079     2,805       1,432       1,362     2,794
Total Intl. Crude Tankers Revenue Days       6,460       2,069     8,529       6,543       1,637     8,180
International Product Carriers                              
LR2
Average TCE Rate $ 21,153 $ $ 32,075 $
Number of Revenue Days 365 365 365 365
LR1
Average TCE Rate $ 20,599 $ 21,107 $ 27,465 $ 17,337
Number of Revenue Days 361 1,029 1,390 327 929 1,256
MR
Average TCE Rate $ 13,107 $ 11,309 $ 19,490 $ 7,004
Number of Revenue Days       6,431       705     7,136       6,949       442     7,391
Total Intl. Product Carriers Revenue Days       7,157       1,734     8,891       7,641       1,371     9,012
TOTAL REVENUE DAYS       13,617       3,803     17,420       14,184       3,008     17,192
 

Fleet Information

As of December 31, 2016, INSW’s owned and operated fleet totaled 55 vessels, 42 of which were owned and 7 of which were chartered in. In addition, through joint venture partnerships, INSW has ownership interest in 2 FSO and 4 LNG vessels. Those figures include vessels in which the Company has a partial ownership interest through its participation in joint ventures.

           
Vessels Owned Vessels Chartered-in Total at December 31, 2016
Vessel Type     Number    

Weighted by
Ownership

    Number     Weighted by
Ownership
    Total Vessels     Vessels
Weighted by
Ownership
    Total Dwt2
Operating Fleet                                          
FSO 2     1.0     2     1.0     873,916
VLCC and ULCC 9 9.0 9 9.0 2,875,775
Aframax 7 7.0 7 7.0 787,859
Panamax     8     8.0             8     8.0     555,504
International Flag Crude Tankers 26 25.0 26 25.0 5,093,054
 
LR2 1 1.0 1 1.0 109,999
LR1 4 4.0 4 4.0 297,710
MR     13     13.0     7     7.0     20     20.0     955,968
International Flag Product Carriers 18 18.0 7 7.0 25 25.0 1,363,677
                                           
Total Int’l Flag Operating Fleet     44     43.0     7     7.0     51     50.0     6,456,731
                                           
LNG Fleet     4     2.0             4     2.0     864,800 cbm
Total Operating Fleet     48     45.0     7     7.0     55     52.0     6,456,731
and
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 December 31,

   

Fiscal Year Ended December 31,

($ in thousands)   2016       2015     2016       2015
TCE revenues $ 82,215     $ 119,856     $385,045     $ 475,790
Add: Voyage Expenses   3,595       5,114     13,274       21,844
Shipping revenues $ 85,810     $ 124,970     $398,319     $ 497,634
 

(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 (loss)/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 (loss)/income as reflected in the consolidated statements of operations, to EBITDA and Adjusted EBITDA:

       

Three Months Ended December 31,

   

Fiscal Year Ended December 31,

($ in thousands)   2016       2015       2016       2015  
Net Income/(loss) $ (57,757 )   $ 37,606 $(18,223 )   $ 173,170
Income tax provision 283 254 440 140
Interest expense 9,525 10,934 39,476 42,970
Depreciation and amortization   19,403       21,196       79,885       81,653  
EBITDA (28,546 ) 69,990 101,578 297,933
Technical management transition costs - - - 39
Separation and transition costs 5,618 - 9,043 -

(Gain)/loss on disposal of vessels and other property, including
impairments

29,734 (55 ) 79,203 (4,459 )
Impairment of equity method investments 30,475 - 30,475 -
Loss on repurchase of debt - - 1,342 -
Other costs associated with repurchase of debt - - 225 -
Reorganization items, net   233       1,151       131       5,659  
Adjusted EBITDA $ 37,514     $ 71,086       $221,997     $ 299,172  
 

(C) Total Cash

       
($ in thousands) December 31,

2016

    December 31,

2015

 
Cash and cash equivalents $ 92,001 $ 308,858
Restricted cash   -       8,989
Total Cash $ 92,001     $ 317,847

Contacts

Investor Relations & Media:
International Seaways, Inc.
Brian Tanner, 212-578-1645
btanner@intlseas.com

Contacts

Investor Relations & Media:
International Seaways, Inc.
Brian Tanner, 212-578-1645
btanner@intlseas.com