International Seaways Reports Second Quarter 2018 Results
Aug. 08, 2018
NEW YORK--(BUSINESS WIRE)--Aug 8, 2018--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 second quarter 2018.
“During a challenging tanker environment, we took steps to enhance our earnings power ahead of a market recovery, while increasing our cash position to $143 million, said Lois K. Zabrocky, International Seaways’ president and CEO. We completed the acquisition of six highly efficient VLCCs, enabling the Company to significantly enhance its fleet size and age profile. We are pleased to have grown and renewed our fleet during a low point in the cycle without diluting shareholders and in a manner that maintains International Seaways’ overall balance sheet strength.”
Ms. Zabrocky continued, “Based on our lean and scalable model with predictable cash flows from our joint ventures and contracted fixed rate charters, we remain in a strong position to effectively operate through the current tanker cycle. Our success increasing our fleet’s DWT by 22% combined with our significant spot market exposure also bodes well for International Seaways to capitalize on future improvements to the product and crude tanker markets.”
Completion of VLCC Acquisition
On June 14, the Company completed its previously announced acquisition of six 300,000 DWT VLCCs for a purchase price of $434 million, inclusive of assumed debt, from Euronav NV. The six consist of five 2016-built VLCCs and one 2015-built VLCC, each constructed at Shanghai Waigaoqiao Shipbuilding Co. International Seaways financed the acquisition with the assumption of $311 million of the amended and restated debt secured by the six vessels under a China Export & Credit Insurance Corporation facility funded by The Export-Import Bank of China, Bank of China (New York Branch) and Citibank, N.A. In connection with this transaction and in order to finance portions of the consideration in connection therewith, and for other general corporate purposes, as applicable, the Company completed the following transactions during the six months ended June 30, 2018:
Second Quarter 2018 Results
Net loss for the second quarter was $18.8 million, or $0.65 per share, compared to the net loss of $11.6 million, or $0.40 per share, in the second quarter of 2017. The net loss in the second quarter of 2018 reflects a decline of $19.3 million in TCE revenues compared with the second quarter of 2017, higher interest expense of $3.8 million and a reduction in equity in income of affiliated companies of $5.0 million. These negative factors were partially offset to a large degree by a net gain on vessel disposals during the period of $6.7 million, as well as decreases in expenses associated with changes to the Company’s debt facilities aggregating $10.1 million and decreases in vessel expenses of $3.8 million and depreciation and amortization of $2.3 million. Net loss for the first half of 2018 was $48.1 million, or $1.65 per share, compared to $6.4 million, or $0.22 per share, for the first half of 2017.
Consolidated TCE revenues for the second quarter of 2018 were $50.0 million, compared to $69.3 million in the second quarter of 2017. Shipping revenues for the second quarter of 2018 were $56.9 million, compared to $72.0 million in the second quarter of 2017. Consolidated TCE revenues for the first half of 2018 were $98.8 million, compared to $153.4 million for the first half of last year. Shipping revenues for the first half of 2018 were $108.9 million compared to $160.7 million in the prior year period. The decline in TCE revenues reflects in part the effect of positioning vessels for sale as part of our fleet renewal strategy.
The reduction in equity in income of affiliated companies was principally attributable to decreases in earnings from the two FSO joint ventures as charter rates in the five-year service contracts that commenced in the third quarter of 2017 are lower than the charter rates included in the service contracts under which the FSO joint ventures operated during the second quarter of 2017. In addition, interest expense for the two FSO joint ventures increased in the second quarter of 2018 compared to the second quarter of 2017 as a result of drawdowns on debt facilities aggregating $220 million during April 2018.
The increase in interest expense was primarily attributable to the higher average outstanding principal balances under the Company’s 2017 Credit Agreement than under the 2014 facility that it replaced late in the second quarter of 2017 and higher related interest rates.
Adjusted EBITDA was $9.2 million for the quarter, compared to $32.0 million in the second quarter of 2017. Adjusted EBITDA was $15.7 million for the first half of 2018, compared to $78.6 million for the first half of 2017.
TCE revenues for the Crude Tankers segment were $34.4 million for the quarter, compared to $45.7 million in the second quarter of 2017. This decrease resulted primarily from the impact of lower average blended rates in the VLCC and Aframax sectors, aggregating approximately $15.4million. VLCC and Aframax spot rates declined to approximately $12,200 and $11,100 per day, respectively. Approximately $6.1 million of the reduction in TCE revenues represents the impact of the Company’s only ULCC being idle for the entirety of the current quarter and a 2000-built VLCC being held-for-sale as of the end of January 2018 through its sale in April 2018. There was a larger disparity in the spot market rates earned by the Company’s modern and non-modern VLCCs in the current period versus in the second quarter of 2017. VLCCs aged 15 years or less earned an average daily rate of $15,407 per day compared to the overall VLCC rate of $12,242 in the current period, while in the prior year’s period the VLCCs under 15 years of age earned an average daily rate of $27,496 per day compared to the overall VLCC rate of $26,657 per day. The decline in TCE revenues also reflects a $1.0 million decrease in revenue in the Crude Tankers Lightering business during the current quarter. These declines were partially offset by the impact of 540 additional revenue days, reflecting the two Suezmaxes and one VLCC that were acquired in the second half of 2017 and six VLCCs that were acquired in June 2018, aggregating $8.8 million. Shipping revenues for the Crude Tankers segment were $41.2 million for the quarter, compared to $47.9 million in the second quarter of 2017. TCE revenues for the Crude Tankers segment were $63.6 million for the first half of 2018, compared to $101.8 million for the first half of 2017. Shipping revenues for the Crude Tankers segment were $73.5 million for the first half of 2018, compared to $107.8 million in the first half of 2017.
TCE revenues for the Product Carriers segment were $15.6 million for the quarter, compared to $23.5 million in the second quarter of 2017. This decrease was primarily due to a decline in average daily blended rates earned by the MR fleet, with spot rates declining to approximately $8,600 per day, accounting for $2.3 million of the decline in TCE revenues. Additionally, the impact of 639 fewer MR revenue days due to the sales of five MRs between August 2017 and April 2018 and the redelivery of three MRs to their owners between December 2017 and June 2018 at the expiry of their respective bareboat charters accounted for $6.3 million of the lower TCE revenues. These declines were partially offset by increased daily rates earned by the LR1 and LR2 fleets. Shipping revenues for the Product Carriers segment were $15.8 million for the quarter, compared to $24.0 million in the second quarter of 2017. TCE revenues for the Product Carriers segment were $35.2 million for the first half of 2018, compared to $51.6 million for the first half of 2017. Shipping revenues for the Product Carriers segment were $35.4 million for the first half of 2018, compared to $52.9 million for the first half of 2017.
During the quarter, the Company delivered a 2000-built VLCC, which was classified as held for sale at March 31, to its buyer in April. The Company also agreed to sell a 2001-built Aframax, a 2004-built MR and a 2003-built ULCC, which delivered to their buyers in April, May and June, respectively. Net proceeds received from the ships delivered to buyers in the second quarter totaled $69.1 million.
The Company will host a conference call to discuss its first quarter 2018 results at 9:00 a.m. Eastern Time (“ET”) on Wednesday, August 8, 2018.
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 Wednesday, August 8, 2018 through 11:59 p.m. ET on Wednesday, August 15, 2018 by dialing (877) 344-7529 for domestic callers and (412) 317-0088 for international callers, and entering Access Code 10122824.
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 owned and operated a fleet of 53 vessels as of June 30, 2018, including fourteen VLCCs, two Suezmaxes, seven Aframaxes/LR2s, 12 Panamaxes/LR1s and 12 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.
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 2017 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.
Consolidated Statements of Operations
The Company adopted ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASC 715), which requires that an employer classify and report the service cost component in the same line item or items in the statement of operations as other compensation costs arising from services rendered by the pertinent employees during the period and disclose by line item in the statement of operations the amount of net benefit cost that is included in the statement of operations. The other components of net benefit cost would be presented in the statement of operations separately from the service cost component and outside the subtotal of income from operations. The Company adopted this accounting standard on January 1, 2018 and has applied the guidance retrospectively.
Consolidated Balance Sheets
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