International Seaways, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report. International Seaways (INSW) owns and operates crude-oil and refined-product tankers, with Crude Tankers and Product Carriers segments. At year-end, it operated 73 vessels and had four LR1 newbuilds scheduled for delivery in 2025–2026.
Financial and operating performance
| Metric | 2023 | 2022 |
|---|---|---|
| Shipping revenue | $1,071.8 million | $864.7 million |
| Time charter equivalent (TCE) revenue | $1,055.5 million | $853.7 million |
| Income from vessel operations | $615.4 million | $442.7 million |
| Net income | $556.4 million | $387.9 million |
| Diluted earnings per share | $11.25 | $7.77 |
| Adjusted EBITDA | $723.8 million | $549.1 million |
| Cash provided by operating activities | $688.4 million | $287.8 million |
| Interest expense | $65.8 million | $57.7 million |
TCE revenue grew 24%, principally on higher average rates across most fleet sectors; Crude Tankers TCE revenue rose 59%, while Product Carriers TCE revenue increased 2%. Product Carriers generated approximately 51% of 2023 TCE revenue. Spot and pool employment accounted for 91% of TCE revenue, versus 96% in 2022. The filing does not present operating or net margins as headline metrics; calculated from reported amounts, operating margin was approximately 57% and net margin approximately 52%.
Year-end cash and cash equivalents were $126.8 million, with $60.0 million in short-term investments and $414.4 million of undrawn revolver capacity, for total liquidity of $601.2 million. Working capital was $269.5 million. Debt, net of discounts and deferred financing costs, was $722.7 million; net debt-to-capital was 23.8%, compared with 33.3% a year earlier. INSW prepaid $323.5 million of debt and made $152.2 million of scheduled principal payments. It ended the year with 30 unencumbered vessels and reported a 17% net loan-to-value ratio.
Total assets were $2.52 billion and total equity was $1.72 billion. Cash declined by $117.0 million during the year, reflecting substantial dividends, debt repayments, share repurchases and vessel investments, partly offset by operating cash flow and vessel-sale proceeds.
Material changes and capital allocation
- Income from vessel operations increased $172.8 million year over year; higher TCE revenue and vessel-sale gains were partly offset by higher depreciation, vessel expenses and charter hire.
- INSW completed delivery of three dual-fuel LNG VLCCs in 2023; they entered seven-year time charters with Shell. It also purchased two Aframaxes previously bareboat chartered-in and sold three 2008-built MRs, recognizing a net aggregate gain of about $36 million on the MR disposals.
- Capital expenditures and other property purchases totaled approximately $241 million, including vessel improvements, construction and drydocking. The company contracted for four dual-fuel-ready LR1s at an estimated total cost of $231 million.
- Shareholders received $308.2 million in dividends, or $6.29 per share, and INSW repurchased $13.9 million of common stock. The board declared a further $0.12 regular and $1.20 supplemental dividend per share in February 2024.
- INSW added a $160 million revolving credit facility maturing in 2029. It also established a $100 million at-the-market equity program in December 2023; the filing states no shares had been sold under it as of the filing date.
Outlook, risks and contingencies
- Management cited strong tanker rates continuing into the first quarter of 2024 and said liquidity, unencumbered vessels and diversified financing support operations and its strategy of fleet renewal, debt reduction and shareholder returns. The filing provides no specific earnings or rate guidance. Management’s market discussion cited IEA estimates of 2024 global oil consumption growth of 1.3% from 2023.
- Management attributes favorable recent tanker demand partly to disrupted trade flows related to the Russia–Ukraine conflict and Red Sea attacks, with rerouting around the Cape of Good Hope increasing ton-mile demand. A normalization of these conditions could reduce rates. Panama Canal drought-related restrictions may also disrupt voyages.
- Results remain highly exposed to volatile spot charter rates: 91% of 2023 TCE revenue came from spot-market activity. Other key risks include tanker supply growth, vessel-value declines, fuel and operating costs, counterparty performance, drydock costs, geopolitical events, piracy, and environmental regulation and decarbonization requirements.
- INSW reported $723 million of debt and said it was in compliance with financing covenants at year-end. Covenants include minimum liquidity, leverage, current-asset and collateral-value tests; weaker rates or vessel values could pressure compliance. A substantial portion of debt and lease financing carries floating rates, although interest-rate swaps hedge the full year-end term-loan balance and part of Ocean Yield financing.
- One vessel was arrested in July 2023 over a commercial dispute and later released. The claimants continue to seek approximately $25 million in security; arbitration is pending in England. INSW is defending the matter and has not accrued an estimated liability.
- INSW increased reserves for uncertain tax liabilities by $3.6 million in 2023; unrecognized tax benefits totaled $4.5 million at year-end. Continued qualification for the U.S. Section 883 shipping-income tax exemption is not assured; losing it could subject certain U.S.-source shipping income to a 4% gross tax.
- Subsequent to year-end, INSW agreed to acquire six MRs for about $232 million, payable 85% in cash and 15% in shares, with delivery expected by the end of the second quarter of 2024. The filing also describes an option for two additional LR1 newbuilds, which was due to expire March 31, 2024.
Important facts for investors to verify
- Whether spot tanker rates and the trade disruptions supporting demand persist, and how exposed earnings remain to spot markets.
- Funding, delivery timing and expected returns for the four LR1 newbuilds and the six-MR acquisition; also confirm whether the additional two-LR1 option was exercised.
- Debt-service and covenant headroom under lower-rate or lower-vessel-value scenarios, including floating-rate exposure and planned capital commitments.
- The outcome and potential security requirements in the arbitration involving the released vessel, and any resulting liability or cash impact.
- Future eligibility for the Section 883 exemption and developments in the uncertain freight-tax positions and global minimum-tax rules.
- The sustainability of supplemental dividends and whether the at-the-market program or other equity issuance would dilute shareholders.