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Section 1: 8-K




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

____________________________________________

FORM 8-K

CURRENT REPORT

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

                       October 7, 2019                       
Date of Report (Date of earliest event reported)


           International Seaways, Inc.           
(Exact Name of Registrant as Specified in Charter)

1-37836-1
Commission File Number


Marshall Islands
 
98-0467117
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification Number)

  
600 Third Avenue
New York, New York 10016
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code (212) 578-1600

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 
 

[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [x]
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. [x]

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

     
Title of each class
Symbol
Name of each exchange on which registered
Common Stock (no par value)
INSW
New York Stock Exchange
8.5% Senior Notes due 2023
INSW - PA
New York Stock Exchange
     
 
 
 


Section 1 – Registrant’s Business and Operations
Item 1.01 Entry Into a Material Definitive Agreement
On October 7, 2019 (the “Closing Date”), International Seaways, Inc. (the “Company”), sold its 49.9% ownership interest in its joint venture (the “JV”) with Qatar Gas Transport Corporation (Nakilat) (“Nakilat”) to Nakilat (the “Transaction”) pursuant to a share purchase agreement (the “Agreement”) entered into on the Closing Date. The JV owns four liquefied natural gas carriers. The purchase price for the Transaction was $123 million, excluding fees and expenses. The Agreement contains specified representations, warranties, covenants and indemnification provisions of the parties customary for transactions of this type. In addition, in connection with the Transaction, various other agreements governing the JV and the JV’s relationships with its counterparties were also amended to reflect the change in ownership and related matters.
Section 2 – Financial Information
 
Item 2.01 Completion of Acquisition or Disposition of Assets.
 
On the Closing Date, the Company completed the Transaction (as described above). This Current Report on Form 8-K is being filed to provide unaudited pro forma financial information for the Company for the fiscal year ended December 31, 2018 and the six months ended June 30, 2019, giving effect to the Transaction. The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2019 and for the year ended December 31, 2018, reflect the Company’s results as if the Transaction had occurred on January 1, 2018. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2019 gives effect to the Transaction as if it occurred on June 30, 2019.
 
This Current Report on Form 8-K and the exhibits hereto contain forward-looking statements. All statements other than statements of historical facts should be considered forward-looking statements. Words such as “may,” “will,” should,” “would,” “could,” “appears,” “believe,” “intends,” expects,” “estimates,” “targeted,” “plans,” “anticipates,” “goal” and similar expressions are intended to identify forward-looking statements but should not be considered as the only means through which these statements may be made. Such forward-looking statements represent the Company’s reasonable expectation with respect to future events or circumstances based on various factors and are subject to various risks and uncertainties and assumptions relating to the Company’s operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors, many of which are beyond the control of the Company, that could cause the Company’s actual results to differ materially from those indicated in these statements. Consideration should be given to these factors, which include but not limited to the risk factors discussed in the Company’s Form 10-K for the year ended December 31, 2018, and other reports filed with the U.S. Securities and Exchange Commission (“SEC”). Undue reliance should not be placed on any forward-looking statements. The Company assumes no obligation to update or revise any forward-looking statements. The forward-looking statements included in this Current Report on Form 8-K and written and oral forward looking statements attributable to the Company or its representatives after the date of this Current Report on Form 8-K are qualified in their entirety by the cautionary statement contained in this paragraph and in other reports hereafter filed by the Company with the SEC.
 
Section 9 - Financial Statements and Exhibits.
 
Item 9.01 Financial Statements and Exhibits.
 
 (b)       Pro Forma Financial Information
 
The Unaudited Pro Forma Condensed Consolidated Financial Statements comprised of the Company’s unaudited pro forma condensed consolidated balance sheet as of June 30, 2019 and unaudited pro forma condensed consolidated statements of operations for the Company for the fiscal year ended December 31, 2018 and the six months ended June 30, 2019 are filed as Exhibit 99 to this Current Report on Form 8-K.

Exhibit No.
Description
99
Unaudited Pro Forma Condensed Consolidated Financial Statements.
   


SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
INTERNATIONAL SEAWAYS, INC.
 
(Registrant)
 
 
   
Date: October 11, 2019
By
/s/ James D. Small III
 
 
Name:
James D. Small III
Title:
Chief Administrative Officer, Senior Vice President,
Secretary and General Counsel
 



  


EXHIBIT INDEX
 
Exhibit No.
Description
99
Unaudited Pro Forma Condensed Consolidated Financial Statements.





 

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Section 2: EX-99

Exhibit 99

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Overview

On October 7, 2019, International Seaways, Inc. (the “Company” or “INSW”) sold its 49.9% interest in its joint venture with Qatar Gas Transport Company Ltd. (Nakilat) (“Nakilat”) which owns four liquefied natural gas carriers to Nakilat for $123 million in cash (the “Transaction”).

Basis of preparation

The unaudited pro forma condensed consolidated financial statements of the Company as set forth below are comprised of our unaudited pro forma condensed consolidated balance sheet as of June 30, 2019 and our unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2018 and the six months ended June 30, 2019. The unaudited pro forma condensed consolidated financial statements of the Company have been derived from our historical audited consolidated financial statements for the year ended December 31, 2018, and our historical unaudited condensed consolidated financial statements for the six months ended June 30, 2019 and have been prepared in accordance with Article 11 of Regulation S-X. Such unaudited pro forma condensed consolidated financial statements should be read in conjunction with (i) the audited consolidated financial statements and accompanying notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, (ii) the unaudited condensed consolidated financial statements and accompanying notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2019 included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019 and (iii) the risk factors outlined in detail under the caption “Risk Factors” within each of the Reports described above.

The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2019 and for the year ended December 31, 2018, reflect the Company’s results as if the Transaction had occurred on January 1, 2018. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2019 gives effect to the Transaction as if it occurred on June 30, 2019.

The unaudited pro forma condensed consolidated financial statements are subject to the assumptions and adjustments described in the accompanying notes. The pro forma adjustments are based on available information and assumptions that the Company’s management believes are reasonable, that reflect the impacts of adjustments directly attributable to the Transaction that are factually supportable, and for purposes of the statements of operations, are expected to have a continuing impact on the Company. The unaudited pro forma condensed consolidated statements of operations do not give effect to items of expense that, although directly attributable to the Transaction, will not have a continuing impact on the statement of operations.

The unaudited pro forma condensed consolidated financial statements are provided for illustrative and information purposes only and are not intended to represent or necessarily be indicative of the Company’s results of operations or financial condition had the Transaction been completed on the dates indicated, nor do they purport to project our results of operations or financial condition for any future period or as of any future date.


 
INTERNATIONAL SEAWAYS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2019
DOLLARS IN THOUSANDS
(UNAUDITED)
 
 
 
INSW Historical
   
Investment in LNG JV (a)
   
Pro Forma
Adjustments for
LNG Sale
   
Pro Forma INSW Continuing Operations
 
ASSETS
                       
Current Assets:
                       
Cash and cash equivalents
 
$
91,662
   
$
36
   
$
-
   
$
91,698
 
Voyage receivables, including unbilled
   
74,460
     
-
     
-
     
74,460
 
Other receivables
   
5,576
     
-
     
-
     
5,576
 
Inventories
   
4,110
     
-
     
-
     
4,110
 
Prepaid expenses and other current assets
   
6,916
     
-
     
-
     
6,916
 
Current portion of derivative asset
   
30
     
-
     
-
     
30
 
  Total Current Assets
   
182,754
     
36
     
-
     
182,790
 
Restricted cash
   
58,630
     
122,790
     
-
     
181,420
 
Vessels and other property, less accumulated depreciation
   
1,291,862
     
-
     
-
     
1,291,862
 
Vessel held for sale
   
6,754
     
-
     
-
     
6,754
 
Deferred drydock expenditures, net
   
23,382
     
-
     
-
     
23,382
 
Operating lease right-of-use assets
   
33,216
     
-
     
-
     
33,216
 
Investments in and advances to affiliated companies
   
265,959
     
(116,203
)
   
-
     
149,756
 
Long-term derivative asset
   
26
     
-
     
-
     
26
 
Other assets
   
2,626
     
-
     
-
     
2,626
 
  Total Assets
 
$
1,865,209
   
$
6,623
   
$
-
   
$
1,871,832
 
                                 
LIABILITIES AND EQUITY
                               
Current Liabilities:
                               
Accounts payable, accrued expenses and other current liabilities
 
$
34,427
   
$
36
   
$
-
   
$
34,463
 
Current portion of operating lease liabilities
   
11,481
     
-
     
-
     
11,481
 
Current installments of long-term debt
   
57,680
     
-
     
-
     
57,680
 
Current portion of derivative liability
   
1,912
     
-
     
-
     
1,912
 
  Total Current Liabilities
   
105,500
     
36
     
-
     
105,536
 
Long-term operating lease liabilities
   
19,030
     
-
     
-
     
19,030
 
Long-term debt
   
736,826
     
-
     
-
     
736,826
 
Long-term derivative liability
   
6,386
     
-
     
-
     
6,386
 
Other liabilities
   
2,129
     
-
     
-
     
2,129
 
Total Liabilities
   
869,871
     
36
     
-
     
869,907
 
                                 
Commitments and contingencies
                               
                                 
Equity:
                               
Capital
   
1,310,731
     
-
     
-
     
1,310,731
 
Accumulated deficit
   
(275,111
)
   
(14,847
)
   
-
     
(289,958
)
     
1,035,620
     
(14,847
)
   
-
     
1,020,773
 
Accumulated other comprehensive loss
   
(40,282
)
   
21,434
     
-
     
(18,848
)
Total Equity
   
995,338
     
6,587
     
-
     
1,001,925
 
Total Liabilities and Equity
 
$
1,865,209
   
$
6,623
   
$
-
   
$
1,871,832
 
 
See accompanying notes to the unaudited pro forma condensed consolidated financial statements


INTERNATIONAL SEAWAYS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2019
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
 
 
 
INSW Historical
   
Investment in LNG JV (a)
   
Pro Forma
Adjustments for
LNG Sale
     
Pro Forma INSW Continuing Operations
 
Shipping Revenues:
                 
 
     
Pool revenues, including revenues from companies accounted for by the equity method
 
$
112,350
   
$
-
   
$
-
 
 
 
$
112,350
 
Time and bareboat charter revenues
   
12,061
     
-
     
-
 
 
   
12,061
 
Voyage charter revenues
   
46,473
     
-
     
-
 
 
   
46,473
 
 
   
170,884
     
-
     
-
 
 
   
170,884
 
 
                       
 
       
Operating Expenses:
                       
 
       
Voyage expenses
   
14,368
     
-
     
-
 
 
   
14,368
 
Vessel expenses
   
61,284
     
-
     
-
 
 
   
61,284
 
Charter hire expenses
   
30,218
     
-
     
-
 
 
   
30,218
 
Depreciation and amortization
   
37,747
     
-
     
-
 
 
   
37,747
 
General and administrative
   
13,070
     
-
     
-
       
13,070
 
Provision for credit losses
   
1,277
     
-
     
-
       
1,277
 
Third-party debt modification fees
   
30
     
-
     
-
       
30
 
Loss/(gain) on disposal of vessels and other property, net of impairments
   
1,500
     
-
               
1,500
 
Total operating expenses
   
159,494
     
-
     
-
 
 
   
159,494
 
(Loss)/income from vessel operations
   
11,390
     
-
     
-
 
 
   
11,390
 
Equity in income of affiliated companies
   
16,085
     
(6,712
)
   
-
       
9,373
 
Operating income/(loss)
   
27,475
     
(6,712
)
   
-
 
 
   
20,763
 
Other income/(expense)
   
1,875
     
-
     
1,408
 
(c)
   
3,283
 
Income before interest expense and income taxes
   
29,350
     
(6,712
)
   
1,408
 
 
   
24,046
 
Interest expense
   
(34,976
)
   
-
     
122
 
(b)
   
(34,854
)
Loss before income taxes
   
(5,626
)
   
(6,712
)
   
1,530
       
(10,808
)
Income tax provision
   
-
     
-
     
-
       
-
 
Net Loss
 
$
(5,626
)
   
(6,712
)
 
$
1,530
 
 
 
$
(10,808
)
 
                       
 
       
Weighted Average Number of Common Shares Outstanding:
                       
 
       
Basic
   
29,200,897
                 
 
   
29,200,897
 
Diluted
   
29,200,897
                 
 
   
29,200,897
 
 
                       
 
       
Per Share Amounts:
                       
 
       
Basic and diluted net loss per share
 
$
(0.19
)
               
     
 
$
(0.37
)
 
See accompanying notes to the unaudited pro forma condensed consolidated financial statements
 


   
INTERNATIONAL SEAWAYS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2018
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
 
 
 
INSW Historical
   
Investment in LNG JV (a)
   
Pro Forma
Adjustments for
LNG Sale
     
Pro Forma INSW Continuing Operations
 
Shipping Revenues:
                 
 
     
Pool revenues, including revenues from companies accounted for by the equity method
 
$
177,206
   
$
-
   
$
-
 
 
 
$
177,206
 
Time and bareboat charter revenues
   
25,961
     
-
     
-
 
 
   
25,961
 
Voyage charter revenues
   
67,194
     
-
     
-
 
 
   
67,194
 
 
   
270,361
     
-
     
-
 
 
   
270,361
 
 
                       
 
       
Operating Expenses:
                       
 
       
Voyage expenses
   
27,261
     
-
     
-
 
   
27,261
 
Vessel expenses
   
135,003
     
-
     
-
 
   
135,003
 
Charter hire expenses
   
44,910
     
-
     
-
 
   
44,910
 
Depreciation and amortization
   
72,428
     
-
     
-
 
   
72,428
 
General and administrative
   
24,304
     
-
     
-
 
   
24,304
 
Third-party debt modification fees
   
1,306
     
-
     
-
 
   
1,306
 
Separation and transition costs
   
-
     
-
     
-
 
   
-
 
Loss on disposal of vessels and other property, including impairments
   
19,680
     
-
     
-
 
   
19,680
 
Total Operating Expenses
   
324,892
     
-
     
-
 
   
324,892
 
(Loss)/income from vessel operations
   
(54,531
)
   
-
     
-
 
   
(54,531
)
Equity in income of affiliated companies
   
29,432
     
(9,850
)
       
   
19,582
 
Operating (loss)/income
   
(25,099
)
   
(9,850
)
   
-
 
   
(34,949
)
Other expense
   
(3,715
)
   
-
     
2,188
 
(c)
   
(1,527
)
(Loss)/income before interest expense, reorganization items and income taxes
   
(28,814
)
   
(9,850
)
   
2,188
 

   
(36,476
)
Interest expense
   
(60,231
)
   
-
     
235
 
(b)
   
(59,996
)
Loss before reorganization items and income taxes
   
(89,045
)
   
(9,850
)
   
2,423
 
   
(96,472
)
Reorganization items, net
   
-
     
-
     
-
 
   
-
 
Loss before income taxes
   
(89,045
)
   
(9,850
)
   
2,423
 
   
(96,472
)
Income tax benefit/(provision)
   
105
     
-
     
-
 
   
105
 
Net Loss
 
$
(88,940
)
   
(9,850
)
 
$
2,423
 
 
$
(96,367
)
 
                       
       
Weighted Average Number of Common Shares Outstanding:
                       
       
Basic
   
29,136,634
                 
   
29,136,634
 
Diluted
   
29,136,634
                 
   
29,136,634
 
 
                       
       
Per Share Amounts:
                       
       
Basic and diluted net loss per share
 
$
(3.05
)
               
 
$
(3.31
)
 
See accompanying notes to the unaudited pro forma condensed consolidated financial statements
 



Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements

(a)
Represents the elimination of the Company’s investment in its joint venture with Nakilat, which had been accounted for as an equity method investment, and its associated interest in the income and other comprehensive loss generated by such joint venture. Upon the sale, the Company’s share of the unrealized losses associated with interest rate swaps held by the joint venture were reclassified to earnings and are reflected as an increase in the “Accumulated deficit” line item in the unaudited pro forma condensed consolidated balance sheet as of June 30, 2019. The investment was sold for net cash proceeds of $122,826, which would have resulted in a gain on sale being recorded by the Company had the Transaction taken place on either January 1, 2018 or June 30, 2019. The Company’s debt agreements restrict the use of such cash proceeds from asset sales and thus the net cash proceeds less $36 of direct transaction costs incurred by the Company are reflected in the “Restricted cash” line item in the unaudited pro forma condensed consolidated balance sheet as of June 30, 2019. The direct transaction costs are reflected as an increase to the “Accounts payable, accrued expenses and other current liabilities” line item in the unaudited pro forma condensed consolidated balance sheet as of June 30, 2019.

(b)
Represents adjustments to exclude contractual fees that the Company paid to Nakilat and Overseas Shipholding Group, Inc. (“OSG”) in association with performance guarantees provided by each of Nakilat and OSG in favor of the charterer of the joint venture’s vessels. Such OSG guarantees and the Company’s obligation to pay fees in connection with such OSG and Nakilat guarantees as well as performance guarantees provided by the Company were all terminated on the date of the Transaction.

(c)
Represents adjustments to include estimated interest income that could have been earned on the cash proceeds received as a part of the Transaction, as the Company has various alternatives as to how it will employ the cash, but at a minimum it would have invested the net cash proceeds in money market accounts in accordance with the terms of the Company’s debt agreements. In arriving at the estimated interest income, average interest rates of 1.78% for the year ended December 31, 2018 and 2.29% for the six months ended June 30, 2019 were used.




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