| • | after the interested person became an interested person and prior to the consummation of the business combination: (i) such interested person shall have taken steps to ensure that the board includes at all times representation by continuing directors proportionate in number to the ratio that the number of shares carrying voting rights in our company from time to time owned by shareholders who are not interested persons bears to all shares carrying voting rights in our company outstanding at the time in question (with a continuing director to occupy any resulting fractional position among the directors); (ii) the interested person shall not have acquired from us or any of our subsidiaries, directly or indirectly, any shares (except (x) upon conversion of convertible securities acquired by it prior to becoming an interested person, or (y) as a result of a pro rata share dividend, share split or division or subdivision of shares, or (z) in a transaction consummated on or after June 7, 2001 and which satisfied all requirements of our Bye-laws); (iii) the interested person shall not have acquired any additional shares, or rights over shares, carrying voting rights or securities convertible into or exchangeable for shares, or rights over shares, carrying voting rights except as a part of the transaction which resulted in the interested person becoming an interested person; and (iv) the interested person shall not have (x) received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or tax credits provided by us or any subsidiary of ours, or (y) made any major change in our business or equity capital structure or entered into any contract, arrangement or understanding with us except any change, contract, arrangement or understanding as may have been approved by the favorable vote of not less than a majority of the continuing directors; and |
| • | a proxy statement complying with the requirements of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), as amended, shall have been mailed to all holders of shares carrying voting rights in our company from time to time owned by shareholders who are not interested persons bears to all shares carrying voting rights in our company outstanding at the time in question (with a continuing director to occupy any resulting fractional position among the directors); (ii) the interested person shall not have acquired from us or any of our subsidiaries, directly or indirectly, any shares (except (x) upon conversion of convertible securities acquired by it prior to becoming an interested person, or (y) as a result of a pro rata share dividend, share split or division or subdivision of shares, or (z) in a transaction consummated on or after June 7, 2001 and which satisfied all requirements of ourBye-laws); (iii) the interested person shall not have acquired any additional shares, or rights over shares, carrying voting rights or securities convertible into or exchangeable for shares, or rights over shares, carrying voting rights except as a part of the transaction which resulted in the interested person becoming an interested person; and (iv) the interested person shall not have (x) received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or tax credits provided by us or any subsidiary of ours, or (y) made any major change in our business or equity capital structure or entered into any contract, arrangement or understanding with us except any change, contract, arrangement or understanding as may have been approved by the favorable vote of not less than a majority of the continuing directors; anda proxy statement complying with the requirements of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), as amended, shall have been mailed to all holders of shares carrying
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| voting rights for the purpose of soliciting approval by the shareholders of the business combination. The proxy statement shall contain at the front thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the business combination which the continuing directors, or any of them, may have furnished in writing and, if deemed advisable by a majority of the continuing directors, an opinion of a reputable investment banking firm as to the adequacy (or inadequacy) of the terms of the business combination from the point of view of the holders of shares carrying voting rights other than any interested person (the investment banking firm to be selected by a majority of the continuing directors, to be furnished with all information it reasonably requests, and to be paid a reasonable fee for its services upon receipt by us of the opinion). |
For purposes of this provision, a “business combination” includes mergers,amalgamations, consolidations, exchanges, asset sales, leases and other transactions resulting in a financial benefit to the interested shareholder and an “interested person” is any person or entity that beneficially owns 15% or more of our voting shares and any person or entity affiliated with or controlling or controlled by that person or entity. “Continuing directors” means directors who have been elected before June 7, 2001 or designated as continuing directors by the majority of the then continuing directors. Consequences of becoming an interested person. OurBye-laws provide that, at any time a person acquires or becomes the beneficial owner of 15% or more of our voting shares, which we refer to as the “threshold,” then, except as permitted by our bye-laws, the person will not be entitled to exercise voting rights for the number of common shares in excess of the threshold he holds or beneficially owns. This disability applies to any general meeting of our company as to which the record date or scheduled meeting date falls within a period of five years from the date such person acquired beneficial ownership of a number of common shares in excess of the threshold. The above restrictions do not apply to us, our subsidiaries or to: | • | any person who on June 7, 2001 was the holder or beneficial owner of a number of shares carrying voting rights that exceeded the threshold and who continues at all times after June 7, 2001 to hold shares in excess of the threshold; and |
| • | any person whose acquisition of a number of shares exceeding the threshold has been approved by (1) a majority of 80% of those present and voting at a general meeting or (2) by a resolution adopted by the continuing directors, followed by a resolution adopted by a shareholder vote in excess of 50% of the voting shares not owned by such interested person. |
any person who on June 7, 2001 was the holder or beneficial owner of a number of shares carrying voting rights that exceeded the threshold and who continues at all times after June 7, 2001 to hold shares in excess of the threshold; and
any person whose acquisition of a number of shares exceeding the threshold has been approved by (1) a majority of 80% of those present and voting at a general meeting or (2) by a resolution adopted by the continuing directors, followed by a resolution adopted by a shareholder vote in excess of 50% of the voting shares not owned by such interested person.
Transfer agent and registrar. Computershare Trust Company N.A. serves as transfer agent and registrar for our common shares and our Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares.Shares, Series F Preferred Shares and Series G Convertible Preferred Shares. New York Stock Exchange listing. Our common shares are listed on the New York Stock Exchange under the ticker symbol “TNP.” Our Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares are listed on the New York Stock Exchange under the trading symbols“TNP-PC” “TNP-PD”,“TNP-PD” “TNP-PE” and “TNP-PF”,“TNP-PE” and“TNP-PF”, respectively. Material Contracts See description of Management Agreement under Item 4. “Information on the Company—Management Contract—Executive and Commercial Management” and for a description of the Share Purchase Agreement for Series G Convertible Preferred Shares “Item 10. Description of Share Capital – Series G Convertible Preferred Shares”. Such description is not intended to be complete and reference is made to the contract itself, which is an exhibit to this Annual Report onForm 20-F. -106-
Exchange Controls Under Bermuda and Greek law, there are currently no restrictions on the export or import of capital, including foreign exchange controls, or restrictions that affect the remittance of dividends, interest or other payments to nonresident holders of our common shares. -107-
TAX CONSIDERATIONS Taxation of Tsakos Energy Navigation Limited We believe that none of our income will be subject to tax in Bermuda, which currently has no corporate income tax, or by other countries in which we conduct activities or in which our customers are located, excluding the United States. However, this belief is based upon the anticipated nature and conduct of our business which may change, and upon our understanding of our position under the tax laws of the various countries in which we have assets or conduct activities, which position is subject to review and possible challenge by taxing authorities and to possible changes in law, which may have retroactive effect. The extent to which certain taxing jurisdictions may require us to pay tax or to make payments in lieu of tax cannot be determined in advance. In addition, payments due to us from our customers may be subject to withholding tax or other tax claims in amounts that exceed the taxation that we might have anticipated based upon our current and anticipated business practices and the current tax regime. Bermuda tax considerations Under current Bermuda law, we are not subject to tax on income or capital gains. Furthermore, we have obtained from the Minister of Finance of Bermuda, under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, as amended (the “Exempted Undertakings Act”), assurance that, in the event that Bermuda enacts any legislation imposing tax computed on profits or income or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of such tax will not be applicable to us or to any of our operations, or to the share capital of Tsakos Energy Navigation Limited, until March 31, 2035. This assurance does not, however, prevent the imposition of property taxes on any company owning real property or leasehold interests in Bermuda or on any person ordinarily resident in Bermuda. We pay an annual government fee on our authorized share capital and share premium, which for 20192022 is $19,615.$19,605. Under current Bermuda law, shareholders not ordinarily resident in Bermuda will not be subject to any income, withholding or other taxes or stamp or other duties upon the issue, transfer or sale of common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares or on any payments made on common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares. United States federal income tax considerations The following summary of United States federal income tax matters is based on the Internal Revenue Code, judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the United States department of the treasury, all of which are subject to change, possibly with retroactive effect. This discussion does not address any United States local or state taxes. The following is a summary of the material United States federal income tax considerations that apply to (1) our operations and the operations of our vessel-operating subsidiaries and (2) the acquisition, ownership and disposition of common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares by a shareholder that is a United States holder. This summary is based upon our beliefs and expectations concerning our past, current and anticipated activities, income and assets and those of our subsidiaries, the direct, indirect and constructive ownership of our shares and the trading and quotation of our shares. Should any such beliefs or expectations prove to be incorrect, the conclusions described herein could be adversely affected. For purposes of this discussion, a United States holder is a beneficial owner of common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares who or which is: | • | An individual citizen or resident of the United States; |
An individual citizen or resident of the United States;
| • | A corporation, or other entity taxable as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States or any of its political subdivisions; |
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A corporation, or other entity taxable as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States or any of its political subdivisions; or
| • | An estate or trust the income of which is subject to United States federal income taxation regardless of its source; or |
An estate or trust the income of which is subject to United States federal income taxation regardless of its source.
| • | a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) it has in effect a valid election to be treated as a U.S. person. |
This summary deals only with common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares that are held as capital assets by a United States holder, and does not address tax considerations applicable to United States holders that may be subject to special tax rules, such as: | • | Dealers or traders in securities or currencies; |
| • | United States holders that hold common shares as a part of a straddle or conversion transaction or other arrangement involving more than one position; |
Dealers or traders in securities or currencies;
| • | United States holders that own, or are deemed for United States tax purposes to own, ten percent or more of the total combined voting power of all classes of our voting stock; |
| • | A person subject to United States federal alternative minimum tax; |
| • | A partnership or other entity classified as a partnership for United States federal income tax purposes; |
United States holders that hold common shares as a part of a straddle or conversion transaction or other arrangement involving more than one position;
| • | United States holders that have a principal place of business or “tax home” outside the United States; or |
United States holders that own, or are deemed for United States tax purposes to own, ten percent or more of the total combined voting power of all classes of our voting stock;
A person subject to United States federal alternative minimum tax;
A partnership or other entity classified as a partnership for United States federal income tax purposes;
United States holders that have a principal place of business or “tax home” outside the United States; or
United States holders whose “functional currency” is not the United States dollar.
| • | United States holders whose “functional currency” is not the United States dollar. |
The discussion below is based upon the provisions of the Internal Revenue Code and regulations, administrative pronouncements and judicial decisions as of the date of this Annual Report; any such authority may be repealed, revoked or modified, perhaps with retroactive effect, so as to result in United States federal income tax consequences different from those discussed below. No ruling has been or will be requested from the IRS regarding any matter affecting us or our shareholders. The statements made herein may be challenged by the IRS and, if so challenged, may not be sustained upon review in a court. Because United States tax consequences may differ from one holder to the next, the discussion set out below does not purport to describe all of the tax considerations that may be relevant to you and your particular situation. Accordingly, you are advised to consult your own tax advisor as to the United States federal, state, local and other tax consequences of investing in the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares. Taxation of our operations In General Unless exempt from United States federal income taxation under the rules discussed below, a foreign corporation is subject to United States federal income taxation in respect of any income that is derived from the use of vessels, from the hiring or leasing of vessels for use on a time, voyage or bareboat charter basis, from the participation in a pool, partnership, strategic alliance, joint operating agreement, code sharing arrangements or other joint venture it directly or indirectly owns or participates in that generates such income, or from the performance of services directly related to those uses, which we refer to as “shipping income,” to the extent that the shipping income is derived from sources within the United States. For these purposes, 50% of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States constitutes income from sources within the United States, which we refer to as “U.S.-source shipping income.” -109-
Shipping income attributable to transportation that both begins and ends in the United States is considered to be 100% from sources within the United States. We do not expect that we or any of our subsidiaries will engage in transportation that produces income which is considered to be 100% from sources within the United States. Shipping income attributable to transportation exclusively betweennon-United States ports will be considered to be 100% derived from sources outside the United States. Shipping income derived from sources outside the United States will not be subject to any United States federal income tax. In the absence of exemption from tax under Section 883, our gross U.S.-source shipping income would be subject to a 4% tax imposed without allowance for deductions as described below. Exemption of Operating Income from United States Federal Income Taxation Under Section 883, we and our subsidiaries will be exempt from United States federal income taxation on our U.S.-source shipping income if: | • | We and the relevant subsidiary are each organized in a foreign country (the “country of organization”) that grants an “equivalent exemption” to corporations organized in the United States; and either |
| • | More than 50% of the value of our stock is owned, directly or indirectly, by “qualified stockholders,” individuals who are (i) “residents” of our country of organization or of another foreign country that grants an “equivalent exemption” to corporations organized in the United States and (ii) satisfy certain documentation requirements, which we refer to as the “50% Ownership Test,” or |
We and the relevant subsidiary are each organized in a foreign country (the “country of organization”) that grants an “equivalent exemption” to corporations organized in the United States; and either
More than 50% of the value of our stock is owned, directly or indirectly, by “qualified stockholders,” individuals who are (i) “residents” of our country of organization or of another foreign country that grants an “equivalent exemption” to corporations organized in the United States and (ii) satisfy certain documentation requirements, which we refer to as the “50% Ownership Test,” or
Our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares, are “primarily and regularly traded on an established securities market” in our country of organization, in another country that grants an “equivalent exemption” to United States corporations, or in the United States, which we refer to as the “Publicly-Traded Test.”
| • | Our common shares, Series C Preferred Shares (prior to their redemption on October 30, 2020), Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares, are “primarily and regularly traded on an established securities market” in our country of organization, in another country that grants an “equivalent exemption” to United States corporations, or in the United States, which we refer to as the “Publicly-Traded Test.” |
We believe that each of Bermuda, Greece, Liberia, Malta, the Marshall Islands and Panama, the jurisdictions where we and our ship-owning subsidiaries are incorporated, grants an “equivalent exemption” to United States corporations. Therefore, we believe that we and each of our subsidiaries will be exempt from United States federal income taxation with respect to our U.S.-source shipping income if we satisfy either the 50% Ownership Test or the Publicly-Traded Test. Due to the widely-held nature of our stock, we will have difficulty satisfying the 50% Ownership Test. Our ability to satisfy the Publicly-Traded Test is discussed below. The regulations provide, in pertinent part, that stock of a foreign corporation will be considered to be “primarily traded” on one or more established securities markets in a country if the number of shares of each class of stock that are traded during any taxable year on all established securities markets in that country exceeds the number of shares in each such class that are traded during that year on established securities markets in any other single country. Our common shares, our Series B Preferred Shares, prior to their redemption on July 30, 2019, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares, which, prior to the issuance ofother than our Series G Convertible Preferred Shares, which are not listed on an exchange on September 25, 2019, were our sole classes of our issued and outstanding shares in 2019,2021, were “primarily traded” on an established securities market in the United States (the New York Stock Exchange) in 20192021 and we expect that will continue to be the case in subsequent years. Under the regulations, our stock will be considered to be “regularly traded” on an established securities market if one or more classes of our stock representing more than 50% of our outstanding shares, by total combined voting power of all classes of stock entitled to vote and total value, is listed on the market, which we refer to as the listing requirement. Since our common shares, Series CD Preferred Shares, Series DE Preferred -110-
Shares and Series EF Preferred Shares, which, other than our Series G Convertible Preferred Shares since their issuance on September 25, 2019, are our sole classes of issued and outstanding shares, were listed on the New York Stock Exchange throughout 2018, and Series F Preferred Shares were listed on the New York Stock Exchange, as were our Series B Preferred Shares prior to the redemption of all such shares on July 30, 2019,2021, we satisfied the listing requirement for 2019.2021. We expect that we will continue to do so, with respect to our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares, notwithstanding our outstanding Series G Convertible Preferred Shares which are not listed on an exchange, for subsequent years. It is further required that with respect to each class of stock relied upon to meet the listing requirement (i) such class of the stock is traded on the market, other than in minimal quantities, on at least 60 days during the taxable year or 1/1/6 of the days in a short taxable year; and (ii) the aggregate number of shares of such class of stock traded on such market is at least 10% of the average number of shares of such class of stock outstanding during such year or as appropriately adjusted in the case of a short taxable year. We believe our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares satisfied the trading frequency and trading volume tests for 2019 (and so did our Series B Preferred Shares prior to the redemption of all Series B Preferred Shares on July 30, 2019)2021 and will also do so in subsequent years. For so long as the aggregate value of our common shares exceeds the aggregate value of our Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares and Series G Convertible Preferred Shares, if our common shares meetthemeet the trading frequency and trading volume tests, our Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares and Series G Convertible Preferred Shares do not need to meet these tests (and, if the aggregate value of our common shares and any of our Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares meet the trading frequency and trading volume tests, the other series of our preferred shares would not need to meet these tests). Even if these tests were not satisfied, with respect to any of our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares and Series G Convertible Preferred Shares, the regulations provide that the trading frequency and trading volume tests will be deemed satisfied by a class of stock if, as we believe was the case with our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares in 20192021 and we expect to be the case with our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares in subsequent years, such class of stock is traded on an established market in the United States and such class of stock is regularly quoted by dealers making a market in such stock. Notwithstanding the foregoing, the regulations provide, in pertinent part, that our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares and Series G Convertible Preferred Shares will not be considered to be “regularly traded” on an established securities market for any taxable year in which 50% or more of our outstanding common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares and Series G Convertible Preferred Shares are owned, actually or constructively under specified stock attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares or Series G Convertible Preferred Shares, which we refer to as the “5 Percent Override Rule.” For so long as the aggregate value of our common shares exceeds the aggregate value of our Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares or Series G Convertible Preferred Shares, if our common shares meet the “regularly traded” test, our Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares or Series G Convertible Preferred Shares do not need to meet this test. For purposes of being able to determine the persons who own 5% or more of our stock, or “5% Stockholders,” the regulations permit us to rely on Schedule 13G and Schedule 13D filings with the SEC to identify persons who have a 5% or more beneficial interest in our common shares or, if our Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares are then entitled to -111-
vote, our Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares. The regulations further provide that an investment company which is registered under the Investment Company Act of 1940, as amended, will not be treated as a 5% Stockholder for such purposes. Until such time, if any, as the Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares are entitled to vote, because Schedule 13G and Schedule 13D filings are only required for voting stock, it could be difficult to determine 5% Stockholders of our Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares. In the event the 5 Percent Override Rule is triggered, the regulations provide that the 5 Percent Override Rule will nevertheless not apply if we can establish, in accordance with specified ownership certification procedures, that a sufficient portion of the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares within the closely-held block are owned, actually or under applicable constructive ownership rules, by qualified shareholders for purposes of Section 883 to preclude the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares in the closely-held block that are not so owned from constituting 50% or more of the our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares for more than half the number of days during the taxable year. We do not believe that we were subject to the 5 Percent Override Rule for 2019.2021. Therefore, we believe that we satisfied the Publicly-Traded Test for 2019.2021. However, there is no assurance that we will continue to satisfy the Publicly-Traded Test. If we were to be subject to the 5 Percent Override Rule for any tax year, then our ability and that of our subsidiaries to qualify for the benefits of Section 883 would depend upon our ability to establish, in accordance with specified ownership certification procedures, that a sufficient portion of the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares or Series G Convertible Preferred Shares within the closely-held block are owned, actually or under applicable constructive ownership rules, by qualified shareholders for purposes of Section 883, to preclude the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares and Series G Convertible Preferred Shares in the closely-held block that are not so owned from constituting 50% or more of the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares or Series G Convertible Preferred Shares for more than half the number of days during the tax year. Since there can be no assurance that we would be able to establish these requirements, there can be no assurance that we or our subsidiaries will qualify for the benefits of Section 883 for any subsequent tax year. Taxation in Absence of Exemption To the extent the benefits of Section 883 are unavailable, our U.S.-source shipping income, to the extent not considered to be “effectively connected” with the conduct of a United States trade or business, as described below, would be subject to a 4% tax imposed by Section 887 of the Internal Revenue Code on a gross basis, without the benefit of deductions. Since under the sourcing rules described above, we do not expect that more than 50% of our shipping income would be treated as being derived from United States sources, the maximum effective rate of United States federal income tax on our shipping income would never exceed 2% under the 4% gross basis tax regime. To the extent the benefits of the Section 883 exemption are unavailable and our U.S.-source shipping income or that of any of our subsidiaries is considered to be “effectively connected” with the conduct of a United States trade or business, as described below, any such “effectively connected” U.S.-source shipping income, net of applicable deductions, would be subject to the United States federal corporate income tax currently imposed at rates of up to 21%. In addition, we or our subsidiaries may be subject to the 30% “branch profits” taxes on earnings effectively connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of its United States trade or business. -112-
U.S.-source shipping income would be considered “effectively connected” with the conduct of a United States trade or business only if: | • | We or one of our subsidiaries has, or is considered to have, a fixed place of business in the United States involved in the earning of shipping income; and |
| • | (i) in the case of shipping income other than that derived from bareboat charters, substantially all of our or such subsidiary’s U.S.-source shipping income is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the United States and (ii) in the case of shipping income from bareboat charters, substantially all of our or such subsidiary’s income from bareboat charters is attributable to a fixed place of business in the U.S. |
We or one of our subsidiaries has, or is considered to have, a fixed place of business in the United States involved in the earning of shipping income; and
(i) in the case of shipping income other than that derived from bareboat charters, substantially all of our or such subsidiary’s U.S.-source shipping income is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the United States and (ii) in the case of shipping income from bareboat charters, substantially all of our or such subsidiary’s income from bareboat charters is attributable to a fixed place of business in the U.S.
We do not intend that we or any of our subsidiaries will have any vessel operating to the United States on a regularly scheduled basis. Based on the foregoing and on the expected mode of our shipping operations and other activities, we believe that none of the U.S.-source shipping income of us or our subsidiaries will be “effectively connected” with the conduct of a United States trade or business. United States Taxation of Gain on Sale of Vessels Regardless of whether we or our subsidiaries qualify for exemption under Section 883, we and our subsidiaries will not be subject to United States federal income taxation with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside of the United States under United States federal income tax principles. In general, a sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United States. It is expected that any sale of a vessel by us or our subsidiaries will be considered to occur outside of the United States. United States Holders Distributions Subject to the discussion below under “—Passive Foreign Investment Company Considerations,” distributions that we make with respect to the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares, other than distributions in liquidation and distributions in redemption of stock that are treated as exchanges, will be taxed to United States holders as dividend income to the extent that the distributions do not exceed our current and accumulated earnings and profits (as determined for United States federal income tax purposes). Distributions, if any, in excess of our current and accumulated earnings and profits will constitute a nontaxable return of capital to a United States holder and will be applied against and reduce the United States holder’s tax basis in its common shares. To the extent that distributions in excess of our current and accumulated earnings and profits exceed the tax basis of the United States holder in its common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares, the excess generally will be treated as capital gain. Qualifying dividends received by individuals are eligible for taxation at capital gains rates (currently 20% for individuals not eligible for a lower rate). We are anon-United States corporation for U.S. federal income tax purposes. Dividends paid by anon-United States corporation are eligible to be treated as qualifying dividends only if (i) thenon-United States corporation is incorporated in a possession of the United States, (ii) thenon-United States corporation is eligible for the benefits of a comprehensive income tax treaty with the United States or (iii) the stock with respect to which the dividends are paid is “readily tradable on an established securities market in the United States.” We will not satisfy either of the conditions described in clauses (i) and (ii) of the preceding sentence. We expect that distributions on our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares that are treated as dividends -113-
will qualify as dividends on stock that is “readily tradable on an established securities market in the United States” so long as our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares are traded on the New York Stock Exchange. In addition, dividends paid by anon-United States corporation will not be treated as qualifying dividends if thenon-United States corporation is a “passive foreign investment company” (a “PFIC”) for the taxable year of the dividend or the prior taxable year. Our potential treatment as a PFIC is discussed below under the heading “—Passive Foreign Investment Company Considerations.” A dividend will also not be treated as a qualifying dividend to the extent that (i) the shareholder does not satisfy a holding period requirement that generally requires that the shareholder hold the shares on which the dividend is paid for more than 60 days during the121-day period that begins on the date which is sixty days before the date on which the shares becomeex-dividend with respect to such dividend, (ii) the shareholder is under an obligation to make related payments with respect to substantially similar or related property or (iii) such dividend is taken into account as investment income under Section 163(d)(4)(B) of the Internal Revenue Code. Legislation has been previously proposed in the United States Congress which, if enacted in its proposed form, would likely cause dividends on our shares to be ineligible for the preferential tax rates described above. There can be no assurance regarding whether, or in what form, such legislation will be enacted. Special rules may apply to any “extraordinary dividend,” generally a dividend in an amount which is equal to or in excess of ten percent (in the case of our common shares) or five percent (in the case of our Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares) of a shareholder’s adjusted basis (or fair market value in certain circumstances) in such shares paid by us. In addition, extraordinary dividends include dividends received within a one year period that, in the aggregate, equal or exceed 20% of a shareholder’s adjusted tax basis (or fair market value in certain circumstances). If we pay an “extraordinary dividend” on our common shares and such dividend is treated as “qualified dividend income,” then any loss derived by a U.S. individual holder from the sale or exchange of such common shares will be treated as long-term capital loss to the extent of such dividend. Because we are not a United States corporation, a United States holder that is a corporation (or a United States entity taxable as a corporation) will not be entitled to claim a dividends received deduction with respect to any distributions paid by us. Dividend income derived with respect to the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares generally will constitute portfolio income for purposes of the limitation on the use of passive activity losses, and, therefore, generally may not be offset by passive activity losses, and, unless treated as qualifying dividends as described above, investment income for purposes of the limitation on the deduction of investment interest expense. Dividends that we pay will not be eligible for the dividends received deduction generally allowed to United States corporations under Section 243 of the Internal Revenue Code. For foreign tax credit purposes, if at least 50 percent of our stock by voting power or by value is owned, directly, indirectly or by attribution, by United States persons, then, subject to the limitation described below, a portion of the dividends that we pay in each taxable year will be treated as U.S.-source income, depending in general upon the ratio for that taxable year of our U.S.-source earnings and profits to our total earnings and profits. The remaining portion of our dividends (or all of our dividends, if we do not meet the 50 percent test described above) will be treated as foreign-source income and generally will be treated as passive category income or, in the case of certain types of United States holders, general category income for purposes of computing allowable foreign tax credits for United States federal income tax purposes. However, if, in any taxable year, we have earnings and profits and less than ten percent of those earnings and profits are from United States sources, then, in general, dividends that we pay from our earnings and profits for that taxable year will be treated entirely as foreign-source income. Where a United States holder that is an individual receives a dividend on our shares that is a qualifying dividend (as described in the second preceding paragraph), special rules will apply that will limit the portion of such dividend that will be included in such individual’s foreign source taxable income and overall taxable income for purposes of calculating such individual’s foreign tax credit limitation. -114-
Sale or exchange Subject to the discussion below under “—Passive Foreign Investment Company Considerations,” upon a sale or exchange of common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares to a person other than us or certain entities related to us, a United States holder will recognize gain or loss in an amount equal to the difference between the amount realized on the sale or exchange and the United States holder’s adjusted tax basis in the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares. Any gain or loss recognized will be capital gain or loss and will be long-term capital gain or loss if the United States holder has held the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares for more than one year. Gain or loss realized by a United States holder on the sale or exchange of common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares generally will be treated as U.S.-source gain or loss for United States foreign tax credit purposes. A United States holder’s ability to deduct capital losses against ordinary income is subject to certain limitations. Passive Foreign Investment Company Considerations PFIC classification. Special and adverse United States tax rules apply to a United States holder that holds an interest in a PFIC. In general, a PFIC is any foreign corporation, if (1) 75 percent or more of the gross income of the corporation for the taxable year is passive income (the “PFIC income test”) or (2) the average percentage of assets held by the corporation during the taxable year that produce passive income or that are held for the production of passive income is at least 50 percent (the “PFIC asset test”). In applying the PFIC income test and the PFIC asset test, a corporation that owns, directly or indirectly, at least 25 percent by value of the stock of a second corporation must take into account its proportionate share of the second corporation’s income and assets. Income we earn, or are deemed to earn, in connection with the performance of services will not constitute passive income. By contrast, rental income will generally constitute passive income (unless we are treated under certain special rules as deriving our rental income in the active conduct of a trade or business). If a corporation is classified as a PFIC for any year during which a United States person is a shareholder, then the corporation generally will continue to be treated as a PFIC with respect to that shareholder in all succeeding years, regardless of whether the corporation continues to meet the PFIC income test or the PFIC asset test, subject to elections to recognize gain that may be available to the shareholder. We do not believe that we were classified as a PFIC for our taxable year ended December 31, 2021. Based on the projected composition of our income and valuation of our assets, we do not expect that we will constitute a PFIC with respect to the current or any future taxable year, although there can be no assurance in this regard. There are legal uncertainties involved in determining whether the income derived from time chartering activities constitutes rental income or income derived from the performance of services. InTidewater Inc. v. United States, 565 F.2d 299 (5th Cir. 2009), the United States Court of Appeals for the Fifth Circuit held that income derived from certain time chartering activities should be treated as rental income rather than services income for purposes of a foreign sales corporation provision of the Code. In a published guidance, however, the Internal Revenue Service (the “IRS”) states that it disagrees with the holding inTidewater, and specifies that time charters should be treated as service contracts. On this basis, we do not believe that we were treated as a PFIC for our most recent taxable year or that we will be treated as a PFIC for any subsequent taxable year. This conclusion is based in part upon our beliefs regarding our past assets and income and our current projections and expectations as to our future business activity, including, in particular, our expectation that the proportion of our income derived from bareboat charters will not materially increase. However, we have not sought, and we do not expect to seek, an IRS ruling on this matter. As a result, the IRS or a court could disagree with our position. No assurance can be given that this result will not occur. In addition, although we intend to conduct our affairs in a manner to avoid, to the extent possible, being classified as a PFIC with respect to any taxable year, we cannot assure you that the nature of our operations will not change in the future, or that we can avoid PFIC status in the future. Consequences of PFIC Status.As discussed below, if we were to be treated as a PFIC for any taxable year, a United States holder generally would be subject to one of three different U.S. income tax regimes, depending on whether or not the United States holder makes certain elections. Additionally, the United States holder would be required to file an annual information report with the IRS. -115-
Taxation of United States Holders that Make No Election.If we are treated as a PFIC for any taxable year during which a United States holder holds our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares, then, subject to the discussion of the qualified electing fund (“QEF”) andmark-to-market rules below, the United States holder will be subject to a special and adverse tax regime in respect of (1) gains realized on the sale or other disposition of our common shares, Series B Preferred Shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares and (2) distributions on our common shares, Series B Preferred Shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares to the extent that those distributions are treated as excess distributions. An excess distribution generally includes dividends or other distributions received from a PFIC in any taxable year of a United States holder to the extent that the amount of those distributions exceeds 125 percent of the average distributions made by the PFIC during a specified base period (or, if shorter, the United States holder’s holding period for the shares). A United States holder that is subject to the PFIC rules (1) will be required to allocate excess distributions received in respect of our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares and gain realized on the sale of common shares, Series B Preferred Shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares to each day during the United States holder’s holding period for the common shares, (2) will be required to include in income as ordinary income the portion of the excess distribution or gain that is allocated to the current taxable year and to certainpre-PFIC years, and (3) will be taxable at the highest rate of taxation applicable to ordinary income for the prior years, other thanpre-PFIC years, to which the excess distribution or gain is allocable, without regard to the United States holder’s other items of income and loss for such prior taxable years (“deferred tax”). The deferred tax for each prior year will be increased by an interest charge for the period from the due date for tax returns for the prior year to the due date for tax returns for the year of the excess distribution or gain, computed at the rates that apply to underpayments of tax. Pledges of PFIC shares will be treated as dispositions for purposes of the foregoing rules. In addition, a United States holder who acquires common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares from a decedent generally will not receive astepped-up basis in the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares. Instead, the United States holder will have a tax basis in the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares equal to the lower of the fair market value of the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares and the decedent’s basis. If we are treated as a PFIC for any taxable year during which a United States holder holds our common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares and one of our subsidiaries also qualifies as a PFIC for such year, then such United States holder may also be subject to the PFIC rules with respect to its indirect interest in such subsidiary. Nomark-to-market election will be available with respect to the indirect interest in the shares of such subsidiary and we currently do not intend to comply with reporting requirements necessary to permit the making of QEF elections in such circumstances. Taxation of United States Holders that Make a QEF Election.In some circumstances, a United States holder may avoid the unfavorable consequences of the PFIC rules by making a QEF election with respect to us. A QEF election effectively would require an electing United States holder to include in income currently its pro rata share of our ordinary earnings and net capital gain. However, a United States holder cannot make a QEF election with respect to us unless we comply with certain reporting requirements and we currently do not intend to provide the required information. Taxation of United States Holders that Make aMark-to-Market Election.A United States holder that holds “marketable” stock in a PFIC may, in lieu of making a QEF election, avoid some of the unfavorable consequences of the PFIC rules by electing to mark the PFIC stock to market as of the close of each taxable year. The common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares will be treated as marketable stock for a calendar year if the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares are traded on the New York Stock Exchange, in other than de minimis quantities, on at least 15 days during each calendar quarter of the -116-
year. A United States holder that makes themark-to-market election generally will be required to include in income each year as ordinary income an amount equal to the increase in value of the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares for that year, regardless of whether the United States holder actually sells the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares. The United States holder generally will be allowed a deduction for the decrease in value of the common shares, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares for the taxable year, to the extent of the amount of gain previously included in income under themark-to-market rules, reduced by prior deductions under themark-to-market rules. Any gain from the actual sale of the PFIC stock will be treated as ordinary income, and any loss will be treated as ordinary loss to the extent of netmark-to-market gains previously included in income and not reversed by prior deductions. Other PFIC Elections.If. If a United States holder held our stock during a period when we were treated as a PFIC, but the United States holder did not have a QEF election in effect with respect to us, then in the event that we failed to qualify as a PFIC for a subsequent taxable year, the United States holder could elect to cease to be subject to the rules described above with respect to those shares by making a “deemed sale” or, in certain circumstances, a “deemed dividend” election with respect to our stock. If the United States holder makes a deemed sale election, the United States holder will be treated, for purposes of applying the rules described above under the heading “consequences of PFIC status,” as having disposed of our stock for its fair market value on the last day of the last taxable year for which we qualified as a PFIC (the “termination date”). The United States holder would increase his, her or its basis in such common stock by the amount of the gain on the deemed sale described in the preceding sentence. Following a deemed sale election, the United States holder would not be treated, for purposes of the PFIC rules, as having owned the common stock during a period prior to the termination date when we qualified as a PFIC. If we were treated as a “controlled foreign corporation” for United States federal income tax purposes for the taxable year that included the termination date, then a United States holder could make a “deemed dividend” election with respect to our common stock, Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares or Series F Preferred Shares. If a deemed dividend election is made, the United States holder is required to include in income as a dividend his, her or its pro rata share (based on all of our stock held by the United States holder, directly or under applicable attribution rules, on the termination date) of our post-1986 earnings and profits as of the close of the taxable year that includes the termination date (taking only earnings and profits accumulated in taxable years in which we were a PFIC into account). The deemed dividend described in the preceding sentence is treated as an excess distribution for purposes of the rules described above under the heading “consequences of PFIC status.” The United States holder would increase his, her or its basis in our stock by the amount of the deemed dividend. Following a deemed dividend election, the United States holder would not be treated, for purposes of the PFIC rules, as having owned the stock during a period prior to the termination date when we qualified as a PFIC. For purposes of determining whether the deemed dividend election is available, we generally will be treated as a controlled foreign corporation for a taxable year when, at any time during that year, United States persons, each of whom owns, directly or under applicable attribution rules, shares having 10% or more of the total voting power of our stock, in the aggregate own, directly or under applicable attribution rules, shares representing more than 50% of the voting power or value of our shares. A deemed sale or deemed dividend election must be made on the United States holder’s original or amended return for the shareholder’s taxable year that includes the termination date and, if made on an amended return, such amended return must be filed not later than the date that is three years after the due date of the original return for such taxable year. Special rules apply where a person is treated, for purposes of the PFIC rules, as indirectly owning our shares. You are urged to consult your own tax advisor regarding our possible classification as a PFIC, as well as the potential tax consequences arising from the ownership and disposition, directly or indirectly, of interests in a PFIC. -117-
Unearned Income Medicare Contribution Tax Certain United States holders that are individuals, estates or trusts are required to pay an additional 3.8% tax on, among other things, dividends on and capital gains from the sale or other disposition of stock. You are encouraged to consult your own tax advisors regarding the effect, if any, of this tax on the ownership and disposition of our shares. Additional Disclosure Requirement U.S. individuals that hold certain specified foreign financial assets with value in excess of reporting thresholds of $50,000 (in the case of unmarried taxpayers) or more (which include shares in a foreign corporation) are subject to U.S. return disclosure requirements (and related penalties for failure to disclose). Such U.S. individuals are required to file IRS Form 8938, listing these assets, with their U.S. Federal income tax returns. You are encouraged to consult your own tax advisors concerning the filing of IRS Form 8938. Information reporting and backup withholding Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting and backup withholding unless (i) you are a corporation or other exempt recipient or (ii) in the case of backup withholding, you provide a correct taxpayer identification number and certify that you are not subject to backup withholding. The amount of any backup withholding from a payment to you will be allowed as a credit against your United States federal income tax liability and may entitle you to a refund, provided that the required information is furnished to the Internal Revenue Service. Available Information We are subject to the informational requirements of the Exchange Act, as amended. In accordance with these requirements, we file reports and other information as a foreign private issuer with the SEC. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. You may access the reports and other information we file with the SEC on this SEC Internet site without charge. | Item 11. | Quantitative and Qualitative Disclosures About Market Risk | | | |
Our risk management policy.Our policy is to continuously monitor our exposure to business risks, including the impact of changes in interest rates, currency rates, and bunker prices on earnings and cash flows. We intend to assess these risks and, when appropriate, enter into derivative contracts with creditworthy counter parties to minimize our exposure to these risks. As part of our efforts to manage our risk, we have in the past entered into derivative contracts for both hedging and, periodically, trading purposes. Each of the committees of the Board of Directors is responsible for the management of risk within their given areas. In particular, the committees are expected to: | • | continuously review and assess all activities that may generate exposure to risk and ensure we are taking appropriate measures; |
continuously review and assess all activities that may generate exposure to risk and ensure we are taking appropriate measures;
| • | ensure that our policies and procedures for evaluating and managing risks are effective and do not significantly increase overall risk; and |
ensure that our policies and procedures for evaluating and managing risks are effective and do not significantly increase overall risk; and
| • | assess the effectiveness of derivative contracts and recommend, if necessary, the early termination of any contract. Our risk management policy provides for the following procedures: |
assess the effectiveness of derivative contracts and recommend, if necessary, the early termination of any contract. Our risk management policy provides for the following procedures:
| • | All recommendations to enter into a derivative contract must originate either from qualified officers or directors of the company or from equivalent specialized officers of our commercial manager; |
All recommendations to enter into a derivative contract must originate either from qualified officers or directors of the company or from equivalent specialized officers of our commercial manager;
| • | All recommendations to enter into a derivative contract must be reviewed by a combined team of officers and advice is taken, as applicable, from third-party sources (e.g., our bankers, other banks, bunker brokers, insurers, etc.); |
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All recommendations to enter into a derivative contract must be reviewed by a combined team of officers and advice is taken, as applicable, from third-party sources (e.g., our bankers, other banks, bunker brokers, insurers, etc.);
| • | Any recommendation must be formalized into a specific proposal which defines the risks to be managed, the action to be implemented, and the benefits and potential risks of the proposed derivative contract, which proposal shall be presented to the Risk Committee; and |
Any recommendation must be formalized into a specific proposal which defines the risks to be managed, the action to be implemented, and the benefits and potential risks of the proposed derivative contract, which proposal shall be presented to the Risk Committee; and
All derivative contracts must be approved by the Risk Committee and be within the overall limits set by the board of directors.
| • | All derivative contracts must be approved by the Risk Committee and be within the overall limits set by the board of directors. |
The Audit Committee is responsible for: | • | overseeing the division of risk-related responsibilities among each of the Board committees as clearly as possible and performing a gap analysis to confirm that the oversight of any risk is not missed; |
overseeing the division of risk-related responsibilities among each of the Board committees as clearly as possible and performing a gap analysis to confirm that the oversight of any risk is not missed;
| • | in conjunction with the full Board, approving the Company-wide risk management program; and |
| • | assessing whether the Company’s technical and commercial managers have effective procedures for managing risks. |
in conjunction with the full Board, approving the Company-wide risk management program; and
assessing whether the Company’s technical and commercial managers have effective procedures for managing risks.
Interest rate risk The Company is exposed to market risk from changes in interest rates, which could impact its results of operations, financial condition and cash flow. The Company manages its ratio of fixed to floating rate debt with the objective of achieving a mix that reflects management’s interest rate outlook. As of March 31, 2020,2022, we had a notional amount of $340.1$488.8 million in hedging swaps and $24.7 million innon-hedging swaps. The annualized impact resulting from a 0.25%-point increase in interest rates based on the notional amount at December 31, 20192021 would be an increase of approximately $0.4$1.3 million in earnings and cash flow. An increase of 0.25% in interest rates will increase our loan interest rate payments by $4.0$3.5 million based on the outstanding amounts as of December 31, 20192021 and the loans scheduled for amortization as of that date. The table below provides information about our financial instruments at December 31, 2019,2021, which are sensitive to changes in interest rates, including our debt and interest rate swaps. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. Weighted-average variable rates are based on the implied forward rates in the yield curves at the reporting date. For interest rate swaps, the table presents notional amounts and weighted-average interest rates by expected contractual maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contracts. | | | | | | | | | | | | | | |
| |
| | | | Balance as of
Dec. 31, 2019 | | | Expected Maturities(1) | | | Expected Maturities(1) | | | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter | | Balance as of
Dec. 31, 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | | | (In millions of U.S. dollars, except percentages) | | (In millions of U.S. dollars, except percentages) | Long-Term Debt: | | | | | | | | | | | | | | | | | | | | | | | | | | | | Variable Rate Debt(2) | | | 1,544.6 | | | | 238.4 | | | | 224.0 | | | | 164.4 | | | | 347.8 | | | | 251.0 | | | | 319.0 | | 1,380.6 | | 175.1 | | 243 | | 283 | | 262.1 | | 199.8 | | 217.6 | Weighted Average Interest Rate | | | 4.41 | % | | | 3.69 | % | | | 3.56 | % | | | 3.60 | % | | | 3.60 | % | | | 3.39 | % | | | 3.83 | % | 2.02% | | 2.19% | | 2.96% | | 3.16% | | 3.19% | | 3.05% | | 2.39% | | | | 1,544.6 | | | | 238.4 | | | | 224.0 | | | | 164.4 | | | | 347.8 | | | | 251.0 | | | | 319.0 | | 1,380.6 | | 175.1 | | 243 | | 283 | | 262.1 | | 199.8 | | 217.6 | Interest Rate Swaps (or Derivatives): | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate swaps—variable to fixed Notional Amount at December 31, 2019 | | | 161.9 | | | | 73.7 | | | | 47.3 | | | | 47.0 | | | | 70.5 | | | | 122.5 | | | | 173.3 | | | Interest rate swaps—variable to fixed Notional Amount at
December 31, 2021 | | 503.8 | | 55.9 | | 79.4 | | 166.6 | | 78.4 | | 77.9 | | 45.6 | Average Pay Rate | | | 2.04 | % | | | 2.34 | % | | | 2.34 | % | | | 2.34 | % | | | 2.30 | % | | | 2.72 | % | | | 3.11 | % | 2.01% | | 2.01% | | 1.95% | | 2.42% | | 2.90% | | 3.16% | | 3.16% | Average Receive Rate | | | 2.01 | % | | | 1.69 | % | | | 1.61 | % | | | 1.65 | % | | | 1.72 | % | | | 1.80 | % | | | 1.98 | % | 0.18% | | 0.65% | | 1.73% | | 1.89% | | 1.67% | | 2.35% | | 1.65% |
(1) | (1) | These are the expected maturities based on the balances as of December 31, 2019.2021. |
(2) | (2) | Interest Payments on US Dollar-denominated debt and interest rate swaps are based on LIBOR.SOFR. |
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Bunker price risk The Company regularly enters into bunker swap agreements in order to hedge its exposure to bunker price fluctuations associated with the consumption of bunkers by its spot trading vessels. During 2019,2021, the companyCompany entered into two swap agreements. During 2020, the Company entered into six swap agreements. During 2018, the Company entered into nineteen swap agreements and two callsix put options with an exercise date in 2019 and through 2020.paid a premium of $1.2 million. On the basis of 142,000233,000 MT of bunker fuel purchased in the spot market during 20192021 every $1/MT increase in prices, decreases annual earnings and cash flow by $0.14$0.23 million. Foreign exchange rate fluctuation The currency the international tanker industry is primarily using is the U.S. dollar. Virtually all of our revenues are in U.S. dollars and the majority of our operating costs are incurred in U.S. dollars. We incur certain operating expenses in foreign currencies, the most significant of which are in Euros. During fiscal 2019,2021, approximately 24%21.5% of the total of our vessel and voyage costs and overhead expenditures were denominated in Euro. Based on 20192021 Euro expenditure, therefore, we estimate that for every 1% change in the Euro/U.S. dollar rate there would be a 0.3% impact on vessel operating expenses and minimal impact on other cost categories apart fromdry-docking which would depend on the location of the selected yard. However, we have the ability to shift our purchase of goods and services from one country to another and, thus, from one currency to another in order to mitigate the effects of exchange rate fluctuations. We have a policy of continuously monitoring and managing our foreign exchange exposure. On occasion, we do directly purchase amounts of Euro with U.S. dollars, but to date, we have not engaged in any foreign currency hedging transactions, as we do not believe we have had material risk exposure to foreign currency fluctuations. Inflation Although inflation has had a moderate impact on operating expenses,dry-docking expenses and corporate overhead, our management does not consider inflation to be a significant risk to direct costs in the current and foreseeable economic environment. However, if inflation becomes a significant factor in the world economy, inflationary pressures could result in increased operating and financing costs. | Item 12. | Description of Securities Other than Equity Securities |
Not Applicable. -120-
PART II | Item 13. | Defaults, Dividend Arrearages and Delinquencies |
Not Applicable. | Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds |
None. | Item 15. | Controls and Procedures |
A. Evaluation of Disclosure Controls and Procedures The Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined inRules 13a-15(e) and15d-15(e) under the Exchange Act, as of the end of the period covered by this Annual Report. Based on that evaluation, the chief executive officer and the chief financial officer concluded that the Company’s disclosure controls and procedures as of the end of the period covered by this Annual Report were designed and were functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to the Company’s management, including our chief executive officer and chief financial officer and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. The Company believes that a system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. B. Management’s Annual Report on Internal Control Over Financial Reporting The management of Tsakos Energy Navigation Limited and its subsidiaries, according toRule 13a-15(f) of the Exchange Act, is responsible for the establishment and maintenance of adequate internal controls over financial reporting for the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. However, in any system of internal control there are inherent limitations and consequently internal control over financial reporting may not absolutely prevent or detect misstatements. The Company’s system of internal control over financial reporting includes policies and procedures that: | | (i) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
| | (ii) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
| | (iii) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. |
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Because of the inherent limitations of internal controls over financial reporting, misstatements may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management has performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019,2021, based on the criteria established withinInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on its assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2019,2021, was effective. C. Attestation Report of Independent Registered Public Accounting Firm Ernst & Young (Hellas) Certified Auditors Accountants S.A., or Ernst & Young (Hellas), which has audited the consolidated financial statements of the Company for the year ended December 31, 2019,2021, has also audited the effectiveness of the Company’s internal control over financial reporting as stated in their audit report which is incorporated into Item 18 of thisForm 20-F frompage F-3 hereof. D. Change in Internal Control over Financial Reporting No change in the Company’s internal control over financial reporting occurred during the Company’s most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. | Item 16A. | Audit Committee Financial Expert |
The Board of Directors of the Company has determined that Nicholas Tommasino and Efstratios Georgios Arapoglou and Dr. Maria Vassalou,, whose biographical details are included in Item 6 of this Annual Report, each qualifies as an “audit committee financial expert” as defined under current SEC regulations and each satisfies the “accounting or related financial management expertise” standard of the New York Stock Exchange. The Company has adopted a code of ethics that applies to its directors, officers and employees. A copy of our code of ethics is posted in the “Investor Relations” section of the Tsakos Energy Navigation Limited website and may be viewed at http://www.tenn.gr. We will also provide a hard copy of our code of ethics free of charge upon written request of a shareholder. Shareholders may direct their requests to the attention of Investor Relations, c/o George Saroglou or Paul Durham, Tsakos Energy Navigation Limited, 367 Syngrou Avenue, 175 64 P. Faliro, Athens, Greece. | Item 16C. | Principal Accountant Fees and Services |
Ernst & Young (Hellas) has audited our annual financial statements acting as our “Independent Registered Public Accounting Firm” for the fiscal years ended December 31, 20192021 and 2018.2020. Audit Fees The audit fees include the aggregate fees billed for professional services rendered for the audit of our 20192021 and 20182020 annual financial statements and for related services that are reasonably related to the performance of -122-
the audit or services that are normally provided by the auditor in connection with regulatory filings or engagements for those financial years (including comfort letters, review of the20-F, consents and other services related to SEC requirements). The total amount billed and accrued for the Ernst & Young Audit(Hellas) audit services performed in 20192021 and 20182020 (in Euros) was €719,250 and €680,000€686,700 respectively. Audit-Related Fees Ernst & Young (Hellas) did not provide any other services that would be classified in this category during 20192021 or 2018.2020. Tax Fees Ernst & Young (Hellas) did not provide any other services that would be classified in this category during 20192021 or 2018.2020. All Other Fees Ernst & Young (Hellas) did not provide any other services that would be classified in this category during 20192021 or 2018.2020. Pre-approval Policies and Procedures The Audit Committee Charter sets forth the Company’s policy regarding retention of the independent auditors, requiring the Audit Committee to review and approve in advance the retention of the independent auditors for the performance of all audit and lawfully permittednon-audit services and the fees related thereto. The Chairman of the Audit Committee or in the absence of the Chairman, any member of the Audit Committee designated by the Chairman, has authority to approve in advance any lawfully permittednon-audit services and fees. The Audit Committee is authorized to establish other policies and procedures for thepre-approval of such services and fees. Wherenon-audit services and fees are approved under delegated authority, the action must be reported to the full Audit Committee at its next regularly scheduled meeting. | Item 16D. | Exemptions from the Listing Standards for Audit Committees |
Not Applicable. | Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
On March 24, 2020, the Company announced that its Board of Directors had authorized a share repurchase program for its common and/or its preferred shares of up to $50 million. Shares may be purchased from time to time in open market or privately negotiated transactions, which may include derivative transactions, at times and prices that are considered to be appropriate by the Company and the program may be discontinued at any time..time. NoIn 2021, the Company acquired 19,836 common orshares for a total amount of $0.2 million, with the average purchase price of $8.33 per share and did not repurchase any preferred shares. The below table presents information about our common share repurchases werethrough December 31, 2021. All purchases have been made byon the Company in 2019, 2018 or 2017.open market within the safe harbor provisions of Regulation 10b-18 under the Exchange Act.
| Period | | Total
Number of
Shares
Purchased
(a) | | Average
Price
Paid Per
Share
(b) | | Total
Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
(c) | | Maximum
Approximate
Dollar Value
of Shares
that May Yet Be
Purchased
Under the
Plans or
Programs
(d) | | January 28 to January 29, 2021 | | 9,836 | | 8.25 | | 9,836 | | 40,210,869 | | February 2, 2021 | | 10,000 | | 8.49 | | 10,000 | | 40,200,869 |
| Item 16F. | Change in Registrant’s Certifying Accountant |
Not Applicable. -123-
| Item 16G. | Corporate Governance |
Pursuant to certain exceptions for foreign private issuers, we are not required to comply with certain of the corporate governance practices followed by U.S. companies under the New York Stock ExchangeNYSE listing standards. However, during 2019 there were nopursuant to Section 303A.11 of the NYSE Listed Company Manual and the requirements of Form 20-F, we are required to state any significant differences between our corporate governance practices and the New York Stock Exchangepractices required by the NYSE. We believe that our established practices in the area of corporate governance are in line with the spirit of the NYSE standards and provide adequate protection to our stockholders. The significant differences between our corporate governance practices and the NYSE standards applicable to listed U.S. companies.companies are set forth below. Pursuant to NYSE Rule 303A.07, the NYSE requires that the audit committee of a listed U.S. company have a minimum of three members. As permitted under Bermuda law, our audit committee currently consists of two members. | Item 16H. | Mine Safety Disclosure |
Not Applicable.
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PART III
Item 17. | Financial Statements
|
Not Applicable. | Item 16I. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. |
Not Applicable. PART III | Item 17. | Financial Statements |
Not Applicable. | Item 18. | Financial Statements |
The following financial statements together with the reports of our independent registered public accounting firm, beginning on pageF-1, are filed as part of this annual report. The following Exhibits are filed as part of this Annual Report. Certain exhibits have been previously filed with the SEC pursuant to the Exchange Act, as amended (Commission File Number001-31236). | | | Number
| | Description
| | | | 1.1 | | Memorandum of Association of Tsakos Energy Navigation Limited(P) (filed as Exhibit 3.1 to the Company’s Registration Statement on FormF-1 (FileNo. 333-82326) filed with the SEC and hereby incorporated by reference to such Registration Statement) | | | | 1.2 | | Memorandum of Increase of Share Capital (filed as Exhibit 3.1 to the Company’s6-K filed with the SEC on June 10, 2014, and hereby incorporated by reference) | | | | 1.3 | | Bye-laws of Tsakos Energy Navigation Limited (filed as Exhibit 3.11.1 to the Company’sForm 6-K filed with the SEC on May 26, 2016,July 7, 2020, and hereby incorporated by reference) | | | | 2.1 | | Certificate of Designation of the 8.875% Series C Cumulative Redeemable Perpetual Preferred Shares (filed as Exhibit 3.3 to the Company’s Form8-A filed with the SEC on September 30, 2013, and hereby incorporated by reference) | | | 2.2 | | Amendment No. 1 to Certificate of Designation of the 8.875% Series C Cumulative Redeemable Perpetual Preferred Shares (filed as Exhibit 3.3.1 to the Company’s Form8-A/A filed with the SEC on October 26, 2015, and hereby incorporated by reference) | | | 2.3 | | Certificate of Designation of the 8.75% Series D Cumulative Redeemable Perpetual Preferred Shares (filed as Exhibit 3.3 to the Company’s Form8-A filed with the SEC on April 24, 2015, and hereby incorporated by reference) | | | 2.42.2 | | Certificate of Designation of the 9.25% Series EFixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Shares (filed as Exhibit 3.3 to the Company’s Form8-A filed with the SEC on April 4, 2017, and hereby incorporated by reference) | | | 2.52.3 | | Certificate of Designation of the 9.50% Series FFixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Shares (filed as Exhibit 3.3 to the Company’s Form8-A filed with the SEC on June 27, 2018 and hereby incorporated by reference) | | | 2.62.4 | | Certificate of Designation of Series G Redeemable Convertible Perpetual Preferred Shares of Tsakos Energy Navigation Limited, dated September 25, 2019 (filed as Exhibit 99.1 to the Company’s Form6-K furnished to the SEC on September 27, 2019 and hereby incorporated by reference) and the Amendment thereto, dated October 8, 2020 (filed as Exhibit 99.2 to the Company’s Form 6-K furnished to the SEC on October 9, 2020 and hereby incorporated by reference) | | | 2.72.5 | | Description of Securities (filed herewith) | | | | 4.1 | | Tsakos Energy Navigation Limited 2012 Incentive Plan (filed as Exhibit 4.2 to the Company’s Annual Report on Form20-F filed with the SEC on April 29, 2013 and hereby incorporated by reference) | | |
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| 4.2 | | Amended and Restated Management Agreement between Tsakos Energy Navigation Limited and Tsakos Energy Management Limited effective January 1, 2007 (filed as Exhibit 4.4 to the Company’s20-F filed with the SEC on May 15, 2007, hereby incorporated by reference to such Annual Report) | | | 4.3 | | | 4.3 | Share Purchase Agreement, dated as of September 23, 2019, by and among Tsakos Energy Navigation Limited, Shyris Shipping Company S.A. and AY Tank Limited, as purchaser (including forms of Certificate of Designation of Series G Redeemable Convertible Perpetual Preferred Shares, Shyris Shipping Statement of Designation of Series B Cumulative Redeemable Perpetual Preferred Shares, and Registration Rights Agreement) (filed as Exhibit 99.1 to the Company’s Form6-K furnished to the SEC on September 23, 2019 and hereby incorporated by reference) | | | 8 | | | 8 | List of subsidiaries of Tsakos Energy Navigation Limited (filed herewith) | | | 12.1 | | | 12.1 | Certification of Chief Executive Officer pursuant to Rule13a-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith) | | | 12.2 | | | 12.2 | Certification of Chief Financial Officer pursuant to Rule13a-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith) | | | 13.1 | | | 13.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) | | | 13.2 | | | 13.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) | | | 15.1 | | | 15.1 | Consent of Independent Registered Public Accounting Firm (filed herewith) | | | | 101.INS | | XBRL Instance Document (filed herewith) | | | | 101.SCH | | XBRL Taxonomy Extension Schema (filed herewith) | | | | 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase (filed herewith) | | | | 101.DEF | | XBRL Taxonomy Extension Definition Linkbase (filed herewith) | | | | 101.LAB | | XBRL Taxonomy Extension Label Linkbase (filed herewith) | | | | 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase (filed herewith) |
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SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. | | | TSAKOS ENERGY NAVIGATION LIMITED | | | | | /s/ Nikolas P. Tsakos | | | Name: | | Nikolas P. Tsakos | | Title: | | President and Chief Executive Officer | | Date: | April 28, 2022 | |
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TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | | | | Page | | | Page | | | | Reports of Independent Registered Public Accounting Firm (PCAOB ID #1457) | | | F-2 | | | | Consolidated Balance Sheets as of December 31, 20192021 and 20182020 | | | F-5 | | | | Consolidated Statements of Comprehensive (Loss) Income (Loss) for the years ended December 31, 2019, 20182021, 2020 and 20172019 | | | F-6 | | | | Consolidated Statements of Other Comprehensive (Loss) Income (Loss) for the years ended December 31, 2019, 20182021, 2020 and 20172019 | | | F-7 | | | | Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 20182021, 2020 and 20172019 | | | F-8 | | | | Consolidated Statements of Cash Flows for the years ended December 31, 2019, 20182021, 2020 and 20172019 | | | F-9 | | | | Notes to the Consolidated Financial Statements | F-10 |
Report of Independent Registered Public Accounting Firm To the ShareholdersStockholders and the Board of Directors of Tsakos Energy Navigation Limited TSAKOS ENERGY NAVIGATION LIMITED
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of TSAKOS ENERGY NAVIGATION LIMITEDTsakos Energy Navigation Limited and subsidiaries (the “Company“)Company) as of December 31, 20192021 and 2018,2020, the related consolidated statements of comprehensive (loss)/income, / (loss), other comprehensive (loss)/income, / (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2019,2021, and the related notes (collectively referred to as the “consolidated financial statements“statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20192021 and 2018,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019,2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated April 14, 202028, 2022 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Impairment of vessels, including right-of-use assets under operating leases |
| Description of the matter | | As of December 31, 2021, the carrying value of the Company’s vessels, including right of use assets under operating leases, plus any unamortized dry-docking costs and leasehold improvements was $2,525,828 thousands. As discussed in Notes 1(i) and 4 to the consolidated financial statements, the Company evaluates its vessels and right-of-use assets for impairment whenever events or changes in circumstances indicate that the carrying value of a vessel or a right-of-use asset plus any unamortized dry-docking costs and leasehold improvements might not be recoverable in accordance with the guidance in ASC 360 – Property, Plant and Equipment (“ASC 360”). If indicators of impairment exist, management compares the future undiscounted net operating cash flows expected to be generated throughout the remaining useful life of each vessel or over the remaining lease term of the right-of-use asset to the carrying value plus any unamortized dry-docking costs and leasehold improvements. Where a vessel’s or a right of use asset’s carrying value plus any unamortized drydocking costs and leasehold improvements exceeds the undiscounted net operating cash flows, management will recognize an impairment loss equal to the excess of the carrying value plus any unamortized dry-docking costs and leasehold improvements over the fair value of the vessel or right-of-use asset. During the year ended December 31, 2021, the Company recognized impairment charges of $86,368 thousands in relation to 7 vessels. Auditing management’s recoverability assessment was complex given the judgement and estimation uncertainty involved in determining the assumption of the future charter rates for non-contracted revenue days when forecasting the undiscounted net operating cash flows. These future charter rates are subjective as they involve the development and use of assumptions about the tanker and Liquified Natural Gas (“LNG”) shipping markets through the end of the useful lives of the vessels, or over the remaining lease term for the right of use assets under operating leases. These assumptions are forward looking and subject to the inherent unpredictability of future global economic and market conditions. |
| How we addressed the matter in our audit | | We obtained an understanding of the Company’s impairment process, evaluated the design, and tested the operating effectiveness of the controls over the Company’s determination of future charter rates for non-contracted revenue days. We analyzed management’s impairment assessment by comparing the methodology used to evaluate impairment of each vessel and right-of-use- asset against the accounting guidance in ASC 360. To test management’s undiscounted net operating cash flow forecasts, our procedures included, among others, comparing the future vessel and right-of-use asset charter rates for non-contracted revenue days against internal and external market data sources, such as available market data from various analysts, historical data for the vessels, and recent economic and industry changes. In addition, we performed sensitivity analyses to assess the impact of changes to future charter rates for non-contracted revenue days in the determination of the net operating cash flows. We evaluated the accuracy of the forecast by comparing actual results to management's historical forecasts. Our procedures also included testing the completeness and accuracy of the future charter rate data used within the forecasts. For vessels where the carrying value exceeded the undiscounted projected net operating cash flows, we inspected the independent broker valuation reports used by management to determine the market value. We evaluated the objectivity and competence of the independent brokers who performed the valuation by considering the work they were engaged to perform, professional qualifications, remuneration structure, and experience. We assessed the adequacy of the Company’s disclosures in Notes 1(i) and 4. |
/s/ Ernst & Young (Hellas) Certified Auditors Accountants S.A.
We have served as the Company’s auditor since 2002.
Athens, Greece April 14, 2020 Report of Independent Registered Public Accounting Firm To the ShareholdersStockholders and the Board of Directors of Tsakos Energy Navigation Limited TSAKOS ENERGY NAVIGATION LIMITED
Opinion on Internal Control over Financial Reporting We have audited TSAKOS ENERGY NAVIGATION LIMITEDTsakos Energy Navigation Limited and subsidiaries’ internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, TSAKOS ENERGY NAVIGATION LIMITEDTsakos Energy Navigation Limited and subsidiaries (the “Company”)Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 20192021 based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20192021 and 2018,2020, the related consolidated statements of comprehensive income(loss) / (loss),income, other comprehensive (loss) / income, / (loss), stockholders’stockholders‘ equity and cash flows for each of the three years in the period ended December 31, 2019,2021, and the related notes and our report dated April 14, 202028, 2022 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young (Hellas) Certified Auditors Accountants S.A. Athens, Greece April 14, 2020 TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 20192021, AND 20182020 (Expressed in thousands of U.S. Dollars—except share and per share data) |
| | | | | | | | | | 2021 | | | 2020 | | ASSETS | | | | | | | CURRENT ASSETS: | | | | | | | Cash and cash equivalents | $ | 117,192 | | $ | 160,475 | | Restricted cash | | 10,005 | | | 11,296 | | Margin deposits (Note 14) | | 5,849 | | | 6,153 | | Trade accounts receivable, net (Note 1(f)) | | 30,622 | | | 25,273 | | Capitalized voyage expenses | | 1,839 | | | 1,601 | | Due from related parties (Note 2) | | 14,607 | | | 20,786 | | Advances and other | | 20,176 | | | 18,019 | | Vessels held for sale (Note 1(j)) | | 0 | | | 54,000 | | Inventories | | 22,918 | | | 21,813 | | Prepaid insurance and other | | 1,861 | | | 1,416 | | Receivable, short-term (Note 4) | | 12,741 | | | 0 | | Current portion of financial instruments—Fair value (Note 14) | | 1,852 | | | 642 | | Total current assets | | 239,662 | | | 321,474 | | FINANCIAL INSTRUMENTS—FAIR VALUE, net of current portion (Note 14) | | 1,526 | | | 0 | | RIGHT OF USE ASSET UNDER OPERATING LEASES (Note 4) | | 88,573 | | | 67,110 | | LONG-TERM RECEIVABLE (Note 4) | | 23,163 | | | 27,294 | | FIXED ASSETS (Note 4) | | | | | | | Advances for vessels under construction | | 104,635 | | | 49,030 | | Vessels | | 3,279,440 | | | 3,618,309 | | Accumulated depreciation | | (876,482) | | | (1,003,197) | | Vessels’ Net Book Value | | 2,402,958 | | | 2,615,112 | | Total fixed assets | | 2,507,593 | | | 2,664,142 | | DEFERRED CHARGES AND LEASEHOLD IMPROVEMENTS, net (Note 5) | | 34,297 | | | 32,255 | | Total assets | $ | 2,894,814 | | $ | 3,112,275 | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | CURRENT LIABILITIES: | | | | | | | Current portion of long-term debt (Note 6) | $ | 172,936 | | $ | 232,428 | | Payables | | 74,912 | | | 55,291 | | Due to related parties (Note 2) | | 7,747 | | | 4,003 | | Accrued liabilities | | 27,851 | | | 40,551 | | Unearned revenue | | 9,020 | | | 12,623 | | Current portion of obligations under operating leases (Note 4) | | 29,749 | | | 20,976 | | Current portion of financial liability (Note 4) | | 997 | | | 905 | | Current portion of financial instruments—Fair value (Note 14) | | 8,884 | | | 15,263 | | Total current liabilities | | 332,096 | | | 382,040 | | LONG-TERM DEBT, net of current portion (Note 6) | | 1,200,251 | | | 1,267,929 | | LONG-TERM OBLIGATIONS UNDER OPERATING LEASES (Note 4) | | 58,824 | | | 46,134 | | FINANCIAL LIABILITY, net of current portion (Note 4) | | 3,196 | | | 4,243 | | FINANCIAL INSTRUMENTS—FAIR VALUE, net of current portion (Note 14) | | 8,656 | | | 30,111 | | STOCKHOLDERS’ EQUITY (Note 8) | | | | | | | Preferred Shares, $ 1.00 par value; 25,000,000 shares authorized, 3,516,896 Series D Preferred Shares, 4,743,708 Series E Preferred Shares, 6,741,259 Series F Preferred Shares and 459,286 Series G Convertible Preferred Shares issued and outstanding at December 31, 2021 and 3,424,803 Series D Preferred Shares, 4,600,000 Series E Preferred Shares, 6,000,000 Series F Preferred Shares and 2,615,000 Series G Convertible Preferred Shares issued and outstanding at December 31, 2020. | | 15,461 | | | 16,640 | | Common shares, $ 5.00 par value; 35,000,000 shares authorized at December 31, 2021 and December 31, 2020; 25,244,113 shares issued and 24,565,940 shares outstanding at December 31, 2021 and 19,194,615 shares issued and 18,215,679 shares issued and outstanding at December 31, 2020 respectively. | | 126,221 | | | 95,973 | | Additional paid-in capital | | 973,582 | | | 949,090 | | Cost of treasury stock | | (6,791) | | | (9,834) | | Accumulated other comprehensive loss | | (17,175) | | | (36,994) | | Retained earnings | | 149,505 | | | 338,800 | | Total Tsakos Energy Navigation Limited stockholders’ equity | | 1,240,803 | | | 1,353,675 | | Non-controlling interest | | 50,988 | | | 28,143 | | Total stockholders’ equity | | 1,291,791 | | | 1,381,818 | | Total liabilities and stockholders’ equity | $ | 2,894,814 | | $ | 3,112,275 |
| | | | | | | | | | | | 2019 | | | 2018 | | | ASSETS | | | | | | | | | CURRENT ASSETS: | | | | | | | | | Cash and cash equivalents | | $ | 184,835 | | | $ | 204,763 | | Restricted cash | | | 12,935 | | | | 15,763 | | Accounts receivable, net (Note 1(f)) | | | 40,342 | | | | 35,351 | | Capitalized voyage expenses | | | 505 | | | | 617 | | Due from related parties (Note 2) | | | 20,113 | | | | 20,923 | | Advances and other | | | 23,282 | | | | 18,407 | | Vessels held for sale (Note 1(j)) | | | 100,277 | | | | — | | Inventories | | | 13,032 | | | | 20,388 | | Prepaid insurance and other | | | 895 | | | | 1,073 | | Current portion of financial instruments—Fair value (Note 14) | | | 798 | | | | 217 | | | | | | | | | | | Total current assets | | | 397,014 | | | | 317,502 | | | | | | | | | | | INVESTMENTS (Note 3) | | | — | | | | 1,000 | | FINANCIAL INSTRUMENTS—FAIR VALUE, net of current portion (Note 14) | | | 287 | | | | 133 | | RIGHT OF USE ASSET UNDER OPERATING LEASES (Note 4) | | | 21,428 | | | | — | | LONG TERM RECEIVABLE (Note 4) | | | 13,000 | | | | 13,000 | | FIXED ASSETS (Note 4) | | | | | | | | | Advances for vessels under construction | | | 61,475 | | | | 16,161 | | Vessels | | | 3,610,590 | | | | 3,813,987 | | Accumulated depreciation | | | (977,339 | ) | | | (984,540 | ) | | | | | | | | | | Vessels’ Net Book Value | | | 2,633,251 | | | | 2,829,447 | | | | | | | | | | | Total fixed assets | | | 2,694,726 | | | | 2,845,608 | | | | | | | | | | | DEFERRED CHARGES, net (Note 5) | | | 27,648 | | | | 27,815 | | | | | | | | | | | Total assets | | $ | 3,154,103 | | | $ | 3,205,058 | | | | | | | | | | | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | CURRENT LIABILITIES: | | | | | | | | | Current portion of long-term debt (Note 6) | | $ | 235,513 | | | $ | 160,584 | | Payables | | | 36,611 | | | | 37,532 | | Due to related parties (Note 2) | | | 7,702 | | | | 4,366 | | Accrued liabilities | | | 50,873 | | | | 45,765 | | Unearned revenue | | | 12,067 | | | | 6,007 | | Current portion of obligations under operating leases (Note 4) | | | 7,534 | | | | — | | Current portion of financial instruments—Fair value (Note 14) | | | 3,900 | | | | 48 | | | | | | | | | | | Total current liabilities | | | 354,200 | | | | 254,302 | | | | | | | | | | | LONG-TERM DEBT, net of current portion (Note 6) | | | 1,298,783 | | | | 1,435,017 | | LONG-TERM OBLIGATIONS UNDER OPERATING LEASES (Note 4) | | | 13,894 | | | | — | | FINANCIAL INSTRUMENTS—FAIR VALUE, net of current portion (Note 14) | | | 14,907 | | | | 8,962 | | STOCKHOLDERS’ EQUITY | | | | | | | | | Preferred Shares, $ 1.00 par value; 25,000,000 shares authorized, 2,000,000 Series C Preferred Shares, 3,424,803 Series D Preferred Shares, 4,600,000 Series E Preferred Shares, 6,000,000 Series F Preferred Shares and 2,625,000 Series G Convertible Preferred Shares issued and outstanding at December 31, 2019 and 2,000,000 Series B Preferred Shares, 2,000,000 Series C Preferred Shares, 3,424,803 Series D Preferred Shares, 4,600,000 Series E Preferred Shares and 6,000,000 Series F Preferred Shares at December 31, 2018 | | | 18,650 | | | | 18,025 | | Common shares, $ 1.00 par value; 175,000,000 shares authorized at December 31, 2019 and December 31, 2018; 95,078,607 and 87,604,645 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively | | | 95,079 | | | | 87,605 | | Additionalpaid-in capital | | | 992,020 | | | | 996,833 | | Accumulated other comprehensive loss | | | (18,353 | ) | | | (8,660 | ) | Retained earnings | | | 364,000 | | | | 400,933 | | | | | | | | | | | Total Tsakos Energy Navigation Limited stockholders’ equity | | | 1,451,396 | | | | 1,494,736 | | Non-controlling Interest | | | 20,923 | | | | 12,041 | | | | | | | | | | | Total stockholders’ equity | | | 1,472,319 | | | | 1,506,777 | | | | | | | | | | | Total liabilities and stockholders’ equity | | $ | 3,154,103 | | | $ | 3,205,058 | | | | | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements. TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2019, 20182021, 2020 AND 20172019 (Expressed in thousands of U.S. Dollars—except share and per share data) |
| | | | | | | | | | | | | 2021 | | | 2020 | | | 2019 | | VOYAGE REVENUES: | $ | 546,120 | | $ | 644,135 | | $ | 597,452 | | EXPENSES: | | | | | | | | | | Voyage expenses | | 198,078 | | | 145,267 | | | 125,802 | | Charter hire expense | | 30,056 | | | 21,602 | | | 10,822 | | Vessel operating expenses | | 173,277 | | | 179,205 | | | 180,233 | | Depreciation and amortization | | 143,253 | | | 137,100 | | | 139,424 | | General and administrative expenses | | 29,130 | | | 29,040 | | | 27,696 | | Loss on sale of vessels (Note 4) | | 5,817 | | | 6,451 | | | 0 | | Impairment charges (Note 3, 4) | | 86,368 | | | 28,776 | | | 27,613 | | Total expenses | | 665,979 | | | 547,441 | | | 511,590 | | Operating (loss) income | | (119,859) | | | 96,694 | | | 85,862 | | OTHER INCOME (EXPENSES): | | | | | | | | | | Interest and finance costs, net (Note 7) | | (31,407) | | | (70,579) | | | (74,723) | | Interest income | | 703 | | | 1,071 | | | 3,694 | | Other, net | | (18) | | | 36 | | | (825) | | Total other expenses, net | | (30,722) | | | (69,472) | | | (71,854) | | Net (loss) income | | (150,581) | | | 27,222 | | | 14,008 | | Less: Net (income) loss attributable to the non-controlling interest | | (820) | | | (3,220) | | | 1,118 | | Net (loss) income attributable to Tsakos Energy Navigation Limited | $ | (151,401) | | $ | 24,002 | | $ | 15,126 | | Effect of preferred dividends (Note 10) | | (33,603) | | | (36,579) | | | (40,400) | | Deemed dividend on Series B Preferred Shares (Note 10) | | 0 | | | 0 | | | (2,750) | | Deemed dividend on Series C Preferred Shares (Note 10) | | 0 | | | (2,493) | | | 0 | | Deemed dividend on partially redeemed Series G Convertible Preferred Shares (Note 10) | | (2,171) | | | 0 | | | 0 | | Net loss attributable to common stockholders of Tsakos Energy Navigation Limited | $ | (187,175) | | $ | (15,070) | | $ | (28,024) | Loss per share, basic and diluted attributable to Tsakos Energy Navigation Limited common stockholders | $ | (9.53) | | $ | (0.80) | | $ | (1.58) | Weighted average number of shares, basic and diluted | | 19,650,307 | | | 18,768,599 | | | 17,751,585 |
| | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | VOYAGE REVENUES: | | $ | 597,452 | | | $ | 529,879 | | | $ | 529,182 | | EXPENSES: | | | | | | | | | | | | | Voyage expenses | | | 125,802 | | | | 125,350 | | | | 113,403 | | Charter hire expense | | | 10,822 | | | | 10,822 | | | | 311 | | Vessel operating expenses | | | 180,233 | | | | 181,693 | | | | 173,864 | | Depreciation and amortization | | | 139,424 | | | | 146,798 | | | | 139,020 | | General and administrative expenses | | | 27,696 | | | | 27,032 | | | | 26,324 | | Loss on sale of vessels (Note 4) | | | — | | | | 364 | | | | 3,860 | | Impairment charges (Note 3, 4) | | | 27,613 | | | | 65,965 | | | | 8,922 | | | | | | | | | | | | | | | Total expenses | | | 511,590 | | | | 558,024 | | | | 465,704 | | | | | | | | | | | | | | | Operating income (loss) | | | 85,862 | | | | (28,145 | ) | | | 63,478 | | | | | | | | | | | | | | | OTHER INCOME (EXPENSES): | | | | | | | | | | | | | Interest and finance costs, net (Note 7) | | | (74,723 | ) | | | (76,809 | ) | | | (56,839 | ) | Interest income | | | 3,694 | | | | 2,507 | | | | 1,082 | | Other, net | | | (825 | ) | | | 1,405 | | | | 1,464 | | | | | | | | | | | | | | | Total other expenses, net | | | (71,854 | ) | | | (72,897 | ) | | | (54,293 | ) | | | | | | | | | | | | | | Net income (loss) | | | 14,008 | | | | (101,042 | ) | | | 9,185 | | Less: Net loss (income) attributable to thenon-controlling interest | | | 1,118 | | | | 1,839 | | | | (1,573 | ) | | | | | | | | | | | | | | Net income (loss) attributable to Tsakos Energy Navigation Limited | | $ | 15,126 | | | $ | (99,203 | ) | | $ | 7,612 | | | | | | | | | | | | | | | Effect of preferred dividends (Note 10) | | | (40,400 | ) | | | (33,763 | ) | | | (23,776 | ) | Deemed dividend on Series B Preferred Shares (Note 10) | | | (2,750 | ) | | | — | | | | — | | Net loss attributable to common stockholders of Tsakos Energy Navigation Limited | | | (28,024 | ) | | | (132,966 | ) | | | (16,164 | ) | Loss per share, basic and diluted attributable to Tsakos Energy Navigation Limited common stockholders | | $ | (0.32 | ) | | $ | (1.53 | ) | | $ | (0.19 | ) | | | | | | | | | | | | | | Weighted average number of shares, basic and diluted | | | 88,757,923 | | | | 87,111,636 | | | | 84,713,572 | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE (LOSS) INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2019, 20182021, 2020 AND 20172019 (Expressed in thousands of U.S. Dollars)Dollars-except share and per share data) |
| | | | | | | | | | | | | 2021 | | | 2020 | | | 2019 | | Net (loss) income | $ | (150,581) | | $ | 27,222 | | $ | 14,008 | | Other comprehensive income (loss) | | | | | | | | | | Unrealized losses from hedging financial instruments | | | | | | | | | | Unrealized income (loss) on interest rate swaps, net | | 19,819 | | | (18,641) | | | (9,693) | | Comprehensive (loss) income | | (130,762) | | | 8,581 | | | 4,315 | | Less: comprehensive (income) loss attributable to the non-controlling interest | | (820) | | | (3,220) | | | 1,118 | | Comprehensive (loss) income attributable to Tsakos Energy Navigation Limited | $ | (131,582) | | $ | 5,361 | | $ | 5,433 |
| | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | Net income (loss) | | $ | 14,008 | | | $ | (101,042 | ) | | $ | 9,185 | | | | | | Other comprehensive income (loss) | | | | | | | | | | | | | Unrealized losses from hedging financial instruments | | | | | | | | | | | | | Unrealized loss on interest rate swaps, net | | | (9,693 | ) | | | (3,355 | ) | | | (992 | ) | | | | | | | | | | | | | | Comprehensive income (loss) | | | 4,315 | | | | (104,397 | ) | | | 8,193 | | | | | | | | | | | | | | | Less: comprehensive loss (income) attributable to thenon-controlling interest | | | 1,118 | | | | 1,839 | | | | (1,573 | ) | | | | | | | | | | | | | | Comprehensive income (loss) attributable to Tsakos Energy Navigation Limited | | $ | 5,433 | | | $ | (102,558 | ) | | $ | 6,620 | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019, 20182021, 2020 AND 20172019 (Expressed in thousands of U.S. Dollars—exceptDollars-except for share and per share data) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Treasury stock | | | | | | | | | | | | | | | | | | | Preferred
Shares | | | Common
Shares | | | Additional
Paid-in
Capital | | Shares | | | Amount | | | Retained
Earnings | | | Accumulated
Other
Comprehensive
(Loss) | | | Tsakos Energy
Navigation
Limited | | | Non-
controlling
Interest | | | Total
Stockholders’ Equity | | | BALANCE December 31, 2018 | $ | 18,025 | | $ | 87,605 | | $ | 996,833 | | 0 | | $ | 0 | | $ | 400,933 | | $ | (8,660) | | $ | 1,494,736 | | $ | 12,041 | | $ | 1,506,777 | | | Net income (loss) | | 0 | | | 0 | | | | | | | | 0 | | | 15,126 | | | | | | 15,126 | | | (1,118) | | | 14,008 | | | Issuance of Series G Convertible Preferred Shares | | 3,500 | | | | | | 30,484 | | | | | | | | | | | | | | 33,984 | | | | | | 33,984 | | | Conversion of Series G Convertible Preferred Shares | | (875) | | | 2,917 | | | (2,042) | | | | | | | | | | | | | | | | | | | | | | | Sale of Common Shares | | | | | 4,557 | | | 11,995 | | | | | | | | | | | | | | 16,552 | | | | | | 16,552 | | | Capital contribution from non-controlling interest | | | | | | | | | | | | | | | | | | | | | | | | | 10,000 | | | 10,000 | | | Cash dividends paid ($0.25 per common share) | | | | | | | | | | | | | | | | (8,907) | | | | | | (8,907) | | | | | | (8,907) | | | Redemption of Series B Preferred Shares paid | | (2,000) | | | | | | (45,250) | | | | | | | | (2,750) | | | | | | (50,000) | | | | | | (50,000) | | | Dividends paid on Series B preferred shares | | | | | | | | | | | | | | | | (3,000) | | | | | | (3,000) | | | | | | (3,000) | | | Dividends paid on Series C preferred shares | | | | | | | | | | | | | | | | (4,438) | | | | | | (4,438) | | | | | | (4,438) | | | Dividends paid on Series D preferred shares | | | | | | | | | | | | | | | | (7,492) | | | | | | (7,492) | | | | | | (7,492) | | | Dividends paid on Series E preferred shares | | | | | | | | | | | | | | | | (10,639) | | | | | | (10,639) | | | | | | (10,639) | | | Dividends paid on Series F preferred shares | | | | | | | | | | | | | | | | (14,250) | | | | | | (14,250) | | | | | | (14,250) | | | Dividends paid on Series G Convertible preferred shares | | | | | | | | | | | | | | | | (583) | | | | | | (583) | | | | | | (583) | | Other comprehensive loss | | | | | | | | | | | | | | | | | | | (9,693) | | | (9,693) | | | | | | (9,693) | | | BALANCE December 31, 2019 | $ | 18,650 | | $ | 95,079 | | $ | 992,020 | | 0 | | $ | 0 | | $ | 364,000 | | $ | (18,353) | | $ | 1,451,396 | | $ | 20,923 | | $ | 1,472,319 | | | Net income | | | | | | | | | | | | | | | | 24,002 | | | | | | 24,002 | | | 3,220 | | | 27,222 | | | Conversion of Series G Convertible Preferred Shares | | (10) | | | 33 | | | (23) | | | | | | | | | | | | | | | | | | | | | | | Sale of Common Shares | | | | | 861 | | | 2,600 | | | | | | | | | | | | | | 3,461 | | | | | | 3,461 | | | Purchase of Treasury Stock | | | | | | | | | | 978,936 | | | (9,834) | | | | | | | | | (9,834) | | | | | | (9,834) | | | Capital contribution from non-controlling interest | | | | | | | | | | | | | | | | | | | | | | | | | 4,000 | | | 4,000 | | | Cash dividends paid ($0.50 per common share) | | | | | | | | | | | | | | | | (9,379) | | | | | | (9,379) | | | | | | (9,379) | | Redemption of Series C Preferred Shares paid | | (2,000) | | | | | | (45,507) | | | | | | | | (2,493) | | | | | | (50,000) | | | | | | (50,000) | | | Dividends paid on Series C preferred shares | | | | | | | | | | | | | | | | (4,079) | | | | | | (4,079) | | | | | | (4,079) | | | Dividends paid on Series D preferred shares | | | | | | | | | | | | | | | | (7,492) | | | | | | (7,492) | | | | | | (7,492) | | | Dividends paid on Series E preferred shares | | | | | | | | | | | | | | | | (10,637) | | | | | | (10,637) | | | | | | (10,637) | | | Dividends paid on Series F preferred shares | | | | | | | | | | | | | | | | (14,250) | | | | | | (14,250) | | | | | | (14,250) | | | Dividends paid on Series G Convertible preferred shares | | | | | | | | | | | | | | | | (872) | | | | | | (872) | | | | | | (872) | | | Other comprehensive loss | | | | | | | | | | | | | | | | | | | (18,641) | | | (18,641) | | | | | | (18,641) | | | BALANCE December 31, 2020 | $ | 16,640 | | $ | 95,973 | | $ | 949,090 | | 978,936 | | $ | (9,834) | | $ | 338,800 | | $ | (36,994) | | $ | 1,353,675 | | $ | 28,143 | | $ | 1,381,818 | | | Net (loss) income | | | | | | | | | | | | | | | | (151,401) | | | | | | (151,401) | | | 820 | | | (150,581) | | Purchase of Treasury Stock | | | | | | | | | | 19,836 | | | (168) | | | | | | | | | (168) | | | | | | (168) | | | Sale of Common Shares | | | | | 30,248 | | | 20,290 | | (320,599) | | | 3,211 | | | (273) | | | | | | 53,476 | | | | | | 53,476 | | | Partial redemption of Series G convertible preferred shares | | (2,156) | | | | | | (18,562) | | | | | | | | (2,171) | | | | | | (22,889) | | | 22,889 | | | 0 | | | Sale of Series D preferred shares | | 92 | | | | | | 2,148 | | | | | | | | | | | | | | 2,240 | | | | | | 2,240 | | | Sale of Series E preferred shares | | 144 | | | | | | 3,357 | | | | | | | | | | | | | | 3,501 | | | | | | 3,501 | | | Sale of Series F preferred shares | | 741 | | | | | | 17,259 | | | | | | | | | | | | | | 18,000 | | | | | | 18,000 | | | Cash dividends paid ($0.10 per common share) | | | | | | | | | | | | | | | | (1,978) | | | | | | (1,978) | | | | | | (1,978) | | | Dividends paid on Class B preferred shares of subsidiary | | | | | | | | | | | | | | | | | | | | | | | | | (864) | | | (864) | | | Dividends paid on Series D preferred shares | | | | | | | | | | | | | | | | (7,594) | | | | | | (7,594) | | | | | | (7,594) | | | Dividends paid on Series E preferred shares | | | | | | | | | | | | | | | | (10,814) | | | | | | (10,814) | | | | | | (10,814) | | | Dividends paid on Series F preferred shares | | | | | | | | | | | | | | | | (15,010) | | | | | | (15,010) | | | | | | (15,010) | | | Dividends paid on Series G Convertible preferred shares | | | | | | | | | | | | | | | | (54) | | | | | | (54) | | | | | | (54) | | | Other comprehensive income | | | | | | | | | | | | | | | | | | | 19,819 | | | 19,819 | | | | | | 19,819 | | | BALANCE December 31, 2021 | $ | 15,461 | | $ | 126,221 | | $ | 973,582 | | 678,173 | | $ | (6,791) | | $ | 149,505 | | $ | (17,175) | | $ | 1,240,803 | | $ | 50,988 | | $ | 1,291,791 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Preferred
Shares | | | Common
Shares | | | Additional
Paid-in
Capital | | | Treasury stock | | | Retained
Earnings | | | Accumulated
Other
Comprehensive
Loss | | | Tsakos
Energy
Navigation
Limited | | | Non-controlling
Interest | | | Total
Stockholders’
Equity | | | | Shares | | | Amount | | BALANCE December 31, 2016 | | $ | 7,400 | | | $ | 87,339 | | | $ | 752,001 | | | | 3,617,786 | | | $ | (20,173 | ) | | $ | 582,889 | | | $ | (4,313 | ) | | $ | 1,405,143 | | | $ | 12,307 | | | $ | 1,417,450 | | Net income | | | | | | | | | | | | | | | | | | | | | | | 7,612 | | | | | | | | 7,612 | | | | 1,573 | | | | 9,185 | | —Issuance of 9.25% Series E Preferred Shares | | | 4,600 | | | | | | | | 105,896 | | | | | | | | | | | | — | | | | | | | | 110,496 | | | | | | | | 110,496 | | —Sale of Series D Preferred Shares | | | 25 | | | | | | | | 508 | | | | | | | | | | | | — | | | | | | | | 533 | | | | | | | | 533 | | —Sale of Common Shares | | | | | | | | | | | (407 | ) | | | (2,488,717 | ) | | | 13,848 | | | | (2,588 | ) | | | | | | | 10,853 | | | | | | | | 10,853 | | —Shares granted tonon-executive directors | | | | | | | | | | | | | | | (110,000 | ) | | | 589 | | | | (102 | ) | | | | | | | 487 | | | | | | | | 487 | | —Cash dividends paid ($0.05 per common share) | | | | | | | | | | | | | | | | | | | | | | | (17,066 | ) | | | | | | | (17,066 | ) | | | | | | | (17,066 | ) | —Dividends paid on Series B Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (4,000 | ) | | | | | | | (4,000 | ) | | | | | | | (4,000 | ) | —Dividends paid on Series C Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (4,438 | ) | | | | | | | (4,438 | ) | | | | | | | (4,438 | ) | —Dividends paid on Series D Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (7,485 | ) | | | | | | | (7,485 | ) | | | | | | | (7,485 | ) | —Dividends paid on Series E Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (6,885 | ) | | | | | | | (6,885 | ) | | | | | | | (6,885 | ) | —Other comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | — | | | | (992 | ) | | | (992 | ) | | | | | | | (992 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BALANCE December 31, 2017 | | $ | 12,025 | | | $ | 87,339 | | | $ | 857,998 | | | | 1,019,069 | | | $ | (5,736 | ) | | $ | 547,937 | | | $ | (5,305 | ) | | $ | 1,494,258 | | | $ | 13,880 | | | $ | 1,508,138 | | Adoption of new accounting standard | | | | | | | | | | | | | | | | | | | | | | | (1,311 | ) | | | | | | | (1,311 | ) | | | | | | | (1,311 | ) | Net Loss | | | | | | | | | | | | | | | | | | | | | | | (99,203 | ) | | | | | | | (99,203 | ) | | | (1,839 | ) | | | (101,042 | ) | —Issuance of 9.50% Series F Preferred Shares | | | 6,000 | | | | | | | | 138,280 | | | | | | | | | | | | — | | | | | | | | 144,280 | | | | | | | | 144,280 | | —Sale of Common Shares | | | | | | | 266 | | | | 555 | | | | (1,019,069 | ) | | | 5,736 | | | | (2,046 | ) | | | | | | | 4,511 | | | | | | | | 4,511 | | —Cash dividends paid ($0.05 per common share) | | | | | | | | | | | | | | | | | | | | | | | (13,096 | ) | | | | | | | (13,096 | ) | | | | | | | (13,096 | ) | —Dividends paid on Series B Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (4,000 | ) | | | | | | | (4,000 | ) | | | | | | | (4,000 | ) | —Dividends paid on Series C Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (4,438 | ) | | | | | | | (4,438 | ) | | | | | | | (4,438 | ) | —Dividends paid on Series D Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (7,492 | ) | | | | | | | (7,492 | ) | | | | | | | (7,492 | ) | —Dividends paid on Series E Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (10,637 | ) | | | | | | | (10,637 | ) | | | | | | | (10,637 | ) | —Dividends paid on Series F Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (4,781 | ) | | | | | | | (4,781 | ) | | | | | | | (4,781 | ) | —Other comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | — | | | | (3,355 | ) | | | (3,355 | ) | | | | | | | (3,355 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BALANCE December 31, 2018 | | $ | 18,025 | | | $ | 87,605 | | | $ | 996,833 | | | | — | | | $ | — | | | $ | 400,933 | | | $ | (8,660 | ) | | $ | 1,494,736 | | | $ | 12,041 | | | $ | 1,506,777 | | Net income (loss) | | | | | | | | | | | | | | | | | | | | | | | 15,126 | | | | | | | | 15,126 | | | | (1,118 | ) | | | 14,008 | | —Issuance of Series G Convertible Preferred Shares | | | 3,500 | | | | | | | | 30,484 | | | | | | | | | | | | — | | | | | | | | 33,984 | | | | | | | | 33,984 | | —Conversion of Series G Convertible Preferred Shares | | | (875 | ) | | | 2,917 | | | | (2,042 | ) | | | | | | | | | | | — | | | | | | | | — | | | | | | | | — | | —Sale of Common Shares | | | | | | | 4,557 | | | | 11,995 | | | | | | | | | | | | — | | | | | | | | 16,552 | | | | | | | | 16,552 | | —Capital contribution fromnon-controlling interest | | | | | | | | | | | | | | | | | | | | | | | — | | | | | | | | — | | | | 10,000 | | | | 10,000 | | —Cash dividends paid ($0.05 per common share) | | | | | | | | | | | | | | | | | | | | | | | (8,907 | ) | | | | | | | (8,907 | ) | | | | | | | (8,907 | ) | —Redemption of Series B Preferred Shares paid | | | (2,000 | ) | | | | | | | (45,250 | ) | | | | | | | | | | | (2,750 | ) | | | | | | | (50,000 | ) | | | | | | | (50,000 | ) | —Dividends paid on Series B Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (3,000 | ) | | | | | | | (3,000 | ) | | | | | | | (3,000 | ) | —Dividends paid on Series C Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (4,438 | ) | | | | | | | (4,438 | ) | | | | | | | (4,438 | ) | —Dividends paid on Series D Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (7,492 | ) | | | | | | | (7,492 | ) | | | | | | | (7,492 | ) | —Dividends paid on Series E Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (10,639 | ) | | | | | | | (10,639 | ) | | | | | | | (10,639 | ) | —Dividends paid on Series F Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (14,250 | ) | | | | | | | (14,250 | ) | | | | | | | (14,250 | ) | —Dividends paid on Series G Convertible Preferred Shares | | | | | | | | | | | | | | | | | | | | | | | (583 | ) | | | | | | | (583 | ) | | | | | | | (583 | ) | —Other comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | — | | | | (9,693 | ) | | | (9,693 | ) | | | | | | | (9,693 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BALANCE December 31, 2019 | | $ | 18,650 | | | $ | 95,079 | | | $ | 992,020 | | | | — | | | $ | — | | | $ | 364,000 | | | $ | (18,353 | ) | | $ | 1,451,396 | | | $ | 20,923 | | | $ | 1,472,319 | |
The accompanying notes are an integral part of these consolidated financial statements.
TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019, 20182021, 2020 AND 20172019 (Expressed in thousands of U.S. Dollars) |
| | | | | | | | | | | | | 2021 | | | 2020 | | | 2019 | | Cash Flows from Operating Activities: | | | | | | | | | | Net (loss) income | $ | (150,581) | | $ | 27,222 | | $ | 14,008 | | Adjustments to reconcile net (loss) income to net cash provided by operating activities | | | | | | | | | | Depreciation | | 126,821 | | | 127,278 | | | 128,783 | | Amortization of deferred dry-docking costs | | 16,432 | | | 9,822 | | | 10,641 | | Amortization of deferred finance costs | | 3,246 | | | 3,782 | | | 4,822 | | Interest expense on long term receivable, net | | (32) | | | 1,932 | | | 0 | | Change in fair value of derivative instruments | | (12,054) | | | 8,121 | | | (820) | | Loss on sale of vessels | | 5,817 | | | 6,451 | | | 0 | | Impairment charges | | 86,368 | | | 28,776 | | | 27,613 | | Payments for dry-docking | | (27,157) | | | (16,291) | | | (12,871) | | (Increase) Decrease in: | | | | | | | | | | Receivables, net | | (1,327) | | | 19,659 | | | (9,056) | | Margin deposits | | 304 | | | (6,153) | | | 0 | | Inventories | | (1,105) | | | (8,781) | | | 7,356 | | Prepaid insurance and other | | (445) | | | (521) | | | 178 | | Capitalized voyage expenses | | (238) | | | (1,096) | | | 112 | | Increase (Decrease) in: | | | | | | | | | | Payables | | 23,365 | | | 14,981 | | | 2,415 | | Accrued liabilities | | (12,700) | | | (10,322) | | | 5,108 | | Unearned revenue | | (3,603) | | | 556 | | | 6,060 | | Net Cash provided by Operating Activities | | 53,111 | | | 205,416 | | | 184,349 | | Cash Flows from Investing Activities: | | | | | | | | | | Advances for vessels under construction and acquisitions | | (55,605) | | | (39,671) | | | (55,988) | | Vessel acquisitions and/or improvements | | (5,623) | | | (148,569) | | | (46,217) | | Proceeds from sale of vessels | | 53,224 | | | 93,627 | | | 0 | | Net Cash used in Investing Activities | | (8,004) | | | (94,613) | | | (102,205) | | Cash Flows from Financing Activities: | | | | | | | | | | Proceeds from long-term debt | | 189,758 | | | 348,903 | | | 494,368 | | Financing costs | | (1,270) | | | (2,964) | | | (3,556) | | Payments of long-term debt | | (318,904) | | | (383,660) | | | (556,939) | | Purchase of treasury stock | | (168) | | | (9,834) | | | 0 | | Redemption of Series B preferred shares | | 0 | | | 0 | | | (50,000) | | Redemption of Series C preferred shares | | 0 | | | (50,000) | | | 0 | | Proceeds from stock issuance program, net | | 53,476 | | | 3,461 | | | 16,552 | | Proceeds from preferred stock issuance, net | | 23,741 | | | 0 | | | 33,984 | | Cash dividends | | (36,314) | | | (46,708) | | | (49,309) | | Capital contribution from non-controlling interest to subsidiary | | 0 | | | 4,000 | | | 10,000 | | Net Cash used in Financing Activities | | (89,681) | | | (136,802) | | | (104,900) | | Net decrease in cash and cash equivalents and restricted cash | | (44,574) | | | (25,999) | | | (22,756) | | Cash and cash equivalents and restricted cash at beginning of period | | 171,771 | | | 197,770 | | | 220,526 | | Cash and cash equivalents and restricted cash at end of period | $ | 127,197 | | $ | 171,771 | | $ | 197,770 | | Interest paid | | | | | | | | | | Cash paid for interest, net of amounts capitalized | $ | 40,840 | | $ | 53,813 | | $ | 70,755 | | Reconciliation of cash and cash equivalents and restricted cash at end of period: | | | | | | | | | | Current Assets: | | | | | | | | | | Cash and cash equivalents | | 117,192 | | | 160,475 | | | 184,835 | | Restricted cash | | 10,005 | | | 11,296 | | | 12,935 | | Total Cash and cash equivalents and restricted cash | | 127,197 | | | 171,771 | | | 197,770 |
| | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | Cash Flows from Operating Activities: | | | | | | | | | Net income (loss) | | $ | 14,008 | | | $ | (101,042 | ) | | $ | 9,185 | | Adjustments to reconcile net income (loss) to net cash provided by operating activities | | | | | | | | | Depreciation | | | 128,783 | | | | 137,023 | | | | 131,873 | | Amortization of deferreddry-docking costs | | | 10,641 | | | | 9,775 | | | | 7,147 | | Amortization of loan costs | | | 4,822 | | | | 3,992 | | | | 4,152 | | Stock compensation expense | | | — | | | | — | | | | 487 | | Change in fair value of derivative instruments | | | (820 | ) | | | 10,295 | | | | (3,692 | ) | Loss on sale of vessels | | | — | | | | 364 | | | | 3,860 | | Impairment charges | | | 27,613 | | | | 65,965 | | | | 8,922 | | Payments fordry-docking | | | (12,871 | ) | | | (14,869 | ) | | | (12,532 | ) | (Increase) Decrease in: | | | | | | | | | | | | | Receivables, net | | | (9,056 | ) | | | (15,995 | ) | | | 8,573 | | Inventories | | | 7,356 | | | | (4,095 | ) | | | 2,463 | | Prepaid insurance and other | | | 178 | | | | 504 | | | | 265 | | Capitalized voyage expenses | | | 112 | | | | 20 | | | | — | | Increase (Decrease) in: | | | | | | | | | Payables | | | 2,415 | | | | (12,460 | ) | | | (4,045 | ) | Accrued liabilities | | | 5,108 | | | | 2,072 | | | | 8,986 | | Unearned revenue | | | 6,060 | | | | (7,604 | ) | | | 5,183 | | | | | | | | | | | | | | | Net Cash provided by Operating Activities | | | 184,349 | | | | 73,945 | | | | 170,827 | | | | | | | | | | | | | | | Cash Flows from Investing Activities: | | | | | | | | | Advances for vessels under construction and acquisitions | | | (55,988 | ) | | | (16,161 | ) | | | — | | Vessel acquisitions and/or improvements | | | (46,217 | ) | | | (1,154 | ) | | | (293,347 | ) | Proceeds from sale of vessels | | | — | | | | 17,136 | | | | 51,550 | | | | | | | | | | | | | | | Net Cash used in Investing Activities | | | (102,205 | ) | | | (179 | ) | | | (241,797 | ) | | | | | | | | | | | | | | Cash Flows from Financing Activities: | | | | | | | | | Proceeds from long-term debt | | | 494,368 | | | | 352,872 | | | | 397,092 | | Financing costs | | | (3,556 | ) | | | (4,300 | ) | | | (3,177 | ) | Payments of long-term debt | | | (556,939 | ) | | | (508,832 | ) | | | (400,053 | ) | Sale of treasury stock, net | | | — | | | | 4,511 | | | | 10,853 | | Redemption of Series B preferred shares | | | (50,000 | ) | | | — | | | | — | | Proceeds from stock issuance program, net | | | 16,552 | | | | — | | | | — | | Proceeds from preferred stock issuance, net | | | 33,984 | | | | 144,280 | | | | 111,029 | | Cash dividends | | | (49,309 | ) | | | (44,444 | ) | | | (39,874 | ) | Capital contribution fromnon-controlling interest to subsidiary | | | 10,000 | | | | — | | | | — | | | | | | | | | | | | | | | Net Cash (used in) provided by Financing Activities | | | (104,900 | ) | | | (55,913 | ) | | | 75,870 | | | | | | | | | | | | | | | Net (decrease) increase in cash and cash equivalents and restricted cash | | | (22,756 | ) | | | 17,853 | | | | 4,900 | | Cash and cash equivalents and restricted cash at beginning of period | | | 220,526 | | | | 202,673 | | | | 197,773 | | | | | | | | | | | | | | | Cash and cash equivalents and restricted cash at end of period | | $ | 197,770 | | | $ | 220,526 | | | $ | 202,673 | | | | | | | | | | | | | | | Interest paid | | | | | | | | | | | | | Cash paid for interest, net of amounts capitalized | | $ | 70,755 | | | $ | 67,922 | | | $ | 56,580 | | Reconciliation of cash and cash equivalents and restricted cash at end of period: | | | | | | | | | | | | | Current Assets: | | | | | | | | | | | | | Cash and cash equivalents | | | 184,835 | | | | 204,763 | | | | 189,763 | | Restricted cash | | | 12,935 | | | | 15,763 | | | | 12,910 | | Total Cash and cash equivalents and restricted cash | | | 197,770 | | | | 220,526 | | | | 202,673 | |
The accompanying notes are an integral part of these consolidated financial statements. TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2019, 20182021, 2020 AND 20172019 (Expressed in thousands of U.S. Dollars, except for share and per share data, unless otherwise stated) |
1. Significant Accounting Policies 1. | Significant Accounting Policies
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(a) | Basis of presentation and description of business: The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”(a) Basis of presentation and description of business: The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the accounts of Tsakos Energy Navigation Limited (the “Holding Company”), and its wholly-owned and majority-owned subsidiaries (collectively, the “Company”). All intercompany balances and transactions have been eliminated upon consolidation.
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The Company owns and operates a fleet of crude oil and product carriers including two vesselschartered-in and two liquified natural gas (“LNG”) carriers providing worldwide marine transportation services under long, medium or short-term charters.
(b) | Use of Estimates:The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and expenses, reported in the consolidated financial statements and the accompanying notes. Although actual results could differ from those estimates, management does not believe that such differences would be material.
The Company owns and operates a fleet of crude oil and product carriers including five vessels chartered-in and two liquified natural gas (“LNG”) carriers providing worldwide marine transportation services under long, medium or short-term charters. |
(c) | Other Comprehensive Income (loss):The statement of other comprehensive income (loss), presents the change in equity (net assets) during a period from transactions and other events and circumstances fromnon-owner sources. It includes all changes in equity during a period except those resulting from investments by shareholders and distributions to shareholders. Reclassification adjustments are presented out of accumulated other comprehensive loss on the face of the statement in which the components of other comprehensive income (loss) are presented or in the notes to the consolidated financial statements. The Company follows the provisions of ASC 220 “Comprehensive Income”, and presents items of net income, items of other comprehensive income (“OCI”) and total comprehensive income in two separate and consecutive statements.
On July 1, 2020, the Company effected a 1-for-5 reverse stock split of its common shares. In connection with the reverse stock split 33.2 fractional shares were cashed out. All share and per share amounts disclosed in the consolidated financial statements and notes give effect to this reverse stock split retroactively, for all periods presented prior to the reverse stock split. |
(d) | Foreign Currency Translation:The functional currency of the Company is the U.S. Dollar because the Company’s vessels operate in international shipping markets in which the U.S. Dollar is utilized to transact most business. The accounting books of the Company are also maintained in U.S. Dollars. Transactions involving other currencies during the year are converted into U.S. Dollars using the exchange rates in effect at the time of the transactions. At the balance sheet dates, monetary assets and liabilities, which are denominated in other currencies, are translated into U.S. Dollars at theyear-end exchange rates. Resulting gains or losses are reflected within Vessel operating expenses in the accompanying Consolidated Statements of Comprehensive Income (Loss).
Impact of COVID-19 and conflict in Ukraine on the Company’s Business The impact of the COVID-19 pandemic and the conflict in Ukraine will continue to negatively affect the global economy and demand for oil and charter rates, which may continue to have a negative effect on the Company’s business, financial performance and the results of its operations. As a result, many of the Company’s estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, the Company’s estimates may change in future periods. (b) Use of Estimates:The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and expenses, reported in the consolidated financial statements and the accompanying notes. Although actual results could differ from those estimates, management does not believe that such differences would be material. |
(e) | Cash, Cash Equivalents and Restricted Cash:The Company classifies highly liquid investments such as time deposits and certificates of deposit and their equivalents with original maturities of three months or less as cash and cash equivalents. Cash deposits with certain banks that may only be used for special purposes (including loan repayments) are classified as Restricted cash.
(c) Other Comprehensive (Loss) Income:The consolidated statement of other comprehensive (loss) income, presents the change in equity (net assets) during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by shareholders and distributions to shareholders. Reclassification adjustments are presented out of accumulated other comprehensive loss on the face of the statement in which the components of other comprehensive (loss) income are presented or in the notes to the consolidated financial statements. The Company follows the provisions of ASC 220 “Comprehensive Income”, and presents items of net income, items of other comprehensive income (“OCI”) and total comprehensive income in two separate and consecutive statements. |
(d) Foreign Currency Translation:The functional currency of the Company is the U.S. Dollar because the Company’s vessels operate in international shipping markets in which the U.S. Dollar is utilized to transact most business. The accounting books of the Company are also maintained in U.S. Dollars. Transactions involving other currencies during the year are converted into U.S. Dollars using the exchange rates in effect at the time of the transactions. At the balance sheet dates, monetary assets and liabilities, which are denominated in other currencies, are translated into U.S. Dollars at the year-end exchange rates. Resulting gains or losses are reflected within Vessel operating expenses in the accompanying Consolidated Statements of Comprehensive (Loss) Income. (e) Cash, Cash Equivalents and Restricted Cash:The Company classifies highly liquid investments such as time deposits and certificates of deposit and their equivalents with original maturities of three months or less as cash and cash equivalents. Cash deposits with certain banks that may only be used for special purposes (including loan repayments) are classified as Restricted cash. (f) | Accounts Receivable, Net:Accounts receivable, net at each balance sheet date includes estimated recoveries from charterers for hire, freight and demurrage billings and revenue earned but not yet billed, net of an allowance for doubtful accounts (nil as of December 31, 2019 and 2018). Accounts receivable are recorded when the right to consideration becomes unconditional. The Company’s management at each balance sheet date reviews all outstanding invoices and provides allowance for receivables deemed uncollectible primarily based on the aging of such balances and any amounts in dispute. During 2019, the Company has written off $3,218 ($nil during 2018) of accounts receivable, deemed uncollectible.
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TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2019, 20182021, 2020 AND 2017—(Continued)2019 (Expressed in thousands of U.S. Dollars, except for share and per share data, unless otherwise stated) |
