TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
2023
TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES | |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | |
Page | |
Reports of Independent Registered Public Accounting Firm (PCAOB ID #1457) | F-2 |
Consolidated Balance Sheets as of December 31, 2023 and 2022 | F-7 |
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, 2022 | |
and 2021 | F-8 |
Consolidated Statements of Other Comprehensive Income (Loss) for the years ended December 31, 2023, | |
2022 and 2021 | F-9 |
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2023, 2022 and | |
2021 | F-10 |
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 | F-11 |
Notes to the Consolidated Financial Statements | F-12 |
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Tsakos Energy Navigation Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Tsakos Energy Navigation Limited and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income/(loss), other comprehensive income/(loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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, 2023, 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 19, 2024 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 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.
F-2
Recoverability assessment and impairment measurement of vessels, including right-of-use assets under operating leases
Description of the matter | As of December 31, 2023, 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 (hereinafter, the "carrying | |
value of a vessel or a right-of-use asset") was $2,675,303 thousands. As | |
discussed in Notes 1(i), 1(q) and 4 to the consolidated financial statements, | |
the Company evaluates its vessels and right-of-use assets under operating | |
leases for impairment, whenever events or changes in circumstances indicate | |
that the carrying value of a vessel or a right-of-use asset, 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 carrying value of a vessel or a right of use asset, to its future | |
undiscounted net operating cash flows expected to be generated throughout | |
the remaining useful life of the vessel or over the remaining lease term of the | |
right-of-use asset under operating lease. Where the carrying value of a vessel | |
or a right-of-use asset exceeds its future undiscounted net operating cash | |
flows, management recognizes an impairment loss equal to the excess of its | |
carrying value over its fair value, determined as per ASC 820 - Fair Value | |
Measurements ("ASC 820"). As of December 31, 2023, the Company | |
determined that the carrying value of the Liquified Natural Gas ("LNG") | |
vessel Neo Energy, was not recoverable and was impaired. The Company | |
determined the fair value of this vessel through a combination of future | |
discounted net operating cash flows and third-party valuations. As a result, | |
the Company recognized a $26,367 thousands impairment charge. | |
Auditing management's recoverability assessment of the Company's vessels | |
and right-ofuse-assets under operating leases and the impairment | |
measurement of vessel Neo Energy were complex, given the judgement and | |
estimation uncertainty involved in determining the assumptions of (i) the | |
future charter rates when forecasting the undiscounted, and for the vessel Neo | |
Energy the discounted, net operating cash flows, and (ii) for the vessel Neo | |
Energy, the discount rate. The future charter rates are subjective as they | |
involve the development and use of assumptions about the tanker and 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. | |
Changes in the discount rate may significantly impact the recoverable amount | |
of the vessel Neo Energy and therefore the impairment charge recognized. | |
The future charter rates and discount rate assumptions are forward looking | |
and subject to the inherent unpredictability of future global economic and | |
market conditions. | |
How we addressed the matter in We obtained an understanding of the Company's impairment process, | |
our audit | evaluated the design, and tested the operating effectiveness of the controls |
over the Company's determination of future charter rates and the discount | |
rate. |
We analyzed management's impairment assessment by comparing the methodology used to evaluate whether there was an impairment, against the accounting guidance in ASC 360.
F-3
To test management's future undiscounted net operating cash flows, our procedures included, among others, comparing the future vessel and right-of-use asset under operating lease charter rates for non-contracted revenue days, against internal and external market data sources, such as available market data from various analysts, and historical data for the vessels or right-of-use assets under operating leases.
To test management's future discounted net operating cash flows for the vessel Neo Energy, we compared the significant assumptions such as future charter rates for LNGs, used to estimate market participant cash flows, against available external market data sources. We also involved internal valuation professionals with specialized skills and knowledge, who assisted in our evaluation of the Company's discount rate, by comparing it to independently developed estimates using publicly available data from comparable entities in the LNG sector.
Our procedures also included performing sensitivity analyses to assess the impact of changes to future charter rates and, for the vessel Neo Energy, the discount rate, in the determination of the future undiscounted and discounted net operating cash flows, evaluating the accuracy of the forecasts by comparing actual results to management's historical forecasts and testing the completeness and accuracy of the future charter rates data used within the forecasts and the data used to determine the discount rate.
/s/ Ernst & Young (Hellas) Certified Auditors Accountants S.A.
We have served as the Company's auditor since 2002.
Athens, Greece
April 19, 2024
F-4
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Tsakos Energy Navigation Limited
Opinion on Internal Control over Financial Reporting
We have audited Tsakos Energy Navigation Limited and subsidiaries' internal control over financial reporting as of December 31, 2023, 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 Limited and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, 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, 2023 and 2022, the related consolidated statements of comprehensive income/(loss), other comprehensive income/(loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated April 19, 2024 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
F-5
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 19, 2024
F-6
TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2023, AND 2022
(Expressed in thousands of U.S. Dollars-except share and per share data)
2023 | 2022 | ||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 372,032 | $ | 304,367 | |||
Restricted cash | 4,662 | 5,072 | |||||
Margin deposits | 4,270 | 4,270 | |||||
Trade accounts receivable, net (Note 1(f)) | 46,698 | 78,198 | |||||
Capitalized voyage expenses | 1,448 | 1,904 | |||||
Due from related parties (Note 2) | 5,287 | 8,889 | |||||
Advances and other | 26,275 | 15,560 | |||||
Vessels held for sale (Note 1(j)) | 20,985 | 61,626 | |||||
Inventories | 22,513 | 26,217 | |||||
Prepaid insurance and other | 3,913 | 6,818 | |||||
Current portion of financial instruments-Fair value | 1,253 | 193 | |||||
Total current assets | 509,336 | 513,114 | |||||
RIGHT OF USE ASSETS UNDER OPERATING LEASES (Note 3) | |||||||
36,969 | 58,706 | ||||||
RIGHT OF USE ASSETS UNDER FINANCE LEASES (Note 3) | - | 41,851 | |||||
LONG-TERMRECEIVABLE (Note 3) | 23,812 | 23,307 | |||||
INVESTMENT IN DEBT SECURITIES | 5,064 | - | |||||
FIXED ASSETS (Note 4) | |||||||
Advances for vessels under construction | 150,575 | 46,650 | |||||
Vessels | 3,616,223 | 3,552,607 | |||||
Accumulated depreciation | (1,016,202) | (972,032) | |||||
Vessels' Net Book Value | 2,600,021 | 2,580,575 | |||||
Total fixed assets | 2,750,596 | 2,627,225 | |||||
DEFERRED CHARGES AND LEASEHOLD IMPROVEMENTS, net (Note 5) | 38,313 | 44,372 | |||||
Total assets | $ | 3,364,090 | $ | 3,308,575 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Current portion of long-term debt and other financial liabilities (Note 6) | $ | 191,974 | $ | 201,046 | |||
Payables | 40,207 | 48,156 | |||||
Due to related parties (Note 2) | 3,558 | 7,439 | |||||
Accrued liabilities | 33,391 | 36,196 | |||||
Unearned revenue (Note 1n) | 31,902 | 26,049 | |||||
Current portion of obligations under operating leases (Note 3) | 21,031 | 21,737 | |||||
Current portion of financial liability under operating leases (Note 3) | 1,067 | 1,031 | |||||
Current portion of financial liability under finance leases (Note 3) | - | 28,033 | |||||
Current portion of financial instruments-Fair value | 72 | - | |||||
Total current liabilities | $ | 323,202 | $ | 369,687 | |||
LONG-TERM DEBT AND OTHER FINANCIAL LIABILITIES, net of current portion | |||||||
(Note 6) | 1,370,683 | 1,376,831 | |||||
LONG-TERM OBLIGATIONS UNDER OPERATING LEASES (Note 3) | 15,937 | 36,969 | |||||
FINANCIAL LIABILITY UNDER OPERATING LEASES, net of current portion (Note 3) | 1,097 | 2,164 | |||||
FINANCIAL INSTRUMENTS-FAIR VALUE, net of current portion | 524 | 5 | |||||
STOCKHOLDERS' EQUITY (Note 8) | |||||||
Preferred Shares, $ 1.00 par value; 25,000,000 shares authorized, 4,745,947 Series E Preferred | |||||||
Shares and 6,747,147 Series F Preferred Shares issued and outstanding at December 31, 2023 | |||||||
and 3,517,061 Series D Preferred Shares, 4,745,947 Series E Preferred Shares, 6,747,147 Series | |||||||
F Preferred Shares issued and outstanding at December 31, 2022 | 11,493 | 15,010 | |||||
Common shares, $ 5.00 par value; 60,000,000 shares authorized at December 31, 2023 and | |||||||
December 31, 2022; 30,183,776 shares issued and 29,505,603 shares outstanding at | |||||||
December 31, 2023 and December 31, 2022 | 150,919 | 150,919 | |||||
Additional paid-in capital | 912,214 | 993,368 | |||||
Cost of treasury stock | (6,791) | (6,791) | |||||
Accumulated other comprehensive income | 2,485 | 7,665 | |||||
Retained earnings | 548,237 | 311,726 | |||||
Total Tsakos Energy Navigation Limited stockholders' equity | 1,618,557 | 1,471,897 | |||||
Non-controlling interest | 34,090 | 51,022 | |||||
Total stockholders' equity | 1,652,647 | 1,522,919 | |||||
Total liabilities and stockholders' equity | $ | 3,364,090 | $ | 3,308,575 | |||
The accompanying notes are an integral part of the consolidated financial statements.
F-7
TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 (Expressed in thousands of U.S. Dollars-except share and per share data)
2023 | 2022 | 2021 | |||||||
VOYAGE REVENUES: | $ | 889,566 | $ | 860,400 | $ | 546,120 | |||
EXPENSES: | |||||||||
Voyage expenses | 155,724 | 209,890 | 198,078 | ||||||
Charter hire expense | 24,680 | 32,774 | 30,056 | ||||||
Vessel operating expenses | 194,914 | 190,268 | 173,277 | ||||||
Depreciation and amortization | 144,241 | 140,821 | 143,253 | ||||||
General and administrative expenses | 33,339 | 29,854 | 29,130 | ||||||
(Gain) Loss on sale of vessels (Note 4) | (81,198) | 440 | 5,817 | ||||||
Impairment charges (Note 4) | 26,367 | - | 86,368 | ||||||
Total expenses | 498,067 | 604,047 | 665,979 | ||||||
Operating income (loss) | 391,499 | 256,353 | (119,859) | ||||||
OTHER INCOME (EXPENSES): | |||||||||
Interest and finance costs, net (Note 7) | (100,821) | (50,253) | (31,407) | ||||||
Interest income | 14,582 | 2,000 | 703 | ||||||
Other, net | (176) | 366 | (18) | ||||||
Total other expenses, net | (86,415) | (47,887) | (30,722) | ||||||
Net income (loss) | 305,084 | 208,466 | (150,581) | ||||||
Less: Net income attributable to the non-controlling interest | (4,902) | (4,232) | (820) | ||||||
Net income (loss) attributable to Tsakos Energy Navigation | |||||||||
Limited | $ | 300,182 | $ | 204,234 | $ | (151,401) | |||
Effect of preferred dividends (Note 10) | (30,184) | (34,724) | (33,603) | ||||||
Deemed dividend on Series D Preferred Shares (Note 10) | (3,256) | - | - | ||||||
Undistributed income to Series G participants | - | (1,250) | - | ||||||
Deemed dividend on partially redeemed Series G Convertible | |||||||||
Preferred Shares | - | - | (2,171) | ||||||
Net income (loss) attributable to common stockholders of | |||||||||
Tsakos Energy Navigation Limited | $ | 266,742 | $ | 168,260 | $ | (187,175) | |||
Earnings (Loss) per share, basic attributable to Tsakos | |||||||||
Energy Navigation Limited common stockholders | $ | 9.04 | $ | 6.02 | $ | (9.53) | |||
Earnings (Loss) per share, diluted attributable to Tsakos | |||||||||
Energy Navigation Limited common stockholders | $ | 9.04 | $ | 6.01 | $ | (9.53) | |||
Weighted average number of shares, basic | 29,505,603 | 27,970,799 | 19,650,307 | ||||||
Weighted average number of shares, diluted | 29,505,603 | 28,188,064 | 19,650,307 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-8
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TEN - Tsakos Energy Navigation Limited published this content on 08 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 May 2024 15:22:01 UTC.