ANNUALREPORT2021
ANNUAL REPORT 2021 - 1
BoardofDirectors’Reportfor2021
Introduction
AmericanTanker,Inc.(“ATI”orthe“Company”)isashipowningandleasefinancecompanywithamodernfleetofnineproducttankers
andoneshuttletankeroperatingintheU.S.domestic(“JonesAct”)trades.During2021,alltentankerswereinoperationonbareboat
charterstoOverseasShipholdingGroup,Inc.anditssubsidiaries(collectively“OSG”),oneofthelargestoperatorsintheJonesActtanker
market,anddomiciledinTampa,Florida.
TheGroup’sbusinessactivities
ThemainentitiesintheATIGroup(the“Group”)areAmericanTanker,Inc.(ATI),AmericanShippingCorporation(ASC),andtheten
singlepurposeleasingcompanies(ASCLeasingIthroughX,Inc.),eachowningoneofthetentankersanddomiciledintheU.S. ATIis
whollyowned b y A m e r i c a n T a n k e r H o l d i n g C o mpany,Inc.(ATHC),a wholly owned subsidiary of American Shipping Company ASA
(“AMSC”or“Parent”).American Shipping Company ASA isdomiciledinLysaker,Norway,andlistedontheOsloStockExchange,with
theU.S.subsidiarieslocatedinKennettSquare,Pennsylvania.AswhollyownedsubsidiariesofAMSC,theGroupisdirected,controlled
andmanagedbytheParentanditsBoardofDirectorsandexecutivemanagement.
ATI’sbusinessmodelistoownandlong‐termbareboatcharter‐outvesselsforoperationintheU.S.JonesActmarket,earningfixed
bareboatcharterrevenuesgeneratingstablecashflowstoprotectagainstshort‐termmarketfluctuations,and,inaddition,withprofit
sharepotentialgeneratedbythebareboatcharterers’operationsinthetimeorvoyagechartermarkets.
Inaccordancewiththis policy,allof ATI’svesselsareonfixedratebareboat charterswith OSG,togetherwithaprofitsharing
agreementwhichgivesATItheupsideofsharingtheprofitsgeneratedbyOSG.OSGemploysthevesselsonvoyageandtimecharters
tomajoroilcompanies,refineriesandtradingcompanies.
ThevesselswerebuiltatPhillyShipyard(“PHLY”),aleadingU.S.shipyardanddeliveredbetween2007and2011.
TheCompanyhasnoresearchanddevelopmentactivity.
TheJonesActmarket
TheU.S.cabotagelaw,commonlyreferredtoastheJonesAct,requiresallcommercialvesselstransportingcargoesbetweenpointsin
theUnitedStatestobeU.S.built,owned,operatedandmannedbyU.S.citizens,andregisteredundertheU.S.flag.TheJonesActhas
existedsince1920andenjoysstrongbipartisanpoliticalsupportintheUSA.
ATI’soperationintheJonesActmarketismadepossiblebytheleasefinanceexceptionoftheJonesAct,whichpermitsforeign
ownershipoftheshipsundercertainconditions.Compliancewiththeleasefinanceexceptionrequires,amongotherthings,thatthe
vesselsarebareboatcharteredtoqualifiedU.S.citizenoperators,suchasOSG.
Keyevents2021
Unsecuredbondtapissue
InApril2021,ATIexecutedatapissueofUSD20millionintheseniorunsecuredbondsdue2July2025.Thetapissuewasmadeatan
issuepriceof101%ofnominalamount.Followingsettlement,theoutstandingamountofthebondisUSD220million.
OSGbareboatcharterupdate
InDecember2021,theCompanyannouncedOSG’sdecisiontoexerciseits1‐yearextensionoptionsfortwoships,movingthecharter
expirytoDecember2023,andredeliverynoticesforthreeships,whichexpireinDecember2022.TheCompanyviewstheredeliveries
asanopportunitytodiversifyitscustomerbaseandwillworktowardsredeployingthevesselsintheJonesActtankermarketduring
2022andbeyond.
Vessel CharterExpiration RemainingCharterExtensionOptions
OverseasHouston Dec2023 Unlimited3and5year
OverseasLongBeach Dec2023 Unlimited3and5year
ANNUAL REPORT 2021 - 2
OverseasLosAngeles Dec2022 None
OverseasNewYork Dec2022 None
OverseasTexasCity Dec2022 None
OverseasBoston Dec2023 Unlimited3and5year
OverseasNikiski Dec2023 Unlimited3and5year
OverseasMartinez Dec2023 Unlimited3and5year
OverseasAnacortes Dec2023 Unlimited3and5year
OverseasTampa Jun2025 2x5yearfollowedby5x1year
Reviewoftheconsolidatedannualaccounts
ATIpreparesandpresentsitsconsolidatedaccountsaccordingtoInternationalFinancialReportingStandards(IFRS)asadoptedbythe
EU,andhasoneoperatingsegment.
ConsolidatedIncomestatement
In2021and2020,ATIhadoperatingrevenuesofUSD88.2millioneach,areflectionoftheCompany’sstable,predictablebusiness
model.Revenuesarerecognizedonamonthlybasisandrepresenttheincomefromthebareboatcharteragreements.Therewereno
profitsgeneratedundertheprofitsharingagreementwithOSGin2021or2020.
DepreciationwasUSD34.4millionin2021versusUSD34.1millionin2020.ATI’soperatingprofit(EBIT)wasUSD50.3millionin
2021versusUSD51.3millionin2020.
NetfinancialitemswerenegativeUSD36.1millionin2021comparedtonegativeUSD60.3millionin2020.Netfinancialitemsof
negativeUSD36.1millionin2021consistprimarilyofnetinterestexpenseofUSD36.4millionandotherfinancialexpensesofUSD
4.5million,offsetbynon‐cashgainonthemark‐to‐marketvaluationofinterestrateswapagreementsofUSD4.8million.Netfinancial
itemsofnegativeUSD60.3millionin2020consistprimarilyofnetinterestexpenseofUSD42.5millionandotherfinancialexpensesof
USD17.4million,(mainlyrefinancingfees),andnon‐cashlossonthemark‐to‐marketvaluationofinterestrateswapagreementsofUSD
0.4million.
Netprofitbeforetaxfor2021wasUSD14.2million(netlossbeforetaxofUSD9.0millionfor2020).
DeferredincometaxexpensewasUSD6.7millionin2021.DeferredincometaxbenefitwasUSD2.2millionin2020.Incometax
expensein2021wasUSD0.5million(USD0.4millionin2020).
ATI’s2021netincomewasUSD7.0millionversusnetlossofUSD7.2millionin2020.The2021basicanddilutedearningspershare
(EPS)wereUSD7.02.Thecorrespondingfiguresfor2020werenegativeUSD7.24,forbothbasicanddilutedEPS.
ConsolidatedCashflowstatement
TheCompany’soperatingcashflowisprimarilycomposedofbareboatcharterhireandDPOreceived,lessinterestpaid.Totalnetcash
flowfromoperatingactivitiesin2021waspositiveUSD48.2million(USD33.3millionin2020).
In2021,therewerenocashflowsusedininvestingactivities.Netcashflowusedininvestingactivitiesin2020wasUSD4.8million,
representingtheCompany’sinvestmentintwoballastwatertreatmentsystems.
Netcashflowusedinfinancingactivitiesin2021wasUSD20.3million,whichincludedUSD26.9millioninvesseldebtinstallments,
USD13.0millionindividendspaid/returnofcapital,USD0.4millioninloanfeespaid,offsetbythebondtapissueraisedin2021ofUSD
20.0million.Netcashflowusedinfinancingactivitiesin2020wasUSD33.8million,whichincludedUSD31.2millioninvesseldebt
installments, USD 7.0million in dividends paid/return of capital, USD 10.1 million in loan fees paid, offset by net received from
refinancingofUSD14.5million.
ConsolidatedStatementoffinancialposition
Asof31December2021,ATIhadcashondepositwithbankstotalingUSD50.0million.Ofthistotalamount,USD5.4millioniscashheld
forspecifieduses.Thecorrespondingamountsfor2020wereUSD22.0millionincashondepositwithbanksandUSD5.5millionincash
heldforspecifieduses.
ReceivablesandothercurrentassetswereUSD14.5millionasof31December2021andUSD2.1millionasof31December2020
andrelatedmostlytothecurrentportionofthelong‐termreceivableduefromOSG.
Property, plant and equipment as of 31December 2021 was USD 614.1million (USD 648.5million as of 31December 2020),
consistingoftenvessels.
Interest‐bearinglong‐termreceivablestotaledUSD7.3millionasof31December2021(USD21.4millionasof31December2020)
andrepresenttheDPOduefromOSG.ReceivablefromgroupcompanieswasUSD2.8millionasof31December2021and2020,and
relatestotheborrowingofU.S.federalNOLsamongsttheATHCGroup.
DerivativefinancialassetswereUSD3.6millionasof31December2021(0in2020).
At31December2021,totalassetswereUSD692.6million(USD696.8millionasof31December2020).
At31December2021totalequitywasUSD38.6million.Theequityratiowas5.6%oftotalassets.Correspondingamountsfor2020
wereUSD44.6millionand6.4%,respectively.
ANNUAL REPORT 2021 - 3
Totalcurrentliabilitiesasof31December2021wereUSD35.9million,consistingofUSD26.8millioninshort‐terminterestbearing
debt and USD 8.7million in accrued interest and other payables and USD 0.4 million in tax payable. The corresponding
totalcurrentliabilitiesasof31December2020wereUSD34.9million,consistingofUSD26.8millioninshort‐terminterestbearingdebt
andUSD8.0millioninaccruedinterestandotherpayables.
Non‐currentliabilities totaledUSD 618.0millionat31December2021, consistingoflong‐termbank debt of USD298.7million
relatedtothetenvesselsownedbyATI,abondissueofUSD220.0million,interest‐bearingloanfromAMSCofUSD89.6millionand
deferred tax liability of USD 16.6 million, offset by unamortized loan fees of USD 6.9 million. Non‐current liabilities totaled USD
617.4millionat31December2020,consistingoflong‐termbankdebtofUSD325.6millionrelatedtothetenvesselsownedbyATI,a
bondissue ofUSD 200.0million,interest‐bearingloanfromAMSCof USD89.5 million,deferredtaxliabilityofUSD9.9millionand
derivativefinancialliabilitiesofUSD1.2million,offsetbyunamortizedloanfeesofUSD8.7million.
Consolidatedtaxposition
ATIhasfederalnetoperatinglossescarryforward(NOLs)asof31December2021ofUSD465.6millionintheU.S..TheseNOLshave
beengeneratedsinceinceptionfromthetaxlossesoftheCompany,whicharemostlyduetotheaccelerateddepreciationofthevessels
fortaxpurposes(10years).
Seenote5intheconsolidatedaccountsandnote4intheparentcompanyaccountsforfurtherinformation.
Risks
ATI’srisksaremanagedbytheParent’sBoardofDirectorsandexecutivemanagementandaresummarizedbelow.
Counterpartyriskandcharterrenewalrisk
TherisksfacingATIprincipallyrelatetothecommercialandfinancialperformanceofOSGandfromOSG’soperationofourvessels,re‐
charteringriskaswellasoverallJonesActmarketrisk.
FollowingtheDecember2021announcement,threevesselshavebareboatchartersexpiringinDecember2022,sixvesselshave
bareboatchartersexpiringinDecember2023,andonevesseliscontractedthroughJune2025.ThreevesselswillberedeliveredtoATI
uponexpirationinDecember2022.ThereisnoguaranteethatATIwillbesuccessfulinfindingalternativeemploymentforthethree
vessels.
SinceOSGiscurrentlyATI’sonlycounterparty,ATIisexposedtoOSG’screditrisk.AschartererofalloftheCompany’svessels,OSG
continuedtoserviceitsfinancialobligationstoATIin2021ontime,includingpaymentsontheDPOreceivable.ATIenjoysdownside
marketprotectionwith“comehellorhighwater”bareboatcontractsandthroughthetwelvemonthnoticeperiodtoredelivervessels
whichprovidesmanagementwithampletimetofindalternativeemploymentfortheassets.Theredeliveryofthreevesselspresents
anopportunitytodiversifytheCompany’scustomerbase.
The long‐term fundamentals in the Jones Act tanker market remain stable. Although the impact of the COVID‐19 pandemic
temporarilyreduceddemandforcrudeoilandcleanproductsintheU.S.,themarketsarenowclosetofullrecovery.
ATIcontinuestocloselymonitoritsemploymentandcounterpartyrisk,aswellasJonesActtankermarketfundamentals.
ATIconsidereditsclimaterisk.ATI'sbusinesscouldbeaffectedbyclimatechangethroughincreasedfinancingcostsandcostsfor
regulatorychangestoitsvessels,amongstotherthings.ThesefactorswereconsideredbytheCompanyforthepurposeofidentifying
impairmenttriggers.
Financialriskandriskmanagement
ATI’sactivitiesexposeittoavarietyoffinancialrisks:marketrisk,currencyrisk,interestraterisk,counterpartyrisk,pricerisk,credit
risk,andliquidityrisk.ATI’soverallriskmanagementprogramfocusesontheunpredictabilityoffinancialmarketsandseekstominimize
potentialadverseeffectsonATI’sfinancialperformance.ATIusesderivativefinancialinstrumentstohedgecertainriskexposure.
ATI operates in a business environment that is capitalintensive. The Company is dependent upon having access to long‐term
fundingforthevesselsandotherloanfacilitiestotheextentitsowncashflowfromoperationsisinsufficienttofunditsoperations.
Withtheclosingofthesecuredbankdebtandunsecuredbondduring2020,alloftheCompany’sdebtmaturesin2025.
Throughthevesselfinancing,theCompanyisexposedtofluctuationsininterestratesonitslong‐termdebt.Theinterestraterisk
relatedtothevesselfinancingispartiallymitigatedbytheuseofinterestrateswapagreementstohedgetheinterestraterisk.The
Companyhasinterestrateswapstoconvertitsfloatingratedebttofixedratesforaportionofitsvesseldebt(USD195.4millionasof
31December2021).
ATIissubjecttofinancialcovenantsunderthesecuredbankloansrelatingtominimumliquidityandcollateral,andleverageand
debtserviceratios.ATIissubjecttofinancialcovenantsunderthebondrelatedtominimumliquidityandmaximumleverage.ATIwas
incompliancewithallofitsdebtcovenantsasof31December2021.
Thegoingconcernassumption
InviewofATI’sfinancialposition,theBoardconfirmsthegoingconcernassumptionsandthatthe2021annualaccountshavebeen
preparedbasedontheassumptionofagoingconcern.
ANNUAL REPORT 2021 - 4
Outlook
TheJonesActtankermarketduring1H2021wasnegativelyimpactedbyCOVID‐relatedmeasures,effectivelyreducingdemand
forcrudeoilandcleanpetroleumproductsintheUSA.During2H2021,theJonesActtankermarketrecoveredsignificantlyasa
numberoftimecharterswerefixedatfirmingratesandofdurationsrangingfrom3monthsto5years.Thistrendhascontinuedin
2022andfixturesareconcludedonthebackofU.S.domesticdemandforcleanpetroleumproductsreturningtohistoricallevels,
increaseddemandforcrudetransportationandincreasingdemandfortransportationofrenewablediesel.OnlyoneMRtanker
remaininwarmlayup,downfromeightduringthesummerlastyear,anditisexpectedthattheentireJonesActtankerfleetwillbe
operationalduringthesecondhalfof2022.
During2021,demandforcleanproductsintheUSAhasrecoveredtopre‐COVIDlevels.U.S.refineryutilizationisstilllagging
somewhat,butisexpectedtoimproveastheglobaleconomicrecoverycontinues.
DemandforcrudeoiltransportationfromtheU.S.GulftotheU.S.Northeastincreasedonthebackofawideningspreadbetween
WTIpricedinHoustonandBrent/BonnyLight.WeareoptimisticthatthistradewillcontinuetogrowasU.S.shaleproduction
increasesdrivenbyhigherenergyprices.
Aspreviouslypredicted,thesupplysideofthemarkethasretractedwithtwooldertankerssoldforscraptowardstheendof
2021.DuetolimitedUSyardcapacityandrisingnewbuildingcosts,suchvesselsareunlikelytobereplacedinthemarketformany
yearstocome.
ATI’sbusinessmodelisnotdirectlyaffectedbythepresentconflictinUkraine,butislikelytobeindirectlyaffectedbycontinued
volatilityinoilpricesandchangingtradepatternsforinternationalcrudeandcleanpetroleumproductsgoingforward.
Thelong‐termfundamentalsintheJonesActtankermarketremainpositive.MRtankersareareliablemeansoftransportation
andakeypartoftheinfrastructuretransportingfuelandcrudeoilacrosstheUSA.ATI’s10tankersareakeypartoftheJonesActfleet
andrepresentabout30%ofthemoderntankers.ATIcontinuestoenjoydownsideprotectionwith“comehellorhighwater”bareboat
contracts,withthreeproducttankersoncontractuntilDecember2022,sixproducttankersoncontractuntilDecember2023andone
shuttletankeroncontractuntilJune2025.
KennettSquare,30April2022
TheBoardofDirectors
AmericanTanker,Inc.LeighJaros,Director
ANNUAL REPORT 2021 - 5
BoardResponsibilitystatement
Today,thesoledirectorreviewedandapprovedtheBoardofDirectors’Reportandtheconsolidatedannualfinancialstatementsfor
AmericanTanker,Inc.asofandfortheyearended31December2021(AnnualReport2021).
AmericanTankerInc.’sconsolidatedfinancialstatementshavebeenpreparedinaccordancewithInternationalFinancialReporting
StandardsasadoptedbytheEUandadditionaldisclosurerequirementsintheNorwegianAccountingAct.TheBoardofDirectors’Report
forthegroupisinaccordancewiththerequirementsintheNorwegianAccountingActandNorwegianAccountingStandardno.16as
of31December2021.
Tothebestofmyknowledge:
Theconsolidatedannualfinancialstatementsfor2021havebeenpreparedinaccordancewiththeapplicableaccountingstandards.
Theconsolidatedannualfinancialstatementsgiveatrueandfairviewoftheassets,liabilities,financialpositionandprofitasa
wholeasofandfortheyearended31December2021forthegroup.
TheBoardofDirectors’Reportforthegroupincludesatrueandfairreviewof:
∎
thedevelopmentandperformanceofthebusinessandthepositionofthegroup
∎
theprincipalrisksanduncertaintiesthegroupfaces
KennettSquare,30April2022
TheBoardofDirectors
AmericanTanker,Inc.
LeighJaros,Director
ANNUAL REPORT 2021 - 6
American Tanker, Inc. & Subsidiaries
Consolidated Statement of Financial Position as of 31 December
Amounts in USD thousands
Note 2021 2020
Assets
Non-current assets
Interest-bearing Long-term Receivable 7, 16 7,292 21,388
Derivative Financial Assets 9, 16 3,631 -
Receivable from Group companies 16, 17 2,816 2,795
Property, plant and equipment 6 614,123 648,506
Total non-current assets 627,861 672,690
Current Assets
Cash & Cash Equivalents 16 44,506 16,446
Cash held for specified uses 16 5,449 5,572
Receivables and other current assets 8, 16 14,456 2,136
Tax Receivable 5 317 -
Total Current Assets 64,729 24,154
Total Assets 692,590 696,844
Liabilities & Equity
Equity
Share capital and share premium 11 38,601 51,601
Retained Earnings/(Accumulated deficit) 48 (6,974 )
Total Equity 38,649 44,627
Long-Term Liabilities
Interest bearing loans 13, 16 601,364 606,218
Deferred Tax Liability 5 16,632 9,926
Derivative financial liabilities 9, 16 - 1,211
Total Long-Term Liabilities 617,997 617,355
Current Liabilities
Current portion of long-term loans 13, 16 26,862 26,862
Trade and other payables 15 8,720 7,963
Tax Payable 5 363 37
Total Current Liabilities 35,944 34,862
Total Liabilities & Equity 692,590 696,844
30 April 2022
Leigh Jaros, Director/President/CEO
ANNUAL REPORT 2021 - 7
American Tanker, Inc. & Subsidiaries
Consolidated Income Statement for the years ended
Amounts in USD thousands Note
2021 2020
Bareboat Charter Revenue
14
Total Revenues 88,193 88,203
Operating Expenses
Wages and other personnel expenses 2 (290 ) (259 )
Other operating expenses 3 (3,185 ) (2,471 )
Total Operating Expenses (3,475 ) (2,729 )
Operating Profit before Depreciation 84,718 85,474
Depreciation 6 (34,383 ) (34,149 )
Operating Profit 50,335 51,324
Financial income 4 6,620 1,673
Financial expenses 4 (42,723 ) (62,002 )
Net Financial Items (36,103 ) (60,329 )
Profit/(Loss) before tax 14,232 (9,005 )
Income tax benefit/(expense) 5 (7,210 ) 1,769
Net Profit/(Loss) for the period
(1)
Basic and diluted earnings per share 10 7.02 (7.24 )
American Tanker, Inc. & Subsidiaries
Consolidated Statement of comprehensive income for the
years ended
Amounts in USD thousands
2021 2020
Net income/(loss) for the year 7,022 (7,236 )
Other comprehensive income for the period, net of tax - -
Total comprehensive income/(loss) for the year
(1)
(1)
Applicable to common shareholders of ATI
ANNUAL REPORT 2021 - 8
American Tanker, Inc. & Subsidiaries
Consolidated Statement of changes in equity
Amounts in USD thousands
Note
Share
capital
Share
premium
Retained earnings/
(Accumulated
deficit)
Total equity
Balance at 31 December 2019 0.01 58,601 262 58,864
Total comprehensive income for the year (7,236 ) (7,236 )
Dividends paid / return of capital 11 (7,000 ) (7,000 )
Balance at 31 December 2020 0.01 51,601 (6,974 ) 44,627
Total comprehensive income for the year 7,022 7,022
Dividends paid / return of capital 11 (13,000 ) (13,000 )
Balance at 31 December 2021 0.01 38,601 48 38,649
ANNUAL REPORT 2021 - 9
American Tanker, Inc. & Subsidiaries
Consolidated Cash flow for the years ended
Amounts in USD thousands Note 2021 2020
Net profit/(loss) before tax 14,232 (9,005 )
Add back:
Depreciation expense 6 34,383 34,149
Net interest expense 4 36,436 42,518
Unrealized (gain)/loss on interest swaps 9 (4,841 ) 371
Non-cash interest expense/(income) 4 (443 ) (2,969 )
Other non-cash items (amortization of prepaids & loan fees) 2,280 6,093
(Increase)/Decrease in:
Other current assets 8 (168 ) 102
Long term receivables 7 1,944 1,944
Increase/(Decrease) in:
Accounts payable 15 (462 ) (515 )
Accrued liabilities 15 704 139
Interest paid 4 (37,289 ) (41,221 )
Interest received 4 1,448 1,673
Net cash from/(used in) operating activities 48,223 33,279
Investments in vessels 6 - (4,840 )
Net cash from/(used in) investing activities - (4,840 )
Proceeds from long term interest-bearing debt 13 20,000 507,513
Repayment of long term interest-bearing debt 13 (26,863 ) (524,230 )
Loan fees paid 13 (423 ) (10,063 )
Dividends paid / return of capital 11 (13,000 ) (7,000 )
Net cash from/(used in) financing activities (20,286 ) (33,781 )
Net increase/(decrease) in cash 27,937 (5,342 )
Cash at beginning of period 22,018 27,360
Cash at end of period 49,955 22,018
(0) (0)
ANNUAL REPORT 2021 - 10
NOTE 1 - ACCOUNTING PRINCIPLES
CORPORATE INFORMATION
(ATHC), which is wholly owned by American Shipping Company ASA (AMSC), an Oslo Stock Exchange listed company based
in Norway .
STATEMENT OF COMPLIANCE
The consolidated financial statements of American Tanker, Inc. (ATI) and all its subsidiaries have been prepared in
accordance with International Financial Reporting Standards as adopted by the European Union (IFRS).
BASIS FOR PREPARATION
These consolidated financial statements have been prepared on a historical cost basis, except for derivative financial
instruments that have been measured at fair value. Fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The consolidated financial statements are presented in USD (thousands), except when indicated otherwise.
USE OF ESTIMATES, ASSUMPTIONS AND SIGNIFICANT JUDGEMENTS
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect
the reported amounts in the financial statements. Although these estimates are based on management’s best knowledge of
current events and actions, actual results may ultimately differ from those estimates. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the
estimates are revised if the revision affects that period or in the period of revision and future periods if the revision affects
both current and future periods.
The following areas involve a significant degree of judgement and complexity, and may result in significant variation in
amounts:
Impairment of property, plant and equipment
The Group has significant investments in Jones Act tankers. Evaluating whether there are impairment indicators present, or
if a vessel is impaired, requires significant judgment and may to a large extent depend upon the selection of key future
assumptions such as charter rates, useful life of vessels, potential impact of climate changes, vessel values, expected status
of Jones Act legislation and determination of cash-generating unit (“CGU”). See note 6 for further discussions.
Useful life of property, plant and equipment
In accounting for property, plant and equipment, judgements and assumptions are applied for useful life of vessels,
including its salvage value, when determining annual depreciation. Estimated useful lives may change due to changes in the
industry, and in environmental and legal requirements. In addition, salvage value may vary due to changes in market prices
for scrap value.
The significant factors that affect these estimates and assumptions are detailed in the accompanying financial statements
and footnotes.
ANNUAL REPORT 2021 - 11
GROUP ACCOUNTING AND CONSOLIDATION PRINCIPLES
The consolidated financial statements of ATI Group include the financial statements of the parent company American
Tanker, Inc. and its subsidiaries. Subsidiaries are those entities over which American Tanker has control. Control is normally
achieved through ownership, directly or indirectly, of more than 50% of the voting power. Currently, all of ATI's subsidiaries
are wholly owned. Intercompany balances and transactions, and any unrealized income and expenses arising from
intercompany transactions, are eliminated.
FUNCTIONAL CURRENCY
The financial statements are presented in United States dollars (USD), which is the functional and reporting currency of the
company.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment acquired by Group companies are recognized at acquisition cost. Vessels are depreciated to
their salvage value on a straight-line basis and adjusted for impairment charges, if any. Each vessel’s salvage value is equal
to the product of its lightweight tonnage and an estimated scrap rate less estimated costs of disposal. The carrying value of
the property, plant and equipment in the statement of financial position represents the cost less accumulated depreciation
and any impairment charges. Cost includes expenditures that are directly attributable to the acquisition of the asset.
Interest costs on borrowings to finance the construction of property, plant and equipment are capitalized during the period
of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed.
Expected useful lives and salvage value estimates of long-lived assets are reviewed annually and, where they differ
significantly from previous estimates, depreciation is changed prospectively. Ordinary repairs and maintenance costs, to
the extent they are ATI's responsibility, are charged to the income statement during the financial period in which they are
incurred. The cost of improvements is included in the asset’s carrying amount when it is probable that the Group will derive
future economic benefits in excess of the originally assessed standard of performance of the existing asset. Improvements
are depreciated over the useful lives of the related assets.
Ordinary repairs and maintenance costs, to the extent they are ATI's responsibility, are charged to the income statement
during the financial period in which they are incurred. The cost of improvements is included in the asset’s carrying amount
when it is probable that the Group will derive future economic benefits in excess of the originally assessed standard of
performance of the existing asset. Improvements are depreciated over the useful lives of the related assets.
ANNUAL REPORT 2021 - 12
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less.
Cash held for specified uses is restricted to debt service payments and is comprised of cash on deposit with banks.
IMPAIRMENT OF LONG-LIVED ASSETS
Property, plant and equipment and other non-current assets are reviewed for potential impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable, mainly independent, cash flows. The Company considers the vessels’ cash generating unit (“CGU”) as the group
of ten product tankers. Although each of the tankers produces its own cash inflows through the bareboat charter contracts,
the profit sharing agreement with Overseas Shipholding Group (“OSG”) is based on the aggregate results of the group of
ten vessels. An impairment loss is the amount by which the carrying amount of the assets exceeds the recoverable amount.
The recoverable amount is estimated as the higher of the CGU’s fair value less cost of disposal, or its value in use. The value
in use is determined by reference to discounted cash flows. Most critical in determining the value in use of vessels is
determining the estimated profit share on existing contracts and estimating future revenues from leases. These estimates
are primarily influenced by expectations of future demand in the Jones Act market.
A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the
recoverable amount, however not to an extent higher than the carrying amount that would have been determined had no
impairment loss been recognized in prior years.
LEASES
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. Leased assets with a remaining
lease period of less than 12 months at inception are excluded from lease accounting. Further, leases of assets of a low value
(small asset leases), mainly such items as PCs, office equipment and similar, are excluded from lease accounting.
Income from lease contracts where American Tanker, Inc. is a lessor is accounted for in accordance with IFRS 16, and
classified as Operating Revenues in the Income Statement.
As a lessor, ATI classifies its leases as an operating or finance lease. Leases in which a significant portion of the risks and
rewards of ownership are retained by ATI are classified as operating leases. Revenue from operating leases is recognized
straight-line over the charter period.
OTHER NON-CURRENT ASSETS
Other non-current assets represent a long-term receivable balance due from a customer which is accounted for using the
amortized cost method.
TRADE RECEIVABLES
Trade receivables are carried at their anticipated realizable value, which is the original invoice amount less an expected
credit losses of these receivables. The Company performed an analysis of expected credit losses in accordance with IFRS 9.
ANNUAL REPORT 2021 - 13
INTEREST-BEARING LIABILITIES
All loans and borrowings are initially recognized at cost, being the fair value of the consideration received net of issue costs
associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the
effective interest method; any difference between proceeds (net of transaction costs) and the redemption value is
recognized in the income statement over the period of the interest-bearing liabilities. Amortized cost is calculated by taking
into account any issue costs, and any discount or premium.
Gains and losses are recognized in net profit or loss when the liabilities are derecognized, for instance due to significant
modifications to or settlements of existing financing agreements.
REVENUE RECOGNITION
Income from lease contracts where ATI is a lessor is accounted for in accordance with IFRS 16, and classified as Operating
Revenues in the Income Statement. Lease revenues related to fixed term vessel bareboat charter agreements are
recognized straight line over the charter period. Revenue related to profit sharing agreements (see note 19) is recognized
when the amount becomes fixed and determinable.
INCOME TAXES
Current income taxes
Income tax receivable and payable for the current period are measured at the amount expected to be recovered from or
paid to the taxation authorities. The tax rates and tax law as used to compute the amount are those that are enacted or
substantively enacted at the balance sheet date.
Deferred income taxes
Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between
the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilized. The carrying
amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.
Expected utilization of tax losses are not discounted when calculating the deferred tax asset.
Deferred income tax assets are recognized when it is probable that they will be realized. Determining probability requires
the Group to estimate the sources of future taxable income from operations and reversing taxable temporary differences.
Determining these amounts is subject to uncertainty and is based primarily on expected earnings from existing contracts
and expected profit sharing participation.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the
asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
at the end of the reporting period.
ACCOUNTING FOR DERIVATIVE FINANCING INSTRUMENTS AND HEDGING ACTIVITIES
Derivative financial instruments are recognized initially and on a recurring basis at fair value. ATI does not apply hedge
accounting to derivative contracts held.
Changes in the fair value of any derivative instruments are recognized immediately in the income statement.
In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading
purposes. Estimates of the fair value of interest rate swaps are based on broker quotes, with an adjustment for credit risk
as described in note 14. The fair value of derivative short-term and long-term financial liabilities is disclosed in note 16
regarding financial instruments.
ANNUAL REPORT 2021 - 14
EVENTS AFTER THE BALANCE SHEET DATE
A distinction is made between events both favorable and unfavorable that provide evidence of conditions that existed at
the balance sheet date (adjusting events) and those that are indicative of conditions that arose after the balance sheet date
(non-adjusting events). Financial statements will only be adjusted to reflect adjusting events (although there are disclosure
requirements for non-adjusting events).
FINANCIAL RISK MANAGEMENT
The Company is part of the American Shipping Company Group, which activities exposes the Group to a variety of financial
risks: market risk (including currency risk, fair value interest risk and price risk), credit risk, cash flow interest rate risk and
foreign exchange risk. The Group’s overall risk management program, which also includes risk handling in ATI, focuses on
the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial
performance. The Group uses derivative financial instruments to hedge certain risk exposures. Risk-management is carried
out under policies approved by the Board of Directors. The Board of Directors provides principles for overall financial risk
management as well as policies covering specific areas such as foreign exchange risk, interest-rate risk, credit risk, and use
of derivative financial instruments and non-derivative financial instruments. Exposure to credit, interest rate and currency
risk arises in the normal course of the Group’s business. Derivative financial instruments are used from time to time to
hedge exposure to fluctuations in foreign exchange rates and interest rates for business purposes.
CHANGES IN ACCOUNTING PRINCIPLES AND NEW PRONOUCMENTS
ATI had not implemented any new accounting standards or otherwise made any changes to accounting policies during
2021.
None of the issued, not yet effective, accounting standards or amendments to such standards are expected to have
significant effects for ATI's financial reporting. Further, none of the recently issued IFRS Interpretations Committee agenda
decisions are expected to significantly change ATI's accounting policies or practices.
RELATED PARTY TRANSACTIONS
All transactions, agreements and business activities with related parties are, in the Company's opinion, conducted on an
arm’s length basis according to ordinary business terms and conditions.
BASIC AND DILUTED EARNINGS PER SHARE
The calculation of basic earnings per share is based on the profit attributable to ordinary shareholders using the weighted
average number of shares outstanding during the year after deduction of the average number of treasury shares held over
the period. The calculation of diluted earnings per share is consistent with the calculation of basic earnings per share while
giving effect to all dilutive potential ordinary shares that were outstanding during the period. The Group currently has no
potentially dilutive shares outstanding.
ANNUAL REPORT 2021 - 15
NOTE 2: WAGES AND OTHER PERSONNEL EXPENSES
Wages and other personnel expenses consist of:
Amounts in USD thousands 2021 2020
Wages and bonuses 254 211
Social security contributions 11 12
Pension costs 3 6
Other expenses 22 30
Total expense 290 259
Average number of employees 1 1
Number of employees at year-end 1 1
NOTE 3: OTHER OPERATING EXPENSES
Other operating expenses consist of:
Amounts in USD thousands 2021 2020
Rent and leasing expenses 45 52
Other operating expenses 3,140 2,419
Total other operating expenses 3,185 2,471
Other operating expenses primarily relate to selling, general and administrative expenses including
management fee from AMSC, legal and outside consulting costs.
The Group has a defined contribution plan for its employees which provides for a contribution based upon a
fixed matching amount plus discretionary percentage of salaries. This expense is included in pension costs
above.
ANNUAL REPORT 2021 - 16
NOTE 4: FINANCIAL ITEMS
Amounts in USD thousands 2021 2020
Financial income
Interest income 1,778 1,673
Change in mark to market value of interest rate swaps 4,841 -
Financial income 6,620 1,673
Financial expenses
Interest expense - vessel debt / bond (29,376) (35,452)
Interest expense - intercompany (8,839) (8,739)
Change in mark to market value of interest rate swaps - (371)
Other financial expenses (4,508) (17,441)
Financial expenses (42,723) (62,002)
NET FINANCIAL ITEMS (36,103) (60,329)
The Company has interest rate swaps, related to a portion of its vessel debt financing, with BNP Paribas ("BNP"), Skandinaviska
Enskilda Banken AB ("SEB"), National Australia Bank ("NAB") and CIT Bank, N.A. ("CIT"). Estimates of the fair value of the interest
rate swaps are obtained from a third party, with an adjustment for credit risk as described in note 9.
Interest expense in 2021 includes interest paid of USD 37.3 million, comprised of USD 15.6 million paid for the bond, USD 13.0
million paid for secured vessel debt and USD 8.7 million paid for intercompany loans from AMSC. Interest paid during 2020 totaled
USD 41.2 million, comprised of USD 17.9 million paid for the bond, USD 17.1 million paid for secured vessel debt (including a one-
time fee of USD 1.9 million to terminate the previous interest rate swap agreements) and USD 6.2 million paid for intercompany
loans from AMSC.
Other financial expenses in 2021 relate to amortization of loan fees of USD 2.5 million and parent company guarantee fees of USD
2.0 million. Other financial expenses in 2020 relate to the cost of early redemption of bonds of USD 9.2 million, write-off of
capitalized loan fees of USD 3.4 million, amortization of loan fees of USD 2.7 million and parent company guarantee fees of USD 2.1
million.
Interest income in 2021 includes interest received from Overseas Shipholding Group ("OSG") of USD 1.7 million on the DPO
receivable (see note 7) and interest earned on bank deposits of USD 0.1 million. Interest income in 2020 includes interest received
from OSG of USD 1.5 million on the DPO receivable and interest earned on bank deposits of USD 0.2 million.
ANNUAL REPORT 2021 - 17
NOTE 5: TAX
INCOME TAX EXPENSE
Recognized in the income statement
Amounts in USD thousands 2021 2020
Current tax expense/(benefit):
Current year 504 406
Total current tax expense/(benefit) 504 406
Deferred tax expense/(benefit):
Origination and reversal of temporary differences 6,706 (2,174)
Total deferred tax expense/(benefit) 6,706 (2,174)
Total income tax expense/(benefit) in income statement 7,210 (1,769)
Reconciliation of income tax expense/(benefit):
Amounts in USD thousands 2021 2020
Profit/(loss) before tax 14,232 (9,005)
22.4% 22.6%
Expected tax expense/(benefit) using nominal US tax rate 3,190 (2,039)
State taxes (16) (1,436)
Change in valuation allowance and derecognized NOLs 5,765 1,206
U.S. federal and state tax (expense)/benefit of change in effective rates (1,207) 190
Other differences (522) 310
Total income tax expense/(benefit) in income statement 7,210 (1,769)
INCOME TAX EXPENSE
DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and (liabilities) were as follows at 31 December:
United States
Amounts in USD thousands 2021 2020
Net operating losses 105,347 120,885
Financial derivatives (800) 284
Vessels (135,654) (148,690)
Unused interest deductions 22,234 24,914
Other 116 76
Net deferred tax assets/(liabilities) (8,757) (2,531)
Net deferred tax assets not recorded (7,875) (7,396)
Net deferred tax assets/(liabilities) (16,632) (9,926)
On 3 January 2014, ATI's parent, American Tanker Holding Company, Inc. (ATHC) and subsidiaries experienced a change of ownership in the U.S. as defined by Internal Revenue
Code Section 382 due to a greater than 50% shift in owners of AMSC stock. The utilization of the tax losses in carryforward as of that date are subject to annual limitations. The
NOLs subject to limitations totaled USD 381.3 million.
Based on the IRC 382 limits, ATI expects to be able to utilize USD 12.6 million per year from 2022-2033 of its U.S. tax losses to reduce U.S. taxable income. Any net tax losses
recovered but not used in a year will carry over to the following year. Therefore, USD 151.7 million of the total IRC 382 limited losses of USD 381.3 million NOLs have not been
used through 31 December 2021 and are carried forward.
The Group's U.S. Federal tax losses in carryforward are comprised of the remaining IRC 382 limited NOLs of USD 151.7 million and the freely useable NOLs through 31
December 2021 of USD 313.9 million. There are no restrictions on the use of the USD 313.9 million net operating loss, the last of which expires in 2038.
In 2021, the Company recognized a deferred tax expense of USD 2.7 million (USD 1.9 million benefit in 2020) related to U.S. Federal income taxes.
In 2021, the Company recognized a deferred tax expense of USD 4.0 million (USD 0.3 million benefit in 2020) related to income taxes in the states where the vessels have
operated.
During 2021, ATI recognized an income tax expense of USD 0.5 million relating to state franchise taxes (USD 0.4 million in 2020).
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred
income taxes relate to the same fiscal authority, which through 31 December 2021 for the Group was primarily the U.S., and other local states in the U.S. where the vessels
operate.
The Group has federal tax losses in carryforward as of 31 December 2021 of USD 465.6 million in the U.S., the last of which expires in 2038. Unused interest deductions inlcude
differences between book and tax interest expense deductions based upon tax limitations in accordance with IRC Section 163(j). IRC Section 163(j) limits the amount of interest
expense that is deductible in the current year to 30% of EBITDA. Net deferred tax assets not recorded include valuation allowances for state tax assets in certain individual
reporting states that the company has determined may expire before they can be used.
ANNUAL REPORT 2021 - 18
NOTE 6: PROPERTY, PLANT AND EQUIPMENT
Movements in property, plant and equipment for 2021 are shown below:
Amounts in USD thousands Ships
Cost balance at 1 January 2021 1,081,863
Purchases -
Cost balance at 31 December 2021 1,081,863
Depreciation at 1 January 2021 433,356
Depreciation charge for the year 34,383
Depreciation at 31 December 2021 467,740
Book value at 31 December 2021 614,123
Movements in property, plant and equipment for 2020 are shown below:
Amounts in USD thousands Ships
Cost balance at 1 January 2020 1,077,023
Purchases 4,840
Cost balance at 31 December 2020 1,081,863
Depreciation at 1 January 2020 399,207
Depreciation charge for the year 34,149
Depreciation at 31 December 2020 433,356
Book value at 31 December 2020 648,506
Depreciation period 30 years
Depreciation method straight-line
Secured property, plant and equipment
Impairment trigger assessment
The Company evaluates any potential impairment of its vessels annually. During 2021 and 2020, the Company performed an impairment
trigger assessment. Triggers that are considered include: newbuild values and second-hand vessel sales; shipbroker valuations on a charter-
free basis versus book values; market rates, Jones Act legislation status; and vessel option extensions. The company has also evaluated the
potential impact of climate changes and considered the determination of CGUs. No impairment triggers were identified in 2021 or 2020.
Each vessel's salvage value is equal to the product of its lightweight tonnage and an estimated scrap rate of USD 365 per ton less estimated
costs of disposal.
At 31 December 2021 vessels with a carrying amount of USD 614.1 million are subject to a registered debenture to secure bank loans (see
note 13).
The BNP, Prudential and CIT credit facilities are secured by, among other things, a first preferred mortgage on five of the ten product tankers
in the case of the BNP facility, four of the ten product tankers in the case of the Prudential facility and one of the ten product tankers in the
case of the CIT facility. In addition, the credit facilities are secured by collateral assignments of the insurances, earnings and bareboat charters
for those vessels (and certain related guarantees of those bareboat charters and related supplemental indemnifications by OSG).
ANNUAL REPORT 2021 - 19
NOTE 7: INTEREST-BEARING LONG-TERM RECEIVABLES
Financial interest-bearing long-term receivables consist of the following items:
Amounts in USD thousands 2021 2020
DPO balance at beginning of period 23,333 25,278
Repayments of principal (1,944) (1,944)
DPO balance at end of period 21,389 23,333
Reclassified to short-term receivables (14,097) (1,945)
Long-term DPO balance at end of period 7,292 21,388
NOTE 8: RECEIVABLES AND OTHER CURRENT ASSETS
Trade and other receivables consist of the following items:
Amounts in USD thousands 2021 2020
Trade receivables 359 52
Prepaid fees / withheld taxes - 139
Other short-term interest-bearing receivables 14,097 1,945
Total 14,456 2,136
Trade receivables and other short-term interest-bearing receivables both relate to the DPO receivable
from OSG (see note 7). Accrued and unpaid interest of USD 0.3 million is included in trade receivables in
2021. The portion of the DPO balance relating to the three vessels that OSG opted not to extend during
2021 will become due upon redelivery of the vessels in Q4 2022 and is thus classified as short-term.
Other interest-bearing long-term receivables relate to a deferred principal obligation (DPO). Pursuant to
the current charter and financing agreements, OSG had the right to defer payment of a portion of the
bareboat charter hire for the first five vessels during the initial seven year fixed bareboat charter periods.
OSG paid a reduced bareboat charter rate and assumed the DPO. The DPO accrued on a daily basis to a
maximum liability of USD 7.0 million per vessel. The DPO during the initial seven year period was
discounted using the estimated market discount rate at lease inception. After the initial seven years, the
DPO is repaid over 18 years including interest at 6.04% unless the bareboat charter is terminated earlier
at which time the DPO becomes due immediately.
The Company assessed the Expected Credit Loss ("ECL") in accordance with IFRS 9 and determined that
the ECL is immaterial as of 31 December 2021 and 2020.
ANNUAL REPORT 2021 - 20
NOTE 9: DERIVATIVE FINANCIAL ASSETS AND LIABILITIES
Derivative financial assets and liabilities comprise the following items:
Amounts in USD thousands 2021 2020
Fair value of interest rate swaps 3,631 -
Derivative financial assets 3,631 -
Fair value of interest rate swaps - 1,211
Derivative financial liabilities - 1,211
Refer to note 16 for additional information regarding financial instruments.
The Company entered into interest rate swaps in 2020 for USD 226 million of the principal
amount of the secured loans (USD 195.4 million as of 31 December 2021). The previous
interest rate swaps were terminated in Q1 2020 for USD 1.9 million. As of 31 December
2021 and 2020 the market value of derivative financial instruments was positive USD 3.6
million and negative USD 1.2 million, respectively. The fair value of the interest swaps is
based on broker quotes. Similar contracts are traded in an active market and the quotes
reflect the actual transactions in similar instruments. In accordance with IFRS 9, the
Company considered the impact of credit risk on the valuation in the market. The result is
immaterial in 2021 and 2020.
ATI generally aims to coincide its interest rate swap contracts with the underlying debt
instrument. Therefore, it is swapping a floating LIBOR rate with an average fixed rate of 49
bps for 60% of the secured loans.
ANNUAL REPORT 2021 - 21
NOTE 10: EARNINGS PER SHARE
Amounts in USD thousands (except share and per share data) 2021
2020
Profit/(loss) attributable to equity holders of the Company for the
period for determination of earnings per share
7,022 (7,236)
Weighted average number of ordinary shares in issue 1,000 1,000
Basic and diluted earnings per share 7,022 (7,236)
NOTE 11: PAID IN CAPITAL
The changes in equity are:
Share Share Total
Amounts in USD thousands Capital premium paid in equity
31 December 2019 0.01 58,601 58,601
Dividends paid / return of capital - (7,000) (7,000)
31 December 2020 0.01 51,601 51,601
Dividends paid / return of capital - (13,000) (13,000)
31 December 2021 0.01 38,601 38,601
Basic and diluted earnings/(loss) per share are calculated by dividing the profit/(loss) attributable to equity
holders of the Company by the weighted average number of ordinary shares.
The current authorized share capital of ATI is 2,000 ordinary shares. The issued share capital of ATI as of 31 December 2021 is
1,000 ordinary shares, each with a par value of USD 0.01. No common shares were issued in 2021.
Common shares of equity holders of the
parent
ANNUAL REPORT 2021 - 22
NOTE 12: SUBSIDIARIES
ATI's
common ATI's Principal
2021 holding % voting share % place of business Country
American Shipping Corporation (ASC) 100% 100% Kennett Square, PA USA
ASC Leasing I - X, Inc. (10 legal entities) 100% 100% Kennett Square, PA USA
The subsidiaries included in the American Tanker Inc.'s Group account were as follows. Companies owned directly by ATI are highlighted.
Each of the Company's ten vessels are owned by an individual leasing company, ASC Leasing I - X, Inc. Each of the individual leasing companies have contracts
directly with OSG and vessel debt directly with BNP Paribas, Prudential or CIT Bank which are covered by overall agreements that tie the arrangements
together through either a framework agreement and/or guarantees.
ANNUAL REPORT 2021 - 23
NOTE 13: INTEREST-BEARING LOANS AND LIABILITIES
Following is information about the contractual terms of ATI's interest-bearing loans and borrowings.
Amounts in USD thousands 2021 2020
Non-current liabilities
Secured loans, net of capitalized fees 294,922 320,397
Unsecured bond issues, net of capitalized fees 216,838 196,370
Subordinated loan from AMSC 89,604 89,451
Total long term interest bearing loans 601,364 606,218
Current liabilities
Current portion of secured loans 26,862 26,862
Total interest-bearing short term debt 26,862 26,862
Summary of secured Loans as of 31 December 2021 2020
BNP Paribas gross borrowings 136,667 150,000
Prudential gross borrowings 130,074 138,603
CIT Bank gross borrowings 58,750 63,750
Less unamortized loan fees (3,706) (5,093)
Sum Secured Loans 321,784 347,259
Unsecured bond issue as of 31 December Maturity 2021 2020
Gross bond balance at beginning of period 2025 200,000 220,000
New bond raised 20,000 200,000
Repayment of old bond - (220,000)
Less unamortized loan fees (3,162) (3,630)
Sum unsecured bond issue 216,838 196,370
On 7 July 2020, ATI closed on the refinancing of the then oustanding USD 220 million unsecured bond, with a
new USD 200 million bond plus USD 25 million from the Company's revolving credit facility. The new bond has
a 7.75% semiannual coupon and matures 2 July 2025. On 25 January 2021, the ATI bond was listed on the Oslo
Stock Exchange under the ticker ATI02. On 9 April 2021, the Company completed a tap issue of USD 20 million
at an issue price of 101% of nominal amount. ATI capitalized USD 0.4 million in fees for the tap issue.
The refinancing repaid the previous BNP vessel debt of USD 228.0 million and part of the CIT vessel debt of USD 45.0 million, which
had a maturity in Q2 2021. The Company paid USD 5.2 million in fees for the new borrowing arrangements, which were capitalized
and will be amortized as additional interest expense over the term of the loans.
The Company entered into interest rate swap contracts in 2020 that swap the LIBOR for an average rate of 49 bps for USD 226
million of the debt (USD 195.4 million as of 31 December 2021).
On 9 April 2020, ATI closed on the refinancing of its senior secured debt for nine of the vessels with new and existing lenders. The
refinancing is structured in two separate facilities; one being a USD 160 million facility secured by five vessels with a club of three
banks consisting of BNP Paribas, SEB and National Australia Bank and the other, a USD 145 million facility secured by four vessels,
with a syndicate of four lenders consisting of Prudential Private Capital, Siemens Financial Services, Wintrust Asset Finance and
Atlantic Union Equipment Finance. The CIT facility remains secured by one vessel.
The two facilities are summarized below:
BNP Paribas:
- 5 year loan secured by 5 vessels
- USD 160 million, of which USD 90 million is a term loan and USD 70 million is a revolving credit facility
- Pricing: LIBOR + 270 bps
- Annual amortization: USD 13.3 million, 12 year repayment profile
Prudential facility:
- 5 year loan secured by 4 vessels
- USD 145 million
- Pricing: LIBOR + 325 bps
- Annual amortization: USD 8.5 million, 17 year repayment profile
There are no undrawn amounts on the Company's credit facilities as of 31 December 2021.
ANNUAL REPORT 2021 - 24
Amounts in USD thousands 2021 2020
Non-current liabilities
Due to AMSC 89,604 89,451
Intercompany loan due to AMSC 89,604 89,451
2021 2020
Balance at beginning of period 633,080 653,914
Repayment of debt (26,863) (524,230)
Payment of loan fees (423) (9,913)
Issuance of debt 20,000 505,000
PIK interest 152 2,513
Amortization of loan fees 2,280 5,797
Balance at end of period 628,226 633,080
Financial covenants
ATI was in compliance with all of its debt covenants as of 31 December 2021.
ATI is subject to financial covenants under the secured bank loans relating to minimum liquidity and collateral, and leverage and
debt service ratios. ATI is subject to financial covenants under the bond related to minimum liquidity and maximum leverage.
As of 31 December 2021, AMSC holds a USD 28.9 million loan to ATI. The loan from AMSC is unsecured and bears interest at the higher of 9.5% or
LIBOR plus 7% (9.5% at 31 December 2021) and with an option to pay in kind semi-annually. During 2021, ATI paid USD 2.6 million in interest
payments to AMSC for this loan.
During 2015, in connection with vessel debt refinancing, AMSC made a second loan of USD 52.2 million loan to ATI. The loan from AMSC is
unsecured and bears interest at 10%, with an option to pay in kind each quarter. The balance as of 31 December 2021 is USD 60.6 million. During
2021, ATI paid USD 6.1 million in interest payments to AMSC for this loan. The ATI note is payable on demand by AMSC, provided that demand may
not be made prior to the maturity date of the secured vessel debt.
Intercompany Loans
The ATI Group and its ultimate parent, AMSC, use intercompany loans from time to time. Below are the outstanding amounts,
including accrued interest for the years then ending.
The following table shows the reconciliation between the opening and closing balance of interest-bearing
loans:
ANNUAL REPORT 2021 - 25
NOTE 14: LEASES
Non-cancellable lease rentals for bareboat charter hire are receivable as follows:
Amounts in USD thousands 2021 2020
Less than one year 86,775 88,185
Between one and two years 59,031 88,185
Between two and three years 9,168 45,298
Between three and four years 4,534 9,168
Between four and five years - 4,534
More than five years - -
Total 159,508 235,371
Non-cancellable lease rentals for office space are payable as follows:
Amounts in USD thousands 2021 2020
Less than one year 44 47
Between one and five years 61 16
Total 105 63
In December 2021, OSG exercised its one year extension options for the bareboat charter agreements for two of ATI's
vessels, moving these charter expiries to December 2023. In addition, OSG provided notice not to extend the bareboat
contracts for three vessels, which will expire in December 2022. For all vessels excluding the Overseas Tampa, OSG has
options to extend the charter terms for one, three or five years for the remaining useful lives of the vessels. The one-
year extension options may only be used once for each vessel and OSG has exhausted the opportunity to declare a one
year extension for six vessels. OSG holds two five year extension options on the Overseas Tampa, followed by five one
year extensions that may be declared after the two five year extensions are exhausted. All extension options must be
declared 12 months prior to the expiry of the individual bareboat charter.
ANNUAL REPORT 2021 - 26
NOTE 15: TRADE AND OTHER PAYABLES
Trade and other payables comprise the following items:
Amounts in USD thousands 2021 2020
Accrual of financial costs 8,501 7,785
Other short-term interest free liabilities 219 178
Total 8,720 7,963
Financial costs include interest accrued but unpaid on the unsecured bond issue.
ANNUAL REPORT 2021 - 27
NOTE 16: FINANCIAL INSTRUMENTS
Credit risk
The carrying amount of financial assets represents the maximum credit exposure.
At 31 December the maximum exposure to credit risk is as follows:
Amounts in USD thousands
2021 2020
Loans and receivables 24,564 26,319
Cash and cash equivalents 44,506 16,446
Cash held for specified uses 5,449 5,572
Total 74,519 48,337
Receivables are to be collected from the following types of counterparties:
Amounts in USD thousands
2021 2020
Type of counterparty:
End-user customer
(1)
21,748 23,385
Other receivables 2,816 2,934
Total 24,564 26,319
Liquidity risk
Amounts in USD thousands Book value
Contractual cash
flow
6 mths and less 6-12 mths 1-2 years 2-5 years
More than 5
years
Non-derivative financial liabilities
Unsecured bonds (gross)
(220,000) (288,153) (8,525) (8,431) (17,050) (254,147) -
Long-term interest bearing external liabilities (gross) (325,490) (370,897) (19,393) (20,086)
(41,021)
(290,397) -
Long-term related parties interest bearing liabilities (89,604) (151,357) (4,419) (4,419) (8,839) (46,541) (87,139)
Derivative financial assets
Interest rate swaps 3,631 5,222 (111) 524 2,031 2,778 -
Total as of 31 December 2021 (631,463) (805,185) (32,448) (32,412) (64,879) (588,307) (87,139)
31 December 2021
FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risk, credit risk, and cash-flow interest-rate risk. The Group’s overall risk management program
is set by the Board of Directors of the ultimate parent company, AMSC, and focuses on the unpredictability of financial markets and seeks to minimize potential
adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.
Risk-management is carried out under policies approved by the parent company's Board of Directors. The parent's Board of Directors provides principles for overall
financial risk management as well as policies covering specific areas such as foreign exchange risk, interest-rate risk, credit risk, and use of derivative financial
instruments and non-derivative financial instruments.
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or
another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities
when due, under both normal and stressed conditions.
With regards to making the debt service payments on the secured loans, the Group has established cash accounts ("Earnings Accounts") whereby all charter hire
payments are deposited and utilized for debt service prior to being available for general corporate purposes. When these Earnings Accounts are restricted under
the relevant loan agreement, the balances in the accounts are classified as "Cash held for specified uses".
Exposure to credit and interest rate risk arises in the normal course of the Group's business. Derivative financial instruments are used from time to time to hedge
exposure to fluctuations in interest rates for business purposes. The Company entered into interest rate swaps for a portion of the secured bank debt.
ATI regularly monitors the financial health of the financial institutions which it uses for cash management services and in which it makes deposits and other
investments. ATI responds to changes in conditions affecting its deposit relationships as situations warrant.
The following are the contractual maturities of financial liabilities including interest payments:
(1)
Due to the nature of the Group's operations, revenues and related receivables, including the DPO, are currently concentrated amongst OSG and its
affiliates. The Group continually evaluates the credit risk associated with customers. No expected credit loss has been recorded for financial assets as of 31
December 2021 or 2020.
ANNUAL REPORT 2021 - 28
Amounts in USD thousands Book value
Contractual cash
flow
6 mths and less 6-12 mths 1-2 years 2-5 years
More than 5
years
Non-derivative financial liabilities
Unsecured bonds (gross)
(200,000) (277,542) (7,835) (7,665) (15,500) (246,542) -
Long-term interest bearing external liabilities (gross) (352,353) (402,070) (19,703) (19,501)
(38,287)
(324,579) -
Short-term related parties interest bearing liabilities (89,451) (160,045) (4,343) (4,343) (8,839) (26,541) (115,979)
Derivative financial liabilities
Interest rate swaps (1,211) (446) (324) (363) (581) 822 -
Total as of 31 December 2020 (643,015) (840,103) (32,205) (31,872) (63,207) (596,840) (115,979)
Exposure to interest rate risk
Sensitivity analysis
An increase of 100 basis points in interest rates in the reporting year would have increased /(decreased) pre-tax equity and profit or loss by
the amounts shown below. This analysis assumes thal all other variables remain constant.
Amounts in USD thousands 2021 2020
Increase/(decrease)
Bank deposits 540 372
Financial liabilities (581) (739)
Change in interest swap valuation 7,776 6,417
P&L sensitivity (net) 7,735 6,050
Fair values
Fair value hierarchy
Carrying Fair Fair
amount value value Valuation
Amounts in USD thousands 2021 2021 hierarchy technique
Interest-bearing receivables from external companies, maturity greater than 3 years 21,389 19,622 3
Discounted cash flows
at 10%
Interest swap contracts:
Assets 3,631 3,631 2
Market comparison
from a third party
Unsecured bonds (gross) (220,000) (221,650) 2
OSE trading price at
year-end
Secured loans (gross) (325,490) (335,650) 2
Discounted cash flows
at 3.5%
Subordinated parent company loans (gross) (89,604) (108,457) 2
Discounted cash flows
at WACC
Carrying Fair Fair
amount value value Valuation
Amounts in USD thousands 2020 2020 hierarchy technique
Interest-bearing receivables from external companies, maturity greater than 3 years 23,333 19,521 3
Discounted cash flows
at 10%
Interest swap contracts:
Liabilities (1,211) (1,211) 2
Market comparison
from a third party
Unsecured bonds (gross) (200,000) (201,620) 2
OSE trading price at
year-end
Secured loans (gross) (352,353) (353,069) 2
Discounted cash flows
at 3.5%
Subordinated loans (gross) (89,451) (110,283) 2
Discounted cash flows
at WACC
Financial instruments measured at fair value
31 December 2020
The fair value of cash, accounts receivable and accounts payable approximate the carrying values due to their short-term nature.
The fair values of financial instruments, the related fair value hierarchy, together with the carrying amounts shown in the balance sheet as of 31 December 2020 are as follows:
The fair values of financial instruments, the related fair value hierarchy, together with the carrying amounts shown in the balance sheet as of 31 December 2021 are as follows:
The discounted cash flow valuation model considers the present value of expected payments, discounted using the risk adjusted discount rate noted.
The only financial instruments that the Company accounts for at fair value are the interest rate swaps as of 31 December 2021 and 2020, which are classified in the Level 2 category
described above. The Company's policy is to recognize transfers into and transfers out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the
transfer. During the year ended 31 December 2021, there were no transfers between categories.
In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives where hedge accounting is not applied
are accounted for as trading instruments.
IFRS requires companies to disclose certain information about how fair value is determined in a "fair value hierarchy" for financial instruments recorded at fair value, which for ATI are
derivative financial instruments, or disclosures about fair value measurements which have been identified below. The fair value hierarchy gives the highest priority to quoted prices in
active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 includes assets and liabilities whose values are based on quoted
prices in markets that are not active or model inputs that are observable either directly or indirectly.
The Group is exposed to fluctuations in interest rates for its variable interest rate debt. With regards to the secured debt financing, the Group has entered into
interest swap agreements to lock in the interest rate paid on a portion of the loans. The bond issued in 2020 has a fixed interest rate.
ANNUAL REPORT 2021 - 29
Type Valuation technique
Significant
unobservable
inputs
Inter-relationship
between significant
unobservable inputs
and fair value
measurement
Interest rate swaps
Market comparison
technique: The fair values
are based on broker
quotes. Similar contracts
are traded in an active
market and the quotes
reflect the actual
transactions in similar
instruments.
Not applicable Not applicable
ANNUAL REPORT 2021 - 30
NOTE 17: RECEIVABLE FROM GROUP COMPANIES
Amounts in USD thousands 2021 2020
Intercompany accounts receivable 2,816 2,795
Total 2,816 2,795
Intercompany accounts receivable relates to the borrowing of Federal NOLs within the
U.S. group companies (ATHC).
ANNUAL REPORT 2021 - 31
NOTE 18: TRANSACTIONS AND AGREEMENTS WITH RELATED PARTIES
Counterparty Description of services
Annual amount (USD
thousands)
American Shipping Company ASA Management fees 1,271
American Shipping Company ASA Guarantee fees 2,073
American Shipping Company ASA Loan interest 8,839
Aker US Services, Inc. Tax consulting 81
Akastor
Office lease
29
Aker IT Services
IT consulting and support
17
The Company believes that related party transactions are made on terms equivalent to those that prevail in arm's length transactions and the table below summarizes the related party transactions and the cost
incurred in 2021.
ATI's only shareholder is ATHC, a wholly owned subidiary of American Shipping Company ASA. AMSC's largest shareholder is a subsidiary of Aker ASA which holds 19.1 percent of the AMSC's shares.
ATI has management and guarantee fee agreements with AMSC, as well as intercompany loans from AMSC. The AMSC Group has service agreements with Aker ASA and Aker US Services, LLC which provide certain
office services and tax services. In addition, the AMSC has a lease for office space in Norway from a company affiliated with Aker ASA. The cost of these services is detailed below.
ANNUAL REPORT 2021 - 32
NOTE 19: AGREEMENTS WITH OSG
Time Charter Hire Fleet revenue
Less:
BBC hire Bareboat rate paid from OSG to ATI
OPEX Crew, maintenance & repairs, insurance, fees & vetting, lubes
OSG profit layer Fixed daily rate of USD 4,000/day per vessel
Management fee Fixed daily rate plus annual escalation
Auditor expenses Actual OSG auditor expenses
Amortization of conversion costs Amortized over ten years
= Profit to share before Drydock
Reserve Provision, Drydock Reserve
True-Up
Income subject to Profit Share before covering drydocking costs
Balance per 31 December 2021 and 2020 (USD millions):
ATI’s 50% share of the profit (0 for 2021) is used to reduce the OSG credit, which accrues interest at 9.5% per year. The cumulative balance as of the end of 2021 and 2020 for the OSG credit is shown in the table below and as described
above, must be covered prior to ATI being entitled to receive cash profit share from OSG. The profit share credit is an off-balance sheet liability and is contingent on actual profits being generated to repay the credit. ATI has no obligation
to pay OSG this credit at the end of the charter period in case future profits are not sufficient to repay the amounts.
ATI's only customer is OSG. The key agreements with OSG include the bareboat charter agreements, DPO agreements and profit sharing agreement.
Under the bareboat charter agreements, OSG pays ATI a fixed daily rate for leasing the vessels and OSG is responsible for operating costs and maintenance of the vessels. The fixed terms of three of the bareboat charters run through
December 2022; six of the bareboat charters run through December 2023; and the Overseas Tampa runs to 2025, with options for OSG to extend the charters for 1, 3 or 5 years for the useful lives of the vessels.
Under the DPO agreement (see note 7), OSG deferred payment of a portion of the daily bareboat charter hire for the first seven years of vessels 1-5. This deferred payment accrued on a daily basis to a maximum of USD 7.0 million per
vessel and is now repayable over 18 years after the initial 7 year period.
Under the profit sharing agreement, ATI and OSG share in the profits from OSG's operations of ATI's 10 vessels. The calculation of profit to share is made on an aggregated fleet level. The calculation thus starts with total vessel revenue,
subtracted by defined cost elements, as described below.
The profit to share is then reduced by a drydock reserve provision, adjusted for a drydock reserve true-up once a drydock has been completed. The drydock reserve provision includes the estimated costs for each Intermediary Repair
Period (IRP), which occurs every 3 years and each special survey occurring every 5 years. In years of weak markets there may be shortfalls in net time charter revenues applied to cover provisions for future drydocks. Such shortfalls need to
be recovered by net time charter revenues in subsequent years with stronger markets. Similarly, if drydock provisions deducted in the profit share calculation are too high, these are adjusted through a true-up mechanism once special
surveys for individual vessels are completed. The concept of true-ups ensure that any shortfall or excess in drydock provisions are adjusted to reflect the actual cost of drydocks over the five-year special survey cycles.
After drydock expenses are covered, ATI’s portion of the profit share must be used to reduce the USD 7.7 million credit negotiated with OSG in 2009 (originally USD 18.2 million, accruing interest annually, and repaid to current level with
historical profits), which is the amount of ATI's profit sharing OSG retains prior to having an obligation to remit cash payments to ATI. After the OSG credit has been fully reduced to zero, ATI will receive its 50% of subsequent profits under
the formula above in cash and will recognize profit sharing revenue. ATI's portion of the profit can never be negative on an annual basis. For the full year 2021 and 2020, the profit share was zero. The calculation of profit sharing for the
full year 2021 and 2020 are shown with aggregated, rounded figures in USD millions below.
Balance per 31 Dec 2020:
Beginning balance
Ending balance
as of 31 Dec 2019 as of 31 Dec 2020
OSG credit 6.5 7.1
Accrued
interest
Reduction
0.6
-
Beginning balance
Ending balance
as of 31 Dec 2020 as of 31 Dec 2021
OSG credit 7.1 7.7
Accrued
interest
Reduction
0.6
-
ANNUAL REPORT 2021 - 33
NOTE 20: EVENTS AFTER THE BALANCE SHEET DATE
On 1 March 2022, a distribution of USD 8.0 million was paid to ATHC.
ANNUAL REPORT 2021 - 34
Corporategovernance
AmericanTanker,Inc.(“ATI”orthe“Company”)isacorporationdulyincorporatedunderthelawsofthe
StateofDelaware.TheCompanyisa100%indirectlyownedsubsidiaryofAmericanShippingCompanyASA
(the“Parent”andtogetherwithits subsidiariesthe “Group”).TheGroup’sfocusis onbuildingapremier
ownershippositionintheJonesActmarkettocreatemaximumvaluefortheParent’sshareholders.Good
corporategovernancewillhelptoreduceriskandensuresustainablevaluecreation.
Thecorporategovernanceprinciplesapplicableto the Companyarebasedon the Parent’s corporategovernance
principles, Sections 141, 211, and 212 of the Delaware General Corporation Law (the “DGCL”),its Certificate of
IncorporationanditsBylaws,aseachhavebeenamended.AsaconsequenceoftheCompanyhavingissuedbonds
thatarelistedontheOsloStockExchange(the“OSE”),theCompanyisrequiredtopreparethiscorporategovernance
reportpursuanttotheNorwegianSecuritiesTradingActandtheprinciplessetoutintheContinuingObligationsfor
issuersofbondsontheOSEwhichcanbefoundonhttps://www.oslobors.no/ob_eng/Oslo‐Boers/Regulations/The‐
Issuer‐Rules. The Board of Directors (the “Board”) of the Company has reviewed and approved the Company’s
principlesforcorporategovernance.TheBoard’sstatementofcorporategovernanceisincludedintheannualreport.
TheprinciplesarebasedontheNorwegianCodeofPracticeforCorporateGovernance,dated14October2021(the
“CodeofPractice”),theprinciplessetoutinthecontinuingobligationsofcompaniesadmittedtotradingontheOslo
Stock Exchange, and the relevant Norwegian background law such as the Norwegian Accounting Act and the
NorwegianPublicLimitedLiabilityCompaniesAct.TheCodeofPracticeisavailableatwww.nues.noandthecontinuing
obligationsforcompanieslistedontheOsloStockExchangemaybefoundatwww.oslobors.no.Thefollowingpresents
theGroup’spracticeregardingeachoftherecommendationscontainedintheCodeofPractice.Anydeviationsfrom
therecommendationsarefoundundertheiteminquestion.
Purpose
TheseCorporateGovernanceprinciplesareintendedtoensureanappropriatedivisionofrolesandresponsibilities
amongtheGroup’sownerandtherelevantGroupcompany’sBoard,andthattheCompany’sactivitiesaresubjectto
satisfactorycontrolbyitsstockholder.Theseprinciplescontributetothegreatestpossiblevaluecreationovertime,
tothebenefitofownersandotherstakeholders.ItistheresponsibilityoftheBoardofATItoensurethattheCompany
implementssoundcorporategovernance.
Business
TheGroup’sbusinessmodelistoownandbareboatchartervesselsforoperationintheU.S.JonesActmarketthrough
its wholly owned subsidiary leasing companies. The corporate structureoftheParent,throughitsoperating
subsidiariesintheUnitedStates,isinconformancewiththeapplicablerequirementsoftheJonesAct.Allofitsvessels
arefullyqualifiedtoutilizetheleasefinancelawexceptiontotheJonesActtobareboatchartervesselstoJonesAct
citizensforoperationinthedomesticmaritimetradesoftheUnitedStates.
PursuanttoArticleTHIRDoftheCompany’sCertificateofIncorporation,asamended,whichhasbeenfiledwith
theSecretaryofStateoftheStateofDelawareunderFileNumber3899715,thepurposeoftheCompanyis“toengage
inanylawfulactoractivityforwhichcorporationsmaybeorganizedundertheGeneralCorporationLawoftheState
ofDelaware.”PursuanttoSection3oftheParent’sArticlesofAssociation,whichisregisteredwiththeNorwegian
Business Registry, the Parent’s objective is “to own and carry out industrial business and other activities hereto,
includingownershipofvessels,capitalmanagementandotherfunctionsforthegroup,aswellasparticipationinor
acquisitionofothercompanies.”
Thefunctionofthebusinesspurposeclausesistoensurethattherelevantcompany’sshareholdershavecontrol
ofthebusinessanditsriskprofile,withoutlimitingtherespectiveBoardormanagement’sabilitytocarryoutstrategic
ANNUAL REPORT 2021 - 39
andfinanciallyviabledecisionswithinthedefinedpurpose.TheGroup’sfinancialgoalsandmainstrategiesareas
follows:
∎ BeapreferredshipowningandleasefinancecompanyintheJonesActmarket
∎
Generatestablecashflowfromlongtermbareboatcharters
∎ Haveamodern,safeandoperationallyfriendlyfleet
∎
Exploreandinvestinvaluecreatingopportunitiesfortherelevantcompany’sshareholders
∎
Ensureanoptimaluseofcapital
TheBoarddefinesclearobjectives,strategiesandriskprofilesfortheCompany’sbusinessactivitiessuchthatthe
CompanycreatesvalueforitsstockholderandinturntheGroup’sshareholders.TheGrouphasguidelinesforhowit
integrates considerations related to the Group’s stakeholders into its value creation. The Board evaluates these
objectives,strategiesandriskprofilesatleastyearly.
Equityanddividends
Equity
TheCompany’sbookequityasof31December2021wasUSD38.6million corresponding to an equity ratio of
5.6percent. The Company’s Board frequently monitors the Company’s equity level in accordance with its
responsibilitiesunderSection141oftheDGCLandtheCompany’sBylaws.Assuch,theCompanyregardsitscurrent
equityassound.TheBoardalsomonitorstheCompany’scapitalstructureandensuresthattheCompany’scapital
structureisappropriatetotheGroup’sobjective,strategyandriskprofile.
Dividends
AnypaymentofdividendsbytheCompanywillbebaseduponitsearningsforthelastyearendedandotherfactors,
thefinancialsituationattherelevantpointintimeandapplicablerestrictionsundertheGroup’sfinancialagreements,
Sections154and170oftheDGCL,andanyotherapplicablelawsandregulations.
Boardauthorizations
UndertheDGCLandtheCompany’sCertificateofIncorporation,theCompany’sBoarddoesnothaveauthorityto
increasethenumberofsharesthattheCompanyisauthorizedtoissue.However,becausetheCompany’sCertificate
ofIncorporationauthorizestheissuanceofupto2,000sharesofcommonstockandtheCompanyhasissuedonly
1,000ofsuchsharestodate,theBoardhastheauthoritytoissueanadditional1,000sharesofcommonstockin
accordancewiththerequirementsoftheDGCL.
Equaltreatmentofshareholdersandtransactionswithcloseassociates
EqualtreatmentofallshareholdersiscrucialtotheParent.AstheCompanyisindirectlywholly‐ownedbythe
Parent,therearenoequaltreatmentissuesinrelationtotheCompanyanditssolestockholder.
IftherearematerialtransactionsbetweentheCompanyanditssolestockholderoradirector,officer,member
ofexecutivemanagement,theParentorothersubsidiariesintheGrouporapartycloselyrelatedtoanyofthe
aforementioned,theBoardshallensurethatindependentvaluationsareavailable.
SeeinformationontransactionswithrelatedpartiesinNote15toATI’sconsolidatedaccounts.
Sharesandnegotiability
TheCompanyhas a single class ofsharesofcommonstock.UnderArticle FIFTH oftheCompany’sCertificateof
Incorporation,theCompanyisauthorizedtoissue2,000sharesofcommonstockwithaparvalueof$0.01pershare.
Asnotedabove,theCompanyhaspreviouslyissued1,000sharestoitssolestockholderandhastheauthoritytoissue
theremaining1,000shares.However,theCompanynotesthatthe shares in the Parent are subject to certain
ANNUAL REPORT 2021 - 40
ownershipandvotingrestrictionson“ShippingOperators”duetothefactthattheCompany’sindirectwhollyowned
subsidiaryleasingcompaniesareoperatingundertheleasefinancelaw,whichisanexceptiontotheU.S.citizen
ownershiprequirementsoftheJonesAct.A“ShippingOperator”isdefinedintheParent’sarticlesofassociationasa
personorentitythatoperatesanyvesselforhireordirectlyorindirectlycontrols,iscontrolledby,orisundercommon
controlwithanycompanyorpersonwhooperatesanyvesselforhire.
AnnualMeetings
InaccordancewiththeDGCLanditsBylaws,theCompanyholdsanannualmeetingofitsstockholdersonthefirst
TuesdayofMayfollowedbyanannualmeetingoftheBoard.(AnannualmeetingforaDelawarecorporationisthe
basicequivalentofageneralmeetingforaNorwegiancompany).Theseannualmeetingsareaccomplishedthrough
theadoptionofawrittenconsentinlieuoftheannualmeetingsincetheCompanyonlyhasonestockholder.Thus,
theproceduresforcarryingouttheannualmeetingsdeviatefromtheproceduressetoutintheCodeofPractice.
NominationCommitteeNotRequired
TheCodeofPracticerecommendsthattheCompanyhasanominationcommittee.However,theCompanyisnot,
requiredtoestablishanominationcommitteeundertheDGCLoritsCertificateofIncorporationorBylaws,andthe
Boardisoftheopinionthatthereare,forthetimebeing,notsufficientreasonstoestablishanominationcommittee.
TheBoardwillconsultwithitssolestockholderpriortoproposingcandidatesforDirectorsandwillensurethatthe
BoardconsistsofDirectorswiththeexpertiseandcompetenceasshallberequiredbytheCompanyfromtimeto
time.
TheParenthasanominationcommitteewhichissetoutintheParent’s articles of association and governed by
guidelinesadoptedbythegeneralmeeting.ThecurrentmembersoftheParent’snominationcommittee,aselected
bythegeneralmeeting,areOveA.Taklo(chair)andIngebretG.Hisdal.
BoardofDirectors:compositionandindependence
Pursuantto the Company’sBylaws,the Boardshallbe comprisedofaminimumofone(1)Director,andthe
numberofDirectorsmaybedesignatedfromtimetotimebyresolutionsoftheBoard.,TheDirectorsareelectedat
theannualmeetingofthestockholdersbypluralityvotetosucceedtheDirectorswhosetermshaveexpiredandto
fill any vacancies then existing. The term of office of each Director is from the time of his or her election and
qualificationuntilthenext annualmeetingofthestockholders and untilhisor her successor is duly elected and
qualifiedoruntilhisorherearlierdeath,resignation,orremoval.ThecurrentDirectorisLeighJaros,whoisnot
independentoftheCompany’ssolestockholderandtheParent,butisindependentoftheParent’ssignificantbusiness
associates.
ThesoleDirectorisupforelectionatthenextannualmeetingofthestockholders,whichwilloccuronMay3,
2022,andbeaccomplishedthroughawrittenconsentinlieuoftheannualmeeting.
TheworkoftheBoardofDirectors
The Board manages the Company in accordance with the requirementsofSection141oftheDGCLandits
CertificateofIncorporationandBylaws. TheBoardalsoactsatthedirectionof itssolestockholder.The Code of
PracticerecommendsthattheBoardestablishedanauditcommittee.However,theCompanyis notrequiredto
establishanauditcommitteeundertheDGCLortheCompany’sCertificateofIncorporationorBylaws,andtheBoard
isoftheopinionthatthereisnoreasontoestablishanauditcommitteeatpresentandwillrelyontheauditcommittee
oftheParentforcertainauditrelatedmatters.Thus,theCompanydeviatesfromtheCodeofPracticeinthisrespect.
Further,astheBoardiscomprisedofoneDirector,ithasnotdeemeditnecessarytoestablishanyotherboard
committeesatthistimeanddoesnotcarryoutanyregularself‐assessment.
Riskmanagementandinternalcontrol
TheParent’sBoardistoensurethattheGroup,includingtheCompany,maintainssolidin‐housecontrolpractices
andappropriaterisk managementsystemstailoredtotheCompany’sbusinessactivitiesanditsvaluesandethical
ANNUAL REPORT 2021 - 41
guidelines.TheParent’sBoardannuallyreviewstheGroup’smostimportantriskareasandinternalcontrolsystems
andprocedures,andthemainelementsoftheseassessmentsarementionedintheBoardreport.
AuditCommittee
TheParent’s audit committee has reviewedtheGroup’sinternalreporting systems,internal control and risk
management and had dialogue with the Group’s auditor. The Parent’s audit committee has also considered the
auditor’sindependence.
The Group’s financial policies ensure follow‐up of financial risk. Key targets are identified by the Board and
managementoftheCompanytoensuretimelycontrolofcurrencyexposure,interestrateexposureandcompliance
withloancovenants.
FinancialStatementCloseProcess
ConsolidationandcontroloverthefinancialstatementcloseprocessistheresponsibilityoftheChiefFinancial
OfficeroftheCompanyandtheControlleroftheParent.TheGroup’scurrentbusinessincludesbareboatchartering
ofitstenvesselsandthereforemeansthattheactivitiesofitsemployeesaremanagingthefinancingofvesselsand
overhead.TheParenthasasmallorganizationwiththreeemployees,whoallhavedirectcommunicationwiththe
Parent’sBoard.MeetingsbetweenthemanagementoftheCompany,theParentandothersubsidiariesintheGroup,
theexternalauditorandmembersoftheBoard,toidentifysignificantaccountingissuesorotherissuesareheldprior
tocompletionoftheGroup’sannualreportandinconnectionwithmanagement’sreportingtotheauditcommittee.
Thepurposeofthesemeetingsistofocusonnewandamendedaccountingprinciplesorotherissuesinthefinancial
statements.FinancialresultsandcashdevelopmentareanalyzedandcomparedtothebudgetbytheChiefFinancial
OfficeroftheCompanyandtheCFOandControlleroftheParentandreportedtotheParent’sBoardquarterly.
Becauseoftheinherentsegregationofdutiesmatterscausedbyhavingonlythreeemployees,specialactions
havebeenimplementedintheParent.
TheBoardapprovestheCompany’syearlybudgetandreviewsdeviationstothebudgetonaquarterlybasis.
RemunerationoftheBoardofDirectors
BoardremunerationistoreflecttheBoard’sresponsibility,expertise,timespent,andthecomplexityofthebusiness.
Remunerationdoesnot dependonthe Company’sfinancialperformanceandtheCompanydoesnotgrantshare
optionstotheDirectors.UndertheCompany’sBylaws,Directorsdonotreceiveanystatedsalaryfortheirservicesas
directors,butDirectorsmayreceiveafixedfeeandexpensesofattendanceateachmeetingbyresolutionsofthe
Board.RemunerationisnotpaidtoDirectorswhoarealsoemployeesoftheCompanyandwherecompensationfor
theBoardpositionisincludedintheirsalary.
Remunerationofexecutivemanagement
TheCompanyismanagedbyitsofficers,whoareelectedbytheBoardandpaidinaccordancewithguidelinesadopted
bytheParent’sBoardonremunerationfortheexecutivemanagementofeachsubsidiaryintheGroupinaccordance
withtheNorwegianPublicLimitedCompanyActsection6‐16a.SalaryandotherremunerationofAmericanShipping
Company’sCEOaredeterminedbytheBoard.
Informationandcommunications
TheParentBoardhasestablishedguidelinesforthereportingof financial and other informationand isbasedon
opennessandonequaltreatmentofshareholders,thefinancialcommunity,andotherinterestedparties.Thelong‐
termgoaloftheGroup’sinvestorrelationsactivitiesistoensuretheGroup’saccesstocapitalatcompetitiveterms
andtoensureshareholders’correctpricingofshares.
ThesegoalsaretobeaccomplishedthroughcorrectandtimelydistributionofinformationbytheCompanytoits
solestockholderthatcanaffecttheParent’sshareprice.TheCompanyisalsotocomplywithcurrentrulesandmarket
practices. All stock exchange notifications and press releases are made available on the Group’s website
www.americanshippingco.com; stock exchange notices are also available from www.newsweb.no on the ticker
ANNUAL REPORT 2021 - 42
“AMSC”inrespectoftheParentand“ATI02”inrespectoftheCompany. All information that is distributed on
newswebissimultaneouslypublishedontheGroup’swebsite.
Take‐overs
TheCompanyhasnotimplementedanti‐takeoverprinciplesonthebasisthatitisindirectlywholly‐ownedbythe
Parent,andtheCompany’sCertificateofIncorporationandBylawsdonotcontainanysuchrestrictionsnoristhe
CompanysubjecttotherestrictionscontainedinSection203oftheDGCL.
Auditor
TheGroup’sauditorwillmakeanannualpresentationtotheParentBoardofaplanfortheauditingworkforthe
year. Further, the auditor is to provide the Board with an annualwrittenconfirmationthattherequirementof
independencehasbeenmet.
TheGroup’sauditorparticipatesinatleastoneBoardmeetingoftheParentannually,includingthemeetingprior
totheannualgeneralmeeting.Atthismeeting,theauditorreviewsanymaterialchangesintheCompany’saccounting
policies,commentsonanymaterialestimatedaccountingfiguresandreportsallmaterialmattersonwhichtherehas
beendisagreementbetweentheauditorandtheexecutivemanagementoftheCompany.Theauditoralsopresents
totheBoardareviewoftheCompany’sinternalcontrolprocedures,includingidentifiedweaknessesandproposals
forimprovements.
AuditorsaretoprovidetheBoardwithanannualoverviewofservicesotherthanauditingthathavebeensupplied
totheCompany.Remunerationforauditors,presentedinnote3totheconsolidatedaccounts,isstatedforthefour
categoriesofordinaryauditing,otherattestationservices,taxassistanceandotherassuranceservices.Inaddition,
these details are presented at the annual general meeting. The auditor has provided the Board with written
confirmationofitsindependence.
ANNUAL REPORT 2021 - 43