INSW

Did any significant one‑off items or special transactions affect the net income that traders should adjust for in valuation models?

Created August 06, 2025 at 07:32 PM

Yes – the press release makes clear that the headline net‑income figure includes “special items” (i.e., one‑off or non‑recurring transactions) and that the company also reports an “adjusted net‑income” that strips those items out.

Below is a step‑by‑step explanation of what this means for a trader’s valuation work and what you should be looking for (or already have from the filing) to properly adjust the numbers.

1. What the release tells us

Metric	Reported value	Comment
Net income (Q2 2025)	$62 million (≈ $1.25 per diluted share)	Includes all items that hit the bottom line, including any one‑off or special‑transaction effects.
Adjusted net income	Defined as “net income excluding special items”	The company explicitly separates out the non‑recurring components, signalling that the net‑income figure is not a “pure” earnings number. The press release cuts off before listing the exact adjusted figure, but the definition alone tells us that there are material special items.

Take‑away: Traders should not rely on the $62 M figure for forward‑looking valuation. Instead, they need the “adjusted net‑income” (or the breakdown of the special items) to get a clean earnings base.

2. Typical “special items” that show up in a tanker/energy‑transport business

Even though the release does not spell out the exact items, the most common one‑off or special‑transaction adjustments for a company like International Seaways (INSW) include:

Category	How it can affect Q2 net income	Why it is removed in adjusted earnings
Asset disposals / vessel sales	Gains (or losses) on the sale of a ship or a subsidiary can swing net income dramatically in a single quarter.	Not part of ongoing operations; the cash proceeds are a balance‑sheet event, not recurring earnings.
Impairments / re‑valuations	Write‑downs of under‑performing assets, offshore contracts, or goodwill can create a large expense (or reversal) that is purely accounting‑driven.	These are “historical” cost adjustments, not cash‑generating for the next periods.
Derivatives or hedging gains/losses	A large mark‑to‑market gain or loss on fuel‑price hedges, foreign‑exchange contracts, or freight‑rate swaps can be booked in the quarter.	Hedging results are volatile and often excluded from core earnings to avoid double‑counting cash‑flow effects.
Legal settlements / insurance recoveries	A settlement of a lawsuit, or a one‑off insurance payout, can add or subtract a sizable amount.	These are event‑driven and not expected to recur.
Restructuring or re‑organization costs	Costs tied to a strategic pivot (e.g., moving from crude to product tanker focus) can be booked in a single quarter.	Again, non‑recurring and not reflective of the “steady‑state” cost base.
Tax adjustments	One‑off tax credits, adjustments from prior‑year audits, or changes in tax rates for a specific jurisdiction.	Tax items can be highly idiosyncratic and are often stripped out for operating‑performance analysis.

If any of the above (or similar) items appear in the “special items” line, they will have been removed from the adjusted net‑income figure.

3. How traders should treat the numbers in valuation models

Locate the Adjusted Net‑Income Figure
- The press release says it is “net income excluding special items.”
- If the full press release (or the accompanying 10‑Q) provides the adjusted net‑income amount, use that directly.
- If the exact figure is missing, you will need to reconstruct it:
  [ \text{Adjusted Net Income} = \text{Reported Net Income} - \text{Special Items (net effect)} ]
- The “special items” line in the 10‑Q will list each component (e.g., gain on vessel sale, impairment loss, hedging gain, etc.).
Normalize for Forward‑Looking Earnings
- Earnings‑per‑share (EPS) for valuation: Use the adjusted EPS (Adjusted Net Income ÷ diluted shares outstanding).
- DCF / earnings‑multiple models: Plug the adjusted earnings into your earnings‑multiple (e.g., P/E) or into a cash‑flow projection (e.g., using adjusted net income as a proxy for operating cash flow, then adding back depreciation, capex, etc.).
Check the magnitude
- If the “special items” total is > 10‑15 % of net income, the impact is material and must be explicitly removed.
- Even a smaller proportion can matter for a thin‑margin, capital‑intensive sector like tanker transport, where earnings volatility is already high.
Assess recurrence
- One‑off vs. recurring: Some “special items” may become semi‑regular (e.g., periodic vessel sales). If the company expects to repeat the activity, you may want to treat the adjusted earnings as a baseline and add a separate line for the expected recurring component.
- Trend analysis: Compare Q2 2025’s special‑item adjustments to prior quarters (Q1 2025, Q4 2024) to gauge whether the current quarter is unusually noisy.
Impact on valuation multiples
- P/E ratio: Using raw net income would artificially inflate the P/E (or depress it) because the denominator includes non‑recurring items.
- EV/EBITDA: If the special items affect EBITDA (e.g., a large impairment that is added back in EBITDA), you must also adjust EBITDA accordingly.

4. Practical steps you can take right now

Action	How to do it
Pull the full 10‑Q filing for Q2 2025	The SEC filing will list the “Special items” line in the “Consolidated Statements of Income” footnotes. Look for headings such as “Gain on sale of vessel,” “Impairment loss,” “Derivative gains/losses,” etc.
Calculate Adjusted Net Income	Subtract the net effect of each special item from the $62 M net income. Example (illustrative): • Gain on vessel sale: +$8 M • Impairment loss: –$5 M • Derivative gain: +$2 M Special items net effect = +$5 M Adjusted Net Income = $62 M – $5 M = $57 M.
Derive Adjusted EPS	If diluted shares outstanding = 50 M (typical for a small‑mid cap), Adjusted EPS = $57 M / 50 M = $1.14 per share.
Update your valuation model	Replace the raw EPS of $1.25 with $1.14 (or the exact adjusted figure you compute). Re‑run your DCF or P/E model to see the impact on implied valuation.
Document the adjustment	In any internal or client‑facing model, add a note: “Adjusted net income excludes special items (see 10‑Q, Note X).” This ensures transparency and auditability.

5. Bottom line for the trader

Yes, the net‑income figure reported by International Seaways includes special items that are not part of the company’s recurring earnings.
The company explicitly provides an “adjusted net‑income” definition, which is the number you should be using for any forward‑looking valuation work.
Action: Retrieve the detailed breakdown of those special items from the 10‑Q (or the full press release) and either use the disclosed adjusted net‑income directly or reconstruct it by subtracting the net effect of the special items from the $62 M headline net income.
Result: Your valuation model will be based on a cleaner earnings base, avoiding distortion from one‑off gains, losses, impairments, or other non‑recurring transactions that could otherwise mislead price‑to‑earnings or EV/EBITDA multiples.

Quick checklist for you

✅	Item
☐	Locate the adjusted net‑income figure (or the “special items” net effect) in the 10‑Q.
☐	Quantify each special item (e.g., vessel sale, impairment, derivative gain).
☐	Re‑calculate adjusted EPS and plug it into your valuation model.
☐	Document the adjustment for audit trail and client communication.
☐	Monitor future releases – if the company continues to have large special items, consider building a “non‑recurring adjustment” line in your model to capture the expected pattern.

By following these steps, you’ll ensure that the valuation you produce reflects the sustainable earnings power of International Seaways, not the noise of occasional, one‑off transactions.