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Section 1: 8-K (FORM 8-K)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

May 10, 2017

Date of Report (Date of earliest event reported)

 

Overseas Shipholding Group, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   001-06479   13-2637623
(State of Incorporation)   (Commission File
Number)
  (IRS Employer
Identification No.)

 

Two Harbor Place

302 Knights Run Avenue, Suite 1200

Tampa, Florida 33602

 

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (813) 209-0600

 

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

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

   

 

 

Section 2 –Financial Information

 

Item 2.02Results of Operations and Financial Condition.

 

The following information, including the Exhibit to this Form 8-K, is being furnished pursuant to Item 2.02 – Results of Operations and Financial Condition of Form 8-K. This information is not deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 and is not incorporated by reference into any Securities Act of 1933 registration statements.

 

On May 10, 2017, Overseas Shipholding Group, Inc. issued a press release, a copy of which is attached hereto as Exhibit 99.1, announcing first quarter 2017 earnings.

 

Section 9 – Financial Statements and Exhibits

 

Item 9.01Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No. Description
99.1 Press Release dated May 10, 2017.

 

   

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    OVERSEAS SHIPHOLDING GROUP, INC.
    (Registrant)
       
Date:  May 10, 2017 By: /s/ Christopher Wolf  
    Christopher Wolf  
    Senior Vice President and Chief Financial Officer

 

   

 

 

EXHIBIT INDEX

 

Exhibit No. Description
99.1 Press Release dated May 10, 2017.

 

   

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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

 

 

OVERSEAS SHIPHOLDING GROUP REPORTS

FIRST QUARTER 2017 RESULTS

 

Tampa, FL – May 10, 2017 – Overseas Shipholding Group, Inc. (NYSE: OSG) (the “Company” or “OSG”) a provider of energy transportation services for crude oil and petroleum products in the U.S. Flag markets, today reported results for the first quarter 2017.

 

Highlights

·Income from continuing operations for the first quarter was $5.4 million, or $0.06 per diluted share, compared to a net loss from continuing operations of $8.7 million, or ($0.09) per diluted share, for the first quarter 2016.
·Shipping revenues were $108.1 million for the current quarter, a decrease of 6.1% from $115.1 million in the prior year quarter. Time charter equivalent (TCE) revenues(A) for the first quarter 2017 were $102.3 million, down 8.8% compared to the same period in 2016.
·Net income was $5.4 million for the quarter ended March 31, 2017, compared to $50.7 million for the quarter ended March 31, 2016. Net income for the prior year period included income from discontinued operations from International Seaways (INSW) of $59.4 million.
·First quarter 2017 adjusted EBITDA(B) was $36.2 million, down 11.2% from $40.7 million in the same period in 2016.
·Cash and cash equivalents were $198.1 million at March 31, 2017. Total cash(C) was $204.4 million at the end of the current quarter.
·Repurchased and retired $14.5 million in principal of the 8.125% notes due in 2018.
·Pursuant to a final decree and order of the bankruptcy court, OSG closed its bankruptcy case.

 

Sam Norton, OSG’s President and CEO stated, “We had a solid first quarter to start 2017 despite ongoing challenging market conditions. Although we experienced lower charter rates, our ability to attain high utilization rates throughout the first quarter helped drive revenue. Our diverse operating platform, which includes shuttle tankers in the U.S. Gulf Coast, the only licensed operator of lightering vessels in the Delaware Bay, and the only operator of tankers in the Maritime Security Program (“MSP”), provides stability against market volatility affecting other areas of our business. Additionally, we are starting to see results of efforts to be more efficient with general and administrative costs. This helped reduce expenses which drove higher operating income.”

 

First Quarter 2017 Results

 

TCE revenues for the first quarter of 2017 were $102.3 million, a decrease of $9.9 million, or 8.8%, compared with the first quarter of 2016, primarily due to lower average daily rates earned. Excluding the Delaware Bay lightering TCE revenues, TCE revenues declined by $12.0 million, of which $10.9 million was due to lower average daily rates. This decrease in TCE revenues was partially offset by a $2.0 million increase in Delaware Bay lightering revenues. Shipping revenues were $108.1 million for the quarter, down 6.1% compared with the first quarter of 2016. The decrease in shipping revenues was also driven by lower charter rates.

 

A, B, CReconciliations of these non-GAAP financial measures are included in the financial tables attached to this press release starting on Page 8.

 

 

 

Operating income for the first quarter of 2017 was $19.3 million, compared to operating income of $17.4 million in the first quarter of 2016. The increase reflected reduced operating expense, including depreciation and amortization expense, and lower general and administrative expenses, which offset the decline in shipping revenues

 

Income from continuing operations for the current period first quarter was $5.4 million, or $0.06 per diluted share, compared with a loss from continuing operations of $8.7 million, or ($0.09) per diluted share, for the first quarter 2016. The increase reflects a lower tax provision in the first quarter of 2017 compared to 2016. In the prior year period, a deferred tax liability on the unremitted earnings of INSW was recorded, resulting in an income tax provision of $33.2 million, compared to tax expense of $3.6 million in the 2017 period. In addition, interest expense decreased by $2.6 million in the current period as the result of significant debt reductions in the current and prior year periods.

 

Adjusted EBITDA was $36.2 million for the quarter, a decrease of $4.6 million compared with the first quarter of 2016, driven primarily by the decline in TCE revenues, partially offset by lower general and administrative expenses.

 

Discontinued Operations

 

As previously disclosed, OSG completed the separation of its business into two independent publicly traded companies through the spin-off of its then wholly owned subsidiary INSW on November 30, 2016. The spin-off separated OSG and INSW into two distinct businesses with separate management. OSG retained the U.S. Flag business and INSW holds entities and other assets and liabilities that formed OSG’s former International Flag business.  The spin-off transaction was in the form of a pro rata distribution of INSW’s common stock to our stockholders and warrant holders of record as of the close of business on November 18, 2016.

 

In accordance with Accounting Standards Update (“ASU”) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the assets and liabilities and results of operations of INSW are reported as discontinued operations for the first quarter of 2016.

 

Net income from discontinued operations for the first quarter of 2016 was $59.4 million.

 

Conference Call

 

The Company will host a conference call to discuss its first quarter 2017 results at 9:00 a.m. Eastern Time (“ET”) on Wednesday, May 10, 2017.

 

To access the call, participants should dial (844) 850-0546 for domestic callers and (412) 317-5203 for international callers. Please dial in ten minutes prior to the start of the call.

 

A live webcast of the conference call will be available from the Investor Relations section of the Company’s website at http://www.osg.com/

 

An audio replay of the conference call will be available starting at 11:00 a.m. ET on Wednesday, May 10, 2017 by dialing (877) 344-7529 for domestic callers and (412) 317-0088 for international callers, and entering Access Code 10106141.

 

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About Overseas Shipholding Group, Inc.

 

Overseas Shipholding Group, Inc. (NYSE: OSG) is a publicly traded tanker company providing energy transportation services for crude oil and petroleum products in the U.S. Flag markets. OSG is a major operator of tankers and ATBs in the Jones Act industry. OSG’s 24-vessel U.S. Flag fleet consists of eight ATBs, two lightering ATBs, three shuttle tankers, nine MR tankers, and two non-Jones Act MR tankers that participate in the U.S. MSP. OSG is committed to setting high standards of excellence for its quality, safety and environmental programs. OSG is recognized as one of the world’s most customer-focused marine transportation companies and is headquartered in Tampa, FL. More information is available at www.osg.com.

Forward-Looking Statements

 

This release contains forward-looking statements as defined under the federal securities laws. Words such as “may”, “should”, ”believes”, “estimates”, “targets”, “anticipates” and similar expressions generally identify forward-looking statements; however, statements other than statements of historical facts should be considered forward-looking statements. These matters or statements may relate to the Company’s prospects, its ability to retain and effectively integrate new members of management and the effect of the Company’s spin-off of International Seaways, Inc. Forward-looking statements are based on the Company’s current plans, estimates and projections, and are subject to change based on a number of factors. The following factors, among others, could cause the Company’s actual results to differ: the reduced diversification and heightened exposure to the Jones Act market of OSG’s business following the spin-off from OSG on November 30, 2016 of International Seaways, Inc. (INSW), which owned or leased OSG’s fleet of International Flag vessels, which may make OSG more susceptible to market fluctuations than before such spin-off; the highly cyclical nature of OSG’s industry; fluctuations in the market value of vessels; declines in charter rates, including spot charter rates or other market deterioration; an increase in the supply of vessels without a commensurate increase in demand; the impact of adverse weather and natural disasters; the adequacy of OSG’s insurance to cover its losses, including in connection with maritime accidents or spill events; constraints on capital availability; the Company’s ability to generate sufficient cash to service its indebtedness and to comply with debt covenants; the Company’s ability to renew its time charters when they expire or to enter into new time charters; competition within the Company’s industry and OSG’s ability to compete effectively for charters; the loss of a large customer; and changes in demand in specialized markets in which the Company currently trades. Investors should also carefully consider the risk factors outlined in more detail in the Annual Report on Form 10-K for OSG and in similar sections of other filings made by the Company with the SEC from time to time. The Company assumes no obligation to update or revise any forward-looking statements. Forward-looking statements and written and oral forward looking statements attributable to the Company or its representatives after the date of this release are qualified in their entirety by the cautionary statements contained in this paragraph and in other reports previously or hereafter filed by the Company with the SEC.

 

Investor Relations & Media Contact:

Christopher Wolf, Overseas Shipholding Group, Inc.

(813) 209-0699

cwolf@osg.com

 

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Consolidated Statements of Operations

($ in thousands, except per share amounts)

 

   Three Months Ended 
   March 31, 
   2017   2016 
Shipping Revenues:  unaudited   unaudited 
         
Time and bareboat charter revenues  $79,767   $98,690 
Voyage charter revenues   28,349    16,390 
    108,116    115,080 
           
Operating Expenses:          
Voyage expenses   5,792    2,867 
Vessel expenses   35,609    35,904 
Charter hire expenses   22,577    22,842 
Depreciation and amortization   16,625    23,124 
General and administrative   8,255    12,957 
Total operating expenses   88,858    97,694 
Operating income   19,258    17,386 
Other (expense)/income   (668)   1,158 
Income before interest expense, reorganization items and income taxes   18,590    18,544 
Interest expense   (9,357)   (11,917)
Income before reorganization items and income taxes   9,233    6,627 
Reorganization items, net   (235)   17,910 
Income from continuing operations before Income Taxes   8,998    24,537 
Income tax provision from continuing operations   (3,569)   (33,235)
Income/(loss) from continuing operations   5,429    (8,698)
Income from discontinued operations   -    59,437 
Net income  $5,429   $50,739 
           
Weighted Average Number of Common Shares Outstanding:          
Basic - Class A   87,908,032    94,737,606 
Diluted - Class A   88,179,855    94,741,560 
Basic - Class B   -    1,319,970 
Diluted - Class B   -    1,319,970 
           
Per Share Amounts:          
Basic and Diluted income (loss) - Class A from continuing operations  $0.06   $(0.09)
Basic and Diluted income - Class A from discontinued operations  $-   $0.62 
Basic and Diluted net income - Class A  $0.06   $0.53 
           
Basic and Diluted income (loss) - Class B from continuing operations  $-    (0.09)
Basic and Diluted income - Class B from discontinued operations  $-    0.64 
Basic and Diluted net income - Class B  $-    0.55 
           
Cash dividends declared - Class A  $-    0.48 
Cash dividends declared - Class B  $-    0.48 

 

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Consolidated Balance Sheets

($ in thousands)

   March 31,   December 31, 
   2017   2016 
   unaudited     
ASSETS          
Current Assets:          
Cash and cash equivalents  $198,082   $191,089 
Restricted cash   6,029    7,272 
Voyage receivables, including unbilled of $4,444 and $12,593   24,147    23,456 
Income tax recoverable   313    877 
Receivable from INSW   595    683 
Other receivables   17,140    2,696 
Inventories, prepaid expenses and other current assets   11,306    12,243 
Total Current Assets   257,612    238,316 
Restricted cash – non-current   272    8,572 
Vessels and other property, less accumulated depreciation of $223,356 and $213,173   674,290    684,468 
Deferred drydock expenditures, net   26,678    31,172 
Total Vessels, Deferred Drydock and Other Property   700,968    715,640 
Investments in and advances to affiliated companies   38    3,694 
Intangible assets, less accumulated amortization of $47,533 and $46,383   44,467    45,617 
Other assets   21,666    18,658 
Total Assets  $1,025,023   $1,030,497 
           
LIABILITIES AND EQUITY          
Current Liabilities:          
Accounts payable, accrued expenses and other current liabilities  $54,008   $57,222 
Income taxes payable   2,085    306 
Current installments of long-term debt   95,177    - 
Total Current Liabilities   151,270    57,528 
Reserve for uncertain tax positions   3,152    3,129 
Long-term debt   416,856    525,082 
Deferred income taxes   142,719    141,457 
Other liabilities   51,636    48,969 
Total Liabilities   765,633    776,165 
           
Commitments and contingencies          
           
Equity:          
Common stock   738    702 
Paid-in additional capital   582,971    583,526 
Accumulated deficit   (316,307)   (321,736)
    267,402    262,492 
Accumulated other comprehensive loss   (8,012)   (8,160)
Total Equity   259,390    254,332 
Total Liabilities and Equity  $1,025,023   $1,030,497 

 

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Consolidated Statements of Cash Flows

($ in thousands)

   Three Months Ended 
   March 31, 
   2017   2016 
Cash Flows from Operating Activities:          
Net income  $5,429   $50,739 
Less: Net income from discontinued operations   -    59,437 
Net income/(loss) from continuing operations   5,429    (8,698)
Items included in net (loss)/income from continuing operations not affecting cash flows:          
Depreciation and amortization   16,625    23,124 
Amortization of debt discount and other deferred financing costs   1,334    1,686 
Compensation relating to restricted stock/stock unit and stock option grants   541    780 
Deferred income tax benefit   1,178    31,246 
Reorganization items, non-cash   214    136 
Discount on repurchase of debt   -    (3,415)
Other – net   616    487 
Distributions from INSW   -    72,000 
Distributed earnings of affiliated companies   3,657    3,789 
Payments for drydocking   (730)   (3,527)
SEC, Bankruptcy and IRS claim payments   (5,000)   (7,136)
Changes in operating assets and liabilities:   (10,853)   4,588 
Net cash provided by operating activities   13,011    115,060 
Cash Flows from Investing Activities:          
Change in restricted cash   9,542    4,996 
Expenditures for vessels and vessel improvements   -    (58)
Expenditures for other property   -    (147)
Net cash provided by investing activities   9,542    4,791 
Cash Flows from Financing Activities:          
Cash dividends paid   -    (30,574)
Payments on debt   (14,500)   (52,667)
Extinguishment of debt   -    (23,879)
Repurchases of common stock and common stock warrants   -    (44,126)
Treasury stock minimum tax withholding related to vesting of restricted stock   (1,060)   - 
Net cash used in financing activities   (15,560)   (151,246)
Net increase/(decrease) in cash and cash equivalents from continuing operations   6,993    (31,395)
Cash and cash equivalents at beginning of period   191,089    193,978 
Cash and cash equivalents at end of period   198,082    162,583 
           
Cash flows from discontinued operations:          
   Cash flows provided by operating activities   -    70,358 
   Cash flows used in investing activities   -    (1,058)
   Cash flows used in financing activities   -    (138,738)
Net decrease in cash and cash equivalents from discontinued operations  $-   $(69,438)

 

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Spot and Fixed TCE Rates Achieved and Revenue Days

 

The following tables provide a breakdown of TCE rates achieved for spot and fixed charters and the related revenue days for the three months ended March 31, 2017 and 2016. Revenue days in the quarter ended March 31, 2017 totaled 2,125 compared with 2,141 in the same quarter in the prior year. A summary fleet list by vessel class can be found later in this press release.

 

  Three Months Ended March 31, 2017 Three Months Ended March 31, 2016
  Spot Fixed Total Spot Fixed Total
Jones Act Handysize Product Carriers            
Average TCE Rate $45,061 $63,136   $  — $64,491  
Number of Revenue Days 72 989 1,061 1,080 1,080
Non-Jones Act Handysize Product Carriers            
Average TCE Rate $32,132 $15,543   $31,517 $19,016  
Number of Revenue Days 112 68 180 91 91 182
ATBs            
Average TCE Rate $ 17,057 $29,433   $  — $38,075  
Number of Revenue Days 180 524 704 697 697
Lightering            
Average TCE Rate $75,124 $  —   $63,036 $  —  
Number of Revenue Days 180  180 182 182
Total Revenue Days 544 1,581 2,125 273 1,868 2,141

 

Fleet Information

 

As of March 31, 2017, OSG’s owned and operated fleet totaled 24 vessels (14 vessels owned and 10 chartered-in) which remains unchanged since December 31, 2016. Those figures include vessels in which the Company has a partial ownership interest through its participation in joint ventures.

 

 

Vessels Owned

Vessels Chartered-in

Total at March 31, 2017

Vessel Type Number Weighted by
Ownership
Number Weighted by
Ownership
Total
Vessels
Vessels
Weighted by
Ownership
Total Dwt2
Operating Fleet              
Handysize Product Carriers 1 4 4.0 10 10.0 14 14.0 664,490
Clean ATBs 8 8.0 8 8.0 226,064
Lightering ATBs 2 2.0 2 2.0 91,112
Total Operating Fleet 14 14.0 10 10.0 24 24.0 981,666

1 Includes two owned shuttle tankers, one chartered in shuttle tanker and two owned U.S. Flag Product Carriers that trade internationally.

2 Total Dwt is defined as the total deadweight for all vessels of that type.

 

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Reconciliation to Non-GAAP Financial Information

 

The Company believes that, in addition to conventional measures prepared in accordance with GAAP, the following non-GAAP measures may provide certain investors with additional information that will better enable them to evaluate the Company’s performance. Accordingly, these non-GAAP measures are intended to provide supplemental information, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

 

 

(A) Time Charter Equivalent (TCE) Revenues

 

Consistent with general practice in the shipping industry, the Company uses TCE revenues, which represents shipping revenues less voyage expenses, as a measure to compare revenue generated from a voyage charter to revenue generated from a time charter. TCE, a non-GAAP measure, provides additional meaningful information in conjunction with shipping revenues, the most directly comparable GAAP measure, because it assists Company management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance. Reconciliation of TCE revenues of the segments to shipping revenues as reported in the consolidated statements of operations follow:

  

Three Months Ended March 31,

 

($ in thousands)

  2017   2016 
TCE revenues  $102,324   $112,213 
Add: Voyage Expenses   5,792    2,867 
Shipping revenues  $108,116   $115,080 

 

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(B) EBITDA and Adjusted EBITDA

 

EBITDA represents net income before interest expense, income taxes and depreciation and amortization expense. Adjusted EBITDA consists of EBITDA adjusted for the impact of certain items that we do not consider indicative of our ongoing operating performance. EBITDA and Adjusted EBITDA do not represent, and should not be a substitute for, net income or cash flows from operations as determined in accordance with GAAP. Some of the limitations are: (i) EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; (ii) EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; and (iii) EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt. While EBITDA and Adjusted EBITDA are frequently used as a measure of operating results and performance, neither of them is necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. The following table reconciles net income as reflected in the consolidated statements of operations, to EBITDA and Adjusted EBITDA:

 

   Three Months Ended March 31, 
($ in thousands)  2017   2016 
Net income (loss)  $5,429   $(8,698)
Income tax provision   3,569    33,235 
Interest expense   9,357    11,917 
Depreciation and amortization   16,625    23,124 
EBITDA   34,980    59,578 
Loss (gain) on repurchase of debt   937    (1,014)
Other costs associated with repurchase of debt   -    77 
Reorganization items, net   235    (17,910)
Adjusted EBITDA  $36,152   $40,731 

 

(C) Total Cash

 

($ in thousands) 

March 31,

2017

  

December 31,

2016

 
         
Cash and cash equivalents  $198,082   $191,089 
Restricted cash   6,301    15,844 
Total Cash  $ 204,383   $206,933 

 

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