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Section 1: 8-K (8-K)

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United States
Securities and Exchange Commission
Washington, D.C. 20549
_______________________________________________
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934

____________ August 9, 2018___________                         
Date of Report (Date of earliest event reported)
  
Overseas Shipholding Group, Inc.
(Exact Name of Registrant as Specified in Charter)

____1-6479-1____
Commission File Number
 
Delaware
 
13-2637623
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
  
Two Harbour 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))
 





OVERSEAS SHIPHOLDING GROUP, INC.
 
FORM 8-K
CURRENT REPORT


Section 2 – Financial Information
 
 
Item 2.02
Results 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 August 9, 2018, Overseas Shipholding Group, Inc. issued a press release, a copy of which is attached hereto as Exhibit 99.1, announcing second quarter 2018 earnings.
 

Section 9 - Financial Statements and Exhibits.
 
 
Item 9.01
Financial Statements and Exhibits.
 
(d)          Exhibits
 
Pursuant to General Instruction B.2 of Form 8-K, the following exhibit is furnished with this Form 8-K.
 
Exhibit No.
Description
99.1






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: August 9, 2018
By
/s/ Richard Trueblood
 
 
Name:         Richard Trueblood
Title:           Vice President and Chief Financial Officer


EXHIBIT INDEX
 
Exhibit No.
Description
99.1




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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
394577799_osgprlogoa04.jpg

Exhibit 99.1
 

OVERSEAS SHIPHOLDING GROUP REPORTS
SECOND QUARTER 2018 RESULTS
 
Tampa, FL – August 9, 2018 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 second quarter 2018.
 
Highlights

Net income for the second quarter was $3.1 million, or $0.03 per diluted share, compared with net income of $3.2 million, or $0.04 per diluted share, for the second quarter 2017.

Shipping revenues for the second quarter 2018 were $95.4 million, down 0.9% compared with the same period in 2017. Time charter equivalent (TCE) revenues(A), a non-GAAP measure, for the second quarter 2018 were $86.0 million, down 5.6% compared with the second quarter 2017. These results reflect an active fleet of 22 vessels in the second quarter of 2018 compared to 24 vessels in the second quarter 2017.

Second quarter 2018 Adjusted EBITDA(B), a non-GAAP measure, was $23.3 million, down 21.1% from $29.6 million in the second quarter 2017.

Total cash(C) was $131.2 million as of June 30, 2018.

In July 2018, the Company signed binding contracts with Hyundai Mipo Dockyard Company Ltd. for the construction of two 50,000 deadweight tons class product chemical tankers for anticipated delivery to the Company during the second half of 2019. Additionally, in July 2018, the Company signed a binding contract with Gunderson Marine LLC for the construction of one, approximately 204,000 BBL, oil and chemical tank barge for anticipated delivery to the Company during the first half of 2020.
 
Mr. Sam Norton, President and CEO, stated, “While seasonal softness in spot tanker rates has slowed the momentum of recent market gains, we remain confident that the mix of our revenue streams will continue to provide a solid foundation to capture the benefits of the continuing arc of improving fundamentals. Our niche businesses once again performed well and progress in securing more long-term charter contracts during recent months, coupled with resilience in our ATB earnings stream, gives cause to believe that our commercial chartering strategy is on the right track. Importantly, new contract signings for additions to our fleet position OSG well to reap economic rewards which are expected to materialize in the wake of new regulations coming into force over the next two years.”

Second Quarter 2018 Results
 
Shipping revenues were $95.4 million for the quarter, down 0.9% compared with the second quarter of 2017. TCE revenues for the second quarter of 2018 were $86.0 million, a decrease of $5.1 million, or 5.6%, compared with the second quarter of 2017. This decrease reflected the reduction of two vessels in operation in the second quarter of 2018 when compared to the 2017 second quarter.
 
Operating income for the second quarter of 2018 was $10.5 million, compared to operating income of $14.3 million in the second quarter of 2017.

Net income for the second quarter was $3.1 million, or $0.03 per diluted share, compared with net income of $3.2 million, or $0.04 per diluted share, for the second quarter 2017.

Adjusted EBITDA was $23.3 million for the second quarter, a decrease of $6.3 million compared with the second quarter of 2017, driven primarily by the decline in TCE revenues.
 
 
 
 
 
A, B, C Reconciliations of these non-GAAP financial measures are included in the financial tables attached to this press release starting on Page 7.

1



Conference Call
 
The Company will host a conference call to discuss its second quarter 2018 results at 9:00 a.m. Eastern Time (“ET”) on Thursday, August 9, 2018.
 
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 Thursday, August 9, 2018 by dialing (877) 344-7529 for domestic callers and (412) 317-0088 for international callers, and entering Access Code 10122734.
 
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 23-vessel U.S. Flag fleet consists of seven 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. In addition, the Company may make or approve certain statements in future filings with the Securities and Exchange Commission (SEC), in press releases, or in oral or written presentations by representatives of the Company. All 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 the Company’s current plans, estimates and projections, and are subject to change based on a number of factors. Investors should 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:
Susan Allan, Overseas Shipholding Group, Inc.
(813) 209-0620
[email protected]

2



Consolidated Statements of Operations
($ in thousands, except per share amounts)

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
Shipping Revenues:
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Time and bareboat charter revenues
$
54,543

 
$
72,116

 
$
108,437

 
$
151,883

Voyage charter revenues
40,824

 
24,109

 
87,959

 
52,458

 
95,367

 
96,225

 
196,396

 
204,341

 
 
 
 
 
 
 
 
Operating Expenses:
 

 
 

 
 
 
 
Voyage expenses
9,402

 
5,149

 
21,654

 
10,941

Vessel expenses
33,656

 
32,599

 
67,160

 
68,243

Charter hire expenses
22,768

 
22,856

 
45,315

 
45,433

Depreciation and amortization
12,426

 
15,086

 
24,798

 
31,711

General and administrative
6,586

 
6,190

 
13,369

 
14,284

Total operating expenses
84,838

 
81,880

 
172,296

 
170,612

Operating income
10,529

 
14,345

 
24,100

 
33,729

Other income/(expense)
385

 
(87
)
 
(246
)
 
(880
)
Income before interest expense, reorganization items and income taxes
10,914

 
14,258

 
23,854

 
32,849

Interest expense
(7,497
)
 
(9,445
)
 
(15,573
)
 
(18,802
)
Income before reorganization items and income taxes
3,417

 
4,813

 
8,281

 
14,047

Reorganization items, net

 
(9
)
 

 
(244
)
Income before income taxes
3,417

 
4,804

 
8,281

 
13,803

Income tax provision
(362
)
 
(1,593
)
 
(1,564
)
 
(5,162
)
Net income
$
3,055

 
$
3,211

 
$
6,717

 
$
8,641

 
 
 
 
 
 
 
 
Weighted Average Number of Common Shares Outstanding:
 

 
 

 
 
 
 
Basic - Class A
88,367,302

 
87,769,483

 
88,237,093

 
88,309,231

Diluted - Class A
89,198,996

 
87,964,755

 
88,910,518

 
88,542,779

 
 
 
 
 
 
 
 
Per Share Amounts:
 

 
 

 
 
 
 
Basic and diluted net income - Class A
$
0.03

 
$
0.04

 
$
0.08

 
$
0.10

 
The Company adopted ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASC 715), which requires that an employer classify and report the service cost component in the same line item or items in the statement of operations as other compensation costs arising from services rendered by the pertinent employees during the period and disclose by line item in the statement of operations the amount of net benefit cost that is included in the statement of operations. The other components of net benefit cost would be presented in the statement of operations separately from the service cost component and outside the subtotal of income from operations. The Company adopted this accounting standard on January 1, 2018 and has applied the guidance retrospectively.


3



Consolidated Balance Sheets
($ in thousands)
 
 
June 30,
2018
 
December 31,
2017
 
(unaudited)
 
 
ASSETS
 

 
 

Current Assets:
 

 
 

Cash and cash equivalents
$
130,974

 
$
165,994

Restricted cash
59

 
58

Voyage receivables, including unbilled of $6,135 and $9,919
18,257

 
24,209

Income tax receivable
835

 
1,122

Receivable from INSW
34

 
372

Other receivables
1,471

 
2,184

Inventories, prepaid expenses and other current assets
14,854

 
13,356

Total Current Assets
166,484

 
207,295

Vessels and other property, less accumulated depreciation
615,530

 
632,509

Deferred drydock expenditures, net
24,062

 
23,914

Total Vessels, Other Property and Deferred Drydock
639,592

 
656,423

Restricted cash - non current
191

 
217

Investments in and advances to affiliated companies
38

 
3,785

Intangible assets, less accumulated amortization
38,717

 
41,017

Other assets
22,539

 
23,150

Total Assets
$
867,561

 
$
931,887

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

Current Liabilities:
 

 
 

Accounts payable, accrued expenses and other current liabilities
$
34,643

 
$
34,371

Current installments of long-term debt

 
28,160

Total Current Liabilities
34,643

 
62,531

Reserve for uncertain tax positions
3,254

 
3,205

Long-term debt
376,660

 
420,776

Deferred income taxes, net
84,757

 
83,671

Other liabilities
47,415

 
48,466

Total Liabilities
546,729

 
618,649

 
 
 
 
Equity:
 

 
 

Common stock - Class A ($0.01 par value; 166,666,666 shares authorized; 80,713,679 and 78,277,669 shares issued and outstanding
807

 
783

Paid-in additional capital
586,414

 
584,675

Accumulated deficit
(260,269
)
 
(265,758
)
 
326,952

 
319,700

Accumulated other comprehensive loss
(6,120
)
 
(6,462
)
Total Equity
320,832

 
313,238

Total Liabilities and Equity
$
867,561

 
$
931,887




4



Consolidated Statements of Cash Flows
($ in thousands) 
 
Six Months Ended
June 30,
 
2018
 
2017
Cash Flows from Operating Activities:
 

 
 

Net income
$
6,717

 
$
8,641

Items included in net income not affecting cash flows:
 

 
 

Depreciation and amortization
24,798

 
31,711

Amortization of debt discount and other deferred financing costs
2,099

 
2,653

Compensation relating to restricted stock awards and stock option grants
1,497

 
1,699

Deferred income tax provision
1,057

 
2,121

Reorganization items, non-cash

 
85

Other – net
1,110

 
1,481

Loss on extinguishment of debt, net
981

 
1,189

Distributed earnings of affiliated companies
3,747

 
3,656

Payments for drydocking
(4,107
)
 
(3,305
)
SEC, Bankruptcy and IRS claim payments

 
(5,000
)
Changes in operating assets and liabilities
2,603

 
(20,273
)
Net cash provided by operating activities
40,502

 
24,658

Cash Flows from Investing Activities:
 
 
 
Expenditures for other property
(22
)
 
(11
)
       Net cash used in investing activities
(22
)
 
(11
)
Cash Flows from Financing Activities:
 

 
 

Payments on debt
(28,166
)
 

Extinguishment of debt
(47,000
)
 
(20,008
)
Tax withholding on share-based awards
(359
)
 
(1,062
)
Net cash used in financing activities
(75,525
)
 
(21,070
)
Net (decrease)/increase in cash, cash equivalents and restricted cash
(35,045
)
 
3,577

Cash, cash equivalents and restricted cash at beginning of period
166,269

 
206,933

Cash, cash equivalents and restricted cash at end of period
$
131,224

 
$
210,510


The Company adopted ASU No. 2016-18, Statement of Cash Flows (ASC 230), Restricted Cash, which requires that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for annual periods beginning after December 31, 2017 and interim periods within that reporting period. The Company adopted this accounting standard on January 1, 2018. The prior period has been adjusted to conform to current period presentation, which resulted in a decrease of $9,909 in net cash provided by investing activities for the six months ended June 30, 2017, related to changes in restricted cash amounts.


5



Spot and Fixed TCE Rates Achieved and Revenue Days
 
The following tables provide a breakdown of TCE rates achieved for the three and six months ended June 30, 2018 and 2017, between spot and fixed earnings and the related revenue days. Revenue days in the quarter ended June 30, 2018 totaled 1,945 compared with 2,127 in the same quarter in the prior year. A summary fleet list by vessel class can be found later in this press release.
 
 
2018
 
2017
Three Months Ended June 30,
Spot Earnings
 
Fixed Earnings
 
Spot Earnings
 
Fixed Earnings
Jones Act Handysize Product Carriers:
 

 
 

 
 

 
 

Average rate
$
32,180

 
$
60,953

 
$
18,288

 
$
63,796

Revenue days
282

 
795

 
173

 
900

Non-Jones Act Handysize Product Carriers:
 
 
 
 
 
 
 
Average rate
$
32,493

 
$

 
$
28,169

 
$
12,836

Revenue days
163

 

 
91

 
91

ATBs:
 
 
 
 
 
 
 
Average rate
$
20,679

 
$
23,629

 
$
7,234

 
$
26,047

Revenue days
268

 
255

 
202

 
488

Lightering:
 
 
 
 
 
 
 
Average rate
$
63,999

 
$

 
$
69,183

 
$

Revenue days
182

 

 
182

 



 
2018
 
2017
Six Months Ended June 30,
Spot Earnings
 
Fixed Earnings
 
Spot Earnings
 
Fixed Earnings
Jones Act Handysize Product Carriers:
 

 
 

 
 

 
 

Average rate
$
37,109

 
$
62,852

 
$
26,361

 
$
63,421

Revenue days
619

 
1,515

 
245

 
1,889

Non-Jones Act Handysize Product Carriers:
 
 
 
 
 
 
 
Average rate
$
34,939

 
$

 
$
30,353

 
$
13,997

Revenue days
342

 

 
203

 
159

ATBs:
 
 
 
 
 
 
 
Average rate
$
16,508

 
$
23,300

 
$
11,856

 
$
27,802

Revenue days
530

 
516

 
382

 
1,012

Lightering:
 
 
 
 
 
 
 
Average rate
$
67,372

 
$

 
$
72,137

 
$

Revenue days
355

 

 
362

 

 


6



Fleet Information
 
As of June 30, 2018, OSG’s operating fleet consisted of 23 vessels, 13 of which were owned, with the remaining vessels chartered-in. Vessels chartered-in are on Bareboat Charters.

 
 
Vessels Owned
 
Vessels Chartered-in
 
Total at June 30, 2018
Vessel Type
 
Number

 
Weighted by
Ownership

 
Number

 
Weighted by
Ownership

 
Total Vessels

 
Vessels
Weighted by
Ownership

 
Total dwt (1)

Handysize Product Carriers
 
4

 
4.0

 
10

 
10.0

 
14

 
14.0

 
664,490

Rebuilt ATBs
 
7

 
7.0

 

 

 
7

 
7.0

 
195,131

Lightering ATBs
 
2

 
2.0

 

 

 
2

 
2.0

 
91,112

Total Operating Fleet
 
13

 
13.0

 
10

 
10.0

 
23

 
23.0

 
950,733

 
(1)
Total dwt is defined as total deadweight tons for all vessels of that type.

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 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. Time charter equivalent revenues, 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
June 30,
 
Six Months Ended
June 30,
($ in thousands)
2018
 
2017
 
2018
 
2017
Time charter equivalent revenues
$
85,965

 
$
91,076

 
$
174,742

 
$
193,400

Add: voyage expenses
9,402

 
5,149

 
21,654

 
10,941

Shipping revenues
$
95,367

 
$
96,225

 
$
196,396

 
$
204,341

 
Vessel Operating Contribution

Vessel operating contribution, a non-GAAP measure, is TCE revenues minus vessel expenses and charter hire expenses.

Our “niche market activities”, which includes Delaware Bay lightering, MSP vessels and shuttle tankers, continue to provide a stable operating platform underlying our total US Flag operations. These vessels’ operations are insulated from the forces affecting the broader Jones Act market.






7



The following table sets forth the contribution of our vessels:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
($ in thousands)
2018
 
2017
 
2018
 
2017
Niche Market Activities
$
24,342

 
$
27,303

 
$
52,250

 
52,744

Jones Act Handysize Tankers
156

 
2,066

 
2,465

 
10,082

ATBs
5,043

 
6,252

 
7,552

 
16,898

Vessel Operating Contribution
29,541

 
35,621

 
62,267

 
79,724

Depreciation and amortization
12,426

 
15,086

 
24,798

 
31,711

General and administrative
6,586

 
6,190

 
13,369

 
14,284

Operating income
$
10,529

 
$
14,345

 
$
24,100

 
$
33,729


(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
June 30,
 
Six Months Ended
June 30,
($ in thousands)
2018
 
2017
 
2018
 
2017
Net income
$
3,055

 
$
3,211

 
$
6,717

 
$
8,641

Income tax provision
362

 
1,593

 
1,564

 
5,162

Interest expense
7,497

 
9,445

 
15,573

 
18,802

Depreciation and amortization
12,426

 
15,086

 
24,798

 
31,711

EBITDA
23,340

 
29,335

 
48,652

 
64,316

Severance costs

 

 

 
16

Loss on extinguishment of debt, net

 
252

 
981

 
1,189

Reorganization items, net

 
9

 

 
244

Adjusted EBITDA
$
23,340

 
$
29,596

 
$
49,633

 
$
65,765


 
(C) Total Cash
 
($ in thousands)
June 30, 2018
 
December 31, 2017
Cash and cash equivalents
$
130,974

 
165,994

Restricted cash - current
59

 
58

Restricted cash – non-current
191

 
217

Total Cash
$
131,224

 
$
166,269



8
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