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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

____________ November 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 November 9, 2018, Overseas Shipholding Group, Inc. issued a press release, a copy of which is attached hereto as Exhibit 99.1, announcing third 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: November 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
395704674_osgprlogoa05.jpg

Exhibit 99.1
 
OVERSEAS SHIPHOLDING GROUP REPORTS
THIRD QUARTER 2018 RESULTS
 
Tampa, FL – November 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 third quarter 2018.
 
Mr. Sam Norton, President and CEO, stated, “The third quarter saw OSG make meaningful progress in executing on its business plan, notwithstanding our short-term financial results. Highlights for the quarter are that we secured multiple new term-charter fixtures, extended our contract of affreightment with the Government of Israel through the end of 2020, and announced contracts for the construction of two new tankers and one new barge. We are well along the path to refinance and fully pay off our term debt which matures in August 2019 using a combination of cash and new debt. We have in hand commitments exceeding $325.0 million from a syndicate of lenders for a new term loan, as well as a second loan with another lender of $27.5 million, both of which we anticipate closing in the coming weeks. We expect these financings to add longer-term stability to our balance sheet, clearing the path for the pursuit of expansion opportunities. We are confident that the trajectory and mix of our revenue streams position the Company well to benefit from the continuing arc of improving fundamentals.”

Highlights

Net income for the third quarter was $11.9 million, or $0.13 per diluted share, compared with a net loss of $6.3 million, or $(0.07) per diluted share, for the third quarter 2017.

Shipping revenues for the third quarter 2018 were $80.5 million, down 13.7% compared with the same period in 2017. Time charter equivalent (TCE) revenues(A), a non-GAAP measure, for the third quarter 2018 were $72.1 million, down 15.1% compared with the third quarter 2017.

Operating loss for the third quarter of 2018 was $(4.1) million, compared to operating income of $0.6 million in the third quarter of 2017.

Third quarter 2018 Adjusted EBITDA(B), a non-GAAP measure, was $9.2 million, down 59.1% from $22.6 million in the third quarter 2017.

Total cash(C), a non-GAAP measure, was $124.2 million as of September 30, 2018.

Third Quarter 2018 Results
 
Shipping revenues were $80.5 million for the quarter, down 13.7% compared with the third quarter of 2017. TCE revenues for the third quarter of 2018 were $72.1 million, a decrease of $12.8 million, or 15.1%, compared with the third quarter of 2017. Several factors contributed to the decrease in revenues including: (a) 52 day increase in scheduled drydocking, which is an out of service period used to perform required major maintenance to continue trading and maximize a vessel’s useful life, (b) 89 unplanned repair days, including one vessel that was hit by a third-party ship, (c) one less Government of Israel voyage during the third quarter of 2018 compared to the same period in 2017, (d) one less vessel in operation in the third quarter 2018 compared to third quarter 2017, and (e) seasonal slow-down manifested by fewer spot market opportunities. The new term charters we secured during the third quarter will increase our forward revenue day coverage for 2019 to approximately 65%. In the future, we expect revenues from long-term time charters to increase and revenues from spot market charters to decrease, which should result in decreased exposure to fluctuations in spot market rates.
 
Operating loss for the third quarter of 2018 was $(4.1) million, compared to operating income of $0.6 million in the third quarter of 2017.

Net income for the third quarter was $11.9 million, or $0.13 per diluted share, compared with a net loss of $6.3 million, or $(0.07) per diluted share, for the third quarter 2017.

Adjusted EBITDA was $9.2 million for the third quarter, a decrease of $13.4 million compared with the third 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 8.

1



Conference Call
 
The Company will host a conference call to discuss its third quarter 2018 results at 9:00 a.m. Eastern Time (“ET”) on Friday, November 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 Friday, November 9, 2018 by dialing (877) 344-7529 for domestic callers and (412) 317-0088 for international callers, and entering Access Code 10126013.
 
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
sallan@osg.com

2



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

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Shipping Revenues:
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Time and bareboat charter revenues
$
51,033

 
$
56,911

 
$
159,113

 
$
208,794

Voyage charter revenues
29,503

 
36,359

 
117,820

 
88,817

 
80,536

 
93,270

 
276,933

 
297,611

 
 
 
 
 
 
 
 
Operating Expenses:
 

 
 

 
 
 
 
Voyage expenses
8,481

 
8,388

 
30,135

 
19,329

Vessel expenses
33,865

 
33,194

 
101,025

 
101,438

Charter hire expenses
23,079

 
23,053

 
68,394

 
68,486

Depreciation and amortization
12,828

 
14,390

 
37,627

 
46,100

General and administrative
6,410

 
6,333

 
19,778

 
20,616

Loss on disposal of vessels and other property, including impairments

 
7,353

 

 
7,353

Total operating expenses
84,663

 
92,711

 
256,959

 
263,322

Operating (loss)/income
(4,127
)
 
559

 
19,974

 
34,289

Other income/(expense)
518

 
(548
)
 
271

 
(1,428
)
(Loss)/income before interest expense, reorganization items and income taxes
(3,609
)
 
11

 
20,245

 
32,861

Interest expense
(7,828
)
 
(9,474
)
 
(23,401
)
 
(28,277
)
(Loss)/income before reorganization items and income taxes
(11,437
)
 
(9,463
)
 
(3,156
)
 
4,584

Reorganization items, net

 
46

 

 
(198
)
(Loss)/income before income taxes
(11,437
)
 
(9,417
)
 
(3,156
)
 
4,386

Income tax benefit/(provision)
23,385

 
3,110

 
21,821

 
(2,052
)
Net income/(loss)
$
11,948

 
$
(6,307
)
 
$
18,665

 
$
2,334

 
 
 
 
 
 
 
 
Weighted Average Number of Common Shares Outstanding:
 

 
 

 
 
 
 
Basic - Class A
88,535,376

 
87,822,274

 
88,337,614

 
87,832,949

Diluted - Class A
89,229,282

 
87,822,274

 
89,017,866

 
88,031,375

 
 
 
 
 
 
 
 
Per Share Amounts:
 

 
 

 
 
 
 
Basic and diluted net income - Class A
$
0.13

 
$
(0.07
)
 
$
0.21

 
$
0.03

 
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)
 
 
September 30,
2018
 
December 31,
2017
 
(unaudited)
 
 
ASSETS
 

 
 

Current Assets:
 

 
 

Cash and cash equivalents
$
123,977

 
$
165,994

Restricted cash
59

 
58

Voyage receivables, including unbilled of $5,711 and $9,919
14,364

 
24,209

Income tax receivable
879

 
1,122

Other receivables
1,123

 
2,556

Inventories, prepaid expenses and other current assets
15,493

 
13,356

Total Current Assets
155,895

 
207,295

Vessels and other property, less accumulated depreciation
607,001

 
632,509

Deferred drydock expenditures, net
26,537

 
23,914

Total Vessels, Other Property and Deferred Drydock
633,538

 
656,423

Restricted cash - non current
165

 
217

Investments in and advances to affiliated companies
38

 
3,785

Intangible assets, less accumulated amortization
37,567

 
41,017

Other assets
33,690

 
23,150

Total Assets
$
860,893

 
$
931,887

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

Current Liabilities:
 

 
 

Accounts payable, accrued expenses and other current liabilities
$
38,510

 
$
34,371

Current installments of long-term debt
376,897

 
28,160

Total Current Liabilities
415,407

 
62,531

Reserve for uncertain tax positions
218

 
3,205

Long-term debt
686

 
420,776

Deferred income taxes, net
64,340

 
83,671

Other liabilities
46,857

 
48,466

Total Liabilities
527,508

 
618,649

 
 
 
 
Equity:
 

 
 

Common stock - Class A ($0.01 par value; 166,666,666 shares authorized; 84,587,414 and 78,277,669 shares issued and outstanding)
846

 
783

Paid-in additional capital
586,877

 
584,675

Accumulated deficit
(248,321
)
 
(265,758
)
 
339,402

 
319,700

Accumulated other comprehensive loss
(6,017
)
 
(6,462
)
Total Equity
333,385

 
313,238

Total Liabilities and Equity
$
860,893

 
$
931,887




4



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

 
 

Net income
$
18,665

 
$
2,334

Items included in net income not affecting cash flows:
 

 
 

Depreciation and amortization
37,627

 
46,100

Loss on disposal of vessels and other property, including impairments

 
7,353

Amortization of debt discount and other deferred financing costs
3,117

 
3,971

Compensation relating to restricted stock awards and stock option grants
2,312

 
2,526

Deferred income tax (benefit)/provision
(22,328
)
 
1,423

Other – net
1,575

 
2,336

Loss on extinguishment of debt, net
981

 
1,999

Distributed earnings of affiliated companies
3,747

 
3,656

Payments for drydocking
(9,629
)
 
(4,833
)
SEC, Bankruptcy and IRS claim payments

 
(5,000
)
Changes in operating assets and liabilities
7,630

 
(25,025
)
Net cash provided by operating activities
43,697

 
36,840

Cash Flows from Investing Activities:
 
 
 
Expenditures for vessels and vessel improvements
(10,116
)
 

Expenditures for other property
(124
)
 
(11
)
       Net cash used in investing activities
(10,240
)
 
(11
)
Cash Flows from Financing Activities:
 

 
 

Payments on debt
(28,166
)
 

Extinguishment of debt
(47,000
)
 
(39,115
)
Tax withholding on share-based awards
(359
)
 
(1,062
)
Net cash used in financing activities
(75,525
)
 
(40,177
)
Net decrease in cash, cash equivalents and restricted cash
(42,068
)
 
(3,348
)
Cash, cash equivalents and restricted cash at beginning of period
166,269

 
206,933

Cash, cash equivalents and restricted cash at end of period
$
124,201

 
$
203,585


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 $11,988 in net cash provided by investing activities for the nine months ended September 30, 2017, related to changes in restricted cash amounts.


5



Fleet Information
 
As of September 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 September 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.

Spot and Fixed TCE Rates Achieved and Revenue Days
 
The following tables provide a breakdown of TCE rates achieved for the three and nine months ended September 30, 2018 and 2017, between spot and fixed earnings and the related revenue days. Revenue days in the quarter ended September 30, 2018 totaled 1,874 compared with 2,097 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 September 30,
Spot Earnings
 
Fixed Earnings
 
Spot Earnings
 
Fixed Earnings
Jones Act Handysize Product Carriers:
 

 
 

 
 

 
 

Average rate
$
17,133

 
$
56,999

 
$
24,466

 
$
64,553

Revenue days
276

 
797

 
367

 
732

Non-Jones Act Handysize Product Carriers:
 
 
 
 
 
 
 
Average rate
$
16,541

 
$

 
$
35,054

 
$

Revenue days
184

 

 
179

 

ATBs:
 
 
 
 
 
 
 
Average rate
$
15,233

 
$
22,171

 
$
8,360

 
$
25,331

Revenue days
235

 
224

 
280

 
355

Lightering:
 
 
 
 
 
 
 
Average rate
$
65,023

 
$

 
$
59,857

 
$

Revenue days
158

 

 
184

 




6



 
2018
 
2017
Nine Months Ended September 30,
Spot Earnings
 
Fixed Earnings
 
Spot Earnings
 
Fixed Earnings
Jones Act Handysize Product Carriers:
 

 
 

 
 

 
 

Average rate
$
30,931

 
$
60,759

 
$
25,224

 
$
63,737

Revenue days
894

 
2,315

 
612

 
2,621

Non-Jones Act Handysize Product Carriers:
 
 
 
 
 
 
 
Average rate
$
28,506

 
$

 
$
32,543

 
$
14,031

Revenue days
526

 

 
382

 
159

ATBs:
 
 
 
 
 
 
 
Average rate
$
16,620

 
$
22,438

 
$
10,378

 
$
27,159

Revenue days
764

 
740

 
662

 
1,367

Lightering:
 
 
 
 
 
 
 
Average rate
$
66,648

 
$

 
$
67,998

 
$

Revenue days
513

 

 
546

 

 


7



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 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
September 30,
 
Nine Months Ended
September 30,
($ in thousands)
2018
 
2017
 
2018
 
2017
Time charter equivalent revenues
$
72,055

 
$
84,882

 
$
246,798

 
$
278,282

Add: voyage expenses
8,481

 
8,388

 
30,135

 
19,329

Shipping revenues
$
80,536

 
$
93,270

 
$
276,933

 
$
297,611

 
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.
The following table sets forth the contribution of our vessels:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
($ in thousands)
2018
 
2017
 
2018
 
2017
Niche Market Activities
$
19,224

 
$
26,708

 
$
71,475

 
$
79,452

Jones Act Handysize Tankers
(6,537
)
 
(2,982
)
 
(4,072
)
 
7,100

ATBs
2,424

 
4,909

 
9,976

 
21,806

Vessel Operating Contribution
15,111

 
28,635

 
77,379

 
108,358

Depreciation and amortization
12,828

 
14,390

 
37,627

 
46,100

General and administrative
6,410

 
6,333

 
19,778

 
20,616

Loss on disposal of vessels and other property, including impairments

 
7,353

 

 
7,353

Operating (loss)/income
$
(4,127
)
 
$
559

 
$
19,974

 
$
34,289


(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

8



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 September 30,
 
Nine Months Ended September 30,
($ in thousands)
2018
 
2017
 
2018
 
2017
Net income/(loss)
$
11,948

 
$
(6,307
)
 
$
18,665

 
$
2,334

Income tax (benefit)/provision
(23,385
)
 
(3,110
)
 
(21,821
)
 
2,052

Interest expense
7,828

 
9,474

 
23,401

 
28,277

Depreciation and amortization
12,828

 
14,390

 
37,627

 
46,100

EBITDA
9,219

 
14,447

 
57,872

 
78,763

Severance costs

 

 

 
16

Loss on disposal of vessels, including impairments

 
7,353

 

 
7,353

Loss on extinguishment of debt, net

 
810

 
981

 
1,999

Reorganization items, net

 
(46
)
 

 
198

Adjusted EBITDA
$
9,219

 
$
22,564

 
$
58,853

 
$
88,329


 
(C) Total Cash
 
($ in thousands)
September 30, 2018
 
December 31, 2017
Cash and cash equivalents
$
123,977

 
$
165,994

Restricted cash - current
59

 
58

Restricted cash – non-current
165

 
217

Total Cash
$
124,201

 
$
166,269



9
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