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Section 1: 8-K

 

 

 

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 8, 2019  

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))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Class A Common Stock (par value $0.01 per share)   OSG   New York Stock Exchange

 

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 pursuant to Section 13(a) of the Exchange Act. [  ]

 

 

 

 
 

 

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 8, 2019, Overseas Shipholding Group, Inc. issued a press release, a copy of which is attached hereto as Exhibit 99.1, announcing third quarter 2019 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   Press Release dated November 8, 2019.

 

 
 

 

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 8, 2019 By /s/ Richard Trueblood                                     
  Name: Richard Trueblood
  Title: Vice President and Chief Financial Officer

 

 
 

 

EXHIBIT INDEX

 

Exhibit No.   Description
99.1   Press Release dated November 8, 2019.

 

 
 

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Section 2: EX-99.1

 

 

Exhibit 99.1

 

OVERSEAS SHIPHOLDING GROUP REPORTS

THIRD QUARTER 2019 RESULTS

 

Tampa, FL – November 8, 2019 – 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 2019.

 

Highlights

 

  Shipping revenues for the third quarter 2019 were $80.9 million, up 0.5% compared with the same period in 2018. Time charter equivalent (TCE) revenues(A), a non-GAAP measure, for the third quarter 2019 were $76.5 million, up 6.2% compared with the third quarter 2018.
     
  Third quarter 2019 Adjusted EBITDA(B), a non-GAAP measure, was $16.1 million, up 47.7% from $10.9 million in the third quarter 2018.
     
  Operating income for the third quarter of 2019 was $1.2 million, compared to an operating loss of $4.1 million in the third quarter of 2018.
     
  Net loss for the third quarter 2019 was $3.8 million, or ($0.04) per diluted share, compared with net income of $11.9 million, or $0.13 per diluted share, for the third quarter 2018 at which time we recognized $21.7 million of previously deferred tax benefits upon completion of an Internal Revenue Service examination.
     
  Total cash(C) was $49.7 million as of September 30, 2019.
     
  On September 30, 2019, the Company took delivery of two 50,000 DWT class product and chemical tankers at Hyundai Mipo Dockyard Co., Ltd. The tankers, named the Overseas Gulf Coast and Overseas Sun Coast, will be operating in the international market under the Marshall Islands flag, with both vessels having entered into one-year time charters. We entered into loans in an aggregate principal amount of $50.0 million to finance the vessels.

 

Mr. Sam Norton, President and CEO, stated, “Attaining key commercial targets across the second half of 2019 has stood as a defining element of whether or not the business strategy we have been pursuing for the past several years would find success. In this respect, we are pleased to have been able to secure time charter contracts for a total of 10 of our vessels since the end of the second quarter, increasing our forward revenue cover for 2020 to over 75% of available vessel days. Several of these contracts are for firm periods of more than one year, adding increased duration to our charter book in addition to higher charter rates. In both these areas, we consider the progress evidenced as particularly promising for our future financial performance.”

 

Mr. Norton added, “Overall, third quarter results were gratifying, showing a marked improvement in operating performance over last year’s third quarter in the context of material changes to both vessels in operation and the mix of contract revenues.”

 

Third Quarter 2019 Results

 

Shipping revenues were $80.9 million for the quarter, up 0.5% compared with the third quarter of 2018. TCE revenues for the third quarter of 2019 were $76.5 million, an increase of $4.4 million, or 6.2%, compared with the third quarter of 2018. The increase primarily resulted from (a) an increase in average daily rates earned by the Company’s fleet, (b) decreased spot market exposure, (c) a 61 day decrease in scheduled drydocking, and (d) a 78 day decrease in unplanned repair days. The increase was offset by two fewer vessels in operation during the third quarter of 2019 compared to the third quarter of 2018.

 

Operating income for the third quarter of 2019 was $1.2 million, compared to an operating loss of $4.1 million in the third quarter of 2018.

 

 

A, B, C Reconciliations of these non-GAAP financial measures are included in the financial tables attached to this press release.

 

   
 

 

Net loss for the third quarter 2019 was $3.8 million, or ($0.04) per diluted share, compared with net income of $11.9 million, or $0.13 per diluted share, for the third quarter 2018 at which time we recognized $21.7 million of previously deferred tax benefits upon completion of an Internal Revenue Service examination.

 

Adjusted EBITDA was $16.1 million for the third quarter, an increase of $5.2 million compared with the third quarter of 2018.

 

Conference Call

 

The Company will host a conference call to discuss its 2019 third quarter results at 9:00 a.m. Eastern Time (“ET”) on Friday, November 8, 2019.

 

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 8, 2019 by dialing (877) 344-7529 for domestic callers and (412) 317-0088 for international callers, and entering Access Code 10136164.

 

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 21 vessel fleet consists of two conventional ATBs, two lightering ATBs, three shuttle tankers, 10 conventional MR tankers, and two non-Jones Act MR tankers that participate in the U.S. Maritime Security Program, all of which are U.S. flagged, as well as two Marshall Island flagged non-Jones Act MR tankers trading in international markets. In addition, OSG has two barges under construction in the U.S. that will be Jones Act qualified vessels, with delivery anticipated during 2020. These vessels are anticipated to be paired with the Company’s existing tugs operating in the Jones Act trade.

 

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 press 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 our prospects, supply and demand for vessels in the markets in which we operate and the impact on market rates and vessel earnings, the expected delivery schedule of our two new barges under construction and their expected participation in the Jones Act trade, the continued stability of our niche business, and the impact of our time charter contracts on our future financial performance. Forward-looking statements are based on our 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 our Annual Report on Form 10-K and in similar sections of other filings we make with the SEC from time to time. We do not assume any obligation to update or revise any forward-looking statements except as required by applicable law. Forward-looking statements and written and oral forward-looking statements attributable to us or our representatives after the date of this press release are qualified in their entirety by the cautionary statements contained in this paragraph and in other reports previously or hereafter filed by us 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

September 30,

  

Nine Months Ended

September 30,

 
   2019   2018   2019   2018 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
Shipping Revenues:                    
                     
Time and bareboat charter revenues  $63,491   $51,033   $188,619   $159,113 
Voyage charter revenues   17,435    29,503    68,503    117,820 
    80,926    80,536    257,122    276,933 
                     
Operating Expenses:                    
Voyage expenses   4,424    8,481    15,762    30,135 
Vessel expenses   33,993    33,865    98,960    101,025 
Charter hire expenses   22,802    23,079    67,645    68,394 
Depreciation and amortization   13,324    12,828    38,922    37,627 
General and administrative   5,288    6,410    16,917    19,768 
Bad debt expense           4,300     
Loss on disposal of vessels and other property, including impairments, net   36        87     
Total operating expenses   79,867    84,663    242,593    256,949 
Income/(loss) from vessel operations   1,059    (4,127)   14,529    19,984 
Equity in income/(loss) of affiliated companies   156        224    (10)
Operating income/(loss)   1,215    (4,127)   14,753    19,974 
Other income, net   375    518    992    271 
Income/(loss) before interest expense and income taxes   1,590    (3,609)   15,745    20,245 
Interest expense   (6,047)   (7,828)   (19,124)   (23,401)
Loss before income taxes   (4,457)   (11,437)   (3,379)   (3,156)
Income tax benefit   694    23,385    1,075    21,821 
Net (loss)/income  $(3,763)  $11,948   $(2,304)  $18,665 
                     
Weighted Average Number of Common Shares Outstanding:                    
Basic - Class A   89,375,668    88,535,376    89,210,136    88,337,614 
Diluted - Class A   89,375,668    89,229,282    89,210,136    89,017,866 
Per Share Amounts:                    
Basic and diluted net (loss)/income - Class A  $(0.04)  $0.13   $(0.03)  $0.21 

 

  3
 

 

Consolidated Balance Sheets

($ in thousands)

 

  

September 30,

2019

  

December 31,

2018

 
   (unaudited)     
ASSETS          
Current Assets:          
Cash and cash equivalents  $49,484   $80,417 
Restricted cash   60    59 
Voyage receivables, including unbilled of $4,532 and $10,160, net of reserve for doubtful accounts   7,172    16,096 
Income tax receivable   476    439 
Other receivables   2,781    3,027 
Prepaid expenses   1,130    9,886 
Inventories and other current assets   1,998    2,456 
Total Current Assets   63,101    112,380 
Vessels and other property, less accumulated depreciation   732,675    597,659 
Deferred drydock expenditures, net   26,888    26,099 
Total Vessels, Other Property and Deferred Drydock   759,563    623,758 
Restricted cash - non current   114    165 
Investments in and advances to affiliated companies   272    3,585 
Intangible assets, less accumulated amortization   32,967    36,417 
Operating lease right-of-use assets   257,630     
Other assets   23,312    51,425 
Total Assets  $1,136,959   $827,730 
LIABILITIES AND EQUITY          
Current Liabilities:          
Accounts payable, accrued expenses and other current liabilities  $31,933   $34,678 
Current portion of operating lease liabilities   89,136     
Current portion of finance lease liabilities   4,011     
Current installments of long-term debt   30,821    23,240 
Total Current Liabilities   155,901    57,918 
Reserve for uncertain tax positions   218    220 
Noncurrent operating lease liabilities   191,046     
Noncurrent finance lease liabilities   24,075     
Long-term debt   344,696    322,295 
Deferred income taxes, net   71,456    73,365 
Other liabilities   19,982    44,464 
Total Liabilities   807,374    498,262 
Equity:          
Common stock - Class A ($0.01 par value; 166,666,666 shares authorized; 85,668,793 and 84,834,790 shares issued and outstanding)   857    848 
Paid-in additional capital   589,985    587,826 
Accumulated deficit   (254,318)   (252,014)
    336,524    336,660 
Accumulated other comprehensive loss   (6,939)   (7,192)
Total Equity   329,585    329,468 
Total Liabilities and Equity  $1,136,959   $827,730 

 

  4
 

 

Consolidated Statements of Cash Flows

($ in thousands)

 

   Nine Months Ended
September 30,
 
   2019   2018 
   (unaudited)   (unaudited) 
Cash Flows from Operating Activities:          
Net (loss)/income  $(2,304)  $18,665 
Items included in net income not affecting cash flows:          
Depreciation and amortization   38,922    37,627 
Bad debt expense   4,300     
Loss on disposal of vessels and other property, including impairments, net   87     
Amortization of debt discount and other deferred financing costs   1,477    3,117 
Compensation relating to restricted stock awards and stock option grants   1,212    2,312 
Deferred income tax benefit   (1,851)   (22,328)
Interest on finance lease liabilities   941     
Non-cash operating lease expense   62,058     
Loss on extinguishment of debt, net   72    981 
Other - net       1,575 
Distributed earnings of affiliated companies   3,314    3,747 
Payments for drydocking   (11,477)   (9,629)
Operating lease right-of-use assets   5,999     
Operating lease liabilities   (61,366)    
Changes in operating assets and liabilities, net   4,368    7,630 
Net cash provided by operating activities   45,752    43,697 
Cash Flows from Investing Activities:          
Proceeds from disposals of vessels and other property   3,404     
Expenditures for vessels and vessel improvements   (105,244)   (10,116)
Expenditures for other property   (1,399)   (124)
Net cash used in investing activities   (103,239)   (10,240)
Cash Flows from Financing Activities:          
Payments on debt   (16,667)   (28,166)
Extinguishment of debt   (3,271)   (47,000)
Tax withholding on share-based awards   (294)   (359)
Issuance of debt   50,000     
Deferred financing costs for issuance of debt   (1,417)    
Payments on principal portion of finance lease liabilities   (1,847)    
Net cash provided by/(used in) financing activities   26,504    (75,525)
Net decrease in cash, cash equivalents and restricted cash   (30,983)   (42,068)
Cash, cash equivalents and restricted cash at beginning of period   80,641    166,269 
Cash, cash equivalents and restricted cash at end of period  $49,658   $124,201 

 

  5
 

 

Spot and Fixed TCE Rates Achieved and Revenue Days

 

The following tables provides a breakdown of TCE rates achieved for spot and fixed charters and the related revenue days for the three and nine months ended September 30, 2019 and the comparable period of 2018. Revenue days in the quarter ended September 30, 2019 totaled 1,735 compared with 1,874 in the prior year quarter. A summary fleet list by vessel class can be found later in this press release.

 

   2019   2018 
   Spot
Earnings
   Fixed
Earnings
   Spot
Earnings
   Fixed
Earnings
 
Three Months Ended September 30,                
Jones Act Handysize Product Carriers:                    
Average rate  $2,825   $57,494   $17,133   $56,999 
Revenue days   184    1,009    276    797 
Non-Jones Act Handysize Product Carriers:                    
Average rate  $32,809   $12,810   $16,541   $ 
Revenue days   92    91    184     
ATBs:                    
Average rate  $938   $21,507   $15,233   $22,171 
Revenue days   14    166    235    224 
Lightering:                    
Average rate  $56,923   $   $65,023   $ 
Revenue days   179        158     

 

   2019   2018 
   Spot
Earnings
   Fixed
Earnings
   Spot
Earnings
   Fixed
Earnings
 
Nine Months Ended September 30,                
Jones Act Handysize Product Carriers:                    
Average rate  $20,635   $57,192   $30,931   $60,759 
Revenue days   431    2,950    894    2,315 
Non-Jones Act Handysize Product Carriers:                    
Average rate  $25,213   $12,319   $28,506   $ 
Revenue days   303    242    526     
ATBs:                    
Average rate  $18,573   $21,565   $16,620   $22,438 
Revenue days   188    685    764    740 
Lightering:                    
Average rate  $65,984   $   $66,648   $ 
Revenue days   529        513     

 

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Fleet Information

 

As of September 30, 2019, OSG’s operating fleet consisted of 21 vessels, 10 of which were owned, with the remaining vessels chartered-in. Vessels chartered-in are on bareboat charters.

 

Vessel Type  Vessels
Owned
   Vessels
Chartered-In
   Total
Vessels
   Total
dwt (2)
 
Handysize Product Carriers (1)   6    11    17    810,825 
Refined Product ATBs   2        2    59,490 
Lightering ATBs   2        2    91,112 
Total Operating Fleet   10    11    21    961,427 

 

(1)Includes two owned shuttle tankers, 11 chartered-in shuttle tankers, two non-Jones Act MR tankers that participate in the U.S. Maritime Security Program, all of which are U.S. flagged, as well as two owned Marshall Island flagged non-Jones Act MR tankers trading in international markets.
(2)Total dwt is defined as aggregate 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
September 30,
   Nine Months Ended
September 30,
 
   2019   2018   2019   2018 
Time charter equivalent revenues  $76,502   $72,055   $241,360   $246,798 
Add: Voyage expenses   4,424    8,481    15,762    30,135 
Shipping revenues  $80,926   $80,536   $257,122   $276,933 

 

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. We believe 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
September 30,
   Nine Months Ended
September 30,
 
($ in thousands)  2019   2018   2019   2018 
Niche market activities  $20,435   $19,224   $63,786   $71,475 
Jones Act handysize tankers   (1,590)   (6,537)   3,555    (4,072)
ATBs   862    2,424    7,414    9,976 
Vessel operating contribution   19,707    15,111    74,755    77,379 
Depreciation and amortization   13,324    12,828    38,922    37,627 
General and administrative   5,288    6,410    16,917    19,768 
Bad debt expense           4,300     
Loss on disposal of vessels and other property, including impairments, net   36        87     
Equity in income/(loss) of affiliated companies   156        224    (10)
Operating income/(loss)  $1,215   $(4,127)  $14,753   $19,974 

 

(B) EBITDA and Adjusted EBITDA

 

EBITDA represents net (loss)/income from continuing operations before interest expense, income taxes and depreciation and amortization expense. Adjusted EBITDA consists of EBITDA adjusted to exclude amortization classified in charter hire expenses, interest expense classified in charter hire expenses, gain/(loss) on disposal of vessels and other property, including impairments, loss on repurchases and extinguishment of debt, non-cash stock based compensation expense and the impact of other 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 (loss)/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/(loss) from continuing operations as reflected in the consolidated statements of operations, to EBITDA and Adjusted EBITDA. Prior periods have been adjusted to conform to current year presentation.

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
($ in thousands)  2019   2018   2019   2018 
Net (loss)/income  $(3,763)  $11,948   $(2,304)  $18,665 
Income tax benefit   (694)   (23,385)   (1,075)   (21,821)
Interest expense   6,047    7,828    19,124    23,401 
Depreciation and amortization   13,324    12,828    38,922    37,627 
EBITDA   14,914    9,219    54,667    57,872 
Amortization classified in charter hire expenses   231    465    692    1,394 
Interest expense classified in charter hire expenses   398    428    1,202    1,291 
Non-cash stock based compensation expense   450    815    1,212    2,312 
Loss on disposal of vessels and other property, including impairments, net   36        87     
Loss on extinguishment of debt, net   24        72    981 
Adjusted EBITDA  $16,053   $10,927   $57,932   $63,850 

 

(C) Total Cash

 

($ in thousands) 

 

September 30,

2019

  

December 31,

2018

 
Cash and cash equivalents  $49,484   $80,417 
Restricted cash - current   60    59 
Restricted cash – non-current   114    165 
Total Cash  $49,658   $80,641 

 

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