Press Release

Overseas Shipholding Group Reports Fourth Quarter and Fiscal 2014 Results

Company Release - 3/16/2015 5:00 PM ET

Highlights

  • Net income for the fourth quarter was $26.5 million, or $0.05 per diluted share. Adjusted for special items, fourth quarter net income was $22.1 million, or $0.04 per diluted share
  • Net loss for fiscal year 2014 was $152.2 million, or $0.65 per diluted share. Adjusted for special items, net loss for fiscal year 2014 was $61.8 million, or $0.26 per diluted share

NEW YORK--(BUSINESS WIRE)-- Overseas Shipholding Group, Inc. (NYSE MKT:OSGB), a provider of oceangoing energy transportation services, today reported results for the fourth quarter of fiscal 2014 ended December 31, 2014.

For the quarter ended December 31, 2014, the Company reported time charter equivalent (TCE) revenues of $198.9 million, an increase of $5.0 million, or 3%, from $193.8 million in the comparable 2013 quarter. Net income for the quarter ended December 31, 2014 was $26.5 million, or $0.05 per diluted share, compared with a net loss of $447.3 million, or $14.67 per diluted share, in the same period in 2013. After adjusting for special items that increased net income by $4.4 million, or $0.01 per diluted share, fourth quarter 2014 net income was $22.1 million, or $0.04 per diluted share, compared with net income of $24.9 million, or $0.82 per diluted share, in the fourth quarter of 2013. Details on special items for the fourth quarter of 2014 are provided later in this press release. In addition, see Appendix 1 for a reconciliation of net income/(loss) to adjusted net income/(loss) and a reconciliation of shipping revenues to TCE revenues, both non-GAAP measures.

“We are very pleased to report adjusted net income of $22.1 million in our first full quarter of financial results since the Company’s reorganization was completed in August 2014,” said Ian T. Blackley, President and CEO. “In the quarter, higher Crude spot rates combined with the continuing strength of the U.S. Flag market had a positive impact on our earnings.”

For the fiscal year ended December 31, 2014, the Company reported TCE revenues of $761.4 million, a decrease of $1.9 million, or 0.3%, from $763.3 million in 2013. Net loss for the fiscal year ended December 31, 2014 was $152.3 million, or $0.65 per diluted share, compared with a net loss of $638.2 million, or $20.94 per diluted share, in 2013. After adjusting for special items that increased net loss by $90.4 million, or $0.39 per diluted share, net loss for the fiscal year ended December 31, 2014 was $61.8 million, or $0.26 per diluted share, compared with net income of $57.0 million, or $1.87 per diluted share, in the fiscal year ended December 31, 2013.

The $5.0 million increase in TCE revenues for the quarter ended December 31, 2014 from the prior-year quarter was due principally to continuing strength in the U.S. Flag markets and strengthening Crude spot market rates. The increase was partially offset by a significant decrease in revenue days of 1,154 days. The decrease in revenue days was due to the redelivery of ten vessels (eight Aframaxes, one Suezmax and one MR) at the expiry of their short-term time charters in 2014, the sale of five vessels (two older VLCCs, one Panamax and two Aframaxes that had been employed in International Flag Lightering operations) and the Company’s exit from the full service International Flag Lightering business.

  • TCE revenues for the U.S. Flag segment increased by $9.2 million, or 9%, to $111.4 million from $102.2 million in the fourth quarter of 2013. The increase was attributable to the continued strong rate environment in the U.S. Flag market, which allowed time charters on the Company’s Product Carriers and ATBs to be renewed in 2014 at rates in excess of expiring rates. In addition, incremental revenue was earned in 2014 relating to coastwise voyages performed by the ATBs employed in the Delaware Bay Lightering business.
  • TCE revenues for the International Crude Tankers segment decreased by $6.1 million, or 11%, to $51.2 million from $57.3 million in the fourth quarter of 2013. This decrease in TCE revenues reflects a 1,119 day decrease in revenue days, as discussed above. The decrease in revenue days was partially offset by higher average TCE rates earned across all Crude sectors.
  • TCE revenues for the International Product Carriers segment increased by $2.1 million, or 6%, to $36.3 million from $34.2 million in the fourth quarter of 2013. This increase in TCE revenues resulted primarily from the delivery of the Overseas Shenandoah, an LR2, in July 2014.

About OSG

Overseas Shipholding Group, Inc. (NYSE MKT: OSGB) is a publicly traded tanker company providing energy transportation services for crude oil and petroleum products in the U.S. and International Flag markets. 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 New York City, NY. 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, in press releases, or 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 will relate to the Company's prospects, including statements regarding trends in the tanker and articulated tug/barge markets, and including prospects for certain strategic alliances and investments. These statements are based on 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 Company’s Annual Report for 2014 on Form 10-K and in other reports hereafter filed by the Company with the SEC under the caption “Risk Factors.” 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 statement contained in this paragraph and in other reports hereafter filed by the Company with the SEC.

Financial Statements and Appendix I Follow

 

Consolidated Statements of Operations

 
($ in thousands, except per share amounts)       Three Months Ended December 31,     Fiscal Year Ended December 31,
2014     2013     2014     2013
(Unaudited)     (Unaudited)        
Shipping Revenues:
Pool revenues $62,357 $37,576 $180,813 $177,068
Time and bareboat charter revenues 105,199 99,917 392,669 370,689
Voyage charter revenues 49,372     135,609     383,952     468,239
Total Shipping Revenues 216,928     273,102     957,434     1,015,996
Operating Expenses:
Voyage expenses 18,007 79,219 196,075 252,668
Vessel expenses 67,389 68,909 268,852 265,146
Charter hire expenses 31,901 44,767 152,016 206,873
Depreciation and amortization 1 38,365 45,965 151,758 176,276
General and administrative 20,687 28,491 83,716 97,663
Technical management transition costs 741 - 3,427 -
Severance and relocation costs (1,340) (244) 17,020 3,097
Goodwill and other intangibles impairment charge - 16,214 - 16,214
(Gain)/loss on disposal of vessels, including impairments (6,298)     366,400     (10,532)     365,257
Total Operating Expenses 169,452     649,721     862,332     1,383,194
Income /(Loss) from Vessel Operations 47,476 (376,619) 95,102 (367,198)
Equity in Income of Affiliated Companies 11,911     10,364     41,355     40,894
Operating Income (Loss) 59,387 (366,255) 136,457 (326,304)
Other Income 48     385     426     849
Income/(loss) before Interest Expense, Reorganization Items

and Income Taxes

59,435 (365,870) 136,883 (325,455)
Interest Expense (28,746)     (28)     (232,491)     (350)
Income/(loss) before Reorganization Items

and Income Taxes

30,689 (365,898) (95,608) (325,805)
Reorganization Items, net (6,338)     (90,341)     (171,473)     (327,170)
Income/(Loss) before Income Taxes 24,351 (456,239) (267,081) (652,975)
Income Tax Benefit 2,179     8,958     114,808     14,745
Net Income/(Loss) $26,530     $(447,281)     $(152,273)     $(638,230)
 
Weighted Average Number of Common Shares Outstanding:
Basic - Class A 520,573,197 - 212,507,963 -
Basic and diluted - Class B and Common Stock 7,925,960 30,493,982 21,372,197 30,482,818
Diluted - Class A 520,604,930 - 212,507,963 -
 
Per Share Amounts:
Basic and diluted net income/(loss) - Class A and Class B $0.05 - $(0.65) -
Basic and diluted net loss - Common Stock - $(14.67) - $(20.94)
 

1 The quarterly depreciation amounts for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014 have been revised from those previously reported in the quarterly reports on Form 10-Q for the respective periods to reflect the correction of an error which resulted in an overstatement of depreciation expense on certain vessels for the periods. The error overstated depreciation expense for each of the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014 by $2,133, $2,144 and $2,169, respectively. The Company assessed the materiality of the error and concluded that the impacts were not material to the respective periods. There was no impact on the full fiscal year 2014 amounts, or on periods prior to 2014.

 

Consolidated Balance Sheets

 
($ in thousands)       December 31,

2014

    December 31,

2013

ASSETS    
Current Assets:
Cash and cash equivalents $389,226 $601,927
Restricted cash 123,178 -
Voyage receivables 101,513 147,964
Income tax recoverable 55,856 3,952
Other receivables 8,293 16,838
Inventories , prepaid expenses and other current assets 24,290 41,168
Deferred income taxes 5,312     5,464
Total Current Assets 707,668     817,313
Vessels and other property, including construction in progress of $54,644 (2013), less accumulated depreciation 2,213,217 2,359,352
Deferred drydock expenditures, net 62,413     57,248
Total Vessels, Deferred Drydock and Other Property 2,275,630     2,416,600
 
Investments in affiliated companies 334,863 323,327
Intangible assets, less accumulated amortization 54,817 60,167
Other assets 63,513     27,087
Total Assets $3,436,491     $3,644,494
 
 
LIABILITIES AND EQUITY / (DEFICIT)
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities $96,066 $121,582
Income taxes payable 906 256,258
Current installments of long-term debt 12,314     -
Total Current Liabilities 109,286 377,840
 
Reserve for uncertain tax positions 34,520 26,585
Long-term debt 1,656,353 -
Deferred income taxes 283,277 369,954
Other liabilities 66,968 42,189
Liabilities subject to compromise -     2,888,173
Total Liabilities 2,150,404 3,704,741
Equity/(Deficit):
Total Equity /(Deficit) 1,286,087     (60,247)
Total Liabilities and Equity /(Deficit) $3,436,491     3,644,494
 
 

Consolidated Statements of Cash Flows

 
($ in thousands)       Fiscal Year Ended December 31,
2014     2013
Cash Flows from Operating Activities:    
Net loss $ (152,273) $(638,230)
Items included in net loss not affecting cash flows:
Depreciation and amortization 151,758 176,276
Loss on write-down of vessels and other fixed assets - 366,439
Goodwill and other intangibles write-down - 16,214
Amortization of deferred gain on sale and leasebacks - 42
Amortization of debt discount and other deferred financing costs 3,973 -
Compensation relating to restricted stock and stock option grants 1,009 (131)
Deferred income tax benefit (82,432) (7,398)
Undistributed earnings of affiliated companies (32,534) (35,826)
Deferred payment obligations on charters-in 3,232 5,446
Reorganization items, non-cash 23,715 261,221
Gain on sublease contracts - (896)
Other – net 2,139 2,243

Loss on sale or write-down of securities and investments - net

-

198

Gain on disposal of vessels – net (10,532) (1,182)
Payments for drydocking (37,817) (22,024)
Bankruptcy and IRS claim payments (584,369) -
Changes in other operating assets and liabilities       (13,018)     19,504
Net cash (used in) / provided by operating activities       (727,149)     141,896
Cash Flows from Investing Activities:
Change in restricted cash (123,178) -
Proceeds from sale of marketable securities and investments - 459
Expenditures for vessels (32,412) (36,377)
Proceeds from disposal of vessels 78,426 485
Expenditures for other property (489) (2,181)
Distributions from affiliated companies 29,722 2,097
Other – net       593     979
Net cash used in investing activities       (47,338)     (34,538)
Cash Flows from Financing Activities:
Issuance of common stock, net of issuance costs 1,510,000 -
Purchases of treasury stock (162) (42)
Issuance of debt, net of issuance and deferred financing costs 1,176,664 -
Payments on debt, including adequate protection payments       (2,124,716)     (12,731)
Net cash provided by / (used in) financing activities       561,786     (12,773)
Net (decrease)/increase in cash and cash equivalents (212,701) 94,585
Cash and cash equivalents at beginning of year       601,927     507,342
Cash and cash equivalents at end of year       $389,226     $601,927
 

Fleet Information

As of December 31, 2014, OSG’s owned and operated fleet totaled 81 International Flag and U.S. Flag vessels (63 vessels owned and 18 chartered-in) compared with 89 at December 31, 2013. Those figures include vessels in which the Company has a partial ownership interest through its participation in joint ventures. The Company’s fleet list excludes vessels chartered-in where the charter duration was one year or less at inception.

 
    Vessels Owned     Vessels Chartered-in     Total at December 31, 2014
Vessel Type     Number    

Weighted by
Ownership

    Number    

Weighted by
Ownership

   

Total
Vessels

   

Vessels
Weighted by
Ownership

    Total Dwt
Operating Fleet                                          
FSO 2     1.0     2     1.0     864,046
VLCC and ULCC 9 9.0 9 9.0 2,875,798
Aframax 7 7.0 7 7.0 787,215
Panamax     8     8.0             8     8.0     557,198
International Flag Crude Tankers 26 25.0 26 25.0 5,084,257
 
LR2 1 1.0 1 1.0 112,792
LR1 4 4.0 4 4.0 297,681
MR     14     14.0     8     8.0     22    

22.0

    1,152,502
International Flag Product Carriers 19 19.0 8 8.0 27 27.0 1,562,975
                                           
Total Int’l Flag Operating Fleet     45     44.0     8     8.0     53     52.0     6,647,232
                                           
Handysize Product Carriers 1 4 4.0 10 10.0 14 14.0 561,117
Clean ATBs 8 8.0 8 8.0 226,064
Lightering ATBs     2     2.0             2     2.0     91,112
Total U.S. Flag Operating Fleet     14     14.0     10     10.0     24     24.0     878,293
                                           
LNG Fleet     4     2.0             4     2.0     864,800 cbm
Total Operating Fleet     63     60.0     18     18.0     81     78.0    

7,525,525
and
864,800 cbm

1Includes two owned shuttle tankers and two owned U.S. Flag Product Carriers that trade internationally.

Appendix 1 – 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.

Adjusted Net Income/(Loss) Reconciliation

Reconciliation of income/(loss) as reported in the consolidated statements of operations to adjusted net income/(loss) follow:

 
      Three Months Ended Dec. 31,     Fiscal year Ended Dec. 31,
($ in thousands)       2014     2013     2014     2013
Reported net income/(loss) $26,530     $(447,281)     $(152,273)     $(638,230)
 
Adjustments to remove impact of special items, net of taxes:
Severance and technical management transition costs 1,330 (79) 20,078 2,044
Goodwill & other intangibles impairment charge 16,214 16,214
(Gain)/loss on disposal of vessels, including impairments (6,298) 366,400 (10,532) 365,257
Reorganization items, net 558 89,684 136,498 311,728
Release of deferred taxes for undistributed earnings of foreign subsidiaries         (55,602)    
Adjusted net income/(loss) $22,121     $24,938     $(61,832)     $57,013
 
 
      Three Months Ended Dec. 31,     Fiscal year Ended Dec. 31,
(per share amounts)       2014     2013     2014     2013
Reported net income/(loss) per diluted share $0.05     $(14.67)     $(0.65)     $(20.94)
 
Adjustments to remove impact of special items:
Severance and technical management transition costs 0.00 0.00 0.09 0.07
Goodwill & other intangibles impairment charge 0.53 0.53
(Gain)/loss on disposal of vessels, including impairments (0.01) 12.02 (0.05) 11.98
Reorganization items, net 0.00 2.94 0.58 10.23
Release of deferred taxes for undistributed earnings of foreign subsidiaries         (0.24)    
Adjusted net income/(loss) per diluted share $0.04     $0.82     $(0.26)     $1.87
 

The Company has included in this press release a non-GAAP performance measure (net income (loss) adjusted for special items). This non-GAAP performance measure does not have any standardized meaning prescribed by GAAP and, therefore, may not be comparable to similar measures presented by other companies.

TCE Reconciliation

Reconciliation of time charter equivalent revenues of the segments to shipping revenues as reported in the consolidated statements of operations follow:

 
      Three Months Ended Dec. 31,     Fiscal year Ended Dec. 31,
($ in thousands)       2014     2013     2014     2013
Time charter equivalent revenues $198,921     $193,883     $761,359     $763,328
Add: Voyage Expenses 18,007     79,219     196,075     252,668
Shipping revenues $216,928     $273,102     $957,434     $1,015,996
 

Consistent with general practice in the shipping industry, the Company uses time charter equivalent 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.

Overseas Shipholding Group, Inc.
Investor Relations
+1-212-578-1699
Fax: +1-212-578-1670
www.osg.com

Source: Overseas Shipholding Group, Inc.