Press Release

Overseas Shipholding Group Reports First Quarter 2015 Results

Company Release - 5/7/2015 7:00 AM ET

NEW YORK--(BUSINESS WIRE)-- Overseas Shipholding Group, Inc. (OSG) (NYSE MKT:OSGB), a provider of oceangoing energy transportation services, today reported results for the quarter ended March 31, 2015.

Highlights

  • Time charter equivalent (TCE) revenues(1) for the first quarter of 2015 totaled $221.6 million, up 3% compared with the same period in 2014 even as revenue days decreased by 18%.
  • Net income for the first quarter was $42.9 million, compared to $12.6 million in the same period in 2014.
  • Adjusted EBITDA(2) was $113.7 million, up 31% from $86.6 million in the same period in 2014.
  • VLCC spot rates increased to approximately $49,300 per day in the first quarter, up 54% compared with the same period in 2014 and the highest average first quarter VLCC spot rates in five years.
  • Total cash(3) was $595.3 million as of March 31, 2015, growing from $512.4 million at the end of 2014.

“Our first quarter performance was a strong start to the year and we remain well positioned in both our domestic and international businesses to capitalize on the strength of the tanker markets,” said Captain Ian T. Blackley, OSG’s president and CEO. “With 80 vessels on the water generating cash, I remain excited by our prospects and am confident in our ability to create value for our shareholders.”

First Quarter 2015 Results

For the quarter ended March 31, 2015, the Company reported TCE revenues of $221.6 million, an increase of $7.0 million, or 3%, from $214.6 million in the comparable 2014 quarter. The $7.0 million increase was principally driven by continuing strength in the U.S. Flag markets and strengthening crude and product spot market rates, significantly offset by a decrease in revenue days of 1,432 days, an 18% decrease compared with the same period in 2014. That decrease was largely due to the redelivery of ten vessels (eight Aframaxes, one Suezmax and one MR) at the expiry of their short-term time charters and the sale of five older vessels in 2014; two VLCCs, two Aframaxes and one Panamax. For the quarter ended March 31, 2015, the Company reported shipping revenues of $233.5 million, a decrease of $58.9 million, or 20%, from $292.4 million in the comparable 2014 quarter.

Adjusted EBITDA was $113.7 million for the quarter ended March 31, 2015, an increase of $27.1 million, or 31%, from $86.6 million in the comparable 2014 quarter. The $27.1 million increase was driven primarily by the strength of spot rates, particularly in the international crude market, and lower general and administrative expenses.

Net income for the quarter ended March 31, 2015 was $42.9 million, or $0.08 per diluted share, an increase of $30.3 million from $12.6 million in the comparable 2014 quarter.

U.S. Flag

TCE revenues for the U.S. Flag segment increased by $10.8 million, or 11%, to $111.2 million from $100.4 million in the first quarter of 2014. The increase reflects the continued strength of the Jones Act market, which allowed the Company’s Jones Act Product Carriers and Articulated Tug Barges (ATBs) to achieve higher rates on new time charters upon the expiry of their prior time charters.

International Crude Tankers

TCE revenues for the International Crude Tankers segment decreased by $16.1 million, or 19%, to $66.8 million from $82.9 million in the first quarter of 2014. This decrease in TCE revenues reflects a 1,448 day decrease in revenue days, largely driven by the vessel redeliveries and sales of older vessels noted above. The decrease in revenue days was partially offset by a strengthening in average daily rates across all fleets in the segment, with VLCC spot rates increasing to approximately $49,300 per day in the first quarter, up 54% from the comparable 2014 period. Aframax spot rates increased to almost $31,000 per day in the first quarter, up 15% and Panamax blended rates increased to approximately $20,800 per day, up 12%.

International Product Carriers

TCE revenues for the International Product Carriers segment increased by $12.3 million, or 39%, to $43.5 million from $31.2 million in the first quarter of 2014. This increase resulted primarily from a 49% increase in Medium Range (MR) spot rates to almost $19,000 per day from the same period in 2014.

Conference Call

The Company will host a conference call to discuss its first quarter 2015 results at 9:00 a.m. ET on Thursday, May 7, 2015.

To access the call, participants should dial (866) 490-3149 for domestic callers and (707) 294-1567 for international callers. Please dial in ten minutes prior to the start of the call and enter Conference ID 37133128.

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 2:00 p.m. ET on Thursday, May 7, 2015 through 11:59 p.m. ET on Thursday, May 14, 2015 by dialing (855) 859-2056 for domestic callers and (404) 537-3406 for international callers, and entering Conference ID 37133128.

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 (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, including statements regarding trends in the tanker and articulated tug/barge markets, and including prospects for certain strategic alliances and investments. Forward-looking statements are based on the Company’s current plans, estimates and projections, and are subject to change based on a number of factors. Investors should carefully consider the risk factors outlined in more detail in the Company’s Annual Report for 2014 on Form 10-K under the caption “Risk Factors.” 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.

 

Consolidated Statements of Operations

 
($ in thousands, except per share amounts)     Three Months Ended March 31,
    2015       2014  
(Unaudited) (Unaudited)
Shipping Revenues:
Pool revenues $ 78,769 $ 45,067
Time and bareboat charter revenues 107,942 95,128
Voyage charter revenues   46,831     152,251  
Total Shipping Revenues   233,542     292,446  
Operating Expenses:
Voyage expenses 11,900 77,893
Vessel expenses 69,239 66,671
Charter hire expenses 31,898 45,482
Depreciation and amortization (i) 37,119 37,945
General and administrative 19,282 24,425
Technical management transition costs 40 194
Severance and relocation costs 5 6,683
Gain on disposal of vessels and other property   (1,073 )   (1,477 )
Total Operating Expenses   168,410     257,816  
Income from Vessel Operations 65,132 34,630
Equity in Income of Affiliated Companies   12,412     8,494  
Operating Income 77,544 43,124
Other Income   73     134  
Income before Interest Expense, Reorganization Items and Income Taxes 77,617 43,258
Interest Expense   (28,569 )   (123 )
Income before Reorganization Items and Income Taxes 49,048 43,135
Reorganization Items, net   (3,487 )   (29,256 )
Income before Income Taxes 45,561 13,879
Income Tax Provision   (2,660 )   (1,329 )
Net Income $ 42,901   $ 12,550  
 
Weighted Average Number of Common Shares Outstanding:
Basic - Class A 520,583,598 -
Diluted - Class A 520,587,201 -
Basic and Diluted - Class B and Common Stock 7,924,944 30,516,394
 
Per Share Amounts:
Basic and diluted net income - Class A and Class B $ 0.08 -
Basic and diluted net income - Common Stock - $ 0.41
 

(i) The quarterly depreciation amount for the quarter ended March 31, 2014 has been revised from the amount previously reported in the quarterly report on Form 10-Q for the respective period to reflect the correction of an error which resulted in an overstatement of depreciation expense on certain vessels. The error overstated depreciation expense for the quarter ended March 31, 2014 by $2,133. This error had no impact on the full fiscal year 2014 amounts, or on periods prior to 2014.

 

Consolidated Balance Sheets

 
    March 31,     December 31,
($ in thousands) 2015   2014
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $ 477,321 $ 389,226
Restricted cash 118,010 123,178
Voyage receivables 78,740 101,513
Income tax recoverable 56,324 55,856
Other receivables 6,209 8,293
Inventories , prepaid expenses and other current assets 24,934 24,290
Deferred income taxes   5,312     5,312
Total Current Assets   766,850     707,668
Vessels and other property, less accumulated depreciation 2,178,627 2,213,217
Deferred drydock expenditures, net   64,995     62,413
Total Vessels, Deferred Drydock and Other Property   2,243,622     2,275,630
 
Investments in affiliated companies 331,411 334,863
Intangible assets, less accumulated amortization 53,667 54,817
Other assets   61,767     63,513
Total Assets $ 3,457,317   $ 3,436,491
 
 
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities $ 78,002 $ 96,066
Income taxes payable 3,385 906
Current installments of long-term debt   72,314     12,314
Total Current Liabilities 153,701 109,286
 
Reserve for uncertain tax positions 42,635 34,520
Long-term debt 1,593,298 1,656,353
Deferred income taxes 275,339 283,277
Other liabilities   66,079     66,968
Total Liabilities 2,131,052 2,150,404
Equity:
Total Equity   1,326,265     1,286,087
Total Liabilities and Equity $ 3,457,317   $ 3,436,491
 
 

Consolidated Statements of Cash Flows

 
    Three Months Ended March 31,
($ in thousands)   2015       2014  
(Unaudited) (Unaudited)
Cash Flows from Operating Activities:
Net income $ 42,901 $ 12,550
Items included in net income not affecting cash flows:
Depreciation and amortization 37,119 37,945
Amortization of debt discount and other deferred financing costs 2,501 -
Compensation relating to restricted stock and stock option grants 357 542
Deferred income tax provision/(benefit) (7,622 ) 8,461
Undistributed earnings of affiliated companies (9,073 ) (4,996 )
Deferred payment obligations on charters-in 325 1,102
Reorganization items, non-cash 55 14,259
Straight-line charter hire revenue (1,256 ) -
Other – net 82 567
Items included in net income related to investing and financing activities:
Gain on disposal of vessels and other property - net (1,073 ) (1,477 )
Payments for drydocking (7,876 ) (5,738 )
Bankruptcy claim payments (3,084 ) -
Changes in operating assets and liabilities   13,058     (19,157 )
Net cash provided by operating activities   66,414     44,058  
Cash Flows from Investing Activities:
Change in restricted cash 5,167 -
Expenditures for vessels - (9,510 )
Proceeds from disposal of vessels and other property 7,757 7,594
Expenditures for other property (65 ) (54 )
Investments in and advances to affiliated companies (500 ) -
Repayments of advances from affiliated companies 12,500 -
Other – net   -     131  
Net cash provided by/(used in) investing activities   24,859     (1,839 )
Cash Flows from Financing Activities:
Purchases of treasury stock - (162 )
Payments on debt, including adequate protection payments   (3,178 )   (5,307 )
Net cash used in financing activities   (3,178 )   (5,469 )
Net increase in cash and cash equivalents 88,095 36,750
Cash and cash equivalents at beginning of year   389,226     601,927  
Cash and cash equivalents at end of period $ 477,321   $ 638,677  
 

Fleet Information

As of March 31, 2015, OSG’s owned and operated fleet totaled 80 International Flag and U.S. Flag vessels (63 vessels owned and 17 chartered-in) compared with 81 at December 31, 2014. Those figures include vessels in which the Company has a partial ownership interest through its participation in joint ventures.

 
    Vessels Owned   Vessels Chartered-in   Total at March 31, 2015
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   873,916
VLCC and ULCC 9 9.0 9 9.0 2,875,798
Aframax 7 7.0 7 7.0 787,859
Panamax     8   8.0       8   8.0   557,187
International Flag Crude Tankers 26 25.0 26 25.0 5,094,760
 
LR2 1 1.0 1 1.0 112,792
LR1 4 4.0 4 4.0 297,705
MR     14   14.0   7   7.0   21   21.0   1,001,978
International Flag Product Carriers 19 19.0 7 7.0 26 26.0 1,412,475
                               
Total Int’l Flag Operating Fleet     45   44.0   7   7.0   52   51.0   6,507,235
                               
Handysize Product Carriers 1 4 4.0 10 10.0 14 14.0 664,490
Clean ATBs 8 8.0 8 8.0 226,064
Lightering ATBs     2   2.0       2   2.0   91,112
Total U.S. Flag Operating Fleet     14   14.0   10   10.0   24   24.0   981,666
                               
LNG Fleet     4   2.0       4   2.0   864,800 cbm
Total Operating Fleet 63 60.0 17 17.0 80 77.0 7,488,901
and
864,800 cbm
 

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

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.

(1) 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 March 31,
($ in thousands)     2015     2014
TCE revenues $ 221,642   $ 214,553
Add: Voyage Expenses   11,900     77,893
Shipping revenues $ 233,542   $ 292,446
 

(2) EBITDA and Adjusted EBITDA

EBITDA represents net (loss)/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 (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 as reflected in the consolidated statements of operations, to EBITDA and Adjusted EBITDA:

 
    Three Months Ended March 31,
($ in thousands)     2015       2014  
Net Income $ 42,901   $ 12,550
Income tax provision 2,660 1,329
Interest expense 28,569 123
Depreciation and amortization   37,119       37,945  
EBITDA 111,249 51,947
Technical management transition costs 40 194
Severance and relocation costs 5 6,683
Gain on disposal of vessels and other property (1,073 ) (1,477 )
Reorganization items, net   3,487       29,256  
Adjusted EBITDA $ 113,708     $ 86,603  
 

(3) Total Cash

     
March 31, December 31,
($ in thousands) 2015     2014
 
Cash and cash equivalents $ 477,321 $ 389,226
Restricted cash   118,010       123,178
Total Cash $ 595,331     $ 512,404
 

Investor Relations & Media:
Overseas Shipholding Group, Inc.
Brian Tanner, 212-578-1645
btanner@osg.com

Source: Overseas Shipholding Group, Inc.