Press Release

Overseas Shipholding Group Reports First Quarter 2019 Results

Company Release - 5/9/2019 7:30 AM ET

TAMPA, Fla.--(BUSINESS WIRE)-- 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 first quarter 2019.

Highlights

  • Net income for the first quarter 2019 was $3.2 million, or $0.04 per diluted share, compared with net income of $3.7 million, or $0.04 per diluted share, for the first quarter 2018. The Company's 2019 first quarter net income of $3.2 million compares to a $5.2 million loss in the 2018 fourth quarter.
  • Shipping revenues for the first quarter 2019 were $87.7 million, down 13.2% compared with the same period in 2018. Time charter equivalent (TCE) revenues(A), a non-GAAP measure, for the first quarter 2019 were $82.8 million, down 6.8% compared with the first quarter 2018. First quarter 2019 TCE revenues exceeded fourth quarter 2018 by 3.6%.
  • First quarter 2019 Adjusted EBITDA(B), a non-GAAP measure, was $23.6 million, down 15.5% from $28.0 million in the first quarter 2018. Adjusted EBITDA increased 2.2% from the fourth quarter 2018.
  • Total cash(C) was $75.8 million as of March 31, 2019.
  • In January 2019, we entered into a 10-year bareboat charter party agreement for a U.S. flagged product tanker and we exercised an option to construct a second approximately 204,000 BBL, oil and chemical tank barge for anticipated delivery to the Company during the second half of 2020.

Mr. Sam Norton, President and CEO, stated, “Our first quarter financial performance is evidence of the developing recovery of OSG’s earnings power, as improved charter terms for our conventional tanker fleet counterbalanced the retirement of aging tonnage as part of our ongoing fleet renewal efforts. Time charter contracts fixed during the second half of 2018, coupled with active interest in the few spot days available, led utilization rates for the combined conventional tanker and ATB fleet to exceed 95% of available operating days during the quarter. In line with tightening supply availability, we are seeing the benefits of both an improved rate environment and better utilization rates. In particular, conventional tanker TCE earnings have improved 5% from the 4th quarter of 2018 and more than 25% from their 3rd quarter levels. Meanwhile, our niche businesses continued to perform in-line with our expectations, providing a solid foundation of industrial business that underlies our growth and margin expansion initiatives.”

Mr. Norton added, “We are confident in the strong, tangible fundamentals underlying the Jones Act and U.S. Flag energy transportation markets in which we operate. We anticipate that the full effects of our high operating leverage will be more fully expressed in the latter part of 2019 and into 2020, alongside the additional earnings contribution we expect from our newly built ATBs and MR tankers delivering over the next 18 months. All in all, we remain extremely upbeat about the future and the promise of improving earnings in our core businesses.”

First Quarter 2019 Results

Shipping revenues were $87.7 million for the quarter, down 13.2% compared with the first quarter of 2018. TCE revenues for the first quarter of 2019 were $82.8 million, a decrease of $6.0 million, or 6.8%, compared with the first quarter of 2018. This decrease reflected two fewer vessels in operation in the first quarter of 2019 when compared to the 2018 first quarter and a decrease in spot market charters as our fleet moved to long-term time charters.

 

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.

 

Operating income for the first quarter of 2019 was $9.7 million, compared to operating income of $13.6 million in the first quarter of 2018.

Net income for the first quarter 2019 was $3.2 million, or $0.04 per diluted share, compared with net income of $3.7 million, or $0.04 per diluted share, for the first quarter 2018.

Adjusted EBITDA was $23.6 million for the first quarter, a decrease of $4.4 million compared with the first quarter of 2018, driven primarily by the decline in TCE revenues.

Conference Call

The Company will host a conference call to discuss its 2019 first quarter results at 11:00 a.m. Eastern Time (“ET”) on Thursday, May 9, 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 1:00 p.m. ET on Thursday, May 9, 2019, by dialing (877) 344-7529 for domestic callers and (412) 317-0088 for international callers and entering Access Code 10131358.

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 U.S. Flag fleet consists of five 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, the delivery timelines for the Company's new vessels, and the performance of the Company's niche and core businesses. 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.

   

Consolidated Statements of Operations

($ in thousands, except per share amounts)

 
Three Months Ended
March 31,
2019 2018
Shipping Revenues:
 
Time and bareboat charter revenues $ 63,120 $ 53,895
Voyage charter revenues   24,617     47,135  
  87,737     101,030  
 
Operating Expenses:
Voyage expenses 4,984 12,252
Vessel expenses 32,446 33,505
Charter hire expenses 22,298 22,547
Depreciation and amortization 12,478 12,372
General and administrative 5,674 6,783
Loss on disposal of vessels and other property, including impairments   117      
Total operating expenses   77,997     87,459  
Operating income 9,740 13,571
Other income/(expense)   355     (631 )
Income before interest expense, reorganization items and income taxes 10,095 12,940
Interest expense   (6,506 )   (8,076 )
Income before income taxes 3,589 4,864
Income tax provision   (392 )   (1,202 )
Net income $ 3,197   $ 3,662  
 
Weighted Average Number of Common Shares Outstanding:
Basic - Class A 89,004,947 88,105,439
Diluted - Class A 89,421,143 88,620,596
Per Share Amounts:
Basic and diluted net income - Class A $ 0.04 $ 0.04
 
   

Consolidated Balance Sheets

($ in thousands)

 
March 31, December 31,
2019 2018
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 75,602 $ 80,417
Restricted cash 59 59
Voyage receivables, including unbilled of $8,400 and $10,160 26,799 16,096
Income tax receivable 505 439
Other receivables 1,452 3,027
Prepaid expenses 1,751 9,886
Inventories and other current assets   2,465     2,456  
Total Current Assets 108,633 112,380
Vessels and other property, less accumulated depreciation 598,407 597,659
Deferred drydock expenditures, net   24,105     26,099  
Total Vessels, Other Property and Deferred Drydock   622,512     623,758  
Restricted cash - noncurrent 140 165
Investments in and advances to affiliated companies 38 3,585
Intangible assets, less accumulated amortization 35,267 36,417
Operating lease right-of-use assets 247,262
Other assets   50,411     51,425  
Total Assets $ 1,064,263   $ 827,730  
 
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities $ 30,571 $ 34,678
Current portion of operating lease liabilities 81,897
Current installments of long-term debt   26,306     23,240  
Total Current Liabilities 138,774 57,918
Reserve for uncertain tax positions 218 220
Noncurrent operating lease liabilities 181,211
Long-term debt 315,211 322,295
Deferred income taxes, net 73,373 73,365
Other liabilities   21,463     44,464  
Total Liabilities 730,250 498,262
 
Equity:
Common stock - Class A ($0.01 par value; 166,666,666 shares authorized; 85,292,751 and 84,834,790 shares issued and outstanding) 853 848
Paid-in additional capital 589,086 587,826
Accumulated deficit   (248,817 )   (252,014 )
341,122 336,660
Accumulated other comprehensive loss   (7,109 )   (7,192 )
Total Equity   334,013     329,468  
Total Liabilities and Equity $ 1,064,263   $ 827,730  
 
   

Consolidated Statements of Cash Flows

($ in thousands)

 
Three Months Ended
March 31,
2019 2018
Cash Flows from Operating Activities:
Net income $ 3,197   $ 3,662  
Items included in net income not affecting cash flows:
Depreciation and amortization 12,478 12,372
Loss on disposal of vessels and other property, including impairments 117
Amortization of debt discount and other deferred financing costs 510 1,106
Compensation relating to restricted stock awards and stock option grants 309 793
Deferred income tax provision 111 1,492
Other – net 231 645
Distributed earnings of affiliated companies 3,548 3,747
Payments for drydocking (1,342 ) (2,037 )
Changes in operating assets and liabilities (8,040 ) (1,789 )
Loss on extinguishment of debt, net       981  
Net cash provided by operating activities   11,119     20,972  
Cash Flows from Investing Activities:
Expenditures for vessels and vessel improvements (10,955 )
Expenditures for other property   (588 )    
Net cash used in investing activities   (11,498 )    
Cash Flows from Financing Activities:
Payments on debt (4,167 ) (28,166 )
Extinguishment of debt (47,000 )
Tax withholding on share-based awards   (294 )   (359 )
Net cash used in financing activities   (4,461 )   (75,525 )
Net decrease in cash, cash equivalents and restricted cash (4,840 ) (54,553 )
Cash, cash equivalents and restricted cash at beginning of period   80,641     166,269  
Cash, cash equivalents and restricted cash at end of period $ 75,801   $ 111,716  
 

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 months ended March 31, 2019, and the comparable period of 2018. Revenue days in the quarter ended March 31, 2019, totaled 1,784 compared with 1,932 in the prior year quarter. A summary fleet list by vessel class can be found later in this press release.

  2019   2018
Spot   Fixed Spot   Fixed
Three Months Ended March 31, 2019 Earnings Earnings Earnings Earnings
Jones Act Handysize Product Carriers:
Average rate $ 27,940 $ 56,863 $ 41,227 $ 64,947
Revenue days 90 982 337 720
Non-Jones Act Handysize Product Carriers:
Average rate $ 25,898 $ 12,097 $ 35,900 $ 62,542
Revenue days 113 67 172 8
ATBs:
Average rate $ 20,992 $ 21,557 $ 12,230 $ 22,979
Revenue days 86 266 261 261
Lightering:
Average rate $ 72,905 $ $ 70,925 $
Revenue days 180 173
 

Fleet Information

As of March 31, 2019, OSG’s operating fleet consisted of 21 vessels, 11 of which were owned, with the remaining vessels chartered-in. Vessels chartered-in are on Bareboat Charters.

Vessels   Vessels   Total  
Vessel Type Owned   Chartered-In   Vessels   Total dwt (2)
Handysize Product Carriers (1) 4 10 14 664,490
Refined Product ATBs 5 5 141,612
Lightering ATBs 2 2 91,112
Total Operating Fleet 11 10 21 897,214

(1) Includes two owned shuttle tankers, one chartered-in shuttle tanker and two owned U.S. Flag Product Carriers that trade internationally.

(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
March 31,
2019   2018
Time charter equivalent revenues $ 82,753 $ 88,778
Add: Voyage expenses   4,984   12,252
Shipping revenues $ 87,737 $ 101,030
 

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
March 31,
($ in thousands) 2019   2018
Niche Market Activities $ 22,602 $ 27,908
Jones Act Handysize Tankers 2,439 2,309
ATBs   2,968   2,509
Vessel Operating Contribution   28,009   32,726
Depreciation and amortization 12,478 12,372
General and administrative 5,674 6,783
Loss on disposal of vessels and other property, including impairments   117  
Operating income $ 9,740 $ 13,571
 

(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
March 31,
($ in thousands) 2019   2018
Net income $ 3,197 $ 3,662
Income tax provision 392 1,202
Interest expense 6,506 8,076
Depreciation and amortization   12,478   12,372
EBITDA 22,573 25,312
Amortization classified in charter hire expenses 231 465
Interest expense classified in charter hire expenses 404 433
Non-cash stock based compensation expense 309 793
Loss on disposal of vessels and other property, including impairments 117
Loss on extinguishment of debt, net     981
Adjusted EBITDA $ 23,634 $ 27,984
 
   

(C) Total Cash

 
March 31, December 31,
($ in thousands)   2019   2018
Cash and cash equivalents $ 75,602 $ 80,417
Restricted cash - current 59 59
Restricted cash – non-current   140   165
Total Cash $ 75,801 $ 80,641

Susan Allan, Overseas Shipholding Group, Inc.
(813) 209-0620
sallan@osg.com

Source: Overseas Shipholding Group, Inc.