Press Release

OVERSEAS SHIPHOLDING GROUP REPORTS FOURTH QUARTER AND FULL YEAR 2019 RESULTS

Company Release - 3/13/2020 8:15 AM ET

Tampa, FL, March 13, 2020 (GLOBE NEWSWIRE) -- 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 fourth quarter and full year 2019.

Highlights

 Net income for the fourth quarter was $11.0 million, or $0.12 per diluted share, compared with net loss of $5.2 million, or $(0.05) per diluted share, for the fourth quarter 2018.
   
 Net income for the full year 2019 was $8.7 million, or $0.10 per diluted share, compared with $13.5 million, or $0.15 per diluted share for the full year 2018.
   
 Shipping revenues for the fourth quarter 2019 were $98.4 million, up 10.3% compared with the fourth quarter 2018. Shipping revenues for the full year 2019 were $355.5 million, down 2.9% compared with the full year 2018.
   
 Time charter equivalent (TCE) revenues(A), a non-GAAP measure, for the fourth quarter and full year 2019 were $93.8 million and $335.1 million, up 17.3% and 2.6%, respectively, compared with the same periods in 2018.
   
 Fourth quarter and full year 2019 Adjusted EBITDA(B), a non-GAAP measure, were $33.7 million and $91.6 million, up 45.8% and 5.4%, respectively, from $23.1 million and $87.0 million in the same periods in 2018.
   
 Total cash(C) was $41.7 million as of December 31, 2019.
   
 On December 11, 2019, we extended the terms on four of our bareboat charters ending December 2020 for additional three-year periods to December 2023.
   
 On March 12, 2020, subsidiaries of the Company completed the purchase of three U.S.-flagged crude oil carrier vessels, the Alaskan Explorer, Alaskan Legend, and Alaskan Navigator from BP Oil Shipping Company USA and BP AMI Leasing Inc. (BP) and have entered into a bareboat charter with BP for a fourth vessel, the Alaskan Frontier. In connection with these transactions, OSG also completed the acquisition of Alaska Tanker Company LLC (ATC), the operator of the vessels, making ATC a wholly owned subsidiary of OSG.

Mr. Sam Norton, President and CEO, stated, “We are extremely pleased with the results for the fourth quarter of last year. Revenue, EBITDA and earnings all came in at levels that portend continued progress in fulfilling the promise of our business strategy. For some time, we have been expressing confidence that the mix of our revenue streams has positioned OSG to generate stable revenues from our niche businesses while capturing the upside of the ongoing market recovery. The emerging strength of our conventional tanker earnings contribution is now evident. Combined with the expectation of continued stability from our other revenue streams, we have reason to believe that the long-anticipated return to sustained profitability is now at hand.”

Mr. Norton added, “Looking forward, the acquisition of Alaska Tanker Company and the three large crude oil tankers operated by that company will have a profoundly positive impact on our 2020 results. With the transaction having been completed yesterday, we now expect an incremental EBITDA contribution of $15mm over the balance of this year, and more than $20mm for the first full year of operations in 2021. These transactions allow us to build on our strong Jones Act franchise and present an exciting opportunity for OSG - one that we are looking forward to delivering on.”

A, B, CReconciliations of these non-GAAP financial measures are included in the financial tables attached to this press release starting on Page 8.

Fourth Quarter 2019 Results

Shipping revenues were $98.4 million for the quarter, up 10.3% compared with the fourth quarter of 2018. TCE revenues for the fourth quarter of 2019 were $93.8 million, an increase of $13.9 million, or 17.3%, compared with the fourth quarter of 2018, primarily due to an increase in average daily rates earned and decreased spot market exposure.

Operating income for the fourth quarter of 2019 was $18.7 million compared to operating income of $7.4 million in the fourth quarter of 2018.

Net income for the fourth quarter was $11.0 million, or $0.12 per diluted share, compared with net loss of $5.2 million, or $(0.05) per diluted share, for the fourth quarter 2018.

Adjusted EBITDA was $33.7 million for the quarter, an increase of $10.6 million compared with the fourth quarter of 2018, driven primarily by the increase in TCE revenues.

Full Year 2019 Results

Shipping revenues were $355.5 million for the full year 2019, down 2.9% compared with the full year 2018. TCE revenues for the full year 2019 were $335.1 million, an increase of $8.4 million, or 2.6%, compared with the full year 2017. The decrease in shipping revenues primarily resulted from three fewer vessels in operation during most of 2019 compared to 2018. The increase in TCE revenues primarily resulted from an increase in average daily rates earned and decreased spot market exposure.

Operating income for the full year 2019 was $33.4 million compared to operating income of $27.4 million for the full year 2018.

Net income for the full year 2019 was $8.7 million, or $0.10 per diluted share, compared with net income of $13.5 million, or $0.15 per diluted share, for the full year 2018. The decrease was due to the recognition of $21.7 million of previously deferred tax benefits upon completion of an Internal Revenue Service examination in the third quarter of 2018.

Adjusted EBITDA was $91.6 million for the full year 2019, an increase of $4.7 million compared with the full year 2018, driven primarily by the increase in TCE revenues.

Conference Call

The Company will host a conference call to discuss its fourth quarter and full year 2019 results at 9:00 a.m. Eastern Time (“ET”) on Friday, March 13, 2020.

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, March 13, 2020 through 10:59 p.m. ET on Friday, March 20, 2020 by dialing (877) 344-7529 for domestic callers and (412) 317-0088 for international callers, and entering Access Code 10139416.

About Overseas Shipholding Group, Inc.

Overseas Shipholding Group, Inc. (NYSE: OSG) is a publicly traded 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 22 vessel U.S. Flag fleet consists of the three crude oil tankers just acquired doing business in Alaska, two conventional ATBs, two lightering ATBs, three shuttle tankers, ten MR tankers, and two non-Jones Act MR tankers that participate in the U.S. Maritime Security Program. OSG also currently owns and operates two Marshall Islands flagged MR tankers which trade internationally. In addition to the currently operating fleet, OSG has on order two Jones Act compliant barges which are scheduled for delivery in 2020.

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 within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, the Company may make or approve certain forward-looking 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 businesses, 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 may be 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]

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

  Three Months Ended December 31,  Years Ended
December 31,
 
  2019  2018  2019  2018 
  (unaudited)  (unaudited)       
Shipping Revenues:                
Time and bareboat charter revenues $75,064  $53,523  $263,683  $213,923 
Voyage charter revenues  23,361   35,707   91,864   152,240 
Total shipping revenues  98,425   89,230   355,547   366,163 
Operating Expenses:                
Voyage expenses  4,652   9,321   20,414   39,456 
Vessel expenses  35,657   33,931   134,618   134,956 
Charter hire expenses  22,630   22,956   90,359   91,350 
Depreciation and amortization  13,662   12,885   52,499   50,512 
General and administrative  6,482   7,114   23,399   26,880 
Bad debt expense        4,300    
Loss/(gain) on disposal of vessels and other property, including impairments, net  19   (877)  106   (877)
Total operating expenses  83,102   85,330   325,695   342,277 
Income from vessel operations  15,323   3,900   29,852   23,886 
Equity in income of affiliated companies  3,328   3,548   3,552   3,538 
Operating income  18,651   7,448   33,404   27,424 
Other income/(expense), net  448   (1,029)  1,440   (759)
Income before interest expense and income taxes  19,099   6,419   34,844   26,665 
Interest expense  (6,509)  (7,488)  (25,633)  (30,890)
Income/(loss) before income taxes  12,590   (1,069)  9,211   (4,225)
Income tax (expense)/benefit  (1,611)  (4,107)  (536)  17,714 
Net income/(loss) $10,979  $(5,176) $8,675  $13,489 
                 
Weighted Average Number of Common Shares Outstanding:                
Basic - Class A  89,375,508   88,563,614   89,251,818   88,394,580 
Diluted - Class A  89,954,079   88,563,614   89,658,938   89,045,734 
                 
Per Share Amounts from Continuing Operations:                
Basic and diluted net income/(loss) – Class A $0.12  $(0.05) $0.10  $0.15 

Consolidated Balance Sheets
($ in thousands)

  December 31, 2019  December 31, 2018 
ASSETS        
Current Assets:        
Cash and cash equivalents $41,503  $80,417 
Restricted cash  60   59 
Voyage receivables, including unbilled of $5,611 and $10,160, net of reserve for doubtful accounts  9,247   16,096 
Income tax recoverable  1,192   439 
Other receivables  3,037   3,027 
Prepaid expenses  1,292   9,886 
Inventories and other current assets  1,178   2,456 
Total Current Assets  57,509   112,380 
Vessels and other property, less accumulated depreciation and amortization  737,212   597,659 
Deferred drydock expenditures, net  23,734   26,099 
Total Vessels, Deferred Drydock and Other Property  760,946   623,758 
Restricted cash  114   165 
Investments in and advances to affiliated companies  3,599   3,585 
Intangible assets, less accumulated amortization  31,817   36,417 
Operating lease right-of-use assets  286,469    
Other assets  35,013   51,425 
Total Assets $1,175,467  $827,730 
         
LIABILITIES AND EQUITY        
Current Liabilities:        
Accounts payable, accrued expenses and other current liabilities $35,876  $34,678 
Current installments of long-term debt  31,512   23,240 
Current portion of operating lease liabilities  90,145    
Current portion of finance lease liabilities  4,011    
Total Current Liabilities  161,544   57,918 
Reserve for uncertain tax positions  864   220 
Long-term debt  336,535   322,295 
Deferred income taxes, net  72,833   73,365 
Noncurrent operating lease liabilities  219,501    
Noncurrent finance lease liabilities  23,548    
Other liabilities  19,097   44,464 
Total Liabilities  833,922   498,262 
         
Commitments and contingencies        
         
Equity:        
Common stock - Class A ($0.01 par value; 166,666,666 shares authorized; 85,713,610 and 84,834,790 shares issued and outstanding)  857   848 
Paid-in additional capital  590,436   587,826 
Accumulated deficit  (243,339)  (252,014)
   347,954   336,660 
Accumulated other comprehensive loss  (6,409)  (7,192)
Total Equity  341,545   329,468 
Total Liabilities and Equity $1,175,467  $827,730 

Consolidated Statements of Cash Flows
($ in thousands)

  Years Ended December 31, 
  2019  2018 
Cash Flows from Operating Activities:        
Net income $8,675  $13,489 
Items included in net income not affecting cash flows:        
Depreciation and amortization  52,499   50,512 
Bad debt expense  4,300    
Amortization of debt discount and other deferred financing costs  1,965   4,069 
Compensation relating to restricted stock, stock unit and stock option grants  1,662   3,785 
Deferred income tax benefit  (991)  (18,794)
Interest on finance lease liabilities  1,462    
Non-cash operating lease expense  90,922    
Undistributed earnings of affiliated companies  (14)  200 
Other – net     1,961 
Items included in net income related to investing and financing activities:        
Loss on repurchases and extinguishment of debt  72   3,399 
Loss/(gain) on disposal of vessels and other property, net  106   (877)
Payments for drydocking  (12,278)  (12,902)
Changes in operating assets and liabilities:        
Operating lease liabilities  (83,608)   
Decrease in receivables  2,549   6,531 
Decrease in income tax recoverable  (601)  (4,797)
Increase in deferred revenue  4,848   1,514 
Net change in other operating assets and liabilities  1,881   (2,835)
Net cash provided by operating activities  73,449   45,255 
Cash Flows from Investing Activities:        
Expenditures for vessels and vessel improvements  (118,055)  (21,807)
Expenditures for other property  (4,459)  (386)
Proceeds from disposal of vessels and other property  3,404   2,367 
Deposit for vessel purchases  (10,800)   
Net cash used in investing activities  (129,910)  (19,826)
Cash Flows from Financing Activities:        
Extinguishment and repurchases of debt  (3,271)  (427,123)
Issuance of debt, net of issuance and deferred financing costs  47,824   344,801 
Payments on debt  (23,866)  (28,166)
Tax withholding on share-based awards  (294)  (569)
Payments on principal portion of finance lease liabilities  (2,896)   
Net cash provided by/(used in) financing activities  17,497   (111,057)
Net decrease in cash, cash equivalents and restricted cash  (38,964)  (85,628)
Cash, cash equivalents and restricted cash at beginning of year  80,641   166,269 
Cash, cash equivalents and restricted cash at end of year $41,677  $80,641 

Spot and Fixed TCE Rates Achieved and Revenue Days

The following tables provide a breakdown of TCE rates achieved for spot and fixed charters and the related revenue days for the three months and fiscal year ended December 31, 2019 and the comparable periods of 2018. Revenue days in the quarter ended December 31, 2019 totaled 1,887 compared with 1,927 in the prior year quarter. Revenue days in the fiscal year ended December 31, 2019 totaled 7,215 compared with 7,678 in the prior year. A summary fleet list by vessel class can be found later in this press release.

For the three months ended December 31, 2019  2018 
  Spot
Earnings
  Fixed
Earnings
  Spot
Earnings
  Fixed
Earnings
 
Jones Act Handysize Product Carriers:                
Average rate $45,640  $59,832  $32,420  $58,833 
Revenue days  92   1,102   248   826 
Non-Jones Act Handysize Product Carriers:                
Average rate $39,904  $16,114  $18,427  $11,220 
Revenue days  179   175   181   3 
ATBs:                
Average rate $20,666  $24,150  $10,984  $21,548 
Revenue days  66   89   226   259 
Lightering:                
Average rate $55,056  $  $64,347  $ 
Revenue days  184      184    


For the years ended December 31, 2019  2018 
   Spot
Earnings
   Fixed
Earnings
   Spot
Earnings
   Fixed
Earnings
 
Jones Act Handysize Product Carriers:                
Average rate $25,036  $57,910  $31,254  $60,252 
Revenue days  523   4,052   1,142   3,141 
Non-Jones Act Handysize Product Carriers:                
Average rate $30,671  $13,912  $25,925  $12,097 
Revenue days  482   417   707   3 
ATBs:                
Average rate $19,117  $21,861  $15,333  $22,207 
Revenue days  255   773   990   998 
Lightering:                
Average rate $63,162  $  $66,041  $ 
Revenue days  713      697    

Fleet Information

As of December 31, 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.

  Vessels Owned  Vessels Chartered-In  Total at December 31, 2019 
Vessel Type Number  Number  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 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 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. TCE 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 follows:

  Three Months Ended December 31,  Years Ended
December 31,
 
($ in thousands) 2019  2018  2019  2018 
TCE revenues $93,773  $79,909  $335,133  $326,707 
Add: Voyage Expenses  4,652   9,321   20,414   39,456 
Shipping revenues $98,425  $89,230  $355,547  $366,163 

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 include 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:

  Years Ended December 31, 
($ in thousands) 2019  2018 
Niche Market Activities $88,438  $92,163 
Jones Act Handysize Tankers  12,902   (4,238)
ATBs  8,816   12,476 
Vessel Operating Contribution  110,156   100,401 
Depreciation and amortization  52,499   50,512 
General and administrative  23,399   26,880 
Bad debt expense  4,300    
Loss/(gain) on disposal of vessels and other property, including impairments, net  106   (877)
Income from vessel operations $29,852  $23,886 

(B) EBITDA and Adjusted EBITDA

EBITDA represents net income/(loss) 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, loss/(gain) on disposal of vessels and other property, including impairments, net, non-cash stock based compensation expense and loss on repurchases and extinguishment of debt 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 income/(loss) 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) as reflected in the consolidated statements of operations, to EBITDA and Adjusted EBITDA.

  Three Months Ended December 31,  Years Ended
December 31,
 
($ in thousands) 2019  2018  2019  2018 
Net income/(loss) $10,979  $(5,176) $8,675  $13,489 
Income tax expense/(benefit)  1,611   4,107   536   (17,714)
Interest expense  6,509   7,488   25,633   30,890 
Depreciation and amortization  13,662   12,885   52,499   50,512 
EBITDA  32,761   19,304   87,343   77,177 
Amortization classified in charter hire expenses  96   387   873   1,781 
Interest expense classified in charter hire expenses  390   420   1,592   1,711 
Loss/(gain) on disposal of vessels and other property, including impairments, net  19   (877)  106   (877)
Non-cash stock based compensation expense  450   1,473   1,662   3,785 
Loss on repurchases and extinguishment of debt     2,417   72   3,399 
Adjusted EBITDA $33,716  $23,124  $91,648  $86,976 

(C) Total Cash

($ in thousands) December 31,
2019
  December 31,
2018
 
Cash and cash equivalents $41,503  $80,417 
Restricted cash - current  60   59 
Restricted cash – non-current  114   165 
Total Cash $41,677  $80,641 

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Source: Overseas Shipholding Group, Inc.