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 second quarter 2017.
Highlights
- Income from continuing operations for
the second quarter was $3.2 million, or $0.04 per diluted share,
compared to a net loss from continuing operations of $4.2 million,
or ($0.04) per diluted share, for the second quarter 2016.
- Shipping revenues were $96.2 million
for the current quarter, a decrease of 18.7% from $118.4 million in
the prior year quarter. Time charter equivalent (TCE)
revenues(A) for the second quarter 2017 were $91.1 million,
down 20.6% compared to the same period in 2016.
- Net income was $3.2 million for the
quarter ended June 30, 2017, compared to $29.9 million for the
quarter ended June 30, 2016. Net income for the prior year period
included income from discontinued operations from International
Seaways (INSW) of $34.0 million.
- Second quarter 2017 adjusted
EBITDA(B) was $29.6 million, down 35.6% from $46.0 million in
the same period in 2016.
- Cash and cash equivalents were $204.6
million at June 30, 2017. Total cash(C) was $210.5 million at
the end of the current quarter.
- During the second quarter 2017, we
repurchased and retired $4.6 million in principal of the 8.125%
notes due in 2018.
“Increasing exposure to weakening spot markets
during the just completed quarter weighed on top-line performance”,
Sam Norton, OSG’s President and CEO stated. “However, cost
discipline helped to mitigate the effects of these developments,
and, together with earnings from our shuttle tanker and lightering
operations, served to produce healthy cash flows. Progress
continues strengthening our balance sheet and, with over $275
million of available liquidity, OSG remains favorably positioned to
respond to opportunities in our markets. “
Second Quarter 2017
Results
Shipping revenues were $96.2 million for the
quarter, down 18.7% compared with the second quarter of 2016. The
decrease in shipping revenues was also driven by lower charter
rates. TCE revenues for the second quarter of 2017 were $91.1
million, a decrease of $23.7 million, or 20.6%, compared with the
second quarter of 2016, primarily due to lower average daily rates
earned. Shipping revenue for the first half of 2017 were $204.3
million, a decrease of $29.1 million compared to the first half of
2016. TCE revenues for the first half of 2017 were $193.4 million,
a decrease of $33.6 million compared to the first half of 2016.
Operating income for the second quarter of 2017
was $14.2 million, compared to operating income of $23.0 million in
the second quarter of 2016. The decrease reflected reduced
operating expense, including depreciation and amortization expense,
and lower general and administrative expenses, which partially
offset the decline in shipping revenues. Operating income for the
first half of 2017 was $33.5 million, a decrease of $6.9 million
compared to the first half of 2016.
Income from continuing operations for the
current period second quarter was $3.2 million, or $0.04 per
diluted share, compared with a loss from continuing operations of
$4.2 million, or ($0.04) per diluted share, for the second quarter
2016. The increase reflects a lower tax provision in the second
quarter of 2017 compared to 2016. In the prior year period, a
deferred tax liability on the unremitted earnings of INSW was
recorded, resulting in an income tax provision of $15.1 million,
compared to tax expense of $1.6 million in the 2017 period. In
addition, interest expense decreased by $1.4 million in the current
period as the result of significant debt reductions in the current
and prior year periods.
Income from continuing operations for the first
half of 2017 was $8.6 million compared with a loss from continuing
operations of $12.9 million for the first half of 2016. The
increase reflects a lower tax provision in the first half of 2017
compared to 2016. In the prior period, a deferred tax liability on
the unremitted earnings of INSW was recorded, resulting in an
income tax provision of $48.3 million, compared to tax expense of
$5.2 million in the 2017 period.
Adjusted EBITDA(B), a non-GAAP measure, was
$29.6 million for the quarter, a decrease of $16.4 million or 35.6%
compared with the second quarter of 2016, driven primarily by the
decline in TCE revenues, partially offset by lower general and
administrative expenses. Adjusted EBITDA for the first half of 2017
was $65.7 million, a decrease of $21.0 million or 24.2% compared
with the first half of 2016.
Discontinued
Operations
As previously disclosed, OSG completed the
separation of its business into two independent publicly traded
companies through the spin-off of its then wholly owned subsidiary
INSW on November 30, 2016. The spin-off separated OSG and INSW into
two distinct businesses with separate management. OSG retained the
U.S. Flag business and INSW holds entities and other assets and
liabilities that formed OSG’s former International Flag business.
The spin-off transaction was in the form of a pro rata distribution
of INSW’s common stock to our stockholders and warrant holders of
record as of the close of business on November 18, 2016.
In accordance with Accounting Standards Update
(“ASU”) 2014-08, Reporting Discontinued Operations and
Disclosures of Disposals of Components of an Entity, the assets and
liabilities and results of operations of INSW are reported as
discontinued operations for the three and six months ended June 30,
2016.
Net income from discontinued operations for the
three and six months ended June 30, 2016 was $34.0 million and
$93.5 million, respectively.
Conference Call
The Company will host a conference call to
discuss its second quarter 2017 results at 9:00 a.m. Eastern Time
(“ET”) on Wednesday, August 9, 2017.
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 Wednesday, August 9, 2017 by
dialing (877) 344-7529 for domestic callers and (412) 317-0088 for
international callers, and entering Access Code 10106141.
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 24-vessel U.S. Flag fleet consists of eight
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 as defined under the federal securities laws. Words such
as “may”, “should”, ”believes”, “estimates”, “targets”,
“anticipates” and similar expressions generally identify
forward-looking statements; however, 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 and the effect of the Company’s spin-off of
International Seaways, Inc. 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. The following
factors, among others, could cause the Company’s actual results to
differ: the reduced diversification and heightened exposure to the
Jones Act market of OSG’s business following the spin-off from OSG
on November 30, 2016 of International Seaways, Inc. (INSW), which
owned or leased OSG’s fleet of International Flag vessels, which
may make OSG more susceptible to market fluctuations than before
such spin-off; the highly cyclical nature of OSG’s industry;
fluctuations in the market value of vessels; declines in charter
rates, including spot charter rates or other market deterioration;
an increase in the supply of vessels without a commensurate
increase in demand; the impact of adverse weather and natural
disasters; the adequacy of OSG’s insurance to cover its losses,
including in connection with maritime accidents or spill events;
constraints on capital availability; the Company’s ability to
generate sufficient cash to service its indebtedness and to comply
with debt covenants; the Company’s ability to renew its time
charters when they expire or to enter into new time charters;
competition within the Company’s industry and OSG’s ability to
compete effectively for charters; the loss of a large customer; and
changes in demand in specialized markets in which the Company
currently trades. Investors should also 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.
A, B Reconciliations of these non-GAAP
financial measures are included in the financial tables attached to
this press release starting on Page 8.C Reconciliation to total
cash is included in the financial tables attached to this press
release starting on Page 8.
Consolidated Statements of
Operations
($ in thousands, except per share
amounts)
Three Months Ended Six
Months Ended June 30, June 30, 2017
2016 2017 2016 Shipping
Revenues: Time and bareboat charter revenues $ 72,116 $
97,413 $ 151,883 $ 196,103 Voyage charter revenues 24,109
20,971 52,458 37,361 96,225
118,384 204,341 233,464
Operating Expenses: Voyage expenses 5,149 3,643 10,941 6,510
Vessel expenses 32,564 34,610 68,173 70,514 Charter hire expenses
22,856 22,884 45,433 45,726 Depreciation and amortization 15,086
22,672 31,711 45,796 General and administrative 6,350
11,540 14,604 24,496 Total Operating Expenses
82,005 95,349 170,862 193,042
Operating income 14,220 23,035 33,479 40,422 Other (expense)/income
38 (422 ) (630 ) 736 Income before interest
expense, reorganization items and income taxes 14,258 22,613 32,849
41,158 Interest expense (9,445 ) (10,862 ) (18,802 ) (22,779
) Income before reorganization items and income taxes 4,813 11,751
14,047 18,379 Reorganization items, net (9 ) (861 ) (244 )
17,050 Income from continuing operations before income taxes
4,804 10,890 13,803 35,429 Income tax provision from continuing
operations (1,593 ) (15,075 ) (5,162 ) (48,310 )
Income/(loss) from continuing operations 3,211 (4,185 ) 8,641
(12,881 ) Income from discontinued operations -
34,045 - 93,481
Net income $ 3,211
$ 29,860 $ 8,641 $ 80,600
Weighted Average Number of Common Shares Outstanding: Basic
- Class A 87,769,483 92,255,692 88,309,231 93,496,651 Diluted -
Class A 87,964,755 92,321,359 88,542,779 93,531,462 Basic and
Diluted - Class B - 826,794 - 1,073,382
Per Share
Amounts: Basic and diluted net income/(loss) - Class A from
continuing operations $ 0.04 $ (0.04 ) $ 0.10 $ (0.13 ) Basic and
diluted net income - Class A from discontinued operations $ - $
0.35 $ - $ 0.97 Basic net income - Class A $ 0.04 $ 0.31 $ 0.10 $
0.84 Diluted net income - Class A $ 0.04 0.32 $ 0.10 $ 0.85
Basic and diluted net income/(loss) - Class B from continuing
operations $ - $ (0.27 ) $ - $ (0.35 ) Basic and diluted net income
- Class B from discontinued operations $ - $ 2.19 $ - $ 2.56 Basic
and diluted net income - Class B $ - $ 1.92 $ - $ 2.21 Cash
dividends declared - Class A $ - $ - $ - $ 0.48 Cash dividends
declared - Class B $ - $ 1.08 $ - $ 1.56
Consolidated Balance Sheets
($ in thousands)
June 30, December
31, 2017 2016 (unaudited)
ASSETS
Current Assets: Cash and cash equivalents $ 204,575 $
191,089 Restricted cash 5,935 7,272 Voyage receivables, including
unbilled of $5,887 and $12,593 20,819 23,456 Income tax receivable
381 877 Receivable from INSW 506 683 Other receivables 17,745 2,696
Inventories, prepaid expenses and other current assets
11,542 12,243 Total Current Assets 261,503
238,316 Restricted cash – non-current - 8,572 Vessels and other
property, less accumulated depreciation of $233,241 and $213,173
664,411 684,468 Deferred drydock expenditures, net 25,697
31,172 Total Vessels, Deferred Drydock and
Other Property 690,108 715,640
Investments in and advances to affiliated companies 38 3,694
Intangible assets, less accumulated amortization of $48,683 and
$46,383 43,317 45,617 Other assets 22,481
18,658 Total Assets $ 1,017,447 $ 1,030,497
LIABILITIES AND EQUITY Current Liabilities:
Accounts payable, accrued expenses and other current liabilities $
44,029 $ 57,222 Income taxes payable 1,990 306 Current installments
of long-term debt 86,579 - Total
Current Liabilities 132,598 57,528 Reserve for uncertain tax
positions 3,175 3,129 Long-term debt 422,147 525,082 Deferred
income taxes, net 143,777 141,457 Other liabilities 51,455
48,969 Total Liabilities 753,152 776,165
Equity: Common stock 753 702 Paid-in additional
capital 584,112 583,526 Accumulated deficit (313,095 )
(321,736 ) 271,770 262,492 Accumulated other comprehensive
loss (7,475 ) (8,160 ) Total Equity 264,295
254,332 Total Liabilities and Equity $
1,017,447 $ 1,030,497
Consolidated Statements of Cash
Flows
($ in thousands)
Six Months Ended June 30,
2017 2016 Cash Flows from Operating
Activities: Net income $ 8,641 $ 80,600 Less: Net income from
discontinued operations - 93,481 Net income/(loss)
from continuing operations 8,641 (12,881 ) Items included in net
(loss)/income from continuing operations not affecting cash flows:
Depreciation and amortization 31,711 45,796 Amortization of debt
discount and other deferred financing costs 2,653 3,190
Compensation relating to restricted stock/stock unit and stock
option grants 1,699 1,804 Deferred income tax benefit 2,121 45,666
Reorganization items, non-cash 85 327 Discount on repurchase of
debt (925 ) (3,415 ) Other – net 1,481 1,176 Distributions from
INSW - 102,000 Distributed earnings of affiliated companies 3,656
3,789 Payments for drydocking (3,305 ) (4,588 ) SEC, Bankruptcy and
IRS claim payments (5,000 ) (7,136 ) Changes in operating assets
and liabilities (19,084 ) 7,349 Net cash provided by
operating activities 23,733 183,077 Cash Flows from
Investing Activities: Change in restricted cash 9,909 4,994
Expenditures for vessels and vessel improvements - (58 )
Expenditures for other property (11 ) (265 ) Net cash provided by
investing activities 9,898 4,671 Cash Flows from
Financing Activities: Cash dividends paid - (31,910 ) Payments on
debt - (43,879 ) Extinguishment of debt (19,083 ) (52,667 )
Repurchases of common stock and common stock warrants - (76,388 )
Tax withholding on share-based awards (1,062 ) - Net cash
used in financing activities (20,145 ) (204,844 ) Net
increase/(decrease) in cash and cash equivalents from continuing
operations 13,486 (17,096 ) Cash and cash equivalents at beginning
of period 191,089 193,978 Cash and cash equivalents
at end of period $ 204,575 $ 176,882
Cash flows from discontinued
operations:
Cash flows provided by operating activities $ - $ 122,764 Cash
flows used in investing activities - 26,464 Cash flows used in
financing activities - (179,141 ) Net decrease in cash and
cash equivalents from discontinued operations $ - $ (29,913
)
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 and six months ended June 30, 2017 and 2016.
Revenue days in the quarter ended June 30, 2017 totaled 2,127
compared with 2,169 in the same quarter in the prior year. A
summary fleet list by vessel class can be found later in this press
release.
Three Months
Ended June 30,
2017 2016 Spot
Fixed Spot Fixed
Earnings Earnings Earnings Earnings
Jones Act Handysize ProductCarriers:
Average rate $ 18,288 $ 63,796 $ 26,483 $ 64,830 Revenue days 173
900 24 1,057
Non-Jones Act Handysize
ProductCarriers:
Average rate $ 28,169 $ 12,836 $ 30,492 $ 17,556 Revenue days 91 91
125 57 ATBs: Average rate $ 7,234 $ 26,047 $ - $ 37,054 Revenue
days 202 488 - 724 Lightering: Average rate $ 69,183 $ - $ 76,555 $
- Revenue days 182 - 182 -
TOTAL REVENUE DAYS
648 1,479
331 1,838
Six Months Ended
June 30,
2017 2016 Spot Fixed Spot
Fixed Earnings Earnings Earnings
Earnings Jones Act Handysize Product Carriers: Average rate
$ 26,361 $ 63,421 $ 26,483 $ 64,662 Revenue days 245 1,889 24 2,136
Non-Jones Act Handysize Product Carriers: Average rate $ 30,353 $
13,997 $ 30,924 $ 18,452 Revenue days 203 159 216 148 ATBs: Average
rate $ 11,856 $ 27,802 $ - $ 37,454 Revenue days 382 1,012 - 1,420
Lightering: Average rate $ 72,137 $ - $ 69,795 $ - Revenue days 362
- 364 -
TOTAL REVENUE DAYS 1,192
3,060 604
3,704
Fleet Information
As of June 30, 2017, OSG’s owned and operated
fleet totaled 24 vessels (14 vessels owned and 10 chartered-in)
which remains unchanged since December 31, 2016. 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 June 30, 2017 Vessel Type Number
WeightedbyOwnership
Number
WeightedbyOwnership
Total Vessels
VesselsWeighted byOwnership
Total dwt (2)) Handysize Product Carriers (1) 4
4.0 10 10.0 14 14.0 664,490 Refined Product
ATBs 8 8.0 - - 8 8.0 226,064 Lightering ATBs 2 2.0 -
- 2 2.0 91,112 Total Operating Fleet 14
14.0 10 10.0 24 24.0
981,666
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
the total deadweight for all vessels of that type.
Reconciliation to Total Cash
(C) Total Cash
($ in thousands)
June 30,2017
December 31,2016 Cash and cash equivalents
$204,575
$ 191,089 Restricted cash 5,935 15,844
Total Cash $210,510 $206,933
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 in accordance 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
long-term time charter. TCE, 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 Six
Months Ended June 30, June 30, 2017
2016 2017 2016 Time charter equivalent
revenues $ 91,076 $ 114,741 $ 193,400 $ 226,954 Add: Voyage
expenses 5,149 3,643 10,941 6,510 Shipping revenues $ 96,225 $
118,384 $ 204,341 $ 233,464
(B) EBITDA and Adjusted
EBITDA
EBITDA represents net 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 are presented to
provide investors with meaningful additional information that
management uses to monitor ongoing operating results and evaluate
trends over comparative periods. EBITDA and Adjusted EBITDA do not
represent, and should not be a substitute for, net 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 June 30,
Six Months Ended June 30, ($ in thousands)
2017 2016 2017
2016 Net income (loss) from continuing operations $
3,211 $ (4,185) $ 8,641 $ (12,881) Income tax
provision 1,593 15,075 5,162 48,310 Interest expense 9,445 10,862
18,802 22,779 Depreciation and amortization 15,086
22,672 31,711 45,796 EBITDA 29,335
44,424 64,316 104,004 Loss on disposal of vessels, including
impairments - 113 - 113 Loss (gain) on repurchase of debt 252 580
1,189 (434) Other costs associated with repurchase of debt - - - 77
Reorganization items, net 9 861 244
(17,050) Adjusted EBITDA $ 29,596 $ 45,978 $
65,749 $ 86,710
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version on businesswire.com: http://www.businesswire.com/news/home/20170809005356/en/
Investor Relations & Media:Overseas
Shipholding Group, Inc.Susan Allan, 813-209-0620sallan@osg.com
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