Overseas Shipholding Group, Inc. (NYSE: OSG) (the “Company”,
“we”, “us”, “our” 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 third quarter 2017.
Highlights
- Loss from continuing operations for the
third quarter was $6.3 million, or ($0.07) per diluted share,
compared to a loss from continuing operations of $52.9 million, or
($0.59) per diluted share, for the third quarter 2016. During the
third quarter 2017, we recognized a $7.4 million impairment charge
on one of our ATBs which is currently held for sale.
- Net loss was $6.3 million for the
quarter ended September 30, 2017, compared to a net loss of $98.7
million for the quarter ended September 30, 2016. Net loss for the
prior year period included a loss from discontinued operations from
International Seaways (INSW) of $45.9 million.
- Shipping revenues were $93.3 million
for the current quarter, a decrease of 18.3% from $114.2 million in
the prior year quarter. Time charter equivalent (TCE) revenues(A)
for the third quarter 2017 were $84.9 million, down 22.6% compared
to the same period in 2016.
- Third quarter 2017 adjusted EBITDA(B),
a non-GAAP measure, was $22.6 million, down 43.0% from $39.6
million in the same period in 2016.
- Cash and cash equivalents were $199.7
million at September 30, 2017. Total cash(C), a non-GAAP measure,
was $203.6 million at the end of the current quarter.
- During the third quarter 2017, we
repurchased and retired $18.5 million in principal of the 8.125%
notes due in 2018.
“The solid performance of our niche market activities was once
again the key take away from our third quarter results,” Sam
Norton, OSG’s President and CEO stated. “Earnings from spot market
voyages disappointed, but a strong balance sheet, continued focus
on cost control and a belief that upside potential now outweighs
downside risk in accepting short term market challenges leads us to
be optimistic about the future.”
Third Quarter 2017
Results
Shipping revenues were $93.3 million for the quarter, down 18.3%
compared with the third quarter of 2016. The decrease in shipping
revenues primarily resulted from weakening market conditions and
reduced charter rates. TCE revenues for the third quarter of 2017
were $84.9 million, a decrease of $24.8 million, or 22.6%, compared
with the third quarter of 2016, primarily due to lower average
daily rates earned as a result of a continuing excess supply of
vessels in the market and the shift from time charter contracts to
spot market charters. The hurricanes that occurred during the third
quarter disrupted the petroleum markets in the Gulf of Mexico. As a
result, shipments were reduced for a period of time due to port and
refinery closures. The impact was partially mitigated by recoveries
from customers and an increase in demand after the storms. Shipping
revenue for the first nine months of 2017 were $297.6 million, a
decrease of $50.0 million compared to the first nine months of
2016. TCE revenues for the first nine months of 2017 were $278.3
million, a decrease of $58.3 million compared to the first nine
months of 2016.
Operating income for the third quarter of 2017 was $0.4 million,
compared to an operating loss of $83.4 million in the third quarter
of 2016. The increase reflected reduced operating expenses,
including depreciation and amortization expense and lower general
and administrative expenses, which partially offset the decline in
shipping revenues. During the third quarter 2017, we recognized an
impairment charge of $7.4 million on one of our ATBs due to a
change in its expected deployment. In the third quarter of 2016, we
recognized an impairment charge of $97.8 million. Operating income
for the first nine months of 2017 was $33.9 million, an increase of
$76.9 million compared to the first nine months of 2016.
Loss from continuing operations for the third quarter 2017 was
$6.3 million, or ($0.07) per diluted share, compared with a loss
from continuing operations of $52.9 million, or ($0.59) per diluted
share, for the third quarter of 2016. This change reflects a lower
tax benefit in the third 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 $49.8 million, compared to an income tax provision of $3.1
million in the 2017 period. In addition, interest expense decreased
by $1.1 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 nine months of
2017 was $2.3 million compared with a loss from continuing
operations of $65.7 million for the first nine months of 2016. The
increase reflects a lower tax provision in the first nine months 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 $1.4 million, compared to
tax expense of $2.1 million in the 2017 period.
Adjusted EBITDA(B), a non-GAAP measure, was $22.6 million for
the quarter, a decrease of $17.1 million or 43.0% compared with the
third quarter of 2016, driven primarily by the decline in TCE
revenues, partially offset by lower general and administrative
expenses. Adjusted EBITDA for the first nine months of 2017 was
$88.3 million, a decrease of $38.0 million or 30.1% compared with
the first nine months of 2016.
A, B, C Reconciliations of these non-GAAP
financial measures are included in the financial tables at the end
of this press releasestarting on Page 8.
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 nine months ended September 30, 2016.
Net (loss)/income from discontinued operations for the three and
nine months ended September 30, 2016 was $(45.9) million and $47.6
million, respectively.
Conference Call
The Company will host a conference call to discuss its third
quarter 2017 results at 9:00 a.m. Eastern Time (“ET”) on Thursday,
November 9, 2017.
To access the call, participants should dial (844) 850-0546 for
domestic callers, (412) 317-5203 for international callers and
(855) 669-9657 for Canada 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 Thursday, November 9, 2017 by dialing
(877) 344-7529 for domestic callers, (412) 317-0088 for
international callers and (855) 669-9658 for Canada callers, and
entering Access Code 10114153.
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.
Consolidated Statements of
Operations
($ in thousands, except per share
amounts)
Three Months Ended September
30,
Nine Months Ended September
30,
2017 2016 2017
2016 Shipping Revenues: Time and bareboat charter
revenues $ 56,911 $ 90,507 $ 208,794 $ 286,610 Voyage charter
revenues 36,359 23,673 88,817 61,034
93,270 114,180 297,611 347,644
Operating Expenses: Voyage expenses 8,388 4,531 19,329
11,041 Vessel expenses 33,159 36,839 101,332 107,353 Charter hire
expenses 23,053 23,083 68,486 68,809 Depreciation and amortization
14,390 22,905 46,100 68,701 General and administrative 6,493 10,241
21,081 34,610 Severance costs — 2,238 16 2,238
Loss on disposal of vessels and other
property, includingimpairments
7,353 97,782 7,353 97,909 Total
operating expenses 92,836 197,619 263,697
390,661 Operating income/(loss) 434 (83,439 ) 33,914 (43,017
) Other expense (423 ) (2,832 ) (1,053 ) (2,096 ) Income/(loss)
before interest expense, reorganization items and income taxes 11
(86,271 ) 32,861 (45,113 ) Interest expense (9,474 ) (10,607 )
(28,277 ) (33,386 )
(Loss)/income before reorganization items
andincome taxes
(9,463 ) (96,878 ) 4,584 (78,499 ) Reorganization items, net 46
(5,732 ) (198 ) 11,318 (Loss)/income from continuing
operations before income taxes (9,417 ) (102,610 ) 4,386 (67,181 )
Income tax benefit/(provision) from continuing operations 3,110
49,755 (2,052 ) 1,445 (Loss)/income from
continuing operations (6,307 ) (52,855 ) 2,334 (65,736 )
(Loss)/income from discontinued operations — (45,884 ) — 47,597
Net (loss)/income $ (6,307 ) $ (98,739 ) $ 2,334 $
(18,139 )
Weighted Average Number of Common Shares
Outstanding: Basic - Class A 87,822,274 89,363,106 87,832,949
92,108,745 Diluted - Class A 87,822,274 89,363,106 88,031,375
92,108,745 Basic and Diluted - Class B — — — 712,976
Per
Share Amounts:
Basic and diluted net income/(loss) -
Class A from continuingoperations
$ (0.07 ) $ (0.59 ) $ 0.03 $ (0.79 )
Basic and diluted net income - Class A
from discontinuedoperations
$ — $ (0.51 ) $ — $ 0.57 Basic and diluted net income - Class A $
(0.07 ) $ (1.10 ) $ 0.03 $ (0.22 )
Basic and diluted net income/(loss) -
Class B from continuingoperations
$ — $ — $ — $ 9.93
Basic and diluted net income - Class B
from discontinuedoperations
$ — $ — $ — $ (6.60 ) Basic and diluted net income - Class B $ — $
— $ — $ 3.32 Cash dividends declared - Class A $ — $ — $ — $
0.48 Cash dividends declared - Class B $ — $ — $ — $ 1.56
Consolidated Balance Sheets ($ in thousands)
September 30, 2017
December 31, 2016
(unaudited) ASSETS Current Assets: Cash and
cash equivalents $ 199,729 $ 191,089 Restricted cash 3,856 7,272
Voyage receivables, including unbilled of $9,900 and $12,593 20,773
23,456 Income tax receivable 563 877 Receivable from INSW 506 683
Other receivables 2,030 2,696 Inventories, prepaid expenses and
other current assets 12,056 12,243 Total Current
Assets 239,513 238,316 Restricted cash - non current — 8,572
Vessels and other property, less
accumulated depreciation of $215,431 and$213,173
647,660 684,468 Deferred drydock expenditures, net 23,759
31,172 Total Vessels, Deferred Drydock and Other Property
671,419 715,640 Investments in and advances to
affiliated companies 38 3,694 Intangible assets, less accumulated
amortization of $49,833 and $46,383 42,167 45,617 Other assets
22,711 18,658 Total Assets $ 975,848 $
1,030,497
LIABILITIES AND EQUITY Current
Liabilities: Accounts payable, accrued expenses and other
current liabilities $ 29,286 $ 57,528 Current installments of
long-term debt 71,554 — Total Current Liabilities
100,840 57,528 Reserve for uncertain tax positions 3,198 3,129
Long-term debt 420,098 525,082 Deferred income taxes, net 142,827
141,457 Other liabilities 49,615 48,969 Total
Liabilities 716,578 776,165
Equity: Common stock 753
702 Paid-in additional capital 584,940 583,526 Accumulated deficit
(319,402 ) (321,736 ) 266,291 262,492 Accumulated other
comprehensive loss (7,021 ) (8,160 ) Total Equity 259,270
254,332 Total Liabilities and Equity $ 975,848 $
1,030,497
Consolidated Statements of Cash
Flows
($ in thousands)
Nine Months Ended September
30,
2017 2016 Cash Flows from Operating
Activities: Net income/(loss) $ 2,334 $ (18,139 ) Income from
discontinued operations — 47,597 Income/(loss) from
continuing operations 2,334 (65,736 ) Items included in net
income/(loss) from continuing operations not affecting cash flows:
Depreciation and amortization 46,100 68,701 Loss on write-down of
vessels 7,353 — Amortization of debt discount and other deferred
financing costs 3,971 4,637 Compensation relating to restricted
stock/stock unit and stock option grants 2,526 3,768 Deferred
income tax provision/(benefit) 1,423 (5,624 ) Reorganization items,
non-cash (25 ) 5,392 Other – net 2,361 1,732 Loss on repurchase of
debt, net 1,999 2,531 Distributions from INSW — 202,000 Distributed
earnings of affiliated companies 3,656 3,789 Payments for
drydocking (4,833 ) (5,307 ) SEC, Bankruptcy and IRS claim payments
(5,000 ) (7,136 ) Changes in operating assets and liabilities
(25,025 ) 8,177 Net cash provided by operating activities
36,840 216,924 Cash Flows from Investing Activities:
Change in restricted cash 11,988 5,011 Expenditures for other
property (11 ) (583 ) Net cash provided by investing activities
11,977 4,428 Cash Flows from Financing Activities:
Cash dividends paid — (31,910 ) Payments on debt — (52,667 )
Extinguishment of debt (39,115 ) (102,902 ) Repurchases of common
stock and common stock warrants — (119,343 ) Tax withholding on
share-based awards (1,062 ) — Net cash used in financing
activities (40,177 ) (306,822 ) Net increase/(decrease) in cash and
cash equivalents from continuing operations 8,640 (85,470 ) Cash
and cash equivalents at beginning of period 191,089 193,978
Cash and cash equivalents at end of period $ 199,729
$ 108,508 Cash flows from discontinued operations:
Cash flows provided by operating activities $ — $ 131,148 Cash
flows provided by investing activities — 25,839 Cash flows used in
financing activities — (355,686 ) Net decrease in cash and
cash equivalents from discontinued operations $ — $ (198,699
)
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 nine months ended September 30, 2017 and 2016. Revenue
days in the quarter ended September 30, 2017 totaled 2,097 compared
with 2,181 in the same quarter in the prior year. A summary fleet
list by vessel class can be found later in this press release.
2017 2016 Spot
Fixed Spot Fixed
Three Months Ended September 30, Earnings
Earnings Earnings Earnings Jones Act Handysize
Product Carriers: Average rate $ 24,466 $ 64,553 $ 28,416 $ 65,175
Revenue days 367 732 92 995 Non-Jones Act Handysize Product
Carriers: Average rate $ 35,054 $ — $ 37,214 $ — Revenue days 179 —
181 — ATBs: Average rate $ 8,360 $ 25,331 $ — $ 33,876 Revenue days
280 355 — 729 Lightering: Average rate $ 59,857 $ — $ 58,387 $ —
Revenue days 184 — 184 —
Total Revenue
Days 1,010 1,087 457
1,724 2017
2016 Spot Fixed Spot
Fixed Nine Months Ended September 30,
Earnings Earnings Earnings Earnings
Jones Act Handysize Product Carriers: Average rate $ 25,224 $
63,737 $ 27,952 $ 64,825 Revenue days 612 2,621 116 3,131 Non-Jones
Act Handysize Product Carriers: Average rate $ 32,543 14,031 $
33,798 $ 18,452 Revenue days 382 159 397 148 ATBs: Average rate $
10,378 $ 27,159 $ — $ 36,240 Revenue days 662 1,367 — 2,149
Lightering: Average rate $ 67,998 $ — $ 65,965 $ — Revenue days 546
— 548 —
Total Revenue Days 2,202
4,147 1,061 5,428
Fleet Information
As of September 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
September 30, 2017 Vessel Type Number
Weighted by
Ownership
Number
Weighted by
Ownership
Total Vessels
Vessels Weighted by
Ownership
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 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 September
30,
Nine Months Ended September
30,
($ in thousands)
2017 2016 2017
2016 Time charter equivalent revenues $ 84,882
$ 109,649 $ 278,282 $ 336,603 Add: Voyage expenses 8,388
4,531 19,329 11,041 Shipping revenues $ 93,270
$ 114,180 $ 297,611 $ 347,644
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 September
30,
Nine Months Ended September
30,
($ in thousands)
2017 2016 2017
2016 Niche Market Activities $ 26,724 $ 25,372
$ 79,500 $ 76,678 Jones Act Handysize Tankers (2,962 ) 7,419 7,162
29,603 ATBs 4,927 16,840 21,860 54,032 Vessel
Operating Contribution $ 28,689 $ 49,631 $ 108,522
$ 160,313
(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 September
30,
Nine Months Ended September
30,
($ in thousands)
2017 2016 2017
2016 Net (loss)/income from continuing
operations $ (6,307 ) $ (52,855 ) $ 2,334 $ (65,736 ) Income tax
provision/(benefit) (3,110 ) (49,755 ) 2,052 (1,445 ) Interest
expense 9,474 10,607 28,277 33,386 Depreciation and amortization
14,390 22,905 46,100 68,701 EBITDA
14,447 (69,098 ) 78,763 34,906 Severance costs — 2,238 16 2,238
Loss on disposal of vessels, including impairments 7,353 97,782
7,353 97,909 Loss on repurchase of debt 810 2,966 1,999 2,608
Reorganization items, net (46 ) 5,732 198 (11,318 )
Adjusted EBITDA $ 22,564 $ 39,620 $ 88,329 $
126,343
(C) Total Cash
($ in thousands)
September 30, 2017
December 31, 2016 Cash and cash equivalents $ 199,729
$ 191,089 Restricted cash 3,856 15,844 Total Cash $ 203,585
$ 206,933
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version on businesswire.com: http://www.businesswire.com/news/home/20171109005387/en/
Investor Relations & Media:Overseas Shipholding
Group, Inc.Susan Allan, 813-209-0620sallan@osg.com
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