Press Release

Overseas Shipholding Group Reports Second Quarter 2019 Results

Company Release - 8/9/2019 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 second quarter 2019.

Highlights

  • Net loss for the second quarter 2019 was $1.7 million, or ($0.02) per diluted share, compared with net income of $3.1 million, or $0.03 per diluted share, for the second quarter 2018. Net income for the second quarter 2019 before accounting reserves for Philadelphia Energy Solutions was $1.6 million, or $0.02 per diluted share.
  • Shipping revenues for the second quarter 2019 were $88.5 million, down 7.2% compared with the same period in 2018. Time charter equivalent (TCE) revenues(A), a non-GAAP measure, for the second quarter 2019 were $82.1 million, down 4.5% compared with the second quarter 2018. Second quarter 2019 TCE revenues remained consistent with first quarter 2019 TCE revenues.
  • Second quarter 2019 Adjusted EBITDA(B), a non-GAAP measure, was $18.2 million, down 26.8% from $24.9 million in the second quarter 2018. Adjusted EBITDA was reduced by $4.3 million due to reserves for possible losses associated with Philadelphia Energy Solutions' bankruptcy.
  • Total cash(C) was $53.6 million as of June 30, 2019.

Mr. Sam Norton, President and CEO, stated, “We have made significant progress towards securing more stable and visible cash flows in our conventional tanker and ATB trades. Supported by strong fundamentals and high utilization, our conventional tanker and ATB fleets both made solid contributions to our second quarter performance. This performance, together with a continually improving supply-demand balance, underpin our optimism about the emerging earnings recovery for these assets.”

Mr. Norton added, “In response to the Chapter 11 filing of Philadelphia Energy Solutions, OSG’s largest lightering customer, we have re-deployed one of our two lightering vessels into the strengthening conventional tanker market while we await clarity on the longer-term intentions for the PES refinery complex. Notwithstanding this adjustment, we believe that OSG’s niche businesses collectively remain well positioned to continue benefitting from the long-term stability that these unique assets have historically provided.”

Second Quarter 2019 Results

Shipping revenues were $88.5 million for the quarter, down 7.2% compared with the second quarter of 2018. TCE revenues for the second quarter of 2019 were $82.1 million, a decrease of $3.9 million, or 4.5%, compared with the second quarter of 2018. This decrease primarily resulted from (a) an increase in drydock days, (b) one less Government of Israel voyage during the second quarter of 2019 compared to the same period in 2018, (c) one less vessel in operation during the second quarter of 2019 compared to the same period in 2018, and (d) the sale of one vessel towards the end of the second quarter of 2019 compared to no vessel sales during the same period in 2018.

__________________________________________________________________________________________________________________________
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.

 

Following a significant refinery explosion in June 2019, our customer, Philadelphia Energy Solutions (“PES”), filed a Chapter 11 bankruptcy petition on July 21, 2019. At the time of filing, OSG had outstanding receivables from PES of approximately $4.3 million. The ultimate recovery of these receivables is currently unknown. The Company established, at June 30, 2019, a loss provision equal to $4.3 million. OSG is working diligently to maximize the Company's recovery.

Operating income for the second quarter of 2019 was $3.8 million, compared to operating income of $10.5 million in the second quarter of 2018.

Net loss for the second quarter 2019 was $1.7 million, or ($0.02) per diluted share, compared with net income of $3.1 million, or $0.03 per diluted share, for the second quarter 2018. Net income for the second quarter 2019 before accounting reserves for Philadelphia Energy Solutions was $1.6 million, or $0.02 per diluted share.

Adjusted EBITDA was $18.2 million for the second quarter, a decrease of $6.7 million compared with the second quarter of 2018. Adjusted EBITDA was reduced by $4.3 million due to reserves for possible losses associated with Philadelphia Energy Solutions' bankruptcy.

Conference Call

The Company will host a conference call to discuss its 2019 second quarter results at 9:00 a.m. Eastern Time (“ET”) on Friday, August 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 11:00 a.m. ET on Friday, August 9, 2019 by dialing (877) 344-7529 for domestic callers and (412) 317-0088 for international callers, and entering Access Code 10133620.

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 20-vessel U.S. Flag fleet consists of three ATBs, two lightering ATBs, three shuttle tankers, 10 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 press 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 our prospects, supply and demand for vessels in the markets in which we operate and the impact on market rates and vessel earnings, the impact of the Philadelphia Energy Solutions' bankruptcy on our business, including the adequacy of the related loss reserve, and future performance of our niche and core businesses. 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 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.

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

     

 

   

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

   

2019

 

2018

 

2019

 

2018

 

   

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Shipping Revenues:

   

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

Time and bareboat charter revenues

   

$

62,007

 

 

$

54,543

 

 

$

125,127

 

 

$

108,437

 

Voyage charter revenues

   

26,452

 

 

40,824

 

 

51,070

 

 

87,959

 

 

   

88,459

 

 

95,367

 

 

176,197

 

 

196,396

 

 

   

 

 

 

 

 

 

 

Operating Expenses:

   

 

 

 

 

 

 

 

Voyage expenses

   

6,353

 

 

9,402

 

 

11,337

 

 

21,654

 

Vessel expenses

   

32,520

 

 

33,656

 

 

64,967

 

 

67,160

 

Charter hire expenses

   

22,581

 

 

22,768

 

 

44,879

 

 

45,315

 

Depreciation and amortization

   

13,084

 

 

12,426

 

 

25,561

 

 

24,798

 

General and administrative

   

5,957

 

 

6,576

 

 

11,633

 

 

13,359

 

Bad debt expense

   

4,300

 

 

 

 

4,300

 

 

 

(Gain)/loss on disposal of vessels and other property, including impairments, net

   

(66

)

 

 

 

51

 

 

 

Total operating expenses

   

84,729

 

 

84,828

 

 

162,728

 

 

172,286

 

Income from vessel operations

   

3,730

 

 

10,539

 

 

13,469

 

 

24,110

 

Equity in income/(loss) of affiliated companies

   

68

 

 

(10

)

 

68

 

 

(10

)

Operating income

   

3,798

 

 

10,529

 

 

13,537

 

 

24,100

 

Other income/(expense), net

   

262

 

 

385

 

 

617

 

 

(246

)

Income before interest expense, reorganization items and income taxes

   

4,060

 

 

10,914

 

 

14,154

 

 

23,854

 

Interest expense

   

(6,571

)

 

(7,497

)

 

(13,077

)

 

(15,573

)

(Loss)/income before income taxes

   

(2,511

)

 

3,417

 

 

1,077

 

 

8,281

 

Income tax benefit/(provision)

   

773

 

 

(362

)

 

381

 

 

(1,564

)

Net (loss)/income

   

$

(1,738

)

 

$

3,055

 

 

$

1,458

 

 

$

6,717

 

 

   

 

 

 

 

 

 

 

Weighted Average Number of Common Shares Outstanding:

   

 

 

 

 

 

 

 

Basic - Class A

   

89,245,696

 

 

88,367,302

 

 

89,125,986

 

 

88,237,093

 

Diluted - Class A

   

89,245,696

 

 

89,198,996

 

 

89,507,860

 

 

88,910,518

 

Per Share Amounts:

   

 

 

 

 

 

 

 

Basic and diluted net (loss)/income - Class A

   

$

(0.02

)

 

$

0.03

 

 

$

0.02

 

 

$

0.08

 

Consolidated Balance Sheets
($ in thousands)

     

 

   

June 30,
2019

 

December 31,
2018

 

   

(unaudited)

 

 

ASSETS

   

 

 

 

Current Assets:

   

 

 

 

Cash and cash equivalents

   

$

53,437

 

 

$

80,417

 

Restricted cash

   

59

 

 

59

 

Voyage receivables, including unbilled of $6,041 and $10,160, net of reserve for doubtful accounts

   

11,400

 

 

16,096

 

Income tax receivable

   

476

 

 

439

 

Other receivables

   

3,020

 

 

3,027

 

Prepaid expenses

   

1,492

 

 

9,886

 

Inventories and other current assets

   

2,656

 

 

2,456

 

Total Current Assets

   

72,540

 

 

112,380

 

Vessels and other property, less accumulated depreciation

   

638,121

 

 

597,659

 

Deferred drydock expenditures, net

   

30,041

 

 

26,099

 

Total Vessels, Other Property and Deferred Drydock

   

668,162

 

 

623,758

 

Restricted cash - non current

   

140

 

 

165

 

Investments in and advances to affiliated companies

   

116

 

 

3,585

 

Intangible assets, less accumulated amortization

   

34,117

 

 

36,417

 

Operating lease right-of-use assets

   

229,265

 

 

 

Other assets

   

52,377

 

 

51,425

 

Total Assets

   

$

1,056,717

 

 

$

827,730

 

LIABILITIES AND EQUITY

   

 

 

 

Current Liabilities:

   

 

 

 

Accounts payable, accrued expenses and other current liabilities

   

$

24,061

 

 

$

34,678

 

Current portion of operating lease liabilities

   

81,586

 

 

 

Current portion of finance lease liabilities

   

3,929

 

 

 

Current installments of long-term debt

   

27,289

 

 

23,240

 

Total Current Liabilities

   

136,865

 

 

57,918

 

Reserve for uncertain tax positions

   

218

 

 

220

 

Noncurrent operating lease liabilities

   

163,029

 

 

 

Noncurrent finance lease liabilities

   

24,677

 

 

 

Long-term debt

   

306,308

 

 

322,295

 

Deferred income taxes, net

   

72,238

 

 

73,365

 

Other liabilities

   

20,569

 

 

44,464

 

Total Liabilities

   

723,904

 

 

498,262

 

Equity:

   

 

 

 

Common stock - Class A ($0.01 par value; 166,666,666 shares authorized; 85,651,060 and 84,834,790 shares issued and outstanding)

   

857

 

 

848

 

Paid-in additional capital

   

589,535

 

 

587,826

 

Accumulated deficit

   

(250,555

)

 

(252,014

)

 

   

339,837

 

 

336,660

 

Accumulated other comprehensive loss

   

(7,024

)

 

(7,192

)

Total Equity

   

332,813

 

 

329,468

 

Total Liabilities and Equity

   

$

1,056,717

 

 

$

827,730

 

Consolidated Statements of Cash Flows
($ in thousands)

       

 

     

Six Months Ended
June 30,

 

     

2019

 

2018

 

     

(unaudited)

 

(unaudited)

Cash Flows from Operating Activities:

     

 

 

 

Net income

     

$

1,458

 

 

$

6,717

 

Items included in net income not affecting cash flows:

     

 

 

 

Depreciation and amortization

     

25,561

 

 

24,798

 

Bad debt expense

     

4,300

 

 

 

Loss on disposal of vessels and other property, including impairments, net

     

51

 

 

 

Amortization of debt discount and other deferred financing costs

     

1,023

 

 

2,099

 

Compensation relating to restricted stock awards and stock option grants

     

763

 

 

1,497

 

Deferred income tax (benefit)/provision

     

(1,047

)

 

1,057

 

Interest on finance lease liabilities

     

410

 

 

 

Non-cash operating lease expense

     

461

 

 

1,110

 

Distributed earnings of affiliated companies

     

3,470

 

 

3,747

 

Payments for drydocking

     

(9,383

)

 

(4,107

)

Operating lease right-of-use assets

     

44,344

 

 

 

Operating lease liabilities

     

(45,316

)

 

 

Changes in operating assets and liabilities, net

     

(6,337

)

 

2,603

 

Loss on extinguishment of debt, net

     

48

 

 

981

 

Net cash provided by operating activities

     

19,806

 

 

40,502

 

Cash Flows from Investing Activities:

     

 

 

 

Proceeds from disposals of vessels and other property

     

2,197

 

 

 

Expenditures for vessels and vessel improvements

     

(34,722

)

 

 

Expenditures for other property

     

(638

)

 

(22

)

Net cash used in investing activities

     

(33,163

)

 

(22

)

Cash Flows from Financing Activities:

     

 

 

 

Payments on principal portion of finance lease liabilities

     

(798

)

 

 

Payments on debt

     

(10,417

)

 

(28,166

)

Extinguishment of debt

     

(2,139

)

 

(47,000

)

Tax withholding on share-based awards

     

(294

)

 

(359

)

Net cash used in financing activities

     

(13,648

)

 

(75,525

)

Net decrease in cash, cash equivalents and restricted cash

     

(27,005

)

 

(35,045

)

Cash, cash equivalents and restricted cash at beginning of period

     

80,641

 

 

166,269

 

Cash, cash equivalents and restricted cash at end of period

     

$

53,636

 

 

$

131,224

 

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 and six months ended June 30, 2019 and the comparable period of 2018. Revenue days in the quarter ended June 30, 2019 totaled 1,808 compared with 1,945 in the prior year quarter. A summary fleet list by vessel class can be found later in this press release.

     
     

 

   

2019

 

2018

Three Months Ended June 30,

   

Spot
Earnings

 

Fixed
Earnings

 

Spot
Earnings

 

Fixed
Earnings

Jones Act Handysize Product Carriers:

   

 

 

 

 

 

 

 

Average rate

   

$

37,356

 

 

$

57,212

 

 

$

32,180

 

 

$

60,953

 

Revenue days

   

157

 

 

959

 

 

282

 

 

795

 

Non-Jones Act Handysize Product Carriers:

   

 

 

 

 

 

 

 

Average rate

   

$

17,347

 

 

$

11,962

 

 

$

32,493

 

 

$

 

Revenue days

   

99

 

 

83

 

 

163

 

 

 

ATBs:

   

 

 

 

 

 

 

 

Average rate

   

$

19,000

 

 

$

21,610

 

 

$

20,679

 

 

$

23,629

 

Revenue days

   

89

 

 

252

 

 

268

 

 

255

 

Lightering:

   

 

 

 

 

 

 

 

Average rate

   

$

68,220

 

 

$

 

 

$

63,999

 

 

$

 

Revenue days

   

169

 

 

 

 

182

 

 

 

     
     

 

   

2019

 

2018

Six Months Ended June 30,

   

Spot
Earnings

 

Fixed
Earnings

 

Spot
Earnings

 

Fixed
Earnings

Jones Act Handysize Product Carriers:

   

 

 

 

 

 

 

 

Average rate

   

$

33,920

 

 

$

57,035

 

 

$

37,109

 

 

$

62,852

 

Revenue days

   

247

 

 

1,941

 

 

619

 

 

1,515

 

Non-Jones Act Handysize Product Carriers:

   

 

 

 

 

 

 

 

Average rate

   

$

21,905

 

 

$

12,023

 

 

$

34,939

 

 

$

 

Revenue days

   

211

 

 

151

 

 

342

 

 

 

ATBs:

   

 

 

 

 

 

 

 

Average rate

   

$

19,979

 

 

$

21,583

 

 

$

16,508

 

 

$

23,300

 

Revenue days

   

175

 

 

518

 

 

530

 

 

516

 

Lightering:

   

 

 

 

 

 

 

 

Average rate

   

$

70,634

 

 

$

 

 

$

67,372

 

 

$

 

Revenue days

   

349

 

 

 

 

355

 

 

 

Fleet Information

As of June 30, 2019, OSG’s operating fleet consisted of 20 vessels, nine of which were owned, with the remaining vessels chartered-in. Vessels chartered-in are on bareboat charters.

         

Vessel Type

     

Vessels
Owned

 

Vessels
Chartered-
In

 

Total
Vessels

 

Total dwt (2)

 

Handysize Product Carriers (1)

     

4

 

11

 

15

 

710,161

 

Refined Product ATBs

     

3

 

 

3

 

89,881

 

Lightering ATBs

     

2

 

 

2

 

91,112

 

Total Operating Fleet

     

9

 

11

 

20

 

891,154

 
   

(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
June 30,

 

Six Months Ended
June 30,

($ in thousands)

     

2019

 

2018

 

2019

 

2018

Time charter equivalent revenues

     

$

82,106

 

 

$

85,965

 

 

$

164,860

 

 

$

174,742

 

Add: Voyage expenses

     

6,353

 

 

9,402

 

 

11,337

 

 

21,654

 

Shipping revenues

     

$

88,459

 

 

$

95,367

 

 

$

176,197

 

 

$

196,396

 

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
June 30,

 

Six Months Ended
June 30,

($ in thousands)

   

2019

 

2018

 

2019

 

2018

Niche Market Activities

   

$

20,736

 

 

$

24,342

 

 

$

43,339

 

 

$

52,250

 

Jones Act Handysize Tankers

   

2,692

 

 

156

 

 

5,126

 

 

2,465

 

ATBs

   

3,577

 

 

5,043

 

 

6,549

 

 

7,552

 

Vessel Operating Contribution

   

27,005

 

 

29,541

 

 

55,014

 

 

62,267

 

Depreciation and amortization

   

13,084

 

 

12,426

 

 

25,561

 

 

24,798

 

General and administrative

   

5,957

 

 

6,576

 

 

11,633

 

 

13,359

 

Bad debt expense

   

4,300

 

 

 

 

4,300

 

 

 

(Gain)/loss on disposal of vessels and other property, including impairments, net

   

(66

)

 

 

 

51

 

 

 

Equity in income/(loss) of affiliated companies

   

68

 

 

(10

)

 

68

 

 

(10

)

Operating income

   

$

3,798

 

 

$

10,529

 

 

$

13,537

 

 

$

24,100

 

 

(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
June 30,

 

Six Months Ended
June 30,

($ in thousands)

   

2019

 

2018

 

2019

 

2018

Net (loss)/income

   

$

(1,738

)

 

$

3,055

 

 

$

1,458

 

 

$

6,717

 

Income tax (benefit)/provision

   

(773

)

 

362

 

 

(381

)

 

1,564

 

Interest expense

   

6,571

 

 

7,497

 

 

13,077

 

 

15,573

 

Depreciation and amortization

   

13,084

 

 

12,426

 

 

25,561

 

 

24,798

 

EBITDA

   

17,144

 

 

23,340

 

 

39,715

 

 

48,652

 

Amortization classified in charter hire expenses

   

267

 

 

465

 

 

497

 

 

929

 

Interest expense classified in charter hire expenses

   

401

 

 

430

 

 

804

 

 

864

 

Non-cash stock based compensation expense

   

453

 

 

704

 

 

763

 

 

1,497

 

(Gain)/loss on disposal of vessels and other property, including impairments, net

   

(66

)

 

 

 

51

 

 

 

Loss on extinguishment of debt, net

   

48

 

 

 

 

48

 

 

981

 

Adjusted EBITDA

   

$

18,247

 

 

$

24,939

 

 

$

41,878

 

 

$

52,923

 

         

(C) Total Cash

         

($ in thousands)

       

June 30,
2019

 

December 31,
2018

Cash and cash equivalents

       

$

53,437

 

 

$

80,417

 

Restricted cash - current

       

59

 

 

59

 

Restricted cash – non-current

       

140

 

 

165

 

Total Cash

       

$

53,636

 

 

$

80,641

 

 

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

Source: Overseas Shipholding Group, Inc.