Nov 6, 2023

Overseas Shipholding Group Reports Third Quarter 2023 Results

TAMPA, Fla. – Overseas Shipholding Group, Inc. (NYSE: OSG) (the “Company” or “OSG”), a leading provider of liquid bulk transportation services in the energy industry for crude oil and petroleum products in the U.S. Flag markets, today reported results for the third quarter of 2023.

  • Net income for the third quarter of 2023 was $17.6 million, or $0.22 per diluted share, compared with net income of $13.2 million, or $0.15 per diluted share, for the third quarter of 2022.
  • Third quarter 2023 Adjusted EBITDA(A), a non-GAAP measure, was $48.1 million, an increase of $5.8 million, or 13.7%, from the third quarter of 2022.
  • Shipping revenues for the third quarter of 2023 were $115.4 million, a decrease of $7.6, million, or 6.2%, from the third quarter of 2022.
  • Time charter equivalent (TCE) revenues(B), a non-GAAP measure, for the third quarter of 2023 were $108.6 million, a decrease of $6.5 million, or 5.6%, from the third quarter of 2022.
  • Total cash and investments(C) were $112.5 million as of September 30, 2023.
  • During the third quarter of 2023, the Company repurchased 4,580,921 shares for total consideration of $18.7 million.
  • During the quarter, the Company also purchased 13,851,382 warrants which were exercisable for 2,631,763 shares for total consideration of $11.4 million.

Sam Norton, OSG’s President and CEO, said. “We made progress on all of our key objectives since our report for the second quarter. Adjusted EBITDA increased by more than 20% from the second quarter. We completed transactions to repurchase the equivalent of 7.2 million shares, returning nearly $30 million to our shareholders. We took steps to add additional earning assets to our fleet through an agreement to purchase the Alaskan Frontier, which we expect to be in operation within the next 12 months. And, after the quarter end, we prepaid $6.7 million of interest-bearing liabilities at a discount, which will see us book a gain of $911,000 during the fourth quarter.”

Mr. Norton added, “Cashflow from operations continues to meet or exceed our expectations, giving us continuing confidence that our business plan is working. As has been the case for most of this year, healthy refining margins and strong international tanker rates have supported better than expected performance from our TSP vessels and have boosted volumes lifted in our lightering operations. With three-year charter extensions obtained during the quarter for both the Overseas Boston and OSG 204/Endurance, 90% of 2024 available trading days for the Jones Act fleet are now fixed at rates that will generate TCE from fixed contracts in excess of $30 million per month through the end of 2024. Free cashflow above debt service and capital expenditures should thus be available to allow us to make further progress in meeting our key capital allocation goals.”

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

Third Quarter 2023 Results

Shipping revenues were $115.4 million for the third quarter of 2023, a decrease of $7.6 million, or 6.2%, compared to the third quarter of 2022. TCE revenues were $108.6 million for the third quarter of 2023, a decrease of $6.5 million, or 5.6%, from the third quarter of 2022. The decreases primarily resulted from (a) fewer vessels in our fleet, as we redelivered three conventional tankers leased from American Shipping Company in December 2022, (b) an 8-day increase in drydock days, and (c) a decrease in Delaware Bay lightering volumes. The decrease was partially offset by an increase in average daily rates earned by our fleet and one full Government of Israel voyage and one partial Government of Israel voyage that began during the third quarter of 2023 and continued in the fourth quarter compared to two partial Government of Israel voyages in the third quarter of 2022.

Operating income for the third quarter of 2023 was $28.2 million compared to operating income of $22.4 million for the third quarter of 2022. Net income for the third quarter of 2023 was $17.6 million, or $0.22 per diluted share, compared with net income of $13.2 million, or $0.15 per diluted share, for the third quarter of 2022. The increases in operating and net income primarily reflected decreases in voyage, vessel and charter hire expenses of $13.1 million when compared to the third quarter of 2022. The decrease in voyage expenses was primarily due to a decrease in fuel expenses, as our vessels performed fewer voyage charters during the third quarter of 2023 compared to the third quarter of 2022. The decreases in vessel and charter hire expenses were primarily due to the redelivery of three conventional tankers leased from American Shipping Company in December 2022.

Adjusted EBITDA was $48.1 million for the 2023 third quarter, an increase of $5.8 million compared with the third quarter of 2022, driven primarily by the increases in operating and net income.

Conference Call

The Company will host a conference call to discuss its third quarter 2023 results at 9:30 a.m. Eastern Time (“ET”) on Monday, November 6, 2023.

To access the call, participants should dial (844) 850-0546 for U.S. callers and (412) 317-5203 for international callers.

Participants have an option of calling in to listen or watching a live audio webcast and slide presentation available at the Investors section of the Company’s website located at www.osg.com/investors. A replay of the webcast will also be available on the website after the completion of the call.

About Overseas Shipholding Group, Inc.

Overseas Shipholding Group, Inc. (NYSE:OSG) is a publicly traded company providing liquid bulk transportation services in the U.S. Flag markets. OSG’s U.S. Flag fleet consists of Suezmax crude oil tankers doing business in Alaska, conventional and lightering ATBs, shuttle and conventional MR tankers, and non-Jones Act MR tankers that participate in the U.S. Tanker Security Program.

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 fact 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 continued stability of our niche businesses, the impact of our time charter contracts on our future financial performance, and external events including geopolitical conflicts such as the Russia/Ukraine conflict and recent developments in the Middle East. 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 filings with the SEC. 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.

Consolidated Statements of Operations

($ in thousands, except per share amounts)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2023

2022

2023

2022

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Shipping Revenues:

Time and bareboat charter revenues

$

93,224

$

92,730

$

264,621

$

232,934

Voyage charter revenues

22,211

30,329

71,230

112,108

115,435

123,059

335,851

345,042

Operating Expenses:

Voyage expenses

6,858

7,997

22,413

32,813

Vessel expenses

39,969

45,430

123,337

130,380

Charter hire expenses

16,233

22,743

47,988

67,089

Depreciation and amortization

17,003

17,902

49,500

51,058

General and administrative

7,173

6,556

21,614

20,929

Total operating expenses

87,236

100,628

264,852

302,269

Operating income

28,199

22,431

70,999

42,773

Other income, net

1,643

568

4,184

649

Income before interest expense and income taxes

29,842

22,999

75,183

43,422

Interest expense

(7,779

)

(8,229

)

(24,019

)

(24,869

)

Income before income taxes

22,063

14,770

51,164

18,553

Income tax expense

(4,471

)

(1,522

)

(9,131

)

(2,074

)

Net income

$

17,592

$

13,248

$

42,033

$

16,479

Weighted Average Number of Common Shares Outstanding:

Basic – Class A

78,263,667

88,174,640

80,544,607

87,579,624

Diluted – Class A

80,700,618

90,349,567

83,233,332

89,211,983

Per Share Amounts:

Basic net income – Class A

$

0.22

$

0.15

$

0.52

$

0.19

Diluted net income – Class A

$

0.22

$

0.15

$

0.51

$

0.18

Consolidated Balance Sheets

($ in thousands)

September 30,

2023

December 31,

2022

(unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

97,598

$

78,732

Investment security to be held to maturity

14,900

Voyage receivables, including unbilled of $4,862 and $11,364, net of reserve for credit losses

12,522

19,698

Income tax receivable

696

1,914

Other receivables

2,227

5,334

Inventories, prepaid expenses and other current assets

3,237

2,668

Total Current Assets

131,180

108,346

Vessels and other property, less accumulated depreciation

679,399

726,179

Deferred drydock expenditures, net

41,703

38,976

Total Vessels, Other Property and Deferred Drydock

721,102

765,155

Intangible assets, less accumulated amortization

14,567

18,017

Operating lease right-of-use assets, net

187,135

206,797

Investment security to be held to maturity

14,803

Other assets

27,188

25,945

Total Assets

$

1,081,172

$

1,139,063

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable, accrued expenses and other current liabilities

$

49,061

$

54,906

Current portion of operating lease liabilities

67,320

63,288

Current portion of finance lease liabilities

4,000

Current installments of long-term debt

43,183

23,733

Total Current Liabilities

159,564

145,927

Reserve for uncertain tax positions

212

175

Noncurrent operating lease liabilities

127,266

149,960

Noncurrent finance lease liabilities

16,456

Long-term debt

363,327

399,630

Deferred income taxes, net

79,263

70,233

Other liabilities

8,893

16,997

Total Liabilities

738,525

799,378

Equity:

Common stock – Class A ($0.01 par value; 166,666,666 shares authorized; 89,496,512 and 88,297,439 shares issued; 72,322,453 and 78,297,439 shares outstanding)

895

883

Paid-in additional capital

587,447

597,455

Accumulated deficit

(190,989

)

(233,023

)

Treasury stock, 17,174,059 and 10,000,000 shares, at cost

(57,540

)

(29,040

)

339,813

336,275

Accumulated other comprehensive income

2,834

3,410

Total Equity

342,647

339,685

Total Liabilities and Equity

$

1,081,172

$

1,139,063

Consolidated Statements of Cash Flows

($ in thousands)

Nine Months Ended

September 30,

2023

2022

(unaudited)

(unaudited)

Cash Flows from Operating Activities:

Net income

$

42,033

$

16,479

Items included in net income not affecting cash flows:

Depreciation and amortization

49,500

51,058

Amortization of debt discount and other deferred financing costs

855

840

Compensation relating to restricted stock awards and stock option grants

2,556

3,237

Deferred income tax expense

9,068

1,998

Interest on finance lease liabilities

917

1,228

Non-cash operating lease expense

48,970

67,769

Payments for drydocking

(12,862

)

(13,896

)

Operating lease liabilities

(50,257

)

(69,368

)

Changes in operating assets and liabilities, net

(7,730

)

(18,166

)

Net cash provided by operating activities

83,050

41,179

Cash Flows from Investing Activities:

Expenditures for vessels and vessel improvements

(2,593

)

(4,519

)

Purchase of investment security to be held to maturity

(14,794

)

Net cash used in investing activities

(2,593

)

(19,313

)

Cash Flows from Financing Activities:

Payments on debt

(17,522

)

(16,530

)

Tax withholding on share-based awards

(1,168

)

(496

)

Payments on principal portion of finance lease liabilities

(2,964

)

(3,124

)

Deferred financing costs paid for debt amendments

(53

)

(261

)

Purchases of treasury stock and Class A warrants

(39,884

)

(11,026

)

Net cash used in financing activities

(61,591

)

(31,437

)

Net increase/(decrease) in cash and cash equivalents

18,866

(9,571

)

Cash and cash equivalents at beginning of period

78,732

83,253

Cash and cash equivalents at end of period

$

97,598

$

73,682

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, 2023 and the comparable periods of 2022. Revenue days in the quarter ended September 30, 2023 totaled 1,747 compared with 2,035 in the prior year quarter. A summary fleet list by vessel class can be found later in this press release. Prior period amounts have been updated to conform to current period presentation.

2023

2022

Three months ended September 30,

Spot

Earnings

Fixed

Earnings

Spot

Earnings

Fixed

Earnings

Jones Act Handysize Product Carriers:

Average rate

$

$

67,694

$

38,296

$

60,923

Revenue days

903

55

1,086

Non-Jones Act Handysize Product Carriers:

Average rate

$

43,834

$

68,875

$

47,779

$

38,911

Revenue days

189

60

184

92

ATBs:

Average rate

$

$

44,354

$

41,117

$

35,590

Revenue days

247

85

99

Lightering:

Average rate

$

89,255

$

$

71,086

$

46,906

Revenue days

94

135

49

Alaska (a):

Average rate

$

$

61,016

$

$

60,438

Revenue days

254

250

2023

2022

Nine months ended September 30,

Spot

Earnings

Fixed

Earnings

Spot

Earnings

Fixed

Earnings

Jones Act Handysize Product Carriers:

Average rate

$

60,505

$

65,807

$

53,710

$

60,067

Revenue days

40

2,658

585

2,574

Non-Jones Act Handysize Product Carriers:

Average rate

$

36,622

$

63,239

$

44,720

$

29,632

Revenue days

677

74

546

273

ATBs:

Average rate

$

$

43,511

$

41,048

$

35,059

Revenue days

737

85

458

Lightering:

Average rate

$

91,900

$

$

65,758

$

46,906

Revenue days

275

363

49

Alaska (a):

Average rate

$

$

60,355

$

$

59,799

Revenue days

797

785

(a) Excludes one Alaska vessel currently in layup.

OSG has realigned some of our vessels in the analytical tables to reflect their current employment. The tables affected in the press release are the TCE Spot and Fixed Rate table and the Vessel Operating Contribution table. Prior year information has been revised to conform with the current presentation.

Fleet Information

As of September 30, 2023, OSG’s operating fleet consisted of 21 vessels, 12 of which were owned, with the remaining vessels chartered-in. Vessels chartered-in are on Bareboat Charters.

Vessels Owned

Vessels

Chartered-In

Total at September 30, 2023

Vessel Type

Number

Number

Total Vessels

Total dwt (3)

Handysize Product Carriers (1)

5

8

13

619,854

Crude Oil Tankers (2)

3

1

4

772,194

Refined Product ATBs

3

3

99,738

Lightering ATBs

1

1

45,556

Total Operating Fleet

12

9

21

1,537,342

(1)

Includes two owned shuttle tankers, eight chartered-in tankers, and three non-Jones Act MR tankers that participate in the U.S. Tanker Security Program or are on time charter to the U.S. Military Sealift Command.

(2)

Includes three crude oil tankers doing business in Alaska and one crude oil tanker bareboat chartered-in and in layup.

(3)

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 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

September 30,

Nine Months Ended

September 30,

($ in thousands)

2023

2022

2023

2022

Time charter equivalent revenues

$

108,577

$

115,062

$

313,438

$

312,229

Add: Voyage expenses

6,858

7,997

22,413

32,813

Shipping revenues

$

115,435

$

123,059

$

335,851

$

345,042

Vessel Operating Contribution

Vessel operating contribution, a non-GAAP measure, is TCE revenues minus vessel expenses and charter hire expenses. The Company changed the presentation of the table below to reflect the current business operations of the Company’s vessels. Accordingly, prior period amounts have been updated to conform to current period presentation.

Three Months Ended

September 30,

Nine Months Ended

September 30,

($ in thousands)

2023

2022

2023

2022

Specialized businesses

$

31,981

$

31,739

$

88,312

$

89,385

Jones Act handysize tankers

12,709

8,046

32,868

10,166

Jones Act ATBs

7,685

7,104

20,933

15,209

Vessel operating contribution

52,375

46,889

142,113

114,760

Depreciation and amortization

17,003

17,902

49,500

51,058

General and administrative

7,173

6,556

21,614

20,929

Operating income

$

28,199

$

22,431

$

70,999

$

42,773

(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 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 measures used by 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

September 30,

Nine Months Ended

September 30,

($ in thousands)

2023

2022

2023

2022

Net income

$

17,592

$

13,248

$

42,033

$

16,479

Income tax expense

4,471

1,522

9,131

2,074

Interest expense, net

7,779

8,229

24,019

24,869

Depreciation and amortization

17,003

17,902

49,500

51,058

EBITDA

46,845

40,901

124,683

94,480

Amortization classified in charter hire and vessel expenses

273

260

820

545

Interest expense classified in charter hire expenses

104

308

426

935

Non-cash stock based compensation expense

894

846

2,556

3,237

Adjusted EBITDA

$

48,116

$

42,315

$

128,485

$

99,197

(C) Total Cash and Investments

($ in thousands)

September 30,

2023

December 31,

2022

Cash and cash equivalents

$

97,575

$

78,680

Restricted cash

23

52

Investment security to be held to maturity

14,900

14,803

Total cash and investments

$

112,498

$

93,535

 

Investor Relations & Media Contact:

Susan Allan, Overseas Shipholding Group, Inc.

(813) 209-0620

sallan@osg.com