Overseas Shipholding Group, Inc. (NYSE: OSG) (the “Company” or
“OSG”) a provider of energy transportation services for crude oil
and petroleum products in the U.S. Flag markets, today reported
results for the fourth quarter and full year 2018.
Highlights
- Net loss for the fourth quarter was
$5.2 million, or $(0.05) per diluted share, compared with net
income of $53.6 million, or $0.61 per diluted share for the fourth
quarter 2017.
- Net income for the full year 2018 was
$13.5 million, or $0.15 per diluted share, compared with $56.0
million, or $0.64 per diluted share for the full year 2017.
- Shipping revenues for the fourth
quarter and full year 2018 were $89.2 million and $366.2 million,
down 4% and 6%, respectively, compared with the same periods in
2017. Time charter equivalent (TCE) revenues(A), a non-GAAP
measure, for the fourth quarter and full year 2018 were $79.9
million and $326.7 million, down 4% and 10%, respectively, compared
with the same periods in 2017.
- Fourth quarter and full year 2018
Adjusted EBITDA(B), a non-GAAP measure, was $23.1 million and $87.0
million, down 7% and 27%, respectively, from $24.8 million and
$118.4 million in the same periods in 2017.
- Total cash(C) was $80.6 million as of
December 31, 2018.
- During the quarter we refinanced our
$380 million term loan due August 2019, with a $325 million term
loan due December 2023, a $27.5 million term loan due November 2026
and $27.6 million from cash on hand. This lengthened the maturity
of our long-term debt.
- We also extended the term on five of
our bareboat charters to December 2022 and the remaining four
vessels until December 2020.
- In January 2019, we entered into a
10-year bareboat charter party agreement for a U.S. flagged product
tanker.
Mr. Sam Norton, President and CEO, stated, “During 2018, we took
steps to reduce debt, gain cost efficiencies, and retain capacity
available to capture value from an improving rate environment,
positioning the Company well to benefit from the inherent operating
leverage of its business model. The fourth quarter saw continued
progress in the developing recovery story for OSG’s core Jones Act
businesses. Further time charter contracts for our conventional
tankers were obtained at rates above those previously entered into,
combining to give the Company fixed time charter cover for 75% of
available vessel days for 2019 at the beginning of the year. We are
as convinced as ever that improving fundamentals will support a
continuing recovery, and we expect to benefit from that recovery as
our fleet of conventional tankers is re-chartered beginning in late
2019.”
Mr. Norton added, “Success in refinancing our term debt and in
extending the nine leases on vessels chartered-in from American
Shipping Company removed considerable uncertainty and stabilized
the principal elements of our balance sheet for the foreseeable
future, and provided us with the ability to pursue long-term
employment opportunities with customers who are increasingly aware
of a supply constrained market. Commitments to invest in new
barges, new tankers, and the long-term lease of an existing Jones
Act Tanker provide tangible evidence of our confidence in our core
markets and in our commitment to sustaining a leading position in
the markets that we serve.”
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.
Fourth Quarter 2018
Results
Shipping revenues were $89.2 million for the quarter, down 4%
compared with the fourth quarter of 2017. TCE revenues for the
fourth quarter of 2018 were $79.9 million, a decrease of $2.9
million, or 4%, compared with the fourth quarter of 2017, primarily
due to lower average daily rates earned, which accounted for a $6.8
million decrease in TCE revenues and a 102-day decrease in revenue
days for its fleet, excluding its modern lightering ATBs. This
decrease is offset by an increase in TCE revenues of $4.0 million
for the modern lightering ATBs in the fourth quarter of 2018
compared with the fourth quarter of 2017. We also traded two fewer
vessels in the fourth quarter 2018 compared to fourth quarter
2017.
Operating income for the fourth quarter of 2018 was $7.4
million, compared to operating income of $3.4 million in the fourth
quarter of 2017.
Net loss for the fourth quarter was $5.2 million, or $(0.05) per
diluted share, compared with net income of $53.6 million, or $0.61
per diluted share, for the fourth quarter 2017. The decrease
reflects the income tax benefit recorded in the fourth quarter of
2017 as a result of the remeasurement of the net deferred tax
liability based on the newly enacted federal corporate statutory
rate of 21%.
Adjusted EBITDA was $23.1 million for the quarter, a decrease of
$1.7 million compared with the fourth quarter of 2017, driven
primarily by the decline in TCE revenues.
Full Year 2018 Results
Shipping revenues were $366.2 million for the full year 2018,
down 6% compared with the full year 2017. TCE revenues for the full
year 2018 were $326.7 million, a decrease of $34.3 million, or 10%,
compared with the full year 2017. Several factors contributed to
these decreases: (a) 74-day increase in scheduled drydocking, which
is an out-of-service period used to perform required major
maintenance to continue trading and maximize a vessel's useful
life, (b) 92-day increase in unplanned repair days, including one
vessel that was hit by a third-party ship, and (c) two fewer
vessels in operation for most of 2018 compared to 2017.
Operating income for the full year 2018 was $27.4 million,
compared to operating income of $37.7 million for the full year
2017.
Net income for the full year 2018 was $13.5 million, or $0.15
per diluted share, compared with net income of $56.0 million, or
$0.64 per diluted share, for the full year 2017. The decrease
reflected the income tax benefit recorded in 2017 as a result of
the remeasurement of the net deferred tax liability based on the
newly enacted federal corporate statutory rate of 21%.
Adjusted EBITDA was $87.0 million for the full year 2018, a
decrease of $31.4 million compared with the full year 2017, driven
primarily by the decline in TCE revenues.
Conference Call
The Company will host a conference call to discuss its fourth
quarter and full year 2018 results at 9:00 a.m. Eastern Time (“ET”)
on Friday, March 8, 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, March 8, 2019 through 10:59
p.m. ET on Friday, March 15, 2019 by dialing (877) 344-7529 for
domestic callers and (412) 317-0088 for international callers, and
entering Access Code 10129249.
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
21-vessel U.S. Flag fleet consists of five 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. 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 the Company’s prospects.
Forward-looking statements are based the Company’s 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 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 EndedDecember
31,
Years EndedDecember 31,
2018 2017 2018
2017 (unaudited) (unaudited) Shipping
Revenues: Time and bareboat charter revenues $ 53,523 $ 57,400
$ 213,923 $ 266,193 Voyage charter revenues 35,707 35,415
152,240 124,233 Total shipping revenues 89,230
92,815 366,163 390,426
Operating
Expenses: Voyage expenses 9,321 10,061 39,456 29,390 Vessel
expenses 33,931 34,709 134,956 136,148 Charter hire expenses 22,956
23,101 91,350 91,587 Depreciation and amortization 12,885 12,573
50,512 58,673 General and administrative 7,114 6,895 26,880 27,464
Severance costs — — — 16 (Gain)/loss on disposal of vessels and
other property, including impairments (877 ) 5,847 (877 )
13,200 Total operating expenses 85,330 93,186
342,277 356,478 Income from vessel operations 3,900
(371 ) 23,886 33,948 Equity in income of affiliated companies 3,548
3,747 3,538 3,747 Operating income
7,448 3,376 27,424 37,695 Other expense (1,029 ) (293 ) (759 )
(1,753 ) Income before interest expense, reorganization items and
income taxes 6,419 3,083 26,665 35,942 Interest expense (7,488 )
(9,125 ) (30,890 ) (37,401 ) Loss before reorganization items and
income taxes (1,069 ) (6,042 ) (4,225 ) (1,459 ) Reorganization
items, net — 8 — (190 ) Loss from operations
before income taxes (1,069 ) (6,034 ) (4,225 ) (1,649 ) Income tax
(expense)/benefit from operations (4,107 ) 59,679 17,714
57,627
Net (loss)/income $ (5,176 ) $ 53,645
$ 13,489 $ 55,978
Weighted Average
Number of Common Shares Outstanding: Basic - Class A 88,563,614
87,840,169 88,394,580 87,834,769 Diluted - Class A 88,563,614
88,108,079 89,045,734 88,082,978
Per Share Amounts from
Continuing Operations: Basic and diluted net (loss)/income –
Class A $ (0.05 ) $ 0.61 $ 0.15 $ 0.64
The Company adopted ASU No. 2017-07, Improving the Presentation
of Net Periodic Pension Cost and Net Periodic Postretirement
Benefit Cost (ASC 715), which requires that an employer classify
and report the service cost component in the same line item or
items in the statement of operations as other compensation costs
arising from services rendered by the pertinent employees during
the period and disclose by line item in the statement of operations
the amount of net benefit cost that is included in the statement of
operations. The other components of net benefit cost would be
presented in the statement of operations separately from the
service cost component and outside the subtotal of income from
operations. The Company adopted this accounting standard on January
1, 2018 and has applied the guidance retrospectively.
Consolidated Balance Sheets
($ in thousands)
December 31,2018
December 31,2017
ASSETS Current Assets: Cash and cash equivalents $
80,417 $ 165,994 Restricted cash 59 58 Voyage receivables,
including unbilled of $10,160 and $9,919 16,096 24,209 Income tax
recoverable 439 1,122 Receivable from INSW 34 372 Other receivables
2,993 2,184 Prepaid expenses 9,886 9,867 Inventories and other
current assets 2,456 3,489 Total Current Assets
112,380 207,295 Vessels and other property, less accumulated
depreciation 597,659 632,509 Deferred drydock expenditures, net
26,099 23,914 Total Vessels, Deferred Drydock and
Other Property 623,758 656,423 Restricted cash 165
217 Investments in and advances to affiliated companies 3,585 3,785
Intangible assets, less accumulated amortization 36,417 41,017
Other assets 51,425 23,150 Total Assets $ 827,730
$ 931,887
LIABILITIES AND EQUITY
Current Liabilities: Accounts payable, accrued expenses and
other current liabilities $ 34,678 $ 34,371 Current installments of
long-term debt 23,240 28,160 Total Current
Liabilities 57,918 62,531 Reserve for uncertain tax positions 220
3,205 Long-term debt 322,295 420,776 Deferred income taxes, net
73,365 83,671 Other liabilities 44,464 48,466 Total
Liabilities 498,262 618,649 Commitments and
contingencies
Equity: Common stock - Class A ($0.01
par value; 166,666,666 shares authorized; 84,834,790 and 78,277,669
shares issued and outstanding) 848 783 Paid-in additional capital
587,826 584,675 Accumulated deficit (252,014 ) (265,758 ) 336,660
319,700 Accumulated other comprehensive loss (7,192 ) (6,462 )
Total Equity 329,468 313,238 Total Liabilities and
Equity $ 827,730 $ 931,887
Consolidated Statements of Cash
Flows
($ in thousands)
Years Ended December 31,
2018 2017 2016
Cash Flows from Operating Activities: Net income/(loss) $ 13,489 $
55,978 $ (293,614 ) Loss from discontinued operations — —
(292,555 ) Net income/(loss) from continuing operations
13,489 55,978 (1,059 ) Items included in net income/(loss) from
continuing operations not affecting cash flows: Depreciation and
amortization 50,512 58,673 89,563 Amortization of debt discount and
other deferred financing costs 4,069 5,167 6,005 Compensation
relating to restricted stock, stock unit and stock option grants
3,785 2,388 7,441 Deferred income tax benefit (18,794 ) (59,047 )
(67,394 ) Undistributed earnings of affiliated companies 200 (91 )
132 Reorganization items, non-cash — (105 ) 5,198 Vessel impairment
charges — 5,878 104,405 Other – net 1,961 3,282 2,268 Items
included in net income/(loss) related to investing and financing
activities: Loss on repurchases and extinguishment of debt 3,399
3,237 2,988 (Gain)/loss on disposal of vessels and other property,
net (877 ) 7,322 127 Payments for drydocking (12,902 ) (8,390 )
(6,844 ) SEC payment, bankruptcy and IRS claim payments — (5,000 )
(7,136 ) Distributions from INSW — — 202,000 Changes in operating
assets and liabilities: Decrease/(increase) in receivables 6,531
(753 ) (16,794 ) (Increase)/decrease in income tax recoverable
(4,797 ) (246 ) 323 Increase/(decrease) in deferred revenue 1,514
(4,639 ) 63 Net change in prepaid items and accounts payable,
accrued expenses and other current and long-term liabilities (2,835
) (20,035 ) 7,574 Net cash provided by operating activities
45,255 43,619 328,860 Cash Flows from
Investing Activities: Expenditures for vessels and vessel
improvements (21,807 ) — — Expenditures for other property (386 )
(11 ) (666 ) Proceeds from disposal of vessels and other property
2,367 1,055 — Net cash (used in)/provided by
investing activities (19,826 ) 1,044 (666 ) Cash Flows from
Financing Activities: Repurchases and extinguishment of debt
(427,123 ) (84,170 ) (120,224 ) Issuance of debt, net of issuance
and deferred financing costs 344,801 — — Payments on debt,
including adequate protection payments (28,166 ) — (54,345 ) Tax
withholding on share-based awards (569 ) (1,157 ) — Repurchases of
common stock and common stock warrants — — (119,343 ) Cash
dividends paid — — (31,910 ) Net cash used in
financing activities (111,057 ) (85,327 ) (325,822 ) Net
(decrease)/increase in cash, cash equivalents and restricted cash
(Note 3) (85,628 ) (40,664 ) 2,372 Cash, cash equivalents and
restricted cash at beginning of year (Note 3) 166,269
206,933 204,561 Cash, cash equivalents and restricted
cash at end of year (Note 3) $ 80,641 $ 166,269 $
206,933 Cash flows from discontinued operations: Cash
flows provided by operating activities $ — $ — $ 111,768 Cash flows
provided by investing activities — — 25,202 Cash flows used in
financing activities — — (355,687 ) Net decrease in
cash and cash equivalents from discontinued operations $ — $
— $ (218,717 )
The Company adopted ASU No. 2016-18, Statement of Cash Flows
(ASC 230), Restricted Cash, which requires that amounts generally
described as restricted cash and restricted cash equivalents be
included with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period total amounts shown on the
statement of cash flows. The standard is effective for annual
periods beginning after December 31, 2017 and interim periods
within that reporting period. The Company adopted this accounting
standard on January 1, 2018. The prior periods have been adjusted
to conform to current period presentation, which resulted in a
decrease of $15,569 in net cash provided by investing activities
for the year ended December 31, 2017 and an increase of $5,261 in
net cash provided by investing activities for the year ended
December 31, 2016, related to changes in restricted cash
amounts.
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 months and fiscal year ended December 31, 2018 and the
comparable periods of 2017. Revenue days in the quarter ended
December 31, 2018 totaled 1,927 compared with 2,029 in the prior
year quarter. Revenue days in the fiscal year ended December 31,
2018 totaled 7,678 compared with 8,378 in the prior year. A summary
fleet list by vessel class can be found later in this press
release.
For the three months ended
December 31, 2018 2017
SpotEarnings
FixedEarnings
SpotEarnings
FixedEarnings
Jones Act Handysize Product Carriers: Average rate $ 32,420 $
58,833 $ 31,397 $ 63,163 Revenue days 248 826 284 790 Non-Jones Act
Handysize Product Carriers: Average rate $ 18,427 $ 11,220 $ 28,334
$ — Revenue days 181 3 184 — ATBs: Average rate $ 10,984 $ 21,548 $
12,644 $ 25,363 Revenue days 226 259 317 270 Lightering: Average
rate $ 64,347 $ — $ 42,802 $ — Revenue days 184 — 184 —
For the years ended December
31, 2018 2017
SpotEarnings
FixedEarnings
SpotEarnings
FixedEarnings
Jones Act Handysize Product Carriers: Average rate $ 31,254 $
60,252 $ 27,179 $ 63,604 Revenue days 1,142 3,141 896 3,411
Non-Jones Act Handysize Product Carriers: Average rate $ 25,925 $
12,097 $ 31,174 $ 14,031 Revenue days 707 3 566 159 ATBs: Average
rate $ 15,333 $ 22,207 $ 11,111 $ 26,863 Revenue days 990 998 979
1,637 Lightering: Average rate $ 66,041 $ — $ 61,648 $ — Revenue
days 697 — 730 —
Fleet Information
As of December 31, 2018, OSG’s operating fleet consisted of 21
vessels, 11 of which were owned, with the remaining vessels
chartered-in. Vessels chartered-in are on bareboat charters.
Vessel Type
VesselsOwned
VesselsChartered-in
TotalVessels
Total dwt (2) Handysize Product Carriers (1) 4 10 14 664,490
Refined Product ATBs 5 — 5 141,612 Lightering ATBs 2 — 2 91,112
Total Operating Fleet 11 10 21 897,214
(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. 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
follow:
Three Months EndedDecember
31,
Years EndedDecember 31,
($ in thousands)
2018 2017 2018
2017 TCE revenues $ 79,909 $ 82,754 $ 326,707
$ 361,036 Add: Voyage Expenses 9,321 10,061 39,456 29,390 Shipping
revenues $ 89,230 $ 92,815 $ 366,163 $ 390,426
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:
Years Ended December 31, ($ in
thousands)
2018 2017
2016 Niche Market Activities $ 92,163 $ 101,333 $ 106,490
Jones Act Handysize Tankers (4,238 ) 5,991 36,750 ATBs 12,477
25,977 70,019 Vessel Operating Contribution 100,402
133,301 213,259
Depreciation and amortization
50,512 58,673 89,563 General and administrative 26,881 27,464
41,060 Severance costs — 16 12,996 (Gain)/loss on disposal of
vessels and other property, including impairments (877 ) 13,200
104,532 Income/(loss) from vessel operations $ 23,886
$ 33,948 $ (34,892 )
(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 EndedDecember
31,
Years EndedDecember 31,
($ in thousands)
2018 2017 2018
2017 Net (loss)/income from continuing
operations $ (5,176 ) $ 53,645 $ 13,489 $ 55,978 Income tax
expense/(benefit) from continuing operations 4,107 (59,679 )
(17,714 ) (57,627 ) Interest expense 7,488 9,125 30,890 37,401
Depreciation and amortization 12,885 12,573 50,512
58,673 EBITDA 19,304 15,664 77,177 94,425
Amortization classified in charter hire expenses 387 465 1,781
1,859 Interest expense classified in charter hire expenses 420 450
1,711 1,831 (Gain)/loss on disposal of vessels and other property,
including impairments (877 ) 5,847 (877 ) 13,200 Loss on
repurchases and extinguishment of debt 2,417 1,238 3,399 3,237
Non-cash stock based compensation expense 1,473 1,112 3,785 3,638
Reorganization items, net — (8 ) — 190 Severance costs — —
— 16 Adjusted EBITDA $ 23,124 $ 24,768
$ 86,976 $ 118,396
(C) Total Cash
($ in thousands)
December 31,2018
December 31,2017
Cash and cash equivalents $ 80,417 $ 165,994 Restricted cash -
current 59 58 Restricted cash – non-current 165 217 Total Cash $
80,641 $ 166,269
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version on businesswire.com: https://www.businesswire.com/news/home/20190308005099/en/
Investor Relations & Media Contact:Susan Allan,
Overseas Shipholding Group, Inc.(813) 209-0620sallan@osg.com
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