OSGB Overseas Shipholding Grp. Com CL B (delisted)

Overseas Shipholding Group, Inc. (OSG) (NYSE MKT:OSGB), a provider of oceangoing energy transportation services, today reported results for the quarter ended September 30, 2015.

Highlights

• Time charter equivalent (TCE) revenues(1) for the third quarter of 2015 were $233.6 million, up 33% compared with the same period in 2014.
• Net income for the third quarter was $173.4 million, or $0.33 per diluted share, compared with $10.6 million, or $0.03 per diluted share, in the third quarter of 2014. The increase included net tax benefits of $119.1 million recorded in third quarter 2015 that were not a result of pre-tax income in the quarter.
• Adjusted EBITDA(2) was $123.9 million, up 88% from $65.8 million in the same period in 2014.
• Total cash(3) was $654.6 million as of September 30, 2015, growing from $512.4 million at the end of 2014.
• Repurchased approximately $101 million in principal amount of unsecured notes, reducing annual cash interest expense by approximately $8 million.
• The Board of Directors authorized a $200 million equity repurchase plan, for purchases during the next two years.
• Entered into a pre-filing closing agreement with the Internal Revenue Service (IRS), which contributes to a cash refund of $54.9 million anticipated to be received in fourth quarter 2015 and increased net operating loss carryforwards available to reduce future taxable income of approximately $392 million.

“Our third quarter results reflect the earning power of our 79 vessel fleet and the effectiveness of our operating strategy,” said Captain Ian T. Blackley, OSG’s president and CEO. “Our international fleet predominantly trades in the spot market, which continues to demonstrate underlying strength in both crude and product, and we enjoy the security of medium-term time charters in the domestic market. Our strong cash generation is giving us significant flexibility to enhance our capital structure, position the firm to take advantage of growth opportunities and deliver value for our shareholders.”

Third Quarter & First Nine Months of 2015 Results

TCE revenues grew to $233.6 million for the quarter, an increase of $57.4 million compared with the third quarter of 2014, driven by continuing strength in international crude and product spot market rates. TCE revenues grew to $690.4 million for the first nine months of 2015, an increase of $128.0 million compared with the first nine months of 2014.

Net income for the third quarter of 2015 was $173.4 million, or $0.33 per diluted share, compared with $10.6 million, or $0.03 per diluted share in the third quarter of 2014. The Company entered into a final IRS closing agreement regarding payments it made on behalf of OSG International (OIN) at its emergence from bankruptcy. The IRS agreed these payments are a deductible expense, and as a result, the Company recognized a one-time, non-cash income tax benefit of $150.1 million. Accordingly, OSG’s investment in OIN for financial reporting purposes now exceeds its tax basis; as management does not believe it can assert that investment is indefinite, the Company was required to record a non-cash tax liability of $31.0 million.

Net income for the first nine months of 2015 was $274.7 million, or $0.52 per diluted share, compared to a net loss for the first nine months of 2014 of $178.8 million.

Adjusted EBITDA was $123.9 million for the quarter, an increase of $58.1 million compared with the third quarter of 2014, driven primarily by the strength of spot rates in the international crude and product markets. Adjusted EBITDA was $368.2 million for the first nine months of 2015, an increase of $160.6 million compared with the first nine months of 2014, driven primarily by those higher rates.

International Crude Tankers

TCE revenues for the International Crude Tankers segment were $76.2 million for the quarter, an increase of $26.8 million compared with the third quarter of 2014. This significant increase resulted from a substantial strengthening in daily rates across all vessel types in the segment, with the VLCC spot rate increasing to approximately $57,600 per day in the third quarter, up nearly three times from the comparable 2014 period; the Aframax spot rate increasing 80% to $35,500 per day; and the Panamax blended rate increasing 19% to $19,000 per day. TCE revenues for the International Crude Tankers segment were $220.0 million for the first nine months of 2015, an increase of $43.0 million compared with the first nine months of 2014.

International Product Carriers

TCE revenues for the International Product Carriers segment were $50.0 million for the quarter, an increase of $21.2 million compared with the third quarter of 2014. This significant increase resulted primarily from higher Medium Range (MR) spot rates, nearly doubling from the same period in 2014 to approximately $22,000 per day. TCE revenues for the International Product Carriers segment were $135.9 million for the first nine months of 2015, an increase of $53.5 million compared with the first nine months of 2014.

U.S. Flag

TCE revenues for the U.S. Flag segment were $107.4 million for the quarter, an increase of $9.4 million compared with the third quarter of 2014, driven by a $6.4 million, or 11% increase in Jones Act Product Carrier TCE revenues, largely driven by increased rates achieved on renewal of expiring time charters. TCE revenues for the U.S. Flag segment were $334.5 million for the first nine months of 2015, an increase of $31.5 million compared with the first nine months of 2014.

Conference Call

The Company will host a conference call to discuss its third quarter 2015 results at 9:00 a.m. ET on Monday, November 9, 2015.

To access the call, participants should dial (866) 490-3149 for domestic callers and (707) 294-1567 for international callers. Please dial in ten minutes prior to the start of the call and enter Conference ID 72079545.

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 12:00 p.m. ET on Monday, November 9, 2015 through 11:59 p.m. ET on Monday, November 16, 2015 by dialing (855) 859-2056 for domestic callers and (404) 537-3406 for international callers, and entering Conference ID 72079545.

About OSG

Overseas Shipholding Group, Inc. (NYSE MKT: OSGB) is a publicly traded tanker company providing energy transportation services for crude oil and petroleum products in the U.S. and International Flag markets. 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 New York City, NY. 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, including statements regarding trends in the tanker and articulated tug/barge markets, and including prospects for certain strategic alliances and investments. 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. Investors should carefully consider the risk factors outlined in more detail in the Company’s Annual Report for 2014 on Form 10-K under the caption “Risk Factors” 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,   2015       2014         2015         2014  

Shipping Revenues:

(unaudited)       (unaudited)       (unaudited)       (unaudited) Pool revenues $97,797 $44,979 $267,157 $118,456 Time and bareboat charter revenues 111,120 95,733 328,816 287,470 Voyage charter revenues 32,835         65,571         124,808         334,580   Total Shipping Revenues 241,752         206,283         720,781         740,506   Operating Expenses: Voyage expenses 8,164 30,046 30,348 178,068 Vessel expenses 70,448 68,066 207,966 201,463 Charter hire expenses 31,993 34,650 95,018 120,115 Depreciation and amortization (i) 38,743 38,063 113,731 113,393 General and administrative 21,376 19,119 58,129 63,029 Technical management transition costs - 854 40 2,686 Severance and relocation costs - 3,713 5 18,360 Gain on disposal of vessels and other property (3,185 )       (2,753 )       (4,258 )       (4,234 ) Total Operating Expenses 167,539         191,758         500,979         692,880   Income from vessel operations 74,213 14,525 219,802 47,626 Equity in income of affiliated companies 10,978         11,313         35,220         29,444   Operating income 85,191 25,838 255,022 77,070 Other (expense)/income (1,963 )       99         (1,842 )       378   Income before interest expense, reorganization items

and income taxes

83,228 25,937 253,180 77,448 Interest expense (29,191 )       (29,111 )       (86,691 )       (203,745 ) Income/(loss) before reorganization items

and income taxes

54,037 (3,174 ) 166,489 (126,297 ) Reorganization items, net (1,420 )       (49,756 )       (6,344 )       (165,135 ) Income (loss) before income taxes 52,617 (52,930 ) 160,145 (291,432 ) Income tax benefit 120,737         63,544         114,548         112,629   Net Income/(Loss) $173,354         $10,614         $274,693         $(178,803 )   Weighted Average Number of Common Shares Outstanding: Basic - Class A 520,678,592 322,529,046 520,622,720 108,691,107 Diluted - Class A 520,731,354 322,529,765 520,710,899 108,691,107 Basic and Diluted - Class B and Common Stock 7,920,566 16,532,116 7,922,754 25,903,529

Per Share Amounts:

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

$0.33

$0.03

$0.52 $(1.33 ) Diluted net income/(loss) – Class A and Class B

$0.33

$0.03

$0.52 $(1.33 )   (i) The three months and nine months depreciation amounts for the periods ended September 30, 2014 have been revised from the amounts previously reported in the quarterly report on Form 10-Q for the respective periods to reflect the correction of an error which resulted in an overstatement of depreciation expense on certain vessels. The error overstated three months and nine months depreciation expense for the periods ended September 30, 2014 by $2,169 and $6,446. This error had no impact on the full fiscal year 2014 amounts, or on periods prior to 2014.     Consolidated Balance Sheets

($ in thousands)

             

September 30,2015

     

December 31,2014

ASSETS (Unaudited) Current Assets: Cash and cash equivalents $628,015 $389,226 Restricted cash 17,579 53,085 Voyage receivables 74,787 101,513 Income tax recoverable 56,140 55,856 Other receivables 8,092 8,293 Inventories , prepaid expenses and other current assets 22,123 24,290 Deferred income taxes 5,312       5,312 Total Current Assets 812,048       637,575 Restricted cash – non current(i) 8,989

 

70,093 Vessels and other property, less accumulated depreciation 2,115,861 2,213,217 Deferred drydock expenditures, net 80,299       62,413 Total Vessels, Deferred Drydock and Other Property 2,196,160       2,275,630   Investments in and advances to affiliated companies 343,645 334,863 Intangible assets, less accumulated amortization 51,367 54,817 Other assets 62,627       63,513 Total Assets $3,474,836       $3,436,491     LIABILITIES AND EQUITY Current Liabilities: Accounts payable, accrued expenses and other current liabilities $85,746 $96,066 Income taxes payable 621 906 Current installments of long-term debt 61,314       12,314 Total Current Liabilities 147,681 109,286   Reserve for uncertain tax positions 2,228 34,520 Long-term debt 1,497,400 1,656,353 Deferred income taxes 199,569 283,277 Other liabilities 65,555       66,968 Total Liabilities 1,912,433 2,150,404 Equity: Total Equity 1,562,403       1,286,087 Total Liabilities and Equity $3,474,836       $3,436,491   (i) The December 31, 2014 balance sheet has been revised from that previously reported in the Annual Report on Form 10-K to reflect the correction of an error by reclassifying restricted cash of $70,093 from current assets to non-current assets and to reflect a corresponding reduction in the previously reported amount for total current assets. The error had no impact on the Company’s consolidated statements of operations, comprehensive loss, changes in equity/(deficit) or cash flows.     Consolidated Statements of Cash Flows

($ in thousands)

          Nine Months Ended September 30,  

 

2015         2014   (Unaudited)       (Unaudited) Cash Flows from Operating Activities: Net income/(loss) $ 274,693 $(178,803 ) Items included in net income/(loss) not affecting cash flows: Depreciation and amortization 113,731 113,393 Amortization of debt discount and other deferred financing costs 8,009 1,689 Compensation relating to restricted stock and stock option grants 2,511 644 Deferred income tax benefit (83,151 ) (76,141 ) Undistributed earnings of affiliated companies (29,497 ) (25,947 ) Deferred payment obligations on charters-in 590 2,669 Reorganization items, non-cash 255 55,511 Other – net 1,422 1,945 Items included in net income/(loss) related to investing and financing activities: Gain on disposal of vessels and other property – net (4,258 ) (4,234 ) Payments for drydocking (38,269 ) (29,385 ) Bankruptcy claim payments (7,916 ) (786,651 ) Deferred financing costs paid for loan modification (6,187 ) - Changes in other operating assets and liabilities (20,368 )       182,689   Net cash provided by/(used in) operating activities 211,535         (742,621 ) Cash Flows from Investing Activities: Change in restricted cash 96,610 (131,703 ) Expenditures for vessels (769 ) (32,068 ) Proceeds from disposal of vessels and other property 16,954 16,081 Expenditures for other property (53 ) (345 ) Investments in and advances to affiliated companies (153 ) - Repayments of advances from affiliated companies 25,000 30,197 Other – net (8 )       647   Net cash provided by / (used in) investing activities 137,581         (117,191 ) Cash Flows from Financing Activities: Issuance of common stock, net of issuance costs - 1,510,000 Issuance of debt, net of issuance and deferred financing costs - 1,178,760 Payments on debt, including adequate protection payments (9,235 ) (2,134,368 ) Repurchase of debt (101,092 ) - Purchases of treasury stock -         (162 ) Net cash (used in)/provided by financing activities (110,327 )       554,230   Net increase/(decrease) in cash and cash equivalents 238,789 (305,582 ) Cash and cash equivalents at beginning of year 389,226         601,927   Cash and cash equivalents at end of period $628,015         $296,345    

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 ended September 30, 2015 and the comparable period of 2014. Revenue days in the quarter ended September 30, 2015 totaled 6,337 compared with 7,201 in the prior year quarter. A summary fleet list by vessel class can be found later in this press release.

                    Three Months Ended September 30, 2015       Three Months Ended September 30, 2014           Spot       Fixed       Total       Spot       Fixed       Total International Crude Tankers                                                   ULCC                               Average TCE Rate $ — $ 39,000 $ — $ — Number of Revenue Days — 92 92 — — — VLCC Average TCE Rate $57,642 $ — $19,778 $ — Number of Revenue Days 648 — 648 898 — 898 Aframax Average TCE Rate $35,521 $ — $19,780 $ — Number of Revenue Days 564 — 564 913 — 913 Panamax Average TCE Rate $22,652 $15,522 $21,012 $12,062 Number of Revenue Days 347 362 709 355 459 814 Other Intl. Crude Tankers Revenue Days1         13       —       13       151       —       151 Total Intl. Crude Tankers Revenue Days         1,572       454       2,026       2,317       459       2,776 International Product Carriers                                         Aframax Product Carriers Average TCE Rate $48,062 $ — $7,649 $ — Number of Revenue Days 92 — 92 56 — 56 Panamax Product Carriers Average TCE Rate $23,959 $21,030 $21,804 $13,970 Number of Revenue Days 92 243 335 92 268 360 Handysize Product Carriers Average TCE Rate $22,258 $5,294 $11,814 $ — Number of Revenue Days         1,742       92       1,834       1,963       —       1,963 Total Intl. Product Carriers Revenue Days         1,926       335       2,261       2,111       268       2,379 U.S. Flag                                                   Jones Act Handysize Product Carriers Average TCE Rate $ — $63,754 $ — $58,705 Number of Revenue Days — 1,054 1,054 — 1,035 1,035 Non-Jones Act Handysize Product Carriers Average TCE Rate $26,220 $15,761 $12,014 $12,895 Number of Revenue Days 60 124 184 141 43 184 ATBs Average TCE Rate $ — $39,844 $ — $34,557 Number of Revenue Days — 649 649 — 640 640 Lightering Average TCE Rate $65,020 $ — $67,654 $ — Number of Revenue Days         163       —       163       187       —       187 Total U.S. Flag Revenue Days         223       1,827       2,050       328       1,718       2,046 TOTAL REVENUE DAYS         3,721       2,616       6,337       4,756       2,445       7,201   1 Other International Crude Tankers revenue days consists of the Company’s International Flag Lightering full service revenue days for the quarters ended September 30, 2015 and September 30, 2014.  

Fleet Information

As of September 30, 2015, OSG’s owned and operated fleet totaled 79 International Flag and U.S. Flag vessels (62 vessels owned and 17 chartered-in) compared with 81 at December 31, 2014. 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, 2015     Vessel Type         Number      

Weighted byOwnership

      Number       Weighted byOwnership      

TotalVessels

      VesselsWeighted byOwnership       Total Dwt(2) Operating Fleet                                                           FSO 2       1.0 —       — 2       1.0       873,916 VLCC and ULCC 9 9.0 — — 9 9.0 2,875,798 Aframax 7 7.0 — — 7 7.0 787,859 Panamax         8       8.0       —       —       8       8.0       557,187 International Flag Crude Tankers 26 25.0 — — 26 25.0 5,094,760   LR2 1 1.0 — — 1 1.0 109,999 LR1 4 4.0 — — 4 4.0 297,705 MR         13       13.0       7       7.0       20       20.0       955,979 International Flag Product Carriers 18 18.0 7 7.0 25 25.0 1,363,683                                                             Total Int’l Flag Operating Fleet         44       43.0       7       7.0       51       50.0       6,458,443                                                             Handysize Product Carriers 1 4 4.0 10 10.0 14 14.0 664,490 Clean ATBs 8 8.0 — — 8 8.0 226,064 Lightering ATBs         2       2.0       —       —       2       2.0       91,112 Total U.S. Flag Operating Fleet         14       14.0       10       10.0       24       24.0       981,666                                                             LNG Fleet         4       2.0       —       —       4       2.0       864,800 cbm Total Operating Fleet         62       59.0       17       17.0       79       76.0       7,440,109and864,800 cbm   1Includes two owned shuttle tankers, one chartered in shuttle tanker and two owned U.S. Flag Product Carriers that trade internationally.   2Total Dwt is defined as the total deadweight of all 79 vessels.  

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.

(1) 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 to shipping revenues as reported in the consolidated statements of operations follow:

       

Three Months Ended September 30,

   

Nine Months Ended September 30,

($ in thousands) 2015 2014         2015     2014 TCE revenues $233,588 $176,237         $690,433     $562,438 Add: Voyage Expenses 8,164 30,046         30,348     178,068 Shipping revenues $241,752 $ 206,283         $720,781     $740,506  

(2) EBITDA and Adjusted EBITDA

EBITDA represents net (loss)/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 do not represent, and should not be considered 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 by companies as a measure of operating results and performance, neither of those items as prepared by the Company 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) as reflected in the Company’s consolidated statements of operations to EBITDA and Adjusted EBITDA:

             

Three Months Ended September 30,

   

Nine Months Ended September 30,

($ in thousands) 2015   2014         2015     2014 Net Income/(loss) $173,354   $10,614     $274,693     $(178,803) Income tax benefit (120,737) (63,544) (114,548) (112,629) Interest expense 29,191 29,111 86,691 203,745 Depreciation and amortization 38,743   38,063         113,731     113,393 EBITDA 120,551 14,244 360,567 25,706 Technical management transition costs - 854 40 2,686 Severance and relocation costs - 3,713 5 18,360 Gain on disposal of vessels and other property (3,185) (2,753) (4,258) (4,234) Loss on repurchase of debt 2,051 - 2,039 - Write-off of registration statement costs 3,082 - 3,493 - Reorganization items, net 1,420   49,756         6,344     165,135 Adjusted EBITDA $123,919   $ 65,814         $368,230     $207,653  

(3) Total Cash

($ in thousands)        

September 30,2015

      December 31,

2014

      Cash and cash equivalents $628,015 $389,226 Restricted cash 26,568       123,178 Total Cash $654,583       $512,404    

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Investor Relations & Media Contact:Overseas Shipholding Group, Inc.Brian Tanner, 212-578-1645btanner@osg.com