UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30,March 31, 20232024
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____to_____
Commission File Number: 001-06479
OVERSEAS SHIPHOLDING GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware | 13-2637623 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
302 Knights Run Avenue, Tampa, Florida | 33602 | |
(Address of principal executive office) | (Zip Code) |
(813) 209-0600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A Common Stock (par value $0.01 per share) | OSG | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S–T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☒ | Non-accelerated filer ☐ | Smaller reporting company | |||
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No No☒ ☒
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the issuer’s Class A common stock, par value $0.01, as of November 2, 2023:May 6, 2024: shares. Excluded from this amount are warrants outstanding as of November 2, 2023May 6, 2024 for the purchase of 809,575507,797 shares of Class A common stock for nominal consideration.
TABLE OF CONTENTS
2 |
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DOLLARS IN THOUSANDS
September 30, 2023 | December 31, 2022 | March 31, 2024 | December 31, 2023 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
ASSETS | ||||||||||||||||
Current Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 97,598 | $ | 78,732 | $ | 82,203 | $ | 76,257 | ||||||||
Investment security to be held to maturity | 14,900 | — | 14,950 | 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 | ||||||||||||||
Voyage receivables, including unbilled of $4,081 and $4,976, net of reserve for credit losses | 9,415 | 17,362 | ||||||||||||||
Income tax recoverable | 447 | 407 | ||||||||||||||
Other receivables | 2,227 | 5,334 | 2,275 | 3,140 | ||||||||||||
Inventories, prepaid expenses and other current assets | 3,237 | 2,668 | 6,682 | 2,522 | ||||||||||||
Total Current Assets | 131,180 | 108,346 | 115,972 | 114,588 | ||||||||||||
Vessels and other property, less accumulated depreciation | 679,399 | 726,179 | ||||||||||||||
Vessels and other property, less accumulated depreciation and amortization | 695,633 | 699,032 | ||||||||||||||
Deferred drydock expenditures, net | 41,703 | 38,976 | 45,680 | 44,827 | ||||||||||||
Total Vessels, Other Property and Deferred Drydock | 721,102 | 765,155 | ||||||||||||||
Total Vessels, Deferred Drydock and Other Property | 741,313 | 743,859 | ||||||||||||||
Intangible assets, less accumulated amortization | 14,567 | 18,017 | 12,267 | 13,417 | ||||||||||||
Operating lease right-of-use assets, net | 187,135 | 206,797 | ||||||||||||||
Investment security to be held to maturity | — | 14,803 | ||||||||||||||
Operating lease right-of-use assets | 192,636 | 172,703 | ||||||||||||||
Other assets | 27,188 | 25,945 | 34,652 | 34,317 | ||||||||||||
Total Assets | $ | 1,081,172 | $ | 1,139,063 | $ | 1,096,840 | $ | 1,078,884 | ||||||||
LIABILITIES AND EQUITY | ||||||||||||||||
Current Liabilities: | ||||||||||||||||
Accounts payable, accrued expenses and other current liabilities | $ | 49,061 | $ | 54,906 | $ | 53,165 | $ | 60,911 | ||||||||
Current installments of long-term debt | 56,205 | 43,305 | ||||||||||||||
Current portion of operating lease liabilities | 67,320 | 63,288 | 64,779 | 65,272 | ||||||||||||
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 | 174,149 | 169,488 | ||||||||||||
Reserve for uncertain tax positions | 212 | 175 | 295 | 285 | ||||||||||||
Long-term debt, net | 338,215 | 357,406 | ||||||||||||||
Deferred income taxes, net | 82,511 | 79,373 | ||||||||||||||
Noncurrent operating lease liabilities | 127,266 | 149,960 | 128,191 | 107,911 | ||||||||||||
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 | 10,605 | 10,368 | ||||||||||||
Total Liabilities | 738,525 | 799,378 | 733,966 | 724,831 | ||||||||||||
Equity: | ||||||||||||||||
Common stock - Class A ($ | par value; shares authorized; and shares issued; and shares outstanding)895 | 883 | ||||||||||||||
Common stock - Class A ($ | par value; shares authorized; and shares issued; and shares outstanding)903 | 895 | ||||||||||||||
Paid-in additional capital | 587,447 | 597,455 | 587,087 | 588,361 | ||||||||||||
Accumulated deficit | (190,989 | ) | (233,023 | ) | (164,534 | ) | (174,825 | ) | ||||||||
Treasury stock, | and shares, at cost(57,540 | ) | (29,040 | ) | ||||||||||||
Treasury stock, | shares at cost(64,380 | ) | (64,380 | ) | ||||||||||||
Stockholder’s Equity Subtotal | 339,813 | 336,275 | 359,076 | 350,051 | ||||||||||||
Accumulated other comprehensive income | 2,834 | 3,410 | 3,798 | 4,002 | ||||||||||||
Total Equity | 342,647 | 339,685 | 362,874 | 354,053 | ||||||||||||
Total Liabilities and Equity | $ | 1,081,172 | $ | 1,139,063 | $ | 1,096,840 | $ | 1,078,884 |
See notes to condensed consolidated financial statements.
3 |
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Shipping Revenues: | ||||||||||||||||||||||||
Time and bareboat charter revenues | $ | 93,224 | $ | 92,730 | $ | 264,621 | $ | 232,934 | $ | 95,931 | $ | 84,140 | ||||||||||||
Voyage charter revenues | 22,211 | 30,329 | 71,230 | 112,108 | 21,566 | 29,651 | ||||||||||||||||||
Total shipping revenues | 115,435 | 123,059 | 335,851 | 345,042 | 117,497 | 113,791 | ||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||
Voyage expenses | 6,858 | 7,997 | 22,413 | 32,813 | 6,805 | 9,056 | ||||||||||||||||||
Vessel expenses | 39,969 | 45,430 | 123,337 | 130,380 | 42,038 | 42,571 | ||||||||||||||||||
Charter hire expenses | 16,233 | 22,743 | 47,988 | 67,089 | 16,818 | 15,737 | ||||||||||||||||||
Depreciation and amortization | 17,003 | 17,902 | 49,500 | 51,058 | 17,994 | 16,048 | ||||||||||||||||||
General and administrative | 7,173 | 6,556 | 21,614 | 20,929 | 10,354 | 7,843 | ||||||||||||||||||
Total operating expenses | 87,236 | 100,628 | 264,852 | 302,269 | 94,009 | 91,255 | ||||||||||||||||||
Operating income | 28,199 | 22,431 | 70,999 | 42,773 | 23,488 | 22,536 | ||||||||||||||||||
Other income, net | 1,643 | 568 | 4,184 | 649 | 1,235 | 1,080 | ||||||||||||||||||
Income before interest expense and income taxes | 29,842 | 22,999 | 75,183 | 43,422 | 24,723 | 23,616 | ||||||||||||||||||
Interest expense | (7,779 | ) | (8,229 | ) | (24,019 | ) | (24,869 | ) | ||||||||||||||||
Interest expense, net | (6,782 | ) | (8,156 | ) | ||||||||||||||||||||
Income before income taxes | 22,063 | 14,770 | 51,164 | 18,553 | 17,941 | 15,460 | ||||||||||||||||||
Income tax expense | (4,471 | ) | (1,522 | ) | (9,131 | ) | (2,074 | ) | (3,300 | ) | (3,321 | ) | ||||||||||||
Net income | $ | 17,592 | $ | 13,248 | $ | 42,033 | $ | 16,479 | $ | 14,641 | $ | 12,139 | ||||||||||||
Weighted Average Number of Common Shares Outstanding: | ||||||||||||||||||||||||
Basic - Class A | 78,263,667 | 88,174,640 | 80,544,607 | 87,579,624 | 71,901,503 | 82,006,666 | ||||||||||||||||||
Diluted - Class A | 80,700,618 | 90,349,567 | 83,233,332 | 89,211,983 | 75,159,109 | 85,340,906 | ||||||||||||||||||
Per Share Amounts: | ||||||||||||||||||||||||
Basic net income - Class A | $ | 0.22 | $ | 0.15 | $ | 0.52 | $ | 0.19 | $ | 0.20 | $ | 0.15 | ||||||||||||
Diluted net income - Class A | $ | 0.22 | $ | 0.15 | $ | 0.51 | $ | 0.18 | $ | 0.19 | $ | 0.14 |
See notes to condensed consolidated financial statements.
4 |
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
DOLLARS IN THOUSANDS
(UNAUDITED)
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Net income | $ | 17,592 | $ | 13,248 | $ | 42,033 | $ | 16,479 | $ | 14,641 | $ | 12,139 | ||||||||||||
Other comprehensive loss, net of tax: | ||||||||||||||||||||||||
Defined benefit pension and other postretirement benefit plans: | ||||||||||||||||||||||||
Net change in unrecognized prior service costs | (181 | ) | (180 | ) | (542 | ) | (541 | ) | (179 | ) | (208 | ) | ||||||||||||
Net change in unrecognized actuarial losses | (11 | ) | — | (34 | ) | — | (25 | ) | 16 | |||||||||||||||
Other comprehensive loss | (192 | ) | (180 | ) | (576 | ) | (541 | ) | (204 | ) | (192 | ) | ||||||||||||
Comprehensive income | $ | 17,400 | $ | 13,068 | $ | 41,457 | $ | 15,938 | $ | 14,437 | $ | 11,947 |
See notes to condensed consolidated financial statements.
5 |
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
DOLLARS IN THOUSANDS
(UNAUDITED)
2023 | 2022 | 2024 | 2023 | |||||||||||||
Nine Months Ended September 30, | Three Months Ended March 31, | |||||||||||||||
2023 | 2022 | 2024 | 2023 | |||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||
Net income | $ | 42,033 | $ | 16,479 | $ | 14,641 | $ | 12,139 | ||||||||
Items included in net income not affecting cash flows: | ||||||||||||||||
Depreciation and amortization | 49,500 | 51,058 | 17,994 | 16,048 | ||||||||||||
Amortization of debt discount and other deferred financing costs | 855 | 840 | 283 | 282 | ||||||||||||
Compensation relating to restricted stock awards and stock option grants | 2,556 | 3,237 | 918 | 800 | ||||||||||||
Deferred income tax expense | 9,068 | 1,998 | 3,148 | 3,287 | ||||||||||||
Interest on finance lease liabilities | 917 | 1,228 | — | 370 | ||||||||||||
Non-cash operating lease expense | 48,970 | 67,769 | 16,986 | 15,892 | ||||||||||||
Payments for drydocking | (12,862 | ) | (13,896 | ) | (5,456 | ) | (1,918 | ) | ||||||||
Operating lease liabilities | (50,257 | ) | (69,368 | ) | (17,133 | ) | (16,292 | ) | ||||||||
Changes in operating assets and liabilities, net | (7,730 | ) | (18,166 | ) | (6,638 | ) | 5,088 | |||||||||
Net cash provided by operating activities | 83,050 | 41,179 | 24,743 | 35,696 | ||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||
Expenditures for vessels and vessel improvements | (2,593 | ) | (4,519 | ) | (5,782 | ) | (454 | ) | ||||||||
Purchase of investment security to be held to maturity | — | (14,794 | ) | |||||||||||||
Net cash used in investing activities | (2,593 | ) | (19,313 | ) | (5,782 | ) | (454 | ) | ||||||||
Cash Flows from Financing Activities: | ||||||||||||||||
Payments on debt | (17,522 | ) | (16,530 | ) | (6,571 | ) | (5,787 | ) | ||||||||
Tax withholding on share-based awards | (1,168 | ) | (496 | ) | (2,184 | ) | (1,168 | ) | ||||||||
Dividends paid | (4,256 | ) | — | |||||||||||||
Deferred financing costs paid for debt amendments | (4 | ) | (40 | ) | ||||||||||||
Payments on principal portion of finance lease liabilities | (2,964 | ) | (3,124 | ) | — | (1,026 | ) | |||||||||
Deferred financing costs paid for debt amendments | (53 | ) | (261 | ) | ||||||||||||
Purchases of treasury stock and Class A warrants | (39,884 | ) | (11,026 | ) | — | (1,862 | ) | |||||||||
Net cash used in financing activities | (61,591 | ) | (31,437 | ) | (13,015 | ) | (9,883 | ) | ||||||||
Net increase/(decrease) in cash and cash equivalents | 18,866 | (9,571 | ) | |||||||||||||
Net increase in cash and cash equivalents | 5,946 | 25,359 | ||||||||||||||
Cash and cash equivalents at beginning of period | 78,732 | 83,253 | 76,257 | 78,732 | ||||||||||||
Cash and cash equivalents at end of period | $ | 97,598 | $ | 73,682 | $ | 82,203 | $ | 104,091 |
See notes to condensed consolidated financial statements.
6 |
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
DOLLARS IN THOUSANDS
(UNAUDITED)
Common Stock (1) | Paid-in Additional Capital (2) | Accumulated Deficit | Treasury Stock | Accumulated Other Comprehensive Income (3) | Total | |||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | 872 | $ | 594,386 | $ | (259,587 | ) | $ | — | $ | 2,943 | $ | 338,614 | |||||||||||||||||||||||||||||||||||
Net loss | — | — | (509 | ) | — | — | (509 | ) | ||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (180 | ) | (180 | ) | ||||||||||||||||||||||||||||||||||||||||
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net | 5 | (375 | ) | — | — | — | (370 | ) | ||||||||||||||||||||||||||||||||||||||||
Compensation related to Class A restricted stock awards | — | 656 | — | — | — | 656 | ||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 | 877 | 594,667 | (260,096 | ) | — | 2,763 | 338,211 | |||||||||||||||||||||||||||||||||||||||||
Net income | — | — | 3,740 | — | — | 3,740 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (181 | ) | (181 | ) | ||||||||||||||||||||||||||||||||||||||||
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net | 3 | (3 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Compensation related to Class A restricted stock awards | — | 1,735 | — | — | — | 1,735 | ||||||||||||||||||||||||||||||||||||||||||
Purchases under the stock repurchase program | — | — | — | (310 | ) | — | (310 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | 880 | 596,399 | (256,356 | ) | (310 | ) | 2,582 | 343,195 | ||||||||||||||||||||||||||||||||||||||||
Net income | — | — | 13,248 | — | — | 13,248 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (180 | ) | (180 | ) | ||||||||||||||||||||||||||||||||||||||||
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net | 3 | (128 | ) | — | — | — | (125 | ) | ||||||||||||||||||||||||||||||||||||||||
Compensation related to Class A restricted stock awards | — | 846 | — | — | — | 846 | ||||||||||||||||||||||||||||||||||||||||||
Purchases under the stock repurchase program | — | — | — | (10,716 | ) | — | (10,716 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2022 | $ | 883 | $ | 597,117 | $ | (243,108 | ) | $ | (11,026 | ) | $ | 2,402 | $ | 346,268 | ||||||||||||||||||||||||||||||||||
Common Stock (1) | Paid-in Additional Capital (2) | Accumulated Deficit | Treasury Stock | Accumulated Other Comprehensive Income (3) | Total | |||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2022 | $ | 883 | $ | 597,455 | $ | (233,023 | ) | $ | (29,040 | ) | $ | 3,410 | $ | 339,685 | $ | 883 | $ | 597,455 | $ | (233,023 | ) | $ | (29,040 | ) | $ | 3,410 | $ | 339,685 | ||||||||||||||||||||
Net income | — | — | 12,139 | — | — | 12,139 | — | — | 12,139 | — | — | 12,139 | ||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (192 | ) | (192 | ) | — | — | — | — | (192 | ) | (192 | ) | ||||||||||||||||||||||||||||||||
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net | 8 | (1,176 | ) | — | — | — | (1,168 | ) | 8 | (1,176 | ) | — | — | — | (1,168 | ) | ||||||||||||||||||||||||||||||||
Compensation related to Class A restricted stock awards | — | 800 | — | — | — | 800 | — | 800 | — | — | — | 800 | ||||||||||||||||||||||||||||||||||||
Conversion of Class A warrants to Class A common stock | 1 | (1 | ) | — | — | — | — | 1 | (1 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||||
Purchases of treasury stock | — | — | — | (1,862 | ) | — | (1,862 | ) | — | — | — | (1,862 | ) | — | (1,862 | ) | ||||||||||||||||||||||||||||||||
Balance at March 31, 2023 | 892 | 597,078 | (220,884 | ) | (30,902 | ) | 3,218 | 349,402 | $ | 892 | $ | 597,078 | $ | (220,884 | ) | $ | (30,902 | ) | $ | 3,218 | $ | 349,402 | ||||||||||||||||||||||||||
Balance at December 31, 2023 | $ | 895 | $ | 588,361 | $ | (174,825 | ) | $ | (64,380 | ) | $ | 4,002 | $ | 354,053 | ||||||||||||||||||||||||||||||||||
Balance | $ | 895 | $ | 588,361 | $ | (174,825 | ) | $ | (64,380 | ) | $ | 4,002 | $ | 354,053 | ||||||||||||||||||||||||||||||||||
Net income | — | — | 12,303 | — | — | 12,303 | — | — | 14,641 | — | — | 14,641 | ||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (192 | ) | (192 | ) | — | — | — | — | (204 | ) | (204 | ) | ||||||||||||||||||||||||||||||||
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net | 3 | (3 | ) | — | — | — | — | 8 | (2,192 | ) | — | — | — | (2,184 | ) | |||||||||||||||||||||||||||||||||
Compensation related to Class A restricted stock awards | — | 862 | — | — | — | 862 | — | 918 | — | — | — | 918 | ||||||||||||||||||||||||||||||||||||
Conversion of Class A warrants to Class A common stock | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Purchases of treasury stock | — | — | — | (7,985 | ) | — | (7,985 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2023 | 895 | 597,937 | (208,581 | ) | (38,887 | ) | 3,026 | 354,390 | ||||||||||||||||||||||||||||||||||||||||
Net income | — | — | 17,592 | — | — | 17,592 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (192 | ) | (192 | ) | ||||||||||||||||||||||||||||||||||||||||
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Compensation related to Class A restricted stock awards | — | 894 | — | — | — | 894 | ||||||||||||||||||||||||||||||||||||||||||
Conversion of Class A warrants to Class A common stock | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Purchases of treasury stock | — | — | — | (18,653 | ) | — | (18,653 | ) | ||||||||||||||||||||||||||||||||||||||||
Purchase of Class A warrants | — | (11,384 | ) | — | — | — | (11,384 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2023 | $ | 895 | $ | 587,447 | $ | (190,989 | ) | $ | (57,540 | ) | $ | 2,834 | $ | 342,647 | ||||||||||||||||||||||||||||||||||
Dividends declared | — | — | (4,350 | ) | — | — | (4,350 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2024 | $ | 903 | $ | 587,087 | $ | (164,534 | ) | $ | (64,380 | ) | $ | 3,798 | $ | 362,874 | ||||||||||||||||||||||||||||||||||
Balance | $ | 903 | $ | 587,087 | $ | (164,534 | ) | $ | (64,380 | ) | $ | 3,798 | $ | 362,874 |
(1) | Par value $ | |
(2) | Includes | |
(3) | Amounts are net of tax. |
See notes to condensed consolidated financial statements.
7 |
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
Note 1 — Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Overseas Shipholding Group, Inc., a Delaware corporation (the “Parent Company”), and its wholly owned subsidiaries (collectively, the “Company” or “OSG”, “we”, “us” or “our”). The Company owns and operates a fleet of oceangoing vessels engaged primarily in the transportation of crude oil and refined petroleum products in the U.S. Flag trade.
These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and notes required by generally accepted accounting principles in the United States (“GAAP”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the results have been included. Operating results for the three and nine months ended September 30, 2023March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 20232024 or for any other period.
The condensed consolidated balance sheet as of December 31, 20222023 has been derived from the audited financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20222023 (the “Form 10-K”).
Note 2 — Recently Adopted and Issued Accounting Standards
In November 2019,2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-10, Financial Instruments – Credit Losses2023-07, Segment Reporting (Topic 326), Derivatives280): Improvements to Reportable Segment Disclosure. The amendments require a public entity to disclose significant segment expenses and Hedging (Topic 815)other segment items on an annual and Leases (Topic 842): Effective Dates, which allowsinterim basis and to provide in interim periods all disclosures about a two-bucket approach for determining the effective dates of these accounting standards. Under this approach, the buckets would be defined as follows:
Bucket 1— All public business entities (“PBEs”)reportable segment’s profit or loss and assets that are SEC filers (as definedcurrently required annually. Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under Accounting Standards Codification (“ASC”) 280. The guidance is effective for all public entities for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The enhanced segment disclosure requirements apply retrospectively to all prior periods presented in GAAP), excluding smaller reporting companies (“SRCs”) (as defined by the Securitiesfinancial statements. The significant segment expense and Exchange Commission (“SEC”). Thisother segment item amounts disclosed in prior periods shall be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company will adopt this standard became effective January 1, 2020.
Bucket 2— All other entities, including SRCs, other PBEs that are not SEC filers, private companies, not-for-profit organizations, and employee benefit plans. This standard became effective January 1, 2023.
At June 30, 2019,for its 2024 Form 10-K. Management is currently reviewing the evaluation date for purposes of determining the applicabilityimpact of the Bucket 2 credit losses standard, the Company met the SEC definition of a smaller reporting company. The Company adopted that standard on January 1, 2023. The adoption of thethis accounting standard did not have a material impact on the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The new requirements will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. The Company will adopt this standard on January 1, 2025. Management is currently reviewing the impact of the adoption of this accounting standard on the Company’s consolidated financial statements.
Note 3 - Revenue Recognition
Disaggregated Revenue
The Company has disaggregated revenue from contracts with customers into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The disaggregation below is based on contract type. Since the terms within these contract types are generally standard in nature, the Company does not believe that further disaggregation would result in increased insight into the economic factors impacting revenue and cash flows.
The following table shows the Company’s shipping revenues disaggregated by nature of the charter arrangement for the three and nine months ended September 30, 2023March 31, 2024 and 2022:2023:
Schedule of Disaggregation of Revenue
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Time and bareboat charter revenues | $ | 93,224 | $ | 92,730 | $ | 264,621 | $ | 232,934 | $ | 95,931 | $ | 84,140 | ||||||||||||
Voyage charter revenues (1) | 8,421 | 17,665 | 28,864 | 73,036 | 3,558 | 13,789 | ||||||||||||||||||
Contracts of affreightment (“COA”) revenues | 13,790 | 12,664 | 42,366 | 39,072 | 18,008 | 15,862 | ||||||||||||||||||
Total shipping revenues | $ | 115,435 | $ | 123,059 | $ | 335,851 | $ | 345,042 | $ | 117,497 | $ | 113,791 |
(1) | For the three months ended |
Voyage Receivables
As of September 30, 2023 and December 31, 2022, contract balances from contracts with customers consisted of voyage receivables of $9,317 and $9,258, respectively, net of reserves for credit losses for voyage charters and lightering contracts, which were not material.
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OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
Voyage Receivables
As of March 31, 2024 and December 31, 2023, contract balances from contracts with customers consisted of voyage receivables of $4,386 and $7,768, respectively, net of reserves for credit losses for voyage charters and lightering contracts, which were not material.
Transaction Price Allocated to the Remaining Performance Obligations
As of September 30, 2023,March 31, 2024, the Company expects to recognize revenue of approximately $11,77936,653 for the remainder of 2023, $47,578 for 2024 and $14,608 for 2025 under COAs. These estimated amounts relate to the fixed consideration of contractual minimums within the contracts based on the Company’s estimate of future services.
Basic earnings per common share is computed by dividing earnings by the weighted average number of common shares outstanding during the period. As management deems the exercise price for the Class A warrants of $0.01 per share to be nominal, warrant proceeds are ignored, and the shares issuable upon exercises of Class A warrants are included in the calculation of basic weighted average common shares outstanding for all periods.
The computation of diluted earnings per share assumes the issuance of common stock for all potentially dilutive stock options and restricted stock units.units (“RSUs”). Participating securities are defined by ASC 260, Earnings Per Share, as unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents and are included in the computation of earnings per share pursuant to the two-class method.
Class A
As of September 30, 2023,March 31, 2024, there were shares of Class A common stock issuable under outstanding restricted stock unitsRSUs and shares of Class A common stock issuable under outstanding options, both of which are considered to be potentially dilutive securities. As of September 30, 2022,March 31, 2023, there were shares of Class A common stock issuable under outstanding restricted stock unitsRSUs and shares of Class A common stock issuable under outstanding options, both of which are considered to be potentially dilutive securities.
Schedule of Earnings Per Share
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Net income | $ | 17,592 | $ | 13,248 | $ | 42,033 | $ | 16,479 | $ | 14,641 | $ | 12,139 | ||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||||||
Class A common stock - basic | 78,263,667 | 88,174,640 | 80,544,607 | 87,579,624 | 71,901,503 | 82,006,666 | ||||||||||||||||||
Class A common stock - diluted | 80,700,618 | 90,349,567 | 83,233,332 | 89,211,983 | 75,159,109 | 85,340,906 |
For the three and nine months ended September 30,March 31, 2024 and 2023, there were dilutive equity awards outstanding covering and shares, respectively. For the three months ended March 31, 2024, there were anti-dilutive shares. Awards of and shares (related to RSUs and stock options), respectively, were not included in the computation of diluted earnings per share because inclusion of these awards would be anti-dilutive for the three and nine months ended September 30,March 31, 2023. For the three and nine months ended September 30, 2022, there were dilutive equity awards outstanding covering and shares, respectively. Awards of and shares (related to restricted stock units and stock options), respectively, were not included in the computation of diluted earnings per share because inclusion of these awards would be anti-dilutive for the three and nine months ended September 30, 2022.
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OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
Note 5 — Investment in Security to be Held to Maturity
In July 2022, the Company purchased a $15,000 U.S. Treasury Note for $14,794, with a maturity date of August 15, 2024. The U.S. Treasury Note is classified as investment in security to be held to maturity and is carried at amortized cost on the condensed consolidated balance sheets, as the Company has the intent and ability to hold until maturity. The amortized cost, gross unrealized loss and fair value of the U.S. Treasury Note at September 30, 2023March 31, 2024 and December 31, 20222023 was as follows:
Schedule of Fair Value of the U.S. Treasury Note
September 30, 2023 | Amortized Cost | Gross Unrealized Loss | Fair Value | |||||||||||||||||||||
March 31, 2024 | Amortized Cost | Gross Unrealized Loss | Fair Value | |||||||||||||||||||||
U.S. Treasury Note | $ | 14,900 | $ | (298 | ) | $ | 14,602 | $ | 14,950 | $ | (114 | ) | $ | 14,836 | ||||||||||
$ | 14,900 | $ | (298 | ) | $ | 14,602 | $ | 14,950 | $ | (114 | ) | $ | 14,836 |
December 31, 2022 | Amortized Cost | Gross Unrealized Loss | Fair Value | |||||||||||||||||||||
December 31, 2023 | Amortized Cost | Gross Unrealized Loss | Fair Value | |||||||||||||||||||||
U.S. Treasury Note | $ | 14,803 | $ | (328 | ) | $ | 14,475 | $ | 14,900 | $ | (148 | ) | $ | 14,752 | ||||||||||
$ | 14,803 | $ | (328 | ) | $ | 14,475 | $ | 14,900 | $ | (148 | ) | $ | 14,752 |
Other-Than-Temporarily Impaired (“OTTI”)
The Company performed a quarterly review of the U.S. Treasury Note in order to determine whether the decline in fair value below the amortized cost basis was considered other-than-temporary in accordance with applicable guidance. At September 30, 2023,March 31, 2024, the Company determined that the unrealized loss on the U.S. Treasury Note was primarily due to increases in interest rates. Therefore, there was no OTTI loss recognized during the three and nine months ended September 30, 2023March 31, 2024 or three monthsfor the year ended December 31, 2022.2023.
Note 6 — Fair Value Measurements and Fair Value Disclosures
The following methods and assumptions are used to estimate the fair value of each class of financial instrument:
Cash and cash equivalents and restricted cash—— The carrying amounts reported in the condensed consolidated balance sheet for interest-bearing deposits approximate fair value. Investments in trading securities consist of equity securities and were measured using quoted market prices at the reporting date.
U.S. Treasury Note — The fair value of the U.S. Treasury Note is based on a quoted market price in an active market.
Debt— The fair values of the publicly traded and non-public debt held by the Company are estimated based on similar instruments.
ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and establishes a framework for measuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions, based on the available information deemed best in the circumstances. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, the fair value of assets and liabilities should include consideration of non-performance risk, which for the liabilities described below includes the Company’s own credit risk.
The levels of the fair value hierarchy established by ASC 820 are as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities
Level 2 - Quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
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OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
Financial Instruments that are not Measured at Fair Value on a Recurring Basis
The estimated fair values of the Company’s financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows:
Schedule of Financial Instruments notNot Measured at Fair Value on a Recurring Basis
Carrying | Fair Value | Carrying | Fair Value | |||||||||||||||||||||
Value | Level 1 | Level 2 | Value | Level 1 | Level 2 | |||||||||||||||||||
September 30, 2023: | ||||||||||||||||||||||||
March 31, 2024: | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 97,598 | $ | 97,598 | $ | — | $ | 82,203 | $ | 82,203 | $ | — | ||||||||||||
U.S. Treasury Note | 14,900 | 14,602 | — | 14,950 | 14,836 | — | ||||||||||||||||||
Total | $ | 112,498 | $ | 112,200 | $ | — | $ | 97,153 | $ | 97,039 | $ | — | ||||||||||||
Liabilities | ||||||||||||||||||||||||
Term loan, due 2024, net | $ | 19,291 | $ | — | $ | 18,596 | $ | 18,587 | $ | — | $ | 18,292 | ||||||||||||
Alaska tankers term loan, due 2025, net | 21,413 | — | 20,030 | 18,751 | — | 18,027 | ||||||||||||||||||
OSG 204 LLC term loan, due 2025, net | 24,032 | — | 22,735 | 23,357 | — | 22,587 | ||||||||||||||||||
OSG 205 LLC and OSG Courageous II LLC term loan, due 2027, net | 42,721 | — | 38,444 | 41,597 | — | 38,504 | ||||||||||||||||||
Term loan, due 2028, net | 298,663 | — | 280,111 | 292,128 | — | 281,008 | ||||||||||||||||||
Unsecured senior notes, net | 390 | — | 387 | |||||||||||||||||||||
Total | $ | 406,510 | $ | — | $ | 380,303 | $ | 394,420 | $ | — | $ | 378,418 |
Carrying | Fair Value | Carrying | Fair Value | |||||||||||||||||||||
Value | Level 1 | Level 2 | Value | Level 1 | Level 2 | |||||||||||||||||||
December 31, 2022: | ||||||||||||||||||||||||
December 31, 2023: | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 78,732 | $ | 78,732 | $ | — | $ | 76,257 | $ | 76,257 | $ | — | ||||||||||||
U.S. Treasury Note | 14,803 | 14,475 | — | 14,900 | 14,752 | — | ||||||||||||||||||
Total | $ | 93,535 | $ | 93,207 | $ | — | $ | 91,157 | $ | 91,009 | $ | — | ||||||||||||
Liabilities | ||||||||||||||||||||||||
Term loan, due 2024, net | $ | 20,330 | $ | — | $ | 19,296 | $ | 18,942 | $ | — | $ | 18,546 | ||||||||||||
Alaska tankers term loan, due 2025, net | 25,289 | — | 23,195 | 20,091 | — | 19,203 | ||||||||||||||||||
OSG 204 LLC term loan, due 2025, net | 25,006 | — | 23,448 | 23,697 | — | 22,875 | ||||||||||||||||||
OSG 205 LLC and OSG Courageous II LLC term loan, due 2027, net | 44,342 | — | 40,331 | 42,163 | — | 39,350 | ||||||||||||||||||
Term loan, due 2028, net | 308,006 | — | 295,320 | 295,428 | — | 287,918 | ||||||||||||||||||
Unsecured senior notes, net | 390 | — | 385 | 390 | — | 389 | ||||||||||||||||||
Total | $ | 423,363 | $ | — | $ | 401,975 | $ | 400,711 | $ | — | $ | 388,281 |
Derivatives
During the fourth quarter of 2023, the Company entered into contracts for the purchase and installation of equipment related to engine life cycle upgrades on the Company’s four Alaska class vessels. The contracts are denominated in euros and the Company is party to forward contracts and options to fix the dollar cost of the project. The maturity dates and amounts of the forward contracts and options correspond to the scheduled payments due under the contracts. For the three months ended March 31, 2024, the Company concluded that the forward contracts and options were effective at hedging the scheduled payments.
Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring Basis
Vessel and Intangible Assets Impairments
During the thirdfirst quarter of 2023,2024, the Company considered whether events or changes in circumstances had occurred since December 31, 20222023 that could indicate whether the carrying amounts of the vessels, including operating right-of-use assets, in the Company’s fleet, and whether the carrying value of the Company’s intangible assets, may not be recoverable as of September 30, 2023.March 31, 2024. The Company concluded that no such events or changes in circumstances had occurred.
Note 7 — Taxes
For the three months ended September 30,March 31, 2024 and 2023, and 2022, the Company recorded income tax expense of $4,4713,300 and $1,5223,321, respectively, which represented effective tax rates of 20.318.4%% and 10.321.5%%, respectively. The increasedecrease in the effective tax rate for the three months ended September 30, 2023March 31, 2024 compared to the three months ended September 30, 2022March 31, 2023 was primarily due to the tonnage tax exclusion. For the nine months ended September 30, 2023a benefit related to stock compensation and 2022, the Company recorded income tax expense of $9,131 and $2,074, respectively, which represented effective tax rates of 17.9% and 11.2%, respectively.changes in state apportionment. The increase in the effective tax rate for the ninethree months ended September 30, 2023 compared toMarch 31, 2024 was less than the nine months ended September 30, 2022 was primarilystatutory rate due to thea benefit related to stock compensation and tonnage tax exclusion. The effective tax rate for the ninethree months ended September 30,March 31, 2023 was less than the statutory rate due to a favorable Louisiana law change and the tonnage tax exclusion. The effective tax rate for the nine months ended September 30, 2022 was lessmore than the statutory rate due to the tonnagestate tax exclusion.expense.
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OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
Share and Warrant Repurchases
In September 2023, the Company purchased warrants for the Company’s common stock from entities managed by Cyrus Capital Partners, L.P. (“Cyrus”), a major stockholder of the Company, for total consideration of $11,384. The warrants purchased, which were exercisable for 2,631,763 shares of the Company’s Class A common stock and represented all of the warrants held by Cyrus, were cancelled subsequent to the purchase. At September 30, 2023, the Company had 4,519,504 warrants outstanding convertible into shares.
On March 17, 2023, the Company’s Board of Directors (the “Board”) authorized a program (the “program”) to purchase up to $10,000 of the Company’s common stock. In June 2023, the Board authorized the repurchase of an additional $ of common stock, raising the total value of the program to $20,000. Under the program, the Company may repurchase shares from time to time in open market transactions or in privately negotiated transactions.
In August 2023, the Company purchased shares of the Company’s common stock from entities managed by Cyrus at a price of $ per share for total consideration of $15,344. Including these transactions, for the three and nine months ended September 30, 2023, the Company repurchased and shares, respectively, for $18,653 and $28,499, respectively, at an average price of $ and $ per share, respectively. At September 30, 2023, the Company had a remaining authorization under the program of $ for share repurchases.
Warrant Conversions
During the ninethree months ended September 30,March 31, 2024 and 2023, and 2022, the Company issued and shares of Class A common stock, respectively, as a result of the exercise of 680,89231,015 and 59,124 679,642Class A warrants, respectively.
Dividends
In March 2024 the Company’s Board of Directors declared a cash dividend of $4,350, which is included in accounts payable, accrued expenses and other current liabilities on the condensed consolidated balance sheet as of March 31, 2024. per share on its Class A common stock. Pursuant to such dividend declaration, the Company made dividend payments in April 2024 totaling $
Stock Compensation
The Company accounts for stock compensation expense in accordance with the fair value-based method required by ASC 718, Compensation – Stock Compensation. This method requires share-based payment transactions to be measured based on the fair value of the equity instruments issued.
Director Compensation — Restricted Stock Units
On June 15, 2023 and June 1, 2022, the Company awarded and time-based RSUs, respectively, to its non-employee directors. The grant date fair values of these awards were $ and $ per RSU, respectively. Each RSU represents a contingent right to receive one share of Class A common stock upon vesting. These RSUs vest in full on the first anniversary of the grant date, subject to each director continuing to provide services to the Company through such date.
Management Compensation — Restricted Stock Units
During the ninethree months ended September 30,March 31, 2024 and 2023, and 2022, the Company granted RSUs to its employees, including senior officers, covering and shares, respectively. The grant date fair values of these awards were $ and $ per RSU, respectively. Each RSU represents a contingent right to receive one share of Class A common stock upon vesting. Each award vests in approximately equal installments on each of the first three anniversaries of the grant date.
During the ninethree months ended September 30,March 31, 2024 and 2023, and 2022, the Company awarded performance-based RSUs to its senior officers covering and shares, respectively (which amounts may be increased up to a maximum of and shares, respectively, based upon performance). Each performance-based RSU represents a contingent right to receive RSUs based upon continuous employment, subject to the achievement of performance metrics through the end of a three-year performance period. The grant date fair values of the awards, which are subject to performance conditions, were determined to be $ and $ per RSU, respectively.
During the ninethree months ended September 30, 2022, the Company awarded RSUs to its senior officers covering shares. The grant date fair value of these awards was $. Each award of RSUs vest as follows: . Each RSU represents a contingent right to receive one share of Class A common stock upon vesting.
During the nine months ended September 30, 2023, and 2022, in connection with the vesting of restricted stock units (“RSUs”),RSUs, the Company withheld and , respectively, shares of Class A common stock respectively, at an average priceprices of $ and $ per share (based on the market prices on the dates of vesting), respectively, from certain members of management to cover withholding taxes.
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OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
Note 9 — Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income, net of related taxes, in the condensed consolidated balance sheets follow:
Schedule of Components of Accumulated Other Comprehensive LossIncome
As of | September 30, 2023 | December 31, 2022 | March 31, 2024 | December 31, 2023 | ||||||||||||
Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement benefit plans) | $ | 2,834 | $ | 3,410 | $ | 3,798 | $ | 4,002 | ||||||||
Accumulated other comprehensive income | $ | 2,834 | $ | 3,410 | $ | 3,798 | $ | 4,002 |
The following tables presenttable presents the changes in the balances of each component of accumulated other comprehensive income, net of related taxes, during the three and nine months ended September 30, 2023March 31, 2024 and 2022:2023:
Schedule of Changes in Balances of Component of Accumulated Other Comprehensive LossIncome
Items not yet recognized as a component of net periodic benefit cost | ||||
Balance as of June 30, 2023 | $ | 3,026 | ||
Current period change, excluding amounts reclassified from accumulated other comprehensive income | — | |||
Amounts reclassified from accumulated other comprehensive income | (192 | ) | ||
Total change in accumulated other comprehensive income | (192 | ) | ||
Balance as of September 30, 2023 | $ | 2,834 | ||
Balance as of June 30, 2022 | $ | 2,582 | ||
Current period change, excluding amounts reclassified from accumulated other comprehensive loss | — | |||
Amounts reclassified from accumulated other comprehensive income | (180 | ) | ||
Total change in accumulated other comprehensive income | (180 | ) | ||
Balance as of September 30, 2022 | $ | 2,402 |
Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement plans) | Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement plans) | |||||||
Balance as of December 31, 2022 | $ | 3,410 | ||||||
Balance as of December 31, 2023 | $ | 4,002 | ||||||
Current period change, excluding amounts reclassified from accumulated other comprehensive income | — | — | ||||||
Amounts reclassified from accumulated other comprehensive income | (576 | ) | (204 | ) | ||||
Total change in accumulated other comprehensive income | (576 | ) | (204 | ) | ||||
Balance as of September 30, 2023 | $ | 2,834 | ||||||
Balance as of March 31, 2024 | $ | 3,798 | ||||||
Balance as of December 31, 2021 | $ | 2,943 | ||||||
Balance as of December 31, 2022 | $ | 3,410 | ||||||
Current period change, excluding amounts reclassified from accumulated other comprehensive loss | — | — | ||||||
Amounts reclassified from accumulated other comprehensive income | (541 | ) | (192 | ) | ||||
Total change in accumulated other comprehensive income | (541 | ) | (192 | ) | ||||
Balance as of September 30, 2022 | $ | 2,402 | ||||||
Balance as of March 31, 2023 | $ | 3,218 |
The Company includes the service cost component for net periodic benefit cost/(income) in vessel expenses and general and administrative expenses and other components in other (expense)/income, net on the condensed consolidated statements of operations.
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
Note 10 — Leases
In October 2023, the Company entered into new bareboat charter agreements in respect of the seven vessels comprising OSG’s Veteran Class products tanker fleet, all of which are now indirectly owned by a private fund (the “MP Fund”) managed by Maritime Partners, LLC. The economic terms of the bareboat charters remain the same as the previous bareboat charters. Prior to their recent acquisition by a Jones Act qualified subsidiary of the MP Fund, these seven vessels were previously owned indirectly by AMSC ASA (“AMSC”). The previous charters with AMSC for two of the seven chartered-in vessels contained a deferred payment obligation (“DPO”), which was $6,514 at September 30, 2023, related to charter hire expense incurred by the Company in prior years and was payable to AMSC in future periods. As part of the new agreements, the Company prepaid, at a discount, $5,602 to the MP Fund, representing all of its remaining outstanding DPO.
In August 2023, the Company extended its lease on the Overseas Key West for an additional lease term of two months to April 2029. Upon reassessment, the lease is accounted for as an operating lease. It was previously accounted for as a finance lease. The future minimum commitments under the lease are $1,550 for 2023, $4,172 for 2024, $4,161 for 2025, $4,161 for 2026, $4,161 for 2027, and $5,449 thereafter. For the nine months ended September 30, 2023, the non-cash activity for obtaining an operating right-of-use asset and liability was not material as a result of the lease extension.
In March 2023, 2024, the Company extendedexercised its lease onfirst option to extend the bareboat charter of the Alaskan FrontierOverseas Tampa with its vessel owner for an additional lease term of three years,a five-year option period commencing in June 2025 and ending in June 2030. Additional options to March 2026.extend remain. The leasecharter is accounted for as an operating lease. The future minimum commitments under the leasecharter are $92 7,061for the remainder of 2023, $366 in 2024, $365 9,371in 2025, $9,371 in 2026, $9,371 in 2027, $9,397 in 2028 and $71 14,019in 2026. thereafter. For the ninethree months ended September 30, 2023,March 2024, the Company had non-cash operating activity of approximately $1,000 34,003for obtaining an operating right-of-use asset and liability as a result of the lease extension. Subsequently, the Company entered into an agreement with BP Oil Shipping Company, USA, in October 2023, to purchase the Alaskan Frontier for $20,000. The purchase is expected to be completed in November 2023. OSG intends to reactivate the 1.3-million-barrel capacity tanker which has been in cold layup in Malaysia since 2019. OSG plans to make investments in the vessel for it to begin commercial trade by the fourth quarter of 2024.
Charters-out
The Company is the lessor under its time charter contracts. Total time charter revenue for the three and nine months ended September 30, 2023March 31, 2024 was equal to income from lease payments of $90,80195,566 and $262,087, respectively, plus straight-line adjustments of $2,423365 and $2,534, respectively.. For the three and nine months ended September 30, 2022,March 31, 2023, total time charter revenue was equal to income from lease payments of $92,53984,434 and $232,360, respectively, plusless straight-line adjustments of $191294. The net book value of owned vessels on noncancelable time charters was equal to $450,907 and $574448,663, at March 31, 2024 and 2023, respectively.
The future minimum revenues, including rent escalations, which is equal to lease payments expected to be received over the noncancelable time charters term are as follows:
Schedule of Future Minimum Commitments Operating Leases
At March 31, 2024 | Amount | |||
2024 | $ | 294,428 | ||
2025 | 306,517 | |||
2026 | 171,306 | |||
2027 | 64,559 | |||
2028 | — | |||
Thereafter | — | |||
Net minimum lease receipts | $ | 836,810 |
Revenues from a time charter are not generally received when a vessel is off-hire, including time required for normal periodic maintenance of the vessel. In arriving at the minimum future charter revenues, an estimated time off-hire to perform periodic maintenance on each vessel has been deducted, although it cannot be assured that such estimate will be reflective of the actual off-hire in the future.
Note 11 — Contingencies
The Company is a party, as plaintiff or defendant, to various suits in the ordinary course of business for monetary relief arising principally from personal injuries (including exposure to asbestos and other toxic materials), wrongful death, collision or other casualty and to claims arising under charter parties. A substantial majority of such personal injury, wrongful death, collision or other casualty claims against the Company are covered by insurance (subject to deductibles not material in amount). In the opinion of management, none of these claims, individually or in the aggregate, are expected to be material to the Company’s financial position, results of operations and cash flows.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements.
All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements. Please see the section titled “Forward-Looking Statements” and Item 1A. Risk Factors of our Form 10-K. Other factors besides those listed in our Form 10-K and in our quarterly reports also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. The following highlights some of these risk factors:
● | the inability to attract or retain qualified mariners, as a result of labor shortages, competition to hire mariners, and other influences | |
● | volatility in supply and demand in the crude oil and refined product markets worldwide or in the specialized markets in which the Company currently trades, which could also affect the nature and severity of certain factors listed below; | |
● | uncertain economic, political and governmental conditions | |
● | challenges associated with compliance with complex environmental laws and regulations, including those relating to the emission of greenhouse gases and protections to the quality of water and sealife, and corresponding increases in expenses; | |
● | unionization, work stoppages or other labor disruptions by the unionized employees of the Company or other companies in related industries, or the impact of any potential liabilities resulting from withdrawal from participation in multiemployer plans; | |
● | increasing operating costs, unexpected drydock costs, and/or increasing capital expenses as a result of supply chain limitations, lack of availability of materials and of qualified contractors and technical experts, the consolidation of suppliers, and inflation; | |
● | public health threats | |
● | the inability to clear oil majors’ risk assessment processes; | |
● | the highly cyclical nature of OSG’s industry and significant fluctuations in the market value of our vessels; | |
● | the | |
● | the Company’s compliance with 46 U.S.C. sections 50501 and 55101 (commonly known as the “Jones Act”) and heightened exposure to Jones Act market fluctuations, as well as stockholder citizenship requirements imposed on us by the Jones Act, which result in restrictions on foreign ownership of the Company’s common stock; | |
● | limitations on U.S. coastwise trade, the waiver, modification or repeal of the Jones Act limitations, or changes in international trade agreements; and | |
● | the Company’s ability to use its net operating loss carryforwards. |
The Company assumes no obligation to update or revise any forward-looking statements, except as may be required by law. Forward-looking statements in this Quarterly Report on Form 10-Q and written and oral forward-looking statements attributable to the Company or its representatives after the date of this Quarterly Report on Form 10-Q are qualified in their entirety by the cautionary statement contained in this paragraph and in other reports filed by the Company with the SEC.
Business Overview
OSG is a publicly traded company providing liquid bulk and energy transportation services for crude oil and petroleum products in the U.S. Flag markets. In January 2023, the Overseas Sun Coast was converted to U.S. Flag status, joining the rest of OSG’s U.S. Flag fleet. OSG’s U.S. Flag fleet consists of Suezmax crude oil tankers, doing business in Alaska, conventional and lightering ATBs,articulated tug barges (“ATBs”), shuttle and conventional MR tankers, and non-Jones Act MR tankers that participate in the U.S. Tanker Security Program (“TSP”) or are on time charter to the U.S. Military Sealift Command. In October 2023, the Company entered into an agreement with BP Oil Shipping Company, USA to purchase the Alaskan Frontier. The purchase is expected to be completed in November 2023. OSG intends to reactivate the 1.3-million-barrel capacity tanker which has been in cold layup in Malaysia since 2019. OSG plans to make significant investments in the vessel for it to begin commercial trade by the fourth quarter of 2024. 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. Our revenues are derived predominantly from time charter agreements for specific periods of time at fixed daily amounts. We also charter-out vessels for specific voyages where we typically earn freight revenue at spot market rates.
The following is a discussion and analysis of our financial condition and results of operations for the three and nine months ended September 30, 2023March 31, 2024 and 2022.2023. This Quarterly Report on Form 10-Q includes industry data and forecasts that we have prepared based in part on information obtained from industry publications and surveys. Third-party industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. In addition, certain statements regarding our market position in this report are based on information derived from internal market studies and research reports. Unless we state otherwise, statements about the Company’s relative competitive position in this report are based on management’s beliefs, internal studies and management’s knowledge of industry trends.
All dollar amounts are in thousands, except daily dollar amounts and per share amounts.
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Operations and Oil Tanker Markets
Our revenues are highly sensitive to patterns of supply and demand for vessels of the size and design configurations owned and operated by us and the trades in which those vessels operate. Rates for the transportation of crude oil and refined petroleum products are determined by market forces such as the supply and demand for oil, the distance that cargoes must be transported, and the number of vessels expected to be available at the time cargoes need to be transported. In the Jones Act trades within which the substantial majority of our vessels operate, demand factors for transportation are affected almost exclusively by supply and distribution decisions of oil producers, refiners and distributors based in the United States. Further, the demand for U.S. domestic oil shipments is significantly affected by the state of the U.S. and global economies, the level of imports into the U.S. from OPEC and other foreign producers, oil production in the United States, and the relative price differentials of U.S. produced crude oil and refined petroleum products as compared with comparable products sourced from or destined for foreign markets, including the cost of transportation on international flag vessels to or from those markets. The number of vessels is affected by newbuilding deliveries and by the removal of existing vessels from service, principally through storage, layup, deletions, or conversions. Our revenues are also affected by the mix of charters between spot (voyage charters which include short-term time charters) and long-term (time or bareboat charters).
The Russia/Ukraine conflict has resulted in economic sanctions against Russia, including the banningfollowing principal developments have directly or limitation of oil imports from Russia by certain countriesindirectly impacted our business recently and self-sanctioning by many oil companies and traders. In December 2022, the EU banned waterborne crude oil imports from Russia and the G7 nations implemented a price cap limiting the global price paid for Russian oil. Some countries have taken advantage of the current availability of Russian crude oil sold at a discount to world prices. These circumstances have resulted in the redirection of oil (crude and refined product) trade flows, which are aptexpected to continue reflecting the needs of countries that were large consumers of Russian oil to obtain other supply sources. Although the United States was not a major importer of Russian oil, it is impacted by these global events. Crude and refined products that were previously imported into the United States from non-Russian sources may not be available in prior quantities. Another potential impact is more movement from domestic producing locations via pipeline and marine assets, which would increase vessel demand. An increase in demand could result in higher utilization levels and potentially higher rates for Jones Act vessels.do so:
Renewable diesel produces less carbon dioxide and nitrogen oxide than conventional diesel. As it is chemically identical to regular diesel, it can be used on its own or blended with conventional diesel. Production of renewable diesel increased in 2022 and is expected to grow significantly by 2025 as governments implement policies to encourage further growth of this fuel, including California’s Low Carbon Fuel Standard. The U.S. Gulf Coast currently produces a significant proportion of U.S renewable diesel, and California has been a large consumer of renewable diesel. Marine transportation provides the most cost-effective solution to move finished product to the West Coast. The length of the trip to California creates a significant increase in ton mile demand, creating a large new market for Jones Act shipping.
● | Geopolitical tensions outside of the US have severely disrupted historical trading patterns for crude oil and its refined products. Since December 2022, the EU has, in response to the war in Ukraine, banned waterborne crude oil imports from Russia, and the G7 nations have implemented price caps limiting the global price paid for Russian oil and its refined products. Other countries have stepped in to purchase these commodities at a discount to world prices. More recently, vessels transiting the Red Sea have been the target of Houthi missile and drone attacks, causing many vessels to avoid Red Sea transits and to instead make longer voyages around the Cape of Good Hope. These circumstances have collectively resulted in the redirection of crude oil and refined product trade flows and increased aggregate ton-mile demand. Although the United States was not a major importer of Russian or Persian Gulf oil, its markets have nonetheless been impacted by these global events. Historically high international freight costs have resulted from disrupted trade patterns. Supply constraints now exist in markets that were alternative supply sources competing against domestic product shipped on Jones Act tonnage. As a result, traders now seem to favor domestic product sources over overseas alternatives, giving strong support for the use of Jones Act vessels. This increase in demand has resulted in higher utilization levels and higher rates for Jones Act vessels. | |
● | The continued impact of government policies encouraging the use of renewable fuels has driven strong demand growth for transporting renewable diesel and its feedstock components from production sources along the U.S. Gulf Coast to markets along the West Coast. California’s low carbon fuel standard regulations in particular have stimulated the use of renewable diesel, which is chemically identical to regular diesel, can be used on its own or blended with conventional diesel, and produces less carbon dioxide and nitrogen oxide than conventional diesel. The Gulf Coast currently produces a significant proportion of renewable diesel, and California has been the largest consumer of this product. Marine transportation is the most cost-effective solution to move finished product to the West Coast. The length of the trip to California creates a significant increase in ton-mile demand and has created a large new market for Jones Act tankers. | |
● | The Biden Administration in 2023 approved ConocoPhillips’ “Willow Project” in Alaska. This project, together with a previously permitted project to develop the “Pikka” discovery operated by Santos, are expected to bring on nearly 250,000 barrels per day of new crude oil production in Alaska by 2027. The promise of significant increased future production bodes well for the prospective demand for OSG’s Alaska Class tankers, which provide the most cost-effective means for delivery of North Slope crude oil to refineries located in California and Washington state. Anticipating this increase in demand, in late 2023 OSG acquired the Alaskan Frontier, sister to the other three Alaska class vessels, and contracted with engine manufacturer MAN B&W to perform life cycle upgrades on each of the engines on all four vessels. The life cycle upgrades will improve performance and fuel efficiency and also prepare the engines for possible use of methanol fuel in the future. It is expected that the fuel efficiency gain will result in 15-20% fuel savings as compared to the original engine design leading to a meaningful reduction in carbon output. The significant capital investment in the four Alaska class vessels should permit OSG to operate the vessels for a longer period of time and with lower maintenance costs for their remaining lives. | |
● | In December 2023, OSG was awarded a $400 thousand grant from the U.S. Department of Energy (“DOE”) to study the development of its proposed Tampa Regional Intermodal Carbon Hub (“T-RICH”). The study is an important step towards realizing the potential for participating in an emerging market for managing the transport and sequestration of captured carbon dioxide (“CO2”). The study will evaluate the commercial feasibility of developing an intermediate storage hub at Port Tampa Bay for CO2 captured from industrial emitters across the State of Florida. As conceived, T-RICH would receive, store, and process, initially, two million metric tons of CO2 per year, which would be transported by OSG vessels across the Gulf of Mexico for permanent underground storage. T-RICH would be the first of its kind in the nation and could be scaled in the future to meet expanded volumes of captured CO2. | |
● | In April 2024, OSG was awarded a $3.0 million grant from the DOE for the engineering and design of a new vessel that will transport liquified CO2. The award will be used to develop the design of an ATB to provide a marine transport solution for captured CO2 aggregated at the T-RICH hub terminal in Tampa, to be shipped in liquified form to developed, approved sequestration sites in the northern Gulf of Mexico region. |
Having our vessels committed on time charters is a fundamental objective of our chartering strategy. We seek to have a majority of available vessel operating days covered with time charters or contracts of affreightment, but if such charters are not remunerative, or prove unachievable under certain market conditions, some of our vessels may operate in the spot market, which is more volatile and less predictable. Because shipping revenues and voyage expenses are significantly affected by the mix between voyage charters and time charters, we manage our vessels based on TCEtime charter equivalent (“TCE”) revenues and rates, which are non-GAAP measures.
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Continued lack of available tonnage throughoutin the thirdfirst quarter of 20232024 contributed to minimal spot activity for Jones Act tankers and ATBs. Charterers arehave been increasing the duration of some new time charter contracts to secure tonnage for multi-year periods. There arewere few vessels available in the spot market and total spot activity wasdecreased from 11 spot fixtures in the thirdfirst quarter of 2023. For the 112023 to seven spot fixtures two were performed by tankers andin the othersfirst quarter of 2024. All seven spot fixtures were performed by ATBs.
Our vessels were employed for 100%97% of available days during the thirdfirst quarter of 2023,2024, with 45 of a total of 1,5901,503 available days (excluding 5744 days for vessels that were off-hire due to drydock requirements) seeing no vessels idle without employment. Industry-wide, there were no firm Jones Act vesselconstruction orders as of September 30, 2023.March 31, 2024.
Delaware Bay lightering volumes averaged 61,00090,000 b/d in in the first quarter of 2024 compared with 82,000 b/d in the thirdfirst quarter of 2023 compared with 65,000 b/d in the third quarter of 2022.2023. We have contract minimums with our refinery customers that compensate us for barrels not lightered below minimum amounts.
Critical Accounting Policies
The Company’s consolidated financial statements are prepared in accordance with GAAP, which requires the Company to make estimates in the application of its accounting policies based on the best assumptions, judgments and opinions of management. There have been no changes to the Company’s critical accounting estimates disclosed in Note 2, “Summary of Significant Accounting Policies,” to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for 2022.2023.
Results of Vessel Operations
In December 2022 we redelivered three conventional tankers leased from American Shipping Company. The reduction in the number of vessels we operated in 2023 were the primary reasons for decreases in our revenues in 2023 compared to the comparable periods in 2022. There were additional items that impacted our revenues both positively and negatively which are described below.
During the three months ended September 30, 2023,March 31, 2024, shipping revenues decreasedincreased by $7,624,$3,706, or 6.2%3.3%, compared to the same period in 2022. In addition to the changes in the number of vessels we operate, there was an 8-day2023. The increase in drydock days and 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 overlapped into the fourth quarter compared to two partial Government of Israel voyages in the third quarter of 2022.
For the nine months ended September 30, 2023, shipping revenues decreased by $9,191, or 2.7%, compared to the nine months ended September 30, 2022. In addition to the changes in the number of vessels we operate, there were fewer Military Sealift Command (“MSC”) voyages during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, which were longer international voyages. The decrease in shipping revenues was partially offset by a 337-day decrease in layup days. We had no vessels in layup during the nine months ended September 30, 2023. During the first quarter of 2022, we had two vessels in layup for the full quarter and two additional vessels that came out of layup in January 2022 and late February 2022. Our remaining two vessels in layup returned to service in May 2022. Additionally, the decrease was partially offset byprimarily resulted from (a) an increase in average daily rates earned by our fleet, (b) an increase in Delaware Bay lightering volumes and (c) a 5-day decrease in drydock days and (d) an 8-day decreaserepair days. The increase was moderated by a 22-day increase in repairdrydock days.
Reconciliation of TCE revenues, a non-GAAP measure, to shipping revenues as reported in the consolidated statements of operations follows:
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Time charter equivalent revenues | $ | 108,577 | $ | 115,062 | $ | 313,438 | $ | 312,229 | $ | 110,692 | $ | 104,735 | ||||||||||||
Add: Voyage expenses | 6,858 | 7,997 | 22,413 | 32,813 | 6,805 | 9,056 | ||||||||||||||||||
Shipping revenues | $ | 115,435 | $ | 123,059 | $ | 335,851 | $ | 345,042 | $ | 117,497 | $ | 113,791 |
The following tables providetable provides a breakdown of TCE rates achieved for the three and nine months ended September 30,March 31, 2024 and 2023 and 2022 between spot and fixed earnings and the related revenue days. 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 | 2024 | 2023 | |||||||||||||||||||||||||||||
Nine months ended September 30, | Spot Earnings | Fixed Earnings | Spot Earnings | Fixed Earnings | ||||||||||||||||||||||||||||
Jones Act Handysize Product Carriers: | ||||||||||||||||||||||||||||||||
Three months ended March 31, | Spot Earnings | Fixed Earnings | Spot Earnings | Fixed Earnings | ||||||||||||||||||||||||||||
Jones Act MR Product Carriers: | ||||||||||||||||||||||||||||||||
Average rate | $ | 60,505 | $ | 65,807 | $ | 53,710 | $ | 60,067 | $ | — | $ | 70,975 | $ | 55,522 | $ | 64,417 | ||||||||||||||||
Revenue days | 40 | 2,658 | 585 | 2,574 | — | 866 | 40 | 847 | ||||||||||||||||||||||||
Non-Jones Act Handysize Product Carriers: | ||||||||||||||||||||||||||||||||
Non-Jones Act MR Product Carriers: | ||||||||||||||||||||||||||||||||
Average rate | $ | 36,622 | $ | 63,239 | $ | 44,720 | $ | 29,632 | $ | 27,391 | $ | 53,451 | $ | 41,384 | $ | 33,319 | ||||||||||||||||
Revenue days | 677 | 74 | 546 | 273 | 182 | 91 | 246 | 14 | ||||||||||||||||||||||||
ATBs: | ||||||||||||||||||||||||||||||||
Average rate | $ | — | $ | 43,511 | $ | 41,048 | $ | 35,059 | $ | — | $ | 47,992 | $ | — | $ | 42,479 | ||||||||||||||||
Revenue days | — | 737 | 85 | 458 | — | 273 | — | 265 | ||||||||||||||||||||||||
Lightering: | ||||||||||||||||||||||||||||||||
Average rate | $ | 91,900 | $ | — | $ | 65,758 | $ | 46,906 | $ | 126,069 | $ | — | $ | 104,512 | $ | — | ||||||||||||||||
Revenue days | 275 | — | 363 | 49 | 91 | — | 90 | — | ||||||||||||||||||||||||
Alaska (a): | ||||||||||||||||||||||||||||||||
Alaska (a): | ||||||||||||||||||||||||||||||||
Average rate | $ | — | $ | 60,355 | $ | — | $ | 59,799 | $ | — | $ | 64,937 | $ | — | $ | 60,115 | ||||||||||||||||
Revenue days | — | 797 | — | 785 | — | 228 | — | 270 |
a) Excludes one Alaska vessel currently in layup.
During the thirdfirst quarter of 2023,2024, TCE revenues decreasedincreased by $6,485,$5,957, or 5.6%5.7%, to $108,577$110,692 from $115,062$104,735 in the thirdfirst quarter of 2022.2023. The decreaseincrease in TCE revenues was primarily driven by the decrease in shipping revenues explained above.
Voyage expenses decreased by $1,139, or 14.2%, in the third quarter of 2023 to $6,858 compared to $7,997 in the third quarter of 2022, primarily due to decreases in fuel expenses, as our vessels performed fewer voyage charters during the third quarter of 2023 compared to the third quarter of 2022.
Vessel expenses decreased by $5,461, or 12.0%, in the third quarter of 2023 to $39,969 compared to $45,430 in the third quarter of 2022, primarily due to a decrease in crewing costs related to fewer vessels in our fleet, as we redelivered three conventional tankers leased from American Shipping Company in December 2022.
Charter hire expenses decreased by $6,510, or 28.6%, to $16,233 in 2023 from $22,743 in 2022. The decrease primarily resulted from the redelivery of three conventional tankers leased from American Shipping Company in December 2022.
Depreciation and amortization decreased by $899, or 5.0%, to $17,003 in the third quarter of 2023 compared to $17,902 in the third quarter of 2022. The decrease primarily resulted from a decrease in amortization of drydock costs.
During the nine months ended September 30, 2023, TCE revenues increased $1,209, or 0.4%, to $313,438 from $312,229 during the nine months ended September 30, 2022. The increase primarily resulted from the decrease in shipping revenues explained above offset byand the decrease in voyage expenses explained below.
Voyage expenses decreased by $10,400,$2,251, or 31.7%24.9%, duringin the nine months ended September 30, 2023first quarter of 2024 to $22,413$6,805 compared to $32,813 during$9,056 in the nine months ended September 30, 2022,first quarter of 2023, primarily due to decreases in fuelport and portfuel expenses, as our vessels performed fewer voyage charters during the nine months ended September 30, 2023first quarter of 2024 compared to the nine months ended September 30, 2022.first quarter of 2023.
Vessel expenses decreased by $7,043,$533, or 5.4%1.3%, forin the nine months ended September 30, 2023first quarter of 2024 to $123,337$42,038 compared to $130,380 for$42,571 in the nine months ended September 30, 2022,first quarter of 2023, primarily due to a decrease in crewing costs related to fewer vessels in our fleet as we redelivered three conventional tankers leased from American Shipping Company in December 2022.repair and spares costs.
Charter hire expenses decreasedincreased by $19,101,$1,081, or 28.5%6.9%, to $47,988 for the nine months ended September 30, 2023$16,818 in 2024 from $67,089 for the nine months ended September 30, 2022.$15,737 in 2023. The decreaseincrease primarily resulted from the redeliverychange in accounting treatment due to the reclassification of three conventional tankers leasedthe Overseas Key West lease as an operating lease from American Shipping Company in December 2022.a finance lease.
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Depreciation and amortization decreasedincreased by $1,558,$1,946, or 3.1%12.1%, to $49,500 during$17,994 in the nine months ended September 30, 2023first quarter of 2024 compared to $51,058 during$16,048 in the nine months ended September 30, 2022.first quarter of 2023. The decreaseincrease primarily resulted from a decreasean increase in amortization of drydock costs.
Two of our U.S. Flag Product Carriers participated in the Maritime Security Program (“MSP”) during the first quarter of 2023. The stipend received was $1,325 for each vessel.
In April 2023, three of our vessels were accepted into the TSP. The program is designed to ensure that militarily useful U.S. Flag tank vessels are available to the U.S. Department of Defense in the event of war or national emergency. The initial program calls for 10 tankers to participate. Under the TSP, participants receive an annual stipend designed to reduce vessel expenses to a level that will allow them to compete for international business.Tanker Security Program (“TSP”). We transferred the two non-Jones Act U.S. Flag Product Carriers that had been participating in the U.S. Maritime Security Program toMSP into the TSP and added the Overseas Sun Coast, which was converted to U.S. Flag status in January 2023,, to participate in the program. We expect to receive an annual stipend of $6,000 for each vessel under the TSP.
In June 2023, the MSCMilitary Sealift Command (“MSC”) awarded one of ourthe vessels that had been in the TSP, the Overseas Mykonos,a time charter contract to provide ongoing fuel transportation services to MSC in support of our nation’s defense. The time charter awarded is for a one-year base period with the MSC holding additional option periods to extend the contract out to a maximum period of five- and one-half years. The Overseas Mykonos was transferred out of the TSP and delivered to MSC in August 2023.
During the three months ended March 31, 2024, we received $3,000 under the TSP. Under the terms of the TSP, we expect to receive up to $6,000 for each vessel in 2024. We do not receive a stipend for any days exceeding 180 days for which the vessels operate under a time charter to a U.S. government agency.
General and Administrative Expenses
General and administrative expenses increased by $617,$2,511, or 9.4%32.0%, to $7,173$10,354 during the three months ended September 30, 2023March 31, 2024 compared to $6,556$7,843 for the three months ended September 30, 2022.March 31, 2023. The increase was primarily driven by higher compensation and benefits costs related to an increase in headcount and higher compensation levels. Additionally, general and administrative expenses increased primarily due to increased travel, training andan increase in legal expenses during the three months ended September 30, 2023March 31, 2024 compared to the same period in 2022.2023.
For the nine months ended September 30, 2023, general and administrative expenses increased by $685 or 3.3% at $21,614 compared to $20,929 for the nine months ended September 30, 2022. The increase was primarily driven by higher compensation and benefits costs related to an increase in headcount and higher compensation levels.
Other Income, Net
Other income, net was $1,643 and $4,184$1,235 for the three and nine months ended September 30, 2023, respectively,March 31, 2024 compared with $568 and $649$1,080 for the three and nine months ended September 30, 2022, respectively.March 31, 2023. The increase in other income, net was primarily due to investment income earned on our investment accounts at higher interest rates year over year.
Interest Expense
Interest expense was $7,779 and $24,019$6,782 for the three and nine months ended September 30, 2023, respectively,March 31, 2024 compared with $8,229 and $24,869$8,156 for the three and nine months ended September 30, 2022.March 31, 2023. The decrease in interest expense was primarily due to a lower average balance of debt outstanding during the three and nine months ended September 30, 2023March 31, 2024 compared to the same periodsperiod in 2022.2023 and an increase in interest capitalized due to vessel improvement projects.
Income Taxes
For the three months ended September 30,March 31, 2024 and 2023, and 2022, wethe Company recorded income tax expense of $4,471$3,300 and $1,522,$3,321, respectively, which represented effective tax rates of 20.3%18.4% and 10.3%21.5%, respectively. The increasedecrease in the effective tax rate for the three months ended September 30, 2023March 31, 2024 compared to the three months ended September 30, 2022March 31, 2023 was substantiallyprimarily due to the tonnage tax exclusion. For the nine months ended September 30, 2023a benefit related to stock compensation and 2022, we recorded income tax expense of $9,131 and $2,074, respectively, which represented effective tax rates of 17.9% and 11.2%, respectively. The increasechanges in the effective tax rate for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was substantially due to the tonnage tax exclusion.state apportionment. The effective tax rate for the ninethree months ended September 30, 2023March 31, 2024 was less than the statutory rate due to a favorable Louisiana law changebenefit related to stock compensation and tonnage tax exclusion. The effective tax rate for the ninethree months ended September 30, 2022March 31, 2023 was lessmore than the statutory rate due to the tonnagestate tax exclusion.expense.
Liquidity and Sources of Capital
Our business is capital intensive. Our ability to successfully implement our strategy is dependent on the continued availability of capital on attractive terms. In addition, our ability to successfully operate our business to meet near-term and long-term debt repayment obligations is dependent on maintaining sufficient liquidity.
Liquidity
Working capital at September 30, 2023March 31, 2024 was approximately $(28,000)$(58,000) compared with approximately $(38,000)$(55,000) at December 31, 2022.2023. Excluding the current portion of operating and finance lease liabilities, working capital was approximately $38,936$7,000 at September 30, 2023March 31, 2024 compared to $30,000approximately $10,000 at December 31, 2022.2023. The increasedecrease in working capital was primarily due to an increase in cash and cash equivalents,current installments of long-term debt as our Alaska tankers term loan, due 2025, matures on March 12, 2025. This loan, along with our term loan, due 2024, which matures on September 30, 2024, totaling $37,519, are included in current installments of long-term debt at March 31, 2024. Also, working capital decreases due to a decrease in receivables related to the Company generated cash flowtiming of collections from operations during the current year, andour customers. The decrease in working capital was partially offset by a decrease in accounts payable, accrued expenses and other current liabilities as a result of our payout of the Alaska Tanker Company deferred compensation plan of $6,661 and timing of accounts payable payments made through September 30, 2023during the three months ended March 31, 2024 compared to Decemberthe three months ended March 31, 2022. The increase in working capital was partially offset by a decrease in receivables related to the timing of collections from our customers2023 and an increase in cash and cash equivalents as we generated cash flow from operations during the current installments of long-term debt as our term loan, due 2024, matures on September 30, 2024.year.
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As of September 30, 2023,March 31, 2024, we had total liquidity on a consolidated basis comprised of $97,598$97,153 of cash and cash equivalents. We manage our cash in accordance with our intercompany cash management system. Our cash and cash equivalents as well as our restricted cash balances, generally exceed Federal Deposit Insurance Corporation insurance limits. We place our cash and cash equivalents and restricted cash in what we believe to be credit-worthy financial institutions. In addition, certain of our money market accounts invest in U.S. Treasury securities or other obligations issued or guaranteed by the U.S. government or its agencies.
As of September 30, 2023,March 31, 2024, we had total debt outstanding (net of deferred financing costs) of $406,510$394,420 and a total debt to total capitalization of 54.3%52.1%, compared to $423,363$400,711 and 55.5%53.1%, respectively, at December 31, 2022.2023.
Sources, Uses and Management of Capital
We generate significant cash flows through our complementary mix of time charters, voyage charters and contracts of affreightment. Net cash provided by operating activities during the ninethree months ended September 30, 2023March 31, 2024 was $83,050.$24,743. In addition to operating cash flows, our other current potential sources of funds are proceeds from additional issuances of equity securities, additional borrowings, and proceeds from the opportunistic sales of our vessels. In the past, we have also obtained funds from the issuance of long-term debt securities. However, we can give no assurance as to whether or the terms on which we may be able to issue equity or debt securities, obtain additional borrowings, or sell vessels.
We use capital to fund working capital requirements, maintain the quality of our vessels, comply with U.S. and international shipping standards, and repay our outstanding loan facilities. We also use capital to comply with environmental laws and regulations, and we expect that the costs of such compliance will continue to increase; while it is not possible to determine the amounts of such costs for any future period, we believe that they are likely to be substantial. We may also use cash generated by operations to finance capital expenditures to modernize and grow our fleet.
In October 2023,March 2024 the Company’s Board of Directors declared a cash dividend of $0.06 per share on its Class A common stock. Pursuant to such dividend declaration, the Company entered into an agreement with BP Oil Shipping Company, USA to purchasemade dividend payments in April 2024 totaling $4,350, which is included in accounts payable, accrued expenses and other current liabilities on the Alaskan Frontier, for $20,000, which the Company had been leasing. The purchase is expected to be completed in November 2023. OSG intends to reactivate the 1.3-million-barrel capacity tanker which has been in cold layup in Malaysia since 2019. OSG plans to make investments in the vessel for it to begin commercial trade by the fourth quartercondensed consolidated balance sheet as of March 31, 2024.
Additionally,Also, in October 2023,March 2024, we exercised our first option to extend the bareboat charter of the Overseas Tampa with its vessel owner for a five-year option period commencing in June 2025 and ending in June 2030. Additional options to extend remain. The charter is accounted for as an operating lease. The future minimum commitments under the charter are $7,061 for the remainder of 2024, $9,371 in 2025, $9,371 in 2026, $9,371 in 2027, $9,397 in 2028 and $14,019 thereafter. For the three months ended March 2024, the Company entered into new bareboat charter agreements in respecthad non-cash operating activity of approximately $34,003 for obtaining an operating right-of-use asset and liability as a result of the seven vessels comprising OSG’s Veteran Class products tanker fleet, all of which are now indirectly owned by a private fund (the “MP Fund”) managed by Maritime Partners, LLC. The economic terms of the bareboat charters remain the same as the previous bareboat charters. Prior to their recent acquisition by a Jones Act qualified subsidiary of the MP Fund, these seven vessels were owned indirectly by AMSC ASA (“AMSC”). The previous charters with AMSC for two of the seven chartered-in vessels contained a deferred payment obligation (“DPO”), which was $6,514 at September 20, 2023, related to charter hire expense incurred by the Company in prior years and was payable to AMSC in future periods. As part of the new agreements, the Company prepaid, at a discount, $5,602 to the MP Fund, representing all of its remaining outstanding DPO.extension.
In September 2023, we purchased, using available cash, 13,851,382 warrants for our common stock from entities managed by Cyrus for total consideration of $11,384. The warrants purchased, which were exercisable for 2,631,763 shares of our Class A common stock and represented all of the warrants held by Cyrus, were cancelled subsequent to the purchase.
In August 2023, we purchased 3,788,639 shares of our common stock from entities managed by Cyrus at a price of $4.05 per share for total consideration of $15,344. Including these transactions, for the three and nine months ended September 30, 2023, we used $18,652 and $28,499, respectively, of available cash to repurchase 4,580,921 and 7,174,059 shares, respectively, of our common stock at an average price of $4.07 and $3.97 per share, respectively.
Item 3: Quantitative and Qualitative Disclosures about Market Risk
Not applicable dueFor an in-depth discussion of our market risks, see “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2023. During the three months ended March 31, 2024, there were no material changes to the Company’s status as a smaller reporting company.our disclosures about market risk.
Item 4: Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s current disclosure controls and procedures were effective as of September 30, 2023March 31, 2024 to ensure that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2023March 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are party to lawsuits and claims arising out of the normal course of business. In management’s opinion, there are no known pending claims or litigation, the outcome of which would, individually or in the aggregate, have a material effect on our consolidated results of operations, financial position, or cash flows.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our 20222023 Form 10-K, and as may be updated in our subsequent quarterly reports. The risks described in our 20222023 Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. There have been no material changes in our risk factors from those disclosed in our 20222023 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On March 17, 2023, the Company’s Board of Directors (the “Board”) authorized a program (the “program”) to purchase up to $10,000 of the Company’s common stock. In June 2023, the Board authorized the repurchase of an additional $10,000 of common stock, raising the total value of the program to $20,000. Under the program, the Company may repurchase shares from time to time in open market transactions or in privately negotiated transactions.
During the three months ended September 30, 2023, purchasesMarch 31, 2024, in connection with the vesting of our commonrestricted stock under the program were as follows:
Period | Total Number Shares of Class A Purchased | Average Price Paid per | ||||||
July 1, 2023 through July 31, 2023 | 213,596 | $ | 4.03 | |||||
August 1, 2023 through August 31, 2023 (1) | 4,050,847 | $ | 4.05 | |||||
September 1, 2023 through September 30, 2023 | 316,478 | $ | 4.32 | |||||
4,580,921 | $ | 4.07 |
In September 2023,awards, the Company purchased, using available cash, 13,851,382 warrants forwithheld the Company’s common stock from entities managed by Cyrus for total considerationfollowing number of $11,384. The warrants purchased, which were exercisable for 2,631,763 shares of our Class A common stock and represented allfrom certain members of the warrants held by Cyrus, were cancelled subsequentmanagement to the purchase.cover withholding taxes.
Period | Total Number Shares of Class A Withheld | Average Price Paid per Share of Class A | Total Number of Shares Purchased As Part of Publicly Announced Program | Dollar Value of Shares Remaining Under the Program | ||||||||||||
January 1, 2024 through January 31, 2024 | — | $ | — | — | $ | 25,000 | ||||||||||
February 1, 2024 through February 29, 2024 | 92,465 | $ | 5.27 | — | $ | 25,000 | ||||||||||
March 1, 2024 through March 31, 2024 | 269,706 | $ | 6.29 | — | $ | 25,000 | ||||||||||
362,171 | $ | 6.03 | — | $ | 25,000 |
Item 3. Defaults upon senior securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other information
None.
None.
Item 6. Exhibits
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended. | |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended. | |
32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
OVERSEAS SHIPHOLDING GROUP, INC. | |
(Registrant) | |
Date: | /s/ Samuel H. Norton |
Samuel H. Norton | |
Chief Executive Officer | |
Date: | /s/ Richard Trueblood |
Richard Trueblood | |
Chief Financial Officer | |
(Mr. Trueblood is the Principal Financial Officer and has been duly authorized to sign on behalf of the Registrant) |