OVERSEAS SHIPHOLDING GROUP REPORTS SECOND QUARTER 2015 RESULTS
New York, NY – August 10, 2015 –Overseas Shipholding Group, Inc. (OSG) (NYSE MKT: OSGB), a provider of oceangoing energy transportation services, today reported results for the quarter ended June 30, 2015.
Highlights
| · | Time charter equivalent (TCE) revenues(1) for the second quarter of 2015 totaled $235.2 million, up 37% compared with the same period in 2014. |
| · | Net income for the second quarter was $58.4 million, or $0.11 per diluted share. |
| · | Adjusted EBITDA(2) was $130.2 million, more than doubling from $55.2 million in the same period in 2014. |
| · | Generated $156.1 million of total cash(3) in the first half of 2015 to $668.5 million. |
“I am pleased to report strong second quarter and first half results, which reflect the continuing strength in the U.S. and International tanker markets and our unique position in both these markets,” said Ian T. Blackley, President and CEO. “With a fleet of 79 vessels on the water, generating cash, we remain confident in our ability to deliver value for our shareholders.”
Second Quarter & First Half 2015 Results
TCE revenues grew to $235.2 million for the quarter, an increase of $63.6 million compared with the second quarter of 2014, driven by continuing strength in crude and product spot market rates. TCE revenues grew to $456.8 million for the first half of 2015, an increase of $70.6 million compared with the first half of 2014.
Net income for the second quarter of 2015 was $58.4 million, or $0.11 per diluted share, compared to a net loss for the second quarter of 2014 of $202.0 million. Net income for the first half of 2015 was $101.3 million, or $0.19 per diluted share, compared to a net loss for the first half of 2014 of $189.4 million. The net losses in the comparative 2014 periods reflect bankruptcy related charges.
Adjusted EBITDA was $130.2 million for the quarter, an increase of $75.0 million compared with the second quarter of 2014, driven primarily by the strength of spot rates, particularly in the international crude market, and lower general and administrative expenses. Adjusted EBITDA was $243.9 million for the first half of 2015, an increase of $102.1 million compared with the first half of 2014.
U.S. Flag
TCE revenues for the U.S. Flag segment were $115.9 million for the quarter, an increase of $11.3 million compared with the second quarter of 2014, driven by the continued strength of the Jones Act market. TCE revenues for the U.S. Flag segment were $227.1 million for the first half of 2015, an increase of $22.1 million compared with the first half of 2014.
International Crude Tankers
TCE revenues for the International Crude Tankers segment were $77.0 million for the quarter, an increase of $32.3 million compared with the second quarter of 2014. This significant increase resulted from a substantial strengthening in average daily rates across all vessel types in the segment, with VLCC and Aframax spot rates increasing to approximately $50,600 and $34,800 per day in the second quarter, respectively, both up nearly three times from the comparable 2014 period; and Panamax blended rates increased to approximately $21,700 per day, up 44%. TCE revenues for the International Crude Tankers segment were $143.8 million for the first half of 2015, an increase of $16.2 million compared with the first half of 2014.
International Product Carriers
TCE revenues for the International Product Carriers segment were $42.4 million for the quarter, an increase of $20.1 million compared with the second quarter of 2014. This significant increase resulted primarily from higher Medium Range (MR) spot rates, more than doubling from the same period in 2014 to approximately $18,500 per day. TCE revenues for the International Product Carriers segment were $85.9 million for the first half of 2015, an increase of $32.4 million compared with the first half of 2014.
Conference Call
The Company will host a conference call to discuss its second quarter 2015 results at 9:00 a.m. ET on Monday, August 10, 2015.
To access the call, participants should dial (866) 490-3149 for domestic callers and (707) 294-1567 for international callers. Please dial in ten minutes prior to the start of the call and enter Conference ID 94574018.
A live webcast of the conference call will be available from the Investor Relations section of the Company’s website at http://www.osg.com/
An audio replay of the conference call will be available starting at 12:00 p.m. ET on Monday, August 10, 2015 through 11:59 p.m. ET on Monday, August 17, 2015 by dialing (855) 859-2056 for domestic callers and (404) 537-3406 for international callers, and entering Conference ID 94574018.
About OSG
Overseas Shipholding Group, Inc. (NYSE MKT: OSGB) is a publicly traded tanker company providing energy transportation services for crude oil and petroleum products in the U.S. and International Flag markets. OSG is committed to setting high standards of excellence for its quality, safety and environmental programs. OSG is recognized as one of the world’s most customer-focused marine transportation companies and is headquartered in New York City, NY. More information is available at www.osg.com.
Forward-Looking Statements
This release contains forward looking statements. In addition, the Company may make or approve certain statements in future filings with the Securities and Exchange Commission (SEC), in press releases, or in oral or written presentations by representatives of the Company. All statements other than statements of historical facts should be considered forward-looking statements. These matters or statements may relate to the Company's prospects, including statements regarding trends in the tanker and articulated tug/barge markets, and including prospects for certain strategic alliances and investments. Forward-looking statements are based on the Company’s current plans, estimates and projections, and are subject to change based on a number of factors. Investors should carefully consider the risk factors outlined in more detail in the Company’s Annual Report for 2014 on Form 10-K under the caption “Risk Factors” and in similar sections of other filings made by the Company with the SEC from time to time. The Company assumes no obligation to update or revise any forward looking statements. Forward looking statements and written and oral forward looking statements attributable to the Company or its representatives after the date of this release are qualified in their entirety by the cautionary statements contained in this paragraph and in other reports previously or hereafter filed by the Company with the SEC.
Investor Relations & Media Contact:
Brian Tanner, Overseas Shipholding Group, Inc.
(212) 578-1645
btanner@osg.com
Consolidated Statements of Operations
($ in thousands, except per share amounts) | Three Months Ended June 30, | Six Months Ended June 30, |
| 2015 | 2014 | 2015 | 2014 |
Shipping Revenues: | (unaudited) | (unaudited) | (unaudited) | (unaudited) |
Pool revenues | $90,591 | $28,410 | $169,360 | $73,477 |
Time and bareboat charter revenues | 109,754 | 96,609 | 217,696 | 191,737 |
Voyage charter revenues | 45,142 | 116,758 | 91,973 | 269,009 |
Total Shipping Revenues | 245,487 | 241,777 | 479,029 | 534,223 |
Operating Expenses: | | | | |
Voyage expenses | 10,284 | 70,129 | 22,184 | 148,022 |
Vessel expenses | 68,279 | 66,726 | 137,518 | 133,397 |
Charter hire expenses | 31,127 | 39,983 | 63,025 | 85,465 |
Depreciation and amortization(i) | 37,869 | 37,385 | 74,988 | 75,330 |
General and administrative | 17,471 | 19,485 | 36,753 | 43,910 |
Technical management transition costs | - | 1,638 | 40 | 1,832 |
Severance and relocation costs | - | 7,964 | 5 | 14,647 |
Gain on disposal of vessels and other property | - | (4) | (1,073) | (1,481) |
Total Operating Expenses | 165,030 | 243,306 | 333,440 | 501,122 |
Income/(loss) from Vessel Operations | 80,457 | (1,529) | 145,589 | 33,101 |
Equity in Income of Affiliated Companies | 11,830 | 9,637 | 24,242 | 18,131 |
Operating Income | 92,287 | 8,108 | 169,831 | 51,232 |
Other Income | 48 | 145 | 121 | 279 |
Income before interest expense, reorganization items and income taxes | 92,335 | 8,253 | 169,952 | 51,511 |
Interest Expense | (28,931) | (174,511) | (57,500) | (174,634) |
Income/(loss) before reorganization items and income taxes | 63,404 | (166,258) | 112,452 | (123,123) |
Reorganization items, net | (1,437) | (86,123) | (4,924) | (115,379) |
Income (loss) before income taxes | 61,967 | (252,381) | 107,528 | (238,502) |
Income tax (provision)/benefit | (3,529) | 50,414 | (6,189) | 49,085 |
Net Income/(Loss) | $58,438 | $(201,967) | $101,339 | $(189,417) |
| | | | |
Weighted Average Number of Common Shares Outstanding: | | | | |
Basic - Class A | 520,604,924 | - | 520,594,320 | - |
Diluted - Class A | 520,811,125 | - | 520,699,222 | - |
Basic and Diluted - Class B and CommonStock | 7,922,800 | 30,546,423 | 7,923,866 | 30,531,493 |
Per Share Amounts: | | | | |
Basic net income/(loss) - Class A and Class B | $0.11 | - | $0.19 | - |
Diluted net income/(loss) – Class A and Class B | $0.11 | - | $0.19 | - |
Basic and diluted net income/(loss) - Common Stock | - | $(6.61) | - | $(6.20) |
| | | | |
| | | | | |
(i) The three months and six months depreciation amounts for the periods ended June 30, 2014 have been revised from the amounts previously reported in the quarterly report on Form 10-Q for the respective periods to reflect the correction of an error which resulted in an overstatement of depreciation expense on certain vessels. The error overstated three months and six months depreciation expense for the periods ended June 30, 2014 by $2,144 and $4,277. This error had no impact on the full fiscal year 2014 amounts, or on periods prior to 2014.
Consolidated Balance Sheets
($ in thousands) | June 30, 2015 | | December 31, 2014 |
ASSETS | (Unaudited) | | |
Current Assets: | | | |
Cash and cash equivalents | $646,265 | | $389,226 |
Restricted cash | 22,245 | | 53,085 |
Voyage receivables | 87,671 | | 101,513 |
Income tax recoverable | 56,199 | | 55,856 |
Other receivables | 6,747 | | 8,293 |
Inventories , prepaid expenses and other current assets | 25,068 | | 24,290 |
Deferred income taxes | 5,312 | | 5,312 |
Total Current Assets | 849,507 | | 637,575 |
Restricted cash – non current(i) | - | | 70,093 |
Vessels and other property, less accumulated depreciation | 2,150,185 | | 2,213,217 |
Deferred drydock expenditures, net | 74,524 | | 62,413 |
Total Vessels, Deferred Drydock and Other Property | 2,224,709 | | 2,275,630 |
| | | |
Investments in affiliated companies | 348,188 | | 334,863 |
Intangible assets, less accumulated amortization | 52,517 | | 54,817 |
Other assets | 68,653 | | 63,513 |
Total Assets | $3,543,574 | | $3,436,491 |
| | | |
| | | |
LIABILITIES AND EQUITY | | | |
Current Liabilities: | | | |
Accounts payable, accrued expenses and other current liabilities | $97,757 | | $96,066 |
Income taxes payable | 1,537 | | 906 |
Current installments of long-term debt | 58,314 | | 12,314 |
Total Current Liabilities | 157,608 | | 109,286 |
| | | |
Reserve for uncertain tax positions | 37,004 | | 34,520 |
Long-term debt | 1,604,344 | | 1,656,353 |
Deferred income taxes | 285,154 | | 283,277 |
Other liabilities | 66,498 | | 66,968 |
Total Liabilities | 2,150,608 | | 2,150,404 |
Equity: | | | |
Total Equity | 1,392,966 | | 1,286,087 |
Total Liabilities and Equity | $3,543,574 | | $3,436,491 |
(i)The December 31, 2014 balance sheet has been revised from that previously reported in the Annual Report on Form 10-K to reflect the correction of an error by reclassifying restricted cash of $70,093 from current assets to non-current assets and to reflect a corresponding reduction in the previously reported amount for total current assets. The error had no impact on the Company’s consolidated statements of operations, comprehensive loss, changes in equity/(deficit) or cash flows.
Consolidated Statements of Cash Flows
($ in thousands) | Six Months Ended June 30, |
| 2015 | 2014 |
| (Unaudited) | (Unaudited) |
Cash Flows from Operating Activities: | | |
Net income/(loss) | $ 101,339 | $(189,417) |
Items included in net income/(loss) not affecting cash flows: | | |
Depreciation and amortization | 74,988 | 75,330 |
Amortization of debt discount and other deferred financing costs | 5,119 | - |
Compensation relating to restricted stock and stock option grants | 981 | 517 |
Deferred income tax provision/(benefit) | 2,269 | (44,903) |
Undistributed earnings of affiliated companies | (19,056) | (14,633) |
Deferred payment obligations on charters-in | 590 | 1,940 |
Contractual post-petition interest accrued on liabilities subject to compromise | - | 174,476 |
Reorganization items, non-cash | 812 | 64,469 |
Other – net | 549 | 1,377 |
Items included in net income/(loss) related to investing and financing activities: | | |
Gain on disposal of vessels and other property – net | (1,073) | (1,481) |
Payments for drydocking | (25,394) | (15,712) |
Bankruptcy claim payments | (3,436) | - |
Deferred financing costs paid for loan modification | (6,187) | - |
Changes in other operating assets and liabilities | 8,120 | 13,067 |
Net cash provided by operating activities | 139,621 | 65,030 |
Cash Flows from Investing Activities: | | |
Change in restricted cash | 100,933 | - |
Expenditures for vessels | (440) | (15,721) |
Proceeds from disposal of vessels and other property | 7,757 | 7,594 |
Expenditures for other property | (69) | (216) |
Investments in and advances to affiliated companies | (1,506) | - |
Repayments of advances from affiliated companies | 17,000 | - |
Other – net | - | 185 |
Net cash provided by / (used in) investing activities | 123,675 | (8,158) |
Cash Flows from Financing Activities: | | |
Purchases of treasury stock | - | (162) |
Payments on debt, including adequate protection payments | (6,257) | (5,307) |
Deferred financing costs paid for issuance of debt | - | (8,425) |
Net cash used in financing activities | (6,257) | (13,894) |
Net increase in cash and cash equivalents | 257,039 | 42,978 |
Cash and cash equivalents at beginning of year | 389,226 | 601,927 |
Cash and cash equivalents at end of period | $646,265 | $644,905 |
Fleet Information
As of June 30, 2015, OSG’s owned and operated fleet totaled 80 International Flag and U.S. Flag vessels (63 vessels owned and 17 chartered-in) compared with 81 at December 31, 2014. Those figures include vessels in which the Company has a partial ownership interest through its participation in joint ventures.
| Vessels Owned | Vessels Chartered-in | Total at June 30, 2015 |
Vessel Type | Number | Weighted by Ownership | Number | Weighted by Ownership | Total Vessels | Vessels Weighted by Ownership | Total Dwt |
Operating Fleet | | | | | | | |
FSO | 2 | 1.0 | — | — | 2 | 1.0 | 873,916 |
VLCC and ULCC | 9 | 9.0 | — | — | 9 | 9.0 | 2,875,798 |
Aframax | 7 | 7.0 | — | — | 7 | 7.0 | 787,859 |
Panamax | 8 | 8.0 | — | — | 8 | 8.0 | 557,187 |
International Flag Crude Tankers | 26 | 25.0 | — | — | 26 | 25.0 | 5,094,760 |
| | | | | | | |
LR2 | 1 | 1.0 | — | — | 1 | 1.0 | 109,999 |
LR1 | 4 | 4.0 | — | — | 4 | 4.0 | 297,705 |
MR | 14 | 14.0 | 7 | 7.0 | 21 | 21.0 | 1,001,978 |
International Flag Product Carriers | 19 | 19.0 | 7 | 7.0 | 26 | 26.0 | 1,409,682 |
| | | | | | | |
Total Int’l Flag Operating Fleet | 45 | 44.0 | 7 | 7.0 | 52 | 51.0 | 6,504,442 |
| | | | | | | |
Handysize Product Carriers1 | 4 | 4.0 | 10 | 10.0 | 14 | 14.0 | 664,490 |
Clean ATBs | 8 | 8.0 | — | — | 8 | 8.0 | 226,064 |
Lightering ATBs | 2 | 2.0 | — | — | 2 | 2.0 | 91,112 |
Total U.S. Flag Operating Fleet | 14 | 14.0 | 10 | 10.0 | 24 | 24.0 | 981,666 |
| | | | | | | |
LNG Fleet | 4 | 2.0 | — | — | 4 | 2.0 | 864,800 cbm |
Total Operating Fleet | 63 | 60.0 | 17 | 17.0 | 80 | 77.0 | 7,486,108 and 864,800 cbm |
1Includes two owned shuttle tankers, one chartered-in shuttle tanker and two owned U.S. Flag Product Carriers that trade internationally.
Reconciliation to Non-GAAP Financial Information
The Company believes that, in addition to conventional measures prepared in accordance with GAAP, the following non-GAAP measures may provide certain investors with additional information that will better enable them to evaluate the Company’s performance. Accordingly, these non-GAAP measures are intended to provide supplemental information, and should not be considered in isolation or as a substitute for measures of performance prepared with GAAP.
(1) Time Charter Equivalent (TCE) Revenues
Consistent with general practice in the shipping industry, the Company uses TCE revenues, which represents shipping revenues less voyage expenses, as a measure to compare revenue generated from a voyage charter to revenue generated from a time charter. Time charter equivalent revenues, a non-GAAP measure, provides additional meaningful information in conjunction with shipping revenues, the most directly comparable GAAP measure, because it assists Company management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance. Reconciliation of TCE revenues to shipping revenues as reported in the consolidated statements of operations follow:
| Three Months Ended June 30, | Six Months Ended June 30, |
($ in thousands) | 2015 | 2014 | 2015 | 2014 |
TCE revenues | $235,203 | $171,648 | $456,845 | $386,201 |
Add: Voyage Expenses | 10,284 | 70,129 | 22,184 | 148,022 |
Shipping revenues | $245,487 | $ 241,777 | $479,029 | $534,223 |
| | | | | |
(2) EBITDA and Adjusted EBITDA
EBITDA represents net income before interest expense, income taxes and depreciation and amortization expense. Adjusted EBITDA consists of EBITDA adjusted for the impact of certain items that we do not consider indicative of our ongoing operating performance. EBITDA and Adjusted EBITDA do not represent, and should not be a substitute for, net income or cash flows from operations as determined in accordance with GAAP. Some of the limitations are: (i) EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; (ii) EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; and (iii) EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt. While EBITDA and Adjusted EBITDA are frequently used as a measure of operating results and performance, neither of them is necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. The following table reconciles net income as reflected in the consolidated statements of operations, to EBITDA and Adjusted EBITDA:
| Three Months Ended June 30, | Six Months Ended June 30, |
($ in thousands) | 2015 | 2014 | 2015 | 2014 |
Net Income/(loss) | $58,438 | $(201,967) | $101,339 | $(189,417) |
Income tax provision/(benefit) | 3,529 | (50,414) | 6,189 | (49,085) |
Interest expense | 28,931 | 174,511 | 57,500 | 174,634 |
Depreciation and amortization | 37,869 | 37,385 | 74,988 | 75,330 |
EBITDA | 128,767 | (40,485) | 240,016 | 11,462 |
Technical management transition costs | - | 1,638 | 40 | 1,832 |
Severance and relocation costs | - | 7,964 | 5 | 14,647 |
Gain on disposal of vessels and other property | - | (4) | (1,073) | (1,481) |
Reorganization items, net | 1,437 | 86,123 | 4,924 | 115,379 |
Adjusted EBITDA | $130,204 | $ 55,236 | $243,912 | $141,839 |
| | | | | |
(3) Total Cash
($ in thousands) | June 30, 2015 | | December 31, 2014 |
| | | |
Cash and cash equivalents | $646,265 | | $389,226 |
Restricted cash, including non-current portion | 22,245 | | 123,178 |
Total Cash | $668,510 | | $512,404 |