EX-99.1 2 a20192qerexhibit991.htm EXHIBIT 99.1 Exhibit
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Exhibit 99.1
OVERSEAS SHIPHOLDING GROUP REPORTS
SECOND QUARTER 2019 RESULTS
 
Tampa, FL – August 9, 2019 – Overseas Shipholding Group, Inc. (NYSE: OSG) (the “Company” or “OSG”) a provider of energy transportation services for crude oil and petroleum products in the U.S. Flag markets, today reported results for the second quarter 2019.
 
Highlights

•
Net loss for the second quarter 2019 was $1.7 million, or ($0.02) per diluted share, compared with net income of $3.1 million, or $0.03 per diluted share, for the second quarter 2018. Net income for the second quarter 2019 before accounting reserves for Philadelphia Energy Solutions was $1.6 million, or $0.02 per diluted share.

•
Shipping revenues for the second quarter 2019 were $88.5 million, down 7.2% compared with the same period in 2018. Time charter equivalent (TCE) revenues(A), a non-GAAP measure, for the second quarter 2019 were $82.1 million, down 4.5% compared with the second quarter 2018. Second quarter 2019 TCE revenues remained consistent with first quarter 2019 TCE revenues.

•
Second quarter 2019 Adjusted EBITDA(B), a non-GAAP measure, was $18.2 million, down 26.8% from $24.9 million in the second quarter 2018. Adjusted EBITDA was reduced by $4.3 million due to reserves for possible losses associated with Philadelphia Energy Solutions' bankruptcy.

•
Total cash(C) was $53.6 million as of June 30, 2019.

Mr. Sam Norton, President and CEO, stated, “We have made significant progress towards securing more stable and visible cash flows in our conventional tanker and ATB trades. Supported by strong fundamentals and high utilization, our conventional tanker and ATB fleets both made solid contributions to our second quarter performance. This performance, together with a continually improving supply-demand balance, underpin our optimism about the emerging earnings recovery for these assets.” 
 
Mr. Norton added, “In response to the Chapter 11 filing of Philadelphia Energy Solutions, OSG’s largest lightering customer, we have re-deployed one of our two lightering vessels into the strengthening conventional tanker market while we await clarity on the longer-term intentions for the PES refinery complex. Notwithstanding this adjustment, we believe that OSG’s niche businesses collectively remain well positioned to continue benefitting from the long-term stability that these unique assets have historically provided.”

Second Quarter 2019 Results
 
Shipping revenues were $88.5 million for the quarter, down 7.2% compared with the second quarter of 2018. TCE revenues for the second quarter of 2019 were $82.1 million, a decrease of $3.9 million, or 4.5%, compared with the second quarter of 2018. This decrease primarily resulted from (a) an increase in drydock days, (b) one less Government of Israel voyage during the second quarter of 2019 compared to the same period in 2018, (c) one less vessel in operation during the second quarter of 2019 compared to the same period in 2018, and (d) the sale of one vessel towards the end of the second quarter of 2019 compared to no vessel sales during the same period in 2018.
 
Following a significant refinery explosion in June 2019, our customer, Philadelphia Energy Solutions (“PES”), filed a Chapter 11 bankruptcy petition on July 21, 2019. At the time of filing, OSG had outstanding receivables from PES of approximately





 
 
 
 
 
A, B, C Reconciliations of these non-GAAP financial measures are included in the financial tables attached to this press release starting on Page 7.

1


$4.3 million. The ultimate recovery of these receivables is currently unknown. The Company established, at June 30, 2019, a loss provision equal to $4.3 million. OSG is working diligently to maximize the Company's recovery.

Operating income for the second quarter of 2019 was $3.8 million, compared to operating income of $10.5 million in the second quarter of 2018.

Net loss for the second quarter 2019 was $1.7 million, or ($0.02) per diluted share, compared with net income of $3.1 million, or $0.03 per diluted share, for the second quarter 2018. Net income for the second quarter 2019 before accounting reserves for Philadelphia Energy Solutions was $1.6 million, or $0.02 per diluted share.

Adjusted EBITDA was $18.2 million for the second quarter, a decrease of $6.7 million compared with the second quarter of 2018. Adjusted EBITDA was reduced by $4.3 million due to reserves for possible losses associated with Philadelphia Energy Solutions' bankruptcy.

Conference Call
 
The Company will host a conference call to discuss its 2019 second quarter results at 9:00 a.m. Eastern Time (“ET”) on Friday, August 9, 2019.
 
To access the call, participants should dial (844) 850-0546 for domestic callers and (412) 317-5203 for international callers. Please dial in ten minutes prior to the start of the call.
 
A live webcast of the conference call will be available from the Investor Relations section of the Company’s website at http://www.osg.com/.
 
An audio replay of the conference call will be available starting at 11:00 a.m. ET on Friday, August 9, 2019 by dialing (877) 344-7529 for domestic callers and (412) 317-0088 for international callers, and entering Access Code 10133620.
 
About Overseas Shipholding Group, Inc.
 
Overseas Shipholding Group, Inc. (NYSE: OSG) is a publicly traded tanker company providing energy transportation services for crude oil and petroleum products in the U.S. Flag markets. OSG is a major operator of tankers and ATBs in the Jones Act industry. OSG’s 20-vessel U.S. Flag fleet consists of three ATBs, two lightering ATBs, three shuttle tankers, 10 MR tankers, and two non-Jones Act MR tankers that participate in the U.S. MSP. OSG is committed to setting high standards of excellence for its quality, safety and environmental programs. OSG is recognized as one of the world’s most customer-focused marine transportation companies and is headquartered in Tampa, FL. More information is available at www.osg.com.
 
Forward-Looking Statements
 
This press 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 our prospects, supply and demand for vessels in the markets in which we operate and the impact on market rates and vessel earnings, the impact of the Philadelphia Energy Solutions' bankruptcy on our business, including the adequacy of the related loss reserve, and future performance of our niche and core businesses. Forward-looking statements are based on our current plans, estimates and projections, and are subject to change based on a number of factors. Investors should carefully consider the risk factors outlined in more detail in our Annual Report on Form 10-K and in similar sections of other filings we make with the SEC from time to time. We do not assume any obligation to update or revise any forward-looking statements except as required by applicable law. Forward-looking statements and written and oral forward-looking statements attributable to us or our representatives after the date of this press release are qualified in their entirety by the cautionary statements contained in this paragraph and in other reports previously or hereafter filed by us with the SEC.
 
Investor Relations & Media Contact:
Susan Allan, Overseas Shipholding Group, Inc.
(813) 209-0620
sallan@osg.com

2


Consolidated Statements of Operations
($ in thousands, except per share amounts)

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
Shipping Revenues:
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Time and bareboat charter revenues
$
62,007

 
$
54,543

 
$
125,127

 
$
108,437

Voyage charter revenues
26,452

 
40,824

 
51,070

 
87,959

 
88,459

 
95,367

 
176,197

 
196,396

 
 
 
 
 
 
 
 
Operating Expenses:
 

 
 

 
 
 
 
Voyage expenses
6,353

 
9,402

 
11,337

 
21,654

Vessel expenses
32,520

 
33,656

 
64,967

 
67,160

Charter hire expenses
22,581

 
22,768

 
44,879

 
45,315

Depreciation and amortization
13,084

 
12,426

 
25,561

 
24,798

General and administrative
5,957

 
6,576

 
11,633

 
13,359

Bad debt expense
4,300

 
—

 
4,300

 
—

(Gain)/loss on disposal of vessels and other property, including impairments, net
(66
)
 
—

 
51

 
—

Total operating expenses
84,729

 
84,828

 
162,728

 
172,286

Income from vessel operations
3,730

 
10,539

 
13,469

 
24,110

Equity in income/(loss) of affiliated companies
68

 
(10
)
 
68

 
(10
)
Operating income
3,798

 
10,529

 
13,537

 
24,100

Other income/(expense), net
262

 
385

 
617

 
(246
)
Income before interest expense, reorganization items and income taxes
4,060

 
10,914

 
14,154

 
23,854

Interest expense
(6,571
)
 
(7,497
)
 
(13,077
)
 
(15,573
)
(Loss)/income before income taxes
(2,511
)
 
3,417

 
1,077

 
8,281

Income tax benefit/(provision)
773

 
(362
)
 
381

 
(1,564
)
Net (loss)/income
$
(1,738
)
 
$
3,055

 
$
1,458

 
$
6,717

 
 
 
 
 
 
 
 
Weighted Average Number of Common Shares Outstanding:
 

 
 

 
 
 
 
Basic - Class A
89,245,696

 
88,367,302

 
89,125,986

 
88,237,093

Diluted - Class A
89,245,696

 
89,198,996

 
89,507,860

 
88,910,518

Per Share Amounts:
 

 
 

 
 
 
 
Basic and diluted net (loss)/income - Class A
$
(0.02
)
 
$
0.03

 
$
0.02

 
$
0.08





3


Consolidated Balance Sheets
($ in thousands)

 
June 30,
2019
 
December 31,
2018
 
(unaudited)
 
 
ASSETS
 

 
 

Current Assets:
 

 
 

Cash and cash equivalents
$
53,437

 
$
80,417

Restricted cash
59

 
59

Voyage receivables, including unbilled of $6,041 and $10,160, net of reserve for doubtful accounts
11,400

 
16,096

Income tax receivable
476

 
439

Other receivables
3,020

 
3,027

Prepaid expenses
1,492

 
9,886

Inventories and other current assets
2,656

 
2,456

Total Current Assets
72,540

 
112,380

Vessels and other property, less accumulated depreciation
638,121

 
597,659

Deferred drydock expenditures, net
30,041

 
26,099

Total Vessels, Other Property and Deferred Drydock
668,162

 
623,758

Restricted cash - non current
140

 
165

Investments in and advances to affiliated companies
116

 
3,585

Intangible assets, less accumulated amortization
34,117

 
36,417

Operating lease right-of-use assets
229,265

 
—

Other assets
52,377

 
51,425

Total Assets
$
1,056,717

 
$
827,730

LIABILITIES AND EQUITY
 

 
 

Current Liabilities:
 

 
 

Accounts payable, accrued expenses and other current liabilities
$
24,061

 
$
34,678

Current portion of operating lease liabilities
81,586

 
—

Current portion of finance lease liabilities
3,929

 
—

Current installments of long-term debt
27,289

 
23,240

Total Current Liabilities
136,865

 
57,918

Reserve for uncertain tax positions
218

 
220

Noncurrent operating lease liabilities
163,029

 
—

Noncurrent finance lease liabilities
24,677

 
—

Long-term debt
306,308

 
322,295

Deferred income taxes, net
72,238

 
73,365

Other liabilities
20,569

 
44,464

Total Liabilities
723,904

 
498,262

Equity:
 

 
 

Common stock - Class A ($0.01 par value; 166,666,666 shares authorized; 85,651,060 and 84,834,790 shares issued and outstanding)
857

 
848

Paid-in additional capital
589,535

 
587,826

Accumulated deficit
(250,555
)
 
(252,014
)
 
339,837

 
336,660

Accumulated other comprehensive loss
(7,024
)
 
(7,192
)
Total Equity
332,813

 
329,468

Total Liabilities and Equity
$
1,056,717

 
$
827,730




4


Consolidated Statements of Cash Flows
($ in thousands) 

 
Six Months Ended
June 30,
 
2019
 
2018
 
(unaudited)
 
(unaudited)
Cash Flows from Operating Activities:
 

 
 

Net income
$
1,458

 
$
6,717

Items included in net income not affecting cash flows:
 

 
 

Depreciation and amortization
25,561

 
24,798

Bad debt expense
4,300

 
—

Loss on disposal of vessels and other property, including impairments, net
51

 
—

Amortization of debt discount and other deferred financing costs
1,023

 
2,099

Compensation relating to restricted stock awards and stock option grants
763

 
1,497

Deferred income tax (benefit)/provision
(1,047
)
 
1,057

Interest on finance lease liabilities
410

 
—

Non-cash operating lease expense
461

 
1,110

Distributed earnings of affiliated companies
3,470

 
3,747

Payments for drydocking
(9,383
)
 
(4,107
)
Operating lease right-of-use assets
44,344

 
—

Operating lease liabilities
(45,316
)
 
—

Changes in operating assets and liabilities, net
(6,337
)
 
2,603

Loss on extinguishment of debt, net
48

 
981

Net cash provided by operating activities
19,806

 
40,502

Cash Flows from Investing Activities:
 
 
 
Proceeds from disposals of vessels and other property
2,197

 
—

Expenditures for vessels and vessel improvements
(34,722
)
 
—

Expenditures for other property
(638
)
 
(22
)
       Net cash used in investing activities
(33,163
)
 
(22
)
Cash Flows from Financing Activities:
 

 
 

Payments on principal portion of finance lease liabilities
(798
)
 
—

Payments on debt
(10,417
)
 
(28,166
)
Extinguishment of debt
(2,139
)
 
(47,000
)
Tax withholding on share-based awards
(294
)
 
(359
)
Net cash used in financing activities
(13,648
)
 
(75,525
)
Net decrease in cash, cash equivalents and restricted cash
(27,005
)
 
(35,045
)
Cash, cash equivalents and restricted cash at beginning of period
80,641

 
166,269

Cash, cash equivalents and restricted cash at end of period
$
53,636

 
$
131,224



5


Spot and Fixed TCE Rates Achieved and Revenue Days
 
The following tables provides a breakdown of TCE rates achieved for spot and fixed charters and the related revenue days for the three and six months ended June 30, 2019 and the comparable period of 2018. Revenue days in the quarter ended June 30, 2019 totaled 1,808 compared with 1,945 in the prior year quarter. A summary fleet list by vessel class can be found later in this press release. 

 
2019
 
2018
Three Months Ended June 30,
Spot Earnings
 
Fixed Earnings
 
Spot Earnings
 
Fixed Earnings
Jones Act Handysize Product Carriers:
 

 
 

 
 

 
 

Average rate
$
37,356

 
$
57,212

 
$
32,180

 
$
60,953

Revenue days
157

 
959

 
282

 
795

Non-Jones Act Handysize Product Carriers:
 

 
 

 
 

 
 

Average rate
$
17,347

 
$
11,962

 
$
32,493

 
$
—

Revenue days
99

 
83

 
163

 
—

ATBs:
 

 
 

 
 

 
 

Average rate
$
19,000

 
$
21,610

 
$
20,679

 
$
23,629

Revenue days
89

 
252

 
268

 
255

Lightering:
 

 
 

 
 

 
 

Average rate
$
68,220

 
$
—

 
$
63,999

 
$
—

Revenue days
169

 
—

 
182

 
—


 
2019
 
2018
Six Months Ended June 30,
Spot Earnings
 
Fixed Earnings
 
Spot Earnings
 
Fixed Earnings
Jones Act Handysize Product Carriers:
 

 
 

 
 

 
 

Average rate
$
33,920

 
$
57,035

 
$
37,109

 
$
62,852

Revenue days
247

 
1,941

 
619

 
1,515

Non-Jones Act Handysize Product Carriers:
 

 
 

 
 

 
 

Average rate
$
21,905

 
$
12,023

 
$
34,939

 
$
—

Revenue days
211

 
151

 
342

 
—

ATBs:
 

 
 

 
 

 
 

Average rate
$
19,979

 
$
21,583

 
$
16,508

 
$
23,300

Revenue days
175

 
518

 
530

 
516

Lightering:
 

 
 

 
 

 
 

Average rate
$
70,634

 
$
—

 
$
67,372

 
$
—

Revenue days
349

 
—

 
355

 
—



 


6


Fleet Information
 
As of June 30, 2019, OSG’s operating fleet consisted of 20 vessels, nine of which were owned, with the remaining vessels chartered-in. Vessels chartered-in are on bareboat charters. 
Vessel Type
Vessels Owned
 
Vessels Chartered-In
 
Total Vessels
 
Total dwt (2)
Handysize Product Carriers (1)
4

 
11

 
15

 
710,161

Refined Product ATBs
3

 
—

 
3

 
89,881

Lightering ATBs
2

 
—

 
2

 
91,112

Total Operating Fleet
9

 
11

 
20

 
891,154

 
(1)
Includes two owned shuttle tankers, one chartered-in shuttle tanker and two owned U.S. Flag Product Carriers that trade internationally.
(2)
Total dwt is defined as aggregate deadweight tons for all vessels of that type.

Reconciliation to Non-GAAP Financial Information
 
The Company believes that, in addition to conventional measures prepared in accordance with GAAP, the following non-GAAP measures may provide certain investors with additional information that will better enable them to evaluate the Company’s performance. Accordingly, these non-GAAP measures are intended to provide supplemental information, and should not be considered in isolation or as a substitute for measures of performance prepared with GAAP.
 
(A) Time Charter Equivalent (TCE) Revenues
 
Consistent with general practice in the shipping industry, the Company uses TCE revenues, which represents shipping revenues less voyage expenses, as a measure to compare revenue generated from a voyage charter to revenue generated from a time charter. 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 of the segments to shipping revenues as reported in the consolidated statements of operations follow: 

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
($ in thousands)
2019
 
2018
 
2019
 
2018
Time charter equivalent revenues
$
82,106

 
$
85,965

 
$
164,860

 
$
174,742

Add: Voyage expenses
6,353

 
9,402

 
11,337

 
21,654

Shipping revenues
$
88,459

 
$
95,367

 
$
176,197

 
$
196,396



 Vessel Operating Contribution

Vessel operating contribution, a non-GAAP measure, is TCE revenues minus vessel expenses and charter hire expenses.

Our “niche market activities”, which includes Delaware Bay lightering, MSP vessels and shuttle tankers, continue to provide a stable operating platform underlying our total US Flag operations. These vessels’ operations are insulated from the forces affecting the broader Jones Act market.






7


The following table sets forth the contribution of our vessels:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
($ in thousands)
2019
 
2018
 
2019
 
2018
Niche Market Activities
$
20,736

 
$
24,342

 
$
43,339

 
$
52,250

Jones Act Handysize Tankers
2,692

 
156

 
5,126

 
2,465

ATBs
3,577

 
5,043

 
6,549

 
7,552

Vessel Operating Contribution
27,005

 
29,541

 
55,014

 
62,267

Depreciation and amortization
13,084

 
12,426

 
25,561

 
24,798

General and administrative
5,957

 
6,576

 
11,633

 
13,359

Bad debt expense
4,300

 
—

 
4,300

 
—

(Gain)/loss on disposal of vessels and other property, including impairments, net
(66
)
 
—

 
51

 
—

Equity in income/(loss) of affiliated companies
68

 
(10
)
 
68

 
(10
)
Operating income
$
3,798

 
$
10,529

 
$
13,537

 
$
24,100


(B) EBITDA and Adjusted EBITDA
 
EBITDA represents net (loss)/income from continuing operations before interest expense, income taxes and depreciation and amortization expense. Adjusted EBITDA consists of EBITDA adjusted to exclude amortization classified in charter hire expenses, interest expense classified in charter hire expenses, gain/(loss) on disposal of vessels and other property, including impairments, loss on repurchases and extinguishment of debt, non-cash stock based compensation expense and the impact of other items that we do not consider indicative of our ongoing operating performance. EBITDA and Adjusted EBITDA do not represent, and should not be a substitute for, net (loss)/income or cash flows from operations as determined in accordance with GAAP. Some of the limitations are: (i) EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; (ii) EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; and (iii) EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt. While EBITDA and Adjusted EBITDA are frequently used as a measure of operating results and performance, neither of them is necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. The following table reconciles net income/(loss) from continuing operations as reflected in the consolidated statements of operations, to EBITDA and Adjusted EBITDA. Prior periods have been adjusted to conform to current year presentation.

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
($ in thousands)
2019
 
2018
 
2019
 
2018
Net (loss)/income
$
(1,738
)
 
$
3,055

 
$
1,458

 
$
6,717

Income tax (benefit)/provision
(773
)
 
362

 
(381
)
 
1,564

Interest expense
6,571

 
7,497

 
13,077

 
15,573

Depreciation and amortization
13,084

 
12,426

 
25,561

 
24,798

EBITDA
17,144

 
23,340

 
39,715

 
48,652

Amortization classified in charter hire expenses
267

 
465

 
497

 
929

Interest expense classified in charter hire expenses
401

 
430

 
804

 
864

Non-cash stock based compensation expense
453

 
704

 
763

 
1,497

(Gain)/loss on disposal of vessels and other property, including impairments, net
(66
)
 
—

 
51

 
—

Loss on extinguishment of debt, net
48

 
—

 
48

 
981

Adjusted EBITDA
$
18,247

 
$
24,939

 
$
41,878

 
$
52,923

 




8


(C) Total Cash
 
($ in thousands)
June 30,
2019
 
December 31,
2018
Cash and cash equivalents
$
53,437

 
$
80,417

Restricted cash - current
59

 
59

Restricted cash – non-current
140

 
165

Total Cash
$
53,636

 
$
80,641



9