Overseas Shipholding Group Reports Fourth Quarter and Full Year 2018 Results

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Overseas Shipholding Group, Inc. (NYSE: OSG) (the “Company” or “OSG”) a provider of energy transportation services for crude oil and petroleum products in the U.S. Flag markets, today reported results for the fourth quarter and full year 2018.

Highlights

  • Net loss for the fourth quarter was $5.2 million, or $(0.05) per diluted share, compared with net income of $53.6 million, or $0.61 per diluted share for the fourth quarter 2017.
  • Net income for the full year 2018 was $13.5 million, or $0.15 per diluted share, compared with $56.0 million, or $0.64 per diluted share for the full year 2017.
  • Shipping revenues for the fourth quarter and full year 2018 were $89.2 million and $366.2 million, down 4% and 6%, respectively, compared with the same periods in 2017. Time charter equivalent (TCE) revenues(A), a non-GAAP measure, for the fourth quarter and full year 2018 were $79.9 million and $326.7 million, down 4% and 10%, respectively, compared with the same periods in 2017.
  • Fourth quarter and full year 2018 Adjusted EBITDA(B), a non-GAAP measure, was $23.1 million and $87.0 million, down 7% and 27%, respectively, from $24.8 million and $118.4 million in the same periods in 2017.
  • Total cash(C) was $80.6 million as of December 31, 2018.
  • During the quarter we refinanced our $380 million term loan due August 2019, with a $325 million term loan due December 2023, a $27.5 million term loan due November 2026 and $27.6 million from cash on hand. This lengthened the maturity of our long-term debt.
  • We also extended the term on five of our bareboat charters to December 2022 and the remaining four vessels until December 2020.
  • In January 2019, we entered into a 10-year bareboat charter party agreement for a U.S. flagged product tanker.

Mr. Sam Norton, President and CEO, stated, “During 2018, we took steps to reduce debt, gain cost efficiencies, and retain capacity available to capture value from an improving rate environment, positioning the Company well to benefit from the inherent operating leverage of its business model. The fourth quarter saw continued progress in the developing recovery story for OSG’s core Jones Act businesses. Further time charter contracts for our conventional tankers were obtained at rates above those previously entered into, combining to give the Company fixed time charter cover for 75% of available vessel days for 2019 at the beginning of the year. We are as convinced as ever that improving fundamentals will support a continuing recovery, and we expect to benefit from that recovery as our fleet of conventional tankers is re-chartered beginning in late 2019.”

Mr. Norton added, “Success in refinancing our term debt and in extending the nine leases on vessels chartered-in from American Shipping Company removed considerable uncertainty and stabilized the principal elements of our balance sheet for the foreseeable future, and provided us with the ability to pursue long-term employment opportunities with customers who are increasingly aware of a supply constrained market. Commitments to invest in new barges, new tankers, and the long-term lease of an existing Jones Act Tanker provide tangible evidence of our confidence in our core markets and in our commitment to sustaining a leading position in the markets that we serve.”

Fourth Quarter 2018 Results

Shipping revenues were $89.2 million for the quarter, down 4% compared with the fourth quarter of 2017. TCE revenues for the fourth quarter of 2018 were $79.9 million, a decrease of $2.9 million, or 4%, compared with the fourth quarter of 2017, primarily due to lower average daily rates earned, which accounted for a $6.8 million decrease in TCE revenues and a 102-day decrease in revenue days for its fleet, excluding its modern lightering ATBs. This decrease is offset by an increase in TCE revenues of $4.0 million for the modern lightering ATBs in the fourth quarter of 2018 compared with the fourth quarter of 2017. We also traded two fewer vessels in the fourth quarter 2018 compared to fourth quarter 2017.

Operating income for the fourth quarter of 2018 was $7.4 million, compared to operating income of $3.4 million in the fourth quarter of 2017.

Net loss for the fourth quarter was $5.2 million, or $(0.05) per diluted share, compared with net income of $53.6 million, or $0.61 per diluted share, for the fourth quarter 2017. The decrease reflects the income tax benefit recorded in the fourth quarter of 2017 as a result of the remeasurement of the net deferred tax liability based on the newly enacted federal corporate statutory rate of 21%.

Adjusted EBITDA was $23.1 million for the quarter, a decrease of $1.7 million compared with the fourth quarter of 2017, driven primarily by the decline in TCE revenues.

Full Year 2018 Results

Shipping revenues were $366.2 million for the full year 2018, down 6% compared with the full year 2017. TCE revenues for the full year 2018 were $326.7 million, a decrease of $34.3 million, or 10%, compared with the full year 2017. Several factors contributed to these decreases: (a) 74-day increase in scheduled drydocking, which is an out-of-service period used to perform required major maintenance to continue trading and maximize a vessel’s useful life, (b) 92-day increase in unplanned repair days, including one vessel that was hit by a third-party ship, and (c) two fewer vessels in operation for most of 2018 compared to 2017.

Operating income for the full year 2018 was $27.4 million, compared to operating income of $37.7 million for the full year 2017.

Net income for the full year 2018 was $13.5 million, or $0.15 per diluted share, compared with net income of $56.0 million, or $0.64 per diluted share, for the full year 2017. The decrease reflected the income tax benefit recorded in 2017 as a result of the remeasurement of the net deferred tax liability based on the newly enacted federal corporate statutory rate of 21%.

Adjusted EBITDA was $87.0 million for the full year 2018, a decrease of $31.4 million compared with the full year 2017, driven primarily by the decline in TCE revenues.