Overseas Shipholding Group Reports Third Quarter 2014 Results

Highlights

  • Net income for the third quarter was $8.4 million, or $0.02 per diluted share. Adjusted for special items, third quarter net loss was $2.4 million, or $0.01 per diluted share
  • On August 5, 2014, the Company’s amended plan of reorganization became effective and we emerged from bankruptcy
  • During the third quarter, the Company completed initiatives to outsource the technical and commercial management of its International Flag fleet
  • On October 9, 2014, the Company’s Class B Common Stock was approved for listing on the NYSE MKT

NEW YORK--()--Overseas Shipholding Group, Inc. (NYSE MKT LLC - the “NYSE MKT”:OSGB), a provider of energy transportation services, today reported results for the third quarter of fiscal 2014 ended September 30, 2014.

For the quarter ended September 30, 2014, the Company reported TCE1 revenues of $176.2 million, a decrease of $11.4 million, or 6%, from $187.6 million in the comparable 2013 quarter. For the quarter ended September 30, 2014, the Company reported shipping revenues of $206.3 million, a decrease of $61.1 million from $267.3 million in the comparable 2013 quarter. Net income for the quarter ended September 30, 2014 was $8.4 million, or $0.02 per diluted share, compared with net income of $1.0 million, or $0.03 per diluted share, in the same period in 2013. After adjusting for special items that increased net income by $10.9 million, or $0.03 per diluted share, third quarter 2014 net loss was $2.4 million, or $0.01 per diluted share, compared with net income of $12.7 million, or $0.42 per diluted share, in the third quarter of 2013. Details on special items for the third quarter of 2014 are provided later in this press release. In addition, see Appendix 1 for reconciliation of net income/(loss) to adjusted net income/(loss), a non-GAAP measure.

For the nine months ended September 30, 2014, the Company reported TCE revenues of $562.4 million, a decrease of $7.0 million, or 1%, from $569.4 million in the comparable 2013 period. For the nine months ended September 30, 2014, the Company reported shipping revenues of $740.5 million, a decrease of $2.4 million from $742.9 million in the comparable 2013 period. Net loss for the nine months ended September 30, 2014 was $185.2 million, or $1.38 per diluted share, compared with a net loss of $190.9 million, or $6.26 per diluted share, in the same period in 2013. After adjusting for special items that increased net loss by $94.9 million, or $0.70 per diluted share, net loss for the nine months ended September 30, 2014 was $90.4 million, or $0.68 per diluted share, compared with net income of $32.1 million, or $1.05 per diluted share, in the nine months ended September 30, 2013.

______________

1 See Appendix 1 for reconciliation of TCE (time charter equivalent) revenues, a non-GAAP measure, to shipping revenues.

 

Select Quarterly Income Statement Detail

Results for the quarter ended September 30, 2014 were significantly impacted by transactions, expenses and provisions resulting from the Company’s emergence from bankruptcy on August 5, 2014.

  • The $11.4 million (6%) decrease in TCE revenues for the quarter ended September 30, 2014 from the prior-year quarter was due principally to a significant decrease in revenue days of 907 days reflecting the redelivery of eight vessels (six Aframaxes, one Suezmax and one MR) at the expiry of their short-term time charters-in as well as the Company’s exit from the full service International Flag Lightering business, and a weakening of rates in the International Flag Handysize Product Carrier fleet. These factors were partially offset by an improvement in average rates in the International Flag VLCC and Aframax fleets.
    • TCE revenues for the International Product Carriers segment decreased by $5.1 million, or 15% to $28.8 million from $33.9 million in the third quarter of 2013. This decrease in TCE revenues resulted primarily from a period-over-period decrease in the average rate earned by the Handysize Product Carrier fleet. This decrease was partially offset by the delivery and entry into service of a newbuild LR2 to the Company in July 2014.
    • TCE revenues for the U.S. Flag segment decreased by $2.8 million, or 3%, to $97.9 million from $100.7 million in the third quarter of 2013. While the Jones Act market remained strong during the third quarter, the decrease in revenue was primarily attributable to the Non-Jones Act Handysize Products Carriers due to the timing of voyages performed under a contract of affreightment (“COA”) that earns a premium to the spot International Flag MR market, which resulted in fewer voyages being performed under this COA than in the comparable period in the prior year. A 95 day increase in drydock and repair days in the current quarter also contributed to the decrease in revenue.
    • TCE revenues for the International Crude Tankers segment decreased by $2.5 million, or 5%, to $49.4 million from $51.9 million in the third quarter of 2013. This decrease in TCE revenues reflects a 691 day decrease in revenue days. The decrease in revenue days primarily reflects a reduction in the size of International Crude Tankers Lightering fleet ahead of the Company’s exit from the full service International Flag Lightering business in September 2014. This reduction included the sale of two 1994-built Aframaxes that had been utilized in the International Flag Lightering business, the first in March 2014 and the second in September 2014, and the redelivery of two other vessels at the expiry of their short-term time charters-in. Also contributing to the decrease in revenue days were fewer chartered-in days in the Aframax and Suezmax fleets, which decreased by 340 and 83 days, respectively. These decreases were partially offset by higher average rates for the Aframax and VLCC sectors.
  • Vessel expenses increased by $2.5 million from the third quarter of 2013 to $68.0 million, principally reflecting increased daily vessel expenses of $1,170 per day in the International Product Carriers segment (related to technical management fees paid to V.Ships, higher damage repairs and the timing of the delivery of lubricating oils) and $719 per day in the U.S. Flag segment (related primarily to higher crew costs). These increases in daily vessel expenses were partially offset by a net decrease in owned and bareboat chartered-in vessels following the sales of the two Aframaxes and the delivery and entry into service of the newbuild LR2.
  • Charter hire expenses decreased by $12.0 million from the third quarter of 2013 to $34.7 million, principally reflecting the redelivery of eight vessels at the expiry of their short-term time charters-in referred to above.
  • Depreciation and amortization decreased by $4.0 million from the third quarter of 2013 to $40.2 million, principally reflecting reductions in vessel bases that resulted from impairment charges aggregating $366.0 million recorded in the International Crude Tankers and International product Carriers segments in the fourth quarter of 2013. These decreases were partially offset by the impact of the delivery of the LR2 in July 2014.
  • General and administrative (“G&A”) expenses decreased $4.0 million from third quarter of 2013 to $19.1 million, principally reflecting a decrease in compensation and benefits for shore-based staff of approximately $4.7 million attributable to (i) a reduction in the number of shore-based staff, (ii) the classification in the 2014 period of 2014 incentive bonus related accruals associated with staff included in the restructuring plan announced in January 2014 as part of severance costs, (iii) a decrease in retention bonuses under programs approved by the Bankruptcy Court in late-March 2013, and (iv) a decrease in stock compensation expense as a result of the cancellation of the 2004 Stock Incentive Plan. In addition, G&A declined due to decreases in consulting costs of approximately $0.4 million and in rent and facility related expenses and travel and entertainment totaling $0.7 million. All of the above decreases were partially offset by an increase in liability insurance of $2.2 million, principally related to the acceleration of certain directors and officers liability insurance costs and a one-time premium paid for runoff coverage for the former directors and officers of the Company.
  • Interest expense of $29.1 million for the third quarter of 2014 includes $22.0 million associated with the Company’s reinstated unsecured senior notes and new Exit Financing Facilities (as defined below). The balance of interest expense recognized during the third quarter of 2014 represents contractual post-petition interest on allowed claims associated with our pre-reorganized OSG loan agreements (excluding the reinstated unsecured senior notes) and certain rejected executory contracts, from July 1, 2014 through the claim settlement date, which was generally August 5, 2014. Interest expense for the three months ended September 30, 2014 is not indicative of the expense that will be recognized in future quarters, nor is it comparable to interest expense recognized in the third quarter of 2013 (a quarter during which the Company was in bankruptcy).
  • For the three months ended September 30, 2014, the Company recorded an income tax benefit of $63.5 million. The benefit reflects the release of a deferred tax liability associated with undistributed earnings of its foreign subsidiaries, offset in part by the impact of non-deductible costs incurred in connection with the bankruptcy proceedings. As part of the Company’s emergence from bankruptcy, the Company repaid the $1.5 billion unsecured revolving credit facility, for which OSG International, Inc., a wholly-owned Marshall Islands subsidiary of OSG, was liable on a joint and several basis. As a result, the amount of undistributed earnings of its foreign subsidiaries attributable to the excess of the $1.5 billion facility limit over the cumulative potential deemed dividends arising from the drawdowns by OSG under such facility were released and recorded as an income tax benefit of $55.6 million.

The Company currently plans to treat certain payments made by OSG in connection with the Company’s emergence from bankruptcy in August 2014 as having been made in its capacity as guarantor of the obligation of subsidiaries of OIN, a wholly owned subsidiary of the Company incorporated in the Marshall Islands, arising under certain loan agreements and deductible for U.S. income tax purposes. In connection with these payments, the Company has recorded a tax benefit; however, due to significant uncertainty as to whether the IRS will agree with the Company’s position on the deductibility of those payments, the Company has established a reserve to fully offset the benefit.

Special Items

Special items in the third quarter of 2014 (which are included in the discussion above) increased quarterly net income by a net of $10.9 million, or $0.03 per diluted share, and included:

Increases relating to:

  • Release of a deferred tax liability for undistributed earnings of foreign subsidiaries of $55.6 million, or $0.16 per diluted share; and
  • Gain on disposal of vessels of $2.8 million, or $0.01 per diluted share.

Offset by decreases relating to:

  • Reorganization items, which includes all transactions (including but not limited to, all professional fees and other expenses, realized gains and losses, and provisions for losses) directly associated with the reorganization and restructuring of the business, of $43.4 million, or $0.13 per diluted share; and
  • Costs incurred of $4.1 million, or $0.01 per diluted share, associated with employee severance and technical management transition.

Emergence from Bankruptcy and Other Financial Highlights

  • On May 2, 2014, the Company entered into an equity commitment agreement with certain equity interest holders of the outstanding shares of the Company (collectively, the “Commitment Parties”). That equity commitment agreement was amended on May 20, 2014 and May 26, 2014 (as amended, the “ECA”). Pursuant to the ECA, the Company conducted a subscription rights offering (“Rights Offering”) to its OSG equity holders (“Equity Interest Holders”) and the Commitment Parties under which an aggregate 503,333,133 of New Securities (defined below) including Class A common stock (“Class A Shares”) and/or penny warrants (“Class A Warrants” and collectively with Class A Shares, the “Class A Securities”) and Class B common stock (“Class B Shares”) and/or penny warrants (“Class B Warrants” and collectively with Class B Shares, the “Class B Securities”) were issued for an aggregate subscription price of $1.51 billion. The ECA was subject to an underwriting fee of 5%, which was paid to the Commitment Parties through the issuance of 25,166,668 additional Class A Securities at emergence. These transactions resulted in the recapitalization of the Company (prior to such recapitalization, “Pre-Reorganized OSG”) upon emergence from bankruptcy along with the cancellation of Pre-Reorganized OSG’s existing common stock. The proceeds received from the issuance of the Class A Securities and Class B Securities, together with certain proceeds from the Exit Financing Facilities, were used primarily to settle allowed claims under the Company’s plan of reorganization (“Equity Plan”), including interest, to pay certain transaction related expenses and fund working capital requirements.
  • On August 5, 2014, to support the Equity Plan, the Company and certain of its affiliates entered into secured debt facilities consisting of: (i) a secured asset-based revolving loan facility of $75.0 million, among OSG, OBS, certain OBS subsidiaries, Wells Fargo Bank, National Association, (“Wells Fargo”) as Administrative Agent, and other lenders party thereto (the “OBS ABL Facility”), secured by a first lien on substantially all of the U.S. Flag assets of OBS and its subsidiaries and a second lien on certain other specified U.S. Flag assets of OBS and its subsidiaries; (ii) a secured term loan of $603.0 million, among OSG, OBS, certain OBS subsidiaries Jefferies Finance LLC (“Jefferies”), as Administrative Agent, and other lenders party thereto (the “OBS Term Loan”), secured by a first lien on certain specified U.S. Flag assets of OBS and its subsidiaries and a second lien on substantially all of the other U.S. Flag assets of OBS and its subsidiaries; and (iii) a secured term loan facility of approximately $628.4 million (the “OIN Term Loan”) and a revolving loan facility of $50.0 million (the “OIN Revolver Facility” and, together with the OBS ABL Facility, the OBS Term Loan and the OIN Term Loan, the “Exit Financing Facilities”), among OSG, OIN, OIN Delaware LLC, certain OIN subsidiaries, Jefferies, as Administrative Agent, and the other lenders party thereto, both secured by a first lien on substantially all of the International Flag assets of OIN and its subsidiaries that, collectively and together with the proceeds from the issuance of the Class A Securities and Class B Securities in the Rights Offering, provided the Company with the funding necessary to satisfy the Equity Plan’s cash payment obligations, the expenses associated with closing the Exit Financing Facilities and working capital to fund the Company’s operations after emergence from bankruptcy. On August 5, 2014, the available amounts under each of the OBS Term Loan and OIN Term Loan were drawn in full and proceeds therefrom were used to satisfy certain of the Equity Plan’s cash payment obligations and the expenses associated with closing the Exit Financing Facilities. As of September 30, 2014, no amounts were drawn under the OBS ABL Facility or the OIN Revolver Facility.
  • Cash and cash equivalents aggregated $296.3 million as of September 30, 2014, including approximately $73 million held by borrowers under the OBS Term Loan and approximately $155 million held by borrowers under the OIN Term Loan. The Company has designated cash reserves of $131.7 million, which is included in the restricted cash line item on the balance sheet; to be utilized for the settlement of certain unsecured claims and other bankruptcy related costs.
  • As of September 30, 2014, OSG was in compliance with all of the financial covenants contained in its Exit Financing Facilities and other debt agreements.
  • On October 9, 2014, the Company’s Class B Common Stock was approved for listing on the NYSE MKT. The listing and commencement of trading of the Company’s Class B Common Stock on the NYSE MKT is a significant corporate milestone for OSG.

Segment Activity

Crude Oil

  • On July 23, 2014, we redelivered one of the two remaining time chartered-in vessels employed in the full service International Crude Tankers lightering business to owners. The one remaining time chartered-in vessel utilized in such business was redelivered on August 13, 2014.
  • On September 22, 2014, we sold and delivered to buyers one Aframax that had previously been engaged in the International Flag Lightering business.
  • One Aframax was redelivered at the expiry of its time charter-in on September 24, 2014.

Products

  • The Overseas Shenandoah, an LR2, was delivered on July 24, 2014.

U.S. Flag

  • OSG’s Jones Act product tanker fleet remains fully committed under time charters, with renewals in the year 2014 to date at rates in excess of expiring rates.
  • The conversion of the Overseas Tampa to a shuttle tanker was completed August 2, 2014. The vessel will commence a ten-year charter as a shuttle tanker in mid-2015.

Spot and Fixed TCE Rates Achieved and Revenue Days

The following tables provides a breakdown of TCE rates achieved for spot and fixed charters and the related revenue days for the three months ended September 30, 2014 and the comparable period of 2013. Revenue days in the quarter ended September 30, 2014 totaled 7,200 compared with 8,107 in the prior year quarter. The decrease in revenue days resulted principally from the redelivery of eight vessels (six Aframaxes, one Suezmax and one MR) at the expiry of their short-term time charters-in. A summary fleet list by vessel class can be found later in this press release.

                     
Three Months Ended September 30, 2014         Three Months Ended September 30, 2013
          Spot       Fixed       Total         Spot       Fixed       Total
Business Unit – Crude Oil                                                    
VLCC (< 15 years old)                                
Average TCE Rate $19,778 $ — $17,385 $17,757
Number of Revenue Days 714 714 689 54 743
VLCC (> 15 years old)
Average TCE Rate $16,189 $ — $8,855 $ —
Number of Revenue Days 184 184 183 183
Suezmax
Average TCE Rate $ — $ — $11,256 $ —
Number of Revenue Days 83 83
Aframax
Average TCE Rate $20,167 $ — $12,687 $ —
Number of Revenue Days 913 913 1,071 1,071
Aframax – Lightering
Average TCE Rate $10,853 $ — $19,827 $ —
Number of Revenue Days 150 150 587 587
Panamax
Average TCE Rate $21,012 $12,062 $19,232 $11,178
Number of Revenue Days 355       459       814         459       342       801
Total Crude Oil Revenue Days         2,316       459       2,775         3,072       396       3,468
Business Unit – Products                                          
LR2
Average TCE Rate $7,649 $ — $ — $ —
Number of Revenue Days 56 56
LR1
Average TCE Rate $21,804 $13,970 $19,020 $12,626
Number of Revenue Days 92 268 360 183 184 367
MR
Average TCE Rate $11,814 $ — $13,999 $11,949
Number of Revenue Days 1,963             1,963         1,738       310       2,048
Total Refined Products Revenue Days         2,111       268       2,379         1,921       494       2,415
Business Unit – U.S. Flag                                                    
Handysize Product Carrier
Average TCE Rate $ — $58,705 $ — $56,476
Number of Revenue Days 1,035 1,035 1,077 1,077
Non-Jones Act Product Carrier
Average TCE Rate $12,014 $12,895 $27,417 $ —
Number of Revenue Days 141 43 184 183 183
ATB
Average TCE Rate $ — $34,557 $36,267 $33,522
Number of Revenue Days 640 640 47 642 689
Lightering
Average TCE Rate $67,654 $ — $66,289 $ —
Number of Revenue Days 187             187         183             183
Total U.S. Flag Revenue Days         328       1,718       2,046         413       1,719       2,132
Other – Number of Revenue Days                                   92       92
TOTAL REVENUE DAYS         4,755       2,445       7,200         5,406       2,701       8,107
 
 

Unaudited Consolidated Statements of Operations

             
($ in thousands, except per share amounts) Three Months Ended September 30,       Nine Months Ended September 30,
2014         2013         2014         2013  
Shipping Revenues:            
Pool revenues $44,979 $34,985 $118,456 $139,492
Time and bareboat charter revenues 95,733 95,355 287,470 270,772
Voyage charter revenues 65,571         137,002         334,580         332,630  
Total Shipping Revenues 206,283         267,342         740,506         742,894  
Operating Expenses:
Voyage expenses 30,046 79,708 178,068 173,449
Vessel expenses 68,066 65,559 201,463 196,237
Charter hire expenses 34,650 46,682 120,115 162,106
Depreciation and amortization 40,232 44,168 119,839 130,311
General and administrative 19,119 23,117 63,029 69,172
Technical management transition costs 854 - 2,686 -
Severance costs 3,713 277 18,360 3,341
(Gain)/loss on disposal of vessels and other fixed assets (2,753 )       63         (4,234 )       (1,143 )
Total Operating Expenses 193,927         259,574         699,326         733,473  
Income from Vessel Operations 12,356 7,768 41,180 9,421
Equity in Income of Affiliated Companies 11,313         9,667         29,444         30,530  
Operating Income 23,669 17,435 70,624 39,951
Other Income 99         180         378         464  
Income before interest expense, reorganization items

and income taxes

23,768 17,615 71,002 40,415
Interest Expense (29,111 )       (3 )       (203,745 )       (322 )
Income/(loss) before reorganization items

and income taxes

(5,343 ) 17,612 (132,743 ) 40,093
Reorganization items, net (49,756 )       (14,705 )       (165,135 )       (236,829 )
Income (loss) before income taxes (55,099 ) 2,907 (297,878 ) (196,736 )
Income tax benefit (provision) 63,544         (1,947 )       112,629         5,787  
Net Income / (Loss) $8,445         $960         $(185,249 )       $(190,949 )
 
Weighted Average Number of Common Shares Outstanding:
Basic - Class A 322,529,046 108,691,107
Basic - Class B 16,532,116 30,493,981 25,903,529 30,479,054
Diluted - Class A 322,529,765 108,691,107
Diluted - Class B 16,532,116 30,493,981 25,903,529 30,479,054
Per Share Amounts:
Basic net income/(loss) - Class A and Class B $0.02 $(1.38 )
Diluted net (loss)/income - Class A and Class B $0.02 $(1.38 )
Basic net (loss)/income - Common Stock $0.03 $(6.26 )
Diluted net (loss)/income - Common Stock $0.03 $(6.26 )
 
               

Unaudited Consolidated Balance Sheets

 
($ in thousands)

September 30,
2014

 

December 31,
2013

ASSETS
Current Assets:
Cash and cash equivalents $296,345 $601,927
Restricted cash 140,879 -
Voyage receivables 97,990 147,964
Income tax recoverable 61,514 3,952
Other receivables 10,184 16,838
Inventories , prepaid expenses and other current assets 27,465 41,168
Deferred income taxes 5,464   5,464  
Total Current Assets 639,841   817,313  

Vessels and other property, including construction in progress of $54,644 (2013),

less accumulated depreciation

2,290,396 2,359,352
Deferred drydock expenditures, net 62,554   57,248  
Total Vessels, Deferred Drydock and Other Property 2,352,950   2,416,600  
 
Investments in affiliated companies 327,207 323,327
Intangible assets, less accumulated amortization 56,444 60,167
Other assets 64,455   27,087  
Total Assets $3,440,897   $3,644,494  
 
 
LIABILITIES AND EQUITY / (DEFICIT)
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities $123,675 $121,582
Income taxes payable 883 256,258
Current installments of long-term debt 12,314   -  
Total Current Liabilities 136,872 377,840
 
Reserve for uncertain tax positions 33,054 26,585
Long-term debt 1,659,067 -
Deferred income taxes 292,209 369,954
Other liabilities 52,096 42,189
Liabilities subject to compromise -   2,888,173  
Total Liabilities 2,173,298 3,704,741
Equity/(Deficit):
Total Equity /(Deficit) 1,267,599   (60,247 )
Total Liabilities and Equity /(Deficit) $3,440,897  

$3,644,494

 
 
 

Unaudited Consolidated Statements of Cash Flows

 
($ in thousands)         Nine Months Ended September 30,
2014         2013  
Cash Flows from Operating Activities:
Net loss $ (185,249 ) $(190,949 )
Items included in net loss not affecting cash flows:
Depreciation and amortization 119,839 130,311
Amortization of deferred gain on sale and leasebacks - 42
Amortization of debt discount and other deferred financing costs 1,689 -
Compensation relating to restricted stock and stock option grants 644 (571 )
Deferred income tax benefit (76,141 ) (24,093 )
Undistributed earnings of affiliated companies (25,947 ) (26,960 )
Deferred payment obligations on charters-in 2,669 4,177
Reorganization items, non-cash 55,511 198,521
Gain on sublease contracts - (896 )
Other – net 1,945 1,688
Loss on sale of securities and other investments – net - 198
Gain on disposal of vessels – net (4,234 ) (1,143 )
Payments for drydocking (29,385 ) (17,110 )
Bankruptcy and IRS claim payments (786,651 ) -
Changes in other operating assets and liabilities         182,689         29,211  
Net cash (used in) / provided by operating activities         (742,621 )       102,426  
Cash Flows from Investing Activities:
Change in restricted cash (131,703 ) -
Proceeds from sale of marketable securities and investments - 344
Expenditures for vessels (32,068 ) (27,769 )
Proceeds from disposal of vessels 16,081 485
Expenditures for other property (345 ) (1,754 )
Distributions from affiliated companies 30,197 854
Other – net         647         932  
Net cash provided by / (used in) investing activities         (117,191 )       (26,908 )
Cash Flows from Financing Activities:
Issuance of common stock, net of issuance costs 1,510,000 -
Purchases of treasury stock (162 ) (42 )
Issuance of debt, net of issuance and deferred financing costs 1,178,760 -
Payments on debt, including adequate protection payments         (2,134,368 )       (12,186 )
Net cash provided by / (used in) financing activities         554,230         (12,228 )
Net (decrease) / increase in cash and cash equivalents (305,582 ) 63,290
Cash and cash equivalents at beginning of year         601,927         507,342  
Cash and cash equivalents at end of period         $296,345         $570,632  
 

Fleet Information

As of September 30, 2014, OSG’s owned and operated fleet totaled 85 International Flag and U.S. Flag vessels (66 vessels owned and 19 chartered-in) compared with 90 at September 30, 2013. Those figures include vessels in which the Company has a partial ownership interest through its participation in joint ventures. The Company’s fleet list excludes vessels chartered-in where the charter duration was one year or less at inception

                       
Vessels Owned Vessels Chartered-in Total at September 30, 2014
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       864,046
VLCC and ULCC 11 11.0 11 11.0 3,486,039
Aframax 7 7.0 1 1.0 8 8.0 903,082
Panamax         9       9.0                   9       9.0       626,834
International Flag Crude Tankers 29 28.0 1 1.0 30 29.0 5,880,001
 
LR2 1 1.0 1 1.0 112,792
LR1 4 4.0 4 4.0 297,681
MR         14       14.0       8       8.0       22       22.0       1,152,502
International Flag Product Carriers 19 19.0 8 8.0 27 27.0 1,562,975
                                                           
Total Int’l Flag Operating Fleet         48       47.0       9       9.0       57       56.0       7,442,976
                                                           
Handysize Product Carriers 4 4.0 10 10.0 14 14.0 561,117
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       878,293
                                                           
LNG Fleet         4       2.0                   4       2.0       864,800 cbm
Total Operating Fleet         66       63.0       19       19.0       85       82.0       8,321,269
and
864,800 cbm
 

Appendix 1 – Reconciliation to Non-GAAP Financial Information

TCE Reconciliation

Reconciliation of time charter equivalent revenues of the segments to shipping revenues as reported in the consolidated statements of operations follow:

               
Three Months Ended Sep. 30,       Nine Months Ended Sep. 30,
($ in thousands)         2014       2013       2014       2013
Time charter equivalent revenues $176,237       $187,634 $562,438       $569,445
Add: Voyage Expenses 30,046       79,708       178,068       173,449
Shipping revenues $206,283       $267,342       $740,506       $742,894
 

Consistent with general practice in the shipping industry, the Company uses time charter equivalent 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.

Adjusted Net Income/(Loss) Reconciliation

Reconciliation of income/(loss) as reported in the consolidated statements of operations to adjusted net income/(loss) follow:

        Three Months Ended Sep. 30,       Nine Months Ended Sep. 30,  
($ in thousands)         2014         2013       2014         2013  
Reported net income/(loss) $8,445       $960       $(185,249 )       $(190,949 )
 
Adjustments to remove impact of special items:
Severance and technical management transition costs 4,089 181 18,748 2,123
(Gain)/loss on disposal of vessels and other fixed assets (2,753 ) 63 (4,234 ) (1,143 )
Reorganization items, net 43,412 11,505 135,939 222,044
Release of deferred taxes for undistributed earnings of foreign subsidiaries (55,602 )             (55,602 )        
Adjusted net income/(loss) $(2,409 )       $12,709       $(90,398 )       $32,075  
 
        Three Months Ended Sep. 30,       Nine Months Ended Sep. 30,  
(per share amounts)         2014         2013       2014         2013  
Reported net income/(loss) per diluted share $0.02       $0.03       $(1.38 )       $(6.26 )
 
Adjustments to remove impact of special items:
Severance and technical management transition costs 0.01 0.01 0.14 0.07
(Gain)/loss on disposal of vessels and other fixed assets (0.01 ) 0.00 (0.03 ) (0.04 )
Reorganization items, net 0.13 0.38 1.00 7.28
Release of deferred taxes for undistributed earnings of foreign subsidiaries (0.16 )             (0.41 )        
Adjusted net income/(loss) per diluted share $(0.01 )       $0.42       $(0.68 )       $1.05  
 

The Company has included in this press release a non-GAAP performance measure (net income (loss) adjusted for special items). This non-GAAP performance measure does not have any standardized meaning prescribed by GAAP and, therefore, may not be comparable to similar measures presented by other companies. The Company believes that, in addition to conventional measures prepared in accordance with GAAP, this non-GAAP measure may provide certain investors with additional information that will better enable them to evaluate the Company’s performance. Accordingly, this non-GAAP measure is intended to provide supplemental information, and should not be considered in isolation or as a substitute for measures of performance prepared with GAAP.

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 regarding the tanker and articulated tug/barge markets, and the Company's prospects, including prospects for certain strategic alliances and investments. All statements other than statements of historical facts should be considered forward-looking statements. There are a number of factors, risks and uncertainties, many of which are beyond the control of the Company, that could cause actual results to differ materially from the expectations expressed or implied in these forward-looking statements; the Company’s ability to generate cash; the Company’s ability to raise cash through the sale of non-core assets; the success of the Company’s strategic investment decisions; the success of the Company’s plan to reduce its cost structure, including to implement the outsourcing of the technical and commercial management of its International Flag fleet, and the Company’s dependence on third party service providers for such management; the Company’s ability to attract, retain and motivate key employees; continued weakness or worsening of economic conditions; the Company’s ability to streamline its operations and reduce its general and administrative expenses; the highly cyclical nature of OSG’s industry; fluctuations in the market value of vessels; an increase in the supply of vessels without a commensurate increase in demand; adequacy of OSG’s insurance to cover its losses; constraints on capital availability; acts of piracy on ocean-going vessels; terrorist attacks and international hostilities and instability; changing economic, political and governmental conditions abroad; compliance with environmental laws or regulations, including compliance with regulations concerning discharge of ballast water and effluents scheduled to become effective in the next few years; seasonal variations in OSG’s revenues; the effect of the Company’s indebtedness on its ability to finance operations, pursue desirable business operations and successfully run its business in the future; the Company’s ability to generate cash to service its indebtedness; potential costs, penalties and adverse effects associated with litigation and regulatory inquiries regarding the restatement of the Company’s prior financial statements; the Company’s compliance with the Jones Act provisions on coastwise trade and the continuing existence of these provisions and international trade agreements; the Company’s ability to renew its time charters when they expire or to enter into new time charters for newbuilds; delays or cost overruns in building new vessels (including delivery of new vessels); the scheduled shipyard maintenance of the Company’s vessels or rebuilding or conversion of the Company’s vessels; termination or change in the nature of OSG’s relationship with any of the pools in which it participates; OSG’s ability to compete effectively for charters with companies with greater resources; increased operating costs and capital expenses as the Company’s vessels age; refusal of certain customers to use vessels of a certain age; the failure of contract counterparties to meet their obligations; the shipping income of OSG’s foreign subsidiaries becoming subject to current taxation in the United States; the potential for audit or material adjustment by the IRS of certain tax benefits recognized by the Company; unexpected drydock costs; and the arrest of OSG’s vessels by maritime claimants. The Company assumes no obligation to update or revise any forward looking statements. Forward looking statements in this release 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 statement contained in this paragraph and in other reports hereafter filed by the Company with the Securities and Exchange Commission. Factors, risks and uncertainties that could cause actual results to differ from the expectations reflected in these forward-looking statements are described in the Company’s Annual Report for 2013 on Form 10-K and in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014 and September 30, 2014, and those risks discussed in the other reports OSG files with the Securities and Exchange Commission.

Contacts

Overseas Shipholding Group, Inc.
Investor Relations, +1-212-578-1699
www.osg.com

Contacts

Overseas Shipholding Group, Inc.
Investor Relations, +1-212-578-1699
www.osg.com