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Overseas Shipholding Group Reports First Quarter 2022 Results

OSG

Overseas Shipholding Group, Inc. (NYSE: OSG) (the “Company” or “OSG”), a leading provider of energy transportation services for crude oil and petroleum products in the U.S. Flag markets, today reported results for the first quarter 2022.

  • Shipping revenues for the first quarter 2022 were $104.0 million, an increase of $8.5 million from the fourth quarter 2021. Compared to the first quarter 2021, shipping revenues increased 28.0% from $81.3 million.
  • Net loss for the first quarter 2022 was $509 thousand, or $(0.01) per diluted share, compared with net loss of $3.7 million, or ($0.03) per diluted share, in the fourth quarter 2021. Net loss was $15.9 million, or $(0.18) per diluted share, for the first quarter 2021.
  • Time charter equivalent (TCE) revenues(A), a non-GAAP measure, for the first quarter 2022 were $93.9 million, an increase of $13.9 million from fourth quarter 2021. TCE revenues were up 43.4% compared to first quarter 2021.
  • First quarter 2022 Adjusted EBITDA(B), a non-GAAP measure, was $25.4 million, an increase of $8.8 million from the fourth quarter 2021. Adjusted EBITDA increased 309.2% from $6.2 million in the first quarter 2021.
  • Total cash(C) was $76.9 million as of March 31, 2022.
  • During the quarter, we returned two vessels to service from layup. We expect the two remaining vessels in layup to return to service during the second quarter of 2022.

Sam Norton, President and CEO, offered the following comments on the quarterly results announced today: “Operating activities during the quarter generated positive free cash flow after debt service and capital expenditures, with the quarter-to-quarter change in cash balances attributable to changes in working capital. For the fourth consecutive quarter, OSG has achieved better sequential TCE and EBITDA performance, evidence of continuing progress made towards restoring our business to a normalized and financially sustainable state. These results give us renewed confidence that the condition of our balance sheet and the opportunities inherent in an improving market environment will allow us to realize the latent potential of our long-term business strategy.”

Mr. Norton added, “Our last two vessels in layup are slated to return to service before the end of June giving us a full fleet of vessels in service for the first time in nearly two years. We continue to anticipate further improvement in all important financial metrics and a gradual build in available cash balances over the next several quarters as higher utilization at stronger time charter rates is realized by substantially all of our vessels in operation.”

A, B, C

Reconciliations of these non-GAAP financial measures are included in the financial tables attached to this press release starting on Page 8.

First Quarter 2022 Results

Shipping revenues were $104.0 million for the first quarter of 2022, an increase of $8.5 million, or 8.9%, from the fourth quarter of 2021. TCE revenues increased $13.9 million, or 17.4%, from the fourth quarter to $93.9 million in the first quarter. The increases were primarily a result of (a) a 175-day decrease in layup days, as two vessels came out of layup in January 2022 and February 2022, respectively, (b) a 30-day decrease in scheduled drydocking and (c) five Military Sealift Command voyages, which were longer international voyages, during the first quarter of 2022 compared to one such voyage during the fourth quarter of 2021.

First quarter 2022 operating income was $7.7 million compared to the fourth quarter 2021 operating loss of $1.9 million.

Quarterly adjusted EBITDA increased to $25.4 million during the first quarter of 2022, an $8.8 million increase from the fourth quarter of 2021. The increase was driven by the increased revenues for the quarter.

In comparison to the first quarter of 2021, shipping revenues were up 28.0%. TCE revenues for the first quarter of 2022 were $93.9 million, an increase of $28.4 million, or 43.4%, compared with the first quarter of 2021. The increase primarily resulted from a 369-day decrease in layup days, as we had fewer vessels in layup during the first quarter of 2022 compared to the first quarter of 2021. 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. During the first quarter of 2021, we had seven vessels in layup. Additionally, the increase in revenues resulted from five Military Sealift Command voyages, which were longer international voyages, during the first quarter of 2022 compared to no such voyages during the same period in 2021 and an increase in Delaware Bay lightering volumes. The increase was partially offset by one less MR tanker in our fleet, Overseas Gulf Coast, which was sold during the second quarter of 2021. We continued to see an increase in demand during the first quarter of 2022 and as a result, we expect our two remaining vessels in layup to return to service during the second quarter of 2022.

Operating income for the first quarter of 2022 was $7.7 million compared to operating loss of $15.8 million for the first quarter of 2021. Net loss for the first quarter of 2022 was $509 thousand, or $(0.01) per diluted share, compared with net loss of $15.9 million, or $(0.18) per diluted share, for the first quarter 2021.

Adjusted EBITDA was $25.4 million for the 2022 first quarter, an increase of $19.2 million compared with the first quarter of 2021, driven primarily by the increase in TCE revenues.

Conference Call

The Company will host a conference call to discuss its first quarter 2022 results at 9:30 a.m. Eastern Time (“ET”) on Monday, May 9, 2022.

To access the call, participants should dial (844) 200-6205 for U.S. and Canada callers and (929) 526-1599 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 for one week starting at 11:30 a.m. ET on Monday, May 9, 2022 by dialing (866) 813-9403 for U.S. and Canada callers and (929) 458-6194 for international callers, and entering Access Code 892890.

About Overseas Shipholding Group, Inc.

Overseas Shipholding Group, Inc. (NYSE:OSG) is a publicly traded 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 22 vessel U.S. Flag fleet consists of three crude oil tankers doing business in Alaska, two conventional ATBs, two lightering ATBs, three shuttle tankers, ten MR tankers, and two non-Jones Act MR tankers that participate in the U.S. Maritime Security Program. OSG also currently owns and operates one Marshall Islands flagged MR tanker which trades internationally.

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 within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, the Company may make or approve certain forward-looking 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 continued stability of our niche businesses, the impact of our time charter contracts on our future financial performance, and such external events such as geopolitical conflicts such as the Russian/Ukraine conflict. Forward-looking statements are based on our current plans, estimates and projections, and are subject to change based on a number of factors. COVID-19 has had, and will continue to have, a profound impact on our workforce and many other aspects of our business and industry. Investors should carefully consider the risk factors outlined in more detail in our filings with the SEC. We do not assume any obligation to update or revise any forward-looking statements except as may be 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.

Consolidated Statements of Operations

($ in thousands, except per share amounts)

Three Months Ended
March 31,

2022

2021

(unaudited)

(unaudited)

Shipping Revenues:

Time and bareboat charter revenues

$

57,236

$

63,788

Voyage charter revenues

46,763

17,485

103,999

81,273

Operating Expenses:

Voyage expenses

10,074

15,760

Vessel expenses

40,798

31,807

Charter hire expenses

21,996

22,318

Depreciation and amortization

16,493

15,319

General and administrative

6,938

6,365

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

5,493

Total operating expenses

96,299

97,062

Operating income/(loss)

7,700

(15,789

)

Other income, net

97

122

Income/(loss) before interest expense and income taxes

7,797

(15,667

)

Interest expense

(8,365

)

(6,370

)

Loss before income taxes

(568

)

(22,037

)

Income tax benefit

59

6,169

Net loss

$

(509

)

$

(15,868

)

Weighted Average Number of Common Shares Outstanding:

Basic - Class A

90,856,688

90,111,701

Diluted - Class A

90,856,688

90,111,701

Per Share Amounts:

Basic and diluted net loss - Class A

$

(0.01

)

$

(0.18

)

Consolidated Balance Sheets

($ in thousands)

March 31, 2022

December 31, 2021

(unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

76,903

$

83,253

Voyage receivables, including unbilled of $4,905 and $3,777, net of reserve for doubtful accounts

12,467

14,586

Income tax receivable

1,883

1,882

Other receivables

10,779

5,816

Inventories, prepaid expenses and other current assets

6,799

3,438

Total Current Assets

108,831

108,975

Vessels and other property, less accumulated depreciation

752,734

761,777

Deferred drydock expenditures, net

42,381

43,342

Total Vessels, Other Property and Deferred Drydock

795,115

805,119

Intangible assets, less accumulated amortization

21,467

22,617

Operating lease right-of-use assets, net

132,258

152,027

Other assets

26,864

26,991

Total Assets

$

1,084,535

$

1,115,729

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable, accrued expenses and other current liabilities

$

45,995

$

49,901

Current installments of long-term debt

22,592

22,225

Current portion of operating lease liabilities

93,552

100,010

Current portion of finance lease liabilities

4,001

4,000

Total Current Liabilities

166,140

176,136

Reserve for uncertain tax positions

181

179

Noncurrent operating lease liabilities

59,153

73,150

Noncurrent finance lease liabilities

18,388

18,998

Long-term debt

416,740

422,515

Deferred income taxes, net

63,656

63,744

Other liabilities

22,066

22,393

Total Liabilities

746,324

777,115

Equity:

Common stock - Class A ($0.01 par value; 166,666,666 shares authorized; 87,698,624 and 87,170,463 shares issued and outstanding)

877

872

Paid-in additional capital

594,667

594,386

Accumulated deficit

(260,096

)

(259,587

)

335,448

335,671

Accumulated other comprehensive loss

2,763

2,943

Total Equity

338,211

338,614

Total Liabilities and Equity

$

1,084,535

$

1,115,729

Consolidated Statements of Cash Flows

($ in thousands)

Three Months Ended
March 31,

2022

2021

(unaudited)

(unaudited)

Cash Flows from Operating Activities:

Net loss

$

(509

)

$

(15,868

)

Items included in net income not affecting cash flows:

Depreciation and amortization

16,493

15,319

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

5,493

Amortization of debt discount and other deferred financing costs

274

557

Compensation relating to restricted stock awards and stock option grants

656

575

Deferred income tax benefit

(86

)

(6,178

)

Interest on finance lease liabilities

416

460

Non-cash operating lease expense

22,317

22,717

Payments for drydocking

(3,236

)

(8,179

)

Operating lease liabilities

(22,846

)

(22,860

)

Changes in operating assets and liabilities, net

(11,694

)

(1,217

)

Net cash provided by/(used in) operating activities

1,785

(9,181

)

Cash Flows from Investing Activities:

Expenditures for vessels and vessel improvements

(1,058

)

(3,227

)

Net cash used in investing activities

(1,058

)

(3,227

)

Cash Flows from Financing Activities:

Payments on debt

(5,420

)

(9,616

)

Tax withholding on share-based awards

(370

)

(402

)

Payments on principal portion of finance lease liabilities

(1,026

)

(1,026

)

Extinguishment of debt

(301

)

Deferred financing costs paid for debt

(261

)

(877

)

Net cash used in financing activities

(7,077

)

(12,222

)

Net decrease in cash, cash equivalents and restricted cash

(6,350

)

(24,630

)

Cash, cash equivalents and restricted cash at beginning of period

83,253

69,819

Cash, cash equivalents and restricted cash at end of period

$

76,903

$

45,189

Spot and Fixed TCE Rates Achieved and Revenue Days

The following table provides a breakdown of TCE rates achieved for spot and fixed charters and the related revenue days for the three months ended March 31, 2022 and the comparable period of 2021. Revenue days in the quarter ended March 31, 2022 totaled 1,763 compared with 1,473 in the prior year quarter. A summary fleet list by vessel class can be found later in this press release.

2022

2021

Three Months Ended March 31,

Spot
Earnings

Fixed
Earnings

Spot
Earnings

Fixed
Earnings

Jones Act Handysize Product Carriers:

Average rate

$

57,368

$

58,228

$

24,467

$

65,165

Revenue days

411

545

148

477

Non-Jones Act Handysize Product Carriers:

Average rate

$

44,075

$

17,469

$

14,958

$

7,044

Revenue days

180

90

180

177

ATBs:

Average rate

$

$

34,854

$

$

32,339

Revenue days

178

180

Lightering:

Average rate

$

74,311

$

$

92,524

$

Revenue days

90

73

Alaska (a):

Average rate

$

$

58,996

$

$

58,743

Revenue days

269

238

(a) Excludes one Alaska vessel currently in layup.

Fleet Information

As of March 31, 2022, OSG’s operating fleet consisted of 24 vessels, 12 of which were owned, with the remaining vessels chartered-in. Vessels chartered-in are on Bareboat Charters.

Vessels Owned

Vessels
Chartered-In

Total at March 31, 2022

Vessel Type

Number

Number

Total Vessels

Total dwt (3)

Handysize Product Carriers (1)

5

11

16

760,493

Crude Oil Tankers (2)

3

1

4

772,194

Refined Product ATBs

2

2

54,182

Lightering ATBs

2

2

91,112

Total Operating Fleet

12

12

24

1,677,981

(1)

Includes two owned shuttle tankers, 11 chartered-in tankers, and two non-Jones Act MR tankers that participate in the U.S. Maritime Security Program, all of which are U.S. flagged, as well as one owned Marshall Island flagged non-Jones Act MR tanker trading in international markets.

(2)

Includes three crude oil tankers doing business in Alaska and one crude oil tanker bareboat chartered-in and in layup.

(3)

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 provide 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. TCE 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 follows:

Three Months Ended
March 31,

2022

2021

Time charter equivalent revenues

$

93,925

$

65,513

Add: Voyage expenses

10,074

15,760

Shipping revenues

$

103,999

$

81,273

Vessel Operating Contribution

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

Three Months Ended
March 31,

($ in thousands)

2022

2021

Niche market activities

$

18,123

$

13,142

Jones Act handysize tankers

1,458

(12,257

)

ATBs

4,069

3,581

Alaska crude oil tankers

7,481

6,922

Vessel operating contribution

31,131

11,388

Depreciation and amortization

16,493

15,319

General and administrative

6,938

6,365

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

5,493

Operating income/(loss)

$

7,700

$

(15,789

)

(B) EBITDA and Adjusted EBITDA

EBITDA represents net income/(loss) 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, loss/(gain) on disposal of vessels and other property, including impairments, net, non-cash stock based compensation expense and loss on repurchases and extinguishment of debt 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 income/(loss) 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 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 measures used by other companies due to differences in methods of calculation. The following table reconciles net income/(loss) as reflected in the consolidated statements of operations, to EBITDA and Adjusted EBITDA.

Three Months Ended
March 31,

($ in thousands)

2022

2021

Net loss

$

(509

)

$

(15,868

)

Income tax benefit

(59

)

(6,169

)

Interest expense

8,365

6,370

Depreciation and amortization

16,493

15,319

EBITDA

24,290

(348

)

Amortization classified in charter hire expenses

143

143

Interest expense classified in charter hire expenses

316

345

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

5,493

Non-cash stock based compensation expense

656

575

Adjusted EBITDA

$

25,405

$

6,208

(C) Total Cash

($ in thousands)

March 31,
2022

December 31,
2021

Cash and cash equivalents

$

76,836

$

83,172

Restricted cash

67

81

Total cash

$

76,903

$

83,253

Category: Earnings

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