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Overseas Shipholding Group Reports Third Quarter 2011 Results

From time to time the Company enters into FFAs and related bunker swaps as hedges for reducing the volatility of earnings from operating the Company’s VLCCs in the spot market. These derivative instruments seek to create synthetic time charters. The impact of these derivatives, which qualify for hedge accounting treatment, are reported together with time charters entered in the physical market under Fixed Earnings. As of September 30, 2011, the Company had no synthetic time charters outstanding. The information in this table is based in part on information provided by the pools or commercial joint ventures in which the segment’s vessels participate.

1   See Appendix 1 for reconciliation of TCE revenues, a non-GAAP measure, to shipping revenues.
2 References to Results, Earnings or Loss refers to Net Income / (Loss).
3 Liquidity is defined as cash plus short-term investments plus availability under the Company’s secured and unsecured credit facilities.
4 Liquidity-adjusted debt is defined as long-term debt reduced by cash and short-term investments.
 
 
      Three Months Ended September 30, 2011       Three Months Ended September 30, 2010
        Spot     Fixed     Total       Spot     Fixed     Total
Business Unit – Crude Oil                                        
VLCC 1                      
Average TCE Rate $10,993 $ — $32,017 $32,578
Number of Revenue Days 1,215 1,215 1,245 92 1,337
Suezmax
Average TCE Rate $15,123 $ — $19,185 $ —
Number of Revenue Days 533 533 285 285
Aframax
Average TCE Rate $10,322 $19,771 $15,518 $20,882
Number of Revenue Days 822 142 964 790 212 1,002
Aframax – Lightering 1
Average TCE Rate $15,393 $ — $21,171 $ —
Number of Revenue Days 747 747 759 759
Panamax 2
Average TCE Rate $12,005 $16,902 $16,557 $17,102
Number of Revenue Days 434 368 802 458 364 822
Other Crude Oil Revenue Days 1 92         92       276         276
Total Crude Oil Revenue Days       3,843     510     4,353       3,813     668     4,481
Business Unit – Products                                        
LR2
Average TCE Rate $ — $ — $8,479 $ —
Number of Revenue Days 92 92
LR1
Average TCE Rate $11,205 $13,180 $15,915 $ —
Number of Revenue Days 404 99 503 184 184
MR
Average TCE Rate $13,171 $14,781 $13,057 $22,193
Number of Revenue Days 2,899     273     3,172       2,089     782     2,871
Total Refined Products Revenue Days       3,303     372     3,675       2,365     782     3,147
Business Unit – U.S. Flag                                        
Handysize Product Carrier
Average TCE Rate $ — $50,965 $ — $49,350
Number of Revenue Days 1,089 1,089 846 846
ATB
Average TCE Rate $21,137 $ — $20,826 $32,654
Number of Revenue Days 489 489 391 49 440
Lightering
Average TCE Rate $48,501 $ — $32,217 $ —
Number of Revenue Days 329         329       301         301
Total U.S. Flag Revenue Days       818     1,089     1,907       692     895     1,587
Other – Number of Revenue Days           105     105           184     184
TOTAL REVENUE DAYS       7,964     2,076     10,040       6,870     2,529     9,399

1

 

Other Crude Oil revenue days includes the Company’s ULCC and, for the quarter ended September 30, 2010, two double-sided Aframaxes, which had substantial idle time during such period and were previously included in Aframax Lightering.

2

Includes one vessel performing a bareboat charter-out during the three months ended September 30, 2011 and 2010.

 
 

Consolidated Statements of Operations

               
($ in thousands, except per share amounts) Three Months Ended September 30,       Nine Months Ended September 30,
2011   2010       2011   2010
Shipping Revenues:
Pool revenues $50,263 $81,497 $197,102 $301,089
Time and bareboat charter revenues 70,310 71,707 194,961 205,083
Voyage charter revenues 135,806     106,724         399,722     307,413  
Total Shipping Revenues 256,379     259,928         791,785     813,585  
Operating Expenses:
Voyage expenses 70,195 51,370 191,708 143,504
Vessel expenses 75,665 64,009 213,620 195,745
Charter hire expenses 95,394 91,068 289,876 270,313
Depreciation and amortization 47,429 42,195 132,457 127,333
General and administrative 19,835 25,085 66,737 76,393
Shipyard contract termination recoveries

-

- - (627 )
(Gain)/loss on disposal of vessels, net of impairments in 2010 233     1,722         (354 )   29,273  
Total Operating Expenses 308,751     275,449         894,044     841,934  
Loss from Vessel Operations (52,372 ) (15,521 ) (102,259 ) (28,349 )
Equity in Income / (Loss) of Affiliated Companies 3,523     (165 )       13,095     (5,508 )
Operating Loss (48,849 ) (15,686 ) (89,164 ) (33,857 )
Other Income / (Expense) (1,463 )   155         1,083     494  
(50,312 ) (15,531 ) (88,081 ) (33,363 )
Interest Expense (21,097 )   (17,739 )       (57,970 )   (49,225 )
Loss before Income Taxes (71,409 ) (33,270 ) (146,051 ) (82,588 )
Income Tax Benefit 329     1,516         3,105     3,624  
Net Loss $(71,080 )   $(31,754 )       $(142,946 )   $(78,964 )
 
Weighted Average Number of Common Shares Outstanding:
Basic 30,232,603 30,146,783 30,223,828 29,276,685
Diluted 30,232,603 30,146,783 30,223,828 29,276,685
Per Share Amounts:
Basic $ (2.35 ) $ (1.06 ) $ (4.74 ) $ (2.71 )
Diluted $ (2.35 ) $ (1.06 ) $ (4.74 ) $ (2.71 )
Cash dividends declared $ 0.22 $ 0.44 $ 1.53 $ 1.75
 
 

Consolidated Balance Sheets

         
September 30, Dec. 31,
($ in thousands) 2011     2010
ASSETS
Current Assets:
Cash and cash equivalents $156,347 $253,649
Short-term investments 25,726 20,047
Voyage receivables 173,066 160,993
Other receivables, including income taxes recoverable 57,149 99,611
Inventories, prepaid expenses and other current assets 56,519     60,577
Total Current Assets 468,807 594,877
 

Vessels and other property, including construction in progress of $220,412 and $806,818, less accumulated depreciation

3,241,274 3,195,383
Vessels held for sale 3,592 3,305
Deferred drydock expenditures, net 53,794     46,827
Total Vessels, Deferred Drydock and Other Property 3,298,660     3,245,515
 
Investments in affiliated companies 237,687 265,096
Intangible assets, less accumulated amortization 78,454 83,137
Goodwill 9,589 9,589
Other assets 62,232     42,889
Total Assets $4,155,429     $4,241,103
 
 
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities $137,473 $129,178
Current installments of long-term debt 54,879     44,607
Total Current Liabilities 192,352 173,785
 
Long-term debt 2,071,362 1,941,583
Deferred gain on sale and leaseback of vessels 15,802 40,876
Deferred income taxes and other liabilities 272,267     274,716
Total Liabilities 2,551,783 2,430,960
Equity        
Total Equity 1,603,646     1,810,143
Total Liabilities and Equity $4,155,429     $4,241,103
 
 

Consolidated Statements of Cash Flows

         
($ in thousands) Nine Months Ended September 30,
2011     2010
Cash Flows from Operating Activities:
Net loss $(142,946 ) $(78,964 )
Items included in net loss not affecting cash flows:
Depreciation and amortization 132,457 127,333
Amortization of deferred gain on sale and leasebacks (25,074 ) (31,841 )
Amortization of debt discount and other deferred financing costs 2,361 3,017

Loss on write-down of vessels and intangible assets

-

28,783
Compensation relating to restricted stock and stock option grants 7,515 8,678
Deferred income tax benefit (2,992 ) (4,644 )
Unrealized losses / (gains) on forward freight agreements and bunker swaps 853 (237 )
Undistributed earnings of affiliated companies (670 ) 14,991
Deferred payment obligations on charters-in 3,992 3,644
Other – net 3,681 (595 )
Items included in net loss related to investing and financing activities:
(Gain) / loss on sale or write-down of securities and investments – net (116 ) 783
(Gain) / loss on disposal of vessels – net (354 ) 490
Loss on repurchase of debt 375 -
Payments for drydocking (28,244 ) (14,078 )
Changes in operating assets and liabilities       25,017       (22,021 )
Net cash (used in) / provided by operating activities       (24,145 )     35,339  
Cash Flows from Investing Activities:
Long-term investments (13,512 ) -
Short-term investments (5,678 ) -
Disposal of short-term investments - 50,000
Proceeds from sales of investments 3,148 190
Expenditures for vessels (163,088 ) (240,230 )
Withdrawals from Capital Construction Fund - 40,726
Proceeds from disposal of vessels 12,577 5,252
Expenditures for other property (5,701 ) (1,968 )
Distributions from / (Investments in and advances to) affiliated companies – net 7,915 (152,155 )
Shipyard contract termination payments - (1,973 )
Other – net       5,180       1,556  
Net cash used in investing activities       (159,159 )     (298,602 )
Cash Flows from Financing Activities:
Issuance of common stock, net of issuance costs - 158,266
Decrease in restricted cash - 7,945
Purchases of treasury stock (830 ) (1,281 )
Issuance of debt, net of issuance costs and deferred finance costs 170,748 511,745
Payments on debt (44,288 ) (499,579 )
Cash dividends paid (40,171 ) (38,391 )
Issuance of common stock upon exercise of stock options 543 907
Other – net       -       (386 )
Net cash provided by financing activities       86,002       139,226  
Net decrease in cash and cash equivalents (97,302 ) (124,037 )
Cash and cash equivalents at beginning of year       253,649       474,690  
Cash and cash equivalents at end of period       $156,347       $350,653  
 
 

Fleet Information

As of September 30, 2011, OSG’s owned and operated fleet totaled 112 International Flag and U.S. Flag vessels compared with 112 at September 30, 2010. Fifty-nine percent, or 66 vessels, were owned as of September 30, 2011, with the remaining vessels bareboat or time chartered-in. OSG’s newbuild program of four vessels consisted of three crude carriers and one product carrier (all owned). The Company’s fleet list excludes vessels chartered-in where the duration of the charter was one year or less at inception. A detailed fleet list and updates on vessels under construction can be found in the Fleet section on www.osg.com.

      Vessels Owned       Vessels Chartered-in       Total at September 30, 2011
            Vessels    
Weighted by Weighted by Total Weighted by
Vessel Type       Number     Ownership       Number     Ownership       Vessels     Ownership     Total Dwt
Operating Fleet                                                
FSO 2 1.0 2 1.0 864,046
VLCC and ULCC 10 10.0 4 4.0 14 14.0 4,424,459
Suezmax 2 2.0 2 2.0 317,000
Aframax 6 6.0 3 3.0 9 9.0 1,011,501
Panamax 9 9.0 9 9.0 626,834
Lightering       2     2.0       4     4.0       6     6.0     598,012
International Flag Crude Tankers 29 28.0 13 13.0 42 41.0 7,841,852
 
LR1 4 4.0 2 2.0 6 6.0 445,154
MR (1)       15     15.0       20     20.0       35     35.0     1,675,935
International Flag Product Carriers 19 19.0 22 22.0 41 41.0 2,121,089

 

 

 

 

 

 

 

 

Chemical Carrier 1 1.0 1 1.0 19,900
Car Carrier       1     1.0                 1     1.0     16,101
Total Int’l Flag Operating Fleet       49     48.0       36     36.0       85     84.0     9,998,942
                                                 
Handysize Product Carriers (2) 2 2.0 10 10.0 12 12.0 561,623
Clean ATBs 7 7.0 7 7.0 195,616
Lightering ATBs       4     4.0                 4     4.0     175,622
Total U.S. Flag Operating Fleet       13     13.0       10     10.0       23     23.0     932,861
                                                 
LNG Fleet       4     2.0                 4     2.0     864,800 cbm
10,931,803
Total Operating Fleet       66     63.0       46     46.0       112     109.0     864,800 cbm
Newbuild/Conversion Fleet                                                
 
International Flag
VLCC 1 1.0 1 1.0 298,000
Aframax 2 2.0 2 2.0 226,000
MR       1     1.0                 1     1.0     50,000
Total Newbuild Fleet       4     4.0                 4     4.0     574,400
Total Operating & Newbuild Fleet 70 67.0 46 46.0 116 113.0 11,505,803
                                                864,800 cbm
1   Includes two owned U.S. Flag product carriers that trade internationally with associated revenue included in the Product Carriers segment
2 Includes two owned shuttle tankers, the Overseas Cascade and the Overseas Chinook
 
 

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)       2011     2010       2011     2010
Time charter equivalent revenues $186,184     $208,558       $600,077     $670,081
Add: Voyage Expenses 70,195     51,370       191,708     143,504
Shipping revenues $256,379     $259,928       $791,785     $813,585

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.

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