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Mar 9, 2018

Overseas Shipholding Group Reports Fourth Quarter and Full Year 2017 Results

TAMPA, Fla. –
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 2017.

Highlights

  • Income from continuing operations for the fourth quarter was $53.6
    million, or $0.61 per diluted share, compared with income from
    continuing operations of $64.7 million, or $0.74 per diluted share for
    the fourth quarter 2016.
  • Income from continuing operations for the full year 2017 was $56.0
    million, or $0.64 per diluted share, compared with a loss of $1.1
    million, or $0.01 per diluted share for the full year 2016.
  • Shipping revenues for the fourth quarter and full year 2017 were $92.8
    million and $390.4 million, down 19% and 16%, respectively, compared
    with the same periods in 2016. Time charter equivalent (TCE) revenues(A),
    a non-GAAP measure, for the fourth quarter and full year 2017 were
    $82.8 million and $361.0 million, down 24% and 19%, respectively,
    compared with the same periods in 2016.
  • Fourth quarter and full year 2017 Adjusted EBITDA(B), a
    non-GAAP measure, was $22.7 million and $111.1 million, down 54% and
    37%, respectively, from $49.9 million and $176.2 million in the same
    periods in 2016.
  • Total cash(C), was $166.3 million as of December 31, 2017.
  • Principal payment of $26.4 million plus accrued and unpaid interest of
    $514 thousand was made on December 27, 2017, on all of the outstanding
    8.125% Notes in the fourth quarter, and as a result, the Company’s
    obligations under the indenture was canceled and discharged.

Mr. Norton stated, “We witnessed a robust recovery of spot market rates
during the fourth quarter. While still early days, we consider realized
reduction in available supply and the emergence of the demand catalysts
that we have been looking for – in particular in respect to demand for
domestic crude oil transportation – as supportive of increased
confidence in a progression towards a more balanced and normalized
market environment.”

Fourth Quarter 2017 Results

Shipping revenues were $92.8 million for the quarter, down 19% compared
with the fourth quarter of 2016. TCE revenues for the fourth quarter of
2017 were $82.8 million, a decrease of $26.8 million, or 24%, compared
with the fourth quarter of 2016, primarily due to lower average daily
rates earned, which accounted for a $22.8 million decrease in TCE
revenues and a 138-day decrease in revenue days for its fleet, excluding
its modern lightering ATBs, driven by additional drydock and repair days
resulting in a $4.0 million decrease in TCE revenues.

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.

Operating income for the fourth quarter of 2017 was $3.9 million,
compared to operating income of $4.1 million in the fourth quarter of
2016.

Net income for the fourth quarter was $53.6 million, compared with net
loss of $275.5 million for the fourth quarter 2016. Net income from
continuing operations for the fourth quarter was $53.6 million, or $0.61
per diluted share, compared with a net income from continuing operations
of $64.7 million, or $0.74 per diluted share for the fourth quarter
2016. The increase reflects the income tax benefit primarily as a result
of the remeasurement of the net deferred tax liability to the newly
enacted statutory rate of 21%.

Adjusted EBITDA was $22.7 million for the quarter, a decrease of $27.1
million compared with the fourth quarter of 2016, driven primarily by
the decline in TCE revenues.

Full Year 2017 Results

Shipping revenues were $390.4 million for the full year 2017, down 16%
compared with the full year 2016. TCE revenues for the full year 2017
were $361.0 million, a decrease of $85.1 million, or 19%, compared with
the full year 2016, primarily due to lower average daily rates, which
accounted for a $75.2 million decrease in TCE revenues and a 278-day
decrease in revenue days for its Jones Act fleet, excluding its modern
lightering ATBs, driven by an increase in drydock days resulting in a
$9.8 million decrease in TCE revenues.

Operating income for the full year 2017 was $37.8 million, compared to
operating loss of $31.5 million for the full year 2016.

Net income for the full year 2017 was $56.0 million, compared with net
loss of $293.6 million for the full year 2016. Income from continuing
operations for the full year 2017 was $56.0 million, or $0.64 per
diluted share, compared with a loss from continuing operations of $1.1
million, or $0.01 per diluted share for the full year 2016. The increase
reflects the income tax benefit primarily as a result of the
remeasurement of the net deferred tax liability to the newly enacted
statutory rate of 21%.

Adjusted EBITDA was $111.1 million for the full year 2017, a decrease of
$65.1 million compared with the full year 2016, driven primarily by the
decline in TCE revenues.

Conference Call

The Company will host a conference call to discuss its fourth quarter
and full year 2017 results at 9:00 a.m. Eastern Time (“ET”) on Friday,
March 9, 2018.

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, March 9, 2018, through 10:59 p.m. ET on Friday,
March 16, 2018, by dialing (877) 344-7529 for domestic callers and (412)
317-0088 for international callers, and entering Access Code 10117595.

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 23-vessel U.S. Flag
fleet consists of seven ATBs, two lightering ATBs, three shuttle
tankers, nine 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 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 the Company’s prospects, its ability to retain and effectively
integrate new members of management and the effect of the Company’s
spin-off of International Seaways, Inc. Forward-looking statements are
based the Company’s 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 the
Annual Report on Form 10-K for OSG and in similar sections of other
filings made by the Company with the SEC from time to time. The Company
assumes no obligation to update or revise any forward-looking
statements. Forward-looking statements 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 statements contained in this paragraph and in
other reports previously or hereafter filed by the Company with the SEC.

Consolidated Statements of Operations

($ in thousands, except per share amounts)

Three Months Ended December 31, Fiscal Year Ended December 31,
2017 2016 2017 2016
(unaudited) (unaudited)
Shipping Revenues:
Time and bareboat charter revenues 57,400 85,539 266,193 372,149
Voyage charter revenues 35,415 29,237 124,233 90,271
Total shipping revenues 92,815 114,776 390,426 462,420
Operating Expenses:
Voyage expenses 10,061 5,219 29,390 16,260
Vessel expenses 34,658 33,343 135,991 140,696
Charter hire expenses 23,101 23,138 91,587 91,947
Depreciation and amortization 12,573 20,862 58,673 89,563
General and administrative 6,413 7,013 27,493 41,608
Severance costs – 10,758 16 12,996
Loss on disposal of vessels and other property, including impairments 5,847 6,623 13,200 104,532
Total operating expenses 92,653 106,956 356,350 497,602
Income/(loss) from vessel operations 162 7,821 34,076 (35,182 )
Equity in income of affiliated companies 3,747 3,656 3,747 3,642
Operating income/(loss) 3,909 11,476 37,823 (31,540 )
Other expense (826 ) (295 ) (1,881 ) (2,391 )
Income/(loss) before interest expense, reorganization items and
income taxes and income taxes 		3,083 11,181 35,942 (33,931 )
Interest expense (9,125 ) (9,765 ) (37,401 ) (43,151 )
(Loss)/income before reorganization items and income taxes and
income taxes 		(6,042 ) 1,416 (1,459 ) (77,082 )
Reorganization items, net 8 (393 ) (190 ) 10,925
(Loss)/income from continuing operations before income taxes (6,034 ) 1,023 (1,649 ) (66,157 )
Income tax benefit from continuing operations 59,679 63,653 57,627 65,098
Net income/(loss) from continuing operations 53,645 64,678 55,978 (1,059 )
Net income/(loss) from discontinued operations – (340,153 ) – (292,555 )
Net income/(loss) $ 53,645 $ (275,475 ) $ 55,978 $ (293,614 )
Weighted Average Number of Common Shares Outstanding:
Basic – Class A 87,840,169 87,497,273 87,834,769 90,949,577
Diluted – Class A 88,108,079 87,721,704 88,082,978 90,949,577
Basic and diluted – Class B – – – 533,758
Per Share Amounts from Continuing Operations:
Basic and diluted net income/(loss) – Class A $ 0.61 $ 0.74 $ 0.64 $ (0.01 )
Basic and diluted net income/(loss) – Class B – – – $ (0.11 )
Per Share Amounts from Discontinued Operations:
Basic and diluted net income/(loss) – Class A – $ (3.89 ) – $ (3.24 )
Basic and diluted net income/(loss) – Class B – – – $ 4.54

On June 2, 2016, the Board approved the Reverse Split Amendment to
the Company’s Amended and Restated Certificate of Incorporation. The
Reverse Split Amendment effected the Reverse Split. The Reverse Split
Amendment became effective on June 13, 2016. In accordance with
Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) ASC 260, Earnings Per Share, the Company adjusted
the computations of basic and diluted earnings per share retroactively
for all periods presented to reflect that change in its capital
structure.

Consolidated Balance Sheets

($ in thousands)

December 31, December 31,
2017 2016
ASSETS
Current Assets:
Cash and cash equivalents $ 165,994 $ 191,089
Restricted cash 58 7,272
Voyage receivables, including unbilled of $9,919 and $12,593 24,209 23,456
Income tax recoverable 1,122 877
Receivable from INSW 372 683
Other receivables 2,184 2,696
Inventories, prepaid expenses and other current assets 13,356 12,243
Total Current Assets 207,295 238,316
Restricted cash 217 8,572
Vessels and other property, less accumulated depreciation 632,509 684,468
Deferred drydock expenditures, net 23,914 31,172
Total Vessels, Deferred Drydock and Other Property 656,423 715,640
Investments in and advances to affiliated companies 3,785 3,694
Intangible assets, less accumulated amortization 41,017 45,617
Other assets 23,150 18,658
Total Assets $ 931,887 $ 1,030,497
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities $ 34,220 $ 57,222
Income taxes payable 151 306
Current installments of long-term debt 28,160 –
Total Current Liabilities 62,531 57,528
Reserve for uncertain tax positions 3,205 3,129
Long-term debt 420,776 525,082
Deferred income taxes 83,671 141,457
Other liabilities 48,466 48,969
Total Liabilities 618,649 776,165
Commitments and contingencies
Equity:
Common stock – Class A ($0.01 par value; 166,666,666 shares
authorized; 78,277,669 and 70,271,172 shares issued and outstanding) 		783 702
Paid-in additional capital 584,675 583,526
Accumulated deficit (265,758 ) (321,736 )
319,700 262,492
Accumulated other comprehensive loss (6,462 ) (8,160 )
Total Equity 313,238 254,332
Total Liabilities and Equity $ 931,887 $ 1,030,497
Consolidated Statements of Cash Flows

($ in thousands)

Years Ended December 31,
2017 2016 2015
Cash Flows from Operating Activities:
Net income/(loss) $ 55,978 $ (293,614 ) $ 283,960
(Loss)/income from discontinued operations – (292,555 ) 203,395
Net income/(loss) from continuing operations 55,978 (1,059 ) 80,565
Items included in net income/(loss) from continuing operations not
affecting cash flows:
Depreciation and amortization 58,673 89,563 76,851
Vessel impairment charges 5,878 104,405 –
Amortization of debt discount and other deferred financing costs 5,167 6,005 5,154
Compensation relating to restricted stock, stock unit and stock
option grants 		2,388 7,441 3,580
Deferred income tax benefit (59,047 ) (67,394 ) (69,564 )
Undistributed earnings of affiliated companies (91 ) 132 (399 )
Deferred payment obligations on charters-in – – 590
Reorganization items, non-cash (105 ) 5,198 (50 )
Other – net 3,282 2,268 1,971
Items included in net income/(loss) related to investing and
financing activities:
Loss on repurchases and extinguishment of debt 3,237 2,988 –
Loss on disposal of vessels and other property, net 7,322 127 207
Distributions from INSW – 202,000 200,000
Payments for drydocking (8,390 ) (6,844 ) (41,323 )
SEC payment, bankruptcy and IRS claim payments (5,000 ) (7,136 ) (8,343 )
Deferred financing costs paid for loan modification – – (4,220 )
Changes in operating assets and liabilities:
(Increase)/decrease in receivables (753 ) (16,794 ) 6,502
(Increase)/decrease in income tax recoverable (246 ) 323 54,637
(Decrease)/increase in deferred revenue (4,639 ) 63 (3,034 )
Net change in prepaid items and accounts payable, accrued expenses
and other current and long-term liabilities 		(20,035 ) 7,574 (26,791 )
Net cash provided by operating activities 43,619 328,860 276,333
Cash Flows from Investing Activities:
Change in restricted cash 15,569 (5,261 ) 42,502
Expenditures for other property (11 ) (666 ) (75 )
Proceeds from disposal of vessels and other property 1,055 – –
Other – net – – (54 )
Net cash provided by/(used in) investing activities 16,613 (5,927 ) 42,373
Cash Flows from Financing Activities:
Cash dividends paid – (31,910 ) –
Payments on debt, including adequate protection payments – (54,345 ) (6,030 )
Repurchases and extinguishment of debt (84,170 ) (120,224 ) (326,051 )
Repurchases of common stock and common stock warrants – (119,343 ) (3,633 )
Tax withholding on share-based awards (1,157 ) – –
Net cash used in financing activities (85,327 ) (325,822 ) (335,714 )
Net decrease in cash and cash equivalents (25,095 ) (2,889 ) (17,008 )
Cash and cash equivalents at beginning of year 191,089 193,978 210,986
Cash and cash equivalents at end of year $ 165,994 $ 191,089 $ 193,978
Cash flows from discontinued operations:
Cash flows provided by operating activities $ – $ 111,768 $ 222,739
Cash flows provided by investing activities – 25,202 114,163
Cash flows used in financing activities – (355,687 ) (206,284 )
Net (decrease)/increase in cash and cash equivalents from
discontinued operations 		$ – $ (218,717 ) $ 130,618

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 and
fiscal year ended December 31, 2017, and the comparable periods of 2016.
Revenue days in the quarter ended December 31, 2017, totaled 2,029
compared with 2,167 in the prior year quarter. Revenue days in the
fiscal year ended December 31, 2017, totaled 8,378 compared with 8,658
in the prior year. A summary fleet list by vessel class can be found
later in this press release.

For the three months ended December 31, 2017 2016
Spot Fixed Spot Fixed
Earnings Earnings Earnings Earnings
Jones Act Handysize Product Carriers:
Average rate $ 31,397 $ 63,163 $ 29,742 $ 65,060
Revenue days 284 790 92 972
Non-Jones Act Handysize Product Carriers:
Average rate $ 28,334 $ – $ 24,311 $ 9,628
Revenue days 184 – 147 37
ATBs:
Average rate $ 12,644 $ 25,363 $ 26,473 $ 32,029
Revenue days 317 270 83 652
Lightering:
Average rate $ 42,802 $ – $ 91,052 $ –
Revenue days 184 – 184 –
For the years ended December 31, 2017 2016
Spot Fixed Spot Fixed
Earnings Earnings Earnings Earnings
Jones Act Handysize Product Carriers:
Average rate $ 27,179 $ 63,604 $ 27,989 $ 64,919
Revenue days 896 3,411 208 4,103
Non-Jones Act Handysize Product Carriers:
Average rate $ 31,174 $ 14,031 $ 31,422 $ 16,141
Revenue days 566 159 544 186
ATBs:
Average rate $ 11,111 $ 26,863 $ 26,473 $ 35,269
Revenue days 979 1,637 83 2,802
Lightering:
Average rate $ 61,648 $ – $ 72,271 $ –
Revenue days 730 – 732 –

Fleet Information

As of December 31, 2017, OSG’s operating fleet consisted of 23 vessels,
13 of which were owned, with the remaining vessels chartered-in. Vessels
chartered-in are on Bareboat Charters.

Vessels Owned Vessels Chartered-in Total at December 31, 2017
Vessel Type Number Weighted by

Ownership

Number Weighted by

Ownership

Total Vessels Vessels

Weighted by

Ownership

Total dwt (2)
Handysize Product Carriers (1) 4 4.0 10 10.0 14 14.0 664,490
Refined Product ATBs 7 7.0 – – 7 7.0 195,131
Lightering ATBs 2 2.0 – – 2 2.0 91,112
Total Operating Fleet 13 13.0 10 10.0 23 23.0 950,733

(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 total 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 Fiscal Year Ended
December 31, December 31,
($ in thousands) 2017 2016 2017 2016
TCE revenues $ 82,754 $ 109,557 $ 361,036 $ 446,160
Add: Voyage Expenses 10,061 5,219 29,390 16,260
Shipping revenues $ 92,815 $ 114,776 $ 390,426 $ 462,420

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.

The following table sets forth the contribution of our vessels:

Years Ended December 31,
2017 2016 2015
Niche Market Activities $ 101,405 $ 106,410 $ 97,890
Jones Act Handysize Tankers 6,083 36,648 46,539
ATBs 26,057 69,928 74,678
Vessel Operating Contribution $ 133,545 $ 212,986 $ 219,107

(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 for the impact of
certain 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:

Three Months Ended Fiscal Year Ended
December 31, December 31,
($ in thousands) 2017 2016 2017 2016
Net Income/(loss) from continuing operations $ 53,645 $ 64,678 $ 55,978 $ (1,059 )
Income tax benefit from continuing operations (59,679 ) (63,653 ) (57,627 ) (65,098 )
Interest expense 9,125 9,765 37,401 43,151
Depreciation and amortization 12,573 20,862 58,673 89,563
EBITDA 15,664 31,652 94,425 66,557
Severance costs – 10,758 16 12,996
Loss on disposal of vessels and other property, including impairments 5,847 6,623 13,200 104,532
Loss on repurchase of debt 1,238 456 3,237 2,988
Reorganization items, net (8 ) 393 190 (10,925 )
Adjusted EBITDA $ 22,741 $ 49,882 $ 111,068 $ 176,225

(C) Total Cash

December 31, December 31,
($ in thousands) 2017 2016
Cash and cash equivalents $ 165,994 $ 191,089
Restricted cash – current 58 7,272
Restricted cash – non-current 217 8,572
Total Cash $ 166,269 $ 206,933

Overseas Shipholding Group, Inc.
Susan Allan, 813-209-0620
sallan@osg.com