Overseas Shipholding Group (OSG), a leading energy transportation company, reported better-than-expected financial results for the third quarter of 2010. Quarterly Shipping revenue was nearly $260 million, up 6.7% year over year and significantly above the Zacks Consensus Estimate of $219 million. Third quarter Time Charter Equivalent (TCE) revenue was $208.6 million, up 0.6% year over year. The TCE revenue represents Shipping revenue less Voyage expenses.
Quarterly net loss was $31.7 million or a loss of $1.06 per share compared to a net loss of $21.9 million or a loss of 73 cents per share in the prior-year quarter. However, in the reported quarter, Overseas Shipholding incurred $4.9 million of one-time special charges. Excluding this, third quarter 2010 adjusted earnings per share (EPS) were a loss of 89 cents, significantly lower than the Zacks Consensus Estimate of a loss of 95 cents.
Shipping Revenue by Segments
Quarterly Pool revenue was $81.5 million, up 4% year over year. Time and bareboat charter revenue was $71.7 million, down 9.6% year over year. Voyage charter revenue was $106.7 million, up 24.2% year over year.
TCE Revenue in Details
Quarterly TCE revenue for the crude oil segment was $95.3 million, down 5% year over year. This was mainly due to an adverse shift in the mix of spot and fixed charters. Product TCE revenue was $47.9 million, up 4% year over year. This was primarily due to an increase in 579 revenue days in MR class. Flag TCE revenue was $61.3 million, up 3% year over year.
Operating Expenses
Total operating expenses, in the third quarter of 2010, was $275.5 million, up 6% year over year. Voyage expenses increased 41.6% year over year. Vessel expense decreased 4% year over year. Charter hire expenses reduced 2.6% year over year. General and administrative expense was $25.1 million, down 11.4% year over year.
During the first nine months of 2010, Overseas Shipholding generated $35.3 million of cash from operations compared to $206.1 million in the year-ago period. Free cash flow, in the same period was a negative $204.9 million compared to a negative $156.5 million in the year-earlier quarter.
Liquidity
At the end of the third quarter of 2010, Overseas Shipholding had $350.7 million of cash & marketable securities compared to $524.7 million at the end of fiscal 2009. Total debt, at the end of the same quarter was $1,864.9 million compared to $1,846.5 million at the end of fiscal 2009. At the end of the third quarter of 2010, debt-to-capitalization ratio was 0.50 compared to 0.49 at the end of fiscal 2009.
Operating Metrics
Quarterly total revenue days were 9,399 compared to 9,238 in the year-ago quarter. Within this, total Crude oil revenue days were 4,481 compared to 4,707 in the prior-year quarter. Total Refined Products revenue days were 3,147 compared to 2,830 in the prior-year quarter. Total U.S. Flag revenue days were 1,587 compared to 1,609 in the year-ago quarter. Other revenue days were 184compared to 92 in the year-ago quarter.
Our Recommendation
We maintain our long-term Neutral recommendation for Overseas Shipholding. Currently it is a short-term Zacks #4 Rank (Sell) stock. We believe this is primarily due to growing competition that resulted in lower average revenue per day.
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