BEING FILED PURSUANT TO RULE 901 (d) OF REGULATION S-T
================================================================================
FORM 10-Q
---------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934.
For the quarterly period ended JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934.
For the period from __________________ to _______________________
COMMISSION FILE NUMBER
001-14135
----------------------
OMI CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARSHALL ISLANDS 52-2098714
- ------------------------------ -------------------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
ONE STATION PLACE, STAMFORD, CT 06902
- ------------------------------- ----------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (203) 602-6700
----------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF AUGUST 12, 1999:
Common Stock, par value $0.50 per share 41,647,387 shares
-1-
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
INDEX
Page
----
PART I: FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations for the three months and six months
ended June 30, 1999 and 1998 3
Condensed Consolidated Balance Sheets--
June 30, 1999 and December 31, 1998 4
Condensed Consolidated Statements of Changes
in Stockholders' Equity for the year
ended December 31, 1998 and the
(unaudited) six months ended June 30, 1999 5
Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 1999 and 1998 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 26
PART II: OTHER INFORMATION 27
Signatures 28
-2-
<PAGE>
<TABLE>
<CAPTION>
OMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
FOR THE THREE FOR THE SIX
MONTHS MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 30,535 $ 36,827 $ 65,513 $ 76,859
-------- -------- -------- --------
Operating Expenses:
Vessel and voyage 17,840 23,194 36,785 42,962
Charter hire 3,557 7,223 6,783 14,378
Depreciation and amortization 6,130 5,633 12,317 11,382
Provision for loss on lease
obligation (Note 10) 6,229 -- 6,229 --
General and administrative 2,543 2,567 5,229 4,638
-------- -------- -------- --------
Total operating expenses 36,299 38,617 67,343 73,360
-------- -------- -------- --------
Operating (loss) income (5,764) (1,790) (1,830) 3,499
-------- -------- -------- --------
Other Income (Expense):
Loss on disposal/writedown of
assets-net (Notes 11, 12) (23,666) -- (23,666) --
Interest expense-net (3,921) (1,659) (7,658) (3,282)
-------- -------- -------- --------
Net other expense (27,587) (1,659) (31,324) (3,282)
-------- -------- -------- --------
(Loss) income before income taxes,
equity in operations of joint
ventures and cumulative effect of
change in accounting principle (33,351) (3,449) (33,154) 217
Benefit for income taxes -- (38,777) -- (37,158)
-------- -------- -------- --------
(Loss) income before equity in
operations of joint ventures
and cumulative effect of change in
accounting principle (33,351) 35,328 (33,154) 37,375
Equity (loss) in operations of joint
ventures 179 1,122 (11) 2,164
-------- -------- -------- --------
(Loss) income before cumulative effect
of change in accounting principle (33,172) 36,450 (33,165) 39,539
Cumulative effect of change in
accounting principle (Note 9) -- -- 2,729 --
-------- -------- -------- --------
Net (loss) income (33,172) 36,450 (30,436) 39,539
Other comprehensive income:
Reversal of deferred income taxes
on cumulative translation adjustment -- 2,530 -- 2,530
-------- -------- -------- --------
Comprehensive (loss) income $(33,172) $ 38,980 $(30,436) $ 42,069
======== ======== ======== ========
Basic (loss) earnings per common share:
(Loss) income before cumulative effect
of change in accounting principle $ (0.80) $ 0.84 $ (0.80) $ 0.92
Net (loss) income $ (0.80) $ 0.84 $ (0.73) $ 0.92
Diluted (loss) earnings per common share:
(Loss) income before cumulative effect
of change in accounting principle $ (0.80) $ 0.83 $ (0.80) $ 0.90
Net (loss) income $ (0.80) $ 0.83 $ (0.73) $ 0.90
</TABLE>
See notes to condensed consolidated financial statements
-3-
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, DECEMBER 31,
1999 1998
----------- -------------
(UNAUDITED)
ASSETS
Current assets:
Cash, including cash equivalents:
1999-$9,000; 1998-$10,166 $ 24,418 $ 22,698
Receivables:
Traffic 9,479 12,842
Other 3,175 2,733
Vessels held for sale (Note 11) 16,755 --
Prepaid expenses and other current assets 10,921 8,822
-------- --------
Total current assets 64,748 47,095
-------- --------
Vessels, construction in progress
and other property:
Vessels and other property 469,759 544,447
Construction in progress 23,027 34,733
Less accumulated depreciation 117,171 150,585
-------- --------
Vessels, construction in progress
and other property-net 375,615 428,595
-------- --------
Investments in, and advances to joint ventures 24,153 25,507
Notes receivable 15,392 6,604
Other assets and deferred charges 21,620 22,326
-------- --------
Total $501,528 $530,127
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 877 $ 2,520
Accrued liabilities:
Voyage and vessel 16,221 11,438
Interest 3,245 4,007
Other 991 2,571
Deferred gain on sale of vessels 3,151 3,151
Current portion of long-term debt 28,542 21,494
-------- --------
Total current liabilities 53,027 45,181
-------- --------
Advance time charter revenues and other
liabilities 8,531 3,496
Deferred gain on sale of vessels 5,938 7,514
Deferred income taxes payable 3,100 3,100
Long-term debt 216,105 225,653
Stockholders' equity 214,827 245,183
-------- --------
Total $501,528 $530,127
======== ========
See notes to condensed consolidated financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
OMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS)
Common Stock Net Retained
------------------------ Capital Intercompany Treasury (Deficit)
Shares Amount Surplus Transaction Stock Earnings
-------- ------------ --------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1998 43,066 $ 21,533 $ 243,062 $ 39,503 $(25,452)
Comprehensive income:
Net income 42,917
Reversal of deferred income taxes on
cumulative transaction adjustment
Comprehensive income
Capital distribution of net intercompany
account balance with parent (76,119)
Net intercompany transactions 1,337
Capital distribution of net intercompany
transactions with parent 40,840 (40,840)
Exercise of stock options 50 25 (25)
Issuance of common stock 560 280 (280)
Purchase of treasury stock $ (9,040)
-------- -------- --------- -------- -------- --------
Balance at December 31, 1998 43,676 21,838 207,478 -- (9,040) 17,465
Comprehensive loss:
Net loss (30,436)
Net change in valuation account
Comprehensive loss
Issuance of common stock 48 24 56
-------- -------- --------- -------- -------- --------
Balance at June 30, 1999 43,724 $ 21,862 $ 207,534 -- $ (9,040) $(12,971)
======== ======== ========= ======== ======== ========
<CAPTION>
Accumulated
Other Total
Comprehensive Comprehensive Stockholders'
Income Income Equity
------------- ------------- -------------
<S> <C> <C> <C>
Balance as of January 1, 1998 $ 4,912 $283,558
Comprehensive income:
Net income $ 42,917 42,917
Reversal of deferred income taxes on
cumulative transaction adjustment 2,530 2,530 2,530
--------
Comprehensive income $ 45,447
========
Capital distribution of net intercompany
account balance with parent (76,119)
Net intercompany transactions 1,337
Capital distribution of net intercompany
transactions with parent --
Exercise of stock options --
Issuance of common stock --
Purchase of treasury stock (9,040)
--------- --------
Balance at December 31, 1998 7,442 245,183
Comprehensive loss:
Net loss $(30,436) (30,436)
Net change in valuation account --
Comprehensive loss --------
$(30,436)
Issuance of common stock ========
80
--------- --------
Balance at June 30, 1999 $ 7,442 $214,827
========= ========
</TABLE>
See notes to condensed consolidated financial statements
-5-
<PAGE>
<TABLE>
<CAPTION>
OMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
FOR THE SIX MONTHS
ENDED JUNE 30,
----------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net (loss) income $(30,436) $ 39,539
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Cumulative effect of change in accounting principle (2,729) --
Decrease in deferred income taxes -- (39,850)
Depreciation and amortization 12,317 11,382
Net intercompany transactions -- 1,337
Loss on disposal of assets-net 23,666 --
Amortization of deferred gain on sale of vessel (1,576) (1,576)
Provision for loss on lease obligation 6,229 --
Equity (loss) in operations of joint ventures
over dividends received 2,439 (2,164)
Changes in assets and liabilities:
Decrease (increase) in receivables and other
current assets 1,914 (2,315)
Advances to joint ventures - net (965) (74)
Decrease in other assets and deferred charges (1,158) 1,290
Increase (decrease) in accounts payable and
accrued liabilities 669 4,858
Increase in advance time charter revenues
and other liabilities 45 1,287
Payable to Parent-net -- (3,217)
-------- --------
Net cash provided by operating activities 10,415 10,497
-------- --------
CASH FLOWS (USED) PROVIDED BY INVESTING ACTIVITIES:
Proceeds from disposition of vessels and other property 54,000 --
Additions to vessels and other property (45,267) (59,731)
Proceeds from notes receivable 212 --
Issuance of notes receivable (9,000) --
Other (6,000) (261)
-------- --------
Net cash used by investing activities (6,055) (59,992)
-------- --------
CASH FLOWS (USED) PROVIDED BY FINANCING ACTIVITIES:
Proceeds from long-term and short-term debt 86,498 63,750
Payments on long-term and short-term debt (88,998) (22,600)
Issuance of common stock 80 --
Payments for debt issue costs (220) (598)
-------- --------
Net cash (used) provided by financing activities (2,640) 40,552
-------- --------
Net increase (decrease) in cash and cash equivalents 1,720 (8,943)
Cash and cash equivalents at beginning of year 22,698 30,608
-------- --------
Cash and cash equivalents at end of period $ 24,418 $ 21,665
======== ========
</TABLE>
See notes to condensed consolidated financial statements
-6-
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. However, in the
opinion of the management of OMI Corporation and subsidiaries ("OMI" or the
"Company"), all adjustments (comprising only normal recurring accruals and the
cumulative effect of the change in accounting principle) necessary for a fair
presentation of operating results have been included in the statements.
Reference is made to the OMI Corporation's Form 10-K for additional information.
The Company is the successor to Universal Bulk Carriers, Inc. ("UBC"),
a Liberian corporation, which was a wholly-owned subsidiary of OMI Corp. ("Old
OMI") until June 17, 1998 at which date the Company was separated from Old OMI
(renamed Marine Transport Corporation, "MTC") through a tax-free distribution
("Distribution") of one share of the Company's common stock for each share of
Old OMI common stock. The distribution separated Old OMI into two publicly-owned
companies. OMI Corporation operates what was Old OMI's foreign shipping
businesses under the management of certain of the officers formerly of Old OMI
who moved to the new company and certain former directors of Old OMI and
additional new directors. The Company continues to trade under the symbol OMM on
the New York Stock Exchange.
The financial statements and computations of basic and diluted earnings
per share (see Note 3) have been presented giving effect to the Distribution as
though it occurred at the beginning of the earliest period presented. Except as
indicated, amounts reflected in the financial statements or disclosed in the
notes to financial statements relate to the Company's continuing operations and
prior year amounts have been reclassified to conform with the current
presentation.
NOTE 2 - CREDIT FACILITIES AND LOAN AGREEMENTS
<TABLE>
As of June 30, 1999, the Company's debt and credit arrangements consisted of the
following:
<CAPTION>
Outstanding Available
(in thousands) Commitment Balance Balance
---------- ----------- ---------
<S> <C> <C> <C> <C>
FIXED RATE UNSECURED NOTES:
7% Convertible Note due February 2004 (A) $ 3,000 $ 3,000 --
10.25% Senior Notes due November 2003 4,357 4,357 --
FLOATING RATE CREDIT FACILITIES:
Due April 2002 (B) 105,500 99,090 $ 6,410
Due June 2003 49,800 12,800 37,000
Due August 2008 71,500 71,500 --
Due May 2008 (C) 70,400 36,900 33,500
FLOATING RATE REVOLVING LINES OF CREDIT:
Due December 1999 (D) 60,000 -- 60,000
Due February 2000 (E) 25,000 17,000 8,000
-------- -------- --------
Total $389,557 244,647 $144,910
======== ========
Less current portion of long-term debt 28,542
--------
Long-term debt $216,105
========
</TABLE>
- ----------
(A) The 7% Convertible Note is convertible into 407,800 shares at $7.375 per
share.
(B) As of June 30, 1999, there were four semi-annual reductions of $8,875,000
included in the commitment remaining. As long as the available balance
exceeds the outstanding balance and the collateral tests are met, current
amortization is not required.
(C) In April 1999, this facility was increased by $33,500,000 for the
financing of a Suezmax vessel under construction scheduled to be
delivered in 2000 (see Note 12).
(D) $35,000,000 was drawn down under the $60,000,000 revolving Line of Credit
to finance the COLUMBIA, which was delivered in January 1999. This amount
was repaid upon the sale/leaseback of the vessel on June 30, 1999. On
July 15, 1999, $21,200,000 was drawn down to finance the SEINE, a new
product tanker delivered July 19, 1999 (see Note 12). The line of credit
may be renewed annually subject to bank approval.
(E) The $25,000,000 revolving Line of Credit was obtained in February 1999
for working capital and other general corporate purposes. In July 1999,
due to the sale of two vessels which were collateral for this loan, the
availability under the line was reduced.
-7-
<PAGE>
to $19,000,000. The line of credit may be renewed annually subject to
bank approval. On July 8, 1999, $3,000,000 of the outstanding balance was
repaid.
Restrictive Covenants
Certain of the loan agreements contain restrictive covenants requiring
minimum levels of cash or cash equivalents, working capital and net worth,
maintenance of specified financial ratios and collateral values, and restricting
the Company's ability to pay dividends. These loan agreements also contain
various provisions restricting the right of OMI and/or its subsidiaries to make
certain investments, to place additional liens on the property of certain of
OMI's subsidiaries to make certain investments, to place additional liens on the
property of certain of OMI's subsidiaries, to incur additional long-term debt,
to make certain payments, to merge or to undergo a similar corporate
reorganization, and to enter into certain transactions with affiliated
companies. In the event of a sale of a secured asset, each of the loan
agreements requires the Company to reduce the applicable loan by net proceeds of
the sale up to the outstanding loan balance, except for the Credit Facility
maturing April 2002 which permits the Company to substitute another vessel. As
of June 30, 1999, the Company was in compliance with all of its financial
covenants.
Interest Rates
The interest rates on the 10.25% unsecured Senior Notes and 7.00%
Convertible Note are fixed. The interest rates range from 0.60% to 1.00% above
London Interbank Offering Rate ("LIBOR") on the credit facilities and from 0.55%
to 1.75% above LIBOR for the lines of credit.
Security
At June 30, 1999, vessels, vessels held for sale and shares in a joint
venture with an aggregate net book value of $375,000,000 have been pledged as
collateral for debt agreements.
NOTE 3 - EARNINGS PER COMMON SHARE
The computation of basic earnings per share is based on the weighted
average number of common shares outstanding during the period. The computation
of diluted earnings per share assumes the foregoing and the exercise of all
dilutive stock options using the treasury stock method and if dilutive the
conversion of the 7% convertible note due 2004.
<TABLE>
The components of the denominator for the calculation of basic earnings
per share and diluted earnings per share are as follows:
<CAPTION>
FOR THE FOR THE
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
(in thousands, except per share ------------------ ------------------
amounts) 1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Weighted average common shares
outstanding.................................. 41,647 43,271 41,629 43,172
====== ====== ====== ======
DILUTED EARNINGS PER SHARE:
Weighted average common shares
outstanding.................................. 41,647 43,271 41,629 43,172
7 % convertible Note........................... -- 408 -- 408
Options........................................ -- 283 -- 283
-8-
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C>
------ ------ ------ ------
Weighted average common shares-
diluted...................................... 41,647 43,962 41,629 43,863
====== ====== ====== ======
BASIC (LOSS) EARNINGS PER COMMON SHARE:
(Loss) income before cumulative effect
of change in accounting principle............ $(0.80) $ 0.84 $(0.80) $0.92
Cumulative effect of change in
accounting principle......................... -- -- 0.07 --
------ ------ ------ ------
Net (loss) income per common share............. $(0.80) $ 0.84 $(0.73) $0.92
====== ====== ====== ======
DILUTED (LOSS) EARNINGS PER COMMON SHARE:
(Loss) income before cumulative effect
of change in accounting principle............ $(0.80) $ 0.83 $(0.80) $0.90
Cumulative effect of change in
accounting principle......................... -- -- 0.07 --
------ ------ ------ ------
Net (loss) income per common share............. $(0.80) $ 0.83 $(0.73) $0.90
====== ====== ====== ======
</TABLE>
The effect of the assumed conversion of the 7% convertible note due 2004 was not
included in the computation of diluted earnings per share for the three and
six months ended June 30, 1999 because the effect was antidilutive.
NOTE 4 - INCOME TAXES
As of the Distribution date of June 17, 1998, OMI Corporation is no longer
subject to U.S. taxes on its shipping income.
The benefit for income taxes on income varies from the statutory rates as
follows:
FOR THE SIX MONTHS
ENDED JUNE 30,
-----------------------
(in thousands) 1999 1998
-------- --------
Provision calculated at
statutory rates $ -- $ 1,204
Reversal of deferred income taxes -- (38,887)
Adjustment for equity in operations
of certain joint ventures -- 525
-------- --------
Benefit for income taxes $ -- $(37,158)
======== ========
For the six months ended June 30, 1998, the Company did not provide
deferred income taxes on its equity in the undistributed earnings of foreign
corporate joint ventures accounted for under the equity method other than Amazon
Transport, Inc. ("Amazon") and White Sea Holdings Ltd. ("White Sea"). These
earnings are considered by management to be invested in the business for an
indefinite period.
Management estimated that the distribution of shares to the
shareholders of OMI Corp. would result in Federal income taxes becoming
currently payable by OMI Corporation of approximately $1,900,000 representing
Federal income taxes on previously excluded foreign ("Subpart F") income and on
the distribution of shares of non-United States shareholders. As OMI will not be
subject to any additional income taxes with its respect to its shipping income,
$38,887,000 of the balance of deferred income taxes was credited to income,
leaving a balance of $3,100,000.
NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments include interest of approximately $9,327,000 and
$2,206,000 for the six months ended June 30, 1999 and 1998, respectively.
NOTE 6 - JOINT VENTURE INFORMATION
Amazon and White Sea are both 49.0 percent owned by the Company and are
accounted for using the equity method. Summarized income statement information
for the three and six months ended June 30, 1999 and 1998 is as follows:
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<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED JUNE 30, MONTHS ENDED JUNE 30,
---------------------------------------- ----------------------------------------
AMAZON WHITE SEA AMAZON WHITE SEA
------------------ ------- ------- ------- ------- ------- -------
1999 1998 1999 1998 1999 1998 1999 1998
------- ------- ------- ------- ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 1,684 $ 4,426 $ 1,553 $ 2,545 $ 3,557 $ 8,000 $ 3,501 $ 5,077
Expenses 1,941 2,637 1,269 2,047 3,941 5,006 2,596 3,910
------- ------- ------- ------- ------- ------- ------- -------
Operating (loss) income $ (257) $ 1,789 $ 284 $ 498 $ (384) $ 2,994 $ 905 $ 1,167
======= ======= ======= ======= ======= ======= ======= =======
Cumulative effect
of change in
accounting
principle -- -- -- -- -- -- $ 245 --
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss) $ (209) $ 1,868 $ 295 $ 497 $ (235) $ 3,112 $ 1,180 $ 1,179
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
NOTE 7 - FINANCIAL INFORMATION RELATING TO SEGMENTS
The Company organizes its business principally into two operating
segments. These segments and their respective operations are as follows:
Crude Oil Tanker Fleet - Includes vessels that normally carry crude oil
and "dirty" products. This fleet includes three sizes of vessels, Suezmax,
aframax and Panamax vessels.
Product Carrier Fleet - Includes vessels that normally carry refined
petroleum products such as gasoline, naphtha and kerosene. This fleet includes
two sizes of vessels, Panamax and handysize vessels.
The following is a summary of the operations by major operating
segments:
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED JUNE 30, MONTHS ENDED JUNE 30,
--------------------- ---------------------
(in thousands) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
TOTAL REVENUES:
Crude Oil Tanker Fleet ........................... $ 20,868 $ 22,856 44,959 $ 49,615
Product Carrier Fleet ............................ 9,534 13,973 20,370 27,232
Other ............................................ 133 (2) 184 12
-------- -------- -------- --------
Total ........................................... $ 30,535 $ 36,827 $ 65,513 $ 76,859
======== ======== ======== ========
(LOSS) INCOME BEFORE INCOME TAXES,
EQUITY IN OPERATIONS OF JOINT
VENTURES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE:
Crude Oil Tanker Fleet.........................(1) $ (7,732) $ 1,197 $ (5,550) $ 5,226
Product Carrier Fleet ............................ 325 606 537 1,912
General and administrative expense
not allocated to vessels ........................ (1,847) (1,577) (3,431) (2,453)
Other ............................................ (431) (3,675) (1,044) (4,468)
-------- -------- -------- --------
Total ........................................... $ (9,685) $ (3,449) $ (9,488) $ 217
======== ======== ======== ========
</TABLE>
- ----------
(1) For the three and six months ended June 30, 1999, operating income (loss)
for the crude oil fleet includes a provision for loss on lease obligation of
$6,229,000 (see Note 10)
-10-
<PAGE>
and excludes the estimated loss on disposals/writedown of vessels (see Notes
11,12).
During the three and six months ended June 30, 1999 and 1998, mortgage
debt of OMI Corporation and its related interest expense have been allocated to
the above segments based upon the value of the vessels collateralizing the debt.
For the period ended June 17, 1998, general and administrative expense included
in determining income before income tax and equity in operations of joint
ventures includes an allocation of costs of corporate administrative services
provided by the Company's parent prior to the spin-off. The foreign segments
were charged a fixed amount per month per vessel for vessel management and
accounting activities and was charged 1.25 percent of revenues earned by each
vessel for commercial management. General corporate activities, such as salaries
(other than those included in the aforementioned fees), legal, accounting,
communications and other administrative expenses were allocated based on the
services provided to the segment. Rent expense was allocated based on the number
of employees included in the corporate allocation. Management believes the
methods for allocating were reasonable.
NOTE 8 - GUARANTEES AND OTHER COMMITMENTS
OMI acts as a guarantor for a portion of the debt incurred by a joint
venture with affiliates of its joint venture partner. Such debt was
approximately $14,252,000 at June 30, 1999 with OMI's guaranty of such debt
being approximately $7,126,000.
The Company and its joint venture partners have committed to fund any
working capital deficiencies which may be incurred by their joint venture
investments. As of June 30, 1999, OMI has advanced an aggregate of $800,000 in
the form of non-interest bearing loans to cover operating expenses for a joint
venture formed in 1997. At June 30, 1999, no other such deficiencies have been
funded.
-11-
<PAGE>
NOTE 9 - CHANGE IN ACCOUNTING PRINCIPLE AND PRIOR PERIOD ADJUSTMENTS
Prior to 1999, voyage freight for vessels operating on voyage charters
was accounted for on a load-to load ("LL") basis. Under this method, voyage
revenue is recognized evenly over the period from arrival of the vessel at the
first load port to arrival at the next load port. Under this method of revenue
recognition it is necessary to assume the next load port to complete the revenue
recognition cycle.
Effective January 1, 1999, OMI changed its accounting policy on
recognition of voyage freight for vessels operating on voyage charters from LL
to discharge-to-discharge ("DD") basis. Under this method, voyage revenue is
recognized evenly over the period from the departure of a vessel from its
original discharge port to departure at the next discharge port. Each method has
its own advantages. The predominant method for shipowners is DD. The change in
revenue recognition policy is a more reliable method in recognizing voyage
revenue as it eliminates the uncertainty associated with the location of the
next load port. The cumulative effect of this accounting change is shown
separately in the Condensed Consolidated Statements of Operations and resulted
in income of $2,729,000 or $0.07 per basic and diluted earnings per share.
The cumulative effect of this change in accounting principle as of
January 1, 1999 on the Company's Condensed Balance Sheet was to increase total
assets by $1,490,000, decrease total liabilities by $1,239,000 and increase
total stockholders' equity by $2,729,000.
The three months ended March 31, 1999 was previously presented using
the LL method of accounting for voyages. The impact of the restatement to DD on
the Company's Condensed Statement of Operations is summarized as follows:
As Originally
Reported Restated
-------------- --------
(in thousands)
Income before cumulative effect of change in
accounting principle ............................ $ 240 $ 7
Cumulative effect of change in accounting principle -- 2,729
------ -------
Net income ........................................ $ 240 $ 2,736
====== =======
BASIC EARNINGS PER SHARE:
Income before cumulative effect of change in
accounting principle ............................ $ 0.01 $ 0.00
Cumulative effect of change in accounting principle -- 0.07
------ -------
Net income ........................................ $ 0.01 $ 0.07
====== =======
DILUTED EARNINGS PER SHARE:
Income before cumulative effect of change in
accounting principle ............................ $ 0.01 $ 0.00
Cumulative effect of change in accounting principle -- 0.07
------ -------
Net income ........................................ $ 0.01 $ 0.07
====== =======
The three and six months ended June 30, 1998 were previously presented
using the LL method of accounting for voyages. Pro forma amounts for these
periods assuming DD had been retroactively applied are summarized as follows:
12
<PAGE>
For the period ended June 30, 1998 Three Months Six Months
------------ ----------
(in thousands)
Net income ..................................... $ 36,436 $ 39,049
======== ========
BASIC EARNINGS PER SHARE:
Net income ..................................... $ 0.84 $ 0.90
======== ========
DILUTED EARNINGS PER SHARE:
Net income ..................................... $ 0.83 $ 0.89
======== ========
NOTE 10 - PROVISION FOR LOSS ON LEASE OBLIGATION
During June 1999, as part of OMI's periodic review, the Company
evaluated the forecasted future net cash flows for vessels with lease
obligations. The Company determined that the current lease obligation for a
vessel whose lease terminates September 2001 exceeded its undiscounted
forecasted future net cash flows from operations. The loss was measured by the
excess of the future lease payments, as set forth in the lease agreement, over
the vessels estimated forecasted future cash flows over the lease term. It was
determined that an impairment loss for the lease should be recognized and a
provision of $6,229,000 was recorded in June 1999. The loss is reported as a
separate item in the Condensed Consolidated Statements of Operations.
NOTE 11 - VESSELS HELD FOR SALE
During June 1999, OMI contracted to sell two Suezmax vessels, one built
in 1974 and the other built in 1975. Both vessels were held for sale at June 30,
1999; one was delivered to the buyers on July 7, 1999 and the other vessel was
delivered on July 21, 1999. At June 30, 1999, $6,945,000 was recorded as loss
from the disposition of the two vessels.
Management intends on selling its aframax vessel and two of its 1975
built Suezmax tankers which are included on the balance sheet as Vessels held
for sale as of June 30, 1999. In August 1999, one of the 1975 Suezmax tankers
was contracted for sale at the end of the month. The disposal of the remaining
1975 Suezmax tanker and the aframax are expected within a year. The vessels are
held for sale at their estimated fair values. The estimated fair values for the
Suezmax tankers were based on the salvage values of two similar vessels sold by
the Company in July 1999. The estimated fair value of the aframax vessel was
based on current selling prices of similar vessels. The resulting adjustment of
$14,729,000 to reduce assets held for sale to the fair value of these vessels
was recorded in the second quarter of 1999 and is included in Loss on disposal
of assets-net.
As a result of the current market condition and estimated losses on the
disposal of certain vessels, the Company re-evaluated the carrying value of its
remaining vessels under the provisions of FAS 121 and concluded that no further
writedowns were necessary.
NOTE 12 - ACQUISITION AND DISPOSAL OF VESSELS
On January 19, 1999, the COLUMBIA, a new double-hulled Suezmax tanker
was delivered. The vessel which had a book value of $55,992,000 was sold on June
30, 1999 for $54,000,000 in a sale/leaseback transaction. The COLUMBIA was
chartered back from the purchaser over a period of three years. The resulting
lease is being accounted for as an operating lease. Under the agreement, the
Company is responsible for operating expenses and is required to maintain
$2,000,000 in escrow over the lease term, and a cash collateral account
initially of $4,000,000 which will be replaced by a stand by letter of credit
which will increase by $750,000 per quarter in the first year and by $500,000
per quarter in the second year to a maximum of $9,000,000. The letter of credit
will serve as additional collateral for the Company's obligation under the
charter.
On July 19, 1999, OMI took delivery of the SEINE, a 35,407 dwt product
carrier. This vessel is time chartered for the next two years.
OMI has contracted for one additional 156,000 deadweight ton ("dwt")
double-hulled Suezmax tanker to be delivered in 2000 with an expected cost of
$51,000,000 and a 35,000 dwt product carrier to be delivered in September 1999
with an expected cost of $28,500,000. The product carrier will be time chartered
for two years.
-13-
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The following presentation of management's discussion and analysis of
the OMI Corporation ("OMI" or the "Company") financial condition and results of
operations should be read in conjunction with the consolidated financial
statements, accompanying notes thereto and other financial information appearing
elsewhere in this Form 10-Q.
The information below and elsewhere in this document contains certain
forward-looking statements which reflect the current view of the Company with
respect to future events and financial performance. Wherever used, the words
"believes," "estimates," "expects," "plan" "anticipates" and similar expressions
identify forward-looking statements. Any such forward- looking statements are
subject to risks and uncertainties that could cause the actual results of the
Company's results of operations to differ materially from historical results or
current expectations. The Company does not publicly update its forward-looking
statements even if experience or future changes make it clear that any projected
results expressed or implied therein will not be realized. The information
contained in the discussion of the Year 2000 Issue ("Y2K") constitutes
forward-looking information. The identification and remediation of Y2K issues is
a technological effort that has never been undertaken before and estimates of
the outcome, time and expense of this project are, for that reason, particularly
hard to make with any certainty. Factors that may cause these differences
include, but are not limited to, those outlined in the Risk Assessment category
of the Year 2000 Issue.
GENERAL
Overview
OMI provides seaborne transportation services primarily for crude oil
and refined petroleum. The Company is the successor to Universal Bulk Carriers,
Inc. ("UBC"), a Liberian corporation, which was a wholly-owned subsidiary of OMI
Corp. ("Old OMI") until June 17, 1998 at which date the Company was separated
from Old OMI (renamed Marine Transport Corporation, "MTC") through a tax-free
distribution ("Distribution") of one share of the Company's common stock for
each share of Old OMI common stock. The distribution separated Old OMI into two
publicly-owned companies. OMI Corporation operates what was Old OMI's foreign
shipping businesses under the management of certain of the officers formerly of
Old OMI who moved to the new company and certain former directors of Old OMI and
additional new directors. The Company continues to trade under the symbol "OMM"
on the New York Stock Exchange.
The Company's net loss was $33.2 million for the quarter ended June 30,
1999 or $0.80 basic loss per share. The quarter loss includes loss on disposal
of assets of $23.7 million and a provision for loss on lease obligation of $6.2
million. Net loss for the six months ended June 30, 1999 was $30.4 million or
$0.73 basic loss per share after income from the cumulative effect of change in
accounting principle of $2.7 million or $0.07 per basic earnings per share. Net
income for the quarter and six months ended June 30, 1998 was $36.4 million or
$0.84 basic earnings per share and $39.5 million or $0.92 basic earnings per
share, respectively, which includes a reversal of deferred income taxes in the
amount of $38.9 million or $0.90 per share. In connection with the Distribution
described above, OMI became a decontrolled corporation and its shipping income
is no longer subject to United States federal income tax.
14
<PAGE>
OMI's Fleet
Currently, OMI's fleet comprises 26 vessels (including a new product
carrier delivered in July 1999). In June, July and August of 1998 and January
1999, OMI took delivery of four Suezmax newbuildings and will take delivery of a
fifth Suezmax in May 2000. Additionally, one 35,000 deadweight ton ("dwt")
product carrier newbuilding is scheduled to be delivered in September of 1999
and is time chartered for the next two years.
The Company's fleet comprises five wholly-owned and one jointly owned
Suezmax tankers, three chartered-in Suezmaxes, one jointly owned Ultra Large
Crude Carrier ("ULCC"), one aframax, three Panamax product tankers (currently
carrying crude oil), eleven handysize product carriers transporting clean
products and one jointly owned drybulk carrier.
Recent Activities
During January 1999, the Company took delivery of a Suezmax
newbuilding, the COLUMBIA, and on June 30, 1999, the Company completed a
sale/leaseback of this vessel for $54 million. On July 19, 1999, the SEINE, a
product tanker newbuilding was delivered at an approximate cost of $28.5
million. This vessel is time chartered for the next two years.
As a result of market conditions, as well as new tonnage entering the
market OMI is disposing of its older Suezmax vessels and less competitive
vessels. By doing this, the Company will be better able to focus its capital on
areas where its resources can provide higher returns. During July 1999, OMI sold
two Suezmax vessels built in 1974 and 1975. These two vessels were held for sale
at their net realizable values on June 30, 1999. Two 1975 Suezmax tankers and
one aframax vessel were also held for sale at their fair values at June 30,
1999. In August 1999, one of the 1975 Suezmax tankers was contracted for sale at
the end of the month. The disposal of the remaining 1975 Suezmax tanker and the
aframax tanker are expected within a year.
An additional non-recurring item included in the second quarter
operating loss is a provision for loss on one of the Company's chartered-in
vessels. An accounting adjustment was required because the estimated forecasted
future cash flows which are based on projected estimated future revenue rates
were less than the lease obligation for the vessel.
Market Alliances
OMI has concentrated its fleet in two classes of vessels, Suezmax and
product tankers. Currently, rates in both fleets are below historical levels
resulting from the imbalance of the supply and demand for ships which carry
crude oil and refined products and various factors detailed in the Market
Overview.
The Company has identified the advantages of owning a large modern
Suezmax fleet and has been implementing strategies to maximize such advantages.
First, the fleet will be more attractive to large customers by providing better
scheduling opportunities. A large fleet also provides opportunities to obtain
contracts for large volume movements and creates the potential to increase
vessel utilization. Second, large and concentrated fleets create economies of
scale to spread efficiently the overhead costs associated with environmental
regulations and inspections. Third, operating expertise and efficiency are
enhanced by concentration in certain vessel classes. Fourth, OMI believes that
large customers will prefer to deal with a limited number of large shipping
companies with fleets that they have inspected for quality, rather than smaller
shipping companies characteristic of the fragmented international tanker market.
15
<PAGE>
In 1998, in order to increase the Company's market share in the Suezmax
trades in the Atlantic Basin, OMI and Frontline Ltd, a Norwegian owner of one of
the world's largest and modern Suezmax fleets, combined Suezmax tanker fleets
for commercial purposes and created Alliance Chartering LLC ("Alliance").
Alliance primarily markets its Suezmax tankers in the Atlantic market.
Alliance's control of the largest modern fleet of Suezmaxes has enabled it to
strengthen relationships and obtain contracts with customers. These contracts
may allow Alliance the opportunity to increase its Suezmax fleet utilization
through backhauls, when cargo is available, which will improve vessel earnings.
OMI's strategy for its handysize fleet is to increase market share by
consolidating commercial operations of vessels through marketing joint ventures
and through concentrating trading in selected areas. In March 1999, the Company
agreed with Osprey Maritime Limited, a major international shipping company
based in Singapore, to consolidate their product tanker operations, establishing
International Product Carriers Limited ("IPC") to form a mid-size product tanker
venture. IPC intends to expand the pool to include other product carrier owners
to enhance its marketing capacity. The joint venture began operating effective
May 1, 1999.
MARKET OVERVIEW
The charter rates that the Company is able to obtain for its vessels
are determined in a highly competitive market. The industry is cyclical,
experiencing significant swings in profitability and asset values resulting from
changes in the supply of and demand for vessels. The following is an overview
for the two market segments OMI primarily operates in.
Product Carriers
The product carrier market is the segment of the tanker market which
transports refined petroleum products such as gasoline, jet fuel, kerosene,
naphtha and gas oil. Historically, earnings in the product tanker market have
been less volatile than earnings in the other tanker sectors. This is the result
of a stable long term fleet growth that has matched steady ton-mile demand
growth over the years.
However, after product tanker rates reached a very high level early in
1997, they began receding gradually as a result of lower oil product imports in
the Pacific region due to the ongoing financial crisis and new refinery
capacity, higher throughput in industrialized countries as well as the
substantial growth of the product tanker fleet. Ton-mile demand for product
tankers fell by about 4% in 1998 from the preceding year level, while the
product tanker fleet grew by about 4.5%. As a result, average freight rates for
product tankers in 1998 were substantially lower than rates prevailing in the
previous year, and the lowest since 1992.
Freight rates in the product tanker market showed some seasonal
improvement in the last months of 1998, but they began falling again early in
1999 as a result of further product tanker fleet expansion and weak oil demand
in the Pacific region, notwithstanding signs of recovery of economic activity in
the area. The adverse freight rate environment in the product tanker market is
expected to persist in the short-term due to relatively high newbuilding
deliveries for the balance of 1999 and a substantial draw of petroleum product
inventories in the next few months. However, prospects for recovery in this
tanker sector may be enhanced as newbuilding deliveries return to a moderate
level next year. Furthermore, oil product import requirements are expected to
increase in the three major world oil consuming areas (North America, Western
Europe and the Pacific region) in the next few years as oil demand growth is
expected to exceed refinery capacity in these areas.
16
<PAGE>
Suezmax Tankers
Freight rates in the Suezmax market recovered somewhat in the first
quarter of 1999 in relation to the preceding quarter, but subsequently fell in
the second quarter to the lowest level in four years. This was the result of
further OPEC and non-OPEC oil production cuts, the summer maintenance in the
North Sea, unrest in West Africa and increasing competition from displaced
VLCCs. The crude tanker market is expected to remain relatively weak in the near
term due to high newbuilding deliveries unless there is substantial scrapping
activity.
The world tanker fleet totaled approximately 276.5 million dwt at
mid-year 1999, the same as at the end of the first quarter, but up by 3.7
million dwt or 1.4% from the year-end 1998 level. At the same time, the tanker
orderbook stood at 42.3 million dwt, or 15.3% of the existing fleet.
Approximately 11.3 million dwt is scheduled for delivery in the second half of
1999, 20.1 million dwt in the year 2000 and most of the balance in the year
2001. The tanker orderbook includes 32 Suezmaxes of about 4.9 million dwt or
14.3% of the existing fleet, and 6.3 million dwt of product tankers or about
13.4% of the existing product tanker fleet.
However, 90 Suezmax tankers of 12.4 million dwt or 36.4% of the
existing Suezmax fleet, and 9.1 million dwt or 19.5% of the existing product
tanker fleet were 20 or more years old at mid-1999. In addition, 101.1 million
dwt or 36.6% of the total tanker fleet was 20 or more years old. The fall in
tanker freight rates has led to increasing tanker scrapping activity and
restraint in ordering new tonnage. Tanker sales for scrap totaled about 7.0
million dwt in the first half of 1999, more than double the tanker tonnage sold
for scrap in the same period a year ago, while new orders totaled 5.4 million
dwt. The sales for scrap include 15 VLCCs and seven Suezmaxes. The current
tanker market weakness, the relatively high tanker orderbook, an expensive fifth
special survey and stricter environmental regulations should accelerate
deletions of the old tanker tonnage.
Any improvement in freight rates in the crude as well as the product
carrier market will be largely dependent upon the continuous improvement of
economic activity in the Pacific region, as well as an increase in the rate of
tanker scrappings in view of the relatively high tanker newbuilding deliveries
expected in the balance of this year and in the year 2000.
RESULTS OF OPERATIONS
Results of operations of OMI Corporation include operating activities
of the Company's vessels. The discussion that follows explains the Company's
operating results in terms of net voyage revenues, which equals voyage revenues
minus vessel and voyage expenses (including charter hire expense), because
fluctuations in voyage revenues and expenses occur based on the nature of a
charter. The Company's vessels currently operate, or have operated in prior
years, on time, bareboat or voyage ("spot") charters. Each type of charter
denotes a method by which revenues are recorded and expenses are allocated.
Under a time charter, revenue is measured based on a daily or monthly rate and
the charterer assumes certain voyage expenses, such as fuel and port charges.
Under a bareboat charter, the charterer assumes all voyage and operating
expenses; therefore, the revenue rate is likely to be lower than a time charter.
Under a voyage charter, revenue is calculated based on the amount of cargo
carried, most expenses are for the shipowner's account and the length of the
charter is one voyage. Revenue may be higher in the spot market, as the owner is
responsible for most of the costs of the voyage. Other factors affecting net
voyage revenues for voyage charters are waiting time between cargoes, port
costs, and bunker prices.
Vessel expenses included in net voyage revenue discussed above include
operating expenses such as crew payroll/benefits/travel, stores, maintenance and
repairs, drydock, insurance and miscellaneous. These expenses are a function of
the fleet size, utilization levels for certain expenses, requirements under
laws, by charterers and Company standards. Insurance expense varies with the
overall insurance market conditions as well as the insured's loss record, level
of insurance and desired coverage.
17
<PAGE>
VOYAGE REVENUES LESS VESSEL AND VOYAGE EXPENSES.
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1999 VERSUS JUNE 30, 1998
Net voyage revenues of $21.9 million for the six months and $9.1
million for three months ended June 30, 1999 increased by a net of $2.4 million
and $2.7 million, respectively, from $19.5 million for the six months and $6.4
million for the three months ended June 30, 1998. The Crude oil fleet's net
voyage revenues increased by $1.5 million in the six months and $0.4 million in
the three months; the Product carrier fleet decreased by $1.6 million in the six
months and $0.4 million in the three months, and other net voyage revenue
increased by $2.4 million in the six months and $2.7 million in the three
months. Increases in other net voyage revenues of approximately $2.3 million in
both the six and three month periods are primarily related to management fee
expense not specifically allocated to vessel expenses in 1998.
Net voyage revenues for the three and six months ended June 30, 1999
and 1998 are as follows by market segments in which OMI primarily operates.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------- --------------------
1999 1998 1999 1998
------- ------- ------- -------
(in millions)
<S> <C> <C> <C> <C>
VOYAGE REVENUES:
Crude Oil Fleet.......................... $ 20.9 $ 22.8 $ 44.9 $ 49.6
Product Carrier Fleet.................... 9.5 14.0 20.4 27.2
All Other ............................... 0.1 0.0 0.2 0.0
------- ------- ------- -------
Total.............................. $ 30.5 $ 36.8 $ 65.5 $ 76.8
======= ======= ======= =======
VESSEL AND VOYAGE EXPENSES: (1)
Crude Oil Fleet (2)...................... $ 15.8 $ 18.1 $ 31.1 $ 37.3
Product Carrier Fleet.................... 5.5 9.6 12.2 17.4
All Other................................ 0.1 2.7 0.3 2.6
------- ------- ------- -------
Total.............................. $ 21.4 $ 30.4 $ 43.6 $ 57.3
======= ======= ======= =======
NET VOYAGE REVENUES:
Crude Oil Fleet.......................... $ 5.1 $ 4.7 $ 13.8 $ 12.3
Product Carrier Fleet.................... 4.0 4.4 8.2 9.8
All Other 0.0 (2.7) (0.1) (2.6)
------- ------- ------- -------
Total.............................. $ 9.1 $ 6.4 $ 21.9 $ 19.5
======= ======= ======= =======
</TABLE>
- ----------
(1) Includes charter hire expenses.
(2) Excludes provision for loss on lease obligation of $6.2 million.
Net changes are discussed as follows according to the two market
segments (product carrier and crude oil) in which OMI primarily operates.
Product Carrier Fleet
The product carrier fleet consisted of thirteen vessels (ten handysize
and three Panamaxes) at June 30, 1999 and 1998. Rates in the product market
began to decline in the second half of 1997. To minimize decreases due to rate
declines in the short-term, OMI placed three Panamaxes which previously carried
clean products, into a marketing pool in November 1997, May 1998 and July 1998.
Decreases in the product carrier fleet in the first half of 1999 pertain in part
to two of the Panamaxes which were carrying clean products in the first half
1998 and are carrying crude oil (included in the crude oil fleet's operating
results).
18
<PAGE>
During the six months ended June 30, 1999, the Company's handysize
product tankers were employed in the spot market. However, effective May 1,
1999, the majority have been time chartered to a newly formed joint venture,
IPC, described in the overview. Time charter rates from this venture reflect
spot charter rates since they are adjusted periodically with pool profits.
Similarly, three vessels are chartered to another joint venture. However, by
September 1999, these vessels will also operate in the IPC pool.
Net voyage revenues of $8.2 million decreased by a net of $1.6 million
for the six months ended June 30, 1999 compared to $9.8 million in the same
period in 1998. Decreases of approximately $1.4 million relate to two Panamaxes
which are not included with the product carriers results in 1999. The remaining
net decrease in net voyage revenue in 1999 compared to the same period in 1998
relates to spot rate fluctuations of the combined ten vessels. Offire relating
to drydocks and other repairs were approximately the same number of days in both
periods.
Net voyage revenues of $4.0 million decreased by a net of $0.4 million
for the three months ended June 30, 1999 compared to $4.4 million in the same
period in 1998. The net decrease relates to spot rate fluctuations where half
the vessels net voyage revenues increased offsetting a portion of the vessels
which had lower net voyage revenues.
Crude Oil Tanker Fleet
At June 30, 1999, the crude fleet consisted of eight wholly-owned
vessels (seven Suezmaxes and one aframax) and three chartered-in Suezmaxes; all
but one of the vessels is currently operating in the spot market. During July
and August 1999, three wholly-own vessels classified on the Balance Sheet as
held for sale at June 30, 1999 have been sold and one Suezmax and the aframax
vessel currently remain as held for sale. Additionally, one of the three Panamax
vessels was carrying crude oil in both the 1999 and comparable 1998 periods and
the other other two Panamax vessels began carrying crude oil in May 1998 and
July 1998. At June 30, 1998, OMI owned six Suezmaxes and one aframax and
chartered-in four vessels. During 1998 and January 1999, four new Suezmax
vessels were delivered (the first one June 1998), a vessel was sold in August
1998 and two chartered-in vessels were redelivered to their owners in July and
December 1998.
The COLUMBIA, a newly built Suezmax tanker, was delivered January 1999.
The vessel operated in the spot market during the six months ended June 30, 1999
and at that date was sold in a sale/leaseback transaction. The COLUMBIA was
bareboat chartered back to OMI in this transaction and continues to operate in
the spot market.
Net voyage revenues of $13.8 million generated by the crude tanker
fleet increased a net of $1.5 million for the six months ended June 30, 1999
from $12.3 million for the six months ended June 30, 1998. The net increase in
net voyage revenues can be attributed to increases of approximately $10.1
million primarily from two reasons: net voyage revenues earned from four Suezmax
vessels (three delivered in the summer of 1998 and one delivered January 1999)
and net voyage revenue from two Panamaxes that had been carrying clean products
in the first half of 1998 were and carrying crude in the first half of 1999. Net
voyage revenues were reduced by decreases in revenues of approximately $8.6
million relating primarily to lower rates in the spot market earned on the five
vessels held for sale at June 30, 1999 (four 1970's built vessels and OMI's
1980's built aframax vessel) in comparison to the first quarter 1998 rates
earned, resulting from various factors explained in the market overview and
decreases in net voyage revenues earned by the four vessels chartered-in during
the first half of 1998 as compared to earnings on two chartered-in vessels in
the first half of 1999.
19
<PAGE>
Net voyage revenues of $5.1 million generated by the crude tanker fleet
increased a net of $0.4 million for the three months ended June 30, 1999 from
$4.7 million for the three months ended June 30, 1998. The explanation for the
net increase in net voyage revenues is the same as the six month explanations
which primarily attributes the net increase to the increase in revenue from the
delivery of the four new Suezmaxes offset by decreases in revenue earned from
the five vessels held for sale at June 30, 1999.
OTHER OPERATING EXPENSES.
The Company's operating expenses, other than vessel, voyage and
operating lease expenses consist of provision for loss on lease obligation,
depreciation and amortization and general and administrative ("G & A") expenses.
For the six and three months ended June 30, 1999, these expenses increased $7.8
million to $23.8 million for the six months ended June 30, 1999, from $16.0
million in 1998 and increased $6.7 million to $14.9 million for the three months
ended June 30, 1999, from $8.2 million in 1998.
The provision for loss on lease obligation of $6.2 was recorded at June
30, 1999 and relates to one of OMI's chartered-in vessels. During the Company's
periodic review, it was determined that the current lease obligation for a
vessel whose lease terminates September 2001 exceeded its undiscounted
forecasted future net cash flows from operations. The loss was measured by the
excess of the future lease payments as set forth in the lease agreement, over
the vessels estimated forecasted future discounted cash flows over the lease
term.
Additional increases in operating expenses for both the six and three
month periods relates to net increases in depreciation expense from the delivery
of three Suezmax tankers in 1998 offset by the sale of a Suezmax tanker in
August 1998. G & A expenses increased by $0.5 million during the six months
ended June 30, 1999 compared to the same period in 1998 primarily because the G
& A expenses during 1999 were actual expenses incurred as compared to an
allocation for the period up to June 17, 1998 of Old OMI's G & A expenses to its
foreign subsidiaries.
OTHER INCOME (EXPENSE).
Other income (expense) consists of disposal/writedown of assets-net and
interest expense-net for the periods presented. Net other expense increased by
$28.0 million from $3.3 million during the first half of 1998 to $31.3 million
for the six months ended June 30, 1999 and by $25.9 million from $1.7 million
during the second quarter of 1998 to $27.6 million during the second quarter
1999.
Losses and writedowns recorded at June 30, 1999 included in disposal of
assets-net of $23.6 million relate to six vessels. During July 1999, OMI sold
for scrap two Suezmax vessels built in 1974 and 1975. An aggregate loss of $6.9
million was recognized from the sale of these two vessels which were held for
sale at their net realizable values on June 30, 1999. Three other vessels, two
1975 Suezmax tankers, one of which was sold August 1999, and one aframax vessel
were also held for sale at June 30, 1999. These vessels were also held for sale
at their fair values and an additional loss of $14.7 million was recognized. The
COLUMBIA with a book value of $56.0 million was sold on June 30, 1999 for $54.0
million, a loss of $2.0 million was recognized.
Net interest expense increased $4.4 million and $2.3 million in the six
and three months ended June 30, 1999 in comparison to the same period in 1998.
The additional interest expense was due to $146.8 million of borrowings and
decreases in the capitalization of interest on construction in progress. During
the second quarter $38.4 million was repaid including the repayment of the $37.5
million for the COLUMBIA loan.
EQUITY IN OPERATIONS OF JOINT VENTURES.
Equity in operations of joint ventures decreased by $2.2 million for
the six months ended June 30, 1999 compared to the six months ended June 30,
1998 and decreased $0.9 million
20
<PAGE>
for the three months ended June 30, 1999 compared to the same period in 1998.
The decrease in both periods was primarily attributed to lower earnings for a
49.0 percent owned joint venture which operates one ULCC vessel that was in
drydock during the first half of 1999 and decreased earnings from three other
joint ventures related to declines in spot rates during 1999 compared to the
first half of 1998, resulting from current market conditions.
During 1999, the Company received an aggregate of $2.4 million in
dividends from joint ventures, $1.9 million from Amazon Transport, Inc. and $0.5
million from White Sea Holdings Ltd.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
During the second quarter 1999, OMI changed its method of accounting
for freight on voyage charters. The accounting change is effective for the
period beginning January 1, 1999 and income of $2.7 million was recorded for the
six months ended June 30, 1999 as cumulative effect of change in accounting
principle. The change in the Company's method of revenue recognition for voyages
from the load-to-load basis to discharge-to-discharge basis is a more reliable
method in recognizing voyage revenue as it eliminates the uncertainty associated
with estimating location of the next load port under the load-to-load basis.
Voyage revenue is recognized evenly over the period from the departure of a
vessel from its original discharge port to departure at the next discharge port.
BALANCE SHEET
In January 1999, the Company took delivery of a newly constructed
double hulled Suezmax tanker, the COLUMBIA. At December 31, 1998, there was a
balance in Construction in Progress of $17.7 million relating to the COLUMBIA
which was relieved in 1999. The COLUMBIA was then sold June 30, 1999 for $54.0
million in a sale/leaseback transaction. The $54.0 million proceeds reduced debt
incurred in January 1999 of $35.0 million and OMI has a long-term note
receivable for $6.0 million from the sale of the vessel. Additionally, the
Company maintains $2.0 million in escrow and $4.0 million in a cash collateral
account as required by the lease agreement (see Commitments). The aggregate $6.0
million is included in Other assets and deferred charges.
Vessels held for sale of $16.8 million at June 30, 1999 comprises
amounts relating to five vessels. There were decreases to Vessels of $75.8
million, Accumulated depreciation of $45.4 million, Other assets and deferred
charges of $7.7 million related to the write-off of the remaining balances for
vessels prepaid drydock and goodwill, $1.0 million accrued for selling expenses
and decreases in retained earnings for the loss on disposal of assets of $21.7
million.
Decreases in Investment and advances in joint ventures primarily relate
to decreases in Investments in two joint ventures that paid dividends, as a
return on investment in 1999.
Advance time charter revenues and other liabilities increased $6.2
million for the provision of loss on lease obligation. This reserve will be
amortized over the life of the lease obligation that expires September 2001.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash and cash equivalents of $24.4 million at June 30, 1999 increased
$1.7 million from cash and cash equivalents of $22.7 million at December 31,
1998. The Company's working capital of $11.7 million at June 30, 1999, increased
$9.8 million from working capital of $1.9 million at December 31, 1998. Current
assets increased $17.7 million primarily due to the vessels held for sale of
$16.8 million. Current liabilities increased $7.8 million due to the increase in
current portion of long-term debt, primarily for draw downs on a line of credit
(see Financing Activities). Net cash provided by operating activities decreased
$0.1 million
21
<PAGE>
to $10.4 million for the six months ended June 30, 1999 compared to net cash
provided by operating activities of $10.5 million for the six months ended June
30, 1998 (see Results of Operations).
The Company operates in a capital-intensive industry and augments cash
generated by operating activities with debt and sales of vessels that no longer
fit the Company's strategy. Cash used by investing activities was $6.1 million
for the six months ending June 30, 1999, a decrease of $53.9 million from cash
used by investing activities of $60.0 million for the six months ending June 30,
1998. Cash used by investing activities decreased in 1999 primarily due to the
delivery of the sale of the new Suezmax vessel the COLUMBIA for $54.0 million.
Decreases in investing activities were partially offset by increases resulting
from $14.5 million lower additions to vessels during the first six months in
1999 compared to 1998 due to fewer installment payments on vessels under
construction in 1999 and increases in notes receivable of $9.0 million.
FINANCING ACTIVITIES
Cash used by financing activities was $2.6 million for the six months
ended June 30, 1999, compared to cash provided of $40.6 million for the six
months ended 1998. In 1999, there were $89.0 million in principal payments on
long-term and short-term debt and $86.5 million in proceeds from borrowings.
These payments in 1999 included $49.0 million for short-term financing and
working capital borrowings, $37.5 million for the COLUMBIA loan (sold in June
1999) and $2.5 million for required payments on two credit facilities. The
proceeds in 1999 included $37.5 for the COLUMBIA (delivered in January 1999) and
$49.0 for short-term financing and working capital borrowings.
For the six months ended June 30, 1998, there were $22.6 million of
principal payments on long-term and short-term debt and $63.8 million proceeds
from the issuance of debt and borrowings. The payments in 1998 included $2.0
million for scheduled installments and $20.6 million for the payment of a loan
balance that was refinanced. The proceeds in 1998 included $35.8 million drawn
down for the delivery of a new Suezmax tanker in June, $16.0 to refinance two
Panamax vessels and $12.0 million for working capital.
Currently, OMI has four credit facilities and two lines of credit
("LOC") aggregating $376.2 million of which $120.7 million is available. At June
30, 1999, these facilities/LOCs aggregated $382.2 million, $237.3 million was
outstanding and $144.9 million was available at that date. One facility with a
commitment of $105.5 million was assumed from Old OMI, and the remaining
facilities/LOCs aggregating $276.7 million at June 30, 1999, were secured
subsequent to the spin-off.
During December 1998, the Company entered into an agreement for a $60.0
million revolving LOC to finance, on an interim basis, the acquisition of
vessels. The facility bears interest at LIBOR plus a margin ranging from 55-80
basis points based on the Company's funded debt to capitalization ratio and
interest coverage ratio. On January 14, 1999, the Company drew down $37.5
million to finance the Suezmax vessel delivered. The vessel was sold on June 30,
1999 and the $37.5 million was repaid in the second quarter. In July 1999, $21.2
million was drawn down to finance the delivery of the new product tanker.
In February 1999, OMI entered into a $25.0 million revolving line of
credit to be used for working capital and other general corporate purposes. The
line of credit bears interest at LIBOR plus a margin that varies with facility
use, but not greater than 1.75%. In July 1999, this line of credit was reduced
to $19.0 million because two of the five vessels that were collateral for this
line, were sold. On June 30, 1999, the outstanding balance was $17.0 million,
and in July, $3.0 million was repaid.
The Company has a credit facility, which was assumed from Old OMI. At
June 30, 1999, the commitment was $105.5, and the outstanding loan was $90.1
million. The facility bears interest at LIBOR plus a margin ranging from 60-95
basis points, which is computed based on OMI s funded debt to equity ratio and
interest coverage ratio. The agreement, as amended,
22
<PAGE>
expires in April 2002 and provides for four semi-annual reductions of $8.9
million from the remaining commitment beginning April 2000. As long as the
available balance of the credit facility exceeds the outstanding loan balance,
and the collateral tests are met, current amortization is not required.
During June and July 1998, the Company entered into three new secured
revolving credit agreements to refinance two Panamax tankers, three Suezmax
tankers and two product carriers when delivered. On April 30, 1999, the amount
available under the facilities increased by $33.5 million for a new Suezmax
tanker to be delivered in May 2000. As of June 30, 1999, the total available
commitment was $191.7 million, and the outstanding balance was $121.2 million.
The facilities bear interest at LIBOR plus a margin ranging from 0.65%-1.00%.
Certain of the loan agreements contain restrictive covenants requiring
minimum levels of cash or cash equivalents, working capital and net worth,
maintenance of specified financial ratios and collateral values, and restricting
the Company's ability to pay dividends. These loan agreements also contain
various provisions restricting the right of OMI and/or its subsidiaries to make
certain investments, to place additional liens on the property of certain of
OMI's subsidiaries, to incur additional long- term debt, to make certain
payments, to merge or to undergo a similar corporate reorganization, and to
enter into transactions with affiliated companies. At June 30, 1999, the Company
was in compliance with all its financial covenants.
The Company believes that the actions it has taken in the last year and
continues to do currently to improve its liquidity and financial position will
give the Company greater financial flexibility to fund its vessel acquisition
program and finance its other cash needs.
OTHER COMMITMENTS
The Company has two remaining construction contracts with the same yard
for one product carrier with expected capitalized costs at delivery in September
1999 of $28.5 million and one Suezmax carrier with an expected capitalized cost
of $51.0 million scheduled to be delivered in 2000. As of June 30, 1999, total
capitalized costs for the two vessels aggregated $16.5 million. At June 30,
1999, $6.5 million in capitalized costs was included on the balance sheet for a
product carrier delivered in July for approximately $28.5 million (see Financing
Activities).
The sale/leaseback of the COLUMBIA on June 30, 1999 resulted in a three
year operating lease with the purchaser. The Company is responsible for
operating expenses of the vessel and is required to maintain $2.0 million in
escrow over the lease term, and a cash collateral account initially of $4.0
million. The cash collateral account will be replaced by a stand by letter of
credit, which will increase by $0.75 million per quarter in the first year and
by $0.50 million per quarter in the second year to a maximum of $9.0 million.
The letter of credit will serve as additional collateral for the Company's
obligation under the lease.
OMI acts a guarantor for a portion of the debt incurred by a joint
venture with affiliates of its joint venture partner. Such debt was
approximately $14.3 million at June 30, 1999 with OMI's guaranty of such debt
being approximately $7.1 million.
The Company and its joint venture partners have committed to fund any
working capital deficiencies that may be incurred by their joint venture
investments. As of June 30, 1999, OMI has advanced an aggregate of $0.8 million
in the form of non-interest bearing loans to cover operating expenses for a
joint venture formed in 1997. At June 30, 1999, no other such deficiencies have
been funded.
23
<PAGE>
AGREEMENTS
As part of the Distribution, OMI is party to certain agreements with
Marine Transport Corporation ("MTC'), including the following:
Distribution Agreement-The Distribution Agreement provides for, with
certain exceptions, assumptions of liabilities and cross-indemnities designed
principally to place financial responsibility for the liabilities with the
appropriate company. OMI, however, assumed the obligations of Old OMI with
respect to Old OMI's 10.25 percent Senior Notes due November 1, 2003 in exchange
for a note from MTC in the amount of $6.4 million, which is equivalent in value
to the principal amount of the Senior Notes then outstanding. The Distribution
Agreement also provides that each of MTC and OMI will indemnify the other in the
event of certain liabilities arising under the Federal securities laws. Each of
MTC and OMI will have sole responsibility for claims arising out of its
respective activities after the Distribution.
The Distribution Agreement also provides that, except as otherwise set
forth therein or in any other agreement, all costs or expenses incurred on or
prior to the Distribution Date in connection with the Distribution will be
charged to and paid by the party incurring such costs or expenses. Except as set
forth in the Distribution Agreement or any related agreement, each party shall
bear its own costs and expenses incurred after the Distribution Date.
As part of the Distribution Agreement, OMI has, subject to certain
exceptions, provided indemnity to MTC for all taxes attributable to the
Distribution and to certain corporate restructuring transactions preceding the
Distribution.
Tax Cooperation Agreement-Prior to the Distribution, OMI and MTC
entered into a Tax Cooperation Agreement which sets forth each party's rights
and obligations with respect to federal, state, local and foreign taxes for
periods prior and after the Distribution and related matters such as the filing
of tax returns and the conduct of audits and other proceedings. In general, the
Tax Cooperation Agreement provides that OMI will be liable for taxes and be
entitled to refunds for each period covered by any such return which are
attributable to OMI and its subsidiaries and that MTC will be liable for and be
entitled to refunds for each period covered by such return which are not
attributable to OMI or OMI subsidiaries. Though valid as between the parties
thereto, the Tax Cooperation Agreement is not binding on the IRS and does not
alter either party s tax liability to the IRS.
Dividends-Any determination to pay dividends in the future by OMI will
be at the discretion of the board of directors and will be dependent upon its
results of operations, financial condition, capital restrictions, covenants and
other factors deemed relevant by the board of directors. Currently, the payment
of dividends by OMI is limited by its credit agreements.
EFFECTS OF INFLATION
The Company does not consider inflation to be a significant risk to the
cost of doing business in the current or foreseeable future. Inflation has a
moderate impact on operating expenses, drydocking expenses and corporate
overhead.
YEAR 2000 ISSUE
GENERAL
The Year 2000 issue arises from the fact that many computer hardware
and software systems use only two digits rather than four digits to define the
applicable year. As a result, these systems may not calculate dates beyond 1999,
which may result in system failure or miscalculations by computer programs which
could cause disruption of the Company's operations.
24
<PAGE>
STATE OF READINESS
The Company has taken steps to ensure that its systems will be year
2000 compliant including systems on board vessels. The Company has been in the
process over the last year of upgrading its internal hardware and software
systems for business reasons other than Year 2000 compliance. Therefore, the
Company believes, after conversion to the new systems, the Year 2000 issue will
not pose significant operational problems for its computer systems. However, the
Year 2000 readiness of the Company's customers, suppliers and business partners
may vary.
The Company developed a plan that outlines the Company's procedures to
become Y2K compliant which was approved in November 1998 by senior management of
OMI, as well as the Board of Directors. An oversight committee was formed which
includes members of senior and technical management who meet on a monthly basis
with the Company's Information Services team. The procedures in the plan or the
Project, address the following: identification of inventory and assessment as to
its Y2K readiness, remediation strategies and remediation costs. The Company has
had formal communications with vendors and other customers which the Company
does business with, to determine the extent to which the Company is vulnerable
to those third parties failure to remedy their own Y2K issue. The Company cannot
predict the outcome of other companies remediation efforts. The Project included
procedures for fixing critical systems using a combination of replacements and
upgrades.
The Company identified and scheduled a sufficient number of qualified
personnel to accomplish the Project objectives and established a process for
monitoring its progress against the Y2K plan in accordance with a timetable of
expected completion dates for the various phases of the Project.
The Company's critical systems and products are substantially Y2K
compliant as of August 1999. Currently, a Y2K accounting system has been
implemented and substantially all of the ship hardware which has been identified
is year 2000 compliant.
COSTS
The Y2K Project includes approximately costs of $0.2 million related to
financial systems. The cost that relates to fixture of ships software and
hardware has been minimal. Additionally, the Company paid $0.3 million, not
included in the estimated budget for financial systems, towards new financial
applications implementation which included the hardware, software and support
fees.
Based on responses received from vendors, to date, the Company is not
aware of any significant investments in assets that are not Y2K compliant.
There can be no guarantee that the costs incurred to date will be the
final actual results, which could differ from what has been anticipated. Based
on its current estimates and information currently available, the Company does
not anticipate that costs associated with this Project will have a material
adverse effect on the Company's consolidated financial position, results of
operations or cash flows in future periods.
RISK ASSESSMENT
At this time, until the process is tested, the Company cannot fully
estimate the risks of its Y2K issue. To date, OMI has not identified any
material risks of not being year 2000 ready. However, if a risk should
subsequently arise, OMI would identify its effects and remedy by the contingency
plan, see below. Additionally, there is exposure to third parties because
guarantees which the Company relies on as to Y2K compliance are not specifically
verified, which can also cause disruption if not remedied in a timely manner.
25
<PAGE>
CONTINGENCY PLAN
The Company relies on vendor guarantees that critical systems are Y2K
compliant. Therefore, the Company anticipates that those critical systems will
function properly. OMI has full maintenance contracts with all its vendors in
the case of any system problem, they are required to resolve such problems
within a reasonable amount of time.
The Company does not anticipate that any of their critical and
non-critical systems will not be Y2K compliant. There are no critical and unique
high volume systems for which a contingency plan may not be possible. Further,
if the computer system would go down, the Company plans to revert to manual
procedures, which will be reviewed and tested during 1999.
ITEM 3:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Market Risk
The company is exposed to various market risks, including interest
rates. The exposure to interest rate risk relates primarily to the debt and
related interest rate swaps. At June 30, 1999, the majority the $244.7 million
debt was floating rate debt, which totaled $237.3 million. A one percent
increase in the floating rate would increase interest expense by $2.4 million
per year.
The fixed rate debt on the balance sheet and the fair market value were
$7.4 million as of June 30, 1999. If interest rates were to increase (decrease)
by one percent with all other variables remaining constant, the market value of
the fixed rate debt would decrease (increase) by approximately $0.3 million.
The Company has an interest rate swap agreement to manage its expose
with interest rates by locking in fixed interest rate from floating rates. At
June 30, 1999, there was one swap with at notional principal of $10.0, and it
would cost approximately $0.2 million to terminate the agreement.
26
<PAGE>
PART II: OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
None.
ITEM 2 -- CHANGES IN SECURITIES
None.
ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 -- OTHER INFORMATION
None.
ITEM 6 -- EXHIBIT AND REPORTS ON FORM 8-K
a. EXHIBITS
27 OMI Corporation - Financial Data Schedule, dated June 30, 1999.
b. REPORTS ON FORM 8-K
As filed on July 1, 1999
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMI CORPORATION
---------------------------------------------------------------
(REGISTRANT)
DATE: AUGUSt 13, 1999 BY:/s/ CRAIG H. STEVENSON, JR.
------------------------------------
Craig H. Stevenson, Jr.
President, Chairman of the Board
and Chief Executive Officer
DATE: AUGUST 13, 1999 BY:/S/ VINCENT DE SOSTOA
------------------------------------
Vincent De Sostoa
Senior Vice President and
Chief Financial Officer
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27 contains summary information extracted from OMI Corporation and
Subsidiaries Consolidated condensed financial statements and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 24,418
<SECURITIES> 0
<RECEIVABLES> 12,654
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 64,748
<PP&E> 492,786
<DEPRECIATION> 117,171
<TOTAL-ASSETS> 501,528
<CURRENT-LIABILITIES> 53,027
<BONDS> 216,105
0
0
<COMMON> 21,862
<OTHER-SE> 192,965
<TOTAL-LIABILITY-AND-EQUITY> 501,528
<SALES> 0
<TOTAL-REVENUES> 65,513
<CGS> 0
<TOTAL-COSTS> 43,568
<OTHER-EXPENSES> 23,775
<LOSS-PROVISION> 23,666
<INTEREST-EXPENSE> 8,223
<INCOME-PRETAX> (33,165)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 2,729
<NET-INCOME> (30,436)
<EPS-BASIC> (0.73)
<EPS-DILUTED> (0.73)
</TABLE>
