Being Filed Pursuant to Rule 901 (d) of Regulation S-T
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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 March 31, 2000
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 May 15, 2000:
------------
Common Stock, par value $0.50 per share 57,527,678 shares
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<PAGE>
OMI CORPORATION AND SUBSIDIARIES
INDEX
PART I: FINANCIAL INFORMATION PAGE
----
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of
Operations and Comprehensive Income (unaudited) for the
three months ended March 31, 2000 and 1999 3
Condensed Consolidated Balance Sheets-
March 31, 2000 (unaudited) and December 31, 1999 4
Condensed Consolidated Statements of Changes in Stockholders'
Equity for the year ended December 31, 1999 and the
(unaudited) three months ended March 31, 2000 5
Condensed Consolidated Statements of Cash Flows (unaudited)
for the three months ended March 31, 2000 and 1999 6
Notes to Condensed Consolidated Financial
Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 12
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 22
PART II: OTHER INFORMATION 23
SIGNATURES 24
2
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
FOR THE THREE
MONTHS ENDED MARCH 31,
-----------------------
2000 1999
--------- ---------
Revenues $ 30,816 $ 34,978
-------- --------
Operating Expenses:
Vessel and voyage 12,907 18,945
Charter hire 4,599 3,226
Depreciation and amortization 3,556 6,187
General and administrative 2,706 2,686
Loss on disposal/write down of assets-net
(Note 8) 13,155 --
-------- --------
Total Operating Expenses 36,923 31,044
-------- --------
Operating (loss) income (6,107) 3,934
-------- --------
Other (Expense) Income:
Interest expense-net (5,170) (3,737)
Other-net 1,448 --
-------- --------
Net other expense (3,722) (3,737)
-------- --------
(Loss) income before (loss)equity in
operations of joint ventures and
cumulative effect of change in
accounting principle (9,829) 197
(Loss) equity in operations of joint
ventures (141) (190)
-------- --------
(Loss) income before cumulative effect
of change in accounting principle (9,970) 7
Cumulative effect of change in
accounting principle -- 2,729
-------- --------
Net (loss) income (9,970) 2,736
Other comprehensive income -- --
-------- --------
Comprehensive (loss) income $ (9,970) $ 2,736
======== ========
Basic (loss) earnings per common share:
(Loss) income before cumulative effect
of change in accounting principle $ (0.21) $ --
Net (loss) income $ (0.21) $ 0.07
Diluted (loss) earnings per common share:
(Loss) income before cumulative effect
of change in accounting principle $ (0.21) $ --
Net (loss) income $ (0.21) $ 0.07
See notes to condensed consolidated financial statements
3
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
2000 1999
---------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash, including cash equivalents:
2000-$28,500; 1999-$5,172 $ 29,525 $ 7,381
Receivables:
Traffic 11,677 9,245
Other 3,126 9,136
Assets to be disposed of (Note 8) 87,409 90,996
Prepaid expenses and current assets 4,256 4,437
--------- ---------
Total current assets 135,993 121,195
--------- ---------
Vessels, construction in progress
and other property:
Vessels and other property 356,877 334,342
Construction in progress 11,416 25,340
Less accumulated depreciation (35,842) (42,926)
--------- ---------
Vessels, construction in progress
and other property-net 332,451 316,756
--------- ---------
Investments in, and advances to joint ventures 12,439 11,519
Notes receivable 9,262 9,262
Other assets and deferred charges 15,381 13,683
--------- ---------
Total $ 505,526 $ 472,415
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,736 $ 7,017
Accrued liabilities:
Voyage and vessel 2,394 4,285
Interest 3,542 2,762
Other 4,548 5,190
Deferred gain on sale of vessels 3,151 3,151
Current portion of long-term debt (Note 2) 57,535 54,834
--------- ---------
Total current liabilities 77,906 77,239
--------- ---------
Other liabilities 2,047 3,034
Deferred gain on sale of vessels 3,575 4,363
Deferred income taxes 3,100 3,100
Long-term debt (Note 2) 237,722 212,913
Stockholders' equity 181,176 171,766
--------- ---------
Total $ 505,526 $ 472,415
========= =========
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, 1999 AND THE (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
Accumulated
Retained Other Total
Common Stock Capital Treasury Earnings Comprehensive Comprehensive Stockholders'
Shares Amount Surplus Stock (Deficit) Income (Loss) Income Equity
------ -------- ------- ------- --------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1999 43,694 $ 21,847 $207,469 $(9,040) $ 17,465 $ 7,442 $245,183
Comprehensive loss:
Net loss (80,305) $ (80,305) (80,305)
Realization of cumulative
translation adjustment (7,442) (7,442) (7,442)
---------
Comprehensive loss $ (87,747)
=========
Issuance of common stock 5,700 2,850 11,400 14,250
Purchase of treasury stock 206 (126) 80
------ ------- - ------- ------- -------- --------- --------
Balance at December 31, 1999 49,394 24,697 218,869 (8,834) (62,966) -- 171,766
Comprehensive loss:
Net loss (9,970) $ (9,970) (9,970)
Net change in valuation account --
---------
Comprehensive loss $ (9,970)
=========
Issuance of common stock 10,210 5,105 14,275
19,380
------ -------- --------- ------- -------- --------- --------
Balance at March 31, 2000 (unaudited) 59,604 $ 29,802 $233,144 $(8,834) $(72,936) $ -- $181,176
====== ======== ========= ======= ======== ========= ========
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------------
2000 1999
---------- ----------
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net (loss) income $ (9,970) $ 2,736
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Cumulative effect of change in accounting principle -- (2,729)
Depreciation and amortization 3,556 6,187
Loss on disposal/write down of assets-net 13,155 --
Amortization of lease reserve (692) --
Amortization of deferred gain on sale of vessel (788) (788)
Equity (loss)in operations of joint ventures-
net of dividends received 1,349 2,640
Changes in assets and liabilities:
Increase in receivables and other current assets (2,648) (2,297)
Advances (to) from joint ventures - net (131) 59
(Decrease) increase in other assets and
deferred charges 257 (1,117)
(Decrease) increase in accounts payable and
accrued liabilities (2,128) 424
(Decrease) increase in advance time charter
revenues and other liabilities (295) 630
Other 60 80
--------- ---------
Net cash provided by operating activities 1,725 5,825
--------- ---------
CASH FLOWS (USED) PROVIDED BY INVESTING ACTIVITIES:
Additions to vessels and other property (31,677) (41,588)
Proceeds from disposition of vessels 4,543 --
Proceeds from disposition of a joint venture 2,373 --
Proceeds from notes receivable 5,100 --
Payments for investments (1,467) --
--------- ---------
Net cash used by investing activities (21,128) (41,588)
--------- ---------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Proceeds from the refinancing of long-term and
short-term debt 264,500 --
Payments on long-term and short-term debt
refinanced (257,850) --
Proceeds from issuance of long-term and
short-term debt 27,000 49,499
Payments on long-term and short-term debt (6,140) (12,800)
Payments for debt issue costs (3,783) (191)
Proceeds from issuance of common stock 17,820 --
--------- ---------
Net cash provided by financing activities 41,547 36,508
--------- ---------
Net increase in cash and cash equivalents 22,144 745
Cash and cash equivalents at beginning of year 7,381 22,698
--------- ---------
Cash and cash equivalents at end of period $ 29,525 $ 23,443
========= =========
</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) 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 a bulk shipping company incorporated on January 9, 1998 in the
Republic of the Marshall Islands, and is the successor company to Universal Bulk
Carriers, Inc., a company which was a wholly-owned subsidiary of OMI Corp.
(renamed Marine Transport Corporation) until June 17, 1998. OMI provides
seaborne transportation services primarily of crude and refined petroleum
products. The Company trades under the symbol OMM on the New York Stock
Exchange.
Certain reclassifications have been made to the 1999 financial statements to
conform to the 2000 presentation. The financial statements for the period ended
March 31, 1999 have been restated giving effect to the cumulative effect of the
change in accounting principle for recognizing voyage freight for vessels
operating on voyage charters from the load-to-load basis to the
discharge-to-discharge basis effective January 1, 1999.
NOTE 2 -- CREDIT FACILITIES AND LOAN AGREEMENTS
As of March 31, 2000, the Company's debt and credit arrangements consisted of
the following:
(in thousands)
Loans under bank credit agreements at a margin plus variable
rates of the London Interbank Offering
Rate ("LIBOR")(1)....................................... $ 288,420
10.25% Unsecured Senior Notes due 2003..................... 4,357
7.00% Convertible Note due 2004............................ 2,480
---------
Total .............................................. 295,257
Less current portion of long-term debt:
Scheduled amortization payments of debt................. 12,277
Debt related to Assets to be disposed of................ 45,258
---------
Total Current Portion............................... 57,535
---------
Long-term debt............................................. $ 237,722
=========
- ----------
(1) Rates at March 31, 2000 ranged from 8.00 percent to 9.375 percent
(including margins).
On February 11,2000, OMI completed its refinancing with its previous lenders for
a credit agreement in the amount of $264,500,000. There are two primary
facilities under the new agreement. Facility A matures five years from drawdown
date, and the balance was $218,000,000 from February 11, 2000 until May 10,
2000. On May 10, 2000, Facility A was reduced by $36.0 million to $182,000,000
when Facility C was drawn down. Facility A will be repaid in ten semi-annual
installments commencing six months from the drawdown date, the first four
installments in the amount of $1,000,000, the next two installments in the
amount of $2,500,000 and the remaining four installments in the amount of
$12,500,000, in addition to a balloon payment in the amount of $123,000,000 as
the last installment on maturity. The outstanding balance of Facility A bears
interest at LIBOR plus a margin of 1.75% and is secured by thirteen vessels.
Facility B was in the amount of $46,500,000 ($43,420,000 at
7
<PAGE>
March 31, 2000) and is a short-term facility which matures two years after the
drawdown date. The principal of this Facility will be repaid with proceeds on
the sale of vessels secured by this Facility, which are classified as vessels to
be disposed of on the Condensed Consolidated Balance Sheets at March 31, 2000.
The outstanding balance of this Facility bears interest at LIBOR plus a margin
of 3% and is secured by five vessels and OMI's interest in its 49 percent owned
joint venture.
On March 15, 2000, OMI agreed with an existing lender to finance $27,000,000 for
the new Suezmax vessel delivered on March 21, 2000. The bank Facility is for a
two year term and is secured by the vessel delivered. The Facility includes
three options to the Company to extend the term of the loan by one year for each
option or for a total of three years if all options are exercised. Under the
current terms it requires eight consecutive quarterly payments of $430,000 with
the final installment equal to the balance of the loan. The Facility bears
interest at LIBOR plus a margin of 1.75%.
On May 10, 2000, Facility C was converted from a letter of credit to a
secured-term loan of $36,000,000, which reduced Facility A by the same amount.
Facility C was initiated when ship mortgage indemnity insurance was not placed
within 90 days of the refinancing. This Facility will be repaid in six
semi-annual installments commencing six months from the refinancing. The first
four installments are $4,000,000, and the next two installments are $10,000,000.
If the amounts outstanding under Facility A and Facility C exceed 70 percent of
the market value of the vessels securing Facility A, the outstanding balance has
an interest rate of LIBOR plus a margin of 4 percent for the first six months, 6
percent for the next six months, and 8 percent thereafter, provided that each
increase in the margin will be deferred by six months if at least $8,000,000 is
prepaid by August 10, 2000.
Restrictive Covenants
Certain of the loan agreements contain restrictive covenants requiring minimum
levels of cash or cash equivalents, working capital and net worth; maintaining
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. 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. As a result
of losses on disposals/write down of assets required in the loan agreements, one
of the Company's convenants is not consistent with the requirements of the loan.
The Company's lenders are currently processing a Waiver and amendment to the
covenant to compensate for the change in vessel values for vessels scheduled for
sale.
Interest Rates
The interest rates on the 10.25% unsecured Senior Notes and 7.00% Convertible
Note are fixed. The interest rates range from 1.75% to 3.00% above London
Interbank Offering Rate ("LIBOR") on the credit facilities.
Security
At March 31, 2000, vessels and shares in a joint venture with an aggregate net
book value of $414,066,000 have been pledged as collateral for debt agreements.
8
<PAGE>
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 the conversion of the
7% convertible note due 2004.
The components of the denominator for the calculation of basic earnings per
share and diluted earnings per share are as follows:
FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------------
2000 1999
---------- ---------
(in thousands, except per share
amounts)
BASIC EARNINGS PER SHARE:
Weighted average common shares
outstanding........................................ 48,124 41,611
======= =======
DILUTED EARNINGS PER SHARE:
Weighted average common shares
outstanding........................................ 48,124 41,611
Options............................................. -- --
------- -------
Weighted average common shares
outstanding-diluted................................ 48,124 41,611
======= =======
BASIC (LOSS) EARNINGS PER SHARE:
Net (loss) income before cumulative effect
of change in accounting principle.................. $ (0.21) --
Cumulative effect of change in accounting
principle.......................................... -- $ 0.07
------- -------
Net (loss) income................................... $ (0.21) $ 0.07
======= =======
DILUTED (LOSS) EARNINGS PER SHARE:
Net (loss) income before cumulative effect
of change in account principle..................... $ (0.21) --
Cumulative effect of change in accounting
principle.......................................... -- $ 0.07
------- -------
Net (loss) income................................... $ (0.21) $ 0.07
======= =======
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 months
ended March 31, 2000 and 1999 because the effect of the average price of OMI's
stock was less than the stock conversion price of $7.285. The effect of the
assumed exercise of options was not included in the computation of diluted
earnings per share because the grant prices exceeded the average price of OMI
stock in both periods in 2000 and 1999.
NOTE 4 -- SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments include interest of approximately $4,702,000 and $5,640,000 for
the three months ended March 31, 2000 and 1999, respectively.
NOTE 5 -- JOINT VENTURE INFORMATION
Amazon Transport, Inc. is 49.0 percent owned by the Company and is accounted for
using the equity method. Summarized income statement information for the three
months ended March 31, 2000 and 1999 is as follows:
9
<PAGE>
FOR THE THREE
MONTHS ENDED MARCH 31,
--------------------------
AMAZON
--------------------------
2000 1999
-------- ---------
(in thousands)
Revenues $2,308 $1,873
Expenses 2,633 2,000
------ ------
Operating (loss) income $ (325) $ (127)
====== ======
Net (loss) income $ (287) $ (26)
====== ======
During the first quarter 2000, OMI sold its 49.9 percent investment in Geraldton
Navigation Company, Inc. to its partner. The investment was recorded in Assets
to be disposed of on the Consolidated Balance Sheet at its net realizable value
of $2,700,000 at December 31, 1999. During the quarter, a dividend was paid to
OMI of $1,209,000 and cash of $2,373,000 was received.
NOTE 6 -- 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 handysize
vessels.
The following is a summary of the operations by major operating segments:
FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------------
(in thousands) 2000 1999
--------- ---------
TOTAL REVENUES:
Crude Oil Tanker Fleet............................ $ 22,017 $24,078
Product Carrier Fleet............................. 8,799 10,835
Other............................................. -- 65
-------- -------
Total............................................ $ 30,816 $34,978
======== =======
INCOME BEFORE EQUITY IN OPERATIONS OF
JOINT VENTURES AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE:
Crude Oil Tanker Fleet............................ $ 5,194 $ 2,409
Product Carrier Fleet............................. (11,829) 378
General and administrative expense
not allocated to vessels.......................... (1,406) (1,974)
Other............................................. (1,788) (616)
-------- -------
Total.........................................(1) $ (9,829) $ 197
======== =======
- -----------
(1) The three months ended March 31, 2000 balance includes losses from the
disposition and write down of vessels and a joint venture aggregating
$13,155,000.
During the three months ended March 31, 2000 and 1999, mortgage debt of OMI
Corporation and its related interest expense have been allocated to the above
segments based upon the value of the vessel collateralizing the debt.
10
<PAGE>
NOTE 7 -- GUARANTEES AND OTHER COMMITMENTS
The Company had one remaining construction contract with a shipyard for a
Suezmax carrier with an expected capitalized cost of $51,000,000. This vessel
will be delivered during May 2000 (See Note 2)
The Company and its joint venture partner have committed to fund any working
capital deficiencies which may be incurred by the joint venture. At March 31,
2000, no such deficiencies have been funded.
NOTE 8 -- ASSETS TO BE DISPOSED OF
During March and April 2000, three product carriers were contracted for sale.
Two of these vessels were recorded on the Consolidated Balance Sheet at December
31, 1999 as Assets to be disposed of. Adjustments to the carrying amount of
these vessels aggregating $4,833,000 were recorded to loss on disposal of assets
as of March 31, 2000. The third product carrier contracted for sale in April
2000 was reclassified to Assets to be disposed of at March 31, 2000. This vessel
was written down to its sale price, which is equivalent to its net realizable
value and a charge of $4,801,000 was recorded to loss on disposal of assets. The
three vessels were delivered to their new owners in May 2000.
Additionally, during March 2000, OMI adjusted two vessels which were classified
as Assets to be disposed of at year end 1999 to reflect values of similar
vessels contracted for sale during March 2000. A charge of $3,000,000 was
recorded to loss on disposal/write down of assets-net for the three months ended
March 31, 2000.
NOTE 9 -- COMMON STOCK ISSUED
On February 11, 2000 OMI issued 599,998 shares of common stock to affiliates of
Mega Tankers Newbuilding AS, which combined with the 5,700,000 shares issued in
November 1999 aggregated 6,299,998 shares issued for $15,750,000 (at $2.50 per
share) excluding expenses of $589,000. These shares were issued in exchange for
a Suezmax construction contract. The Suezmax tanker was delivered to OMI in
March 2000 for an aggregate cost of approximately $46,900,000, of which
$27,000,000 was financed upon delivery (see Note 2).
On March 7, 2000, OMI issued 26,667 shares of common stock to three non-employee
directors for fees at $2.25 per share in lieu of cash.
On March 28, 2000, OMI sold in a private placement to four unrelated investors,
9,583,000 shares of common stock for $2.00 per share, $1.92 net of commissions.
Part of the funds received were used to pay for the newbuilding delivered in
March 2000, and the remaining funds will be used towards the delivery of the
Suezmax vessel in May 2000.
11
<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 condensed consolidated
financial statements and accompanying notes 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.
GENERAL
Overview
OMI provides seaborne transportation services primarily for crude oil and
refined petroleum. The Company is the successor to Universal Bulk Carriers,
Inc., 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. The
Company trades under the symbol "OMM" on the New York Stock Exchange.
The Company's net loss was $10.0 million or $0.21 basic loss per share
compared to net income of $2.7 million or $0.07 basic earnings per share after
the cumulative effect of the change in accounting principle of $2.7 million or
$0.07 basic earnings per share. Income excluding losses on the disposal/ write
down of assets of $13.2 million was $3.2 million or $0.07 basic earnings per
share in the first quarter 2000 before, compared to $7,000 income ($0.00 basic
earnings per share) excluding the cumulative effect of the change in accounting
principle in the first quarter 1999. OMI had shipping income of $7.0 million
(excluding losses on the disposal/write down of assets) for the three months
ended March 31, 2000 compared to $3.9 million for the three months ended March
31, 1999 (see Results of Operations).
OMI's Fleet
OMI's fleet currently comprises 20 vessels (23 vessels at March 31, 2000)
including three chartered-in vessels and one jointly owned vessel. The Company's
fleet includes four wholly owned Suezmax tankers, three chartered-in Suezmaxes,
one jointly owned Ultra Large Crude Carrier ("ULCC"), three Panamax product
tankers (currently carrying crude oil) and nine handysize product carriers
transporting clean products (not including the three which were sold and
delivered to new owners in May 2000). One Suezmax vessel is scheduled for
delivery to the Company during May 2000.
The Company also participates in marketing alliances for its Suezmax and
product carrier fleets. In 1998, OMI formed a joint venture, Alliance Chartering
LLC, with Frontline Ltd., to charter both companies' Suezmaxes. This joint
venture currently has a significant market share in the Suezmax market. In 1999,
OMI entered into a joint venture, International Product Carriers Limited ("IPC")
with Osprey Maritime Limited for midsize product tankers. This joint venture
began operations on May 1, 1999. Currently all of OMI's product carriers except
the
12
<PAGE>
two new product carriers (which are on time charter) are operating under
adjustable rate time charters with IPC.
MARKET OVERVIEW
Suezmax Tanker Overview
After a very difficult tanker market in 1999, crude tanker time charter
equivalent rates ("TCEs") increased in the first quarter of 2000 compared to the
previous quarter, as well as the same period a year ago. TCEs for modern Suezmax
tankers improved throughout the quarter and in March reached the highest level
in the last two years. The crude tanker rate improvement was the result of
increased crude oil seaborne volumes due to reduced compliance by OPEC producers
to their oil production cuts agreed in the last two years as well as a reduction
of the tanker supply from the year-end 1999 level.
The crude tanker market is expected to benefit in the short term from
increases of oil production by OPEC, in excess of that announced recently, to
accommodate the increasing world oil demand at a time when oil inventories are
at very low levels. However, for a sustained improvement of tanker freight rates
the relatively high deletions of old tanker tonnage of the first three months of
this year must continue to counteract the substantial tanker newbuilding
deliveries scheduled this year.
The following schedule presents a comparative market analysis of new
Suezmaxes. OMI's calculation accounts for 365 days on an annual basis.
Clarkson's TCE's reflect a round trip voyage and excludes waiting time.
<TABLE>
<CAPTION>
TCE for
Avg. Price Avg. Price Avg. OMI Modern
380 CST MD WS100 Fixing TCE Suezmaxes
Period $/Ton (1) $/Ton (1) $/Ton (2) WS Rate (3) $/Day (3),(4) $/Day (4)
- ------ --------- --------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1Q2000 138 271 8.93 110 24,321 22,733
1Q1999 62 139 8.82 85 19,206 20,497
</TABLE>
- ----------
(1) Average bunker prices at Philadelphia
(2) West Africa/Philadelphia
(3) West Africa/Philadelphia for early-1990's built double hull Suezmax
tankers. Rates do not include waiting time.
(4) The results for new Suezmaxes in 2000 were higher than in 1999 as a result
of a marginally higher flat rate and a higher fixing world scale rate that
more than compensated for the higher bunker prices. Rates for OMI's modern
Suezmaxes include waiting time.
Source for (1), (2), (3) - Clarkson's Shipping Intelligence Weekly
WS100 = Nominal freight scale set by the Worldscale Association (London & New
York).
380CST = Fuel oil used for vessel propulsion (bunkers).
MDO = Marine diesel oil used for vessel auxiliary machinery.
Product Tanker Overview
The product tanker market showed some seasonal improvement in the first
quarter of 2000. TCEs for handysize product tankers in the Caribbean averaged
about $9,250 day, a level that was higher than rates prevailing in the second
half last year but lower compared to the rates in the same period in 1999. The
relatively small rate improvement was the result of another warm winter, usage
of oil product inventories and product tanker fleet expansion.
13
<PAGE>
Rates for product tankers are expected to show some additional improvement
in the short term due to increasing world oil demand, including oil demand in
the Pacific region which is a major trading area for product tankers, low
petroleum product inventories and higher scrapping levels in the aftermath of
the recent breakup and sinking in Europe of an old product tanker,
notwithstanding relatively high newbuilding deliveries this year. It should be
mentioned that prospects for further gains in the product tanker market are
enhanced due to some fundamental changes in the pattern of petroleum product
trades towards long-haul movements. In addition, the three major world oil
consuming areas-the U.S., Western Europe and the Pacific region- are expected to
become more dependent on oil product imports in the next few years as oil demand
growth is expected to exceed refinery capacity in these areas.
RESULTS OF OPERATIONS
Results of operations of OMI Corporation include operating activities of
the Company's vessels. The following discussion explains the Company's operating
results in terms of net voyage revenues and TCE revenues. Net voyage revenues
are voyage revenues minus vessel and voyage expenses (including charter hire
expense). TCE revenues are voyage revenues less voyage expenses in a spot
charter or revenue from a time charter. In spot charters, voyage revenues and
expenses fluctuate 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 for 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 charterer 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.
VOYAGE REVENUES LESS VESSEL AND VOYAGE EXPENSES.
FOR THE THREE MONTHS ENDED MARCH 31, 2000 VERSUS MARCH 31, 1999
Net voyage revenues of $13.3 million for the three months ended March 31,
2000 increased by a net of $0.5 million from $12.8 million for the three months
ended March 31, 1999. Net voyage revenues for the three months ended March 31,
2000 and 1999 are as follows by market segments in which OMI primarily operates.
14
<PAGE>
For The Three Months
(in millions) Ended March 31, Percent
2000 1999 Change
----------------------------------------
Voyage Revenues:
Crude Oil Fleet $ 22.0 $ 24.0 -8%
Product Carrier Fleet 8.8 10.8 -19%
All Other 0.0 0.1 N/A
----------------------------------------
Total $ 30.8 $ 34.9 -12%
========================================
Vessel and Voyage Expenses:
Crude Oil Fleet (1) $ 13.3 $ 15.3 -13%
Product Carrier Fleet 4.2 6.7 -37%
All Other 0.0 0.1 N/A
----------------------------------------
Total $ 17.5 $ 22.1 -21%
======================================
Net Voyage Revenues:
Crude Oil Fleet $ 8.7 $ 8.7 0%
Product Carrier Fleet 4.6 4.1 12%
All Other 0.0 0.0 --
----------------------------------------
Total $ 13.3 $ 12.8 4%
========================================
- ---------
(1) Includes charter hire expenses
Net changes are discussed as follows according to the two market segments
(crude oil and product carrier) in which OMI primarily operates.
Crude Oil Tanker Fleet
AT March 31, 2000 and March 31, 1999, the crude fleet consisted of:
2000 1999
-------------------------
1990's built Suezmax vessels 4 4
1989-1990's Suezmax vessels chartered-in 3 2
1970's built Suezmax vessels 0 4
1980's built Panamax vessels 3 3
1980's built Aframax vessel 0 1
At March 31, 2000, OMI owned or operated 10 crude carriers, excluding one
aframax vessel which was sold and delivered to new owners in March 2000 and
including one new Suezmax vessel which was delivered in March 2000 and began its
first voyage in April. OMI disposed of its four older crude carriers in the
second half of 1999 and completed a sale/leaseback in June 1999 for a new
Suezmax vessel delivered January 1999.
The following table sets forth comparative operating results for the crude
oil fleet for the three months ended March 31, 2000 versus the three months
ended March 31, 1999.
15
<PAGE>
For the Three Months
(in millions) Ended March 31, Percent
CRUDE FLEET: 2000 1999 Change
-----------------------------
NEW SUEZMAXES:
TCE revenue $12.0 $10.5 15%
-----------------------------
Vessel expenses 1.7 1.5 19%
Charter hire expenses 4.6 3.2 43%
-----------------------------
Net voyage revenue $ 5.7 $ 5.8 -2%
=============================
PANAMAXES:
TCE revenue $ 3.7 $ 3.3 13%
-----------------------------
Vessel expenses 1.5 1.4 10%
Charter hire expenses 0.0 0.0 --
-----------------------------
Net voyage revenue $ 2.2 $ 1.9 15%
=============================
OLD SUEZMAXES/AFRAMAX:(SOLD IN 1999 & 2000)
TCE revenue $ 1.1 $ 4.5 -76%
-----------------------------
Vessel expenses 0.3 3.5 -91%
Charter hire expense 0.0 0.0 --
-----------------------------
Net voyage revenue $ 0.8 $ 1.0 -21%
=============================
TOTAL CRUDE FLEET NET VOYAGE REVENUE $ 8.7 $ 8.7 0%
=============================
Net Voyage revenues earned in the first quarter of both 1999 and 2000 were
$8.7 million by the crude oil fleet. Fluctuations in each of the crude groups
were as follows; increases in the Panamax net voyage revenues of $0.3 million
were offset by decreases of $0.3 million for the new Suezmaxes and vessels sold.
Although there was a net decrease of $0.1 million in the new Suezmax net voyage
revenues, TCE revenues increased $1.5 million due to better spot rates for three
of the vessels (see Market Summary). The increase was offset primarily from
additional charter hire expense of $1.4 million, which was attributed to the
vessel that was sold and leased back by the Company and increased vessel expense
of $0.3 million.
Increased earnings for the Panamax vessels was the result of better
performance due to improvement for crude oil TCEs (see Market Overview), in the
quarter ended March 31, 2000 compared to the same period 1999. TCE revenue
increased due to additional pool profits from the three vessels, which have been
time chartered into a pool operated by Heidenreich Marine Inc. in both periods.
Earnings for the quarter for the Old Suezmax/Aframax group reflect earnings
for 2000 quarter of $0.8 million primarily for the aframax vessel sold compared
to $1.0 million for the 1999 quarter which also included four older Suezmax
vessels sold in the second half of 1999 and the aframax vessel. During 1999, the
older Suezmax vessels incurred operating losses or small profits.
Product Carrier Fleet
At March 31, 2000 and March 31, 1999, the product carrier fleet consisted
of:
2000 1999
------------------
1999's built product carriers 2 0
1984-1991 built product carriers 10 10
16
<PAGE>
During 1999, two product carrier newbuildings were delivered in July and
September. During March 2000, two product carriers were contracted for sale and
another was contracted for sale in April 2000. The three vessels were delivered
to the new owners during May 2000.
The following table sets forth comparative operating results for the
product carrier fleet for the three months ended March 31, 2000 versus the three
months ended March 31, 1999.
PRODUCT CARRIER FLEET:
(in millions) For the Three Months
PRODUCTS (IPC POOL BEGINNING Ended March 31, Percent
SECOND QUARTER 1999): 2000 1999 Change
-----------------------------
TCE revenue $ 6.6 $8.1 -19%
-----------------------------
Vessel expenses 3.7 4.0 -10%
Charter hire expenses 0.0 0.0 --
-----------------------------
Net voyage revenue $ 2.9 $4.1 -28%
=============================
PRODUCTS-ON TIME CHARTER (DELIVERED
JULY, SEPT. 1999):
TCE revenue $ 2.2 $0.0 100%
-----------------------------
Vessel expenses 0.5 0.0 100%
Charter hire expense 0.0 0.0 100%
-----------------------------
Net voyage revenue $ 1.7 $0.0 100%
=============================
TOTAL PRUDUCT CARRIER FLEET NET
VOYAGE REVENUE $ 4.6 $4.1 13%
=============================
During the three months ended March 31, 1999, seven of the Company's ten
handysize product tankers were employed in the spot market and three on time
charters in a pool operated by a joint venture which terminated in mid-1999.
Effective May 1, 1999, all of the 1984-1991 built product carrier vessels were
contracted for time charters (at the conclusion of their previous charters) to a
newly formed joint venture, IPC, a marketing alliance. Time charter rates from
this venture reflect spot market rates since they are adjusted periodically with
pool profits.
Net voyage revenues decreased a net of $1.2 million in the IPC operated
vessels primarily due to the decline in TCE rates for seven product carriers
operating in the spot market in the first quarter of 1999, which have been
operating in the IPC marketing pool (earning spot rates, through adjustable time
charters with pool adjustments) in the first quarter 2000. Rates in this market
were much lower at the start of the first quarter, largely due to the imbalance
of supply and demand for refined products; however, TCE's showed significant
improvement during the latter part of the first quarter 2000 (see the Market
Summary for further explanations for fluctuations in spot rates). Increases in
TCE revenue offsetting these decreases included the earnings from three vessels
previously time chartered to a joint venture in the first half of 1999.
Increases in net voyage revenue of $1.7 million relate to earnings from two
1999 built product carriers, which were delivered in the third and fourth
quarters of 1999. The two new vessels have been operating on time charter since
their deliveries.
17
<PAGE>
OTHER OPERATING EXPENSES.
The Company's operating expenses, other than vessel, voyage and charter
hire expenses consist of depreciation and amortization, and general and
administrative expenses. For the three months ended March 31, 2000, these
expenses decreased $2.6 million to $6.3 million, in $8.9 million for the three
months ended March 31, 1999.
Decreases in operating expenses for the three months ended March 31, 2000
were primarily attributed to the nine vessels to be disposed of that were not
depreciated during the first quarter of 2000. Decreases in depreciation expense
were offset in part by increases from depreciation expense on the two product
carriers delivered in 1999.
LOSS ON DISPOSAL/WRITE DOWN OF ASSETS-NET.
Loss on disposal/write down of assets-net was $13.2 million for the three
months ended March 31, 2000. A vessel contracted for sale in April 2000 was
reclassed on the financials to Assets to be disposed of and written down to its
net realizable value as of March 31, 2000 resulting in a loss of $4.8 million.
Losses aggregating $7.8 million for four vessels previously classified as Assets
to be disposed of at December 31, 1999, two of which were contracted for sale in
March 2000, were adjusted. Additionally, a loss from the sale of a joint venture
in the first quarter 2000 of $0.5 million was recorded.
OTHER INCOME (EXPENSE).
Other income (expense) consists of net interest expense and other-net. Net
other expense decreased by $15,000 from $3.7 million during the three months
ended March 31, 1999.
Net Interest expense increased $1.4 million for the three months ended
March 31, 2000 compared to the three months ended March 31, 1999. The increases
were primarily due to interest expense on additional borrowings to finance two
product carrier newbuildings delivered in 1999, and the corresponding reduction
of capitalized interest, in addition to increased interest rate margins after
the refinancing of debt in February 2000 (see Financing Activities).
Other-net of $1.4 million was primarily attributed to the settlement of
various insurance claims from prior years.
EQUITY (LOSS) IN OPERATIONS OF JOINT VENTURES.
Equity (loss) in operations of joint ventures increased $49,000 for the
three months ended March 31, 2000 compared to the three months ended March 31,
1999. OMI currently participates in one vessel-owning joint venture, which
operates a ULCC vessel. Rates for the ULCC vessel increased in the first quarter
2000; however, bunker price increases have lowered such earnings. Two joint
ventures operating in the first quarter 1999 have been sold.
During the first quarter of 2000, OMI sold its 49.9 percent investment in
Geraldton Navigation Company Inc. ("Geraldton") to its partner. An adjustment
for an additional loss of $0.5 million was recorded for the three months ended
March 31, 2000 relating to the disposal of this venture for which the Company
received $2.4 million. Also during the quarter, a dividend was paid to OMI of
$1.2 million.
18
<PAGE>
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
During the second quarter of 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 in 1999 as a
cumulative effect of change in accounting principle. The financial statements
for the period ended March 31, 1999 have been restated giving effect to the
cumulative effect of the change in accounting principle for recognizing voyage
freight for vessels operating on voyage charters from the load-to-load basis to
the discharge-to-discharge basis effective January 1, 1999.
BALANCE SHEET
Assets to be disposed of of $87.4 million at March 31, 2000 decreased by a
net of $3.5 million from its year-end December 31, 1999 balance. One vessel,
which was sold in May 2000, increased Assets to be disposed of by $11.2 million
at March 31, 2000, as discussed below. Four vessels included in this
classification at year-end were adjusted to further decrease their net
realizable values by $7.8 million (two of these vessels were sold in May 2000
and adjusted to their sales prices at March 31, 2000). The aframax vessel sold
in March 2000, decreased Assets to be disposed of by $4.2 million and related
debt currently due by $3.1 million. Cash of $2.4 million was received for the
investment to be disposed of and the remaining balance of $0.3 million was
reclassified to receivables.
Assets to be disposed of increased by $11.2 million for the vessel
contracted for sale in April 2000 and delivered to new owners in May. The
following fluctuations in the Condensed Consolidated Balance Sheet relate to the
reclassification in and write down of the vessel to its net realizable value,
which was equivalent to its sales price less expense. Variances from year-end
1999 include decreased Vessels by $24.6 million, Accumulated depreciation by
$10.6 million, Other assets and deferred charges for goodwill and prepaid
drydock of $2.0 and decreased equity by $4.8 million.
On February 11, 2000 OMI issued 599,998 shares of common stock to
affiliates of Mega Tankers Newbuilding AS, which combined with the 5,700,000
shares issued in November 1999 aggregated 6,299,998 shares issued for $15.8
million (at $2.50 per share) excluding expenses of $0.6 million. These shares
were issued in exchange for a Suezmax construction contract. The Suezmax tanker
was delivered to OMI in March 2000 for an aggregate cost of approximately $46.9
million (including previous capitalized costs of $14.4 million included in
Construction in progress at year-end 1999), of which $27.0 million was financed
upon delivery (see Financing Activities).
On March 28, 2000, OMI sold in a private placement to four unrelated
investors, 9,583,000 shares of common stock for $2.00 per share, $1.92 net of
commissions.
During February 2000, MTC paid OMI $5.1 million for a note, which was due
in November 2003 in exchange for a discount. At December 31, 1999, the note
receivable of $5.1 million was included with Other receivables in current
assets.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash and cash equivalents of $29.5 million at March 31, 2000 increased
$22.1 million from cash and cash equivalents of $7.4 million at December 31,
1999. The Company's working capital of $58.1 million at March 31, 2000 increased
$14.1 million from working capital of $44.0 million at December 31, 1999.
Current assets increased $14.8 million primarily because of the increases in
cash and cash equivalents. Cash increased primarily by financing activities such
as new equity through the issuance of common stock of $17.8 million. Net cash
provided by operating activities decreased $4.1 million to $1.7 million for the
three months ended March 31, 2000 compared to net cash provided by operating
activities of $5.8 million for the three months ended March 31, 1999 (see
Results of Operations).
19
<PAGE>
The Company operates in a capital-intensive industry and augments cash
generated by operating activities with debt and sales of non-core
vessels/assets. Cash used by investing activities was $21.1 million for the
three months ended March 31, 2000, which decreased $20.5 million from cash used
by investing activities of $41.6 million for the three months ended March 31,
1999. Cash used by investing activities decreased in the first quarter 2000
primarily due to reductions in additions to vessels of $9.9 million, $5.8
million of the decrease resulted from the delivery of a new Suezmax vessel in
January 1999 with payments aggregating $38.3 million compared to the 2000
delivery of a new Suezmax vessel with payments aggregating $32.5 million. The
remaining balance for 1999 additions to vessels was higher in the first quarter
1999 than the first quarter 2000 due to higher capitalized cost for three
vessels under construction. Proceeds of $12.0 million received in the first
quarter 2000 also attributed to decreases in the cash used for investing
activities. These proceeds were from the disposal of OMI's aframax vessel of
$4.5 million in March 2000, proceeds of $5.1 million received from the repayment
of a note receivable and proceeds of $2.4 million received for the sale of a
joint venture.
FINANCING ACTIVITIES
Cash provided by financing activities was $41.5 million for the three
months ended March 31, 2000, compared to $36.5 million for the three months
ended March 31, 1999. In the first quarter of 2000, there were $6.1 million in
principal payments ($3.1 million from the sale of the aframax vessel) on
long-term and short-term debt and $27.0 million in proceeds from borrowings used
for the purchase of the new Suezmax vessel. In February 2000, the Company
finalized its refinancing of bank debt with its lenders in the amount of $264.5
million, which resulted in payments of $257.9 million on long and short-term
debt related to the refinancing in the first quarter 2000. The effect of the
refinancing revised debt covenants, increased interest rate margins and reduced
principal amortization.
During the three months ended March 31, 2000, OMI raised $17.8 million in
cash by selling 9,583,000 shares of OMI common stock in a private placement. A
portion of the funds received, were used to pay for the newbuilding delivered in
March 2000, and the remaining funds will be used towards the delivery of the
Suezmax vessel in May 2000.
On February 11,2000, OMI completed its refinancing with its previous
lenders for a credit agreement in the amount of $264.5 million. There are three
primary facilities under the new agreement. Facility A matures five years from
drawdown date, and the balance was $218.0 million from February 11, 2000 until
May 10, 2000. On May 10, 2000, Facility A was reduced by $36.0 million to $182.0
million when Facility C was drawn down. Facility A will be repaid in ten
semi-annual installments commencing six months from the drawdown date, the first
four installments in the amount of $1.0 million, the next two installments in
the amount of $2.5 million and the remaining four installments in the amount of
$12.5 million, in addition to a balloon payment in the amount of $123.0 million
as the last installment on maturity. The outstanding balance of this Facility
bears interest at LIBOR plus a margin of 1.75% and is secured by thirteen
vessels at March 31, 2000. Facility B was in the amount of $46.5 million ($43.4
million at March 31, 2000) and is a short-term facility which matures two years
after the drawdown date. The principal of this Facility will be repaid with
proceeds on the sale of vessels secured by this facility, which are classified
as vessels to be disposed of on the Condensed Consolidated Balance Sheets at
March 31, 2000. The outstanding balance of this Facility bears interest at LIBOR
plus a margin of 3% and is secured by five vessels and OMI's interest in its 49
percent owned joint venture.
On May 10, 2000, Facility C was converted from a letter of credit to a
secured-term loan of $36.0 million which reduced Facility A by the same amount.
Facility C was initiated when the ship mortgage indemnity insurance was not
placed within 90 days of the refinancing. This Facility will be repaid in six
semi-annual installments commencing six months from the refinancing. The first
four installments are $4.0 million, and the next two installments are $10.0
million.
20
<PAGE>
If the amounts outstanding under Facility A and Facility C exceed 70 percent of
the market value of the vessels securing Facility A, the outstanding balance has
an interest rate of LIBOR plus margins of 4 percent for the first six months, 6
percent for the next six months, and 8 percent thereafter, provided that each
increase in the margin will be deferred by six months if at least $8.0 million
is prepaid by August 10, 2000.
During May 2000, the three vessels sold had mortgages under Facility A of
the new credit agreement aggregating $31.8 million. Upon the delivery to new
owners, this cash was deposited in a cash collateral account as required for the
substitution of debt under the agreement for the delivery of the Suezmax vessel
on May 17, 2000.
On March 15, 2000, an existing lender agreed to finance $27.0 million for
the new Suezmax vessel delivered on March 21, 2000. The bank Facility is for a
two-year term and is secured by the vessel delivered. The Facility includes
three options to the Company to extend the term of the loan by one year for each
option or for a total of three years if all options are exercised. Under the
current terms it requires eight consecutive quarterly payments of $430,000 with
the final installment equal to the balance of the loan. The Facility bears
interest at LIBOR plus a margin of 1.75%.
At March 31, 2000, vessels and shares in a joint venture with an aggregate
net book value of $414.1 million have been pledged as collateral for debt
agreements.
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 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. 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. As a result
of losses on disposals/write down of assets required in the loan agreements, one
of the Company's convenants is not consistent with the requirements of the loan.
The Company's lenders are currently processing a Waiver and amendment to the
covenant to compensate for the change in vessel values for vessels scheduled for
sale.
OTHER COMMITMENTS
The Company has one remaining construction contract with a shipyard for a
Suezmax carrier with an expected capitalized cost of $51,000,000. This vessel
will be delivered May 17, 2000 and the remaining payments of approximately $39.6
million will be financed from existing debt and cash received from new equity.
The Company and its joint venture partner have committed to fund any
working capital deficiencies that may be incurred by the joint venture. As of
March 31, 2000, no such deficiencies have been funded.
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.
21
<PAGE>
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 March 31, 2000, the majority of the $295.3 million debt
was floating rate debt, which totaled $288.4 million. A one-percent increase in
the floating rate would increase interest expense by $2.9 million per year.
The fixed rate debt on the balance sheet and the fair market value were
$6.9 million as of March 31, 2000. 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 $0.1 million.
The Company has an interest rate swap agreement to manage its exposure with
interest rates by locking in fixed interest rate from floating rates. At March
31, 2000, there was one swap with at notional principal of $10.0 million, and it
would cost approximately $0.1 million to terminate the agreement.
22
<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 March 31,
2000.
b. REPORTS ON FORM 8-K
As filed on May 11, 2000.
23
<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: MAY 15, 2000 BY: /s/ CRAIG H. STEVENSON, JR.
- ------------------------- ------------------------------------------
Craig H. Stevenson, Jr.
President, Chairman of the Board
and Chief Executive Officer
DATE: MAY 15, 2000 BY: /s/ VINCENT DE SOSTOA
- ------------------------- ------------------------------------------
Vincent de Sostoa
Senior Vice President and
Chief Financial Officer
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27 contains summary information extracted from OMI Corporation and
subsidiaries Condensed Consolidated 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 29,525
<SECURITIES> 0
<RECEIVABLES> 14,803
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 135,993
<PP&E> 368,293
<DEPRECIATION> 35,842
<TOTAL-ASSETS> 505,526
<CURRENT-LIABILITIES> 77,906
<BONDS> 237,722
0
0
<COMMON> 29,802
<OTHER-SE> 151,374
<TOTAL-LIABILITY-AND-EQUITY> 505,526
<SALES> 0
<TOTAL-REVENUES> 30,816
<CGS> 0
<TOTAL-COSTS> 17,506
<OTHER-EXPENSES> 6,262
<LOSS-PROVISION> 13,155
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<NET-INCOME> (9,970)
<EPS-BASIC> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
