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, 1996
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
----------------------
2-87930
OMI CORP.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2625280
--------------------------- ----------------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
90 Park Avenue, New York, N.Y. 10016
------------------------------ ----------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (212) 986-1960
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 14, 1996:
Common Stock, par value 0.50 per share 31,150,515 shares
<PAGE>
OMI CORP. AND SUBSIDIARIES
INDEX
PART I: FINANCIAL INFORMATION Page
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations for the three and six months
ended June 30, 1996 and 1995 3
Condensed Consolidated Balance Sheets-
June 30, 1996 and December 31, 1995 4
Consolidated Statement of Changes in
Stockholders' Equity for the six months
ended June 30, 1996 5
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II: OTHER INFORMATION 16
SIGNATURES 17
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<PAGE>
OMI CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1995 1996 1995
--------- --------- --------- ---------
Revenues:
Voyage revenues $ 59,207 $ 60,806 $ 119,494 $ 116,269
Other income 2,075 1,357 3,626 2,884
--------- --------- --------- ---------
Total revenues 61,282 62,163 123,120 119,153
--------- --------- --------- ---------
Operating Expenses:
Vessel and voyage 46,015 52,329 89,863 102,034
Depreciation and amortization 8,181 8,499 16,247 17,192
Operating lease 1,360 755 2,963
General and administrative 3,585 3,842 7,329 7,713
--------- --------- --------- ---------
Total operating expenses 57,781 66,030 114,194 129,902
--------- --------- --------- ---------
Operating income (loss) 3,501 (3,867) 8,926 (10,749)
--------- --------- --------- ---------
Other Income (Expense):
Gain (loss) on disposal of
assets-net 3,745 (1,128) 3,601 6,235
Interest expense-net (6,658) (6,214) (13,143) (12,704)
Minority interest in (income)
loss of subsidiary (43) (22) (93) 119
Other-net 458 556 883
--------- --------- --------- ---------
Net other expense (2,956) (6,906) (9,079) (5,467)
--------- --------- --------- ---------
Income (loss) before income taxes
and equity in operations of
joint ventures 545 (10,773) (153) (16,216)
Provision (benefit) for
income taxes 45 (3,397) (367) (5,195)
--------- --------- --------- ---------
Income (loss)before equity in
operations of joint ventures 500 (7,376) 214 (11,021)
Equity in operations of joint
ventures-net 175 2,080 1,066 4,599
--------- --------- --------- ---------
Net income (loss) $ 675 $ (5,296) $ 1,280 $ (6,422)
========= ========= ========= =========
Net income (loss) per
common share $ 0.02 $ (0.17) $ 0.04 $ (0.21)
========= ========= ========= =========
Weighted average number of shares
of common stock outstanding 31,499 30,533 31,351 30,510
========= ========= ========= =========
See notes to condensed consolidated financial statements.
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<PAGE>
OMI CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
ASSETS (UNAUDITED)
Current assets:
Cash, including cash equivalents: 1996-
$3,545, 1995-$26,008 $ 17,265 $ 32,569
Advances to masters 2,519 2,033
Receivables:
Traffic 9,721 12,016
Other 12,109 9,333
Income tax refund receivable 5,651 5,651
Prepaid expenses and other current assets 4,385 5,937
Vessel held for sale 14,668
-------- --------
Total current assets 51,650 82,207
-------- --------
Capital construction and other restricted funds 9,857 9,765
Vessels and other property, at cost 633,898 646,135
Less accumulated depreciation (278,481) (277,694)
-------- --------
Vessels and other property-net 355,417 368,441
-------- --------
Investments in, and advances to joint ventures 84,891 84,915
Cash held in escrow 14,919
Other assets and deferred charges 21,256 20,158
-------- --------
Total $537,990 $565,486
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 23,000
Accounts payable 4,872 $ 5,187
Accrued liabilities:
Voyage and vessel 23,730 24,548
Interest 3,660 4,375
Lease termination costs 22,000
Other 1,979 4,169
Current portion of long-term debt 10,306 24,582
-------- --------
Total current liabilities 67,547 84,861
-------- --------
Long-term debt 250,924 259,284
Deferred income taxes payable ` 62,651 63,082
Advance time charter revenues and other
liabilities 7,261 10,470
Minority interest in subsidiary 2,468 2,594
Stockholders' equity 147,139 145,195
-------- --------
Total $537,990 $565,486
======== ========
See notes to condensed consolidated financial statements.
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<PAGE>
OMI CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Unrealized
Unearned Gain (Loss)
Cumulative Compensation on Total
Common Stock Capital Retained Translation Restricted Securities Treasury Stockholders'
Shares Amount Surplus Deficit Adjustment Stock -Net Stock Equity
------ ------ ------- ------- ---------- ----- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 31,042 $ 15,521 $131,622 $ (5,265) $ 4,912 $ (1,404) $ 29 $ (220) $ 145,195
Net income 1,280 1,280
Common stock issued 108 54 508 562
Amortization of unearned
compensation 222 222
Net change in valuation
account (120) (120)
------- -------- -------- -------- -------- -------- ------- -------- ----------
Balance at June 30, 1996 31,150 $ 15,575 $132,130 $ (3,985) $ 4,912 $ (1,182) $ (91) $ (220) $ 147,139
======= ======== ======== ======== ======== ======== ======= ======== ==========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
OMI CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
FOR THE SIX MONTHS
ENDED JUNE 30,
1996 1995
-------- --------
CASH FLOWS (USED)PROVIDED BY OPERATING ACTIVITIES:
Net income (loss) $ 1,280 $ (6,422)
-------- --------
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Deferred income taxes (317) (5,195)
Depreciation and amortization 16,247 17,192
Amortization of unearned compensation 222 388
Gain on disposal of assets-net (3,510) (6,322)
Other - net (556) (883)
Equity in operations of joint ventures
over dividends received (291) (3,399)
Changes in assets and liabilities:
Receivables and other current assets 586 (4,637)
Accounts payable and accrued liabilities (26,802) (396)
Advances from joint ventures & affiliates - net 315 2,585
Other assets and deferred charges (77) 935
Advance charter hire and other liabilities (293) (2,144)
Other assets and liabilities - net 6 1,007
-------- --------
Total adjustments (14,470) (869)
-------- --------
Net cash used by operating activities (13,190) (7,291)
-------- --------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Additions to vessels and other property (10,520) (15,319)
Proceeds/payments from sale of marketable securities (104) 8,938
Proceeds from disposal of assets 29,622 13,535
Proceeds and interest received and reinvested in the
Capital construction and other restricted funds (352) (224)
Withdrawals from Capital construction and other
restricted funds 4,700
-------- --------
Net cash provided by investing activities 18,646 11,630
-------- --------
CASH FLOWS (USED) PROVIDED BY FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 541 137
Proceeds on notes payable to banks 23,000
Proceeds from issuance of long-term debt 9,257
Payments on long-term debt (44,301) (16,200)
-------- --------
Net cash used by financing activities (20,760) (6,806)
-------- --------
Net decrease in cash and cash equivalents (15,304) (2,467)
Cash and cash equivalents at beginning of period 32,569 31,797
-------- --------
Cash and cash equivalents at end of period $ 17,265 $ 29,330
======== ========
See notes to condensed consolidated financial statements.
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<PAGE>
OMI CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 Corp. 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.
Note 2 - Income Taxes
The provision (benefit) for income taxes for the three and six months ended June
30, 1996 and 1995 varies from statutory rates as follows:
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
(in thousands) 1996 1995 1996 1995
---- ---- ---- ----
Provision (benefit) calculated at
statutory rates $ 252 $(3,042) $ 320 $(4,066)
Adjustment for equity in operations
of certain joint ventures (207) (355) (687) (1,129)
----- ------- ----- -------
Provision (benefit) $ 45 $(3,397) $(367) $(5,195)
===== ======= ===== =======
The Company has not provided 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.
Note 3 - Supplemental Cash Flow Information
Cash payments include interest of approximately $14,764,000 and $13,813,000 for
the six months ended June 30, 1996 and 1995, respectively. There were no income
taxes paid during the six months ended June 30, 1996 or June 30, 1995.
In March 1996 the Company delivered a vessel with a book value of $16,537,000 to
new owners as part of an exchange transaction. Cash in the amount of $14,820,000
was received and was held in an escrow account until the delivery of the vessel
on July 17, 1996 to the Company which completed the exchange transaction. The
vessel acquired in the transaction was previously owned by Mosaic Alliance
Corporation ("Mosaic"), a company 49.9 percent owned by OMI.
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<PAGE>
Note 4 - Joint Venture Information
Amazon and Wilomi, Inc. ("Wilomi") are both 49 percent owned by OMI and are
accounted for using the equity method.
Summarized income statement information for the three and six months ended June
30, 1996 and 1995 for Amazon and Wilomi are as follows:
<TABLE>
<CAPTION>
For the Three Months Ended June 30, For the Six Months Ended June 30,
----------------------------------- ---------------------------------
Amazon Wilomi Amazon Wilomi
------ ------ ------ ------
(In thousands) 1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 2,154 $ 2,084 $ 5,792 $ 4,184 $ 4,232 $ 4,758 $11,104 $ 9,519
Expenses 3,332 2,568 3,590 3,509 7,047 5,176 7,293 6,640
------- ------- ------- ------- ------- ------- ------- -------
Operating (loss)
income (1,178) (484) 2,202 675 (2,815) (418) 3,811 2,879
------- ------- ------- ------- ------- ------- ------- -------
Net (loss)
income $ (1,130) $ (460) $ 1,186 $ (713) $(2,717) $ (369) $ 2,379 $ 251
======== ======= ======= ======= ======= ======= ======= =======
</TABLE>
Note 5 - Credit Lines/Loan Agreements
On July 12, 1996, OMI completed its cash tender offer for the purchase at par of
its $136,950,000 outstanding aggregate principal 10 1/4 percent unsecured Notes
("Notes") due 2003. Of the $136,950,000 outstanding aggregate amount of Notes,
$130,123,000 was tendered for payment pursuant to the offer and $6,827,000
remain outstanding. An extraordinary loss (net of the tax benefit) of
approximately $3,000,000 or $.10 per share will be recorded in the third quarter
for the extinguishment of debt. The purchase of the Notes was financed by a new
credit facility described below.
In addition, prior to July 12, 1996, the Company had two $10,000,000 line of
credit facilities. In conjunction with the negotiation of the new credit
facility described below, these lines were terminated. The Company also had a
revolving credit/term loan agreement providing for a credit facility of up to
$37,000,000 secured by three vessels. This loan was included as part of the new
credit agreement.
In July 1996 the Company signed a $167,750,000 credit agreement with two foreign
banks as co-arrangers. This new credit agreement, which matures in 18 months,
requires two equal semi-annual installments of $7,500,000 until January 1998
when all of the remaining balance is due. The credit agreement bears interest at
a rate of LIBOR plus 1 3/4 percent until December 31, 1996 when the rate
increases to LIBOR plus 2 1/2 percent unless OMI has made aggregate principal
repayments of at least $67,500,000 on or before such date. The Company repaid
$6,827,000 (equal to the amount of Notes not tendered) of such outstanding
principal amounts on July 18, 1996.
The new credit agreement is secured by first priority mortgages and
assignment of earnings on 13 vessels, second priority mortgages on six other
vessels and a first priority pledge of the Company's equity ownership interests
in OMI Petrolink Corporation, Amazon, Wilomi, and White Sea. Further, OMI's
equity ownership interests in Mosaic and Geraldton Navigation Co. Inc. may not
be pledged to secure other borrowings. The facility calls for a commitment fee
of .75% per annum payable monthly on the total credit. The agreement requires
maintenance of certain financial ratios and other restrictive covenants,
including restrictions on payment of dividends.
-8-
<PAGE>
Note 6 - Guaranteed Debt
OMI acts as a guarantor for a portion of the debt incurred by joint ventures
with affiliates of two of its joint venture partners. Such debt was
approximately $86,555,000 at June 30, 1996, with OMI's share of such guarantees
being approximately $42,580,000. OMI also is a guarantor for one of its joint
venture's revolving lines of credit of $4,000,000, with a guarantee to OMI from
its joint venture partner of $2,000,000.
The Company and its joint venture partners have committed to fund any working
capital deficiencies which may be incurred by their joint venture investments.
At June 30, 1996, no such deficiencies have occurred which have required
funding.
Note 7 - Newly Issued Accounting Standard
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Awards of
Stock-Based Compensation to Employees," which was adopted by the Company
effective January 1, 1996. SFAS No. 123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages (but does
not require) compensation cost to be measured based on the fair value of the
equity instrument awarded. Companies are permitted, however, to continue to
apply APB Opinion No. 25 "Accounting for Stock Issued to Employees" which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 to its
stock based compensation awards to employees and will disclose the required pro
forma effect on net income and earnings per share.
Note 8 - Contingent Sale
The Company contracted in 1995 to sell the OMI HUDSON along with two other
vessels and its interest in Ocean Specialty Tankers Corporation to Hvide Marine,
Inc. ("Hvide") for $64,650,000. OMI will receive approximately $30,000,000 in
cash from the sale. Of the cash proceeds, $12,775,000 will be placed in an
escrow account for use in acquiring another vessel. Hvide will assume
$34,650,000 of debt. Approximately $8,000,000 of the cash received will be used
to repay debt. The sale is contingent upon Hvide successfully completing an
initial public offering of its common stock which is expected to be accomplished
in August 1996.
-9-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OMI Corp. ("OMI" or the "Company") is a major bulk shipping company operating 38
vessels including eight joint venture vessels and four chartered-in vessels. The
fleet comprises three domestic chemical/product carriers, 16 product carriers
(five domestic vessels, ten foreign vessels and one jointly owned vessel), four
dry bulk carriers (one domestic vessel and three jointly owned vessels), 14
crude oil tankers (six foreign vessels, four jointly owned vessels, one vessel
chartered by a foreign subsidiary and three vessels chartered by a domestic
subsidiary) and one foreign liquid petroleum gas carrier. A Suezmax tanker is
currently under construction and scheduled for delivery this year to a 49
percent owned joint venture. The Company also is involved in other marine
related activities, including lightering of crude carriers and workboat supply
services in the Gulf of Mexico and ship management for the U.S. Government Ready
Reserve Fleet.
OVERVIEW
During 1996, OMI earned net income of $0.04 per share for the six months and
$0.02 per share for the three months ended June 30, 1996, compared to a net loss
of $(0.21) per share and $(0.17) per share for the six and three months ended
June 30, 1995. Results in the past years have suffered primarily as a result of
the decline in revenues earned by the U.S. flag fleet. Consequently, over the
past two years, the Company has sold or contracted for sale certain assets,
primarily U.S. flag vessels. During the first quarter of 1996, OMI delivered two
U.S. flag dry bulk carriers to new owners and currently has an agreement to sell
three U.S. flag chemical/product carriers to Hvide Marine Inc. ("Hvide") to be
delivered in August 1996, contingent upon the completion of Hvide's public
offering of common stock.
The Company believes that the opportunities for future acquisitions are more
favorable in the international market and is focusing its efforts on its foreign
fleet. In line with OMI's current strategy to focus on product carriers and
Suezmax tankers, the Company disposed of three older foreign flag vessels in
1995; one combination carrier, a Panamax crude oil carrier and a product
carrier. Three 30,000 dwt. product carriers were acquired in the third and
fourth quarters of 1995. In June 1996, OMI sold a 1978 built VLCC for a gain.
OMI's foreign fleet comprises product carriers and crude oil tankers,
predominantly Suezmax tankers. OMI owns ten foreign flag product carriers of
which five vessels operate on time charters and the remaining vessels operate in
the spot market. The market for product carriers has been more stable than the
Suezmax tanker market, although the opportunity to earn higher rates is greater
in the Suezmax tanker market. The average six month 1996 rate in the product
carrier market is stronger than the average annual 1995 rate. This increase is
partially due to the increased world demand for refined petroleum products.
The tanker market has been highly volatile since the late 1980's when new
tonnage was delivered into an improving tanker market. At the same time, the
strong tanker market discouraged scrapping of older vessels. In 1992, as a
result of the supply in the tanker market and a global recession, tanker rates
declined and have continued to be volatile over the last few years. Beginning
mid - 1995, rates in the tanker market are improving as a result of increased
demand for oil due to higher economic growth and low oil inventories. Typically,
rates in the tanker market increase in the third and fourth quarters due to
increases in demand for oil in preparation for the winter months. Rates are
expected to continue to improve into 1997, although there is no assurance that
this will occur.
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<PAGE>
The OMI Columbia, OMI's largest domestic vessel, began operating under a seven
year time charter for a major oil company in the Alaskan oil trade in May 1996.
Two other U.S. flag vessels, the Patriot and the Courier are on time charter to
the Military Sealift Command ("MSC") until 1997. The Ranger, a sister vessel,
was laid up in July 1996 due to the lack of profitable charters. The Company is
currently evaluating offers from potential buyers for this vessel. A U.S. flag
bulk carrier, the Platte, is also laid up while the Company is seeking
permission to reflag the vessel.
Operating results improved in 1996 for OMI's 83 percent owned subsidiary OMI
Petrolink Corporation ("Petrolink") a Houston-based subsidiary in the business
of lightering large crude oil carriers and operating an offshore supply boat
business. In 1995, increased competition in the lightering business caused a
decrease in both volume and rates which resulted in operating losses. The
company reduced the number of vessels it charters from six to three,
renegotiated the rates paid for the ships it charters-in and increased
utilization of its supply boats, resulting in profits for the six months ended
June 30, 1996.
Results of Operations
Results of operations of OMI include operating activities of the Company's
domestic and foreign vessels. The discussion that follows explains the Company's
operating results in terms of net voyage revenue, which is voyage revenue less
vessel and voyage expenses, 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 operating expenses, such
as fuel and port charges. Under a bareboat charter, the charterer assumes all
operating expenses. The revenue rate is likely to be lower than a time charter
since the costs are assumed by the charterer. Under a voyage charter, revenue is
calculated based on the amount of cargo carried, most expenses are for the ship
owner'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 revenue for voyage charters are
waiting time between cargoes, port costs, fuel price and consumption.
Vessel expenses included in net voyage revenue discussed above include operating
expenses such as crew payroll/benefits/travel, stores expense, maintenance and
repair expense, drydock expense, insurance expense and miscellaneous vessel
expenses. These expenses are a function of the fleet size, utilization levels
for certain expenses and 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.
Results of Operations for the Six and Three Months Ended June 30, 1996 versus
June 30, 1995
Voyage Revenue less Vessel and Voyage Expenses
Net voyage revenues of $29,631,000 for the six months ended June 30, 1996
increased $15,396,000 or 108 percent as compared to net voyage revenues of
$14,235,000 for the six months ended June 30, 1995. The net increase was
primarily attributable to the U.S. flag fleet, which accounted for $12,642,000
of the increase. Net increases in 1996 domestic operations primarily resulted
from the following: (i) the OMI Columbia operated on a time charter in 1996 at
higher rates with no offhire days
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<PAGE>
compared to 71 idle days in the first six months of 1995, (ii) two vessels, the
Patriot and the Courier, are currently operating on time charters with MSC; in
1995 these vessels were offhire an aggregate of 107 days while in drydock in
preparation for these long-term charters, (iii) the OMI Star was purchased in
June 1995, thus eliminating expenses of chartering-in this ship, (iv) the Platte
earned more revenue in 1996 due to 42 more operating days in 1996 compared to
1995 (however, the vessel has still incurred losses in 1996) and (v) results of
operations of Petrolink improved in 1996. Increases in domestic operations were
offset in part by decreases in net voyage revenue which had been contributed by
two dry bulk carriers that were sold in the first quarter of 1996.
Net increases of $2,754,000 in 1996 foreign net voyage revenues resulted from
improved international market conditions primarily in the crude oil market.
Increases in revenue were offset, however, by increases in fuel expenses as
compared to the first half of 1995. Other increases in foreign net voyage
revenue were from revenue generated from a product carrier acquired in November
1995. Increases in net voyage revenue were offset in part by decreases in net
voyage revenue resulting from the sale of a vessel in June 1995.
Net voyage revenues of $13,192,000 for the three months ended June 30, 1996
increased $4,715,000 or 56 percent as compared with $8,477,000 for the three
months ended June 30, 1995. The net increase in the domestic fleet of $3,984,000
was primarily attributable to the OMI Columbia, which accounted for $1,635,000
of the increase. Other domestic increases were due to increased revenue for the
Platte which was idle for 18 less days in 1996 compared to 1995 and improvement
in the results of operations of Petrolink. The net increase in the foreign fleet
of $731,000 was due to higher rates for crude oil tankers than rates in the
comparable period in 1995 and net voyage revenue generated from a vessel
acquired November 1995. The increases were offset in part by decreases in net
voyage revenue from the sale of the two dry bulk carriers in the first quarter
of 1996 and the sale of a foreign vessel in June 1995.
Other Income
Other income consists primarily of management fees and dividend income earned on
investments. During the six months ended June 30, 1996, other income increased
$742,000 or 26 percent to $3,626,000 from $2,884,000 for the same period in
1995. The increase in 1996 was primarily from fees received from the U.S.
government for the management of ten vessels in 1996 versus six vessels in 1995.
Increases were offset in part by decreases in management fees from two joint
ventures, one which is currently being managed by OMI's joint venture partner
and the other is being managed by a contracted technical manager.
For the second quarter 1996 other income increased $718,000 or 53 percent to
$2,075,000 from $1,357,000 for the same period in 1995.
Other Operating Expenses
The Company's operating expenses, other than vessel and voyage expenses, consist
of depreciation and amortization, operating lease expense and general and
administrative expenses. For the six months ended June 30,1996, these expenses
decreased an aggregate of $3,537,000 or 13 percent. The primary reason for the
decrease was the reduction of operating lease expense of $2,208,000 after the
purchase of the OMI Hudson from its lessor in February 1996. Depreciation
expense declined by $945,000 as a result of the disposal of two dry bulk
carriers in 1996, the disposal of a vessel in June 1995 and the write-down of
the carrying value of two vessels in December 1995 to recognize impairment
losses. The decreases in depreciation expense were offset, in part, by
depreciation on two vessels acquired in 1995 and depreciation on the OMI Hudson.
Decreases in general and
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<PAGE>
administrative expenses of $384,000 include a decline in employee salaries and
benefits of approximately $568,000 for a charge for employees electing to
terminate their employment under a voluntary severance program in the first
quarter of 1995. Such decreases were offset in part by increases in professional
fees for legal and consulting services.
For the three months ended June 30, 1996, other operating expenses decreased an
aggregate of $1,935,000 or 14 percent. The primary reasons for the decrease
were due to a reduction of operating lease expense of $1,360,000, net decreases
in depreciation expense of $318,000 and decreased general and administrative
expenses of $257,000.
Other Income (Expense)
Other income (expense) consists of gain (loss) on disposal of assets-net,
interest expense-net, minority interest in (income) loss of subsidiary and
other-net. The net decrease of $3,612,000 or 66 percent in net other expense for
the six months ended June 30, 1996 compared to the same period in 1995 was
primarily due to the decrease in gain on disposal of assets. In 1995, 2,503,389
shares of Noble Drilling Corporation stock were sold for a gain of $7,806,000
which was offset by the loss on sale of a foreign vessel in June 1995 of
$1,428,000. A gain of $3,660,000 was recorded in 1996 for the sale of a vessel
in June. Interest expense increased $376,000 or three percent due to interest
related to drawdowns on lines of credit aggregating $23,000,000 during the six
months ended June 30, 1996. An additional increase in net other expense was due
to an increase in minority interest in Petrolink, corresponding to the improved
operating results for that company in 1996.
For the three months ended June 30, 1996, net other expense decreased $3,950,000
or 57 percent, primarily resulting from the disposal of a vessel in June 1996
for a $3,660,000 gain compared to the loss on disposal of $1,428,000 in June
1995.
Benefit for Income Taxes
The benefit for income taxes of $367,000 and $5,195,000 for the six months ended
June 30, 1996 and 1995, respectively, varied from statutory rates primarily
because deferred taxes are not recorded for equity in operations of joint
ventures, net of dividends declared, other than Amazon Transport, Inc.
("Amazon") and White Sea Holdings, Ltd. ("White Sea") as management considers
such earnings to be invested for an indefinite period.
Equity in Operations of Joint Ventures
Equity in operations of joint ventures of $1,066,000 decreased $3,533,000 for
the six months ended June 30, 1996 from $4,599,000 for the same period in 1995.
The net decreases were primarily attributable to three joint ventures. One 49.9
percent joint venture, Geraldton Navigation Company Inc. ("Geraldton") sold a
vessel in the first half of 1995, OMI's portion of the gain was $990,000.
Amazon, a 49 percent owned joint venture, operates one vessel which was offhire
due to drydocking an aggregate of 87 days during the six months ended June 30,
1996. Also, in June of 1996, OMI recorded a loss of $867,000 related to the sale
of a vessel by Mosaic Alliance Corporation ("Mosaic"), a 49.9 percent owned
joint venture.
For the second quarter of 1996, equity in operations of joint ventures of
$175,000 decreased $1,905,000 from the second quarter 1995.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents of $17,265,000 decreased $15,304,000 or 47 percent at
June 30, 1996 from the balance of $32,569,000 at December 31, 1995. The
Company's working capital of $(15,897,000) at June 30, 1996, decreased
$13,243,000 from $(2,654,000) at December 31, 1995. The primary reasons for the
decline in working capital were the purchase of the OMI Hudson, the repurchase
of $14,050,000 of Senior Notes in the first quarter and payment of outstanding
debt of $7,500,000 for a vessel delivered in an exchange transaction.
For the six months ended June 30, 1996, net cash used by operating activities
was $13,190,000 which was an increase of $5,899,000 compared to net cash used by
operating activities of $7,291,000 for the six months ended June 30, 1995. The
primary cause of the increase in cash used was the payment of the $22,000,000
lease termination fee for the OMI Hudson.
For the six months ended June 30, 1996, sources of liquidity, other than from
operating activities were primarily proceeds of $29,622,000 from the sale of two
vessels and proceeds of $23,000,000 drawn on two lines of credit. The primary
uses of cash, other than for operating activities, during the six months ended
June 30, 1996 were for payments of $44,301,000 of long-term debt ( which
includes $13,144,000 for repurchases of Senior Notes and $20,500,000 in debt
prepayments for vessels disposed of) purchase of the OMI Hudson for cash of
$9,300,000 (for which OMI also assumed $19,750,000 in related debt) and other
capital expenditures for improvements on vessels of $1,220,000.
On July 12, 1996, OMI completed its cash tender offer for the purchase at par of
its $136,950,000 aggregate principal 10 1/4 percent unsecured Notes ("Notes")
due 2003. Of the $136,950,000 aggregate amount of Notes, $130,123,000 was
tendered for payment pursuant to the offer and $6,827,000 principal amount of
Notes not tendered remain outstanding. An extraordinary loss (net of the tax
benefit) of approximately $3,000,000 or $.10 per share will be recorded in the
third quarter for the extinguishment of debt. The purchase of the Notes was
financed by a bank credit facility.
In addition, prior to July 12, 1996, the Company had two $10,000,000 line of
credit facilities. In conjunction with the negotiation of the new credit
facility described below, these lines were terminated. The Company also had a
revolving credit/term loan agreement providing for a credit facility of up to
$37,000,000 secured by three vessels. This loan was included as part of the new
credit agreement.
In July 1996 the Company signed a $167,750,000 credit agreement with two foreign
banks as co-arrangers. The new credit agreement, which matures in 18 months,
requires two equal semi-annual installments of $7,500,000 until January 1998
when all of the remaining balance is due. The credit agreement bears interest at
a rate of LIBOR plus 1 3/4 percent until December 31, 1996 when the rate
increases to LIBOR plus 2 1/2 percent unless OMI has made aggregate principal
repayments of at least $67,500,000 on or before such date. The Company repaid
$6,827,000 (equal to the amount of Notes not tendered) of such outstanding
principal amounts on July 18, 1996.
The new credit agreement is secured by first priority mortgages and assignment
of new earnings on 13 vessels, second priority mortgages on six other vessels
and a first priority pledge of the Company's equity ownership interests in
Petrolink, Amazon, Wilomi, and White Sea. Further, OMI's equity ownership
interests in Mosaic and Geraldton may not be pledged to secure other borrowings.
In August 1996, OMI expects to receive approximately $30,000,000 in cash for the
-14-
<PAGE>
sale of the three chemical carrier vessels and its interest in Ocean Specialty
Tankers Corporation ("OSTC") to Hvide. Of the cash proceeds, $12,775,000 will be
placed in an escrow account for use in acquiring another vessel. Hvide will
assume $34,650,000 of debt. Approximately $8,000,000 of the cash received will
be used to repay debt.
OMI believes it is in the position to meet its current and future obligations.
The Company is continually considering other debt and equity opportunities to
increase the Company's cash flow and reduce future interest costs. OMI may also
increase its liquidity by selling additional vessels in 1996 that are not in
line with the Company's strategy to concentrate in Suezmax tankers and product
carriers.
COMMITMENTS
OMI and a joint venture partner have committed to construct a vessel being built
in the Peoples Republic of China for a cost of approximately $56,000,000. The
vessel is scheduled to be delivered in 1996. OMI guarantees 49 percent through a
joint venture partner.
OMI acts as a Co-guarantor for a portion of the debt incurred by joint ventures
with affiliates of two of its joint venture partners. The portion of debt
guaranteed by the partners was approximately $86,555,000 at June 30, 1996, with
OMI's share of such guarantees being approximately $42,580,000. OMI also is
guarantor for a joint venture, OSTC's revolving line of credit of up to
$4,000,000 at June 30, 1996, with a guarantee to OMI from its joint venture
partner Hvide of 50 percent of the amount guaranteed by OMI. OMI will be
relieved of its guarantee when the sale of OSTC is consummated.
The Company and its joint venture partners have committed to fund any working
capital deficiencies that may be incurred by their joint venture investments. At
June 30, 1996, no such deficiencies have occurred which have required funding.
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.
-15-
<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
On May 21, 1996, OMI Corp. held the annual meeting of shareholders. At this
meeting, the stockholders were asked to consider and vote upon the
following matters:
1) To elect two directors (Class I) for a three year term. Messrs. Livio
M. Borghese and Emanuel L. Rouvelas whose terms expire in 1996 were
approved for reelection for new three year terms expiring in 1999.
2) To ratify the appointment of Deloitte & Touche LLP as auditors of OMI
Corp. and various subsidiaries for the year ending December 31, 1996.
This proposal was approved.
Item 5 - Other Information
None.
Item 6 - Exhibit and Reports on Form 8-K
a. Exhibits
27 OMI Corp. - Financial Data Schedule, dated June 30, 1996.
b. Reports on Form 8-K
As filed on June 12, 1996.
-16-
<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 CORP.
-------------------------------------------------
(REGISTRANT)
Date: August 14, 1996 By: Jack Goldstein
--------------------- ------------------------
Jack Goldstein
Chairman of the Board and
Chief Executive Officer
Date: August 14, 1996 By: Vincent de Sostoa
--------------------- ------------------------
Vincent de Sostoa
Senior Vice President/
Finance and Chief
Financial Officer
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27 contains summary information extracted from OMI Corp. 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-31-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 17,265
<SECURITIES> 0
<RECEIVABLES> 9,721
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 51,650
<PP&E> 633,898
<DEPRECIATION> 278,481
<TOTAL-ASSETS> 537,990
<CURRENT-LIABILITIES> 67,547
<BONDS> 250,924
0
0
<COMMON> 15,575
<OTHER-SE> 131,564
<TOTAL-LIABILITY-AND-EQUITY> 537,990
<SALES> 0
<TOTAL-REVENUES> 123,120
<CGS> 0
<TOTAL-COSTS> 89,863
<OTHER-EXPENSES> 24,331
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,049
<INCOME-PRETAX> 913
<INCOME-TAX> (367)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,280
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
