<PAGE>
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 MARCH 31, 1997
--------------
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
1-10164
-------
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
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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 7, 1997 :
--------------
Common Stock, par value 0.50 per share 42,865,670 shares
<PAGE>
OMI CORP. AND SUBSIDIARIES
INDEX
PART I: FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of
Operations for the three months
ended March 31, 1997 and 1996 3
Condensed Consolidated Balance Sheets-
March 31, 1997 and December 31, 1996 4
Consolidated Statement of Changes in
Stockholders' Equity for the three months
ended March 31, 1997 5
Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and 1996 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 17
SIGNATURES 18
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OMI CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
1997 1996
----------- ---------
<S> <C> <C>
Revenues:
Voyage revenues $ 57,474 $ 60,287
Other income 1,682 1,551
------------ ------------
Total revenues 59,156 61,838
------------ ------------
Operating Expenses:
Vessel and voyage 41,818 43,848
Depreciation and amortization 7,285 8,066
Operating lease 1,047 755
General and administrative 3,652 3,744
------------ ------------
Total operating expenses 53,802 56,413
------------ ------------
Operating income 5,354 5,425
------------ ------------
Other Income (Expense):
Gain (loss) on disposal of
assets-net 893 (144)
Interest expense-net (3,283) (6,485)
Minority interest in income of subsidiary (10) (50)
------------ ------------
Net other expense (2,400) (6,679)
------------ ------------
Income (loss) before income taxes,
equity in operations of joint
ventures and extraordinary gain 2,954 (1,254)
Provision (benefit) for income
taxes 1,289 (607)
------------ ------------
Income (loss) before equity in
operations of joint ventures
and extraordinary gain 1,665 (647)
Equity in operations of joint ventures 1,155 891
------------ ------------
Income before extraordinary gain 2,820 244
Extraordinary gain, net of tax
provision of $195 -- 361
------------ ------------
Net income $ 2,820 $ 605
============ ============
Earnings Per Common Share:
Income before extraordinary gain $ 0.07 $ 0.01
Extraordinary gain -- 0.01
------------ ------------
Net income $ 0.07 $ 0.02
============ ============
Weighted average number of shares
of common stock outstanding 42,783 31,199
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
OMI CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash, including cash equivalents: 1997-
$10,902, 1996-$32,132 $ 17,042 $ 47,877
Advances to masters 2,572 1,422
Receivables:
Traffic 11,123 11,715
Other 14,833 12,234
Prepaid expenses and other current assets 8,770 4,830
Vessels held for sale 23,498 34,399
------------ ------------
Total current assets 77,838 112,477
------------ ------------
Capital Construction Fund 10,405 10,283
Vessels and other property, at cost 496,012 527,461
Construction in progress 16,358 10,754
Less accumulated depreciation (184,684) (186,152)
------------ ------------
Vessels and other property-net 327,686 352,063
------------ ------------
Cash held in escrow 18,912 ----
Investments in, and advances to joint ventures 60,355 59,322
Note receivable 9,000 ----
Other assets and deferred charges 21,000 17,049
------------ ------------
Total $ 525,196 $ 551,194
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,820 $ 6,278
Accrued liabilities:
Voyage and vessel 21,891 17,555
Interest 1,923 4,150
Other 3,347 5,586
Current portion of long-term debt 32,412 34,892
------------ ------------
Total current liabilities 66,393 68,461
------------ ------------
Advance time charter revenues and other
liabilities 6,597 8,685
Deferred gain on sale and leaseback of vessel 24,286 --
Long-term debt 153,984 202,256
Deferred income taxes payable 61,854 60,577
Minority interest in subsidiary 1,791 3,637
Stockholders' equity 210,291 207,578
------------ ------------
Total $ 525,196 $ 551,194
============= =============
</TABLE>
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 THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Unearned
Retained Cumulative Compensation
Common Stock Capital (Deficit) Translation Restricted
Shares Amount Surplus Earnings Adjustment Stock
-------- --------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 42,691 $ 21,346 $ 184,251 $ (1,848) $ 4,912 $ (1,039)
Net income 2,820
Exercise of stock options 67 34 379
Issuance of restricted stock awards 50 25 413 (438)
Retirement of minority stockholders'
equity interest in subsidiary (600)
Amortization of unearned
compensation 101
Net change in valuation
account
------ -------- --------- -------- --------- ---------
Balance at March 31, 1997 42,808 $ 21,405 $ 184,443 $ 972 $ 4,912 $ (1,376)
====== ======== ========= ======== ======== =========
<CAPTION>
Unrealized
Gain (Loss)
on Total
Securities Stockholders'
-Net Equity
---------- --------------
<S> <C> <C>
Balance at January 1, 1997 $ (44) $ 207,578
Net income 2,820
Exercise of stock options 413
Issuance of restricted stock awards -
Retirement of minority stockholders'
equity interest in subsidiary (600)
Amortization of unearned
compensation 101
Net change in valuation
account (21) (21)
--------- -----------
Balance at March 31, 1997 $ (65) $ 210,291
========= ===========
</TABLE>
See notes to condensed consolidated financial statements.
-5-
<PAGE>
OMI CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
1997 1996
--------- --------
<S> <C> <C>
CASH FLOWS (USED)PROVIDED BY OPERATING ACTIVITIES:
Net income $ 2,820 $ 605
Adjustments to reconcile net income to net cash
(used) provided by operating activities:
Increase (decrease) in deferred income taxes 1,289 (607)
Depreciation and amortization 7,285 8,066
Amortization of unearned compensation 101 111
(Gain) loss on disposal of assets-net (893) 150
Amortization of deferred gain on sale of vessel (443) --
Extraordinary gain - net of tax -- (361)
Equity in operations of joint ventures
over dividends received (1,155) (482)
Changes in assets and liabilities:
Increase in receivables and other current assets (7,096) (1,222)
Increase (decrease) in accounts payable and
accrued liabilities 510 (16,383)
Advances to joint ventures - net 122 310
Increase in other assets and deferred charges (4,126) (3,255)
(Decrease) increase in advance time charter
revenues and other liabilities (2,089) 496
Other assets and liabilities - net 75 77
------------ ----------
Net cash used by operating activities (3,600) (12,495)
------------ ----------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Proceeds from disposal of assets 50,890 14,531
Additions to vessels and other property (25,110) (10,450)
Proceeds and interest received and reinvested in the
Capital Construction Fund (220) (101)
Payments for the retirement of minority
stockholders' interest (2,456) --
------------ ----------
Net cash provided by investing activities 23,104 3,980
------------ ----------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 413 137
Proceeds from bank notes 20,000
Payments on long-term debt (50,752) (33,339)
------------ ----------
Net cash used by financing activities (50,339) (13,202)
------------ ----------
Net decrease in cash and cash equivalents (30,835) (21,717)
Cash and cash equivalents at beginning of period 47,877 32,569
------------ ----------
Cash and cash equivalents at end of period $ 17,042 $ 10,852
============ =============
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
OMI CORP. 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 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. Certain
accounts have been reclassified in the 1996 financial statements to conform to
their 1997 presentation.
NOTE 2 - INCOME TAXES
The provision (benefit) for income taxes on income excluding the extraordinary
gain varies from statutory rates as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
(in thousands) 1997 1996
- -------------- ---- ----
<S> <C> <C>
Provision (benefit) calculated at
statutory rates $ 1,438 $ (127)
Adjustment for equity in operations
of certain joint ventures (149) (480)
---------- ----------
Provision (benefit) $ 1,289 $ (607)
========== ==========
</TABLE>
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 $6,185,000 and $4,500,000 for
the three months ended March 31, 1997 and 1996, respectively. Income taxes of
$1,958,000 were paid during the first quarter of 1997. There were no income
taxes paid during the three months ended March 31, 1996.
-7-
<PAGE>
NOTE 4 - JOINT VENTURE INFORMATION
Mosaic Alliance Corporation ("Mosaic") is 49.9 percent owned by OMI and is
accounted for using the equity method.
Summarized income statement information for the three months ended March 31,
1997, and 1996 for Mosaic is as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
1997 1996
---- ----
<S> <C> <C>
(unaudited, in thousands)
Revenues $ 2,040 $ 4,146
Expenses 1,327 2,577
------------- -------------
Operating income $ 713 $ 1,569
============= ==============
Net income $ 716 $ 1,301
============= ==============
</TABLE>
NOTE 5 - CREDIT LINES/LOAN AGREEMENTS
During the first quarter of 1997, the Company negotiated a new bank credit
facility (the "Credit Facility") with its existing lenders. The Credit Facility
provides for a line of credit in the amount of $133,000,000 (not to exceed 70
percent of the fair market value of the vessels securing the loan). On April 1,
1997, the Company drew down $101,090,000 which was used to pay off $44,650,000
outstanding under the previous $167,750,000 credit agreement, the $45,000,000
lines of credit and a ship mortgage of $11,440,000. The Credit Facility is
secured by ten vessels with a book value of $169,820,000 on April 1, 1997. On
April 21, 1997, OMI drew down an additional $8,000,000 to finance a vessel
purchased for approximately $19,000,000. The Notes under the Credit Facility
bear interest at LIBOR plus a margin ranging from 60-95 basis points which is
computed based on the Company's funded debt to equity ratio and interest
coverage ratio. The agreement, which expires in March 2002, provides for nine
semi-annual reductions in the amount which can be outstanding; the first five
are $5,500,000, the next four are $8,875,000 and the balance is due at maturity.
In the event any vessels collateralizing the agreement are sold, the Credit
Facility shall be reduced by up to 100 percent of the sales proceeds; however,
the Company is permitted to substitute another vessel as collateral. The Credit
Facility contains financial covenants with respect to cash, interest rate
coverage, net worth and funded debt to equity. Dividends paid in any year are
limited to 50 percent of net income in that year. The Company was required to
pay one time fees aggregating $532,000 and is to pay annual fees of 25 basis
points on the average undrawn available credit facility commitment and $7,500
per annum to each of three lenders.
Aggregate maturities of long-term debt following the drawdowns of $109,090,000
million under the Credit Facility and the balances paid off as of April 21,
1997, which were discussed above are $10,980,000, $17,475,000, $17,798,000,
$24,900,000 and $25,296,000 for the periods ending December 31, 1997, 1998,
1999, 2000 and 2001, respectively.
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
-8-
<PAGE>
$18,518,000 at March 31, 1997, with OMI's share of such guarantees being
approximately $9,230,000.
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 March 31, 1997, no such deficiencies have been funded.
NOTE 7 - DISPOSAL AND ACQUISITION OF ASSETS
On January 31, 1997, the Company sold and leased back the OMI Columbia and
received $40,000,000 in cash and a $9,000,000 interest bearing note. The gain on
the sale of $24,729,000 has been deferred and is being credited to income as an
adjustment to lease expense over the term of the lease which expires in December
2002. At March 31, 1997, the balance of the deferred gain was $24,286,000.
On March 12, 1997, the Company entered into an agreement for the sale of the
Alta for approximately $39,900,000 and a leaseback of the vessel for five years.
The gain on the sale of approximately $15,700,000 will be deferred and credited
to income as an adjustment to lease expense over the term of the lease. The
lessor has the option to cancel the lease at any time after two years upon the
payment of a $1,000,000 termination fee.
On March 18, 1997, the Company agreed to acquire a 1988 built product carrier
for approximately $19,000,000 which was delivered in April 1997.
NOTE 8 - NEWLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share." SFAS No. 128 requires dual presentation of basic earnings
per share ("EPS") and diluted EPS on the face of all statements of earnings
ending after December 15, 1997 for all entities with complex capital structures.
The Company does not anticipate the effect on earnings per share to be material.
-9-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
OMI Corp. ("OMI" or the "Company") is one of the largest, measured by deadweight
tons ("dwt"), publicly traded bulk shipping companies headquartered in the
United States and provides seaborne transportation services for crude oil,
petroleum products and, to a much lesser extent, dry bulk cargoes (primarily
iron ore, coal and grain) through joint ventures. The charter rates that the
Company is able to obtain for its vessels are determined in highly competitive
markets. The industry is cyclical, experiencing significant swings in
profitability and asset values resulting from changes in the supply and demand
for vessels.
The Company currently has a wholly-owned foreign flag fleet of thirteen product
carriers, including one that was delivered in April 1997 and seven crude oil
tankers, six Suezmax tankers and one Aframax tanker. The Company has entered
into contracts for the construction of three Suezmax tankers with an option for
one more. Each new Suezmax tanker will cost approximately $54 million and will
be delivered in 1998 and 1999.
Since early 1996, OMI has been in the process of implementing several key
strategic initiatives including (i) refocusing its operations from the U.S. flag
domestic market to the international tanker market; (ii) developing large and
concentrated fleets of small product carriers and Suezmax tankers; (iii)
managing the spot versus time charter mix of its vessels; (iv) reducing vessel
operating and corporate overhead costs by reducing the U.S. fleet; (v)
continuing its commitment to the highest quality fleet and management; and (vi)
reducing reliance on joint ventures.
OMI actively implemented its plan to dispose of U.S. flag vessels and refocus
its operations on its international fleet beginning in early 1996. The losses
generated by U.S. flag vessels in previous years were due to insufficient
revenue to cover operating expenses and debt service costs. In addition, in 1995
and 1994 losses from these vessels were compounded by additional losses due to
impairment of vessel values. In 1996 the Company reduced its ownership in the
domestic fleet as follows: in the first quarter two U.S. flag dry bulk carriers
were delivered to new owners, three chemical carriers were sold in August 1996
and another dry bulk carrier and a product carrier were sold in the last half of
the year. In January 1997, the Company completed the sale and leaseback of the
OMI Columbia, its largest U.S. flag vessel. Under the terms of the lease, OMI
continues as the operator of the OMI Columbia. Two U.S. flag product carriers
the Company owns are in idle status. Another vessel came out of lay-up for a
voyage in May 1997. The Company has been exploring options for these ships, it
could continue to lay-up the vessels until profitable charters are available in
U.S. coastwise trade or sell the vessels.
The Company believes that operating large concentrated fleets attract major
customers and create several strategic advantages by: (i) providing better
scheduling opportunities through substitution; (ii) creating the potential to
increase vessel utilization; (iii) creating economies of scale to efficiently
spread overhead costs and (iv) enhancing operating expertise and efficiency by
concentrations in certain vessel types. In addition, the Company believes that
the major oil companies prefer to deal with a limited number of shipping
companies with fleets that are pre-approved to meet their requirements, rather
than smaller shipping companies characteristic of the fragmented international
tanker market.
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<PAGE>
The product carrier market is the market segment which transports refined
petroleum products such as gasoline, jet fuel, kerosene, naphtha and gas oil.
Rates in this market, as well as the crude oil market, have increased as a
result of increasing world fuel consumption resulting from improved economic
growth. Additionally, refinery capacity is expanding in oil exporting regions
such as the Middle East and Latin America. Historically, earnings from the
product carrier fleet have been less volatile than earnings from the Suezmax
fleet. Approximately half of this fleet operates on time charter and the other
half operates in the spot market. This mix of time charter and voyage charters
further stabilizes earnings from OMI's product carrier fleet.
Freight rates in the tanker markets have improved since mid 1995 as a result of
increasing demand for oil due to higher world economic growth, coupled with a
modest decrease of the supply of tankers in the 1994 - 1996 period. Management
believes this upward trend will continue due to the strength of the world
economy and the resulting increase in oil consumption as well as the high
proportion of old tankers, the relatively low tanker order book, and the
continued focus of governments and charterers on environmentally safe and well
maintained tonnage.
The Company's Suezmax tanker fleet is one of the largest independent fleets in
the world. OMI has targeted this market segment due to the flexibility of the
Suezmax tankers to engage in long-haul and short-haul trades, as well as the
growth potential in the crude oil market. The crude oil tanker market has
historically been very volatile and has experienced large swings in rates. OMI
can control a portion of its risk in this market by operating some of its
vessels on time charters while taking advantage of increased rates in the spot
market at the same time. OMI currently operates four of its six Suezmax tankers
in the spot market.
During 1996 and early 1997, management improved its balance sheet by reducing
debt and thereby reducing its interest expense which has been a significant
factor in the Company's financial performance. In July 1996, $130 million of the
Senior Notes were purchased in a tender offer and the debt was refinanced with
commercial banks at more favorable rates. Such debt was reduced further by a
portion of the net proceeds of a $75.7 million public offering of 11,500,000
shares of the Company's common stock in the fourth quarter of 1996, and in the
fourth quarter of 1996 and the first quarter of 1997 by proceeds from sales of
assets which were not strategic to the Company's operations. In April 1997, the
Company again refinanced its remaining debt under more favorable terms. (See
"Liquidity and Capital Resources-Financing Facilities").
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 equals voyage revenues
minus 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, therefore, the revenue rate is likely to be lower than a
time charter. Under a voyage charter, revenue is calculated based on the amount
of cargo carried, most expenses are for the ship owner's account and the length
of the charter is one voyage. Revenue may be higher in the spot market as the
-11-
<PAGE>
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 and bunker prices.
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.
VOYAGE REVENUES LESS VESSEL AND VOYAGE EXPENSES
Net voyage revenues of $15.7 million for the three months ended March 31, 1997
decreased by $783,000 from $16.4 million for the same period in 1996. Foreign
fleet net voyage revenue increased to $13.6 million, which is 87 percent of
total net voyage revenues for the three months ended March 1997, as compared to
$10.6 million in the same period of 1996. Domestic net voyage revenue decreased
$3.7 million to $2.1 million for the three months ended March 1997, as compared
to $5.8 million in the same period of 1996. Changes in net voyage revenues for
the three months ended 1997 compared with 1996 are discussed as follows by
market segments OMI primarily operates in.
DOMESTIC
Net voyage revenues for domestic operations for the first quarter of 1997
decreased $3.7 million. The decrease was primarily attributable to seven vessels
disposed of during 1996, in addition to decreases for the product carriers which
were on time charters in 1996 but were laid up in the first quarter of 1997.
Decreases were offset in part by increases in net voyage revenues for the OMI
Columbia.
In January 1997, the OMI Columbia, a crude oil tanker which carries Alaskan
North Slope ("ANS") oil for a major oil company, was sold and leased back under
a charter agreement terminating December 31, 2002. Net voyage revenues from the
OMI Columbia increased in the first quarter of 1997 compared to the first
quarter of 1996, as the vessel began operating on a long term time charter in
the spring of 1996, after legislation to eliminate restrictions on the export of
ANS crude oil went into effect. Exports must be carried on U.S. flag vessels.
The length of this charter corresponds to the length of the lease.
The three remaining vessels in the domestic fleet were on time charters in the
first quarter of 1996. Two of these vessels were redelivered in January and
April 1997 having been on long-term time charters with the Military Sealift
Command . The third vessel was on a time charter which ended in February 1997.
Two of these vessels are currently laid up; however, the Company continues to
actively seek and evaluate all employment opportunities for these vessels.
-12-
<PAGE>
PRODUCT CARRIER FLEET
Net voyage revenues for the product carrier fleet were $8.1 million for the
first quarter of 1997, an increase of $1.8 million or 28.6 percent from net
voyage revenues of $6.3 million for the same period of 1996. The product carrier
fleet consisted of twelve vessels in 1997 as compared to ten vessels in 1996.
The two additional vessels purchased in 1996, the Shannon and the Elbe,
contributed $1.4 million to this increase. In both years, approximately one half
of the fleet operated on time charters. The remaining increase in net voyage
revenues was due to higher rates received for the vessels operating on time
charters, in addition to higher rates received for all but one of the vessels
that were on voyage charters.
CRUDE TANKER FLEET
Net voyage revenues from the crude tanker fleet were $4.7 million in 1997 as
compared to $3.9 million in 1996 or an increase of $825,000. The crude fleet in
1997 consisted of seven wholly-owned vessels, four of which operated in the spot
market compared to six vessels in 1996, four of which operated in the spot
market. Net voyage revenues increased due to the acquisition of the Alta and the
Tanana, (two Suezmax tankers in which the Company acquired its partner's
interest at year end 1996) and increased rates in the spot market in 1997,
offset by decreases due to the sale of the Promise in the second quarter of
1996.
OTHER OPERATING EXPENSES
The Company's operating expenses, other than vessel and voyage expenses consists
of depreciation and amortization, operating lease expense and general and
administrative expenses. For the three months ended March 31, 1997, these
expenses decreased $581,000 to $12 million, from $12.6 million for the same
period in 1996. The primary reasons for the reduction were a decrease in
depreciation expense of $781,000 from the sale of non-strategic vessels and a
decrease in general and administrative expenses of $92,000, offset by an
increase in operating lease expense of $292,000. In the first quarter of 1997,
OMI incurred expense of $1.5 million for the leaseback of the OMI Columbia. This
operating lease expense was offset by the recognition of deferred gains of
$443,000 from the sale of the vessel. The deferred gain of $24.7 million
recorded in January 1997 will be credited to income over the six year term of
the lease. For the first quarter of 1996, operating lease expense of $755,000
pertained to the OMI Hudson.
OTHER INCOME (EXPENSE)
Other income (expense) consists of gain (loss) on disposal of assets-net,
interest expense-net, and minority interest in income of subsidiary. Net other
expense decreased by $4.3 million in the three months ended March 31, 1997
compared to the same period in 1996. Interest expense decreased by a net of $2.7
million primarily due to the repurchase of an aggregate of $143 million of
Senior Notes during 1996. The Senior Notes outstanding in the first three months
of 1996 of $136 million accrued interest at 10.25 percent compared to $44.7
million of mortgage debt (which replaced the Senior Notes) which accrued
interest at LIBOR plus a spread which ranged from 7.25 percent to 7.43 percent
in the first quarter of 1997. The balance of the decrease was primarily due to
the gain of $995,000 from the sale of a liquid petroleum gas carrier ("LPG") in
March of 1997.
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<PAGE>
PROVISION (BENEFIT) FOR INCOME TAXES
The income tax provision of $1.3 million and benefit of $607,000 for the three
months ended March 31, 1997 and 1996, 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 increased 30 percent to $1.2 million in
the first quarter of 1997, compared to $900,000 in the first quarter of 1996.
The increase in equity was primarily attributable to Amazon , a 49 percent owned
joint venture which operates one crude oil tanker, the Settebello. The equity in
earnings for Amazon increased by $1.1 million in the first quarter of 1997 from
a loss of $777,000 for the same period in 1996. The Settebello was in drydock in
the first quarter of 1996 which resulted in both a lack of earnings and
additional expense. This increase was offset by decreases explained below.
In accordance with the Company's plan to decrease its participation in joint
ventures, on December 30, 1996, the interest in Wilomi, Inc. ("Wilomi") owned by
a partner was acquired by the venture, and Wilomi became a 100 percent owned
subsidiary with its earnings consolidated in OMI's results. The decrease in
equity in operations of joint ventures attributable to Wilomi was $500,000.
Earnings of Mosaic Alliance Corporation ("Mosaic") decreased by approximately
$200,000 in the first quarter of 1997 compared to the first quarter of 1996. The
primary reason for the decrease was that Mosaic operated two vessels in 1997 as
compared with four in the same period for 1996. In March of 1997, a dry bulk
carrier was sold.
EXTRAORDINARY GAIN
In the first quarter of 1996, the Company recorded an extraordinary gain of
$361,000 (net of a tax provision of $195,000), or $0.01 per share, in connection
with the repurchase of $13 million of Senior Notes.
-14-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Cash and cash equivalents of $17 million at March 31, 1997 decreased $30.8
million from cash and cash equivalents of $47.9 million at December 31, 1996.
The Company's working capital of $11.4 million decreased $32.6 million from
working capital of $44 million at December 31, 1996. Current assets decreased
$34.6 million primarily due to the decrease in cash and cash equivalents
(explained below) and a decrease of $11 million in vessels held for sale. Two
vessels were held for sale at December 31, 1996 compared to one at March 31,
1997.
Cash used by financing activities was $50.3 million in 1997 compared to $13.2
million in the first quarter of 1996. Payments on long-term debt of $50.8
million were made in the first quarter of 1997. Of this amount, $40 million was
used to prepay debt and $10.8 million was used for scheduled debt repayments.
Total debt to capitalization of 47 percent at March 31, 1997 decreased 20
percent as compared to the same period in 1996.
The Company operates in a capital-intensive industry and augments cash generated
by operating activities with debt and sales of vessels that no longer fit the
Company's strategy. Cash provided by investing activities was $23.1 million in
1997 compared to $4 million in the first quarter of 1996. Net proceeds of $50.4
million were received in the first quarter of 1997 from the sale of two vessels.
Of these proceeds, $40 million in cash and a $9 million interest bearing note
receivable was received from the sale of the OMI Columbia. Proceeds of $10.9
million were received from the sale of the LPG. In anticipation of the delivery
in April of the Severen, a product carrier, OMI paid approximately $19 million
in the first quarter into an escrow account. In addition, a down payment of $5.3
million was made on the third option to build a Suezmax tanker.
FINANCING FACILITIES
During the first quarter of 1997, the Company negotiated a new bank credit
facility (the "Credit Facility") with its existing lenders. The Credit Facility
provides for a line of credit in the amount of $133 million (not to exceed 70
percent of the fair market value of the vessels securing the loan). On April 1,
1997, the Company drew down $101.1 million which was used to pay off $44.7
million outstanding under the previous $167.8 million credit agreement , $45
million in lines of credit and a ship mortgage of $11.4 million. The Credit
Facility is secured by ten vessels. On April 21, 1997, OMI drew down an
additional $8 million to finance a vessel purchased for approximately $19
million. The note bears interest at LIBOR plus a margin ranging from 60-95 basis
points which is computed based on the Company's funded debt to equity ratio and
interest coverage ratio. The agreement, which expires in March 2002, provides
for nine semiannual reductions in the amount which can be outstanding; the first
five are $5.5 million, the next four are $8.9 million and the balance is due at
maturity. In the event any vessels collateralizing the agreement are sold, the
Credit Facility shall be reduced by up to 100 percent of the sales proceeds;
however, the Company is permitted to substitute another vessel. The Credit
Facility contains financial covenants with respect to cash, interest rate
coverage, net worth and funded debt to equity. Dividends paid in any year are
limited to 50 percent of net income in that year. The Company was required to
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<PAGE>
pay one time fees aggregating $532,000 and annual fees of 25 basis points on the
average undrawn available Credit Facility commitment and is to pay $7,500 per
annum to each of the three lenders.
The Company believes that the actions it has taken in the last year to improve
its liquidity and financial position will give the Company greater flexibility
to fund its vessel acquisition program and finance its other cash needs.
COMMITMENTS
OMI acts as a co-guarantor for a portion of the debt incurred by joint ventures
with affiliates of its joint venture partners. The portion of debt guaranteed by
the partners was approximately $18.5 million at March 31, 1997, with OMI's share
of such guarantees being approximately $9.2 million.
The Company and its joint venture partners have committed to fund any working
capital deficiencies that may be incurred by their joint venture investments. At
March 31, 1997, no such deficiencies have been funded.
On March 12, 1997, the Company entered into an agreement for the sale of the
ALTA for approximately $39.9 million and a leaseback of the vessel for five
years. The gain on the sale of approximately $15.7 million will be deferred and
credited to income over the term of the lease. The lessor has the option to
cancel the lease at any time after two years upon payment of a $1 million
termination fee.
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.
-16-
<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 Corp. - Financial Data Schedule, dated March 31, 1997.
b. REPORTS ON FORM 8-K
None
-17-
<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: MAY 7,1997 BY: /s/ CRAIG H. STEVENSON, JR.
--------------------- -----------------------
CRAIG H. STEVENSON, JR.
PRESIDENT, CHIEF EXECUTIVE
OFFICER AND DIRECTOR
DATE: MAY 7, 1997 BY: /s/ VINCENT DE SOSTOA
--------------------- -----------------
VINCENT DE SOSTOA
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
-18-
<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
entiretly by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 17,042
<SECURITIES> 0
<RECEIVABLES> 11,123
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 77,838
<PP&E> 512,370
<DEPRECIATION> 184,684
<TOTAL-ASSETS> 525,196
<CURRENT-LIABILITIES> 66,393
<BONDS> 153,984
0
0
<COMMON> 21,405
<OTHER-SE> 188,886
<TOTAL-LIABILITY-AND-EQUITY> 525,196
<SALES> 0
<TOTAL-REVENUES> 59,156
<CGS> 0
<TOTAL-COSTS> 42,865
<OTHER-EXPENSES> 10,937
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,120
<INCOME-PRETAX> 4,109
<INCOME-TAX> 1,289
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,820
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
