UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
COMMISSION FILE NO.
1-6479-1
OVERSEAS SHIPHOLDING GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-2637623
(State or other jurisdiction of (IRS Employer Identi-
incorporation or organization) fication No.)
1114 Avenue of the Americas, New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (212) 869-1222
No Change
Former name, former address and former fiscal year, if
changed since last report
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 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
Common Shares outstanding as of November 9, 1994 - 36,206,887
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1994 AND DECEMBER 31, 1993
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
30, 1994 31, 1993 (A)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash, including interest-bearing deposits
of $80,548,000 and $101,790,000 $ 90,047,000 $ 110,167,000
Receivables 38,116,000 27,182,000
Prepaid expenses 24,371,000 25,738,000
-------------- --------------
Total Current Assets 152,534,000 163,087,000
Investments in Marketable Securities 38,653,000 21,158,000
Capital Construction and Restricted Funds 107,519,000 105,654,000
Vessels, at cost, less accumulated depreciation of
$487,522,000 and $463,864,000 - Note F 1,040,276,000 999,782,000
Vessels Under Capital Leases, less accumulated
amortization of $137,299,000 and $129,135,000 122,178,000 130,342,000
Investment in Celebrity Cruise Lines Inc. - Note B 232,395,000 229,780,000
Investments in Bulk Shipping Joint Ventures - Note C 80,680,000 78,484,000
Other Assets 100,773,000 95,450,000
-------------- --------------
$1,875,008,000 $1,823,737,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C>
Accounts payable $ 5,057,000 $ 3,811,000
Sundry liabilities and accrued expenses 41,360,000 36,251,000
-------------- --------------
46,417,000 40,062,000
Current installments of long-term debt - Note F 16,070,000 15,003,000
Current obligations under capital leases 9,411,000 8,555,000
-------------- --------------
Total Current Liabilities 71,898,000 63,620,000
Advance Charter Revenues 7,870,000 7,722,000
Long-term Debt - Note F 694,959,000 705,558,000
Obligations Under Capital Leases 164,603,000 170,716,000
Minority Interest 4,104,000 4,368,000
Deferred Federal Income Taxes ($105,445,000 and
$100,161,000) and Deferred Credits - Note E 108,503,000 103,316,000
Shareholders' Equity - Notes E and H:
Common Stock, par value $1 per share:
Authorized - 60,000,000 shares
Issued - 39,590,759 and 36,140,759 shares 39,591,000 36,141,000
Paid-in Additional Capital 93,586,000 21,035,000
Retained Earnings 747,318,000 764,987,000
-------------- --------------
880,495,000 822,163,000
Less - cost of Treasury Stock - 3,386,614 and
3,436,765 shares 49,557,000 50,136,000
-------------- --------------
830,938,000 772,027,000
Less - net unrealized loss on
marketable securities 7,867,000 3,590,000
-------------- --------------
Total Shareholders' Equity 823,071,000 768,437,000
Commitments and Other Comments - Note H
-------------- --------------
$1,875,008,000 $1,823,737,000
============== ==============
<FN>
(A) The balance sheet at December 31, 1993 has been derived from the audited
financial statements at that date.
(See Accompanying Notes)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1993
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ----------------------------
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
30, 1994 30, 1993 30, 1994 30, 1993
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shipping Revenues:
Revenue from voyages $ 88,356,000 $ 93,485,000 $264,935,000 $284,582,000
Equity in results of
Celebrity Cruise
Lines Inc.- Note B (963,000) 3,180,000 2,551,000 5,533,000
Income attributable to
bulk shipping joint
ventures - Note C
1,207,000 1,782,000 3,442,000 5,086,000
------------ ------------ ------------ ------------
88,600,000 98,447,000 270,928,000 295,201,000
------------ ------------ ------------ ------------
Shipping Expenses:
Vessel and voyage - Note D 59,778,000 61,410,000 180,720,000 188,844,000
Depreciation of vessels
and amortization
of capital leases 15,258,000 14,498,000 44,293,000 44,095,000
Agency fees - Note D 8,177,000 8,273,000 23,294,000 25,032,000
General and administrative 2,313,000 1,384,000 8,101,000 5,914,000
------------ ------------ ------------ ------------
85,526,000 85,565,000 256,408,000 263,885,000
------------ ------------ ------------ -------------
Income from Vessel Operations 3,074,000 12,882,000 14,520,000 31,316,000
Other Income (net) - Note G 8,262,000 6,901,000 20,577,000 24,268,000
------------ ------------ ------------ ------------
11,336,000 19,783,000 35,097,000 55,584,000
Interest Expense 14,249,000 10,264,000 39,768,000 32,275,000
------------ ------------ ------------ ------------
Income/(loss) before Federal
income taxes (2,913,000) 9,519,000 (4,671,000) 23,309,000
Provision/(credit) for Federal
income taxes, reflecting
deferred provision of
$2,400,000 and $1,750,000,
$4,225,000 and $5,150,000 -
Note E (600,000) 5,000,000 (2,775,000) 8,400,000
------------ ------------ ------------ ------------
Net Income/(loss) (2,313,000) 4,519,000 (1,896,000) 14,909,000
Retained Earnings at
beginning of period 749,631,000 762,333,000 764,987,000 766,647,000
------------ ------------ ------------ ------------
747,318,000 766,852,000 763,091,000 781,556,000
Cash Dividends Declared 4,901,000 15,773,000 19,605,000
------------ ------------ ------------ ------------
Retained Earnings at end
of period $747,318,000 $761,951,000 $747,318,000 $761,951,000
============ ============ ============ ============
Per Share Amounts - Note H:
Net income/(loss) ($.06) $.14 ($.05) $.46
==== ==== ===== ====
Cash dividends declared $.15* $.45 $.60*
==== ==== ====
<FN>
*Includes $.15 per share for the fourth quarter.
(See Accompanying Notes)
</TABLE>
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER
30, 1994 30, 1993
<S> <C> <C>
Net cash provided by Operating
Activities $ 16,880,000 $ 57,581,000
----------- ------------
Cash Flows from Investing Activities:
Purchases of marketable securities ( 37,752,000) (34,445,000)
Proceeds from sales of marketable
securities 19,507,000 39,465,000
Additions to vessels (109,671,000) (46,298,000)
Proceeds from disposal of vessels 40,780,000 48,994,000
Other - net 2,818,000 (8,066,000)
----------- ------------
Net cash used in investing
activities (84,318,000) (350,000)
----------- ------------
Cash Flows from Financing Activities:
Issuance of Common Stock 76,004,000
Issuance of long-term debt 2,000,000 110,000,000
Payments on long-term debt and
obligations under capital leases (16,789,000) (143,401,000)
Cash dividends paid (15,773,000) (14,704,000)
Other - net 1,876,000 (346,000)
------------ ------------
Net cash provided by/(used in)
financing activities 47,318,000 (48,451,000)
------------ ------------
Net Increase/(decrease) in Cash (20,120,000) 8,780,000
Cash, including interest-bearing
deposits, at beginning of period 110,167,000 85,699,000
------------ ------------
Cash, including interest-bearing
deposits, at end of period $ 90,047,000 $ 94,479,000
============ ============
(See Accompanying Notes)
<FN>
</TABLE>
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Financial Statements
General - As contemplated by the Securities and Exchange Commission,
the accompanying financial statements and footnotes, which have been
rounded to the nearest thousand dollars, have been condensed and
therefore do not contain all disclosures required by generally
accepted accounting principles. Reference should be made to the
Company's Annual Report to Shareholders for the year ended December
31, 1993.
The statements as of September 30, 1994 and for the three month and
nine month periods ended September 30, 1994 and September 30, 1993 are
unaudited. In the opinion of the Company all adjustments (which were
of a normal recurring nature) have been made to present fairly the
results for such unaudited interim periods.
The results of operations for the three month and nine month periods
ended September 30, 1994 are not necessarily indicative of those for a
full fiscal year.
Note A - Foreign Subsidiaries:
A condensed summary of the combined assets and liabilities of the
Company's foreign (incorporated outside the U.S.) subsidiaries, whose
operations are principally conducted in U.S. Dollars, follows:
<TABLE>
<CAPTION>
AS OF
--------------------------------
SEPTEMBER DECEMBER
30, 1994 31, 1993
-------------- ---------------
<S> <C> <C>
Current Assets $ 39,611,000 $ 38,730,000
Vessels, net 834,347,000 765,850,000
Investment in Celebrity Cruise
Lines Inc. 232,395,000 229,780,000
Other Assets 115,584,000 95,628,000
-------------- --------------
1,221,937,000 1,129,988,000
-------------- --------------
Current Installments of
Long-term Debt 10,545,000 9,728,000
Other Current Liabilities 12,623,000 8,692,000
-------------- --------------
Total Current Liabilities 23,168,000 18,420,000
Long-term Debt, including intercompany,
and Deferred Credits, etc. 257,950,000 187,252,000
-------------- --------------
281,118,000 205,672,000
-------------- --------------
Net Assets $ 940,819,000 $ 924,316,000
============== ==============
<FN>
(See Notes on Following Pages)
</TABLE>
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Financial Statements
Note B - Investment in Celebrity Cruise Lines Inc.:
A condensed summary of the assets and liabilities of Celebrity Cruise
Lines Inc. ("CCLI"), the Company's cruise industry joint venture, and
the results of its operations follows:
<TABLE>
<CAPTION>
AS OF
----------------------------
SEPTEMBER DECEMBER
30, 1994 31, 1993
------------ ------------
<S> <C> <C>
Current assets $ 99,760,000 $147,344,000
Vessels, net 697,747,000 670,459,000
Other assets 51,397,000 48,072,000
------------ ------------
848,904,000 865,875,000
------------ ------------
Short-term debt and current
installments of long-term debt 50,153,000 42,593,000
Other current liabilities 66,798,000 70,612,000
------------ ------------
Total current liabilities 116,951,000 113,205,000
Long-term debt 260,643,000 286,624,000
------------ ------------
377,594,000 399,829,000
------------ ------------
Net assets (principally capital
contributions) $471,310,000 $466,046,000
============ ============
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1994 1993
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Revenue $78,558,000 $84,963,000 $242,971,000 $239,276,000
Costs and expenses 80,503,000 78,484,000 237,707,000 227,903,000
----------- ----------- ------------ ------------
Net income/(loss) ($ 1,945,000) $ 6,479,000 $ 5,264,000 $ 11,373,000
=========== =========== ============ ============
As of November 9, 1994, CCLI has commitments with an approximate
aggregate unpaid cost of $900,000,000 for the construction of three
cruise ships, one scheduled for delivery in late 1995, one in 1996 and
the third in late 1997. Unpaid costs are net of $81,400,000 of
progress payments (all paid prior to September 30, 1994). Long-term
financing arrangements exist for substantially all of the unpaid cost
of these ships. Net of hedges, approximately 30% of the unpaid cost is
denominated in German marks.
Note C - Bulk Shipping Joint Ventures:
Certain subsidiaries have investments in bulk shipping joint ventures.
A condensed summary of the combined assets and liabilities and results
of operations of the bulk shipping joint ventures follows:
AS OF
-----------------------------
SEPTEMBER DECEMBER
30, 1994 31, 1993
------------- ------------
<S> <C> <C>
Current assets (including $7,526,000
and $6,814,000 due from owners) $ 90,735,000 $ 75,236,000
Vessels, net 56,756,000 64,013,000
Other assets (including $28,385,000
and $33,172,000 due from owners) 32,128,000 34,880,000
------------ ------------
179,619,000 174,129,000
Current liabilities 7,302,000 6,792,000
------------ ------------
Net assets (principally undistributed
net earnings) $172,317,000 $167,337,000
============ ============
<FN>
(See Notes on Following Pages)
</TABLE>
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Financial Statements
Note C - Bulk Shipping Joint Ventures (continued):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue, primarily from
voyages (including
$6,611,000,
$9,550,000,
$20,728,000 and
$27,542,000 from
vessels chartered
to other owners) $10,016,000 $11,111,000 $31,186,000 $32,678,000
Costs and expenses 7,389,000 7,079,000 23,206,000 22,003,000
----------- ----------- ----------- -----------
Net income $ 2,627,000 $ 4,032,000 $ 7,980,000 $10,675,000
=========== =========== =========== ===========
</TABLE>
In September 1994, certain 50% owned companies entered into contracts
for the construction of two VLCCs scheduled to be delivered in 1996, at
an aggregate price of approximately $180,000,000. Upon delivery, these
vessels will commence eight year charters to the joint venture partner.
Note D - Agency Fees and Brokerage Commissions:
All subsidiaries with vessels and certain joint ventures are parties to
agreements with Maritime Overseas Corporation ("Maritime") that
provide, among other matters, for Maritime and its subsidiaries to
render services related to the chartering and operation of the vessels
and certain general and administrative services for which Maritime and
its subsidiaries receive specified compensation. Vessel and voyage
expenses include $1,232,000 (three months ended September 30, 1994),
$1,498,000 (three months ended September 30, 1993), $3,818,000 (nine
months ended September 30, 1994) and $4,551,000 (nine months ended
September 30, 1993) of brokerage commissions to Maritime. Maritime is
owned by a director of the Company; directors or officers of the
Company constitute all four of the directors and the majority of the
principal officers of Maritime.
Note E - Taxes:
Effective from January 1, 1987, earnings of the foreign shipping
companies, other than CCLI, are subject to U.S. income taxation
currently; post-1986 taxable income may be distributed to the U.S.
parent without further tax. Prior thereto, tax on such earnings was
deferred as long as the earnings were reinvested in foreign shipping
operations. Foreign income, substantially all of which was earned by
companies which are not subject to income taxes in their country of
incorporation, aggregated $4,859,000 (three months ended September
30, 1994), $11,418,000 (three months ended September 30, 1993),
$16,313,000 (nine months ended September 30, 1994) and $37,078,000
(nine months ended September 30, 1993) before any U.S. income tax
effect. No provision for U.S. income taxes on the undistributed
income of the foreign shipping companies accumulated through December
31, 1986 was required, since such undistributed earnings have been
(See Notes on Following Pages)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Financial Statements
Note E - Taxes (continued):
reinvested or are intended to be reinvested in foreign shipping
operations so that the qualified investment therein is not expected to
be reduced below the corresponding amount at December 31, 1986.
Further, no provision for U.S. income taxes on the undistributed
earnings of CCLI was required, since it is intended that such
undistributed earnings will be indefinitely reinvested.
In the third quarter of 1993 the Company provided $2,900,000, or $.09
per share, for additional deferred taxes resulting from the increase in
the Federal statutory rate from 34% to 35% enacted on August 10, 1993.
The 1993 estimated annual effective tax rate was adjusted to reflect
the foregoing rate increase.
Federal income taxes paid amounted to $4,200,000 (all of which related
to 1993) in the nine months ended September 30, 1994 and $534,000 in
the nine months ended September 30, 1993. The Company received a
Federal income tax refund of $6,800,000 in the first quarter of 1993.
Note F - Long-term Debt:
Agreements relating to long-term debt provide for prepayment privileges
(in certain instances with penalties), limitations on the amount of
secured debt and total borrowings, and acceleration of payment under
certain circumstances, including if any of the minimum consolidated
financial covenants contained in certain of such agreements are not
met. The amount that the Company can use for Restricted Payments, as
defined, including dividends and purchases of its capital stock, is
limited as of September 30, 1994 to $83,000,000.
In March 1994, the Company terminated a floating to fixed interest rate
swap (which was designated as a hedge against certain debt) with a bank
covering a notional amount of $24,000,000. The cost of terminating the
swap is being amortized over the remaining term of the hedged debt.
As of September 30, 1994, the Company is a party to fixed to floating
interest rate swaps (designated as hedges against certain debt) ranging
between three and fifteen years with various banks covering notional
amounts aggregating $685,000,000, pursuant to which it pays LIBOR and
receives fixed rates ranging from 5.3% to 8.1% calculated on the
notional amounts. These agreements have various maturity dates from
1995 to 2008.
Approximately 20% of the net book amount of the Company's vessels,
representing approximately 8% of the number of foreign flag and 55% of
the number of U.S. flag vessels, is pledged as collateral for certain
long-term debt.
Interest paid approximated $34,268,000 (nine months ended September 30,
1994) and $32,704,000 (nine months ended September 30, 1993), excluding
capitalized interest.
(See Notes on Following Pages)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Financial Statements
Note G - Other Income - net:
Other income - net consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- --------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment income:
Interest and dividends $2,185,000 $1,677,000 $ 5,708,000 $ 5,654,000
Gain on sale of
securities 686,000 4,501,000 5,304,000 5,266,000
---------- ---------- ----------- -----------
2,871,000 6,178,000 11,012,000 10,920,000
Gain on disposal
of vessels 4,303,000 6,815,000 12,088,000
Foreign currency
exchange gain/(loss) 673,000 (280,000) 647,000 (1,289,000)
Minority interest (172,000) 9,000 (16,000) (174,000)
Miscellaneous - net 587,000 994,000 2,119,000 2,723,000
---------- ---------- ----------- -----------
$8,262,000 $6,901,000 $20,577,000 $24,268,000
=========== ========== ============ ===========
</TABLE>
Note H - Commitments and Other Comments:
1. As of November 9, 1994, commitments with an aggregate unpaid cost of
approximately $53,100,000 exist for the construction of three foreign
flag bulk vessels, scheduled to be delivered in 1994 and 1995. Unpaid
costs are net of $177,000,000 of progress payments and prepayments (all
paid prior to September 30, 1994) and of discounts resulting from such
prepayments.
In October 1994, the Company entered into a letter agreement providing
for the construction of two foreign flag VLCCs scheduled to be
delivered in 1996 and 1997, at an aggregate price of approximately
$180,000,000.
2. In March 1994, the Company sold 3,450,000 shares of its common stock
in a public offering. Net proceeds were $76,004,000, which were
credited to common stock ($3,450,000) and paid-in additional capital
($72,554,000).
Net income/(loss) per share is based on the weighted average number of
common shares outstanding during each period, 36,204,000 shares (three
months ended September 30, 1994), 32,677,000 shares (three months ended
September 30, 1993), 35,379,000 shares (nine months ended September 30,
1994) and 32,676,000 shares (nine months ended September 30, 1993).
(See Note on Following Page)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Financial Statements
Note H - Commitments and Other Comments (continued):
Stock options have not been included in the computation of per share
amounts since their effect would not be material. The effect on per
share amounts assuming that the aforementioned sale of shares and the
use of a portion of the proceeds to reduce amounts outstanding under
the Revolving Credit Agreement had occurred at the beginning of 1994
was not material.
3. The Company has hedged its exchange rate risk with respect to
contracted future charter revenues receivable in a foreign currency by
entering into currency swaps with a major financial institution to
deliver such foreign currency at rates which will result in the Company
receiving approximately $150,000,000 for such foreign currency through
2004. Changes in the value of the currency swaps are deferred and are
offset against corresponding changes in the value of the charter hire,
over the related charter periods.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
Operations
Income from Vessel Operations
Revenues and income from vessel operations of the Company are highly
sensitive to patterns of supply and demand for vessels of the types and
sizes owned and operated by the Company and the markets in which those
vessels operate. Freight rates for major bulk commodities are
determined by market forces including local and worldwide demand for
such commodities, volumes of trade, distances between sources and
destinations of cargoes and amount of available tonnage both at the
time such tonnage is required and over periods of projected
requirements. Available tonnage is affected, over time, by the amount
of newbuilding deliveries and removal of existing tonnage from service.
Results in particular periods are also affected by such factors as the
mix between voyage and time charters, the timing of the completion of
voyage charters, the time and prevailing rates when charters that are
currently being performed were negotiated, the levels of applicable
rates and the business available as particular vessels come off
existing charters, and the timing of drydocking of vessels.
Historically, the diversity of the Company's fleet has tended to
cushion the effects of weakness in particular markets. However, since
early 1992 there has been weakness in all of the Company's major
markets, although at various times during 1993 and 1994 market rates in
certain trades were somewhat improved.
Overall, rates in the first nine months of 1994 were disappointing for
crude carriers, particularly for VLCCs (over 200,000 dwt) and, on
average, were below those in the comparable period of 1993. Dry bulk
rates generally stabilized during the first half of 1994, but remained
near the lowest levels seen in the past several years, except for
Capesize vessels (100,000 dwt or more). Rates for the Capesize ships
were at about the same levels as in the first half of 1993. In the
1994 third quarter, dry bulk rates rose above those of the comparable
1993 period for all sizes. Early in the fourth quarter of 1994, rates
for most sizes of tankers and dry bulk carriers in the international
market improved. Near the end of the first quarter of 1994, rates for
U.S. flag product tankers fell sharply as seasonal requirements eased
and tankers that had operated in the crude market for a time returned
to the products trades. Rates for such vessels did not improve until
the early part of the fourth quarter of 1994, when there was a
significant firming. Tonnage demand for U.S. flag crude carriers has
been weak throughout 1994; as of November 9, 1994, three of the
Company's U.S. flag crude carriers remained unemployed, as does a U.S.
flag dry bulk carrier.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Income from Vessel Operations (Continued)
Income from vessel operations for the quarter ended September 30, 1994
decreased by approximately $9,800,000 from the results for the third
quarter of 1993. Approximately $4,200,000 of this decrease was
attributable to the fact that CCLI incurred a loss in the third quarter
of 1994, normally its most profitable quarter of the year, due to the
11-day withdrawal of a vessel from service. OSG's share of the loss
was approximately $1,000,000 whereas the Company's share of CCLI's
profit in the third quarter of 1993 was approximately $3,200,000.
Approximately $2,300,000 of the decrease occurred in the Company's
international bulk shipping business. Rates obtained for certain crude
carrier tonnage, primarily Suezmaxes (approximately 128,000 dwt), were
lower in the third quarter of 1994 as compared to 1993, and results
were adversely affected by substantially increased drydockings in 1994
over 1993. This was partially offset by higher rates obtained in the
1994 quarter than in 1993 for a VLCC fixed on long-term charter earlier
in the year. The balance of the 1994 third quarter decrease was
attributable to reduced income from operations of the U.S. flag fleet.
In the second quarter of 1994, there was an unusually sharp decline in
demand for OSG's tonnage in the U.S. crude market. This decline
persisted in the third quarter of 1994 and three of the Company's U.S.
flag crude carriers were idle for substantial portions of that period.
An older U.S. flag petroleum products carrier was also idle during a
portion of the quarter due to lack of employment and the results from
two U.S. flag dry bulk carriers were less favorable in the 1994 period
compared to 1993. Rates realized for certain modern U.S. flag petroleum
products tonnage increased in the 1994 third quarter as compared to
1993 and a crude carrier that was idle during the third quarter of 1993
was employed during the 1994 quarter.
Income from vessel operations for the first nine months of 1994
decreased by approximately $16,800,000 from the results for the
comparable period of 1993. Approximately 60% of this decrease occurred
due to a decline in results of operations of the U.S. flag fleet
substantially because of the impact of the idle U.S. flag crude
carriers (which were also idle during portions of the second quarter of
1994) and the petroleum products carrier and the decline in results of
the dry bulk carriers as set forth above. This was partially offset by
increased rates for certain modern U.S. flag petroleum products carrier
tonnage and increased employment for a crude carrier in the 1994 first
nine months as compared to 1993. OSG's share of CCLI's earnings was
approximately $2,600,000 for the nine months ended September 30, 1994
compared with approximately $5,500,000 for the comparable 1993 period.
This decline reflects the withdrawal of a vessel from service referred
to above. Income from foreign flag bulk shipping vessel operations
declined by approximately $3,600,000, reflecting lower rates obtained
for foreign flag crude carrier tonnage, primarily Suezmaxes and
Aframaxes (approximately 96,000 dwt) and increased drydockings in the
1994 first nine months compared to 1993. This was partially offset by
higher rates obtained for a VLCC in the first nine months of 1994
compared to 1993, as set forth above.
The effect of vessels delivered in 1994 and vessels sold in 1994 and
1993 is also reflected in both the three month and nine month analyses.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Income from Vessel Operations (continued)
The decreases in income attributable to bulk shipping joint ventures in
the 1994 periods as compared to 1993 resulted primarily from the effect
on revenues of increased drydockings in 1994 as compared to the
corresponding periods of 1993.
Other Income-Net
The details of other income are shown in Note G. Interest and dividends
increased in the 1994 third quarter and first nine months as compared
to the 1993 periods because of higher rates of return on interest-
bearing deposits and investments and increased amounts utilized for
such deposits and investments. The nine month increase was net of a
decrease, reflecting the sale or redemption of certain preferred stocks
during and subsequent to the first nine months of 1993 which were
replaced with lower yielding investments. Disposal of vessels resulted
in gains of approximately $4,300,000 and $6,800,000 in the third
quarter and first nine months of 1994, respectively, and approximately
$12,100,000 in the first nine months of 1993. Gain on sale of
securities was approximately $700,000 and $5,300,000 in the third
quarter and first nine months of 1994, respectively, and approximately
$4,500,000 and $5,300,000, respectively, in the comparable 1993
periods. Other income also reflects the results of foreign currency
transactions in all four periods.
Interest Expense
Interest expense increased in the third quarter and first nine months
of 1994 from the comparable periods of 1993 primarily as a result of
increases in the average amount of debt outstanding in the 1994 periods
and increased rates on floating rate debt, net of increased interest
costs capitalized in connection with vessel construction. Interest
expense also reflects net benefits from interest rate swaps of
$1,700,000 and $7,400,000 in the third quarter and first nine months of
1994, respectively, and $3,700,000 and $9,600,000, respectively, in the
comparable periods of 1993.
Provision for Federal Income Taxes
There were income tax credits in the third quarter and first nine
months of 1994 of $600,000 and $2,775,000, respectively, as a result of
pretax losses, adjusted to reflect income items which are not subject
to tax and the dividends received deduction. The provisions for taxes
of $5,000,000 and $8,400,000 in the comparable 1993 periods include
$2,900,000 for additional deferred taxes resulting from the increase in
the Federal statutory rate from 34% to 35% enacted in August 1993. The
balance of the 1993 provisions were based on pretax income, adjusted
for the same items referred to above.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Liquidity and Sources of Capital
As reflected in the accompanying condensed financial statements working
capital at September 30, 1994 was approximately $81,000,000. Current
assets are highly liquid, consisting principally of cash, interest-
bearing deposits and receivables. The Company also had investments in
marketable securities carried as noncurrent assets, other than
securities included in restricted funds, with a market value of
approximately $39,000,000.
Net cash provided by operating activities in the first nine months of
1994 approximated $17,000,000 (which is not necessarily indicative of
the cash to be provided by operating activities for a full fiscal
year). Current financial resources, together with cash anticipated to
be generated from operations, are expected to be adequate to meet
requirements for short-term funds in the next year. As of September 30,
1994, the Company is a party to fixed to floating interest rate swaps
(designated as hedges against certain debt) ranging between three and
fifteen years with various banks covering notional amounts aggregating
$685,000,000, pursuant to which it pays LIBOR and receives fixed rates
ranging from 5.3% to 8.1% calculated on the notional amounts. These
agreements have various maturity dates from 1995 to 2008.
The Company has an unsecured long-term credit facility of $500,000,000,
of which $94,000,000 was used at September 30, 1994, and an unsecured
short-term credit facility of $30,000,000, which was unused at that
date. In March 1994, the Company sold 3,450,000 shares of its common
stock for net proceeds of approximately $76,000,000, of which
$50,000,000 was used to reduce amounts outstanding under the Revolving
Credit Agreement. The remaining proceeds were added to working capital.
At November 9, 1994, commitments with an aggregate unpaid cost of
approximately $53,100,000 exist for the construction of three foreign
flag bulk vessels scheduled for delivery in 1994 and 1995. In October
1994, the Company entered into a letter agreement providing for the
construction of two foreign flag VLCCs scheduled to be delivered in
1996 and 1997, at an aggregate price of approximately $180,000,000.
Ratio of Earnings to Fixed Charges
There was a deficiency of earnings to fixed charges for the nine months
ended September 30, 1994 of $17,887,000. This has been computed by
subtracting the sum of income before Federal income taxes and fixed
charges from fixed charges. Fixed charges consist of interest expense,
including the proportionate share of interest of joint venture
companies, capitalized interest and an estimate of the interest
component of an operating lease.
Independent Accountant's Report on Review of Interim Financial
Information
The accompanying financial statements as of September 30, 1994 and for
the three and nine months ended September 30, 1994 and 1993 are
unaudited; however, such financial statements have been reviewed by the
Company's independent accountants.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
PART II
Item 6(a). Exhibits
See Exhibit Index on page 18.
Item 6(b). Reports on Form 8-K
The registrant was not required to file any report on Form 8-K during
the quarter ended September 30, 1994.
<PAGE>
Ernst & Young LLP 787 Seventh Avenue Phone: 212 773 3000
New York, New York 10019
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM FINANCIAL
INFORMATION
To the Stockholders
Overseas Shipholding Group, Inc.
We have reviewed the accompanying condensed consolidated balance sheet
of Overseas Shipholding Group, Inc. and subsidiaries as of September
30, 1994 and the related condensed consolidated statements of
operations and retained earnings for the three month and nine month
periods ended September 30, 1994 and 1993 and the related condensed
consolidated statements of cash flows for the nine month periods ended
September 30, 1994 and 1993. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with generally
accepted auditing standards, which will be performed for the full year
with the objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Overseas
Shipholding Group, Inc. and subsidiaries as of December 31, 1993, and
the related consolidated statements of income and retained earnings
and cash flows for the year then ended, not presented herein, and in
our report dated March 7, 1994, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1993, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from
which it has been derived.
ERNST & YOUNG LLP
November 9, 1994
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC.
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
OVERSEAS SHIPHOLDING GROUP, INC.
--------------------------------
(Registrant)
Date: November 10, 1994 S/ROBERT N. COWEN
----------------- ---------------------------------
Robert N. Cowen
Senior Vice President,
Secretary and General Counsel
Date: November 10, 1994 S/ALAN CARUS
----------------- ------------------------
Alan Carus
Controller
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
EXHIBIT INDEX
12. Computation of Ratio of Earnings to Fixed Charges.
15. Letter from Ernst & Young.
27. Financial Data Schedule.
NOTE: Instruments authorizing long-term debt of the
registrant and subsidiaries, which do not exceed
10% of their total assets on a consolidated basis,
are not being filed herewith. The registrant
agrees to furnish a copy of each such instrument
to the Commission upon request.
<TABLE>
<CAPTION>
OVERSEAS SHIPHOLDING GROUP, INC.
RATIO OF EARNINGS TO FIXED CHARGES
For the nine months ended September 30, 1994
(In thousands)
Presented in connection with Amendment No. 1
filed on November 9, 1993 to Registration Statement No. 33-50441
<S> <C>
Loss before Federal income taxes ($ 4,671)
Adjustments of income related to
companies owned less than 100% (2,010)
Interest expense 39,768
Proportionate share of interest of
50% - owned companies 6,984
Interest component of an operating
lease 2,252
Amortization of capitalized interest 1,764
-------
Earnings $44,087
=======
Interest expense $39,768
Proportionate share of fixed charges
of 50% - owned companies 8,996
Capitalized interest 10,958
Interest component of an operating
lease 2,252
-------
Fixed charges $61,974
=======
Deficiency of earnings available to cover
fixed charges ($17,887)
==========
</TABLE>
<PAGE>
November 9, 1994
Securities and Exchange Commission
Washington, D. C. 20549
We are aware of the incorporation by reference in the Registration
Statements (Form S-8 No. 33-44013 and Form S-3 No. 33-50441) of
Overseas Shipholding Group, Inc. of our report dated November 9, 1994
relating to the unaudited condensed consolidated interim financial
statements of Overseas Shipholding Group, Inc. which are included in
its Form 10-Q for the quarter ended September 30, 1994.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not
part of the registration statement prepared or certified by accountants
within the meaning of Section 7 or 11 of the Securities Act of 1933.
ERNST & YOUNG LLP
New York, New York
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 90,047
<SECURITIES> 38,653
<RECEIVABLES> 38,116
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 152,534
<PP&E> 1,162,454
<DEPRECIATION> 624,821
<TOTAL-ASSETS> 1,875,008
<CURRENT-LIABILITIES> 71,898
<BONDS> 694,959
<COMMON> 39,591
0
0
<OTHER-SE> 783,480
<TOTAL-LIABILITY-AND-EQUITY> 1,875,008
<SALES> 0
<TOTAL-REVENUES> 270,928
<CGS> 0
<TOTAL-COSTS> 256,408
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,768
<INCOME-PRETAX> ( 4,671 )
<INCOME-TAX> ( 2,775 )
<INCOME-CONTINUING> ( 1,896 )
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ( 1,896 )
<EPS-PRIMARY> ( 0.05 )
<EPS-DILUTED> ( 0.05 )
</TABLE>
