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
June 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 August 10, 1994 - 36,203,902
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1994 AND DECEMBER 31, 1993
<TABLE>
<CAPTION>
JUNE DECEMBER
30, 1994 31, 1993(A)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash, including interest-bearing deposits
of $82,000,000 and $101,790,000 $ 90,508,000 $110,167,000
Receivables 33,596,000 27,182,000
Prepaid expenses 27,753,000 25,738,000
-------------- ------------
Total Current Assets 151,857,000 163,087,000
Investments in Marketable Securities 30,120,000 21,158,000
Capital Construction and Restricted Funds 106,191,000 105,654,000
Vessels, at cost, less accumulated depreciation of
$483,565,000 and $463,864,000 - Note F 1,058,491,000 999,782,000
Vessels Under Capital Leases, less accumulated
amortization of $134,578,000 and $129,135,000 124,900,000 130,342,000
Investment in Celebrity Cruise Lines Inc. - Note B 233,294,000 229,780,000
Investments in Bulk Shipping Joint Ventures - Note C 79,393,000 78,484,000
Other Assets 101,989,000 95,450,000
-------------- ------------
$1,886,235,000 $1,823,737,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C>
Accounts payable $ 8,406,000 $ 3,811,000
Sundry liabilities and accrued expenses 46,006,000 36,251,000
-------------- --------------
54,412,000 40,062,000
Current installments of long-term debt - Note F 15,691,000 15,003,000
Current obligations under capital leases 9,197,000 8,555,000
-------------- --------------
Total Current Liabilities 79,300,000 63,620,000
Advance Charter Revenues 7,066,000 7,722,000
Long-term Debt - Note F 698,557,000 705,558,000
Obligations Under Capital Leases 165,902,000 170,716,000
Minority Interest 3,932,000 4,368,000
Deferred Federal Income Taxes ($102,186,000 and
$100,161,000) and Deferred Credits - Note E 105,776,000 103,316,000
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 93,585,000 21,035,000
Retained Earnings 749,631,000 764,987,000
-------------- --------------
882,807,000 822,163,000
Less - cost of Treasury Stock - 3,386,857 and
3,436,765 shares 49,560,000 50,136,000
-------------- --------------
833,247,000 772,027,000
Less - net unrealized loss on
marketable securities 7,545,000 3,590,000
-------------- --------------
Total Shareholders' Equity 825,702,000 768,437,000
Commitments and Other Comments - Note H
-------------- --------------
$1,886,235,000 $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 SIX MONTHS ENDED JUNE 30, 1994 AND JUNE 30,
1993
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- ----------------------------
JUNE JUNE JUNE JUNE
30, 1994 30, 1993 30, 1994 30, 1993
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Shipping Revenues:
Revenue from voyages $ 77,774,000 $ 91,415,000 $176,579,000 $191,097,000
Income from Celebrity
Cruise Lines Inc. -
Note B 1,831,000 1,559,000 3,514,000 2,353,000
Income attributable to
bulk shipping joint
ventures - Note C 542,000 1,736,000 2,235,000 3,304,000
------------ ----------- ------------ ------------
80,147,000 94,710,000 182,328,000 196,754,000
------------ ----------- ------------ ------------
Shipping Expenses:
Vessel and voyage -
Note D 56,895,000 60,814,000 120,942,000 127,434,000
Depreciation of vessels
and amortization
of capital leases 14,187,000 14,611,000 29,035,000 29,597,000
Agency fees - Note D 7,569,000 8,841,000 15,117,000 16,759,000
General and administrative 2,492,000 1,971,000 5,788,000 4,530,000
----------- ------------ ------------ ------------
81,143,000 86,237,000 170,882,000 178,320,000
------------ ------------ ------------ -------------
Income/(loss) from Vessel
Operations (996,000) 8,473,000 11,446,000 18,434,000
Other Income (net) - Note G 6,205,000 9,966,000 12,315,000 17,367,000
------------ ------------ ------------ ------------
5,209,000 18,439,000 23,761,000 35,801,000
Interest Expense 13,698,000 10,925,000 25,519,000 22,011,000
------------ ------------ ------------ ------------
Income/(loss) before Federal
income taxes (8,489,000) 7,514,000 (1,758,000) 13,790,000
Provision/(credit) for Federal
income taxes, reflecting
deferred provision of
$110,000 and $2,000,000,
$1,825,000 and $3,400,000 -
Note E (3,890,000) 2,000,000 (2,175,000) 3,400,000
------------ ------------ ------------ ------------
Net Income/(loss) (4,599,000) 5,514,000 417,000 10,390,000
Retained Earnings at
beginning of period 765,091,000 766,622,000 764,987,000 766,647,000
------------ ------------ ----------- ------------
760,492,000 772,136,000 765,404,000 777,037,000
Cash Dividends Declared 10,861,000 9,803,000 15,773,000 14,704,000
------------ ------------ ------------ ------------
Retained Earnings at end
of period $749,631,000 $762,333,000 $749,631,000 $762,333,000
============ ============ ============ ============
Per Share Amounts - Note H:
Net income/(loss) ($.14) $.17 $.01 $.32
==== ==== ==== ====
Cash dividends declared* $.30 $.30 $.45 $.45
==== ==== ==== ====
<FN>
*Includes $.15 (1994 and 1993) per share for the third quarter.
(See Accompanying Notes)
</TABLE>
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND JUNE 30, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE JUNE
30, 1994 30, 1993
<S> <C> <C>
Net cash provided by Operating Activities $10,551,000 $ 37,966,000
----------- ------------
Cash Flows from Investing Activities:
Purchases of marketable securities (27,779,000) (24,511,000)
Proceeds from sales of marketable
securities 17,742,000 17,916,000
Additions to vessels (91,297,000) (5,836,000)
Proceeds from disposal of vessels 11,608,000 44,370,000
Other - net 2,468,000 (6,218,000)
----------- ----------
Net cash provided by/(used in)
investing activities (87,258,000) 25,721,000
----------- ------------
Cash Flows from Financing Activities:
Issuance of Common Stock 76,004,000
Issuance of long-term debt 1,000,000 110,000,000
Payments on long-term debt and
obligations under capital leases (11,485,000) (165,533,000)
Cash dividends paid (10,343,000) (9,802,000)
Other - net 1,872,000 (130,000)
----------- ------------
Net cash provided by/(used in)
financing activities 57,048,000 (65,465,000)
------------ ------------
Net Decrease in Cash (19,659,000) (1,778,000)
Cash, including interest-bearing
deposits, at beginning of period 110,167,000 85,699,000
------------ ------------
Cash, including interest-bearing
deposits, at end of period $90,508,000 $ 83,921,000
============ ============
<FN>
(See Accompanying Notes)
</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 June 30, 1994 and for the three month and six
month periods ended June 30, 1994 and June 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 six month periods
ended June 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
--------------------------------
JUNE DECEMBER
30, 1994 31, 1993
-------------- ---------------
<S> <C> <C>
Current Assets $ 43,894,000 $ 38,730,000
Vessels, net 840,047,000 765,850,000
Investment in Celebrity Cruise Lines Inc. 233,294,000 229,780,000
Other Assets 111,459,000 95,628,000
-------------- --------------
1,228,694,000 1,129,988,000
-------------- --------------
Current Installments of Long-term Debt 10,219,000 9,728,000
Other Current Liabilities 13,990,000 8,692,000
-------------- --------------
Total Current Liabilities 24,209,000 18,420,000
Long-term Debt, including intercompany,
and Deferred Credits, etc. 268,417,000 187,252,000
-------------- --------------
292,626,000 205,672,000
-------------- --------------
Net Assets $ 936,068,000 $ 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
----------------------------
JUNE DECEMBER
30, 1994 31, 1993
------------ ------------
<S> <C> <C>
Current assets $121,361,000 $147,344,000
Vessels, net 680,871,000 670,459,000
Other assets 50,527,000 48,072,000
------------ ------------
852,759,000 865,875,000
------------ ------------
Current installments of long-term debt 41,508,000 42,593,000
Other current liabilities 73,126,000 70,612,000
------------ ------------
Total current liabilities 114,634,000 113,205,000
Long-term debt 264,870,000 286,624,000
------------ ------------
379,504,000 399,829,000
------------ ------------
Net assets (principally capital
contributions) $473,255,000 $466,046,000
============ ============
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1994 1993 1994 1993
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Revenue $81,729,000 $76,385,000 $164,413,000 $154,313,000
Costs and expenses 77,973,000 73,152,000 157,204,000 149,419,000
----------- ----------- ------------ ------------
Net income $ 3,756,000 $ 3,233,000 $ 7,209,000 $ 4,894,000
=========== =========== ============ ============
As of August 10, 1994, CCLI has commitments with an aggregate unpaid
cost of $918,000,000 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 $64,300,000 of progress payments (all
paid prior to June 30, 1994). Long-term financing arrangements exist
for substantially all of the unpaid cost of these ships. Approximately
56% 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
-----------------------------
JUNE DECEMBER
30, 1994 31, 1993
------------- ------------
<S> <C> <C>
Current assets (including $7,139,000
and $6,814,000 due from owners) $ 86,632,000 $ 75,236,000
Vessels, net 56,719,000 64,013,000
Other assets (including $30,107,000
and $33,172,000 due from owners) 32,271,000 34,880,000
------------ ------------
175,622,000 174,129,000
Current liabilities 5,932,000 6,792,000
------------ ------------
Net assets (principally undistributed
net earnings) $169,690,000 $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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ -------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue, primarily from
voyages (including
$6,492,000,
$9,282,000,
$14,117,000 and
$17,992,000 from
vessels chartered
to other owners) $9,759,000 $11,022,000 $21,170,000 $21,567,000
Costs and expenses 8,147,000 7,682,000 15,817,000 14,924,000
----------- ----------- ----------- -----------
Net income $1,612,000 $ 3,340,000 $ 5,353,000 $ 6,643,000
========== =========== =========== ===========
</TABLE>
In June 1994, the Company entered into a Memorandum of Agreement on
behalf of 50%-owned companies for the construction of two VLCCs to be
delivered in 1996, at an aggregate price of approximately $180,000,000.
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 $1,095,000 (three months ended June 30, 1994),
$1,473,000 (three months ended June 30, 1993), $2,586,000 (six months
ended June 30, 1994) and $3,053,000 (six months ended June 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 $4,114,000 (three months ended June 30,
1994), $15,026,000 (three months ended June 30, 1993), $11,454,000 (six
months ended June 30, 1994) and $25,660,000 (six months ended June 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 reinvested or are intended to be
reinvested in foreign shipping operations so that the
(See Notes on Following Pages)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Financial Statements
Note E - Taxes: (continued)
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.
Federal income taxes paid (all of which related to 1993) amounted to
$4,200,000 in the six months ended June 30, 1994. No payments of
Federalincome taxes were required or made during the six month period
ended June 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 June 30, 1994 to $84,000,000.
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 June 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 25% 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 $24,514,000 (six months ended June 30, 1994)
and $21,870,000 (six months ended June 30, 1993), excluding capitalized
interest.
(See Notes on Following Page)
<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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- --------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment income:
Interest and dividends $1,764,000 $1,906,000 $ 3,523,000 $ 3,977,000
Gain on sale of
securities 2,202,000 703,000 4,618,000 765,000
---------- ---------- ----------- -----------
3,966,000 2,609,000 8,141,000 4,742,000
Gain on disposal
of vessels 6,011,000 2,512,000 12,088,000
Foreign currency
exchange gain/(loss) 538,000 (107,000) (26,000) (1,009,000)
Minority interest 145,000 ( 40,000) 156,000 (183,000)
Miscellaneous - net 1,556,000 1,493,000 1,532,000 1,729,000
---------- ---------- ----------- -----------
$6,205,000 $9,966,000 $12,315,000 $17,367,000
=========== ========== ============ ===========
</TABLE>
Note H - Commitments and Other Comments:
1. As of August 10, 1994, commitments with an aggregate unpaid cost of
approximately $64,300,000 exist for the construction of four foreign
flag bulk vessels, scheduled to be delivered in 1994 and 1995. Unpaid
costs are net of $221,000,000 of progress payments and prepayments (all
paid prior to June 30, 1994) and of discounts resulting from such
prepayments.
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 per share is based on the weighted average number of common
shares outstanding during each period, 36,204,000 shares (three months
ended June 30, 1994), 32,676,000 shares (three months ended June 30,
1993), 34,960,000 shares (six months ended June 30, 1994) and
32,675,000 shares (six months ended June 30, 1993).
Stock options have not been included in the computation of net income
per share since their effect would not be material. The effect on net
income per share 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. Beginning in the fourth quarter
of 1993, spot market freight rates for foreign flag VLCCs (over 200,000
dwt) and dry bulk carriers weakened, while rates for foreign and U.S.
flag products carriers experienced seasonal increases which continued
in early 1994.
Overall, rates in the first half of 1994 were disappointing for crude
carriers, particularly for VLCCs and, on average, were below those in
the first half 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. Rates for VLCCs and Capesize vessels in the
international market improved early in the third quarter of 1994;
however, rates for other international flag tankers and dry bulk
carriers remained near or were down from their second quarter levels.
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 throughout the second
quarter and the early part of the third quarter. Tonnage demand for
U.S. flag crude carriers has significantly weakened; as of August 10,
1994, two of the Company's U.S. flag crude carriers remained
unemployed, as does a U.S. flag petroleum products carrier.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Income from Vessel Operations (Continued)
Results from vessel operations for the quarter ended June 30, 1994
decreased by approximately $9,500,000 from the results for the second
quarter of 1993. Approximately 60% of this decrease was attributable
to a reduction in results of 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. Four of the Company's
larger U.S. flag crude carriers were idle for varying portions of the
quarter. The effect on OSG's fleet was exacerbated by the entry of
previously idle tonnage into the market. A U.S. flag dry bulk carrier
was also idle during the quarter due to lack of employment. Rates for
certain U.S. flag petroleum products tonnage increased in the 1994
second quarter as compared to 1993. The balance of the 1994 second
quarter decrease was attributable to reduced income from foreign flag
vessel operations reflecting lower rates obtained for certain crude
carrier tonnage, primarily Suezmaxes (approximately 128,000 dwt) and
Aframaxes (approximately 96,000 dwt), in the 1994 second quarter than
in 1993. This was partially offset by higher rates obtained for certain
VLCC tonnage in the 1994 quarter than in 1993. The effect of vessels
delivered in 1994 and vessels sold in 1994 and 1993 is also reflected.
Income from vessel operations for the first half of 1994 decreased by
approximately $7,000,000 from the results for the comparable period of
1993. This decrease occurred primarily due to a decline in results of
operations of the U.S. flag fleet during the second quarter for the
reasons set forth above. In addition, a U.S. flag dry bulk carrier and
certain crude carrier tonnage were idle during the latter part of the
first quarter. This was partially offset by improved earnings of a U.S.
flag dry bulk carrier in the first quarter of 1994 as compared to 1993
and increased rates for certain U.S. flag petroleum products carrier
tonnage in the 1994 first half as compared to 1993. Income from foreign
flag vessel operations reflected lower rates obtained for the
aforementioned foreign flag crude carrier tonnage in the 1994 first
half compared to 1993. This was offset primarily by higher rates
obtained for certain VLCC tonnage in the first half of 1994 compared to
1993.
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.
The Company's equity in the income of CCLI improved in 1994 over 1993
due to an improvement in CCLI's earnings resulting primarily from
higher passenger loads and increased per diems.
In July 1994, CCLI withdrew from service one of its vessels, the
HORIZON, as a precautionary health measure for a period of eleven days
(affecting two week-long cruises). Following extensive testing done in
cooperation with the the Centers for Disease Control and Prevention
("CDC"), the vessel was cleared by the CDC to resume her normal
cruising schedule. CCLI maintains insurance which covers liabilities
that may arise out of this matter, including a major portion of the
losses and expenses associated with the canceled cruises. The vessel is
now back in normal service. The effect of of these events on the
current and future operating results of the vessel is not yet fully
determinable.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Other Income-Net
The details of other income are shown in Note G. Interest and dividends
decreased in the 1994 second quarter and first half as compared to the
1993 periods, reflecting a change in the mix of the Company's
investment portfolio. During the 1994 periods the Company's investments
in common stocks and interest-bearing deposits and securities increased
compared to 1993, at which time the Company had investments in certain
preferred stocks which were redeemed or sold during and subsequent to
the first half of 1993; these 1994 investments had lower yields than
the ones held in 1993. Disposal of vessels resulted in gains of
approximately $2,500,000 in the first half of 1994 and approximately
$6,000,000 and $12,000,000 in the second quarter and first half of
1993, respectively. Gain on sale of securities was approximately
$2,200,000 and $4,600,000 in the second quarter and first half of 1994,
respectively, and approximately $700,000 and $800,000, 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 second quarter and first half 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 $1,900,000 and
$5,700,000 in the second quarter and first half of 1994, respectively,
and $2,900,000 and $5,900,000, respectively, in the comparable periods
of 1993.
Provision for Federal Income Taxes
There were income tax credits in the second quarter and first half of
1994 of $3,890,000 and $2,175,000, 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
$2,000,000 and $3,400,000 in the comparable 1993 periods were based on
pretax income, adjusted for the same items referred to above.
Liquidity and Sources of Capital
As reflected in the accompanying condensed financial statements working
capital at June 30, 1994 was approximately $73,000,000. 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 $30,000,000.
Net cash provided by operating activities in the first half of 1994
approximated $11,000,000 (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 June 30,
1994, the Company is a party to fixed to floating interest rate swaps
(designated as hedges against certain debt)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Liquidity and Sources of Capital (Continued)
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 $86,000,000 was used at June 30, 1994, and an unsecured short-
term credit facility of $30,000,000, of which $7,000,000 was used at
that date (the latter amount was classified as long-term since the
Company intends to replace such borrowings with borrowings under its
long-term facility). 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 August 10, 1994, commitments with an aggregate
unpaid cost of approximately $64,300,000 exist for the construction of
four foreign flag bulk vessels scheduled for delivery in 1994 and 1995.
Ratio of Earnings to Fixed Charges
There was a deficiency of earnings to fixed charges for the six months
ended June 30, 1994 of $11,136,000. 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 June 30, 1994 and for the
three and six months ended June 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 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders on June 9, 1994 the stockholders
elected twelve directors, each for a term of one year, and approved the
appointment of Ernst & Young as independent auditors for the year 1994.
Proxies for the meeting were solicited pursuant to Regulation 14A of
the Securities Exchange Act of 1934. A total of 31,474,255 shares were
voted with respect to each of the aforementioned matters, and there
were no broker non-votes. The tabulation of the votes cast for each
nominee for director was as follows:
<TABLE>
NUMBER OF SHARES
NAME OF NOMINEE VOTED FOR WITHHELD AUTHORITY
FOR DIRECTOR TO VOTE
<S> <C> <C>
Raphael Recanati 30,500,400 973,855
Morton P. Hyman 30,595,840 878,415
Michael A. Recanati 30,594,480 879,775
Robert N. Cowen 30,595,700 878,555
George C. Blake 30,695,670 778,585
Thomas H. Dean 30,590,187 884,068
Michael Fribourg 30,593,189 881,066
William L. Frost 30,694,329 779,926
Ran Hettena 30,594,598 879,657
Stanley Komaroff 30,592,390 881,865
Solomon N. Merkin 30,591,046 883,209
Joel I. Picket 30,691,276 782,979
</TABLE>
The resolution to approve the appointment of Ernst & Young as
independent auditors was adopted by a vote of 31,438,687 shares in
favor, 26,756 shares against and 8,812 shares abstained.
Item 6(a). Exhibits
See Exhibit Index on page 17.
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 June 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 June 30,
1994 and the related condensed consolidated statements of operations
and retained earnings for the three month and six month periods ended
June 30, 1994 and 1993 and the related condensed consolidated
statements of cash flows for the six month periods ended June 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
August 10, 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: August 11, 1994 s/Robert N. Cowen
----------------- ---------------------------------
Robert N. Cowen
Senior Vice President,
Secretary and General Counsel
Date: August 11, 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.
23. Letter from Ernst & Young.
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 six months ended June 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 ($ 1,758)
Adjustments of income related to
companies owned less than 100% (1,687)
Interest expense 25,519
Proportionate share of interest of
50% - owned companies 4,792
Interest component of an operating
lease 1,502
Amortization of capitalized interest 1,176
-------
Earnings $29,544
=======
Interest expense $25,519
Proportionate share of fixed charges
of 50% - owned companies 6,026
Capitalized interest 7,633
Interest component of an operating
lease 1,502
-------
Fixed charges $40,680
=======
Deficiency of earnings available to cover
fixed charges ($11,136)
=========
</TABLE>
<PAGE>
August 12, 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 August 10, 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 June 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