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, 1995
-------------
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 9, 1995 - 36,225,185
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
JUNE DECEMBER
30, 1995 31, 1994 (A)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash, including interest-bearing
deposits of $150,830,000 and
$88,490,000 $ 162,549,000 $ 100,034,000
Receivables 28,984,000 33,804,000
Prepaid expenses 30,269,000 26,868,000
-------------- --------------
Total Current Assets 221,802,000 160,706,000
Investments in Marketable Securities 17,371,000 36,052,000
Capital Construction and Restricted Funds 116,526,000 105,570,000
Vessels, at cost, less accumulated
depreciation of $528,148,000 and
$500,477,000 - Note F 1,157,812,000 1,063,784,000
Vessels Under Capital Leases, less
accumulated amortization of
$145,463,000 and $140,020,000 114,014,000 119,457,000
Investment in Celebrity Cruise Lines
Inc. - Note B 228,685,000 230,642,000
Investments in Bulk Shipping Joint
Ventures - Note C 85,883,000 82,894,000
Other Assets 100,048,000 106,304,000
-------------- --------------
$2,042,141,000 $1,905,409,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C>
Accounts payable $ 5,086,000 $ 4,563,000
Sundry liabilities and accrued expenses 50,821,000 39,242,000
-------------- --------------
55,907,000 43,805,000
Current installments of long-term debt
- Note F 15,521,000 17,638,000
Current obligations under capital leases 10,174,000 9,737,000
-------------- --------------
Total Current Liabilities 81,602,000 71,180,000
Advance Time Charter Revenues 4,264,000 4,828,000
Long-term Debt - Note F 908,076,000 749,185,000
Obligations Under Capital Leases 155,614,000 160,871,000
Minority Interest 3,093,000 3,803,000
Deferred Federal Income Taxes
($95,120,000 and $102,170,000) and
Deferred Credits - Note E 98,702,000 105,763,000
Shareholders' Equity - Notes E and H:
Common Stock, par value $1 per share:
Authorized - 60,000,000 shares
Issued - 39,590,759 shares 39,591,000 39,591,000
Paid-in Additional Capital 93,638,000 93,599,000
Retained Earnings 711,996,000 737,583,000
-------------- --------------
845,225,000 870,773,000
Less - cost of Treasury Stock -
3,373,032 and 3,380,838 shares 49,405,000 49,491,000
-------------- --------------
795,820,000 821,282,000
Less - net unrealized loss on
marketable securities 5,030,000 11,503,000
-------------- --------------
Total Shareholders' Equity 790,790,000 809,779,000
Commitments and Other Comments -
Note H
-------------- --------------
$2,042,141,000 $1,905,409,000
============== ==============
<FN>
(A) The balance sheet at December 31, 1994 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, 1995 AND JUNE 30, 1994
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- ----------------------------
JUNE JUNE JUNE JUNE
30, 1995 30, 1994 30, 1995 30, 1994
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shipping Revenues:
Revenue from voyages $ 90,875,000 $ 77,774,000 $196,618,000 $176,579,000
Income attributable to
bulk shipping joint
ventures - Note C
1,645,000 542,000 2,847,000 2,235,000
------------ ------------ ------------ ------------
92,520,000 78,316,000 199,465,000 178,814,000
------------ ------------ ------------ ------------
Shipping Expenses:
Vessel and voyage -
Note D 64,381,000 56,895,000 130,320,000 120,942,000
Depreciation of vessels
and amortization
of capital leases 16,146,000 14,187,000 32,621,000 29,035,000
Agency fees - Note D 8,602,000 7,569,000 16,184,000 15,117,000
General and administrative 1,919,000 2,492,000 4,961,000 5,788,000
------------ ------------ ------------ ------------
91,048,000 81,143,000 184,086,000 170,882,000
------------ ------------ ------------ ------------
Income/(loss) from Vessel
Operations 1,472,000 (2,827,000) 15,379,000 7,932,000
Equity in Results of
Celebrity Cruise
Lines Inc.- Note B (696,000) 1,831,000 (1,957,000) 3,514,000
Other Income (net) -
Note G 6,587,000 6,205,000 5,922,000 12,315,000
------------ ------------ ------------ ------------
7,363,000 5,209,000 19,344,000 23,761,000
Interest Expense 16,497,000 13,698,000 33,084,000 25,519,000
------------ ------------ ------------ ------------
(Loss) before Federal
income taxes (9,134,000) (8,489,000) (13,740,000) (1,758,000)
(Credit) for Federal
income taxes, reflecting
deferred provision/
(credit) of ($3,150,000),
$ 110,000, ($4,450,000)
and $1,825,000 - Note E (3,150,000) (3,890,000) ( 4,450,000) (2,175,000)
------------ ----------- ------------ ------------
Net Income/(loss) (5,984,000) (4,599,000) ( 9,290,000) 417,000
Retained Earnings at
beginning of period 728,846,000 765,091,000 737,583,000 764,987,000
------------ ------------ ------------ ------------
722,862,000 760,492,000 728,293,000 765,404,000
Cash Dividends Declared 10,866,000 10,861,000 16,297,000 15,773,000
------------ ------------ ------------ ------------
Retained Earnings at end
of period $ 711,996,000 $749,631,000 $711,996,000 $749,631,000
============ ============ ============ ============
Per Share Amounts - Note H:
Net income/(loss) ($.17) ($.14) ($ .26) $.01
==== ==== ===== ====
Cash dividends declared* $.30 $.30 $ .45 $.45
==== ==== ===== ====
<FN>
*Includes $.15 (1995 and 1994) 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, 1995 AND JUNE 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE JUNE
30, 1995 30, 1994
<S> <C> <C>
Net cash provided by Operating Activities $ 15,615,000 $ 10,551,000
------------ ------------
Cash Flows from Investing Activities:
Purchases of marketable securities ( 2,892,000) (27,779,000)
Proceeds from sales of marketable
securities 22,218,000 17,742,000
Purchases of other investments ( 3,342,000)
Proceeds from disposal of other
investments 13,682,000
Additions to vessels (121,698,000) (91,297,000)
Proceeds from disposal of vessels 11,608,000
Other - net ( 2,376,000) 2,468,000
------------ ------------
Net cash used in investing activities ( 94,408,000) (87,258,000)
------------ ------------
Cash Flows from Financing Activities:
Issuance of Common Stock 76,004,000
Issuance of long-term debt 166,000,000 1,000,000
Payments on long-term debt and
obligations under capital leases ( 14,046,000) (11,485,000)
Cash dividends paid ( 10,865,000) (10,343,000)
Other - net 219,000 1,872,000
------------ ------------
Net cash provided by
financing activities 141,308,000 57,048,000
------------ ------------
Net Increase/(decrease) in Cash 62,515,000 (19,659,000)
Cash, including interest-bearing
deposits, at beginning of period 100,034,000 110,167,000
------------ ------------
Cash, including interest-bearing
deposits, at end of period $162,549,000 $ 90,508,000
============ ============
<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, 1994.
The statements as of June 30, 1995 and for the three month and six month
periods ended June 30, 1995 and June 30, 1994 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, 1995 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, 1995 31, 1994
-------------- ---------------
<S> <C> <C>
Current Assets $ 48,667,000 $ 41,515,000
Vessels, net 961,179,000 859,939,000
Investment in Celebrity Cruise
Lines Inc. 228,685,000 230,642,000
Other Assets 120,579,000 119,065,000
-------------- --------------
1,359,110,000 1,251,161,000
-------------- --------------
Current Installments of
Long-term Debt 9,626,000 11,958,000
Other Current Liabilities 20,465,000 17,212,000
-------------- --------------
Total Current Liabilities 30,091,000 29,170,000
Long-term Debt, including
intercompany, and Deferred
Credits, etc. 373,368,000 276,477,000
-------------- --------------
403,459,000 305,647,000
-------------- --------------
Net Assets $ 955,651,000 $ 945,514,000
============== ==============
<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, 1995 31, 1994
------------ ------------
<S> <C> <C>
Current assets $ 91,228,000 $101,149,000
Vessels, net 714,821,000 696,126,000
Other assets 44,949,000 51,084,000
------------ ------------
850,998,000 848,359,000
------------ ------------
Short-term debt and current
installments of long-term debt 54,499,000 54,676,000
Other current liabilities 75,287,000 65,289,000
------------ ------------
Total current liabilities 129,786,000 119,965,000
Long-term debt 257,415,000 260,643,000
------------ ------------
387,201,000 380,608,000
------------ ------------
Net assets (principally capital
contributions) $463,797,000 $467,751,000
============ ============
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue $73,705,000 $81,729,000 $138,582,000 $164,413,000
Costs and expenses 75,105,000 77,973,000 142,536,000 157,204,000
----------- ----------- ------------- -----------
Net income/(loss) ($ 1,400,000) $ 3,756,000 ($ 3,954,000) $ 7,209,000
=========== =========== ============ ===========
</TABLE>
The Company's equity in the results of CCLI for each of the periods is
before interest expense of approximately $4,200,000 (three months
ended June 30, 1995), $3,000,000 (three months ended June 30, 1994),
$8,100,000 (six months ended June 30, 1995) and $5,900,000 (six months
ended June 30, 1994), estimated to have been incurred by the Company
in connection with the funding of its investment in CCLI. These
amounts were calculated based on the Company's long-term interest
rates during the respective periods.
As of August 9, 1995, CCLI has commitments (which are nonrecourse to OSG)
with an approximate aggregate unpaid cost of $930,000,000 for the
construction of three cruise ships, one scheduled for delivery in late
1995, one in late 1996 and the third in late 1997. Unpaid costs are
net of $99,000,000 of progress payments (all paid prior to July 1,
1995). Long-term financing arrangements exist for substantially all
of the unpaid cost of these ships. Approximately 57% of the unpaid
cost is denominated in German marks, substantially all of which is
covered by forward contracts or option contracts; this includes
approximately 17% of the unpaid cost hedged by currency option
contracts that terminate in the event that the exchange rate of the
German mark to the dollar falls below certain levels.
(See Notes on Following Pages)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Financial Statements
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:
<TABLE>
<CAPTION>
AS OF
--------------------------
JUNE DECEMBER
30, 1995 31, 1994
----------- ------------
<S> <C> <C>
Cash ($26,142,000 and $62,486,000) and
other current assets (including
$9,028,000 and $8,265,000 due
from owners) $ 42,820,000 $ 78,412,000
Vessels, net 120,974,000 73,286,000
Other assets (including $22,831,000
and $26,279,000 due from owners) 24,908,000 29,573,000
----------- ------------
188,702,000 181,271,000
Current liabilities 4,858,000 4,214,000
----------- -----------
Net assets (principally undistributed
net earnings) $183,844,000 $177,057,000
============ ============
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ -------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue, primarily from
voyages (including
$7,278,000,
$6,492,000,
$14,772,000 and
$14,117,000 from
vessels chartered
to other owners) $11,497,000 $9,759,000 $22,629,000 $21,170,000
Costs and expenses 8,071,000 8,147,000 15,842,000 15,817,000
----------- ----------- ----------- -----------
Net income $ 3,426,000 $1,612,000 $ 6,787,000 $ 5,353,000
=========== =========== =========== ===========
</TABLE>
As of August 9, 1995, certain 50%-owned companies have commitments (which
are nonrecourse to OSG) with an aggregate unpaid cost of $108,000,000
for the construction of two foreign flag VLCCs (very large crude
carriers) scheduled for delivery in late 1996 and early 1997. Unpaid
costs are net of $72,000,000 of progress payments and prepayments (all
paid prior to July 1, 1995) and of discounts resulting from such
prepayments. The joint venture companies expect to pay the unpaid
costs from their available cash resources and to utilize existing long-
term shipyard financing arrangements as needed. Upon delivery, these
vessels will commence eight-year charters to the joint venture partner.
(See Notes on Following Pages)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Financial Statements
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 subsidiaries to render
services related to the chartering and operation of the vessels and
certain general and administrative services for which Maritime and
subsidiaries receive specified compensation. Vessel and voyage
expenses include $1,262,000 (three months ended June 30, 1995),
$1,095,000 (three months ended June 30, 1994), $2,708,000 (six months
ended June 30, 1995) and $2,586,000 (six months ended June 30, 1994),
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 $1,636,000 (three months ended June 30,
1995), $4,114,000 (three months ended June 30, 1994), $10,740,000 (six
months ended June 30, 1995) and $11,454,000 (six months ended June 30,
1994) 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 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 Company's share of the undistributed earnings
of CCLI was required, since it is intended that such undistributed
earnings will be indefinitely reinvested.
Federal income taxes paid (which related to prior periods in each case)
amounted to $600,000 and $4,200,000 in the six months ended June 30,
1995 and 1994, respectively.
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, 1995 to $54,800,000.
(See Notes on Following Pages)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Financial Statements
Note F - Long-term Debt (continued):
As of June 30, 1995, the Company is a party to fixed to floating interest
rate swaps (designated as hedges against certain debt) 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 contain no
leverage features and have various maturity dates from 1995 to 2008.
Approximately 20% of the net book amount of the Company's vessels,
representing three foreign flag and nine U.S. flag vessels, is pledged
as collateral for certain long-term debt.
Interest paid approximated $34,746,000 (six months ended June 30, 1995) and
$24,514,000 (six months ended June 30, 1994), excluding capitalized
interest.
Note G - Other Income - net:
Other income - net consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- --------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment income:
Interest and dividends $2,715,000 1,764,000 $5,397,000 $ 3,523,000
Gain on sale of
securities 2,461,000 2,202,000 2,565,000 4,618,000
---------- ---------- ----------- -----------
5,176,000 3,966,000 7,962,000 8,141,000
Gain on disposal
of vessels 2,512,000
Foreign currency
exchange gain/(loss) 132,000 538,000 ( 2,254,000) (26,000)
Minority interest 577,000 145,000 710,000 156,000
Miscellaneous - net 702,000 1,556,000 ( 496,000) 1,532,000
---------- ---------- ----------- -----------
$6,587,000 $6,205,000 $ 5,922,000 $12,315,000
========== ========== =========== ===========
</TABLE>
Note H - Commitments and Other Comments:
1. As of August 9, 1995, the Company has commitments with an aggregate
unpaid cost of approximately $273,700,000 for the construction of six
foreign flag bulk vessels, two of which are scheduled for delivery in
1995, three in late 1996 and the other one in 1997. Unpaid costs are
net of $176,000,000 of progress payments and prepayments (all paid
prior to July 1, 1995) and of discounts arising from such prepayments.
Long-term shipyard financing arrangements exist for approximately
$76,000,000 of the unpaid cost of certain of the vessels.
(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):
2. Net income/(loss) per share is based on the weighted average number of
common shares outstanding during each period, 36,217,000 shares (three
months ended June 30, 1995), 36,204,000 shares (three months ended June
30, 1994), 36,215,000 shares (six months ended June 30, 1995) and
34,960,000 shares (six months ended June 30, 1994).
Stock options have not been included in the computation of net income/(loss)
per share since their effect thereon would either be antidilutive or
not material.
3. The Company has hedged its exchange rate risk with respect to contracted
future charter revenues receivable in Japanese yen by entering into
currency swaps with a major financial institution to deliver such
foreign currency at fixed rates that will result in the Company
receiving approximately $138,000,000 for such foreign currency
from July 1, 1995 through 2004.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
Operations
Results of Vessel Operations
Revenues and results of 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.
Rates in the international tanker markets were weak in the first half of
1995, although VLCCs (over 200,000 dwt) and Aframax vessels (80-110,000
dwt) were earning more than in the first half of 1994. Near the end of
the second quarter, rates for VLCCs began to rise significantly and
those for Suezmaxes (120-160,000 dwt) strengthened in July. Dry bulk
rates rose in the second half of 1994 and, for most of the first half
of 1995, were nearly double those of the same period of the prior year.
Demand for U.S. flag tankers decreased in the first half of 1995 from
the unsatisfactory 1994 levels. As of August 9, 1995, six of OSG's
U.S. flag tankers were idle. Two of these ships have been chartered
for employment beginning in October 1995.
Results from vessel operations for the quarter ended June 30, 1995 improved
by approximately $4,300,000 from the results of the second quarter of
1994. This improvement was attributable to increased income from
foreign flag vessel operations reflecting the positive effect of three
new Aframax vessels which entered the operating fleet after the second
quarter of 1994 and improved rates earned by certain crude carriers and
petroleum products carriers in the 1995 period compared to 1994. Dry
cargo vessels also obtained higher rates in the 1995 quarter compared
to 1994. The effect on revenues of increased drydockings in the 1995
second quarter compared to 1994 is also included. Results from vessel
operations of the U.S. flag fleet declined somewhat in the 1995 second
quarter compared to the corresponding 1994 period. This reflected
significantly increased idle days for certain of the Company's U.S.
flag crude carriers offset by improved results for certain U.S. flag
products carriers and reduced general and administrative expenses.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Results of Vessel Operations (continued)
Income from vessel operations for the first half of 1995 improved by
approximately $7,400,000 from the results for the comparable period of
1994. This increase was attributable to improved income of
approximately $14,900,000 from foreign flag vessel operations
reflecting the favorable impact of four new Aframax vessels which
entered the operating fleet after the first quarter of 1994, higher
rates obtained in the 1995 half year than in 1994 for a VLCC that
commenced a long-term charter toward the end of the first quarter of
1994 and improved rates earned by certain crude carriers and petroleum
products carriers in the 1995 half compared to 1994. Dry cargo vessels
also obtained higher rates in the 1995 six months compared to 1994.
The effect on revenues of increased drydockings in the 1995 six months
compared to 1994 is also included. Results from vessel operations of
the U.S. flag fleet declined approximately $7,500,000 in the 1995 first
half from the 1994 period. Five of the Company's U.S. flag crude
carriers were idle for significant portions of the 1995 half year and
results from two U.S. flag dry bulk carriers were less favorable in the
1995 first half than in 1994. Improved results for certain U.S. flag
products carriers and reduced general and administrative expenses are
also reflected.
Equity in Results of Celebrity Cruise Lines Inc. ("CCLI")
The Company's share of CCLI's results were losses of $696,000 and $1,957,000
in the second quarter and first half of 1995, respectively, compared
with income of $1,831,000 and $3,514,000 in the comparable periods of
1994. The declines reflect strong competitive pricing pressures and
weakness in demand in the North American cruise market resulting in
reduced per diems. These pricing pressures have continued into the
third quarter.
Other Income-Net
The details of other income-net are shown in Note G. Interest and dividends
increased in the 1995 second quarter and first half as compared to the
1994 periods because of higher rates of return on interest-bearing
deposits and investments and increased amounts utilized for such
deposits and investments. Gains on sale of securities were $2,461,000
(1995 second quarter), $2,565,000 (1995 first half), $2,202,000 (1994
second quarter) and $4,618,000 (1994 first half). Disposal of vessels
resulted in a gain in the first half of 1994 (all in the first quarter)
of approximately $2,500,000 (there were no sales of vessels in the 1995
first half). Other income-net also reflects the results of foreign
currency transactions and income/losses from other investments
(included in miscellaneous-net) including, in the 1995 first half, a
loss (all in the first quarter) of approximately $1,500,000 on an
investment.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Interest Expense
Interest expense increased in the second quarter and first half of 1995 from
the corresponding periods of 1994 as a result of increases in the
average amount of debt outstanding in the 1995 periods compared to
1994, including debt incurred in connection with vessels entering the
operating fleet, increased rates on floating rate debt and decreased
interest cost capitalized in connection with vessel construction.
Interest expense reflects approximately $1,400,000 and $2,400,000 in
the second quarter and first half of 1995, respectively, and $1,900,000
and $5,700,000 in the comparable 1994 periods, of net benefits from the
interest rate swaps referred to below in Liquidity and Sources of
Capital.
Provision for Federal Income Taxes
There was an income tax credit in each of the four periods as a result of
the pretax loss incurred in each of the respective periods. The tax
credits reflect items that are not subject to tax and the dividends
received deduction.
Liquidity and Sources of Capital
Working capital at June 30, 1995 was approximately $140,000,000. 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 $17,000,000 at June 30, 1995.
Net cash provided by operating activities in the first half of 1995
approximated $16,000,000 (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. The Company has
used interest rate swaps to effectively convert a portion of its fixed
rate debt to a floating rate basis, reflecting management's interest
rate outlook. As of June 30, 1995, the Company is a party to fixed to
floating interest rate swaps (designated as hedges against certain
debt) 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 contain no leverage features and have various maturity dates
from 1995 to 2008. The Company uses derivative financial instruments
for trading purposes from time to time. The Company has hedged its
exchange rate risk with respect to contracted future charter revenues
receivable in Japanese yen to minimize the effect of foreign exchange
rate fluctuations on reported income by entering into currency swaps
with a major financial institution to deliver such foreign currency at
fixed rates that will result in the Company receiving approximately
$138,000,000 for such foreign currency from July 1, 1995 through 2004.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Liquidity and Sources of Capital (continued)
The Company has an unsecured long-term credit facility of $500,000,000, of
which $318,000,000 was used at June 30, 1995, and an unsecured short-
term credit facility of $30,000,000, which was unused at that date. At
August 9, 1995, the Company has commitments with an aggregate unpaid
cost of approximately $273,700,000 for the construction of six foreign
flag bulk vessels, two of which are scheduled for delivery in 1995,
three in late 1996 and the other one in 1997. Long-term shipyard
financing arrangements exist for approximately $76,000,000 of the
unpaid cost of certain of the vessels.
Ratio of Earnings to Fixed Charges
There was a deficiency of earnings to fixed charges for the six months ended
June 30, 1995 of $20,639,000. This has been computed by subtracting
the sum of loss 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, 1995 and for the three
and six months ended June 30, 1995 and 1994 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 6, 1995 the stockholders
elected twelve directors, each for a term of one year, and approved the
appointment of Ernst & Young LLP as independent auditors for the year
1995. Proxies for the meeting were solicited pursuant to Regulation
14A of the Securities Exchange Act of 1934. A total of 30,439,104
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>
<CAPTION>
NUMBER OF SHARES
NAME OF NOMINEE WITHHELD AUTHORITY
FOR DIRECTOR VOTED FOR TO VOTE
<S> <C> <C>
Raphael Recanati 30,395,605 43,499
Morton P. Hyman 30,419,568 19,536
Michael A. Recanati 30,419,020 20,084
Robert N. Cowen 30,419,593 19,511
George C. Blake 30,419,593 19,511
Thomas H. Dean 30,415,415 23,689
Michel Fribourg 30,417,308 21,796
William L. Frost 30,417,839 21,265
Ran Hettena 30,417,666 21,438
Stanley Komaroff 30,416,525 22,579
Solomon N. Merkin 30,418,893 20,211
Joel I. Picket 30,416,637 22,467
</TABLE>
The resolution to approve the appointment of Ernst & Young LLP as
independent auditors was adopted by a vote of 30,423,872 shares in
favor, 4,052 shares against and 11,180 shares abstained.
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 June 30, 1995.
<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 Shareholders
Overseas Shipholding Group, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Overseas Shipholding Group, Inc. and subsidiaries as of June 30, 1995
and the related condensed consolidated statements of operations and
retained earnings for the three month and six month periods ended June
30, 1995 and 1994 and the related condensed consolidated statements of
cash flows for the six month periods ended June 30, 1995 and 1994.
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 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, 1994, and the related
consolidated statements of operations and retained earnings and cash
flows for the year then ended, not presented herein, and in our report
dated February 21, 1995, 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, 1994, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
ERNST & YOUNG LLP
August 9, 1995
<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 10, 1995 MORTON P. HYMAN
----------------- ---------------------------------
Morton P. Hyman
President
Date: August 10, 1995 ALAN CARUS
----------------- ------------------------
Alan Carus
Controller
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
EXHIBIT INDEX
10. Employment Contract with an executive officer.
12. Computation of Ratio of Earnings to Fixed Charges.
15. Letter from Ernst & Young LLP.
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.
EXHIBIT 10
OVERSEAS SHIPHOLDING GROUP, INC. LETTERHEAD
June 19, 1995
Mr. Myles Robert Itkin
1060 Fifth Avenue
New York, NY 10128
Dear Myles:
This letter will confirm our employment offer to you as Chief Financial
Officer and a Senior Vice President of Overseas Shipholding Group, Inc.
I welcome you to the OSG family and I am confident that you will be
making a major contribution to the continued growth of our Company in
the years to come.
Your employment with the Company will commence on June 19, 1995 with
the following compensation package:
1.Annualized salary of $460,000 with an annual review.
2.The Company will undertake to make available to you an option to
purchase a total of 60,000 shares of Common Stock of OSG at the
closing price on the New York Stock Exchange on the date of grant.
The option will become exercisable to the extent of 12,000 shares no
later than the anniversary of the date of grant falling in the year
2000, and to the extent of an additional 12,000 shares on each of
the four subsequent anniversary dates thereafter, provided you are
employed by the Company on the respective dates such installments
become exercisable. The installments once exercisable expire on the
earlier of December 31, 2005 or 90 days following termination of
employment (other than for cause, in which case such option will
automatically expire immediately).
3.After the respective eligibility requirements are met, inclusion in
our employee benefit plans, including health care, pension, 401(k),
group life, disability, and the officers' personal liability
umbrella coverage.
4.Car allowance.
5.You are entitled to four weeks of vacation for each full calendar
year. You may not carry over more than 10 days of vacation from one
year to the next.
Any and all of the above benefits described in (3), (4) and (5) above
may be amended or terminated from time to time, at the discretion of
the Company.
You will be asked to sign an acknowledgment that you are an employee-at-
will and that you will abide by our corporate policy guidelines. All
employees are employees-at-will, which means they can be discharged at
any time with, or without, cause or notice, at the option of the
Company. Our corporate policy guidelines, among other things, requires
employees not to disclose confidential information during the period
of, and after the termination of, their employment.
Should we discharge you, other than for cause, we agree to pay you bi-
weekly installments at the same rate as your annualized salary
described in (1) above during the period between the date of such
discharge and June 19, 1998. However, from the date of discharge, you
shall cease to be an officer and employee of the Company.
The above describes the terms of our offer and the conditions of
employment with the Company.
In closing, we are eager to have you join us and await your acceptance
of our offer. If you accept, please sign and return one copy to us.
Sincerely,
s/Michael Recanati
Michael Recanati
Executive Vice President
ACCEPTED:
S/Myles Robert Itkin 6/21/95
--------------------- --------------
Myles Robert Itkin Date
<TABLE>
<CAPTION>
EXHIBIT 12
OVERSEAS SHIPHOLDING GROUP, INC.
RATIO OF EARNINGS TO FIXED CHARGES
For the six months ended June 30, 1995
(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 ($13,740)
Adjustments of income related to
companies owned less than 100% 176
Interest expense 33,084
Proportionate share of interest of
50% - owned companies 3,896
Interest component of an operating
lease 1,242
Amortization of capitalized interest 1,349
-------
Earnings $26,007
=======
Interest expense $33,084
Proportionate share of fixed charges
of 50% - owned companies 6,083
Capitalized interest 6,237
Interest component of an operating
lease 1,242
-------
Fixed charges $46,646
=======
Deficiency of earnings available to cover
fixed charges ($20,639)
=======
</TABLE>
<PAGE>
EXHIBIT 15
August 9, 1995
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 9, 1995
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, 1995.
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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 162,549
<SECURITIES> 17,371
<RECEIVABLES> 28,984
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 221,802
<PP&E> 1,945,437
<DEPRECIATION> 673,611
<TOTAL-ASSETS> 2,042,141
<CURRENT-LIABILITIES> 81,602
<BONDS> 1,063,690
<COMMON> 39,591
0
0
<OTHER-SE> 751,199
<TOTAL-LIABILITY-AND-EQUITY> 2,042,141
<SALES> 0
<TOTAL-REVENUES> 203,430
<CGS> 0
<TOTAL-COSTS> 184,086
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,084
<INCOME-PRETAX> ( 13,740 )
<INCOME-TAX> ( 4,450 )
<INCOME-CONTINUING> ( 9,290 )
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ( 9,290 )
<EPS-PRIMARY> ( 0.26 )
<EPS-DILUTED> ( 0.26 )
</TABLE>
