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, 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 November 8, 1995 - 36,227,381
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
30, 1995 31, 1994 (A)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash, including interest-bearing deposits
of $183,559,000 and $88,490,000 $ 192,853,000 $ 100,034,000
Receivables 39,002,000 33,804,000
Prepaid expenses 26,895,000 26,868,000
-------------- --------------
Total Current Assets 258,750,000 160,706,000
Investments in Marketable Securities 15,632,000 36,052,000
Capital Construction and Restricted Funds 122,100,000 105,570,000
Vessels, at cost, less accumulated
depreciation of $542,459,000 and
$500,477,000 - Note F 1,168,696,000 1,063,784,000
Vessels Under Capital Leases, less
accumulated amortization of
$148,184,000 and $140,020,000 111,293,000 119,457,000
Investment in Celebrity Cruise Lines
Inc. - Note B 229,900,000 230,642,000
Investments in Bulk Shipping Joint
Ventures - Note C 86,166,000 82,894,000
Other Assets 98,715,000 106,304,000
-------------- --------------
$2,091,252,000 $1,905,409,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C>
Accounts payable $ 5,071,000 $ 4,563,000
Sundry liabilities and accrued expenses 48,808,000 39,242,000
-------------- --------------
53,879,000 43,805,000
Current installments of long-term
debt - Note F 14,209,000 17,638,000
Current obligations under capital leases 10,289,000 9,737,000
-------------- --------------
Total Current Liabilities 78,377,000 71,180,000
Advance Time Charter Revenues 6,094,000 4,828,000
Long-term Debt - Note F 968,790,000 749,185,000
Obligations Under Capital Leases 154,197,000 160,871,000
Minority Interest 2,276,000 3,803,000
Deferred Federal Income Taxes
($93,228,000 and $102,170,000)
and Deferred Credits - Note E 96,903,000 105,763,000
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 93,687,000 93,599,000
Retained Earnings 705,817,000 737,583,000
-------------- --------------
839,095,000 870,773,000
Less - cost of Treasury Stock -
3,363,378 and 3,380,838 shares 49,299,000 49,491,000
-------------- --------------
789,796,000 821,282,000
Less - net unrealized loss on
marketable securities 5,181,000 11,503,000
-------------- --------------
Total Shareholders' Equity 784,615,000 809,779,000
Commitments and Other Comments - Note H
-------------- --------------
$2,091,252,000 $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 NINE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER
30, 1994
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ----------------------------
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
30, 1995 30, 1994 30, 1995 30, 1994
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shipping Revenues:
Revenue from voyages $ 98,171,000 $ 88,356,000 $294,789,000 $264,935,000
Income attributable
to bulk shipping
joint ventures -
Note C
1,398,000 1,207,000 4,245,000 3,442,000
------------ ------------ ------------ ------------
99,569,000 89,563,000 299,034,000 268,377,000
------------ ------------ ------------ ------------
Shipping Expenses:
Vessel and voyage -
Note D 67,986,000 59,778,000 198,306,000 180,720,000
Depreciation of vessels
and amortization
of capital leases 17,100,000 15,258,000 49,721,000 44,293,000
Agency fees - Note D 9,208,000 8,177,000 25,392,000 23,294,000
General and
administrative 1,565,000 2,313,000 6,526,000 8,101,000
------------ ------------ ------------ ------------
95,859,000 85,526,000 279,945,000 256,408,000
------------ ------------ ------------ ------------
Income from Vessel
Operations 3,710,000 4,037,000 19,089,000 11,969,000
Equity in Results of
Celebrity Cruise
Lines Inc.- Note B 1,215,000 ( 963,000) ( 742,000) 2,551,000
Other Income (net) -
Note G 10,297,000 8,262,000 16,219,000 20,577,000
------------ ------------ ------------ ------------
15,222,000 11,336,000 34,566,000 35,097,000
Interest Expense 17,568,000 14,249,000 50,652,000 39,768,000
------------ ------------ ------------ ------------
(Loss) before Federal
income taxes (2,346,000) (2,913,000) (16,086,000) (4,671,000)
(Credit) for Federal
income taxes, reflecting
deferred provision/(credit)
of ($1,600,000),
$2,400,000, ($6,050,000)
and $4,225,000 - Note E (1,600,000) ( 600,000) ( 6,050,000) (2,775,000)
------------ ------------ ------------ ------------
Net (Loss) ( 746,000) (2,313,000) (10,036,000) (1,896,000)
Retained Earnings at
beginning of period 711,996,000 749,631,000 737,583,000 764,987,000
------------ ------------ ------------ ------------
711,250,000 747,318,000 727,547,000 763,091,000
Cash Dividends Declared 5,433,000 21,730,000 15,773,000
------------ ------------ ------------ ------------
Retained Earnings at end
of period $705,817,000 $747,318,000 $705,817,000 $747,318,000
============ ============ ============ ============
Per Share Amounts - Note H:
Net (loss) ($.02) ($.06) ($.28) ($.05)
==== ==== ===== ====
Cash dividends declared $.15* $.60* $.45
==== ==== ===== ====
<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, 1995 AND SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER
30, 1995 30, 1994
<S> <C> <C>
Net cash provided by Operating Activities $ 13,557,000 $ 16,880,000
------------ ------------
Cash Flows from Investing Activities:
Purchases of marketable securities ( 10,455,000) (37,752,000)
Proceeds from sales of marketable
securities 34,337,000 19,507,000
Purchases of other investments ( 3,219,000)
Proceeds from disposal of other
investments 13,909,000
Additions to vessels (146,894,000) (109,671,000)
Proceeds from disposal of vessels 40,780,000
Other - net ( 2,597,000) 2,818,000
------------ ------------
Net cash used in investing activities (114,919,000) (84,318,000)
------------ ------------
Cash Flows from Financing Activities:
Issuance of Common Stock 76,004,000
Issuance of long-term debt 230,000,000 2,000,000
Payments on long-term debt and
obligations under capital leases ( 19,946,000) (16,789,000)
Cash dividends paid ( 16,297,000) (15,773,000)
Other - net 424,000 1,876,000
------------ ------------
Net cash provided by
financing activities 194,181,000 47,318,000
------------ ------------
Net Increase/(decrease) in Cash 92,819,000 (20,120,000)
Cash, including interest-bearing
deposits, at beginning of period 100,034,000 110,167,000
------------ ------------
Cash, including interest-bearing
deposits, at end of period $192,853,000 $ 90,047,000
============ ============
<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 September 30, 1995 and for the three month and nine
month periods ended September 30, 1995 and September 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 nine month periods ended
September 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
--------------------------------
SEPTEMBER DECEMBER
30, 1995 31, 1994
-------------- ---------------
<S> <C> <C>
Current Assets $ 46,223,000 $ 41,515,000
Vessels, net 975,132,000 859,939,000
Investment in Celebrity Cruise
Lines Inc. 229,900,000 230,642,000
Other Assets 114,457,000 119,065,000
-------------- --------------
1,365,712,000 1,251,161,000
-------------- --------------
Current Installments of
Long-term Debt 8,255,000 11,958,000
Other Current Liabilities 15,073,000 17,212,000
-------------- --------------
Total Current Liabilities 23,328,000 29,170,000
Long-term Debt, including
intercompany, and Deferred
Credits, etc. 378,831,000 276,477,000
-------------- --------------
402,159,000 305,647,000
-------------- --------------
Net Assets $ 963,553,000 $ 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
----------------------------
SEPTEMBER DECEMBER
30, 1995 31, 1994
------------ ------------
<S> <C> <C>
Current assets $ 83,235,000 $101,149,000
Vessels, net 720,792,000 696,126,000
Other assets 35,728,000 51,084,000
------------ ------------
839,755,000 848,359,000
------------ ------------
Short-term debt and current
installments of long-term debt 59,946,000 54,676,000
Other current liabilities 68,465,000 65,289,000
------------ ------------
Total current liabilities 128,411,000 119,965,000
Long-term debt 245,048,000 260,643,000
------------ ------------
373,459,000 380,608,000
------------ ------------
Net assets (principally capital
contributions) $466,296,000 $467,751,000
============ ============
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue $74,539,000 $78,558,000 $213,121,000 $242,971,000
Costs and expenses 72,040,000 80,503,000 214,576,000 237,707,000
----------- ----------- ------------ ------------
Net income/(loss) $ 2,499,000 ($ 1,945,000) ($ 1,455,000) $ 5,264,000
=========== =========== ============ ============
</TABLE>
The Company's equity in the results of CCLI for each of the periods is
before interest expense of approximately $4,400,000 (three months
ended September 30, 1995), $3,300,000 (three months ended September
30, 1994), $12,500,000 (nine months ended September 30, 1995) and
$9,200,000 (nine months ended September 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 November 8, 1995, CCLI has commitments (which are nonrecourse to OSG)
with an approximate aggregate unpaid cost of $965,000,000 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 October 1,
1995). Long-term financing arrangements exist for substantially all
of the unpaid cost of these ships. Approximately 51% of the unpaid
cost is denominated in German marks, substantially all of which is
covered by forward contracts or option contracts; this includes
approximately 32% 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
--------------------------
SEPTEMBER DECEMBER
30, 1995 31, 1994
----------- ------------
<S> <C> <C>
Cash ($25,799,000 and $62,486,000) and
other current assets (including
$9,231,000 and $8,265,000 due
from owners) $ 41,661,000 $ 78,412,000
Vessels, net 123,756,000 73,286,000
Other assets (including $11,372,000
and $26,279,000 due from owners) 12,828,000 29,573,000
----------- -----------
178,245,000 181,271,000
Current liabilities 2,967,000 4,214,000
----------- -----------
Net assets (principally undistributed
net earnings) $175,278,000 $177,057,000
============ ============
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue, primarily from
voyages (including
$7,900,000,
$6,611,000,
$22,672,000 and
$20,728,000 from
vessels chartered
to other owners) $11,178,000 $10,016,000 $33,807,000 $31,186,000
Costs and expenses 8,566,000 7,389,000 24,408,000 23,206,000
----------- ----------- ----------- -----------
Net income $ 2,612,000 $ 2,627,000 $ 9,399,000 $ 7,980,000
=========== =========== =========== ===========
</TABLE>
As of November 8, 1995, certain 50%-owned companies have commitments (which
are nonrecourse to OSG) with an aggregate unpaid cost of $99,000,000
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 $81,000,000 of progress payments and prepayments
(including $5,000,000 paid subsequent to September 30, 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 $1,348,000 (three months ended September 30, 1995),
$1,232,000 (three months ended September 30, 1994), $4,056,000 (nine
months ended September 30, 1995) and $3,818,000 (nine months ended
September 30, 1994) of brokerage commissions to Maritime. Maritime is
owned by a director of the Company; directors or officers of the
Company constitute all three 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 $8,289,000 (three months ended September 30,
1995), $4,859,000 (three months ended September 30, 1994), $19,029,000
(nine months ended September 30, 1995) and $16,313,000 (nine months
ended September 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 nine months ended September
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 September 30, 1995 to $49,200,000.
(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 September 30, 1995, the Company was 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. In early November 1995, interest rate swaps with notional
amounts of $85,000,000 matured.
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 $48,734,000 (nine months ended September 30,
1995) and $34,268,000 (nine months ended September 30, 1994), excluding
capitalized interest.
Note G - Other Income - net:
Other income - net consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- --------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment income:
Interest and dividends $ 3,135,000 $2,185,000 $ 8,532,000 $ 5,708,000
Gain on sale of
securities 5,964,000 686,000 8,529,000 5,304,000
---------- ---------- ----------- -----------
9,099,000 2,871,000 17,061,000 11,012,000
Gain on disposal
of vessels 4,303,000 6,815,000
Foreign currency
exchange gain/(loss) 261,000 673,000 ( 1,993,000) 647,000
Minority interest 817,000 (172,000) 1,527,000 (16,000)
Miscellaneous - net 120,000 587,000 ( 376,000) 2,119,000
----------- --------- ----------- -----------
$10,297,000 $8,262,000 $16,219,000 $20,577,000
=========== ========== =========== ===========
</TABLE>
Note H - Commitments and Other Comments:
1. As of November 8, 1995, the Company has commitments with an aggregate
unpaid cost of approximately $241,300,000 for the construction of six
foreign flag bulk vessels, two of which are scheduled for delivery in
early 1996, three in late 1996 and the other one in 1997. Unpaid costs
are net of $216,000,000 of progress payments and prepayments (including
$14,000,000 paid subsequent to September 30, 1995) and of discounts
arising from such prepayments. Long-term shipyard financing
arrangements exist for approximately $38,000,000 of the unpaid cost of
one 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 (loss) per share is based on the weighted average number of common
shares outstanding during each period, 36,224,000 shares (three months
ended September 30, 1995), 36,204,000 shares (three months ended
September 30, 1994), 36,218,000 shares (nine months ended September 30,
1995) and 35,379,000 shares (nine months ended September 30, 1994).
Stock options have not been included in the computation of net (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 $135,000,000 for such foreign currency from
October 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 crude tanker markets were weak in the first nine
months of 1995, although, on average, crude carriers were earning more
than in the comparable period of 1994. Spot rates for international
crude carriers trended upward during the third quarter of 1995, but
toward the end of the quarter, rates for VLCCs (over 200,000 dwt) and
Suezmaxes (120-160,000 dwt) decreased and, in the early part of the
fourth quarter of 1995, remained below their third quarter highs. Dry
bulk rates rose in the second half of 1994 and, for much of the first
nine months of 1995, were nearly double those of the same period of the
prior year. These rates trended downward near the end of the third
quarter of 1995 and in the early part of the fourth quarter. Demand
for U.S. flag tankers decreased during most of the first nine months of
1995 from the unsatisfactory 1994 levels. Six of OSG's U.S. flag
tankers were unemployed for substantial portions of the 1995 period.
Five of these ships are chartered for employment beginning in October
and November 1995.
Income from vessel operations for the quarter ended September 30, 1995 was
slightly lower than in the third quarter of 1994. Income from foreign
flag vessel operations improved approximately $7,300,000, reflecting
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 reduced drydockings in the 1995 third quarter compared
to 1994 is included. Results from vessel operations of the U.S. flag
fleet declined by approximately $7,600,000 in the 1995 third quarter
compared to the corresponding 1994 period. This reflected
significantly increased days without employment for certain of the
Company's U.S. flag crude carriers. This was partially offset by
reduced general and administrative expenses.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Results of Vessel Operations (continued)
Income from vessel operations for the first nine months of 1995 improved by
approximately $7,100,000 from the results for the comparable period of
1994. This increase was attributable to improved income of
approximately $22,200,000 from foreign flag vessel operations,
reflecting the favorable impact of four newly built Aframax vessels
delivered during 1994 and two modern Aframaxes purchased in 1995 and
improved rates earned by certain crude carriers and petroleum products
carriers in the 1995 nine months compared to 1994. Dry cargo vessels
also obtained higher rates in the 1995 nine months compared to 1994.
Results from vessel operations of the U.S. flag fleet declined
approximately $15,100,000 in the 1995 first nine months from the 1994
period. As previously mentioned, six of the Company's U.S. flag crude
carriers were without employment for substantial portions of the 1995
nine months; also, results from two U.S. flag dry bulk carriers were
less favorable in the 1995 nine months 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 income of $1,215,000 and a loss
of $742,000 in the third quarter and first nine months of 1995,
respectively, compared with a loss of $963,000 and income of $2,551,000
in the comparable periods of 1994. CCLI's results reflect strong
competitive pressures in the North American cruise market resulting in
reduced per diems. These pressures have continued into the fourth
quarter.
Other Income-Net
The details of other income-net are shown in Note G. Interest and dividends
increased in the 1995 third quarter and first nine months 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
$5,964,000 (1995 third quarter), $8,529,000 (1995 first nine months),
$686,000 (1994 third quarter)
and $5,304,000 (1994 first nine months). Disposal of vessels resulted in
gains of $4,303,0000 and $6,815,000 in the third quarter and first nine
months of 1994, respectively (there were no sales of vessels in the
1995 first nine months). 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 nine
months, 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 third quarter and first nine months 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 and increased rates on floating rate debt. Interest
cost capitalized in connection with vessel construction increased
slightly in the third quarter of 1995 compared to the 1994 third
quarter and decreased slightly in the first nine months of 1995 from
the comparable 1994 period. Interest expense reflects approximately
$1,000,000 and $3,400,000 in the third quarter and first nine months of
1995, respectively, and $1,700,000 and $7,400,000 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 September 30, 1995 was approximately $180,000,000.
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 $16,000,000 at September 30, 1995.
Net cash provided by operating activities in the first nine months of 1995
approximated $14,000,000 (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 September 30, 1995, the Company was 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. In early November 1995, interest rate swaps with
notional amounts of $85,000,000 matured. 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 $135,000,000 for such foreign currency
from October 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 $382,000,000 was used at September 30, 1995, and an unsecured
short-term credit facility of $30,000,000, which was unused at that
date. At November 8, 1995, the Company has commitments with an
aggregate unpaid cost of approximately $241,300,000 for the
construction of six foreign flag bulk vessels, two of which are
scheduled for delivery in early 1996, three in late 1996 and the other
one in 1997. Long-term shipyard financing arrangements exist for
approximately $38,000,000 of the unpaid cost of one of the vessels.
Ratio of Earnings to Fixed Charges
There was a deficiency of earnings to fixed charges for the nine months
ended September 30, 1995 of $28,383,000. 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 September 30, 1995 and for the
three and nine months ended September 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 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, 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 September 30,
1995 and the related condensed consolidated statements of operations
and retained earnings for the three month and nine month periods ended
September 30, 1995 and 1994 and the related condensed consolidated
statements of cash flows for the nine month periods ended September
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
November 8, 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: November 9, 1995 s/MORTON P. HYMAN
----------------- ---------------------------------
Morton P. Hyman
President
Date: November 9, 1995 s/ALAN CARUS
----------------- ------------------------
Alan Carus
Controller
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
EXHIBIT INDEX
10. Letter Agreement 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
September 19, 1995
Mr. Michael A. Recanati
40 East 78th Street
New York, NY 10021
Dear Mr. Recanati,
This letter and the General Release attached hereto sets forth
the arrangement agreed to by Overseas Shipholding Group, Inc.
("OSG") and you in connection with your termination of employment
and your retention as a consultant to OSG, as follows:
1. Your employment with OSG shall terminate as of September 11,
1995. Thereafter, you shall serve as a consultant to OSG
for a period of two years, as provided in paragraph 10
hereof.
2. You resigned as Executive Vice President of OSG and as an
officer and/or director of its subsidiaries, as Vice
Chairman of the Finance and Development Committee of the
Board of Directors of OSG, and as a member of all committees
of the Board, effective as of September 11, 1995.
3. OSG shall pay you on October 5, 1995 the gross amount of
$115,904, which represents payment for all unused vacation
days earned by you as of September 11, 1995. OSG shall make
appropriate deductions from said payments for FICA, Federal,
State and local income taxes, etc. and 401(k) contributions.
4. OSG shall make payments to you in the total gross amount of
$1,530,000 payable in 52 bi-weekly installments of
$29,423.08, with the first such installment relating to the
period ending September 22, 1995. The payments provided in
this paragraph do not survive you and they are not payable
to your estate (in such event, the life insurance payment
referred to in paragraph 7 shall be applicable).
5. OSG shall pay to you in December of 1996 and 1997 an amount
equal to the contribution OSG would have made to the
Maritime Overseas Corporation ("MOC") 401(k) Plan in each
such year in respect of your participation therein, had you
been eligible and elected to participate and contribute the
maximum permissible amount.
6. Your aggregate accrued monthly retirement benefit under the
MOC qualified pension plan and under the supplemental
employee retirement plans will reflect two additional years
of service through September 11, 1997 at $765,000 per year.
7. Your participation in and benefits under the life insurance
plan and the medical and dental plan shall continue as at
present until September 30, 1997 unless, in the case of
medical and dental plans, you are eligible for equivalent
coverage under the medical and dental plans related to new
employment.
8. Your rights with respect to any options granted to you under
the OSG 1989 Stock Option Plan (As Amended), which are
unvested at termination of your employment, will all become
vested and exercisable on October 9, 1995. All options,
including those which are presently vested, shall remain
exercisable until December 31, 1997 and shall expire on said
date.
9. Until September 11, 1997, OSG will provide you with the
services of an Executive Secretary/Administrative Assistant,
to be designated by you, at the same compensation level as
your current Secretary/Administrative Assistant.
10. You agree to make yourself available to render such
consulting services as may be requested by OSG from time to
time until September 11, 1997 at no additional cost or
expense to the Company, except that OSG will reimburse your
ordinary and necessary out-of-pocket expenses for business
travel outside of New York City in the course of performing
such services.
11. You agree (i) not to disclose any material or information
which is treated as confidential by OSG and/or MOC
(hereinafter for the purposes of paragraphs 11 and 12 of
this Agreement collectively referred as "OSG"), (ii) not to
disparage OSG, its agents, or any of their subsidiaries,
affiliated or related companies or their respective
employees, (iii) not to work prior to September 11, 1997, as
an employee of, or a consultant to, a shipping company or
ship broker, in any capacity other than dealing with the
development of information systems, and (iv) to keep the
terms of this Agreement confidential and not to disclose its
contents to anyone except your attorney, financial
consultant or other professional advisor.
12. (a) Any breach of the provisions of paragraphs 10 and 11 of
this Agreement by you during the term hereof shall be
considered a material breach of this Agreement. In the
event of such breach, and due to the difficulties in
calculating the damages that might be sustained (directly or
indirectly) as a result of such breach, you specifically
consent to the entry of injunctive relief against you, in
addition to any and all of OSG's remedies under the law, and
you further agree that OSG may obtain the foregoing relief
without the posting of a bond.
(b) In addition, in the event of a breach of the provisions
of paragraphs 10 and 11 of this Agreement by you, OSG shall
be entitled to terminate its obligations to you hereunder
and you shall forfeit all future rights under this
Agreement.
13. This Agreement and the General Release attached hereto
contains the entire agreement between you and OSG and fully
supersedes any and all prior agreements or understandings
with respect to the subject matter hereof and the terms and
provisions of this Agreement and the General Release
attached hereto may not be modified or amended except in a
writing signed by both parties.
14. You have the right to consider fully the terms of this
Agreement for twenty-one (21) days and to consult with an
attorney of your choosing in connection with this Agreement.
15. You represent and warrant that (a) you have carefully read
this Agreement in its entirety and you fully understand the
significance of all of the terms and conditions of this
Agreement, and (b) you are signing this Agreement
voluntarily and of your own free will, and assent to all the
terms and conditions contained herein.
16. No waiver by either party of any breach by the other party
of its obligations hereunder shall be deemed a waiver of any
prior or subsequent breach. Except to the extent otherwise
specifically provided herein, any waiver must be in writing
and signed by you or an authorized officer of OSG, as the
case may be.
17. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New
York applicable to contracts to be performed therein.
18. The parties agree that OSG shall withhold all amounts
required to be withheld for federal, state and local income
tax purposes to the extent required by applicable law.
This Agreement and the General Release attached hereto shall not
become effective until the eighth day following your execution
thereof, and you may revoke your agreement prior to that date by
giving written notice of such revocation to the undersigned.
If you are in agreement with the Agreement and the General
Release attached hereto, please indicate your approval and
acceptance thereof by signing your name and inserting the date
where indicated below on both copies of the Agreement, and
executing both copies of the General Release in the presence of a
Notary, and return one original copy of each thereof to me. The
enclosed duplicate original of each are for you.
Very truly yours,
S/Morton P. Hyman
Morton P. Hyman
President
Enclosures
I hereby agree to be bound by the terms and conditions of the
above Agreement.
Date: 9/19/95 S/Michael A. Recanati
--------- -------------------------------
Michael A. Recanati
<TABLE>
<CAPTION>
EXHIBIT 12
OVERSEAS SHIPHOLDING GROUP, INC.
RATIO OF EARNINGS TO FIXED CHARGES
For the nine months ended September 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 ($16,086)
Adjustments of income related to
companies owned less than 100% (741)
Interest expense 50,652
Proportionate share of interest of
50% - owned companies 5,688
Interest component of an operating
lease 1,863
Amortization of capitalized interest 2,023
-------
Earnings $43,399
=======
Interest expense $50,652
Proportionate share of fixed charges
of 50% - owned companies 9,134
Capitalized interest 10,133
Interest component of an operating
lease 1,863
-------
Fixed charges $71,782
=======
Deficiency of earnings available to cover
fixed charges ($28,383)
=======
</TABLE>
<PAGE>
EXHIBIT 15
November 8, 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 November 8, 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 September 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 192,853
<SECURITIES> 15,632
<RECEIVABLES> 39,002
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 258,750
<PP&E> 1,970,632
<DEPRECIATION> 690,643
<TOTAL-ASSETS> 2,091,252
<CURRENT-LIABILITIES> 78,377
<BONDS> 1,122,987
<COMMON> 39,591
0
0
<OTHER-SE> 745,024
<TOTAL-LIABILITY-AND-EQUITY> 2,091,252
<SALES> 0
<TOTAL-REVENUES> 314,511
<CGS> 0
<TOTAL-COSTS> 279,945
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,652
<INCOME-PRETAX> ( 16,086 )
<INCOME-TAX> ( 6,050 )
<INCOME-CONTINUING> ( 10,036 )
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ( 10,036 )
<EPS-PRIMARY> ( 0.28 )
<EPS-DILUTED> ( 0.28 )
</TABLE>
