SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 1-6479-1
OVERSEAS SHIPHOLDING GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-2637623
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1114 Avenue of the Americas, New York, New York 10036
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-869-1222
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock - (par New York Stock Exchange
value $1.00 per share) Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of the Common Stock held by non-affiliates
of the registrant, based on the closing price on the New York
Stock Exchange on March 20 , 1996: $442,022,805. (For this
purpose, all outstanding shares of Common Stock have been
considered held by non-affiliates, other than the shares
beneficially owned by directors, officers and certain 5%
shareholders of the registrant; certain of such persons disclaim
that they are affiliates of the registrant.)
Number of shares of Common Stock outstanding at March 20 , 1996:
36,232,976.
Documents incorporated by reference: portions of the
registrant's Annual Report to Shareholders for 1995 (incorporated
in Parts I and II); portions of the definitive proxy statement to
be filed by the registrant in connection with its 1996 Annual
Meeting of Shareholders (incorporated in Part III).
<PAGE>
ITEM 1. BUSINESS
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Overseas Shipholding Group, Inc. (the "registrant") and
its subsidiaries (collectively the "Company") constitute a major
international shipping enterprise owning and operating a
diversified fleet of oceangoing bulk cargo vessels (principally
tankers and dry bulk carriers). The Company's operating bulk
fleet consists of 61 vessels having an aggregate carrying
capacity of approximately 6,050,650 deadweight tons ("DWT"),
including ten ships aggregating approximately 1,536,300 DWT
which the Company owns jointly with others and in which the
Company has at least a 49% interest.* Sixteen vessels in the
Company's operating bulk fleet, which total approximately 993,350
DWT and represent about 30% of the Company's investment in bulk
cargo vessels at cost, are registered under the U.S. flag; the
balance are registered under foreign flags. Forty-five tankers
account for 78% of the total tonnage, and 15 dry bulk carriers
and a pure car carrier account for the remainder. A single
company and its subsidiaries, for and under the direction and
control of the Company, act as agents in respect of the bulk
fleet of the registrant's majority-owned subsidiaries and certain
of its bulk shipping joint ventures.
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* Except as otherwise noted, references herein to the
Company's "operating bulk fleet" are as of February 14,
1996. Such fleet includes eight vessels that are leased from
financial institutions under bareboat charters having
remaining terms of from 6 to 16 years, but does not include
a 254,000 DWT single-hulled tanker which the Company sold in
late February 1996, or a 29,300 DWT petroleum barge which is
owned by a partnership in which the Company has a 50%
interest, or the six newbuildings currently on order which
are more fully described under "Bulk Fleet Renewal Program"
below.
<PAGE>
Celebrity Cruise Lines Inc. (together with its
subsidiaries collectively "CCLI"), the passenger cruise business
joint venture which the Company entered into in late 1992, owns
and operates cruise ships marketed primarily under the trade name
Celebrity Cruises in the premium segment of the industry. The
Celebrity Cruises fleet currently consists of four cruise ships
with a total passenger-carrying capacity of 5,584 berths. In
addition, CCLI has a budget-priced Fantasy Cruises division,
which consists of two vessels. In late November, Celebrity
Cruises took delivery of the 70,600 gross ton vessel, CENTURY.
The 1,750-passenger CENTURY will be followed by two 1,870-
passenger sisterships, the GALAXY and the MERCURY, scheduled
for delivery in late 1996 and 1997, respectively, which will
increase the Celebrity Cruises total passenger-carrying capacity
to over 9,300 berths. See "Investment in Cruise Business"
below.
The Company's operating bulk fleet, aggregating
approximately 6,050,650 DWT, represents approximately 1% of the
total world tonnage of oceangoing bulk cargo vessels. As of
February 14, 1996, the Company had on order six vessels,
aggregating 1,459,800 DWT, for delivery to its international bulk
fleet. See "Bulk Fleet Renewal Program" below.
The Company charters its ships to commercial shippers
and U.S. and foreign governmental agencies for the carriage of
bulk commodities, primarily crude oil, petroleum products, grain,
coal and iron ore. Generally, each ship is chartered for a
specific period of time ("time charter"), or for a specific
voyage or voyages ("voyage charter"). Under the terms of time
and voyage charters covering the Company's vessels, the ships are
equipped and operated by the Company and are manned by personnel
in the Company's employ. From time to time, the Company also has
some of its vessels on bareboat charter. Under the terms of
bareboat charters, the ships are chartered for fixed periods of
time (generally medium- or long-term) during which they are
operated and manned by the charterer.
The Company's ships engage in carriage of cargo in
various parts of the world. For information regarding the types
of vessels in the Company's bulk fleet and the major routes for
each type of vessel, see the "OSG International and U.S. Flag
Vessel Types" section (page 20) of the registrant's Annual Report
to Shareholders for 1995, which section is incorporated herein by
reference. The Company does not employ any container or similar
vessels in its operation.
Revenues from carriage of petroleum and its derivatives
represented approximately 77% of the voyage revenues of the
Company in 1995, 78% in 1994 and 75% in 1993. Revenues from
carriage of dry cargo accounted for the balance of such voyage
revenues for each of those years. The carriage of petroleum and
its derivatives also accounted for the majority of the voyage
revenues of the Company's bulk shipping joint ventures. The
relative contributions to voyage revenues of the various types of
cargoes carried may vary from year to year, depending upon demand
for particular kinds of carriage and the purposes for which and
the terms on which the ships are chartered.
As of February 14, 1996, with the exception of two U.S.-
flag crude oil carriers, all of the vessels in the Company's
operating bulk fleet were employed. Forty-nine of these vessels
were chartered to non-governmental commercial shippers. These 49
ships include eleven U.S.-flag ships and 38 foreign-flag ships,
which together represent approximately 81% of the combined
carrying capacity of the Company's operating bulk fleet. Of the
remaining ships in the Company's operating bulk fleet, three U.S.-
flag ships and seven foreign-flag ships were under charter to
foreign or U.S. governmental agencies.
U.S.-FLAG AND FOREIGN-FLAG OPERATIONS
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The Company's U.S.-flag and foreign-flag bulk fleets
operate substantially in separate markets. The Company believes
that ownership of a diversified fleet, with vessels of different
flags, types and sizes and with operating flexibility, enables
the Company to take advantage of chartering opportunities for
domestic and international shipment of bulk commodities and
thereby cushions the effects of weakness in particular markets.
Information about the Company's operations under U.S. and foreign
flags for the three years ended December 31, 1995 is set forth in
the table in Note B to the Company's financial statements
incorporated by reference in Item 8 below. For information
regarding the revenues and net income of the Company's bulk
shipping joint ventures for the three years ended December 31,
1995, see Note E to the Company's financial statements
incorporated by reference in Item 8 below.
In each of the years 1995, 1994 and 1993 the Company
had one charterer (BP Oil Company, USA) from which it had
revenues in excess of 10% of revenues from voyages, amounting in
1995 to approximately $49.5 million, in 1994 to approximately
$63.7 million, and in 1993 to approximately $73.7 million.
U.S. DOMESTIC AND PREFERENCE TRADES
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Under the Jones Act, shipping between United States
coastal ports, including the movement of Alaskan oil, is reserved
by law primarily to U.S.-flag vessels, owned by U.S. citizens,
crewed by U.S. seafarers, and built in the United States without
construction subsidies and operated without operating
differential subsidies. With eight crude carriers and five
product carriers, the Company is the largest independent owner of
unsubsidized U.S.-flag tankers and is a major participant in the
Alaskan oil trade.
Demand for tonnage in the Alaskan oil trade depends on
the volume of crude shipped out of Alaska and its distribution to
ports at varying distances from the source. Significantly more
tonnage is required for long-haul shipments of Alaskan crude to
the U.S. Gulf and East Coasts than for movements to the West
Coast. In recent years, the amount of crude shipped on the
long-haul route to the Gulf of Mexico, via the Panama Pipeline,
has fallen sharply, and this development has reduced tonnage
requirements. Shipments of Alaskan crude oil from Valdez are the
main source of employment for U.S.-flag crude carriers and are
carried mostly on unsubsidized U.S.-flag crude carriers of over
60,000 DWT.
In November of 1995, President Clinton signed into law
legislation that would permit the export of Alaskan North Slope
crude oil on U.S.-flag vessels once certain findings have been
made by the President and appropriate licensing regulations are
promulgated. Under this legislation, it is expected that exports
could begin as early as the second quarter of 1996. The Company
has entered into an agreement which provides long term employment
for five of its U.S.-flag crude carriers. This agreement will go
into effect after exports are permitted.
As noted, vessels built with construction differential
subsidies and operated with operating differential subsidies
("ODS") are not permitted in the Jones Act trade. However, the
Maritime Administration has deemed tankers built with subsidies
to be eligible for full coastwise privileges when they reach 20
years of age and their ODS contracts have expired. In recent
years there have been increased calls by members of Congress and
others to reduce or eliminate cargo preference and, in some
cases, to weaken the long-standing requirement that U.S. coastwise
trade be conducted by U.S.-flag Jones Act ships. If such changes
were implemented, they would adversely affect the already
diminished U.S.-flag merchant marine.
United States military cargo must be transported on
U.S.-flag vessels, if available. The Merchant Marine Act, 1936,
as amended, requires that preference be given to U.S.-flag
vessels, if available at reasonable rates, in the shipment of at
least half of all U.S. government-generated cargoes and 75% of
food-aid cargoes.
Vessels in the Company's operating bulk fleet have been
chartered from time to time to the Military Sealift Command of
the United States Navy ("MSC"), and to recipient nations for the
carriage of grain and other cargoes under United States foreign
aid and agricultural assistance programs. Charters to MSC
reflect in large part the requirements of the United States
military for waterborne carriage of cargoes, and, accordingly,
depend in part on world conditions and United States foreign
policy.
EMPLOYMENT OF VESSELS
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The bulk shipping industry is highly fragmented and
competitive. The Company competes with other owners of U.S. and
foreign-flag tankers and dry cargo ships operating on an
unscheduled basis similar to the Company and, to some extent,
with owners operating cargo ships on a scheduled basis.
Because of increasing environmental concerns and
decreasing control over their sources of oil, the major oil
companies have sharply reduced their tanker ownership in recent
years. In 1987, the oil majors owned 20% of the world tanker
fleet compared with only 7% in 1995. Independent shipowners now
control approximately 73% of the world tanker fleet, up from 58%
in 1987. They also control the most modern fleets, with an
average vessel age of 13 years. State-owned companies (17%) and
independent oil companies(3%) make up the balance of
international tanker owners.
In chartering vessels to the United States government,
the Company competes primarily with other owners of U.S.-flag
vessels. Demand for U.S.-flag product carriers is closely linked
to changes in regional energy demands and in refinery activity.
These vessels also compete with pipelines and oceangoing barges
and are affected by the level of imports on foreign-flag product
carriers. In the spot and short-term charter market, the
Company's vessels compete with all other vessels of a size and
type required by a charterer that can be available at the date
specified. In the spot market, competition is based primarily on
price. Nevertheless, within a narrow price band, factors related
to quality of service and safety enter into a potential
customer's decision as to which vessel to charter.
Prevailing rates for charters of particular types of
ships are subject to fluctuations depending on conditions in
United States and international bulk shipping markets and other
factors. Although medium- and long-term charter business avoids,
to some extent, the sharp rate fluctuations characteristic of the
spot or voyage markets, the availability of such business in
recent years has been relatively limited, and, when available,
rates of return have generally been unattractive.
For additional information as of February 14, 1996
regarding the 61 vessels in the Company's operating bulk fleet,
including information as to the employment of such vessels, see
the table in the "To Our Shareholders" section (page 3), and the
"International Bulk Fleet" and "U.S. Bulk Fleet" tables (pages 18
and 19), of the registrant's Annual Report to Shareholders for
1995, which tables are incorporated herein by reference.
ENVIRONMENTAL MATTERS RELATING TO BULK SHIPPING
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Since 1990, the bulk shipping industry has experienced
a more stringent regulatory environment. Classification
societies, governmental authorities and charterers have
strengthened their inspection programs, and there has been an
increasing reluctance among charterers to accept older vessels
due to safety and pollution concerns.
OPA 90. The Oil Pollution Act of 1990 ("OPA 90")
significantly expands the potential liability of a vessel owner
or operator (including a bareboat charterer), for damage
resulting from spills in U.S. waters (up to 200 miles offshore).
OPA 90 applies to all U.S. and foreign-flag vessels.
Under OPA 90, a vessel owner or operator is liable
without fault for removal costs and damages, including economic
loss without physical damage to property, up to $1,200 per gross
ton of the vessel. When a spill is proximately caused by gross
negligence, willful misconduct or a violation of a Federal
safety, construction or operating regulation, liability is
unlimited. OPA 90 did not preempt State law, and therefore States
remain free to enact legislation imposing additional liability.
Virtually all coastal states have enacted pollution prevention,
liability and response laws, many with some form of unlimited
liability.
In addition, OPA 90 imposes a requirement that tankers
calling at U.S. ports have double hulls. This requirement applies
to newly constructed tankers contracted for after June 30, 1990,
or delivered after January 1, 1994. Beginning on January 1,
1995, the double-hull requirement was phased in for existing
tankers. The age requirement is reduced in stages so that by the
year 2000, tankers of at least 30,000 gross tons over 23 years
old (and tankers between 15,000 and 30,000 gross tons over 30
years old) must have double hulls, and by 2010, all tankers must
have double hulls, except that tankers with double bottoms or
double sides are afforded an additional five years for compliance
but must comply no later than January 1, 2015. Tankers
discharging at a deepwater port or lightering more than 60 miles
offshore will not be required to have double hulls until January
1, 2015.
OPA 90 also requires owners and operators of vessels
calling at U.S. ports to adopt contingency plans for responding
to a worst case oil spill under adverse weather conditions. The
plans must include contractual commitments with clean-up response
contractors in order to ensure an immediate response to an oil
spill. Furthermore, training programs and drills for vessel,
shore and response personnel are required. The Company has
developed and timely filed its vessel response plans with the
United States U.S. Coast Guard and has received approval of such
plans.
Under U.S. Coast Guard financial responsibility
regulations issued pursuant to OPA 90, all tankers entering U.S.
waters since the end of 1994 were required to obtain Certificates
of Financial Responsibility ("COFRs") from the Coast Guard
demonstrating financial capability to meet potential spill
liabilities. All the vessels in the Company's U.S.-flag and
international flag tanker fleets have obtained COFRs.
INTERNATIONAL REQUIREMENTS. In addition to the OPA 90
requirements, International Maritime Organization (IMO)
regulations require double hulls or equivalent tanker designs for
newbuilding orders and mandate double hulls for existing tankers
by their 30th anniversary. These regulations also require
modifications to existing tankers by their 25th anniversary to
provide side or bottom protection covering at least 30% of the
cargo tank area. Such modifications can be costly and would
reduce a ship's carrying capacity by an estimated 20%.
Over the next five years, OPA 90 and IMO regulations
are expected to accelerate the scrapping of older tankers.
Since the Company maintains a modern fleet, these
double-hull requirements will not apply to most of the Company's
existing tanker fleet until after the year 2000, at which time
the affected ships will have operated for substantially all of
their economic lives.
INSURANCE. Consistent with the currently prevailing
practice in the industry, the Company presently carries $700
million of pollution coverage per occurrence on every vessel in
its fleet. While the Company has historically been able to
obtain such insurance at commercially reasonable rates, no
assurances can be given that such insurance will continue to be
available in the future.
BULK SHIPPING MARKETS
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Information regarding the international bulk shipping
markets and the markets for U.S.-flag vessels, including the
Alaskan oil trade, is set forth in the text of the "Global Bulk
Shipping Markets" section (pages 6, 9, 10 and 13) of the
registrant's Annual Report to Shareholders for 1995, which
information is incorporated herein by reference.
BULK FLEET RENEWAL PROGRAM
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As part of the Company's ongoing modernization program,
the Company continually reviews its fleet profile. This entails
periodically selling older vessels, placing newbuilding orders
and purchasing existing modern tonnage, when available at
attractive prices. After giving effect to the deliveries of two
newbuildings in January 1996, the Company's newbuilding program
totals six ships aggregating 1,459,800 DWT.
NEWBUILDING ORDERS. In January 1996, the Company took
delivery for its international fleet of two double-hulled very
large crude carriers ("VLCCs"), each approximately 296,000 DWT,
ordered in 1993. Over the next twelve months, four VLCCs,
ranging from 269,650 to 302,150 DWT and two large Capesize bulk
carriers (each 158,100 DWT) are scheduled to join the
fleet. Two of these VLCCs were ordered with a joint venture
partner and will commence eight-year charters to the partner when
delivered in December 1996 and February 1997. The other two
VLCCs are scheduled for delivery in late 1996 and early 1997. On
the dry bulk side, the Company in 1995 placed orders for two
158,100 DWT Capesize ships for delivery in late 1996. All of
these six ships are being built by major shipbuilders (four in
South Korea and two in Japan) for delivery to the Company's
international fleet. The commitments for these six vessels are
in U.S. Dollars; for additional information as of February 14,
1996 about the commitments, see Notes E and L(1) to the Company's
financial statements incorporated by reference in Item 8 below.
PURCHASES. In March 1995, the Company purchased two
94,000 DWT double-hulled Aframax tankers built in 1994, which
were delivered to the Company for its international fleet.
SALES. In December 1995, the Company sold a single-
hulled 133,000 DWT foreign- flag tanker and in February 1996 sold
a single-hulled 254,000 DWT foreign- flag VLCC; both vessels were
built in 1989.
The Company's newbuilding program, together with the
selective upgrading of the Company's fleet through acquisition
and disposition of existing tonnage, reflects changes that the
Company makes from time to time in light of its continuing review
of changing market conditions and the needs of its customers.
All of the ships in the Company's fleet have been either built to
its exacting specifications or purchased after stringent
inspection. These vessels are designed for safe, efficient and
environmentally-friendly operation. Features in the tankers in
the current newbuilding program such as double hulls, satellite
navigation systems and increased steel in areas of high stress,
have been included to improve their safety and efficiency. Upon
delivery of all the tanker newbuildings, over half of the
Company's tanker tonnage will be either totally double-hulled or
protected by double sides or double bottoms. There is no
assurance that the Company's fleet will expand, or that the
Company will acquire vessels or place orders for the construction
of new vessels, to the same extent as in the past.
EMPLOYEES
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At February 14, 1996, the Company employed
approximately 2,000 seagoing personnel to operate its ships. The
Company has collective bargaining agreements with three different
maritime unions, covering seagoing personnel employed on the
Company's U.S.-flag vessels. These agreements are in effect
through June 15, 1996 with one of the unions and through June 15,
2000 with two of the unions. Under the collective bargaining
agreements, the Company is obligated to make contributions to
pension and other welfare programs. The Company believes that
its relations with its employees are satisfactory.
U.S. SUBSIDIES
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To encourage private investment in U.S.-flag ships, the
Merchant Marine Act of 1970 permits deferral of taxes on earnings
deposited into capital construction funds and amounts earned
thereon, which can be used for the construction or acquisition
of, or retirement of debt on, qualified U.S.-flag vessels
(primarily those limited to United States foreign and
noncontiguous domestic trades). The registrant is a party to an
agreement under the Act. Under the agreement, the general
objective is (by use of assets accumulated in the fund) for two
vessels to be constructed or acquired by the end of 1999. If the
agreement is terminated or amounts are withdrawn from the capital
construction fund for non-qualified purposes, such amounts will
then be subject to Federal income taxes. Monies can remain tax-
deferred in the fund for a maximum period of twenty-five years
(commencing January 1, 1987 for deposits prior thereto). See the
second paragraph of Note J to the Company's financial statements
incorporated by reference in Item 8 below.
The Company does not receive any operating differential
subsidies or any construction differential subsidies under the
Merchant Marine Act, 1936, as amended.
INVESTMENT IN CRUISE BUSINESS
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The Company owns a 49% equity investment in Celebrity
Cruise Lines Inc. (together with its subsidiaries collectively
"CCLI"), a joint venture formed in late 1992 that owns and
operates cruise vessels. CCLI functions as an equal joint
venture and the approval of both shareholders is required for all
substantive policy matters. All debt of the joint venture is
nonrecourse to the joint venture partners. It is anticipated
that CCLI's earnings will be reinvested in the cruise business,
and accordingly the Company has made no provision for U.S. income
taxation with respect to its share of CCLI's earnings.
CCLI markets its ships primarily under the brand name
Celebrity Cruises, which is a leading provider of cruises in the
premium segment of the North American cruise market. The
Celebrity Cruises fleet consists of four ships -- CENTURY,
ZENITH, HORIZON and MERIDIAN -- having a total of 5,584 berths
and sailing mainly in the Caribbean and to Bermuda. Cruises to
Alaska and the West Coast, and increased Panama Canal routes,
will be added to the itineraries during 1996.
Two vessels operated in 1995 as part of CCLI's budget-
priced Fantasy Cruises division. One of these ships, BRITANIS,
was chartered during part of 1995 to the U.S. Military Sealift
Command, while the division's other ship, AMERIKANIS, sailed on
European itineraries.
The Company's results for 1995 include a net loss of
$1,208,000 from CCLI. This is before the Company's estimated
interest expense, after-tax, of approximately $11,000,000
incurred to fund the CCLI investment. In 1995, strong
competitive pressures in the North American cruise market caused
significant discounting throughout the industry, which is
reflected in the results of CCLI.
In late November, CCLI took delivery of the 70,600-ton
CENTURY, designed to be among the most elegant and innovative
cruise ships afloat. The 1,750-passenger CENTURY will be
followed by two 1,870-passenger sisterships, the GALAXY in late
1996 and the MERCURY in late 1997, which will expand the
Celebrity Cruises fleet passenger-carrying capacity to over 9,300
berths, providing significant economies of scale and
strengthening its position in the premium segment of the cruise
market. The contracts for the GALAXY and MERCURY are with the
same European shipyard that built the CENTURY, ZENITH and
HORIZON. Long-term financing arrangements exist for substantially
all of the unpaid cost of these ships. For additional
information about CCLI and its fleets and the CCLI commitments as
of February 14, 1996, see the text of the "CCLI" section (pages
13 and 14), including the CCLI fleet table (page 19), of the
registrant's Annual Report to Shareholders for 1995, which
information is incorporated herein by reference, and Note D to
the Company's financial statements incorporated by reference in
Item 8 below.
COMPETITION. CCLI operates its vessels primarily in
the North American cruise market, which accounts for
approximately 80% of total cruise passengers carried worldwide.
The North American cruise industry is characterized by large and
generally well-capitalized companies and is highly competitive.
According to the Cruise Lines International Association (CLIA),
the five largest companies, including CCLI, have almost 70% of
total capacity.
Over the past decade, growth in demand (measured by the
number of passengers carried) averaged 7% per year for the North
American cruise market. More recently, however, beginning in the
second half of 1994, demand growth has abated. Preliminary CLIA
statistics indicate a 3% decline in passengers carried in 1995
from a year earlier.
Capacity growth in the North American cruise market
averaged 6% per year during the past decade versus the 7% demand
growth noted above. In 1995, capacity rose less than 1% as
13,100 berths were added and 12,500 berths were removed through
retirements, redeployments and shutdowns. At year-end 1995, North
American cruise capacity was estimated to be 104,700 berths.
The industry is in the midst of its largest newbuilding
program ever, with a trend toward increasingly larger ships. On
the basis of the newbuilding orderbook, CLIA forecasts that
capacity will rise 11% in 1996. Before taking into consideration
any retirements and deletions from the existing fleet, CLIA
expects capacity to grow 10% in 1997 and 12% in 1998.
Cruise lines compete with other vacation alternatives
such as land-based resort hotels and sightseeing destinations for
consumers' discretionary income. The amount of discretionary
income spent on vacations is influenced by general economic
conditions. Within the cruise industry, competition is primarily
based on product quality, itinerary and price. Product quality
is a function of ship design, onboard facilities, amenities,
service and cuisine.
REGULATORY MATTERS. Each cruise ship is subject to
regulations of its country of registry, including regulations
issued pursuant to international treaties governing the safety of
the ship and its passengers. Each country of registry conducts
periodic inspections to verify compliance with these regulations.
In addition, ships operating from U.S. ports are subject to
inspection by the U.S. Coast Guard for compliance with
international treaties and by the U.S. Public Health Service for
sanitary conditions.
With respect to passengers to and from U.S. ports, CCLI
is required to obtain certificates from the U.S. Federal Maritime
Commission and the U.S. Coast Guard relating to its ability to
satisfy liabilities arising out of nonperformance of obligations
to passengers, casualty or personal injury and water pollution.
The Company believes CCLI is in compliance with all material
regulations applicable to its ships and has all licenses
necessary for the conduct of its business.
The International Maritime Organization's SOLAS 1974
convention, which became effective in 1980 and was last amended
in 1992, established minimum safety, fire prevention and fire
protection standards (the "SOLAS '74 standards"). Under the
amended SOLAS requirements, all existing passenger ships must
have upgraded fire detection and fire protection systems by
October 1997. The schedule for compliance with certain other
aspects of the amended requirements for passenger vessels
currently meeting SOLAS '74 standards extends until 2005 or 15
years after construction, whichever is later.
A significant number of berths are on ships that are
expected to need SOLAS upgrades. The actual number of deletions
will depend on shipowners' willingness to incur the potentially
significant capital expenditures needed to bring older vessels
into compliance with these requirements.
Three of Celebrity Cruises' vessels were delivered
between 1990 and 1995 and a fourth was rebuilt in 1990. Because
Celebrity maintains a modern fleet, the work necessary for its
ships to meet 1997 SOLAS requirements can be done without
material capital expenditures.
ITEM 2. PROPERTIES
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See Item 1.
ITEM 3. LEGAL PROCEEDINGS
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The Company and CCLI are parties, as plaintiff or
defendant, to various suits in the ordinary course of business
for monetary relief arising principally from personal injuries,
collision or other casualty and to claims arising under charter
parties. All such personal injury, collision and casualty claims
against the Company and CCLI are fully covered by insurance
(subject to deductibles not material in amount). Each of the
other claims involves an amount which in the opinion of
management is not material in relation to the consolidated
current assets of the Company as shown in the Company's
Consolidated Balance Sheet as at December 31, 1995, incorporated
herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
Has Served as
Name Age Position Held Such Since
- ---- --- ------------- -------------
Morton P. Hyman 60 President October 1971
Robert N. Cowen 47 Senior Vice February 1993
President,
Secretary, June 1982
Myles R. Itkin 48 Senior Vice June 1995
President, Chief
Financial Officer
and Treasurer
Alan Carus 57 Controller December 1987
Messrs. Hyman and Cowen are directors of the registrant
and members of the Finance and Development Committee of its Board
of Directors. The term of office of each executive officer
continues until the first meeting of the Board of Directors of
the registrant immediately following the next annual meeting of
its stockholders, to be held in June 1996, and until the election
and qualification of his successor. There is no family
relationship between the executive officers.
Mr. Morton P. Hyman has served as a director of the
registrant since 1969. Mr. Robert N. Cowen has served as a
director of the registrant since June 1993, as an officer and
director of certain of the registrant's subsidiaries during the
past five years, and as a director of Maritime Overseas
Corporation ("MOC"), the agent for the Company's vessels referred
to in the first paragraph of Item 1, during the past five years.
Prior to joining the registrant in June 1995, Mr. Myles R. Itkin
was employed for one year by Alliance Capital Management L.P. as
Senior Vice President-Finance, and prior thereto he was employed
by Northwest Airlines, Inc. as Vice President-Finance. Mr. Alan
Carus has served as an officer and director of certain of the
registrant's subsidiaries during the past five years; he has also
served as a senior officer of MOC during the past five years.
PART II
-------
The information called for by Items 5 through 8 is
incorporated herein by this reference from the following
respective portions and page numbers of the registrant's Annual
Report to Shareholders for 1995:
Item Incorporated from:
---- -----------------
ITEM 5.Market for Registrant's Last three paragraphs under
- ------ Common Equity and Related "Shareholder Information" on
Stockholder Matters inside back cover (page 41);
------------------------- "Stock Price and Dividend
Data" table on last page
(page 24) of "Management's
Discussion and Analysis"
section.
ITEM 6.Selected Financial Data The information for the years
- ------ ----------------------- 1991 through 1995 under "Eleven-
Year Statistical Review"
section (pages 38 and 39).
ITEM 7.Management's Discussion Information set forth in text
- ------ and Analysis of Financial of "Management's Discussion
Condition and Results of and Analysis" section (pages
Operations 21 through 24).
-------------------------
ITEM 8.Financial Statements and "Consolidated Statements of
- ------ Supplementary Data Operations and Retained
------------------------ Earnings", "Consolidated
Balance Sheets", "Consolidated
Statements of Cash Flows",
"Notes to Consolidated
Financial Statements" and
"Report of Independent
Auditors" sections (pages 25
through 37).
Additional Supplementary Data -
Ratio of Earnings to Fixed Charges
----------------------------------
There was a deficiency of earnings to fixed charges
for 1995 of $31,967,000. 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.
ITEM 9.Changes in and Disagreements with Accountants on
- ------ Accounting and Financial Disclosure
------------------------------------------------
None.
PART III
---------
The information called for by Items 10 through 13,
except for the information set forth in Part I above regarding
the executive officers of the registrant, is incorporated herein
by this reference from the following respective portions of the
definitive proxy statement to be filed by the registrant in
connection with its 1996 Annual Meeting of Shareholders.
Item Incorporated from:
---- -----------------
ITEM 10.Directors and Executive "Election of Directors"
- ------- Officers of the Registrant
--------------------------
ITEM 11.Executive Compensation "Compensation and Certain
- ------- -------------------------- Transactions"*
ITEM 12.Security Ownership of "Election of Directors"
- ------- Certain Beneficial Owners and "Information as to
and Management Stock Ownership"
--------------------------
ITEM 13.Certain Relationships and "Election of Directors" and
- ------ Related Transactions "Compensation and Certain
-------------------------- Transactions"*
___________
* Excluding material under "Stockholder Return Performance
Presentation" and "Executive Compensation Report of the
Executive Compensation Committee and the Stock Option
Committee".
PART IV
-------
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
- -------- Form 8-K
-------------------------------------------------------
(a) See the accompanying index to financial statements
and schedules, and the accompanying Exhibit Index.
(b) Reports on Form 8-K: The registrant did not file
any report on Form 8-K during the quarter ended December 31,
1995.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
By: S/Myles R. Itkin
--------------------------------
Myles R. Itkin
Senior Vice President,
Chief Financial Officer & Treasurer
Date: March 26, 1996
<PAGE>
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the date indicated. Each of such persons appoints Morton P.
Hyman and Myles R. Itkin, and each of them, as his agents and
attorneys-in-fact, in his name, place and stead in all
capacities, to sign and file with the SEC any amendments to this
report and any exhibits and other documents in connection
therewith, hereby ratifying and confirming all that such
attorneys-in-fact or either of them may lawfully do or cause to
be done by virtue of this power of attorney.
By S/Morton P. Hyman
------------------------------
Morton P. Hyman, Principal
Executive Officer and Director
By S/Myles R. Itkin
------------------------------
Myles R. Itkin, Principal
Financial Officer
By S/Alan Carus
------------------------------
Alan Carus, Controller
By S/Robert N. Cowen
------------------------------
Robert N. Cowen, Director
By S/Ran Hettena
------------------------------
Ran Hettena, Director
By S/George C. Blake
------------------------------
George C. Blake, Director
By S/Solomon N. Merkin
------------------------------
Solomon N. Merkin, Director
By S/William L. Frost
------------------------------
William L. Frost, Director
By S/Thomas H. Dean
------------------------------
Thomas H. Dean, Director
Date: March 26, 1996
<PAGE>
<PAGE>
FORM 10-K--ITEM 14(a) (1) and (2)
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Overseas
Shipholding Group, Inc. and subsidiaries, included in the annual
report of the registrant to its shareholders for the year ended
December 31, 1995 are incorporated by reference in Item 8:
Consolidated Balance Sheets--December 31, 1995 and 1994
Consolidated Statements of Operations and Retained Earnings--
Years Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows--
Years Ended December 31, 1995, 1994 and 1993
Notes to Financial Statements --December 31, 1995
All schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.
<PAGE>
Exhibit Index
3(i) Certificate of Incorporation of the
registrant, as amended to date (filed as
Exhibit 3(a) to the registrant's Form 10-K
for 1988 and incorporated herein by
reference).
3(ii) By-Laws of the registrant, as amended to date
(filed via EDGAR as Exhibit 3(ii) to the
registrant's Form 10-K for 1993 and
incorporated herein by reference).
4(a) Amended and Restated Credit Agreement dated
as of February 9, 1990, as amended and
restated as of October 31, 1994, among the
registrant, two subsidiaries of the
registrant and certain banks (filed via EDGAR
as Exhibit 4(a) to the registrant's Form 10-K
for 1994 and incorporated herein by
reference).
4(b) Form of Note Purchase Agreement dated as of
March 1, 1992 between the registrant and each
of the purchasers of its senior notes (filed
as Exhibit 4(b) to the registrant's Form 10-K
for 1991 and incorporated herein by
reference).
4(c) Form of Note Purchase Agreement dated as of
June 1, 1993 between the registrant and each
of the purchasers of its senior notes (filed
via EDGAR as Exhibit 4 to the registrant's
Form 10-Q for the quarter ended June 30, 1993
and incorporated herein by reference.)
4(d)(1) Form of Indenture dated as of December 1,
1993 between the registrant and The Chase
Manhattan Bank (National Association)
providing for the issuance of debt securities
by the registrant from time to time (filed
via EDGAR as Exhibit 4(d)(1) to the
registrant's Form 10-K for 1993 and
incorporated herein by reference).
4(d)(2) Resolutions dated December 2, 1993 fixing the
terms of two series of debt securities issued
by the registrant under the Indenture (filed
via EDGAR as Exhibit 4(d)(2) to the
registrant's Form 10-K for 1993 and
incorporated herein by reference).
4(d)(3) Form of 8% Notes due December 1, 2003 of the
registrant (filed via EDGAR as Exhibit
4(d)(3) to the registrant's Form 10-K for
1993 and incorporated herein by reference).
4(d)(4) Form of 8-3/4% Debentures due December 1,
2013 of the registrant (filed via EDGAR as
Exhibit 4(d)(4) to the registrant's Form 10-K
for 1993 and incorporated herein by
reference).
NOTE: The Exhibits filed herewith do not
include other instruments authorizing long-
term debt of the registrant and its
subsidiaries, none of which exceeds 10% of
total assets of the registrant and its
subsidiaries on a consolidated basis. The
registrant agrees to furnish a copy of each
such instrument to the Commission upon
request.
10(a) Form of Agency Agreements between Maritime
Overseas Corporation and each of the
registrant's majority-owned subsidiaries that
owns or operates a U.S.-flag vessel (refiled
as Exhibit 10(a) to the registrant's Form 10-
K for 1989 and incorporated herein by
reference).
10(b) Form of Agency Agreements between Maritime
Overseas Corporation and each of the
registrant's majority-owned subsidiaries that
owns or operates a foreign-flag vessel
(refiled as Exhibit 10(b) to the registrant's
Form 10-K for 1989 and incorporated herein by
reference).
*10(c)(1) Form of Management Agreement dated as of
January 1, 1985 between Lion Insurance
Company Ltd. and Maritime Overseas
Corporation (previously filed more than 10
years ago and refiled herewith).
10(c)(2) Form of Amendment No. 1 dated as of April 1,
1986 to the Management Agreement between Lion
Insurance Company Ltd. and Maritime Overseas
Corporation (filed as Exhibit 10(c)(2) to the
registrant's Form 10-K for 1986 and
incorporated herein by reference).
10(d)(1) Form of General Services Agreement dated
December 31, 1969 between the registrant and
Maritime Overseas Corporation (the form of
which was filed as Exhibit 13(3) to
Registration Statement No. 2-34124 and is
incorporated herein by reference).
10(d)(2) Form of Amendment dated as of January 1, 1975
to General Services Agreement between the
registrant and Maritime Overseas Corporation
(refiled via EDGAR as Exhibit 10(d)(2) to the
registrant's Form 10-K for 1994 and
incorporated herein by reference).
10(d)(3) Amendment dated January 10, 1980 to General
Services Agreement between the registrant
and Maritime Overseas Corporation (refiled as
Exhibit 10(d)(3) to the registrant's Form 10-
K for 1989 and incorporated herein by
reference).
10(d)(4) Form of Amendment dated as of January 1, 1981
to General Services Agreement between the
registrant and Maritime Overseas Corporation
(refiled as Exhibit 10(d)(4) to the
registrant's Form 10-K for 1990 and
incorporated herein by reference).
10(d)(5) Form of Amendment dated as of October 1, 1987
to General Services Agreement between the
registrant and Maritime Overseas Corporation
(filed as Exhibit 10(d)(5) to the
registrant's Form 10-K for 1987 and
incorporated herein by reference).
10(d)(6) Form of Amendment dated as of July 1, 1994 to
General Services Agreement between the
registrant and Maritime Overseas Corporation
(filed via EDGAR as Exhibit 10(d)(6) to the
registrant's Form 10-K for 1994 and
incorporated herein by reference).
10(e)(1) Form of Letter Agreement dated as of August
9, 1973 between the registrant and Maritime
Overseas Corporation (refiled via EDGAR as
Exhibit 10(e)(1) to the registrant's Form 10-
K for 1994 and incorporated herein by
reference).
10(e)(2) Form of Letter Agreement dated as of August
9, 1973 by Maritime Overseas Corporation
(refiled via EDGAR as Exhibit 10(e)(2) to the
registrant's Form 10-K for 1994 and
incorporated herein by reference).
10(e)(3) Form of Letter Agreement dated as of August
9, 1973 by Maritime Overseas Corporation
(refiled via EDGAR as Exhibit 10(e)(3) to the
registrant's Form 10-K for 1994 and
incorporated herein by reference).
10(e)(4) Form of Letter Agreement dated as of January
1, 1981 between the registrant and Maritime
Overseas Corporation (refiled as Exhibit
10(e)(4) to the registrant's Form 10-K for
1991 and incorporated herein by reference).
10(f)(1) Form of Service Agreements between Maritime
Overseas Corporation and each of the
partnerships First Shipmor Associates, Second
Shipmor Associates, Third Shipmor Associates
and Fourth Shipmor Associates and related
letter agreements between the registrant and
each of said partnerships (refiled as Exhibit
10(f)(1) to the registrant's Form 10-K for
1987 and incorporated herein by reference).
10(f)(2) Service Agreement dated January 27, 1983
between Cambridge Tankers, Inc. and Maritime
Overseas Corporation relating to the OVERSEAS
BOSTON (refiled as Exhibit 10(f)(2) to the
registrant's Form 10-K for 1992 and
incorporated herein by reference).
10(f)(3) Form of Service Agreement between respective
subsidiaries of the registrant and Maritime
Overseas Corporation relating to the OVERSEAS
NEW ORLEANS and OVERSEAS PHILADELPHIA (not
filed--substantially identical in all
material respects to the agreement listed as
Exhibit 10(f)(2) hereto except as to the
parties, the vessels and the dates).
10(g)(1) Form of Management Agreements between
Maritime Overseas Corporation and each of
First United Shipping Corporation, Interocean
Tanker Corporation, Second United Shipping
Corporation and Third United Shipping
Corporation (refiled via EDGAR as Exhibit
10(g)(1) to the registrant's Form 10-K for
1994 and incorporated herein by reference).
*10(g)(2) Form of Amendment No. 1 and Amendment No. 2
to Management Agreements between Maritime
Overseas Corporation and each of First United
Shipping Corporation, Interocean Tanker
Corporation, Second United Shipping
Corporation and Third United Shipping
Corporation (previously filed more than 10
years ago and refiled herewith).
10(g)(3) Form of Amendment No. 3 to Management
Agreements between Maritime Overseas
Corporation and each of First United Shipping
Corporation, Interocean Tanker Corporation,
Second United Shipping Corporation and Third
United Shipping Corporation (filed via EDGAR
as Exhibit 10(g)(3) to the registrant's Form
10-K for 1994 and incorporated herein by
reference).
10(g)(4) Form of Company Service Employees Agreement
between Maritime Overseas Corporation and
each of First Union Tanker Corporation and
Second Union Tanker Corporation (filed via
EDGAR as Exhibit 10(g)(4) to the registrant's
Form 10-K for 1994 and incorporated herein by
reference).
10(h)(1) Agreement dated April 1, 1992 between the
registrant and Maritime Overseas Corporation
(filed as Exhibit 10 to the registrant's Form
10-Q for the quarter ended March 31, 1992 and
incorporated herein by reference).
10(h)(2) Letter Agreement dated November 9, 1993
amending the Agreement dated April 1, 1992
referred to above (filed via EDGAR as Exhibit
10(h)(2) to the registrant's Form 10-K for
1993 and incorporated herein by reference).
10(i) Indemnification Agreement dated December 21,
1992 among Continental Grain Company, Third
Contiship Inc., Fourth Contiship Inc., OSG
Bulk Ships, Inc., Third Shipco Inc., Fourth
Shipco Inc. and the registrant (filed as
Exhibit 10(i) to registrant's Form 10-K for
1992 and incorporated herein by reference).
10(j)(1) Exchange Agreement dated December 9, 1969
(including exhibits thereto) between the
registrant and various parties relating to
the formation of the registrant (the form of
which was filed as Exhibit 2(3) to
Registration Statement No. 2-34124 and is
incorporated herein by reference).
10(j)(2) Form of Additional Exchange Agreement
referred to in Section 2.02 of Exhibit
10(j)(1) hereto (filed as Exhibit 2(4) to
Registration Statement No. 2-34124 and
incorporated herein by reference).
10(k)(1) Supplemental Executive Retirement Plan of the
registrant, as amended and restated as of
January 1, 1995 (filed via EDGAR as Exhibit
10(k) to registrant's Form 10-K for 1994 and
incorporated herein by reference).
10(k)(2) Employment Contract with an executive officer
(filed via EDGAR as Exhibit 10 to the
registrant's Form 10-Q for the quarter ended
June 30, 1995 and incorporated herein by
reference).
10(k)(3) Letter Agreement with a former executive
officer (filed via EDGAR as Exhibit 10 to the
registrant's Form 10-Q for the quarter ended
September 30, 1995 and incorporated herein by
reference).
10(l)(1) 1989 Stock Option Plan adopted for officers
and key employees of the registrant or its
subsidiaries (filed as Exhibit 10(l) to the
registrant's Form 10-K for 1989 and
incorporated herein by reference).
10(l)(2) Amendment adopted October 9, 1990 to the
registrant's 1989 Stock Option Plan referred
to above (filed as Exhibit 10(l)(2) to the
registrant's Form 10-K for 1990 and
incorporated herein by reference).
10(m) 1990 Stock Option Plan adopted for officers
and employees of the registrant or its
subsidiaries, excluding the recipients of
options under Exhibits 10(l)(1) and (2)
listed above (filed as Exhibit 10(m) to the
registrant's Form 10-K for 1990 and
incorporated herein by reference).
10(n)(1) Joint Venture Agreement dated September 23,
1992 among Archinav Holdings Ltd.
("Archinav"), Overseas Cruiseship Inc.
("Overseas"), and Celebrity Cruise Lines Inc.
("CCLI") (excluding exhibits and schedules)
and the following related agreements:
Guarantee of the registrant dated September
23, 1992 and Shareholders Agreement dated
October 21, 1992 among Archinav, Overseas and
CCLI (excluding exhibits)(filed as Exhibits
2(a), (b) and (c), respectively, to the
registrant's Report on Form 8-K dated October
21, 1992 and incorporated herein by
reference).
10(n)(2) Supplemental Agreement dated January 29, 1993
to the Shareholders Agreement referred to in
Exhibit 10(n)(1) above (filed as Exhibit
10(n)(2) to the registrant's Form 10-K for
1992 and incorporated herein by reference).
*10(n)(3) Supplemental Agreement dated November 21,
1995 to the Shareholders Agreement referred
to in Exhibit 10(n)(1) above.
*12 Computation of Ratio of Earnings to Fixed
Charges.
*13 Such portions of the Annual Report to
security holders for 1995 as are expressly
incorporated herein by reference.
*21 List of subsidiaries of the registrant.
*23 Consent of Independent Auditors of the registrant.
*27 Financial Data Schedule.
NOTE: The Exhibits which have not previously
been filed or listed or are being refiled are
marked with an asterisk (*).
List of Executive Compensation Plans and Arrangements -
See Exhibits 10(k)(1),(2) and (3), 10(l)(1)
and (2), and 10(m) above.
<PAGE>
EXHIBIT 10(c)(1)
----------------
MANAGEMENT AGREEMENT made and entered into as of the 1st day
of January, 1985, by and between LION INSURANCE COMPANY LTD., a
Bermuda corporation ("Lion"), and MARITIME OVERSEAS CORPORATION,
a New York corporation ("MOC").
W I T N E S S E T H:
WHEREAS, MOC is a corporation engaged in rendering
management and administrative services; and
WHEREAS, Lion desires to employ MOC to perform certain
management and administration services for Lion and MOC is
willing to perform such services, on the terms herein provided.
NOW THEREFORE, in consideration of the mutual covenants
herein contained, it is agreed as follows:
1. Appointment of MOC - Lion appoints MOC as its agent to
perform the duties and provide the services described in this
Agreement, in accordance with such directions and instructions as
Lion may issue from time to time, and upon the terms and
conditions herein provided.
2. Acceptance of Appointment - MOC accepts such
appointment and undertakes to perform the duties and provide the
services described in this Agreement in accordance with such
reasonable directions and instructions as Lion may issue from
time to time, and upon the terms and conditions herein provided.
MOC shall exercise reasonable care in the performance of its
duties under this Agreement. Nothing in this Agreement shall be
deemed to grant to MOC any interest in the profits resulting from
its operation or as creating any relationship other than that of
principal and agent.
3. Duties of MOC - For the account of Lion, in accordance
with such directions, orders, forms and methods of supervision
and inspection as Lion may from time to time issue, in an
economical and efficient manner, and exercising due diligence to
protect and safeguard the interests of Lion, in connection with
the duties prescribed in this Agreement, MOC shall:
(a) Supervise the performance of all underwriting functions
in connection with risks submitted to Lion including,
but not limited to, such functions as the handling of
policy terms and conditions, premium rates and loss
settlements.
(b) Supervise the preparation, audit and processing as
necessary of all insurance documentation to be issued
by Lion such as policies, reinsurance contracts,
binders and endorsements.
(c) Supervise the preparation of all experience statistics
required by Lion.
(d) Supervise the preparation of all quarterly and annual
insurance statements required by Lion.
(e) Supervise the complete insurance accounting service,
including but not limited to the establishment of all
necessary reserves such as those for unearned premiums,
loss reserves and reserves for expenses.
(f) Supervise the preparation of all tax statements and
returns required of Lion with respect to premiums and
all other taxes.
(g) Supervise the preparation and maintenance of complete
books and records with respect to all aspects of Lion's
operations, including books and records necessary for
the annual financial statements and audit of Lion and
quarterly financial statements; such financial
statements shall include figures showing the earned
premium rates to incurred claims ratio for Lion.
(h) Advise Lion periodically, at such intervals and with
such frequency as Lion may specify, as to the amount of
reserves and other funds available for investment from
time to time by Lion, and advise Lion with respect to
investments.
(i) Assist in obtaining and maintaining in force, except
for the percentage of risk retained by Lion,
reinsurance with financially responsible reinsurers, of
all risks insured by Lion.
In connection with the performance of its duties under this
Agreement, MOC shall, from time to time, consult with members of
its legal department, and, upon instructions of Lion, shall
retain independent counsel for the account of Lion.
Nothing in this Agreement shall be deemed to obligate MOC to
expend its own funds in the payment of any amounts to be
disbursed for the account of Lion, it being understood that all
such funds shall be provided by Lion as herein set forth.
4. Office and Staff - MOC shall at all times maintain
appropriate offices, facilities and staff in order to perform
properly the duties and services set forth in this Agreement.
5. Compensation - (a) For the duties and services to be
performed hereunder MOC shall receive a fee for each year in an
amount to equal to eight percent (8%) of Lion's Gross Revenues
for that year. Anything herein to the contrary notwithstanding,
the total fee payable hereunder to MOC for any year may not
exceed ninety percent (90%) of Lion's Net Income for that year
before deductions for the fee.
Lion's Gross Revenues and Net Income for any year shall
be determined on an accrual basis in accordance with generally
accepted accounting principles applied on a consistent basis from
year to year.
(b) The parties shall agree upon an estimated fee for
each calendar year or portion thereof that this Agreement is in
effect, during the ninety days immediately preceding the
commencement of that year. MOC shall be entitled to receive
advances during the year based on the estimated fee. Promptly
after the final determination of Lion's Gross Revenues and Net
Income for the year, the fee shall be finally fixed, based on
Lion's Gross Revenues and Net Income for that year, and the
amount by which the fee as finally determined exceeds or is less
than the amounts advanced to MOC shall be paid by Lion or
refunded by MOC, as the case may be.
6. Expenses - The fees set forth in Section 5 of this
Agreement shall not include, and Lion shall promptly reimburse
MOC for, all amounts incurred, expended or disbursed by MOC for
the account of Lion pursuant to this Agreement or otherwise.
7. Indemnification of MOC - Lion shall indemnify, hold
harmless and defend MOC against any and all claims and demands
(including costs and reasonable lawyers' fees in defending such
claims and demands), whether or not any such claims or demands be
found to be valid, of whatsoever kind or nature and by whomsoever
asserted, and whether or not such claim or damage is caused by
MOC's negligence (but not arising out of MOC's gross negligence
or wilful misconduct), arising out of or in any way connected
with the performance of MOC's services in good faith hereunder.
MOC shall be under no responsibility or liability for
loss of profits, or otherwise, to Lion, arising out of any act or
omission involving any error of judgement or any negligence
(other than gross negligence or wilful misconduct) on the part of
its officers or employees, selected with due care, or otherwise
in connection with the performance of MOC's duties under this
Agreement.
MOC shall promptly notify Lion of any claim or demand
in respect of which MOC may be indemnified hereunder and shall co-
operate with Lion in the defense thereof.
8. Force Majeure - MOC shall be under no liability of any
kind or nature whatsoever in the event that it should fail to
perform any services hereunder if such failure is directly or
indirectly caused by war, war-like activities, government order,
supervening illegality, or any labor shortage, labor trouble,
strike or lock-out, or any shortage of material or Act of God or
any other cause whatsoever beyond MOC's control, whether or not
of the same or similar nature.
9. Dealings with Affiliates - If MOC shall utilize any
related or affiliated company to render any services or to
furnish any facilities in connection with the performance of its
duties under this Agreement, it shall disclose such relationship
to Lion.
10. Directions and Approvals - In acting under this
Agreement, MOC may accept and rely upon directions or approvals
made or given on behalf of Lion by any officer of Lion or by any
other person designated by Lion to give such directions and
approvals, unless and until MOC shall have received written
notice from Lion of the revocation or limitation of the authority
of such persons to act on behalf of Lion.
11. Term of Agreement - (a) This Agreement shall continue
to and including December 31, 1986. This Agreement shall be
automatically renewed for successive terms of one (1) year each,
unless, at least thirty (30) days prior to the expiration of the
initial term or the then current renewal term, either party shall
give written notice to the other electing to terminate this
Agreement at the expiration of the then current term.
(b) The termination of this Agreement shall not
relieve either party of liability for the performance of
obligations incurred by said party during the effective period of
the Agreement which have not been performed at the time of its
termination.
12. Assignment - This Agreement shall not be assigned by
either party without the consent in writing of the other.
13. Notices - All notices, demands, requests, approvals and
other communications ("Notices") which are given or required to
be given under, or with respect to, this Agreement, shall be sent
by registered or certified mail, postage prepaid, (except in case
of emergency or urgency when they shall be sent by telex, cable
or telegram and confirmed by such registered or certified mail),
addressed to the party for whom intended at its address specified
below or to such other address as such party shall hereafter
specify by like Notice.
Notices to Lion shall be addressed, until further notice, as
follows:
c/o Overseas Shipholding Group, Inc.
1114 Avenue of the Americas
New York, New York 10036
Notices to MOC shall be addressed, until further notice, as
follows:
511 Fifth Avenue
New York, New York 10017
14. Entire Agreement and Amendments - This Agreement sets
forth the entire understanding of the parties relating to the
subject matter hereof and supersedes all other proposals and
agreements, oral or written, between the parties concerning the
subject matter hereof. None of the terms or provisions hereof
shall be modified, and this Agreement may not be amended, except
by a written instrument signed by the party against which such
modification or amendment is to be enforced.
15. Waiver - No waiver of any provision of this Agreement
shall be effective unless in writing signed by the waiving party
and no waiver of any breach or default hereunder shall constitute
a waiver of any other subsequent breach or default, whether of
the same or different nature.
16. Governing Law - This Agreement shall be governed and
construed in accordance with the laws of the State of New York.
17. Parties in Interest - This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the day
and year first above written.
LION INSURANCE COMPANY LTD.
By:
-------------------------
MARITIME OVERSEAS CORPORATION
By:
-------------------------
<PAGE>
EXHIBIT 10(g)(2)
----------------
AMENDMENT NO. 1
DATED
TO MANAGEMENT AGREEMENT DATED AS OF
BETWEEN (THE "OWNER")
AND MARITIME OVERSEAS CORPORATION ("MOC")
W I T N E S S E T H :
IT IS HEREBY MUTUALLY AGREED as follows:
1. Section 5(b) of the Management Agreement, which
provides for the escalation of the fees payable to MOC in the
circumstances set forth therein, is hereby amended, effective the
date hereof, by suspending the application of the provisions of
said Section 5(b) during such period as the Owner's vessel
(formerly Hull No. ) is chartered under Time
Charter Party dated , as amended from time to
time, including the Renewal Period referred to therein (the
"Charter"). Upon termination of the Charter, the provisions of
said Section 5(b) shall once again become effective.
2. Except as amended hereby, all of the terms and
conditions of the Management Agreement shall remain unaltered and
continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 1 to the Management Agreement the day and year
first above written.
By:
--------------------------
MARITIME OVERSEAS CORPORATION
By:
---------------------------
<PAGE>
EXHIBIT 10(g)(2)
----------------
AMENDMENT NO. 2
DATED AS OF
TO MANAGEMENT AGREEMENT DATED AS OF
BETWEEN (THE "OWNER")
AND MARITIME OVERSEAS CORPORATION ("MOC")
W I T N E S S E T H :
IT IS HEREBY MUTUALLY AGREED as follows:
1. Section 5(a) of the Management Agreement is hereby
amended, commencing on the Effective Date, as defined in Addendum
No. dated as of to the Time Charter Party
dated covering the Owner's vessel (formerly
Hull No. ), to read as follows:
"(a) For the duties and services to be performed
hereunder, MOC shall receive in respect of the Vessel
listed on Schedule "A" hereto, during such period as
said Vessel is chartered under Time Charter Party dated
, as amended from time to time, the sum
of $24,240 per month, payable in advance on the first
business day of each month."
2. Except as amended hereby, all of the terms and
conditions of the Management Agreement, as amended by
Amendment No. 1, shall remain unaltered and continue in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment No. 2 to the Management Agreement the day and
year first above written.
By:
--------------------------
MARITIME OVERSEAS CORPORATION
By:
--------------------------
<PAGE>
EXHIBIT 10(n)(3)
----------------
AGREEMENT SUPPLEMENTAL TO SHAREHOLDERS' AGREEMENT
ARCHINAV HOLDINGS LTD. (1)
OVERSEAS CRUISESHIP INC. (2)
- and -
CELEBRITY CRUISE LINES INC. (3)
relating to CELEBRITY CRUISE LINES INC.
<PAGE>
THIS AGREEMENT made the 21st day of November, 1995
BETWEEN
(1) ARCHINAV HOLDINGS LTD incorporated in the Republic of
Liberia and having its registered office at 80 Broad Street,
Monrovia, Liberia (the "C Shareholder");
(2) OVERSEAS CRUISESHIP INC. incorporated in the Cayman Islands
and having its registered office at P.O. Box 309, George
Town, Cayman Islands (the "O Shareholder"); and
(3) CELEBRITY CRUISE LINES INC. incorporated in the Cayman
Islands and having its registered office at P.O. Box 1350,
George Town, Cayman Islands (the "Company").
IS SUPPLEMENTAL TO the shareholders agreement (the "Original
Shareholders Agreement") dated 21st October, 1992 made between
the parties hereto and the agreement supplemental thereto dated
29th January 1993 made between the same parties (the "First
Supplemental Agreement" and together with the Original
Shareholders Agreement, the "Shareholders Agreement").
WHEREAS
(A) The parties are desirous to arrange the issue of (i) a
further 51,000 C Ordinary Shares in the Company (the "New C
Shares") to the C Shareholder in addition to the 2,550,000 C
Ordinary Shares (the "Existing C Shares") currently recorded
in the name of the C Shareholder and (ii) a further 49,000
Ordinary Shares in the Company (the "New O Shares") to the O
Shareholder in addition to the 2,450,000 O Ordinary Shares
(the "Existing O Shares") currently recorded in the name of
the O Shareholder.
(B) This Supplemental Agreement sets out the agreement of the
parties in respect of such issue.
NOW IT IS HEREBY MUTUALLY AGREED by and between the parties
hereto as follows:
1. (i) On 30th November, 1995 the C Shareholder shall
subscribe and pay for 51,000 of the New C Shares at
US$100 per share (amounting to an aggregate
subscription of US$5,100,000); and
(ii) On 30th November, 1995 the O Shareholder shall
subscribe and pay for 49,000 of the new O Shares at
US$100 per share (amounting to an aggregate
subscription of US$4,900,000).
2. Upon the subscription, payment for and issue of the New C
Shares all references to the Existing C Shares contained in
the Shareholders Agreement shall be read and construed as if
they were references to both the Existing C Shares and the
New C Shares and accordingly the definition of "Shares" in
the Shareholders Agreement shall include all such shares and
the share certificate(s) for such New C Shares shall be
deposited in the same manner as the share certificate(s) for
the Existing C Shares have been deposited pursuant to terms
of the Shareholders Agreement;
3. Upon the subscription, payment for and issue of the New O
Shares all references to the Existing O Shares contained in
the Shareholders Agreement shall be read and construed as if
they were references to both the Existing O Shares and the
New O Shares and accordingly the definition of "Shares" in
the Shareholders Agreement shall include all such shares and
the share certificate(s) for such New O Shares shall be
deposited in the same manner as the share certificates for
the Existing O Shares have been deposited pursuant to the
terms of the Shareholders Agreement.
4. The provisions of Clauses 13, 18 and 20 of the Original
Shareholders Agreement shall apply to this Supplemental
Agreement mutatis mutandis.
5. This Agreement may be executed in one or more counterparts
each of which shall be deemed an original but all of which
taken together shall constitute one and the same instrument.
IN WITNESS whereof this Agreement has been executed by the
parties hereto the day and year first above written.
SIGNED by )
)
for and on behalf of )
ARCHINAV HOLDINGS LTD )
in the presence of: )
SIGNED by )
)
for and on behalf of )
OVERSEAS CRUISESHIP INC. )
in the presence of: )
SIGNED by )
)
for and on behalf of )
CELEBRITY CRUISE LINES INC. )
in the presence of: )
<PAGE>
EXHIBIT 12
----------
OVERSEAS SHIPHOLDING GROUP, INC.
RATIO OF EARNINGS TO FIXED CHARGES
For the year ended December 31, 1995
(In thousands)
Presented in connection with Amendment No. 1
filed on November 9, 1993 to Registration Statement No. 33-50441
Loss before Federal income taxes $(13,892)
Adjustments of income related to
companies owned less than 100% (592)
Interest expense 66,440
Proportionate share of interest of
50% - owned companies 7,691
Interest component of an operating lease 2,484
Amortization of capitalized interest 2,697
---------
Earnings $ 64,828
=========
Interest expense $ 66,440
Proportionate share of fixed charges of
50% - owned companies 13,060
Capitalized interest 14,811
Interest component of an operating lease 2,484
---------
Fixed charges $ 96,795
=========
Deficiency of earnings available to cover fixed charges $(31,967)
=========
<PAGE>
EXHIBIT 13
----------
<TABLE>
[From page 3 of the 1995 Annual Report]
TWO-YEAR CHARTER POSITION OF OSG FLEET
(Including Scheduled Deliveries)
<CAPTION>
Through Year-End 1996 1997
<S> <C> <C>
Total Fleet dwt 6,938,650 7,510,450
% of Total Fleet on Charter 22 19
U.S. Fleet dwt 993,350 993,350
% of U.S. Fleet on Charter 2 0
Intl. Fleet dwt 5,945,300 6,517,100
% of Intl. Fleet on Charter 25 22
</TABLE>
<PAGE>
[From Page 18 and 19 of the 1995 Annual Report]
THE FLEET
February 14, 1996
Operating Bulk Fleet: 61 vessels, 6,050,650 dwt
On Order: 6 vessels, 1,459,800 dwt
Total Bulk Tonnage: 67 vessels, 7,510,450 dwt
<TABLE>
INTERNATIONAL BULK FLEET
- ------------------------
<CAPTION>
Year Deadweight Charter
Type of Ship Built Tonnage Expiration Date
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Tankers 1996 295,800 Voyage Charter
1996 295,750 Voyage Charter
1973 50%-owned 264,900 November 1996
1975 50%-owned 264,850 September 1998
1974 50%-owned 264,850 December 1997
1974 50%-owned 264,850 July 1997
1990 254,000 March 2002
1989 133,000 June 2005
1976 128,450 Voyage Charter
1975 128,250 Voyage Charter
1975 128,200 Voyage Charter
1980 96,050 Voyage Charter
1981 96,000 Voyage Charter
1979 95,600 Voyage Charter
1994 94,850 Voyage Charter
1994 94,650 Voyage Charter
1994 93,350 July 1996
1994 93,350 July 1996
1994 93,300 Voyage Charter
1994 93,300 Voyage Charter
- -----------------------------------------------------------------------------
Petroleum Products
Carriers 1986 65,150 August 1996
1986 65,150 Voyage Charter
1986 63,200 September 1996
1987 63,150 September 1996
1989 39,450 March 1997
1988 39,450 Voyage Charter
1989 39,100 September 1996
1989 39,050 July 1996
1979 31,600 April 1996
1981 30,800 Voyage Charter
1981 30,800 Voyage Charter
1982 29,500 Voyage Charter
- -----------------------------------------------------------------------------
Bulk Carriers 1982 138,800 May 1996
1982 138,800 Voyage Charter
1975 121,050 May 1996
1975 121,000 May 1996
1990 120,900 Voyage Charter
1990 120,800 Voyage Charter
1973 116,100 Voyage Charter
1981 64,550 March 1996
1983 64,200 March 1996
1989 63,350 Voyage Charter
1989 63,250 Voyage Charter
1977 49%-owned 60,300 March 1996
1973 49%-owned 54,450 March 1996
- -----------------------------------------------------------------------------
Operating International
Bulk Fleet Total(a) 45 vessels 5,057,300 dwt
=============================================================================
</TABLE>
<TABLE>
ON ORDER BULK FLEET
- -------------------
<CAPTION>
Delivery Deadweight Charter
Type of Ship Date Tonnage Expiration Date
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Tankers December 1996 50%-owned 269,650 2004
Quarter 4 1996 302,150
February 1997 50%-owned 269,650 2005
Quarter 1 1997 302,150
- ------------------------------------------------------------------------------
Bulk Carriers October 1996 158,100
December 1996 158,100
- ------------------------------------------------------------------------------
6 vessels 1,459,800 dwt
- ------------------------------------------------------------------------------
International Bulk
Fleet Total 51 vessels 6,517,100 dwt
==============================================================================
</TABLE>
<TABLE>
U.S. BULK FLEET
- ---------------
<CAPTION>
Year Deadweight Charter
Type of Ship Built Tonnage Expiration Date
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Tankers 1974 120,800 August 1996
1973 120,500 June 1996
1977 (b) 80%-owned 90,650 Idle
1977 (b) 80%-owned 90,550 April 1996
1978 (b) 80%-owned 90,500 February 1996
1977 (b) 80%-owned 90,400 Idle
1971 62,000 March 1996
1970 62,000 May 1996
- -----------------------------------------------------------------------------
Petroleum Products
Carriers 1983 (c) 42,950 Voyage Charter
1982 (c) 42,600 Voyage Charter
1969 37,800 Voyage Charter
1968 37,800 Voyage Charter
1968 37,800 Voyage Charter
- -----------------------------------------------------------------------------
Geared Bulk Carriers 1978 (b) 25,550 Voyage Charter
1978 (b) 25,550 Voyage Charter
- -----------------------------------------------------------------------------
Pure Car Carrier
(5,000 cars) 1987 15,900 August 1997
- -----------------------------------------------------------------------------
Operating U.S. Bulk
Fleet Total(d) 16 vessels 993,350 dwt
=============================================================================
<FN>
(a) Does not include a 254,000 dwt tanker under contract of sale for
delivery during the first quarter of 1996.
(b) 25-year capital leases, commencing in year built.
(c) 22-year capital leases, commencing in 1989.
(d) Does not include a 29,300 dwt petroleum barge, 50%-owned by OSG.
</TABLE>
<TABLE>
CELEBRITY CRUISE LINES INC.
- --------------------------
<CAPTION>
Gross
Year Registered
Name of Ship Built/Rebuilt Berths Tonnage
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
CENTURY 1995 1,750 70,600
ZENITH 1992 1,374 47,250
HORIZON 1990 1,354 46,800
MERIDIAN 1990 1,106 30,450
- -----------------------------------------------------------------------------
Operating Cruise
Fleet Total* 4 ships 5,584 berths
=============================================================================
<FN>
*The fleet of CCLI's Fantasy Cruises division consists of BRITANIS (926
berths) and AMERIKANIS (617 berths).
</TABLE>
<TABLE>
ON ORDER CRUISE FLEET
- ---------------------
<CAPTION>
Gross
Delivery Registered
Name of Ship Date Berths Tonnage
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
GALAXY December 1996 1,870 73,000
MERCURY October 1997 1,870 74,000
- -----------------------------------------------------------------------------
On Order Cruise
Fleet Total 2 ships 3,740 berths
=============================================================================
</TABLE>
<PAGE>
[From pages 6, 9, 10 and 13 of the 1995 Annual Report]
GLOBAL BULK SHIPPING MARKETS
The bulk shipping industry is highly competitive and fragmented, with no one
organization owning more than 2% of the world fleet. With 61 ships totaling
6.1 million dwt, OSG ranks among the world's ten largest bulk shipowners. The
Company is the second largest tanker owner in terms of the number of vessels
and eighth largest in carrying capacity. Approximately 77% of the Company's
voyage revenues in 1995, 78% in 1994 and 75% in 1993 came from carrying
petroleum and its derivatives. These liquid cargoes also accounted for the
majority of the voyage revenues of OSG's bulk shipping joint ventures.
INTERNATIONAL TANKER MARKETS
- ----------------------------
In 1995, rates for international crude carriers were, on average,
significantly higher than in 1994. During the first half of the year, rates
remained low, but by midyear strong scrapping and modest newbuilding
deliveries helped reduce surplus tonnage, bringing about an improved
supply/demand balance. Beginning in mid 1995 and continuing into 1996, rates
for Very Large Crude Carriers (VLCCs - 200,000 dwt and greater) in particular
have strengthened, but are still low relative to the capital costs of
newbuildings.
International product tanker rates also increased in 1995. Tonnage demand for
shipments to the United States, which is the largest market for refined
petroleum products such as gasoline, fuel oil and diesel fuel, decreased last
year. Greater requirements in the Far East, however, more than offset the
decline.
WORLD OIL DEMAND DEVELOPMENTS
Oil demand in the major oil-importing regions rose 2% in 1995. Increased
demand for transport fuels slightly offset reduced use of oil resulting from
unusually mild weather and the substitution of natural gas for fuel oil in
electric power generation in the United States and Western Europe. Oil
consumption in developing Asia expanded by 8% and accounted for most of the
demand growth in the major oil-importing regions of the world. Developing
Asia's share of world oil demand has been steadily increasing and reached 16%
last year. It is expected to rise further in 1996.
NON-MIDDLE EAST SUPPLIES CONTINUE TO GROW
In 1995, as in the prior year, the average length of a voyage between oil-
producing and -consuming nations declined, reflecting greater short-haul
shipments from the North Sea and the Caribbean at the expense of long-haul
Middle Eastern shipments. This decreased tanker tonnage requirements.
Over the next few years, production from sources outside the Middle East is
expected to grow, increasing short-haul shipments. In addition, should Iraqi
production return, a significant portion would likely be exported via
pipeline from the Mediterranean on short-haul routes.
Aframax crude carriers (80,000 to 110,000 dwt) are the size most likely to
benefit from increased short-haul movements from the North Sea and the
Caribbean. With its fleet of seven Aframax crude carriers, OSG is a major
supplier of tonnage in the Caribbean crude market, the largest source of
imported crude oil for the United States.
WORLD TANKER FLEET DECLINES
The world tanker fleet declined for the second consecutive year, falling a
modest 1 million dwt to 261 million dwt by year-end 1995. Nearly all of the
sales for scrap occurred in the first half of the year, before stronger
freight rates discouraged shipowners from selling older tonnage. Most of the
tonnage scrapped was in the VLCC segment, where 57% of the fleet is at least
15 years old. The advanced age of the fleet combined with mandated deletions
due to U.S. and international environmental regulations is expected to keep
scrapping at relatively high levels in the coming years.
International tankers in lay-up at year-end 1995 fell to 3 million dwt, the
lowest since 1991.
Newbuilding prices stabilized and prices for secondhand vessels continued to
firm in 1995 as freight rates improved. Newbuilding deliveries of
approximately 11 million dwt were slightly greater than a year ago, while
contracting for new ships fell sharply to 7 million dwt from 12 million dwt
in 1994. As a result, the newbuilding orderbook for delivery over the next
three years declined 4 million dwt to 20 million dwt, its lowest year-end
level since 1988. Of this total, 11 million dwt are scheduled for delivery in
1996.
TANKER SAFETY REGULATIONS
Since 1990, the shipping industry has experienced a more stringent regulatory
environment. Classification societies, governmental authorities and
charterers have strengthened their inspection programs, and there has been an
increasing reluctance among charterers to accept older vessels due to safety
and pollution concerns.
These trends persisted in 1995. The shipping industry continued to be
affected by requirements of the Oil Pollution Act of 1990 (OPA 90) as well as
heightened safety and environmental concerns worldwide. Between 1995 and
2015, OPA 90 phases in a requirement that all tankers entering U.S. waters
have double hulls. OPA 90 also significantly expands the potential liability
of tanker owners for environmental accidents in U.S. waters.
In addition, International Maritime Organization (IMO) regulations require
double hulls or equivalent tanker designs for newbuilding orders and mandate
double hulls for existing tankers by their 30th anniversary. These
regulations also require modifications to existing tankers by their 25th
anniversary to provide side or bottom protection covering at least 30% of the
cargo tank area. Such modifications can be costly and would reduce a ship's
carrying capacity by an estimated 20%.
Over the next five years, OPA 90 and IMO regulations are expected to
accelerate the scrapping of older tankers.
Since OSG maintains a modern fleet, these double-hull requirements will not
apply to most of the Company's existing tanker fleet until after the year
2000, at which time the affected ships will have operated for substantially
all of their economic lives.
INTERNATIONAL DRY BULK MARKETS
- ------------------------------
Rates in the international dry bulk market in 1995 averaged well above those
of recent years as seaborne trade in all the major dry bulk commodities -
iron ore, coal and grain - rose. Yet, after peaking in the spring, rates for
dry bulk carriers came under pressure as the size of the dry bulk fleet
increased and economic growth slowed in the OECD countries. Rates for
Capesize ships (100,000 to 170,000 dwt) dropped sharply toward year-end as a
significant number of new vessels entered the market. Rates for Panamax
vessels (50,000 to 80,000 dwt) also declined.
SEABORNE TRADE IN IRON ORE, COAL AND GRAIN RISES
In 1995, seaborne shipments of iron ore and coking coal, used for steel
production, showed moderate growth. Although world steel production grew 3%
last year, an increased proportion came from electric arc furnaces, which
utilize scrap steel in lieu of iron ore and coking coal. This dampened the
growth in demand for these two commodities.
In contrast, seaborne movements of steam coal, used primarily for power
generation, rose substantially in 1995; much of the incremental demand came
from new coal-fired power stations in Asia.
Seaborne grain shipments grew 8% in 1995 spurred by increased supplies from
major exporters such as the United States and sharply higher demand in Asia,
particularly China. A reduction in Australian wheat exports, due to drought,
provided additional opportunities for long-haul shipments from the United
States and Canada to Asia.
PACE OF FLEET EXPANSION QUICKENS
The international dry bulk fleet grew by 6% in 1995 to an all-time high of
242 million dwt. Capesize vessels accounted for a significant share of this
new tonnage, with 6 million dwt being added to the fleet. Scrap sales fell to
their lowest level since 1991 as high freight rates tended to discourage
owners from discarding older vessels. At year-end, the amount of tonnage in
lay-up remained low at about 1 million dwt.
Contracting for new orders stayed at a very high level, resulting in a steady
rise in the orderbook, which ended the year at a record 32 million dwt for
delivery over the next three years.
While the orderbook is high, scrapping of bulk carriers is expected to
increase in 1996, driven in part by lower freight rates and new regulations
requiring more stringent ship surveys.
U.S. MARKETS
- ------------
Under the Jones Act, shipping between U.S. coastal ports, including the
movement of Alaskan oil, is reserved primarily to U.S. flag vessels, owned by
U.S. citizens, crewed by U.S. seafarers, and built in the United States
without construction subsidies and operated without operating differential
subsidies. U.S. flag vessels also receive preference in carrying U.S.
military and government-sponsored shipments (preference trades) around the
world. With eight crude carriers and five product carriers, OSG is the
largest independent owner of unsubsidized U.S. flag tankers. The Company also
has two dry bulk carriers that participate in the preference trades and one
car carrier, which is on a long-term charter transporting vehicles to and
from Japan.
Shipments of Alaskan crude oil from Valdez are the main source of employment
for U.S. flag crude carriers, including the eight owned by OSG. In 1995,
Alaskan crude shipments declined as production decreased 4% to 1.57 million
barrels per day. Significantly more tonnage is required for long-haul
shipments of Alaskan crude to the U.S. Gulf and East Coasts than for
movements to the West Coast. With the decrease in Alaskan production, the
volume moving on long-haul routes fell by a third from its already low level
in 1994, further exacerbating the drop in Alaskan crude oil shipments. As a
result, six of OSG's U.S. flag crude carriers were unemployed for significant
portions of the year.
FAVORABLE DEVELOPMENTS FOR U.S. FLAG CRUDE CARRIERS
Certain developments in late 1995 have significantly improved the outlook for
OSG's U.S. flag crude carrier fleet. In November, President Clinton signed
into law legislation that would permit the export of Alaskan North Slope
crude oil on U.S. flag vessels beginning as early as the second quarter of
1996. This creates significant new employment opportunities for OSG's U.S.
flag crude carrier fleet. In addition, in late 1995 four large U.S. flag
crude carriers were withdrawn from service, eliminating substantial excess
tonnage from the market. All but two of OSG's U.S. flag crude carriers are
now employed.
DEMAND FOR U.S. FLAG PRODUCT CARRIERS DECLINES
U.S. flag product tankers, ranging in size up to 50,000 dwt, carry gasoline,
diesel fuel, jet fuel and other refined petroleum products. These ships
compete with pipelines and oceangoing barges and are affected by the level of
imports on foreign flag product carriers. OSG has five ships that participate
in the U.S. flag product market.
Tonnage demand in the clean products trade declined during 1995, primarily
because high heating oil inventories in the first quarter, coupled with mild
winter weather, reduced the need for additional shipments. Freight rates
averaged close to the low levels prevailing in 1994.
Primary Data Sources: Fearnleys Review 1995, Clarkson Research Studies,
Drewry Shipping Consultants, International Energy Agency, Maritime
Administration, State of Alaska and U.S. Department of Energy
<PAGE>
[From pages 13 and 14 of the 1995 Annual Report]
CELEBRITY CRUISE LINES INC.
- ---------------------------
Celebrity Cruise Lines Inc., OSG's joint venture in the cruise industry, is a
leading provider of premium cruises in the North American cruise market. The
award-winning Celebrity fleet totals 5,584 berths and currently consists of
four ships - CENTURY, ZENITH, HORIZON and MERIDIAN.
CELEBRITY NEWBUILDING PROGRAM
In late November, Celebrity took delivery of the luxurious 1,750-passenger
vessel CENTURY. Built with state-of-the-art technology, spacious public areas
and many innovative design features, the CENTURY has received critical
acclaim from travel writers and passengers alike.
The CENTURY is the first of three sisterships to be added to the Celebrity
fleet by year-end 1997. These new ships will expand Celebrity's fleet from
3,800 to over 9,300 berths, providing significant economies of scale and
strengthening its position in the premium segment of the cruise market. In
early 1996, Celebrity began its first television advertising campaign.
EXPANDED ITINERARIES
The introduction of the CENTURY to the Caribbean market has allowed Celebrity
to reposition its other vessels and to increase the number of destinations it
offers, while maintaining its leading position in the lucrative Bermuda
market. Beginning in 1996, the HORIZON will sail to Alaska, a particularly
attractive market, which had a record number of passengers last year. West
Coast cruises and increased Panama Canal routes will also be added to this
year's itineraries. The Celebrity fleet will be traveling on 31 itineraries
to 54 ports of call during 1996, serving the largest cruise markets and most
popular destinations.
NORTH AMERICAN CRUISE MARKET
Celebrity operates its vessels primarily in the North American cruise market,
which accounts for approximately 80% of total cruise passengers carried
worldwide. The North American cruise industry is characterized by large and
generally well-capitalized companies and is highly competitive. According to
the Cruise Lines International Association (CLIA), the five largest
companies, including Celebrity, have almost 70% of total capacity.
GROWTH IN CRUISE DEMAND
Over the past decade, growth in demand (measured by the number of passengers
carried) averaged 7% per year for the North American cruise market. More
recently, however, beginning in the second half of 1994, demand growth has
abated. Preliminary CLIA statistics indicate a 3% decline in passengers
carried in 1995 from a year earlier.
According to industry estimates, cruise vacations currently represent less
than 5% of the overall leisure travel market. Based upon this and past growth
in the cruise industry, we believe that the North American cruise market
holds significant growth potential. Many industry analysts believe that
demand will resume its growth over the next few years, stimulated by the
introduction of additional capacity in the form of exciting new luxury
vessels such as the CENTURY and its sisterships.
Favorable demographics are also likely to enhance passenger growth during the
next decade. According to the U.S. Department of Commerce, between 1995 and
2005, the number of people aged 45-64 years is forecast to grow 36% versus 9%
for the U.S. population as a whole. This age category is the fastest growing
segment of the U.S. population and represents the most significant group of
vacationers who take cruises.
SUPPLY OUTLOOK
Capacity growth in the North American cruise market averaged 6% per year
during the past decade versus the 7% demand growth noted above. In 1995,
capacity rose less than 1% as 13,100 berths were added and 12,500 berths were
removed through retirements, redeployments and shutdowns. At year-end 1995,
North American cruise capacity was estimated to be 104,700 berths.
The industry is in the midst of its largest newbuilding program ever, with a
trend toward increasingly larger ships. On the basis of the newbuilding
orderbook, CLIA forecasts that capacity will rise 11% in 1996. Before taking
into consideration any retirements and deletions from the existing fleet,
CLIA expects capacity to grow 10% in 1997 and 12% in 1998.
An important factor influencing supply in the next several years is the
International Maritime Organization's Safety of Life at Sea (SOLAS)
convention, which establishes minimum safety, fire prevention and fire
protection standards. Under SOLAS requirements, all passenger ships must have
upgraded fire detection and fire protection systems by October 1997. A
significant number of berths are on ships that are expected to need SOLAS
upgrades. The actual number of deletions will depend on shipowners'
willingness to incur the potentially significant capital expenditures needed
to bring older vessels into compliance with these requirements.
Three of Celebrity's vessels were delivered between 1990 and 1995 and a
fourth was rebuilt in 1990. Because Celebrity maintains a modern fleet, the
work necessary for its ships to meet 1997 SOLAS requirements can be done
without material capital expenditures.
<PAGE>
[From page 20 of the 1995 Annual Report]
OSG INTERNATIONAL AND U.S. FLAG VESSEL TYPES
INTERNATIONAL FLAG TANKER TYPES DESCRIPTION AND MAJOR ROUTES
- ---------------------------------- ------------------------------------
VLCC Very large crude carriers can
200,000 dwt and greater generally transport 2 million
7 in OSG International Fleet* barrels or more of crude oil. They
4 on order are used mainly on oil routes from
the Arabian Gulf to Asia, Europe and
the United States.
SUEZMAX Suezmaxes can carry about 1 million
120,000 to 160,000 dwt barrels of crude oil. They are used
4 in OSG International Fleet mainly on oil routes from the
Eastern Mediterranean, West Africa
and North Sea load ports to Europe
and the United States.
AFRAMAX Because of their size, Aframax
80,000 to 110,000 dwt tankers are able to operate on many
9 in OSG International Fleet different routes including Latin
(7 carry crude oil, 2 transport America and the North Sea to the
refined petroleum products) U.S. and Europe, and are used in
Asian intra-regional trade.
Aframaxes generally carry crude oil
but a small number carry refined
products. They are also used in
lightering - transfer of cargo from
a VLCC or Suezmax to a smaller
vessel - and transshipments -
shipping on a larger vessel to an
onshore storage facility and then
reloading onto an Aframax.
PETROLEUM PRODUCTS CARRIER Petroleum products carriers
Two classes: 30,000 to 50,000 dwt transport refined products in a
(medium-range) and large number of long- and short-haul
50,000 to 80,000 dwt (long-range) trades, between and within the
12 in OSG International Fleet various continents. Demand for these
tankers is influenced both by
product demand and by changes in
refinery runs and in the location of
refining capacity.
INTERNATIONAL FLAG DRY BULK DESCRIPTION AND MAJOR ROUTES
CARRIER TYPES
- ---------------------------------- ------------------------------------
CAPESIZE Capesize ships mainly transport iron
100,000 to 170,000 dwt ore and coal but sometimes carry
7 in OSG International Fleet grain as well. Their major routes
2 on order are Australia to Japan and other
Asian nations (coal and iron ore),
South Africa to Europe (coal) and
Latin America to Europe and Asia
(iron ore).
PANAMAX Panamaxes are used primarily to
50,000 to 80,000 dwt transport coal and grain but
6 in OSG International Fleet sometimes carry iron ore. Major
routes for Panamax vessels are North
America to Europe (coal) and North
America to the Far East and Europe
(grain).
U.S. FLAG TANKER TYPES DESCRIPTION AND MAJOR ROUTES
- ---------------------------------- ------------------------------------
CRUDE CARRIER U.S. flag crude carriers primarily
60,000 dwt and greater transport crude oil from Valdez,
8 in OSG U.S. Fleet Alaska to the U.S. West Coast and
occasionally to the Panama Pipeline
for delivery to the U.S. Gulf and
East Coasts. Under recently enacted
legislation, exports of Alaskan
North Slope crude oil on U.S. flag
vessels could begin as early as the
second quarter of 1996. OSG is the
largest independent owner of
unsubsidized U.S. flag crude
carriers.
PETROLEUM PRODUCTS CARRIER These ships carry refined products
30,000 to 50,000 dwt such as gasoline, heating oil and
5 in OSG U.S. Fleet diesel fuel between U.S. ports.
Their major routes are from the U.S.
Gulf to the East Coast and along the
U.S. Gulf, East and West Coasts.
U.S. FLAG DRY BULK CARRIER TYPES DESCRIPTION AND MAJOR ROUTES
- ---------------------------------- ------------------------------------
BULK CARRIER U.S. flag bulk carriers transport
16,000 dwt and greater government-sponsored cargoes of
2 in OSG U.S. Fleet grain and other agricultural
commodities under various federal
aid programs. The majority of their
cargo is dependent upon allocations
made under these programs.
PURE CAR CARRIER U.S. flag car carriers transport
11,900 to 15,900 dwt cars to and from Japan and the
1 in OSG U.S. Fleet United States. In 1995, OSG's vessel
carried more than 35,000 cars. This
ship is the largest of four U.S.
flag pure car carriers.
*Does not include a 254,000 dwt tanker under contract of sale for
delivery during the first quarter of 1996.
<PAGE>
[From pages 21 through 24 of the 1995 Annual Report]
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
Overseas Shipholding Group, Inc. and Subsidiaries
OPERATIONS
INCOME FROM 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.
In 1995, rates in the international tanker markets, on average, improved
significantly from the unsatisfactory levels of the preceding year. In
particular, during the second half of 1995, rates for VLCCs (over 200,000
dwt) and Aframaxes (80,000 to 110,000 dwt) increased markedly. In early 1996,
rates for VLCCs strengthened and remained above the rates prevailing during
late 1995. Aframax rates continued strong in January 1996 and declined
somewhat thereafter. While Suezmax (120,000 to 160,000 dwt) rates remained at
about the same levels as in late 1995, products tanker rates trended downward
in early 1996. Dry bulk rates rose in the second half of 1994 and during the
first half of 1995, reaching levels in 1995 nearly double those of the prior
year. Dry bulk rates declined significantly during the latter half of 1995
and have remained at low levels in early 1996. Demand for U.S. flag tankers
decreased during most of 1995 from the unsatisfactory 1994 levels. Six of
OSG's U.S. flag tankers were unemployed for substantial portions of 1995. All
but two of OSG's U.S. flag crude carriers were employed at February 14, 1996.
In November 1995, legislation was signed by the President that would permit
the export of Alaskan North Slope crude oil on U.S. flag vessels as early as
the second quarter of 1996. This creates significant new employment
opportunities for the U.S. flag crude carrier fleet.
Income from vessel operations for 1995 increased by approximately $10,100,000
from the results for 1994. This increase was attributable to improved income
of approximately $26,400,000 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 1995 compared with
1994. Dry bulk vessels also obtained higher rates in 1995 compared with 1994.
Results from vessel operations of the U.S. flag fleet declined approximately
$16,300,000 in 1995 from 1994. As previously mentioned, six of the Company's
U.S. flag crude carriers were without employment for substantial portions of
1995. This was partially offset by improved results for certain U.S. flag
products carriers. Voyage expenses, such as fuel and port costs, are paid by
the vessel owner under a voyage charter and by the charterer under a time
charter. The effect on revenues and expenses of a higher proportion of voyage
charters to time charters in both the U.S. flag and the international fleets
in 1995 compared with 1994 is also reflected.
Income from vessel operations for 1994 decreased by approximately $12,300,000
compared with the results for 1993. This decrease occurred due to a decline
in the 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 that persisted throughout the second half of 1994. Three of
the Company's U.S. flag crude carriers and an older U.S. flag products
carrier were idle for substantial portions of the second half of 1994.
Results from two U.S. flag dry bulk carriers were less favorable in 1994
compared with 1993. The effect on revenues of increased drydockings in 1994
compared with 1993 is also included. The U.S. flag decline was partially
mitigated by increased rates in 1994 for a U.S. flag crude carrier and
certain modern U.S. flag petroleum products carrier tonnage and increased
employment for a U.S. flag crude carrier in 1994 compared with 1993. Income
from foreign flag vessel operations was approximately the same in 1994 as it
was in 1993. This reflected lower rates obtained for foreign flag crude
carrier tonnage, primarily Suezmaxes and Aframaxes. This was offset by higher
rates obtained in 1994 than in 1993 for a VLCC that commenced a long-term
charter in early 1994 and improved rates earned by certain dry cargo vessels
in the second half of 1994 compared with 1993. The effect of vessels
delivered in 1994 and vessels sold in 1994 and 1993 is also reflected.
EQUITY IN RESULTS OF CELEBRITY CRUISE LINES INC. ("CCLI")
OSG's share of CCLI's results was a loss of $1,208,000 in 1995 compared with
income of $797,000 and $6,841,000 in 1994 and 1993, respectively. The
decrease in such results reflects strong competitive pressures in the North
American cruise market that began in late 1994 and have persisted during 1995
and early 1996, causing significant discounting throughout the industry. The
1994 results also reflect the 11-day withdrawal of a vessel from service
during the third quarter of 1994, normally CCLI's most profitable quarter of
the year. The Company's equity in the results of CCLI is before interest
expense (pretax) of approximately $16,900,000 (1995), $12,800,000 (1994) and
$12,500,000 (1993) estimated to have been incurred in connection with the
funding of its investment in CCLI.
OTHER INCOME (NET)
The details of other income for the three-year period are shown in Note K on
page 35 of this report. Interest and dividends increased in 1995 compared
with 1994 and in 1994 compared with 1993 because of higher rates of return on
interest-bearing deposits and investments and increased amounts utilized for
such deposits and investments. The 1995 increase was net of a decrease in
dividend income resulting from a change in the Company's investment portfolio
mix from equity securities to interest-bearing deposits. The 1994 increase
reflected the sale or redemption of certain preferred stocks during and
subsequent to 1993 that were replaced with lower yielding investments.
Disposal of vessels resulted in gains of approximately $2,700,000 in 1995
(net of a provision of $3,000,000 for loss on a vessel to be disposed of
subsequent to year-end), $6,800,000 in 1994 and $12,100,000 in 1993. Gain on
sale of securities was approximately $11,100,000 in 1995 compared with
approximately $8,000,000 in 1994 and $9,100,000 in 1993. Other income also
reflects the results of foreign currency transactions and minority interest
in all three years and income/losses from other investments (included in
miscellaneous - net) including, in 1995, losses of approximately $2,600,000
on an investment.
INTEREST EXPENSE
Interest expense increased in 1995 and 1994 from the respective preceding
years as a result of increases in the average amount of debt outstanding and
increased rates on floating rate debt, including debt incurred in connection
with vessels entering the operating fleet. The increases are net of increased
interest costs capitalized in connection with vessel construction. Interest
expense in 1995, 1994 and 1993 reflects $5,300,000, $6,500,000 and
$13,300,000, respectively, of net benefits from the interest rate swaps
referred to below in Liquidity and Sources of Capital.
PROVISION FOR FEDERAL INCOME TAXES
There were income tax credits of $5,260,000 and $3,750,000 in 1995 and 1994,
respectively, as a result of the pretax loss incurred in each of the years
and a provision of $8,900,000 in 1993; the tax credits and the provision
reflect items that are not subject to tax and the dividends received
deduction. The 1993 provision includes $2,900,000, or $.09 per share, of
additional deferred taxes resulting from the increase in the Federal
statutory rate from 34% to 35% enacted in August 1993.
LIQUIDITY AND SOURCES OF CAPITAL
Working capital at December 31, 1995 was approximately $152,000,000 compared
with $90,000,000 at year-end 1994 and $99,000,000 at year-end 1993. Current
assets are highly liquid, consisting principally of cash, interest-bearing
deposits and receivables. The Company also has investments in marketable
securities carried as noncurrent assets, other than securities included in
restricted funds, with a market value of approximately $18,000,000 at
December 31, 1995. Net cash provided by operating activities approximated
$27,000,000 in 1995, $10,000,000 in 1994 and $69,000,000 in 1993. 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 1996.
The Company has an unsecured long-term credit facility of $500,000,000 of
which $369,000,000 was used at December 31, 1995, and an unsecured short-term
credit facility of $30,000,000, which was unused at that date. The Company
finances vessel additions primarily with cash provided by operating
activities, long-term borrowings and capital lease obligations. Long-term
borrowings in 1995, 1994 and 1993 aggregated approximately $217,000,000,
$60,000,000 and $310,000,000, respectively.
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 December 31, 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 $600,000,000,
pursuant to which it pays LIBOR (5.5% as of December 31, 1995) and receives
fixed rates ranging from 5.8% to 8.1% calculated on the notional amounts.
These agreements contain no leverage features and have various maturity dates
from 1998 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 $130,000,000 for such foreign currency
from 1996 through 2004.
In 1995, 1994 and 1993, cash used for vessel additions approximated
$196,000,000, $146,000,000 and $164,000,000, respectively. At February 14,
1996, the Company has commitments with an aggregate unpaid cost of
approximately $200,000,000 for the construction of four foreign flag bulk
vessels, of which three are scheduled for delivery in late 1996 and one in
1997. Long-term shipyard financing arrangements exist for approximately
$38,000,000 of the unpaid cost of one of the vessels.
EFFECTS OF INFLATION
Additions to the costs of operating the fleet due to wage increases and price
level increases in certain other expense categories were experienced over the
three-year period. In some cases, these increases were offset by rates
available to tonnage open for chartering and to some extent by charter
escalation provisions.
ENVIRONMENTAL MATTERS
See "Tanker Safety Regulations" on page 9 hereof for a discussion regarding
OPA 90 and certain regulations of the IMO.
<PAGE>
[From page 24 of the 1995 Annual Report]
<TABLE>
STOCK PRICE AND DIVIDEND DATA
<CAPTION>
1995 Quarter 1st 2nd 3rd 4th
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
High 23-7/8 21-1/2 23 20-7/8
Low 19-1/4 18-1/2 19-7/8 17
Dividend 15 cents 15 cents 15 cents(a) 15 cents(b)
- ------------------------------------------------------------------
<CAPTION>
1994 Quarter 1st 2nd 3rd 4th
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
High 26-3/4 21-5/8 21-7/8 24-3/8
Low 19-7/8 17-7/8 17-1/4 19-1/2
Dividend 15 cents 15 cents 15 cents(a) 15 cents
- ------------------------------------------------------------------
<FN>
(a) Declared in second quarter of the respective year.
(b) Declared in third quarter.
</TABLE>
<PAGE>
[From pages 25 through 37 of the 1995 Annual Report]
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Overseas Shipholding Group, Inc. and Subsidiaries
<CAPTION>
In thousands, except per share amounts,
for the year ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
SHIPPING REVENUES:
Revenues from voyages - Note B $407,834 $358,537 $376,885
Income attributable to bulk
shipping joint ventures - Note E 6,083 5,599 5,695
- ---------------------------------------------------------------------------
413,917 364,136 382,580
- ---------------------------------------------------------------------------
SHIPPING EXPENSES:
Vessel and voyage - Note H 272,778 243,684 252,153
Depreciation of vessels and
amortization of capital leases 66,134 59,992 58,734
Agency fees - Note H 34,105 30,302 30,225
General and administrative 10,515 9,825 8,826
- ---------------------------------------------------------------------------
383,532 343,803 349,938
- ---------------------------------------------------------------------------
Income from Vessel Operations 30,385 20,333 32,642
Equity in Results of Celebrity
Cruise Lines Inc. - Note D (1,208) 797 6,841
Other Income (Net) - Note K 23,371 25,908 30,674
- ---------------------------------------------------------------------------
52,548 47,038 70,157
Interest Expense 66,440 56,988 43,311
- ---------------------------------------------------------------------------
Income/(Loss) before Federal
Income Taxes (13,892) (9,950) 26,846
Provision/(Credit) for Federal
Income Taxes - Note J (5,260) (3,750) 8,900
- ---------------------------------------------------------------------------
Net Income/(Loss) (8,632) (6,200) 17,946
Retained Earnings at
Beginning of Year 737,583 764,987 766,647
- ---------------------------------------------------------------------------
728,951 758,787 784,593
Cash Dividends Declared and Paid 21,731 21,204 19,606
- ---------------------------------------------------------------------------
Retained Earnings at End of Year $707,220 $737,583 $764,987
===========================================================================
PER SHARE AMOUNTS - NOTE N:
Net income/(loss) $ (.24) $ (.17) $ .55
Cash dividends declared and paid $ .60 $ .60 $ .60
===========================================================================
<FN>
See notes to financial statements.
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Overseas Shipholding Group, Inc. and Subsidiaries
<CAPTION>
Dollars in thousands at December 31, 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, including interest-bearing deposits of
$155,864 and $88,490 $ 160,578 $ 100,034
Receivables:
Voyages 18,158 11,699
Refundable Federal income taxes - 5,200
Other 13,379 16,905
Prepaid expenses 31,218 26,868
- ---------------------------------------------------------------------------
Total Current Assets 223,333 160,706
Investments in Marketable Securities - Note F 18,482 36,052
Capital Construction and Restricted Funds -
Notes F, J and M1 124,258 105,570
Vessels, at cost, less accumulated depreciation
of $551,752 and $500,477 - Notes G and L1 1,173,029 1,063,784
Vessels Under Capital Leases, less accumulated
amortization of $150,906 and $140,020 - Note M1 108,572 119,457
Investment in Celebrity Cruise Lines Inc. - Note D 234,334 230,642
Investments in Bulk Shipping
Joint Ventures - Note E 87,794 82,894
Other Assets 95,024 106,304
- ---------------------------------------------------------------------------
$2,064,826 $1,905,409
===========================================================================
<CAPTION>
Dollars in thousands at December 31, 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,047 $ 4,563
Sundry liabilities and accrued expenses - Note L2 31,706 33,042
Federal income taxes (all deferred) - Note J 8,000 6,200
- ---------------------------------------------------------------------------
44,753 43,805
Current installments of long-term debt - Note G 15,943 17,638
Current obligations under capital leases - Note M1 10,630 9,737
- ---------------------------------------------------------------------------
Total Current Liabilities 71,326 71,180
Advance Time Charter Revenues 8,081 4,828
Long-term Debt - Note G 951,638 749,185
Obligations Under Capital Leases - Note M1 150,120 160,871
Minority Interest 1,813 3,803
Deferred Federal Income Taxes ($93,218 and $102,170)
and Deferred Credits - Note J 97,067 105,763
SHAREHOLDERS' EQUITY - NOTES F, G, J AND N:
Common Stock, par value $1 per share:
Authorized - 60,000,000 shares
Issued - 39,590,759 shares 39,591 39,591
Paid-in Additional Capital 93,687 93,599
Retained Earnings 707,220 737,583
- ---------------------------------------------------------------------------
840,498 870,773
Less-cost of Treasury Stock - 3,363,243 and
3,380,838 shares 49,297 49,491
- ---------------------------------------------------------------------------
791,201 821,282
Less-net unrealized loss on marketable securities 6,420 11,503
- ---------------------------------------------------------------------------
Total Shareholders' Equity 784,781 809,779
Commitments, Leases and Other Comments -
Notes L and M
- ---------------------------------------------------------------------------
$2,064,826 $1,905,409
===========================================================================
<FN>
See notes to financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Overseas Shipholding Group, Inc. and Subsidiaries
<CAPTION>
In thousands for the year ended December 31,
1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ (8,632) $ (6,200) $ 17,946
Items included in net income/(loss)
not affecting cash flows:
Depreciation and amortization 66,134 59,992 58,734
Provision/(credit) for deferred
Federal income taxes (5,260) 1,909 5,315
Equity in results of Celebrity
Cruise Lines Inc. 1,208 (797) (6,841)
Equity in net income of bulk
shipping joint ventures (6,416) (6,360) (5,796)
Other - net 917 (6,243) (7,036)
Items included in net income/(loss)
related to investing activities:
(Gain) on sale of securities - net (11,130) (7,986) (9,128)
(Gain) on disposal of vessels (5,700) (6,815) (12,088)
Changes in operating assets
and liabilities:
Decrease/(increase) in receivables 813 (12,147) 12,420
Net change in prepaid items,
accounts payable and sundry
liabilities and accrued expenses (8,175) (2,596) 15,078
Increase/(decrease) in advance
time charter revenues 3,253 (2,894) 492
- ---------------------------------------------------------------------------
Net cash provided by
operating activities 27,012 9,863 69,096
- ---------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (13,456) (34,811) (42,529)
Proceeds from sales of
marketable securities 34,344 21,022 44,509
Additions to vessels (196,127) (146,133) (163,538)
Proceeds from disposal of vessels 33,786 40,780 48,994
Investment in Celebrity
Cruise Lines Inc. (4,900) - (2,733)
Purchases of other investments (3,640) (667) (16,996)
Proceeds from dispositions
of other investments 15,933 4,406 13,939
Other - net (2,003) 1,078 (1,001)
- ---------------------------------------------------------------------------
Net cash (used in) investing
activities (136,063) (114,325) (119,355)
- ---------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock - 76,004 -
Purchases of treasury stock - - (237)
Issuance of long-term debt 217,000 60,000 309,439
Payments on long-term debt and
obligations under capital leases (26,140) (22,442) (215,542)
Cash dividends paid (21,731) (21,204) (19,606)
Other - net 466 1,971 673
- ---------------------------------------------------------------------------
Net cash provided by financing
activities 169,595 94,329 74,727
- ---------------------------------------------------------------------------
Net increase/(decrease) in cash 60,544 (10,133) 24,468
Cash, including interest-bearing
deposits, at beginning of year 100,034 110,167 85,699
- ---------------------------------------------------------------------------
Cash, including interest-bearing
deposits, at end of year $ 160,578 $ 100,034 $ 110,167
===========================================================================
<FN>
See notes to financial statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Overseas Shipholding Group, Inc. and Subsidiaries
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1. The consolidated financial statements include the accounts of the Company
and its subsidiaries ("Company" or "OSG"). All subsidiaries are wholly owned,
except four which are 80%-owned. Significant intercompany items and
transactions have been eliminated in consolidation. Investments in Celebrity
Cruise Lines Inc. (see Note D) and the bulk shipping joint ventures (which
are 50%-owned except one small venture which is 49%-owned) are stated at the
Company's cost thereof adjusted for its proportionate share of the
undistributed operating results of such companies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
2. As required by Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows", only interest-bearing deposits that are highly
liquid investments and have a maturity of three months or less when purchased
are included in cash.
3. Depreciation of vessels is computed for financial reporting purposes based
on cost, less estimated salvage value, by the straight-line method primarily
using a vessel life of 25 years.
4. Certain subsidiaries have bareboat charters-in on vessels that are
accounted for as capital leases. Amortization of capital leases is computed
by the straight-line method over 22 or 25 years, representing the terms of
the leases (see Note M).
5. Time charters and a bareboat charter that are operating leases are
reported on the accrual basis. Voyage charters are reported on the completed
voyage basis.
6. Interest costs incurred during the construction of vessels (until the
vessel is substantially complete and ready for its intended use) are
capitalized. Interest capitalized aggregated $14,811,000 (1995), $14,157,000
(1994) and $7,416,000 (1993). Interest paid amounted to $67,877,000 (1995),
$53,182,000 (1994) and $42,093,000 (1993), excluding capitalized interest.
7. The Company adopted the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("FAS 115"), as of December 31, 1993. Adoption of this standard
had no significant effect on the Company's financial statements. Under FAS
115, the Company's investments in marketable securities are classified as
available-for-sale and are carried at market value. Net unrealized gains or
losses are reported as a separate component of shareholders' equity. Prior
thereto, the Company's investments in marketable equity securities were
carried at the lower of aggregate cost or market, and the amount of the
allowance for net unrealized loss on the noncurrent marketable equity
securities was shown as a reduction of shareholders' equity.
8. Amounts receivable or payable under interest rate swaps (designated as
hedges against certain existing debt and capital lease obligations-see Note
G) are accrued and reflected as adjustments of interest expense. Such
receivables or payables are included in other receivables or sundry
liabilities and accrued expenses, respectively. Any gain or loss realized
upon the early termination of an interest rate swap is recognized as an
adjustment of interest expense over the remaining term of the hedged debt.
Changes in the value of currency swaps (designated as hedges against
contracted future charter revenues receivable in a foreign currency) are
deferred and are offset against corresponding changes in the value of the
charter hire, over the related charter periods (see Note M2). Any gain or
loss realized upon the termination of foreign currency swaps would be
recognized as an adjustment of voyage revenues over the remaining term of the
related charter.
The Company uses derivative financial instruments for trading purposes from
time to time. Realized and unrealized changes in fair values are recognized
in income in the period in which the changes occur (see Note K).
<TABLE>
NOTE B - BUSINESS-DOMESTIC AND FOREIGN OPERATIONS:
The Company is principally engaged in the ocean transportation of liquid and
dry bulk cargoes in both the worldwide markets and the self-contained U.S.
markets through the ownership and operation of a diversified fleet of bulk
cargo vessels (principally tankers and dry bulk carriers). The Company's
subsidiaries charter their vessels to commercial shippers and U.S. and
foreign governmental agencies primarily on time and voyage charters and
occasionally on bareboat charters (see Note M2). The Company also owns an
equity investment in Celebrity Cruise Lines Inc. (see Note D), an owner and
operator of cruise ships. Information about the Company's operations for the
three years ended December 31, 1995 follows:
<CAPTION>
Foreign Flag
(principally
In thousands Consolidated U.S. Flag Liberian)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
1995
Shipping Revenues $ 413,917 $ 113,778 $ 300,139
===========================================================================
Net Income/(Loss) $ (8,632) $ (42,562) $ 33,930
===========================================================================
Identifiable Assets at
December 31, 1995 $2,064,826 $ 547,011 $1,517,815
===========================================================================
1994
Shipping Revenues $ 364,136 $ 130,832 $ 233,304
===========================================================================
Net Income/(Loss) $ (6,200) $ (30,505) $ 24,305
===========================================================================
Identifiable Assets at
December 31, 1994 $1,905,409 $ 538,596 $1,366,813
===========================================================================
1993
Shipping Revenues $ 382,580 $ 154,652 $ 227,928
===========================================================================
Net Income/(Loss) $ 17,946 $ (12,842) $ 30,788
===========================================================================
Identifiable Assets at
December 31, 1993 $1,823,737 $ 551,341 $1,272,396
===========================================================================
<FN>
See Note J for information relating to taxation of income and undistributed
earnings of foreign companies.
The Company had one charterer (a U.S. oil company) during the above periods
from which revenues exceeded 10% of revenues from voyages. Revenues from
such charterer amounted to $49,541,000 in 1995, $63,668,000 in 1994 and
$73,656,000 in 1993.
</TABLE>
NOTE C - ASSETS AND LIABILITIES OF FOREIGN SUBSIDIARIES:
<TABLE>
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:
<CAPTION>
In thousands at December 31, 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 78,635 $ 41,515
Vessels, net 981,053 859,939
Investment in Celebrity Cruise Lines Inc. 234,334 230,642
Other assets 111,119 119,065
- ---------------------------------------------------------------------------
1,405,141 1,251,161
- ---------------------------------------------------------------------------
Current installments of long-term debt 9,821 11,958
Other current liabilities 15,581 17,212
- ---------------------------------------------------------------------------
Total current liabilities 25,402 29,170
Long-term debt (including intercompany)
and deferred credits, etc. 399,537 276,477
- ---------------------------------------------------------------------------
424,939 305,647
- ---------------------------------------------------------------------------
Net assets $ 980,202 $ 945,514
===========================================================================
</TABLE>
NOTE D - INVESTMENT IN CELEBRITY CRUISE LINES INC.:
The Company owns a 49% equity investment in Celebrity Cruise Lines Inc.
("CCLI"), a joint venture that owns and operates cruise vessels. Pursuant to
related agreements, CCLI functions as an equal joint venture and the approval
of both shareholders is required for all substantive policy matters.
<TABLE>
A condensed summary of the assets and liabilities of CCLI and the results of
its operations follows:
<CAPTION>
In thousands at December 31, 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 97,319 $ 101,149
Vessels, net 1,042,928 696,126
Other assets 32,548 51,084
- ---------------------------------------------------------------------------
1,172,795 848,359
- ---------------------------------------------------------------------------
Short-term debt and current installments
of long-term debt 83,002 54,676
Other current liabilities 96,565 65,289
- ---------------------------------------------------------------------------
Total current liabilities 179,567 119,965
Long-term debt 517,864 260,643
- ---------------------------------------------------------------------------
697,431 380,608
- ---------------------------------------------------------------------------
Net assets (principally capital contributions) $ 475,364 $ 467,751
===========================================================================
<CAPTION>
In thousands for the year ended
December 31, 1995 1994 1993
<S> <C> <C> <C>
Revenue $ 272,564 $ 307,565 $ 315,700
Costs and expenses (274,951) (305,860) (301,642)
- ---------------------------------------------------------------------------
Net income/(loss) $ (2,387) $ 1,705 $ 14,058
===========================================================================
</TABLE>
CCLI's results of operations include net gains on foreign currency
transactions of $7,543,000 in 1995 and net losses of $1,094,000 in 1994 and
$363,000 in 1993.
The Company's equity in the results of CCLI for each of the years is before
interest expense of approximately $16,900,000 (1995), $12,800,000 (1994) and
$12,500,000 (1993), 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 average interest rates during the
respective years.
As of February 14, 1996, CCLI has commitments (which are nonrecourse to OSG)
with an aggregate unpaid cost of approximately $647,000,000 for the
construction of two cruise ships scheduled for delivery in late 1996 and late
1997. Unpaid costs are net of $66,000,000 of progress payments (all paid
prior to January 1, 1996). Long-term financing arrangements exist for
substantially all of the unpaid cost of these ships. Approximately 47% of the
unpaid cost is denominated in German marks, substantially all of which is
covered by option contracts that terminate in the event that the exchange
rate of the German mark to the dollar falls below certain levels.
<TABLE>
NOTE E - BULK SHIPPING JOINT VENTURES:
Certain subsidiaries have investments in bulk shipping joint ventures (see
Note A1). A condensed summary of the combined assets and liabilities and
results of operations of the bulk shipping joint ventures follows:
<CAPTION>
In thousands at December 31, 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Cash ($20,950 and $62,486) and other
current assets (including $9,569
and $8,265 due from owners) $ 36,464 $ 78,412
Vessels, net 134,601 73,286
Other assets (including $9,178 and
$26,279 due from owners) 11,384 29,573
- ---------------------------------------------------------------------------
182,449 181,271
Current liabilities 3,568 4,214
- ---------------------------------------------------------------------------
Net assets (principally undistributed
net earnings) $178,881 $177,057
===========================================================================
<CAPTION>
In thousands for the year
ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue, primarily from voyages
(including $30,598, $28,627
and $36,008 from vessels
chartered to other owners) $45,032 $ 42,825 $ 42,083
Costs and expenses 32,030 30,105 30,495
- ---------------------------------------------------------------------------
Net income $13,002 $ 12,720 $ 11,588
===========================================================================
</TABLE>
As of February 14, 1996, certain 50%-owned companies have commitments (which
are nonrecourse to OSG) with an aggregate unpaid cost of approximately
$90,000,000 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 $90,000,000 of progress payments and prepayments (all paid prior
to January 1, 1996) 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.
NOTE F - INVESTMENTS IN MARKETABLE SECURITIES:
<TABLE>
Certain information concerning the Company's marketable securities (including
securities in Capital Construction and Restricted Funds), which consist of
available-for-sale securities, follows:
<CAPTION>
Approximate
Market and
In thousands at Gross Unrealized Carrying
December 31, Cost Gains Losses Amount
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Equity securities $ 79,551 $1,291 $ 7,705 $ 73,137
U.S. Treasury
securities and
obligations of
U.S. government
agencies (due after
five years through
ten years) 2,512 - 6 2,506
- ---------------------------------------------------------------------------
$ 82,063 $1,291 $ 7,711 $ 75,643
===========================================================================
1994
Equity securities $ 80,638 $1,350 $10,589 $ 71,399
U.S. Treasury securities
and obligations of U.S.
government agencies 50,788 - 2,264 48,524
- ---------------------------------------------------------------------------
$131,426 $1,350 $12,853 $119,923
===========================================================================
</TABLE>
The unrealized loss on marketable securities included as a separate component
of shareholders' equity decreased $5,083,000 (1995) and $7,261,000 (1993) and
increased $7,913,000 (1994).
At February 14, 1996, the aggregate market quotation of the above marketable
securities was approximately $79,300,000 and the net unrealized loss was
reduced to approximately $2,760,000.
NOTE G - DEBT:
<TABLE>
Long-term debt exclusive of current installments follows:
<CAPTION>
In thousands at December 31, 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Unsecured Senior Notes, due from 2000
through 2013, interest from 7.77% to 9.57% $310,000 $310,000
Unsecured Revolving Credit Agreement
with banks 369,000 152,000
8.75% Debentures due 2013, net of
unamortized discount of $288 and $305 99,712 99,695
8% Notes due 2003, net of unamortized
discount of $191 and $215 99,809 99,785
8% to 10.58% unsecured Promissory Notes
and Term Loans, due through 2001 40,267 49,661
10.5% and 10.58% secured Promissory Notes
and Term Loans, due through 2001 23,090 27,254
8.45% United States Government Guaranteed
Merchant Marine Bonds, due through 2006 9,760 10,790
- ---------------------------------------------------------------------------
$951,638 $749,185
===========================================================================
</TABLE>
The Revolving Credit Agreement, as amended, provides for borrowings of up to
$500,000,000 on a revolving credit basis through November 1999, at which time
any outstanding balance is due. As of December 31, 1995, interest was at the
rate of .475% above the London interbank offered rate ("LIBOR"). The Company
also has interest rate options related to the certificate of deposit, money
market or prime rates.
Agreements related 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 most
restrictive of these covenants require the Company to maintain positive
consolidated working capital, consolidated net worth as of December 31, 1995
of approximately $581,000,000 (increasing quarterly by an amount related to
net income), a ratio of total debt to net worth of not more than 1.75:1, and
a liquid cash flow coverage ratio of at least 2.00:1. The amount that the
Company can use for Restricted Payments, as defined, including dividends and
purchases of its capital stock, is limited as of December 31, 1995, to
$49,900,000.
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 December 31, 1995, the Company is a party to
fixed to floating interest rate swaps with various banks covering notional
amounts aggregating $600,000,000, pursuant to which it pays LIBOR (5.5% as of
December 31, 1995) and receives fixed rates ranging from 5.8% to 8.1%
calculated on the notional amounts. These agreements contain no leverage
features and have various maturity dates from 1998 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. In some instances, debt is
collateralized by revenues from certain charters.
The aggregate annual principal payments required to be made on long-term debt
for the five years subsequent to December 31, 1995 are $15,943,000 (1996),
$19,336,000 (1997), $13,774,000 (1998), $390,835,000 (1999) and $34,429,000
(2000).
The Company also has a $30,000,000 committed short-term line of credit
facility with a bank, under which there were no outstanding borrowings as of
December 31, 1995.
NOTE H - 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 $5,601,000 (1995),
$5,118,000 (1994) and $6,009,000 (1993) of brokerage commissions to Maritime.
By agreement, Maritime's compensation for any year is limited to the extent
Maritime's consolidated net income from shipping operations would exceed a
specified amount (approximately $917,000 (1995), $834,000 (1994) and $758,000
(1993)). 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 I - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
CASH AND INTEREST-BEARING DEPOSITS
The carrying amount reported in the balance sheet for interest-bearing
deposits approximates its fair value.
INVESTMENT SECURITIES
The fair value for marketable securities is based on quoted market prices or
dealer quotes.
DEBT
The carrying amounts of the borrowings under the Revolving Credit Agreement
approximate their fair value. The fair values of the Company's other debt are
estimated using discounted cash flow analyses, based on the rates currently
available for debt with similar terms and remaining maturities.
INTEREST RATE SWAPS
The fair value of interest rate swaps (used for hedging purposes) is the
estimated amount that the Company would receive or pay to terminate the swaps
at the reporting date.
FOREIGN CURRENCY SWAPS AND FORWARD CONTRACTS
The fair value of foreign currency swaps (used for hedging purposes) is the
estimated amount that the Company would receive or pay to terminate the swaps
at the reporting date. The average fair values of foreign currency forward
contracts held for trading during 1995, 1994 and 1993 were not material.
<TABLE>
The estimated fair value of the Company's financial instruments follows:
<CAPTION>
Carrying Fair Carrying Fair
In thousands at Amount Value Amount Value
December 31, 1995 1995 1994 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
(LIABILITIES)
Cash and interest-
bearing deposits $ 160,578 $ 160,578 $ 100,034 $ 100,034
Interest-bearing
deposits in
restricted funds 68,128 68,128 20,544 20,544
Investments in
marketable
securities 75,643 75,643 119,923 119,923
Debt (1,128,331) (1,186,499) (937,431) (913,238)
Interest rate swaps - 33,442 - (51,869)
Foreign currency swaps - (9,556) - (16,267)
===========================================================================
</TABLE>
NOTE J - TAXES:
Effective from January 1, 1987, earnings of the foreign shipping companies
(exclusive of CCLI) are subject to U.S. income taxation currently; post-1986
taxable income may be distributed to the U.S. parent without further tax. The
foreign companies' shipping income earned from January 1, 1976 through
December 31, 1986 ("Deferred Income") is excluded from U.S. income taxation
to the extent that such income is reinvested in foreign shipping operations,
and the foreign shipping income earned before 1976 is not subject to tax
unless distributed to the U.S. parent. A determination of the amount of
qualified investments in foreign shipping operations, as defined, is made at
the end of each year and such amount is compared to the corresponding amount
at December 31, 1986. If during any determination period there is a reduction
of qualified investments in foreign shipping operations, Deferred Income,
limited to the amount of such reduction, would become subject to tax.
Treasury Department regulations regarding the foregoing have not been revised
to reflect law changes effective for post-1986 years. The Company believes
that it will be reinvesting sufficient amounts in foreign shipping operations
so that any significant U.S. income taxes on the undistributed income of its
foreign companies accumulated through December 31, 1986 will be postponed
indefinitely. U.S. income taxes on the income of its foreign companies
accumulated through December 31, 1986 will be provided at such time as it
becomes probable that a liability for such taxes will be incurred and the
amount thereof can reasonably be estimated. No provision for U. S. income
taxes on the income of the foreign shipping companies accumulated through
December 31, 1986 was required at December 31, 1995 since undistributed
earnings of foreign shipping companies have been reinvested or are intended
to be reinvested in foreign shipping operations. As of December 31, 1995,
such undistributed earnings aggregated approximately $475,000,000, including
$114,000,000 earned prior to 1976; the unrecognized deferred U.S. income tax
attributable to such undistributed earnings approximated $165,000,000.
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 ($6,300,000 at December 31, 1995) will be indefinitely
reinvested; the unrecognized deferred U.S. income tax attributable thereto
approximated $2,200,000.
Pursuant to the Merchant Marine Act of 1936, as amended, the Company is a
party to an agreement that permits annual deposits, related to taxable income
of certain of its domestic subsidiaries, into a Capital Construction Fund.
Payments of Federal income taxes on such deposits and earnings thereon are
deferred until, and if, such funds are withdrawn for nonqualified purposes or
termination of the agreement; however, if withdrawn for qualified purposes
(acquisition of vessels or retirement of debt on vessels), such funds remain
tax-deferred and the Federal income tax basis of any such vessel is reduced
by the amount of such withdrawals. Under the agreement, the general objective
is (by use of assets accumulated in the fund) for two vessels to be
constructed or acquired by the end of 1999. Monies can remain tax-deferred in
the fund for a maximum of 25 years (commencing January 1, 1987 for deposits
prior thereto).
<TABLE>
The significant components of the Company's deferred tax liabilities and
assets follow:
<CAPTION>
In thousands at December 31, 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
- ---------------------------------------------------------------------------
Excess of tax over statement depreciation-net $ 74,330 $ 73,369
Tax benefits of the Merchant Marine Act of
1936, as amended, on amounts accumulated
in the Capital Construction Fund 35,122 30,503
Costs capitalized and amortized for statement,
expensed for tax 13,114 9,678
Other-net 22,782 24,640
- ---------------------------------------------------------------------------
Total deferred tax liabilities 145,348 138,190
- ---------------------------------------------------------------------------
DEFERRED TAX ASSETS:
- ---------------------------------------------------------------------------
Capital leases 11,229 11,760
Excess of tax over statement basis of investment
in securities 1,353 2,188
Alternative minimum tax credit carryforwards,
which can be carried forward indefinitely 16,057 15,872
Net operating loss carryforward,
expiring in 2010 15,491 -
- ---------------------------------------------------------------------------
Total deferred tax assets 44,130 29,820
- ---------------------------------------------------------------------------
Net deferred tax liabilities $101,218 $108,370
===========================================================================
</TABLE>
Federal income taxes paid amounted to $600,000 in 1995 and $4,200,000 in
1994. Federal income tax refunds received amounted to $5,307,000 in 1995 and
$6,221,000 in 1993.
<TABLE>
The components of income/(loss) before Federal income taxes follow:
In thousands for the year
ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $(45,486) $(31,456) $(15,980)
Foreign 31,594 21,506 42,826
- ---------------------------------------------------------------------------
$(13,892) $ (9,950) $ 26,846
===========================================================================
Substantially all of the above foreign income was earned by companies that
were not subject to income taxes in their countries of incorporation.
The components of the provision/(credit) for Federal income taxes follow:
<CAPTION>
In thousands for the year
ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Current - $ (5,659) $ 3,585
Deferred $ (5,260) 1,909 2,415
Adjustment of net deferred
tax liabilities to reflect
increase in tax rates - - 2,900
- ---------------------------------------------------------------------------
$ (5,260) $ (3,750) $ 8,900
===========================================================================
</TABLE>
<TABLE>
Reconciliations of the actual Federal income tax rate and the U.S. statutory
income tax rate follow:
<CAPTION>
For the year ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Actual Federal income tax
provision/(credit) rate (37.9%) (37.7%) 33.1%
Adjustment of net deferred
tax liabilities to reflect
increase in tax rates - - (10.8%)
Adjustment due to:
Dividends received deduction 3.1% 4.9% 3.2%
Income not subject to U.S.
income taxes (.2%) 2.2% 9.7%
Other - (4.4%) (.2%)
- ---------------------------------------------------------------------------
U.S. statutory income tax
provision/(credit) rate (35.0%) (35.0%) 35.0%
===========================================================================
</TABLE>
NOTE K - OTHER INCOME (NET):
<TABLE>
Other income (net) consists of:
<CAPTION>
In thousands for the year
ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $ 9,545 $ 6,116 $ 4,017
Dividends 1,803 2,072 3,473
Gain on sales of securities-net
(based on first-in,
first-out method) 11,130 7,986 9,128
Gain on disposal of vessels-net 2,693* 6,815 12,088
Foreign currency exchange
gains/(losses) (2,559) 490 (1,647)
Minority interest 1,990 285 (116)
Miscellaneous-net (1,231) 2,144 3,731
- ---------------------------------------------------------------------------
$ 23,371 $25,908 $30,674
===========================================================================
<FN>
*Reflects a provision of approximately $3,000,000 for loss on a vessel to be
disposed of subsequent to year-end.
</TABLE>
Gross realized gains on sales of securities were $14,625,000 (1995),
$10,199,000 (1994) and $10,802,000 (1993), and gross realized losses were
$3,495,000 (1995), $2,213,000 (1994) and $1,674,000 (1993).
NOTE L - COMMITMENTS AND OTHER COMMENTS:
1. As of February 14, 1996, the Company has commitments with an aggregate
unpaid cost of approximately $200,000,000 for the construction of four
foreign flag bulk vessels, of which three are scheduled for delivery in late
1996 and one in 1997. Unpaid costs are net of $74,000,000 of progress
payments and prepayments (all paid prior to January 1, 1996) and of
discounts resulting from such prepayments. Long-term shipyard financing
arrangements exist for approximately $38,000,000 of the unpaid cost of one of
the vessels. In addition, two foreign flag VLCCs with an aggregate unpaid
cost of approximately $9,000,000 as of December 31,1995 were delivered in
January 1996.
<TABLE>
2. Sundry liabilities and accrued expenses consist of:
<CAPTION>
In thousands at December 31, 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Payroll and benefits $ 4,331 $ 2,501
Interest 12,094 12,697
Insurance 2,613 10,778
Other 12,668 7,066
- ---------------------------------------------------------------------------
$31,706 $33,042
===========================================================================
</TABLE>
3. Certain subsidiaries make contributions to union-sponsored multi-employer
pension plans covering seagoing personnel. The Employee Retirement Income
Security Act requires employers who are contributors to domestic multi-
employer plans to continue funding their allocable share of each plan's
unfunded vested benefits in the event of withdrawal from or termination of
such plans. The Company has been advised by the trustees of such plans that
it has no withdrawal liability as of December 31, 1995.
Certain other seagoing personnel of U.S. flag vessels are covered under a
subsidiary's defined contribution plan, the cost of which is funded as
accrued.
NOTE M - LEASES:
<TABLE>
1. Charters-in:
The approximate minimum commitments under capital leases for eight U.S. flag
vessels were:
<CAPTION>
In thousands at December 31, 1995
- ---------------------------------------------------------------------------
<S> <C>
1996 $ 25,528
1997 25,528
1998 25,528
1999 25,660
2000 26,038
Beyond 2000 139,919
- ---------------------------------------------------------------------------
Net minimum lease payments 268,201
Less amount representing interest 107,451
- ---------------------------------------------------------------------------
Present value of net minimum lease payments $160,750
===========================================================================
</TABLE>
Certain of the capital leases provide for deposits in restricted funds under
certain circumstances. Such deposits aggregated approximately $4,677,000 at
December 31, 1995 and are held as collateral for the related obligations.
The Company has a time charter (which is an operating lease) for a 1992-built
foreign flag tanker, which charter has a remaining term of approximately
three years, at an annual time charter rental of approximately $8,800,000,
assuming a full year's operations. Under the charter, the Company has renewal
and purchase options. Time charter rental expense is not payable when the
vessel is off-hire. The total rental expense for charters accounted for as
operating leases, including the one referred to above, amounted to $9,767,000
in 1995, $12,150,000 in 1994 and $8,842,000 in 1993.
2. Charters-out:
Revenues from vessels on time charter are dependent upon the ability to
deliver and operate vessels in accordance with charter terms. Revenues from a
time charter are not received when a vessel is off-hire, including time
required for normal periodic maintenance of the vessel. The minimum future
revenues expected to be received subsequent to December 31, 1995 on
noncancelable time charters and a bareboat charter are $98,252,000 (1996),
$32,238,000 (1997), $19,535,000 (1998), $18,288,000 (1999) and $19,547,000
(2000); the aggregate for 2001 and later years is $80,176,000.
The foregoing amounts do not include escalations and do not purport to be an
estimate of aggregate voyage revenues for any of the years. In arriving at
the minimum future charter revenues, an estimated time off-hire to perform
periodic maintenance on each vessel has been deducted, although there is no
assurance that such estimate will be reflective of the actual off-hire in the
future.
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 $130,000,000 for such foreign currency from 1996 through 2004.
NOTE N - CAPITAL STOCK AND PER SHARE AMOUNTS:
<TABLE>
The Company's 1989 nonqualified stock option plan, as amended, covered
570,000 treasury shares. Options were granted to certain officers of the
Company and a subsidiary for the purchase of all the shares covered by the
amended plan, at $14.00 per share, which was in excess of the market price at
the date of grant. During 1993, options for 10,000 shares were exercised.
Options for 560,000 shares are outstanding and exercisable at December 31,
1995. These options remain exercisable until October 2000.
At December 31, 1995, the Company has reserved 689,639 treasury shares for
issuance pursuant to (i) its 1990 nonqualified stock option plan, which
covered options for 2,102 shares granted by the Company to employees (except
senior officers), and (ii) an agreement, as amended, to make available for
purchase by Maritime (see Note H) 687,537 shares (including an increase of
200,000 shares in 1993). Maritime can acquire the shares reserved for it only
for the purpose of fulfilling its obligations under its 1990 nonqualified
stock option plan, as amended. The exercise price of the options granted by
the Company to its employees is $16.00 per share, and the prices for any
shares Maritime purchases from the Company range from $16.00 to $19.63 per
share (the market prices at dates of grant). The options granted have a term
of approximately ten years and become exercisable in annual increments of 20%
upon the option holder's completion of five years of service. Certain details
of activity in the Company's 1990 plan and Maritime's plan are summarized as
follows:
<CAPTION>
Company's Maritime's
1990 Plan Plan
- ---------------------------------------------------------------------------
<S> <C> <C>
Options Outstanding at January 1, 1993 6,392 458,221
Granted - 190,000
Canceled - (23,899)
Exercised ($16.00 per share) (872) (20,409)
- ---------------------------------------------------------------------------
Options Outstanding at December 31, 1993 5,520 603,913
Granted - 24,600
Canceled (1,005) (80,430)
Exercised ($16.00 per share) (1,000) (54,927)
- ---------------------------------------------------------------------------
Options Outstanding at December 31, 1994 3,515 493,156
Granted - -
Canceled (345) (14,433)
Exercised ($16.00 per share) (1,068) (16,527)
- ---------------------------------------------------------------------------
Options Outstanding at December 31, 1995 2,102 462,196
===========================================================================
Options Exercisable at December 31, 1995 1,646 331,202
===========================================================================
</TABLE>
Net income/(loss) per share is based on the following weighted average number
of common shares outstanding during each year: 36,220,401 shares (1995),
35,587,856 shares (1994) and 32,678,031 shares (1993). The aforementioned
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 be
material.
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). The effect
on net loss 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.
<TABLE>
NOTE O - 1995 AND 1994 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
<CAPTION>
Results of Operations for Quarter Ended
(in thousands, except per share amounts)
March 31, June 30, Sept. 30, Dec. 31,
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Shipping revenues $106,945 $ 92,520 $ 99,569 $114,883
Income from
vessel operations 13,907 1,472 3,710 11,296
Gain on disposal
of vessels-net - - - 2,693*
Net income/(loss) $ (3,306) $ (5,984) $ (746) $ 1,404
- ---------------------------------------------------------------------------
Net income/(loss)
per share $ (.09) $ (.17) $ (.02) $ .04
===========================================================================
1994
Shipping revenues $100,498 $ 78,316 $ 89,563 $ 95,759
Income/(loss)
from vessel
operations 10,759 (2,827) 4,037 8,364
Gain on disposal
of vessels 2,512 - 4,303 -
Net income/(loss) $ 5,016 $ (4,599) $ (2,313) $ (4,304)
- ---------------------------------------------------------------------------
Net income/(loss)
per share $ .15 $ (.14) $ (.06) $ (.12)
===========================================================================
<FN>
*Reflects a provision of approximately $3,000,000 for loss on a vessel to be
disposed of subsequent to year-end.
</TABLE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders
Overseas Shipholding Group, Inc.
We have audited the accompanying consolidated balance sheets of Overseas
Shipholding Group, Inc. and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of operations and retained earnings
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Overseas
Shipholding Group, Inc. and subsidiaries at December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
S/ERNST & YOUNG LLP
New York, New York
February 14, 1996
<PAGE>
[From pages 38 and 39 of the 1995 Annual Report]
<TABLE>
ELEVEN-YEAR STATISTICAL REVIEW (UNAUDITED)
<CAPTION>
In thousands, except per
share amounts 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues(a) $ 436,080 $ 390,841 $ 420,095 $ 383,222 $ 452,459
- ------------------------------------------------------------------------------
Income from vessel
operations 30,385 20,333 32,642 29,614 102,046
- ------------------------------------------------------------------------------
Income/(loss) before
Federal income taxes (13,892) (9,950) 26,846 (2,829) 79,826
- ------------------------------------------------------------------------------
Net income/(loss) (8,632) (6,200) 17,946 16,071(c) 55,076
- ------------------------------------------------------------------------------
Depreciation of
vessels and
amortization of
capital leases 66,134 59,992 58,734 56,472 56,214
- ------------------------------------------------------------------------------
Vessels, capital
leases and direct
financing leases,
at net book amount 1,281,601 1,183,241 1,130,124 1,067,122 1,026,817
- ------------------------------------------------------------------------------
Total assets 2,064,826 1,905,409 1,823,737 1,714,548 1,545,675
- ------------------------------------------------------------------------------
Long-term debt and
lease obligations
(exclusive of
current portions) 1,101,758 910,056 876,274 784,452 576,321
- ------------------------------------------------------------------------------
Reserve for deferred
Federal income taxes
- noncurrent 93,218 102,170 100,161 94,247 114,589
- ------------------------------------------------------------------------------
Shareholders' equity $ 784,781 $ 809,779 $ 768,437 $ 762,425 $ 760,322
- ------------------------------------------------------------------------------
PER SHARE AMOUNTS (b):
Net income/(loss) $ (.24) $ (.17) $ .55 $ .49(c) $ 1.67
- ------------------------------------------------------------------------------
Shareholders' equity $ 21.66 $ 22.36 $ 23.50 $ 23.33 $ 23.05
- ------------------------------------------------------------------------------
Cash dividends paid $ .60 $ .60 $ .60 $ .60 $ .55
- ------------------------------------------------------------------------------
AVERAGE SHARES
OUTSTANDING 36,220 35,588 32,678 32,806 33,012
- ------------------------------------------------------------------------------
<FN>
(a) Represents shipping revenues and other income.
(b) Gives effect to a 7-for-5 stock split declared in February 1989.
(c) Includes $16,000,000 ($.49 per share) from the cumulative effect of the
change in accounting for income taxes in accordance with FAS 109, and a
provision of $13,100,000 ($.40 per share) for loss on investment in GPA Group
plc.
</TABLE>
<PAGE>
[From page 41 of the 1995 Annual Report]
The Company's stock is listed for trading on the New York Stock Exchange and
the Pacific Stock Exchange.
Stock Symbol: OSG
Shareholders of Record February 14, 1996: 1,094
<PAGE>
EXHIBIT 21
----------
as of 3/20/96
SUBSIDIARIES OF OVERSEAS SHIPHOLDING GROUP, INC.
The following table lists all subsidiaries of the registrant and all
companies in which the registrant directly or indirectly owns at least
a 49% interest, except for certain companies which, if considered in
the aggregate as a single entity, would not constitute a significant
entity. All the entities named below are corporations, unless
otherwise noted.
Where Incorporated
Name or Organized
Ajax Navigation Corporation Liberia
Alice Tankships Corporation New York
American Shipholding Group, Inc. New York
Amity Products Carriers, Inc. Delaware
Ania Tanker Corporation Liberia
Antilles Bulk Holdings N.V. Netherlands Antilles
Atlantia Tanker Corporation Liberia
Baywatch Marine Inc. Liberia
Blue Sapphire Marine Inc. Liberia
Cambridge Tankers, Inc. New York
Canopus Tankers, Inc. Liberia
Caribbean Tanker Corporation Liberia
Celebrity Cruise Lines Inc. Cayman Islands
Celebrity Cruises (Management) Inc. Liberia
Celebrity Cruises Inc. Liberia
Chrismir Shipping Corporation Liberia
Columbia Tanker Corporation Liberia
Commonwealth Shipping Company Limited Bermuda
Community Ocean Services, Inc. New York
Concert Tanker Corporation Liberia
Concord Tanker S.A. Panama
Corolla Shipping S.A. Panama
Cruise Mar Investment Inc. Liberia
Cruise Mar Shipping Holdings Ltd. Liberia
Delphina Tanker Corporation Delaware
Diane Tanker Corporation Liberia
Edinburgh Bulk Carriers Limited Bermuda
Enterprise Shipping Company Limited Bermuda
ERN Holdings Inc. Panama
Esker Marine Shipping Inc. Liberia
Excelsior Bulk Carriers Limited Bermuda
Exemplar Bulk Carriers Limited Bermuda
Explorer Bulk Carriers, Inc. Liberia
Fantasia Cruising Inc. Liberia
Fifth Transoceanic Shipping Company Limited Liberia
First Pacific Corporation Liberia
First Products Tankers, Inc. Liberia
First Shipco Inc. Liberia
First Shipmor Associates (partnership) Delaware
First Union Tanker Corporation Liberia
First United Shipping Corporation Liberia
Fourth Aframax Tanker Corporation Liberia
Fourth Products Tankers, Inc. Liberia
Fourth Shipmor Associates (partnership) Delaware
Fourth Spirit Holding N.V. Netherlands Antilles
Fourth Transoceanic Shipping Company Limited Liberia
Friendship Marine Inc. Liberia
General Guaranty Corporation Delaware
General Ship Services, Inc. Delaware
Glasgow Bulk Carriers Limited Bermuda
Global Bulk Oil S.A. Panama
Global Tankers S.A. Panama
Hyperion Shipping Corporation Liberia
Hyperion Transportation S.A. Panama
Imperial Tankers Corporation Liberia
Intercontinental Bulktank Corporation New York
Intercontinental Coal Transport Inc. Delaware
Intercontinental Coal Transport Limited Bermuda
International Seaways, Inc. Liberia
Interocean Tanker Corporation Liberia
Island Tanker S.A. Panama
ITI Shipping S.A. Panama
Jostelle Shipping Company Limited Bermuda
Juneau Tanker Corporation New York
Kaigai Shipping Corporation Liberia
Lake Michigan Bulk Carriers, Inc. New York
Lake Ontario Bulk Carriers, Inc. New York
Lion Insurance Company Ltd. Bermuda
Lion Shipping Ltd. Liberia
Majestic Tankers Corporation Liberia
Mansfield Marine Corporation Liberia
Marina Tanker Corporation Liberia
Matilde Tanker Corporation Liberia
Mediteranean Blue Sea Holdings Ltd. Liberia
Mercury Bulkcarriers S.A. Panama
Mermi Shipping Holdings Ltd. Liberia
Monarch Tanker S.A. Panama
Moran Maritime Associates (partnership) Delaware
New Orleans Tanker Corporation Delaware
North American Ship Agencies, Inc. New York
Northanger Shipping Corporation Liberia
Northwestern Tanker Corporation Liberia
Ocean Bulk Ships, Inc. Delaware
Oleron Tanker S.A. Panama
Olympia Tanker Corporation Liberia
Ore-Oil Carriers S.A. Panama
OSG Bulk Ships, Inc. New York
OSG Car Carriers, Inc. New York
OSG Financial Corp. Delaware
OSG Foundation New York
OSG International Partners (partnership) Liberia
OSG International, Inc. Liberia
Overseas Airship Corporation Delaware
Overseas Bulktank Corporation New York
Overseas Coal Transport Inc. Delaware
Overseas Coal Transport Limited Bermuda
Overseas Cruiseship Inc. Cayman Islands
Overseas Petroleum Carriers, Inc. Delaware
Phaidon Navegacion S.A. Panama
Philadelphia Tanker Corporation Delaware
Pluto Tankers, Inc. Liberia
Polycon Investment Inc. Liberia
Regency Tankers Corporation Liberia
Reliance Shipping B.V. Netherlands
Rex Shipholdings Inc. Liberia
Rio Grande Bulk Carriers, Inc. Liberia
Royal Tankers Corporation Liberia
Ruby Tanker Corporation Liberia
San Diego Tankers, Inc. Delaware
San Jose Tankers, Inc. Delaware
Santa Barbara Tankers, Inc. Delaware
Santa Monica Tankers, Inc. Delaware
Sapphire Tanker Corporation Liberia
Sargasso Tanker Corporation Liberia
Saturn Bulk Carriers, Inc. Liberia
Seabrook Maritime Inc. Liberia
Second Pacific Corporation Liberia
Second Products Tankers, Inc. Liberia
Second Shipmor Associates (partnership) Delaware
Second Union Tanker Corporation Liberia
Second United Shipping Corporation Liberia
Ship Paying Corporation No. 1 Delaware
Ship Paying Corporation No. 2 Delaware
Ship Paying Corporation No. 3 Liberia
Spirit Shipping B.V. Netherlands
Third Aframax Tanker Corporation Liberia
Third Products Tankers, Inc. Liberia
Third Shipco Inc. Delaware
Third Shipmor Associates (partnership) Delaware
Third United Shipping Corporation Liberia
Timor Navigation Ltd. Liberia
TRA Shipping S.A. Panama
Trader Shipping Corporation Liberia
Tranquility Maritime Ltd. Liberia
Transbulk Carriers, Inc. Delaware
Tropical United Shipping Corporation Liberia
TSC Shipping S.A. Panama
Tubarao Bulk Carriers, Inc. Liberia
U.S. Shipholding Group, Inc. New York
United Partners (partnership) Liberia
United Steamship Corporation Panama
Universal Cruise Holdings Limited British Virgin Islands
Upperway Investments Ltd. Liberia
Valdez Tankships Corporation New York
Vega Tanker Corporation Delaware
Venus Tanker Corporation Liberia
Vivian Tankships Corporation New York
Western Ship Agencies Limited England
Wolcon Corp. Delaware
Zenith Shipping Corporation Liberia
<PAGE>
EXHIBIT 23
----------
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Overseas Shipholding Group, Inc. of our
report dated February 14, 1996, included in the 1995 Annual
Report to Shareholders of Overseas Shipholding Group, Inc.
We also consent to the incorporation by reference in the
Registration Statements, Form S-8 (No. 33-44013) pertaining to
the Overseas Shipholding Group, Inc. 1989 Stock Option Plan, the
Overseas Shipholding Group, Inc. 1990 Stock Option Plan, and the
Maritime Overseas Corporation 1990 Stock Option Plan, and Form
S-3 (No. 33-50441) pertaining to the registration of $500,000,000
of Overseas Shipholding Group, Inc. debt securities, of our
report dated February 14, 1996, with respect to the consolidated
financial statements of Overseas Shipholding Group, Inc.,
incorporated herein by reference.
ERNST & YOUNG LLP
New York, New York
March 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-K and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 160,578
<SECURITIES> 0
<RECEIVABLES> 31,537
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 223,333
<PP&E> 1,984,259
<DEPRECIATION> 702,658
<TOTAL-ASSETS> 2,064,826
<CURRENT-LIABILITIES> 71,326
<BONDS> 1,101,758
<COMMON> 39,591
0
0
<OTHER-SE> 745,190
<TOTAL-LIABILITY-AND-EQUITY> 2,064,826
<SALES> 0
<TOTAL-REVENUES> 436,080
<CGS> 0
<TOTAL-COSTS> 383,532
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,440
<INCOME-PRETAX> ( 13,892 )
<INCOME-TAX> ( 5,260 )
<INCOME-CONTINUING> ( 8,632 )
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ( 8,632 )
<EPS-PRIMARY> ( 0.24 )
<EPS-DILUTED> ( 0.24 )
</TABLE>
