UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
----------
(X) QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended
MARCH 31, 1996
--------------
OR
( ) TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
---------
to
---------
COMMISSION FILE NO.
1-6479-1
-------------------
OVERSEAS SHIPHOLDING GROUP, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-2637623
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer Identi-
incorporation or organization) fication No.)
1114 Avenue of the Americas, New York, New York 10036
- ----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (212) 869-1222
------------------
No Change
- ----------------------------------------------------------------
Former name, former address and former fiscal year, if
changed since last report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
--- ---
Common Shares outstanding as of May 13, 1996 - 36,234,479
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARCH DECEMBER
31, 1996 31, 1995 (A)
------------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
Current Assets:
- --------------
Cash, including interest-bearing
deposits of $128,512,000 and
$155,864,000 $ 132,660,000 $ 160,578,000
Receivables 33,894,000 31,537,000
Prepaid expenses 38,408,000 31,218,000
-------------- --------------
Total Current Assets 204,962,000 223,333,000
Investments in Marketable Securities 18,920,000 18,482,000
Capital Construction and Restricted
Funds 127,385,000 124,258,000
Vessels, at cost, less accumulated
depreciation of $552,681,000 and
$551,752,000 - Note F 1,141,917,000 1,173,029,000
Vessels Under Capital Leases, less
accumulated amortization of
$153,627,000 and $150,906,000 105,851,000 108,572,000
Investment in Celebrity Cruise Lines
Inc. - Note B 231,626,000 234,334,000
Investments in Bulk Shipping Joint
Ventures - Note C 89,338,000 87,794,000
Other Assets 88,717,000 95,024,000
-------------- --------------
$2,008,716,000 $2,064,826,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C>
Accounts payable $ 5,647,000 $ 5,047,000
Sundry liabilities and accrued
expenses 50,598,000 39,706,000
-------------- --------------
56,245,000 44,753,000
Current installments of long-term
debt - Note F 13,212,000 15,943,000
Current obligations under capital
leases 10,750,000 10,630,000
-------------- --------------
Total Current Liabilities 80,207,000 71,326,000
Advance Time Charter Revenues 4,763,000 8,081,000
Long-term Debt - Note F 886,112,000 951,638,000
Obligations Under Capital Leases 148,641,000 150,120,000
Minority Interest 1,294,000 1,813,000
Deferred Federal Income Taxes
($97,768,000 and $93,218,000)
and Deferred Credits - Note E 101,604,000 97,067,000
Shareholders' Equity - Notes E and H:
Common Stock, par value $1 per share:
Authorized - 60,000,000 shares
Issued - 39,590,759 shares 39,591,000 39,591,000
Paid-in Additional Capital 93,714,000 93,687,000
Retained Earnings 707,130,000 707,220,000
-------------- --------------
840,435,000 840,498,000
Less - cost of Treasury Stock -
3,357,783 and 3,363,243 shares 49,237,000 49,297,000
-------------- --------------
791,198,000 791,201,000
Less - net unrealized loss on
marketable securities 5,103,000 6,420,000
-------------- --------------
Total Shareholders' Equity 786,095,000 784,781,000
Commitments and Other Comments -
Note H
-------------- --------------
$2,008,716,000 $2,064,826,000
============== ==============
<FN>
(A) The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date.
(See Accompanying Notes)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(UNAUDITED)
- ----------------------------------------------------------------------
MARCH MARCH
31, 1996 31, 1995
------------ ------------
<S> <C> <C>
Shipping Revenues:
Revenue from voyages $124,321,000 $105,743,000
Income attributable to bulk shipping joint
ventures - Note C 1,544,000 1,202,000
------------ ------------
125,865,000 106,945,000
------------ ------------
Shipping Expenses:
Vessel and voyage - Note D 77,758,000 65,939,000
Depreciation of vessels and amortization
of capital leases 18,154,000 16,475,000
Agency fees - Note D 8,483,000 7,582,000
General and administrative 2,992,000 3,042,000
------------ ------------
107,387,000 93,038,000
------------ ------------
Income from Vessel Operations 18,478,000 13,907,000
Equity in Results of Celebrity Cruise Lines
Inc.- Note B ( 2,707,000) (1,261,000)
Other Income/(expense) (net) - Note G 10,234,000 ( 665,000)
------------ ------------
26,005,000 11,981,000
Interest Expense 16,411,000 16,587,000
------------ ------------
Income/(loss) before Federal Income Taxes 9,594,000 (4,606,000)
Provision/(credit) for Federal Income Taxes,
reflecting deferred provision/(credit) of
$4,050,000 and ($1,300,000) - Note E 4,250,000 (1,300,000)
------------ ------------
Net Income/(loss) 5,344,000 (3,306,000)
Retained Earnings at beginning of period 707,220,000 737,583,000
------------ ------------
712,564,000 734,277,000
Cash Dividends Declared 5,434,000 5,431,000
------------ ------------
Retained Earnings at end of period $707,130,000 $728,846,000
============ ============
Per Share Amounts - Note H:
Net income/(loss) $.15 ($.09)
==== ====
Cash dividends declared $.15 $.15
===== ====
<FN>
(See Accompanying Notes)
</TABLE>
<PAGE>
<TABLE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(UNAUDITED)
--------------------------------------------------------------
<CAPTION>
MARCH MARCH
31, 1996 31, 1995
-------- --------
<S> <C> <C>
Net cash provided by Operating Activities $ 20,765,000 $ 20,216,000
------------ ------------
Cash Flows from Investing Activities:
Purchases of marketable securities ( 440,000) ( 414,000)
Proceeds from sales of marketable
securities 1,055,000 12,211,000
Proceeds from disposal of other
investments 907,000 8,609,000
Additions to vessels (23,550,000) ( 94,872,000)
Proceeds from disposal of vessels 47,887,000
Other - net 4,000 (3,217,000)
------------ ------------
Net cash provided by/(used in)
investing activities 25,863,000 (77,683,000)
------------ ------------
Cash Flows from Financing Activities:
Issuance of long-term debt 125,000,000
Payments on long-term debt and
obligations under capital leases (69,616,000) ( 6,875,000)
Cash dividends paid ( 5,434,000) ( 5,431,000)
Other - net 504,000 110,000
------------ ------------
Net cash (used in)/provided by
financing activities (74,546,000) 112,804,000
------------ ------------
Net (Decrease)/increase in Cash (27,918,000) 55,337,000
Cash, including interest-bearing
deposits, at beginning of period 160,578,000 100,034,000
------------ ------------
Cash, including interest-bearing
deposits, at end of period $132,660,000 $155,371,000
============ ============
<FN>
(See Accompanying Notes)
</TABLE>
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
Notes to Unaudited Condensed Financial Statements
General - As contemplated by the Securities and Exchange Commission, the
accompanying financial statements and footnotes, which have been
rounded to the nearest thousand dollars, have been condensed and
therefore do not contain all disclosures required by generally
accepted accounting principles. Reference should be made to the
Company's Annual Report to Shareholders for the year ended December
31, 1995.
The statements as of and for the three month period ended March 31, 1996
and for the three month period ended March 31, 1995 are unaudited. In
the opinion of the Company all adjustments (which were of a normal
recurring nature) have been made to present fairly the results for
such unaudited interim periods.
The results of operations for the three month period ended March 31, 1996
are not necessarily indicative of those for a full fiscal year.
Note A - Foreign Subsidiaries:
A condensed summary of the combined assets and liabilities of the Company's
foreign (incorporated outside the U.S.) subsidiaries, whose operations
are principally conducted in U.S. Dollars, follows:
<TABLE>
<CAPTION>
AS OF
--------------------------------
MARCH DECEMBER
31, 1996 31, 1995
-------------- ---------------
<S> <C> <C>
Current Assets $ 49,788,000 $ 78,635,000
Vessels, net 953,759,000 981,053,000
Investment in Celebrity Cruise
Lines Inc. 231,626,000 234,334,000
Other Assets 110,120,000 111,119,000
-------------- --------------
1,345,293,000 1,405,141,000
-------------- --------------
Current Installments
of Long-term Debt, including
intercompany of $8,950,000 in 1996 15,978,000 9,821,000
Other Current Liabilities 16,310,000 15,581,000
-------------- --------------
Total Current Liabilities 32,288,000 25,402,000
Long-term Debt, including
intercompany, and Deferred
Credits, etc. 316,248,000 399,537,000
-------------- --------------
348,536,000 424,939,000
-------------- --------------
Net Assets $ 996,757,000 $ 980,202,000
============== ==============
<FN>
(See Notes on Following Pages)
</TABLE>
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
Notes to Unaudited Condensed Financial Statements
Note B - Investment in Celebrity Cruise Lines Inc.:
A condensed summary of the assets and liabilities of Celebrity Cruise Lines
Inc. ("CCLI"), the Company's cruise industry joint venture, and the
results of its operations follows:
<TABLE>
<CAPTION>
AS OF
--------------------------------
MARCH DECEMBER
31, 1996 31, 1995
-------------- --------------
<S> <C> <C>
Current assets $ 112,258,000 $ 97,319,000
Vessels, net 1,040,805,000 1,042,928,000
Other assets 28,750,000 32,548,000
-------------- --------------
1,181,813,000 1,172,795,000
-------------- --------------
Short-term debt and current
installments of long-term debt 83,226,000 83,002,000
Other current liabilities 116,694,000 96,565,000
-------------- --------------
Total current liabilities 199,920,000 179,567,000
Long-term debt 512,034,000 517,864,000
-------------- --------------
711,954,000 697,431,000
-------------- --------------
Net assets (principally capital
contributions) $ 469,859,000 $ 475,364,000
============== ==============
THREE MONTHS ENDED
MARCH 31,
1996 1995
-------------- ------------
<S> <C> <C>
Revenue $ 94,561,000 $64,877,000
Costs and expenses 100,066,000 67,431,000
-------------- ------------
Net(loss) ($ 5,505,000) ($ 2,554,000)
============== ============
</TABLE>
The Company's equity in the results of CCLI for each of the periods is
before interest expense of approximately $3,900,000 (three months
ended March 31, 1996) and $3,900,000 (three months ended March 31,
1995), 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 periods.
As of May 13, 1996, CCLI has commitments (which are nonrecourse to OSG)
with an approximate aggregate unpaid cost of $645,000,000 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 April 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.
Note C - Bulk Shipping Joint Ventures:
Certain subsidiaries have investments in bulk shipping joint ventures. A
condensed summary of the combined assets and liabilities and results of
(See Notes on Following Pages)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Financial Statements
Note C - Bulk Shipping Joint Ventures (Continued)
operations of the bulk shipping joint ventures follows:
<TABLE>
<CAPTION>
AS OF
--------------------------
MARCH DECEMBER
31, 1996 31, 1995
----------- ------------
<S> <C> <C>
Cash ($27,710,000 and $20,950,000) and
other current assets (including
$9,558,000 and $9,569,000 due
from owners) $ 43,584,000 $ 36,464,000
Vessels, net 133,258,000 134,601,000
Other assets (including $7,224,000
and $9,178,000 due from owners) 8,974,000 11,384,000
----------- ------------
185,816,000 182,449,000
Current liabilities 4,213,000 3,568,000
------------ ------------
Net assets (principally undistributed
net earnings) $181,603,000 $178,881,000
============ ============
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1995
---- ----
<S> <C> <C>
Revenue, primarily from
voyages (including $7,752,000 and
$7,494,000 from vessels chartered
to other owners) $10,701,000 $11,132,000
Costs and expenses 7,979,000 7,771,000
----------- -----------
Net income $ 2,722,000 $ 3,361,000
=========== ===========
</TABLE>
As of May 13, 1996, certain 50%-owned companies have commitments (which are
nonrecourse to OSG) with an aggregate unpaid cost of approximately
$78,000,000 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 $102,000,000 of progress payments and
prepayments (including approximately $12,000,000 paid subsequent to
March 31, 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.
(See Notes on Following Pages)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
Notes to Unaudited Condensed Financial Statements
Note D - Agency Fees and Brokerage Commissions:
All subsidiaries with vessels and certain joint ventures are parties to
agreements with Maritime Overseas Corporation ("Maritime") that
provide, among other matters, for Maritime and subsidiaries to render
services related to the chartering and operation of the vessels and
certain general and administrative services for which Maritime and
subsidiaries receive specified compensation. Vessel and voyage
expenses include $1,675,000 (three months ended March 31, 1996) and
$1,446,000 (three months ended March 31, 1995) of brokerage commissions
to Maritime. Maritime is owned by a director of the Company; directors
or officers of the Company constitute all four of the directors and the
majority of the principal officers of Maritime.
Note E - Taxes:
Effective from January 1, 1987, earnings of the foreign shipping companies,
other than CCLI, are subject to U.S. income taxation currently; post-
1986 taxable income may be distributed to the U.S. parent without
further tax. Prior thereto, tax on such earnings was deferred as long
as the earnings were reinvested in foreign shipping operations.
Foreign income, substantially all of which was earned by companies
which are not subject to income taxes in their country of
incorporation, aggregated $16,790,000 (three months ended March 31,
1996) and $9,104,000 (three months ended March 31, 1995), before any
U.S. income tax effect. No provision for U.S. income taxes on the
undistributed income of the foreign shipping companies accumulated
through December 31, 1986 was required, since such undistributed
earnings have been reinvested or are intended to be reinvested in
foreign shipping operations so that the qualified investment therein is
not expected to be reduced below the corresponding amount at December
31, 1986. Further, no provision for U.S. income taxes on the Company's
share of the undistributed earnings of CCLI was required, since it is
intended that such undistributed earnings will be indefinitely
reinvested.
No payments of Federal income taxes were required or made during the three
month period ended March 31, 1996. Federal income taxes paid (which
related to prior periods) amounted to $600,000 in the three months
ended March 31, 1995.
Note F - Long-term Debt:
Agreements relating to long-term debt provide for prepayment privileges (in
certain instances with penalties), limitations on the amount of secured
debt and total borrowings, and acceleration of payment under certain
circumstances, including if any of the minimum consolidated financial
covenants contained in certain of such agreements are not met. The
amount that the Company can use for Restricted Payments, as defined,
including dividends and purchases of its capital stock, is limited as
of March 31, 1996 to $47,200,000.
(See Notes on Following Pages)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
Notes to Unaudited Condensed Financial Statements
Note F - Long-term Debt (continued):
As of March 31, 1996, 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 March 31, 1996) 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 15% of the net book amount of the Company's vessels,
representing three foreign flag and nine U.S. flag vessels, is pledged
as collateral for certain long-term debt.
Interest paid approximated $14,335,000 (three months ended March 31, 1996)
and $13,582,000 (three months ended March 31, 1995), excluding
capitalized interest.
Note G - Other Income/(expense) - net:
Other income/(expense) - net consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1995
---- ----
<S> <C> <C>
Investment income:
Interest and dividends $ 2,264,000 $ 2,682,000
Gain on sale of securities 2,918,000 104,000
Provision for loss on investments ( 3,157,000) ( 1,491,000)
----------- -----------
2,025,000 1,295,000
Gain on disposal of vessels 7,523,000
Foreign currency exchange gain/(loss) 56,000 ( 2,386,000)
Minority interest 519,000 133,000
Miscellaneous - net 111,000 293,000
----------- -----------
$10,234,000 ($ 665,000)
=========== ===========
</TABLE>
Note H - Commitments and Other Comments:
1. As of May 13, 1996, the Company has commitments with an aggregate unpaid
cost of approximately $178,000,000 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 approximately
$96,000,000 of progress payments and prepayments (including
approximately $13,000,000 paid subsequent to March 31, 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.
(See Note on Following Page)
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
--------------------------------------------------
Notes to Unaudited Condensed Financial Statements
Note H - Commitments and Other Comments (continued):
2. Net income/(loss) per share is based on the weighted average number of
common shares outstanding during each period, 36,232,000 shares (three
months ended March 31, 1996) and 36,213,000 shares (three months ended
March 31, 1995).
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.
3. The Company has hedged its exchange rate risk with respect to contracted
future charter revenues receivable in Japanese yen by entering into
currency swaps with a major financial institution that will result in
the Company receiving approximately $126,000,000 for such foreign
currency from April 1, 1996 through 2004.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
-------------------------------------
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 the first quarter of 1996, rates in the international tanker markets
improved from the levels prevailing in the comparable period of 1995
and, generally, from the rates in the fourth quarter of 1995. Toward
the end of the 1996 first quarter and in the early part of the second
quarter, rates declined significantly for VLCCs (200,000 DWT and
greater) and, to a lesser extent, for Aframaxes (80,000 to 110,000
DWT). Dry bulk rates declined significantly during the latter half of
1995 and have remained at low levels in the first and second quarters
of 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; export regulations are expected to be adopted in the
second quarter of 1996. OSG has entered into an agreement providing
for the long-term employment of five, and possibly six, of its eight
U.S. flag crude carriers once the regulations are adopted.
Income from vessel operations for the quarter ended March 31, 1996 increased
by approximately $4,600,000 compared to the first quarter of 1995.
Approximately 80% of this increase was attributable to improved income
from operations of the U.S. flag fleet, reflecting substantially
increased employment of the Company's U.S. flag tanker fleet in the
1996 period (when two of the U.S. flag tankers were idle for
significant periods) as compared to 1995 (when four of the tankers were
idle for significant periods).
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
Income from Vessel Operations (continued)
- -----------------------------
Also, rates earned by certain U.S. flag tanker tonnage were higher in 1996.
The balance of the 1996 first quarter increase was attributable to
improved income from foreign flag vessel operations, reflecting the
positive effect on 1996 vessel operating results of two modern
Aframaxes purchased near the end of the first quarter of 1995 and two
VLCCs delivered in early 1996. Improved rates earned by certain crude
carrier and petroleum products carrier tonnage in 1996 compared with
1995 was partially offset by lower rates obtained by certain dry bulk
vessels in 1996 compared with 1995. 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 the 1996 period as
compared with 1995 is also reflected.
Equity in Results of Celebrity Cruise Lines Inc. ("CCLI")
- ---------------------------------------------------------
The Company recorded losses of approximately $2,700,000 for the first
quarter of 1996 and approximately $1,300,000 for the first quarter of
1995, representing its share of CCLI's results. These results reflect
the adverse effect of continuing competitive pressures in the premium
segment of the North American cruise market.
Other Income/(Expense) - Net
- ----------------------------
The details of other income/(expense) are shown in Note G. Interest and
dividends decreased in the 1996 quarter as compared to 1995 because of
lower rates of return on interest bearing deposits and investments,
partially offset by increased amounts utilized for such deposits and
investments. Gain on sale of securities approximated $2,900,000 in the
first quarter of 1996 compared to approximately $100,000 in the
corresponding 1995 period. In the first quarter of 1996, disposal of
vessels resulted in a gain of approximately $7,500,000 (there were no
sales of vessels in the 1995 period). Other income/(expense) also
reflects provisions for losses on investments of approximately
$3,200,000 and $1,500,000 in the 1996 and 1995 quarters, respectively,
and the results of foreign currency transactions in both periods.
Interest Expense
- ----------------
Interest expense decreased slightly in the first quarter of 1996 from the
comparable period of 1995 as a result of decreased rates on floating
rate debt partially offset by increases in the average amount of debt
outstanding in the 1996 period compared with 1995, including debt
incurred in connection with vessels entering the operating fleet.
Interest expense reflects $2,000,000 in the 1996 period and $1,000,000
in the 1995 period of net benefits from interest rate swaps referred to
below in Liquidity and Sources of Capital.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
-------------------------------------------------
Provision for Federal Income Taxes
- ----------------------------------
The tax provision in the first quarter of 1996 and the income tax credit in
the comparable period of 1995 were based on pretax income and loss,
respectively, adjusted to reflect items that are not subject to tax and
the dividends received deduction.
Liquidity and Sources of Capital
- --------------------------------
Working capital at March 31, 1996 was approximately $125,000,000. Current
assets are highly liquid, consisting principally of cash, interest-
bearing deposits and receivables. The Company also had investments in
marketable securities carried as noncurrent assets, other than
securities included in restricted funds, with a market value of
approximately $19,000,000 at March 31, 1996.
Net cash provided by operating activities in the first three months of 1996
approximated $21,000,000 (which is not necessarily indicative of the
cash to be provided by operating activities for a full fiscal year).
Current financial resources, together with cash anticipated to be
generated from operations, are expected to be adequate to meet
requirements for short-term funds in the next year. The Company has
used interest rate swaps to effectively convert a portion of its fixed
rate debt to a floating rate basis, reflecting management's interest
rate outlook. As of March 31, 1996, 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 March 31,
1996) 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 that will result in the Company receiving approximately
$126,000,000 for such foreign currency from April 1, 1996 through
2004.
The Company has an unsecured long-term credit facility of $500,000,000, of
which $284,000,000 was used at March 31, 1996, and an unsecured short-
term credit facility of $30,000,000, of which $28,000,000 was used at
that date. The latter amount has been classified as long-term since it
is expected to be refinanced under the long-term credit facility. At
May 13, 1996, the Company has commitments with an aggregate unpaid cost
of approximately $178,000,000 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.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
--------------------------------------------------
Ratio of Earnings to Fixed Charges
- ----------------------------------
The ratio of earnings to fixed charges for the three months ended March 31,
1996 was 1.24 and has been computed by dividing the sum of income
before Federal income taxes and fixed charges by fixed charges. Fixed
charges consist of interest expense, including the proportionate share
of interest of joint venture companies, capitalized interest and an
estimate of the interest component of an operating lease.
Independent Accountant's Report on Review of Interim Financial Information
- --------------------------------------------------------------------------
The accompanying financial statements as of March 31, 1996 and for the three
months ended March 31, 1996 and 1995 are unaudited; however, such
financial statements have been reviewed by the Company's independent
accountants.
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
--------------------------------------------------
PART II
---------
Item 6(a). Exhibits
- --------- --------
See Exhibit Index on page 18.
Item 6(b). Reports on Form 8-K
- --------- -------------------
The registrant was not required to file any report on Form 8-K during the
quarter ended March 31, 1996.
<PAGE>
ERNST & YOUNG LLP 787 Seventh Avenue Phone: 212 773 3000
New York, New York 10019
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION
To the Shareholders
Overseas Shipholding Group, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Overseas Shipholding Group, Inc. and subsidiaries as of March 31, 1996
and the related condensed consolidated statements of operations and
retained earnings and cash flows for the three month periods ended
March 31, 1996 and 1995. These financial statements are the
responsibility of the Company''s management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data, and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with generally
accepted auditing standards, which will be performed for the full year
with the objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the condensed financial statements referred to above
for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Overseas Shipholding
Group, Inc. and subsidiaries as of December 31, 1995, and the related
consolidated statements of operations and retained earnings and cash
flows for the year then ended, not presented herein, and in our report
dated February 14, 1996 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of
December 31, 1995, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
ERNST & YOUNG LLP
May 13, 1996
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC.
AND SUBSIDIARIES
--------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
OVERSEAS SHIPHOLDING GROUP, INC.
--------------------------------
(Registrant)
Date: May 13, 1996 MORTON P. HYMAN
------------ --------------------------
Morton P. Hyman
President
Date: May 13, 1996 ALAN CARUS
------------ --------------------------
Alan Carus
Controller
<PAGE>
OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
--------------------------------------------------
EXHIBIT INDEX
--------------
12. Computation of Ratio of Earnings to Fixed Charges.
15. Letter from Ernst & Young LLP.
27. Financial Data Schedule.
NOTE: Instruments authorizing long-term debt of the
registrant and subsidiaries, which do not exceed
10% of their total assets on a consolidated basis,
are not being filed herewith. The registrant
agrees to furnish a copy of each such instrument
to the Commission upon request.
<TABLE>
<CAPTION>
EXHIBIT 12
OVERSEAS SHIPHOLDING GROUP, INC.
RATIO OF EARNINGS TO FIXED CHARGES
For the three months ended March 31, 1996
(In thousands)
Presented in connection with Amendment No. 1
filed on November 9, 1993 to Registration Statement No. 33-50441
<S> <C>
Income before Federal income taxes $ 9,594
Adjustments of income related to
companies owned less than 100% (306)
Interest expense 16,411
Proportionate share of interest of
50% - owned companies 4,800
Interest component of an operating
lease 475
Amortization of capitalized interest 849
-------
Earnings $31,823
=======
Interest expense $16,411
Proportionate share of fixed charges
of 50% - owned companies 5,737
Capitalized interest 3,020
Interest component of an operating
lease 475
-------
Fixed charges $25,643
=======
Ratio of earnings to fixed charges 1.24X
=======
</TABLE>
<PAGE>
EXHIBIT 15
May 14, 1996
Securities and Exchange Commission
Washington, D. C. 20549
We are aware of the incorporation by reference in the Registration
Statements (Form S-8 No. 33-44013 and Form S-3 No. 33-50441) of
Overseas Shipholding Group, Inc. of our report dated May 13, 1996
relating to the unaudited condensed consolidated interim financial
statements of Overseas Shipholding Group, Inc. which are included in
its Form 10-Q for the quarter ended March 31, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not
part of the registration statement prepared or certified by accountants
within the meaning of Section 7 or 11 of the Securities Act of 1933.
ERNST & YOUNG LLP
New York, New York
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 132,660
<SECURITIES> 18,920
<RECEIVABLES> 33,894
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 204,962
<PP&E> 1,954,076
<DEPRECIATION> 706,308
<TOTAL-ASSETS> 2,008,716
<CURRENT-LIABILITIES> 80,207
<BONDS> 1,034,753
<COMMON> 39,591
0
0
<OTHER-SE> 746,504
<TOTAL-LIABILITY-AND-EQUITY> 2,008,716
<SALES> 0
<TOTAL-REVENUES> 133,392
<CGS> 0
<TOTAL-COSTS> 107,387
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,411
<INCOME-PRETAX> 9,594
<INCOME-TAX> 4,250
<INCOME-CONTINUING> 5,344
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,344
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
