Item 3. LEGAL PROCEEDINGS
OMI and its subsidiaries are not parties to any material pending legal proceedings for damages, or a related group of such proceedings, other than ordinary routine litigation incidental to the business.
OMI is a party, as plaintiff or defendant, in a variety of lawsuits for damages arising principally from personal injuries or other casualties in the ordinary course of the maritime business. All such personal injury and casualty claims against OMI are fully covered by insurance (subject to deductibles which are not material).
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of the Company during the fourth quarter of 1994.
EXECUTIVE OFFICERS OF OMI
Set forth below are the names, ages, position and office, term and year appointed of all of the Company's executive officers as of March 23, 1995.
There is no family relationship by blood, marriage or adoption (not more remote than first cousins) between any of the above individuals and any other executive officer or any OMI director.
The term of office of each officer is until the first meeting of directors after the annual stockholders' meeting next succeeding his election and until his respective successor is chosen and qualified.
There are no arrangements or understandings between any of the above officers and any other person pursuant to which any of the above was selected as an officer.
Mr. Klebanoff has served as Chairman of the Board of the Company since 1983.
The following are descriptions of other occupations or positions that the other executive officers of the Company have held during the last five years:
Jack Goldstein was appointed President and Chief Executive Officer of the Company in April 1986.
Craig H. Stevenson, Jr. was elected Executive Vice President and Chief Operating Officer in November 1994. He was elected Senior Vice President/Chartering of the Company in August 1993. For five years prior thereto he was President of Ocean Specialty Tankers Corp., a marketing manager for several of the Company's chemical tankers.
Vincent de Sostoa was elected Chief Financial Officer in January, 1994. He was elected Senior Vice President/Finance of the Company in January 1989.
Fredric S. London was elected Senior Vice President of the Company in December 1991. He was elected Vice President of the Company in December 1988.
Judith Blackman was elected Vice President of the Company in January, 1995. She was Director of the Office of Cargo Preference for the United States Maritime Administration the three previous years and prior to that time was an employee in the chartering department at the Company.
Kathleen C. Haines was elected Vice President and Controller of the Company in January 1994. She was elected Assistant Vice President and Controller in December 1992. Prior thereto, Ms. Haines was Assistant Controller.
Richard Halluska was elected Vice President of the Company in July 1993. He was elected Assistant Vice President of the Company in December 1989.
William A.G. Hogg was elected Vice President of the Company in January 1994. He was elected Assistant Vice President of the Company in June 1987.
Anthony Naccarato was elected Vice President of Human Resources/Administration in October, 1993. He was elected Vice President/Labor Relations of the Company in June 1987.
William Osmer was elected Vice President of the Company in January 1994. He was elected Assistant Vice President of the Company in December 1986.
Kenneth Rogers was elected Vice President of the Company in January 1994. He was elected Assistant Vice President of the Company in December 1990. Prior thereto, Mr. Rogers was Ship Manager.
Thomas M. Scott was elected Vice President of the Company in February, 1995. He was Ship Manager starting in September, 1991 and was elected Assistant Vice President/Operations in 1993. Prior thereto he was Port Captain for International Maritime Carriers for one year and prior thereto Marine Superintendent for Marine Transport Lines.
PART II
Item 5.
Item 5. MARKET FOR OMI CORP.'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Common Stock
The Company listed for trading on the New York Stock Exchange all of its common stock on March 13, 1992 (NYSE-OMM). Previously, the Company's common stock initially traded on the over-the-counter market on January 4, 1984, began trading on the NASDAQ National Market System on February 18, 1986, and on January 27, 1989 was listed for trading on the American Stock Exchange. As of March 23, 1995, the number of holders of OMI common stock was approximately 5,122.
Payment of Dividends to Stockholders
On June 15, 1993, the Board voted to declare special dividends rather than adhere to a regular dividend policy. For the years ended December 31, 1993 and 1994, there were no dividends declared.
In 1992 dividends were paid at $0.07 per share on July 23, 1992 and January 21, 1993 to stockholders of record June 26, 1992 and December 28, 1992, respectively.
1994 Quarter 1st 2nd 3rd 4th ------------ ----- ----- ----- -----
High ........................ 8 7 1/8 6 7/8 6 3/4 Low ......................... 6 1/4 6 5 3/4 5 7/8
1993 Quarter 1st 2nd 3rd 4th ------------ ----- ----- ----- -----
High ........................ 5 5/8 6 1/4 7 7 Low ......................... 3 7/8 4 3/4 5 5/8 6 1/8
Item 6.
Item 6. SELECTED FINANCIAL DATA
See Notes to Consolidated Financial Statements.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OMI Corp. ("OMI" or the "Company"), is a highly diversified major bulk shipping company operating in both the U.S. flag and international markets. Its operating fleet currently totals 43 vessels, including nine joint venture vessels and five chartered-in tankers, aggregating approximately 3.7 million deadweight ("dwt."). One Suezmax tanker is currently under construction and scheduled to be delivered mid-1996 to a 49 percent owned joint venture. The Company also has significant investments in other marine related activities, including lightering of large crude carriers in the Gulf of Mexico and workboat supply services.
Results of operations of OMI include operating activities of the Company's domestic and foreign wholly-owned, leased and chartered-in vessels.
FISCAL YEARS 1994, 1993 AND 1992
Results of Operations
Net voyage revenues is defined as voyage revenue less vessel and voyage expenses. The Company's vessels operate on time charters, short-term time charters, bareboat charters, voyage (or "spot") charters, or in accordance with other contractual arrangements involving one of the four mentioned charters. Each type of charter or arrangement connotates a method by which revenue and expenses are recorded. Under a time charter, revenue is usually based on daily or monthly rates, the charterer assumes certain operating expenses, such as bunkers and port charges, and the length of the charter ranges from one to five years. Short-term time charters have similar characteristics as time charters but are usually less than one year. Bareboat charters are similar to time charters but the charterer assumes all operating expenses and the revenue rate may be lower due to the additional costs covered by the charterer. Under a voyage charter, revenues are based on amount of cargo carried, most expenses are for the owner's account and the length of the charter is generally short-term. Revenues may be higher in the spot market as the owner has to cover more costs. As a result of fluctuations in voyage revenues and expenses due to the nature of the charter, the discussion below addresses variations in net voyage revenues to show trends in profitability.
In 1991, the majority of OMI's fleet was operating under long-term time charter agreements which provided stable earnings. In 1992, many of the time charters terminated and net voyage revenues declined $41,611,000 or 39 percent in that year. As a result of weak worldwide economic conditions and lower demand for petroleum products, profitable time charters were no longer available, and spot rates were fluctuating. As revenues were reduced as a result of lower rates, costs increased, partially due to regulatory changes, new environmental laws and increased operating costs for vessels and crews. As a result of the Oil Pollution Act of 1990, OMI sustained a substantial increase in insurance costs in 1992, which leveled off in 1993. In 1993, net voyage revenues decreased $10,299,000 or 16 percent from 1992, and continued to decrease in 1994 by $11,841,000 or 21 percent due to market conditions. During the latter part of 1994, rates in the international tanker fleet began improving. Revenue for the domestic fleet, however, has declined from 1993 to 1994 based on changes in both government programs and business available for certain types of vessels. Domestic operations are expected to continue to be uncertain in 1995.
YEAR ENDED DECEMBER 31, 1994 VERSUS DECEMBER 31, 1993
Net Voyage Revenues
Net voyage revenues of $44,217,000 for the year ended December 31, 1994 decreased $11,841,000 or 21 percent as compared to the year ended December 31, 1993. The decrease was primarily attributable to the U.S. flag fleet, which accounted for a $14,364,000 decline in revenues. This decline was offset by $2,523,000 in net increases in the foreign fleet. The majority of the decrease in domestic revenues is attributable to three dry bulk carriers which have been operating under a U.S. government sponsored foreign aid program ("PL480") for the distribution of agricultural products. In 1993, there was a large volume of cargo available under this program, especially for shipment to the Commonwealth of Independent States. In fact, there was so much cargo moved under this program that in 1993 and the first few months of 1994, four U.S. flag tankers also participated in this program. As a result of reductions in subsidized cargoes, there was much less tonnage available under this program in 1994 with even less tonnage expected to be available in 1995.
Although the PL480 voyages were profitable in 1994, the rates earned declined due to increased competition for less cargo. As the program decreased in volume the four U.S. flag tankers moved into the vegetable oil trade at lower profit margins and two of the bulkers are currently transporting grain in the commercial market. The four U.S. flag tankers and two of the bulkers share four Operating-Differential Subsidy ("ODS") contracts, under which the Company is eligible to receive subsidy on commercial foreign cargoes. The subsidy covers part of the expenses incurred for personal and indemnity insurance, crew and maintenance and repairs.
Another reason for the decrease in domestic net revenues was that three vessels built in 1969 were sold in July 1994, resulting in 213 less operating days as compared to 1993.
The OMI Columbia, the largest of OMI's domestic vessels, has been operating in the spot market or laid up since its redelivery from a time charter in 1992. In 1993, the OMI Columbia was laid up for 288 days as there was no business for the vessel. There was some improvement in 1994, with net voyage revenues of $636,000 primarily from five spot charters, four consecutive voyages in the Alaskan North Slope trade and one in PL480 trade. During the past few years Alaskan crude oil production has decreased and distribution favors short hauls. Additionally, there is a law
restricting exports on Alaskan North Slope oil imposed by Congress. Alaska favors lifting the export ban specifically because sales of crude oil outside the U.S. would get higher prices. Legislation to retain the export ban and the restrictions on exports has been extended until June 30, 1995. Separate legislation has been introduced to Congress to eliminate restrictions on export of Alaskan North Slope oil.
Increases in foreign net voyage revenues were primarily the result of purchasing of two crude oil tankers in December 1993. These vessels were on bareboat charters with a steady inflow of revenues when they were purchased until the charters terminated in July and August 1994. At that time the two vessels entered the spot market as crude oil rates began to improve in the international markets. Additional increases in net voyage revenues were from three profitable time charters, one of which continued from 1993 with a higher rate in 1994, and the other two were for vessels previously in the spot market.
OMI periodically reviews the book value of its vessels and its ability to recover the remaining book value of the vessels using estimated undiscounted cash flows over the remaining life of each vessel. During its last review the Company determined that the carrying value of one of its chemical/product vessels, operating in coastal trade for liquid chemicals in a marketing pool with a joint venture, exceeded the forecasted estimated undiscounted future net cash flows from operations. An impairment loss of $14,798,000, measured by the excess of the vessel's carrying value over its estimated fair value, based on appraised values from two ship brokers, was recognized and reported as a separate component of operating expenses in the Consolidated Statement of Operations. Additionally, a similar loss was recognized as a separate component of operating expenses, for the forecasted loss from operations of an almost identical vessel chartered-in under an operating lease through 2006, operating in the same marketing pool. The recognized loss of $19,800,000 was based on estimated undiscounted cash flows, excluding from rent expense an amount representative of the interest component of the lease agreement, through the lease expiration date.
Other Income
Other income consists primarily of management fees, insurance premiums received from affiliates and/or other parties and dividend income on investments. During the year ended December 31, 1994, other income increased $740,000 or 16 percent, as compared to 1993. The increase in 1994 comprises dividend income received on a five percent owned investment in a company, insurance premiums collected from affiliates and increased fees from the U.S. government to manage vessels in the Ready Reserve Fleet.
Other Operating Expenses
The Company's operating expenses other than vessel and voyage expenses and provision for losses, consist of depreciation and amortization, operating lease expense and general and administrative expenses. For the year ended December 31, 1994, these expenses increased $4,287,000 or seven percent. Depreciation increased seven percent due to the shortening of lives of six domestic vessels and the purchase of four vessels, offset by the termination of depreciation for the three vessels sold in July 1994. General and administrative expenses increased 13 percent primarily due to costs associated with downsizing international operations and severance agreements.
Other Income (Expense)
Other income (expense) consists of gain on disposal of assets-net, provision for writedown of investments, interest expense, interest income, minority interest in subsidiary and other-net. The decrease in net other expense of $435,000 or two percent for the year ended December 31, 1994 over the same period in 1993 is due to the sale of the three domestic vessels in July 1994 for a net gain of $7,178,000, compared with gains from the sale of OMI Petrolink Corp. ("Petrolink") workboats and marketable securities in 1993. Interest expense increased in 1994 by $7,020,000 due primarily to the interest accrued at 10.25 percent on Senior Notes (the "Notes"), of which $160,650,000 were outstanding at December 31, 1994. Interest income increased $1,105,000 because of interest earned on invested proceeds of the Notes.
Benefit for Income Taxes
The benefit for income taxes of $22,305,000 for the year ended December 31, 1994 varied from statutory rates primarily because deferred taxes are not recorded for the equity in operations of joint ventures other than Amazon Transport, Inc. ("Amazon") and White Sea Holdings Ltd. ("White Sea"), as management considers such earnings to be permanently invested.
In August 1993, Congress passed the Omnibus Budget Reconciliation Act of 1993 (the "Act") which increased OMI's corporate tax rate of 34 percent to 35 percent. A retroactive provision of $3,044,000 for deferred income taxes was made in 1993 to comply with the provisions of the Act.
Equity in Operations of Joint Ventures
Equity in operations of joint ventures of $5,402,000 was $142,000 or three percent less in 1994 than in 1993. The decline in equity is primarily due to a vessel owned by Amazon which was operating under a time charter until July 1993, at which time it began operating in the spot market at lower rates with idle time between voyages. Additionally, Wilomi, Inc. ("Wilomi") and White Sea experienced declines in earnings pertaining to three vessels which operated in the spot market in both years. These declines were offset, in part, by the gain on the sale of a vessel owned by Mosaic Alliance Corporation and operating activity from a vessel delivered in January 1994 to Geraldton Navigation Inc. ("Geraldton"). During January 1995, Geraldton sold one of its vessels for a gain.
Balance Sheet
The increase in Marketable securities and the decrease in Long-term securities is due primarily to the reclassification of all Noble Drilling Corporation ("Noble") shares to current assets as all shares were sold in March 1995. Fair value of the 2,503,389 common shares in Marketable securities was $14,394,000 at December 31, 1994. The decrease in Long-term securities was offset in part by an increase due to the unrealized gain of $609,000 on 125,000 shares of SEACOR Holdings, Inc.
YEAR ENDED DECEMBER 31, 1993 VERSUS DECEMBER 31, 1992
Net Voyage Revenues
Net voyage revenues of $56,058,000, decreased $10,299,000 or 16 percent, for the year ended December 31, 1993 from the prior year. The decreases in domestic net voyage revenues of $11,609,000 were offset in part by increases in foreign operations of $1,310,000. The net decrease resulted primarily from increased idle time between voyages for five domestic vessels (aggregating 541 more offhire days in 1993 than in 1992) while continuing to incur port expenses and other daily expenses. The net decrease was also attributable to three domestic vessels operating in a profit sharing pool, four vessels operating on time charters that were offhire a total of 144 days for drydocking, loss of revenue for two vessels disposed of, and reduced revenue from Petrolink resulting from reduced volume of its lightering operations in 1993 and the sale of seven workboats.
Other Income
During the year ended December 31, 1993, other income decreased $986,000, or 17 percent, compared to 1992. The decrease in 1993 resulted primarily from a payment of $1,000,000 from Wilomi during the first quarter of 1992, which was paid in accordance with a contractual agreement relating to the construction contract of a vessel delivered, offset by increases in fees from the U.S. government for the management of vessels in the Ready Reserve Fleet.
Other Operating Expenses
For the year ended December 31, 1993, these expenses decreased a net $992,000 or two percent, as compared to the year ended December 31, 1992. The primary causes of the decrease in 1993 in general and administrative expenses were a change in health insurance coverage for employees, a decrease in other employee benefits and a reduction in legal fees.
Other Income (Expense)
For the year ended December 31, 1993, net other expense decreased $21,633,000, or 55 percent, as compared to 1992. The net decrease resulted primarily from the writedown of $13,094,000 on Chiles Offshore Corporation stock ("Chiles") during 1992. In addition, decreases during 1993 also resulted from the $2,190,000 gain from the sale of seven workboats of Petrolink, gain from the sale of Chiles stock of $4,086,000 and the decrease in interest expense resulting from both lower interest rates and a decrease in outstanding principal balance of debt during the year prior to issuing $170,000,000 in Senior Notes in November 1993, offset in part by losses on the sale of a 50 percent owned joint venture and a 25 percent equity investment aggregating approximately $1,554,000.
Equity in Operations of Joint Ventures
Equity in operations of joint ventures of $5,544,000 was $3,515,000 or 39 percent less in 1993 than in 1992. Joint venture equity was less in 1993 primarily due to a gain on sale of a vessel owned by Wilomi in April 1992, which increased OMI's equity by approximately $4,826,000. This decline, along with a decline in profits for the vessel owned by Amazon, resulting from the termination of its time charter in 1993 and lower profits being earned in the spot market, were offset by decreases in operating losses in 1993 compared to 1992 incurred by a partnership, Ecomarine USA and increased equity in operating results of White Sea, a joint venture formed during December 1992.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital of $23,161,000 at December 31, 1994 was $9,796,000 or 30 percent less than $32,957,000 at December 31, 1993. Cash and cash equivalents of $31,797,000 decreased $13,524,000 or 30 percent from the balance of $45,321,000 at December 31, 1993. For the year ended December 31, 1994, net cash provided by operating activities was $871,000 which was a decrease of $29,252,000 or 97 percent from net cash provided by operations of $30,123,000 for the year ended 1993.
During 1994, the source of the Company's liquidity was primarily from the proceeds of $23,703,000 received from the sale of the three domestic vessels in July 1994, the issuance of debt of $12,050,000, proceeds received from the sale of Chiles stock of $3,749,000, and a cash distribution of $2,450,000 from Amazon.
The primary uses of cash during 1994 were scheduled debt payments of $16,963,000 and prepayments of debt of $19,484,000. OMI repurchased $9,350,000 of the Notes for a gain of $753,000 during 1994, and repurchased an additional $4,100,000 for a gain of $431,000 in the first quarter of 1995. Other uses of cash were the purchase of a foreign flag vessel at a cost of $12,050,000, capital improvements on vessels of $3,268,000, capital contributions of $2,847,000 to joint ventures, and $1,033,000 in proceeds from sales of investments in and interest on the Capital Construction and other restricted funds that was reinvested in the fund.
On March 3, 1995, OMI sold all its shares of Noble stock for $12,360,000 and recognized a gain of $7,806,000.
The Company anticipates cash from operations in 1995 to improve liquidity and its financial position as it recovers from a depressed market. With its four unused lines of credit aggregating $65,000,000 at December 31, 1994, OMI is in the position to meet its current and future obligations, and to acquire and dispose of vessels as opportunity and need arises.
COMMITMENTS
OMI and a joint venture partner have committed to construct a vessel being built in the Peoples Republic of China for a cost of approximately $54,400,000. The vessel is scheduled to be delivered mid-1996. OMI guarantees 49 percent, through a joint venture subsidiary, of the shipbuilding contract as a backup guarantor to the joint venture partner. OMI acts as a co-guarantor for a portion of the debt incurred by joint ventures with affiliates of two of its joint venture partners. Such debt was approximately $110,697,000 at December 31, 1994, with OMI's share of such guarantees being approximately $54,547,000. OMI also is a guarantor for one of its joint venture's revolving line of credit of up to $4,000,000 at December 31, 1994, with a guarantee to OMI from its joint venture partner of 50 percent of the amount guaranteed by OMI.
The Company and its joint ventures partners have committed to fund any working capital deficiencies which may be incurred by their joint venture investments. At December 31, 1994, no such deficiencies have occurred which have required funding.
EFFECTS OF INFLATION
The Company does not consider inflation to be a significant risk to the cost of doing business in the current and foreseeable future. The Company has experienced some additions to the costs of operating the vessels due to price level increases, however, in some cases, the effect has been offset by charter escalation clauses.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See notes to consolidated financial statements.
See notes to consolidated financial statements.
See notes to consolidated financial statements.
See notes to consolidated financial statements.
See notes to consolidated financial statements.
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Three Years Ended December 31, 1994
(All tabular amounts are in thousands of dollars)
Note 1--Summary of Significant Accounting Policies
Principles of Consolidation--The consolidated financial statements include all domestic and foreign subsidiaries which are more than 50 percent owned by OMI Corp. ("OMI" or the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation.
Investments in joint ventures, in which the Company's interest is 50 percent or less and where it is deemed that the Company's ownership gives it significant influence over operating and financial policies, are accounted for by the equity method. Accordingly, net income includes OMI's share of the earnings of these companies.
Operating Revenues and Expenses--Voyage revenues and expenses are recognized on the percentage of completion method of accounting based on voyage costs incurred to date to estimated total voyage costs. Estimated losses on voyages are provided for in full at the time such losses become evident.
Special survey and drydock expenses are accrued and charged to operating expenses over the survey cycle, which is generally a two to three year period.
Accounting for Investments in Securities--The Company adopted Financial Accounting Standards Board Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115") as of December 31, 1993. In applying SFAS 115, investments in marketable securities have been classified by management as available-for-sale and are carried at fair value. Net unrealized gains or losses are reported as a separate component of stockholders' equity. Upon adoption of SFAS 115, the Company recorded a net unrealized gain of $9,709,000, net of deferred taxes of $5,228,000. Adjustments are made to net income for any impairment in value that is deemed to be other than temporary. Realized gains and losses on the sales of securities are recognized in net income on the specific identification basis.
Capital Construction and Other Restricted Funds--The Capital Construction Fund ("CCF") is restricted to provide for replacement vessels, additional vessels or reconstruction of vessels built in the United States. The other restricted funds are to be used to pay certain of the Company's debt. These funds can be used at the discretion of the Company upon receipt of written approval from the Maritime Administration.
Vessels and Other Property--Vessels and other property are recorded at cost. Depreciation for financial reporting purposes is provided principally on the straight-line method based on the estimated useful lives of the assets up to the assets' estimated salvage value. The useful lives of the vessels range from 20 to 30 years. Salvage value is based upon a vessel's light weight tonnage multiplied by a scrap rate.
The Company periodically reviews the book value of its vessels and its ability to recover the remaining book value of the vessels using estimated undiscounted cash flows over the remaining life of each vessel (see Note 11).
Leasehold improvements are amortized on the straight-line method over the terms of the leases or the estimated useful lives of the improvements as appropriate.
Goodwill--Goodwill, recognized in business combinations accounted for as purchases, of $17,868,000 before accumulated amortization of $3,260,000 and $2,559,000 at December 31, 1994 and 1993, respectively, is being amortized over 25 years.
Net Loss per Common Share--Net loss per common share is determined by dividing net loss by the weighted average number of common shares outstanding during the period. Shares issuable upon the exercise of stock options (see Note 8) have not been included in the computation because their effect would be anti-dilutive.
Income Taxes--OMI files a consolidated Federal income tax return which includes all its domestic subsidiary companies. Deferred income taxes are recorded under the provisions of SFAS 109, "Accounting for Income Taxes" (see Note 5).
Postemployment Benefits--In 1994, the Company adopted SFAS 112, "Employers' Accounting for Post-employment Benefits". Adoption of this statement did not have a material effect on the Company's financial position or results of operations.
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For the Three Years Ended December 31, 1994
(All tabular amounts are in thousands of dollars)
Cash Flows--Cash equivalents represent liquid investments which mature within 90 days. The carrying amount approximates fair value.
During the years ended December 31, 1994, 1993 and 1992, interest paid totaled approximately $29,447,000, $20,647,000 and $25,429,000, respectively. For the years ended December 31, 1993 and 1992, income taxes paid were approximately $6,413,000, and $7,628,000, respectively. There were no income taxes paid during 1994.
Reclassifications--Certain reclassifications have been made to the 1993 and 1992 financial statements to conform to the 1994 presentation.
Note 2--Investments in Joint Ventures
The operating results of the joint ventures have been included in the accompanying consolidated financial statements on the basis of ownership as follows:
Percent of Ownership ----------- Amazon Transport, Inc. ("Amazon") .......................... 49.0 Aurora Management Ltd. ("Aurora") .......................... 49.9(1) Aurora Tankers Ltd. ........................................ 49.9 Aurora Tankers Pte. Ltd. ................................... 49.9 Aurora Tankers (UK) Ltd. ................................... 49.9 Ecomarine USA .............................................. 49.0 Gainwell Investments Ltd. .................................. 25.0 Geraldton Navigation Company Inc. .......................... 49.9(2) Grandteam Ship Management Ltd. ............................. 50.0 Greeley Management Ltd. ("Greeley") ........................ 49.9(1) K/S Palawan Princess ....................................... 25.0(3) Mosaic Alliance Corporation ("Mosaic") ..................... 49.9 Mundogas Orinoco Ltd. ...................................... 50.0(4) Ocean Specialty Tankers Corp. ("OSTC") ..................... 50.0 Vanomi Management, Inc. .................................... 50.0 White Sea Holdings Ltd. ("White Sea") ...................... 49.0 Wilomi, Inc. ("Wilomi") .................................... 49.0 -------------------
(1) Joint ventures terminated July 1, 1993.
(2) During January 1995, Geraldton Navigation Company Inc. sold a vessel at a gain.
(3) The joint venture sold its primary asset in January 1994.
(4) OMI sold its investment in Mundogas Orinoco Ltd. on May 4, 1993 for $1,363,000.
OMI has entered into management service agreements with certain of its joint ventures, wherein the Company acts as technical and/or commercial manager for certain of the ventures' vessels. Management fees relating to services rendered to joint ventures aggregated $820,000, $699,000 and $567,000 for the years ended December 31, 1994, 1993 and 1992, respectively. During 1992, OMI received a $1,000,000 payment from Wilomi, which is included in other income.
In 1994, Mosaic owned 893,800 shares of OMI common stock acquired on the open market at an aggregate cost of $4,595,000 and also sold 600,000 of these shares. OMI's equity in these shares is accounted for as treasury stock (see Note 6).
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For the Three Years Ended December 31, 1994
(All tabular amounts are in thousands of dollars)
Summarized combined financial information pertaining to all affiliated companies accounted for by the equity method is as follows:
During 1994, 1993 and 1992, OMI chartered three vessels to OSTC for $26,689,000, $24,269,000, and $27,260,000, respectively. These amounts are included in revenues of OMI as the operations of OSTC are not consolidated.
During 1994, OMI wrote down its investment in Aurora Tankers Ltd. by $1,250,000 to recognize the estimated loss on exiting the joint venture. The Company has written off its investment in Ecomarine, $1,625,000 in 1993 and $1,982,000 in 1992, and has entered into an agreement to sell its interest in the partnership which is expected to conclude in the second quarter of 1995.
In 1994, the Company received distributions from Amazon of $2,450,000 and Greeley of $27,000. In 1993, dividends of $4,410,000 and $258,000 were received from Amazon and Aurora, respectively.
Certain of the loan agreements to which the Company's joint ventures are party contain restrictive covenants requiring minimum levels of cash or cash equivalents, working capital and net worth, maintenance of specified financial ratios and collateral values, and restrict the ability of the joint ventures to pay dividends to the Company. These loan agreements also contain various provisions restricting the right of the joint ventures to make certain investments, to place additional liens on their property, to incur additional long-term debt, to make certain payments (including in certain instances, dividends), to merge or to undergo a similar corporate reorganization, and to enter into transactions with affiliated companies.
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For the Three Years Ended December 31, 1994
(All tabular amounts are in thousands of dollars)
Note 3--Long-Term Debt and Credit Arrangements
Long-term debt consists of the following:
Aggregate maturities during the next five years are $18,900,000, $16,703,000, $15,930,000, $20,423,000 and $13,407,000.
In November 1993, the Company issued $170,000,000 in unsecured Senior Notes ("Notes") due November 1, 2003. The Notes are not redeemable prior to November 1, 1998; thereafter, the Notes are redeemable at the option of the Company at a premium until November 1, 2000 when the Notes will be redeemable at face value, plus accrued interest. During 1994, OMI repurchased $9,350,000 of the Notes for a gain of $753,000. Bonds of a domestic subsidiary of OMI in the amount of $20,013,000 at December 31, 1994 are collateralized by a mortgage on a vessel. Bonds of domestic subsidiaries aggregating $36,390,000, including the amounts due within one year, were collateralized by mortgages on specific vessels at December 31, 1993. Such bonds are guaranteed as to the principal and interest by the U.S. Government under the Title XI program. These security arrangements restrict the subsidiary from, among other things, the withdrawal of capital, the payment of common stock dividends and the extending of loans to affiliated parties.
At December 31, 1994, vessels with a net book value of $248,487,000, investments of $12,961,000 (included in Capital Construction and other restricted funds in the accompanying consolidated balance sheets) and shares of a subsidiary and a joint venture with an aggregate carrying value of $21,034,000 have been pledged as collateral on available lines of credit with banks and on long-term debt issues.
Certain of the loan agreements of the Company's subsidiaries contain restrictive covenants requiring minimum levels of cash or cash equivalents, working capital and net worth, maintenance of specified financial ratios and collateral values, and restrict the ability of the Company's subsidiaries to pay dividends to the Company. These loan agreements also contain various provisions restricting the right of OMI and/or its subsidiaries to make certain investments, to place additional liens on the property of certain of OMI's subsidiaries, to incur additional long-term debt, to make certain payments, to merge or to undergo a similar corporate reorganization, and to enter into transactions with affiliated companies. As dividend payments are limited to 50 percent of net income earned subsequent to issuance of the Notes, none of the retained earnings at December 31, 1994 were available for payment of dividends.
At December 31, 1994, OMI had available and unused a total of $65,000,000 in four lines of credit with banks at variable rates, based on LIBOR.
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For the Three Years Ended December 31, 1994
(All tabular amounts are in thousands of dollars)
OMI has entered into interest rate SWAP agreements to manage interest costs and the risk associated with changing interest rates. At December 31, 1994 and 1993, the Company had outstanding three and four, respectively, interest rate SWAP agreements with commercial banks. These agreements effectively change the Company's interest rate exposure on floating rate loans to fixed rates ranging from 7.83 percent to 9.02 percent. The differential to be paid or received on these interest rate SWAP agreements is recognized as an adjustment to interest expense over the lives of the agreements. The interest rate SWAP agreements have various maturity dates from December 1995 to February 1999. The changes in the notional principal amounts are as follows:
Interest expense pertaining to interest rate SWAPS for the years ended December 31, 1994, 1993 and 1992 was $2,100,000, $2,914,000 and $4,332,000, respectively.
The Company is exposed to credit loss in the event of non-performance by other parties to the interest rate SWAP agreements. However, OMI does not anticipate non-performance by the counter-parties.
Note 4--Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments at December 31 are as follows:
The fair value of long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The fair value of interest rate SWAPS (used for purposes other than trading) is the estimated amount the Company would receive or pay to terminate SWAP agreements at the reporting date, taking into account current interest rates and the current credit-worthiness of the SWAP counter-parties.
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For the Three Years Ended December 31, 1994
(All tabular amounts are in thousands of dollars)
Securities available-for-sale included in Marketable securities, Capital Construction and other restricted funds, and Long-term securities consist of the following components at December 31,
On September 15, 1994, Noble merged with Chiles which resulted in the receipt of 0.75 of Noble common stock for each share of Chiles common stock OMI owned. In 1992, OMI recognized a $13,094,000 loss provision as a charge against operations pertaining to the Chiles investment.
Excluded from the above schedule in 1993 are the 125,000 shares of SEACOR Holdings, Inc., with a carrying value of $1,875,000, which were restricted from sale until February 1995 and were not available-for-sale.
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For the Three Years Ended December 31, 1994
(All tabular amounts are in thousands of dollars)
Note 5--Income Taxes
A summary of the components of the benefit for income taxes is as follows:
The benefit for income taxes varies from the statutory rates due to the following:
The components of deferred income taxes relate to the tax effects of temporary differences as follows:
The Company has not provided deferred taxes on its equity in the undistributed earnings of foreign corporate joint ventures accounted for under the equity method other than those of Amazon and White Sea. These earnings are considered by management to be permanently invested in the business. If the earnings were not considered permanently invested, approximately $12,094,000 of additional deferred tax liabilities would have been provided at December 31, 1994.
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For the Three Years Ended December 31, 1994
(All tabular amounts are in thousands of dollars)
On August 2, 1993, Congress passed the Omnibus Budget Reconciliation Act of 1993, (the "Act"). The major component of the Act affecting OMI was the retroactive increase in the marginal corporate tax rate from 34 percent to 35 percent, increasing 1993 deferred income taxes by $3,044,000 to comply with the provisions of the Act.
Note 6--Treasury Stock
During 1994, OMI had 446,006 shares or $2,293,000 in treasury stock representing OMI's proportionate share of Mosaic's ownership in OMI common stock (see Note 2). Mosaic sold 600,000 shares of this stock during the year ended December 31, 1994. OMI's share of this gain, or $767,000, was recorded in capital surplus.
During 1992, OMI purchased 639,000 shares of the Company's common stock at an aggregate price of $2,658,000. In addition, 666,000 shares were repurchased from the ESOP and added to treasury and 1,291,000 shares were retired.
Note 7--Employee Stock Ownership Plan
In 1987, the Company established an Employee Stock Ownership Plan ("ESOP"). From November 1987 through February 1990, the ESOP trust purchased a total of 3,404,032 shares of OMI common stock for an aggregate purchase price of $17,558,000. Such purchases were funded through an initial contribution of $400,000 by the Company and $17,158,000 of bank debt, which was repaid with contributions from the Company. Unearned compensation--employee stock ownership trust in the accompanying consolidated balance sheets represents the cost of unallocated shares held by the ESOP trust. Shares are allocated annually to eligible participants based on a percentage of their annual salaries up to the extent allowable by the Internal Revenue Code.
Note 8--Stock Option and Restricted Stock Plans
The Incentive Stock Option Plan ("ISO") of 1984 provides for the granting of options to acquire up to 600,000 shares of the Company's common stock. Options under this Plan are exercisable at the rate of 33 1/3 percent a year, commencing one year from the date of grant and expiring ten years after the date of grant.
The Non-Qualified Stock Option Plan of 1986 provides for the granting of up to 500,000 shares at a price not less than fair market value at the date of grant. Options are exercisable at the rate of 20 percent per year, commencing one year from the date of grant, and expiring ten years after the date of grant. Stock Appreciation Rights ("SARs") have been granted in tandem with all options under this plan. Such rights offer recipients the alternative of electing to cancel the related stock option, and to receive instead an amount in cash, stock or a combination of cash and stock equal to the difference between the option price and the market price of the Company's stock on the date at which the SAR is exercised.
Proceeds received from the exercise of the options are credited to the capital accounts. Compensation expense is recorded for options based on the difference between market price on the day exercised and option prices. Compensation expense relating to SARs is recorded with respect to the rights based upon the quoted market value of the shares and exercise provisions. Charges (benefits) to net income relating to SARs and/or options in 1994, 1993 and 1992 were ($36,000), $96,000 and ($126,000), respectively.
On June 12, 1990, the Board of Directors of OMI adopted, with shareholders' approval, the 1990 Equity Incentive Plan (the "1990 Plan"). The total number of shares that may be optioned or issued as restricted stock under the 1990 Plan was 1,000,000 shares of OMI common stock with the maximum number of issuable restricted stock being 300,000 shares, of which OMI awarded 15,000 shares in 1994, 15,000 shares in 1991, and 254,000 shares in 1990 to eligible key employees under this Plan. On January 27, 1993 and December 18, 1990, OMI granted options to acquire 131,000 and 606,000 shares, respectively, that are not intended to qualify as incentive stock options which are exercisable at a rate of 33 1/3 percent per year commencing one year from the date of grant, and expiring ten years after the date of grant. Upon issuance of restricted common stock under the 1990 Plan, unearned compensation, equivalent to the
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For the Three Years Ended December 31, 1994
(All tabular amounts are in thousands of dollars)
market value at the date of grant, is charged to stockholders' equity and subsequently amortized over the life of the award.
A summary of the changes in shares under option for all plans is as follows:
Number of Options Option Price --------- ------------ Outstanding at January 1, 1992 ........ 917,679 $2.8125 to 9.875 Exercised ........................... (6,000) 5.125 Forfeited ........................... (4,267) 4.6875 ------- Outstanding at December 31, 1992 ...... 907,412 2.8125 to 9.875 Granted ............................. 131,000 4.50 Exercised ........................... (47,623) 2.8125 to 5.125 Forfeited ........................... (14,300) 5.125 to 9.875 ------- Outstanding at December 31, 1993 ...... 976,489 4.25 to 9.875 Granted ............................. 40,000 6.25 Exercised ........................... (66,834) 4.6875 to 5.125 Forfeited ........................... (34,400) 4.50 to 9.875 ------- Outstanding at December 31, 1994 ...... 915,255 $4.25 to 9.875 =======
Note 9--Retirement Benefits and Deferred Compensation
In June 1993, the Company terminated its non-contributory defined benefit Pension Plan (the "Plan"). This termination resulted in a loss of $1,017,000, which was recognized in 1993. All participants of the Plan were fully vested as of the termination date. In April 1994, OMI settled the accumulated benefit obligation through lump-sum payments of $2,950,000 to participants. The net periodic pension costs in 1993 and 1992 were $158,000 and $252,000 respectively.
The terminated Plan was replaced by a 401(k) Plan. The 401(k) Plan is available to full-time employees who meet the Plan's eligibility requirements. This Plan is a defined contribution Plan, which permits employees to make contributions up to two percent of their annual salaries. The Company matches 100 percent of the employee's contribution. Company contributions were $160,000 and $91,000 in 1994 and 1993, respectively.
In addition, certain domestic subsidiaries make contributions to union sponsored multi-employer pension plans covering seagoing personnel. Contributions to these plans amounted to approximately $1,020,000, $961,000 and $746,000 for 1994, 1993 and 1992, respectively. If these subsidiaries were to withdraw from the plans or the plans were to terminate, the subsidiaries would be liable for a portion of any unfunded plan benefits that might exist. The Company has been advised by the trustees of such plans that it has no withdrawal liability as of December 31, 1994.
In December 1991, the Board of Directors adopted the OMI Corp. Key Employees Deferred Compensation Plan which enables key employees of the Company and its subsidiaries to defer the receipt of a portion of their compensation, including salary, bonus and income derived from restricted stock and stock options, until termination of employment or for a certain period of years. The Company has included $303,000 and $134,000 in other accrued liabilities, at December 31, 1994 and 1993, respectively, to reflect its liability under this Plan.
Note 10--Operating Leases
Total rental expense, including contingent rentals, amounted to $49,247,000, $40,350,000 and $42,647,000 for the years ended December 31, 1994, 1993 and 1992, respectively. Leases are primarily for vessels and office space.
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For the Three Years Ended December 31, 1994
(All tabular amounts are in thousands of dollars)
The future minimum rental payments required, by year, under operating leases subsequent to December 31, 1994, are as follows:
1995 ........................................................ $ 18,629 1996 ........................................................ 11,879 1997 ........................................................ 12,531 1998 ........................................................ 12,037 1999 ........................................................ 8,619 Thereafter .................................................. 58,613 -------- Total .................................................... $122,308 ========
Time charters to third parties of the Company's owned and leased vessels are accounted for as operating leases. Minimum future revenues, by year, to be received subsequent to December 31, 1994 on these time charters are as follows:
1995 ......................................................... $61,193 1996 ......................................................... 23,847 1997 ......................................................... 8,037 ---- ------- Total ..................................................... $93,077(1) =======
------------------
(1) Minimum future revenues for later years are not included above due to the charterers' options to continue the lease at such dates.
Note 11--Impairment and Provision for Loss on Lease Obligation
As part of OMI's periodic review of the recoverability of its investment in its vessels, the Company determined that the carrying value of one of its chemical/product vessels engaged in U.S. domestic shipping operations exceeded the undiscounted forecasted future net cash flows from its operations. This indicated that an impairment loss for this vessel should be recognized. This loss was measured by the excess of the carrying value of the vessel over its estimated fair value which was based on values provided by two ship brokers. The carrying value of the vessel was reduced by $14,798,000, the amount of the impairment loss which is reported as a separate item in the 1994 consolidated statement of operations.
As part of this periodic review, the Company also determined that a similar loss should be recognized for the forecasted loss from operations of an almost identical vessel similarly engaged in U.S. domestic shipping operations which is chartered in on an operating lease through 2006. The amount of the loss has been estimated based on forecasted undiscounted cash flows, excluding from rent expense an amount representative of the interest component of the lease agreement, through the lease expiration date. This loss, estimated as $19,800,000, was also reported as a separate item in the 1994 consolidated statement of operations.
Note 12--Disposal of Assets
In July 1994, OMI sold three vessels for $23,750,000 and realized a gain of $7,178,000.
In 1992, the Company entered into a sale/leaseback transaction on a vessel. The Company received $11,500,000 in cash, of which $3,500,000 was used to pay the mortgage on the vessel, a $2,000,000 secured note receivable paid December 1994, and a six-year lease at the current market rate. The gain of approximately $2,001,000 is being amortized over the term of the lease.
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For the Three Years Ended December 31, 1994
(All tabular amounts are in thousands of dollars)
The Gain (loss) on disposal of assets--net for the years ended December 31, consists of the following:
1994 1993 1992 -------- -------- -------- Amortization of gain on sale/leaseback ..... $ 334 $ 334 $ 52 Gain on sale of vessels .................... 7,178 1,802 (1,322) Net loss on disposal of other assets ....... (26) (318) (72) Net (loss) gain on sale of CCF investments . (78) 77 196 Loss on sale of joint venture interests .... (1,554) Gain on sale of marketable securities ...... 2,814 4,060 -------- -------- -------- Total ................................... $ 10,222 $ 4,401 $ (1,146) ======== ======== ========
Note 13--Financial Information Relating to Domestic and Foreign Operations
Presented below is certain information relating to OMI's operations:
Years ended December 31, -------------------------------- 1994 1993 1992 -------- -------- -------- Revenues: Domestic ............................. $173,378 $199,118 $196,804 Foreign .............................. 93,418 71,361 68,725 -------- -------- -------- Total ............................. $266,796 $270,479 $265,529 ======== ======== ======== Operating income (loss): Domestic ............................. $(63,093) $(12,276) $ (2,419) Foreign .............................. 15,009 14,178 14,614 -------- -------- -------- Total ............................. $(48,084) $ 1,902 $ 12,195 Identifiable assets: Domestic ............................. $228,162 $299,860 $271,172 Foreign .............................. 376,970 371,656 373,271 -------- -------- -------- Total ............................. $605,132 $671,516 $644,443 ======== ======== ======== Capital expenditures: Domestic ............................. $ 2,589 $ 15,199 $ 5,920 Foreign .............................. 12,729 21,349 16,704 -------- -------- -------- Total ............................. $ 15,318 $ 36,548 $ 22,624 ======== ======== ======== Depreciation and amortization: Domestic ............................. $ 19,953 $ 20,258 $ 21,170 Foreign .............................. 17,817 15,183 14,313 -------- -------- -------- Total ............................. $ 37,770 $ 35,441 $ 35,483 ======== ======== ========
The operating loss pertaining to domestic operations for the year ended December 31, 1994 includes the adjustments for impairment and provision for loss on lease obligation (see Note 11).
Investments in and net receivables from foreign subsidiaries amounting to $292,286,000, $395,988,000 and $274,109,000 at December 31, 1994, 1993 and 1992, respectively, have been excluded from domestic assets as they have been eliminated in consolidation.
OMI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For the Three Years Ended December 31, 1994
(All tabular amounts are in thousands of dollars)
Voyage revenues include revenue from major customers as follows:
Years ended December 31, ----------------------------- 1994 1993 1992 ------- ------- ------- Federal Government Program, PL480 $40,573 $75,017 $28,273 Military Sealift Command 2,188 192 23,942 ------- ------- ------- Total $42,761 $75,209 $52,215 ======= ======= =======
Note 14--Commitments and Contingencies
OMI and certain subsidiaries are defendants in various actions arising from shipping operations. Such actions are covered by insurance or, in the opinion of management, after review with counsel, are of such nature that the ultimate liability, if any, would not have a material adverse effect on the consolidated financial statements.
In September 1988, the Board of Directors adopted a Separation Allowance Program providing for severance benefits to all non-union employees other than non-resident aliens, leased employees, directors who are not employees of the Company or employees with individual severance plans in the event there is a change of control in OMI and such employees are thereafter terminated without cause or transferred or their position is significantly changed. Severance benefits include a lump-sum payment equal to the employee's average monthly wages immediately prior to the date of termination times the lesser of 24 or one for each year of full-time employment by the Company (but not less than six).
The Company has employment agreements with four key officers. Each of the employment agreements provide that if the employee is terminated without cause, voluntarily terminates his employment within 90 days of a relocation or reduction in compensation or responsibilities, dies or is disabled, such employee will continue to receive base salary and other benefits until December 31, 1995 or twelve months from the date of termination, whichever is later. In addition, if any such employee is terminated without cause (other than for reasons of disability) within two years of a Change of Control (as defined in the Company's Separation Allowance Program), the Company will pay such employee an amount equal to three times the sum of his then current base salary and the incentive bonus paid during the previous twelve months. The aggregate commitment for future salaries, excluding bonuses, under these employment agreements is approximately $977,000 at December 31, 1994. The maximum contingent liability for salary and incentive compensation in the event of a change in control is approximately $2,623,000 at December 31, 1994. The Company has recently entered into employment agreements with additional employees.
OMI and a joint venture partner have contracted to construct a vessel which is being built in the Peoples Republic of China for a cost of approximately $54,400,000. The vessel is scheduled to be delivered in the second quarter of 1996.
OMI acts as a guarantor for a portion of the debt incurred by joint ventures with affiliates of two of its joint venture partners. Such debt was approximately $110,697,000 at December 31, 1994 with OMI's share of such guarantees being approximately $54,547,000. OMI also is a guarantor for one of its joint venture's revolving line of credit of $4,000,000, with a guarantee to OMI from its joint venture partner of $2,000,000.
The Company and its joint venture partners have committed to fund any working capital deficiencies which may be incurred by their joint venture investments. At December 31, 1994, no such deficiencies have been funded.
Note 15--Subsequent Event
On March 3, 1995, the Company sold all of its shares of Noble for $12,360,000 recognizing a gain of $7,806,000.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of OMI Corp.:
We have audited the accompanying consolidated balance sheets of OMI Corp. and its subsidiaries as of December 31, 1994 and 1993 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. Our audits also included the financial statement schedules listed in Item 14. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules 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, such consolidated financial statements present fairly, in all material respects, the financial position of the companies at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
New York, New York February 22, 1995 (March 3, 1995 as to Note 15)
Item 8. Supplementary Data
See notes to condensed financial statements.
See notes to condensed financial statements.
See notes to condensed financial statements.
SCHEDULE I
OMI CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS For The Three Years Ended December 31, 1994
1. The condensed financial statements present the separate financial data (parent only) of OMI Corp. ("OMI" or the "Company"). All domestic and foreign subsidiaries which are more than 20% owned and investments in joint ventures are accounted for by the equity method.
See Notes to Consolidated Financial Statements on pages 20 through 31 of OMI's 1994 Annual Report on Form 10-K.
Certain reclassifications have been made to the 1993 and 1992 financial statements to conform to the 1994 presentation.
2. Cash Flows--Cash equivalents represent liquid investments which mature within 90 days. The carrying amount approximates fair value.
During the years ended December 31, 1994, 1993, and 1992, interest paid totaled approximately $19,430,000, 2,305,000 and $2,334,000, respectively. For the years ended December 31, 1993 and 1992, income taxes paid were approximately $6,413,000, and $7,628,000, respectively. There were no income taxes paid during 1994.
3. Long-Term Debt--Long-term debt as of December 31, 1994 and 1993 consists of the following:
1994 1993 -------- -------- (dollars in thousands) 10.25% unsecured Senior Notes due 11/01/03 ............... $160,650 $170,000 Mortgage note at a variable rate above the London Interbank Offering Rate ("LIBOR") in varying installments to 1998(1) ................................ 6,000 7,000 Unsecured notes payable to an affiliate at 5.0% to 1996 .. 7,624 8,881 -------- -------- Total ............................................... 174,274 185,881 Less current portion of long-term debt ................... 6,027 2,350 -------- -------- Long-term debt............................................ $168,247 $183,531 ======== ========
------------- (1) Rate at December 31, 1994 was 6.6875 percent.
In November 1993, the Company issued $170,000,000 in unsecured Senior Notes ("Notes") due November 1, 2003. The Notes are not redeemable prior to November 1, 1998; thereafter, the Notes are redeemable at the option of the Company at a premium until November 1, 2000 when the Notes will be redeemable at face value, plus accrued interest. During 1994, OMI repurchased $9,350,000 of the Notes for a gain of $753,000.
4. Lines of Credit--At December 31, 1994, the Company had available and unused $25,000,000 in two lines of credit with banks at variable rates, based on LIBOR.
WILOMI, INC. AND SUBSIDIARIES
Page ---- CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 1994 and 1993 ............. 39
Statements of Consolidated Income and Retained Earnings for the years ended December 31, 1994, 1993 and 1992 .............................. 40
Statements of Consolidated Cash Flows for the years ended December 31, 1994, 1993 and 1992 .................................... 41
Notes to Consolidated Financial Statements ............................ 42-43
INDEPENDENT AUDITORS' REPORT ............................................ 44
See notes to consolidated financial statements.
See notes to consolidated financial statements.
See notes to consolidated financial statements.
WILOMI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Three Years Ended December 31, 1994
1. Company
Wilomi, Inc. and subsidiaries (the "Company" or "Wilomi") are jointly-owned by Loire Transport, Inc., a wholly-owned subsidiary of OMI Corp. ("OMI"), and K/S Wilhelmsen Transport and Trading A/S ("Wilhelmsen") with interests of 49 and 51 percent, respectively. The joint venture, incorporated on May 15, 1987, owns and operates commercial vessels.
2. Summary of Significant Accounting Policies
Basis of Presentation--The consolidated financial statements include all subsidiaries of the Company. All significant intercompany accounts and transactions have been eliminated in consolidation.
Operating Revenues and Expenses--Voyage revenues and expenses are recognized on the percentage of completion method of accounting based on voyage costs incurred to date to estimated total voyage costs. Estimated losses on voyages are provided in full at the time such losses become evident.
Special survey and drydock expenses are accrued and charged to operating expenses over the survey cycle, which is generally a three year period.
Vessels and Vessel Under Construction--Vessels are recorded at cost; including interest on funds borrowed to finance the construction of new vessels.
Depreciation is provided on the straight-line method based on the vessel's estimated useful life of 25 years, up to the vessel's estimated salvage value. Salvage value is based upon the vessel's light weight tonnage, multiplied by a scrap rate.
The Company periodically reviews the book value of its vessels and its ability to recover the remaining book value of the vessels using estimated undiscounted cash flow over the remaining life of each vessel.
Federal Income Taxes--No provision has been made for Federal income taxes. The income of the Company is not generally subject to tax as a result of various provisions of the Internal Revenue Code. Additionally, the country in which the Company is incorporated exempts shipping and maritime operations from taxation.
Cash Flows--Cash equivalents represent liquid investments which mature within 90 days. The carrying amount approximates fair value.
During the years ended December 31, 1994, 1993 and 1992, the Company paid interest of $5,019,256, $4,605,435 and $4,097,261, respectively.
3. Vessels and Vessels Under Construction
In November 1993, the Company entered into an agreement to construct a new vessel at an approximate cost of $54,400,000. As of December 31, 1994, construction costs were $2,719,000. The vessel is expected to be delivered in 1996.
During 1992, the Company took delivery of three vessels which had been under construction in 1991. One vessel, with a cost of $37,681,683, was sold in April, 1992 at a gain of $9,848,317.
4. Related Party Transactions
OMI acted as technical and commercial manager for two vessels owned during 1994 and 1993 and three vessels owned during 1992. Management fees to OMI relating to years ended December 31, 1994, 1993 and 1992 were $288,000, $288,000 and $255,827, respectively.
WILOMI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For the Three Years Ended December 31, 1994
Wilhelmsen acted as manager for one vessel owned during 1994 and 1993. Management fees to Wilhelmsen in each of the years ended December 31, 1994 and 1993 were $144,000.
The Company declared dividends of $5,102,041 and $1,000,000 in 1992. In 1992, the Company forgave a $2,602,041 note due from Wilhelmsen in lieu of payment of a portion of the dividends.
Notes due from affiliates are as follows:
1994 1993 ----------- ----------- Wilhelmsen ......................... $ 8,907,150 $10,284,150 OMI ................................ 7,623,850 8,880,850 ----------- ----------- 16,531,000 19,165,000 Less: current portion .............. 10,535,400 2,755,102 ----------- ----------- Notes due from affiliates .......... $ 5,995,600 $16,409,898 =========== =========== Interest rate ...................... 5% 6.5%
Included in interest income are the following amounts attributable to these notes: $906,000, $1,263,000 and $836,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
5. Long-Term Debt
Long-term debt at December 31, 1994 and 1993 consists of the following:
1994 1993 ----------- ----------- Mortgage notes on vessels at variable rates above LIBOR, payable semi-annually to 2002* ... $90,283,000 $96,347,000 Less current portion of long-term debt ............................. 6,446,000 6,064,000 ----------- ----------- Long-term debt ..................... $83,837,000 $90,283,000 =========== ===========
-------------- * Rates at December 31, 1994 ranged from 5.9375 percent to 6.9375 percent.
Aggregate maturities during the next five years are $6,446,000, $6,654,000, $6,879,000, $7,122,000 and $7,385,000.
At December 31, 1994, the Company had available $10,000,000 in a short-term line of credit with a bank at a variable rate based on LIBOR.
The fair value of long-term debt at December 31, 1994 and 1993 approximates its carrying value.
6. Commitments and Contingencies
The Company acts as a guarantor on debt incurred by an affiliated company. Such debt was $3,000,000 at December 31, 1994.
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Wilomi, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Wilomi, Inc. and subsidiaries as of December 31, 1994 and 1993 and the related statements of consolidated income and retained earnings and of cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Companies' 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, such financial statements present fairly, in all material respects, the financial position of the Companies at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York February 22, 1995
AMAZON TRANSPORT, INC.
Page ---- FINANCIAL STATEMENTS:
Balance Sheets at December 31, 1994 and 1993 ......................... 46
Statements of Operations and Retained Earnings (Deficit) for the years ended December 31, 1994, 1993 and 1992 .............................. 47
Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992 ....................................................... 48
Notes to Financial Statements ........................................ 49
INDEPENDENT AUDITORS' REPORT .......................................... 50
See notes to financial statements.
See notes to financial statements.
See notes to financial statements.
AMAZON TRANSPORT, INC.
NOTES TO FINANCIAL STATEMENTS For the Three Years Ended December 31, 1994
1. COMPANY
Amazon Transport, Inc. (the "Company" or "Amazon") is jointly owned by a subsidiary of Universal Bulk Carriers, Inc. ("UBC"), a wholly-owned subsidiary of OMI Corp. ("OMI"), and Bergesen d.y. A/S ("Bergesen") with interests of 49 and 51 percent, respectively. The Company began operating as a joint venture on December 3, 1988 for the purpose of owning and chartering commercial vessels. The Company owned and operated one vessel, the Settebello, for all periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operating Revenues and Expenses--Voyage revenues and expenses are recognized on the percentage of completion method of accounting based on voyage costs incurred to date to estimated voyage costs. Estimated losses are provided in full at the time such losses become evident.
Special survey and drydock expenses are accrued and charged to operating expenses over the survey cycle, which is generally a three year period.
Vessel--The vessel is recorded at cost. Depreciation is provided on the straight-line method based on the estimated 25 year useful life of the vessel up to the estimated salvage value. Salvage value is based upon the vessel's light weight tonnage multiplied by a scrap rate.
The Company periodically reviews the book value of its vessel and its ability to recover the remaining book value of the vessel using estimated undiscounted cash flows over the remaining life of the vessel.
Federal Income Taxes--No provision has been made for Federal income taxes. The income of the Company is not generally subject to tax as a result of various provisions of the Internal Revenue Code. Additionally, the country in which the Company is incorporated exempts shipping and maritime operations from taxation.
Cash Flows--Cash equivalents represent liquid investments which mature within 90 days. The carrying amount approximates fair value. The Company paid no interest in 1994, 1993 and 1992.
3. RELATED PARTY TRANSACTIONS
The Company has entered into management service agreements with OMI and Bergesen, who act as technical and commercial managers of the Settebello. The Company paid OMI and Bergesen management fees of $200,000 for each of the years ended December 31, 1994, 1993, and 1992.
The following table summarizes balances due to affiliated companies at December 31:
1994 1993 ------- ------- Payable to affiliates: OMI .............................. $16,980 $14,646 UBC .............................. 61 ------- ------- $16,980 $14,707 ======= =======
On December 31, 1992, the Company forgave a $4,590,000 note due from Bergesen and $199,443 of related interest in lieu of payment of a portion of the 1992 dividend.
4. DIVIDENDS
During 1994, the Company declared and paid a $5,000,000 dividend.
During 1993, the Company declared and paid a $9,000,000 dividend and also paid $4,655,000 of dividends which had been declared in 1992.
During 1992, the Company declared dividends of $9,500,000 of which $55,557 was paid.
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Amazon Transport, Inc.:
We have audited the accompanying balance sheets of Amazon Transport, Inc. as of December 31, 1994 and 1993 and the related statements of operations and retained earnings (deficit) and of cash flows for each of the three years in the period ended December 31, 1994. 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 accompanying financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York February 22, 1995
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF OMI
Pursuant to General Instruction G(3) the information regarding directors called for by this item is hereby incorporated by reference from OMI's 1994 Proxy Statement to be filed with the Securities and Exchange Commission. Certain information relating to Executive Officers of the Company appears at the end of Part I of this Form 10-K Annual Report.
Item 11.
Item 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) the information called for by this item is hereby incorporated by reference from OMI's 1994 Proxy Statement to be filed with the Securities and Exchange Commission.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G(3) the information called for by this item is hereby incorporated by reference from OMI's 1994 Proxy Statement to be filed with the Securities and Exchange Commission.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) the information called for by this item is hereby incorporated by reference from OMI's 1994 Proxy Statement to be filed with the Securities and Exchange Commission.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
1. Financial Statements:
OMI Corp. and Subsidiaries Consolidated Statements of Operations for the three years ended December 31, 1994.
OMI Corp. and Subsidiaries Consolidated Balance Sheets at December 31, 1994 and 1993.
OMI Corp. and Subsidiaries Consolidated Statements of Cash Flows for the three years ended December 31, 1994.
OMI Corp. and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity for the three years ended December 31, 1994.
OMI Corp. and Subsidiaries Notes to Consolidated Financial Statements for the three years ended December 31, 1994.
OMI Corp. and Subsidiaries Quarterly Results of Operations for 1994 and 1993.
2. Financial Statement Schedules:
I--OMI Corp. (Parent only) Condensed financial information as to financial position as of December 31, 1994 and 1993, and cash flows and results of operations for the years ended December 31, 1994, 1993 and 1992.
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.
OMI CORP.
By /s/ JACK GOLDSTEIN --------------------------------------- Jack Goldstein, Chief Executive officer and director
Pursuant to the requirements of the Securities Act of 1933, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.