0000075208 false Accelerated Filer true 2020 Q2 --12-31 4236 0000075208 2020-01-01 2020-06-30 0000075208 2020-08-04 0000075208 2020-06-30 0000075208 2019-12-31 0000075208 2020-04-01 2020-06-30 0000075208 2019-04-01 2019-06-30 0000075208 2019-01-01 2019-06-30 0000075208 2018-12-31 0000075208 2019-06-30 0000075208 us-gaap:CommonStockMember 2018-12-31 0000075208 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0000075208 us-gaap:RetainedEarningsMember 2018-12-31 0000075208 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000075208 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0000075208 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0000075208 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0000075208 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0000075208 2019-01-01 2019-03-31 0000075208 us-gaap:CommonStockMember 2019-03-31 0000075208 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0000075208 us-gaap:RetainedEarningsMember 2019-03-31 0000075208 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0000075208 2019-03-31 0000075208 us-gaap:CommonStockMember 2019-04-01 2019-06-30 0000075208 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0000075208 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0000075208 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01 2019-06-30 0000075208 us-gaap:CommonStockMember 2019-06-30 0000075208 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0000075208 us-gaap:RetainedEarningsMember 2019-06-30 0000075208 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0000075208 us-gaap:CommonStockMember 2019-12-31 0000075208 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0000075208 us-gaap:RetainedEarningsMember 2019-12-31 0000075208 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0000075208 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0000075208 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0000075208 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0000075208 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0000075208 2020-01-01 2020-03-31 0000075208 us-gaap:CommonStockMember 2020-03-31 0000075208 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0000075208 us-gaap:RetainedEarningsMember 2020-03-31 0000075208 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0000075208 2020-03-31 0000075208 us-gaap:CommonStockMember 2020-04-01 2020-06-30 0000075208 us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30 0000075208 us-gaap:RetainedEarningsMember 2020-04-01 2020-06-30 0000075208 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-04-01 2020-06-30 0000075208 us-gaap:CommonStockMember 2020-06-30 0000075208 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0000075208 us-gaap:RetainedEarningsMember 2020-06-30 0000075208 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0000075208 OSG:TimeAndBareboatCharterRevenuesMember 2020-04-01 2020-06-30 0000075208 OSG:TimeAndBareboatCharterRevenuesMember 2019-04-01 2019-06-30 0000075208 OSG:TimeAndBareboatCharterRevenuesMember 2020-01-01 2020-06-30 0000075208 OSG:TimeAndBareboatCharterRevenuesMember 2019-01-01 2019-06-30 0000075208 OSG:VoyageCharterRevenuesMember 2020-04-01 2020-06-30 0000075208 OSG:VoyageCharterRevenuesMember 2019-04-01 2019-06-30 0000075208 OSG:VoyageCharterRevenuesMember 2020-01-01 2020-06-30 0000075208 OSG:VoyageCharterRevenuesMember 2019-01-01 2019-06-30 0000075208 OSG:ContractsOfAffreightmentRevenuesMember 2020-04-01 2020-06-30 0000075208 OSG:ContractsOfAffreightmentRevenuesMember 2019-04-01 2019-06-30 0000075208 OSG:ContractsOfAffreightmentRevenuesMember 2020-01-01 2020-06-30 0000075208 OSG:ContractsOfAffreightmentRevenuesMember 2019-01-01 2019-06-30 0000075208 OSG:ShortTermTimeCharterContractsMember 2020-04-01 2020-06-30 0000075208 OSG:ShortTermTimeCharterContractsMember 2019-04-01 2019-06-30 0000075208 OSG:ShortTermTimeCharterContractsMember 2020-01-01 2020-06-30 0000075208 OSG:ShortTermTimeCharterContractsMember 2019-01-01 2019-06-30 0000075208 OSG:TwoThousandAndTwentyMember 2020-06-30 0000075208 OSG:TwoThousandAndTwentyOneMember 2020-06-30 0000075208 OSG:ClassAWarrantsMember 2020-06-30 0000075208 OSG:ClassARestrictedStockUnitsMember 2020-01-01 2020-06-30 0000075208 OSG:ClassAStockOptionsOutstandingMember 2020-01-01 2020-06-30 0000075208 OSG:ClassARestrictedStockUnitsMember 2019-01-01 2019-06-30 0000075208 OSG:ClassAStockOptionsOutstandingMember 2019-01-01 2019-06-30 0000075208 OSG:StockOptionsMember 2020-01-01 2020-06-30 0000075208 us-gaap:RestrictedStockMember 2019-01-01 2019-06-30 0000075208 us-gaap:FairValueInputsLevel1Member 2020-06-30 0000075208 us-gaap:FairValueInputsLevel2Member 2020-06-30 0000075208 OSG:TermLoanAgreementDueTwoThousandTwentyThreeMember 2020-06-30 0000075208 OSG:TermLoanAgreementDueTwoThousandTwentyThreeMember us-gaap:FairValueInputsLevel1Member 2020-06-30 0000075208 OSG:TermLoanAgreementDueTwoThousandTwentyThreeMember us-gaap:FairValueInputsLevel2Member 2020-06-30 0000075208 OSG:TermLoanAgreementsDueTwoThousandTwentyFourMember 2020-06-30 0000075208 OSG:TermLoanAgreementsDueTwoThousandTwentyFourMember us-gaap:FairValueInputsLevel1Member 2020-06-30 0000075208 OSG:TermLoanAgreementsDueTwoThousandTwentyFourMember us-gaap:FairValueInputsLevel2Member 2020-06-30 0000075208 OSG:AlaskaTankersTermLoanAgreementDueTwoThousandTwentyFiveMember 2020-06-30 0000075208 OSG:AlaskaTankersTermLoanAgreementDueTwoThousandTwentyFiveMember us-gaap:FairValueInputsLevel1Member 2020-06-30 0000075208 OSG:AlaskaTankersTermLoanAgreementDueTwoThousandTwentyFiveMember us-gaap:FairValueInputsLevel2Member 2020-06-30 0000075208 OSG:OSGTwoZeroFourLLCTermLoanAgreementDueTwoThousandTwentyFiveMember 2020-06-30 0000075208 OSG:OSGTwoZeroFourLLCTermLoanAgreementDueTwoThousandTwentyFiveMember us-gaap:FairValueInputsLevel1Member 2020-06-30 0000075208 OSG:OSGTwoZeroFourLLCTermLoanAgreementDueTwoThousandTwentyFiveMember us-gaap:FairValueInputsLevel2Member 2020-06-30 0000075208 OSG:TermLoanAgreementDueTwoThousandTwentySixMember 2020-06-30 0000075208 OSG:TermLoanAgreementDueTwoThousandTwentySixMember us-gaap:FairValueInputsLevel1Member 2020-06-30 0000075208 OSG:TermLoanAgreementDueTwoThousandTwentySixMember us-gaap:FairValueInputsLevel2Member 2020-06-30 0000075208 OSG:UnsecuredSeniorNotesMember 2020-06-30 0000075208 OSG:UnsecuredSeniorNotesMember us-gaap:FairValueInputsLevel1Member 2020-06-30 0000075208 OSG:UnsecuredSeniorNotesMember us-gaap:FairValueInputsLevel2Member 2020-06-30 0000075208 us-gaap:FairValueInputsLevel1Member 2019-12-31 0000075208 us-gaap:FairValueInputsLevel2Member 2019-12-31 0000075208 OSG:TermLoanAgreementDueTwoThousandTwentyThreeMember 2019-12-31 0000075208 OSG:TermLoanAgreementDueTwoThousandTwentyThreeMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0000075208 OSG:TermLoanAgreementDueTwoThousandTwentyThreeMember us-gaap:FairValueInputsLevel2Member 2019-12-31 0000075208 OSG:TermLoanAgreementsDueTwoThousandTwentyFourMember 2019-12-31 0000075208 OSG:TermLoanAgreementsDueTwoThousandTwentyFourMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0000075208 OSG:TermLoanAgreementsDueTwoThousandTwentyFourMember us-gaap:FairValueInputsLevel2Member 2019-12-31 0000075208 OSG:TermLoanAgreementDueTwoThousandTwentySixMember 2019-12-31 0000075208 OSG:TermLoanAgreementDueTwoThousandTwentySixMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0000075208 OSG:TermLoanAgreementDueTwoThousandTwentySixMember us-gaap:FairValueInputsLevel2Member 2019-12-31 0000075208 OSG:UnsecuredSeniorNotesMember 2019-12-31 0000075208 OSG:UnsecuredSeniorNotesMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0000075208 OSG:UnsecuredSeniorNotesMember us-gaap:FairValueInputsLevel2Member 2019-12-31 0000075208 OSG:TermLoanAgreementsDueTwoThousandTwentyFourMember 2020-07-29 2020-07-30 0000075208 OSG:AlaskaTankerCompanyLLCMember 2019-12-31 0000075208 OSG:AlaskaTankerCompanyLLCMember 2019-01-01 2019-12-31 0000075208 2019-01-01 2019-12-31 0000075208 us-gaap:CommonClassAMember 2020-01-01 2020-06-30 0000075208 us-gaap:CommonClassAMember 2020-06-30 0000075208 OSG:ClassAWarrantsMember 2020-01-01 2020-06-30 0000075208 us-gaap:CommonClassAMember 2019-01-01 2019-06-30 0000075208 OSG:ClassAWarrantsMember 2019-01-01 2019-06-30 0000075208 OSG:NonEmployeeDirectorsMember us-gaap:RestrictedStockUnitsRSUMember 2020-05-27 2020-05-28 0000075208 OSG:EmployeesIncludingSeniorOfficersMember us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-06-30 0000075208 OSG:CertainSeniorOfficersMember us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-06-30 0000075208 us-gaap:RestrictedStockUnitsRSUMember OSG:SubjectToIncreaseMember 2020-01-01 2020-06-30 0000075208 us-gaap:RestrictedStockUnitsRSUMember OSG:DecreaseDependingOnApplicableMeasureandTargetsMember 2020-01-01 2020-06-30 0000075208 us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-06-30 0000075208 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-03-31 0000075208 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-04-01 2020-06-30 0000075208 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-06-30 0000075208 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-03-31 0000075208 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-04-01 2019-06-30 0000075208 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-06-30 0000075208 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-12-31 0000075208 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-01-01 2020-06-30 0000075208 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-31 0000075208 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-01-01 2019-06-30 0000075208 OSG:TimeCharterRevenueMember 2020-04-01 2020-06-30 0000075208 OSG:TimeCharterRevenueMember 2020-01-01 2020-06-30 0000075208 OSG:TimeCharterRevenueMember 2019-04-01 2019-06-30 0000075208 OSG:TimeCharterRevenueMember 2019-01-01 2019-06-30 0000075208 2020-05-01 2020-05-31 0000075208 OSG:AlaskaTankerCompanyLLCMember 2020-03-10 2020-03-12 0000075208 OSG:AlaskaTankersTermLoanAgreementDueTwoThousandTwentyFiveMember 2020-07-29 2020-07-30 0000075208 us-gaap:SubsequentEventMember 2020-07-29 2020-07-30 0000075208 2020-03-26 0000075208 2020-03-24 2020-03-26 0000075208 us-gaap:LondonInterbankOfferedRateLIBORMember 2020-03-26 0000075208 OSG:OSGTwoHundredAndFourLLCMember 2020-03-25 2020-03-26 0000075208 OSG:OSGTwoHundredAndFourLLCMember 2020-03-26 0000075208 OSG:BancOfAmericaLeasingAndCapitalLLCMember 2020-03-12 0000075208 OSG:BancOfAmericaLeasingAndCapitalLLCMember 2020-03-10 2020-03-11 0000075208 OSG:BancOfAmericaLeasingAndCapitalLLCMember 2020-03-10 2020-03-12 iso4217:USD xbrli:shares iso4217:USD xbrli:shares OSG:Products xbrli:pure

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2020

 

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 Number: 001-06479

 

OVERSEAS SHIPHOLDING GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   13-2637623
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
     
302 Knights Run Avenue, Tampa, Florida   33602
(Address of principal executive office)   (Zip Code)

 

(813) 209-0600

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Class A Common Stock (par value $0.01 per share)   OSG   New York Stock Exchange

 

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 ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S–T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐   Accelerated filer ☒   Non-accelerated filer ☐   Smaller reporting company ☒
            Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES ☒ NO☐

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date. The number of shares outstanding of the issuer’s Class A common stock as of August 4, 2020: Class A common stock, par value $0.01 – 86,336,977 shares. Excluded from these amounts are penny warrants, which were outstanding as of August 4, 2020 for the purchase of 3,654,890 shares of Class A common stock without consideration of any withholding pursuant to the cashless exercise procedures.

 

 

 

 

 

 

TABLE OF CONTENTS

 

   

Page

     
Part I—FINANCIAL INFORMATION  
     
Item 1. Financial Statements  
     
  Condensed Consolidated Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019 3
     
  Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2020 and 2019 4
     
  Condensed Consolidated Statements of Comprehensive Income/(Loss) (Unaudited) for the three and six months ended June 30, 2020 and 2019 5
     
  Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2020 and 2019 6
     
  Condensed Consolidated Statements of Changes in Equity (Unaudited) for the three and six months ended June 30, 2020 and 2019 7
     
  Notes to Condensed Consolidated Financial Statements (Unaudited) 8
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 28
     
Item 4. Controls and Procedures 29
     
Part II—OTHER INFORMATION
     
Item 1A Risk Factors 30
     
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 31
     
Item 3 Defaults upon Senior Securities 31
     
Item 4 Mine Safety Disclosure 32
     
Item 5 Other Information 32
     
Item 6. Exhibits 32
     
Signatures 33

 

  2

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

DOLLARS IN THOUSANDS

 

  

June 30, 2020

   December 31, 2019 
   (unaudited)     
ASSETS          
Current Assets:          
Cash and cash equivalents  $74,192   $41,503 
Restricted cash   20,062    60 
Voyage receivables, including unbilled of $3,291 and $5,611, net of reserve for doubtful accounts   6,100    9,247 
Income tax receivable   454    1,192 
Other receivables   2,967    3,037 
Inventories, prepaid expenses and other current assets   3,037    2,470 
Total Current Assets   106,812    57,509 
Vessels and other property, less accumulated depreciation   833,716    737,212 
Deferred drydock expenditures, net   27,557    23,734 
Total Vessels, Other Property and Deferred Drydock   861,273    760,946 
Restricted cash - non current   88    114 
Investments in and advances to affiliated companies   —    3,599 
Intangible assets, less accumulated amortization   29,517    31,817 
Operating lease right-of-use assets   252,379    286,469 
Other assets   18,547    35,013 
Total Assets  $1,268,616   $1,175,467 
LIABILITIES AND EQUITY          
Current Liabilities:          
Accounts payable, accrued expenses and other current liabilities  $37,567   $35,876 
Current portion of operating lease liabilities   90,384    90,145 
Current portion of finance lease liabilities   4,001    4,011 
Current installments of long-term debt   60,755    31,512 
Total Current Liabilities   192,707    161,544 
Reserve for uncertain tax positions   891    864 
Noncurrent operating lease liabilities   184,662    219,501 
Noncurrent finance lease liabilities   22,473    23,548 
Long-term debt   376,529    336,535 
Deferred income taxes, net   80,237    72,833 
Other liabilities   37,094    19,097 
Total Liabilities   894,593    833,922 
Equity:          
Common stock - Class A ($0.01 par value; 166,666,666 shares authorized; 86,336,977 and 85,713,610 shares issued and outstanding)   863    857 
Paid-in additional capital   591,286    590,436 
Accumulated deficit   (211,834)   (243,339)
 Stockholders Equity Subtotal   380,315    347,954 
Accumulated other comprehensive loss   (6,292)   (6,409)
Total Equity   374,023    341,545 
Total Liabilities and Equity  $1,268,616   $1,175,467 

 

See notes to condensed consolidated financial statements

 

  3

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

(UNAUDITED)

 

   2020   2019   2020   2019 
  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
   2020   2019   2020   2019 
Shipping Revenues:                    
                     
Time and bareboat charter revenues  $96,662   $62,007   $174,812   $125,127 
Voyage charter revenues   17,877    26,452    40,586    51,070 
Total Shipping revenues   114,539    88,459    215,398    176,197 
                     
Operating Expenses:                    
Voyage expenses   14,112    6,353    17,897    11,337 
Vessel expenses   41,644    32,520    77,413    64,967 
Charter hire expenses   22,505    22,581    44,965    44,879 
Depreciation and amortization   14,217    13,084    28,236    25,561 
General and administrative   7,599    5,957    13,772    11,633 
Bad debt expense   

—

    

4,300

    —    4,300 
Loss/(gain) on disposal of vessels and other property, including impairments, net   813    (66)   1,110    51 
Total operating expenses   100,890    84,729    183,393    162,728 
Income from vessel operations   13,649    3,730    32,005    13,469 
Equity in income of affiliated companies   —    68    —    68 
Gain on termination of pre-existing arrangement   —    —    19,172    — 
Operating income   13,649    3,798    51,177    13,537 
Other (expense)/income, net   (58)   262    (27)   617 
Income before interest expense and income taxes   13,591    4,060    51,150    14,154 
Interest expense   (6,167)   (6,571)   (12,241)   (13,077)
Income/(loss) before income taxes   7,424    (2,511)   38,909    1,077 
Income tax (expense)/benefit   (1,044)   773    (7,404)   381 
Net income/(loss)  $6,380   $(1,738)  $31,505   $1,458 
                     
Weighted Average Number of Common Shares Outstanding:                    
Basic - Class A   89,747,630    89,245,696    89,584,969    89,125,986 
Diluted - Class A   90,812,332    89,245,696    90,600,658    89,507,860 
Per Share Amounts:                    
Basic and diluted net income - Class A  $0.07   $(0.02)  $0.35   $0.02 

 

See notes to condensed consolidated financial statements

 

  4

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

DOLLARS IN THOUSANDS

(UNAUDITED) 

 

   2020   2019   2020   2019 
  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
   2020   2019   2020   2019 
Net income/(loss)  $6,380   $(1,738)  $31,505   $1,458 
Other comprehensive income, net of tax:                    
Defined benefit pension and other postretirement benefit plans:                    
Net change in unrecognized prior service costs   (18)   (17)   (36)   (33)
Net change in unrecognized actuarial losses   77    102    153    201 
Other comprehensive income   59    85    117    168 
Comprehensive income/(loss)  $6,439   $(1,653)  $31,622   $1,626 

 

See notes to condensed consolidated financial statements

 

  5

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

DOLLARS IN THOUSANDS

(UNAUDITED)

 

   2020   2019 
  

Six Months Ended

June 30,

 
   2020   2019 
Cash Flows from Operating Activities:          
Net income  $31,505   $1,458 
Items included in net income not affecting cash flows:          
Depreciation and amortization   28,236    25,561 
Bad debt expense   —    4,300 
Gain on termination of pre-existing arrangement   (19,172)   — 
Loss on disposal of vessels and other property, including impairments, net   1,110    51 
Amortization of debt discount and other deferred financing costs   1,124    1,023 
Compensation relating to restricted stock awards and stock option grants   1,055    763 
Deferred income tax expense/(benefit)   7,431    (1,047)
Interest on finance lease liabilities   1,001    410 
Non-cash operating lease expense   45,680    44,805 
Loss on extinguishment of debt, net   14    48 
Distributed earnings of affiliated companies   3,562    3,470 
Payments for drydocking   (10,078)   (9,383)
Operating lease liabilities   (45,998)   (45,316)
Changes in operating assets and liabilities, net   (3,204)   (6,337)
Net cash provided by operating activities   42,266    19,806 
Cash Flows from Investing Activities:          
Acquisition, net of cash acquired   (16,973)   — 
Proceeds from disposals of vessels and other property   700    2,197 
Expenditures for vessels and vessel improvements   (38,657)   (34,722)
Expenditures for other property   (498)   (638)
Net cash used in investing activities   (55,428)   (33,163)
Cash Flows from Financing Activities:          
Payments on debt   (26,669)   (10,417)
Extinguishment of debt   (673)   (2,139)
Tax withholding on share-based awards   (197)   (294)
Issuance of debt, net of issuance and deferred financing costs   95,441    — 
Payments on principal portion of finance lease liabilities   (2,075)   (798)
Net cash provided by/(used in) financing activities   65,827    (13,648)
Net increase/(decrease) in cash, cash equivalents and restricted cash   52,665    (27,005)
Cash, cash equivalents and restricted cash at beginning of period   41,677    80,641 
Cash, cash equivalents and restricted cash at end of period  $94,342   $53,636 

 

See notes to condensed consolidated financial statements

 

  6

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

DOLLARS IN THOUSANDS

(UNAUDITED)

 

  

Common

Stock (1)

   Paid-in
Additional
Capital (2)		  

Accumulated

Deficit

   Accumulated
Other
Comprehensive
Loss (3)		   Total 
Balance at December 31, 2018  $848   $587,826   $(252,014)  $(7,192)  $329,468 
Net income   —    —    3,197    —    3,197 
Other comprehensive income   —    —    —    83    83 
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net   5    (299)   —    —    (294)
Compensation related to Class A options granted and restricted stock awards   —    1,559    —    —    1,559 
Balance at March 31, 2019   853    589,086    (248,817)   (7,109)   334,013 
Net loss   —    —    (1,738)   —    (1,738)
Other comprehensive income   —    —    —    85    85 
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net   2    (3)   —    —    (1)
Compensation related to Class A options granted and restricted stock awards        454    —    —    454 
Conversion of Class A warrants to common stock   2    (2)   —    —    — 
Balance at June 30, 2019  $857   $589,535   $(250,555)  $(7,024)  $332,813 
                          
Balance at December 31, 2019  $857   $590,436   $(243,339)  $(6,409)  $341,545 
Net income   —    —    25,125    —    25,125 
Other comprehensive income   —    —    —    58    58 
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net   1    (200)   —    —    (199)
Compensation related to Class A options granted and restricted stock awards   —    438    —    —    438 
Balance at March 31, 2020   858    590,674    (218,214)   (6,351)   366,967 
Net income   —    —    6,380    —    6,380 
Other comprehensive income   —    —    —    59    59 
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net   5    (5)   —    —    — 
Compensation related to Class A options granted and restricted stock awards   —    617    —    —    617 
Balance at June 30, 2020  $863   $591,286   $(211,834)  $(6,292)  $374,023 

 

  (1) Par value $0.01 per share; 166,666,666 Class A shares authorized; 86,336,977 and 85,651,060 Class A shares outstanding as of June 30, 2020 and 2019, respectively.
  (2) Includes 19,236,264 and 19,569,286 outstanding Class A warrants as of June 30, 2020 and 2019, respectively.
  (3) Amounts are net of tax.

 

See notes to condensed consolidated financial statements

 

  7

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

Note 1 — Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of Overseas Shipholding Group, Inc., a Delaware corporation (the “Parent Company”), and its wholly-owned subsidiaries (collectively, the “Company” or “OSG”, “we”, “us” or “our”), including Alaska Tanker Company (“ATC”) as of its March 12, 2020 acquisition date. The Company owns and operates a fleet of oceangoing vessels engaged primarily in the transportation of crude oil and refined petroleum products in the U.S. Flag trade.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and notes required by generally accepted accounting principles in the United States. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the results have been included. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any other interim period.

 

The condensed consolidated balance sheet as of December 31, 2019 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles in the United States for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (“Form 10-K”).

 

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic, which continues to spread throughout the United States and the world. The spread of COVID-19 has caused significant volatility in U.S. and international markets and there is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies.

 

The COVID-19 pandemic is a dynamic and continuously evolving phenomenon and the ultimate severity of the outbreak, and its effect on the Company’s business in the future, is uncertain.

 

Note 2 — Recently Adopted and Issued Accounting Standards

 

Recently Adopted Accounting Standards

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. The new guidance was effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

 

Recently Issued Accounting Standards

 

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The new guidance is effective for fiscal years ending after December 15, 2020 and is required to be applied on a retrospective basis to all periods presented. Early adoption is permitted. The Company plans to adopt this standard on December 31, 2020. The adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which adds a new Topic 326 and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to maturity debt securities. Under current U.S. GAAP, entities generally recognize credit losses when it is probable that a loss has been incurred. The revised guidance will remove all recognition thresholds and will require entities to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the entity expects to collect over the instrument’s contractual life. Subsequently, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, to clarify that receivables arising from operating leases are within the scope of lease accounting standards.

 

  8

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates, which allows a two-bucket approach for determining the effective dates of these accounting standards. Under this approach, the buckets would be defined as follows:

 

Bucket 1— All public business entities (“PBEs”) that are SEC filers (as defined in U.S. GAAP), excluding smaller reporting companies (“SRCs”) (as defined by the SEC). The credit losses standard became effective January 1, 2020.

 

Bucket 2— All other entities, including SRCs, other PBEs that are not SEC filers, private companies, not-for-profit organizations, and employee benefit plans. The credit losses standard are to become effective January 1, 2023.

 

At the annual evaluation date on June 30, 2019, the Company met the SEC definition of a smaller reporting company. Accordingly, the Company plans to adopt the credit losses standard on January 1, 2023. Management is currently reviewing the impact of the adoption of this accounting standard on the Company’s consolidated financial statements.

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. The new guidance is effective for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years. The Company will adopt this standard on January 1, 2021. Management is currently reviewing the impact of the adoption of this accounting standard on the Company’s consolidated financial statements.

 

 

Note 3 - Revenue Recognition

 

Shipping Revenues

 

Time Charter Revenues

 

The Company enters into time charter contracts under which a customer pays a fixed daily or monthly rate for a fixed period of time for use of a vessel. The Company recognizes revenues from time charters as operating leases ratably over the noncancellable contract term. Customers generally pay voyage expenses such as fuel, canal tolls and port charges. The Company also provides the charterer with services such as technical management expenses and crew costs. While there are lease and service (non-lease) components related to time charter contracts, the predominant component of the contract is the charterer’s lease of the vessel. The non-lease components of the contract have the same timing and pattern of transfer as the underlying lease component; therefore, the Company applies the practical expedient of combining lease and non-lease components and recognizes revenue related to this service ratably over the life of the contract term.

 

Voyage Charter Revenues

 

The Company enters into voyage charter contracts, under which the customer pays a transportation charge (voyage freight) for the movement of a specific cargo between two or more specified ports. The Company’s performance obligation under voyage charters, which consists of moving cargo from a load port to a discharge port, is satisfied over time. Accordingly, under ASC 606, the Company recognizes revenue from voyage charters ratably over the estimated length of each voyage, calculated on a load-to-discharge basis. The transaction price is in the form of a fixed fee at contract inception, which is the transportation charge. Voyage charter contracts also include variable consideration primarily in the form of demurrage, which is additional revenue the Company receives for delays experienced in loading or unloading cargo that are not deemed to be the responsibility of the Company. The Company does not include demurrage in the transaction price for voyage charters since it is highly susceptible to factors outside the Company’s influence. Examples of when demurrage is incurred include unforeseeable weather conditions and security regulations at ports. The uncertainty related to this variable consideration is resolved upon the completion of the voyage, the duration of which is generally less than 30 days.

 

  9

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

U.S. Maritime Security Program

 

Two of the Company’s U.S. Flag Product Carriers participate in the U.S. Maritime Security Program (“MSP”), which is designed to ensure that privately-owned, military-useful U.S. Flag vessels are available to the U.S. Department of Defense in the event of war or national emergency. The Company considers the MSP contract with the U.S. government a service arrangement under ASC 606. Under this arrangement, the Company receives an annual operating-differential subsidy pursuant to the Merchant Marine Act of 1936 for each participating vessel, subject in each case to annual congressional appropriations. The subsidy is intended to reimburse owners for the additional costs of operating U.S. Flag vessels; therefore, the Company has presented this subsidy as an offset to vessel expenses.

 

Contracts of Affreightment

 

The Company enters into contracts of affreightment (each a “COA”) to provide transportation services between specified points for a stated quantity of cargo over a specific time period, but without designating voyage schedules. The Company has COA arrangements to provide for lightering services and other arrangements based on the number of voyages. These contracts are service contracts within the scope of ASC 606 for which the underlying performance obligation is satisfied as a series of distinct services.

 

The Company’s COAs include minimum purchase requirements from customers that are expressed in either fixed monthly barrels, annual minimum barrel volume requirements or annual minimum number of voyages to complete. The Company is required to transport and the charterer is required to provide the Company with a minimum volume requirement. These contract minimums represent fixed consideration within the contract which is recognized as the distinct services of delivering barrels or voyages are performed in the series over time. The Company will adjust revenue recognized for any minimum volume unexercised right.

 

COAs provide the charterer with the opportunity to purchase additional transportation services above the minimum. If this is not considered a material right, the Company recognizes revenue related to the additional services at the contractual rate as the product is transferred over time. If the additional transportation service is considered a material right, the Company applies the practical alternative of allocating the transaction price to the material right. As a result, the Company may recognize revenue related to COAs at an amount different from the invoiced amount if the Company’s estimated volume to be transported under the contract exceeds the contractual minimum.

 

At June 30, 2020, the Company did not have deferred revenue related to the Company’s COAs.

 

  10

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

Disaggregated Revenue

 

The Company has disaggregated revenue from contracts with customers into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Consequently, the disaggregation below is based on contract type. Since the terms within these contract types are generally standard in nature, the Company does not believe that further disaggregation would result in increased insight into the economic factors impacting revenue and cash flows.

 

The following table shows the Company’s shipping revenues disaggregated by nature of the charter arrangement for the three and six months ended June 30, 2020 and 2019:

 

Schedule of Disaggregation of Revenue 

  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
   2020   2019   2020   2019 
Time and bareboat charter revenues  $96,662   $62,007   $174,812   $125,127 
Voyage charter revenues(1)   9,423    6,150    20,892    13,784 
Contracts of affreightment revenues   8,454    20,302    19,694    37,286 
Total shipping revenues  $114,539   $88,459   $215,398   $176,197 

 

(1) Voyage charter revenues include approximately $3,946 and $3,088 of revenue related to short-term time charter contracts for the three months ended June 30, 2020 and 2019, respectively, and $15,265 and $3,858 for the six months ended June 30, 2020 and 2019, respectively.

 

Voyage Receivables

 

As of June 30, 2020 and December 31, 2019, contract balances from contracts with customers consisted of voyage receivables, including unbilled receivables, of $4,726 and $5,831, respectively, net of reserve for doubtful accounts for voyage charters and lightering contracts. For voyage charters, voyage freight is due to the Company upon completion of discharge at the last discharge port. For lightering contracts, the Company invoices the customer monthly based on the actual barrels of cargo lightered. The Company routinely reviews its voyage receivables and makes provisions for probable doubtful accounts; however, those provisions are estimates and actual results could differ from those estimates and those differences may be material. Voyage receivables are removed from accounts receivable and the reserve for doubtful accounts when they are deemed uncollectible. The Company deems voyage receivables uncollectible when the Company has exhausted collection efforts.

 

Costs to Fulfill a Contract

 

Under ASC 606, for voyage charters and contracts of affreightment, the Company capitalizes the direct costs, which are voyage expenses, of relocating the vessel to the load port and amortizes those costs during transport of the cargo. At June 30, 2020, the costs related to voyages that were not yet completed were not material.

 

Additionally, these contracts include out-of-pocket expense (i.e. fuel, port charges, canal tolls) incurred by the Company in fulfilling its performance obligations, which are reimbursed by the charterer at cost. The reimbursement for these fulfillment costs are included in the Company’s estimated transaction price for the contract and recognized as revenue when performance obligations are satisfied.

 

  11

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

Transaction Price Allocated to the Remaining Performance Obligations

 

As of June 30, 2020, there was an aggregate of $22,929 of revenue under COAs that the Company will be entitled to by providing services in the future. The Company expects to recognize revenue of approximately $19,134 in 2020 and $3,795 in 2021 under these contracts. These estimated amounts relate to the fixed consideration of contractual minimums within the contracts based on the Company’s estimate of future services.

 

Practical Expedients and Exemptions

 

The Company’s voyage charter contracts and some of the Company’s COAs have an original expected duration of one year or less; therefore, the Company has elected to apply the practical expedient, which permits the Company to not disclose the portion of the transaction price allocated to the remaining performance obligations within these COAs.

 

The Company expenses broker commissions for voyage charters, which are costs of obtaining a contract, as they are incurred because the amortization period is less than one year or are otherwise amortized as the underlying performance obligation is satisfied. The Company records these costs within voyage expenses in the consolidated statements of operations.

 

Note 4 — Earnings per Common Share

 

Basic earnings per common share is computed by dividing earnings, after the deduction of dividends and undistributed earnings allocated to participating securities, by the weighted average number of common shares outstanding during the period. As management deems the exercise price for the Class A warrants of $0.01 per share to be nominal, warrant proceeds are ignored and the shares issuable upon Class A warrant exercise are included in the calculation of basic weighted average common shares outstanding for all periods.

 

The computation of diluted earnings per share assumes the issuance of common stock for all potentially dilutive stock options and restricted stock units. Participating securities are defined by ASC 260, Earnings Per Share, as unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents and are included in the computation of earnings per share pursuant to the two-class method.

 

Class A

 

As of June 30, 2020, there were 2,645,025 shares of Class A common stock issuable under outstanding restricted stock units and 1,478,756 shares of Class A common stock issuable under outstanding options, both of which are considered to be potentially dilutive securities. As of June 30, 2019, there were 1,718,865 shares of Class A common stock issuable under outstanding restricted stock units and 1,478,756 shares of Class A common stock issuable under outstanding options, both of which are considered to be potentially dilutive securities.

 

The components of the calculation of basic earnings per share and diluted earnings per share are as follows:

 

  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
   2020   2019   2020   2019 
Net income  $6,380   $(1,738)  $31,505   $1,458 
                     
Weighted average common shares outstanding:                    
Class A common stock - basic   89,747,630    89,245,696    89,584,969    89,125,986 
Class A common stock - diluted   90,812,332    89,245,696    90,600,658    89,507,860 

 

For the three months ended June 30, 2020, there were dilutive equity awards outstanding covering 1,064,702 shares, and for the six months ended June 30, 2020 and 2019, there were dilutive equity awards outstanding covering 1,015,689 and 381,874 shares, respectively. Awards of 371,893 shares (which are related to stock options) for both the three and six months ended June 30, 2020 were not included in the computation of diluted earnings per share because inclusion of these awards would be anti-dilutive. For the six months ended June 30, 2019, awards of 1,419,325 shares (which include restricted stock units and stock options) were not included in the computation of diluted earnings per share because inclusion of these awards would be anti-dilutive.

 

  12

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

Note 5 — Fair Value Measurements and Fair Value Disclosures

 

The following methods and assumptions are used to estimate the fair value of each class of financial instrument:

 

Cash and cash equivalents and restricted cash— The carrying amounts reported in the condensed consolidated balance sheet for interest-bearing deposits approximate fair value. Investments in trading securities consist of equity securities and were measured using quoted market prices at the reporting date.

 

Debt— The fair values of the Company’s publicly traded and non-public debt are estimated based on quoted market prices.

 

ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements defines fair value and establishes a framework for measuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, the fair value of assets and liabilities should include consideration of non-performance risk, which for the liabilities described below includes the Company’s own credit risk.

 

The levels of the fair value hierarchy established by ASC 820 are as follows:

 

Level 1 - Quoted prices in active markets for identical assets or liabilities

 

Level 2 - Quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

 

  13

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

Financial Instruments that are not Measured at Fair Value on a Recurring Basis

 

The estimated fair values of the Company’s financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows:

   Carrying   Fair Value 
   Value   Level 1   Level 2 
June 30, 2020:            
Assets            
Cash and cash equivalents (1)  $94,342   $94,342   $— 
Total  $94,342   $94,342   $— 
Liabilities               
Term loan agreement, due 2023  $279,749   $—   $286,366 
Term loan agreements, due 2024   47,134    —    51,178 
Alaska Tankers term loan agreement, due 2025   52,297    —    48,458 
OSG 204 LLC term loan agreement, due 2025   32,291    —    32,557 
Term loan agreement, due 2026   25,123    —    23,723 
Unsecured senior notes   690    —    722 
Total  $437,284   $—   $443,004 

 

   Carrying   Fair Value 
   Value   Level 1   Level 2 
December 31, 2019:            
Assets               
Cash (1)  $41,677   $41,677   $— 
Total  $41,677   $41,677   $— 
Liabilities               
Term loan agreement, due 2023  $291,994   $—   $299,974 
Term loan agreements, due 2024   48,289    —    49,015 
Term loan agreement, due 2026   27,075    —    27,359 
Unsecured senior notes   689    —    722 
Total  $368,047   $—   $377,070 

 

(1) Includes current and non-current restricted cash aggregating $20,150 and $174 at June 30, 2020 and December 31, 2019, respectively. At June 30, 2020, $20,002 of restricted cash is in escrow to be applied as a prepayment on the term loan on the Overseas Gulf Coast, due 2024. On July 30, 2020, the $20,002 of restricted cash was used towards the payment in full of the Overseas Gulf Coast term loan, due 2024. See Note 12, “Debt” for further details. Restricted cash of $148 and $174 as of June 30, 2020 and December 31, 2019, respectively, was related to the Company’s Unsecured Senior Notes.

 

Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring Basis

 

Vessel and Intangible Assets Impairments

 

During the second quarter of 2020, the Company considered whether events or changes in circumstances had occurred since December 31, 2019 that could indicate the carrying amounts of the vessels in the Company’s fleet and the carrying value of the Company’s intangible assets may not be recoverable as of June 30, 2020.

 

  14

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

The Company concluded that no such events or changes in circumstances had occurred for its intangible assets at June 30, 2020.

 

During the second quarter of 2020 the Company established basic terms to sell for scrap the OSG 244, one of the Company’s barges. Based on the negotiated sale terms, the Company recorded a loss, which was not material and included in loss on disposal of vessels and other property, including impairments, net on the condensed consolidated statements of operations, on the planned disposition of this barge.

 

Note 6 — Taxes

 

For the three months ended June 30, 2020 and 2019, the Company recorded an income tax (provision)/benefit of $(1,044) and $773, respectively, which represented effective tax rates of 14% and 31%, respectively. For the six months ended June 30, 2020 and 2019, the Company recorded an income tax (provision)/benefit of $(7,404) and $381, respectively, which represented effective tax rates of 19% and (35)%, respectively. The decrease in the effective tax rate for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was substantially due to a significant reduction in state income tax, as well as, the tonnage tax exclusion under the Internal Revenue Code. The increase in the effective tax rate for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to the establishment of deductible expenses related to Code Section 162(m) in the first quarter of 2019 causing a more favorable discrete adjustment compared to pretax income. The effective tax rate for the six months ended June 30, 2020 was less than the statutory rate due to discrete tax benefits recorded relating to state benefit resulting from the Alaska Tanker Company acquisition, interest related to an alternative minimum tax refund and the tonnage tax exclusion. The effective tax rate for the six months ended June 30, 2019 was less than the statutory rate due to the discrete tax benefit recorded in the first quarter of 2019 relating to Code Section 162(m) deductible expenses and the tonnage tax exclusion.

 

On March 27, 2020, H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act, or the “CARES Act”, was signed into law. The CARES Act includes tax provisions relevant to businesses that will impact taxes related to 2018, 2019 and 2020. Some of the significant changes are to increase the limitation on deductible business interest expense for 2019 and 2020, allow for the five year carryback of net operating losses for 2018-2020, suspend the 80% limitation of taxable income for net operating loss carryforwards for 2018-2020, the acceleration of depreciation expense from 2018 forward on qualified improvement property, and acceleration of the ability to claim refunds of alternative minimum tax credit carryforwards. The Company is required to recognize the effect on the consolidated financial statements in the period in which the law was enacted, which is 2020. At this time, the Company does not expect the CARES Act to have a material impact on the Company’s tax provision as any effect will be a reclassification between net operating losses and the affected deferred tax assets or liabilities on the consolidated balance sheet.

 

As of June 30, 2020 and December 31, 2019, the Company recorded a non-current reserve for uncertain tax positions of $891 and $864, respectively.

 

Note 7 — Investment in Alaska Tanker Company, LLC

 

At December 31, 2019, the Company had a 37.5% interest in Alaska Tanker Company, LLC (“ATC”), a joint venture that was formed in 1999 among OSG America Operating Co LLC, Keystone Shipping Company and subsidiaries of British Petroleum (“BP”). Each member of ATC was entitled to receive its respective share of incentive charter hire related to time charter contracts in ATC with a minimum term ending in December 2023.

 

In December 2019, the Company entered into an agreement with BP to purchase three U.S.-flagged crude oil carrier vessels (Alaskan Explorer, Alaskan Legend and Alaskan Navigator) for total cash consideration of $54,000, which was financed by borrowing $54,000 under a five-year term loan as discussed in Note 12, “Debt”.

 

  15

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

In connection with the purchase of the vessels from BP, the Company agreed to time charter arrangements with BP for terms of 2.5 years to 6.4 years at a fixed daily rate with an annual escalation and five renewal options for one year each. The time charter arrangements are treated as operating leases under ASC 842. The Company also entered into a bareboat charter with BP for a fourth vessel, the Alaskan Frontier, which is currently in layup. In connection with these transactions, the Company also acquired the remaining equity ownership of ATC, making ATC a wholly owned subsidiary of the Company.

 

The Company accounted for the purchase of the three vessels and remaining equity ownership interest in ATC collectively as an asset acquisition, with substantially all the fair value of the acquisition attributed to the three vessels purchased from BP. The pre-existing ATC arrangements with a minimum term through December 2023 were terminated, and a non-cash gain equal to the value of the remaining arrangement of $19,172 was recognized, with a corresponding increase in the value of the vessels acquired from BP in a manner consistent with how ASC 805, Business Combinations, would be applied to the settlement of a pre-existing arrangement.

 

As part of the acquisition of ATC, the Company assumed liabilities of $9,898 related to pension and postretirement plans. The postretirement medical and life insurance plan provides benefits to shore-based employees and nonunion licensed deck officers at least 55 years of age with 10 years or more of service, as defined. The plan was frozen as of December 31, 2016 and closed to new entrants as of January 1, 2017. The Company also contributes to six multiemployer defined benefit pension plans, two of which comprise the majority of current year contributions and employee coverage: the MEBA Pension Plan - Defined Benefit Plan and the Seafarers Pension Plan. The Company’s withdrawal obligation on the multi-employer plans, which is unrecorded, is approximately $9,000.

 

The Company also assumed liabilities of $8,812 related to deferred compensation. The deferred compensation plan is an unfunded, nonqualified plan that allows eligible employees to defer up to 100% of their performance bonuses or defer up to 50% (5% minimum) of their salary, select investments for their deferral balances and determine when to be paid out. Eligible employees can elect to receive payment either on a specified date, or on a specified date after termination of employment, and either in a lump sum or annual installments, with a maximum deferral period of 20 years. Expected timing of payout is greater than one year and therefore classified as long-term.

 

Note 8 — Capital Stock and Stock Compensation

 

Share and Warrant Repurchases

 

During the six months ended June 30, 2020, in connection with the vesting of restricted stock units (“RSUs”), the Company withheld 104,552 shares of Class A common stock at an average price of $1.90 per share (based on the market prices on the dates of vesting) from certain members of management to cover withholding taxes.

 

Warrant Conversions

 

During the six months ended June 30, 2020, the Company issued 378 shares of Class A common stock as a result of the exercise of 1,998 Class A warrants. During the six months ended June 30, 2019, the Company issued 195,413 shares of Class A common stock as a result of the exercise of 1,034,368 Class A warrants.

 

Stock Compensation

 

The Company accounts for stock compensation expense in accordance with the fair value-based method required by ASC 718, Compensation – Stock Compensation. This method requires share-based payment transactions to be measured based on the fair value of the equity instruments issued.

 

Director Compensation — Restricted Stock Units

 

On May 28, 2020, the Company awarded 321,000 time-based RSUs to its non-employee directors. The grant date fair value of these awards was $2.25 per RSU. Each RSU represents a contingent right to receive one share of Class A common stock upon vesting. These RSUs vest in full on the first anniversary of the grant date, subject to each director continuing to provide services to the Company through such date.

 

Management Compensation — Restricted Stock Units and Stock Options

 

During the six months ended June 30, 2020, the Company granted 764,406 RSUs to its employees, including senior officers. The grant date fair value of these awards was $2.03 per RSU. Each RSU represents a contingent right to receive one share of Class A common stock upon vesting. Each award of RSUs will vest in equal installments on each of the first three anniversaries of the grant date.

 

During the six months ended June 30, 2020, the Company awarded 582,224 performance-based RSUs to its senior officers. Each performance-based RSU represents a contingent right to receive RSUs based upon continuous employment through the end of a three-year performance period and will vest as follows: (i) one-half of the target RSUs will vest and become nonforfeitable subject to OSG’s return on invested capital (“ROIC”) performance in the three-year ROIC performance period relative to a target rate (the “ROIC Target”) set forth in the award agreements (which define ROIC as net operating profit after taxes divided by the net of total debt plus shareholders equity less cash); and (ii) one–half of the target RSUs will be subject to OSG’s three–year total shareholder return (“TSR Target”) performance relative to that of a performance index over a three–year TSR performance period. The index consists of companies that comprise a combination of the oil and gas storage and transportation and marine GICS sub-industries indexes during the performance period. Vesting is subject in each case to certification by the Human Resources and Compensation Committee of the Parent Company’s Board of Directors as to achievement of the performance measures and targets.

 

The ROIC Target RSU awards and the TSR Target RSU awards are subject to an increase of up to a maximum of 291,112 target RSUs combined (873,340 RSUs in total) or decrease, depending on performance against the applicable measure and targets. The ROIC performance goal is a performance condition which, as of June 30, 2020, management believed was probable of being achieved. Accordingly, for financial reporting purposes, compensation costs have been recognized for these awards. The grant date fair value of the TSR based performance awards, which have a market condition, was determined to be $2.03 per RSU.

 

  16

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

Note 9 — Accumulated Other Comprehensive Loss

 

The components of accumulated other comprehensive loss, net of related taxes, in the condensed consolidated balance sheets follow:

 

As of 

June 30, 2020

   December 31, 2019 
Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement benefit plans)  $(6,292)  $(6,409)
Accumulated other comprehensive loss  $(6,292)  $(6,409)

 

The following tables present the changes in the balances of each component of accumulated other comprehensive loss, net of related taxes, during the three and six months ended June 30, 2020 and 2019:

 

  Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement plans) 
     
Balance as of March 31, 2020  $(6,351)
Current period change, excluding amounts reclassified from accumulated other comprehensive income   — 
Amounts reclassified from accumulated other comprehensive income   59 
Total change in accumulated other comprehensive income   59 
Balance as of June 30, 2020  $(6,292)
      
Balance as of March 31, 2019  $(7,109)
Current period change, excluding amounts reclassified from accumulated other comprehensive income   (23)
Amounts reclassified from accumulated other comprehensive income   108 
Total change in accumulated other comprehensive income   85 
Balance as of June 30, 2019  $(7,024)

 

  17

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

   Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement plans) 
     
Balance as of December 31, 2019  $(6,409)
Current period change, excluding amounts reclassified from accumulated other comprehensive income   — 
Amounts reclassified from accumulated other comprehensive income   117 
Total change in accumulated other comprehensive income   117 
Balance as of June 30, 2020  $(6,292)
      
Balance as of December 31, 2018  $(7,192)
Current period change, excluding amounts reclassified from accumulated other comprehensive income   (48)
Amounts reclassified from accumulated other comprehensive income   216 
Total change in accumulated other comprehensive income   168 
Balance as of June 30, 2019  $(7,024)

 

The Company includes the service cost component for net periodic benefit cost/(income) in vessel expenses and general and administrative expenses and other components in other (expense)/income, net on the condensed consolidated statements of operations.

 

Note 10 — Leases

 

For the six months ended June 30, 2020, the Company had non-cash operating activities of $1,533 for obtaining operating right-of-use assets and liabilities.

 

Charters-in

 

On March 12, 2020, the Company commenced a bareboat charter for the Alaskan Frontier for a lease term of three years. Based on the length of the lease term and the remaining economic life of the vessel, it is accounted for as an operating lease. The lease contains a three-year renewal option and is available indefinitely. The future minimum commitments under the lease are $184 for the remainder of 2020, $365 in 2021, $365 in 2022 and $71 in 2023.

 

Charters-out

 

The Company is the lessor under its time charter contracts. Total time charter revenue for the three and six months ended June 30, 2020 was equal to lease income from lease payments of $95,893 and $174,746, respectively, plus straight-line adjustments of $769 and $66, respectively. For the three and six months ended June 30, 2019, total time charter revenue was equal to lease income from lease payments of $62,320 and $125,757, respectively, less straight-line adjustments of $313 and $630, respectively.

 

  18

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

Note 11 — Vessels

 

At the end of May 2020, the Company took delivery of a 204,000 barrel capacity oil and chemical tank barge. The barge, named the OSG 204, has been paired with an existing tug within the Company’s fleet, the OSG Endurance. The ATB unit will be operating in the Jones Act trade and has entered into a one-year time charter.

 

In May 2020, the Company sold for scrap one of its ATBs for $700, net of broker commissions. As a result of the sale, the Company recognized a loss, which is not considered material and is included in loss on disposal of vessels and other property, including impairments, net on the condensed consolidated statements of operations. The Company used the proceeds from the sale to make a mandatory prepayment on its term loan due in 2023.The aggregate loss realized on this transaction, which related to the write-off of unamortized deferred finance costs, was not material.

 

On March 12, 2020, the Parent Company’s subsidiaries completed the purchase of three U.S.-flagged crude oil carrier vessels, the Alaskan Explorer, Alaskan Legend, and Alaskan Navigator, from BP for total consideration of $54,000 and have entered into a bareboat charter with BP for a fourth vessel, the Alaskan Frontier. The vessels purchased will continue to be operated by ATC under time charters with Hilcorp North Slope, LLC (formerly BP Exploration (Alaska), Inc.), with firm charter periods lasting until 2022, 2025 and 2026. Each charter also provides for five one-year extension options.

 

For the six months ended June 30, 2020, the Company’s non-cash investing activities for the accrual of capital expenditures related to the Company’s newbuilds were $3,925.

 

Note 12 — Debt

 

On July 30, 2020, the Company used $20,002 of restricted cash, along with a cash payment of $4,236, which included interest and other fees, to pay in full the Company’s term loan on the Overseas Gulf Coast, due 2024. At June 30, 2020, the principal amount of the term loan of $24,050 is included in current installments of long-term debt on the condensed consolidated balance sheets.

 

On March 26, 2020, one of the Company’s subsidiaries, OSG 204 LLC, entered into a credit agreement with Wintrust Commercial Finance and other syndicate lenders to finance a new 204,000 barrel U.S. Flag oil and chemical ATB barge, which was delivered to the Company during the second quarter of 2020. The credit agreement included a construction loan, against which the Company could make drawdowns to pay for construction costs, and a five-year term loan. The construction loan, which was guaranteed by the Company, was for an aggregate principal amount of $33,150, of which $28,084 was drawn at loan closing, and had a floating rate of interest of LIBOR plus 5.00%. The remaining two milestone construction payments for the barge, accrued and unpaid interest and commitment fees on the construction loan of $4,849 were funded as additions to the construction loan. The construction loan was secured by a collateral assignment of the vessel construction contract. Upon delivery of the barge to OSG 204 LLC, the construction loan was converted into a fixed rate five-year term loan guaranteed by the Company for $32,933. The fixed-rate loan bears interest of 5.00% and matures on June 1, 2025. The lenders hold a perfected first priority security interest and preferred ship mortgage against the vessel. The annual principal payments expected to be made are $1,015 for the remainder of 2020, $2,107 in 2021, $2,215 in 2022, $2,328 in 2023, $2,447 in 2024 and $22,821 thereafter.

 

On March 12, 2020, the Company entered into a loan with Banc of America Leasing & Capital, LLC and other syndicate lenders in the aggregate principal amount of $54,000 to finance the purchase of three U.S.-flagged crude oil carrier vessels, the Alaskan Explorer, Alaskan Legend, and Alaskan Navigator. The loan is secured by first preferred ship mortgages on the vessels, bears a fixed rate of interest of 4.43% and has a five-year term maturing on March 12, 2025. The annual principal payments required to be made are $2,023 for the remainder of 2020, $4,182 in 2021, $4,371 in 2022, $4,568 in 2023, $4,775 in 2024 and $33,087 thereafter.

 

Note 13 — Commitments and Contingencies

 

The Company is a party, as plaintiff or defendant, to various suits in the ordinary course of business for monetary relief arising principally from personal injuries (including without limitation exposure to asbestos and other toxic materials), wrongful death, collision or other casualty and to claims arising under charter parties. A substantial majority of such personal injury, wrongful death, collision or other casualty claims against the Company are covered by insurance (subject to deductibles not material in amount). Each of the claims involves an amount which, in the opinion of management, are not expected to be material to the Company’s financial position, results of operations and cash flows.

 

  19

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements.

 

All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements. Please see the section titled “Forward-Looking Statements” and Item 1A. Risk Factors of our 2019 Annual Report on Form 10-K, as updated in our subsequent quarterly reports filed on Form 10-Q, in this Form 10-Q and in our other filings made from time to time with the SEC after the date of this report.

 

Other factors besides those listed in our Quarterly Report or in our Annual Report also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Such factors include, but are not limited to:

 

  ● public health threats, particularly the COVID-19 pandemic, that impose increases in operating costs to protect the health and safety of the Company’s crew members and others in the industry as a result;
     
  ● volatile fluctuations in supply and demand in the crude oil market worldwide, which could also affect the nature and severity of certain factors listed below;
     
  ● the Company’s ability to renew its time charters when they expire or to enter into new time charters, or to replace its operating leases on favorable terms;
     
  ● the loss of or reduction in business with a large customer, should it be impacted by the COVID-19 pandemic or otherwise;
     
  ● changing economic, political and governmental conditions in the United States or abroad and general conditions in the oil and natural gas industry, in particular in reaction to the COVID-19 pandemic;
     
  ● changes in demand in certain specialized markets in which the Company currently trades;
     
  ● changes in credit risk with respect to the Company’s counterparties on contracts or the failure of contract counterparties to meet their obligations;
     
  ● the Company’s compliance with complex laws and regulations, in particular those seeking to reduce the spread of the COVID-19 virus, and environmental laws and regulations, including those relating to the emission of greenhouse gases and ballast water treatment;
     
  ● the highly cyclical nature of OSG’s industry;
     
  ● significant fluctuations in the market value of our vessels;
     
  ● constraints on capital availability;
     
  ● the Company’s compliance with 46 U.S.C. sections 50501 and 55101 (commonly known as the “Jones Act”) and heightened exposure to Jones Act market fluctuations, as well as stockholder citizenship requirements imposed on us by the Jones Act which result in restrictions on foreign ownership of the Company’s common stock;
     
  ● the effect of the Company’s indebtedness on its ability to finance operations, pursue desirable business operations and successfully run its business in the future;
     
  ● the Company’s ability to generate sufficient cash to service its indebtedness and to comply with debt covenants;
     
  ● competition within the Company’s industry and OSG’s ability to compete effectively for charters;
     
  ● the refusal of certain customers to use vessels of a certain age;

 

  20

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

  ● increasing operating costs, unexpected drydock costs or increasing capital expenses as the Company’s vessels age, including increases due to limited shipbuilder warranties of the consolidation of suppliers;
     
  ● work stoppages or other labor disruptions by the unionized employees of OSG or other companies in related industries or the impact of any potential liabilities resulting from withdrawal from participation in multiemployer plans;
     
  ● limitations on U.S. coastwise trade, the waiver, modification or repeal of the Jones Act limitations or changes in international trade agreements;
     
  ● the inability to clear oil majors’ risk assessment processes;
     
  ● the Company’s ability to use its net operating loss carryforwards;
     
  ● the market price of the Company’s securities fluctuates significantly; and
     
  ● some provisions of Delaware law and the Company’s governing documents could influence its ability to effect a change of control.

 

The Company assumes no obligation to update or revise any forward-looking statements, except as may be required by law. Forward-looking statements in this Quarterly Report on Form 10-Q and written and oral forward-looking statements attributable to the Company or its representatives after the date of this Quarterly Report on Form 10-Q are qualified in their entirety by the cautionary statement contained in this paragraph and in other reports hereafter filed by the Company with the SEC.

 

Business Overview

 

OSG is a publicly traded tanker company providing energy transportation services for crude oil and petroleum products in the U.S. Flag markets. OSG is a major operator of tankers and ATBs in the Jones Act industry. OSG’s 24 active vessel fleet, of which 22 are U.S. Flag vessels, consists of three crude oil tankers doing business in Alaska, two conventional ATBs, two lightering ATBs, three shuttle tankers, ten MR tankers, and two non-Jones Act MR tankers that participate in the U.S. Maritime Security Program. OSG also owns and operates two Marshall Islands flagged MR tankers which trade internationally. In addition to the currently operating fleet, OSG has on order another Jones Act compliant barge which is scheduled for delivery in late 2020. OSG is committed to setting high standards of excellence for its quality, safety and environmental programs. OSG is recognized as one of the world’s most customer-focused marine transportation companies and is headquartered in Tampa, FL. Our revenues are derived predominantly from time charter agreements for specific periods of time at fixed daily amounts. We also charter-out vessels for specific voyages where we typically earn freight revenue at spot market rates.

 

  21

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

The following is a discussion and analysis of our financial condition and results of operations for the three and six months ended June 30, 2020 and 2019. You should consider the foregoing when reviewing the condensed consolidated financial statements, including the notes thereto, and this discussion and analysis. This Quarterly Report on Form 10-Q includes industry data and forecasts that we have prepared based in part on information obtained from industry publications and surveys. Third-party industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. In addition, certain statements regarding our market position in this report are based on information derived from internal market studies and research reports. Unless we state otherwise, statements about the Company’s relative competitive position in this report are based on management’s beliefs, internal studies and management’s knowledge of industry trends.

 

All dollar amounts are in thousands, except daily dollar amounts and per share amounts.

 

Operations and Oil Tanker Markets

 

Our revenues are highly sensitive to patterns of supply and demand for vessels of the size and design configurations owned and operated by us and the trades in which those vessels operate. Rates for the transportation of crude oil and refined petroleum products are determined by market forces such as the supply and demand for oil, the distance that cargoes must be transported and the number of vessels expected to be available at the time such cargoes need to be transported. In the Jones Act trades within which the substantial majority of our vessels operate, demand factors for transportation are affected almost exclusively by supply and distribution decisions of oil producers, refiners and distributors based in the United States. Further, the demand for U.S. domestic oil shipments is significantly affected by the state of the U.S. and global economy, the level of imports into the U.S. from OPEC and other foreign producers, oil production in the United States, and the relative price differentials of U.S. produced crude oil and refined petroleum products as compared with comparable products sourced from or destined for foreign markets, including the cost of transportation on international flag vessels to or from those markets. The number of vessels is affected by newbuilding deliveries and by the removal of existing vessels from service, principally through storage, deletions, or conversions. Our revenues are also affected by the mix of charters between spot (voyage charter which includes short-term time charter) and long-term (time or bareboat charter).

 

Beginning in the 2020 first quarter, COVID-19 has resulted in disruptions in demand and oversupply of oil. Many analysts predict that gasoline and diesel demand will recover as 2020 progresses. These analysts predict that volume demand will be slightly below 2019 levels by the end of 2020. Jet fuel demand is anticipated to remain well below 2019 levels through at least the end of 2021. These estimates include estimates on the prevalence of COVID-19 and the recovery of the U.S. economy. While COVID-19 has presented our industry and markets with significant challenges, we believe that we have thus far managed its impact on our business well, with all of our Jones Act and internationally trading vessels able to load, transit and discharge cargo without material interruption.

 

As a result of the COVID-19 pandemic, we have implemented procedures to protect the health and safety of our employees, crew and contractors. These procedures and protocols are those mandated or recommended by the Centers of Disease Control and Prevention, the US Coast Guard, local ports and shipyards, and country and state specific requirements. They include such actions as providing personal protective equipment, minimizing crew changes, managing the locations where crew members board and depart from our vessels, requiring crew members to disclose symptoms and health of those they have been in contact with, sanitization of the vessels, mandating face coverings, social distancing and temperature checks, and requiring testing in certain instances. COVID-19 has also impacted planned shipyard maintenance and vetting activities resulting in delays, rescheduling and extensions. These additional procedures and delays have resulted in increased costs, which at this point in time, have not been material but are expected to continue.

 

Having our vessels committed on time charters is a fundamental objective of our chartering strategy. The majority of available vessel operating days are covered with medium-term charters or contracts of affreightment. However, medium-term charters may not always be remunerative, nor prove achievable under certain market conditions. As a result, some of our vessels operate in the spot market, which is more volatile and less predictable. Because shipping revenues and voyage expenses are significantly affected by the mix between voyage charters and time charters, we manage our vessels based on time charter equivalent (“TCE”) revenues and TCE rates, which are non-GAAP measures. TCE revenues equal GAAP shipping revenues, less voyage expenses. TCE rates are determined by dividing TCE revenues by revenue days. These measures are reported because management makes economic decisions based on anticipated TCE rates and evaluates financial performance based on TCE rates achieved.

 

TCE rates for Jones Act Product Carriers and large ATBs (defined as vessels having carrying capacities greater than 140,000 barrels) available for service in the spot market decreased during the second quarter of 2020 compared to second quarter of 2019 for all of our vessel classes. The decrease in rates can be attributed to lower demand for coastwise crude oil and refined product as a result of the impact of COVID-19. This has been partially offset by the tightening of vessel supply through scrapping, lay ups and sales out of Jones Act service versus one new delivery since 2018. There were few spot market voyages in the second quarter of 2020 due to charterers securing time charters over the past year. This has led to minimal vessels available for spot voyages other than charterers re-chartering the vessels to the spot market.

 

Our time charter coverage is substantial for the balance of this year. We contracted employment covering 89% of available operating days during the third quarter of 2020 and have 83% of available operating days contracted for the second half of the year, which includes the ATC vessels recently purchased. The deep book of time charters which we entered into is expected to provide some insulation from the current market turmoil that has followed not only the outbreak of COVID-19, but also the decline in transportation fuel demand affecting both crude oil and refined product pricing. Our vessels were employed for 93% of available days during the 2020 second quarter, with 132 of a total 1,816 available days seeing vessels idle without employment.

 

  22

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

The industry’s firm Jones Act orderbook as of June 30, 2020 consists of one large ATB with delivery scheduled in the fourth quarter of 2020, which is our order.

 

Delaware Bay lightering volumes averaged 38,000 b/d in the second quarter of 2020 compared with 163,000 b/d in the second quarter of 2019. Refinery demand for crude oil was significantly reduced in the second quarter of 2020 due to COVID-19, reducing the need for lightering services. We have contract minimums with our refinery customers that compensates us for barrels not lightered below those minimum amounts. In June 2019, one of our lightering customers, Philadelphia Energy Solutions (“PES”), suffered an explosion and fire at its refinery in the Delaware Bay. The refinery has been shut down since the fire. In July 2019, PES filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Due to the reduction in lightering volumes, we redeployed one of our two lightering ATBs to the U.S. Gulf of Mexico for alternative employment. In May 2020 the PES bankruptcy process resulted in the sale of the refinery complex which will be permanently closed.

 

At December 31, 2019, the Company had a 37.5% interest in Alaska Tanker Company, LLC (“ATC”), a joint venture that was formed in 1999 among OSG America Operating Co LLC, Keystone Shipping Company and BP plc to support BP plc’s Alaskan crude oil transportation requirements. Each member in ATC was entitled to receive its respective share of any incentive charter hire payable to ATC.

 

On December 26, 2019, the Company announced that its subsidiaries entered into agreements with BP Oil Shipping Company USA and BP AMI Leasing Inc. (“BP”) to purchase three U.S.-flagged crude oil carrier vessels operated by ATC for total consideration of $54,000. The Company made a $10,800 deposit upon execution of the vessel purchase agreements. Additionally, the Company acquired the remaining 62.5% interest of ATC, from its partners, that it did not own for approximately $19,100.

 

On March 12, 2020, our subsidiaries completed the purchase of the Alaskan Explorer, Alaskan Legend and Alaskan Navigator, and have entered into a bareboat charter with BP for a fourth vessel, the Alaskan Frontier. The Alaskan Frontier is currently in layup. In connection with these transactions, we also completed the acquisition of ATC, making ATC a wholly owned subsidiary of OSG. Operating results of these vessels are included from that date.

 

Critical Accounting Policies

 

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Company to make estimates in the application of its accounting policies based on the best assumptions, judgments and opinions of management. For a description of all of the Company’s material accounting policies, see Note 2, “Summary of Significant Accounting Policies,” to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for 2019.

 

  23

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

Results of Vessel Operations

 

During the three and six months ended June 30, 2020, shipping revenues increased by $26,080 and $39,201, or 29.5% and 22.2%, respectively, compared to the same periods in 2019. The increases primarily resulted from the addition to our fleet of two Marshall Islands flagged MR tankers, Overseas Gulf Coast and Overseas Sun Coast, three crude oil tankers, Alaskan Explorer, Alaskan Legend and Alaskan Navigator, and one ATB, OSG 204 and OSG Endurance, which was delivered at the end of May 2020.

 

Reconciliation of TCE revenues, a non-GAAP measure, to shipping revenues as reported in the consolidated statements of operations follows:

 

  

Three Months Ended

June 30,

 

Six Months Ended

June 30,

   2020  2019  2020  2019
Time charter equivalent revenues  $100,427   $82,106   $197,501   $164,860 
Add: Voyage expenses   14,112    6,353    17,897    11,337 
Shipping revenues  $114,539   $88,459   $215,398   $176,197 

 

The following tables provide a breakdown of TCE rates achieved for the three and six months ended June 30, 2020 and 2019 between spot and fixed earnings and the related revenue days.

 

   2020  2019
Three Months Ended June 30, 

Spot

Earnings

   

Fixed

Earnings

 

Spot

Earnings

 

Fixed

Earnings

Jones Act Handysize Product Carriers:                        
Average rate  $31,120    $ 61,360    $37,356    $57,212 
Revenue days   89      1,088     157     959 
Non-Jones Act Handysize Product Carriers:                        
Average rate  $27,051    $ 16,752    $17,347    $11,962 
Revenue days   156      181     99     83 
ATBs:                        
Average rate  $16,333    $ —    $19,000    $21,610 
Revenue days   124      —     89     252 
Lightering:                        
Average rate  $44,346    $ —    $68,220    $— 
Revenue days   121      —     169     — 
Alaska (a):                        
Average rate  $—    $ 58,538    $—    $— 
Revenue days   —      272     —     — 

 

  24

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

   2020  2019
Six Months Ended June 30, 

Spot

Earnings

 

Fixed

Earnings

 

Spot

Earnings

 

Fixed

Earnings

Jones Act Handysize Product Carriers:                    
Average rate  $46,830   $60,819   $33,920   $57,035 
Revenue days   181    2,140    247    1,941 
Non-Jones Act Handysize Product Carriers:                    
Average rate  $27,387    16,770   $21,905   $12,023 
Revenue days   310    363    211    151 
ATBs:                    
Average rate  $21,213   $24,686   $19,979   $21,583 
Revenue days   217    89    175    518 
Lightering:                    
Average rate  $51,388   $61,012   $70,634   $— 
Revenue days   243    87    349    — 
Alaska (a):                    
Average rate  $—   $58,621   $—    $— 
Revenue days   —    330    —    —  

 

(a) Excludes one Alaska vessel currently in layup.

 

During the second quarter of 2020, TCE revenues increased by $18,321, or 22.3%, to $100,427 from $82,106 in the second quarter of 2019. The increase primarily resulted from the addition to our fleet of two Marshall Islands flagged MR tankers, Overseas Gulf Coast and Overseas Sun Coast, three crude oil tankers, Alaskan Explorer, Alaskan Legend and Alaskan Navigator, and one ATB, OSG 204 and OSG Endurance, which was delivered at the end of May 2020, and two Government of Israel voyages during the second quarter of 2020 compared to one during the second quarter of 2019. The increase was offset by two fewer ATBs in our fleet and a decrease in Delaware Bay lightering volumes during the second quarter of 2020 compared to the second quarter of 2019.

 

Vessel expenses increased by $9,124, or 28.1%, in the second quarter of 2020 to $41,644 compared to $32,520 in the second quarter of 2019 primarily due to an increase in crewing costs. The increase in crewing costs was due to the addition of two Marshall Islands flagged MR tankers, Overseas Gulf Coast and Overseas Sun Coast, and three crude oil tankers, Alaskan Explorer, Alaskan Legend and Alaskan Navigator, to our fleet, which was offset by two fewer ATBs in our fleet.

 

Depreciation and amortization increased by $1,133, or 8.7%, to $14,217 in the second quarter of 2020 compared to $13,084 in the second quarter of 2019. The increase primarily resulted from an increase in depreciation expense due to the Overseas Gulf Coast and Overseas Sun Coast, our two newbuild Marshall Islands flagged MR tankers, which entered service at the beginning of the fourth quarter of 2019. The increase was partially offset by a decrease due to drydock amortization.

 

During the first six months of 2020, TCE revenues increased by $32,641, or 19.8%, to $197,501 from $164,860 in the first six months of 2019. The increase primarily resulted from the addition to our fleet of two Marshall Islands flagged MR tankers, Overseas Gulf Coast and Overseas Sun Coast, three crude oil tankers, Alaskan Explorer, Alaskan Legend and Alaskan Navigator, one MR tanker, Overseas Key West, which was added during the second quarter of 2019, and one ATB, OSG 204 and OSG Endurance, which was delivered at the end of May 2020 and an increase in average daily rates earned by our fleet. The increase was offset by (a) one less ATB in our fleet, (b) a 55-day increase in scheduled drydocking and (c) a decrease in Delaware Bay lightering volumes during the first six months of 2020 compared to the first six months of 2019.

 

Vessel expenses increased 19.2%, or $12,446, to $77,413 for the six months ended June 30, 2020 from $64,967 for the same period in 2019 primarily due to an increase in crewing costs. The increase in crewing costs was due to the addition to our fleet of two Marshall Islands flagged MR tankers, Overseas Gulf Coast and Overseas Sun Coast, three crude oil tankers, Alaskan Explorer, Alaskan Legend and Alaskan Navigator, and one MR tanker, Overseas Key West, which was added during the second quarter of 2019, offset by one less ATB in our fleet.

 

  25

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

Depreciation and amortization increased by $2,675, or 10.5%, to $28,236 in the first six months of 2020 compared to $25,561 in the first six months of 2019. The increase primarily resulted from an increase in depreciation expense due to the Overseas Gulf Coast and Overseas Sun Coast, our two newbuild Marshall Islands flagged MR tankers, which entered service at the beginning of the fourth quarter of 2019.

 

Our two U.S. Flag Product Carriers participate in the MSP, which is designed to ensure that militarily useful U.S. Flag vessels are available to the U.S. Department of Defense in the event of war or national emergency. We receive an annual subsidy, subject in each case to annual congressional appropriations, which is intended to offset the increased cost incurred by such vessels from operating under the U.S. Flag. For fiscal year 2020, we expect to receive $5,000 for each vessel and up to $5,200 for each vessel beginning in 2021. During fiscal year 2019, we received a $5,000 annual subsidy for each participating MSP vessel. We do not receive a subsidy for any days for which either of the two vessels operate under a time charter to a U.S. government agency.

 

General and Administrative Expenses

 

General and administrative expenses were $7,599 and $13,772 for the three and six months ended June 30, 2020, respectively, compared with $5,957 and $11,633 for the three and six months ended June 30, 2019, respectively. The increase was primarily driven by an increase in compensation and benefit costs due to our acquisition of ATC and the resulting increase in headcount. General and administrative expenses also increased primarily due to an increase in consulting fees.

 

Interest Expense

 

Interest expense was $6,167 and $12,241 for the three and six months ended June 30, 2020, respectively, compared with $6,571 and $13,077 for the three and six months ended June 30, 2019, respectively. The decrease in interest expense was primarily associated with the decrease in the 30-Day LIBOR rate on our term loans, due 2023 and 2026, from the same period in 2019 and interest capitalized due to vessels under construction.

 

Income Taxes

 

For the three months ended June 30, 2020 and 2019, the Company recorded an income tax (provision)/benefit of $(1,044) and $773, respectively, which represented effective tax rates of 14% and 31%, respectively. For the six months ended June 30, 2020 and 2019, the Company recorded an income tax (provision)/benefit of $(7,404) and $381, respectively, which represented effective tax rates of 19% and (35)%, respectively. The decrease in the effective tax rate for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was substantially due to a significant reduction in state income tax, as well as, the tonnage tax exclusion. The increase in the effective tax rate for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to the establishment of deductible expenses related to Code Section 162(m) in the first quarter of 2019 causing a more favorable discrete adjustment compared to pretax income. The effective tax rate for the six months ended June 30, 2020 was less than the statutory rate due to discrete tax benefits recorded relating to state benefit resulting from the Alaska Tanker Company acquisition, interest related to an alternative minimum tax refund and the tonnage tax exclusion. The effective tax rate for the six months ended June 30, 2019 was less than the statutory rate due to the discrete tax benefit recorded in the first quarter of 2019 relating to Code Section 162(m) deductible expenses and the tonnage tax exclusion.

 

  26

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

Liquidity and Sources of Capital

 

Our business is capital intensive. Our ability to successfully implement our strategy is dependent on the continued availability of capital on attractive terms. In addition, our ability to successfully operate our business to meet near-term and long-term debt repayment obligations is dependent on maintaining sufficient liquidity.

 

Liquidity

 

Working capital at June 30, 2020 was approximately $(86,000) compared with approximately $(104,000) at December 31, 2019. Excluding the current portion of operating and finance lease liabilities, working capital was approximately $8,490 at June 30, 2020 compared to $(9,880) at December 31, 2019. The increase in working capital is primarily due to the proceeds we received from the OSG 204 LLC term loan discussed below and assets obtained as a result of the completed acquisition of ATC.

 

As of June 30, 2020, we had total liquidity on a consolidated basis comprised of $94,342 of cash and cash equivalents (including $20,150 of restricted cash). We manage our cash in accordance with our intercompany cash management system subject to the requirements of our debt facilities. Our cash and cash equivalents, as well as our restricted cash balances, generally exceed Federal Deposit Insurance Corporation insurance limits. We place our cash, cash equivalents and restricted cash in what we believe to be credit-worthy financial institutions. In addition, certain of our money market accounts invest in U.S. Treasury securities or other obligations issued or guaranteed by the U.S. government or its agencies. At June 30, 2020, $20,002 of restricted cash is in escrow to be applied as a prepayment on the term loan on the Overseas Gulf Coast, due 2024. On July 30, 2020, the $20,002 of restricted cash was used towards the payment in full of the Overseas Gulf Coast term loan, due 2024. See below for further details. The remaining $148 of restricted cash as of June 30, 2020 was related to the Company’s Unsecured Senior Notes.

 

As of June 30, 2020, we had total debt outstanding (net of original issue discount and deferred financing costs) of $437,284 and a total debt to total capitalization of 53.9%, compared to $368,047 and 51.9%, respectively, at December 31, 2019. Net debt at June 30, 2020 was $343,090 compared to $326,544 at December 31, 2019.

 

Sources, Uses and Management of Capital

 

We generate significant cash flows through our complementary mix of time charters, voyage charters and contracts of affreightment. Net cash provided by operating activities during the six months ended June 30, 2020 was $42,266. In addition to operating cash flows, our other current potential sources of funds are proceeds from additional issuances of equity securities, additional borrowings and proceeds from the opportunistic sales of our vessels. In the past, we have also obtained funds from the issuance of long-term debt securities.

 

We use capital to fund working capital requirements, maintain the quality of our vessels, comply with U.S. and international shipping standards and environmental laws and regulations, repay or repurchase our outstanding loan facilities and to repurchase our common stock from time to time. We may also use cash generated by operations to finance capital expenditures to modernize and grow our fleet.

 

We are presently assessing the impact of the expected discontinuation of LIBOR in 2021.

 

  27

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

On July 30, 2020, the Company used $20,002 of restricted cash, along with a cash payment of $4,236, which included interest and other fees, to pay in full the Company’s term loan on the Overseas Gulf Coast, due 2024. At June 30, 2020, the principal amount of the term loan of $24,050 is included in current installments of long-term debt on the condensed consolidated balance sheets.

 

Off-Balance Sheet Arrangements

 

The Company did not have, during the periods presented, and does not currently have, any off-balance sheet arrangements.

 

Commitments

 

In 2019, the Company signed a binding contract for the construction of one approximately 204,000 BBL, oil and chemical tank barge. The anticipated delivery of the barge to the Company is during the fourth quarter of 2020. The Company’s commitments under the contract are $14,540 for the remainder of 2020.

  

Item 3: Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable due to the Company’s status as a smaller reporting company.

 

  28

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

Item 4: Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s current disclosure controls and procedures were effective as of June 30, 2020 to ensure that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

  29

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

PART II – OTHER INFORMATION

 

Item 1A. Risk Factors

 

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for 2019, and as may be updated in our subsequent quarterly reports. The risks described in our Annual Report on Form 10-K for 2019 are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. In particular, the COVID-19 pandemic has impacted our industry and our business in significant ways, creating new risks and heightening existing risks. Such risks include:

 

  ● Uncertainties in the oil trading market, with volatile and unpredictable oil pricing;
     
  ● Drastic decreases in demand that are expected to have a long duration;
     
  ● Heightened risk of off-hire periods resulting from managing virus-related delays;
     
  ● Potential and as yet unknowable costs for testing, cleaning, quarantine, immunization and certifications;
     
  ● Difficulty in easily accessing critical supplies - in particular face masks and other personal protective equipment;
     
  ● Questionable reliability and effectiveness of testing methodologies and PPE;
     
  ● Possible delays in receiving critical supplies and the services of specialized technicians;
     
  ● Unavailability of inspectors and delays in vetting of the vessels;
     
  ● The imposition of additional operational burdens on our crews;
     
  ● Unavailability of airlines or other transportation to move our crews into position, and increased costs associated with such travel;
     
  ● Compliance with mandates and recommendations of various regulatory agencies as they seek to react to continuously evolving information;
     
  ● Health of our key employees to operate our vessels and executives to manage the business during this turbulent time;
     
  ● Increased possibilities of refineries and other customers experiencing financial instability or going out of business;
     
  ● Delayed receipt of payments owed to us; and
     
  ● Increased costs to develop and implement policies and procedures to deal with all of these challenges.

 

As a direct result of the COVID-19 pandemic, the environment within which we operate is under escalating stress, presenting new risks and vulnerabilities that have previously not affected our performance. The level of uncertainty about the extent, duration and ultimate impact of the forces that are currently unsettling our markets has never been greater and will impact how supply, demand and price of crude oil will unfold in the months ahead. We expect to incur increased costs to address these challenges.

 

Direct management and operational risks exist now and are likely to continue and increase in the future relating to our ability to effectively sustain operational readiness. We may encounter challenges getting crew to and from our vessels in a manner that both protects their personal safety and endeavors to assure that a joining crew member is not bringing COVID-19 onto a vessel or is otherwise affecting a vessel’s acceptability in service. Our ability to adapt and implement policies and procedures in this regard, and to anticipate associated costs, are subject to developing consensus with relevant constituencies, including regulatory authorities, health officials, unions, customers, and those in our industry and supply chain, to achieve consistency and a common approach to coping with the very real and very difficult problems presented by COVID-19. There are heightened risks in our ability to comply with what are evolving, and sometimes conflicting, logistical health and safety protocols.

 

  30

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

In addition, we see heightened risks of off-hire periods resulting from managing virus-related delays, and anticipate increased costs for testing, cleaning, quarantine, immunization and certifications. Difficulty in accessing critical supplies, such as face masks and other personal protective equipment, receiving spare parts, and obtaining timely services of specialized technicians, impose additional operational burdens. It is not certain whether testing methodologies and personal protective equipment will prove reliable as effective measures to protect against the virus, and compliance with mandates and recommendations of various regulatory agencies as they seek to react to continuously evolving information also pose significant risks. We face the potential for increased costs and claims in the event that an employee tests positive for COVID-19. While OSG has not found it necessary to lay-off or furlough employees as a result of the COVID-19 pandemic, others in our industry have done so or are considering it as a possibility.

 

Further risks relate to potential longer-term impacts of the virus on our Jones Act trade. We are experiencing reduced cargo volumes and increased idle times, derivatives of falling refinery runs and unprecedented demand destruction for transportation fuels arising out of stay-at-home policies in many populated regions. The models we typically use to forecast demand may not be reliable in the wake of this health emergency. A V-shaped recovery is not expected in transportation fuel demand, with uneven recovery predicted in various fuel sectors. The shape and speed of fuel demand recovery could have significant negative impacts on our key customers, refineries in particular, which would likely have a material impact on both domestic tank vessel demand as well as on OSG’s expected forward revenue streams. Our shuttle tankers rely on customers with wells and fields in the Gulf of Mexico. Customers with high cash production costs are likely to be vulnerable to production cuts. In the event that wells and fields are shut in response to persistently low oil prices, this could have a material adverse effect on the revenues generated by our shuttle tankers.

 

It should be anticipated that volatility in rates will continue. The overall level of crude oil production cuts in the U.S. over the coming months and the impact of these cuts on the relative price differentials between domestic and comparable international crude oil are significant factors for the U.S. trades. Declining crude oil production, coupled with the increase of tonnage released back into the market once product stored is delivered for consumption, will likely impact negatively on future rates. We have exposed risk to those of our vessels which come into the spot market, as rate and utilization assumptions for those vessels must cover a wide range of possible scenarios. The range of possible outcomes is wide and the possible impact on actual rates achieved unknowable at this time.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults upon senior securities

 

None.

 

  31

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other information

 

None.

 

Item 6. Exhibits

 

31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.
   
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.
   
32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
10.1

Form of Overseas Shipholding Group, Inc. 2019 Incentive Compensation Plan for Management Time-Based Restricted Stock Unit Grant Agreement, Form “TB-Officer”. 

   
10.2

Form of Overseas Shipholding Group, Inc. 2019 Incentive Compensation Plan for Management Performance-Based Restricted Stock Unit Grant Agreement, Form “PB-ROIC”. 

   
10.3

Form of Overseas Shipholding Group, Inc. 2019 Incentive Compensation Plan for Management Performance-Based Restricted Stock Unit Grant Agreement, Form “PB-TSR”. 

   
101.INS

Inline XBRL Instance Document. 

   
101.SCH

Inline XBRL Taxonomy Schema. 

   
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase.
   
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase.
   
101.LAB Inline XBRL Taxonomy Extension Label Linkbase.
   
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase.

 

  32

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  OVERSEAS SHIPHOLDING GROUP, INC.
  (Registrant)
   
Date: August 7, 2020 /s/ Samuel H. Norton
  Samuel H. Norton
  Chief Executive Officer
   
Date: August 7, 2020 /s/ Richard Trueblood
  Richard Trueblood
  Chief Financial Officer
  (Mr. Trueblood is the Principal Financial Officer and has been duly authorized to sign on behalf of the Registrant)

 

  33

 

Exhibit 10.1

 

OVERSEAS SHIPHOLDING GROUP, INC.

2019 INCENTIVE COMPENSATION PLAN FOR MANAGEMENT

TIME-BASED RESTRICTED STOCK UNIT GRANT AGREEMENT

Form TB-Officer

 

THIS AGREEMENT, made as of this ________________, ____ (the “Agreement”), by and between Overseas Shipholding Group, Inc. (the “Company”), and __________ (the “Grantee”).

 

WHEREAS, the Company has adopted the Overseas Shipholding Group, Inc. 2019 Incentive Compensation Plan for Management (the “Plan”) to promote the interests of the Company and its shareholders by providing the employees and consultants of the Company with incentives and rewards to encourage them to continue in the service of the Company and with a proprietary interest in pursuing the long-term growth, profitability and financial success of the Company; and

 

WHEREAS, Section 7 of the Plan provides for the grant of Other Stock-Based Awards, including restricted stock units, to Participants in the Plan.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows:

 

1. Grant of RSUs. Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Grantee an award of __________ RSUs (collectively, the “RSUs”). Each RSU represents the right to receive one share of Common Stock subject to Section 4 below.

 

2. Grant Date. The “Grant Date” of the RSUs hereby granted is ___________________.

 

3. Incorporation of the Plan. All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein. If there is any conflict between the terms and conditions of the Plan and this Agreement, the terms and conditions of the Plan shall govern. Unless otherwise indicated herein, all capitalized terms used herein shall have the meanings given to such terms in the Plan.

 

4. Vesting and Settlement.

 

(a) Subject to Section 4(b) below, the RSUs shall vest as set forth in this Section 4(a), provided that the Grantee remains continuously employed by the Company through each applicable vesting date:

 

  a. One-third (1/3) of the RSUs shall vest and become exercisable on the first anniversary of the Grant Date
     
  b. One-third (1/3) of the RSUs shall vest and become exercisable on the second anniversary of the Grant Date
     
  c. One-third (1/3) of the RSUs shall vest and become exercisable on the third anniversary of the Grant Date

 

(b) If the Grantee’s Employment is terminated by the Company for a reason other than Cause or if the Grantee’s employment terminates due to the Grantee’s death or Disability, the RSUs shall vest and become exercisable in full as of the last date of employment, death or Disability.

  

 

 

 

(c) Settlement of the vested RSUs may be in either shares of Common Stock or cash, as determined by the Committee in its discretion, and shall occur as soon as practicable following the vesting date, but in no event later than 60 days after the vesting date (such date, the “Settlement Date”).

 

5. Rights as Shareholder.

 

(a) During the period beginning on the Grant Date and ending on the date that the RSU is settled, the Grantee will accrue dividend equivalents on the RSUs equal to the cash dividend or distribution that would have been paid on the RSU had the RSU been an issued and outstanding share of Common Stock on the record date for the dividend or distribution. Such accrued dividend equivalents (i) will vest and become payable upon the same terms and at the same time of settlement as the RSUs to which they relate, and (ii) will be denominated and payable solely in cash.

 

(b) If the RSUs are settled in shares of Common Stock, upon and following the Settlement Date and the entry of such settlement on the books of the Company or its transfer agents or registrars, the Grantee shall be the record owner of the shares of Common Stock and shall be entitled to all of the rights of a shareholder of the Company including the right to vote such shares of Common Stock and receive all dividends or other distributions paid with respect to such shares of Common Stock.

 

6. Forfeiture. RSUs and any related dividend equivalents which have not become vested, or do not vest, as of the date the Grantee’s Employment terminates shall immediately be forfeited on such date, and the Grantee shall have no further rights with respect thereto, unless the Grantee has a valid and enforceable employment agreement with the Company containing provisions that conflict with the foregoing, in which case the terms of such employment agreement shall prevail. In addition, in the event the Company experiences a major safety and/or containment incident which results from gross negligence or willful misconduct of management or results from a violation of federal operation, safety or construction regulations, or if the responsible party fails to report the incident, or to cooperate with relevant authorities in responding to such incident, in any such case as determined by the Committee in its sole discretion, all RSUs and any related dividend equivalents which have not become vested as of the date such incident occurs may be cancelled at the sole discretion of the Committee and the Grantee shall have no further rights with respect to the forfeited RSUs.

 

7. Restrictions. Subject to any exceptions set forth in this Agreement or the Plan, until such time as the RSUs are settled in accordance with Section 4, the RSUs or the rights represented thereby may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of. No purported sale, assignment, transfer, pledge, hypothecation or other disposal of the RSUs, or the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise will vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such purported sale, assignment, transfer, pledge, hypothecation or other disposal of the RSUs will be forfeited by the Grantee and all of the Grantee’s rights to such RSUs shall immediately terminate without any payment or consideration from the Company.

 

8. Restrictive Covenants. Unless otherwise determined by the Committee in its sole discretion, by accepting the RSUs, the Grantee acknowledges that the Grantee is bound by the following restrictive covenants (the “Restrictive Covenants”):

 

(a) Except to the extent (1) expressly authorized in writing by the Company or (2) required by law or any legal process, the Grantee shall not at any time during the Grantee’s Employment with the Company or any of its Affiliates or following the date the Grantee’s Employment terminates use, disseminate, disclose or divulge to any person or to any firm, corporation, association or other business entity, Confidential Information (as defined in Section 20 herein) or proprietary Trade Secrets (as defined in Section 20 herein) of the Company or any of its Affiliates; or

 

(b) The Grantee shall not at any time during the Grantee’s Employment with the Company or any of its Affiliates or following the date the Grantee’s Employment terminates make any derogatory, disparaging or negative statements, orally, written or otherwise, against the Company or any of its Affiliates or any of their respective directors, officers and employees.

 

 2 

 

 

Notwithstanding clause (a) above, pursuant to the Defend Trade Secrets Act of 2016 (18 U.S.C. 1833(b)), the Grantee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made in confidence either directly or indirectly to a federal, state, or local government official, or to an attorney, solely for the purpose of reporting or investigating a violation of law. The Grantee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret made in a complaint, or other document filed in a lawsuit or other proceeding, if such filing is made under seal. If the Grantee files a lawsuit or other action alleging retaliation by the Company for reporting a suspected violation of law, the Grantee may disclose the trade secret to the Grantee’s attorney and use the trade secret in the court proceeding or other action, if the Grantee files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order. This paragraph shall govern to the extent it may conflict with any other provision of this Agreement.

 

The Restrictive Covenants are in addition to and do not supersede any rights the Company or any of its Affiliates may have in law or at equity or under any other agreement. Notwithstanding the foregoing, in the event Grantee has a valid and enforceable employment agreement with the Company that contains similar restrictive covenants to those set forth herein, to the extent there is a conflict between the Restrictive Covenants and such employment agreement, the terms of such employment agreement shall prevail.

 

By accepting the RSUs, the Grantee shall further agree that it is impossible to measure in money the damages which will accrue to the Company or any of its Affiliates in the event the Grantee breaches the Restrictive Covenants. Therefore, if the Company or any of its Affiliates shall institute any action or proceeding to enforce the provisions hereof, the Grantee shall agree to waive the claim or defense that the Company or any of its Affiliates has an adequate remedy at law and the Grantee shall agree not to assert in any such action or proceeding the claim or defense that the Company or any of its Affiliates has an adequate remedy at law.

 

If at any time the Committee reasonably believes that the Grantee has breached any of the Restrictive Covenants described in clauses (a) and (b) above or in any other agreement including any employment agreement, the Committee may suspend the vesting of Grantee’s RSUs pending a good faith determination by the Committee of whether any such Restrictive Covenant has been breached, it being understood that such suspension shall not cause the settlement to be delayed beyond the last date that settlement may occur pursuant to Section 4 hereof. If the Committee determines in good faith that the Grantee has breached any such Restrictive Covenant, the Grantee shall immediately forfeit any outstanding unvested RSUs and any related dividend equivalents and shall repay to the Company, upon demand, any Common Stock or cash issued upon the settlement of the Grantee’s RSUs (and the payment of any related dividend equivalents) if the vesting of such RSUs occurred during such breach. The Grantee shall also be required to repay to the Company, in cash and upon demand, any proceeds resulting from the sale or other disposition (including to the Company) of Common Stock issued upon settlement of the Grantee’s RSUs if the sale or disposition was effected at any time during such breach.

 

The foregoing shall not prejudice the Company’s right to require the Grantee to account for and pay over to the Company on a pre-tax basis any profit obtained by the Grantee as a result of any transaction constituting a breach of the Restrictive Covenants.

 

9. Taxes.

 

(a) Liability for Tax-Related Items. Except to the extent prohibited by law, the Grantee acknowledges that the Grantee is ultimately liable and responsible for any and all income taxes (including federal, state, local and other income taxes), social insurance, payroll taxes and other tax-related withholding (the “Tax-Related Items”) arising in connection with the RSUs, regardless of any action the Company takes with respect to such Tax-Related Items. The Grantee further acknowledges that the Company (i) does not make any representation or undertaking regarding the treatment of any Tax-Related Item in connection with any aspect of the RSUs, including the grant and vesting of the RSUs, or the subsequent sale of the shares of Common Stock and (ii) does not commit, and is under no obligation, to structure the terms of the RSUs or any aspect of the RSUs to reduce or eliminate the Grantee’s liability for Tax-Related Items or achieve any particular tax result.

 

 3 

 

 

(b) Payment of Withholding Taxes. Notwithstanding any contrary provision of this Agreement, no shares of Common Stock shall be issued and no dividend equivalents shall be paid unless and until satisfactory arrangements (as determined by the Committee) have been made by the Grantee with respect to the payment of any taxes which the Company determines must be withheld with respect to such shares of Common Stock and payment of dividend equivalents. If the Grantee is subject to Section 16 of the Exchange Act pursuant to Rule 16a-2 promulgated thereunder, the Company will withhold from shares of Common Stock upon the relevant tax withholding event, unless the use of such withholding method is prevented by applicable law or has materially adverse accounting or tax consequences, in which case, the withholding obligation may be satisfied by one or a combination of the methods set forth in the Plan. If the Grantee is not subject to Section 16 of the Exchange Act pursuant to Rule 16a-2 promulgated thereunder, the Grantee may elect to have the Company withhold from shares of Common Stock upon the relevant tax withholding event and such election shall satisfy the Grantee’s obligations under this Section 9.

 

10. Modification; Entire Agreement; Waiver. No change, modification or waiver of any provision of this Agreement which reduces the Grantee’s rights hereunder will be valid unless the same is agreed to in writing by the parties hereto. This Agreement, together with the Plan, represent the entire agreement between the parties with respect to the RSUs. The failure of the Company to enforce at any time any provision of this Agreement will in no way be construed to be a waiver of such provision or of any other provision hereof.

 

11. Policy Against Insider Trading; Recoupment. By accepting the RSUs, the Grantee acknowledges that the Grantee is bound by and shall comply with all the terms and conditions of the Company’s insider trading policy as may be in effect from time to time. The Grantee further acknowledges and agrees that shares of Common Stock or cash delivered in settlement of the RSUs or any dividend equivalents, and any proceeds of such shares of Common Stock, are subject to any recoupment or “clawback” policy of the Company as may be in effect from time to time and applied with prospective or retroactive effect.

 

12. Data Privacy Consent. The Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantee’s personal data as described in this Agreement and any other RSU grant materials by the Company for the exclusive purpose of implementing, administering and managing the Grantee’s participation in the Plan. The Grantee understands that the Company may hold certain personal information about the Grantee, including, but not limited to, the Grantee’s name, home address and telephone number, work location and phone number, date of birth, social insurance number or other identification number, salary, nationality, job title, hire date, any shares of Common Stock or directorships held in the Company or any of its Affiliates, details of all awards or any other entitlement to shares awarded, cancelled, exercised, vested, unvested or outstanding in the Grantee’s favor, for the purpose of implementing, administering and managing the Plan (“Personal Data”). The Grantee understands that Personal Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, now or in the future, that these recipients may be located in the Grantee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the Grantee’s country. The Grantee authorizes the recipients to receive, possess, use, retain and transfer the Personal Data, in electronic or other form, for the purposes of implementing, administering and managing the Grantee’s participation in the Plan. The Grantee understands that Personal Data will be held only as long as is necessary or appropriate to implement, administer and manage the Grantee’s participation in the Plan. Further, the Grantee understands that the Grantee is providing the consents herein on a purely voluntary basis.

 

 4 

 

 

13. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Grantee and the Grantee’s beneficiary, if applicable.

 

14. Captions. Captions provided herein are for convenience only and shall not affect the scope, meaning, intent or interpretation of the provisions of this Agreement.

 

15. Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.

 

16. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.

 

17. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without regard to the provisions governing conflict of laws.

 

18. Acceptance. The Grantee hereby acknowledges receipt of a copy of the Plan and this Agreement. The Grantee has read and understands the terms and provisions thereof, and accepts the RSUs subject to all of the terms and conditions of the Plan and this Agreement. The Grantee hereby acknowledges that all decisions, determinations and interpretations of the Board of Directors, or a Committee thereof, in respect of the Plan, this Agreement and the RSUs shall be final and conclusive. The Grantee acknowledges that there may be adverse tax consequences upon disposition of the underlying shares and that the Grantee should consult a tax advisor prior to such disposition.

 

19. Section 409A. This Agreement is intended to comply with Section 409A of the Code or an exemption thereunder and shall be construed and interpreted in a manner that is consistent with the requirements for avoiding additional taxes or penalties under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no representations that the payment and benefits provided under this Agreement comply with Section 409A of the Code and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with Section 409A of the Code. Notwithstanding any provision of this Agreement to the contrary, any compensation or benefit payable hereunder that constitutes a deferral of compensation under Code Section 409A shall be subject to the following:

 

(a) no amount or benefit that is payable upon a termination of employment or services from the Company shall be payable unless such termination also meets the requirements of a “separation from service” under Treasury Regulation Section 1.409A-1(h), and references in the Agreement to “termination”, “termination of employment” or like terms shall mean a “separation from service;”

 

(b) in the event that any payment to the Grantee or any benefit hereunder is made upon, or as a result of, the Grantee’s termination of employment, and the Grantee is a “specified employee” (as that term is defined under Section 409A of the Code) at the time the Grantee becomes entitled to any such payment or benefit, and provided further that such payment or benefit does not otherwise qualify for an applicable exemption from Section 409A of the Code, then no such payment or benefit will be paid or commenced to be paid to the Grantee under this Agreement until the date that is the earlier to occur of (i) the Grantee’s death or (ii) six months and one day following the Grantee’s termination of employment (the “Delay Period”). Any payments which the Grantee would otherwise have received during the Delay Period will be payable to the Grantee in a lump sum on the date that is six months and one day following the effective date of the termination, and any remaining compensation and benefits due under the Agreement shall be paid or provided as otherwise set forth herein;

 

 5 

 

 

(c) whenever a payment under this Agreement specifies a payment period, the actual date of payment within such specified period shall be within the sole discretion of the Company, and the Grantee shall have no right (directly or indirectly) to determine the year in which such payment is made. In the event a payment period straddles two consecutive calendar years, the payment shall be made in the later of such calendar years;

 

(d) each separately identified amount and each installment payment to which the Grantee is entitled to payment shall be deemed to be a separate payment for purposes of Section 409A of the Code; and

 

(e) the payment of any compensation or benefit may not be accelerated except to the extent permitted by Section 409A of the Code.

 

20. Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below:

 

(a) “Cause” shall mean (i) the Grantee’s failure to attempt in good faith to perform his or her lawful duties (other than as a result of Disability); (ii) the Grantee’s willful misconduct or gross negligence of a material nature in connection with the performance of his or her duties as an employee, which is or could reasonably be expected to be materially injurious to the Company, or any of its Affiliates (whether financially, reputationally or otherwise) (“Injurious”); (iii) a breach by the Grantee of the Grantee’s fiduciary duty or duty of loyalty to the Company or its Affiliates which is or could reasonably be expected to be Injurious; (iv) the Grantee’s intentional and unauthorized removal, use or disclosure of the Company’s or any Affiliate’s document (in any medium or form) relating to the Company or an Affiliate, or the customers of the Company or an Affiliate thereof and which is not pursuant to his or her lawful duties and may be Injurious to the Company, its customers or their respective Affiliates; (v) the willful performance by the Grantee of any act or acts of dishonesty in connection with or relating to the Company’s or its Affiliates’ business which is or could reasonably be expected to be Injurious, or the willful misappropriation (or willful attempted misappropriation) of any of the Company’s or any of its Affiliates’ funds or property; (vi) the indictment of the Grantee for, or a plea of guilty or nolo contendere by the Grantee to, any felony or other serious crime involving moral turpitude; (vii) a material breach of any of the Grantee’s obligations under any agreement entered into between the Grantee and the Company or any of its Affiliates that is material to either (A) the employment relationship between the Company or any of its Affiliates and the Grantee or (B) the relationship between the Company and the Grantee as investor or prospective investor in the Company; or (viii) a material breach of the Company’s policies or procedures, which breach causes or could reasonably be expected to cause material harm to the Company or its business reputation; provided that, with respect to the events in clauses (i), (ii), (iv), or (vii) herein, the Company shall have delivered written notice to the Grantee of its intention to terminate the Grantee’s employment for Cause, which notice specifies in reasonable detail the circumstances claimed to give rise to the Company’s right to terminate the Grantee’s employment for Cause and the Grantee shall not have cured such circumstances, to the extent such circumstances are reasonably susceptible to cure as determined by the Board of Directors in good faith, within 30 days following the Company’s delivery of such notice.

 

(b) “Competitor” shall mean any individual, corporation, partnership or other entity that engages in (or that owns a significant interest in any corporation, partnership or other entity that engages in) any business conducted by the Company or any of its Affiliates.

 

 6 

 

 

(c) “Confidential Information” shall mean all information regarding the Company or any of its Affiliates, any Company activity or the activity of any of its Affiliates, Company business or the business of any of its Affiliates, or Company customers or the customers of any of its Affiliates that is not generally known to persons not employed or retained (as employees or as independent contractors or agents) by the Company or any of its Affiliates, that is not generally disclosed by Company practice or authority to persons not employed by the Company or any of its Affiliates that does not rise to the level of a Trade Secret and that is the subject of reasonable efforts to keep it confidential, and shall include, to the extent such information is not a Trade Secret and to the extent material, but not be limited to product code, product concepts, production techniques, technical information regarding the Company’s or any of its Affiliates’ products or services, production processes and product/service development, operations techniques, product/service formulas, information concerning Company or any of its Affiliates’ techniques for use and integration of its website and other products/services, current and future development and expansion or contraction plans of the Company or any of its Affiliates, sale/acquisition plans and contacts, marketing plans and contacts, information concerning the legal affairs of the Company or any of its Affiliates and certain information concerning the strategy, tactics and financial affairs of the Company or any of its Affiliates; provided that Confidential Information shall not include information that has become generally available to the public, other than through a breach by such Grantee; and provided further that this definition shall not limit any definition of “confidential information” or any equivalent term under the Uniform Trade Secrets Act or any other state, local or federal law.

 

(d) “Disability” shall mean, as a result of the Grantee’s incapacity due to physical or mental illness or injury, the Grantee (i) becomes eligible to receive a benefit under the Company’s long-term disability plan applicable to the Grantee, or (ii) has been unable, due to physical or mental illness or incapacity, to perform the essential duties of his or her employment with reasonable accommodation for a continuous period of 90 days or an aggregate of 180 days within a one-year period.

 

(e) “Trade Secrets” shall mean all secret, proprietary or confidential information regarding the Company (which shall mean and include all of the Company’s subsidiaries and all Affiliates and joint ventures connected by ownership to the Company at any time) or any Company activity that fits within the definition of “trade secrets” under the Uniform Trade Secrets Act or other applicable law, and shall include, but not be limited to, all source codes and object codes for the Company’s software and all website design information to the extent that such information fits within the Uniform Trade Secrets Act; provided that Trade Secrets shall not include information that has become generally available to the public, other than through a breach by such Grantee; and provided further that this definition shall not limit any definition of “trade secrets” or any equivalent term under the Uniform Trade Secrets Act or any other state, local or federal law.

 

* * * * *

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer and said Grantee has hereunto signed this Agreement on the Grantee’s own behalf, thereby representing that the Grantee has carefully read and understands this Agreement and the Plan as of the day and year first written above.

 

  OVERSEAS SHIPHOLDING GROUP, INC.
     
     
  By: Samuel H. Norton
  Title: President and CEO

 

  Acknowledged and Accepted:
   
   
  Executive Officer Name  

 

 7 

 

 

Exhibit 10.2

 

OVERSEAS SHIPHOLDING GROUP, INC.

2019 INCENTIVE COMPENSATION PLAN FOR MANAGEMENT

PERFORMANCE-BASED

RESTRICTED STOCK UNIT GRANT AGREEMENT

Form PB - ROIC

 

THIS AGREEMENT, made as of this ___________, ____ (the “Agreement”), by and between Overseas Shipholding Group, Inc. (the “Company”), and ________________ (the “Grantee”).

 

WHEREAS, the Company has adopted the Overseas Shipholding Group, Inc. 2019 Incentive Compensation Plan for Management (the “Plan”) to promote the interests of the Company and its shareholders by providing the employees and consultants of the Company with incentives and rewards to encourage them to continue in the service of the Company and with a proprietary interest in pursuing the long-term growth, profitability and financial success of the Company; and

 

WHEREAS, Section 7 of the Plan provides for the grant of Other Stock-Based Awards, including restricted stock units, to Participants in the Plan.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows:

 

1. Grant of RSUs. Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Grantee an award of performance-based RSUs (collectively, the “RSUs”) in a number equal to a target of _________ (the “Target RSUs”) and a maximum of __________ with the actual number of RSUs to be determined based upon achievement of performance criteria as described in Section 4 below. Each RSU represents the right to receive one share of Common Stock subject to Section 4 below.

 

2. Grant Date. The “Grant Date” of the RSUs hereby granted is _________________.

 

3. Incorporation of the Plan. All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein. If there is any conflict between the terms and conditions of the Plan and this Agreement, the terms and conditions of the Plan shall govern. Unless otherwise indicated herein, all capitalized terms used herein shall have the meanings given to such terms in the Plan.

 

4. Vesting and Settlement.

 

(a) Except as specifically provided in this Agreement and subject to certain restrictions and conditions set forth in the Plan, the RSUs shall vest and become nonforfeitable based upon the satisfaction of the ROIC performance goal (the “ROIC Performance Goal”) as set forth below, provided that the Grantee remains continuously employed by the Company through the end of the three-year period commencing on ___________ and ending on _______________ (the “Performance Period”). The ROIC Performance Goal shall be based on the Company’s cumulative return on invested capital (“ROIC”) relative to the Company’s budgeted ROIC for the Performance Period. The formula for calculating “ROIC” is:

 

Net operating profit after taxes (operating income less taxes)

Long term debt + Current portion of long term debt - Cash+ Shareholders Equity

 

as determined in accordance with U.S. generally accepted accounting procedures and as reflected on the Company’s audited financial statements. The portion of the Grantee’s RSUs, if any, that vests and becomes nonforfeitable in the Performance Period shall be determined in accordance with the following schedule, using linear interpolation between 80% and 100% attainment and between 100% and 120% attainment of the Performance Goal, as certified by the Committee:

 

Performance Attainment (as a % of Performance Goal)   Percentage of Target RSUs that Vest and Become Nonforfeitable
Below 80%   0%
80%   50%
100%   100%
120%   150%

 

   

 

 

No fractional shares of Common Stock shall be issued, and any fractional share that would have resulted from the foregoing calculations shall be rounded down to the next whole share.

 

(b) Notwithstanding anything to the contrary in Section 4(a) above, if the Grantee’s Employment is terminated by the Company for a reason other than Cause before the end of the Performance Period, a pro-rata portion of the RSUs shall vest as of the last day of the Performance Period, determined by multiplying the number of RSUs that otherwise would have vested at the end of the Performance Period, based on the level of attainment of the ROIC Performance Goal as certified by the Committee as provided in Section 4(c) below, by a fraction, the numerator of which is the number of days the Grantee was in Employment during the Performance Period and the denominator of which is the number of days in the Performance Period.

 

(c) Settlement of the vested RSUs may be in either shares of Common Stock or cash, as determined by the Committee in its discretion, and shall occur as soon as practicable following the Committee’s certification following the end of the Performance Period of the level of attainment of the ROIC Performance Goal and in any event no later than 60 days after the date of the Committee’s certification (such date, the “Settlement Date”).

 

5. Rights as Shareholder.

 

(a) During the period beginning on the Grant Date and ending on the date that the RSU is settled, the Grantee will accrue dividend equivalents on the RSUs equal to the cash dividend or distribution that would have been paid on the RSU had the RSU been an issued and outstanding share of Common Stock on the record date for the dividend or distribution. Such accrued dividend equivalents (i) will vest and become payable upon the same terms and at the same time of settlement as the RSUs to which they relate, and (ii) will be denominated and payable solely in cash.

 

(b) If the RSUs are settled in shares of Common Stock, upon and following the Settlement Date and the entry of such settlement on the books of the Company or its transfer agents or registrars, the Grantee shall be the record owner of the shares of Common Stock and shall be entitled to all of the rights of a shareholder of the Company including the right to vote such shares of Common Stock and receive all dividends or other distributions paid with respect to such shares of Common Stock

 

6. Forfeiture. Except as otherwise provided in Section 4(b), RSUs and any dividend equivalents which have not become vested as of the date the Grantee’s Employment terminates shall immediately be forfeited on such date, and the Grantee shall have no further rights with respect thereto. In addition, in the event the Company experiences a major safety and/or containment incident which results from gross negligence or willful misconduct of management or results from a violation of federal operation, safety or construction regulations, or if the responsible party fails to report the incident, or to cooperate with relevant authorities in responding to such incident, in any such case as determined by the Committee in its sole discretion, all RSUs and any related dividend equivalents which have not become vested as of the date such incident occurs may be cancelled at the sole discretion of the Committee and the Grantee shall have no further rights with respect to the forfeited RSUs.

 

 2 

 

 

7. Restrictions. Subject to any exceptions set forth in this Agreement or the Plan, until such time as the RSUs are settled in accordance with Section 4, the RSUs or the rights represented thereby may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of. No purported sale, assignment, transfer, pledge, hypothecation or other disposal of the RSUs, or the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise will vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such purported sale, assignment, transfer, pledge, hypothecation or other disposal of the RSUs will be forfeited by the Grantee and all of the Grantee’s rights to such RSUs shall immediately terminate without any payment or consideration from the Company.

 

8. Restrictive Covenants. Unless otherwise determined by the Committee in its sole discretion, by accepting the RSUs, the Grantee acknowledges that the Grantee is bound by the following restrictive covenants (the “Restrictive Covenants”):

 

(a) Except to the extent (1) expressly authorized in writing by the Company or (2) required by law or any legal process, the Grantee shall not at any time during the Grantee’s Employment with the Company or any of its Affiliates or following the date the Grantee’s Employment terminates use, disseminate, disclose or divulge to any person or to any firm, corporation, association or other business entity, Confidential Information (as defined in Section 20 herein) or proprietary Trade Secrets (as defined in Section 20 herein) of the Company or any of its Affiliates; or

 

(b) The Grantee shall not at any time during the Grantee’s Employment with the Company or any of its Affiliates or following the date the Grantee’s Employment terminates make any derogatory, disparaging or negative statements, orally, written or otherwise, against the Company or any of its Affiliates or any of their respective directors, officers and employees.

 

Notwithstanding clause (a) above, pursuant to the Defend Trade Secrets Act of 2016 (18 U.S.C. 1833(b)), the Grantee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made in confidence either directly or indirectly to a federal, state, or local government official, or to an attorney, solely for the purpose of reporting or investigating a violation of law. The Grantee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret made in a complaint, or other document filed in a lawsuit or other proceeding, if such filing is made under seal. If the Grantee files a lawsuit or other action alleging retaliation by the Company for reporting a suspected violation of law, the Grantee may disclose the trade secret to the Grantee’s attorney and use the trade secret in the court proceeding or other action, if the Grantee files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order. This paragraph shall govern to the extent it may conflict with any other provision of this Agreement.

 

The Restrictive Covenants are in addition to and do not supersede any rights the Company or any of its Affiliates may have in law or at equity or under any other agreement.

 

By accepting the RSUs, the Grantee shall further agree that it is impossible to measure in money the damages which will accrue to the Company or any of its Affiliates in the event the Grantee breaches the Restrictive Covenants. Therefore, if the Company or any of its Affiliates shall institute any action or proceeding to enforce the provisions hereof, the Grantee shall agree to waive the claim or defense that the Company or any of its Affiliates has an adequate remedy at law and the Grantee shall agree not to assert in any such action or proceeding the claim or defense that the Company or any of its Affiliates has an adequate remedy at law.

 

If at any time the Committee reasonably believes that the Grantee has breached any of the Restrictive Covenants described in clauses (a) and (b) above, the Committee may suspend the vesting of Grantee’s RSUs pending a good faith determination by the Committee of whether any such Restrictive Covenant has been breached, it being understood that such suspension shall not cause the settlement to be delayed beyond the last date that settlement may occur pursuant to Section 4 hereof. If the Committee determines in good faith that the Grantee has breached any such Restrictive Covenant, the Grantee shall immediately forfeit any outstanding unvested RSUs and any related dividend equivalents and shall repay to the Company, upon demand, any Common Stock or cash issued upon the settlement of the Grantee’s RSUs (and the payment of any related dividend equivalents) if the vesting of such RSUs occurred during such breach. The Grantee shall also be required to repay to the Company, in cash and upon demand, any proceeds resulting from the sale or other disposition (including to the Company) of Common Stock issued upon settlement of the Grantee’s RSUs if the sale or disposition was effected at any time during such breach.

 

 3 

 

 

The foregoing shall not prejudice the Company’s right to require the Grantee to account for and pay over to the Company on a pre-tax basis any profit obtained by the Grantee as a result of any transaction constituting a breach of the Restrictive Covenants.

 

9. Taxes.

 

(a) Liability for Tax-Related Items. Except to the extent prohibited by law, the Grantee acknowledges that the Grantee is ultimately liable and responsible for any and all income taxes (including federal, state, local and other income taxes), social insurance, payroll taxes and other tax-related withholding (the “Tax-Related Items”) arising in connection with the RSUs, regardless of any action the Company takes with respect to such Tax-Related Items. The Grantee further acknowledges that the Company (i) does not make any representation or undertaking regarding the treatment of any Tax-Related Item in connection with any aspect of the RSUs, including the grant and vesting of the RSUs, or the subsequent sale of the shares of Common Stock and (ii) does not commit, and is under no obligation, to structure the terms of the RSUs or any aspect of the RSUs to reduce or eliminate the Grantee’s liability for Tax-Related Items or achieve any particular tax result.

 

(b) Payment of Withholding Taxes. Notwithstanding any contrary provision of this Agreement, no shares of Common Stock shall be issued and no dividend equivalents shall be paid unless and until satisfactory arrangements (as determined by the Committee) have been made by the Grantee with respect to the payment of any taxes which the Company determines must be withheld with respect to such shares of Common Stock and payment of dividend equivalents. If the Grantee is subject to Section 16 of the Exchange Act pursuant to Rule 16a-2 promulgated thereunder, the Company will withhold from shares of Common Stock upon the relevant tax withholding event, unless the use of such withholding method is prevented by applicable law or has materially adverse accounting or tax consequences, in which case, the withholding obligation may be satisfied by one or a combination of the methods set forth in the Plan. If the Grantee is not subject to Section 16 of the Exchange Act pursuant to Rule 16a-2 promulgated thereunder, the Grantee may elect to have the Company withhold from shares of Common Stock upon the relevant tax withholding event and such election shall satisfy the Grantee’s obligations under this Section 9.

 

10. Modification; Entire Agreement; Waiver. No change, modification or waiver of any provision of this Agreement which reduces the Grantee’s rights hereunder will be valid unless the same is agreed to in writing by the parties hereto. This Agreement, together with the Plan, represent the entire agreement between the parties with respect to the RSUs. The failure of the Company to enforce at any time any provision of this Agreement will in no way be construed to be a waiver of such provision or of any other provision hereof.

 

11. Policy Against Insider Trading; Recoupment. By accepting the RSUs, the Grantee acknowledges that the Grantee is bound by and shall comply with all the terms and conditions of the Company’s insider trading policy as may be in effect from time to time. The Grantee further acknowledges and agrees that shares of Common Stock or cash delivered in settlement of the RSUs or any dividend equivalents, and any proceeds of such shares of Common Stock, are subject to any recoupment or “clawback” policy of the Company as may be in effect from time to time and applied with prospective or retroactive effect.

 

 4 

 

 

12. Data Privacy Consent. The Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantee’s personal data as described in this Agreement and any other RSU grant materials by the Company for the exclusive purpose of implementing, administering and managing the Grantee’s participation in the Plan. The Grantee understands that the Company may hold certain personal information about the Grantee, including, but not limited to, the Grantee’s name, home address and telephone number, work location and phone number, date of birth, social insurance number or other identification number, salary, nationality, job title, hire date, any shares of Common Stock or directorships held in the Company or any of its Affiliates, details of all awards or any other entitlement to shares awarded, cancelled, exercised, vested, unvested or outstanding in the Grantee’s favor, for the purpose of implementing, administering and managing the Plan (“Personal Data”). The Grantee understands that Personal Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, now or in the future, that these recipients may be located in the Grantee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the Grantee’s country. The Grantee authorizes the recipients to receive, possess, use, retain and transfer the Personal Data, in electronic or other form, for the purposes of implementing, administering and managing the Grantee’s participation in the Plan. The Grantee understands that Personal Data will be held only as long as is necessary or appropriate to implement, administer and manage the Grantee’s participation in the Plan. Further, the Grantee understands that the Grantee is providing the consents herein on a purely voluntary basis.

 

13. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Grantee and the Grantee’s beneficiary, if applicable.

 

14. Captions. Captions provided herein are for convenience only and shall not affect the scope, meaning, intent or interpretation of the provisions of this Agreement.

 

15. Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.

 

16. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.

 

17. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without regard to the provisions governing conflict of laws.

 

18. Acceptance. The Grantee hereby acknowledges receipt of a copy of the Plan and this Agreement. The Grantee has read and understands the terms and provisions thereof, and accepts the RSUs subject to all of the terms and conditions of the Plan and this Agreement. The Grantee hereby acknowledges that all decisions, determinations and interpretations of the Board of Directors, or a Committee thereof, in respect of the Plan, this Agreement and the RSUs shall be final and conclusive. The Grantee acknowledges that there may be adverse tax consequences upon disposition of the underlying shares and that the Grantee should consult a tax advisor prior to such disposition.

 

19. Section 409A. This Agreement is intended to comply with Section 409A of the Code or an exemption thereunder and shall be construed and interpreted in a manner that is consistent with the requirements for avoiding additional taxes or penalties under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no representations that the payment and benefits provided under this Agreement comply with Section 409A of the Code and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with Section 409A of the Code. Notwithstanding any provision of this Agreement to the contrary, any compensation or benefit payable hereunder that constitutes a deferral of compensation under Code Section 409A shall be subject to the following:

 

(a) no amount or benefit that is payable upon a termination of employment or services from the Company shall be payable unless such termination also meets the requirements of a “separation from service” under Treasury Regulation Section 1.409A-1(h), and references in the Agreement to “termination”, “termination of employment” or like terms shall mean a “separation from service;”

 

 5 

 

 

(b) in the event that any payment to the Grantee or any benefit hereunder is made upon, or as a result of, the Grantee’s termination of employment, and the Grantee is a “specified employee” (as that term is defined under Section 409A of the Code) at the time the Grantee becomes entitled to any such payment or benefit, and provided further that such payment or benefit does not otherwise qualify for an applicable exemption from Section 409A of the Code, then no such payment or benefit will be paid or commenced to be paid to the Grantee under this Agreement until the date that is the earlier to occur of (i) the Grantee’s death or (ii) six months and one day following the Grantee’s termination of employment (the “Delay Period”). Any payments which the Grantee would otherwise have received during the Delay Period will be payable to the Grantee in a lump sum on the date that is six months and one day following the effective date of the termination, and any remaining compensation and benefits due under the Agreement shall be paid or provided as otherwise set forth herein;

 

(c) whenever a payment under this Agreement specifies a payment period, the actual date of payment within such specified period shall be within the sole discretion of the Company, and the Grantee shall have no right (directly or indirectly) to determine the year in which such payment is made. In the event a payment period straddles two consecutive calendar years, the payment shall be made in the later of such calendar years;

 

(d) each separately identified amount and each installment payment to which the Grantee is entitled to payment shall be deemed to be a separate payment for purposes of Section 409A of the Code; and

 

(e) the payment of any compensation or benefit may not be accelerated except to the extent permitted by Section 409A of the Code.

 

20. Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below:

 

(a) “Cause” shall mean (i) the Grantee’s failure to attempt in good faith to perform his or her lawful duties (other than as a result of Disability); (ii) the Grantee’s willful misconduct or gross negligence of a material nature in connection with the performance of his or her duties as an employee, which is or could reasonably be expected to be materially injurious to the Company, or any of its Affiliates (whether financially, reputationally or otherwise) (“Injurious”); (iii) a breach by the Grantee of the Grantee’s fiduciary duty or duty of loyalty to the Company or its Affiliates which is or could reasonably be expected to be Injurious; (iv) the Grantee’s intentional and unauthorized removal, use or disclosure of the Company’s or any Affiliate’s document (in any medium or form) relating to the Company or an Affiliate, or the customers of the Company or an Affiliate thereof and which is not pursuant to his or her lawful duties and may be Injurious to the Company, its customers or their respective Affiliates; (v) the willful performance by the Grantee of any act or acts of dishonesty in connection with or relating to the Company’s or its Affiliates’ business which is or could reasonably be expected to be Injurious, or the willful misappropriation (or willful attempted misappropriation) of any of the Company’s or any of its Affiliates’ funds or property; (vi) the indictment of the Grantee for, or a plea of guilty or nolo contendere by the Grantee to, any felony or other serious crime involving moral turpitude; (vii) a material breach of any of the Grantee’s obligations under any agreement entered into between the Grantee and the Company or any of its Affiliates that is material to either (A) the employment relationship between the Company or any of its Affiliates and the Grantee or (B) the relationship between the Company and the Grantee as investor or prospective investor in the Company; or (viii) a material breach of the Company’s policies or procedures, which breach causes or could reasonably be expected to cause material harm to the Company or its business reputation; provided that, with respect to the events in clauses (i), (ii), (iv), or (vii) herein, the Company shall have delivered written notice to the Grantee of its intention to terminate the Grantee’s employment for Cause, which notice specifies in reasonable detail the circumstances claimed to give rise to the Company’s right to terminate the Grantee’s employment for Cause and the Grantee shall not have cured such circumstances, to the extent such circumstances are reasonably susceptible to cure as determined by the Board of Directors in good faith, within 30 days following the Company’s delivery of such notice.

 

 6 

 

 

(b) “Competitor” shall mean any individual, corporation, partnership or other entity that engages in (or that owns a significant interest in any corporation, partnership or other entity that engages in) any business conducted by the Company or any of its Affiliates.

 

(c) “Confidential Information” shall mean all information regarding the Company or any of its Affiliates, any Company activity or the activity of any of its Affiliates, Company business or the business of any of its Affiliates, or Company customers or the customers of any of its Affiliates that is not generally known to persons not employed or retained (as employees or as independent contractors or agents) by the Company or any of its Affiliates, that is not generally disclosed by Company practice or authority to persons not employed by the Company or any of its Affiliates that does not rise to the level of a Trade Secret and that is the subject of reasonable efforts to keep it confidential, and shall include, to the extent such information is not a Trade Secret and to the extent material, but not be limited to product code, product concepts, production techniques, technical information regarding the Company’s or any of its Affiliates’ products or services, production processes and product/service development, operations techniques, product/service formulas, information concerning Company or any of its Affiliates’ techniques for use and integration of its website and other products/services, current and future development and expansion or contraction plans of the Company or any of its Affiliates, sale/acquisition plans and contacts, marketing plans and contacts, information concerning the legal affairs of the Company or any of its Affiliates and certain information concerning the strategy, tactics and financial affairs of the Company or any of its Affiliates; provided that Confidential Information shall not include information that has become generally available to the public, other than through a breach by such Grantee; and provided further that this definition shall not limit any definition of “confidential information” or any equivalent term under the Uniform Trade Secrets Act or any other state, local or federal law.

 

(d) “Disability” shall mean, as a result of the Grantee’s incapacity due to physical or mental illness or injury, the Grantee (i) becomes eligible to receive a benefit under the Company’s long-term disability plan applicable to the Grantee, or (ii) has been unable, due to physical or mental illness or incapacity, to perform the essential duties of his or her employment with reasonable accommodation for a continuous period of 90 days or an aggregate of 180 days within a one-year period.

 

(e) “Trade Secrets” shall mean all secret, proprietary or confidential information regarding the Company (which shall mean and include all of the Company’s subsidiaries and all Affiliates and joint ventures connected by ownership to the Company at any time) or any Company activity that fits within the definition of “trade secrets” under the Uniform Trade Secrets Act or other applicable law, and shall include, but not be limited to, all source codes and object codes for the Company’s software and all website design information to the extent that such information fits within the Uniform Trade Secrets Act; provided that Trade Secrets shall not include information that has become generally available to the public, other than through a breach by such Grantee; and provided further that this definition shall not limit any definition of “trade secrets” or any equivalent term under the Uniform Trade Secrets Act or any other state, local or federal law.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer and said Grantee has hereunto signed this Agreement on the Grantee’s own behalf, thereby representing that the Grantee has carefully read and understands this Agreement and the Plan as of the day and year first written above.

 

  OVERSEAS SHIPHOLDING GROUP, INC.
   
     
  By: Samuel H. Norton
  Title: President and CEO
   
  Acknowledged and Accepted:
   
   
  Executive Officer name

 

 7 

 

 

Exhibit 10.3

 

OVERSEAS SHIPHOLDING GROUP, INC.

2019 INCENTIVE COMPENSATION PLAN FOR MANAGEMENT

PERFORMANCE-BASED

RESTRICTED STOCK UNIT GRANT AGREEMENT

Form PB-TSR

 

THIS AGREEMENT, made as of this this______, ____ (the “Agreement”), by and between Overseas Shipholding Group, Inc. (the “Company”), and _____________ (the “Grantee”).

 

WHEREAS, the Company has adopted the Overseas Shipholding Group, Inc. 2019 Incentive Compensation Plan for Management (the “Plan”) to promote the interests of the Company and its shareholders by providing the employees and consultants of the Company with incentives and rewards to encourage them to continue in the service of the Company and with a proprietary interest in pursuing the long-term growth, profitability and financial success of the Company; and

 

WHEREAS, Section 7 of the Plan provides for the grant of Other Stock-Based Awards, including restricted stock units, to Participants in the Plan.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows:

 

1. Grant of RSUs. Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Grantee an award of performance-based RSUs (collectively, the “RSUs”) in a number equal to a target of ______ (the “Target RSUs”) and a maximum of _________ with the actual number of RSUs to be determined based upon achievement of performance criteria as described in Section 4 below. Each RSU represents the right to receive one share of Common Stock subject to Section 4 below.

 

2. Grant Date. The “Grant Date” of the RSUs hereby granted is _______________.

 

3. Incorporation of the Plan. All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein. If there is any conflict between the terms and conditions of the Plan and this Agreement, the terms and conditions of the Plan shall govern. Unless otherwise indicated herein, all capitalized terms used herein shall have the meanings given to such terms in the Plan.

 

4. Vesting and Settlement.

 

(a) Except as specifically provided in this Agreement and subject to certain restrictions and conditions set forth in the Plan, the RSUs shall vest and become nonforfeitable based upon the satisfaction of the TSR performance goal (the “TSR Performance Goal”) as set forth below, provided that the Grantee remains continuously employed by the Company through the end of the three-year period commencing on ________ and ending on ____________ (the “Performance Period”). The TSR Performance Goal shall be based upon a comparison of the total shareholder return (“TSR”) of the Company to the TSRs of the companies (other than the Company) that comprise a combination of the Oil & Gas Storage & Transport and Marine GICS Sub Industries Indexes (the “Index”) during the Performance Period; provided, any company that is included in the Index at the beginning of the Performance Period but that is removed from the Index prior to the end of the Performance Period due to bankruptcy or a restructuring shall be assigned a level of TSR achievement that is lower than that of any company included in the Index on the last day of the Performance Period. “TSR” means the percentage rate of return, which can be positive or negative, from the first trading day of the Performance Period to the last trading day of the Performance Period, of an equivalent investment in the Common Stock of the Company, or the common shares of beneficial interest issued by the relevant company in the Index on the first trading day of the Performance Period, assuming reinvestment of all dividends and other distributions paid during the Performance Period. The portion of the Grantee’s RSUs, if any, that vests and becomes nonforfeitable in the Performance Period shall be determined in accordance with the following schedule, using linear interpolation between the 40th and 50th percentiles and between the 50th and 75th percentiles, as certified by the Committee:

 

Company TSR Relative to the TSR of the

Companies in Index

 

Percentage of Target RSUs That Vest and

Become Nonforfeitable

Below 40th Percentile  0
40th Percentile  50%
50th Percentile  100%
75th Percentile  150%

 

   

 

 

The Company shall be excluded in determining the percentile rank of the other companies in the Index, and the Company’s percentile rank shall be calculated by using linear interpolation between the percentile rank of the other companies in the Index.

 

Notwithstanding the preceding schedule, if the Company TSR is a negative number, then the percentage of the RSUs that vests and becomes nonforfeitable, as determined in accordance with the preceding schedule, shall be limited to 100%.

 

No fractional shares of Common Stock shall be issued, and any fractional share that would have resulted from the foregoing calculations shall be rounded down to the next whole share.

 

(b) Notwithstanding anything to the contrary in Section 4(a) above, if the Grantee’s Employment is terminated by the Company for a reason other than Cause before the end of the Performance Period, a pro-rata portion of the RSUs shall vest as of the last day of the Performance Period, determined by multiplying the number of RSUs that otherwise would have vested at the end of the Performance Period, based on the level of attainment of the TSR Performance Goal as certified by the Committee as provided in Section 4(c) below, by a fraction, the numerator of which is the number of days the Grantee was in Employment during the Performance Period and the denominator of which is the number of days in the Performance Period.

 

(c) Settlement of the vested RSUs may be in either shares of Common Stock or cash, as determined by the Committee in its discretion, and shall occur as soon as practicable following the Committee’s certification following the end of the Performance Period of the level of attainment of the TSR Performance Goal and in any event no later than 60 days after the date of the Committee’s certification (such date, the “Settlement Date”).

 

5. Rights as Shareholder.

 

(a) During the period beginning on the Grant Date and ending on the date that the RSU is settled, the Grantee will accrue dividend equivalents on the RSUs equal to the cash dividend or distribution that would have been paid on the RSU had the RSU been an issued and outstanding share of Common Stock on the record date for the dividend or distribution. Such accrued dividend equivalents (i) will vest and become payable upon the same terms and at the same time of settlement as the RSUs to which they relate, and (ii) will be denominated and payable solely in cash.

 

(b) If the RSUs are settled in shares of Common Stock, upon and following the Settlement Date and the entry of such settlement on the books of the Company or its transfer agents or registrars, the Grantee shall be the record owner of the shares of Common Stock and shall be entitled to all of the rights of a shareholder of the Company including the right to vote such shares of Common Stock and receive all dividends or other distributions paid with respect to such shares of Common Stock.

 

 2 

 

 

6. Forfeiture. Except as otherwise provided in Section 4(b), RSUs and any related dividend equivalents which have not become vested as of the date the Grantee’s Employment terminates shall immediately be forfeited on such date, and the Grantee shall have no further rights with respect thereto. In addition, in the event the Company experiences a major safety and/or containment incident which results from gross negligence or willful misconduct of management or results from a violation of federal operation, safety or construction regulations, or if the responsible party fails to report the incident, or to cooperate with relevant authorities in responding to such incident, in any such case as determined by the Committee in its sole discretion, all RSUs and any related dividend equivalents which have not become vested as of the date such incident occurs may be cancelled at the sole discretion of the Committee and the Grantee shall have no further rights with respect to the forfeited RSUs.

 

7. Restrictions. Subject to any exceptions set forth in this Agreement or the Plan, until such time as the RSUs are settled in accordance with Section 4, the RSUs or the rights represented thereby may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of. No purported sale, assignment, transfer, pledge, hypothecation or other disposal of the RSUs, or the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise will vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such purported sale, assignment, transfer, pledge, hypothecation or other disposal of the RSUs will be forfeited by the Grantee and all of the Grantee’s rights to such RSUs shall immediately terminate without any payment or consideration from the Company.

 

8. Restrictive Covenants. Unless otherwise determined by the Committee in its sole discretion, by accepting the RSUs, the Grantee acknowledges that the Grantee is bound by the following restrictive covenants (the “Restrictive Covenants”):

 

(a) Except to the extent (1) expressly authorized in writing by the Company or (2) required by law or any legal process, the Grantee shall not at any time during the Grantee’s Employment with the Company or any of its Affiliates or following the date the Grantee’s Employment terminates use, disseminate, disclose or divulge to any person or to any firm, corporation, association or other business entity, Confidential Information (as defined in Section 20 herein) or proprietary Trade Secrets (as defined in Section 20 herein) of the Company or any of its Affiliates; or

 

(b) The Grantee shall not at any time during the Grantee’s Employment with the Company or any of its Affiliates or following the date the Grantee’s Employment terminates make any derogatory, disparaging or negative statements, orally, written or otherwise, against the Company or any of its Affiliates or any of their respective directors, officers and employees.

 

Notwithstanding clause (a) above, pursuant to the Defend Trade Secrets Act of 2016 (18 U.S.C. 1833(b)), the Grantee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made in confidence either directly or indirectly to a federal, state, or local government official, or to an attorney, solely for the purpose of reporting or investigating a violation of law. The Grantee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret made in a complaint, or other document filed in a lawsuit or other proceeding, if such filing is made under seal. If the Grantee files a lawsuit or other action alleging retaliation by the Company for reporting a suspected violation of law, the Grantee may disclose the trade secret to the Grantee’s attorney and use the trade secret in the court proceeding or other action, if the Grantee files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order. This paragraph shall govern to the extent it may conflict with any other provision of this Agreement.

 

The Restrictive Covenants are in addition to and do not supersede any rights the Company or any of its Affiliates may have in law or at equity or under any other agreement.

 

By accepting the RSUs, the Grantee shall further agree that it is impossible to measure in money the damages which will accrue to the Company or any of its Affiliates in the event the Grantee breaches the Restrictive Covenants. Therefore, if the Company or any of its Affiliates shall institute any action or proceeding to enforce the provisions hereof, the Grantee shall agree to waive the claim or defense that the Company or any of its Affiliates has an adequate remedy at law and the Grantee shall agree not to assert in any such action or proceeding the claim or defense that the Company or any of its Affiliates has an adequate remedy at law.

 

 3 

 

 

If at any time the Committee reasonably believes that the Grantee has breached any of the Restrictive Covenants described in clauses (a) and (b) above, the Committee may suspend the vesting of Grantee’s RSUs pending a good faith determination by the Committee of whether any such Restrictive Covenant has been breached, it being understood that such suspension shall not cause the settlement to be delayed beyond the last date that settlement may occur pursuant to Section 4 hereof. If the Committee determines in good faith that the Grantee has breached any such Restrictive Covenant, the Grantee shall immediately forfeit any outstanding unvested RSUs and any related dividend equivalents and shall repay to the Company, upon demand, any Common Stock or cash issued upon the settlement of the Grantee’s RSUs (and the payment of any related dividend equivalents) if the vesting of such RSUs occurred during such breach. The Grantee shall also be required to repay to the Company, in cash and upon demand, any proceeds resulting from the sale or other disposition (including to the Company) of Common Stock issued upon settlement of the Grantee’s RSUs if the sale or disposition was effected at any time during such breach.

 

The foregoing shall not prejudice the Company’s right to require the Grantee to account for and pay over to the Company on a pre-tax basis any profit obtained by the Grantee as a result of any transaction constituting a breach of the Restrictive Covenants.

 

9. Taxes.

 

(a) Liability for Tax-Related Items. Except to the extent prohibited by law, the Grantee acknowledges that the Grantee is ultimately liable and responsible for any and all income taxes (including federal, state, local and other income taxes), social insurance, payroll taxes and other tax-related withholding (the “Tax-Related Items”) arising in connection with the RSUs, regardless of any action the Company takes with respect to such Tax-Related Items. The Grantee further acknowledges that the Company (i) does not make any representation or undertaking regarding the treatment of any Tax-Related Item in connection with any aspect of the RSUs, including the grant and vesting of the RSUs, or the subsequent sale of the shares of Common Stock and (ii) does not commit, and is under no obligation, to structure the terms of the RSUs or any aspect of the RSUs to reduce or eliminate the Grantee’s liability for Tax-Related Items or achieve any particular tax result.

 

(b) Payment of Withholding Taxes. Notwithstanding any contrary provision of this Agreement, no shares of Common Stock shall be issued and no dividend equivalents shall be paid unless and until satisfactory arrangements (as determined by the Committee) have been made by the Grantee with respect to the payment of any taxes which the Company determines must be withheld with respect to such shares of Common Stock and payment of dividend equivalents. If the Grantee is subject to Section 16 of the Exchange Act pursuant to Rule 16a-2 promulgated thereunder, the Company will withhold from shares of Common Stock upon the relevant tax withholding event, unless the use of such withholding method is prevented by applicable law or has materially adverse accounting or tax consequences, in which case, the withholding obligation may be satisfied by one or a combination of the methods set forth in the Plan. If the Grantee is not subject to Section 16 of the Exchange Act pursuant to Rule 16a-2 promulgated thereunder, the Grantee may elect to have the Company withhold from shares of Common Stock upon the relevant tax withholding event and such election shall satisfy the Grantee’s obligations under this Section 9.

 

10. Modification; Entire Agreement; Waiver. No change, modification or waiver of any provision of this Agreement which reduces the Grantee’s rights hereunder will be valid unless the same is agreed to in writing by the parties hereto. This Agreement, together with the Plan, represent the entire agreement between the parties with respect to the RSUs. The failure of the Company to enforce at any time any provision of this Agreement will in no way be construed to be a waiver of such provision or of any other provision hereof.

 

 4 

 

 

11. Policy Against Insider Trading; Recoupment. By accepting the RSUs, the Grantee acknowledges that the Grantee is bound by and shall comply with all the terms and conditions of the Company’s insider trading policy as may be in effect from time to time. The Grantee further acknowledges and agrees that shares of Common Stock or cash delivered in settlement of the RSUs or any dividend equivalents, and any proceeds of such shares of Common Stock, are subject to any recoupment or “clawback” policy of the Company as may be in effect from time to time and applied with prospective or retroactive effect.

 

12. Data Privacy Consent. The Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantee’s personal data as described in this Agreement and any other RSU grant materials by the Company for the exclusive purpose of implementing, administering and managing the Grantee’s participation in the Plan. The Grantee understands that the Company may hold certain personal information about the Grantee, including, but not limited to, the Grantee’s name, home address and telephone number, work location and phone number, date of birth, social insurance number or other identification number, salary, nationality, job title, hire date, any shares of Common Stock or directorships held in the Company or any of its Affiliates, details of all awards or any other entitlement to shares awarded, cancelled, exercised, vested, unvested or outstanding in the Grantee’s favor, for the purpose of implementing, administering and managing the Plan (“Personal Data”). The Grantee understands that Personal Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, now or in the future, that these recipients may be located in the Grantee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the Grantee’s country. The Grantee authorizes the recipients to receive, possess, use, retain and transfer the Personal Data, in electronic or other form, for the purposes of implementing, administering and managing the Grantee’s participation in the Plan. The Grantee understands that Personal Data will be held only as long as is necessary or appropriate to implement, administer and manage the Grantee’s participation in the Plan. Further, the Grantee understands that the Grantee is providing the consents herein on a purely voluntary basis.

 

13. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Grantee and the Grantee’s beneficiary, if applicable.

 

14. Captions. Captions provided herein are for convenience only and shall not affect the scope, meaning, intent or interpretation of the provisions of this Agreement.

 

15. Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.

 

16. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.

 

17. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without regard to the provisions governing conflict of laws.

 

18. Acceptance. The Grantee hereby acknowledges receipt of a copy of the Plan and this Agreement. The Grantee has read and understands the terms and provisions thereof, and accepts the RSUs subject to all of the terms and conditions of the Plan and this Agreement. The Grantee hereby acknowledges that all decisions, determinations and interpretations of the Board of Directors, or a Committee thereof, in respect of the Plan, this Agreement and the RSUs shall be final and conclusive. The Grantee acknowledges that there may be adverse tax consequences upon disposition of the underlying shares and that the Grantee should consult a tax advisor prior to such disposition.

 

 5 

 

 

19. Section 409A. This Agreement is intended to comply with Section 409A of the Code or an exemption thereunder and shall be construed and interpreted in a manner that is consistent with the requirements for avoiding additional taxes or penalties under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no representations that the payment and benefits provided under this Agreement comply with Section 409A of the Code and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with Section 409A of the Code. Notwithstanding any provision of this Agreement to the contrary, any compensation or benefit payable hereunder that constitutes a deferral of compensation under Code Section 409A shall be subject to the following:

 

(a) no amount or benefit that is payable upon a termination of employment or services from the Company shall be payable unless such termination also meets the requirements of a “separation from service” under Treasury Regulation Section 1.409A-1(h), and references in the Agreement to “termination”, “termination of employment” or like terms shall mean a “separation from service;”

 

(b) in the event that any payment to the Grantee or any benefit hereunder is made upon, or as a result of, the Grantee’s termination of employment, and the Grantee is a “specified employee” (as that term is defined under Section 409A of the Code) at the time the Grantee becomes entitled to any such payment or benefit, and provided further that such payment or benefit does not otherwise qualify for an applicable exemption from Section 409A of the Code, then no such payment or benefit will be paid or commenced to be paid to the Grantee under this Agreement until the date that is the earlier to occur of (i) the Grantee’s death or (ii) six months and one day following the Grantee’s termination of employment (the “Delay Period”). Any payments which the Grantee would otherwise have received during the Delay Period will be payable to the Grantee in a lump sum on the date that is six months and one day following the effective date of the termination, and any remaining compensation and benefits due under the Agreement shall be paid or provided as otherwise set forth herein;

 

(c) whenever a payment under this Agreement specifies a payment period, the actual date of payment within such specified period shall be within the sole discretion of the Company, and the Grantee shall have no right (directly or indirectly) to determine the year in which such payment is made. In the event a payment period straddles two consecutive calendar years, the payment shall be made in the later of such calendar years;

 

(d) each separately identified amount and each installment payment to which the Grantee is entitled to payment shall be deemed to be a separate payment for purposes of Section 409A of the Code; and

 

(e) the payment of any compensation or benefit may not be accelerated except to the extent permitted by Section 409A of the Code.

 

 6 

 

 

20. Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below:

 

(a) “Cause” shall mean (i) the Grantee’s failure to attempt in good faith to perform his or her lawful duties (other than as a result of Disability); (ii) the Grantee’s willful misconduct or gross negligence of a material nature in connection with the performance of his or her duties as an employee, which is or could reasonably be expected to be materially injurious to the Company, or any of its Affiliates (whether financially, reputationally or otherwise) (“Injurious”); (iii) a breach by the Grantee of the Grantee’s fiduciary duty or duty of loyalty to the Company or its Affiliates which is or could reasonably be expected to be Injurious; (iv) the Grantee’s intentional and unauthorized removal, use or disclosure of the Company’s or any Affiliate’s document (in any medium or form) relating to the Company or an Affiliate, or the customers of the Company or an Affiliate thereof and which is not pursuant to his or her lawful duties and may be Injurious to the Company, its customers or their respective Affiliates; (v) the willful performance by the Grantee of any act or acts of dishonesty in connection with or relating to the Company’s or its Affiliates’ business which is or could reasonably be expected to be Injurious, or the willful misappropriation (or willful attempted misappropriation) of any of the Company’s or any of its Affiliates’ funds or property; (vi) the indictment of the Grantee for, or a plea of guilty or nolo contendere by the Grantee to, any felony or other serious crime involving moral turpitude; (vii) a material breach of any of the Grantee’s obligations under any agreement entered into between the Grantee and the Company or any of its Affiliates that is material to either (A) the employment relationship between the Company or any of its Affiliates and the Grantee or (B) the relationship between the Company and the Grantee as investor or prospective investor in the Company; or (viii) a material breach of the Company’s policies or procedures, which breach causes or could reasonably be expected to cause material harm to the Company or its business reputation; provided that, with respect to the events in clauses (i), (ii), (iv), or (vii) herein, the Company shall have delivered written notice to the Grantee of its intention to terminate the Grantee’s employment for Cause, which notice specifies in reasonable detail the circumstances claimed to give rise to the Company’s right to terminate the Grantee’s employment for Cause and the Grantee shall not have cured such circumstances, to the extent such circumstances are reasonably susceptible to cure as determined by the Board of Directors in good faith, within 30 days following the Company’s delivery of such notice.

 

(b) “Competitor” shall mean any individual, corporation, partnership or other entity that engages in (or that owns a significant interest in any corporation, partnership or other entity that engages in) any business conducted by the Company or any of its Affiliates.

 

(c) “Confidential Information” shall mean all information regarding the Company or any of its Affiliates, any Company activity or the activity of any of its Affiliates, Company business or the business of any of its Affiliates, or Company customers or the customers of any of its Affiliates that is not generally known to persons not employed or retained (as employees or as independent contractors or agents) by the Company or any of its Affiliates, that is not generally disclosed by Company practice or authority to persons not employed by the Company or any of its Affiliates that does not rise to the level of a Trade Secret and that is the subject of reasonable efforts to keep it confidential, and shall include, to the extent such information is not a Trade Secret and to the extent material, but not be limited to product code, product concepts, production techniques, technical information regarding the Company’s or any of its Affiliates’ products or services, production processes and product/service development, operations techniques, product/service formulas, information concerning Company or any of its Affiliates’ techniques for use and integration of its website and other products/services, current and future development and expansion or contraction plans of the Company or any of its Affiliates, sale/acquisition plans and contacts, marketing plans and contacts, information concerning the legal affairs of the Company or any of its Affiliates and certain information concerning the strategy, tactics and financial affairs of the Company or any of its Affiliates; provided that Confidential Information shall not include information that has become generally available to the public, other than through a breach by such Grantee; and provided further that this definition shall not limit any definition of “confidential information” or any equivalent term under the Uniform Trade Secrets Act or any other state, local or federal law.

 

(d) “Disability” shall mean, as a result of the Grantee’s incapacity due to physical or mental illness or injury, the Grantee (i) becomes eligible to receive a benefit under the Company’s long-term disability plan applicable to the Grantee, or (ii) has been unable, due to physical or mental illness or incapacity, to perform the essential duties of his or her employment with reasonable accommodation for a continuous period of 90 days or an aggregate of 180 days within a one-year period.

 

(e) “Trade Secrets” shall mean all secret, proprietary or confidential information regarding the Company (which shall mean and include all of the Company’s subsidiaries and all Affiliates and joint ventures connected by ownership to the Company at any time) or any Company activity that fits within the definition of “trade secrets” under the Uniform Trade Secrets Act or other applicable law, and shall include, but not be limited to, all source codes and object codes for the Company’s software and all website design information to the extent that such information fits within the Uniform Trade Secrets Act; provided that Trade Secrets shall not include information that has become generally available to the public, other than through a breach by such Grantee; and provided further that this definition shall not limit any definition of “trade secrets” or any equivalent term under the Uniform Trade Secrets Act or any other state, local or federal law.

 

 7 

 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer and said Grantee has hereunto signed this Agreement on the Grantee’s own behalf, thereby representing that the Grantee has carefully read and understands this Agreement and the Plan as of the day and year first written above.

 

  OVERSEAS SHIPHOLDING GROUP, INC.
     
     
  By: Samuel H. Norton
  Title: President and CEO
     
  Acknowledged and Accepted:
   
   
  Executive Officer Name

 

 8 

 

 

Exhibit 31.1

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a) AND 15d-14(a), AS AMENDED

 

I, Samuel H. Norton, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Overseas Shipholding Group, Inc.
     
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
     
  4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

  5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Date: August 7, 2020 /s/ Samuel H. Norton
  Samuel H. Norton
  Chief Executive Officer

 

   

 

 

Exhibit 31.2

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) AND 15d-14(a), AS AMENDED

 

I, Richard Trueblood, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Overseas Shipholding Group, Inc.
     
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
     
  4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

  5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Date: August 7, 2020 /s/ Richard Trueblood
  Richard Trueblood
  Chief Financial Officer

 

   

 

 

Exhibit 32

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT 0F 2002

 

Each of the undersigned, the Chief Executive Officer and the Chief Financial Officer of Overseas Shipholding Group, Inc. (the “Company”), hereby certifies, to the best of his knowledge and belief, that the Form 10-Q of the Company for the quarterly period ended June 30, 2020 (the “Periodic Report”) accompanying this certification fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely for purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act and is not intended to be used for any other purpose.

 

Date: August 7, 2020 /s/ Samuel H. Norton
  Samuel H. Norton
  Chief Executive Officer

 

Date: August 7, 2020 /s/ Richard Trueblood
  Richard Trueblood
  Chief Financial Officer

 

   

v3.20.2
Cover - shares
 6 Months Ended
Jun. 30, 2020
Aug. 04, 2020
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2020  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2020  
Current Fiscal Year End Date --12-31  
Entity File Number 001-06479  
Entity Registrant Name OVERSEAS SHIPHOLDING GROUP, INC.  
Entity Central Index Key 0000075208  
Entity Tax Identification Number 13-2637623  
Entity Incorporation, State or Country Code DE  
Entity Address, Address Line One 302 Knights Run Avenue  
Entity Address, City or Town Tampa  
Entity Address, State or Province FL  
Entity Address, Postal Zip Code 33602  
City Area Code (813)  
Local Phone Number 209-0600  
Title of 12(b) Security Class A Common Stock (par value $0.01 per share)  
Trading Symbol OSG  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Bankruptcy Proceedings, Reporting Current true  
Entity Common Stock, Shares Outstanding   86,336,977
v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Current Assets:    
Cash and cash equivalents $ 74,192 $ 41,503
Restricted cash 20,062 60
Voyage receivables, including unbilled of $3,291 and $5,611, net of reserve for doubtful accounts 6,100 9,247
Income tax receivable 454 1,192
Other receivables 2,967 3,037
Inventories, prepaid expenses and other current assets 3,037 2,470
Total Current Assets 106,812 57,509
Vessels and other property, less accumulated depreciation 833,716 737,212
Deferred drydock expenditures, net 27,557 23,734
Total Vessels, Other Property and Deferred Drydock 861,273 760,946
Restricted cash - non current 88 114
Investments in and advances to affiliated companies 3,599
Intangible assets, less accumulated amortization 29,517 31,817
Operating lease right-of-use assets 252,379 286,469
Other assets 18,547 35,013
Total Assets 1,268,616 1,175,467
Current Liabilities:    
Accounts payable, accrued expenses and other current liabilities 37,567 35,876
Current portion of operating lease liabilities 90,384 90,145
Current portion of finance lease liabilities 4,001 4,011
Current installments of long-term debt 60,755 31,512
Total Current Liabilities 192,707 161,544
Reserve for uncertain tax positions 891 864
Noncurrent operating lease liabilities 184,662 219,501
Noncurrent finance lease liabilities 22,473 23,548
Long-term debt 376,529 336,535
Deferred income taxes, net 80,237 72,833
Other liabilities 37,094 19,097
Total Liabilities 894,593 833,922
Equity:    
Common stock - Class A ($0.01 par value; 166,666,666 shares authorized; 86,336,977 and 85,713,610 shares issued and outstanding) 863 857
Paid-in additional capital 591,286 590,436
Accumulated deficit (211,834) (243,339)
 Stockholders Equity Subtotal 380,315 347,954
Accumulated other comprehensive loss (6,292) (6,409)
Total Equity 374,023 341,545
Total Liabilities and Equity $ 1,268,616 $ 1,175,467
v3.20.2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Statement of Financial Position [Abstract]    
Unbilled contracts receivable $ 3,291 $ 5,611
Class A common stock, par value $ 0.01 $ 0.01
Class A common stock, shares authorized 166,666,666 166,666,666
Class A common stock, shares issued 86,336,977 85,713,610
Class A common stock, shares outstanding 86,336,977 85,713,610
v3.20.2
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Shipping Revenues:        
Time and bareboat charter revenues $ 96,662 $ 62,007 $ 174,812 $ 125,127
Voyage charter revenues 17,877 26,452 40,586 51,070
Total Shipping revenues 114,539 88,459 215,398 176,197
Operating Expenses:        
Voyage expenses 14,112 6,353 17,897 11,337
Vessel expenses 41,644 32,520 77,413 64,967
Charter hire expenses 22,505 22,581 44,965 44,879
Depreciation and amortization 14,217 13,084 28,236 25,561
General and administrative 7,599 5,957 13,772 11,633
Bad debt expense 4,300 4,300
Loss/(gain) on disposal of vessels and other property, including impairments, net 813 (66) 1,110 51
Total operating expenses 100,890 84,729 183,393 162,728
Income from vessel operations 13,649 3,730 32,005 13,469
Equity in income of affiliated companies 68 68
Gain on termination of pre-existing arrangement 19,172
Operating income 13,649 3,798 51,177 13,537
Other (expense)/income, net (58) 262 (27) 617
Income before interest expense and income taxes 13,591 4,060 51,150 14,154
Interest expense (6,167) (6,571) (12,241) (13,077)
Income/(loss) before income taxes 7,424 (2,511) 38,909 1,077
Income tax (expense)/benefit (1,044) 773 (7,404) 381
Net income/(loss) $ 6,380 $ (1,738) $ 31,505 $ 1,458
Weighted Average Number of Common Shares Outstanding:        
Basic - Class A 89,747,630 89,245,696 89,584,969 89,125,986
Diluted - Class A 90,812,332 89,245,696 90,600,658 89,507,860
Per Share Amounts:        
Basic and diluted net income - Class A $ 0.07 $ (0.02) $ 0.35 $ 0.02
v3.20.2
Condensed Consolidated Statements of Comprehensive Income/(Loss) (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Income Statement [Abstract]        
Net income/(loss) $ 6,380 $ (1,738) $ 31,505 $ 1,458
Defined benefit pension and other postretirement benefit plans:        
Net change in unrecognized prior service costs (18) (17) (36) (33)
Net change in unrecognized actuarial losses 77 102 153 201
Other comprehensive income 59 85 117 168
Comprehensive income/(loss) $ 6,439 $ (1,653) $ 31,622 $ 1,626
v3.20.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Cash Flows from Operating Activities:              
Net income $ 6,380 $ 25,125 $ (1,738) $ 3,197 $ 31,505 $ 1,458  
Items included in net income not affecting cash flows:              
Depreciation and amortization 14,217   13,084   28,236 25,561  
Bad debt expense   4,300   4,300  
Gain on termination of pre-existing arrangement     (19,172)  
Loss on disposal of vessels and other property, including impairments, net         1,110 51  
Amortization of debt discount and other deferred financing costs         1,124 1,023  
Compensation relating to restricted stock awards and stock option grants         1,055 763  
Deferred income tax expense/(benefit)         7,431 (1,047)  
Interest on finance lease liabilities         1,001 410  
Non-cash operating lease expense         45,680 44,805  
Loss on extinguishment of debt, net         14 48  
Distributed earnings of affiliated companies         3,562 3,470  
Payments for drydocking         (10,078) (9,383)  
Operating lease liabilities         (45,998) (45,316)  
Changes in operating assets and liabilities, net         (3,204) (6,337)  
Net cash provided by operating activities         42,266 19,806  
Cash Flows from Investing Activities:              
Acquisition, net of cash acquired         (16,973)  
Proceeds from disposals of vessels and other property         700 2,197  
Expenditures for vessels and vessel improvements         (38,657) (34,722)  
Expenditures for other property         (498) (638)  
Net cash used in investing activities         (55,428) (33,163)  
Cash Flows from Financing Activities:              
Payments on debt         (26,669) (10,417)  
Extinguishment of debt         (673) (2,139)  
Tax withholding on share-based awards         (197) (294)  
Issuance of debt, net of issuance and deferred financing costs         95,441  
Payments on principal portion of finance lease liabilities         (2,075) (798)  
Net cash provided by/(used in) financing activities         65,827 (13,648)  
Net increase/(decrease) in cash, cash equivalents and restricted cash         52,665 (27,005)  
Cash, cash equivalents and restricted cash at beginning of period   $ 41,677   $ 80,641 41,677 80,641 $ 80,641
Cash, cash equivalents and restricted cash at end of period $ 94,342   $ 53,636   $ 94,342 $ 53,636 $ 41,677
v3.20.2
Condensed Consolidated Statements of Changes in Equity (Unaudited) - USD ($)
$ in Thousands
Common Stock [Member]
 [1]
Additional Paid-in Capital [Member]
 [2]
Retained Earnings [Member]
AOCI Attributable to Parent [Member]
 [3]
Total
Beginning balance, value at Dec. 31, 2018 $ 848 $ 587,826 $ (252,014) $ (7,192) $ 329,468
Net income 3,197 3,197
Other comprehensive income 83 83
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net 5 (299) (294)
Compensation related to Class A options granted and restricted stock awards 1,559 1,559
Ending balance, value at Mar. 31, 2019 853 589,086 (248,817) (7,109) 334,013
Beginning balance, value at Dec. 31, 2018 848 587,826 (252,014) (7,192) 329,468
Net income         1,458
Other comprehensive income         168
Ending balance, value at Jun. 30, 2019 857 589,535 (250,555) (7,024) 332,813
Beginning balance, value at Mar. 31, 2019 853 589,086 (248,817) (7,109) 334,013
Net income (1,738) (1,738)
Other comprehensive income 85 85
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net 2 (3) (1)
Compensation related to Class A options granted and restricted stock awards   454 454
Conversion of Class A warrants to common stock 2 (2)
Ending balance, value at Jun. 30, 2019 857 589,535 (250,555) (7,024) 332,813
Beginning balance, value at Dec. 31, 2019 857 590,436 (243,339) (6,409) 341,545
Net income 25,125 25,125
Other comprehensive income 58 58
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net 1 (200) (199)
Compensation related to Class A options granted and restricted stock awards 438 438
Ending balance, value at Mar. 31, 2020 858 590,674 (218,214) (6,351) 366,967
Beginning balance, value at Dec. 31, 2019 857 590,436 (243,339) (6,409) 341,545
Net income         31,505
Other comprehensive income         117
Ending balance, value at Jun. 30, 2020 863 591,286 (211,834) (6,292) 374,023
Beginning balance, value at Mar. 31, 2020 858 590,674 (218,214) (6,351) 366,967
Net income 6,380 6,380
Other comprehensive income 59 59
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net 5 (5)
Compensation related to Class A options granted and restricted stock awards 617 617
Ending balance, value at Jun. 30, 2020 $ 863 $ 591,286 $ (211,834) $ (6,292) $ 374,023
[1] Par value $0.01 per share; 166,666,666 Class A shares authorized; 86,336,977 and 85,651,060 Class A shares outstanding as of June 30, 2020 and 2019, respectively.
[2] Includes 19,236,264 and 19,569,286 outstanding Class A warrants as of June 30, 2020 and 2019, respectively.
[3] Amounts are net of tax.
v3.20.2
Condensed Consolidated Statements of Changes in Equity (Unaudited) (Parenthetical) - $ / shares
Jun. 30, 2020
Jun. 30, 2019
Statement of Stockholders' Equity [Abstract]    
Class A common stock, par value $ 0.01 $ 0.01
Class A common stock, shares authorized 166,666,666 166,666,666
Class A common stock, shares outstanding 86,336,977 85,651,060
Class A warrants outstanding 19,236,264 19,569,286
v3.20.2
Basis of Presentation
 6 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1 — Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of Overseas Shipholding Group, Inc., a Delaware corporation (the “Parent Company”), and its wholly-owned subsidiaries (collectively, the “Company” or “OSG”, “we”, “us” or “our”), including Alaska Tanker Company (“ATC”) as of its March 12, 2020 acquisition date. The Company owns and operates a fleet of oceangoing vessels engaged primarily in the transportation of crude oil and refined petroleum products in the U.S. Flag trade.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and notes required by generally accepted accounting principles in the United States. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the results have been included. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any other interim period.

 

The condensed consolidated balance sheet as of December 31, 2019 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles in the United States for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (“Form 10-K”).

 

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic, which continues to spread throughout the United States and the world. The spread of COVID-19 has caused significant volatility in U.S. and international markets and there is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies.

 

The COVID-19 pandemic is a dynamic and continuously evolving phenomenon and the ultimate severity of the outbreak, and its effect on the Company’s business in the future, is uncertain.
v3.20.2
Recently Adopted and Issued Accounting Standards
 6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Basis of Presentation and Significant Accounting Policies [Text Block]

Note 2 — Recently Adopted and Issued Accounting Standards

 

Recently Adopted Accounting Standards

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. The new guidance was effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

 

Recently Issued Accounting Standards

 

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The new guidance is effective for fiscal years ending after December 15, 2020 and is required to be applied on a retrospective basis to all periods presented. Early adoption is permitted. The Company plans to adopt this standard on December 31, 2020. The adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which adds a new Topic 326 and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to maturity debt securities. Under current U.S. GAAP, entities generally recognize credit losses when it is probable that a loss has been incurred. The revised guidance will remove all recognition thresholds and will require entities to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the entity expects to collect over the instrument’s contractual life. Subsequently, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, to clarify that receivables arising from operating leases are within the scope of lease accounting standards.

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates, which allows a two-bucket approach for determining the effective dates of these accounting standards. Under this approach, the buckets would be defined as follows:

 

Bucket 1— All public business entities (“PBEs”) that are SEC filers (as defined in U.S. GAAP), excluding smaller reporting companies (“SRCs”) (as defined by the SEC). The credit losses standard became effective January 1, 2020.

 

Bucket 2— All other entities, including SRCs, other PBEs that are not SEC filers, private companies, not-for-profit organizations, and employee benefit plans. The credit losses standard are to become effective January 1, 2023.

 

At the annual evaluation date on June 30, 2019, the Company met the SEC definition of a smaller reporting company. Accordingly, the Company plans to adopt the credit losses standard on January 1, 2023. Management is currently reviewing the impact of the adoption of this accounting standard on the Company’s consolidated financial statements.

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. The new guidance is effective for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years. The Company will adopt this standard on January 1, 2021. Management is currently reviewing the impact of the adoption of this accounting standard on the Company’s consolidated financial statements.

 
v3.20.2
Revenue Recognition
 6 Months Ended
Jun. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer [Text Block]

Note 3 - Revenue Recognition

 

Shipping Revenues

 

Time Charter Revenues

 

The Company enters into time charter contracts under which a customer pays a fixed daily or monthly rate for a fixed period of time for use of a vessel. The Company recognizes revenues from time charters as operating leases ratably over the noncancellable contract term. Customers generally pay voyage expenses such as fuel, canal tolls and port charges. The Company also provides the charterer with services such as technical management expenses and crew costs. While there are lease and service (non-lease) components related to time charter contracts, the predominant component of the contract is the charterer’s lease of the vessel. The non-lease components of the contract have the same timing and pattern of transfer as the underlying lease component; therefore, the Company applies the practical expedient of combining lease and non-lease components and recognizes revenue related to this service ratably over the life of the contract term.

 

Voyage Charter Revenues

 

The Company enters into voyage charter contracts, under which the customer pays a transportation charge (voyage freight) for the movement of a specific cargo between two or more specified ports. The Company’s performance obligation under voyage charters, which consists of moving cargo from a load port to a discharge port, is satisfied over time. Accordingly, under ASC 606, the Company recognizes revenue from voyage charters ratably over the estimated length of each voyage, calculated on a load-to-discharge basis. The transaction price is in the form of a fixed fee at contract inception, which is the transportation charge. Voyage charter contracts also include variable consideration primarily in the form of demurrage, which is additional revenue the Company receives for delays experienced in loading or unloading cargo that are not deemed to be the responsibility of the Company. The Company does not include demurrage in the transaction price for voyage charters since it is highly susceptible to factors outside the Company’s influence. Examples of when demurrage is incurred include unforeseeable weather conditions and security regulations at ports. The uncertainty related to this variable consideration is resolved upon the completion of the voyage, the duration of which is generally less than 30 days.

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

U.S. Maritime Security Program

 

Two of the Company’s U.S. Flag Product Carriers participate in the U.S. Maritime Security Program (“MSP”), which is designed to ensure that privately-owned, military-useful U.S. Flag vessels are available to the U.S. Department of Defense in the event of war or national emergency. The Company considers the MSP contract with the U.S. government a service arrangement under ASC 606. Under this arrangement, the Company receives an annual operating-differential subsidy pursuant to the Merchant Marine Act of 1936 for each participating vessel, subject in each case to annual congressional appropriations. The subsidy is intended to reimburse owners for the additional costs of operating U.S. Flag vessels; therefore, the Company has presented this subsidy as an offset to vessel expenses.

 

Contracts of Affreightment

 

The Company enters into contracts of affreightment (each a “COA”) to provide transportation services between specified points for a stated quantity of cargo over a specific time period, but without designating voyage schedules. The Company has COA arrangements to provide for lightering services and other arrangements based on the number of voyages. These contracts are service contracts within the scope of ASC 606 for which the underlying performance obligation is satisfied as a series of distinct services.

 

The Company’s COAs include minimum purchase requirements from customers that are expressed in either fixed monthly barrels, annual minimum barrel volume requirements or annual minimum number of voyages to complete. The Company is required to transport and the charterer is required to provide the Company with a minimum volume requirement. These contract minimums represent fixed consideration within the contract which is recognized as the distinct services of delivering barrels or voyages are performed in the series over time. The Company will adjust revenue recognized for any minimum volume unexercised right.

 

COAs provide the charterer with the opportunity to purchase additional transportation services above the minimum. If this is not considered a material right, the Company recognizes revenue related to the additional services at the contractual rate as the product is transferred over time. If the additional transportation service is considered a material right, the Company applies the practical alternative of allocating the transaction price to the material right. As a result, the Company may recognize revenue related to COAs at an amount different from the invoiced amount if the Company’s estimated volume to be transported under the contract exceeds the contractual minimum.

 

At June 30, 2020, the Company did not have deferred revenue related to the Company’s COAs.

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

Disaggregated Revenue

 

The Company has disaggregated revenue from contracts with customers into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Consequently, the disaggregation below is based on contract type. Since the terms within these contract types are generally standard in nature, the Company does not believe that further disaggregation would result in increased insight into the economic factors impacting revenue and cash flows.

 

The following table shows the Company’s shipping revenues disaggregated by nature of the charter arrangement for the three and six months ended June 30, 2020 and 2019:

 

Schedule of Disaggregation of Revenue 

  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
   2020   2019   2020   2019 
Time and bareboat charter revenues  $96,662   $62,007   $174,812   $125,127 
Voyage charter revenues(1)   9,423    6,150    20,892    13,784 
Contracts of affreightment revenues   8,454    20,302    19,694    37,286 
Total shipping revenues  $114,539   $88,459   $215,398   $176,197 

 

(1) Voyage charter revenues include approximately $3,946 and $3,088 of revenue related to short-term time charter contracts for the three months ended June 30, 2020 and 2019, respectively, and $15,265 and $3,858 for the six months ended June 30, 2020 and 2019, respectively.

 

Voyage Receivables

 

As of June 30, 2020 and December 31, 2019, contract balances from contracts with customers consisted of voyage receivables, including unbilled receivables, of $4,726 and $5,831, respectively, net of reserve for doubtful accounts for voyage charters and lightering contracts. For voyage charters, voyage freight is due to the Company upon completion of discharge at the last discharge port. For lightering contracts, the Company invoices the customer monthly based on the actual barrels of cargo lightered. The Company routinely reviews its voyage receivables and makes provisions for probable doubtful accounts; however, those provisions are estimates and actual results could differ from those estimates and those differences may be material. Voyage receivables are removed from accounts receivable and the reserve for doubtful accounts when they are deemed uncollectible. The Company deems voyage receivables uncollectible when the Company has exhausted collection efforts.

 

Costs to Fulfill a Contract

 

Under ASC 606, for voyage charters and contracts of affreightment, the Company capitalizes the direct costs, which are voyage expenses, of relocating the vessel to the load port and amortizes those costs during transport of the cargo. At June 30, 2020, the costs related to voyages that were not yet completed were not material.

 

Additionally, these contracts include out-of-pocket expense (i.e. fuel, port charges, canal tolls) incurred by the Company in fulfilling its performance obligations, which are reimbursed by the charterer at cost. The reimbursement for these fulfillment costs are included in the Company’s estimated transaction price for the contract and recognized as revenue when performance obligations are satisfied.

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

Transaction Price Allocated to the Remaining Performance Obligations

 

As of June 30, 2020, there was an aggregate of $22,929 of revenue under COAs that the Company will be entitled to by providing services in the future. The Company expects to recognize revenue of approximately $19,134 in 2020 and $3,795 in 2021 under these contracts. These estimated amounts relate to the fixed consideration of contractual minimums within the contracts based on the Company’s estimate of future services.

 

Practical Expedients and Exemptions

 

The Company’s voyage charter contracts and some of the Company’s COAs have an original expected duration of one year or less; therefore, the Company has elected to apply the practical expedient, which permits the Company to not disclose the portion of the transaction price allocated to the remaining performance obligations within these COAs.

 

The Company expenses broker commissions for voyage charters, which are costs of obtaining a contract, as they are incurred because the amortization period is less than one year or are otherwise amortized as the underlying performance obligation is satisfied. The Company records these costs within voyage expenses in the consolidated statements of operations.
v3.20.2
Earnings per Common Share
 6 Months Ended
Jun. 30, 2020
Per Share Amounts:  
Earnings Per Share [Text Block]

Note 4 — Earnings per Common Share

 

Basic earnings per common share is computed by dividing earnings, after the deduction of dividends and undistributed earnings allocated to participating securities, by the weighted average number of common shares outstanding during the period. As management deems the exercise price for the Class A warrants of $0.01 per share to be nominal, warrant proceeds are ignored and the shares issuable upon Class A warrant exercise are included in the calculation of basic weighted average common shares outstanding for all periods.

 

The computation of diluted earnings per share assumes the issuance of common stock for all potentially dilutive stock options and restricted stock units. Participating securities are defined by ASC 260, Earnings Per Share, as unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents and are included in the computation of earnings per share pursuant to the two-class method.

 

Class A

 

As of June 30, 2020, there were 2,645,025 shares of Class A common stock issuable under outstanding restricted stock units and 1,478,756 shares of Class A common stock issuable under outstanding options, both of which are considered to be potentially dilutive securities. As of June 30, 2019, there were 1,718,865 shares of Class A common stock issuable under outstanding restricted stock units and 1,478,756 shares of Class A common stock issuable under outstanding options, both of which are considered to be potentially dilutive securities.

 

The components of the calculation of basic earnings per share and diluted earnings per share are as follows:

 

  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
   2020   2019   2020   2019 
Net income  $6,380   $(1,738)  $31,505   $1,458 
                     
Weighted average common shares outstanding:                    
Class A common stock - basic   89,747,630    89,245,696    89,584,969    89,125,986 
Class A common stock - diluted   90,812,332    89,245,696    90,600,658    89,507,860 

 

For the three months ended June 30, 2020, there were dilutive equity awards outstanding covering 1,064,702 shares, and for the six months ended June 30, 2020 and 2019, there were dilutive equity awards outstanding covering 1,015,689 and 381,874 shares, respectively. Awards of 371,893 shares (which are related to stock options) for both the three and six months ended June 30, 2020 were not included in the computation of diluted earnings per share because inclusion of these awards would be anti-dilutive. For the six months ended June 30, 2019, awards of 1,419,325 shares (which include restricted stock units and stock options) were not included in the computation of diluted earnings per share because inclusion of these awards would be anti-dilutive.
v3.20.2
Fair Value Measurements and Fair Value Disclosures
 6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value Disclosures [Text Block]

Note 5 — Fair Value Measurements and Fair Value Disclosures

 

The following methods and assumptions are used to estimate the fair value of each class of financial instrument:

 

Cash and cash equivalents and restricted cash— The carrying amounts reported in the condensed consolidated balance sheet for interest-bearing deposits approximate fair value. Investments in trading securities consist of equity securities and were measured using quoted market prices at the reporting date.

 

Debt— The fair values of the Company’s publicly traded and non-public debt are estimated based on quoted market prices.

 

ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements defines fair value and establishes a framework for measuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, the fair value of assets and liabilities should include consideration of non-performance risk, which for the liabilities described below includes the Company’s own credit risk.

 

The levels of the fair value hierarchy established by ASC 820 are as follows:

 

Level 1 - Quoted prices in active markets for identical assets or liabilities

 

Level 2 - Quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

Financial Instruments that are not Measured at Fair Value on a Recurring Basis

 

The estimated fair values of the Company’s financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows:

   Carrying   Fair Value 
   Value   Level 1   Level 2 
June 30, 2020:            
Assets            
Cash and cash equivalents (1)  $94,342   $94,342   $— 
Total  $94,342   $94,342   $— 
Liabilities               
Term loan agreement, due 2023  $279,749   $—   $286,366 
Term loan agreements, due 2024   47,134    —    51,178 
Alaska Tankers term loan agreement, due 2025   52,297    —    48,458 
OSG 204 LLC term loan agreement, due 2025   32,291    —    32,557 
Term loan agreement, due 2026   25,123    —    23,723 
Unsecured senior notes   690    —    722 
Total  $437,284   $—   $443,004 

 

   Carrying   Fair Value 
   Value   Level 1   Level 2 
December 31, 2019:            
Assets               
Cash (1)  $41,677   $41,677   $— 
Total  $41,677   $41,677   $— 
Liabilities               
Term loan agreement, due 2023  $291,994   $—   $299,974 
Term loan agreements, due 2024   48,289    —    49,015 
Term loan agreement, due 2026   27,075    —    27,359 
Unsecured senior notes   689    —    722 
Total  $368,047   $—   $377,070 

 

(1) Includes current and non-current restricted cash aggregating $20,150 and $174 at June 30, 2020 and December 31, 2019, respectively. At June 30, 2020, $20,002 of restricted cash is in escrow to be applied as a prepayment on the term loan on the Overseas Gulf Coast, due 2024. On July 30, 2020, the $20,002 of restricted cash was used towards the payment in full of the Overseas Gulf Coast term loan, due 2024. See Note 12, “Debt” for further details. Restricted cash of $148 and $174 as of June 30, 2020 and December 31, 2019, respectively, was related to the Company’s Unsecured Senior Notes.

 

Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring Basis

 

Vessel and Intangible Assets Impairments

 

During the second quarter of 2020, the Company considered whether events or changes in circumstances had occurred since December 31, 2019 that could indicate the carrying amounts of the vessels in the Company’s fleet and the carrying value of the Company’s intangible assets may not be recoverable as of June 30, 2020.

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

The Company concluded that no such events or changes in circumstances had occurred for its intangible assets at June 30, 2020.

 

During the second quarter of 2020 the Company established basic terms to sell for scrap the OSG 244, one of the Company’s barges. Based on the negotiated sale terms, the Company recorded a loss, which was not material and included in loss on disposal of vessels and other property, including impairments, net on the condensed consolidated statements of operations, on the planned disposition of this barge.
v3.20.2
Taxes
 6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

Note 6 — Taxes

 

For the three months ended June 30, 2020 and 2019, the Company recorded an income tax (provision)/benefit of $(1,044) and $773, respectively, which represented effective tax rates of 14% and 31%, respectively. For the six months ended June 30, 2020 and 2019, the Company recorded an income tax (provision)/benefit of $(7,404) and $381, respectively, which represented effective tax rates of 19% and (35)%, respectively. The decrease in the effective tax rate for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was substantially due to a significant reduction in state income tax, as well as, the tonnage tax exclusion under the Internal Revenue Code. The increase in the effective tax rate for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to the establishment of deductible expenses related to Code Section 162(m) in the first quarter of 2019 causing a more favorable discrete adjustment compared to pretax income. The effective tax rate for the six months ended June 30, 2020 was less than the statutory rate due to discrete tax benefits recorded relating to state benefit resulting from the Alaska Tanker Company acquisition, interest related to an alternative minimum tax refund and the tonnage tax exclusion. The effective tax rate for the six months ended June 30, 2019 was less than the statutory rate due to the discrete tax benefit recorded in the first quarter of 2019 relating to Code Section 162(m) deductible expenses and the tonnage tax exclusion.

 

On March 27, 2020, H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act, or the “CARES Act”, was signed into law. The CARES Act includes tax provisions relevant to businesses that will impact taxes related to 2018, 2019 and 2020. Some of the significant changes are to increase the limitation on deductible business interest expense for 2019 and 2020, allow for the five year carryback of net operating losses for 2018-2020, suspend the 80% limitation of taxable income for net operating loss carryforwards for 2018-2020, the acceleration of depreciation expense from 2018 forward on qualified improvement property, and acceleration of the ability to claim refunds of alternative minimum tax credit carryforwards. The Company is required to recognize the effect on the consolidated financial statements in the period in which the law was enacted, which is 2020. At this time, the Company does not expect the CARES Act to have a material impact on the Company’s tax provision as any effect will be a reclassification between net operating losses and the affected deferred tax assets or liabilities on the consolidated balance sheet.

 

As of June 30, 2020 and December 31, 2019, the Company recorded a non-current reserve for uncertain tax positions of $891 and $864, respectively.

 
v3.20.2
Investment in Alaska Tanker Company, LLC
 6 Months Ended
Jun. 30, 2020
Investments, All Other Investments [Abstract]  
Investment [Text Block]

Note 7 — Investment in Alaska Tanker Company, LLC

 

At December 31, 2019, the Company had a 37.5% interest in Alaska Tanker Company, LLC (“ATC”), a joint venture that was formed in 1999 among OSG America Operating Co LLC, Keystone Shipping Company and subsidiaries of British Petroleum (“BP”). Each member of ATC was entitled to receive its respective share of incentive charter hire related to time charter contracts in ATC with a minimum term ending in December 2023.

 

In December 2019, the Company entered into an agreement with BP to purchase three U.S.-flagged crude oil carrier vessels (Alaskan Explorer, Alaskan Legend and Alaskan Navigator) for total cash consideration of $54,000, which was financed by borrowing $54,000 under a five-year term loan as discussed in Note 12, “Debt”.

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

In connection with the purchase of the vessels from BP, the Company agreed to time charter arrangements with BP for terms of 2.5 years to 6.4 years at a fixed daily rate with an annual escalation and five renewal options for one year each. The time charter arrangements are treated as operating leases under ASC 842. The Company also entered into a bareboat charter with BP for a fourth vessel, the Alaskan Frontier, which is currently in layup. In connection with these transactions, the Company also acquired the remaining equity ownership of ATC, making ATC a wholly owned subsidiary of the Company.

 

The Company accounted for the purchase of the three vessels and remaining equity ownership interest in ATC collectively as an asset acquisition, with substantially all the fair value of the acquisition attributed to the three vessels purchased from BP. The pre-existing ATC arrangements with a minimum term through December 2023 were terminated, and a non-cash gain equal to the value of the remaining arrangement of $19,172 was recognized, with a corresponding increase in the value of the vessels acquired from BP in a manner consistent with how ASC 805, Business Combinations, would be applied to the settlement of a pre-existing arrangement.

 

As part of the acquisition of ATC, the Company assumed liabilities of $9,898 related to pension and postretirement plans. The postretirement medical and life insurance plan provides benefits to shore-based employees and nonunion licensed deck officers at least 55 years of age with 10 years or more of service, as defined. The plan was frozen as of December 31, 2016 and closed to new entrants as of January 1, 2017. The Company also contributes to six multiemployer defined benefit pension plans, two of which comprise the majority of current year contributions and employee coverage: the MEBA Pension Plan - Defined Benefit Plan and the Seafarers Pension Plan. The Company’s withdrawal obligation on the multi-employer plans, which is unrecorded, is approximately $9,000.

 

The Company also assumed liabilities of $8,812 related to deferred compensation. The deferred compensation plan is an unfunded, nonqualified plan that allows eligible employees to defer up to 100% of their performance bonuses or defer up to 50% (5% minimum) of their salary, select investments for their deferral balances and determine when to be paid out. Eligible employees can elect to receive payment either on a specified date, or on a specified date after termination of employment, and either in a lump sum or annual installments, with a maximum deferral period of 20 years. Expected timing of payout is greater than one year and therefore classified as long-term.

 
v3.20.2
Capital Stock and Stock Compensation
 6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Shareholders' Equity and Share-based Payments [Text Block]

Note 8 — Capital Stock and Stock Compensation

 

Share and Warrant Repurchases

 

During the six months ended June 30, 2020, in connection with the vesting of restricted stock units (“RSUs”), the Company withheld 104,552 shares of Class A common stock at an average price of $1.90 per share (based on the market prices on the dates of vesting) from certain members of management to cover withholding taxes.

 

Warrant Conversions

 

During the six months ended June 30, 2020, the Company issued 378 shares of Class A common stock as a result of the exercise of 1,998 Class A warrants. During the six months ended June 30, 2019, the Company issued 195,413 shares of Class A common stock as a result of the exercise of 1,034,368 Class A warrants.

 

Stock Compensation

 

The Company accounts for stock compensation expense in accordance with the fair value-based method required by ASC 718, Compensation – Stock Compensation. This method requires share-based payment transactions to be measured based on the fair value of the equity instruments issued.

 

Director Compensation — Restricted Stock Units

 

On May 28, 2020, the Company awarded 321,000 time-based RSUs to its non-employee directors. The grant date fair value of these awards was $2.25 per RSU. Each RSU represents a contingent right to receive one share of Class A common stock upon vesting. These RSUs vest in full on the first anniversary of the grant date, subject to each director continuing to provide services to the Company through such date.

 

Management Compensation — Restricted Stock Units and Stock Options

 

During the six months ended June 30, 2020, the Company granted 764,406 RSUs to its employees, including senior officers. The grant date fair value of these awards was $2.03 per RSU. Each RSU represents a contingent right to receive one share of Class A common stock upon vesting. Each award of RSUs will vest in equal installments on each of the first three anniversaries of the grant date.

 

During the six months ended June 30, 2020, the Company awarded 582,224 performance-based RSUs to its senior officers. Each performance-based RSU represents a contingent right to receive RSUs based upon continuous employment through the end of a three-year performance period and will vest as follows: (i) one-half of the target RSUs will vest and become nonforfeitable subject to OSG’s return on invested capital (“ROIC”) performance in the three-year ROIC performance period relative to a target rate (the “ROIC Target”) set forth in the award agreements (which define ROIC as net operating profit after taxes divided by the net of total debt plus shareholders equity less cash); and (ii) one–half of the target RSUs will be subject to OSG’s three–year total shareholder return (“TSR Target”) performance relative to that of a performance index over a three–year TSR performance period. The index consists of companies that comprise a combination of the oil and gas storage and transportation and marine GICS sub-industries indexes during the performance period. Vesting is subject in each case to certification by the Human Resources and Compensation Committee of the Parent Company’s Board of Directors as to achievement of the performance measures and targets.

 

The ROIC Target RSU awards and the TSR Target RSU awards are subject to an increase of up to a maximum of 291,112 target RSUs combined (873,340 RSUs in total) or decrease, depending on performance against the applicable measure and targets. The ROIC performance goal is a performance condition which, as of June 30, 2020, management believed was probable of being achieved. Accordingly, for financial reporting purposes, compensation costs have been recognized for these awards. The grant date fair value of the TSR based performance awards, which have a market condition, was determined to be $2.03 per RSU.

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 
v3.20.2
Accumulated Other Comprehensive Loss
 6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Comprehensive Income (Loss) Note [Text Block]

Note 9 — Accumulated Other Comprehensive Loss

 

The components of accumulated other comprehensive loss, net of related taxes, in the condensed consolidated balance sheets follow:

 

As of 

June 30, 2020

   December 31, 2019 
Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement benefit plans)  $(6,292)  $(6,409)
Accumulated other comprehensive loss  $(6,292)  $(6,409)

 

The following tables present the changes in the balances of each component of accumulated other comprehensive loss, net of related taxes, during the three and six months ended June 30, 2020 and 2019:

 

  Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement plans) 
     
Balance as of March 31, 2020  $(6,351)
Current period change, excluding amounts reclassified from accumulated other comprehensive income   — 
Amounts reclassified from accumulated other comprehensive income   59 
Total change in accumulated other comprehensive income   59 
Balance as of June 30, 2020  $(6,292)
      
Balance as of March 31, 2019  $(7,109)
Current period change, excluding amounts reclassified from accumulated other comprehensive income   (23)
Amounts reclassified from accumulated other comprehensive income   108 
Total change in accumulated other comprehensive income   85 
Balance as of June 30, 2019  $(7,024)

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

   Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement plans) 
     
Balance as of December 31, 2019  $(6,409)
Current period change, excluding amounts reclassified from accumulated other comprehensive income   — 
Amounts reclassified from accumulated other comprehensive income   117 
Total change in accumulated other comprehensive income   117 
Balance as of June 30, 2020  $(6,292)
      
Balance as of December 31, 2018  $(7,192)
Current period change, excluding amounts reclassified from accumulated other comprehensive income   (48)
Amounts reclassified from accumulated other comprehensive income   216 
Total change in accumulated other comprehensive income   168 
Balance as of June 30, 2019  $(7,024)

 

The Company includes the service cost component for net periodic benefit cost/(income) in vessel expenses and general and administrative expenses and other components in other (expense)/income, net on the condensed consolidated statements of operations.

 
v3.20.2
Leases
 6 Months Ended
Jun. 30, 2020
Leases  
Lessee, Operating Leases [Text Block]

Note 10 — Leases

 

For the six months ended June 30, 2020, the Company had non-cash operating activities of $1,533 for obtaining operating right-of-use assets and liabilities.

 

Charters-in

 

On March 12, 2020, the Company commenced a bareboat charter for the Alaskan Frontier for a lease term of three years. Based on the length of the lease term and the remaining economic life of the vessel, it is accounted for as an operating lease. The lease contains a three-year renewal option and is available indefinitely. The future minimum commitments under the lease are $184 for the remainder of 2020, $365 in 2021, $365 in 2022 and $71 in 2023.

 

Charters-out

 

The Company is the lessor under its time charter contracts. Total time charter revenue for the three and six months ended June 30, 2020 was equal to lease income from lease payments of $95,893 and $174,746, respectively, plus straight-line adjustments of $769 and $66, respectively. For the three and six months ended June 30, 2019, total time charter revenue was equal to lease income from lease payments of $62,320 and $125,757, respectively, less straight-line adjustments of $313 and $630, respectively.
v3.20.2
Vessels
 6 Months Ended
Jun. 30, 2020
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment Disclosure [Text Block]

Note 11 — Vessels

 

At the end of May 2020, the Company took delivery of a 204,000 barrel capacity oil and chemical tank barge. The barge, named the OSG 204, has been paired with an existing tug within the Company’s fleet, the OSG Endurance. The ATB unit will be operating in the Jones Act trade and has entered into a one-year time charter.

 

In May 2020, the Company sold for scrap one of its ATBs for $700, net of broker commissions. As a result of the sale, the Company recognized a loss, which is not considered material and is included in loss on disposal of vessels and other property, including impairments, net on the condensed consolidated statements of operations. The Company used the proceeds from the sale to make a mandatory prepayment on its term loan due in 2023.The aggregate loss realized on this transaction, which related to the write-off of unamortized deferred finance costs, was not material.

 

On March 12, 2020, the Parent Company’s subsidiaries completed the purchase of three U.S.-flagged crude oil carrier vessels, the Alaskan Explorer, Alaskan Legend, and Alaskan Navigator, from BP for total consideration of $54,000 and have entered into a bareboat charter with BP for a fourth vessel, the Alaskan Frontier. The vessels purchased will continue to be operated by ATC under time charters with Hilcorp North Slope, LLC (formerly BP Exploration (Alaska), Inc.), with firm charter periods lasting until 2022, 2025 and 2026. Each charter also provides for five one-year extension options.

 

For the six months ended June 30, 2020, the Company’s non-cash investing activities for the accrual of capital expenditures related to the Company’s newbuilds were $3,925.
v3.20.2
Debt
 6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]

Note 12 — Debt

 

On July 30, 2020, the Company used $20,002 of restricted cash, along with a cash payment of $4,236, which included interest and other fees, to pay in full the Company’s term loan on the Overseas Gulf Coast, due 2024. At June 30, 2020, the principal amount of the term loan of $24,050 is included in current installments of long-term debt on the condensed consolidated balance sheets.

 

On March 26, 2020, one of the Company’s subsidiaries, OSG 204 LLC, entered into a credit agreement with Wintrust Commercial Finance and other syndicate lenders to finance a new 204,000 barrel U.S. Flag oil and chemical ATB barge, which was delivered to the Company during the second quarter of 2020. The credit agreement included a construction loan, against which the Company could make drawdowns to pay for construction costs, and a five-year term loan. The construction loan, which was guaranteed by the Company, was for an aggregate principal amount of $33,150, of which $28,084 was drawn at loan closing, and had a floating rate of interest of LIBOR plus 5.00%. The remaining two milestone construction payments for the barge, accrued and unpaid interest and commitment fees on the construction loan of $4,849 were funded as additions to the construction loan. The construction loan was secured by a collateral assignment of the vessel construction contract. Upon delivery of the barge to OSG 204 LLC, the construction loan was converted into a fixed rate five-year term loan guaranteed by the Company for $32,933. The fixed-rate loan bears interest of 5.00% and matures on June 1, 2025. The lenders hold a perfected first priority security interest and preferred ship mortgage against the vessel. The annual principal payments expected to be made are $1,015 for the remainder of 2020, $2,107 in 2021, $2,215 in 2022, $2,328 in 2023, $2,447 in 2024 and $22,821 thereafter.

 

On March 12, 2020, the Company entered into a loan with Banc of America Leasing & Capital, LLC and other syndicate lenders in the aggregate principal amount of $54,000 to finance the purchase of three U.S.-flagged crude oil carrier vessels, the Alaskan Explorer, Alaskan Legend, and Alaskan Navigator. The loan is secured by first preferred ship mortgages on the vessels, bears a fixed rate of interest of 4.43% and has a five-year term maturing on March 12, 2025. The annual principal payments required to be made are $2,023 for the remainder of 2020, $4,182 in 2021, $4,371 in 2022, $4,568 in 2023, $4,775 in 2024 and $33,087 thereafter.
v3.20.2
Commitments and Contingencies
 6 Months Ended
Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Disclosure [Text Block]

Note 13 — Commitments and Contingencies

 

The Company is a party, as plaintiff or defendant, to various suits in the ordinary course of business for monetary relief arising principally from personal injuries (including without limitation exposure to asbestos and other toxic materials), wrongful death, collision or other casualty and to claims arising under charter parties. A substantial majority of such personal injury, wrongful death, collision or other casualty claims against the Company are covered by insurance (subject to deductibles not material in amount). Each of the claims involves an amount which, in the opinion of management, are not expected to be material to the Company’s financial position, results of operations and cash flows.
v3.20.2
Recently Adopted and Issued Accounting Standards (Policies)
 6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Recently Adopted Accounting Standards

Recently Adopted Accounting Standards

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. The new guidance was effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Standards

Recently Issued Accounting Standards

 

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The new guidance is effective for fiscal years ending after December 15, 2020 and is required to be applied on a retrospective basis to all periods presented. Early adoption is permitted. The Company plans to adopt this standard on December 31, 2020. The adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which adds a new Topic 326 and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to maturity debt securities. Under current U.S. GAAP, entities generally recognize credit losses when it is probable that a loss has been incurred. The revised guidance will remove all recognition thresholds and will require entities to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the entity expects to collect over the instrument’s contractual life. Subsequently, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, to clarify that receivables arising from operating leases are within the scope of lease accounting standards.

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates, which allows a two-bucket approach for determining the effective dates of these accounting standards. Under this approach, the buckets would be defined as follows:

 

Bucket 1— All public business entities (“PBEs”) that are SEC filers (as defined in U.S. GAAP), excluding smaller reporting companies (“SRCs”) (as defined by the SEC). The credit losses standard became effective January 1, 2020.

 

Bucket 2— All other entities, including SRCs, other PBEs that are not SEC filers, private companies, not-for-profit organizations, and employee benefit plans. The credit losses standard are to become effective January 1, 2023.

 

At the annual evaluation date on June 30, 2019, the Company met the SEC definition of a smaller reporting company. Accordingly, the Company plans to adopt the credit losses standard on January 1, 2023. Management is currently reviewing the impact of the adoption of this accounting standard on the Company’s consolidated financial statements.

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. The new guidance is effective for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years. The Company will adopt this standard on January 1, 2021. Management is currently reviewing the impact of the adoption of this accounting standard on the Company’s consolidated financial statements.
v3.20.2
Revenue Recognition (Tables)
 6 Months Ended
Jun. 30, 2020
Revenue from Contract with Customer [Abstract]  
Schedule of Disaggregation of Revenue

The following table shows the Company’s shipping revenues disaggregated by nature of the charter arrangement for the three and six months ended June 30, 2020 and 2019:

 

Schedule of Disaggregation of Revenue 

  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
   2020   2019   2020   2019 
Time and bareboat charter revenues  $96,662   $62,007   $174,812   $125,127 
Voyage charter revenues(1)   9,423    6,150    20,892    13,784 
Contracts of affreightment revenues   8,454    20,302    19,694    37,286 
Total shipping revenues  $114,539   $88,459   $215,398   $176,197 

 

(1) Voyage charter revenues include approximately $3,946 and $3,088 of revenue related to short-term time charter contracts for the three months ended June 30, 2020 and 2019, respectively, and $15,265 and $3,858 for the six months ended June 30, 2020 and 2019, respectively.
v3.20.2
Earnings per Common Share (Tables)
 6 Months Ended
Jun. 30, 2020
Per Share Amounts:  
Schedule of Earnings Per Share

The components of the calculation of basic earnings per share and diluted earnings per share are as follows:

 

  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
   2020   2019   2020   2019 
Net income  $6,380   $(1,738)  $31,505   $1,458 
                     
Weighted average common shares outstanding:                    
Class A common stock - basic   89,747,630    89,245,696    89,584,969    89,125,986 
Class A common stock - diluted   90,812,332    89,245,696    90,600,658    89,507,860 
v3.20.2
Fair Value Measurements and Fair Value Disclosures (Tables)
 6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Schedule of Hierarchy Categorized on Fair Value

The estimated fair values of the Company’s financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows:

   Carrying   Fair Value 
   Value   Level 1   Level 2 
June 30, 2020:            
Assets            
Cash and cash equivalents (1)  $94,342   $94,342   $— 
Total  $94,342   $94,342   $— 
Liabilities               
Term loan agreement, due 2023  $279,749   $—   $286,366 
Term loan agreements, due 2024   47,134    —    51,178 
Alaska Tankers term loan agreement, due 2025   52,297    —    48,458 
OSG 204 LLC term loan agreement, due 2025   32,291    —    32,557 
Term loan agreement, due 2026   25,123    —    23,723 
Unsecured senior notes   690    —    722 
Total  $437,284   $—   $443,004 

 

   Carrying   Fair Value 
   Value   Level 1   Level 2 
December 31, 2019:            
Assets               
Cash (1)  $41,677   $41,677   $— 
Total  $41,677   $41,677   $— 
Liabilities               
Term loan agreement, due 2023  $291,994   $—   $299,974 
Term loan agreements, due 2024   48,289    —    49,015 
Term loan agreement, due 2026   27,075    —    27,359 
Unsecured senior notes   689    —    722 
Total  $368,047   $—   $377,070 

 

(1) Includes current and non-current restricted cash aggregating $20,150 and $174 at June 30, 2020 and December 31, 2019, respectively. At June 30, 2020, $20,002 of restricted cash is in escrow to be applied as a prepayment on the term loan on the Overseas Gulf Coast, due 2024. On July 30, 2020, the $20,002 of restricted cash was used towards the payment in full of the Overseas Gulf Coast term loan, due 2024. See Note 12, “Debt” for further details. Restricted cash of $148 and $174 as of June 30, 2020 and December 31, 2019, respectively, was related to the Company’s Unsecured Senior Notes.
v3.20.2
Accumulated Other Comprehensive Loss (Tables)
 6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Schedule of Components of Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of related taxes, in the condensed consolidated balance sheets follow:

 

As of 

June 30, 2020

   December 31, 2019 
Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement benefit plans)  $(6,292)  $(6,409)
Accumulated other comprehensive loss  $(6,292)  $(6,409)
Schedule of Changes in Balances of Component of Accumulated Other Comprehensive Loss

The following tables present the changes in the balances of each component of accumulated other comprehensive loss, net of related taxes, during the three and six months ended June 30, 2020 and 2019:

 

  Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement plans) 
     
Balance as of March 31, 2020  $(6,351)
Current period change, excluding amounts reclassified from accumulated other comprehensive income   — 
Amounts reclassified from accumulated other comprehensive income   59 
Total change in accumulated other comprehensive income   59 
Balance as of June 30, 2020  $(6,292)
      
Balance as of March 31, 2019  $(7,109)
Current period change, excluding amounts reclassified from accumulated other comprehensive income   (23)
Amounts reclassified from accumulated other comprehensive income   108 
Total change in accumulated other comprehensive income   85 
Balance as of June 30, 2019  $(7,024)

 

 

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

 

   Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement plans) 
     
Balance as of December 31, 2019  $(6,409)
Current period change, excluding amounts reclassified from accumulated other comprehensive income   — 
Amounts reclassified from accumulated other comprehensive income   117 
Total change in accumulated other comprehensive income   117 
Balance as of June 30, 2020  $(6,292)
      
Balance as of December 31, 2018  $(7,192)
Current period change, excluding amounts reclassified from accumulated other comprehensive income   (48)
Amounts reclassified from accumulated other comprehensive income   216 
Total change in accumulated other comprehensive income   168 
Balance as of June 30, 2019  $(7,024)
v3.20.2
Schedule of Disaggregation of Revenue (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Disaggregation of Revenue [Line Items]        
Total shipping revenues $ 114,539 $ 88,459 $ 215,398 $ 176,197
Voyage charter revenues 17,877 26,452 40,586 51,070
Time and Bareboat Charter Revenues [Member]        
Disaggregation of Revenue [Line Items]        
Total shipping revenues 96,662 62,007 174,812 125,127
Voyage Charter Revenues [Member]        
Disaggregation of Revenue [Line Items]        
Total shipping revenues [1] 9,423 6,150 20,892 13,784
Contracts of Affreightment Revenues [Member]        
Disaggregation of Revenue [Line Items]        
Total shipping revenues 8,454 20,302 19,694 37,286
Short-term Time Charter Contracts [Member]        
Disaggregation of Revenue [Line Items]        
Voyage charter revenues $ 3,946 $ 3,088 $ 15,265 $ 3,858
[1] Voyage charter revenues include approximately $3,946 and $3,088 of revenue related to short-term time charter contracts for the three months ended June 30, 2020 and 2019, respectively, and $15,265 and $3,858 for the six months ended June 30, 2020 and 2019, respectively.
v3.20.2
Revenue Recognition (Details Narrative)
$ in Thousands
 6 Months Ended
Jun. 30, 2020
USD ($)
Products
Dec. 31, 2019
USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Period for voyage completion 30 days  
Number of products participating in U.S Maritime Security Program | Products 2  
Contract with Customer, Asset, after Allowance for Credit Loss $ 4,726 $ 5,831
Revenue, Remaining Performance Obligation, Amount 22,929  
2020 [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Revenue, Remaining Performance Obligation, Amount 19,134  
2021 [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Revenue, Remaining Performance Obligation, Amount $ 3,795  
v3.20.2
Schedule of Earnings Per Share (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2020
Jun. 30, 2019
Per Share Amounts:            
Net income $ 6,380 $ 25,125 $ (1,738) $ 3,197 $ 31,505 $ 1,458
Weighted average common shares outstanding: Class A common stock - basic 89,747,630   89,245,696   89,584,969 89,125,986
Weighted average common shares outstanding: Class A common stock - diluted 90,812,332   89,245,696   90,600,658 89,507,860
v3.20.2
Earnings per Common Share (Details Narrative) - $ / shares
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2020
Jun. 30, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]      
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount 1,064,702 1,015,689 381,874
Class A Restricted Stock Units [Member]      
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]      
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount   2,645,025 1,718,865
Class A Stock Options Outstanding [Member]      
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]      
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount   1,478,756 1,478,756
Stock Option Member [Member]      
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]      
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount   371,893  
Restricted Stock [Member]      
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]      
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount     1,419,325
Class A Warrants [Member]      
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]      
Warrant exercise price $ 0.01 $ 0.01  
v3.20.2
Schedule of Hierarchy Categorized on Fair Value (Details) - USD ($)
$ in Thousands
Jul. 30, 2020
Jun. 30, 2020
Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Cash and cash equivalents [1]   $ 94,342 $ 41,677
Total   94,342 41,677 [1]
Term loan agreements, fair value   437,284 368,047
Restricted Cash Fair Value Disclosure.   20,150 174
Term Loan Agreement, Due 2023 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value   279,749 291,994
Term Loan Agreements, Due 2024 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value   47,134 48,289
Restricted Cash   20,002  
Restricted cash used to payoff term loan. $ 20,002    
Alaska Tankers Term Loan Agreement, Due 2025 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value   52,297  
Restricted cash used to payoff term loan. $ 20,002    
OSG 204 LLC Term Loan Agreement, Due 2025 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value   32,291  
Term Loan Agreement, Due 2026 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value   25,123 27,075
Unsecured Senior Notes [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value   690 689
Restricted Cash   148 174
Fair Value, Inputs, Level 1 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Cash and cash equivalents [1]   94,342 41,677
Total   94,342 41,677 [1]
Term loan agreements, fair value  
Fair Value, Inputs, Level 1 [Member] | Term Loan Agreement, Due 2023 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value  
Fair Value, Inputs, Level 1 [Member] | Term Loan Agreements, Due 2024 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value  
Fair Value, Inputs, Level 1 [Member] | Alaska Tankers Term Loan Agreement, Due 2025 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value    
Fair Value, Inputs, Level 1 [Member] | OSG 204 LLC Term Loan Agreement, Due 2025 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value    
Fair Value, Inputs, Level 1 [Member] | Term Loan Agreement, Due 2026 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value  
Fair Value, Inputs, Level 1 [Member] | Unsecured Senior Notes [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value  
Fair Value, Inputs, Level 2 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Cash and cash equivalents [1]  
Total   [1]
Term loan agreements, fair value   443,004 377,070
Fair Value, Inputs, Level 2 [Member] | Term Loan Agreement, Due 2023 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value   286,366 299,974
Fair Value, Inputs, Level 2 [Member] | Term Loan Agreements, Due 2024 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value   51,178 49,015
Fair Value, Inputs, Level 2 [Member] | Alaska Tankers Term Loan Agreement, Due 2025 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value   48,458  
Fair Value, Inputs, Level 2 [Member] | OSG 204 LLC Term Loan Agreement, Due 2025 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value   32,557  
Fair Value, Inputs, Level 2 [Member] | Term Loan Agreement, Due 2026 [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value   23,723 27,359
Fair Value, Inputs, Level 2 [Member] | Unsecured Senior Notes [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Term loan agreements, fair value   $ 722 $ 722
[1] Includes current and non-current restricted cash aggregating $20,150 and $174 at June 30, 2020 and December 31, 2019, respectively. At June 30, 2020, $20,002 of restricted cash is in escrow to be applied as a prepayment on the term loan on the Overseas Gulf Coast, due 2024. On July 30, 2020, the $20,002 of restricted cash was used towards the payment in full of the Overseas Gulf Coast term loan, due 2024. See Note 12, “Debt” for further details. Restricted cash of $148 and $174 as of June 30, 2020 and December 31, 2019, respectively, was related to the Company’s Unsecured Senior Notes.
v3.20.2
Taxes (Details Narrative) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Income Tax Disclosure [Abstract]          
Other Income Tax Expense (Benefit), Continuing Operations $ (1,044) $ 773      
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Percent 14.00% 31.00% 19.00% 35.00%  
Income tax provisions     $ (7,404) $ 381  
Operating loss carryforwards, expiration date     Some of the significant changes are to increase the limitation on deductible business interest expense for 2019 and 2020, allow for the five year carryback of net operating losses for 2018-2020, suspend the 80% limitation of taxable income for net operating loss carryforwards for 2018-2020    
Liability for Uncertainty in Income Taxes, Noncurrent $ 891   $ 891   $ 864
v3.20.2
Investment in Alaska Tanker Company, LLC (Details Narrative) - USD ($)
$ in Thousands
 6 Months Ended 12 Months Ended
Mar. 12, 2020
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Entity Listings [Line Items]        
Payment to purchase of oil carrier vessels   $ 38,657 $ 34,722  
Defined Contribution Plan, Description       The deferred compensation plan is an unfunded, nonqualified plan that allows eligible employees to defer up to
Multiemployer Plans, Withdrawal Obligation       $ 9,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Deferred Revenue       $ 8,812
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent       100.00%
Alaska Tanker Company, LLC [Member]        
Entity Listings [Line Items]        
Investment Interest Rate       37.50%
Contract term ending date, description       December 2023
Payment to purchase of oil carrier vessels       $ 54,000
Acquisition by borrowing       $ 54,000
Acquired term loan, description       five-year term loan
Purchase of vessels term description       In connection with the purchase of the vessels from BP, the Company agreed to time charter arrangements with BP for terms of 2.5 years to 6.4 years at a fixed daily rate with an annual escalation and five renewal options for one year each.
Business Combination, Consideration Transferred $ 54,000     $ 19,172
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net       $ 9,898
Defined Contribution Plan, Description       The postretirement medical and life insurance plan provides benefits to shore-based employees and nonunion licensed deck officers at least 55 years of age with 10 years or more of service, as defined. The plan was frozen as of December 31, 2016 and closed to new entrants as of January 1, 2017. The Company also contributes to six multiemployer defined benefit pension plans, two of which comprise the majority of current year contributions and employee coverage: the MEBA Pension Plan - Defined Benefit Plan and the Seafarers Pension Plan.
v3.20.2
Capital Stock and Stock Compensation (Details Narrative) - $ / shares
 6 Months Ended
May 28, 2020
Jun. 30, 2020
Jun. 30, 2019
Restricted Stock Units (RSUs) [Member]      
Class of Stock [Line Items]      
Share based payment options granted, per share   $ 2.03  
Restricted Stock Units (RSUs) [Member] | Subject to Increase RSU Award [Member]      
Class of Stock [Line Items]      
Share based payment options grants in period gross   291,112  
Restricted Stock Units (RSUs) [Member] | Decrease Depending on Applicable Measures and Targets [Member]      
Class of Stock [Line Items]      
Share based payment options grants in period gross   873,340  
Non-employee Directors [Member] | Restricted Stock Units (RSUs) [Member]      
Class of Stock [Line Items]      
Share based payment options grants in period gross 321,000    
Share based payment options granted, per share $ 2.25    
Employees, Including Senior Officers [Member] | Restricted Stock Units (RSUs) [Member]      
Class of Stock [Line Items]      
Share based payment options grants in period gross   764,406  
Share based payment options granted, per share   $ 2.03  
Certain Senior Officers [Member] | Restricted Stock Units (RSUs) [Member]      
Class of Stock [Line Items]      
Share based payment options grants in period gross   582,224  
Class A Warrants [Member]      
Class of Stock [Line Items]      
Number of warrants exercised   1,998 1,034,368
Common Class A [Member]      
Class of Stock [Line Items]      
Stock Repurchased During Period, Shares   104,552  
Stock repurchased during period, per share amount   $ 1.90  
Number of shares issued for exercise of warrants   378 195,413
v3.20.2
Schedule of Components of Accumulated Other Comprehensive Loss (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Retirement Benefits [Abstract]    
Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement benefit plans) $ (6,292) $ (6,409)
Accumulated other comprehensive loss $ (6,292) $ (6,409)
v3.20.2
Schedule of Changes in Balances of Component of Accumulated Other Comprehensive Loss (Details) - Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member] - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Defined Benefit Plan Disclosure [Line Items]        
Beginning balance $ (6,351) $ (7,109) $ (6,409) $ (7,192)
Current period change, excluding amounts reclassified from accumulated other comprehensive income (23) (48)
Amounts reclassified from accumulated other comprehensive income 59 108 117 216
Total change in accumulated other comprehensive income 59 85 117 168
Ending balance $ (6,292) $ (7,024) $ (6,292) $ (7,024)
v3.20.2
Leases (Details Narrative) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
SEC Schedule, 12-17, Insurance Companies, Reinsurance [Line Items]        
Operating right-of-use assets $ 1,533   $ 1,533  
Operating right-of-use liabilities 1,533   1,533  
Lessee, Operating Lease, Liability, to be Paid, Remainder of Fiscal Year 184   184  
Lessee, Operating Lease, Liability, to be Paid, Year Two 365   365  
Lessee, Operating Lease, Liability, to be Paid, Year Three 365   365  
Lessee, Operating Lease, Liability, to be Paid, Year Four 71   71  
Time Charter Revenue [Member]        
SEC Schedule, 12-17, Insurance Companies, Reinsurance [Line Items]        
Operating Lease, Lease Income 95,893 $ 62,320 174,746 $ 125,757
Straight Line Rent Adjustments $ 769 $ 313 $ 66 $ 630
v3.20.2
Vessels (Details Narrative) - USD ($)
$ in Thousands
 1 Months Ended 6 Months Ended 12 Months Ended
Mar. 12, 2020
May 31, 2020
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Entity Listings [Line Items]          
Proceeds from Sale of Property, Plant, and Equipment   $ 700 $ 700 $ 2,197  
Accrual of capital expenditures     $ 3,925    
Alaska Tanker Company, LLC [Member]          
Entity Listings [Line Items]          
Business Combination, Consideration Transferred $ 54,000       $ 19,172
v3.20.2
Debt (Details Narrative) - USD ($)
$ in Thousands
Jul. 30, 2020
Mar. 26, 2020
Mar. 26, 2020
Mar. 12, 2020
Mar. 11, 2020
Jun. 30, 2020
Short-term Debt [Line Items]            
Long-term Debt           $ 24,050
Debt Instrument, Face Amount   $ 33,150 $ 33,150      
Payments for Loans   28,084        
Construction Loan   $ 4,849 $ 4,849      
Debt Instrument, Interest Rate, Stated Percentage   5.00% 5.00%      
Loan maturity date   Jun. 01, 2025        
Long-Term Debt, Maturity, Remainder of Fiscal Year   $ 1,015 $ 1,015      
Long-Term Debt, Maturity, Year Two   2,107 2,107      
Long-Term Debt, Maturity, Year Three   2,215 2,215      
Long-Term Debt, Maturity, Year Four   2,328 2,328      
Long-Term Debt, Maturity, Year Four and Five   2,447 2,447      
Long-Term Debt, Maturity, after Year Five   22,821 22,821      
OSG 204 LLC [Member]            
Short-term Debt [Line Items]            
Construction Loan   $ 32,933 $ 32,933      
Debt instrument term, description     five-year term loan      
Banc of America Leasing and Capital LLC [Member]            
Short-term Debt [Line Items]            
Long-Term Debt, Maturity, Remainder of Fiscal Year       $ 2,023    
Long-Term Debt, Maturity, Year Two       4,182    
Long-Term Debt, Maturity, Year Three       4,371    
Long-Term Debt, Maturity, Year Four       4,568    
Long-Term Debt, Maturity, Year Four and Five       4,775    
Long-Term Debt, Maturity, after Year Five       33,087    
Loans Payable       $ 54,000    
Line of Credit Facility, Interest Rate During Period         4.43%  
Loan term, description       five-year term    
Line of Credit Facility, Expiration Date       Mar. 12, 2025    
London Interbank Offered Rate (LIBOR) [Member]            
Short-term Debt [Line Items]            
Debt, Weighted Average Interest Rate   5.00% 5.00%      
Subsequent Event [Member]            
Short-term Debt [Line Items]            
Debt Instrument, Maturity Date, Description due 2024          
Alaska Tankers Term Loan Agreement, Due 2025 [Member]            
Short-term Debt [Line Items]            
Restricted cash used to payoff term loan. $ 20,002          
Repayments of Lines of Credit $ 4,236