NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DOLLARS
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
NOTE
1 — BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
The
consolidated financial statements include the accounts of Overseas Shipholding Group, Inc., a Delaware corporation incorporated in 1969,
and its wholly owned subsidiaries (the “Company” or “OSG”, or “we” or “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. All
significant intercompany balances and transactions have been eliminated in consolidation.
The
World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic in March 2020. The COVID-19
pandemic is a dynamic and continuously evolving phenomenon and our disclosures throughout describe its effects on our business.
Recent geopolitical tensions involving Russia and the Ukraine have
disrupted markets and resulted in volatile oil prices. The impact of this situation is uncertain and ongoing.
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and cash equivalents - Interest-bearing deposits that are highly liquid investments and have a maturity of three months or less when purchased are included in cash and cash equivalents. Restricted cash as of December 31, 2021 and 2020 was related to the Company’s Unsecured Senior Notes as defined in Note 8, “Debt”.
2. Vessels, vessel lives, deferred drydocking expenditures and other property - Vessels are recorded at cost and are depreciated to their estimated salvage value on the straight-line basis over the estimated useful lives of the vessels, which are generally 25 years (except for new ATBs for which estimated useful lives of 30 years are used).
Other
property, including leasehold improvements, are recorded at cost and amortized on a straight-line basis over the shorter of the terms
of the leases or the estimated useful lives of the assets, which range from three years to 15 years.
Interest
costs are capitalized to vessels and other property during the period that vessels are under construction and projects are in progress.
During the years ended December 31, 2021 and 2020, interest costs capitalized were $1,427 and $3,717, respectively.
Expenditures
incurred during a drydocking are deferred and amortized on the straight-line basis over the shorter of the terms of the leases or the
period until the next scheduled drydocking, generally two and a half to five years. The Company only includes in deferred drydocking
costs those direct costs that are incurred as part of the drydocking to meet regulatory requirements, or are expenditures that add economic
life to the vessel, increase the vessel’s earnings capacity or improve the vessel’s efficiency. Direct costs include shipyard
costs as well as the costs of placing the vessel in the shipyard. Expenditures for normal maintenance and repairs, whether incurred as
part of the drydocking or not, are expensed as incurred.
The
carrying value of each of the Company’s vessels represents its original cost at the time it was delivered or purchased less depreciation
calculated using estimated useful lives from the date such vessel was originally delivered from the shipyard or from the date (as in
the case of certain of the Company’s ATBs) a vessel was rebuilt. A vessel’s carrying value is reduced to its new cost basis
(i.e., its current fair value) if a vessel impairment charge is recorded.
If
the estimated economic lives assigned to the Company’s vessels prove to be too long because of new regulations, a prolonged weak
market environment, a broad imposition of age restrictions by the Company’s customers, or other future events, it could result
in higher depreciation expense and impairment losses in future periods related to a reduction in the useful lives of any affected vessels.
3.
Impairment of long-lived assets, including right-of-use assets -
The carrying amounts of long-lived assets held and used by the Company are reviewed for potential impairment whenever events or changes
in circumstances indicate that the carrying amount of a particular asset may not be fully recoverable. In such instances, the requirement
for impairment could be triggered if the estimate of the undiscounted future cash flows expected to result from the use of the asset
and its eventual disposition is less than the asset’s carrying amount. This assessment is made at the individual vessel level since
separately identifiable cash flow information for each vessel is available. The impairment charge, if any, would be measured as the amount
by which the carrying amount of a vessel exceeded its fair value. A long-lived asset impairment charge results in a new cost basis being
established for the relevant long-lived asset. See Note 9, “Fair Value Measurements and Fair Value Disclosures,” for further
discussion on the impairment tests performed on our vessels during the two years ended December 31, 2021.
44 | | Overseas Shipholding Group, Inc. |
4. Intangible assets - Intangible assets with estimable useful lives are amortized over their estimated useful lives and are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may be impaired. See Note 9, “Fair Value Measurements and Fair Value Disclosures,” for further discussion on the impairment test performed on the Company’s intangible assets at December 31, 2021.
5. Deferred finance charges - Finance charges incurred in the arrangement and amendment of debt are deferred and amortized to interest expense on an effective interest method over the life of the related debt.
Unamortized
deferred financing charges of $5,542 and $6,998 relating to the Company’s term loans are netted against long-term debt in the consolidated
balance sheets as of December 31, 2021 and 2020, respectively. Interest expense relating to the amortization of deferred financing charges
amounted to $2,099 in 2021 and $2,286 in 2020.
6. Revenue and expense recognition - Revenues from time charters are accounted for as operating leases and are thus recognized ratably over the rental periods of such charters, as service is performed. Revenues from voyage charter contracts are recognized ratably over the estimated length of each voyage, calculated on a load-to-discharge basis.
The
Company classifies time charter leasing arrangements less than 90 days within the voyage charter revenue financial statement line item
because the Company believes the pricing negotiated within these short-term time charter contracts more closely aligns with the Company’s
voyage charter spot market.
Under
voyage charters, expenses such as fuel, port charges, canal tolls, cargo handling operations and brokerage commissions are paid by the
Company whereas, under time and bareboat charters, such voyage costs are generally paid by the Company’s customers.
The
Company receives a stipend pursuant to the Maritime Security Act of 1996 for the two U.S. Flag Product Carriers which participate in
the U.S. MSP program. This stipend has been recorded as an offset to vessel expenses which amounted to $10,500 in 2021 and $9,665 in
2020.
7. Voyage receivables - All customers are granted credit on a short-term basis and related credit risks are considered minimal. 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 deemed uncollectible and removed from accounts receivable and the allowance for doubtful accounts when collection efforts have been exhausted.
8.
Concentration of credit risk -
Financial instruments that potentially subject the Company to concentrations of credit risk are voyage receivables due from charterers.
With respect to voyage receivables, the Company limits its credit risk by performing ongoing credit evaluations. Voyage receivables reflected
on the consolidated balance sheets as of December 31, 2021 and 2020 are net of a reserve for doubtful accounts of $150
and $4,604,
respectively. In June 2019, one of the Company’s lightering customers, PES, suffered an explosion and fire at their refinery in
the Delaware Bay. In July 2019, PES filed a Chapter 11 bankruptcy petition. The reserve for doubtful accounts at December 31, 2020 included
a provision of $4,300
on outstanding receivables of $4,300
from PES that we established in the second
quarter of 2019. During the fourth quarter of 2021, our recovery became determinable and we recognized a recovery
of $1,080. The $1,080 payment
was received by us in February 2022.
During
the years ended December 31, 2021 and 2020, the Company had two and three individual customers, respectively, who accounted for 10% or
more of the Company’s revenues. The customers and their related percentages were Hilcorp North Slope LLC (28.2%) and BP Products
North America Inc. (10.6%) for the year ended December 31, 2021 and Monroe Energy LLC (12.6%), BP Exploration Alaska Inc. (11.4%) and
SeaRiver Maritime Inc. (10.1%) for the year ended December 31, 2020.
The
Company’s cash and cash equivalents balances generally exceed Federal Deposit Insurance Corporation insurance limits. Cash and
cash equivalents are placed in what the Company believes to be creditworthy financial institutions. In addition, certain of the Company’s
money market accounts invest in U.S. Treasury securities or other obligations issued or guaranteed by the U.S. government or its agencies.
45 | | Overseas Shipholding Group, Inc. |
9. Income taxes - The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
Net
deferred tax assets are recorded to the extent the Company believes these assets will more likely than not be realized. In making such
a determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary
differences, projected future taxable income, tax-planning strategies, and results of recent operations. In the event the Company were
to determine that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount, an
adjustment would be made to the deferred tax asset valuation allowance, which would reduce the provision for income taxes in the period
such determination is made.
Uncertain
tax positions are recorded in accordance with ASC 740, Income Taxes, on the basis of a two-step process whereby (1) the Company
first determines whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position
and (2) for tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax
benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority.
10. Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts of assets, liabilities, equity, revenues and expenses reported in the financial statements and accompanying notes. The most significant estimates relate to the depreciation of vessels and other property, amortization of drydocking costs, estimates used in assessing the recoverability of vessels, intangible assets and other long-lived assets, liabilities incurred relating to pension benefits, and income taxes. Actual results could differ from those estimates.
11. Segment information - Operating segments are defined as components of an enterprise that engage in business activities. The Company has determined that it operates its business as a single segment as its chief operating decision maker makes decisions about resource allocations and reviews and measures the Company’s results as one line of business with similar regulatory requirements, customers and commodities transported.
12. Inventories - Inventories are included in the inventories and other current assets line item on the consolidated balance sheets. Inventories are accounted for on the first in first out basis and consist of fuel on the Company’s vessels.
13. Acquisition of Alaska Tanker Company, LLC and related transactions - In connection with the Company’s acquisition of three vessels and remaining equity ownership interest in ATC, the Company accounted for these transactions collectively as an asset acquisition, with substantially all the cost of the acquisition attributed to the three vessels purchased from BP. The accounting for these transactions as an asset acquisition required the Company to estimate the fair value of the acquired vessels and related long term charter arrangements for determining whether the acquired assets were concentrated in a single asset. In doing so, the Company considered various assumptions including estimated salvage value of vessels, insured values of vessels, loan-to-value ratios and gross margin assumptions compared to similar existing arrangements. The Company also considered these estimates when allocating the purchase price to the acquired assets. See Note 6, “Investment in Alaska Tanker Company, LLC,” for further discussion on the Company’s acquisition of ATC during 2020.
14. Recently adopted accounting standards - In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which contains amendments to improve the codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the disclosure section so that disclosure is not missed. The standard also clarifies various guidance so that an entity can apply the guidance more consistently. The new guidance is effective for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years. The Company adopted this standard on January 1, 2021. The adoption of this standard did not have an impact to the Company’s condensed 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 adopted this standard on January 1, 2021. The adoption of this standard did not have a material impact to the
Company’s condensed consolidated financial statements.
46 | | Overseas Shipholding Group, Inc. |
15. Recently issued accounting standards — 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.
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 is to become effective January 1, 2023.
At
June 30, 2019, the evaluation date for purposes of determining the applicability of the credit losses standard, 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.
NOTE
3 — 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 deemed the exercise
price for the Class A 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 Class A 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.
Class
A
As
of December 31, 2021, there were 3,371,177 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 December 31, 2020, there were 2,605,263 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.
47 | | Overseas Shipholding Group, Inc. |
The
components of the calculation of basic earnings per share and diluted earnings per share are as follows:
SCHEDULE OF EARNINGS PER SHARE
| |
Years Ended December 31, | |
| |
2021 | | |
2020 | |
Net (loss)/income | |
$ | (46,252 | ) | |
$ | 30,004 | |
| |
| | | |
| | |
Weighted average common shares outstanding: | |
| | | |
| | |
Class A common stock - basic | |
| 90,587,454 | | |
| 89,794,392 | |
Class A common stock - diluted | |
| 90,587,454 | | |
| 90,838,262 | |
There
were 1,043,870
dilutive equity awards outstanding for the year
ended December 31, 2020. For the year ended December 31, 2021, awards of 2,017,810, which related to 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
due to a net loss during the period. Awards of 371,893,
which are related to stock options, for the year ended December 31, 2020 were not included in the computation of diluted earnings per
share because inclusion of these awards would be anti-dilutive.
NOTE
4 — 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 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.
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 a stipend pursuant to the Maritime Security Act of 1996 for each participating vessel, subject in each
case to annual congressional appropriations. The stipend is intended to reimburse owners for the additional costs of operating U.S. Flag
vessels; therefore, the Company has presented this stipend 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 transportation services are provided.
48 | | Overseas Shipholding Group, Inc. |
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 allocates 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.
COAs
also include variable consideration primarily related to demurrage. The Company does not include this variable consideration in the transaction
price for these contracts as the consideration is constrained since the obligation to deliver this service is outside the control of
the Company. The uncertainty related to this variable consideration is resolved with the customer over the course of the contract term
as individual voyages discharge.
At
December 31, 2021, the Company did not have deferred revenue related to the Company’s COAs.
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 years ended December
31, 2021 and 2020:
SCHEDULE OF DISAGGREGATION OF REVENUE
| |
Years Ended December 31, | |
| |
2021 | | |
2020 | |
Time and bareboat charter revenues | |
$ | 254,744 | | |
$ | 344,512 | |
Voyage charter revenues (1) | |
| 57,946 | | |
| 29,752 | |
Contracts of affreightment revenues | |
| 46,372 | | |
| 44,428 | |
Total shipping revenues | |
$ | 359,062 | | |
$ | 418,692 | |
(1) |
Voyage
charter revenues include approximately $14,843 and $15,466 of revenue related to short-term time charter contracts for the years
ended December 31, 2021 and 2020, respectively. |
Voyage
Receivables
As
of December 31, 2021 and December 31, 2020, contract balances from contracts with customers consisted of voyage receivables of $8,227
and $9,351, respectively, net of reserve of $150 and $4,604, respectively, 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 customers 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.
49 | | Overseas Shipholding Group, Inc. |
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 to be amortized during transport of the cargo. At December 31, 2021, 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.
Transaction
Price Allocated to the Remaining Performance Obligations
As
of December 31, 2021, the Company expects to recognize revenue of approximately $27,402 in 2022 under COAs. This estimated amount relates
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 on the consolidated statements of operations.
NOTE
5 — VESSELS, OTHER PROPERTY AND DEFERRED DRYDOCK
Vessels
and other property consist of the following:
SCHEDULE OF VESSELS AND OTHER PROPERTY
| |
2021 | | |
2020 | |
| |
Years Ended December 31, | |
| |
2021 | | |
2020 | |
Vessels, at cost | |
$ | 1,066,327 | | |
$ | 1,099,187 | |
Accumulated depreciation | |
| (345,531 | ) | |
| (308,449 | ) |
Vessels, net | |
| 720,796 | | |
| 790,738 | |
| |
| | | |
| | |
Construction in progress | |
| 19,799 | | |
| 17,238 | |
| |
| | | |
| | |
Finance lease right-of-use asset, at cost (Note 14) | |
| 26,940 | | |
| 26,940 | |
Accumulated amortization (Note 14) | |
| (5,906 | ) | |
| (2,957 | ) |
Finance lease right-of use asset, net (Note 14) | |
| 21,034 | | |
| 23,983 | |
| |
| | | |
| | |
Other property, at cost | |
| 5,578 | | |
| 5,552 | |
Transfers from construction in progress | |
| — | | |
| 25 | |
Accumulated depreciation and amortization | |
| (5,430 | ) | |
| (5,362 | ) |
Other property, net | |
| 148 | | |
| 215 | |
| |
| | | |
| | |
Total vessels and other property | |
$ | 761,777 | | |
$ | 832,174 | |
During
the first quarter of 2021, the Company received a firm offer for the sale of the Overseas Gulf Coast. Based on the negotiated
sale terms, the Company recorded a loss of $5,446
on the planned disposition of this tanker.
In April 2021, the Company entered into a contract to sell the vessel for $31,850,
net of broker commissions. The sale of the vessel was completed in June 2021 for $32,128,
net of broker commissions and other fees, resulting in an immaterial gain recognized during the second quarter of 2021, which is included
in loss on disposal of vessels and other property, including impairments, net on the consolidated statements of operations.
During the first and second quarters of 2020,
the Company established terms to sell for scrap the OSG 243, OSG Independence and the OSG 244. Based on the negotiated
sale terms, the Company recorded losses, which were not material and included in loss on disposal of vessels and other property, including
impairments, net on the consolidated statements of operations.
The
Company took delivery of two 204,000-barrel capacity oil and chemical tank barges in 2020, one in May and the other in December. The
barges, named the OSG 205 and OSG 204, have been paired with existing tugs within the Company’s fleet, the OSG
Courageous and OSG Endurance. The ATB units operate in the Jones Act trade.
50 | | Overseas Shipholding Group, Inc. |
In
May 2020 and August 2020, the Company sold two of its ATBs for $1,407, net of broker commissions. As a result of the sales, the Company
recognized losses, which were not material and are included in loss on disposal of vessels and other property, including impairments,
net on the consolidated statements of operations.
On
March 12, 2020, subsidiaries of OSG, as the Parent Company, 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 entered
into a bareboat charter with BP for a fourth vessel, the Alaskan Frontier. The vessels purchased 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 October
2022, March 2025 and August 2026. Each charter also provides for five one-year extension options.
At
December 31, 2021, the Company’s owned vessel fleet with a weighted average age of 13.5 years, consisted of five Handysize Product
Carriers, three crude oil tankers, two lightering ATBs and two ATBs. These vessels were pledged as collateral under term loan agreements
and have an aggregate carrying value of $714,306.
Vessel
activity, excluding construction in progress, for the two years ended December 31, 2021 is summarized as follows:
SUMMARY OF VESSEL ACTIVITY EXCLUDING CONSTRUCTION PROGRESS
| |
Vessel Cost | | |
Accumulated Depreciation | | |
Net Book Value | |
Balance at December 31, 2019 | |
$ | 919,212 | | |
$ | (274,900 | ) | |
$ | 644,312 | |
Transfers from construction in progress | |
| 111,685 | | |
| — | | |
| | |
Additions | |
| 74,076 | | |
| — | | |
| | |
Depreciation | |
| — | | |
| (37,339 | ) | |
| | |
Disposals | |
| (5,786 | ) | |
| 3,790 | | |
| | |
Balance at December 31, 2020 | |
| 1,099,187 | | |
| (308,449 | ) | |
| 790,738 | |
Transfers from construction in progress | |
| 6,836 | | |
| — | | |
| | |
Depreciation | |
| — | | |
| (39,398 | ) | |
| | |
Disposals | |
| (39,696 | ) | |
| 2,316 | | |
| | |
Balance at December 31, 2021 | |
$ | 1,066,327 | | |
$ | (345,531 | ) | |
$ | 720,796 | |
The
total of vessel additions can be different from expenditures for vessels as shown in the consolidated statements of cash flows because
of the timing of when payments were made. For the years ended December 31, 2021 and 2020, the Company
had approximately $1,341 and $1,820 of non-cash investing activities for the accrual of capital expenditures related to the Company’s
vessels.
Drydocking
activity for the two years ended December 31, 2021 is summarized as follows:
SUMMARY OF DRYDOCKING ACTIVITY
| |
2021 | | |
2020 | |
Balance at January 1 | |
$ | 43,134 | | |
$ | 23,734 | |
Additions | |
| 15,017 | | |
| 33,398 | |
Drydock amortization | |
| (14,809 | ) | |
| (13,998 | ) |
Balance at December 31 | |
$ | 43,342 | | |
$ | 43,134 | |
NOTE
6 — INVESTMENT IN ALASKA TANKER COMPANY, LLC
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. In March 2020, the purchase of the vessels
was financed by borrowing $54,000 under a five-year term loan as discussed in Note 8, “Debt”.
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.
51 | | Overseas Shipholding Group, Inc. |
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 cost 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 on March 12, 2020, the Company assumed liabilities of $9,898 related to a pension and postretirement plan
and $8,812 related to a deferred compensation plan. See Note 15, “Pension, Other Postretirement Benefit Plans and Benefit Liabilities”
for further discussion on these plans.
NOTE
7 — INTANGIBLE ASSETS
Intangible
assets activity for the two years ended December 31, 2021 is summarized as follows:
SCHEDULE OF INTANGIBLE ASSETS
| |
Total | |
Balance at December 31, 2019 | |
$ | 31,817 | |
Amortization | |
| (4,600 | ) |
Balance at December 31, 2020 | |
| 27,217 | |
Amortization | |
| (4,600 | ) |
Balance at December 31, 2021 | |
$ | 22,617 | |
As
discussed in Note 2, “Summary of Significant Accounting Policies,” the Company’s intangible assets at December 31,
2021 and 2020 consist of long-term customer relationships acquired as part of the 2006 purchase of Maritrans, Inc. The gross intangible
assets were $92,000 at December 31, 2021 and 2020. The unamortized balance of the Company’s intangible assets at December 31, 2021
will be recognized over the remaining useful life, which is five years. Amortization of intangible assets for the five years subsequent
to December 31, 2021 is expected to approximate $4,600 per year.
NOTE
8 — DEBT
Debt
consists of the following:
SCHEDULE
OF LONG-TERM DEBT INSTRUMENTS
| |
December 31, | |
| |
2021 | | |
2020 | |
Term loan, due 2024, net of unamortized deferred costs of $398 and $426 | |
$ | 21,633 | | |
$ | 22,972 | |
Term loan, due 2024, net of unamortized deferred costs of $398 and $426 | |
$ | 21,633 | | |
$ | 22,972 | |
Alaska tankers term loan, due 2025, net of unamortized deferred costs of $421 and $623 | |
| 30,236 | | |
| 50,360 | |
OSG 204 LLC term loan, due 2025, net of unamortized deferred costs of $646 and $636 | |
| 26,231 | | |
| 31,283 | |
OSG 205 LLC and OSG Courageous II LLC term loan, due 2027, net of unamortized deferred costs of $734 and $564 | |
| 46,380 | | |
| 48,586 | |
Unsecured senior notes, net of unamortized deferred costs | |
| 390 | | |
| 691 | |
Term loan, due 2028, net of unamortized deferred costs of $3,343 | |
| 319,870 | | |
| — | |
Term loan, due 2023, net of unamortized deferred costs of $4,676 | |
| — | | |
| 252,057 | |
Term loan, due 2026, net of unamortized deferred costs of $73 | |
| — | | |
| 23,171 | |
Total debt | |
| 444,740 | | |
| 429,120 | |
Less current installments of long-term debt | |
| (22,225 | ) | |
| (38,922 | ) |
Total long-term debt | |
$ | 422,515 | | |
$ | 390,198 | |
The
weighted average interest rate for debt outstanding at December 31, 2021 and 2020 was 7.20% and 5.21%, respectively.
52 | | Overseas Shipholding Group, Inc. |
Term
Loans
Capitalized
terms used hereafter have the meaning given in this Annual Report on Form 10-K or in the respective transaction documents referred to
below, including subsequent amendments thereto.
Term
loan, due 2028 - On September 29, 2021, certain subsidiaries (the “Borrowers”)
of the Company entered into a seven-year, $325,000
term loan credit facility with Stonebriar Commercial
Finance. Proceeds were used to pay off the Company’s term loan, due
2023, with The Prudential Insurance Company of
America, as administrative agent, and certain other lenders, and the Company’s term loan, due
2026, with Wintrust Commercial Finance, for $237,983
and $20,298,
respectively. Additionally, the Company used proceeds to make a prepayment of $16,000,
to partially prepay a term loan with Banc of America Leasing & Capital, LLC, the Company’s Alaska tankers term loan,
due
2025. The remaining proceeds will be used for
general working capital purposes. The Company recognized an aggregate net loss of $7,961
on these transactions, which reflects a write-off
of unamortized deferred financing costs and prepayment fees. The new term loan bears interest at a rate of 7.75%
and matures on October 1, 2028.
The performance of the Borrowers’ obligations under the term loan is guaranteed by the Company
and certain other subsidiaries and are secured by the Borrowers’ assets, including five tankers, three tugs, and two barges, and
by the Company’s equity interests in certain of its subsidiaries.
OSG
205 LLC and OSG Courageous II LLC term loan, due 2027 - In November 2020, two of the Company’s subsidiaries, OSG 205 LLC and
OSG Courageous II LLC, entered into a construction loan in the original principal amount of $49,150
of which $46,711
was drawn down to finance a new 204,000-barrel
U.S. Flag oil and chemical ATB barge, OSG 205, and to refinance the tug to which the barge is being paired, the OSG Courageous.
The Company made a prepayment of $15,811,
which included accrued interest on its term loan, due
2023. The aggregate net loss realized on this
transaction, which was not material, reflects a write-off of unamortized original issue discount and deferred financing costs associated
with the principal reduction and is included in loss on extinguishment of debt, net on the consolidated statements of operations
for the year ended December 31, 2020. On December 3, 2020, upon completion and delivery of the OSG 205, the remainder of the construction
loan was drawn down and the construction loan was converted to a term loan. The term loan had a fixed rate of interest of 6.37%.
In March 2021, the Company obtained an amendment for certain financial covenants of the term loan. In
connection with the amendment, the interest rate was updated to a fixed interest rate of 6.87% until the end of the first quarter of
2022. Beginning in the second quarter of 2022, the interest rate returns to a fixed interest rate of 6.37%. The
loan is guaranteed by the Company and has a seven-year
term maturing on December
1, 2027. The lenders hold a perfected first priority
security interest and preferred ship mortgage against the barge and tug. In November 2021, the Company completed an amendment on the
term loan to conform the covenants with the Stonebriar $325,000
loan.
OSG
204 LLC term loan, due 2025 - In June 2020, one of the Company’s subsidiaries, OSG 204 LLC, entered into a loan with Wintrust
Commercial Finance in the aggregate original principal amount of $32,933
to finance a new 204,000-barrel
U.S. Flag oil and chemical ATB barge. The loan had a fixed interest rate of 5.00%.
On November 5, 2021, the Company amended the loan to conform the covenants with the Stonebriar $325,000 loan. In connection
with the amendment, the Company made a prepayment of $3,000
on the outstanding balance
of the loan and the loan’s interest rate was updated to a fixed interest rate of 5.75%.
The loan is guaranteed by the Company and has a five-year
term maturing on June
1, 2025. The lender
holds a perfected first priority security interest and preferred ship mortgage against the vessel.
Alaska
tankers term loan, due 2025 - On March 12, 2020, the Company entered into a loan with Banc of America Leasing & Capital, LLC
and other syndicate lenders in the aggregate original 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. On September 29, 2021, the Company made a prepayment of $16,000
to release the Alaskan Legend as
security. The loan bears a fixed rate of interest of 4.43%
and has a maturity date of March
12, 2025. In
November 2021, the Company completed an amendment on the term loan to conform the covenants with
the Stonebriar $325,000
loan.
Term
loan, due 2024 - In August 2019, two of the Company’s subsidiaries entered into term loans in an aggregate principal amount
of $50,000 with a five-year term maturing on September 30, 2024 to finance the Overseas Gulf Coast and the Overseas Sun Coast.
On July 30, 2020, the Company repaid, using cash on hand, its $24,000 term loan secured by the Overseas Gulf Coast. The remaining
term loan is secured by a first preferred ship mortgage on the Overseas Sun Coast and a guaranty by the Company. The term loan
bears a fixed rate of interest of 5.54%. In November 2021, the Company completed an amendment on the term loan to conform the covenants
with the Stonebriar $325,000 loan.
Term
loan, due 2023 – In December 2018, the Company and several of its subsidiaries entered into a term loan with PGIM, Inc. as
Administrative Agent for a syndication of lenders, which was secured by a guarantee from the Company. The loan had an aggregate original
principal amount of $325,000 and a five-year term. As discussed above, this loan was paid off in September 2021.
In
May 2020 and August 2020, in connection with the Company’s sale of two of its ATBs, the Company made mandatory prepayments of
$1,307 on
its term loan due in
2023. The aggregate losses realized
on these transactions, which related to the write-off of unamortized deferred finance costs, were not material.
53 | | Overseas Shipholding Group, Inc. |
Term
loan, due 2026 – In November 2018, two of the Company’s subsidiaries, Mykonos Tanker LL and Santorini Tanker LLC, entered
into a loan with Wintrust Commercial Finance which was guaranteed by the Company. The loan had an aggregate original principal amount
of $27,500 and a seven-year term. As discussed above, this loan was paid off in September 2021.
Unsecured
Senior Notes
7.5%
Notes – The unsecured senior notes were
issued on March 7, 2003 and consisted of $146,000
in face value, which are due on February
15, 2024. Pursuant to the Equity Plan, the Company
issued two series of 7.50%
Notes due February
15, 2021, one series in an aggregate principal
amount of $6,508
(the “Election 1 Notes”) and the
other series in an aggregate principal amount of $138,708
(the “Election 2 Notes”) to holders
of the 7.50%
Notes due 2024 that elected to receive Election 1 Notes or Election 2 Notes, as the case may be. The outstanding Election 1 Notes were
repurchased and retired during the year ended December 31, 2015. The Election 2 Notes
matured in February 2021 and the Company paid
off the remaining balance of $301.
At December 31, 2021, the remaining outstanding balance is related to the 7.50% Notes due 2024.
Interest
Expense
The
following table summarizes interest expense, including amortization of issuance and deferred financing costs, commitment, administrative
and other fees, recognized during the two years ended December 31, 2021 with respect to the Company’s debt facilities:
SCHEDULE
OF DEBT EXPENSES
| |
Years Ended December 31, | |
Debt Facility | |
2021 | | |
2020 | |
Term loan, due 2024 | |
$ | 1,407 | | |
$ | 2,383 | |
Alaska tankers term loan, due 2025 | |
| 2,193 | | |
| 2,014 | |
OSG 204 LLC term loan, due 2025 | |
| 1,747 | | |
| 1,365 | |
OSG 205 LLC and OSG Courageous II LLC term loan, due 2027 | |
| 3,423 | | |
| 374 | |
Unsecured senior notes | |
| 32 | | |
| 302 | |
Term loan, due 2028 | |
| 6,550 | | |
| — | |
Term loan, due 2023 | |
| 12,618 | | |
| 18,132 | |
Term loan, due 2026 | |
| 712 | | |
| 1,209 | |
Total interest expense on debt facilities | |
$ | 28,682 | | |
$ | 25,779 | |
Cash
paid for interest expense was $25,609 and $23,134 in the years ended December 31, 2021 and 2020, respectively.
As
of December 31, 2021, the aggregate annual principal payments required to be made on the Company’s debt are as follows:
SCHEDULE
OF AGGREGATE ANNUAL PRINCIPAL PAYMENTS
| |
| | |
2022 | |
$ | 22,222 | |
2023 | |
| 23,730 | |
2024 | |
| 43,184 | |
2025 | |
| 54,903 | |
2026 | |
| 19,268 | |
Thereafter | |
| 286,972 | |
Total | |
$ | 450,279 | |
54 | | Overseas Shipholding Group, Inc. |
NOTE
9 — FAIR VALUE MEASUREMENTS AND FAIR VALUE DISCLOSURES
ASC
820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established 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, essentially an exit price. 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 |
Financial
Instruments that are not Measured at Fair Value on a Recurring Basis
The
following methods and assumptions were 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 consolidated balance sheets for interest-bearing
deposits approximate their 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 similar instruments.
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, at December 31, 2021 and 2020, are as follows:
SCHEDULE
OF HIERARCHY CATEGORIZED ON FAIR VALUE
| |
Carrying | | |
Fair Value | |
| |
Value | | |
Level 1 | | |
Level 2 | |
December 31, 2021: | |
| | | |
| | | |
| | |
Assets | |
| | | |
| | | |
| | |
Cash and cash equivalents (1) | |
$ | 83,253 | | |
$ | 83,253 | | |
$ | — | |
Total | |
$ | 83,253 | | |
$ | 83,253 | | |
$ | — | |
Liabilities | |
| | | |
| | | |
| | |
Term loan, due 2024, net | |
$ | 21,633 | | |
$ | — | | |
$ | 21,229 | |
Alaska tankers term loan, due 2025, net | |
| 30,236 | | |
| — | | |
| 28,695 | |
OSG 204 LLC term loan, due 2025, net | |
| 26,231 | | |
| — | | |
| 25,265 | |
OSG 205 LLC and OSG Courageous II LLC term loan, due 2027, net | |
| 46,380 | | |
| — | | |
| 47,863 | |
Term loan, due 2028, net | |
| 319,870 | | |
| — | | |
| 321,630 | |
Unsecured senior notes, net | |
| 390 | | |
| — | | |
| 399 | |
Total | |
$ | 444,740 | | |
$ | — | | |
$ | 445,081 | |
55 | | Overseas Shipholding Group, Inc. |
| |
Carrying | | |
Fair Value | |
| |
Value | | |
Level 1 | | |
Level 2 | |
December 31, 2020: | |
| | | |
| | | |
| | |
Assets | |
| | | |
| | | |
| | |
Cash and cash equivalents (1) | |
$ | 69,819 | | |
$ | 69,819 | | |
$ | — | |
Total | |
$ | 69,819 | | |
$ | 69,819 | | |
$ | — | |
Liabilities | |
| | | |
| | | |
| | |
Term loan, due 2023, net | |
$ | 252,057 | | |
$ | — | | |
$ | 257,228 | |
Term loan, due 2024, net | |
| 22,972 | | |
| — | | |
| 23,535 | |
Alaska tankers term loan, due 2025, net | |
| 50,360 | | |
| — | | |
| 49,357 | |
OSG 204 LLC term loan, due 2025, net | |
| 31,283 | | |
| — | | |
| 31,562 | |
Term loan, due 2026, net | |
| 23,171 | | |
| — | | |
| 21,921 | |
OSG 205 LLC and OSG Courageous II LLC term loan, due 2027, net | |
| 48,586 | | |
| — | | |
| 52,199 | |
Unsecured senior notes, net | |
| 691 | | |
| — | | |
| 715 | |
Total | |
$ | 429,120 | | |
$ | — | | |
$ | 436,517 | |
| (1) | Includes
current and non-current restricted cash totaling $81 and $122 at December 31, 2021 and 2020,
respectively. Restricted cash as of December 31, 2021 and 2020 was related to the Company’s
Unsecured Senior Notes. |
Nonfinancial
Instruments that are Measured at Fair Value on a Nonrecurring Basis
Vessel
Impairments
During
the third quarter of 2021, the Company gave consideration as to whether events or changes in circumstances had occurred that could indicate
that the carrying amounts of the Company’s operating lease right-of-use assets may not be fully recoverable. The Company concluded
that the decline in previously forecasted cash flows on two of the Company’s leased vessels, due to a change in the expected deployment,
constituted an impairment triggering event during the third quarter of 2021. Based on the Company’s analysis, an impairment charge
of $1,000, which is included in loss on disposal of vessels and other property, including impairments, net on the consolidated statements
of operations, was recorded to reduce the carrying value of the operating lease right-of-use assets to the estimated fair value. The
Company’s undiscounted cash flows are highly subjective as future expected deployment of the vessels is uncertain. If market conditions
decline, changes in the Company’s expectations on future cash flows may result in recognition of additional impairment charges
in future periods. Because the Company uses its own cash flow projections, the cash flow projections are considered to be Level 3.
Valuation
of Intangible Assets
The
Company’s intangible assets at December 31, 2021 and 2020 consisted of long-term customer relationships acquired as part of the
2006 purchase of Maritrans, Inc. The long-term customer relationships are being amortized on a straight-line basis over 20 years.
During
the years ended December 31, 2021 and 2020, the Company gave consideration as to whether events or changes in circumstances had occurred
that could indicate the carrying value of the Company’s intangible assets may not be recoverable. The Company concluded that no
such events or changes in circumstances had occurred.
56 | | Overseas Shipholding Group, Inc. |
NOTE
10 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
SCHEDULE
OF ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
| |
2021 | | |
2020 | |
| |
Years Ended December 31, | |
| |
2021 | | |
2020 | |
Accounts payable | |
$ | 9,496 | | |
$ | 8,717 | |
Payroll and benefits | |
| 12,013 | | |
| 14,184 | |
Interest | |
| 2,565 | | |
| 1,752 | |
Insurance | |
| 335 | | |
| 1,040 | |
Accrued drydock and repair costs | |
| 450 | | |
| 2,371 | |
Bunkers and lubricants | |
| 1,125 | | |
| 725 | |
Charter revenues received in advance | |
| 18,343 | | |
| 8,677 | |
Accrued vessel expenses | |
| 4,095 | | |
| 9,642 | |
Accrued general and administrative, primarily professional fees | |
| 860 | | |
| 307 | |
Other | |
| 619 | | |
| 674 | |
Accounts payable and
other accrued liabilities, current | |
$ | 49,901 | | |
$ | 48,089 | |
NOTE
11 —TAXES
The
benefit/(expense) for income taxes on income before income taxes consists of the following:
SCHEDULE
OF INCOME TAX (EXPENSE)/BENEFIT
| |
2021 | | |
2020 | |
| |
Years Ended December 31, | |
| |
2021 | | |
2020 | |
Current - Federal | |
$ | (8 | ) | |
$ | 161 | |
Current - State | |
| (131 | ) | |
| (48 | ) |
Deferred - Federal | |
| 15,275 | | |
| (5,401 | ) |
Deferred - State | |
| 2,961 | | |
| (897 | ) |
Total | |
$ | 18,097 | | |
$ | (6,185 | ) |
The
reconciliations between the U.S. federal statutory income tax rate and the effective tax rate follows:
SCHEDULE
OF EFFECTIVE INCOME TAX RATE RECONCILIATION
| |
Years Ended December 31, | |
| |
2021 | | |
2020 | |
U.S. federal statutory income tax rate | |
| 21.0 | % | |
| 21.0 | % |
| |
| | | |
| | |
Adjustments due to: | |
| | | |
| | |
State taxes, net of federal benefit | |
| 3.7 | % | |
| 2.9 | % |
Change in valuation allowance | |
| 0.9 | % | |
| 0.1 | % |
Equity awards | |
| 0.0 | % | |
| 0.1 | % |
Return to provision | |
| (0.5 | )% | |
| 0.5 | % |
Nondeductible expenses | |
| 0.0 | % | |
| 0.1 | % |
Uncertain tax positions and tax examination settlement | |
| 0.0 | % | |
| (1.9 | )% |
U.S. income subject to tonnage tax | |
| 2.2 | % | |
| (3.8 | )% |
Other | |
| 0.8 | % | |
| (1.9 | )% |
Effective tax rate | |
| 28.1 | % | |
| 17.1 | % |
During
the years ended December 31, 2021 and 2020, $6,700 and $6,500, respectively, of income from the Overseas Mykonos and Overseas
Santorini was excluded as part of the tonnage tax exclusion resulting in a 2.2% and (3.8)%, respectively, impact on the Company’s
effective tax rate.
57 | | Overseas Shipholding Group, Inc. |
The
significant components of the Company’s deferred tax liabilities and assets follow:
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
| |
2021 | | |
2020 | |
| |
December 31, | |
| |
2021 | | |
2020 | |
Deferred tax liabilities: | |
| | | |
| | |
Vessels and other property (1) | |
$ | 121,169 | | |
$ | 124,304 | |
Prepaid expenditures | |
| 9,445 | | |
| 9,130 | |
Operating lease right-of-use assets | |
| 40,176 | | |
| 55,754 | |
Other-net | |
| 9 | | |
| — | |
Total deferred tax liabilities | |
| 170,799 | | |
| 189,188 | |
Deferred tax assets: | |
| | | |
| | |
Loss carryforwards | |
| 75,874 | | |
| 64,487 | |
Operating lease liability | |
| 40,217 | | |
| 55,426 | |
Finance lease liability | |
| 5,180 | | |
| 5,754 | |
Employee compensation and benefit plans | |
| 178 | | |
| 2,456 | |
Financing and professional fees | |
| 5,993 | | |
| 15 | |
Accrued expenses and other | |
| 33 | | |
| 1,062 | |
Total deferred tax assets | |
| 127,475 | | |
| 129,200 | |
Valuation allowance | |
| (20,420 | ) | |
| (21,004 | ) |
Net deferred tax assets | |
| 107,055 | | |
| 108,196 | |
Net deferred tax liabilities | |
$ | 63,744 | | |
$ | 80,992 | |
(1) |
Includes
deferred tax liabilities related to finance lease right-of-use assets totaling $4,737 and $5,441 at December 31, 2021 and 2020, respectively. |
As
of December 31, 2021, the Company had U.S. federal net operating loss carryforwards of $243,547
which are available
to reduce future taxes, if any. The federal net operating loss carryforwards begin to expire in 2034.
Additionally, as of December 31, 2021, the Company had U.S. state net operating loss carryforwards of $444,526.
These U.S. state net operating loss carryforwards
expire in various years from December 31, 2022 through December 31, 2041.
Included in the financing
and professional fees deferred income assets above are U.S. federal interest expense deductions with an indefinite carryforward period.
The
Company assessed all available positive and negative evidence to determine whether sufficient future taxable income will be generated
to permit use of existing deferred tax assets. For U.S. federal deferred tax assets, the Company concluded that sufficient positive evidence
existed, primarily the result of reversing deferred tax liabilities during the carryover period. However, for certain state deferred
tax assets, the negative evidence has outweighed the positive evidence which has resulted in the Company establishing a valuation allowance
of $20,420 and $21,004 as of December 31, 2021 and 2020, respectively, to recognize only the portion of the deferred tax asset that is
more likely than not to be realized.
During
the year ended December 31, 2021, the Company paid income taxes (net of refunds received) of $1,751. During the year ended
December 31, 2020, the Company received refunds (net of payments made) of $5,695
of income taxes.
The
following is a tabular reconciliation of the total amounts of unrecognized tax benefits (excluding interest and penalties):
SCHEDULE OF UNRECOGNIZED TAX BENEFITS
| |
Years Ended December 31, | |
| |
2021 | | |
2020 | |
Balance of unrecognized tax benefits as of January 1, | |
$ | 813 | | |
$ | 2,495 | |
Increases/(decreases) for positions taken in prior years | |
| 21 | | |
| (1,177 | ) |
Decreases due to settlements with taxing authorities | |
| — | | |
| (505 | ) |
Balance of unrecognized tax benefits as of December 31, | |
$ | 834 | | |
$ | 813 | |
Included
in the balance of unrecognized tax benefits as of December 31, 2021 and 2020 are $834 and $813, respectively, of tax benefits that, if
recognized would affect the effective tax rate.
58 | | Overseas Shipholding Group, Inc. |
The
Company records interest and penalties on unrecognized tax benefits in its provision for income taxes. Accrued interest and penalties
are included within the related liability for unrecognized tax benefit line on the consolidated balance sheets. During the years ended
December 31, 2021 and 2020, the Company accrued interest and recorded liabilities for interest and penalties which were not material
to the consolidated financial statements.
After
taking into consideration tax attributes, such as net operating loss carryforwards and interest, the Company’s unrecognized tax
benefits represent a noncurrent reserve for uncertain tax positions of $179 and $189 as of December 31, 2021 and 2020, respectively.
With few
exceptions, the Company is no longer subject to state and local income tax examinations by tax authorities for years before 2016. The
Company conducts business and files income tax returns in numerous states. Currently, one of the Company’s state tax returns is
under examination by a state as part of routine audits conducted in the ordinary course of business. The future utilization of state
net operating losses could potentially subject the Company to state examinations prior to the otherwise applicable statute of limitation.
States vary in carryforward periods but generally extend up to 20 years or a period consistent with the federal limits under the Tax
Cuts and Jobs Act.
NOTE
12 — CAPITAL STOCK AND STOCK COMPENSATION
Ownership
Restrictions
In
order to preserve the status of OSG as a Jones Act company, the percentage of each class of its common stock that may be owned by non-U.S.
citizens is limited. In addition, the Company has established policies and procedures to ensure compliance with the Jones Act. In order
to provide a reasonable margin for compliance with the Jones Act, our Board of Directors has determined that until further action by
our Board, at least 77% of the outstanding shares of each class of capital stock of the Company must be owned by U.S. citizens. At and
during such time that the limit is reached with respect to shares of Class A common stock as applicable, we will be unable to issue any
further shares of such class of common stock or approve transfers of such class of common stock to non-U.S. citizens until the holdings
of non-U.S. citizens falls below the maximum percentage allowable.
Share
Repurchases
During
the years ended December 31, 2021 and 2020, in connection with the vesting of restricted stock units (“RSUs”), the Company
withheld 185,459 and 104,552, respectively, shares of Class A common stock at an average price of $2.18 and $1.90 per share (based on
the market prices on the dates of vesting), respectively, from certain members of management to cover withholding taxes.
Warrant
Conversions
Each
Class A warrant represents the right to purchase one share of Class A common stock, subject in each case to the adjustments as provided
pursuant to the terms thereof. The warrants may be exercised at a price per share of Class A common stock, as applicable, of $0.01, which
shall be paid pursuant to a cashless exercise procedure. Warrants may be exercised at any time or from time to time on or before August
5, 2039 and will expire thereafter. Until they exercise their warrants, except as otherwise provided in the warrants, the holders of
the warrants will not have the rights or privileges of holders of the Company’s common stock, including any voting rights. Warrants
may only be exercised by holders who establish to OSG’s reasonable satisfaction that they or the person designated to receive the
shares is a U.S. person or to the extent shares deliverable upon exercise would not constitute Non-Complying Shares (as defined in OSG’s
Amended and Restated Certificate of Incorporation). As of December 31, 2021, the Company had 19,110,902 Class A warrants outstanding,
convertible into 3,631,071 shares of Class A common stock.
During
the years ended December 31, 2021 and 2020, the Company issued 23,612 and 473 shares of Class A common stock, respectively, as a result
of the exercise of 124,862 and 2,498 Class A warrants, respectively.
59 | | Overseas Shipholding Group, Inc. |
Incentive
Plans
On
September 23, 2014, the Company’s Compensation Committee (“the Committee”) approved the Overseas Shipholding Group,
Inc. Management Incentive Compensation Plan (the “Management Compensation Plan”) and the Overseas Shipholding Group, Inc.
Non-Employee Director Incentive Compensation Plan (the “Director Plan”). OSG stockholders approved these plans on June 9,
2015. On June 6, 2017, at the annual stockholders meeting, the Company’s stockholders approved an increase to the maximum number
of shares for issuance under the Director Plan by 1,500,000 shares. The 2019 Incentive Compensation Plan for Management was approved
by the Committee on March 22, 2019, by our Board on April 4, 2019 and then by the Company’s stockholders at the annual meeting
on May 30, 2019 (together with the Management Compensation Plan and Non-employee Director Incentive Compensation Plan, the “Incentive
Plans”).
The
Incentive Plans contain anti-dilution provisions whereby in the event of any change in the capitalization of the Company, the number
and type of securities underlying outstanding share-based payment awards must be adjusted, as appropriate, in order to prevent dilution
or enlargement of rights. The impact of these provisions resulted in a modification of all outstanding share-based payment awards upon
the stock dividend, reverse stock split and spin-off transactions. As the fair value of the awards immediately after the stock dividend,
reverse stock split and spin off transactions, did not increase when compared to the fair value of such awards immediately prior to such
transactions, no incremental compensation costs were recognized as a result of such modifications.
The
purpose of the Incentive Plans is to promote the interests of the Company and its stockholders by providing certain employees and members
of the Board, who are largely responsible for the management, growth and protection of the business of the Company, with incentives and
rewards to encourage them to continue in the service of the Company. The Incentive Plans permit the Committee to grant to eligible employees
and directors of the Company, as applicable, any of the following types of awards (or any combination thereof): cash incentive awards,
nonqualified stock options, incentive stock options and other stock-based awards, including, without limitation, stock appreciation rights,
phantom stock, restricted stock, restricted stock units, performance shares, deferred share units and share-denominated performance units.
Stock
Compensation
The
Company accounts for stock compensation expense in accordance with the fair value based method required by ASC 718, Compensation –
Stock Compensation. Such fair value based method requires share based payment transactions to be measured based on the fair value
of the equity instruments issued.
Director
Compensation - Restricted Stock Units
The
Company awarded a total of 275,800 and 321,000 RSUs for the years ended December 31, 2021 and 2020, respectively, to its non-employee
directors. The grant date fair value of these awards was $2.29 (2021) and $2.25 (2020) per RSU, respectively. Such RSUs vest in full
on the earlier of the next annual meeting of the stockholders or the first anniversary of the grant date, subject to each director continuing
to provide services to the Company through such date. The RSUs granted may not be transferred, pledged, assigned or otherwise encumbered
prior to vesting. Upon vesting, a holder of restricted share awards has all the rights of a stockholder of the Company, including the
right to vote such shares and the right to receive dividends paid with respect to such shares at the same time as common stockholders
generally. RSUs which have not become vested as of the date the grantee’s service on the Board of Directors terminates will be
forfeited and the grantee will have no further rights with respect to the RSUs.
60 | | Overseas Shipholding Group, Inc. |
Management
Compensation
Restricted
Stock Units
During
the years ended December 31, 2021 and 2020, the Company granted RSUs to its employees, including senior officers, covering
552,844
and 764,406
shares, respectively. The grant date fair value
of these awards was $2.36
(2021) and $2.03
(2020) per RSU, respectively. 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. RSUs may not be transferred, pledged, assigned or otherwise encumbered until they
are settled. Settlement of vested RSUs may be in either shares of Class A common stock or cash, as determined at the discretion of the
Human Resources and Compensation Committee, and will occur as soon as practicable after the vesting date. If the RSUs are settled in
shares of common stock, following the settlement of such shares, the grantee will be the record owner of the shares of Class A common
stock and will have all the rights of a shareholder of the Company, including the right to vote such shares and the right to receive
dividends paid with respect to such shares of Class A common stock. RSUs which have not become vested as of the date of a grantee’s
termination from the Company will be forfeited without the payment of any consideration, unless otherwise provided for.
During
the years ended December 31, 2021 and 2020, the Company awarded performance-based RSUs to its senior officers covering 363,238 and 582,224
shares, respectively. 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 performance 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 up to a maximum of 181,619
and 291,112
target RSUs combined, respectively, (544,857
and 873,340
RSUs in total, respectively) or decrease, depending
on performance against the applicable measure and targets. The performance awards have performance conditions which,
as of December 31, 2021, 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 performance awards, which have a market condition,
was determined to be $2.36
(2021) and $2.03
(2020) per RSU, respectively.
During
the year ended December 31, 2021, the Company awarded performance-based RSUs to its senior officers covering 590,251
shares. The grant date fair value of these awards
was $2.36
per RSU. Each performance-based RSU represents
a contingent right to receive RSUs based on performance criteria tied to specific operational and financial goals that must be achieved
over an 18-month performance period. Vesting is subject to certification by the Compensation Committee as to achievement of the performance
measures. The performance awards have performance conditions which, as of December 31, 2021, management believed were not probable
of being achieved. Accordingly, for financial reporting purposes, compensation costs have not been recognized for these awards.
For
the Incentive Plans, compensation expense is recognized over the vesting period, contingent or otherwise, applicable to each grant, using
the straight-line method. Compensation expense as a result of the RSUs described above was $2,232 and $2,321 during the years ended December
31, 2021 and 2020, respectively.
Activity
with respect to restricted stock units under the Incentive Plans during the two years ended December 31, 2021 is summarized as follows:
SCHEDULE OF RESTRICTED STOCK UNITS UNDER INCENTIVE PLANS
Activity for the two years ended December 31, 2021 | |
Class A common shares | |
Nonvested Shares Outstanding at December 31, 2019 | |
| 1,718,865 | |
Granted | |
| 1,667,633 | |
Vested ($1.74 to $2.32 per share) | |
| (755,898 | ) |
Forfeited ($ to $ per share) | |
| (25,337 | ) |
Nonvested Shares Outstanding at December 31, 2020 | |
| 2,605,263 | |
Granted | |
| 1,782,133 | |
Vested ($2.12 to $2.31 per share) | |
| (963,338 | ) |
Forfeited ($ to $ per share) | |
| (52,881 | ) |
Nonvested Shares Outstanding at December 31, 2021 | |
| 3,371,177 | |
61 | | Overseas Shipholding Group, Inc. |
Activity
with respect to stock options under the Incentive Plans during the two years ended December 31, 2021 is summarized as follows:
SCHEDULE
OF STOCK OPTIONS ACTIVITY UNDER INCENTIVE PLANS
Activity for the two years ended December 31, 2021 | |
Class A common shares | |
Options Outstanding at December 31, 2019 | |
| 1,478,756 | |
Options Outstanding at December 31, 2020 | |
| 1,478,756 | |
Options Outstanding at December 31, 2021 | |
| 1,478,756 | |
Options Exercisable at December 31, 2021 | |
| 1,478,756 | |
The
weighted average remaining contractual life of the outstanding stock options at December 31, 2021 was 6.18 years. The range of exercise
prices of the stock options outstanding at December 31, 2021 was between $1.70 and $5.57 per share. The weighted average exercise price
of the stock options outstanding was $2.67 per share at both December 31, 2021 and 2020.
There
was no compensation expense as a result of the grants of stock options for the year ended December 31, 2021. Compensation expense as
a result of the grants of stock options was not material for the year ended December 31, 2020.
As
of December 31, 2021, there was $4,441 of unrecognized compensation cost related to nonvested share-based compensation arrangements.
That cost is expected to be recognized over a weighted average period of 1.63 years.
NOTE
13 — ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
The
components of accumulated other comprehensive income/(loss), net of related taxes at an effective tax rate of 28.1%
and 17.1%
for the years ended December 31, 2021 and 2020, respectively, on the consolidated balance sheets follow:
SCHEDULE OF COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
| |
2021 | | |
2020 | |
| |
Years Ended December 31, | |
| |
2021 | | |
2020 | |
Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement benefit plans) | |
$ | 2,943 | | |
$ | (282 | ) |
Accumulated other comprehensive
loss | |
$ | 2,943 | | |
$ | (282 | ) |
The
following tables present the changes in the balances of each component of accumulated other comprehensive income/(loss), net of
related taxes, for the two years ended December 31, 2021.
SCHEDULE OF CHANGES IN BALANCES OF COMPONENT OF ACCUMULATED OTHER COMPREHENSIVE LOSS
| |
Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement plans) | |
Balance as of December 31, 2020 | |
$ | (282 | ) |
Current period change, excluding amounts reclassified from accumulated other comprehensive
income/(loss) | |
| 3,522 | |
Amounts reclassified from accumulated other comprehensive income/(loss) | |
| (297 | ) |
Total change in accumulated other comprehensive income/(loss) | |
| 3,225 | |
Balance as of December 31, 2021 | |
$ | 2,943 | |
| |
| | |
Balance as of December 31, 2019 | |
$ | (6,409 | ) |
Current period change, excluding amounts reclassified from accumulated other comprehensive
income/(loss) | |
| 5,935 | |
Amounts reclassified from accumulated other comprehensive income/(loss) | |
| 192 | |
Total change in accumulated other comprehensive income/(loss) | |
| 6,127 | |
Balance as of December 31, 2020 | |
$ | (282 | ) |
62 | | Overseas Shipholding Group, Inc. |
The
following table presents information with respect to amounts reclassified out of accumulated other comprehensive income/(loss)
for the two years ended December 31, 2021.
SCHEDULE OF AMOUNTS RECLASSIFIED OUT OF ACCUMULATED OTHER COMPREHENSIVE LOSS
| |
Years Ended December 31, | | |
Statement of Operations |
Accumulated Other Comprehensive Income/(Loss) Component | |
2021 | | |
2020 | | |
Line Item |
Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement plans): | |
| | | |
| | | |
|
Net periodic benefit costs associated with pension and postretirement
benefit plans for shore-based employees | |
$ | (63 | ) | |
$ | 424 | | |
Other income, net |
Net periodic benefit costs associated with pension and
postretirement benefit plans for seagoing employees | |
| 450 | | |
| (174 | ) | |
Other income, net |
| |
| 387 | | |
| 250 | | |
Total before tax |
| |
| (684 | ) | |
| (58 | ) | |
Tax provision |
| |
$ | (297 | ) | |
$ | 192 | | |
Total net of tax |
The
following amounts are included in accumulated other comprehensive income/(loss) at December 31, 2021, which have not yet been
recognized in net periodic cost: unrecognized prior service credits of $6,884
($5,708
net of tax) and unrecognized actuarial losses
$2,944
($2,765
net of tax).
The
income tax (expense)/benefit allocated to each component of other comprehensive (loss)/income follows:
SCHEDULE
OF INCOME TAX (EXPENSE) BENEFIT ALLOCATED TO COMPONENT
| |
Items not yet recognized as a component of net periodic benefit cost | |
For the year ended December 31, 2021: | |
| | |
Current period change excluding amounts reclassified from accumulated other comprehensive
income/(loss) | |
$ | (1,069 | ) |
Amounts reclassified from accumulated other comprehensive income/(loss) | |
| 90 | |
Total change in accumulated other comprehensive income/(loss) | |
$ | (979 | ) |
| |
| | |
For the year ended December 31, 2020: | |
| | |
Current period change excluding amounts reclassified from accumulated other comprehensive income/(loss) | |
$ | (1,803 | ) |
Amounts reclassified from accumulated other comprehensive income/(loss) | |
| (58 | ) |
Total change in accumulated other comprehensive income/(loss) | |
$ | (1,861 | ) |
NOTE
14 — LEASES
The
Company’s lease portfolio is comprised of vessels chartered-in, office space and equipment under agreements with contractual periods
ranging from less than one year to 13 years. Many of the Company’s leases contain one or more options to extend. The Company includes
options that it is reasonably certain to exercise in its evaluation of the lease term after considering all relevant economic and financial
factors and calculates the initial lease liability as the present value of fixed payments, or in substance fixed payments, not yet paid
and variable payments that are based on an index (e.g., CPI), measured at commencement. Leases are discounted using the Company’s
incremental borrowing rate adjusted for risk based on the length of the lease term because the rate implicit in the lease is not readily
determinable. The Company made the accounting policy election to keep leases with a term of 12 months or less off the balance sheet.
63 | | Overseas Shipholding Group, Inc. |
The
Company’s lease right-of-use assets and lease liabilities at December 31, 2021 and 2020 were as follows:
SCHEDULE OF LEASE RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
| |
December 31, | |
| |
2021 | | |
2020 | |
Operating leases | |
| | | |
| | |
Vessels chartered-in noncurrent operating lease assets | |
$ | 148,681 | | |
$ | 213,414 | |
Office space noncurrent operating lease assets | |
| 3,346 | | |
| 2,403 | |
Total noncurrent operating lease assets | |
$ | 152,027 | | |
$ | 215,817 | |
Vessels chartered-in operating lease liabilities | |
| | | |
| | |
Current portion of operating lease liabilities | |
$ | 99,255 | | |
$ | 89,889 | |
Noncurrent operating lease liabilities | |
| 71,909 | | |
| 145,302 | |
| |
| 171,164 | | |
| 235,191 | |
Office space operating lease liabilities | |
| | | |
| | |
Current portion of operating lease liabilities | |
| 755 | | |
| 724 | |
Noncurrent operating lease liabilities | |
| 1,241 | | |
| 1,852 | |
| |
| 1,996 | | |
| 2,576 | |
Total operating lease liabilities | |
$ | 173,160 | | |
$ | 237,767 | |
Finance lease | |
| | | |
| | |
Vessels and other property | |
$ | 26,940 | | |
$ | 26,940 | |
Accumulated amortization | |
| (5,906 | ) | |
| (2,957 | ) |
Vessels and other property, less accumulated amortization | |
$ | 21,034 | | |
$ | 23,983 | |
| |
| | | |
| | |
Current portion of finance lease liabilities | |
$ | 4,000 | | |
$ | 4,000 | |
Noncurrent finance lease liabilities | |
| 18,998 | | |
| 21,360 | |
Total finance lease liabilities | |
$ | 22,998 | | |
$ | 25,360 | |
Charters-in
As
of December 31, 2021, the Company had commitments to charter-in 12
vessels, which are all bareboat charters. 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. For the remaining
11 chartered-in vessels, 10 vessels are accounted for as operating leases and one vessel is accounted for as a finance lease. The
finance lease arrangement is reported in vessels and other property, less accumulated depreciation on the Company’s consolidated
balance sheets. The Company holds options
for 11 of the vessels chartered-in. For one vessel, the option can be exercised for 3-years and is available indefinitely. For the remaining
10 vessels, the options can be exercised for one, three or five years with the one-year option only usable once, while the three- and
five-year options are available indefinitely. The lease payments for the charters-in are fixed throughout the option periods and the
options are on a vessel-by-vessel basis that can be exercised individually. The Company exercised its option on one of its vessels to
extend the term until June 2025. On December 10, 2018, terms for five of the vessels were extended for an additional three years, with
terms ending in December 2022, and terms for four of the vessels were extended for an additional year, with terms ending December 2020.
On December 11, 2019, the terms for the four vessels ending December 2020 were extended for an additional three years, with terms ending
in December 2023. On December 10, 2021, for the
five vessels with terms ending in December 2022, the Company exercised its option to extend the terms of two of the vessels for an additional
year, with terms ending in December 2023, and announced its intention to redeliver three of the vessels at the end of their lease terms
in December 2022.
Five
of the Company’s chartered in vessels contain a deferred payment obligation (“DPO”) which relates to charter hire expense
incurred by the Company in prior years and payable to the vessel owner in future periods. This DPO is due in quarterly installments with
the final quarterly payment due upon lease termination.
64 | | Overseas Shipholding Group, Inc. |
The
future minimum commitments under these leases are as follows:
SCHEDULE OF FUTURE MINIMUM LEASE COMMITMENTS UNDER MINIMUM LEASE PAYMENTS
At December 31, 2021 | |
Operating Leases | | |
Finance Lease | |
2022 | |
$ | 102,140 | | |
$ | 4,161 | |
2023 | |
| 67,118 | | |
| 4,161 | |
2024 | |
| 9,168 | | |
| 4,172 | |
2025 | |
| 4,535 | | |
| 4,161 | |
2026 | |
| — | | |
| 4,161 | |
Thereafter | |
| — | | |
| 8,858 | |
Net minimum lease payments | |
| 182,961 | | |
| 29,674 | |
Less present value discount | |
| (11,797 | ) | |
| (6,676 | ) |
Total lease liabilities | |
$ | 171,164 | | |
$ | 22,998 | |
The
bareboat charters-in provide for variable lease payments in the form of profit share to the owners of the vessels calculated in accordance
with the respective charter agreements or based on time charter sublease revenue. Because such amounts and the periods impacted are not
reasonably estimable, they are not currently reflected in the table above. Due to reserve funding requirements and current rate forecasts,
no profits are currently expected to be paid to the owners in respect of the charter term within the next year.
For
the years ended December 31, 2021 and 2020, lease expense for the Company’s chartered-in vessels accounted for as operating leases
was $90,166 and $90,608, respectively, which is included in charter hire expense on the consolidated statements of operations and operating
cash flows on the consolidated statements of cash flows. The Company recognized sublease income of $75,516 and $197,546, respectively,
for the years ended December 31, 2021 and 2020. For the years ended December 31, 2021 and 2020, the Company had non-cash operating activities
of $15,713 and $1,533, respectively, for obtaining operating right-of-use assets and liabilities.
For
the years ended December 31, 2021 and 2020, lease expense related to the Company’s finance lease was $2,949 and $2,957, respectively,
related to amortization of the right-of-use asset and $1,799 and $1,973, respectively, related to interest on the lease liability. These
are included in operating cash flows on the consolidated statements of cash flows.
Office
space
The
Company has lease obligations for office space that generally require fixed annual rental payments and may also include escalation clauses
and renewal options.
The
future minimum commitments under lease obligations for office space, which are operating leases, as of December 31, 2021 are as follows:
SCHEDULE OF FUTURE MINIMUM LEASE COMMITMENTS UNDER MINIMUM LEASE PAYMENTS
At December 31, 2021 | |
Amount | |
2022 | |
$ | 780 | |
2023 | |
| 609 | |
2024 | |
| 168 | |
2025 | |
| 100 | |
2026 | |
| 102 | |
Thereafter | |
| 885 | |
Net minimum lease payments | |
| 2,644 | |
Less present value discount | |
| (648 | ) |
Total lease liabilities | |
$ | 1,996 | |
For
the years ended December 31, 2021 and 2020, the rental expense for office space, which is included in general and administrative expenses
on the consolidated statements of operations, was $640 and $851, respectively. For the years ended December 31, 2021 and 2020, cash paid
for office space rental was $748 and $739, respectively, which is included in operating cash flows on the consolidated statements of
cash flows.
65 | | Overseas Shipholding Group, Inc. |
Supplemental
balance sheet information related to leases was as follows:
SCHEDULE
OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES
| |
December 31, | |
| |
2021 | | |
2020 | |
Weighted average remaining lease term - operating leases | |
| 2.1 years | | |
| 2.8 years | |
Weighted average discount rate - operating leases | |
| 6.5 | % | |
| 6.5 | % |
Weighted average remaining lease term - finance lease | |
| 7.1 years | | |
| 8.1 years | |
Weighted average discount rate - finance lease | |
| 7.3 | % | |
| 7.3 | % |
Charters-out
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 noncancelable contract term. Under
certain time charter contracts, the Company receives variable lease payments based on a defined profit share arrangement, which are recognized
as revenue in the period in which the changes in facts and circumstances on which the variable lease payments are based occur. 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 and crew costs. Services are recognized ratably over the life of the contract term.
The
Company is the lessor under its time charter contracts. Certain time charter contracts provide the charterer with the option to extend
the contract for a specific period of time. For time charters, the Company applied the practical expedient to combine the lease and non-lease
components for these contracts under ASC 842. Total time charter revenue for the years ended December 31, 2021 and 2020 was equal to
lease income from lease payments of $254,181 and $343,290, respectively, plus straight-line adjustments of $563 and $1,222, respectively.
The net book value of owned vessels on noncancelable time charters was equal to $355,388 and $284,259 at December 31, 2021 and 2020,
respectively.
The
future minimum revenues, including rent escalations, which is equal to lease payments expected to be received over the noncancelable
time charters term are as follows:
SCHEDULE OF FUTURE MINIMUM COMMITMENTS OPERATING LEASES
At December 31, 2021 | |
Amount | |
2022 | |
$ | 210,856 | |
2023 | |
| 147,305 | |
2024 | |
| 115,503 | |
2025 | |
| 64,417 | |
2026 | |
| 14,356 | |
Thereafter | |
| — | |
Net minimum lease receipts | |
$ | 552,437 | |
Revenues
from a time charter are not generally received when a vessel is off-hire, including time required for normal periodic maintenance of
the vessel. In arriving at the minimum future charter revenues, an estimated time off-hire to perform periodic maintenance on each vessel
has been deducted, although it cannot be assured that such estimate will be reflective of the actual off-hire in the future.
NOTE
15 — PENSION, OTHER POSTRETIREMENT BENEFIT PLANS AND BENEFIT LIABILITIES
For
the years ended December 31, 2021 and 2020, pension and other benefit liabilities are included in other liabilities on the consolidated
balance sheets.
Pension
Plans
In
connection with the November 2006 acquisition of Maritrans, the Company assumed the obligations under the defined benefit retirement
plan of Maritrans Inc. (“the Maritrans Plan”). As of December 31, 2006, the Company froze the benefits under the Maritrans
Plan. At December 31, 2021, the Maritrans Plan is the only defined benefit pension plan in existence at the Company. The Maritrans Plan
was noncontributory and covered substantially all shore-based employees and substantially all of the seagoing supervisors who were supervisors
in 1984, or who were hired in, or promoted into, supervisory roles between 1984 and 1998 for that period of time. Beginning in 1999,
the seagoing supervisors’ retirement benefits are provided through contributions to an industry-wide, multiemployer union sponsored
pension plan. Upon retirement, those seagoing supervisors are entitled to retirement benefits from the Maritrans Plan for service periods
between 1984 and 1998 and from the multiemployer union sponsored plan for other covered periods. Retirement benefits are based primarily
on years of service and average compensation for the five consecutive plan years that produce the highest results.
66 | | Overseas Shipholding Group, Inc. |
Multiemployer
Pension and Postretirement Benefit Plans
The
Company’s subsidiaries are parties to collective-bargaining agreements that require them to make contributions to three jointly
managed (Company and union) multiemployer pension plans covering seagoing personnel of U.S. Flag vessels. All three plans, the American
Maritime Officers (“AMO”) Pension Plan, the Seafarers Pension Plan (“SIU”) and the Marine Engineers’ Beneficial
Association (“MEBA”) Defined Benefit Pension Plan, are deemed individually significant by management.
Plan
level information is available in the public domain for each of the multiemployer pension plans the Company participates in. The table
below provides additional information about the Company’s participation in the above multi-employer pension plans:
SCHEDULE OF MULTIEMPLOYER PLANS
| |
EIN / Pension | |
Pension Protection Act Zone Status | | |
| |
Contributions made by the Company | |
Pension Plan | |
Plan Number | |
2021 | | |
2020 | | |
Rehabilitation Plan Status | |
2021 | | |
2020 | |
AMO Pension Plan | |
13-1936709 | |
| Green | (1) | |
| Green | (1) | |
None | |
$ | 795 | | |
$ | 580 | |
| |
| |
| | | |
| | | |
| |
| | | |
| | |
MEBA Pension Plan | |
51-6029896 | |
| Green | (1) | |
| Green | (1) | |
None | |
| 2,748 | | |
| 2,895 | |
| |
| |
| | | |
| | | |
| |
| | | |
| | |
Seafarers Pension Plan | |
13-6100329 | |
| Green | (1) | |
| Green | (1) | |
None | |
| 222 | | |
| 279 | |
| |
| |
| | | |
| | | |
Total contributions | |
$ | 3,765 | | |
$ | 3,754 | |
| (1) | A
“Yellow” Zone Status plan is a plan that has a funding ratio between 65% and
80%. A “Green” Zone Status plan is a plan that is 80% funded or more. |
The
plan years for the three union plans end as follows: MEBA and SIU on December 31 and AMO on September 30. The Company has no future minimum
contribution requirements under the three multiemployer pension plans shown above as of December 31, 2021 and any future contributions
are subject to negotiations between the employers and the unions.
ERISA
requires employers who are contributors to U.S. multiemployer plans to continue funding their allocable share of each plan’s unfunded
vested benefits in the event of withdrawal from or termination of such plans. Based on information received from the trustees of the
SIU Pension Plan, the Company is not subject to withdrawal liabilities under that plan. Based on the actuarial report received from the
trustees of the MEBA Pension Plan, as of December 31, 2020, the Company’s estimated withdrawal liability would have been
approximately $41,150 had the Company elected to withdraw from the plan in 2021. Based on the actuarial report received
from the trustees of the AMO Pension Plan, as of September 30, 2020, the Company’s estimated withdrawal liability would have been
approximately $20,032 had the Company elected to withdraw from the plan in 2021. The Company has no intentions of terminating
its participation in any of the three multiemployer pension plans and has no expectations that the plans will be terminated. Accordingly,
no provisions have been made for the estimated withdrawal liability as of December 31, 2021.
The
SIU – Tug Agreement and AMO collective bargaining agreements for OSG expire in March 2024 and March 2022, respectively. The
ATC MEBA collective bargaining agreement expires in May 2022 and the SIU – Tanker Agreement for OSG and MEBA for the
Parent Company collective bargaining agreements expire in June 2022.
Postretirement
Benefit Plans
The
Company also provides certain postretirement health care and life insurance benefits to qualifying domestic retirees and their eligible
dependents (“OSG Postretirement Plan”). The health care plan for shore-based employees and their dependents and seagoing
licensed deck officers (“Deck Officers”) and their dependents is contributory at retirement, while the life insurance plan
for all employees is noncontributory. In general, postretirement medical coverage is provided to shore-based employees hired prior to
January 1, 2005 and all Deck Officers who retire and have met minimum age and service requirements under a formula related to total years
of service. The Company no longer provides prescription drug coverage to its retirees or their beneficiaries once they reach age 65.
The Company does not currently fund these benefit arrangements and has the right to amend or terminate the health care and life insurance
benefits at any time.
67 | | Overseas Shipholding Group, Inc. |
As
part of the acquisition of ATC, the Company assumed liabilities of $9,898
related to a pension and postretirement plan
(“ATC Plan”). The
postretirement medical and life insurance plan provided 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, closed to new entrants as of January 1, 2017 and terminated December 31, 2020.
The
acquisition of the ATC Plan resulted in an increase in benefit obligation of $9,124 on March 12, 2020. The OSG Postretirement Plan was
amended effective December 31, 2020 to include participants of the ATC Plan. Due to changes in the plan provisions, certain participants
from the ATC Plan elected not to continue coverage in the OSG Postretirement Plan and an actuarial gain of $1,485 in other comprehensive
income was recognized. The plan provisions for the ATC participants that moved into the OSG Postretirement Plan were amended and a negative
plan amendment of $6,219 was established.
Information
with respect to the domestic pension and postretirement benefit plans for which the Company uses a December 31 measurement date, follow:
SCHEDULE OF BENEFIT OBLIGATIONS IN EXCESS OF FAIR VALUE OF PLAN ASSETS
| |
Pension Benefits | | |
Other Benefits | |
At December 31, | |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Change in benefit obligation: | |
| | | |
| | | |
| | | |
| | |
Benefit obligation at beginning of year | |
$ | 48,979 | | |
$ | 46,936 | | |
$ | 5,871 | | |
$ | 3,572 | |
Cost of benefits earned (service cost) | |
| — | | |
| — | | |
| 203 | | |
| 307 | |
Interest cost on benefit obligation | |
| 1,120 | | |
| 1,450 | | |
| 165 | | |
| 386 | |
Actuarial (gains)/losses | |
| (1,868 | ) | |
| 3,452 | | |
| (435 | ) | |
| (857 | ) |
Benefits paid | |
| (2,761 | ) | |
| (2,859 | ) | |
| (267 | ) | |
| (442 | ) |
Plan Amendments | |
| — | | |
| — | | |
| — | | |
| (6,219 | ) |
Acquisition | |
| — | | |
| — | | |
| — | | |
| 9,124 | |
Benefit obligation at year end | |
| 45,470 | | |
| 48,979 | | |
| 5,537 | | |
| 5,871 | |
Change in plan assets: | |
| | | |
| | | |
| | | |
| | |
Fair value of plan assets at beginning of year | |
| 42,216 | | |
| 36,754 | | |
| — | | |
| — | |
Actual return on plan assets | |
| 5,257 | | |
| 6,726 | | |
| — | | |
| — | |
Employer contributions | |
| 160 | | |
| 1,595 | | |
| 267 | | |
| 442 | |
Benefits paid | |
| (2,761 | ) | |
| (2,859 | ) | |
| (267 | ) | |
| (442 | ) |
Fair value of plan assets at year end | |
| 44,872 | | |
| 42,216 | | |
| — | | |
| — | |
Unfunded status at December 31 | |
$ | (598 | ) | |
$ | (6,763 | ) | |
$ | (5,537 | ) | |
$ | (5,871 | ) |
Information
for defined benefit pension plans with accumulated benefit obligations in excess of plan assets follows:
SCHEDULE OF ACCUMULATED BENEFIT OBLIGATIONS IN EXCESS OF FAIR VALUE OF PLAN ASSETS
At December 31, | |
2021 | | |
2020 | |
Projected benefit obligation | |
$ | 45,470 | | |
$ | 48,979 | |
Accumulated benefit obligation | |
| 45,470 | | |
| 48,979 | |
Fair value of plan assets | |
| 44,872 | | |
| 42,216 | |
Information
for defined benefit pension plans and other postretirement benefit plans net periodic (benefit)/cost follows:
SCHEDULE OF NET BENEFIT COSTS
For the year ended December 31, | |
2021 | | |
2020 | | |
2021 | | |
2020 | |
| |
Pension Benefits | | |
Other Benefits | |
For the year ended December 31, | |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Components of expense: | |
| | | |
| | | |
| | | |
| | |
Cost of benefits earned | |
$ | — | | |
$ | — | | |
$ | 203 | | |
$ | 307 | |
Interest cost on benefit obligation | |
| 1,120 | | |
| 1,450 | | |
| 165 | | |
| 386 | |
Expected return on plan assets | |
| (2,970 | ) | |
| (2,612 | ) | |
| — | | |
| — | |
Amortization of prior-service costs | |
| — | | |
| — | | |
| (722 | ) | |
| (229 | ) |
Recognized net actuarial loss | |
| 335 | | |
| 444 | | |
| — | | |
| 35 | |
Net periodic benefit cost | |
$ | (1,515 | ) | |
$ | (718 | ) | |
$ | (354 | ) | |
$ | 499 | |
68 | | Overseas Shipholding Group, Inc. |
The
weighted-average assumptions used to determine benefit obligations follow:
SCHEDULE OF ASSUMPTIONS USED
| |
Pension Benefits | | |
Other Benefits | |
At December 31, | |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Discount rate | |
| 2.80 | % | |
| 2.35 | % | |
| 3.10 | % | |
| 2.90 | % |
The
selection of a single discount rate for the Maritrans Plan was derived from bond yield curves, which the Company believed as of such
dates to be appropriate for ongoing plans with a long duration, such as the Maritrans Plan, and that generally mirror the type of high
yield bond portfolio the Company could acquire to offset its obligations under the Maritrans Plan.
The
weighted-average assumptions used to determine net periodic benefit cost follow:
SCHEDULE OF ASSUMPTIONS USED
| |
Pension Benefits | | |
Other Benefits | |
For the year ended December 31, | |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Discount rate | |
| 2.35 | % | |
| 3.20 | % | |
| 2.90 | % | |
| 3.55%/3.50 | % |
Expected (long-term) return on plan assets | |
| 7.25 | % | |
| 7.25 | % | |
| — | | |
| — | |
The
assumed health care cost trend rate for measuring the benefit obligation included in Other Benefits above is an increase of 6.00% as
of December 31, 2021, with the rate of increase declining to an ultimate trend rate of 4.75% per annum by 2027. Assumed health care cost
trend rates have a significant effect on the amounts reported for the health care plans.
Expected
benefit payments for the following ten years are as follows:
SCHEDULE OF EXPECTED BENEFIT PAYMENTS
| |
Pension Benefits | | |
Other Benefits | |
2022 | |
$ | 2,907 | | |
$ | 268 | |
2023 | |
| 2,953 | | |
| 269 | |
2024 | |
| 3,022 | | |
| 268 | |
2025 | |
| 3,075 | | |
| 255 | |
2026 | |
| 3,077 | | |
| 248 | |
2027-2031 | |
| 14,360 | | |
| 1,282 | |
Total | |
$ | 29,394 | | |
$ | 2,590 | |
The
expected long-term rate of return on plan assets is based on the current and expected asset allocations. Additionally, the long-term
rate of return is based on historical returns, investment strategy, inflation expectations and other economic factors. The expected long-term
rate of return is then applied to the market value of plan assets.
The
fair values of the Company’s pension plan assets, which are valued based Level 1 inputs, at December 31, 2021 and 2020, by asset
category are as follows:
SCHEDULE OF CHANGES IN FAIR VALUE OF PLAN ASSETS
| |
Fair Value | |
| |
Level 1 | |
At December 31, | |
2021 | | |
2020 | |
Cash and cash equivalents | |
$ | 822 | | |
$ | 773 | |
Equity securities: | |
| | | |
| | |
Large cap exchange traded fund | |
| 17,005 | | |
| 15,998 | |
Small company - mid value | |
| 2,868 | | |
| 3,050 | |
Small company - mid growth | |
| 2,724 | | |
| 3,180 | |
International value | |
| 3,181 | | |
| 3,162 | |
International growth | |
| 3,360 | | |
| 3,326 | |
Fixed income and preferred stock: | |
| | | |
| | |
Intermediate term bond fund | |
| 14,870 | | |
| 12,662 | |
Small company - mid value - preferred stock | |
| 42 | | |
| 65 | |
Total | |
$ | 44,872 | | |
$ | 42,216 | |
Plan
fiduciaries of the Retirement Plan of Maritrans, Inc. set investment policies, strategies and oversee its investment allocation, which
includes selecting investment managers and setting long term strategic targets. The primary strategic investment objective is to maximize
total return while maintaining a broadly diversified portfolio for the primary purpose of satisfying obligations for future benefit payments.
Equities are the primary holdings of the Retirement Plan of Maritrans, Inc. Other investments, including fixed income investments, provide
diversification, and, in certain cases, lower the volatility of returns. In general, equity can range from 55 to 75 percent of total
plan assets, fixed income securities can range from 25 to 45 percent of total plan assets and cash can be held in amounts up to 5 percent
of plan assets. Actual asset allocation within the approved ranges varies from time to time based on economic conditions (both current
and forecast) and the advice of professional advisors.
The
Company contributed $160 and $1,595 to the Maritrans Plan in 2021 and 2020, respectively. The Company does not expect to make any contributions
to the Maritrans Plan in 2022.
69 | | Overseas Shipholding Group, Inc. |
Defined
Contribution Plans
The
Company also had defined contribution plans covering all eligible employees. Contributions are limited to amounts allowable for income
tax purposes. Commencing in 2006, employer contributions include both employer contributions made regardless of employee contributions
and matching contributions to the plans. All contributions to the plans are at the discretion of the Company. The Company’s contributions
to the plan were $2,415 and $2,888 for the years ended December 31, 2021 and 2020, respectively.
The
Company also has an unfunded, nonqualified supplemental savings plan covering highly compensated U.S. shore-based employees of the Company,
which was terminated in connection with the Company’s filing for bankruptcy in 2012. This plan provided for levels of hypothetical
employer contributions that would otherwise have been made under the Company’s defined contribution plans in the absence of limitations
imposed by income tax regulations. The Company’s unfunded obligations under this plan at December 31, 2021 and 2020 were not material.
Benefit
Liabilities
As
part of the acquisition of ATC, the Company assumed liabilities related to a deferred compensation plan. The deferred compensation plan
was an unfunded, nonqualified plan that allowed 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. The balance of the deferred compensation
plan at December 31, 2021 was $10,727,
of which $2,640
is included in accounts payable, accrued expenses
and other current liabilities and $8,087
is included in other liabilities on the consolidated
balance sheets. At December 31, 2020, the balance of the deferred compensation plan was $10,079
and included in other liabilities on the consolidated
balance sheets.
NOTE
16 — OTHER INCOME, NET
Other
income, net consists of:
SCHEDULE OF OTHER NONOPERATING INCOME
| |
Years Ended December 31, | |
| |
2021 | | |
2020 | |
Investment income: | |
| | | |
| | |
Interest | |
$ | 5 | | |
$ | 102 | |
Change in investment value | |
| (241 | ) | |
| (248 | ) |
| |
| (236 | ) | |
| (146 | ) |
Pension and post retirement items (1) | |
| 2,157 | | |
| 2,071 | |
Miscellaneous-net | |
| 64 | | |
| 489 | |
| |
$ | 1,985 | | |
$ | 2,414 | |
(1) |
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 income, net on the consolidated statements of operations. |
NOTE
17 — CONTINGENCIES
The
Company’s policy for recording legal costs related to contingencies is to expense such legal costs as incurred.
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.
70 | | Overseas Shipholding Group, Inc. |