UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~March 31,~~June 30, 2021

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

For the transition period from ~~_____ to~~_____to_____

Commission File Number: 001-06479

OVERSEAS SHIPHOLDING GROUP, ~~INC~~.INC.

(Exact name of registrant as specified in its charter)

Delaware

13-2637623

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

302 Knights Run Avenue, Tampa, Florida		33602
(Address of principal executive office)		(Zip Code)

(813) 209-0600

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

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

			Emerging growth company ☐

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

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES ☒ NO ☐

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares outstanding of the issuer’s Class A common stock as of ~~May 5,~~August 4, 2021: Class A common stock, par value $0.01 – ~~86,863,651~~87,146,851 shares. Excluded from these amounts are penny warrants, which were outstanding as of ~~May 5,~~August 4, 2021 for the purchase of 3,654,795 shares of Class A common stock without consideration of any withholding pursuant to the cashless exercise procedures.

TABLE OF CONTENTS

		Page # #

Part I—FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2021 (Unaudited) and December 31, 2020	3

	Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended ~~March 31,~~June 30, 2021 and 2020	4

	Condensed Consolidated Statements of Comprehensive (Loss)/Income (Unaudited) for the three and six months ended ~~March 31,~~June 30, 2021 and 2020	5

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020	6

	Condensed Consolidated Statements of Changes in Equity (Unaudited) for the three and six months ended ~~March 31,~~June 30, 2021 and 2020	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1617

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2223

Item 4.	Controls and Procedures	2324

Part II—OTHER INFORMATION

Item 1A	Risk Factors	2425

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3	Defaults upon Senior Securities	25

Item 4	Mine Safety Disclosure	26

Item 5	Other Information	26

Item 6.	Exhibits	26

Signatures	~~Signatures~~	27

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

DOLLARS IN THOUSANDS

	March 31, 2021			December 31, 2020			June 30, 2021			December 31, 2020
	(unaudited)						(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	45,093		$	69,697		$	61,735		$	69,697
Restricted cash		37			49			37			49
Voyage receivables, including unbilled of $4,999 and $6,740, net of reserve for doubtful accounts		10,872			13,123
Voyage receivables, including unbilled of $4,954 and $6,740, net of reserve for doubtful accounts								9,234			13,123
Income tax receivable		388			387			386			387
Other receivables		3,817			1,817			3,165			1,817
Inventories, prepaid expenses and other current assets		5,067			3,603			4,348			3,603
Total Current Assets		65,274			88,676			78,905			88,676
Vessels and other property, less accumulated depreciation		787,241			832,174			777,698			832,174
Asset held for sale		31,850			—
Deferred drydock expenditures, net		45,810			43,134			46,703			43,134
Total Vessels, Other Property and Deferred Drydock		864,901			875,308			824,401			875,308
Restricted cash - non current		59			73			59			73
Intangible assets, less accumulated amortization		26,067			27,217			24,917			27,217
Operating lease right-of-use assets, net		197,073			215,817			177,752			215,817
Other assets		26,058			24,646			26,096			24,646
Total Assets	$	1,179,432		$	1,231,737		$	1,132,130		$	1,231,737
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities	$	48,449		$	48,089		$	42,208		$	48,089
Current portion of operating lease liabilities		90,612			90,613			90,590			90,613
Current portion of finance lease liabilities		4,001			4,000			4,001			4,000
Current installments of long-term debt		38,718			38,922			38,867			38,922
Total Current Liabilities		181,780			181,624			175,666			181,624
Reserve for uncertain tax positions		183			189			185			189
Noncurrent operating lease liabilities		128,055			147,154			108,396			147,154
Noncurrent finance lease liabilities		20,793			21,360			20,198			21,360
Long-term debt		380,165			390,198			369,523			390,198
Deferred income taxes, net		74,821			80,992			72,317			80,992
Other liabilities		29,618			30,409			31,932			30,409
Total Liabilities		815,415			851,926			778,217			851,926
Equity:
Common stock - Class A ($0.01 par value; 166,666,666 shares authorized; 86,863,651 and 86,365,422 shares issued and outstanding)		869			864
Common stock - Class A ($0.01 par value; 166,666,666 shares authorized; 87,146,851 and 86,365,422 shares issued and outstanding)								871			864
Paid-in additional capital		592,732			592,564			593,424			592,564
Accumulated deficit		(229,203	)		(213,335	)		(239,902	)		(213,335	)
Stockholder’s Equity Subtotal		364,398			380,093			354,393			380,093
Accumulated other comprehensive loss		(381	)		(282	)		(480	)		(282	)
Total Equity		364,017			379,811			353,913			379,811
Total Liabilities and Equity	$	1,179,432		$	1,231,737		$	1,132,130		$	1,231,737

See notes to condensed consolidated financial statements

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

(UNAUDITED)

	2021			2020			2021			2020			2021			2020
	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2021			2020
Shipping Revenues:

Time and bareboat charter revenues	$	63,788		$	78,150		$	62,806		$	96,662		$	126,594		$	174,812
Voyage charter revenues		17,485			22,709			25,553			17,877			43,039			40,586
Total Shipping revenues		81,273			100,859			88,359			114,539			169,633			215,398

Operating Expenses:
Voyage expenses		15,760			3,786			16,668			14,112			32,428			17,897
Vessel expenses		31,807			35,769			34,002			41,644			65,809			77,413
Charter hire expenses		22,318			22,460			22,595			22,505			44,913			44,965
Depreciation and amortization		15,319			14,019			15,068			14,217			30,387			28,236
General and administrative		6,365			6,173			6,004			7,599			12,370			13,772
Loss on disposal of vessels and other property, including impairments, net		5,493			296
(Gain)/loss on disposal of vessels and other property, including impairments, net								(196	)		813			5,298			1,110
Total operating expenses		97,062			82,503			94,141			100,890			191,205			183,393
(Loss)/income from vessel operations		(15,789	)		18,356			(5,782	)		13,649			(21,572	)		32,005
Gain on termination of pre-existing arrangement		—			19,172			—			—			—			19,172
Operating (loss)/income		(15,789	)		37,528			(5,782	)		13,649			(21,572	)		51,177
Other income, net		122			31
Other (expense)/income, net								(111	)		(58	)		11			(27	)
(Loss)/income before interest expense and income taxes		(15,667	)		37,559			(5,893	)		13,591			(21,561	)		51,150
Interest expense		(6,370	)		(6,074	)		(7,317	)		(6,167	)		(13,687	)		(12,241	)
(Loss)/income before income taxes		(22,037	)		31,485			(13,210	)		7,424			(35,248	)		38,909
Income tax benefit/(expense)		6,169			(6,360	)		2,511			(1,044	)		8,681			(7,404	)
Net (loss)/income	$	(15,868	)	$	25,125		$	(10,699	)	$	6,380		$	(26,567	)	$	31,505

Weighted Average Number of Common Shares Outstanding:
Basic - Class A		90,111,701			89,422,311			90,612,019			89,747,630			90,363,243			89,584,969
Diluted - Class A		90,111,701			90,388,988			90,612,019			90,812,332			90,363,243			90,600,658
Per Share Amounts:
Basic and diluted net (loss)/income - Class A	$	(0.18	)	$	0.28		$	(0.12	)	$	0.07		$	(0.29	)	$	0.35

See notes to condensed consolidated financial statements

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

DOLLARS IN THOUSANDS

(UNAUDITED)

	2021			2020			2021			2020			2021			2020
	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020				2021		2020			2021			2020
Net (loss)/income	$	(15,868	)	$	25,125		$	(10,699	)	$	6,380		$	(26,567	)	$	31,505
Other comprehensive (loss)/income, net of tax:
Defined benefit pension and other postretirement benefit plans:
Net change in unrecognized prior service costs		(180	)		(18	)		(180	)		(18	)		(360	)		(36	)
Net change in unrecognized actuarial losses		81			76			81			77			162			153
Other comprehensive (loss)/income		(99	)		58			(99	)		59			(198	)		117
Comprehensive (loss)/income	$	(15,967	)	$	25,183		$	(10,798	)	$	6,439		$	(26,765	)	$	31,622

See notes to condensed consolidated financial statements

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

DOLLARS IN THOUSANDS

(UNAUDITED)

	2021			2020			2021			2020
	Three Months Ended March 31,						Six Months Ended June 30,
	2021			2020			2021			2020
Cash Flows from Operating Activities:
Net (loss)/income	$	(15,868	)	$	25,125		$	(26,567	)	$	31,505
Items included in net income not affecting cash flows:
Depreciation and amortization		15,319			14,019			30,387			28,236
Gain on termination of pre-existing arrangement		—			(19,172	)		—			(19,172	)
Loss on disposal of vessels and other property, including impairments, net		5,493			296			5,298			1,110
Amortization of debt discount and other deferred financing costs		557			533			1,252			1,124
Compensation relating to restricted stock awards and stock option grants		575			438			1,270			1,055
Deferred income tax (benefit)/expense		(6,178	)		2,135			(8,679	)		7,431
Interest on finance lease liabilities		460			506			914			1,001
Non-cash operating lease expense		22,717			22,811			45,672			45,680
Loss on extinguishment of debt, net								—			14
Distributed earnings of affiliated companies		—			3,562			—			3,562
Payments for drydocking		(8,179	)		(3,327	)		(14,222	)		(10,078	)
Operating lease liabilities		(22,860	)		(22,969	)		(45,957	)		(45,998	)
Changes in operating assets and liabilities, net		(1,217	)		2,162			63			(3,204	)
Net cash (used in)/provided by operating activities		(9,181	)		26,119			(10,569	)		42,266
Cash Flows from Investing Activities:
Acquisition, net of cash acquired		—			(16,973	)		—			(16,973	)
Proceeds from disposals of vessels and other property								32,128			700
Expenditures for vessels and vessel improvements		(3,227	)		(20,871	)		(5,101	)		(38,657	)
Expenditures for other property		—			(232	)		—			(498	)
Net cash used in investing activities		(3,227	)		(38,076	)
Net cash provided by/(used in) investing activities								27,027			(55,428	)
Cash Flows from Financing Activities:
Payments on debt		(9,616	)		(7,865	)		(19,251	)		(26,669	)
Tax withholding on share-based awards		(402	)		(197	)		(402	)		(197	)
Payments on principal portion of finance lease liabilities		(1,026	)		(1,037	)		(2,063	)		(2,075	)
Extinguishment of debt		(301	)		—			(301	)		(673	)
Deferred financing costs paid for debt amendments		(877	)		—			(2,429	)		—
Issuance of debt, net of issuance and deferred financing costs		—			80,886			—			95,441
Net cash (used in)/provided by financing activities		(12,222	)		71,787			(24,446	)		65,827
Net (decrease)/increase in cash, cash equivalents and restricted cash		(24,630	)		59,830			(7,988	)		52,665
Cash, cash equivalents and restricted cash at beginning of period		69,819			41,677			69,819			41,677
Cash, cash equivalents and restricted cash at end of period	$	45,189		$	101,507		$	61,831		$	94,342

See notes to condensed consolidated financial statements

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

DOLLARS IN THOUSANDS

(UNAUDITED)

Common Stock (1) Paid-in Additional Capital (2) Accumulated Deficit Accumulated Other Comprehensive Loss (3) Total
Balance at December 31, 2019 $ 857 $ 590,436 $ (243,339 ) $ (6,409 ) $ 341,545
Net income — — 25,125 — 25,125
Other comprehensive income — — — 58 58
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net 1 (200 ) — — (199 )
Compensation related to Class A options granted and restricted stock awards — 438 — — 438
Balance at March 31, 2020 $ 858 $ 590,674 $ (218,214 ) $ (6,351 ) $ 366,967

Balance at December 31, 2020 $ 864 $ 592,564 $ (213,335 ) $ (282 ) $ 379,811
Net loss — — (15,868 ) — (15,868 )
Other comprehensive loss — — — (99 ) (99 )
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net 5 (407 ) — — (402 )
Compensation related to Class A options granted and restricted stock awards — 575 — — 575
Balance at March 31, 2021 $ 869 $ 592,732 $ (229,203 ) $ (381 ) $ 364,017

	Common Stock (1)		Paid-in Additional Capital (2)			Accumulated Deficit			Accumulated Other Comprehensive Loss (3)			Total
Balance at December 31, 2019	$	857	$	590,436		$	(243,339	)	$	(6,409	)	$	341,545
Net income		—		—			25,125			—			25,125
Other comprehensive income		—		—			—			58			58
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net		1		(200	)		—			—			(199	)
Compensation related to Class A options granted and restricted stock awards		—		438			—			—			438
Balance at March 31, 2020		858		590,674			(218,214	)		(6,351	)		366,967
Net income		—		—			6,380			—			6,380
Other comprehensive income		—		—			—			59			59
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net		5		(5	)		—			—			—
Compensation related to Class A options granted and restricted stock awards		—		617			—			—			617
Balance at June 30, 2020	$	863	$	591,286		$	(211,834	)	$	(6,292	)	$	374,023

Balance at December 31, 2020	$	864	$	592,564		$	(213,335	)	$	(282	)	$	379,811
Net loss		—		—			(15,868	)		—			(15,868	)
Other comprehensive loss		—		—			—			(99	)		(99	)
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net		5		(407	)		—			—			(402	)
Compensation related to Class A options granted and restricted stock awards		—		575			—			—			575
Balance at March 31, 2021		869		592,732			(229,203	)		(381	)		364,017
Net loss		—		—			(10,699	)		—			(10,699	)
Net income (loss)		—		—			(10,699	)		—			(10,699	)
Other comprehensive loss		—		—			—			(99	)		(99	)
Other comprehensive income (loss)		—		—			—			(99	)		(99	)
Forfeitures, cancellations, issuance and vesting of restricted stock awards, net		2		(3	)		—						(1	)
Compensation related to Class A options granted and restricted stock awards		—		695			—						695
Balance at June 30, 2021	$	871	$	593,424		$	(239,902	)	$	(480	)	$	353,913

(1)

Par value $0.01 per share; 166,666,666 Class A shares authorized; ~~86,863,651~~87,146,851 and ~~85,845,920~~86,336,977 Class A shares outstanding as of ~~March 31,~~June 30, 2021 and 2020, respectively.

(2)

Includes 19,235,764 and ~~19,238,262~~19,236,264 outstanding Class A warrants as of ~~March 31,~~June 30, 2021 and 2020, respectively.

(3)

Amounts are net of tax.

See notes to condensed consolidated financial statements

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

Note 1 — Basis of Presentation

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

These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and notes required by generally accepted accounting principles in the United States. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the results have been included. Operating results for the three and six months ended ~~March 31,~~June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any other interim period.

The condensed consolidated balance sheet as of December 31, 2020 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles in the United States for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (“Form 10-K”).

~~In March 2020, the~~The World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic ~~which continues to affect the United States and the world. COVID-19 and its direct and indirect consequences have caused significant volatility~~ in U.S. and international markets, and there is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies.March 2020. The COVID-19 pandemic is a dynamic and continuously evolving phenomenon and the ultimate severity of the outbreak, and its effect on the Company’s business in the future, is uncertain.

Note 2 — Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards

In 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.

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS~~

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.

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

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

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

Bucket 2— All other entities, including SRCs, other PBEs that are not SEC filers, private companies, not-for-profit organizations, and employee benefit plans. The credit losses standard 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 - Revenue Recognition

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.

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS~~

The following table shows the Company’s shipping revenues disaggregated by nature of the charter arrangement for the three and six months ended ~~March 31,~~June 30, 2021 and 2020:

Schedule of Disaggregation of Revenue

	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2021		2020
Time and bareboat charter revenues	$	63,788	$	78,150	$	62,806	$	96,662	$	126,594	$	174,812
Voyage charter revenues⁽¹⁾		7,037		11,468		13,405		9,423		20,443		20,892
Contracts of affreightment revenues		10,448		11,241		12,148		8,454		22,596		19,694
Total shipping revenues	$	81,273	$	100,859	$	88,359	$	114,539	$	169,633	$	215,398

(1)

Voyage charter revenues include approximately $2,530 and $3,946 of revenue related to short-term time charter contracts ~~was $2,864~~ ~~and $11,319~~for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and $5,394 and $15,265 for the six months ended June 30, 2021 and 2020, respectively.

Voyage Receivables

As of ~~March 31,~~June 30, 2021 and December 31, 2020, contract balances from contracts with customers consisted of voyage receivables of $~~8,458~~7,343 and $9,351, respectively, net of reserve of $4,459for doubtful accounts for voyage charters and lightering contracts.

Contracts of Affreightment

At ~~March~~June 30, 2021 and December 31, ~~2021,~~2020, the Company did not have deferred revenue related to the ~~Company's~~Company’s contracts of affreightment (“COAs”).

Costs to Fulfill a Contract

At ~~March~~June 30, 2021 and December 31, ~~2021,~~2020, the costs related to voyages that were not yet completed were not material.

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

Transaction Price Allocated to the Remaining Performance Obligations

As of ~~March 31,~~June 30, 2021, the Company expects to recognize revenue of approximately $~~16,519~~ 10,139for the remainder of 2021 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.

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS~~

Note 4 — Earnings per Common Share

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

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

Class A

As of ~~March 31,~~June 30, 2021, there were ~~3,414,189~~3,380,708 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 ~~March 31,~~June 30, 2020, there were ~~2,681,891~~2,645,025 shares of Class A common stock issuable under outstanding restricted stock units and 1,478,756 shares of Class A common stock issuable under outstanding options, both of which are considered to be potentially dilutive securities.

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

Schedule of Earnings Per Share

	Three Months Ended March 31,					Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021			2020		2021			2020
Net (loss)/income	$	(15,868	)	$	25,125	$	(10,699	)	$	6,380	$	(26,567	)	$	31,505

Weighted average common shares outstanding:
Class A common stock - basic		90,111,701			89,422,311		90,612,019			89,747,630		90,363,243			89,584,969
Class A common stock - diluted		90,111,701			90,388,988		90,612,019			90,812,332		90,363,243			90,600,658

For the three and six months ended ~~March 31,~~June 30, 2020, there were dilutive equity awards outstanding covering ~~966,677~~1,064,702 ~~shares.~~and 1,015,689 shares, respectively. Awards of 371,893 shares (which are related to stock options) for both the three and six months ended ~~March 31,~~June 30, 2020 were not included in the computation of diluted earnings per share because inclusion of these awards would be anti-dilutive.

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS~~

Note 5 — Fair Value Measurements and Fair Value Disclosures

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

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

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

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

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

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

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

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

Schedule of Hierarchy Categorized on Fair Value

	Carrying		Fair Value				Carrying		Fair Value
	Value		Level 1		Level 2		Value		Level 1		Level 2
March 31, 2021:
June 30, 2021:
Assets
Cash and cash equivalents ⁽¹⁾	$	45,189	$	45,189	$	—	$	61,831	$	61,831	$	—
Total	$	45,189	$	45,189	$	—	$	61,831	$	61,831	$	—
Liabilities
Term loan, due 2023, net	$	245,994	$	—	$	250,988	$	239,076	$	—	$	241,694
Term loan, due 2024, net		22,603		—		22,868		22,251		—		22,109
Alaska tankers term loan, due 2025, net		49,242		—		47,688		48,154		—		46,167
OSG 204 LLC term loan, due 2025, net		30,647		—		30,562		30,103		—		29,390
Term loan, due 2026, net		47,924		—		50,346		21,066		—		19,528
OSG 205 LLC and OSG Courageous II LLC term loan, due 2027, net		22,083		—		20,555		47,350		—		50,337
Unsecured senior notes, net		390		—		407		390		—		406
Total	$	418,883	$	—	$	423,414	$	408,390	$	—	$	409,631

1211

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

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

	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 aggregating $96 and $122 at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. Restricted cash as of ~~March 31,~~June 30, 2021 and December 31, 2020 was related to the Company’s Unsecured Senior Notes.

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

Vessel and Intangible Assets Impairments

During the ~~first~~second quarter of 2021, the Company considered whether events or changes in circumstances had occurred since December 31, 2020 that could indicate the carrying amounts of the vessels in the Company’s fleet and the carrying value of the Company’s intangible assets may not be recoverable as of ~~March 31,~~June 30, 2021.

The Company concluded that no such events or changes in circumstances had occurred for its intangible assets at ~~March 31,~~June 30, 2021.

During the first quarter of 2021 the Company received a firm offer for the sale of the Overseas Gulf Coast~~, which is classified as asset held for sale on the condensed consolidated balance sheets at March 31, 2021.~~. Based on the negotiated sale terms, the Company recorded a loss of $5,446~~, which is included in loss on disposal of vessels and other property, including impairments, net on the condensed consolidated statements of operations,~~ on the planned disposition of this tanker. In April 2021, the Company entered into a contract to sell the vessel for $31,850, net of broker commissions. The sale ~~is anticipated to be final prior to the end~~ of the ~~second quarter~~vessel was completed in June 2021 for $32,128, net of ~~2021.~~broker commissions and other fees, resulting in an immaterial gain recognized during the three months ended June 30, 2021, which is included in (gain)/loss on disposal of vessels and other property, including impairments, net on the condensed consolidated statements of operations.

Note 6 — Taxes

For the three months ended ~~March 31,~~June 30, 2021 and 2020, the Company recorded an income tax benefit/(provision) of $~~6,169~~ 2,511and $$(~~(6,360)~~1,044), respectively, which represented effective tax rates of ~~28%~~ 19%and ~~20%~~14%, respectively. For the six months ended June 30, 2021 and 2020, the Company recorded an income tax benefit/(provision) of $8,681 and $(7,404), respectively, which represented effective tax rates of 25% and 19%, respectively. The increase in the effective tax rate for the three and six months ended ~~March 31,~~June 30, 2021 compared to the three and six months ended ~~March 31,~~June 30, 2020 was ~~primarily~~substantially due to changes in state apportionment, as well as the tonnage tax ~~exclusion.~~exclusion under the Internal Revenue Code. The effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2021 was more than the statutory rate due to the tonnage tax exclusion and state tax benefit. The effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2020 was less than the statutory rate due to a discrete tax benefit ~~in the quarter~~ relating to state benefit resulting from the Alaska Tanker Company acquisition, ~~and deductible expenses~~interest related to ~~Code Section 162(m).~~an alternative minimum tax refund and the tonnage tax exclusion.

1312

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

Note 7 — Capital Stock and Stock Compensation

Share and Warrant Repurchases

During the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, in connection with the vesting of restricted stock units (“RSUs”), the Company withheld 185,459and 104,552, respectively, shares of Class A common stock at an average price of $2.18 and $~~2.18~~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

During the ~~three~~six months ended ~~March 31,~~June 30 2021, ~~and 2020,~~ the Company did not issue any shares of Class A common stock as a result of the exercise of Class A warrants. During the six months ended June 30, 2020, the Company issued 378 shares of Class A common stock as a result of the exercise of 1,998 Class A warrants.

Stock Compensation

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

Director Compensation — Restricted Stock Units

On May 27, 2021 and May 28, 2020, the Company awarded 275,800 and 321,000, respectively, time-based RSUs to its non-employee directors. The grant date fair value of these awards was $2.29 and $2.25 per RSU, respectively. Each RSU represents a contingent right to receive one share of Class A common stock upon vesting. These RSUs vest in full on the first anniversary of the grant date, subject to each director continuing to provide services to the Company through such date.

Management Compensation — Restricted Stock Units and Stock Options

During the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, the Company granted 554,962and 764,406 RSUs to its employees, including senior ~~officers.~~officers, respectively. The grant date fair value of these awards was $2.36 and $~~2.36~~2.03 per ~~RSU.~~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.

During the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, the Company awarded 363,238and 582,224 performance-based RSUs to its senior ~~officers.~~officers, 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 index consists of companies that comprise a combination of the oil and gas storage and transportation and marine GICS sub-industries indexes during the performance period. Vesting is subject in each case to certification by the Human Resources and Compensation Committee of the Parent Company’s Board of Directors as to achievement of the performance measures and targets.

The ROIC Target RSU awards and the TSR Target RSU awards are subject to an increase of up to a maximum of 181,619and 291,112 target RSUs combined, respectively, (544,857and 873,340 RSUs in ~~total)~~total, respectively) or decrease, depending on performance against the applicable measure and targets. ~~The ROIC performance goal is a performance condition which, as of March 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 TSR based performance awards, which have a market condition, was determined to be $2.36 and $~~2.36~~2.03 per ~~RSU.~~RSU, respectively.

During the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company awarded 590,251performance-based RSUs to its senior officers. The grant date fair value of these awards was $$2.36per 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.

1413

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

Note 8 — Accumulated Other Comprehensive Loss

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

Schedule of Components of Accumulated Other Comprehensive Loss

As of	March 31, 2021			December 31, 2020			June 30, 2021			December 31, 2020
Items not yet recognized as a component of net periodic benefit cost (pension and other postretirement benefit plans)	$	(381	)	$	(282	)	$	(480	)	$	(282	)
Accumulated other comprehensive loss	$	(381	)	$	(282	)	$	(480	)	$	(282	)

The following tables present the changes in the balances of each component of accumulated other comprehensive loss, net of related taxes, during the three and ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020:

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 March 31, 2021	$	(381	)
Current period change, excluding amounts reclassified from accumulated other comprehensive income		—
Amounts reclassified from accumulated other comprehensive income		(99	)
Total change in accumulated other comprehensive income		(99	)
Balance as of June 30, 2021	$	(480	)

Balance as of March 31, 2020	$	(6,351	)
Current period change, excluding amounts reclassified from accumulated other comprehensive income		—
Amounts reclassified from accumulated other comprehensive income		59
Total change in accumulated other comprehensive income		59
Balance as of June 30, 2020	$	(6,292	)

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

Items not yet
recognized as a component of net periodic benefit
cost (pension and
other
postretirement plans)

Balance as of December 31, 2020 $ (282 )
Current period change, excluding amounts reclassified from accumulated other comprehensive income —
Amounts reclassified from accumulated other comprehensive income (99 )
Total change in accumulated other comprehensive income (99 )
Balance as of March 31, 2021 $ (381 )

Balance as of December 31, 2019 $ (6,409 )
Current period change, excluding amounts reclassified from accumulated other comprehensive income —
Amounts reclassified from accumulated other comprehensive income 58
Total change in accumulated other comprehensive income 58
Balance as of March 31, 2020 $ (6,351 )

	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		—
Amounts reclassified from accumulated other comprehensive income		(198	)
Total change in accumulated other comprehensive income		(198	)
Balance as of June 30, 2021	$	(480	)

Balance as of December 31, 2019	$	(6,409	)
Current period change, excluding amounts reclassified from accumulated other comprehensive income		—
Amounts reclassified from accumulated other comprehensive income		117
Total change in accumulated other comprehensive income		117
Balance as of June 30, 2020	$	(6,292	)

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

Note 9 — Leases

Charters-out

The Company is the lessor under its time charter contracts. Total time charter revenue for the three and six months ended ~~March 31,~~June 30, 2021 ~~and 2020~~ was equal to lease income from lease payments of $~~63,417~~62,705 and $~~78,853~~126,122, respectively, plus straight-line adjustments of $~~371~~101 ~~for~~and $472, respectively. For the three and six months ended ~~March 31, 2021~~June 30, 2020, total time charter revenue was equal to lease income from lease payments of $95,893 and ~~less~~$174,746, respectively, plus straight-line adjustments of $~~703~~769 ~~for the three months ended March 31, 2020.~~and $66, respectively.

OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

Note 10 — Debt

~~The COVID-19 pandemic~~In recent months, there has ~~resulted in a significant reduction~~been some recovery in demand for oil and refined petroleum products worldwide ~~which has had a direct impact on~~from the ~~Company’s business. In an effort to conserve costs,~~lowest levels that resulted from the COVID-19 pandemic. The Company placed several ~~of the~~ vessels ~~in the Company’s fleet were placed~~ in layup in late 2020 and ~~2021.~~2021 to conserve costs, with the pace of demand recovery influencing decisions to bring the vessels back into service. In recognition that certain of the financial covenants that were in place in each of the Company’s vessel financing facilities did not appropriately reflect the impact of the pandemic on the ~~Company's~~Company’s business, in March 2021, the Company obtained waivers and amendments of certain financial covenants in each of its vessel financing facilities, with respect to fourth quarter 2020 and later periods’ compliance requirements. In accordance with the loan amendments, the Company agreed to sell one of its vessels, the Overseas Gulf Coast.

Note 11 — ~~Commitments and~~ Contingencies

The Company is a party, as plaintiff or defendant, to various suits in the ordinary course of business for monetary relief arising principally from personal injuries (including without limitation exposure to asbestos and other toxic materials), wrongful death, collision or other casualty and to claims arising under charter parties. A substantial majority of such personal injury, wrongful death, collision or other casualty claims against the Company are covered by insurance (subject to deductibles not material in amount). ~~Each of the claims involves an amount which, in~~In the opinion of management, none of these claims, individually or in the aggregate, are ~~not~~ expected to be material to the Company’s financial position, results of operations and cash flows.

1516

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

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

FORWARD-LOOKING STATEMENTS

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

All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements. Please see the section titled “Forward-Looking Statements” and Item 1A. Risk Factors of our 2020 Annual Report on Form 10-K. Other factors besides those listed in our quarterly reports or in our Annual Report also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. The following highlights some of these risk factors:

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

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

	●	work stoppages or other labor disruptions by the unionized employees of OSG or other companies in related industries or the impact of any potential liabilities resulting from withdrawal from participation in multiemployer plans;
	●	limitations on U.S. coastwise trade, the waiver, modification or repeal of the Jones Act limitations or changes in international trade agreements;
	●	the inability to clear oil majors’ risk assessment processes;
	●	the Company’s ability to use its net operating loss carryforwards;
	●	significant fluctuations in the market price of the Company’s securities; and
	●	provisions of Delaware law and the Company’s governing documents that could influence its ability to effect a change of control.

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

Business Overview

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

On June 30, 2021, OSG received a non-binding indication of interest to acquire all of the issued and outstanding shares of common stock of the Company for a price of $3.00 per share from Saltchuk Holdings, Inc. OSG’s Board of Directors has commenced a strategic process to explore, review and evaluate a range of strategic alternatives available to the Company to enhance shareholder value, including the non-binding indication of interest.

The Company’s Board of Directors has not set a timetable for the strategic process, nor has it made any decisions related to strategic alternatives, including with respect to the non-binding indication of interest. There can be no assurance that the exploration of strategic alternatives will result in a sale of the Company, or in any other strategic change or outcome.

The following is a discussion and analysis of our financial condition and results of operations for the three and six months ended ~~March 31,~~June 30, 2021 and 2020. You should consider the foregoing when reviewing the condensed consolidated financial statements, including the notes thereto, and this discussion and analysis. This Quarterly Report on Form 10-Q includes industry data and forecasts that we have prepared based in part on information obtained from industry publications and surveys. Third-party industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. In addition, certain statements regarding our market position in this report are based on information derived from internal market studies and research reports. Unless we state otherwise, statements about the Company’s relative competitive position in this report are based on management’s beliefs, internal studies and management’s knowledge of industry trends.

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

Operations and Oil Tanker Markets

The ongoing coronavirus pandemic has severely impacted global and national economies. Lockdown orders, business closures and travel restrictions among many other events have reduced the demand for many products, including petroleum. This has led to a significant reduction in refinery operations and end user demand for transportation fuels. The reduced demand has created extreme business uncertainty for our customers and the result has been a reluctance to enter into longer term transportation commitments. We believe that, as our customers’ visibility and confidence in the future returns, there will be a resumption of more typical customer behavior and time charter activity will rebound.

Heightened uncertainty has resulted in the non-renewal of charters for vessels whose time charters ended in late 2020 and early in 2021. In response to this we have placed seven vessels in lay-up. Laying up vessels in times of limited near-term employment opportunities allows us to reduce the costs associated with vessels that are without charter. The historic Texas freeze during the just completed quarter also impacted lay-up decisions as more than 50% of PADD 3 refining capacity was shut in for a good portion of the just completed quarter. The refinery shutdowns have by now largely been resolved. Further, we anticipate that, as vaccines become more widely distributed and there is a lifting of the COVID-19 restrictions, mobility and related US consumption of transportation fuels will, more likely than not, normalize. A normalization of fuel demand patterns consistent with historic levels of consumption is expected to stimulate more marine transportation demand, which in turn should lead to a reactivation of vessels from lay-up to meet any such increase in demand. The pace and trajectory of demand recovery continues to be influenced by many factors, including progress in resolving the pandemic outside of the US, and near-term uncertainty will continue to define a wide spectrum of possible vessel reactivation outcomes as we move through the late spring and summer.

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

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

Beginning in the 2020 first quarter, COVID-19 ~~has resulted in~~caused material disruptions in demand for and an oversupply of crude oil and refined products. ~~Many~~During the second half 2020, large inventory builds around the world ensued. Managed reductions in both crude oil production levels and refinery utilization rates have combined to reduce inventory levels over the past year. As supply has been constrained, crude oil prices in particular have risen strongly in response. As a result, many analysts ~~predict that gasoline~~now consider market conditions to be favorable for increased oil production, and ~~diesel~~a corresponding rise in the demand ~~will recover in 2021. Jet fuel demand is anticipated to remain well below 2019 levels through at least the end of 2021.~~for its transportation. These predictions reflect estimates on the prevalence of COVID-19 and the recovery of the ~~U.S.~~global economy. Energy markets are ~~however,~~ global in nature and the pace and extent of COVID and the changing state of its ~~continuing~~ presence in all markets ~~outside of the U.S.~~ is ~~also~~ an important factor in understanding the timing and extent of recovery of supply and consumption patterns within the U.S. While COVID-19 has presented our industry and markets with significant challenges, we believe that we have thus far managed its impact on our business operations well, with all of our Jones Act and internationally trading vessels able to load, transit and discharge cargo without material interruption.

Despite the foregoing, the ongoing global coronavirus pandemic continues to weigh on demand and transport pricing dynamics in the global liquid bulk transportation markets. While demand for transportation fuels in the United States has recovered strongly from year-ago lows, weak international markets have caused imports of both crude oil and refined product into the U.S. to rise over the first half of this year. Import substitution for domestic supply has dampened demand, especially for conventional Jones Act tankers, and continues to create conditions of business uncertainty for our customers and, accordingly, for our business. Our customers’ reluctance to enter into longer-term transportation commitments has been a continuing condition since the onset of the pandemic. In the face of this soft demand environment, we have chosen to place and retain seven vessels in lay-up. Laying up vessels in times of limited near-term employment opportunities allows us to reduce the costs associated with vessels that are without charter.

While the recovery slope of domestic marine transportation demand levels has been flatter than what had been expected earlier in the year, we believe that, as our customers’ visibility and confidence in the future returns, there will be a resumption of more typical customer behavior, and time charter activity will rebound. Timing of the reactivation of laid up vessels is contingent upon increased demand from our domestic customer base. We anticipate that, as vaccines become more widely distributed globally and mobility and related consumption of transportation fuels outside of the U.S. regains traction, demand for Jones Act tanker domestically should normalize. A normalization of fuel demand patterns consistent with historical levels of consumption is expected to stimulate more marine transportation demand, which in turn should lead to a reactivation of vessels from lay-up to meet any such increase in demand. The pace and trajectory of demand recovery continues to be influenced by many factors, including progress in resolving the pandemic, both within and outside of the US, and near-term uncertainty will continue to define a wide spectrum of possible vessel reactivation outcomes as we move through the balance of the year.

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

Having our vessels committed on time charters is a fundamental objective of our chartering strategy. The majority of available vessel operating days are covered with medium-term charters or contracts of affreightment. However, medium-term charters may not always be remunerative, nor prove achievable under certain market conditions. As a result, some of our vessels may operate in the spot market, which is more volatile and less predictable. In some cases, where neither time charter nor consistent spot market business is available, ~~lay up~~lay-up and removal of vessels from an actively available status is deemed necessary. Because shipping revenues and voyage expenses are significantly affected by the mix between voyage charters and time charters, we manage our vessels based on TCE revenues and rates, which are non-GAAP measures.

COVID-19 induced demand destruction that started in March 2020 has resulted in minimal spot market activity since then. ~~The few voyages that~~Spot activity increased during the second quarter of 2021 with 30 spot fixtures versus 20 spot fixtures in the first quarter of 2021. Of the 30 spot fixtures, 10 were ~~available~~tankers and the remaining were ~~typically performed by ATBs and not by product tankers.~~ATBs.

Our vessels, excluding vessels in lay-up, were employed for ~~92%~~94% of available days during the ~~first~~second quarter of 2021, with 9369 of a total ~~1,223~~1,229 available days (available days excludes 4345 days vessels were ~~offhire~~off hire due to drydock requirements) seeing vessels idle without employment.

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

Industry-wide, there were no firm Jones Act vessel orders as of ~~March 31,~~June 30, 2021. There was one large ATB scrapped during the second quarter of 2021.

Delaware Bay lightering volumes averaged ~~66,000~~81,000 b/d in the ~~first~~second quarter of 2021 compared with ~~80,000~~38,000 b/d in the ~~first~~second quarter of 2020. Refinery demand for crude oil has ~~been significantly reduced since~~increased from the ~~third quarter of~~low demand levels in 2020 ~~due to COVID-19, reducing the need for lightering services.~~caused by COVID-19. We have contract minimums with our refinery customers that compensate us for barrels not lightered below those minimum amounts.

Critical Accounting Policies

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Company to make estimates in the application of its accounting policies based on the best assumptions, judgments and opinions of management. For a description of all of the Company’s material accounting policies, see Note 2, “Summary of Significant Accounting Policies,” to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for 2020.

Results of Vessel Operations

During the three and six months ended ~~March 31,~~June 30, 2021, shipping revenues decreased by ~~$19,586,~~$26,180 and $45,765, or ~~19.4%~~22.9% and 21.3%, respectively, compared to the same ~~period~~periods in 2020. The ~~decrease was~~decreases primarily resulted from a ~~result of a 624-day~~599-day and 1,223-day, respectively, increase in lay-up days due to seven vessels in lay-up, a decision taken in light of the lack of demand due to the economic impact of COVID-19. ~~The decrease in shipping revenues was partially offset by the addition to our fleet of three crude oil tankers,~~ ~~Alaskan Explorer~~, ~~Alaskan Legend~~ ~~and~~ ~~Alaskan Navigator~~~~, which were purchased on March 12, 2020.~~

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

Three Months Ended
March 31,

2021 2020
Time charter equivalent revenues $ 65,513 $ 97,073
Add: Voyage expenses 15,760 3,786
Shipping revenues $ 81,273 $ 100,859

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Time charter equivalent revenues	$	71,691	$	100,427	$	137,205	$	197,501
Add: Voyage expenses		16,668		14,112		32,428		17,897
Shipping revenues	$	88,359	$	114,539	$	169,633	$	215,398

The following ~~table provides~~tables provide a breakdown of TCE rates achieved for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 between spot and fixed earnings and the related revenue days.

	2021				2020				2021				2020
Three Months Ended March 31,	Spot Earnings		Fixed Earnings		Spot Earnings		Fixed Earnings
Three Months Ended June 30,									Spot Earnings		Fixed Earnings		Spot Earnings		Fixed Earnings
Jones Act Handysize Product Carriers:
Average rate	$	24,467	$	65,165	$	61,951	$	60,260	$	32,613	$	65,822	$	31,120	$	61,360
Revenue days		148		477		92		1,052		182		455		89		1,088
Non-Jones Act Handysize Product Carriers:
Average rate	$	14,958	$	7,044	$	27,727	$	16,788	$	33,437	$	12,417	$	27,051	$	16,752
Revenue days		180		177		154		182		187		159		156		181
ATBs:
Average rate	$	—	$	32,339	$	28,332	$	24,015	$	—	$	32,087	$	16,333	$	—
Revenue days		—		180		93		89		—		182		124		—
Lightering:
Average rate	$	92,524	$	—	$	78,258	$	61,012	$	87,948	$	—	$	44,346	$	—
Revenue days		73		—		91		87		91		—		121		—
Alaska ^(a):
Average rate	$	—	$	58,743	$	—	$	59,015	$	—	$	58,753	$	—	$	58,538
Revenue days		—		238		—		58		—		228		—		272

~~(a)~~

~~Excludes one Alaska vessel currently in layup.~~20

	2021				2020
Six Months Ended June 30,	Spot Earnings		Fixed Earnings		Spot Earnings		Fixed Earnings
Jones Act Handysize Product Carriers:
Average rate	$	28,964	$	65,486	$	46,830	$	60,819
Revenue days		330		932		181		2,140
Non-Jones Act Handysize Product Carriers:
Average rate	$	24,383	$	9,586	$	27,387	$	16,770
Revenue days		367		336		310		363
ATBs:
Average rate	$	—	$	32,213	$	21,213	$	24,686
Revenue days		—		362		217		89
Lightering:
Average rate	$	81,339	$	—	$	51,388	$	61,012
Revenue days		181		—		243		87
Alaska (a):
Average rate	$	—	$	58,748	$	—	$	58,621
Revenue days		—		466		—		330

(a) Excludes one Alaska vessel currently in layup.

During the ~~first~~second quarter of 2021, TCE revenues decreased by ~~$31,560,~~$28,736, or ~~32.5%~~28.6%, to ~~$65,513~~$71,691 from ~~$97,073~~$100,427 in the ~~first~~second quarter of 2020. The decrease was primarily a result of a ~~624-day~~599-day increase in lay-up days due to seven vessels in lay-up, a decision taken in light of the lack of demand due to the economic impact of COVID-19. ~~The decrease in TCE revenues was partially offset by the addition to our fleet of three crude oil tankers,~~ ~~Alaskan Explorer~~, ~~Alaskan Legend~~ ~~and~~ ~~Alaskan Navigator~~~~, which were purchased on March 12, 2020.~~

Voyage expenses increased by ~~$11,974,~~$2,556, or ~~316.3%~~18.1%, in the ~~first~~second quarter of 2021 to ~~$15,760~~$16,668 compared to ~~$3,786~~$14,112 in the ~~first~~second quarter of 2020, primarily related to ~~expenses for oil pollution mitigation services for the Alaskan tankers~~increases in the first quarter of 2021 compared to none during the first quarter of 2020 as we acquired the vessels on March 12, 2020. These expenses are passed through to the charterer each month. Additionally, voyage expenses increased due to fuel and port expenses ~~related~~due to ~~one Government of Israel~~more voyage ~~during the first quarter of 2021~~charters performed by our vessels compared to ~~no Government of Israel voyages during~~ the ~~first quarter of~~same period in 2020.

Vessel expenses decreased by ~~$3,962,~~$7,642, or ~~11.1%~~18.4%, in the ~~first~~second quarter of 2021 to ~~$31,807~~$34,002 compared to ~~$35,769~~$41,644 in the ~~first~~second quarter of 2020, primarily due to a decrease in crewing costs. The decrease in crewing costs was due to the decision to place seven vessels in layup as a result of the lack of demand due to COVID-19 economic impact.

Depreciation and amortization increased by ~~$1,300,~~$851, or ~~9.3%~~6.0%, to ~~$15,319~~$15,068 in the second quarter of 2021 compared to $14,217 in the first quarter of 2020. The increase primarily resulted from an increase in depreciation expense due to the addition of our newbuild barges, OSG 204 and OSG 205, which entered service at the end of the second quarter of 2020 and the fourth quarter of 2020, respectively, and an increase in amortization of drydock costs.

During the first six months of 2021, TCE revenues decreased by $60,296, or 30.5%, to $137,205 from $197,501 in the first six months of 2020. The decrease was primarily a result of a 1,223-day increase in lay-up days due to seven vessels in lay-up, a decision taken in light of the lack of demand due to the economic impact of COVID-19.

Voyage expenses increased by $14,531, or 81.2%, in the first six months of 2021 to $32,428 compared to $17,897 in the first six months of 2020, primarily related to an increase in expenses for oil pollution mitigation services for the Alaskan tankers during the first six months of 2021 compared to ~~$14,019~~the first six months of 2020 as we acquired the vessels on March 12, 2020. These expenses are passed through to the charterer each month.

Vessel expenses decreased by $11,604, or 15.0%, for the six months ended June 30, 2021 to $65,809 compared to $77,413 for the six months ended June 30, 2020, primarily due to a decrease in crewing costs. The decrease in crewing costs was due to the decision to place seven vessels in layup as a result of the lack of demand due to COVID-19 economic impact.

Depreciation and amortization increased by $2,151, or 7.6%, to $30,387 in the first ~~quarter~~six months of 2021 compared to $28,236 in the first six months of 2020. The increase primarily resulted from an increase in depreciation expense due to the addition of three crude oil tankers, Alaskan Explorer, Alaskan Legendand Alaskan Navigator, to our fleet in March 2020 and the addition of our newbuild barges, OSG 204and OSG 205,, which entered service during the end of the second quarter of 2020 and fourth ~~quarters~~quarter of 2020, ~~respectively.~~respectively, and an increase in amortization of drydock costs.

Our two U.S. Flag Product Carriers participate in the MSP, which is designed to ensure that militarily useful U.S. Flag vessels are available to the U.S. Department of Defense in the event of war or national emergency. We receive an annual subsidy, subject in each case to annual congressional appropriations, which is intended to offset the increased cost incurred by such vessels from operating under the U.S. Flag. For 2021, we expect to receive up to $5,200 for each vessel. During 2020, the stipend we received was $5,058 on one vessel and $4,607 on one vessel. We do not receive a subsidy for any days for which either of the two vessels operate under a time charter to a U.S. government agency.

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

General and Administrative Expenses

~~During the first quarter of 2021, general~~General and administrative expenses ~~increased by $192, or 3.1%, to $6,365 from $6,173 in~~were $6,004 and $12,370 for the ~~first quarter of 2020.~~three and six months ended June 30, 2021, respectively, compared with $7,599 and $13,772 for the three and six months ended June 30, 2020, respectively. The ~~increase~~decrease was primarily driven by ~~an increase in~~lower compensation and ~~benefit~~benefits costs ~~due to our acquisition of ATC on March 12, 2020~~ and ~~the resulting increase in headcount.~~lower consulting and accounting fees.

(Gain)/Loss on Disposal of Vessels and Other Property, Including Impairments, Net

~~Loss~~(Gain)/loss on disposal of vessels and other property, including impairments, net was ~~$5,493~~$(196) for the three months ended ~~March 31,~~June 30, 2021 compared to ~~$296~~$813 for the three months ended ~~March 31,~~June 30, 2020 primarily related to a gain recognized on the sale of the Overseas Gulf Coast. We recognized a loss of $5,446 during the first quarter of 2021 due to the anticipated sale of this vessel for $31,850, net of broker commissions, however, the vessel sold during the second quarter of 2021 for $32,128, net of broker commissions and other fees, resulting in a gain. For the three months ended June 30, 2020, a loss was recognized due to the sale of one ATB and an anticipated sale on another ATB.

For the six months ended June 30, 2021, (gain)/loss on disposal of vessels and other property, including impairments, net was $5,298 compared to $1,110 for the six months ended June 30, 2020. The increase was a result of ~~a firm offer we received to sell~~the sale of the Overseas Gulf Coast~~. Based on the negotiated sale terms, we recorded a loss of $5,446 on the planned disposition of this tanker. We expect the sale to be completed prior to the end of~~during the second quarter of ~~2021.~~2021 for $32,128, net of broker commissions and other fees. For the six months ended June 30, 2020, a loss was recognized due to the sale of one ATB and an anticipated sale on another ATB.

Gain on Termination of Pre-Existing Arrangement

Gain on termination of pre-existing arrangement was $0 for the three and six months ended ~~March 31,~~June 30, 2021, respectively, compared to $0 and $19,172 during the three and six months ended ~~March 31, 2020.~~June 30, 2020, respectively. The decrease for the six months ended June 30, 2021 was due to our acquisition of ATC on March 12, 2020. Our pre-existing ATC arrangements with a minimum term through December 2023 were terminated at the time of acquisition and a non-cash gain equal to the value of the remaining arrangement of $19,172 was recognized.

Interest Expense

Interest expense was ~~$6,370~~$7,317 for the three months ended ~~March 31,~~June 30, 2021 compared with ~~$6,074~~$6,167 for the three months ended ~~March 31,~~June 30, 2020. The increase in interest expense was primarily ~~associated with~~related to the ~~additional debt outstanding at March 31,~~addition of the OSG 205 LLC and OSG Courageous II LLC term loan, due 2027, in the fourth quarter of 2020 and less interest capitalized during the three months ended June 30, 2021 compared to ~~at March 31,~~the same period in 2020. The increase was offset by a decrease in interest expense due to the payoff of the term loan on the Overseas Gulf Coast during the third quarter of 2020.

For the six months ended June 30, 2021, interest expense was $13,687 compared to $12,241 for the six months ended June 30, 2020. The increase in interest expense was primarily related to the addition of the OSG 205 LLC and OSG Courageous II LLC term loan, due 2027, in the fourth quarter of 2020 and less interest capitalized during the six months ended June 30, 2021 compared to the same period in 2020. The increase was offset by a decrease in the 30-Day LIBOR rate on our term loans, due 2023 and 2026, from the same period in 2020 and a decrease due to the payoff of the term loan on the Overseas Gulf Coast during the third quarter of 2020.

Income Taxes

For the three months ended ~~March 31,~~June 30, 2021 and 2020, wethe Company recorded an income tax benefit/(provision) of ~~$6,169~~$2,511 and ~~$(6,360)~~$(1,044), respectively, which represented effective tax rates of ~~28%~~19% and ~~20%~~14%, respectively. For the six months ended June 30, 2021 and 2020, the Company recorded an income tax benefit/(provision) of $8,681 and $(7,404), respectively, which represented effective tax rates of 25% and 19%, respectively. The increase in the effective tax rate for the three and six months ended ~~March 31,~~June 30, 2021 compared to the three and six months ended ~~March 31,~~June 30, 2020 was substantially due to changes in state apportionment, as well as, the tonnage tax ~~exclusion.~~exclusion under the Internal Revenue Code. The effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2021 was more than the statutory rate due to the tonnage tax exclusion and state tax benefit. The effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2020 was less than the statutory rate due to a discrete tax benefit ~~in the quarter~~ relating to state benefit resulting from the Alaska Tanker Company acquisition, ~~and deductible expenses~~interest related to ~~Code Section 162(m).~~an alternative minimum tax refund and the tonnage tax exclusion.

Liquidity and Sources of Capital

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

Liquidity

Working capital at ~~March 31,~~June 30, 2021 was approximately ~~$(117,000)~~$(97,000) compared with approximately $(93,000) at December 31, 2020. Excluding the current portion of operating and finance lease liabilities, working capital was approximately ~~$(22,000)~~$(2,200) at ~~March 31,~~June 30, 2021 compared to $1,700 at December 31, 2020. The decrease in working capital was primarily due to a decrease in cash and cash equivalents from use in operations including for payments on debt and expenditures for vessel ~~improvements.~~improvements, which was partially offset by the proceeds of $32,128 received for the sale of the Overseas Gulf Coast. Additionally, working capital decreased due to a decrease in voyage receivables related to the timing of collection from our customers and fewer vessels in operations in 2021. The decrease in working capital was offset by an increase in working capital as a result of timing of accounts payable payments made at June 30, 2021 compared to December 31, 2020.

As of ~~March 31,~~June 30, 2021, we had total liquidity on a consolidated basis comprised of ~~$45,093~~$61,735 of cash and cash equivalents. We manage our cash in accordance with our intercompany cash management system, subject to the requirements of our debt facilities. Our cash and cash equivalents, as well as our restricted cash balances, generally exceed Federal Deposit Insurance Corporation insurance limits. We place our cash, cash equivalents and restricted cash in what we believe to be credit-worthy financial institutions. In addition, certain of our money market accounts invest in U.S. Treasury securities or other obligations issued or guaranteed by the U.S. government or its agencies. Restricted cash as of ~~March 31,~~June 30, 2021 was related to requirements under the Unsecured Senior Notes.

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

As of ~~March 31,~~June 30, 2021, we had total debt outstanding (net of deferred financing costs) of ~~$418,883~~$408,390 and a total debt to total capitalization of ~~53.5%~~53.6%, compared to $429,120 and 53.0%, respectively, at December 31, 2020.

The Company’s debt agreements contain covenants that require compliance with specified financial metrics. As described in Note 10, certain of these covenants were amended in March 2021. The amended covenants became effective for the fourth quarter of 2020; remain in effect for later periods; become more restrictive throughout 2021; and begin to revert to the original covenants starting in the first quarter of 2022. The Company’s projections over the next year reflect inherent uncertainty with respect to certain matters, such as when certain vessels return to service, which is largely dependent upon the expected increase in demand for marine petroleum transportation. In the event we are unable to meet our covenants, we may seek to further amend our debt agreements, to refinance, or to sell vessels.

Sources, Uses and Management of Capital

We generate significant cash flows through our complementary mix of time charters, voyage charters and contracts of affreightment. Net cash used in operating activities during the ~~three~~six months ended ~~March 31,~~June 30, 2021 was ~~$9,181.~~$10,569. In addition to operating cash flows, our other current potential sources of funds are proceeds from additional issuances of equity securities, additional borrowings and proceeds from the opportunistic sales of our vessels. In the past, we have also obtained funds from the issuance of long-term debt securities.

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

We are presently assessing the impact of the expected discontinuation of LIBOR, expected by year-end 2021.

~~The COVID-19 pandemic~~In recent months, there has ~~resulted in~~been a ~~significant reduction~~recovery in demand for oil and refined petroleum products worldwide ~~which has had a direct impact on our business. In an effort to conserve costs, seven of~~from the low levels that resulted from the COVID-19 pandemic. The Company placed several vessels ~~in our fleet were placed~~ in layup in late 2020 and ~~2021.~~2021 to conserve costs. In recognition that certain of the financial covenants that were in place in each of the Company’s vessel financing facilities did not appropriately reflect the impact of the pandemic on the Company’s business, in March 2021, wethe Company obtained waivers and amendments of certain financial covenants in each of ~~our~~its vessel financing facilities, with respect to fourth quarter 2020 and later periods’ compliance requirements. In accordance with the loan amendments, the Company agreed to sell one of its vessels, the Overseas Gulf Coast.

During the first quarter of 2021 the Company received a firm offer for the sale of the Overseas Gulf Coast~~, which is classified as asset held for sale on the condensed consolidated balance sheets at March 31, 2021.~~. Based on the negotiated sale terms, the Company recorded a loss of $5,446 ~~which is included in loss on disposal of vessels and other property, including impairments, net on the condensed consolidated statements of operations,~~ on the planned disposition of this tanker. In April 2021, the Company entered into a contract to sell the vessel for $31,850, net of broker commissions. The sale ~~is expected to be final prior to the end~~ of the ~~second quarter~~vessel was completed in June 2021 for $32,128, net of ~~2021.~~broker commissions and other fees, resulting in an immaterial gain recognized during the three months ended June 30, 2021, which is included in (gain)/loss on disposal of vessels and other property, including impairments, net on the condensed consolidated statements of operations.

Off-Balance Sheet Arrangements

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

Item 3: Quantitative and Qualitative Disclosures about Market Risk

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

2223

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s current disclosure controls and procedures were effective as of ~~March 31,~~June 30, 2021 to ensure that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended ~~March 31,~~June 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

2324

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

PART II – OTHER INFORMATION

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our 2020 Form 10-K, and as may be updated in our subsequent quarterly reports. The risks described in our 2020 Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. There have been no material changes in our risk factors from those disclosed in our 2020 Form 10-K.

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

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

During the three months ended March 31, 2021, in connection with the vesting of restricted stock awards, the Company withheld the following number of shares of Class A common stock from certain members of management to cover withholding taxes.None.

Period Total Number Shares of Class A Withheld Average Price Paid per Share of Class A
January 1, 2021 through January 31, 2021 — $ —
February 1, 2021 through February 28, 2021 74,270 $ 2.19
March 1, 2021 through March 31, 2021 111,189 $ 2.17
185,459 $ 2.18

Item 3. Defaults upon senior securities

None.

~~OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES~~

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other information

None.

Item 6. Exhibits

10.1		Non-Disclosure Agreement as of June 11, 2021 by and between Overseas Shipholding Group, Inc. and Cyrus Capital Partners, L.P.

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.

32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~10.1~~		~~Form of Overseas Shipholding Group, Inc. 2019 Incentive Compensation Plan For Management Performance-Based Restricted Stock Unit Grant Agreement Form PB-2021 Special Grant.~~

101.INS		Inline XBRL Instance Document.

101.SCH		Inline XBRL Taxonomy Schema.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase.

SIGNATURES

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

	OVERSEAS SHIPHOLDING GROUP, INC.
	(Registrant)

Date: ~~May 7,~~August 6, 2021	/s/ Samuel H. Norton
	Samuel H. Norton
	Chief Executive Officer

Date: ~~May 7,~~August 6, 2021	/s/ Richard Trueblood
	Richard Trueblood
	Chief Financial Officer
	(Mr. Trueblood is the Principal Financial Officer and has been duly authorized to sign on behalf of the Registrant)

	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 -	~~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

Period	Total Number Shares of Class A Withheld		Average Price Paid per Share of Class A
January 1, 2021 through January 31, 2021		—	$	—
February 1, 2021 through February 28, 2021		74,270	$	2.19
March 1, 2021 through March 31, 2021		111,189	$	2.17
		185,459	$	2.18