BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

Overseas Shipholding Group, Inc. (the “Parent”) is a holding company that conducts substantially all of its business operations through its subsidiaries. The condensed financial information and related notes have been prepared in accordance with Rule 12.04, Schedule I of Regulation S-X. This financial information should be read in conjunction with the consolidated financial statements and notes thereto of Overseas Shipholding Group, Inc., and subsidiaries (collectively, the “Company”).

The Parent owns 100% of OSG Bulk Ships, Inc. (“OBS”), which is incorporated in New York State, and OSG Financial Corp., which is incorporated in Delaware. OBS and its subsidiaries own and operate a fleet of oceangoing vessels engaged in the transportation of crude oil and refined petroleum products in the U.S. Flag trades. On November 30, 2016 (the “Distribution Date”), the Parent spun off its international business into a new independent company, International Seaways, Inc. (“INSW”). For additional information regarding the spin-off, see Note 1, “Basis of Presentation and Description of Business,” to the Company’s consolidated financial statements set forth in Item 8, “Financial Statements and Supplementary Data.”

NOTE B — BANKRUPTCY FILING AND EMERGENCE FROM BANKRUPTCY

On November 14, 2012 (the “Petition Date”), the Parent and 180 of its subsidiaries (together with OSG, the “Debtors”) filed voluntary petitions for reorganization under Chapter 11 of Title II of the U.S. Code (the “Bankruptcy Code”) in the U.S. Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). On March 7, 2014, the Debtors filed a plan of reorganization supported by certain of the lenders under OSG’s $1,500,000 credit agreement, dated as of February 9, 2006 (the “Lender Plan”). On April 18, 2014, the Debtors received a proposal for an alternative plan of reorganization from certain holders of existing equity interests of OSG, which the Debtors determined to be more favorable to the Debtors’ creditors and equity interest holders than the Lender Plan (the “Equity Proposal”). Accordingly, the Debtors filed with the Bankruptcy Court a plan of reorganization that effectuates the terms of the Equity Proposal (as subsequently amended, the “Equity Plan”). The Bankruptcy Court confirmed the Equity Plan by order entered on July 18, 2014 (the “Confirmation Order”). On August 5, 2014 (the “Effective Date”), the Equity Plan became effective and OSG emerged from bankruptcy. As of February 10, 2017, none of the original 181 Chapter 11 cases filed remains open.

For additional information regarding the Company’s emergence from bankruptcy, see Note 2, “Chapter 11 Filing and Emergence from Bankruptcy,” to the Company’s consolidated financial statements set forth in Item 8, “Financial Statements and Supplementary Data.”

NOTE C—DEBT:

Long-term debt consists of the following:



	Years Ended December 31,
	2017		2016
8.125% notes due 2018, net of unamortized discount and deferred costs of $0 and $1,406	$	—	$	80,213
7.5% Election 2 notes due 2021, net of unamortized discount and deferred costs of $6 and $8	295		293
7.50% notes due 2024	390		390
	$	685	$	80,896

The aggregate annual principal payments required to be made on debt over the next five years and thereafter are $301 (2021) and $390 (2024).

During the years ended December 31, 2017 and 2016, the Company repurchased and retired an aggregate principal amount of $0 and $294, respectively, of its 7.50% notes due 2024 and $55,202 and $37,345, respectively, of its 8.125% notes due 2018. The aggregate losses of $2,495 and $2,463 realized on these transactions during the years ended December 31, 2017 and 2016, respectively, are included in other expense in the consolidated statements of operations. The net losses reflect a $504 and $784 write-off of unamortized deferred finance costs associated with the repurchased debt during the years ended December 31, 2017 and 2016, respectively.

On December 27, 2017, the Company deposited cash in the amount of $27,491 with The Bank of New York Mellon Trust Company, N.A., as trustee, to pay the principal of $26,417 plus accrued and unpaid interest of $514 on all of the outstanding 8.125% Notes ("Remaining Notes") on their stated maturity. As a result, the Company's obligations under the indenture and the Remaining Notes were satisfied and the indenture was cancelled and discharged. The aggregate loss of $742 realized on this transaction during the year ended December 31, 2017 is included in other expense in the consolidated statements of operations. The net loss reflects a $182 write-off of unamortized deferred finance costs.

During 2015, the Parent repurchased and retired an aggregate principal amount of $326,051 of the above notes. The aggregate net loss of $26,516 realized on these transactions during 2015, is included in other expense in the accompanying condensed statement of operations and comprehensive income/(loss).

See Note 9, “Debt,” to the Company’s consolidated financial statements set forth in Item 8, “Financial Statements and Supplementary Data,” for additional information relating to the Parent’s debt.

NOTE D—RELATED PARTY TRANSACTIONS:

The financial statements of the Parent included related party transactions as presented in the tables below:



	Years Ended December 31,
	2017			2016			2015
General and administrative expenses reimbursed to/(by) subsidiaries
International Seaways, Inc. - Discontinued Operations⁽¹⁾	$	—		$	(7,838	)	$	(17,185	)
OSG Bulk Ships, Inc. ⁽¹⁾	(6,715		)	(17,321		)	(11,617		)
Net reduction in general and administrative expenses	$	(6,715	)	$	(25,159	)	$	(28,802	)


(1)	According to the "Shared Services and Cost Sharing Agreement" and the "Cost Sharing Agreement" signed by the Parent and its subsidiaries, effective August 5, 2014, certain overhead costs paid by the Parent on behalf of INSW and OBS are allocated to such subsidiaries.



	Years Ended December 31,
	2017			2016			2015
Equity in income/(loss) of subsidiaries
OSG Bulk Ships, Inc.	$	(6,576	)	$	(63,744	)	$	47,482
OSG Financial Corp.	1			46			52
Total	$	(6,575	)	$	(63,698	)	$	47,534

On November 30, 2016, the Parent completed the separation of its business into two independent publicly-traded companies through the spin-off of its then wholly-owned subsidiary INSW. Income/(loss) from the discontinued operations of INSW during the eleven months ended November 30, 2016 and the year ended December 31, 2015 was $(292,555) and $203,395, respectively. For additional information regarding the spin-off, see Note 1, “Basis of Presentation and Description of Business,” and Note 5, “Discontinued Operations,” to the Company’s consolidated financial statements set forth in Item 8, “Financial Statements and Supplementary Data.”



	Years Ended December 31,
	2017		2016
Intercompany receivables:
OSG Ship Management (Tampa)	$	2,086	$	—
OSG Bulk Ships, Inc.	1,193		809
Total	$	3,279	$	809

Intercompany receivables principally represent outstanding balances due from the subsidiaries in accordance with the "Shared Services and Cost Sharing Agreement" and the "Cost Sharing Agreement" effective August 5, 2014.



	Years Ended December 31,
	2017		2016
Intercompany payables:
OSG Bulk Ships, Inc.	$	—	$	563
OSG Ship Management Inc.	157		—
OSG Financial Corp.	117		116
Total	$	274	$	679

During 2017, OBS paid a cash distribution to the Parent of $50,000. The return of capital distribution received by the Parent is reflected in the condensed statement of cash flows as cash flows from investing activities.

During 2016, INSW, OBS, and OSG Financial Corp. paid cash distributions to the Parent of $202,000, $51,295, and $537, respectively, including earnings distributions of $202,000 from INSW and returns of capital from OBS of $51,295 and OSG Financial Corp. of $537. The earnings distributions and return of capital distributions received by the Parent are reflected in the condensed statement of cash flows as cash flows from operating activities and investing activities, respectively. Supplemental cash flow information for the year ended December 31, 2016 associated with net non-cash capital transactions aggregating $884,591 were non-cash investing activities, including $895,650 related to the spin-off of INSW.

During 2015, INSW and OBS paid cash distributions to the Parent of $200,000 and $25,000, respectively, including earnings distributions from INSW of $200,000 and a $25,000 return of capital from OBS. The earnings distributions and the return of capital distributions received by the Parent are reflected in the condensed statement of cash flows as cash flows from operating activities and investing activities, respectively. Supplemental cash flow information for the year ended December 31, 2015 associated with net non-cash capital transactions aggregating $1,502 were non-cash investing activities. Such amounts are not to be settled in cash.

Receivables of $65 and $47 due from INSW as of December 31, 2017 and 2016, respectively, are primarily in relation to amounts owed pursuant to the Separation and Distribution Agreement, as described in Note 5, “Discontinued Operations.”

NOTE E —GUARANTEES:

See Note 13, “Related Parties,” to the Company’s consolidated financial statements set forth in Item 8, “Financial Statements and Supplementary Data,” for information relating to Parent guarantees.

NOTE F —CONTINGENCIES:

See Note 21, “Contingencies,” to the Company’s consolidated financial statements set forth in Item 8, “Financial Statements and Supplementary Data,” for information with respect to the Parent’s contingencies.