**UNITED STATES SECURITIES ANDEXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 

| **(Mark  One)**                                                                                                                        |
|----------------------------------------------------------------------------------------------------------------------------------------|
| **x**                                                                                                                                  | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
| ** **                                                                                                                             |
| **For the quarterly period ended September 30, 2007**                                                                                  |
| ** **                                                                                                                             |
| **OR**                                                                                                                                 |
| ** **                                                                                                                             |
| **o**                                                                                                                                  | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
| ** **                                                                                                                             |
| **For the transition period from          to        ** |

** **

**Commission File Number 001-33806**

 

**OSG AMERICA L.P.**

(Exact name of registrant asspecified in its charter)

 

| **Delaware**                                                   | ** ** | **11-3812936**                    |
|----------------------------------------------------------------|------------|-----------------------------------|
| (State or other jurisdiction of incorporation or organization) |       | (IRS Employer Identification No.) |

 

| **Two Harbor Place, 302 Knights Run Avenue,  Suite 1200, Tampa, FL** | ** ** | **33602**  |
|---------------------------------------------------------------------------|------------|------------|
| (Address of principal executive offices)                                  |       | (Zip Code) |

 

**(813) 209-0600**Registrant’s telephone number, including area code

 

**None**Former name, former address and former fiscal year, if  changed since last report

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  YES o      NO x

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act.

 

| Large accelerated filer  o |   | Accelerated filer  o |   | Non-accelerated  filer  x |
|--------------------------------------|--------|--------------------------------|--------|-------------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  YES o   NO  x

 

Thenumber of common units outstanding as of December 14, 2007 was15,002,250.  The number of subordinatedunits outstanding as of that date was 15,000,000. 

 

 

 

 

 

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FORM 10-Q

 

OSG AMERICA L.P.

 

TABLE OF CONTENTS

 
|          |                                                                                                                                                       | **Page** |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| PART I.  | FINANCIAL INFORMATION                                                                                                                                      |     |
|          |                                                                                                                                                       |     |
| Item. 1.      | Financial Statements (Unaudited)                                                                                                                           |     |
|          |                                                                                                                                                       |     |
|          | Predecessor Condensed  Combined Carve-out Balance Sheets — September 30, 2007 and  December 31, 2006                                        | 3        |
|          |                                                                                                                                                       |     |
|          | Predecessor  Condensed Combined Carve-out Statements of Operations — Three months and nine  months ended September 30, 2007 and 2006             | 4        |
|          |                                                                                                                                                       |     |
|          | Predecessor  Condensed Combined Carve-out Statements of Cash Flows — Nine months ended  September 30, 2007 and 2006                              | 5        |
|          |                                                                                                                                                       |     |
|          | Predecessor  Condensed Combined Carve-out Statement of Changes in Stockholder’s  Equity/(Deficiency) — Nine months ended September 30, 2007 | 6        |
|          |                                                                                                                                                       |     |
|          | Notes  to Predecessor Condensed Combined Carve-out Financial Statements                                                                                    | 7        |
|          |                                                                                                                                                       |     |
| Item 2.       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                | 14       |
|          |                                                                                                                                                       |     |
| Item 3.       | Qualitative and Quantitative  Disclosures About Market Risk                                                                                                | 23       |
|          |                                                                                                                                                       |     |
| Item 4.       | Controls and  Procedures                                                                                                                                   | 24       |
|          |                                                                                                                                                       |     |
| PART II. | OTHER  INFORMATION                                                                                                                                         |     |
|          |                                                                                                                                                       |     |
| Item 1.       | Legal Proceedings                                                                                                                                          | 25       |
|          |                                                                                                                                                       |     |
| Item 1A.      | Risk Factors                                                                                                                                               | 25       |
|          |                                                                                                                                                       |     |
| Item 2.       | Unregistered Sales of Equity  Securities and Use of Proceeds                                                                                               | 25       |
|          |                                                                                                                                                       |     |
| Item 6.       | Exhibits                                                                                                                                                   | 26       |
|          |                                                                                                                                                       |     |
|          |                                                                                                                                                       |     |
| SIGNATURES    |                                                                                                                                                       |     |

 

 

 

2

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OSG AMERICA PREDECESSOR

PREDECESSOR CONDENSED COMBINED CARVE-OUT

BALANCE SHEETS

IN THOUSANDS

 

| ** **                                                                          | ** ** | **As of****September 30,  2007** | ** ** | **As of****December 31,  2006** | ** ** |
|-------------------------------------------------------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                          | ** ** | **(Unaudited)**                       | ** ** | ** **                           | ** ** |
| **Assets**                                                                          |       |                                  |       |                                 |       |
| **Current Assets:**                                                                 | ** ** | ** **                            | ** ** | ** **                           | ** ** |
| Cash and cash equivalents                                                           |       | $                                     | 235        |                                 | $          | 280 |   |
| Voyage receivables                                                                  |       | 16,510                                |       | 18,407                               |       |
| Other receivables                                                                   |       | 11,671                                |       | 2,083                                |       |
| Prepaid expenses and other current assets                                           |       | 4,717                                 |       | 3,225                                |       |
| Total Current Assets                                                                |       | 33,133                                |       | 23,995                               |       |
|                                                                                |       |                                  |       |                                 |       |
| Vessels, less accumulated  depreciation of $51,178 and $27,264                      |       | 396,420                               |       | 392,953                              |       |
| Vessels under capital leases,  less accumulated amortization of $78,931 and $74,994 |       | 22,710                                |       | 25,749                               |       |
| Deferred drydock expenditures,  net                                                 |       | 12,594                                |       | 4,212                                |       |
| Investment in Alaska Tanker  Company, LLC                                           |       | 3,230                                 |       | 6,848                                |       |
| Intangible Assets, less  accumulated amortization of $3,889 and $389                |       | 88,111                                |       | 91,611                               |       |
| Goodwill                                                                            |       | 64,103                                |       | 64,912                               |       |
| Other Assets                                                                        |       | 4,346                                 |       | 677                                  |       |
| Total Assets                                                                        |       | $                                     | 624,647    |                                 | $          | 610,957 |   |
| ** **                                                                          | ** ** | ** **                            | ** ** | ** **                           | ** ** |
| **Liabilities and Stockholder’s  Equity/(Deficiency)**                         |       |                                  |       |                                 |       |
| **Current Liabilities:**                                                            | ** ** | ** **                            | ** ** | ** **                           | ** ** |
| Accounts payable and accrued expenses                                               |       | $                                     | 11,936     |                                 | $          | 15,756 |   |
| Accrued Federal Income Taxes                                                        |       | —                                |       | 3,325                                |       |
| Current portion of debt                                                             |       | 2,793                                 |       | 4,202                                |       |
| Current obligations under capital leases                                            |       | 6,218                                 |       | 5,771                                |       |
| Total Current Liabilities                                                           |       | 20,947                                |       | 29,054                               |       |
|                                                                                |       |                                  |       |                                 |       |
| Long-term Debt                                                                      |       | 47,477                                |       | 51,198                               |       |
| Obligations under Capital  Leases                                                   |       | 25,643                                |       | 30,772                               |       |
| Advances from Affiliated  Companies                                                 |       | 410,820                               |       | 568,986                              |       |
| Deferred Federal Income Taxes                                                       |       | 76,918                                |       | 75,237                               |       |
| Other Non-current Liabilities                                                       |       | 832                                   |       | —                               |       |
|                                                                                |       |                                  |       |                                 |       |
| **Stockholder’s  Equity/(Deficiency):**                                        |       | 42,010                                |       | (144,290                             | )          |
| Total Liabilities and Stockholder’s Equity/(Deficiency)                        |       | $                                     | 624,647    |                                 | $          | 610,957 |   |

 

Seenotes to combined financial statements.

 

 

3

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OSG AMERICA PREDECESSOR

PREDECESSOR CONDENSED COMBINED CARVE-OUT

STATEMENTS OF OPERATIONS

DOLLARS IN THOUSANDS, EXCEPT PER SHAREAMOUNTS

(UNAUDITED)

 

| ** **                                                                              | ** ** | **Three Months Ended**        | ** ** | **Nine Months Ended**          | ** ** |
|-----------------------------------------------------------------------------------------|------------|-------------------------------|------------|--------------------------------|------------|
| ** **                                                                              | ** ** | **September 30,   2007** | ** ** | **September 30,****2006** | ** ** | **September 30,****2007** | ** ** | **September 30,**** 2006** | ** ** |
| **Shipping Revenues:**                                                                  | ** ** | ** **                    | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Time and bareboat charter  revenues                                                     |       | $                             | 29,909     |                           | $          | 13,343 |   | $ | 77,335 |   | $ | 33,333 |   |
| Voyage charter revenues                                                                 |       | 25,875                        |       | 8,280                          |       | 77,549 |   | 26,127 |   |
|                                                                                    |       | 55,784                        |       | 21,623                         |       | 154,884 |   | 59,460 |   |
| **Operating Expenses:**                                                                 | ** ** | ** **                    | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Voyage expenses                                                                         |       | 7,480                         |       | 1,844                          |       | 22,324 |   | 6,246 |   |
| Vessel expenses                                                                         |       | 23,905                        |       | 9,179                          |       | 60,017 |   | 22,372 |   |
| Bareboat charter expenses                                                               |       | 4,928                         |       | —                         |       | 7,937 |   | — |   |
| Depreciation and amortization                                                           |       | 12,234                        |       | 5,123                          |       | 34,698 |   | 14,620 |   |
| General and administrative allocated from Overseas Shipholding  Group, Inc.        |       | 5,791                         |       | 1,479                          |       | 15,903 |   | 4,818 |   |
| Total Operating Expenses                                                                |       | 54,338                        |       | 17,625                         |       | 140,879 |   | 48,056 |   |
| Income from Vessel Operations                                                           |       | 1,446                         |       | 3,998                          |       | 14,005 |   | 11,404 |   |
| Equity in Income of Affiliated  Companies                                               |       | 934                           |       | 1,953                          |       | 3,192 |   | 4,944 |   |
| Operating Income                                                                        |       | 2,380                         |       | 5,951                          |       | 17,197 |   | 16,348 |   |
| Other Income /(Expense)                                                                 |       | —                        |       | —                         |       | (8 | ) | 9 |   |
|                                                                                    |       | 2,380                         |       | 5,951                          |       | 17,189 |   | 16,357 |   |
| Interest Expense to a Wholly-owned Subsidiary of Overseas Shipholding  Group, Inc. |       | 2,256                         |       | 2,279                          |       | 6,426 |   | 6,216 |   |
| Interest Expense, other                                                                 |       | 1,267                         |       | 976                            |       | 3,805 |   | 3,032 |   |
| Income/(Loss) before Federal  Income Taxes                                              |       | (1,143                        | )          | 2,696                          |       | 6,958 |   | 7,109 |   |
| Provision for Federal Income  Taxes                                                     |       | 434                           |       | 410                            |       | 1,658 |   | 146 |   |
| Net Income/(Loss)                                                                       |       | $                             | (1,577     | )                              | $          | 2,286 |   | $ | 5,300 |   | $ | 6,963 |   |
|                                                                                    |       |                          |       |                           |       |   |   |   |   |
| Basic and Diluted Net  Income/(Loss) per Share                                          |       | $                             | (80.83     | )                              | $          | 1,524.53 |   | $ | 271.82 |   | $ | 4,642.27 |   |
| ** **                                                                              | ** ** | ** **                    | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Shares Used in Computing Basic and Diluted Net Income/(Loss) per Share                  |       | 19,500                        |       | 1,500                          |       | 19,500 |   | 1,500 |   |

 

Seenotes to combined financial statements.

 

 

 

4

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OSG AMERICA PREDECESSOR

PREDECESSOR CONDENSED COMBINED CARVE-OUT

STATEMENTS OF CASH FLOWS

IN THOUSANDS

(UNAUDITED)

 

| ** **                                                           | ** ** | **Nine Months Ended  September 30,** | ** ** |
|----------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                           | ** ** | **2007**                                  | ** ** | **2006** | ** ** |
| **Cash Flows from Operating  Activities:**                           | ** ** | ** **                                | ** ** | ** ** | ** ** |
| Net income                                                           |       | $                                         | 5,300      |   | $ | 6,963 |   |
| Items included in net income  not affecting cash flows:              |       |                                      |       |   |   |
| Depreciation and amortization                                        |       | 34,698                                    |       | 14,620 |   |
| Provision/(credit) for deferred federal income taxes                 |       | 1,681                                     |       | (898 | ) |
| Undistributed earnings of affiliated companies                       |       | 3,618                                     |       | 2,887 |   |
| Other – net                                                     |       | —                                    |       | (279 | ) |
| Payments for drydocking                                              |       | (11,729                                   | )          | (5,833 | ) |
| Changes in operating assets  and liabilities:                        |       |                                      |       |   |   |
| Increase in receivables                                              |       | (7,691                                    | )          | (1,716 | ) |
| Increase in other current assets                                     |       | (1,469                                    | )          | (573 | ) |
| Decrease in accrued federal income taxes                             |       | (3,348                                    | )          | (3,357 | ) |
| Decrease in accounts payable, accrued expenses and other liabilities |       | (2,988                                    | )          | (4,264 | ) |
| Net cash provided by operating activities                            |       | 18,072                                    |       | 7,550 |   |
| ** **                                                           | ** ** | ** **                                | ** ** | ** ** | ** ** |
| **Cash Flows from Investing Activities:**                            | ** ** | ** **                                | ** ** | ** ** | ** ** |
| Expenditures for vessels                                             |       | (31,418                                   | )          | (3,646 | ) |
| Net cash used in investing activities                                |       | (31,418                                   | )          | (3,646 | ) |
| ** **                                                           | ** ** | ** **                                | ** ** | ** ** | ** ** |
| **Cash Flows from Financing  Activities:**                           | ** ** | ** **                                | ** ** | ** ** | ** ** |
| Payments on debt and  obligations under capital leases               |       | (9,812                                    | )          | (4,238 | ) |
| Changes in advances from  affiliates                                 |       | 23,113                                    |       | 452 |   |
| Net cash provided by/(used in) financing activities                  |       | 13,301                                    |       | (3,786 | ) |
| Net increase/(decrease) in  cash and cash equivalents                |       | (45                                       | )          | 118 |   |
| Cash and cash equivalents at  beginning of year                      |       | 280                                       |       | 65 |   |
| Cash and cash equivalents at  end of period                          |       | $                                         | 235        |   | $ | 183 |   |

 

**Supplemental Schedule of Noncash Financing Activities:**

 

Loans and non-interestbearing advances aggregating $181,000,000 were contributed to capital byOverseas Shipholding Group, Inc. in September 2007.

 

See notes to combined financial statements.

 

 

 

5

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OSG AMERICA PREDECESSOR

PREDECESSOR CONDENSED COMBINED CARVE-OUT

STATEMENTS OF CHANGES INSTOCKHOLDER’S EQUITY/(DEFICIENCY)

DOLLARS IN THOUSANDS

(UNAUDITED)

 

 

| ** **                                                  | ** ** | **Common   Registered Stock** | ** ** | **Paid-in  Additional** | ** ** | **Accumulated** | ** ** | ** **  | ** ** |
|-------------------------------------------------------------|------------|-------------------------------|------------|-------------------------|------------|-----------------|------------|-------------|------------|
| ** **                                                  | ** ** | **Shares**                    | ** ** | **Amount**              | ** ** | **Capital**     | ** ** | **Deficit** | ** ** | **Total** | ** ** |
| Balance at January 1, 2007                             |       | 19,500                        |       | $                       | 201        |            | $          | 1,299       |       | $ | (145,790 | ) | $ | (144,290 | ) |
| Net Income                                                  |       |                          |       |                    |       |            |       | 5,300       |       | 5,300 |   |
| Capital  Contribution of Advances from Affiliated Companies |       |                          |       |                    |       | 181,000         |       |        |       | 181,000 |   |
| Balance at September 30, 2007                          |       | 19,500                        |       | $                       | 201        |            | $          | 182,299     |       | $ | (140,490 | ) | $ | 42,010 |   |

 

Seenotes to combined financial statements.

 

 

 

 

6

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OSG AMERICA PREDECESSOR

 

Notesto Predecessor Condensed Combined Carve-Out Financial Statements:

 

**Note ****A****—Organization:**

 

OSGAmerica L.P., a Delaware limited partnership (the “Partnership”), was formed onMay 14, 2007 to ultimately own a 100% interest in the operating company.The Partnership’s general partner, OSG America LLC (the “General Partner”), isa wholly owned subsidiary of Overseas Shipholding Group, Inc. (“OSG”), apublicly traded company incorporated in Delaware. The Partnership obtained theforegoing assets in connection with the initial public offering of its commonunits, which was consummated on November 15, 2007.

 

Ator prior to the completion of the offering, the following transactions occurred:

 

·                     The Partnershipentered into a contribution agreement with OSG pursuant to which OSGtransferred to the Partnership all of the outstanding membership interests ofthe 18 vessel subsidiaries (such subsidiaries are collectively referred to as“OSG America Predecessor”, the “Predecessor”, or the “Company”), represented bythe 19,500 issued and outstanding common registered shares as ofSeptember 30, 2007 reflected in the accompanying statements of operations,that own the vessels in the Partnership’s initial fleet and a 37.5% membershipinterest in Alaska Tanker Company, LLC;

·                     OSG assignedthe agreements to bareboat charter, from subsidiaries of Aker AmericanShipping, Inc., six newbuild product carriers upon delivery of thosevessels;

·                     The Partnershipissued to OSG 7,500,000 common units and 15,000,000 subordinated units, representinga 73.5% limited partner interest in the Partnership;

·                     The Partnershipissued to the General Partner a 2% general partner interest in the Partnershipand all of the Partnership’s incentive distribution rights, which will entitlethe General Partner to increasing percentages of the cash the Partnershipdistributes in excess of $0.43125 per unit per quarter;

·                     The Partnershipissued 7,500,000 of its common units to the public in this offering,representing a 24.5% limited partner interest in the Partnership; and

·                     The Partnership satisfiedits obligation to reimburse OSG for approximately $129,500,000 of capitalexpenditures incurred prior to this offering with the proceeds from thisoffering.

 

Inaddition, at or prior to the completion of the offering, the Partnership entered into the followingagreements:

 

·                  a managementagreement with OSG Ship Management, Inc. (“OSGM”), a wholly ownedsubsidiary of OSG, pursuant to which OSGM agreed to provide the Partnershipcommercial and technical management services;

·                  anadministrative services agreement with OSGM, pursuant to which OSGM agreed toprovide the Partnership administrative services;

·                  anomnibus agreement with OSG, the General Partner and others, setting forth,among other things:

·                  when thePartnership and OSG may compete with each other;

·                  certainrights of first offer on Jones Act tank vessels;

·                  the grant to the Partnership of options to purchase the membership interests ofone or more subsidiaries of OSG that have entered into shipbuilding contractswith Bender Shipbuilding & Repair Co., Inc. for six newbuildATBs;

·                  the grant to the Partnership of options to acquire the membership interests ofone or more subsidiaries of OSG that have entered into agreements to bareboatcharter from subsidiaries of Aker American Shipping, Inc. two newbuildproduct carriers and two newbuild shuttle tankers, upon delivery of thosevessels; and

·                   a $200,000,000 senior secured revolving creditfacility.

 

 

 

7

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The following table providespro forma information with respect to the Company’s capitalization assuming theinitial public offering and related transactions occurred on September 30,2007: 

 

| *In  thousands*                                      |   |    |    |
|------------------------------------------------------|--------|---------|---------|
| Total cash and cash equivalents                      |   | $       | 235     |   |
|                                                 |   |    |    |
| Debt, including current portion:                     |   |    |    |
| Long-term debt                                       |   | 50,270  |    |
| Capital lease  obligations                           |   | 31,861  |    |
| Advances from  affiliated companies                  |   | 51,000  |    |
| Total debt                                           |   | 133,131 |    |
|                                                 |   |    |    |
| Equity:                                              |   |    |    |
| Common units  held by public                         |   | 129,525 |    |
| Common units  held by general partner and affiliates |   | 113,641 |    |
| Subordinated  units                                  |   | 227,282 |    |
| General partner  interest                            |   | 9,277   |    |
| Total equity                                         |   | 479,725 |    |
| Total capitalization                                 |   | $       | 612,856 |   |

** **

**The following table provides pro forma informationfor the nine months ended September 30, 2007, assuming the initial publicoffering and related transactions occurred at the beginning of the year:**

 

| ** **                                              | ** ** | **Common   Unit Holders**                                    | ** ** | **Subordinated   Unit Holders** | ** ** | **All Unit   Holders** | ** ** |
|---------------------------------------------------------|------------|--------------------------------------------------------------|------------|---------------------------------|------------|------------------------|------------|
| ** **                                              | ** ** | **(in thousands, except number of units and per unit data)** | ** ** |
| General Partner’s Interest in Net Income           |       |                                                         |       |                            |       | $                      | 189        |   |
| Limited Partners Interest in Net Income                 |       | $                                                            | 9,271      | ** **                      | **$**      | **—**             |       | $ | 9,271 |   |
| Pro forma Weighted Average Number of Units  Outstanding |       | 15,000,000                                                   |       | 15,000,000                      |       | 30,000,000             |       |
| Pro forma Net Income Per Unit                           |       | $                                                            | 0.62       | ** **                      | **$**      | **—**             |       | $ | 0.31 |   |

 

**Note B—Basis of Presentation andDescription of Business:**

 

The accompanying unaudited predecessor combined carve-out financialstatements include the accounts of certain wholly owned subsidiaries of OSG.Such subsidiaries, OSG America Predecessor, which are incorporated in theUnited States, own and operate a U.S. flag fleet consisting of ten tankers,seven articulated tug barges (“ATBs”), one of which is in the process of beingdouble hulled, and one conventional tug/barge unit (“CTB”) and a 37.5%ownership interest in a joint venture, Alaska Tanker Company, LLC. Theseunaudited predecessor combined carve-out financial statements have beenprepared to reflect the financial position, results of operations and cashflows of OSG America Predecessor, which owns or operates the vessels acquiredby the Partnership.

 

 

 

 

8

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The accompanying unaudited predecessor condensed combined carve-outfinancial statements have been prepared in accordance with generally acceptedaccounting principles for interim financial information and with theinstructions to Form 10-Q and Article 10 of Regulation S-X.  They do not include all of the informationand footnotes required by generally accepted accounting principles.  In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for a fairpresentation have been included. Operating results for the three and ninemonths ended September 30, 2007 are not necessarily indicative of theresults that may be expected for the year ended December 31, 2007.

 

OSG America Predecessor is engaged in providing marine transportationservices through the ownership and operation of a fleet of tankers andATBs.  Of the 18 vessels in the operatingfleet, 16 operate in the Jones Act trade and two operate in the internationalmarket under the U.S. flag while participating in the Maritime SecurityProgram.  These two tankers are noteligible for Jones Act trading because they were not built in the UnitedStates.  The management of OSG AmericaPredecessor has determined that it operates in one segment.

 

The consolidated balance sheet as of December 31, 2006 has beenderived from the audited financial statements at that date, but does notinclude all of the information and footnotes required by generally acceptedaccounting principles for complete financial statements.

 

For further information, refer to the predecessor combined financialstatements and footnotes thereto included in the Company’s RegistrationStatement on Form S-1 that became effective on November 8, 2007.

 

*Newly Issued Accounting Standards*

 

InSeptember 2006, the Financial Accounting Standards Board issued Statementof Financial Accounting Standards No. 157 (“FAS 157”), “Fair ValueMeasurements.” The standard provides guidance for using fair value to measureassets and liabilities in accordance with generally accepted accountingprinciples, and expands disclosures about the extent to which companies measureassets and liabilities at fair value, the information used to measure fairvalue, and the effect of fair value measurements on earnings. FAS 157 applieswhenever other standards require or permit assets or liabilities to be measuredat fair value but does not expand the use of fair value in any newcircumstances. FAS 157 is effective for financial statements issued for fiscalyears beginning after November 15, 2007, and interim periods within thosefiscal years. Early adoption is permitted. The Company believes that theadoption of FAS 157 will not have a material effect on its earnings orfinancial position.

 

**Note C—Change in AccountingPrinciple:**

 

In June 2006, the Financial Accounting Standards Board issuedInterpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in IncomeTaxes,” an interpretation of Statement of Financial Accounting Standards No. 109(“FAS 109”), “Accounting for Income Taxes.” FIN 48 clarifies the accounting forincome taxes by prescribing the minimum recognition threshold a tax position isrequired to meet before being recognized in the financial statements.  In addition, FIN 48 specifically excludesincome taxes from the scope of Statement of Financial Accounting Standards No. 5,“Accounting for Contingencies.”  FIN 48applies to all tax positions related to income taxes that are subject to FAS109, including tax positions considered to be routine. The Company, asrequired, adopted FIN 48 effective January 1, 2007.  The adoption of FIN 48 did not have amaterial effect on the Company’s earnings or financial position.

 

 

 

9

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**Note D—Maritrans Entities:**

 

On November 28, 2006, OSG acquiredMaritrans Inc. (“Maritrans”), a leading U.S. flag crude oil and petroleumproduct shipping company that owned and operated one of the largest fleets ofdouble hull vessels serving the East Coast and U.S. Gulf Coast trades.  The operating results of certain wholly ownedsubsidiaries of Maritrans, which we refer to collectively as the “MaritransEntities”, which were carved out of the consolidated financial statements ofMaritrans, have been included in the Company’s combined financial statementscommencing November 29, 2006.  TheMaritrans Entities’ fleet consisted of seven ATBs, one of which was in theprocess of being double hulled, one CTB and two tankers, all operating underthe U.S. flag.

 

The following table summarizes the preliminaryallocation of the purchase price to the fair value of the Maritrans Entities’assets and liabilities at the date of the acquisition (in thousands):

 

| Assets:                                                                |   |    |    |
|------------------------------------------------------------------------|--------|---------|---------|
| Current assets,  including receivables                                 |   | $       | 16,227  |   |
| Vessels                                                                |   | 300,267 |    |
| Intangible  assets subject to amortization                             |   | 92,000  |    |
| Goodwill                                                               |   | 64,103  |    |
| Total assets                                                           |   | 472,597 |    |
| Liabilities:                                                           |   |    |    |
| Current  liabilities, including current installments of long-term debt |   | 14,976  |    |
| Long-term debt                                                         |   | 51,427  |    |
| Deferred federal  income taxes and other liabilities                   |   | 65,613  |    |
| Total liabilities assumed                                              |   | 132,016 |    |
| Net assets acquired (cash consideration)                               |   | $       | 340,581 |   |

 

The purchase price allocation is preliminaryand will be finalized by year-end 2007.

 

The following pro forma financialinformation reflects the results for the nine months ended September 30,2006, as if the Maritrans Entities acquisition had occurred on January 1,2006, after giving effect to purchase accounting adjustments (in thousands,except per share amounts):

 

| Pro forma shipping revenues             |   | $      | 142,045 |   |
|-----------------------------------------|--------|--------|---------|--------|
| Pro forma net income                    |   | $      | 11,469  |   |
| Pro forma per share amounts:            |   |   |    |
| Basic and  diluted net income per share |   | $      | 588.17  |   |
| Average shares  outstanding             |   | 19,500 |    |

 

The pro forma results have been prepared forcomparative purposes only and do not purport to be indicative of what operatingresults would have been had the acquisition actually taken place on January 1,2006.  These results do not reflect anysynergies that might be achieved from the combined operations.

 

 

 

 

10

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** **

**Note E —Alaska TankerCompany, LLC:**

** **

In the first quarter of1999, OSG, BP and Keystone Shipping Company formed Alaska Tanker Company, LLC (“ATC”)to manage the vessels carrying Alaskan crude oil for BP. ATC, 37.5% of which isowned by OSG, provides marine transportation services in the environmentallysensitive Alaskan crude oil trade.  Eachmember of ATC is entitled to receive its respective share of any incentivecharter hire payable by BP to ATC.  TheCompany accounts for its 37.5% interest in ATC according to the equity method.

 

Acondensed summary of the results of operations of the equity method investmentfollows:

 
| ** **                       | ** ** | **Three Months Ended**

**September 30,** | ** ** | **Nine Months Ended**

**September 30,** | ** ** |
|----------------------------------|------------|------------------------------------------------|------------|-----------------------------------------------|------------|
| **In  thousands**                | ** ** | **2007**                                       | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| Time charter equivalent revenues |       | $                                              | 32,615     |                                          | $          | 39,567 |   | $ | 98,376 |   | $ | 117,269 |   |
| Ship operating expenses          |       | (29,955                                        | )          | (34,862                                       | )          | (89,863 | ) | (104,584 | ) |
|                             |       | $                                              | 2,660      |                                          | $          | 4,705 |   | $ | 8,513 |   | $ | 12,685 |   |

 

**Note F—Advances from Affiliates:**

 
| **In thousands**                                                | ** ** | **September 30,**

** 2007** | ** ** | **December 31,**

**2006** | ** ** |
|-----------------------------------------------------------------|------------|----------------------------------------|------------|---------------------------------|------------|
| Interest bearing loans                                          |       | $                                      | —     |                            | $          | 167,093 |   |
| Non-interest bearing advances with no fixed terms of  repayment |       | 410,820                                |       | 401,893                         |       |
|                                                            |       | $                                      | 410,820    |                            | $          | 568,986 |   |

 

Loans and non-interestbearing advances aggregating $181,000,000 were contributed to capital by OSG inSeptember 2007.  The effectiveinterest rate on borrowings outstanding at December 31, 2006 was 4.89%.

 

**Note G —Debt:**

 

On September 28, 2007, the Companyrepaid the remaining principal amount of $2,001,000 of its 5.14% term loan thatwas due in 2008.

 

As of September 30, 2007, approximately18.4% of the net book value of the Company’s vessels is pledged as collateralunder secured term loans.  The term loansrequire the Company to maintain the vessels in good condition, maintainspecified insurance, and abide by other covenants, which are customary withrespect to such borrowings.

 

Interestpaid, excluding loans to affiliates and capitalized interest, amounted to$3,856,000 and $3,032,000 for the nine month periods ended September 30,2007 and 2006, respectively.

 

 

 

11

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**Note H— Taxes:**

 

Thecomponents of the provision for federal income taxes follow:

 
| ** **        | ** ** | **Three Months Ended**

**September 30,** | ** ** | **Nine Months Ended**

**September 30,** | ** ** |
|-------------------|------------|------------------------------------------------|------------|-----------------------------------------------|------------|
| **In  thousands** | ** ** | **2007**                                       | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| Current           |       | $                                              | (3,515     | )                                             | $          | 380 |   | $ | (23 | ) | $ | 1,044 |   |
| Deferred          |       | 3,949                                          |       | 30                                            |       | 1,681 |   | (898 | ) |
|              |       | $                                              | 434        |                                          | $          | 410 |   | $ | 1,658 |   | $ | 146 |   |

 

**Note I— Leases:**

 

As of September 30,2007, the Company had commitments to charter-in ten vessels.  Eight of such charter-ins are, or will be,accounted for as operating leases, all of which are bareboat charters.  The future minimum commitments and relatednumber of operating days under these operating leases are as follows:

 
| **Dollars in thousands at  September 30, 2007** | ** ** | **Amount** | ** ** | **Operating Days** | ** ** |
|------------------------------------------------------|------------|------------|------------|--------------------|------------|
| 2007                                                 |       | $          | 5,134      |               | 245        |   |
| 2008                                                 |       | 30,929     |       | 1,476              |       |
| 2009                                                 |       | 51,963     |       | 2,385              |       |
| 2010                                                 |       | 61,497     |       | 2,787              |       |
| 2011                                                 |       | 64,312     |       | 2,920              |       |
| Thereafter                                           |       | 210,705    |       | 7,980              |       |
| Net minimum lease payments                           |       | $          | 424,540    |               | 17,793     |   |

 

The future minimumcommitments under two bareboat charters-in that are classified as capitalleases are as follows:

 
| **Dollars in thousands at  September 30, 2007** | ** ** | **Amount** |
|------------------------------------------------------|------------|------------|
| 2007                                                 |       | $          | 1,615 |   |
| 2008                                                 |       | 9,692      |   |
| 2009                                                 |       | 9,692      |   |
| 2010                                                 |       | 9,691      |   |
| 2011                                                 |       | 8,103      |   |
| Net minimum lease payments                           |       | 38,793     |   |
| Less amount representing interest                    |       | (6,932     | ) |
| Present value of net minimum lease payments          |       | 31,861     |   |

 

**Note J— Commitments:**

 

As of September 30,2007, the Company had remaining commitments of $34,920,000 on non-cancelablecontracts for the construction of two tugs (to be delivered in 2008 and 2009)and the double hulling of one existing barge (to be completed later in 2007).

 

 

 

 

 

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**Note K— Subsequent Events:**

 

*Initial Public Offering*

 

OnNovember 8, 2007, OSG announced the pricing of the initial public offeringof 7,500,000 common units representing limited partner interests in thePartnership at $19.00****per unit.The common units issued to the public represent a 24.5% limited partnerinterest in the Partnership. OSG America LLC, a wholly owned subsidiary of OSG,is the sole general partner of the partnership and has a 2% general partnerinterest, and other subsidiaries of OSG hold a 73.5% limited partnershipinterest.

 

Netproceeds after deducting fees on the transaction were $129,525,000, which wereused to satisfy the obligation of the Partnership to reimburse OSG for capitalexpenditures incurred in the 24 months prior to this offering to improve theassets being contributed to the Partnership by OSG as partial consideration forthat contribution.

 

*Senior Secured Revolving Credit Facility*

 

OnNovember 15, 2007, OSG America Operating Company LLC, a wholly ownedsubsidiary of the Partnership, entered into a $200,000,000 senior securedrevolving credit facility with ING Bank N.V. and DnB NOR Bank ASA.

 

Borrowingsunder the senior secured revolving credit facility are due and payable fiveyears after the date that the facility agreement is signed (the “closing date”),subject to a 24 month extension period which may be requested by us on orafter the second anniversary of the closing date (up to 90 days prior tothe fifth anniversary of the closing date) and which may be approved by thelenders. Drawings under the facility will be available on a revolving basisuntil the earlier of one month prior to the applicable maturity date or thedate on which the facility is permanently reduced to zero and the lenders areno longer required to make advances. The maximum number of advances permittedto be outstanding under the senior secured revolving credit facility at any onetime will be ten.

 

Borrowingsunder the senior secured revolving credit facility are secured by, among otherthings, first preferred mortgages on certain owned vessels, and are guaranteedby the Partnership and certain of its subsidiaries.

 

Wewill be able at our option, to prepay all loans under our senior securedrevolving credit facility at any time without penalty (other than customaryLIBOR breakage costs).

 

Theoutstanding loans under our senior secured revolving credit facility will bearinterest at a rate equal to LIBOR plus the applicable margin (70 basis pointsper year until the fifth anniversary of the closing date and, if the extensionoption is exercised, 75 basis points per year thereafter).

 

Our new senior secured revolving credit facility will prevent us fromdeclaring dividends or making distributions if any event of default, as definedin the revolving credit agreement, exists or would result from such payments.In addition, the senior secured revolving credit facility contains covenantsrequiring us to adhere to certain financial covenants.

 

 

 

13

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| **Item 2.** | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF**  |   |
|-------------|----------------------------------------------------|--------|
|        | **FINANCIAL  CONDITION AND RESULTS OF OPERATIONS** |   |
|             |                                                    |        |  |

 

 

**Overview**

 

TheCompany is the largest operator, based on barrel-carrying capacity, of U.S.flag vessels transporting refined petroleum products. The Company was recentlyformed by Overseas Shipholding Group, Inc., a market leader in providingglobal energy transportation services. The Company plans to use the expertise,customer base and reputation of OSG to expand its marine transportationservice.

 

OnNovember 15, 2007, upon completion of the initial public offering, OSGcontributed to us entities owning or operating a fleet of ten product carriers,seven articulated tug barges (ATBs) and one conventional tug/barge unit, withan aggregate carrying capacity of approximately 4.9 million barrels. OSGalso contributed to us a 37.5% ownership interest in Alaska Tanker Company,LLC, a joint venture that transports crude oil from Alaska to the continentalUnited States and which employs a fleet of five crude-oil tankers. OSG owns a75.5% interest in us, including a 2% interest through our general partner,which OSG owns and controls.

 

Ourmembership interests in our operating subsidiaries represent our onlycash-generating assets.

 

Ourmarket is protected from direct foreign competition by the Merchant Marine Actof 1920 (“Jones Act”), which mandates that all vessels transporting cargobetween U.S. ports must be built in the United States, registered under theU.S. flag, manned by U.S. crews and owned and operated by U.S. organizedcompanies that are controlled and at least 75% owned by U.S. citizens.Sixteen of the eighteen vessels comprising our initial fleet are operatedin the U.S. coastwise trade in accordance with the Jones Act and all of ourfuture scheduled newbuild deliveries will qualify to operate under the JonesAct.

 

Thehistorical results discussed below and the financial statements and relatednotes of what we refer to as “OSG America Predecessor” or “the Predecessor”included elsewhere in this Form 10-Q are the results of the entitiescontributed to us. References in this Management’s Discussion and Analysis ofFinancial Condition and Results of Operations to OSG America L.P., “us”, “we”, “our”or similar terms when used in a historical context refer to OSG AmericaPredecessor and when used in the present tense or prospectively refers to OSGAmerica L.P. or any one or more of its subsidiaries, or to all such entities.

 

**Overview—OSG America Predecessor**

 

Forthe nine months ended September 30, 2007 and 2006, the combined financialstatements presented herein have been carved out of the consolidated financialstatements of OSG. Our financial position, results of operations and cash flowsreflected in our combined financial statements are not indicative of those thatwould have been achieved had we operated as an independent stand-alone entityfor all periods presented or of future results.

 

Asof September 30, 2007, OSG America Predecessor’s U.S. flag fleet consistedof ten product carriers, seven double-hulled ATBs and one conventionaltug-barge unit, aggregating 679,966 deadweight tons (dwt).

 

Tothe extent that assets, liabilities, revenues and expenses relate to thePredecessor, they have been identified and carved out of OSG for inclusion inour combined financial statements. OSG’s other assets, liabilities, revenuesand expenses that do not relate to the vessel interests are not included in ourcombined financial statements. In addition, the preparation of our combinedcarve-out financial statements required the allocation of certain expenseswhere these items were not identifiable as related to OSG America Predecessor.

 

Generaland administrative expenses, consisting primarily of salaries and otheremployee related costs, office rent, legal and professional fees and travel andentertainment expenses were allocated based on the total number of vessels(weighted by operating days) in the respective fleets of OSG AmericaPredecessor and OSG for each of 

 

 

 

14

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theperiods presented. Management believes that the allocation of general andadministrative expenses was based on a reasonable method.

 

Allof the companies included in the OSG America Predecessor combined carve-outfinancial statements have been included in the OSG consolidated group for U.S.income tax purposes for periods through December 31, 2006. The Predecessorfinancial statements have been prepared on the basis that OSG was responsiblefor all taxes related to periods prior to January 1, 2002. Theprovisions/(credits) for income taxes in the Predecessor’s combined financialstatements have been determined on a separate-return basis for all periods presented.

 

**Acquisition of Maritrans Inc.**

 

OnNovember 28, 2006, OSG acquired Maritrans Inc. (“Maritrans”), aleading U.S. flag crude oil and petroleum product shipping company that ownedand operated one of the largest fleets of double-hulled vessels serving theEast Coast and Gulf Coast trades. The operating results of certain wholly-ownedsubsidiaries of Maritrans, which we refer to collectively as the “MaritransEntities”, which were carved out of the consolidated financial statements ofMaritrans, have been included in the Predecessor’s combined financialstatements commencing November 29, 2006. The Maritrans Entities’ fleetconsisted of seven ATBs, one of which was in the process of beingdouble-hulled, one conventional tug/barge unit and two product carriers, alloperating under the U.S. flag.

 

**Future Business**

 

Wehave entered into agreements with OSG Ship Management, Inc. (“OSGM”) forthe provision of technical and commercial management of our vessels and foradministrative and accounting services.

 

InJune 2005, OSG signed agreements to bareboat charter ten Jones Act productcarriers from a subsidiary of Aker American Shipping, Inc. (“Aker”). In February 2007,OSG agreed in principle to bareboat charter up to six additional Jones Actproduct carriers, which eventually resulted in OSG concluding agreements tobareboat charter two vessels. The bareboat charters on eight of these twelvevessels have been assigned to OSG America Predecessor. We have committed tobareboat charter five of the eight vessels for initial terms of seven years andthe other three vessels for initial terms of five years. We have extensionoptions for the remaining lives of these vessels. Three of these vessels, the *Overseas Houston,**Overseas Long Beach* and *Overseas**Los Angeles*,have already been delivered from the shipyard, in February, June, and November 2007,respectively. The remaining five vessels that we have committed to bareboatcharter are scheduled to be delivered from the shipyard between mid 2008 andearly 2010.

 

Wehave options to purchase from OSG up to six ATBs, to be constructed by BenderShipping & Repair Co., Inc. (“Bender”) and scheduled for deliverybetween mid-2008 and late 2010. We also have options to acquire from OSG theright to bareboat charter up to four of the remaining newbuild vessels to beconstructed by Aker Philadelphia Shipyard Inc., scheduled for delivery betweenlate 2009 and early 2011.

 

**Update****on****CriticalAccounting Policies**

 

TheCompany’s combined carve-out financial statements have been prepared in accordancewith accounting principles generally accepted in the United States (U.S. GAAP),which require us to make estimates in the application of accounting policiesbased on the best assumptions, judgments and opinions of management. For acomplete description of all of our material accounting policies, see Note A tothe Company’s combined carve-out financial statements for the year ended December 31,2006 included in the Company’s Registration Statement on Form S-1 thatbecame effective on November 8, 2007.

 

 

 

 

 

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*Newly Issued Accounting Standards*

 

InSeptember 2006, the Financial Accounting Standards Board issued Statementof Financial Accounting Standards No. 157 “Fair Value Measurements”(FAS 157). This standard provides guidance for using fair value to measureassets and liabilities in accordance with U.S. GAAP and expands disclosuresabout the extent to which companies measure assets and liabilities at fairvalue, the information used to measure fair value and the effect of fair valuemeasurements on earnings. FAS 157 applies whenever other standards requireor permit assets or liabilities to be measured at fair value, but does notexpand the use of fair value in any new circumstances. FAS 157 is effectivefor financial statements issued for fiscal years beginning after November 15,2007 and interim periods within those fiscal years. Early adoption of thestandard is permitted. We believe that the adoption of FAS 157 will nothave a material effect on our earnings or financial position.

 

**Income from Vessel Operations**

 

*Time Charter Equivalent Revenues*

 

The following tablereconciles time charter equivalent (“TCE”) revenues to shipping revenues, asreported in the predecessor combined statements of operations:

 
| **In  thousands** | ** ** | **Three Months Ended****September 30,** | ** ** | **Nine Months Ended****September 30,** | ** ** |
|-------------------|------------|----------------------------------------------|------------|---------------------------------------------|------------|
| ** **        | ** ** | **2007**                                     | ** ** | **2006**                                    | ** ** | **2007** | ** ** | **2006** | ** ** |
| TCE revenues      |       | $                                            | 48,304     |                                        | $          | 19,779 |   | $ | 132,560 |   | $ | 53,214 |   |
| Voyage expenses   |       | 7,480                                        |       | 1,844                                       |       | 22,324 |   | 6,246 |   |
| Shipping revenues |       | $                                            | 55,784     |                                        | $          | 21,623 |   | $ | 154,884 |   | $ | 59,460 |   |

 

Consistent with generalpractice in the shipping industry, we use TCE revenues, which representsshipping revenues less voyage expenses, as a measure to compare revenuesgenerated from voyage charters to revenues generated from time charters. TCErevenues, a non-U.S. GAAP measure, provides additional meaningful informationin conjunction with shipping revenues, the most directly comparable U.S. GAAPmeasure, because it assists management in making decisions regarding thedeployment and use of our vessels and in evaluating their financialperformance.

 

The following tableprovides information with respect to average daily TCE rates earned and revenuedays for the three and nine months ended September 30, 2007 and 2006:

 
| *** ***                    | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|---------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| ** **                      | ** ** | **2007**                              | ** ** | **2006**                             | ** ** | **2007** | ** ** | **2006** | ** ** |
| Revenue Days:                   |       |                                  |       |                                 |       |   |   |   |   |
| Jones Act ATBs                  |       | 525                                   |       | —                               |       | 1,720 |   | — |   |
| Jones Act  Product Carriers     |       | 695                                   |       | 366                                  |       | 1,782 |   | 1,011 |   |
| Non-Jones Act  Product Carriers |       | 179                                   |       | 182                                  |       | 535 |   | 540 |   |
|                            |       | 1,399                                 |       | 548                                  |       | 4,037 |   | 1,551 |   |
|                            |       |                                  |       |                                 |       |   |   |   |   |
| Average Daily TCE Rates:        |       |                                  |       |                                 |       |   |   |   |   |
| Jones Act ATBs                  |       | $                                     | 33,859     |                                 | $          | — |   | $ | 28,359 |   | $ | — |   |
| Jones Act  Product Carriers     |       | $                                     | 37,239     |                                 | $          | 36,697 |   | $ | 35,872 |   | $ | 32,328 |   |
| Non-Jones Act  Product Carriers |       | $                                     | 25,961     |                                 | $          | 34,879 |   | $ | 37,120 |   | $ | 38,019 |   |

 

 

 

 

16

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Duringthe three months ended September 30, 2007, TCE revenues increased$28,525,000, or 144%, to $48,304,000 from $19,779,000 for the three monthsended September 30, 2006.  Duringthe nine months ended September 30, 2007, TCE revenues increased$79,346,000, or 149%, to $132,560,000 from $53,214,000 for the nine monthsended September 30, 2006. These increases in TCE revenues resultedprincipally from an increase in  revenuedays of 851 and 2,486 in the three months and nine months ending September 30,2007, respectively, compared with the same 2006 periods. These additional dayswere attributable primarily to the acquisition of Maritrans, which contributedan additional 711 revenue days and 2,211 revenue days during the three monthsand nine months ended September 30, 2007, respectively.  In addition, the Company took delivery of the*Overseas Houston* and the *Overseas Long Beach* in February 2007 and late-June 2007,respectively. At the time of the Maritrans acquisition, the ATB *OSG 242* was in a shipyard beingdouble-hulled, which was completed on April 5, 2007. On February 20,2007, a second ATB was taken out of service and entered a shipyard to bedoubled hulled, which work is now expected to be completed in early 2008.

 

*VesselExpenses***

 

The following tableprovides information with respect to average daily vessel expenses andoperating days for the three and nine months ended September 30, 2007 and2006:

 
| *** ***                    | ** ** | **Three Months Ended****September 30,** | ** ** | **Nine Months Ended****September 30,** | ** ** |
|---------------------------------|------------|----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                      | ** ** | **2007**                                     | ** ** | **2006**                                    | ** ** | **2007** | ** ** | **2006** | ** ** |
| Operating Days:                 |       |                                         |       |                                        |       |   |   |   |   |
| Jones Act ATBs                  |       | 736                                          |       | —                                      |       | 2,184 |   | — |   |
| Jones Act  Product Carriers     |       | 736                                          |       | 368                                         |       | 1,968 |   | 1,092 |   |
| Non-Jones Act  Product Carriers |       | 184                                          |       | 184                                         |       | 546 |   | 546 |   |
|                            |       | 1,656                                        |       | 552                                         |       | 4,698 |   | 1,638 |   |
|                            |       |                                         |       |                                        |       |   |   |   |   |
| Average Daily Vessel Expenses:  |       |                                         |       |                                        |       |   |   |   |   |
| Jones Act ATBs                  |       | $                                            | 9,213      |                                        | $          | — |   | $ | 8,277 |   | $ | — |   |
| Jones Act  Product Carriers     |       | $                                            | 18,711     |                                        | $          | 17,174 |   | $ | 17,168 |   | $ | 13,340 |   |
| Non-Jones Act  Product Carriers |       | $                                            | 18,223     |                                        | $          | 15,538 |   | $ | 14,932 |   | $ | 14,295 |   |

 

Duringthe three months ended September 30, 2007, vessel expenses increased by$14,726,000 to $23,905,000 from $9,179,000 for the three months ended September 30,2006. This increase was principally due to an increase of 1,104 operating daysas a result of the inclusion of the Maritrans fleet, which added $10,076,000 tovessel expenses and 920 operating days in the 2007 period, the delivery of twobareboat chartered-in vessels in the first nine months of 2007, a higher levelof damage repairs incurred and an increase in crew wages effective July 1,2007.

 

Forthe nine months ended September 30, 2007, vessel expenses increased by$37,645,000 to $60,017,000 from $22,372,000. The increase in expenses and operating days was principally the resultof the inclusion of the Maritrans fleet, which added $26,866,000 to vesselexpenses and 2,730 operating days in the 2007 period, and the delivery of thetwo bareboat chartered-in vessels in 2007. In addition, the charter on the *Overseas Galena Bay* was converted from abareboat charter to a time charter in July 2006, which increased vesselexpenses and TCE revenues by comparable amounts.

 

 

 

17

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*Bareboat Charter Expenses*

 

The*Overseas Houston* and the *Overseas Long Beach* were delivered from the shipyard in February andlate June 2007, respectively.  The *Overseas Houston* operated for 92 days and 233 days for thethree months and nine months ended September 30, 2007, respectively. The *Overseas Long Beach*operated for 92 days and 97 days duringthe three months and nine months ended September 30, 2007,respectively.  The expense for the threemonths ended September 30, 2007 includes additional amounts recorded withrespect to the initial voyages of these two vessels from their delivery fromthe shipyard until commencement of their respective time charters.

 

*Depreciation and Amortization*

 

Depreciationand amortization increased by $7,111,000 to $12,234,000 for the three monthsended September 30, 2007 from $5,123,000 for the three months ended September 30,2006, and increased by $20,078,000 to $34,698,000 for the nine months ended September 30,2007 from $14,620,000 for the nine months ended September 30, 2006. Theseincreases were primarily due to an increase in the operating fleet as a resultof the acquisition of Maritrans. Depreciation and amortization for the threemonths and nine months ended September 30, 2007 includes $1,167,000 and$3,500,000, respectively, related to the amortization of intangibles resultingfrom the acquisition of Maritrans.

 

*General and Administrative Expenses*

 

Generaland administrative expenses were allocated based on OSG America Predecessor’sproportionate share of OSG’s total ship-operating (calendar) days for each ofthe periods presented. We had 1,656 ship-operating days for the three monthsended September 30, 2007 and 552 ship-operating days for the three monthsended September 30, 2006.  For thenine months ended September 30, 2007 and 2006, ship-operating days were4,698 days and 1,638 days, respectively.  General and administrative expenses for thethree months ended September 30, 2007 reflects an increase in both theCompany’s share of OSG’s operating days and an overall increase in OSG’sexpenses. Management believes these allocations reasonably present thefinancial position, results of operations and cash flows of OSG AmericaPredecessor for the periods presented.

 

**Equity in Income of Affiliated Companies**

 

Ona quarterly basis, OSG America Predecessor recognizes its share of theestimated incentive charter hire that has been deemed earned through thereporting date that is not reversible subsequent thereto. ATC fully distributesits net income for each year by making a distribution in the first quarter ofthe following year. Equity in income of affiliated companies decreased by$1,019,000 to $934,000 for the three months ended September 30, 2007, from$1,953,000 for the three months ended September 30, 2006, and decreased by$1,752,000 to $3,192,000 for the nine months ended September 30, 2007,from $4,944,000 for the nine months ended September 30, 2006. Thesedecreases were attributable to a reduction in the number of vessels operated byATC and a decrease in the incentive hire rate earned by ATC in the first ninemonths of 2007 compared with the comparable period of the prior year.

 

**Interest Expense, other**

 

Interestexpense on third party obligations for the three months ended September 30,2007 increased by $291,000 to $1,267,000 from $976,000 for the three monthsended September 30, 2006, and increased by $773,000 to $3,805,000 for thenine months ended September 30, 2007, from $3,032,000 for the nine monthsended September 30, 2006. As a result of the acquisition of Maritrans, thePredecessor assumed $55,616,000 of secured term loans. The net interest expenseincurred in the three months and nine months ended September 30, 2007 withrespect to these term loans amounted to $443,000 and $1,218,000, respectively.Interest expense for the three months and nine months ended September 30,2007 is net of $347,000 and $1,173,000, respectively, capitalized in connectionwith vessel construction.

 

 

 

18

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**Provision for Federal Income Taxes**

 

Theincome tax provisions for the three months and nine months ended September 30,2007 and 2006 were based on the pre-tax results of the Company determined on aseparate-return basis.  The changes inthe tax provisions for the three months and nine months ended September 30,2007 compared with the same 2006 periods were principally attributable to theacquisition the Maritrans fleet.

 

In2006, OSG made an election under the American Jobs Creation Act of 2004,effective for years commencing with 2005, to have its qualifying U.S. flagoperations taxed under a new tonnage tax regime rather than under the usualU.S. corporate income tax regime.  As aresult of that election, the Predecessor’s taxable income for U.S. income taxpurposes with respect to the eligible U.S. flag vessels will not include incomefrom qualifying shipping activities in U.S. foreign trade (i.e., transportationbetween the U.S. and foreign ports or between foreign ports).

 

Asa result of the initial public offering, OSG America L.P., as a partnership, isnot a taxable entity and will incur no federal income tax liability.  Instead, each unitholder will be required totake into account his share of items of income, gain, loss, and deduction ofthe partnership in completing his federal income tax liability without regardto whether corresponding cash distributions are received from the partnershipby him.

 

**EBITDA**

 

EBITDArepresents net income plus interest expense, provision for income taxes anddepreciation and amortization expense. EBITDA is presented to provide investorswith meaningful additional information that management uses to monitor ongoingoperating results and evaluate trends over comparative periods.

 

EBITDAassists our management and investors by increasing the comparability of ourfundamental performance from period to period and against the fundamentalperformance of other companies in our industry that provide EBITDA information.This increased comparability is achieved by excluding the potentially disparateeffects between periods or companies of interest expense, taxes, depreciationor amortization, which items may significantly affect net income betweenperiods and are affected by various and possibly changing financing methods,capital structure and historical cost basis. We believe that including EBITDAas a financial and operating measure benefits investors in (a) selectingbetween investing in us and other investment alternatives and (b) monitoringour ongoing financial and operational strength and health in assessing whetherto continue to hold common units.

 

EBITDAallows us to assess the ability of assets to generate cash sufficient toservice debt, make distributions and undertake capital expenditures. Byeliminating the cash flow effect resulting from our existing capitalization andother items such as drydocking expenditures and working capital changes (whichmay vary significantly from period to period), EBITDA provides a consistentmeasure of our ability to generate cash over the long term. Management usesthis information as a significant factor in determining (a) our propercapitalization (including assessing how much debt to incur and whether changesto the capitalization should be made) and (b) whether to undertakematerial capital expenditures and how to finance them, all in light of existingcash distribution commitments to unitholders. Use of EBITDA as a liquiditymeasure also permits investors to assess our fundamental ability to generate cash sufficientto meet cash needs, including distributions on our common units.

 

EBITDAshould not be considered as a substitute for net income, cash flow fromoperating activities prepared in accordance with accounting principlesgenerally accepted in the United States or as a measure of profitability orliquidity.  While EBITDA is frequentlyused as a measure of operating results and performance, it is not necessarily comparableto other similarly titled captions of other companies due to differences inmethods of calculation.

 

 

 

19

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Thefollowing table reconciles net income, as reflected in our predecessor combinedcarve-out statements of operations, to EBITDA:

 
| **In  thousands**                  | ** ** | **Three Months Ended****September 30,** | ** ** | **Nine Months Ended****September 30,** | ** ** |
|------------------------------------|------------|----------------------------------------------|------------|---------------------------------------------|------------|
|                               |       | **2007**                                     | ** ** | **2006**                                    | ** ** | **2007** | ** ** | **2006** |   |
| Net income/(loss)                  |       | $                                            | (1,577     | )                                           | $          | 2,286 |   | $ | 5,300 |   | $ | 6,963 |   |   |
| Provision for federal income taxes |       | 434                                          |       | 410                                         |       | 1,658 |   | 146 |   |   |
| Interest expense                   |       | 3,523                                        |       | 3,255                                       |       | 10,231 |   | 9,248 |   |   |
| Depreciation and amortization      |       | 12,234                                       |       | 5,123                                       |       | 34,698 |   | 14,620 |   |   |
| EBITDA                             |       | $                                            | 14,614     |                                        | $          | 11,074 |   | $ | 51,887 |   | $ | 30,977 |   |   |

 

* *
| **In  thousands**                                               | *** *** | **Nine Months Ended****September 30,** | *** *** |
|-----------------------------------------------------------------|--------------|---------------------------------------------|--------------|
|                                                            |         | **2007**                                    | ** **   | **2006** |   |
| Net cash provided by operating activities                       |         | $                                           | 18,072       |   | $ | 7,550 |   |
| Payments for drydocking                                         |         | 11,729                                      |         | 5,833 |   |
| Interest expense                                                |         | 10,231                                      |         | 9,248 |   |
| Undistributed earnings from affiliated companies                |         | (3,618                                      | )            | (2,887 | ) |
| Changes in operating assets and liabilities (except  for taxes) |         | 12,148                                      |         | 6,553 |   |
| Federal income taxes                                            |         | 3,325                                       |         | 4,401 |   |
| Other                                                           |         | —                                      |         | 279 |   |
| EBITDA                                                          |         | $                                           | 51,887       |   | $ | 30,977 |   |

 

**Liquidity and Sources of Capital**

 

Weoperate in a capital intensive industry. In addition to distributions on ourpartnership units, our primary liquidity requirements relate to our operatingexpenses, including payments under our management and administrative servicesagreements, drydocking expenditures, payments of interest and principal underour secured credit facility and lease obligations. Our long-term liquidityneeds primarily relate to capital expenditures for the purchase or constructionof vessels.

 

Theamount of available cash we need to pay the minimum quarterly distributions forfour quarters on our common units, subordinated units and the 2% generalpartner interest outstanding immediately after this offering is $45,900,000.There is no guarantee that we will pay the minimum quarterly distribution onour common and subordinated units in any quarter and we will be prohibited frommaking any distributions to unitholders if it would cause an event of default,or an event of default exists, under our credit agreement.

 

Weanticipate that our primary sources of funds for our short-term liquidity needswill be cash flows from operations. We believe that cash flows from operationsand bank borrowings from our senior secured revolving credit agreement referredto below will be sufficient to meet our existing short-term liquidity needs forthe next 12 months.

 

Generally,our long-term sources of funds will be from cash from operations, long-termbank borrowings and other debt or equity financings. Because we distribute allof our available cash, we expect that we will rely upon external financingsources, including bank borrowings and the issuance of debt and equitysecurities, to fund acquisitions and expansion capital expenditures, includingopportunities we may pursue under the omnibus

 

 

 

20

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agreement.We cannot assure you that we will be able to raise additional funds onfavorable terms. For more information, please read “—Ongoing CapitalExpenditures” below.

 

Ourcombined financial statements represent the operations of our vessels by OSG priorto our acquisition of those vessels. The acquisition of the Maritrans vesselsby OSG and their operations were funded by loans from OSG. As a result, ourcombined financial statements are not indicative of the financial position,results of operations or cash flows we would have achieved had we operated asan independent stand-alone entity during these periods or of future results.

 

Workingcapital at September 30, 2007 was $12,186,000 compared with a workingcapital deficiency of $5,059,000 at December 31, 2006. The treasuryfunctions of OSG are managed centrally. Accordingly, cash received by thePredecessor (principally charter hire) was swept from our accounts to OSG forinvestment purposes, with a corresponding reduction in the advances from affiliatedcompanies. Cash required by the Predecessor (principally vessel operatingexpenses, voyage expenses and debt amortization) was transferred from OSG witha corresponding increase in the advances from affiliated companies. We hadtotal debt outstanding of $492,951,000 at September 30, 2007, including$410,820,000 due to OSG, compared with $660,929,000 at December 31, 2006,including $568,986,000 due to OSG. Advances payable to OSG do not have fixedrepayment dates. Available net cash provided by operating activities was usedto repay certain of the amounts advanced by OSG.

 

Securedterm loan agreements impose certain operating restrictions and establishminimum financial covenants for OSG America Predecessor. The Predecessor was incompliance with the financial covenants contained in the secured loanagreements as of September 30, 2007. Our failure to comply with any of thecovenants in the agreements could result in a default, which would permitlenders to accelerate the maturity of the debt and to foreclose upon collateralsecuring the debt. Under those circumstances, we might not have sufficientfunds or other resources to satisfy our remaining obligations.

 

*Ongoing Capital Expenditures*

 

Marinetransportation of crude oil and refined petroleum products is acapital-intensive business, which requires significant investment to maintainan efficient fleet and stay in regulatory compliance.

 

Forpurposes of determining operating surplus, maintenance capital expenditures arethose capital expenditures required to maintain over the long term the currentoperating capacity of our fleet or the revenue generated by our capital assets.Expansion capital expenditures are those capital expenditures that increase theoperating capacity of our fleet or the revenue generated by our capital assets.

 

Overthe three years following the date of this offering, we estimate that we willspend an average of approximately $19,300,000 per year for drydocking andclassification society surveys. We drydock our vessels twice in every five-yearperiod and, as our fleet matures and expands, our drydocking expenses willlikely increase. Ongoing costs for compliance with environmental regulationsare primarily included as part of our drydocking and classification societysurvey costs or are a component of our operating expenses. In addition, vesselsmay have to be drydocked in the event of accidents or other unforeseen damage.Periodically, we also incur expenditures to acquire or construct additionalproduct carriers and barges and/or to upgrade or double hull vessels in orderto comply with statutory regulations. We are not aware of any regulatorychanges or environmental liabilities that will have a material impact on ourcurrent or future operations.

 

Webelieve that our cash flow from charters-out will be sufficient to cover theinterest and principal payments under our debt agreements, amounts due underthe administrative services and management agreements, other general andadministrative expenses and other working capital requirements for the shortand medium term. To the extent we pursue other vessel acquisitions, we expectto finance any such commitments from existing long-term credit facilities andadditional long-term debt as required. The amounts of working capital and cash 

 

 

 

 

21

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generatedfrom operations that may, in the future, be utilized to finance vesselcommitments are dependent on the rates at which we can charter our vessels.Such charter rates are volatile.

 

Becausewe distribute all of our available cash, we may not grow as fast as companiesthat reinvest their available cash. We expect that we will rely upon externalfinancing sources, including bank borrowings and the issuance of debt andequity securities, to fund acquisitions and expansion capital expenditures. Asa result, to the extent we are unable to finance growth externally, our cashdistribution policy will significantly impair our ability to grow. To theextent we issue additional units in connection with any acquisitions orexpansion capital expenditures, the payment of distributions on thoseadditional units may increase the risk that we will be unable to maintain orincrease our per unit distribution level, which in turn may affect theavailable cash that we have to distribute on each unit. Our partnershipagreement does not limit our ability to issue additional units, including unitsranking senior to the common units being offered under this prospectus. Theincurrence of additional debt by us or our operating subsidiaries would resultin increased interest expense, which in turn may also affect the available cashthat we have to distribute to our unitholders.

 

*Aggregate Contractual Obligations*

 

Asummary of the Company’s long-term contractual obligations as of September 30,2007 follows:

 
| **In thousands**                                        | ** ** | **Balance of 2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **Beyond  2011** | ** ** | **Total** | ** ** |
|---------------------------------------------------------|------------|---------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|------------------|------------|-----------|------------|
| Long-term debt (1)                                      |       | $                   | 1,429      |     | $          | 5,716    |       | $        | 5,717      |     | $          | 5,717            |       | $         | 5,716      |   | $ | 40,755 |   | $ | 65,050 |   |
| Obligations under capital leases (1)                    |       | 1,615               |       | 9,692    |       | 9,692    |       | 9,691    |       | 8,103    |       | —           |       | 38,793    |       |
| Operating lease obligations (chartered-in vessels)  (2) |       | 5,134               |       | 30,929   |       | 51,963   |       | 61,497   |       | 64,312   |       | 210,705          |       | 424,540   |       |
| Construction installments (3)                           |       | 16,865              |       | 15,700   |       | 2,355    |       | —   |       | —   |       | —           |       | 34,920    |       |
| Total                                                   |       | $                   | 25,043     |     | $          | 62,037   |       | $        | 69,727     |     | $          | 76,905           |       | $         | 78,131     |   | $ | 251,460 |   | $ | 563,303 |   |

----

 

(1)  Amounts shown includecontractual interest obligations.

 

(2)  As of September 30, 2007we had charter-in commitments for eight vessels on leases that are, or will be,accounted for as operating leases. These leases provide us with various renewaloptions.

 

(3)  Represents remaining shipyardcommitments and excludes capitalized interest and other construction costs.Includes payments in respect of two ATBs to be contributed by OSG to our fleet.

 

***Senior Secured Revolving Credit Facility***

 

Inconnection with the closing of the initial public offering, we entered into anew $200 million senior secured revolving credit facility.  OSG America Operating Company LLC, ouroperating company, is the borrower under this revolving credit facility. Ourobligations under the facility are secured by, among others, first preferredmortgages on certain of our owned vessels and the two tugs under constructionby Bender and are guaranteed by us and our subsidiaries which own those vessels.

 

Borrowingsunder the senior secured revolving credit facility are due and payable fiveyears after the date that the facility agreement is signed (the “closing date”),subject to a 24 month extension period which may be requested by us on orafter the second anniversary of the closing date (up to 90 days prior tothe fifth anniversary of the closing date) and which may be approved by thelenders. Drawings under the facility will be available on a revolving basisuntil the earlier of one month prior to the applicable maturity date or thedate on which the facility is permanently reduced to zero and the lenders areno longer required to make advances. The maximum number 

 

 

 

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ofadvances permitted to be outstanding under the senior secured revolving creditfacility at any one time will be ten.

 

Wewill be able, at our option, to prepay all loans under our senior securedrevolving credit facility at any time without penalty (other than customaryLIBOR breakage costs).

 

Theoutstanding loans under our senior secured revolving credit facility will bearinterest at a rate equal to LIBOR plus the applicable margin (70 basis pointsper year until the fifth anniversary of the closing date and, if the extensionoption is exercised, 75 basis points per year thereafter) plus the cost ofcomplying with any applicable regulatory requirements of any relevantregulatory authority.

 

Our new senior secured revolving credit facility will prevent us fromdeclaring dividends or making distributions if any event of default, as definedin the revolving credit agreement, exists or would result from such payments.In addition, the new senior secured revolving credit facility containscovenants requiring us to adhere to certain financial covenants.

 

***Off Balance Sheet Arrangements***

 

Wedo not currently have any liabilities, contingent or otherwise, that weconsider to be off balance sheet arrangements.

 
| **Item 3.** | ** ** | **Qualitative and Quantitative Disclosures about Market Risk** |   |
|-------------|------------|----------------------------------------------------------------|--------|

 

ThePredecessor was exposed, and we also expect to be exposed, to market risk fromchanges in interest rates, which could impact our results of operations andfinancial condition. We will manage this exposure through our regular operatingand financing activities.

 

***Interest Rate Risk***

 

Wewill be exposed to the impact of interest rate changes primarily through ourunhedged floating-rate borrowings. Significant increases in interest ratescould adversely affect our operating margins, results of operations and ourability to service our debt. From time to time, we may use interest rate swapsto reduce our exposure to market risk from changes in interest rates. Theprincipal objective of these contracts would be to minimize the risks and costsassociated with our floating-rate debt. As at September 30, 2007, allof our long-term debt consisted of fixed-rate secured term loans.

 

Weintend to invest our cash in financial instruments with maturities of less thanthree months within the parameters of our investment policy and guidelines.

 

Wemay use interest rate swaps to manage the impact of interest rate changes onearnings and cash flows. Changes in the fair value of interest rate swaps areeither offset against the fair value of assets or liabilities through income,or recognized in other comprehensive income until the hedged item is recognizedin income. The ineffective portion of an interest rate swap change in fairvalue is immediately recognized in income. Premiums and receipts, if any, arerecognized as adjustments to interest expense over the lives of the individualcontracts.

 

***Foreign Currency Risk***

 

Theshipping industry’s functional currency is the U.S. dollar. All of our revenuesand most of our operating costs are in U.S. dollars.

 

 

 

 

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**Reportof Independent Registered Public Accounting Firm on Review of Interim FinancialInformation**

 

Thecondensed combined financial statements as of September 30, 2007 and forthe three and nine months ended September 30, 2007 and 2006 are unaudited;however, such financial statements have been reviewed by the Company’sindependent registered public accounting firm.

 

**AvailableInformation**

 

Weare subject to the information requirements of the Securities Exchange Act of1934 and, in accordance therewith, we are required to file with the SECperiodic reports and other information. These reports and other information maybe inspected and copied at the Public Reference Room maintained by the SECat 100 F Street, N.E., Washington, D.C. 20549 or obtained from the SEC’swebsite (http://www.sec.gov). Our website on the internet is located athttp://www.osgamerica.com. Our periodic reports and other information filedwith or furnished to the SEC are available, free of charge, through ourwebsite, as soon as reasonably practicable after those reports and otherinformation are electronically filed with or furnished to the SEC.

 
| **Item 4.** | ** ** | **Controls  and Procedures** |   |
|-------------|------------|------------------------------|--------|

 

 

Asof the end of the period covered by this Quarterly Report on Form 10-Q, anevaluation was performed under the supervision and with the participation ofthe Company’s management, including the Chief Executive Officer (“CEO”) andChief Financial Officer (“CFO”), of the effectiveness of the design andoperation of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”).  Based on that evaluation, the Company’smanagement, including the CEO and CFO, concluded that the Company’s currentdisclosure controls and procedures are effective to ensure that informationrequired to be disclosed by the Company in the reports the Company files orsubmits under the Exchange Act is (i) recorded, processed, summarized andreported, within the time periods specified in the Securities and ExchangeCommission’s rules and forms and (ii) accumulated and communicated tothe Company’s management, including the CEO and CFO, as appropriate to allowtimely decisions regarding required disclosure. There have been no material changes in the Company’s internal controlsor in other factors that could materially affect these controls during theperiod covered by this Quarterly Report.

 

 

 

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**PART II — OTHER INFORMATION**

 
| **Item 1.** | ** ** | **Legal  Proceedings** |   |
|-------------|------------|------------------------|--------|

 

Weare party to routine, marine related claims, lawsuits and labor arbitrationsarising in the ordinary course of our business. The claims made in connectionwith our marine operations are covered by insurance, subject to applicablepolicy deductibles that are not material as to any type of insurance coverage.We provide on a current basis for amounts we expect to pay.

 

**Item 1A.****      RiskFactors**

 

Therehave been no material changes in the Partnership’s risk factors from thosedisclosed in the Partnership’s Registration Statement on Form S-1 thatbecame effective on November 8, 2007.

 
| **Item 2.** | ** ** | **Unregistered  Sales of Equity Securities and Use of Proceeds** |   |
|-------------|------------|------------------------------------------------------------------|--------|

 

In connection with theformation of the Partnership on May 14, 2007, the Partnership issued (i) a2% general partner interest in the Partnership to the General Partner inexchange for an initial capital contribution of $20 and (ii) a 98% limitedpartner interest in the Partnership to OSG Bulk Ships, Inc. (“OSG BulkShips”) in exchange for an initial capital contribution of $980 in an offeringexempt from registration under Section 4(2) of the Securities Act of1933 (the “Securities Act”).

 

On August 30, 2007, OSGBulk Ships transferred to OSGAMLP One Percent Interest Corporation (“OSG 1%”)its right, title and interest in and to a limited partnership interest in thePartnership representing a 1% interest in the Partnership.  Following this transfer, OSG Bulk Ships andOSG 1% owned 97% and 1% of the limited partner interests in the Partnership,respectively.

 

On August 10, 2007, thePartnership filed a Registration Statement with the SEC on Form S-1(Registration No. 333-145341) (as amended, the “Registration Statement”)in connection with its initial public offering of 7,500,000 common units representinglimited partner interests in the Partnership (the “Offering”).  The SEC declared the Registration Statementeffective on November 8, 2007.

 

Citigroup Global MarketsInc. and UBS Securities LLC acted as joint bookrunning managers of theOffering.

 

The Offering was completedon November 15, 2007.  Uponcompletion of the Offering, the Partnership issued a total of 7,500,000 commonunits to the public at an initial public offering price of $19.00 per commonunit.  Gross proceeds to the Partnershipfrom the Offering were $142.5 million. Net proceeds, after payment of underwriting discounts and offering costsof $13 million, were approximately $129.5 million.

 

The Partnership used all ofthe net proceeds of the Offering to satisfy its obligation to reimburse OSG forapproximately $129.5 million of capital expenditures incurred in the 24 monthsprior to the Offering to improve the assets contributed to the Partnership byOSG upon completion of the Offering, including in connection with theacquisition of and improvements to vessels in the Partnership’s initial fleet,as partial consideration for the contribution to the Partnership of all of theoutstanding membership interests of the subsidiaries that own or operate the 18vessels in its initial fleet and the subsidiaries that have committed tobareboat charter six newbuild product carriers from Aker, as well as a 37.5%membership interest in ATC.

 

In addition, at completionof the Offering, (a) the Partnership, in an offering exempt fromregistration under Section 4(2) of the Securities Act, issued (i) 6,496,827common units and 14,999,999 subordinated units to OSG Bulk Ships, (ii) 277,413common units to OSG 1%, (iii) 725,759 common units to OSGM, and (iv) 612,244

 

 

 

 

25

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general partner units andall of the incentive distribution rights to the General Partner, in exchangefor the contribution of certain assets by such entities to the Partnership onthe closing date of the Offering, and (b)(i) OSG Bulk Ships’ limitedpartner interest representing a 97% interest in the Partnership was convertedinto one subordinated unit, (ii) OSG 1%’s limited partner interestrepresenting a 1% interest in the Partnership was converted into one commonunit, and (iii) the General Partner’s general partner interestrepresenting a 2% interest in the Partnership was converted into one generalpartner unit.

 

As more fully described inthe Partnership’s amended and restated agreement of limited partnership, thesubordinated units are convertible into common units on a one-for-one basisupon the satisfaction of certain financial conditions by the Partnership.

 

There have been no othersales of unregistered equity securities by the Partnership within the pastthree years.

 

 
| **Item 6.** | ** ** | **Exhibits** |   |
|-------------|------------|--------------|--------|

 

See Exhibit Index on page 29.

 

 

 

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| **Ernst & Young LLP** |   | 5 Times Square           |   | Phone: 212 773-3000 |
|--------------------------------|--------|--------------------------|--------|---------------------|
|                           |   | New York, New York 10036 |   |                |
|                           |   |                     |   |                |

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

Tothe General Partner and Unitholders

OSGAmerica L.P.

 

Wehave reviewed the predecessor condensed combined carve-out balance sheet of OSGAmerica Predecessor as of September 30, 2007, and the related predecessorcondensed combined carve-out statements of operations for the three and ninemonth periods ended September 30, 2007 and 2006, and the predecessorcondensed combined  carve-out statementsof cash flows for the nine month periods ended September 30, 2007 and2006, and the predecessor condensed combined carve-out statement of changes instockholder’s equity/(deficiency) for the nine month period ended September 30,2007.  These financial statements are theresponsibility of the Company’s management.

 

Weconducted our review in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). A review of interim financial information consists principally ofapplying analytical procedures and making inquiries of persons responsible forfinancial and accounting matters. It is substantially less in scope than anaudit conducted in accordance with the standards of the Public CompanyAccounting Oversight Board, the objective of which is the expression of anopinion regarding the financial statements taken as a whole. Accordingly, we donot express such an opinion.

 

Basedon our review, we are not aware of any material modifications that should bemade to the predecessor condensed combined carve-out financial statementsreferred to above for them to be in conformity with U.S. generally accepted accountingprinciples.

 

Wehave previously audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the predecessor combined carve-outbalance sheet of OSG America Predecessor as of December 31, 2006, and therelated predecessor combined carve-out statements of operations, changes instockholder’s equity/(deficiency) and cash flows for the year then ended notpresented herein, and in our report dated September 14, 2007, we expressedan unqualified opinion on those predecessor combined carve-out financialstatements.  In our opinion, theinformation set forth in the accompanying predecessor condensed combinedcarve-out balance sheet as of December 31, 2006, is fairly stated in allmaterial respects, in relation to the predecessor combined carve-out balancesheet from which it has been derived.

 

                                                                                                                                                        **ERNST & YOUNG LLP**

 

NewYork, New York

December 14,2007

 

 

 

 

 

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OSG AMERICA L.P

 

SIGNATURES

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
|   | OSG  AMERICA L.P.                        |
|--------|------------------------------------------|
|   | (Registrant)                             |   |
|   |                                     |
|   |                                     |
|   | by  OSG America LLC, its general partner |
|   |                                     |
| Date:  | December 19,  2007                  |   | /s/  Jonathan P. Whitworth |
|   | Jonathan  P. Whitworth                   |
|   | President,  Chief Executive Officer      |
|   |                                     |
|   |                                     |
| Date:  | December 19,  2007                  |   | /s/  Myles R. Itkin |
|   | Myles  R. Itkin                          |
|   | Chief  Financial Officer                 |
|   |                                     |
|   |                                     |

 

 

 

 

 

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OSG AMERICA L.P.

 

EXHIBIT INDEX
| 1.1    | Underwriting  Agreement                                                                                                                                                                                                                                                                                                                  |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                     |
| 3.1    | Amended  and Restated Certificate of Limited Partnership of OSG America L.P.  (incorporated by reference to Exhibit 3.1 to the Partnership’s  Registration Statement on Form S-1 (Registration No. 333-145341),  as filed on August 10, 2007 and amended thereafter (the “Registration  Statement”)). |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 3.2    | Amended  and Restated Agreement of Limited Partnership of OSG America L.P.                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 3.3    | Certificate  of Formation of OSG America LLC (incorporated by reference to  Exhibit 3.3 to the Registration Statement).                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 3.4    | Amended  and Restated Limited Liability Company Agreement of OSG America LLC.                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 10.1   | Senior  Secured Revolving Credit Facility Agreement.                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 10.2   | Contribution,  Conveyance and Assumption Agreement.                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 10.3   | Omnibus  Agreement.                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 10.4   | Management  Agreement.                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 10.5   | Administrative  Services Agreement.                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 10.6.1 | Indemnity  Agreement — Morten Arntzen.                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 10.6.2 | Indemnity  Agreement — Jonathan P. Whitworth.                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 10.6.3 | Indemnity  Agreement — Myles R. Itkin.                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 10.6.4 | Indemnity  Agreement — Robert E. Johnston.                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 10.6.5 | Indemnity  Agreement — Kathleen C. Haines.                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 10.6.6 | Indemnity  Agreement — James G. Dolphin.                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 10.6.7 | Indemnity  Agreement — Steven T. Benz.                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                     |
| 10.7   | OSG  America L.P. 2007 Omnibus Incentive Compensation Plan.                                                                                                                                                                                                                                                                              |

 

 

 

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| 15     | Letter  from Ernst & Young LLP.                                                                                                                                                                                                                                                                                               |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                   |
| 31.1   | Certification  of Chief Executive Officer pursuant to Rule 13a-14(a) and15d-14(a), as amended.                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                   |
| 31.2   | Certification  of Chief Financial Officer pursuant to Rule 13a-14(a) and15d-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.                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                   |
| NOTE:  | Instruments  authorizing long-term debt of the Registrant and its subsidiaries, where the  amounts authorized thereunder do not exceed 10% of total assets of the  Registrant on a consolidated basis, are not being filed herewith. The  Registrant agrees to furnish a copy of each such instrument to the Commission  upon request. |

 

 

 

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