-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DlJucLupDbtwluiM6SrLDFVu32z5TdO/j/9jbgDB/aFdNFKhlcGn0qhxa2agSB47 Xj5dK3KpQN/Popt8Zvgg4Q== 0000919574-04-002485.txt : 20040824 0000919574-04-002485.hdr.sgml : 20040824 20040824105242 ACCESSION NUMBER: 0000919574-04-002485 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040831 FILED AS OF DATE: 20040824 DATE AS OF CHANGE: 20040824 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Ship Finance International LTD CENTRAL INDEX KEY: 0001289877 STANDARD INDUSTRIAL CLASSIFICATION: DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT [4412] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-32199 FILM NUMBER: 04993247 BUSINESS ADDRESS: STREET 1: 14 PAR-LA-VILLE ROAD CITY: HAMILTON, HM 08 STATE: D0 ZIP: 00000-0000 BUSINESS PHONE: 441-295-9500 MAIL ADDRESS: STREET 1: 14 PAR-LA-VILLE ROAD CITY: HAMILTON, HM 08 STATE: D0 ZIP: 00000-0000 6-K 1 d507551_6-k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 6-K Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of August , 2004 - -------------------------------------------------------------------------------- Ship Finance International Limited - -------------------------------------------------------------------------------- (Translation of registrant's name into English) Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda - -------------------------------------------------------------------------------- (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F Form 20-F |X| Form 40-F |_| Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes |_| No |X| If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-________ Item 1. INFORMATION CONTAINED IN THIS FORM 6-K REPORT Attached is a copy of the earnings release of Ship Finance International Limited (the "Company") dated August 20, 2004, for the quarter ended June 2004. Ship Finance International Limited Interim Report April - June 2004 Highlights o Ship Finance reports a quarterly result of $62.2 million for the second quarter of 2004. o Ship Finance announces a cash dividend of $0.35 per share. o 25 percent of Ship Finance's common shares distributed to Frontline Ltd. (NYSE:FRO) common shareholders on June 16, 2004. o Ship Finance listed on the New York Stock Exchange on June 17, 2004. o A further 10 percentage points of Frontline's shares in Ship Finance will be distributed to Frontline shareholders. Second quarter and six month results Ship Finance reports total operating revenues of $93.2 million, operating income of $59.2 million and net income of $62.2 million for the second quarter of 2004. Operating revenues include finance lease interest income and finance lease service revenues in addition to charter revenues for the period prior to the vessels commencing trading under the charters to Frontline. Operating revenues also include charter revenues for vessels trading under long term charters to third parties during the period and $5.7 million of profit share due from Frontline under the long-term charter arrangements. The average daily time charter equivalents ("TCEs") earned by Frontline in the spot and time charter period market by the Company's VLCCs, Suezmax tankers, and Suezmax OBO carriers were $56,600, $37,100 and $27,000, respectively. Ship operating expenses of $23.7 million for the second quarter primarily consist of the management fee payable to Frontline. In the first quarter of 2004 the Company entered into interest rates swaps with a total notional principal amount of $500 million and an average interest rate of 3.4 percent. In the second quarter other financial items includes a credit of $25.7 million of which $25.5 million is attributable to the mark to market valuations of these interest rate swaps. Ship Finance reports net income of $106.3 million for the six months ended June 30, 2004. For this six month period the average daily time charter equivalents ("TCEs") earned by Frontline in the spot and time charter period market by the Company's VLCCs, Suezmax tankers, and Suezmax OBO carriers were $63,800, $47,200 and $26,600, respectively. As at June 30, 2004, the Company had total cash and cash equivalents of $40.0 million, of which $7.9 million is restricted. Cash provided by operating activities in the quarter was $27.1 million, net cash used in investing activities was $38.5 million and net cash used in financing activities was $86.1 million. The latter amount includes the repayment of $83.4 million to Frontline. At quarter end the Company had an amount due from Frontline of $55.3 million which has since been repaid. The Company's cash position as of August 19 is approximately $102.0 million. Total book equity at quarter end was $642.4 million. Corporate and Other Matters On June 16, 2004, Frontline completed the partial spin off of Ship Finance. Frontline distributed 25 per cent of Ship Finance's common shares to Frontline's ordinary shareholders with each Frontline shareholder receiving one share in Ship Finance for every four Frontline shares held. On June 17, 2004, Ship Finance common shares commenced trading on the New York Stock Exchange under the ticker symbol "SFL". As of June 30, 2004 the total shares outstanding in Ship Finance was 73,925,827 of which 75 percent was held by Frontline. On July 13, 2004, Ship Finance announced that it had completed the private placement of 1,600,000 common shares to an institutional investor at a purchase price of $15.75 per share. The Company is intending to use the total proceeds of $25.2 million to expand the business. One opportunity is to use the funds to take over two new VLCCs, which were acquired by Frontline's major shareholder, Hemen Holding. Hemen has, as stated in an earlier Frontline press release, so far financed and taken all financial risk in this project. The first vessel was delivered in July 2004 and the second vessel will be delivered from the yard in September. The parties will conclude after the second delivery if there is a financial basis for such a transaction. The Company has received several attractive offers for some of the older VLCCs in its fleet. Relative to newer tonnage these offers look attractive to the Board, particularly in view of the new rules for single hull tonnage coming up in 2010. The difficulties in financing single hull tonnage is another factor. In order to sell some of the vessels the Company will need to obtain agreement from Frontline, who is the long-term charterer of the vessels. Such an arrangement could include the replacement of older vessels by more modern vessels. Through such a solution both Frontline and Ship Finance are likely to increase their earnings power long term. The two newbuildings controlled by Hemen might be a key to such a solution. In the first half year of operation, Ship Finance has bought back $20 million of the Company's $580 million 8.5% Senior Notes and has repurchased a further $5 million to date in the third quarter. The repurchased Notes will be cancelled. The Company has, as stated above, a 20 percent profit share in any earnings the charterer makes above the fixed charter rate. This profit share is calculated on an annual basis. So far this year approximately $40.0 million has been accumulated of which $5.7 million has been accounted for in the quarter in accordance with US generally accepted accounting principles. The Board has thoroughly considered the future dividend policy of the Company. In this review they have paid special attention to the following factors: o The outlook for the underlying market o The likely buffer created by a substantial 20 percent profit sharing expected in 2004 o The strong increase in second-hand values of the underlying assets o The $25 million repurchased and cancelled Senior Notes including the future credit-worthiness of this bond. o The $91 million in yearly bank amortizations o The ability to expand the Company between 5 percent and 10 percent per year. Based on these factors the Board finds it responsible to increase the targeted sustainable long-term dividend yield from $1.00 per share to $1.40 per share. On August 19, 2004, the Board of Ship Finance declared a dividend of $0.35 per share. The record date for the dividend is August 30, 2004, ex dividend date is August 26, 2004 and the dividend will be paid on or about September 13, 2004. The Market The strong tanker market that we experienced in the first quarter of 2004 continued into the second quarter although at slightly lower levels. Except for a weak period at the beginning of the quarter, the VLCC market from the Middle East to the Far East stayed above TCE rates of $50,000 for the whole quarter. The average TCE rate Arabian Gulf to East was about $61,500 versus $71,500 in the first quarter. In the Suezmax market from West Africa to the east coast of the U.S. the average TCE rate for the quarter was around $37,000 per day. This was the result of continued high world oil demand due to the economic recovery in the U.S. and Europe, continued strong growth in the demand for oil into China, and improving world economic activity in general. The oil production in Venezuela again failed to reach pre-strike levels, the shortfall being covered from the Middle East, resulting in increased ton miles. According to the August 11 update from IEA, the average OPEC oil production, including Iraq, in the second quarter of 2004 was approximately 28.2 million barrels per day (b/d), an increase from the first quarter when they produced about 27.9 million b/d. This surprising development came in spite of OPEC going ahead with their announced cut of 1 million b/d from April 1. After implementing the cut, OPEC soon discovered that the world economy required more oil, and for the last two months of the quarter they have produced at close to capacity levels. On June 3 OPEC announced that they would increase the quota by 2.0 million b/d and that they where committed to `produce what is needed to supply the market'. IEA estimates that world oil demand averaged 80.4 million b/d in the second quarter, an increase of 5.6 percent from the second quarter of 2003. Industry analysts had expected a seasonal decrease in the demand in the second quarter, but demand only fell by 1.3 percent from the first quarter and this indicates a very strong demand for oil. At present all the oil analysts have announced that they had seriously underestimated the demand for oil, and several are concerned that demand might end up being higher than production capacity this coming winter. The world VLCC fleet totalled 435 vessels at the end of the second quarter 2004, an increase of three vessels or 0.7 percent over the quarter. One VLCC was scrapped in the period and 4 were delivered. The total order book is now at 85 vessels up from 80 after the first quarter. This represents 19.5 percent of the current VLCC fleet. A total of nine VLCCs were ordered during the quarter. The world Suezmax fleet totalled 304 vessels at the end of the quarter, up from 301 vessels after the first quarter. Three Suezmaxes were scrapped during the quarter and six were delivered. The total order book for Suezmaxes is now at 79 up from 77 after the first quarter. A total of eight Suezmaxes were ordered in the quarter. The value of secondhand vessels has increased more than 10 percent in the quarter. The main reason for this has been increased willingness to pay to catch the strong spot earnings. In addition, owners have increased confidence in the long-term prospects for the tanker market. Newbuilding prices have gone up by approximately 10 percent in the quarter but the lack of building slots before 2008 has limited the ordering. Strategy The Board of Ship Finance is continuously reviewing new opportunities. Based on input from bondholders and shareholders the Board has focused on transactions in market segments, which are related to tanker business. The positive development in earnings and values in Ship Finance has led to increased interest from commercial banks to finance/refinance the existing bank debt at very competitive terms. The Board will in the coming period consider different alternatives with the target to reduce the debt costs in the Company. Outlook The tight supply/demand situation, strong demand for oil, increased Middle East production and new rules and regulation gives fundamental strength to the tanker market. The freight futures market is reflecting this view, and at the moment it is possible to sell freight futures for the rest of the year at a level that equates to approximate TCE rates of $81,000 per day on VLCC, and $60,000 per day for next year. For Suezmaxes the TCE rate for the rest of the year is $47,000 and $40,000 for next year. The strength in the short term market combined with the increasingly tight supply/demand balance until phase out of single hull tonnage in 2010 may create a positive market situation for tankers for the next five to seven years. The Company will, through the profit sharing arrangement, have a market upside on top of the fixed return. The annual profit sharing, which will first be paid in the first quarter of 2005, will increase the liquidity position, and will together with the fixed income make substantial resources available for expanding the Company. Ship Finance is likely to report strong earnings for the second half of the year and the Board is optimistic about the outlook for Company Forward Looking Statements This press release contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including Ship Finance management's examination of historical operating trends. Although Ship Finance believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, Ship Finance cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions. Important factors that, in the Company's view, could cause actual results to differ materially from those discussed in this press release include the strength of world economies and currencies, general market conditions including fluctuations in charter hire rates and vessel values, changes in demand in the tanker market as a result of changes in OPEC's petroleum production levels and world wide oil consumption and storage, changes in the Company's operating expenses including bunker prices, dry-docking and insurance costs, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors described from time to time in the reports filed by the Company with the United States Securities and Exchange Commission. August 19, 2004 The Board of Directors Ship Finance International Limited Hamilton, Bermuda Questions should be directed to: Contact: Tor Olav Troim: Chief Executive Officer +47 23 11 40 00 Tom Jebsen, Chief Financial Officer +47 23 11 40 00 SHIP FINANCE INTERNATIONAL LIMITED SECOND QUARTER REPORT (UNAUDITED)
- ----------------------------------------------------------------------------------------------- 2004 INCOME STATEMENT 2004 2003 2003 Apr-Jun (in thousands of $) Jan-Jun Jan-Dec Jan-Dec Predecessor (Audited) (Audited) - ----------------------------------------------------------------------------------------------- 93,247 Total operating revenues 219,513 - 695,068 798 Voyage expenses 8,971 - 148,533 23,739 Ship operating expenses 48,377 - 81,989 1,028 Administrative expenses 1,514 14 9,715 8,515 Depreciation 21,786 - 106,015 34,080 Total operating expenses 80,648 (14) 346,252 59,167 Operating income (loss) 138,865 (14) 348,816 794 Interest income 2,269 199 5,866 (23,490) Interest expense (48,929) (2,122) (35,117) - Share of results from associated - - 22,098 companies 25,743 Other financial items 13,991 - 3,591 (20) Foreign currency exchange gain (loss) 116 - (10,442) 62,194 Net income (loss) 106,312 (1,937) 334,812 - -----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------- CONDENSED BALANCE SHEET 2004 2003 2003 (in thousands of $) Jun 30 Dec 31 Dec 31 Predecessor (Audited) (Audited) - ----------------------------------------------------------------------------------------------- ASSETS Short term Cash and cash equivalents 40,024 565,500 26,519 Other current assets 125,974 211 84,545 Long term Newbuildings and vessel purchase options - - 8,370 Vessels and equipment, net 518,479 - 1,863,504 Investment in finance leases 1,501,102 - - Investment in associated companies - - 160,082 Deferred charges and other long-term assets 37,394 16,481 13,328 Total assets 2,222,973 582,192 2,156,348 LIABILITIES AND STOCKHOLDERS' EQUITY Short term Short term interest bearing debt 88,843 - 141,522 Amount due to parent - 102 299,166 Other current liabilities 26,286 4,015 43,546 Long term Long term interest bearing debt 1,465,431 580,000 850,088 Other long term liabilities - - - Stockholders' equity 642,413 (1,925) 822,026 Total liabilities and stockholders' equity 2,222,973 582,192 2,156,348 - -----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------- 2004 STATEMENT OF CASHFLOWS 2004 2003 2003 Apr-Jun (in thousands of $) Jan-Jun Jan-Dec Jan-Dec Predecessor (Audited) (Audited) - ----------------------------------------------------------------------------------------------- OPERATING ACTIVITIES 62,194 Net income (loss) 106,312 (1,937) 334,812 Adjustments to reconcile net income to net cash provided by operating activities 10,046 Depreciation and amortisation 28,368 69 107,034 - Unrealised foreign currency exchange (137) - 10,716 (gain) loss - Results from associated companies - - (22,098) (25,533) Adjustment of financial derivatives to (15,095) - (6,850) market value (488) Other (488) - (2,880) (19,142) Change in operating assets and (9,438) 1,868 (5,211) liabilities 27,077 Net cash provided by operating activities 109,522 - 415,523 INVESTING ACTIVITIES - Investments in associated companies, net - - (70,045) - Proceeds from sale of investments in - - 17,245 associated companies - Net maturity of loans receivable - 1,168 15,392 Repayment of investments in finance 26,654 - - leases 1,392 Net maturities (placement) of restricted 557,614 (565,500) - cash - Acquisition of subsidiaries, net of cash (1,061,793) - - acquired (55,254) Short-term loan advances to parent (55,254) - - company (38,470) Net cash provided by (used in) investing (532,779) (565,500) (51,632) activities FINANCING ACTIVITIES - Equity contribution from parent company 525,000 - - (83,437) Amount due to parent company - - (178,785) 39,400 Proceeds from long-term debt, net of 1,017,100 580,000 - fees paid (166) Debt fees paid (13,787) (14,500) (985) (32,351) Repayment of long-term debt (1,025,010) - (178,236) (9,538) Equity adjustment for charter rate (48,032) - - differential (86,092) Net cash provided by (used in) financing 455,271 565,500 (358,006) activities (97,485) Net increase (decrease) in cash and 32,014 - 5,885 cash equivalents 129,499 Cash and cash equivalents at start of - - 20,634 period 32,014 Cash and cash equivalents at end of 32,014 - 26,519 period - -----------------------------------------------------------------------------------------------
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised. Ship Finance International Limited ----------------------------------------- (Registrant) Date August 24, 2004 By /s/ Kate Blankenship ----------------------------------------- Kate Blankenship Secretary and Chief Accounting Officer 02089.0022 #507551 -----END PRIVACY-ENHANCED MESSAGE-----