6-K 1 d620245_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 November 2005 ---------------------------------------- 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 as Exhibit 1 is a copy of the press release of Ship Finance International Limited (the "Company") dated November 13, 2005. Exhibit 1 Ship Finance International Limited Interim Report July - September 2005 Highlights o Ship Finance reports a net income of $65.3 million and earnings per share of $0.87 for the third quarter of 2005. o Ship Finance announces an ordinary cash dividend of $0.45 per share, and a supplementary extraordinary dividend of $0.05 per share. Third Quarter and Nine Months Results Ship Finance International Limited ("Ship Finance" or the "Company") reports total operating revenues of $118.4 million, operating income of $80.1 million and net income of $65.3 million for the third quarter of 2005. Earnings per share for the quarter were $0.87. Currently, all but eight of the Company's vessels are trading under long term charters to Frontline Ltd ("Frontline"). Two of these vessels, the Company's first containerships, are on a medium and short term time charter to unrelated third parties. In the third quarter, operating revenues include $26.8 million of accrued profit share due from Frontline under long term charter agreements. The Company estimates that an additional $22.2 million in profit share has accumulated, however this cannot yet be accounted for in accordance with U.S. generally accepted accounting principles. The unrecognised income of $22.2 million will be recognised in the fourth quarter provided Ship Finance's vessels continue to earn in excess of the fixed charter rates received from Frontline. The average daily time charter equivalents ("TCEs") earned by Frontline in the third quarter in the spot and time charter period market from the Company's VLCCs, Suezmax tankers, and Suezmax OBO carriers were $37,700, $25,400 and $34,700, respectively. In July 2005, the Company drew the remaining $158.4 million under its $350 million bank debt facility. As at September 30, 2005, the Company had interest rate swaps with a total notional principal of $572.6 million and an average interest rate of 3.7% percent. In the third quarter other financial items include a gain of $8.1 million that is attributable to the mark to market valuations of interest rate swaps compared with a loss of $8.3 million in the second quarter and a gain of $12.1 million in the first quarter. Ship Finance announces net income of $126.5 million for the nine months ended September 30, 2005 equivalent to earnings per share of $1.69. The average daily time charter equivalents ("TCEs") earned by Frontline in the spot and time charter period market from the Company's VLCCs, Suezmax tankers, and Suezmax OBO carriers were $56,400, $39,300 and $35,600, respectively. As at September 30, 2005, the Company had total cash and cash equivalents of $71.8 million, of which $2.9 million is restricted. Cash provided by operating activities in the quarter was $40.5 million, net cash provided by investing activities was $59.6 million and net cash used in financing activities was $81.0 million. In August 2005 the Company sold a Suezmax tanker, Front Hunter, for net proceeds of $71.0 million. A $3.8 million termination payment has been accrued as a result of the termination of the charter. In addition, Frontline will have the right to sell to Ship Finance and charter back its newbuilding VLCC which is due for delivery in July 2006. A gain of approximately $25.8 million was incurred upon the sale of this vessel; however, this gain has been deferred in the financial statements as the termination of the charter with Frontline will give rise to a discounted rate for the new charter established for VLCC newbuilding. When and if the charter commences, this deferred gain will be amortised over the life of the replacement charter, in line with the embedded discount. Corporate and Other Matters On November 13, 2005 the Board declared a dividend of $0.50 per share which represents an ordinary cash dividend of $0.45 per share, and a supplementary extraordinary dividend of $0.05 per share. The record date for the dividend is November 29, 2005, ex dividend date is November 25, 2005 and the dividend will be paid on or about December 13, 2005. In September 2005, the Company took delivery of a second newbuilding containership. The vessel is trading on short term time charter until December 2005. In the third quarter the Company repurchased $30.8 million of its 8.5% Notes, and has done another $1.0 million in the current quarter bringing the total amount repurchased to date in 2005 to $73.2 million. Outstanding amount under the bond indenture is currently $457.1 million. In July the Company bought back and cancelled 100,000 of its shares pursuant to its existing authority. At September 30, 2005 74,600,837 ordinary shares were outstanding and the weighted average number of shares outstanding for the quarter and nine months then ended was 74,606,272 and 74,781,057 respectively. In the current quarter the Company has continued the repurchase and has so far bought back another 710,100 shares. Total outstanding shares are thereby currently 73,890,737. Market The overall downward trend of the VLCC market witnessed in the second quarter of the year shifted to a significantly more positive trend during the third quarter. July started off on a rebound, seeing a peak in rates at Worldscale ("WS") 107 for the benchmark route from the Arabian Gulf to the East. The market experienced great volatility during the quarter, demonstrated by a fall in rates down to WS 60 levels in the first half of August. However, at the end of the quarter the rates rose dramatically, seeing fixtures being concluded at WS 105 levels at period end. The average WS rate from Arabian Gulf to the East was about WS 83 compared to WS 72 in the second quarter of 2005. This equates to a TCE of approximately $34,000 per day. The Suezmax market experienced a downward trend compared to the second quarter. The benchmark route from West Africa to the East coast of U.S. started off falling from a peak in rates at the end of the second quarter down to WS 100 levels. The rates remained relatively stable until the end of September, when the market strengthened considerably and rates rose to WS 165 at period end. The average WS rate from West Africa to the East coast of the U.S. was about 115, or approximately $25,500 per day, compared to WS 133 in the second quarter. The hurricane activity in the Gulf of Mexico during the quarter led to shut downs of refinery capacity and production capacity. The shut downs boosted the U.S. demand for sweeter crude from West Africa. Consequently, a larger portion of heavier, sour crude from the Caribbean went eastwards. Combined with a seasonal strengthening of the market, the increase in long haul transportation stimulated the demand side, and led to an upwards pressure on rates. The International Energy Agency (IEA) reported in its October report an average OPEC oil production, including Iraq, of approximately 29.7 million barrels per day during the third quarter of the year, an increase of 0.4 million barrels per day or 1.4 percent from the second quarter. OPEC announced in September that, should it be necessary, it would make the entire spare production capacity of 2 million barrels per day available. IEA estimates that world oil demand averaged 82.4 million barrels per day in the third quarter, a 0.7 percent increase from the second quarter in 2005. IEA further predicts that the average demand for 2005 in total will be 83.4 million barrels per day, or a 1.6 percent growth from 2004. The organisation estimates world oil demand in 2006 to average 85.2 million barrels per day, showing a belief in continued demand growth. The world trading VLCC fleet totalled 461 vessels at the end of the third quarter of 2005, an increase of 1.1 percent over the quarter. One VLCC was scrapped in the period and six were delivered. The total order book is at 98 vessels at the end of the third quarter, up from 94 vessels after the second quarter of 2005. This represents 21.3 percent of the current VLCC fleet. A total of ten VLCCs were ordered during the quarter. The world Suezmax fleet totalled 333 vessels at the end of the quarter, up from 328 vessels after the second quarter of 2005, a 1.6 percent fleet growth. No Suezmaxes were scrapped during the quarter and five were delivered. The total order book at the end of the quarter is 64, down from 69 after the second quarter. This represents 19.3 percent of the Suezmax fleet. No Suezmaxes were ordered during the period. The freight futures market maintains an optimistic view, demonstrated through the possibility of selling freight futures for the remainder of the year at a level that equates to TCEs for VLCCs of approximately $120,000, and $47,500 for the calendar year 2006. Strategy The Board has continued the effort to broaden the Company's long term leasing portfolio. Several transactions are under evaluation. The Board is aware of the fact that most shipping markets today have historic high new building and second-hand prices. This increases the risk in most transactions. The Board is looking for transactions which on a stand alone basis can provide a reasonable high financial leverage to optimize the return on equity. The Offshore market which is likely to have a better risk reward situation than most shipping markets can be an attractive alternative. Particularly since this market also provides good opportunities for charters to cover the risk by chartering out for long term period to major oil companies. The Company has of November 14 approximately USD 75 million in cash and approximately USD 120 million in additional debt capacity linked to unencumbered assets. Until new attractive transactions can be found, the Board will continue to consider buy back of stock and bonds as attractive opportunities to improve the short to medium term return to shareholders. Outlook The Company will as a function of the fixed charter portfolio and the profit sharing for 2005 generate a strong cash flow, of which the latter is payable in the first quarter of 2006 The results for the fourth quarter will be positively influenced by the accrued but not recorded profit sharing estimated to be $22.2 million by the end of September and further increased since that time. The Company is financially strong and well positioned to benefit from positive as well as negative developments in the underlying markets. The Board is optimistic about the future for the Company, and the opportunity to provide good long term return on equity to shareholders based on a moderate to low risk profile. 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. November 13, 2005 The Board of Directors Ship Finance International Limited Hamilton, Bermuda Questions should be directed to: Tor Olav Troim: Director, Ship Finance International Limited +44 7734 976 575 Oscar Spieler: Chief Executive Officer, Frontline Management AS +47 23 11 40 79 Tom Jebsen, Chief Financial Officer, Ship Finance International Limited +47 23 11 40 21 SHIP FINANCE INTERNATIONAL LIMITED THIRD QUARTER REPORT (UNAUDITED)
------------------ --------------- ----------------------------------------- --------------- ---------------- ---------------- 2004 2005 INCOME STATEMENT 2005 2004 2004 Jul-Sep Jul-Sep Jan-Sep Jan-Sep Jan-Dec (in thousands of $ except per share (audited) data) ------------------ --------------- ----------------------------------------- --------------- ---------------- ---------------- 121,074 118,403 Total operating revenues 295,572 340,587 492,069 795 1,158 Voyage expenses 3,000 9,765 9,978 23,619 31,411 Ship operating expenses 82,729 71,998 96,505 1,315 536 Administrative expenses 1,621 2,829 3,812 7,693 5,193 Depreciation 14,682 29,478 34,617 33,422 38,298 Total operating expenses 102,032 114,070 144,912 87,652 80,105 Operating income (loss) 193,540 226,517 347,157 (76) 1,048 Interest income 2,333 2193 2,567 (24,209) (25,384) Interest expense (84,242) (73,138) (95,933) (10,477) 9,516 Other financial items 14,862 3,512 8,780 (74) (19) Foreign currency exchange gain (loss) (21) 43 88 52,816 65,266 Net income (loss) 126,473 159,127 262,659 $0.70 $0.87 Basic earnings per share amounts ($) $1.69 $2.14 $3.52 -------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------- ---------------- ---------------- ---------------- 2005 2004 2004 BALANCE SHEET Sep 30 Sep 30 Dec 31 (in thousands of $) (audited) ---------------------------------------------------------------------------- ---------------- ---------------- ---------------- ASSETS Short term Cash, restricted cash and cash equivalents 71,808 69,171 34,572 Amount due from parent 4,155 - 4,864 Other current assets 148,391 123,279 192,421 Long term Newbuildings and vessel purchase options - 8,370 8,370 Vessels and equipment, net 322,362 347,126 236,305 Investment in finance leases 1,834,772 1,556,010 1,641,644 Deferred charges and other long-term assets 35,770 27,931 34,761 Total assets 2,417,258 2,131,887 2,152,937 LIABILITIES AND STOCKHOLDERS' EQUITY Short term Short term and current portion of long term interest bearing debt 122,519 88,845 91,308 Amount due to parent - - - Other current liabilities 23,082 19,544 8,958 Long term Long term interest bearing debt 1,702,768 1,412,875 1,387,586 Other long term liabilities 27,154 1,679 4,103 Stockholders' equity 541,735 608,944 660,982 Total liabilities and stockholders' equity 2,417,258 2,131,887 2,152,937 ---------------------------------------------------------------------------------------------------------------------------------
---------------- ------------- ------------------------------------------------ ---------------- --------------- ---------------- 2004 2005 2005 2004 2004 Jul-Sep Jul-Sep STATEMENT OF CASHFLOWS Jan-Sep Jan-Sep Jan-Dec (in thousands of $) (audited) ---------------- ------------- ------------------------------------------------ ---------------- --------------- ---------------- OPERATING ACTIVITIES 52,816 65,266 Net income (loss) 126,473 159,127 262,659 Adjustments to reconcile net income to net cash provided by operating activities 9,688 8,192 Depreciation and amortisation 31,706 38,057 44,102 (26) - Unrealised foreign currency exchange (gain) - (163) (164) loss 11,120 (8,076) Adjustment of financial derivatives to market (11,872) (3,975) (9,289) value (658) (3,461) Other (6,024) (1,146) (1,146) (25,519) (21,395) Change in operating assets and liabilities 104,447 (34,956) (117,634) 47,421 40,525 Net cash provided by operating activities 244,730 156,944 178,528 INVESTING ACTIVITIES 16,370 25,794 Repayment of investments in finance leases 72,922 43,024 61,990 2,085 (149) Net maturities (placement) of restricted cash 2,515 559,698 560,121 - 71,000 Sale of investment in finance lease 229,800 - 288 Acquisition of subsidiaries, net of cash (549,090) (536,793) (536,793) acquired (8,370) - Purchase of option - (8,370) (8,370) - 12,535 Investment in newbuilding - - - - - Short-term loan advances to parent company (55,254) (55,254) - (49,889) Purchase of vessels (49,889) - - 55,254 - Repayments from parent company 55,254 55,254 Net cash provided by (used in) investing (293,722) 57,559 76,948 65,339 59,579 activities FINANCING ACTIVITIES 24,696 - Proceeds from share issue - 24,696 24,696 - - Amount due to parent - - - (1,874) Repurchase of shares (5,874) - (14,713) - 141,950 Proceeds from long-term debt 1,571,429 1,017,100 1,017,100 (1,973) (1,423) Debt fees paid (8,512) (15,760) (15,760) (51,872) (178,659) Repayment of long-term debt (1,221,874) (1,076,882) (1,099,707) - (37,300) Cash dividends paid (112,201) - (78,902) (52,380) (3,699) Deemed dividends paid (134,225) (100,288) (58,997) (81,529) (81,005) Net cash provided by (used in) financing 88,743 (151,134) (226,283) activities 31,231 19,099 Net increase in cash and cash equivalents 39,751 63,369 29,193 32,138 49,845 Cash and cash equivalents at start of period 29,193 - - 63,369 68,944 Cash and cash equivalents at end of period 68,944 63,369 29,193 ----------------------------------------------------------------------------------------------------------------------------------
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 November 21, 2005 By /s/ Tom E. Jebsen ---------------------------- ---------------------------------- Tom E. Jebsen Chief Financial Officer 23153.0001 #620245