-----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, Lqe1cDNeSjuuecEep70qVvQXZ81pcN0QVOj+SuO756NtH7wa6nrJwqTBqIVlF560 MHb7NjUyp07iz3I9iULlyg== /in/edgar/work/0000911971-00-000008/0000911971-00-000008.txt : 20001115 0000911971-00-000008.hdr.sgml : 20001115 ACCESSION NUMBER: 0000911971-00-000008 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEEKAY SHIPPING CORP CENTRAL INDEX KEY: 0000911971 STANDARD INDUSTRIAL CLASSIFICATION: [4412 ] IRS NUMBER: 000000000 STATE OF INCORPORATION: C5 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: SEC FILE NUMBER: 001-12874 FILM NUMBER: 766330 BUSINESS ADDRESS: STREET 1: TK HOUSE, BAYSIDE EXECUTIVE PARK STREET 2: WEST BAY ST & BLAKE RD, PO BOX AP-59213 CITY: NASSAU BAHAMAS STATE: C5 ZIP: 00000 BUSINESS PHONE: 8093228020 MAIL ADDRESS: STREET 1: TK HOUSE, BAYSIDE EXECUTIVE PARK STREET 2: WEST BAY ST & BLAKE RD, PO BOX AP-59213 CITY: NASSAU BAHAMAS STATE: C5 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: VIKING STAR SHIPPING INC DATE OF NAME CHANGE: 19930914 6-K 1 0001.txt FORM 6-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 6-K Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2000 TEEKAY SHIPPING CORPORATION (Exact name of Registrant as specified in its charter) TK House Bayside Executive Park West Bay Street & Blake Road P.O. Box AP-59213, Nassau, Bahamas (Address of principal executive office) [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-_______ ] TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 INDEX PART I: FINANCIAL INFORMATION PAGE Item 1. Financial Statements Independent Accountants' Report......................................3 Consolidated Statements of Income and Retained Earnings for the three and nine months ended September 30, 2000 and 1999......4 Consolidated Balance Sheets September 30, 2000 and December 31, 1999.............................5 Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and 1999................6 Notes to Consolidated Financial Statements...........................7 Schedule A to the Consolidated Financial Statements.................11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...........................................15 Item 3. Market Rate Risks...................................................21 PART II: OTHER INFORMATION...................................................22 SIGNATURES...................................................................23 INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION To the Shareholders and Board of Directors of Teekay Shipping Corporation We have reviewed the accompanying consolidated balance sheet of Teekay Shipping Corporation and subsidiaries as of September 30, 2000, and the related consolidated statements of income and retained earnings for the three and nine month periods ended September 30, 2000 and 1999, and the related consolidated statements of cash flows for the nine month periods ended September 30, 2000 and 1999. Our review also included the financial schedule listed in Index Item 1. These financial statements and schedule are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements and schedule referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of Teekay Shipping Corporation and subsidiaries as of December 31, 1999, and the related consolidated statements of income and retained earnings, and cash flows for the nine month period then ended, not presented herein, and in our report dated February 11, 2000, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet and related schedule as of December 31, 1999, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Nassau, Bahamas, /s/ ERNST & YOUNG October 25, 2000 Chartered Accountants TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (in thousands of U.S. dollars, except per share amounts)
Three Months Ended Nine Months Ended September 30, September 30, --------------- --------------- 2000 1999 2000 1999 ---- ---- ---- ---- $ $ $ $ (unaudited) (unaudited) NET VOYAGE REVENUES Voyage revenues 238,686 136,932 622,148 328,570 Voyage expenses 63,791 49,138 184,566 99,859 - ----------------------------------------------------- ----------------- -------------- -------------- -------------- Net voyage revenues 174,895 87,794 437,582 228,711 - ----------------------------------------------------- ----------------- -------------- -------------- -------------- OPERATING EXPENSES Vessel operating expenses 31,161 36,256 100,653 81,840 Time-charter hire expense 14,218 10,783 40,298 27,433 Depreciation and amortization 25,249 24,287 74,915 65,958 General and administrative 8,930 9,616 27,511 24,080 - ----------------------------------------------------- ----------------- -------------- -------------- -------------- 79,558 80,942 243,377 199,311 - ----------------------------------------------------- ----------------- -------------- -------------- -------------- Income from vessel operations 95,337 6,852 194,205 29,400 - ----------------------------------------------------- ----------------- -------------- -------------- -------------- OTHER ITEMS Interest expense (18,022) (15,972) (57,287) (36,477) Interest income 2,277 2,058 9,667 5,048 Other income (loss) (note 8) 1,260 (1,663) 953 (4,092) - ----------------------------------------------------- ----------------- -------------- -------------- -------------- (14,485) (15,577) (46,667) (35,521) - ----------------------------------------------------- ----------------- -------------- -------------- -------------- Net income (loss) 80,852 (8,725) 147,538 (6,121) Retained earnings, beginning of the period 454,416 440,825 404,130 451,829 - ----------------------------------------------------- ----------------- -------------- -------------- -------------- 535,268 432,100 551,668 445,708 Dividends declared (8,210) (8,184) (24,610) (21,792) - ----------------------------------------------------- ----------------- -------------- -------------- -------------- Retained earnings, end of the period 527,058 423,916 527,058 423,916 - ----------------------------------------------------- ----------------- -------------- -------------- -------------- Earnings (loss) per common share (note 6) - Basic 2.10 (0.23) 3.85 (0.18) - Diluted 2.02 (0.23) 3.77 (0.18) - ----------------------------------------------------- ----------------- -------------- -------------- -------------- The accompanying notes are an integral part of the consolidated financial statements.
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands of U.S. dollars)
As at As at September 30, December 31, 2000 1999 ---- ---- $ $ - - (unaudited) (unaudited) ASSETS Current Cash and cash equivalents 219,721 220,327 Accounts receivable 45,572 30,753 Prepaid expenses and other assets 37,111 29,579 -------------------------------------------------------------------- ---------------------- ------------------- Total current assets 302,404 280,659 -------------------------------------------------------------------- ---------------------- ------------------- Marketable securities (note 2) 17,069 6,054 Vessels and equipment at cost, less accumulated depreciation of $664,704 (December 31, 1999 - $624,727) (note 5) 1,621,569 1,666,755 Investment in joint venture 21,667 19,402 Other assets 15,456 9,814 -------------------------------------------------------------------- ---------------------- ------------------- 1,978,165 1,982,684 -------------------------------------------------------------------- ---------------------- ------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Accounts payable 23,173 20,431 Accrued liabilities 44,215 39,515 Current portion of long-term debt (note 5) 83,861 66,557 -------------------------------------------------------------------- ---------------------- ------------------- Total current liabilities 151,249 126,503 -------------------------------------------------------------------- ---------------------- ------------------- Long-term debt (note 5) 839,096 1,018,610 Other long-term liabilities 8,295 3,400 -------------------------------------------------------------------- ---------------------- ------------------- Total liabilities 998,640 1,148,513 -------------------------------------------------------------------- ---------------------- ------------------- Minority interest 3,800 2,104 Stockholders' equity Capital stock (note 6) 448,667 427,937 Retained earnings 527,058 404,130 -------------------------------------------------------------------- ---------------------- ------------------- Total stockholders' equity 975,725 832,067 -------------------------------------------------------------------- ---------------------- ------------------- 1,978,165 1,982,684 -------------------------------------------------------------------- ---------------------- ------------------- Commitments and contingencies (note 7) The accompanying notes are an integral part of the consolidated financial statements.
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of U.S. dollars)
Nine Months Ended September 30, 2000 1999 ---- ---- $ $ (unaudited) Cash and cash equivalents provided by (used for) OPERATING ACTIVITIES Net income (loss) 147,538 (6,121) Adjustment to reconcile net income (loss) to net cash flow from operating activities: Depreciation and amortization 74,915 65,958 Equity income (net of dividends received of $2.98 million) (2,319) - Future income taxes 1,500 1,500 Loss on disposition of assets 1,004 - Other - net (316) (63) Change in non-cash working capital items related to operating activities (12,969) (2,578) - ------------------------------------------------------------------------ -------------------- ------------------ Net cash flow from operating activities 209,353 58,696 - ------------------------------------------------------------------------ -------------------- ------------------ FINANCING ACTIVITIES Proceeds from long-term debt 11,000 50,000 Scheduled repayments of long-term debt (27,484) (16,586) Prepayment of long-term debt (145,726) (10,000) Proceeds from stock options exercised 20,710 - Cash dividends paid (24,590) (21,771) Other 3,395 (605) - ------------------------------------------------------------------------ -------------------- ------------------ Net cash flow from financing activities (162,695) 1,038 - ------------------------------------------------------------------------ -------------------- ------------------ INVESTING ACTIVITIES Expenditures for vessels and equipment (35,705) (39,914) Expenditures for drydocking (8,125) (3,699) Proceeds from disposition of assets 9,713 - Net cash acquired through purchase of Bona Shipholding Ltd. (note 9) - 51,774 Acquisition costs related to purchase of Bona Shipholding Ltd. (note 9) (2,247) (6,231) Proceeds on sale of available-for-sale securities - 21,029 Purchases of available-for-sale securities (10,900) - - ------------------------------------------------------------------------ -------------------- ------------------ Net cash flow from investing activities (47,264) 22,959 - ------------------------------------------------------------------------ -------------------- ------------------ (Decrease) increase in cash and cash equivalents (606) 82,693 Cash and cash equivalents, beginning of the period 220,327 66,133 - ------------------------------------------------------------------------ -------------------- ------------------ Cash and cash equivalents, end of the period 219,721 148,826 - ------------------------------------------------------------------------ -------------------- ------------------ The accompanying notes are an integral part of the consolidated financial statements.
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (all tabular amounts stated in thousands of U.S. dollars, except share data) (Information as at September 30, 2000 and for the Three and Nine Month Periods Ended September 30, 2000 and 1999 is unaudited) 1. Basis of Presentation The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States and the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures required by generally accepted accounting principles for complete annual financial statements have been omitted and, therefore, it is suggested that these interim financial statements be read in conjunction with the Company's audited financial statements for the nine month period ended December 31, 1999. In the opinion of management, these statements reflect all adjustments (consisting only of normal recurring accruals), necessary to present fairly, in all material respects, the Company's consolidated financial position, results of operations and cash flows for the interim periods presented. The results of operations for the three and nine month periods ended September 30, 2000 are not necessarily indicative of those for a full fiscal year. 2. Marketable Securities The Company's investments in marketable securities are classified as available-for-sale securities and are carried at fair value. Net unrealized gains or losses on available-for-sale securities, if material, are reported as a separate component of stockholders' equity. 3. Cash Flows Cash interest paid during the nine month periods ended September 30, 2000 and 1999 totalled approximately $62,004,000 and $57,087,000, respectively. 4. Income Taxes The legal jurisdictions of the countries in which Teekay and the majority of its subsidiaries are incorporated do not impose income taxes upon shipping-related activities. The Company's Australian ship-owning subsidiaries are subject to income taxes (see Note 8). The Company accounts for such taxes using the liability method pursuant to Statement of Financial Accounting Standards No. 109, " Accounting for Income Taxes". 5. Long-Term Debt September 30, December 31, 2000 1999 $ $ --------------------------- Revolving Credit Facilities................ 525,000 634,000 First Preferred Ship Mortgage Notes (8.32%) due through 2008.......................... 189,274 225,000 Term Loans due through 2009 ..................208,683 226,167 ------- --------- 922,957 1,085,167 Less current portion.......................... 83,861 66,557 ------- --------- 839,096 1,018,610 ======= ========= TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (all tabular amounts stated in thousands of U.S. dollars, except share data) (Information as at September 30, 2000 and for the Three and Nine Month Periods Ended September 30, 2000 and 1999 is unaudited) The Company has two long-term Revolving Credit Facilities (the "Revolvers") available which, as at September 30, 2000, provided for borrowings of up to $620.0 million. Interest payments are based on LIBOR (September 30, 2000: 6.8%; December 31, 1999: 6.0%) plus a margin depending on the financial leverage of the Company; at September 30, 2000 the margins ranged between 0.5% and 0.85% (December 31, 1999: 0.6% and 0.9%). The amount available under the Revolvers reduces semi-annually with final balloon reductions in 2006 and 2008. The Revolvers are collateralized by first priority mortgages granted on forty of the Company's Aframax tankers and oil/bulk/ore carriers, together with certain other related collateral, and a guarantee from the Company for all amounts outstanding under the Revolvers. The 8.32% First Preferred Ship Mortgage Notes due February 1, 2008 (the "8.32% Notes") are collateralized by first preferred mortgages on seven of the Company's Aframax tankers, together with certain other related collateral, and are guaranteed by seven subsidiaries of the Company that own the mortgaged vessels (the "8.32% Notes Guarantor Subsidiaries") to a maximum of 95% of the fair value of their net assets. As at September 30, 2000, the fair value of these net assets approximated $221.5 million. The 8.32% Notes are also subject to a sinking fund, which will retire $45.0 million principal amount of the 8.32% Notes on each February 1, commencing 2004. Condensed financial information regarding the Company, the 8.32% Notes Guarantor Subsidiaries, and non-guarantor subsidiaries of the Company is set out in Schedule A of these consolidated financial statements. The Company has several term loans outstanding, which, as at September 30, 2000, totalled $208.7 million. Interest payments are based on LIBOR plus a margin. At September 30, 2000, the margins ranged between 0.55% and 1.25%. The term loans reduce in quarterly or semi-annual payments with varying maturities through 2009. All term loans of the Company are collateralized by first preferred mortgages on the vessels to which the loans relate, together with certain other collateral, and guarantees from the Company. As at September 30, 2000, the Company was committed to a series of interest rate swap agreements whereby $100.0 million of the Company's floating rate debt was swapped with fixed rate obligations having an average remaining term of 1.73 years, expiring between December 2001 and December 2002. These agreements effectively change the Company's interest rate exposure on $100.0 million of debt from a floating LIBOR rate to an average fixed rate of 6.7%. The Company is exposed to credit loss in the event of non-performance by the counter parties to the interest rate swap agreements; however, the Company does not anticipate non-performance by any of the counter parties. 6. Capital Stock
Authorized 25,000,000 Preferred Stock with a par value of $1 per share 725,000,000 Common Stock with a par value of $0.001 per share --------------------------------------- ---------------- --------------- ------------- ------------- Common Thousands Preferred Thousands Issued and outstanding Stock of shares Stock of shares $ $ --------------------------------------- ---------------- --------------- ------------- ------------- Balance December 31, 1999 427,937 38,064 - - Reinvested dividends 20 1 - - Exercise of stock options 20,710 893 - - --------------------------------------- ---------------- --------------- ------------- ------------- Balance September 30, 2000 448,667 38,958 - - --------------------------------------- ---------------- --------------- ------------- -------------
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (all tabular amounts stated in thousands of U.S. dollars, except share data) (Information as at September 30, 2000 and for the Three and Nine Month Periods Ended September 30, 2000 and 1999 is unaudited) As at September 30, 2000, the Company had reserved 6,299,000 shares of Common Stock for issuance upon exercise of options granted pursuant to the Company's 1995 Stock Option Plan. As at September 30, 2000, options to purchase a total of 3,052,000 shares of the Company's Common Stock were outstanding, of which 1,644,000 options were then exercisable at prices ranging from $16.875 to $33.50 per share. The remaining outstanding options have exercise prices ranging from $16.875 to $33.50 per share. All outstanding options expire between July 19, 2005 and March 6, 2010, ten years after the date of each respective grant. The Company's basic earnings per share is based upon the following weighted average number of common shares outstanding: 38,549,937 shares and 38,276,111 shares for the three and nine month periods ended September 30, 2000; and 38,063,639 shares and 34,256,746 shares for the three and nine month periods ended September 30, 1999. Diluted earnings per share is based upon the following weighted average number of common shares outstanding: 39,983,038 shares and 39,156,229 shares for the three and nine month periods ended September 30, 2000; and 38,063,639 shares and 34,257,646 shares for the three and nine month periods ended September 30, 1999. 7. Commitments and Contingencies The Company has guaranteed 50% of the outstanding mortgage debt in Soponata-Teekay Limited, a joint venture company, totalling $27.5 million as at September 30, 2000. The Company has a 50% interest in the joint venture company which owns three vessels (one Aframax and two Suezmax tankers). The Company has guaranteed its share of committed, uncalled capital in certain limited partnerships which own two of the Company's oil/bulk/ore carriers, totalling $1.7 million as at September 30, 2000. As at September 30, 2000, the Company was committed to foreign exchange contracts for the forward purchase of approximately Japanese yen 100 million, Singapore dollars 3.9 million and Norwegian kroner 12.3 million for U.S. dollars, at an average rate of Japanese yen 105.8 per U.S. dollar, Singapore dollar 1.71 per U.S. dollar and Norwegian kroner 8.18 per U.S. dollar, respectively, for the purpose of hedging accounts payable and accrued liabilities. 8. Other Income (Loss)
Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2000 1999 2000 1999 $ $ $ $ ---------------- -------------- ----------------- ---------------- Loss on disposition of assets............... - - (1,004) - Equity income from joint venture............ 3,282 - 5,294 - Future income taxes......................... (500) (500) (1,500) (1,500) Miscellaneous............................... (1,522) (1,163) (1,837) (2,592) ------- ------- ------- ------- 1,260 (1,663) 953 (4,092) ======= ======= ======= =======
9. Acquisition of Bona Shipholding Ltd. On June 11, 1999, Teekay purchased Bona Shipholding Ltd. ("Bona") for aggregate consideration (including estimated transaction expenses of $19.0 million) of $450.3 million, consisting of $39.9 million in cash, $294.0 million of assumed debt (net of cash acquired of $91.7 million) and the balance of $97.4 million in shares of Teekay's Common Stock. Bona's operating results are reflected in these financial statements commencing the effective date of the acquisition. 10. Recent Accounting Pronouncements FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by FASB Statements No. 137 and 138, is effective for fiscal periods beginning after June 15, 2000. This statement requires recording all derivative instruments as assets or liabilities measured at fair value. Management has not determined the impact, if any, that the adoption of the new statements will have on the consolidated results of operations or financial position of the Company. TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS (in thousands of U.S. dollars) (unaudited) SCHEDULE A
Three Months Ended September 30, 2000 ------------------------------------------------------------------------------- 8.32% Notes Teekay Teekay Guarantor Non-Guarantor Shipping Corp. Shipping Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ ------------------------------------------------------------------------------- Net voyage revenues - 8,492 210,451 (44,048) 174,895 Operating expenses 56 7,657 110,608 (38,763) 79,558 ------------------------------------------------------------------------------- Income (loss) from vessel operations (56) 835 99,843 (5,285) 95,337 Net interest expense (3,643) - (12,101) (1) (15,745) Equity in net income of subsidiaries 84,551 - - (84,551) - Other income - - 1,259 1 1,260 ------------------------------------------------------------------------------- Net income 80,852 835 89,001 (89,836) 80,852 Retained earnings (deficit), beginning of the period 454,416 (26,773) 456,151 (429,378) 454,416 Dividends declared (8,210) - - - (8,210) =============================================================================== Retained earnings (deficit), end of the period 527,058 (25,938) 545,152 (519,214) 527,058 =============================================================================== Three Months Ended September 30, 1999 ------------------------------------------------------------------------------- 8.32% Notes Teekay Teekay Guarantor Non-Guarantor Shipping Corp. Shipping Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ ------------------------------------------------------------------------------- Net voyage revenues - 9,397 120,140 (41,743) 87,794 Operating expenses 180 8,180 114,325 (41,743) 80,942 ------------------------------------------------------------------------------- Income (loss) from vessel operations (180) 1,217 5,815 - 6,852 Net interest income (expense) (4,823) 49 (9,081) (59) (13,914) Equity in net income (loss) of subsidiaries (3,722) - - 3,722 - Other income (loss) - - 4,790 (6,453) (1,663) ------------------------------------------------------------------------------- Net income (loss) (8,725) 1,266 1,524 (2,790) (8,725) Retained earnings (deficit), beginning of the period 440,825 (32,217) 369,869 (337,652) 440,825 Dividends declared (8,184) - - - (8,184) =============================================================================== Retained earnings (deficit), end of the period 423,916 (30,951) 371,393 (340,442) 423,916 =============================================================================== (See Note 5)
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS (in thousands of U.S. dollars) (unaudited) SCHEDULE A
Nine Months Ended September 30, 2000 --------------------------------------------------------------------------- Teekay 8.32% Notes Teekay Shipping Guarantor Non-Guarantor Shipping Corp. Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ --------------------------------------------------------------------------- Net voyage revenues - 26,372 542,255 (131,045) 437,582 Operating expenses 323 23,406 332,416 (112,768) 243,377 --------------------------------------------------------------------------- Income (loss) from vessel operations (323) 2,966 209,839 (18,277) 194,205 Net interest income (expense) (13,342) 46 (34,324) - (47,620) Equity in net income of subsidiaries 160,517 - - (160,517) - Other income 686 - 267 - 953 --------------------------------------------------------------------------- Net income 147,538 3,012 175,782 (178,794) 147,538 Retained earnings (deficit), beginning of the period 404,130 (28,950) 369,370 (340,420) 404,130 Dividends declared (24,610) - - - (24,610) =========================================================================== Retained earnings (deficit), end of the period 527,058 (25,938) 545,152 (519,214) 527,058 =========================================================================== Nine Months Ended September 30, 1999 --------------------------------------------------------------------------- Teekay 8.32% Notes Teekay Shipping Guarantor Non-Guarantor Shipping Corp. Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ --------------------------------------------------------------------------- Net voyage revenues - 28,295 331,846 (131,430) 228,711 Operating expenses 397 25,606 304,738 (131,430) 199,311 --------------------------------------------------------------------------- Income (loss) from vessel operations (397) 2,689 27,108 - 29,400 Net interest income (expense) (14,346) 78 (17,161) - (31,429) Equity in net income of subsidiaries 8,622 - - (8,622) - Other income (loss) - - 15,129 (19,221) (4,092) --------------------------------------------------------------------------- Net income (loss) (6,121) 2,767 25,076 (27,843) (6,121) Retained earnings (deficit), beginning of the period 451,829 (33,718) 346,317 (312,599) 451,829 Dividends declared (21,792) - - - (21,792) =========================================================================== Retained earnings (deficit), end of the period 423,916 (30,951) 371,393 (340,442) 423,916 =========================================================================== (See Note 5)
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES CONDENSED BALANCE SHEETS (in thousands of U.S. dollars) (unaudited) SCHEDULE A
As at September 30, 2000 --------------------------------------------------------------------------------- 8.32% Notes Teekay Teekay Shipping Guarantor Non-Guarantor Shipping Corp. Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ --------------------------------------------------------------------------------- ASSETS Cash and cash equivalents 508 - 219,213 - 219,721 Other current assets 45 700 177,938 (96,000) 82,683 --------------------------------------------------------------------------------- Total current assets 553 700 397,151 (96,000) 302,404 Vessels and equipment (net) - 283,337 1,338,232 - 1,621,569 Advances due from subsidiaries 62,290 - - (62,290) - Other assets (principally marketable securities 1,103,156 - 32,525 (1,103,156) 32,525 and investments in subsidiaries) Investment in joint venture - - 21,667 - 21,667 --------------------------------------------------------------------------------- 1,165,999 284,037 1,789,575 (1,261,446) 1,978,165 ================================================================================= LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities 1,000 2,243 244,006 (96,000) 151,249 Long-term debt 189,274 - 658,117 - 847,391 Due to (from) affiliates - (61,598) 195,791 (134,193) - --------------------------------------------------------------------------------- Total liabilities 190,274 (59,355) 1,097,914 (230,193) 998,640 --------------------------------------------------------------------------------- Minority interest - - 3,800 - 3,800 Stockholders' Equity Capital Stock 448,667 23 5,943 (5,966) 448,667 Contributed capital - 369,307 136,766 (506,073) - Retained earnings (deficit) 527,058 (25,938) 545,152 (519,214) 527,058 --------------------------------------------------------------------------------- Total stockholders' equity 975,725 343,392 687,861 (1,031,253) 975,725 --------------------------------------------------------------------------------- 1,165,999 284,037 1,789,575 (1,261,446) 1,978,165 ================================================================================= As at December 31, 1999 --------------------------------------------------------------------------------- 8.32% Notes Teekay Teekay Shipping Guarantor Non-Guarantor Shipping Corp. Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ --------------------------------------------------------------------------------- ASSETS Cash and cash equivalents 210 39,652 180,465 - 220,327 Other current assets 42 582 162,084 (102,376) 60,332 --------------------------------------------------------------------------------- Total current assets 252 40,234 342,549 (102,376) 280,659 Vessels and equipment (net) - 294,800 1,371,955 - 1,666,755 Advances due from subsidiaries 121,415 - - (121,415) - Other assets (principally marketable securities 943,389 - 15,873 (943,394) 15,868 and investments in subsidiaries) Investment in joint venture - - 19,402 - 19,402 --------------------------------------------------------------------------------- 1,065,056 335,034 1,749,779 (1,167,185) 1,982,684 ================================================================================= LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities 7,989 991 227,331 (109,808) 126,503 Long-term debt 225,000 - 797,010 - 1,022,010 Due to (from) affiliates - (6,337) 211,255 (204,918) - --------------------------------------------------------------------------------- Total liabilities 232,989 (5,346) 1,235,596 (314,726) 1,148,513 --------------------------------------------------------------------------------- Minority interest - - 2,104 - 2,104 Stockholders' Equity Capital Stock 427,937 23 5,943 (5,966) 427,937 Contributed capital - 369,307 136,766 (506,073) - Retained earnings (deficit) 404,130 (28,950) 369,370 (340,420) 404,130 --------------------------------------------------------------------------------- Total stockholders' equity 832,067 340,380 512,079 (852,459) 832,067 --------------------------------------------------------------------------------- 1,065,056 335,034 1,749,779 (1,167,185) 1,982,684 =================================================================================
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS (in thousands of U.S. dollars) (unaudited) SCHEDULE A
Nine Months Ended September 30, 2000 ------------------------------------------------------------------------- Teekay 8.32% Notes Non- Teekay Shipping Guarantor Guarantor Shipping Corp. Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ -------------- --------------- ------------- ------------ --------------- Cash and cash equivalents provided by (used for) OPERATING ACTIVITIES -------------- --------------- ------------- ------------ --------------- Net cash flow from operating activities (19,221) 16,157 212,417 - 209,353 -------------- --------------- ------------- ------------ --------------- FINANCING ACTIVITIES Proceeds from long-term debt - - 11,000 - 11,000 Repayments of long-term debt - - (27,484) - (27,484) Prepayments of long-term debt (35,726) - (110,000) - (145,726) Other 55,245 (55,261) (469) - (485) -------------- --------------- ------------- ------------ --------------- -------------- --------------- ------------- ------------ --------------- Net cash flow from financing activities 19,519 (55,261) (126,953) - (162,695) -------------- --------------- ------------- ------------ --------------- INVESTING ACTIVITIES Expenditures for vessels and equipment - (548) (43,282) - (43,830) Proceeds from disposition of assets - - 9,713 - 9,713 Acquisition costs related to purchase of Bona - Shipholding Ltd. - - (2,247) (2,247) Other - - (10,900) - (10,900) -------------- --------------- ------------- ------------ --------------- -------------- --------------- ------------- ------------ --------------- Net cash flow from investing activities - (548) (46,716) - (47,264) -------------- --------------- ------------- ------------ --------------- Increase (decrease) in cash and cash equivalents 298 (39,652) 38,748 - (606) Cash and cash equivalents, beginning of the period 210 39,652 180,465 - 220,327 ============== =============== ============= ============ =============== Cash and cash equivalents, end of the period 508 - 219,213 - 219,721 ============== =============== ============= ============ =============== Nine Months Ended September 30, 1999 ------------------------------------------------------------------------- -------------- --------------- ------------- ------------ --------------- Teekay 8.32% Notes Non- Teekay Shipping Guarantor Guarantor Shipping Corp. Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ -------------- --------------- ------------- ------------ --------------- Cash and cash equivalents provided by (used for) OPERATING ACTIVITIES -------------- --------------- ------------- ------------ --------------- Net cash flow from operating activities (19,164) 16,849 61,011 - 58,696 -------------- --------------- ------------- ------------ --------------- FINANCING ACTIVITIES Proceeds from long-term debt - - 50,000 - 50,000 Repayments of long-term debt - - (16,586) - (16,586) Prepayments of long-term debt - - (10,000) (10,000) Other (26,061) (9,286) 12,971 - (22,376) -------------- --------------- ------------- ------------ --------------- Net cash flow from financing activities (26,061) (9,286) 36,385 - 1,038 -------------- --------------- ------------- ------------ --------------- INVESTING ACTIVITIES Expenditures for vessels and equipment - (74) (43,539) - (43,613) Net cash acquired through purchase of Bona - Shipholding Ltd. 45,543 - - 45,543 Other - - 21,029 - 21,029 -------------- --------------- ------------- ------------ --------------- Net cash flow from investing activities 45,543 (74) (22,510) - 22,959 -------------- --------------- ------------- ------------ --------------- Increase in cash and cash equivalents 318 7,489 74,886 - 82,693 Cash and cash equivalents, beginning of the period 3 27,345 38,785 - 66,133 ============== =============== ============= ============ =============== Cash and cash equivalents, end of the period 321 34,834 113,671 - 148,826 ============== =============== ============= ============ =============== (See Note 5)
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SEPTEMBER 30, 2000 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Teekay Shipping Corporation (the "Company") changed its fiscal year end from March 31 to December 31, commencing December 31, 1999, in order to facilitate comparison of its operating results to those of other companies in the transportation industry. RESULTS OF OPERATIONS General The Company is a leading provider of international crude oil and petroleum product transportation services to major oil companies, major oil traders and government agencies. The Company's fleet consists of 74 vessels (including four vessels time-chartered-in and three vessels owned by a joint venture), for a total cargo-carrying capacity of approximately 7.4 million tonnes. During the nine months ended September 30, 2000, approximately 65% of the Company's net voyage revenue was derived from spot voyages. The balance of the Company's revenue is generated by two other modes of employment: time-charters, whereby vessels are chartered to customers for a fixed period; and contracts of affreightment ("COAs"), whereby the Company carries an agreed quantity of cargo for a customer over a specified trade route over a given period of time. In the nine months ended September 30, 2000, approximately 14% of net voyage revenues were generated by time-charters and COAs priced on a spot market basis. In aggregate, approximately 79% of the Company's net voyage revenues during the nine months ended September 30, 2000 were derived from spot voyages or time-charters and COAs priced on a spot market basis, with the remaining 21% being derived from fixed-rate time charters and COAs. This dependence on the spot market, which is within industry norms, contributes to the volatility of the Company's revenue, cash flow from operations, and net income. Historically, the tanker industry has been cyclical, experiencing volatility in profitability and asset values resulting from changes in the supply of, and demand for, vessel capacity. In addition, tanker markets have historically exhibited seasonal variations in charter rates. Tanker markets are typically stronger in the winter months as a result of increased oil consumption in the Northern Hemisphere and unpredictable weather patterns that tend to disrupt vessel scheduling. In December 1997, the Company acquired two vessels and related shore support services from an Australian affiliate of Caltex Petroleum. These two tankers, together with one of the Company's existing Aframax tankers, have been time-chartered to the Caltex affiliate in connection with the Company's provision of Caltex's oil transportation requirements formerly provided by that affiliate. In addition, the Company has converted one of its existing vessels to a floating storage and off-loading vessel, which is sharing crews with the vessels employed in the Caltex arrangement (together with the other three vessels involved in this arrangement, the "Australian Vessels"). Vessel operating expenses for the Australian Vessels are substantially higher than those for the rest of the Company's fleet, primarily as a result of higher costs associated with employing an Australian crew. The time-charter rates (as defined below) for the Australian Vessels are correspondingly higher to compensate for these increased costs. During the nine months ended September 30, 2000, the Australian Vessels earned net voyage revenues of $26.1 million and an average TCE rate of $23,856, and incurred vessel operating expenses of $8.6 million, or $7,808 on a per ship per day basis. In comparison, during the nine months ended September 30, 1999, the Australian Vessels earned net voyage revenues of $27.6 million and an average TCE rate of $25,284, and incurred vessel operating expenses of $10.3 million, or $9,390 on a per ship per day basis. The results of the Australian Vessels are included in the Company's Consolidated Financial Statements included herein. Acquisition of Bona Shipholding Ltd. On June 11, 1999, the Company acquired Bona Shipholding Ltd. ("Bona") for aggregate consideration (including estimated transaction expenses of $19.0 million) of $450.3 million, consisting of $39.9 million in cash, $294.0 million of assumed debt (net of cash acquired of $91.7 million) and the balance of $97.4 million in shares of the Company's common stock. Bona was the third largest operator of medium-size tankers, controlling a fleet of vessels consisting of fifteen Aframax tankers, eight oil/bulk/ore carriers and, through a joint venture, 50% interests in one additional Aframax tanker and two Suezmax tankers. Bona engaged in the transportation of oil, oil products, and dry bulk commodities, primarily in the Atlantic region. Through this acquisition, the Company has combined Bona's market strength in the Atlantic region with the Company's franchise in the Indo-Pacific Basin. The acquisition of Bona has been accounted for using the purchase method of accounting. Bona's operating results are reflected in the Company's financial statements commencing June 11, 1999. Historically, the Company has depreciated its vessels for accounting purposes over an economic life of 20 years down to estimated residual values. Bona depreciated its vessels over an economic life of 25 years down to estimated scrap values, the method used by the majority of companies in the shipping industry. Effective April 1, 1999, the Company revised the estimated useful life of its vessels to 25 years and also replaced the estimated residual values with estimated scrap values. Since such changes, the Company's average depreciation expense per vessel has decreased from historical levels. As a result of the Bona acquisition, the Company's general and administrative expenses, while remaining relatively stable on a per vessel basis during the first few fiscal quarters of combined operations, have began to decline on a per vessel basis as efficiencies are obtained from the integration of the two companies' operations. The Company's interest expense has increased as a result of debt that was assumed as part of the acquisition. All oil/bulk/ore carriers ("O/B/Os") owned by Bona have been operated through an O/B/O pool managed by a subsidiary of Bona. Net voyage revenues from the O/B/O pool are currently included on a 100% basis in the Company's consolidated financial statements. Where the Company owns less than 50% of a vessel, the minority participants' share of the O/B/O pool is reflected as a time charter hire expense. The Company anticipates that these O/B/Os will earn lower average TCE rates than the rest of the Teekay fleet as these vessels command lower rates than modern Aframax tankers under typical market conditions, which reflects the lower capital cost of these vessels. Results of Operations Bulk shipping industry freight rates are commonly measured at the net voyage revenue level in terms of "time- charter equivalent" (or "TCE") rates, defined as voyage revenues less voyage expenses (excluding commissions), divided by revenue-generating ship-days for the round-trip voyage. Voyage revenues and voyage expenses are a function of the type of charter, either spot charter or time charter, and port, canal and fuel costs depending on the trade route upon which a vessel is sailing, in addition to being a function of the level of shipping freight rates. For this reason, shipowners base economic decisions regarding the deployment of their vessels upon anticipated TCE rates, and industry analysts typically measure bulk shipping freight rates in terms of TCE rates. Therefore, the discussion of revenue below focuses on net voyage revenue and TCE rates. Quarter Ended September 30, 2000 versus Quarter Ended September 30, 1999 Aframax TCE rates continued to strengthen in the third quarter of 2000 due to increased demand for modern tankers, arising from increased oil production and age discrimination by charterers. TCE rates are dependent on oil production levels, oil consumption growth, the number of vessels scrapped and charterers' preference for modern tankers. As a result of the Company's dependence on the tanker spot market, any fluctuations in Aframax TCE rates will impact the Company's revenues and earnings. The Company's net income was $80.9 million in the quarter ended September 30, 2000 compared to a net loss of $8.7 million in the quarter ended September 30, 1999, due mainly to the improvement in Aframax TCE rates. Income from Vessel Operations The Company's average fleet size in the quarter ended September 30, 2000 was unchanged from that of the same quarter one year ago. Net voyage revenues increased 99.2% to $174.9 million in the current quarter compared to a $87.8 million for the same quarter last year. This is the result of a 95.1% increase in the Company's average TCE rate in the current quarter to $27,331 from $14,008 in the same quarter last year. Vessel operating expenses, which include crewing, repairs and maintenance, insurance, stores and lubes, and communication expenses, decreased 14.1% to $31.2 million in the quarter ended September 30, 2000 from $36.3 million in the quarter ended September 30, 1999, mainly as a result of operating expense synergies arising from the Bona acquisition and lower operating expenses for the Australian fleet. Time-charter hire expense increased to $14.2 million in the quarter ended September 30, 2000, from $10.8 million in the quarter ended September 30, 1999, primarily due to an increase in TCE rates for the O/B/O pool. The minority pool participants' share of net voyage revenues which is reflected as time-charter hire expense was $7.7 million for the quarter ended September 30, 2000, compared to $4.8 million in the same quarter last year. The average number of vessels time-chartered-in by the Company, excluding the O/B/Os, was four in the quarters ended September 30, 1999 and 2000. Depreciation and amortization expense increased 4.0% to $25.2 million in the current quarter from $24.3 million in the same quarter last year, mainly due to an increase in drydock amortization expense of $2.4 million in the quarter ended September 30, 2000, compared to $1.8 million in the quarter ended September 30, 1999. General and administrative expenses decreased 7.1% to $8.9 million in the current quarter from $9.6 million in the same quarter last year, primarily as a result of overhead cost synergies from the Bona acquisition. Other Items Interest expense increased 12.8% to $18.0 million in the current quarter from $16.0 million in the same quarter last year, reflecting higher interest rates. Interest income was $2.3 million in the current quarter as compared to $2.1 million in the same quarter last year, representing an increase of 10.6%, as a result of increased interest rates and higher cash and marketable securities balances. Nine Months Ended September 30, 2000 versus Nine Months Ended September 30, 1999 Net income for the nine months ended September 30, 2000 was $147.5 million compared to a net loss of $6.1 million for the same period last year. The results for the current period included a loss of $1.0 million on asset sales. There were no asset sales in the previous period. Income from Vessel Operations The Company's average fleet size was 25.8% greater in the nine months ended September 30, 2000 compared to the same period one year ago, due mainly to the acquisition of Bona. Net voyage revenues increased 91.3% to $437.6 million in the current period compared to $228.7 million for the same period last year. This is a result of the increase in fleet size and a 46.7% increase in the Company's average TCE rate in the current period to $22,969 from $15,652 in the same period last year. Vessel operating expenses increased 23.0% to $100.7 million in the nine months ended September 30, 2000 from $81.8 million in the nine months ended September 30, 1999, primarily as a result of the increase in fleet size. Time-charter hire expense increased to $40.3 million in the nine months ended September 30, 2000, up from $27.4 million in the nine months ended September 30, 1999, primarily due to the Bona acquisition. The minority pool participants' share of net voyage revenues which is reflected as time-charter hire expense was $18.9 million for the nine months ended September 30, 2000, compared to $5.7 million in the same period last year. The average number of vessels time-chartered-in by the Company, excluding the O/B/Os, was five in the nine months ended September 30, 2000 compared to four in the nine months ended September 30, 1999. Depreciation and amortization expense increased 13.6% to $74.9 million in the current period from $66.0 million in the same period last year, reflecting the increase in fleet size arising from the acquisition of Bona, partially offset by the change in estimated useful life of the vessels from 20 to 25 years, effective April 1, 1999. Depreciation and amortization expense included amortization of drydocking costs of $6.7 million in the nine months ended September 30, 2000, compared to $5.9 million in the nine months ended September 30, 1999. General and administrative expenses rose 14.2% to $27.5 million in the current period from $24.1 million in the same period last year, primarily as a result of the acquisition of Bona, partially offset by overhead cost synergies related to the acquisition. Other Items Interest expense increased 57.0% to $57.3 million in the current period from $36.5 million in the same period last year, reflecting higher interest rates and the additional debt assumed as part of the Bona acquisition. Interest income was $9.7 million in the nine months ended September 30, 2000 as compared to $5.0 million in the same period last year, representing an increase of 91.5% as a result of increased interest rates and higher cash and marketable securities balances. The following table illustrates the relationship between fleet size (measured in ship-days), TCE performance, and operating results per calendar ship-day. To facilitate comparison to the prior periods' results, the figures in the table below include or exclude the results from the Company's Australian Vessels and O/B/Os acquired as part of the Bona acquisition as indicated:
- ------------------------------------------------------- -------------------------------- ------------------------------ Three Months Ended Nine Months Ended September 30 September 30 2000 1999 2000 1999 - ------------------------------------------------------- -- ----------- --- ------------- -- ----------- -- ------------ International Fleet (excluding ex-Bona O/B/Os and Australian crewed vessels): Average number of ships 58 58 59 50 Total calendar ship-days 5,380 5,371 16,281 13,516 Revenue-generating ship-days (A) 5,205 5,092 15,583 12,699 Net voyage revenue before commissions(B) (000's) $ 152,574 $ 67,540 $ 373,197 $ 190,330 - ------------------------------------------------------- -- ----------- --- ------------- -- ------------ TCE (B/A) $ 29,313 $ 13,264 $ 23,949 $ 14,988 - ------------------------------------------------------- -- ----------- --- ------------- -- ----------- -- ------------ Operating results per calendar ship-day: Net voyage revenue $ 27,525 $ 12,177 $ 22,241 $ 13,719 Vessel operating expense 5,259 5,577 5,285 5,363 General and administrative expense 1,377 1,485 1,406 1,554 Drydocking expense 442 408 420 494 - ------------------------------------------------------- -- ----------- --- ------------- -- ----------- -- ------------ Operating cash flow per calendar ship-day $ 20,447 $ 4,707 $ 15,130 $ 6,308 - ------------------------------------------------------- -- ----------- --- ------------- -- ----------- -- ------------ Australian Vessels: Operating cash flow per calendar ship-day $ 14,976 $ 14,297 $ 14,293 $ 14,326 - ------------------------------------------------------- -- ----------- --- ------------- -- ----------- -- ------------ Total Fleet (including ex-Bona O/B/Os and Australian crewed vessels): Operating cash flow per calendar ship-day $ 18,690 $ 5,130 $ 14,042 $ 6,678 - ------------------------------------------------------- -- ----------- --- ------------- -- ----------- -- ------------
LIQUIDITY AND CAPITAL RESOURCES As at September 30, 2000, the Company's total liquidity, which includes cash, marketable securities and undrawn borrowings, was $331.8 million, up from $237.4 million as at December 31, 1999, mainly as a result of an increase in net cash flow from operating activities due to higher TCE rates. Net cash flow from operating activities increased to $209.4 million in the nine months ended September 30, 2000 from $58.7 million in the same period one year ago, mainly reflecting the increase in TCE rates and increased fleet size as a result of the Bona acquisition. The Company's scheduled debt repayments were $27.5 million during the nine months ended September 30, 2000, compared to $16.6 million in the same period last year. Debt prepayments during the nine months ended September 30, 2000 totalled $145.7 million, of which $35.7 million was used for the repurchase of the Company's 8.32% Notes and the balance of $110.0 million was used to reduce the Company's Revolvers. Debt prepayments during the same period last year totalled $10.0 million. During the nine months ended September 30, 2000, the Company incurred capital expenditures for vessels and equipment of $35.7 million, consisting mainly of the purchase of a modern second-hand Aframax tanker. Cash expenditures for drydocking were $8.1 million in the nine months ended September 30, 2000 compared to $3.7 million over the same period one year ago. Dividends declared during the nine months ended September 30, 2000 were $24.6 million, or 64.5 cents per share. As part of its growth strategy, the Company will continue to consider strategic opportunities, including the acquisition of additional vessels and expansion into new markets. The Company may choose to pursue such opportunities through internal growth, joint ventures, or business acquisitions. The Company intends to finance any future acquisitions through various sources of capital, including internally generated cash flow, existing credit lines, additional debt borrowings, and the issuance of additional shares of capital stock. YEAR 2000 COMPLIANCE The Company relies on computer systems, software, databases, third party electronic data interchange interfaces and embedded processors to operate its business. The Company successfully implemented a program to systematically address the Year 2000 problem. The Company was Year 2000 compliant prior to the rollover to the Year 2000. The Company will continue to monitor electronic date recognition issues. FORWARD-LOOKING STATEMENTS This Report on Form 6-K for the quarterly period ended September 30, 2000 contains certain forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events and the Company's operations, performance and financial condition, including, in particular, statements regarding: TCE rates in the near-term; supply and demand for tankers; supply and demand for oil; and the Company's growth strategy and measures to implement such strategy. Words such as "expects," "intends," "plans," "believes," "anticipates," "estimates" and variations of such words and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to: changes in production of or demand for oil and petroleum products, either generally or in particular regions; the cyclical nature of the tanker industry and its dependence on oil markets; the supply of tankers available to meet the demand for transportation of petroleum products; charterers' preference for modern tankers; greater than anticipated levels of tanker newbuilding orders or less than anticipated rates of tanker scrapping; changes in trading patterns significantly impacting overall tanker tonnage requirements; changes in typical seasonal variations in tanker charter rates; the Company's dependence on spot oil voyages; competitive factors in the markets in which the Company operates; changes in environmental and applicable industry regulations; changes in tax laws; the Company's potential inability to achieve and manage growth; risks associated with operations outside the United States; the potential inability of the Company to generate internal cash flow and obtain additional debt or equity financing to fund capital expenditures; and other factors detailed from time to time in the Company's periodic reports filed with the U.S. Securities and Exchange Commission. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based. TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SEPTEMBER 30, 2000 PART I - FINANCIAL INFORMATION ITEM 3 - MARKET RATE RISKS The Company is exposed to market risk from foreign currency and changes in interest rate fluctuations. The Company uses interest rate swaps and forward foreign currency contracts to manage these risks, but does not use financial instruments for trading or speculative purposes. Interest Rate Risk The Company invests its cash and marketable securities in financial instruments with maturities of less than three months within the parameters of its investment policy and guidelines. The Company uses interest rate swaps to manage the impact of interest rate changes on earnings and cash flows. The differential to be paid or received under these swap agreements is accrued as interest rates change and is recognized as an adjustment to interest expense. Premiums and receipts, if any, are recognized as adjustments to interest expense over the lives of the individual contracts. Foreign Exchange Rate Risk The international tanker industry's functional currency is the U.S. dollar. Virtually all of the Company's revenues and most of its operating costs are in U.S. dollars. The Company incurs certain operating expenses, drydocking, and overhead costs in foreign currencies, the most significant of which are Japanese yen, Singapore dollars, Canadian dollars, Australian dollars and Norwegian kroner. During the nine months ended September 30, 2000, approximately 20% of vessel and voyage costs, overhead and drydock expenditures were denominated in these currencies. However, the Company has the ability to shift its purchase of goods and services from one country to another and, thus, from one currency to another, on relatively short notice. The Company enters into forward contracts as a hedge against changes in certain foreign exchange rates. Market value gains and losses are deferred and recognized during the period in which the hedged transaction is recorded in the accounts.
Contract Carrying Amount Fair (in USD 000's) Amount Asset Liability Value - ---------------------------------------- ------------------ ---------------- ------------------ -------------------- September 30, 2000 FX Forward Contracts $ 4,719 $ - $ - $ (186) Interest Rate Swap Agreements 100,000 - - (109) Debt 922,957 - 922,957 915,386 December 31, 1999 FX Forward Contracts $ 4,448 $ - $ - $ (20) Interest Rate Swap Agreements 200,000 - - 4,488 Debt 1,085,167 - 1,085,167 1,060,417 - ---------------------------------------- ------------------ ---------------- ------------------ --------------------
Inflation Although inflation has had a moderate impact on operating, drydocking and corporate overhead expenses, management does not consider inflation to be a significant risk to direct costs in the current and foreseeable economic environment. However, in the event that inflation becomes a significant factor in the world economy, inflationary pressures could result in increased operating and financing costs. TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SEPTEMBER 30, 2000 PART II - OTHER INFORMATION Item 1 - Legal Proceedings None Item 2 - Changes in Securities None Item 3 - Defaults Upon Senior Securities None Item 4 - Submission of Matters to a Vote of Security Holders None Item 5 - Other Information None Item 6 - Exhibits and Reports on Form 6-K a. Exhibits 27.1 Financial Data Schedule b. Reports on Form 6-K (i) On September 11, 2000, the Company filed a report on Form 6-K with respect to its Rights Agreement. THIS REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE INTO THE REGISTRATION STATEMENT OF THE COMPANY ON FORM F-3 FILED WITH THE COMMISSION ON OCTOBER 4, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TEEKAY SHIPPING CORPORATION Date: November 14, 2000 By: /s/ Peter S. Antturi --------------------- Peter S. Antturi Vice President and Chief Financial Officer EX-27.1 2 0002.txt FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 219,721 0 45,572 0 0 302,404 2,286,273 664,704 1,978,165 151,249 839,096 0 0 448,667 527,058 1,978,165 0 622,148 0 184,566 243,377 0 57,287 147,538 0 147,538 0 0 0 147,538 3.85 3.77
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