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 month of March 2007
Commission File Number: 0-22704
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 office)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): ___
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)7: ___
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-______________.
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Attached as Exhibit 99.1 is a copy of the press release of Ship Finance
International Limited (the "Company") dated February 27, 2007, announcing
the Company's preliminary financial results for the fourth quarter and year
ended December 31, 2006 and the Company's declaration of a dividend.
Exhibit 99.1
Ship Finance International Limited (NYSE: SFL)
Reports Preliminary Results for Fourth Quarter 2006 and Declares Quarterly
Dividend
Ship Finance International Limited ("Ship Finance" or the "Company") announces
today the preliminary financial results for the fourth quarter and year ended
December 31, 2006.
Highlights
o The Board of Directors has declared a cash dividend of $0.54 per share with
respect to the fourth quarter of 2006, up from $0.53 per share for the
previous quarter. For the year 2006, a total of $2.09 per share has been
declared - an increase of 4.5% compared to 2005.
o Total operating revenues for the quarter were $118.4 million or $1.63 per
share. Net income was $57.8 million or $0.79 per share.
o For the year 2006, there will be a profit share payment from Frontline Ltd.
("Frontline") of $78.9 million or $1.08 per share
o The single-hull VLCC "Front Tobago" was sold and delivered to its new
owners in December 2006, and in January 2007 the Company agreed to sell six
additional single-hull vessels. Following these sales, the number of
single-hull vessels in the fleet will be reduced from 18 to 11 vessels over
a period of three months.
o In January 2007, Ship Finance announced the acquisition of a newbuilding
jack-up drilling rig for a purchase price of $210 million, in combination
with a 15 year charter to Seadrill Limited ("Seadrill"). The rig is
scheduled to be delivered from the shipyard in July 2007.
o In February 2007, the Company announced the acquisition of two newbuilding
170,000 dwt dry bulk vessels for a total delivered cost price of $160
million, in combination with 15 year charters to Golden Ocean Group Limited
("Golden Ocean"). The vessels are scheduled to be delivered from the
shipyard in the fourth quarter of 2008 and the first quarter of 2009.
Dividends and Results for the Quarter Ended December 31, 2006
The Board of Directors has reviewed the long term prospects for the Company
including its significant fixed charter backlog and growth prospects, and
decided to increase the dividend payment for the quarter to $0.54 per share. The
dividend will be paid on March 22, 2007 to shareholders of record as of March 8,
2007. The ex-dividend date is March 6, 2007.
The Company reported total operating revenue of $118.4 million, operating income
of $80.7 million and net income of $57.8 million for the fourth quarter of 2006.
Earnings per share for the quarter were $0.79.
Cash provided by operating activities in the fourth quarter was $35.8 million,
net cash provided by investing activities was $7.7 million and net cash used in
financing activities was $18.5 million.
For the year 2006, operating revenue was $415.2 million, operating income was
$284.3 million and net income was $180.8 million. Earnings per share for the
year were $2.48.
For the fourth quarter, operating revenues include $35.9 million of profit share
due from Frontline with respect to vessels under long term charter agreements.
Of the $35.9 million, $15 million accrued during the fourth quarter, while the
remaining $20.9 million was accrued during the first nine months of the year but
had not been recognized under US GAAP. For the year 2006, a total of $78.9
million in profit share has accrued, and this amount is due from Frontline in
March 2007.
As of December 31, 2006, the Company had total cash and cash equivalents of
$56.6 million and restricted cash of $12.9 million. In addition, $8.4 million in
cash and cash equivalents was held in 100% owned subsidiaries accounted for
under the equity method, based on US GAAP. At year-end, the Company had
available undrawn credit lines in the amount of $146.7 million.
Business Update
As of December 31, 2006 the fleet consisted of 60 vessels, including seven
vessels under construction or conversion. After subsequent announced sales and
new acquisitions, the fleet will consist of 57 vessels, including nine vessels
under construction.
The gross fixed-rate charter backlog was $5.2 billion as of December 31, 2006,
with an average charter tenor of 11.4 years. Some of our charters have purchase
options which, if exercised, will reduce the fixed charter backlog and average
charter tenor.
At year-end 2006, 41 of our crude oil tankers and eight of our OBOs operated on
long term contracts to subsidiaries of Frontline. In addition to the fixed base
charter rate, Ship Finance also receives 20% of the annual earnings for these
vessels in excess of a base rate. For the year 2006, the average base rate was
approximately $26,600 for our VLCC's, $21,100 for our Suezmax tankers and
$21,100 for our Suezmax OBOs. The average vessel earnings have consistently been
above the base charter rates since the Company's inception in 2003.
The average daily time charter equivalents ("TCEs") earned by Frontline in the
fourth quarter in the spot and time charter period market from the Company's
VLCCs, Suezmax tankers and Suezmax OBO carriers were $46,839, $32,730 and
$34,164, respectively.
The average daily TCEs earned by Frontline for the twelve months ended December
31, 2006 in the spot and time charter period market from the Company's VLCCs,
Suezmax tankers and Suezmax OBO carriers were $55,202, $38,589 and $31,685,
respectively.
In January 2007, Ship Finance announced two separate agreements to sell a total
of six single-hull Suezmax tankers, including a vessel under conversion to a
heavy-lift vessel. The aggregate sales price is $221.7 million, and delivery to
new owners is expected to take place during the first quarter. Net of debt
repayments associated with these vessels and compensation payments to Frontline
for the termination of the charters, the sale of the single-hull tankers are
expected to generate about $130 million in net cash to the Company. This capital
is intended to be re-invested as equity in new projects.
At the end of November 2006, Ship Finance took delivery of the "Horizon Hunter",
the first vessel in a series of five 2,824 TEU containerships to be chartered to
Horizon Lines, LLC for an initial period of 12 years. The remaining four vessels
are expected to be delivered to us in the first and second quarters of 2007.
The 1,700 TEU container vessel "Sea Beta" was on a charter to the Australian
company Pan Logistics until early October 2006. Ship Finance then terminated the
charter as a consequence of the charterer going into voluntary receivership and
suspended the charter payments. The charter was secured by a $2.7 million bank
guarantee, and we will make claims under this guarantee for cost associated with
the termination of the charter and loss of revenues. The vessel has subsequently
been chartered out until June 2007 at a gross timecharter rate of $12,500 per
day, with options for the charterer to extend up to six months at $13,500 per
day for the first three month period and $14,500 per day for the next three
months. We thereafter intend to market the vessel for medium to long-term
contracts, consistent with our strategy.
The Company has recently announced several new projects, including a jack-up
drilling rig and two dry bulk carriers. The newbuilding jack-up drilling rig
"West Prospero" will be acquired from a subsidiary of Seadrill and the expected
delivery from Keppel Fels Limited in Singapore is July 2007. The rig will be
owned by a subsidiary of Ship Finance, and the purchase price is agreed at $210
million. We expect to enter into a six-year term loan facility in an amount of
approximately $170 million, and the equity contribution is expected to be around
$40 million. Ship Finance will guarantee only a portion of the bank loan.
The rig will be chartered back to the seller for 15 years on a bareboat basis
guaranteed by Seadrill, who is among the world's leading offshore drilling
contractors with a market capitalization of approximately $6.4 billion. The
aggregate charter payments for the first three years will be approximately $120
million, of which approximately $64 million for the first 400 days. The
aggregate charter payments the following four years will be approximately $77
million, and the last eight years approximately $109 million. In addition to the
fixed charter rate, Ship Finance will receive a profit split element of 4% above
certain threshold levels, starting January 1, 2009.
The loan amortization will be higher in the beginning when the charter rate is
high, and thereafter reduce over time. During the charter period, Seadrill will
have several options to buy back the rig, and the first purchase option will be
after three years at $142 million and the last purchase option after 15 years at
$60 million.
In February 2007, Ship Finance announced the agreement to acquire two
newbuilding Capesize dry bulk vessels from Golden Ocean based on a total
delivered price of $160 million, or $80 million per vessel. The vessels will
have a cargo capacity of around 170,000 dwt each, and will be constructed by
Daehan Shipbuilding Co. Ltd. in South Korea. Delivery from the shipyard is
scheduled in the fourth quarter of 2008 and in the first quarter of 2009.
Upon delivery from the shipyard, the vessels will commence 15 year bareboat
contracts to Golden Ocean, and the charter rate per vessel will be $27,450 per
day the first 5 years, $22,600 per day the following 5 years and $19,750 per day
the last 5 years.
We expect to finance approximately 75% of the purchase price of the Golden Ocean
vessels through a bank loan, and as for all our recently announced acquisitions,
the purchase of the vessels and corresponding financing will be in subsidiaries
with no or limited guarantee obligations from Ship Finance.
Golden Ocean has been granted fixed price purchase options for each of the
vessels after 5, 10 and 15 years at $61 million, $44 million and $24 million,
respectively.
Corporate and Other Matters
At December 31, 2006, $449.1 million of the 8.5% Senior Notes due 2013 was
outstanding. Senior Notes with a par value of $51.5 million were subject to Bond
Swap Agreements as of year-end. During the first quarter of 2007, this has
increased by an additional $5.0 million. The annual interest rate on the $56.5
million of Senior Notes held under Bond Swap Agreements has been effectively
reduced to approximately Libor + 1.00%.
The Company is currently analyzing the financial statement presentation of the
consolidation of its 100% owned subsidiaries under US GAAP. Most of the
Company's subsidiaries have been historically presented in full consolidated
with the Company, while other subsidiaries, such as the entities that own the
jack-up rig "West Ceres" and the dry bulk vessel "Golden Shadow", are accounted
for as investments in associates. Any change in the consolidation presentation
is not expected to materially impact the Company's net income, cash flow or
dividend capacity.
Strategy and Outlook
The strategy of the Company is to increase its portfolio of assets and to employ
its assets on medium to long term contracts. The Company will seek to reduce the
risks for its shareholders by investing in different sectors of the shipping and
oil service industry, and also by having a diversified client base.
Over the last 12 months, the Company has committed to new investments in excess
of $1.1 billion, and these investments are expected to increase the Company's
fixed charter income and dividend distribution capacity.
The Company will continue to pursue new projects, and additional investment
opportunities are currently under consideration. The Company has significant
capital available to fund the equity portion of new projects, including
approximately $130 million in net cash proceeds from the sale of the six
single-hull tankers and $78.9 million in profit-share due from Frontline. Based
on current financing levels available in the market for projects with long term
charters, Ship Finance has the capacity to invest in new projects with a gross
cost price in excess of $1.0 billion without raising additional equity capital.
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.
February 27, 2007
The Board of Directors
Ship Finance International Limited
Hamilton, Bermuda
Questions should be directed to:
Lars Solbakken: Chief Executive Officer, Ship Finance Management AS
+47 23114006 / +47 91198844
Ole B. Hjertaker: Chief Financial Officer, Ship Finance Management AS
+47 23114011 / +47 90141243
SHIP FINANCE INTERNATIONAL LIMITED FOURTH QUARTER REPORT
(UNAUDITED)
2005 2006 INCOME STATEMENT 2006 2005
Oct-Dec Oct-Dec (in thousands of $ except per share Jan-Dec Jan-Dec
data) (audited)
------------------------------------------------------------------------------------------------------
143,159 118,433 Total operating revenue (1) 415,248 437,510
1,875 324 (Gain) loss on sale of assets (9,807) 654
601 179 Voyage expenses 1,736 3,600
27,511 30,469 Ship operating expenses 117,957 110,240
824 3,886 Administrative expenses 6,564 2,447
5,225 2,857 Depreciation 14,490 19,907
34,161 37,391 Total operating expenses 140,747 136,194
107,123 80,718 Operating income 284,308 300,662
1,010 818 Interest income 3,978 3,343
(27,694) (27,200) Interest expense (108,101) (111,935)
- 2,292 Results in associate 4,206 -
2,666 1,206 Other financial items (3,771) 17,528
(32) 14 Foreign currency exchange gain (loss) 219 (52)
- (42) Taxes (42) -
83,073 57,806 Net income 180,797 209,546
$1.11 $0.79 Basic earnings per share ($) $2.48 $2.84
74,606,272 72,743,737 Weighted average number of shares 72,764,285 74,560,108
74,600,837 72,743,737 Common shares outstanding 72,743,737 73,143,737
(1) For all vessels on finance lease, the fixed charter payments are split in
three elements; `Interest income', `Repayment of investment in finance
leases' and `Service income'. The `Interest income' and the `Service
income' are included in the Company's Income Statement. `Repayment of
investment in finance leases' is not included in the Total operating
revenues, and appears in the Statement of Cashflows and in the Balance
Sheet as a reduction of the balance "Investment in finance leases" .
BALANCE SHEET 2006 2005
(in thousands of $) Dec 31 Dec 31
(audited)
--------------------------------------------------------------------------
ASSETS
Short term
Cash and cash equivalents 56,641 32,857
Restricted cash 12,937 1,575
Amount due from related parties 63,024 79,416
Other current assets 143,014 109,092
Long term
Newbuildings and vessel purchase options 7,658 -
Vessels and equipment, net 238,891 315,220
Investment in finance leases 1,783,550 1,818,344
Investments in associates 55,307 -
Deferred charges 15,912 17,846
Other long-term assets 20,739 19,563
Total assets 2,397,673 2,393,913
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term and current portion of long term
interest bearing debt 119,606 122,519
Other current liabilities 13,925 12,201
Amount due to related parties 14,410 -
Long term
Long term interest bearing debt 1,640,459 1,671,138
Other long term liabilities 8,743 26,533
Stockholders' equity (2) 600,530 561,522
Total liabilities and stockholders' equity 2,397,673 2,393,913
(2) As at December 31, 2006 Stockholders' equity excludes $ 237.2 million of
deferred equity which is being recognised over time. In connection with the
initial and subsequent acquisitions of vessels from Frontline, Ship Finance
was required to carry over Frontline's historical book values of the
vessels to its books, and the excess of the aggregate purchase price above
their historical book value was treated as deferred equity and recorded as
a reduction of the Investment in finance leases. This deferred equity is
amortised to Stockholders' equity in line with the charter payments
received from Frontline.
2005 2006 STATEMENT OF CASHFLOWS 2006 2005
Oct-Dec Oct-Dec (in thousands of $) Jan-Dec Jan-Dec
(audited)
--------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
83,073 57,806 Net income 180,797 209,546
Adjustments to reconcile net income to net
cash provided by operating activities
5,916 2,636 Depreciation and amortization 12,733 36,431
- - Unrealised foreign currency exchange (gain) -
loss
(2,861) (963) Adjustment of financial derivatives to market 6,376 (14,732)
value
1,895 - (Gain) loss on sale of assets (26,469) 654
- (2,292) Result in associate (4,206) -
- 49 Stock options 49 -
187 (70) Other (401) (4,708)
(50,803) (21,363) Change in operating assets and liabilities 24,686 53,643
37,407 35,803 Net cash provided by operating activities 193,565 280,834
INVESTING ACTIVITIES
21,736 31,620 Repayment of investments in finance leases 125,509 94,777
1,289 (2,013) Net maturities (placement) of restricted cash (11,362) 3,804
- - Sale of investment in finance lease -
21 - Acquisition of subsidiaries, net of cash (34,810) (518,182)
acquired
- 35,140 Proceeds from sale of vessels 75,606 229,800
994 (56,750) Purchase of vessels (56,750) (79,772)
- (3,000) Purchase of short term investments (3,000) -
- 2,723 Investment in newbuildings (7,658) -
- (41) Investment in associated companies (51,101) -
24,040 7,679 Net cash provided by (used in) investing 36,434 (269,573)
activities
FINANCING ACTIVITIES
(27,210) - Repurchase of shares (7,212) (33,083)
- 91,588 Proceeds from long-term debt 147,588 1,571,429
(26) 219 Debt fees paid (1,047) (7,346)
(31,630) (70,071) Repayment of long-term debt (180,852) (1,253,503)
(36,663) (38,554) Cash dividends paid (149,123) (148,864)
(2,005) (1,644) Deemed dividends paid (15,569) (136,230)
(97,534) (18,462) Net cash provided by (used in) financing (206,215) (7,597)
activities
(36,087) 25,020 Net (decrease) increase in cash and cash 23,784 3,664
equivalents
68,944 31,621 Cash and cash equivalents at start of period 32,857 29,193
32,857 56,641 Cash and cash equivalents at end of period 56,641 32,857
BREAKDOWN OF WHOLLY OWNED SUBSIDIARIES ACCOUNTED FOR AS
INVESTMENTS IN ASSOCIATES
------------------------------------------------------------------------------
INCOME STATEMENT 2006 2006 2006
(in thousands of $) Jan-Dec Jan-Dec Jan-Dec
Rig Finance Front Shadow Total
------------------------------------------------ -----------------------------
Total operating revenue (1) 9,410 (2) 694 10,104
Total operating expenses 46 9 55
Operating income 9,364 685 10,049
Interest expense (5,401) (422) (5,823)
Other financial items (24) 4 (20)
Net income 3,939 267 4,206
------------------------------------------------ ----------------------------
1) Revenue is comprised of interest income derived from a long-term finance
lease with a subsidiary of Seadrill. The lease is for a period of 15 years
and Seadrill has various call options to purchase the jack-up drilling rig
"West Ceres" from our subsidiary Rig Finance Ltd.
2) Revenue is comprised of interest income derived from a long-term finance
lease with Golden Ocean. The lease is for a period of 10 years and Golden
Ocean has various call options to purchase the vessel from our subsidiary
Front Shadow Inc.
--------------------------------------------------------------------------------
BALANCE SHEET 2006 2006 2006
(in thousands of $) Dec 31 Dec 31 Dec 31
Rig Finance Front Shadow Total
-------------------------------------------------------------------------------
ASSETS
Short term
Cash and cash equivalents 7,928 461 8,389
Other current assets - 517 517
Long term
Investment in finance leases 198,749 28,026 226,775
Deferred charges 936 73 1,009
Total assets 207,613 29,077 236,690
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term and current portion of long 24,845 2,060 26,905
term interest bearing debt
Other current liabilities 868 79 947
Amounts due to related party (1) 1,709 (2) 2,600 4,309
Long term
Long term interest bearing debt 130,290 20,640 150,930
Stockholders' equity 49,901 3,698 53,599
Total liabilities and stockholders' 207,613 29,077 236,690
equity
-------------------------------------------------------------------------------
1) Comprised of amounts due to Ship Finance International that was not part of
the original capital contribution to the Company.
2) Comprised of a seller's credit received from Golden Ocean at the time the
vessel was purchased. The seller's credit is treated as a non-interest
bearing loan.
-------------------------------------------------------------------------------------------
STATEMENT OF CASHFLOWS 2006 2006 2006
(in thousands of $) Dec 31 Dec 31 Dec 31
Rig Front Total
Finance Shadow
---------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income 3,939 267 4,206
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 87 79 166
Change in operating assets and liabilities 1,554 2,010 3,564
Net cash provided by operating activities 5,580 2,356 7,936
INVESTING ACTIVITIES
Repayment of investments in finance leases 11,251 408 11,659
Purchase of vessels (210,000) (28,434) (238,434)
Net cash provided by (used in) investing
activities (198,749) (28,026) (226,774)
FINANCING ACTIVITIES
Proceeds from shares 12 - 12
Proceeds from contribution from parent 45,950 3,431 49,381
Proceeds from long-term debt 165,000 22,700 187,700
Repayment of long-term debt (9,865) - (9,865)
Net cash provided by (used in) financing activities 201,097 26,131 227,228
-
Net (decrease) increase in cash and cash equivalents 7,928 461 8,389
Cash and cash equivalents at start of period - - -
Cash and cash equivalents at end of period 7,928 461 8,389
---------------------------------------------------------------------------------------
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
Dated: March 21, 2007 By /s/ Lars Solbakken
---------------------------------------
Name: Lars Solbakken
Title: Chief Executive Officer
Ship Finance Management AS
SK 23153 0001 757773