SFL- Q4 2014 Results

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 UNDER THE SECURITIES
 
EXCHANGE ACT OF 1934
 
For the month of March, 2015
Commission File Number: 001-32199
 
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 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): ________.
 
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
 
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): ________.
 
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.


1




INFORMATION CONTAINED IN THIS FORM 6-K REPORT

Attached hereto is a copy of the press release of Ship Finance International Limited (the "Company"), dated February 26, 2015, announcing preliminary financial results for the quarter ended December 31, 2014.



2



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.
 
 
 
SHIP FINANCE INTERNATIONAL LIMITED
 
 
 
 
 
Date: March 5, 2015
By:
/s/ Ole B. Hjertaker
 
 
Name: 
Ole B. Hjertaker
 
 
Title: 
Ship Finance Management AS
 
 
 
(Principal Executive Officer)
 


3



Ship Finance International Limited (NYSE: SFL) - Earnings Release

Reports preliminary fourth quarter 2014 results and increased quarterly dividend of $0.42 per share

Hamilton, Bermuda, February 26, 2015. Ship Finance International Limited (“Ship Finance” or the “Company”) today announced its preliminary financial results for the quarter ended December 31, 2014.

Highlights
•
Increased fourth quarter dividend of $0.42 per share
•
Delivery of remaining 8,700 TEU container vessels in combination with long-term charters
•
Sale of three older VLCCs in the fourth quarter 2014
•
Sale of the ultra-deepwater drillship West Polaris in the fourth quarter 2014
•
Selected key financial data:
Three Months Ended
 
 
 
Dec 31, 2014

Sep 30, 2014

 
Charter revenues(1)
$179m
$176m
 
EBITDA(2)
$149m
$146m
 
Net income
$25m
$35m
 
Earnings per share

$0.27


$0.37

 

Dividends and Results for the Quarter Ended December 31, 2014
The Board of Directors has declared an increased quarterly cash dividend of $0.42 per share. The dividend will be paid on or about March 27, 2015 to shareholders on record as of March 10, 2015 and the ex-dividend date at the NYSE will be March 6, 2015. This will be the 44th consecutive quarterly dividend declared by the Company.
The Company reported total U.S. GAAP operating revenues on a consolidated basis of $88.7 million, or $0.95 per share, in the fourth quarter of 2014. This number excludes $10.5 million of revenues classified as ‘repayment of investments in finance lease’, and $80.1 million of charter revenues earned by 100% owned assets classified as ‘investment in associate’.
The cash sweep agreement with Frontline had a positive effect of $11.3 million, or $0.12 per share in the fourth quarter. For the full year 2014 a total of $32.7 million cash sweep was recorded and is payable to the Company in March 2015. There was also a $0.2 million profit share in the quarter relating to some of our dry bulk vessels.
Reported net operating income pursuant to U.S. GAAP for the quarter was $29.3 million, or $0.31 per share, and reported net income was $25.1 million, or $0.27 per share. This is after approximately $22.6 million, or $0.24 per share in negative non-cash charges, which includes a negative mark-to-market of $6.3 million related to interest rate hedging instruments, a book loss of $1.4 million on the sale of three older VLCCs, a non-cash amortization of deferred charges of $3.1 million and an impairment of approximately $11.8 million related to the divestment of five feeder-size container vessels in the first quarter of 2015. The negative charges were partly offset by $11.3 million, or $0.12 per share in book gains, which includes a gain of $6.1 million on the sale of West Polaris and a gain of $5.2 million relating to a settlement for the early redelivery of four Handysize dry bulk carriers in 2012.



1. Charter revenues include total charter hire from all vessels and rigs, including assets in 100% owned subsidiaries classified as ‘Investment in associates’ and cash sweep/profit share income.
2. EBITDA is a non- GAAP measure and includes assets in 100% owned subsidiaries classified as 'Investment in associates'. For more details please see Appendix 1.


Business Update
As of December 31, 2014 and adjusted for subsequent transactions, the fixed-rate charter backlog from our fleet of 64 vessels and rigs was approximately $3.9 billion, with an average remaining charter term of 5.4 years, or 9.2 years if weighted by charter revenue. Some of our charters include purchase options which, if exercised, may reduce the fixed charter backlog and average remaining charter term.
The two remaining 8,700 TEU container vessels under construction in Korea were delivered to the Company in January 2015. Both vessels have commenced their long-term time-charters to Hamburg Süd container line for a period of 7 years, similar to the two vessels delivered in September and November 2014. The vessels will have full cash flow effect from the second quarter of 2015, and average EBITDA contribution from the four vessels is estimated to approximately $46 million per year.
In December 2014, Seadrill acquired the ultra-deepwater drillship West Polaris following the exercise of a purchase option. The transaction was effected as a sale of the shares in the asset-owning subsidiary. Ship Finance received a cash consideration of approximately $111 million, and the Company recorded a book gain of approximately $6.1 million. The Company will continue to guarantee a part of the bank loan relating to the rig for a period against a fee, with full indemnification by Seadrill for any potential claims.
In February 2015, the charter for the harsh environment jack-up drilling rig West Linus was modified, whereby Seadrill has replaced North Atlantic Drilling as guarantor for the long-term charter. West Linus is employed on a profitable 5-year sub-charter to Conoco Philips, and has enjoyed a very high utilization rate after start-up of the contract in May 2014.
The crude oil tanker market was significantly stronger in the fourth quarter compared to the third quarter, and according to market analysts, the market has strengthened further into the first quarter of 2015. The Company has exposure to the crude oil tanker market via the cash sweep agreement with Frontline and two modern Suezmax tankers operating in the spot market via a pool arrangement.
The cash sweep from the vessels on charter to Frontline was $11.3 million in the fourth quarter, compared to $7.9 million in the third quarter. The cash sweep accumulates from a time-charter equivalent base rate of $13,200 per day for the Suezmax tankers and $17,675 per day for the majority of the VLCCs. As the financial leverage on these vessels is very low, the free cash flow from the vessels is significant even without the cash sweep contribution.
The Suezmax tankers Glorycrown (built 2009) and Everbright (built 2010) are operating in a pool together with sister-vessels owned by Frontline 2012. In the fourth quarter, the average charter rate per trading day for the vessels was approximately $32,400, up from $20,900 reported in the third quarter. In the fourth quarter, Glorycrown was out of service for a total of 29 days in connection with scheduled special survey and a major upgrade to improve earnings capacity. The work was completed on time and budget and Everbright is scheduled to start a similar upgrade towards the end of the first quarter of 2015.
After the sale of the drillship West Polaris, the Company has four drilling units on long-term fixed-rate bareboat contracts. The rigs, including West Polaris, generated approximately $87 million in aggregate EBITDA in the fourth quarter of 2014. Based on the fixed-rate charter structure for the drilling rigs, Ship Finance is not directly impacted by fluctuations in the drilling market.
In November 2014, the Company announced that it was in dialogue with the other stakeholders in five 2,800 TEU container vessels where the Company’s only commitment was a limited charter backstop guarantee. Due to the weak chartering market for feeder-size container vessels, these vessels have negatively impacted our results by approximately $5.1    million, or $0.05 per share, per quarter in 2014. Subsequent to quarter-end, the vessels were transferred to new unrelated owners, and Ship Finance will have no further obligations. The Company has recorded a non-cash impairment in the fourth quarter of 2014 of approximately $11.8 million related to these vessels.

5


At year-end, the Company owned approximately $59 million second-lien notes and $9.25 million warrants in the U.S liner company Horizon Lines, Inc. In November 2014, Horizon Lines announced a merger with Matson, Inc., subject only to regulatory approval of a sale of Horizon Lines’ Hawaii assets to The Pasha Group. This approval is still pending. The notes are conservatively valued at only 40% of their nominal value in our accounts.
Two 1,700 TEU container vessels are chartered out in the short-term market. The rates achieved in the container feeder segment have been marginally above operating expense levels in 2014 and the Company does not foresee any material near term market improvement. Ship Finance intends to continue employing these vessels in the short term market.
Five of our Handysize dry bulk carriers are chartered out on shorter-term time-charters with a fixed base rate and a profit share. The profit share generated was approximately $0.2 million in additional earnings in the fourth quarter. The Company intends to continue chartering these vessels in the short-term market until long-term rates improve.
Ship Finance owns a number of other vessels, including offshore support vessels, container vessels, car carriers, chemical tankers and dry bulk carriers. The majority of our vessels and rigs are chartered out on long-term, fixed-rate contracts that provide the Company with stability in cash flow and earnings, irrespective of fluctuations in the short-term charter market.
Financing and Capital Expenditure
As of December 31, 2014, Ship Finance had a total liquidity position of approximately $213 million including approximately $51 million in cash and cash equivalents and approximately $162 million available under revolving credit facilities. The number does not include the cash consideration of approximately $111 million received in January 2015 after the sale of West Polaris. In addition, the Company had approximately $74 million of assets classified as available for sale securities at quarter end.
Ship Finance has secured long-term bank financing for the last two 8,700 TEU newbuilding container vessels delivered in January 2015. The financing amount was higher than the remaining payments to the yard at delivery of the vessels, giving a total positive cash effect of approximately $43 million for the Company in the first quarter 2015.
For the time being, the Company has no further capital expenditure commitments after the delivery of the two container vessels in January. The Company is in compliance with all financial covenants and several of our financing arrangements are in subsidiaries with only limited guarantees from Ship Finance.
Strategy and Outlook
Over the last year the Company has expanded its asset portfolio by adding 15 vessels and one jack-up rig, spread across the container, dry bulk and offshore sectors. Over the same period, nine units have been sold from the portfolio, as part of the Company’s continuous fleet renewal. The long-term strategy of the Company is to continue building the distribution capacity on the back of a diversified asset portfolio consisting of high-quality vessels and strong counterparties.
Our diversified asset approach gives us the opportunity to benchmark transactions across our main markets and we believe this will enable us to generate a superior return over time compared to focusing on one segment only.
After significantly reducing the financial leverage relating to crude oil tanker vessels over the last three years, we now benefit from the net cash flow generated by these vessels, even before cash sweep revenues. With the improved prospects for the tanker market in combination with significant capital available for new accretive investments, the Company is confident that it can continue to grow its asset base and distribution capacity.

6


Accounting Items
Under U.S. GAAP, subsidiaries owning the drilling units West Polaris, West Hercules, West Taurus and West Linus have been accounted for as ‘investment in associate’ using the ‘equity method’.
All the equity accounted subsidiaries are wholly owned by Ship Finance, but due to the conservative structure of the transactions, Ship Finance has not been deemed ‘primary beneficiary’ according to U.S. GAAP. As a result of the accounting treatment, operating revenues, operating expenses and net interest expenses in these subsidiaries are not shown in Ship Finance’s consolidated Income Statement. Instead, the net contribution from these subsidiaries is recognized as a combination of ‘Interest income from associates and long term investments’ and ‘Results in associate’.
In Ship Finance’s consolidated Balance Sheet, the net investments are shown as a combination of ‘Investment in associate’ and ‘Amount due from related parties - Long term’. The reason for this treatment is that a part of the investment in these subsidiaries is in the form of intercompany loans. For further detailed explanation of these features, please consult our ‘Accounting Items’ presentation available as webcast at our website at www.shipfinance.org.
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, data contained in the Company’s records and other data available from third parties. 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 our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies, fluctuations in currencies and interest rates, general market conditions including fluctuations in charter hire rates and vessel values, changes in demand in the markets in which we operate, changes in demand resulting from changes in OPEC's petroleum production levels and worldwide oil consumption and storage, developments regarding the technologies relating to oil exploration, changes in market demand in countries which import commodities and finished goods and changes in the amount and location of the production of those commodities and finished goods, increased inspection procedures and more restrictive import and export controls, changes in our operating expenses, including bunker prices, drydocking and insurance costs, performance of our charterers and other counterparties with whom we deal, timely delivery of vessels under construction within the contracted price, 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 Securities and Exchange Commission.


February 26, 2015

The Board of Directors
Ship Finance International Limited
Hamilton, Bermuda


Questions can be directed to Ship Finance Management AS:

Harald Gurvin, Chief Financial Officer: +47 2311 4009
André Reppen, Senior Vice President: +47 2311 4055

7


SHIP FINANCE INTERNATIONAL LIMITED
FOURTH QUARTER 2014 REPORT (UNAUDITED)

INCOME STATEMENT
Three months ended
 
Full year

 
Full year

(in thousands of $
Dec 31,

 
Sep 30,

 
2014

 
2013

except per share data)
2014

 
2014

 
 
 
(audited)

Charter revenues - operating lease
55,448

 
51,759

 
201,879

 
156,238

Charter revenues - finance leases
32,338

 
34,618

 
136,151

 
166,172

Revenues classified as Repayment of investment in finance leases
(10,543
)
 
(11,256
)
 
(44,300
)
 
(52,320
)
Profit share income
166

 
142

 
1,094

 
770

Cash sweep income
11,253

 
7,906

 
32,663

 
—

Total operating revenues
88,662

 
83,169

 
327,487

 
270,860

 
 
 
 
 
 
 
 
Gain on sale of assets and termination of charters
3,830

 
4,904

 
23,931

 
18,025

 
 
 
 
 
 
 
 
Vessel operating expenses
(31,158
)
 
(30,571
)
 
(119,470
)
 
(105,534
)
Administrative expenses
(1,774
)
 
(1,816
)
 
(7,609
)
 
(7,549
)
Depreciation
(18,501
)
 
(17,231
)
 
(67,393
)
 
(58,436
)
Vessel impairment charge
(11,800
)
 
—

 
(11,800
)
 
—

 
 
 
 
 
 
 
 
Total operating expenses
(63,233
)
 
(49,618
)
 
(206,272
)
 
(171,519
)
 
 
 
 
 
 
 
 
Operating income
29,259

 
38,455

 
145,146

 
117,366

 
 
 
 
 
 
 
 
Results in associate(1)
10,472

 
9,006

 
33,497

 
28,200

Interest income from associates and long term investments(1)
6,299

 
6,300

 
24,857

 
22,617

Interest income, other
3,799

 
2,667

 
15,594

 
7,463

Interest expense
(19,001
)
 
(18,660
)
 
(74,810
)
 
(75,920
)
Amortization of deferred charges
(3,061
)
 
(2,786
)
 
(11,271
)
 
(11,305
)
Gain on sale of associate
6,055

 
—

 
6,055

 
—

Other financial items
(259
)
 
(83
)
 
(1,358
)
 
(4,512
)
Mark to Market of Derivatives
(8,426
)
 
(313
)
 
(14,895
)
 
5,297

Taxes
—

 
—

 
—

 
—

Net income
25,137

 
34,586

 
122,815

 
89,206

 
 
 
 
 
 
 
 
Basic earnings per share ($)
0.27

 
0.37

 
1.32

 
1.00

 
 
 
 
 
 
 
 
Weighted average number of shares
93,402,261

 
93,364,815

 
93,330,622

 
89,508,000

Common shares outstanding
93,404,000

 
93,394,000

 
93,404,000

 
93,260,000


(1)
Four of our subsidiaries were accounted for as ‘Investment in associate’ during the quarter. The contribution from these subsidiaries is reflected in our consolidated Income Statement as a combination of ‘Results in associate’ and ‘Interest income from associates and long term investments’.


8


SHIP FINANCE INTERNATIONAL LIMITED
FOURTH QUARTER 2014 REPORT (UNAUDITED)


BALANCE SHEET
Dec 31,

 
Sep 30,

 
Dec 31, 2013

(in thousands of $)
2014

 
2014

 
(audited)

ASSETS
 
 
 
 
 
Short term
 
 
 
 
 
Cash and cash equivalents
50,818

 
32,623

 
58,641

Available for sale securities
73,656

 
62,299

 
76,925

Amount due from related parties
152,491

 
38,140

 
13,249

Other current assets
63,260

 
67,503

 
143,389

 
 
 
 
 
 
Long term
 
 
 
 
 
Newbuildings and vessel deposits
87,567

 
103,837

 
126,008

Vessels and equipment, net
1,377,133

 
1,317,729

 
1,089,616

Investment in finance leases
709,014

 
828,842

 
858,260

Investment in associate(1)
53,457

 
51,820

 
40,987

Amount due from related parties - Long term(1)
425,325

 
517,334

 
579,562

Deferred charges
36,958

 
37,598

 
41,478

Other long-term assets
11,875

 
11,709

 
17,868

 
 
 
 
 
 
Total assets
3,041,554

 
3,069,434

 
3,045,983

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
Short term
 
 
 
 
 
Short term and current portion of long term interest bearing debt
182,415

 
319,684

 
389,888

Other current liabilities
30,231

 
21,602

 
28,587

Amount due to related parties
1,109

 
6,050

 
13,965

 
 
 
 
 
 
Long term
 
 
 
 
 
Long term interest bearing debt
1,550,044

 
1,458,710

 
1,346,991

Other long term liabilities
124,263

 
80,624

 
74,619

 
 
 
 
 
 
Stockholders’ equity(2)
1,153,492

 
1,182,764

 
1,191,933

Total liabilities and stockholders’ equity
3,041,554

 
3,069,434

 
3,045,983


(1)
Three of our subsidiaries were accounted for as ‘Investments in associate’ at quarter end. Our investment is a combination of equity classified as ‘Investment in associate’ and intercompany loans classified as ‘Amount due from related parties, long term’. In addition to this, notes from Frontline Ltd. are included in the line item ‘Amount due from related parties, long term’.
(2)
As of December 31, 2014, ‘Stockholders’ equity’ excludes $86.6 million of deferred equity which is being recognized over time. In connection with the initial and subsequent acquisitions of vessels from Frontline, Ship Finance has accounted for the difference between the historical cost of the vessels and the net investment in the lease as a deferred equity contribution. This deferred equity contribution is shown as a reduction in the net investment in finance leases in the balance sheet. This results from the related party nature of both the transfer of the vessel and the subsequent charter. This deferred equity is amortized to ‘Stockholders’ equity’ in line with the charter payments received from Frontline.


9


SHIP FINANCE INTERNATIONAL LIMITED
FOURTH QUARTER 2014 REPORT (UNAUDITED)

STATEMENT OF CASHFLOWS
Three months ended
 
Full year

 
Full year

(in thousands of $)
Dec 31,

 
Sep 30,

 
Dec 31, 2014

 
Dec 31, 2013

 
2014

 
2014

 
 
 
(audited)

 
 
 
 
 
 
 
 
OPERATING ACTIVITIES
 
 
 
 
 
 
 
Net income
25,137

 
34,586

 
122,815

 
89,206

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
21,078

 
19,501

 
76,683

 
67,150

Vessel impairment charge
11,800

 
—

 
11,800

 
—

Adjustment of derivatives to fair value recognised in net income
6,308

 
(1,314
)
 
7,699

 
(7,950
)
Gain on sale of assets and termination of charters
(3,830
)
 
(4,904
)
 
(23,931
)
 
(18,025
)
Result in associate
(10,472
)
 
(9,006
)
 
(33,497
)
 
(28,200
)
Gain on sale of associated company
(6,055
)
 
—

 
(6,055
)
 
—

Other, net
(1,164
)
 
1,058

 
(3,555
)
 
(2,337
)
Change in operating assets and liabilities
(6,207
)
 
(1,192
)
 
(19,558
)
 
40,280

Net cash provided by operating activities
36,595

 
38,729

 
132,401

 
140,124

 
 
 
 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
 
 
 
Repayment of investments in finance leases
10,240

 
10,959

 
43,120

 
51,220

Proceeds from sale of vessel/new buildings and termination of charters
82,587

 
26,096

 
199,429

 
83,583

Net investment in newbuildings and vessel deposits
(72,069
)
 
(46,025
)
 
(202,333
)
 
(109,337
)
Purchase of vessels
(1,965
)
 
(68,029
)
 
(192,864
)
 
—

Cash received from (paid to) associates(1)
39,570

 
4,613

 
88,585

 
(81,308
)
Other assets / investments
(22,181
)
 
(1,760
)
 
42,123

 
(18,140
)
Net cash provided by/ (used in) investing activities
36,182

 
(74,146
)
 
(21,940
)
 
(73,982
)
 
 
 
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
 
 
 
Proceeds from long and short term debt
121,150

 
215,150

 
733,632

 
705,347

Expenses paid in connection with securing finance
(2,422
)
 
(2,784
)
 
(7,460
)
 
(8,390
)
Repayment of long and short term debt
(135,073
)
 
(155,927
)
 
(616,783
)
 
(530,186
)
Re-purchase of Company bonds
—

 
—

 
(75,262
)
 
(254,132
)
Cash received from share issue
55

 
409

 
927

 
128,880

Payments in lieu of issuing shares for exercised share options
—

 
—

 
(1,196
)
 
(448
)
Cash dividends paid
(38,292
)
 
(38,288
)
 
(152,142
)
 
(109,114
)
Net cash used in financing activities
(54,582
)
 
18,560

 
(118,284
)
 
(68,043
)
 
 
 
 
 
 
 
 
Net increase/ (decrease) in cash and cash equivalents
18,195

 
(16,857
)
 
(7,823
)
 
(1,901
)
Cash and cash equivalents at beginning of period
32,623

 
49,480

 
58,641

 
60,542

Cash and cash equivalents at end of period
50,818

 
32,623

 
50,818

 
58,641

(1)
Four of our subsidiaries were accounted for as ‘Investments in associate’ during the quarter. The ‘Cash received from/ (Investment in) associates’ is only a part of the contribution from these subsidiaries. The balance is recorded as ‘Interest income from associates and long term investments’ and reflected in the Company’s Income Statement.

10


SUBSIDIARIES ACCOUNTED FOR AS INVESTMENT IN ASSOCIATES
FOURTH QUARTER 2014 (UNAUDITED)

Please note that full preliminary accounts for SFL West Polaris Limited (West Polaris), SFL Deepwater Ltd (West Taurus), SFL Hercules Ltd (West Hercules) and SFL Linus Ltd (West Linus) are available from the Company's website: www.shipfinance.org.



Selected income statement data for the three months ended December 31, 2014
 
SFL West Polaris

SFL Deepwater

SFL Hercules

SFL Linus

Total

(in thousands of $)
Limited

Ltd

Ltd

Ltd

 
Charter revenues - finance lease
13,871

28,201

16,105

21,906

80,083

Revenues classified as Repayment of investment in finance leases
(8,184
)
(22,321
)
(10,285
)
(10,754
)
(51,544
)
Interest expense, related party(1)
(1,631
)
(1,631
)
(1,631
)
(1,406
)
(6,299
)
Interest expense, other
(2,556
)
(2,409
)
(2,295
)
(4,379
)
(11,639
)
Other items
—

(2
)
(138
)
11

(129
)
Net income(2)
1,500

1,838

1,756

5,378

10,472


(1)
‘Interest expense, related party’ from these subsidiaries appears in the Company’s consolidated income statement as ‘Interest income from associate and long term investments’.
(2)
‘Net income’ from these subsidiaries appears in the Company’s consolidated income statement as ‘Results in associate’.



Selected balance sheet data as of December 31, 2014
 
SFL West Polaris

SFL Deepwater

SFL Hercules

SFL Linus

Total

(in thousands of $)
Limited

Ltd

Ltd

Ltd

 
Cash and cash equivalents
—

—

—

—

—

Investment in finance leases
—

428,796

426,244

574,478

1,429,518

Other assets
—

12,692

9,601

222

22,515

Total assets
—

441,488

435,845

574,700

1,452,033

 
 
 
 
 
 
Short term and current portion of long term interest bearing debt
—

32,222

27,500

51,458

111,180

Other current liabilities
—

6,154

5,445

82

11,681

 
 
 
 
 
 
Long term interest bearing debt
—

271,111

256,250

399,792

927,153

Long term loans from shareholders, net
—

100,036

135,250

110,745

346,031

Other long term liabilities
—

—

—

2,531

2,531

 
 
 
 
 
 
Stockholders equity(1)
—

31,965

11,400

10,092

53,457

 
 
 
 
 
 
Total liabilities and stockholders’ equity
—

441,488

435,845

574,700

1,452,033


(1)
‘Stockholder’s equity’ from these subsidiaries appears in the Company’s consolidated balance sheet as ‘Investment in associate’.
(2)
SFL West Polaris Ltd. was sold in December 2014.


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APPENDIX 1: RECONCILIATION OF NET INCOME TO EBITDA
FOURTH QUARTER 2014 (UNAUDITED)

EBITDA
Three months ended
 
Twelve months

 
Twelve months

(in thousands of $)
Dec 31,

 
Sep 30,

 
ended Dec 31,

 
ended Dec 31,

 
2014

 
2014

 
2014

 
2013

 
 
 
 
 
 
 
 
Net income
25,137

 
34,586

 
122,815

 
89,206

 
 
 
 
 
 
 
 
Add:
 
 
 
 
 
 
 
Mark to Market of Derivatives
8,426

 
313

 
14,895

 
(5,297
)
Amortization of deferred charges
3,061

 
2,786

 
11,271

 
11,305

Interest expense
19,001

 
18,660

 
74,810

 
75,920

Interest income, other(1)
(472
)
 
(159
)
 
(4,576
)
 
(617
)
Interest income from associates
(6,299
)
 
(6,300
)
 
(24,464
)
 
(19,575
)
Results in associate
(10,472
)
 
(9,006
)
 
(33,497
)
 
(28,200
)
Depreciation
18,501

 
17,231

 
67,393

 
58,436

Gain on sale of assets and termination of charters
(3,830
)
 
(4,904
)
 
(23,931
)
 
(18,025
)
Gain on sale of associated company
(6,055
)
 
—

 
(6,055
)
 
—

Vessel impairment charge
11,800

 
—

 
11,800

 
—

Revenues classified as Repayment of investment in finance leases
10,240

 
10,959

 
43,120

 
51,220

Other reconciling items
(305
)
 
(478
)
 
(295
)
 
326

Investment in associate
 
 
 
 
 
 
 
  Charter revenues - finance lease
80,083

 
82,339

 
299,505

 
259,402

  Charter revenues - operating lease
—

 
—

 
3,663

 
39,115

  Total operating expenses
—

 
(13
)
 
(3,065
)
 
(34,658
)
 
 
 
 
 
 
 
 
EBITDA (2)
148,816

 
146,014

 
553,389

 
478,558


(1)
Interest income excludes interest income generated from financial investments.
(2)
‘EBITDA’ is not a US-GAAP figure. It is defined as aggregate charter hire from all our 100% owned assets and revenues from financial investments, less vessel operating expenses and general & administrative expenses.


12