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 month of July 2007
Commission File Number: 0-22704
Ship Finance International Limited
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(Translation of registrant's name into English)
Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda
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(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 1 is a copy of the press release of Ship Finance
International Limited (the "Company") dated May 30, 2007.
Exhibit 1
Ship Finance International Limited (NYSE: SFL)
Reports Results for First Quarter 2007 and Declares Quarterly Dividend
Ship Finance International Limited ("Ship Finance" or the "Company") announces
today the financial results for the first quarter ended March 31, 2007.
Highlights
o The Board of Directors has declared a cash dividend of $0.55 per share with
respect to the first quarter of 2007, up from $0.54 per share for the
previous quarter.
o Total operating revenues for the quarter were $86.5 million or $1.19 per
share and net income was $55.3 million or $0.76 per share.
o The six single-hull Suezmax tankers Front Target, Front Traveller, Front
Transporter, Front Comor, Front Granite and Front Sunda were sold and
delivered to their new owners in March 2007. Net proceeds to the Company
were $142.0 million adjusted for charter termination compensations to
Frontline. A gain of $30.8 million relating to the sale of these vessels
was recorded in the quarter.
o In January 2007, Ship Finance announced the acquisition of a second
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.
o In March 2007, Ship Finance announced the agreement to acquire three
newbuilding seismic vessels from SCAN Geophysical ASA ("SCAN") based on a
total delivered price of $210 million, or $70 million per vessel, including
complete seismic equipment. The vessels are scheduled for delivery in 2008,
and will be chartered back to SCAN for a period of 12 years thereafter.
o In March 2007, Ship Finance announced the agreement to sell the single hull
VLCC Front Vanadis to Great Elephant Corporation ("Great Elephant") a
subsidiary of Taiwan Maritime Transportation Co. Ltd. in the form of a
hire-purchase agreement. The vessel is chartered to Great Elephant until
November 2010, with a purchase obligation at the end of the charter.
Delivery took place at the beginning of May 2007.
Dividends and Results for the Quarter ended March 31, 2007
The Board of Directors has reviewed the long term prospects for the Company
including its significant fixed charter backlog, growth prospects and strong
financial position, and has decided to increase the dividend payment for the
quarter to $0.55 per share. The dividend will be paid on or about June 21, 2007
to shareholders of record as of June 8, 2007. The ex-dividend date is June 6,
2007.
The Company reported total operating revenues of $86.5 million, net operating
income of $83.0 million and net income of $55.3 million for the first quarter of
2007. Earnings per share for the quarter were $0.76. This includes a profit of
$30.8 million relating to the sale of the six single hull Suezmax tankers.
For the first quarter of 2007, the Company estimates that a total of $15.2
million or $0.21 per share has accumulated in profit share from Frontline Ltd.
("Frontline"). Based on U.S. generally accepted accounting principles ("US
GAAP"), this has not been accounted for in the period and will be recognized
later in the year provided the vessels on charter to Frontline continue to earn
in excess of the minimum fixed charter rates.
As most of the Company's assets are accounted for based on lease accounting, a
significant portion of the charter hire received does not appear in the income
statement as described in Note 2 to the Income Statement. These amounts are
classified as 'repayment of investment in finance leases', and are included in
the statement of cashflows only. For the first quarter, this amounted to $36.3
million or $0.50 per share.
Net cash provided by operating activities in the first quarter was $112.1
million, net cash provided by investing activities was $6.4 million and net cash
used in financing activities was $36.6 million.
As of March 31, 2007, the Company had total cash and cash equivalents of $146.4
million and restricted cash of $13.5 million. In addition, $0.4 million in cash
and cash equivalents was held in a 100% owned subsidiary accounted for under the
equity method. At the end of the quarter, the Company had available undrawn
credit lines in the amount of $219.7 million.
Business Update
As of March 31, 2007 the fleet consisted of 60 vessels, including 11 vessels
under construction.
The gross fixed-rate charter backlog was approximately $5.6 billion as of March
31, 2007, with an average charter tenure of 11.4 years, or 14.1 years if
weighted by charter revenue. Some of our charters have purchase or cancellation
options which, if exercised, will reduce the fixed charter backlog and average
charter tenure.
As of March 31, 2007, 35 of our crude oil tankers and eight of our oil/bulk/ore
("OBO") vessels 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 charter rate. For the
first quarter of 2007, the average base charter rate was approximately $26,300
for our VLCC's and $20,700 for our Suezmax tankers and 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 equivalent ("TCE") earned by Frontline in the
first quarter in the spot and time charter period market from the Company's
VLCCs, Suezmax tankers and OBOs were $46,654, $36,597 and $33,866, 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 net sales price was $221.3 million, and delivery to the
new owners took place at the end of the first quarter. The Company agreed to pay
compensation to Frontline for the termination of the charters in the amount of
$79.3 million, and net proceeds from the sale were $142.0 million. After
prepaying $14.2 million of loans relating to the sold vessels, the Company's
cash position increased by approximately $127.8 million following the sales.
In January 2007, the Company also announced the acquisition of a second
newbuilding jack-up drilling rig from Seadrill, the "West Prospero" scheduled
for delivery in July 2007. The rig will then commence a 15 year bareboat charter
to a subsidiary of Seadrill. The charter rate will be higher in the initial
period when the rig is on a profitable third party charter. Seadrill will have
several options to buy back the rig, and the first purchase option will be after
three years. The Company estimates the average annual net cash contribution the
first six years after estimated interest expense and debt repayment to be
approximately $0.10 per share.
The Company announced the acquisition of two newbuilding Capesize dry bulk
vessels from Golden Ocean in January based on a total delivered price of $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 for the fourth quarter of 2008 and first
quarter of 2009. Depending on the final financing terms for this transaction,
the Company estimates the annual net cash contribution the first six years after
estimated interest expense and debt repayment to be approximately $0.06 per
share.
In early March 2007, Ship Finance took delivery of the "Horizon Hawk", the
second vessel in a series of five 2,824 TEU containerships on charter to Horizon
Lines for an initial period of 12 years. The three remaining vessels were
delivered to the Company in April and May, and the vessels will have full
cashflow and earnings effect from the third quarter. When all the vessels are
delivered, the average annual net cash contribution after interest expense and
debt repayment will be approximately $0.15 per share.
In late March 2007, Ship Finance announced the agreement to sell the single hull
VLCC Front Vanadis to Great Elephant. This is a hire-purchase agreement, where
the vessel will be chartered for a 3.5 years period, with a purchase obligation
at the end of the charter. Delivery took place at the beginning of May 2007 and
there was a gross upfront payment of $12.5 million from Great Elephant. The
gross bareboat charter rate will be $25,000 per day during the charter period,
and this is on average $10,000 more per day compared to the previous time
charter to Frontline, adjusted for the operating expenses relating to the
vessel. The purchase obligation at the end of the charter is $3 million, and
Great Elephant will have quarterly purchase options during the charter, starting
at $27.9 million, and reducing gradually over the term of the charter. Ship
Finance has agreed to pay a compensation payment of approximately $13.2 million
to Frontline for the termination of the previous charter.
In March 2007, Ship Finance announced the agreement to acquire three newbuilding
seismic vessels from SCAN based on a total delivered price of $210 million, or
$70 million per vessel, including complete seismic equipment. The vessels are
being constructed at the ABG Shipyard in India and delivery is scheduled in
2008. Ship Finance is financing the transaction by a six year senior loan
facility of $120 million ($40 million per vessel) and an equity contribution of
$30 million ($10 million per vessel). SCAN will provide a non-interest bearing
seller's credit of $60 million ($20 million per vessel). Upon delivery from the
shipyard, the vessels will commence 12 year bareboat contracts to SCAN and
during the first six years of the charters, the average annual net cash
contribution after estimated interest expense and debt repayment will be
approximately $0.12 per share.
Corporate and Other Matters
As of March 31, 2007, $449.1 million of the 8.5% Senior Notes due 2013 was
outstanding. Senior Notes with a par value of $57.0 million were subject to Bond
Swap Agreements as of the end of the quarter. The annual interest rate on the
Senior Notes held under Bond Swap Agreements has been effectively reduced to
approximately Libor + 1.00% p.a.
After a review of the financial statement presentation of the consolidation of
the Company's 100% owned subsidiaries under US GAAP, the Company has changed the
accounting treatment for the subsidiary Rig Finance Limited which owns the
jack-up rig "West Ceres". Previously, this subsidiary was accounted for as
investment in associate, but the Company will now consolidate Rig Finance
Limited with effect from 2006. The change in the consolidation will not impact
the Company's net income, book equity or cash flow.
On March 22, 2007, Frontline distributed essentially all of its remaining
shareholding in Ship Finance to its shareholders as a dividend. Frontline has
previously consolidated Ship Finance into its accounts, but following the recent
distribution of shares, Frontline will not consolidate Ship Finance going
forward. For Ship Finance, we do not expect any accounting impacts as a
consequence of the distribution of shares.
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 to support a predictable long-term
dividend capacity. 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. During 2006 and 2007 the
Company has committed to new investments in excess of $1.2 billion, and these
investments are expected to increase the Company's fixed charter income and
dividend distribution capacity.
Over the last quarters, there has been an increasing average volume of Ship
Finance shares traded on the New York Stock Exchange. The Company believes that
this is due to a combination of increased focus on yield-oriented shipping
stocks in general and more activity in the Company after the employment of a
dedicated management team in 2006. Our focus is on building the long-term
dividend capacity in Ship Finance, and an integral part of achieving this is to
preserve capital for debt repayments and reinvestments in new assets on a
continuous basis.
With a total fleet of 60 vessels (including 11 vessels under construction), and
a strategy to grow the fleet with accretive transactions, the management of Ship
Finance sees opportunities from time to time to potentially further enhance the
value to shareholders through ordering newbuildings or acquiring modern
second-hand vessels with no or shorter term charter initially. The objective
will then be to find more profitable long-term charters for these assets over
time as the market develops, and to capture the upside potential for our
shareholders.
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 existing and new projects,
including more than $360 million of cash reserves and available amounts under a
revolving credit facility. Based on current financing levels available in the
market for projects with long term charters, Ship Finance has significant
capacity to invest in new projects 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.
May 30, 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
FIRST QUARTER 2007 REPORT (UNAUDITED)
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INCOME STATEMENT 2007 2006 2006
(in thousands of $ except per share data) Jan - Mar Jan - Mar Jan - Dec (1)
--------------------------------------------- ------------------ ----------------- -------------------
Total operating revenue (2) 86,541 84,121 424,658
Loss (gain) on sale of assets (30,764) (1,132) (9,807)
Voyage expenses 373 711 1,736
Ship operating expenses 28,959 27,543 117,957
Administrative expenses 2,017 521 6,584
Depreciation 2,998 4,359 14,490
Total operating expenses 34,347 33,134 140,767
Operating income 82,958 52,119 293,698
Interest income 1,436 726 3,978
Interest expense (32,062) (26,398) (113,588)
Results in associates 235 - 267
Other financial items 2,788 7,379 (3,820)
Foreign currency exchange (loss) gain (74) 26 219
Taxes - - (42)
Net income 55,281 33,851 180,799
Basic earnings per share ($) $0.76 $0.46 $2.48
Weighted average number of shares 72,743,737 72,827,070 72,764,285
Common shares outstanding 72,743,737 72,743,737 72,743,737
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(1) 2006 figures have been adjusted to reflect full consolidation of Rig
Finance Limited, a 100% owned subsidiary previously consolidated as
Investment in associated companies.
(2) 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' (Frontline charters only). 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".
SHIP FINANCE INTERNATIONAL LIMITED
FIRST QUARTER 2007 REPORT (UNAUDITED)
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BALANCE SHEET 2007 2006 2006
(in thousands of $) Mar 31 Mar 31 Dec 31 (1)
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ASSETS
Short term
Cash and cash equivalents 146,435 88,472 64,570
Restricted cash 13,482 11,083 12,937
Amount due from related parties 13,544 - 63,024
Other current assets 146,604 124,982 166,622
Long term
Newbuildings and vessel purchase options 126,115 2,000 7,658
Vessels and equipment, net 292,643 271,528 238,891
Investment in finance leases 1,841,930 1,810,667 1,958,691
Investments in associates 3,839 - 3,698
Deferred charges 17,484 17,198 16,848
Other long-term assets 23,845 24,276 20,738
Total assets 2,625,921 2,350,206 2,553,677
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term and current portion of long term interest bearing debt 170,124 120,026 144,451
Other current liabilities 25,778 25,070 14,793
Amount due to related parties 42,619 3,112 14,411
Long term
Long term interest bearing debt 1,749,913 1,630,535 1,770,749
Other long term liabilities 8,235 26,159 8,743
Stockholders' equity (2) 629,252 545,304 600,530
Total liabilities and stockholders' equity 2,625,921 2,350,206 2,553,677
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(1) 2006 figures have been adjusted to reflect full consolidation of Rig
Finance Limited, a 100% owned subsidiary previously consolidated as
Investment in associated companies.
(2) As of March 31, 2007 Stockholders' equity excludes $ 223.1 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.
SHIP FINANCE INTERNATIONAL LIMITED
FIRST QUARTER 2007 REPORT (UNAUDITED)
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STATEMENT OF CASHFLOWS 2007 2006 2006
(in thousands of $) Jan - Mar Jan - Mar Jan - Dec (1)
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OPERATING ACTIVITIES
Net income 55,281 33,851 180,798
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortisation 2,900 5,007 17,559
Adjustment of financial derivatives to market value (3,618) (5,087) 6,375
Loss (gain) on sale of assets (30,764) (1,132) (26,469)
Result in associate (235) - (4,206)
Stock option expense 152 - 49
Other (87) (1,759) (5,140)
Change in operating assets and liabilities 88,486 96,351 24,531
Net cash provided by operating activities 112,115 127,231 193,497
INVESTING ACTIVITIES
Repayment of investments in finance leases 36,314 32,134 136,760
Net placement of restricted cash (545) (9,507) (11,362)
Sale of vessels 141,855 40,466 75,606
Acquisition of subsidiaries, net of cash acquired 879 (34,810) (34,810)
Investment in newbuildings 7,658 (2,000) (7,658)
Purchase of vessels (182,864) - (266,750)
Investment in associated companies 94 - 508
Purchase of short term investments 3,000 - (3,000)
Net cash provided by (used in) investing activities 6,391 26,283 (110,706)
FINANCING ACTIVITES
Repurchase of shares - (7,212) (7,212)
Proceeds of long-term debt 127,188 - 312,588
Debt fees paid (539) - (1,047)
Repayment of long-term debt (122,349) (43,097) (190,716)
Cash dividends paid (39,282) (36,372) (149,123)
Deemed dividends paid (1,658) (11,218) (15,569)
Net cash provided by (used in) financing activities (36,640) (97,899) (51,079)
Net increase in cash and cash equivalents 81,866 55,615 31,712
Cash and cash equivalents at start of period 64,569 32,857 32,857
Cash and cash equivalents at end of period 146,435 88,472 64,569
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(1) 2006 figures have been adjusted to reflect full consolidation of Rig
Finance Limited, a 100% owned subsidiary previously consolidated as
Investment in associated companies.
SUBSIDIARY ACCOUNTED FOR AS INVESTMENTS IN ASSOCIATES
FIRST QUARTER 2007 REPORT (UNAUDITED)
FRONT SHADOW INC
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INCOME STATEMENT 2007 2006
(in thousands of $) Jan - Mar Jan - Dec
---------------------------------------------- --------------- ---------------
Total operating revenue (1) 562 694
Total operating expenses - 9
Operating income 562 685
Interest expense (333) (422)
Other financial items 6 4
Net income 235 267
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1) 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. At the end of the lease, Ship Finance also has a put
option on Golden Ocean.
SUBSIDIARY ACCOUNTED FOR AS INVESTMENTS IN ASSOCIATES
FIRST QUARTER 2007 REPORT (UNAUDITED)
FRONT SHADOW INC
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BALANCE SHEET 2007 2006
(in thousands of $) Mar 31 Dec 31
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ASSETS
Short term
Cash and cash equivalents 387 461
Other current assets 1,432 517
Long term
Investment in finance leases 26,270 28,026
Deferred charges 90 73
Total assets 28,179 29,077
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term and current portion of long term
interest bearing debt
2,060 2,060
Other current liabilities 71 79
Amounts due to related party 2,600 (1) 2,600
Long term
Long term interest bearing debt 19,610 20,640
Stockholders equity 3,838 3,698
Total liabilities and stockholders' equity 28,179 29,077
------------------------------------------------- ------------ ----------------
1) 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.
SUBSIDIARY ACCOUNTED FOR AS INVESTMENTS IN ASSOCIATES
FIRST QUARTER 2007 REPORT (UNAUDITED)
FRONT SHADOW INC
------------------------------------------------------ --------- -----------
STATEMENT OF CASHFLOWS 2007 2006
(in thousands of $) Mar 31 Dec 31
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OPERATING ACTIVITIES
Net income 235 267
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortisation (17) -
Change in operating assets and liabilities (103) 5,520
Net cash provided by operating activities 115 5,787
INVESTING ACTIVITIES
Repayment of investment in finance leases 841 408
Purchase of vessels - (28,434)
Net cash provided by (used in) investing activities 841 (28,026)
FINANCING ACTIVITIES
Proceeds from long term debt - 22,700
Repayment of long term debt (1,030) -
Net cash (used in) provided by financing activities (1,030) 22,700
Net (decrease) increase in cash and cash equivalents (74) 461
Cash and cash equivalents as start of period 461 -
Cash and cash equivalents at end of period 387 461
------------------------------------------------------ --------- -----------
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: July 10, 2007 By: /s/ Lars Solbakken
------------------------
Name: Lars Solbakken
Title: Chief Executive Officer
Ship Finance Management AS