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 November 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 1 is a copy of the Earnings Release dated November 15, 2007,
of Ship Finance International Limited announcing its financial results for the
quarter ended September 30, 2007.
Exhibit 1
SFL - 3Q 2007 Earnings
Earnings release from Ship Finance International Ltd. November 15, 2007
Ship Finance International Limited (NYSE: SFL) - Earnings Release
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Reports third quarter 2007 results and quarterly dividend of $0.55 per share
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Ship Finance International Limited ("Ship Finance" or the "Company") announces
the financial results for the quarter ended September 30, 2007.
Highlights
o Declared a quarterly cash dividend of $0.55 per share.
o Reported net income for the quarter of $20.6 million or $0.28 per share,
including profit share contribution of $5.5 million or $0.07 per share
in the third quarter.
o $7.2 million or $0.10 per share non-cash negative adjustment in
mark-to-market of interest and bond swaps, primarily due to lower
interest rates at the end of the third quarter compared to the
previous quarter.
o Fixed-rate charter hire, excluding profit share contribution,
increased by 15% to $132.8 million, or $1.83 per share in the quarter.
Due to lease accounting, a significant portion of the cash flow is not
included in the Income Statement, but appears as 'repayment of
investment in finance leases' only.
o The Company's second jack-up drilling rig West Prospero was delivered
from the shipyard end of June 2007 and was in operation for the full
quarter.
o Acquisition of the 2003 built 1,700 TEU container vessel Montemar
Europa, which was delivered to Ship Finance end of August 2007.
o Acquisition of seven offshore supply vessels from Deep Sea Supply Plc.
in combination with 12-year charters. Four vessels were delivered in
September 2007, one vessel in October 2007 and the last two vessels
are expected to be delivered in December 2007.
o Announced the sale of the single hull VLCC Front Duchess to an
unrelated third party. Delivery to new owner is expected in the first
quarter 2008.
o The Board of Directors has approved a share repurchase program for up
to 7 million shares (9.6% of outstanding shares).
Dividends and Results for the Quarter ended September 30, 2007
The Board of Directors has declared a cash dividend for the third quarter of
$0.55 per share. The dividend will be paid on or about December 10, 2007 to
shareholders of record as of November 27, 2007. The ex-dividend date will be
November 23, 2007.
The Company reported total operating revenues of $93.4 million or $1.28 per
share in the third quarter. This includes $5.5 million or $0.07 per share of
profit share from subsidiaries of Frontline Ltd. ("Frontline"). Net operating
income for the quarter was $59.9 million or $0.82 per share and net income was
$20.6 million or $0.28 per share.
The profit share contribution is down from $15.7 million, or $0.22 per share in
the second quarter, due to lower earnings in the spot tanker market in the
period. Year-to-date, $36.4 million of profit share has accumulated, of which
$15.2 million, or $0.21 per share has not yet been recognized in the accounts,
and will be included in the fourth quarter.
The fixed-rate charter hire increased to $132.8 million, or $1.83 per share in
the quarter, up from $115.0 million, or $1.58 per share in the second quarter.
Net of operating expenses and general and administrative expenses in the third
quarter, the contribution from the fixed-rate charters was $105.4 million or
$1.45 per share, compared to $87.8 million, or $1.21 per share in the second
quarter. This excludes profit share contribution.
As the majority of the Company's assets are accounted for as finance leases, a
significant portion of the charter hire received does not appear in the Income
Statement. These amounts are classified as 'repayment of investment in finance
leases', and are only included in the Statement of Cashflows. For the third
quarter, this amounted to $44.8 million or $0.62 per share.
Liquidity and Capital Expenditure
Net cash provided by operating activities in the third quarter was $18.0
million, net cash used in investing activities was $211.0 million and net cash
provided by financing activities was $139.3 million.
As of September 30, 2007, the Company had $165.7 million in available funds,
comprised of $46.0 million in free cash and cash equivalents (including $0.6
million in a 100% owned subsidiary accounted for under the equity method) and
$119.7 million in available credit lines. The Company also owns several vessels
without any associated debt, and if required, these vessels can be used as
security for new borrowings to fund the equity portion in new projects.
As of September 30, 2007, and including acquisitions announced after the quarter
end, the Company's capital commitments relating to newbuildings and acquisitions
are estimated as follows:
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Period: 4Q 2007 2008 2009 2010 Total
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$138 mill. $323 mill. $168 mill. $98 mill. $727 mill.
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The above amounts are net of any seller's credits. In several of the projects,
the equity from the Company has been paid in already, and a large portion of the
remaining capital commitments is expected to be financed by bank loans. Ship
Finance has the capacity to continue investing in new projects without raising
additional equity capital.
Business Update
After the completion of recently announced acquisitions and sales, the Company
will have an operating fleet of 60 vessels and rigs and the Company has
contracted to acquire 12 additional vessels.
The gross fixed-rate charter backlog was approximately $5.6 billion as of
September 30, 2007, with an average charter tenure of 10.1 years, or 13.6 years
if weighted by charter revenue. Some of our charters have purchase options
which, if exercised, will reduce the fixed charter backlog and average charter
tenure.
As of September 30, 2007, 34 of our crude oil tankers and eight of our
oil/bulk/ore ("OBO") vessels operated on long term contracts to Frontline. In
addition to the fixed base charter rate, Ship Finance is also entitled to
receive 20% of the time charter equivalent ("TCE") earnings for these vessels in
excess of the base charter rate. For the third 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 TCE earned by Frontline in the third quarter in the spot and
time charter period market from the Company's VLCCs, Suezmax tankers and OBOs
were approximately $33,000, $27,200 and $41,300, respectively. The corresponding
average daily TCEs in the second quarter were approximately $49,200, $43,700 and
$38,300, respectively.
The spot tanker market has been substantially weaker in the third quarter
compared to the previous quarter, and this has had an impact on the profit share
contribution in the quarter. The weaker spot market for tankers has continued
into the fourth quarter, but we are benefiting from the fact that several of the
vessels on charter to Frontline have been sub-chartered at higher levels than
the current spot market.
The Company's second jack-up drilling rig West Prospero was delivered from the
shipyard and commenced a 15-year bareboat charter to a subsidiary of Seadrill
Limited at the end of the second quarter. The rig is accounted for as a finance
lease, and due to an accelerated rate structure the first 400 days when the rig
is on a profitable third party sub-charter, 2/3rd of the charter revenues
generated by the rig in the quarter ($9.6M or $0.13/share) are included in
'repayment of investment in finance lease' only.
In August 2007, the Company took delivery of the 2003 built 1,700 TEU container
vessel Montemar Europa. The vessel was acquired for a net purchase price of
$32.5 million. Montemar Europa has a time-charter attached that expires in the
fourth quarter of 2008, with a net time-charter rate of approximately $13,500
per day. The vessel was funded by our available cash reserves, but we plan to
arrange for a separate financing of the vessel at a later stage.
In August and November 2007, Ship Finance announced the agreement to acquire a
total of seven offshore supply vessels from Deep Sea Supply Plc. ("Deep Sea"),
in combination with 12-year bareboat charters back to Deep Sea. Total delivered
price for all vessels will be $324.5 million, less a seller's credits of $39.5
million. The Company has arranged a $148.9 million bank financing for the first
five vessels, and plans to arrange a $77.0 million bank financing for the last
two vessels. Four vessels were delivered in September 2007, one vessel in
October 2007 and the last two vessels are expected to be delivered in December
2007. Of the $59.1 million equity contribution, $32.1 million has been invested,
and $27.0 million is expected to be invested in
connection with the delivery of the two last vessels. The vessels are accounted
for as operating leases, and the average annual net cash contribution for the
first seven years after estimated interest expense and debt repayment will be
approximately $0.12 per share.
The Company has agreed to sell the single hull VLCC Front Duchess to an
unrelated third party for net sales proceeds of $54.5 million. Delivery to the
new owner is expected to take place in January/February 2008, and the net cash
effect is estimated to be approximately $21.9 million. The book profit is
estimated to be approximately $2.6 million, and will be recognized in the first
quarter of 2008.
Corporate and Other Matters
At the end of the third quarter 2007, $449.1 million of the 8.5% Senior Notes
due 2013 were outstanding, of which $109.2 million were subject to Bond Swap
Agreements. The financing cost on the Senior Notes held under Bond Swap
Agreements is effectively reduced to approximately LIBOR plus 1% per annum.
In September 2007, Mr. Craig H. Stevenson Jr., the former Chairman and Chief
Executive Officer of OMI Corporation, joined the Company's Board of Directors as
Chairman. Mr. Tor Olav Tr0im, who served as Chairman from the Company's
inception in 2003, will continue as a Board Member. As part of the compensation
for serving as Chairman, Mr. Stevenson was awarded 200,000 options to aquire
shares in Ship Finance, such options to be vested over three years.
In October 2007, the Company's Board of Directors announced a share repurchase
program of up to 7 million shares (9.6% of outstanding shares). To preserve the
Company's capacity for new accretive asset acquisitions, the Company will
initially use Total Return Swaps ("TRS") to effectively achieve the economic
effect of repurchasing shares.
The TRS agreements will be up to 12 months, and the Banks providing the TRS
agreements will be compensated for their carrying cost plus a margin of Libor +
1.0% p.a. Based on the latest announced dividend and the current share price,
the annualized dividend yield on Ship Finance's shares well exceeds the
financing costs for the TRS program. The TRS agreements are structured so that
the number of shares may increase and decrease over time. Currently, no shares
are held under the TRS program.
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 by having a diversified client base. During 2006 and 2007, the
Company has committed to new investments of $1.8 billion and these investments
have increased the Company's fixed charter income and dividend capacity.
In the fourth quarter, the net cash flow from fixed charters is expected to
increase. Four of the seven vessels on charter to Deep Sea and the Montemar
Europa will then be included for the full quarter, and the remaining three
vessels on charter to Deep Sea will be included for part of the quarter. Based
on the current spot market for tankers, we expect a low profit share to be
accumulated in the fourth quarter, but the profit share will then also include
the $15.2 million profit share from the first quarter of 2007.
We see an increasing number of transaction opportunities as a consequence of the
turmoil in the financial markets. In these market conditions, the banks focus
their attention and capacity on key clients with strong balance sheets, like
Ship Finance. We therefore continue to see competitive financing terms for new
projects.
Our strategy is to continue to grow the fleet with accretive transactions, and
additional investment opportunities are currently under consideration.
Forward Looking Statements
This press release contains forward looking statements. These statements are
based upon various assumptions, many of which are based, in turn, upon further
assumptions, including Ship Finance management's examination of historical
operating trends. Although Ship Finance believes that these assumptions were
reasonable when made, because assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict and
are beyond its control, Ship Finance cannot give assurance that it will achieve
or accomplish these expectations, beliefs or intentions.
Important factors that, in the Company's view, could cause actual results to
differ materially from those discussed in this press release include the
strength of world economies and currencies, general market conditions including
fluctuations in charter hire rates and vessel values, changes in demand in the
tanker market as a result of changes in OPEC's petroleum production levels and
world wide oil consumption and storage, changes in the Company's operating
expenses including bunker prices, dry-docking and insurance costs, changes in
governmental rules and regulations or actions taken by regulatory authorities,
potential liability from pending or future litigation, general domestic and
international political conditions, potential disruption of shipping routes due
to accidents or political events, and other important factors described from
time to time in the reports filed by the Company with the United States
Securities and Exchange Commission.
November 15, 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
THIRD QUARTER 2007 REPORT (UNAUDITED)
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INCOME STATEMENT
Three months ended Nine months ended Twelve months ended
September September September September December
(in thousands of $ except per share data) 30, 2007 30, 2006 30, 2007 30, 2006 31, 2006
(audited)
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Total operating revenues(1) 93,431 121,796 276,522 296,815 424,658
Gain on sale of assets -- -- 35,096 10,131 9,806
Voyage expenses 120 461 717 1,557 1,736
Ship operating expenses 25,810 30,164 80,039 87,488 117,957
Administrative expenses 1,482 1,219 5,203 2,677 6,584
Depreciation 6,079 3,628 12,274 11,633 14,490
Total operating expenses 33,491 35,472 98,233 103,355 140,767
Operating income 59,940 86,324 213,385 203,591 293,697
Interest income 1,010 769 5,312 3,159 3,978
Interest expense (26,534) (27,366) (95,721) (80,901) (113,588)
Results in associate 227 1,987 689 1,914 267
Other financial items (14,124) (16,028) (8,298) (4,976) (3,733)
Foreign currency exchange gain (loss) 46 36 (21) 205 219
Taxes -- -- -- -- (42)
Net income 20,565 45,722 115,346 122,992 180,798
Basic earnings per share($) $0.28 $0.63 $1.59 $1.69 $2.48
Weighted average number of shares 72,743,737 72,743,737 72,743,737 72,771,210 72,764,285
Common shares outstanding 72,743,737 72,743,737 72,743,737 72,743,737 72,743,737
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(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 in the Income Statement, 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
THIRD QUARTER 2007 REPORT (UNAUDITED)
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BALANCE SHEET September September December
(in thousands of $) 30, 2007 30, 2006(2) 31, 2006
(audited)
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ASSETS
Short term
Cash and cash equivalents 45,426 31,621 64,569
Restricted cash 22,670 10,924 12,937
Amount due from related parties 16,271 44,703 63,024
Other current assets 197,828 138,075 166,623
Long term
Newbuildings and vessel purchase options 45,705 10,382 7,658
Vessels and equipment, net 562,119 238,492 238,891
Investment in finance leases 2,004,724 1,785,667 1,958,691
Investment in associate 4,296 52,975 3,698
Deferred charges 17,413 16,909 16,848
Other long-term assets 22,069 20,167 20,738
Total assets 2,938,521 2,349,915 2,553,677
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term and current portion of long
term interest bearing debt 189,742 134,776 144,451
Other current liabilities 31,247 19,569 14,793
Amount due to related parties 5,353 11,113 14,411
Long term
Long term interest bearing debt 2,077,390 1,603,772 1,770,749
Other long term liabilities 25,175 9,139 8,743
Stockholders' equity (1) 609,614 571,546 600,530
Total liabilities and stockholders' equity 2,938,521 2,349,915 2,553,677
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(1) As of September 30, 2007 Stockholders' equity excludes $230 million of
deferred equity which is being recognised 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 amortised to Stockholders' equity in line with the charter
payments received from Frontline.
(2) As of September 30, 2006 Rig Finance Ltd. was not fully consolidated,
but accounted for as an investment in associate company. Following
further analysis, the subsidiary was fully consolidated effective
December 31, 2006.
SHIP FINANCE INTERNATIONAL LIMITED
THIRD QUARTER 2007 REPORT (UNAUDITED)
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STATEMENT OF CASHFLOWS
Three months ended Nine months ended Twelve months ended
September September September September December
(in thousands of $ except per share data) 30, 2007 30, 2006(1) 30, 2007 30, 2006(1) 31, 2006
(audited)
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OPERATING ACTIVITIES
Net income 20,568 45,722 115,346 122,992 180,798
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortisation 6,771 4,519 14,724 13,836 17,559
Adjustment of financial derivatives to
market value 13,995 16,260 7,012 7,339 6,375
Gain on sale of assets - - (35,095) (26,469) (26,469)
Result in associate (226) (1,987) (689) (1,914) (4,205)
Stock based compensation 159 - 470 - 49
Other (12,757) (1,319) (28,385) (4,070) (5,140)
Change in operating assets and (10,531) (34,226) 87,596 46,047 24,530
liabilities
Net cash provided by operating 17,979 28,967 160,979 157,761 193,497
activities
INVESTING ACTIVITIES
Repayment of investments in finance
leases 44,839 31,485 126,965 93,889 136,760
Net placement of restricted cash (10,963) (77) (9,733) (9,349) (11,362)
Sale of vessel (13,191) - 128,827 40,466 75,606
Acquisition of subsidiaries, net of
cash acquired - - - (34,810) (34,810)
Net investment in newbuildings (37,220) (10,382) (37,479) (10,381) (7,658)
Purchase of vessels (194,458) - (617,300) - (266,750)
Investment in associate companies - (5,093) 92 (51,060) 508
Purchase of short term investment 4 - 3,000 (3,000)
Other investments - - (2,008) - -
Net cash (used in) provided by
investing activities (210,989) 15,933 (407,636) 28,755 (110,706)
FINANCING ACTIVITIES
Repurchase of shares - - - (7,212) (7,212)
Proceeds from long-term debt 226,750 31,000 563,100 56,000 312,588
Debt fees paid (1,198) (1,179) (3,103) (1,266) (1,047)
Repayment of long-term debt (46,177) (37,676) (211,166) (110,780) (190,716)
Cash dividends paid (40,055) (37,827) (119,338) (110,569) (149,123)
Deemed dividends paid - (944) (1,979) (13,925) (15,569)
Net cash provided by (used in) 139,320 (46,626) 227,514 (187,752) (51,079)
financing activities
Net (decrease) increase in cash and
cash equivalents (53,690) (1,726) (19,143) (1,237) 31,712
Cash and cash equivalents at start of
period 99,116 33,347 64,569 32,857 32,857
Cash and cash equivalents at end of
period 45,426 31,621 45,426 31,621 64,569
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(1) As of September 30, 2006 Rig Finance Ltd. was not fully consolidated,
but accounted for as an investment in associate company. Following
further analysis, the subsidiary was fully consolidated effective
December 31, 2006.
SUBSIDIARY ACCOUNTED FOR AS INVESTMENTS IN ASSOCIATES
THIRD QUARTER 2007 REPORT (UNAUDITED)
FRONT SHADOW INC
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INCOME STATEMENT (2) Three months ended Three months ended
(in thousands of $) September 30, 2007 June 30, 2007
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Total operating revenue (1) 549 552
Total operating expenses - (3)
Operating income 549 549
Interest expense (323) (324)
Other financial items - 3
Net income 226 228
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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.
(2) The Charter for Golden Shadow is accounted for as a finance lease. A part
of the charter hire is classified as 'Repayment of investment in finance
leases' and is not included in the Total operating revenues in the Income
Statement. 'Repayment of investment in finance leases' was $361,150 for the
three months ended September 30, 2007, and $342,238 for the three months
ended June 30, 2007
SUBSIDIARY ACCOUNTED FOR AS INVESTMENTS IN ASSOCIATES
THIRD QUARTER 2007 REPORT (UNAUDITED)
FRONT SHADOW INC
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BALANCE SHEET
(in thousands of $) September 30, 2007 December 31, 2007
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ASSETS
Short term
Cash and cash equivalents 618 461
Other current assets 1,492 1,911
Long term
Investment in finance leases 25,507 26,632
Deferred charges 85 73
Total assets 27,702 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 166 79
Amounts due to related party (1) 5,940 6,031
Long term
Long term interest bearing debt 18,580 20,640
Stockholders equity 956 267
Total liabilities and stockholders'
equity 27,702 29,077
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(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.
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: November 16, 2007 By: /s/ Lars Solbakken
--------------------------------
Name: Lars Solbakken
Title: Chief Executive Officer
Ship Finance Management AS