UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of November 2006
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Commission File Number: 001-32199
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 offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F
Form 20-F [X] Form 40-F [_]
Indicate by check mark if the registrant is submitting the Form 6-K in paper by
Regulations S-T Rule 101(b)(1):__________
Indicate by check mark if the registrant is submitting the Form 6-K in paper by
Regulations S-T Rule 101(b)(1):__________
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):
Item 1. 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 November 28, 2006.
Exhibit 1
Ship Finance International Limited (NYSE: SFL)
Reports Results for Third Quarter 2006 and Declares Quarterly Dividend
Ship Finance International Limited ("Ship Finance" or the "Company") announced
today the financial results for the third quarter ended September 30, 2006.
Highlights
o The Board of Directors has declared a cash dividend of $0.53 per share
with respect to the third quarter of 2006, consisting of a $0.50
ordinary base dividend and a supplementary extraordinary dividend of
$0.03 per share.
o Total operating revenues for the quarter was $121.8 million or $1.67
per share. Net income was reported at $45.7 million or $0.63 per
share.
o The Company's net income for the third quarter of 2006 was reduced by
a $16.4 million ($0.22 per share) unrealized loss representing the
change in the fair value of the Company's interest rate swaps related
to its secured credit facilities. A part of the Company's debt is on
floating rate terms and lower interest rates in the future will, if
sustained, improve long term earnings.
o For the first nine months of 2006, the Company estimates that a total
of $63.9 million ($0.88 per share) in profit share from Frontline Ltd.
has accumulated. Based on U.S. generally accepted accounting
principles ("US GAAP"), $43.0 million ($0.52 per share) has been
accounted for in the period, of which $37.5 million was included in
the third quarter. The unrecognized income of $20.9 million ($0.29 per
share) will be recognized in the fourth quarter provided Ship
Finance's vessels continue to earn in excess of the fixed charter
rates received from Frontline Ltd. ("Frontline").
o The single-hull VLCC "Front Tobago" has been sold for a gross sales
price of $45.0 million. Delivery to the new owners is expected in
December 2007.
o The single-hull Suezmax "Front Sunda" will be converted to a
heavy-lift vessel. The vessel is expected to be delivered from the
shipyard at the beginning of the second quarter of 2007. After
delivery, the vessel will commence a new 10 year fixed-rate charter to
Frontline Shipping II Limited.
o Two Suezmax newbuildings have been ordered in China for delivery in
2009. The vessels will be marketed for medium to long-term charters,
consistent with the Company's strategy.
Dividends and Results for the Quarter Ended September 30, 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 ordinary cash dividend basis from $0.45 per share to
$0.50 per share. In addition, the Board of Directors has decided to pay a
supplementary extraordinary dividend of $0.03 per share, bringing the total
dividend payment for the quarter to $0.53 per share. The dividend will be paid
on December 21, 2006 to shareholders of record as of December 7, 2006. The ex
dividend date is December 5, 2006.
The Company reported total operating revenue of $121.8 million, operating income
of $86.3 million and net income of $45.7 million for the third quarter of 2006.
Earnings per share for the quarter were $0.63.
As of September 30, 2006, the Company had interest rate swaps with a total
notional principal of $740.4 million and an average interest rate of 4.42
percent per annum. In the third quarter other financial items include a loss of
$16.4 million that is attributable to the mark-to-market valuations of interest
rate swaps. The interest rate swaps are used to fix a portion of the interest
rate on the Company's floating rate debt. The decrease in the mark-to-market
valuations is attributable to lower interest rates compared to the end of the
second quarter of 2006. A part of the Company's debt is on floating rate terms,
and lower interest rates in the future will, if sustained, improve long term
earnings.
As of September 30, 2006, the Company had total cash and cash equivalents of
$31.6 million and restricted cash of $10.9 million. In addition, the Company had
available undrawn credit lines in the amount of $196.7 million. Cash provided by
operating activities in the quarter was $29.0 million, net cash provided by
investing activities was $15.9 million and net cash used in financing activities
was $46.6 million.
For the third quarter, operating revenues include $37.5 million of profit share
due from Frontline under long term charter agreements. For the second quarter of
2006, $5.5 million of profit share was included in the operating revenues. For
the first nine months of 2006, $43.0 million of profit share has been included
in the operating revenues. The Company estimates that a total of $63.9 million
in profit share has accumulated during the first nine months of 2006, of which
$20.3 million in the third quarter. However this cannot be fully accounted for
in accordance with US GAAP. The unrecognised income of $20.9 million will be
recognised in the fourth quarter provided the vessels continue to earn in excess
of the fixed charter rates received from Frontline.
Business Update
The Company's business model is to have a long term contract coverage and
predictable cashflows from its vessels. The fleet, including seven vessels under
construction, totals 61 vessels. As of September 30, 2006, the gross fixed-rate
charter backlog amounts to $5.3 billion with an average charter tenure of 11.6
years. Some of our charters have purchase options which, if exercised, will
reduce the fixed charter backlog and average charter tenure.
Fifty of our crude oil tankers operate on long term contracts to subsidiaries of
Frontline. In addition to the fixed base charter rate, Ship Finance also
receives 20% of the annual premium earnings in excess of an average of $26,597
for our VLCC's, $21,100 for our Suezmax crude oil tankers and $21,100 for our
Suezmax OBO carriers. The earnings have consistently been above the minimum
charter levels since the Company's inception in 2003.
The average daily time charter equivalents ("TCEs") earned by Frontline in the
third quarter in the spot and time charter period market from the Company's
VLCCs, Suezmax tankers and Suezmax OBO carriers were $58,962, $40,374 and
$30,767, respectively.
The average daily TCEs earned by Frontline for the first nine months in the spot
and time charter period market from the Company's VLCCs, Suezmax tankers and
Suezmax OBO carriers were $60,149, $41,452 and $30,860, respectively.
Two Suezmax newbuildings have been ordered in China for delivery in the first
and third quarters of 2009. The contract terms, payment schedule and delivery
dates are considered to be attractive compared to other newbuilding orders
reported in the market recently. The vessels will be marketed for medium to
long-term charters, consistent with the Company's strategy.
The single-hull VLCC "Front Tobago" has been sold for a gross sales price of
$45.0 million. Delivery to the new owners is expected in late December 2006 or
early January 2007, and a compensation payment will be paid to Frontline for the
cancellation of the charter. The sale is not expected to have a material impact
on the Company's accounts.
The single-hull Suezmax "Front Sunda" will be converted to a heavy-lift vessel
and the additional investment is estimated to be approximately $41 million. The
vessel is expected to be delivered from the shipyard at the beginning of the
second quarter of 2007, and "Front Sunda" will then commence a new 10 year
fixed-rate charter to Frontline Shipping II Limited.
At the end of November, Ship Finance expects to take delivery of the first
vessel in a series of five 2,850 TEU containerships to be chartered to Horizon
Lines for an initial period of 12 years. The remaining vessels are estimated to
be delivered to us in the first and second quarters of 2007. Horizon Lines has
been granted fixed-price purchase options, first time after 5 years.
Ship Finance owns two 1,700 TEU container vessels; "Sea Alfa" and "Sea Beta".
"Sea Alfa" is on a time charter to the Korean operator Heung A until May 2009.
"Sea Beta" was on a bareboat charter to the Australian charterer PAN Logistics
until the beginning of October, but the charterparty was cancelled as a
consequence of PAN Logistics going into voluntary receivership. The charter was
secured by a $2.7 million bank guarantee. "Sea Beta" is currently employed on a
short term contract.
The jack-up drilling rig "West Ceres" (ex. Seadrill 3) was delivered to the
Company in June 2006 and has been on a bareboat charter to Seadrill Ltd. for the
entire third quarter. The charter period is 15 years. Seadrill has been granted
fixed-price purchase options, first time after 3 years. "West Ceres" is
accounted for as an investment in associate using the equity method.
The 1997 built Panamax dry bulk vessel Golden Shadow was delivered to the
Company on September 11, 2006 and has been chartered to Golden Ocean Group
Limited for a period of 10 years. Golden Ocean has been granted fixed-price
purchase options, first time after 3 years. Golden Shadow is accounted for as an
investment in associate using the equity method.
Corporate and Other Matters
In September the Company increased one of its existing secured credit facilities
by $219.7 million. The additional funds are available on a revolving basis and
can be used to fund the equity portion in new projects or as working capital in
the Company. At the end of the third quarter, $196.7 million was undrawn.
After the sale of "Front Tobago" and conversion of "Front Sunda" to a heavy lift
vessel, the Company will own nine VLCC and seven Suezmax crude oil tankers
classified as single hull tankers. Of these, three vessels have double sides.
The Company is pursuing further opportunities to extend the commercial life of
the single-hull vessels, including potential conversions to other uses such as
heavy-lift or floating production, storage and offloading vessel (FPSO) .
During the third quarter, the Company repurchased $8.0 million of its 8.5%
Senior Notes due 2013. Net of the repurchased bonds, $449.1 million was
outstanding at the end of the quarter. In addition, Senior Notes with a par
value of $51.5 million is controlled under a Bond Swap Agreement, effectively
reducing the interest expense to Libor + 1.00% p.a.
The Company plans to implement a dividend reinvestment plan (DRIP) and direct
stock purchase plan (DSPP) for individual shareholders who wish to invest in
shares in the Company on a regular basis. All relevant details for how to join
this plan will be announced at a later stage.
On September 22, 2006, Mr Ole B. Hjertaker (39) was hired as CFO of Ship Finance
Management AS. Mr. Hjertaker has extensive investment banking and commercial
banking experience focused on the marine sector. Upon his commencement, Mr
Hjertaker was awarded 150,000 options for Ship Finance shares, to be vested over
three years.
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.
During 2006 the Company has committed to new investments in excess of $650
million, and these investments are expected to increase the Company's fixed
charter income and dividend distribution capacity.
The Company will aggressively pursue new projects, and additional investment
opportunities are currently under consideration. The Company has capital
available to fund the equity portion of new projects, including $196.7 million
of undrawn amounts under credit facilities. Based on current financing levels
available in the market for projects with long term charters, Ship Finance has
the capacity to invest in projects with a costprice in excess of $800 million
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.
November 28, 2006
The Board of Directors
Ship Finance International Limited
Hamilton, Bermuda
Questions should be directed to:
Tor Olav Troim: Director, Ship Finance International Limited
+44 7734 976 575
Lars Solbakken: Chief Executive Officer, Ship Finance Management AS
+47 2311 4006
Ole B. Hjertaker: Chief Financial Officer, Ship Finance Management AS
+47 2311 4011 / +47 9014 1243
SHIP FINANCE INTERNATIONAL LIMITED THIRD QUARTER REPORT (UNAUDITED)
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2005 2006 INCOME STATEMENT 2006 2005 2005
Jul-Sep Jul-Sep (in thousands of $ except per share data) Jan-Sep Jan-Sep Jan-Dec
(audited)
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118,403 121,796 Total operating revenue (1) 296,816 295,572 437,510
- - (Gain) loss on sale of assets (10,131) - 654
1,158 461 Voyage expenses 1,557 3,000 3,600
31,411 30,164 Ship operating expenses 87,488 82,729 110,240
536 1,220 Administrative expenses 2,678 1,621 2,447
5,193 3,628 Depreciation 11,633 14,682 19,907
38,298 35,473 Total operating expenses 103,356 102,032 136,194
80,105 86,323 Operating income 203,591 193,540 300,662
1,048 769 Interest income 3,159 2,333 3,343
(25,384) (27,365) Interest expense (80,899) (84,242) (111,935)
- 1,987 Results in associate 1,914 - -
9,516 (16,027) Other financial items (4,978) 14,862 17,528
(19) 36 Foreign currency exchange gain (loss) 205 (21) (52)
65,266 45,723 Net income 122,992 126,473 209,546
$0.87 $0.63 Basic earnings per share ($) $1.69 $1.69 $2.84
74,606,272 72,743,737 Weighted average number of shares 72,771,210 74,781,057 74,560,108
74,600,837 72,743,737 Common shares outstanding 72,743,737 74,600,837 73,143,737
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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, and appears in the Statement of Cashflows and in the Balance Sheet as a
reduction of the balance "Investment in finance leases" .
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BALANCE SHEET
(in thousands of $)
2006 2005 2005
Sep 30 Sep 30 Dec 31
(audited)
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ASSETS
Short term
Cash and cash equivalents 31,621 68,944 32,857
Restricted cash 10,924 2,864 1,575
Amount due from related parties (2) 44,703 4,155 79,416
Other current assets 138,074 148,391 109,092
Long term
Newbuildings and vessel purchase options 10,382 - -
Vessels and equipment, net 238,492 322,362 315,220
Investment in finance leases 1,785,667 1,834,772 1,818,344
Investments in associates 52,975 - -
Deferred charges 16,910 18,512 17,846
Other long-term assets 20,167 17,258 19,563
Total assets 2,349,915 2,417,258 2,393,913
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term and current portion of long term interest bearing debt 134,776 122,519 122,519
Other current liabilities 19,569 23,082 12,201
Amount due to related parties 11,113 - -
Long term
Long term interest bearing debt 1,603,772 1,702,768 1,671,138
Other long term liabilities 9,139 27,154 26,533
Stockholders' equity (3) 571,546 541,735 561,522
Total liabilities and stockholders' equity 2,349,915 2,417,258 2,393,913
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(2) Accumulated profit share included in amount due from related parties is 43.0 million as at
September 30, 2006.
(3) As at September 30, 2006 Stockholders equity excludes $237.4 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.
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2005 2006 STATEMENT OF CASHFLOWS 2006 2005 2005
Jul-Sep Jul-Sep (in thousands of $) Jan-Sep Jan-Sep Jan-Dec
(audited)
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OPERATING ACTIVITIES
65,266 45,723 Net income 122,992 126,473 209,546
Adjustments to reconcile net income to net
cash provided by operating activities
8,192 4,519 Depreciation and amortisation 13,836 31,706 36,431
- (2) Unrealised foreign currency exchange (gain) loss - -
(8,076) 16,261 Adjustment of financial derivatives to market value 7,339 (11,872) (14,732)
- - (Gain) loss on sale of assets (26,469) - 654
- (1,987) Result in associate (1,914) - -
(3,462) (1,321) Other (4,071) (6,024) (4,708)
(21,395) (34,227) Change in operating assets and liabilities 46,048 104,447 53,643
40,525 28,966 Net cash provided by operating activities 157,761 244,730 280,834
INVESTING ACTIVITIES
25,794 31,484 Repayment of investments in finance leases 93,889 72,922 94,777
(149) (77) Net maturities (placement) of restricted cash (9,349) 2,515 3,804
71,000 - Sale of investment in finance lease - 229,800
288 - Acquisition of subsidiaries, net of cash acquired (34,810) (549,090) (518,182)
- - Proceeds from sale of vessels 40,466 - 229,800
(49,889) - Purchase of vessels - (49,889) (79,772)
12,535 (10,382) Investment in newbuildings (10,382) - -
- (5,092) Investment in associated companies (51,059) - -
59,579 15,933 Net cash provided by (used in) investing activities 28,755 (293,722) (269,573)
FINANCING ACTIVITIES
(1,874) - Repurchase of shares (7,212) (5,874) (33,083)
141,950 31,000 Proceeds from long-term debt 56,000 1,571,429 1,571,429
(1,423) (1,177) Debt fees paid (1,265) (8,512) (7,347)
(178,659) (37,677) Repayment of long-term debt (110,780) (1,221,874) (1,253,503)
(37,300) (37,827) Cash dividends paid (110,569) (112,201) (148,863)
(3,699) (944) Deemed dividends paid (13,926) (134,225) (136,230)
(81,005) (46,625) Net cash provided by (used in) financing activities (187,752) 88,743 (7,597)
19,099 (1,726) Net (decrease) increase in cash and cash equivalents (1,236) 39,751 3,664
49,845 33,347 Cash and cash equivalents at start of period 32,857 29,193 29,193
68,944 31,621 Cash and cash equivalents at end of period 31,621 68,944 32,857
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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
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(Registrant)
Date November 28, 2006 By /s/ Ole Bjarte Hjertaker
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Ole Bjarte Hjertaker
Chief Financial Officer
SK 23153 0001 726239