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 May 2006
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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 [ ]
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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]
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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 May 26, 2006, reporting the
Company's results for the first quarter of 2006.
Ship Finance International Limited
Interim Report January - March 2006
Highlights
o Ship Finance reports a net income of $33.9 million and earnings per share
of $0.46 for the first quarter of 2006.
o Ship Finance announces an ordinary cash dividend of $0.45 per share, and a
supplementary extraordinary dividend of $0.05 per share.
Ship Finance International Limited ("Ship Finance" or the "Company") reports
total operating revenues of $84.1 million, operating income of $52.1 million and
net income of $33.9 million for the first quarter of 2006. Earnings per share
for the quarter were $0.46. Currently, all but seven of the Company's vessels
are trading under long term charters to Frontline Ltd. ("Frontline"). The
average daily time charter equivalents ("TCEs") earned by Frontline in the spot
and time charter period market from the Company's VLCCs, Suezmax tankers, and
Suezmax OBO carriers were $68,491, $49,883 and $31,716, respectively. In
accordance with accounting principles generally accepted in the United States,
no accrual has been made to recognise any amounts receivable under the profit
sharing arrangements with Frontline. However, the Company estimates that this
would be approximately $29.9 million for the first quarter of 2006 compared with
$33.5 million that was estimated for the first quarter of 2005.
As at March 31, 2006, the Company had interest rate swaps with a total notional
principal of $535.7 million and an average interest rate of 3.6 percent. In the
first quarter of 2006 other financial items include a gain of $8.7 million that
is attributable to the mark to market valuations of interest rate swaps
resulting from the continued increase in the forward curve for LIBOR in the
quarter.
As at March 31, 2006, the Company had total cash and cash equivalents of $99.6
million, of which $11.1 million was restricted. Cash provided by operating
activities in the quarter was $127.2 million, net cash provided by investing
activities was $26.3 million and net cash used in financing activities was $97.9
million.
Corporate and Other Matters
In January 2006, the VLCC Navix Astral was delivered to its existing bareboat
charterer pursuant to a charterer's purchase option that was exercised in
November 2005. In January 2006 the Company acquired the Front Tobago from
Frontline for $40 million. The Front Tobago has replaced and will fulfil the
remainder of the Navix Astral time charter with Frontline.
In February 2006 the Company entered into a total return bond swap line with
Fortis Bank. The total return swap is for a term of twelve months and will
facilitate the buyback of the Company's 8.5% senior notes in an amount of $50
million. As of today the bank has acquired bonds for $48.6 million with par
value $51.5 million.
On March 2006 according to a mutual understanding, a termination contract was
entered into between the Company and Consafe Offshore AB (publ) which terminated
the Heads of Agreement concerning a sale and lease back deal. The parties agreed
to keep a dialog with respect to potential future projects together. As a result
of the termination certain financial mechanisms which were set up for the deal
were also terminated. This resulted in a small net profit for the terminated
transaction.
In April 2006 the Company announced that it had closed the definitive agreement
and related financing documents to acquire five newbuilding container vessels
from third parties for a sum of approximately $280 million and to place the
vessels on long-term charters to Horizon Lines, LLC, a subsidiary of Horizon
Lines Inc., which will guarantee the charters. The term of each bareboat charter
will be 12 years with a three year renewal option on the part of Horizon Lines
which will operate the vessels in its TP1 service from the U.S. West Coast to
Guam and Asia. The vessels will fly the United States flag.
In the first quarter of 2006 the Company bought back and cancelled 400,000 of
its shares. At March 31, 2006, 72,743,737 ordinary shares were outstanding and
the weighted average number of shares outstanding for the quarter then ended was
72,827,070.
On May 26, 2006 the Board declared a dividend of $0.50 per share which
represents an ordinary cash dividend of $0.45 per share, and a supplementary
extraordinary dividend of $0.05 per share. The record date for the dividend is
June 12, 2006, ex dividend date is June 8, 2006 and the dividend will be paid on
or about June 26, 2006.
As from May 2, 2006 Mr. Lars Solbakken (49) has been hired as the new CEO of
Ship Finance. Mr.Solbakken has extensive experience from the marine sector both
from the owners' and financial services' side. With this recruitment, the Board
has secured that the Company has a fully dedicated person whose primary focus
will be on new projects. A further one or two recruitments are likely in the
near future.
Market
The downward pressure which started mid November 2005 for the VLCCs, and early
December 2005 for the Suezmaxes, continued until mid January 2006. The markets
saw, at the time, a low for VLCCs of about World Scale ("WS") 80, for the
benchmark route MEG to Japan, and about WS 124 from WAF to USAC for Suezmaxes.
From that time it took the market approximately two weeks to hit the high for
VLCCs of about WS 180 for the given route. This equated to a daily time charter
equivalent ("TCE") of approximately $137,000 per day. The equivalent number for
the Suezmaxes was a peak of about WS 210 at the start of February which equates
to a TCE of approximately $72,000 per day. Following the peak, the VLCC market
softened seeing a relatively steady decline until end quarter when fixtures
where conducted at WS 60. The Suezmaxes managed to stay firm at the peak for two
weeks and afterwards witnessed the same trend as the VLCCs did, steadily
declining towards quarter end at about WS 115. The average rate from the MEG to
Japan in the first quarter of 2006 was about WS 110 ($71,307 per day), compared
to about WS 108 ($68,027 per day) in the first quarter of 2005. The average rate
from WAF to USAC in the first quarter of 2006 was about WS 159 ($50,957 per
day), compared to about WS 164 ($50,705 per day) in the first quarter of 2005.
Bunkers are becoming an even more substantial part of operating costs and bunker
prices increased 14 percent during the first quarter. Fujairah's highest bunker
quote for the quarter was $339 per mt, with an average of $318 per mt.
The International Energy Agency (IEA) reported in May an average OPEC Oil
production, including Iraq, of 29.78 million barrels per day during the first
quarter of the year, a 0.24 million barrels per day or 0.8 percent decrease from
the fourth quarter. OPEC decided at its meeting held in Vienna in March to
maintain current production levels.
IEA estimates that world oil demand averaged 84.9 million barrels per day in the
first quarter, a 0.9 percent increase from the fourth quarter of 2005. IEA
further predicts that the average demand for 2006 in total will be 84.8 million
barrels per day, or a 1.5 percent growth from 2005, hence showing a firm belief
in continued demand growth.
The VLCC fleet totalled 468 vessels at the end of the first quarter of 2006, an
increase of 0.6 percent over the quarter. No VLCCs were scrapped in the period
whilst four were delivered. The total order book now stands at 122 vessels at
the end of the first quarter, up from 90 vessels after the fourth quarter of
2005. For the remainder of 2006 there are 13 deliveries expected and for 2007 we
count 35. The current orderbook represent 26 percent of the current VLCC fleet.
A total of 31 VLCCs were ordered during the quarter. The high ordering inflow in
the quarter is partly a result of new rules introduced April 1, 2006 which made
construction of VLCCs more expensive.
The Suezmax fleet totalled 342 vessels at the end of the quarter, up from 337
vessels after the fourth quarter of 2005, a 1.5 percent fleet growth over the
quarter. No Suezmaxes were scrapped during the quarter whilst five were
delivered. The total order book at the end of the quarter is 62, down by one
from the end of the fourth quarter. For the remainder of 2006 there are 19
deliveries expected and 2007 counts 28. The current orderbook represents 18
percent of the Suezmax fleet. Four Suezmaxes were ordered during the period.
At the beginning of May it was possible to sell freight futures for the
remainder of 2006 at a level that equated to TCEs for VLCCs at approximately
$51,500 per day and $35,000 per day for Suezmaxes.
Strategy
The strategy of the company is to increase its portfolio of assets and to try to
diversify the risk by also investing in shipping sectors other than the tanker
market. The company is also considering investments in the oil service sector,
with a particular focus on drilling rigs. Heavy-lift vessels and FPSO projects
are also currently being considered, partly to seek a life extension of the
Company's single hull vessels. The Board finds this an attractive alternative
that would help bridge the decline in contracted revenues in 2010 for the
Company's single hulls. The goal is to grow the Company's asset base by five to
ten percent per year as a minimum.
Outlook
With the completion of the Horizon deal discussed above, the Company's minimum
target revenue growth for 2006 is secured.
The Board is very pleased with the recruitment of Lars Solbakken as CEO and feel
that the Company has an attractive deal "pipeline", and should be able to
conclude several new deals to further expand the Company before year end. The
recruitment should also be seen as another step in making the Company more
independent of Frontline.
The increased spot interest level will increase the financing cost for the
unfixed part of the Company's debt. Total interest bearing debt as of quarter
end was $1,750 million of which $760 million was unhedged.
Based on the trading results achieved this year and the positive outlook for the
market, the Company expects to receive a solid profit-sharing also for 2006. The
Company's cash flow should thereby be strong enough to support growth as well as
secure a continued high long term dividend distribution. The target for the
Board will be to optimize long term return on equity based on a moderate to low
risk profile.
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 26, 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 23 11 40 06
Inger M. Klemp, Vice President Finance, Ship Finance International Limited
+47 23 11 40 76
SHIP FINANCE INTERNATIONAL LIMITED FIRST QUARTER REPORT (UNAUDITED)
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INCOME STATEMENT 2006 2005 2005
Jan-Mar Jan-Mar Jan-Dec
(in thousands of $ except per share data) (restated)
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Total operating revenues 84,121 82,389 437,510
(Gain)/loss on sale of assets (1,132) (470) 654
Voyage expenses 711 835 3,600
Ship operating expenses 27,543 24,980 110,241
Administrative expenses 521 868 2,446
Depreciation 4,359 4,659 19,907
Total operating expenses 33,134 31,342 136,194
Operating income (loss) 52,119 51,517 300,662
Interest income 726 718 3,343
Interest expense (26,399) (34,303) (111,935)
Other financial items 7,379 12,002 17,528
Foreign currency exchange gain (loss) 26 31 (52)
Net income (loss) 33,851 29,965 209,546
Basic earnings per share amounts ($) 0.46 0.40 2.84
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2006 2005 2005
BALANCE SHEET Jan-Mar Jan-Mar Dec 31
(in thousands of $) (restated)
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ASSETS
Short term
Cash and cash equivalents 88,472 112,037 32,857
Restricted cash 11,083 3,661 1,575
Other current assets 124,982 104,790 197,188
Long term
Newbuildings and vessel purchase options 2,000 8,370 -
Vessels and equipment, net 271,528 232,117 315,220
Investment in finance leases 1,810,667 1,749,695 1,818,344
Deferred charges and other long-term assets 41,474 37,906 37,409
Total assets 2,350,206 2,248,576 2,402,593
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term and current portion of long term 120,026 104,188 122,519
interest bearing debt
Amount due to parent 3,112 31,848 4,880
Other current liabilities 25,070 24,082 16,001
Long term
Long term interest bearing debt 1,630,535 1,513,025 1,671,138
Other long term liabilities 26,159 2,658 26,533
Stockholders' equity 545,304 572,775 561,522
Total liabilities and stockholders' equity 2,350,206 2,248,576 2,402,593
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2006 2005 2005
STATEMENT OF CASHFLOWS Jan-Mar Jan-Mar Jan-Dec
(in thousands of $) (restated)
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OPERATING ACTIVITIES
Net income (loss) 33,851 29,965 209,546
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortisation 5,007 16,934 36,431
Adjustment of financial derivatives to market (5,087) (12,084) (14,732)
value
(Gain)/loss on sale of assets (1,132) (470) 654
Other (1,759) (112) (4,708)
Change in operating assets and liabilities 96,351 126,419 53,643
Net cash provided by operating activities 127,231 160,652 280,834
INVESTING ACTIVITIES
Repayment of investments in finance leases 32,134 22,929 94,777
Net maturities (placement) of restricted cash (9,507) 1,718 3,804
Sale of investment in finance lease 67,750 229,800
Sale of vessel 40,466 - -
Acquisition of subsidiaries, net of cash (34,810) (224,224) (518,182)
acquired
Investment in newbuilding (2,000) - -
Purchase of vessels - - (79,772)
Net cash provided by (used in) investing
activities 26,283 (131,827) (269,573)
FINANCING ACTIVITIES
Repurchase of shares (7,212) - (33,083)
Proceeds from long-term debt - 1,086,940 1,571,429
Debt fees paid - (4,781) (7,346)
Repayment of long-term debt (43,097) (948,621) (1,253,503)
Cash dividends paid (36,372) (37,450) (148,864)
Deemed dividends paid (11,218) (82,092) (136,230)
Short-term loan advances to parent company - 299,949 -
Repayment of short term loan from parent company - (259,926) -
Net cash provided by (used in) financing (97,899) 54,019 (7,597)
activities
Net increase in cash and cash equivalents 55,615 82,844 3,664
Cash and cash equivalents at start of period 32,857 29,193 29,193
Cash and cash equivalents at end of period 88,472 112,037 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 authorized.
Ship Finance International Limited.
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(Registrant)
Date May 30, 2006 By /s/ Tom E. Jebsen
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Tom E. Jebsen
Chief Financial Officer
SK 23153 0001 674019