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 August 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): 82-
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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 August 22, 2006.
Ship Finance International Limited
Interim Report April - June 2006
Highlights
o Ship Finance reports a net income of $43.4 million and earnings per
share of $0.60 for the second quarter of 2006.
o Ship Finance announces an ordinary cash dividend of $0.45 per share,
and a supplementary extraordinary dividend of $0.07 per share.
Second Quarter and Six Months Results
Ship Finance International Limited ("Ship Finance" or the "Company") reports
total operating revenues of $90.9 million, operating income of $65.1 million and
net income of $43.4 million for the second quarter of 2006. Earnings per share
for the quarter were $0.60. All vessels are operating under long term charters.
In the second quarter, operating revenues include $5.5 million of accrued profit
share due from Frontline Ltd. ("Frontline") under long term charter agreements.
The Company estimates that an additional $38.2 million in profit share has
accumulated during the first half of 2006, however this cannot yet be accounted
for in accordance with U.S. generally accepted accounting principles. The
unrecognised income of $38.2 million will be recognised in the third and fourth
quarters provided the vessels continue to earn in excess of the fixed charter
rates received from Frontline. The estimated profit share for the second quarter
was $13.8 million. The average daily time charter equivalents ("TCEs") earned by
Frontline in the second quarter in the spot and time charter period market from
the Company's VLCCs, Suezmax tankers, and Suezmax OBO carriers were $48,990,
$30,594 and $30,059 respectively.
As per June 30, 2006, the Company had interest rate swaps with a total notional
principal of $742 million and an average interest rate of about 4.2 percent per
annum. In the second quarter other financial items include a gain of $3.8
million that is attributable to the mark to market valuations of swaps compared
with a gain of $8.7 million in the first quarter.
Ship Finance announces net income of $77.3 million for the six months ended June
30, 2006 equivalent to earnings per share of $1.06. The average daily time
charter equivalents ("TCEs") earned by Frontline for the first six months in the
spot and time charter period market from the Company's VLCCs, Suezmax tankers,
and Suezmax OBO carriers were $59,404, $40,515 and $30,907, respectively.
As per June 30, 2006, the Company had total cash and cash equivalents of $44.2
million, of which $10.8 million is restricted. Cash provided by operating
activities in the quarter was $1.6 million, net cash used in investing
activities was $13.5 million and net cash used in financing activities was $43.2
million.
Corporate and Other Matters
In April 2006, Ship Finance entered into agreements 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 ("Horizon
Lines"), 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
service from the U.S. West Coast to Guam and Asia. Horizon Lines has been
granted fixed price purchase options after 5, 8, 12 and 15 years. The
acquisition has been financed by a non-recourse debt facility of $210 million.
The first vessel is expected delivered in November 2006 and the remaining four
vessels during the first half 2007.
In June 2006, Rig Finance Limited ("Rig Finance"), a wholly owned subsidiary of
the Company, purchased the jack up rig SeaDrill 3 from SeaDrill Invest I Ltd.
("SeaDrill Invest") for a total consideration of $210 million. The acquisition
has been financed by a $45 million equity contribution from Ship Finance and a
$165 million debt facility. Ship Finance is guaranteeing $10 million of the debt
facility. Upon delivery to Rig Finance, the rig was immediately chartered back
to SeaDrill Invest for a period of 15 years. The charter party is fully
guaranteed by SeaDrill Limited, the ultimate parent company of SeaDrill Invest.
SeaDrill Invest has been granted fixed price purchase options after 3, 5, 7, 10,
12 and 15 years. The first purchase option after 3 years is at $135.5 million
and the last purchase option after 15 years is at $60 million. In accordance
with U.S. generally accepted accounting principles, Ship Finance has been
required to deconsolidate Rig Finance and has accounted for the transaction as a
100 percent equity investment.
In June 2005, Ship Finance sold the Suezmax Front Hunter to an unrelated third
party for a net gain of $25.3 million which was deferred. The charter and
management agreements with Frontline relating to this vessel were terminated,
and Ship Finance paid Frontline a $3.8 million termination fee, in addition to
Frontline having the right to sell to Ship Finance a newbuilding VLCC and
charter it back at reduced charter rates. In June 2006, the parties agreed to
cancel the agreement, and to split the profit in accordance with the profit
share agreement (80 percent to Frontline and 20 percent to Ship Finance), but
adjusted for the residual value belonging to Ship Finance. The cancellation of
this agreement resulted in a net payment of $16.3 million to Frontline, in
addition to the earlier termination payment of $3.8 million. Ship Finance booked
a net gain of $9 million relating to the sale of Front Hunter and the
cancellation of the option agreement in the second quarter.
In July 2006, the Company entered into an agreement to acquire the 1997 built
Panamax M/V Rainshadow for $28.4 million from Golden Ocean Group Limited
("Golden Ocean"). The vessel will be chartered back to the seller for a period
of 10 years. As part of the agreement, Golden Ocean has provided an interest
free and non-amortising seller credit of $2.6 million. Golden Ocean has been
granted fixed price purchase options after 3, 5, 7 and 10 years. At the end of
the charter, Ship Finance also has an option to sell the vessel back to Golden
Ocean at an agreed fixed price of $10.4 million. The Company is in the process
of securing a $22.7 million debt facility in connection with the acquisition, of
which $2.1 million will be guaranteed by Ship Finance. The vessel is expected to
be delivered in September 2006.
In June 2006, the Company's wholly owned subsidiary Front Tobago Inc. entered
into a $25.0 million revolving credit facility, which was fully drawn at the end
of the second quarter.
The Company is in discussions with the banks in the $1,131 million main debt
facility in order to increase the facility by $219.7 million to the original
loan amount of $1,131 million. The increase will be available on a revolving
basis, and the intention is that the proceeds will be used to fund the equity
portion of new projects and for general working capital purposes.
In the second quarter the Company repurchased $16.1 million of its 8.5 percent
Notes through the Bond Swap Agreement with Fortis Bank. Notes with a par value
of $51.5 million have been purchased under the Bond Swap Agreement.
On August 22, 2006 the Board declared a dividend of $0.52 per share which
represents an ordinary cash dividend of $0.45 per share, and a supplementary
extraordinary dividend of $0.07 per share. The record date for the dividend is
August 31, 2006, ex dividend date is August 29, 2006 and the dividend will be
paid on or about September 18, 2006.
Market
The VLCC market started at the weakest point in April where the lowest rate in
the second quarter was witnessed with about World Scale ("WS") 55, for the
benchmark route MEG to Japan. This equated to a TCE of approximately $18,500 per
day. The rates firmed in a slow but steady manner for mentioned route until mid
May for thereafter to accelerate to its peak at about WS 120 ($80,500 per day)
in the third week of June. Following the peak, the VLCC market softened seeing a
steady decline until quarter end where fixtures where conducted at about WS 97
($58,500 per day). The average rate from the MEG to Japan in the second quarter
of 2006 was about WS 80 ($41,700 per day), compared to about WS 71 ($32,600 per
day) in the second quarter of 2005.
The Suezmaxes opened the second quarter with its lowest quote for the quarter at
about WS 94 ($21,400 per day) early in the second week of April for the
benchmark route WAF to USAC. The market firmed during the next two weeks to
about WS 152 ($45,500 per day) and thereafter taking a dip to about WS 130
($36,200 per day) in early May. The market subsequently firmed back up again and
was stable moving sideways at about WS 150 throughout most of May. Rates
declined to about WS 110 ($28,000 /day) in mid June and thereafter to peak a
week from the quarter end at about WS 178 ($ 59,300 per day) and finally ending
the second quarter at about WS 164 ($53,200 per day). The average rate from WAF
to USAC in the second quarter of 2006 was about WS 138 ($40,600 per day),
compared to about WS 132 ($34,800 per day) in the second quarter of 2005.
Bunkers continued the upward trend seen in the first quarter with Fujairah's
highest bunker quote for the quarter early May at $359/mt, and thereafter slowly
decreasing to $325/mt at the end of the quarter with an average of $335/mt.
The International Energy Agency (IEA) reported in August an average OPEC Oil
production, including Iraq, of 29.75 million barrels per day during the second
quarter of the year, a 0.12 million barrels per day or 0.4 percent decrease from
the first quarter. OPEC decided at its extraordinary meeting held in Caracas on
June 1 to maintain current production levels. The Conference's next ordinary
meeting is to take place in Vienna on September 11.
IEA estimates that world oil demand averaged 83.1 million barrels per day in the
second quarter, a 2.2 percent decrease from the first quarter of 2006. IEA
further predicts that the average demand for 2006 in total will be 84.8 million
barrels per day, or a 1.4 percent growth from 2005, hence showing a firm belief
in continued demand growth.
According to Fearnleys, the VLCC fleet totalled 473 vessels at the end of the
second quarter of 2006, an increase of 0.9 percent over the quarter. No VLCCs
were scrapped in the period whilst four were delivered. The total order book now
stands at 149 vessels at the end of the second quarter, up from 130 vessels
after the first quarter of 2006. For the remainder of 2006 there are seven
deliveries expected and for 2007 we count 32. The current orderbook represent
31.5 percent of the current VLCC fleet. A total of 23 VLCCs were ordered during
the quarter.
The Suezmax fleet totalled 335 vessels at the end of the quarter, up from 329
vessels after the first quarter of 2006, a 1.8 percent fleet growth over the
quarter. No Suezmaxes were scrapped during the quarter whilst six were
delivered. The total order book at the end of the quarter is 68, up by one from
the end of the first quarter. For the remainder of 2006 there are 10 deliveries
expected and 2007 counts 26. The current orderbook represent 20.2 percent of the
Suezmax fleet. 7 Suezmaxes were ordered during the second quarter.
At the start of August it was possible to sell freight futures for the remainder
of 2006 at a level that equated to TCEs for VLCCs at approximately $94,000 per
day and $57,200 per day for Suezmaxes.
Strategy
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 try to reduce the
risk by investing in different sectors of the shipping and oil service industry,
and also by having a diversified client base. Investment opportunities in both
second hand assets and newbuilding projects will be considered.
Outlook
During the last few months the Company has committed to new investments in
excess of $500 million, and these investments will result in an increase in the
Company's fixed charter income. A number of investment opportunities are under
consideration and it is expected that further investments will be made later
this year. In this respect, we have been offered by our affiliated company
Frontline to take over 2 newbuilding contracts for Suezmax tankers at Jiangsu
Rongsheng Heavy Industries Group Co. Ltd. in China at the original contract
price. These vessels are 156,000 dwt and will be delivered in 2009. The contract
price and the payment terms are considered to be attractive. A final decision
with respect to these contracts will be taken within shortly.
Based on the trading results achieved so far this year, and the positive outlook
for the tanker market, the Company expects a solid profit sharing also for 2006.
The Company's strong cash flow, together with the expected more than $200
million increase of the main debt facility, should be sufficient to support a
strong growth and a continued high long term dividend distribution. Focus will
be given on increasing long term dividend payments as well as minimising the
risk in the asset portfolio.
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.
August 22, 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: Chief Financial Officer, Frontline Management AS
+47 23 11 40 76
SHIP FINANCE INTERNATIONAL LIMITED SECOND QUARTER REPORT (UNAUDITED)
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2005 2006 INCOME STATEMENT 2006 2005 2005
Apr-Jun Apr-Jun Jan-Jun Jan-Jun Jan-Dec
(restated) (in thousands of $ except per share (restated) (audited)
data)
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94,246 90,899 Total operating revenues 175,020 176,635 437,510
(63) (8,999) (Gain)/loss on sale of assets (10,131) (533) 654
1,006 385 Voyage expenses 1,096 1,841 3,600
26,339 29,781 Ship operating expenses 57,324 51,319 110,240
217 937 Administrative expenses 1,458 1,085 2,447
4,830 3,646 Depreciation 8,005 9,489 19,907
32,392 34,749 Total operating expenses 67,883 63,734 136,194
61,917 65,149 Operating income (loss) 117,268 113,434 300,662
567 1,664 Interest income 2,390 1,285 3,343
(24,554) (27,136) Interest expense (53,534) (58,857) (111,935)
- (73) Results in associate (73) - -
(6,655) 3,671 Other financial items 11,049 5,347 17,528
(33) 143 Foreign currency exchange gain (loss) 169 (2) (52)
31,242 43,418 Net income (loss) 77,269 61,207 209,546
$0.42 $0.60 Basic earnings per share amounts ($) $1.06 $0.82 $2.84
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2006 2005 2005
BALANCE SHEET Jun 30 Jun 30 Dec 31
(in thousands of $) (restated) (audited)
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ASSETS
Short term
Cash, restricted cash and cash equivalents 44,194 52,560 34,432
Amount due from parent 7,646 8,628 79,416
Other current assets 136,777 101,653 109,092
Long term
Newbuildings and vessel purchase options - 12,535 -
Vessels and equipment, net 242,121 502,282 315,220
Investment in finance leases 1,813,243 1,703,554 1,818,344
Investment in associate 45,895 - -
Deferred charges 16,622 20,088 17,846
Other long-term assets 27,893 10,070 19,563
Total assets 2,334,391 2,411,370 2,393,913
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term and current portion of long term interest bearing debt 125,426 118,507 122,519
Other current liabilities 27,635 28,744 12,201
Long term
Long term interest bearing debt 1,620,129 1,728,518 1,671,138
Other long term liabilities 604 17,501 26,533
Stockholders' equity 560,597 518,100 561,522
Total liabilities and stockholders' equity 2,334,391 2,411,370 2.393,913
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2005 2006 2006 2005 2005
Apr-Jun Apr-Jun STATEMENT OF CASHFLOWS Jan-Jun Jan-Jun Jan-Dec
(restated) (in thousands of $) (restated) (audited)
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OPERATING ACTIVITIES
31,242 43,418 Net income (loss) 77,269 61,207 209,546
Adjustments to reconcile net income to net
cash provided by operating activities
6,580 4,310 Depreciation and amortisation 9,317 23,514 36,431
2 Unrealised foreign currency exchange (gain) 2 -
loss
8,288 (3,834) Adjustment of financial derivatives to market (8,922) (3,796) (14,732)
value
(63) (25,337) Gain on sale of assets (26,469) (533) 654
- 73 Result in associate 73 -
(1,917) (993) Other (2,750) (2,029) (4,708)
(16,076) Change in operating assets and liabilities 80,275 125,842 53,643
(577)
1,563 Net cash provided by operating activities 128,795 204,205 280,834
43,553
INVESTING ACTIVITIES
24,199 30,271 Repayment of investments in finance leases 62,405 47,128 94,777
946 236 Net maturities (placement) of restricted cash (9,272) 2,664 3,804
91,050 - Sale of investment in finance lease - 158,800
(325,134) - Acquisition of subsidiaries, net of cash (34,810) (549,358) (518,182)
acquired
- - Proceeds from sale of vessels 40,466 - 229,800
- - Purchase of vessels - - (79,772)
(12,535) 2,000 Investment in newbuilding - (12,535)
(45,967) Investment in associate (45,967) -
-
(221,474) (13,460) Net cash provided by (used in) investing 12,822 (353,301) (269,573)
activities
FINANCING ACTIVITIES
(40,023) - Amount due to parent - -
(4,000) - Repurchase of shares (7,212) (4,000) (33,083)
342,539 25,000 Proceeds from long-term debt 25,000 1,429,479 1,571,429
(2,309) (88) Debt fees paid (88) (7,089) (7,346)
(94,594) (30,006) Repayment of long-term debt (73,103) (1,043,215) (1,253,503)
(37,450) (36,370) Cash dividends paid (72,742) (74,901) (148,864)
(48,434) (1,764) Deemed dividends paid (12,982) (130,526) (136,230)
115,729 (43,228) Net cash provided by (used in) financing (141,127) 169,748 (7,597)
activities
(62,192) (55,125) Net increase in cash and cash equivalents 490 20,652 3,664
112,037 88,472 Cash and cash equivalents at start of period 32,857 29,193 29,193
49,845 33,347 Cash and cash equivalents at end of period 33,347 49,845 32,857
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Exhibit 1
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 August 22, 2006 By /s/ Inger M. Klemp
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Inger M. Klemp
Chief Financial Officer
SK 23153 0002 696967