FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of June 2005
NORDIC AMERICAN TANKER SHIPPING LIMITED
--------------------------------------------------------------------------------
(Translation of registrant's name into English)
Canon's Court
22 Victoria Street
Hamilton HM 12
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 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]
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Attached hereto as Exhibit 1 is a copy of the 2004 Annual Report to
Shareholders of Nordic American Tanker Shipping Limited.
EXHIBIT 1
[Company Logo]
Nordic American Tanker
Shipping Limited
2004 ANNUAL
REPORT TO
SHAREHOLDERS
BUSINESS
General
Nordic American Tanker Shipping Limited. (the "Company") was formed on June 12,
1995 under the laws of the Islands of Bermuda ("Bermuda") for the purpose of
acquiring and chartering three Suezmax tankers that were built in 1997. These
three vessels were bareboat chartered to BP Shipping Ltd., or BP Shipping, for a
period of seven years. BP Shipping redelivered these three vessels to us in
September 2004, October 2004 and November 2004, respectively. We have continued
contracts with BP Shipping by time chartering to it two of our original vessels
at spot market related rates for three-year terms up to the autumn of 2007. We
have bareboat chartered the third of our original three vessels to Gulf
Navigation Company LLC, or Gulf Navigation, of Dubai, U.A.E. for a term of five
years at a fixed rate of charterhire, subject to two one-year extensions at Gulf
Navigation's option. We acquired in November 2004 our fourth vessel, which we
are currently operating in the spot market.
In January 2005, the Company agreed to acquire a double hull Suezmax tanker
which was delivered to us on March 21, 2005. In February 2005, the Company
agreed to acquire a double hull Suezmax tanker which was delivered to us from
Daewoo Shipyard in Korea on March 29, 2005.
Our Fleet
Our fleet, including the two additional vessels we have acquired in 2005,
consists of six modern double-hull Suezmax tankers. The following chart provides
information regarding each vessel, including its employment status.
Year Employment Status
Vessel Yard Built Dwt (Expiration Date) Flag
------ ---- ----- --- ----------------- ----
Gulf Scandic (ex. British Harrier) Samsung 1997 151,459 Bareboat (Nov. 2009) Isle of Man
Nordic Hawk (ex. British Hawk) Samsung 1997 151,459 TC/spot(1) (Oct. 2007) Bahamas
Nordic Hunter (ex. British Hunter) Samsung 1997 151,459 TC/spot(1) (Oct. 2007) Bahamas
Nordic Voyager (ex. Wilma Yangtze) Dalian New 1997 149,591 Spot Norway
Nordic Fighter (ex. Front Fighter) Hyundai 1998 153,181 Spot(2) Norway
Nordic Freedom (newbuilding) Daewoo 2005 159,500 Spot(2) Bahamas
----------
(1) TC/Spot = Time Charter on spot market related terms.
(2) The vessels were delivered to us in late March 2005.
OUR CHARTERS
We operate our vessels on bareboat charter, spot related time charters and in
the spot market. Our goal is to manage our cash flows through the use of
fixed-rate bareboat and time charters for part of our fleet, while taking
advantage of potentially higher market rates through time charters with spot
market related rates and voyage charters.
Bareboat Charters
We have chartered one of our vessels (the Gulf Scandic) under a bareboat charter
to Gulf Navigation, for a period of five years, terminating in the fourth
quarter of 2009, subject to two one-year extensions at Gulf Navigation's option.
Under the terms of the bareboat charter, Gulf Navigation is obligated to pay a
fixed charterhire of $17,325 per day for the entire charter period. During the
charter period, Gulf Navigation will be responsible for operating and
maintaining the vessel and will bear all costs and expenses with respect to the
vessel.
Time Charters
We have chartered two of our vessels (the Nordic Hawk and the Nordic Hunter)
under spot market related time charters to BP Shipping for a period of three
years each, terminating between September 1 and October 31, 2007. The amount of
charterhire payable under the charters to BP Shipping is based on a formula
designed to generate earnings to us as if we had operated the vessels in the
spot market on two routes used for the calculation, less 5%. The charterhire is
payable to us monthly. Under the time charters, BP Shipping is responsible for
all voyage related costs while the Company is responsible for providing the crew
and paying other operating costs.
Spot Charters
We currently operate one of our four vessels (the Nordic Voyager) and have
deployed the two additional vessels that we have recently purchased in 2005 (the
Nordic Fighter and the Nordic Freedom), in the spot market. Tankers operating in
the spot market typically are chartered for a single voyage which may last up to
several weeks. Tankers operating in the spot market may generate increased
profit margins during improvements in tanker rates, while tankers operating
fixed-rate time charters generally provide more predictable cash flows.
Under a typical voyage charter in the spot market, we will be paid freight on
the basis of moving cargo from a loading port to a discharge port. We are
responsible for paying both operating costs and voyage costs and the charterer
is responsible for any delay at the loading or discharging ports.
THE TANKER MARKET 2004
Tanker freight rates in 2004 were significantly higher than in the previous high
periods in 2000 and 2003. In the single voyage market VLCCs achieved an average
of close to $90,000 per day compared to the $50,000 per day level in the two
previous peak years. For the year as a whole Suezmax tankers reached an average
of $65,000 per day, significantly higher than the $40,000 per day obtained in
2000 and in 2003.
Based on export volume data, estimates indicate an increase in seaborne oil
trade of 6% from 2003 to 2004. Average transport distance rose by 1%. There
seems to have been a small improvement in productivity due to the modernization
of the tanker fleet and a reduction in waiting days in the Bosphorus from 2003
to 2004. Accordingly tonnage demand increased by 6.5%.
The active tanker fleet rose by 3.7% from 2003 to 2004, calculated on an annual
average basis, resulting in an increase in the utilization rate from 89% in 2003
to 91.5% in 2004, the highest level recorded in the last three decades. Freight
rates in 2004 fluctuated wildly, a logical consequence of such a record high
utilization rate level.
The active VLCC fleet increased by 2 %, while the Suezmax fleet rose by 5%.
Deliveries of new tankers reached 27 million dwt in 2004, down from 30 million
dwt in 2003. Removals amounted to 10 million dwt in 2004 compared to an average
of 19 million dwt in the previous four years. Removals are based on the point in
time vessels are actually removed from the market and not when reported sold for
scrapping or for conversions.
Some 8 million dwt were sold for scrapping in 2004 and 2 million dwt were sold
for conversion. The average age for all tankers sold for scrapping was 27.3
years in 2004, compared to 26.6 years in 2003.
As a result of the extremely strong dry bulk market, 2 million dwt of combined
carriers moved from oil trades to dry trades from 2003 to 2004 and limited the
fleet growth in oil transportation.
The highest global economic growth since 1976 stimulated world oil consumption,
which rose by 3.4% in 2004. This is the highest oil consumption growth rate
since the 1970s. Global oil production climbed an exceptional 4.5% resulting in
a moderate building of oil inventories. OPEC raised its crude oil production by
more than 7% and reached a peak of more than 30 mbd in the fourth quarter of the
year. This was very close to its production capacity, leading to a 35% surge in
crude oil prices from 2003 to 2004. The strong growth in oil consumption despite
the sharp rise in oil prices may be attributed, in parts, to heavy subsidization
of end-user prices in many of the countries with strong consumption growth.
The main driver behind these strong freight market conditions was China with its
strong growth in oil consumption and imports. In the first half of 2004, Chinese
oil consumption was 22% higher than in the same period the year before. Oil
imports rose by more than 30% for the second year in a row.
2004 was also a record-breaking year in the vessel sale and purchase market with
regard to transaction volumes as well as ship market values. During 2004,
tankers monitored by R.S. Platou Shipbrokers increased in market value by some
45% (20% in 2003). Double hull tankers rose by 40% (25%), whereas single hull
tankers were up between 35% and 75%.
OUR CREDIT FACILITY
In October 2004, we entered into the Credit Facility, which consists of a $50
million revolving credit facility and a $250 million revolving credit facility.
The $50 million facility will mature in October 2007 and the $250 million
facility will mature in October 2005, unless we exercise our one-year extension
option or our option to convert any drawn amounts to a five-year term loan.
Amounts borrowed under the Credit Facility bear interest at a rate equal to
LIBOR plus a margin of 0.80% to 1.20% per year (depending on the loan to vessel
value ratio). We may draw unborrowed amounts under the Credit Facility in
connection with any future vessel acquisitions or for working capital purposes.
Borrowings under the Credit Facility are secured by mortgages over our existing
and new vessels and assignments of earnings and insurances, and drawings will be
available subject to loan to vessel value ratios. The terms and conditions of
the Credit Facility require compliance with certain restrictive covenants, which
we feel are consistent with loan facilities incurred by other shipping
companies. Under the Credit Facility, we are, among other things, required to
(i) maintain certain loan to vessel value ratios, (ii) maintain a book equity of
no less than $75 million, (iii) remain listed on a recognized stock exchange and
(iv) obtain the consent of the lenders prior to creating liens on our vessels.
The Credit Facility provides that we may not pay dividends if there is a default
under the Credit Facility. We will be able to pay dividends in accordance with
our dividend policy as long as we repay any amounts drawn under the $250 million
facility within one year from the closing of the Credit Facility and are not
otherwise in default of the Credit Facility.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Results of Operations
Our net voyage revenues increased from $37,185,975 for year ended December 31,
2003 compared to $62,526,245 for year ended December 31, 2004, an increase of
68.1%.
2004 2003
-----------------------------------------------------------
Voyage Revenue 67,451,598 37,185,975
Voyage Expenses (4,925,353) 0
-----------------------------------------------------------
Net Voyage Revenue 62,526,245 37,185,975
-----------------------------------------------------------
The increase in net voyage revenues was due to higher tanker spot market rates
in the twelve month period in 2004 and the addition of one vessel on November
23, 2004. The tanker spot market rates are determined by the demand for the
carriage of oil and the distance the oil is to be carried, measured in tonne
miles, and the supply of vessels to transport that oil.
Vessel operating expenses were $1,976,766 for 2004. The Company's results for
2004 were impacted by one time extra operating costs associated with the expiry
of the bareboat charters with BP for two of the Company's ships and the
continued employment for one of them to BP under a spot related time charter.
The Company did not have vessel operating expenses for the comparable period of
2003 since all the vessels were chartered to BP Shipping under bareboat charter
agreements. Under bareboat charter agreements all vessel operating expenses are
paid by the charterer.
Administrative expenses were $10,851,688 for 2004 compared to $468,087 for the
comparable period of 2003. The increase was primarily due to costs associated
with our transition to an operating company. These costs are mainly due to
increased frequency of communication with shareholders, increased frequency of
board meetings, costs related to the redelivery of the three vessels from BP
Shipping, legal fees and consulting fees. Administrative expenses also include a
non-cash charge of $9.2 million linked to a change in the compensation scheme
for our Manager, Scandic American Shipping Ltd. The original incentive plan was
a revenue based cash commission structure. The Manager agreed to eliminate the
commission. The cash commission was replaced by restricted share issuances to
the Manager of 2% of the Company's outstanding common shares in order to align
the interests of the Manager and the Company. These restricted shares are
non-transferable for three years from issuance. In connection with the
transition to an operating company, a stock incentive plan of 400,000 shares has
been introduced. The initial strike price for options granted in 2005 was equal
to $38.75 - the issue price in the follow-on offering in November 2004.
Net operating income for 2004 increased 43.1% from the comparable period in 2003
from $29,886,849 to $42,779,627 primarily due to increased revenue and costs as
described above.
Liquidity and Capital Resources
Cash flows provided by operating activities increased by 110.1% in 2004 to
$62,817,261 compared to $29,893,551 in 2003 primarily due to the increased
revenue and change in the Company's operation as described above.
Cash flow provided from financing activities for 2004 was $33,486,608 compared
to cash flow used of $29,605,410 for the same period in 2003. The increase was
due to (i) proceeds from a follow-on offering of $112.1million offset by (ii)
dividends paid of $47.2 million, (iii) repayment of $30 million in bank debt and
(iv) payment of loan facility costs of $1.5 million in respect of our $300
million credit facility.
Cash flow used by investing activities was $66,137,277 which represents the
acquisition cost of the vessel acquired in November 2004. There were no
investing activities for the comparable period of 2003.
The Company is of the opinion that the working capital is sufficient for the
Company's present requirements.
Dividend payment
Total dividends paid in 2004 were $47,195,842 or $4.84 per share. Dividend
payments per share in 2002, 2003 and 2004 have been as follows:
Period 2002 2003 2004
------------------------------------------------------
1st Quarter $0.36 $0.63 $1.15
2nd Quarter 0.34 1.27 1.70
3rd Quarter 0.33 0.78 0.88
4th Quarter 0.32 0.37 1.11
------------------------------------------------------
Total USD $1.35 $3.05 $4.84
------------------------------------------------------
The Company declared a dividend of $1.62 per share for the first quarter of
2005 which was paid to shareholders in February 2005. In addition, the Company
declared a dividend of $1.15 per share for the second quarter of 2005, which
will be paid to shareholders in May 2005.
THE MANAGEMENT AGREEMENT
Under the Management Agreement the Manager assumes commercial and operational
responsibility of our vessels and is required to manage our day-to-day business
subject, always, to our objectives and policies as established and directed from
time to time by the Board of Directors. All decisions of a material nature
concerning our business are reserved to the Board of Directors. The Management
Agreement has been extended five years and will terminate on June 30, 2019,
unless earlier terminated pursuant to its terms, as discussed below, or extended
by the parties following mutual agreement. For its services under the Management
Agreement, the Manager is entitled to cover the cost incurred plus a management
fee equal to $100,000 per annum. The Management Agreement formerly provided that
the Manager would receive 1.25% of any gross charterhire paid to us. In order to
further align the Manager's interests with those of the Company, the Manager
agreed with us to amend the Management Agreement to eliminate this payment, and
we have issued to the Manager restricted common shares equal to 2% of our
outstanding common shares. Any time additional common shares are issued, the
Manager will receive additional restricted common shares to maintain the number
of common shares issued to the Manager at 2% of our total outstanding common
shares. These restricted shares are non-transferable for three years from
issuance.
CHARTERING AND TECHNICAL MANAGEMENT AGREEMENTS
We have entered into a chartering agreement, commencing end of March 2005, with
Teekay Chartering Limited, or Teekay, an affiliate of Teekay Shipping
Corporation for our newbuilding, Nordic Freedom. Under the supervision of the
Manager, Teekay's duties will include seeking and negotiating charters for this
vessel. As with the Nordic Hunter and the Nordic Hawk, the technical management
of the Nordic Freedom will be performed by IUM Shipmanagement AS under the
supervision of the Manager.
We have entered into a chartering agreement, commencing in the second quarter of
2005, with the Swedish based Stena Bulk AS, or Stena, for the Nordic Voyager
under the supervision of the Manager. Stena's duties will include seeking and
negotiating charters for this vessel. The chartering and technical management
for the Nordic Voyager is being temporarily performed by affiliates of the
previous owner. Following the commencement of the chartering agreement with
Stena, Wilhelmsen Marine Services AS, an affiliate of the previous owner will,
in the near term, continue to perform the technical management for the vessel.
We have entered into a chartering agreement, commencing in the second quarter of
2005, with Frontline under the supervision of the Manager for the Nordic
Fighter. Frontline's duties will, under the supervision of the Manager, include
seeking and negotiating charters for this vessel. We have entered into a
technical management agreement for the Nordic Fighter with V.Ships under the
supervision of the Manager.
COMPENSATION OF DIRECTORS AND OFFICERS
During 2004, the five non-employee directors received, in the aggregate,
approximately $106,000 in cash fees for their services as directors. For the
period from October 1, 2004 through December 31, 2004 and for each fiscal year
thereafter, each of our non-employee directors receives a fee at the annual rate
of $45,000. We do not pay director fees to employee directors. We do, however,
reimburse our directors for all reasonable expenses incurred by them incurred in
connection with serving on our board of directors. Directors may receive
restricted shares or other grants under our 2004 Stock Incentive Plan described
below.
EMPLOYMENT AGREEMENTS
We have an employment agreement with Herbjorn Hansson, our Chairman, President
and Chief Executive Officer and Mr. Rolf Amundsen, our Chief Financial Officer.
Mr. Hansson does not receive any additional compensation for serving as a
director or the Chairman of the Board. The aggregate compensation of our
executive officer during 2004 was $133,333 The aggregate compensation of our
executive officers is expected to be approximately $560,000 during 2005. On
certain terms the employment agreement may be terminated by us or Mr. Hansson
upon six months' written notice to the other party.
2004 STOCK INCENTIVE PLAN
Under the terms of the Company's 2004 Stock Incentive Plan, the directors,
officers and certain key employees of the Company and the Manager are eligible
to receive awards which include incentive stock options, non-qualified stock
options, stock appreciation rights, dividend equivalent rights, restricted
stock, restricted stock units and performance shares. A total of 400,000 common
shares is reserved for issuance upon exercise of options, as restricted share
grants or otherwise under the plan. Included under the 2004 Stock Incentive Plan
are options to purchase common shares at an exercise price equal to $38.75, the
offering price of the shares offered in the follow-on offering in November 2004,
subject to annual downward adjustment if the payment of dividends in the related
fiscal year exceed a 3% yield calculated based on the initial strike price. In
February 2005 the Company granted, under the terms of the Company's 2004 Stock
Incentive Plan, a total of 270,000 stock options that the Board of Directors had
agreed to issue during 2004. These options will vest in equal installments on
each of the first four anniversaries of the closing of the follow-on offering in
November 2004.
MAY 18, 2005 NORDIC AMERICAN TANKER
SHIPPING LIMITED
NORDIC AMERICAN TANKER SHIPPING LIMITED
TABLE OF CONTENTS
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS 8
FINANCIAL STATEMENTS
Balance Sheets 9
Statements of Operations 10
Statements of Cash Flows 11
Statements of Shareholders' Equity 12
Notes to Financial Statements 13
Deloitte
Deloitte
Statsautoriserte Revisorer AS
Karenslyst alle 20
Postboks 347 Skoyen
0213 Oslo
Telefon: 23 27 90 00
Telefax: 23 27 90 01
www.deloitte.no
To the annual general meeting of Nordic American Tanker Shipping Ltd.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the balance sheets of Nordic American Tanker Shipping Ltd. (the
"Company") as of December 31, 2004 and 2003, and the related statements of
operations, cash flows, and shareholders' equity for each of the three years in
the period ended December 31, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted. our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United Stages). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and. significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Nordic American Tanker Shipping as of
December 31, 2004 and 2003, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2004 in
conformity with accounting principles generally accepted in the United States of
America.
Oslo, Norway, 18 May 2005
Deloitte Statsautoriserte Revisorer AS
BALANCE SHEET Dec. 31 Dec. 31
All figures in USD Notes 2004 2003
------------------ ----- ---- ----
ASSETS
Current Assets
Cash and Cash Equivalents 1 30,732,516 565,924
Accounts and Receivable 1 4,539,354 8,142,307
Prepaid Finance Charges 1,206,348 14,475
Prepaid Insurance 273,362 91,667
---------------------------------------------------------------------------------------------------------------
Total Current Assets 36,751,580 8,814,373
---------------------------------------------------------------------------------------------------------------
Long-term Assets
Vessels 4 187,301,038 128,081,925
Prepaid Finance Charges 150,793 0
Total Assets 224,203,411 136,896,298
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable 411,366 0
Deferred Revenue 1,286,070 0
Accrued Liabilities 637,582 38,322
Derivative Contract 0 1,150,000
Current Portion of Long-term Debt 0 30,000,000
---------------------------------------------------------------------------------------------------------------
Total Current liabilities 2,335,018 31,188,322
---------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common Shares, par value $.01 per share,
(51,200,000 shares authorized; 13,067,838
Issued and outstanding, (9,706,606 in 2003) 6 130,678 97,066
Additional Paid-in Capital 265,752,581 144,395,866
Accumulated Other Comprehensive Loss 0 (1,150,000)
Accumulated Deficit (44,014,866) (37,634,956)
---------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 221,868,393 105,707,976
---------------------------------------------------------------------------------------------------------------
Total liabilities & Shareholders' equity 224,203,411 136,896,298
---------------------------------------------------------------------------------------------------------------
The footnotes are an integral part of these financial statements
STATEMENT OF OPERATIONS
(all figures in USD)
Year Ended December 31,
--------------------------------------------------
Notes 2004 2003 2002
Voyage Revenue 1, 3 67,451,598 37,185,975 17,873,208
Voyage Expenses (4,925,353) 0 0
Vessel Operating Expenses (1,976,766) 0 0
Administrative Expenses 2, 5 (10,851,688) (468,087) (427,048)
Depreciation 4 (6,918,164) (6,831,040) (6,831,040)
--------------- ----------------- ----------------
Net Operating Income 42,779,627 29,886,848 10,615,120
--------------- ----------------- ----------------
Interest Income 143,230 26,462 21,409
Interest Expense (1,971,304) (1,797,981) (1,764,424)
Other Financial Charges (135,621) (15,040) (24,837)
--------------- ----------------- ----------------
Net Financial Items (1,963,695) (1,786,559) (1,767,852)
--------------- ----------------- ----------------
Net Profit before tax 40,815,932 28,100,289 8,847,268
--------------- ----------------- ----------------
Tax Expense 0 0 0
--------------- ----------------- ----------------
Net Profit for the Year 40,815,932 28,100,289 8,847,268
--------------- ----------------- ----------------
Basic and Diluted Earnings per Share 4.05 2.89 0.91
Weighted Average Number of
Shares Outstanding 10,078,391 9,706,606 9,706,606
The footnotes are an integral part of these financial statements
STATEMENT OF CASH FLOWS
(all figures in USD)
Year Ended December 31,
--------------------------------------------------
2004 2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit 40,815,932 28,100,289 8,847,268
Reconcilation of Net Profit to Net Cash From
Operating Activities
Depreciation 6,918,164 6,831,040 6,831,040
Amortization of Prepaid Finance Costs 112,838 14,480 14,480
Share-based Compensation 9,252,365 0 0
Increase (decrease) in:
Accounts Receivable 3,602,956 (4,865,784) (3,106,343)
Accounts Payable and Accrued Liabilities 1,010,626 (178,140) 176,800
Deferred Revenue 1,286,075 0 0
Other Assets (181,695) (8,334) (12,337)
--------------- ---------------- ---------------
Net Cash Provided By Operating Activities 62,817,261 29,893,551 12,750,908
--------------- ---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Vessels (66,137,277) 0 0
--------------- ---------------- ---------------
Net Cash Used In Investing Activities (66,137,277) 0 0
--------------- ---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Sale of Common Stock 112,137,953 0 0
Proceeds from Use of the Credit Facility 96,000,000 0 0
Repayment of Debt (126,000,000) 0 0
Loan Facility Costs (1,455,503) 0 0
Dividends Paid (47,195,842) (29,605,410) (13,103,993)
--------------- ---------------- ---------------
Net Cash Provided By (Used In) Financing Activities 33,486,608 (29,605,410) (13,103,993)
--------------- ---------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents 30,166,592 288,141 (353,085)
--------------- ---------------- ---------------
Beginning Cash and Cash Equivalents 565,924 277,783 630,868
--------------- ---------------- ---------------
Ending Cash and Cash Equivalents 30,732 516 565,924 277,783
--------------- ---------------- ---------------
Cash Paid for Interest 1,774,264 1,975,125 1,587,622
The footnotes are an integral part of these financial statements
STATEMENTS OF SHAREHOLDERS' EQUITY
(all figures in USD)
Accumulated
Additional Other Total Total
Common Paid-in Accumulated Comprehensive Shareholders' Comprehensive
Shares Capital Deficit Loss Equity Income
----------------------------------------------------------------------------------------------------------------------------
Balance at 01.01.02 97,066 144,395,866 (31,873,110) (778,000) 111,841,822
----------------------------------------------------------------------------------------------------------------------------
Net Profit 8,847,268 8,847,268 8,847,268
Unrealized Loss on
Derivative Instruments (2,262,564) (2,262,564) (2,262,564)
Adjustment for Losses on
Derivatives Reclassified to
Earnings 1,024,564 1,024,564 1,024,564
Dividends Paid (13,103,993) (13,103,993)
Total Comprehensive Income 7,609,268
----------------------------------------------------------------------------------------------------------------------------
Balance at 12.31.02 97,066 144,395,866 (36,129,835) (2,016,000) 106,347,097
Net Profit 28,100,289 28,100,289 28,100,289
Unrealized Loss on
Derivative Instruments (365,723) (365,723) (365,723)
Adjustment for Losses on
Derivatives Reclassified to
Earnings 1,231,723 1,231,723 1,231,723
Dividends Paid (29,05,410) (29,605,410)
Total Comprehensive Income 28,966,289
----------------------------------------------------------------------------------------------------------------------------
Balance at 12.31.03 97,066 144,395,866 (37,634,956) (1,150,000) 105,707,976
Net profit 40,815,932 40,815,932 40,815,932
Common Shares Issued 33,612 121,356,715 121,390,327
Unrealized Loss on
Derivative Instruments (20,710) (20,710) (20,710)
Adjustment for Losses on
Derivatives Reclassified to
Earnings 1,170,710 1,170,710 1,170,710
Dividends Paid (47,195,842) (47,195,842)
Total Comprehensive Income 41,965,932
----------------------------------------------------------------------------------------------------------------------------
Balance at 12.31.04 130,678 265,752,581 (44,014,866) - 221,868,393
The footnotes are an integral part of these financial statements
NORDIC AMERICAN TANKER SHIPPING LIMITED
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (US GAAP).
Nature of Business: The principal business of Nordic American Tanker Shipping
Limited (the "Company") is to own and operate Suezmax crude oil tankers.
Use of Estimates: Preparation of financial statements in accordance with US GAAP
necessarily includes amounts based on estimates and assumptions made by
management. Actual results could differ from those amounts.
Concentration of Credit Risk: Financial instruments that potentially subject the
Company to concentrations of credit risk consist principally of cash and
accounts receivable. The Company maintains its cash with reputable financial
institutions. The terms of these deposits are on demand to minimize risk. The
Company has not experienced any losses related to these cash deposits and
believes it is not exposed to any significant credit risk.
Accounts receivable consist of uncollateralized receivables from international
customers primarily in the international shipping industry. To minimize risk
associated with international transactions, all sales are denominated in U.S.
currency. The Company routinely assesses the financial strength of its
customers. The Company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required. If amounts become
uncollectible, they will be charged to operations when that determination is
made.
Cash and Cash Equivalents: Cash and cash equivalents consist of deposits with
original maturities of three months or less.
Property and Equipment: Depreciation and amortization are provided on a
straight-line basis over the estimated useful lives of the assets. The Company's
property and equipment consist solely of vessels. The estimated useful life of
these vessels is 25 years from the date the vessel is delivered from the
shipyard. Repairs and maintenance are expensed as incurred.
Impairment of Long-Lived Assets: Long-lived assets are required to be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposition is less than the carrying amount of the asset, the
asset is deemed impaired. The amount of the impairment is measured as the
difference between the carrying value and the fair value of the asset.
Revenue Recognition: Revenues are generated from freight billings, time charter
and bareboat charter hires. Time charter and bareboat charter revenues are
recorded over the term of the charter as the applicable vessel operates under
the charter. The Company uses a discharge-to-discharge basis in determining
percentage of completion for all spot voyages. The operating results of voyages
in progress at a reporting date are estimated and recognized pro-rata on a per
day basis.
Financial Instruments: The fair values of cash and cash equivalents, short-term
investments, accounts receivable, and accounts payable approximated carrying
value because of the short-term nature of these instruments
Finance costs: Finance costs, including fees, commissions and legal expenses,
which are presented as other assets are capitalized and amortized on a
straight-line basis over the term of the relevant Credit Facility. Amortization
of finance costs is included in interest expense.
Segment Information: The Company has identified only one operating segment under
Statement of Financial Accounting Standards ("SFAS") No. 131 "Segments of an
Enterprise and Related Information." The Company has only one type of vessel -
Suezmax crude oil tankers - operating on time charter contracts at market
related rates, in the spot market and on long-term bareboat contract.
Stock-Based Compensation: The Company follows No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), which establishes a fair value-based
method of accounting for stock-based compensation plans
Derivative Instruments and Hedging Activities: The Company accounts for its
derivative instruments and hedging activities according to No. 133, "Accounting
for Derivative Instruments and Hedging Activities", as amended by SFAS No. 137
and SFAS No. 138. This standard, as amended, requires derivative instruments to
be recorded in the balance sheet at their fair value. Changes in the fair value
of derivatives that do not qualify for hedge treatment, as well as ineffective
portions of any hedge, are recorded to earnings. Changes in fair value for
qualifying cash flow-hedges are recorded in equity and are realized in earnings
in conjunction with the gain or loss on the hedged item or transaction.
Changes in the fair value of qualifying hedges offset corresponding changes
in the fair value of the hedged item in the statement of operations.
Net Profit per Share: SFAS No. 128 "Earnings Per Share," (EPS) requires earnings
per share to be computed and reported as both basic EPS and diluted EPS. Basic
EPS is computed by dividing net income by the weighted average number of common
shares outstanding for the period. Diluted EPS is computed by dividing net
income by the weighted average number of common shares and dilutive common stock
equivalents (ie. stock options, warrants) outstanding during the period. The
Company does not have any potentially dilutive or anti-dilutive securities
outstanding.
Income taxes: The Company is incorporated in Bermuda. Under current Bermuda law,
the Company is not subject to corporate income taxes.
New Pronouncements: In December 2004, the FASB issued SFAS No. 123 (revised
2004), "Share-Based Payment" ("SFAS 123R"), which replaces SFAS No. 123 and
supercedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS
123R requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the financial statements based on
their fair values beginning with the first annual period after June 15, 2005,
with early adoption encouraged. Under SFAS 123R, the Company must determine the
appropriate fair value model to be used for valuing share-based payments, the
amortization method for compensation cost and the transition method to be used
at date of adoption. The Company is currently evaluating the effect that the
adoption of SFAS 123R will have on its results of operations and financial
condition but does not expect it to have a material impact.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets--An Amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions" ("SFAS 153"). SFAS 153 eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets in paragraph
21(b) of APB Opinion No. 29, "Accounting for Nonmonetary Transactions," and
replaces it with an exception for exchanges that do not have commercial
substance. SFAS 153 specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS 153 is effective for the fiscal
periods beginning after June 15, 2005. The Company is currently evaluating the
effect that the adoption of SFAS 153 will have on its results of operations and
financial condition but does not expect it to have a material impact.
2. RELATED PARTY TRANSACTIONS
The Manager, Scandic American Shipping Ltd., is jointly owned by the Chairman
and CEO of the Company, Mr. Herbjorn Hansson, and a Board Member, Mr. Andreas
Ove Ugland. The Manager, under the Management Agreement, assumes commercial and
operational responsibility of our vessels and is required to manage our
day-to-day business subject, always, to our objectives and policies as
established from time to time by the Board of Directors. For its services under
the Management Agreement, the Manager is entitled to cover the cost incurred
plus a management fee equal to $100,000 per annum. The Manager also has a right
to 2% of the Company's total outstanding shares (see Note 7 "Share-Based
Compensation"). The Company has recognized total costs of $653,799 for the
services provided under the Management Agreement for the year ended December 31,
2004, additionally the Company recognized $9,252,365 in non-cash share-based
compensation expense related to the issuance of shares to the Manager (see Note
7 "Share-Based Compensation"). Payable at year end was $105,080.
At the end of the year 2004 Mr. Ugland held a 25.7% ownership interest in IUM
Shipmanagement AS (IUM), a third-party technical manager to whom the Manager has
sub-contracted technical management for some of the vessels. The Company has
recognized costs of $1,863,552 for the services provided under the Technical
Management Agreements for the year ended December 31, 2004. Payable at year end
was $116,681.
Mr. Jan Erik Langangen, Executive Vice President of the Manager, is a partner of
Langangen & Helset Advokatfirma DA which in the past has also provided and may
continue to provide legal services to us. The Company has recognized costs of
$33,435 for the services provided by Langangen & Helset Advokatfirma DA. Payable
at year end was $38,157.
3. REVENUE
For the twelve months ending December 31, 2004, our only source of income was
from our four vessels of which two are on charter to BP Shipping, one vessel on
charter to Gulf Navigation and one on charter to the previous owner. All of the
Company's revenues are earned in international markets.
One customer accounted for 97% of Company's revenues during the year ended
December 31, 2004. One customer accounted for 100% of Company's revenues during
the year ended December 31, 2003 and December 31, 2002.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of four Suezmax crude oil tankers built in 1997.
Depreciation is calculated on a straight-line basis over the estimated useful
life of the vessels. The estimated useful life of a new vessel is 25 years.
2004 2003
--------------------------------------------------------------------------
Acquisition cost $236,913,247 $170,775,970
Accumulated depreciation (49,612,209) (42,694,045)
--------------------------------------------------------------------------
$187,301,038 $128,081,925
==========================================================================
5. ADMINISTRATIVE EXPENSES
2004 2003 2002
--------------------------------------------------------------------------
Management fee $175,000 $250,000 $250,000
Directors and officers insurance 112,500 101,666 86,667
Share-based compensation 9,252,365 0 0
Other fees and expenses 1,311,823 116,421 90,381
--------------------------------------------------------------------------
Total administrative expenses $10,851,688 $468,087 $427,048
==========================================================================
6. STOCK HOLDERS' EQUITY
Authorized, and issued and outstanding common shares rollforward is as follows:
Issued and
Authorized Shares Outstanding Shares
--------------------------------------------------------------------------
Balance at 01.01.03 51,200,000 9,706,606
Follow-on Offering - November 2004 - 3,105,000
Share-based Compensation - 256,232
--------------------------------------------------------------------------
Balance at 12.31.04 51,200,000 13,067,838
--------------------------------------------------------------------------
7. SHARE-BASED COMPENSATION
2004 Stock Incentive Plan
Under the terms of the Company's 2004 Stock Incentive Plan, the directors,
officers and certain key employees of the Company and the Manager will be
eligible to receive awards which include incentive stock options, non-qualified
stock options, stock appreciation rights, dividend equivalent rights, restricted
stock, restricted stock units and performance shares. A total of 400,000 common
shares are reserved for issuance upon exercise of options, as restricted share
grants or otherwise under the plan. No options have been issued or are
outstanding at December 31, 2004.
Restricted Shares
The Management Agreement formerly provided that the Manager would receive 1.25%
of any gross charterhire paid to us. In order to further align the Manager's
interests with those of the Company, the Manager agreed with us to amend the
Management Agreement, effective October 12, 2004, to eliminate this payment, and
we have issued to the Manager restricted common shares equal to 2% of our
outstanding common shares at par value of $0.01 per share. At the time when
additional common shares are issued, the Manager will receive additional
restricted common shares to maintain the number of common shares issued to the
Manager at 2% of our total outstanding common shares. These restricted shares
are non-transferable for three years from issuance. During 2004 the Company has
issued to the Manager an aggregate of 256,232 shares at an average fair value of
$36.11. The share-based compensation expense related to the issuance of
restricted shares to the Manager of $9,252,365 in 2004 was classified as
administrative expenses.
8. LONG-TERM DEBT
On September 29, 2004, the Company obtained an extension of the maturity of its
$30 million loan from December 2004 to October 2007. Interest on the loan, as
extended, was at a rate equal to LIBOR plus a margin of 0.70%.
In October 2004 the Company entered into the Credit Facility, which consists of
a $50 million revolving credit facility and a $250 million revolving credit
facility. The $50 million facility will mature in October 2007 and the $250
million facility will mature in October 2005, unless the Company exercises the
one-year extension option or the option to convert any drawn amounts to a
five-year term loan. Amounts borrowed under the Credit Facility will bear
interest at a rate equal to LIBOR plus a margin between 0.80% to 1.20% per year.
The Company pays a commitment fee, at a rate ranging from 0.24% to 0.36% per
year, on any undrawn amount.
On November 8, 2004, the Company repaid its $30 million loan with proceeds from
the Credit Facility. The drawn amount on the credit facility was subsequently
repaid with proceeds from the share issue on November 23, 2004. There were no
outstanding borrowings under the Credit Facility at December 31, 2004.
9. DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT
In 2003, the Company had outstanding a $ 30 million variable rate loan that was
repaid in November 2004. The Company had hedged the variable interest exposure
by an interest rate swap whereby the Company paid a fixed interest rate and
received a variable interest (LIBOR). The interest rate swap was designated as a
cash flow hedge of the interest payments on the loan. The interest rate swap
matured in 2004. The Company did not hold any derivative instruments at December
31, 2004.
The effective portion of gains and losses on the interest rate swap designated
as a cash flow hedge was deferred to accumulated other comprehensive income and
was reclassified to earnings as the hedged interest payments were recognized.
The Company reclassified $1,170,000 from accumulated other comprehensive income
to earnings in 2004. The reclassified loss was included in interest expense.
The fair value of the swap was recorded as a liability of $1,150,000 at December
31, 2003.
10. COMMITMENTS AND CONTINGENCIES
Litigation and Environmental Matters -The Company can be a party to various
legal proceedings generally incidental to its business and is subject to a
variety of environmental and pollution control laws and regulations. As is the
case with other companies in similar industries, the Company faces exposure from
actual or potential claims and legal proceedings. Although the ultimate
disposition of legal proceedings cannot be predicted with certainty, it is the
opinion of the Company's management that the outcome of any claim which might be
pending or threatened, either individually or on a combined basis, will not have
a materially adverse effect on the financial position of the Company, but could
materially affect the Company's results of operations in a given year.
11. SUBSEQUENT EVENTS
In January 2005 the Company entered into two separate agreements to acquire a
1998 built Suezmax vessel and a 2005 Suezmax newbuilding at an aggregate
purchase price of $149.25 million. The Company took delivery of the vessels in
March 2005.
In February 2005 the Company granted, under the terms of the Company's 2004
Stock Incentive Plan, a total of 270,000 stock options. The closing price of our
common shares on the date these options were granted was $48.95 per share as
reported on the New York Stock Exchange. These options will vest in equal
installments on each of the first four anniversaries of the closing of the
Company's follow-on offering in November 2004.
In March 2005, the Company sold 3,500,000 shares in a public offering in the US
to fund the acquisition of the two vessels and to repay outstanding debt. The
offering was priced at $49.50 per share, and net proceeds (after offering costs
of $ 11.1 million) to the Company were $162.1 million. The Company issued 76,658
restricted shares to the Manager as a result of this offering (see Note 7
Share-based Compensation).
In May 2005 Mr. Andreas Ove Ugland has exercised a right to sell his shares in
IUM Shipmanagement AS (IUM) and does no longer hold any interests in IUM
* * * * *
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Matters discussed in this press release may constitute forward-looking
statements. The Private Securities Litigation Reform Act of 1995 provides safe
harbor protections for forward-looking statements in order to encourage
companies to provide prospective information about their business.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance, and underlying assumptions and
other statements, which are other than statements of historical facts.
The Company desires to take advantage of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 and is including this
cautionary statement in connection with this safe harbor legislation. The words
"believe," "anticipate," "intend," "estimate," "forecast," "project," "plan,"
"potential," "will," "may," "should," "expect," "pending" and similar
expressions identify forward-looking statements.
The forward-looking statements in this press release are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, our management's examination of historical
operating trends, data contained in our records and other data available from
third parties. Although we believe that these assumptions were reasonable when
made, because these assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict and
are beyond our control, we cannot assure you that we will achieve or accomplish
these expectations, beliefs or projections. We undertake no obligation to update
any forward-looking statement, whether as a result of new information, future
events or otherwise.
Important factors that, in our view, could cause actual results to differ
materially from those discussed in the forward-looking statements include the
strength of world economies and currencies, general market conditions, including
fluctuations in charter 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 our operating expenses, including
bunker prices, drydocking and insurance costs, the market for our vessels,
availability of financing and refinancing, 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, vessels breakdowns and instances of off-hires and other
important factors described from time to time in the reports filed by the
Company with the Securities and Exchange Commission, including reports filed by
the Company with the Securities and Exchange Commission, including our Annual
Report on Form 20-F.
Contacts:
Scandic American Shipping Ltd
Manager for
Nordic American Tanker Shipping Ltd.
P.O Box 56
3201 Sandefjord
Norway
Tel: + 47 33 42 73 00
E-mail: info@scandicamerican.com
Web-site: www.nat.bm
Rolf Amundsen
Chief Financial Officer
Nordic American Tanker Shipping Ltd.
Tel: +1 800 601 9079 or + 47 908 26 906
Herbjorn Hansson
Chairman & CEO
Nordic American Tanker Shipping Ltd.
Tel: +1 866 805 9504 or + 47 901 46 291
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.
NORDIC AMERICAN TANKER SHIPPING LIMITED
(registrant)
Dated: June 16, 2005 By: /s/ Herbjorn Hansson
---------------------------
Herbjorn Hansson
President and
Chief Executive Officer
01318.0002 #576229