PRELIMINARY FOURTH QUARTER AND FINANCIAL YEAR 2005 RESULTS
Fourth Quarter and Financial Year 2005 Results
The Board of Frontline Ltd. (the “Company” or “Frontline”) announces net income of $133.8 million for the fourth quarter of 2005, equivalent to earnings per share of $1.79. Operating income for the quarter was $236.9 million compared to $142.1 million in the third quarter. This reflects the strengthening of the market during the fourth quarter. The average daily time charter equivalents (“TCEs”) earned in the spot and period market by the Company’s VLCCs, Suezmax tankers and Suezmax OBO carriers were $65,800, $44,100 and $32,900 respectively compared with $37,100, $26,200 and $34,700 respectively in the third quarter of 2005.
Interest income was $11.2 million in the quarter, of which, $6.2 million relates to restricted deposits held by subsidiaries reported in Independent Tankers Corporation (“ITC”). The Company recorded interest expense of $53.8 million in the fourth quarter of which $15.6 million relates to ITC.
The Company’s share of income from associates excludes its share of the profit arising from its purchase of the Front Tobago from its joint venture partners. This share of profit has been offset against the cost of the vessel. At December 31, 2005 a $1.8 million loss on impairment was accrued on the Navix Astral which was sold in January 2006 to its bareboat charterer pursuant to a purchase option.
The total for other financial items in the fourth quarter was a gain of $6.8 million compared to a net gain of $17.3 million in the third quarter of 2005. An increase in the forward curve for Libor rates in the quarter has resulted in valuation gains of $3.1 million on interest rate swaps in the fourth quarter compared to valuation gains of $8.4 million in the third quarter of 2005. As at December 31, 2005, the Company had interest rate swaps with a total notional principal of $618.3 million of which $568.3 million relates to Ship Finance International Limited (“Ship Finance”). The valuation of freight future agreements to market value has resulted in a gain of $0.6 million compared to a gain of $0.4 million in the third quarter.
Frontline announces net income of $606.8 million for the year ended December 31, 2005, equivalent to earnings per share of $8.11. The TCEs earned in the spot and period market by the Company’s VLCCs, Suezmax tankers, and Suezmax OBO carriers were $57,400, $40,300 and $34,900, respectively.
As at December 31, 2005, the Company had total cash and cash equivalents of $737.3 million which includes $636.8 million of restricted cash. Restricted cash includes $328.9 million relating to deposits in ITC and $274.4 million in Frontline Shipping Limited and Frontline Shipping II Limited. As of February 2006, the Company has cash breakeven rates on a TCE basis for VLCCs and Suezmaxes of $28,149 and $22,027 respectively.
The results for the quarter and the year ended December 31, 2004 have been restated to reflect discontinued operations related to the dry bulk operations sold during 2004 and 2005. In addition, the balance sheet has been restated in the second quarter of 2005 as a result of an adjustment to the accounting for the purchase of the two vessels Ship Finance acquired from related parties associated with Hemen Holdings Ltd in June 2005. Following consultation and advice received from the United States Securities and Exchange Commission, the Company has now recorded this transaction at fair value and consequently recorded an equity contribution of approximately $85 million.
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