Highlights
- A further 13.2 percentage points of Frontline’s holding of common shares of Ship Finance International Limited (“Ship Finance”) will be distributed to Frontline’s shareholders on December 15, 2004.
Third Quarter and Nine Months Results
The Board of Frontline Ltd. announces net income of $150.6 million for the third quarter of 2004, equivalent to earnings per share of $2.02. This is the best third quarter results ever recorded by the Company. Operating income for the quarter was $220.5 million. This after a one time charge of $9.6 million incurred in connection with the termination of the bareboat charters out for two of the Company’s VLCCs. 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 $67,200, $45,900 and $27,300, respectively, compared with $58,500, $36,700 and $27,000 respectively in the second quarter of 2004.
Administrative expenses were $5.0 million for the third quarter of 2004. Interest income for the quarter was $7.0 million, of which $5.8 million relates to Independent Tankers Corporation (“ITC”). Interest expense for the quarter was $51.1 million (of which $16.3 million relates to ITC) compared with $51.1 million in the second quarter (of which $16.4 million relates to ITC). The total of other financial items for the quarter was a net loss of $26.2 million compared to net gains of $25.3 million in the second quarter. Other financial items include losses of $17.2 million from freight future agreements in the third quarter compared with gains of $0.5 million in the second quarter. The freight futures losses result from mark to market valuation of the Company’s hedging program for financial forward fixtures. Movement in interest rates has generated valuation losses of $10.9 million on interest rate swaps in the third quarter compared with gains of $26.8 million in the second quarter. At September 30, 2004 the Company had interest rate swaps with a total notional principal amount of $633.9 million outstanding, of which Ship Finance holds $583.9 million. Net income for the quarter includes a gain of $9.1 million which resulted from an issue of shares in July 2004 by our subsidiary Ship Finance. As a result of this transaction, the Company’s ownership interest in Ship Finance International Limited is reduced, resulting in a “dilution gain.” The Yen rate moved from 108.38 at June 30, 2004 to 110.92 at September 30, 2004 and accordingly the Company recording total foreign exchange gain of $3.0 million in the quarter on Yen debt in subsidiaries and certain Yen currency contracts.
The Company has a 20 percent profit share arrangement with Ship Finance for any earnings Frontline makes above the fixed charter rates. This profit share is determined on an annual basis. So far this year approximately $61.9 million has been accumulated of which $42.4 million has been recognised in the third quarter in accordance with US generally accepted accounting principles. The unrecognized profit share of $19.5 million will be recognised in the fourth quarter provided Ship Finance’s vessels continue to earn in excess of the fixed charter rates we pay Ship Finance. Frontline’s minority interest includes approximately 36% of the booked amount of profit share as at September 30, 2004.
Frontline announces net income of $534.2 million for the nine months ended September 30, 2004, equivalent to earnings per share of $7.24. This is the best nine months results ever recorded by the Company. 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 $66,900, $47,000 and $26,800, respectively
As at September 30, 2004, the Company had total cash and cash equivalents of $726.5 million. This amount includes restricted cash of $566.9 million of which $305.8 million relates to deposits in ITC and $250.0 million in Frontline Shipping Limited. As of October 25, 2004, Frontline has cash breakeven rates on a TCE basis for VLCCs and Suezmaxes of $21,263 and $15,848, respectively.
The complete report is enclosed on the following link: