Highlights
The Board of Frontline Ltd. (the “Company” or “Frontline”) is pleased to announce net income of $498.2 million for the fourth quarter of 2004, equivalent to earnings per share of $6.66. This is the best quarterly results ever recorded by the Company. Operating income for the quarter was $471.7 million, up from $220.5 million in the third quarter as the tanker market experienced a continued period of exceptionally strong rates. 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 $111,200, $85,000 and $31,100, respectively, compared with $67,200, $45,900 and $27,300 respectively in the third quarter of 2004. In the fourth quarter of 2004, the Company reported a gain of $19.8 million from the sale of assets that relates to the sale of the Company’s interest in one VLCC.
Interest income for the quarter was $8.4 million, of which $6.1 million relates to Independent Tankers Corporation (“ITC”). Interest expense for the quarter was $50.4 million (of which $16.4 million relates to ITC) compared with $51.1 million in the third quarter (of which $16.3 million relates to ITC). The total of other financial items for the quarter was a net gain of $17.1 million compared to net losses of $26.2 million in the third quarter. This change reflects movements in the financial and freight markets from the third to fourth quarter. Other financial items include a gain of $0.7 million from the mark to market valuation of freight future agreements in the fourth quarter compared with losses of $17.2 million in the third quarter. Movement in interest rates has generated valuation gains of $5.9 million on interest rate swaps in the fourth quarter compared with losses of $10.9 million in the third quarter. Other financial items also include a gain on sale of marketable securities of $7.2 million. At December 31, 2004 the Company had interest rate swaps with a total notional principal amount of $631.4 million outstanding, of which Ship Finance holds $581.4 million. The Company has recorded a foreign exchange loss of $9.8 million in the quarter arising on Yen debt in subsidiaries and certain Yen currency contracts as the Yen strengthened from 110.92 at September 30, 2004 to 103.10 at December 31, 2004.
In the fourth quarter of 2004, the Company spun off the newly formed dry bulk group, Golden Ocean Group Limited (“Golden Ocean”). This transaction has been accounted for at fair value and is presented as discontinued operations. Included in the discontinued operations amount of $104.1 million for the fourth quarter of 2004 is a gain of $99.5 million resulting from the recognition of the distribution of Golden Ocean shares and cash to Frontline shareholders at fair value.
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 and for 2004 totals $114.9 million.
Frontline announces net income of $1.0 billion for the year ended December 31, 2004, equivalent to earnings per share of $13.79. 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 $78,000, $57,900 and $27,900, respectively.
As at December 31, 2004, the Company had total cash and cash equivalents of $698.3 million. This amount includes restricted cash of $592.6 million of which $325.9 million relates to deposits in ITC and $250.0 million in Frontline Shipping Limited. As of February 18, 2005, Frontline has cash breakeven rates on a TCE basis for VLCCs and Suezmaxes of $28,042 and $21,370, respectively.
The Company has restated prior periods reported to reflect the treatment of the spin off of Golden Ocean as discontinued operations. This is a reclassification of certain line items presented in our statement of operations and has had no effect on reported net income.
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