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 May 2004
NORDIC AMERICAN TANKER SHIPPING LIMITED
(Translation of registrant's name into English)
Canon's Court
22 Victoria Street
Hamilton HM 12
Bermuda
(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 2003 Annual Report to
Shareholders of Nordic American Tanker Shipping Limited (the "Company"), which
includes information regarding "Cash Dividends Declared Per Share", "Weighted
Average Shares Outstanding: Basic" and "Weighted Average Shares Outstanding:
Diluted" in the Selected Balance Sheet Data that was unintentionally omitted
from the Company's 2003 Annual Report distributed to shareholders.
ADDITIONAL INFORMATION
BP Plc files annual reports on Form 20-F (File No. 1-6262) and
periodic reports on Form 6-K with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended.
EXHIBIT 1
NORDIC AMERICAN TANKER
SHIPPING LIMITED
2003 ANNUAL
REPORT TO
SHAREHOLDERS
BUSINESS
General
Nordic American Tanker Shipping Limited (the "Company") was incorporated on
June 12, 1995, under the laws of the Islands of Bermuda ("Bermuda") for the
purpose of acquiring, disposing, owning, leasing, and chartering three double
hull Suezmax oil tankers (the "Vessels"). The principal executive offices of the
Company are located at Canon's Court, 22 Victoria Street, Hamilton HM 12,
Bermuda, telephone number (441) 298-3207.
Pursuant to an agreement (the "Management Agreement") between the Company
and its Manager, Scandic American Shipping Ltd. (the "Manager"), the Manager
provides certain management, administrative and advisory services to the
Company.
Vessels owned by the Company
Each Vessel acquired by the Company is a 1997 built, 151,459 dead weight
tonne double hull Suezmax oil tanker. The purchase price of each Vessel was
approximately $56.9 million (the "Original Contract Price"). The Vessels were
delivered between August and December 1997 and have been designed according to
the specifications set forth in the shipbuilding contracts between the Builder
and the Company (the "Shipbuilding Contracts"). The Vessels were built at
Samsung Heavy Industries Co. Ltd. in South Korea (the "Builder").
Each Vessel is registered in the Isle of Man and flies the British flag.
Chartering Operations Commenced on September 30, 1997
Each Vessel is chartered to BP Shipping Ltd. (the "Charterer") pursuant to
separate "hell and high water" bareboat charters (the "Charters"). The initial
term of the Charters is from September 30, 1997 and will end approximately seven
years from that date, subject to extension at the option of the Charterer for up
to seven successive one-year periods. BP Shipping the charterer of the Company's
3 Suezmax tankers, has not delivered notice of exercise of its options to extend
the charters. Accordingly, the existing charters will terminate on October 1,
2004, subject to a redelivery window for the vessels of between September 1,
2004 and November 1, 2004. The Company's dividend policy is to pay dividends to
the shareholders in amounts substantially equal to the amounts received by it
under the Charters, less expenses. In 2003, a portion of these dividends was
considered return of capital for United States federal income tax purposes.
The daily charterhire rate payable under each Charter is comprised of two
components: (i) a fixed minimum rate of charterhire of $13,500 per Vessel per
day (the "Base Rate"), paid quarterly in advance, and (ii) additional
charterhire (which will be determined and paid quarterly in arrears and may
equal zero) which would equal the excess, if any, of a weighted average of the
daily time charter rates for two round-trip trade routes traditionally served by
Suezmax tankers (Bonny, Nigeria to/from the Louisiana Offshore Oil Port, and
Hound Point, U.K. to/from Philadelphia, Pennsylvania (the "Reference Ports")),
over the sum of (A) an agreed amount of $8,500 representing daily operating
costs and (B) the Base Rate ("Additional Hire"). The amount of Additional Hire,
if any, will be determined by the London Tanker Brokers Panel or another panel
of ship brokers mutually acceptable to the Charterer and the Company (the
"Brokers Panel"). In 2003, the Company received Additional Hire for all four
quarters.
Pursuant to the terms of the Charters, the Charterer's obligation to pay
charterhire is absolute, regardless whether there is loss or damage to a Vessel
or any other reason. The Charterer is also obligated to indemnify and hold the
Company harmless from all liabilities arising from the operation, design and
construction of the Vessels prior to and during the term of the Charters,
including environmental liabilities, other than liabilities arising out of the
gross negligence or willful misconduct of the Company. The obligations of the
Charterer are guaranteed by BP p.l.c., the successor company to the merger
between Amoco Corp and The British Petroleum Company p.l.c.
At the annual general meeting of the company on May 30, 2003 it was decided
to novate the management agreement from Ugland Nordic Shipping AS to Scandic
American Shipping Ltd.
On October 1, 2003 the Company announced that BP Shipping (BP) did not
exercise its option to extend the charters for all three vessels. Under the
Company`s Bye-Laws, the Company was obligated to call a special meeting of
shareholders no later than April 1, 2004, to consider a proposal to sell the
vessels and distribute the net proceeds to shareholders or to assess other
alternatives. At the Company's Special Meeting of Shareholders on March 15,
2004, the Company's shareholders decided by vote of approximately 96% of those
voting to continue the Company in business. However, as the quorum was not
sufficient to amend the Company's bye-laws, the restrictions on the Company's
business activities will continue to expire on the termination of the BP
charters on October 1, 2004 (subject to possible extensions of up to 30 days at
BP's option). Following termination of the restrictions, the Company will be
free under its bye-laws to conduct any business permitted by law on an
unrestricted basis. The Board of Directors is currently reviewing the Company's
business plan. The Board has authorized Management to negotiate an extention of
the Den norske Bank loan or its refinancing for an additional three years,
expiring in the year 2008.
On May 10, 2004, the Company announced that it has entered into a bareboat
charter with Gulf Navigation Company LLC of Dubai, U.A.E. for one of its vessels
as of the expiration of its Charter. The five-year bareboat charter agreement,
with two optional one-year extensions, provides for a bareboat charter rate of
$17,325 per day for the vessel.
Nature of Trading Market
The primary trading market for the Shares is the American Stock Exchange
(the "AMEX"), on which the Shares are listed under the symbol NAT. The secondary
trading market for the Shares is the Oslo Stock Exchange (the "OSE") also with
the symbol NAT.
The high and low bid prices for the Shares by quarter, in 2002 and 2003 are
as follows:
AMEX AMEX OSE OSE
Low High Low High
------ ------ --- ----
For the quarter ended:
March 31, 2002 $12.95 $15.50 NOK 127.00 NOK 140.00
June 30, 2002 $13.50 $16.55 NOK 122.00 NOK 140.00
September 30, 2002 $ 9.86 $14.25 NOK 90.00 NOK 135.00
December 31, 2002 $10.11 $13.82 NOK 90.00 NOK 100.00
March 31, 2003 $12.62 $14.65 NOK 70.00 NOK 101.00
June 30, 2003 $13.00 $16.89 NOK 70.00 NOK 105.00
September 30, 2003 $13.10 $15.80 NOK 80.00 NOK 110.00
December 31, 2003 $11.25 $15.45 NOK 67.00 NOK 146.00
These bid quotations represent interdealer quotations without retail
mark-ups, mark-downs or commissions, and do not necessarily represent actual
transactions. On December 31, 2003, the closing price of the Shares as quoted on
the AMEX was $15.05, and as quoted on the OSE was NOK 103.00. On such date,
there were 9,706,606 Shares issued and outstanding.
SELECTED FINANCIAL INFORMATION
The following historical financial information should be read in
conjunction with our audited consolidated financial statements and related notes
all of which are included elsewhere in this document and "Operating and
Financial Review and Prospects." The statements of operations data for each of
the three years ended December 31, 2001, 2002, and 2003 and selected balance
sheet data as of December 31, 2002 and 2003 are derived from our audited
consolidated financial statements included elsewhere in this document. The
statements of operations data for each of the years ended December 31, 1999,
2000 and 2001 and selected balance sheet data as of December 31, 1999, 2000 and
2001 are derived from our audited financial statements not included in this
document.
SELECTED BALANCE SHEET DATA
December 31,
---------------------------------------------------------------------------
2003 2002 2001 2000 1999
---------------------------------------------------------------------------
Assets
Cash and Cash Deposit 565,924 277,783 630,868 1,922,925 2,507,017
Prepaid Finance Expenses 14,475 28,955 43,435 57,915 72,395
Prepaid Insurance 91,667 83,333 70,000 58,333 70,833
Accounts Receivable 8,142,307 3,276,523 170,180 10,228,286 0
Vessels 128,081,925 134,912,965 141,744,005 148,575,045 155,406,085
---------------------------------------------------------------------------
Total Assets 136,896,298 138,579,559 142,658,488 160,842,504 158,056,330
===========================================================================
Accounts Payable 0 996 0 0 0
Accrued expenses 1,150,000 0 0 0 0
Accrued Interest 38,322 0 0 0 0
Bank Loan 30,000,000 0 0 0 0
---------------------------------------------------------------------------
Total Short-term Liabilities 31,188,322 996 0 0 0
---------------------------------------------------------------------------
Accrued expenses 0 2,016,000 778,000 0 0
Accrued Interest 0 215,466 38,666 43,500 77,333
Bank Loan 0 30,000,000 30,000,000 30,000,000 30,000,000
---------------------------------------------------------------------------
Total Long-term Liabilities 0 32,231,466 30,816,666 30,043,500 30,077,333
---------------------------------------------------------------------------
Shareholders' Equity
Share Capital 97,066 97,066 97,066 97,066 97,066
Accumulated Other Comprehensive Loss (1,150,000) (2,016,000) (778,000) 0 0
Other Shareholders Equity 106,760,910 108,266,031 112,522,756 130,701,938 127,881,931
---------------------------------------------------------------------------
Total Shareholders' Equity 105,707,976 106,347,097 111,841,822 130,799,004 127,978,997
---------------------------------------------------------------------------
Total Liabilities
and Shareholders' Equity 136,896,298 138,579,559 142,658,488 160,842,504 158,056,330
===========================================================================
SELECTED STATEMENT OF OPERATIONS DATA
Year Ended December 31,
-----------------------------------------------------------------------
2003 2002 2001 2000 1999
-----------------------------------------------------------------------
Revenue 37,370,756 18,057,989 28,359,568 36,577,262 14,782,500
Ship Broker Commissions (184,781) (184,781) (184,781) (185,288) (184,781)
Mgmt. Fee & Admin. Exp (366,421) (340,381) (281,406) (290,791) (314,004)
Directors Insurance (101,666) (86,667) (72,333) (82,500) (97,500)
Depreciation (6,831,040) (6,831,040) (6,831,040) (6,831,040) (6,831,039)
-----------------------------------------------------------------------
Net Operating Income 29,886,848 10,615,120 20,990,008 29,187,643 7,355,176
-----------------------------------------------------------------------
Net Financial Items (1,786,559) (1,767,852) (1,604,532) (1,518,677) (1,580,498)
-----------------------------------------------------------------------
Net Profit for the Year 28,100,289 8,847,268 19,385,476 27,668,966 5,774,678
=======================================================================
Basic Earnings Per Share 2.89 0.91 2.00 2.85 0.59
Diluted Earnings Per Share 2.89 0.91 2.00 2.85 0.59
Cash Dividends
Declared Per Share 3.05 1.35 3.87 2.56 1.35
Weighted Average Shares Outstanding:
Basic 9,706,606 9,706,606 9,706,606 9,706,606 9,706,606
Diluted 9,706,606 9,706,606 9,706,606 9,706,606 9,706,606
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Overview
The Company owns three modern double hull 151,459 dead weight tonne Suezmax
tankers (the "Vessels"), which were delivered in the last half of 1997. The
Vessels were built at Samsung Heavy Industries Ltd. in South Korea.
The contracts with BP Shipping commenced on October 1, 1997 and will
terminate on 1 October 2004, subject to a redelivery window for the vessels of
between September 1, 2004 and November 1, 2004. During the term of each Charter
the Charterer is obligated to pay (i) the Base Rate, which is charterhire at a
fixed minimum daily rate of $13,500 per Vessel per day (time charter equivalent
of $22,000 per day), payable quarterly in advance and (ii) Additional Hire, to
the extent spot charter rates exceed certain levels, payable quarterly in
arrears, from January 1998. The amount of Additional Hire for each quarter, if
any, will be determined by the Brokers Panel.
Results of Operations
The Company's revenues from charterhire for 2003 increased 106.9% from 2002
to $37,370,756 or $34,129 per day per vessel (time charter equivalent of $42,628
per day per vessel). Charterhire revenue for 2003 was derived from Base Hire of
$14,782,500 ($13,500 per day per Vessel) and Additional Hire of $22,588,256
($20,629 per day per vessel).
Market rates which are used to determine additional hire increased
significantly in 2003. The strong tanker market was driven by very cold weather
at start of the year combined with very high natural gas prices in North
America. Strong demand increases in China alongside economic recovery in the
United States supported the growth in oil demand throughout the year. Additional
hire by quarter, as determined by the Brokers Panel was $22,588,256 for the
first through the fourth quarters of 2003 respectively. Charterhire per day per
Vessel (time charter equivalent) for each quarter of 2003 was $57,756, $38,291,
$23,243 and $51,501 per day per Vessel, respectively.
Comparatively, Base Hire in 2002 and 2001 was $14,782,500 ($13,500 per day
per Vessel) for each year. Additional Hire was $3,275,489 and $13,577,068 in
2001.
Management, insurance and administrative costs ("MI&A") for 2003, 2002 and
2001 were $652,868, $611,829 and $538,520 respectively. The Company's MI&A for
all three years consisted of ship brokers commissions of approximately $185,000
and management fees of $250,000 which are fixed. The increase in costs of
$41,039 from 2002 to 2003 is mainly due to higher insurance costs and attorney
fees. Depreciation expense approximated $6,831,040 for each of the three years.
Liquidity and Capital Resources
The Company's cash flows are primarily from charter hire revenue.
Cash flows provided by operating activities increased in 2003 to
$29,893,551 due primarily to the increase in net profit and an increase in
accounts receivable due to additional hire awarded in 4th quarter.
Cash flow used in financing activities increased 126% to $29,605,408 due to
the increase in dividends paid during the year.
There were no cash flows from investing activities during the year.
Due to the nature of the business, cash flows have been predictable with
the exception of additional charter hire to be awarded, if any. However, with
the expiration of the Charters with BP, the Company will be exposed to the
international tanker charter spot market, which historically has been quite
volatile. On May 10, 2004, the Company announced that it has entered into a
bareboat charter with Gulf Navigation Company LLC of Dubai, U.A.E. for one of
its vessels as of the expiration of its Charter. The five-year bareboat charter
agreement, with two optional one-year extensions, provides for a bareboat
charter rate of $17,325 per day for the vessel. However, the Company does not
expect that both of its remaining vessels will be placed on fixed rate charters
following termination of the Charters with BP.
The Company expects that cash from charter hire will be sufficient to meet
operational requirements in 2004. The Company does not have plans for
significant capital expenditures or other investments during 2004, and the
Company expects to refinance its $30 million loan with Den norske Bank ASA, as
set forth below.
Dividend payment
Total dividend paid out in 2003 was $29,605,410 or $3.05 per Share. The
dividend payments per share in 1997, 1998, 1999, 2000, 2001,2002 and 2003 have
been as follows:
Period 1997 1998 1999 2000 2001 2002 2003
------------------------------------------------------------------------------
1st Quarter 0.40 0.32 0.34 1.41 0.36 0.63
2nd Quarter 0.41 0.32 0.45 1.19 0.34 1.27
3rd Quarter 0.32 0.35 0.67 0.72 0.33 0.78
4th Quarter 0.30 0.30 0.36 1.10 0.55 0.32 0.37
------------------------------------------------------------------------------
Total USD 0.30 1.43 1.35 2.56 3.87 1.35 3.05
------------------------------------------------------------------------------
The Company declared a dividend of $1.15 per share for the first quarter of
2004. The dividend of $1.15 was paid to Shareholders in February 2004. In
addition, the Company declared a dividend of $1.70 per share for the second
quarter of 2004, which is being paid to Shareholders in May 2004.
Long-Term Debt and Repurchase of Common Stock
In 1998 the Company borrowed $30.0 million from Den norske Bank ASA, Oslo,
Norway ("DnB"), to finance the repurchase of 2,107,244 shares through a "Dutch
Auction" self-tender offer at a price of $12.50 per Share. The total purchase
price of the Shares including the costs associated with the transaction was
$27.1 million. On May 12, 1999, the General Shareholders Meeting approved the
remaining proceeds being utilized to increase the quarterly dividends. The loan
with DnB is due during the fourth quarter of 2004. The Company believes that it
will be able to refinance this loan with DnB on similar terms.
An important objective of the repurchase of Shares was to increase the
Company's cash distribution to shareholders while the Vessels are on charter to
the Charterer. While the Vessels are on the Charters with BP, the minimum cash
distribution per Share (assuming receipt of Base Hire and no increase of
expenses) has increased by $0.15, from $1.20 to $1.35 per year, an increase of
12.5%. There is no guarantee that this level can be maintained following
termination of the Charters.
The Company has entered into an interest swap agreement with DnB, as a
result of which the Company pays a fixed interest on the Loan of 5.80% per
annum. The swap agreement terminates on the final repayment date of the Loan,
i.e., the fourth quarter of the year 2004.
Contractual Obligations
The Company does not have contractual obligations or commercial commitments
except long-term debt as described above.
Disclosure and Internal Controls
As of December 31, 2003, an evaluation was performed under the supervision
and with the participation of the Company's Chairman, Chief Executive Officer of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on that evaluation, these officers have concluded
that the Company's disclosure controls and procedures were effective as of
December 31, 2003. No significant changes in the Company's internal controls or
in other factors have occurred that could significantly affect controls
subsequent to December 31, 2003.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management of the Company and the Manager
Pursuant to the Management Agreement, the Manager provides management,
administrative and advisory services to the Company with respect to the Vessels.
At the Annual General Meeting of the Company on May 30, 2003 it was decided
to novate the management agreement from Ugland Nordic Shipping AS to Scandic
American Shipping Ltd, Bermuda.
Set forth below are the names and positions of the directors and executive
officers of the Company and the Manager. Directors of the Company are elected
annually, and each director elected holds office until a successor is elected.
Officers of both the Company and the Manager are elected from time to time by
vote of the respective board of directors and hold office until a successor is
elected.
The Company
Name Age Position
---------------------------------------------------------
Peter Bubenzer 49 Secretary
Hon. Sir David Gibbons 76 Director
Herbj0rn Hansson 56 Director and Chairman,
Chief Executive Officer
and President
George C. Lodge 76 Director
Andreas Ove Ugland 49 Director
Torbj0rn Glads0 56 Director
The Manager
Name Age Position
---------------------------------------------------------
Andreas Ove Ugland 49 Director
Herbj0rn Hansson 56 Director; President
Certain biographical information with respect to each director and
executive officer of the Company and the Manager is set forth below.
Herbjorn Hansson has been President and Chief Executive Officer of the Company
since July 1995. He is a major shareholder and Deputy Chairman of Scandic
American Shipping Ltd. ("Scandic"), the Company's manager. He has been President
and Chief Executive Officer of Ugland Nordic Shipping ASA (the "Former
Manager"), the Company's previous manager, since September 1993. Mr. Hansson has
served as a director of the Company since July 1995 and as a director of the
Former Manager, since its organization in June 1989. Mr. Hansson served as the
Chairman of the Board of the Former Manager from June 1989 to September 1993.
Mr. Hansson has been involved in various aspects of the shipping industry and
international finance since the early 1970s, including serving as Chief
Economist of Intertanko, the International Association of Tanker Owners and
independent operators, from 1975-1980. He was an officer of the Anders
Jahre/Kosmos Group from 1980 to 1989, serving as Chief Financial Officer from
1983 to 1988.
Sir David Gibbons has been a director of the Company since September1995. Sir
David served as the Prime Minister of Bermuda from August 1977 to January 1982.
Sir David has served as Chairman of The Bank of N.T. Butterfield and Son Limited
from 1986 to 1997, Chairman of Colonial Insurance Co. Ltd. since 1986 and as
Chief Executive Officer of Edmund Gibbons Ltd. since 1954.
George C. Lodge has been a director of the Company since September 1995.
Professor Lodge has been a member of the Harvard Business School faculty since
1963. He was named associate professor of business administration at Harvard in
1968 and received tenure in 1972.
Andreas Ove Ugland has been a director of the Company since February 1997. Mr.
Ugland has also served as director and Chairman of: Ugland International Holding
Plc, a shipping/transport company listed on the London Stock Exchange, Andreas
Ugland & Sons AS, Grimstad, Norway, H0egh Ugland Autoliners AS, Oslo and Buld
Associates Inc., Bermuda. Mr. Ugland has had his whole career in shipping in the
Ugland family owned shipping group. Mr. Ugland is controlling shareholder and
Chairman of Scandic.
Torbjorn Gladso has been a director of the Company since October 2003. Mr.
Glads0 is a partner in Saga Corporate Finance AS. He has extensive experience
within investment banking since 1978. He has been the Chairman of the Board of
the Norwegian Register of Securities and Vice Chairman of the Board of Directors
of the Oslo Stock Exchange.
COMPENSATION OF DIRECTORS AND OFFICERS
Pursuant to the Management Agreement, the Manager will pay from the
Management Fee the annual directors' fees of the Company, currently estimated at
an aggregate amount of $80,000 per annum. Accordingly, from the inception of the
Company through December 31, 2003, the Directors of the Company have not been
paid by the Company any amount for services rendered by them to the Company in
any capacity.
ADDITIONAL INFORMATION
The Company will file with the Securities and Exchange Commission an Annual
Report on Form 20-F. A copy of such report is available without cost to each
shareholder.
BP p.l.c., the successor company to the merger between Amoco Corp and The
British Petroleum Company p.l.c., files annual reports on Form 20-F (File No.
005-42076) and periodic reports on Form 6-K with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended.
The Company is incorporated in Bermuda. Under current Bermuda law, the
Company is not subject to tax on income or capital gains, and no Bermuda
withholding tax will be imposed upon payments of dividends by the Company to its
shareholders. No Bermuda tax is imposed on holders with respect to the sale or
exchange of Shares. Furthermore, the Company has received from the Minister of
Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966, as
amended, an assurance that, in the event that Bermuda enacts any legislation
imposing any tax computed on profits or income, including any dividend or
capital gains withholding tax, or computed on any capital asset, appreciation,
or any tax in the nature of an estate, duty or inheritance tax, then the
imposition of any such tax shall not be applicable. The assurance further
provides that such taxes, and any tax in the nature of estate duty or
inheritance tax, shall not be applicable to the Company or any of its
operations, nor to the shares, debentures or other obligations of the Company,
until March 2016.
MAY 11, 2004
NORDIC AMERICAN TANKER
SHIPPING LIMITED
NORDIC AMERICAN TANKER SHIPPING LIMITED
TABLE OF CONTENTS.
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Page
INDEPENDENT AUDITORS' REPORT 12
FINANCIAL STATEMENTS
Balance Sheets 13
Statements of Operations 14
Statements of Cash Flows 14
Statements of Shareholders' Equity 15
Notes to Financial Statements 16-19
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
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Nordic American Tanker Shipping Ltd
Bermuda
We have audited the accompanying balance sheets of Nordic American Tanker
Shipping Ltd. (the "company") as of December 31, 2003 and 2002 and the related
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 2003. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan an perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used an 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 the Company as of December 31, 2003 and
2002, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2003 in conformity with accounting
principles generally accepted in the United States of America.
Oslo, Norway, May 11, 2004
Deloitte
BALANCE SHEET AT DECEMBER 31,
(all figures in USD)
ASSETS 2003 2002
------------ ------------
Current assets
Cash and cash equivalents Note 1 565,924 277,783
Accounts receivables 8,142,307 3,276,523
Prepaid finance costs Note 6 14,475 28,955
Prepaid insurance 91,667 83,333
------------ ------------
Total current assets 8,814,373 3,666,594
------------ ------------
Long term assets
Vessels Note 4 128,081,925 134,912,965
------------ ------------
TOTAL ASSETS 136,896,298 138,579,559
------------ ------------
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities 2003 2002
------------ ------------
Accounts payables -- 996
Accrued interest Note 6 38,322 215,466
Derivative contract Note 7, 8 1,150,000 --
Current portion of long-term debt Note 6, 8 30,000,000 --
------------ ------------
Total Current liabilities 31,188,322 216,462
------------ ------------
Long-term liabilities
Derivative contract Note 7, 8 -- 2,016,000
Long-term debt Note 6, 8 -- 30,000,000
------------ ------------
Total Long-term liabilities -- 32,016,000
------------ ------------
Shareholders' Equity
Common stock Note 7 97,066 97,066
Additional paid-in capital Note 7 144,395,866 144,395,866
Accumulated deficit Note 7 (37,634,956) (36,129,835)
Accumulated other comprehensive loss Note 7, 8 (1,150,000) (2,016,000)
------------ ------------
Total Shareholders' Equity 105,707,976 106,347,097
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 136,896,298 138,579,559
------------ ------------
The footnotes are an integral part of these financial statements
STATEMENTS OF OPERATIONS
(all figures in USD) Year Ended December 31,
-----------------------------------------
Notes 2003 2002 2001
----- ----------- ----------- -----------
Operating Revenue 1, 3 37,370,756 18,057,989 28,359,568
----------- ----------- -----------
Ship Broker Commissions (184,781) (184,781) (184,781)
Administrative Expenses 2, 5 (468,087) (427,048) (353,739)
Depreciation 4 (6,831,040) (6,831,040) (6,831,040)
----------- ----------- -----------
Net Operating Income 29,886,848 10,615,120 20,990,008
----------- ----------- -----------
Interest Income 26,462 21,409 189,244
Interest Expense 6 (1,797,981) (1,764,424) (1,769,000)
Other Financial Charges (15,040) (24,837) (24,776)
----------- ----------- -----------
Net Financial Items 6 (1,786,559) (1,767,852) (1,604,532)
----------- ----------- -----------
Net Profit before tax 28,100,289 8,847,268 19,385,476
----------- ----------- -----------
Tax Expense 0 0 0
----------- ----------- -----------
Net Profit for the Year 28,100,289 8,847,268 19,385,476
=========== =========== ===========
Basic and Diluted Earnings per Share 2.89 0.91 2.00
Weighted Average Number of
Shares Outstanding 9,706,606 9,706,606 9,706,606
STATEMENT OF CASH FLOWS
All figures in USD
Year Ended December 31,
----------- ----------- -----------
2003 2002 2001
----------- ----------- -----------
Net profit 28,100,289 8,847,268 19,385,476
Reconciliation of Net Profit to Net Cash from
Operating Activities
Depreciation 6,831,040 6,831,040 6,831,039
Amortization of prepaid finance costs 14,480 14,480 14,480
Increase (decrease) in receivables and payables (5,052,258) (2,941,880) 10,041,605
----------- ----------- -----------
Net cash from Operating Activitites 29,893,551 12,750,908 36,272,600
----------- ----------- -----------
Financing Activities
Dividends paid (29,605,410) (13,103,993) (37,564,658)
----------- ----------- -----------
Net cash from financing activities (29,605,410) (13,103,993) (37,564,658)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 288,141 (353,085) (1,292,058)
----------- ----------- -----------
Beginning Cash and Cash Equivalents 277,783 630,868 1,922,925
----------- ----------- -----------
Ending Cash and Cash Equivalents 565,924 277,783 630,867
----------- ----------- -----------
Cash Paid for Interest 1,975,125 1,587,622 1,773,834
----------- ----------- -----------
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 Retained comprehensive Shareholders' comprehensive
stock capital earnings income Equity income
-----------------------------------------------------------------------------------------------------------------------------
Balance at 12.31.00 97,066 144,395,866 (13,693,928) 130,799,004
------------------------------------------------------------------------------------------------------------
Net profit 19,385,476 19,385,476 19,385,476
Cumulative effect of
change in accounting for
derivative instruments 618,094 618,094 618,094
Unrealized loss on
derivative instruments (1,656,146) (1,656,146) (1,656,146)
Adjustment for losses on
derivatives reclassified
to earnings 260,052 260,052 260,052
------------
Total comprehensive income 18,607,476
------------
Dividends paid (37,564,658) (37,564,658)
------------------------------------------------------------------------------------------------------------
Balance at 12.31.01 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
------------
Total comprehensive income 7,609,268
------------
Dividends paid (13,103,993) (13,103,993)
------------------------------------------------------------------------------------------------------------
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
------------
Total comprehensive income 28,966,289
------------
Dividends paid (29,605,410) (29,605,410)
------------------------------------------------------------------------------------------------------------
Balance at 12.31.03 97,066 144,395,866 (37,634,956) (1,150,000) 105,707,976
------------------------------------------------------------------------------------------------------------
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.
Nature of Business and Concentration of Risk: The principal business of
Nordic American Tanker Shipping Limited (the "Company") is the charter of
three Suezmax tankers to BP Shipping until September 2004, with a further
seven one-year options in BP's favour.
Use of estimates: Preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
necessarily includes amounts based on estimates and assumptions made by
management. Actual results could differ from those amounts.
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 consists solely of vessels. The estimated useful life of
these vessels is 25 years.
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: The daily charterhire rate payable under each Charter
is comprised of two components: (i) a fixed minimum rate of charterhire of
$13,500 per Vessel per day (the "Base Rate"), paid quarterly in advance at
the beginning of the quarter, and (ii) additional charterhire (which will
be determined and paid quarterly in arrears and may equal zero) which would
equal the excess, if any, of a weighted average of the daily time charter
rates for two round-trip trade routes traditionally served by Suezmax
tankers (Bonny, Nigeria to/from the Louisiana Offshore Oil Port, and Hound
Point, U.K. to/from Philadelphia, Pennsylvania (the "Reference Ports")),
over the sum of (A) an agreed amount of $8,500 representing daily operating
costs and (B) the Base Rate ("Additional Hire"). The amount of Additional
Hire, if any, will be determined by the London Tanker Brokers Panel or
another panel of ship brokers mutually acceptable to the Charterer and the
Company.
Revenue from vessel charter is recognized on the basis of the number of
days in the fiscal period.
Segment Information: The Company has only one type of vessels - oil tankers
on bareboat charters. As a result, management, including the chief
operating decision makers, reviews operating results solely by revenue per
day and thus the Company has determined that it operates under one
reportable segment.
Derivative instrument and Hedging: The Company accounts for its derivative
instruments and hedges according to SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities" as amended. This standard, as amended,
requires derivative instruments to be recorded in the balance sheet at
their fair value. Changes in the fair value are recorded to earnings for
each period unless specific hedge criteria are met. 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.
Taxes: The company is incorporated in Bermuda. Under current Bermuda law,
the Company is not subject to corporate income taxes.
New Pronouncements: In November 2002, the FASB issued FASB Interpretation
No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN
45 requires that a liability be recorded in the guarantor's balance sheet
upon issuance of a guarantee. In addition, FIN 45 requires disclosures
about the guarantees that an entity has issued. The adoption of FIN 45 did
not have a material impact on the Company's financial statement.
In April 2003 the FASB issued SFAS No. 149, "Amendment of SFAS No. 133 on
Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments by
requiring that contracts with comparable characteristics be accounted for
similarly. In particular, this statement clarifies the circumstances under
which a contract with an initial net investment meets the characteristics
of a derivative, clarifies when a derivative contains a financing
component, amends the definition of an underlying to conform it to the
language used in FIN No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others" and amends certain other existing pronouncements. SFAS No. 149
is effective for contracts entered into or modified after June 30, 2003,
except as stated below and for hedging relationships designated after June
30, 2003. The adoption of SFAS No. 149 did not have a material impact on
the Company's financial statements.
In May 2003 the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No.
150 modifies the accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity. SFAS No. 150
requires that those instruments be classified as liabilities in statements
of financial position. The adoption of SFAS No. 150 did not have a material
impact on the Company's financial statements."
2. RELATED PARTY TRANSACTIONS
The Company has entered into a management agreement with Scandic American
Shipping Ltd. (SAS) under which SAS will provide certain administrative,
management and advisory services to the Company for an amount of $250,000
per year. SAS is the Commercial Manager of the Company and it is owned by
Herbjorn Hansson and Andreas Ove Ugland. SAS owns as of December 31, 2003
indirectly through its owners 0.15% of the shares.
Management fees expense was $250,000 for 2003, 2002 and 2001.
3. REVENUE
The table below illustrates the breakdown of the charter hire for the years
ended December 31, 2003, 2002 and 2001:
Year 2003 2002 2001
----------------------------------------------------------------------
Base Hire 14,782,500 14,782,500 14,782,500
Additional Hire 22,588,256 3,275,489 13,577,068
----------------------------------------------------------------------
Total 37,370,756 18,057,989 28,359,568
======================================================================
4. VESSELS
All Vessel 2003 2002
----------------------------------------------------------------------
Aquisition cost 1997 170,775,970 170,775,970
Accumulated depreciation as of December 31 42,694,045 35,863,005
----------------------------------------------------------------------
Book value as of December 31 128,081,925 134,912,965
======================================================================
The long term assets consist of three suezmax oil tankers built in 1997.
Depreciation is calculated on a straight-line basis over the estimated
lifetime of 25 years. The basis for the depreciation is the actual cost
price of the vessels in 1997, i.e. $170,775,970 in total for the three
vessels.
5. ADMINISTRATIVE EXPENSES
2003 2002 2001
----------------------------------------------------------------------
Management fee 250,000 250,000 250,000
Directors and officers insurance 101,666 86,667 72,333
Other fees and expenses 116,421 90,381 31,406
----------------------------------------------------------------------
Total administrative expenses 468,087 427,048 353,739
======================================================================
6. LONG-TERM DEBT
In 1998, the Company entered into a loan agreement for $30 million with Den
norske Bank ASA, Oslo (DnB). The loan falls due in full at expiration of
the BP contract in 2004. Interest payments are based on the variable rate
of LIBOR plus 0.525% margin, approximately 1.665% at December 31, 2003.
Accrued interest at December 31, 2003 and 2002 was $38,322 and $215,466
respectively. The Company has pledged the vessels as collateral. In
association with the loan the Company must meet certain financial
covenants. The main covenants are associated with change in ownership, new
contracts or change in existing contracts, minimum value adjusted equity
and minimum liquidity.
The Company pays an annual agency fee of $10,000 to DnB in connection with
the loan.
Interest on all long-term borrowings is variable, therefore the carrying
amount of the debt approximates its fair value.
The Company has entered into an interest swap agreement with DnB, enabling
the Company to pay a fixed interest on the loan of 5.80% annually for the
next two years. The swap agreement terminates on the final repayment date
of the Loan, i.e. the 4th quarter of year 2004. Interest on all long-term
borrowings is variable, therefore the carrying amount of the debt
approximates its fair value.
The Company believes that it will be able to refinance this loan with DnB
on similar terms.
Prepaid finance costs
In connection with the loan in 1998, the Company paid $86,875 in an
arrangement fee and commitment fee. The fees will be amortized over the
term of the Loan, i.e. with 1/6 every year from January 1, 1999.
7. SHAREHOLDERS' EQUITY
Par value of the common shares is $.01. At December 31, 2003 and 2002 the
number of shares authorized, issued and outstanding was 9,706,606.
8. DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT
The company is exposed to interest rate risk from its variable rate loan of
$30 million. The company's risk management objective has been to lock in
the interest payments on the loan. The company has entered into an interest
rate swap where the company pays a fixed interest and receives a variable
interest and has designated this swap as a cash flow hedge of the interest
payments on the loan.
Gains or losses on the interest rate swap designated as a cash flow hedge
will be deferred to accumulated other comprehensive income and will be
reclassified to earnings when the hedged interest payments are recognized.
The amount of ineffectiveness recorded in 2003, 2002 and 2001 was
immaterial. As of December 31, 2003 a loss of $1,150,000 is expected to be
reclassified from accumulated other comprehensive income to earnings during
the next twelve months. The maximum length of time that the company has
hedged its exposure to variability in future interest payments is
approximately 11 months as of December 31, 2003.
The fair value of the swap was recorded as a liability of $1,150,000 and
$2,016,000 at December 31, 2003 and 2002, respectively.
9. CONCENTRATIONS
The Company's charter revenues and accounts receivable are derived entirely
from bareboat charters with one counterparty, BP Shipping Ltd.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Matters discussed in this report 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.
Nordic American Tanker Shipping Limited (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," "except," "anticipate,"
"intends," "estimate," "forecast," "project," "plan," "potential," "will,"
"may," "should," "expect" "pending and similar expressions identify
forward-looking statements.
The forward-looking statements in this report 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.
In addition to these important factors, 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, and other important
factors described from time to time in the reports filed by the Company with the
Securities and Exchange Commission, including our Annual Report on Form 20-F.
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: May 20, 2004 By: /s/ Herbjorn Hansson
----------------------------
Herbjorn Hansson
President and
Chief Executive Officer