UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of November, 2001
Frontline Ltd.
(Translation of registrant's name into English)
Par-la-Ville Place, 4th Floor, 14 Par-la-Ville Road,
Hamilton HM 08, 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
-------
If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82-
Item 1. INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Attached as Exhibit 1 is a copy of the press release of Frontline
Ltd. (the "Company"), dated November 12, 2001.
Attached as Exhibit 2 is a copy of an announcement of the
Company, dated November 12, 2001.
2
Exhibit 1
FRONTLINE LTD.
INTERIM REPORT JULY - SEPTEMBER 2001
THIRD QUARTER AND NINE MONTH RESULTS
Frontline reports earnings before interest, tax, depreciation,
and amortisation including earnings from associated companies
(EBITDA) of $107.4 million and net income of $39.3 million for
the third quarter of 2001. These results include a gain on sale
of assets of $18.8 million arising from the sale of the Suezmax
tanker Front Archer in July 2001. Basic earnings per share for
the quarter were $0.51 compared to $1.23 in the same period in
2000 and cashflow per share for the quarter was $0.92 (2000 -
$1.51). The results for the third quarter of 2001 compare with
EBITDA and net income of $141.3 million and $97.0 million
respectively in the third quarter of 2000, a period when rates in
the tanker market were at significantly higher levels.
The average daily time charter equivalents ("TCEs") earned by
VLCCs, Suezmax tankers, and Suezmax OBO carriers were $30,800,
$23,100 and $23,000, respectively, down from $51,400, $36,500 and
$33,400, respectively in the immediately preceding quarter.
Operating costs for the third quarter of 2001 include a charge of
approximately $1.3 million for supplementary calls for P&I
insurance and a charge of approximately $2.1 million in
connection with the drydocking of four vessels in the quarter.
With the exception of these items, total operating costs have
been maintained across the fleet at budgeted levels. In the third
quarter of 2001, the Company has changed its accounting policy
for drydockings. Prior to the third quarter of 2001, provisions
for future drydockings have been accrued and charged to expense
on a pro-rata basis over the period to the next scheduled
drydockings. Effective January 1, 2001 the Company will recognise
the cost of a drydocking at the time the drydocking takes place,
that is it will apply the "expense as incurred" method. The
expense as incurred method is considered by management to be a
more reliable method of recognising drydocking costs as it
eliminates the uncertainty associated with estimating the cost
and timing of future drydockings. The cumulative effect of this
change in accounting principle is shown separately in the
consolidated statements of operations for the nine months ended
September 30, 2001 and resulted in a credit to income of $32.3
million in the first quarter of 2001. The cumulative effect of
this change as of January 1, 2001 on the Company's consolidated
balance sheet was to reduce total liabilities by $32.3 million.
The Company's income statements and balance sheets have also been
restated for the first and second quarters of 2001 as a
consequence of this change in accounting policy.
3
Net interest expense for the quarter was $19.7 million (2000 -
$22.0 million). This compares with $19.4 million the second
quarter of 2001. Other financial items for the quarter were $7.5
million of which $7.2 million is attributable to the market value
adjustment on interest rate swaps. The strengthening of the Yen
against the US Dollar in the third quarter of 2001 has resulted
in the Company recording an unrealised foreign currency exchange
loss of $9.6 million primarily relating to the revaluation of Yen
debt in certain Golden Ocean subsidiaries. For the 2001 year to
date there is an unrealised foreign currency gain of $9.3
million. There is a similar foreign currency impact on the share
of results from associated companies due to the revaluation of
Yen debt within certain of these companies.
On 12 November 2001 the Board has declared a dividend of $0.10
per share for third quarter. The record date for the dividend is
22 November 2001, and ex dividend date is 20 November 2001. The
dividend is to be paid on or about 5 December 2001.
For the first nine months of 2001, the Company had EBITDA of
$459.3 million (2000 - $260.1 million) and earned net income of
$339.0 million (2000 - $132.7 million). This net income in 2001
includes $32.3 million relating to the cumulative effect of the
change in the accounting policy for drydockings as discussed
above.
Net interest expense for the nine month period was $60.8 million
(2000 - $64.3 million). This decrease reflects the benefit of
lower interest rates on debt and increased interest income
arising from higher average cash balances. Other financial items
for the nine months ended September 30, 2001 were $11.6 million
which is attributable to the market value adjustment on interest
rate swaps. The foreign exchange gain for the nine month period
was $9.3 million, reduced from $19.0 million at June 30, 2001
principally due to the strengthening of the yen against the US
Dollar. Earnings per share for the 2001 year to date are $4.41
(2000 - $1.86) and cashflow per share was $5.57 (2000 - $2.74).
THE MARKET
At the start of the third quarter of 2001, charter rates improved
from the very low rates experienced towards the end of the second
quarter. VLCC rates showed great volatility and varied between
below $20,000 per day in August and $50,000 per day in the second
half of September. Suezmax rates peaked in July and declined
thereafter. After the end of the quarter the market has weakened
considerably and both VLCCs and Suezmaxes are currently being
fixed at low levels.
The rate decline is explained by a general slowdown in the world
economy and a decrease in OPEC Middle East production as a
consequence of several OPEC quota reductions. The balance between
4
supply and demand is not as bad though as current rate levels
seem to indicate but general pessimism has contributed to
depressing the market.
As a consequence of market development scrapping and conversion
of older tonnage has accelerated and so far this year 28
VLCCs/ULCCs and 18 Suezmaxes have been scrapped or converted
compared to 23 and 14 respectively delivered. Newbuilding
contracting has more or less come to a halt. The order book,
though, still stands at 89 VLCCs and 67 Suezmaxes for delivery
from now until first half of 2004.
CORPORATE AND OTHER MATTERS
Frontline's wholly-owned subsidiary, Golden Ocean, agreed in May
2001 to a settlement with certain parties in order to acquire
five VLCCs over which Golden Ocean had purchase options. Three of
these vessels were delivered to the Company in the second quarter
of 2001 and the fourth was delivered in mid July. One of these
VLCCs is on time charter to Arcadia until mid 2002 at a TCE of
approximately $40,000 per day and one is trading under a market
related bareboat charter to Shell. The other two vessels have
been employed in the Tankers International Pool.
In the third quarter of 2001, the Company took delivery of three
new double-hulled VLCCs from Bergesen D.Y. ASA in a joint venture
together with Overseas Shipholding Group, Inc. and Euronav
Luxembourg S.A. These vessels are employed in the Tankers
International Pool. The joint venture with OSG and Euronav has
also acquired two newbuilding contracts for double-hulled VLCCs
from Bergesen, with delivery scheduled for February and July
2002.
In August 2001, the Company took delivery of a newbuilding
Suezmax, Front Melody and in early October took delivery of her
sister ship, Front Symphony. These vessels acquired by the
Company, together with the three vessels acquired through the
joint venture with Euronav and OSG, have been financed by
traditional bank financing.
In July 2001, the Company sold the Suezmax tanker, Front Archer
and the 1974-built VLCC Mosocean that was purchased as a result
of the acquisition of Mosvold Shipping Limited in the second
quarter of 2001.
During the third quarter of 2001 the Company issued a total of
15,000 shares in connection with the exercise of employee share
options and bought back and cancelled a total of 520,000 of its
own shares. In September 2001, the Company announced that it has
established a Stock Indexed Total Return Swap Programme (or
Equity Swap Line) with The Bank of Nova Scotia Group ("Scotia").
The Programme secures that Scotia may acquire up to 3,500,000
5
Frontline shares over the next 12 months. Since the shares are
owned by Scotia the shares will not be subject to immediate
cancellation, which has been the case for regular buy backs
carried out by the Company. At September 30, 2001, the Company
has acquired a total amount of 3,927,145 of its shares and
301,400 shares had been acquired by Scotia within the current
Board authorization to buy back up to 7,500,000 shares. At
September 30, 2001, 76,407,566 shares were outstanding and the
weighted average number of shares outstanding for the quarter was
76,489,577 (as at September 30, 2000, 78,537,524 and for the
quarter then ended - 78,804,371).
OUTLOOK
The downturn in the global economy this year will be negative for
oil consumption resulting in slow or marginal growth. In
addition, Middle East OPEC's market share may decline. This will
negatively affect the tanker market. We expect that this will
result in increased scrapping of old tonnage, which may balance
or exceed expected newbuilding deliveries. Scrapping alone,
however, will not be sufficient to create an improved rate
environment but will create room for higher rates as demand picks
up. Generally global oil stocks are tight so there is little risk
of stock draw reducing tanker demand further. The recent
weakening of the oil price should over time stimulate demand for
oil relative to other energy sources. This is likely to make a
positive contribution to the freight market. Part of this effect
was experienced after the fall in oil price in 1997-98.
The Board expects that tanker rates will be lower than what we
have been used to until oil demand growth starts to increase, but
expects periods of good rates due to seasonal demand swings in
the winter. The lower freight rates have resulted in decreasing
second-hand values. The Board sees opportunities for acquisitions
or corporate transaction in a changing market. It is, however, a
concern for the Board that the Frontline share price currently is
trading at 44 per cent of book value. This limits the opportunity
for expansion but makes an extension of the current buyback
program very interesting. The current cash position of US$ 117
million gives the company good financial flexibility. The Board
is currently considering actions, which will boost the cash
position further. Frontline has today a profit and loss breakeven
rate of US$ 21,400 for VLCCs and US$ 15,700 for Suezmaxes. Based
on the current age composition of the fleet the Board is
confident that the rates in the coming periods will exceed these
levels even in a negative economic development scenario.
FORWARD LOOKING STATEMENTS
This press release contains forward looking statements. These
statements are based upon various assumptions, many of which are
based, in turn, upon further assumptions, including Frontline
management's examination of historical operating trends. Although
6
Frontline believes that these assumptions were reasonable when
made, because assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible
to predict and are beyond its control, Frontline cannot give
assurance that it will achieve or accomplish these expectations,
beliefs or intentions.
Important factors that, in the Company's view, could cause actual
results to differ materially from those discussed in this press
release include the strength of world economies and currencies,
general market conditions, including fluctuations in charterhire
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 the Company's
operating expenses, including bunker prices, drydocking and
insurance costs, 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 United States Securities and Exchange Commission.
November 12, 2001
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
Questions should be directed to:
Contact: Tor Olav Troim: Director and Vice-President, Frontline
Ltd
+47 23 11 40 00
Ola Lorentzon, Managing Director, Frontline Management
AS
+47 23 11 40 00
Tom E. Jebsen: Chief Financial Officer, Frontline
Management AS
+47 23 11 40 00
Kate Blankenship: Chief Accounting Officer, Frontline
Ltd
+ 1 441 295-6935
7
FRONTLINE GROUP UNAUDITED THIRD QUARTER REPORT
2000 2001 INCOME STATEMENT 2001 2000 2000
Jul-Sep Jul-Sep (in thousands of $) Jan-Sep Jan-Sep Jan-Dec
(audited)
174,156 132,406 Net operating revenues 537,752 352,252 599,944
- 18,822 Gain (loss) from sale of
assets 34,839 463 1,160
23,025 32,240 Ship operating expenses 89,611 63,042 88,455
8,385 10,460 Charterhire expenses 31,516 25,019 34,351
3,275 1,767 Administrative expenses 8,126 8,483 9,326
139,471 106,761 Operating income before
depreciation and
amortisation 443,338 256,171 468,972
22,343 31,118 Depreciation and
amortisation 89,264 63,073 92,880
117,128 75,643 Operating income after
depreciation and
amortisation 354,074 193,098 376,092
2,223 2,234 Interest income 10,115 3,724 6,858
(24,181) (21,942) Interest expense (70,881) (68,016) (96,174)
1,868 684 Share of results from
associated companies 15,953 3,935 12,817
253 (7,455) Other financial items (11,618) 72 248
(308) (9,638) Foreign currency exchange
gain (loss) 9,328 (149) 14,563
96,983 39,526 Income before taxes and
minority interest 306,971 132,664 313,908
- (31) Minority interest 14 - -
- 271 Taxes 256 - 41
- - Cumulative effect of
change in accounting
principle 32,339 - -
96,983 39,286 Net income 339,040 132,664 313,867
Earnings Per Share
Amounts ($)
$1.23 $0.51 EPS before cumulative
effect of change in
accounting principle $3.99 $1.86 $4.28
- - Cumulative effect of
change in accounting
principle $0.42 - -
$1.23 $0.51 EPS $4.41 $1.86 $4.28
Income on timecharter
basis
($ per day per ship)*
52,000 30,800 VLCC 47,600 37,700 46,300
8
41,100 23,100 Suezmax 34,100 30,200 35,500
41,200 23,000 Suezmax OBO 31,900 29,000 33,300
* Basis = Calendar days
minus off-hire. Figures
after deduction of broker
commission
9
BALANCE SHEET 2001 2000 2000
(in thousands of $) Sep 30 Sep 30 Dec 31
(audited)
ASSETS
Short term
Cash and cash equivalents 117,351 136,807 116,094
Marketable securities 323 23,888 3,713
Other current assets 96,556 113,704 172,842
Long term
Newbuildings and vessel purchase options 100,968 - 36,326
Vessel and equipment, net 2,502,755 1,778,857 2,363,308
Investment in associated companies 98,565 8,651 27,361
Goodwill 14,224 11,782 14,385
Deferred charges and other long-term assets 16,867 18,366 46,959
Total assets 2,947,609 2,092,055 2,780,988
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term interest bearing debt 223,930 140,614 212,767
Other current liabilities 70,488 52,728 77,624
Long term
Long term interest bearing debt 1,331,107 1,023,271 1,331,372
Other long term liabilities 103,994 18,449 123,665
Minority interest 6,070 4,372 6,070
Stockholders' equity 1,212,020 852,621 1,029,490
Total liabilities and stockholders' equity 2,947,609 2,092,055 2,780,988
UNAUDITED THIRD QUARTER SUPPLEMENTARY INFORMATION
SELECTED FINANCIAL DATA
(in thousands of $) Frontline Golden
Jan-Sep Ocean
2001 Jan-Sep
2001
Net operating revenues 473,502 64,154
Operating income before depreciation and amortisation 395,983 53,260
Depreciation and amortisation 74,300 16,036
Operating income after depreciation and amortisation 321,683 37,224
Interest income 11,582 1,770
Interest expense (58,517) (15,603)
Share of results from associated companies 7,549 8,405
Other financial items (11,618) -
Foreign currency exchange gain (loss) (846) 10,174
Net income before taxes, minority interest and
cumulative effect of change in accounting principle 269,833 41,970
Total current assets 201,841 12,209
Vessels and equipment
(including newbuildings,
10
options and vessels under capital lease) 2,157,201 452,608
Total assets 2,487,320 524,460
Total current liabilities 254,087 40,330
Total long-term liabilities 1,071,450 408,251
Stockholders' equity 1,161,782 75,877
Total liabilities and stockholders' equity 2,487,320 524,460
11
Exhibit 2
Presentation of third quarter 2001 results
On Wednesday 14 November 2001, Frontline will present the results
for third quarter 2001 as follows:
1. Presentation
A presentation will take place in Oslo at Stranden 21 (DnB
building) in the Auditorium at second floor at 08:30 A.M. If you
wish to attend please confirm to:
Mrs Bente Thommessen or Mrs Elisabeth Roer at +47 23 11 40 00.
2. Teleconference and webcast
A conference call will be held at 04:00 P.M. CET (Norwegian
time).
Wednesday morning, the presentation will be available for
download at http://www.frontline.bm - click "Investor Relations"
- "Presentations" - "Presentation of 3rd Quarter 2001".
To listen you may do one of the following:
A. Webcast
Go to "Investor relations" and click on the link "Conference Call
Q3".
To listen to the conference call from the web, you need to have
installed Windows Media Player or Real Player, and you need to
have a sound card on your computer.
B. Teleconference
Call at +47-23 00 04 00, or free of charge from Norway at
80080119, tell the operator you wish to participate in the
Frontline conference call.
There will be a Q&A session after the presentation. Information
on how to ask questions will be given at the beginning of the
call.
If you are not able to participate at the time of the call, you
can listen to a replay of the conference call directly from
www.frontline.bm (investor relations) or a playback:
dial +47-22331113
account no: 1114 followed by # (pound-sign) press 1
conference no: 114 followed by # (pound-sign) press 1 to play
Kind regards
Inger M. Klemp
12
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 authorised.
Frontline Ltd.
-----------------------------
(Registrant)
Date November 13, 2001 By /s/ Kate Blankenship
----------------- -----------------------------
Kate Blankenship
Secretary
13
02089009.AH0