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 February , 2003
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Frontline Ltd.
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(Translation of registrant's name into English)
Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda
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(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
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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
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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 February 24, 2003.
Exhibit 1
FRONTLINE LTD.
FOURTH QUARTER AND FINANCIAL YEAR 2002 RESULTS
Frontline Ltd. reports earnings before interest, tax, depreciation, and
amortisation including earnings from associated companies (EBITDA) of $105.3
million and net income of $67.1 million for the fourth quarter of 2002.
Earnings per share for the quarter were $0.88.
The average daily time charter equivalents ("TCEs") earned by the Company's
VLCCs, Suezmax tankers, and Suezmax OBO carriers were $30,900, $25,300 and
$24,200, respectively, compared with $16,900, $14,300 and $13,400,
respectively in the immediately preceding quarter.
Net interest expense for the quarter was $12.2 million compared to $18.1
million in the same period in 2001. This decrease reflects the reduction in
interest rates in the period. At December 31, 2002 approximately 74 per cent
of the Company's total debt is floating. Other financial items for the quarter
were positive $14.5 million. This includes a positive $13.6 million for the
market value adjustment on the Company's Equity Swap Line based on the
revaluation of 2,695,000 shares to the market price of $8.85 at quarter end
from $3.82 per share at September 30, 2002. The strengthening of the Yen
against the US Dollar in the fourth quarter of 2002 resulted in an unrealised
foreign currency exchange loss of $4.3 million due to the revaluation of Yen
debt in certain subsidiaries and a loss of $2.0 million included within the
share of results from associated companies.
For the year ended December 31, 2002, the Company had EBITDA of $226.9 million
and a net loss of $6.9 million. Loss per share for the 2002 year was $0.09.
This compares to EBITDA, net income and earnings per share of $528.8 million,
$382.7 million and $4.99, respectively for 2001. The TCEs earned by the
Company's VLCCs, Suezmax tankers, and Suezmax OBO carriers for year 2002 were
$22,500, $18,400 and $17,700, respectively, compared with $40,800, $30,700 and
$28,900, respectively in 2001. The net loss for 2002 is after a charge of
$14.1 million relating to the adoption of Financial Accounting Standard 142
"Goodwill and Other Intangible Assets". The Company adopted FAS 142 effective
January 1, 2002 and recognised an impairment loss on goodwill that is shown
separately in the consolidated statement of operations as a cumulative effect
of change in accounting principle. Net income for 2002 before the cumulative
effect of change in accounting principle was $7.2 million and earnings per
share were $0.09.
Net interest expense for 2002 was $59.8 million (2001 - $78.8 million). This
decrease reflects the benefit of lower interest rates on outstanding debt.
Other financial items for 2002 were a charge of $6.6 million (2001 - charge of
$5.7 million). In 2002 other financial items includes a charge of $4.0 million
relating to the market value adjustment on the Company's Equity Swap Line and
a $3.0 million charge relating to the market value adjustments for interest
rate swaps. The strengthening of the Yen against the US Dollar from 131.14 at
December 31, 2001 to 118.54 at December 31, 2002 resulted in an unrealised
exchange loss of $12.3 million in 2002. In addition, there is an unrealised
exchange loss of $5.8 million included within the share of results from
associated companies. At December 31, 2002, the Company has Yen debt
(including our share of associated companies) of Yen 20.3 billion, compared
with Yen 23.7 billion and Yen 35.5 billion at September 30, 2002 and December
31, 2001, respectively.
THE MARKET
The tanker market showed a strong recovery in the fourth quarter mainly caused
by increased OPEC production starting in August / September. Combined with a
high stabilized export from Iraq this improved the utilisation of the tanker
fleet and pushed VLCC rates from $10 - 15,000 per day in August to $25 -
30,000 per day in late October. Suezmax rates followed a similar trend.
On November 13, 2002, the single hull tanker MT Prestige started to break up
off the coast of Spain. The vessel, which carried 77,000 tons of fuel oil
later sank and created an environmental disaster. The accident put pressure on
European politicians to tighten the legislation for tankers, and also had
immediate effects on the chartering policies of several of the major oil
companies. As a result of the accident, the market tightened further up to a
VLCC level of around $40,000 per day.
The oil strike in Venezuela, which started December 2 created large logistical
inefficiencies in the fleet and freight rates improved further. The need to
replace the Venezuelan exports to the US with alternative crude with longer
transportation distance, helped further.
The market situation during most of 2002 led to an early demise of many
elderly tankers, and total removal from the fleet through scrapping or
conversion came to 38 VLCCs and 17 Suezmaxes. New building deliveries in the
year were 37 VLCCs and 23 Suezmaxes.
Second-hand values and new building prices showed a positive trend in the
fourth quarter. Order activity picked up. Order books currently stand at 76
VLCCs and 63 Suezmaxes for delivery into mid 2006.
CORPORATE AND OTHER MATTERS
Frontline has, a result of the withdrawal from Tankers International and the
new chartering agreement with BP, strengthened its chartering operations. The
Board is pleased to see that the agreement with BP is now fully operational
and works to both parties mutual benefit.
The Board is also pleased to observe that the withdrawal from Tankers
International has been completed satisfactorily and for the fourth quarter has
lead to relative improvement in charter revenue and reduced costs.
In the fourth quarter of 2002, the Company took delivery of two wholly-owned
VLCC newbuildings, with delivery of these vessels financed through traditional
bank financing. The Company has one remaining newbuilding VLCC on order for
delivery in 2003, and as at December 31, 2002, the remaining equity investment
was estimated to be $12 million. Committed financing for the mentioned
newbuilding has been secured. Except for this, the Company has no other
material capital commitments.
In the fourth quarter of 2002, the Company sold and leased back one of its
VLCCs, Front Eagle, thereby generating net cash of approximately $27.4
million. The leaseback of the vessel is being accounted for as a capital lease
and a loss of $2.1 million was recognised immediately on the sale of the
vessel.
The Capesize vessel Channel Poterne was sold during the quarter at a small
profit.
In the fourth quarter of 2002, the Company restructured and refinanced Golden
Stream. As a result of the refinancing, $45.8 million was reclassified from
short-term to long-term interest bearing debt. The ship is currently placed in
a non-recourse subsidiary where Frontline has guaranteed and partly provided
the first $28 million of the debt, while the remaining debt is provided by the
vessel's financiers on a stand alone basis.
The Company's largest financing facility, which at year-end had $194.4 million
outstanding, has been extended for two years until November 2005.
At December 31, 2002, and for the quarter then ended, 76,466,566 ordinary
shares were outstanding. At December 31, 2002, the Bank of Nova Scotia Group
had acquired 2,695,000 Frontline shares pursuant to the existing Equity Swap
Line facility that is in place until February 2004. The average cost on the
swap line's shares is $8.71 per share. The Company therefore has an option to
pay a total of $23.5 million in cash in order to repay the swap line and
thereby effectively eliminate the shares, or continue with the existing swap
line until it expires in February 2004.
On February 24, 2003, the Board declared a dividend of $0.15 per share. The
record date for the dividend is March 10, 2003, ex dividend date is March 6,
2003 and the dividend will be paid on or about March 24, 2003.
As of February 22, 2003, Frontline has cash break even rates for Suezmaxes and
VLCCs respectively of $13,700 and $20,900 per day. In order to give a 15 %
cash yield on the current market capitalisation, the Company will need to
generate on average an additional $4,900 per day per vessel. This should be
seen up against the average rates during the last thirteen years, which have
been $21,200 and $28,900 per day for Suezmaxes and VLCCs respectively.
The Company has used the current strong market to fix three of its VLCCs and
two Suezmaxes on longer-term employment either physically or through financial
derivatives. The one-year time charter rates for VLCCs and Suezmaxes are
$40,000 and $30,000 per day respectively.
OUTLOOK
The 2003 year has started with very strong VLCC and Suezmax markets. The
volatility in the market has been high with sharp spikes reaching $100,000 and
lows around $35,000 per day for VLCCs. Suezmaxes have shown a more steady
level around $40,000 per day.
The charterers have used a strategy where they have concentrated their fixing
activities to certain periods of the months. This leads to other periods with
low activity. The low activity periods normally trigger a nervousness among
owners that spurs volatility and leads to reduced rates.
It is interesting to note that the major part of the increase in AG spot
export until the last two weeks actually has been trading east instead of
going west. This signals a strong Asian demand mainly driven by China, Korea
and India, and also tells us that the effect of the Venezuelan strike on the
chartering market has not been as high as one might anticipate.
It is likely that a full recovery of the Venezuelan export, combined with any
interruption in the export from Iraq, could put downwards pressure on rates.
There are however several factors which are likely to reverse this trend:
- Low world-wide oil inventories.
- A potential Iraqi war will create large fleet inefficiencies including
substantial fleet capacity in storage.
- A reverse of the current backwardation in the oil market would stimulate
higher inventories.
- The Prestige effects. The introduction of new EU legislation on tankers
and the consequent pressure put on the US and Japan to implement similar
regulations to avoid them becoming dumping grounds for trading old
tankers.
- Continued strong Asian demand combined with possible improved economical
outlook in the rest of the world.
- A tight energy situation world wide created by such factors as nuclear
reactor shutdown in Asia, low water magazines for hydropower generation
and low natural gas production in the US.
The strengthening of other shipping markets like dry-bulk and containers has
during the last months improved the yards' order backlogs. Combined with a
weak dollar this is likely to lead to continued strenghtening in the
newbuilding prices as well as second-hand prices.
The Board will, in view of the Company's strong growth during the last few
years and the overall moderness of Frontline's fleet, have a cautious attitude
to new investments. The Company will however still seek to take an active role
in pushing further consolidation of the tanker market through structural
changes.
The Board has during the last half year focused on building balance sheet
strength to reduce the Company's financial risk in the future. The Board is
satisfied with the development of the Company's break even rate. The Company's
cash position will increase significantly in the first quarter based on the
receipts of freight revenues from the fourth quarter 2002 as well as the
earnings from the first quarter of 2003. This will substantially strengthen
the Company going forward, and give a necessary buffer to meet the volatility
in the tanker market. Due to the size of the existing cash flow and the
limited committed capital expenditure, is it likely that a significant part of
the current cash flow can be returned to the shareholders in the form of cash
dividends without stretching the financial risk.
Frontline has at the time of writing covered 73 per cent of its VLCC capacity
in the first quarter at average rates of $56,000 per day and 60 per cent of
its Suezmax capacity at $39,000 per day. Current rates are around $65,000 for
VLCCs and $50,000 for Suezmaxes.
Based on achieved rates and the outlook for the remainder of the quarter the
Board assumes that the Company is likely to make a profit in excess of $150
million for the first quarter.
Even if it is likely that there will be substantial volatility in the market,
the Board is optimistic for the year 2003 overall.
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 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 charter hire 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.
February 24, 2003
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
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2001 2002 INCOME STATEMENT 2002 2001
Oct-Dec Oct-Dec (in thousands of $) Jan-Dec Jan-Dec
(audited)
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109,593 159,350 Net operating revenues 429,025 647,345
781 (1,465) Gain (loss) from sale of assets (4,337) 35,620
31,841 27,214 Ship operating expenses 113,596 121,452
10,343 21,365 Charterhire expenses 60,634 41,858
5,053 3,162 Administrative expenses 12,895 13,176
63,137 106,144 Operating income before depreciation and 237,563 506,479
amortisation
32,461 36,212 Depreciation and amortisation 139,855 121,725
30,676 69,932 Operating income after depreciation and 97,708 384,754
amortisation
2,838 5,240 Interest income 13,052 12,953
(20,919) (17,455) Interest expense (72,898) (91,800)
6,363 (873) Share of results from associated companies (10,711) 22,317
5,911 14,523 Other financial items (6,649) (5,709)
18,989 (4,320) Foreign currency exchange gain (loss) (13,313) 28,318
43,861 67,047 Income (loss) before taxes and minority 7,189 350,833
interest
188 (24) Taxes (22) 444
- - Cumulative effect of change in accounting (14,142) 32,339
principle
43,687 67,071 Net income (loss) (6,931) 382,728
Earnings (loss) Per Share Amounts ($)
$0.57 $0.88 EPS before cumulative effect of change in $0.09 $4.57
accounting principle
- - Cumulative effect of change in accounting $(0.18) $0.42
principle
$0.57 $0.88 EPS $(0.09) $4.99
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Income on timecharter basis ($ per day per ship)*
19,900 30,900 VLCC 22,500 40,800
20,600 25,300 Suezmax 18,400 30,700
20,300 24,200 Suezmax OBO 17,700 28,900
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* Basis = Calendar days minus off-hire.
Figures after deduction of broker commission
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BALANCE SHEET 2002 2001
(in thousands of $) Dec 31 Dec 31
(audited)
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ASSETS
Short term
Cash and cash equivalents 100,298 189,277
Other current assets 133,066 88,641
Long term
Newbuildings and vessel purchase options 27,405 102,781
Vessels and equipment, net 2,373,239 2,196,959
Vessels under capital lease, net 264,902 317,208
Investment in associated companies 119,329 109,898
Goodwill - 14,049
Deferred charges and other long-term assets 17,708 14,961
Total assets 3,035,947 3,033,774
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short-term interest bearing debt 167,807 227,597
Current portion of obligations under capital lease 13,164 17,127
Other current liabilities 61,408 70,332
Long term
Long-term interest bearing debt 1,277,665 1,164,354
Obligations under capital lease 259,527 283,663
Other long term liabilities 28,199 11,478
Minority interest - 6,822
Stockholders' equity 1,228,177 1,252,401
Total liabilities and stockholders' equity 3,035,947 3,033,774
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2001 2002 STATEMENT OF CASHFLOWS 2002 2001
Oct-Dec Oct-Dec (in thousands of $) Jan-Dec Jan-Dec
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OPERATING ACTIVITIES
43,687 67,071 Net income (loss) (6,931) 382,728
Adjustments to reconcile net income to
net cash provided by operating activities
32,829 36,944 Depreciation and amortisation 142,149 123,958
(16,398) 2,782 Unrealised foreign currency exchange 14,176 (29,148)
(gain) loss
( 781) 1,466 Gain or loss on sale of assets 4,337 (35,620)
(6,364) 873 Share in results from associated companies 10,711 (22,321)
(6,233) (3,189) Adjustment of financial derivatives to 7,495 5,404
market value
- - Change in accounting principle 14,142 ( 32,339)
19,700 (47,384) Change in operating assets and liabilities (34,816) 84,945
66,440 58,563 Net cash provided by operating activities 151,263 477,607
INVESTING ACTIVITIES
(60,332) (179,088) Additions to newbuildings, vessels and (376,844) (386,130)
equipment
(6,829) (9,943) Advances to associated companies, net (20,010) (57,689)
(83) - Acquisition of businesses (net of cash - (64,656)
acquired)
- - Purchase of minority interest (6,822) -
227,377 103,661 Proceeds from sale of assets 177,902 403,214
160,133 (85,370) Net cash provided by (used in) investing (225,774)(105,261)
activities
FINANCING ACTIVITIES
28,802 143,922 Proceeds from long-term debt, net of fees
paid 370,880 323,431
(173,522) (143,881) Repayments of long-term debt (341,784) (460,725)
(2,287) 42,223 Repayment of capital leases (24,671) (10,337)
(7,640) - Dividends paid (19,116) (115,206)
- - Repurchase/Issue of shares, net 223 (36,326)
(154,647) 42,264 Net cash used in financing activities (14,468) (299,163)
71,926 15,457 Net increase (decrease) in cash and cash (88,979) 73,183
equivalents
117,351 84,841 Cash and cash equivalents at start of 189,277 116,094
period
189,277 100,298 Cash and cash equivalents at end of period 100,298 189,277
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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.
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(Registrant)
Date February 25, 2003 By /s/ Kate Blankenship
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Kate Blankenship
Secretary and Chief Accounting Officer
02089-0009#387406