Third quarter 2005 – Strong profitability and long term external contracts secured through OSG with Shell Oil this week for two product tankers. (05.11.05)
Oslo/Philadelphia, November 3, 2005: During the third quarter of 2005, the Aker American Shipping Group has continued to produce good financial results. A strong market for the product tankers has been confirmed during the quarter.
• After close of the third quarter of 2005 a 2 ship time charter contract was signed between Overseas Shipholding Group, Inc. (OSG) and Shell Oil. The long term contract is estimated to give profit sharing contribution to Aker American Shipping.
• Aker American Shipping Group has confirmed and closed the USD 350 million credit facility for the financing of the first five product tankers.
• EBITDA was USD 6.0 million for third quarter and USD 16.2 million for the first nine months of 2005.
• After close of the third quarter of 2005 a 2 ship time charter contract was signed between Overseas Shipholding Group, Inc. (OSG) and Shell Oil. The long term contract is estimated to give profit sharing contribution to Aker American Shipping.
• Aker American Shipping Group has confirmed and closed the USD 350 million credit facility for the financing of the first five product tankers.
• EBITDA was USD 6.0 million for third quarter and USD 16.2 million for the first nine months of 2005.
Operating revenues as of the third quarter of 2005 was USD 229.9 million. No revenues were recognized on either ship # 3 or # 4 in 2004 since the contracts with Matson were not in place until the first quarter of 2005. The third quarter revenues are lower than the previous quarter as more work were done on the first product tanker in this quarter. There will not be revenues from the product tankers before they are completed and in operation.
EBITDA of USD 16.2 million as of the third quarter of 2005 after reporting of USD 6.0 million in the third quarter. The same period in 2004 had a loss of USD 10.4 million. Operating profit of USD 11.7 million year to date compared to an operating loss of USD 14.7 by the end of third quarter 2004.
The proforma numbers contain the impact on interest cost from the improvement in equity from debt to equity conversion (USD 120.7 million) and new paid in equity (USD 117.9 million). The “Adjusted Net profit/(loss)” numbers are actuals for the AKASA group in the current quarter and historical financials Kvaerner Philadelphia Shipyard in earlier periods. The differences impact profit (loss) before tax and net profit (loss) in the income statement only.
The receivable against DnBNOR and Enskilda of USD 119.4 million reported at the end of the second quarter was paid 7 July 2005.
Construction has reached 10% complete on the first of the 10 product-tankers leased to Overseas Shipholding Group, Inc (OSG). As this represents construction of own assets, it is accounted for under property, plant and equipment with USD 22 million.
Increase in work in progress represents construction of the container vessel.
Interest bearing long term receivables of USD 10.1 million is a margin call related to securing of the interest rates for all 10 tankers. Other long term assets represent prepaid costs related to long term financing for the product tankers.
Jones Act Market
In June the AKASA Group entered into agreements for the construction and bareboat charter of 10 newbuild Jones Act product tankers. The vessels have been chartered to OSG which again will charter the vessels to end customers in the Jones Act market.
The Jones Act Product Tanker time charter rates have remained firm and healthy between the second and third quarter of 2005. Industry experts continue to report charter rates at levels 10-30% higher than same period in 2004.
Operations
Construction continued on the fourth container vessel to be delivered to Matson Navigation Company during Q3 2006. An accident during loading of this ships main engine in Spain will delay installation, testing and commissioning activity for the container vessel. Although this event will lead to a later delivery for this vessel, no negative financial impact is anticipated.
Completion of the first product tanker reached approximately 10% and the first section of the ship was dock mounted in the building dock on October 28 2005. As the shipyard has the ability to build ships in tandem, the engine delay for the fourth container vessel will not impact delivery of first product tanker.
Outlook
Although the Q3 result is slightly better than anticipated, Aker American Shipping ASA continues to expect that the second half of the year will have a result at the level of first half of the year, with an EBITDA result around USD 20 million for the year. The company recognizes profit according to percentage of completion which means that there might be fluctuations from quarter to quarter dependant on level of activity in the period.
As the transition is made from the sale of Container Vessels to the bareboat charter of Product Tankers, revenues from ship sales will end with delivery of the fourth container vessel in Q3 next year. There will be revenues from participation in ship operations in the US Jones Act Product Tanker market starting in Q4 of 2006 when the first product tanker chartered to OSG goes into operation.
Definitions
Jones Act - The U.S. coast wise laws, referred to as Jones Act, require all commercial vessels operating between U.S. ports to be built, owned, operated and manned by U.S. citizens and to be registered under the U.S. flag. In 1996 certain amendments were enacted to the U.S. vessel documentations laws, allowing increased non-U.S. participation in the ownership of vessels operating in the Jones Act trade under certain conditions.
OPA 90 - The Oil Pollution Act (OPA 90) was enacted in 1990 as a result of the Exxon Valdez oil spill. OPA 90 requires all tankers in U.S. waters to have double hull by 2015.
The total Jones Act Product Carrier fleet consists of 43 vessels, totaling 1.8 million dwt. Some 60% of this fleet is not double hull and will be phased out over the next ten years as a result of the OPA 90 regulations.
This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting, and the accounting principles in the report are consistent with the principles which will be used for annual reporting.
The difference between appraised value and historic cost has been reported as other intangible assets, and a related deferred tax adjustment and gross up of USD 21 million to a total of USD 60.1 million was taken during the third quarter of 2005. A detailed analysis of the transaction for purchase price allocation purposes will be completed in Q4 of 2005.
The AKASA Group commenced operations 28 June 2005, by Aker American Shipping ASA (AKASA) taking control of the shares in Kvaerner Philadelphia Shipyard, Inc (KPSI). From a reporting standpoint the takeover date is assumed to be 30 June 2005. The proforma reported income statements, cash flows, equity reconciliations and balance sheet are historic KPSI accounts adjusted for proforma equity and converted to IFRS accounting. During the third quarter of 2005, the shipyard was renamed the Aker Philadelphia Shipyard.
November 2nd, 2005
Board of Directors
Aker American Shipping ASA
Contact information:
Aker American Shipping ASA
2100 Kitty Hawk Avenue
Philadelphia, PA 19112-1808
USA
Tel: + 1 215 875 2600
David Meehan, President & CEO
Tel: + 1 215 875 2601
Cell: + 1 215 203 2708
Jan Ivar Nielsen, CFO
Tel: + 1 215 875 2678
Cell: + 1 215 203 2713
Disclaimer
This press release includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. Such forward-looking information and statements are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Aker American Shipping ASA and its subsidiaries and affiliates (the "Aker American Shipping Group") lines of business. These expectations, estimates, and projections are generally identifiable by statements containing words such as "expects,” "believes,” "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for the Aker American Shipping Group’s businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time. Although Aker American Shipping ASA believes that its expectations and the information in this Press release were based upon reasonable assumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this Press release. Neither Aker American Shipping ASA nor any other company within the Aker American Shipping Group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the Press release, and neither Aker American Shipping ASA, any other company within the Aker American Shipping Group nor any of their directors, officers or employees will have any liability to you or any other persons resulting from your use of the information in the Press release.
Aker American Shipping ASA undertakes no obligation to publicly update or revise any forward-looking information or statements in the press release, other than what is required by law.
The Aker American Shipping Group consists of many legally independent entities, constituting their own separate identities. Aker American Shipping is used as the common brand or trade mark for most of these entities. In this press release we may sometimes use "Aker American Shipping”," "Group, "we," or "us," when we refer to Aker American Shipping companies in general or where no useful purpose is served by identifying any particular Aker American Shipping company.
EBITDA of USD 16.2 million as of the third quarter of 2005 after reporting of USD 6.0 million in the third quarter. The same period in 2004 had a loss of USD 10.4 million. Operating profit of USD 11.7 million year to date compared to an operating loss of USD 14.7 by the end of third quarter 2004.
The proforma numbers contain the impact on interest cost from the improvement in equity from debt to equity conversion (USD 120.7 million) and new paid in equity (USD 117.9 million). The “Adjusted Net profit/(loss)” numbers are actuals for the AKASA group in the current quarter and historical financials Kvaerner Philadelphia Shipyard in earlier periods. The differences impact profit (loss) before tax and net profit (loss) in the income statement only.
The receivable against DnBNOR and Enskilda of USD 119.4 million reported at the end of the second quarter was paid 7 July 2005.
Construction has reached 10% complete on the first of the 10 product-tankers leased to Overseas Shipholding Group, Inc (OSG). As this represents construction of own assets, it is accounted for under property, plant and equipment with USD 22 million.
Increase in work in progress represents construction of the container vessel.
Interest bearing long term receivables of USD 10.1 million is a margin call related to securing of the interest rates for all 10 tankers. Other long term assets represent prepaid costs related to long term financing for the product tankers.
Jones Act Market
In June the AKASA Group entered into agreements for the construction and bareboat charter of 10 newbuild Jones Act product tankers. The vessels have been chartered to OSG which again will charter the vessels to end customers in the Jones Act market.
The Jones Act Product Tanker time charter rates have remained firm and healthy between the second and third quarter of 2005. Industry experts continue to report charter rates at levels 10-30% higher than same period in 2004.
Operations
Construction continued on the fourth container vessel to be delivered to Matson Navigation Company during Q3 2006. An accident during loading of this ships main engine in Spain will delay installation, testing and commissioning activity for the container vessel. Although this event will lead to a later delivery for this vessel, no negative financial impact is anticipated.
Completion of the first product tanker reached approximately 10% and the first section of the ship was dock mounted in the building dock on October 28 2005. As the shipyard has the ability to build ships in tandem, the engine delay for the fourth container vessel will not impact delivery of first product tanker.
Outlook
Although the Q3 result is slightly better than anticipated, Aker American Shipping ASA continues to expect that the second half of the year will have a result at the level of first half of the year, with an EBITDA result around USD 20 million for the year. The company recognizes profit according to percentage of completion which means that there might be fluctuations from quarter to quarter dependant on level of activity in the period.
As the transition is made from the sale of Container Vessels to the bareboat charter of Product Tankers, revenues from ship sales will end with delivery of the fourth container vessel in Q3 next year. There will be revenues from participation in ship operations in the US Jones Act Product Tanker market starting in Q4 of 2006 when the first product tanker chartered to OSG goes into operation.
Definitions
Jones Act - The U.S. coast wise laws, referred to as Jones Act, require all commercial vessels operating between U.S. ports to be built, owned, operated and manned by U.S. citizens and to be registered under the U.S. flag. In 1996 certain amendments were enacted to the U.S. vessel documentations laws, allowing increased non-U.S. participation in the ownership of vessels operating in the Jones Act trade under certain conditions.
OPA 90 - The Oil Pollution Act (OPA 90) was enacted in 1990 as a result of the Exxon Valdez oil spill. OPA 90 requires all tankers in U.S. waters to have double hull by 2015.
The total Jones Act Product Carrier fleet consists of 43 vessels, totaling 1.8 million dwt. Some 60% of this fleet is not double hull and will be phased out over the next ten years as a result of the OPA 90 regulations.
This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting, and the accounting principles in the report are consistent with the principles which will be used for annual reporting.
The difference between appraised value and historic cost has been reported as other intangible assets, and a related deferred tax adjustment and gross up of USD 21 million to a total of USD 60.1 million was taken during the third quarter of 2005. A detailed analysis of the transaction for purchase price allocation purposes will be completed in Q4 of 2005.
The AKASA Group commenced operations 28 June 2005, by Aker American Shipping ASA (AKASA) taking control of the shares in Kvaerner Philadelphia Shipyard, Inc (KPSI). From a reporting standpoint the takeover date is assumed to be 30 June 2005. The proforma reported income statements, cash flows, equity reconciliations and balance sheet are historic KPSI accounts adjusted for proforma equity and converted to IFRS accounting. During the third quarter of 2005, the shipyard was renamed the Aker Philadelphia Shipyard.
November 2nd, 2005
Board of Directors
Aker American Shipping ASA
Contact information:
Aker American Shipping ASA
2100 Kitty Hawk Avenue
Philadelphia, PA 19112-1808
USA
Tel: + 1 215 875 2600
David Meehan, President & CEO
Tel: + 1 215 875 2601
Cell: + 1 215 203 2708
Jan Ivar Nielsen, CFO
Tel: + 1 215 875 2678
Cell: + 1 215 203 2713
Disclaimer
This press release includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. Such forward-looking information and statements are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Aker American Shipping ASA and its subsidiaries and affiliates (the "Aker American Shipping Group") lines of business. These expectations, estimates, and projections are generally identifiable by statements containing words such as "expects,” "believes,” "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for the Aker American Shipping Group’s businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time. Although Aker American Shipping ASA believes that its expectations and the information in this Press release were based upon reasonable assumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this Press release. Neither Aker American Shipping ASA nor any other company within the Aker American Shipping Group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the Press release, and neither Aker American Shipping ASA, any other company within the Aker American Shipping Group nor any of their directors, officers or employees will have any liability to you or any other persons resulting from your use of the information in the Press release.
Aker American Shipping ASA undertakes no obligation to publicly update or revise any forward-looking information or statements in the press release, other than what is required by law.
The Aker American Shipping Group consists of many legally independent entities, constituting their own separate identities. Aker American Shipping is used as the common brand or trade mark for most of these entities. In this press release we may sometimes use "Aker American Shipping”," "Group, "we," or "us," when we refer to Aker American Shipping companies in general or where no useful purpose is served by identifying any particular Aker American Shipping company.
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