Fourth quarter 2005 – Solid financial performance and strong tanker market fundamentals confirmed. (16.02.06)
OSG already secures long term contracts for four of ten product tankers.
OSLO / PHILADELPHIA (February 16, 2006) – After close of the fourth quarter of 2005, a two-ship time charter contract was signed between Overseas Shipholding Group, Inc. (OSG) and BP. The long term contract is expected to result in profit sharing contribution for Aker American Shipping (AKASA).
OSLO / PHILADELPHIA (February 16, 2006) – After close of the fourth quarter of 2005, a two-ship time charter contract was signed between Overseas Shipholding Group, Inc. (OSG) and BP. The long term contract is expected to result in profit sharing contribution for Aker American Shipping (AKASA).
During the fourth quarter of 2005, AKASA continued to produce good financial results. EBITDA was USD 6,4 million for fourth quarter and USD 20,3 million for the full year on a pro forma basis.
Operating revenues as of the fourth quarter of 2005 were USD 254,3 million. Prior to 2005, no revenues were recognized on either Container Vessel (CV) 3 or 4 since the contracts with Matson Navigation Company (Matson) were not in place until the first quarter of 2005. The fourth quarter revenues are lower than the previous quarter as more work and resources gradually are shifted to building product tankers. As previously reported, there will be no revenue from the product tankers before they are in operation (the first at end of this year).
EBITDA of USD 20,3 million for the pro forma full year of 2005 including USD 6,4 million in the fourth quarter of 2005. The same period in 2004 had EBITDA of USD 22,3 million after reversing USD 21 million in loss provision following external contracts signed for CV 3/4 with Matson. Pro forma operating profit was USD 13,4 million in 2005 compared to an operating profit of USD 5,3 million in 2004.
Pro forma numbers include the impact of reduced interest cost from the debt to equity conversion (USD 120,7 million) and the new paid-in equity (USD 118,3 million). The pro forma figures are historical financials for Aker Philadelphia Shipyard in earlier periods, with pro forma effect only on profit / loss before tax and net profit (loss) in the income statement, adjusted for the effects of purchase accounting as explained on page 3.
The “Adjusted Net profit / (loss)” numbers are actual for AKASA in the current quarter.
Construction reached 30% complete for the first of the ten product tankers leased to OSG. As this represents construction of own assets, related costs of USD 42 million are included in property, plant & equipment (PPE) with USD 7 million related to the second product tanker as construction commenced in November of 2005.
Interest bearing non-current receivables of USD 10,3 million is a margin call related to securing the interest rates for all ten tankers. Other non-current assets represent prepaid financing fees and other prepaid costs related to construction and non-current financing of the product tankers.
Jones Act Market
In June, AKASA entered into agreements for the construction and bareboat charter of ten newbuild Jones Act product tankers. The vessels have been chartered to OSG which will charter the vessels to end users in the Jones Act market.
The Jones Act product tanker time charter rates have remained firm and healthy during the fourth quarter, continuing the strong trend seen throughout the year. Industry experts continue to report spot charter rates at levels 10-30% higher than the same period in 2004.
Operations
Construction continued on the fourth container vessel to be delivered to Matson during Q3 2006. An accident during loading of the ship’s main engine in Spain has delayed 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.
The first section of the first product tanker was dock mounted on October 28, 2005. Production of the second product tanker began on November 29, 2005.
Outlook
The full year result for 2005 was as expected. Profit is recognized according to the percentage of completion of a vessel. Positive margin from construction of product tankers is eliminated in the consolidated accounts as this represents internal sales.
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 of this 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.
AKASA expects a slightly positive operating result in the first half of 2006 as CV 4 is completed. The second half of the year will be slightly negative as the SG&A cost can not be capitalized to the vessels. The year as a whole is expected to have a positive operating result.
With four of the ten vessels now under charter agreements to Shell and BP, we expect interest to remain strong for other first class users to enter into charter agreements. With the continued strong charter market, such new charter agreements should provide the basis for additional profit sharing contributions to AKASA.
During 2006, AKASA will continue to evaluate the opportunities for securing a build program beyond 2010. Such a build program could, among others, include product tankers, shuttle tankers, container vessels and ro-ro’s.
Definitions
Jones Act - The U.S. coastwise 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 fair value and historic cost was in previous interim reports included under other intangible assets, and a related deferred tax adjustment and gross up of USD 21 million totaling USD 60,1 million was shown under non current assets. A purchase price appraisal and allocation completed in January 2006 was completed with a fair value step-up of property plant and equipment of USD 25,1 million and an initial goodwill of USD 7,1 million. Deferred tax of USD 10,4 million related to the asset step-up has been added to the goodwill totaling USD 17,5 million.
The pro forma reporting has retroactively been adjusted for the effects of the fair value purchase price distribution allocating a depreciation expense and other adjustments to the pro forma income statements, with the same reallocation between fixed assets, goodwill and deferred tax also incorporated for the 2004 pro forma financials.
Aker American Shipping ASA (AKASA) commenced operations 28 June 2005, with 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 pro forma reported income statements, cash flows, equity reconciliations and balance sheet are historic KPSI accounts adjusted for pro forma equity and converted to IFRS accounting.
During the third quarter of 2005, the shipyard was renamed Aker Philadelphia Shipyard (APSI).
February 16th, 2006
Board of Directors
Aker American Shipping ASA
Contact information:
Aker American Shipping ASA
Fjordalleen 16
Postboks 1423 Vika
0115 Oslo
NORWAY
David Meehan
President & CEO
Tel: + 1 215 875 2601
Cell: + 1 215 203 2708
Jan Ivar Nielsen
CFO
+1 215 875 2678
+1 215 203 2713
Bengt A. Rem
Vice President
+47 24 13 00 00
+47 91 63 00 30
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.
Operating revenues as of the fourth quarter of 2005 were USD 254,3 million. Prior to 2005, no revenues were recognized on either Container Vessel (CV) 3 or 4 since the contracts with Matson Navigation Company (Matson) were not in place until the first quarter of 2005. The fourth quarter revenues are lower than the previous quarter as more work and resources gradually are shifted to building product tankers. As previously reported, there will be no revenue from the product tankers before they are in operation (the first at end of this year).
EBITDA of USD 20,3 million for the pro forma full year of 2005 including USD 6,4 million in the fourth quarter of 2005. The same period in 2004 had EBITDA of USD 22,3 million after reversing USD 21 million in loss provision following external contracts signed for CV 3/4 with Matson. Pro forma operating profit was USD 13,4 million in 2005 compared to an operating profit of USD 5,3 million in 2004.
Pro forma numbers include the impact of reduced interest cost from the debt to equity conversion (USD 120,7 million) and the new paid-in equity (USD 118,3 million). The pro forma figures are historical financials for Aker Philadelphia Shipyard in earlier periods, with pro forma effect only on profit / loss before tax and net profit (loss) in the income statement, adjusted for the effects of purchase accounting as explained on page 3.
The “Adjusted Net profit / (loss)” numbers are actual for AKASA in the current quarter.
Construction reached 30% complete for the first of the ten product tankers leased to OSG. As this represents construction of own assets, related costs of USD 42 million are included in property, plant & equipment (PPE) with USD 7 million related to the second product tanker as construction commenced in November of 2005.
Interest bearing non-current receivables of USD 10,3 million is a margin call related to securing the interest rates for all ten tankers. Other non-current assets represent prepaid financing fees and other prepaid costs related to construction and non-current financing of the product tankers.
Jones Act Market
In June, AKASA entered into agreements for the construction and bareboat charter of ten newbuild Jones Act product tankers. The vessels have been chartered to OSG which will charter the vessels to end users in the Jones Act market.
The Jones Act product tanker time charter rates have remained firm and healthy during the fourth quarter, continuing the strong trend seen throughout the year. Industry experts continue to report spot charter rates at levels 10-30% higher than the same period in 2004.
Operations
Construction continued on the fourth container vessel to be delivered to Matson during Q3 2006. An accident during loading of the ship’s main engine in Spain has delayed 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.
The first section of the first product tanker was dock mounted on October 28, 2005. Production of the second product tanker began on November 29, 2005.
Outlook
The full year result for 2005 was as expected. Profit is recognized according to the percentage of completion of a vessel. Positive margin from construction of product tankers is eliminated in the consolidated accounts as this represents internal sales.
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 of this 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.
AKASA expects a slightly positive operating result in the first half of 2006 as CV 4 is completed. The second half of the year will be slightly negative as the SG&A cost can not be capitalized to the vessels. The year as a whole is expected to have a positive operating result.
With four of the ten vessels now under charter agreements to Shell and BP, we expect interest to remain strong for other first class users to enter into charter agreements. With the continued strong charter market, such new charter agreements should provide the basis for additional profit sharing contributions to AKASA.
During 2006, AKASA will continue to evaluate the opportunities for securing a build program beyond 2010. Such a build program could, among others, include product tankers, shuttle tankers, container vessels and ro-ro’s.
Definitions
Jones Act - The U.S. coastwise 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 fair value and historic cost was in previous interim reports included under other intangible assets, and a related deferred tax adjustment and gross up of USD 21 million totaling USD 60,1 million was shown under non current assets. A purchase price appraisal and allocation completed in January 2006 was completed with a fair value step-up of property plant and equipment of USD 25,1 million and an initial goodwill of USD 7,1 million. Deferred tax of USD 10,4 million related to the asset step-up has been added to the goodwill totaling USD 17,5 million.
The pro forma reporting has retroactively been adjusted for the effects of the fair value purchase price distribution allocating a depreciation expense and other adjustments to the pro forma income statements, with the same reallocation between fixed assets, goodwill and deferred tax also incorporated for the 2004 pro forma financials.
Aker American Shipping ASA (AKASA) commenced operations 28 June 2005, with 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 pro forma reported income statements, cash flows, equity reconciliations and balance sheet are historic KPSI accounts adjusted for pro forma equity and converted to IFRS accounting.
During the third quarter of 2005, the shipyard was renamed Aker Philadelphia Shipyard (APSI).
February 16th, 2006
Board of Directors
Aker American Shipping ASA
Contact information:
Aker American Shipping ASA
Fjordalleen 16
Postboks 1423 Vika
0115 Oslo
NORWAY
David Meehan
President & CEO
Tel: + 1 215 875 2601
Cell: + 1 215 203 2708
Jan Ivar Nielsen
CFO
+1 215 875 2678
+1 215 203 2713
Bengt A. Rem
Vice President
+47 24 13 00 00
+47 91 63 00 30
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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