Ship Finance International Limited Management Discusses Q4 2012 Results - Earnings Call Transcript
February 25, 2013 3:10 PM ET
Ship Finance International Limited (SFL)
Q4 2012 Earnings Call
February 25, 2013 10:00 am ET
Ole B. Hjertaker - Chief Executive Officer and Chief Executive Officer of Ship Finance Management AS
Harald Gurvin - Principal Financial Officer
Fotis Giannakoulis - Morgan Stanley, Research Division
Herman Hildan - RS Platou Markets AS, Research Division
Good day, and welcome to the Q4 2012 Ship Finance International Ltd. Earnings Conference Call. Just to advise, today's conference is being recorded. And at this time, I would like to hand the conference over to Mr. Ole Hjertaker. Please go ahead, sir.
Ole B. Hjertaker
Thank you, and welcome, everyone, to Ship Finance International's fourth quarter conference call. My name is Ole Hjertaker, and I am the CEO in Ship Finance Management. And with me here today, I also have the CFO, Harald Gurvin; and our Senior Vice President, Magnus Valeberg.
Before we begin our presentation, I would like to note that this conference call will contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intends, estimates or similar expressions are intended to identify these forward-looking statements. These statements are based on our current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include conditions in the shipping, offshore and credit markets. For further information, please refer to Ship Finance's reports and filings with the Securities and Exchange Commission.
Net income for the quarter was $51 million or $0.60 per share. This number included a gain on sale of assets of approximately $21.5 million or $0.27 per share. Aggregate charter revenues recorded in the quarter, including 100% owned subsidiaries accounted for as investment in associate, was $168 million. The EBITDA equivalent cash flow in the quarter was $134 million and last 12 months, the EBITDA equivalent was $585 million. There was a full cash sweep effect on 22 out of 27 Frontline vessels worth $12.1 million in the quarter. Including the accumulated amount in the 3 previous quarters, the cash sweep for the year ended up at $52.2 million or approximately $0.65 per share for 2012. The Board of Directors declared a cash dividend of $0.39 per share for the fourth quarter are ready in November 2012 with payment before year end. The reason for the early declaration of payment of the dividend was the uncertainty relating to taxes and dividends for our U.S.-based shareholders in 2013. The $0.39 dividend represents $1.56 per share on an annualized basis or 9.6% dividend yield based on closing price on Friday. We have declared and paid dividends for 36 consecutive quarters totaling more than $14.5 per share since 2004. In the fourth quarter and including all 100% owned assets, 50% of our charter revenues came from the offshore segment, nearly 30% from tankers and the remaining 20% split between our drybulk and container assets.
We announced the acquisition of 2 car carriers in the fourth quarter and took delivery of the vessels in October and November. The vessels were built in 2005 and 2006 in Japan and have a capacity of 6,500 car equivalent units. The vessels were immediately chartered out to Hyundai Glovis for a period of 5 years, adding $85 million to our charter backlog. There will be a full cash flow effect from these vessels in the first quarter this year.
Over the last 4 months, we have raised more than $1 billion in the capital markets. This includes equity bonds, convertible notes and equity. Our CFO will elaborate on these transactions, but we are, of course, very pleased to notice the positive reaction of the market with several of these transactions significantly oversubscribed.
Some of the newly raised capital has been used to refinance existing indebtedness, but a part of the capital will also be earmarked for additional growth. Including a vessel to be delivered to the new owner at the end of this quarter, we will have sold and delivered 7 older vessels during the fourth quarter 2012 and first quarter 2013. This includes the 2 remaining single-hull tankers, the 4 remaining combination carriers and 1 Suezmax tankers. The vessels sold were the oldest in their fleet built between 1991 and 1995. The book gain in the fourth quarter was approximately $21.5 million and net cash proceeds after charter termination compensation and prepayment of associated debt was $31 million. In the first quarter and including the vessel due to be delivered at the end of the quarter, we expect there to be a book gain of nearly $18 million with net cash proceeds of approximately $37 million. And the newbuilding program continues with high vessels still under construction. One drybulk courier is scheduled for delivery in March and we'll then go on a 3-year charter to Western Bulk and 4 eco-design 4,800 teu container vessels are due for delivery between the third quarter of 2013 and the first quarter of 2014 and will then be employed on 7-year charter to Hamburg Süd from delivery.
We restructured the chartering agreement with Frontline in December 2011. Frontline paid the cash compensation of $106 million to us, which was equivalent to nearly 2 years reduction in base rates. We used these proceeds to prepay on bank financing and have therefore reduced break-even rates for these vessels to below the new reduced base rates. While we had a net contribution per share of approximately $0.10 per share from these vessels before the restructuring, the cash sweep therefore represents the maturity of the net contribution from the vessels -- these vessels currently. The cash sweep effect for 2012 was $52.2 million or approximately $0.16 per share per quarter on average. Based on historic charter rates provided by Clarksons, there have been few quarters last 15 years where we wouldn't accumulate a cash sweep effect.
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