2000 Annual Report to Shareholders
NORDIC AMERICAN TANKER
SHIPPING LIMITED
2000 ANNUAL
REPORT TO
SHAREHOLDERS
Nordic American Tanker Shipping Ltd
Page 1 of 17
2000 Annual Report to Shareholders
BUSINESS
General
Nordic American Tanker Shipping Limited (the "Company") was incorporated on June
12, 1995, under the laws of the Islands of Bermuda ("Bermuda") for the purpose of acquiring,
disposing, owning, leasing, and chartering three double hull Suezmax oil tankers (the "Vessels")
and engaging in activities necessary, suitable or convenient to accomplish, or in connection with
or incidental to, the foregoing. The principal executive offices of the Company are located at:
Cedar House, 41 Cedar Avenue, Hamilton HM EX, Bermuda, telephone number (441) 295-2244.
The Company now owns three modern double hull 150,000 dead-weight tonne (“dwt”)
Suezmax tankers (the “Vessels”). The Vessels were built at Samsung Heavy Industries Co. Ltd.
in South Korea (the “Builder”).
Pursuant to an agreement (the "Management Agreement") between the Company and its
Manager, Ugland Nordic Shipping ASA (the “Manager”), the Manager provides certain
management, administrative and advisory services to the Company.
Vessels owned by the Company
Each Vessel acquired by the Company is a 1997 built, 151,459 dwt double hull Suezmax
oil tanker. The purchase price of each Vessel was approximately $56.9 million (the "Original
Contract Price”). The Vessels were delivered between August and December 1997 and have been
designed according to the specifications set forth in the shipbuilding contracts between the
Builder and the Company (the "Shipbuilding Contracts").
Each Vessel is registered in the Isle of Man and flies the British flag.
Chartering Operations Commenced on September 30, 1997
Each Vessel is chartered to BP Shipping Ltd. (the “Charterer”) pursuant to separate "hell
and high water" bareboat charters (the "Charters). The initial term of the Charters is from
September 30, 1997 and will end approximately seven years after the such date, subject to
extension at the option of the Charterer for up to seven successive one-year periods. Under each
Charter, the Charterer is required to provide the Company with at least twelve months' prior
notice of each such extension. The Company’s dividend policy is to pay dividends to the holders
of the Company's Shares in amounts substantially equal to the amounts received by it under the
Charters, less expenses. In 2000, a portion of these dividends was considered return of capital
for United States federal income tax purposes.
The daily charterhire rate payable under each Charter is comprised of two components:
(i) a fixed minimum rate of charterhire of $13,500 per Vessel per day (the "Base Rate"), paid
quarterly in advance, and (ii) additional charterhire (which will be determined and paid quarterly
in arrears and may equal zero) which would equal the excess, if any, of a weighted average of the
daily time charter rates for two round-trip trade routes traditionally served by Suezmax tankers
(Bonny, Nigeria to/from the Louisiana Offshore Oil Port, and Hound Point, U.K. to/from
Philadelphia, Pennsylvania (the "Reference Ports")), over the sum of (A) an agreed amount of
$8,500 representing daily operating costs and (B) the Base Rate ("Additional Hire"). The
amount of Additional Hire, if any, will be determined by the London Tanker Brokers Panel or
Nordic American Tanker Shipping Ltd
Page 2 of 17
2000 Annual Report to Shareholders
another panel of ship brokers mutually acceptable to the Charterer and the Company (the
"Brokers Panel"). In 2000, the Company received Additional Hire for all four quarters.
Pursuant to the terms of the Charters, the Charterer's obligation to pay charterhire is
absolute, regardless whether there is loss or damage to a Vessel of any kind or whether such
Vessel or any part thereof is rendered unfit for use or is requisitioned for hire or for title, and
regardless of any other reason whatsoever. The Charterer is also obligated to indemnify and hold
the Company harmless from all liabilities arising from the operation, design and construction of
the Vessels prior to and during the term of the Charters, including environmental liabilities, other
than liabilities arising out of the gross negligence or willful misconduct of the Company. The
obligations of the Charterer are guaranteed by BP Amoco p.l.c., the successor company to the
merger between Amoco Corp and The British Petroleum Company p.l.c.
The Charters will end approximately seven years after September 30, 1997, unless
extended as noted above. At least six months prior to the end of the term (including any
extension thereof) of a Charter, the holders of the Shares will be entitled to vote on a proposal to
sell the related Vessels and to distribute the net proceeds of such sale to the holders of the Shares
to the extent permitted under Bermuda law. The Board of Directors of the Company (the
"Board") will make a recommendation as to that proposal, which recommendation may favor
such sale or an alternative plan, such as the operation, rechartering or other disposition of the
Vessels. The proposal to sell the Vessels and distribute the resulting net proceeds shall be
adopted if approved by the holders of a majority of the Common Shares voting at the meeting
called for such purpose.
Nature of Trading Market
The primary trading market for the Shares is the American Stock Exchange (the
"AMEX"), on which the Shares are listed under the symbol NAT. The secondary trading market
for the Shares is the Oslo Stock Exchange (the "OSE") also with the symbol NAT.
The high and low bid prices for the Shares by quarter, in 1999 thru 2000 are as
follows:
For the quarter ended:
March 31, 1999
June 30, 1999
September 30, 1999
December 31, 1999
March 31, 2000
June 30, 2000
September 30, 2000
December 31, 2000
AMEX
Low
$10 1/8
$10 7/8
$11 1/4
$10 1/8
$10 1/4
$12 1/2
$16 9/16
$17 7/8
AMEX
High
$11 5/8
$11 3/4
$12 3/4
$12
$12 3/4
$17
$22 5/8
$23 1/4
OSE
Low
OSE
High
NOK N/A
NOK N/A
NOK 95.00
NOK 94.00
NOK 90.00
NOK 95.00
NOK 140.00
NOK 170.00
NOK N/A
NOK N/A
NOK 95.00
NOK 95.00
NOK 100.00
NOK 130.00
NOK 212.00
NOK 210.00
These bid quotations represent interdealer quotations, without retail mark-ups,
mark-downs or commissions, and do not necessarily represent actual transactions. On December
31, 2000, the closing price of the Shares as quoted on the AMEX was $20, and as quoted on the
OSE was NOK 177.00. On such date, there were 9,706,606 Shares issued and outstanding.
Nordic American Tanker Shipping Ltd
Page 3 of 17
2000 Annual Report to Shareholders
SELECTED FINANCIAL INFORMATION
The following Balance Sheets and Income Statements have been derived from
the Financial Statements of the Company which are included herein and which have been audited
by Deloitte & Touche, independent auditors, whose report thereon is also included herein. The
Balance Sheet information provided below should be read in conjunction with the accompanying
Financial Statements and the related notes thereto, and the discussion under Management's
Discussion and Analysis of Financial Condition and Results of Operations herein.
BALANCE SHEETS FOR THE YEAR ENDING DECEMBER 31,
Assets
Cash and Cash Deposit
Prepaid Finance Expenses
Prepaid Insurance
Account Receivables
Vessels
Total Assets
2000
1999
1998
1997
1996
1 922 925
57 915
58 333
10 228 286
148 575 045
160 842 504
2 507 017
72 395
70 833
0
155 406 085
158 056 330
3 637 758
86 875
83 333
0
162 237 124
166 045 090
19 499
0
95 836
1 499 380
169 068 163
170 682 878
83 275
0
180 000
111 644
51 224 760
51 599 679
Account Payables
Accrued Interest
Bank Loan
Total Long-term Liabilities
0
43 500
30 000 000
30 043 500
0
77 333
30 000 000
30 077 333
675 384
43 781
30 000 000
30 719 165
1 181 385
0
0
1 181 385
0
0
0
0
Shareholders' Equity
Share Capital
Other Shareholders Equity
Total Shareholders' Equity
Total Liabilities
and Shareholders Equity
97 066
130 701 938
130 799 004
97 066
127 881 931
127 978 997
97 066
135 228 859
135 325 925
118 138
169 383 355
169 501 493
12 822
51 586 857
51 599 679
160 842 504
158 056 330
166 045 090
170 682 878
51 599 679
INCOME STATEMENT FOR THE PERIOD 01.01. - 31.12.,
Revenue
Ship Broker Commissions
Mgmt. Fee & Admin. Exp.
Directors Insurance
Depreciation
Net Operating Income
Net Financial Items
Net Profit for the Year
2000
36 577 262
(185 288)
(290 791)
(82 500)
(6 831 040)
29 187 643
(1 518 679)
27 668 964
1999
14 782 500
(184 781)
(314 004)
(97 500)
(6 831 039)
7 355 176
(1 580 500)
5 774 676
1998
16 006 199
(184 781)
(412 779)
0
(6 831 039)
8 577 600
51 912
8 629 512
1997
5 265 880
(47 081)
(461 674)
0
(1 707 807)
3 049 318
147 174
3 196 492
1996
0
0
(430 000)
0
0
(430 000)
0
(430 000)
Nordic American Tanker Shipping Ltd
Page 4 of 17
2000 Annual Report to Shareholders
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company owns three modern double hull 151,459 dead weight tonne Suezmax
tankers (the Vessels), which were delivered in the last half of 1997. The Vessels were built at
Samsung Heavy Industries Ltd. in South Korea.
The Charterer has agreed to charter each Vessel for a period of seven years from
September 30, 1997. Each Charter is subject to extension at the option of the Charterer for up to
seven successive one-year periods. During the term of each Charter (including any extension
thereof) the Charterer is obligated to pay (i) the Base Rate, which is charterhire at a fixed
minimum daily rate of $13,500 per Vessel per day (time charter equivalent of $22,000 per day),
payable quarterly in advance and (ii) Additional Hire, to the extent spot charter rates exceed
certain levels, payable quarterly in arrears, from January 1998. The amount of Additional Hire
for each quarter, if any, will be determined by the Brokers Panel.
Results of Operations
The Company’s revenues from the charterhire for 2000 were derived from Base Hire of
$14,823,000 ($13,500 per day per Vessel) and Additional Hire of $21,754,262 ($19,813 per day
per vessel). Total Charterhire for the period was $36,577,262 or $33,313 per day per vessel (T/C
equivalent of $41,813 per day per vessel).
In January 2001, the Brokers Panel in London determined that the Additional Hire for the
period October 1 to December 31, 2000 was $10,228,286, i.e., $37,059 per day per Vessel. The
total Charterhire for 2000 was thus $36,577,262. Charterhire (time charter equivalent) in each
quarter of 2000 was $26,079, $33,701, $48,153 and $59,059 per day per Vessel, respectively.
Comparatively, 1999 Base Hire was $14,782,500 ($13,500 per day per Vessel) and
Additional Hire of $0, for a total of $14,782,500. Comparatively, 1998 Base Hire was
$14,782,500 ($13,500 per day per Vessel) and Additional Hire of $1,223,699 ($4,532 per day per
vessel) for a total of $16,006,199.
Operating costs for 2000 and 1999 were $7,389,619 and $7,427,324 respectively.
Depreciation of the Vessels represents $6,831,040, which in 2000 approximates the 1999
depreciation. Management Fee and administrative expenses decreased $23,213 mainly due to
lower insurance cost.
Operating costs for 1998 approximated the 1999 amounts.
Nordic American Tanker Shipping Ltd
Page 5 of 17
2000 Annual Report to Shareholders
Liquidity and Capital Resources
Dividend payment
Total dividend paid out in 2000 was $24,848,956 or $2.56 per Share. The dividend
payments in 1998, 1999 and 2000 have been as follows:
Period
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total USD
1998
0.40
0.41
0.32
0.30
1.43
1999
0.32
0.32
0.35
0.36
1.35
2000
0.34
0.45
0.67
1.10
2.56
The Company declared a dividend of $1.41 for the first quarter of 2001. The dividend of
$1,41 was paid to Shareholders in February 2001.
The Company is incorporated in Bermuda. Under current Bermuda law, the Company is
not subject to tax on income or capital gains, and no Bermuda withholding tax will be imposed
upon payments of dividends by the Company to its shareholders. No Bermuda tax is imposed on
holders with respect to the sale or exchange of Shares. Furthermore, the Company has received
from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act
1966, as amended, an assurance that, in the event that Bermuda enacts any legislation imposing
any tax computed on profits or income, including any dividend or capital gains withholding tax,
or computed on any capital asset, appreciation, or any tax in the nature of an estate, duty or
inheritance tax, then the imposition of any such tax shall not be applicable. The assurance
further provides that such taxes, and any tax in the nature of estate duty or inheritance tax, shall
not be applicable to the Company or any of its operations, nor to the shares, debentures or other
obligations of the Company, until March 2016.
Repurchase of Common Stock
On December 28, 1998, the Company repurchased 2,107,244 Shares through a “Dutch
Auction” self-tender offer at a price of $12.50 per Share. After the repurchase, a total of
9,706,606 Shares are in issue, down from 11,813,850 Shares. Payment for the repurchased
Shares was made at the end of December 1998.
In 1998 the Company borrowed $30.0 million from Den norske Bank ASA, Oslo,
Norway (DnB) to finance the repurchase of Shares. The total purchase price of the Shares
including the costs associated with the transaction was $27.1 million. On May 12, 1999, the
General Shareholders Meeting approved the remaining proceeds being utilized to increase the
quarterly dividends.
An important objective of the repurchase of Shares was to increase the Company’s cash
distribution to shareholders while the Vessels are on charter to the Charterer. While the Vessels
are on charter, the minimum cash distribution per Share (assuming receipt of Base Hire and no
increase of expenses) has increased by $0.15, from $1.20 to $1.35 per year, an increase of 12.5%.
Nordic American Tanker Shipping Ltd
Page 6 of 17
2000 Annual Report to Shareholders
The Company has entered into an interest swap agreement with DnB, as a result of which
the Company pays a fixed interest on the Loan of 5.80% p.a. including the margin of 0.525% for
the next 5 years. The swap agreement terminates on the final repayment date of the Loan, i.e.,
the fourth quarter of the year 2004.
DIRECTORS AND OFFICERS
Directors and Senior Management of the Company and the Manager
Pursuant
the Management Agreement,
administrative and advisory services to the Company with respect to the Vessels.
the Manager provides management,
to
Set forth below are the names and positions of the directors and executive officers of the
Company and the Manager. Directors of the Company are elected annually, and each director
elected holds office until a successor is elected. Officers of both the Company and the Manager
are elected from time to time by vote of the respective board of directors and hold office until a
successor is elected.
Name
Herbjørn Hansson
Peter Bubenzer
Niels Erik Feilberg
Tharald Brøvig
Hon. Sir David Gibbons
George C. Lodge
Axel Stove Lorentzen
Andreas Ove Ugland
Name
Tharald Brøvig
Niels Erik Feilberg
Herbjørn Hansson
Njål Hansson
Ulf G. Ryder
Christian Rytter Jr
Andreas Ove Ugland
Johan Benad Ugland
The Company
Age
Position
53
39
58
73
73
48
46
Director and President
Secretary
Vice President and Treasurer
Director
Director
Director
Director
Director
The Manager
Age
Position
58
39
53
58
49
45
46
47
Director
Chief Financial Officer
Director; President and
Chief Executive Officer
Director
Director
Director
Director, Chairman
Director
Certain biographical information with respect to each director and executive officer of
the Company and the Manager is set forth below.
Nordic American Tanker Shipping Ltd
Page 7 of 17
2000 Annual Report to Shareholders
Herbjørn Hansson has been President and Chief Executive Officer of the Company and
of the Manager since July 1995 and September 1993, respectively, and has served as a director of
the Manager since its organization in June 1989 and as a director of the Company since July
1995. Mr. Hansson formerly served as the Chairman of the Board of the Manager from June
1989 to September 1993. Mr. Hansson has been involved in various aspects of the shipping
industry and international finance since the early 1970s, including serving as Chief Economist of
Intertanko, the International Association of Independent Tanker Owners ,from 1975-1980. He
was an executive officer of the Anders Jahre/Kosmos Group from 1980 to 1989, serving as Chief
Financial Officer from 1983 to 1988.
Peter Bubenzer has been the Secretary of the Company since May 1999. Mr. Bubenzer
has been a Partner of the law firm of Appleby, Spurling & Kempe, Bermuda since 1986.
Niels Erik Feilberg has been Vice President and Treasurer of the Company since July
1995 and is Chief Financial Officer of the Manager, which he has been with since 1994. He was
working in the Treasury Department of Anders Jahre/Kosmos Group from 1987 and in the same
area in the Skaugen Group from 1989 to the end of 1993.
Tharald Brøvig has been a director of the Company since July 1995 and has been a
director of the Manager since its organization in June 1989.
Sir David Gibbons has been a director of the Company since September 1995. Sir
David served as the Prime Minister of Bermuda from August 1977 to January 1982. Sir David
has served as Chairman of The Bank of N.T. Butterfield and Son Limited since 1986 and as
Chief Executive Officer of Edmund Gibbons Ltd. since 1954.
George C. Lodge has been a director of the Company since September 1995. Professor
Lodge has been a member of the Harvard Business School faculty since 1963. He was named
associate professor of business administration at Harvard in 1968 and received tenure in 1972.
Axel Stove Lorentzen has been a director of the Company since September 1995. Mr.
Stove Lorentzen has also served as a director and Chairman of the Manager since May 1991 and
September 1993 to June 1996, respectively, a director and Chairman of Lorentzen & Stemoco
A/S since January 1981 and November 1994, respectively, and as a director of
Skipskredittforeningen AS from March 1988 to May 1996. Mr. Stove Lorentzen formerly served
as a director of Grand Hotel A/S from May 1986 to October 1993 and a director of Belships
Company Ltd. Ships A/S from February 1984 to June 1993.
Njål Hansson has been a director of the Manager since its organization in June 1989.
Mr. Hansson is a private investor and owns the company Siving, Njål Hansson A/S is a company
engaged in the importing and distribution of consumer electronics in Norway. Mr. Hansson is
the brother of Herbjørn Hansson.
Andreas Ove Ugland has been a director of the Company since February 1997. Mr.
Ugland has also served as director and Chairman of: Ugland International Holding Plc, a
shipping/transport company listed on the London Stock Exchange, Andreas Ugland & Sons AS,
Grimstad, Norway, Høegh Ugland Autoliners AS, Oslo and Buld Associates Inc., Bermuda. Mr.
Ugland has had his whole career in shipping in the Ugland family owned shipping group.
Nordic American Tanker Shipping Ltd
Page 8 of 17
2000 Annual Report to Shareholders
Johan Benad Ugland has been a director of the Manager since May 1999. Mr Ugland
is Chairman of JBO Holding AS.
Ulf G. Ryder has been a Director of the Manager since June 1999. Mr. Ryder is
Managing Director of Stena Bulk AB of Gothenburg, Sweden.
Christian Rytter Jr has been a director of the Manager since May 1996. Mr. Rytter is
Managing Director of L.Giil-Johannessen AS and is also Chairman of Seabulk a.s.
COMPENSATION OF DIRECTORS AND OFFICERS
Pursuant to the Management Agreement, the Manager will pay from the Management
Fee the annual directors' fees of the Company, currently estimated at an aggregate amount of
$95,000 per annum. Accordingly, from the inception of the Company through December 31,
2000, the Directors of the Company have not been paid by the Company any amount for services
rendered by them to the Company in any capacity.
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
The Manager owns 1,593,621 (16.42%) Shares in the Company as of April 2, 2001, and
is party to the Management Agreement with the Company, pursuant to which the Manager is
entitled to a management fee of $250,000 per annum.
ADDITIONAL INFORMATION
The Company will file with the Securities and Exchange Commission an Annual Report
on Form 20-F. A copy of such report is available without cost to each shareholder.
BP Amoco p.l.c., the successor company to the merger between Amoco Corp and The
British Petroleum Company p.l.c., files annual reports on Form 20-F (File No. 005-42076) and
periodic reports on Form 6-K with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended.
APRIL 5, 2001
NORDIC AMERICAN TANKER
SHIPPING LIMITED
Nordic American Tanker Shipping Ltd
Page 9 of 17
NORDIC AMERICAN TANKER SHIPPING LIMITED
2000 Annual Report to Shareholders
TABLE OF CONTENTS.
______________________________________________________________________________
INDEPENDENT AUDITORS’ REPORT
FINANCIAL STATEMENTS
Balance Sheets
Statements of Operations
Statements of Cash Flows
Notes to Financial Statements
Page
11
12
13
13
14-17
Nordic American Tanker Shipping Ltd
Page 10 of 17
2000 Annual Report to Shareholders
This page will be replaced by the Auditors’ Report.
Nordic American Tanker Shipping Ltd
Page 11 of 17
BALANCE SHEETS AT DECEMBER 31,
(all figures are in USD)
2000 Annual Report to Shareholders
ASSETS
Current assets
Cash and Cash Equivalents
Accounts receivable
Prepaid finance costs
Prepaid insurance
Total current assets
Long term assets
Note 1
Note 6
2000
1999
1,922,925
10,228,286
57,915
58,333
12,267,459
2,507,017
0
72,395
70,833
2,650,245
Vessels
Note 4
148,575,045
155,406,085
TOTAL ASSETS
160,842,504
158,056,330
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities
2000
1999
Accrued interest
Note 6
43,500
77,333
Long-term liabilities
Long-term Debt
Note 6
30,000,000
30,000,000
Commitments and Contingencies
Note 10
0
0
Shareholders Equity
Common Stock
Additional Paid in Capital
Total Shareholders Equity
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
Note 8
Note 8
97,066
130,701,938
97,066
127,881,931
130,799,004
127,978,997
160,842,504
158,056,330
The footnotes are an integral part of these financial statements
Nordic American Tanker Shipping Ltd
Page 12 of 17
2000 Annual Report to Shareholders
STATEMENTS OF OPERATIONS
(all figures in USD)
Operating Revenue
Ship Broker Commissions
Administrative Expenses
Depreciation
Net Operating Income
Interest Income
Interest Expense
Other Financial Charges
Net Financial Items
Net Profit before tax
Tax Expense
Net Profit for the Year
Notes
1, 3
2, 5
4
6
6
2000
1999
1998
36 577 262
(185 288)
(373 291)
(6 831 040)
29 187 643
277 552
(1 770 808)
(25 423)
(1 518 679)
14 782 500
(184 781)
(411 504)
(6 831 039)
7 355 176
214 532
(1 767 449)
(27 583)
(1 580 500)
16 006 199
(184 781)
(412 779)
(6 831 039)
8 577 600
105 999
(43 781)
(10 306)
51 912
27 668 964
5 774 676
8 629 512
0
0
0
27 668 964
5 774 676
8 629 512
Earnings per Share (EPS)
2.85
0.59
0.89
STATEMENTS OF CASH FLOW
(all figures in USD)
Reconciliation of Net Profit to Net Cash from Operating Activities
Net Profit
Depreciation
Increase (decrease) in receivables and payables
2000
27 668 964
6 831 040
(10 235 140)
1999
5 774 676
6 831 039
(614 852)
1998
8 629 512
6 831 039
(2 682 212)
Net Cash from Operating Activities
24 264 864
11 990 863
12 778 339
Financial Activities
Additional Warrant Issue Cost
Dividends paid
Bank Loan
Repurchasing of Common Stock
0
(24 848 956)
0
0
(17 686)
(13 103 918)
0
0
(36 676)
(15 712 421)
30 000 000
(27 055 933)
Net Cash from Financing Activities
(24 848 956)
(13 121 604)
(12 805 030)
Net (decrease) in Cash and Cash Equivalents
(584 092)
(1 130 741)
(26 691)
Beginning Cash and Cash Equivalents
2 507 017
3 637 758
3 664 449
Ending Cash and Cash Equivalents
1 922 925
2 507 017
3 637 758
Cash Paid for Interest
1 770 808
1 767 449
43 781
The footnotes are an integral part of these financial statements
Nordic American Tanker Shipping Ltd
Page 13 of 17
2000 Annual Report to Shareholders
NORDIC AMERICAN TANKER SHIPPING LIMITED
NOTES TO FINANCIAL STATEMENTS
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These Financial Statements have been prepared in accordance with accounting principles generally
accepted in the United States of America.
Nature of Business and Concentration of Risk: The Company’s principal business is the
ownership of three suezmax tankers on charter to BP Shipping until September 2004, with a
further seven one-year options in BP’s favour.
Use of estimates: Preparation of financial statements in accordance with generally accepted
accounting principles necessarily includes amounts based on estimates and assumptions made by
management. Actual results could differ from those amounts.
Cash and cash equivalents consists of deposits with original maturities of three months or less.
Property and Equipment: Depreciation and amortization are provided on a straight-linebasis over
the estimated useful lives of the assets. The Company’s sole of property consists of vessels. The
estimated useful life of these vessels is 25 years.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. If the fair value is less than the carrying
amount of the assets, a loss is recognized for the difference.
Revenue recognition: Revenue from vessel charter is recognized on the basis of the number of days
in the fiscal period. Revenue is due quarterly in advance.
New Pronouncements: In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133).
This standard incorporating the amendments from SFAS 138 requires derivative instruments to be
recorded in the balance sheet at their fair value. Changes in the fair value are recorded to earnings
for each period unless specific hedge criteria are met. Changes in fair value for qualifying cash
flow-hedges are recorded in equity and are realized in earnings in conjunction with the gain or loss
on the hedged item or transaction. Changes in the fair value for qualifying offset corresponding
changes in the fair value of the hedged item in the income statement. The Company implemented
SFAS 133 on January 1, 2001. The statement will not have significant impact on NATS’
consolidated statement.
2.
RELATED PARTY TRANSACTION
The Company has entered into a management agreement with Ugland Nordic Shipping ASA
(UNS) under which UNS will provide certain administrative, management and advisory services to
the Company for an amount of $250,000 per year. UNS is the Commercial Manager of the
Company, and owns as of December 31, 2000 18.8% of the shares.
Management fees expense was $250,000 for 2000, 1999 and 1998.
Nordic American Tanker Shipping Ltd
Page 14 of 17
3.
REVENUE
The table below illustrates the breakdown of the charter hire for the years ended December 31,
2000, 1999 and 1998:
2000 Annual Report to Shareholders
Period
Base Hire
Additional Hire
2000
14,823,000
21,754,262
1999
14,782,500
0
Total
36,577,262
14,782,500
1998
14,782,500
1,223,699
16,006,199
4.
VESSELS
Depreciation is calculated on a straight-line basis over the estimated lifetime of 25 years. The basis
for the depreciation is the actual cost price of the vessels in 1997, i.e. $170,775,970 in total for the
three vessels.
5.
ADMINISTRATIVE EXPENSES
$ 250,000
Management fee, Ugland Nordic Shipping ASA
Directors and officers insurance
$ 82,500
Other fees and expenses $ 40,791
Total administrative expenses $ 373,291
6.
LONG-TERM DEBT
The Company has since 1998 had a loan of $30 million with Den norske Bank, Oslo (DnB). The
loan falls due in full in September 2004. Interest is payable semi-annually at a variable rate of
LIBOR plus 0.525% margin. Accrued interest at December 31, 2000 and 1999 was $43,500 and
$77,333. The Company has pledged the vessels as collateral. In association with the loan the
Company must meet certain financial covenants. The main covenants are associated with change
in ownership, new contracts or change in existing contracts, minimum value adjusted equity and
minimum liquidity. The Company satisfied the loan covenants at year end.
The Company pays an annual agency fee of $10,000 to DnB in connection with the loan.
The Company has entered into an interest swap agreement with DnB, enabling the Company to pay
a fixed interest on the loan of 5.80% p.a. including the margin of 0.525% for the next 5 years. The
swap agreement terminates on the final repayment date of the Loan, i.e. the 4th quarter of year
2004.
Prepaid finance costs
In connection with the loan in 1998, the Company paid $86,875 in an arrangement fee and
commitment fee. The fees will be amortized over the term of the Loan, i.e. with 1/6 every year
from January 1, 1999.
Nordic American Tanker Shipping Ltd
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7.
EQUITY
2000 Annual Report to Shareholders
BALANCE DECEMBER 31, 1996
Repurchase of B Stock
Exercise of Warrants to Common Stock
Net Profit
Dividends paid
BALANCE DECEMBER 31, 1997
Repurchase of Common Stock
Net Profit
Dividends paid
BALANCE DECEMBER 31, 1998
Additional costs, Repurchase of Shares
Net Profit
Dividends paid
BALANCE DECEMBER 31, 1999
Net Profit
Dividends paid
BALANCE DECEMBER 31, 2000
Common Stock
Class B Stock
Issued Shares
82 237
Amount
822
Issued Shares
12 000
-12 000
Amount
12 000
-12 000
11 731 613
117 316
11 813 850
-2 107 244
118 138
-21 072
9 706 606
97 066
9 706 606
97 066
9 706 606
97 066
0
0
0
0
0
0
0
0
Retained
Earnings/
Add. paid-
in Capital
51 586 857
119 325 546
3 196 492
-4 725 540
169 383 355
-27 071 537
8 629 512
-15 712 471
135 228 859
-17 686
5 774 676
-13 103 918
127 881 931
27 668 964
-24 848 957
130 701 938
The table below illustrates the historical development of the Dividend per Common Share.
Period
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total USD
1997
0.30
0.30
1998
0.40
0.41
0.32
0.30
1.43
1999
0.32
0.32
0.35
0.36
1.35
2000
0.34
0.45
0.67
1.10
2.56
2001
1.41
1.41
In September 1995, the Company offered and sold to the public 11,731,613 warrants (“Warrants”)
at the initial public offering price of $5.00 per Warrant. The exercise price of a Warrant was
$10.21. Prior to September 30, 1997 (the “Exercise Date”), the Company did not have any
operations other than certain limited operations related to the acquisition of the Vessels, of which
all three were delivered in the last half of 1997.
On September 30, 1997, all of the outstanding Warrants of the Company were exercised at an
exercise price of $10.21 per Warrant. The Company received a total of $119,779,768.73 by issuing
a total of 11,731,613 new Common Shares (the “Shares”). At that time there was a total of
11,813,850 Shares in issue. Expenses in the total amount of approximately $337,000 related to the
exercise of the Warrants were deducted from the proceeds of the exercise.
On October 6, 1997, the Company paid to the Charterer for payment to the Builder a total of
$119,490,000 for final payment of the three Vessels.
On November 30, 1998, the Company’s shareholders approved a proposal to allow the Company
to borrow money for the purpose of repurchasing its Shares. On December 28, 1998, the Company
purchased 2,107,244 Shares through a “Dutch Auction” self-tender offer at a price of $12.50 per
Nordic American Tanker Shipping Ltd
Page 16 of 17
Share. In addition, the Company paid $715,000 in transaction costs. After the repurchase, a total
of 9,706,606 Shares are in issue, down from 11,813,850 Shares.
2000 Annual Report to Shareholders
8.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimated fair values and carrying amounts of financial instruments are as follows:
December 31, 2000
December 31, 1999
Carrying Amount
Fair Value Carrying Amount
Fair Value
Long-term Debt
30,000,000
30,000,0000
30,000,000
30,000,000
Interest rate Swap
-
618,094
-
1,689,105
The fair value of long-term debt was determined based on borrowing rates currently available for
debt with similar terms. The fair value of interest rate swaps is based on the amount the Company
would pay or receive to terminate the swaps. The carrying amounts of all other financial
instruments reported in the financial statements approximate their fair value.
9.
CONCENTRATIONS
The Company’s charter revenues and accounts receivable are derived entirely from bareboat
charters with one counterparty, BP Shipping Ltd.
10.
COMMITMENTS AND CONTINGENCIES
The Company is subject to claims and litigation in the normal course of business. In the view of
the management, there were no such matters of significance at December 31, 2000 or 1999.
Nordic American Tanker Shipping Ltd
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