2001 Annual Report to Shareholders
NORDIC AMERICAN TANKER
SHIPPING LIMITED
2001 ANNUAL
REPORT TO
SHAREHOLDERS
Nordic American Tanker Shipping Ltd
2001 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").
The principal executive offices of the Company are located at Cedar House, 41 Cedar Avenue,
Hamilton HM EX, Bermuda, telephone number (441) 295-2244.
Pursuant to an agreement (the "Management Agreement") between the Company and its
Manager, Ugland Nordic Shipping AS (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 dead weight tonne 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"). The Vessels were built at Samsung
Heavy Industries Co. Ltd. in South Korea (the “Builder”).
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 from that 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 shareholders in
amounts substantially equal to the amounts received by it under the Charters, less expenses. In
2001, 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
another panel of ship brokers mutually acceptable to the Charterer and the Company (the
"Brokers Panel"). In 2001, 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 or any other reason. The
Charterer is also obligated to indemnify and hold the Company harmless from all liabilities
Nordic American Tanker Shipping Ltd
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2001 Annual Report to Shareholders
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.
At least six months prior to the end of the term (including any extension ) of a Charter,
the Company’s shareholders will be entitled to vote on a proposal to sell the related Vessels and
to distribute the net proceeds to the shareholders to the extent permitted under Bermuda law.
The Board of Directors of the Company (the "Board") will make a recommendation which 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 a majority of the shareholders.
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 2000 thru 2001 are as
follows:
For the quarter ended:
March 31, 2000
June 30, 2000
September 30, 2000
December 31, 2000
March 31, 2001
June 30, 2001
September 30, 2001
December 31, 2001
AMEX
Low
$10.25
$12.50
$16.56
$17.88
$16.90
$16.00
$13.75
$13.00
AMEX
High
$12.75
$17.00
$22.63
$23.25
$22.25
$22.89
$19.52
$17.10
OSE
Low
OSE
High
NOK 90.00
NOK 95.00
NOK 140.00
NOK 170.00
NOK 215.00
NOK 180.00
NOK 190.00
NOK 170.00
NOK 100.00
NOK 130.00
NOK 212.00
NOK 210.00
NOK 155.00
NOK 172.00
NOK 140.00
NOK 125.00
These bid quotations represent interdealer quotations without retail mark-ups,
mark-downs or commissions, and do not necessarily represent actual transactions. On December
31, 2001, the closing price of the Shares as quoted on the AMEX was $13.85, and as quoted on
the OSE was NOK 131.00. On such date, there were 9,706,606 Shares issued and outstanding.
Nordic American Tanker Shipping Ltd
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2001 Annual Report to Shareholders
SELECTED FINANCIAL INFORMATION
The following historical financial information should be read in conjunction
with our audited consolidated financial statements and related notes all of which are included
elsewhere in this document and "Operating and Financial Review and Prospects." The
statements of operations data for each of the three years ended December 31, 1999, 2000, and
2001 and selected balance sheet data as of December 31, 2000 and 2001 are derived from, and
qualified by reference to, our audited consolidated financial statements included elsewhere in
this document. The statements of operations data for each of the years ended December 31, 1997
1998 and 1999 and selected balance sheet data as of December 31, 1997, 1998 and 1999 are
derived from our audited financial statements not included in this document.
Nordic American Tanker Shipping Ltd
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2001 Annual Report to Shareholders
SELECTED BALANCE SHEET DATA
Assets
Cash and Cash Deposit
Prepaid Finance Expenses
Prepaid Insurance
Accounts Receivable
Vessels
Total Assets
Accounts Payable
Accrued expenses
Accrued Interest
Bank Loan
Total Long-term Liabilities
Shareholders' Equity
Share Capital
Other comprehensive income
Other Shareholders Equity
Total Shareholders' Equity
Total Liabilities
and Shareholders Equity
2001
2000
December 31,
1999
1998
1997
630 868
43 435
70 000
170 180
141 744 005
142 658 488
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
0
778 000
38 666
30 000 000
30 816 666
97 066
(778 000)
112 522 756
111 841 822
0
0
675 384
1 181 385
43 500
30 000 000
30 043 500
77 333
30 000 000
30 077 333
43 781
30 000 000
30 719 165
0
0
1 181 385
97 066
97 066
97 066
118 138
130 701 938
130 799 004
127 881 931
127 978 997
135 228 859
135 325 925
169 383 355
169 501 493
142 658 488
160 842 504
158 056 330
166 045 090
170 682 878
SELECTED STATEMENT OF OPERATIONS DATA
Revenue
Ship Broker Commissions
Mgmt. Fee & Admin. Exp.
Directors Insurance
Depreciation
Net Operating Income
Net Financial Items
Net Profit for the Year
2001
28 359 568
(184 781)
(281 406)
(72 333)
(6 831 040)
20 990 008
(1 604 532)
19 385 476
Year Ended December 31,
1999
2000
36 577 262
(185 288)
(290 791)
(82 500)
(6 831 040)
29 187 643
(1 518 677)
27 668 966
14 782 500
(184 781)
(314 004)
(97 500)
(6 831 039)
7 355 176
(1 580 498)
5 774 678
Basic Earnings Per Share {a}
Diluted Earnings Per Share
Cash Dividends
Declared Per Share
Weighted Average Shares Outstanding:
Basic
Diluted
2,00
2,00
3,87
2,85
2,85
2,56
0,59
0,59
1,35
9 706 606
9 706 606
9 706 606
9 706 606
9 706 606
9 706 606
11 796 530
11 796 530
3 018 518
5 606 055
1998
16 006 199
(184 781)
(412 779)
0
(6 831 039)
8 577 600
51 912
8 629 512
0,73
0,73
1,33
1997
5 265 880
(47 081)
(461 674)
0
(1 707 807)
3 049 318
147 176
3 196 492
1,06
0,57
1,57
Nordic American Tanker Shipping Ltd
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS
2001 Annual Report to Shareholders
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.
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 charterhire for 2001 decreased 22% from 2000 to
$28,359,568 or $25,899 per day per vessel (T/C equivalent of $34,399 per day per vessel).
Charterhire revenue for 2001 was derived from Base Hire of $14,782,500 ($13,500 per day per
Vessel) and Additional Hire of $13,577,068 ($12,399 per day per vessel).
Market rates which are used to determine additional hire decreased in 2001. The
decrease was driven by OPEC oil production decreases and a slow down in the world economy.
Additional hire by quarter, as determined by the Brokers Panel was $7,994,018, $3,572,587,
$1,840,283 and $170,180 for the first through the fourth quarters of 2001 respectively.
Charterhire (time charter equivalent) in each quarter of 2001 was $51,607, $35,088, $28,668 and
$22,617 per day per Vessel, respectively.
Comparatively, Base Hire in 2000 and 1999 was $14,823,000 and $14,782,500 ($13,500
per day per Vessel) respectively. Additional Hire was $21,754,262 in 2000 and $0 in 1999.
Management, insurance and administrative costs (MI&A) for 2001, 2000 and 1999 were
$538,520, $558,759 and $596,285 respectively. The Company’s MI&A for all three years
consisted of ship brokers commissions of approximately $185,000 and management fees of
$250,000 which are fixed. The decrease in costs of $20,239 from 2000 to 2001 is mainly due to
lower insurance costs. Depreciation expense approximated $6,831,040 for each of the three
years.
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2001 Annual Report to Shareholders
Liquidity and Capital Resources
The Company’s cash flows are primarily from charter hire revenue.
Cash flows provided by operating activities increased in 2001 to $36,272,601 due primarily to
the decrease in accounts receivable of $10,058,106 partially offset by a decrease in charterhire
revenue. The decrease in accounts receivable was due to the Additional Charter Hire for the 4th
quarter 2000 was paid in January 2001.
Cash flow used in financing activities increased 51% to $37,564,658 due to the increase in
dividends paid during the year.
There were no cash flows from investing activities during the year.
Dividend payment
Total dividend paid out in 2001 was $37,564,658 or $3.87 per Share. The dividend
payments per share in 1997, 1998, 1999, 2000 and 2001 have been as follows:
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
1.19
0.72
0.55
3.87
The Company declared a dividend of $0.36 per share for the first quarter of 2002. The
dividend of $0.36 will be paid to Shareholders in February 2002.
Long-Term Debt and Repurchase of Common Stock
In 1998 the Company borrowed $30.0 million from Den norske Bank ASA, Oslo,
Norway (DnB) to finance the repurchase of 2,107,244 shares through a “Dutch Auction” self-
tender offer at a price of $12.50 per Share. 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.
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2001 Annual Report to Shareholders
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%.
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% per annum for the next 3 years. The
swap agreement terminates on the final repayment date of the Loan, i.e., the fourth quarter of the
year 2004.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
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
Age
Position
The Company
Peter Bubenzer
Tharald Brøvig
Niels Erik Feilberg
Hon. Sir David Gibbons
Herbjørn Hansson
George C. Lodge
Axel Stove Lorentzen
Andreas Ove Ugland
59
40
74
54
74
49
47
Secretary
Director
Vice President and Treasurer
Director
Director and President
Director
Director
Director
Name
Peter Antturi
Niels Erik Feilberg
Herbjørn Hansson
Bjørn Møller
Paul Wogan
The Manager
Age
Position
43
40
54
44
39
Director
Chief Financial Officer
Director; President
Director
Director
Certain biographical information with respect to each director and executive officer of
the Company and the Manager is set forth below.
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2001 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 Antturi has been a director of the Manager since December 2001. Mr Antturi is
Vice President and Chief Financial Officer of Teekay Shipping Corp. Mr Antturi joined Teekay
in 1991, as Manager, Accounting and Controller, before becoming CFO in 1997. Since 1985, Mr.
Antturi has held a number of accounting and finance roles in the shipping industry.
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.
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.
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.
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.
Bjørn Møller has been a director of the Manager since April 2001. Mr. Moller is the
President and CEO of Teekay Shipping Corp. and has been with Teekay since 1985, serving as
Head of Group Chartering and Strategic Development before heading up overall operations in
1997 with his promotion to Chief Operating Officer. In 1998 Mr. Moller assumed the role of
President and Chief Executive Officer. Mr. Moller has a multinational background in shipping
and commodities and is a graduate of the Copenhagen School of Business Economics.
Andreas Ove Ugland has been a director of the Company since February 1997. Mr.
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2001 Annual Report to Shareholders
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.
Paul Wogan has been a director of the Manager since April 2001. Mr Wogan is the
Managing Director of Teekay Shipping (UK). Mr Wogan, the former Chief Executive Officer of
Seachem Tankers, joined Teekay in November 2000. Mr. Wogan spent 10 years with Seachem,
the world's fourth largest chemical tanker company, serving as Vice President of Marketing
before becoming CEO in 1997. Prior to joining Seachem, he was involved in chartering for a
major crude oil and product carrier fleet controlled by the Ceres Hellenic Group (Livanos), the
company that subsequently founded Seachem. Mr. Wogan holds an MBA from Cranfield School
of Management.
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,
2001, 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 1,150,221 (11.85%) Shares in the Company as of February 1, 2002,
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.
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
Nordic American Tanker Shipping Ltd
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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.
2001 Annual Report to Shareholders
FEBRUARY 28, 2002
NORDIC AMERICAN TANKER
SHIPPING LIMITED
Nordic American Tanker Shipping Ltd
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NORDIC AMERICAN TANKER SHIPPING LIMITED
2001 Annual Report to Shareholders
TABLE OF CONTENTS.
______________________________________________________________________________
INDEPENDENT AUDITORS’ REPORT
FINANCIAL STATEMENTS
Balance Sheets
Statements of Operations
Statements of Comprehensive Income
Statements of Cash Flows
Notes to Financial Statements
Page
12
13
14
14
15
16-20
Nordic American Tanker Shipping Ltd
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2001 Annual Report to Shareholders
INDEPENDENT AUDITORS’ REPORT
To the Board of Directors and Stockholders of
Nordic American Tanker Shipping Ltd
Bermuda
We have audited the accompanying balance sheets of Nordic American
Tanker Shipping Ltd. as of December 31, 2001 and 2000 and the related
statements of operations, comprehensive income and cash flows for each of
the three years in the period ended December 31, 2001. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2001 and
2000, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche AS
Oslo, February 28, 2002
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2001 Annual Report to Shareholders
(all figures are in USD)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable
Prepaid finance costs
Prepaid insurance
Total current assets
Long term assets
BALANCE SHEETS AT DECEMBER 31,
Note 1
Note 6
2001
2000
630,868
170,180
43,435
70,000
914,483
1,922,925
10,228,286
57,915
58,333
12,267,459
Vessels
Note 4
141,744,005
148,575,045
TOTAL ASSETS
142,658,488
160,842,504
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities
2001
2000
Accrued interest
Note 6
38,666
43,500
Long-term liabilities
Derivative contract
Long-term Debt
Shareholders Equity
Common Stock
Additional Paid in Capital
Retained Earnings
Other comprehensive income
Total Shareholders Equity
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
Note 7,8
Note 6,8
778,000 0
30,000,000
30,000,000
97,066
Note 7
144,395,866
Note 7
Note 7 (31,873,110) (13,693,928)
Note 7,8 (778,000) 0
97,066
144,395,866
111,841,822
130,799,004
142,658,488
160,842,504
The footnotes are an integral part of these financial statements
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2001 Annual Report to Shareholders
STATEMENTS OF OPERATIONS
(all figures in USD)
Notes
1, 3
2, 5
4
6
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
Year Ended December 31,
2000
2001
28 359 568
(184 781)
(353 739)
(6 831 040)
20 990 008
189 244
(1 769 000)
(24 776)
(1 604 532)
19 385 476
36 577 262
(185 288)
(373 291)
(6 831 040)
29 187 643
277 552
(1 770 808)
(25 423)
(1 518 679)
27 668 964
1999
14 782 500
(184 781)
(411 504)
(6 831 039)
7 355 176
214 532
(1 767 449)
(27 583)
(1 580 500)
5 774 676
0
19 385 476
0
27 668 964
0
5 774 676
Basic and Diluted Earnings per Share
Weighted Average Number of
Shares Outstanding
2.00
2.85
0.59
9 706 606
9 706 606
9 706 606
STATEMENTS OF COMPREHENSIVE INCOME
(all figures in USD)
2001
2000
1999
Net income
19 385 476
27 668 964
5 774 676
Cash flow hedges:
Unrealized gain (loss) on derivatives
Reclassified to earnings
Total other comprehensive income
(1 656 146)
260 052
(1 396 094)
0
0
0
0
0
0
Comprehensive income
17 989 382
27 668 964
5 774 676
The footnotes are an integral part of these financial statements
Nordic American Tanker Shipping Ltd
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2001 Annual Report to Shareholders
STATEMENTS OF CASH FLOWS
(all figures in USD)
Net Profit
Reconciliation of Net Profit to Net Cash from
Operating Activities
Depreciation
Amortization of prepaid finance costs
Increase (decrease) in receivables and payables
Year Ended December 31,
2001
2000
1999
19 385 476
27 668 964
5 774 676
6 831 040
14 480
10 041 605
6 831 040
14 480
(10 249 619)
6 831 039
14 480
(629 332)
Net Cash from Operating Activities
36 272 601
24 264 865
11 990 863
Financing Activities
Additional Warrant Issue Cost
Dividends paid
0
(37 564 658)
0
(24 848 957)
(17 686)
(13 103 918)
Net Cash from Financing Activities
(37 564 658)
(24 848 957)
(13 121 604)
Net (decrease) in Cash and Cash Equivalents
(1 292 057)
(584 092)
(1 130 741)
Beginning Cash and Cash Equivalents
1 922 925
2 507 017
3 637 758
Ending Cash and Cash Equivalents
630 868
1 922 925
2 507 017
Cash Paid for Interest
1 773 834
1 804 641
1 767 449
Nordic American Tanker Shipping Ltd
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2001 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 principal business of Nordic American
Tanker Shipping Limited (the ”Company”) is the charter of three Suezmax tankers 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 accounting principles
generally accepted in the United States of America necessarily includes amounts based on
estimates and assumptions made by management. Actual results could differ from those amounts.
Cash and Cash Equivalents: Cash and cash equivalents consist of deposits with original
maturities of three months or less.
Property and Equipment: Depreciation and amortization are provided on a straight-line basis
over the estimated useful lives of the assets. The Company’s property consists solely of vessels.
The estimated useful life of these vessels is 25 years.
Impairment of Long-Lived Assets: Long-lived assets are required to be reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. If the estimated undiscounted future cash flows expected to result
from the use of the asset and its eventual disposition is less than the carrying amount of the asset,
the asset is deemed impaired. The amount of the impairment is measured as the difference
between the carrying value and the fair value of the asset.
Revenue Recognition: 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 at the beginning of the quarter, 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 another panel of ship brokers mutually acceptable to the Charterer and the
Company.
Revenue from vessel charter is recognized on the basis of the number of days in the fiscal period.
Segment Information: The Company has only one type of vessels – oil tankers on bareboat
charters. As a result, management, including the chief operating decision makers, reviews
operating results solely by revenue per day and thus the Company has determined that it operates
under one reportable segment.
Interest Rate Swap: The Company uses interest rate swap to mitigate its exposure to interest rate
fluctuations on Company’s long-term debt. Interest rate swap is classified as a matched transaction.
The differential to be paid or received as interest rates change is accrued and recognized as an
adjustment to interest expense. The related amount payable to, or receivable from the counterparty,
is included in accounts receivable or accrued liabilities.
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2001 Annual Report to Shareholders
The fair value of long-term debt was determined based on borrowing rates currently available for
debt with similar terms. The fair value of the interest rate swap is based on the amount the
Company would pay or receive to terminate the swap. The fair values of cash and cash equivalents
and short-term assets and liabilities approximate their carrying value due to the short-term nature
of these instruments.
The Company is exposed to credit risk associated with the interest rate swap. However, as the
counterparty is the creditor on the long-term debt and an institution with high credit quality,
management believes the risk of default is remote.
Taxes: The company is incorporated in Bermuda. Under current Bermuda law, the Company is not
subject to corporate income taxes.
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 of qualifying hedges offset
corresponding changes in the fair value of the hedged item in the statement of operations. The
Company implemented SFAS 133 on January 1, 2001.
2.
RELATED PARTY TRANSACTION
The Company has entered into a management agreement with Ugland Nordic Shipping AS (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, 2001 11.9% of the shares.
Management fees expense was $250,000 for 2001, 2000 and 1999.
3.
REVENUE
The table below illustrates the breakdown of the charter hire for the years ended December 31,
2001, 2000 and 1999:
Period
2001
2000
1999
Base Hire
Additional Hire
14,782,500
13,577,068
14,823,000
21,754,262
14,782,500
0
Total
28,359,568
36,577,262
14,782,500
Nordic American Tanker Shipping Ltd
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2001 Annual Report to Shareholders
4.
VESSELS
The long term assets consist of 3 suezmax oil tankers built in 1997.
All Vessel
2001
2000
Aquisition cost 1997
Accumulated depreciation 31.12.
170,775,970
29,031,965
170,775,970
22,200,925
Book value as of 31.12.
141,744,005
148,575,045
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
Management fee, Ugland Nordic Shipping AS
Directors and officers insurance
Other fees and expenses
2000
2001
$ 250,000 $ 250,000 $ 250,000
$ 72,333 $ 82,500 $ 97,500
$ 31,406 $ 40,791 $ 64,004
1999
Total administrative expenses
$ 353,739 $ 373,291 $ 411,504
6.
LONG-TERM DEBT
In 1998, the Company entered into a loan agreement for $30 million with Den norske Bank ASA,
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, approximately 2.5% at December 31, 2001. Accrued
interest at December 31, 2001 and 2000 was $38,666 and $43,500. 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 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% annually for the next 3 years. The swap agreement terminates
on the final repayment date of the Loan, i.e. the 4th quarter of year 2004.
Estimated fair values and carrying amounts of long term debt are as follows:
December 31, 2001
December 31, 2000
Carrying Amount Fair Value Carrying Amount Fair Value
Long-term Debt
30,000,000
30,000,0000
30,000,000
30,000,000
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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2001 Annual Report to Shareholders
7.
EQUITY
Common
stock
Balance at 12.31.98
Net profit
Additional costs, repurchase of Shares
Dividends paid
97 066
APIC
144 395 866
97 066
144 395 866
Retained
earnings
(9 167 007)
5 774 676
(17 686)
(13 103 918)
(16 513 935)
27 668 964
(24 848 957)
Accumulated
other
comprehensive
income
-
-
-
618 094
(1 396 094)
Total
135 325 925
5 774 676
(17 686)
(13 103 918)
127 978 997
27 668 964
(24 848 957)
130 799 004
618 094
19 385 476
(37 564 658)
(1 396 094)
97 066
144 395 866
(13 693 928)
19 385 476
(37 564 658)
Balance at 12.31.99
Net profit
Dividends paid
Balance at 12.31.00
Transition adjustment
Net profit
Dividends paid
Cash flow hedges
Balance at 12.31.01
97 066
144 395 866
(31 873 110)
(778 000)
111 841 822
The only component of accumulated other comprehensive income is:
Cash flow hedges
(778 000)
-
2001
2000
Par value of the common shares is $.01. At December 31, 2001 and 2000 the number of shares
authorized, issued and outstanding was 9,706,606.
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 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
Share. In addition, the Company paid $715,000 in transaction costs. The repurchased shares were
retired.
Nordic American Tanker Shipping Ltd
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8.
DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT
2001 Annual Report to Shareholders
The company is exposed to interest rate risk from its variable rate loan of $ 30 million. The
company’s risk management objective has been to lock in the interest payments on the loan. The
company has entered into an interest rate swap where the company pays a fixed interest and
receives a variable interest and has designated this swap as a cash flow hedge of the interest
payments on the loan.
Gains or losses on the interest rate swap designated as a cash flow hedge will be deferred to
accumulated other comprehensive income and will be reclassified to earnings when the hedged
interest payments are recognized. No ineffectiveness has been recognized in earnings during 2001
since the critical terms of the interest rate swap and the hedged loan are the same. As of December
31, 2001 loss of $848,500 after tax is expected to be reclassified from accumulated other
comprehensive income to earnings during the next twelve months. The maximum length of time
that the company has hedged its exposure to variability in future interest payments is
approximately 36 months as of December 31, 2001.
The fair value of the swap of $ -778,000 is recorded as a liability as of December 31, 2001. The
fair value and carrying amount of the swap was $ 618,094 and 0, respectively, at December 31,
2000.
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 that would have a material adverse effect on future
earnings or financial position.
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