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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of September, 1999
GOLDEN OCEAN GROUP LIMITED
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(Translation of registrant's name into English)
P.O. Box 265, Suite 6, Tower Hill House, Le Bordage,
St. Peter Port, GY1 3QU Channel Islands
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(Address of principal executive office)
[Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.
Form 20-F / X / Form 40-F / /
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934. Yes / / No / X /
[If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2 (b):
82-___________________________.]
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The following is the half-year financial report of
Golden Ocean Group Limited for the period ended June 30, 1999:
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CHAIRMAN'S STATEMENT
This statement accompanies Golden Ocean Group Limited's half-year
financial report for the six months to June 30th 1999. The
financial statements show Company EBITDA for the half year of
$28.8 million. On an annualised basis this is now running at a
rate of over $60 million per annum, approximately double that of
a year ago. But the statements at the same time show that the
Group net income for the six months of $4.8 million has only been
achieved after foreign exchange gains of $17.9 million. Until
revenues increase or interest expense is reduced, profitability
will continue to depend on favourable exceptional items.
The success of OPEC in restraining production and in increasing
crude prices has had a negative effect on tanker demand. One-year
time charter rates for modern VLCCs have fallen from $35,500 per
day a year ago to $25,500 per day currently. Nonetheless there
are grounds for optimism over the outlook for next year. Strong
growth in tonnage demand from the United States and East Asia
(especially South Korea) is expected and total crude tanker
utilisation is predicted to increase in 2000 by 4%
Our trading fleet now consists of 19 modern vessels of 3.3
million deadweight tons, an increase of 79% on a year previously.
Between now and the end of the year we intend to take delivery of
a further five VLCCs and this will increase our fleet by a
further 45%. The mt Opalia will be delivered to Shell in
September. We expect shortly to be able to announce employment
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for the three VLCCs to be delivered from Hitachi Zosen during
1999.
Since the middle of June we and our financial advisors, Chase
Securities Inc, have been actively pursuing a capital
restructuring for Golden Ocean with representatives of the
Company's noteholders. Those discussions are continuing. We hope
that we will be able to announce a positive result, which will
strengthen our capital structure and reduce our interest burden.
We have now resolved our dispute with SA Marine Corporation and
have withdrawn our court application in Cape Town. This followed
assurances in the court papers relating to the continuation of
our charterparties and a significant capital injection into SA
Marine.
The VLCC market currently presents owners with serious
challenges. Nonetheless we believe that the Company is in a
strong position to benefit from Asian market recovery and the
need for quality tonnage.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The Group is an international owner, operator and manager of
VLCCs and dry-bulk carriers. The Group focuses on long-term
chartering of newbuilding vessels.
FLEET REVIEW
The Group has a delivered fleet of nineteen ships, comprising
eleven dry-bulk vessels and eight VLCCs. It has on order ten
VLCCs and one dry cargo vessel and has options to purchase a
further seven VLCCs ordered by the parent company Golden Ocean
Limited. Of the delivered fleet three existing VLCCs and two dry
cargo vessels are owned by Joint Ventures. A fleet list is
included in this report.
In the first six months of 1999 there were five additions to the
fleet. In January, the third of the Group's double-hulled VLCCs,
the Golden Victory was delivered. This vessel has been placed on
a seven-year time charter to NYK. The Group also took delivery
of the Handymax Cos Hero in January which has been fixed on
bareboat charter to COSCO (Singapore) Pte. Ltd. for fifteen
years. In March, the Group took delivery of the Panamax Golden
Disa which has been fixed on a time charter to S.A. Marine
Corporation for twelve years and the VLCC New Circassia which has
been placed on a bareboat charter to Hong Kong Ming Wah Shipping
Co. for one year. The New Circassia is owned by a Joint Venture.
In June, the Group took delivery of the VLCC Pacific Lagoon which
has been placed on time charter to Euronav S.A. for one year with
an optional further year. In August, the Group took delivery of
the Panamax Golden Nerina which has been fixed on a time charter
to S.A. Marine Corporation for twelve years.
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RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999
COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998.
OPERATING REVENUES
Net operating revenues (charter income less brokers' commissions)
for the six months ended June 30, 1999 were $39.8 million
compared with $21.6 million for the six months ended June 30,
1998. This increase resulted from the expansion of the fleet.
Between July 1, 1998 and June 30, 1999 the wholly owned fleet
increased from seven to thirteen vessels. Available operating
days of 2,258 days were 74% higher in the first half of 1999 than
in the first half of 1998 (1,301 days). Total off hire for the
first six months of 1999 amounted to one day compared with four
days for the same period in 1998. Total operating revenues for
the six months ended June 30, 1999 increased by 74% to $43.9
million compared with $25.2 million for the six months ended June
30, 1998, primarily due to the expansion of the fleet.
SHARE OF EARNINGS OF JOINT VENTURES
The Company's share of earnings of Joint Ventures for the six
months ended June 30, 1999 was $4.1 million compared with $2.7
million for the same period in 1998.
Net operating revenues of the Joint Ventures grew by 120% to
$11.2 million in the six months ended June 30, 1999 compared to
$5.1 million in the six months ended June 30, 1998. This increase
in revenues resulted from the expansion of the Joint Venture
owned fleet between July 1, 1998 and June 30, 1999 from three to
five vessels. The Group's currently operating Joint Ventures are
the owning companies of the Golden Fountain, New Circassia and
Pacific Lagoon (VLCCs), and the owning companies of the Golden
Daisy and Golden Rose, both Handymaxes.
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OPERATING EXPENSES
Vessel operating costs, which include crew wages and expenses,
insurance, lubricating oils, stores and spares, repairs and
maintenance, increased by 24% to $6.2 million for the six months
ended June 30, 1999 compared with $5.0 million for the six months
ended June 30, 1998. Vessel operating costs amount to 16% of net
operating revenues for the period. This compares with 23% for
the same period in 1998. The reduction in vessel operating costs
as a proportion of net operating revenues is a reflection of the
Group chartering a higher proportion of its vessels on bareboat
rather than time charters. As at June 30, 1999 three wholly
owned VLCCs and one dry-bulk carrier were on bareboat charters.
At the same date a year previously there were two VLCCs on
bareboat charters. The Group does not bear operating costs for
vessels under bareboat charter apart from some sundry insurance
costs.
Due to the expansion the fleet, depreciation expense increased by
78% to $13.2 million for the six months ended June 30, 1999
compared with $7.4 million for the six months ended June 30,
1998.
Administrative expenses were $4.4 million for the six months
ended June 30, 1999, and were $3.8 million for the six months
ended June 30, 1998. Administrative expenses principally cover
expenses of the subsidiary agents of the Group in London and
Tokyo and affiliated agents of the Group in Hong Kong, Shanghai,
and Vancouver, together with audit, administrative and legal fees
for the Group. Where affiliated agents have been used, these
costs have been charged to the Group on an actual cost basis.
Administrative expenses for the half-year include an exceptional
charge of $1.0 million payable on the appointment of Chase
Securities Inc. as financial advisors to the Group.
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Primarily as a result of these developments, total operating
expenses increased by 46% to $25.0 million for the six months
ended June 30, 1999 compared with $17.1 million for the six
months ended June 30, 1998.
NET OPERATING INCOME
As a result of the foregoing factors, net operating income
increased by 133% to $18.9 million for the six months ended June
30, 1999, compared with $8.1 million for the six months ended
June 30, 1998. EBITDA for the six months ended June 30, 1999 was
$28.8 million, compared with $15.8 million for the six months
ended June 30, 1998, an increase of 82%.
OTHER INCOME/EXPENSES
Foreign exchange gains for the six months ended June 30, 1999
were $17.9 million compared with $11.6 million for the six months
ended June 30, 1998. The foreign exchange gains were due
principally to the appreciation of the Dollar against the Yen
since the year-end. At June 30, 1999, the exchange rate had
risen to Yen 121.0 per $1 from Yen 112.8 per $1 at December 31,
1998, an appreciation of 7% in the half-year.
Interest income, mainly from escrow funds held as security for
the Senior Notes and from the uninvested portion thereof,
amounted to $0.9 million in the six months ended June 30, 1999.
Interest expense increased by 37% to $32.2 million as compared
with $23.5 million for the six months ended June 30, 1998,
primarily due to the expansion of the fleet. The interest expense
for the six months ended June 30, 1999 represents an average
interest cost of 5.2% on interest bearing secured loans and
capital leases and an overall interest expense cost of 9.8% on
all debt including the Senior Notes. Interest expense for the
six months ended June 30, 1998 represented an average interest
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cost of 3.7% on interest bearing secured loans and capital leases
and an overall interest expense cost of 10.4% on all debt
including the Senior Notes.
NET INCOME
As a result of the foregoing, net income was $4.8 million for the
six months ended June 30, 1999, compared to a loss of $2.1
million for the six months ended June 30, 1998.
OUTLOOK FOR CURRENT YEAR
As all delivered vessels in the wholly owned fleet are on time or
bareboat charter, some of the constituent factors of net
operating income are relatively predictable. With the heavy cost
of servicing the Senior Notes a loss for the full year is
expected. However the results in the latter quarters in the year
to December 31, 1999 will vary from those in the first six months
due to among other factors the following:
(a) The Yen has depreciated against the Dollar from Yen 112.8 per
$1 at December 31, 1998 to Yen 121.0 per $1 at June 30, 1999.
Future changes in the exchange rate of Yen to Dollars will
affect the Company's result of operations.
(b) The Joint Venture owned Golden Fountain is currently employed
in the voyage charter market. Fluctuations in the market
rate for voyage charters of VLCCs will affect the results of
operations of this vessel. Management continues to monitor
market conditions for favourable time charter opportunities.
(c) The Channel Alliance is expected to redeliver on expiry of
its current charter in August and will commence a new five
year time charter to Bocimar at a daily rate of $13,750 plus
50% of any profit made on subcharters of the vessel.
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(d) The latter quarters will have the full benefit of the
earnings of the Golden Victory (delivered January 7, 1999),
Cos Hero (delivered January 12, 1999), Golden Disa (delivered
March 19, 1999), Golden Nerina (delivered August 5, 1999) and
a share of earnings of the Joint Venture owned New Circassia
(delivered March 24, 1999) and Pacific Lagoon (delivered June
29, 1999). Later quarters are expected to benefit also from
the earnings of a further five VLCCs which are scheduled for
delivery later in the year. Scheduled delivery dates are
shown in the fleet list included in this report.
LIQUIDITY AND CAPITAL RESOURCES
Total shareholders equity at June 30, 1999 was $59.6 million
compared to $54.8 million at December 31, 1998 . The increase
was due to the net profit for the half-year of $4.8 million.
Long term debt as of June 30, 1999 consists of $245.8 million of
10% Senior Notes on an accreted value basis and $537.2 million of
long term secured debt and obligations under capital leases.
At June 30, 1999 the Company had cash and cash equivalents of
$7.6 million compared with $8.5 million at December 31, 1998.
This included restricted or escrow cash of $5.2 million at June
30, 1999 and $4.9 million at December 31, 1998.
Management believes that it will be able to enter into long term
charters for each of the remaining unchartered VLCC newbuildings
and that on the strength of these charters it will be able to
arrange long term financing. In the second quarter, arrangements
have been made for the charter of the next newbuilding VLCC, the
Opalia, which is due for delivery in September. This vessel will
be fixed on a two-year bareboat charter to Shell. Management is
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now focusing on arranging suitable charters for the remaining
unfinanced VLCCs to be delivered in 1999.
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GOLDEN OCEAN GROUP LIMITED (INCORPORATED IN LIBERIA)
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN US$'000)
JUNE 30 DECEMBER 31
1999 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents 7,641 8,487
Inventories 843 549
Trade accounts receivable 30 27
Prepaid expenses and other
accounts receivable 2,671 1,358
Short term investments 14,504 28,747
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Total current assets 25,689 39,168
Vessels owned, net 512,504 420,889
Vessels under capital lease, net 132,443 107,898
Vessels under construction 117,367 132,276
Options to purchase vessels 48,654 48,654
Investment in joint ventures 5,509 1,382
Loans to joint ventures 25,666 23,012
Goodwill, net 18,050 18,439
Deferred note issue costs, net 7,245 8,917
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Total assets $893,127 $800,635
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long term debt 27,281 23,050
Obligations under capital leases 7,557 6,524
Trade accounts payable and accrued expenses 5,247 3,765
Note interest payable 9,713 9,713
Time charter income received in advance 2,689 1,949
Amounts due to related parties 177 237
Drydocking and special survey provisions 1,330 1,045
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Total current liabilities 53,994 46,283
Other loans 13,768 13,262
Long term debt 386,106 324,527
Obligations under capital leases 116,234 104,893
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Notes payable 245,837 236,372
Amounts due to shareholder 16,899 19,820
Drydocking and special survey provisions 396 611
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Total liabilities 833,234 745,768
Minority interest 313 41
SHAREHOLDERS' EQUITY
Share capital - -
Additional paid in capital 63,661 63,661
Retained deficit (4,081) (8,835)
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Total shareholder's equity 59,580 54,826
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Total liabilities and shareholders'
equity $893,127 $800,635
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GOLDEN OCEAN GROUP LIMITED (INCORPORATED IN LIBERIA)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(EXPRESSED IN US$'000)
6 months 6 months
ended ended
30/06/99 30/06/98
OPERATING REVENUES
Charter income 40,165 21,793
Brokers' commission (375) (228)
Share of earnings/(losses) of joint ventures 4,126 2,702
Interest on direct financing sub-lease - 977
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Total operating revenue 43,916 25,244
OPERATING EXPENSES
Vessel operating costs 6,229 4,970
Administrative expenses 4,385 3,766
Depreciation and amortisation expense 13,161 7,448
Amortisation of goodwill 390 390
Drydocking and special survey costs 855 528
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Total operating expenses 25,020 17,102
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Net operating income 18,896 8,142
OTHER INCOME (EXPENSES)
Foreign exchange gain 17,927 11,627
Interest income 862 2,341
Interest expense (32,249) (23,456)
Other income (expenses) (410) 214
Loss on disposal of vessels - (965)
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Net other income (expense) (13,870) (10,239)
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Net income/(loss) before minority interest 5,026 (2,097)
Minority interest (272) -
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- -Net income/(loss) 4,754 (2,097)
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Retained earnings/(deficit) at
beginning of the period (8,835) 61,578
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Retained earnings/(deficit) at
end of the period (4,081) $59,481
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ADDITIONAL FINANCIAL INFORMATION
EBITDA 28,772 15,831
Ratio of earnings to fixed charges 0.96 0.79
EBITDA to interest expense, net 0.89 0.67
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GOLDEN OCEAN GROUP LIMITED (INCORPORATED IN LIBERIA)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN US$'000)
6 months 6 months
ended ended
30/06/99 30/06/98
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss) 4,754 (2,097)
Adjustments to reconcile net income to
net cash provided by operating activities:
Foreign exchange gain (17,927) (11,627)
Depreciation and amortisation expense 13,161 7,448
Share of earnings of joint ventures (4,126) (2,702)
Loss on disposal of vessels - 965
Amortisation of note discount 9,465 7,850
Amortisation of goodwill 390 390
Amortisation of deferred note
issue costs 1,672 1,538
Interest receivable on loans to
joint ventures (162) -
Minority interest 272 -
Net change in:
Inventories (294) 126
Trade accounts receivable (5) (171)
Prepaid expenses and other
accounts receivable (1,639) (2,636)
Trade accounts payable and
accrued expenses 1,988 (5,710)
Note interest payable - 3,046
Accrued profit share - (6,243)
Time charter income received
in advance 740 (256)
Drydocking and special
survey provisions 70 528
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Net cash provided by operating activities 8,359 (9,551)
CASH FLOWS FROM INVESTING ACTIVITIES
Loans to joint ventures (2,491) (1,309)
Payments received on direct
financing sub-lease - 2,117
Additions to vessels under construction (114,414) (108,487)
Proceeds from sale of vessels - 62,540
Payments to acquire pledged investments - (13,646)
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Proceeds from redemption of investments 14,569 10,000
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Net cash used in investing activities (102,336) (48,785)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long term debt 108,760 98,223
Repayment of long term debt (8,813) (25,419)
Payment of capital lease obligations (3,837) (29,600)
Amounts due to related party (60) (666)
Repayments to shareholder (2,919) (14,455)
Proceeds of note issue - 69,140
Payments for deferred note issue costs - (2,814)
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Net cash provided by financing activities 93,131 94,409
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Net increase in cash and cash equivalents (846) 36,073
Cash and cash equivalents at
beginning of period 8,487 6,419
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Cash and cash equivalents at
end of period $7,641 $42,492
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
GOLDEN OCEAN GROUP LIMITED
(registrant)
Date: September 7, 1999 By: /s/ Fred W.Y. Cheng
_____________________
Fred W.Y. Cheng
Chairman
02052005.AA6
