FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of June, 1999
GOLDEN OCEAN GROUP LIMITED
(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
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover 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
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GOLDEN OCEAN GROUP LIMITED
QUARTERLY REPORT 31st MARCH, 1999
CHAIRMAN'S STATEMENT
This statement accompanies Golden Ocean Group Limited's report
for the first quarter of 1999. The unaudited financial
statements show a profit for the first quarter of $5.6 million
compared to a loss in the first quarter of 1998 of $1.8 million.
The main contribution to this improvement comes from a foreign
exchange gain of $13.3 million as the yen weakened against the
dollar from yen 112.8 at the year-end to yen 118.4 at March 31,
1999. During the first quarter of 1999 we took delivery of two
VLCCs, the Golden Victory and the joint venture owned New
Circassia. We also took delivery of a Panamax bulk carrier, the
Golden Disa and of the Handymax Cos Hero. With a total tonnage
of three million tons deadweight, almost double on a year ago,
Golden Ocean Group Limited now has one of the largest and most
modern fleets in the world, under independent ownership. The New
Circassia has been placed on bareboat charter to Hong Kong Ming
Wah Shipping Company for one year with an option for a further
year. The sister vessel Pacific Lagoon, due for delivery at the
end of June, also owned by a joint venture company, has fixed on
a one-year time charter. Arrangements to charter the VLCC (hull
number 1618) due for delivery from Kawasaki Heavy Industries in
August have been finalised. The vessel will be named 'Opalia'
and will be bareboat chartered to Shell for a minimum period of
two years.
We have taken action in South Africa to prevent the dismemberment
of Safmarine, one of our most important charterers, to whom we
have six bulk carriers on twelve year time charter. This follows
the sale by Safmarine of its container liner business to A P
Moller and the planned intention of distributing the $200 million
net sales proceeds to Safmarine's shareholders. Our claim is due
to be heard before the court on September 6th. In the meanwhile
the court has ruled that $200 million may not be disposed of and
ordered that $25 million of the money be placed in an escrow
account.
The key challenges facing the Company are to arrange finance for
the remaining VLCCs to be delivered in 1999 and to deal with the
interest payments due to Senior Note Holders from 2000 onward.
The two are not unconnected. We intend to have meetings with the
Note Holders commencing June 16th to negotiate a more viable
capital structure for the Company. The effects of the Asian
crisis that started in the second half of 1997 are now receding.
We continue to believe that with some of the best quality assets
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in the shipping industry Golden Ocean Group has a robust and
profitable future.
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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
A fleet list is included in this report. The Group has a
delivered fleet of seventeen ships, comprising ten dry-bulk
vessels and seven VLCCs. It has on order eleven VLCCs and two
dry cargo vessels and has options to purchase a further seven
VLCCs ordered by the parent company Golden Ocean Limited. Of the
delivered fleet, two existing VLCCs and two dry cargo vessels are
owned by Joint Ventures. One VLCC newbuilding is owned by a
Joint Venture.
In the first three months of 1999 there were four 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 Safmarine 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.
Results of Operations for the quarter ended March 31, 1999
compared to the quarter ended March 31, 1998.
Operating revenues
Net operating revenues (charter income less brokers' commissions)
for the quarter ended March 31, 1999 were $19.2 million compared
with $9.3 million for the quarter ended March 31, 1998. This
increase resulted from the expansion of the fleet. Between April
1, 1998 and March 31, 1999, the wholly owned fleet increased from
eight to thirteen vessels. Available operating days of 1,075
days were 88% higher in the first quarter of 1999 than in the
first quarter of 1998 (571 days). Total off hire for the first
three months of 1999 amounted to 1 day compared with 4 days for
the same period in 1998. Total operating revenues for the
quarter ended March 31, 1999 increased by 107% to $21.3 million
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compared with $10.3 million for the quarter ended March 31, 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 quarter
ended March 31, 1999 was $2.1 million compared with $0.5 million
for the same period in 1998.
Net operating revenues of the Joint Ventures grew by 70% to $5.1
million in the quarter ended March 31, 1999 compared to $3.0
million in the quarter ended March 31, 1998. This increase in
revenues resulted from the expansion of the Joint Venture owned
fleet between April 1, 1998 and March 31, 1999 from two to four
vessels and from improved earnings of the Golden Fountain. The
Golden Fountain achieved time charter equivalent earnings of
$36,800 per day from voyage charters in the first three months of
1999 compared to time charter earnings of $30,000 per day in the
same period in 1998. The Group's currently operating Joint
Ventures are the owning companies of the Golden Fountain and New
Circassia, both VLCCs, and the owning companies of the Golden
Daisy and Golden Rose, both Handymaxes.
Operating expenses
Vessel operating costs, which include crew wages and expenses,
insurance, lubricating oils, stores and spares, repairs and
maintenance, increased by 50% to $3.3 million for the quarter
ended March 31, 1999 compared with $2.2 million for the quarter
ended March 31, 1998. Vessel operating costs amount to 17% of
net operating revenues for the period. This compares with 24%
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 March 31, 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
100% to $6.6 million for the quarter ended March 31, 1999
compared with $3.3 million for the quarter ended March 31, 1998.
Administrative expenses were $2.7 million for the quarter ended
March 31, 1999, and were $1.8 million for the quarter ended March
31, 1998. Administrative expenses principally cover expenses of
the subsidiary agents of the Group in London and Tokyo and
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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 quarter include an exceptional
charge of $1.0 million payable on the appointment of Chase
Securities Inc. as financial advisors to the Group.
Primarily as a result of these developments, total operating
expenses increased by 71% to $13.2 million for the quarter ended
March 31, 1999 compared with $7.7 million for the quarter ended
March 31, 1998.
Net operating income
As a result of the foregoing factors, net operating income
increased by 224% to $8.1 million for the quarter ended March 31,
1999, compared with $2.5 million for the quarter ended March 31,
1998. EBITDA for the quarter ended March 31, 1999 was $13.2
million, compared with $6.7 million for the quarter ended March
31, 1998, an increase of 97%.
Other income/expenses
Foreign exchange gains for the quarter ended March 31, 1999 were
$13.3 million compared with $4.5 million for the quarter ended
March 31, 1998. The foreign exchange gains were due principally
to the appreciation of the Dollar against the Yen since the year-
end. At March 31, 1999, the exchange rate had risen to Yen 118.4
per $1 from Yen 112.8 per $1 at December 31, 1998, an
appreciation of 5% in the quarter.
Interest income, mainly from escrow funds held as security for
the Senior Notes and from the uninvested portion thereof,
amounted to $0.7 million in the quarter ended March 31, 1999.
Interest expense increased by 64% to $16.2 million as compared
with $9.9 million for the quarter ended March 31, 1998, primarily
due to the issuance of the Senior Notes. The interest expense
for the quarter ended March 31, 1999 represents an average
interest cost of 5.1% on interest bearing secured loans and
capital leases and an overall interest expense cost of 9.6% on
all debt including the Senior Notes. Interest expense for the
quarter ended March 31, 1998 represented an average interest cost
of 4.3% on interest bearing secured loans and capital leases and
an overall interest expense cost of 8.5% on all debt including
the Senior Notes.
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Net income
As a result of the foregoing, net income was $5.6 million for the
quarter ended March 31, 1999, compared to a loss of $1.8 million
for the quarter ended March 31, 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 three
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 118.4 per $1 at March 31,
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.
(d) The second and subsequent quarters will have the full benefit
of the earnings of the Golden Victory (delivered January 7,
1999), Cos Hero (delivered January 12, 1999) and Golden Disa
(delivered March 19, 1999) and a 50% share of earnings of the
Joint Venture owned New Circassia (delivered March 24, 1999).
Later quarters are expected to benefit also from the earnings
of a further five VLCCs and one dry-bulk carrier 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 March 31, 1999 was $60.4 million
compared to $54.8 million at December 31, 1998 . The increase
was due to the net profit for the quarter of $5.6 million.
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Long term debt as of March 31, 1998 consists of $241.0 million of
10% Senior Notes on an accreted value basis and $547.6 million of
long term secured debt and obligations under capital leases.
At March 31, 1999, the Company had cash and cash equivalents of
$10.7 million compared with $8.5 million at December 31, 1998.
This included restricted or escrow cash of $5.4 million at March
31, 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 uncharted VLCC newbuildings and that on
the strength of these charters it will be able to arrange long
term financing. Since release of the company's annual report,
arrangements have been made for the charter of the next
newbuilding VLCC, the Pacific Lagoon, which is due for delivery
in June. This vessel will be fixed on a one-year time charter at
$24,100 per day plus 40% of sub-charter earnings above $28,000
per day. The Joint Venture owning company will reimburse 50% of
the charterer's losses on sub-charters of the vessel subject to a
maximum claim of $1,250 per day. This vessel has committed
financing sufficient to pay the remaining instalments due to the
shipyard. Management is now focusing on arranging suitable long-
term charters for the unfinanced VLCCs to be delivered in 1999,
the first two of which are due for delivery in July and
September.
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GOLDEN OCEAN GROUP LIMITED (INCORPORATED IN LIBERIA)
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN US$'000)
March 31 December 31
1999 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents 10,720 8,487
Inventories 616 549
Trade accounts receivable 33 27
Prepaid expenses and other accounts receivable 2,832 1,358
Short term investments 14,375 28,747
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Total current assets 28,576 39,168
Vessels owned, net 517,524 420,889
Vessels under capital lease, net 133,559 107,898
Vessels under construction 111,520 132,276
Options to purchase vessels 48,654 48,654
Investment in joint ventures 3,484 1,382
Loans to joint ventures 23,781 23,012
Goodwill, net 18,245 18,439
Deferred note issue costs, net 8,082 8,917
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Total assets $893,425 $800,635
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long term debt 26,596 23,050
Obligations under capital leases 7,634 6,524
Trade accounts payable and accrued expenses 5,614 3,765
Note interest payable 2,428 9,713
Time charter income received in advance 2,496 1,949
Amounts due to related parties 236 237
Drydocking and special survey provisions 1,188 1,045
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Total current liabilities 46,192 46,283
Other loans 13,515 13,262
Long term debt 392,375 324,527
Obligations under capital leases 121,032 104,893
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Notes payable 241,043 236,372
Amounts due to shareholder 17,828 19,820
Drydocking and special survey provisions 917 611
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Total liabilities 832,902 745,768
Minority interest 140 41
SHAREHOLDERS' EQUITY
Share capital - -
Additional paid in capital 63,661 63,661
Retained deficit (3,278) (8,835)
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Total shareholder's equity 60,383 54,826
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Total liabilities and shareholders' equity $893,425 $800,635
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GOLDEN OCEAN GROUP LIMITED (INCORPORATED IN LIBERIA)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(EXPRESSED IN US$'000)
3 months 3 months
ended ended
March 31, 1999 March 31, 1998
OPERATING REVENUES
Charter income 19,416 9,369
Brokers' commission (187) (112)
Share of earnings/(losses) of joint ventures 2,102 528
Interest on direct financing sub-lease - 499
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Total operating revenue 21,331 10,284
OPERATING EXPENSES
Vessel operating costs 3,302 2,202
Administrative expenses 2,718 1,752
Depreciation and amortisation expense 6,574 3,323
Amortisation of goodwill 195 195
Drydocking and special survey costs 436 263
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Total operating expenses 13,225 7,735
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Net operating income 8,106 2,549
OTHER INCOME (EXPENSES)
Foreign exchange gain 13,309 4,476
Interest income 653 1,112
Interest expense (16,207) (9,937)
Other income (expenses) (205) -
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Net other income (expense) (2,450) (4,349)
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Net income/(loss) before minority interest 5,656 (1,800)
Minority interest (99) -
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Net income/(loss) 5,557 (1,800)
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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
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period (3,278) $59,778
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ADDITIONAL FINANCIAL INFORMATION
EBITDA 13,221 6,650
Ratio of earnings to fixed charges 1.09 0.60
EBITDA to interest expense, net 0.82 0.67
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GOLDEN OCEAN GROUP LIMITED (INCORPORATED IN LIBERIA)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN US$'000)
3 months 3 months
ended ended
March 31, 1999 March 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 5,557 (1,800)
Adjustments to reconcile net income to net
cash provided by operating activities:
Foreign exchange gain (13,309) (4,476)
Depreciation and amortisation expense 6,574 3,323
Share of earnings of joint ventures (2,102) (528)
Amortisation of note discount 4,671 3,418
Amortisation of goodwill 195 195
Amortisation of deferred note issue costs 836 702
Interest receivable on loans to joint ventures (107) -
Minority interest 99 -
Net change in:
Inventories (67) (69)
Trade accounts receivable (6) (31)
Prepaid expenses and other
accounts receivable (1,671) (2,157)
Trade accounts payable
and accrued expenses 2,102 1,075
Note interest payable (7,284) (4,238)
Accrued profit share - (6,243)
Time charter income received in advance 547 804
Drydocking and special survey provisions 448 264
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Net cash used in by operating activities (3,517) (9,761)
CASH FLOWS FROM INVESTING ACTIVITIES
Loans to joint ventures (661) (993)
Payments received on direct financing sub-lease - 506
Additions to vessels under construction (108,116) (97,237)
Proceeds from sale of vessels - 40,000
Payments to acquire pledged investments - (13,646)
Proceeds from redemption of investments 14,569 10,000
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Net cash used in investing activities (94,208) (61,370)
CASH FLOWS FROM FINANCING ACTIVITIES
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Proceeds from long term debt 108,760 90,266
Repayment of long term debt (5,088) (1,809)
Payment of capital lease obligations (1,721) (27,514)
Amounts due to related party (1) (208)
Repayments to shareholder (1,992) (3,649)
Proceeds of note issue - 69,140
Payments for deferred note issue costs - (2,814)
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Net cash provided by financing activities 99,958 123,412
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Net increase in cash and cash equivalents 2,233 52,281
Cash and cash equivalents at beginning of period 8,487 6,419
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Cash and cash equivalents at end of period $10,720 $58,700
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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)
Dated: June 22, 1999 By: /s/Fred W.Y. Cheng
Fred W.Y. Cheng
Chairman
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