<PAGE>1
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 of
the Securities Exchange Act of 1934
-----------------------------------
For the quarterly period ended June 30, 1998
-------------
TEEKAY SHIPPING CORPORATION
(Exact name of Registrant as specified in its charter)
Fourth Floor, Euro Canadian Centre
Marlborough Street & Navy Lion Road
P.O. Box SS-6293, Nassau, Bahamas
(Address of principal executive office)
---------------------------------------
[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
----- -----
[If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):82-_______ ]
================================================================================
Page 1 of 18
<PAGE>2
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
INDEX
-----
PART I: FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Statements of Income
and Retained Earnings for the Three Months
Ended June 30, 1998 and 1997...................................3
Consolidated Balance Sheets -
June 30, 1998 and March 31, 1998...............................4
Consolidated Statements of Cash Flows
for the Three Months Ended June 30, 1998
and 1997.......................................................5
Notes to Consolidated Financial
Statements.....................................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................13
PART II: OTHER INFORMATION....................................................17
SIGNATURES....................................................................18
<PAGE>3
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
(in thousands of U.S. dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1998 1997
---- ----
$ (Unaudited) $
---- ---------- ----
<S> <C> <C>
NET VOYAGE REVENUES
Voyage revenues 109,433 98,274
Voyage expenses 22,846 24,417
- --------------------------------------------------------------------------------
Net voyage revenues 86,587 73,857
- --------------------------------------------------------------------------------
OPERATING EXPENSES
Vessel operating expenses 20,774 17,974
Time-charter hire expense 5,253 1,292
Depreciation and amortization 24,291 23,670
General and administrative 5,276 4,773
- --------------------------------------------------------------------------------
55,594 47,709
- --------------------------------------------------------------------------------
Income from vessel operations 30,993 26,148
- --------------------------------------------------------------------------------
OTHER ITEMS
Interest expense (14,034) (14,092)
Interest income 2,015 1,803
Other income (note 7) 6,474 154
- --------------------------------------------------------------------------------
(5,545) (12,135)
- --------------------------------------------------------------------------------
Net income 25,448 14,013
Retained earnings, beginning of the period 428,102 382,178
- --------------------------------------------------------------------------------
453,550 396,191
Dividends declared and paid (6,199) (6,090)
- --------------------------------------------------------------------------------
Retained earnings, end of the period 447,351 390,101
- --------------------------------------------------------------------------------
Earnings per common share (note 6)
- -basic and diluted $0.87 $0.49
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>4
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
As at As at
June 30, March 31,
1998 1998
---- ----
$ $
---- ----
(Unaudited)
-----------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents 78,651 87,953
Marketable securities (note 2) 22,238 13,448
Accounts receivable
- - trade 23,699 23,092
- - other 2,693 1,235
Prepaid expenses and other assets 14,705 13,786
- --------------------------------------------------------------------------------
Total current assets 141,986 139,514
- --------------------------------------------------------------------------------
Marketable securities (note 2) 5,059 13,853
- --------------------------------------------------------------------------------
Vessels and equipment (notes 5 and 8)
At cost, less accumulated depreciation of $489,114
(1998 - $500,779) 1,259,689 1,297,883
Advances on vessels (note 8) 31,639
- --------------------------------------------------------------------------------
Total vessels and equipment 1,291,328 1,297,883
- --------------------------------------------------------------------------------
other assets 8,841 8,933
- --------------------------------------------------------------------------------
1,447,214 1,460,183
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable 14,776 16,164
Accrued liabilities 28,521 29,195
Current portion of long-term debt (notes 5 and 9) 54,962 52,932
- --------------------------------------------------------------------------------
Total current liabilities 98,259 98,291
- --------------------------------------------------------------------------------
Long-term debt (notes 5 and 9) 571,014 672,437
- --------------------------------------------------------------------------------
Total liabilities 669,273 770,728
- --------------------------------------------------------------------------------
Stockholders' equity
Capital stock (note 6) 330,590 261,353
Retained earnings 447,351 428,102
- --------------------------------------------------------------------------------
Total stockholders' equity 777,941 689,455
- --------------------------------------------------------------------------------
1,447,214 1,460,183
================================================================================
</TABLE>
Commitments and contingencies (notes 5 and 8)
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>5
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Three Months Ended June 30,
1998 1997
---- ----
$ (Unaudited) $
---- ----
<S> <C> <C>
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income 25,448 14,013
Add charges to operations not requiring
a payment of cash and cash equivalents:
Depreciation and amortization 24,291 23,670
Gains on disposition of assets (7,117)
Other - net 346 382
Change in non-cash working capital items related to
operating activities 1,006 4,254
- --------------------------------------------------------------------------------
Net cash flow from operating activities 43,974 42,319
- --------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 30,000 35,600
Scheduled repayments of long-term debt (14,393) (14,385)
Prepayment of long-term debt (115,000)
Net proceeds from issuance of Common Stock 68,866 1,385
Cash dividends paid (5,828) (3,369)
Other (250) (158)
- --------------------------------------------------------------------------------
Net cash flow from financing activities (36,605) 19,073
- --------------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (37,720) (36,711)
Expenditures for drydocking (2,386) (4,673)
Proceeds from disposition of assets 23,435
Net cash flow from investment 6,335
- --------------------------------------------------------------------------------
Net cash flow from investing activities (16,671) (35,049)
- --------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (9,302) 26,343
Cash and cash equivalents, beginning of the period 87,953 117,523
- --------------------------------------------------------------------------------
Cash and cash equivalents, end of the period 78,651 143,866
================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>6
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars)
(Information as at June 30, 1998, and for the Three-Month
Periods Ended June 30, 1998 and 1997 is unaudited)
1. Basis of Presentation
The accompanying unaudited interim consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles in the United States and the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures required by generally accepted accounting principles for
complete annual financial statements have been omitted and, therefore,
it is suggested that these interim financial statements be read in
conjunction with the Company's audited financial statements for the
fiscal year ended March 31, 1998. In the opinion of management, these
statements reflect all adjustments (consisting only of normal recurring
accruals), necessary to present fairly, in all material respects, the
Company's consolidated financial position, results of operations and
cash flows for the interim periods presented. The results of operations
for the three-month period ended June 30, 1998 are not necessarily
indicative of those for a full fiscal year.
2. Marketable Securities
The Company's investments in marketable securities are classified as
available-for-sale securities and are carried at fair value. Net
unrealized gains or losses on available-for-sale securities, if
material, are reported as a separate component of stockholders' equity.
The Company classifies all marketable securities with a maturity date
of twelve months or less under current assets.
3. Cash Flows
Cash interest paid during the three-month periods ended June 30, 1998
and 1997 totalled approximately $7,383,000 and $5,474,000, respectively.
4. Income Taxes
The legal jurisdictions of the countries in which the Company and the
majority of its subsidiaries are incorporated do not impose income
taxes upon shipping-related activities.
5. Long-Term Debt
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
$ $
-------------------------------------------------------------------------------------
<S> <C> <C>
Revolving Credit Facility 14,000 129,000
First Preferred Ship Mortgage Notes (8.32%)
U.S. dollar debt due through 2008 225,000 225,000
First Preferred Ship Mortgage Notes ( 9 5/8%)
U.S. dollar debt due through 2003 123,718 123,718
Floating rate (LIBOR + 0.50% to 1%) U.S. dollar
debt due through 2009 263,258 247,651
-------------------------------------------------------------------------------------
625,976 725,369
Less current portion 54,962 52,932
-------------------------------------------------------------------------------------
571,014 672,437
=====================================================================================
</TABLE>
<PAGE>7
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars)
(Information as at June 30, 1998, and for the Three-Month
Periods Ended June 30, 1998 and 1997 is unaudited)
5. Long Term Debt (cont'd)
The Company has a long-term Revolving Credit Facility (the "Revolver")
available which, as at June 30, 1998 provided for borrowings of up to
$200.0 million. Interest payments are based on LIBOR plus a margin
depending on the financial leverage of the Company; at June 30, 1998
the margin was +0.50%. The Revolver is collaterized by first priority
mortgages granted on eight of the Company's Aframax tankers, together
with certain other related collateral, and a guarantee from the Company
for all amounts outstanding under the Revolver.
The 8.32% First Preferred Ship Mortgage Notes due February 1, 2008 (the
"8.32% Notes") are collaterized by first preferred mortgages on seven
of the Company's Aframax tankers, together with certain other related
collateral, and are guaranteed by seven subsidiaries of Teekay that own
the mortgaged vessels (the "8.32% Notes Guarantor Subsidiaries") to a
maximum of 95% of the fair value of their net assets. As at June 30,
1998, the fair value of these net assets approximated $237.5 million.
The 9 5/8% First Preferred Ship Mortgage Notes due July 15, 2003 (the
"9 5/8% Notes") are collateralized by first preferred mortgages on six
of the Company's Aframax tankers, together with certain other related
collateral, and are guaranteed by six subsidiaries of Teekay that own
the mortgaged vessels (the "9 5/8% Notes Guarantor Subsidiaries") to a
maximum of 95% of the fair value of their net assets. As at June 30,
1998, the fair value of these net assets approximated $166.0 million
(see Note 9 - Subsequent Events).
Condensed financial information regarding the Company, the 9 5/8% Notes
Guarantor Subsidiaries, the 8.32% Notes Guarantor Subsidiaries, and
non-guarantor subsidiaries of the Company is set out in Schedule A of
these consolidated financial statements.
As at June 30, 1998, the Company was committed to a series of interest
rate swap agreements whereby $150.0 million of the Company's floating
rate debt was swapped with fixed rate obligations having an average
remaining term of 4.5 months. The swap agreements expire between
October 1998 and December 1998. These arrangements effectively change
the Company's interest rate exposure on $150 million of debt from a
floating LIBOR rate to an average fixed rate of 5.86%. The Company is
exposed to credit loss in the event of non-performance by the counter
parties to the interest rate swap agreements; however, the Company does
not anticipate non-performance by any of the counter parties.
<PAGE>8
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars)
(Information as at June 30, 1998, and for the Three-Month
Periods Ended June 30, 1998 and 1997 is unaudited)
6. Capital Stock
Authorized
25,000,000 Preferred Stock with a par value of $1 per share
125,000,000 Common Stock with no par value
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Common Thousands Preferred Thousands of
Issued and outstanding Stock of shares Stock shares
$ $
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance March 31, 1998 261,353 28,833 0 0
June 15, 1998 Common Stock offering:
2,800,000 shares at $25.9375
per share of Common Stock (net of
share issue costs) 68,815 2,800
Reinvested dividends 371 12
Exercise of stock options 51 2
------------------------------------------------------------------------------------------------------
Balance June 30, 1998 330,590 31,647 0 0
------------------------------------------------------------------------------------------------------
</TABLE>
In June 1998, the Company completed an offering of 7,000,000 shares of
Common Stock, of which 2,800,000 shares were offered by the Company and
4,200,000 shares were offered by a selling shareholder. The Company
intends to use the net proceeds to the Company from the offering of
approximately $68.8 million, together with other funds, to redeem the
outstanding 9 5/8% Notes (see Note 9 - Subsequent Events).
The Company has reserved 1,841,750 shares of Common Stock for issuance
upon exercise of options granted pursuant to the Company's 1995 Stock
Option Plan. As at June 30, 1998, options to purchase a total of
1,728,866 shares of the Company's Common Stock were outstanding, of
which 731,460 options were then exercisable at prices ranging from
$21.50 to $33.50 per share. The options will expire between July 19,
2005 and June 13, 2008, ten years after the date of the grant.
The Company's basic earnings per share is based upon the following
weighted average number of shares of Common Stock outstanding:
29,303,499 shares at June 30, 1998; and 28,412,665 shares at June 30,
1997. Diluted earnings per share is based upon the following weighted
average number of shares of Common Stock outstanding: 29,416,055 shares
at June 30, 1998; and 28,645,310 shares at June 30, 1997.
7. Other Income (Loss)
<TABLE>
<CAPTION>
Three Months
Ended June 30
-------------
1998 1997
$ $
-------------------------------------------------------------------------
<S> <C> <C>
Gain on disposition of assets 7,117
Foreign exchange gain (loss) (81) 109
Miscellaneous - net (562) 45
-------------------------------------------------------------------------
6,474 154
=========================================================================
</TABLE>
<PAGE>9
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars)
(Information as at June 30, 1998, and for the Three-Month
Periods Ended June 30, 1998 and 1997 is unaudited)
8. Commitments and Contingencies
During the quarter ended June 30, 1998, the Company time-chartered-in
two additional Aframax tankers for periods of three and two years,
respectively.
As at June 30, 1998, the Company was committed to the construction of
two Aframax vessels for an aggregate cost of approximately $76.0
million, scheduled for delivery in July and September of 1999. As at
June 30, 1998, there had been payments made towards this commitment of
approximately $31.6 million.
9. Subsequent Events
Subsequent to June 30, 1998, the Company filed notification to redeem
the outstanding balance of its 9 5/8% Notes effective as at August 17,
1998.
<PAGE>10
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(in thousands of U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998
---------------------------------------------------------------------------------------------
9 5/8% 8.32%
Teekay Notes Notes Teekay
Shipping Guarantor Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $ $
----------- --------------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net voyage revenues 13,163 9,423 116,634 (52,633) 86,587
Operating expenses 68 5,754 9,131 93,274 (52,633) 55,594
---------------------------------------------------------------------------------------------
Income (loss) from vessel (68) 7,409 292 23,360 30,993
operations
Net interest income (expense) (7,987) 70 42 (4,144) (12,019)
Equity in net income of subsidiaries 33,503 (33,503)
Other income 12,900 (6,426) 6,474
---------------------------------------------------------------------------------------------
Net income 25,448 7,479 334 32,116 (39,929) 25,448
Retained earnings (deficit), 428,102 25,432 (34,324) 233,479 (224,587) 428,102
beginning of the year
Dividends declared and paid (6,199) (6,199)
=============================================================================================
Retained earnings (deficit), end of 447,351 32,911 (33,990) 265,595 (264,516) 447,351
the year =============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1997
---------------------------------------------------------------------------------------------
9 5/8% 8.32%
Teekay Notes Notes Teekay
Shipping Guarantor Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $ $
----------- --------------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net voyage revenues 13,162 9,086 109,908 (58,299) 73,857
Operating expenses 74 5,728 8,701 91,505 (58,299) 47,709
---------------------------------------------------------------------------------------------
Income (loss) from vessel (74) 7,434 385 18,403 26,148
operations
Net interest income (expense) (8,578) 39 51 (3,801) (12,289)
Equity in net income of subsidiaries 22,617 (22,572) 45
Other income 48 3,328 (3,267) 109
---------------------------------------------------------------------------------------------
Net income 14,013 7,473 436 17,930 (25,839) 14,013
Retained earnings (deficit), 382,178 11,056 (18,124) 144,125 (137,057) 382,178
beginning of the year
Dividends declared and paid (6,090) (6,090)
=============================================================================================
Retained earnings (deficit), end of 390,101 18,529 (17,688) 162,055 (162,896) 390,101
the year
=============================================================================================
</TABLE>
(See Note 5)
<PAGE>11
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A
CONDENSED BALANCE SHEETS
(in thousands of U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION> As at June 30, 1998
-----------------------------------------------------------------------------
9 5/8% 8.32% Teekay
Teekay Notes Notes Shipping
Shipping Guarantor Guarantor Non-Guarantor Corp. &
Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations Subsidiaries
$ $ $ $ $ $
---------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents 229 38,745 15,876 23,801 78,651
Other current assets 24 654 974 157,719 (96,036) 63,335
-----------------------------------------------------------------------------
Total current assets 253 39,399 16,850 181,520 (96,036) 141,986
Vessels and equipment (net) 126,892 321,778 842,658 1,291,328
Advances due from subsidiaries 387,212 (387,212)
Other assets (principally marketable
securities, and investments in 752,627 13,905 (752,632) 13,900
subsidiaries)
=============================================================================
1,140,092 166,291 338,628 1,038,083 (1,235,880) 1,447,214
=============================================================================
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities 13,433 1,567 1,761 177,535 (96,037) 98,259
Long-term debt 348,718 222,296 571,014
Due to (from) affiliates (15) 1,527 361,776 (363,288)
-----------------------------------------------------------------------------
Total liabilities 362,151 1,552 3,288 761,607 (459,325) 669,273
-----------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital Stock 330,590 10 23 5,933 (5,966) 330,590
Contributed capital 131,818 369,307 4,948 (506,073)
Retained earnings (deficit) 447,351 32,911 (33,990) 265,595 (264,516) 447,351
-----------------------------------------------------------------------------
Total stockholders' equity 777,941 164,739 335,340 276,476 (776,555) 777,941
-----------------------------------------------------------------------------
1,140,092 166,291 338,628 1,038,083 (1,235,880) 1,447,214
=============================================================================
</TABLE>
<TABLE>
<CAPTION> As at March 31, 1998
-----------------------------------------------------------------------------
9 5/8% 8.32% Teekay
Teekay Notes Notes Shipping
Shipping Guarantor Guarantor Non-Guarantor Corp. &
Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations Subsidiaries
$ $ $ $ $ $
---------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents 22 29,595 10,687 47,649 87,953
Other current assets 13 710 722 165,006 (114,890) 51,561
-----------------------------------------------------------------------------
Total current assets 35 30,305 11,409 212,655 (114,890) 139,514
Vessels and equipment (net) 129,050 327,460 841,373 1,297,883
Advances due from subsidiaries 324,460 (324,460)
Other assets (principally marketable
securities, and investments in 719,369 22,791 (719,374) 22,786
subsidiaries)
=============================================================================
1,043,864 159,355 338,869 1,076,819 (1,158,724) 1,460,183
=============================================================================
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities 5,691 2,113 3,126 184,840 (97,479) 98,291
Long-term debt 348,718 323,719 672,437
Due to (from) affiliates (18) 737 323,900 (324,619)
-----------------------------------------------------------------------------
Total liabilities 354,409 2,095 3,863 832,459 (422,098) 770,728
-----------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital Stock 261,353 10 23 5,933 (5,966) 261,353
Contributed capital 131,818 369,307 4,948 (506,073)
Retained earnings (deficit) 428,102 25,432 (34,324) 233,479 (224,587) 428,102
-----------------------------------------------------------------------------
Total stockholders' equity 689,455 157,260 335,006 244,360 (736,626) 689,455
-----------------------------------------------------------------------------
1,043,864 159,355 338,869 1,076,819 (1,158,724) 1,460,183
=============================================================================
</TABLE>
- -----------------
(See Note 5)
<PAGE>12
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998
-----------------------------------------------------------------------------
9 5/8% 8.32% Teekay
Teekay Notes Notes Shipping
Shipping Guarantor Guarantor Non-Guarantor Corp. &
Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations Subsidiaries
$ $ $ $ $ $
---------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents provided by
(used for)
OPERATING ACTIVITIES
-----------------------------------------------------------------------------
Net cash flow from operating activities (79) 9,474 4,684 29,895 43,974
-----------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 30,000 30,000
Prepayments of long-term debt (115,000) (115,000)
Repayments of long-term debt (14,393) (14,393)
Net proceeds from issuance of Common Stock 68,866 68,866
Other (68,580) 790 61,712 (6,078)
-----------------------------------------------------------------------------
Net cash flow from financing activities 286 790 (37,681) (36,605)
-----------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (324) (285) (37,111) (37,720)
Other 21,049 21,049
-----------------------------------------------------------------------------
Net cash flow from investing activiities (324) (285) (16,062) (16,671)
-----------------------------------------------------------------------------
Increase (decrease) in cash and 207 9,150 5,189 (23,848) (9,302)
cash equivalents
Cash and cash equivalents, 22 29,595 10,687 47,649 87,953
beginning of the year -----------------------------------------------------------------------------
Cash and cash equivalents, end of the year 229 38,745 15,876 23,801 78,651
=============================================================================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1997
-----------------------------------------------------------------------------
9 5/8% 8.32% Teekay
Teekay Notes Notes Shipping
Shipping Guarantor Guarantor Non-Guarantor Corp. &
Corp. Subsidiaries Subsidiaries Subsidiaries Eliminations Subsidiaries
$ $ $ $ $ $
---------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents provided by
(used for)
OPERATING ACTIVITIES
-----------------------------------------------------------------------------
Net cash flow from operating activities 108 9,933 5,176 27,102 42,319
-----------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 35,600 35,600
Repayments of long-term debt (14,385) (14,385)
Net proceeds from issuance of Common Stock 1,385 1,385
Other (1,273) 1 8 (2,263) (3,527)
-----------------------------------------------------------------------------
Net cash flow from financing activities 112 1 8 18,952 19,073
-----------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (1,662) (799) (38,923) (41,384)
Other 6,335 6,335
-----------------------------------------------------------------------------
Net cash flow from investing activities (1,662) (799) (32,588) (35,049)
-----------------------------------------------------------------------------
Increase (decrease) in cash and 220 8,272 4,385 13,466 26,343
cash equivalents
Cash and cash equivalents, 32 9,248 8,732 99,511 117,523
beginning of the year
-----------------------------------------------------------------------------
Cash and cash equivalents, end of the year 252 17,520 13,117 112,977 143,866
=============================================================================
</TABLE>
(See Note 5)
<PAGE>13
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
JUNE 30, 1998
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
General
Teekay Shipping Corporation (the "Company") is a leading provider of
international crude oil and petroleum product transportation services to major
oil companies, major oil traders, and government agencies, principally in the
region spanning from the Red Sea to the U.S. West Coast. The Company's fleet
consists of 46 tankers, including 42 Aframax oil tankers and oil/bulk/ore
carriers (including four vessels time-chartered-in), three smaller tankers, and
one Very Large Crude Carrier ("VLCC"), for a total cargo-carrying capacity of
approximately 4.6 million tonnes. In addition, the Company entered into an
agreement to purchase two newbuilding Aframax tankers, which are scheduled for
delivery in July and September 1999.
During the first quarter of fiscal 1999, approximately 58% of the Company's net
voyage revenue was derived from spot voyages. The balance of the Company's
revenue was generated primarily by two other modes of employment: time charters,
whereby vessels are chartered to customers for a fixed period; and contracts of
affreightment ("COAs"), whereby the Company carries an agreed quantity of cargo
for a customer over a specified trade route over a given period of time. In the
first quarter of fiscal 1999, 19% of net voyage revenues was generated by time
charters and COAs priced on a spot market basis. In the aggregate, approximately
77% of the Company's net voyage revenue during the first quarter of fiscal 1999
was derived from spot voyages or time charters and COAs priced on a spot market
basis, with the remaining 23% being derived from fixed-rate time-charters and
COAs. This dependence on the spot market, which is within industry norms,
contributes to the volatility of the Company's revenues, cash flow from
operations, and net income.
Historically, the tanker industry has been cyclical, experiencing volatility in
profitability and asset values resulting from changes in the supply of, and
demand for, vessel capacity. Additionally, tanker markets have historically
exhibited seasonal variations in charter rates. Tanker markets are typically
stronger in the winter months as a result of increased oil consumption in the
northern hemisphere and unpredictable winter weather patterns which tend to
disrupt vessel scheduling.
In December 1997, the Company acquired two vessels and related shore support
services from an Australian affiliate of Caltex Petroleum. These two tankers,
together with one of the Company's existing Aframax tankers, have been time
chartered to the Caltex affiliate in connection with the Company's provision of
Caltex's oil transportation requirements formerly provided by that affiliate.
The Company has converted one of its existing vessels to a floating storage and
off-loading vessel, which is sharing crews with the vessels employed in the
Caltex arrangement (together with the other three vessels involved in this
arrangement, the "Australian Vessels"). Vessel operating expenses for the
Australian Vessels are substantially higher than those for the rest of the
Company's fleet, primarily as a result of higher costs associated with employing
an Australian crew. The TCE rates (as defined below) for the Australian Vessels
are correspondingly higher to compensate for these increased costs. During the
first quarter of fiscal 1999, the Australian Vessels earned net voyage revenues
and an average TCE rate of $9.0 million and $25,094, respectively, and incurred
vessel operating expenses of $3.7 million, or $10,250 on a per ship per day
basis. The results of the Australian Vessels are included in the Company's
Consolidated Financial Statements included herein.
Bulk shipping industry freight rates are commonly measured at the net voyage
revenue level in terms of "time charter equivalent" (or "TCE") rates, defined as
voyage revenues less voyage expenses (excluding commissions), divided by
revenue-generating ship-days for the round-trip voyage. Voyage revenues and
voyage expenses are a function of the type of charter, either spot charter or
time charter, and port, canal and fuel costs depending on the trade route upon
which a vessel is sailing, in addition to being a function of the level of
shipping freight rates. For this reason, shipowners base economic decisions
regarding the deployment of their vessels upon anticipated TCE rates, and
industry analysts typically measure bulk shipping freight rates in terms of TCE
rates. Therefore, the discussion of revenue below focuses on net voyage revenue
and TCE rates.
<PAGE>14
First Quarter Fiscal 1999 versus First Quarter Fiscal 1998
The Company's net income was $25.4 million, or 87 cents per share, in the first
quarter of fiscal 1999, up from $14.0 million, or 49 cents per share, in the
first quarter of fiscal 1998. The current quarter's results include $7.1
million, or 24 cents per share, in gains on asset sales, while there were no
asset dispositions during the same period last year. A combination of firm
freight rates for Aframax tankers in the Indo-Pacific basin and lower bunker
fuel costs contributed to stronger results for the first quarter of fiscal 1999
in comparison to the same period one year ago.
Income from Vessel Operations
An increase in the size of the Company's fleet and an increase in freight rates
contributed to an 18.8% increase in income from vessel operations, from $26.1
million in the first quarter of fiscal 1998 to $31.0 million in the first
quarter of fiscal 1999.
The Company's average fleet size increased 10.0% in the first quarter of fiscal
1999 compared to the first quarter of fiscal 1998, as five older vessels were
sold and nine newer vessels were added to the fleet (including four
time-chartered-in vessels) since the beginning of fiscal 1998.
Net voyage revenues increased 17.2% to $86.6 million in the first quarter of
fiscal 1999, as compared to $73.9 million in the first quarter of fiscal 1998.
The increase mainly reflects a combination of the Company's increased fleet size
and an improvement in TCE rates, which includes the effect of higher TCE rates
earned by the four Australian Vessels. The Company's average TCE rate during the
first quarter of fiscal 1999, excluding the Australian Vessels, increased 2.8%
to $21,810 from $21,214 in the first quarter of fiscal 1998.
Vessel operating expenses include crewing, repairs and maintenance, insurance,
stores and lubes, and miscellaneous expenses, including communications. Vessel
operating expenses increased 15.6% to $20.8 million in the first quarter of
fiscal 1999 from $18.0 million in the first quarter of fiscal 1998, as a result
of an increase in the size of the Company's owned fleet and the higher crewing
costs associated with the Australian Vessels.
Time-charter hire expense was $5.3 million in the first quarter of fiscal 1999,
up from $1.3 million in the first quarter of fiscal 1998 as a result of four
vessels time-chartered-in by the Company during the first quarter of fiscal 1999
as compared to only one vessel time-chartered-in during the first quarter of
fiscal 1998.
Depreciation and amortization expense increased 2.6% to $24.3 million in the
first quarter of fiscal 1999 from $23.7 million in the first quarter of fiscal
1998, reflecting the increase in the size of the Company's owned fleet,
partially offset by fewer scheduled drydockings. Depreciation and amortization
expense included amortization of drydocking costs of $2.4 million in the first
quarter of fiscal 1999 and $3.3 million in the first quarter of fiscal 1998.
General and administrative expenses rose 10.5% to $5.3 million in the first
quarter of fiscal 1999 from $4.8 million in the first quarter of fiscal 1998,
mainly as the result of the hiring of additional personnel in connection with
the expansion of the Company's operations, particularly in Australia.
Interest Expense
Interest expense remained virtually unchanged at $14.0 million in the first
quarter of fiscal 1999, compared to $14.1 million in the first quarter of fiscal
1998. Interest expense is expected to decrease as the Company intends to use the
net proceeds received from the public offering of its Common Stock to redeem its
9 5/8% First Preferred Ship Mortgage Notes due 2003 in August 1998.
<PAGE>15
The following table illustrates the relationship between fleet size (measured in
ship-days), TCE performance, and operating results per calendar ship-day. To
facilitate comparison to the prior years' results, the figures in the table
below exclude the results from the Company's Australian Vessels:
<TABLE>
<CAPTION>
First Quarter First Quarter
Fiscal 1999 Fiscal 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Average number of ships 46 42
Total calendar ship-days 3,828 3,813
- -----------------------------------------------------------------------------------------------------
Voyage days (A) 3,649 3,561
- -----------------------------------------------------------------------------------------------------
Net voyage revenue before commissions (B) (000s) $79,583 $75,543
- -----------------------------------------------------------------------------------------------------
TCE (B/A) $21,810 $21,214
=====================================================================================================
Operating results per calendar ship-day:
Net voyage revenue $20,260 $19, 370
Vessel operating expense 4,785 4,799
General and administrative expense 1,259 1,252
Drydocking expense 681 857
- -----------------------------------------------------------------------------------------------------
Operating cash flow per calendar ship-day $13,535 $12,462
=====================================================================================================
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's total liquidity, including cash, marketable securities, and
undrawn long-term lines of credit, increased to $291.9 million as at June 30,
1998 from $186.3 million as at March 31, 1998, as a result of internally
generated cash and the Company's receipt of net proceeds from its issuance of
2.8 million shares of Common Stock in June 1998.
Net cash flow from operating activities rose to $44.0 million in the first
quarter of fiscal 1999 from $42.3 million in the same period one year ago,
mainly reflecting the improvement in TCE rates and the increase in the size of
the Company's fleet.
The Company's scheduled debt repayments were $14.4 million during the first
quarter of fiscal 1999, virtually unchanged from the first quarter of fiscal
1998. In addition, the Company prepaid $115.0 million of long-term debt under
its revolving credit facility (the "Revolver"). In June 1998, the Company
completed a public offering of 7.0 million shares of its Common Stock, of which
2.8 million shares were issued by the Company and 4.2 million shares were
offered by an existing shareholder, the Cirrus Trust. The Company received net
proceeds of approximately $68.8 million from the offering, which was applied
temporarily against outstanding indebtedness under the Company's Revolver and in
August 1998 is intended to be used, along with other funds, to redeem the
Company's outstanding 9 5/8% First Preferred Ship Mortgage Notes.
During the first quarter of fiscal 1999, the Company incurred capital
expenditures for vessels and equipment of $37.7 million, which includes $31.6
million in payments towards the two newbuilding double-hull Aframax tankers
scheduled for delivery in July and September 1999, and $4.6 million related to
the conversion of the floating storage and off-loading vessel. The Company
intends to pay for the remaining cost of approximately $44 million for the two
newbuildings by using existing cash balances, borrowings under the Revolver or
other debt financing. Capital expenditures for drydocking were $2.4 million in
the first quarter of fiscal 1999 compared to $4.7 million in the same period one
year ago, reflecting a reduction in scheduled drydockings.
<PAGE>16
Dividend payments during the first quarter of fiscal 1999 were $6.2 million, or
21.5 cents per share, of which $5.8 million was paid in cash and the remainder
was paid in the form of shares of common stock issued under the Company's
dividend reinvestment plan.
As part of its growth strategy, the Company will continue to consider strategic
opportunities, including the acquisition of additional vessels and the expansion
into new markets. The Company may choose to pursue such opportunities through
internal growth, joint ventures, or business acquisitions. The Company intends
to finance any future acquisitions through various sources of capital, including
internally generated cash flow, existing credit lines, additional debt
borrowings, and the issuance of additional shares of capital stock.
YEAR 2000 COMPLIANCE
The Company relies on computer systems and software to operate its business,
including applications used in chartering, shipping, communications, finance and
various administrative functions. To the extent that the Company's software
applications contain source code that is unable to appropriately interpret the
calendar year 2000 and subsequent years, some level of modification for
replacement of such applications will be necessary. The Company is reviewing all
of its systems in order to verify that they are "Year 2000 compliant" and
believes, with limited exceptions, that they will require only minor
modification. Accordingly, management does not expect Year 2000 compliance costs
to have a material adverse effect on the Company. No assurance can be given
however, that all of the Company's systems will be Year 2000 compliant or that
compliance costs or the impact of any failure by the Company to achieve full
Year 2000 compliance will not have a material adverse effect on the Company. In
addition, the Company could be adversely affected by the failure of one or more
of its customers, lenders, suppliers or other organizations with which it
conducts business to become fully Year 2000 compliant.
FORWARD-LOOKING STATEMENTS
This Report on Form 6-K for the quarterly period ended June 30, 1998 contains
forward-looking statements (as defined in Section 21E of the Securities Exchange
Act of 1934, as amended) which reflect management's current views with respect
to future events and financial performance, in particular the statements
regarding future capital expenditures including expenditures for newbuilding
vessels; the redemption of the Company's 9 5/8% First Preferred Ship Mortgage
Notes; and the Company's growth strategy and expansion. The following factors
are among those that could cause actual results to differ materially from the
forward-looking statement and that should be considered in evaluating any such
statement: changes in production of or demand for oil and petroleum products,
either generally or in particular regions, including Asia; the cyclical nature
of the tanker industry and its dependence on oil markets; greater than
anticipated levels of tanker newbuilding orders or less than anticipated rates
of tanker scrapping; the supply of tankers available to meet the demand for
transportation of petroleum products; changes in trading patterns significantly
impacting overall tanker tonnage requirements; changes in demand for modern,
high quality vessels; the Company's dependence on spot oil voyages; whether, as
is typical, oil consumption in the northern hemisphere will increase in the fall
and winter months and unpredictable weather patterns in the winter months will
tend to disrupt vessel scheduling, factors that historically have resulted in
increased oil price volatility and increased oil trading activity; environmental
and other regulation; the Company's potential inability to achieve and manage
growth; risks associated with operations outside the United States; and other
risks detailed from time to time in the Company's periodic reports filed with
the U.S. Securities and Exchange Commission. The Company may issue additional
written or oral forward-looking statements from time to time which are qualified
in their entirety by the cautionary statements contained in this paragraph and
in other reports hereafter filed by the Company with the U.S. Securities and
Exchange Commission.
<PAGE>17
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
JUNE 30, 1998
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 6-K
a. Exhibits
27.1 Financial Data Schedule
b. Reports on Form 6-K
None
THIS REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE INTO THE
REGISTRATION STATEMENT OF THE COMPANY ON FORM F-3 FILED WITH THE COMMISSION ON
OCTOBER 4, 1995.
<PAGE>18
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.
TEEKAY SHIPPING CORPORATION
Date: August 14, 1998 By: /s/ Peter S. Antturi
--------------------
Peter S. Antturi
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TEEKAY
SHIPPING CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 78,651
<SECURITIES> 22,238
<RECEIVABLES> 23,699
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 141,986
<PP&E> 1,780,442
<DEPRECIATION> 489,114
<TOTAL-ASSETS> 1,447,214
<CURRENT-LIABILITIES> 98,259
<BONDS> 571,014
0
0
<COMMON> 330,590
<OTHER-SE> 447,351
<TOTAL-LIABILITY-AND-EQUITY> 1,447,214
<SALES> 0
<TOTAL-REVENUES> 109,433
<CGS> 0
<TOTAL-COSTS> 22,846
<OTHER-EXPENSES> 55,594
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,034
<INCOME-PRETAX> 25,448
<INCOME-TAX> 0
<INCOME-CONTINUING> 25,448
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,448
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.87
</TABLE>
