<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 September 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, The 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>2
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
INDEX
PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income
and Retained Earnings for the three and six months
ended September 30, 1998 and 1997.............................3
Consolidated Balance Sheets -
September 30, 1998 and March 31, 1998.........................4
Consolidated Statements of Cash Flows
for the six months ended September 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......................14
PART II: OTHER INFORMATION...................................................20
SIGNATURES....................................................................22
<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 Six Months Ended
September 30, September 30,
1998 1997 1998 1997
$ (Unaudited) $ $ (Unaudited) $
<S> <C> <C> <C> <C>
NET VOYAGE REVENUES
Voyage revenues 112,209 99,705 221,642 197,979
Voyage expenses 23,600 27,597 46,446 52,014
- ----------------------------------------------------------------------------------------------------------------------
Net voyage revenues 88,609 72,108 175,196 145,965
- ----------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Vessel operating expenses 21,003 18,610 41,777 36,584
Time-charter hire expense 8,372 2,764 13,625 4,056
Depreciation and amortization 23,626 23,924 47,917 47,594
General and administrative 5,811 4,916 11,087 9,689
- ----------------------------------------------------------------------------------------------------------------------
58,812 50,214 114,406 97,923
- ----------------------------------------------------------------------------------------------------------------------
Income from vessel operations 29,797 21,894 60,790 48,042
- ----------------------------------------------------------------------------------------------------------------------
OTHER ITEMS
Interest expense (10,858) (14,688) (24,892) (28,780)
Interest income 1,653 2,089 3,668 3,892
Other income (loss) (note 7) (301) 2,977 6,173 3,131
- ----------------------------------------------------------------------------------------------------------------------
(9,506) (9,622) (15,051) (21,757)
- ----------------------------------------------------------------------------------------------------------------------
Net income before extraordinary loss 20,291 12,272 45,739 26,285
Extraordinary loss on bond redemption (7,306) (7,306)
(note 5)
- ----------------------------------------------------------------------------------------------------------------------
Net income 12,985 12,272 38,433 26,285
Retained earnings, beginning of the period 447,351 390,101 428,102 382,177
- ----------------------------------------------------------------------------------------------------------------------
460,336 402,373 466,535 408,462
Dividends declared and paid (6,804) (6,125) (13,003) (12,214)
- ----------------------------------------------------------------------------------------------------------------------
Retained earnings, end of the period 453,532 396,248 453,532 396,248
- ----------------------------------------------------------------------------------------------------------------------
Basic Earnings per Common Share (note 6):
Net income before extraordinary loss $0.64 $0.43 $1.50 $0.92
Net income $0.41 $0.43 $1.26 $0.92
Diluted Earnings per Common Share (note
6):
Net income before extraordinary loss $0.64 $0.43 $1.50 $0.91
Net income $0.41 $0.43 $1.26 $0.91
- ----------------------------------------------------------------------------------------------------------------------
</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
September 30, March 31,
1998 1998
$ $
(Unaudited)
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents 102,629 87,953
Marketable securities (note 2) 21,230 13,448
Accounts receivable 21,691 24,327
Prepaid expenses and other assets 13,498 13,786
------------------------------------------------------- -- ---------------- ---- -------------
Total current assets 159,048 139,514
------------------------------------------------------- -- ---------------- ---- -------------
Marketable securities (note 2) 5,060 13,853
Vessels and equipment (notes 5 and 8)
At cost, less accumulated depreciation of $512,150
(March 31, 1998 - $500,779) 1,244,419 1,297,883
Advances on vessels 31,717
------------------------------------------------------- -- ---------------- ---- -------------
Total vessels and equipment 1,276,136 1,297,883
------------------------------------------------------- -- ---------------- ---- -------------
Other assets 6,272 8,933
------------------------------------------------------- -- ---------------- ---- -------------
1,446,516 1,460,183
------------------------------------------------------- -- ---------------- ---- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable 12,418 16,164
Accrued liabilities 23,312 29,195
Current portion of long-term debt (note 5) 29,994 52,932
------------------------------------------------------- -- ---------------- ---- -------------
Total current liabilities 65,724 98,291
------------------------------------------------------- -- ---------------- ---- -------------
Long-term debt (note 5) 596,706 672,437
------------------------------------------------------- -- ---------------- ---- -------------
Total liabilities 662,430 770,728
------------------------------------------------------- -- ---------------- ---- -------------
Stockholders' equity
Capital stock (note 6) 330,554 261,353
Retained earnings 453,532 428,102
------------------------------------------------------- -- ---------------- ---- -------------
Total stockholders' equity 784,086 689,455
------------------------------------------------------- -- ---------------- ---- -------------
1,446,516 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>
Six Months Ended September 30,
1998 1997
$ $
(Unaudited)
<S> <C> <C>
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income 38,433 26,285
Add (deduct) charges to operations not requiring
a payment of cash and cash equivalents:
Depreciation and amortization 47,917 47,594
Gain on disposition of assets (7,117) (3,914)
Extraordinary loss on bond redemption 7,306
Other - net 633 1,528
Change in non-cash working capital items related to
operating activities (1,362) 2,972
- ------------------------------------------------------ ----------- ------------ ---------- ------------- ---
Net cash flow from operating activities 85,810 74,465
- ------------------------------------------------------ ----------- ------------ ---------- ------------- ---
FINANCING ACTIVITIES
Proceeds from long-term debt 155,000 35,600
Scheduled repayments of long-term debt (39,951) (19,083)
Prepayment of long-term debt (218,679) (27,408)
Net proceeds from issuance of Common Stock 68,824 4,269
Cash dividends paid (12,626) (6,746)
Other (307) (171)
- ------------------------------------------------------ ----------- ------------ ---------- ------------- ---
Net cash flow from financing activities (47,739) (13,539)
- ------------------------------------------------------ ----------- ------------ ---------- ------------- ---
INVESTING ACTIVITIES
Expenditures for vessels and equipment (41,860) (38,617)
Expenditures for drydocking (5,970) (9,618)
Net cash flow from investment 6,335
Proceeds from disposition of assets 23,435
Proceeds on sale of available-for-sale securities 1,000 9,945
Purchases of available-for-sale securities (37,339)
Other (446)
- ------------------------------------------------------ ----------- ------------ ---------- ------------- ---
Net cash flow from investing activities (23,395) (69,740)
- ------------------------------------------------------ ----------- ------------ ---------- ------------- ---
Increase (decrease) in cash and cash equivalents 14,676 (8,814)
Cash and cash equivalents, beginning of the period 87,953 117,523
- ------------------------------------------------------ ----------- ------------ ---------- ------------- ---
Cash and cash equivalents, end of the period 102,629 108,709
- ------------------------------------------------------ ----------- ------------ ---------- ------------- ---
</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 September 30, 1998, and for the Three-Month
and Six-Month Periods Ended September 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 and six-month periods ended September 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 six-month periods ended September 30,
1998 and 1997 totalled approximately $28,316,000 and $28,826,000,
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>
September 30, March 31,
1998 1998
$ $
-- ------------------------------------------------------- --- ---------------- ----- ------------- ----
<S> <C> <C>
Revolving Credit Facility 139,000 129,000
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
Floating rate (LIBOR + 0.50% to 1%)
U.S. dollar debt due through 2009 262,700 247,651
-- ------------------------------------------------------- --- ---------------- ----- ------------- ----
626,700 725,369
Less current portion of long-term debt 29,994 52,932
-- ------------------------------------------------------- --- ---------------- ----- ------------- ----
596,706 672,437
-- ------------------------------------------------------- --- ---------------- ----- ------------- ----
</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 September 30, 1998, and for the Three-Month
and Six-Month Periods Ended September 30, 1998 and 1997 is unaudited)
5. Long Term Debt (cont'd)
In August 1998, the Company redeemed the remaining $98.7 million of
the 9 5/8% First Preferred Ship Mortgage Notes ("the 9 5/8% Notes")
which resulted in an extraordinary loss of $7.3 million, or 23 cents
and 24 cents per share for the three and six months ended
September 30, 1998, respectively. The redemption of the 9 5/8% Notes
was financed by a public offering of Common Stock in June 1998 (see
Note 6 - Capital Stock) and existing cash balances.
The Company has a long-term Revolving Credit Facility (the "Revolver")
available which, as at September 30, 1998, provided for borrowings of
up to $190.0 million. Interest payments are based on LIBOR plus a
margin depending on the financial leverage of the Company; at
September 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 collateralized 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 September 30, 1998, the fair value of these net assets
approximated $201.5 million.
Condensed financial information regarding the Company, 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 September 30, 1998, the Company was committed to a series of
interest rate swap agreements whereby $150 million of the Company's
floating rate debt was swapped with fixed rate obligations having an
average remaining term of 1.5 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 September 30, 1998, and for the Three-Month
and Six-Month Periods Ended September 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
Stock of shares Stock of shares
Issued and outstanding $ $
----------------------------------------- -- ----------- -- ------------ -- ----------- - ------------- --
<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) 68,773 2,800
Reinvested dividends 377 18
Exercise of stock options 51 2
----------------------------------------- -- ----------- -- ------------ -- ----------- - ------------- --
Balance September 30, 1998 330,554 31,653 0 0
----------------------------------------- -- ----------- -- ------------ -- ----------- - ------------- --
</TABLE>
In June 1998, the Company completed a public 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 used its net proceeds from the offering of
approximately $68.8 million, together with other funds, to redeem the
outstanding 9 5/8% Notes. (See Note 5 - Long Term Debt).
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 September 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:
31,647,505 shares and 30,481,906 shares for the three and six months
ended September 30, 1998, respectively; and 28,617,157 shares and
28,515,470 shares for the three and six months ended September 30,
1997, respectively. Diluted earnings per share is based upon the
following weighted average number of shares of Common Stock
outstanding: 31,647,505 shares and 30,537,491 shares for the three and
six months ended September 30, 1998, respectively; and 28,868,322
shares and 28,739,938 shares for the three and six months ended
September 30, 1997.
7. Other Income (Loss)
<TABLE>
<CAPTION>
Three Months Six Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
$ $ $ $
--------------------------------------- --- ----------- -- ---------- -- -------- ----------- -- ---------- ---
<S> <C> <C> <C> <C>
Gain on disposition of assets 3,914 7,117 3,914
Loss on repurchase of 9 5/8% Notes (761) (761)
Miscellaneous - net (301) (176) (944) (22)
--------------------------------------- --- ----------- -- ---------- -- -------- ----------- -- ---------- ---
(301) 2,977 6,173 3,131
--------------------------------------- --- ----------- -- ---------- -- -------- ----------- -- ---------- ---
</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 September 30, 1998, and for the Three-Month
and Six-Month Periods Ended September 30, 1998 and 1997 is unaudited)
8. Commitments and Contingencies
As at September 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 September 30, 1998 there had been payments made towards this
commitment of approximately $31.7 million.
<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 September 30, 1998
---------------------------------------------------------------------
Teekay 8.32% Notes Teekay
Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
----------- -------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Net voyage revenues 9,399 120,827 (41,617) 88,609
Operating expenses 220 9,241 90,968 (41,617) 58,812
----------------------------------------------------------------------
Income (loss) from vessel
operations (220) 158 29,859 29,797
Net interest income (expense) (5,118) 39 (4,126) (9,205)
Equity in net income of subsidiaries 25,629 (25,629)
Other income (loss) 6,027 (6,328) (301)
----------------------------------------------------------------------
Net income before extraordinary items 20,291 197 31,760 (31,957) 20,291
Extraordinary loss on bond redemption (7,306) (7,306)
----------------------------------------------------------------------
Net income (loss) 12,985 197 31,760 (31,957) 12,985
Retained earnings (deficit),
beginning of the period 447,351 (33,990) 298,506 (264,516) 447,351
Dividends declared and paid (6,804) (6,804)
----------------------------------------------------------------------
Retained earnings (deficit), end of
the period 453,532 (33,793) 330,266 (296,473) 453,532
======================================================================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended September 30, 1997
------------------------------------------------------------------------
Teekay 8.32% Notes Non- Teekay
Shipping Guarantor Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Net voyage revenues 9,322 123,103 (60,317) 72,108
Operating expenses 307 8,581 101,643 (60,317) 50,214
------------------------------------------------------------------------
Income (loss) from vessel
operations (307) 741 21,460 21,894
Net interest income (expense) (8,365) 124 (4,358) (12,599)
Equity in net income of subsidiaries 21,657 (21,657)
Other income (loss) (713) (9,241) 12,931 2,977
------------------------------------------------------------------------
Net income 12,272 865 7,861 (8,726) 12,272
Retained earnings (deficit),
beginning of the period 390,101 (17,688) 180,584 (162,896) 390,101
Dividends declared and paid (6,125) (9,345) (8,400) 17,745 (6,125)
------------------------------------------------------------------------
Retained earnings (deficit), end of
the period 396,248 (26,168) 180,045 (153,877) 396,248
========================================================================
</TABLE>
(See Note 5)
<PAGE>11
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(in thousands of U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended September 30, 1998
--------------------------------------------------------------------
Teekay 8.32% Notes Teekay
Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations &Subsidiaries
$ $ $ $ $
---------- ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Net voyage revenues 18,822 250,624 (94,250) 175,196
Operating expenses 534 18,372 189,750 (94,250) 114,406
--------------------------------------------------------------------
Income (loss) from vessel
operations (534) 450 60,874 60,790
Net interest income (expense) (12,859) 81 (8,446) (21,224)
Equity in net income of subsidiaries 59,132 (59,132)
Other income 18,927 (12,754) 6,173
--------------------------------------------------------------------
Net income (loss) before
extraordinary loss 45,739 531 71,355 (71,886) 45,739
Extraordinary loss on bond redemption (7,306) (7,306)
--------------------------------------------------------------------
Net income (loss) 38,433 531 71,355 (71,886) 38,433
Retained earnings (deficit),
beginning of the period 428,102 (34,324) 258,911 (224,587) 428,102
Dividends declared and paid (13,003) (13,003)
--------------------------------------------------------------------
Retained earnings (deficit), end of 453,532 (33,793) 330,266 (296,473) 453,532
the period
====================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended September 30, 1997
--------------------------------------------------------------------
Teekay 8.32% Notes Teekay
Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
---------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Net voyage revenues 18,408 246,173 (118,616) 145,965
Operating expenses 642 17,282 198,615 (118,616) 97,923
--------------------------------------------------------------------
Income (loss) from vessel
operations (642) 1,126 47,558 48,042
Net interest income (expense) (16,682) 174 (8,380) (24,888)
Equity in net income of subsidiaries 44,274 (44,229) 45
Other income (loss) (665) 10,430 (6,679) 3,086
--------------------------------------------------------------------
Net income 26,285 1,300 49,608 (50,908) 26,285
Retained earnings (deficit),
beginning of the period 382,177 (18,124) 155,181 (137,057) 382,177
Dividends declared and paid (12,214) (9,345) (8,400) 17,745 (12,214)
--------------------------------------------------------------------
Retained earnings (deficit), end of
the period 396,248 (26,169) 196,389 (170,220) 396,248
====================================================================
</TABLE>
(See Note 5)
<PAGE>12
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A
CONDENSED BALANCE SHEETS
(in thousands of U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
As at September 30, 1998
--------------------------------------------------------------------
Teekay 8.32% Notes Teekay
Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
----------- -------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents 160 21,584 80,885 102,629
Other current assets 26 699 151,285 (95,591) 56,419
--------------------------------------------------------------------
Total current assets 186 22,283 232,170 (95,591) 159,048
Vessels and equipment (net) 317,173 958,963 1,276,136
Advances due from subsidiaries 236,319 (236,319)
Other assets (principally marketable securities
and investments in subsidiaries) 775,731 11,337 (775,736) 11,332
--------------------------------------------------------------------
1,012,236 339,456 1,202,470 (1,107,646) 1,446,516
====================================================================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities 3,150 1,530 157,042 (95,998) 65,724
Long-term debt 225,000 371,706 596,706
Due to (from) affiliates 2,389 200,747 (203,136)
--------------------------------------------------------------------
Total liabilities 228,150 3,919 729,495 (299,134) 662,430
--------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital Stock 330,554 23 5,943 (5,966) 330,554
Contributed capital 369,307 136,766 (506,073)
Retained earnings (deficit) 453,532 (33,793) 330,266 (296,473) 453,532
--------------------------------------------------------------------
Total stockholders' equity 784,086 335,537 472,975 (808,512) 784,086
--------------------------------------------------------------------
1,012,236 339,456 1,202,470 (1,107,646) 1,446,516
====================================================================
</TABLE>
<TABLE>
<CAPTION>
As at March 31, 1998
---------------------------------------------------------------------
Teekay 8.32% Notes Teekay
Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
----------- -------------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents 22 10,687 77,244 87,953
Other current assets 13 722 165,716 (114,890) 51,561
-------------------------------------------------------------------
Total current assets 35 11,409 242,960 (114,890) 139,514
Vessels and equipment (net) 327,460 970,423 1,297,883
Advances due from subsidiaries 324,460 (324,460)
Other assets (principally marketable securities
and investments in subsidiaries) 719,369 22,791 (719,374) 22,786
-------------------------------------------------------------------
1,043,864 338,869 1,236,174 (1,158,724) 1,460,183
===================================================================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities 5,691 3,126 186,953 (97,479) 98,291
Long-term debt 348,718 323,719 672,437
Due to (from) parent 737 323,882 (324,619)
-------------------------------------------------------------------
Total liabilities 354,409 3,863 834,554 (422,098) 770,728
-------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital Stock 261,353 23 5,943 (5,966) 261,353
Contributed capital 369,307 136,766 (506,073)
Retained earnings (deficit) 428,102 (34,324) 258,911 (224,587) 428,102
-------------------------------------------------------------------
Total stockholders' equity 689,455 335,006 401,620 (736,626) 689,455
-------------------------------------------------------------------
1,043,864 338,869 1,236,174 (1,158,724) 1,460,183
===================================================================
</TABLE>
(See Note 5)
<PAGE>13
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended September 30, 1998
---------------------------------------------------------------------
Teekay 8.32% Notes Teekay
Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
----------- -------------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
-------------------------------------------------------------------
Net cash flow from operating activities (15,522) 10,503 90,829 85,810
-------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 155,000 155,000
Prepayments of long-term debt (103,679) (115,000) (218,679)
Repayments of long-term debt (25,000) (14,951) (39,951)
Net proceeds from issuance of Common Stock 68,824 68,824
Other 75,515 1,652 (90,100) (12,933)
-------------------------------------------------------------------
Net cash flow from financing activities 15,660 1,652 (65,051) (47,739)
-------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (1,258) (40,602) (41,860)
Other 18,465 18,465
-------------------------------------------------------------------
Net cash flow from investing activities (1,258) (22,137) (23,395)
-------------------------------------------------------------------
Increase in cash and cash equivalents 138 10,897 3,641 14,676
Cash and cash equivalents, beginning of the
period 22 10,687 77,244 87,953
-------------------------------------------------------------------
Cash and cash equivalents, end of the period 160 21,584 80,885 102,629
===================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended September 30, 1997
-----------------------------------------------------------------------
Teekay 8.32% Notes Teekay
Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
---------- -------------- ------------ ------------- -----------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
----------------------------------------------------------------------
Net cash flow from operating activities (36,610) 11,824 99,251 74,465
----------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 35,600 35,600
Prepayments of long-term debt (8,854) (18,554) (27,408)
Repayments of long-term debt (19,083) (19,083)
Net proceeds from issuance of Common Stock 4,269 4,269
Other 23,616 (9,331) (21,202) (6,917)
----------------------------------------------------------------------
Net cash flow from financing activities 19,031 (9,331) (23,239) (13,539)
----------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (1,364) (46,871) (48,235)
Other 17,745 (39,250) (21,505)
----------------------------------------------------------------------
Net cash flow from investing activities 17,745 (1,364) (86,121) (69,740)
----------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 166 1,129 (10,109) (8,814)
Cash and cash equivalents, beginning of the
period 32 8,732 108,759 117,523
----------------------------------------------------------------------
Cash and cash equivalents, end of the period 198 9,861 98,650 108,709
======================================================================
</TABLE>
<PAGE>14
(See Note 5)
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
SEPTEMBER 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 47 tankers, including 43 Aframax oil tankers and
oil/bulk/ore carriers (including five vessels time-chartered-in), three
smaller tankers, and one Very Large Crude Carrier ("VLCC"), for a total
cargo-carrying capacity of approximately 4.7 million tonnes. In addition, the
Company has entered into an agreement to purchase two newbuilding Aframax
tankers, which are scheduled for delivery in July and September 1999.
During the first half of fiscal 1999, approximately 59% of the Company's net
voyage revenue were derived from spot voyages. The balance of the Company's
revenue is generated primarily by two other modes of employment: time charters,
whereby vessels are chartered to customers for a fixed period; and by contracts
of affreightment ("COAs"), whereby the Company carries an agreed quantity of
cargo for a customer over a specified trade route over a specified period of
time. In the first half of fiscal 1999, 15% of net voyage revenues was generated
by time charters and COA's priced on a spot market basis. In the aggregate,
approximately 74% of the Company's net voyage revenues during the first half
of fiscal 1999 was derived from spot voyages or time charters and COA's
priced on a spot market basis, with the remaining 26% being derived from fixed
rate time-charters and COA's. This dependence on the spot market, which is
within industry norms, contributes to the volatility of the Company's
revenue, 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 the 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 half of fiscal 1999, the Australian
Vessels earned net voyage revenues and an average TCE rate of $18.7 million
and $25,855 respectively, and incurred vessel operating expenses of $7.5
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>15
Three Months Ended September 30, 1998 versus Three Months Ended September 30,
1997
The Company's net income before extraordinary items was $20.3 million, or
64 cents per share, in the second quarter of fiscal 1999, up from $12.3 million,
or 43 cents per share, in the second quarter of fiscal 1998. Net income after
extraordinary items was $13.0 million, or 41 cents per share, for the current
quarter, which included an extraordinary loss of $7.3 million , or 23 cents
per share, arising from the redemption of the Company's 9 5/8% First
Preferred Ship Mortgage Notes (the "9 5/8% Notes"). There were no asset sales
in the current quarter, in comparison to a gain on sale of assets of $3.9
million, or 14 cents per share, for the same quarter last year. The improvement
in earnings is primarily the result of higher TCE rates and an increase in the
Company's fleet size. In the second quarter of fiscal 1999, the Company earned
an average TCE rate of $22,187, up 11.9% from $19,834 in the second quarter of
fiscal 1998. The Company's average fleet size was 7.7% larger in the second
quarter of fiscal 1999 than in the second quarter of fiscal 1998, as four older
tankers were sold and eight newer vessels were added to the Company's fleet
(including three time-chartered-in vessels) since the end of the second quarter
of fiscal 1998.
Aframax TCE rates on the Gulf-East routes remained firm throughout most of
the current quarter but declined significantly near the end of September 1998.
At October 31, 1998, average Aframax TCE rates on the Gulf-East routes, as
published by industry sources, had dropped nearly 50% from their peaks for
the second quarter of fiscal 1999, and had declined to approximately 55% of
the average rates for the entire quarter. In the near-term, the Company believes
that TCE rates will remain weak as a result of a reduction in oil demand,
particularly in Asia, relatively high world oil inventories, and the large
number of newbuilding tankers that are expected to be delivered over the next
twelve to eighteen months. As a result of the Company's dependence on the
tanker spot market, any decline in Aframax TCE rates will adversely affect the
Company's revenues and earnings.
Income from Vessel Operations
Income from vessel operations increased 36.1% from $21.9 million in the
second quarter of fiscal 1998 to $29.8 million in the second quarter of fiscal
1999, mainly as a result of the increase in TCE rates and an increase in the
Company's fleet size.
Net voyage revenues were $88.6 million in the second quarter of fiscal 1999,
an increase of 22.9% from $72.1 million in the second quarter of fiscal 1998.
The increase mainly reflects a combination of the Company's increased fleet
size and an improvement in TCE rates, including the effect of higher TCE rates
earned by the four Australian Vessels.
Vessel operating expenses include crewing, repairs and maintenance,
insurance, stores and lubes, and miscellaneous expenses, including
communications. Vessel operating expenses increased 12.9% to $21.0 million in
the second quarter of fiscal 1999 from $18.6 million in the second quarter of
fiscal 1998, primarily as a result of higher crewing costs associated with the
Australian Vessels and increases in crew wage rates and salaries for the
non-Australian crew, effective April 1, 1998.
Time-charter hire expense was $8.4 million in the second quarter of fiscal
1999, up from $2.8 million in the second quarter of fiscal 1998, as a result
of an average of 5.0 vessels time-chartered-in by the Company during the
second quarter of fiscal 1999 as compared to an average of only 1.6 vessels
time-chartered-in during the second quarter of fiscal 1998.
Depreciation and amortization expense decreased 1.2% from $23.9 million in
the second quarter of fiscal 1998 to $23.6 million in the second quarter of
fiscal 1999, due to lower amortization of drydocking costs in the current
quarter, partially offset by an increase in average cost of the Company's
owned vessels resulting from the modernization of the fleet during the past
year. Depreciation and amortization expense included amortization of
drydocking costs of $2.2 million in the second quarter of fiscal 1999
compared to $3.1 million in the second quarter of fiscal 1998.
General and administrative expenses increased 18.2% to $5.8 million in the
second quarter of fiscal 1999 from $4.9 million in the second quarter of
fiscal 1998, mainly as a result of the hiring of additional personnel in
connection with the expansion of the Company's operations, particularly in
Australia.
<PAGE>16
Interest Expense
Interest expense decreased 25.9% to $10.9 million in the second quarter of
fiscal 1999, from $14.7 million in the second quarter of fiscal 1998, reflecting
a combination of a reduction in the Company's total debt and lower interest
rates. In June 1998, the Company completed a public offering of its Common Stock
resulting in net proceeds to the Company of approximately $69.0 million. These
net proceeds, together with other funds, were applied in August 1998 to
redeem the Company's outstanding 9 5/8% Notes.
Six Months Ended September 30, 1998 versus Six Months Ended September 30, 1997
Net income for the first half of fiscal 1999 before extraordinary items was
$45.7 million, or $1.50 per share, compared to a net income of $26.3 million,
or 92 cents per share, in the first half of fiscal 1998. Net income after
extraordinary items was $38.4 million, or $1.26 per share, for the first
half of fiscal 1999. This included an extraordinary loss of $7.3 million, or
24 cents per share, arising from the redemption of the 9 5/8% Notes. Net income
for the first half of fiscal 1999 included gains on asset sales of $7.1
million, or 23 cents per share, compared to $3.9 million of gains on asset
sales, or 14 cents per share, for the same period one year ago. The increase
in earnings is mainly the result of an improvement in TCE rates and an increase
in the size of the Company's fleet. The Company earned an average TCE rate of
$22,146 in the first half of fiscal 1999, up 8.0% from $20,508 in the first half
of fiscal 1998. Since September 1997, the Company sold four older vessels
and added eight newer vessels to the fleet (including three time-chartered-in
vessels). As a result, the Company's fleet was 8.8% larger on average in the
first half of fiscal 1999 than during the first half of fiscal 1998.
Income from Vessel Operations
The combination of increased average TCE rates and a larger fleet resulted in a
26.5% increase in income from vessel operations, to $60.8 million in the
first half of fiscal 1999 from $48.0 million in the first half of fiscal 1998.
Net voyage revenues were $175.2 million in the first half of fiscal 1999,
an increase of 20.0% from $146.0 million in the first half of fiscal 1998.
This again reflects the increase in the Company's fleet size and an improvement
in TCE rates, including the effect of higher TCE rates earned by the four
Australian Vessels.
Vessel operating expenses increased 14.2% to $41.8 million in the first half of
fiscal 1999 from $36.6 million in the first half of fiscal 1998, mainly as a
result of an increase in crewing costs related to the Australian Vessels
and increases in crew wage rates and salaries for the non-Australian crew,
effective April 1, 1998.
Time-charter hire expense increased to $13.6 million in the first half of
fiscal 1999 from $4.1 million in the first half, as a result of an average of
4.0 vessels time-chartered-in by the Company during the first half of fiscal
1999 as compared to an average of only 1.2 vessels time-chartered-in, during the
same period last year.
Depreciation and amortization expense for the first half of fiscal 1999 was
$47.9 million, up slightly from $47.6 million over the same period one year ago,
as a result of an increase in the average cost per vessel and average size of
the Company's owned fleet, partially offset by lower amortization of drydocking
costs during the current period. Depreciation and amortization expense included
amortization of drydocking costs of $4.6 million in the first half of fiscal
1999 in comparison to $6.3 million in the first half of fiscal 1998.
General and administrative expenses rose 14.4% to $11.1 million in the first
half of fiscal 1999 from $9.7 million in the first half of fiscal 1998,
mainly as a result of the expansion of the Company's operations, particularly
in Australia.
Interest Expense
Interest expense decreased 13.5% to $24.9 million in the first half of fiscal
1999 from $28.8 million in the first half of fiscal 1998, primarily reflecting
a reduction in the Company's total debt as well as lower interest rates. In
August 1998, the Company applied the net proceeds from its public offering of
Common Stock, together with other funds, to redeem its outstanding 9 5/8% Notes.
<PAGE>17
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, unless otherwise indicated,
the figures in the table below exclude the results from the Company's Australian
Vessels:
<TABLE>
<CAPTION>
-- ---------------------------------------- -- ------------------------ -- -------------------------- -
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
<S> <C> <C> <C> <C>
International Fleet:
Average number of ships 43 44 43 43
Total calendar ship-days 3,957 4,015 7,785 7,828
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
Revenue-generating ship-days (A) 3,713 3,729 7,362 7,290
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
Net voyage revenue before
commissions(B) (000's) $80,779 $73,960 $160,362 $149,503
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
TCE (B/A) $21,756 $19,834 $21,782 $20,508
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
Operating results per calendar ship-day:
Net voyage revenue $19,959 $17,960 $20,108 $18,647
Vessel operating expense 4,924 4,816 4,854 4,808
General and administrative expense 1,344 1,224 1,301 1,238
Drydocking expense 627 762 654 808
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
Operating cash flow per calendar
ship-day $13,064 $11,158 $13,299 $11,793
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
Australian Vessels:
Operating cash flow per calendar
ship-day $14,583 N/A $13,950 N/A
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
Total Fleet:
Operating cash flow per calendar
ship-day $13,145 $11,158 $13,317 $11,793
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's total liquidity, including cash, marketable securities, and
undrawn long-term lines of credit, decreased to $179.9 million as at September
30, 1998 from $186.3 million as at March 31, 1998. The decrease was primarily
the result of the Company's redemption of its 9 5/8% Notes in August 1998 and
progress payments on the Company's two newbuildings, offset in part by, among
other things, proceeds from the Company's public offering of Common Stock in
June 1998, cash from operations, and proceeds from the disposition of two
older vessels. The Company received net proceeds of approximately $69.0 million
in the public offering, which were used, together with other funds, to redeem
the outstanding balance of the 9 5/8% Notes. The redemption resulted in the
release of mortgages on the six vessels which collateralized the 9 5/8%
Notes, making a total of twelve unencumbered vessels in the Company's fleet
as at September 30, 1998.
Net cash flow from operating activities rose to $85.8 million in the first
half of fiscal 1999 as compared to $74.5 million in the first half of fiscal
1998, reflecting the higher average TCE rates earned during the current fiscal
period and an increase in the size of the Company's fleet.
The Company's scheduled debt repayments were $40.0 million during the first
half of fiscal 1999, up from $19.1 million in the first half of fiscal 1998,
mainly as a result of a $25 million sinking fund payment on the 9 5/8% Notes in
July 1998.
<PAGE>18
Dividend payments during the first half of fiscal 1999 were $13.0 million, or
43 cents per share, of which $12.6 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.
During the first half of fiscal 1999, the Company incurred capital expenditures
for vessels and equipment of $41.9 million, consisting mainly of payments
made towards the two newbuilding double-hull Aframax tankers scheduled for
delivery in July and September of 1999 and costs related to the conversion of
a floating storage and off-loading Australian 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. Cash expenditures for drydocking were $6.0 million in the first half
of fiscal 1999 compared to $9.6 million in the same period one year ago,
reflecting a reduction in scheduled drydockings. Two older vessels were
sold during the first half of fiscal 1999, resulting in net proceeds of $23.4
million.
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. Because certain software applications are
unable to appropriately interpret the calendar year 2000 and subsequent years,
some level of modification or replacement of such applications will be
necessary.
Since December 1997, the Company has been actively engaged in achieving Year
2000 compliance and has formed a Year 2000 Compliance Task Force comprised of
employees from various areas of the organization. The Company's Year 2000
compliance project has been divided into several phases. First, the Company
completed the risk prioritization phase to prioritize its efforts. Second, a
full inventory of all hardware and software applications, both shore-side and
ship-side, has been completed and only a few applications were found to have
Year 2000 issues, none of which the Company believes are critical to its
operations. The Company is undertaking remedial action planning and
implementation to modify or replace these applications. Third, the Company is
undertaking a Year 2000 readiness survey with its top customers, lenders,
suppliers and other organizations with which it conducts business. The Company
anticipates completion of the survey by December 1998. Finally, the Company is
currently testing remediated systems and preparing contingency plans as no
assurance can be given that all of the Company's systems will be Year 2000
compliant or that its customers, lenders or suppliers or the other
organizations with which it conducts business will become fully Year 2000
compliant.
An outside consultant has been hired to assist with the Year 2000 compliance of
the Company's shore-side applications while ship-side compliance will be
performed primarily by existing staff. The target date for full compliance is
April 16, 1999.
Management does not expect Year 2000 compliance costs to have a material adverse
effect on the Company. Should the Company not achieve full compliance in a
timely manner or complete its Year 2000 project within its current cost
estimates, the Company's business, financial condition and results of operations
could be adversely affected. However, in the event that the Company fails to
meet the deadlines above, the Company believes that the financial impact will
not be material since all systems believed by the Company to be critical have
already been identified as Year 2000 compliant.
FORWARD-LOOKING STATEMENTS
This Report on Form 6-K for the quarterly period ended September 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 Aframax TCE rates in the near-term; future capital
expenditures, including expenditures for newbuilding vessels; 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 statements
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; the Company's potential inability
to achieve and manage growth; and other risks detailed from time to time in
<PAGE>19
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>20
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
SEPTEMBER 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
The Company's 1998 Annual Meeting of Shareholders was held September 2,
1998. At the meeting the Company's shareholders (i) elected as Directors of the
Company Arthur F. Coady, Michael D. Dingman, Morris L. Feder, Steve G.K. Hsu,
Thomas Kuo-Yuen Hsu, Axel Karlshoej and Bjorn Moller, (ii) approved the
amendment to the Company's 1995 Stock Option Plan to increase the number of
shares of Common Stock subject thereto from 2,148,571 to 3,948,571 and
(iii) ratified the selection of Ernst & Young, Chartered Accountants, as
independent auditors of the Company for the fiscal year ending March 31, 1999,
as set forth below:
<TABLE>
<CAPTION>
Votes Votes Against Shares Which Broker
For or Withheld Abstained Non-Votes
<S> <C> <C> <C> <C>
Election of Directors
Arthur F. Coady 30,226,139 19,276 3,100
Michael D. Dingman 30,229,239 16,176 3,100
Morris L. Feder 30,227,839 17,576 3,100
Steve G.K. Hsu 30,229,239 16,176 3,100
Thomas Kuo-Yuen Hsu 30,229,239 16,176 3,100
Axel Karlshoej 30,226,239 19,176 3,100
Bjorn Moller 30,226,139 19,276 3,100
Approval of Amendment to the 1995 Stock
Option Plan 25,501,357 2,123,571 18,025 2,602,962
Ernst & Young as Independent Auditors 30,232,674 4,577 8,164
</TABLE>
<PAGE>21
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 5, 1995.
<PAGE>22
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: November 16, 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> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 102,629
<SECURITIES> 21,230
<RECEIVABLES> 21,691
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 159,048
<PP&E> 1,788,286
<DEPRECIATION> 512,150
<TOTAL-ASSETS> 1,446,516
<CURRENT-LIABILITIES> 65,724
<BONDS> 596,706
0
0
<COMMON> 330,554
<OTHER-SE> 453,532
<TOTAL-LIABILITY-AND-EQUITY> 1,446,516
<SALES> 0
<TOTAL-REVENUES> 221,642
<CGS> 0
<TOTAL-COSTS> 46,446
<OTHER-EXPENSES> 114,406
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,892
<INCOME-PRETAX> 45,739
<INCOME-TAX> 0
<INCOME-CONTINUING> 45,739
<DISCONTINUED> 0
<EXTRAORDINARY> 7,306
<CHANGES> 0
<NET-INCOME> 38,433
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.26
</TABLE>
