<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 December 31, 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 DECEMBER 31, 1998
INDEX
PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income
and Retained Earnings for the three and nine months
ended December 31, 1998 and 1997................................3
Consolidated Balance Sheets -
December 31, 1998 and March 31, 1998............................4
Consolidated Statements of Cash Flows
for the nine months ended December 31, 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....................................................19
SIGNATURES....................................................................20
<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 Nine Months Ended
December 31, December 31,
1998 1997 1998 1997
$ (Unaudited) $ $ (Unaudited) $
<S> <C> <C> <C> <C>
NET VOYAGE REVENUES
Voyage revenues 97,268 107,084 318,910 305,063
Voyage expenses 24,051 26,392 70,497 78,406
- ----------------------------------------------------------------------------------------------------------------------
Net voyage revenues 73,217 80,692 248,413 226,657
- ----------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Vessel operating expenses 20,362 17,685 62,139 54,269
Time-charter hire expense 8,271 3,316 21,896 7,372
Depreciation and amortization 23,769 23,460 71,686 71,054
General and administrative 6,588 5,276 17,675 14,965
- ----------------------------------------------------------------------------------------------------------------------
58,990 49,737 173,396 147,660
- ----------------------------------------------------------------------------------------------------------------------
Income from vessel operations 14,227 30,955 75,017 78,997
- ----------------------------------------------------------------------------------------------------------------------
OTHER ITEMS
Interest expense (10,138) (13,463) (35,030) (42,243)
Interest income 1,340 1,870 5,008 5,762
Other income (loss) (note 7) (328) 9,246 5,845 12,377
- ----------------------------------------------------------------------------------------------------------------------
(9,126) (2,347) (24,177) (24,104)
- ----------------------------------------------------------------------------------------------------------------------
Net income before extraordinary loss 5,101 28,608 50,840 54,893
Extraordinary loss on bond redemption (7,306)
(note 5)
- ----------------------------------------------------------------------------------------------------------------------
Net income 5,101 28,608 43,534 54,893
Retained earnings, beginning of the period 453,532 396,248 428,102 382,178
- ----------------------------------------------------------------------------------------------------------------------
458,633 424,856 471,636 437,071
Dividends declared and paid (6,804) (6,171) (19,807) (18,386)
- ----------------------------------------------------------------------------------------------------------------------
Retained earnings, end of the period 451,829 418,685 451,829 418,685
- ----------------------------------------------------------------------------------------------------------------------
Basic Earnings per Common Share (note 6):
Net income before extraordinary loss $0.16 $0.99 $1.65 $1.92
Net income $0.16 $0.99 $1.41 $1.92
Diluted Earnings per Common Share (note
6):
Net income before extraordinary loss $0.16 $0.99 $1.65 $1.90
Net income $0.16 $0.99 $1.41 $1.90
- ----------------------------------------------------------------------------------------------------------------------
</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
December 31, March 31,
1998 1998
---- ----
$ $
- -
(Unaudited)
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents 66,133 87,953
Marketable securities (note 2) 21,210 13,448
Accounts receivable 22,058 24,327
Prepaid expenses and other assets 16,182 13,786
------------------------------------------------------- -- ---------------- ---- ------------- ------
Total current assets 125,583 139,514
------------------------------------------------------- -- ---------------- ---- ------------- ------
Marketable securities (note 2) 5,056 13,853
Vessels and equipment (notes 5 and 8)
At cost, less accumulated depreciation of $535,920
(March 31, 1998 - $500,779) 1,224,272 1,297,883
Advances on newbuilding contracts 51,497
------------------------------------------------------- -- ---------------- ---- ------------- ------
Total vessels and equipment 1,275,769 1,297,883
------------------------------------------------------- -- ---------------- ---- ------------- ------
Other assets 6,181 8,933
------------------------------------------------------- -- ---------------- ---- ------------- ------
1,412,589 1,460,183
------------------------------------------------------- -- ---------------- ---- ------------- ------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable 13,702 16,164
Accrued liabilities 24,262 29,195
Current portion of long-term debt (note 5) 30,026 52,932
------------------------------------------------------- -- ---------------- ---- ------------- ------
Total current liabilities 67,990 98,291
------------------------------------------------------- -- ---------------- ---- ------------- ------
Long-term debt (note 5) 562,267 672,437
------------------------------------------------------- -- ---------------- ---- ------------- ------
Total liabilities 630,257 770,728
------------------------------------------------------- -- ---------------- ---- ------------- ------
Stockholders' equity
Capital stock (note 6) 330,503 261,353
Retained earnings 451,829 428,102
------------------------------------------------------- -- ---------------- ---- ------------- ------
Total stockholders' equity 782,332 689,455
------------------------------------------------------- -- ---------------- ---- ------------- ------
1,412,589 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>
Nine Months Ended December 31,
1998 1997
---- ----
$ $
(Unaudited)
<S> <C> <C>
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income 43,534 54,893
Add (deduct) charges to operations not requiring
a payment of cash and cash equivalents:
Depreciation and amortization 71,686 71,054
Gain on disposition of assets (7,117) (14,430)
Loss on bond redemption 7,306 2,039
Other - net 869 1,133
Change in non-cash working capital items related to
operating activities 1,310 12,239
- ------------------------------------------------------ ----------- ------------ ---------- ------------- ---
Net cash flow from operating activities 117,588 126,928
- ------------------------------------------------------ ----------- ------------ ---------- ------------- ---
FINANCING ACTIVITIES
Proceeds from long-term debt 155,000 79,600
Scheduled repayments of long-term debt (54,358) (32,724)
Prepayments of long-term debt (238,679) (43,778)
Net proceeds from issuance of Common Stock 68,767 4,822
Cash dividends paid (19,424) (10,167)
Other (428) (257)
- ------------------------------------------------------ ----------- ------------- ---------- ------------ ---
Net cash flow from financing activities (89,122) (2,504)
- ------------------------------------------------------ ----------- ------------- ---------- ------------ ---
INVESTING ACTIVITIES
Expenditures for vessels and equipment (65,177) (123,702)
Expenditures for drydocking (9,544) (14,737)
Net cash flow from investment 6,335
Proceeds from disposition of assets 23,435 33,901
Proceeds on sale of available-for-sale securities 1,000 9,818
Purchases of available-for-sale securities (37,155)
Other (274)
- ------------------------------------------------------ ----------- ------------- ---------- ------------ ---
Net cash flow from investing activities (50,286) (125,814)
- ------------------------------------------------------ ----------- ------------- ---------- ------------ ---
(Decrease) increase in cash and cash equivalents (21,820) (1,390)
Cash and cash equivalents, beginning of the period 87,953 117,523
- ------------------------------------------------------ ----------- ------------ ----------- ------------ ---
Cash and cash equivalents, end of the period 66,133 116,133
- ------------------------------------------------------ ----------- ------------ ----------- ------------ ---
</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 December 31, 1998, and for the Three-Month
and Nine Month Periods Ended December 31, 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 nine-month periods ended December 31, 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 nine-month periods ended December 31,
1998 and 1997 totaled approximately $34,559,000 and $33,782,000,
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>
December 31, March 31,
1998 1998
$ $
-- ------------------------------------------------------- --- ---------------- ----- ------------- ----
<S> <C> <C>
Revolving Credit Facility 119,000 129,000
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 248,293 247,651
-- ------------------------------------------------------- --- ---------------- ----- ------------- ----
592,293 725,369
Less current portion of long-term debt 30,026 52,932
-- ------------------------------------------------------- --- ---------------- ----- ------------- ----
562,267 672,437
-- ------------------------------------------------------- --- ---------------- ----- ------------- ----
</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 December 31, 1998, and for the Three-Month
and Nine-Month Periods Ended December 31, 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 24 cents per
share for the nine months ended December 31, 1998. 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 December 31, 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 December 31,
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 December
31, 1998, the fair value of these net assets approximated $198.4
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.
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) 68,716 2,800
Reinvested dividends 383 13
Exercise of stock options 51 2
----------------------------------------- -- ----------- -- ------------ -- ----------- - -------------
330,503 31,648
Balance December 31, 1998 0 0
----------------------------------------- -- ----------- -- ------------ -- ----------- - -------------
</TABLE>
<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 December 31, 1998, and for the Three-Month
and Nine-Month Periods Ended December 31, 1998 and 1997 is unaudited)
6. Capital Stock (cont'd)
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).
In September 1998, the Company's shareholders approved an amendment to
the Company's 1995 Stock Option Plan (the "Plan") to increase the
number of shares of Common Stock reserved and available for future
grants of options under the Plan by an additional 1,800,000 shares. As
of December 31, 1998 the Company had 3,641,750 shares of Common Stock
reserved for issuance upon exercise of options granted pursuant to the
Plan. As of December 31, 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:
31,647,819 shares and 30,871,957 shares for the three and nine months
ended December 31, 1998, respectively; and 28,768,227 shares and
28,600,028 shares for the three and nine months ended December 31,
1997, respectively. Diluted earnings per share is based upon the
following weighted average number of shares of Common Stock
outstanding: 31,647,819 shares and 30,882,582 shares for the three and
nine months ended December 31, 1998, respectively; and 29,017,095
shares and 28,820,693 shares for the three and nine months ended
December 31, 1997, respectively.
7. Other Income (Loss)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended December 31, Ended December 31,
1998 1997 1998 1997
$ $ $ $
--------------------------------------- --- ----------- -- ---------- -- -------- ----------- -- ---------- ---
<S> <C> <C> <C> <C>
Gain on disposition of assets 10,516 7,117 14,430
Loss on repurchase of 9 5/8% Notes (1,278) (2,039)
Miscellaneous - net (328) 8 (1,272) (14)
--------------------------------------- --- ----------- -- ---------- -- -------- ----------- -- ---------- ---
(328) 9,246 5,845 12,377
--------------------------------------- --- ----------- -- ---------- -- -------- ----------- -- ---------- ---
</TABLE>
8. Commitments and Contingencies
As at December 31, 1998, the Company was committed to the construction
of two newbuilding Aframax vessels for an aggregate contact price of
approximately $71.2 million, scheduled for delivery in July and
September of 1999. As at December 31, 1998, there had been payments
made towards this commitment of approximately $51.4 million.
<PAGE>9
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 December 31, 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 9,398 105,435 (41,616) 73,217
Operating expenses 121 9,361 91,124 (41,616) 58,990
---------------------------------------------------------------------
Income (loss) from vessel (121) 37 14,311 14,227
operations
Net interest income (expense) (4,823) 38 (4,013) (8,798)
Equity in net income of subsidiaries 9,818 (9,818)
Other income (loss) 227 5,753 (6,308) (328)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income 5,101 75 16,051 (16,126) 5,101
Retained earnings (deficit), 453,532 (33,793) 330,266 (296,473) 453,532
beginning of the period
Dividends declared and paid (6,804) (6,804)
---------------------------------------------------------------------
Retained earnings (deficit), end of 451,829 (33,718) 346,317 (312,599) 451,829
the period
=====================================================================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended December 31, 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 9,110 129,307 (57,725) 80,692
Operating expenses 139 8,769 98,554 (57,725) 49,737
---------------------------------------------------------------------
Income (loss) from vessel (139) 341 30,753 30,955
operations
Net interest income (expense) (8,299) 117 (3,411) (11,593)
Equity in net income of subsidiaries 38,304 (38,304)
Other income (loss) (1,258) 13,839 (3,335) 9,246
---------------------------------------------------------------------
Net income 28,608 458 41,181 (41,639) 28,608
Retained earnings (deficit), 396,248 (26,168) 196,388 (170,220) 396,248
beginning of the period
Dividends declared and paid (6,171) (6,171)
---------------------------------------------------------------------
Retained earnings (deficit), end of 418,685 (25,710) 237,569 (211,859) 418,685
the period
=====================================================================
</TABLE>
(See Note 5)
<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>
Nine Months Ended December 31, 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 28,220 356,059 (135,866) 248,413
Operating expenses 230 27,733 281,299 (135,866) 173,396
---------------------------------------------------------------------
Income (loss) from vessel (230) 487 74,760 75,017
operations
Net interest income (expense) (18,107) 119 (12,034) (30,022)
Equity in net income of subsidiaries 68,950 (68,950)
Other income 227 24,680 (19,062) 5,845
---------------------------------------------------------------------
Net income before extraordinary loss 50,840 606 87,406 (88,012) 50,840
Extraordinary loss on bond redemption (7,306) (7,306)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income 43,534 606 87,406 (88,012) 43,534
Retained earnings (deficit), 428,102 (34,324) 258,911 (224,587) 428,102
beginning of the period
Dividends declared and paid (19,807) (19,807)
---------------------------------------------------------------------
Retained earnings (deficit), end of 451,829 (33,718) 346,317 (312,599) 451,829
the period
=====================================================================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended December 31, 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 27,518 375,480 (176,341) 226,657
Operating expenses 262 26,051 297,688 (176,341) 147,660
--------------------------------------------------------------------
Income (loss) from vessel (262) 1,467 77,792 78,997
operations
Net interest income (expense) (25,500) 292 (11,273) (36,481)
Equity in net income of subsidiaries 82,578 (82,533) 45
Other income (loss) (1,923) 24,269 (10,014) 12,332
--------------------------------------------------------------------
Net income 54,893 1,759 90,788 (92,547) 54,893
Retained earnings (deficit), 382,178 (18,124) 155,181 (137,057) 382,178
beginning of the period
Dividends declared and paid (18,386) (9,345) (8,400) 17,745 (18,386)
--------------------------------------------------------------------
Retained earnings (deficit), end of 418,685 (25,710) 237,569 (211,859) 418,685
the period
====================================================================
</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 December 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 3 27,345 38,785 66,133
Other current assets 27 507 154,463 (95,547) 59,450
----------------------------------------------------------------------
Total current assets 30 27,852 193,248 (95,547) 125,583
Vessels and equipment (net) 311,962 963,807 1,275,769
Advances due from subsidiaries 229,727 (229,727)
Other assets (principally marketable securities
and investments in subsidiaries) 785,443 11,242 (785,448) 11,237
======================================================================
1,015,200 339,814 1,168,297 (1,110,722) 1,412,589
======================================================================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities 7,868 1,135 154,981 (95,994) 67,990
Long-term debt 225,000 337,267 562,267
Due to affiliates 3,067 187,023 (190,090)
----------------------------------------------------------------------
Total liabilities 232,868 4,202 679,271 (286,084) 630,257
----------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital Stock 330,503 23 5,943 (5,966) 330,503
Contributed capital 369,307 136,766 (506,073)
Retained earnings (deficit) 451,829 (33,718) 346,317 (312,599) 451,829
----------------------------------------------------------------------
Total stockholders' equity 782,232 335,612 489,026 (824,638) 782,332
----------------------------------------------------------------------
1,015,200 339,814 1,168,297 (1,110,722) 1,412,589
======================================================================
</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 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>12
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended December 31, 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 (15,416) 16,149 116,855 117,588
-----------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 155,000 155,000
Prepayments of long-term debt (103,679) (135,000) (238,679)
Repayments of long-term debt (25,000) (29,358) (54,358)
Net proceeds from issuance of Common Stock 68,767 68,767
Other 75,309 2,330 (97,491) (19,852)
-----------------------------------------------------------------------
Net cash flow from financing activities 15,397 2,330 (106,849) (89,122)
-----------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (1,821) (63,356) (65,177)
Other 14,891 14,891
-----------------------------------------------------------------------
Net cash flow from investing activities (1,821) (48,465) (50,286)
-----------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (19) 16,658 (38,459) (21,820)
Cash and cash equivalents, beginning of the 22 10,687 77,244 87,953
period
=======================================================================
Cash and cash equivalents, end of the period 3 27,345 38,785 66,133
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended December 31, 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 (17,113) 17,844 126,197 126,928
----------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt
Prepayments of long-term debt 79,600 79,600
Repayments of long-term debt (26,978) (49,524) (76,502)
Net proceeds from issuance of Common Stock 4,822 4,822
Other 21,595 (9,120) (22,899) (10,424)
----------------------------------------------------------------------
Net cash flow from financing activities (561) (9,120) 7,177 (2,504)
----------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (1,681) (136,758) (138,439)
Other 17,745 (5,120) 12,625
----------------------------------------------------------------------
Net cash flow from investing activities 17,745 (1,681) (141,878) (125,814)
----------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 71 7,043 (8,504) (1,390)
Cash and cash equivalents, beginning of the 32 8,732 108,759 117,523
period
======================================================================
Cash and cash equivalents, end of the period 103 15,775 100,255 116,133
======================================================================
</TABLE>
(See Note 5)
<PAGE>13
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
DECEMBER 31, 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 nine-month period ended December 31, 1998, approximately 58% of the
Company's net voyage revenue was derived from spot voyages. The balance of the
Company's revenue is generated 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 within a specified period of
time. During the nine-month period ended December 31, 1998, 13% of net voyage
revenues was generated by time-charters and COAs priced on a spot market basis.
In the aggregate, approximately 71% of the Company's net voyage revenue
during the nine-month period ended December 31, 1998 was derived from spot
voyages or time-charters and COAs priced on a spot market basis, with the
remaining 29% 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 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
nine month period ended December 31, 1998, the Australian Vessels earned net
voyage revenues and an average TCE rate of $28.7 million and $26,295
respectively, and incurred vessel operating expenses of $11.0 million or $10,029
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
Three Months Ended December 31, 1998 versus Three Months Ended December 31, 1997
The Company's net income was $5.1 million, or 16 cents per share, in the third
quarter of fiscal 1999, down from $28.6 million, or 99 cents per share, in the
third quarter of fiscal 1998. Net income for the third quarter of fiscal 1998
included $10.5 million, or 36 cents per share, in gains on asset sales.
There were no asset sales in the current quarter. The decrease in net income
is due primarily to a decline in TCE rates, partially offset by an increase in
the Company's fleet size. In the third quarter of fiscal 1999, the Company
earned an average TCE rate of $18,411, down 18.6% from $22,613 in the third
quarter of fiscal 1998. The Company's average fleet size was 10.2% larger
in the third quarter of fiscal 1999 than in the third quarter of fiscal 1998,
as two older vessels were sold and five newer vessels were added to the
Company's fleet (including three time-chartered-in vessels) since the end of the
third quarter of fiscal 1998.
Aframax TCE rates on the Gulf-East routes declined at the beginning of the
current quarter, and have remained at this lower level as a result of an
increase in tanker supply in conjunction with stable oil demand. In the
near-term, the Company believes that TCE rates could remain weak as a result of
low tanker demand growth, relatively high world oil inventories, and an increase
in the number of newbuilding tankers that are expected to be delivered over
the next twelve months. As a result of the Company's dependence on the tanker
spot market, any decline in Aframax TCE rates will reduce the Company's revenues
and earnings.
Income from Vessel Operations
Net voyage revenues were $73.2 million in the third quarter of fiscal 1999, a
decrease of 9.3% from $80.7 million in the third quarter of fiscal 1998. The
decrease mainly reflects lower spot market TCE rates, partially offset by the
increase in the Company's fleet size and higher TCE rates earned on the
Australian Vessels.
Vessel operating expenses include crewing, repairs and maintenance, insurance,
stores and lubes, and miscellaneous expenses, including communications. Vessel
operating expenses increased 15.1% to $20.4 million in the third quarter of
fiscal 1999 from $17.7 million in the third quarter of fiscal 1998, primarily as
a result of higher crewing costs associated with the Australian Vessels.
Time-charter hire expense was $8.3 million in the third quarter of fiscal 1999,
up from $3.3 million in the third quarter of fiscal 1998, as the number of
vessels time-chartered-in by the Company increased to five in the third quarter
of fiscal 1999, compared to two in the third quarter of fiscal 1998.
Depreciation and amortization expense increased 1.3% from $23.5 million in the
third quarter of fiscal 1998 to $23.8 million in the third quarter of fiscal
1999, due to an increase in average cost of the Company's owned vessels
resulting from the modernization of the fleet during the past year, partially
offset by lower amortization of drydocking costs during the current period.
Depreciation and amortization expense included amortization of drydocking costs
of $2.2 million in the third quarter of fiscal 1999 compared to $2.8 million in
the third quarter of fiscal 1998.
General and administrative expenses increased 24.9% to $6.6 million in the third
quarter of fiscal 1999 from $5.3 million in the third 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.
Interest Expense
Interest expense decreased 24.7% to $10.1 million in the third quarter of fiscal
1999, from $13.5 million in the third quarter of fiscal 1998, reflecting a
reduction in the Company's total debt and lower average 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.
<PAGE>15
Nine Months Ended December 31, 1998 versus Nine Months Ended December 31, 1997
Net income for the first nine months of fiscal 1999 before extraordinary items
was $50.8 million, or $1.65 per share, compared to a net income of $54.9
million, or $1.92 cents per share, in the first nine months of fiscal 1998. Net
income after extraordinary items was $43.5 million, or $1.41 per share, for the
first nine months 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 nine months of fiscal 1999 included gains on asset
sales of $7.1 million, or 23 cents per share, compared to $14.4 million of gains
on asset sales, or 50 cents per share, for the same period one year ago. The
increase in net income excluding gains on asset sales and extraordinary items is
due primarily to lower interest expense and an increase in the size of the
Company's fleet, partially offset by the decline in TCE rates. The Company
earned an average TCE rate of $20,897 in the first nine months of fiscal 1999, a
reduction of 1.4% from $21,201 in the first nine months of fiscal 1998. Since
December 1997, the Company sold two older vessels and added five newer vessels
to the fleet (including three time-chartered-in vessels). As a result, the
Company's fleet was 9.3% larger on average in the first nine months of fiscal
1999 than during the first nine months of fiscal 1998.
Income from Vessel Operations
Net voyage revenues were $248.4 million in the first nine months of fiscal 1999,
an increase of 9.6% from $226.7 million in the first nine months of fiscal 1998,
mainly reflecting the increase in the Company's fleet size and higher TCE rates
earned on the Australian Vessels, partially offset by lower spot TCE Rates.
Vessel operating expenses increased 14.5% to $62.1 million in the first nine
months of fiscal 1999 from $54.3 million in the first nine months of fiscal
1998, mainly as a result of higher crewing costs related to the Australian
Vessels.
Time-charter hire expense increased to $21.9 million in the first nine months of
fiscal 1999 from $7.4 million in the first nine months of fiscal 1998, as an
average of 4.3 vessels were time-chartered-in by the Company during the first
nine months of fiscal 1999, compared to only 1.5 vessels during the same period
last year.
Depreciation and amortization expense for the first nine months of fiscal 1999
was $71.7 million, up slightly from $71.1 million over the same period one year
ago, as a result of an increase in the average cost per vessel, offset by lower
amortization of drydocking costs during the current period. Depreciation and
amortization expense included amortization of drydocking costs of $6.9 million
in the first nine months of fiscal 1999 in comparison to $9.2 million in the
first nine months of fiscal 1998.
General and administrative expenses rose 18.1% to $17.7 million in the first
nine months of fiscal 1999 from $15.0 million in the first nine months 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.
Interest Expense
Interest expense decreased 17.1% to $35.0 million in the first nine months of
fiscal 1999 from $42.2 million in the first nine months of fiscal 1998,
reflecting a reduction in the Company's total debt and 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>16
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 Nine Months Ended
December 31, December 31,
1998 1997 1998 1997
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
<S> <C> <C> <C> <C>
International Fleet:
Average number of ships 43 42 43 43
Total calendar ship-days 3,956 3,880 11,741 11,708
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
Revenue-generating ship-days (A) 3,692 3,611 11,054 10,901
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
Net voyage revenue before $64,753 $81,608 $225,115 $231,111
commissions(B) (000's)
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
TCE (B/A) $17,539 $22,600 $20,365 $21,201
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
-- ------------------------------------------------------ -- ---------- -- ----------- -- ----------- -
Operating results per calendar ship-day:
Net voyage revenue $15,981 $20,574 $18,717 $19,290
Vessel operating expense 4,815 4,731 4,841 4,783
General and administrative expense 1,524 1,345 1,376 1,274
Drydocking expense 643 726 650 781
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
Operating cash flow per calendar
ship-day $8,999 $13,772 $11,850 $12,452
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
Australian Vessels:
Operating cash flow per calendar
ship-day $16,046 N/A $14,650 N/A
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
Total Fleet:
Operating cash flow per calendar
ship-day $9,557 $13,772 $12,049 $12,452
-- ---------------------------------------- -- ---------- -- ---------- -- ----------- -- ----------- -
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's total liquidity, including cash, marketable securities, and
undrawn long-term lines of credit, decreased to $163.4 million as at December
31, 1998 from $186.3 million as at March 31, 1998. The decrease was primarily
the result of the use of cash balances to redeem the Company's 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 flow 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 of December 31, 1998.
Net cash flow from operating activities decreased to $117.6 million in the first
nine months of fiscal 1999, compared to $126.9 million in the first nine months
of fiscal 1998. This reflects the decline in TCE rates during the current fiscal
period, as well as, temporary changes in non-cash working capital.
The Company's scheduled debt repayments were $54.4 million during the first nine
months of fiscal 1999, up from $32.7 million in the first nine months of fiscal
1998, mainly as a result of a $25 million sinking fund payment on the 9 5/8%
Notes in July 1998.
Dividend payments during the first nine months of fiscal 1999 were $19.8
million, or 64 cents per share, of which $19.4 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.
<PAGE>17
During the first nine months of fiscal 1999, the Company incurred capital
expenditures for vessels and equipment of $65.2 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 tanker into a floating storage and off-loading vessel. The Company intends
to pay for the remaining cost of approximately $19.8 million for the two
newbuilding vessels by using existing cash balances, borrowings under the
Revolver or other debt financing. Cash expenditures for drydocking were $9.5
million in the first nine months of fiscal 1999 compared to $14.7 million in the
same period one year ago, reflecting a reduction in scheduled drydockings. Two
older vessels were sold during the first nine months 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, software, databases, third party
electronic data interchange interfaces and embedded processors to operate
its business. Some of these applications may be unable to appropriately
interpret the calendar year 2000 and certain other dates and some level of
modification or replacement of such applications will be necessary.
The Company has been actively engaged in systematically addressing the Year
2000 problem since December 1997. A Year 2000 Compliance Task Force comprised
of employees from a broad cross section of the Company has been charged
with the task of ensuring that the Company achieves Year 2000 compliance.
The Company expects to be largely Year 2000 compliant by the summer of this
year, and to achieve full Year 2000 compliance by mid-November of this year.
The Company's Year 2000 compliance project has been divided into several phases.
1. First, the Company completed a business and safety risk analysis to
prioritize the efforts of the Year 2000 Task Force. Those areas of the
Company's operations that posed the greatest safety risk or were the most
important to the survival and continuity of the business were assigned
the highest priority.
2. Second, a full inventory of all computer hardware and software
applications, and all systems which utilize "embedded chips", both on
the ships and in the Company's offices, has been completed. Embedded
chips are used, for example, in navigation systems, communication
systems, safety and detection systems, and electrical and electro-
mechanical control systems on the Company's vessels.
3. Third, a comprehensive audit and test program of information technology
and non-information technology systems, such as embedded chips, was
developed and is being deployed to ensure seamless operation through all
of the dates which have been identified as potentially problematic. These
dates include August 22, 1999, September 9, 1999, January 1, 2000, and
February 29, 2000. Extensive off-line testing will be conducted on vessels
in drydock during the year and safe off-line testing will be conducted
on the remaining fleet during the normal course of operations. We have
requested, and in many cases have received, Certificates of Compliance
from the manufacturers of the equipment identified in the inventory
phase as possibly containing date sensitive functions. In addition, the
Company has completed a "Year 2000 Readiness Survey" with its top
customers, lenders, suppliers and other organizations with which it
conducts business. This survey has confirmed that our key business
partners are aware of the Year 2000 issue and are actively working toward
Year 2000 compliance. This "investigation phase" is virtually complete at
this time.
4. Fourth, the Company is currently undertaking remedial action with respect
to all non-compliant systems and items. Remedial action includes
modifying, repairing or replacing systems or items which are of high
safety or business criticality, or a "work around" strategy for less
critical systems. This phase also includes testing remediated systems
to ensure compliance. The Company expects to complete the majority of this
work by the middle of this year before the potentially problematic dates
mentioned above. However, the Company's two Australian-flagged product
tankers must be drydocked to have the remedial work done. The second
vessel may not be completed until mid November 1999.
5. The final phase consists of preparing contingency plans, vessel placement
strategies and business continuity plans. These plans will be developed
and refined in consultation with our key business partners. It is expected
this planning process will continue for the balance of this year.
<PAGE>18
Although the Company expects to be Year 2000 compliant in a timely manner,
no assurance can be given that all of the Company's systems will be Year 2000
compliant or that its customers, lenders, suppliers or the other organizations
with which it conducts business will become fully Year 2000 compliant in a
timely manner. If the Company does not achieve full compliance in a timely
manner or complete its Year 2000 project within its current cost estimates,or
if one or more of its key customers, lenders, suppliers or other organizations
with which it does business fails to become fully Year 2000 compliant, the
Company's business, financial condition and results of operations could be
adversely affected. There are also risks inherent in the Company's operations
arising from the potential failure of systems and equipment aboard other vessels
sharing navigable waters with the Company's vessels as well as problems
which could arise from the malfunction or failure of port and shore-based
infrastructure systems.
The Company estimates that it will cost $2.0 million to achieve Year 2000
compliance. The majority of these costs will either be recovered directly from
customers of the Company pursuant to contractual arrangements currently in place
or represent ongoing equipment upgrades which would have been undertaken
regardless of Year 2000 issues. Based on the findings of the Year 2000 Task
Force to date, the Company does not expect Year 2000 compliance costs to have a
material adverse effect on the Company.
FORWARD-LOOKING STATEMENTS
This Report on Form 6-K for the quarterly period ended December 31, 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; supply and demand for oil; future
capital expenditures, including expenditures for newbuilding vessels; the
Company's growth strategy and expansion; and Year 2000 compliance. 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; the potential
inability of the Company to generate internal cash flow and obtain additional
debt or equity financing to fund capital expenditures and progress payments on
newbuildings; the Company's potential inability to identify embedded
processors in a timely manner or to achieve Year 2000 compliance within current
cost estimates; the failure of the Company's key business partners to
achieve Year 2000 compliance and the subsequent impact on the Company's
operating results; 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>19
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
DECEMBER 31, 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>20
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: February 16, 1999 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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 66,133
<SECURITIES> 21,210
<RECEIVABLES> 22,058
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 125,583
<PP&E> 1,760,192
<DEPRECIATION> 535,920
<TOTAL-ASSETS> 1,412,589
<CURRENT-LIABILITIES> 67,990
<BONDS> 562,267
0
0
<COMMON> 330,503
<OTHER-SE> 451,829
<TOTAL-LIABILITY-AND-EQUITY> 1,412,589
<SALES> 0
<TOTAL-REVENUES> 318,910
<CGS> 0
<TOTAL-COSTS> 70,497
<OTHER-EXPENSES> 173,396
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,030
<INCOME-PRETAX> 50,840
<INCOME-TAX> 0
<INCOME-CONTINUING> 50,840
<DISCONTINUED> 0
<EXTRAORDINARY> 7,306
<CHANGES> 0
<NET-INCOME> 43,534
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
</TABLE>
