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, 2000
TEEKAY SHIPPING CORPORATION
(Exact name of Registrant as specified in its charter)
TK House
Bayside Executive Park
West Bay Street & Blake Road
P.O. Box AP-59213, Nassau, Bahamas
(Address of principal executive office)
[Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.]
Form 20-F X Form 40- F
------- ----------
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.]
Yes No X
-------- ----------
[If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):82-_______ ]
<PAGE>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
INDEX
PART I: FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Independent Accountants' Report......................................3
Consolidated Statements of Income and Retained Earnings
for the three and nine months ended September 30, 2000 and 1999......4
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999.............................5
Consolidated Statements of Cash Flows
for the nine months ended September 30, 2000 and 1999................6
Notes to Consolidated Financial Statements...........................7
Schedule A to the Consolidated Financial Statements.................11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................15
Item 3. Market Rate Risks...................................................21
PART II: OTHER INFORMATION...................................................22
SIGNATURES...................................................................23
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM
FINANCIAL INFORMATION
To the Shareholders and Board of Directors of
Teekay Shipping Corporation
We have reviewed the accompanying consolidated balance sheet of Teekay Shipping
Corporation and subsidiaries as of September 30, 2000, and the related
consolidated statements of income and retained earnings for the three and nine
month periods ended September 30, 2000 and 1999, and the related
consolidated statements of cash flows for the nine month periods ended
September 30, 2000 and 1999. Our review also included the financial schedule
listed in Index Item 1. These financial statements and schedule are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the consolidated financial statements and schedule referred to above
for them to be in conformity with accounting principles generally accepted in
the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Teekay Shipping
Corporation and subsidiaries as of December 31, 1999, and the related
consolidated statements of income and retained earnings, and cash flows for the
nine month period then ended, not presented herein, and in our report dated
February 11, 2000, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet and related schedule as of December 31,
1999, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
Nassau, Bahamas, /s/ ERNST & YOUNG
October 25, 2000 Chartered Accountants
<PAGE>
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
September 30, September 30,
--------------- ---------------
2000 1999 2000 1999
---- ---- ---- ----
$ $ $ $
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
NET VOYAGE REVENUES
Voyage revenues 238,686 136,932 622,148 328,570
Voyage expenses 63,791 49,138 184,566 99,859
----------------------------------------------------- ----------------- -------------- -------------- --------------
Net voyage revenues 174,895 87,794 437,582 228,711
----------------------------------------------------- ----------------- -------------- -------------- --------------
OPERATING EXPENSES
Vessel operating expenses 31,161 36,256 100,653 81,840
Time-charter hire expense 14,218 10,783 40,298 27,433
Depreciation and amortization 25,249 24,287 74,915 65,958
General and administrative 8,930 9,616 27,511 24,080
----------------------------------------------------- ----------------- -------------- -------------- --------------
79,558 80,942 243,377 199,311
----------------------------------------------------- ----------------- -------------- -------------- --------------
Income from vessel operations 95,337 6,852 194,205 29,400
----------------------------------------------------- ----------------- -------------- -------------- --------------
OTHER ITEMS
Interest expense (18,022) (15,972) (57,287) (36,477)
Interest income 2,277 2,058 9,667 5,048
Other income (loss) (note 8) 1,260 (1,663) 953 (4,092)
----------------------------------------------------- ----------------- -------------- -------------- --------------
(14,485) (15,577) (46,667) (35,521)
----------------------------------------------------- ----------------- -------------- -------------- --------------
Net income (loss) 80,852 (8,725) 147,538 (6,121)
Retained earnings, beginning of the period 454,416 440,825 404,130 451,829
----------------------------------------------------- ----------------- -------------- -------------- --------------
535,268 432,100 551,668 445,708
Dividends declared (8,210) (8,184) (24,610) (21,792)
----------------------------------------------------- ----------------- -------------- -------------- --------------
Retained earnings, end of the period 527,058 423,916 527,058 423,916
----------------------------------------------------- ----------------- -------------- -------------- --------------
Earnings (loss) per common share (note 6)
- Basic 2.10 (0.23) 3.85 (0.18)
- Diluted 2.02 (0.23) 3.77 (0.18)
----------------------------------------------------- ----------------- -------------- -------------- --------------
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
As at As at
September 30, December 31,
2000 1999
---- ----
$ $
- -
(unaudited) (unaudited)
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents 219,721 220,327
Accounts receivable 45,572 30,753
Prepaid expenses and other assets 37,111 29,579
-------------------------------------------------------------------- ---------------------- -------------------
Total current assets 302,404 280,659
-------------------------------------------------------------------- ---------------------- -------------------
Marketable securities (note 2) 17,069 6,054
Vessels and equipment
at cost, less accumulated depreciation of $664,704
(December 31, 1999 - $624,727) (note 5) 1,621,569 1,666,755
Investment in joint venture 21,667 19,402
Other assets 15,456 9,814
-------------------------------------------------------------------- ---------------------- -------------------
1,978,165 1,982,684
-------------------------------------------------------------------- ---------------------- -------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable 23,173 20,431
Accrued liabilities 44,215 39,515
Current portion of long-term debt (note 5) 83,861 66,557
-------------------------------------------------------------------- ---------------------- -------------------
Total current liabilities 151,249 126,503
-------------------------------------------------------------------- ---------------------- -------------------
Long-term debt (note 5) 839,096 1,018,610
Other long-term liabilities 8,295 3,400
-------------------------------------------------------------------- ---------------------- -------------------
Total liabilities 998,640 1,148,513
-------------------------------------------------------------------- ---------------------- -------------------
Minority interest 3,800 2,104
Stockholders' equity
Capital stock (note 6) 448,667 427,937
Retained earnings 527,058 404,130
-------------------------------------------------------------------- ---------------------- -------------------
Total stockholders' equity 975,725 832,067
-------------------------------------------------------------------- ---------------------- -------------------
1,978,165 1,982,684
-------------------------------------------------------------------- ---------------------- -------------------
Commitments and contingencies (note 7)
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999
---- ----
$ $
(unaudited)
<S> <C> <C>
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income (loss) 147,538 (6,121)
Adjustment to reconcile net income (loss) to net cash flow from
operating activities:
Depreciation and amortization 74,915 65,958
Equity income (net of dividends received of $2.98 million) (2,319) -
Future income taxes 1,500 1,500
Loss on disposition of assets 1,004 -
Other - net (316) (63)
Change in non-cash working capital items related to
operating activities (12,969) (2,578)
------------------------------------------------------------------------ -------------------- ------------------
Net cash flow from operating activities 209,353 58,696
------------------------------------------------------------------------ -------------------- ------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 11,000 50,000
Scheduled repayments of long-term debt (27,484) (16,586)
Prepayment of long-term debt (145,726) (10,000)
Proceeds from stock options exercised 20,710 -
Cash dividends paid (24,590) (21,771)
Other 3,395 (605)
------------------------------------------------------------------------ -------------------- ------------------
Net cash flow from financing activities (162,695) 1,038
------------------------------------------------------------------------ -------------------- ------------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (35,705) (39,914)
Expenditures for drydocking (8,125) (3,699)
Proceeds from disposition of assets 9,713 -
Net cash acquired through purchase of Bona Shipholding Ltd. (note 9) - 51,774
Acquisition costs related to purchase of Bona Shipholding Ltd. (note 9) (2,247) (6,231)
Proceeds on sale of available-for-sale securities - 21,029
Purchases of available-for-sale securities (10,900) -
------------------------------------------------------------------------ -------------------- ------------------
Net cash flow from investing activities (47,264) 22,959
------------------------------------------------------------------------ -------------------- ------------------
(Decrease) increase in cash and cash equivalents (606) 82,693
Cash and cash equivalents, beginning of the period 220,327 66,133
------------------------------------------------------------------------ -------------------- ------------------
Cash and cash equivalents, end of the period 219,721 148,826
------------------------------------------------------------------------ -------------------- ------------------
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
(Information as at September 30, 2000 and for the Three and Nine Month Periods
Ended September 30, 2000 and 1999 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
nine month period ended December 31, 1999. 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 and nine month periods ended
September 30, 2000 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.
3. Cash Flows
Cash interest paid during the nine month periods ended September 30,
2000 and 1999 totalled approximately $62,004,000 and $57,087,000,
respectively.
4. Income Taxes
The legal jurisdictions of the countries in which Teekay and the
majority of its subsidiaries are incorporated do not impose income
taxes upon shipping-related activities. The Company's Australian
ship-owning subsidiaries are subject to income taxes (see Note 8). The
Company accounts for such taxes using the liability method pursuant to
Statement of Financial Accounting Standards No. 109, " Accounting for
Income Taxes".
5. Long-Term Debt
September 30, December 31,
2000 1999
$ $
---------------------------
Revolving Credit Facilities................ 525,000 634,000
First Preferred Ship Mortgage Notes (8.32%)
due through 2008.......................... 189,274 225,000
Term Loans due through 2009 ..................208,683 226,167
------- ---------
922,957 1,085,167
Less current portion.......................... 83,861 66,557
------- ---------
839,096 1,018,610
======= =========
<PAGE>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
(Information as at September 30, 2000 and for the Three and Nine Month Periods
Ended September 30, 2000 and 1999 is unaudited)
The Company has two long-term Revolving Credit Facilities (the "Revolvers")
available which, as at September 30, 2000, provided for borrowings of up to
$620.0 million. Interest payments are based on LIBOR (September 30, 2000: 6.8%;
December 31, 1999: 6.0%) plus a margin depending on the financial leverage of
the Company; at September 30, 2000 the margins ranged between 0.5% and 0.85%
(December 31, 1999: 0.6% and 0.9%). The amount available under the Revolvers
reduces semi-annually with final balloon reductions in 2006 and 2008. The
Revolvers are collateralized by first priority mortgages granted on forty of
the Company's Aframax tankers and oil/bulk/ore carriers, together with certain
other related collateral, and a guarantee from the Company for all amounts
outstanding under the Revolvers.
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 the Company 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, 2000, the fair value of
these net assets approximated $221.5 million. The 8.32% Notes are also subject
to a sinking fund, which will retire $45.0 million principal amount of the 8.32%
Notes on each February 1, commencing 2004.
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.
The Company has several term loans outstanding, which, as at September 30,
2000, totalled $208.7 million. Interest payments are based on LIBOR plus a
margin. At September 30, 2000, the margins ranged between 0.55% and 1.25%. The
term loans reduce in quarterly or semi-annual payments with varying maturities
through 2009. All term loans of the Company are collateralized by first
preferred mortgages on the vessels to which the loans relate, together with
certain other collateral, and guarantees from the Company.
As at September 30, 2000, the Company was committed to a series of interest
rate swap agreements whereby $100.0 million of the Company's floating rate debt
was swapped with fixed rate obligations having an average remaining term of 1.73
years, expiring between December 2001 and December 2002. These agreements
effectively change the Company's interest rate exposure on $100.0 million of
debt from a floating LIBOR rate to an average fixed rate of 6.7%. 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.
6. Capital Stock
<TABLE>
<CAPTION>
Authorized
25,000,000 Preferred Stock with a par value of $1 per share
725,000,000 Common Stock with a par value of $0.001 per share
<S> <C> <C> <C> <C>
--------------------------------------- ---------------- --------------- ------------- -------------
Common Thousands Preferred Thousands
Issued and outstanding Stock of shares Stock of shares
$ $
--------------------------------------- ---------------- --------------- ------------- -------------
Balance December 31, 1999 427,937 38,064 - -
Reinvested dividends 20 1 - -
Exercise of stock options 20,710 893 - -
--------------------------------------- ---------------- --------------- ------------- -------------
Balance September 30, 2000 448,667 38,958 - -
--------------------------------------- ---------------- --------------- ------------- -------------
</TABLE>
<PAGE>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
(Information as at September 30, 2000 and for the Three and Nine Month
Periods Ended September 30, 2000 and 1999 is unaudited)
As at September 30, 2000, the Company had reserved 6,299,000 shares of
Common Stock for issuance upon exercise of options granted pursuant to
the Company's 1995 Stock Option Plan. As at September 30, 2000, options
to purchase a total of 3,052,000 shares of the Company's Common Stock
were outstanding, of which 1,644,000 options were then exercisable at
prices ranging from $16.875 to $33.50 per share. The remaining
outstanding options have exercise prices ranging from $16.875 to $33.50
per share. All outstanding options expire between July 19, 2005 and
March 6, 2010, ten years after the date of each respective grant.
The Company's basic earnings per share is based upon the following
weighted average number of common shares outstanding: 38,549,937 shares
and 38,276,111 shares for the three and nine month periods ended
September 30, 2000; and 38,063,639 shares and 34,256,746 shares for the
three and nine month periods ended September 30, 1999. Diluted earnings
per share is based upon the following weighted average number of common
shares outstanding: 39,983,038 shares and 39,156,229 shares for the
three and nine month periods ended September 30, 2000; and 38,063,639
shares and 34,257,646 shares for the three and nine month periods ended
September 30, 1999.
7. Commitments and Contingencies
The Company has guaranteed 50% of the outstanding mortgage debt in
Soponata-Teekay Limited, a joint venture company, totalling $27.5
million as at September 30, 2000. The Company has a 50% interest in the
joint venture company which owns three vessels (one Aframax and two
Suezmax tankers).
The Company has guaranteed its share of committed, uncalled capital in
certain limited partnerships which own two of the Company's
oil/bulk/ore carriers, totalling $1.7 million as at September 30, 2000.
As at September 30, 2000, the Company was committed to foreign exchange
contracts for the forward purchase of approximately Japanese yen 100
million, Singapore dollars 3.9 million and Norwegian kroner 12.3
million for U.S. dollars, at an average rate of Japanese yen 105.8 per
U.S. dollar, Singapore dollar 1.71 per U.S. dollar and Norwegian kroner
8.18 per U.S. dollar, respectively, for the purpose of hedging accounts
payable and accrued liabilities.
8. Other Income (Loss)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
$ $ $ $
---------------- -------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Loss on disposition of assets............... - - (1,004) -
Equity income from joint venture............ 3,282 - 5,294 -
Future income taxes......................... (500) (500) (1,500) (1,500)
Miscellaneous............................... (1,522) (1,163) (1,837) (2,592)
------- ------- ------- -------
1,260 (1,663) 953 (4,092)
======= ======= ======= =======
</TABLE>
9. Acquisition of Bona Shipholding Ltd.
On June 11, 1999, Teekay purchased Bona Shipholding Ltd. ("Bona") for
aggregate consideration (including estimated transaction expenses of
$19.0 million) of $450.3 million, consisting of $39.9 million in cash,
$294.0 million of assumed debt (net of cash acquired of $91.7 million)
and the balance of $97.4 million in shares of Teekay's Common Stock.
Bona's operating results are reflected in these financial statements
commencing the effective date of the acquisition.
<PAGE>
10. Recent Accounting Pronouncements
FASB Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities", as amended by FASB Statements No. 137 and 138, is
effective for fiscal periods beginning after June 15, 2000. This
statement requires recording all derivative instruments as assets or
liabilities measured at fair value. Management has not determined the
impact, if any, that the adoption of the new statements will have on
the consolidated results of operations or financial position of the
Company.
<PAGE>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(in thousands of U.S. dollars)
(unaudited)
SCHEDULE A
<TABLE>
<CAPTION>
Three Months Ended September 30, 2000
-------------------------------------------------------------------------------
8.32% Notes Teekay
Teekay Guarantor Non-Guarantor Shipping Corp.
Shipping Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net voyage revenues - 8,492 210,451 (44,048) 174,895
Operating expenses 56 7,657 110,608 (38,763) 79,558
-------------------------------------------------------------------------------
Income (loss) from vessel operations (56) 835 99,843 (5,285) 95,337
Net interest expense (3,643) - (12,101) (1) (15,745)
Equity in net income of subsidiaries 84,551 - - (84,551) -
Other income - - 1,259 1 1,260
-------------------------------------------------------------------------------
Net income 80,852 835 89,001 (89,836) 80,852
Retained earnings (deficit), beginning of
the period 454,416 (26,773) 456,151 (429,378) 454,416
Dividends declared (8,210) - - - (8,210)
===============================================================================
Retained earnings (deficit), end of the
period 527,058 (25,938) 545,152 (519,214) 527,058
===============================================================================
Three Months Ended September 30, 1999
-------------------------------------------------------------------------------
8.32% Notes Teekay
Teekay Guarantor Non-Guarantor Shipping Corp.
Shipping Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
-------------------------------------------------------------------------------
Net voyage revenues - 9,397 120,140 (41,743) 87,794
Operating expenses 180 8,180 114,325 (41,743) 80,942
-------------------------------------------------------------------------------
Income (loss) from vessel operations (180) 1,217 5,815 - 6,852
Net interest income (expense) (4,823) 49 (9,081) (59) (13,914)
Equity in net income (loss) of
subsidiaries (3,722) - - 3,722 -
Other income (loss) - - 4,790 (6,453) (1,663)
-------------------------------------------------------------------------------
Net income (loss) (8,725) 1,266 1,524 (2,790) (8,725)
Retained earnings (deficit), beginning of
the period 440,825 (32,217) 369,869 (337,652) 440,825
Dividends declared (8,184) - - - (8,184)
===============================================================================
Retained earnings (deficit), end of the
period 423,916 (30,951) 371,393 (340,442) 423,916
===============================================================================
(See Note 5)
</TABLE>
<PAGE>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(in thousands of U.S. dollars)
(unaudited)
SCHEDULE A
<TABLE>
<CAPTION>
Nine Months Ended September 30, 2000
---------------------------------------------------------------------------
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 - 26,372 542,255 (131,045) 437,582
Operating expenses 323 23,406 332,416 (112,768) 243,377
---------------------------------------------------------------------------
Income (loss) from vessel operations (323) 2,966 209,839 (18,277) 194,205
Net interest income (expense) (13,342) 46 (34,324) - (47,620)
Equity in net income of subsidiaries 160,517 - - (160,517) -
Other income 686 - 267 - 953
---------------------------------------------------------------------------
Net income 147,538 3,012 175,782 (178,794) 147,538
Retained earnings (deficit), beginning of
the period 404,130 (28,950) 369,370 (340,420) 404,130
Dividends declared (24,610) - - - (24,610)
===========================================================================
Retained earnings (deficit), end of the
period 527,058 (25,938) 545,152 (519,214) 527,058
===========================================================================
Nine Months Ended September 30, 1999
---------------------------------------------------------------------------
Teekay 8.32% Notes Teekay
Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
---------------------------------------------------------------------------
Net voyage revenues - 28,295 331,846 (131,430) 228,711
Operating expenses 397 25,606 304,738 (131,430) 199,311
---------------------------------------------------------------------------
Income (loss) from vessel operations (397) 2,689 27,108 - 29,400
Net interest income (expense) (14,346) 78 (17,161) - (31,429)
Equity in net income of subsidiaries 8,622 - - (8,622) -
Other income (loss) - - 15,129 (19,221) (4,092)
---------------------------------------------------------------------------
Net income (loss) (6,121) 2,767 25,076 (27,843) (6,121)
Retained earnings (deficit), beginning of
the period 451,829 (33,718) 346,317 (312,599) 451,829
Dividends declared (21,792) - - - (21,792)
===========================================================================
Retained earnings (deficit), end of the
period 423,916 (30,951) 371,393 (340,442) 423,916
===========================================================================
(See Note 5)
</TABLE>
<PAGE>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(in thousands of U.S. dollars)
(unaudited)
SCHEDULE A
<TABLE>
<CAPTION>
As at September 30, 2000
---------------------------------------------------------------------------------
8.32% Notes Teekay
Teekay Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents 508 - 219,213 - 219,721
Other current assets 45 700 177,938 (96,000) 82,683
---------------------------------------------------------------------------------
Total current assets 553 700 397,151 (96,000) 302,404
Vessels and equipment (net) - 283,337 1,338,232 - 1,621,569
Advances due from subsidiaries 62,290 - - (62,290) -
Other assets (principally marketable
securities 1,103,156 - 32,525 (1,103,156) 32,525
and investments in subsidiaries)
Investment in joint venture - - 21,667 - 21,667
---------------------------------------------------------------------------------
1,165,999 284,037 1,789,575 (1,261,446) 1,978,165
=================================================================================
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities 1,000 2,243 244,006 (96,000) 151,249
Long-term debt 189,274 - 658,117 - 847,391
Due to (from) affiliates - (61,598) 195,791 (134,193) -
---------------------------------------------------------------------------------
Total liabilities 190,274 (59,355) 1,097,914 (230,193) 998,640
---------------------------------------------------------------------------------
Minority interest - - 3,800 - 3,800
Stockholders' Equity
Capital Stock 448,667 23 5,943 (5,966) 448,667
Contributed capital - 369,307 136,766 (506,073) -
Retained earnings (deficit) 527,058 (25,938) 545,152 (519,214) 527,058
---------------------------------------------------------------------------------
Total stockholders' equity 975,725 343,392 687,861 (1,031,253) 975,725
---------------------------------------------------------------------------------
1,165,999 284,037 1,789,575 (1,261,446) 1,978,165
=================================================================================
As at December 31, 1999
---------------------------------------------------------------------------------
8.32% Notes Teekay
Teekay Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
---------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents 210 39,652 180,465 - 220,327
Other current assets 42 582 162,084 (102,376) 60,332
---------------------------------------------------------------------------------
Total current assets 252 40,234 342,549 (102,376) 280,659
Vessels and equipment (net) - 294,800 1,371,955 - 1,666,755
Advances due from subsidiaries 121,415 - - (121,415) -
Other assets (principally marketable
securities 943,389 - 15,873 (943,394) 15,868
and investments in subsidiaries)
Investment in joint venture - - 19,402 - 19,402
---------------------------------------------------------------------------------
1,065,056 335,034 1,749,779 (1,167,185) 1,982,684
=================================================================================
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities 7,989 991 227,331 (109,808) 126,503
Long-term debt 225,000 - 797,010 - 1,022,010
Due to (from) affiliates - (6,337) 211,255 (204,918) -
---------------------------------------------------------------------------------
Total liabilities 232,989 (5,346) 1,235,596 (314,726) 1,148,513
---------------------------------------------------------------------------------
Minority interest - - 2,104 - 2,104
Stockholders' Equity
Capital Stock 427,937 23 5,943 (5,966) 427,937
Contributed capital - 369,307 136,766 (506,073) -
Retained earnings (deficit) 404,130 (28,950) 369,370 (340,420) 404,130
---------------------------------------------------------------------------------
Total stockholders' equity 832,067 340,380 512,079 (852,459) 832,067
---------------------------------------------------------------------------------
1,065,056 335,034 1,749,779 (1,167,185) 1,982,684
=================================================================================
</TABLE>
<PAGE>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
(unaudited)
SCHEDULE A
<TABLE>
<CAPTION>
Nine Months Ended September 30, 2000
-------------------------------------------------------------------------
Teekay 8.32% Notes Non- Teekay
Shipping Guarantor 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 (19,221) 16,157 212,417 - 209,353
-------------- --------------- ------------- ------------ ---------------
FINANCING ACTIVITIES
Proceeds from long-term debt - - 11,000 - 11,000
Repayments of long-term debt - - (27,484) - (27,484)
Prepayments of long-term debt (35,726) - (110,000) - (145,726)
Other 55,245 (55,261) (469) - (485)
-------------- --------------- ------------- ------------ ---------------
-------------- --------------- ------------- ------------ ---------------
Net cash flow from financing activities 19,519 (55,261) (126,953) - (162,695)
-------------- --------------- ------------- ------------ ---------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment - (548) (43,282) - (43,830)
Proceeds from disposition of assets - - 9,713 - 9,713
Acquisition costs related to purchase of Bona -
Shipholding Ltd. - - (2,247) (2,247)
Other - - (10,900) - (10,900)
-------------- --------------- ------------- ------------ ---------------
-------------- --------------- ------------- ------------ ---------------
Net cash flow from investing activities - (548) (46,716) - (47,264)
-------------- --------------- ------------- ------------ ---------------
Increase (decrease) in cash and cash equivalents 298 (39,652) 38,748 - (606)
Cash and cash equivalents, beginning of the period 210 39,652 180,465 - 220,327
============== =============== ============= ============ ===============
Cash and cash equivalents, end of the period 508 - 219,213 - 219,721
============== =============== ============= ============ ===============
Nine Months Ended September 30, 1999
-------------------------------------------------------------------------
-------------- --------------- ------------- ------------ ---------------
Teekay 8.32% Notes Non- Teekay
Shipping Guarantor Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
-------------- --------------- ------------- ------------ ---------------
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
-------------- --------------- ------------- ------------ ---------------
Net cash flow from operating activities (19,164) 16,849 61,011 - 58,696
-------------- --------------- ------------- ------------ ---------------
FINANCING ACTIVITIES
Proceeds from long-term debt - - 50,000 - 50,000
Repayments of long-term debt - - (16,586) - (16,586)
Prepayments of long-term debt - - (10,000) (10,000)
Other (26,061) (9,286) 12,971 - (22,376)
-------------- --------------- ------------- ------------ ---------------
Net cash flow from financing activities (26,061) (9,286) 36,385 - 1,038
-------------- --------------- ------------- ------------ ---------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment - (74) (43,539) - (43,613)
Net cash acquired through purchase of Bona -
Shipholding Ltd. 45,543 - - 45,543
Other - - 21,029 - 21,029
-------------- --------------- ------------- ------------ ---------------
Net cash flow from investing activities 45,543 (74) (22,510) - 22,959
-------------- --------------- ------------- ------------ ---------------
Increase in cash and cash equivalents 318 7,489 74,886 - 82,693
Cash and cash equivalents, beginning of the period 3 27,345 38,785 - 66,133
============== =============== ============= ============ ===============
Cash and cash equivalents, end of the period 321 34,834 113,671 - 148,826
============== =============== ============= ============ ===============
(See Note 5)
</TABLE>
<PAGE>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 2000
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Teekay Shipping Corporation (the "Company") changed its fiscal year end from
March 31 to December 31, commencing December 31, 1999, in order to facilitate
comparison of its operating results to those of other companies in the
transportation industry.
RESULTS OF OPERATIONS
General
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. The Company's fleet consists of 74 vessels (including four
vessels time-chartered-in and three vessels owned by a joint venture), for a
total cargo-carrying capacity of approximately 7.4 million tonnes.
During the nine months ended September 30, 2000, approximately 65% 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 contracts of
affreightment ("COAs"), whereby the Company carries an agreed quantity of cargo
for a customer over a specified trade route over a given period of time. In the
nine months ended September 30, 2000, approximately 14% of net voyage revenues
were generated by time-charters and COAs priced on a spot market basis. In
aggregate, approximately 79% of the Company's net voyage revenues during the
nine months ended September 30, 2000 were derived from spot voyages or
time-charters and COAs priced on a spot market basis, with the remaining 21%
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. In addition, 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 weather patterns that 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. In addition, the Company has converted one of its existing vessels to
a floating storage and off-loading vessel, which is sharing crews with the
vessels employed in the Caltex arrangement (together with the other three
vessels involved in this arrangement, the "Australian Vessels"). Vessel
operating expenses for the Australian Vessels are substantially higher than
those for the rest of the Company's fleet, primarily as a result of higher costs
associated with employing an Australian crew. The time-charter rates (as defined
below) for the Australian Vessels are correspondingly higher to compensate for
these increased costs. During the nine months ended September 30, 2000, the
Australian Vessels earned net voyage revenues of $26.1 million and an average
TCE rate of $23,856, and incurred vessel operating expenses of $8.6 million, or
$7,808 on a per ship per day basis. In comparison, during the nine months ended
September 30, 1999, the Australian Vessels earned net voyage revenues of $27.6
million and an average TCE rate of $25,284, and incurred vessel operating
expenses of $10.3 million, or $9,390 on a per ship per day basis. The results of
the Australian Vessels are included in the Company's Consolidated Financial
Statements included herein.
<PAGE>
Acquisition of Bona Shipholding Ltd.
On June 11, 1999, the Company acquired Bona Shipholding Ltd. ("Bona") for
aggregate consideration (including estimated transaction expenses of $19.0
million) of $450.3 million, consisting of $39.9 million in cash, $294.0 million
of assumed debt (net of cash acquired of $91.7 million) and the balance of $97.4
million in shares of the Company's common stock. Bona was the third largest
operator of medium-size tankers, controlling a fleet of vessels consisting of
fifteen Aframax tankers, eight oil/bulk/ore carriers and, through a joint
venture, 50% interests in one additional Aframax tanker and two Suezmax tankers.
Bona engaged in the transportation of oil, oil products, and dry bulk
commodities, primarily in the Atlantic region. Through this acquisition, the
Company has combined Bona's market strength in the Atlantic region with the
Company's franchise in the Indo-Pacific Basin.
The acquisition of Bona has been accounted for using the purchase method of
accounting. Bona's operating results are reflected in the Company's financial
statements commencing June 11, 1999.
Historically, the Company has depreciated its vessels for accounting purposes
over an economic life of 20 years down to estimated residual values. Bona
depreciated its vessels over an economic life of 25 years down to estimated
scrap values, the method used by the majority of companies in the shipping
industry. Effective April 1, 1999, the Company revised the estimated useful life
of its vessels to 25 years and also replaced the estimated residual values with
estimated scrap values. Since such changes, the Company's average depreciation
expense per vessel has decreased from historical levels.
As a result of the Bona acquisition, the Company's general and administrative
expenses, while remaining relatively stable on a per vessel basis during the
first few fiscal quarters of combined operations, have began to decline on a per
vessel basis as efficiencies are obtained from the integration of the two
companies' operations. The Company's interest expense has increased as a result
of debt that was assumed as part of the acquisition.
All oil/bulk/ore carriers ("O/B/Os") owned by Bona have been operated through an
O/B/O pool managed by a subsidiary of Bona. Net voyage revenues from the O/B/O
pool are currently included on a 100% basis in the Company's consolidated
financial statements. Where the Company owns less than 50% of a vessel, the
minority participants' share of the O/B/O pool is reflected as a time charter
hire expense. The Company anticipates that these O/B/Os will earn lower average
TCE rates than the rest of the Teekay fleet as these vessels command lower rates
than modern Aframax tankers under typical market conditions, which reflects the
lower capital cost of these vessels.
Results of Operations
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>
Quarter Ended September 30, 2000 versus Quarter Ended September 30, 1999
Aframax TCE rates continued to strengthen in the third quarter of 2000 due to
increased demand for modern tankers, arising from increased oil production and
age discrimination by charterers. TCE rates are dependent on oil production
levels, oil consumption growth, the number of vessels scrapped and charterers'
preference for modern tankers. As a result of the Company's dependence on the
tanker spot market, any fluctuations in Aframax TCE rates will impact the
Company's revenues and earnings.
The Company's net income was $80.9 million in the quarter ended September 30,
2000 compared to a net loss of $8.7 million in the quarter ended September 30,
1999, due mainly to the improvement in Aframax TCE rates.
Income from Vessel Operations
The Company's average fleet size in the quarter ended September 30, 2000 was
unchanged from that of the same quarter one year ago.
Net voyage revenues increased 99.2% to $174.9 million in the current quarter
compared to a $87.8 million for the same quarter last year. This is the result
of a 95.1% increase in the Company's average TCE rate in the current quarter to
$27,331 from $14,008 in the same quarter last year.
Vessel operating expenses, which include crewing, repairs and maintenance,
insurance, stores and lubes, and communication expenses, decreased 14.1% to
$31.2 million in the quarter ended September 30, 2000 from $36.3 million in the
quarter ended September 30, 1999, mainly as a result of operating expense
synergies arising from the Bona acquisition and lower operating expenses for the
Australian fleet.
Time-charter hire expense increased to $14.2 million in the quarter ended
September 30, 2000, from $10.8 million in the quarter ended September 30, 1999,
primarily due to an increase in TCE rates for the O/B/O pool. The minority
pool participants' share of net voyage revenues which is reflected as
time-charter hire expense was $7.7 million for the quarter ended September 30,
2000, compared to $4.8 million in the same quarter last year. The average
number of vessels time-chartered-in by the Company, excluding the O/B/Os, was
four in the quarters ended September 30, 1999 and 2000.
Depreciation and amortization expense increased 4.0% to $25.2 million in the
current quarter from $24.3 million in the same quarter last year, mainly due to
an increase in drydock amortization expense of $2.4 million in the quarter
ended September 30, 2000, compared to $1.8 million in the quarter ended
September 30, 1999.
General and administrative expenses decreased 7.1% to $8.9 million in the
current quarter from $9.6 million in the same quarter last year, primarily as a
result of overhead cost synergies from the Bona acquisition.
Other Items
Interest expense increased 12.8% to $18.0 million in the current quarter from
$16.0 million in the same quarter last year, reflecting higher interest rates.
Interest income was $2.3 million in the current quarter as compared to $2.1
million in the same quarter last year, representing an increase of 10.6%, as a
result of increased interest rates and higher cash and marketable securities
balances.
<PAGE>
Nine Months Ended September 30, 2000 versus Nine Months Ended September 30, 1999
Net income for the nine months ended September 30, 2000 was $147.5 million
compared to a net loss of $6.1 million for the same period last year. The
results for the current period included a loss of $1.0 million on asset sales.
There were no asset sales in the previous period.
Income from Vessel Operations
The Company's average fleet size was 25.8% greater in the nine months ended
September 30, 2000 compared to the same period one year ago, due mainly to the
acquisition of Bona.
Net voyage revenues increased 91.3% to $437.6 million in the current period
compared to $228.7 million for the same period last year. This is a result of
the increase in fleet size and a 46.7% increase in the Company's average TCE
rate in the current period to $22,969 from $15,652 in the same period last year.
Vessel operating expenses increased 23.0% to $100.7 million in the nine months
ended September 30, 2000 from $81.8 million in the nine months ended September
30, 1999, primarily as a result of the increase in fleet size.
Time-charter hire expense increased to $40.3 million in the nine months ended
September 30, 2000, up from $27.4 million in the nine months ended September 30,
1999, primarily due to the Bona acquisition. The minority pool participants'
share of net voyage revenues which is reflected as time-charter hire expense was
$18.9 million for the nine months ended September 30, 2000, compared to $5.7
million in the same period last year. The average number of vessels
time-chartered-in by the Company, excluding the O/B/Os, was five in the nine
months ended September 30, 2000 compared to four in the nine months ended
September 30, 1999.
Depreciation and amortization expense increased 13.6% to $74.9 million in the
current period from $66.0 million in the same period last year, reflecting the
increase in fleet size arising from the acquisition of Bona, partially offset by
the change in estimated useful life of the vessels from 20 to 25 years,
effective April 1, 1999. Depreciation and amortization expense included
amortization of drydocking costs of $6.7 million in the nine months ended
September 30, 2000, compared to $5.9 million in the nine months ended September
30, 1999.
General and administrative expenses rose 14.2% to $27.5 million in the current
period from $24.1 million in the same period last year, primarily as a result of
the acquisition of Bona, partially offset by overhead cost synergies related to
the acquisition.
Other Items
Interest expense increased 57.0% to $57.3 million in the current period from
$36.5 million in the same period last year, reflecting higher interest rates and
the additional debt assumed as part of the Bona acquisition. Interest income was
$9.7 million in the nine months ended September 30, 2000 as compared to $5.0
million in the same period last year, representing an increase of 91.5% as a
result of increased interest rates and higher cash and marketable securities
balances.
<PAGE>
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 periods' results, the figures in the table
below include or exclude the results from the Company's Australian Vessels and
O/B/Os acquired as part of the Bona acquisition as indicated:
<TABLE>
<CAPTION>
------------------------------------------------------- -------------------------------- ------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
------------------------------------------------------- -- ----------- --- ------------- -- ----------- -- ------------
<S> <C> <C> <C> <C>
International Fleet (excluding ex-Bona O/B/Os and
Australian crewed vessels):
Average number of ships 58 58 59 50
Total calendar ship-days 5,380 5,371 16,281 13,516
Revenue-generating ship-days (A) 5,205 5,092 15,583 12,699
Net voyage revenue before commissions(B) (000's) $ 152,574 $ 67,540 $ 373,197 $ 190,330
------------------------------------------------------- -- ----------- --- ------------- -- ------------
TCE (B/A) $ 29,313 $ 13,264 $ 23,949 $ 14,988
------------------------------------------------------- -- ----------- --- ------------- -- ----------- -- ------------
Operating results per calendar ship-day:
Net voyage revenue $ 27,525 $ 12,177 $ 22,241 $ 13,719
Vessel operating expense 5,259 5,577 5,285 5,363
General and administrative expense 1,377 1,485 1,406 1,554
Drydocking expense 442 408 420 494
------------------------------------------------------- -- ----------- --- ------------- -- ----------- -- ------------
Operating cash flow per calendar ship-day $ 20,447 $ 4,707 $ 15,130 $ 6,308
------------------------------------------------------- -- ----------- --- ------------- -- ----------- -- ------------
Australian Vessels:
Operating cash flow per calendar ship-day $ 14,976 $ 14,297 $ 14,293 $ 14,326
------------------------------------------------------- -- ----------- --- ------------- -- ----------- -- ------------
Total Fleet (including ex-Bona O/B/Os and Australian
crewed vessels):
Operating cash flow per calendar ship-day $ 18,690 $ 5,130 $ 14,042 $ 6,678
------------------------------------------------------- -- ----------- --- ------------- -- ----------- -- ------------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
As at September 30, 2000, the Company's total liquidity, which includes cash,
marketable securities and undrawn borrowings, was $331.8 million, up from $237.4
million as at December 31, 1999, mainly as a result of an increase in net cash
flow from operating activities due to higher TCE rates.
Net cash flow from operating activities increased to $209.4 million in the nine
months ended September 30, 2000 from $58.7 million in the same period one year
ago, mainly reflecting the increase in TCE rates and increased fleet size as a
result of the Bona acquisition.
The Company's scheduled debt repayments were $27.5 million during the nine
months ended September 30, 2000, compared to $16.6 million in the same period
last year. Debt prepayments during the nine months ended September 30, 2000
totalled $145.7 million, of which $35.7 million was used for the repurchase of
the Company's 8.32% Notes and the balance of $110.0 million was used to reduce
the Company's Revolvers. Debt prepayments during the same period last year
totalled $10.0 million.
During the nine months ended September 30, 2000, the Company incurred capital
expenditures for vessels and equipment of $35.7 million, consisting mainly of
the purchase of a modern second-hand Aframax tanker. Cash expenditures for
drydocking were $8.1 million in the nine months ended September 30, 2000
compared to $3.7 million over the same period one year ago.
Dividends declared during the nine months ended September 30, 2000 were $24.6
million, or 64.5 cents per share.
As part of its growth strategy, the Company will continue to consider strategic
opportunities, including the acquisition of additional vessels and 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.
<PAGE>
YEAR 2000 COMPLIANCE
The Company relies on computer systems, software, databases, third party
electronic data interchange interfaces and embedded processors to operate its
business. The Company successfully implemented a program to systematically
address the Year 2000 problem. The Company was Year 2000 compliant prior to the
rollover to the Year 2000. The Company will continue to monitor electronic date
recognition issues.
FORWARD-LOOKING STATEMENTS
This Report on Form 6-K for the quarterly period ended September 30, 2000
contains certain forward-looking statements (as such term is defined in Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended) concerning future events and the Company's
operations, performance and financial condition, including, in particular,
statements regarding: TCE rates in the near-term; supply and demand for tankers;
supply and demand for oil; and the Company's growth strategy and measures to
implement such strategy. Words such as "expects," "intends," "plans,"
"believes," "anticipates," "estimates" and variations of such words and similar
expressions are intended to identify forward-looking statements. These
statements involve known and unknown risks and are based upon a number of
assumptions and estimates which are inherently subject to significant
uncertainties and contingencies, many of which are beyond the control of the
Company. Actual results may differ materially from those expressed or implied by
such forward-looking statements. Factors that could cause actual results to
differ materially include, but are not limited to: changes in production of or
demand for oil and petroleum products, either generally or in particular
regions; the cyclical nature of the tanker industry and its dependence on oil
markets; the supply of tankers available to meet the demand for transportation
of petroleum products; charterers' preference for modern tankers; greater than
anticipated levels of tanker newbuilding orders or less than anticipated rates
of tanker scrapping; changes in trading patterns significantly impacting overall
tanker tonnage requirements; changes in typical seasonal variations in tanker
charter rates; the Company's dependence on spot oil voyages; competitive factors
in the markets in which the Company operates; changes in environmental and
applicable industry regulations; changes in tax laws; the Company's potential
inability to achieve and manage growth; risks associated with operations outside
the United States; the potential inability of the Company to generate internal
cash flow and obtain additional debt or equity financing to fund capital
expenditures; and other factors detailed from time to time in the Company's
periodic reports filed with the U.S. Securities and Exchange Commission. The
Company expressly disclaims any obligation or undertaking to release publicly
any updates or revisions to any forward-looking statements contained herein to
reflect any change in the Company's expectations with respect thereto or any
change in events, conditions or circumstances on which any such statement is
based.
<PAGE>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 2000
PART I - FINANCIAL INFORMATION
ITEM 3 - MARKET RATE RISKS
The Company is exposed to market risk from foreign currency and changes in
interest rate fluctuations. The Company uses interest rate swaps and forward
foreign currency contracts to manage these risks, but does not use financial
instruments for trading or speculative purposes.
Interest Rate Risk
The Company invests its cash and marketable securities in financial instruments
with maturities of less than three months within the parameters of its
investment policy and guidelines.
The Company uses interest rate swaps to manage the impact of interest rate
changes on earnings and cash flows. The differential to be paid or received
under these swap agreements is accrued as interest rates change and is
recognized as an adjustment to interest expense. Premiums and receipts, if any,
are recognized as adjustments to interest expense over the lives of the
individual contracts.
Foreign Exchange Rate Risk
The international tanker industry's functional currency is the U.S. dollar.
Virtually all of the Company's revenues and most of its operating costs are in
U.S. dollars. The Company incurs certain operating expenses, drydocking, and
overhead costs in foreign currencies, the most significant of which are Japanese
yen, Singapore dollars, Canadian dollars, Australian dollars and Norwegian
kroner. During the nine months ended September 30, 2000, approximately 20% of
vessel and voyage costs, overhead and drydock expenditures were denominated in
these currencies. However, the Company has the ability to shift its purchase of
goods and services from one country to another and, thus, from one currency to
another, on relatively short notice.
The Company enters into forward contracts as a hedge against changes in certain
foreign exchange rates. Market value gains and losses are deferred and
recognized during the period in which the hedged transaction is recorded in the
accounts.
<TABLE>
<CAPTION>
Contract Carrying Amount Fair
(in USD 000's) Amount Asset Liability Value
---------------------------------------- ------------------ ---------------- ------------------ --------------------
<S> <C> <C> <C> <C>
September 30, 2000
FX Forward Contracts $ 4,719 $ - $ - $ (186)
Interest Rate Swap Agreements 100,000 - - (109)
Debt 922,957 - 922,957 915,386
December 31, 1999
FX Forward Contracts $ 4,448 $ - $ - $ (20)
Interest Rate Swap Agreements 200,000 - - 4,488
Debt 1,085,167 - 1,085,167 1,060,417
---------------------------------------- ------------------ ---------------- ------------------ --------------------
</TABLE>
Inflation
Although inflation has had a moderate impact on operating, drydocking and
corporate overhead expenses, management does not consider inflation to be a
significant risk to direct costs in the current and foreseeable economic
environment. However, in the event that inflation becomes a significant factor
in the world economy, inflationary pressures could result in increased operating
and financing costs.
<PAGE>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 2000
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
(i) On September 11, 2000, the Company filed a report on Form 6-K
with respect to its Rights Agreement.
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>
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 14, 2000 By: /s/ Peter S. Antturi
---------------------
Peter S. Antturi
Vice President and Chief Financial Officer
