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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of December, 1999
FRONTLINE LTD. (FORMERLY LONDON & OVERSEAS FREIGHTERS LIMITED)
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(Translation of registrant's name into English)
MERCURY HOUSE, 101 FRONT STREET, HAMILTON, HM 12, BERMUDA
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(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F
Form 20-F X Form 40-F
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
Yes No X
If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82-
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FRO: INTERIM RESULTS
Frontline reports a net loss of $17.3 million for the third
quarter of 1999 (1998 - net income of $8.3 million) and a net
loss of $20.7 million for the first nine months of 1999 (1998 -
net income of $32.2 million). Earnings per share for the quarter
were $(0.37), (1998 - $0.18), and for the nine months $(0.45),
(1998 - $0.70).
(in thousands of $)
1998 1999 1999 1998
JUL-SEP JUL-SEP JAN-SEP JAN-SEP
Net operating revenue 53,619 38,550 129,809 158,756
Operating profit before
depreciation 36,120 15,716 60,669 101,886
Operating profit after
depreciation 21,714 533 17,604 64,176
Net income (loss) after
tax 8,349 (17,265) (20,709) 32,200
Earnings per share 0.18 (0.37) (0.45) 0.70
THIRD QUARTER AND NINE MONTH RESULTS
The Board of Frontline, at a meeting in Hamilton Bermuda, met and
discussed the Company's results for the third quarter of 1999.
The Board is disappointed to report a net loss of $17.3 million,
compared with net income of $8.3 million for the third quarter of
1998. The result is in line with what the Board predicted in the
second quarter report. Earnings before interest, tax,
depreciation, and amortisation (EBITDA) for the quarter,
including earnings from associated companies were $16.4 million,
compared with $36.7 million for the 1998 period. The average
daily time charter equivalents ("TCEs") earned by the VLCCs,
Suezmax tankers, and Suezmax OBO carriers were $19,400, $14,100
and $15,300, respectively, (1998 - $34,200, $22,200 and $18,600,
respectively). These TCEs do not include the vessels on time
charter to BP since the earnings are subject to subsequent semi-
annual adjustment. Total days offhire in the 1999 quarter were 45
for the VLCCs and 9 for the Suezmax fleet, of which 38 days were
for scheduled docking. Total operating costs, administrative
expenses and depreciation have increased due to the expansion of
the fleet and the Company.
Net other expenses for the quarter were $18.5 million (1998 -
$13.9 million). This reflects an increase in the average debt
resulting from the fleet expansion and the further investment in
ICB at the end of the quarter. In addition, the Company incurred
a total of $1.7 million fees relating to the renegotiation of
debt covenants and arrangement fees in connection with the
refinancing of the debt associated with ICB.
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Earnings per share for the quarter were $(0.37), (1998 - $0.18).
On September 30, 1999, the Company issued a total of 12,945,000
shares in two capital transactions discussed below, resulting in
59,051,860 shares outstanding at September 30, 1999 and a
weighted average number of shares outstanding for the quarter of
46,247,567 (as at September 30, 1998 and for the quarter then
ended - 46,106,860). Cashflow per share for the quarter was
$(0.05), compared with $0.49 for the same quarter in 1998.
For the first nine months of 1999, the Company incurred a net
loss of $20.7 million (1998 - net income of $32.2 million) and
EBITDA of $62.6 million (1998 - $104.3 million). The average
daily TCEs earned by the VLCCs, Suezmax tankers, and Suezmax OBO
carriers were $21,400, $17,100 and $17,600 respectively, compared
with $33,600, $24,300 and $23,200 in the first nine months of
1998.
Net other expenses for the nine months were $40.3 million (1998 -
$34.3 million). As for the quarter, this principally reflects an
increase in the average debt resulting from the fleet expansion
and the acquisition of ICB, offset by the ICB dividend received
in the second quarter.
Earnings per share for the 1999 year to date were $(0.45), (1998
- - $0.70) and cashflow per share was $0.48 (1998 - $1.51).
ACCOUNTING TREATMENT OF ICB
In the quarter and nine months ended September 30, 1999, the
investment in ICB is accounted for as an investment in marketable
securities. The market price for ICB shares used in Frontline's
balance sheet as of September 30, 1999 was SEK 140 per A share
and SEK 63.5 per B share. This is consistent with the treatment
applied in prior period interim reports and annual financial
statements. Due to the nature of the acquisition of ICB by
Frontline, US generally accepted accounting principles ("US
GAAP") require restatement of certain previously reported
Frontline financial statements. ICB will be included in the
financial statements of Frontline according to the equity method
for periods to December 31, 1998 and will be included on a
consolidated basis from January 1, 1999. Due to the need to
convert the financial statements of ICB to US GAAP before this
restatement can be done, this accounting has not been applied to
the Frontline financial statements included in this Interim
Report. The restatement will first be presented in the financial
statements for the year ended December 31, 1999.
The following unaudited table presents ICB's net operating
revenues and net income as prepared in accordance with Swedish
GAAP:
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1998 1999 1999 1998 1998
Jul-Sep Jul-Sep (in Jan-Sep Jan-Sep Jan-Dec
thousands of $)
45,800 29,900 Net operating 103,200 122,700 161,000
revenues
8,300 (40,800) Net income (37,800) 19,600 20,000
ICB has reported negative EBITDA of $28.7 million and $0.4
million for the quarter and nine months ended September 30, 1999,
respectively. However, these results include a loss on sale of
vessels of $35.5 million that will not impact the results of
Frontline on a consolidated basis. The sale of the four vessels
to ACOL Tankers is done based on broker valuation assessment. The
transaction has therefore not negatively influenced the
underlying value of ICB.
THE MARKET
The TCE results for the third quarter is another set back for
tanker owners. Based on a continued strong adherence to the OPEC
production cut, rates continued the weak trend from the second
quarter. The VLCC market from the Middle East fluctuated in the
quarter around WS 45, which, based on the bunker prices in the
third quarter, gave TCE earnings of $15-16,000 per day. The
market for VLCCs out of West Africa was particularly active in
September when about 15 VLCCs were fixed in this direction. The
backhaul opportunities created the potential for $2 - 3,000 per
day additional earnings, while it took away demand from the
Suezmaxes. The earnings differential between modern VLCCs and old
turbines increased in the third quarter as a function of
increased bunker prices. The differential is estimated to $9,500
per day. Old tonnage is thereby giving owners an operating loss
of $6 - 7,000 per day.
The Suezmax market went as low as WS 50 for W Africa - USG trades
during the quarter. Based on a modern Suezmax this gives
earnings of $7,500 per day. The market picked up somewhat in
September when Novorossisk in the Russian Black Sea opened up
after one month of closedown. The market has after that remained
in the WS 70 - 75 level. The weak freight market has given
limited availability for cross trading of Suezmax tonnage.
The Capesize bulk market showed a very strong trend in the third
quarter, when rates moved from TCE of $7-8,000 up to $20,000.
This led to a decision by Frontline to move the OBO carriers into
the dry-market. This decision had limited positive effects in the
third quarter, but the effect is expected to increase in the
fourth quarter. All of the Company's eight OBO carriers have
recently been employed with dry bulk cargoes.
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In the third quarter a total of 11 VLCC and 7 Suezmaxes were
delivered from the yard while 5 VLCCs and 10 Suezmaxes have been
scrapped. For the nine months to September 30, 1999, 25 VLCC and
14 Suezmax newbuildings have been delivered while 19 VLCCs and 16
Suezmaxes have been scrapped.
CORPORATE AND OTHER MATTERS
At the end of September 1999, Frontline acquired ICB shares
previously owned by the so-called "A group" consortium including
those controlled by board members and ICB shares controlled by
the Angelicoussis family. Frontline, as a result of the
acquisitions, increased its shareholding in ICB to approximately
90 per cent of the capital and 93 per cent of the votes. In
October 1999, a new Board of Directors was appointed in ICB and
is consequently controlled by Frontline.
Frontline intends to co-ordinate the activities of ICB and
Frontline into the existing Frontline organisation. As a result
of the change of control in ICB, part of ICB's existing financing
will have to be refinanced. Frontline will refinance ICB as soon
as possible, and thereafter seek to acquire the minority
shareholders.
Also at the end of September 1999, Frontline entered into three
transactions to substantially increase financial flexibility in
the coming years. Frontline has entered into an agreement with
its banks to allow flexibility in its debt repayment schedule,
which, if utilised in 2000, will increase working capital by up
to a maximum of $32 million. The Company issued approximately
$20 million in equity through a private placement with five
financial institutions. Issue price was NOK 33.00 and the total
number of shares issued was 4,715,000. In addition, $35 million
of the $89 million Metrogas subordinated loan facility was
converted to equity. At an issue price of NOK 33.00 a total of
8,230,000 shares were issued. In connection with this conversion,
Metrogas offered $15 million of the resulting ordinary shares to
existing Frontline shareholders and warrant holders. The total
number of shares outstanding in Frontline after completion of
these transactions is 59,051,860.
The three combined transactions will increase Frontline's equity
by $55 million, and will improve the working capital by up to $52
million.
During the third quarter, Frontline took delivery of the fourth
and fifth VLCC C-Class newbuilding, the Front Commander and Front
Crown, both vessels being financed by traditional bank financing.
On October 28, 1999, the Board of Directors approved a
transaction with the Mosvold Farsund Group under which Frontline
will acquire one Suezmax newbuilding (the "Mosvold ship"). The
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vessel, which is due for delivery in January 2000, is presently
under construction at Hyundai in South Korea and is a sister ship
of the three Suezmaxes Frontline took delivery of in 1998. In
addition to the Mosvold ship, Frontline is also scheduled to take
delivery of another two Suezmaxes newbuildings from Hyundai in
January and April 2000.
The purchase price of $45.5 million for the Mosvold ship will be
partly paid by the issuance of 1,910,000 Frontline shares to the
seller at a price of NOK 37.00. Frontline will receive a one year
American style call option to buy back 430,000 of these shares
for NOK 37.00 per share plus 10 per cent interest per annum
compensation. Frontline's partner in Alliance Chartering, OMI
Corporation, has in another transaction concluded the purchase of
Mosvold Farsund's second Suezmax newbuilding which is scheduled
to be delivered in March 2000.
The Board estimates that ICB will be fully integrated
operationally into Frontline within the first quarter of 2000.
This should strengthen Frontline's market position, increase the
Group's purchasing power and reduce the Group's overhead per
ship. In connection with the take-over of ICB, special importance
has been given to strengthen the technical side of the Group. Mr.
O. Spieler has been hired as new Technical Director. Spieler
comes from a position as fleet manager in Bergesen dy. ASA.
OUTLOOK
The Board in Frontline will continue to focus on all efforts that
can strengthen Frontline's market position in the VLCC and
Suezmax market.
The rate development so far in the fourth quarter has not given
any clear positive signals. It is however encouraging to
recognise that the level of scrapping of old tonnage is picking
up. The Board anticipates that the earnings in the fourth quarter
will show a positive development from the third quarter. In
particular, it is anticipated that the OBO carriers will show
improved earnings due to the improved bulk market. Newbuilding
prices and secondhand prices are showing marginal positive
development.
A major positive improvement in the freight market will not
happen before OPEC decides to open up for increased production.
Limited overall overhang of tonnage, the increased scrapping, the
increased world wide consumption of oil, and the falling trend in
world wide oil storage, makes the board cautiously optimistic
about the development in 2000.
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November 16, 1999
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
Questions should be directed to:
Contact: Tor Olav Troim: Director
+47 23 11 40 00
Tom E. Jebsen: CFO Frontline Management A.S.
+47 23 11 40 00
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<TABLE>
FRONTLINE GROUP THIRD QUARTER REPORT (UNAUDITED)
<CAPTION>
1998 1999 INCOME STATEMENT 1999 1998 1998
Jul-Sep Jul-Sep (in thousands of $) Jan-Sep Jan-Sep Jan-Dec
(audited)
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<S> <C> <C> <C> <C> <C>
70,415 56,524 Freight revenues 179,905 208,553 270,405
(16,796) (17,974) Voyage expenses (50,096) (49,797) (66,545)
53,619 38,550 Net operating revenues 129,809 158,756 203,860
- - Gain (loss) from sale
of vessels 207 222 (1,514)
12,577 16,443 Ship operating expenses 46,741 40,679 55,586
3,562 4,632 Charterhire expenses 17,311 10,730 14,889
1,360 1,759 Administrative expenses 5,295 5,683 7,757
36,120 15,716 Operating profit before
depreciation 60,669 101,886 124,114
14,406 15,183 Depreciation 43,065 37,710 51,659
21,714 533 Operating profit after
depreciation 17,604 64,176 72,455
329 390 Interest income 1,408 1,957 2,998
(16,411) (18,957) Interest expense (49,433) (43,970) (59,320)
- - Dividends 9,000 5,324 5,324
587 656 Results from associated
companies 1,956 2,380 2,807
2,164 113 Other financial items (1,244) 2,367 2,765
8,383 (17,265) Income (loss) before taxes (20,709) 32,234 27,029
34 - Taxes - 34 30
8,349 (17,265) Net income (loss) after tax (20,709) 32,200 26,999
0.18 (0.37) Earnings per Share ($) (0.45) 0.70 0.59
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INCOME ON TIMECHARTER BASIS
($ PER DAY PER SHIP)*
34,200 19,400 VLCC 21,400 33,600 31,800
22,200 14,100 Suezmax 17,100 24,300 22,400
18,600 15,300 Suezmax OBO 17,600 23,200 21,800
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* Basis = Calendar days minus
off-hire. Figures after
deduction of broker commission
BALANCE SHEET 1999 1998 1998
(in thousands of $) Sep 30 Sep 30 Dec 31
(audited)
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ASSETS
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Short term
Cash and bank deposits 64,765 40,549 75,950
Other current assets 29,314 43,329 30,439
Long term
Newbuildings 23,181 93,618 75,681
Vessel and equipment, net 1,288,305 1,173,723 1,078,956
Marketable securities 217,209 131,648 110,157
Associated companies 1,858 3,944 3,837
Deferred charges and other assets 5,657 3,312 4,501
TOTAL ASSETS 1,630,289 1,490,123 1,379,521
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term
Short term interest bearing debt 227,437 156,922 170,551
Other current liabilities 32,721 38,057 27,952
Long term
Long term interest bearing debt 842,982 808,029 712,470
Other long term liabilities 16,233 1,730 10,867
Stockholders' equity 510,916 485,385 457,681
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 1,630,289 1,490,123 1,379,521
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</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorised.
FRONTLINE LTD.
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(Registrant)
Date December 1, 1999 By /s/ Kate Blankenship
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Kate Blankenship
Secretary
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02089006.AC0
