Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2002
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- ]
PART I: FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Independent Accountant's Report........................................................ 3
Consolidated Statements of Income
for the three months ended June 30, 2002 and 2001.............................. 4
Consolidated Balance Sheets
June 30, 2002 and December 31, 2001............................................ 5
Consolidated Statements of Cash Flows
for the six months ended June 30, 2002 and 2001................................ 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. Quantitative and Qualitative Disclosures about Market Risk.................................... 19
PART II: OTHER INFORMATION............................................................................. 20
SIGNATURES............................................................................................. 21
INDEPENDENT ACCOUNTANT’S REVIEW REPORT ON INTERIM
FINANCIAL STATEMENTS
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 June 30, 2002, the related consolidated statements of income for the three and six-month periods ended June 30, 2002 and 2001, and the consolidated statements of cash flows for the six-month periods ended June 30, 2002 and 2001. Our review also included Schedule A listed in Index Item 1. These financial statements and schedule are the responsibility of the Company’s management.
We were furnished with the report of other accountants on their review of the interim information of Ugland Nordic Shipping ASA, a wholly owned subsidiary, whose total assets as of June 30, 2002 and whose net voyage revenues for the six-month period ended June 30, 2002 constituted 22 per cent and 18 per cent, respectively, of the consolidated totals.
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 conducted in accordance with auditing standards generally accepted in the United States, 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 and the report of other accountants, we are not aware of any material modifications that should be made to the accompanying 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, 2001, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the year then ended, not presented herein, and in our report dated February 8, 2002, we expressed an unqualified opinion on those consolidated financial statements. We did not audit the financial statements of Ugland Nordic Shipping ASA, a wholly owned subsidiary, which statements reflect total assets and net voyage revenues constituting 21 per cent and 10 per cent, respectively of the related consolidated totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Ugland Nordic Shipping ASA, is based solely on the report of other auditors. In our opinion, the information set forth in the accompanying consolidated balance sheet and related schedule as of December 31, 2001, is fairly stated, in all material respects, in relation to the consolidated balance sheet and schedule from which they have been derived.
| Vancouver, Canada, July 25, 2002 |
/s/ ERNST & YOUNG LLP Chartered Accountants |
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of U.S. dollars, except per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
$ $ $ $
================== ================= ================ ===============
(unaudited) (unaudited)
NET VOYAGE REVENUES
Voyage revenues 186,935 276,048 375,565 583,934
Voyage expenses 57,127 62,227 109,598 124,957
-------------------------------------------------- ------------------ ----------------- ---------------- ---------------
Net voyage revenues 129,808 213,821 265,967 458,977
-------------------------------------------------- ------------------ ----------------- ---------------- ---------------
OPERATING EXPENSES
Vessel operating expenses 42,663 39,274 83,050 73,153
Time-charter hire expense 13,496 16,346 26,210 33,529
Depreciation and amortization 36,763 36,100 72,841 63,621
General and administrative 14,327 11,761 28,494 22,599
-------------------------------------------------- ------------------ ----------------- ---------------- ---------------
107,249 103,481 210,595 192,902
-------------------------------------------------- ------------------ ----------------- ---------------- ---------------
Income from vessel operations 22,559 110,340 55,372 266,075
-------------------------------------------------- ------------------ ----------------- ---------------- ---------------
OTHER ITEMS
Interest expense (14,478) (18,080) (29,179) (32,866)
Interest income 1,001 2,849 1,793 5,652
Other (loss) income (note 8) (5,131) 1,132 (8,344) 2,068
-------------------------------------------------- ------------------ ----------------- ---------------- ---------------
(18,608) (14,099) (35,730) (25,146)
-------------------------------------------------- ------------------ ----------------- ---------------- ---------------
Net income 3,951 96,241 19,642 240,929
================================================== ================== ================= ================ ===============
Earnings per common share
- Basic 0.10 2.42 0.50 6.10
- Diluted 0.10 2.35 0.49 5.95
Weighted average number of common shares
- Basic 39,631,949 39,807,935 39,593,419 39,520,392
- Diluted 40,348,900 40,941,121 40,278,281 40,512,712
================================================== ================== ================= ================ ===============
The accompanying notes are an integral part of the consolidated financial statements.
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
As at As at
June 30, December 31,
2002 2001
$ $
================ =================
(unaudited)
ASSETS
Current
Cash and cash equivalents (note 5) 174,115 174,950
Marketable securities - 5,028
Restricted cash (note 5) 11,123 7,833
Accounts receivable 56,046 57,519
Prepaid expenses and other assets 27,695 22,139
----------------------------------------------------------------------------- ---------------- -----------------
Total current assets 268,979 267,469
----------------------------------------------------------------------------- ---------------- -----------------
Marketable securities 13,763 16,026
Vessels and equipment (note 5)
At cost, less accumulated depreciation of $867,045
(December 31, 2001 - $801,985) 1,924,863 1,925,844
Advances on newbuilding contracts (note 7) 141,008 117,254
----------------------------------------------------------------------------- ---------------- -----------------
Total vessels and equipment 2,065,871 2,043,098
----------------------------------------------------------------------------- ---------------- -----------------
Investment in joint ventures 28,306 27,352
Other assets 28,433 26,757
Goodwill (note 4) 89,189 87,079
----------------------------------------------------------------------------- ---------------- -----------------
2,494,541 2,467,781
============================================================================= ================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable 20,843 24,484
Accrued liabilities 71,579 51,011
Current portion of long-term debt (note 5) 52,366 51,830
----------------------------------------------------------------------------- ---------------- -----------------
Total current liabilities 144,788 127,325
----------------------------------------------------------------------------- ---------------- -----------------
Long-term debt (note 5) 876,581 883,872
Other long-term liabilities 45,725 39,407
----------------------------------------------------------------------------- ---------------- -----------------
Total liabilities 1,067,094 1,050,604
----------------------------------------------------------------------------- ---------------- -----------------
Minority interest 19,842 18,977
Stockholders' equity
Capital stock (note 6) 470,570 467,341
Retained earnings 938,285 935,660
Accumulated other comprehensive loss (1,250) (4,801)
----------------------------------------------------------------------------- ---------------- -----------------
Total stockholders' equity 1,407,605 1,398,200
----------------------------------------------------------------------------- ---------------- -----------------
2,494,541 2,467,781
============================================================================= ================ =================
Commitments and contingencies (note 7)
The accompanying notes are an integral part of the consolidated financial statements.
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
Six Months Ended June 30,
2002 2001
$ $
======================= =======================
(unaudited)
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income 19,642 240,929
Non-cash items:
Depreciation and amortization 72,841 63,621
Gain on disposition of available-for-sale securities 1,130 (1,944)
Equity income (net of dividends received: June 30, 2002 - $1,748;
June 30, 2001 - $5,000) (539) (394)
Future income taxes 6,991 3,090
Other - net 796 258
Change in non-cash working capital items related to
operating activities 11,148 (10,856)
-------------------------------------------------------------------------- ----------------------- -----------------------
Net cash flow from operating activities 112,009 294,704
-------------------------------------------------------------------------- ----------------------- -----------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 19,260 529,733
Scheduled repayments of long-term debt (25,897) (40,886)
Prepayments of long-term debt - (378,735)
Increase in restricted cash (3,290) -
Proceeds from issuance of Common Stock 3,225 20,323
Cash dividends paid (17,013) (16,894)
-------------------------------------------------------------------------- ----------------------- -----------------------
Net cash flow (used in) from financing activities (23,715) 113,541
-------------------------------------------------------------------------- ----------------------- -----------------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (80,373) (114,531)
Expenditures for drydocking (13,546) (8,049)
Expenditure for purchase of Ugland Nordic Shipping ASA (net of cash
acquired of $26,605) - (176,453)
Acquisition costs related to purchase of Ugland Nordic Shipping ASA - (888)
Acquisition costs related to purchase of Bona Shipholding Ltd. - (20)
Proceeds from disposition of available-for-sale securities 6,675 14,618
Other (1,885) -
-------------------------------------------------------------------------- ----------------------- -----------------------
Net cash flow used in investing activities (89,129) (285,323)
-------------------------------------------------------------------------- ----------------------- -----------------------
(Decrease) increase in cash and cash equivalents (835) 122,922
Cash and cash equivalents, beginning of the period 174,950 181,300
-------------------------------------------------------------------------- ----------------------- -----------------------
Cash and cash equivalents, end of the period 174,115 304,222
========================================================================== ======================= =======================
The accompanying notes are an integral part of the consolidated financial statements.
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 June 30, 2002 and for the Three and Six-Month Periods
Ended June 30, 2002 and 2001 is unaudited)
1. Basis of Presentation
|
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules and regulations of the Securities and Exchange Commission. They include the accounts of Teekay Shipping Corporation (“Teekay”), which is incorporated under the laws of the Republic of the Marshall Islands, and its wholly owned or controlled subsidiaries (the “Company”). 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 year ended December 31, 2001. 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 six-month periods ended June 30, 2002 are not necessarily indicative of those for a full fiscal year. |
2. Acquisition of Ugland Nordic Shipping ASA
|
As of May 28, 2001, Teekay had purchased 100% of the issued and outstanding shares of Ugland Nordic Shipping ASA (“UNS”) (9% of which was purchased in fiscal 2000 and the remaining 91% of which was purchased in fiscal 2001), for $222.8 million cash, including estimated transaction expenses of approximately $7 million. UNS controls a modern fleet of 18 shuttle tankers (including three newbuildings on order) that engage in the transportation of oil from offshore production platforms to onshore storage and refinery facilities. |
|
The acquisition of UNS has been accounted for using the purchase method of accounting, based upon estimates of fair value. UNS’ operating results are reflected in Teekay’s financial statements commencing March 6, 2001, the date Teekay acquired a majority interest in UNS. Teekay’s interest in UNS for the period from January 1, 2001 to March 5, 2001 has been included in equity income for the corresponding period. |
3. Cash Flows
|
Cash interest paid during the six-month periods ended June 30, 2002 and 2001 totalled approximately $33.5 million and $35.2 million, respectively. |
4. Goodwill
|
In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets”, which establishes new standards for accounting for goodwill and other intangible assets. SFAS 142 requires that goodwill and indefinite lived intangible assets no longer be amortized but reviewed for impairment during the first six months of 2002 and annually thereafter, or more frequently if impairment indicators arise. This statement is effective for existing goodwill beginning with fiscal years starting after December 15, 2001. During the six-month period ended June 30, 2002, the Company completed its transitional impairment testing required by SFAS 142 and has determined that goodwill is not impaired. Based upon the Company‘s goodwill balance at December 31, 2001, the Company estimates that adoption of SFAS 142 will result in an annual increase in net income of approximately $4.5 million, by no longer amortizing goodwill. |
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 June 30, 2002 and for the Three and Six-Month Periods
Ended June 30, 2002 and 2001 is unaudited)
5. Long-Term Debt
June 30, December 31,
2002 2001
$ $
-------------------- ------------------
First Preferred Ship Mortgage Notes (8.32%)
due through 2008............................................... 167,229 167,229
Term Loans due through 2010 ..................................... 409,601 416,239
Senior Notes (8.875%) due July 15, 2011 ......................... 352,117 352,234
-------------------- ------------------
928,947 935,702
Less current portion............................................. 52,366 51,830
-------------------- ------------------
876,581 883,872
==================== ==================
|
The Company has two undrawn long-term Revolving Credit Facilities (the “Revolvers”) available, which, as at June 30, 2002, provided for borrowings of up to $479.4 million. The Revolvers are collateralized by first priority mortgages granted on 33 of the Company’s vessels, together with certain other related collateral, and a guarantee from Teekay 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 Teekay that own the mortgaged vessels (the “8.32% Notes Guarantor Subsidiaries”) to a maximum of 95% of the fair value of their net assets. As at June 30, 2002, the fair value of these net assets approximated $170.8 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 Teekay, the 8.32% Notes Guarantor Subsidiaries, and non-guarantor subsidiaries of Teekay is set out in Schedule A of these consolidated financial statements. |
|
The Company has several term loans outstanding, which, as at June 30, 2002, totalled $409.6 million. 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. All term loans, other than UNS term loans totaling $307.9 million, are guaranteed by Teekay. One term loan required a retention deposit of $11.1 million as at June 30, 2002. |
|
Pursuant to certain long-term debt agreements, the amount of Restricted Payments, as defined, that the Company can make, including dividends and purchases of its own capital stock, was limited as of June 30, 2002, to $444.1 million. Certain loan agreements require that a minimum level of free cash be maintained. As at June 30, 2002, this amount was $75.0 million. |
6. Capital Stock
|
The authorized capital stock of Teekay at June 30, 2002 is 25,000,000 shares of Preferred Stock, with a par value of $1 per share, and 725,000,000 shares of Common Stock, with a par value of $0.001 per share. As at June 30, 2002, Teekay had 39,695,536 shares of Common Stock and no shares of Preferred Stock issued and outstanding. |
|
As at June 30, 2002, 3,848,842 shares of Common Stock were reserved and available for issuance upon exercise of options granted or to be granted pursuant to its 1995 Stock Option Plan. As at June 30, 2002, options to purchase a total of 3,573,498 shares of Teekay’s Common Stock were outstanding, of which 1,695,738 options were then exercisable at prices ranging from $16.875 to $41.190 per share and a weighted average exercise price of $25.396 per share. The remaining outstanding options have exercise prices ranging from $16.875 to $41.190 per share and a weighted average exercise price of $31.385 per share. All outstanding options expire between July 19, 2005 and March 11, 2012, ten years after the date of each respective grant. |
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 June 30, 2002 and for the Three and Six-Month Periods
Ended June 30, 2002 and 2001 is unaudited)
7. Commitments and Contingencies
|
As at June 30, 2002, the Company was committed to the construction of three shuttle, three Suezmax and two Aframax tankers scheduled for delivery between December 2002 and December 2003, at a total cost of approximately $411.7 million. As of June 30, 2002, there have been payments made towards these commitments of $132.1 million and long-term financing arrangements exist for $42.2 million of the unpaid cost of these vessels. It is the Company’s intention to finance the remaining unpaid amount of $279.6 million through either debt borrowing or surplus cash balances, or a combination thereof. As of June 30, 2002, the remaining payments required to be made under these newbuilding contracts are as follows: $37.3 million in 2002 and $242.3 million in 2003. Upon delivery, the vessels will be subject to long-term charter contracts, which expire between 2009 and 2015. |
|
Teekay and certain subsidiaries of Teekay have guaranteed their share of the outstanding mortgage debt in three 50%-owned joint venture companies. As of June 30, 2002, Teekay and these subsidiaries have guaranteed $85.4 million of such debt, or 50% of the total $170.8 million in outstanding mortgage debt of the joint venture companies. These joint venture companies own three shuttle tankers. |
8. Other (Loss) Income
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
$ $ $ $
------------- ------------ ----------- -----------
(Loss) gain on disposition of available-for-sale securities - (229) (1,130) 1,944
Equity income from joint venture........................... 402 2,601 2,287 5,394
Future income taxes........................................ (3,810) (2,419) (6,991) (3,090)
Miscellaneous.............................................. (1,723) 1,179 (2,510) (2,180)
------------- ------------ ----------- -----------
(5,131) 1,132 (8,344) 2,068
============= ============ =========== ============
9. Comprehensive Income
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
$ $ $ $
------------- ------------ ----------- -----------
Net income................................................. 3,951 96,241 19,642 240,929
Other comprehensive income:
Unrealized loss on available-for-sale securities........ (1,168) (2,062) (144) (3,565)
Reclassification adjustment for loss (gain) on
available-for-sale securities included in net income.. - 519 737 (4,427)
Cumulative effect of accounting change.................. - - - 4,155
Unrealized gain (loss) on derivative instruments........ 2,735 597 3,458 (2,717)
Reclassification adjustment for gain on derivative
instruments.......................................... (361) (267) (500) (657)
------------- ------------ ----------- -----------
Comprehensive income....................................... 5,157 95,028 23,193 233,718
============= ============ =========== ============
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 June 30, 2002 and for the Three and Six-Month Periods
Ended June 30, 2002 and 2001 is unaudited)
10. Derivative Instruments and Hedging Activities
|
The Company uses derivatives only for hedging purposes. The following summarizes the Company’s risk
strategies with respect to market risk from foreign currency fluctuations, changes in interest rates,
bunker fuel prices and tanker freight rates and the effect of these strategies on the Company’s
financial statements. |
SCHEDULE A
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(in thousands of U.S. dollars)
(unaudited)
Three Months Ended June 30, 2002
-------------------------------------------------------------------------------
8.32% Notes Teekay
Teekay Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
-------------------------------------------------------------------------------
Net voyage revenues - 9,038 155,852 (35,082) 129,808
Operating expenses 3,220 8,522 130,589 (35,082) 107,249
-------------------------------------------------------------------------------
(Loss) income from vessel operations (3,220) 516 25,263 - 22,559
Net interest expense (10,367) - (3,110) - (13,477)
Equity in net income of subsidiaries 16,784 - - (16,784) -
Other income (loss) 754 - (5,885) - (5,131)
-------------------------------------------------------------------------------
Net income 3,951 516 16,268 (16,784) 3,951
Retained earnings (deficit), beginning
of the period 942,844 (13,524) 1,062,204 (1,048,680) 942,844
Dividends declared (8,510) - - - (8,510)
-------------------------------------------------------------------------------
Retained earnings (deficit), end of the
the period 938,285 (13,008) 1,078,472 (1,065,464) 938,285
===============================================================================
Three Months Ended June 30, 2001
-------------------------------------------------------------------------------
8.32% Notes Teekay
Teekay Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
-------------------------------------------------------------------------------
Net voyage revenues - 8,879 243,770 (38,828) 213,821
Operating expenses 2,695 8,313 131,301 (38,828) 103,481
-------------------------------------------------------------------------------
(Loss) income from vessel operations (2,695) 566 112,469 - 110,340
Net interest expense (3,217) - (12,014) - (15,231)
Equity in net income of subsidiaries 103,130 - - (103,130) -
Other income (977) 1,663 446 - 1,132
-------------------------------------------------------------------------------
Net income 96,241 2,229 100,901 (103,130) 96,241
Retained earnings (deficit), beginning
of the period 777,618 (18,928) 818,886 (799,958) 777,618
Dividends declared (8,481) - - - (8,481)
-------------------------------------------------------------------------------
Retained earnings (deficit), end of
the period 865,378 (16,699) 919,787 (903,088) 865,378
===============================================================================
____________SCHEDULE A
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(in thousands of U.S. dollars)
(unaudited)
Six Months Ended June 30, 2002
-------------------------------------------------------------------------------
8.32% Notes Teekay
Teekay Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
-------------------------------------------------------------------------------
Net voyage revenues - 17,977 317,783 (69,793) 265,967
Operating expenses 5,834 15,707 258,847 (69,793) 210,595
-------------------------------------------------------------------------------
(Loss) income from vessel operations (5,834) 2,270 58,936 - 55,372
Net interest expense (20,818) - (6,568) - (27,386)
Equity in net income of subsidiaries 44,341 - - (44,341) -
Other income (loss) 1,953 - (10,297) - (8,344)
-------------------------------------------------------------------------------
Net income 19,642 2,270 42,071 (44,341) 19,642
Retained earnings (deficit), beginning
of the period 935,660 (15,278) 1,036,401 (1,021,123) 935,660
Dividends declared (17,017) - - - (17,017)
-------------------------------------------------------------------------------
Retained earnings (deficit), end of
the period 938,285 (13,008) 1,078,472 (1,065,464) 938,285
===============================================================================
Six Months Ended June 30, 2001
-------------------------------------------------------------------------------
8.32% Notes Teekay
Teekay Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
-------------------------------------------------------------------------------
Net voyage revenues - 17,660 520,304 (78,987) 458,977
Operating expenses 5,488 17,053 249,348 (78,987) 192,902
-------------------------------------------------------------------------------
(Loss) income from vessel operations (5,488) 607 270,956 - 266,075
Net interest expense (5,963) - (21,251) - (27,214)
Equity in net income of subsidiaries 250,988 - - (250,988) -
Other income (loss) 1,392 1,663 (987) - 2,068
-------------------------------------------------------------------------------
Net income 240,929 2,270 248,718 (250,988) 240,929
Retained earnings (deficit), beginning
of the period 641,149 (18,969) 671,069 (652,100) 641,149
Adjustment for equity income on step
acquisition 198 - - - 198
Dividends declared (16,898) - - - (16,898)
-------------------------------------------------------------------------------
Retained earnings (deficit), end of
the period 865,378 (16,699) 919,787 (903,088) 865,378
===============================================================================
____________SCHEDULE A
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(in thousands of U.S. dollars)
(unaudited)
As at June 30, 2002
---------------------------------------------------------------------------------
8.32% Notes Teekay
Teekay Shipping Guarantor Non-Guarantor Shipping Corp.
Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
---------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents 3 - 174,112 - 174,115
Other current assets 375 790 189,699 (96,000) 94,864
---------------------------------------------------------------------------------
Total current assets 378 790 363,811 (96,000) 268,979
Vessels and equipment (net) - 258,499 1,807,372 - 2,065,871
Advances due from subsidiaries 318,522 - - (318,522) -
Other assets (principally marketable
securities and investment in
subsidiaries 1,631,224 - 42,196 (1,631,224) 42,196
Investment in joint ventures - - 28,306 - 28,306
Goodwill - - 89,189 - 89,189
---------------------------------------------------------------------------------
1,950,124 259,289 2,330,874 (2,045,746) 2,494,541
=================================================================================
LIABILITIES & STOCKHOLDERS’
EQUITY
Current liabilities 21,923 1,932 216,933 (96,000) 144,788
Long-term debt 519,346 - 402,960 - 922,306
Due to (from) affiliates - (98,965) 471,208 (372,243) -
---------------------------------------------------------------------------------
Total liabilities 541,269 (97,033) 1,091,101 (468,243) 1,067,094
---------------------------------------------------------------------------------
Minority Interest - - 19,842 - 19,842
Stockholders’ Equity
Capital stock 470,570 23 5,943 (5,966) 470,570
Contributed capital - 369,307 136,766 (506,073) -
Retained earnings (deficit) 938,285 (13,008) 1,078,472 (1,065,464) 938,285
Accumulated other comprehensive loss - - (1,250) - (1,250)
---------------------------------------------------------------------------------
Total stockholders’ equity 1,408,855 356,322 1,219,931 (1,577,503) 1,407,605
---------------------------------------------------------------------------------
1,950,124 259,289 2,330,874 (2,045,746) 2,494,541
=================================================================================
As at December 31, 2001
----------------------------------------------------------------------------------
8.32% Notes Teekay
Teekay Guarantor Non-Guarantor Shipping Corp.
Shipping Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
------------------ ------------ ----------------- --------------- ----------------
ASSETS - - 174,950 - 174,950
Cash and cash equivalents
Other current assets 1 1,101 472 186,946 (96,000) 92,519
------------------ ------------ ----------------- --------------- ----------------
Total current assets 1,101 472 361,896 (96,000) 267,469
Vessels and equipment (net) - 264,768 1,778,330 - 2,043,098
Advances due from subsidiaries 346,430 - - (346,430) -
Other assets (principally marketable
securities and investments in
subsidiaries) 1,599,746 - 42,783 (1,599,746) 42,783
Investment in joint ventures - - 27,352 - 27,352
Goodwill - - 87,079 - 87,079
------------------ ------------ ----------------- --------------- ----------------
1,947,277 265,240 2,297,440 (2,042,176) 2,467,781
================== ============ ================= =============== ================
LIABILITIES & STOCKHOLDERS’
EQUITY
Current liabilities 24,813 1,319 197,193 (96,000) 127,325
Long-term debt 519,463 - 403,816 - 923,279
Due to (from) affiliates - (90,131) 503,145 (413,014) -
------------------ ------------ ----------------- --------------- ----------------
Total liabilities 544,276 (88,812) 1,104,154 (509,014) 1,050,604
------------------ ------------ ----------------- --------------- ----------------
Minority Interest - - 18,977 - 18,977
Stockholders’ Equity
Capital stock 467,341 23 5,943 (5,966) 467,341
Contributed capital - 369,307 136,766 (506,073) -
Retained earnings (deficit) 935,660 (15,278) 1,036,401 (1,021,123) 935,660
Accumulated other comprehensive loss - - (4,801) - (4,801)
------------------ ------------ ----------------- --------------- ----------------
Total stockholders' equity 1,403,001 354,052 1,174,309 (1,533,162) 1,398,200
------------------ ------------ ----------------- --------------- ----------------
1,947,277 265,240 2,297,440 (2,042,176) 2,467,781
================== ============ ================= =============== ================
SCHEDULE A
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
(unaudited)
Six Months Ended June 30, 2002
-------------- --------------- ------------- ------------ ---------------
8.32% Notes Non-Guarantor Teekay
Teekay Guarantor Subsidiaries Shipping Corp.
Shipping Subsidiaries Eliminations & Subsidiaries
Corp.
$ $ $ $ $
-------------- --------------- ------------- ------------ ---------------
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
-------------- --------------- ------------- ------------ ---------------
Net cash flow from operating activities (14,105) 10,564 115,550 - 112,009
-------------- --------------- ------------- ------------ ---------------
FINANCING ACTIVITIES
Proceeds from long-term debt - - 19,260 - 19,260
Scheduled repayments of long-term debt - - (25,897) - (25,897)
Other 14,108 (8,833) (22,353) - (17,078)
-------------- --------------- ------------- ------------ ---------------
Net cash flow from (used in) financing
activities 14,108 (8,833) (28,990) - (23,715)
-------------- --------------- ------------- ------------ ---------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment - (1,731) (92,188) - (93,919)
Other - - 4,790 - 4,790
-------------- --------------- ------------- ------------ ---------------
Net cash flow used in investing activities - (1,731) (87,398) - (89,129)
-------------- --------------- ------------- ------------ ---------------
Increase (decrease) in cash and cash equivalents 3 - (838) - (835)
Cash and cash equivalents, beginning of the period - - 174,950 - 174,950
-------------- --------------- ------------- ------------ ---------------
Cash and cash equivalents, end of the period 3 - 174,112 - 174,115
============== =============== ============= ============ ===============
Six Months Ended June 30, 2001
---------------- --------------- -------------- ----------- -----------------
8.32% Notes Teekay
Teekay Guarantor Non-Guarantor Shipping Corp.
Shipping Corp. Subsidiaries Subsidiaries Eliminations & Subsidiaries
$ $ $ $ $
---------------- --------------- -------------- ----------- -----------------
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
---------------- --------------- -------------- ----------- -----------------
Net cash flow from operating activities 3,296 11,676 279,732 - 294,704
---------------- --------------- -------------- ----------- -----------------
FINANCING ACTIVITIES
Net proceeds from long-term debt 245,233 - 284,500 - 529,733
Scheduled repayments of long-term debt - - (40,886) - (40,886)
Prepayments of long-term debt (22,045) - (356,690) - (378,735)
Other (226,918) (11,301) 241,648 - 3,429
---------------- --------------- -------------- ----------- -----------------
Net cash flow (used in) from financing
activities (3,730) (11,301) 128,572 - 113,541
---------------- --------------- -------------- ----------- -----------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment - (376) (122,204) - (122,580)
Expenditure for the purchase of Ugland Nordic
Shipping ASA 198 - (176,651) - (176,453)
Other - 1 13,709 - 13,710
---------------- --------------- -------------- ----------- -----------------
Net cash flow from (used in) investing 198 (375) (285,146) - (285,323)
activities
---------------- --------------- -------------- ----------- -----------------
Increase (decrease) in cash and cash
equivalents (236) - 123,158 - 122,922
Cash and cash equivalents, beginning of
the period 294 - 181,006 - 181,300
---------------- --------------- -------------- ----------- -----------------
Cash and cash equivalents, end of the period 58 - 304,164 - 304,222
================ =============== ============== =========== =================
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
JUNE 30, 2002
PART I – FINANCIAL INFORMATION
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
General
Teekay is a leading provider of international crude oil and petroleum product transportation services to major
oil companies, major oil traders and government agencies worldwide. As at June 30, 2002, the Company’s fleet
consisted of 96 vessels (including eight newbuildings on order, five vessels time-chartered-in, and three vessels
owned by joint ventures), for a total cargo-carrying capacity of approximately 9.8 million tonnes.
During the six months ended June 30, 2002, approximately 46% of the Company’s net voyage revenues 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
within a given period of time. In the six months ended June 30, 2002, approximately 19% of net voyage revenues
was generated by time-charters and COAs priced on a spot market basis. In the aggregate, approximately 65% of the
Company’s net voyage revenues during the six months ended June 30, 2002 was derived from spot voyages or
time-charters and COAs priced on a spot market basis, with the remaining 35% being derived from fixed-rate
time-charters and COAs. This dependence on the spot market, which is within industry norms, contributes to the
volatility of the Company’s revenues, cash flow from operations, and net income.
Historically, the tanker industry has been cyclical, experiencing volatility in profitability and asset values
resulting from changes in the supply of, and demand for, vessel capacity. 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.
Acquisition of Ugland Nordic Shipping ASA
As of May 28, 2001, the Company had purchased 100% of the issued and outstanding shares of Ugland Nordic Shipping
ASA (“UNS”) (9% of which was purchased in fiscal 2000 and the remaining 91% of which was purchased in fiscal
2001), for $222.8 million in cash.
UNS is the world’s largest owner of shuttle tankers, controlling a modern fleet of 18 vessels (including three
newbuildings on order) (the “UNS Fleet”) that engage in the transportation of oil from offshore production
platforms to onshore storage and refinery facilities. The UNS Fleet has an average age of approximately 9.5
years, excluding the three newbuildings on order, and operates primarily in the North Sea under fixed-rate
long-term contracts. In addition, as of June 30, 2002, UNS owned approximately 10.3% of the publicly traded
company Nordic American Tankers Shipping Ltd. (AMEX: NAT) (“NAT”), the owner of three Suezmax tankers on a
long-term contract to BP Shipping.
The operating results of UNS have been consolidated in the Company’s financial statements commencing March 6,
2001, the date that the Company acquired a majority interest in UNS. Minority interest expense, which is
included as part of other (loss) income, has been recorded to reflect the minority shareholders’ share of UNS’
net income for the period from March 6, 2001 to May 28, 2001, when the Company acquired the remaining shares in
UNS.
Results of Operations
Bulk shipping industry freight rates are commonly measured at the net voyage revenue level in terms of
“time-charter equivalent” (“TCE”) rates, defined as voyage revenues less voyage expenses (excluding commissions),
divided by voyage 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 revenues and TCE rates.
TCE rates are primarily dependent on oil production and consumption levels, the number of vessels scrapped, the
number of newbuildings delivered 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 average fleet size decreased 0.8% and increased 7.1%, respectively, in the three and six-month
periods ended June 30, 2002, compared to the same periods last year. The increase in the six-month period ended
June 30, 2002 was primarily due to the acquisition of UNS in March 2001.
In response to a slowing global economy, a series of OPEC oil production cuts were made during 2001. These cuts
resulted in a reduction in tanker demand, contributing to a significant decline in average TCE rates during the
last three quarters of 2001. Average TCE rates continued to decline in the first six months of 2002 and have
remained low during the third quarter of 2002 as a result of decreased world oil production. The Company’s
average TCE rate decreased 37.9% to $18,430 and 44.9% to $18,908, respectively, for the three and six-month
periods ended June 30, 2002, from $29,658 and $34,290 in the same periods last year.
Net voyage revenues decreased 39.3% to $129.8 million and 42.1% to $266.0 million, respectively, in the three and
six-month periods ended June 30, 2002, from $213.8 million and $459.0 million in the same periods last year. The
decrease for the three-month period ended June 30, 2002 was due primarily to a decrease in the Company’s average
TCE rate while the decrease for the six-month period ended June 30, 2002 was primarily due to a decrease in the
Company’s average TCE rate, partially offset by the increase in the Company’s average fleet size.
Vessel operating expenses, which include crewing, repairs and maintenance, insurance, stores and lubes, and
communication expenses, increased 8.6% to $42.7 million and 13.5% to $83.1 million, respectively, in the three
and six-month periods ended June 30, 2002, from $39.3 million and $73.2 million in the same periods last year.
The increase for the three-month period ended June 30, 2002 was primarily as a result of higher repairs and
maintenance costs while the increase for the six-month period ended June 30, 2002 was primarily as a result of
the acquisition of UNS and higher repairs and maintenance costs.
Time-charter hire expense decreased 17.4% to $13.5 million and 21.8% to $26.2 million, respectively, in the three
and six-month periods ended June 30, 2002, from $16.3 million and $33.5 million in the same periods last year.
The decrease in both periods was due primarily to a decrease in the average TCE rates earned by the 13 vessels in
the oil/bulk/ore (“O/B/O”) pool managed by the Company and a decrease in the average number of vessels
time-chartered-in by the Company. The minority participants’ share of the O/B/O pool’s net voyage revenues, which
is reflected as a time-charter hire expense, was $5.7 million and $10.2 million, respectively, in the three and
six-month periods ended June 30, 2002, compared to $7.0 million and $16.4 million in the same periods last year.
The average number of vessels time-chartered-in by the Company, excluding the O/B/Os, was five in both the three
and six-month periods ended June 30, 2002, compared to six in the same periods last year.
Depreciation and amortization expense increased 1.8% to $36.8 million and 14.5% to $72.8 million, respectively,
in the three and six-month periods ended June 30, 2002, from $36.1 million and $63.6 million in the same periods
last year. The increase in the three-month period ended was mainly due to an increase in drydock amortization
expense, partially offset by the elimination of goodwill amortization in 2002. The increase in the six-month
period ended June 30, 2002 was mainly due to the acquisition of UNS, which resulted in an increase in the average
size and average cost base of the Company’s owned fleet and an increase in drydock amortization expense,
partially offset by the elimination of goodwill amortization. Depreciation and amortization expense included
amortization of drydocking costs of $5.2 million and $9.9 million, respectively, in the three and six-month
periods ended June 30, 2002, compared to $3.5 million and $6.5 million in the same periods last year.
General and administrative expenses increased 21.8% to $14.3 million and 26.1% to $28.5 million, respectively, in
the three and six-month periods ended June 30, 2002, from $11.8 million and $22.6 million in the same periods
last year. This increase in the three-month period ended June 30, 2002 was primarily a result of an increase in
the number of shore staff. The increase in the six-month period ended June 30, 2002 was primarily a result of the
acquisition of UNS and an increase in the number of shore staff.
Interest expense decreased 19.9% to $14.5 million and 11.2% to $29.2 million, respectively, in the three and
six-month periods ended June 30, 2002, from $18.1 million and $32.9 million in the same periods last year. The
decrease in the three-month period ended June 30, 2002 reflects lower interest rates. The decrease in the
six-month period ended June 30, 2002 reflects lower interest rates, partially offset by the additional debt
assumed as part of the UNS acquisition.
Interest income decreased 64.9% to $1.0 million and 68.3% to $1.8 million, respectively, in the three and
six-month periods ended June 30, 2002, from $2.8 million and $5.7 million in the same periods last year. The
decrease in both periods was mainly as a result of lower interest rates.
Other loss in the three and six-month periods ended June 30, 2002 was $5.1 million and $8.4 million,
respectively, and was comprised mainly of income taxes, loss on sale of available-for-sale securities, minority
interest expense, partially offset by equity income from 50%-owned joint ventures, dividend income from NAT, and
foreign exchange gains. Other income in the three and six-month periods ended June 30, 2001 was $1.1 million and
$2.1 million, respectively, and was comprised mainly of equity income from 50%-owned joint ventures, dividend
income from NAT, gain on the disposition of available-for-sale securities and foreign exchange gains, partially
offset by income taxes, minority interest, loss on the disposition of available-for-sale securities and foreign
exchange losses.
As a result of the foregoing factors, net income was $4.0 million and $19.6 million, respectively, in the three
and six-month periods ended June 30, 2002, compared to net income of $96.2 million and $240.9 million in the same
periods last year.
LIQUIDITY AND CAPITAL RESOURCES
As at June 30, 2002, the Company’s total cash and cash equivalents was $174.1 million, compared to $174.9 million
at December 31, 2001. The Company’s total liquidity, including cash, short-term marketable securities and undrawn
long-term borrowings, was $653.5 million as at June 30, 2002, down from $688.2 million as at December 31, 2001.
The decrease in liquidity was mainly the result of cash used for capital expenditures, debt repayments, the
payment of dividends, and an $18.8 million scheduled reduction in the available borrowing limit of one of the
Company’s two long-term revolving credit facilities (the “Revolvers”), partially offset by net cash flow from
operating activities during the first half of 2002. In the Company’s opinion, working capital is sufficient for
the Company’s present requirements.
Net cash flow from operating activities decreased to $112.0 million in the six months ended June 30, 2002, from
$294.7 million in the same period last year, mainly reflecting the significant decrease in TCE rates.
Scheduled debt repayments were $25.9 million during the six months ended June 30, 2002, compared to $40.9 million
during the same period last year. There were no debt prepayments during the six months ended June 30, 2002. Debt
prepayments during the six months ended June 30, 2001 totalled $378.7 million.
As at June 30, 2002, the Company’s total debt was $928.9 million, compared to $935.7 million as at December 31,
2001. The Company’s Revolvers provided for additional borrowings of $479.4 million as at June 30, 2002. The
amount available under the Revolvers reduces semi-annually, with final balloon reductions in 2006 and 2008. The
Company’s 8.32% First Preferred Ship Mortgage Notes are due February 1, 2008 and are subject to a sinking fund
which will retire $45.0 million principal amount of the 8.32% Notes in February 1 of each year, commencing 2004.
The Company’s unsecured 8.875% Senior Notes are due July 15, 2011. The Company’s outstanding term loans reduce in
quarterly or semi-annual payments with varying maturities through 2009. The aggregate annual long-term debt
principal repayments required to be made for the remainder of fiscal 2002 and the four following fiscal years are
$26.0 million (2002), $63.6 million (2003), $84.9 million (2004), $111.1 million (2005) and $130.9 million
(2006).
Among other matters, the Company’s long-term debt agreements generally provide for maintenance of certain vessel
market value-to-loan ratios and minimum consolidated financial covenants, prepayment privileges (in some cases
with penalties), and restrictions against the incurrence of new investments by the individual subsidiaries
without prior lender consent. The amount of Restricted Payments, as defined, that the Company can make, including
dividends and purchases of its own capital stock, was limited to $444.1 million as of June 30, 2002. Certain of
the loan agreements require that a minimum level of free cash be maintained. As at June 30, 2002, this amount was
$75.0 million.
Dividends declared during the six months ended June 30, 2002 were $17.0 million, or 43.0 cents per share.
During the six months ended June 30, 2002, the Company incurred capital expenditures for vessels and equipment of
$80.4 million. These capital expenditures were primarily for the purchase of a 2001-built Suezmax tanker and for
shuttle tanker newbuilding installment payments. Cash expenditures for drydocking were $13.5 million in the six
months ended June 30, 2002, compared to $3.9 million during the same period last year.
As at June 30, 2002, the Company was committed to the construction of three shuttle, three Suezmax and two
Aframax tankers. See Item 1 - Notes to Consolidated Financial Statements: Note 7 – Commitments and
Contingencies.
The Company and certain subsidiaries of the Company have guaranteed their share of the outstanding mortgage debt
in three 50%-owned joint venture companies. See Item 1 - Notes to Consolidated Financial Statements: Note 7 -
Commitments and Contingencies.
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.
FORWARD-LOOKING STATEMENTS
This Report on Form 6-K for the quarterly period ended June 30, 2002 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: Aframax TCE rates; tanker supply and
demand; supply and demand for oil; future capital expenditures; the Company’s growth strategy and measures to
implement such strategy; and the future success of the Company. These statements involve known and unknown risks
and are based upon a number of assumptions and estimates that 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. Important 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; changes in the offshore production of oil; 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 or less than
anticipated levels of tanker newbuilding orders or greater 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; environmental and other regulation, including without limitation, the
imposition of freight taxes and income taxes; 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 or Company
expansion; the potential inability of the Company to renew long-term contracts; and other factors detailed from
time to time in the Company’s periodic reports, including its Form 20-F for the year ended December 31, 2001,
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.
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
JUNE 30, 2002
PART I – FINANCIAL INFORMATION
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from foreign currency fluctuations, changes in interest rates, bunker fuel
prices, and tanker freight rates. The Company uses forward currency contracts, interest rate swaps, and bunker
fuel swap contracts to manage currency, interest rate, and bunker fuel price risks, but does not use financial
instruments for trading or speculative purposes. See Item 1 - Notes to Consolidated Financial Statements: Note
10 - Derivative Instruments and Hedging Activities.
The following table sets forth the magnitude of these foreign exchange forward contracts, interest rate swap
agreements, bunker fuel swap contracts, and written freight call option:
Contract Carrying Amount Fair (in USD 000’s) Amount Asset Liability Value ---------------------------------------- ------------------ ---------------- ------------------ -------------------- June 30, 2002 FX Forward Contracts $ 52,476 $ 2,515 $ - $ 2,515 Interest Rate Swap Agreements 70,000 - 2,088 (2,088) Bunker Fuel Swap Contracts 4,693 535 - 535 Written Freight Call Option 2,999 - 429 (429) Debt 928,947 - 928,947 (946,233) December 31, 2001 FX Forward Contracts $ 65,500 $ - $ 343 $ (343) Interest Rate Swap Agreements 85,000 - 2,429 (2,429) Bunker Fuel Swap Contracts 4,769 - 328 (328) Written Freight Call Option 5,998 - 857 (857) Debt 935,702 - 935,702 (952,055) ---------------------------------------- ------------------ ---------------- ------------------ --------------------
For a more comprehensive discussion related to the general characteristics of Quantitative and Qualitative Disclosures about Market Risk, refer to Item 11. Quantitative and Qualitative Disclosures about Market Risk contained in the Company’s Annual Report on Form 20-F for the year ended December 31, 2001.
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES JUNE 30, 2002 PART II – OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company’s 2002 Annual Meeting of Shareholders was held on May 20, 2002. The following persons were elected directors for a term of three years by the votes set forth opposite their names:
Votes against or Shares Which Broker Terms Expiring in 2005 Votes For Withheld Abstained Non-Votes Thomas Kuo-Yuen Hsu 37,453,366 25,004 N/A N/A Axel Karlshoej 37,453,504 24,866 N/A N/A Bjorn Moller 37,453,216 25,154 N/A N/A
The terms of Directors Bruce C. Bell, Dr. Ian D. Blackburne, C. Sean Day, Morris L. Feder, Leif O. Hoegh, and
Eileen A. Mercier continued after the meeting.
Shareholders also ratified the selection of Ernst & Young LLP, Chartered Accountants, as independent auditors of
the Company for the fiscal year ending December 31, 2002, as set forth below:
Votes against or Shares Which Broker
Votes For Withheld Abstained Non-Votes
Ernst & Young LLP 37,436,672 11,356 30,342 -
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 6-K
| a. | Exhibits |
| 15.1 | Letter from Ernst & Young LLP, as independent chartered accountants, dated August 14, 2002, regarding unaudited interim financial information. |
| 99.1 | Certification of Chief Executive Officer |
| 99.2 | Certification of Chief Financial Officer |
| b. | Reports on Form 6-K |
| (i) | On April 2, 2002, the Company filed a report on Form 6-K with respect to its Proxy Statement. |
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.
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.
| Date: August 14, 2002 |
TEEKAY SHIPPING CORPORATION
By: /s/ Peter S. Antturi Peter S. Antturi Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 15.1
To the Shareholders and Board of Directors of
Teekay Shipping Corporation
We are aware of the incorporation by reference in the Registration Statement (Form F-3 No. 33-97746 filed with the Commission on October 4, 1995) and related prospectus of Teekay Shipping Corporation (“Teekay”) for the registration of 2,000,000 shares of Teekay common stock, with a par value of $0.001 per share, and to incorporation by reference therein of our report dated July 25, 2002 relating to the unaudited consolidated interim financial statements of Teekay for the quarter ended June 30, 2002 that are included in its Form 6-K.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part of the registration statement prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933.
| Vancouver, Canada, August 14, 2002 |
/s/ ERNST & YOUNG LLP Chartered Accountants |
Exhibit 99.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
In connection with the Report of Teekay Shipping Corporation (the "Company") on Form 6-K for the quarter ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Bjorn Moller, Chief Executive Officer of the Company, certify that:
| 1. |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and |
|
| 2. |
The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company. |
The Company is a foreign private issuer under the Securities and Exchange Act of 1934. Accordingly, this certification is being submitted on a voluntary basis and not for the purpose of complying with Section 906 of the Sarbanes-Oxley Act of 2002.
/s/ Bjorn Moller
Bjorn Moller
Chief Executive Officer
August 14, 2002
Exhibit 99.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
In connection with the Report of Teekay Shipping Corporation (the "Company") on Form 6-K for the quarter ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Peter S. Antturi, Chief Financial Officer of the Company, certify that:
| 1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
The Company is a foreign private issuer under the Securities and Exchange Act of 1934. Accordingly, this certification is being submitted on a voluntary basis and not for the purpose of complying with Section 906 of the Sarbanes-Oxley Act of 2002.
/s/ Peter S. Antturi
Peter S. Antturi
Chief Financial Officer
August 14, 2002