Business Context and Reporting Period
This Form 6-K, dated May 20, 2004, serves as a report of foreign private issuer for Nordic American Tanker Shipping Limited. The filing primarily provides the 2003 Annual Report to Shareholders, which was previously distributed with unintentional omissions regarding dividend and share data. The Company is a Bermuda-incorporated entity owning three double-hull Suezmax oil tankers. Its principal business involves chartering these vessels to BP Shipping Ltd. under "hell and high water" bareboat charters that are scheduled to terminate on October 1, 2004.
Key Financial Metrics (Year Ended December 31, 2003)
- Revenue: $37,370,756 (comprised of $14,782,500 Base Hire and $22,588,256 Additional Hire).
- Net Profit: $28,100,289.
- Earnings Per Share (Basic & Diluted): $2.89.
- Cash Flow from Operations: $29,893,551.
- Dividends Paid: $29,605,410 ($3.05 per share).
- Total Assets: $136,896,298 (Cash and equivalents: $565,924).
- Debt: $30,000,000 long-term loan from Den norske Bank ASA, classified as current liability due to maturity in Q4 2004.
- Shareholders' Equity: $105,707,976.
Material Changes Versus Prior Period
Compared to 2002, the Company experienced significant financial growth driven by the tanker market:
- Revenue Increase: Revenue rose 106.9% from $18,057,989 in 2002 to $37,370,756 in 2003. This was primarily due to a surge in "Additional Hire" payments, which increased from $3.28 million in 2002 to $22.59 million in 2003, reflecting strong spot market rates.
- Profit Surge: Net profit increased from $8,847,268 in 2002 to $28,100,289 in 2003.
- Dividend Increase: Dividends per share increased from $1.35 in 2002 to $3.05 in 2003.
- Expense Growth: Management, insurance, and administrative costs increased slightly by $41,039 to $652,868, mainly due to higher insurance and legal fees.
Outlook, Risks, and Management Commentary
Charter Expiration and Strategy: The Company's primary revenue source, the BP charters, expires on October 1, 2004. BP did not exercise options to extend. While shareholders voted in March 2004 to continue operations, the Company faces exposure to the volatile spot market upon expiration. As of May 10, 2004, the Company secured a five-year bareboat charter for one vessel with Gulf Navigation Company LLC at $17,325 per day. Management does not expect the remaining two vessels to be placed on fixed-rate charters immediately.
Debt Refinancing: The $30 million loan matures in Q4 2004. Management is authorized to negotiate an extension or refinancing with Den norske Bank ASA for an additional three years (expiring 2008).
Risks: Key risks include the volatility of the international tanker spot market post-BP charter, the ability to refinance the $30 million debt, and potential changes in operating expenses (bunker, insurance, drydocking). The Company is also subject to Bermuda tax laws, though currently exempt until 2016.
Investor Verification Checklist
- Verify the status of refinancing negotiations for the $30 million Den norske Bank loan due in Q4 2004.
- Confirm the chartering status and rates for the two vessels not yet secured with Gulf Navigation Company LLC following the October 2004 BP charter expiration.
- Monitor the Company's cash position ($565,924 as of Dec 31, 2003) against upcoming debt service and operational costs in the absence of guaranteed BP revenue.
- Review the impact of the interest rate swap agreement (fixed 5.80%) on future earnings as the loan matures.