Business Context and Reporting Period
Nordic American Tanker Shipping Ltd (NAT) filed a Form 6-K on January 10, 2002, reporting results for the full year ended December 31, 2001, and the fourth quarter of 2001. The company operates three Suezmax tankers under long-term contracts with BP Shipping, which link earnings to spot market rates with a guaranteed minimum of $22,000 per day.
Key Financial Metrics
| Metric | Full Year 2001 | Full Year 2000 | Q4 2001 | Q4 2000 |
|---|---|---|---|---|
| Revenue | $28.36 million | $36.58 million | $3.90 million | $13.95 million |
| Operating Profit | $21.0 million | $29.2 million | $2.1 million | $12.1 million |
| Net Profit | $19.4 million | $27.7 million | $1.6 million | $11.7 million |
| Earnings Per Share | $2.00 | $2.85 | $0.17 | $1.21 |
| Cash Flow Per Share | $2.70 | $3.55 | $0.34 | $1.39 |
| Long-Term Debt | $30.0 million | $30.0 million | N/A | N/A |
| Cash Deposits | $0.63 million | $1.92 million | N/A | N/A |
| Shareholders' Equity | $112.6 million | $130.8 million | N/A | N/A |
Total dividends paid in 2001 were $3.87 per share. A first-quarter 2002 dividend of $0.36 per share was declared.
Material Changes
- Revenue and Profit Decline: Full-year 2001 revenue decreased by approximately 22% compared to 2000. Net profit fell by roughly 30% year-over-year.
- Q4 Performance: The fourth quarter saw a significant drop in earnings, with operating profit falling from $12.1 million in Q4 2000 to $2.1 million in Q4 2001. This was attributed to exceptionally high tanker rates in the fall of 2000.
- Market Rates: The Suezmax time charter equivalent rate dropped to $22,617 in Q4 2001 from $28,668 in Q3 2001, approaching the contract floor of $22,000.
- Liquidity: Cash deposits decreased from $1.92 million at year-end 2000 to $630,868 at year-end 2001.
Outlook, Risks, and Management Commentary
Management noted that despite falling tanker markets, the company achieved good results sufficient to maintain dividend payments. The contracts with BP Shipping secure income 365 days a year with no off-hire, providing stability against spot market volatility. However, earnings are directly linked to the general spot market for Suezmax tankers, which declined in the fourth quarter. The next dividend payment is expected to be declared in April 2002.
Investor Verification Checklist
- Verify the sustainability of the $22,000 per day minimum rate floor in the BP Shipping contracts.
- Monitor the trend of Suezmax spot market rates to assess future revenue exposure.
- Review the significant reduction in cash deposits ($1.92m to $0.63m) and its impact on liquidity.
- Confirm the payment date and record date for the Q1 2002 dividend (Record date: Jan 25, 2002; Payment: ~Feb 15, 2002).
- Assess the impact of the 2000 rate anomaly on year-over-year comparisons for 2001.