SFL – Second Quarter 2009 Results

Ship Finance International Limited (NYSE: SFL) – Earnings Release
Reports preliminary 2Q 2009 results and quarterly dividend of $0.30 per share
Hamilton, Bermuda, August 20, 2009. Ship Finance International Limited (“Ship Finance” or the “Company”) today announced its preliminary financial results for the quarter ended June 30, 2009.
  • Declared a quarterly dividend of $0.30 per share.
  • Reported net income for the quarter of $53.5 million, or $0.72 per share, including accrued profit share of $8.0 million, or $0.11 per share.
  • A non-recurring gain of $41.7 million was recognized in the second quarter relating to our 8.5% Senior Notes previously controlled under total return swap (“TRS”) agreements. The Company also recognized a $33.9 million non-cash write-down of assets, predominantly linked to the remaining single-hull VLCCs.
  • 3.5 million new shares were issued in the quarter, as a combination of stock dividends and shares sold in the market. Subsequent to quarter end, an additional 1.0 million shares have been issued as stock dividend.
  • Announced the appointment of Mr. Ole B. Hjertaker as the new Chief Executive Officer (“CEO”) of Ship Finance Management AS.
  • Announced the sale of the jack-up drilling rig West Ceres to Seadrill Ltd. (“Seadrill”) pursuant to a purchase option. Delivery took place in July 2009, and the net cash effect to the Company in the third quarter was $40 million after repayment of associated bank debt.
  • Announced the sale of the single-hull VLCC Front Duchess to an unrelated third party. Delivery to the new owner is expected in September 2009, and the net cash effect to the Company is estimated at approximately $2.5 million after repayment of associated bank debt.

The Board of Directors has declared a quarterly dividend of $0.30 per share in cash, or, at the election of the shareholder, payable in newly issued common shares. The dividend will be paid on or about 16 October, 2009 to shareholders of record as of 31 August, 2009. The ex-dividend date will be 27 August, 2009.
Similar to the previous two quarters, shareholders may make an election to receive the dividend in newly issued common shares after reviewing a prospectus supplement relating to the dividend payment which will be filed with the U.S. Securities and Exchange Commission (“SEC”). The number of common shares to be issued as dividend will be set based on the volume-weighted average price of the shares on the New York Stock Exchange during the three trading days prior to the ex-dividend date, less a 5% discount.
The Company’s largest shareholders, Farahead Investments Inc. and Hemen Holding Ltd., who collectively own 42.1 % of the shares and are indirectly controlled by trusts affiliated with Mr. John Fredriksen, have again informed the Company that they would like to receive all of their dividends in the form of newly issued common shares.
Results for the Quarter ended June 30, 2009
The Company reported total operating revenues of $88.2 million, or $1.19 per share, in the second quarter of 2009. This number excludes charter hire classified as ‘Repayment of investments in finance lease’, and excludes substantial charter revenues in three 100% owned subsidiaries classified as ‘investment in associate’. Net operating income for the quarter was $28.1 million, or $0.37 per share, and reported net income was $53.5 million, or $0.72 per share.
The profit share accrued in the second quarter was $8.0 million, or $0.11 per share, compared to $14.5 million, or $0.20 per share in the first quarter of 2009. The accrued profit share for 2009 will be payable in March 2010.
At the end of the second quarter 2009, $449 million of the 8.5% Senior Notes due 2013 were outstanding. In June 2009, the Company bought back Senior Notes with a face value of $148 million, giving a net outstanding amount of $301 million under the Senior Notes. The repurchased Senior Notes were previously held by two banks under TRS agreements and were bought back at 84.5% of face value. Following this transaction, the Company recognized a non-recurring gain of $41.7 million in the second quarter. The repurchase of the Senior Notes was part financed by new bank facilities with a total initial outstanding of $90 million.
The Company also recognized a $33.9 million non-cash impairment charge related to our remaining six single-hull tankers and a financial investment in a container vessel owner/operator.
Under US GAAP, the 100% owned ultra-deepwater drilling units West Polaris, West Hercules and West Taurus and the Panamax dry bulk vessel Golden Shadow are accounted for as ‘investment in associate’. Consequently, only the aggregate ‘net income’ from these vessel-owning subsidiaries is recognized in the consolidated income statement of Ship Finance as ‘Results in associate’.
August 20, 2009
The Board of Directors
Ship Finance International Limited
Hamilton, Bermuda
Questions should be directed to:
Ole B. Hjertaker: Chief Executive Officer, Ship Finance Management AS
+47 23114011 / +47 90141243
Magnus T. Valeberg: Vice President, Ship Finance Management AS
+47 23114012 / +47 93440960

2nd quarter 2009 results