Quarterly Report • May 23, 2014
Quarterly Report
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First quarter 2014 May 23rd, 2014
*EBITDA is equal to operating profit plus depreciations (including impairment related to vessels) and amortisation.
Golden Ocean Group Limited (the "Company" or "Golden Ocean") reports profit of \$10.1 million and earnings per share of \$0.02 for the first quarter of 2014. This compares with profit and earnings per share of \$18.1 million and \$0.04 respectively for the fourth quarter of 2013. Total operating revenues for the first quarter were \$74.2 million; total operating expenses were \$65.1 million and other gains/losses net were positive with \$9.4 million. Net financial items were negative with \$8.3 million.
The profit for the period of \$10.1 million is a decrease of \$8.0 million compared to last quarter. Net operating income is down by \$3.5 million while net financial items are down by \$4.6 million. In total the earnings on the vessels are down for the quarter. This is a result of a weaker spot market, some profitable charter contracts on Capesize vessels that have expired and off-hire for vessels being in dock. To some extent this is compensated by higher earnings on our ice-class vessels, which achieve a premium during the winter season. In addition a profit related to the transaction on Golden Magnum contributes positively. The net financial items are more negative compared to last quarter due to the interest allocated to the convertible bond as well as negative mark-to-market development on the Company's interest rate swaps.
The table below shows the split for some key numbers between the long term and the short term portfolio for the first quarter of 2014. Administrative expenses are not allocated. The long term portfolio is defined as owned vessels, long term time charter in contracts and bareboat vessels and relates to the vessels that the Company gives information on in quarterly releases and on the web page. The short term portfolio consists of the vessels, cargoes and derivatives that are entered into with a short duration.
| (in millions of \$) | Long term portfolio | Short term portfolio | Total |
|---|---|---|---|
| Total operating revenue | 45.8 | 28.4 | 74.2 |
| Total operating expenses (ex admin) | -34.1 | -28.3 | -62.4 |
| Total other gain/losses net | 9.7 | -0.3 | 9.4 |
| Operating profit (ex admin) | 21.4 | -0.2 | 21.2 |
| Admin expenses | -2.8 | ||
| Operating profit | 18.4 |
Cash and cash equivalents increased by \$155.4 million during the quarter. The Company generated cash from operating activities of \$9.2 million during the quarter. Restricted cash increased with \$10.5 million. The Company paid \$10.2 million in installments and other predelivery cost. Financing activities contributed positive with \$166.6 million in the quarter. Proceeds from the Convertible Bond was \$200 million, repayment of debt, interest and financing charges amounted to \$17.1 million, while dividends declared both for third and fourth quarter 2013 results were paid in the first quarter, in total \$16.2 million.
In February 2014 the Company purchased three 2012 Korean built 81,500 dwt Kamsarmax bulk carriers. The sister vessels were bought in one complete transaction. The vessels have been delivered to the Company through April and May 2014. One of the vessels is fixed out on an index linked Time Charter Contract until second quarter 2016. Charters are paying a premium of 13% compared to the Baltic average four time charter Panamax routes reflecting the earning capacity of the vessels. The second vessel is on a Time Charter contract until fourth quarter 2014 at \$15.881 (net) and the third vessel will be redelivered to Owners from the current Time Charter contract at the end of second quarter 2014.
In March 2014 Golden Ocean purchased 50% of the shares of Golden Magnum from its Joint Venture partner and the vessel is now wholly owned by the Company. The vessel was originally bought in May 2013.
In April 2014 the Company entered into an agreement to buy one ice class Panamax vessel resale built at Pipavav Defence & Offshore Engineering Company ("Pipavav"). The vessel is named Golden Ruby and is acquired from a third party. The Company took delivery of the vessel in May 2014.
Three vessels have been docked during the first quarter. Golden Feng and Golden Shui have been through 5 year dock while Channel Alliance has had 18 year dock with steel renewals. Channel Navigator will be docked during the second quarter. In total 7 of the Company's vessels will be docked during 2014.
The Company has arbitration processes ongoing in relation to the nine construction contracts cancelled at Zhoushan Jinhaiwan Shipyard Co. Ltd. during 2012 and 2013. As of now the Company has received final awards on three contracts, preliminary awards on two contracts and waiting awards following completed hearings on the last four of the contracts. All awards so far has been in favor of the Company. The Board is confident that the Company has a strong case on the remaining contracts where awards have not been obtained. The Company's claim towards the yard is secured by refund guarantees from two of the top four Chinese banks. Demands have been sent under the contracts where final awards have been obtained. The Company has in aggregate paid \$175.3 million on these nine vessels and has drawn \$43.2 million under the related loan facilities.
As per today Golden Ocean's total newbuilding program consists of eight Supramax vessels, two vessels from Japan Marine United Corporation ("JMU") and six vessels from Chengxi. The remaining capital expenditure for vessels under construction is \$184.7 million as of end Q1-2014. None of the newbuildings are yet financed.
On May 23, 2014 the Board has declared a dividend of \$0.025 per share. The record date for the dividend has been set to June 6, 2014, ex dividend date will be June 4, 2014 and the dividend will be paid on or about June 25, 2014.
In January 2014 the Company issued a \$200 million Convertible Bond with a 5 year tenor and coupon of 3.07% p.a. The conversion price is currently at 2.82 \$/share. The conversion price will be adjusted for dividend payments from the Company. There is both an asset and a liability part in the convertible bond, and \$28.1 million of the bond value has been allocated as Equity in the financial statement.
The Company will consider delisting Golden Ocean from the secondary listing on SGX. The volume of shares traded on SGX is very limited and the Company would like to simplify its operation and reduce cost. The Company's presence in Asia on the shipping side is increasing and not affected by this delisting.
As of March 31, 2014 the total number of shares outstanding in Golden Ocean was 447,261,796 of \$0.10 par value each. Additionally the Company had stock options for 4.9 million shares outstanding under various share incentive programs for management and the Directors, of which 1.5 million are vested and exercisable.
The second biggest economy in the world continued to make the headlines during first quarter of 2014. China has become the favorite of concerns among many observers analyzing the macroeconomics. The importance for the dry bulk industry is well known and China contributed with 83 per cent of global dry bulk growth, or 200 million tons in pure volume growth, during 2013. Chinese GDP grew by 7.4 per cent during the first quarter which was in line with expectations. In addition to the positive development in the U.S., several of the European economies showed signs of recovery. On the back of this EU increased its steel production by 6.7 percent compared to same quarter in 2013.
The global steel industry and energy coal for utilities are accounting for about 70 percent of seaborne dry bulk transportations and both coal and iron ore volumes increased during first quarter. China imported 240 million mt of iron ore during the first quarter. This is 20 per cent more than the same quarter last year. Coal imports to China came in at 71 million mt or 9.5 per cent more than the first quarter of 2013. Japan imported 49.5 million mt of coal, which again represented an increase of about 9 per cent. Preliminary data is indicating an overall volume growth in seaborne dry bulk trade of 6 per cent for the first three months of 2014 against a net fleet growth of about 5 per cent.
About 16 million dwt of new capacity was delivered and 3.5 million dwt was scrapped during first quarter. Delivery ratio, versus what should have been delivered according to the official order book, is slightly higher this year compared to the previous five years. The main reason is that the current order book has a higher percentage of good quality yards where orders are delivered in time. About 25 million dwt were ordered during the first quarter, almost twice as much as the same quarter last year, but still 10 million dwt less than the fourth quarter of 2013. The order book represents 19 per cent of the total dry bulk fleet.
Capesize vessels earned on average \$16,300 per day during the first quarter, and experienced strong volatility ranging from \$7,900 per day to \$35,000 per day. Panamaxes earned on average \$10.425 per day with less volatility. The market performed better than most forecasters predicted, given that iron ore stockpiles in the major Chinese ports were high by the end of last year. However de-stocking did not take place and stocks remained unchanged during the quarter. We have witnessed some draw down of inventories in recent weeks and the Capesize spot market in particular has reacted accordingly.
Expectations for an upturn in earnings were high through most of the first quarter. This was reflected in the Forward Freight Curve which was in contango, in particular for the second half of 2014. Due to the fact that spot earnings surprised on the upside in combination with a positive sentiment, asset values continued to trend higher in the three first months of the year. The value of a five year old Capesize was up 10 per cent for the quarter and according to broker estimates was worth \$48 million, while a five year old Panamax was up 7.5 per cent first quarter and was estimated to be worth \$29 million by the end of March 2014.
In April 2014 both spot and forward markets have been under pressure, but most analysts remain confident that the fundamentals should cater for a market upswing within the next few months.
In anticipation of a stronger market in the second half of 2014 the Company has positioned its fleet for an upturn by keeping most of the vessels exposed to the spot market. The entire Capesize fleet is either employed on an index linked time charter or performing spot voyages. The Panamaxes and Kamsarmaxes have on aggregate about 75 per cent open capacity through 2015. If the market recovers as expected in the second half of 2014 and into 2015 the Company intends to benefit from that and take down the spot exposure gradually.
Following the acquisition of one ice class Panamax in April the composition of the GOGL fleet is:
1 Kamsarmax and 1 Panamax on long term bare boat with purchase options
2 Panamaxes on long term time charter with purchase options
Given its strong financial position, with an equity portion of 46%, a strong cash position and four sailing vessels without mortgage attached, GOGL will continue its search for attractive investment opportunities. Potential acquisitions should be attractive opportunities that are accretive for the shareholders and / or represent a positive arbitrage against older assets that may be disposed of.
Even though second quarter spot market so far has been weaker than predicted by most analysts following the sector, earnings have still been better than for the same period last year. The Capesize earnings has year to date been \$14,650 /day, compared to \$5,650/day for the same period last year. In 2013 the dry bulk market started its recovery in June and gained more momentum from August onwards.
From a demand perspective it is expected that new iron ore supply coming on stream will be the main driver over the next two to three years. From 2014 through 2016 as much as 280 million tons additional supply will become available for the global steel industry.
Analysts following the Chinese steel industry are expecting lower steel production growth. This is based on the assumptions of lower GDP growth and a gradual change from heavy infrastructure projects and construction to a more consumer focused growth model.
In spite of a slower steel production growth analysts believe that demand for iron ore will continue to grow at a steady pace. With all the new capacity entering the market is likely that international iron ore prices will come under even stronger pressure. Consequently a major portion of the domestically produced iron ore which is both more expensive and with an inferior quality could potentially be ousted.
As stated in the "Market" section, the ordering of new vessels has been quite brisk. But given that most orders that have been placed lately are for second half 2016 onwards, the supply growth next eighteen months is not expected to exceed five per cent per annum.
Most shipping analysts believe that demand growth will be around six per cent per annum and thereby outpace supply growth, leading to a higher utilization of the dry bulk fleet through 2015.
Given the Company's high spot exposure, the relative weak spot market and the market development for interest rates so far in the second quarter, the Board of Directors expects a small net loss for the second quarter of 2014. Future earnings will continue to correlate with the spot market and the result for 2014 is therefore highly dependent on the market development going forward.
The arbitration processes against Jinhaiwan is progressing according to expectations and the Company still believe that the cases should be settled this year. Payment for the first two awards is expected to be received within a few weeks.
The Board of Directors evaluates consolidation opportunities for the Company.
This press release contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including Golden Ocean's management's examination of historical operating trends. Although Golden Ocean believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, Golden Ocean cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.
Important factors that, in the Company's view, could cause actual results to differ materially from those discussed in this press release include the strength of world economies and currencies, general market conditions including fluctuations in charter hire rates and vessel values, changes in demand in the dry bulk market, changes in the Company's operating expenses including bunker prices, dry-docking and insurance costs, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors described from time to time in the reports filed by the Company.
May 23rd, 2014
The Board of Directors Golden Ocean Group Limited Hamilton, Bermuda
Questions should be directed to: Herman Billung: CEO Golden Ocean Management AS +47 22 01 73 41
Birgitte Ringstad Vartdal: CFO Golden Ocean Management AS +47 22 01 73 53
Consolidated Comprehensive Income Statement March 31, 2014
Consolidated Balance Sheet as at March 31, 2014
Consolidated Cash Flow Statement for March 31, 2014
Consolidated Statement of Changes in Equity for March 31, 2014
Notes to Consolidated financial information
Golden Ocean Group Limited (GOGL) is a leading international dry bulk shipping company based in Bermuda, mainly operating in the Capesize and Panamax market segments. The Golden Ocean Group fleet is managed by the fully owned subsidiary Golden Ocean Management (Bermuda) Ltd, who in turn has subcontracted services to Golden Ocean Management AS, based in Oslo, Norway, and Golden Ocean management Asia Pte Ltd, based in Singapore Golden Ocean Group Ltd. is dual listed on Oslo Stock Exchange and Singapore Exchange with ticker GOGL.
(in thousands of \$, except per share data which are in \$)
| 2014 | 2013 | ||
|---|---|---|---|
| Notes | Jan-Mar | Jan-Mar | |
| Unaudited | Unaudited | ||
| Operating revenue | |||
| Revenue | 73 805 | 54 173 | |
| Other operating income | 3 | 391 | 259 |
| Total operating revenue | 74 195 | 54 432 | |
| Operating expenses | |||
| Voyage expenses and commission | 22 260 | 12 817 | |
| Vessel operating expenses | 12 037 | 11 136 | |
| Charter hire expenses | 17 735 | 8 599 | |
| Administrative expenses | 2 784 | 3 055 | |
| Depreciation and amortisation | 7,8 | 10 333 | 9 176 |
| Impairment of vessels and vessels under construction Total operating expenses |
65 149- | - 44 783 | |
| Other gain/(losses) net Other gains/(losses) net |
4 | 9 360 | 1 809 |
| Total other gains/(losses) net | 9 360 | 1 809 | |
| Operating profit/(loss) | 18 406 | 11 458 | |
| Interest income | 183 | 284 | |
| Interest expense | 5 | (7 125) | (4 662) |
| Other financial items | 6 | (1 318) | (313) |
| Total net financial items | (8 259) | (4 691) | |
| Profit/(loss) before income tax | 10 147 | 6 767 | |
| Income tax | - | - | |
| Profit/(loss) for the period | 10 147 | 6 767 | |
| Profit/(loss) attributable to: | |||
| Owners of the parent | 10 262 | 6 819 | |
| Non-controlling interests | (115) | (52) | |
| Profit/(loss) for the period | 10 147 | 6 767 | |
| Basic earnings/(loss) per share | \$0.023 | \$0.015 | |
| Diluted earnings/(loss) per share | \$0.022 | \$0.015 | |
| Other comprehensive income: | |||
| Items that may be subsequently reclassified to profit or | |||
| loss | |||
| Changes in fair value of available-for-sale financial assets | (597) | - | |
| Total comprehensive income/(loss) for the period | 9 550 | 6 767 | |
| Comprehensive income/(loss) attributable to: | |||
| Owners of the parent | 9 665 | 6 819 | |
| Non-controlling interests | (115) | (52) | |
| Total comprehensive income/(loss) for the period | 9 550 | 6 767 |
See accompanying notes that are an integral part of these financial statements
| 2014 | 2013 | ||
|---|---|---|---|
| (in thousands of \$) | Notes | Mar 31 | Dec 31 |
| ASSETS | Unaudited | ||
| Non current assets | |||
| Vessels and equipment, net | 7 | 708 497 | 667 788 |
| Vessels held under finance leases, net | 8 | 128 471 | 130 795 |
| Vessels under construction | 9 | 26 694 | 16 144 |
| Other long term receivables | 11 | 8 734 | 8 588 |
| Investment in associated companies / JV | 12 | 9 534 - |
17 419 - |
| Total non-current assets | 881 930 | 840 734 | |
| Current assets | |||
| Inventories | 21 124 | 10 775 | |
| Trade and other receivables | 11 | 29 759 | 25 495 |
| Derivative financial assets | 13 | 1 921 | 2 735 |
| Refundable installments for cancelled newbuildings | 9 | 193 664 | 192 976 |
| Available-for-sale financial assets | 14 | 16 320 | 16 916 |
| Cash and cash equivalents incl. restricted cash | 10 | 264 701 | 98 841- |
| Total current assets | 527 490 | 347 737 | |
| Total assets | 1 409 420 | 1 188 471 |
| Equity attributable to equity holders of the parent | |||
|---|---|---|---|
| Share capital | 44 726 | 44 726 | |
| Additional paid in capital | 99 156 | 99 156 | |
| Other reserves | 51 069 | 23 551 | |
| Retained earnings | 452 503 | 457 823 | |
| Owners Equity | 647 454 | 625 256 | |
| Non-controlling interests | 472 | 1 108 | |
| Total Equity | 647 926 | 626 364 | |
| Non-Current Liabilities | |||
| Long term debt | 15 | 496 990 | 319 605 |
| Obligations under finance leases | 16 | 108 604 | 110 416 |
| Other long term liabilities | 1 829 - |
1 903 - |
|
| Total non-current liabilities | 607 423 | 431 924 | |
| Current Liabilities | |||
| Long-term debt - current portion | 15 | 86 534 | 84 414 |
| Obligations under finance leases – current portion | 16 | 7 496 | 7 370 |
| Amount due to related parties | 402 | 1 216 | |
| Provisions | 601 | - | |
| Trade payables and other current liabilities | 17 | 59 038 | 37 183 |
| Total current liabilities | 154 071 | 130 183 | |
| Total liabilities and shareholders' equity | 1 409 420 | 1 188 471 |
See accompanying notes that are an integral part of these financial statements
| (in thousands of \$) | 2014 | 2013 | |
|---|---|---|---|
| Notes | Jan-Mar | Jan-Mar | |
| OPERATING ACTIVITIES | Unaudited | Unaudited | |
| Profit for the period | 10 147 | 6 767 | |
| Adjustments for: | |||
| Capitalised docking and periodic maintenance | (3 200) | - | |
| Value of services under stock option scheme | 132 | 351 | |
| Share of (profit) / loss from associates/JV's | (7 218) | (403) | |
| Interest expense | 4 836 | 2 447 | |
| Interest income | (183) | (284) | |
| Depreciation | 7,8 | 10 333 | 9 176 |
| Amortisation of deferred charges | 344 | 146 | |
| Net change in: | |||
| Amount due to related parties | (814) | (519) | |
| Derivative instrument receivable / payable amounts | 13 | 814 | (973) |
| Trade and other receivables | 11 | (4 411) | (6 013) |
| Inventories | (10 349) | (5 597) | |
| Trade payables and other current liabilities | 17 | 8 779 | 1 185 |
| Net cash provided by operating activities | 9 209 | 6 282 | |
| INVESTING ACTIVITIES | |||
| Changes in restricted cash | (10 453) | 2 087 | |
| Interest received | 183 | 284 | |
| Payments on vessels | 7,9 | (10 176) - |
(5 255) - |
| Investment in shares-available for sale Sale of available-for-sale financial assets Net cash provided by / (used in) investing activities |
(20 446) | (2 884) | |
| FINANCING ACTIVITIES Payment of financing charges |
(3 612) | (70) | |
| Interest paid | (2 549) | (2 399) | |
| Repayment of obligations under finance leases | (1 686) | (1 612) | |
| Repayment of long term debt | (9 279) | (20 552) | |
| Stock options paid in cash | (54) | - | |
| Payment of dividends | (16 175) | - | |
| Proceeds from Convertible bonds | 200 000 | - | |
| Net cash (used in) / provided by financing activities | 166 645 | (24 633) | |
| Net change in cash and cash equivalents | 155 407 | (21 235) | |
| Cash and cash equivalents at beginning of period | 93 881 | 104 358 | |
| Cash and cash equivalents at end of period | 10 | 249 288 | 83 123 |
(in thousands of \$)
| Additional | Non | ||||||
|---|---|---|---|---|---|---|---|
| Share | paid in | Retained | Controlling | Total | |||
| Capital | capital Other Reserves | Earnings | Total | interests | Equity | ||
| Balance at January 1, 2013 | 44 726 | 99 156 | 16 635 | 377 288 | 537 806 | 491 | 538 296 |
| Comprehensive income for the period | - | - | 6 916 | 83 875 | 90 792 | 617 | 91 409 |
| Dividend paid | - | - | - | (4 473) | (4 473) | - | (4 473) |
| Value of services under stock options scheme | - | - | - | 1 132 | 1 132 | - | 1 132 |
| Balance at December 31, 2013 | 44 726 | 99 156 | 23 551 | 457 824 | 625 257 | 1 108 | 626 364 |
| Comprehensive income for the period | - | - | (597) | 10 262 | 9 665 | (115) | 9 550 |
| Equity portion Convertible Bond | - | - | 28 115 | - | 28 115 | - | 28 114 |
| Currency translation / other | - | - | - | (59) | (59) | - | (59) |
| Dividend paid | - | - | - | (15 654) | (15 654) | (521) | (16 175) |
| Value of services under stock options scheme | - | - | - | 132 | 132 | - | 132 |
| Balance at March 31, 2014 | 44 726 | 99 156 | 51 069 | 452 503 | 647 454 | 472 | 647 926 |
The condensed interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. A full description of the accounting principles used in preparing the consolidated financial statements for Golden Ocean Group Ltd. is included in note 2 in the annual report for 2013. The annual consolidated financial statements are prepared in accordance with IFRS as adopted by the EU. There have been no changes in the accounting principles in 2014 except as noted below.
The following standards have been adopted by the Group for the first time for the financial year beginning on or after 1 January 2014.
IFRS 10 'Consolidated financial statements' (effective 1 January 2014). The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entity (an entity that controls one or more other entities) to present consolidated financial statements. The standard defines the principle of control, and establishes controls as the basis for consolidation. The standard also sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee.
IFRS 11 'Joint arrangements' (effective 1 January 2014). IFRS 11 is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed.
IFRS 12 'Disclosures of interest in other entities' (effective 1 January 2014). IFRS 12 includes the disclosure requirements for all forms of interest in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.
The adaption of the new standards has no material affect in the 2014 financial statements.
Preparation of the interim financial statements in accordance with IFRS implies use of estimates, which are based on judgments and assumptions that affect the application of accounting principles and the reported amounts of assets, liabilities, revenues and expenses. Actual amounts might differ from such estimates.
The Company has not tested any of the vessels for impairment this quarter due to lack of indicators. There has been an increase in broker values and higher market rates compared to previous quarters.
In total the Company has cancelled nine newbuilding contracts from Zhoushan Jinhaiwan Shipyard Co. Ltd. The yard has referred all the matters to arbitration. The installments and accrued cost have been classified as short term receivable. Management expects refunds to exceed the recorded receivable. Debt obtained directly to fund the installments on the cancelled vessels under construction is classified as short term debt, as it falls due following the final arbitration award.
| (in thousands of \$) | 3/31/2014 - |
3/31/2013 |
|---|---|---|
| Impairment of newbuilding Management fee revenues |
391 | 259 |
| Total other revenue | 391 | 259 |
| (in thousands of \$) | 3/31/2014 - |
3/31/2013 |
|---|---|---|
| Impairment of newbuilding Gain/(loss) on Forward freight agreements |
2 226 | 1 130 |
| Gain/(loss) on bunkers derivatives | (84) | 276 |
| Accounting gain on purchase of JV | 6 200 | - |
| Income from associates / JV's | 1 019 | 403 |
| Total other gains/(losses) net | 9 360 | 1 809 |
| (in thousands of \$) | 3/31/2014 | 3/31/2013 |
|---|---|---|
| Interest on bank overdrafts and loans | 5 472 | 3 098 |
| Interest on obligations under finance leases | 1 946 | 2 069 |
| Total interest expense | 7 417 | 5 167 |
| Less amounts included in the cost of qualifying assets | (292) | (505) |
| Net interest expense | 7 125 | 4 662 |
| (in thousands of \$) | 3/31/2014 | 3/31/2013 |
|---|---|---|
| Interest swap | (1 712) | (238) |
| Dividend received | 325 | - |
| Other financial items | 70 | (75) |
| Total other financial items | (1 318) | (313) |
Total interest rate swap loss in the first quarter was \$1.7 million. The unrealized portion of the interest rate swap was a loss of \$0.8 million while the realized portion was a loss of \$0.9 million. The Company received dividend from Greenship Bulk Trust in the first quarter of 2014.
The Group has the following owned vessels at March 31, 2014.
| Vessel | Built | DWT | Flag | |
|---|---|---|---|---|
| Channel Alliance | 1996 | 171 978 | Hong Kong | |
| Channel Navigator | 1997 | 172 058 | Hong Kong | |
| Golden Saguenay | 2008 | 75 500 | Hong Kong | |
| Golden Opportunity | 2008 | 75 500 | Hong Kong | |
| Golden Ice | 2008 | 75 845 | Hong Kong | |
| Golden Feng | 2009 | 170 500 | Marshall Island | |
| Golden Strength | 2009 | 75 745 | Hong Kong | |
| Golden Shui | 2009 | 170 500 | Marshall Island | |
| Golden Beijing | 2010 | 176 000 | Hong Kong | |
| Golden Eminence | 2010 | 79 447 | Hong Kong | |
| Golden Empress | 2010 | 79 600 | Hong Kong | |
| Golden Endeavour | 2010 | 79 600 | Hong Kong | |
| Golden Endurer | 2011 | 79 600 | Hong Kong | |
| Golden Enterprise | 2011 | 79 471 | Hong Kong | |
| Golden Zhoushan | 2011 | 175 834 | Hong Kong | |
| Golden Suek | 2011 | 74 500 | Hong Kong | |
| Golden Bull | 2012 | 74 500 | Hong Kong | |
| Golden Brilliant | 2013 | 74 500 | Hong Kong | |
| Golden Pearl | 2013 | 74 187 | Hong Kong | |
| Golden Diamond | 2013 | 74 187 | Hong Kong | |
| Golden Magnum | 2009 | 179 788 | Hong Kong | |
| (in thousands of \$) | Docking and | |||
| periodic | Fixtures and | |||
| Vessels | maintenance | Equipment | Total | |
| Cost: | ||||
| At January 1, 2013 | 768 452 | 7 482 | 486 | 776 420 |
| Additions Transferred from vessels under construction (note 9) |
51 803 29 214 |
3 486 1 000 |
10 | 55 299 30 214 |
| At December 31, 2013 | 849 469 | 11 968 | 496 | 861 932 |
| 849 469 | 11 968 | 496 | 861 932 | |
| At January 1, 2014 Additions |
45 532 | 3 187 | - | 48 719 |
| Transferred to non-current assets held for sale At March 31, 2014 |
- 895 001 |
- 15 155 |
- 496 |
- 910 651 |
| Accumulated depreciation and impairment: At January 1, 2013 |
161 414 | 3 081 | 408 | 164 903 |
| Depreciation | 27 192 | 2 025 | 25 | 29 241 |
| At December 31, 2013 | 188 606 | 5 106 | 433 | 194 144 |
| At January 1, 2014 | ||||
| Depreciation | 188 606 7 116 |
5 106 886 |
433 8 |
194 144 8 010 |
| At March 31, 2014 | 195 722 | 5 991 | 441 | 202 154 |
| Carrying amount: | ||||
| At March 31, 2014 | 699 279 | 9 163 | 55 | 708 497 |
The Group has pledged all of owned vessels to secure various banking facilities (note 15).
| Vessel | Built | DWT | Flag |
|---|---|---|---|
| Golden Lyderhorn | 1999 | 74 242 | Hong Kong |
| Ocean Minerva | 2007 | 75 698 | Panama |
| Golden Heiwa | 2007 | 76 662 | Panama |
| Golden Eclipse | 2010 | 79 600 | Hong Kong |
| (in thousands of \$) | |||
| Cost: | |||
| At January 1, 2013 Transferred to non-current assets held for sale |
176 159 | ||
| At December 31, 2013 | 176 159 | ||
| At January 1, 2014 Transferred to non-current assets held for sale |
176 159 | ||
| At March 31, 2014 | - 176 159 |
||
| Accumulated depreciation: | |||
| At January 1, 2013 | 35 942 | ||
| Depreciation | 9 422 | ||
| At December 31, 2013 | - 45 364 |
||
| At January 1, 2014 | 45 364 | ||
| Depreciation Transferred to non-current assets held for sale |
2 323 | ||
| At March 31, 2014 | - 47 688 |
||
| Carrying amount: | |||
| At March 31, 2014 | 128 471 | ||
| At December 31, 2013 | 130 795 |
The Group has the following vessels on financial lease at March 31, 2014.
Vessels held under finance lease are normally depreciated on the same basis as owned vessels.
| (in thousands of \$) | |
|---|---|
| At January 1, 2013 | 116 082 |
| Additions | 22 288 |
| Cancellations - transferred to short term receivables | (92 012) |
| Transferred to vessels and equipment (note 7) | (30 214) |
| At December 31, 2013 | 16 144 |
| At January 1, 2014 | 16 144 |
| Additions | 10 550 |
| At March 31, 2014 | 26 694 |
Additions include instalments, interest and supervision on newbuildings.
| Restricted cash At March 31, 2014 |
15 414 264 701 |
4 960 98 841 |
|---|---|---|
| Cash and cash equivalents, non restricted | 249 288 | 93 881 |
| Short-term deposits | 162 500 | 12 500 |
| Current accounts | 86 788 | 81 381 |
| (in thousands of \$) | 3/31/2014 | 12/31/2013 |
| (in thousands of \$) | 3/31/2014 | 12/31/2013 |
|---|---|---|
| Trade receivables, net | 6 503 | 7 343 |
| Other receivables | 17 288 | 15 867 |
| Prepayments | 14 702 | 10 873 |
| Accrued income | 38 493 | 34 083 |
| Less non-current portion: other receivables | (8 734) | (8 588) |
| Current portion | 29 759 | 25 495 |
| UFC | Golden | Golden Opus | Seateam | 3/31/14 | 12/31/13 | |
|---|---|---|---|---|---|---|
| (in thousands of \$) | Magnum Inc. | Inc. | ||||
| Ownership | 50 % | 50 % | 50 % | 25 % | ||
| At 1 January , 2014 | 1921 | 7 184 | 8 200 | 114 | 17 419 | 1 248 |
| Additions | - | - | - | - | - | 19 675 |
| Disposals/Dividends | (1 500) | (7 405) | - | - | (8 905) | (7 653) |
| Share of profit | 457 | 221 | 341 | - | 1 019 | 4 148 |
| At 31 March, 2014 | 878 | - | 8541 | 114 | 9534 | 17419 |
The figures reflect the Group's investment in the above companies.
| UFC | Golden | Golden Opus | Seateam | 3/31/14 | 12/31/13 | |
|---|---|---|---|---|---|---|
| (in thousands of \$) | Magnum Inc. | Inc. | ||||
| Ownership | 50 % | 50 % | 50 % | 25 % | ||
| Current | ||||||
| Cash and cash equivalents | 706 | - | 3 380 | - | 4 086 | 4 410 |
| Other current assets | 1 505 | - | 2 058 | 456 | 4 019 | 11 735 |
| Total current assets | 2 211 | - | 5 438 | 456 | 8 105 | 16 145 |
| Financial liabilities | - | - | 458 | 458 | 1 410 | |
| Other current liabilities | 453 | - | 482 | 935 | 2984 | |
| Total current liabilities | 453 | - | 940 | - | 1 393 | 4394 |
| Non-current | ||||||
| Assets | - | - | 33 329 | - | 33 329 | 66 940 |
| Financial liabilities | - | - | 20 745 | - | 20 745 | 43 625 |
| Other liabilities | - | - | - | - | - | - |
| Total non-current liabilites | - | - | 20 745 | - | 20 745 | 43 625 |
| Net total assets | 1 758 | - | 17 082 | 456 | 19 296 | 35 066 |
The table above reflects the total assets and liability for the Group's JV/associated companies.
The Group has bought the remaining 50% of Golden Magnum Inc. and it is now considered as a fully owned subsidiary where all assets and liability are consolidated into the Group's financial statement.
| (in thousands of \$) | 3/31/2014 | 12/31/2013 |
|---|---|---|
| Interest derivatives | 1 861 | 2 566 |
| Bunkers derivatives | 60 | 169 |
| Forward freight agreements Derivative financial instruments, net |
1 921 | 2 735 |
| Total available for sale-financial assets | 16 320 | 16 916 |
|---|---|---|
| Greenship Bulk Trust - Europe | 12 644 | 12 644 - |
| Unlisted Equity securities: | ||
| Knightsbridge Tankers Limited - US | 158 | 107 |
| Korea Line Corporation - Asia | 3 518 | 4 166 |
| Listed Equity securities: | ||
| (in thousands of \$) | 3/31/14 | 12/31/13 |
| At 31 March, 2014 | 16 320 | 16 916 |
| Disposals | - | (339)- |
| Net gains/(losses) transfer to equity | (597) | 7 255 |
| Additions | - | 10 000 |
| At 1 January, 2014 | 16 916 | - |
| (in thousands of \$) | 3/31/14 | 12/31/13 |
| Total available for sale-financial assets | 16 320 | 16 916 |
|---|---|---|
| US dollar | 158 | 107- |
| KRW (Korean Won) | 3 518 | 4 166 |
| NOK (Norwegian kroner) | 12 644 | 12 644 |
| Currencies: | ||
| (in thousands of \$) | 3/31/14 | 12/31/13 |
| (in thousands of \$) | 3/31/2014 | 12/31/2013 |
|---|---|---|
| Within one year | 86 534 | 84 414 |
| Between one and two years | 119 942 | 77 451 |
| Between two and five years | 385 239 | 180 172 |
| After five years | - | 67 373 |
| Total debt | 591 715 | 409 410 |
| Current portion | (86 534) | (84 414) |
| Long-term debt, nominal value | 505 181 | 324 996 |
| Value of sellers credit | (900) | (1 029) |
| Deferred transaction costs | (7 291) | (4 362) |
All debt is secured by mortgages over sailing vessels and vessels under construction.
The Company issued a \$200 million Convertible Bond with a 5 year tenor and coupon of 3.07% p.a in January 2014. The conversion price is currently at 2.82 \$/share. The conversion price will be adjusted for dividend payments from the Company. There is both an asset and a liability part in the convertible bond, and \$28.1 million of the bond value has been allocated as Equity in the financial statement. The liability component of the bond is \$ 173.537 million at March 31 2014 (December 31, 2013 \$0).
All debt related to the cancelled newbuildings has been classified as short term debt as it falls due following the final arbitration award.
Long-term debt and finance lease liabilities:
| (in thousands of \$) | 3/31/2014 | 12/31/2013 |
|---|---|---|
| Non-current | ||
| Bank borrowings and sellers credit | 496 990 | 319 605 |
| Finance lease liabilities | 108 604 | 110 416 |
| 605 594 | 430 021 | |
| Current | ||
| Bank borrowings and sellers credit | 86 534 | 84 414 |
| Finance lease liabilities | 7 496 | 7 370 |
| 94 030 | 91 784 | |
| Total borrowings | 699 624 | 521 805 |
All debt is denominated in US Dollars and the bank debt has an interest rate at LIBOR plus a fixed margin of an average of 2.70 percent. The interest rate is mainly repriced on a monthly basis, while some facilities are repriced on a quarterly basis.
| Within one year | 2-5 years | 6-10 years | Total | |||||
|---|---|---|---|---|---|---|---|---|
| (in thousands of \$) | 3/31/2014 | 12/31/2013 3/31/2014 | 12/31/2013 | 3/31/2014 | 12/31/2013 | 3/31/2014 | 12/31/2013 | |
| Minimum Lease Payments | ||||||||
| Interest | 7 349 | 7 501 | 27 802 | 28 652 | 3 695 | 4 609 | 38 846 | 40 762 |
| Purchase option | - | - | 55 017 | 55 017 | 33 550 | 33 550 | 88 567 | 88 567 |
| Instalments | 7 496 | 7 370 | 17 592 | 18 852 | 2 445 | 2 996 | 27 533 | 29 218 |
| Total Minimum Lease Payments |
14 845 | 14 871 | 100 411 | 102 521 | 39 690 | 41 155 | 154 946 | 158 547 |
| Present Value of Lease Obligations | 116 100 | 117 785 | ||||||
| Current portion | 7 496 | 7 370 | ||||||
| Non-current portion | 108 604 | 110 416 |
The Group has recorded finance leases on four vessels at March 31, 2014 (and 2013).The Group has purchase options and the exercise price of the option changes based upon the date the option is exercised.
The table below lays out the approximate latest exercisable dates and purchase option amounts based on the date the purchase options are calculated to be exercisable, and the first lease renewal date.
| (in thousands of \$) | Purchase option expected exercisable date |
Purchase option amount |
Lease renewal date |
|---|---|---|---|
| Golden Lyderhorn | September 2016 | 11 500 | September 2016 |
| Ocean Minerva | January 2018 | 21 052 | January 2015 |
| Golden Heiwa | March 2017 | 22 465 | March 2015 |
| Golden Eclipse | April 2020 | 33 550 | April 2020 |
The purchase option exercise prices at the final exercise date for Ocean Minerva and Golden Heiwa are denominated in JPY, and are JPY1.64 billion and JPY1.75 billion respectively. The purchase option amount in USD above is based on the exchange rate at September 30, 2012. The same purchase option exercise prices based on the exchange rate at March 31, 2014 would have been \$16.0 million related to Ocean Minerva and \$17.0 million on Golden Heiwa. In the third quarter of 2012 the Company reassessed the likelihood of exercising the purchase option denominated in JPY. The Company then assumed to be redelivering the vessels at the end of the charter period. The JPY lease liabilities relating to the purchase options are therefore considered non-monetary liabilities and are translated at the historical exchange rate at the date of reassessment was made (shown in the table above).
All lease payments are denominated in US Dollars. The Group's finance lease obligations are secured by the lessor's title to the leased assets.
| (in thousands of \$) | 3/31/2014 | 12/31/2013 |
|---|---|---|
| Trade payables | 8 401 | 1 512 |
| Accruals | 10 634 | 6 273 |
| Deferred revenue | 22 742 | 27 540 |
| Other current liabilities | 17 261 | 1 858 |
| Total | 59 038 | 37 183 |
Deferred revenue relates to time charter revenue received in advance for future periods.
The Company received \$14.1 million dollars as income in advance during the fourth quarter of 2013. The amount relates to prepaid hire for 1 year for three vessels.
The Group has not recognized contingent liabilities in respect of legal claims arising in the ordinary course of business.
| (in thousands of \$) | Within one year | 2-5 years | Total | |||
|---|---|---|---|---|---|---|
| 3/31/2014 - |
12/31/2013 3/31/2014 - |
- | 12/31/2013 3/31/2014 - |
- | 12/31/2013 - |
|
| Vessels and equipment Vessels under construction |
96 726 | 23 511 | 87 975 | 171 764 | 184 701 | 195 275 |
| Total | 96 726 | 23 511 | 87 975 | 171 764 | 184 701 | 195 275 |
Five of the Supramax vessels are expected to be delivered during first half of 2015 while the remaining three are expected to be delivered during first half of 2016. None of the vessels under construction are currently financed.
The future minimum rental payments under the Group's non-cancellable operating leases as of March 31, 2014 are as follows:
| (in thousands of \$) | 3/31/2014 | 12/31/2013 |
|---|---|---|
| Within one year | 24 446 | 25 099 |
| In the second to fifth years | 14 021 - |
17 351 - |
| Later than five years Total minimum lease payments |
38 466 | 42 450 |
Total rental expense for the period ended March 31, 2014 for operating leases was \$17.7 million (March 31, 2013:\$8.6 million).
The minimum future revenue payments (including owned vessels) to be received under the Group's noncancellable operating leases as of March 31, 2014 are as follows:
| (in thousands of \$) | 3/31/2014 | 12/31/2013 |
|---|---|---|
| Within one year | 92 562 | 67 251 |
| In the second to fifth years | 165 700 | 164 207 |
| Later than five years | 53 196 | 55 918 |
| Total minimum lease revenue | 311 458 | 287 376 |
Total rental income from operating leases was \$73.8 million for the period ended March 31, 2014 (March 31, 2013:\$54.2 million).
Through its activities the Group is exposed to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial performance. The Group makes use of derivative financial instruments such as foreign exchange forward contracts and interest rate swaps to moderate certain risk exposures.
The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 31 December 2013. There have been no changes in the risk management department or in any risk management policies since the prior year end.
The following table presents the Group's assets and liabilities that are measured at fair value at March 31, 2014:
| (in thousands of \$) | Level 1 | Level 2 | Total |
|---|---|---|---|
| At March 31, 2014 | |||
| Assets | |||
| Available-for-sale financial assets | 3 676 | 12 644 | 16 320 |
| Derivative financial instruments (interest swap) | - | 1 921 | 1 921 |
| Total assets | 3 676 | 14 565 | 18 241 |
| (in thousands of \$) | Level 1 | Level 2 | Total |
| At December 31, 2013 | |||
| Assets | |||
| Available-for-sale financial assets | 4 272 | 12 644 | 16 916 |
| Derivative financial instruments (interest swap) | - | 2 735 | 2 735 |
| Total assets | 4 272 | 15 379 | 19 651 |
Level 1 is the fair value of financial instruments traded in active markets based on quoted market prices at the balance sheet date. Level 2 is defined as inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). The fair value of financial instruments that are not traded in an active (for example, over the counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 2 trading and hedging derivatives comprise forward foreign exchange contracts and interest rate swaps. These forward foreign exchange contracts have been fair valued using forward exchange rates that are quoted in an active market. Interest rate swaps are fair valued using forward interest extracted from observable yield curves. The effects of discounting are generally insignificant for Level 2 derivatives.
The fair value of borrowings, trade and other receivables, other current financial assets, cash and cash equivalents (excluding bank overdrafts), and trade and other payables approximate their carrying amount.
Details of the share options outstanding during the quarter are as follows:
| 3/31/2014 | 12/31/2013 | |||
|---|---|---|---|---|
| Number of share options |
Weighted average exercise price |
Number of share options |
Weighted average exercise price |
|
| USD | USD | |||
| At the beginning of the year | 4 945 000 | 0,74 | 5 000 000 | 0,84 |
| Exercised year to date | (37 500) | - | (55 000) | - |
| Outstanding at March 31, 2014 | 4 907 500 | 0,72 | 4 945 000 | 0,74 |
| Exercisable at March 31, 2014 | 1 532 500 | 1,00 | 1 570 000 | 0,98 |
Total outstanding share options relates to the program issued in 2012 (4.407.500) and the 500.000 options issued in year 2009 that will expire in November 2014.
In February 2014 the Company purchased three 2012 Korean built 81,500 dwt Kamsarmax bulk carriers. The sister vessels were bought in an "enblock" transaction. The vessels have been delivered to the Company through April and May 2014.
In April the Company entered into an agreement to purchase one ice class Panamax resale built at Pipavav Defence & Offshore Engineering Company. The vessel will be named Golden Ruby and is expected to be delivered in the second quarter of 2014.
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