Earnings Release • Feb 27, 2015
Earnings Release
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Fourth quarter and year end 2014 February 27th, 2015
*EBITDA is equal to operating profit plus depreciation (including impairment related to vessels) and amortisation.
Golden Ocean Group Limited (the "Company" or "Golden Ocean") reports loss of \$135.1 million and loss per share of \$0.30 for the fourth quarter of 2014. This compares with loss of \$11.6 million and loss per share at \$0.03 for the third quarter of 2014. Total operating revenues for the fourth quarter were \$53.0 million and total operating expenses were \$235.4 million including \$183.3 million in impairment charges. Other gains/losses net were positive with \$56.4 million, including \$51.5 million in reversal of lease obligations. Net financial items were negative with \$9.0 million.
The loss for the period of \$135.1 million is an increase in loss of \$123.4 million compared to last quarter. Net operating income is down by \$120.6 million and net financial items are down by \$2.7 million. The changes are largely explained by the impairment charge and reversal of lease obligation in the quarter. The Company has also booked a gain of \$8.8 million in relation to refundable installments of cancelled newbuildings as the Company obtained positive award on interest payments for two contracts in December 2014. When excluding one-off items of impairment, reversal of liability and profit in relation to the receivable from Jinhawan, the net operating income is at the same level in the fourth quarter as in the third quarter. The net financial cost increased in the fourth quarter relative to the third quarter as the interest rate swaps had a negative mark to market change in the quarter.
The table below shows the split for some key numbers between the long term and the short term portfolio for the fourth 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 | 43.4 | 9.6 | 53.0 |
| Total operating expenses (ex admin) | -223.3 | -8.7 | -232.0 |
| Total other gain/losses net | 57.3 | -0.9 | 56.4 |
| Operating profit (ex admin) | -122.6 | 0 | -122.6 |
| Admin expenses | -3.4 | ||
| Operating profit | -126.0 |
Cash and cash equivalents decreased by \$23.0 million during the quarter. Cash from operating activities was positive with \$8 million in the quarter. The Company paid \$13.3 million in installments and docking costs during the fourth quarter. Financing activities were negative with \$18.4 million in the quarter, including dividends declared of \$3.1 million for the third quarter of 2014.
On October 7, 2014, Golden Ocean and Knightsbridge Shipping Limited ("Knightsbridge") announced that the two companies had entered into an agreement and plan of merger (the "Merger Agreement"), pursuant to which the two companies had agreed to merge, with Knightsbridge as the surviving legal entity (the "Combined Company"). The Combined Company will be renamed Golden Ocean Group Limited upon completion of the merger. As a result of the expected merger, the Combined Company would become one of the world's leading dry bulk companies with a modern fleet of 72 vessels, of which 34 are newbuildings under construction as of December 31, 2014. The merger is subject to approval by the shareholders of Golden Ocean and Knightsbridge in separate special general meetings which have been called for on March 26, 2015. The record date for the shareholders meetings was February 16, 2015. The merger is expected to close at the end of March 2015. Completion of the merger is also subject to the execution of certain definitive documents, customary closing conditions and regulatory approvals. Knightsbridge originally filed a Registration Statement on Form F-4 with the Securities and Exchange Commission on November 18, 2014, which was declared effective on February 25, 2015.
Knightsbridge's ordinary shares are currently listed for trading on the NASDAQ Global Select Market ("NASDAQ"), and Golden Ocean's ordinary shares are currently listed for trading on the Oslo Stock Exchange (the "OSE") and the Singapore Stock Exchange. In accordance with the Merger Agreement, the Combined Company have applied for a secondary listing of its ordinary shares on the OSE, so that after the merger the ordinary shares will be listed for trading on both NASDAQ and the OSE. The Singapore Stock Exchange (the "SGX") has approved the delisting of Golden Ocean on the SGX and it is expected that the Company will be delisted from the SGX on March 20, 2015.
Shareholders of Golden Ocean will receive shares in Knightsbridge as merger consideration. Pursuant to the Merger Agreement, one share in Golden Ocean will give the right to receive 0.13749 shares in Knightsbridge, and Knightsbridge will issue at most a total of 61.5 million shares to shareholders in Golden Ocean as merger consideration.
In January and February 2015 the Company took delivery of three Supramax vessels. Two of the Supramax vessels were delivered from the Japan Marine United Corporation ("JMU"), and are named Golden Cecilie and Golden Cathrine, and we took delivery of one Supramax vessel from Chengxi, named Golden Aries.
In February 2015 the 58.000 dwt Japanese built Supramax Golden Hawk was delivered to the Company on a seven year Time Charter contract with three optional years and purchase option. This contract was entered into and announced in relation to the third quarter 2013 release.
The Company has decided not to declare the optional years on Ocean Minerva and Golden Heiwa and the vessels were redelivered to their owners in January 2015 and February 2015, respectively.
Golden Lyderhorn has drydocked during the fourth quarter. The Company has scheduled five-year docking for seven vessels during 2015.
In February 2015, Bocimar International NV, CTM (C Transport Holding Ltd), Golden Union Shipping Co S.A., Golden Ocean Group Limited ("Golden Ocean") and STAR BULK CARRIERS CORP announced the formation of a new joint venture company, Capesize Chartering Ltd. The new company will combine and coordinate the chartering services of all the parties. Capesize Chartering Ltd will commence operations in the second half of February 2015 from the existing offices of each of the five parties involved.
As per today Golden Ocean's total newbuilding program consists of five Supramax vessels from Chengxi. The remaining capital expenditure for vessels under construction is \$171.8 million as of 31 December 2014, of which \$63.1 million was the remaining capital expenditure for the three vessels delivered during January and February 2015. The Company has obtained financing for the first five Supramax vessels, including the three delivered to date. The Company will wait closer to delivery in 2016 to finance the last three newbuildings.
As earlier reported the Company has had arbitration processes ongoing in relation to nine construction contracts cancelled at Zhoushan Jinhaiwan Shipyard Co. Ltd. As per the last quarterly report, the Company had received refund on three contracts, appeal was dismissed on two contracts and hearing was pending on four contracts. In December 2014 the High Court in London found in favor of the Company on the remaining four appeals and also ordered the yard to pay interest on the two contracts where this was not awarded in the arbitration proceedings.
The Company has received refund on four of the remaining six contracts in the first quarter of 2015. In total the Company has received \$72 million in the quarter, covering instalments and interest and has paid down debt of \$9.6 million. This is in addition to the \$103.6 million received during 2014. The remaining claim towards the yard is \$40 million and there is no more debt related to these contracts. The Company has sent demand and is waiting for refund for the remaining amount.
The Board has decided not to declare any dividends for the fourth quarter of 2014.
In December 2014 the Company has entered into a loan agreement for 19 vessels, including five newbuildings, four sailing vessels not financed previously and refinancing of 10 vessels. The loan has a 20 year profile (age-adjusted) and 55% loan to value on drawdown.
Two of the Company's loan facilities expire in 2015 and the outstanding debt under these facilities, \$83.6 million, has been classified as short term debt in the fourth quarter. These facilities have been refinanced in January 2015 as part of the new financing.
During the fourth quarter the Company sold its remaining 67,354 shares in Korea Line Corporation at krw 24,949 per share with total proceeds of \$1.6 million. Including sales proceeds from shares the Company has in total received \$6.3 million as compensation for the default on the charter contracts for Golden Empress and Golden Eminence in 2012.
The Company repurchased the shares held by employees in Golden Ocean Trading Limited in December 2014. Golden Ocean Trading Limited is now fully owned by Golden Ocean Group Limited.
As of December 31, 2014 the total number of shares outstanding in Golden Ocean was 447,314,296 of \$0.10 par value each. Additionally the Company had stock options for 4.15 million shares outstanding under various share incentive programs for management and the Directors, of which 2.03 million are vested and exercisable.
In many aspects the dry bulk market behaved differently during 2014 from what has been the case in earlier years. Traditionally the seasonal pattern has been a slow start to the year due to adverse weather in the Southern hemisphere, while the fourth quarter normally provides more energy with restocking of both iron ore and coal. The first quarter started on a high note with Baltic Dry Index (BDI) averaging 1.371 followed by 28 percent and three percent declines in the following two quarters. The negative trend reversed during October and November, the gains were during December. Consequently the average BDI of 2014 was down by six percent compared to the previous year, making 2014 the second worst year since 1999. Capesize vessels earned on average \$14,335 per day in the fourth quarter compared to \$12,635 per day in the previous quarter and \$27,071 in fourth quarter of 2013.
Chinese industrial production increased by 8.5 percent in 2014 compared to 9.5 percent in 2013. The Chinese leadership seems to be fairly comfortable with lower GDP growth, but is still indicating that their growth target for the coming three years is within a six to seven percent range. If this materializes it is still decent given the size of the Chinese economy, but it is expected that we will see a shift towards more consumer focused growth rather than infrastructure driven projects.
Chinese steel consumption experienced a small negative growth last year compared to nine percent growth in 2013. However the production of steel increased by 1.5 percent last year which was backed by strong growth in steel exports. Annualized steel exports in November and December was about 115 million mt.
Expectations were high for seaborne transportation of iron ore in 2014, based on additional supply in particular from the miners in Australia. Iron ore imports to China were up with approximately 100 million mt last year and total iron ore imports to the country reached 925 million mt which was in line with forecaster's expectations.
What derailed the dry bulk freight market recovery were the lack of coal demand from China, the relief of the grain port congestion in South America compared to the previous year and the after effect of the stock piling ahead of the Indonesian ban on raw ore (nickel ore and bauxite) exports.
Approximately 8.5 million dwt of new dry bulk capacity was delivered during fourth quarter of 2014, compared to 11.8 million dwt in third quarter. About 15.5 million dwt was removed from the tonnage list during 2014, fairly evenly spread out over the four quarters. The delivery ratio compared to the official order book at the beginning of 2014 was very similar to what has been the case the last couple of year. Just below 80 percent resulted in 47.5 million mt of new capacity. A total of 600 vessels above 10,000 dwt were delivered and 285 removed resulting in a net fleet growth of 5.2 percent measured in carrying capacity.
The downward pressure on asset prices continued during the fourth quarter. Capesizes values that had been more robust in the previous two quarters experienced a stronger negative correction than the smaller segments. According to sale and purchase brokers, modern vessels (maximum five years old) were priced approximately 12 percent lower by the end of the year compared to the end of September 2014. Panamaxes and Supramaxes lost around 8 % and 4% respectively for the same period.
Two months into 2015 the freight market has continued its negative trend with a BDI touching "all time low." With Owners not even covering their operating expenses ordering of new capacity is not being considered and for the last four months shipyards have secured very few new orders. In addition, scrapping activity has picked up. During the first six weeks of this year 19 Capesizes have been committed to scrap buyers. This is almost half of what was scrapped in total last year.
Most analysts expect that spot earnings this year on average will be in line with 2014.
The main downside risks are considered to be:
Upside potential should derive from:
The process to merge with Knightsbridge is entering into its final stage and the companies have called for special general meetings on March 26, 2015. The Board and management are dedicated to conclude the process of creating one of the world's leading dry bulk companies. After completion of the merger we expect that the Combined Company should be in a position to seek further consolidation opportunities in the dry bulk market.
The completed financing of 19 vessels at an attractive margin proves the strong support the Company has in the banking market. The structure with low gearing and long repayment profile will assist the Company in managing the current weak market and indicates which financial gearing the combined company is aiming to achieve going forward.
In an effort to increase operational efficiency five Owners (Bocimar, CTM, Golden Ocean, Golden Union and Starbulk) have decided to join forces to optimize their chartering services through Capesize Chartering Ltd. For the ship owners the major benefit is achieving a reduction in costs, since always the best positioned vessel can be offered for a fixture of a cargo. This will reduce ballast voyages and associated running costs, notably in respect of bunkers. It is therefore our belief that the new company in sum will offer to the market a combined Capesize fleet with more flexibility and options, that will benefit both the ship owners and the charterers/cargo owners.
The arbitration process against Jinhaiwan is coming to an end. The Company has now received full refund with interest on seven of the nine contracts. The Board of Golden Ocean expects that the Company will receive installments and interest on the last two contracts within the next months and is satisfied with the final outcome of the process. As a result Golden Ocean has a strong cash position in spite of a disappointing market.
The Board of Golden Ocean has concluded not to declare a dividend for the fourth quarter due to the current market environment which caters for a cautious approach.
Golden Ocean and Knightsbridge have called for Special General Meetings on March 26, 2015 for voting over the proposed merger between the companies. If the shareholders approve the merger the companies plan to conclude the merger by the end of March 2015, subject to the execution of certain definitive documents, customary closing conditions and regulatory approvals.
The market so far in the first quarter has been disappointing and this will affect the earnings for the first quarter. Future earnings will continue to correlate with the spot market as long as the majority of our vessels are employed in the spot market. Should the weak market continue this will force changes on the industry, some participants will disappear, and it will open for consolidation and for those that have stamina to stand through this period there will be opportunities. During a period with a weak market we expect to see increased scrapping, postponed orders, cancellations and conversions, and in the long run this will cater for better fundamentals for an upturn in the future.
The statements contained in this press release that are not purely historical are forward-looking statements. The forward-looking statements include, but are not limited to, statements regarding the expectations, hopes, beliefs, intentions or strategies regarding the future of Golden Ocean Group Limited ("Golden Ocean"), Knightsbridge Shipping Ltd. ("Knightsbridge") and the shipping market in general. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipate", "believe", "continue", "could", "estimate", "expect", "intend", "may", "might", "plan", "possible", "potential", "predict", "project", "forecast", "should", "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this press release may include, for example, statements about: the shipping markets, sources of and demand for drybulk and other shipping cargo, and the performance of the shipping markets and the Chinese and global economy.
The forward-looking statements contained in this press release are based on the current expectations and beliefs of Golden Ocean concerning future developments and their potential effects on Golden Ocean, Knightsbridge, the shipping markets and factors affecting supply and demand for drybulk and other shipping cargo, including, among other things, the expected merger between Golden Ocean and Knightsbridge. All statements and information in this press release relating to the merger and the resulting combined company are based on the anticipated effectuation of the merger, which is subject to certain conditions precedent. There can be no assurance that future developments affecting any of them will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties (many of which are beyond Golden Ocean's or Knightsbridge's control) or other assumptions that may cause actual results or
performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of Golden Ocean's assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Neither Golden Ocean nor Knightsbridge undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Certain shipping, steel, Chinese and global industry information, statistics and charts contained herein have been derived from several sources. You are hereby advised that such industry data, charts and statistics have not been prepared specifically for inclusion in these materials and Golden Ocean has not undertaken any independent investigation to confirm the accuracy or completeness of such information.
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed transaction between Golden Ocean Group Limited ("Golden Ocean") and Knightsbridge Shipping Limited ("Knightsbridge"), Knightsbridge has filed relevant materials with the Securities and Exchange Commission (the "SEC"), including a registration statement of Knightsbridge on Form F-4, including Amendments No. 1, 2 and 3 thereto, containing a joint proxy statement of Golden Ocean and Knightsbridge that also constitutes a prospectus of Knightsbridge. The registration statement has been declared effective by the SEC on February 25, 2015, and Golden Ocean and Knightsbridge commenced mailing the definitive joint proxy statement/prospectus to shareholders of Golden Ocean and Knightsbridge on or about February 26, 2015. INVESTORS AND SECURITY HOLDERS OF GOLDEN OCEAN AND KNIGHTSBRIDGE ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders will be able to obtain free copies of the registration statement and the joint proxy statement/prospectus and other documents filed with or furnished to the SEC by Knightsbridge through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with or furnished to the SEC by Knightsbridge will be available free of charge on Knightsbridge's website at http://www.knightsbridgeshipping.com. Additional information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, are contained in the joint proxy statement/prospectus and other relevant materials to be filed with or furnished to the SEC when they become available.
February 27th, 2015
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
Fourth Quarter 2014
Index
Consolidated Comprehensive Income Statement for the periods ended December 31, 2014 and 2013 Consolidated Balance Sheet as at December 31, 2014 and December 31, 2013 Consolidated Cash Flow Statement for the periods ended December 31, 2014 and 2013 Consolidated Statement of Changes in Equity for the periods ended December 31, 2014 and 2013 Notes to Condensed Interim financial information
Consolidated Comprehensive Income Statement
(in thousands of \$, except per share data which are in \$)
| 2014 | 2013 | 2014 | 2013 | ||
|---|---|---|---|---|---|
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | ||
| Notes | |||||
| Unaudited | Unaudited | Unaudited | Unaudited | ||
| Operating revenue | |||||
| Time charter and voyage charter revenues | 52 332 | 69 491 | 246 005 | 276 457 | |
| Other operating revenue | 3 | 688 | 1 507 | 7 453 | 32 444 |
| Total operating revenue | 53 020 | 70 998 | 253 458 | 308 901 | |
| Operating expenses | |||||
| Voyage expenses and commission | 14 191 | 14 810 | 75 971 | 70 448 | |
| Vessel operating expenses | 14 700 | 11 882 | 56 404 | 46 012 | |
| Charter hire expenses | 7 378 | 15 306 | 43 268 | 57 723 | |
| Administrative expenses | 3 410 | 2 603 | 11 864 | 12 233 | |
| Depreciation | 8,9 | 12 429 | 10 031 | 47 475 | 38 664 |
| Impairment of vessels and vessels held under finance leases | 5 | 183 300 | - | 183 300 | |
| Total operating expenses | 235 408 | 54 631 | 418 282 | 225 079 | |
| Other gain (losses) net | |||||
| Share of income from associates and Joint Ventures | 13 | 94 | 3 069 | 2 017 | 4 149 |
| Adjustment of financial lease obligation | 51 454 | - | 51 454 | - | |
| Other gains (losses) net | 4 | 4 836 | 2 509 | 9 397 | 7 291 |
| Total other gains (losses) net | 56 384 | 5 578 | 62 868 | 11 440 | |
| Operating profit (loss) | (126 004) | 21 945 | (101 956) | 95 262 | |
| Interest income | 315 | 207 | 1 134 | 1 096 | |
| Interest expense | 6 | (7 723) | (4 955) | (31 394) | (19 115) |
| Other financial items | 7 | (1 569) | 1 085 | (3 188) | 7 423 |
| Total net financial items | (8 977) | (3 663) | (33 448) | (10 596) | |
| Profit (loss) before income tax | (134 981) | 18 282 | (135 404) | 84 666 | |
| Income tax | (82) | (89) | (197) | (174) | |
| Profit (loss) for the period | (135 063) | 18 193 | (135 601) | 84 492 | |
| Other comprehensive income: | |||||
| Items that will not be subsequently reclassified to profit or loss | |||||
| Remeasurements of post employment obligations | (829) | - | (829) | - | |
| (829) | - | (829) | - | ||
| Items that may be subsequently reclassified to profit or loss | |||||
| Changes in fair value of available-for-sale financial assets | (2 374) | 6 270 | (3 906) | 7 255 | |
| Recycling of changes in fair value of sold available-for-sale financial assets | (1 603) | - | (3 846) | (339) | |
| Currency translation differences Total comprehensive income (loss) for the period |
- (139 869) |
- 24 463 |
- (144 182) |
- 91 408 |
|
| Profit (loss) attributable to: | |||||
| - Owners of the parent | (135 063) | 18 070 | (135 008) | 83 875 | |
| - Non-controlling interests | - | 122 | (593) | 617 | |
| Profit (loss) for the period | (135 063) | 18 192 | (135 601) | 84 492 | |
| Comprehensive income (loss) attributable to: | |||||
| Owners of the parent | (139 869) | 24 340 | (143 589) | 90 791 | |
| Non-controlling interests | - | 122 | (593) | 617 | |
| Total comprehensive income (loss) for the period | (139 869) | 24 462 | (144 182) | 91 408 | |
| Basic and diluted earnings per share | \$(0.30) | \$0.04 | \$(0.30) | \$0.19 |
See accompanying notes that are an integral part of these financial statements
| 2014 | 2013 | ||
|---|---|---|---|
| (in thousands of \$) | Notes | Dec 31 | Dec 31 |
| ASSETS | Unaudited | ||
| Non current assets | |||
| Vessels and equipment | 8 | 698 258 | 667 788 |
| Vessels held under finance leases | 9 | 56 535 | 130 795 |
| Vessels under construction | 10 | 42 398 | 16 144 |
| Other long term receivables | 12 | 9 189 | 8 588 |
| Available-for-sale financial assets | 16 | 9 164 | 16 916 |
| Derivative financial instruments | 15 | 2 093 | 2 735 |
| Instalments on cancelled newbuildings | - | 192 976 | |
| Investment in associates and Joint Ventures | 13 | 10 481 - |
17 419 - |
| Total non-current assets | 828 118 | 1 053 361 | |
| Current assets | |||
| Inventories | 8 513 | 10 775 | |
| Trade and other receivables | 12 | 21 554 | 25 495 |
| Refundable installments on cancelled newbuildings | 25 | 111 561 | - |
| Restricted deposit | 11 | 3 531 | 4 960 |
| Cash and cash equivalents | 11 | 106 147 | 93 881- |
| Total current assets | 251 306 | 135 110 | |
| Total assets | 1 079 424 | 1 188 471 | |
| EQUITY AND LIABILITIES Equity attributable to equity holders of the parent |
|||
| Share capital | 44 731 | 44 726 | |
| Additional paid in capital | 99 187 | 99 156 | |
| Other reserves | 42 999 | 23 466 | |
| Retained earnings | 282 059 | 453 434 | |
| 468 976 | 620 782 | ||
| Non-controlling interests | - | 1 108 | |
| Total Equity | 468 976 | 621 890 | |
| Non-Current Liabilities | |||
| Long term debt | 17,18 | 396 957 | 362 805 |
| Obligations under finance leases | 19 | 55 288 | 110 416 |
| Derivative financial instruments | 15 | 2 106 | - |
| Derivative financial instruments | 15 | 2 106 | - |
|---|---|---|---|
| Other long term liabilities | 1 601 - |
3 476 - |
|
| Total non-current liabilities | 455 952 | 476 697 | |
| Current Liabilities | |||
| Long-term debt - current portion | 17 | 128 435 | 41 214 |
| Obligations under finance leases – current portion | 19 | 4 290 | 7 370 |
| Amount due to related parties | 1 180 | 1 216 | |
| Trade payables and other current liabilities | 20 | 20 591 | 40 084 |
| Total current liabilities | 154 496 | 89 884 | |
| Total liabilities and shareholders' equity | 1 079 424 | 1 188 471 |
See accompanying notes that are an integral part of these financial statements
Golden Ocean Group Limited
Consolidated Cash Flow Statement
| (in thousands of \$) | 2014 | 2013 |
|---|---|---|
| Notes | Jan-Dec | Jan-Dec | |
|---|---|---|---|
| OPERATING ACTIVITIES | Unaudited | Unaudited | |
| Profit (loss) for the period | (135 601) | 84 492 | |
| Adjustments for: | |||
| Share based payment | 488 | 1 172 | |
| Stock options paid in cash | (54) | (40) | |
| Gain on sale and Impairment of available-for-sale financial assets | (4 126) | (339) | |
| Share of (profit) loss from associates and Joint Ventures | 13 | (8 215) | (4 149) |
| Gain from refundable instalments for cancelled new buildings | (19 458) | - | |
| Interest expensed | 22 624 | 10 280 | |
| Interest income | (1 134) | (1 096) | |
| Depreciation | 8,9 | 47 475 | 38 664 |
| Impairment | 8,9 | 183 300 | - |
| Adjustment of financial lease obligation | (51 454) | - | |
| Amortisation of deferred charges | 1 384 | 638 | |
| Foreign currency gain (losses) | 340 | (521) | |
| Imputed interest on other long term receivables | (601) | (562) | |
| Net change in: | |||
| Other long term receivables and liabilities | (302) | (302) | |
| Amount due to related parties | (35) | (112) | |
| Derivative financial instrument | 15 | 9 131 | (6 562) |
| Trade and other receivables | 12 | 3 941 | (10 818) |
| Inventories | 2 262 | (5 025) | |
| Trade payables and other current liabilities | 20 | (18 642) | (5 005) |
| Net cash provided by operating activities | 31 323 | 100 714 | |
| INVESTING ACTIVITIES | |||
| Changes in restricted deposit | 1 429 | 3 217 | |
| Interest received | 1 134 | 1 096 | |
| Payments on vessels | 8,1 | (156 592) | (62 680) |
| Payment of business combination | 8,14 | (13 600) | - |
| Capitalised docking and periodic maintenance | (13 231) | (1 485) | |
| Investment in financial assets-available- for sale | (136) | (10 000) | |
| Investment in Joint Venture | 13 | - | (13 275) |
| Dividend received Joint Venture | - | 1 252 | |
| Proceeds from cancelled new buildings | 103 569 | - | |
| Sale of available-for-sale financial assets | 4 126 | 339 | |
| Net cash provided by (used in) investing activities | (73 301) | (81 536) | |
| FINANCING ACTIVITIES Payment of financing charges |
|||
| (3 685) | (1 709) | ||
| Payment of interest | (15 825) | (10 103) | |
| Payment of interest sw aps | (6 384) | (3 954) | |
| Repayment of obligations under finance leases | (6 817) | (6 594) | |
| Repayment of long term debt Proceeds from long term debt |
(71 412) | (36 770) | |
| Proceeds from issue of new shares | - | 33 947 | |
| 36 | - | ||
| Payment of dividends Proceeds from Convertible bonds |
(41 670) | (4 473) | |
| 200 000 | - | ||
| Net cash (used in) provided by financing activities | 54 243 | (29 656) | |
| Net change in cash and cash equivalents | 12 266 | (10 478) | |
| Cash and cash equivalents at beginning of period | 93 881 | 104 359 | |
| Cash and cash equivalents at end of period | 11 | 106 147 | 93 881 |
Consolidated Statement of
Changes in Equity
(in thousands of \$)
| Additional | Non | ||||||
|---|---|---|---|---|---|---|---|
| Share | paid in | Retained | Controlling | ||||
| Capital | capital Other Reserves | Earnings | Total | interests | Total Equity | ||
| Balance at January 1, 2013 | 44 726 | 99 156 | 16 550 | 377 372 | 537 805 | 491 | 538 296 |
| Comprehensive income for the period | - | - | 6 916 | 83 875 | 90 791 | 617 | 91 408 |
| Dividends and related tax | - | - | - | (8 946) | (8 946) | - | (8 946) |
| Value of services under stock options scheme | - | - | - | 1 132 | 1 132 | - | 1 132 |
| Balance at December 31, 2013 | 44 726 | 99 156 | 23 466 | 453 434 | 620 782 | 1 108 | 621 890 |
| Balance at January 1, 2014 | 44 726 | 99 156 | 23 466 | 453 434 | 620 782 | 1 108 | 621 890 |
| Comprehensive income (loss) for the period | - | - | (8 581) | (135 008) | (143 589) | (593) | (144 182) |
| Equity portion Convertible Bond | - | - | 28 114 | - | 28 114 | - | 28 114 |
| Issue of new share capital | 5 | 31 | - | - | 36 | 21 | 57 |
| Dividends and related tax | - | - | - | (36 680) | (36 680) | (657) | (37 337) |
| Value of services under stock options scheme | - | - | - | 488 | 488 | - | 488 |
| Shares purchased from minority | (121) | (121) | 121 | - | |||
| Stock option paid in cash | - | - | - | (54) | (54) | - | (54) |
| Balance at December 31, 2014 | 44 731 | 99 187 | 42 999 | 282 059 | 468 976 | 0 | 468 976 |
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 approved by IASB. There have been no changes in the accounting principles in 2014 compared to 2013.
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. Other than in the case of the item described below, there were no significant changes to the estimates and judgments made in these interim financial statements compared to the previous annual financial statements.
In the fourth quarter the Company succeeded in their appeal in High Court that Golden Ocean had the right to refund of interest for the two contracts where interest was not initially awarded. The value of the financial assets increased with \$8.8 million in the forth quarter of 2014 principally due to this award. Total value of the financial assets is \$111.6 for the six remaining contracts and it is expected that settlement will be mainly within the first quarter of 2015.
Management tested all vessels for impairment at the end of the fourth quarter in 2014 due to identified indicators (decrease in newbuilding prices, second hand values and spot and forward rates). Several of the vessels had recoverable amount below the carrying amount. The impairment test has been carried out based on the same model as in previous years. The Company has recorded impairment on Vessels and equipment of \$116.6 million in the quarter. For Vessels under finance leases the Company recorded an impairment of \$66.7 million, mainly due to early redelivery of Golden Heiwa and Ocean Minerva with a total impairment of \$57.3million in addition to impairment on Golden Lyderhorn.
Based on the same model for WACC and the current values for the different parameters, the Company calculated a WACC of 7.41% for the end of 2014 (q1 - 2013: 6.92%). The WACC has increased from q1- 2013 due to higher levels for interest rates and the higher volatility for dry bulk stocks relative to the overall equity market, increasing the beta for the dry bulk peers. If the estimated cost of capital (WACC) used in the valuation model had been 1% higher, ceteris paribus, than management's estimate above, the Group would have recognised a higher net impairment of \$0.4 million in the fourth quarter. If the forward market had been 10 % lower, ceteris paribus, the Group would have recognised a higher impairment loss of \$4.6 million in the fourth quarter. If the broker values had dropped by 10%, ceteris paribus, the Group would have recognised a higher impairment loss of \$52.4 million. If the WACC had been 8.41%, and the forward market rates and the broker values had decreased by 10%, the impairment would have increased by \$59.5 million in the fourth quarter. The Group applies a growth rate of 4% in the terminal period between 8-25 years, mainly based on expected growth from the Chinese market. Using a 1% lower growth rate of 3% would not have any effect of the total impairment recorded in q4, all other parameters held constant (2013:\$nil).
| (in thousands of \$) | 2014 | 2013 | 2014 | 2013 |
|---|---|---|---|---|
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
| Management fee revenues | 688 | 1 507 | 2 104 | 2 444 |
| Other revenues | - | - | 5 349 | 30 000 |
| Total other revenue | 688 | 1 507 | 7 453 | 32 444 |
Other revenue of \$5.3 million in the second quarter of 2014 is related to compensation for a default on a charter contract. Other revenues of \$ 30.0 million in second quarter 2013 relates to a settlement from a 2010 claim from a Company for non-performance of a long term charter party.
| (in thousands of \$) | 2014 | 2013 | 2014 | 2013 |
|---|---|---|---|---|
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
| Gain (loss) on Forward freight agreements | (2 134) | 2 420 | (14 170) | 7 368 |
| Gain (loss) on bunkers derivatives | (1 830) | 89 | (2 089) | (77) |
| Gain (loss) from refundable installments for cancelled newbuildings | 8 800 | - | 19 458 | - |
| Gain from purchase of Shares in Joint Venture | - | - | 6 198 | - |
| Total other gains (losses) net | 4 836 | 2 509 | 9 397 | 7 291 |
The refundable installments on cancelled newbuildings have been reclassified from a non – financial asset to a financial asset based on the outcome of the arbitration in the second quarter. The asset has been measured at fair value when initially recognised in the second quarter and thereafter measured at amortised cost. There has been recognised a total net gain of \$13.5 million for the period January 2014 to December 2014 on the remaining refundable installmets. Furthermore the company has received final settlement of three contracts during 2014 resulting in a gain of \$5.9 million.
The Group has booked impairment of \$183.3 million for the quarter (2013; nil). The Company booked a net impairment expense of \$116.6 million for Vessels and \$66.7 million for Vessels held under finance lease.
During the fourth quarter of 2014 current spot and forward rates, as well as broker values, dropped, indicating that that the carrying amount of the vessels and vessels under construction may not be recoverable. The recoverable amount of the assets was estimated in order to determine whether any impairment charges would be required in relation to the current book values.
The recoverable amount is the higher of the fair value of the asset less costs to sell, and its value in use. To estimate the fair value of the vessels, valuations from three independent brokers are collected. The broker valuations are prepared on a charter free basis and do not take into account the value of the long-term charters that the Group has entered into for some of the vessels. The mark-to-market value of the charter contract is added to the broker value to find the fair value of the asset. The mark-to-market value of the charter contract is calculated as the net present value of the charter hire rate less the forward market, multiplied by the number of days the charter is running.
When determining the value in use, estimated future cash flow is discounted using a WACC rate over the remaining useful life of the vessels. The estimated cash flows are based on the agreed charter rate for fixed periods for vessels with contracts in place and on the forward market revenues for open periods and vessels without a fixed contract, less an estimate of operating expenses. Revenue on open periods and for vessels without a fixed contract is estimated by the Group based on the forward freight curve for minimum five next years and then an estimate development for the remaining life. The underlying assumptions for the estimated revenues are applied consistently for estimating related expense. The Weighted Average Cost of Capital (WACC) is calculated as Debt Ratio * (risk free interest rate + loan margin) + Equity Ratio * (risk free interest rate + Beta * Risk Premium)
The book values exceeded the recoverable amount for most of the vessels. The broker values exceeded the value in use at the measurement date for most of the Vessels and were mainly used as the recoverable amount. The company recognised an impairment loss to the extent that the carrying amount exceeded the broker value amount for most of the vessels and the value in use for a few vessels.
During the fourth quarter of 2014 the Company decided not to extend the optional periods on the vessels Ocean Minerva and Golden Heiwa and the vessels will be redelivered to owners during January and February 2015 respectively. As a consequence the Company has revalued the finance lease asset and taken impairment on the asset value of these two assets in the fourth quarter.
The impairment expense recognised in the quarter related to the individual vessels as specified in the table below.
| (in thousands of \$) | 2014 | 2013 |
|---|---|---|
| Impairment per CGU | ||
| Owned vessels | ||
| Golden Feng | 5 900 | - |
| Golden Shui | 7 900 | - |
| Golden Beijing | 8 150 | - |
| Golden Zhoushan | 5 200 | - |
| Golden Magnum | 5 750 | - |
| Golden Eminence | 8 200 | - |
| Golden Enterprise | 8 000 | - |
| Golden Daisy | 6 450 | - |
| Golden Ginger | 6 200 | - |
| Golden Rose | 6 300 | - |
| Golden Saguenay | 7 700 | - |
| Golden Opportunity | 9 900 | - |
| Golden Ice | 11 100 | - |
| Golden Strenght | 9 800 | - |
| Golden Suek | 5 750 | - |
| Golden Brilliant | 3 000 | - |
| Other Vessel | 1 300 | |
| Vessels on financial lease | ||
| Golden Heiwa | 28 600 | - |
| Ocean Minerva | 28 700 | - |
| Golden Lyderhorn | 9 400 | - |
| Total impairment | 183 300 | - |
| (in thousands of \$) | 2014 | 2013 | 2014 | 2013 |
|---|---|---|---|---|
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
| Interest on bank overdrafts and loans | 6 259 | 2 974 | 25 966 | 12 440 |
| Interest on obligations under finance leases | 1 629 | 2 012 | 7 386 | 8 197 |
| Total interest expense | 7 888 | 4 986 | 33 352 | 20 637 |
| Less amounts included in the cost of qualifying assets | (165) | (31) | (1 958) | (1 522) |
| Net interest expense | 7 723 | 4 955 | 31 394 | 19 115 |
| (in thousands of \$) | 2014 | 2013 | 2014 | 2013 |
|---|---|---|---|---|
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
| Interest swap | (2 984) | 651 | (7 401) | 6 187 |
| Foreign currency gain/ (losses) | (340) | 521 | (340) | 521 |
| Other financial items | 1 755 | (87) | 4 553 | 715 |
| Total other financial items | (1 569) | 1 085 | (3 188) | 7 423 |
Total interest rate swap loss in the fourth quarter was \$3.0 million compared to a gain of \$0.7 million same quarter previous year. Total interest rate swap loss for the period from January to December 2014 was \$7.4 million compared to a gain of \$6.2 million for the same period previous year. The Company sold 67,357 shares in Korea Line Corporation in the fourth quarter. A related gain of \$1.6 million is reported as other financial items. In total the Company has sold 170,042 Korea Line shares and booked a gain of \$4.1 million for the period January 2014 to December 2014
| The Group has the following owned vessels at December 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 Magnum | 2009 | 179 788 | Hong Kong |
| 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 Daisy | 2012 | 81 507 | Marshall Island |
| Golden Ginger | 2012 | 81 487 | Marshall Island |
| Golden Rose | 2012 | 81 585 | Marshall Island |
| Golden Brilliant | 2013 | 74 500 | Hong Kong |
| Golden Pearl | 2013 | 74 187 | Hong Kong |
| Golden Diamond | 2013 | 74 187 | Hong Kong |
| Golden Ruby | 2013 | 74 500 | 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 | 51 803 | 3 486 | 10 | 55 299 |
| Transferred from vessels under construction (note | 29 214 | 1 000 | - | 30 214 |
| At December 31, 2013 | 849 469 | 11 968 | 496 | 861 932 |
| At January 1, 2014 | 849 469 | 11 968 | 496 | 861 932 |
| Additions | 128 253 | 11 367 | 29 | 139 649 |
| Additions from purchase of business combination | 45 500 | - | - | 45 500 |
| At December 31, 2014 | 1 023 222 | 23 335 | 525 | 1 047 081 |
| 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 | 188 606 | 5 106 | 433 | 194 144 |
| Disposals | - | - | ||
| Impairment (note 5) | 116 573 | - | - | 116 573 |
| Depreciation | 34 161 | 3 930 | 16 | 38 107 |
| At December 31, 2014 | 339 339 | 9 036 | 449 | 348 823 |
| Carrying amount: | ||||
| At December 31, 2014 | 683 883 | 14 299 | 76 | 698 258 |
| At December 31, 2013 | 660 863 | 6 862 | 63 | 667 788 |
The Group has pledged most of it's owned vessels to secure various banking facilities (note 17).
| The Group has the following vessels on financial lease at December 31, 2014. | |||
|---|---|---|---|
| Vessel | Built | DWT | Flag |
| Golden Lyderhorn | 1999 | 74 242 | Hong Kong |
| 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 | 176 159 | ||
| Additions - drydocking | 1 835 | ||
| Transferred to non-current assets held for sale | - | ||
| At december 31, 2014 | 177 994 | ||
| Accumulated depreciation: | |||
| At January 1, 2013 | 35 942 | ||
| Depreciation | 9 422 | ||
| At December 31, 2013 | - 45 364 |
||
| At January 1, 2014 | 45 364 | ||
| Depreciation | 9 368 | ||
| impairment (note 5) | 66 727 | ||
| At december 31, 2014 | 121 459 | ||
| Carrying amount: | |||
| At december 31, 2014 | 56 535 | ||
| At December 31, 2013 | 130 795 |
Vessels held under finance lease are depreciated on the same basis as owned vessels. During the fourth quarter of 2014 the Company decided not to extend the optional periods on the vessels Ocean Minerva and Golden Heiwa and the vessels will be redelivered to owners during January and February 2015 respectively. As a consequence the Company has revalued the finance lease asset and taken impairment on the asset value of these two assets in the fourth quarter.
| (in thousands of \$) | |
|---|---|
| At January 1, 2013 | 116 082 |
| Additions | 22 288 |
| Transferred to instalments on cancelled newbuildings | (92 012) |
| Transferred to vessels and equipment (note 8) | (30 214) |
| At December 31, 2013 | 16 144 |
| At January 1, 2014 | 16 144 |
| Additions | 26 254 |
| At December 31, 2014 | 42 398 |
Additions include instalments, interest and supervision on newbuildings.
| (in thousands of \$) | 2014 | 2013 |
|---|---|---|
| December | December | |
| Cash at bank and in hand | 76 147 | 81 381 |
| Short-term deposits | 30 000 | 12 500 |
| Cash and cash equivalents | 106 147 | 93 881 |
| Restricted deposit | 3 531 | 4 960 |
| Cash and cash equivalents and restricted deposit | 109 678 | 98 841 |
| (in thousands of \$) | 2014 | 2013 |
|---|---|---|
| December | December | |
| Trade receivables, net | 2 555 | 7 343 |
| Other receivables | 20 511 | 15 867 |
| Prepayments | 7 677 | 10 873 |
| Accrued income | 30 743 | 34 083 |
| Less non-current portion: other receivables | (9 189) | (8 588) |
| Current portion | 21 554 | 25 495 |
| UFC Golden Magnum | Golden Opus | Golden Azalea | Seateam | Totals | ||
|---|---|---|---|---|---|---|
| (in thousands of \$) | Inc. | Inc. | Inc. | Management | ||
| Ownership | 50 % | 50 % | 50 % | 50 % | 21 % | |
| At 1 January , 2013 | 1248 | - | - | - | - | 1 248 |
| Additions | - | 6 350 | 6 924 | 6 400 | - | 19 674 |
| Disposals/Dividends | - | - | - | (7 653) | - | (7 653) |
| Share of income | 673 | 834 | 1 276 | 1 253 | 114 | 4 150 |
| At 31 December, 2013 | 1921 | 7 184 | 8 200 | - | 114 | 17419 |
| At 1 January , 2014 | 1921 | 7 184 | 8 200 | - | 114 | 17 419 |
| Disposals/Dividends | (1 500) | - | - | - | (49) | (1 549) |
| Transfer to investment in subsidiaries | (7 405) | - | - | - | (7 405) | |
| Share of income | 954 | 221 | 564 | - | 277 | 2 016 |
| At 31 December, 2014 | 1 375 | - | 8 764 | - | 342 | 10 481 |
The figures reflect the Group's investment in the above companies.
| UFC | Golden Magnum | Golden Opus Inc. | Seateam | Totals | |
|---|---|---|---|---|---|
| (in thousands of \$) | Inc. | Management | |||
| Ownership | 50 % | 50 % | 50 % | 21 % | |
| At December 31, 2014 | |||||
| Current assets | |||||
| Cash and cash equivalents | 5 545 | - | 4 836 | - | 10 381 |
| Other current assets | 3 389 | - | 2 778 | 1 605 | 7 772 |
| Total current assets | 8 934 | - | 7 614 | 1 605 | 18 153 |
| Current liabilities | |||||
| Financial liabilities | - | - | 1 833 | - | 1 833 |
| Other current liabilities | 6 184 | - | 2 591 | - | 8 775 |
| Total current liabilities | 6 184 | - | 4 424 | - | 10 608 |
| Non-current assets | |||||
| Assets | - | - | 32 412 | - | 32 412 |
| Total non-current assets | - | - | 32 412 | - | 32 412 |
| Non-current liabilities | |||||
| Financial liabilities Other liabilities |
-- | -- | 18 073- | -- | 18 073- |
| Total non-current liabilites | - | - | 18 073 | - | 18 073 |
| Net total assets | 2 750 | - | 17 529 | 1 605 | 21 884 |
| UFC | Golden Magnum | Golden Opus Inc. | Seateam | Totals | |
|---|---|---|---|---|---|
| (in thousands of \$) | Inc. | Management | |||
| Ownership | 50 % | 50 % | 50 % | 25 % | |
| At December 31, 2013 | |||||
| Current assets | |||||
| Cash and cash equivalents | 3 606 | 804 | - | - | 4 410 |
| Other current assets | 1 848 | 4 586 | 4 845 | 456 | 11 735 |
| Total current assets | 5 454 | 5 390 | 4 845 | 456 | 16 145 |
| Current liabilities | |||||
| Financial liabilities | - | 952 | 458 | - | 1 410 |
| Other current liabilities | 1 612 | 1 077 | 295 | - | 2 984 |
| Total current liabilities | 1 612 | 2 029 | 753 | - | 4 394 |
| Non-current assets | |||||
| Assets | - | 33 310 | 33 630 | - | 66 940 |
| Total non-current assets | - | 33 310 | 33 630 | - | |
| Non-current liabilities | |||||
| Financial liabilities | - | 22 303 | 21 322 | - | 43 625 |
| Total non-current liabilites | - | 22 303 | 21 322 | - | 43 625 |
| Net total assets | 3 842 | 14 368 | 16 400 | 456 | 35 066 |
The tables above reflect the total assets and liability for the Group's JV/associated companies.
The Group bought the remaining 50% of Golden Magnum Inc. in the first quarter of 2014 and it is now considered as a fully owned subsidiary where all assets and liability are consolidated into the Group's financial statement.
During March 2014, the Company acquired the 50% outstanding shares in Golden Magnum Inc. for \$ 13.6 million from the other joint venture partner. The acquisition resulted in a holding gain on the existing 50% share of 6.2 million, which has been included in other gains in profit and loss in the first quarter of 2014.
The shares were acquired by \$13.6 million in cash which is also considered to be the fair value of the consideration.
The fair value of the assets and liabilities in Golden Magnum Inc. were as follows at the acquisition date.
| (in thousands of \$) | 2014 |
|---|---|
| March 12 | |
| Non current assets | |
| Vessel and equipment | 45 500 |
| Total non-curremt assets | 45 500 |
| Current assets | |
| Cash and cash equivalents | 1 512 |
| other current assets | 4 014 |
| Total current assets | 5 526 |
| Tota assets | 51 026 |
| Non current liabilities | |
| Long term debt | 22 326 |
| Total non-current liabilities | 22 326 |
| Current liabilities | |
| Long term debt - current portion | 952 |
| other current liabilities | 548 |
| Total current liabilities | 1 500 |
| Total liabilities | 23 826 |
| Total identifiable net assets | 27 200 |
The investment was transferred from investment in joint ventures to investments in subsidiaries as a wholly owned subsidiary and consolidated from the same date.
Since the acquisition date the Group has included \$ 8.0 million in revenues and \$ 0.7 million in profit and loss for the period ended December 31, 2014. Had the acquisition occurred as of the beginning of the year, the revenue reported for the combined entity would have been \$1.3 million higher with a \$0.4 million decrease in loss.
| (in thousands of \$) | 2014 | 2013 |
|---|---|---|
| December | December | |
| Assets | ||
| Interest derivatives | 2 093 | 2 566 |
| Bunkers derivatives | 169 | |
| Forward freight agreements Total assets |
2 093 | 2 735 |
| Liabilities | ||
| Interest derivatives | 545 | - |
| Bunkers derivatives | 1 561 | - |
| (in thousands of \$) | 2014 | 2013 |
|---|---|---|
| December | December | |
| At 1 January, 2014 | 16 916 | - |
| Additions | - | 10 000 |
| Changes in fair value of available-for-sale financial assets | (3 906) | 7 255 |
| Recycling of changes in fair value of sold available-for-sale financial assets | (3 846) | (339)- |
| At December 31, 2014 | 9 164 | 16 916 |
| (in thousands of \$) | 2014 | 2013 |
| December | December | |
| Listed Equity securities: | ||
| Korea Line Corporation - Asia | - | 4 166 |
| Knightsbridge Tankers Limited - US | 109 | 107 |
| Unlisted Equity securities: | ||
| Greenship Bulk Trust - Europe | 9 055 | 12 644- |
| Total available for sale-financial assets | 9 164 | 16 916 |
| (in thousands of \$) | 2014 | 2013 |
| December | December | |
| Currencies: | ||
| NOK (Norwegian kroner) | 9 055 | 12 644 |
| KRW (Korean Won) | - | 4 166 |
| US dollar | 109 | 107- |
| Total available for sale-financial assets | 9 164 | 16 916 |
| (in thousands of \$) | 2014 | 2013 |
|---|---|---|
| December | December | |
| Within one year | 128 435 | 41 214 |
| Between one and two years | 67 749 | 120 651 |
| Between two and five years | 334 762 | 180 172 |
| After five years | - | 67 373 |
| Total debt | 530 946 | 409 410 |
| Current portion | (128 435) | (41 214) |
| Long-term debt, nominal value | 402 511 | 368 196 |
| Value of sellers credit | (520) | (1 029) |
| Deferred transaction costs | (5 034) | (4 362) |
| Long-term debt, net | 396 957 | 362 805 |
All debt is secured by mortgages over sailing vessels and vessels under construction.
All debt related to the cancelled newbuildings has been classified as short term debt as it falls due following the final arbitration award. Two facilities expire within one year from the balance sheet date and the total loan amount (\$83.6 million) is classified as short term debt. These loans are refinanced in the first quarter of 2015 and will be classified as long term debt next quarter.
Long-term debt and finance lease liabilities:
| (in thousands of \$) | 2014 | 2013 |
|---|---|---|
| December | December | |
| Non-current | ||
| Bank borrowings and sellers credit | 218 781 | 362 805 |
| Convertible Bond | 178 176 | - |
| Finance lease liabilities | 55 288 | 110 416 |
| 452 245 | 473 221 | |
| Current | ||
| Bank borrowings and sellers credit | 128 435 | 41 214 |
| Finance lease liabilities | 4 290 | 7 370 |
| 132 725 | 48 584 | |
| Total borrowings | 584 970 | 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. The Convertible bond debt (\$ 200 million) has a fixed coupon of 3.07% p.a.
During January 2014 the company issued a \$ 200 million 3.07% senior unsecured convertible bonds due 2019, with a conversion price of \$ 2.86. The bond was separated into a liability and equity component upon initial recognition of the instrument. \$ 171.4 million is estimated to be the fair value of the liability component and is recorded as the initial carrying amount of the liability. The residual value of \$ 28.1 million is recognised as an equity component.
| (in thousands of \$) | Carrying value | Fair Value |
|---|---|---|
| December 178 176 |
December | |
| Convertible Convertible bond |
178 176 | 158 500 |
The fair value of the convertible bonds is based on market prices on OTC market in Oslo at December 31, 2014. The fair values are within level 2 of the fair value hierarchy.
| Within one year | 2-5 years | 6-10 years | Total | |||||
|---|---|---|---|---|---|---|---|---|
| (in thousands of \$) | 12/31/2014 12/31/2013 12/31/2014 12/31/2013 | 12/31/2014 12/31/2013 | 12/31/2014 12/31/2013 | |||||
| Minimum Lease Payments | ||||||||
| Interest | 5 664 | 7 501 | 17 305 | 28 652 | 125 | 4 609 | 23 094 | 40 762 |
| Purchase option | - | - | 11 500 | 55 017 | 33 550 | 33 550 | 45 050 | 88 567 |
| Instalments | 4 290 | 7 370 | 10 183 | 18 852 | 55 | 2 996 | 14 528 | 29 218 |
| Total Minimum Lease Payments |
9 954 | 14 871 | 38 988 | 102 521 | 33 730 | 41 155 | 82 672 | 158 547 |
| Less interest | (23 094) | (40 762) | ||||||
| Present Value of Lease Obligations | 59 578 | 117 785 | ||||||
| Current portion | 4 290 | 7 370 | ||||||
| Non-current portion | 55 288 | 110 416 |
The Group has recorded finance leases on two vessels at December 31, 2014 (and four 2013).The Group has purchase options and the exercise price of the option changes based upon the date the option is exercised.
During the fourth quarter of 2014 the Company decided not to extend the optional periods on the vessels Ocean Minerva and Golden Heiwa and the vessels has been redelivered to owners during January and February 2015 respectively. As a consequence the Company has revalued the finance lease obligation and removed the future liability on these two assets in the fourth quarter.
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 exercisable date |
Purchase option amount |
Lease renewal date |
|---|---|---|---|
| Golden Lyderhorn | September 2016 | 11 500 | September 2016 |
| Golden Eclipse | April 2020 | 33 550 | April 2020 |
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 \$) | 2014 | 2013 |
|---|---|---|
| December | December | |
| Trade payables | 1 865 | 1 512 |
| Accruals | 11 311 | 6 273 |
| Deferred revenue | 4 462 | 27 540 |
| Other current liabilities | 2 953 | 4 759 |
| Total | 20 591 | 40 084 |
Deferred revenue relates to time charter revenue received in advance for future periods.
| (in thousands of \$) | Within one year | 2-5 years | Total | |||
|---|---|---|---|---|---|---|
| 12/31/2014 - |
- | 12/31/2013 12/31/2014 - |
- | 12/31/2013 12/31/2014 - |
12/31/2013 - |
|
| Vessels and equipment Vessels under construction |
114 839 | 23 511 | 56 925 | 171 764 | 171 764 | 195 275 |
| Total | 114 839 | 23 511 | 56 925 | 171 764 | 171 764 | 195 275 |
The Company has a newbuilding program of eight Supramax vessels. Five of the 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.
The future minimum rental payments under the Group's non-cancellable operating leases as of December 31, 2014 are as follows:
| (in thousands of \$) | 2014 | 2013 |
|---|---|---|
| December | December | |
| Within one year | 2 045 | 25 099 |
| In the second to fifth years | - - |
17 351 - |
| Later than five years Total minimum lease payments |
2 045 | 42 450 |
Total rental expense for the fourth quarter of 2014 for operating leases was \$7.4 million (fourth quarter 2013: \$15.3 million). Total rental expense for the period from January to December 2014 was \$43.3 million (same period 2013: \$57.7 million)
The minimum future revenue payments (including owned vessels) to be received under the Group's noncancellable operating leases as of December 31, 2014 are as follows:
| (in thousands of \$) | 2014 | 2013 |
|---|---|---|
| December | December | |
| Within one year | 73 883 | 67 251 |
| In the second to fifth years | 152 873 | 164 207 |
| Later than five years | 18 239 | 55 918 |
| Total minimum lease revenue | 244 995 | 287 376 |
Total rental income from operating leases was \$52.3 million in the fourth quarter of 2014 (fourth quarter 2013: \$69.5 million). Total rental income for the period from January to December 2014 was \$246.0 million (same period 2013: \$276.5 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 following table presents the Group's assets and liabilities that are measured at fair value at December 31, 2014:
| (in thousands of \$) | Level 1 | Level 2 | Total |
|---|---|---|---|
| At December 31, 2014 | |||
| Assets | |||
| Available-for-sale financial assets | 109 | 9 055 | 9 164 |
| Derivative financial instruments (interest swap) | - | 2 093 | 2 093 |
| Total assets | 109 | 11 148 | 11 257 |
| Liabilities | |||
| Derivative financial instruments (interest swap and bunker hedge) | - | 2 106 | 2 106 |
| Total liabilities | - | 2 106 | 2 106 |
| (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. Fair value of interest rates are set by the bank by using the discounted value of each contract where they use the forward curve for the relevant remaining period as benchmark towards the fixed rates. The values of the units in available-for-sale financial assets are set to market value at the end of the relevant period when the company is listed on the OTC market in Oslo (less liquid than in level 1 requirement).
All open positions on Fuel Derivatives are benchmarked by the banks (our counterpart) against the relevant forward curve for the relevant products and periods that are open.
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.
| 2014 December |
2013 December |
|||
|---|---|---|---|---|
| Number of share options |
Weighted average exercise price USD |
Number of share options |
Weighted average exercise price USD |
|
| At the beginning of the year | 4 945 000 | 0,74 | 5 000 000 | 1,60 |
| Exercised year to date | (90 000) | (55 000) | ||
| Expired | (700 000) | - | - | |
| Outstanding | 4 155 000 | 0,53 | 4 945 000 | 0,74 |
| Exercisable | 2 030 000 | 0,53 | 1 570 000 | 0,74 |
Details of the share options outstanding during the quarter are as follows:
Total outstanding share options relates to the program issued in 2012 (4,155,000 options outstanding) that will expire in October 2017.
The Company has cancelled nine newbuilding contracts from Zhoushan Jinhaiwan Shipyard Co. Ltd. Five newbuilding contracts were cancelled in 2013 and four in 2012.
In the second quarter of 2014 the Company received awards for all cancelled newbuildings. The newbuilding contracts were from that point considered to be a receivable. For two out of seven contracts the Company was not initially awarded interest, but appealed to High Court in London, and in the fourth quarter the Company obtained a favorable award on the interest. The receivables due include interest on these two contracts . The gain from refundable instalments on cancelled newbuildings increased by \$8.8 million in the fourth quarter due to this award.
| (in thousands of \$) | |
|---|---|
| At January 1, 2014 | - |
| Transferred from instalments on cancelled newbuildings | 192 976 |
| Amount received from refundable instalmemts on cancelled newbuildings | (100 873) |
| Gain from refundable instalments on cancelled newbuildings | 19 458 |
| At December 31, 2014 | 111 561 |
The Company took in January and February 2015 delivery of the three first Supramax vessels to the owned fleet; two Supramax vessels from Japan Marine United Corporation ("JMU"), named Golden Cecilie and Golden Cathrine, and one Supramax vessel from Chengxi, named Golden Aries.
In connection with the cancellation of the newbuilding construction contracts with Jinhaiwan, the Company has received refund on four of the remaining six contracts in the first quarter of 2015. In total the Company has received \$72 million in the first quarter of 2015, covering instalments and interest and has paid down debt of \$9.6 million.
In December 2014, Golden Ocean signed a loan agreement with six banks for \$284 million, for the financing of 19 vessels. As of the date of this report, financing has been drawn on 16 of these 19 vessels and the outstanding commitment is \$45 million.
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