- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 6-K Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 ------------------------- For the quarterly period ended June 30, 1996 ----------------- TEEKAY SHIPPING CORPORATION (Exact name of Registrant as specified in its charter) Tradewinds Building, Sixth Floor Bay Street, P.O. Box SS-6293, Nassau, The Bahamas (Address of principal executive office) ------------------------------ [Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.] Form 20-F X Form 40-F ---- ---- [Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.] Yes No X ----- ----- [If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-___________] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Page 1 of 16 TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 INDEX PART I: FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements Consolidated Statements of Income and Retained Earnings for the three months ended June 30, 1996 and 1995................................... 3 Consolidated Balance Sheets - June 30, 1996 and March 31, 1996............................... 4 Consolidated Statements of Cash Flows for the three months ended June 30, 1996 and 1995....................................................... 5 Notes to Consolidated Financial Statements..................................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 12 PART II: OTHER INFORMATION.................................................. 15 SIGNATURES................................................................... 16 2 TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (in thousands of U.S. dollars) THREE MONTHS ENDED JUNE 30, --------------------------- 1996 1995 ---- ---- $ (UNAUDITED) $ - --------- - NET VOYAGE REVENUES Voyage revenues 90,015 79,284 Voyage expenses 24,907 21,796 - -------------------------------------------------------------------------------- Net voyage revenues 65,108 57,488 - -------------------------------------------------------------------------------- OPERATING EXPENSES Vessel operating expenses 17,668 16,667 Time-charter hire expense 1,663 Depreciation and amortization 22,390 20,879 General and administrative 4,396 4,264 - -------------------------------------------------------------------------------- 46,117 41,810 - -------------------------------------------------------------------------------- Income from vessel operations 18,991 15,678 - -------------------------------------------------------------------------------- OTHER ITEMS Interest expense (15,046) (15,501) Interest income 1,479 1,547 Other income (loss) (NOTE 8) (30) (467) - -------------------------------------------------------------------------------- (13,597) (14,421) - -------------------------------------------------------------------------------- NET INCOME 5,394 1,257 Retained earnings, beginning of the period 363,690 406,547 - -------------------------------------------------------------------------------- 369,084 407,804 Dividends declared and paid (6,000) - -------------------------------------------------------------------------------- RETAINED EARNINGS, END OF THE PERIOD 363,084 407,804 - -------------------------------------------------------------------------------- Net income per common share (NOTE 6) $0.19 $0.07 Weighted average number of common shares outstanding (NOTE 6) 27,977,813 18,000,000 - -------------------------------------------------------------------------------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 3 TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands of U.S. dollars) As at As at ----- ----- June 30, March 31, ------- --------- 1996 1996 ---- ---- $ $ --- --- (Unaudited) ----------- ASSETS CURRENT Cash and cash equivalents 117,973 99,790 Restricted cash 1,663 1,990 Accounts receivable -trade 22,479 22,213 -other 2,876 2,725 Prepaid expenses and other assets 15,532 15,331 - -------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 160,523 142,049 - -------------------------------------------------------------------------------- VESSELS AND EQUIPMENT (NOTES 5 AND 7) At cost, less accumulated depreciation of $396,357 (March 31, 1996 - $377,105) 1,209,752 1,193,557 Advances on vessels 2,228 5,250 - -------------------------------------------------------------------------------- Total vessels and equipment 1,211,980 1,198,807 - -------------------------------------------------------------------------------- Investment 1,342 1,624 Other assets 12,533 12,821 - -------------------------------------------------------------------------------- 1,386,378 1,355,301 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT Accounts payable 11,117 11,761 Accrued liabilities 32,404 18,303 Current portion of long-term debt (NOTES 5 AND 7) 19,102 19,102 - -------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 62,623 49,166 - -------------------------------------------------------------------------------- Long-term debt (NOTES 5 AND 7) 721,964 706,740 - -------------------------------------------------------------------------------- TOTAL LIABILITIES 784,587 755,906 - -------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY Capital stock (note 6) 238,707 235,705 Retained earnings 363,084 363,690 - -------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 601,791 599,395 - -------------------------------------------------------------------------------- 1,386,378 1,355,301 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Commitments and contingencies (NOTE 7) THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 4 TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of U.S. dollars) THREE MONTHS ENDED JUNE 30, --------------------------- 1996 1995 ---- ---- $ (UNAUDITED) $ - --------- - Cash and cash equivalents provided by (used for) OPERATING ACTIVITIES Net income 5,394 1,257 Add (deduct) charges to operations not requiring a payment of cash and cash equivalents: Depreciation and amortization 22,390 20,879 Equity loss 574 Other 131 (70) Change in non-cash working capital items related to operating activities 12,839 (1,285) - -------------------------------------------------------------------------------- NET CASH FLOW FROM OPERATING ACTIVITIES 40,754 21,355 - -------------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from long-term debt 20,000 223,000 Scheduled repayments of long-term debt (4,776) (20,060) Prepayments of long-term debt (184,121) Decrease in restricted cash 327 3,593 Net proceeds from issuance of Common Stock 251 Cash dividends paid (3,249) Other (223) 1,092 - -------------------------------------------------------------------------------- NET CASH FLOW FROM FINANCING ACTIVITIES 12,330 23,504 - -------------------------------------------------------------------------------- INVESTING ACTIVITIES Expenditures for vessels and equipment (28,020) (44,509) Expenditures for drydocking (7,163) (1,937) Proceeds from disposition of assets 17,283 Proceeds on sale of available-for-sale securities 21,771 Purchases of available-for-sale securities (17,688) Other 282 (5) - -------------------------------------------------------------------------------- NET CASH FLOW FROM INVESTING ACTIVITIES (34,901) (25,085) - -------------------------------------------------------------------------------- INCREASE IN CASH AND CASH EQUIVALENTS 18,183 19,774 Cash and cash equivalents, beginning of the period 99,790 16,500 - -------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF THE PERIOD 117,973 36,274 - -------------------------------------------------------------------------------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 5 TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS) (INFORMATION AS AT JUNE 30, 1996, AND FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995 IS UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States and the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures required by generally accepted accounting principles for complete annual financial statements have been omitted and, therefore, it is suggested that these interim financial statements be read in conjunction with the Company's audited financial statements for the fiscal year ended March 31, 1996. In the opinion of management, these statements reflect all adjustments (consisting only of normal recurring accruals), necessary to present fairly, in all material respects, the Company's consolidated financial position, results of operations and cash flows for the interim periods presented. The results of operations for the three-month period ended June 30, 1996 are not necessarily indicative of those for a full fiscal year. Certain of the prior period comparative figures have been reclassified where necessary to conform with the presentation used in the current period. 2. ACCOUNTING FOR STOCK-BASED COMPENSATION The Company accounts for its stock option plan in accordance with provisions of the Accounting Principles Board's Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees." In 1995, the Financial Accounting Standards Board released the Statement of Financial Accounting Standard No. 123 (SFAS 123), "Accounting for Stock-Based Compensation." SFAS 123 provides an alternative to APB 25 and is effective for fiscal years beginning after December 15, 1995. The Company expects to continue to account for its employee stock plans in accordance with the provisions of APB 25 and will disclose the required proforma effect on net income and earnings per share. 3. CASH FLOWS Cash interest paid during the three-month periods ended June 30, 1996 and 1995 totalled approximately $6,757,000 and $12,424,000, respectively. 4. INCOME TAXES The legal jurisdictions of the countries in which the Company and its subsidiaries are incorporated do not impose income taxes upon shipping- related activities. 5. LONG-TERM DEBT JUNE 30, MARCH 31, 1996 1996 $ $ ---------------------------------------------------------------------------- Revolving Credit Facility 138,000 118,000 First Preferred Ship Mortgage Notes (8.32%) U.S. dollar debt through 2008 225,000 225,000 First Preferred Ship Mortgage Notes (9 5/8%) U.S. dollar debt due through 2004 151,200 151,200 Floating rate (LIBOR + 1% to 1 1/2%) U.S. dollar debt due through 2006 226,866 231,642 ---------------------------------------------------------------------------- 741,066 725,842 Less current portion of long-term debt 19,102 19,102 ---------------------------------------------------------------------------- 721,964 706,740 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 6 TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS) (INFORMATION AS AT JUNE 30, 1996, AND FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995 IS UNAUDITED) 5. LONG-TERM DEBT (CONT'D) The 8.32% First Preferred Ship Mortgage Notes due February 1, 2008 (the "8.32% Notes") are collateralized by first preferred mortgages on seven of the Company's Aframax tankers, together with certain other related collateral, and are guaranteed by seven subsidiaries of Teekay that own the mortgaged vessels (the "8.32% Notes Guarantor Subsidiaries") to a maximum of 95% of the fair value of their net assets. As at June 30, 1996, the fair value of these net assets approximated $290 million. The 9 5/8% First Preferred Ship Mortgage Notes due July 15, 2003 (the "9 5/8% Notes") are collateralized by first preferred mortgages on six of the Company's Aframax tankers, together with certain other related collateral, and are guaranteed by six subsidiaries of Teekay that own the mortgaged vessels (the "9 5/8% Notes Guarantor Subsidiaries") to a maximum of 95% of the fair value of their net assets. As at June 30, 1996, the fair value of these net assets approximated $199 million. Condensed financial information regarding the Company, the 9 5/8% Notes Guarantor Subsidiaries, the 8.32% Notes Guarantor Subsidiaries and non- guarantor subsidiaries of the Company is set out in Schedule A of these consolidated financial statements. As at June 30, 1996, the Company was committed to a series of interest rate swap agreements whereby $150 million of the Company's floating rate debt was swapped with fixed rate obligations having an average remaining term of 28.5 months. The swap agreements expire between October 1998 and December 1998. These arrangements effectively change the Company's interest rate exposure on $150 million of debt from a floating LIBOR rate to an average fixed rate of 5.85%. As at June 30, 1996, the Company was a party to interest rate cap contracts which effectively limit the interest rate exposure on $200 million of the Company's floating rate debt to a maximum of 8%. All of the contracts expire on April 1, 1997. The Company is exposed to credit loss in the event of non-performance by the counter parties to the interest rate swap and cap agreements; however, the Company does not anticipate non-performance by any of the counter parties. 6. CAPITAL STOCK AUTHORIZED 25,000,000 Preferred Stock with a par value of $1 per share. 125,000,000 Common Stock with no par value --------------------------------------------------------------------------- Common Thousands Preferred Thousands Issued and outstanding Stock of shares Stock of shares --------------------------------------------------------------------------- Balance March 31, 1996 $235,705 27,904 $0 0 Reinvested dividends 2,751 100 Exercise of stock options 251 11 --------------------------------------------------------------------------- Balance June 30, 1996 $238,707 28,015 $0 0 --------------------------------------------------------------------------- --------------------------------------------------------------------------- 7 TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (ALL TABULAR AMOUNTS STATED IN THOUSANDS OF U.S. DOLLARS) (INFORMATION AS AT JUNE 30, 1996, AND FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995 IS UNAUDITED) 6. CAPITAL STOCK (CONT'D) The Company has reserved 2,148,571 shares of Common Stock for issuance upon exercise of options granted pursuant to the Company's 1995 Stock Option Plan. As at June 30, 1996, options to purchase a total of 1,109,000 shares of the Company's Common Stock were outstanding, of which 568,375 options were then exercisable at $21.50 per share. The options outstanding are exercisable at prices ranging from $21.50 to $27.375 per share and expire between July 19, 2005 and May 28, 2006, ten years after the date of grant. Net income per share is based upon the weighted average number of common shares outstanding during each period. Stock options have not been included in the computation of net income per common share since their effect thereon would not be material. 7. COMMITMENTS AND CONTINGENCIES In October 1995, the Company entered into an agreement for a one-year time- charter and subsequent purchase of a modern second-hand Aframax tanker for a cost of $26.5 million. The cost of this vessel will be financed through cash balances. As at June 30, 1996, the Company was committed to the construction of an Aframax vessel for a cost of $44.5 million, scheduled for delivery in July 1997. A long-term financing arrangement exists for approximately $35.6 million of the unpaid cost of this vessel. 8. OTHER INCOME (LOSS) THREE MONTHS ENDED JUNE 30, ----------------- 1996 1995 $ $ --------------------------------------------------------------------------- Equity in results of 50% owned company (574) Miscellaneous - net (30) 107 --------------------------------------------------------------------------- (30) (467) --------------------------------------------------------------------------- --------------------------------------------------------------------------- 8 TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS (in thousands of U.S. dollars) Three Months Ended June 30, 1996 --------------------------------------------------------------------------------------------- 9 5/8% Notes 8.32% Notes Teekay Teekay Guarantor Guarantor Non-Guarantor Shipping Corp Shipping Corp Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ $ --------------------------------------------------------------------------------------------- Net voyage revenues 7,549 8,962 95,209 (46,612) 65,108 Operating expenses 415 5,537 8,500 78,277 (46,612) 46,117 --------------------------------------------------------------------------------------------- Income (loss) from vessel operations (415) 2,012 462 16,932 18,991 Net interest income (expense) (8,421) 37 56 (5,239) (13,567) Equity in net income (loss) of subsidiaries 14,182 (14,182) Other income (loss) 48 3,054 (3,132) (30) --------------------------------------------------------------------------------------------- Net income 5,394 2,049 518 14,747 (17,314) 5,394 Retained earnings (deficit), beginning of the period 363,690 17,377 (1,245) 66,693 (82,825) 363,690 --------------------------------------------------------------------------------------------- 369,084 19,426 (727) 81,440 (100,139) 369,084 Dividends declared and paid (6,000) (6,000) --------------------------------------------------------------------------------------------- Retained earnings (deficit), end of the period 363,084 19,426 (727) 81,440 (100,139) 363,084 --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- Three Months Ended June 30, 1995 --------------------------------------------------------------------------------------------- 9 5/8% Notes 8.32% Notes Teekay Teekay Guarantor Guarantor Non-Guarantor Shipping Corp Shipping Corp Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ $ --------------------------------------------------------------------------------------------- Net voyage revenues 7,192 12,608 99,667 (61,979) 57,488 Operating expenses 471 5,559 7,553 90,206 (61,979) 41,810 --------------------------------------------------------------------------------------------- Income (loss) from vessel operations (471) 1,633 5,055 9,461 15,678 Net interest income (expense) (3,198) (5) (3,970) (6,781) (13,954) Equity in net income (loss) of subsidiaries 3,811 (4,385) (574) Other income (loss) 1,115 (1,008) 107 --------------------------------------------------------------------------------------------- Net income 1,257 1,628 1,085 1,672 (4,385) 1,257 Retained earnings (deficit), beginning of the period 406,547 22,309 (5,027) 89,301 (106,583) 406,547 --------------------------------------------------------------------------------------------- 407,804 23,937 (3,942) 90,973 (110,968) 407,804 Dividends declared and paid (7,200) (35,200) 42,400 --------------------------------------------------------------------------------------------- Retained earnings (deficit), end of the period 407,804 16,737 (3,942) 55,773 (68,568) 407,804 --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- (See Note 5) 9 TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A CONDENSED BALANCE SHEETS (in thousands of U.S. dollars) As at June 30, 1996 --------------------------------------------------------------------------------------------- 9 5/8% Notes 8.32% Notes Teekay Teekay Guarantor Guarantor Non-Guarantor Shipping Corp Shipping Corp Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ $ --------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents 247 13,013 10,964 93,749 117,973 Restricted cash 1,663 1,663 Other current assets 212 1,554 1,018 38,293 (190) 40,887 --------------------------------------------------------------------------------------------- Total current assets 459 14,567 11,982 133,705 (190) 160,523 Vessels and equipment (net) 139,136 357,452 715,392 1,211,980 Advances due from subsidiaries 371,707 (371,707) Other assets (principally investments in subsidiaries) 620,516 12,538 (619,179) 13,875 --------------------------------------------------------------------------------------------- 992,682 153,703 369,434 861,635 (991,076) 1,386,378 --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities 14,691 2,261 639 45,222 (190) 62,623 Long-term debt 376,200 345,764 721,964 Due to parent 378,328 (378,328) --------------------------------------------------------------------------------------------- Total liabilities 390,891 2,261 639 769,314 (378,518) 784,587 --------------------------------------------------------------------------------------------- Stockholders' Equity Capital stock 238,707 6 23 5,933 (5,962) 238,707 Contributed capital 132,010 369,499 4,948 (506,457) Retained earnings (deficit) 363,084 19,426 (727) 81,440 (100,139) 363,084 --------------------------------------------------------------------------------------------- Total stockholders' equity 601,791 151,442 368,795 92,321 (612,558) 601,791 --------------------------------------------------------------------------------------------- 992,682 153,703 369,434 861,635 (991,076) 1,386,378 --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- As at March 31, 1996 --------------------------------------------------------------------------------------------- 9 5/8% Notes 8.32% Notes Teekay Teekay Guarantor Guarantor Non-Guarantor Shipping Corp Shipping Corp Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ $ --------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents 28 8,613 5,210 85,939 99,790 Restricted cash 1,990 1,990 Other current assets 293 1,475 1,064 37,527 (90) 40,269 --------------------------------------------------------------------------------------------- Total current assets 321 10,088 6,274 125,456 (90) 142,049 Vessels and equipment (net) 139,652 362,424 696,731 1,198,807 Advances due from subsidiaries 372,233 (372,233) Other assets (principally investments in subsidiaries) 606,269 12,826 (604,650) 14,445 --------------------------------------------------------------------------------------------- 978,823 149,740 368,698 835,013 (976,973) 1,355,301 --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities 3,228 539 613 44,876 (90) 49,166 Long-term debt 376,200 330,540 706,740 Due to parent 382,023 (382,023) --------------------------------------------------------------------------------------------- Total liabilities 379,428 539 613 757,439 (382,113) 755,906 --------------------------------------------------------------------------------------------- Stockholders' Equity Capital stock 235,705 6 23 5,933 (5,962) 235,705 Contributed capital 131,818 369,307 4,948 (506,073) Retained earnings (deficit) 363,690 17,377 (1,245) 66,693 (82,825) 363,690 --------------------------------------------------------------------------------------------- Total stockholders' equity 599,395 149,201 368,085 77,574 (594,860) 599,395 --------------------------------------------------------------------------------------------- 978,823 149,740 368,698 835,013 (976,973) 1,355,301 --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- (See Note 5) 10 TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES SCHEDULE A CONDENSED STATEMENTS OF CASH FLOWS (in thousands of U.S. dollars) Three Months Ended June 30, 1996 --------------------------------------------------------------------------------------------- 9 5/8% Notes 8.32% Notes Teekay Teekay Guarantor Guarantor Non-Guarantor Shipping Corp Shipping Corp Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ $ --------------------------------------------------------------------------------------------- Cash and cash equivalents provided by (used for) OPERATING ACTIVITIES --------------------------------------------------------------------------------------------- Net cash flow from operating activities 3,016 5,944 5,580 26,214 40,754 --------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from long-term debt 20,000 20,000 Repayments of long-term debt (4,776) (4,776) Net proceeds from issuance of Common Stock 251 251 Other (2,946) (199) (3,145) --------------------------------------------------------------------------------------------- Net cash flow from financing activities (2,695) 15,025 12,330 --------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Expenditures for vessels and equipment (1,736) (19) (33,428) (35,183) Proceeds from disposition of assets Other (102) 192 193 (1) 282 --------------------------------------------------------------------------------------------- Net cash flow from investing activities (102) (1,544) 174 (33,429) (34,901) --------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 219 4,400 5,754 7,810 18,183 Cash and cash equivalents, beginning of the period 28 8,613 5,210 85,939 99,790 --------------------------------------------------------------------------------------------- Cash and cash equivalents, end of the period 247 13,013 10,964 93,749 117,973 --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- Three Months Ended June 30, 1995 --------------------------------------------------------------------------------------------- 9 5/8% Notes 8.32% Notes Teekay Teekay Guarantor Guarantor Non-Guarantor Shipping Corp Shipping Corp Subsidiaries Subsidiaries Subsidiaries Eliminations & Subsidiaries $ $ $ $ $ $ --------------------------------------------------------------------------------------------- Cash and cash equivalents provided by (used for) OPERATING ACTIVITIES --------------------------------------------------------------------------------------------- Net cash flow from operating activities (2,036) 3,903 5,570 13,918 21,355 --------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from long-term debt 223,000 223,000 Repayments of long-term debt (22,580) (15,463) (166,138) (204,181) Net proceeds from issuance of Common Stock Other (24,869) (7,200) 8,390 28,364 4,685 --------------------------------------------------------------------------------------------- Net cash flow from financing activities (47,449) (7,200) (7,073) 85,226 23,504 --------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Expenditures for vessels and equipment (147) (123) (46,176) (46,446) Proceeds from disposition of assets 17,283 17,283 Other 49,409 444 (45,775) 4,078 --------------------------------------------------------------------------------------------- Net cash flow from investing activities 49,409 297 (123) (74,668) (25,085) --------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (76) (3,000) (1,626) 24,476 19,774 Cash and cash equivalents, beginning of the period 97 5,886 3,076 7,441 16,500 --------------------------------------------------------------------------------------------- Cash and cash equivalents, end of the period 21 2,886 1,450 31,917 36,274 --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- (See Note 5) 11 TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES JUNE 30, 1996 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS GENERAL Teekay Shipping Corporation (the "Company") is a leading provider of international crude oil and petroleum product transportation services to major oil companies, major oil traders, and government agencies, principally in the region spanning from the Red Sea to the U.S. West Coast. The Company's fleet consists of 42 tankers, including 38 Aframax oil tankers and oil/bulk/ore carriers, two smaller tankers, one VLCC and, through a joint venture, a 50% interest in an additional Aframax tanker, for a total cargo-carrying capacity of approximately 4.2 million tonnes. Approximately 82% of the Company's net revenue is currently derived from spot voyages. This dependence on spot voyages, which management believes is within industry norms, contributes to the volatility of the Company's revenue, cash flow from operations, and net income. The balance of the Company's revenue is generated by two other modes of employment: time charters, whereby vessels are chartered to customers for a fixed period at a fixed rate; and by contracts of affreightment, whereby the Company carries an agreed quantity of cargo for a customer over a specified trade route over a specified period of time. Management believes that the Company has a competitive advantage over other tanker owners in the Aframax spot market. Historically, the tanker industry has been cyclical, experiencing volatility in profitability resulting from changes in the supply of and demand for tankers. Additionally, tanker markets have exhibited seasonal variations in charter rates. Tanker markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere and unpredictable winter weather patterns which tend to disrupt vessel scheduling. Bulk shipping industry freight rates are commonly measured at the net voyage revenue level in terms of "time charter equivalent" (or "TCE") rates, defined as voyage revenues less voyage expenses (excluding commissions), divided by revenue-generating ship-days for the round-trip voyage. Voyage revenues and voyage expenses are a function of the type of charter, either spot charter or time charter, and port, canal and fuel costs depending on the trade route upon which a vessel is sailing, in addition to being a function of the level of shipping freight rates. For this reason, shipowners base economic decisions regarding the deployment of their vessels upon anticipated TCE rates, and industry analysts typically measure bulk shipping freight rates in terms of TCE rates. Therefore, the discussion of revenue below focuses on net voyage revenue and TCE rates. FIRST QUARTER FISCAL 1997 VERSUS FIRST QUARTER FISCAL 1996 Teekay's net income was $5.4 million, or 19 cents per share, in the first quarter of fiscal 1997, up from $1.3 million, or 7 cents per share, in the first quarter of fiscal 1996, reflecting a continued, gradual improvement in the tanker charter market. INCOME FROM VESSEL OPERATIONS The Company's fleet was 6.5% larger on average in the first quarter of fiscal 1997 than in the first quarter of fiscal 1996, due to the acquisition of four modern Aframax tankers during the past year, partially offset by the disposal of the Company's two remaining mid-1970s-built tankers. 12 Net voyage revenues were $65.1 million in the first quarter of fiscal 1997, an increase of 13.3% as compared to the first quarter of fiscal 1996. This reflects the increase in fleet size as well as an improvement in tanker charter market conditions, with an average TCE rate of $19,061 in the first quarter of fiscal 1997, up 7.9% from $17,674 in the first quarter of fiscal 1996. Expenses increased in line with the larger fleet. Depreciation and amortization expense included amortization of drydocking costs of $2.6 million in the first quarter of fiscal 1997 and $2.1 million in the first quarter of fiscal 1996. The combination of an increased average TCE rate and a larger fleet resulted in a 21.1% increase in income from vessel operations, to $19.0 million in the first quarter of fiscal 1997 from $15.7 million in the first quarter of fiscal 1996. The following table illustrates the relationship between fleet size (measured in ship-days), time charter equivalent ("TCE") per revenue-generating ship-day performance, and operating results per calendar ship-day: FIRST QUARTER FIRST QUARTER FISCAL 1997 FISCAL 1996 - -------------------------------------------------------------------------------- Total calendar ship-days 3,702 3,477 Non-revenue days 212 157 - -------------------------------------------------------------------------------- Revenue-generating ship-days (A) 3,490 3,320 - -------------------------------------------------------------------------------- Net voyage revenue before commissions (B) (000's) $66,523 $58,678 - -------------------------------------------------------------------------------- Time charter equivalent (TCE) (B/A) $19,061 $17,674 - -------------------------------------------------------------------------------- Operating results per calendar ship-day: Net voyage revenue $17,587 $16,534 Vessel operating expense 4,893 4,794 General and administrative expense 1,187 1,226 Drydocking expense 699 611 - -------------------------------------------------------------------------------- Operating cash flow per calendar ship-day $10,808 $9,903 - -------------------------------------------------------------------------------- INTEREST EXPENSE Interest expense decreased 2.9% to $15.0 million in the first quarter of fiscal 1997, from $15.5 million in the first quarter of fiscal 1996, reflecting a reduction in the Company's total debt, partially offset by higher interest rates. LIQUIDITY AND CAPITAL RESOURCES During the first quarter of fiscal 1997, the Company's total liquidity, including cash, cash equivalents and undrawn long-term lines of credit, decreased slightly to $184.0 million as at June 30, 1996 from $195.3 million as at March 31, 1996. This slight decline in liquidity was largely due to the purchase of a second-hand Aframax tanker, renamed the SEMAKAU SPIRIT, during the quarter. 13 Net cash flow from operating activities was $40.8 million in the first quarter of fiscal 1997, compared to $21.4 million in the first quarter of fiscal 1996. The increase was mainly caused by a reduction in non-cash working capital balances, and higher income from operations. During the first quarter of fiscal 1997, the Company had capital expenditures for vessels and equipment of $28.0 million as a result of the delivery of the SEMAKAU SPIRIT. To finance this acquisition, the Company drew an additional $20.0 million of its long-term revolving credit facility. Capital expenditures for drydocking were higher than average, at $7.1 million in the quarter, reflecting a larger than usual number of scheduled drydockings. The Company has entered into agreements for a one-year time-charter and subsequent purchase of a modern Aframax tanker, and for the construction of a newbuilding double-hull Aframax tanker scheduled for delivery in July 1997, for a total cost of $71.0 million. The remaining unpaid cost of $68.8 million for these two vessels will be financed through a $35.6 million financing arrangement for the newbuilding, existing lines of credit, and cash balances. The Company's scheduled debt repayments were $4.8 million during the first quarter of fiscal 1997, down from $20.1 million in the first quarter of fiscal 1996 as a result of debt refinancings in fiscal 1996. Dividend payments during the first quarter of fiscal 1997 were $6.0 million, or 21.5 cents per share, of which $3.2 million was paid in cash and $2.8 million was paid in the form of common shares issued under the Company's dividend reinvestment plan. 14 TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES JUNE 30, 1996 PART II: OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS None ITEM 2 - CHANGES IN SECURITIES None ITEM 3 - DEFAULTS UPON SENIOR SECURITIES None ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5 - OTHER INFORMATION None ITEM 6 - EXHIBITS AND REPORTS ON FORM 6-K a. Exhibits 27.1 Financial Data Schedule b. Reports on Form 6-K None THIS REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE INTO THE REGISTRATION STATEMENT OF THE COMPANY ON FORM F-3 FILED WITH THE COMMISSION ON OCTOBER 4, 1995. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TEEKAY SHIPPING CORPORATION Date: August 9, 1996 By: /s/ Anthony Gurnee ---------------------------- Anthony Gurnee VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) 16