[X] | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR | |
[ ] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended _________________ | |
OR | |
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________________ to _________________ | |
OR | |
[ ] | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report: |
FLEX LNG Ltd. |
(Exact name of Registrant as specified in its charter) |
(Translation of Registrant's name into English) |
Bermuda |
(Jurisdiction of incorporation or organization) |
Par-La-Ville Place 14 Par-La-Ville Road Hamilton Bermuda |
(Address of principal executive offices) |
With copies to: |
James Ayers, Company Secretary, Par-La-Ville Place, 14 Par-La-Ville Road, Hamilton, Bermuda Telephone: +1 441 295 69 35, Facsimile: +1 441 295 3494 |
(Name, Telephone, E-mail and/or Facsimile, and address of Company Contact Person) |
and |
Keith J. Billotti Seward & Kissel LLP Tel: (212) 574-1200 Fax: (212) 480-8421 One Battery Park Plaza New York, New York 10004 United States |
Title of each class | Name of each exchange on which registered | |
Ordinary Shares, par value $0.10 per share | New York Stock Exchange |
NONE |
(Title of class) |
NONE |
(Title of class) |
Yes | ☐ | No | ☒ |
Yes | ☐ | No | ☐ |
Yes | ☐ | No | ☒ |
Yes | ☒ | No | ☐ |
Large accelerated filer ☐ | Accelerated filer ☐ | ||||
Non-accelerated filer ☒ | Emerging growth company ☒ | ||||
(Do not check if a smaller reporting company) |
[X] | U.S. GAAP |
[ ] | International Financial Reporting Standards as issued by the international Accounting Standards Board |
[ ] | Other |
Item 17 | ☐ | Item 18 | ☐ |
Yes | ☐ | No | ☐ |
ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 1 |
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE | 1 |
ITEM 3. | KEY INFORMATION | 1 |
ITEM 4. | INFORMATION ON THE COMPANY | 25 |
ITEM 4A. | UNRESOLVED STAFF COMMENTS | 43 |
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS | 43 |
ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES | 54 |
ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | 59 |
ITEM 8. | FINANCIAL INFORMATION | 60 |
ITEM 9. | THE OFFER AND LISTING | 61 |
ITEM 10. | ADDITIONAL INFORMATION | 62 |
ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 75 |
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | 77 |
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 77 |
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE | 77 |
ITEM 15. | CONTROLS AND PROCEDURES | 77 |
ITEM 16. | RESERVED | 77 |
ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT. | 77 |
ITEM 16B. | CODE OF ETHICS | 77 |
ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES | 77 |
ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | 77 |
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED | 78 |
ITEM 16F. | CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT | 78 |
ITEM 16G. | CORPORATE GOVERNANCE | 78 |
ITEM 17. | FINANCIAL STATEMENTS | 78 |
ITEM 18. | FINANCIAL STATEMENTS | 78 |
ITEM 19. | EXHIBITS | 78 |
· | our future operating or financial results; |
· | global and regional economic and political conditions; |
· | our pending vessel acquisitions, our business strategy and expected capital spending or operating expenses, including dry-docking and insurance costs; |
· | statements about LNG market trends, including charter rates and factors affecting supply and demand; |
· | our financial condition and liquidity, including our ability to repay our indebtedness and obtain financing in the future to fund capital expenditures, acquisitions and other general corporate activities; |
· | our ability to enter into time charters or other employment arrangements for our vessels after our current charters expire and our ability to earn income in the spot market (which includes vessel employment under single voyage spot charters and time charters with an initial term of less than six months); |
· | our ability to successfully employ our newbuilding vessels; |
· | our expectations of the availability of vessels to purchase, the time it may take to construct new vessels, and vessels' useful lives; |
· | risks associated with vessel construction; |
· | estimated future maintenance and replacement capital expenditures; |
· | changes in operating expenses, including dry-docking and insurance costs and bunker prices; |
· | the expected cost of, and our ability to comply with, governmental regulations, maritime self-regulatory organization standards, as well as standard regulations imposed by our charterers applicable to our business; |
· | availability of and ability to maintain skilled labor, vessel crews and management; |
· | our anticipated incremental general and administrative expenses as a publicly traded company; |
· | customers' increasing emphasis on environmental and safety concerns; |
· | potential disruption of shipping routes due to accidents, political events, piracy or acts by terrorists; and |
· | our ability to maintain relationships with major LNG producers and traders. |
· | changes in governmental rules and regulations or actions taken by regulatory authorities; |
· | changes in economic and competitive conditions affecting our business, including market fluctuations in charter rates and charterers' abilities to perform under existing time charters; |
· | potential liability from future litigation and potential costs due to environmental damage and vessel collisions; |
· | the length and number of off-hire periods; and |
· | other factors discussed in "Item 3. Key Information—D. Risk Factors" in this registration statement. |
· | the ability to present only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations in the registration statement for our initial public offering; |
· | an exemption from the auditor attestation requirement of management's assessment of the effectiveness of our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; and |
· | an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and financial statements. |
ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
A. | Directors and Senior Management |
Name(1) | Position |
David McManus | Director of the Company and Chairman of the Board of Directors |
Marius Hermansen | Director of the Company |
Ola Lorentzon | Director of the Company |
Nikolai Grigoriev | Director of the Company and Chairperson of the Audit Committee |
Oystein M. Kalleklev | Chief Executive Officer of Flex LNG Management AS and Principal Executive Officer of FLEX LNG Ltd. |
Harald Gurvin | Chief Financial Officer of Flex LNG Management AS and Principal Financial Officer of FLEX LNG Ltd. |
B. | Advisers |
C. | Auditors |
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. | KEY INFORMATION |
A. | Selected Financial Data |
Year ended December 31, | ||||||||
(In thousands of U.S. dollars, except per share data) | 2018 | 2017 | ||||||
STATEMENT OF INCOME | ||||||||
Vessel operating revenues | 77,209 | 27,329 | ||||||
Vessel operating costs | (26,161 | ) | (36,532 | ) | ||||
Administrative expenses | (4,639 | ) | (3,409 | ) | ||||
Depreciation | (17,412 | ) | (2 | ) | ||||
Income/(loss) from operations | 28,997 | (12,614 | ) | |||||
Finance income | 607 | 123 | ||||||
Finance cost | (17,781 | ) | (234 | ) | ||||
Other financial items | (54 | ) | 2,334 | |||||
Income/(loss) before taxes | 11,769 | (10,391 | ) | |||||
Income tax expense/(credit) | (10 | ) | 17 | |||||
Net income/(loss) | 11,779 | (10,408 | ) | |||||
Earnings/(loss) per share, basic and diluted | $ | 0.29 | $ | (0.34 | ) | |||
CASH FLOW DATA | ||||||||
Net cash provided by/(used in) operating activities | 35,714 | (17,752 | ) | |||||
Net cash used in investing activities | (584,433 | ) | (77,714 | ) | ||||
Net cash provided by financing activities | 593,855 | 103,988 | ||||||
Net increase in cash and cash equivalents | 45,136 | 8,522 |
As of December 31, | ||||||||
(In thousands of U.S. dollars except common share data) | 2018 | 2017 | ||||||
BALANCE SHEET DATA | ||||||||
Total current assets | 60,425 | 17,570 | ||||||
Total assets | 1,294,386 | 684,510 | ||||||
Total long term debt | 431,602 | 160,000 | ||||||
Total current liabilities | 35,460 | 4,409 | ||||||
Total liabilities | 467,062 | 164,409 | ||||||
Number of shares outstanding | 54,099,929 | 36,797,238 | ||||||
Total equity | 827,324 | 520,101 | ||||||
B. | Capitalization and Indebtedness |
(In thousands of U.S. dollars) | As of December 31, 2018 | |||
Debt (long-term, including short-term portion) | $ | 454,967 | ||
Other current liabilities | 12,095 | |||
Total debt and other current liabilities | $ | 467,062 | ||
Total shareholders' equity | $ | 827,324 | ||
Total capitalization | $ | 1,294,386 |
C. | Reasons for the offer and use of Proceeds |
D. | Risk Factors |
· | supply of and demand for LNG; |
· | changes in the exploration or production of LNG; |
· | the location of regional and global exploration, production and manufacturing facilities; |
· | the location of consuming regions for LNG; |
· | the globalization of production and manufacturing; |
· | global and regional economic and political conditions, including armed conflicts and terrorist activities, embargoes and strikes; |
· | disruptions and developments in international trade; |
· | changes in seaborne and other transportation patterns, including the distance LNG is transported by sea; |
· | environmental and other regulatory developments; |
· | currency exchange rates; and |
· | the weather. |
· | number of newbuilding orders and deliveries; |
· | the number of shipyards and ability of shipyards to deliver vessels; |
· | port and canal congestion; |
· | scrapping of older vessels; |
· | speed of vessel operation; |
· | vessel casualties; and |
· | number of vessels that are out of service or laid up. |
· | low charter rates, particularly for vessels employed in the spot market (which includes vessel employment under single voyage spot charters and time charters with an initial term of less than six months); |
· | decreases in the market value of LNG vessels and limited second-hand market for the sale of vessels; |
· | limited financing for vessels; |
· | widespread loan covenant defaults; and |
· | declaration of bankruptcy by certain vessel operators, vessel owners, shipyards and charterers. |
· | a marine disaster, |
· | terrorism, |
· | environmental accidents, |
· | cargo and property losses and damage, and |
· | business interruptions caused by mechanical failure, human error, war, terrorism, piracy, political action in various countries, labor strikes, or adverse weather conditions. |
· | general economic and market conditions affecting the shipping industry; |
· | competition from other shipping companies; |
· | types and sizes of vessels; |
· | the availability of other modes of transportations; |
· | cost of newbuildings; |
· | shipyard capacity; |
· | governmental or other regulations; |
· | age of vessels; |
· | prevailing level of charter rates; |
· | the need to upgrade secondhand and previously owned vessels as a result of charterer requirements; and |
· | technological advances in vessel design or equipment or otherwise. |
· | pay dividends and make capital expenditures; |
· | incur additional indebtedness, including the issuance of guarantees; |
· | create liens on our assets; |
· | change the flag, class or management of our vessels or terminate or materially amend the management agreement relating to each vessel; |
· | sell our vessels; |
· | merge or consolidate with, or transfer all or substantially all our assets to, another person; or |
· | enter into a new line of business. |
· | fail to realize anticipated benefits, such as cost savings or cash flow enhancements; |
· | incur or assume unanticipated liabilities, losses or costs associated with any vessels or businesses acquired, particularly if any vessel we acquire proves not to be in good condition; |
· | be unable to hire, train or retain qualified shore and seafaring personnel to manage and operate our growing business and fleet; |
· | decrease our liquidity by using a significant portion of available cash or borrowing capacity to finance acquisitions; |
· | significantly increase our interest expense or financial leverage if we incur debt to finance acquisitions; or |
· | incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges. |
ITEM 4. | INFORMATION ON THE COMPANY |
A. | History and Development of the Company |
B. | Business Overview |
Vessel Name | Cargo Capacity (cbm) | Propulsion | Year Built | Shipyard(1) | Charter Expiration(5)(6) | |||||||
Operating Vessels | ||||||||||||
Flex Endeavour | 173,400 | MEGI | 2018 | DSME | 06/26/2019 | |||||||
Flex Enterprise | 173,400 | MEGI | 2018 | DSME | 03/26/2020(2) | |||||||
Flex Ranger | 174,000 | MEGI | 2018 | SHI | 06/07/2020(3) | |||||||
Flex Rainbow | 174,000 | MEGI | 2018 | SHI | 10/01/2019(4) | |||||||
Newbuilding Vessels | ||||||||||||
TBN Flex Constellation | 173,400 | MEGI | Exp. Jun. 2019 | DSME | n/a | |||||||
TBN Flex Courageous | 173,400 | MEGI | Exp. Aug.2019 | DSME | n/a | |||||||
TBN Flex Aurora | 174,000 | X-DF | Exp. Q2 2020 | HSHI | n/a | |||||||
TBN Flex Amber | 174,000 | X-DF | Exp. Q3 2020 | HSHI | n/a | |||||||
TBN Flex Reliance | 173,400 | MEGI | Exp. Q3 2020 | DSME | n/a | |||||||
TBN Flex Resolute | 173,400 | MEGI | Exp. Q3 2020 | DSME | n/a | |||||||
TBN Flex Freedom | 173,400 | MEGI | Exp. Q4 2020 | DSME | n/a | |||||||
TBN Flex Volunteer | 174,000 | X-DF | Exp. Q1 2021 | HSHI | n/a | |||||||
TBN Flex Vigilant | 174,000 | X-DF | Exp. Q2 2021 | HSHI | n/a |
(1) | As used in this registration statement, "DSME" means Daewoo Ship building and Marine Engineering Co. Ltd., "SHI" means Samsung Heavy Industries, and "HSHI" means Hyundai Samho Heavy Industries Co. Ltd. |
(2) | The charterer has the option to extend the charter for up to an additional four years, in 12-month periods. |
(3) | The Flex Ranger is expected to commence employment under a time charter with Enel Trade S.p.A. on June 7, 2019, for a firm period of 12 months, and the charterer will have the option to extend the charter for an additional 12 months. |
(4) | The charterer has the option to extend the charter for up to an additional two and a half years, in 6 month periods. |
(5) | The time-charter expiration dates are subject to re-delivery windows ranging from 15 to 90 days before or after the expiration date. |
(6) | From time to time, in accordance with industry practice, we pay commissions ranging up to 1.25% of the total daily charter rate under the charters to unaffiliated ship brokers, depending on the number of brokers involved with arranging the charter. |
In April 2018, we entered into a time charter agreement with Enel Trade S.p.A., or Enel, a multinational power company. The time charter has firm period of 12 months, which Enel has the option to extend for an additional 12 months. The charter is expected to commence during June 2019. We intend to employ the Flex Ranger on this charter, but we have the option to nominate a sister vessel for such employment.
In March 2019, we entered into a time charter agreement with an international energy major for the employment of the vessel Flex Enterprise. The time charter has a firm period of 12 months, commencing end of first quarter of 2019, and the charterer also has options to extend the charter period up to an additional four years, in 12 month periods.
· | injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs; |
· | injury to, or economic losses resulting from, the destruction of real and personal property; |
· | loss of subsistence use of natural resources that are injured, destroyed or lost; |
· | net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or personal property, or natural resources; |
· | lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and |
· | net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources. |
C. | Organizational Structure |
D. | Property, Plants and Equipment |
ITEM 4A. | UNRESOLVED STAFF COMMENTS |
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
A. | Operating Results |
· | the ability to present only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations in the registration statement for our initial public offering; |
· | an exemption from the auditor attestation requirement of management's assessment of the effectiveness of our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and |
· | an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and financial statements. |
(in thousands of $) | 2018 | 2017 | Change | |||||||||
Vessel operating revenues | 77,209 | 27,329 | 49,880 |
(in thousands of $) | 2018 | 2017 | Change | |||||||||
Vessel operating cost own vessels | (20,061 | ) | (6,732 | ) | (13,329 | ) | ||||||
Vessel operating cost chartered-in vessels | (6,100 | ) | (29,800 | ) | 23,700 | |||||||
Total vessel operating cost | (26,161 | ) | (36,532 | ) | 10,371 |
(in thousands of $) | 2018 | 2017 | Change | |||||||||
Administrative Expenses | (4,639 | ) | (3,409 | ) | (1,230 | ) |
(in thousands of $) | 2018 | 2017 | Change | |||||||||
Depreciation | (17,412 | ) | (2 | ) | (17,410 | ) |
(in thousands of $) | 2018 | 2017 | Change | |||||||||
Finance income | 607 | 123 | 484 | |||||||||
Finance cost | (17,781 | ) | (234 | ) | (17,547 | ) | ||||||
Other financial items | (54 | ) | 2,334 | (2,388 | ) | |||||||
Net financial income/(cost) | (17,228 | ) | 2,223 | (19,451 | ) |
· | a book equity ratio of minimum 0.25 to 1.0; |
· | a positive working capital; and |
· | liquidity of minimum the higher of: (i) $25 million; or (ii) an amount equal to five per cent (5%) of our total interest bearing financial indebtedness (excluding the $270 Million Revolving Credit Facility) and net of any cash and cash equivalents |
(i) | declare, make or pay any dividend, charge, fee or other distribution (whether in cash or in kind) on or in respect of its share capital (or any class of its share capital); |
(ii) | pay any interest or repay any principal amount (or capitalized interest) on any debt to any of its shareholders; |
(iii) | redeem, repurchase or repay any of its share capital or resolve to do so; or |
(iv) | enter into any transaction or arrangement having a similar effect as described in (i) through (iii) above. |
Year ended December 31, | ||||||||
(in thousands of U.S. dollars) | 2018 | 2017 | ||||||
Net cash provided by (used in) operating activities | 35,714 | (17,752 | ) | |||||
Net cash used in investing activities | (584,433 | ) | (77,714 | ) | ||||
Net cash provided by financing activities | 593,855 | 103,988 | ||||||
Net increase in cash and cash equivalents | 45,136 | 8,522 | ||||||
Cash and cash equivalents at beginning of year | 9,961 | 1,439 | ||||||
Cash and cash equivalents at end of year | 55,097 | 9,961 |
$ thousand (unaudited) | Year ended 31 December | |||||||
2018 | 2017 | |||||||
Flex Ranger and Flex Rainbow | 216,627 | — | ||||||
Flex Endeavour and Flex Enterprise(1) | 14,392 | 376,000 | ||||||
TBN Flex Constellation and TBN Flex Courageous | — | 72,000 | ||||||
TBN Flex Aurora and TBN Flex Amber | 73,600 | — | ||||||
TBN Flex Reliance, TBN Flex Resolute and TBN Flex Freedom | 167,400 | — | ||||||
TBN Flex Volunteer and TBN Flex Vigilant | 108,000 | — | ||||||
Capitalized costs(2) | 3,928 | 6,465 | ||||||
Total | 585,111 | 454,465 |
C. | Research and Development, Patents and Licenses, etc. |
D. | Trend Information |
E. | Off-Balance Sheet Arrangements |
F. | Tabular Disclosure of Contractual Obligations |
(In thousands of U.S. dollars) | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Newbuilding commitments | 1,225,000 | 288,000 | 937,000 | - | - | |||||||||||||||
Long-term debt obligations | 460,030 | 23,625 | 51,882 | 268,367 | 116,156 | |||||||||||||||
Interest on floating rate debt | 143,560 | 25,617 | 46,709 | 40,536 | 30,698 | |||||||||||||||
Total | $ | 1,828,590 | $ | 337,242 | $ | 1,035,591 | $ | 308,903 | $ | 146,854 |
(1) | The loan repayments comprise repayments under the $315 Million Term Loan Facility and the Flex Rainbow Sale and Leaseback. |
(2) | The Long-term debt obligation of $460.0 million is gross, before deduction of debt issuing cost of $5.1 million. Carrying value of long-term debt is $455.0 million. |
(3) | Interest on floating rate debt was calculated using the three month USD LIBOR as of December 31, 2018 of 2.8% plus margin applicable for each of our credit facilities and the respective outstanding principal as of December 2018. |
ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
A. | Directors and Senior Management |
Name | Age | Position | ||
David McManus | 65 | Director of the Company and Chairman of the Board of Directors | ||
Marius Hermansen | 40 | Director of the Company | ||
Ola Lorentzon | 69 | Director of the Company | ||
Nikolai Grigoriev | 45 | Director of the Company and Chairperson of the Audit Committee | ||
Oystein M. Kalleklev | 39 | Chief Executive Officer of Flex LNG Management AS | ||
Harald Gurvin | 45 | Chief Financial Officer of Flex LNG Management AS |
B. | Compensation |
Director | Directors' Fees for 2018 | Directors' Fees for 2017 | ||||||
David McManus | $ | 100,000 | $ | 100,000 | ||||
Marius Hermansen | $ | 40,000 | $ | 40,000 | ||||
Ola Lorentzon | $ | 40,000 | $ | 20,000 | ||||
Nikolai Grigoriev | $ | 40,000 | $ | 11,000 | ||||
Georgina Sousa (former director) | $ | 9,484 | $ | 5,000 | ||||
Robin Bakken (former director) | - | $ | 14,000 | |||||
Total | $ | 229,484 | $ | 190,000 |
C. | Board Practices |
D. | Employees |
E. | Share Ownership |
Name | Ordinary shares (1) | Percentage of ordinary shares outstanding | ||||||
David McManus | 89,984 | * | ||||||
Marius Hermansen | 6,168 | * | ||||||
Ola Lorentzon | 2,159 | * | ||||||
Nikolai Grigoriev | 5,993 | * | ||||||
Oystein Kalleklev | 10,000 | * | ||||||
Harald Gurvin | 5,000 | * |
(1) | Not including options to purchase ordinary shares. |
ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
A. | Major Shareholders |
Ordinary Shares Beneficially Owned | ||||||||
Name | Number | Percentage(1) | ||||||
Geveran Trading Co. Ltd. (2) | 24,133,811 | 44.6 | % |
(1) | Calculated based on 54,103,993 ordinary shares outstanding as of April 1, 2019. |
(2) | Geveran is a Cyprus holding company, indirectly controlled by trusts established by Mr. John Fredriksen for the benefit of his immediate family. Mr. Fredriksen disclaims beneficial ownership of the 24,133,811 ordinary shares, except to the extent of his voting and dispositive interests in such ordinary shares and Mr. Fredriksen has no pecuniary interest in such shares. |
ITEM 8. | FINANCIAL INFORMATION |
A. | Consolidated Statements and other Financial Information |
· | we will not be able to pay our liabilities as they fall due; or |
· | the realizable value of our assets, is less than our liabilities. |
B. | Significant Changes |
ITEM 9. | THE OFFER AND LISTING |
A. | Offer and Listing Details. |
B. | Plan of Distribution |
C. | Markets. |
D. | Selling Shareholders |
E. | Dilution |
F. | Expenses of the Issue |
ITEM 10. | ADDITIONAL INFORMATION |
A. | Share Capital |
B. | Memorandum of Continuance |
C. | Material Contracts |
D. | Exchange Controls |
E. | Taxation |
· | we and each subsidiary are organized in a "qualified foreign country," defined as a country that grants an equivalent exemption from tax to corporations organized in the United States in respect of the shipping income for which exemption is being claimed under section 883 of the Code; this is also known as the "Country of Organization Requirement"; and |
· | either |
o | more than 50% of the value of our stock is treated as owned, directly or indirectly, by individuals who are "residents" of qualified foreign countries; this is also known as the "Ownership Requirement"; or |
o | our stock is "primarily and regularly traded on an established securities market" in the United States or any qualified foreign country; this is also known as the "Publicly-Traded Requirement." |
· | at least 75% of our gross income in a taxable year is "passive income"; or |
· | at least 50% of our assets in a taxable year (based on an average of the quarterly values of the assets) are held for the production of, or produce, "passive income." |
ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
A. | Debt Securities |
B. | Warrants and Rights. |
C. | Other Securities. |
D. | American Depositary Shares. |
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
ITEM 15. | CONTROLS AND PROCEDURES |
ITEM 16. | RESERVED |
ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT. |
ITEM 16B. | CODE OF ETHICS |
ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
ITEM 16F. | CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT |
ITEM 16G. | CORPORATE GOVERNANCE |
ITEM 17. | FINANCIAL STATEMENTS |
ITEM 18. | FINANCIAL STATEMENTS |
ITEM 19. | EXHIBITS |
1.1 | |
1.2 | |
2.1 | Form of Ordinary Share Certificate* |
4.1 | |
4.2 | |
4.3 | |
4.4 | |
4.5 | |
4.6 | |
4.7 | |
4.8 | |
4.9 | |
4.10 | |
4.11 | |
4.12 | |
8.1 | |
14.1 | |
15.1 | |
15.2 | |
15.3 |
FLEX LNG Ltd. (registrant) | ||
By: | /s/ Oystein Kalleklev | |
Name: Oystein Kalleklev | ||
Title: Chief Executive Officer of Flex LNG Management AS (Principal Executive Officer of FLEX LNG Ltd.) |
Page | |
Report of Independent Registered Public Accounting Firm | F-2 |
Consolidated Statements of Operations for the years ended December 31, 2018 and 2017 | F-3 |
Consolidated Statements of Other Comprehensive Income (Loss) for the years ended December 31, 2018 and 2017 | F-4 |
Consolidated Balance Sheets as of December 31, 2018 and 2017 | F-5 |
Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017 | F-6 |
Consolidated Statements of Changes in Equity for the years ended December 31, 2018 and 2017 | F-7 |
Notes to the Consolidated Financial Statements | F-8 |
2018 | 2017 | |||||||
Vessel operating revenues | 77,209 | 27,329 | ||||||
Vessel operating costs | (26,161 | ) | (36,532 | ) | ||||
Administrative expenses | (4,639 | ) | (3,409 | ) | ||||
Depreciation | (17,412 | ) | (2 | ) | ||||
Operating income/(loss) | 28,997 | (12,614 | ) | |||||
Finance income | 607 | 123 | ||||||
Finance cost | (17,781 | ) | (234 | ) | ||||
Other financial items | (54 | ) | 2,334 | |||||
Income/(loss) before tax | 11,769 | (10,391 | ) | |||||
Income tax expense/(credit) | (10 | ) | 17 | |||||
Net income/(loss) | 11,779 | (10,408 | ) | |||||
Earnings/(loss) per share: | 2018 | 2017 | ||||||
- Basic and Diluted | 0.29 | (0.34 | ) |
2018 | 2017 | |||||||
Net income/(loss) for the year | 11,779 | (10,408 | ) | |||||
Total other comprehensive income/(expense) | — | — | ||||||
Total comprehensive income/(loss) attributable to FLEX LNG | 11,779 | (10,408 | ) |
2018 | 2017 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash, restricted cash and cash equivalents | 55,097 | 9,961 | ||||||
Inventory | 915 | 1,041 | ||||||
Other current assets | 2,693 | 6,568 | ||||||
Receivables due from related parties | 1,720 | — | ||||||
Total current assets | 60,425 | 17,570 | ||||||
Non-current assets | ||||||||
Newbuildings | — | 594,937 | ||||||
Vessel purchase prepayment | 421,472 | 72,000 | ||||||
Vessels and equipment, net | 812,478 | — | ||||||
Other fixed assets | 11 | 3 | ||||||
Total non-current assets | 1,233,961 | 666,940 | ||||||
Total assets | 1,294,386 | 684,510 | ||||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities | ||||||||
Current portion of long term debt | 23,365 | — | ||||||
Payables due to related parties | 206 | 810 | ||||||
Accounts payable | 592 | 76 | ||||||
Other current liabilities | 11,297 | 3,523 | ||||||
Total current liabilities | 35,460 | 4,409 | ||||||
Non-current liabilities | ||||||||
Long-term debt | 431,602 | 160,000 | ||||||
Total non-current liabilities | 431,602 | 160,000 | ||||||
Total liabilities | 467,062 | 164,409 | ||||||
Equity | ||||||||
Share capital (2018: 54,099,929 (2017: 36,797,238) shares issued and outstanding, par value $0.10 per share) | 5,410 | 3,680 | ||||||
Additional paid in capital | 1,189,665 | 895,951 | ||||||
Accumulated deficit | (367,751 | ) | (379,530 | ) | ||||
Total equity | 827,324 | 520,101 | ||||||
Total equity and liabilities | 1,294,386 | 684,510 |
Year ended December 31 | ||||||||
2018 | 2017 | |||||||
Operating activities | ||||||||
Net income/(loss) | 11,779 | (10,408 | ) | |||||
Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities | ||||||||
Depreciation | 17,412 | 2 | ||||||
Share-based payments | 202 | 115 | ||||||
Foreign exchange loss (gains) | 22 | (2,334 | ) | |||||
Other | (518 | ) | (157 | ) | ||||
Changes in operating assets and liabilities, net: | ||||||||
Inventory | 126 | (1,041 | ) | |||||
Other current assets | 725 | (6,547 | ) | |||||
Receivables due from related parties | (1,720 | ) | - | |||||
Payables due to related parties | (604 | ) | - | |||||
Accounts payable | 516 | 272 | ||||||
Other current liabilities | 7,774 | 2,346 | ||||||
Net cash provided (used in) by operating activities | 35,714 | (17,752 | ) | |||||
Investing activities | ||||||||
Purchase of other fixed assets | (14 | ) | (4 | ) | ||||
Vessel purchase prepayments | (349,000 | ) | (72,000 | ) | ||||
Additions and installments on newbuildings | (232,455 | ) | (3,788 | ) | ||||
Capitalized interest | (2,964 | ) | (1,922 | ) | ||||
Net cash flow (used in) investing activities | (584,433 | ) | (77,714 | ) | ||||
Financing activities | ||||||||
Net proceeds from issuance of share capital | 295,311 | 220,988 | ||||||
Repayment of long term-debt | (286,069 | ) | (117,000 | ) | ||||
Proceeds from long term-debt | 584,613 | - | ||||||
Net cash flow provided by financing activities | 593,855 | 103,988 | ||||||
Net increase in cash and cash equivalents | 45,136 | 8,522 | ||||||
Cash, cash equivalents and restricted cash at the beginning of the period | 9,961 | 1,439 | ||||||
Cash, cash equivalents and restricted cash at the end of the period | 55,097 | 9,961 | ||||||
Supplemental Information | ||||||||
Interest paid, net of amounts capitalized | (12,958 | ) | (61 | ) | ||||
Income tax paid | - | (5 | ) |
2018 | 2017 | |||||||
Number of shares outstanding | ||||||||
Balance at beginning of year | 36,797,238 | 12,794,565 | ||||||
Shares issued | 17,302,691 | 24,002,673 | ||||||
Balance at end of year | 54,099,929 | 36,797,238 | ||||||
Share capital | ||||||||
Balance at beginning of year | 3,680 | 1,280 | ||||||
Shares issued | 1,730 | 2,400 | ||||||
Balance at end of year | 5,410 | 3,680 | ||||||
Additional paid in capital | ||||||||
Balance at beginning of year | 895,951 | 573,785 | ||||||
Shares issued | 293,645 | 322,166 | ||||||
Stock option expense | 69 | - | ||||||
Balance at end of year | 1,189,665 | 895,951 | ||||||
Accumulated retained deficit | ||||||||
Balance at beginning of year | (379,530 | ) | (369,122 | ) | ||||
Net income/(loss) | 11,779 | (10,408 | ) | |||||
Balance at end of year | (367,751 | ) | (379,530 | ) | ||||
Total equity | 827,324 | 520,101 |
Company | Country of registration | Main operations | Ownership share | Voting share |
Flex LNGC 1 Limited | Isle of Man | Shipping | 100% | 100% |
Flex LNGC 2 Limited | Isle of Man | Shipping | 100% | 100% |
Flex LNG Shipping Limited | Isle of Man | Shipping | 100% | 100% |
Flex LNG Chartering Limited | United Kingdom | Chartering services | 100% | 100% |
Flex LNG Management AS | Norway | Management services | 100% | 100% |
Flex LNG Fleet Limited | Bermuda | Holding company | 100% | 100% |
Flex LNG Management Limited | Isle of Man | Management services | 100% | 100% |
Flex LNG Bermuda Limited | Bermuda | Management services | 100% | 100% |
Flex LNG Endeavour Limited | Marshall Islands | Shipping | 100% | 100% |
Flex LNG Enterprise Limited | Marshall Islands | Shipping | 100% | 100% |
Flex LNG Ranger Limited | Marshall Islands | Shipping | 100% | 100% |
Flex LNG Rainbow Limited | Marshall Islands | Shipping | 100% | 100% |
Flex LNG Constellation Limited | Marshall Islands | Shipping | 100% | 100% |
Flex LNG Courageous Limited | Marshall Islands | Shipping | 100% | 100% |
Flex LNG Aurora Limited | Marshall Islands | Shipping | 100% | 100% |
Flex LNG Amber Limited | Marshall Islands | Shipping | 100% | 100% |
Flex LNG Resolute Limited | Marshall Islands | Shipping | 100% | 100% |
Flex LNG Reliance Limited | Marshall Islands | Shipping | 100% | 100% |
Flex LNG Freedom Limited | Marshall Islands | Shipping | 100% | 100% |
Flex LNG Vigilant Limited | Marshall Islands | Shipping | 100% | 100% |
Flex LNG Volunteer Limited | Marshall Islands | Shipping | 100% | 100% |
Flex LNG Shipping (Bermuda) Limited | Bermuda | Shipping | 100% | 100% |
(in thousands of $) | 2018 | 2017 | ||||||
Wages and salaries | 1,826 | 1,040 | ||||||
Social security costs | 180 | 150 | ||||||
Pension costs | 76 | 58 | ||||||
Total employee benefit expenses | 2,083 | 1,248 |
(in thousands of $) | ||||||||
Finance cost | 2018 | 2017 | ||||||
Loan interest | (17,619 | ) | (234 | ) | ||||
Amortization of deferred financing costs | (141 | ) | — | |||||
Other interest | (21 | ) | — | |||||
Total finance cost | (17,781 | ) | (234 | ) |
Finance income | 2018 | 2017 | ||||||
Interest income from bank deposits | 607 | 123 | ||||||
Total finance income | 607 | 123 |
Other financial items | ||||||||
(in thousands of $) | 2018 | 2017 | ||||||
Foreign exchange (loss)/gain | (22 | ) | 2,334 | |||||
Other financial items | (32 | ) | - | |||||
Total other financial items | (54 | ) | 2,334 |
(in thousands of $, except share data) | ||||||||
2018 | 2017 | |||||||
Net income/(loss) attributable to shareholders | 11,779 | (10,408 | ) | |||||
Weighted average number of ordinary shares* | 40,451,462 | 30,763,911 | ||||||
Share options* | 141,000 | — | ||||||
Weighted average number of shares, adjusted for dilution* | 40,592,462 | 30,763.911 |
(in thousands of $) | 2018 | 2017 | ||||||
Current income tax expense/(credit) | (5 | ) | 17 | |||||
Adjustments in respect of current income tax of previous years | (5 | ) | — | |||||
Income tax expense/(credit) reported in the income statement | (10 | ) | 17 |
(in thousands of $) | 2018 | 2017 | ||||||
Net income/(loss) before tax | 11,769 | (10,391 | ) | |||||
Income tax at 0% (2017: 0%) | — | — | ||||||
Effect of higher overseas tax rates | (10 | ) | 17 | |||||
Effective income tax rate of (0.1)% (2017: (0.2)%) | (10 | ) | 17 |
(in thousands of $) | ||||||||
Newbuildings | 2018 | 2017 | ||||||
At January 1 | 594,937 | 212,472 | ||||||
Installments to shipyard | 231,019 | 376,000 | ||||||
Capitalized interest | 2,492 | 1,922 | ||||||
Pre-delivery expenditures | 1,436 | 4,543 | ||||||
Transfer to vessels and equipment | (829,884 | ) | — | |||||
At December 31 | — | 594,937 |
(in thousands of $) | ||||||||
Vessel purchase prepayments | 2018 | 2017 | ||||||
At January 1 | 72,000 | — | ||||||
Additions | 349,000 | 72,000 | ||||||
Capitalized interest | 472 | — | ||||||
Transfer to vessels and equipment | — | — | ||||||
At December 31 | 421,472 | 72,000 |
(in thousands of $) | Vessels and equipment | Dry-docks | Other fixed assets | Total | ||||||||||||
Cost | ||||||||||||||||
At January 1, 2018 | — | — | 8 | 8 | ||||||||||||
Additions | — | — | 14 | 14 | ||||||||||||
Transfer from Newbuildings | 819,884 | 10,000 | — | 829,884 | ||||||||||||
Disposals | — | — | (2 | ) | (2 | ) | ||||||||||
At December 31, 2018 | 819,884 | 10,000 | 20 | 829,904 | ||||||||||||
Accumulated depreciation | ||||||||||||||||
At January 1, 2018 | — | — | 5 | 5 | ||||||||||||
Charge | 15,931 | 1,475 | 6 | 17,412 | ||||||||||||
Disposals | — | — | (2 | ) | (2 | ) | ||||||||||
At December 31, 2018 | 15,931 | 1,475 | 9 | 17,415 | ||||||||||||
Net book value | ||||||||||||||||
At January 1, 2018 | — | — | 3 | 3 | ||||||||||||
At December 31, 2018 | 803,953 | 8,525 | 11 | 812,489 |
(in thousands of $) | 2018 | 2017 | ||||||
Other receivables | 168 | 486 | ||||||
Prepayments and accrued income | 2,525 | 6,082 | ||||||
Total other current assets | 2,693 | 6,568 |
(in thousands of $) | 2018 | 2017 | ||||||
Accrued expenses | 6,441 | 862 | ||||||
Deferred charter revenue | 2,559 | 2,603 | ||||||
Other current liabilities | 15 | 58 | ||||||
Provisions | 2,282 | - | ||||||
Total Other current liabilities | 11,297 | 3,523 |
(in thousands of $) | 2018 | 2017 | ||||||
Cash and cash equivalents | 54,932 | 9,961 | ||||||
Restricted cash | 165 | — | ||||||
Cash and cash equivalents | 55,097 | 9,961 |
2018 | 2017 | |||||||
Ordinary shares (nominal amount $0.10)* | 54,099,929 | 36,797,238 | ||||||
Total number of shares issued and outstanding | 54,099,929 | 36,797,238 |
(in thousands of $, except share data) | Shares* | Share Capital | Additional paid in capital | |||||||||
Ordinary shares - issued and fully paid: | ||||||||||||
At December 31, 2016 | 12,794,565 | 1,279 | 573,785 | |||||||||
Shares issued | 24,002,673 | 2,401 | 322,166 | |||||||||
At December 31, 2017 | 36,797,238 | 3,680 | 895,951 | |||||||||
Shares issued | 17,302,691 | 1,730 | 293,714 | |||||||||
At December 31, 2018 | 54,099,929 | 5,410 | 1,189,665 |
September 2018 | November 2018 | |||||||
Risk free interest rate | 1.44 | % | 1.59 | % | ||||
Expected life (years) | 5 | 5 | ||||||
Expected volatility | 28.3 | % | 36.8 | % | ||||
Expected dividend yield | — | % | — | % |
Number of non-vested options | Weighted average exercise price per share ($) | Weighted average remaining contractual term (years) | Weighted average grant date fair value ($) | Aggregate intrinsic value | ||||||||||||||||
At December 31, 2017 | — | — | — | — | — | |||||||||||||||
Granted during the year* | 141,000 | 15.00 | 4.59 | 15.00 | 2,115,300 | |||||||||||||||
Converted during the year | — | — | — | — | — | |||||||||||||||
Forfeited during the year | — | — | — | — | — | |||||||||||||||
Expired during the year | — | — | — | — | — | |||||||||||||||
At December 31, 2018 | 141,000 | 15.00 | 4.59 | 15.00 | 2,115,300 |
(in thousands of $) | 2018 | |||
Due within: | ||||
1 year | 23,625 | |||
2 years | 25,478 | |||
3 years | 26,404 | |||
4 years | 26,404 | |||
5 years | 241,963 | |||
More than five years | 116,156 | |||
Total long term debt principals | 460,030 | |||
Less: debt issuance costs | (5,063 | ) | ||
Total long term debt | 454,967 |
2018 | 2018 | 2017 | 2017 | ||||||||||||||||||
(in thousands of $) | Note | Fair value hierarchy level | Carrying amount of asset (liability) | Fair value asset (liability) | Carrying amount of asset (liability) | Fair value asset (liability) | |||||||||||||||
Cash and cash equivalents | 11 | Level 1 | 54,932 | 54,932 | 9,961 | 9,961 | |||||||||||||||
Restricted cash | 11 | Level 1 | 165 | 165 | — | — | |||||||||||||||
Receivables due from related parties | 16 | Level 1 | 1,720 | 1,720 | 340 | 340 | |||||||||||||||
Account payable | Level 1 | (592 | ) | (592 | ) | (76 | ) | (76 | ) | ||||||||||||
Payables due to related parties | 16 | Level 1 | (206 | ) | (206 | ) | (810 | ) | (810 | ) | |||||||||||
Long term debt | 14 | Level 2 | (454,967 | )* | (460,030 | )* | (160,000 | ) | (160,000 | ) |
(in thousands of $) | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | |||||||||||||||||||||
Loan repayments | 23,625 | 25,478 | 26,404 | 26,404 | 241,963 | 116,156 | 460,030 | |||||||||||||||||||||
Newbuildings | 288,000 | 685,000 | 252,000 | — | — | — | 1,225,000 | |||||||||||||||||||||
Total | 311,625 | 710,478 | 278,404 | 26,404 | 241,963 | 116,156 | 1,685,030 |