-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BY0PFzWCSuTsQNp2ZfhtVww9qb7RiRUZuK4cd61pYGqSwReaxvvs92wIA2XWu3Pj zn93QR2OAVsIcDAH5o6J+Q== 0000950172-04-001330.txt : 20040527 0000950172-04-001330.hdr.sgml : 20040527 20040527171311 ACCESSION NUMBER: 0000950172-04-001330 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040527 FILED AS OF DATE: 20040527 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STENA AB CENTRAL INDEX KEY: 0001003517 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-99284 FILM NUMBER: 04835818 BUSINESS ADDRESS: STREET 1: MASTHUGGSKAJEN STREET 2: S-405 19 GOTHENBURG CITY: SWEDEN STATE: V7 BUSINESS PHONE: 4631855000 6-K 1 s537946.txt REPORT OF PRIVATE FOREIGN ISSUER FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the Month of May, 2004 Commission File Number: 33-99284 STENA AB (PUBL) (Translation of registrant's name into English) SE-405 19 GOTHENBURG, SWEDEN (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F __X__ Form 40-F _____ Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ________ Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ________ Indicate by check mark whether by furnishing the information contained in this Form, the registrant 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- ________. 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. Stena AB (Publ) Date: May 27, 2004 By: /s/ Svante Carlsson --------------- Name: Svante Carlsson Title: Chief Financial Officer and Executive Vice President Stena AB and Consolidated Subsidiaries Forward-looking statements This Form 6-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Some of these statements can be identified by terms and phrases such as "anticipate," "should," "likely," "foresee," "believe," "estimate," "expect," "intend," "continue," "could," "may," "project," "plan," "predict," "will" and similar expressions and include references to assumptions that we believe are reasonable and relate to our future prospects, developments and business strategies. Such statements reflect our current views and assumptions with respect to future events and are subject to risks and uncertainties. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements, include, but are not limited to: - - changes in general economic and business conditions; - - changes in laws and regulations; - - changes in currency exchange rates and interest rates; - - risks inherent in vessel operations, including discharge of pollutants; - - introduction of competing products by other companies; - - changes in trading or travel patterns; - - increases of costs of operations or the inability to meet efficiency and cost reduction objectives; - - changes in our business strategy; and - - other risk factors listed in our reports furnished to the Securities and Exchange Commission from time to time. We do not intend, and undertake no obligation, to revise the forward-looking statements included in this Form 6-K to reflect any future events or circumstances. Our actual results, performance or achievements could differ materially from the results expressed or implied by these forward-looking statements. Table of Contents Page CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidated Income Statements for the three month periods ended March 31, 2003 and March 31, 2004 3 Condensed Consolidated Balance Sheets as of December 31, 2003 and March 31, 2004 4 Condensed Consolidated Statements of Cash Flow for the three month periods ended March 31, 2003 and March 31, 2004 5 Notes to Condensed Consolidated Financial Statements 6 - 7 OPERATING AND FINANCIAL REVIEW 8 - 17 2
Stena AB and Consolidated Subsidiaries Condensed Consolidated Income Statements Three month periods ended March 31, 2003 March 31, 2004 SEK SEK $ (in millions) Revenues: Ferry operations........................................... 1,577 1,623 215 Drilling................................................... 440 341 45 Shipping................................................... 564 797 106 Net gain on sale of vessels....................... 60 66 9 Total shipping.................................... 624 863 115 Property................................................... 232 230 30 Net gain (loss) on sale of properties............. (2) 20 3 Total property.................................... 230 250 33 ------- ------ ---- Total revenues............................................. 2,871 3,077 408 ------- ------ ---- Direct operating expenses: Ferry operations........................................... (1,424) (1,368) (181) Drilling................................................... (221) (209) (28) Shipping................................................... (391) (453) (60) Property................................................... (107) (110) (15) ------- ------ ---- Total direct operating expenses............................ (2,143) (2,140) (284) ------- ------ ---- Selling and administrative expenses........................ (358) (368) (49) Depreciation and amortization.............................. (420) (391) (52) ------- ------ ---- Total operating expenses................................... (2,921) (2,899) (385) ------- ------ ---- Income (loss) from operations.............................. (50) 178 23 ------- ------ ---- Financial income and expense: Dividends received......................................... 2 4 1 Gain (loss) on securities, net............................. (12) 77 10 Interest income............................................ 27 20 3 Interest expense........................................... (229) (201) (27) Foreign exchange gains (losses), net....................... 2 7 1 Other financial income (expense), net...................... 65 61 8 ------- ------ ---- Total financial income and expense......................... (145) (32) (4) ------- ------ ---- Minority interest.......................................... 1 -- -- Income (loss) before taxes................................. (194) 146 19 Income taxes............................................... 58 20 3 ------- ------ ---- Net income................................................. (136) 166 22 ======= ====== ====
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Stena AB and Consolidated Subsidiaries Condensed Consolidated Balance Sheets December 31, 2003 March 31, 2003 SEK SEK $ (in millions) ASSETS Noncurrent assets: Intangible assets............................................. 11 50 7 Tangible fixed assets: Vessels...................................................... 13,208 14,435 1,912 Construction in progress..................................... 589 455 60 Equipment.................................................... 592 579 77 Property..................................................... 7,625 7,757 1,027 ------- ------ ------ Total tangible fixed assets................................... 22,014 23,226 3,076 ------- ------ ------ Financial fixed assets: Marketable securities......................................... 2,522 3,094 410 Other assets.................................................. 861 892 118 ------- ------ ------ Total financial fixed assets.................................. 3,383 3,986 528 Total noncurrent assets....................................... 25,408 27,262 3,611 Current assets: Inventories................................................... 235 254 34 Trade debtors................................................. 895 1,037 137 Other receivables............................................. 673 789 105 Prepaid expenses and accrued income........................... 870 1,159 154 Short-term investments........................................ 328 645 85 Cash and cash equivalents..................................... 1,718 1,067 141 ------- ------ ------ Total current assets.......................................... 4,719 4,951 656 ------- ------ ------ Total assets.................................................. 30,127 32,213 4,267 ======= ====== ====== STOCKHOLDERS' EQUITY AND LIABILITIES Stockholders' equity: Capital stock................................................. 5 5 1 Reserves ..................................................... 11,465 11,913 1,578 ------- ------ ------ Total stockholders' equity.................................... 11,470 11,918 1,579 ------- ------ ------ Provisions: Deferred income taxes...................................... 961 989 131 Other...................................................... 186 116 15 ------- ------ ------ Total provisions.............................................. 1,147 1,105 146 ------- ------ ------ Noncurrent liabilities: Long-term debt............................................. 10,423 11,609 1,538 Senior notes............................................... 2,699 2,832 375 Capitalized lease obligations.............................. 1,329 1,383 183 Other noncurrent liabilities............................... 174 167 22 ------- ------ ------ Total noncurrent liabilities.................................. 14,625 15,991 2,118 ------- ------ ------ Current liabilities: Short-term debt............................................ 331 352 47 Capitalized lease obligations.............................. 44 43 6 Trade accounts payable..................................... 436 524 69 Income tax payable......................................... 31 33 4 Other...................................................... 323 306 41 Accrued costs and prepaid income........................... 1,720 1,941 257 ------- ------ ------ Total current liabilities..................................... 2,885 3,199 424 ------- ------ ------ Total stockholders' equity and liabilities.................... 30,127 32,213 4,267 ======= ====== ======
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Stena AB and Consolidated Subsidiaries Condensed Consolidated Statements of Cash Flow Three month periods ended March 31, 2003 March 31, 2004 SEK SEK $ (in millions) Net cash flows from operating activities: Net income (loss)............................................... (136) 166 22 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................................... 420 391 52 (Gain)/loss on sale of property, vessels and equipment.......... (58) (86) (12) (Gain)/loss on securities, net.................................. 12 (77) (10) Unrealized foreign exchange (gains) losses...................... 27 (96) (13) Deferred income taxes........................................... (66) (29) (4) Minority interest............................................... (1) -- -- Other non cash items............................................ 38 (66) (9) Net cash flows from trading securities.......................... 9 (290) (38) Changes in assets and liabilities, net of effects of dispositions of business: Receivables..................................................... (353) (221) (29) Prepaid expenses and accrued income............................. (76) (250) (33) Inventories..................................................... 12 (13) (2) Trade accounts payable.......................................... (83) 79 10 Accrued costs and prepaid income................................ 257 181 24 Income tax payable.............................................. (17) 1 -- Other current liabilities....................................... (375) (64) (8) ------- ------- ------- Net cash provided by/(used in) operating activities............. (390) (374) (50) ------- ------- ------- Net cash flows from investing activities: Cash proceeds from sale of property, vessels and equipment...... 640 300 40 Capital expenditure on property, vessels and equipment.......... (979) (1,260) (167) Proceeds from sale of securities................................ 150 151 20 Purchase of securities.......................................... (490) (629) (83) Increase of non-current assets.................................. (51) (9) (1) Decrease of non-current assets.................................. 8 -- -- Other investing activities...................................... (6) (5) (1) ------- ------- ------- Net cash provided by/(used in) investing activities............. (728) (1,452) (192) ------- ------- ------- Net cash flows from financing activities: Proceeds from issuance of debt.................................. -- 407 54 Principal payments on debt...................................... (1,449) (114) (15) Net change in borrowings on line-of-credit agreements........... 2,577 787 104 New capitalized lease obligations............................... 678 -- -- Principle payments capital lease obligations.................... (5) (11) (2) Net change in restricted cash accounts.......................... (1,716) (4) (1) Other financing activities...................................... (104) 98 13 ------- ------- ------- Net cash provided by/(used in) financing activities............. (19) 1,163 153 ------- ------- ------- Effect of exchange rate changes on cash and cash equivalents.... 7 12 2 ------- ------- ------- Net change in cash and cash equivalents......................... (1,130) (651) (87) Cash and cash equivalents at beginning of period................ 2,100 1,718 228 ------- ------- ------- Cash and cash equivalents at end of period...................... 970 1,067 141 ======= ======= =======
5 Stena AB and Consolidated Subsidiaries Notes to Condensed Consolidated Financial Statements Note 1 Basis of presentation The accompanying condensed consolidated financial statements present the financial position and results of operations of Stena AB (publ) and its subsidiaries ("the Company") and have been prepared in accordance with Swedish GAAP. The interim financial information included in the condensed consolidated financial statements is unaudited but reflects all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Interim results for the three months ended March 31, 2004 are not necessarily indicative of the results to be expected for the full year. Solely for the convenience of the reader, the condensed financial statements for the most recent period have been translated into US dollars ($) using the noon buying rate on March 31, 2004 of $1 = SEK 7.5500. Note 2 Segment information Three month periods ended March 31, 2003 2004 ---- ---- Income from operations: Ferry operations.................................... (272) (169) Drilling............................................ 18 (40) Shipping: Roll-on/Roll-off vessels................ (4) 8 Crude oil tankers....................... 93 248 Other shipping.......................... (5) (3) Net gain on sale of vessels............. 60 66 ----- ----- Total shipping........................... 144 319 Property............................................ 93 86 Net gain on sale of properties.......... (2) 20 ----- ----- Total property.......................... 91 106 Other............................................... (31) (38) ----- ----- Total............................................... (50) 178 ----- ----- Three month periods ended March 31, 2003 2004 ----- ----- Depreciation and amortization: Ferry operations.................................... 194 198 Drilling............................................ 172 141 Shipping: Roll-on/Roll-off vessels................ 27 23 Crude oil tankers....................... 7 10 Other shipping.......................... 2 1 ----- ----- Total shipping.......................... 36 34 Property............................................ 17 16 Other............................................... 1 2 ----- ----- Total............................................... 420 391 ----- ----- We have conducted a review of the estimated useful lives of our vessels. As a result of this review, we have established new useful lives for both existing and future vessels as follows, effective January 1, 2004: RoRo vessels and tankers are depreciated over 20 years instead of over 15 years; and the useful life of certain old ferries and drilling rigs has been extended. The effect of these revisions has reduced depreciation expense in the first three months of 2004 by approximately SEK 57 million. 6 Stena AB and Consolidated Subsidiaries Notes to Condensed Consolidated Financial Statements Three month periods ended March 31, 2003 2004 ---- ---- Capital expenditures: Ferry operations.................................... 652 328 Drilling............................................ 100 76 Shipping: Roll-on/Roll-off vessels.................. 23 64 Crude oil tankers......................... 58 712 Other shipping............................ 1 2 ------- ------- Total shipping................................ 82 778 Property............................................ 144 76 Other............................................... 1 2 ------- ------- Total............................................... 979 1,260 ------- ------- Note 3 Stockholders' Equity Restricted reserves include both untaxed reserves (net of deferred taxes) and legal reserves. The legal reserves of SEK 178 million are not available for distribution as they are required to be held to meet statutory requirements in Sweden and other countries where group companies operate. The untaxed reserves may be distributed as dividends upon payment of the related taxes. The changes in stockholders' equity for the period December 31, 2003 to March 31, 2004 are as follows:
Total Capital Restricted Unrestricted stockholders' stock reserves reserves equity ----- -------- -------- ------ (SEK in millions) Balance at December 31, 2003................... 5 583 10,882 11,470 Transfers between reserves..................... -- (3) 3 -- Foreign currency translation adjustments ...... -- 20 262 282 Net income (loss) ............................. -- -- 166 166 ------- ------- ------- ------- Balance at March 31, 2004...................... 5 600 11,313 11,918 ------- ------- ------- -------
7 Stena AB and Consolidated Subsidiaries OPERATING AND FINANCIAL REVIEW The Company generates revenue primarily from ferry operations, chartering out its owned, chartered-in and leased Roll-on/Roll-off Vessels, tankers and drilling rigs, managing tankers, sales of vessels and from real estate rents. The period from June through September is the peak travel season for passengers in the ferry operations. Chartering activities are not significantly affected by seasonal fluctuations, but variations over the year may occur, among other things, as a consequence of vessel utilization rates, dry-docking and charter rates. Any sale or acquisition of vessels, drilling rigs and real estate also have an impact on the results of each period. The Company prepares the consolidated accounts in accordance with Swedish GAAP. These accounting principles differ in certain significant respects from US GAAP. See Note 31 to the Consolidated Financial Statements included in the Company's Form 6-K dated May 11, 2004. Highlights of the first three months of 2004 The first of the Panamax tankers ordered from a shipyard in China, the Stena Companion, was delivered in January 2004. We have a 75% interest in this vessel; the remaining 25% interest is held by Fram Shipping. In February 2004, the first product tanker, the Stena Concord, was delivered from the shipyard in Croatia, followed by the Stena Consul in late March. In March 2004, we entered into two 10 year charter agreements with Progetra S.A. for the Stena Arctica and the Stena Antarctica, two of our ice-class Aframax tankers. These vessels are expected to be delivered in 2005 and 2006. In 2004, we invested an additional SEK 452 million in the shares of the public company Drott AB (publ), referred to hereafter as Drott. As a result of these investments and our prior purchases of Drott shares, our investment in Drott aggregates SEK 1,526 million. At the end of March 2004, the shareholders of Drott approved the distribution to shareholders of a new company, Bostads AB Drott, that would focus on Drott's residential properties. As a result of our investment in Drott, as of April 30, 2004, we owned approximately 14% of the new residential property company and 14% of the existing company, now named Fabege AB, which will focus on commercial properties. The ferry vessel Stena Nautica was hit by another vessel at sea on its route from Grenaa to Varberg in February 2004. No people were injured but the damage to the ship was significant. The ship is scheduled to return to operation in June 2004 after completion of repairs. The damages are covered by insurance. In March 2004, the Company entered into an agreement with P&O to acquire the Fleetwood-Larne ferry route in the Irish Sea together with 3 vessels operating on that route. In addition, the Company agreed to acquire from P&O two other Ropax vessels, the European Envoy and the European Ambassador. The RoRo vessel Chieftain was delivered from the shipyard in Croatia in March 2004. We sold the vessel to a subsidiary of our affiliate, Stena Metall. We chartered this vessel back (renamed the Stena Freighter) on a long-term charter for use in our ferry operations. The sister vessel Aronte was acquired by the Company in April 2004 and renamed the Stena Carrier. SUBSEQUENT EVENTS In late March 2004, the Company agreed to acquire as of April 1, 2004 properties in south of Sweden for SEK 560 million. Stena Adactum acquired a Swedish retail chain store in the flower and plant business as of April 1 2004 for SEK 180 million. The second Panamax vessel, the Stena Compatriot was delivered in April 2004. We have a 75% interest in this vessel; the remaining 25% interest is held by Fram Shipping. 8 Stena AB and Consolidated Subsidiaries In April 2004, the European Envoy and the RoRo vessels Stena Tender and the Stena Timer were sold to third parties. The Company nominated the affiliate Stena Metall to acquire the European Ambassador with an operational lease to the Company under the new name Stena Nordica. On May 10, 2004, the Company exchanged with another shareholder a portion of its shares in Fabege AB for shares in Bostads AB Drott. As a result of this transaction, as of May 10, 2004, the Company owned approximately 29.3% of the outstanding shares of Bostads AB Drott and approximately 9.0% of the outstanding shares of Fabege AB (representing approximately 8.9% of its voting stock). Currency effects The Company's revenues and expenses are significantly affected, as reported in Swedish kronor (SEK), by fluctuations in currency exchange rates, primarily relative to the US dollar, the British pound and the Euro. The Company seeks to mitigate the impact of potential adverse foreign currency exchange fluctuations by matching, to the extent possible, revenue and expenses in the same currency. In addition, the Company enters into certain derivative financial instruments. Revenues in the ferry operations are mainly generated in SEK, British pounds, Euro, Norwegian kronor and Danish kronor. Approximately 25% of the Company's total revenues are generated in US dollars while approximately 40% of the Company's total revenues are generated in SEK. Approximately 20% of the Company's total expenses are incurred in US dollars while approximately 50% of the Company's total expenses are incurred in SEK. Although the Company seeks to hedge the net effects of such fluctuations, the reported gross revenues and expenses are influenced by changes in the currency rates. The exchange rates as used for consolidation purposes are as follows: Average rates: Jan-Mar Jan-Mar 2003 2004 Change ------- ------- ------- US $.................................. 8.55 7.35 (14)% British pound......................... 13.72 13.51 (2)% Euro.................................. 9.18 9.19 -- Closing rates: As of As of Dec 31, March 31, 2003 2004 Change ------- ------- ------- US $.................................. 7.2750 7.5650 4% British pound......................... 12.9125 13.8850 8% Euro.................................. 9.0940 9.2635 2% 9 Stena AB and Consolidated Subsidiaries THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THREE MONTHS ENDED MARCH 31, 2003 Revenues Total revenues increased SEK 206 million, or 7%, in the three months ended March 31, 2004 to SEK 3,077 million from SEK 2,871 million in the three months ended March 31, 2003, primarily as a result of increased revenues in the shipping and ferry operations, partially offset by reduced revenues from drilling. Revenues in the three months ended March 31, 2004 were adversely affected by the increase of the SEK with respect to mainly the US dollar. Ferry operations. Ferry revenues are primarily generated from ticket sales, freight haulage and on board spending. Revenues from ferry operations increased SEK 46 million, or 3%, in the three months ended March 31, 2004 to SEK 1,623 million from SEK 1,577 million in the three months ended March 31, 2003, due to increased volumes in all principal business activities - Travel, Onboard sales and Freight, partly offset by the strengthening of the SEK against the British pound. Drilling. Drilling revenues consist of charter hires for our drilling rigs. Revenues from drilling operations decreased SEK 99 million, or (23)%, in the three months ended March 31, 2004 to SEK 341 million from SEK 440 million in the three months ended March 31, 2003, mainly due the offhire period during its upgrade to meet the requirements for the Norwegian sector of the North Sea and a reduced dayrate for the Stena Spey, as well as the increase of the SEK with respect to the US dollar. The change in dayrates reflects new charter contracts and the market conditions in effect at the time a charter is made in the particular geographic area. Shipping. Shipping revenues primarily represent charter hires for our owned and chartered in vessels and management fees for vessels managed by us. Revenues from shipping operations increased SEK 233 million, or 41%, in the three months ended March 31, 2004 to SEK 797 million from SEK 564 million in the three months ended March 31, 2003. Revenues from chartering out Roll-on/Roll-off vessels increased SEK 39 million to SEK 92 million from SEK 53 million, or 74%, principally due to the deliveries of the Stena Forecaster in June 2003 and the Stena Forerunner in October 2003 and the newly chartered-in vessels the Vasaland and the Svealand in April 2003, partly offset by a decrease of the SEK with respect to the US dollar and the transfer of the Stena Foreteller to our ferry operations during the first three months of 2004. Revenues from crude oil tankers increased SEK 189 million, or 38%, in the three months ended March 31, 2004 to SEK 681 million from SEK 492 million in the three months ended March 31, 2003, mainly due to increased dayrates, deliveries of new tankers and additional tankers chartered in, partly offset by the increase of the SEK with respect to the US dollar. In the three months ended March 31, 2004, an average of 25 tankers were chartered in, compared to an average of 24 tankers in the three months ended March 31, 2003. Net Gain on Sale of Vessels, Shipping. In the three months ended March 31, 2004, we recorded gains of SEK 66 million on the sale of the newly built RoRo vessel Chieftain. In the three months ended March 31, 2003, we recorded gains of SEK 60 million on the sale of the RoPax vessel Stena Britannica. Property. Property revenues consist of rents for properties owned and management fees for properties managed by us. Revenues from property operations decreased SEK 2 million, or (1)%, in the three months ended March 31, 2004 to SEK 230 million from SEK 232 million in the three months ended March 31, 2003, mainly due to properties sold. Net Gain (Loss) on Sale of Properties. In the three months ended March 31, 2004, we recorded gains of SEK 20 million on the sale of properties. In the three months ended March 31, 2003, we recorded losses of SEK (2) million on the sale of properties. 10 Stena AB and Consolidated Subsidiaries Direct operating expenses Total direct operating expenses decreased SEK 3 million in the three months ended March 31, 2004 to SEK 2,140 million from SEK 2,143 million in the three months ended March 31, 2003, as a result of decreased operating expenses in ferry operations as well as effects of the increase of the SEK with respect to the US dollar and, to a lesser extent, with respect to the British pound, offset by increased operating expenses in drilling and shipping. Ferry operations. Direct operating expenses for ferry operations consist principally of personnel costs, costs of goods sold on the vessels, fuel costs, vessel charter costs, commissions, package tour costs and other related costs. A significant portion of these costs are of a fixed nature and do not vary as a result of changes in our seasonal requirements. Direct operating expenses for ferry operations decreased SEK 56 million, or (4)%, in the three months ended March 31, 2004 to SEK 1,368 million from SEK 1,424 million in the three months ended March 31, 2003, mainly due to reduced costs for bunker fuel and the increase of the SEK with respect to the British pound. Direct operating expenses for ferry operations for the three months ended March 31, 2004 was 84% of revenues, as compared to 90% for the three months ended March 31, 2003. Drilling. Direct operating expenses for drilling consist primarily of personnel costs, fuel costs, insurance, maintenance and catering costs. Direct operating expenses from drilling operations decreased SEK 12 million, or (5)%, in the three months ended March 31, 2004 to SEK 209 million from SEK 221 million in the three months ended March 31, 2003, mainly due to the increase of the SEK with respect to the US dollar, partly offset by increased costs for repair and maintenance for the Stena Tay, increased personnel costs for the Stena Don and the amortization of deferred costs for the Stena Don with respect to the Statoil settlement in 2003. Direct operating expenses from drilling operations for the three months ended March 31, 2004 were 61% of drilling revenues as compared to 50% for the three months ended March 31, 2003 reflecting decreased revenues in our drilling operations. Shipping. Direct operating expenses for shipping consist primarily of vessel charter costs, fuel costs, personnel costs, insurance and other related vessel costs. Direct operating expenses from shipping operations increased SEK 62 million, or 16%, in the three months ended March 31, 2004 to SEK 453 million from SEK 391 million in the three months ended March 31, 2003. Direct operating expenses with respect to Roll-on/Roll-off Vessels increased by SEK 28 million, or 127%, in the three months ended March 31, 2004 to SEK 50 million from SEK 22 million in the three months ended March 31, 2003, mainly due to the newly chartered-in vessels the Vasaland and the Svealand in April 2003 and the delivery of the Stena Forecaster in June 2003 and the Stena Forerunner in October 2003. Direct operating expenses associated with crude oil tankers increased SEK 31 million, or 8%, to SEK 398 million from SEK 367 million, mainly due to increased costs resulting from a larger fleet, including deliveries of our new tankers in the first quarter of 2004 and higher rates for our chartered in vessels, partly offset by an increase of the SEK with respect to the US dollar. Direct operating expenses for crude oil operations for the three months ended March 31, 2004 were 58% of revenues, as compared to 75% for the three months ended March 31, 2003. Direct operating expenses for crude oil tankers include time-charter costs, which normally are fixed for periods between 6 months and up to 5 years in advance, while revenues in the spot market vary with each voyage. Property. Property expenses consist primarily of maintenance, heating and personnel costs. Direct operating expenses from property operations increased SEK 3 million, or 3%, in the three months ended March 31, 2004 to SEK 110 million from SEK 107 million in the three months ended March 31, 2003, primarily due to increased costs for repair and maintenance. Direct operating expenses from property operations in the three months ended March 31, 2004 were 48% of property revenues, as compared to 46% for the three months ended March 31, 2003. Selling and administrative expenses Selling and administrative expenses increased SEK 10 million, or 3%, in the three months ended March 31, 2004 to SEK 368 million from SEK 358 million in the three months ended March 31, 2003, mainly due to increased salaries and consultants costs. 11 Stena AB and Consolidated Subsidiaries Depreciation and amortization We have conducted a review of the estimated useful lives of our vessels. As a result of this review, we have established new useful lives for both existing and future vessels as follows, effective January 1, 2004: RoRo vessels and tankers are depreciated over 20 years instead of over 15 years; and the useful life of certain old ferries and drilling rigs has been extended. The effect of these revisions has reduced depreciation expense in the first three months of 2004 with approximately SEK 57 million. Depreciation and amortization charges decreased SEK 29 million, or (7%), in the three months ended March 31, 2004 to SEK 391 million from SEK 420 million in the three months ended March 31, 2003, mainly due to the change in estimated useful lives as above and the increase of the SEK with respect to the US dollar, in particular for the drilling rigs which are denominated in US dollars, partly offset by increased depreciation in the ferry operations and the crude oil tanker segment due to the delivery of new vessels. Financial income and expense, net Financial income and expense, net improved by SEK 113 million in the three months ended March 31, 2004 to SEK (32) million from SEK (145) million in the three months ended March 31, 2003. Net gain (loss) on securities in the three months ended March 31, 2004 amounted to SEK 77 million, of which SEK 68 million related to net realized gains on strategic equity shares and SEK 9 million related to the reversal of previously recorded unrealized losses. Net gain (loss) on securities in the three months ended March 31, 2003 was SEK (12) million, mainly related to unrealized losses on marketable debt and equity securities. Interest income in the three months ended March 31, 2004 decreased SEK 7 million to SEK 20 million from SEK 27 million in the three months ended March 31, 2003. Interest expense for the three months ended March 31, 2004 decreased SEK 28 million to SEK (201) million from SEK (229) million for the three months ended March 31, 2003. Interest expense decreased mainly due to an increase of the SEK with respect to the US dollar and reduced interest rates as a result of a decline in interest rates generally, partly offset by increased borrowings as a consequence of investments in vessels and properties. During the three months ended March 31, 2004, we had foreign exchange gains, net of SEK 7 million consisting of gains of SEK 15 million from currency trading and losses of SEK (8) million from translation differences. In the three months ended March 31, 2003, we had foreign exchange gains, net of SEK 2 million consisting of gains of SEK 9 million from translation differences and losses of SEK (7) million from currency trading. Other financial income (expense) of SEK 61 million for the three months ended March 31, 2004 includes SEK 73 million relating to amortization of the excess of SEK 658 million of the acquisition price of the Stena Line 105/8% Senior Notes due 2008 acquired in late 2000 over their redemption price. The remaining other financial income (expense) for the three months ended March 31, 2004 was SEK (12) million, including normal bank charges and the amortization of deferred financing charges for the 95/8% Senior Notes due 2012, the 7 1/2 % Senior Notes due 2013, the revolving credit facilities and capital lease obligations. Other financial income (expense) of SEK 65 million for the three months ended March 31, 2003 includes SEK 97 million of released provisions relating to the excess value for Stena Line Senior Notes and SEK (32) million of bank charges and deferred finance charges, including the remaining balance of the deferred costs for the 1995 revolving credit facility. Income taxes Income taxes for the three months ended March 31, 2004 were SEK 20 million, consisting of current taxes of SEK (8) million and deferred taxes of SEK 28 million. Income taxes for the three months ended March 31, 2003 were SEK 58 million, consisting of net current taxes of SEK (8) million and deferred taxes of SEK 66 million. The provision for taxes is based upon the applicable tax rates in the various jurisdictions where revenues are generated. 12 Stena AB and Consolidated Subsidiaries Liquidity and Capital Resources The liquidity requirements of the Company principally relate to: (i) servicing debt; (ii) financing the purchase of vessels and other assets; and (iii) funding working capital. The Company has in prior years met its liquidity requirements with cash on hand, cash flows from operations, borrowings under various credit facilities and refinancing arrangements. As of March 31, 2004, the Company had total cash and marketable securities of SEK 4,806 million as compared with SEK 4,568 million at December 31, 2003. For the three months ended March 31, 2004, cash flows used in operating activities amounted to SEK (374) million as compared to SEK (390) million in the first three months ended March 31, 2003. For the three months ended March 31, 2004, cash flows used in investing activities amounted to SEK (1,452) million, of which SEK (1,260) million related to capital expenditures. SEK 452 million was invested in Drott shares. For the three months ended March 31, 2003, cash flows used in investing activities amounted to SEK (728) million. Capital expenditures during this period were SEK (979) million. Total construction in progress as of March 31, 2004 was SEK 455 million as compared to SEK 589 million at December 31, 2003. Cash flows provided by financing activities for the three months ended March 31, 2004 amounted to SEK 1,163 million in 2004, mainly relating to proceeds from new debt and drawings under the revolving credit facilities. For the three months ended March 31, 2003, cash flows used in financing activities amounted to SEK (19) million. Total interest bearing debt as of December 31, 2004 amounted to SEK 16,219 million as compared with SEK 14,826 million at December 31, 2003. The increase in debt relates to the weakening of the SEK against the US dollar, the British pound and the euro as well as new borrowings for the acquisition of further shares in the property company Drott and for the new vessels Stena Companion, Stena Concord and Stena Consul. As of March 31, 2004, the Company had two revolving credit facilities. The $600 million revolving credit facility from 2002 matures in November 2007. As of March 31, 2004, $392 million was outstanding under this facility and $14 million was used for issuing bank guarantees. As of December 31, 2003, $330 million was outstanding under this facility and $14 million was used for issuing bank guarantees. The $275 million revolving credit facility from 2001 has been reduced in accordance with its terms to $215 million and matures in September 2006. As of March 31, 2004, $135 million was outstanding under this facility. As of December 31, 2003, $150 million was outstanding under this facility. Our remaining capital expenditure commitment for newbuildings on order as of March 31, 2004 was SEK 1,498 million, of which SEK 79 million is due within 2004 and all of which is due by 2006. We plan on financing the unpaid balance, together with additional expenses and financing costs, through cash from operations, existing revolving credit facilities, new capital lease agreements, new bank loans or other financing arrangements. We believe that, based on current levels of operating performance and anticipated market conditions, our cash flow from operations, together with other available sources of funds, including refinancings, will be adequate to make required payments of principal and interest on our debt, to permit proposed capital expenditures, including newbuildings and other vessel acquisitions, and to fund anticipated working capital requirements. OTHER FINANCIAL INFORMATION - RESTRICTED GROUP Restricted Group Data represents the Company's selected consolidated financial information excluding the property business segment and, as of January 2003, the Company's investment in certain financial fixed assets through its subsidiaries Stena Adactum AB and Simplon Ltd. The Company's property operations are conducted through various subsidiaries. The Company issued $200 million 9 5/8% Senior Notes due 2012 on November 27, 2002 and $175 million 7 1/2% Senior Notes due 2013 on November 24, 2003 (collectively, the "Notes"). For purposes of the Indentures under which the Notes were issued (the "Indentures"), the subsidiaries in the property operations plus Stena Adactum AB and Simplon Ltd are designated Unrestricted Subsidiaries, as defined in the Indentures, and, as a result, are not be bound by the restrictive provisions of the Indentures. The following information is presented solely for the purpose of additional analysis for investors of the Company's results of operations and financial condition. Amounts in U.S. dollars have been translated, solely for the convenience of the reader, at an exchange rate of $1.00 = SEK 7.5500, the Noon Buying Rate on March 31, 2004. 13
Stena AB and Consolidated Subsidiaries Condensed Consolidated Income Statements - Restricted group Three month periods ended March 31, 2003 March 31, 2004 (unaudited) ------------------------------------ SEK SEK $ (in millions) Revenues: Ferry operations........................................ 1,577 1,623 215 Drilling................................................ 440 341 45 Shipping................................................ 564 797 106 Net gain on sale of vessels.................... 60 66 9 ------- ------- ------- Total shipping................................. 624 863 115 Other................................................... 3 1 -- ------- ------- ------- Total revenues.......................................... 2,644 2,828 375 ------- ------- ------- Direct operating expenses: Ferry operations........................................ (1,424) (1,368) (181) Drilling................................................ (221) (209) (28) Shipping................................................ (391) (453) (60) Other................................................... (3) (1) -- ------- ------- ------- Total direct operating expenses......................... (2,039) (2,031) (269) ------- ------- ------- Selling and administrative expenses..................... (343) (347) (46) Depreciation and amortization........................... (403) (375) (50) ------- ------- ------- Total operating expenses................................ (2,785) (2,753) (365) ------- ------- ------- Income from operations.................................. (141) 75 10 ------- ------- ------- Financial income and expense: Dividends received...................................... -- 1 -- Gain (loss) on securities, net.......................... 31 23 3 Interest income......................................... 24 31 4 Interest expense........................................ (153) (132) (17) Foreign exchange gains (losses), net.................... 2 7 1 Other financial income (expense), net................... 63 62 8 ------- ------- ------- Total financial income and expense...................... (33) (8) (1) ------- ------- ------- Minority interest....................................... 1 -- -- Income before taxes..................................... (173) 67 9 Income taxes............................................ 62 13 2 ------- ------- ------- Net income.............................................. (111) 80 11 ------- ------- -------
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Stena AB and Consolidated Subsidiaries Condensed Consolidated Balance Sheets - Restricted Group December 31, 2003 March 31, 2003 ------------------------------------- (unaudited) SEK SEK $ (in millions) ASSETS Noncurrent assets: Intangible assets.......................................... 11 50 7 Tangible fixed assets: Vessels................................................... 13,208 14,435 1,912 Construction in progress.................................. 589 455 60 Equipment................................................. 592 577 76 Property.................................................. 1,538 1,612 214 ------- ------- ------- Total tangible fixed assets................................ 15,927 17,079 2,262 Financial fixed assets: Marketable securities...................................... 315 355 47 Other assets............................................... 2,538 2,595 343 ------- ------- ------- Total noncurrent assets.................................... 18,791 20,079 2,659 ------- ------- ------- Current assets: Inventories................................................ 235 254 34 Trade debtors.............................................. 883 1,025 136 Other receivables.......................................... 655 738 98 Intercompany accounts...................................... 1,522 1,551 205 Prepaid expenses and accrued income........................ 856 1,141 151 Short-term investments..................................... 327 644 85 Cash and cash equivalents.................................. 1,623 989 131 ------- ------- ------- Total current assets....................................... 6,101 6,342 840 ------- ------- ------- Total assets............................................... 24,892 26,421 3,499 ------- ------- ------- STOCKHOLDERS' EQUITY AND LIABILITIES Stockholders' equity: Capital stock.............................................. 5 5 1 Reserves .................................................. 11,528 11,902 1,576 ------- ------- ------- Total stockholders' equity................................. 11,533 11,907 1,577 ------- ------- ------- Provisions: Deferred income taxes................................... 838 871 115 Other................................................... 183 113 15 ------- ------- ------- Total provisions........................................... 1,021 984 130 ------- ------- ------- Noncurrent liabilities: Long-term debt.......................................... 5,551 6,288 833 Senior notes............................................ 2,699 2,832 375 Capitalized lease obligations........................... 1,329 1,383 183 Other noncurrent liabilities............................ 145 138 18 ------- ------- ------- Total noncurrent liabilities............................... 9,724 10,641 1,409 Current liabilities: Short-term debt......................................... 313 334 44 Capitalized lease obligations........................... 44 43 6 Trade accounts payable.................................. 357 436 58 Income tax payable...................................... 28 30 4 Other................................................... 296 264 35 Accrued costs and prepaid income........................ 1,576 1,782 236 ------- ------- ------- Total current liabilities.................................. 2,614 2,889 383 ------- ------- ------- Total stockholders' equity and liabilities................. 24,892 26,421 3,499 ------- ------- -------
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Stena AB and Consolidated Subsidiaries Condensed Consolidated Statements of Cash Flow - Restricted Group Three month periods ended March 31, 2003 March 31, 2004 (unaudited) ------------------------------------ SEK SEK $ (in millions) Net cash flows from operating activities: Net income.................................................... (111) 80 11 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................................. 403 375 50 (Gain)/loss on sale of property, vessels and equipment........ (60) (66) (9) (Gain)/loss on securities, net................................ (31) (23) (3) Unrealized foreign exchange (gains) losses.................... 25 (95) (13) Deferred income taxes......................................... (71) (20) (3) Minority interest............................................. (1) -- -- Other non cash items.......................................... 26 (66) (9) Net cash flows from trading securities........................ 8 (290) (38) Changes in working capital.................................... (2,276) (298) (39) -------- ------- ------- Net cash provided by operating activities..................... (2,088) (403) (53) -------- ------- ------- Net cash flows from investing activities: Cash proceeds from sale of property, vessels and equipment.... 635 251 33 Capital expenditure on property, vessels and equipment........ (835) (1,184) (157) Proceeds from sale of securities.............................. 150 62 8 Purchase of securities........................................ (285) (82) (11) Increase of non-current assets................................ -- (9) (1) Decrease of non-current assets................................ 8 -- -- Other investing activities.................................... (5) (4) -- -------- ------- ------- Net cash provided by/(used in) investing activities........... (332) (966) (128) -------- ------- ------- Net cash flows from financing activities: Proceeds from issuance of debt................................ -- 204 27 Principal payments on debt.................................... (1,440) (86) (11) Net change in borrowings on line-of-credit agreements......... 2,294 523 69 New capitalized lease obligations............................. 678 -- -- Principle payments capital lease obligations.................. (5) (11) (2) Net change in restricted cash accounts........................ 10 (4) (1) Other financing activities.................................... (104) 98 13 -------- ------- ------- Net cash provided by/(used in) financing activities........... 1,433 724 95 -------- ------- ------- Effect of exchange rate changes on cash and cash equivalents.. 7 11 2 -------- ------- ------- Net change in cash and cash equivalents....................... (980) (634) (84) Cash and cash equivalents at beginning of period.............. 1,880 1,623 215 -------- ------- ------- Cash and cash equivalents at end of period.................... 900 989 131 ======== ======= =======
16 Stena AB and Consolidated Subsidiaries Other data - Restricted Group Three month periods ended March 31, 2003 March 31, 2004 SEK SEK $ ----------------------------------- (in millions) OTHER DATA: Adjusted EBITDA......................... 284 481 64 Adjusted EBITDA is defined as income from operations plus cash dividends received from affiliated companies, interest income, depreciation and amortization, minority interest and non-cash charges minus aggregate gains on vessel dispositions to the extent such gains exceed 25% of Adjusted EBITDA net of all such gains. We have included information concerning Adjusted EBITDA because it conforms with the definition of Consolidated Cash Flow in the indentures governing our Senior Notes due 2012 and 2013. Adjusted EBITDA is not a measure in accordance with Swedish GAAP or US GAAP and should not be used as an alternative to cash flows or as a measure of liquidity and should be read in conjunction with the condensed consolidated statements of cash flows contained in our condensed consolidated financial statements included elsewhere herein. The computation of Adjusted EBITDA and a reconciliation to cash flows from operating activities is presented below: Income from operations............................ (141) 75 10 Adjustments: Interest income................................... 24 31 4 Depreciation and amortization..................... 403 375 50 Minority interest................................. 1 -- -- Excess gains on vessel dispositions............... (3) -- -- Adjusted EBITDA................................... 284 481 64 Adjustments: Remaining (gain)/loss on vessel dispositions...... (57) (66) (9) Net cash flows from trading securities............ 8 (290) (38) Interest expense.................................. (153) (132) (17) Foreign exchange (gains) losses................... 27 (88) (12) Other non cash items.............................. 26 (66) (9) Changes in working capital........................ (2,276) (298) (39) Other items....................................... 53 56 7 Cash flow from operating activities............... (2,088) (403) (53) 17 -----END PRIVACY-ENHANCED MESSAGE-----