MIF has a fleet of sixteen tankers (including one chartered - in Aframax) comprising 1,420,000 DWT with an average tonnage age of approximately eight years which is much younger than the world's tanker tonnage. Although the fleet was unchanged during 1999 and 2000, a very strong charter market lifted revenues by $18.17 million. Effective cost containment held normal operating expenses at year earlier levels; however in the fourth quarter, four vessels underwent special repairs related to upgrades in preparation for more demanding and rewarding charters or damage. As a result, full year operating expenses and overhead increased $3.09 million or 10.6%.
Income from Operations at $53.52 was $15.08 million above the 1999 level. Net interest expense of $18.26 million versus $13.57 million reflected somewhat higher interest rates during the past year as well as much reduced gains from interest rate swaps. Depreciation declined $0.84 million. There were no vessel sales in 2000 while a gain from vessel sale of $0.98 million was realized in 1999.
During 2000, the Board of Directors authorized the repurchase and cancellation of previously outstanding shares of common stocks. This initiative was based on the view that the market price for the shares did not properly reflect their underlying value. It was also designed to improve share marketability. The result of the initiative was the repurchase of 259,254 shares or approximately 2.6% of the outstanding shares. This contributed modestly to the growth in earnings per share and per share book value.
The economic outlook for 2001 is mixed. Both the U.S. and Japan are flirting with modest recession which would have an impact on emerging economies. Europe appears more resilient. Overall petroleum demand could be tempered and grow less than the widely forecast 2% increase. Nevertheless the tanker industry appears well positioned to face the challenge. Modest capacity additions should restrict the impact on supply/demand balance. As a result the improved charterhire environment of last year should be sustained for modern well
managed tonnage.
Industry operating margins could come under pressure from higher insurance rates and a potentially softer dollar. However, the likelihood of lower interest rates should provide some relief. On balance the tanker industry should enjoy another year of above average profitability.
We anticipate that MIF will enjoy a similar experience. A significant portion of the fleet operates on time charters with fixed rates for much or all of 2001. On balance, this segment of the fleet will generate moderately higher revenues in 2001 versus 2000. The remaining four vessels, all aframaxes, operate under market related agreements and within an environment of volatility we expect that full year revenues will equal or exceed those of 2000. Despite higher insurance costs, management plans to hold operating and overhead costs at the levels of last year.
Management and the Board of Directors of MIF are optimistic about the intermediate prospects of the industry and the company. As previously announced the company has on order three newbuilding Suezmaxes to be delivered in 2002, as well as an additional Suezmax under contract option. The company is also exploring other opportunities to renew the fleet.
MIF has advised the Oslo Stock Exchange that its Board of Directors has allocated a fund which may be employed to repurchase shares during March, 2001.