UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999
MILLENIUM SEACARRIERS, INC.
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's Name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
c/o Ugland House
South Church Street
Grand Cayman, Cayman Islands
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.)
Form 20-F /X/ Form 40-F / /
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes / / No /X/
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b):82-_______ )
<PAGE>
MILLENIUM SEACARRIERS, INC.
REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
INDEX
PART I PAGE
- ------ ----
Item 1. Financial Information.................................................1
Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998.................................1
Consolidated Statements of Operations
for the three-month period ended June 30, 1999
and the six-month period ended June 30, 1999..........2
Consolidated Statement of Cash Flows
for the six-month period ended June 30, 1999..........3
Consolidated Statements of Shareholders' Equity
for the six-month period ended June 30, 1999..........4
Notes to Consolidated Financial Statements.....................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
for the three and six month period ended June 30, 1999.........9
PART II Other Information..................................................15
Item 1. Legal Proceedings....................................................15
Item 2. Changes in Securities................................................15
Item 3. Defaults Upon Senior Securities......................................15
Item 4. Submission of Matters to a Vote of Security Holders..................15
Item 5. Other Information....................................................15
Item 6. Exhibits and Reports on Form 6-K.....................................15
Signature.....................................................................16
<PAGE>
PART I
Item 1. FINANCIAL INFORMATION
- ------- ---------------------
<TABLE>
<CAPTION>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF
JUNE 30, 1999 AND DECEMBER 31, 1998
(Expressed in U.S. Dollars)
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents $ 4,574,597 $ 5,736,645
Restricted cash 7,243,470 31,524,890
------------- -------------
11,818,067 37,261,535
Receivables:
Voyages 380,737 311,574
Claims and other 46,535 242,552
Inventories and prepaid expenses 1,227,190 443,252
------------- -------------
TOTAL CURRENT ASSETS 13,472,529 38,258,913
-------------- -------------
Intangible assets 2,832,932 3,065,775
Deferred charges, net of accumulated amortization 5,677,795 5,555,303
FIXED ASSETS
Vessels at cost 108,705,225 84,493,670
Less: accumulated depreciation (4,430,474) (1,774,349)
------------- -------------
NET BOOK VALUE 104,274,751 82,719,321
Other, net of accumulated depreciation 132,602 25,536
------------- -------------
TOTAL FIXED ASSETS 104,407,353 82,744,857
-------------- --------------
TOTAL ASSETS $ 126,390,609 $ 129,624,848
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Trade accounts payable 5,297,874 5,465,844
Sundry liabilities and accruals 8,418,891 7,368,365
Charter revenue received in advance 949,348 613,031
------------- -------------
TOTAL CURRENT LIABILITIES 14,666,113 13,447,240
Senior Notes 95,829,723 95,604,477
------------- -------------
TOTAL LIABILITIES 110,495,836 109,051,717
------------- -------------
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common stock and paid in capital 22,900,000 22,900,000
Warrants 1,200,000 1,200,000
Accumulated deficit (8,205,227) (3,526,869)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 15,894,773 20,573,131
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 126,390,609 $ 129,624,848
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements
-1-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED JUNE 30, 1999
AND FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1999
(Expressed in U.S. Dollars)
THREE-MONTH PERIOD SIX-MONTH PERIOD
ENDED ENDED
JUNE 30, 1999 JUNE 30, 1999
REVENUE
Freight and hire from voyages $ 8,642,975 $ 16,160,505
Voyage expenses (309,096) (611,714)
Commissions (420,004) (756,849)
----------- ------------
NET REVENUE 7,913,875 14,791,942
----------- ------------
EXPENSES
Vessel operating expenses 4,539,993 8,697,060
Management fees 765,400 1,437,942
General and administrative 137,266 298,188
Depreciation and amortization 2,050,254 3,861,884
----------- ------------
7,492,913 14,295,074
OPERATING INCOME 420,962 496,868
----------- ------------
OTHER INCOME / (EXPENSE)
Interest expense (2,902,530) (5,716,360)
Other income 169,905 541,134
----------- ------------
(2,732,625) (5,175,226)
----------- ------------
NET LOSS $(2,311,663) $ (4,678,358)
=========== ============
LOSS PER SHARE, BASIC AND DILUTED $ (0.24) $ (0.49)
=========== ============
The accompanying notes are an integral part of these financial statements
-2-
<PAGE>
<TABLE>
<CAPTION>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1999
(Expressed in U.S. Dollars)
SIX-MONTH PERIOD
ENDED
JUNE 30, 1999
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (4,678,358)
Adjustments to reconcile loss to net cash provided by operating activities:
Depreciation and amortization 3,861,884
Changes in operating assets and liabilities
Decrease in Receivables 126,854
(Increase) in Inventories and prepaid expenses (783,938)
(Decrease) in Trade accounts payable (167,970)
Increase in Sundry liabilities and accruals 1,050,526
Increase in Charter revenue received in advance 336,317
-------------
NET CASH USED IN OPERATING ACTIVITIES (254,685)
-------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of vessels (23,615,000)
Additions to vessels (596,555)
Purchase of other fixed assets (122,137)
Deferred dry-docking and special survey (855,091)
NET CASH USED IN INVESTING ACTIVITIES (25,188,783)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from working capital facility 250,000
Repayment of Proceeds from working capital facility (250,000)
Proceeds from Escrow account and restricted cash 24,281,420
-------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 24,281,420
-------------
DECREASE IN CASH AND CASH EQUIVALENTS (1,162,048)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,736,645
-------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,574,597
=============
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid $ 5,639,958
=============
</TABLE>
The accompanying notes are an integral part of these financial statements
-3-
<PAGE>
<TABLE>
<CAPTION>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1999
(Expressed in U.S. Dollars)
COMMON STOCK
AND PAID-IN ACCUMULATED
CAPITAL WARRANTS DEFICIT TOTAL
<S> <C> <C> <C> <C>
BALANCE JANUARY 1, 1999 22,900,000 1,200,000 (3,526,869) 20,573,131
Net Loss for the six month period
ended June 30, 1999 (4,678,358) (4,678,358)
---------- ---------- ----------- -----------
BALANCE JUNE 30, 1999 $22,900,000 $1,200,000 $(8,205,227) $15,894,773
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
-4-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
1. BUSINESS INFORMATION
On March 10, 1998, Millenium Seacarriers, Inc., ("Millenium") was formed (the
"Formation") to directly hold the capital stock of a group of subsidiaries
(collectively the "Company") each of which owns one of Millenium's vessels.
These consolidated financial statements give effect to the Formation pursuant to
which all of Millenium's subsidiaries became wholly owned subsidiaries of
Millenium. Millenium owns and operates a fleet of dry-bulk carriers, primarily
of Handy-size type. As of June 30, 1999, the Company's fleet consists of 21
vessels, which operate worldwide carrying cargoes for many of the world's
leading charterers.
The Company is registered and incorporated in the Cayman Islands. Its principal
business is the acquiring, upgrading and operating of vessels. Millenium
conducts its operations through its subsidiaries whose principal activity is the
operation and ownership of dry-bulk vessels that are under the exclusive
management of Millenium Management, Inc. ("MMI") and the sub-management of
Millenium Maritime Services Ltd., formerly Kylco Maritime Limited, and Millenium
Maritime Services, Inc, formerly Kylco Maritime (USA), Inc.
2. BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States. For a
description of significant accounting policies, see the Notes to the
consolidated financial statements in the 1998 Form 20-F annual report.
Certain reclassifications have been made to the 1998 financial statements to
conform to the classifications in the 1999 financial statements. In the opinion
of management, all adjustments necessary for a fair statement of the results of
the first six months of 1999, which are all of a recurring nature, have been
reflected in the information provided. In addition, as the Company commenced
operations on July 24, 1998, there are no comparitive statements of operations
and cashflows.
3. COMPREHENSIVE INCOME
The Company has no components of comprehensive income and, as a result,
comprehensive income is equal to net income (loss) for all periods presented.
4. BASIC AND DILUTED EARNINGS (LOSS) PER ORDINARY SHARE
Basic and diluted earnings per ordinary share have been computed by dividing net
income (loss) by the average number of outstanding ordinary shares (9,500,000)
following the formation of the Company. There are also 500,000 warrants
outstanding to acquire 500,000 shares of common stock for $0.01 per share.
Assumed exercise of these warrants has been excluded from the calculation of
earnings per common share as the effect of such exercise would be antidilutive.
-5-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
5. VESSELS AND VESSEL OWNING SUBSIDIARIES
As of June 30, the following dry bulk carriers comprised of the Company's fleet.
The vessels denoted with an asterisk (*) were acquired in 1999.
<TABLE>
<CAPTION>
VESSEL OWNING SUBSIDIARY VESSEL'S NAME YEAR DWT ACQUISITION CAPITAL COST
------------------------ ------------- ---- --- ----------- ------- ----
BUILT COST IMPROVEMENTS
----- ---- ------------
<S> <C> <C> <C> <C> <C> <C>
1. Conifer Shipping Co. Ltd. M/V Clipper Atlantic 1975 7,923 $1,625,000 $38,182 $1,663,182
2. Topscale Company Ltd. M/V Clipper Pacific 1976 7,923 1,675,000 34,680 1,709,680
3. Rapid Ocean Carriers, Inc. M/V Millenium Harmony 1978 16,711 5,175,000 35,329 5,210,329
4. Ivy Navigation Ltd. M/V Millenium Golden Hind 1978 16,560 4,375,000 34,159 4,409,159
5. Oakmont Shipping & Trading Ltd. M/V Monica Marissa 1973 55,057 3,625,000 37,695 3,662,695
6. Millenium Amethyst Inc. M/V Millenium Amethyst 1978 23,538 3,000,000 115,978 3,115,978
7. Millenium Yama Inc. M/V Millenium Yama 1979 23,540 3,500,000 128,189 3,628,189
8. Millenium Majestic Inc. M/V Millenium Majestic 1979 17,152 3,000,000 80,485 3,080,485
9. Millenium Elmar Inc. M/V Millenium Elmar 1987 52,640 8,125,000 164,793 8,289,793
10. Millenium Aleksander Inc. M/V Millenium Aleksander 1988 52,670 8,687,500 230,675 8,918,175
11. Millenium IV Inc. M/V Millenium Condor 1981 27,036 5,500,000 126,461 5,626,461
12. Millenium VI Inc. M/V Millenium Osprey 1984 28,786 7,000,000 155,832 7,155,832
13. Millenium III Inc M/V Millenium Leader 1984 37,489 8,250,000 122,653 8,372,653
14. Millenium V Inc. M/V Millenium Falcon 1981 27,048 5,500,000 164,783 5,664,783
15. Millenium VII Inc. M/V Millenium Eagle 1983 28,788 6,750,000 169,673 6,919,673
16. Millenium II Inc. M/V Millenium Hawk 1984 28,791 7,000,000 165,491 7,165,491
17. Millenium Maritime Inc. M/V Millenium Raptor* 1982 30,670 3,075,000 152,305 3,227,305
18. Millenium Lion, Inc. M/V Millenium Trader* 1985 26,536 5,270,000 110,609 5,380,609
19. Millenium Tiger, Inc. M/V Millenium Dawn* 1985 26,563 5,270,000 76,895 5,346,895
20. Millenium Man, Inc. M/V Millenium Express* 1984 39,055 6,350,000 94,527 6,444,527
21. Millenium Transport, Inc. M/V Millenium Amanda* 1982 36,249 3,650,000 63,331 3,713,331
=========================================
TOTAL VESSELS COST $106,402,500 $2,302,725 $108,705,225
=========================================
</TABLE>
6. WORKING CAPITAL FACILITY
The Company had a $7.0 million one year working capital revolving line of credit
with The Bank of New York, which matured on July 20, 1999. The Bank extended
$500,000 of this facility until August 5, 1999 under the same terms and
conditions. Borrowings under the facility bore interest at LIBOR+1.5%, and were
collateralized by the Company's vessels and subject to various covenants. The
Facility was subject to a 0.375% commitment fee on the unused portion. As of
June 30, 1999 there were no amounts outstanding under this facility. The Company
is in negotiations with other banks to put in place a new working capital
facility.
-6-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
7. LONG TERM DEBT
JUNE 30, DECEMBER 31,
1999 1998
LONG TERM DEBT IS AS FOLLOWS: ------------ ------------
12% First Priority Ship Mortgage Notes
due 2005 ($100 million principal amount
at maturity), (the "Notes"), issued on
July 24, 1998. Interest on the Notes is
payable semi-annually on January 15 and
July 15 of each year, commencing January
15, 1999, at a rate of 12% per annum on
the accreted value. The Notes will
mature on July 15, 2005 and will be
redeemable, in whole or part, at the
option of the Company at any time on or
after July 15, 2003. $100,000,000 $100,000,000
Less : Unamortized portion of bond discount (4,170,277) (4,395,523)
------------ ------------
Notes $ 95,829,723 $ 95,604,477
============ ============
The gross bond discount of $4,607,000 is amortized using the effective interest
method over the life of the Notes (7 years).
The Notes are fully and unconditionally guaranteed (the "Subsidiary
Guarantees"), jointly and severally, on a senior basis by each of the
subsidiaries of Millenium (the "Subsidiary Guarantors"). The Notes are currently
collateralized by First Priority Ship Mortgages on the Company's vessels. As of
June 30, 1999, the remainder of the net proceeds from the offering are held in
an escrow account, and the Company intends to use these proceeds to purchase
additional vessels or for working capital or for other corporate purposes. The
Company's bonds are registered by the United States Securities and Exchange
Commission pursuant to the United States Securities Act of 1933.
The indebtedness evidenced by the Notes constitutes a general secured senior
obligation of the Company and is fully and unconditionally guaranteed by each of
the subsidiaries of the Company and will rank pari passu in right of payment
with all future senior indebtedness of the Company and its subsidiary
guarantors. The Indenture, pursuant to where the Notes were issued (the "Notes
Indenture"), contains certain covenants that among other things, limit the type
and amount of additional indebtedness that may be incurred by the Company and
imposes certain limitations on investments, loans and advances, sales or
transfers of assets, dividends and other payments, the ability of the Company to
enter into sale-leaseback transactions, certain transactions, with affiliates
and certain mergers, consolidations and purchases of assets, and amendments to
security agreements. The Company is currently in compliance with the terms of
the Notes Indenture at June 30, 1999.
-7-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
8. RELATED PARTY TRANSACTIONS
MANAGEMENT FEES
Each of the Company's vessels receives management services from its equity
shareholder MMI pursuant to a Management Agreement among the Company's vessel
owning subsidiaries and MMI. Under the Management Agreement, MMI acts as the
fleet's technical manager and performs all commercial management functions,
including arranging chartering, advising the Company on the purchase and sale of
vessels and advising on obtaining insurance. As a technical manager, MMI (i)
provides qualified officers and crews on board vessels, (ii) manages day-to-day
vessel operations and maintains relationships with charterers, (iii) purchases
on behalf of the Company stores, spares, supplies and equipment for vessels,
(iv) performs general vessel maintenance, subcontracts for dry-dock facilities
for any major repairs and overhauls, (v) ensures regulatory and classification
society compliance, (vi) performs vessel operational budgeting and evaluations,
and (vii) provides accounting, treasury and finance functions (including cash
collections and disbursements on behalf of the Company). As remuneration for its
services, MMI receives a fixed management fee (payable monthly in advance)
ranging from $350 to $600 per day per vessel depending on the vessel type. In
addition, any visit to a vessel by a superintendent of MMI to evaluate and
supervise any repairs, dry-docking or other activities will entitle MMI to
expenses incurred and, from visits in excess of five days per annum per vessel,
its expenses incurred and an amount equal to $550 for each additional day. As
additional remuneration for its services, MMI receives commission of (i) 1.25%
on all gross time charter revenue, (ii) 1.75% on all gross freight revenue,
(iii) 1% on the gross sale or purchase price of a vessel and (iv) 2% of
insurance premiums for insurance placed, in each case as adjusted to reflect
fluctuations in market rates and practices.
MMI has sub-contracted certain of its technical and commercial management
services to Millenium Maritime Services Ltd. and Millenium Maritime Services,
Inc., both affiliates of MMI.
The Company records the management fee paid to MMI in operating expenses. As of
June 30, 1999, there is a payable to MMI which is reflected in Sundry
liabilities and accruals, amounting to $248,264. For the three and six month
periods ending June 30, 1999, $765,400 and $1,437,942, respectively, of
management fees were charged to the Company in connection with the
afore-mentioned agreement.
9. CONTINGENCIES
There are no material legal proceedings to which the Company is a party or to
which any of its properties are the subjects, other than routine litigation
incidental to the Company's business. In the opinion of management, the
disposition of these lawsuits should not have a material impact on the Company's
results of operations, financial position and cash flows.
-8-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
- --------------------------------------------------------------
GENERAL
The Company is an international shipping company that owns and operates a fleet
of drybulk carriers, primarily Handysize drybulk carriers. As of June 30, 1999,
the Company's fleet consisted of 21 vessels totalling 610,725 deadweight-tons.
The Company was incorporated on March 10, 1998 in the Cayman Islands. The
Company began operations on July 24, 1998, with five vessels and subsequently
expanded its fleet to 21 vessels as of June 30, 1999, all of which were acquired
from the net proceeds of an offering of Units ("Units") consisting of $100
million principal amount at maturity of Notes and $1.2 million of Warrants. The
Company also received an equity contribution of $24 million from Millenium
Management, Inc., MMI, the holder of 100% of the outstanding common stock of the
Company.
The vessels acquired in 1999 are as follows :
<TABLE>
<CAPTION>
Date of delivery to
Vessel Acquisition Date Charterer Vessel Flag Purchase Price
- ------------------ ------------------ -------------------- -------------- --------------
<S> <C> <C> <C> <C>
Millenium Raptor March 12, 1999 April 17, 1999 Cayman Islands $3,075,000
Millenium Trader April 28, 1999 Spot market Liberia 5,270,000
Millenium Dawn June 2, 1999 June 4, 1999 Liberia 5,270,000
Millenium Express June 10, 1999 June 15, 1999 Liberia 6,350,000
Millenium Amanda June 22, 1999 June 23, 1999 Liberia 3,650,000
</TABLE>
As the Company began operations on July 24, 1998, the three and six months ended
June 30, 1999, do not have relevant periods for comparison purposes.
Accordingly, this discussion does not present comparisons but only reviews
trends.
The following benchmarks are used by the Company to measure revenues:
(i) utilization as an index that indicates vessel earning days (on the basis
that 350 calendar days per year equals 100% utilization), and (ii) the average
daily time charter equivalent (TCE) rate to analyze net revenues
after commissions on the basis of hire-earning days.
The following table sets forth certain statement of operations and other
operating data for the Company.
Three-month period Six-month period
ended ended
June 30, 1999 June 30, 1999
-------------------------------------
Net Revenue $ 7,913,875 $ 14,791,942
Vessel Operating Expenses (4,539,993) (8,697,060)
Management Fees (765,400) (1,437,942)
General and Administrative (137,266) (298,188)
------------------------------------
Earnings before Interest, Tax,
Depreciation and Amortization (EBITDA) $ 2,471,216 $ 4,358,752
====================================
Average utilization 95.2% 95.2%
====================================
-9-
<PAGE>
RESULTS OF OPERATIONS FOR THREE-MONTHS ENDED JUNE 30, 1999
NET REVENUE
Net revenue for the three-month period ended June 30, 1999 was $7.9 million.
During the quarter, 97% of the Company's revenues were earned from period time
charters contracted with first class charterers, many of which continued from
the previous year. The quarter consisted of 1,668 ship-operating days at an
average fleet gross hire rate of $5,440 per day. In addition, the fleet averaged
a utilization rate of 95.2% during the period.
During the quarter, 20 of the 21 vessels were on time charter while the
Millenium Trader earned revenues from a voyage charter. Towards the end of the
quarter, the Monica Marissa also entered into a voyage charter. The Clipper
Atlantic and the Clipper Pacific continued to be employed by Clipper Shipping,
Inc. ("Clipper"). The Clipper Golden Hind and Clipper Harmony charters with
Clipper ended in mid-June and these vessels were subsequently chartered by other
charterers. The vessels were also renamed Millenium Golden Hind and Millenium
Harmony. The Millenium Leader continues to be chartered by HSH of Singapore. The
Millenium Elmar's charter with Estonian Shipping Co. ("Esco") ended in mid-May
following which it was immediately chartered by another charterer. Fednav
International ("Fednav") took delivery of the Laker-type vessels, the Millenium
Osprey, Millenium Condor, Millenium Falcon and Millenium Hawk during April at
their previously contracted charter rate while the Millenium Eagle, which
remained with Fednav during the first quarter of 1999 at market rates, reverted
to its contracted rate in May. Under the terms of the three-year Fednav
charters, Fednav has the option to redeliver these vessels during the
January-March winter months when the Great Lakes freeze. The Millenium Raptor
entered into service with Fednav in April. The Monica Marissa was on time
charter until mid-May, after which it went into a voyage charter.
VESSEL OPERATING EXPENSES
Vessel operating expenses, excluding management fees and depreciation and
amortization, were $4.5 million for the quarter ended June 30, 1999, compared to
$4.1 million for the quarter ended March 31, 1999. The quarter consisted of
1,668 ship-operating days, which includes ship-operating days for the vessels
acquired in the second quarter of the year duly pro-rated from the date of
acquisition. The second quarter average vessel running costs for crewing,
insurance, lubricants, repairs and maintenances, registry and survey costs, and
vessel communications came to $2,725 per day compared to $2,850 per day during
the first quarter.
MANAGEMENT FEES
Management fees payable to MMI for contracted technical and commercial
management services for the three months ended June 30, 1999 were $765,400.
Each of the Company's vessels receives management services from its equity
shareholder MMI pursuant to a Management Agreement among the Company's vessel
owning subsidiaries (the "Vessel Owning Subsidiaries) and MMI. Under the
Management Agreement, MMI acts as the fleet's technical and commercial manager.
As a technical manager, MMI, on behalf of the Vessel Owning Subsidiaries, (i)
provides qualified officers and crews on board vessels, (ii) manages day-to-day
vessel operations and maintains relationships with charterers, (iii) purchases
on behalf of the Company stores, spares, supplies and equipment for vessels,
(iv) performs general vessel maintenance, subcontracts for drydock facilities
for any major repairs and overhauls, (v) ensures regulatory and classification
society compliance, (vi) performs vessel operational budgeting and evaluations,
and (vii) provides accounting, treasury and finance functions (including cash
collections and disbursements on behalf of the Company). As remuneration for its
services,
-10-
<PAGE>
MMI receives a fixed management fee (payable monthly in advance) ranging from
$350 to $600 per day per vessel. The Company treats the management fee paid to
MMI as an operating expense.
Under commercial management services, MMI, on behalf of the Vessel Owning
Subsidiaries, primarily maintains and negotiates vessel charters, vessel
sale-and-purchase brokering, and places insurance covers for vessels. As
remuneration for its services, MMI receives a commission of 1.25% on all gross
time charter revenue and 1.75% on all gross spot charter revenue earned by each
vessel managed, 1% on the gross sale or purchase price of a vessel for brokerage
services, and 2% of all insurance covers placed per vessel managed.
MMI sub-contracts certain of its technical and commercial management services to
Millenium Maritime Services Ltd. and Millenium Maritime Services, Inc.
DEPRECIATION AND AMORTIZATION
Total depreciation for the three months ended June 30, 1999 was $1,419,841.
Vessel depreciation is calculated based on the remaining useful life of the
vessel, assuming a maximum life of 30 years, net of salvage value.
Deferred vessel costs, including deferred dry-docking expenses, are capitalized
and amortized over a period of two and a half years (30 months). During the
quarter ended June 30, 1999, the new costs for dry-docking and special surveys
amounted to $805,115 which included $525,347 for the Millenium Majestic,
$153,680 for the Millenium Osprey and $110,624 for the Millenium Trader. For the
three months ended June 30, 1999, total amortization of deferred vessel charges,
including deferred dry-docking expenses, were $231,333. Amortization of
transaction costs and other acquisition costs relating to the issuance of the
Units were $399,080. These costs are amortized over the life of the Notes or 7
years from their issuance in July 1998.
INTEREST EXPENSE
For the three months ended June 30, 1999, the interest expense on the Company's
long-term debt was $2,902,530. During the three month period ended June 30,
1999, interest earned on cash balances was $211,021.
NET INCOME (LOSS)
Net loss for the three months ended June 30, 1999 was $2.3 million. Depressed
freight market conditions continue to impact on the Company's earnings. However,
earnings before interest, taxes, depreciation and amortisation (EBITDA) for the
quarter was $2.5 million, up from $1.9 million in the first quarter of
1999.
RESULTS OF OPERATIONS FOR SIX-MONTHS ENDED JUNE 30, 1999
NET REVENUE
Net revenue for the six-month period ended June 30, 1999 was $14.8 million.
During the period, 98% of the Company's revenues were earned from period time
charters contracted with first class charterers, many of which continued from
the previous year. The period consisted of 3,127 ship-operating days at an
average fleet gross hire rate of $5,430 per day. In addition, the fleet averaged
a utilization rate of 95.2% during the period.
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The period saw the Company's fleet expand from 16 vessels to 21 vessels. The
revenue earning profile of the fleet also changed as many vessels ended their
period charters contracted in 1998 and were entered into service with new
charterers at market rates of hire. The revenues during the period were impacted
by adverse market conditions which existed throughout the six-month period of
operations.
During the period, 20 of the 21 vessels were on time charter while the Millenium
Trader earned revenues from a voyage charter. Towards the end of June, the
Monica Marissa also entered into a voyage charter. The Clipper Atlantic and the
Clipper Pacific continued to be employed by Clipper. The Clipper Golden Hind and
Clipper Harmony charters with Clipper ended in mid-June and these vessels were
subsequently chartered by other charterers. The vessels were also renamed
Millenium Golden Hind and Millenium Harmony. The Millenium Leader continues to
be chartered by HSH. The Millenium Aleksander's charter with Esco concluded at
the end of March and the vessel was placed into a period charter with another
charterer at market rates. The Millenium Elmar's charter with Esco ended in
mid-May following which it was placed with another charterer. During the first
quarter, Fednav International Ltd. redelivered the Laker-type vessels the
Millenium Osprey, Millenium Condor, Millenium Falcon and Millenium Hawk, for
three months when the Great Lakes freeze during the Winter, as per terms of the
charter contract. These vessels were immediately placed into short term charters
with other reputable charterers, albeit at lower daily hire rates due to adverse
market conditions. However, Fednav re-hired the Millenium Hawk during this
period, but at market rates. In April, Fednav took re-delivery of all these
vessels back at the previously contracted charter rates, while the Millenium
Eagle reverted to its contracted rate in May. The Millenium Raptor entered into
service with Fednav in April. The Monica Marissa's charter with Cementos
Mexicanos (Cemex) ended in January following which the vessel was placed in a
short-term charter with another charterer at market rates. This charter ended in
May and the vessel then went on a voyage charter after a brief repair period.
VESSEL OPERATING EXPENSES
Vessel operating expenses, excluding management fees and depreciation and
amortization, were $8.7 million for the six-month period ended June 30, 1999.
The period consisted of 3,127 ship-operating days, which includes ship-operating
days for the vessels acquired during the period duly pro-rated from date of
acquisition. The average vessel running costs during the period for crewing,
insurance, lubricants, repairs and maintenances, registry and survey costs, and
vessel communications came to $2,780 per day.
MANAGEMENT FEES
Management fees payable to MMI for contracted technical and commercial
management services for the period ended June 30, 1999 were $1,437,942. For a
detailed description of the type of services provided under the management
agreement see the three months ended June 30, 1999 discussion.
DEPRECIATION AND AMORTIZATION
Total depreciation for the six months ended June 30, 1999 was $2,671,197. Vessel
depreciation is calculated based on the remaining useful life of the vessel,
assuming a maximum life of 30 years, net of salvage
value.
Deferred vessel costs, including deferred dry-docking expenses, are capitalized
and amortized over a period of two and a half years (30 months). During the
six-month period ended June 30, 1999, the new costs for dry- docking and special
surveys amounted to $855,092 which included $538,539 for the Millenium Majestic,
$153,680 for the Millenium Osprey and $110,624 for the Millenium Trader. For the
six-month period ended June 30, 1999, total amortization of deferred vessel
charges, including deferred dry-docking expenses, were $392,527. Amortization of
transaction costs and other acquisition costs relating to the issuance of the
Units
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were $798,160. These costs are amortized over the life of the Units or 7 years
from their issuance in July 1998.
INTEREST EXPENSE
For the period ended June 30, 1999, the accrued interest on the Company's
long-term debt was $5,716,630. During the 6-month period ended June 30, 1999,
interest earned on cash balances was $552,077.
NET INCOME (LOSS)
Net loss for the period ended June 30, 1999 was $4.7 million. Earnings were
impacted by a decline in charter rates during the period. However, earnings
before interest, taxes, depreciation and amortisation (EBITDA) for the period
was $4.4 million.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, the Company's cash position consisted of $4.6 million in
unrestricted cash and cash equivalents. Restricted cash includes $4.0 million of
funds remaining from the Offering, which are included in Escrow, and become
available for working capital and other purposes subsequent to July 31, 1999.
WORKING CAPITAL
Pursuant to a Working Capital Facility Agreement between the Company and The
Bank of New York, the Company had a standby line of credit in a principal amount
up to $7.0 million available for its working capital requirements which expired
on July 20, 1999. The Bank, however, extended the maturity of a $500,000 tranche
until August 5, 1999 which also expired unused. As of June 30, 1999, there were
no amounts outstanding under the facility. The facility was only used once
during the six-months ended June 30, 1999 for an amount of $250,000 which was
repaid. The facility, collateralized by the Company's vessels and subject to
various covenants, bore interest at LIBOR+1.5% and was subject to a 0.375%
commitment fee on the unused portion. Management is currently in negotiations
with other banks and expects to have a new facility in place with similar terms.
The Company believes that based upon the current level of operation, cash flow
from operations, together with other readily available sources of funds,
including escrow cash, which is now available for use as working capital and
other corporate purposes, it has adequate liquidity to fund its working capital
requirements, meet capital expenditures for repairs and maintenance and make
required payments of interest
on the Company's debt.
The Company has completed its schedule of vessel acquisitions, and any further
expansion of its fleet is dependent on its ability to raise capital through
either borrowing activities or from cash generated from operations, or both.
FOREIGN EXCHANGE RATE FLUCTUATIONS
All of the Company's revenue, and most of its expenses, are denominated in
United States dollars. For the quarter ended June 30, 1999, approximately 5% of
the Company's expenses were denominated in foreign currencies, primarily Greek
drachmae. The Company does not hedge its exposure to foreign currency
fluctuations.
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INFLATION
The Company does not believe that inflation has had a material impact on its
operations during the period in review, although certain of the Company's
operating expenses (e.g. crewing, insurance and drydocking costs) are subject to
fluctuations as a result of market forces. Inflationary pressures on bunker
costs are not expected to have a material effect on the Company's results from
operations and cash flows since such costs are paid by the charterers and the
majority of the Company's vessels are on period time charters.
YEAR 2000 CONSEQUENCES
The Company continues to prepare its systems and embedded technologies for Y2K
compliance and to work with outside suppliers on Y2K issues as described in the
Company's 1998 Form 20-F annual report. There has been no material developments
in those preparations since the end of April 1999 when the 1998 Form
20-F report was filed.
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PART II
ITEM 1. LEGAL PROCEEDINGS
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From time to time the Company has been, and expects to continue to be,
subject to legal proceedings and claims in the ordinary course of its business,
principally personal injury and property claims. Such claims, even if lacking
merit, could result in the expenditure of significant financial and managerial
resources. The Company is not aware of any legal proceedings or claims that it
believes will have, individually or in the aggregate, a material adverse effect
on the Company or on its financial condition or results of operation.
ITEM 2. CHANGES IN SECURITIES
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None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
ITEM 5. OTHER INFORMATION
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On June 14, 1999, the Company replaced its independent public
accountants PricewaterhouseCoopers LLP with Deloitte &Touche LLP.
PricewaterhouseCoopers LLP did not resign as the Company's independent public
accountants. The decision to change accountants was recommended and approved by
the board of directors of the Company based upon an interview process in order
to select one accounting firm to serve the Company on a worldwide basis.
PricewaterhouseCoopers LLP's reports on the Company's financial statements since
its inception in July 1998 did not contain an adverse opinion or a disclaimer of
opinion and such reports were not qualified or modified as to uncertainty, audit
scope, or accounting principles. During all periods preceding the date of the
change in accountants, there were no disagreements between the Company and
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers
LLP, would have caused it to make reference to the subject matter of the
disagreements in connection with its report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 6-K
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a. Exhibits
None
b. Reports on Form 6-K
None
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SIGNATURES
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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.
MILLENIUM SEACARRIERS, INC.
By: /s/ Vassilios M. Livanos
Name: Vassilios M. Livanos
Title: Chief Executive Officer
Dated: August 13, 1999
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