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 March 31, 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 MARCH 31, 1999
INDEX
<TABLE>
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PART I PAGE
----
<S> <C>
Item 1. Financial Information.............................................................................1
Consolidated Balance Sheets as of March 31, 1999
and December 31, 1999..................................................1
Consolidated Statement of Operation
for the three months ended March 31, 1999..............................2
Consolidated Statement of Cash Flows
for the three months ended March 31, 1999..............................3
Consolidated Statements of Shareholders Equity for
the three months ended March 31, 1999 and
for the period from March 10, 1998 to
December 31, 1998......................................................4
Notes to Consolidated Financial Statements......................................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................12
PART II Other Information.......................................................................19
Item 1. Legal Proceedings................................................................................19
Item 2. Changes in Securities............................................................................19
Item 3. Defaults Upon Senior Securities..................................................................19
Item 4. Submission of Matters to a Vote of Security Holders..............................................19
Item 5. Other Information................................................................................19
Item 6. Exhibits and Reports of Form 6-K.................................................................19
Signature.................................................................................................20
</TABLE>
<PAGE>
PART I
ITEM 1. FINANCIAL INFORMATION
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF
MARCH 31, 1999 AND DECEMBER 31, 1998
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
UNAUDITED
UNAUDITED
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,611,544 $ 5,736,645
Restricted cash (Note 2) 27,942,667 31,524,890
================== =====================
29,554,211 37,261,535
Receivable - voyages 608,914 311,574
claims and other (Note 3) 252,667 242,552
Inventories and prepaid expenses (Note 4) 780,827 443,252
Advances for purchase of vessels (Note 11) 365,000 0
------------------ ---------------------
TOTAL CURRENT ASSETS 31,561,619 38,258,913
------------------ ---------------------
Intangible assets 2,949,354 3,065,775
Deferred charges, net of accumulated amortization 5,274,050 5,555,303
FIXED ASSETS
Vessels at cost (Note 5) 87,751,982 84,493,670
Less: accumulated depreciation (3,021,105) (1,774,349)
------------------ ---------------------
NET BOOK VALUE 84,730,877 82,719,321
Other, net of accumulated depreciation 86,617 25,536
------------------ ---------------------
TOTAL FIXED ASSETS 84,817,494 82,744,857
------------------ ---------------------
TOTAL ASSETS $ 124,602,517 $ 129,624,848
================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Working Capital Facility $ 250,000 $ 0
Trade accounts payable 4,334,526 5,465,844
Sundry liabilities and accruals (Note 6) 5,479,727 7,368,365
Charter revenue received in advance 614,728 613,031
------------------ ---------------------
TOTAL CURRENT LIABILITIES 10,678,981 13,447,240
Senior Notes (Note 7) 95,717,100 95,604,477
------------------ ---------------------
TOTAL LIABILITIES 106,396,081 109,051,717
------------------ ---------------------
Commitments and contingencies (Notes 7, 10 and 11)
SHAREHOLDERS' EQUITY
Common stock and paid in capital (Note 7) 22,900,000 22,900,000
Warrants (Note 7) 1,200,000 1,200,000
Accumulated deficit (5,893,564) (3,526,869)
------------------ ---------------------
TOTAL SHAREHOLDERS' EQUITY 18,206,436 20,573,131
------------------ ---------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 124,602,517 $ 129,624,848
================== =====================
</TABLE>
The accompanying notes are an integral part of these financial statements
-1-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999
(EXPRESSED IN U.S. DOLLARS)
MARCH 31, 1999
UNAUDITED
REVENUE
Freight and hire from voyages $ 7,517,530
Voyage expenses (302,618)
Commissions (336,845)
-----------
NET REVENUE 6,878,067
-----------
EXPENSES
Vessel operating expenses 4,157,067
Management fees (Note 8) 672,542
General and administrative (Note 8) 160,922
Depreciation and amortization 1,811,630
-----------
6,802,161
-----------
OPERATING INCOME 75,906
-----------
OTHER INCOME / (EXPENSE)
Interest expense (Note 7) (2,813,830)
Other income, net 371,229
-----------
(2,442,601)
-----------
NET LOSS $(2,366,695)
===========
LOSS PER SHARE, BASIC AND DILUTED $ (0.25)
===========
The accompanying notes are an integral part of these financial statements
-2-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999
(EXPRESSED IN U.S. DOLLARS)
MARCH 31,
1999
CASH FLOWS FROM OPERATING ACTIVITIES UNAUDITED
Net loss $(2,366,695)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH (USED
IN)/PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization 1,811,630
Changes in operating assets and liabilities
Receivables (307,455)
Inventories and prepaid expenses (337,575)
Trade accounts payable (1,131,318)
Sundry liabilities and accruals (1,888,638)
Charter revenue received in advance 1,697
-----------
NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (4,218,354)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired 0
Advances for purchase of vessels (365,000)
Purchase of vessels (3,075,000)
Additions to vessels (183,312)
Purchase of other fixed assets (65,680)
Deferred dry-docking and special survey (49,978)
-----------
NET CASH USED IN INVESTING ACTIVITIES (3,738,970)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Shareholders' contributions 0
Proceeds from long term debt 0
Proceeds from working capital facility 250,000
Escrow account and restricted cash 3,582,223
Warrants 0
Principal payments on Existing Vessel debt 0
Deferred financing costs 0
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,832,223
-----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,125,101)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,736,645
-----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,611,544
===========
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid $ 5,639,958
===========
The accompanying notes are an integral part of these financial statements
-3-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999 AND FOR THE PERIOD
FROM MARCH 10, 1998 TO DECEMBER 31, 1998
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
COMMON
STOCK AND
PAID-IN ACCUMULATED
CAPITAL WARRANTS DEFICIT TOTAL
ISSUANCE OF STOCK:
<S> <C> <C> <C> <C>
Incorporation March 10, 1998 2 - - 2
Acquisition of Existing Vessel
Owning Companies, July 24, 3,999,998 - - 3,999,998
1998
--------------- ------------ ---------------- ---------------
BALANCE JULY 24, 1998 4,000,000 - - 4,000,000
Contributions 18,900,000 - - 18,900,000
Warrants - 1,200,000 - 1,200,000
Net loss - - (3,526,869) (3,526,869)
--------------- ------------ ---------------- ---------------
BALANCE DECEMBER 31, 1998 22,900,000 1,200,000 (3,526,869) 20,573,131
Net Loss (unaudited) (2,366,695) (2,366,695)
--------------- ------------ ---------------- ---------------
BALANCE MARCH 31, 1999
(UNAUDITED) 22,900,000 1,200,000 (5,893,564) 18,206,436
=============== ============ ================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements
-4-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(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 March 31, 1999, the Company's fleet consists of 17
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 will
conduct its operations through its subsidiaries whose principal activity is the
operation and ownership of dry-bulk vessels that will be under the exclusive
management of Millenium Management, Inc. ("MMI") and the sub-management of
Millenium Maritime Services Ltd. and Millenium Maritime Services, Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States. All
inter-company balances and transactions have been eliminated upon consolidation.
The financial statements presented herein cover the period from January 1, 1999
through to March 31, 1999.
The unaudited interim financial results of the Company's operations for the
period ended March 31, 1999, presented herein are not necessarily indicative of
the results expected for the full year.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosures of contingent assets and liabilities at
the date of the consolidated financial statements, and the stated amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
ACQUISITIONS AND DISPOSALS
The operating results of vessels acquired or disposed of during the period are
included in the accompanying consolidated financial statements from the date of
their acquisition until the date of their disposal as applicable.
-5-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
VESSELS
Vessels owned by the Company are stated at cost, which comprises the vessels'
contract price, major repairs and improvements, direct delivery and acquisition
expenses, and finance charges relating to the acquisition of vessels.
DEPRECIATION
Depreciation is calculated on a straight-line basis by reference to the vessels'
cost, age and scrap value as estimated at the date of acquisition. Depreciation
is calculated over the remaining useful life of the vessel, which is assumed to
be 30 years from the vessel's original construction.
REVENUE AND EXPENSE RECOGNITION
Revenue and expenses resulting from each voyage or time charter are accounted
for on the accrual basis and are recognized in the income statement on the
percentage of completed voyage basis. Chartered revenue received in advance is
recorded as a liability until charter services are rendered.
Operating expenses comprise all expenses relating to the operation of the
vessels, including crewing, repairs and maintenance, insurance premiums, stores
and lubricants, and miscellaneous expenses, including communications. Voyage
expenses comprise all expenses relating to particular voyages, including
bunkers, port charges, canal tolls and agency fees.
FOREIGN CURRENCIES
The Company's functional currency is the U.S. dollar. Assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at exchange
rates prevailing at the balance sheet date. Income and expenses denominated in
foreign currencies are translated into U.S. dollars at exchange rates prevailing
at the date of the transaction. Resulting exchange gains and/or losses on
settlement or translation are included in operating expenses in the accompanying
consolidated statement of operations.
REPAIRS, MAINTENANCE AND DEFERRED CHARGES
Expenditures for vessel repair and maintenance are charged against income in the
period incurred. Dry-docking and special survey costs are deferred and amortized
over the estimated period to the next scheduled dry-docking or survey, which are
generally two and a half years and five years, respectively. The amortization of
dry-docking and special survey costs are included in amortization in the
accompanying consolidated statement of operations and amounted to $161,195.
Deferred charges also include costs associated with the issuance of Notes and
the acquisition of the Millenium subsidiaries. These costs are amortized over
the life of the Notes (as defined) (7 years). Amortization of the quater
-6-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
amounted to $399,080 and is included in amortization in the accompanying
consolidated statement of operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Concerns goodwill representing the excess of cost over book value of assets
acquired from the companies that owned the five original vessels. Goodwill is
amortized on a straight - line basis over the life of the Notes (7 years).
P&I BACK CALLS
The Company participates in Protection and Indemnity (P&I) insurance coverage
plans provided by mutual insurance societies known as P&I clubs. Under the terms
of the plans, participants may be required to pay additional premiums to fund
operating deficits incurred by the clubs ("back calls"). Obligations for back
calls are accrued annually.
CASH AND CASH EQUIVALENTS AND ESCROW ACCOUNTS
The Company considers time deposits or other certificates purchased with an
original maturity of three months or less to be cash equivalents. Restricted
cash includes proceeds from the issuance of the Notes, which have been placed in
a restricted Escrow account.
INVENTORIES
Inventories consist of lubricants, spares and stores on board the Company's
vessels at the balance sheet date. Inventories are stated at the lower of cost
or market value. Cost is determined on a first-in, first-out method.
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.
FINANCIAL INSTRUMENTS
The Company's financial instruments recorded on the balance sheet include cash
and cash equivalents, accounts receivable, accounts payable and debt. Because of
their short maturity, the carrying amounts of cash and cash equivalents,
accounts receivable and accounts payable approximates fair value. The fair value
of the Notes as of March 31, 1999 was $74.6 million and was based on quoted
market prices.
-7-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEWLY ISSUED PRONOUNCEMENTS
Statement of Financial Accounting Standards 130, Reporting Comprehensive Income,
has been issued and is effective for fiscal years beginning after December 15,
1997. The standard requires that comprehensive income and its components, as
defined, be reported in an income statement. The Company has no components of
comprehensive income, and, as a result comprehensive income is equal to net
income in the first quarter of 1999.
Statement of Financial Accounting Standards 131, Disclosures about Segments of
Enterprise and Related Information has been issued and is effective for fiscal
periods beginning after December 15, 1997. This statement specifies revised
guidelines for determining an entity's operating segments and the type and level
of financial information to be disclosed. Accordingly, management believes that
the adoption of this standard is not applicable because it only has one
operating segment, its dry bulk fleet, which as of March 31, 1999 consists of 17
vessels that are time chartered to unrelated third parties.
Statement of Financial Accounting Standards 133, Accounting for Derivative
Instruments and Hedging Activities, was issued in June 1998 and is effective for
all fiscal quarters and fiscal years beginning after June 15, 1999. The new
standard establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging activities.
The Company did not use any derivative instruments in the period ended March 31,
1999. Accordingly, management believes the adoption of this standard does not
have a material effect in its financial statements.
3. RECEIVABLE
Claims and other receivable principally represent claims arising from hull and
machinery damages, or other insured risks, which have been submitted to
insurance underwriters and insurance adjusters or are currently being compiled.
All amounts are shown net of applicable deductibles. Included in other
receivable are advances to agents in respect of vessels' disbursements at the
various port of calls.
4. INVENTORIES AND PREPAID EXPENSES
Lubricants $ 344,164
Stores and spares 376,386
Prepaid expenses 60,277
----------------------
$ 780,827
======================
-8-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
5. VESSELS AND VESSEL OWNING SUBSIDIARIES
On March 12, 1999, the Company acquired the 17th vessel, the Millenium Raptor at
a cost of $3,075,000 (notes 7 and 11). As of March 31, 1999 the Company's fleet
comprised the following dry bulk carriers:
<TABLE>
<CAPTION>
VESSEL OWNING SUBSIDIARY VESSEL'S NAME YEAR DWT ACQUISITION ADDITIONS COST
------------------------ ------------- ---- --- --------------------- ----
BUILT COST
----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1. Conifer Shipping Co. Ltd. M/V Clipper Atlantic 1975 7,923 1,625,000 26,720 1,651,720
2. Topscale Company Ltd. M/V Clipper Pacific 1976 7,923 1,675,000 26,720 1,701,720
3. Rapid Ocean Carriers, Inc. M/V Clipper Harmony 1978 16,711 5,175,000 26,720 5,201,720
4. Ivy Navigation Ltd. M/V Clipper Golden Hind 1978 16,560 4,375,000 26,720 4,401,720
5. Oakmont Shipping & Trading M/V Monica Marissa 1973 55,057 3,625,000 26,720 3,651,720
Ltd.
6. Millenium Amethyst Inc. M/V Millenium Amethyst 1978 23,169 3,000,000 110,335 3,110,335
7. Millenium Yama Inc. M/V Millenium Yama 1979 23,540 3,500,000 120,866 3,620,866
8. Millenium Majestic Inc. M/V Millenium Majestic 1979 17,152 3,000,000 74,134 3,074,134
9. Millenium Elmar Inc. M/V Millenium Elmar 1987 52,640 8,125,000 159,253 8,284,253
10. Millenium Aleksander Inc. M/V Millenium Aleksander 1988 52,670 8,687,500 225,846 8,913,346
11. Millenium IV Inc. M/V Millenium Condor 1981 27,036 5,500,000 121,941 5,621,941
12. Millenium VI Inc. M/V Millenium Osprey 1984 28,786 7,000,000 149,984 7,149,984
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 5,500,000 159,398 5,659,398
15. Millenium VII Inc. M/V Millenium Eagle 1983 28,788 6,750,000 169,672 6,919,672
16. Millenium II Inc. M/V Millenium Hawk 1984 28,791 7,000,000 158,488 7,158,488
17. Millenium Maritime Inc. M/V Millenium Raptor 1982 30,670 3,075,000 183,312 3,258,312
==================================
TOTAL VESSELS COST 85,862,500 1,889,482 87,751,982
==================================
</TABLE>
6. SUNDRY LIABILITIES AND ACCRUALS
Payroll 1,031,981
Accrued interest 2,466,406
Accrued expenses 1,981,340
--------------------------
5,479,727
==========================
-9-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
7. LONG TERM DEBT
Long term debt is as follows:
December 31,
------------
1998
----
First Priority Ship Mortgage Notes (the
"Notes") due 2005 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. 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
Less : Unamortized portion of bond discount (4,282,900)
----------------------
Notes $ 95,717,100
======================
The gross bond discount and warrants of $4,607,000 is amortized over the life of
the Notes (7 years).
These Notes were issued on July 24, 1998, when Millenium successfully completed
a private placement offering of $100,000,000 principal amount at maturity of its
12% First Priority Ship Mortgage Notes Due 2005 (the "Notes") and warrants of
$1,200,000 (the "Warrants"). 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," together with
Millenium, the "Company"). The Notes are currently collateralized by First
Priority Ship Mortgages on the Company's vessels. 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 (see Note 11). The
Company's bonds are registered by the United States Securities & 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 March 31, 1999.
-10-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
EQUITY CONTRIBUTIONS
As of March 31, 1999, MMI was the sole shareholder and registered owner of
Millenium's 9,500,000 issued and outstanding $.01 par value common stock
(10,000,000 shares authorized).
WORKING CAPITAL FACILITY
The Company currently has a $7.0 million one year working capital revolving line
of credit with The Bank of New York, which matures on July 20, 1999. Borrowings
under the facility bear interest at LIBOR+1.5%, and are collateralized by the
Company's vessels and subject to various covenants. The Facility is subject to a
0.375% commitment fee on the unused portion. As of March 31, 1999 the amount
outstanding under this facility is $250,000. It is management's intention to
renew the above facility when due.
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.
-11-
<PAGE>
EQUITY
MMI, which owns 100% of the outstanding common stock of the Company, has
contributed a total of $24.0 million in equity consisting of $7.1 million in
cash and $16.9 million in contributed vessel equity.
GENERAL AND ADMINISTRATIVE EXPENSES
These expenses include legal and professional fees of $9,876, advisory fees of
$75,000 paid to Millenium Advisors, L.L.C., and charges relating to marketing
and new vessel inspections of $76,046.
9. TAXES
The legal jurisdictions of the countries in which the Company and its
subsidiaries are incorporated do not impose income taxes upon their activities.
The Vessel Owning Subsidiaries are incorporated in the Bahamas, Cayman Islands,
Cyprus, Liberia or Panama and under the laws of these countries the Vessel
Owning Subsidiaries are subject to registration and tonnage taxes, which have
been included in "operating expenses" in the accompanying, consolidated
statements of income.
10. 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.
11. SUBSEQUENT EVENTS
Subsequent to the period-end, the following events occurred:
PURCHASE OF ADDITIONAL VESSELS
In April 1999, the Company completed the acquisition of its 18th vessel, the
Millenium Trader (ex East Trader), at a purchase price of $5,270,000, which was
paid out of Escrow proceeds.
The Company has committed to purchase three additional vessels for a fair market
value of $15,270,000 and has made a down payment equal to 10% of the price.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is an international shipping company that owns and operates
a fleet of drybulk carriers, primarily Handysize drybulk carriers. As of March
31, 1999, the Company's fleet consisted of 17 vessels totalling 482,320
deadweight-tons. As of May 14, 1999, the Company's fleet consists of 18 vessels
totalling 508,856 deadweight-tons, and the Company has commitments to purchase
an additional three vessels.
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<PAGE>
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 to 17 vessels as of March 31, 1999, all of which were
acquired from the net proceeds of a Units offering of $100 million principal
amount at maturity. The Company also received an equity contribution of $24
million from MMI, the holder of 100% of the outstanding common stock of the
Company.
<TABLE>
<CAPTION>
Vessel Purchase
Delivery Date to Registration Price
Vessel Acquisition Date Charterer Jurisdiction
- --------------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
Millenium Amethyst July 31, 1998 July 31, 1998 Bahamas $3,000,000
Millenium Yama July 31, 1998 July 31, 1998 Bahamas 3,500,000
Millenium Majestic July 31, 1998 July 31, 1998 Bahamas 3,000,000
Millenium Osprey August 25, 1998 August 28, 1998 Cayman Islands 7,000,000
Millenium Condor August 27, 1998 August 28, 1998 Cayman Islands 5,500,000
Millenium Leader August 27, 1998 August 28, 1998 Cayman Islands 8,250,000
Millenium Eagle August 28, 1998 August 30, 1998 Cayman Islands 6,750,000
Millenium Falcon August 28, 1998 September 1, 1998 Cayman Islands 5,500,000
Millenium Hawk September 16, 1998 September 19, 1998 Cayman Islands 7,000,000
Millenium Aleksander September 16, 1998 September 19, 1998 Cayman Islands 8,687,500
Millenium Elmar November 25, 1998 November 25, 1998 Cayman Islands 8,125,000
Millenium Raptor March 12, 1999 April 17, 1999 Cayman Islands 3,075,000
</TABLE>
As the Company began operations only on July 24, 1998, the quarter in
review, January 1, 1999 to March 31, 1999, does not have a relevant period 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.
RESULTS OF OPERATIONS FOR QUARTER ENDED MARCH 31, 1999 (UNAUDITED)
OVERVIEW
The following table sets forth certain operating data for the Company.
Net Revenue $6,878,067
Vessel Operating Expenses 4,157,067
Management Fees 672,542
General and Administrative 160,922
Earnings Before Interest, Tax, Depreciation and
Amortization (EBITDA) 1,887,536
Average Utilization (%) 95.29%
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<PAGE>
NET REVENUE
Net revenue for the quarter ended March 31, 1999 was $6.9 million.
During the quarter, 95% 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 1,459 ship- operating days, which
includes the 19 ship-operating days for the Millenium Raptor.
During the quarter, all the vessels were on period charter except for a
48 day period when the Millenium Hawk earned revenue from a voyage charter.
However, the average fleet hire rate during the quarter was impacted primarily
due to the contracted winter months redeliveries of the vessels chartered by
FedNav International Limited ("FedNav"), Millenium Condor, Millenium Osprey,
Millenium Hawk, Millenium Eagle and the Millenium Falcon, and the conclusion of
the charter of the Monica Marissa with Cementos Mexicanos ("Cemex"). Under the
terms of the charter with FedNav, the charterer has the option to redeliver
these vessels during the winter months when the conditions in the Great Lakes
affect shipping. These vessels then reverted to FedNav at the contracted charter
rates of $7,000 per day in April. Upon their redelivery to the Company, the
Millenium Condor, Millenium Osprey, Millenium Hawk and the Millenium Falcon were
employed by other reputable charterers, while the Millenium Eagle continued to
be employed by FedNav. Upon the conclusion of the Cemex charter, the Monica
Marissa was chartered to other reputable charterers for short period at market
rates.
Of the other vessels, the Clipper Atlantic, Clipper Pacific, Clipper
Harmony, Clipper Golden Hind, Millenium Majestic and Millenium Yama continued to
be employed by Clipper Group ("Clipper") for the duration of the quarter. The
charter of the Millenium Amethyst with Clipper ended in mid-March and the vessel
was subsequently hired in the market without loss of hire-earning days. The
Millenium Leader and the Millenium Elmar continued to be employed by their
charterers, Hai Sun Hup Shipping ("HSH") and Estonian Shipping Company Limited
("ESCO"), respectively, during the quarter. The Millenium Aleksander's charter
with ESCO concluded at the end of the quarter. The Millenium Raptor was acquired
on March 12 and it was en route to its charter with FedNav when the quarter
ended.
All of these changes in charters, which reflected market conditions
during the period in review, consequently led to a decline in average gross
daily rates by 16% from the period ending December 31, 1998.
The fleet averaged an utilization rate of 95.29% during the 1,459 days
of ship-operations in the quarter under review.
VESSEL OPERATING EXPENSES
Vessel operating expenses, excluding management fees and depreciation
and amortization, were $4.2 million for the quarter ended March 31, 1999. This
quarter consisted of 1,459 ship- operating days and average vessel running costs
for crewing, insurance, lubricants, repairs and maintenances, registry and
survey costs, and vessel communications came to approximately $2,850 per day.
This is an improvement of approximately 7% in cost controls in the quarter ended
March 31, 1999 as compared to the period ended December 31, 1998. During the
quarter no vessels were dry- docked, however, an amount of $49,978 was spent on
upgrading the Millenium Raptor.
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<PAGE>
MANAGEMENT FEES
Management fees payable to MMI for contracted technical and commercial
management services for the quarter ended March 31, 1999 were $672,542.
Each of the Company's vessels receives management services from 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, 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 quarter in review was $1,251,355. Vessel
depreciation is calculated based on the remaining useful life of the vessel,
assuming a maximum life of 30 years, net of salvage
value.
For the quarter ended March 31, 1999, amortization of deferred vessel
charges, including deferred dry-docking expenses, were $161,195. Deferred vessel
costs are amortized over a period of 30 months from date of incurrence.
Amortization of transaction costs and other acquisition costs relating to the
issue of the Notes were $399,080. These costs are amortized over the life of the
Units or 7 years from their issue in July 1998.
INTEREST EXPENSE
For the quarter ended March 31, 1999, the accrued interest on the
Company's long-term debt was $2,813,830. This accrual relates to the second
interest payment due on July 15, 1999. During the period in review, the Company
paid its first interest payment on the Company's long-term debt of $5,639,958 on
January 15, 1999. During the quarter ended March 31, 1999, interest earned on
cash balances was $341,056.
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<PAGE>
NET INCOME (LOSS)
Net loss for the quarter ended March 31, 1999 was $2.4 million. This
was primarily due to the decline in average gross hire rate of the fleet during
the quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company is a holding company. As of March 31, 1999, it owned all of
the issued and outstanding shares of 17 Vessel Owning Subsidiaries.
As of March 31, 1999, the Company's cash position consisted of $1.6
million in unrestricted cash and cash equivalents and approximately $27.9
million in restricted cash which includes cash in Escrow. The Company also has a
$7.0 million stand-by line of credit, and as of March 31, 1999 $6.75 million was
available to the Company for working capital.
Cash in Escrow consists of funds remaining from the issue of
$100,000,000 aggregate principal amount of Units (the "Offering") on July 24,
1998. Of the $96.6 million in gross proceeds from the issuance of the Units,
$95.4 million has been allocated to the Notes and $1.2 million has been
allocated to additional paid-in capital to reflect the issuance of Warrants.
Concurrently with the Offering, MMI contributed $24.0 million of equity
comprising of $7.1 million in cash and $16.9 million in contributed vessel
equity.
OPERATING ACTIVITIES
Net cash flows used in operations for the quarter ended March 31, 1999
were $4.2 million. As is common in the shipping industry, the Company collects
its hire for all time charters 15 days in advance. The Company also has
established long-term relationships with many suppliers resulting
in the Company receiving favorable credit terms.
INVESTING ACTIVITIES
Net cash used in investing activities were $3.7 million. Principal
investing activities during the period ended March 31, 1999, were the
acquisition of Millenium Raptor and the 10% deposit of $365,000 placed on the
18th vessel, the Millenium Amanda. Transactions for the purchase of vessels from
the international shipping market are usually conducted in two stages: (i) a
deposit of approximately 10% of the purchase price is paid upon the execution of
the related purchase agreement, and (ii) the balance of the purchase price is
paid upon the vessel's physical delivery, usually within 90 days from the date
of the execution of the agreement.
FINANCING ACTIVITIES
Net cash provided by financing activities were $3.8 million. This
includes funds from Escrow to purchase the Millenium Raptor and placement of the
10% deposit on the Millenium Amanda. The drawdown of $250,000 from the Working
Capital facility also contributed to cash.
The Company believes that based upon the current level of operation,
cash flow from operations, together with other readily available sources of
funds, it has adequate liquidity to make required payments of interest on the
Company's debt and fund its working capital requirements.
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<PAGE>
WORKING CAPITAL
Pursuant to a Working Capital Facility Agreement between the Company
and The Bank of New York, the Company has a standby line of credit in a
principal amount up to $7.0 million available for its working capital
requirements. As of March 31, 1999, an amount of $250,000 was oustanding under
the facility. The facility, collateralized by the Company's vessels and subject
to various covenants, bears interest at LIBOR+1.5% and is subject to a 0.375%
commitment fee on the unused portion. This revolving facility matures on July
20, 1999 and management intends to renew the above facility.
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 March 31, 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.
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 operations
since such costs are paid by the charterers as all of the Company's vessels are
on period time charters.
YEAR 2000 CONSEQUENCES
The Company is presently in the process of analyzing the consequences
and costs of compliance with the year 2000 issue but does not, at this time,
forsee any materially adverse financial consequence in respect of such
compliance.
As is the case with most companies using computers in their operations,
the Company is faced with the task of addressing the year 2000 issue during
1999. The year 2000 issue is the result of prior computer programs being written
using two digits, rather than four digits, to define the applicable year. Any of
the Company's programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
major system failure or miscalculations.
The Company is presently in the process of evaluating the consequences
and the cost of upgrading its computer software to programs which will be year
2000 compliant. The historical cost to the Company of such upgrading has not
been material and the Company estimates that any additional costs in this regard
will also not be material.
The Company has analyzed its operations and has identified four primary
areas that may be affected by the year 2000 issue, including crew safety, vessel
maneuverability, vessel communications and vessel navigation. While the Company
believes that its programs in this area are, or will be by the end of the second
quarter of 1999, year 2000 compliant, there can be no assurance that there will
be no delay or unanticipated material costs in connection therewith. The
Company, therefore, has auxiliary systems in place in all of these areas. These
auxiliary systems include with respect to (a) crew safety, having fire detectors
and other safety equipment on the vessels which are analogue
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<PAGE>
technology and non-computer based, (b) vessel maneuverability, having emergency
steering wheels that are not computer-cased, (c) vessel communications, having
non-digital-based radio transmitters, having crew members trained to employ
semi-fores, aldis lights and fog horns and (d) vessel navigation, having crew
members trained to employ gyro-compasses, sextants and magnetic compasses.
The Company has also contacted its material customers and agents to
determine their readiness to address the year 2000 issue. Based on the
information provided to the Company by these entities, the Company believes that
the state of these entities' year 2000 readiness will not materially adversely
affect the Company's operations. However, there can be no assurance that these
customers and agents will successfully and timely achieve year 2000 compliance.
In addition, the Company does not currently have any material suppliers or
brokers whose year 2000 readiness could materially adversely affect the
Company's operations.
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<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
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
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 6-K
a. Exhibits
None
b. Reports on Form 6-K
None
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<PAGE>
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.
MILLENIUM SEACARRIERS, INC.
By: /s/ Vassilios M. Livanos
Name: Vassilios M. Livanos
Title: Chief Executive Officer
Dated: May 14, 1999
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