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 September 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 SEPTEMBER 30, 1999
INDEX
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PART I PAGE
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<S> <C>
Item 1. Financial Information....................................................................................1
Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998.........................................................1
Consolidated Statements of Operations
for the three-month and nine-month periods
ended September 30, 1999, the three-month
period ended September 30, 1998 and the
period from March 10, 1998
to September 30, 1998.........................................................2
Unaudited Consolidated Statements of Cash Flows
for the nine-month period ended September 30, 1999 and
the period from March 10, 1998 to September 30, 1998..........................3
Consolidated Statement of Shareholders' Equity
for the nine-month period ended September 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 nine months
ended September 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
</TABLE>
<PAGE>
PART I
ITEM 1. FINANCIAL INFORMATION
- ------- ---------------------
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1999 1998
- ------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 8,477,489 $ 5,736,645
Restricted cash 1,549,031 31,524,890
------------- -------------
10,026,520 37,261,535
Receivables:
Voyages 383,230 311,574
Claims and other 90,630 242,552
Inventories and prepaid expenses 1,327,304 443,252
------------- -------------
TOTAL CURRENT ASSETS 11,827,684 38,258,913
------------- -------------
Intangible assets 2,716,510 3,065,775
Deferred charges, net of accumulated amortization 5,075,803 5,555,303
FIXED ASSETS
Vessels at cost 105,051,197 84,493,670
Less: accumulated depreciation (5,654,279) (1,774,349)
------------- -------------
NET BOOK VALUE 99,396,918 82,719,321
Other, net of accumulated depreciation 107,574 25,536
------------- -------------
TOTAL FIXED ASSETS 99,504,492 82,744,857
------------- -------------
TOTAL ASSETS $ 119,124,489 $ 129,624,848
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Trade accounts payable 3,983,136 5,465,844
Accrued liabilities 6,118,054 7,368,365
Charter revenue received in advance 963,137 613,031
------------- -------------
Total current liabilities 11,064,327 13,447,240
Notes 95,949,680 95,604,477
------------- -------------
TOTAL LIABILITIES 107,014,007 109,051,717
------------- -------------
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 (11,989,518) (3,526,869)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 12,110,482 20,573,131
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 119,124,489 $ 129,624,848
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1999,
FOR THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1998 AND FOR THE PERIOD
FROM MARCH 10, 1998 TO SEPTEMBER 30, 1998
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
PERIOD FROM
THREE-MONTH THREE-MONTH NINE-MONTH MARCH 10,
PERIOD ENDED PERIOD ENDED PERIOD ENDED 1998 TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
REVENUE
<S> <C> <C> <C> <C>
Freight and hire from voyages $ 10,368,323 $ 4,049,532 $ 26,528,828 $ 4,049,532
Voyage expenses (944,657) (37,687) (1,556,371) (37,687)
Commissions (432,479) (173,396) (1,189,328) (173,396)
------------ ----------- ------------ -----------
Net revenue $ 8,991,187 $ 3,838,449 $ 23,783,129 $ 3,838,449
------------ ----------- ------------ -----------
EXPENSES
Vessel operating expenses 4,412,932 2,398,967 13,109,992 2,398,967
Management fees 1,021,201 328,967 2,459,143 328,967
General and administrative 199,501 - 497,689 -
Depreciation and amortization 2,211,413 974,794 6,073,297 974,794
------------ ----------- ------------ -----------
7,845,047 3,702,721 22,140,121 3,702,721
OPERATING INCOME 1,146,140 135,721 1,643,008 135,721
------------ ----------- ------------ -----------
OTHER INCOME / (EXPENSE)
Interest expense (2,906,751) (1,667,048) (8,623,111) (1,667,048)
Other (expense)/income (5,921) - 535,213 -
(Loss)/gain on sale of vessel (2,017,759) 20,385 (2,017,759) 20,385
------------ ----------- ------------ -----------
(4,930,431) (1,646,663) (10,105,657) (1,646,663)
------------ ----------- ------------ -----------
NET LOSS $(3,784,291) $(1,510,935) $ (8,462,649) $(1,510,935)
=========== =========== ============ ===========
LOSS PER SHARE, BASIC AND DILUTED $ (0.40) $ (0.16) $ (0.89) $ (0.16)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
-2-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND
FOR THE PERIOD FROM MARCH 10, 1998 TO SEPTEMBER 30, 1998
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
NINE-MONTH PERIOD FROM
PERIOD ENDED MARCH 10, 1998 TO
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
<S> <C> <C>
Cash flows from operating activities
Net loss $ (8,462,649) $(1,510,935)
Adjustments to reconcile loss to net cash provided by operating activities:
Loss on sale of vessel 2,017,759 -
Depreciation and amortization 6,073,297 974,794
Changes in operating assets and liabilities
Decrease/(increase) in Receivables 80,266 (185,447)
(Increase) in Inventories and prepaid expenses (884,052) (227,017)
(Decrease)/Increase in Trade accounts payable (1,482,708) 1,284,812
(Decrease)/Increase in Accrued liabilities (1,250,311) 2,061,399
Deferred dry-docking and special survey (851,208) (267,429)
Increase in Charter revenue received in advance 350,106 558,333
------------- -----------
NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (4,409,500) 2,688,510
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of vessels (23,615,000) (47,287,500)
Additions to vessels (605,222) (1,368,013)
Deposit on vessel - (750,000)
Proceeds from sale of vessel 1,498,353 -
Acquisitions, net of cash acquired - (4,687,388)
Purchase of other fixed assets (103,646) -
------------- -----------
NET CASH USED IN INVESTING ACTIVITIES (22,825,515) (54,092,901)
------------- -----------
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 29,975,859 -
Proceeds from long-term debt - 95,393,000
Principal payments on Existing Vessel Debt - (12,428,322)
Issuance of warrants - 1,200,000
Shareholder contribution - 6,000,000
------------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 29,975,859 90,164,678
------------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS (2,740,844) 38,760,287
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,736,645 2
------------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,477,489 $38,760,289
============= ===========
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid $ 11,445,018 $ -
============= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
-3-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
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 nine-month period
ended September 30, 1999 (8,462,649) (8,462,649)
------------ ----------- ------------ ------------
BALANCE SEPTEMBER 30, 1999 $ 22,900,000 $ 1,200,000 $(11,989,518) $ 12,110,482
============ =========== ============ ============
</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 September 30, 1999, the Company's fleet consists of 20
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 nine months of 1999, which are all of a recurring nature, have been
reflected in the information provided.
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 LOSS PER ORDINARY SHARE
Basic and diluted earnings per ordinary share have been computed by dividing net
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 loss per common share
as the effect of such exercise would be antidilutive.
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<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
5. VESSELS AND VESSEL OWNING SUBSIDIARIES
As of September 30, 1999 the following dry bulk carriers comprised the Company's
fleet. The vessels denoted with an asterisk (*) were acquired in 1999.
<TABLE>
<CAPTION>
YEAR CAPITAL
VESSEL OWNING SUBSIDIARY VESSEL'S NAME BUILT DWT ACQUISITION COST IMPROVEMENTS COST
------------------------ ------------- ----- --- ---------------- ------------ ----
<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, M/V Millenium Harmony 1978 16,711 5,175,000 35,329 5,210,329
Inc.
4. Ivy Navigation Ltd. M/V Millenium Golden Hind 1978 16,560 4,375,000 34,159 4,409,159
5 Millenium Amethyst Inc. M/V Millenium Amethyst 1978 23,538 3,000,000 115,978 3,115,978
6. Millenium Yama Inc. M/V Millenium Yama 1979 23,540 3,500,000 128,189 3,628,189
7. Millenium Majestic Inc. M/V Millenium Majestic 1979 17,152 3,000,000 80,485 3,080,485
8. Millenium Elmar Inc. M/V Millenium Elmar 1987 52,640 8,125,000 164,793 8,289,793
9. Millenium Aleksander Inc. M/V Millenium Aleksander 1988 52,670 8,687,500 230,675 8,918,175
10. Millenium IV Inc. M/V Millenium Condor 1981 27,036 5,500,000 126,461 5,626,461
11. Millenium VI Inc. M/V Millenium Osprey 1984 28,786 7,000,000 155,832 7,155,832
12. Millenium III Inc M/V Millenium Leader 1984 37,489 8,250,000 122,653 8,372,653
13. Millenium V Inc. M/V Millenium Falcon 1981 27,048 5,500,000 164,783 5,664,783
14. Millenium VII Inc. M/V Millenium Eagle 1983 28,788 6,750,000 169,673 6,919,673
15. Millenium II Inc. M/V Millenium Hawk 1984 28,791 7,000,000 161,705 7,161,705
16. Millenium Maritime Inc. M/V Millenium Raptor* 1982 30,670 3,075,000 152,305 3,227,305
17. Millenium Lion, Inc. M/V Millenium Trader* 1985 26,536 5,270,000 110,609 5,380,609
18. Millenium Tiger, Inc. M/V Millenium Dawn* 1985 26,563 5,270,000 76,895 5,346,895
19. Millenium Man, Inc. M/V Millenium Express* 1984 39,055 6,350,000 97,732 6,447,732
20. Millenium Transport, Inc. M/V Millenium Amanda* 1982 36,249 3,650,000 72,584 3,722,584
=============================================
TOTAL VESSELS COST $102,777,500 $2,273,697 $105,051,197
=============================================
</TABLE>
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<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
6. LONG TERM DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
---- ----
<S> <C> <C>
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 (4,050,320) (4,395,523)
------------- -------------
Notes $ 95,949,680 $ 95,604,477
============= ============
</TABLE>
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. 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 which 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 September 30, 1999.
-7-
<PAGE>
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
7. 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
September 30, 1999, there is a payable to MMI which is reflected in Sundry
liabilities and accruals, amounting to $632,614. For the three and nine month
periods ending September 30, 1999, $1,021,201 and $2,459,143, respectively, of
management fees were charged to the Company in connection with the
aforementioned agreement.
8. 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 NINE MONTHS ENDED SEPTEMBER 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 September 30,
1999, the Company's fleet consisted of 20 vessels totalling 555,668
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, 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. In the
quarter ended September 30, 1999, the Company sold a vessel, the Monica Marissa,
thereby reducing its fleet to 20 vessels.
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.
<TABLE>
<CAPTION>
Three-month period Nine-month period
ended ended
September 30, 1999 September 30, 1999
------------------ ------------------
<S> <C> <C>
Net Revenue $ 8,991,187 $ 23,783,129
Vessel Operating Expenses (4,412,932) (13,109,992)
Management Fees (1,021,201) (2,459,143)
General and Administrative (199,501) (497,689)
------------------ ------------------
Earnings before Interest, Tax,
Depreciation and Amortization (EBITDA) $ 3,357,553 $ 7,716,305
================== =================
Average utilization 97.8% 96.2%
================== =================
</TABLE>
While the Company began does have a comparable quarter in 1998, the comparisons
are not meaningful as the quarter ended September 30, 1998 was only for 69 days
of operation.
RESULTS OF OPERATIONS FOR THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1999
NET REVENUE
Net revenue for the three-month period ended September 30, 1999 was $9 million.
During the quarter, 91.1% 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 1,909 ship-operating days at an
average fleet gross hire rate of $5,431 per day. The fleet averaged a
utilization rate of 97.8% during the period.
During the quarter, 91.1% of revenues were earned from time charters. Only 3 of
the 21 vessels were on voyage charters for short periods - the Monica Marissa,
the Millenium Trader and the Millenium Amethyst.
-9-
<PAGE>
Towards the end of the quarter, the Monica Marissa was sold, while the Millenium
Trader and Millenium Amethyst entered into period charters. The Clipper Atlantic
and the Clipper Pacific continued to be employed by Clipper Shipping, Inc.
("Clipper"). The Millenium Golden Hind and Millenium Harmony were on short-term
period charters. The Millenium Leader's charter with Hai Sun Hup Shipping
("HSH") ended during the quarter and the vessel was immediately placed on a
period charter. The Millenium Elmar, Millenium Dawn, Millenium Yama, and
Millenium Express continue to be on period charters. Fednav International
("Fednav") continues to charter the Millenium Osprey, Millenium Condor,
Millenium Falcon, Millenium Hawk, Millenium Eagle and Millenium Raptor pursuant
to period charters. The Millenium Majestic's charter with Clipper ended early in
the quarter following which the vessel was immediately placed on another period
charter with a different charterer.
VESSEL OPERATING EXPENSES
Vessel operating expenses, excluding management fees and depreciation and
amortization, were $4.4 million for the quarter ended September 30, 1999. The
quarter consisted of 1,909 ship-operating days; the Monica Marissa was sold
69-days into the third quarter of the year. The third quarter average vessel
running costs for crewing, insurance, lubricants, repairs and maintenances,
registry and survey costs, and vessel communications, came to $2,312 per day.
MANAGEMENT FEES
Management fees payable to MMI for contracted technical and commercial
management services for the three months ended September 30, 1999 were $1.0
million.
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, 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.
-10-
<PAGE>
DEPRECIATION AND AMORTIZATION
Total depreciation for the three months ended September 30, 1999 was $1,583,764.
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 September 30, 1999, there were no new costs associated with
dry-docking or special surveys. For the three months ended September 30, 1999,
total amortization of deferred vessel charges, including deferred dry-docking
expenses, were $221,235. Amortization of transaction costs and other acquisition
costs relating to the issuance of the Units were $406,414. 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 September 30, 1999, the interest expense on the
Company's long-term debt was $2,906,751. During the three-month period ended
September 30, 1999, interest earned on cash balances was $61,065.
LOSS ON SALE OF VESSEL
During the quarter ended September 30, 1999, the vessel Monica Marissa was sold
for scrap. The vessel had a lightweight of 13,881 long-tons. Net proceeds from
the sale amounted to $1,498,353. The loss on the sale was $2,017,759.
NET LOSS
Net loss for the three months ended September 30, 1999 was $3.8 million. This
was mainly due to the $2 million loss incurred in the sale of the Monica
Marissa. Earnings before interest, taxes, depreciation and amortization (EBITDA)
for the quarter was $3.3 million.
RESULTS OF OPERATIONS FOR NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999
NET REVENUE
Net revenue for the nine-month period ended September 30, 1999 was $23.8
million. During the period, 88% 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 5,036 ship-operating
days at an average fleet gross hire rate of $5,267 per day. In addition, the
fleet averaged a utilization rate of 96.2% during the period.
The period saw the Company's fleet expand from 16 vessels to 21 vessels, and
then down to 20 vessels. The revenue earnings 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 nine-month period of operations when compared to market conditions during
inception of the Company in 1998.
During the nine-month period, 88% of revenues were earned from period time
charters. The vessels which were on short voyages during the nine-month period
were Millenium Hawk, Millenium Amethyst, Millenium Trader and the Monica
Marissa. The Clipper Atlantic and the Clipper Pacific continue to be employed by
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Clipper. The Clipper Golden Hind and Clipper Harmony charters with Clipper ended
in mid-June and these vessels were subsequently renamed Millenium Golden Hind
and Millenium Harmony and chartered by other charterers. The Millenium Leader's
charter with HSH ended in the third quarter and the vessel was immediately
placed on another period charter with a different charterer. The Millenium
Aleksander's charter with Estonian Shipping Company ("Esco") concluded at the
end of the first quarter and the vessel was placed into a period charter with
another charterer. The Millenium Elmar's charter with Esco ended in mid-May
following which it was placed with another charterer. During the first quarter,
Fednav 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 the 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.
Fednav re-hired the Millenium Eagle 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 when the vessel went on a
voyage charter after a brief repair period, and at the conclusion of this voyage
in September the vessel was sold.
VESSEL OPERATING EXPENSES
Vessel operating expenses, excluding management fees and depreciation and
amortization, were $13.1 million for the nine-month period ended September 30,
1999. The period consisted of 5,036 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 $2,603 per day.
MANAGEMENT FEES
Management fees payable to MMI for contracted technical and commercial
management services for the period ended September 30, 1999 were $2.5 million.
For a detailed description of the type of services provided under the management
agreement, see the three months ended September 30, 1999 discussion.
DEPRECIATION AND AMORTIZATION
Total depreciation for the nine months ended September 30, 1999 was $4,254,960.
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
nine-month period ended September 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 nine-month period ended September 30, 1999, total amortization
of deferred vessel charges, including deferred dry- docking expenses, were
$613,763. Amortization of transaction costs and other acquisition costs relating
to the issuance of the Units were $1,204,574. These costs are amortized over the
life of the Notes or 7 years from their issuance in July 1998.
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INTEREST EXPENSE
For the nine-month period ended September 30, 1999, the interest expense on the
Company's long-term debt was $8,623,111. During the 9-month period ended
September 30, 1999, interest earned on cash balances was $613,144.
NET INCOME (LOSS)
Net loss for the period ended September 30, 1999 was $8.5 million. Earnings were
impacted by a decline in charter rates during the period and a $2 million loss
on the sale of the Monica Marissa. However, earnings before interest, taxes,
depreciation and amortisation (EBITDA) for the period was $7.7 million.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company's cash position consisted of $8.5 million
in unrestricted cash and cash equivalents. Restricted cash includes $1.5 million
of net proceeds from the sale of the Monica Marissa.
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. The facility was only used once
during its tenure 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 flows
from operations, together with other readily available sources of funds, 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 September 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.
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.
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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 Company's 1998 report
on Form 20-F 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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None.
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: November 12, 1999
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