<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________________
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-9264
AMERICAN CLASSIC VOYAGES CO.
(Exact name of registrant as specified in its charter)
DELAWARE 31-0303330
(State or other jurisdiction (I.R.S. Employer identification No.)
of incorporation or organization)
TWO NORTH RIVERSIDE PLAZA, CHICAGO, IL 60606
(Address of principal executive offices) (Zip Code)
(312) 258-1890
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
As of July 31, 1996, there were 13,819,022 shares of Common Stock outstanding.
================================================================================
<PAGE> 2
AMERICAN CLASSIC VOYAGES CO.
INDEX
ITEM DESCRIPTION PAGE
<TABLE>
<S> <C> <C> <C>
Part I. Financial Information:
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Statements of Income for the Three
Months and Six Months Ended June 30, 1996 and 1995..... 3
Condensed Consolidated Balance Sheets at June 30, 1996
and December 31, 1995.................................. 4
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995................ 5
Notes to Condensed Consolidated Financial Statements... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 9
Part II. Other Information:
Item 1. Legal Proceedings...................................... 15
Item 6. Exhibits and Reports on Form 8-K....................... 15
</TABLE>
2
<PAGE> 3
AMERICAN CLASSIC VOYAGES CO.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- -------------------
1996 1995 1996 1995
---------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues............................................... $ 49,305 $ 45,731 $ 91,250 $ 89,984
Cost of operations (exclusive of depreciation and
amortization shown below)............................ 31,584 36,365 59,973 72,677
-------- -------- -------- --------
Gross profit........................................... 17,721 9,366 31,277 17,307
Selling, general and administrative expenses........... 11,460 13,069 24,962 26,151
Depreciation and amortization expense.................. 3,938 2,489 7,386 4,947
Impairment write-down (Note 4)......................... -- -- 38,390 --
One-time pre-opening costs............................. -- 5,900 -- 5,900
-------- -------- -------- --------
Operating income (loss)................................ 2,323 (12,092) (39,461) (19,691)
Interest income........................................ 210 581 451 1,108
Interest expense....................................... 2,204 625 4,329 900
-------- -------- -------- --------
Income (loss) before income taxes and minority interest 329 (12,136) (43,339) (19,483)
Income tax benefit..................................... 52 3,520 449 6,100
Minority interest in loss.............................. -- 1,132 -- 1,862
-------- -------- -------- --------
Net income (loss)...................................... $ 381 $ (7,484) $(42,890) $(11,521)
======== ======== ======== ========
Per Share Information:
Average common shares outstanding...................... 13,773 13,762 13,771 13,762
======== ======== ======== ========
Earnings (loss) per share.............................. $ 0.03 $ (0.55) $ (3.11) $ (0.84)
======== ======== ======== ========
Cash dividends declared per share...................... -- $ 0.04 -- $ 0.08
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
AMERICAN CLASSIC VOYAGES CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except shares and par value)
(Unaudited)
<TABLE>
June 30, December 31,
1996 1995
ASSETS ---------- ------------
<S> <C> <C>
Cash and cash equivalents.................................................. $ 7,108 $ 6,048
Restricted short-term investments.......................................... 3,003 10,681
Accounts receivable........................................................ 1,562 1,134
Prepaid expenses and other current assets.................................. 7,700 6,612
---------- ------------
Total current assets................................................... 19,373 24,475
Property and equipment, net................................................ 181,831 211,959
Other assets............................................................... 6,462 6,320
Goodwill, net.............................................................. -- 4,719
---------- ------------
Total assets........................................................... $207,666 $247,473
========== ============
LIABILITIES
Accounts payable........................................................... 10,501 13,073
Other accrued expenses..................................................... 23,240 27,437
Current portion of long-term debt.......................................... 4,100 3,746
Unearned passenger revenues................................................ 40,310 28,532
---------- ------------
Total current liabilities............................................. 78,151 72,788
Long-term debt, less current maturities.................................... 100,948 103,272
---------- ------------
Total liabilities..................................................... 179,099 176,060
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value (5,000,000 shares authorized, none issued
and outstanding)......................................................... -- --
Common stock, $.01 par value (20,000,000 shares authorized; 13,776,122
and 13,769,512 shares issued and outstanding, respectively).............. 138 138
Additional paid-in capital................................................. 74,092 74,048
Retained deficit........................................................... (45,663) (2,773)
---------- ------------
Total stockholders' equity............................................ 28,567 71,413
---------- ------------
$207,666 $247,473
========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
AMERICAN CLASSIC VOYAGES CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
-------------------------
1996 1995
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss................................................... $ (42,890) $(11,521)
Depreciation and amortization............................ 7,386 4,947
Minority interest........................................ -- (1,862)
Impairment write-down (Note 4)........................... 38,390 --
Changes in working capital and other:
Working capital changes and other..................... (5,667) (8,409)
Unearned passenger revenues........................... 11,778 7,199
----------- ------------
Net cash provided by (used in) operating activities...... 8,997 (9,646)
----------- ------------
INVESTING ACTIVITIES:
Decrease in restricted short-term investments.............. 7,678 57
Capital expenditures....................................... (13,324) (20,546)
----------- ------------
Net cash used in investing activities.................... (5,646) (20,489)
----------- ------------
FINANCING ACTIVITIES:
Proceeds from borrowings................................... 6,903 25,000
Repayment of borrowings.................................... (8,873) --
Issuance of common stock................................... 44 22
Dividends.................................................. -- (1,101)
Deferred financing fees.................................... (365) (716)
----------- ------------
Net cash (used in) provided by financing activities...... (2,291) 23,205
----------- ------------
Increase (decrease) in cash and cash equivalents............. 1,060 (6,930)
Cash and cash equivalents, beginning of period............... 6,048 12,224
----------- ------------
Cash and cash equivalents, end of period..................... $ 7,108 $ 5,294
=========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (refunded) during the period for:
Interest (net of capitalized interest)................... $ 3,838 $ 490
Income taxes............................................. $ 404 $ (252)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
AMERICAN CLASSIC VOYAGES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
1. BASIS OF PRESENTATION:
These accompanying unaudited Condensed Consolidated Financial Statements
("Financial Statements") have been prepared pursuant to Securities and
Exchange Commission ("SEC") rules and regulations and should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
included on Form 10-K for the year ended December 31, 1995 (the "Annual
Report") for American Classic Voyages Co. ("AMCV") and its subsidiaries. These
Financial Statements include the accounts of AMCV and its wholly owned
subsidiaries, The Delta Queen Steamboat Co. ("DQSC") and Great Hawaiian Cruise
Line, Inc. ("GHCL") (collectively with such subsidiaries, the "Company"). The
following notes to the Financial Statements highlight significant changes to
the notes included in the Annual Report and such interim disclosures as
required by the SEC. These Financial Statements reflect, in the opinion of
management, all adjustments necessary for a fair presentation of the interim
financial statements. All such adjustments are of a normal and recurring
nature. Certain previously reported amounts have been reclassified to conform
to the 1996 presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
2. PROPERTY AND EQUIPMENT:
Property and equipment includes the estimated salvage value for the
Constitution of $2.5 million. The Constitution will not be returned to service
and will remain in wet berth at a shipyard in Portland, Oregon while the
Company explores various other options for the vessel (see Note 4 for further
information).
3. DEBT:
<TABLE>
<CAPTION>
Long-term debt consisted of (in thousands):
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
U.S. Government Guaranteed Ship
Financing Note, American Queen Series,
floating rate notes due semi-annually
beginning February 24, 1996 through
August 24, 2005......................................... $23,024 $24,236
U.S. Government Guaranteed Ship
Financing Bond, American Queen Series,
7.68% fixed rate, sinking fund bonds due
semi-annually beginning February 24,
2006 through June 2, 2020............................... 36,353 36,353
U.S. Government Guaranteed Ship
Financing Note, Independence Series A,
floating rate notes due semi-annually
beginning June 7, 1996 through
December 7, 2005........................................ 12,553 13,214
U.S. Government Guaranteed Ship
Financing Bond, Independence Series A,
6.84% fixed rate sinking fund bonds due
semi-annually beginning June 7, 2006
through December 7, 2015................................ 13,215 13,215
U.S. Government Guaranteed Ship
Financing Note, Independence Series B,
floating rate notes due semi-annually
beginning December 7, 1996 through
December 7, 2005........................................ 3,363 --
U.S. Government Guaranteed Ship
Financing Bond, Independence Series B,
7.46% fixed rate sinking fund bonds due
semi-annually beginning June 7, 2006
through December 7, 2015................................ 3,540 --
Revolving credit facility................................. 13,000 20,000
-------- --------
105,048 107,018
Less current portion...................................... 4,100 3,746
-------- --------
$100,948 $103,272
======== ========
</TABLE>
6
<PAGE> 7
On March 28, 1996, a subsidiary of GHCL issued $6.9 million of debt guaranteed
by the U.S. Government through the U.S. Department of Transportation, Maritime
Administration ("MARAD"). This debt is the second series ("Series B") of the
$26.4 million issue that was completed on December 7, 1995 and therefore
contains the same covenants and security as the original issue which was
guaranteed by GHCL and secured by the first mortgage of the Independence. The
Series B debt consists of $3.4 million of notes due December 7, 2005 with a
floating interest rate equal to London Interbank Offered Rate ("LIBOR") plus
.27% and $3.5 million of 7.46% fixed rate bonds due December 7, 2015. Interest
payments on the notes and bonds, as well as principal payments on the notes,
are payable semi-annually beginning December 7, 1996. Principal payments on the
bonds are payable semi-annually beginning June 7, 2006. In addition, the Series
B debt required the subsidiary to increase the six-month debt service deposit
to $2.2 million. This deposit will be released when either GHCL or its
subsidiary meets certain cash flow and debt-to-equity ratios.
The Company used a portion of the proceeds from the Series B financing to fund
amounts owed to the Newport News Shipbuilding and Dry Dock Company (the
"Shipyard") as part of the litigation settlement as further discussed in Note
6. The remaining proceeds were used, in part, to pay down a portion of amounts
outstanding under its revolving credit facility.
On April 22, 1996, the Company modified the total borrowing availability under
its amended and restated credit agreement with a group of financial
institutions with The Chase Manhattan Bank (formerly Chemical Bank), as agent
(the "Credit Agreement"). The Credit Agreement provides a revolving credit
facility, subject to certain covenants, of up to $25.0 million with a final
maturity on March 31, 1999. Borrowings bear interest, at the option of the
Company, equal to either (i) the greater of The Chase Manhattan Bank's prime
rate or certain alternative base rates plus a margin ranging from 0% to 1.25%,
or (ii) LIBOR plus a margin ranging from 1.0% to 2.25%. The Company is also
required to pay a commitment fee on the unused portion of the facility at a
rate ranging from 0.375% to 0.5% per annum. The Credit Agreement is guaranteed
by AMCV and secured by substantially all the assets of DQSC, excluding the
American Queen. The Credit Agreement contains various limitations, restrictions
and financial covenants which, among other things, requires maintenance of
certain financial ratios, restricts additional indebtedness, limits
intercompany advances to $20.0 million and limits the payment of dividends from
DQSC to AMCV to $2.0 million per annum.
The Company has complied with all covenants as of June 30, 1996.
4. IMPAIRMENT WRITE-DOWN:
After evaluating the scope and cost of the Constitution reconstruction project
as well as considering various alternatives, the Company announced on April 29,
1996 its decision not to renovate or return the Constitution to service. The
Constitution was removed from service on June 27, 1995 and is currently in wet
berth at a shipyard in Portland, Oregon. In the first quarter of 1996, in
connection with the foregoing decision, the Company recognized an impairment
write-down of $38.4 million, comprised of (a) $36.1 million directly related to
the write-down of the vessel and its allocated goodwill to an estimated salvage
value of $2.5 million, and (b) $2.3 million which represented the remaining
goodwill balance from the GHCL acquisition. The Company reserved for the
estimated costs to be incurred on behalf of the Constitution until its eventual
disposition. These costs include insurance, wet berthing fees and general
maintenance of the vessel. As of June 30, 1996, after recently performed
maintenance work to ensure the integrity and watertightness of the vessel, the
balance of this reserve was $4.0 million.
The impairment write-down was recognized in accordance with the Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of", which the
Company adopted effective January 1, 1996. SFAS No. 121 establishes accounting
standards for recognizing the impairment of long-lived assets, identifiable
intangibles and goodwill, whether to be disposed of or to be held and used. In
general, SFAS No. 121 requires recognition of an impairment loss when the sum
of undiscounted expected future cash flows is less than the carrying amount of
such assets.
7
<PAGE> 8
5. STOCK OPTIONS:
Activity under the Company's stock option plans from December 31, 1995 through
June 30, 1996 was:
<TABLE>
<CAPTION>
Executive Stock
Option Plan 1992 Plan Price Per Share
-------------- ------------------------ ---------------
Shares Shares Shares
Subject to Subject to Subject to
Options Options SARs
-------------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 323,971 1,179,410 280,000 $3.25 - $20.42
Options granted -- 106,500 -- 9.50 - 11.00
Options canceled -- (335,501) (55,000) 9.50 - 20.42
-------------- ---------- -----------
Balance at June 30, 1996 323,971 950,409 225,000 $3.25 - $20.42
============== ========== ===========
</TABLE>
With respect to SFAS 123, "Accounting for Stock-based Compensation", which
became effective January 1, 1996, the Company will continue its current
accounting for employee stock-based compensation plans in accordance with
Accounting Principles Board Opinion No. 25, as permitted under SFAS 123. In
addition, the Company will disclose the pro forma effect of the fair value
accounting method in the notes to its annual consolidated financial statements,
as required.
6. LITIGATION SETTLEMENT:
As discussed in Note 10 to the Consolidated Financial Statements included in
the Annual Report, in February 1996, the Company settled its dispute with the
Shipyard which arose during the renovation of the Independence. In March 1996,
the Company, in accordance with the settlement agreement, paid an additional
$8.7 million comprised of (a) the remaining escrow balance of $6.4 million, and
(b) $2.3 million upon the closing of the Series B debt as previously discussed
in Note 3.
8
<PAGE> 9
AMERICAN CLASSIC VOYAGES CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
American Classic Voyages Co. ("AMCV," or along with its subsidiaries, the
"Company"), is a holding company which owns and controls The Delta Queen
Steamboat Co. ("DQSC") and Great Hawaiian Cruise Line, Inc. ("GHCL"). The
following discusses the Company's consolidated results of operations and
financial condition for the second quarter and six month period ended June 30,
1996 versus the comparable periods ended June 30, 1995. This section should be
read in conjunction with the Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's Annual Report
for the year ended December 31, 1995.
The Company, through its various subsidiaries, operates two cruise lines:
"Delta Queen", which owns and operates the American Queen, Mississippi Queen
and Delta Queen steamboats, and "American Hawaii", which owns and operates the
Independence steamship. American Hawaii also owns the Constitution steamship
which was removed from service on June 27, 1995. The Constitution will not be
returned to service and will remain in wet berth at a shipyard in Portland,
Oregon while the Company explores various other options for the vessel. The
Company also owns and operates the Maison Dupuy Hotel located in New Orleans.
The Company's operations are seasonal. Historically, there is greater
passenger interest in the spring and fall months of the year at Delta Queen.
Furthermore, the vessels are typically out of service in January of each year,
undergoing a lay-up for routine repair and maintenance. American Hawaii
experiences greater passenger interest in the spring and summer months of the
year. Current interim results of operations include an impairment write-down
as discussed in Note 4 of the Condensed Consolidated Financial Statements. In
addition, the Delta Queen will be taken out of service for one month beginning
in mid-December 1996 to undergo its scheduled U.S. Coast Guard hull inspection
while this same procedure for the Independence will occur during its
month-long drydocking beginning mid-May 1997. The American Queen, launched in
mid-1995, will undergo its first annual lay-up during the month of January
1997. As a result of the factors mentioned above, interim results of
operations are not necessarily indicative of results for a full year.
RESULTS OF OPERATIONS
The following tables set forth various financial results and operating
statistics for the three months and six months ended June 30, 1996 and 1995
(in thousands):
FINANCIAL DATA
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------- -------------------
1996 1995 1996 1995
-------- --------- --------- --------
<S> <C> <C> <C> <C>
Revenues.................. $49,305 $ 45,731 $ 91,250 $ 89,984
======== ========= ========= ========
Operating income (loss)... $ 2,323 $(12,092) $(39,461) $(19,691)
======== ========= ========= ========
Net income (loss)......... $ 381 $ (7,484) $(42,890) $(11,521)
======== ========= ========= ========
</TABLE>
9
<PAGE> 10
OPERATING STATISTICS
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------- ------------------
1996 1995 1996 1995
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Fare revenue per passenger night.......... $ 220 $ 199 $ 213 $ 193
Total revenue per passenger night......... $ 288 $ 275 $ 284 $ 276
Weighted average operating days (1):
DELTA QUEEN............................ 91 54 166 91
AMERICAN HAWAII........................ 91 89 182 179
Vessels capacity per day (berths) (2):
DELTA QUEEN............................ 1,024 1,024 1,024 1,024
AMERICAN HAWAII........................ 817 1,590 817 1,590
Capacity passenger nights (3)............. 167,531 196,790 318,880 377,238
Passenger nights (4)...................... 164,645 159,162 308,317 311,215
Physical occupancy percentage (berths) (5) 98% 81% 97% 82%
</TABLE>
___________________
(1) Weighted average operating days for each cruise line is determined by
dividing capacity passenger nights for each cruise line by the cruise
line's total vessel capacity per day.
(2) Vessel capacity per day represents the number of passengers each cruise
line can carry assuming double occupancy for cabins which accommodate two
or more passengers. Some cabins on the Independence and the American
Queen can accommodate three or four passengers.
(3) Capacity passenger nights is determined by multiplying, for the
respective period, the actual operating days of each vessel by each
vessel's capacity per day.
(4) A passenger night represents one passenger spending one night on a
vessel; for example, one passenger taking a three-night cruise would
generate three passenger nights.
(5) Physical occupancy percentage is passenger nights divided by capacity
passenger nights.
10
<PAGE> 11
QUARTER ENDED JUNE 30, 1996 COMPARED TO QUARTER ENDED JUNE 30, 1995
Consolidated second quarter 1996 revenues of $49.3 million represented a $3.6
million increase from second quarter 1995 revenues of $45.7 million. American
Hawaii revenues decreased $4.2 million, reflecting a 47% decrease in capacity
as a result of the Constitution's removal from service on June 27, 1995, offset
by an increase of 6% in Independence fare revenue per passenger night ("fare
per diems"). Due to high water levels on the Ohio River in April and May
of 1996, certain cruise itineraries for the American Queen were changed. In an
effort to maintain customer goodwill, refunds were issued to passengers
electing to cancel their cruise, while vouchers for future complimentary
cruises were issued to those remaining on the affected cruises. The net effect
on revenue was not material and the Company believes a portion of the forgone
revenue will be recovered through business interruption insurance. Despite the
high water situation, Delta Queen's revenues increased $7.8 million reflecting
the operation of the American Queen for the entire period in 1996 (the
American Queen began her first cruise in the prior year on June 27, 1995).
Delta Queen's fare per diems decreased by 11% from the prior year period as a
result of management's strategy of discounting fares in the first half of 1996
in an effort to maintain historically high occupancy levels and to help shift
the booking cycle to its optimal schedule of six to nine months in advance. The
consolidated fare per diems for the second quarter of 1996 increased 11% to
$220 as the increase in American Hawaii's fare per diems more than offset the
decrease in Delta Queen's fare per diems. Consolidated total revenue per
passenger night ("total revenue per diems") increased only 5% to $288 for the
second quarter of 1996 due to a reduction in the percentage of passengers at
both cruise lines electing to purchase air travel through the Company.
Consolidated cost of operations decreased to $31.6 million for the second
quarter of 1996 from $36.4 million for the same period in 1995. American Hawaii
operating costs decreased $10.5 million primarily due to (a) the Constitution's
removal from service at the end of the second quarter of 1995, and (b)
realization of operating cost savings on the Independence as a result of cost
cutting efforts undertaken since the second half of 1995. Delta Queen's
operating costs increased $5.7 million which primarily reflected the addition
of the American Queen.
Consolidated selling, general and administrative expenses ("SG&A")
decreased to $11.5 million for the second quarter of 1996 from $13.1 million
for the same quarter in 1995. American Hawaii's SG&A decreased $3.0 million
primarily due to reduced staff levels and lower marketing expenses prompted by
the Constitution's removal from service. Delta Queen's additional capacity
resulted in increased marketing, corporate overhead and selling costs. In
addition, marketing costs at Delta Queen increased due to the efforts to
lengthen the booking cycle.
Consolidated depreciation and amortization expense increased to $3.9 million
for the second quarter of 1996 from $2.5 million for the same period of 1995
primarily due to the addition of the American Queen. American Hawaii's
depreciation remained unchanged as the increased depreciation on the
Independence was offset by the suspension of depreciation on the Constitution
upon its removal from service in the prior year. The increase in operating
income over the prior year was due to the factors mentioned above and the
inclusion of $5.9 million in one-time pre-opening costs related to the American
Queen for the quarter ended June 30, 1995.
Interest expense increased $1.6 million due to a greater outstanding debt
balance in 1996 and because the Company capitalized interest in 1995 related to
the American Queen construction. The Company's effective tax rate for the
second quarter of 1996 represented a benefit for certain state taxes whereas in
the same period for 1995, the effective tax rate also included a Federal tax
benefit. For the first half of 1996, the Company recognized a valuation
allowance for the full amount of the Federal tax benefit. As the minority
interest in GHCL was redeemed in December 1995, net income for the quarter
ended June 30, 1996 reflects 100% ownership of GHCL by the Company.
11
<PAGE> 12
SIX MONTHS ENDED JUNE 30, 1996 VERSUS SIX MONTHS ENDED JUNE 30, 1995
Consolidated first half 1996 revenues of $91.3 million represented a $1.3
million increase from first half 1995 revenues of $90.0 million. American
Hawaii's revenues decreased $12.2 million, or 20%. This decrease was mainly due
to a 48% decrease in capacity as a result of the Constitution's removal from
service on June 27, 1995, partially offset by improvements on the Independence
in fare per diems and occupancy, which increased by 13% and 18%, respectively,
compared to 1995. Delta Queen's revenues increased $13.5 million, or 44%,
reflecting an 80% increase in passenger nights for the period, offset by a 14%
decrease in fare per diems. The decrease in fare per diems as compared to 1995
is attributable to management's strategy of discounting fares in the first half
of 1996 in an effort to maintain historically high occupancy levels and to help
shift the booking cycle to its optimal schedule of six to nine months in
advance. The consolidated fare per diems for the first half of 1996 increased
10% to $213 as the increase in American Hawaii's fare per diems more than
offset the decrease in Delta Queen's fare per diems. Consolidated total revenue
per diems increased by only 3% to $284 due to a reduction in the percentage of
passengers at both cruise lines electing to purchase air travel through the
Company.
Consolidated cost of operations decreased to $60.0 million for the first half
of 1996 from $72.7 million for the first half of 1995. American Hawaii's
operating costs decreased $22.9 million primarily due to the Constitution's
removal from service and realization of operating cost savings on the
Independence as a result of cost cutting efforts undertaken since the second
half of 1995. Delta Queen's operating costs increased $10.2 million, or 56%,
primarily due to the addition of the American Queen.
Consolidated SG&A decreased to $25.0 million for the first half of 1996 from
$26.1 million for the same period in 1995. Delta Queen's additional capacity
resulted in increased marketing and corporate overhead expenditures but was
offset by the reduction in American Hawaii's marketing and corporate overhead
expenditures as only one ship was in operation. The $2.4 million increase in
depreciation expense was due to the addition of the American Queen while
American Hawaii's remained unchanged as the increased depreciation on the
Independence was offset by the suspension of depreciation on the Constitution
upon its removal from service in the prior year.
After evaluating the scope and cost of the Constitution reconstruction project
as well as considering various alternatives, the Company announced on April 29,
1996 its decision not to renovate or return the Constitution to service. In
connection with this decision, the Company recognized an impairment write-down
of $38.4 million in the first quarter of 1996. Excluding this write-down, the
consolidated operating loss for the first half of 1996 was $1.1 million as
compared to an operating loss, before one-time pre-opening costs of $5.9
million, of $13.8 million in 1995.
The $38.4 million impairment write-down was comprised of (a) $36.1 million
directly related to the write-down of the vessel and its allocated goodwill to
an estimated salvage value of $2.5 million, and (b) $2.3 million which
represented the remaining goodwill balance from the American Hawaii
acquisition. The Company has reserved for the estimated costs to be incurred on
behalf of the Constitution until its eventual disposition. These costs include
insurance, wet berthing fees and general maintenance of the vessel. As of
June 30, 1996, after recently performed maintenance work to ensure the
integrity and watertightness of the vessel, the balance of this reserve was
$4.0 million. The impairment write-down was recognized in accordance with the
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of", which the Company adopted effective January 1, 1996.
Interest expense increased $3.4 million due to a greater outstanding debt
balance in 1996 and capitalization of interest costs in 1995 related to the
American Queen construction. The Company's effective tax rate for the first
half of 1996 represented a benefit for certain state taxes. A valuation
allowance was recognized for the full amount of the Federal tax benefit
recorded in the first half of 1996 due to the possibility that the deferred tax
asset created may not be realized in the future. As the minority interest in
GHCL was redeemed in December 1995, the net loss for the first half of 1996
reflects 100% ownership of GHCL by the Company.
12
<PAGE> 13
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Operating Activities
For the six months ended June 30, 1996, cash used in operations before changes
in unearned passenger revenues ("Operating Cash Flow") was $2.8 million
compared to $16.8 million in the prior year. Operating Cash Flow reflected the
improved operating performance of American Hawaii in the first half of 1996,
as discussed previously under Results of Operations. Unearned passenger
revenues, representing passenger cruise deposits, increased $11.8 million in
the first half of 1996 reflecting the seasonal increase in advance reservation
levels typically experienced at Delta Queen.
Capital Expenditures
Capital expenditures of $13.3 million in the first half of 1996 included $10.5
million related to the Independence, of which $8.7 million represented amounts
paid to Newport News Shipbuilding and Dry Dock Company (the "Shipyard") in
March 1996 as part of the litigation settlement. Other significant capital
expenditures included $2.6 million for the Delta Queen and Mississippi Queen
lay-ups, including completion of the Mississippi Queen cosmetic renovation.
Debt
On March 28, 1996, a subsidiary of GHCL issued $6.9 million of debt guaranteed
by the U.S. Government through the U.S. Department of Transportation, Maritime
Administration ("MARAD"). This debt is the second series ("Series B") of the
$26.4 million issue that was completed on December 7, 1995 and therefore
contains the same covenants and security as the original issue which was
guaranteed by GHCL and secured by the first mortgage of the Independence. The
Series B debt consists of $3.4 million of notes due December 7, 2005 with a
floating interest rate equal to London Interbank Offered Rate ("LIBOR") plus
.27% and $3.5 million of 7.46% fixed rate bonds due December 7, 2015. Interest
payments on the notes and bonds, as well as principal payments on the notes are
payable semi-annually beginning December 7, 1996. Principal payments on the
bonds are payable semi-annually beginning June 7, 2006. In addition, the Series
B debt required the subsidiary to increase the six-month debt service deposit
to $2.2 million. This deposit will be released when either GHCL or its
subsidiary meets certain cash flow and debt-to-equity ratios. The Company used
a portion of the proceeds from the Series B financing to fund amounts owed to
the Shipyard as part of the litigation settlement as discussed above. The
remaining proceeds were used, in part, to pay down amounts outstanding under
its revolving credit facility.
On April 22, 1996, the Company modified the total borrowing availability under
its amended and restated credit agreement with a group of financial
institutions with The Chase Manhattan Bank (formerly Chemical Bank), as agent
(the "Credit Agreement"). The Credit Agreement provides a revolving credit
facility, subject to certain covenants, of up to $25.0 million with a final
maturity on March 31, 1999. Borrowings bear interest, at the option of the
Company, equal to either (i) the greater of The Chase Manhattan Bank's prime
rate or certain alternative base rates plus a margin ranging from 0% to 1.25%,
or (ii) LIBOR plus a margin ranging from 1.0% to 2.25%. The Company is also
required to pay a commitment fee on the unused portion of the facility at a
rate ranging from 0.375% to 0.5% per annum. The Credit Agreement is guaranteed
by AMCV and secured by substantially all the assets of DQSC, excluding the
American Queen. The Credit Agreement contains various limitations, restrictions
and financial covenants which, among other things, requires maintenance of
certain financial ratios, restricts additional indebtedness, limits
intercompany advances to $20.0 million and limits the payment of dividends from
DQSC to AMCV to $2.0 million per annum.
The Company has complied with all covenants as of June 30, 1996.
The Company believes it will have adequate access to capital resources, both
internally and externally, to meet its short-term and long-term capital
commitments. Such resources may include cash on hand, the ability to secure
additional financing through the capital markets or the sale of certain
non-strategic assets. The Company has no immediate plans to increase capacity
at either of its two cruise lines. However, the Company continually evaluates
opportunities to increase capacity, particularly with regard to the American
Hawaii business. If it would elect to increase capacity, the Company may seek
to secure additional financing. Notwithstanding, there can be no assurances
that the Company will choose to increase capacity or, if it elects to do so,
that it will obtain additional financing.
13
<PAGE> 14
Dividends
In the second half of 1995, the Company's board of directors elected not to
declare a dividend and determined that any future dividend declarations will be
based on the Company's operating performance and its planned capital needs.
Other
In March 1996, as part of the litigation settlement, the remaining balance of
$6.4 million maintained in an escrow account was released to the Shipyard. In
addition, during the first half of 1996, $1.8 million was released to the
Company from the escrow account maintained for remaining American Queen
construction costs.
The Federal Maritime Commission ("FMC") regulates passenger vessels with 50 or
more berths departing from U.S. ports and requires that such operators post
security with the FMC to be used in the event the operator fails to provide
cruise services or otherwise satisfy certain financial standards. The Company
has been approved as a self-insurer by the FMC, and therefore is not required
to post security for passenger cruise deposits. In light of a recent bankruptcy
of a cruise operator, the FMC has reviewed its financial safeguards for
passenger cruise deposits, and in June 1996, the FMC issued its proposed
regulations to increase the financial responsibility requirements on cruise
operators. If implemented, these proposed regulations would, among other
things, require operators qualifying as a self-insurer, such as the Company, to
satisfy a working capital test, in addition to the existing net worth test, and
to provide third-party coverage for 25% of its unearned passenger revenue in
the form of a surety bond or similar instrument. The FMC has asked that
operators submit comments to the proposals. The Company will file its
objections to the proposals as it believes that the FMC's current standards
provide passengers with adequate protection in the event of an operator's
non-performance, and that further requirements would impose an undue burden
on operators. If the FMC implements the proposed changes, they will be phased
in over time. The Company cannot at this time predict if the proposed
changes will be approved as currently constituted, or at all. If they are
implemented, it will require that the Company establish a bond to cover a
portion of its passenger deposits and payments at some future date.
Factors Concerning Forward-Looking Statements
Certain statements in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
Reform Act). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions which may impact passenger yields and
occupancy; weather patterns affecting either the inland waterways in the
Continental U.S. or the Hawaiian Islands; unscheduled repairs and drydocking of
the Company's vessels; the impact of changes in laws and implementation of
government regulations, such as those proposed by the FMC; the recognition of
a valuation allowance for Federal taxes; the increase in capacity at American
Hawaii; and the ability to obtain additional financing or sell non-strategic
assets.
14
<PAGE> 15
AMERICAN CLASSIC VOYAGES CO.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
As discussed in Note 10 to the Consolidated Financial Statements
included in the Annual Report, in February 1996, the Company settled
its dispute with the Shipyard which arose during the renovation of the
Independence. In March 1996, the Company, in accordance with the
settlement agreement, paid an additional $8.7 million comprised of (a)
the remaining escrow balance of $6.4 million, and (b) $2.3 million
upon the closing of the Series B debt as previously discussed in Note
3 of the Condensed Consolidated Financial Statements.
There are no other material legal proceedings, to which the Company
is a party or of which any of its property is the subject, other than
ordinary routine litigation and claims incidental to the business.
The Company believes it maintains adequate insurance coverage and
reserves for such claims.
ITEM 6. Exhibits and Reports on Form 8-K
a) Exhibits:
4.(ii)(a)(26) Acknowledgment of Trust Indenture dated as of
April 22, 1996 entered into by and among Great River
Cruise Line, Inc. and Chemical Bank as Agent for the
Lenders.
4.(ii)(a)(27) Acknowledgment of Trust Indenture dated as of
April 22, 1996 entered into by and among Great Ocean
Cruise Line, Inc. and Chemical Bank as Agent for the
Lenders.
4.(ii)(d)(19) Amendment No. 1 to Title XI Reserve Fund and
Financial Agreement between Great AQ Steamboat Co.
and the United States of America effective as of
January 1, 1996.
27. Financial data schedule.
b) Reports on Form 8-K:
Form 8-K dated April 29, 1996 announcing the decision not to
renovate or return to service American Hawaii Cruises' steamship,
the Constitution.
15
<PAGE> 16
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.
AMERICAN CLASSIC VOYAGES CO.
By: /s/ Philip C. Calian
------------------------
Philip C. Calian
Chief Executive Officer
By: /s/ Kathryn F. Gray
------------------------
Kathryn F. Gray
Controller and Treasurer
Dated: August 13, 1996
-------------------
16
<PAGE> 1
EXHIBIT 4.(ii)(a)(26)
ACKNOWLEDGMENT OF TRUST INDENTURE
This ACKNOWLEDGMENT OF TRUST INDENTURE (this "Acknowledgment") dated as of
the 22nd day of April, 1996 is entered into by and among GREAT RIVER CRUISE
LINE, INC., a Delaware corporation ("Mortgagor"), CHEMICAL BANK, a New York
banking corporation, as agent (in such capacity, the "Agent") for itself and
the Lenders (as referred to and as defined in the "Credit Agreement" described
below), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES of the Credit
Agreement described below, each other financial institution which from time to
becomes a party thereto in accordance with the provisions thereof (together
with their respective successors and assigns individually, a "Lender" and,
collectively, the "Lenders") (the "Lenders" and the "Mortgagor" being sometimes
referred to individually as a "Settlor" and collectively "Settlors"), the
FINANCIAL INSTITUTIONS LISTED AS EXITING LENDERS ON THE SIGNATURE PAGES of this
Acknowledgment (the "Exiting Lenders"), and Chemical Bank, not in its
individual capacity but as trustee under that certain Trust Indenture (in such
capacity, the "Trustee") dated as of August 3, 1993 by and among the parties
hereto (the "Original Trust Indenture", and together with any amendments,
modifications, or acknowledgments thereto, the "Trust Indenture").
WHEREAS, the parties hereto have previously entered into the Original
Trust Indenture whereunder the Trustee agreed on behalf of the Settlors to hold
that certain Preferred Ship Mortgage dated as of August 3, 1993, by Mortgagor
in favor of Trustee (the "Original Mortgage", and as amended, restated,
supplemented, or otherwise modified from time to time, the "Mortgage"), which
Original Mortgage was recorded with the 8th Coast Guard District in PM Book
245, Instrument 65, and which Original Mortgage affected 100% of the interest
of Mortgagor in the vessel "Delta Queen", Official No. 225875, as amended by
that certain Amendment to Preferred Ship Mortgage dated as of March 31, 1995
("First Amendment") which Amendment was recorded with the 8th Coast Guard
District in PM Book 9504, Instrument 227 and as amended by that certain Second
Amendment to Preferred Ship Mortgage dated as of August 31, 1995 ("Second
Amendment") which Second Amendment was recorded with the National Vessel
Documentation Center in Book 9603, Page/Instrument 673;
<PAGE> 2
WHEREAS, Mortgagor has amended the Mortgage pursuant to a Third Amendment
to Preferred Ship Mortgage ("Third Amendment") of even date herewith by and
between Mortgagor and Trustee to reflect a decrease in the credit facility
arising under the Third Amended and Restated Credit Agreement dated of even
date herewith by and among The Delta Queen Steamboat Co. (formerly known as
DQSC-2, Inc., "DQSC"), American Classic Voyages Co. (formerly known as The
Delta Queen Steamboat Co., "ACVC"), Agent and Lenders (the "Credit Agreement");
and
WHEREAS, pursuant to the Credit Agreement, the Exiting Lenders, which were
certain of the "Lenders" under and as defined in that certain Second Amended
and Restated Credit Agreement dated as of August 31, 1995 by and among DQSC,
ACVC, Agent, and the "Lenders" thereunder, shall not participate in the credit
facilities anticipated to be provided pursuant to the Credit Agreement, and
hereafter shall thus cease to be Settlors under and with respect to the Trust
Indenture.
NOW THEREFORE, the parties hereto agree and acknowledge that the
"Mortgage" subject to the Original Trust Indenture was intended to include,
does now and will hereafter include, in addition to the Original Mortgage, any
amendments, acknowledgments and supplements to the Original Mortgage, including
the Third Amendment.
IN ADDITION, (a) each of the Exiting Lenders hereby conveys and assigns,
without recourse, any and all rights and interests, including, without
limitation, any reversionary interests, such Exiting Lenders hold under the
Trust Indenture, to each of the Lenders on pro-rata basis based upon their
respective "Commitments" under and as defined in the Credit Agreement.
(b) the parties hereto agree and acknowledge that, pursuant to the
Credit Agreement, (i) each of the Exiting Lenders shall hereafter cease to be
Settlors under the Trust Indenture, (ii) any and all references to "Lenders" or
"Settlors" in the Trust Indenture shall hereafter be deemed to exclude the
Exiting Lenders, and (iii) the Exiting Lenders shall hereafter, for all
purposes, cease to be parties to the Trust Indenture and shall have no rights,
duties, or interests thereunder.
****Intentionally Left Blank****
<PAGE> 3
All of the terms and provisions of the Original Trust Indenture, except as
may be affected hereby, shall remain in full force and effect.
TRUSTEE:
CHEMICAL BANK
as Trustee under the Trust
Indenture
By: /s/ Lisa D. Benitez
-------------------------------
Name: Lisa D. Benitez
-----------------------------
Title: Vice President
----------------------------
SETTLORS:
CHEMICAL BANK
as Agent and as a Lender
By: /s/ Lisa D. Benitez
-------------------------------
Name: Lisa D. Benitez
-----------------------------
Title: Vice President
----------------------------
HIBERNIA NATIONAL BANK
By: /s/ Lizette M. Terral
-------------------------------
Name: Lizette M. Terral
-----------------------------
Title: Vice President
----------------------------
DEPOSIT GUARANTY NATIONAL BANK
By: /s/ Gregory A. Moore
-------------------------------
Name: Gregory A. Moore
-----------------------------
Title: Vice President
----------------------------
<PAGE> 4
GREAT RIVER CRUISE LINE, INC.
By: /s/ Jordan B. Allen
-------------------------------
Name: Jordan B. Allen
-----------------------------
Title: Vice President
----------------------------
EXITING LENDERS:
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Brian F.X. Geraghty
-------------------------------
Name: Brian F.X. Geraghty
-----------------------------
Title: Vice President
----------------------------
THE BANK OF NEW YORK
By: /s/ John C. Lambert
-------------------------------
Name: John C. Lambert
-----------------------------
Title: Vice President
----------------------------
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ David Bouhl, F.V.P.
-------------------------------
Name: David Bouhl, F.V.P.
-----------------------------
Title: Head of Corporate
----------------------------
Banking Chicago
----------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Kenneth Sweder
-------------------------------
Name: Kenneth Sweder
-----------------------------
Title: Asst. Vice President
----------------------------
<PAGE> 1
EXHIBIT 4.(ii)(a)(27)
The Mississippi Queen
ACKNOWLEDGMENT OF TRUST INDENTURE
This ACKNOWLEDGMENT OF TRUST INDENTURE (this "Acknowledgment") dated as of
the 22nd day of April, 1996 is entered into by and among GREAT OCEAN CRUISE
LINE, INC., a Delaware corporation ("Mortgagor"), CHEMICAL BANK, a New York
banking corporation, as agent (in such capacity, the "Agent") for itself and
the Lenders (as referred to and as defined in the "Credit Agreement" described
below), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES of the Credit
Agreement described below, each other financial institution which from time to
becomes a party thereto in accordance with the provisions thereof (together
with their respective successors and assigns individually, a "Lender" and,
collectively, the "Lenders") (the "Lenders" and the "Mortgagor" being sometimes
referred to individually as a "Settlor" and collectively "Settlors"), the
FINANCIAL INSTITUTIONS LISTED AS EXITING LENDERS ON THE SIGNATURE PAGES of this
Acknowledgment (the "Exiting Lenders"), and Chemical Bank, not in its
individual capacity but as trustee under that certain Trust Indenture (in such
capacity, the "Trustee") dated as of August 3, 1993 by and among the parties
hereto (the "Original Trust Indenture", and together with any amendments,
modifications, or acknowledgments thereto, the "Trust Indenture").
WHEREAS, the parties hereto have previously entered into the Original
Trust Indenture whereunder the Trustee agreed on behalf of the Settlors to hold
that certain Preferred Ship Mortgage dated as of August 3, 1993, by Mortgagor
in favor of Trustee (the "Original Mortgage", and as amended, restated,
supplemented, or otherwise modified from time to time, the "Mortgage"), which
Original Mortgage was recorded with the 8th Coast Guard District in PM Book
245, Instrument 64, and which Original Mortgage affected 100% of the interest
of Mortgagor in the vessel "Mississippi Queen", Official No. 574200, as amended
by that certain Amendment to Preferred Ship Mortgage dated as of March 31, 1995
("First Amendment") which Amendment was recorded with the 8th Coast Guard
District in PM Book 9504, Instrument 226 and as amended by that certain Second
Amendment to Preferred Ship Mortgage dated as of August 31, 1995 ("Second
Amendment") which Second Amendment was recorded with the National Vessel
Documentation Center in Book 9605, Page/Instrument 659;
<PAGE> 2
WHEREAS, Mortgagor has amended the Mortgage pursuant to a Third Amendment
to Preferred Ship Mortgage ("Third Amendment") of even date herewith by and
between Mortgagor and Trustee to reflect a decrease in the credit facility
arising under the Third Amended and Restated Credit Agreement dated of even
date herewith by and among The Delta Queen Steamboat Co. (formerly known as
DQSC-2, Inc., "DQSC"), American Classic Voyages Co. (formerly known as The
Delta Queen Steamboat Co., "ACVC"), Agent and Lenders (the "Credit Agreement");
and
WHEREAS, pursuant to the Credit Agreement, the Exiting Lenders, which were
certain of the "Lenders" under and as defined in that certain Second Amended
and Restated Credit Agreement dated as of August 31, 1995 by and among DQSC,
ACVC, Agent, and the "Lenders" thereunder, shall not participate in the credit
facilities anticipated to be provided pursuant to the Credit Agreement, and
hereafter shall thus cease to be Settlors under and with respect to the Trust
Indenture.
NOW THEREFORE, the parties hereto agree and acknowledge that the
"Mortgage" subject to the Original Trust Indenture was intended to include,
does now and will hereafter include, in addition to the Original Mortgage, any
amendments, acknowledgments and supplements to the Original Mortgage, including
the Third Amendment.
IN ADDITION, (a) each of the Exiting Lenders hereby conveys and assigns,
without recourse, any and all rights and interests, including, without
limitation, any reversionary interests, such Exiting Lenders hold under the
Trust Indenture, to each of the Lenders on pro-rata basis based upon their
respective "Commitments" under and as defined in the Credit Agreement.
(b) the parties hereto agree and acknowledge that, pursuant to the Credit
Agreement, (i) each of the Exiting Lenders shall hereafter cease to be Settlors
under the Trust Indenture, (ii) any and all references to "Lenders" or
"Settlors" in the Trust Indenture shall hereafter be deemed to exclude the
Exiting Lenders, and (iii) the Exiting Lenders shall hereafter, for all
purposes, cease to be parties to the Trust Indenture and shall have no rights,
duties, or interests thereunder.
****Intentionally Left Blank****
<PAGE> 3
All of the terms and provisions of the Original Trust Indenture, except as
may be affected hereby, shall remain in full force and effect.
TRUSTEE:
CHEMICAL BANK
as Trustee under the Trust
Indenture
By: /s/ Lisa D. Benitez
-------------------------------
Name: Lisa D. Benitez
-----------------------------
Title: Vice President
----------------------------
SETTLORS:
CHEMICAL BANK
as Agent and as a Lender
By: /s/ Lisa D. Benitez
-------------------------------
Name: Lisa D. Benitez
-----------------------------
Title: Vice President
----------------------------
HIBERNIA NATIONAL BANK
By: /s/ Lizette M. Terral
-------------------------------
Name: Lizette M. Terral
-----------------------------
Title: Vice President
----------------------------
DEPOSIT GUARANTY NATIONAL BANK
By: /s/ Gregory A. Moore
-------------------------------
Name: Gregory A. Moore
-----------------------------
Title: Vice President
----------------------------
<PAGE> 4
GREAT OCEAN CRUISE LINE, INC.
By: /s/ Jordan B. Allen
-------------------------------
Name: Jordan B. Allen
-----------------------------
Title: Vice President
----------------------------
EXITING LENDERS:
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Brian F.X. Geraghty
-------------------------------
Name: Brian F.X. Geraghty
-----------------------------
Title: Vice President
----------------------------
THE BANK OF NEW YORK
By: /s/ John C. Lambert
-------------------------------
Name: John C. Lambert
-----------------------------
Title: Vice President
----------------------------
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ David Bouhl, F.V.P.
-------------------------------
Name: David Bouhl, F.V.P.
-----------------------------
Title: Head of Corporate
----------------------------
Banking Chicago
----------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Kenneth Sweder
-------------------------------
Name: Kenneth Sweder
-----------------------------
Title: Asst. Vice President
----------------------------
<PAGE> 1
EXHIBIT 4.(ii)(d)(19)
Contract No. MA-13050
AMENDMENT NUMBER I TO TITLE XI RESERVE FUND
AND FINANCIAL AGREEMENT
This Amendment Number 1 to Title XI Reserve Fund and Financial
Agreement effective as of January 1, 1996 (this "Amendment"), between Great AQ
Steamboat Co. (the "Company") and the United States of America, represented by
the Secretary of Transportation, acting by and through the Maritime
Administrator (the "Secretary").
Recitals:
A. On August 24, 1995, the Company and the Secretary entered into a Title
XI Reserve Fund and Financial Agreement, Contract No. MA-13050;
B. The Delta Queen Steamboat Company ("DQSC"), parent organization of the
Company, requested that the Secretary consent to the merger of Creative
Endeavors, Inc. ("CEI") with and into the Company, effective as of January 1,
1996, at 12:01 a.m. (the "Merger");
C. On December 29, 1995, the Secretary consented to the Merger, subject to
the following conditions: (1) the Company and the Secretary enter into this
Amendment, (2) the Company and DQSC amend their tax sharing agreement (the "Tax
Agreement") to provide that the Company will receive credits against future tax
payments owed under the Tax Agreement to the extent that the Company loses any
tax benefits as a result of the Merger or the related distributions and (3) the
Company and American Classic Voyages Co. ("AMCV") enter into an agreement that
provides that AMCV shall reimburse the Company for any loss or adverse
financial effect caused by the Merger, the distribution of any of the CEI
Assets (as defined in Section 2 below) or the application of any of the
Company's tax rights to shelter the income of CEI (the "Reimbursement
Agreement").
D. In consideration of the continuing Guarantees by the Secretary, the
benefits to the Company in connection with the Merger and for other valuable
consideration, the Company has agreed to enter into this Amendment Number I to
Title XI Reserve Fund and Financial Agreement.
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt of which is hereby acknowledged, the Company and the
Secretary are hereby entering into this amendment, subject to the terms and
conditions herein set forth.
<PAGE> 2
1. Notwithstanding any provision to the contrary contained in the Title XI
Reserve Fund and Financial Agreement, including Sections 13 (c)(6) and (7) of
Exhibit 1 thereto, said agreement is hereby amended in order to provide for and
permit the Merger and the distribution of the CEI Assets, including all
proceeds from any sale thereof, whether by dividend, distribution, advance or
otherwise.
2. The Secretary hereby waives those provisions of the Title XI Reserve
Fund and Financial Agreement that govern, limit and/or restrict distributions
to the extent the provisions relate to the CEI assets, as defined below, and
permits the Company to distribute, whether by dividend, distribution, advance
or otherwise, all properties or assets owned by CEI immediately prior to the
Merger and all cash derived from the operations of CEI's properties or assets
(the "CEI Assets"), including all proceeds from any sale thereof, so long as
(i) the aggregate net sale proceeds of the CEI Assets exceed the liabilities of
CEI existing immediately prior to the Merger (the "CEI Liabilities"), (ii) the
merged company pays or satisfies all of the CEI Liabilities from the proceeds
of the CEI Assets prior to making any other use of the sales proceeds of the
CEI Assets, (iii) the Company incurs no adverse financial effect from the
Merger.
3. The Secretary hereby agrees that the financial effect of the Merger and
any sales or distribution of the CEI Assets are not subject to the depository
and reporting requirements of the Title XI Reserve Fund and Financial
Agreement, except to the extent that the Secretary may request information for
the purpose of enforcing or reviewing the provisions of this Amendment, the
Title XI Reserve Fund and Financial Agreement, the Tax Agreement or the
Reimbursement Agreement.
4. The Company hereby certifies and agrees that, upon the Merger, the
Company shall certify to the Secretary that (i) the aggregate net sale proceeds
of the CEI Assets exceed the CEI Liabilities, (ii) the merged company has paid
or satisfied all of the CEI Liabilities from the proceeds of the CEI Assets
prior to making any other use of the sales proceeds of the CEI Assets and (iii)
the Company has incurred no adverse financial effect from the Merger.
5. In the event of any inconsistency between this Amendment, the Title XI
Reserve Fund and Financial Agreement as originally executed or with Exhibit I
thereto, this Amendment shall control.
This Amendment may be executed in any number of counterparts. All such
counterparts shall be deemed to be originals and shall together constitute but
one and the same instrument.
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, this Amendment Number I to Title XI Reserve Fund and
Financial Agreement has been executed by the parties hereto as of the day and
year first above written.
GREAT AQ STEAMBOAT CO.
By: /s/ Jordan B. Allen
--------------------------------
Vice President
--------------------------------
Attest: /s/ Robin Mariella
------------------------
Title: Assistant Secretary
-------------------------
UNITED STATES OF AMERICA
SECRETARY OF TRANSPORTATION
By: MARITIME ADMINISTRATOR
By: /s/ Joel C. Richard
--------------------------------
Secretary Maritime Administration
--------------------------------
Attest: /s/ Patricia C. Byrne
-------------------------
Title: Assistant Secretary
Maritime Administration
-------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,111<F1>
<SECURITIES> 0
<RECEIVABLES> 1,562
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,373
<PP&E> 225,145
<DEPRECIATION> 43,314
<TOTAL-ASSETS> 207,666
<CURRENT-LIABILITIES> 78,151
<BONDS> 100,948
<COMMON> 138
0
0
<OTHER-SE> 28,567
<TOTAL-LIABILITY-AND-EQUITY> 207,666
<SALES> 0
<TOTAL-REVENUES> 91,250
<CGS> 0
<TOTAL-COSTS> 59,973
<OTHER-EXPENSES> 38,390
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,329
<INCOME-PRETAX> (43,339)
<INCOME-TAX> (449)
<INCOME-CONTINUING> (42,890)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (42,890)
<EPS-PRIMARY> (3.11)
<EPS-DILUTED> (3.11)
<FN>
<F1>Includes restricted short-term investments of $3,003.
</FN>
</TABLE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
April 29, 1996
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(Date of Report)
AMERICAN CLASSIC VOYAGES CO.
(Exact name of Registrant as specified in its charter)
Delaware
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(State or other jurisdiction)
0-9264 31-0303330
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(Commission file number) (IRS employer identification number)
Two North Riverside Plaza, Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
(312) 258-1890
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(Registrant's telephone number, include area code)
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ITEM 5--OTHER EVENTS
American Classic Voyages Co. (the "Company"), which owns and operates two
cruise lines, American Hawaii Cruises and The Delta Queen Steamboat Co.,
announced on April 29, 1996 its decision not to renovate or return to service
American Hawaii Cruises' steamship, the Constitution. The Constitution was
removed from service on June 27, 1995 and is currently in wet berth in
Portland, Oregon.
In connection with the foregoing decision, in the first quarter of 1996, the
Company recognized an impairment write-down of $38.4 million which includes a
reduction in the book value of the vessel and a write-off of the remaining
goodwill related to the acquisition of American Hawaii Cruises. In addition,
the Company established a reserve for future storage and maintenance costs for
the Constitution as it explores various other options for the vessel.
The impairment write-down was recognized in accordance with the Statement of
Financial Accounting Standards ("SFAS"), No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of",
which the Company adopted effective January 1, 1996. SFAS No. 121 establishes
accounting standards for recognizing the impairment of long-lived assets,
identifiable intangibles and goodwill, whether to be disposed of or to be held
and used. In general, SFAS No. 121 requires recognition of an impairment loss
when the sum of undiscounted expected future cash flows is less than the
carrying amount of such assets.
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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.
AMERICAN CLASSIC VOYAGES CO.
By: /s/ Kathryn F. Gray
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Kathryn F. Gray
Controller and Chief Accounting Officer
Dated: May 7, 1996
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