<PAGE> 1
================================================================================
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, 1999
[ ] 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 of (I.R.S. Employer identification No.)
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 August 10, 1999, there were 18,451,093 shares of Common Stock outstanding.
================================================================================
<PAGE> 2
AMERICAN CLASSIC VOYAGES CO.
INDEX
<TABLE>
<CAPTION>
ITEM DESCRIPTION PAGE
- ---------------- ----
<S> <C> <C>
Part I. Financial Information:
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at June 30, 1999
and December 31, 1998............................................... 3
Condensed Consolidated Statements of Operations for the
Three Months and Six Months Ended June 30, 1999 and
1998................................................................ 4
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1999 and 1998............................. 5
Notes to Condensed Consolidated Financial Statements................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................. 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk ......... 16
Part II. Other Information:
Item 1. Legal Proceedings................................................... 17
Item 4. Submission of Matters to a Vote of Security Holders................. 17
Item 6. Exhibits and Reports on Form 8-K.................................... 17
</TABLE>
2
<PAGE> 3
AMERICAN CLASSIC VOYAGES CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and par value)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................................ $ 94,818 $ 27,004
Restricted short-term investments........................................ 60 60
Accounts receivable...................................................... 1,992 1,989
Prepaid expenses and other current assets................................ 13,693 9,053
----------- ---------
Total current assets................................................ 110,563 38,106
Property and equipment, net.............................................. 168,687 162,129
Deferred income taxes, net............................................... 11,434 10,011
Other assets............................................................. 4,485 2,546
----------- ---------
Total assets........................................................ $ 295,169 $ 212,792
=========== =========
LIABILITIES
Accounts payable......................................................... $ 13,491 $ 13,493
Other accrued liabilities................................................ 15,900 16,500
Current portion of long-term debt........................................ 4,100 4,100
Unearned passenger revenues.............................................. 61,271 39,297
----------- ---------
Total current liabilities........................................... 94,762 73,390
Long-term debt, less current portion..................................... 75,338 77,388
----------- ---------
Total liabilities................................................... $ 170,100 $ 150,778
=========== =========
COMMITMENTS AND CONTINGENCIES (NOTE 5)
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value (5,000,000 shares
authorized, none issued and outstanding).............................. $ -- $ --
Common stock, $.01 par value (40,000,000 and 20,000,000
shares authorized, respectively; 18,482,197 and 14,293,931 shares
issued, respectively)................................................ 186 143
Additional paid-in capital............................................... 147,091 80,451
Accumulated deficit...................................................... (20,054) (17,823)
Common stock in treasury, at cost (51,000 shares)........................ (757) (757)
Unearned restricted stock................................................ (1,397) --
----------- ---------
Total stockholders' equity.......................................... 125,069 62,014
----------- ---------
Total liabilities and stockholders' equity.......................... $ 295,169 $ 212,792
=========== =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
AMERICAN CLASSIC VOYAGES CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues............................................... $55,200 $ 53,535 $ 95,766 $ 94,203
Cost of operations (exclusive of depreciation expense
shown below)......................................... 33,694 32,973 62,462 62,432
------- -------- -------- --------
Gross profit............................................ 21,506 20,562 33,304 31,771
Selling, general and administrative expenses............ 12,886 12,292 26,821 25,388
Depreciation expense.................................... 4,187 4,233 8,342 8,489
------- -------- -------- --------
Operating income (loss)................................. 4,433 4,037 (1,859) (2,106)
Interest income......................................... 889 263 1,211 514
Interest expense........................................ 1,500 1,686 3,070 3,356
Other income............................................ -- -- -- 300
------- -------- -------- --------
Income (loss) before income taxes....................... 3,822 2,614 (3,718) (4,648)
Income tax (expense) benefit............................ (1,513) (1,040) 1,487 1,860
------- -------- -------- --------
Net income (loss)....................................... $ 2,309 $ 1,574 $ (2,231) $ (2,788)
======= ======== ======== ========
Per Share Information
Basic:
Basic weighted average shares outstanding.......... 17,209 14,120 15,773 14,094
Earnings (loss) per share.......................... $ 0.13 $ 0.11 $ (0.14) $ (0.20)
Diluted:
Diluted weighted average shares outstanding........ 17,891 14,897 15,773 14,094
Earnings (loss) per share.......................... $ 0.13 $ 0.11 $ (0.14) $ (0.20)
</TABLE>
The accompanying notes are an integral part of these condensed 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,
------------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss........................................................................ $ (2,231) $ (2,788)
Depreciation expense........................................................ 8,342 8,489
Gain on sale of assets...................................................... -- (300)
Changes in working capital and other:
Working capital changes and other....................................... (5,825) (7,834)
Unearned passenger revenues............................................. 21,974 9,598
--------- ---------
Net cash provided by operating activities................................... 22,260 7,165
--------- ---------
INVESTING ACTIVITIES:
Decrease in restricted short-term investments................................... -- 265
Capital expenditures............................................................ (15,060) (4,801)
Proceeds from sale of assets.................................................... -- 300
--------- ---------
Net cash used in investing activities....................................... (15,060) (4,236)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from borrowings........................................................ 2,000 --
Repayment of borrowings......................................................... (4,050) (2,050)
Purchase of common stock........................................................ -- (298)
Proceeds from issuance of common stock, net..................................... 64,798 1,204
Deferred financing fees......................................................... (2,134) --
--------- ---------
Net cash provided by (used in) financing activities......................... 60,614 (1,144)
--------- ---------
Increase in cash and cash equivalents.............................................. 67,814 1,785
Cash and cash equivalents, beginning of period..................................... 27,004 19,187
--------- ---------
Cash and cash equivalents, end of period........................................... $ 94,818 $ 20,972
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of capitalized interest)...................................... $ 2,863 $ 3,034
Income taxes................................................................ 100 --
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
AMERICAN CLASSIC VOYAGES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(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, 1998 (the "Form 10-K") 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 changes to the notes included in the Form 10-K
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 1999 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. EARNINGS PER SHARE
Earnings per share have been computed as follows (in thousands, except per share
data):
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
----------------------------------
1999 1998
------------ -----------
<S> <C> <C>
Basic:
Net income................................................... $ 2,309 $ 1,574
Weighted average shares outstanding.......................... 17,209 14,120
------------ -----------
Earnings per share .......................................... $ 0.13 $ 0.11
============ ===========
Diluted:
Net income................................................... $ 2,309 $ 1,574
Weighted average shares outstanding.......................... 17,209 14,120
Additional shares issuable under various stock plans......... 682 777
------------ -----------
Diluted weighted average shares outstanding.................. 17,891 14,897
------------ -----------
Earnings per share .......................................... $ 0.13 $ 0.11
============ ===========
</TABLE>
As the Company reported losses for the six months ended June 30, 1999 and 1998,
diluted earnings per share was computed in the same manner as basic earnings per
share.
6
<PAGE> 7
3. DEBT
Long-term debt consisted of (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------------- --------------
<S> <C> <C>
U.S. Government Guaranteed Ship Financing Note, American Queen Series, LIBOR +
0.25% floating rate notes due semi-annually beginning February 24, 1996 through
August 24, 2005...................................................................... $ 15,597 $ 16,809
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......................................................................... 36,198 36,198
U.S. Government Guaranteed Ship Financing Note, Independence Series A, LIBOR +
0.27% floating rate notes due semi-annually beginning June 7, 1996 through
December 7, 2015..................................................................... 8,410 9,248
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, LIBOR +
0.27% floating rate notes due semi-annually beginning December 7, 1996 through
December 7, 2005..................................................................... 2,478 2,478
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 3,540
Revolving credit facility (maximum availability of $70 million) ......................... -- --
--------- ---------
79,438 81,488
Less current portion..................................................................... 4,100 4,100
--------- ---------
$ 75,338 $ 77,388
========= =========
</TABLE>
In the first quarter of 1999, DQSC, as borrower, closed on a new long-term
credit facility with The Chase Manhattan Bank, as agent, and several participant
banks (the "Chase Facility"). The Chase Facility, which is a $70 million
revolving credit facility maturing in February 2004, replaces the previous
credit facility with Chase Manhattan. Borrowings under the new facility bear
interest at a rate, at the option of the Company, equal to either (1) the
greater of Chase's prime rate or certain alternative base rates plus a margin
ranging from 0.50% to 1.50%, or (2) the London Interbank Offered Rate plus a
margin ranging from 1.50% to 2.50%. The Company is also required to pay an
unused commitment fee at a rate of 0.50% per annum.
The Chase Facility will be used for the conversion of the fourth Delta Queen
riverboat, the construction of the first two coastal vessels, and Delta Queen
working capital. The new facility is secured by all of the assets of DQSC except
the American Queen, and has various limitations and restrictions on investments,
additional indebtedness, the construction costs of the new vessels, and other
capital expenditures. The Chase Facility also limits dividends by DQSC, when
aggregated with investments and certain other payments, to amounts ranging from
$5 million to $15 million per annum. DQSC is required to comply with certain
financial covenants, including maintenance of minimum interest coverage ratios
and maximum leverage ratios.
On April 8, 1999, the Company received a commitment from the Maritime
Administration for up to $1.1 billion in financing guarantees. The commitment
amount represents 87.5% of the total cost of the initial two Hawaii vessels,
including shipyard costs, capitalized interest, and fees.
As of June 30, 1999, the Company complied with all covenants under its various
debt agreements.
7
<PAGE> 8
4. STOCKHOLDERS' EQUITY
COMMON STOCK OFFERING
On April 27, 1999 and May 4, 1999, the Company completed public offerings of an
additional 3,500,000 and 525,000 shares of common stock, respectively. The net
proceeds to the Company, after offering expenses, were $63.5 million and are
being used for construction of the initial Hawaii vessel.
ACCUMULATED DEFICIT
Changes in accumulated deficit for the six months ended June 30, 1999 were (in
thousands):
Accumulated deficit at December 31, 1998............... $(17,823)
Net loss............................................... (2,231)
--------
Accumulated deficit at June 30, 1999................... $(20,054)
========
RESTRICTED STOCK
In February 1999, the Company issued 72,122 shares of restricted common stock as
compensation for a certain key salaried employee. Issuance and sale of these
shares is restricted prior to the employee's retirement from the Company.
Unearned compensation was recorded at the date of the restricted stock award
based on the market value of shares. Unearned compensation, which is shown as a
separate component of stockholders' equity, will be amortized to expense over a
four year vesting period, beginning in July, 1999.
5. COMMITMENTS AND CONTINGENCIES
HAWAII VESSELS
On March 9, 1999, the Company executed definitive agreements with Ingalls
Shipbuilding, Inc. to construct at least two new vessels for the Hawaii cruise
market. The new Hawaii cruise ships will have the capacity to accommodate
approximately 1,900 passengers each and are currently estimated to cost $440
million each, plus approximately $30 million each for furnishings, fixtures and
equipment. The contract provides that Ingalls Shipbuilding will deliver the
first new ship in January 2003 and the second ship in January 2004. In addition,
the shipbuilding contract provides the Company an option to build up to four
additional vessels. The estimated contract price of the first option vessel is
$487 million and the contract price for the subsequent option vessels will be
negotiated between the parties. Ingalls Shipbuilding will provide a limited
warranty for the design, material, and workmanship of each vessel for one year
after delivery.
COASTAL VESSELS
The Company entered into a construction contract, as of May 1, 1999, with
Atlantic Marine, Inc. of Jacksonville, Florida to construct at least two coastal
cruise vessels for its Delta Queen line. This contract is the culmination of the
previously announced plans to build a series of up to five new vessels to
provide cruises along U.S. coastal waterways. Under the construction contract,
the contract price of the vessels will be $30 million each and will have a total
project cost, including Company provided furnishings, fixtures and equipment, of
approximately $35 million. The coastal cruise vessels will be approximately 300
feet long and provide accommodations for up to 226 passengers. The contract
provides that the delivery date will be early March, 2001 for the first vessel
and mid-June, 2001 for the second vessel. In addition, the contract provides the
Company an option to purchase a third vessel by notifying the shipyard by
December 31, 1999. The contract price for the third vessel will be subject to
negotiation between the parties. Atlantic Marine will provide a limited warranty
for the work, parts, and components of each vessel fabricated by the yard for
one year after delivery.
8
<PAGE> 9
RIVERBOAT ACQUISITION
On May 25, 1999, the Company finalized a contract to acquire a substantially
complete riverboat originally built for the casino trade. The Company is
converting the 218 foot boat into an overnight passenger vessel with
approximately 161 passenger berths for use as the fourth Delta Queen riverboat.
The purchase price for the vessel was $3.2 million and the Company estimates
that the total renovation, relocation, start-up and marketing costs will require
an additional $13 to $15 million. The Company expects the conversion project
will take between six and nine months and that the vessel will enter service in
April, 2000 as the Columbia Queen. The vessel will be operated by Delta Queen in
the Pacific Northwest on the Columbia River system near Portland, Oregon. The
Company also terminated its agreement to acquire the M/V Speculation, a
riverboat it had previously planned to acquire for $8.0 million.
6. SUBSEQUENT EVENT
On August 5, 1999, the Company entered into an agreement with Holland America
Line to purchase the ms Nieuw Amsterdam for $114.5 million. The agreement is
subject to the satisfaction of various conditions, including the Company's due
diligence examination of the cruise ship. The 1,214-passenger cruise ship is
expected to be transferred to the Company in fall of 2000 and operated in the
Hawaiian Islands as a U.S.-flag vessel.
9
<PAGE> 10
AMERICAN CLASSIC VOYAGES CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
American Classic Voyages Co. is a holding company which owns and controls The
Delta Queen Steamboat Co. and Great Hawaiian Cruise Line, Inc. Through our
various subsidiaries, we operate 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.
Our revenues are comprised of:
(1) cruise fares,
(2) onboard revenues, such as those from gift shops and shore excursions,
and
(3) trip cancellation insurance and pre- and post-cruise hotel packages.
Additional revenue is also derived from the sale of airplane tickets to and from
points of embarkation or disembarkation. Our cost for air tickets typically
matches the revenue we generate from sales of airline tickets, so we recognize
minimal profits from such sales. Our cost of operations is comprised of:
(1) passenger expenses, such as employee payroll and benefits and the cost
of food and beverages,
(2) vessel operating costs including lay-up and drydocking costs for our
vessels,
(3) insurance costs,
(4) commissions paid to travel agents, and
(5) air ticket and hotel costs.
When we receive deposits from passengers for cruises, we establish a liability
for unearned passenger revenue. We recognize revenue when the passengers take
their cruises and make a corresponding reduction in our unearned passenger
revenues. Our revenues and some of our expenses vary considerably when measured
on a quarterly basis. This is due to the seasonality of our Delta Queen
revenues, the timing of our Delta Queen and American Hawaii layups and
drydockings, and fluctuations in airfares. These variations are reflected in our
fare revenues per passenger night, which are commonly referred to as fare per
diems, and our occupancy rates.
Delta Queen's operations are seasonal. Historically, we have had greater
passenger interest and higher yields in the spring and fall months of the year.
The vessels typically undergo their annual lay-ups in December or January. While
American Hawaii has historically experienced greater passenger interest in the
summer and fall months of the year, quarterly variations in its revenues are
much smaller than those of Delta Queen. During the summer months, in particular,
American Hawaii tends to have average occupancies in excess of 100% as the
number of families sharing cabins with children increases significantly during
this period.
The following discusses the Company's consolidated results of operations and
financial condition for the three months and six months ended June 30, 1999 and
1998. This section should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in our Form 10-K for the year ended December 31, 1998.
10
<PAGE> 11
RESULTS OF OPERATIONS
Operations data expressed as a percentage of total revenue for the periods
indicated is as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------------- -----------------------------------
1999 1998 1999 1998
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
Revenues 100% 100% 100% 100%
Costs and Expenses:
Operating expenses.................. 61 62 65 66
Selling and administrative.......... 23 23 28 27
Depreciation........................ 8 8 9 9
Operating income (loss).................. 8 8 (2) (2)
Net income (loss)........................ 4 3 (2) (3)
</TABLE>
Selected operating statistics for the periods indicated are as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------------- ------------------------------
1999 1998 1999 1998
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Fare revenue per passenger night........... $ 236 $ 231 $ 224 $ 222
Total revenue per passenger night.......... $ 328 $ 322 $ 320 $ 315
Weighted average operating days (1):
DELTA QUEEN........................... 91 91 158 164
AMERICAN HAWAII....................... 91 91 181 181
Vessels capacity per day (berths) (2):
DELTA QUEEN........................... 1,026 1,026 1,026 1,026
AMERICAN HAWAII....................... 867 867 867 867
Passenger nights (3)....................... 168,281 166,497 299,655 298,822
Physical occupancy percentage (berths) (4). 98% 97% 94% 92%
</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. 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.
(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) 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.
(4) Physical occupancy percentage is passenger nights divided by capacity
passenger nights.
11
<PAGE> 12
QUARTER ENDED JUNE 30, 1999 COMPARED TO QUARTER ENDED JUNE 30, 1998
Consolidated second quarter 1999 revenues increased $1.7 million to $55.2
million from $53.5 million for the second quarter 1998. This represents a $1.2
million increase in fare revenues combined with a $0.5 million increase in other
revenues. Delta Queen's fare revenues increased $0.7 million, reflecting a 5%
increase in fare per diems offset by a 1% decrease in occupancy. American
Hawaii's fare revenues increased $0.5 million on a 4% increase in passenger
nights while fare per diems were consistent with the prior year. The $0.5
million increase in other revenues was mainly due to the increase in passenger
nights at American Hawaii which resulted in higher onboard revenues. As a
result, consolidated total revenues per passenger night increased to $328.
Consolidated cost of operations increased $0.7 million to $33.7 million for the
second quarter of 1999 from $33.0 million for the comparable period of 1998.
Delta Queen's operating costs increased $0.2 million due to an increase in
vessel expenses. American Hawaii's operating costs increased $0.5 million as a
result of increased passenger nights. Consolidated gross profit increased $0.9
million for the second quarter 1999 as compared to 1998.
Consolidated selling, general and administrative expenses, before capacity
expansion expenses, increased $0.9 million to $12.5 million for the second
quarter of 1999 from $11.6 million for the same period in 1998. The increase was
a result of higher selling and marketing expenses, which increased by $0.7
million from the prior year. Capacity expansion expenses, however, decreased
$0.3 million to $0.4 million from $0.7 million. Depreciation expense for the
second quarter of 1999 was consistent with 1998.
The consolidated operating income for the second quarter of 1999 was $4.4
million as compared to $4.0 million for the comparable period of 1998.
Interest expense decreased slightly due to a lower outstanding debt balance in
the second quarter of 1999. Interest income increased by $0.6 million in the
second quarter of 1999 as a result of proceeds received by us upon the sale of
additional common stock in late April and early May. Our consolidated effective
tax rate was 40% for both periods in 1999 and 1998.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Consolidated first half 1999 revenues increased $1.6 million to $95.8 million
from $94.2 million for the first half of 1998 representing a $0.9 million
increase in fare revenues combined with a $0.7 million increase in other
revenues. Delta Queen's fare revenues decreased $0.4 million, reflecting a 4%
decrease in capacity due to six fewer average operating days and a 2% decrease
in occupancy, offset by a 5% increase in fare per diems. American Hawaii's fare
revenues increased $1.3 million on a 6% increase in passenger nights while fare
per diems decreased by 1.0%. The $0.7 million increase in other revenues was
mainly due to the increase in passenger nights at American Hawaii resulting in
higher onboard revenues. As a result, consolidated total revenues per passenger
night increased to $320.
Consolidated cost of operations for the first half of 1999 was consistent with
the comparable period of 1998. Delta Queen's operating costs decreased by $0.7
million primarily corresponding to the decrease in passenger nights. American
Hawaii's operating costs increased $0.7 million as a result of increased
passenger nights. Consolidated gross profit increased $1.5 million for the first
half of 1999.
Consolidated selling, general and administrative expenses increased by $1.4
million to $26.8 million for the first half of 1999 from $25.4 million for the
same period in 1998. The increase was primarily due to a $0.7 million increase
in marketing and selling expenses. Capacity expansion expenses for both periods
was $1.1 million. Depreciation expense for the first half of 1999 was consistent
with 1998.
The consolidated operating loss for the first half of 1999 was $1.8 million as
compared to a operating loss of $2.1 million for the first half of 1998.
Interest expense decreased slightly due to a lower outstanding debt balance in
the first half of 1999. Interest income increased $0.7 million in the first half
of 1999 as a result of proceeds received by us upon the sale of additional
common stock in late April and early May. In February 1998, we received $0.3
million of final proceeds from the buyer of the Maison Dupuy hotel which we sold
in October 1996. Our consolidated effective tax rate was 40% for both periods in
1999 and 1998.
12
<PAGE> 13
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Operating Activities
For the six months ended June 30, 1999, cash provided by operations was $22.3
million compared to $7.2 million in 1998. The improvement reflected a greater
seasonal increase in unearned passenger revenues, which increased $22.0 million
in 1999, as compared to an increase of $9.6 million in 1998. The increase in
unearned passenger revenues was greater in 1999 than in 1998 due to (1) an
improvement in American Hawaii's bookings and (2) deposits received in 1999 for
charter cruises at Delta Queen, including millennium charter cruises.
Investing Activities
For the six months ended June 30, 1999, we made expenditures of $15.0 million on
capital projects, of which $3.6 million related to our existing vessels. On
January 21, 1999, the Mississippi Queen completed a 39-day lay-up. The American
Queen also completed a 15-day lay-up on February 10, 1999. The Delta Queen
completed a 54-day lay-up on February 27, 1999. The lay-ups for the three
vessels, including repairs and maintenance, cost approximately $5.5 million and
were funded from working capital. Other significant capital expenditures
included $11.4 million related to shipyard payments, design fees and other costs
associated with new shipbuilding programs at American Hawaii and Delta Queen, as
discussed below.
Financing Activities
For the six months ended June 30, 1999, we made scheduled principal payments of
$2.1 million under the American Queen and Independence ship financing notes and
borrowed and repaid $2.0 million under our credit facility. On April 27, 1999
and May 4, 1999, the Company completed public offerings of an additional
3,500,000 and 525,000 shares of common stock, respectively. The net proceeds to
the Company, after offering expenses, were $63.5 million and are being used for
construction of the initial Hawaii vessel. We also paid $2.1 million for
financing efforts related to our new credit facility and Maritime Administration
financing, as discussed below.
Capital Expenditures and Debt
For the Hawaii cruise market, we are constructing two new cruise ships over the
next five years and plan to introduce an existing foreign-built cruise ship in
the Hawaii market prior to delivery of the new vessels. On March 9, 1999, we
signed a definitive agreement with Ingalls Shipbuilding to construct two
passenger ships, each containing approximately 1,900 passengers berths, with
options to build up to four additional vessels. The estimated construction cost
of the two initial ships, inclusive of shipyard contract price, furniture,
fixtures, and owner-furnished equipment, will be approximately $470 million
each. The agreement provides that the first ship will be delivered in January
2003 and the second ship in January 2004.
We will finance a significant portion of the construction cost of the Hawaii
cruise ships through the Maritime Administration, which provides guarantees of
private financing for new vessel construction projects conducted in U.S.
shipyards. In April 1999, we received financing guarantees for debt up to 87.5%
of the cost of the vessels. The guaranteed debt will be accessed during the
construction period, with net interest payments during that period capitalized
as part of the cost of construction. In the current market, this type of debt
generally bears interest at a rate of 100 to 150 basis points over the
comparable U.S. government obligations and can have a term of up to 25 years
from the date of delivery of the vessel. The loans generally amortize on a
straight line basis over the term of the loan commencing after the delivery
date. Fees associated with obtaining the financing guarantees included a
one-time investigation fee of approximately $1.4 million, which we paid to the
Maritime Administration in April 1999. In addition, the Maritime Administration
imposes an annual guarantee fee of not less than 1/4 of 1% and not more than 1%
of the indebtedness, reduced by any required escrow, based upon the obligor's
ratio of long-term debt to stockholders' equity. The present value of the annual
guarantee fees is payable at the closing of the Maritime Administration
guaranteed financing and will be capitalized as part of the vessel cost.
Over the next twelve months, we expect to spend approximately $90 million to $95
million on building the two new Hawaii cruise vessels, which includes
anticipated payments to Ingalls Shipbuilding.
13
<PAGE> 14
On August 5, 1999, we entered into an agreement with Holland America Line to
purchase the ms Nieuw Amsterdam for $114.5 million. The agreement is subject to
the satisfaction of various conditions, including our due diligence examination
of the cruise ship. The 1,214-passenger cruise ship is expected to be
transferred to us in fall of 2000 and operated in the Hawaiian Islands as a
U.S.-flag vessel.
For the Delta Queen line, we intend to build up to five new small coastal ships
over the next seven to 10 years. We entered into a construction contract, as of
May 1, 1999, with Atlantic Marine, Inc. of Jacksonville, Florida to construct at
least two coastal cruise vessels for our Delta Queen line. Under the
construction contract, the contract price of the vessels will be $30 million
each and will have a total project cost, including furnishing, fixtures and
equipment, of approximately $35 million. The coastal cruise vessels will be
approximately 300 feet long and provide accommodations for up to 226 passengers.
The contract provides that the delivery date will be early March, 2001 for the
first vessel and mid-June, 2001 for the second vessel. In addition, the contract
provides us with an option to purchase a third vessel by notifying the shipyard
by December 31, 1999. The contract price for the third vessel will be subject to
negotiation between the parties. Atlantic Marine will provide a limited warranty
for the work, parts, and components of each vessel fabricated by the yard for
one year after delivery.
On May 25, 1999, we finalized a contract to acquire a substantially complete
riverboat originally built for the casino trade. We are converting the 218 foot
boat into an overnight passenger vessel with approximately 161 passenger berths
for use as the fourth Delta Queen riverboat. The purchase price for the vessel
was $3.2 million and we estimate that the total renovation, relocation, start-up
and marketing costs will require an additional $13 to $15 million. We expect the
conversion project will take between six and nine months and that the vessel
will enter service in April, 2000 as the Columbia Queen. The vessel will be
operated by Delta Queen in the Pacific Northwest on the Columbia River system
near Portland, Oregon. We also terminated our agreement to acquire the M/V
Speculation, a riverboat we had previously planned to acquire for $8.0 million.
On February 25, 1999, The Delta Queen Steamboat Co. entered into a credit
agreement with a group of lenders, with The Chase Manhattan Bank as agent. This
credit agreement provides for a revolving credit facility of up to $70 million
to fund the expansion of our Delta Queen line. This new $70 million facility
replaced our prior credit facility with Chase Manhattan. Borrowings under the
new credit facility bear interest at either (1) the greater of Chase Manhattan's
prime rate or alternative base rates plus a margin ranging from 0.50% to 1.50%,
or (2) the London Interbank Offered Rate plus a margin ranging from 1.50% to
2.50%. We are also charged a fee of 0.50% per annum on any unused commitment.
The new credit facility is secured by all of the assets of The Delta Queen
Steamboat Co., except for the American Queen. The new credit facility limits the
dividends The Delta Queen Steamboat Co. may pay to between $5 million and $15
million per year when aggregated with investments and other payments.
Over the next twelve months, we expect to spend approximately $30 million to $35
million on building the new coastal cruise vessels, which also includes
anticipated payments to Atlantic Marine, Inc.
As of June 30, 1999, we complied with all covenants under our various debt
agreements.
We believe we will have adequate access to capital resources, both internally
and externally, to meet our current short-term and long-term capital
commitments. Such resources may include cash on hand and the ability to secure
additional financing through the capital markets. We continually evaluate
opportunities to increase capacity at both Delta Queen and in Hawaii and to
strategically grow our business. Although we believe that we will be able to
obtain sufficient equity and debt financing from the capital markets to
construct the new vessels, we cannot assure you that we will be able to obtain
additional financing at commercially acceptable levels to finance such new
construction and, if we so choose, to pursue strategic business opportunities.
In June 1997, our board of directors approved a stock repurchase plan. The plan
authorizes us to repurchase up to one million shares of our stock. These shares
may be purchased from time to time in the public market or through privately
negotiated transactions. As of June 30, 1999, we had repurchased 51,000 shares
at an average purchase price of $14.84 per share under the plan. We currently
have no intention to repurchase any additional shares of common stock.
Impact of Year 2000
Many computer programs have been written using two digits rather than four to
define the applicable year. Any of our computer programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure, miscalculations
and/or other unanticipated problems.
14
<PAGE> 15
State of Readiness
We have established internally staffed project teams to address Year 2000
issues. Each team has formulated a plan that focuses on Year 2000 compliance
efforts for information technology systems and non-information technology
systems. This plan addresses (1) information technology systems software and
hardware such as reservations, accounting and associated systems, personal
computers and software and (2) non-information technology systems such as
embedded chip systems in building facilities, shipboard navigation, control,
power generation systems, and communication systems.
Our Year 2000 plan addresses the Year 2000 issues in various phases for both
types of systems including: (1) inventory of our systems, equipment and
suppliers that may be vulnerable to Year 2000 issues; (2) assessment of
inventoried items to determine the risks associated with their possible failure
to be Year 2000 compliant; (3) testing of systems and components to determine if
they are Year 2000 compliant, both prior to and subsequent to remediation; (4)
remediation and implementation of new systems; and (5) contingency planning to
address reasonably likely worst case scenarios.
For information technology systems, inventories and risk assessments have been
substantially completed for all our shoreside software applications, hardware
and operating systems. Our reservations systems functions have been tested and
were found to be compliant. We have also determined that our shoreside phone
system and onboard financial systems on the Delta Queen vessels are Year 2000
compliant. The Independence's onboard financial system and our shoreside
accounting system, however, are not Year 2000 compliant. We will utilize both
internal and external resources to continue testing, reprogramming and replacing
our information technology systems that require Year 2000 modifications. We
anticipate completing the system improvements and the Year 2000 project no later
than November 1, 1999. This is prior to any anticipated impact on our operating
systems. We anticipate that these modifications and improvements will enable our
information systems to function properly with respect to dates in the Year 2000
and thereafter.
Inventories and risk assessments have been substantially completed for all
non-information technology systems. No Year 2000 issues with respect to
navigation and propulsion systems are believed to exist on our vessels. Certain
galley and air conditioning equipment on the American Queen is not Year 2000
compliant. The process of testing, remediation and implementation is expected to
be completed by September 30, 1999.
Risks of Year 2000 Issues
If any of our suppliers or travel partners do not, or if we do not, successfully
deal with the Year 2000 issue, we could experience delays in scheduled cruises
which could result in lost revenues or increases in costs and could subject us
to claims and damages. To determine the most reasonably likely sources of these
risks, we have been communicating with our major suppliers and travel partners
on their Year 2000 compliance issues. For example, our external air ticketing
and credit card processing software have been determined to be Year 2000
compliant.
Based on these procedures, management believes that the most reasonably likely
sources of risk to us include (1) the disruption of transportation channels
relevant to our operations, including ports and transportation vendors,
primarily airlines, as a result of a general failure of support systems and
necessary infrastructure; (2) the disruption of travel agency and other sales
distribution systems; and (3) the inability of principal product suppliers to
deliver goods and services. The severity of these possible problems would depend
on the nature of these problems and how quickly they could be corrected or
alternatives implemented.
Our major suppliers and travel partners consist of our transportation vendors,
our primary external airline ticketing vendors, and our primary credit card
processing software vendors. Our primary external airline ticketing vendor has
certified that its systems are Year 2000 complaint. Our primary credit card
processing software vendors have also certified that their systems are Year 2000
complaint. We have not received written assurance from our transportation
vendors indicating that they will be Year 2000 complaint before the end of 1999.
Because we have no contingency plan to transport our customers long distance to
and from our embarkation and disembarkation points, failure by our
transportation vendors to provide transportation services could have a material
adverse effect on our operations and our financial condition.
Some risks of the Year 2000 issue are beyond our control and our other travel
partners and suppliers. For example, no preparations or contingency plan will
protect us from a downturn in economic activity caused by the possible ripple
effect throughout the entire economy that could be caused by problems of others
with Year 2000 issues.
15
<PAGE> 16
Costs
We have estimated our total costs for system improvements and the Year 2000
project to be approximately $1.0 million. These efforts are being funded from
working capital. Of the total project cost, approximately $0.5 million is
attributable to the implementation of a new accounting system. This amount
includes new software, new hardware, and consulting fees, all of which are being
capitalized. Another $0.3 million of capital outlays is attributable to the
upgrading of the Independence's onboard financial system and to the replacement
of imbedded chip systems in several of our vessels. The remaining $0.2 million
is expected to be expensed as incurred and is not expected to have a material
impact on the results of operations. The Year 2000 project represents less than
10% of our information systems budget. To date, we have incurred and expensed
approximately $130,000 related to our systems improvements and the Year 2000
project. These costs do not include costs incurred by us as a result of the
failure of any third parties, including suppliers, to become Year 2000 compliant
or costs to implement any contingency plans.
The costs of the project and the date on which we believe we will complete the
Year 2000 modifications are based on our best estimates given presently
available information. These estimates were derived utilizing numerous
assumptions of future events, including the continued availability of the
resources we rely on, third party modification plans and other factors. We
cannot assure you, however, that these estimates will be achieved, and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer code, and similar uncertainties.
Contingency Plans
We are preparing our contingency plans to identify and determine how to handle
our most probable worst case scenarios. Preliminary contingency plans are
currently being reviewed. Comprehensive contingency plans are estimated to be
completed by September 30, 1999 in conjunction with completion of our testing,
remediation and implementation phases.
Factors Concerning Forward-Looking Statements
Certain statements in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" constitute "forward-looking statements"
which we believe are within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause our actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. These forward-looking statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions.
Such factors include, among others, the following: construction delays and
deviations from specifications for the new vessels may adversely affect
expansion plans and future financial performance; limited remedies against
shipyards in the event of shipbuilding delays which would delay the introduction
of new vessels; failure to obtain significant amounts of capital to build,
purchase and renovate vessels, may adversely affect our expansion plans and
future operating results; increased leverage may adversely affect our financial
performance and cash flow; inability to locate and introduce a foreign-built
vessel in Hawaii would delay our growth in Hawaii; inability to manage our
financial resources during our expansion may adversely affect our financial
performance; if demand for our new cruise products fails to develop as expected
or competition increases, our business may be adversely affected; increased
capacity in Hawaii may reduce occupancy at the Independence, adversely affecting
revenues; increased expenditures for the Independence may adversely impact our
operating results; loss of exclusive rights of the Pilot Project Statute may
adversely affect our revenue growth in Hawaii; modification of existing
governmental regulations may adversely affect our business; increased
competition in the Hawaii cruise market and from other vacation alternatives may
adversely impact our financial performance; sensitivity of the vacation and
leisure industry to general economic and business conditions; failure to
complete drydocking on schedule or within budget may adversely affect our
revenues; weather factors can adversely affect our operations and our financial
performance; the loss of vessels from service would adversely impact our
business; our controlling stockholder may take actions that adversely affect our
business; sales of our controlling stockholder's shares could have an adverse
effect on our ability to raise capital; and our controlling stockholder may have
conflicts of interest with competing interests.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
For a discussion of certain market risks related to us, see Part I Item 7A
"Quantitative and Qualitative Disclosures About Market Risks" in our Annual
Report on Form 10-K for the fiscal year ended December 31, 1998. There have been
no significant developments with respect to exposure to market risk.
16
<PAGE> 17
AMERICAN CLASSIC VOYAGES CO.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
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 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of the Company was held on June
24, 1999 (the "Annual Meeting"). Holders of Common Stock were
entitled to elect eight directors. On all matters which came
before the Annual Meeting, holders of Common Stock were entitled
to one vote for each share held. Proxies for 13,691,443 of the
14,411,036 shares of Common Stock entitled to vote were received
in connection with the Annual Meeting.
The following table sets forth the names of the eight persons
elected at the Annual Meeting to serve as directors until the next
annual meeting of shareholders of the Company and the number of
votes cast for, against or withheld with respect to each person.
NAME OF DIRECTOR FOR WITHHELD
Philip C. Calian 13,676,116 15,326
Arthur Greenberg 13,676,416 15,026
Jerry R. Jacob 13,676,416 15,026
Emanuel L. Rouvelas 13,676,416 15,026
Mark Slezak 13,675,916 15,526
Joseph Sullivan 13,675,816 15,626
Jeffrey N. Watanabe 13,676,317 15,125
Samuel Zell 13,676,016 15,426
The following table sets forth an additional matter which was
submitted to the shareholders for approval at the Annual Meeting
and the tabulation of the votes with respect to such matter.
FOR WITHHELD
Approval of the 1999 Stock Option Plan 10,624,127 1,701,726
ITEM 6. Exhibits and Reports on Form 8-K
a) Exhibits:
27. Financial Data Schedule.
99. August 10, 1999 Announcement of Agreement to
Acquire Holland America Line's ms Nieuw
Amsterdam.
b) Reports on Form 8-K:
Form 8-K dated April 14, 1999 announcing Maritime
Administration financing guarantees
Form 8-K/A dated April 21, 1999 amending Form 8-K
dated March 26, 1999
17
<PAGE> 18
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/ Randall L. Talcott
-------------------------------------------------
Randall L. Talcott
Vice President-Finance and Treasurer
(Principal Financial and Accounting Officer)
Dated: August 13, 1999
---------------------------
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 94,878<F1>
<SECURITIES> 0
<RECEIVABLES> 1,992
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 110,563
<PP&E> 252,656
<DEPRECIATION> 83,969
<TOTAL-ASSETS> 295,169
<CURRENT-LIABILITIES> 94,762
<BONDS> 75,338
0
0
<COMMON> 186
<OTHER-SE> 125,069
<TOTAL-LIABILITY-AND-EQUITY> 295,169
<SALES> 0
<TOTAL-REVENUES> 95,766
<CGS> 0
<TOTAL-COSTS> 62,462
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,859
<INCOME-PRETAX> (3,718)
<INCOME-TAX> 1,487
<INCOME-CONTINUING> (2,231)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,231)
<EPS-BASIC> (0.14)
<EPS-DILUTED> (0.14)
<FN>
<F1>Includes restricted short-term investments of $60.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.
FOR IMMEDIATE RELEASE: CONTACTS: Terri Monaghan
800-543-7637
Karen Brown
312-466-6165
AMCV ANNOUNCES AGREEMENT TO ACQUIRE HOLLAND AMERICA LINE'S
MS NIEUW AMSTERDAM
WILL RE-DOCUMENT VESSEL UNDER U.S.-FLAG TO SAIL IN HAWAIIAN ISLANDS AS COMPANY
AWAITS DELIVERY OF PROJECT AMERICA SHIPS BEING BUILT AT INGALLS SHIPBUILDING
CHICAGO - AUGUST 10, 1999 - American Classic Voyages Co. (NASDAQ: AMCV),
announced today that it reached an agreement with Holland America Line to
purchase the MS Nieuw Amsterdam for $114.5 million. The agreement is contingent
on a number of conditions expected to be resolved by fall 1999.
Holland America Line, a unit of Carnival Corporation (NYSE: CCL), is expected to
transfer the 1,214-passenger cruise ship to AMCV in fall 2000. AMCV intends to
re-document the Nieuw Amsterdam as a U.S.-flag vessel, with a U.S.-crew, to sail
the Hawaiian Islands as part of AMCV's Project America.
Philip C. Calian, president and CEO of AMCV, said, "The acquisition of the Nieuw
Amsterdam will expand cruising options in Hawaii, offering consumers the highest
level of service. The vessel will not only expand cruising opportunities in
Hawaii, attracting more cruisers to the state, but also will create
approximately 400 new U.S. jobs onboard this ship."
Roderick K. McLeod, president and CEO of Project America, added, "The Nieuw
Amsterdam is an exciting addition to our Project America program. This cruise
ship will offer consumers a new U.S.-flag, U.S.-crewed cruising option, building
the market for our two new U.S.-flag 1,900-passenger state-of-the-art cruise
ships that will enter service in early 2003 and 2004."
The 704-foot, 33,930-gross-ton Nieuw Amsterdam offers the luxuries of a resort
hotel with the conveniences of cruising. Its Hawaiian Island itineraries will
showcase the natural beauty of the Hawaiian Islands while passengers enjoy nine
passenger decks, five lounges, two restaurants, a fully equipped spa and fitness
center, two outdoor pools, a 230-seat theater, and a 15-foot-wide teak deck that
encircles the Upper Promenade Deck. An estimated one million passengers have
sailed on the Nieuw Amsterdam since its maiden voyage in 1983.
Project America is the result of the U.S.-Flag Cruise Ship Pilot Project Statute
passed by Congress in 1997 (PL 105-56), with the goal of revitalizing the
U.S.-flag oceangoing cruise ship fleet. It is expected to create more than 5,000
American jobs, help sustain and modernize the U.S. shipbuilding industrial base,
increase U.S. tax revenues, boost Hawaii tourism, and expand consumers' leisure
travel opportunities. The Pilot Project Statute was sponsored by Senator Daniel
K. Inouye (D-Hawaii) and was supported by the Department of Defense. In March,
AMCV contracted with Ingalls Shipbuilding, a division of Litton Ship Systems, in
Pascagoula, Miss., for the construction of two 1,900-passenger state-of-the-art
cruise ships.
AMCV is the largest owner and operator of U.S.-flag passenger vessels. In
addition to Project America, it currently owns and operates two U.S.-flag cruise
lines, American Hawaii Cruises and The Delta Queen Steamboat Co., both
headquartered in New Orleans, La. With Project America, AMCV plans to more than
quadruple its passenger capacity in Hawaii in the next seven to 10 years. It
also is significantly expanding its Delta Queen line with the introduction of
both a new line of U.S.-built and U.S.-flag small coastal cruise ships to sail
America's Eastern and Western seaboards, with the first launching in spring
2001, and the introduction of the Columbia Queen in the Pacific Northwest in
April 2000.
20
