<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 MARCH 31, 2000
[ ] 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
incorporation or organization) identification No.)
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 May 8, 2000, there were 20,776,928 shares of Common Stock outstanding.
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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 March 31, 2000
and December 31, 1999......................................................... 3
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2000 and 1999.................................... 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999.................................... 5
Notes to Condensed Consolidated Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................... 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk ................... 14
Part II. Other Information:
Item 1. Legal Proceedings............................................................. 15
Item 6. Exhibits and Reports on Form 8-K.............................................. 15
</TABLE>
2
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AMERICAN CLASSIC VOYAGES CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and par value)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 31, December 31,
2000 1999
------------ -----------
ASSETS
<S> <C> <C>
Cash and cash equivalents .................................................. $ 87,061 $ 42,399
Restricted cash ............................................................ 55,289 289
Short-term investments ..................................................... 13,326 --
Accounts receivable ........................................................ 1,492 1,205
Prepaid air tickets ........................................................ 3,282 1,930
Prepaid expenses and other current assets .................................. 6,643 6,020
--------- ---------
Total current assets .................................................. 167,093 51,843
Property and equipment, net ................................................ 150,989 150,797
Vessels under construction ................................................. 124,428 74,601
Deferred income taxes, net ................................................. 16,909 12,446
Other assets ............................................................... 7,657 4,303
--------- ---------
Total assets .......................................................... $ 467,076 $ 293,990
--------- ---------
LIABILITIES
Accounts payable ........................................................... $ 16,538 $ 14,534
Note payable ............................................................... 25,000 --
Other accrued liabilities .................................................. 18,078 23,712
Current portion of long-term debt .......................................... 4,100 4,100
Unearned passenger revenues ................................................ 58,019 41,381
--------- ---------
Total current liabilities ............................................. 121,735 83,727
Long-term debt, less current portion ....................................... 72,076 80,463
--------- ---------
Total liabilities ..................................................... $ 193,811 $ 164,190
--------- ---------
Company-obligated mandatorily redeemable convertible preferred
securities of subsidiary trust holding solely 7%
convertible subordinated debentures of the Company .................... $ 100,000 --
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value (5,000,000 shares
authorized, none issued and outstanding) ................................ $ -- $ --
Common stock, $.01 par value (40,000,000 shares authorized;
20,806,987 and 18,653,206 shares issued, respectively) ..................... 208 187
Additional paid-in capital ................................................. 200,890 151,094
Accumulated deficit ........................................................ (25,953) (19,573)
Common stock in treasury, at cost (51,000 shares) .......................... (757) (757)
Unearned restricted stock and stock units .................................. (1,123) (1,151)
--------- ---------
Total stockholders' equity ............................................ 173,265 129,800
--------- ---------
Total liabilities and stockholders' equity ............................ $ 467,076 $ 293,990
--------- ---------
</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
Ended March 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Revenues .............................................................. $ 38,960 $ 40,566
Cost of operations (exclusive of depreciation expense shown below)..... 28,235 28,768
------- -------
Gross profit .......................................................... 10,725 11,798
Selling, general and administrative expenses .......................... 16,364 16,865
Depreciation expense .................................................. 3,941 4,155
------- -------
Operating loss ........................................................ (9,580) (9,222)
Interest income ....................................................... 1,263 322
Interest expense and other financing costs ............................ 1,004 1,570
------- -------
Loss before income taxes and accrued distributions on convertible
preferrred securities of subsidiary trust ........................ (9,321) (10,470)
Income tax benefit .................................................... 3,444 4,187
Accrued distributions on convertible preferred securities of subsidiary
trust, net of income tax benefit of $295 ......................... 503 --
------- -------
Net loss .............................................................. (6,380) (6,283)
------- -------
PER SHARE INFORMATION
Basic:
Weighted-average shares outstanding .................................. 19,562 14,321
Loss per share ..................................................... (0.33) (0.44)
Diluted:
Weighted-average shares outstanding .................................. 19,562 14,321
Loss per share ..................................................... $ (0.33) $ (0.44)
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
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AMERICAN CLASSIC VOYAGES CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------------
2000 1999
---------- ---------
OPERATING ACTIVITIES:
<S> <C> <C>
Net loss ....................................................... (6,380) (6,283)
Depreciation expense ....................................... 3,941 4,155
Changes in working capital and other:
Working capital changes and other ...................... (10,081) (5,015)
Unearned passenger revenues ............................ 16,638 16,760
-------- --------
Net cash provided by operating activities .................. 4,118 9,617
-------- --------
INVESTING ACTIVITIES:
Capital expenditures ........................................... (53,960) (4,775)
Purchase of marketable securities .............................. (13,326) --
Increase in restricted investments ......................... (55,000) --
-------- --------
Net cash used in investing activities ...................... (122,286) (4,775)
-------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings ....................................... 41,300 --
Repayment of borrowings ........................................ (24,687) (1,212)
Issuance of common stock ....................................... 49,699 880
Issuance of convertible preferred securities of subsidiary trust 100,000 --
Deferred financing fees ........................................ (3,482) (580)
-------- --------
Net cash provided by (used in) financing activities ........ 162,830 (912)
-------- --------
Increase in cash and cash equivalents ............................. 44,662 3,930
Cash and cash equivalents, beginning of period .................... 42,399 27,004
-------- --------
Cash and cash equivalents, end of period .......................... 87,061 30,934
-------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of capitalized interest) ..................... $ 949 $ 1,946
Income taxes ............................................... 7 100
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
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AMERICAN CLASSIC VOYAGES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(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, 1999 (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"), Great Hawaiian Cruise Line, Inc. ("GHCL") and Project
America, Inc. (collectively with such subsidiaries, the "Company"). The
following notes to the Financial Statements highlight significant 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 2000
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. RESTRICTED CASH
The $55 million increase in restricted cash through March 31, 2000 reflects: (1)
$25 million of proceeds from a debt issuance which were placed into an escrow
account (see Note 5 for further information) and (2) $30 million invested in a
certificate of deposit which is being used as a collateral deposit for a letter
of credit related to an October 2000 ship acquisition (see Note 8 for further
information).
3. SHORT-TERM INVESTMENTS
Under the definitions provided in Statement of Financial Accounting Standards
No. 115, Accounting for Certain Investments in Debt and Equity Securities, the
Company has purchased securities which have been classified as available for
sale and are, therefore, recorded at their fair values. The fair value for these
securities approximates cost due to the short maturities of the instruments.
4. VESSELS UNDER CONSTRUCTION
Capitalized interest on the vessels under construction amounted to $2.0 million
and $0 for the three months ended March 31, 2000 and 1999, respectively.
5. NOTE PAYABLE
On February 10, 2000, the Company issued $25 million of notes guaranteed by the
Maritime Administration ("MARAD"). This is the first issuance of debt under the
$1.1 billion of financing guarantees from MARAD for the construction of the
Hawaii cruise vessels. The notes bear interest at LIBOR minus 0.05%. Interest is
payable quarterly beginning April 28, 2000. The entire principal amount is due
on January 31, 2001. The Company intends to refinance these notes on or before
the maturity date.
Upon issuance of the debt, the proceeds of $25 million were deposited into an
escrow account. The funds will be released from escrow and the proceeds used for
the construction of the first Hawaii vessel, once the Company meets certain
equity requirements under MARAD regulations.
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<PAGE> 7
6. DEBT
Long-term debt consisted of (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
-------- ------------
<S> <C> <C>
U.S. Government Guaranteed Ship Financing Note, American Queen Series ...... $ 13,173 $ 14,385
U.S. Government Guaranteed Ship Financing Bond, American Queen Series ...... 36,198 36,198
U.S. Government Guaranteed Ship Financing Note, Independence Series A ...... 7,926 7,926
U.S. Government Guaranteed Ship Financing Bond, Independence Series A ...... 13,215 13,215
U.S. Government Guaranteed Ship Financing Note, Independence Series B ...... 2,124 2,124
U.S. Government Guaranteed Ship Financing Bond, Independence Series B ...... 3,540 3,540
Revolving credit facility (maximum availability of $70 million) ............ -- 7,175
-------- --------
76,176 84,563
Less current portion ....................................................... 4,100 4,100
-------- --------
$ 72,076 $ 80,463
======== ========
</TABLE>
The revolving credit facility is available only for the conversion of the fourth
Delta Queen riverboat, the construction of the first two coastal vessels, and
Delta Queen working capital. The 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.
In 1999, the Company received a commitment from MARAD for up to $1.1 billion in
financing guarantees. The commitment amount represents 87.5% of the total
maximum potential cost of the initial two Hawaii vessels, including shipyard
costs, contingencies, capitalized interest, and guarantee fees. See Note 5 for
further information.
On March 31, 2000, the Company received a commitment from MARAD for up to $78.3
million in financing guarantees. The commitment amount represents 87.5% of the
total maximum potential cost of the initial two coastal vessels currently under
construction, including shipyard costs, contingencies, capitalized interest, and
guarantee fees.
As of March 31, 2000, the Company complied with all covenants under its various
debt agreements.
7. TRUST PREFERRED SECURITIES
On February 22, 2000, the Company completed an offering of 2,000,000
Company-obligated mandatorily redeemable convertible preferred securities of a
subsidiary trust ("trust preferred securities"). Each $50 security bears
interest at 7% and is convertible at the holder's election into 1.6207 shares of
common stock. All outstanding preferred securities will be redeemed on February
15, 2015 or upon early redemption. The outstanding preferred securities may be
redeemed for cash at the Company's option on or after February 19, 2003. The net
proceeds to the Company, after underwriting fees and other costs, were
approximately $96.5 million. A portion of the proceeds were used to fund the $30
million letter of credit facility related to the ms Nieuw Amsterdam purchase
(see Note 8 for further information) and to pay down outstanding amounts on the
Chase credit facility. The underwriters' overallotment option of 300,000
additional trust preferred securities was not exercised.
8. COMMITMENTS AND CONTINGENCIES
In 1999, the Company finalized an agreement with Holland America Line to
purchase the ms Nieuw Amsterdam for $114.5 million. The purchase agreement
required the Company to make an earnest money deposit of $30 million by January
17, 2000. The Company arranged for an unsecured letter of credit facility with
The Chase Manhattan Bank for up to $30 million and satisfied the deposit
requirement by posting letters of credit for $30 million.
7
<PAGE> 8
In 1999, persons and entities affiliated with Equity Group Investments, Inc.
("Equity"), the Company's largest stockholder, guaranteed the letter of credit
facility for the Company with The Chase Manhattan Bank for up to $30 million.
Under an agreement dated October 15, 1999, as consideration for issuance of the
guarantee, the Company paid Equity a commitment fee of $500,000 in 1999 and
agreed to pay Equity additional compensation in the form of stock appreciation
units contingent, in part, upon appreciation in the Company's common stock.
Equity's rights to receive this additional compensation vested, on a monthly
basis, during the period that the guarantee remained outstanding. On February
22, 2000, the Company deposited $30 million into a cash collateral account with
Chase from proceeds received by the Company from the Company's securities
offering, as discussed in Note 7, thereby terminating the Equity guarantee. The
Company has the right to retire Equity's stock appreciation units by paying a
per unit price, which escalates each year, during the first three years after
issuance. The Company intends to pay to Equity amounts attributable to the
vested units, or $3.2 million, by October 2000. If the Company does not retire
Equity's stock appreciation units during the first three years after issuance,
Equity may exercise, during the fourth and fifth years after issuance, its right
to receive payment based upon the market value of the Company's common stock at
such time.
Holland America Line has agreed to provide financing for the remaining portion
of the purchase price totaling $84.5 million for 75 months at the prevailing
prime rate. The Holland America Line financing will be secured by a first
preferred ship mortgage.
9. STOCKHOLDERS' EQUITY
ACCUMULATED DEFICIT
Changes in accumulated deficit for the three months ended March 31, 2000 were
(in thousands):
Accumulated deficit at December 31, 1999........................ $ (19,573)
Net loss........................................................ (6,380)
----------
Accumulated deficit at March 31, 2000........................... $ (25,953)
----------
COMMON STOCK OFFERING
On February 22, 2000, the Company completed an offering of an additional
2,000,000 shares of common stock. The proceeds to the Company, after
underwriting commissions and other costs, were $46.8 million and are being used
for the construction of the second Hawaii vessel. The underwriters'
overallotment option of 300,000 additional shares was not exercised.
10. EARNINGS PER SHARE
As the Company reported losses for the quarters ended March 31, 2000 and 1999,
diluted earnings per share was computed in the same manner as basic earnings per
share. Conversion of trust preferred securities is not assumed, as the result
would be antidilutive to the loss per share.
8
<PAGE> 9
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., Great Hawaiian Cruise Line, Inc. and Project America,
Inc. Through our various subsidiaries, we currently 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. Delta Queen also owns and will operate the Columbia
Queen steamboat upon completion of its renovation in May 2000. We have formed a
third cruise line, United States Lines, to operate the ms Patriot and the new
Hawaii cruise vessels.
Our revenues are composed 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 are composed 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 these deposits as revenue on a
pro-rata basis during the associated cruise. 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 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 layups 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 month period ended March 31, 2000 versus the
comparable period ended March 31, 1999. 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 Form 10-K for the year ended
December 31, 1999.
9
<PAGE> 10
RESULTS OF OPERATIONS
Operations data expressed as a percentage of total revenue for the periods
indicated is as follows:
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------------------
2000 1999
------------ -------------
<S> <C> <C>
Revenues
100% 100%
Costs and Expenses:
Operating expenses.................. 72 71
Selling, general and administrative. 42 42
Depreciation........................ 10 10
Operating loss........................... (25) (23)
Net loss................................. (16) (15)
</TABLE>
Selected operating statistics for the periods indicated are as follows:
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------------------
2000 1999(5)
----------- -----------
<S> <C> <C>
Fare revenue per passenger night........... 210 204
Total revenue per passenger night.......... 311 301
Weighted average operating days (1):
DELTA QUEEN........................... 63 67
AMERICAN HAWAII....................... 73 90
Vessels capacity per day (berths) (2):
DELTA QUEEN........................... 1,026 1,026
AMERICAN HAWAII....................... 867 867
Passenger nights (3)....................... 125,105 134,900
98% 92%
Physical occupancy percentage (berths) (4).
</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
(5) 1999 passenger nights, fare and total revenue per passenger night and
occupancy percentage were previously reported as 131,374, $209, $309 and
90%, respectively. 1999 amounts have been recalculated to conform to the
current presentation, which now includes passengers sailing on
complimentary tickets. The current presentation will also be used in the
future.
10
<PAGE> 11
RESCISSION OF ACCOUNTING METHOD
On November 2, 1999, the Company announced that it had rescinded its prior
adoption of the American Institute of Certified Public Accountants Accounting
Standards Executive Committee's Statement of Position ("SOP") No. 93-7,
"Reporting on Advertising Costs," relating to the deferral of direct response
advertising costs. The deferral method provided for in SOP 93-7 was adopted in
1999, and made effective as of January 1, 1999. Pursuant to SOP 93-7, the
Company deferred recognition of direct response advertising costs related to
certain direct response advertising efforts. These deferred costs were
recognized in the periods that the cruises promoted by the efforts were
completed, and the related cruise revenue recognized. The Company rescinded its
adoption of SOP 93-7 due to difficulties encountered in implementing the new
method. In rescinding SOP 93-7, the Company returned to its prior method of
recognizing expenses for direct response advertising costs when those costs are
incurred. As a result of the rescission of SOP 93-7, the Company restated its
earnings for the first quarter of 1999 to reflect a loss of $6.3 million, or
($0.44) per share, compared to its previously reported loss of $4.5 million, or
($0.32) per share.
QUARTER ENDED MARCH 31, 2000 COMPARED TO QUARTER ENDED MARCH 31, 1999
Consolidated first quarter 2000 revenues decreased $1.6 million to $39.0 million
from $40.6 for the first quarter of 1999. This represents a $1.2 million
decrease in fare revenues combined with a $0.4 million decrease in other
revenues. American Hawaii's fare revenues decreased $2.2 million due to a 19%
decrease in capacity passenger nights as a result of the scheduled 18-day
Independence drydock. This was offset by a 3% increase in fare per diems from
$194 to $201 and a 2% increase in occupancy from 100% to 102%. Delta Queen's
fare revenues increased $1.0 million. Occupancy rates increased 10% from 83% to
93% and fare per diems increased 1% from $217 to $220. As a result, consolidated
fare per diems for the first quarter of 2000 increased 3% from $204 to $210. The
$0.4 million decrease in other revenues was attributable to the capacity
passenger night decrease at American Hawaii.
Consolidated cost of operations for the first quarter of 2000 decreased $0.6
million to $28.2 million from $28.8 million for 1999. American Hawaii's
operating costs decreased $1.4 million reflecting lower passenger, commission,
air and land expenses associated with the capacity passenger night decrease.
Delta Queen's operating costs increased $0.8 million reflecting higher onboard
and commission expenses associated with the occupancy increase, and higher fuel
costs. Maintenance expenses also increased by $0.3 million at Delta Queen.
Consolidated gross profit decreased $1.1 million in the first quarter of 2000
from 1999 as a result of the Independence being out of service for its
drydocking.
Consolidated selling, general and administrative expenses, before capacity
expansion expenses, decreased $2.7 million to $13.4 million for the first
quarter of 2000 from $16.2 million in 1999. The decrease in selling, general and
administrative expenses reflects reduced marketing spending at both cruise lines
during the quarter. Capacity expansion costs of approximately $3.0 million in
the first quarter of 2000 were $2.3 million higher than in the prior year.
Marketing and public relations expenses for the Columbia Queen and ms Patriot
were incurred, which amounted to $1.3 million. The remainder of the increase is
attributable to salary and benefits associated with new personnel hired during
within the past year in connection with our capacity expansion efforts.
The consolidated operating loss for the first quarter of 2000 was $9.6 million
as compared to $9.2 million for 1999.
Interest income increased by $0.9 million as a result of higher average cash and
marketable securities balances resulting from proceeds received by us upon the
sale of additional common stock and other securities in April 1999 and February
2000. Interest expense and other financing costs of $1.0 million in the first
quarter of 2000 includes an accrual of $0.5 million payable to the guarantor of
our letter of credit facility related to our agreed upon purchase of the ms
Nieuw Amsterdam in October 2000. We also amortized $0.4 million of deferred
financing fees related to this transaction. During the current quarter, we also
capitalized $2.0 million of interest expense related to our vessels under
construction. We capitalized no interest expense in the prior year. We accrued
for distributions on trust preferred securities of $0.5 million, net of tax, in
the first quarter of 2000 due to the February 2000 issuance of trust preferred
securities.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Operating Activities
For the three months ended March 31, 2000, cash provided by operations was $4.1
million compared to $9.6 million in 1999. The decrease primarily reflects the
payment of costs during the first quarter of 2000 that had been accrued as of
December 31, 1999 for layups, drydockings and employee bonuses. Such costs
accrued at December 31, 1999 were approximately $5.0 million higher than in the
prior year.
11
<PAGE> 12
Investing Activities
Our capital expenditures of $54.0 million included $49.8 million for vessels
under construction which mainly consists of payments to shipyards. Other capital
costs for the new shipbuilding programs include technical design, engineering
and architectural fees. For the Hawaii cruise ships under construction, we have
spent $25.9 million during the first quarter of 2000, while $23.9 million was
spent on the Columbia Queen and Delta Queen coastal vessels projects. Other
capital expenditures of $4.2 million were mainly related to our existing vessels
such as layups for our Delta Queen vessels and the Independence drydock, all of
which were completed in the first quarter of 2000. With proceeds from our common
stock and preferred securities offerings, as described below, we purchased $13.3
million of short-term investments. Proceeds from these offerings were also used
to fund a $30 million cash collateral account related to the October 2000
acquisition of the ms Nieuw Amsterdam. The remaining $25 million increase in
restricted cash reflects the proceeds placed into escrow from the issuance of
$25 million in notes, as described below.
Financing Activities
Total proceeds from borrowings of $41.3 million reflects the issuance of $25
million of one year notes related to the first Hawaii vessel under construction.
The remaining amount represents borrowings under our credit facility. Our total
repayments of borrowings of $24.7 million represents the paydown of all
outstanding amounts on our credit facility of $23.5 million and scheduled
principal payments of $1.2 million under the American Queen ship financing
notes. We completed a public offering of an additional 2,000,000 shares of
common stock. The net proceeds to us, after underwriting commissions and other
costs, were approximately $46.9 million and are being used for construction of
the second Hawaii vessel. Additional proceeds from the issuance of common stock
were received from employee stock option exercises. We also completed a public
offering of 2,000,000 American Classic Voyages Co. obligated mandatorily
redeemable convertible preferred securities of a subsidiary trust (trust
preferred securities). The net proceeds to us, after underwriting fees and other
costs of $3.5 million, were approximately $96.5 million.
Capital Expenditures and Debt
At March 31, 2000, we had approximately $155.7 million in cash, restricted cash,
and short-term investments. These funds, along with future cash from operations
and debt to be issued with the financing guarantees from the Maritime
Administration, are expected to be our principal source of capital to fund our
working capital and debt service requirements, ship construction costs and
distributions on trust preferred securities. Additionally, we may also fund a
portion of these cash requirements from borrowings under our revolving credit
facility of which we had $70 million available to us at March 31, 2000. For the
October 2000 acquisition of the ms Nieuw Amsterdam, seller provided financing is
also available to us for the remaining amounts due to the seller.
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, the
ms Patriot, which we have a contract to acquire, in the Hawaii market prior to
delivery of the new vessels. In 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, shipyard incentives, 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. During the remainder of 2000,
we expect to spend approximately $175 million on building the two new Hawaii
cruise vessels, which includes anticipated payments to Ingalls Shipbuilding.
In 1999, we finalized an agreement with Holland America Line to purchase the ms
Nieuw Amsterdam for $114.5 million. We intend to rename the ship and operate it
as the ms Patriot. The purchase agreement required us to make an earnest money
deposit of $30 million by January 17, 2000. We arranged for an unsecured letter
of credit facility with The Chase Manhattan Bank for up to $30 million and
satisfied the deposit requirement by posting letters of credit for $30 million.
12
<PAGE> 13
In 1999, persons and entities affiliated with Equity Group Investments, Inc.
("Equity"), our largest stockholder, guaranteed the letter of credit facility
for us with The Chase Manhattan Bank for up to $30 million. Under an agreement
dated October 15, 1999, as consideration for issuance of the guarantee, we paid
Equity a commitment fee of $500,000 in 1999 and agreed to pay Equity additional
compensation in the form of stock appreciation units contingent, in part, upon
appreciation in our common stock. Equity's rights to receive this additional
compensation vested, on a monthly basis, during the period that the guarantee
remained outstanding. On February 22, 2000, we deposited $30 million into a cash
collateral account with Chase from proceeds received by us from our securities
offering thereby terminating the Equity guarantee. We have the right to retire
Equity's stock appreciation units by paying a per unit price, which escalates
each year, during the first three years after issuance. We intend to pay to
Equity amounts attributable to the vested units, or $3.2 million, by October
2000. If we do not retire Equity's stock appreciation units during the first
three years after issuance, Equity may exercise, during the fourth and fifth
years after issuance, its right to receive payment based upon the market value
of our common stock at such time.
In addition, Holland America Line has agreed to provide financing for the
remaining portion of the purchase price totaling $84.5 million for 75 months at
the prevailing prime rate. The Holland America Line financing will be secured by
a first preferred ship mortgage. Prior to introducing the ms Patriot into
service in December 2000, we expect to spend approximately $12 to $16 million on
improvements to the ship.
We entered into a construction contract in 1999 with Atlantic Marine, Inc. of
Jacksonville, Florida to construct the first two coastal cruise vessels for our
Delta Queen line. Under the construction contract, the price of the vessels will
be $30 million each. We expect each coastal cruise vessel to have a total
construction cost, including furnishing, fixtures and equipment, of
approximately $35 million. The contract provides that the delivery date will be
March 2001 for the first vessel and June 2001 for the second vessel.
During the remainder of 2000, we expect to spend up to $37 million on building
the new coastal cruise vessels, which includes anticipated payments to Atlantic
Marine. This will be funded from cash on hand and debt guaranteed by the
Maritime Administration. On March 31, 2000, we received a commitment from the
Maritime Administration for up to $78.3 million in financing guarantees. The
commitment amount represents 87.5% of the total maximum potential cost of the
initial two coastal vessels, including shipyard costs, contingencies,
capitalized interest, and guarantee fees.
In 1999, we acquired a substantially complete riverboat originally built for the
casino trade that we are converting and will operate as the fourth Delta Queen
riverboat. We expect that vessel, which will be known as the Columbia Queen,
will enter service in late May 2000 operating weekly cruise vacations out of
Portland on the Columbia River system. We entered into an agreement with Cascade
General, Inc. to convert the 218 foot boat into an overnight passenger vessel
with 161 passenger berths. We estimate the total capitalized cost of the vessel,
including capitalized interest and the initial $3.2 million acquisition cost, to
be $35 million to $37 million.
In the first quarter of 2000, the three existing Delta Queen vessels' layups
were completed which cost approximately $6.7 million, including capital
expenditures, repairs and maintenance. These amounts were funded from working
capital and the Delta Queen credit facility. For its most recent drydocking, the
Independence was out of service for 18 days beginning January 5, 2000. This
drydocking cost approximately $5.9 million, including capital expenditures,
repairs and maintenance and was funded from cash on hand.
As of March 31, 2000, 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, new borrowings from
lenders, 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 have obtained sufficient equity and debt financing from the
capital markets to satisfy our financial obligations relating to construction of
the new vessels, and to acquire, renovate and introduce the ms Patriot into
service, we cannot assure you that we will be able to obtain additional
financing, if necessary, at commercially acceptable levels to finance these
projects and, if we so choose, to pursue strategic business opportunities. If we
fail to obtain such financing, we may have to postpone or abandon some of our
plans.
13
<PAGE> 14
OTHER MATTERS
Stock Repurchase Plan
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 December 31, 1998, we had repurchased 51,000
shares at an average purchase price of $14.84 per share under the plan. We have
not purchased any additional shares since then and currently have no intention
to repurchase any additional shares of common stock.
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: the SEC is conducting an
informal inquiry of our accounting practices with respect to direct response
advertising costs; construction delays and deviations from specifications for
the new vessels may adversely affect expansion plans and future financial
performance; 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 maintain adequate managerial resources
during our expansion may adversely affect our business; 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 on the Independence, adversely affecting
revenues; 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; anti-takeover and
transferability limitations of U.S. ownership requirements may adversely affect
the liquidity of our common stock; 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 common stock price or 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, 1999. There have been
no significant developments with respect to exposure to market risk.
14
<PAGE> 15
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 6. Exhibits and Reports on Form 8-K
a) Exhibits:
*4.(iii)(a)(1) Junior Convertible Subordinated Indenture
dated as of February 22, 2000 between the
Company and The Bank of New York, as trustee
(includes form of Subordinated Debenture)
(filed on February 29, 2000 as exhibit 4.1
to the Company's 8-K and incorporated herein
by reference).
*4.(iii)(a)(2) Amended and Restated Declaration of Trust of
AMCV Capital Trust I among American Classic
Voyages Co. (the "Company"), The Bank of New
York, as property Trustee, Philip C. Calian,
Randall L. Talcott and Jordan B. Allen, as
Administrative Trustee (includes form of
Preferred Security) (filed on February 29,
2000 as exhibit 4.2 to the Company's 8-K and
incorporated herein by reference).
*4.(iii)(a)(3) Form of Preferred Security (included in
exhibit 4.(iii)(a)(1))(filed on February 29,
2000 as exhibit 4.3 to the Company's 8-K and
incorporated herein by reference).
*4.(iii)(a)(4) Form of Subordinated Debenture (included in
exhibit 4.(iii)(a)(2))(filed on February 29,
2000 as exhibit 4.4 to the Company's 8-K and
incorporated herein by reference).
*10.(v) Trust Convertible Preferred Securities
Guarantee Agreement dated February 22,2000,
by the Company and The Bank of New York, as
trustee (filed on February 29, 2000 as
exhibit 10.1 to the Company's 8-K and
incorporated herein by reference).
b) Reports on Form 8-K:
*Form 8-K dated January 14, 2000 announcing the following:
1. Information on the expansion plans of our Hawaii
cruise and Delta Queen businesses.
2. The Securities and Exchange Commission is conducting
an informal inquiry into the Company's deferral of
direct response advertising costs.
*Form 8-K dated February 29, 2000 announcing the Company's
completion of public offerings of common stock and Trust
Convertible Preferred Securities of AMCV Capital Trust.
27. Financial data schedule.
*Previously filed
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/ Randall L. Talcott
--------------------------------------------
Randall L. Talcott
Vice President-Finance and Treasurer
(Principal Financial and Accounting Officer)
Dated: May 11, 2000
----------------
16
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