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SEWARD & KISSEL LLP
One Battery Park Plaza
New York, New York 10004
Telephone: (212) 574-1200
Facsimile: (212) 480-8421
Writer's Direct Dial Number
(212) 574-1223
June 30, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Excel Maritime Carriers Ltd.
Dear Sir or Madam:
Pursuant to Rule 13 or 15d of the Securities Exchange Act of
1934, attached herewith is the Form 20-F for the fiscal year
ended December 31, 1998 of Excel Maritime Carriers Ltd.
Sincerely,
/s/ Gary J. Wolfe
___________________________
Gary J. Wolfe
Attorney for Excel Maritime
Carriers Ltd.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
EXCEL MARITIME CARRIERS LTD.
(Exact name of Registrant as specified in its charter)
LIBERIA
(Jurisdiction of incorporation or organization)
c/o Excel Maritime Carriers Ltd.
Par La Ville Place
14 Par La Ville Road
Hamilton HM JX Bermuda
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section
12(b) of the Act: Common shares, par value $.01
Securities registered or to be registered pursuant to Section
12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period
covered by the annual report.
<PAGE>
Common Shares, $.01 par value 6,571,806
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
Indicate by check mark which financial statement item the
Registrant has elected to follow.
Item 17 Item 18 X
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TABLE OF CONTENTS *
Page
Part I Item 1 Description of Business............... 4
Item 2 Description of Property...............25
Item 3 Legal Proceedings.....................25
Item 4 Control of Registrant.................25
Item 5 Nature of Trading Market..............26
Item 7 Taxation..............................26
Item 8 Selected Financial Data...............27
Item 9 Management's Discussion and Analysis
of Financial Condition................28
Item 10 Directors and Officers of
Registrant............................33
Item 11 Compensation of Directors and
Officers..............................36
Item 13 Interest of Management in Certain
Transactions..........................36
Part IV Item 19 Financial Statements and Exhibits.....37
(*) Items omitted are inapplicable
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PART I
ITEM 1 - DESCRIPTION OF BUSINESS
General
Excel Maritime Carriers Ltd. (the "Company") was
incorporated on November 2, 1988 under the laws of Liberia. The
Company, an American Stock Exchange-listed corporation, is a
provider of worldwide seaborne transportation services for crude
oil, refined petroleum products, and dry bulk cargo. During
1998, the Company purchased two crude oil tankers and three bulk
carriers which it later sold during the year. The Company
currently owns and operates two Suezmax oil tankers, with an
aggregate cargo-carrying capacity of approximately 270,385
deadweight tons ("dwt"), one handysize bulk carrier of
approximately 27,422 dwt, and a capesize bulk carrier with a
cargo capacity of 146,157 dwt. The Company's business strategy
is to expand and diversify its fleet to achieve economies of
scale and marketing strength in each of the sectors in which it
operates. The Company intends to expand its presence in the
tanker market and bulk market, in particular, and may also
diversify into the container shipping sector. In accordance with
this strategy, the Company intends to purchase additional vessels
in the open market as market conditions warrant.
Prior to April 28, 1998, the Company was known as B+H
Maritime Carriers Ltd. ("BHM"). BHM engaged in the business of
investing in, owning, operating and selling dry bulk carrier
vessels and product tankers. In December, 1996, another
company, B+H Ocean Carriers Ltd., acquired substantially all of
the business and assets of BHM. From that time, BHM owned no
vessels and ceased active operations. In October, 1997, a new
management and shareholder group acquired control of BHM. On
April 30, 1998, the Company entered into a management agreement
with Excel Management Ltd. to manage the Company. Excel
Management Ltd., in turn, has subcontracted its commercial and
technical management functions to Maryville Maritime Inc.
("Maryville"), a company also associated with the Company's
managerial and shareholder group. Maryville currently manages a
fleet of two clean product tankers, two crude oil tankers and
nine dry bulk vessels. Following its change of name to Excel
Maritime Carriers Ltd., the Company completed a public offering
of its common shares, the proceeds of which were used, in part,
to finance the acquisition of two crude oil tankers and three
bulk carriers. The Company later in 1998 sold these vessels in
connection with its repayment of the loan from a commercial
lender which had assisted in financing the acquisition of the
five vessels. As of December 31, 1998 the Company's assets
consisted of cash and accounts receivable. Subsequently, in
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1999, the Company has acquired two oil tankers and two dry cargo
vessels.
The International Tanker Shipping Market
Overview
The tanker market provides a transportation service to
rectify imbalances between the main oil producing and consuming
nations. More than 80% of crude oil production is moved on a
seaborne basis, with trades from the Middle East dominating. In
contrast, a much smaller proportion of refined products is
traded, some representing export oriented refineries, but many
being intra-regional balancing movements. International seaborne
crude oil and refined petroleum products transportation services
are provided by two main types of operators: major oil company
captive fleets (both private and state-owned) and independent
shipowner fleets. Both types of operators transport oil under
short-term contracts (including single-voyage spot charters) and
long-term time charters, or Contracts of Affreightment ("COA"),
with oil companies, oil traders, refined petroleum product
producers and government agencies. The oil companies own, or
control through long-term time charters, approximately one-third
of the current world tanker capacity, while independent companies
own or control the balance of the fleet. The oil companies use
their fleets not only to transport their own oil, but also to
transport oil for third-party charterers in direct competition
with independent owners and operators in the tanker charter
market. The seaborne oil transportation business is fragmented,
with no owner owning more than approximately 3.5% of the world
tanker fleet tonnage.
A significant and ongoing shift toward quality in
vessels and operations has been taking place in the tanker market
over the past several years as charterers and regulators
increasingly focus on safety and protection of the environment.
The seaborne crude oil and refined petroleum products
transportation industry has historically been subject to
regulation by national authorities and through international
conventions; however, since 1990 there has been an increasing
emphasis on environmental protection through legislation and
regulations such as OPA, IMO protocols and classification society
procedures, demanding higher-quality tanker construction,
maintenance, repair and operations. In addition, oil companies
acting as charterers, terminal operators, shippers and receivers
are becoming increasingly selective in their acceptance of
tankers, inspecting and vetting both vessels and companies on a
periodic basis. Although such changes raise the cost and
potential liabilities of vessel owners and operators, they also
raise the barriers to entry and accentuate the strengths of
shipowners with quality fleets and operations. Management
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believes that the increasingly stringent regulatory environment
will accelerate the obsolescence of poorly maintained, low-
quality tankers. See "Business--Regulation."
Vessel Classification and Primary Trade Routes
The world oil tanker fleet is generally divided into the
following six major types of vessel classifications, based on
vessel carrying capacity: (i) handysize tankers, with an oil
cargo carrying capacity of 10,000 to 60,000 dwt.; (ii) panamax
tankers, with an oil carrying capacity of 60,000 to 80,000 dwt;
(iii) aframax tankers, with an oil cargo carrying capacity of
80,000 to 120,000 dwt; (iv) suezmax tankers, with an oil cargo
carrying capacity of 120,000 to 200,000 dwt; (v) VLCCs, with an
oil cargo carrying capacity of 200,000 to 320,000 and (vi) ULCCs,
with an oil cargo carrying capacity of 320,000 dwt or more. The
Company's vessels all fall into the suezmax size classifications.
Additionally, the Company's fleet consists of crude tankers,
which carry crude oil or residual fuel oil ("dirty" products).
VLCCs carry the largest percentage of crude oil,
typically on long-haul voyage, but because of port constraints
are limited in their trading routes. For example, only a few
U.S. ports, such as the LOOP, are capable of handing a fully
laden VLCC. VLCCs primarily trade on long-haul routes from the
Middle East to Asia, Europe and the U.S.Gulf/Caribbean region but
are also active in trades from West Africa and North Sea to the
U.S. and Asia. Suezmax tankers are engaged in a range of crude
oil trades, most usually from West Africa to the U.S., the Gulf
of Mexico, the Caribbean or Europe, within the Mediterranean, or
within Asia. Aframax tankers are employed in shorter regional
trades, mainly in Northwest Europe, the Caribbean, the
Mediterranean and Asia. Handysize tankers trade on a variety of
regional trade routes carrying refined petroleum products and
crude oil on trade routes not suitable for larger vessels. While
larger size vessels, generally aframax and larger, typically
carry only crude oil, a number of such tankers have the
capability to carry refined petroleum products. However, the
majority of refined petroleum products are carried by handysize
tankers, with more than 90% of vessels in this size range
transporting clean products. Certain vessels ranging in size up
to 120,000 dwt or more also carry refined petroleum products,
typically trading between the Middle East and Asia.
The following table illustrates the size of the world
tanker fleet as of April 30, 1998, divided between crude and
product tankers.
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World Tanker Fleet as of April 30, 1998
Crude Oil Tankers Product Tankers Total
__________________ __________________ __________________
Vessel
Classification No. dwt No. dwt No. dwt
______________ _____ ___________ _____ __________ _____ ___________
Handysize 83 4,570,000 1,229 37,640,000 1,312 42,210,000
Panamax 152 10,030,000 50 3,457,000 202 13,487,000
Aframax 465 39,643,000 34 6,852,470 499 46,496,000
Suezmax 278 39,436,000 1 120,000 279 39,556,000
VLCC 379 103,570,000 --- --- 379 103,577,000
ULCC 55 21,737,000 --- --- 55 21,737,000
Total 1,412 218,986,000 1,314 48,069,470 2,726 267,063,000
Source:FearnResearch
Supply and Demand
Tanker charterhire rates and vessel values for all
tankers are strongly influenced by the supply of and demand for
tanker capacity. While in some cases pipelines are used to
transport oil, the majority of international oil, over 80%, is
transported on a seaborne basis. Small changes in tanker
utilization have historically led to relatively large
fluctuations in tanker charter rates for VLCCs and ULCCs, more
moderate price volatility in the suezmax, aframax and panamax
markets and less volatility in the handysize tanker market
compared to the market as a whole. The handysize segment has
generally been less volatile than other market segments because
these vessels mainly transport refined petroleum products which
are not subject to the same degree of volatility as the crude oil
market, although seasonal fluctuations can be large. Demand for
oil tankers is primarily generated by the demand for oil in
economies that lack sufficient domestic oil supply to meet their
consumption needs. Demand for crude oil and refined petroleum
products is affected by, among other things, general economic
conditions (including increases and decreases in industrial
production and transportation), oil prices, environmental
concerns, climate and competition from alternative energy
sources. Other factors influencing demand can include canal
charges, trade sanctions and the regulatory environment. The
supply of tanker capacity is derived from the balance between
vessels delivered to the fleet (which takes approximately 24
months from the time a building contract is entered into) and
those deleted when they become technically or economically
obsolete. Other factors affecting the supply of tankers include
the number of combined carriers (vessels capable of trading
liquid and dry cargoes) trading in the oil market, the number of
newbuilding tankers on order and the number of tankers in
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storage, drydocked, awaiting repairs or otherwise not available
or out of commission (collectively, "lay-up").
Demand for Tankers
While the world oil market has been prone to periodic
fluctuations, generally, the oil industry has experienced
sustained growth since the 1950s. There has been a continued
overall increase in oil demand over the last five years.
According to the International Energy Agency ("IEA"), between
1993 and 1997, oil consumption increased at a compounded annual
growth rate of 2.2%. The IEA reported a 2.9% increase in oil
consumption in 1997. Growth in 1997 was particularly strong in
China and the rest of Asia, excluding Japan, with gains in excess
of 10% and 5% respectively. [Both China and, despite the recent
economic downturn, the rest of Asia are forecast to sustain
growth rates in excess of average world levels in 1998.] The
product tanker segment has seen significant growth in demand, as
refined petroleum product consumption increased at the compounded
rate of approximately 2.5% per year from 1980 through 1996.
The level of oil exports from the Middle East has
historically had a strong effect on the demand for tanker
capacity, and, consequently, on tanker charterhire rates, due to
the relatively long distance between this supply source and the
typical destination ports. Oil exports from short-haul regions,
such as Latin America and the North Sea, are significantly closer
to ports used by the primary consumers of such exports, which
results in shorter average voyage length as compared to oil
exports from the Middle East. Therefore, production in short-
haul regions historically has had less impact on the demand for
larger vessels while increasing the demand for vessels in the
handysize, and aframax market segment classes. Recently, the
predominant growth in oil production has been by long-haul and
short-haul exporters due primarily to improvements in production
and exploration technology, resulting in a lower rate of growth
of overall tanker demand. The following chart illustrates the
growth of oil production by long-haul and short-haul exporters
from January 1992 to June 1998.
Supply of Tankers
The following discussion analyzes the supply trends in
the world tanker market for each of the handysize, panamax, and
aframax sectors of the market. The incremental supply of tankers
is determined by the rates of deliveries of newbuildings,
scrapping, the number of carriers trading in oil, and the amount
of tonnage in lay-up. Such factors are, in turn, influenced by
prevailing and expected future charterhire rates, as well as,
among other things, costs of bunkers and other operating costs,
the efficiency and age of the tanker fleet and government and
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industry regulation of maritime transportation practices,
particularly environmental protection laws and regulations. As
the tanker fleet ages, a number of vessels are scrapped as they
become uneconomical to operate or forbidden to trade because of
environmental laws which effectively limit single-hull and
double-sided tankers' useful lives to approximately 25 to 30
years. Consequently, a strong level of newbuildings will be
required to maintain the present tanker market balance.
Approximately 37.1% of handysize, 46.3% of suezmax and 27.4% of
aframax tankers, by dwt, respectively, were built before 1980.
However, the strength in recent charter rates has served to limit
anticipated scrappings, as higher incomes allow owners to spend
proportionately more on maintaining their vessels and thereby
extending their trading lives. The average age of tankers sold
for scrap was approximately 28 years in 1997.
Deliveries, Deletions and Orderbook.
As of April 30, 1998, the handysize fleet consisted of
1,314 vessels (1,229 in the product tanker segment) measuring
approximately 42.2 million dwt. About 740 vessels are over 15
years old of which approximately 503 vessels have passed their
25th year. A total of 189 vessels have been added to the
handysize fleet in the period January 1, 1993 through April 30,
1998, while a total of 160 were deleted over the same period. As
of April 30, 1998, the orderbook for the handysize fleet
consisted of 128 vessel, equivalent to 11.1% of existing fleet
(measured by dwt).
As of April 30, 1998, the aframax fleet consisted of 499
vessels, 34 in the product tanker segment, measuring
approximately 46.5 million dwt. 113 aframax tankers are more
than 20 years old with another 91 over 16 years old. A total of
102 vessels have been added to the aframax fleet in the period
from January 1, 1993 through April 30, 1998, while a total of 50
aframax vessels were deleted over the same period. As of April
30, 1998 the orderbook for the aframax fleet consisted of 88
vessels, equivalent to 18.5% of the existing fleet (measured by
dwt).
As of April 30, 1998, the suezmax fleet consisted of 279
vessels (one in the product tanker segment) measuring
approximately 39.6 million dwt. 111 vessels are more than 20
years old with another 23 over 16 years old. A total of 54
vessels have been added to the suezmax fleet in the period from
January 1, 1993 through April 30, 1998, while a total of 50
suezmax tankers were deleted over the same period. As of April
30, 1998, the orderbook for the suezmax fleet consisted of 48
vessels, equivalent to 17.6% of the existing fleet (measured by
dwt).
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Lay-Up. In periods of very low charter rates, it may
become cheaper for an owner to stop trading a vessel and realize
savings from furloughing crews and reducing operating costs. In
low charter rate periods, lay-up may be an alternative if high
repair costs or some other factor makes it desirable to postpone
expenses required for continued operation. Lay-up was a
significant factor in tanker fleet supply in the 1980s, but
currently less than 1% of the tanker fleet is in lay-up, and the
return of laid-up tonnage to active service is not a significant
element in charter rates.
Charter Rates
Vessels can be chartered (hired) to the market in a
variety of ways. Time charterparties involve a charterer hiring
a vessel for a fixed period, which may range from a couple of
days to several years. Most time charters are for periods of
between six months to one year, with the charterhire designed to
meet the financing and operating costs of the owner, while the
charterer is responsible for the voyage costs. The spot market
(subject to meeting charterer requirements) provides the most
frequent source of employment for vessels, whereby a vessel is
chartered to a charterer for the purpose of performing a specific
voyage. In this instance the hire charge paid by the charterer
is designed to meet the costs of performing the specific voyage,
generally including fuel and port costs.
Spot charterhire rates are frequently expressed in terms
of "Worldscale." "Worldscale" refers to the "New Worldwide
Tanker Nominal Freight Scale," an index devised to allow
comparison of freight rates for various size tanker routes. The
Worldscale rate represents a voyage charter for a hypothetical
75,000 ton capacity tanker for a particular route. The
Worldscale rate is not based on actual rates obtained in the
market. The Worldscale rate is used to allow owners to compare
rates offered on differing trades, which would be complicated if
quoted in US dollars per ton, since, for example, the underlying
port costs could vary significantly. Worldscale rates are
calculated in U.S. dollars per ton of crude oil carried and are
updated annually. In the crude oil spot charter market, the rate
actually achieved by a vessel for a particular route is expressed
as a percentage of the Worldscale rate for that route. Thus,
Worldscale 170 would mean 170 percent of the Worldscale rate for
that route. If the Worldscale rate for a particular route were
$10 per ton of cargo carried (that is, W100) a Suezmax or Aframax
tanker actually chartered to carry 50,000 tons of oil at W170
would charge $17 per ton and receive gross revenue of $850,000
for that voyage. The spot charter rates for double hull tankers
generally have been equal to the spot charter rates for single
hull tankers of similar age and condition. The charts below
indicate spot charterhire rates achieved in the market in terms
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of prevailing Worldscale from January 1994 to April 1998 based on
dead weight cargo tons ("dwct") for handysize product tankers,
aframax and suezmax crude tankers for selected routes, as
compiled by FearnResearch.
The International Dry Bulk Shipping Market
Overview
The dry bulk carrier industry is highly fragmented with
many owners and operators of shipping tonnage including
proprietary owners (large shippers of dry bulk cargo), state-
controlled shipping companies and independent operators. Cargoes
are shipped under short-term contracts (including single voyage
charters) and long-term time charters or COAs with trading
companies, dry commodity producers and government agencies. With
the exception of state-controlled shipping groups, no single
owner group controls more than 2% of the world dry bulk carrier
fleet.
Over the last few years a significant shift toward
quality in vessels and operations has been taking place in the
dry bulk industry with emphasis on improving the durability of
vessels. This shift can, in part, be attributed to the need to
comply with IMO regulations and directives and IACS decisions
which promote structural modification of vessel's bulkheads and
cargo loading methods to reduce stresses on the hulls of vessels.
Dry bulk cargo consists of the major bulk commodities, which are
coal, iron ore and grain and the minor bulk commodities which
include, amongst others, steel products, forest products,
agricultural products, bauxite and alumina phosphates, petcoke,
cement, sugar, salt, minerals, scrap metal and pig iron. Dry
bulk carriers are generally single deck vessels which transport
unpacked cargo which is poured, tipped or placed through
hatchways into the hold of the vessels.
Historically, charter rates for dry bulk carriers have
been influenced by the demand for, and the supply of, vessel
tonnage. The demand for vessel tonnage is largely a function of
the level of worldwide economic activity and the distance between
major trade areas. Supply is primarily driven by the size of the
existing worldwide dry bulk carrier fleet, scrapping and
newbuilding activity. Charter rates and vessel values are
determined in a highly competitive global market and have been
characterized by significant fluctuations since the mid-1980s.
Vessel Classification and Primary Trade Routes
Vessels utilized in the carriage of major bulk cargoes
are generally classified into three categories, based on carrying
capacity:
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- Handysize dry bulk carriers (25,000 to 50,000 dwt).
Unlike most larger dry bulk carriers, Handysize dry
bulk carriers are usually equipped with cargo gear
such as cranes. This type of vessel is well-suited
for transporting both major and minor bulk
commodities to ports around the world that may have
draft restrictions or are not equipped with gear
for loading or discharging of cargo.
- Panamax dry bulk carriers (50,000 to 100,000 dwt).
Panamax dry bulk carriers vessels are designed with
the maximum width, length and draft that will allow
them to transit fully laden through the Panama
Canal. Panamax vessels are primarily used in the
transport of major bulks such as grain and coal,
along with some minor bulks like phosphate, petcoke
and salt. The major transit routes for grain
cargoes are from North America to Europe and the
Far East. The major transit routes for coal are
from the US Gulf/East Coast to Europe, Australia
and Indonesia to Asia.
- Capesize dry bulk carriers (100,000 dwt or above).
Capesize dry bulk carriers primarily transit from
the Atlantic to the Pacific Ocean via Cape Horn or
the Cape of Good Hope, hence their name. Capesize
vessels are typically used for long voyages in the
iron ore and coal trades.
In addition to the three standard vessel types, the
world bulk carrier fleet also includes combination carriers.
These vessels are typically large, capable of carrying either
crude oil or dry bulk cargoes and compete with both capesize and
panamax bulk carriers. The role of combination carriers has been
decreasing since 1990 because such vessels, which were not built
primarily for the dry cargo market but rather for the oil tanker
market, have come to be considered less desirable by charterers
of oil tankers, since their oil carrying capacity may be limited
and they are not strictly specialized for the carriage of oil.
Cargo Types
The major bulk cargoes (i.e., coal, iron ore, and grain)
together accounted for approximately 60% of the dry bulk carrier
trade by volume based on vessel cargo carrying capacity in 1997.
Capesize and panamax dry bulk carriers together accounted for
over 80% of the iron ore and coal trade, while handysize and
panamax dry bulk carriers accounted for approximately 36% and 53%
of the grain trade, respectively. The minor cargoes accounted
for approximately 40% of the dry bulk carrier trade by volume
based on vessel cargo carrying capacity in 1997 and approximately
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81% of this trade was handled by handysize dry bulk carriers in
such period.
Set forth below are some of the characteristics of the
principal cargoes carried by dry bulk carriers.
- Coal. The two categories comprising this segment
are steam (or thermal) coal, which is used by power
utilities, and coking (or metallurgical) coal,
which is used by steelmakers. The volume of coal
shipments were estimated to have risen to
approximately 453 million tonnes in 1997 from 435
million tonnes in 1996. Steam coal is primarily
transported from Australia, South Africa and the
U.S. to Europe and Japan. Coking coal is primarily
transported from Australia, the U.S. and Canada to
Europe and Japan. Capesize dry bulk carriers
account for approximately 43% of coal shipments
while panamax dry bulk carriers account for
approximately 38%.
- Iron Ore. Shipments were estimated at
approximately 423 million tonnes in 1997 as
compared to 391 million tonnes for 1996. Iron ore
is primarily transported from Brazil and Australia
to Europe and Japan. Approximately 76% of iron ore
shipments is carried by capesize dry bulk carriers.
- Grain. The grain trade includes wheat, wheat
flour, coarse grains (corn and barley), soybeans
and soybean meal. Although the annual volume of
the grain trade is subject to political factors and
weather conditions, shipments have remained
relatively stable over the past five years. In
1997, grain shipments rose to 203 million tonnes
from 193 million tonnes in 1996. Grain is
primarily transported from the U.S., Canada,
Europe, Australia and Argentina to the Far East,
Latin America and Africa. Approximately 90% of the
international seaborne trade is carried by
handysize and panamax vessels while the remainder
is transported by capesize vessels.
Demand for Dry Bulk Carriers
Due to the variety of cargo carried by dry bulk
carriers, demand for such vessels is dependent on a number of
factors, including global and regional economic and political
conditions, developments in international trade, changes in
seaborne and other transportation patterns, weather patterns,
crop yields, armed conflicts, port congestion, canal closures and
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other diversions of trade. Generally, since larger ships carry
fewer types of cargoes, demand for larger vessels is affected by
trade patterns in a small number of commodities. Demand for
smaller vessels is more diversified and is determined by trade in
a larger number of commodities. As a result, charter rates for
smaller dry bulk carriers, such as handysize dry bulk carriers,
have tended to be more stable than charter rates for larger dry
bulk carriers.
The major dry bulk commodities had a growth rate of 3.5%
in 1994 and 7.3% in 1995, respectively. A decline in worldwide
economic growth occurred in 1996 causing shipments of iron ore to
decrease slightly. Grain shipments, which were affected by
adverse weather conditions in the U.S., also showed a slight
decline in 1996. Both thermal and coking coal, however,
continued to show increases in 1996. The year 1997 brought a
remarkably strong volume increase in major dry bulk commodities
of 5.9% but only modest growth for the less significant dry bulk
commodities. Total coal shipments, according to FearnResearch
estimates, rose from 435 to 453 million tonnes, iron ore
shipments recovered strongly from 391 to 423 million tonnes, and
grain shipments rose from 193 to 203 million tonnes.
Supply of Dry Bulk Carriers
The size of the world's dry bulk carrier fleet changes
as a result of newbuildings and scrapping or loss of vessels.
The world's dry bulk carrier fleet as of April 30, 1998 totaled
5,479 vessels aggregating approximately 252,988 dwt. Solid trade
growth in 1997 did not bring about any significant dry bulk
market recovery due primarily to the record-high number of new
bulk carriers brought on line during the year, amounting to 18.8
million dwt, or 7.4% of the existing fleet at the beginning of
1997. Scrapping and losses amounted to 7.6 million dwt, of which
losses accounted for 0.4 million dwt. Hence, the bulk carrier
fleet rose by 4.5% to 266.8 million dwt. The combined carrier
fleet decreased from 18.1 to 7.9 million dwt during 1997, and the
dry bulk cargo share decreased from 51 % to 37%, as the
significantly better tanker market attracted more combined
carriers over from dry bulk trading. The size distribution of
the existing dry bulk carrier fleet, as of April 30, 1998, is
shown below.
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Size Distribution of Existing Dry Bulk Carrier Fleet
as of April 30, 1998
Size in dwt Dry Bulk Carriers Combination Carriers
____________ ___________________ ____________________
No. dwt No. dwt
______ ___________ ______ __________
10-25,000 1,272 24,221,000 1 15,000
25-50,000 2,651 94,042,000 12 542,000
50-100,000 1,057 55,800,000 85 6,438,000
100-200,000 454 68,462,000 64 8,436,000
200,000+ 45 10,461,000 8 2,225,000
______ ___________ ______ __________
Total 5,479 252,980,000 170 17,656,000
====== =========== ====== ==========
Orderbook
The size of the dry bulk carrier fleet is affected by
orders for new vessels. Newbuilding tonnage on order as of April
30, 1998 for dry bulk carriers totaled approximately 25.4 million
dwt, or 9.5% of the existing fleet, with the approximately 20% of
this newbuilding tonnage scheduled for delivery during the last
two quarters of 1998. During the past few years, the average age
of the dry bulk carrier fleet has remained approximately 13
years. Dry bulk carriers in the size range of (i) 40,000-50,000
dwt accounted for 5.5 million dwt, or approximately 21%, of the
total newbuilding tonnage; (ii) 50,000-100,000 dwt accounted for
8.7 million dwt, or approximately 37%, of the newbuilding tonnage
and (iii) over 100,000 dwt accounted for 8.7 million dwt, or
approximately 29%, of the newbuilding tonnage. The following
graph shows the size of the existing dry bulk carrier fleet and
dry bulk carriers on order.
Lay-Up
The available dry bulk carrier fleet is also influenced
by the number of vessels in lay-up (i.e. not available for
immediate employment). However, the number of dry bulk carriers
in lay-up in recent years has been relatively low. As of January
1, 1998, dry bulk carriers in lay-up totaled only approximately
1.1 million dwt, as compared to over approximately 11.7 million
dwt in 1983.
15
<PAGE>
Charter Rates
From 1974 to 1978 a global recession caused a slowdown
in the newbuilding of dry bulk carriers worldwide. In 1978,
improvement in the global economy combined with a low supply of
vessels caused a dramatic increase in charter rates. Large
numbers of newbuildings were ordered based upon expectations of
continued strong economic growth and vessel demand. However, in
1981, worldwide economic demand declined concurrently with an
increase in the supply of vessels, resulting in significant
oversupply of dry bulk carriers. Over the next five years,
charter rates and vessel values declined, although gradually the
oversupply of tonnage was absorbed. In 1987, as worldwide
economic conditions once again improved, so did dry bulk carrier
charter rates. Charter rates remained strong until 1990 when,
due to adverse economic and political conditions, they
dramatically declined. Charter rates recovered temporarily in
1991, decline in early 1992, remained low through 1993 and then
gradually improved during 1994 and remained strong in the first
three quarters of 1995. Rates declined significantly in the
fourth quarter of 1995 through the third quarter of 1996 before
recovering during the fourth quarter of 1996. In 1997, while
growth in the volume of major dry bulk commodities increased
significantly, the record number of new bulk carriers that
entered service met the increased demand and kept charter rates
from rising meaningfully. Since vessel values and charter rates
are affected by substantially the same market conditions, they
tend to be closely correlated. (Note: As from 1992,
FearnResearch follows a 150,000 dwt, a 70,000 dwt and a 45,000
dwt bulk carrier as the standard vessel for capesizes, panamaxes
and handysizes. Prior to this date the standard size are 120,000
dwt, 60,000 dwt and 38,000 dwt for the respective classes.)
Scrapping
The rate at which vessels are scrapped also affects the
supply of vessels. There are a number of factors that cause an
owner to decide to scrap a vessel, including the prevailing and
anticipating freight rates, the age of the vessel, secondhand
vessel values in relation to scrap prices, and the costs
associated with classification society surveys, international
regulations and normal maintenance and insurance expenses.
Therefore, it may be more economical to scrap an older vessel
than to expend the money required to maintain that vessel in
class. The average age of dry bulk carriers sold for scrap was
approximately 25 years in 1997. Total scrapping in 1997 amounted
to 7.2 million dwt.
16
<PAGE>
The Company's Fleet
The following table sets forth as of June 1, 1999 each of
the Company's vessels with cargo-carrying capacity, year of
build, construction location and type. Each of these vessels is
owned through one or more subsidiaries.
Construction
Vessel Name Capacity(1) Year Built Location Type
__________________ ___________ __________ ____________ _______
Alex Stream 140,037 1977 Japan Tanker
Santa Maria 130,348 1975 Japan Tanker
Lucky Lady 27,422 1975 Japan Dry Bulk
Fighting Lady 146,157 1983 S. Korea Dry Bulk
(1) DWT
Competition
Competition among vessels approved by charterers is
primarily based on price and location and is secondarily based
upon the reputation of the vessel and its operators. Although
Maryville has an established reputation and has a consistent
performance record, there can be no assurance that the Company
will be able to compete successfully with other shipping firms.
The Company competes principally with other vessel
owners through the international tanker charter market, which is
comprised of brokers representing both charterers and vessel
owners in chartering transactions. The charters are quoted on
either an open or private basis. Requests for quotations on an
open charter are usually made by customers to a large number of
vessel operators. Vessels owned by major oil companies, oil
traders and independent ship owners often compete to win open
charters. Requests for quotation on a private basis are made to
a limited number of vessel operators and are greatly influenced
by prior customer relationships. The Company bids on both open
and private requests for quotations.
Customers
Maryville has many long-established customer
relationships, and management believes it is well regarded within
the international shipping community. During the past 15 years,
vessels managed by Maryville have been repeatedly chartered by
subsidiaries of major oil companies, oil traders and dry bulk
operators. The Company's tankers have delivered cargoes to and
routinely passed the necessary inspections for major oil
companies, including: Shell, Exxon, BP, Mobil, Chevron, Agip and
Texaco.
17
<PAGE>
The Company's vessels are currently operated on either
the spot market or the short-term time charter markets. The spot
charter and short-term time charter markets are highly
competitive and rates within those markets are subject to
volatile fluctuations while longer-term time charters provide
income at pre-determined rates over more extended periods of
time. There can be no assurance that the Company will be
successful in keeping all its vessels fully employed in these
short-term markets or that future spot and short-term charter
rates will be sufficient to enable its vessels to be operated
profitably.
Inspection by Classification Society
The hull and machinery of every commercial vessel must
be classed by a classification society authorized by its country
of registry. The classification society certifies that a vessel
is safe and seaworthy in accordance with the applicable rules and
regulations of the country of registry of the vessel and the
Safety of Life at Sea Convention. The Company's vessels are
currently enrolled with Bureau Veritas ("BV"). BV has awarded
ISM certification to Maryville and the Company's vessels.
A vessel must undergo Annual Surveys, Intermediate
Surveys and Special Surveys. In lieu of a Special Survey, a
vessel's machinery may be on a continuous survey cycle, under
which the machinery would be surveyed periodically over a five-
year period. The Company's vessels are on Special Survey cycles
for hull inspection and continuous survey cycles for machinery
inspection. Every vessel is also required to be drydocked every
two to three years for inspection of the underwater parts of such
vessel. Generally, the Company will make a decision to scrap a
vessel or continue operations at the time of a vessel's fifth
Special Survey.
The following table sets forth upcoming periodic survey
and drydocking dates for the Company's vessels:
18
<PAGE>
Scheduled Surveys
Classi-
Drydocking/ Intermediate fication
Vessel Bottom Survey Survey Special Survey Society
___________________ ______________ _____________ ______________ ________
Oil Tankers:
Alex Stream February 1999 (c) February 1999 (c) August 2001 (a) BV
Santa Maria May 1999 October 1998 (b) April 2001 (a) BV
Bulk Carrier:
Lucky Lady July 2000 January 1998 (c) July 2000 (a) BV
Fighting Lady December 2000 June 2000 December 2002 ABS
___________________
(a) Fifth Special Survey.
(b) To be carried out together with dry-docking. To be carried out +/- 9
months from due date.
(c) Passed
Regulation
The business of the Company and the operation of its
vessels is materially affected by government regulation in the
form of international conventions, national, state and local laws
and regulations in force in the jurisdictions in which those
vessels operate, as well as in the country or countries of their
registration. Because such conventions, laws and regulations are
subject to revision, the Company cannot predict the ultimate cost
of complying with such conventions, laws and regulations, or the
impact thereof on the resale price or useful life of the
Company's vessels. The Company is required by various
governmental and quasi-governmental agencies to obtain certain
permits, licenses and certificates with respect to its
operations. Subject to the discussion below and to the fact that
the kinds of permits, licenses and certificates required for the
operations of the Company's vessels will depend upon a number of
factors, the Company believes that it will be able to obtain all
permits, licenses and certificates material to the conduct of its
operations.
The Company believes that the heightened environmental
and quality concerns of insurance underwriters, regulators and
charterers will impose greater inspection and safety requirements
on all vessels. The Company's vessels are subject to both
scheduled and unscheduled inspections by a variety of
governmental and private entities, each of which may have a
different set of requirements for inspected vessels. These
entities include the local port state authorities (Coast Guard,
harbor master or equivalent), classification societies, flag
state administration (country of registry), charterers
19
<PAGE>
(particularly major oil companies which conduct vetting
inspections) and load and discharge terminal operators.
Environmental Regulation-IMO. On March 6, 1992, the
International Maritime Organization ("IMO") adopted regulations
which set forth new and upgraded pollution prevention
requirements applicable to tankers. These regulations, which
went into effect on July 6, 1995 in many jurisdictions in which
the Company's tankers operate, provide that (i) 25-year-old
tankers must be of double-hull construction or of a mid-deck
design with double-sided construction, unless they have wing
tanks or double-bottom spaces not used for the carriage of oil
which cover at least 30% of the length of the cargo tank section
of the hull or bottom or are capable of hydrostatically balanced
loading that ensures at least the same level of protection
against oil spills in the event of collision or stranding ("IMO
25 Year Regulations"), (ii) 30-year-old tankers must be of
double-hull construction or mid-deck design with double-sided
construction and (iii) all tankers will be subject to enhanced
inspections. Also, under IMO regulations, a tanker must be of
double-hull construction or a mid-deck design with double-sided
construction or be of another approved design ensuring the same
level of protection against oil pollution if such tanker (i) is
the subject of a contract for a major conversion or original
construction on or after July 6, 1993, (ii) commences a major
conversion or has its keel laid on or after January 6, 1994 or
(iii) completes a major conversion or is a newbuilding delivered
on or after July 6, 1996.
Environmental Regulation--OPA/CERCLA. The Oil Pollution
Act of 1990 ("OPA") established an extensive regulatory and
liability regime for environmental protection and cleanup of oil
spills. OPA affects all owners and operators whose vessels trade
with the U.S. or its territories or possessions, or whose vessels
operate in the waters of the U.S., which include the U.S.
territorial sea and the two hundred nautical mile exclusive
economic zone of the U.S. The Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") applies to
the discharge of hazardous substances, which vessels of the
Trading Fleet are capable of carrying.
Under OPA, vessel owners, operators and bareboat (or
"demise") charterers are "responsible parties" who are jointly,
severally and strictly liable (unless the spill results solely
from the act or omission of a third party, an act of God or an
act of war) for all oil spill containment and clean-up costs and
other damages arising from oil spills pertaining to their
vessels. These other damages are defined broadly to include
(i) natural resource damages and the costs of assessment thereof,
(ii) real and personal property damages, (iii) net loss of taxes,
royalties, rents, fees and lost natural resources damage,
20
<PAGE>
(iv) net cost of public services necessitated by a spill
response, such as protection from fire, safety or health hazards
and (v) loss of subsistence use of natural resources. OPA limits
the liability of responsible parties to the greater of $1,200 per
gross ton or $10 million per tanker that is over 3,000 gross tons
and $600 per dry bulk (subject to possible adjustment for
inflation). CERCLA, which applies to owners and operators of
vessels, contains a similar liability regime and provides for
cleanup, removal and natural resource damages. Liability under
CERCLA is limited to the greater of $300 per gross ton or $5
million. These limits of liability would not apply if the
incident were proximately caused by violation of applicable U.S.
federal safety, construction or operating regulations, or by the
responsible party's gross negligence or willful misconduct or if
the responsible party fails or refuses to report the incident or
to cooperate and assist in connection with the oil removal
activities. OPA specifically permits individual states to impose
their own liability regimes with regard to oil pollution
incidents occurring within their boundaries, and some states have
enacted legislation providing for unlimited liability for oil
spills. In some cases, states which have enacted such
legislation have not yet issued implementing regulations defining
tanker owners' responsibilities under these laws. Moreover, OPA
and CERCLA preserve the right to recover damages under existing
law, including maritime tort law. The Company complies with all
applicable state regulations in the ports where the Company's
vessels will call.
The Company currently insures and plans to insure each
of its vessels with pollution liability insurance in the amount
of $700 million for tankers and $500 million for dry bulk
carriers. A catastrophic spill could exceed the insurance
coverage available, in which event there could be a material
adverse effect on the Company.
Under OPA, with certain limited exceptions, all newly
built or converted tankers operating in U.S. waters must be built
with double-hulls, and existing vessels that do not comply with
the double-hull requirement must be phased out over a 20-year
period (1995-2015) based on size, age and place of discharge,
unless retrofitted with double-hulls. Notwithstanding the phase-
in period, OPA currently permits existing single-hull tankers to
operate until the year 2015 if their operations within U.S.
waters are limited to discharging at Louisiana Offshore Oil Port
("LOOP"), or off-loading by means of lightering activities within
authorized lightering zones more than 60 miles off-shore.
OPA expands the preexisting financial responsibility
requirements for vessels operating in U.S. waters and requires
owners and operators of vessels to establish and maintain with
the Coast Guard evidence of financial responsibility sufficient
21
<PAGE>
to meet the limit of their potential strict liability under OPA.
In December 1994, the Coast Guard enacted regulations requiring
evidence of financial responsibility in the amount of $1,500 per
gross ton for tankers, coupling the OPA limitation on liability
of $1,200 per gross ton with the CERCLA liability limit of $300
per gross ton. Under the regulations, such evidence of financial
responsibility may be demonstrated by insurance, surety bond,
self-insurance or guaranty. Under OPA regulations, an owner or
operator of more than one tanker will be required to demonstrate
evidence of financial responsibility for the entire fleet in an
amount equal only to the financial responsibility requirement of
the tanker having the greatest maximum strict liability under
OPA/CERCLA. The Company provides requisite guarantees from a
Coast Guard approved mutual insurance organization and receives
certificates of financial responsibility from the Coast Guard for
each vessel required to have one.
The Coast Guard's regulations concerning certificates of
financial responsibility provide, in accordance with OPA and
CERCLA, that claimants may bring suit directly against an insurer
or guarantor that furnishes certificates of financial
responsibility; and, in the event that such insurer or guarantor
is sued directly, it is prohibited from asserting any defense
that it may have had against the responsible party and is limited
to asserting those defenses available to the responsible party
and the defense that the incident was caused by the willful
misconduct of the responsible party. Certain insurance
organizations, which typically provide guarantees for
certificates of financial responsibility, including the major
protection and indemnity organizations which the Company would
normally expect to provide guarantees for a certificate of
financial responsibility on its behalf, declined to furnish
evidence of insurance for vessel owners and operators if they are
subject to direct actions or required to waive insurance policy
defenses.
Owners or operators of tankers operating in the waters
of the U.S. were required to file vessel response plans with the
Coast Guard, and their tankers were required to be operating in
compliance with their Coast Guard approved plans by August 18,
1993. Such response plans must, among other things, (i) address
a "worst case" scenario and identify and ensure, through contract
or other approved means, the availability of necessary private
response resources to respond to a "worst case discharge," (ii)
describe crew training and drills and (iii) identify a qualified
individual with full authority to implement removal actions. The
Company has obtained vessel response plans approved by the Coast
Guard for the Vessels operating in the waters of the U.S. The
Coast Guard has announced it intends to propose similar
regulations requiring certain tank vessels to prepare response
plans for the release of hazardous substances.
22
<PAGE>
Environmental Regulation--Other. Although the U.S. is
not a party to these conventions, many countries have ratified
and follow the liability scheme adopted by the IMO and set out in
the International Convention on Civil Liability for Oil Pollution
Damage, 1969, as amended (the "CLC") and the Convention for the
Establishment of an International Fund for Oil Pollution of 1971,
as amended ("Fund Convention"). Under these conventions, a
vessel's registered owner is strictly liable for pollution damage
caused on the territorial waters of a contracting state by
discharge of persistent oil, subject to certain complete
defenses. Liability is limited to $183 per gross registered ton
or approximately $19.3 million, whichever is less, or $82.7
million, depending on whether the country in which the damage
results is a party to the 1992 Protocol to the CLC, which raised
the maximum limit to approximately $82.7 million. The limit of
liability is tied to a unit of account which varies according to
a basket of currencies. The right to limit liability is
forfeited under the CLC where the spill is caused by the owner's
actual fault or privity and under the 1992 Protocol, where the
spill is caused by the owner's intentional or reckless conduct.
Vessels trading to contracting states, must provide evidence of
insurance covering the limited liability of the owner. in
jurisdictions where the CLC has not been adopted, various
legislative schemes or common law govern, and liability is
imposed either on the basis of fault or in a manner similar to
the CLC.
The European Union ("E.U.") is considering legislation
that will affect the operation of tankers and the liability of
owners for oil pollution. It is impossible to predict what
legislation, if any, may be promulgated by the E.U. or any other
country or authority.
The Company's operations are also affected by the newly-
adopted requirements set forth in the International Safety
Management ("ISM") Code. As of July 1, 1998, the ISM Code and
implementing U.S. regulations require shipowners and bareboat
charterers of passenger vessels, oil tankers, chemical tankers,
gas carriers, bulk carriers and certain high speed craft to
develop an extensive "Safety Management System" that includes,
among other things, the adoption of a safety and environmental
protection policy setting forth instructions and procedures for
operating their vessels safely and describing procedures for
dealing with emergencies. Noncompliance with the ISM Code may
subject the shipowner or bareboat charterer to increased
liability, may lead to decreases in available insurance coverage
for affected vessels and may result in the denial of access to,
or detention in, certain ports. Maryville, which manages the
Company's vessels, is certified as an approved ship manager under
the ISM Code. Currently, the Company's vessels are ISM
certified.
23
<PAGE>
Insurance and Safety
The business of the Company is affected by a number of
risks, including mechanical failure of the vessels, collisions,
property loss to the vessels, cargo loss or damage and business
interruption due to political circumstances in foreign countries,
hostilities and labor strikes. In addition, the operation of any
ocean-going vessel is subject to the inherent possibility of
catastrophic marine disaster, including oil spills and other
environmental mishaps, and the liabilities arising from owning
and operating vessels in international trade. OPA, by imposing
potentially unlimited liability upon owners, operators and
bareboat charterers for certain oil pollution accidents in the
U.S., has made liability insurance more expensive for ship owners
and operators and has also caused insurers to consider reducing
available liability coverage.
The Company maintains hull and machinery and war risks
insurance, which will include the risk of actual or constructive
total loss, and protection and indemnity insurance with mutual
assurance associations. The Company does not carry insurance
covering the loss of revenue resulting from vessel off-hire time.
The Company believes that its insurance coverage is adequate to
protect it against most accident-related risks involved in the
conduct of its business and that it maintains appropriate levels
of environmental damage and pollution insurance coverage.
Currently, the available amount of coverage for pollution is $700
million for tankers and $500 million for dry bulk carriers per
vessel per incident. However, there can be no assurance that all
risks are adequately insured against, that any particular claim
will be paid or that the Company will be able to procure adequate
insurance coverage at commercially reasonable rates.
Recent Developments
On March 11, 1999, the Company acquired, through a
wholly-owned subsidiary, the shares of the owning companies of
two Suezmax tankers for an aggregate price of US$ 9.0 million.
The purchases were financed through the combination of a
secured loan of US$ 6.0 million from Den Norske Bank ASA and a
sellers' credit of US$ 3.0 million. The secured loan carries a
floating interest rate of LIBOR plus 1.5% per annum and matures
on July 31, 2000, with a US$ 4.8 million balloon payment due on
maturity. Half of the sellers' credit will be payable on
March 11, 2000, and the remainder will be payable on March 11,
2001. The two acquired vessels are the Alex Stream, a
1977-built, Cap-2 Suezmax tanker of 140,037 dwt and the Santa
Maria, a 1975-built, Cap-2 Suezmax tanker of 130,348 dwt.
24
<PAGE>
On May 13, 1999, the Company acquired through a wholly-
owned subsidiary, the motor vessel "Happy Day" renamed to "Lucky
Lady," a 1975-built, bulk carrier of 27,422 dwt for a purchase
price of US$ 760,000 paid in cash.
In addition, on May 28, 1999, the Company announced that
it had acquired the m/v Esplanade to be renamed "Fighting Lady,"
a 1983-built, bulk carrier of 146,157 dwt for a purchase price of
US$ 7,470,000.
ITEM 2 - DESCRIPTION OF PROPERTY
The Company has no leasehold or freehold interest in any
real property.
ITEM 3 -LEGAL PROCEEDINGS
There are currently no material legal proceedings,
actions or claims pending against the Company. The nature of the
Company's business exposes it to the risk of lawsuits for damages
or penalties relating to, among other things, personal injury,
property casualty and environmental contamination.
ITEM 4 - CONTROL OF THE REGISTRANT
OWNERSHIP OF THE COMPANY
The following table sets forth, as of May 15, 1999,
certain information regarding the current ownership of the
Company's outstanding voting securities, the Common Shares, by
each person known by the Company to be the owner of more than 10%
of such securities and all the Directors and senior management as
a group.
Number of
Name Common Shares Percent of Class
______________________________ _____________ ________________
Vilpa Investments S.A. (a) 3,587,069 54.6%
As a group, the Directors and executive officers of the
Company own 3,655,369 Common Shares or 55.6% of the Common Shares
outstanding.
________________
(a) Vilpa is a Liberian corporation owned indirectly by members
of the family of Gabriel Panayotides, the Chairman, President
and Chief Executive Officer of the Company. By virtue of
his voting power and power of disposition over the Common
Shares of the Company owned by Vilpa, Mr. Panayotides may be
deemed the beneficial owner of such shares for purposes of
Rule 13d-3 under the Exchange Act. Mr. Panayotides disclaims
25
<PAGE>
beneficial ownership of these securities for any other
purpose.
ITEM 5 - NATURE OF TRADING MARKET
The primary trading market for the Common Shares is the
American Stock Exchange (the "AMEX"), on which the Common Shares
are listed under the symbol "EXM."
The high and low closing prices for the common shares,
by quarter, in 1997, 1998 and 1999 were as follows:
AMX AMX
Low High
For the quarter ended:
March 31, 1997 US$ N/A(a) US$ N/A
June 30, 1997 US$ N/A US$ N/A
September 30, 1997 US$ N/A US$ N/A
December 31, 1997 US$ N/A US$ N/A
March 31, 1998 US$ N/A US$ N/A
June 30, 1998 US$ 2 5/8 US$ 4 1/4
September 30, 1998 US$ 2 3/8 US$ 3 7/8
December 31, 1998 US$ 1 1/4 US$ 3 1/2
March 31, 1999 US$ 1 1/2 US$ 1 3/4
____________________
(a) The stock was not listed from December 1996 until May 1998.
On December 31, 1998, the closing price of the Common
Shares as quoted on the AMEX was US$ 3 1/2. On such date, there
were 6,570,000 Common Shares issued and outstanding.
ITEM 7 - TAXATION
The Company is incorporated in the Republic of Liberia.
The Company is not subject to income taxation under the laws of
the Republic of Liberia. There is no treaty relating to taxation
between the Republic of Liberia and the United States.
U.S. HOLDERS OF NOTES ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE TAX CONSEQUENCES TO THEM OF THE ACQUISITION,
OWNERSHIP AND DISPOSITION OF SHARES, AS WELL AS ANY APPLICABLE
FOREIGN, STATE OR LOCAL TAX LAWS OR ESTATE OR GIFT TAX
CONSIDERATIONS.
26
<PAGE>
ITEM 8 - SELECTED FINANCIAL DATA
The following selected historical income and balance
sheet financial data as of and for the years ended December 31,
1994, 1995, 1996, 1997 and 1998 have been derived from the
audited Consolidated Financial Statements of the Company. The
following information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Company's Consolidated Financial
Statements, including the notes thereto, included elsewhere
herein.
27
<PAGE>
<TABLE>
<CAPTION>
Selected Historical Financial Data
Excel Maritime Carriers Ltd. (formerly B+H Maritime Carriers Ltd.)
Year Ended December 31,
===================================================
1994 1995 1996 1997 1998
_________ _________ _________ _________ _______
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data (a):
Revenues from vessels, net $ 8,165 $ 7,888 $ 7,684 0 $ 7,525
Vessel operating expenses 10,192 5,934 4,745 0 5,949
Depreciation and amortization 2,955 2,427 322 0 1,310
General and administrative expenses 737 527 646 275 979
Loss on sale of vessels 474 11,508
Other income (expenses), net 556 339 348 0 763
-------- -------- --------- --------- --------
Net income (loss) $(6,749) $(1,339) $ 1,623 $ (275) ($12,984)
-------- -------- --------- --------- ---------
Net income (loss) per share (b) $(43.82) $ (8.69) $ 9.68 $ (1.24) $ 3.15)
-------- -------- --------- --------- ---------
Balance Sheet Data (at period end)
Current assets $ 579 $ 536 $ 0 $ 0 $ 7,446
Total assets 10,828 8,654 0 0 7,446
Current liabilities 6,234 5,882 0 138 1,124
Long-term debt, less current portion 2,814 2,331 0 0 0
Shareholders' equity 1,781 442 0 (138) 6,322
</TABLE>
____________________
(a) Income statement data for 1994, 1995, and 1996 reflect the
operation of BHM up to December 4, 1996, when the Company
ceased operations.
Income statement data for 1997 reflect the amount paid by
new owners for the termination of an existing management
agreement.
Income statement data for 1998 reflect the reactivation of
the Company, operation and subsequent sale of the five
vessels.
(b) Per share calculations reflect retroactively the 1 - for -20
reverse stock split effected on May 8, 1998.
28
<PAGE>
ITEM 9 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in
conjunction with the "Selected Historical Financial Data" set
forth above and the combined Financial Statements and the notes
thereto.
General
In October 1997, approximately 65% of the common stock
of an Amex-listed corporation named B+H Maritime Carriers Ltd.,
which had disposed of its assets and ceased operations, was
purchased by certain shareholders of the Company. After changing
its name to Excel maritime Carriers Ltd., the company raised
approximately US$ 20 million in an equity offering, consummation
of which was accomplished on May 22, 1998 and resumed operation.
In May and June 1998 the Company purchased three dry bulk cargo
vessels and two tankers. The purchase was accomplished with a
combination of the net proceeds of the equity offering and US$ 23
million of commercial debt. Due to the downward trend that the
shipping industry experienced starting second half of 1998,
enhanced by the crisis in Asian and Russian Economies during that
period, the Company decided to sell all five of its vessels in
1998 in order to take advantage of the market prior to it
reaching its cyclical low, and apply the cash secured after sale
of the vessels to proceed with new investment and acquisition of
suitable vessels at the earliest appropriate time considering
market conditions.
As of the end of 1998, the five vessels were sold and
the Company used a portion of the proceeds of the sale to repay
in full its outstanding indebtedness of US$ 20.2 million.
In line with its business plan the Company acquired
through a wholly-owned subsidiary, Point Holdings, the following
vessels on the following dates:
Vessel Name Type Date Acquired DWT
Alex Stream Suezmax Oil Tanker March 11, 1999 140,037
Santa Maria Suezmax Oil Tanker March 11, 1999 130,348
Lucky Lady Handy Bulk Carrier May 13, 1999 27,422
Fighting Lady Capesize Bulk Carrier May 28, 1999 146,157
The Company effectuated a "quasi-reorganization" for
accounting purposes in January 1999 by which the Company's
additional paid-in capital of US$ 56,499,000 as of December 31,
1998, was adjusted to US$ 6,256,000 as of January 1, 1999 and the
Company's deficit in retained earnings of US$ 50,243,000 as of
December 31, 1998, was adjusted to US$ 0 as of January 1, 1999.
29
<PAGE>
The Company was effectuated this quasi-reorganization for the
purpose of simplifying its balance sheet and the adjustment does
not involve any actual payments or transfer of funds.
Revenues
Gross revenues from vessels consist primarily of (i)
hire earned under time charter contracts, where charterers pay a
fixed daily hire or (ii) amounts earned under voyage charter
contracts, where charterers pay a fixed amount per ton of cargo
carried. Gross revenues are also affected by the proportion
between voyage and time charters, since voyage freights are
higher than equivalent time charter hire, as they include all
costs relating to a given voyage, including port expenses, canal
dues and fuel (bunker) costs. Accordingly, year-to-year
comparisons of gross revenues are not necessarily indicative of
the Trading Fleet's performance. The time charter equivalent per
vessel ("TCE"), which is defined below as gross revenue per day
less commissions and voyage costs provides a more accurate
measure for comparison.
Expenses
Voyage Expenses
Voyage expenses consist of all costs relating to a given
voyage, including port expenses, canal dues and fuel (bunker)
costs. Under voyage charters, such expenses are paid by the
owner of the vessel whereas under time charters such expenses are
paid by the charterer. Therefore, voyage expenses can exhibit
significant fluctuations from period to period depending on the
type of charter arrangement.
Vessel Operating Expenses
Vessel operating expenses consist primarily of crewing,
repairs and maintenance, lubricants, victualling, stores and
spares and insurance expenses. The Company is responsible for
all vessel operating expenses in voyage, time and period
charters.
Depreciation
Vessels, including the acquisition related costs, are
depreciated on a straight line over an estimated economic life of
30 years for tankers and 28 years for dry bulk carriers (from the
date of construction of each vessel). Vessels are depreciated to
an estimated scrap value calculated at $180 per lightweight ton.
30
<PAGE>
Amortization of Drydocking and Special Survey Costs
Drydocking and special surveys are carried out
approximately every two and a half years and five years,
respectively. Drydocking and special surveys costs are deferred
and amortized over two and a half years and five years,
respectively.
Management Fees
Management fees consist of fixed management fees per
vessel per month charged by Maryville for managing the vessels.
Results of Operations
Fiscal Year ended December 31, 1998 Compared to
Fiscal Year ended December 31, 1997
As the company did not operate during 1997, no
comparative date for 1997 are available.
Revenues from Vessels
Gross revenues (before deduction of broker's commissions
and voyage expenses) were US$ 7.9 million in 1998. The total
number of operating days of the fleet was 941 during 1998,
commencing on May 29th when the first vessel was bought and
ending on December 15th that all vessels were sold. TCE per
vessels in 1998 was US$ 5,180.
Voyage Expenses
Voyage Expenses were US$ 2.65 million in 1998.
Vessel Operating Expenses
Vessel Operating Expenses were US$ 3.3 million in 1998.
Average daily operating expenses per vessel in 1998 were
US$ 3.505.
Depreciation and Amortization
Depreciation charge for 1998 was US$ 1.3 million.
General and Administrative Expenses
General and Administrative expenses for 1998 amounted to
US$ 0.98 million. The fee charged by Excel Management for
managing the vessels was US$ 0.44 million. US$ 0.54 million is
attributable mainly to general corporate expenses, legal fees,
audit fees and consultancy fees connected with expenses incurred
by the Company in an attempt to explore the U.S. Capital Markets
31
<PAGE>
during 1998, which did not materialize due to the adverse climate
experienced by the U.S. Capital Markets as a result of Russian
and Brazilian economic crisis during the second half of the year.
Other Income/Expenses
Other Expenses during 1998 totaled US$ 12.27 million and
consisted of a US$ 11.5 million loss on the sale of the vessels
and US$ 0.76 million in interest and financing costs.
Fiscal Year ended December 31, 1997 Compared to
Fiscal Year ended December 31, 1996
As the Company did not operate during 1997, no
comparative data for 1997 is available.
During 1997, an existing management agreement with B+H
Management was terminated in consideration for US $275,000
Fiscal Year ended December 31, 1996 compared to Fiscal
year ended December 31, 1995
Revenues from Vessels
Total revenues in 1996 decreased US$ 200,000 or 3% as a
result of the acquisition of all of BHM's operations on
December 4, 1996 by B+H Ocean Carriers Ltd. The US$ 600,000
decrease resulting from the 27 day reduction in operating days
was offset by an increase in the charter hire revenue of BHM's
three product tankers of approximately US$ 0.4 million.
Vessel Operating Expenses
Total vessel operating expense, dry-docking and survey
costs for 1996 decreased US$ 1.2 million or 20%, due
predominantly to the decrease in dry-docking of US$ 900,000. The
additional US$ 300,000 decrease was due to the reduction in
operating days stemming from the acquisition, as noted above.
Depreciation and Amortization
Total depreciation and amortization expenses for 1996
were US$ 300,000, a decrease of US$ 2.1 million. Approximately
US$ 1.9 million of the decrease is attributable to the change in
the estimated useful lives of BHM's vessels from 22 to 30 years
from the date of construction. An additional US$ 200,000 of the
reduction in depreciation expense stemmed from the reduction in
operating days, as noted above.
32
<PAGE>
General and Administrative Expenses
General and administrative expenses increased
US$ 100,000 or 23%, due to fees incurred in connection with the
sale of the business and assets to B+H Ocean Carriers Ltd. of
approximately US$ 100,000.
Liquidity and Capital Resources
The Company operates in a capital intensive industry
which requires extensive investment in revenue-producing assets.
The liquidity requirements of the Company relate to servicing its
debt, funding investments in vessels, funding working capital and
maintaining cash reserves. Net cash flow generated by operations
has historically been the main source of liquidity. Additional
sources of liquidity also include proceeds from assets sales,
bank indebtedness and equity contribution.
As of December 31, 1998 the Company had a working
capital (defined as current assets less current liabilities)
surplus of US$ 6.32 million resulting from the cash generated
from the sale of the Company's fleet. As of December 31, 1998
the Company had cash US$ 5.78 million and zero indebtedness.
Operating Activities
The net cash used in Operating Activities totaled
US$ 0.89 million in 1998. This reflects a prepayment of US$ 1
million to the management company for vessel operating expenses.
Investing Activities
The net cash used in Investing Activities totaled
US$ 12.57 million in 1998 which reflects the difference between
the purchase price and the net proceeds from the sale of the
vessels.
Financing Activities
The net cash generated from Financing Activities in 1998
was US$ 19.24 million reflecting the net proceeds of the Equity
Offering, the drawdown of a US$ 23 million bank loan and the full
repayment of that loan within the period.
Foreign Currency Fluctuation
All of the Trading Fleet's revenues are in U.S. dollars.
Approximately 90% of the Trading Fleet's total expenses are paid
in U.S. dollars, with the remaining 10% being paid in Greek
drachmas. The Company does not hedge its exposure to foreign
currency fluctuation. For accounting purposes, expenses incurred
33
<PAGE>
in Greek drachmas are translated into U.S. dollars at the
exchange rate prevailing on the date of each transaction.
Inflation
Although inflation has had a moderate impact on the
Trading Fleet's operating and voyage expenses in recent years,
management does not consider inflation to be a significant risk
to operating or voyage costs in the current economic environment.
However, in the event that inflation becomes a significant factor
in the global economy, inflationary pressures would result in
increased operating, voyage and financing costs.
The Year 2000 Computer Problem
The "Y2K problem" is the term used to describe the
potential failure of computer software systems to properly
process date-related information on or after January 1, 2000.
The Y2K problem creates a problem for the shipping industry
because most ship management and ship owning companies rely on
date dependent computer systems, both on board vessels and
ashore. In addition, port authorities, communication networks
utilized in the shipping industry and customers rely on computer
systems which may be adversely affected by the Y2K problem.
Computer systems on board vessels which are likely to be
affected or even disabled include satellite position control
systems, radar mapping, ballast monitoring systems, engine
vibration monitors, cargo loading software, global maritime
distress and safety system equipment, each of which is likely to
be controlled by computer systems which may not be Y2K compliant.
Insurers have stated that insureds will be penalized if their
computer systems are not Y2K compliant. The Company is presently
in the process of evaluating the compliance of its computer
systems with the Year 2000 requirements and has sent detailed
questionnaires to each vessel in the Trading Fleet. The
Company's shorebased computer systems, including both hardware
and software, are of recent design and manufacture and the
Trading Fleet believes them to be fully Y2K compliant. The
Company completed the evaluation of its vessel-based computer
systems in June 1999. Any upgrade or modification required to
render the vessel-based computer systems compliant with the Year
2000 requirements will be completed within six months after the
completion of the evaluation. Based on current information, the
Company does not believe it will incur any material expenses in
order to undertake any necessary corrective action.
ITEM 10 - DIRECTORS AND OFFICERS OF THE REGISTRANT
34
<PAGE>
MANAGEMENT
Executive Officers, Directors and Consultants
The following table sets forth the name, age and
principal position with the Company of each of its executive
officers, Directors and consultants. Consultants are appointed
from time to time, are not executive officers and do not make
executive decisions for the Company.
Name Age Position
Gabriel Panayotides 43 Chairman, President, Chief
Executive Officer and Class A
Director
George Agadakis 45 Vice President, Chief Operating
Officer and Class B Director
Loukis Papaphilippou 62 Class A Director
Gregory J. Timagenis 53 Class A Director
Trevor J. Williams 54 Class A Director
Nicolas Zouvelos 43 Treasurer
Georgina E. Sousa 48 Secretary
The Board of Directors currently consists of five
persons. Each Director is elected for a two year term. Class A
Directors will serve until the 1999 annual meeting. Class B
Directors will serve until the 2000 annual meeting. Officers are
appointed by the Board of Directors and serve until their
successors are appointed and qualified.
Gabriel Panayotides has been President, Chief Executive
Officer and a Director of the Company since October 1997 and
Chairman since February 1998. He has participated in the
ownership and management of ocean going vessels since 1978 and
has been head of operations of Maryville since July 1983. He is
also a member of the Greek Committee of Bureau Veritas, an
international classification society. He holds a Bachelors
degree from the Piraeus University of Economics.
George Agadakis has been Vice President and a Director
of the Company since November 1997. He has also been General
Manager of Maryville since January 1992. From 1983 to 1992 he
served as Insurance and Claims Manager for Maryville. He has
held positions as Insurance and Claims Manager and as a
consultant with three other shipping companies since 1976. He
35
<PAGE>
holds diplomas in shipping from the Business Centre of Athens and
the London School of Foreign Trade Ltd.
Loukis Papaphilippou has been a Director of the Company
since October 1997 and has been the chief legal executive of L.
Papaphilippou & Co., a leading law firm in Cyprus since July
1963. He has been Vice President of Minerva Insurance since
January 1978 and President of Antenna TV Ltd. and Antenna FM
Ltd., two leading Cypriot broadcasting networks, since December
1989 and December 1995, respectively.
Gregory J. Timagenis has been a Director of the Company
since August 1998 and is a member of the Law Office of Gr. J.
Timagenis, the Company's Greek counsel. He holds a law degree
and a Masters degree in economics and political sciences from the
University of Athens. He was also awarded an L.L.M. and a Ph.D.
by the University of London. He was admitted to the Piraeus Bar
Association in 1971, and, since 1981, he has been qualified to
practice before the Supreme Court of Greece. He has taught legal
courses at the University of Athens and the Greek Naval Academy
in addition to having written several books and articles.
Trevor J. Williams has been a Director of the Company
since November 1988 and has been principally engaged as President
and Director of Consolidated Services Limited, a Bermuda-based
firm providing management services to the shipping industry since
1985.
Nicolas Zouvelos has been Treasurer of the Company since
June 1999. He has also been Deputy Financial Manager of
Maryville since June 1995 and Financial Manager since September
1998. He has been involved with the shipping industry for 15
years and has held positions as Claims Manager and Assistant
Financial Manager with two other shipping companies. He holds a
Master of Science degree in Economics from the University of
Stirling.
Georgina E. Sousa has been Secretary of the Company
since February 1998. She joined the Bermuda law firm of Cos &
Wilkinson in 1982 as Senior Company Secretary and served in that
capacity until 1993 when she joined Consolidated Services Limited
as Manager of Corporate Administration, which position she
currently holds. From 1976 to 1982, Ms. Sousa was employed as
Company Secretary by the Bermuda law firm of Appleby, Spurling &
Kemp. She acts as Company Secretary of several private companies
and of Chemgas Ltd. and Resource Financing and Investment Ltd.
36
<PAGE>
ITEM 11 - COMPENSATION OF DIRECTORS AND OFFICERS
The Company does not pay salaries or provide other
direct compensation to its executive officers including those who
serve as Directors of the Company. For the year ended
December 31, 1998, the Company paid aggregate Directors fees of
$35,306.
No family relationships exist among any of the executive
officers and Directors.
ITEM 13 - INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Excel Management
The Company's management is conducted by and through
Excel Management, an affiliate of the Company. On April 30,
1998, Excel Management and the Company entered into the
Management Agreement, pursuant to which Excel Management is paid
a fee of $13,000 per month in respect of each vessel owned by the
Company in addition to an annual fee of $50,000 for general
corporate and clerical management services.
Maryville
On April 30, 1998, Excel Management and Maryville
entered into the Submanagement Agreement under which Excel
Management procures certain technical and commercial management
services for the vessels of the Trading Fleet from Maryville, a
company also associated with the Company's managerial and
shareholder group. Pursuant to the Submanagement Agreement, the
Company pays Maryville a fee of $11,000 per month per vessel
under management plus a commission for advice on chartering and
purchase and sale transactions. Mr. Agadakis is the General
Manager of Maryville.
During the fiscal years ended December 31, 1998,
Maryville was paid fees of $368,500 for commercial and technical
management services in respect of the vessels. Maryville
currently manages 10 vessels other than those of the Company and
is not restricted in the number or ownership of vessels it may
manage. Maryville has advised the Company that it gives no
priority or preference to any of the vessels under its
management.
Other
L. Papaphilippou & Co. serves as Cypriot counsel to the
Company and has received fees in the past for legal services. L.
Papaphilippou & Co. will continue to receive such fees for the
provision of such services, when rendered, in the future. Loukis
37
<PAGE>
Papaphilippou, a Director of the Company and member of the Audit
Committee, is a member of L. Papaphilippou & Co.
The Law Office of Gr. J. Timagenis serves as Greek
counsel to the Company and has received fees in the past for
legal services. The Law Office of Gr. J. Timagenis will continue
to receive such fees for the provision of such services, when
rendered, in the future. Gregory J. Timagenis, a Director of the
Company and member of the Audit Committee, is a member of the Law
Office of Gr. J. Timagenis.
PART IV
ITEM 17 - FINANCIAL STATEMENTS
See pages F-1 through F-23, which are attached hereto and
incorporated herein.
ITEM 19 - FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements, together with the report
of Arthur Andersen, Independent Accountants, are filed as part of
this annual report:
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Financial Statements
Report of Arthur Andersen, Independent Accountants.... F-2
Consolidated Balance Sheets December 31, 1997, 1998... F-3
Consolidated Statements of Operations for the years
ended December 31, 1996, 1997 and 1998.............. F-5
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1996, 1997 and 1998.... F-7
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1998 and 1997.................... F-8
Notes to Consolidated Financial Statements............ F-10
38
<PAGE>
EXCEL, MARITIME CARRIERS LTD.
(FORMERLY B+H MARITIME CARRIERS LTD.)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1998
TOGETHER WITH INDEPENDENT PUBLIC ACCOUNTANTS
REPORT
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO:
EXCEL MARITIME CARRIERS LTD.
We have audited the accompanying consolidated balance sheets
of EXCEL MARITIME CARRIERS LTD., (formerly B+H Maritime
Carriers Ltd.) and subsidiaries, ("Company") as of December
31, 1997 and 1998, and the related consolidated statements
of operations, stockholders' equity and cash flows for each
of the two years in the period ended December 31, 1998.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
The financial statements of EXCEL MARITIME CARRIERS LTD. as
of December 31, 1996, which are presented for comparative
purposes, were audited by other auditors whose report dated
May 30, 1997, expressed an unqualified opinion on those
statements.
We conducted our audits in accordance with United States
generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
signficant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of EXCEL MARITIME CARRIERS LTD. and subsidiaries as
of December 31, 1997 and 1998 and the results of their
operations and their cash flows for each of the two years in
the period ended December 31, 1998, in conformity with
United States generally accepted accounting principles.
Athens, Greece,
March 29,1999.
F-2
<PAGE>
EXCEL MARITIME CARRIERS LTD.
(FORMERLY B&H MARITIME CARRIERS LTD.)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(Expressed in thousands of U.S. Dollars,
except per share data)
ASSETS 1997 1998
---- ----
CURRENT ASSETS:
Cash and cash equivalents (Note 2h) $ 0 $ 5,783
Accounts receivable- -------- --------
Trade (Note 2i) 0 382
Other 0 142
-------- --------
0 524
-------- --------
Due from management company (Note 1) 0 1,000
Inventories (Note 2c) 0 139
-------- --------
Total current assets 0 7,446
-------- --------
Total assets $ 0 $ 7,446
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable-
Trade 0 742
Other 0 191
-------- --------
0 933
-------- --------
Accrued liabilities (Notes 2f and 4) 138 191
-------- --------
Total current liabilities 138 1,124
-------- --------
CONTINGENCIES (Note 7) - -
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.01 par value; 5,000,000 shares
authorised, none issued.
Common Stock, $0.01 par value; 30,000,000 shares
authorised; 4,436,122 issued and outstanding at
December 31, 1997; 6,571,806 issued and
outstanding at December 31, 1998. 2 66
F-3
<PAGE>
Paid-in capital 37,119 56,499
Retained earnings (deficit) (37,259) (50,243)
-------- --------
Total stockholders' equity (138) 6,322
-------- --------
Total liabilities and stockholders' equity $ 0 $ 7,446
======== ========
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE>
EXCEL MARITIME CARRIERS LTD.
(FORMERLY B&H MARITIME CARRIERS LTD.)
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1996, 1997 AND 1998
(Expressed in thousands of U.S. Dollars,
except per share data)
1996 1997 1998
---- ---- ----
REVENUES:
Revenue from vessels (Notes 1 and 2g) $7,684 $0 $7,883
Commissions (Note 2g) 0 0 (358)
-------- -------- --------
Revenue from vessels, net 7,684 0 7,525
-------- -------- --------
EXPENSES:
Operating expenses
Voyage expenses (Note 2g) 0 0 2,651
Vessel operating expenses
(Notes 2e, 2f, 2g and 5) 4,745 0 3,298
Depreciation and amortization
(Notes 2d and 6) 322 0 1,310
General and administrative expenses
Management fees (Notes 1 and 3) 154 0 436
Other (Notes 1 and 3) 492 275 543
-------- -------- --------
5,713 275 8,238
-------- -------- --------
Income (loss) from operations 1,971 (275) (713)
-------- -------- --------
OTHER INCOME (EXPENSES):
Interest and finance costs, net (Note 6) (348) 0 (759)
Loss on sale of vessels (Note 6) 0 0 (11,508)
Foreign currency gains (losses) (Note 2b) 0 0 (7)
Other, net 0 0 3
-------- -------- --------
Total other income (expenses), net (348) 0 (12,271)
-------- -------- --------
Net Income (loss) $1,623 $(275) $(12,984)
F-5
<PAGE>
======== ======== ========
Basic earnings (loss) per share $9.68 $(1.24) $(3.15)
======== ======== ========
Basic weighted average numbers of shares 167,747 221,806 4,118,792
======== ======== =========
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
EXCEL MARITIME CARRIERS LTD.
(FORMERLY B&H MARITIME CARRIERS LTD.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
DECEMBER 31, 1996, 1997 AND 1998
(Expressed in thousands of U.S. Dollars,
except per share data)
Compre- Retained
hensive Capital Paid-in Earnings
Income Stock Capital (Deficit) Total
------ ------ ------ --------- -----
BALANCE, December 31, 1995 31 34,553 (34,142) 442
- - 1996 net income 1,623 - - 1,623 1,623
- - Shares issued to B+H Ocean - 13 2,387 - 2,400
- - Distributions to stockholders ------ - 0 (4,465) (4,465)
- - Comprehensive Income 1,623
====== ------ ------ ------ ------
BALANCE, December 31, 1996 44 36,940 (36,984) 0
- - 1997 net loss (275) - 0 (275) (275)
- - Reverse stock split,
1 for 20 for 4,436,122
old shares (occurred on
May 21, 1998) - (42) 42 - 0
- - Additions to paid-in capital - - 137 - 137
-------
- - Comprehensive Income (loss) (275)
======= ------ ------ ------ ------
BALANCE, December 31, 1997 - 2 37,119 (37,259) (138)
- - 1998 net loss (12,984) - - (12,984) (12,984)
- - Additions to paid-in capital - - 138 - 138
- - Issuance of 6,350,000 common
shares, par value $0.01 at
$ 3.15 - 64 19,939 - 20,003
- - Capital issuance expenses - - (697) - (697)
--------
- - Comprehensive Income (loss) (12,984)
======== ------ ------- -------- ------
BALANCE, December 31, 1998 $66 $56,499 $(50,243) $6,322
====== ======= ======== ======
The accompanying notes are an integral part of these consolidated statements.
F-7
<PAGE>
EXCEL MARITIME CARRIERS LTD.
(FORMERLY B&H MARITIME CARRIERS LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1996, 1997 AND 1998
(Expressed in thousands of U.S. Dollars)
1996 1997 1998
---- ---- ----
Cash Flows from Operating Activities:
Net income (loss) $1,623 $(275) $(12,984)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 322 0 1,329
Loss on sale of vessels 0 0 11,508
Equity in undistributed earnings of (18) 0 0
Northhampton Assurance Ltd.
Interest expense 351 0 817
Interest income 0 0 (83)
(Increase) Decrease in:
Accounts receivable (325) 0 (507)
Inventories 22 0 (139)
Due from management company 0 0 (1,000)
Prepayments and other (166) 0 0
Increase (Decrease) in:
Accounts payable (82) 0 933
Accrued liabilities (176) 138 53
Due to other related parties (34) 0 0
Unearned revenue (701) 0 0
(Increase) in deferred charges (42) 0 0
Interest paid (351) 0 (817)
-------- -------- --------
Net Cash from (used in) Operating Activities 423 (137) (890)
-------- -------- --------
Cash Flows from Investing Activities:
Vessel acquisitions and/or improvements 0 0 (38,000)
Proceeds from sale of vessels, net 0 0 25,365
Interest received 0 0 66
-------- -------- --------
Net Cash used in Investing Activities 0 0 (12,569)
-------- -------- --------
Cash Flows from Financing Activities
Proceeds from long-term debt 0 0 23,000
F-8
<PAGE>
Proceeds from refinancing of mortgage loan 5,000 0 0
Payment of long-term debt (3,245) 0 (1,000)
Repayment of long-term debt 0 0 (22,000)
Additions to paid-in capital 0 137 138
Issuance of capital stock 0 0 20,003
Capital issuance expenses 0 0 (697)
Financing costs 0 0 (202)
Cash distributed to owners (2,230) 0 0
-------- -------- --------
Net Cash from (used in) Financing Activities (475) 137 19,242
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents (52) 0 5,783
Cash and cash equivalents at beginning
of year 52 0 0
-------- -------- --------
Cash and cash equivalents at end of year $0 $0 $5,783
======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
F-9
<PAGE>
EXCEL MARITIME CARRIERS LTD.
(FORMERLY B+H MARITIME CARRIERS LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998
(Amounts in all tables and notes are presented in thousands of
U.S. Dollars, unless otherwise stated, except per share data)
1. BASIS OF PRESENTATION AND GENERAL INFORMATION:
The accompanying consolidated financial statements include the
accounts of B&H Maritime Carriers Ltd. (B+H), a Liberian
corporation, formed in November 1988 to engage in the business of
investing in, owning, operating and selling dry-cargo bulker
vessels and product-tanker vessels. B+H was renamed to Excel
Maritime Carriers Ltd. on April 28, 1998.
On October 11, 1995, the shareholders of B&H approved amendments
to the Company's Articles of Incorporation, the result of which
was to reorganize it from a self-liquidating enterprise of
limited duration to a perpetual corporation. The amendments to
the Articles of Incorporation also increased the authorized
Common Stock to 30,000,000 shares, authorized a new class of
5,000,000 shares of Preferred Stock, par value $ 0.01 per share
issuable in such series with rights, preferences and limitations
as the Company's Board of Directors may determine.
On October 18, 1996, B&H Ocean Carriers Ltd. ("B&H Ocean")
acquired 1,356,122 of the newly issued shares of common stock of
the Company in full satisfaction of indebtedness of $ 2,400,336
of B&H.
On December 4, 1996, B&H Ocean acquired substantially all of the
business and assets (primarily three product tankers) and assumed
substantially all of the liabilities of B&H, except for the
management agreement referred to in the following paragraph, in
exchange for 495,841 shares of B&H Ocean's common stock, which
was distributed to B&H's shareholders, other than B&H Ocean. As
a result, B&H which operated during 1995 and 1996 three product
carriers, remained with no vessels and operations after that
date.
B&H vessels operated during 1996 under open rate charters with
PROTRANS a tanker operating pool owned and managed by members of
B&H management team. B&H 's charter hire revenues from these
vessels totalled $ 7,684.
In October 1997, Vilpa Investments S.A. and Mr. Odysseos (a
Cypriot businessman representing the vessel-owning companies in
Cyprus) acquired a 14% and 51% interest in B&H, respectively.
F-10
<PAGE>
Concurrent with the change in ownership, the Company terminated
an existing management agreement with a then affiliated company
(B&H Management Ltd.) in consideration for $ 275. As a result,
the historical operations of B&H Maritime are not considered
relevant to the ongoing operations of Excel Maritime Carriers
Ltd.
On December 5, 1997, Excel Maritime Carriers Ltd. (Excel,
formerly B&H) entered into a series of memoranda of agreement,
through its wholly-owned vessel owning subsidiaries and gradually
purchased five vessels with delivery dates up to the end of June
1998. These vessels were all sold in December 1998 (Note 6).
The operations of the above five vessels (Note 2a below) were
managed by Excel Management Ltd., an affiliated Liberian
corporation formed on January 13, 1998. The management company
("the Manager"), which is not included in the accompanying
consolidated financial statements, has an office in Greece,
established under the provisions of Law 89 of 1967, as amended,
and offers to Group vessels a wide range of shipping services.
Such services include technical support and maintenance,
supervision of newbuildings, insurance consulting, chartering,
financial and accounting services, all provided at a fixed
monthly fee per vessel.
The fees charged by the Manager in 1998, amounted to $436 and are
separately reflected in the accompanying 1998 consolidated
statement of operations. In addition, the vessel owning Companies
during the same period paid to Maryville Manilla Inc. (an
affiliated company) crew handling fees of $8. Furthermore, the
Company during 1998 paid to the Manager $29 for accounting and
financial services. These amounts are included in other general
and administrative expenses in the accompanying 1998 consolidated
statement of operations.
The 1996 management fees were paid to B&H Ship Management Company
and are also separately reflected in the accompanying 1996
consolidated statement of operations.
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Revenue from vessels in 1998, included charter hire or freight
revenues from significant customers as follows (in percent of
total revenue):
Charterer
A 24%
B 17%
C 14%
D 13%
E 11%
Total 79%
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation:
The accompanying consolidated financial statements have
been prepared in accordance with United States generally
accepted accounting principles and include for 1996 the
accounts of Excel (formerly B&H) and the three vessel
owning subsidiaries (owners of product tankers all sold
by December 4, 1996). In 1997 there were no vessels in
operation. The December 31, 1998 consolidated financial
statements include the accounts of Excel Maritime
Carriers Ltd. (Note 1) and its wholly-owned subsidiary
Point Holdings Ltd. (a Liberian Corporation incorporated
on February 17, 1998) owner of the following vessel-
owning companies (all registered in Cyprus):
Vessel's Vessel
Owning Company Name DWT LWT Acquired on
1. Donex Shipping Co. Ltd. Erissos XL 89,735 16,035 May 29, 1998
2. Lokman Shipping Co. Ltd. Topaz XL 24,586 5,846 June 4, 1998
3. Parifi Shipping Co. Ltd. Ruby XL 65,132 11,939 June 4, 1998
4. Demplomar Shipping Co. Ltd. Diamond XL 107,140 18,051 June 18, 1998
5. Denlord Shipping Co. Ltd. Brilliant Sea XL 90,989 16,516 June 25, 1998
377,582 68,387
The above vessels were acquired in the period from May 29
through June 25, 1998, under Memoranda of Agreement concluded
in early December 1997 for a total amount of $38,000. The
purchase price was financed through a public share offering
of $19,337 (net proceeds) and $23,000 from a separate loan
facility collateralized with mortgages on the five vessels.
As of December 31, 1998, all five vessels were sold at a loss
of $11,508 (Note 6)
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<PAGE>
All significant intercompany balances and transactions have
been eliminated in the consolidation.
(b) Foreign Currency Translation:
The functional currency of the Company is the U.S. Dollar
because the vessels operate in international shipping markets
which utilize the U.S. dollar as the functional currency. The
books of accounts are maintained in U.S. Dollars.
Transactions involving other currencies during the year are
converted into U.S. Dollars using the exchange rates in
effect at the time of the transactions. On the balance sheet
dates, monetary assets and liabilities which are denominated
in other currencies are adjusted to reflect the current
exchange rates. Gains or losses resulting from foreign
currency remeasurements are reflected separately in the
accompanying consolidated statements of operations. Period-
end translation losses or gains, for all periods presented,
were immaterial.
(c) Inventories:
Inventories consist mainly of spare parts ashore, stated at
the lower of first-in, first-out cost or market.
(d) Vessels Depreciation:
Depreciation for vessels is computed using the straight-line
method over their estimated useful life (twenty-eight years
for bulker vessels and thirty years for tanker vessels). In
computing vessels' depreciation, the estimated salvage value
of the vessel ($0.180 per LWT - Note 2a) is also taken into
consideration. Depreciation for 1998 totaled $1,310.
For vessels owned prior to 1996 the estimated useful lives
used were twenty-five years for bulk carriers and twenty-two
years for product tankers. During 1996, the estimated useful
lives of the vessels were revised to thirty years from the
date of construction, to more closely reflect the expected
remaining lives. The effect of this change in accounting
estimates resulted in an increase in the Company's
consolidated net income for 1996 by $1,911 (or $11.39 per
share).
(e) Repairs and maintenance:
All recurring repair and maintenance expenses, including
major overhauling and underwater inspection expenses, are
charged against income in the period incurred and totaled
$303 for the year ended December 31, 1998. Repairs and
maintenance expenses (including dry-docking expenses)
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<PAGE>
relating to vessels owned up to 1996 totaled $970 for 1996.
Such costs are included in vessel operating expenses in the
accompanying consolidated statements of operations.
(f) Accounting for P&I. Back Calls:
The Company's protection and indemnity (P&I) insurance is
issued subject to additional premiums referred to as back
calls or supplemental calls. Provision has been made for such
estimated future calls, which is included in accrued
liabilities.
(g) Accounting for Revenue and Expenses:
Freight and hire revenues, net of related voyage expenses
(port charges and bunkers) are recorded on a pro rata basis
over the period of the voyage or time charters. Vessels'
operating expenses are accounted for on the accrual basis.
B&H vessels operated until 1996, under open rate charters
with PROTRANS, a product tanker operating pool, which sub-
chartered these vessels on a voyage or time-charter basis to
third party charterers. B&H's charter hire revenues from
these vessels represent its charter hire earned under these
open rate time charters.
(h) Cash and Cash Equivalents:
For purposes of the consolidated statements of cash flows,
the management considers highly liquid investments such as
time deposits and certificates of deposit with original
maturities of three months or less to be cash equivalents.
(i) Accounts Receivable - Trade:
The amount shown as accounts receivable - trade at each
balance sheet date, includes estimated recoveries from
charterers for hire, freight and demurrage billings.
(j) Use of Estimates:
The preparation of consolidated financial statements in
conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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<PAGE>
(k) Per Share Amounts:
The Company follows the provisions of SFAS 128 "Earnings per
Share". Under SFAS 128, basic income per share is computed
by dividing net income by the weighted average number of
common shares outstanding for the period. Diluted income per
share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were
exercised.
(l) Other Comprehensive Income:
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income" has been issued and is
effective for fiscal years beginning after December 15, 1997.
SFAS No. 130 defines comprehensive income and outlines
certain reporting and disclosure requirements related to
comprehensive income. The adoption of SFAS No. 130 had no
effect on the Company's consolidated financial statements or
disclosures.
(m) Segment Reporting:
The Company provides ocean transportation services worldwide
through the ownership and operation of a fleet of tankers.
Management considers that they operate and manage the
business as one business and geographical segment.
(n) Recently Issued Accounting Standards:
In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded
in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. It
also requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income
statement, and requires that a company must formally
document, designate, and assess the effectiveness of
transactions that receive hedge accounting. The Company had
no derivative financial instruments as of December 31, 1998.
The fair value of its assets and liabilities reflected in the
accompanying consolidated financial statements approximate
their fair values due to their short duration.
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<PAGE>
3. RELATED PARTY TRANSACTIONS:
Further to the related party transactions discussed in Note
1, between the Company and Excel Management Ltd., there were
also the following related party transactions:
(a) Excel engaged B&H Management Ltd., a corporation
controlled by its former Chairman, President and Chief
Executive Officer, to provide management services at a
monthly rate of $4.6 per vessel which may have been adjusted
annually for increases in the Consumer Price Index. During
the year ended December 31, 1996, such management fees
totaled $154 and are included in management fees in the
accompanying 1996 consolidated statement of operations.
(b) Excel engaged B&H Ship Management Company, a corporation
controlled by its former Chairman, President and Chief
Executive Officer, to provide technical management services
at a monthly rate of $9.9 per vessel. During the year ended
December 31, 1996, such fees totaled $331 and are included in
other general and administrative expenses in the accompanying
1996 consolidated statement of operations.
(c) Excel engaged a law firm to act as United States counsel.
A director of Excel was a partner at that firm. Fees incurred
for such services were approximately $64 in 1996, and are
included in other general and administrative expenses in the
accompanying 1996 consolidated statement of operations.
In January 1994, Excel and two other affiliated entities
formed a captive insurance company, Northampton Assurance
Ltd. ('Northampton'), for the purpose of reducing their
respective insurance expense. Under this arrangement,
Northampton assumes 100% of losses in excess of the per
accident deductible of $125 up to $400 per accident. The
percentage of losses in excess of $400 that is covered by
Northampton is fully reinsured. Excel's undistributed share
of Northampton's 1996 operations is $18.
4. ACCRUED LIABILITIES:
The amount in the accompanying 1998 consolidated balance
sheet consists of P&I back calls (Note 2f), vessel voyage and
operating expenses and general and administrative expenses.
The December 31, 1997 balance includes the unpaid portion
($138) of the indemnity payable to B&H Management for the
termination of the Management agreement (Note 1 above). The
amount was paid by the shareholders in 1998.
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<PAGE>
5. INCOME TAXES:
Cyprus does not impose a tax on international shipping
income. However, the shipowning companies' vessels are
subject to registration and tonnage taxes which have been
included in vessels' operating expenses in the accompanying
1998 consolidated statement of operations. Certain revenue
earned by the Company is considered as attributable to U.S.
sources. Management of the Company is of the opinion that
such revenue is exempt from U.S. taxation under applicable
provisions of the Internal Revenue Code of the United States
(the "Code"), although sections of the Code are not clear in
all respects.
Excel is not subject to corporate income taxes on its profits
in Liberia because its income is derived from non-Liberian
sources. The Company is not subject to corporate income tax
in other jurisdictions.
6. LOSS ON SALE OF VESSELS:
On December 15, 1998, all of the Company's vessels were sold
to third parties at a loss of $11,508 which is analyzed
below:
Sale proceeds, net
-Selling price 25,500
-Compensation from new owners for delays
in taking vessels' delivery 132
-Other sale expenses (267) 25,365
Vessel's net book value at the date of sale
-Vessel's acquisition cost (38,000)
- -Depreciation up to the sale date 1,310 (36,690)
Unamortized financing costs, written-off (183)
Net loss 11,508
Depreciation expense for the year ended December 31, 1998 totaled
$1,310.
Bank loan interest expense for the year ended December 31, 1998
amounted to $817.
The net sales proceeds were used to repay the loan received for
the acquisition of the same vessels (Note 2a).
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<PAGE>
7. CONTINGENCIES:
Various claims, suits, and complaints, such as those
involving government regulations and product liability, arise
in the ordinary course of the shipping business. In addition,
losses may arise from disputes with charterers, agents,
insurance and other claims with suppliers relating to the
activity of vessels. Currently, management is not aware of
any such contingent liabilities which should be disclosed or
for which a provision should be established.
8. SUBSEQUENT EVENTS:
By an agreement dated March 2, 1999, Point Holdings Ltd.,
acquired 100% of the shares of Lario Shipping Ltd. (Lario)
and Port Shipping and Trading S.A. (Port), the holding
companies of Fiorella Navigation Ltd. (Fiorella) and Weaver
Navigation Ltd. (Weaver), respectively, for an aggregate
consideration of $9,000, satisfied by a seller's credit for
the amount of $3,000 and $6,000 by a mortgage bank loan.
Lario and Port are Liberian corporations and were affiliates
(the capital stock of Lario and Port was held by companies
associated with a group in which family members of the
Company's chairman had a minority interest) of the Company at
the time of their purchase. According to the agreement for
the transfer of shares, the Company acquired only the
vessels, while all debts, claims and receivables relating to
periods prior to the delivery of the vessels will be for
sellers' account.
Sellers' credit is payable in two equal consecutive annual
installments the first being due on the first anniversary of
the date of the delivery of the vessels owned by Fiorella and
Weaver to the Company.
The mortgage bank loan is payable in six variable
installments, the first being due on May 31, 1999, plus a
balloon payment of $4,800 payable together with the last
installment on July 31, 2000. The loan bears interest at
LIBOR plus 1.5% margin.
The vessels owned by Fiorella and Weaver were delivered to
the Company on March 11, 1999 and since then are operating
under a voyage charter which is expected to be completed on
April 20,1999.
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02545001.AA0
