FORM 10 - Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For Quarter Ended June 30, 1996
Commission File Number: 0-20961
COMMODORE HOLDINGS LIMITED
--------------------------
(Exact Name of Registrant as Specified in its Charter)
BERMUDA
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(State or other Jurisdiction of incorporation or organization)
N/A
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(IRS Employer Identification Number)
4000 Hollywood Boulevard, Suite 385, South Tower, Hollywood, FL 33021
---------------------------------------------------------------------
(Address of Principal Offices)
(954) 967-2100
---------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant has (1) 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) been subject to such filing
requirements for the past 90 days.
Yes [ ] No [X]
Common Stock $.01 par value
(Class)
5,581,933 Shares of Common Stock outstanding at August 26, 1996
<PAGE>
COMMODORE HOLDINGS LIMITED
TABLE OF CONTENTS
Page No.
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Earnings 3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II Other Information
Item 1. Legal Proceedings 10
Item 2. Changes in the Rights of the Company's Securities Holders 10
Item 3. Defaults by the Company on its Senior Securities 10
Item 4. Submission of Matters to a Vote of Securities Holders 10
Item 5. Other Information 10
Item 6. A - Exhibits 10
B - Reports on Form 8-K 10
<PAGE>
Part I: Financial Information
Item 1: Financial Statements
<TABLE>
<CAPTION>
Commodore Holdings Limited and Subsidiaries
CONSOLIDATED BALANCE SHEETS
JUNE 30, SEPTEMBER 30,
1996 1995
------------ -------------
(UNAUDITED) (AUDITED)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 3,971,205 $ 3,274,993
Restricted cash 438,704 363,462
Trade and other receivables, net 348,739 79,069
Due from Affiliate 193,910 456,878
Inventories 1,167,484 691,001
Prepaid Expenses 1,507,920 592,664
Other current assets -- 700,000
------------ -------------
Total current assets 7,627,962 6,158,067
Property and equipment, net 37,644,879 33,085,209
Other assets
Investments - restricted 4,629,000 4,629,000
Other assets 445,000 225,000
------------ -------------
5,074,000 4,854,000
------------ -------------
$50,346,841 $44,097,276
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 137,546 $ --
Accounts payable 3,891,400 1,868,415
Accrued liabilities 320,635 219,683
Customer deposits 8,022,622 4,344,657
Accrued interest 49,243 412,672
Income taxes payable 4,841 4,841
Capital lease obligations 114,347 223,960
------------ -------------
Total current liabilities 12,540,634 7,074,228
Long-term debt 24,176,050 24,500,000
Deferred income taxes 3,618 3,618
Minority interest in subsidiary 378,340 --
Stockholders' equity
Preferred stock - authorized 10,000,000 shares
of $.01 par value; issued 1,006,979 shares 10,070 10,000
Common stock - authorized 100,000,000 shares
of $.01 par value; issued 4,931,933 shares 49,319 49,319
Paid-in capital 12,176,422 12,148,576
Retained earnings 1,012,388 311,535
------------ -------------
Total stockholders' equity 13,248,199 12,519,430
------------ -------------
$50,346,841 $44,097,276
============ =============
</TABLE>
The accompanying notes are an integral part of these statements
Page 2
<PAGE>
<TABLE>
<CAPTION>
Commodore Holdings Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
For the three months ended June 30, 1996 and 1995
For the nine months ended June 30, 1996 and 1995
(UNAUDITED)
(Predecessor (Predecessor
Company) Company)
Three months ended Nine months ended
June 30, June 30,
1996 1995 1996 1995
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 15,164,371 $ 8,581,829 $ 34,338,460 $ 26,187,784
Expenses
Operating 5,060,185 9,501,270 19,015,479 27,744,983
Marketing selling and administrative 8,906,279 2,405,841 12,672,856 8,014,427
Depreciation and amortization 409,192 891,526 1,029,291 2,671,667
Loss on vessel fire -- -- -- 1,367,347
-------------------------------------------------------------------
14,375,656 12,798,637 32,717,626 39,798,424
-------------------------------------------------------------------
Operating income 788,715 (4,216,808) 1,620,834 (13,610,640)
Other income (expense)
Other income -- -- 340,641 --
Interest income 82,517 19,280 276,647 60,116
Interest expense (470,319) (1,041,762) (1,149,854) (2,449,867)
Minority interest in earnings of
consolidated joint venture 83,302 -- (328,345) --
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(304,500) (1,022,482) (860,911) (2,389,751)
-------------------------------------------------------------------
Earnings (loss) before provision for
income taxes 484,215 (5,239,290) 759,923 (16,000,391)
Provision for income taxes -- -- -- --
-------------------------------------------------------------------
Net earnings (loss) before provision for
stock dividend 484,215 (5,239,290) 759,923 (16,000,391)
Provision for preferred stock dividend 70,000 -- 210,000 --
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Net earnings available for common
stockholders $ 414,215 $ (5,239,290) $ 549,923 $(16,000,391)
===================================================================
Earnings per share available for common
stockholders $ 0.08 $ 0.11
===================================================================
Weighted average number of common stock
outstanding 5,184,711 -- 5,184,711 --
===================================================================
</TABLE>
The accompanying notes are an integral part of these statements
Page 3
<PAGE>
<TABLE>
<CAPTION>
Commodore Holdings Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the nine months ended June 30, 1996
(UNAUDITED)
COMMON STOCK
------------------------- ADDITIONAL
NUMBER OF PAID-IN RETAINED
SHARES PAR VALUE CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C> <C>
Balances at September 30, 1995 4,931,933 $ 49,319 $8,158,576 $ 311,535 $8,519,430
Dividend - Series A Preference
shares (59,070) (59,070)
Net income 759,923 759,923
Balances at June 30, 1996 4,931,933 $ 49,319 $8,158,576 $1,012,388 $9,220,283
</TABLE>
The accompanying notes are an integral part of these statements
Page 4
<PAGE>
<TABLE>
<CAPTION>
Commodore Holdings Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended June 30, 1996
(UNAUDITED)
(PREDECESSOR
COMPANY)
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net Income (loss) $ 759,923 $(16,000,391)
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation of property and equipment 1,029,291 2,671,667
Amortization of deferred drydock -- 1,547,999
Changes in operating assets and liabilities --
(Increase) in restricted cash (75,242) (10,439)
(Increase) in trade and other receivables (269,670) (484,458)
Decrease in due from affiliate 262,968 --
(Increase) in inventory (476,483) (34,362)
(Increase) decrease in prepaid expenses and other
current assets (215,256) 49,874
(Increase) in other assets (220,000) --
Increase in accounts payable 2,022,985 --
Increase in accrued liabilities 100,952 --
Increase in customer deposits 3,677,965 302,364
(Decrease) in accrued interest (363,429) --
Increase in due to affiliate -- 9,525,453
------------ ------------
Net cash provided by (used in) operating activities 6,234,004 (2,432,293)
Cash Flows from investing activities
Capital expenditures (5,588,961) (5,280,060)
(Decrease) in capital leases obligation (109,613) --
Increase in minority interest in subsidiary 378,340 --
------------ ------------
Net cash used in investing activities (5,320,234) (5,280,060)
Cash flows from financing activities
Principal payments of long-term debt (186,404) --
Dividend - Series A Preference shares (31,154)
Proceeds from debt -- 8,055,034
------------ ------------
Net cash (used in) provided by financing activities (217,558) 8,055,034
------------ ------------
Net increase in cash and cash equivalents 696,212 342,681
Cash and cash equivalents at beginning of period 3,274,993 522,319
------------ ------------
Cash and cash equivalents at end of period $ 3,971,205 $ 865,000
============ ============
Supplemental disclosure of cash flow information
Cash paid during the period for interest $ 1,810,533 $ --
============ ============
Cash paid during the period for taxes $ 1,543 $ --
============ ============
</TABLE>
The accompanying notes are an integral part of these statements
Page 5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
For the nine months ended June 30, 1996
(UNAUDITED)
Supplemental schedule of noncash investing and financing activities
For the nine months ended June 30, 1996 the Company capitalized $294,766
of interest to property and equipment
In April, 1996, the Company issued 6,979 shares of its Series A Preference
Shares in partial payment of its preferred share dividend
The accompanying notes are an integral part of these statements
Page 6
<PAGE>
Commodore Holdings Limited and Subsidiaries
Notes to Consolidated Financial Statements
1. The Financial Statements for the nine months ended June 30, 1996 included
herein have been prepared by Commodore Holdings Limited (the Company ) and S/S
Enchanted Seas and S/S Enchanted Isle (Operating Units of EffJohn International
B.V. (the "Predecessor") - see note 1a to consolidated financial statements
for year ended September 30, 1995 ) without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. All adjustments which
are, in the opinion of management, necessary for a fair statement for the
results of the nine months are included. Certain information and footnote
disclosure normally included in Financial Statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. These financial statements should be read in
conjunction with the financial statements for the year ended September 30, 1995,
contained in the Company's registration statement on Form S-1.
2. JOINT VENTURE. In November, 1995, the Company entered into a charter
agreement for the S/S Universe Explorer, (formerly the Enchanted Seas) with
Sea-Comm. Sea-Comm in turn has a a space charter with Seawise for the majority
of the year pursuant to which Seawise charters 76% of the berths. The Company's
FMC bond for the Enchanted Seas was allowed to expire and the deposit securing
the bond was released to the Company. Additionally, per the terms of the
agreement with Seawise, $250,000 was paid to the Company and is included in
other income. An additional $90,000 of Other Income was earned as a result of
the sale of casino equipment that is no longer required on the vessel during her
current charter.
3. CREDIT CARD ESCROW. The Company's credit card processor, in February 1996,
began the establishment of a chargeback reserve account. The amount of this
reserve, which earns interest for the Company's account, will equal up to 9% of
six months of the Company's Visa/ Mastercard deposits. At June 30, 1996 the
balance of the escrow totaled $438,704 and is included in Restricted Cash.
4. During the three months ended June 30, 1996 the Company paid a dividend to
the holders of its Series A Preference Shares. The Company issued an additional
6,979 Series A Preference Shares in partial payment of the dividend and paid, in
cash, an additional $31,154.
5. SUBSEQUENT EVENTS. On July 27, 1996, the Universe Explorer had a fire
on-board which resulted in the death of five crew members and loss of revenue.
The amount of potential loss is indeterminable at this time. Management believes
that material losses by passenger and crew, damage to the hull and machinery of
the vessel and loss of hire will be covered by its insurance policies, subject
to applicable deductibles.
On July 16, 1996 the Company's Registration Statement on Form S-1 was
declared effective by the Securities and Exchange Commission and the Company's
common stock and warrants began trading on the NASDAQ National Market. Pursuant
to the Registration Statement, the Company sold 500,000 shares of common stock
and warrants to purchase 500,000 shares of common stock. In accordance with the
Company's Preference Share agreement, the redemption rights of the preferred
shareholders terminated when the Company's common stock was first listed on
NASDAQ. As a result of the completion of the offering, the Company has applied
retroactive treatment to the preferred shares and reflected the preferred shares
as part of stockholders' equity at June 30, 1996 and September 30, 1995. On
August 16, 1996 the Underwriter exercised its over-allotment option and
purchased an additional 150,000 shares of common stock and warrants to purchase
75,000 shares of common stock from the Company.
Page 7
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The results of operations for the three and nine months ended June 30, 1995
are of the Predecessor. These results may not be representative of the Company's
future performance due to the different manner in which the Predecessor and the
Company report expenses and the different number of ships operated and
itineraries served by the Predecessor and the Company. In addition, in the first
nine months of fiscal 1995, the Predecessor operated the Enchanted Seas on the
New Orleans itinerary. In the first nine months of fiscal 1996, the Company
operated the Enchanted Isle on this route. Although these two ships were built
as sister ships, and are similar, they are not identical either with respect to
number of cabins or costs of operation. As a result, a comparison of their
results from operations may not be meaningful.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996, COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
Revenues increased by $6,582,542 or 43.4% for the quarter ending June 30,
1996 compared to the quarter ending June 30, 1995, primarily due to the Company
having two vessels in service for the quarter ending June 30, 1996 as compared
to only one vessel being operated by the Predecessor for the quarter ending June
30, 1995.
The Company's operating expenses decreased by $4,441,085 or 87.8% for the
three months ending June 30, 1996 compared to the three months ending June 30,
1995, primarily due to lower operating costs for the Company's semester at sea
program and the additional costs associated with the termination by the
Predecessor, of its Barbados cruise operation in April, 1995.
The Company's marketing, selling and administrative expenses increased by
$6,500,438 or 58.1% for the quarter ending June 30, 1996 compared to the
quarter ending June 30, 1995, primarily due to the Company having two vessels
in service for the quarter ending June 30, 1996 as compared to only one vessel
being operated by the Predecessor for the quarter ending June 30, 1995.
The Company's depreciation and amortization expenses decreased by $482,334
or 117.9% for the three months ending June 30, 1996 compared to the three months
ending June 30, 1995 due to the differences in the cost bases of the Company's
vessels ($53,839,340 for the Predecessor as of July 15, 1995; $32,272,960 for
the Company as of September 30, 1995) and the useful lives of the ships (15
years for the Predecessor and 18 years for the Company).
NINE MONTHS ENDED JUNE 30, 1996, COMPARED TO NINE MONTHS ENDED JUNE 30, 1995
Revenues increased by $8,150,676 or 31.1% for the first nine months of
fiscal 1996 compared to the first nine months of fiscal 1995, primarily due to
the Company's profitable joint venture for the Universe Explorer in fiscal 1996
as compared to the unprofitable Barbados cruise operation, which commenced in
January 1995 and ended in April 1995. Included in the fiscal 1996 revenues are
non-recurring charter cancellation fees of $425,000.
The Company's operating expenses decreased by $8,676,298 or 31.3% for the
first nine months of fiscal 1996 compared to the first nine months of fiscal
1996, primarily due to lower operating costs for the Company's semester at sea
program and and the additional costs associated with the termination by the
Predecessor, of its Barbados cruise operation in April, 1995.
The Company's marketing, selling and administrative expenses increased
by $4,658,429 or 58.1% for the first nine months of fiscal 1996 compared to the
first nine months of fiscal 1995 due to Commodore Cruise Lines Limited (the
entity from which the Company acquired the Enchanted Isle and Universe Explorer,
hereafter "Old Commodore") having operated up to five ships during this period.
As a result, administration and marketing expenses were commingled and allocated
to the Predecessor based on the number of traffic days of all of Old Commodore's
ships. As the Company operates fewer ships its marketing and selling expenses
are higher.
The Company's depreciation and amortization expenses decreased by
$1,642,376 or 61.5% for the first nine months of fiscal 1996 compared to the
first nine months of fiscal 1995, due to the differences in the cost bases of
the Company's vessels ($53,839,340 for the Predecessor as of July 15, 1995;
$32,272,960 for the Company as of September 30, 1995) and the useful lives of
the ships (15 years for the Predecessor and 18 years for the Company).
The Predecessor incurred a loss of $1,367,347 due to a fire aboard the
Enchanted Isle during the nine months ended June 30, 1995. This also had a
negative impact on the selling and marketing of the Barbados itinerary.
Page 8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital deficiency was $4,539,854 and $916,161 at
June 30, 1996 and September 30, 1995, respectively. The Company's working
capital deficit at June 30, 1996 was primarily due to the inclusion, in
non-current assets, of a $4,629,000 deposit securing the Company's FMC bond. The
corresponding liability, customer deposits, is included in current liabilities.
The other increases in working capital at June 30, 1996 and September 30, 1995
were the result of cash flow provided by operations, and particularly the
$425,000 in income from the cancellation of the charter agreement.
Cash flows from operations provided $6,234,004 for the first nine months of
fiscal 1996, and cash flows from operations used $2,432,293 for the first nine
months of 1995. Cash flows for the first nine months of fiscal 1996 consisted
primarily of increases in customer deposits, accounts payable and accrued
liabilities.
At June 30, 1996 the Company owed $24,313,596 to the Company's lender. The
loan is secured by substantially all the assets of the Company and bears
interest at Libor plus 2%.
Page 9
<PAGE>
PART II: OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS Not applicable.
Item 2. CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITIES HOLDERS
Not applicable.
Item 3. DEFAULTS BY THE COMPANY ON ITS SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6.
A. Exhibits
None
B. Reports on Form 8-k
No reports on Form 8-k were filed during the quarter
Page 10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMMODORE HOLDINGS LIMITED
(Registrant)
/s/ Alan Pritzker
------------------------------------
Alan Pritzker
Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
August 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,971,205
<SECURITIES> 0
<RECEIVABLES> 348,739
<ALLOWANCES> 0
<INVENTORY> 1,167,484
<CURRENT-ASSETS> 7,627,962
<PP&E> 38,872,096
<DEPRECIATION> 1,227,217
<TOTAL-ASSETS> 50,346,841
<CURRENT-LIABILITIES> 12,540,634
<BONDS> 24,176,050
0
10,070
<COMMON> 49,319
<OTHER-SE> 13,248,199
<TOTAL-LIABILITY-AND-EQUITY> 50,346,841
<SALES> 0
<TOTAL-REVENUES> 34,338,460
<CGS> 0
<TOTAL-COSTS> 32,717,626
<OTHER-EXPENSES> 1,478,199
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 759,923
<INCOME-TAX> 0
<INCOME-CONTINUING> 759,923
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 759,923
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
