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 March 31, 1997
Commission File Number: 0-20961
COMMODORE HOLDINGS LIMITED
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(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
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(Address of Principal Offices)
(954) 967-2100
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(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 x No ___
Common Stock $.01 par value
(Class)
5,581,933 Shares of Common Stock outstanding at May 12, 1997
<PAGE>
Commodore Holdings Limited
Table of Contents
Page No.
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Operations 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 Securities 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security 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
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, SEPTEMBER 30,
1997 1996
--------- -------------
(UNAUDITED) (AUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 3,977,507 $ 3,476,165
Restricted cash 377,850 1,412,907
Trade and other receivables, net 74,402 328,812
Insurance claim receivable 1,546,626 2,470,525
Due from affiliate 42,921 42,921
Inventories 1,206,600 1,830,241
Prepaid expenses 2,179,837 2,463,842
Other current assets 76,290 76,290
------------- ------------
Total current assets 9,482,033 12,101,703
Property and equipment, net 35,760,792 36,147,435
Other assets
Investments - restricted 4,629,000 4,629,000
Other assets 400,417 406,667
------------- ------------
$ 50,272,242 $ 53,284,805
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 4,392,408 $ 2,277,095
Accounts payable 3,833,751 5,767,110
Accrued liabilities 364,381 723,251
Due to affiliate 1,050,050 249,631
Customer deposits 5,019,422 5,839,360
Accrued interest 82,080 76,914
------------- ------------
Total current liabilities 14,742,092 14,933,361
Long-term debt 19,033,787 21,962,060
Minority interest in subsidiary 150,919 193,018
Stockholders' equity
Preferred stock - authorized 10,000,000
shares of $.01 par value; issued
1,027,230 shares in 1997 and 1,006,979
in 1996 10,273 10,070
Common stock - authorized 100,000,000
shares of $.01 par value; issued
5,581,933 shares 55,819 55,819
Additional paid-in capital 13,958,928 13,868,526
Retained earnings 2,320,424 2,261,951
--------------- -------------
Total stockholders' equity 16,345,444 16,196,366
--------------- -------------
$ 50,272,242 $ 53,284,805
=============== =============
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 AND FOR SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
Three months ended Six months ended
March 31, March 31,
1997 1996 1997 1996
-------------------------- ---------------------------
<S> <C> <C> <C> <C>
Revenues $13,773,240 $11,484,611 $25,907,727 $19,174,089
Expenses
Operating 11,257,595 8,388,845 20,700,484 13,955,294
Marketing, selling and administrative 2,009,314 1,845,026 3,742,908 3,766,577
Depreciation and amortization 419,201 348,973 910,900 620,099
---------- ---------- ----------- ------------
13,686,110 10,582,844 25,354,292 18,341,970
---------- ---------- ----------- ------------
Operating income 87,130 901,767 553,435 832,119
Other income (expense)
Other income - - - 340,641
Interest income 97,973 165,547 200,781 194,130
Interest expense (473,494) (431,730) (955,837) (679,535)
Minority interest in loss (earnings)
of consolidated joint venture 453,971 (411,647) 542,048 (411,647)
---------- ---------- ----------- ------------
78,450 (677,830) (213,008) (556,411)
---------- ---------- ----------- ------------
Earnings before provision for
income taxes 165,580 223,937 340,427 275,708
Provision for income taxes - - - -
---------- ---------- ----------- ------------
Provision for preferred stock dividend 70,000 70,000 140,000 140,000
---------- ---------- ----------- ------------
Net earnings available for
common stockholders $ 95,580 $ 153,937 $ 200,427 $ 135,708
========== ========== =========== ============
Earnings per share available for common
stockholders $ 0.03 $ 0.03 $ 0.07 $ 0.03
========== ========== =========== ============
Weighted average number of common stock
outstanding 6,691,546 5,184,711 6,691,546 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 STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
Preferred Stock Common Stock
------------------------------------------------ Additional
Number of Par Number of Par Paid-in Retained
Shares Value Shares Value Capital Earnings Total
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at
September 30, 1996 1,006,979 $10,070 5,581,933 $55,819 $13,868,526 2,261,951 $16,196,366
Additional paid-in
capital - stock warrants - - - - 9,600 - 9,600
Preferred stock dividend 20,251 203 - - 80,802 (281,954) (200,949)
Net earnings - - - - - 340,427 340,427
----------------------------------------------------------------------------------------
Balances at
March 31, 1997 1,027,230 $10,273 5,581,933 $55,819 $13,958,928 2,320,424 $16,345,444
========================================================================================
</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 SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 340,427 $ 275,708
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation of property and equipment 910,900 620,099
Amortization of deferred drydock 606,391 -
(Increase) decrease in operating assets
Restricted cash 1,035,057 111,386
Investments - restricted - -
Trade and other receivables 254,410 (185,872)
Insurance receivable 923,899 -
Due from affiliate - 290,337
Inventory 623,641 (244,100)
Prepaid expenses and other current assets (322,386) (397,884)
Other assets 6,250 (200,000)
Increase (decrease) in operating liabilities
Accounts payable (1,933,359) 2,166,718
Accrued liabilities (358,870) 664,006
Due to affiliate 800,419 -
Customer and other deposits (819,938) 690,995
Accrued interest 5,166 (340,069)
Capital lease obligations - (132,096)
------------ -------------
Net cash provided by operating activities 2,072,007 3,319,228
Cash Flows from investing activities
Capital expenditures (524,257) (4,985,043)
(Decrease) Increase in minority interest in subsidiary (42,099 461,642
------------ -------------
Net cash used in investing activities (566,356) (4,523,401)
Cash flows from financing activities
Principal payments of long-term debt (812,960) (133,015)
Stock warrants 9,600 -
Dividends paid (200,949) -
------------ -------------
Net cash used in financing activities (1,004,309) (133,015)
------------ -------------
Net increase (decrease) in cash and cash equivalents 501,342 (1,337,188)
Cash and cash equivalents at beginning of period 3,476,165 3,274,993
------------ -------------
Cash and cash equivalents at end of period $ 3,977,507 $ 1,937,805
============ =============
Supplemental disclosure of cash flow information
Cash paid during the period for interest $ 966,470 $ 1,320,834
============ =============
Cash paid during the period for taxes $ - $ -
============ =============
</TABLE>
The accompanying notes are an integral part of these statements Page 5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
Supplemental schedule of noncash investing and financing activities
For the six months ended March 31, 1996 the Company capitalized $294,766 of
interest to property and equipment.
In January 1997, the Company issued 20,251 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 six months ended March 31, 1997 and 1996,
included herein have been prepared by Commodore Holdings Limited (the "Company")
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 three and six 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, 1996, contained in the
Company's annual report on Form 10-K.
2. Additional paid-in capital - stocks warrants. The Company issued warrants to
purchase 150,000 shares of common stock to an outside consultant in October,
1996, in payment for consulting services (see note K to the Company's financial
statements for the year ended September 30, 1996). Under the application of FASB
#123 the Company has valued these warrants at approximately $75,000.
Accordingly, this amount is being charged to operating expense over the vesting
period (between the issue date and November 1997).
3. Earnings Per Share. The Company's earnings per share are calculated using the
modified treasury stock method. This method was used for the six months ended
March 31, 1997, because the number of shares of common stock issuable on
exercise of stock options and warrants, in the aggregate, exceeded 20 percent of
the number of shares of common shares outstanding. The weighted average number
of common and common equivalent shares outstanding for the six months ended
March 31, 1997 and 1996 is 6,691,546 and 5,184,711, respectively.
Page 7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is an analysis of the Company's results of operation, liquidity
and capital resources. To the extent that such analysis contains statements
which are not of a historical nature, such statements are forward-looking
statements, which involve risks and uncertainties. These risks include competing
in a saturated industry against modern and larger fleets; the ability of the
Company to obtain additional financing for the acquisition of additional ships;
a high percentage of debt on assets owned by the Company, the potential for
additional governmental regulations; the need for expensive upgrades and/or
maintenance to aging vessels; general economic factors in markets where the
Company operates; and other factors discussed in the Company's filings with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 31, 1997 AND 1996 Three
Months Ended March 31, 1997, Compared to Three Months Ended March 31, 1996
Revenues increased by $2,288,629, or 19.93%, for the quarter ended March 31,
1997 compared to the quarter ended March 31, 1996 primarily due to the Company
having operated six ship-months for the quarter ended March 31, 1997 as compared
to five and a half ship months for the quarter ended March 31, 1996. The
Universe Explorer commenced operations in January 1996.
The Company's operating expenses increased by $2,868,750, or 34.20%, and the
Company's marketing, selling and administrative expenses increased by $164,288,
or 8.90%, for the three months ended March 31, 1997 compared to the three months
ended March 31, 1996, primarily due to the Company having operated six
ship-months for the quarter ended March 31, 1997 as compared to five and a half
ship months for the quarter ended March 31, 1996. The Company's operating
expenses increased at a higher percentage than the Company's revenues as a
result of low occupancy on the Company's initial Latin America program operated
by World Explorer Cruises. The increase in marketing, selling and administrative
expenses was smaller, as a percentage, than the increase in revenues, because
the marketing and selling for the Semester-at-Sea program is handled by the
Institute for Shipboard Education and is not a Company expense. The Company's
depreciation and amortization expense increased by $70,228, or 20.12%, for the
three months ended March 31, 1997 compared to the three months ended March 31,
1996, because depreciation expense for the Universe Explorer did not begin to
accrue until January, 1996 when the vessel entered cruise service.
Due to the Company's overnight investments of its operating accounts as well as
its restricted investment of $4,629,000, the Company recorded $97,973 of
interest income in the second quarter of fiscal 1997 compared to $165,547 in the
second quarter of fiscal 1996. The Company's Sea-Comm joint venture partner's
share of the loss incurred by the joint venture for the three months ended March
31, 1997 is reflected in the $453,971 line item for "Minority interest in loss
(earnings) of consolidated joint venture." The Sea-Comm joint venture began
operation in the second quarter of fiscal 1996. The joint venture incurred this
loss primarily as a result of the low occupancy on the Company's Latin America
program.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996 Six
Months Ended March 31, 1997, Compared to Six Months Ended March 31, 1996
Revenues increased by $6,733,638, or 35.12%, for the six months ended March 31,
1997 compared to the six months ended March 31, 1996 primarily due to the
Company having two vessels in service for the six months ended March 31, 1997 as
compared to only one vessel in
Page 8
<PAGE>
service for the entire six months ended March 31, 1996 and one vessel which
began service in January 1996.
The Company's operating expenses increased by $6,745,190, or 48.33%, and the
Company's marketing, selling and administrative expenses decreased by $23,669,
or .63%, for the six months ended March 31, 1997 compared to the six months
ended March 31, 1996. The Company's operating expenses increased at a higher
percentage than the Company's revenues as a result of low occupancy on the
Company's initial Latin America program operated by World Explorer Cruises. The
decrease in marketing, selling and administrative expenses was smaller, as a
percentage than the increase in revenues, because the marketing and selling for
the Semester-at-Sea program is handled by the Institute for Shipboard Education
and is not a Company expense. The Company did not earn revenue from such program
in the first quarter of fiscal 1996. The Company's depreciation and amortization
expense increased by $290,801, or 46.90%, for the six months ended March 31,
1997 compared to the six months ended March 31, 1996, because depreciation
expense for the Universe Explorer did not begin to accrue until February, 1996
when the vessel entered cruise service.
In the six months ended March 31, 1996, the Company recorded $340,641 in other
income relating to one time items associated with the Universe Explorer. No
comparable other income was received by the Company in the six months ended
March 31, 1997. Due to the Company's overnight investments of its operating
accounts as well as its restricted investment of $4,629,000, the Company
recorded $200,781 of interest income in the six months of fiscal 1997 compared
to $194,130 in the first six months of fiscal 1996. The Company's Sea-Comm joint
venture partner's share of the loss incurred by the joint venture for the six
months ended March 31, 1997 is reflected in the $542,048 line item for "Minority
interest in loss (earnings) of consolidated joint venture." The Sea-Comm joint
venture began operation in the second quarter of fiscal 1996. The joint venture
incurred this loss primarily as a result of the low occupancy on the Company's
Latin America program.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital deficiency was $5,260,059 and $2,831,658 at March
31, 1997 and September 30, 1996, respectively. The Company's working capital
deficiency 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's deposits, is included in the current liabilities. The increase in the
Company's working capital deficiency was primarily the result of the increase in
the current portion of long-term debt.
Cash flows from operations provided $2,072,007 for the first six months of
fiscal 1997 and provided $3,319,228 for the first six months of fiscal 1996.
Cash flows for the first six months of fiscal 1997 consisted primarily of
decreases in restricted cash as a result of a more favorable credit card
processing agreement entered into by the Company in November 1996.
At March 31, 1997, the Company owed $23,426,195 to the Company's lender. The
loan is secured by substantially all the assets of the Company and bears
interest at LIBOR plus 2%. The interest rate for the six month period ending
July 15, 1997 is 7.75%.
The Company expects to incur a capital expenditure of approximately $500,000
during the remainder of Fiscal 1997 to conform the Universe Explorer with the
requirements of the International Convention on Safety of Life at Sea ("SOLAS").
The Company expects to fund this requirement from cash flows from operations.
Page 9
<PAGE>
Part II: Other Information
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
(a) The Annual Meeting of Shareholders was held on Wednesday, February
5, 1997 at 4000 Hollywood Boulevard, Hollywood Fl 33021.
(b) The following individuals were elected directors until the annual
meeting of shareholders to be held in the year 2000 or until their successors
are elected and qualified:
<TABLE>
<CAPTION>
Votes for Votes against Abstentions and
or Withheld Brokernon-votes
---------- ------------- ---------------
<S> <C> <C> <C> <C>
Ralph V. De Martino 3,603,718 0 23,750
Mark J. Maged 3,603,718 0 23,750
</TABLE>
All members of the previous Board of Directors were nominees and there
has been no change in the Board of directors as a result of this election
(c) The shareholders also voted to ratify the appointment of Grant
Thornton LLP, as the Company's independent auditors for the 1997 fiscal year.
<TABLE>
<CAPTION>
Votes for Votes against Abstentions and
or Withheld Broker non-votes
--------- ------------- ----------------
<S> <C> <C> <C>
3,596,536 13,200 17,732
</TABLE>
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
27.1 Financial Data Schedule
B. Reports on Form 8-k
No reports on Form 8-k were filed during the quarter ended March 31,
1997
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)
May 14, 1997
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,977,507
<SECURITIES> 0
<RECEIVABLES> 74,402
<ALLOWANCES> 0
<INVENTORY> 1,206,600
<CURRENT-ASSETS> 9,482,033
<PP&E> 38,451,137
<DEPRECIATION> 2,690,345
<TOTAL-ASSETS> 50,272,242
<CURRENT-LIABILITIES> 14,742,092
<BONDS> 19,033,787
0
0
<COMMON> 55,819
<OTHER-SE> 16,345,444
<TOTAL-LIABILITY-AND-EQUITY> 50,272,242
<SALES> 0
<TOTAL-REVENUES> 25,907,727
<CGS> 0
<TOTAL-COSTS> 25,354,292
<OTHER-EXPENSES> 413,789
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 340,427
<INCOME-TAX> 0
<INCOME-CONTINUING> 340,427
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 340,427
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
