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, 1997
Commission File Number: 0-20961
COMMODORE HOLDINGS LIMITED
---------------------------------------
(Exact Name of Registrant as Specified in its Charter)
BERMUDA
-------------------------
(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
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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 August 07, 1997
<PAGE>
COMMODORE HOLDINGS LIMITED
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Earnings 3
Consolidated Statement of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. A - Exhibits 9
B - Reports on Form 8-K 9
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
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<CAPTION>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, SEPTEMBER 30,
1997 1996
----------- ------------
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,467,300 $ 3,476,165
Restricted cash 175,957 1,412,907
Trade and other receivable, net 765,545 328,812
Insurance claim receivable 918,976 2,470,525
Due from affiliate 44,141 42,921
Inventories 1,120,232 1,830,241
Prepaid expenses 2,465,234 2,463,842
Other current assets 76,290 76,290
------------- -------------
TOTAL CURRENT ASSETS 10,033,675 12,101,703
------------- -------------
Property and equipment, net 36,892,352 36,147,435
OTHER ASSETS
Investments - restricted 4,629,000 4,629,000
Other assets 397,917 406,667
------------- -------------
$ 51,952,944 $ 53,284,805
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 4,392,408 $ 2,277,095
Accounts payable 3,964,440 5,767,110
Accrued liabilities 1,313,580 723,251
Due to affiliate 550,100 249,631
Customer deposits 6,424,202 5,839,360
Accrued interest 73,264 76,914
------------- -------------
TOTAL CURRENT LIABILITIES 16,717,994 14,933,361
------------- -------------
Long-term debt 17,944,501 21,962,060
Minority interest in subsidiary 221,672 193,018
STOCKHOLDERS' EQUITY
Preferred stock - authorized 10,000,000 shares
of $.01 par value; issued 1,027,230 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
Paid-in capital 13,988,928 13,868,526
Retained earnings 3,013,757 2,261,951
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 17,068,777 16,196,366
------------- -------------
$ 51,952,944 $ 53,284,805
============= =============
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
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<TABLE>
<CAPTION>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS AND FOR NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
Three months ended Nine months ended
June 30, June 30,
1997 1996 1997 1996
------------------------------- ------------------------------
<S> <C> <C> <C> <C>
REVENUES $ 14,218,470 $ 15,165,484 $40,126,197 $ 34,339,573
------------- ------------ ----------- -------------
EXPENSES
Operating 11,038,562 12,602,074 31,739,046 26,557,368
Marketing, selling and administrative 2,123,908 1,365,501 5,866,816 5,132,078
Depreciation and amortization 470,797 409,193 1,381,697 1,029,292
------------ ----------- ----------- --------------
13,633,267 14,376,768 38,987,559 32,718,738
------------ ----------- ----------- --------------
OPERATING INCOME 585,203 788,716 1,138,638 1,620,835
OTHER INCOME (EXPENSE)
Other income - - - 340,641
Interest income 135,651 82,517 336,432 276,647
Interest expense (456,720) (470,319) (1,412,557) (1,149,854)
Minority interest in loss (earnings)
of consolidated joint venture 429,198 83,301 971,246 (328,346)
------------ ----------- ----------- --------------
108,129 (304,501) (104,879) (860,912)
------------ ----------- ----------- --------------
NET EARNINGS BEFORE PROVISION FOR
STOCK DIVIDEND 693,332 484,215 1,033,759 759,923
Provision for preferred stock dividend 70,000 70,000 210,000 210,000
------------ ----------- ----------- --------------
Net earnings available for
common stockholders $ 623,332 $ 414,215 $ 823,759 $ 549,923
============ =========== =========== ==============
Earnings per share available for common
stockholders $ 0.11 $ 0.03 $ 0.18 $ 0.03
============ =========== =========== ==============
Weighted average number of common stock
outstanding 6,691,546 5,184,711 6,691,546 5,184,711
============ =========== =========== ==============
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
</TABLE>
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<TABLE>
<CAPTION>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 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
Fair value of warrants
issued to non-employees - - - - 39,600 - 39,600
Preferred stock dividend 20,251 203 - - 80,802 (281,953) (200,948)
Net earnings - - - - - 1,033,759 1,033,759
------------------------------------------------------------------------------------------------
Balances at
June 30, 1997 1,027,230 $ 10,273 5,581,933 $55,819 $13,988,928 3,013,757 $17,068,777
================================================================================================
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
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<TABLE>
<CAPTION>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
1997 1996
------------ --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 1,033,759 $ 759,923
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation of property and equipment 1,381,697 1,029,292
Amortization of deferred dry-dock 892,919 -
Consulting expense on non-employee stock warrants 39,600 -
(INCREASE) DECREASE IN OPERATING ASSETS
Restricted cash 1,236,950 (75,242)
Trade and other receivables, net (436,733) (269,670)
Insurance claim receivable 1,551,549 -
Due from affiliate (1,220) 262,968
Inventories 710,009 (476,483)
Prepaid expenses and other current assets (894,311) (235,256)
Other assets 8,750 (200,000)
INCREASE (DECREASE) IN OPERATING LIABILITIES
Accounts payable (1,802,670) 2,031,444
Accrued liabilities 590,329 92,493
Due to affiliate 300,469 -
Customer deposits 584,842 3,677,965
Accrued interest (3,650) (363,429)
Capital lease obligations - (109,613)
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,192,289 6,124,392
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,126,614) (5,588,962)
Decrease in minority interest in subsidiary 28,654 378,340
----------- ----------
NET CASH USED IN INVESTING ACTIVITIES (2,097,960) (5,210,622)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments of long-term debt (1,902,246) (186,404)
Stock Dividend (200,948) (31,154)
----------- ----------
NET CASH USED IN FINANCING ACTIVITIES (2,103,194) (217,558)
Net increase in cash and cash equivalents 991,135 696,212
Cash and cash equivalents at beginning of period 3,476,165 3,274,993
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,467,300 $3,971,205
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 1,423,190 $1,320,834
=========== ==========
Cash paid during the period for taxes $ - $ -
=========== ==========
</TABLE>
PAGE 5
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Financial Statements for the nine months ended June 30, 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 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, 1996, contained in the
Company's annual report on Form 10-K.
2. Fair value of warrants issued to non-employees. 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 nine months ended
June 30, 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 nine months ended June
30, 1997 and 1996 is 6,691,546 and 5,184,711, respectively.
PAGE 6
<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 JUNE 30, 1997 AND 1996
Three Months Ended June 30, 1997, compared to Three Months Ended June 30, 1996
The Company's revenues decreased by $ 947,014, or 6.24%, and the Company's
operating expenses decreased by $1,563,512, or 12.41% for the three months ended
June 30, 1997 compared to the three months ended June 30, 1996, primarily due to
the Universe Explorer's twenty-four days out of service for repairs and
maintenance and Safety Of Life At Sea ("SOLAS") upgrades.
Marketing, selling and administrative expenses increased by $758,407, or 55.54%,
for the three months ended June 30, 1997 compared to the three months ended June
30, 1996, due to the recognition of marketing, selling and administrative
expenses for the World Explorer Cruises Alaska program which began in the third
quarter of 1997. In 1996, the World Explorer Cruises Alaska program began in the
fourth quarter. The Company's depreciation and amortization expense increased by
$61,604, or 15.05%, for the three months ended June 30, 1997 compared to the
three months ended June 30, 1996 due to additional property and equipment placed
in service over the intervening period.
Due to the Company's higher overnight investments of its operating accounts as
well as its restricted investment of $4,629,000, the Company recorded $135,651
of interest income in the third quarter of fiscal 1997 compared to $82,517 in
the third 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 June
30, 1997 is reflected in the $429,198 line item for "Minority interest in loss
(earnings) of consolidated joint venture." The joint venture incurred this loss
primarily as a result of the low occupancy on the Company's Latin America and
Alaska programs.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996
Nine Months Ended June 30, 1997, compared to Nine Months Ended June 30, 1996
Revenues increased by $5,786,624, or 16.85%, for the nine months ended June 30,
1997 compared to the nine months ended June 30, 1996 primarily due to the
Company having two vessels in service for the nine months ended June 30, 1997 as
compared to only one vessel in service for the entire nine months ended June 30,
1996 and one vessel which began service in January 1996.
The Company's operating expenses increased by $5,181,678, or 19.51%, and the
Company's marketing, selling and administrative expenses increased by $734,738,
or 14.32%, for the nine months ended June 30, 1997 compared to the nine months
ended June 30, 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
PAGE 7
<PAGE>
Explorer Cruises. 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 $352,405, or 34.24%, for the nine months ended June 30,
1997 compared to the nine months ended June 30, 1996, because depreciation
expense for the Universe Explorer did not begin to accrue until January, 1996
when the vessel entered cruise service.
In the nine months ended June 30, 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 nine months ended
June 30, 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 $336,432 of interest income in the first nine months of fiscal 1997
compared to $276,647 in the first nine months of fiscal 1996. The Company's
Sea-Comm joint venture partner's share of the loss incurred by the joint venture
for the nine months ended June 30, 1997 is reflected in the $971,246 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 and Alaska programs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital deficiency was $6,684,319 and $2,831,658 at June
30, 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 $5,152,689 for the first nine months of
fiscal 1997 and provided $6,124,392 for the first nine months of fiscal 1996.
Cash flows for the first nine 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, collection of
the insurance claim receivable and decreases in inventories.
At June 30, 1997, the Company owed $22,336,909 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 as of June 30, 1997 is 7.75%.
The Company incurred capital expenditures for the first nine months of 1997 of
$2,126,614. Included in this amount were renovations to the Universe Explorer to
conform to SOLAS. In June 1997, the vessel received all the appropriate
certificates showing that it meets current SOLAS requirements. The Enchanted
Isle will undergo similar renovations during dry-dock which begins in the next
fiscal year.
PAGE 8
<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
Not applicable
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.1 Second Amendment to Employment Agreement
by and between New Commodore Cruise Lines
Limited and Frederick Mayer dated May 3,
1997.
27.1 Financial Data Schedule
B. Reports on Form 8-k
No reports on Form 8-k were filed during the quarter ended June 30,
1997.
<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 14, 1997
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10.1 Second Amendment to Employment Agreement
by and between New Commodore Cruise Lines
Limited and Frederick Mayer dated May 3,
1997.
27.1 Financial Data Schedule
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT (the "Second Amendment") to an Employment
Agreement dated May 3, 1995 as amended on May 4, 1995 (together, the "Employment
Agreement"), by and between Frederick Mayer (the "Employee"), and New Commodore
Cruise Lines Limited, a Bermuda corporation (the "Company"), is effective as of
this 3rd day of May, 1997.
W I T N E S S E T H:
WHEREAS, the Company recognizes the Employee's substantial contribution
as Vice-Chairman of the Board of Directors and Chief Executive Officer of the
Company; and
WHEREAS, the Company desires to assure the Employee's continued
employment.
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein and for other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually agreed as follows:
1. EXTENSION OF EMPLOYMENT. The Term is hereby extended until
May 3, 2002; provided, however, that the Employee shall be entitled to terminate
the Employment Agreement at any time during the final two years of the Term by
providing written notice to the Company at least six months prior to such
termination date.
2. RATIFICATION. Except as expressly set forth herein, the
terms of the Employment Agreement shall remain in full force and effect. In the
event of a conflict between this Amendment and the Employment Agreement, this
Amendment shall control to the extent of any such conflict.
3. DEFINED TERMS. Unless otherwise defined herein, capitalized
terms shall have the meanings ascribed to them in the Employment Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment effective as of the date first written above.
<PAGE>
COMPANY:
NEW COMMODORE CRUISE LINES LIMITED
By: /s/ JEFFREY I. BINDER
-----------------------------------------
Jeffrey I. Binder, Director
EMPLOYEE:
/s/ FREDERICK MAYER
---------------------------------------------
Frederick Mayer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,467,300
<SECURITIES> 0
<RECEIVABLES> 765,545
<ALLOWANCES> 0
<INVENTORY> 1,120,232
<CURRENT-ASSETS> 10,033,675
<PP&E> 39,142,594
<DEPRECIATION> 2,250,242
<TOTAL-ASSETS> 51,952,944
<CURRENT-LIABILITIES> 16,717,994
<BONDS> 17,944,501
0
10,273
<COMMON> 55,819
<OTHER-SE> 17,002,685
<TOTAL-LIABILITY-AND-EQUITY> 51,952,944
<SALES> 0
<TOTAL-REVENUES> 40,126,197
<CGS> 0
<TOTAL-COSTS> 38,987,559
<OTHER-EXPENSES> (104,879)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,033,759
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,033,759
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,033,759
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
