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 December 31, 1996
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 February 12, 1997
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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 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
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<TABLE>
<CAPTION>
Part I: Financial Information
Item 1: Financial Statements
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30,
1996 1996
-------------- --------------
(UNAUDITED) (AUDITED)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 2,015,821 $ 3,476,165
Restricted cash 1,110,829 1,412,907
Trade and other receivables, net 345,314 328,812
Insurance claim receivable 2,198,441 2,470,525
Due from affiliate 42,921 42,921
Inventories 1,841,007 1,830,241
Prepaid expenses 2,380,152 2,463,842
Other current assets 76,290 76,290
-------------- --------------
Total current assets 10,010,775 12,101,703
Property and equipment, net 36,064,013 36,147,435
Other assets
Investments - restricted 4,629,000 4,629,000
Other assets 400,417 406,667
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$51,104,205 $53,284,805
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 4,044,161 $ 2,277,095
Accounts payable 4,729,916 5,767,110
Accrued liabilities 627,812 723,251
Due to affiliate 800,000 249,631
Customer deposits 4,220,130 5,839,360
Accrued interest 64,544 76,914
-------------- --------------
Total current liabilities 14,486,563 14,933,361
Long-term debt 20,131,889 21,962,060
Minority interest in subsidiary 104,940 193,018
Stockholders' equity
Preferred stock - authorized 10,000,000 shares
of $.01 par value; issued 1,006,979 shares 10,070 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 13,878,126 13,868,526
Retained earnings 2,436,798 2,261,951
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Total stockholders' equity 16,380,813 16,196,366
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$51,104,205 $53,284,805
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements
Page 2
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COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31,
1996 1995
----------------------------------
Revenues $12,134,487 $7,689,477
Expenses
Operating 9,442,889 5,989,641
Marketing, selling and administrative 1,733,594 1,498,359
Depreciation and amortization 491,699 271,126
--------------------------------
11,668,182 7,759,126
--------------------------------
Operating income (loss) 466,305 (69,649)
Other income (expense)
Other income - 340,641
Interest income 102,808 28,583
Interest expense (482,343) (247,804)
Minority interest in earnings of
consolidated joint venture 88,077 -
--------------------------------
(291,458) 121,420
--------------------------------
Net earnings before provision for
stock dividend 174,847 51,771
Provision for preferred stock dividend 70,000 70,000
--------------------------------
Net earnings (loss) available for
common stockholders $ 104,847 $ (18,229)
================================
Earnings per share available for common
stockholders $ 0.04 $ 0.00
================================
Weighted average number of common stock
outstanding 6,691,546 4,377,593
================================
The accompanying notes are an integral part of these statement
Page 3
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<TABLE>
<CAPTION>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
PREFERRED STOCK COMMON STOCK
-------------------------------------------------- ADDITIONAL
NUMBER OF PAR NUMBER OF PAR PAID-IN RETAINED
SHARES VALUE SHARES VALUE CAPITAL EARNINGS TOTAL
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<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
Net earnings - - - - - 174,847 174,847
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Balances at
December 31, 1996 1,006,979 $10,070 5,581,933 $55,819 $13,878,126 $2,436,798 $16,380,813
===============================================================================================
</TABLE>
The accompanying notes are an integral part of these statement
Page 4
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<TABLE>
<CAPTION>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(UNAUDITED)
1996 1995
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<S> <C> <C>
Cash flows from operating activities
Net earnings $ 174,847 $ 51,771
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation of property and equipment 491,699 271,126
Amortization of deferred drydock 294,862 50,000
(Increase) decrease in operating assets
Restricted cash 302,078 363,462
Trade and other receivables (16,502) (314,699)
Insurance receivable 272,084 -
Due from affiliate - 441,577
Inventory (10,766) (100,818)
Prepaid expenses and other current assets (211,172) 363,294
Other assets 6,250 25,000
Increase (decrease) in operating liabilities
Accounts payable (1,037,194) 815,644
Accrued liabilities (95,439) 859,286
Due to affiliate 550,369 -
Customer and other deposits (1,619,230) (1,264,775)
Accrued interest (12,370) (322,736)
Capital lease obligations - (65,212)
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Net cash (used in) provided by operating activities (910,484) 1,172,920
Cash Flows from investing activities
Capital expenditures (408,277) (3,170,028)
Decrease in minority interest in subsidiary (88,078) -
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Net cash used in investing activities (496,355) (3,170,028)
Cash flows from financing activities
Principal payments of long-term debt (63,105) (89,116)
Stock warrants 9,600 -
Net cash used in financing activities (53,505) (89,116)
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Net decrease in cash and cash equivalents (1,460,344) (2,086,224)
Cash and cash equivalents at beginning of period 3,476,165 3,274,993
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Cash and cash equivalents at end of period $ 2,015,821 $ 1,188,769
============= ===========
Supplemental disclosure of cash flow information
Cash paid during the period for interest $ 492,976 $ 824,884
============= ===========
Cash paid during the period for taxes $ - $ -
============= ===========
</TABLE>
The accompanying notes are an integral part of these statement
Page 5
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CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(UNAUDITED)
Supplemental schedule of noncash investing and financing activities
For the three months ended December 31, 1995 the Company capitalized
$294,766 of interest to property and equipment.
The accompanying notes are an integral part of these statement
Page 6
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COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Financial Statements for the three months ended December 31, 1996 and
1995, 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 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 three months ended
December 31, 1996, 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 three months ended
December 31, 1996 and 1995 is 6,691,546 and 4,377,593, respectively.
Page 7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended December 31, 1996, Compared to Three Months Ended December
31, 1995
Revenues increased by $4,445,010, or 57.8%, for the quarter ended December 31,
1996 compared to the quarter ended December 31, 1995 primarily due to the
Company's having two vessels in service for the quarter ended December 31, 1996
as compared to only one vessel in service for the quarter ended December 31,
1995.
The Company's operating expenses increased by $3,453,248, or 57.7%, and the
Company's marketing, selling and administrative expenses increased by $235,235,
or 15.7%, for the three months ended December 31, 1996 compared to the three
months ended December 31, 1995, primarily due to the Company's having two
vessels in service for the quarter ended December 31, 1996 as compared to only
one vessel in service for the quarter ended December 31, 1995. 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 did not earn revenue from such program in
the first quarter of fiscal 1996. The Company's depreciation and amortization
expense increased by $220,573, or 81.4%, for the three months ended December 31,
1996 compared to the three months ended December 31, 1995, because depreciation
expense for the Universe Explorer did not begin to accrue until January, 1996
when the vessel entered cruise service.
In the three months ended December 31, 1995, 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 three months ended
December 31, 1996. Due to the Company's overnight investments of its operating
accounts as well as its restricted investment of $4,629,000, the Company
recorded $102,808 of interest income in the first quarter of fiscal 1997
compared to $28,583 in the first quarter of fiscal 1996. The interest of the
Company's partner in the Sea-Comm joint venture is reflected in the $88,077 line
item for "Minority interest in earnings of consolidated joint venture." The
Sea-Comm joint venture began operation in the second quarter of fiscal 1996,
consequently no comparable line item exists for the first quarter of fiscal
1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital deficiency was $4,409,121 and $2,931,658 for
December 31, 1996 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 deficit was the result of cash flow
used in operating and investing activities.
Cash flows from operations used $1,325,551 for the first three months of fiscal
1997 and provided $1,172,920 for the first three months of fiscal 1996. Cash
flows for the first three months of fiscal 1997 consisted primarily of decreases
in restricted cash and was offset by decreases in accounts payable and advanced
deposits and increases in current portion of long term debt.
At December 31, 1996, the Company owed $24,176,050 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%.
Page 8
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Part II: Other Information
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES
(c) On October 1, 1996, the Company granted warrants to purchase
150,000 shares of Common Stock to a consultant in exchange for financial
consulting services valued at approximately $75,000. The warrants are
exercisable at $2.75 per share, which was 110% of the market value of the Common
Stock on the date of the grant, and expire on October 31, 2001. The grant of
warrants was exempt from registration pursuant to Section 4(2) of the Securities
Act of 1933, as amended (the "Act").
On October 1, 1996, the Company granted options to purchase an
aggregate of 326,000 shares of Common Stock to 43 of its employees, pursuant to
the Company's 1995 Employee Stock Plan. The options are exercisable at $2.75 per
share, which was 110% of the market value of the Common Stock on the date of the
grant, and expire on October 1, 2006. The grant of options was exempt from
registration pursuant to Section 4(2) of the Act.
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
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27 Financial Data Schedule
B. Reports on Form 8-k
No reports on Form 8-k were filed during the quarter ended December 31,
1996
Page 9
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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)
February 14, 1997
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,015,821
<SECURITIES> 0
<RECEIVABLES> 345,314
<ALLOWANCES> 0
<INVENTORY> 1,841,007
<CURRENT-ASSETS> 10,010,775
<PP&E> 38,335,157
<DEPRECIATION> 2,271,144
<TOTAL-ASSETS> 51,104,205
<CURRENT-LIABILITIES> 14,486,563
<BONDS> 20,131,889
0
10,070
<COMMON> 55,819
<OTHER-SE> 16,380,813
<TOTAL-LIABILITY-AND-EQUITY> 51,104,205
<SALES> 0
<TOTAL-REVENUES> 12,134,487
<CGS> 0
<TOTAL-COSTS> 11,668,182
<OTHER-EXPENSES> 394,266
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 174,847
<INCOME-TAX> 0
<INCOME-CONTINUING> 174,847
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 174,847
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
