-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sq9RHmElZT/gwGjKkCCG1lv0A0Bk8O6/NnuHHRsnO/DI3Tho8PVTs5Sv02TM10tI HYNN6mqa27g/hUzGT1Hc9w== 0000950137-97-002738.txt : 19970814 0000950137-97-002738.hdr.sgml : 19970814 ACCESSION NUMBER: 0000950137-97-002738 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN CLASSIC VOYAGES CO CENTRAL INDEX KEY: 0000315136 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 310303330 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09264 FILM NUMBER: 97658146 BUSINESS ADDRESS: STREET 1: TWO N RIVERSIDE PLZ STREET 2: 2ND FLOOR CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3122581890 MAIL ADDRESS: STREET 1: TWO NORTH RIVERSIDE PLAZA STREET 2: 2ND FLOOR CITY: CHICAGO STATE: IL ZIP: 60606 10-Q 1 FORM 10-Q 1 ============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ___________________________ FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 0-9264 AMERICAN CLASSIC VOYAGES CO. (Exact name of registrant as specified in its charter) DELAWARE 31-0303330 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer identification No.) TWO NORTH RIVERSIDE PLAZA, CHICAGO, IL 60606 (Address of principal executive offices) (Zip Code)
(312) 258-1890 (Registrant's telephone number, including area code) 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 [ ] As of July 31, 1997, there were 13,939,302 shares of Common Stock outstanding. ============================================================================== 2 AMERICAN CLASSIC VOYAGES CO. INDEX
ITEM DESCRIPTION PAGE Part I. Financial Information: Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 1997 and 1996...................... 3 Condensed Consolidated Balance Sheets at June 30, 1997 and December 31, 1996......................................................... 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1997 and 1996................................... 5 Notes to Condensed Consolidated Financial Statements.......................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 8 Part II. Other Information: Item 1. Legal Proceedings............................................................. 14 Item 6. Exhibits and Reports on Form 8-K.............................................. 14
2 3 AMERICAN CLASSIC VOYAGES CO. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (Unaudited)
For the Three Months For the Six Months Ended June 30, Ended June 30, -------------------- ------------------ 1997 1996 1997 1996 -------- ------- ------- ------- Revenues........................................................... $42,356 $49,021 $82,728 $90,649 Cost of operations (exclusive of depreciation and amortization shown below)....................................................... 24,695 31,300 51,834 59,372 -------- ------- ------- ------- Gross profit....................................................... 17,661 17,721 30,894 31,277 Selling, general and administrative expenses....................... 10,657 11,460 22,176 24,962 Depreciation and amortization expense.............................. 3,553 3,938 7,136 7,386 Impairment write-down (Note 4)..................................... -- -- -- 38,390 -------- ------- ------- ------- Operating income (loss)............................................ 3,451 2,323 1,582 (39,461) Interest income.................................................... 251 210 519 451 Interest expense................................................... 1,740 2,204 3,453 4,329 -------- ------- ------- ------- Income (loss) before income taxes.................................. 1,962 329 (1,352) (43,339) Income tax (expense) benefit....................................... (785) 52 541 449 -------- ------- ------- ------- Net income (loss).................................................. $ 1,177 $381 $(811) $(42,890) ======= ======= ====== ======== Per Share Information: Average common and common share equivalent shares outstanding........................................................ 13,940 13,773 13,925 13,771 ======= ======= ====== ======== Earnings (loss) per share....................................... $ 0.08 $0.03 $(0.06) $ (3.11) ======= ======= ====== ========
The accompanying notes are an integral part of these consolidated financial statements. 3 4 AMERICAN CLASSIC VOYAGES CO. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except shares and par value)
(Unaudited) (Audited) June 30, December 31, 1997 1996 ------------ ------------ ASSETS Cash and cash equivalents........................ $ 17,314 $ 17,908 Restricted short-term investments................ 582 2,957 Accounts receivable.............................. 1,130 3,734 Prepaid expenses and other current assets........ 8,152 7,640 -------- -------- Total current assets.......................... 27,178 32,239 Property and equipment, net...................... 176,217 166,883 Deferred tax asset, net.......................... 11,589 10,968 Other assets..................................... 1,688 1,774 -------- -------- Total assets.................................. $216,672 $211,864 LIABILITIES Accounts payable................................. $ 15,341 $ 10,683 Other accrued expenses........................... 17,596 24,532 Current portion of long-term debt................ 4,100 4,100 Unearned passenger revenues...................... 40,737 31,669 -------- -------- Total current liabilities.................... 77,774 70,984 Long-term debt, less current maturities.......... 83,848 85,898 ------- -------- Total liabilities............................ 161,622 156,882 -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, $.01 par value (5,000,000 shares authorized, none issued and outstanding)....... -- -- Common stock, $.01 par value (20,000,000 shares authorized; 13,938,702 and 13,867,829 shares issued and outstanding, respectively).......... 139 139 Additional paid-in capital....................... 76,131 75,252 Accumulated deficit.............................. (21,220) (20,409) -------- -------- Total stockholders' equity................... 55,050 54,982 -------- -------- $216,672 $211,864 ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 5 AMERICAN CLASSIC VOYAGES CO. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
For the Six Months Ended June 30, --------------------- 1997 1996 ------- -------- OPERATING ACTIVITIES: Net loss................................................. $ (811) $ (42,890) Depreciation and amortization........................ 7,136 7,386 Impairment write-down (Note 4)....................... -- 38,390 Changes in working capital and other: Working capital changes and other................ (302) (5,667) Unearned passenger revenues...................... 9,068 11,778 -------- -------- Net cash provided by operating activities............ 15,091 8,997 -------- -------- INVESTING ACTIVITIES: Decrease in restricted short-term investments............ 2,375 7,678 Capital expenditures..................................... (16,470) (13,324) -------- -------- Net cash used in investing activities................ (14,095) (5,646) -------- -------- FINANCING ACTIVITIES: Proceeds from borrowings................................. -- 6,903 Repayment of borrowings.................................. (2,050) (8,873) Issuance of common stock................................. 460 44 Deferred financing fees.................................. -- (365) -------- -------- Net cash used in financing activities................ (1,590) (2,291) -------- -------- (Decrease) increase in cash and cash equivalents........... (594) 1,060 Cash and cash equivalents, beginning of period............. 17,908 6,048 -------- -------- Cash and cash equivalents, end of period................... $ 17,314 $ 7,108 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest............................................... $ 3,129 $ 3,838 Income taxes........................................... $ 194 $ 404
The accompanying notes are an integral part of these consolidated financial statements. 5 6 AMERICAN CLASSIC VOYAGES CO. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) 1. BASIS OF PRESENTATION: These accompanying unaudited Condensed Consolidated Financial Statements ("Financial Statements") have been prepared pursuant to Securities and Exchange Commission ("SEC") rules and regulations and should be read in conjunction with the Consolidated Financial Statements and Notes thereto included on Form 10-K for the year ended December 31, 1996 (the "Annual Report") for American Classic Voyages Co. ("AMCV") and its subsidiaries. These Financial Statements include the accounts of AMCV and its wholly owned subsidiaries, The Delta Queen Steamboat Co. ("DQSC") and Great Hawaiian Cruise Line, Inc. ("GHCL") (collectively with such subsidiaries, the "Company"). The following notes to the Financial Statements highlight significant changes to the notes included in the Annual Report and such interim disclosures as required by the SEC. These Financial Statements reflect, in the opinion of management, all adjustments necessary for a fair presentation of the interim financial statements. All such adjustments are of a normal and recurring nature. Certain previously reported amounts have been reclassified to conform to the 1997 presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. RECENT PRONOUNCEMENTS: In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share", which requires dual presentation of basic and fully diluted earnings per share. The Company will adopt the new standard, as required, in the fourth quarter of 1997. In the interim, the Company will disclose, if material, the pro forma effect of calculating the Company's earnings per share under the new standard in the notes to its financial statements. For the quarter and six months ending June 30, 1997, SFAS No. 128 did not have a material impact on the Company's earnings (loss) per share calculation. 6 7 3. DEBT: Long-term debt consisted of (in thousands):
June 30, December 31, 1997 1996 -------- ----------- U.S. Government Guaranteed Ship Financing Note, American Queen Series, floating rate notes due semi-annually beginning February 24, 1996 through August 24, 2005...................... $20,600 $21,812 U.S. Government Guaranteed Ship Financing Bond, American Queen Series, 7.68% fixed rate, sinking fund bonds due semi-annually beginning February 24, 2006 through June 2, 2020............... 36,353 36,353 U.S. Government Guaranteed Ship Financing Note, Independence Series A, floating rate notes due semi-annually beginning June 7, 1996 through December 7, 2005............................... 11,231 11,892 U.S. Government Guaranteed Ship Financing Bond, Independence Series A, 6.84% fixed rate sinking fund bonds due semi-annually beginning June 7, 2006 through December 7, 2015.. 13,215 13,215 U.S. Government Guaranteed Ship Financing Note, Independence Series B, floating rate notes due semi-annually beginning December 7, 1996 through December 7, 2005...................... 3,009 3,186 U.S. Government Guaranteed Ship Financing Bond, Independence Series B, 7.46% fixed rate sinking fund bonds due semi-annually beginning June 7, 2006 through December 7, 2015.. 3,540 3,540 Revolving credit facility (maximum availability of $15 million) -- -- --------- ------- 87,948 89,998 Less current portion........................................... 4,100 4,100 --------- ------- $83,848 $85,898 ========= =======
As of June 30, 1997, the Company has complied with all covenants under its various debt agreements. 4. IMPAIRMENT WRITE-DOWN: As discussed more fully in the Company's Annual Report, in the first quarter of 1996, the Company recognized an impairment write-down of $38.4 million related to its decision not to renovate or return the Constitution to service. The impairment write-down was recognized in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", which the Company adopted effective January 1, 1996. SFAS No. 121 establishes accounting standards for recognizing the impairment of long-lived assets, identifiable intangibles and goodwill, whether to be disposed of or to be held and used. The Company reserved for the estimated costs to be incurred on behalf of the Constitution until its eventual disposition. These costs include insurance, wet berthing fees and general maintenance of the vessel. As of June 30, 1997, the balance of this reserve was $2.2 million. The estimated salvage value for the Constitution of $2.5 million is reflected in property and equipment on the balance sheet. 5. ACCUMULATED DEFICIT: Changes in accumulated deficit for the six months ended June 30, 1997 were (in thousands): Accumulated deficit at December 31, 1996.............. $(20,409) Net loss.............................................. (811) -------- Accumulated deficit at June 30, 1997.................. $(21,220) ========
7 8 AMERICAN CLASSIC VOYAGES CO. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL American Classic Voyages Co. ("AMCV," or along with its subsidiaries, the "Company"), is a holding company which owns and controls The Delta Queen Steamboat Co. ("DQSC") and Great Hawaiian Cruise Line, Inc. ("GHCL"). The following discusses the Company's consolidated results of operations and financial condition for the second quarter and six month period ended June 30, 1997 versus the comparable periods ended June 30, 1996. This section should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Annual Report for the year ended December 31, 1996. The Company, through its various subsidiaries, operates two cruise lines: "Delta Queen", which owns and operates the American Queen, Mississippi Queen and Delta Queen steamboats, and "American Hawaii", which owns and operates the Independence steamship. American Hawaii also owns the Constitution steamship which was removed from service in June 1995 and is currently in wet berth in Portland, Oregon and will not be returned to service. The Company wrote-down the value of the vessel to its estimated salvage value effective March 31, 1996. The Company also owned and operated the Maison Dupuy Hotel ("Hotel") located in New Orleans, prior to its sale in October 1996 ("Hotel Sale"). The Company's operations are seasonal. At Delta Queen, historically there is greater passenger interest at higher yields in the spring and fall months of the year and the vessels typically undergo an annual lay-up in December and/or January. American Hawaii historically experiences greater passenger interest in the summer and fall months of the year. During the summer months, in particular, American Hawaii tends to have average occupancy in excess of 100% as the number of families sharing cabins with children increases significantly during this period. Results of operations for the first half of 1996 include an impairment write-down as discussed in Note 4 of the Notes to Condensed Consolidated Financial Statements. In addition, 1996 operating results included the operations of the Hotel which was sold in October 1996. American Hawaii is required by the U.S. Coast Guard to drydock the Independence once every 30 months, and as such, the Independence was out of service for a four-week period ending June 13, 1997 ("Independence Drydock"). As a result of the factors mentioned above, interim results of operations are not necessarily indicative of results for a full year. RESULTS OF OPERATIONS The following tables set forth various financial results and operating statistics for the three months and six months ended June 30, 1997 and 1996 (in thousands): FINANCIAL HIGHLIGHTS
For the Three Months For the Six Months Ended June 30, Ended June 30, -------------------- ------------------ 1997 1996 1997 1996 -------- -------- ------- -------- Revenues...................... $42,356 $49,021 $82,728 $ 90,649 ======== ======== ======= ======== Operating income (loss)....... $ 3,451 $ 2,323 $ 1,582 $(39,461) ======== ======== ======= ======== Net income (loss)............. $ 1,177 $ 381 $ (811) $(42,890) ======== ======== ======= ========
8 9 OPERATING STATISTICS
For the Three Months For the Six Months Ended June 30, Ended June 30, -------------------- ------------------ 1997 1996 1997 1996 ------- ------- ------ ------- Fare revenue per passenger night............ $ 245 $ 218 $ 233 $ 212 Total revenue per passenger night........... $ 313 $ 286 $ 308 $ 282 Weighted average operating days (1): DELTA QUEEN............................... 91 91 162 166 AMERICAN HAWAII........................... 63 91 153 182 Vessels capacity per day (berths) (2): DELTA QUEEN............................... 1,026 1,024 1,026 1,024 AMERICAN HAWAII........................... 817 817 817 817 Capacity passenger nights (3)............... 144,837 167,531 291,627 318,880 Passenger nights (4)........................ 135,486 164,645 268,375 308,317 Physical occupancy percentage (berths) (5).. 94% 98% 92% 97%
- --------------- (1) Weighted average operating days for each cruise line is determined by dividing capacity passenger nights for each cruise line by the cruise line's total vessel capacity per day. (2) Vessel capacity per day represents the number of passengers each cruise line can carry assuming double occupancy for cabins which accommodate two or more passengers. Some cabins on the Independence and the American Queen can accommodate three or four passengers. (3) Capacity passenger nights is determined by multiplying, for the respective period, the actual operating days of each vessel by each vessel's capacity per day. (4) A passenger night represents one passenger spending one night on a vessel; for example, one passenger taking a three-night cruise would generate three passenger nights. (5) Physical occupancy percentage is passenger nights divided by capacity passenger nights. 9 10 QUARTER ENDED JUNE 30, 1997 COMPARED TO QUARTER ENDED JUNE 30, 1996 Consolidated second quarter 1997 revenues decreased $6.6 million to $42.4 million from $49.0 million for the second quarter 1996 representing a $4.7 million decrease in cruise revenues combined with a $1.9 million decrease in Hotel revenues as a result of the Hotel Sale in October 1996. Delta Queen's cruise revenues increased $3.5 million, reflecting an 18% increase in fare revenue per passenger night ("fare per diems"). The increase in fare per diems as compared to 1996 was attributable to the shifting of the booking cycle of when a majority of cabin inventory is sold to its optimal schedule of six to nine months in advance, reducing the use of discounts to fill open inventory close to a sailing date. American Hawaii's revenues decreased $8.3 million for the second quarter 1997 due to a 31% decrease in operating days resulting from the Independence Drydock combined with an 7% decrease in occupancy rates. Consolidated fare per diems increased 12% to $245, with consolidated total revenue per passenger night increasing by 9% to $313, primarily due to the increase in fare per diems at Delta Queen. Consolidated cost of operations decreased $6.6 million to $24.7 million for the second quarter of 1997 from $31.3 million for the comparable period of 1996. Of the $31.3 million in 1996, $0.6 million represented Hotel related cost of operations. American Hawaii's operating costs decreased $5.3 million primarily as a result of decreased operating days due to the Independence Drydock. Delta Queen's cruise operating costs decreased $0.7 million primarily due to cost reductions in vessel operations and passenger expenses. Consolidated gross profit for the cruise lines increased $1.3 million for the second quarter 1997 as compared to 1996. Consolidated selling, general and administrative ("SG&A") expenses decreased $0.8 million to $10.7 million for the second quarter of 1997 from $11.5 million for the same period in 1996. Of the $11.5 million in 1996, $0.5 million represented Hotel related SG&A expenses. Both operating lines realized savings in general and administrative expenses as a result of strong cost control measures. Consolidated cruise operating income for the second quarter of 1997 was $3.5 million as compared to a cruise operating income of $1.6 million for the comparable period of 1996. Hotel operating income for second quarter 1996 was $0.7 million. Interest expense decreased $0.5 million due to a lower outstanding debt balance in the second quarter of 1997. The Company's consolidated effective tax rate was higher in the second quarter of 1997 as compared to the same period in 1996. In the first half of 1996, the Company recognized a valuation allowance for the full amount of the Federal tax benefit due to the possibility that the deferred tax asset created may not be realized in the future. The Company subsequently reviewed its position and in the fourth quarter of 1996 recognized an adjustment for the full amount of the Federal tax benefit. 10 11 SIX MONTHS ENDED JUNE 30, 1997 VERSUS SIX MONTHS ENDED JUNE 30, 1996 Consolidated first half 1997 revenues decreased $7.9 million to $82.7 million from $90.6 million for the first half of 1996 representing a $4.1 million decrease in cruise revenues combined with a $3.8 million decrease in Hotel revenues as a result of the Hotel Sale. Delta Queen's cruise revenues increased $7.1 million, reflecting an 18% increase in fare per diems combined with a 34% increase in revenue from air and land packages. The increase in fare per diems as compared to 1996 was attributable to the shifting of the booking cycle of when a majority of cabin inventory is sold to its optimal schedule of six to nine months in advance, reducing the use of discounts to fill open inventory close to a sailing date. American Hawaii's revenues decreased $11.2 million as a result of a 16% decrease in operating days due to the Independence Drydock combined with a 10% decrease in occupancy rates. Consolidated fare per diems for the first half of 1997 increased 10% to $233, with consolidated total revenue per passenger night increasing 9% to $308 primarily due to the increase in fare per diems at Delta Queen. Consolidated cost of operations decreased $7.6 million to $51.8 million for the first half of 1997 from $59.4 million for the comparable period of 1996. Of the $59.4 million in 1996, $1.2 million represented Hotel-related cost of operations. American Hawaii's operating costs decreased $7.2 million primarily as a result of the Independence Drydock; while Delta Queen's cruise operating costs increased only $0.8 million or 3% in response to an 18% increase in revenue. Savings in Delta Queen's passenger and vessel expenses were offset by an increase in air and land package expense corresponding to the increased sales of air and land packages. Consolidated gross profit for the cruise lines increased $2.3 million for the first half of 1997. Consolidated SG&A decreased $2.8 million to $22.2 million for the first half of 1997 from $25.0 million for the same period in 1996. Of the $2.8 million decrease, $1.0 million was attributable to the Hotel, with the remainder of the decrease primarily due to the implementation of cost savings measures. The $0.3 million decrease in depreciation and amortization expense was primarily attributable to a $0.2 million decrease in Hotel-related depreciation expense. In the first quarter of 1996, the Company recognized an impairment write-down of $38.4 million related to its decision not to renovate or return the Constitution to service. The Company has reserved for the estimated costs to be incurred on behalf of the Constitution until its eventual disposition. These costs include insurance, wet berthing fees and general maintenance of the vessel. As of June 30, 1997, the balance of this reserve was $2.2 million. Consolidated cruise operating income for the first half of 1997 was $1.6 million as compared to a cruise operating loss of $2.5 million, excluding the write-down, for the first half of 1996. Hotel operating income for the first half of 1996 was $1.4 million. Interest expense decreased $0.9 million due to a lower outstanding debt balance in the first half of 1997. The Company's consolidated effective tax rate was higher in the first half of 1997 as compared to the same period in 1996. In the first half of 1996, the Company recognized a valuation allowance for the full amount of the Federal tax benefit due to the possibility that the deferred tax asset created may not be realized in the future. The Company subsequently reviewed its position and in the fourth quarter of 1996 recognized an adjustment for the full amount of the Federal tax benefit. 11 12 LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION Operating Activities For the six months ended June 30, 1997, cash received from operations before changes in unearned passenger revenues ("Operating Cash Flow") was $6.0 million compared to cash used in operations of $2.8 million in the prior year. Operating Cash Flow reflected the improved operating performance of Delta Queen in the first half of 1996, as discussed previously under Results of Operations. Unearned passenger revenues, representing passenger cruise deposits, increased $9.1 million in the first half of 1997 reflecting the seasonal increase in advance reservation levels typically experienced at both cruise lines. Capital Expenditures Capital expenditures of $16.5 million in the first half of 1997 included $12.4 million related to the Independence Drydock costs. Other significant capital expenditures included $2.9 million primarily related to the Delta Queen, Mississippi Queen, and American Queen lay-ups. The Independence was out of service for a four-week period ending June 13, 1997 for a drydock as required by the U.S. Coast Guard. During this out of service period, 1997 SOLAS upgrades were made, as well as passenger area enhancements and the build-out of 25 new passenger cabins. The cost of this drydock was approximately $13.5 million of which $1.1 million represented repairs and maintenance. In addition, with the Company's decision to relocate the sales, marketing, and accounting departments of American Hawaii from Chicago to New Orleans, the current Delta Queen operating facility at Robin Street Wharf will be expanded and upgraded. The work will be completed in phases from the middle of September 1997 through the end of December 1997, at an approximate cost of $3.0 million. The Company anticipates the cost of the relocation to be approximately $0.5 million which will be expensed during the second half of 1997. Debt As of June 30, 1997, the Company complied with all covenants under its various debt agreements. The Company believes it will have adequate access to capital resources, both internally and externally, to meet its short-term and long-term capital commitments. Such resources may include cash on hand and the ability to secure additional financing through the capital markets. The Company continually evaluates opportunities to increase capacity, particularly with regard to the American Hawaii business. In addition, the Company also evaluates opportunities to strategically grow its business. If it would elect to increase capacity or pursue a strategic business opportunity, the Company may seek to secure additional financing. Notwithstanding, there can be no assurances that the Company will choose to increase capacity or strategically grow its business, or, if it elects to do so, that it will be able to obtain additional financing at commercially acceptable levels. Other The Federal Maritime Commission ("FMC") regulates passenger vessels with 50 or more berths departing from U.S. ports and requires that operators post security to be used in the event the operator fails to provide cruise services, or otherwise satisfy certain financial standards. The Company has been approved as a self-insurer by the FMC, and therefore, subject to continued approval, is not required to post security for passenger cruise deposits. In June 1996, the FMC issued proposed regulations to increase the financial responsibility requirements. The Company filed its opposition to the proposal, as it believes that the FMC's current standards provide passengers with adequate protection in the event of an operator's non-performance and that further requirements may impose an undue burden on operators. If implemented, these proposed regulations would be phased in over time and, among other things, would require operators qualifying as a self-insurer, such as the Company, to satisfy a working capital test, in addition to the existing net worth test, and to provide third-party coverage for 25% of its unearned passenger revenue in the form of a surety bond or similar instrument. At this time, the Company cannot predict if the proposed changes will be approved as currently constituted, or at all. If they are implemented, the proposed changes would require that the Company establish a bond to cover a portion of its passenger deposits and payments, which may impact the Company's liquidity. 12 13 On July 31, 1997, the Company announced that the Board of Directors of the Company approved a stock repurchase plan on June 11, 1997. The plan authorizes the Company to repurchase up to one million shares of its stock. These shares may be purchased from time to time in the public market or through privately negotiated transactions. Factors Concerning Forward-Looking Statements Certain statements in "Management's Discussion and Analysis of Financial Condition and Results of Operations" constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions which may impact passenger yields and occupancy; weather patterns affecting either the inland waterways in the Continental U.S. or the Hawaiian Islands; unscheduled repairs and drydocking of the Company's vessels; construction delays and/or cost overruns during regularly scheduled lay-ups and/or drydocks; the impact of changes in laws and implementation of government regulations; an increase in capacity at American Hawaii or pursuit of a strategic business opportunity; and the ability to obtain additional financing, if necessary. 13 14 AMERICAN CLASSIC VOYAGES CO. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings There are no other material legal proceedings, to which the Company is a party or of which any of its property is the subject, other than ordinary routine litigation and claims incidental to the business. The Company believes it maintains adequate insurance coverage and reserves for such claims. ITEM 6. Exhibits and Reports on Form 8-K a) Exhibits: 27. Financial data schedule. b) Reports on Form 8-K: None 14 15 SIGNATURES 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. AMERICAN CLASSIC VOYAGES CO. By: /s/ Philip C. Calian ------------------------ Philip C. Calian Chief Executive Officer By: /s/ Kathryn F. Gray ------------------------ Kathryn F. Gray Controller and Treasurer Dated: AUGUST 13, 1997 ----------------------- 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1997 JUN-30-1997 17,896 0 1,130 0 0 27,178 227,990 51,773 216,672 77,774 83,848 0 0 139 54,911 216,672 0 82,728 0 51,834 0 0 3,453 (1,352) (541) (811) 0 0 0 (811) (0.06) (0.06) Includes restricted short-term investments of $582.
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