-----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, GNOLHbeRHfB3G2/Nrk6pRFJjteoYfJ7MhF8X/1dKK2DwdIh0N2oCVk5haLx6QQe9 fCA3gtv/cmzCJorvPK1Tig== 0000950137-97-003755.txt : 19971113 0000950137-97-003755.hdr.sgml : 19971113 ACCESSION NUMBER: 0000950137-97-003755 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: SEC FILE NUMBER: 000-09264 FILM NUMBER: 97717054 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 DATED SEPTEMBER 30, 1997 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 SEPTEMBER 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 (I.R.S. Employer incorporation or organization) 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 October 31, 1997, there were 13,986,344 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 Nine Months Ended September 30, 1997 and 1996....................................................................... 3 Condensed Consolidated Balance Sheets at September 30, 1997 and December 31, 1996..................................................... 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 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............................................ 9 Part II. Other Information: Item 1. Legal Proceedings.............................................................. 15 Item 6. Exhibits and Reports on Form 8-K............................................... 15
2 3 AMERICAN CLASSIC VOYAGES CO. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (Unaudited)
For the Three Months For the Nine Months Ended September 30, Ended September 30, -------------------------------------------- 1997 1996 1997 1996 -------- ------- -------- --------- Revenues............................................................. $49,746 $49,776 $132,474 $ 140,425 Cost of operations (exclusive of depreciation and amortization shown below).......................................... 30,140 31,826 81,974 91,198 -------- ------- -------- --------- Gross profit......................................................... 19,606 17,950 50,500 49,227 Selling, general and administrative expenses......................... 9,150 9,568 31,326 34,530 Depreciation and amortization expense................................ 4,358 3,548 11,494 10,934 Impairment write-down (Note 4)....................................... - - - 38,390 -------- ------- -------- --------- Operating income (loss).............................................. 6,098 4,834 7,680 (34,627) Interest income...................................................... 277 172 796 623 Interest expense..................................................... 1,758 1,977 5,211 6,306 -------- ------- -------- --------- Income (loss) before income taxes.................................... 4,617 3,029 3,265 (40,310) Income tax expense (benefit)......................................... 1,847 178 1,306 (271) -------- ------- -------- --------- Net income (loss).................................................... $ 2,770 $ 2,851 $ 1,959 $ (40,039) ======== ======= ======== ========= Per Share Information: Primary: Average common and common equivalent shares outstanding.......................................................... 14,349 13,805 14,232 13,783 Earnings (loss) per common and common equivalent ======== ======= ======== ========= share................................................................ $ 0.19 $ 0.21 $ 0.14 $ (2.90) ======== ======= ======== ========= Fully Diluted: Average common and common equivalent shares outstanding.......................................................... 14,640 14,004 14,619 13,783 ======== ======= ======== ========= Earnings (loss) per share assuming full dilution..................... $ 0.19 $ 0.20 $ 0.13 $ (2.90) ======== ======= ======== =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 4 AMERICAN CLASSIC VOYAGES CO. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except shares and par value)
(Unaudited) (Audited) September 30, December 31, 1997 1996 ------------ ------------ ASSETS Cash and cash equivalents........................ $ 19,474 $ 17,908 Restricted short-term investments................ 624 2,957 Accounts receivable.............................. 1,084 3,734 Prepaid expenses and other current assets........ 9,989 7,640 ------------ ------------ Total current assets.......................... 31,171 32,239 Property and equipment, net...................... 172,624 166,883 Deferred tax asset, net.......................... 10,125 10,968 Other assets..................................... 1,645 1,774 ------------ ------------ Total assets.................................. $215,565 $211,864 ============ ============ LIABILITIES Accounts payable................................. $ 12,536 $ 10,683 Other accrued expenses........................... 17,650 24,532 Current portion of long-term debt................ 4,410 4,100 Unearned passenger revenues...................... 40,410 31,669 ------------ ------------ Total current liabilities..................... 75,006 70,984 Long-term debt, less current maturities.......... 82,326 85,898 ------------ ------------ Total liabilities............................. 157,332 156,882 ------------ ------------ 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; 13,958,066 and 13,867,829 shares issued and outstanding, respectively)........... 140 139 Additional paid-in capital....................... 76,543 75,252 Accumulated deficit.............................. (18,450) (20,409) ------------ ------------ Total stockholders' equity.................... 58,233 54,982 ------------ ------------ $215,565 $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 Nine Months Ended September 30, -------------------- 1997 1996 ------- -------- OPERATING ACTIVITIES: Net income (loss)................................ $ 1,959 $(40,039) Depreciation and amortization................ 11,494 10,934 Impairment write-down (Note 4)............... - 38,390 Changes in working capital and other: Working capital changes and other........ (2,657) (5,857) Unearned passenger revenues.............. 8,741 11,607 ------- -------- Net cash provided by operating activities.... 19,537 15,035 ------- -------- INVESTING ACTIVITIES: Decrease in restricted short-term investments.... 2,333 7,724 Capital expenditures............................. (17,915) (13,863) ------- -------- Net cash used in investing activities........ (15,582) (6,139) ------- -------- FINANCING ACTIVITIES: Proceeds from borrowings......................... - 6,903 Repayment of borrowings.......................... (3,262) (13,585) Issuance of common stock......................... 873 203 Deferred financing fees.......................... - (366) ------- -------- Net cash used in financing activities........ (2,389) (6,845) ------- -------- Increase in cash and cash equivalents............. 1,566 2,051 Cash and cash equivalents, beginning of period.... 17,908 6,048 ------- -------- Cash and cash equivalents, end of period.......... $19,474 $ 8,099 ======= ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest..................................... $ 5,159 $ 6,104 Income taxes................................. $ 194 $ 425
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 6 AMERICAN CLASSIC VOYAGES CO. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 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 diluted earnings per share. The Company will adopt the new standard, as required, in the fourth quarter of 1997. Pro forma earnings per share, if SFAS No. 128 had been applied, are as follows:
For the Three Months For the Nine Months Ended September 30, 1997 Ended September 30, 1997 ------------------------ ------------------------ Pro forma amounts: Basic earnings per share $0.20 $0.14 Diluted earnings per share $0.19 $0.14 As reported: Primary earnings per share $0.19 $0.14 Fully diluted earnings per share $0.19 $0.13
6 7 3. DEBT: Long-term debt consisted of (in thousands):
September 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................................................................... $19,388 $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)..................... - - ------- ------- 86,736 89,998 Less current portion........................................... 4,410 4,100 ------- ------- $82,326 $85,898 ======= =======
As of September 30, 1997, the Company's restricted short-term investments included the escrow account for the remaining American Queen construction costs. The account balance of $0.3 million was released to the Company in October 1997 and was used to pay down the principal balance of the American Queen Series. As of September 30, 1997, the Company 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. In September 1997, the Company entered into a contract to sell the vessel in the fourth quarter of 1997 for net sale proceeds of $1.8 million. Accordingly, as of September 30, 1997, the salvage value of the vessel was written down from $2.5 million to $1.8 million, which was reflected in property and equipment on the balance sheet. This write-down was offset by a reduction in the reserve set-up for the estimated costs to be incurred on behalf of the vessel, as mentioned above. 7 8 5. ACCUMULATED DEFICIT: Changes in accumulated deficit for the nine months ended September 30, 1997 were (in thousands): Accumulated deficit at December 31, 1996............. $(20,409) Net income........................................... 1,959 -------- Accumulated deficit at September 30, 1997............ $(18,450) ========
8 9 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 third quarter and nine month period ended September 30, 1997 versus the comparable periods ended September 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 owned the Constitution steamship which was removed from service in June 1995 and was sold in November 1997. The Company wrote-down the value of the vessel to its estimated salvage value effective March 31, 1996 and then to its net sale proceeds, effective September 30, 1997. 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 nine months 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 nine months ended September 30, 1997 and 1996 (dollars in thousands): FINANCIAL HIGHLIGHTS
For the Three Months For the Nine Months Ended September 30, Ended September 30, -------------------- -------------------- 1997 1996 1997 1996 ------- ------- -------- -------- Revenues....................... $49,746 $49,776 $132,474 $140,425 ======= ======= ======== ======== Operating income (loss)........ $ 6,098 $ 4,834 $ 7,680 $(34,627) ======= ======= ======== ======== Net income (loss).............. $ 2,770 $ 2,851 $ 1,959 $(40,039) ======= ======= ======== ========
9 10 OPERATING STATISTICS
For the Three Months For the Nine Months Ended September 30, Ended September 30, -------------------- -------------------- 1997 1996 1997 1996 -------- ------- ------- ------- Fare revenue per passenger night............. $ 224 $ 209 $ 230 $ 211 Total revenue per passenger night............ $ 297 $ 278 $ 304 $ 280 Weighted average operating days (1): DELTA QUEEN............................... 92 92 254 258 AMERICAN HAWAII........................... 92 92 245 274 Vessels capacity per day (berths) (2): DELTA QUEEN............................... 1,026 1,024 1,026 1,024 AMERICAN HAWAII........................... 865 817 835 817 Capacity passenger nights (3)................ 173,956 169,372 465,583 488,252 Passenger nights (4)......................... 167,710 173,150 436,085 481,467 Physical occupancy percentage (berths) (5)... 96% 102% 94% 99%
- -------------------------- (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. 10 11 QUARTER ENDED SEPTEMBER 30, 1997 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1996 Consolidated third quarter 1997 revenues were $49.7 million which decreased slightly from $49.8 million for the third quarter of 1996. Cruise revenues increased $1.6 million which was offset by a $1.7 million decrease in Hotel revenues as a result of the Hotel Sale in October 1996. Delta Queen's cruise revenues increased $3.8 million, reflecting a 17% increase in fare revenue per passenger night ("fare per diems") slightly offset by a 2% decrease in occupancy rates. 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. This shifting of the booking cycle reduced the use of discounts to fill open inventory close to a sailing date. American Hawaii's revenues decreased $2.2 million in the third quarter 1997 due to an 11% decrease in occupancy rates combined with a 7% decrease in fare per diems, which was due to an increase in fare discounts. Consolidated fare per diems and consolidated total revenue per passenger night both increased by 7% to $224 and $297 respectively, primarily due to the increase in fare per diems at Delta Queen. Consolidated cost of operations decreased $1.7 million to $30.1 million for the third quarter of 1997 from $31.8 million for the comparable period of 1996. Hotel-related costs of operations represented $0.6 million of the 1996 costs. The remaining decrease in the cost of operations was attributable to lower than anticipated repair and maintenance expense incurred during the Independence Drydock and a decrease in passenger air expense as a result of fewer passengers purchasing add-on air through the Company. Consolidated gross profit for the cruise lines increased $2.8 million for the third quarter 1997 as compared to 1996. Consolidated selling, general and administrative ("SG&A") expenses decreased $0.4 million to $9.2 million for the third quarter of 1997 from $9.6 million for the same period in 1996. Included in SG&A expenses for the third quarter 1997 were $0.7 million of relocation costs incurred as a result of the move of American Hawaii's mainland office from Chicago to New Orleans and costs incurred in planning for capacity expansion in Hawaii. The comparable period of 1996 also included $0.5 million of Hotel related SG&A expenses. The $0.8 million increase in depreciation expense was attributable to the recently completed Independence Drydock and capital improvements on Delta Queen vessels principally placed in service during lay-ups earlier in the year. 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. In September, 1997, the Company entered into a contract to sell the vessel for net sale proceeds of $1.8 million. Accordingly, as of September 30, 1997, the salvage value of the vessel was written down from $2.5 million to $1.8 million, which was reflected in property and equipment on the balance sheet. This write-down was offset by a reduction in the reserve set-up for the estimated costs to be incurred on behalf of the vessel until its eventual disposition. Consolidated cruise operating income for the third quarter of 1997 was $6.1 million, as compared to a cruise operating income of $4.3 million for the comparable period of 1996, which included Hotel operating income of $0.5 million. Interest expense decreased $0.2 million due to a lower outstanding debt balance in the third quarter of 1997. The Company's consolidated effective tax rate was higher in the third quarter of 1997 as compared to the same period in 1996. For the nine months ended September 30, 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 NINE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1996 Consolidated revenues for the first nine months of 1997 decreased $7.9 million to $132.5 million from $140.4 million for the first nine months of 1996 representing a $2.4 million decrease in cruise revenues combined with a $5.5 million decrease in Hotel revenues as a result of the Hotel Sale. Delta Queen's cruise revenues increased $11.0 million, reflecting an 18% increase in fare per diems combined with an 18% 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. This shifting of the booking cycle reduced the use of discounts to fill open inventory close to a sailing date. American Hawaii's revenues decreased $13.4 million as a result of a 11% decrease in operating days due to the Independence Drydock combined with a 10% decrease in occupancy rates. Consolidated fare per diems for the first nine months of 1997 increased 9% to $230, and consolidated total revenue per passenger night increased 8% to $304, primarily due to the increase in fare per diems at Delta Queen. Consolidated cost of operations decreased $9.2 million to $82.0 million for the first nine months of 1997 from $91.2 million for the comparable period of 1996. Hotel-related costs of operations represented $1.8 million of the 1996 costs. American Hawaii's operating costs decreased $8.9 million primarily as a result of the Independence Drydock while Delta Queen's cruise operating costs increased $1.5 million, or 4%. 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 $5.0 million for the first nine months of 1997. Consolidated SG&A decreased $3.2 million to $31.3 million for the first nine months of 1997 from $34.5 million for the same period in 1996. Of the $3.2 million decrease, $1.5 million was attributable to the Hotel, with the remainder of the decrease primarily due to the implementation of cost savings measures. Also included in SG&A expenses for the first nine months of 1997 were $0.9 million of relocation costs and costs incurred for planning for capacity expansion in Hawaii. The $0.6 million increase in depreciation and amortization expense was attributable to the recently completed Independence Drydock and capital improvements on Delta Queen vessels during lay-ups earlier in the year. 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. In September, 1997, the Company entered into a contract to sell the vessel for net sale proceeds of $1.8 million. Accordingly, as of September 30, 1997, the salvage value of the vessel was written down from $2.5 million to $1.8 million, which was reflected in property and equipment on the balance sheet. This write-down was offset by a reduction in the reserve set-up for the estimated costs to be incurred on behalf of the vessel until its eventual disposition. Consolidated cruise operating income for the first nine months of 1997 was $7.7 million as compared to a cruise operating income of $1.9 million, excluding the write-down, for the first nine months of 1996. Hotel operating income for the first nine months of 1996 was $1.9 million. Interest expense decreased $1.1 million due to a lower outstanding debt balance in the first nine months of 1997. The Company's consolidated effective tax rate was higher in the first nine months of 1997 as compared to the same period in 1996. For the nine months ended September 30, 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. 12 13 LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION Operating Activities For the nine months ended September 30, 1997, cash received from operations before changes in unearned passenger revenues ("Operating Cash Flow") was $10.8 million compared to cash received from operations of $3.4 million in the prior year. Operating Cash Flow reflected the improved operating performance of Delta Queen in the first nine months of 1997, as discussed previously under Results of Operations. Unearned passenger revenues, representing passenger cruise deposits, increased $8.7 million in the first nine months of 1997 reflecting the seasonal increase in advance reservation levels typically experienced at both cruise lines. Capital Expenditures Capital expenditures of $17.9 million in the first nine months of 1997 included $12.4 million related to the Independence Drydock costs and $2.9 million related to the Delta Queen vessel lay-ups. In addition, as a result of the Company's decision to relocate the sales, marketing, and accounting departments of American Hawaii from Chicago to New Orleans, the current operating facility at Robin Street Wharf was expanded and upgraded, at an approximate cost of $1.7 million in the first nine months of 1997. The work will continue in the fourth quarter of 1997 and is expected to cost an additional $1.2 million to complete. 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. Starting November 30, 1997, the Mississippi Queen will undergo a 15-day lay-up while the Delta Queen will be out of service starting December 13, 1997 for a scheduled 82-day lay-up in which certain renovations will be performed. The American Queen will undergo a 15-day lay-up beginning January 2, 1998. The lay-up for the three vessels, including repairs and maintenance, is expected to cost $7.0 million and will be funded from cash on hand. Debt As of September 30, 1997, the Company's restricted short-term investments included the escrow account for the remaining American Queen construction costs. The account balance of $0.3 million was released to the Company in October 1997 and was used to pay down the principal balance of the American Queen Series. As of September 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 at both Delta Queen and American Hawaii and to strategically grow its business. As discussed below, the Company recently announced plans to expand capacity at American Hawaii. As it proceeds with such plans, the Company intends to seek additional financing, although it has not yet determined the nature or amount of such financing. Although the Company believes that it will be able to obtain sufficient funding from the capital markets to construct the new vessels, there can be no assurances that the Company will be able to obtain additional financing at commercially acceptable levels to finance such new construction and, if the Company so chooses, to pursue a strategic business opportunity. 13 14 Other On October 17, 1997, the Company announced its plans to expand capacity at American Hawaii. The expansion plans are made possible by a recently enacted law establishing a pilot project to develop the U.S.-flag cruise ship industry and stimulate commercial construction in U.S. shipyards. The shipbuilding pilot project was included in the Department of Defense Appropriations Act for Fiscal Year 1998. The law enables an operator of a U.S.-flag vessel, who commits to building two privately funded cruise ships in a U.S. shipyard, to temporarily operate an existing foreign-flag cruise ship while the new ships are under construction. The Company intends for American Hawaii to add another vessel in the Hawaii market as early as mid-1999. The sale of the Constitution was completed in November, 1997 when the vessel was delivered to the buyer and net sales proceeds of $1.8 million was received by the Company. 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. 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. As of September 30, 1997, the Company has not repurchased any shares under the plan. 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; delays and/or costs overruns during the development and/or construction of new vessels; the impact of changes and/or repeal of 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. 14 15 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: 11. Computation of earnings per share 27. Financial data schedule. b) Reports on Form 8-K: None 15 16 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/ O. Ivy Wu ------------------------------- O. Ivy Wu Treasurer Dated: November 13, 1997 -------------------------- 16 EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 Exhibit 11 American Classic Voyages Co. Computation of Earnings Per Share
For the Three Months For the Nine Months Ended September 30, Ended September 30, ------------------------ ------------------------ (In thousands, except per share data) 1997 1996 1997 1996 ------- -------- -------- -------- Net earnings per common and common equivalent share: Weighted average number of shares of common stock outstanding.................................................. 13,962 13,805 13,938 13,783 Additional shares assuming exercise of dilutive stock options based on treasury stock method using average market price......................................................... 372 - 288 - Additional shares assuming immediate vesting of common stock units................................................... 15 - 6 - Average common and common equivalent shares ------ ------ ------ -------- outstanding.......................................................... 14,349 13,805 14,232 13,783 ====== ====== ====== ======== Net income (loss).................................................... $2,770 $2,851 $1,959 $(40,039) Earnings (loss) per common and common equivalent ====== ====== ====== ======== share................................................................ $ 0.19 $ 0.21 $0.14 $ (2.90) ====== ====== ====== ======== Net earnings per common share assuming full dilution: Weighted average number of shares of common stock outstanding.................................................. 13,962 13,805 13,938 13,783 Additional shares assuming exercise of dilutive stock options based on treasury stock method using the quarter- end price if higher than the average market price.................... 663 199 666 - Additional shares assuming immediate vesting of common stock units................................................... 15 - 15 - Average common and common equivalent shares ------ ------ ------ -------- outstanding.......................................................... 14,640 14,004 14,619 13,783 ====== ====== ====== ======== Net income (loss).................................................... $2,770 $2,851 $1,959 $(40,039) ====== ====== ====== ======== Earnings (loss) per share assuming full dilution..................... $ 0.19 $ 0.20 $ 0.13 $ (2.90) ====== ====== ====== ========
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1997 SEP-30-1997 20,098 0 1,084 0 0 31,171 228,755 56,131 215,565 75,006 82,326 140 0 0 58,093 215,565 0 132,474 0 81,974 0 0 5,211 3,265 1,306 1,959 0 0 0 1,959 $0.14 $0.13 Includes restricted short-term investments of $624.
-----END PRIVACY-ENHANCED MESSAGE-----