-----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, OdUz7Mj5Ze7sSk/kwX0/iuLs1h+p/Uvd1mj4IyJI67Oe/il2jiPUhcP25w88X2ld AkzTNcBzvo6Mj6FeMbwP2w== 0000950137-98-001340.txt : 19980401 0000950137-98-001340.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950137-98-001340 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 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-K SEC ACT: SEC FILE NUMBER: 000-09264 FILM NUMBER: 98581050 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-K 1 10-K 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 _________________________ FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1997 OR [ ] 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, ILLINOIS 60606 (Address of principal executive offices) (Zip Code) (312) 258-1890 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE (Title of Class) 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of voting stock held by non-affiliates of the registrant was $146.8 million based upon the last reported sale price of $22.00 per share on March 23, 1998 on The Nasdaq Stock Market. Using beneficial ownership of stock rules adopted pursuant to Section 13 of the Securities Exchange Act of 1934, certain persons designated as affiliates for purposes of this computation may not be held to be affiliates upon judicial determination. As of March 23, 1998, there were 14,061,904 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE: PART III -- Portions of the registrant's definitive Proxy Statement, which will be filed with the Securities and Exchange Commission by April 29, 1998. =============================================================================== 2 AMERICAN CLASSIC VOYAGES CO. INDEX
ITEM DESCRIPTION PAGE - ---------------- ---- Part I Item 1 - Business...................................................... 3 Item 2 - Properties.................................................... 8 Item 3 - Legal Proceedings............................................. 9 Item 4 - Submission of Matters to a Vote of Security Holders........... 9 Part II Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters........................................... 10 Item 6 - Selected Financial Data....................................... 10 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations........................... 10 Item 7A - Quantitative and Qualitative Disclosures About Market Risk.... 10 Item 8 - Financial Statements and Supplementary Data................... 10 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................ 10 Part III Item 10 - Directors and Executive Officers of the Registrant............ 11 Item 11 - Executive Compensation........................................ 11 Item 12 - Security Ownership of Certain Beneficial Owners and Management................................................ 11 Item 13 - Certain Relationships and Related Transactions................ 11 Part IV Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K....................................... 12
2 3 AMERICAN CLASSIC VOYAGES CO. PART I ITEM 1. BUSINESS GENERAL American Classic Voyages Co. and its subsidiaries (the "Company") is the leading provider of overnight passenger cruises on inland waterways in the continental U.S. and among the Hawaiian Islands. The Company operates two cruise lines under the names of The Delta Queen Steamboat Co. ("Delta Queen") and American Hawaii Cruises ("American Hawaii"). Delta Queen currently operates three U.S. flag paddlewheel steamboats having 1,026 total passenger berths, providing three- to 14-night cruise vacations on the Mississippi River System as well as the Intracoastal Waterway. American Hawaii, acquired in August 1993, operates one U.S. flag ocean liner having 867 total passenger berths, providing three-, four- and seven-night inter-island cruises among the Hawaiian Islands. The Company does not offer gaming on its vessels. The Company believes it is the largest owner and operator of U.S. flag passenger vessels. Since non-U.S. flag vessels are prohibited under Federal law from receiving and discharging passengers at any two U.S. ports without stopping at an intervening non-U.S. port, the Company's U.S. flag designation, arising from having U.S. built, owned and crewed vessels, provides it with significant marketing and operating advantages. As an American flag carrier, there are certain restrictions on foreign ownership of the Company's common stock. The Company, a Delaware corporation incorporated in 1985, is a holding company, which owns and controls: (i) The Delta Queen Steamboat Co., ("DQSC"), Inc., which operates Delta Queen through various subsidiaries; and (ii) Great Hawaiian Cruise Line, Inc. ("GHCL"), which operates American Hawaii, through various subsidiaries. DQSC also owned and operated the Maison Dupuy Hotel (the "Hotel"), located in New Orleans, prior to its sale in October 1996. GHCL also owned the Constitution steamship which was removed from service in June 1995 and sold on November 4, 1997. The Company employed 1,404 persons as of December 31, 1997. The Company's executive offices are located at Two North Riverside Plaza, Suite 200, Chicago, Illinois, 60606, and its telephone number is (312) 258-1890. REVIEW OF 1997 AND RECENT EVENTS In 1997, the Company's results of operations were affected by the following factors: (i) the improved performance of Delta Queen's operations; (ii) the four week drydock of the Independence; and (iii) costs associated with the relocation and integration of American Hawaii's principal offices into Delta Queen's existing offices and costs incurred for planning to increase capacity at American Hawaii. At Delta Queen, cruise gross profit increased by $7.2 million over the prior year due to increases in fare revenue per passenger night while cruise operating costs were consistent with the prior year's levels. Additional cost control was achieved in cruise selling, general, and administrative expenses, which declined by 10% from the prior year. At American Hawaii, the Independence was out of service for a four-week period ending June 13, 1997 for its once every 30-month drydock, which was completed on time and within its budget. With the buildout of 25 new passenger cabins, the vessel's potential revenue producing capability was increased and passenger area enhancements improved the overall appearance of the vessel. During the drydock, the vessel was also brought into compliance with the applicable Safety of Life at Sea Convention ("SOLAS") fire safety amendments. During 1997, the Company incurred $1.6 million of expenses related to potential capacity expansion at American Hawaii (as further discussed below) and for the relocation of American Hawaii's principal offices from Chicago to New Orleans. These factors, among others, resulted in the Company reporting consolidated operating income of $10.0 million in 1997 compared to an operating loss of $30.5 million in 1996. The 1996 operating loss included a write-down of $38.4 million related to the Constitution and $1.4 million of operating income related to the Hotel which was sold in October 1996. On October 17, 1997, the Company announced its plans to expand capacity at American Hawaii. The expansion plans have been 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 to construct two new cruise ships over the next seven years and plans for American Hawaii to introduce another vessel in the Hawaii market as early as mid-1999 while awaiting construction of the new vessels. 3 4 NARRATIVE DESCRIPTION OF BUSINESS Delta Queen Delta Queen markets its steamboats as the "Legendary Delta Queen", the "Magnificent Mississippi Queen" and the "Grand American Queen" and the cruise experience using its Steamboatin'(R) registered servicemark. Delta Queen's steamboats travel along the Mississippi, Ohio, Cumberland, Tennessee, Arkansas, Illinois, Kanawha, Red and Atchafalaya Rivers, as well as the Intracoastal Waterway. Ports of embarkation/debarkation, which are typically locations of historical or cultural significance, include New Orleans, Memphis, St. Louis, St. Paul, Ottawa, Louisville, Cincinnati, Pittsburgh, Nashville, Chattanooga, Little Rock and Galveston. Other ports of call include such towns as Hannibal, Missouri; Prairie du Chien, Wisconsin; Vicksburg and Natchez, Mississippi; and Shiloh, Tennessee. The Company promotes special cruise packages revolving around specific themes which allow passengers to participate in activities, meet special guest lecturers, and enjoy entertainment relevant to the theme. Seasonal theme cruises include: "Spring Pilgrimage", "Autumn in America - Fall Foliage" and "Old Fashioned Holidays" while geographic themes include "Dixie Fest", "Mark Twain Heartland", "Cajun Country Culture" and "Gardens of the River". Old standbys and continuing favorites are "Kentucky Derby" cruises that include attendance at the Kentucky Derby horse race and "The Great Steamboat Race", a reenactment of the famous 19th Century race between the Natchez and the Robert E. Lee steamboats. For nostalgia and history lovers, Delta Queen offers "Big Band", "The Year That Was...", "The Drama of the Civil War" and "Fabulous 50s" theme cruises. In a continuing effort to upgrade its cruise product, Delta Queen will introduce, in 1998, enhancements to the onboard dining, entertainment and shore excursions which will highlight America's heartland. In addition, several new theme cruises will be added, such as "Tramping on the River" cruises featuring impromptu river stops; and "The History of Steamboatin' Revisited", which will retrace the 1811 voyage of the first successful steamboat voyage down the Ohio and Mississippi Rivers to New Orleans. The Steamboatin' cruise fare for an average five-night cruise, as stated in the 1998/1999 cruise brochure, ranges from luxurious suites at $648 per person per night to interior cabins with lower and upper berths at $262 per person per night, based on double occupancy. The fare also includes three full service meals per day, along with mid-afternoon snacks and a late evening buffet, day and night entertainment on the vessels and port charges. To attract additional customers, Delta Queen has developed products which combine its steamboat cruises with escorted tours and overnight stays at historic port cities. Delta Queen offers additional services and products to its passengers, including trip cancellation insurance, bar services, beauty salon services, photographs, shore excursions and gift shop products. Delta Queen also distributes a line of specialty products through its onboard gift shops utilizing the Steamboatin' logo. As a convenience to its passengers, Delta Queen will also arrange hotel accommodations and air and land transportation to and from the cruise embarkation and/or debarkation point. American Hawaii American Hawaii features seven-night cruise vacations among the Hawaiian Islands. In addition, as part of its weekly itinerary, American Hawaii offers three and four night cruise vacations. Ports of call include Hilo and Kona on the Big Island of Hawaii; Kahului, Maui; Nawiliwili, Kauai; and Honolulu, Oahu. Many cruise passengers also choose to extend their stay in Hawaii, purchasing hotel accommodations through American Hawaii. American Hawaii offers more than 50 optional shore excursion activities of interest to its passengers, including helicopter rides, snorkeling, sea tours and other excursions to observe some of the spectacular natural Hawaiian sights. The itinerary also affords an opportunity to view Mount Kilauea, one of the world's few active volcanoes, and the soaring sea cliffs of the inaccessible Na Pali coast. American Hawaii offers theme cruises organized around specific activities or seasons, including: "Whales in the Wild" cruises, in which passengers can observe whales that make Hawaii their winter playground; "Hawaiian Heritage" cruises, which emphasize native Hawaiian ceremonies and rituals; and "Big Band" cruises featuring 1940's Big Band orchestra music and Golden Age of Movies film screenings. Cruise fares on American Hawaii for a seven-night cruise, as stated in the 1998 cruise brochure, range from luxurious suites at $469 per person per night to interior cabins with a single sofa bed and fold-away upper berth at $176 per person per night, based on double occupancy. The fare also includes three full service meals per day, along with mid-afternoon snacks and a late evening buffet, night entertainment on the vessel and port charges. American Hawaii also offers seasonal youth programs to attract passengers with children, as the Independence has a large number of cabins that can accommodate three and four passengers. 4 5 American Hawaii offers additional services and products to its passengers, including trip cancellation insurance, bar services, beauty salon services, photographs, shore excursions and gift shop products. American Hawaii also distributes a line of specialty products through its onboard gift shops utilizing the "American Hawaii Cruises" logo. American Hawaii also offers air transportation arrangements to and from the Hawaiian islands through agreements with several major commercial airlines as well as hotel accommodations on the Hawaiian islands. MARKETING The Company markets Delta Queen and American Hawaii as separate cruise brands. Delta Queen is marketed to mature adult travelers as a unique vacation experience aboard classic steamboats in which the people, sights, romance and history of heartland America are explored. The Company believes individuals are attracted to its paddlewheel steamboat cruises because of the quality of its service, dining, accommodations and entertainment as well as the unique characteristics of the steamboat experience, including the connection to American history. Delta Queen annually welcomes back a large number of prior passengers which is supported through a relationship marketing program. New passengers are acquired through targeted direct mail, direct response advertising and other promotional activity. Media coverage generated by public relations activity is another efficient and effective method of acquiring new customers and building brand awareness. In 1997, Steamboatin' vacations were featured or mentioned in more than 2,000 articles in such publications as Travel & Leisure, The New York Times, Travel Holiday, The Los Angeles Times and McCall's. Inquiries from advertising, promotional activity and media coverage are fulfilled via direct mail and a full color product brochure and promotional literature. In addition, a significant number of annual customers result from referrals given by prior customers. Nearly all Steamboatin' vacations are booked via travel agents, who receive frequent communications from the Company, and who are supported with collateral and mailing materials. American Hawaii is marketed as the best and most convenient way to experience the Hawaiian Islands. The Company accomplishes this by gearing the onboard dining, entertainment, and the extensive offering of shore excursions towards an Hawaiian theme. Additionally, the Hawaiian vacation package is promoted as a convenient and rewarding alternative to land-based multi-island vacations. American Hawaii targets consumers who are interested in Hawaii, as well as cruise enthusiasts, through strategically targeted direct mail campaigns, and the Holokai Hui News newsletter, aimed at repeat passengers. American Hawaii also places full color advertisements in specialized publications such as Modern Maturity, Car and Travel and Endless Vacation magazines and has been the subject of feature articles in national travel and leisure magazines and newspaper travel sections. To supplement and reinforce these efforts, full color sales brochures are distributed to prospective customers as well as travel agents. The travel agency community also receives periodic fax broadcasts and a quarterly newsletter, the Kuaihelani. SALES The Company maintains separate field sales and reservation staffs for Delta Queen and American Hawaii. The Company sells its cruise products primarily through two major channels, of which the most significant channel is travel agents operating throughout the U.S. The Company has programs which educate travel agents about the unique nature of the Company's travel experiences, the vessels' itineraries, special programs, theme cruises and pricing policies. To assist in obtaining reservations from travel agents, the Company engages in both consumer and trade-oriented advertising, including direct mailings of the Company's literature to travel agencies. The Company maintains contact with travel agents through each cruise line's 13 field sales personnel who conduct educational seminars and attend trade shows. The Company's second major sales channel is group travel organizers, consisting of clubs, travel agencies and tour operators who arrange for the sale of cruise vacations at discounted fares. The Company provides a variety of incentives to these organizers, including fare discounts and promotional materials. During 1997, one travel agency consortium accounted for 10.8% of the Company's revenues. The Company believes the loss of such customer would not have a material adverse effect on the Company's sales. PRICING AND ADVANCE RESERVATIONS The Company issues separate full color sales brochures for each of Delta Queen and American Hawaii, which contain descriptive information, itineraries and fare schedules, prior to the beginning of each upcoming calendar year. The Company prices its cruise fares, based on cabin category, using a single pricing schedule for each cruise line throughout the calendar year. As an inducement for passengers to book early, the Company generally offers an early booking discount which typically consists of the current year's fares to passengers who book more than six to eight months in advance for the upcoming year. In 5 6 addition, the Company offers to group travel organizers and others certain discounts from the Company's published fare schedule. To stimulate additional demand, the Company may offer discounts from the Company's published fare schedule. The Company actively markets its cruises up to one year prior to the cruise year and the level of advance reservations at any given date provides the Company with an indication of its future fare revenue. A significant portion of such reservations is booked more than six months in advance of the cruise date. Generally, customers of each cruise line must pay a $300 refundable deposit within one week of booking a cruise with the balance of the cruise fare to be remitted 60 days in advance of the departure date. Cancellations received after a certain date are subject to a loss of deposit and/or a cancellation charge ranging from 25% to 100% of the cruise fare. For a nominal fee, the Company also offers trip cancellation insurance through a third-party insurer which allows the customers to reduce their exposure to cancellation charges. As of December 31, 1997, advance reservations for the 1998 cruise year for both Delta Queen and American Hawaii combined were $76.2 million. However, the Company cannot specifically determine the amount of revenues to be derived from advance reservations as there can be no assurance that any particular advance reservation will result in any revenue to the Company. SEASONALITY Delta Queen's operations are seasonal. Historically, there is greater passenger interest and higher yields in the spring and fall months of the year. Accordingly, the vessels typically undergo their annual lay-up in January for repairs, maintenance and significant capital projects. American Hawaii's operations are moderately seasonal with greater passenger interest in the winter and summer 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. The Company's 1997 results are not comparable to 1996 due to (i) the Independence drydock for a four week period ended June 13, 1997, (ii) the March 1996 impairment write-down of the Constitution and (iii) the October 1996 sale of the Maison Dupuy Hotel. COMPETITION The vacation industry is highly fragmented and characterized by a significant degree of competition among a large number of participants, including cruise lines, land-based destination resorts, sightseeing tours and a wide range of other vacation options. The Company's vessels compete against all of these vacation options. Since leisure spending is discretionary, adverse economic conditions which affect the Company's customer base, including uncertainty over inflation and interest rate fluctuations, may negatively impact the Company's performance. The Company believes that it is the largest provider of overnight cruise vacations on U.S. flag vessels, and that its cruise experience differentiates the Company's vacation packages from other overnight cruise vacations and other vacation alternatives. The Company further believes its principal competitive strengths include: (i) a high level of recognition by, and familiarity with, its customer base; (ii) the distinctive nature of its products as an opportunity to experience historical aspects of American heritage and the beauty of the Hawaiian islands; and (iii) the vessels' status as U.S. flag vessels with American crews. All of the Company's vessels are registered under the U.S. flag for coastwide trade, which requires that they be U.S. built, owned and crewed. Federal maritime laws prohibit non-U.S. flag vessels from receiving and discharging passengers at any two U.S. ports without stopping at an intervening non-U.S. port. Should the law be amended or repealed, other entities, including those with greater resources than the Company, could introduce overnight non-U.S. flag vessels on inland waterways and among the Hawaiian islands in direct competition with the Company's vessels. See "Government Regulation" below. The entry of direct competition could adversely affect the Company's ability to maintain or further increase occupancy or prices for cruise vacations and could result in lower margins, thereby adversely affecting the profitability of the Company's business. GOVERNMENT REGULATION Federal maritime law currently prohibits non-U.S. flag vessels from receiving and discharging passengers at any two U.S. ports without stopping at an intervening non-U.S. port. Periodically there has been debate about the potential amendment or repeal of this law and the broader cabotage laws encompassed under the Merchant Marine Act of 1920, also known as the Jones Act and the Passenger Vessel Services Act ("PVSA"). In August 1995, the Company joined the Maritime Cabotage Task Force ("MCTF"), a broad national coalition of 415 companies, associations and unions representing all modes of domestic transportation. The MCTF is responsible for monitoring potential adverse changes in legislation that could affect the U.S. maritime industry and publicizing the economic and national security issues relevant to maintaining a strong U.S. flag vessel industry. Through the coalition's efforts, numerous legislators and key Congressional staff members have been made 6 7 aware of the substantive issues and positions surrounding any changes to this legislation. In 1997, a bill was introduced to modify the PVSA by allowing foreign flagged ships in certain itineraries where there was no existing U.S.-flag ship in service. This bill, however, would not permit foreign flagged ships to compete with the Company's existing operations and itineraries. In October 1997, a hearing was held before the Surface Transportation and Merchant Marine subcommittee of the Senate Commerce Committee. Since such date, no further actions have been taken and no further hearings have been scheduled to date. American Hawaii's expansion plans have been 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 is subject to various Federal and state regulations which affect the operations of its vessels. Most importantly, the Company's vessels, as U.S. flag vessels, are subject to regulations promulgated by the U.S. Department of Transportation and enforced by the U.S. Coast Guard ("Coast Guard"). The Coast Guard conducts both scheduled and unannounced inspections to determine compliance with these regulations and has the authority to delay or suspend cruises. The Delta Queen vessels must be drydocked for an inspection of the hulls' exteriors every five years. Previously, American Hawaii was required to drydock the Independence approximately every 18 months for a similar procedure. The Coast Guard is empowered to increase the interval between inspections and accordingly, the Company has requested and received permission from the Coast Guard to lengthen the interval of the drydocking of the Independence to every 30 months, subject to annual hull surveys. In May 1997, the Independence was out of service for a four-week period for its once every 30-month drydock. The Company, like other entities that operate vessels on U.S. waterways, is subject to certain Federal, state and local health and safety laws, regulations and ordinances, such as the Clean Air Act, Clean Water Act, Ocean Dumping Act, Occupational Safety and Health Act, Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act. Periodically, the Company incurs expenditures to keep its vessels in compliance with such environmental laws and regulations. The Company does not anticipate making any material expenditures in 1998 with respect to environmental matters. However, the coverage and attendant compliance costs associated with such laws, regulations and ordinances may result in future additional costs to the Company's operations. SOLAS, to which the U.S. is a party, requires that passenger vessels for 50 or more passengers be constructed of fire retardant materials. Since the Delta Queen's superstructure is wood, the vessel requires a legislative exemption from the SOLAS requirement. Since 1968 Congress has granted the Delta Queen seven consecutive Congressional exemptions from this SOLAS requirement because of fire prevention and safety enhancements made to the vessel and the Delta Queen's historic status. The legislation exempting the Delta Queen requires the Company to notify potential passengers that the Delta Queen does not comply with applicable fire standards and prohibits the Company from disclaiming liability for loss due to fire caused by the Company's negligence. The current exemption has been extended to November 1, 2008. The Company's ability to operate the Delta Queen is dependent upon retaining its current Congressional exemption and obtaining additional exemptions subsequent to 2008. For ocean-going passenger vessels, fire safety amendments to SOLAS require that certain enhancements to life safety systems must be made by October 1, 1997. The Independence was brought into compliance during its spring 1997 drydock as discussed above. The Company's vessels are also subject to regulation under the Federal Food, Drug and Cosmetic Act and the Public Health Service Act. 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. The FMC has reviewed its standards and in June 1996 issued proposed regulations to increase the financial responsibility requirements. The Company filed its objection to the proposals, 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. 7 8 INSURANCE The Company carries marine liability insurance on its vessels through Steamship Mutual Underwriting Association (Bermuda) Limited ("Steamship Mutual"), a non-profit, mutual protection and indemnity association. The Company's marine liability insurance arrangements are typical of common marine industry practices and, subject to certain deductibles, provide coverage for losses, other than hull physical damage losses, resulting from its activities as a ship owner, including casualty damage by the vessels and claims by crew members, passengers and other third parties. The policy has no maximum limit of liability coverage, except for a $500 million limit, per occurrence, for oil pollution liability claims. As a member of Steamship Mutual, the Company pays its annual premiums based largely on its risk characteristics and loss experience, and the loss experience of other members. In addition, because Steamship Mutual and other maritime mutual indemnity associations around the world pool a portion of their loss experience in risk sharing arrangements, Steamship Mutual also may be affected by the loss experience of other mutual protection and indemnity organizations. The Company's annual protection and indemnity insurance premium consists of an advance call which recently has approximated 71% of the expected total annual premium, and a supplemental call determined by Steamship Mutual's managing directors later in the year. The Company may be liable for a supplemental call in excess of the anticipated amount in the event that Steamship Mutual incurs heavy losses or experiences unusual circumstances. The Company also carries hull and machinery coverage with various insurers, which insures against physical loss and damage to the vessels, subject to a $750,000 deductible and/or co-payment requirements per occurrence per vessel. Although the Company believes the risk of a total loss of the vessels is remote, in all likelihood the replacement costs would exceed these coverage amounts. The Company believes its insurance coverage is adequate based on the Company's assessment of the risks to be insured, the probabilities of loss and the relative cost of available coverages. EMPLOYEES The Company employed 1,404 persons as of December 31, 1997. Of the vessels' onboard employees, the American Maritime Officers of the AFL-CIO ("American Maritime Officers") represented approximately 118 individuals, and the Seafarers International Union of North America, Atlantic, Gulf, Lakes and Inland Waters District of the AFL-CIO ("Seafarers") represented approximately 673 individuals. The American Maritime Officers' contracts for Delta Queen and American Hawaii expire in February 2004 and May 2000, respectively, and the Seafarers' contracts for Delta Queen and American Hawaii expire in December 2003 and May 2000, respectively. Since 1986, the Company has not experienced any work stoppages, and believes its relations with its employees are good. ITEM 2. PROPERTIES The Company's principal physical properties include the four vessels, the Delta Queen, Mississippi Queen, American Queen and Independence. In addition, the Company leases the Robin Street Wharf facility in New Orleans, Louisiana and office space in Chicago, Illinois and Honolulu, Hawaii. DELTA QUEEN The Delta Queen was constructed in 1926 and has undergone several refurbishments. The vessel is 285 feet long and is powered by twin reciprocating steam engines which generate 2,000 horsepower to drive its paddlewheel. It has a steel hull, a wooden superstructure and 174-passenger berths based on double occupancy. MISSISSIPPI QUEEN The Mississippi Queen was placed in service in 1976 and has 416-passenger berths based on double occupancy. The vessel is 382 feet long, has a steel hull and superstructure and is powered by twin reciprocating steam engines which generate 2,000 horsepower to drive its paddlewheel. 8 9 AMERICAN QUEEN The American Queen, was placed in service in June 1995 and has 436-passenger berths based on double occupancy. The vessel is 418 feet long, has a steel hull and superstructure and is partially powered by twin reciprocating steam engines which, when combined with a supplemental propulsion system, generate 3,500 horsepower to drive a wooden/steel paddlewheel. INDEPENDENCE The Independence steamship was built in 1951 and has undergone several refurbishments. The vessel is 682 feet long, 89 feet wide, and is powered by twin steam turbines providing 5,100 horsepower. It has a steel hull and superstructure and has 867-passenger berths based on double occupancy. In the spring of 1997, the Independence was out of service for a four-week period for its Coast Guard mandated once very thirty-month drydock that included 1997 SOLAS upgrades, the addition of 25 passenger cabins and public area enhancements. ROBIN STREET WHARF FACILITY The New Orleans office building, which is located at Robin Street Wharf, contains approximately 46,000 square feet and houses Delta Queen's and American Hawaii's principal offices. The office building was expanded during 1997 for American Hawaii's passenger services and administrative offices relocated from Chicago, Illinois. The Company has been granted a preferential assignment and right to use the Robin Street Wharf by the Board of Commissioners of the Port of New Orleans (the "Board of Commissioners"). Of the approximately 158,000 square feet of property covered by the preferential assignment, approximately 1,000 linear feet represents river frontage access. The preferential assignment may be terminated at any time by the Board of Commissioners, upon 60 days notice, provided that the Board of Commissioners determines that the wharf is needed for a non-passenger, superior maritime use. The Company believes it is unlikely that the Board of Commissioners will terminate the preferential assignment. If the assignment were to be terminated, the Board of Commissioners would be required to reimburse the Company for a portion of the unamortized cost of its wharf improvements. The Company believes that it could relocate its boarding, docking and office facilities to another location in New Orleans without a material adverse impact on the operations of the Company. CHICAGO LEASE The Company's principal executive offices are located at Two North Riverside Plaza, Chicago, Illinois. The Company currently leases approximately 37,000 square feet from Two North Riverside Joint Venture Limited Partnership, an Illinois limited partnership, controlled by an affiliated company, Equity Group Investments, Inc. After the relocation of American Hawaii's offices, the Company subleased, for a six month period, approximately 13,000 square feet to Equity Office Properties Trust, an affiliated company, at a rate which the Company believes to be competitive for comparable space from an unaffiliated landlord. The Company is marketing the subleased space for a long-term arrangement. HAWAII LEASE American Hawaii leases approximately 40,000 square feet of office, warehouse and parking space at 2100 Nimitz Highway, Honolulu, Hawaii. ITEM 3. LEGAL PROCEEDINGS There are no 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 9 10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) The Company's common stock trades on the Nasdaq National Market tier of the Nasdaq Stock Market under the symbol: AMCV. On March 23, 1998, the last reported sale price for the Company's common stock was $22.00 per share. The following table indicates the high and low sales price information for shares of the Company's common stock as reported by The Nasdaq Stock Market:
High Low --------------------------------------------------------------- QUARTER ENDED: December 31, 1997............... $19.25 $16.00 September 30, 1997.............. 18.25 10.25 June 30, 1997................... 11.88 9.88 March 31, 1997.................. 13.00 10.13 QUARTER ENDED: December 31, 1996............... 13.25 8.50 September 30, 1996.............. 10.00 6.75 June 30, 1996................... 9.50 7.38 March 31, 1996.................. 11.38 8.00
(b) The number of stockholders of record of common stock on March 23, 1998 was approximately 667. (c) No dividends were declared in 1996 and 1997. The declaration and payment of future dividends will be within the discretion of the Company's Board of Directors. Payment of dividends will depend, among other things, upon the Company's operating performance and its planned capital requirements. ITEM 6. SELECTED FINANCIAL DATA Information with respect to the Company's selected financial data is set forth under "Selected Financial Data" on page 15. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis is set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations" on page 16. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements and supplementary data are as set forth in the "Index to Consolidated Financial Statements" on page 14. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 10 11 PART III ITEMS 10, 11, 12 AND 13 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company will file a definitive proxy statement with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 (the "Proxy Statement") relating to the Company's Annual Meeting of Stockholders to be held on June 3, 1998, not later than April 29, 1998. Information required by Items 10 through 13 will appear in the Proxy Statement and is incorporated herein by reference. 11 12 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) Financial Statements. The consolidated financial statements of the Company are set forth in the "Index to Consolidated Financial Statements" on page 14. (a)(2) Financial Statement Schedules. Financial Statement Schedules, except those indicated in the "Index to Consolidated Financial Statements" on page 14, have been omitted because they are not applicable, not required under the instructions, or all the information required is set forth in the financial statements or the notes to the financial statements. (a)(3) Exhibits are as set forth in the "INDEX TO EXHIBITS" on page 40. (b) Reports on Form 8-K: None. 12 13 SIGNATURES Pursuant to the requirements of Section 13 and 15(d) of the Securities and Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Date March 30, 1998 -------------- AMERICAN CLASSIC VOYAGES CO. By /s/ Philip C. Calian ----------------------- Philip C. Calian Chief Executive Officer Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Samuel Zell Chairman of the Board - ------------------------- Samuel Zell /s/ Philip C. Calian President and Chief Executive Officer - ------------------------- (Principal Executive Officer), Director Philip C. Calian /s/ O. Ivy Wu Treasurer and Chief Accounting Officer - ------------------------- (Principal Accounting Officer) O. Ivy Wu /s/ Sheli Z. Rosenberg Director - ------------------------- Sheli Z. Rosenberg /s/ Arthur A. Greenberg Director - ------------------------- Arthur A. Greenberg /s/ Ann Lurie Director - ------------------------- Ann Lurie /s/ Jerry R. Jacob Director - ------------------------- Jerry R. Jacob /s/ Joseph P. Sullivan Director - ------------------------- Joseph P. Sullivan 13 14 AMERICAN CLASSIC VOYAGES CO. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page Number ------ Selected Financial Data..................................................................... 15 Management's Discussion and Analysis of Financial Condition and Results of Operations....... 16 Independent Auditors' Report................................................................ 21 Consolidated Financial Statements Consolidated Balance Sheets............................................................. 22 Consolidated Statements of Operations................................................... 23 Consolidated Statements of Cash Flows................................................... 24 Consolidated Statements of Changes in Stockholders' Equity.............................. 25 Notes to Consolidated Financial Statements.............................................. 26 Financial Statement Schedules Schedule I - Condensed Financial Information of Registrant.......................... 36
14 15 AMERICAN CLASSIC VOYAGES CO. SELECTED FINANCIAL DATA
Years Ended December 31, ------------------------------------------------- 1997 1996 1995 1994 1993(1) ------------------------------------------------- INCOME STATEMENT DATA (Amounts in thousands) Revenues............................... $177,884 $190,408 $188,373 $195,197 $121,689 ------------------------------------------------- Gross profit........................... 66,589 67,863 51,895 51,569 38,708 ------------------------------------------------- One-time charges(2).................... -- 38,390 5,900 5,699 -- ------------------------------------------------- Operating income (loss)................ 9,984 (30,465) (14,535) (4,438) 6,349 ------------------------------------------------- Other income (3)....................... -- 11,729 -- -- -- ------------------------------------------------- Net interest (expense) income.......... (5,935) (7,199) (4,002) 672 577 ------------------------------------------------- Net income (loss)...................... $ 2,429 $(17,636) $ (9,671) $ (983) $ 4,220 ------------------------------------------------- PER SHARE INFORMATION Basic earnings (loss) per share........ $ 0.17 $ (1.28) $ (0.70) $ (0.07) $ 0.38 Diluted earnings (loss) per share ..... $ 0.17 $ (1.28) $ (0.70) $ (0.07) $ 0.36 Cash dividends per share .............. $ -- $ -- $ 0.08 $ 0.16 $ 0.16 OPERATING STATISTICS Fare revenue per passenger night....... $ 228 $ 216 $ 208 $ 202 $ 220 Total revenue per passenger night...... $ 302 $ 287 $ 288 $ 297 $ 302 Weighted average operating days(4): DELTA QUEEN........................ 337 347 263 339 339 AMERICAN HAWAII.................... 337 366 272 303 147 Vessel capacity per day (berths)(5): DELTA QUEEN........................ 1,026 1,024 1,024 588 596 AMERICAN HAWAII.................... 844 817 1,594 1,544 1,526 Passenger nights(6).................... 588,892 643,891 628,660 632,373 382,823 Physical occupancy percentage(7)....... 93.5% 98.4% 89.6% 94.8% 89.8% BALANCE SHEET DATA (at period end) (Amounts in thousands) Total assets........................... $210,895 $211,864 $247,473 $227,798 $192,598 Current portion of long-term debt...... 4,100 4,100 3,746 -- -- Long-term debt......................... 81,488 85,898 103,272 65,000 15,000 Total stockholders' equity............. 59,219 54,982 71,413 82,105 84,786
(1) Includes the effects of the Mississippi River flooding and the acquisition of American Hawaii. (2) In 1996, the Company decided not to renovate and return the Constitution to service, resulting in write-down costs of $38.4 million ($1.89 per share - net of tax on both a basic and diluted basis). In 1995, the Company incurred a $5.9 million ($0.28 per share-net of tax on both a basic and diluted basis) one-time charge that represented costs associated with the introduction of the American Queen in June of 1995. In 1994, the Company incurred $5.7 million ($0.20 per share-net of tax on both a basic and diluted basis) in one-time charges due to problems related to the renovation of the Independence. (3) In 1996, the Company sold its Maison Dupuy Hotel located in New Orleans, Louisiana for a gain of $11.7 million ($0.57 per share - net of tax on both a basic and diluted basis). (4) 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. Capacity passenger nights is determined by multiplying the actual operating days of the vessel by each vessel's capacity per day. (5) 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. (6) 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. (7) Physical occupancy percentage is passenger nights divided by capacity passenger nights. 15 16 AMERICAN CLASSIC VOYAGES CO. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW 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 Company, through its various subsidiaries, operates two cruise lines: The Delta Queen Steamboat Co. ("Delta Queen"), which owns and operates the American Queen, Mississippi Queen and Delta Queen steamboats; and American Hawaii Cruises ("American Hawaii"), which owns and operates the Independence steamship. Delta Queen also owned and operated the Maison Dupuy Hotel (the "Hotel") which is located in New Orleans, prior to its sale in October 1996. American Hawaii also owned the Constitution steamship which was removed from service in June 1995 and sold on November 4, 1997. The following is a review of the Company's consolidated operating results, liquidity, capital resources and financial condition for the calendar years ended December 31, 1997, 1996 and 1995 (referred to herein as 1997, 1996 and 1995). Certain previously reported amounts have been reclassified to conform to the 1997 presentation. REVIEW OF 1997 AND RECENT EVENTS In 1997, the Company's results of operations were affected by the following factors: (i) the improved performance of Delta Queen's operations; (ii) the four week drydock of the Independence; and (iii) costs associated with the relocation and integration of American Hawaii's principal offices into Delta Queen's existing offices and costs incurred for planning to increase capacity at American Hawaii. At Delta Queen, cruise gross profit increased by $7.2 million over the prior year due to increases in fare revenue per passenger night ("fare per diems") while cruise operating costs were consistent with the prior year's levels. Additional cost control was achieved in cruise selling, general, and administrative expenses, which declined by 10% from the prior year. At American Hawaii, the Independence was out of service for a four-week period ending June 13, 1997 for its once every 30-month drydock, which was completed on time and within its budget. With the buildout of 25 new passenger cabins, the vessel's potential revenue producing capability was increased and passenger area enhancements improved the overall appearance of the vessel. During the drydock, the vessel was also brought into compliance with the applicable Safety of Life at Sea Convention fire safety amendments. During 1997, the Company incurred $1.6 million of expenses related to potential capacity expansion at American Hawaii (as further discussed below) and for the relocation of American Hawaii's principal offices from Chicago to New Orleans. These factors, among others, resulted in the Company reporting consolidated operating income of $10.0 million in 1997 compared to an operating loss of $30.5 million in 1996. The 1996 operating loss included a write-down of $38.4 million related to the Constitution and $1.4 million of operating income related to the Hotel which was sold in October 1996. On October 17, 1997, the Company announced its plans to expand capacity at American Hawaii. The expansion plans have been 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 to construct two new cruise ships over the next seven years and plans for American Hawaii to introduce another vessel in the Hawaii market as early as mid-1999 while awaiting construction of the new vessels. 16 17 YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996 Consolidated revenues for 1997 decreased $12.5 million to $177.9 million from $190.4 million for 1996 representing a $6.6 million decrease in cruise revenues combined with a $5.9 million decrease in Hotel revenues as a result of the Hotel sale. Delta Queen's cruise revenues increased $7.1 million, reflecting an 12% increase in fare per diems combined with an 11% increase in revenue from air and land packages. The increase in fare per diems as compared to 1996 was attributable to a reduction in the use of discounts to fill open inventory close to a sailing date. American Hawaii's revenues decreased $13.7 million as a result of an 8% decrease in operating days due to the Independence drydock combined with a 3% decrease in fare per diems and a 9% decrease in occupancy. Consolidated fare per diems for 1997 increased 6% to $228, and consolidated total revenue per passenger night increased 5% to $302, as the increase in fare per diems at Delta Queen more than offset the decrease in fare per diems at American Hawaii. Consolidated cost of operations decreased $11.2 million to $111.3 million for 1997 from $122.5 million for 1996. Hotel-related costs of operations represented $1.9 million of the 1996 costs. American Hawaii's operating costs decreased $9.2 million primarily as a result of the Independence drydock while Delta Queen's cruise operating costs decreased $0.1 million. 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 SG&A decreased $4.4 million to $41.0 million for 1997 from $45.4 million for the prior year. Of the $4.4 million decrease, $2.3 million was attributable to the Hotel, with the remainder of the decrease primarily due to cost savings at Delta Queen. Also included in SG&A expenses for 1997 were $1.6 million of American Hawaii's office relocation costs and costs incurred for planning for capacity expansion in Hawaii. The $1.0 million increase in depreciation and amortization expense was primarily 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. As the vessel was sold in November 1997 for net sale proceeds of $1.8 million, the salvage value of the vessel was written down from $2.5 million to $1.8 million. 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 1997 was $10.0 million as compared to a cruise operating income of $6.5 million, excluding the Constitution write-down and Hotel operations in 1996. Hotel operating income in 1996 was $1.4 million. Interest expense decreased $1.1 million due to a lower outstanding debt balance in 1997. The Company's consolidated effective tax rate increased to 40% in 1997 from 32% in the prior year as the Company recognized certain state tax expenses in 1997. YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 Consolidated revenues increased $2.0 million to $190.4 million for 1996 from $188.4 million for 1995 representing a $3.6 million increase in cruise revenues offset by a $1.6 million decrease in Hotel revenues as a result of the Hotel being sold on October 16, 1996. American Hawaii's revenues decreased $10.2 million, or 10%. This decrease was mainly due to a 31% decrease in capacity as a result of the Constitution's removal from service on June 27, 1995, partially offset by improvements on the Independence in fare per diems which increased by 15% compared to 1995. Delta Queen's revenues increased $13.8 million, or 18%, reflecting a 32% increase in passenger nights for the period, offset by a 11% decrease in fare per diems. The decrease in fare per diems as compared to 1995 was attributable to management's strategy of discounting fares in 1996 in an effort to maintain historically high occupancy levels and to help shift the booking cycle of when a majority of its cabin inventory is sold to its optimal schedule of six to nine months in advance. The consolidated fare per diems for 1996 increased 4% to $216 as the increase in American Hawaii's fare per diems more than offset the decrease in Delta Queen's fare per diems. Consolidated total revenue per passenger night decreased slightly to $287 due to a reduction in the percentage of passengers at both cruise lines electing to purchase air travel through the Company. 17 18 Consolidated cost of operations decreased to $122.5 million for 1996 from $136.5 million for the comparable period of 1995. Of this decrease, $0.5 million represents a reduction of Hotel related cost of operations. American Hawaii's operating costs decreased $24.3 million primarily due to the Constitution's removal from service and realization of operating cost savings on the Independence as a result of cost cutting efforts undertaken since the second half of 1995. Delta Queen's operating costs increased $10.9 million, or 23%, primarily due to the addition of the American Queen, which was placed in service in June 1995. Consolidated SG&A decreased to $45.4 million for 1996 from $48.6 million for the same period in 1995. Delta Queen's additional capacity resulted in increased marketing and corporate overhead expenditures but was offset by the reduction in American Hawaii's marketing and corporate overhead expenditures as only one ship was in operation. The $2.7 million increase in depreciation and amortization expense represents a $3.0 million increase in depreciation expense offset by a $0.3 million decrease in amortization expense. The increase in depreciation was due to the addition of the American Queen while depreciation at American Hawaii remained unchanged as the increased depreciation on the Independence was offset by the suspension of depreciation on the Constitution upon its removal from service in 1995. After evaluating the scope and cost of the Constitution reconstruction project as well as considering various alternatives, the Company announced in April 1996 its decision not to renovate or return the Constitution to service. In connection with this decision, the Company recognized an impairment write-down of $38.4 million in the first quarter of 1996. The $38.4 million impairment write-down was composed of (i) $36.1 million directly related to the write-down of the vessel and its allocated goodwill to an estimated salvage value of $2.5 million, and (ii) $2.3 million which represented the remaining goodwill balance from the American Hawaii acquisition. 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 December 31, 1996, the balance of this reserve was $2.8 million. The impairment write-down was recognized in accordance with the Statement of Financial Accounting Standards 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. Excluding this write-down, the consolidated operating income for 1996 was $7.9 million as compared to an operating loss, before one-time pre-opening costs of $5.9 million, of $8.6 million in 1995. Interest expense increased $2.4 million due to a greater outstanding debt balance in 1996 and capitalization of interest costs in 1995 related to the American Queen construction. The Company's consolidated effective tax rate was lower in 1996 as compared to 1995. As the minority interest in GHCL was redeemed in December 1995, the net loss for 1996 reflected 100% ownership of GHCL by the Company. LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION Operating Activities Cash provided by operations was $22.4 million in 1997 compared to $15.0 million in 1996, reflecting the improved operating performance of Delta Queen. Cash used in operations in 1995 of $9.9 million reflected the lower operating performance of American Hawaii in that year and a one-time charge related to the launch of the American Queen in the summer of 1995. Capital Expenditures The Company's capital expenditures were $22.3 million in 1997 as compared to $15.4 million in 1996 and $45.2 million in 1995. The largest portion of the 1997 capital expenditures was related to the Independence drydock which cost $13.4 million, of which $1.0 million represented repairs and maintenance. Other significant vessel capital expenditures included $5.0 million related to Delta Queen lay-ups, which included the completion of the December 1997 Mississippi Queen lay-up. 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 a capitalized cost of $2.5 million. 18 19 The Company's significant planned capital commitments in 1998 include lay-ups of the American Queen and Delta Queen, in which certain renovations will be performed. The American Queen was out of service for 15 days, starting January 2, 1998 while the Delta Queen's scheduled 82 day lay-up began December 13, 1997. The lay-ups for these two vessels, including repairs and maintenance, are expected to cost $5.1 million and will be funded from cash on hand and cash from operations. Debt As of December 31, 1996, the Company's restricted short-term investments included an escrow account of $0.3 million for the remaining American Queen construction costs and a debt service deposit of $2.2 million related to the Independence Maritime Administration ("MARAD") debt. As American Hawaii met certain cash flow ratios as of December 31, 1996, the debt service deposit was released to the Company in April 1997. Additionally, the escrow balance related to the American Queen was released to the Company in October 1997 and was used to pay down the principal balance of the American Queen MARAD debt. As of December 31, 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 above, 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. Other The sale of the Constitution was completed on November 4, 1997 when the vessel was delivered to the buyer and net sales proceeds of $1.8 million were 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. The FMC has reviewed its standards and in June 1996 issued proposed regulations to increase the financial responsibility requirements. The Company filed its objection to the proposals, 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 June 11, 1997, the Board of Directors of the Company approved a stock repurchase plan. 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 December 31, 1997, the Company has not repurchased any shares under the plan. 19 20 Year 2000 The Company has conducted a preliminary review of its computer systems to identify the systems that could be affected by the "Year 2000" problem. The Year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a major system failure, miscalculations and/or other unanticipated problems. The Company has conducted preliminary testing of its systems and believes that it has no significant Year 2000 compliance issues. The system review and testing will continue in 1998. The Company has also taken steps to communicate with its vendors to coordinate Year 2000 compliance. The Company believes that the expense of the Year 2000 problem will not have a material effect on its financial position or results of operations. The costs, if any, will be expensed as incurred, in compliance with generally accepted accounting principles. 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. 20 21 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders American Classic Voyages Co. We have audited the consolidated balance sheets of American Classic Voyages Co. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1997. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of management of American Classic Voyages Co. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Classic Voyages Co. and subsidiaries as of December 31, 1997 and 1996 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Chicago, Illinois February 20, 1998 21 22 AMERICAN CLASSIC VOYAGES CO. CONSOLIDATED BALANCE SHEETS (In thousands, except shares and par value)
December 31, -------------------- 1997 1996 -------------------- ASSETS Cash and cash equivalents................ $ 19,187 $ 17,908 Restricted short-term investments........ 325 2,957 Accounts receivable...................... 1,299 3,734 Prepaid expenses and other current assets 7,813 7,640 -------------------- Total current assets.................. 28,624 32,239 Property and equipment, net.............. 171,105 166,883 Deferred income taxes, net............... 9,564 10,968 Other assets............................. 1,602 1,774 -------------------- Total assets.......................... $210,895 $211,864 ==================== LIABILITIES Accounts payable......................... $ 14,282 $ 10,683 Other accrued liabilities................ 18,093 24,532 Current portion of long-term debt........ 4,100 4,100 Unearned passenger revenues.............. 33,713 31,669 -------------------- Total current liabilities............. 70,188 70,984 Long-term debt, less current portion..... 81,488 85,898 -------------------- Total liabilities..................... 151,676 156,882 ==================== 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, 14,006,015 and 13,867,829 shares issued and outstanding, respectively).............. 140 139 Additional paid-in capital............... 77,059 75,252 Accumulated deficit...................... (17,980) (20,409) -------------------- Total stockholders' equity............ 59,219 54,982 -------------------- $210,895 $211,864 ====================
The accompanying notes are an integral part of these Consolidated Financial Statements. 22 23 AMERICAN CLASSIC VOYAGES CO. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
Years Ended December 31, ----------------------------- 1997 1996 1995 ----------------------------- Revenues............................................... $177,884 $190,408 $188,373 Cost of operations (exclusive of depreciation and amortization shown below)............................ 111,295 122,545 136,478 ----------------------------- Gross profit........................................... 66,589 67,863 51,895 Selling, general and administrative expenses........... 41,015 45,367 48,613 Depreciation and amortization expense.................. 15,590 14,571 11,917 Impairment write-down (Note 4)......................... -- 38,390 -- One-time pre-opening costs............................. -- -- 5,900 ----------------------------- Operating income (loss)................................ 9,984 (30,465) (14,535) Interest income........................................ 1,028 912 1,706 Interest expense....................................... 6,963 8,111 5,708 Other income........................................... -- 11,729 -- ----------------------------- Income (loss) before income taxes and minority interest 4,049 (25,935) (18,537) Income tax (expense) benefit........................... (1,620) 8,299 6,308 Minority interest in loss.............................. -- -- 2,558 ----------------------------- Net income (loss)...................................... $ 2,429 $(17,636) $ (9,671) ============================= PER SHARE INFORMATION: Basic: Basic weighted average shares outstanding........... 13,952 13,802 13,763 Earnings (loss) per share........................... $ 0.17 $ (1.28) $ (0.70) Diluted: Diluted weighted average shares outstanding......... 14,338 13,802 13,763 Earnings (loss) per share........................... $ 0.17 $ (1.28) $ (0.70)
The accompanying notes are an integral part of these Consolidated Financial Statements. 23 24 AMERICAN CLASSIC VOYAGES CO. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands)
Years Ended December 31, --------------------------------- 1997 1996 1995 --------------------------------- OPERATING ACTIVITIES Net income (loss).................................. $ 2,429 $ (17,636) $ (9,671) ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Depreciation and amortization...................... 15,590 14,571 11,917 Minority interest.................................. -- -- (2,558) Impairment write-down (Note 4)..................... -- 38,390 -- Gain on sale of assets............................. -- (11,729) -- Changes in certain working capital accounts and other Accounts receivable......................... 2,435 (2,600) 190 Accounts payable............................ 3,599 (2,305) (3,971) Accrued liabilities......................... (5,344) (289) 1,537 Other assets................................ 1,576 (6,400) (6,869) Unearned passenger revenues................. 2,044 3,137 (2,534) Prepaid expenses and other.................. 85 (123) 2,012 --------------------------------- Net cash provided by (used in) operating activities 22,414 15,016 (9,947) --------------------------------- INVESTING ACTIVITIES Decrease in restricted investments................. 2,632 7,724 9,706 Capital expenditures............................... (22,326) (15,355) (45,227) Proceeds from sale of assets....................... 1,830 21,522 -- --------------------------------- Net cash (used in) provided by investing activities (17,864) 13,891 (35,521) --------------------------------- FINANCING ACTIVITIES Proceeds from borrowings........................... -- 6,903 117,018 Repayments of borrowings........................... (4,410) (23,923) (75,000) Purchase of subsidiary minority interest........... -- -- (105) Issuance of common stock........................... 1,139 368 80 Dividends.......................................... -- -- (1,101) Deferred financing fees............................ -- (395) (1,600) --------------------------------- Net cash (used in) provided by financing activities (3,271) (17,047) 39,292 --------------------------------- Increase (decrease) in cash and cash equivalents................................ 1,279 11,860 (6,176) Cash and cash equivalents, beginning of period..... 17,908 6,048 12,224 --------------------------------- Cash and cash equivalents, end of period........... $19,187 $ 17,908 $ 6,048 ================================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid (refunded) during the period for: Interest (net of capitalized interest).......... $ 6,223 $ 7,364 $ 3,000 Income taxes.................................... $ 249 $ 450 $ (119)
The accompanying notes are an integral part of these Consolidated Financial Statements. 24 25 AMERICAN CLASSIC VOYAGES CO. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Amounts in thousands)
Years Ended December 31, ---------------------------- 1997 1996 1995 ---------------------------- COMMON STOCK Balance, beginning of period...... $ 139 $ 138 $ 138 Issuance of common stock.......... 1 1 -- ---------------------------- Balance, end of period............ 140 139 138 ---------------------------- ADDITIONAL PAID-IN CAPITAL Balance, beginning of period...... 75,252 74,048 73,968 Issuance of common stock.......... 1,588 1,204 80 Issuance of stock units, net...... 219 -- -- ---------------------------- Balance, end of period............ 77,059 75,252 74,048 ---------------------------- ACCUMULATED DEFICIT Balance, beginning of period...... (20,409) (2,773) 7,999 Net income (loss)................. 2,429 (17,636) (9,671) Dividends......................... -- -- (1,101) ---------------------------- Balance, end of period............ (17,980) (20,409) (2,773) ---------------------------- Total stockholders' equity........ $ 59,219 $ 54,982 $71,413 ============================
The accompanying notes are an integral part of these Consolidated Financial Statements. 25 26 AMERICAN CLASSIC VOYAGES CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS American Classic Voyages Co., through its subsidiaries, operates two cruise lines under the names of The Delta Queen teamboat Co. and American Hawaii Cruises. The Delta Queen Steamboat Co., through its subsidiaries, owns and operates the American Queen, Mississippi Queen and Delta Queen steamboats which conduct overnight cruise operations on certain U.S. inland waterways ("Delta Queen"). Delta Queen also owned and operated the Maison Dupuy Hotel (the "Hotel") located in New Orleans, prior to its sale in October 1996. American Hawaii Cruises, through its subsidiaries owns and operates the Independence steamship providing overnight cruises among the Hawaiian Islands. American Hawaii also owned the Constitution steamship which was removed from service in June 1995 and was sold on November 4, 1997. PRINCIPLES OF CONSOLIDATION The accompanying Consolidated Financial Statements include the accounts of American Classic Voyages Co. ("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 Company acquired an 80% interest in GHCL in August 1993 and subsequently in December 1995 acquired the remaining 20% interest from minority interest shareholders. The accompanying Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain previously reported amounts have been reclassified to conform to the 1997 presentation. USE OF ESTIMATES 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. CASH AND CASH EQUIVALENTS All highly liquid investments purchased with an original maturity of three months or less are considered cash equivalents. RESTRICTED SHORT-TERM INVESTMENTS As of December 31, 1997, the restricted short-term investments reflected cash pledged as collateral on outstanding letters of credit related to certain contracts with vendors. As of December 31, 1996, the balance also included deposits set-up in connection with the U.S. Government guaranteed ship financing secured by the Company. Those deposits were released to the Company in 1997, as further discussed in Note 6. PROPERTY AND EQUIPMENT Property and equipment primarily consists of vessels and leasehold improvements which are recorded at cost. Construction-in-progress represents expenditures for the vessels under construction, renovation, lay-up and/or drydock. Depreciation is computed using the straight-line method based upon the estimated useful lives of the various classes of assets ranging from 3 to 40 years. Lay-up and drydock expenditures relating to vessel improvements or betterments are capitalized. In addition, lay-up and drydock expenditures relating to cleaning, repairs and maintenance are accrued evenly over the period to the next scheduled lay-up and/or drydock and are included in other accrued liabilities. Interest costs incurred during vessel construction periods were capitalized into the cost of the related vessels. In 1996, the cost and related accumulated depreciation of the Hotel building and land were removed upon the sale of the Hotel as discussed in Note 5. The Company reviews long-lived assets, identifiable intangibles, goodwill, and reserves for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable. In 1996 and 1997, the Company reduced the cost of the Constitution to its salvage value as further discussed in Note 4. GOODWILL In August 1993, the Company acquired substantially all the assets and certain liabilities of American Global Line Inc. The acquisition was accounted for as a purchase. In connection with this purchase, goodwill was recorded for the excess of purchase price over the fair value of the net assets acquired and was being amortized over its estimated useful life of 25 years using the straight-line method. In 1995, goodwill was decreased by approximately $4.2 million due to the repurchase of equity from GHCL's minority interest shareholders for $0.1 million. In 1996, in connection with its decision not to return the Constitution to service, the Company wrote-off the remaining goodwill balance (see Note 4). Amortization expense for 1996 and 1995 was $52,000 and $383,000 respectively. 26 27 INCOME TAXES Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between carrying amounts and the tax bases of other assets and liabilities. REVENUE AND EXPENSE RECOGNITION The Company generally receives passenger fares up to 60 days prior to the cruise date. Prepaid passenger fares are deferred and recognized as revenue during the associated cruise. The Company is self-insured in respect of guaranteeing the Company's passenger cruise deposits. Advertising costs are expensed as incurred and are included in selling expense. EARNINGS PER SHARE INFORMATION In February 1997, the Financial Accounting Standards Board issued Statement of Financial Standards ("SFAS") No. 128, "Earnings Per Share", which requires dual presentation of basic and diluted earnings per share. The Company has adopted the new standard and earnings per share information for prior years has been restated accordingly. Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per share is computed in a similar manner except that the denominator is increased to include dilutive potential common shares from stock options and stock units. See Note 2 for a reconciliation of basic and diluted earnings per share. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments include restricted short-term investments, accounts receivable, accounts payable, other accrued expenses and long-term debt. At December 31, 1997 and 1996, the fair values of all financial instruments were not materially different from their carrying or contract values. STOCK-BASED COMPENSATION PLANS The Company has elected to account for employee stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25, as permitted under SFAS No. 123, "Accounting for Stock-Based Compensation". See Note 10 for pro forma effect for the fair value accounting method, as defined in SFAS No. 123. NEW ACCOUNTING PRONOUNCEMENT In June 1997, the Financial Accounting Standards Board issued SFAS No. 131 "Disclosure about Segments of an Enterprise and Related Information", which requires the reporting of certain information about operating segments and related disclosures about products and services, geographic areas, and major customers. The Company will adopt the new standard, as required, in 1998 and estimates its adoption will not have a material effect on the consolidated financial statements. 27 28 NOTE 2. EARNINGS PER SHARE The earnings per share reconciliation presented below for the year ended December 31, 1997 has been prepared pursuant to the requirements of SFAS No. 128.
Net Weighted Average Per In thousands, except per share amounts Income Shares Share (numerator) (denominator) Amount --------- ----------- ------ Basic earnings per share................................... $2,429 13,952 $0.17 ===== Additional shares assuming exercise of dilutive stock options and immediate vesting of stock units......... -- 386 ------ ------ Diluted earnings per share................................. $2,429 14,338 $0.17 ====== ====== =====
For the year ended December 31, 1997, options to purchase 119,000 shares of common stock at prices ranging from $18.88 to $20.00 were outstanding at December 31, 1997, but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market prices of the common shares. As the Company reported net losses for the years ended December 31, 1996 and 1995, diluted earnings per share was computed in the same manner as basic earnings per share. Therefore, at December 31, 1996 and 1995, outstanding options to purchase 1,730,553 and 1,503,381 shares of common stock, respectively, at prices ranging from $3.25 to $20.00, were not included in the computation of diluted earnings per share. NOTE 3. PROPERTY AND EQUIPMENT Property and equipment consisted of (in thousands):
December 31, ------------------ 1997 1996 ------------------ Vessels.......................... $210,715 $196,347 Buildings........................ 8,590 6,253 Construction-in-progress......... 3,190 1,446 Other............................ 8,003 7,474 ------------------ 230,498 211,520 Less accumulated depreciation.... (59,393) (44,637) ------------------ $171,105 $166,883 ==================
During 1997, $0.8 million of fully depreciated assets that were no longer in use were written-off along with the related accumulated depreciation. At December 31, 1996, property and equipment included the estimated salvage value for the Constitution of $2.5 million. (see Note 4 for further information.) NOTE 4. IMPAIRMENT WRITE-DOWN The Constitution was removed from service on June 27, 1995 and was placed in wet berth at a shipyard in Portland, Oregon. In 1996, after evaluating the scope and cost of the Constitution reconstruction project as well as considering various alternatives, the Company announced its decision not to renovate or return the Constitution to service. The Company recognized an impairment write-down of $38.4 million, composed of (i) $36.1 million directly related to the write-down of the vessel and its allocated goodwill to an estimated salvage value of $2.5 million, and (ii) $2.3 million which represented the remaining goodwill balance from the GHCL acquisition. The Company reserved for the estimated costs to be incurred on behalf of the Constitution until its eventual disposition. These costs included insurance, wet berthing fees and general maintenance of the vessel. On November 4, 1997, the Company sold the vessel for net sale proceeds of $1.8 million and as such, the salvage value of the vessel was written down from $2.5 million to $1.8 million. 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. 28 29 NOTE 5. DISPOSITION OF ASSETS On October 16, 1996, the Company sold its subsidiary which owned the Hotel in New Orleans for $22.0 million in cash (the "Disposition"). In addition, the Company entered into a Profit Participation Agreement with the buyer which provided for future payments based on the future performance of the Hotel. The agreement was terminated in February 1998 when the Company received $0.3 million from the buyer. The Company also receives preferred rates at the Hotel for its passengers and employees who require lodging in New Orleans for two years from the date of the sale. In return, the Company has agreed to provide the buyer a minimum of $0.6 million of this business each year in the same time period. Upon the sale of the Hotel, the Company paid down its then outstanding borrowings, which were $9.5 million under its credit agreement with a group of financial institutions with The Chase Manhattan Bank, as agent (the "Credit Agreement"). The balance of the Hotel sale proceeds were used for general corporate purposes. The following pro forma financial information for the years ended December 31, 1996 and 1995 has been prepared as if the Disposition had occurred as of the beginning of each comparative period. In management's opinion, the pro forma financial information is not necessarily indicative of results that would have occurred had the Disposition taken place at the beginning of each period.
Unaudited Pro Forma Years Ended December 31, ------------------------ In thousands, except per share 1996 1995 amounts ---------- ---------- Revenues........................... $184,962 $181,301 Operating loss..................... (31,841) (17,091) Net loss........................... (17,940) (3,435) Loss per share-basic and diluted... $ (1.30) $ (0.25)
The pro forma financial information includes the following adjustments: (i) re-establishment of intercompany revenues and expenses between the Company and the Hotel previously eliminated in consolidation; (ii) decreased depreciation expense due to a lower capitalized interest balance as proceeds received from the Disposition were used to repay amounts outstanding on the Company's credit facility, and therefore, less interest expense was incurred and subject to capitalization; (iii) decreased interest expense due to reduced borrowings under the Company's credit facility as a result of the proceeds received from the Disposition. NOTE 6. LONG-TERM DEBT Long-term debt consists of (in thousands):
December 31, 1997 1996 ------- ------- U.S. Government Guaranteed Ship Financing Note, American Queen Series, LIBOR+0.25% floating rate notes due semi-annually beginning February 24, 1996 through August 24, 2005............................................. $19,233 $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....................................... 36,198 36,353 U.S. Government Guaranteed Ship Financing Note, Independence Series A, LIBOR+0.27% floating rate notes due semi-annually beginning June 7, 1996 through December 7, 2005................................................ 10,570 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, LIBOR+0.27% floating rate notes due semi-annually beginning December 7, 1996 through December 7, 2005............................................. 2,832 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 ------- ------- 85,588 89,998 Less current portion........................................................... 4,100 4,100 ------- ------- $81,488 $85,898 ======= =======
29 30 Required principal payments on long-term debt over the next five years are $4.1 million for each of the years from 1998 to 2002. For the years ended December 31, 1997 and 1996, the weighted average interest rate on outstanding borrowings was approximately 6.9% and 7.0%, respectively. The American Queen Series and the Independence Series A and B debt are guaranteed by the U.S. Government through the Maritime Administration ("MARAD") and are secured by first mortgages on the American Queen and the Independence, respectively. These Series contain various covenants which, among other things, require the compliance with certain financial ratios at the end of each year. Upon the issuance of the Independence Series A and B debt in 1995 and 1996, $2.2 million was deposited into an account representing six months of debt service. The debt service deposit was released to the Company in 1997 as GHCL has met the required cash flow and debt to equity ratios as of December 31, 1996. As of December 31, 1996, the Company's restricted short-term investments included an escrow account for remaining American Queen construction costs in the amount of $0.3 million, which was released to the Company in October 1997 and was used to pay down the principal balance of the American Queen Series. The Company has a revolving credit facility under the Credit Agreement which provides for borrowings of up to $15.0 million with a final maturity on March 31, 1999. In 1997, no borrowings were outstanding at any time under this facility. Borrowings bear interest, at the option of the Company, equal to either a LIBOR rate or prime rate basis. The Company is also required to pay a commitment fee on the unused portion of the facility at a rate ranging from 0.375% to 0.5% per annum. The Credit Agreement is guaranteed by AMCV and secured by substantially all the assets of DQSC, excluding the American Queen. The Credit Agreement contains various limitations, restrictions and financial covenants which, among other things, requires maintenance of certain financial ratios, restricts additional indebtedness, limits intercompany advances to $20.0 million and limits the payment of dividends from DQSC to AMCV to $2.0 million per annum. As of December 31, 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. The Company recently announced plans to expand capacity at American Hawaii and 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. NOTE 7. COMMITMENTS AND CONTINGENCIES The Company leases certain facilities and equipment under operating leases. The Company currently leases approximately 37,000 square feet from a partnership controlled by an affiliated company, at an annual rate of approximately $173,000. In addition, the DQSC and GHCL headquarters is maintained pursuant to an assignment from local authorities. The Company paid approximately $160,000 and $172,000 under this arrangement for the years ended December 31, 1997 and 1996, respectively. This arrangement may be terminated at any time by the local authorities upon determination that a superior maritime use is deemed to exist. Rent expense for the years ended December 31, 1997, 1996 and 1995 was approximately $916,000, $848,000 and $854,000, respectively. The future minimum lease commitments for the next five years and thereafter under all noncancelable operating leases, excluding assignment payments, as of December 31, 1997, are $565,000, $338,000, $325,000, $255,000, $215,000 and $421,000. The Company is subject to litigation in the ordinary course of business. In the opinion of management, the outcome of such litigation will not have a material effect on the results of operations or financial position of the Company as most is covered by insurance, net of a deductible. 30 31 NOTE 8. INCOME TAXES The provision (benefit) for income taxes consisted of (in thousands):
Years Ended December 31, -------------------------- 1997 1996 1995 -------------------------- Current tax provision (benefit): Federal................................. $ -- $ -- $ -- State................................... 163 (458) -- -------------------------- 163 (458) -- -------------------------- Deferred tax provision (benefit): Federal................................. 1,323 (9,073) (6,422) State................................... 134 1,232 114 -------------------------- 1,457 (7,841) (6,308) -------------------------- Total tax provision (benefit)........... $1,620 $(8,299) $(6,308) ==========================
The provision (benefit) for income taxes differs from amounts computed by applying the U.S. statutory Federal income tax rate. The differences are summarized as follows (in thousands):
Years Ended December 31, -------------------------- 1997 1996 1995 -------------------------- 35% 35% 35% -------------------------- Tax provision (benefit) at statutory rate.. $1,417 $(9,076) $(6,488) State income taxes (net of Federal benefit) 193 503 74 Non-deductible expenses.................... 313 121 121 Other...................................... (303) 153 (15) -------------------------- Total tax provision (benefit).............. $1,620 $(8,299) $(6,308) ==========================
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in thousands):
December 31, ---------------- Deferred tax assets: 1997 1996 ---------------- Insurance costs and reserves............... $ 1,198 $ 681 Non-recurring executive compensation....... 809 809 Benefit cost accruals...................... 483 428 Alternative minimum tax credit carryforwards..................... 2,196 2,196 Drydock accruals........................... 820 1,482 Net operating loss carryforward............ 33,041 23,559 Goodwill, due to basis differences......... 1,248 1,383 ------- ------- Total deferred tax assets.................. 39,795 30,538 ------- ------- Deferred tax liabilities: Capital construction fund.................. 1,472 3,369 Property plant and equipment, due to basis differences and depreciation, net.. 28,759 15,650 Other...................................... -- 551 ------- ------- Total deferred tax liabilities............. 30,231 19,570 ------- ------- Net deferred tax asset..................... $ 9,564 $10,968 ======= =======
At December 31, 1997, consolidated net operating losses of approximately $3.0 million, $10.0 million, $36.0 million, $14.0 million and $29.0 million expiring in 2008, 2009, 2010, 2011, and 2012 respectively, were available to offset future taxable income of the Company. 31 32 In 1993, the Company established a capital construction fund (the "CCF") pursuant to Section 607 of the Merchant Marine Act of 1936, into which it deposited approximately $12.0 million. This fund was primarily used to pay liabilities assumed in the Acquisition and allowed the Company to accelerate recognition of certain deductions for qualified capital expenditures for income tax purposes. As a result of the CCF, the Company has approximately a $2.2 million alternative minimum tax credit carryforward available with no expiration date. NOTE 9. RELATED PARTY Equity Group Investments, Inc. ("EGI") and its affiliates provided certain administrative support services for the Company, including but not limited to legal, accounting, tax, benefit and insurance brokerage services. In addition, as previously mentioned in Note 7, the Company leases office space from an affiliate of EGI. In the aggregate, the fees charged by EGI and its affiliates for such services and rent were approximately $0.7 million, $1.5 million, and $1.4 million for the years ended December 31, 1997, 1996 and 1995, respectively. These arrangements with EGI and its affiliates are subject to approval by a majority of the non-affiliated members of the Company's Board of Directors, and are conducted on terms no less favorable to the Company than could be obtained from unaffiliated third parties. In late 1997, the Company subleased approximately 13,000 square feet of Chicago office space to Equity Office Properties Trust, an affiliate of EGI. For the year ended December 31, 1997, approximately $23,000 was received by the Company under the sublease at a rate which it believes to be competitive for comparable space for an unaffiliated party. As of December 31, 1997, the largest stockholders of the Company's common stock were certain affiliates of EGI, including EGI Holdings, Inc. and EGIL Investments, Inc., which collectively owned 53% of the Company's common stock. See Note 7 and 10 for discussion on other related party transactions. NOTE 10. EMPLOYEE BENEFIT PLANS RETIREMENT PLANS The Company's non-union employees are eligible to participate in the ADVANTAGE Retirement Savings Plan (as amended and restated October 1, 1987, "ADVANTAGE Plan"), a profit-sharing plan with a salary deferral feature that qualifies under Section 401 of the Internal Revenue Code of 1986, as amended. The ADVANTAGE Plan allows participants to defer a portion of their eligible compensation on a pre-tax basis. Participant contributions are 100% vested at the time the contribution is made. Matching contributions are made by the Company in an amount equal to 100% of the amount of a participant's contribution with a maximum of 4% of such participant's annual eligible wages, subject to Internal Revenue Service maximums. In addition, the Company may make discretionary profit-sharing contributions which are allocated to eligible employees based on eligible compensation. Company contributions vest over a five-year period. Matching and profit-sharing contributions approximated $550,000, $708,000, and $401,000 for the years ended December 31, 1997, 1996 and 1995, respectively. The Company also contributes, under collective bargaining agreements, to funds designed to provide pension and health benefits for its union employees. The Company contributed $2,147,000, $2,337,000, and $2,312,000 to such plans for the years ended December 31, 1997, 1996 and 1995, respectively. EMPLOYEE STOCK PURCHASE PLAN The American Classic Voyages Co. 1995 Employee Stock Purchase Plan (the "ESP Plan") allows eligible employees to purchase common stock of the Company, through payroll deductions, at a discounted price from the market price. The exercise price under the ESP Plan is deemed to be 85% of the lesser of the market value of the Company's common stock on the last business day of the offering period or the average market value during the offering period. There is a maximum of 500,000 shares authorized under the ESP Plan. There were 9,718 shares, 12,297 shares and 5,821 shares issued during 1997, 1996 and 1995, respectively, at an average price of $10.70, $7.13 and $8.80 per share for 1997, 1996 and 1995, respectively. At December 31, 1997, approximately 472,000 shares were available for offering under the ESP Plan. 32 33 STOCK-BASED COMPENSATION PLANS The Company granted, as of January 1, 1992, fully vested options to Messrs. S. Cody Engle, Patrick Fahey and Jeffrey D. Krida, the Company's then senior executive officers, to purchase up to 205,125 shares, 51,282 shares, and 153,846 shares of common stock, respectively, in lieu of bonus payments (the "Executive Stock Option Plan"). These options are exercisable, in whole or in part, at any time prior to January 2, 2002, at an exercise price of $3.25 per share. The Company adopted the 1992 Stock Option Plan effective January 2, 1992 (the "1992 Plan"). Pursuant to the 1992 Plan, certain officers, directors, key employees, and consultants will be offered the opportunity to acquire shares of the Company's common stock via stock option grants. In addition, the 1992 Plan provides for the granting of stock units and stock appreciation rights ("SARs"). The exercise price of options granted under the 1992 Plan cannot be less than the fair market value of the Company's common stock at the date of grant. As of December 31, 1997, 2,925,245 shares of the Company's common stock have been reserved for issuance under the 1992 Plan. Options granted under the 1992 Plan generally vest over a three-year period and expire 10 years from the date of grant. The per share weighted-average fair value of stock options granted during 1997 and 1996 was $4.25 and $3.48 on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for 1997 and 1996, respectively: expected volatility of 52% and 50%, risk-free interest rates of 5.7% and 6.0%; expected lives of three years and dividend yield of 0% for both years. In 1997, under the terms of the 1992 Plan, the Company paid each non-employee director stock units as an annual retainer. The stock units in general vest at a rate of 25% on the first day of each calendar quarter. The fully vested stock units will be converted into an equal number of common stock shares at any time as selected by each director prior to each grant. In 1995, the Company granted SARs to key employees. All of the SARs were canceled in 1996. During 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock Based Compensation," which defines a fair value based method of accounting for an employee stock option or similar equity instrument and encourages all entities to adopt that method of accounting for all of their employee stock compensation plans. However, it also allows an entity to continue to measure compensation cost for those plans using the method of accounting prescribed by APB No. 25, "Accounting for Stock Issued to Employees." Entities electing to remain with the accounting in APB No. 25 must make pro forma disclosures of net income and earnings per share, as if the fair value based method of accounting defined in this Statement has been applied. The Company applies APB No. 25 in accounting for its plans and, accordingly, no compensation cost has been recognized for its stock options in the financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net income (loss) and earnings (loss) per share would have been adjusted to the pro forma amounts indicated below:
In thousands, except per share amounts 1997 1996 1995 ------ --------- -------- Net income (loss) As reported $2,429 $(17,636) $(9,671) Pro forma 1,422 (18,033) (9,766) Basic earnings (loss) per share As reported $ 0.17 $ (1.28) $ (.70) Pro forma 0.10 (1.31) (.71) Diluted earnings (loss) per share As reported $ 0.17 $ (1.28) $ (.70) Pro forma 0.10 (1.31) (.71)
Pro forma net income (loss) and earnings (loss) per share reflect only options granted since 1995. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma amounts presented above because compensation cost is reflected over the options' vesting period which is generally three years and compensation cost for options granted prior to January 1, 1995 is not considered. 33 34 The table below summarizes the activities for 1995, 1996 and 1997:
Executive Stock Option Plan 1992 Plan Weighted-Average ----------- -------------------------------------- Exercise Price Shares Shares Shares Shares for Options Subject to Subject to Subject to Subject to and SARs Options Options Stock Units SARs only ------- --------- ----------- ---------- ------ Balance at December 31, 1994.... 323,971 1,213,993 -- -- $14.11 Granted..................... -- 245,000 -- 280,000 11.11 Canceled.................... -- (279,583) -- -- 15.34 ------- --------- ----------- ---------- Balance at December 31, 1995.... 323,971 1,179,410 -- 280,000 13.04 Granted..................... -- 895,680 -- -- 9.50 Canceled.................... -- (582,668) -- (280,000) 15.36 Exercised................... (85,840) -- -- -- 3.25 ------- --------- ----------- ---------- Balance at December 31, 1996.... 238,131 1,492,422 -- -- 10.54 Granted..................... -- 62,000 24,500 -- 12.36 Canceled.................... -- (71,753) (1,450) -- 11.43 Exercised................... (43,006) (60,290) -- -- 7.90 Converted................... -- -- (2,650) -- -- ------- --------- ----------- ---------- Balance at December 31, 1997.... 195,125 1,422,379 20,400 -- 10.74 ======= ========= =========== ==========
The following table summarizes information about options outstanding at December 31, 1997:
Options Outstanding Options Exercisable --------------------------------------------- ---------------------------- Weighted-Average Weighted- Weighted- Range of Outstanding Remaining Average Exercisable Average Exercise Price at 12/31/97 Contractual Life Exercise Price at 12/31/97 Exercise Price - -------------- ----------- ---------------- -------------- ----------- -------------- $3.25 195,125 4 $ 3.25 195,125 $ 3.25 7.97 - 9.98 535,765 9 9.00 351,398 8.83 10.25 - 15.00 593,534 8 11.60 371,524 11.77 15.32 - 20.00 293,080 6 17.14 279,246 17.22 - -------------- ----------- ---------------- -------------- ----------- -------------- $ 3.25 -$20.00 1,617,504 7 $10.74 1,197,793 $10.79 ============= =========== ================ ============== =========== ==============
34 35 NOTE 11. UNAUDITED QUARTERLY RESULTS OF OPERATIONS Summarized unaudited quarterly results of operations for 1997 and 1996 are as follows:
Year Ended December 31, 1997 March 31, June 30, September 30, December 31, (Amounts in thousands, except per share data) 1997 1997 1997 1997 --------------------------------------------------- Revenues..................................... $ 40,372 $42,356 $49,746 $45,410 Gross profit................................. 13,233 17,661 19,606 16,089 Operating (loss) income...................... (1,869) 3,451 6,098 2,304 Pre-tax (loss) income........................ (3,314) 1,962 4,617 784 Net (loss) income............................ (1,988) 1,177 2,770 470 Basic (loss) earnings per share.............. (0.14) 0.08 0.20 0.03 Diluted (loss) earnings per share............ (0.14) 0.08 0.19 0.03
Year Ended December 31, 1996 March 31, June 30, September 30, December 31, (Amounts in thousands, except per share data) 1996 1996 1996 1996 --------------------------------------------------- Revenues..................................... $ 41,628 $49,021 $49,776 $49,983 Gross profit................................. 13,556 17,721 17,950 18,636 Operating (loss) income...................... (41,784) 2,323 4,834 4,162 Pre-tax (loss) income........................ (43,668) 329 3,029 14,375 Net (loss) income............................ (43,271) 381 2,851 22,403(a) Basic (loss) earnings per share.............. (3.14) 0.03 0.21 1.62 Diluted (loss) earnings per share............ (3.14) 0.03 0.20 1.59
The sum of quarterly (loss) earnings per common share may differ from full-year amounts due to changes in the number of shares outstanding during the year. ________________________ (a) Includes a year-to-date tax adjustment of the federal tax benefit related to the first quarter impairment write-down. 35 36 Schedule I AMERICAN CLASSIC VOYAGES CO. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) BALANCE SHEETS (AMOUNTS IN THOUSANDS)
December 31, 1997 1996 ----------------------- ASSETS Cash and cash equivalents................. $ 3,304 $ 1,945 Prepaid expenses and other current assets. 301 219 Property and equipment, net............... 1,385 1,920 Investment in and advances to subsidiaries 59,850 57,403 ----------------------- $ 64,840 $61,487 ======================== LIABILITIES Other liabilities......................... $ 5,621 $ 6,505 ----------------------- STOCKHOLDERS' EQUITY Common stock.............................. 140 139 Paid-in capital........................... 77,059 75,252 Accumulated deficit....................... (17,980) (20,409) ----------------------- Total stockholders' equity................ 59,219 54,982 ----------------------- $ 64,840 $ 61,487 ========================
See accompanying notes to Condensed Financial Statements. 36 37 Schedule I AMERICAN CLASSIC VOYAGES CO. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) - (CONTINUED) STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS)
Years Ended December 31, ------------------------------ 1997 1996 1995 ------------------------------ Miscellaneous (expense) revenues........... $ (290) $ 16 $ 4,492 Depreciation expense....................... (713) (793) -- Income tax benefit (expense)............... 547 295 (1,752) Equity in earnings (losses) of subsidiaries 2,885 (17,154) (12,411) ------------------------------ Net income (loss).......................... $ 2,429 $(17,636) $ (9,671) ==============================
See accompanying notes to Condensed Financial Statements. 37 38 Schedule I AMERICAN CLASSIC VOYAGES CO. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) - (CONTINUED) STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS)
Years Ended December 31, ------------------------------ 1997 1996 1995 ------------------------------ OPERATING ACTIVITIES Net income (loss)..................................... $ 2,429 $ (17,636) $ (9,671) ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation........................................ 713 793 -- Equity in (earnings) losses of subsidiaries, net.... (2,885) 17,154 12,411 Dividends received from subsidiaries................ -- -- 1,100 Decrease (increase) in advances to subsidiaries..... 438 1,817 (5,594) Decrease (increase) in prepaid expenses and other... 168 (128) (91) (Decrease) increase in other liabilities............ (465) (743) 2,870 ------------------------------ Net cash provided by operating activities........... 398 1,257 1,025 ------------------------------ INVESTING ACTIVITIES Capital expenditures.................................. (178) (87) (43) ------------------------------ Net cash used in investing activities................. (178) (87) (43) ------------------------------ FINANCING ACTIVITIES Issuance of common stock.............................. 1,139 368 80 Dividends............................................. -- -- (1,101) ------------------------------ Net cash provided by (used in) financing activities... 1,139 368 (1,021) ------------------------------ Increase (decrease) in cash and cash equivalents...... 1,359 1,538 (39) Cash and cash equivalents, beginning of period........ 1,945 407 446 ------------------------------ Cash and cash equivalents, end of period.............. $ 3,304 $ 1,945 $ 407 ============================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash refunded during the period for: Income taxes........................................ $ -- $ -- $ 633 Non-cash investing activities: Conversion of advances to subsidiaries into investment in subsidiaries......................... $ -- $ 30,000 $14,000
See accompanying notes to Condensed Financial Statements. 38 39 Schedule I AMERICAN CLASSIC VOYAGES CO. NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) - (CONTINUED) BASIS OF PRESENTATION The Condensed Financial Information of American Classic Voyages Co. ("AMCV") has been prepared pursuant to Securities and Exchange Commission rules and regulations and should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the years ended December 31, 1997, 1996 and 1995 included herein this Form 10-K. The balance sheets as of December 31, 1997 and 1996, respectively, and the related statements of operations and cash flows have been prepared on an unconsolidated basis. AMCV's investment in its subsidiaries is recorded on the equity basis. DIVIDENDS FROM SUBSIDIARIES No dividends were paid to AMCV for the years ended December 31, 1997 and 1996. Cash dividends paid to AMCV by its consolidated subsidiaries were $1.1 million for the year ended December 31, 1995. COMMITMENTS AMCV has guaranteed the credit agreement between one of its subsidiaries and a group of financial institutions which provides for a borrowing facility to such subsidiary for general corporate purposes. For information related to this credit agreement, see Note 6 of "Notes to Consolidated Financial Statements" included herein this Form 10-K. 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. The FMC has reviewed its standards and in June 1996 issued proposed regulations to increase the financial responsibility requirements. The Company filed its objection to the proposals, 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. INCOME TAXES AMCV has also entered into tax sharing agreements with its subsidiaries which require each subsidiary to compute its Federal income tax liability on a separate company basis and to pay amounts so computed to AMCV. No payments were made under the tax sharing agreement for the years ended December 31, 1997 and 1996. In 1995, AMCV remitted $3.3 million to subsidiaries and received $3.4 million from subsidiaries under the subsidiary tax sharing agreements. In 1993, AMCV established a capital construction fund ("CCF") pursuant to section 607 of the Merchant Marine Act of 1936. The CCF allows AMCV to accelerate recognition of Federal income tax deductions for capital expenditures related to the American Hawaii vessels. A substantial portion of the income generated by AMCV is eligible for deposit into the CCF; however, expenditures for the vessels of DQSC are not qualified for this tax treatment. As such, on a consolidated tax return basis, AMCV was able to obtain the accelerated deduction treatment on a substantial portion of its taxable income. 39 40 AMERICAN CLASSIC VOYAGES CO. INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- **2.(d)(1) Purchase Agreement among Blackland Vistas, Inc. and Great AQ Steamboat Co. as seller and Thayer Hotel Investments L.P. as purchaser (filed as Exhibit 2. to the Company's Form 8-K dated August 22, 1996 and incorporated herein by reference). **2.(d)(2) Preferred Provider Agreement executed as of October 16, 1996 by The Delta Queen Steamboat Co. and THI FQ L.P. (filed as Exhibit 2.(d)(2) to the Company's Form 8-K dated October 31, 1996 and incorporated herein by reference). **3.(i) Amended and Restated Certificate of Incorporation of the Company (filed on January 17, 1992 as Exhibit 3.(a) to the Company's Registration Statement on Form S-1 (Registration No. 33-45139) and incorporated herein by reference). 3.(ii) Amended and Restated By-Laws of the Company. **4.(i) Proof of Common Stock Certificate (filed on February 14, 1992 as Exhibit 4.(i) to Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 33-45139) and incorporated herein by reference). **4.(ii)(a)(1) Stock Pledge Agreement dated as of August 3, 1993, by and between the Company and Chemical Bank, as agent for the Lenders (the "Agent") (filed on September 17, 1993 as Exhibit 4.(ii)(a)(9) to the Company's Registration Statement on Form S-1 (Registration No. 33-68996) and incorporated herein by reference). **4.(ii)(a)(2) Stock Pledge Agreement dated as of August 3, 1993, by and between The Delta Queen Steamboat Co. and the Agent (filed on September 17, 1993 as Exhibit 4.(ii)(a)(10) to the Company's Registration Statement on Form S-1 (Registration No. 33-68996) and incorporated herein by reference). **4.(ii)(a)(3) Guaranty dated as of August 3, 1993, made by the Company, Creative Endeavors, Inc., Delta Queen Steamboat Development, Inc., Cruise America Travel, Incorporated, Great River Cruise Line, Inc., Great Ocean Cruise Line, Inc., Great River Transportation Co. and Blackland Vistas, Inc., in favor of the Lenders and the Agent (filed on September 17, 1993 as Exhibit 4.(ii)(a)(11) to the Company's Registration Statement on Form S-1 (Registration No. 33-68996) and incorporated herein by reference). **4.(ii)(a)(4) Security Agreement dated as of March 31, 1995, by and between the Company and the Agent (filed on May 15, 1995 as Exhibit 4.(ii)(a)(12) to the Company's Form 10-Q dated March 31, 1995 and incorporated herein by reference). The following entities have entered into a security agreement with the Agent which is substantially identical in all material respects to the Security Agreement filed as Exhibit 4.(ii)(a)(12) to the Company's Form 10-Q dated March 31, 1995: (i) The Delta Queen Steamboat Co.; (ii) Great River Transportation Co.; (iii) Great Ocean Cruise Line, Inc.; (iv) Cruise America Travel, Incorporated; and (v) Great River Cruise Line, Inc. **4.(ii)(a)(5) Preferred Ship Mortgage dated August 3, 1993, executed by Great River Cruise Line, Inc. in favor of the Agent for the benefit of the Lenders in the principal amount of $65,000,000 (filed on September 17, 1993 as Exhibit 4.(ii)(a)(13) to the Company's Registration Statement on Form S-1 (Registration No. 33-68996) and incorporated herein by reference). **4.(ii)(a)(6) Preferred Ship Mortgage dated August 3, 1993, executed by Great Ocean Cruise Line, Inc. in favor of the Agent for the benefit of the Lenders in the principal amount of $65,000,000 (filed on September 17, 1993 as Exhibit 4.(ii)(a)(14) to the Company's Registration Statement on Form S-1 (Registration No. 33-68996) and incorporated herein by reference).
40 41 **4.(ii)(a)(7) Master Amendment to the Collateral Documents dated March 31, 1995, executed by the Delta Queen Steamboat Co., the Company, Creative Endeavors, Inc., Cruise America Travel, Incorporated, Great River Transportation Co., Delta Queen Steamboat Development, Inc., Great River Cruise Line, Inc., Great Ocean Cruise Line, Inc., Blackland Vistas, Inc., Great Hawaiian Cruise Line, Inc., and AMCV Development Corp. and the Agent for the benefit of the Agent and the Lenders in connection with the Amended and Restated Credit Agreement dated March 31, 1995 (filed on May 15, 1995 as Exhibit 4.(ii)(a)(19) to the Company's Form 10-Q dated March 31, 1995 and incorporated herein by reference). **4.(ii)(a)(8) Third Amended and Restated Credit Agreement dated as of April 22, 1996, among The Delta Queen Steamboat Co., as Borrower, and the Company, as Parent, the financial institutions from time to time a party hereto (collectively, the "Lenders") and Chemical Bank, as the Lenders' agent ("Agent") and Hibernia Bank as Co-Agent (filed on May 15, 1996 as Exhibit 4.(ii)(a)(16) to the Company's Form 10-Q dated March 31, 1996 and incorporated herein by reference). **4.(ii)(a)(9) Second Master Amendment to the Collateral Documents dated August 31, 1995, executed by The Delta Queen Steamboat Co., the Company, Creative Endeavors, Inc., Cruise America Travel, Incorporated, Great River Transportation Co., Great River Cruise Line, Inc., Great Ocean Cruise Line, Inc., and Blackland Vistas, Inc., and the Agent for the benefit of the Agent and the Lenders in connection with the Amended and Restated Credit Agreement dated March 31, 1995 (filed on November 14, 1995 as Exhibit 4.(ii)(a)(20) to the Company's Form 10-Q dated September 30, 1995 and incorporated herein by reference). **4.(ii)(a)(10) Third Master Amendment to the Collateral Documents dated April 22, 1996, executed by The Delta Queen Steamboat Co., the Company, Cruise America Travel, Incorporated, Great River Transportation Co., Great River Cruise Line, Inc., Great Ocean Cruise Line, Inc., and Blackland Vistas, Inc., and the Agent for the benefit of the Agent and the Lenders in connection with the Amended and Restated Credit Agreement dated March 31, 1995 (filed on May 15, 1996 as Exhibit 4.(ii)(a)(23) to the Company's Form 10-Q dated March 31, 1996 and incorporated herein by reference). **4.(ii)(a)(11) Third Amendment to Preferred Ship Mortgage dated April 22, 1996 executed by Great River Cruise Line, Inc. in favor of the Agent for the benefit of the Lenders in the principal amount of $25,000,000.00 (filed on May 15, 1996 as Exhibit 4.(ii)(a)(24) to the Company's Form 10-Q dated March 31, 1996 and incorporated herein by reference). **4.(ii)(a)(12) Third Amendment to Preferred Ship Mortgage dated April 22, 1996 executed by Great Ocean Cruise Line, Inc. in favor of the Agent for the benefit of the Lenders in the principal amount of $25,000,000.00 (filed on May 15, 1996 as Exhibit 4.(ii)(a)(25) to the Company's Form 10-Q dated March 31, 1996 and incorporated herein by reference). **4.(ii)(a)(13) Acknowledgment of Trust Indenture dated as of April 22, 1996 entered into by and among Great River Cruise Line, Inc. and Chemical Bank as Agent for the Lenders (filed on August 13, 1996 as Exhibit 4.(ii)(a)(26) to the Company's Form 10-Q dated June 30, 1996 and incorporated herein by reference). **4.(ii)(a)(14) Acknowledgment of Trust Indenture dated as of April 22, 1996 entered into by and among Great Ocean Cruise Line, Inc. and Chemical Bank as Agent for the Lenders (filed on August 13, 1996 as Exhibit 4.(ii)(a)(27) to the Company's Form 10-Q dated June 30, 1996 and incorporated herein by reference). **4.(ii)(a)(15) Amendment Number 1 to the Third Amended and Restated Credit Agreement dated as of November 18, 1996 among The Delta Queen Steamboat Co., American Classic Voyages Co., the financial institutions from time to time party thereto and The Chase Manhattan Bank (formerly known as Chemical Bank), as Agent (filed on May 13, 1997 as Exhibit 4.(ii)(a)(28) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(a)(16) Amendment Number 2 to the Third Amended and Restated Credit Agreement dated as of March 26, 1997 among The Delta Queen Steamboat Co., American Classic Voyages Co., the financial institutions from time to time parties thereto and The Chase Manhattan Bank (formerly known as Chemical Bank), as agent (filed on May 13, 1997 as Exhibit 4.(ii)(a)(29) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). 41 42 **4.(ii)(a)(17) Master Assumption Agreement and Fourth Master Amendment to Collateral Documents made as of March 26, 1997 among The Delta Queen Steamboat Co., American Classic Voyages Co., Cruise America Travel, Incorporated, DQSB II, Inc., Great River Cruise Line, L.L.C., Great Ocean Cruise Line, L.L.C. and The Chase Manhattan Bank (formerly known as Chemical Bank), as Agent for itself and the Lenders. (filed on May 13, 1997 as Exhibit 4.(ii)(a)(30) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(a)(18) Second Amendment of Trust Indenture dated as of March 26, 1997 by and among Great Ocean Cruise Line, L.L.C. and The Chase Manhattan Bank (formerly known as Chemical Bank), as Agent for itself and the Lenders (filed on May 13, 1997 as Exhibit 4.(ii)(a)(31) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(a)(19) Second Amendment of Trust Indenture dated as of March 26, 1997 by and among Great River Cruise Line, L.L.C. and The Chase Manhattan Bank (formerly known as Chemical Bank), as Agent for itself and the Lenders (filed on May 13, 1997 as Exhibit 4.(ii)(a)(32) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(a)(20) Assumption of Preferred Ship Mortgage dated March 26, 1997 by and between Great Ocean Cruise Line, L.L.C. and The Chase Manhattan Bank (formerly known as Chemical Bank), as Trustee and Agent (filed on May 13, 1997 as Exhibit 4.(ii)(a)(33) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(a)(21) Assumption of Preferred Ship Mortgage dated March 26, 1997 by and between Great River Cruise Line, L.L.C. and The Chase Manhattan Bank (formerly known as Chemical Bank), as Trustee and Agent (filed on May 13, 1997 as Exhibit 4.(ii)(a)(34) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(a)(22) Third Amended and Restated Revolving Loan Note dated March 26, 1997 in the principal amount of $7,500,000.00 made by The Delta Queen Steamboat Co. in favor of The Chase Manhattan Bank (formerly known as Chemical Bank) (filed on May 13, 1997 as Exhibit 4.(ii)(a)(35) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(a)(23) Third Amended and Restated Revolving Loan Note dated March 26, 1997 in the principal amount of $7,500,000.00 made by The Delta Queen Steamboat Co. in favor of Hibernia National Bank (filed on May 13, 1997 as Exhibit 4.(ii)(a)(36) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(a)(24) Addendum to Stock Pledge Agreement made as of March 26, 1997 by and between The Delta Queen Steamboat Co. and The Chase Manhattan Bank (formerly known as Chemical Bank), as Agent for itself and the other Lenders (filed on May 13, 1997 as Exhibit 4.(ii)(a)(37) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(a)(25) Limited Liability Company Pledge Agreement made as of March 26, 1997 by The Delta Queen Steamboat Co., as Pledgor, and The Chase Manhattan Bank (formerly known as Chemical Bank), as Agent (filed on May 13, 1997 as Exhibit 4.(ii)(a)(38) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(a)(26) Limited Liability Company Pledge Agreement made as of March 26, 1997 by DQSB II, Inc., as Pledgor, and The Chase Manhattan Bank (formerly known as Chemical Bank), as Agent (filed on May 13, 1997 as Exhibit 4.(ii)(a)(39) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(a)(27) Security Agreement dated as of March 26, 1997 by and between DQSB II, Inc. and The Chase Manhattan Bank (formerly known as Chemical Bank), as Agent for itself and the Lenders (filed on May 13, 1997 as Exhibit 4.(ii)(a)(40) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(c)(1) Commitment to Guaranty Obligations by the United States of America accepted by Great AQ Steamboat Co. dated as of August 24, 1995 (filed on November 14, 1995 as Exhibit 4.(ii)(c)(1) to the Company's Form 10-Q dated September 30, 1995 and incorporated herein by reference). 42 43 **4.(ii)(c)(2) Great AQ Steamboat Co. United States Government Guaranteed Ship Financing Obligations, American Queen Series Purchase Agreement dated August 24, 1995 (filed on November 14, 1995 as Exhibit 4.(ii)(c)(2) to the Company's Form 10-Q dated September 30, 1995 and incorporated herein by reference). **4.(ii)(c)(3) Trust Indenture relating to United States Government Guaranteed Ship Financing Obligations, American Queen Series, between Great AQ Steamboat Co. and the Bank of New York, dated as of August 24, 1995 (the "Trust Indenture") along with Schedule A and Exhibit 1 (filed on November 14, 1995 as Exhibit 4.(ii)(c)(3) to the Company's Form 10-Q dated September 30, 1995 and incorporated herein by reference). **4.(ii)(c)(4) Form of 2005 Note, Guarantee and Trustee's Authentication Certificate Specimen Note as it relates to the United States Government Guaranteed Ship Financing Obligation, American Queen Series (filed on November 14, 1995 as Exhibit 4.(ii)(c)(4) to the Company's Form 10-Q dated September 30, 1995 and incorporated herein by reference). **4.(ii)(c)(5) Form of 2020 Bond, Guarantee and Trustee's Authentication Certificate Specimen Bond as it relates to United States Government Guaranteed Ship Financing Bond, American Queen Series (filed on November 14, 1995 as Exhibit 4.(ii)(c)(5) to the Company's Form 10-Q dated September 30, 1995 and incorporated herein by reference). **4.(ii)(c)(6) Authorization Agreement between the United States of America as represented by the Secretary of Transportation and the Bank of New York as Indenture Trustee under the Trust Indenture between it and Great AQ Steamboat Co. dated as of August 24, 1995 (filed on November 14, 1995 as Exhibit 4.(ii)(c)(6) to the Company's Form 10-Q dated September 30, 1995 and incorporated herein by reference). **4.(ii)(c)(7) Security Agreement relating to the United States Government Guaranteed Ship Financing Obligation between Great AQ Steamboat Co. and the United States of America dated as of August 24, 1995 (the "Security Agreement") along with Exhibit 1 and the Schedule of Definitions (filed on November 14, 1995 as Exhibit 4.(ii)(c)(7) to the Company's Form 10-Q dated September 30, 1995 and incorporated herein by reference). **4.(ii)(c)(8) $60,589,000 Promissory Note dated August 24, 1995 by and between Great AQ Steamboat Co. and the United States of America (filed on November 14, 1995 as Exhibit 4.(ii)(c)(8) to the Company's Form 10-Q dated September 30, 1995 and incorporated herein by reference). **4.(ii)(c)(9) Title XI Reserve Fund and Financial Agreement among Great AQ Steamboat Co. and the United States of America dated as of August 24, 1995 along with the General Provisions (filed on November 14, 1995 as Exhibit 4.(ii)(c)(9) to the Company's Form 10-Q dated September 30, 1995 and incorporated herein by reference). **4.(ii)(c)(10) Guaranty Agreement dated August 24, 1995 made by the Delta Queen Steamboat Co. in favor of the United States of America (filed on November 14, 1995 as Exhibit 4.(ii)(c)(10) to the Company's Form 10-Q dated September 30, 1995 and incorporated herein by reference). **4.(ii)(c)(11) Assumption and Supplement No. 1 to First Preferred Ship Mortgage effective as of December 31, 1996 made by and among Great AQ Steamboat, L.L.C., Great AQ Steamboat Co. and the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator (filed on May 13, 1997 as Exhibit 4.(ii)(c)(11) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(c)(12) Modification and Assumption Agreement entered into March 25, 1997, effective as of December 31, 1996, among The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, Great AQ Steamboat, L.L.C., and The Bank of New York (filed on May 13, 1997 as Exhibit 4.(ii)(c)(12) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(c)(13) Confirmation of Guaranty Agreement effective as of December 31, 1996 made by The Delta Queen Steamboat Co. in favor of the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator (filed on May 13, 1997 as Exhibit 4.(ii)(c)(13) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). 43 44 **4.(ii)(c)(14) Endorsement No. 1 to Secretary's Note from Great AQ Steamboat, L.L.C. to the United States of America executed on March 25, 1997, effective as of December 31, 1996 (filed on May 13, 1997 as Exhibit 4.(ii)(c)(14) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(c)(15) Subordination Agreement dated as of March 25, 1997 made by and among Great AQ Steamboat, L.L.C., The Delta Queen Steamboat Co. and DQSB II, Inc. and the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator (filed on May 13, 1997 as Exhibit 4.(ii)(c)(15) to the Company's Form 10-Q dated March 31, 1997 and incorporated herein by reference). **4.(ii)(d)(1) Commitment to Guaranty Obligations by the United States of America Accepted by Great Independence Ship Co. dated as of December 7, 1995 (filed on April 1, 1996 as Exhibit 4.(ii)(d)(1) to the Company's Form 10-K dated December 31, 1995). **4.(ii)(d)(2) Great Independence Ship Co. United States Government Guaranteed Ship Financing Obligations, Independence Series A Purchase Agreement dated December 7, 1995 (filed on April 1, 1996 as Exhibit 4.(ii)(d)(2) to the Company's Form 10-K dated December 31, 1995). **4.(ii)(d)(3) Trust Indenture relating to United States Government Guaranteed Ship Financing Obligations, Independence Series A, between Great Independence Ship Co. and the Bank of New York, dated as of December 7, 1995 (the "Trust Indenture") along with Schedule A and Exhibit 1 (filed on April 1, 1996 as Exhibit 4.(ii)(d)(3) to the Company's Form 10-K dated December 31, 1995). **4.(ii)(d)(4) Forms of 2005 Note, Guarantee and Trustee's Authentication Certificate Specimen Note as it relates to the United States Government Guaranteed Ship Financing Obligation, Independence Series A (filed on April 1, 1996 as Exhibit 4.(ii)(d)(4) to the Company's Form 10-K dated December 31, 1995). **4.(ii)(d)(5) Forms of 2015 Bond, Guarantee and Trustee's Authentication Certificate Specimen Bond as it relates to United States Government Guaranteed Ship Financing Bond, Independence Series A (filed on April 1, 1996 as Exhibit 4.(ii)(d)(5) to the Company's Form 10-K dated December 31, 1995). **4.(ii)(d)(6) Authorization Agreement between the United States of America represented by the Secretary of Transportation and the Bank of New York as Indenture Trustee under the Trust Indenture between it and Great Independence Ship Co. dated as of December 7, 1995 (filed on April 1, 1996 as Exhibit 4.(ii)(d)(6) to the Company's Form 10-K dated December 31, 1995). **4.(ii)(d)(7) Security Agreement relating to the United States Government Guaranteed Ship Financing Obligation between Great Independence Ship Co. and the United States of America dated as of December 7, 1995 (the "Security Agreement") along with Exhibit 1 and the Schedule of Definitions (filed on April 1, 1996 as Exhibit 4.(ii)(d)(7) to the Company's Form 10-K dated December 31, 1995). **4.(ii)(d)(8) $26,429,000 Promissory Note dated December 7, 1995 by and between Great Independence Ship Co. and the United States of America (filed on April 1, 1996 as Exhibit 4.(ii)(d)(8) to the Company's Form 10-K dated December 31, 1995). **4.(ii)(d)(9) Title XI Reserve Fund and Financial Agreement between Great Independence Ship Co. and the United States of America dated as of December 7, 1995 along with the General Provisions (filed on April 1, 1996 as Exhibit 4.(ii)(d)(9) to the Company's Form 10-K dated December 31, 1995). **4.(ii)(d)(10) Guaranty and Security Agreement dated December 7, 1995 made by the Great Independence Ship Co., Great Hawaiian Cruise Line, Inc. and Great Hawaiian Properties Corporation in favor of the United States of America (filed on April 1, 1996 as Exhibit 4.(ii)(d)(10) to the Company's Form 10-K dated December 31, 1995). **4.(ii)(d)(11) Amendment to Commitment to Guarantee Obligations by the United States of America Accepted by Great Independence Ship Co. dated as of March 28, 1996 (filed on May 15, 1996 as Exhibit 4.(ii)(d)(11) to the Company's Form 10-Q dated March 31, 1996). 44 45 **4.(ii)(d)(12) Great Independence Ship Co. United Stated Government Guaranteed Ship Financing Obligations, Independence Series B Purchase Agreement dated March 28, 1996 (filed on May 15, 1996 as Exhibit 4.(ii)(d)(12) to the Company's Form 10-Q dated March 31, 1996). **4.(ii)(d)(13) Supplemental Indenture No. 1 relating to United States Government Guaranteed Ship Financing Obligations, Independence Series B, between Great Independence Ship Co. and the Bank of New York, dated as of March 28, 1996 (filed on May 15, 1996 as Exhibit 4.(ii)(d)(13) to the Company's Form 10-Q dated March 31, 1996). **4.(ii)(d)(14) Form of 2005 Note, Guarantee and Trustee's Authentication Certificate Specimen Note as it relates to the United States Government Guaranteed Ship Financing Obligation, Independence Series B (filed on May 15, 1996 as Exhibit 4.(ii)(d)(14) to the Company's Form 10-Q dated March 31, 1996). **4.(ii)(d)(15) Form of 2015 Bond, Guarantee and Trustee's Authentication Certificate Specimen Bond as it relates to United States Government Guaranteed Ship Financing Bond, Independence Series B (filed on May 15, 1996 as Exhibit 4.(ii)(d)(15) to the Company's Form 10-Q dated March 31, 1996). **4.(ii)(d)(16) Amendment No. 1 to Authorization Agreement between the United States of America represented by the Secretary of Transportation and the Bank of New York as Indenture Trustee under the Trust Indenture between it and Great Independence Ship Co. dated as of March 28, 1996 (filed on May 15, 1996 as Exhibit 4.(ii)(d)(16) to the Company's Form 10-Q dated March 31, 1996). **4.(ii)(d)(17) Amendment No. 1 to Security Agreement relating to the United States Government Guaranteed Ship Financing Obligation between Great Independence Ship Co. and the United States of America dated as of March 28, 1996 (the "Security Agreement") (filed on May 15, 1996 as Exhibit 4.(ii)(d)(17) to the Company's Form 10-Q dated March 31, 1996). **4.(ii)(d)(18) Endorsement to $6,903,000 Promissory Note dated March 28, 1996 by and between Great Independence Ship Co. and the United States of America (filed on May 15, 1996 as Exhibit 4.(ii)(d)(18) to the Company's Form 10-Q dated March 31, 1996). **4.(ii)(d)(19) Amendment No. 1 to Title XI Reserve Fund and Financial Agreement between Great AQ Steamboat Co. and the United States of America effective as of January 1, 1996 (filed on August 14, 1996 as Exhibit 4.(ii)(d)(19) to the Company's Form 10-Q dated June 30, 1996). 9. Not applicable. **10.(ii)(A)(1) Administrative Services Agreement by and between the Company and Equity Group Investments, Inc. (filed on March 2, 1993 as Exhibit 10.(i)(A) to Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 33-45139) and incorporated herein by reference). **10.(ii)(D)(1) Preferential Assignment Agreement dated September 27, 1984, by and between the Board of Commissioners of the Port of New Orleans and the Company, including Assignment thereof and Amendments thereto (filed on January 17, 1992 as Exhibit 10.(ii)(D)(2) to the Company's Registration Statement on Form S-1 (Registration No. 33-45139) and incorporated herein by reference). **10.(ii)(D)(2) Lease by and between Equity Office Properties, Inc. as agent for Beneficial Owner and Great Hawaiian Properties Corporation dated May 30, 1995 (filed on April 1, 1996 as Exhibit 10.(ii)(D)(3) to the Company's Form 10-K dated December 31, 1995). **10.(ii)(D)(3) Lease dated May 31, 1993 by and between Hawaii Press Newspapers, Inc. and American Global Line, Inc. for the property located at 2100 North Nimitz, Honolulu, Hawaii (filed on September 17, 1993 as Exhibit 10.(ii)(D)(5) to the Company's Registration Statement on Form S-1 (Registration No. 33-68996) and incorporated herein by reference). **10.(iii)(A)(1) Performance Management Objectives Bonus Plan (filed on January 17, 1992 as Exhibit 10.(iii)(A)(2) to the Company's Registration Statement on Form S-1 (Registration No. 333-44225) and incorporated herein by reference). 45 46 **10.(iii)(A)(2) Executive Bonus Plan (filed on January 17, 1992 as Exhibit 10.(iii)(A)(4) to the Company's Registration Statement on Form S-1 (Registration No. 33-45139) and incorporated herein by reference). **10.(iii)(A)(3) Advantage Retirement Savings Plan, as amended and further restated effective October 1, 1987, including Amendment thereto (filed on January 17, 1992 as Exhibit 10.(iii)(A)(5) to the Company's Registration Statement on Form S-1 (Registration No. 33-45139) and incorporated herein by reference). **10.(iii)(A)(4) American Classic Voyages Co. S. Cody Engle Stock Option Agreement (filed on January 17, 1992 as Exhibit 10.(iii)(A)(6) to the Company's Registration Statement on Form S-1 (Registration No. 33-45139) and incorporated herein by reference). **10.(iii)(A)(5) American Classic Voyages Co. Dividend Reinvestment and Common Stock Purchase Plan (filed on June 22, 1994 as part of the Company's Registration Statement on Form S-3 (Registration No. 33-80614) and incorporated herein by reference). **10.(iii)(A)(6) American Classic Voyages Co. 1995 Employee Stock Purchase Plan (filed on May 17, 1995 as part of the Company's Registration Statement on Form S-8 (Registration No. 33-92382) and incorporated herein by reference). **10.(iii)(A)(7) American Classic Voyages Co. 1992 Stock Option Plan (filed on January 14, 1998 as part of the Company's Registration Statement on Form S-8 (Registration No. 333-44225) and incorporated herein by reference). 11. Not applicable. 12. Not applicable. 13. Not applicable. 16. Not applicable. 18. Not applicable. 21. Subsidiaries of the Company. 22. Not applicable. 23. Consent of KPMG Peat Marwick LLP. 24. Not applicable. 27. Financial Data Schedule. 28. Not applicable. **Previously filed. 46 EX-3.(II) 2 AMENDED AND RESTATED BY-LAWS 1 EX-3.(ii) AMENDED AND RESTATED BY-LAWS OF AMERICAN CLASSIC VOYAGES CO. ARTICLE I OFFICES The Corporation shall continuously maintain in the State of Delaware a registered office and a registered agent whose business office is identical with such registered office, and may have other offices within or without the State. ARTICLE II SHAREHOLDERS SECTION 1. ANNUAL MEETING. An annual meeting of the shareholders shall be held on the third Wednesday in June of each year or at such time as the Board of Directors may designate for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. If the election of directors shall not be held on the day designated herein for any annual meeting, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a meeting of the shareholders as soon thereafter as may be convenient. SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called either by the President, by the Board of Directors or by the holders of not less than a majority of all the outstanding shares of the Corporation entitled to vote, for the purpose or purposes stated in the call of the meeting. SECTION 3. PLACE OF MEETING. The Board of Directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders may designate any place, either within or without the State of Delaware, as the place for the holding of such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be at Two North Riverside Plaza, Chicago, Illinois 60606, except as otherwise provided in Section 5 of this Article II. SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, date, and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets, not less than 20 nor more than 60 days before the date of the 1 2 meeting, either personally or by mail, by or at the direction of the President, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his or her address as it appears on the records of the corporation, with postage thereon prepaid. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. SECTION 5. MEETING OF ALL SHAREHOLDERS. If all of the shareholders shall meet at any time and place, either within or without the State of Delaware, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and at such meeting any corporate action may be taken. SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 60 days and, for a meeting of shareholders, not less than 10 days or, in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets, not less than 20 days before the date of such meeting. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, such determination shall also apply to any adjournment thereof. SECTION 7. VOTING LISTS. The officer or agent having charge of the transfer book for shares of the Corporation shall make, within 20 days after the record date for a meeting of shareholders or 10 days before such meeting, whichever is earlier, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of 10 days prior to such meeting, shall be kept on file at the registered office of the Corporation and shall be subject to inspection by any shareholder, and to copying at the shareholder's expense, at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof kept in the State of Delaware, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of shareholders. SECTION 8. QUORUM. The holders of a majority of the outstanding shares of the Corporation entitled to vote on a matter, represented in person or by proxy, shall constitute a quorum for consideration of such matter at any meeting of shareholders, but in no event shall a quorum consist of less than one-third of the outstanding shares entitled so to vote; provided that if less than a majority of the outstanding shares are represented at said meeting, a majority of the shares so represented may adjourn the meeting at any time without further notice. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting 2 3 shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the General Corporation Law of Delaware (as now in effect or as amended from time to time, the "Act"), the certificate of incorporation or these by-laws. At any adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting. Withdrawal of shareholders from any meeting shall not cause failure of a duly constituted quorum at that meeting. SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. SECTION 10. VOTING OF SHARES. Unless otherwise provided in the articles of incorporation, each outstanding share shall be entitled to one (1) vote upon each matter submitted to vote at a meeting of shareholders. SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares held by the Corporation in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares entitled to vote at any given time. Shares registered in the name of another corporation, domestic or foreign, may be voted by any officer, agent, proxy or other legal representative authorized to vote such shares under the law of incorporation of such corporation. The Corporation may treat the president or other person holding the position of chief executive officer of such other corporation as authorized to vote such shares, together with any other person indicated and any other holder of any office indicated by the corporate shareholder to the Corporation as a person or an officer authorized to vote such shares. Such persons and officers indicated shall be registered by the Corporation on the transfer books for shares and included in any voting list prepared in accordance with Section 7 of this Article II. Shares registered in the name of a deceased person, a minor ward or a person under legal disability may be voted by his or her administrator, executor or court appointed guardian, either in person or by proxy without a transfer of such shares into the name of such administrator, executor or court appointed guardian. Shares registered in the name of a trustee may be voted by him or her, either in person or by proxy. Shares registered in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his or her name if authority to do so is contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Any number of shareholders may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote or otherwise represent their shares, for a period not to exceed 10 years, by entering into a written voting trust agreement specifying the terms and 3 4 conditions of the voting trust and by transferring their shares to such trustee or trustees for the purpose of the agreement. Any such trust agreement shall not become effective until a counterpart of the agreement is deposited with the Corporation at its registered office. The counterpart of the voting trust agreement so deposited with the Corporation shall be subject to the same right of examination by a shareholder of the Corporation, in person or by agent or attorney, as are the books and records of the Corporation, and shall be subject to examination by any holder of a beneficial interest in the voting trust, either in person or by agent or attorney, at any reasonable time for any proper purpose. Shares of its own stock belonging to the Corporation shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time, but shares of its own stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares at any given time. SECTION 12. INSPECTORS. At any meeting of shareholders, the presiding officer may, or upon the request of any shareholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting, based upon their determination of the validity and effect of proxies; count all votes and report the results; and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the shareholders. Each report of an inspector shall be in writing and signed by him or her or by a majority of them if there be more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. SECTION 13. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting and without a vote if a consent in writing, setting forth the action so taken, shall be signed (a) if 5 days prior notice of the proposed action is given in writing to all of the shareholders entitled to vote with respect to the subject matter hereof, by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voting or (b) by all of the shareholders entitled to vote with respect to the subject matter thereof. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given in writing to those shareholders who have not consented in writing. In the event that the action which is consented to is such as would have required the filing of a certificate under any section of the Act if such action had been voted on by the shareholders at a meeting thereof, the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of shareholders, that written consent has been given in accordance with the provisions of SECTION 229 of the Act and that written notice has been given as provided in such SECTION 229. 4 5 SECTION 14. VOTING BY BALLOT. Voting on any question or in any election may be by voice unless the presiding officer shall order or any shareholder shall demand that voting be by ballot. ARTICLE III DIRECTORS SECTION 1. GENERAL POWERS. The business of the Corporation shall be managed by or under the direction of its Board of Directors. SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the Corporation shall be not less than two (2) and not more than thirteen (13). Each director shall hold office until the next annual meeting of shareholders; or until his successor shall have been elected and qualified. Directors need not be residents of Delaware or shareholders of the Corporation. The number of directors may be increased or decreased from time to time by the amendment of this Section 2. No decrease shall have the effect of shortening the term of any incumbent director. SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of Directors shall be held, without other notice than this by-law, immediately after the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place for holding of additional regular meetings without other notice than such resolution. SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the President or any two directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place as the place for holding any special meeting of the Board of Directors called by them. SECTION 5. NOTICE. Notice of any special meeting shall be given at least two business days previous thereto by written notice to each director at his business address. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegram company. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. SECTION 6. QUORUM. Unless otherwise provided in the articles of incorporation, a majority of the number of directors fixed by these by-laws shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided that if less than a majority of such number of directors are present at said meeting, a majority of the directors present may adjourn the meeting at any time without further notice. Unless specifically prohibited by the articles of incorporation, members of the Board of Directors or of any committee of the Board of Directors may participate in and act at any 5 6 meeting of the Board or such committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such meeting shall constitute attendance and presence in person at the meeting of the person or persons so participating. SECTION 7. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the act of a greater number is required by statute, these by-laws, or the articles of incorporation. SECTION 8. VACANCIES. Any vacancy on the Board of Directors and any directorship to be filled by reason of an increase in the number of directors may be filled by election at the next annual or special meeting of shareholders. A majority of the Board of Directors may fill any vacancy prior to such annual or special meeting of shareholders. SECTION 9. RESIGNATION OF DIRECTORS. A director may resign at any time upon written notice to the Board of Directors, its chairman, if any, or to the chief executive officer or Secretary of the Corporation. SECTION 10. INFORMAL ACTION BY DIRECTORS. Unless specifically prohibited by the articles of incorporation or by other provisions of these by-laws, any action required to be taken at a meeting of the Board of Directors, or any other action which may be taken at a meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the directors entitled to vote with respect to the subject matter thereof or by all the members of such committee, as the case may be. Any such consent signed by all the directors or all the members of the committee shall have the same effect as a unanimous vote, and may be stated as such in any document filed with the Secretary of State or with anyone else. SECTION 11. COMMITTEES. A majority of the directors fixed by these by-laws may, by resolution, create one or more committees and appoint members of the Board to serve on any one or more of such committees. Each committee shall have two or more members who shall serve at the pleasure of the Board. A majority of any committee shall constitute a quorum and a majority of a quorum is necessary for committee action. Each committee, to the extent provided by the Board of Directors in such resolution, shall have and exercise all of the authority of the Board of Directors in the management of the Corporation, except that a committee may not: authorize distributions; approve or recommend to shareholders any act required by statute to be approved by shareholders; fill vacancies on the Board or on any of its committees; elect or remove officers or fix the compensation of any member of the committee; adopt, amend or repeal the by-laws; approve a plan of merger not requiring shareholder approval; authorize or approve the reacquisition of shares, except according to a general formula or method prescribed by the Board; authorize or approve the issuance or sale, or contract for sale, of shares or determine the designation and relative rights, preferences, and limitations of a series of shares, except that the Board may direct a committee to fix the specific terms of issuance or sale or contract for sale or the number of shares to be allocated to particular employees under an employee benefit plan; or, amend, alter, repeal, or take action inconsistent with any resolution or action of the Board of Directors when the resolution or action of the Board of Directors provides by its terms that it shall not be amended, altered or repealed by action of a committee. Vacancies in the membership of any committee shall be filled by the Board of Directors. Each committee shall keep regular minutes of its proceedings and report 6 7 the same to the Board when required. A committee may act by unanimous consent in writing without a meeting and, subject to action by the Board of Directors, each committee, by a majority vote of its members, shall determine the time and place of meetings and the notice therefor. SECTION 12. COMPENSATION. The Board of Directors, by the affirmative vote of a majority of directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the Corporation as directors, officers or otherwise notwithstanding any director conflict of interest. By resolution of the Board of Directors, the directors may be paid their expenses, if any, of attendance at each meeting of the Board. No such payment previously mentioned in this Section shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. SECTION 13. PRESUMPTION OF ASSENT. A director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his or her dissent shall be entered in the minutes of the meeting or unless he or she shall file his or her written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered or certified mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. SECTION 14. REMOVAL OF DIRECTORS. One or more of the directors may be removed, with or without cause, at a meeting of shareholders by the affirmative vote of the holders of a majority of the outstanding shares then entitled to vote at an election of directors, except that no director shall be removed at a meeting of shareholders unless the notice of such meeting shall state that a purpose of the meeting is to vote upon the removal of one or more directors named in the notice, and then only the named director or directors may be removed at such meeting. If a director has been elected by a class or series of shares, he may be removed only by the shareholders of that class or series. SECTION 15. DISINTERESTED DIRECTORS; VOTING. A majority of the Corporation's disinterested directors shall be required to approve any business dealing between the Corporation and (i) any one or more of the directors of the Corporation or (ii) any person affiliated with or under common control with any one or more of the directors of the Corporation. Any such person described in clauses (i) or (ii) of this Section 15 who enters into or intends to enter into a business dealing with the Corporation shall, for purposes of this Section 15, be referred to as an "interested person." For the purposes of this Section 15, the terms "affiliate," "control," "under common control with," "disinterested directors" and "business dealing" shall have the following meanings: (a) an "affiliate" of, or person "affiliated" with, a specified person shall mean a person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the person specified; (b) the word "control" (the meaning of which hereunder shall also be applicable to the term "under common control with") shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or 7 8 policies of the person, whether through board representation, the ownership of voting securities, by contract or otherwise; (c) the word "person" shall mean any natural person, corporation, firm, association, trust, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity; (d) the term "disinterested directors" shall mean any director of the Corporation who is not (i) an employee, officer, director, trustee, partner, 5% shareholder (through beneficial ownership or otherwise) or fiduciary of a person (other than the Corporation) who is affiliated with or under common control with an interested person; or (ii) an employee, officer, director, trustee, partner or fiduciary of any of the persons described in subsection d(i) above; and (e) the term "business dealing" shall mean any transaction providing for the sale, lease or exchange of property or the rendering of any service, other than the sale, lease or exchange of property or the rendering of any service made or undertaken pursuant to and in accordance with an Administrative Services Agreement to be executed between Equity Group Investments, Inc., an Illinois corporation, and the Corporation in such form as the Board of Directors shall approve. ARTICLE IV OFFICERS SECTION 1. NUMBER. The officers of the Corporation shall be a President, a Treasurer and a Secretary and may include a Chairman of the Board (or one or more Co-Chairmen of the Board), Chief Executive Officer, one or more Vice Presidents, a Chief Operating Officer, a Chief Financial Officer, one or more Assistant Treasurers, and one or more Assistant Secretaries. In addition, the Board of Directors may, from time to time, appoint such other officers with such powers and duties as they shall deem necessary or desirable. Any two or more offices may be held by the same person. SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Election of an officer shall not of itself create contract rights. SECTION 3. REMOVAL AND RESIGNATION. Any officer elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interest of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Corporation may resign at any time by giving written notice thereof to the Board of Directors, the Chairman of the Board, 8 9 the President or the Secretary. Any resignation shall take effect at the time specified in the notice, or, if the time when it shall become effective is not specified therein, immediately upon its receipt. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. SECTION 4. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or otherwise may be filled by the Board of Directors for the unexpired portion of the term. SECTION 5. CHAIRMAN OF THE BOARD. The Board of Directors may designate a Chairman of the Board (or one or more Co-Chairmen of the Board). The Chairman of the Board shall preside over the meetings of the Board of Directors and of the stockholders at which he shall be present. If there be more than one, the Co-Chairmen designated by the Board of Directors will perform such duties. The Chairman of the Board shall perform such other duties as may be assigned to him or them by the Board of Directors. SECTION 6. CHIEF EXECUTIVE OFFICER. The Board of Directors shall designate a Chief Executive Officer. In the absence of such designation, the Chairman of the Board (or, if more than one, the Co-Chairmen of the Board in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall be the Chief Executive Officer of the Corporation. The Chief Executive Officer shall have general responsibility for implementing the policies of the Corporation, as determined by the Board of Directors, and for the management of the business and affairs of the Corporation. SECTION 7. PRESIDENT. The President or the Chief Executive Officer, as the case may be, shall be the principal executive officer of the Corporation and shall in general supervise and control all of the business and affairs of the Corporation. In the absence of a designation of a Chief Operating Officer by the Board of Directors, the President shall be the Chief Operating Officer. Subject to the direction and control of the Board of Directors, he/she shall, in general: supervise and control the business and affairs of the Corporation; see that the resolutions and directions of the Board of Directors are carried into effect except in those instances in which that responsibility is specifically assigned to some other person by the Board of Directors; and discharge all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the Corporation or a different mode of execution is expressly prescribed by the Board of Directors or these by-laws, he/she may execute for the Corporation certificates for its shares and any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized to be executed, and he/she may accomplish such execution either under or without the seal of the Corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors, according to the requirements of the form of the instrument. He/she may vote all securities which the Corporation is entitled to vote except as and to the extent such authority shall be vested in a different officer or agent of the Corporation by the Board of Directors. SECTION 8. CHIEF OPERATING OFFICER. The Board of Directors may designate a Chief Operating Officer. The Chief Operating Officer shall have the responsibilities and duties as set forth by the Board of Directors or the Chief Executive Officer or President, as the case may be. 9 10 SECTION 9. CHIEF FINANCIAL OFFICER. The Board of Directors may designate a Chief Financial Officer. The Chief Financial Officer shall have the responsibilities and duties as set forth by the Board of Directors or the Chief Executive Officer or President, as the case may be. SECTION 10. THE VICE PRESIDENTS. The Vice President (or in the event there be more than one Vice President, each of the Vice Presidents) shall assist the President in the discharge of his/her duties as the President may direct and shall perform such other duties as from time to time may be assigned to him/her by the President or by the Board of Directors. In the absence of the President or in the event of his/her inability or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board of Directors or by the President if the Board of Directors has not made such a designation or, in the absence of any designation, then in the order of seniority of tenure as Vice President) shall perform the duties of the President and, when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the Corporation or a different mode of execution is expressly prescribed by the Board of Directors or these by-laws, the Vice President (or each of them if there are more than one) may execute for the Corporation certificates for its shares and any contracts, deeds, mortgages, bonds or other instruments which the Board of Directors has authorized to be executed, and he/she may accomplish such execution either under or without the seal of the Corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the Board of Directors or these by-laws. SECTION 11. THE TREASURER. The Treasurer shall: (a) have charge of and be responsible for the maintenance of adequate books of account for the Corporation; (b) have charge and custody of all funds and securities of the Corporation and be responsible therefor and for the receipt and disbursement thereof; and (c) perform all the duties incident to the office of treasurer and such other duties as from time to time may be assigned to him/her by the President or by the Board of Directors. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors may determine. SECTION 12. THE SECRETARY. The Secretary shall: (a) record the minutes of the shareholders' and of the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws; (c) be custodian of the corporate records and of the seal of the Corporation; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) sign, with the President or a Vice President or any other officer thereunto authorized by the Board of Directors, certificates for shares of the Corporation, the issue of which shall have been authorized by the Board of Directors, and any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the Board of Directors or these by-laws; (f) have general charge of the stock transfer books of the Corporation; (g) have authority to certify the by-laws, resolutions of the shareholders and Board of Directors and committees thereof, and other documents of the Corporation as true and correct copies thereof; and (h) perform all duties 10 11 incident to the office of secretary and such other duties as from time to time may be assigned to him/her by the President or by the Board of Directors. SECTION 13. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant Treasurers and Assistant Secretaries shall perform such duties as shall be assigned to them by the Treasurer or the Secretary, respectively, or by the President or the Board of Directors. The Assistant Secretaries may sign with the President or a Vice President, or any other officer thereunto authorized by the Board of Directors, certificates for shares of the Corporation, the issue of which shall have been authorized by the Board of Directors, and any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the Board of Directors or these by-laws. The Assistant Treasurers shall, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the board of directors shall determine. SECTION 14. SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. ARTICLE V CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. CONTRACTS. The Board of Directors may authorize any officer or officers, agent or agents to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 2. LOANS. No loans shall be contracted on behalf of the Corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 4. DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may select. 11 12 ARTICLE VI SHARES AND THEIR TRANSFER SECTION 1. SHARES REPRESENTED BY CERTIFICATES AND UNCERTIFICATED SHARES. The issued shares of the Corporation shall be represented by certificates or shall be uncertificated shares. Certificates representing shares of the Corporation shall be signed by the appropriate officers and may be sealed with the seal or a facsimile of the seal of the Corporation. If a certificate is countersigned by a transfer agent or registrar, other than the Corporation or its employee, any other signatures may be facsimile. Each certificate representing shares shall be consecutively numbered or otherwise identified and shall also state the name of the person to whom issued, the number and class of shares (with designation of series, if any), the date of issue, and that the Corporation is organized under Delaware law. If the Corporation is authorized to issue shares of more than one class or of series within a class, the certificate shall also contain such information or statement as may be required by law. Unless prohibited by the articles of incorporation, the Board of Directors may provide by resolution that some or all of any class or series of shares shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until the certificate has been surrendered to the Corporation. Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send the registered owner thereof a written notice of all information that would appear on a certificate. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares shall be as identical to those of the holders of certificates representing shares of the same class and series. The name and address of each shareholder, the number and class of shares held and the date on which the shares were issued shall be entered on the books of the Corporation. The person in whose name shares stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. SECTION 2. LOST CERTIFICATES. If a certificate representing shares has allegedly been lost or destroyed, the Board of Directors may, in its discretion, except as may be required by law, direct that a new certificate be issued upon such indemnification and other reasonable requirements as it may impose. SECTION 3. TRANSFER OF SHARES. Transfer of shares of the Corporation shall be recorded on the books of the Corporation. Transfer of shares represented by a certificate, except in the case of a lost or destroyed certificate, shall be made on surrender for cancellation of the certificate for such shares. A certificate presented for transfer must be duly endorsed and accompanied by proper guaranty of signature and other appropriate assurances that the endorsement is effective. Transfer of an uncertificated share shall be made on receipt by the Corporation of an instruction from the registered owner or other appropriate person. The instruction shall be in writing or a communication in such form as may be agreed upon in writing by the Corporation. 12 13 ARTICLE VII FISCAL YEAR The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. ARTICLE VIII DISTRIBUTIONS The Board of Directors may authorize, and the Corporation may make, distributions to its shareholders, subject to any restrictions in its articles of incorporation or provided by law. ARTICLE IX SEAL The corporate seal shall have inscribed thereon the name of the Corporation and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced, provided that the affixing of the corporate seal to an instrument shall not give the instrument additional force or effect, or change the construction thereof, and the use of the corporate seal is not mandatory. ARTICLE X WAIVER OF NOTICE Whenever any notice is required to be given under the provisions of these by-laws or under the provisions of the articles of incorporation or under the provisions of the Act, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance at any meeting shall constitute waiver of notice thereof unless the person at the meeting objects to the holding of the meeting because proper notice was not given. ARTICLE XI INDEMNIFICATION Each person who at any time is or shall have been a director, officer, employee or agent of this Corporation, or is or shall have been serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified by this Corporation in accordance with and to the full extent permitted by the Act. The foregoing right of indemnification shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under 13 14 any by-law, agreement, vote of shareholders or disinterested directors or otherwise. If authorized by the Board of Directors, the Corporation may purchase and maintain insurance on behalf of any person to the full extent permitted by the Act. If the Corporation pays indemnity or makes an advance of expenses to a director, officer, employee or agent, the Corporation shall report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders' meeting. ARTICLE XII AMENDMENTS Unless otherwise provided in the articles of incorporation, these by-laws may be made, altered, amended or repealed by the shareholders or the Board of Directors, but no by-law adopted by the shareholders may be altered, amended or repealed by the Board of Directors. 14 EX-21 3 SUBSIDIARIES OF AMERICAN CLASSIC VOYAGES CO. 1 EXHIBIT 21 SUBSIDIARIES OF AMERICAN CLASSIC VOYAGES CO. ----------------------------
Jurisdiction Under Percentage Name of Subsidiary Which Organized of Ownership - ------------------------------------------ ------------------ ------------ The Delta Queen Steamboat Co. Delaware 100% DQSB II, Inc. Delaware (1) Cruise America Travel, Incorporated Delaware (1) Great River Cruise Line, L.L.C. Delaware (2) Great Ocean Cruise Line, L.L.C. Delaware (2) Great AQ Steamboat, L.L.C. Delaware (2) DQSC Property Co. Delaware (1) Great Hawaiian Cruise Line, Inc. Delaware 100% Great Independence Ship Co. Delaware (3) Oceanic Ship Co. Delaware (3) Great Hawaiian Properties Corporation Delaware (3) American Hawaii Properties Corporation Delaware (3) CAT II, Inc. Delaware (3)
(1) 100% owned subsidiaries of The Delta Queen Steamboat Co. (2) 99% owned subsidiaries of The Delta Queen Steamboat Co. and 1% owned subsidiaries of DQSB II, Inc. (3) 100% owned subsidiaries of Great Hawaiian Cruise Line, Inc. EX-23 4 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23 Consent of Independent Auditors ------------------------------- The Board of Directors and Stockholders American Classic Voyages Co. We consent to incorporation by reference in the registration statement No. 33-80614 on Form S-3 and No. 333-44225 on Form S-8 of American Classic Voyages Co. of our report dated February 20, 1998, relating to the consolidated balance sheets of American Classic Voyages Co. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1997, and the related financial statement schedule, which report appears in the December 31, 1997 annual report on Form 10-K of American Classic Voyages Co. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Chicago, Illinois March 30, 1998 EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1997 DEC-31-1997 19,512 0 1,299 0 0 28,624 230,498 59,393 210,895 70,188 81,488 0 0 140 59,079 210,895 0 177,884 0 111,295 0 0 6,963 4,049 1,620 2,429 0 0 0 2,429 0.17 0.17 Includes restricted short-term investments of $325.
-----END PRIVACY-ENHANCED MESSAGE-----