UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2001
MILLENIUM SEACARRIERS, INC.
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's Name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
c/o Ugland House
South Church Street
Grand Cayman, Cayman Islands
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.)
Form 20-F |X| Form 40-F |_|
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes |_| No |X|
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):82-_______ )
MILLENIUM SEACARRIERS, INC.
REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
INDEX
PART I PAGE
----
Item 1. Financial Information.............................................................................1
Consolidated Balance Sheets as of March 31, 2001 (unaudited)
and December 31, 2000..................................................1
Unaudited Consolidated Statements of Operations
for the three-month period ended March 31, 2001
and 2000...............................................................2
Unaudited Consolidated Statements of Cash Flows
for the three-month period ended March 31, 2001
and 2000...............................................................3
Consolidated Statement of Shareholder's Equity/(Deficit)
for the year ended December 31, 2000 and three-month
period ended March 31, 2001 (unaudited)................................4
Notes to Consolidated Financial Statements......................................5
Item 2. Unaudited Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three-month period ended March 31, 2001...........8
PART II Other Information.......................................................................12
Item 1. Legal Proceedings................................................................................12
Item 2. Changes Securities...............................................................................12
Item 3. Defaults Upon Senior Securities..................................................................12
Item 4. Submission of Matters to a Vote of Security Holders..............................................12
Item 5. Other Information................................................................................12
Item 6. Exhibits and Reports on Form 6-K.................................................................12
Signature.................................................................................................12
PART I
Item 1. FINANCIAL INFORMATION
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31,
2001 DECEMBER 31,
ASSETS (UNAUDITED) 2000
- ------
CURRENT ASSETS
Cash and cash equivalents $ 129,083 $ 1,616,528
Restricted cash 6,326,643 3,400,167
------------------ ------------------
6,455,726 5,016,695
Receivables :
Voyages 962,826 880,637
Claims and other 1,837,794 715,447
Inventories and prepaid expenses 1,411,155 2,093,513
------------------ ------------------
TOTAL CURRENT ASSETS 10,667,501 8,706,292
------------------ ------------------
FIXED ASSETS
Vessels, net of accumulated depreciation of $11,780,983 and
$11,992,543 79,008,133 84,537,841
Other, net of accumulated depreciation 122,134 139,455
------------------ ------------------
TOTAL FIXED ASSETS 79,130,267 84,677,296
Other assets 4,204,773 4,690,076
------------------ ------------------
TOTAL ASSETS $ 94,002,541 $ 98,073,664
================== ==================
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
- ----------------------------------------------
CURRENT LIABILITIES
Trade accounts payable $ 6,865,197 $ 6,747,400
Accrued liabilities 6,338,124 7,774,189
Charter revenue received in advance 935,481 799,003
------------------ ------------------
TOTAL CURRENT LIABILITIES 14,138,802 15,320,592
Notes 96,742,297 96,597,348
------------------ ------------------
TOTAL LIABILITIES 110,881,099 111,917,940
------------------ ------------------
Commitments and contingencies
SHAREHOLDER'S EQUITY
Common stock and paid in capital 22,900,000 22,900,000
Warrants 1,200,000 1,200,000
Accumulated deficit (40,978,558) (37,944,276)
------------------ ------------------
TOTAL SHAREHOLDER'S EQUITY (16,878,558) (13,844,276)
------------------ ------------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY/(DEFICIT) $ 94,002,541 $ 98,073,664
================== ==================
The accompanying notes are an integral part of these financial statements
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three-month Three-month
period ended period ended
March 31, 2001 March 31, 2000
(unaudited) (unaudited)
REVENUE
Freight and hire from voyages $ 10,656,458 $ 10,521,809
Voyage expenses (1,689,309) (1,768,817)
Commissions ( 368,084) (386,372)
-------------------- ---------------------
NET REVENUE 8,599,065 8,366,620
-------------------- ---------------------
EXPENSES
Vessel operating expenses 4,818,901 4,132,800
Management fees 1,282,052 1,342,829
General and administrative 388,015 348,090
Depreciation and amortization 1,484,696 1,537,759
Loss on sale of vessel 407,656 0
-------------------- ---------------------
8,381,320 7,361,478
-------------------- ---------------------
OPERATING INCOME 217,745 1,005,142
-------------------- ---------------------
OTHER INCOME / (EXPENSE)
Interest expense (3,238,674) (3,208,653)
Other income (expense) (13,353) 82,599
-------------------- ---------------------
(3,252,027) (3,126,054)
-------------------- ---------------------
LOSS BEFORE INCOME TAXES (3,034,282) (2,120,912)
INCOME TAX PROVISION - -
-------------------- ---------------------
NET LOSS $ (3,034,282) $ (2,120,912)
==================== =====================
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.32) $ (0.22)
==================== =====================
WEIGHTED AVERAGE SHARES OUTSTANDING 9,500,000 9,500,00
==================== =====================
The accompanying notes are an integral part of these financial statements
2
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
MARCH 31, 2001 MARCH 31, 2000
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (3,034,282) $ (2,120,912)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss on sale of vessel 407,656 -
Depreciation and amortization 1,484,696 1,537,759
Amortization of bond discount and deferred financing costs 314,984 297,803
Changes in operating assets and liabilities
Decrease/(increase) in Receivables 523,464 (321,129)
Decrease (increase) in Inventories and prepaid expenses 682,358 (49,365)
Increase (decrease) in Trade accounts payable 51,470 (64,101)
Decrease in Accrued liabilities (2,361,065) (2,287,802)
Deferred dry-docking and special survey - (665,504)
Increase in Charter revenue received in advance 136,478 41,160
------------------ --------------------
NET CASH USED IN OPERATING ACTIVITIES (1,794,241) (3,632,091)
------------------ --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of vessel (3,000,000) -
Additions to vessels (74,013) -
Proceeds from sale of vessels 6,307,285 -
Purchase of other fixed assets 0 (5,274)
------------------ --------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 3,233,272 (5,274)
------------------ --------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Escrow account and restricted cash (2,926,476) (22,401)
------------------ --------------------
NET CASH USED IN FINANCING ACTIVITIES (2,926,476) (22,401)
------------------ --------------------
DECREASE IN CASH AND CASH EQUIVALENTS (1,487,445) (3,659,766)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,616,528 6,903,645
------------------ --------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 129,083 $ 3,243,879
================== ====================
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid $ 5,837,280 $ 5,815,200
Supplemental schedule of non-cash financing activities :
Notes payable for purchase of vessel $ 925,000 -
Notes receivable for sale of vessels (1,728,000) -
The accompanying notes are an integral part of these financial statements
3
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY/(DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 2000 AND
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2001 (UNAUDITED)
COMMON STOCK
AND PAID-IN ACCUMULATED
CAPITAL WARRANTS DEFICIT TOTAL
BALANCE JANUARY 1, 1999 $ 22,900,000 $ 1,200,000 $(3,526,869) $ 20,573,131
Net Loss for the year ended
December 31, 1999 (18,797,836) (18,797,836)
-------------- ------------- ---------------- -----------------
BALANCE DECEMBER 31, 1999 22,900,000 1,200,000 (22,324,705) 1,775,295
Net Loss for the year ended
December 31, 2000 (15,619,571) (15,619,571)
-------------- ------------- ---------------- -----------------
BALANCE DECEMBER 31, 2000 22,900,000 1,200,000 (37,944,276) (13,844,276)
Net Loss for the the three-month
period ended March 31, 2001
(unaudited) (3,034,282) (3,034,282)
-------------- ------------- ---------------- -----------------
BALANCE MARCH 31, 2001 $ 22,900,000 $ 1,200,000 $(40,978,558) $ (16,878,558)
============== ============= ================ =================
The accompanying notes are an integral part of these financial statements
4
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
1. BUSINESS INFORMATION
On March 10, 1998, Millenium Seacarriers, Inc. ("Millenium") was formed (the
"Formation") to directly hold the capital stock of a group of subsidiaries
(collectively the "Company") each of which owns one of Millenium's vessels.
These consolidated financial statements give effect to the Formation pursuant to
which all of Millenium subsidiaries became wholly owned subsidiaries of
Millenium. Millenium owns and operates a fleet of dry-bulk carriers, primarily
of Handy-size type. As of March 31, 2001, the Company's fleet consisted of 20
vessels. During the quarter ended March 31, 2001, the Company sold two vesels
and acquired one vessel.
The Company is registered and incorporated in the Cayman Islands. Its principal
business is the acquiring, upgrading and operating of vessels. Millenium
conducts its operations through its subsidiaries whose principal activity is the
operation and ownership of dry-bulk vessels that will be under the exclusive
management of Millenium Management, Inc. ("MMI") and the sub-management of
Millenium Maritime Services Ltd. and Millenium Maritime Services, Inc.
The Company incurred losses of approximately $15.6 million and $18.8 million in
2000 and 1999, respectively. In addition, the Company has an accumulated deficit
of approximately $41 million and a shareholder's deficit of approximately $16.9
million as of March 31, 2001. The Company has developed and is in the process of
implementing a plan that includes the strategic sale of certain of its younger
vessels, the proceeds from which will be used to purchase older vessels.
Management believes it can operate the vessels acquired profitably over their
remaining useful lives, enabling the Company to generate cash flows from its
operations. In addition, the Company is in the process of securing a line of
credit. Based on these facts and circumstances, management believes that the
Company will have the financial resources to meet its obligations as they come
due.
The accompanying consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America.
All inter-company balances and transactions have been eliminated upon
consolidation. For a description of significant accounting policies, see the
Notes to the consolidated financial statements in the 2000 annual report on Form
20-F.
2. ACCRUED LIABILITIES
Accrued liabilities primarily consists of accrued payroll, accrued interest and
other accrued expenses. These liabilities at March 31, 2001 were, $1,723,565,
$2,437,250 and $1,252,309 respectively, and at December 31, 2000 were
$1,459,498, $5,350,840 and $963,851, respectively. Accrued liabilities at March
31, 2001 also includes a note payable of $925,000 due towards the purchase price
of the Millenium Scorpio (see Note 4).
3. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended in June 2000 by Statement of
Financial Accounting Standards No. 138 ("SFAS 138"), "Accounting for Certain
Derivative Instruments and Certain Hedging Activities," which requires companies
to recognize all derivatives as either assets or liabilities in the balance
sheet and measure such instruments at fair value. As amended by Statement of
Financial Accounting Standards No. 137 ("SFAS 137"), "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
133," the provisions of SFAS 133 were adopted by the Company as of January 1,
2001. Adoption of SFAS 133, as amended by SFAS 138, did not have a material
impact on the Company's results of operations or financial position during the
first quarter of 2001.
4. FIXED ASSETS
Fixed assets consists of the Company's fleet of dry bulk carriers and other
assets. During the period ended March 31, 2001, the Company sold two vessels for
a gross aggregate price of $9.12 million. Proceeds included a note receivable
5
amounting to 20% of net sales price. Net cash proceeds are placed in the
collateral account (formerly Escrow). During the period, the Company also
purchased a vessel for a gross purchase price of $3.9 million which was partly
paid for out of cash in Collateral and a note payable of $925,000. Vessels owned
by the Company are stated at cost, which comprises the vessels' contract price,
capital improvements, direct delivery and acquisition expenses, and finance
charges relating to the acquisition of vessels.
Balance at Balance at
---------- ----------
March 31, 2001 December 31, 2000
-------------- -----------------
Vessels, at cost $ 90,789,116 $ 96,530,384
Less : accumulated depreciation (11,780,983) (11,992,543)
------------------------ ------------------------
Vessels, net $ 79,008,133 $ 84,537,841
======================== ========================
Other assets, at cost $ 236,799 $ 236,799
Less : accumulated depreciation (114,665) (97,344)
------------------------ ------------------------
Other assets, net $ 122,134 $ 139,455
======================== ========================
5. LONG-TERM DEBT
MARCH 31, DECEMBER 31,
--------- ------------
LONG TERM DEBT IS AS FOLLOWS: 2001 2000
---- ----
12% First Priority Ship Mortgage Exchange Notes due 2005
($100 million principal amount at maturity), (the "Notes").
Interest on the Notes is payable semi-annually on January 15
and July 15 of each year, commencing January 15, 1999, at a
rate of 12% per annum on the accreted value. The Notes will
mature on July 15, 2005 and will be redeemable, in whole or
part, at the option of the Company at any time on or after
July 15, 2003. $100,000,000 $100,000,000
Less : Unamortized portion of bond discount (3,257,703) (3,402,652)
------------------------------------------
Notes $96,742,297 $96,597,348
==========================================
The gross bond discount of $4,607,000 at date of issuance is amortized using the
effective interest method over the life of the Notes (7 years). Amortization
recorded in connection with this discount was $144,949 and $127,768 in the
quarters ended March 31, 2001 and 2000, respectively, and is included in
interest expense. The deferred financing costs amortized in connection with the
debt issue was $170,035 and $170,035 in the quarters ended March 31, 2001 and
2000, respectively, and is included in interest expense.
Semiannual interest payments are made on the Notes on January 15 and July 15 of
each year commencing on January 15, 1999. Cash interest payments are made to
holders of the Notes based on the Accreted Value of the Notes as defined in the
Note Indenture.
The Notes are fully and unconditionally guaranteed (the "Subsidiary
Guarantees"), jointly and severally, on a senior basis by each of the
subsidiaries of Millenium (the "Subsidiary Guarantors"). The Notes are currently
collateralized by First Priority Ship Mortgages on the Company's vessels. The
Company's bonds are registered by the United States Securities & Exchange
Commission pursuant to the United States Securities Act of 1933.
The indebtedness evidenced by the Notes constitutes a general secured senior
obligation of the Company and is fully and unconditionally guaranteed by each of
the subsidiaries of the Company and will rank pari passu in right of payment
with all future senior indebtedness of the Company and its subsidiary
guarantors. The Indenture, pursuant to which the Notes were issued (the "Notes
Indenture"), contains certain covenants that among other things, limit the type
and amount of additional indebtedness that may be incurred by the Company and
imposes certain limitations on investments, loans and advances, sales or
transfers of assets, dividends and other payments, the ability of the Company to
enter into sale-leaseback transactions, certain transactions with affiliates and
certain mergers, consolidations and
6
purchases of assets, and amendments to security agreements. The Company is
currently in compliance with the terms of the Notes Indenture at March 31, 2001.
6. RELATED PARTY TRANSACTIONS
Each of the Company's vessels receives management services from its equity
shareholder MMI pursuant to a Management Agreement among the Company's vessel
owning subsidiaries and MMI. Under the Management Agreement, MMI acts as the
fleet's technical manager and performs all commercial management functions,
including arranging chartering, advising the Company on the purchase and sale of
vessels and advising on obtaining insurance. As a technical manager, MMI (i)
provides qualified officers and crews on board vessels, (ii) manages day-to-day
vessel operations and maintains relationships with charterers, (iii) purchases
on behalf of the Company stores, spares, supplies and equipment for vessels,
(iv) performs general vessel maintenance, subcontracts for dry-dock facilities
for any major repairs and overhauls, (v) ensures regulatory and classification
society compliance, (vi) performs vessel operational budgeting and evaluations,
and (vii) provides accounting, treasury and finance functions (including cash
collections and disbursements on behalf of the Company). As remuneration for its
services, MMI receives a fixed management fee (payable monthly in advance)
ranging from $350 to $600 per day per vessel depending on the vessel type. In
addition, any visit to a vessel by a superintendent of MMI to evaluate and
supervise any repairs, dry-docking or other activities will entitle MMI to
expenses incurred and, from visits in excess of five days per annum per vessel,
its expenses incurred and an amount equal to $550 for each additional day. As
additional remuneration for its services, MMI receives commission of (i) 1.25%
on all gross time charter revenue, (ii) 1.75% on all gross freight revenue,
(iii) 1% on the gross sale or purchase price of a vessel and (iv) 2% of
insurance premiums for insurance placed, in each case as adjusted to reflect
fluctuations in market rates and practices.
MMI has sub-contracted certain of its technical and commercial management
services to Millenium Maritime Services Ltd. and Millenium Maritime Services,
Inc., both affiliates of MMI.
The Company records the management fee paid to MMI in operating expenses. As of
March 31, 2001, there is a payable to MMI which is reflected in Accrued
liabilities, amounting to $238,209. During the three-month periods ended March
31, 2001 and 2000, respectively, the Company incurred management fees of
$1,282,052 and $1,342,829 in connection with the aforementioned agreement.
7. LOSS ON SALE OF VESSELS
During the quarter ended March 31, 2001, the Company sold two vessels, disposal
of which resulted in a loss of $407,656.
8. CONTINGENCIES
From time to time the Company has been, and expects to continue to be, subject
to legal proceedings and claims in the ordinary course of its business,
principally personal injury and property claims. Such claims, even if lacking
merit, could result in the expenditure of significant financial and managerial
resources. As of March 31, 2001, the Company was not aware of any legal
proceedings or claims that it believed would have, individually or in the
aggregate, a material adverse effect on the Company or on its financial
condition or results of operation.
9. SUBSEQUENT EVENTS
In April 2001, the Company acquired a vessel and sold a vessel for a net
aggregate price of $3.92 million.
7
Item 2: UNAUDITED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- ----------------------------------------------------------------------
AND RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2001
- -------------------------------------------------------------------------
GENERAL
- -------
The Company is an international shipping company that owns and operates a fleet
of drybulk carriers, primarily Handysize (generally classified as being in the
20,000-49,000 deadweight-ton range) drybulk carriers. As of March 31, 2001, the
Company's fleet consisted of 20 vessels totalling 579,138 deadweight-tons.
The Company was incorporated on March 10, 1998 in the Cayman Islands. The
Company began operations on July 24, 1998, with five vessels and subsequently
expanded its fleet to 21 vessels as of June 30, 1999, all of which were acquired
from the net proceeds of an offering of Units ("Units") consisting of $100
million principal amount at maturity of Notes and $1.2 million of Warrants. The
Company also received an equity contribution of $24 million from Millenium
Management, Inc., MMI, the holder of 100% of the outstanding common stock of the
Company.
The following benchmarks are used by the Company to measure revenues: (i)
utilization as an index that indicates vessel earning days (on the basis that
350 calendar days per year equals 100% utilization), and (ii) the average daily
time charter equivalent (TCE) rate to analyze net revenues after commissions on
the basis of 350-days utilization.
The following table sets forth certain statement of operations and other
operating data for the Company.
Three-month Three-month
------------ ------------
period ended period ended
------------- ------------
March 31, 2001 March 31, 2000
-------------- --------------
Net Revenue $8,599,065 $8,366,620
Vessel Operating Expenses (4,818,901) (4,132,800)
Mangement Fees (1,282,052) (1,342,829)
General and Administrative (388,015) (348,090)
----------------- ----------------
Earnings before Interest, Tax,
Depreciation and Amortization (Adjusted EBITDA) $ 2,110,097 $2,542,901
================= ================
Average utilization 97.2% 96.5%
================= ================
Adjusted EBITDA consists of net income prior to deductions for interest expense,
income taxes, other income or expense net, depreciation and amortization,
impairment write-downs and loss on sale-disposal of vessels. Adjusted EBITDA is
not required by United States generally accepted accounting principles, and
should not be considered as an alternative to net income as an indicator of the
Company's operating performance or to cash flows from operations as a measure of
liquidity.
RESULTS OF OPERATIONS for three-month period ended March 31, 2001
NET REVENUE
Net revenue for the three-month period ended March 31,2001 was $8.6 million
compared to $8.4 million in the 2000 period. During the period, 76.1% of the
Company's gross revenues were earned from period time charters contracted with
first class charterers, many of which continued from the previous year. The
period consisted of 1,802 ship-operating days. The fleet averaged an utilization
rate of 97.2% during the period.
During the period ended March 31, 2001, a number of the Company's vessels were
in the spot market. This was mainly because of the annual redelivery of the
Laker-type vessels, which are vessels which ply in the Great Lakes trade from
Fednav International ("Fednav"). As per terms of the charter contract, Fednav
redelivered the Laker-type vessels, the Millenium Condor, Millenium Falcon and
Millenium Hawk, for the Winter months when the Great Lakes freeze. These vessels
performed a substantial number of spot market voyages during the period. The
Millenium Osprey remained with Fednav during this period. The Clipper Pacific,
the Millenium Golden Hind, the Millenium Amethyst and the
8
Millenium Elmar performed spot voyages before being placed on short term time
charters. The Millenium Harmony, the Millenium Majestic, the Millenium Leader,
the Millenium Aleksander, the Millenium Dawn, the Millenium Express, the
Millenium Amanda, the Millenium Raptor, the Millenium Mexico, and the Adamas
continue to be on their period charters contracted in 2000. The newly acquired
Millenium Scorpio was placed on a short term period charter. The Clipper
Atlantic performed spot market trades during the quarter ended March 31, 2001.
VESSEL OPERATING EXPENSES
Vessel operating expenses, excluding management fees and depreciation and
amortization were $4.8 million for the period ended March 31, 2001 compared to
$4.1 million for the period ended March 31, 2000. The period ended March 31,
2001 consisted of 1802 ship-operating days compared to 1,820 ship-operating day
for period ended March 31, 2000. The average vessel running costs for crewing,
insurance, lubricants, repairs and maintenances, registry and survey costs, and
vessel communications, came to $2,674 per day in the period ended March 31,
2001.
MANAGEMENT FEES
Management fees incurred to MMI for contracted technical and commercial
management services for the period ended March 31, 2001 were $1.28 million
compared to $1.34 million for the period ended March 31, 2000.
Each of the Company's vessels receives management services from its equity
shareholder MMI pursuant to a Management Agreement among the Company's vessel
owning subsidiaries (the "Vessel Owning Subsidiaries) and MMI. Under the
Management Agreement, MMI acts as the fleet's technical and commercial manager.
As a technical manager, MMI, on behalf of the Vessel Owning Subsidiaries, (i)
provides qualified officers and crews on board vessels, (ii) manages day-to-day
vessel operations and maintains relationships with charterers, (iii) purchases
on behalf of the Company stores, spares, supplies and equipment for vessels,
(iv) performs general vessel maintenance, subcontracts for drydock facilities
for any major repairs and overhauls, (v) ensures regulatory and classification
society compliance, (vi) performs vessel operational budgeting and evaluations,
and (vii) provides accounting, treasury and finance functions (including cash
collections and disbursements on behalf of the Company). As remuneration for its
services, MMI receives a fixed management fee (payable monthly in advance)
ranging from $350 to $600 per day per vessel. The Company treats the management
fee paid to MMI as an operating expense.
Under commercial management services, MMI, on behalf of the Vessel Owning
Subsidiaries, primarily maintains and negotiates vessel charters, vessel
sale-and-purchase brokering, and places insurance covers for vessels. As
remuneration for its services, MMI receives a commission of 1.25% on all gross
time charter revenue and 1.75% on all gross spot charter revenue earned by each
vessel managed, 1% on the gross sale or purchase price of a vessel for brokerage
services, and 2% of all insurance covers placed per vessel managed.
MMI sub-contracts certain of its technical and commercial management services to
Millenium Maritime Services Ltd. and Millenium Maritime Services, Inc.
GENERAL AND ADMINISTRATIVE
These expenses totalled $388,015 for the period ended March 31, 2001 compared to
$348,090 for the period ended March 31, 2000. For the period ended March 31,
2001, these expenses included, among other things, legal and professional fees
of $294,129 and advisory fees of $75,000 paid to Millenium Advisors, L.L.C.
DEPRECIATION AND AMORTIZATION
Total depreciation for the three-month period ended March 31, 2001 was
$1,205,201 compared to $1,332,071 for the period ended March 31, 2000. Vessel
depreciation is calculated based on the remaining useful life of the vessel,
assuming a maximum life of 30 years, net of salvage value.
Deferred vessel costs, including deferred dry-docking expenses, are capitalized
and amortized over a period of two and a half years (30 months). For the period
ended March 31, 2001, total amortization of deferred vessel charges, including
deferred dry-docking expenses, were $279,497. For the comparable period ended
March 31, 2000 total amortization of deferred vessel charges including deferred
dry-docking expenses,were $205,688.
9
LOSS ON SALE
During the period ended March 31, 2001, the Company sold two vessels for an
gross aggregate sales price of $9.12 million. The two transactions also included
a deferred note receivable from the respective buyers amounting to 20% of net
sale price of each vessel amounting to a total of $1,728,000 in notes
receivable. Cash proceeds are in the collateral account (formerly Escrow). The
sale of the two vessels resulted in a loss of $407,656
INTEREST EXPENSE
For the three-month period ended March 31, 2001, the accrued interest expense on
the Company's long-term debt was $2,923,690, compared to $2,910,850 in the
three-month period ended March 31, 2000. During the three-month ended March 31,
2001, interest earned on cash balances was $31,903, compared to $71,604 in the
quarter ended March 31, 2000. Interest expense in the statement of operations
for the quarter ended March 31, 2001 also included amortization of $144,949
recorded in connection with the bond discount relating to the debt issue, and
the amortization of $170,035 recorded in connection with the deferred financing
costs incurred relating to the debt issue. Comparable amortization charges
recorded in the quarter ended March 31, 2000 were $127,768 and $170,035
respectively.
NET LOSS
Net loss for the three-month period ended March 31, 2001 was $3.0 million
compared to a net loss of $2.1 million for the three-month period ended March
31, 2000. Earnings for the three-month period ended March 31, 2001 were impacted
by relatively higher costs associated with vessel operations and vessel sale and
purchase transactions compared to the period ended March 31, 2000. Earnings
before interest, taxes, depreciation and amortization, and provision for
impairment (adjusted EBITDA) for the quarter ended March 31, 2001 was $2.1
million compared to $2.5 million in the quarter ended March 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company is a holding company. As of March 31, 2001, it owns all of the
issued and outstanding shares of 20 Vessel Owning Subsidiaries.
As of March 31, 2001, the Company's cash position consisted of $129,083 in
unrestricted cash and cash equivalents. Restricted cash includes $3.1 million of
net proceeds in the collateral account (formerly Escrow) realized from the sale
of the Millenium Trader and the Millenium Eagle and the purchase of the
Millenium Scorpio.
OPERATING ACTIVITIES
Net cash flows used in operations for the three-month period ended March 31,
2001 were $1.8 million compared to cash used in operations in the quarter ended
March 31, 2000 of $3.6 million. As is common in the shipping industry, the
Company collects its hire for all time charters 15 days in advance. The Company
also continues to have well established long-term relationships with many
suppliers resulting in the Company receiving favorable credit terms.
INVESTING ACTIVITIES
During the quarter ended March 31, 2001, the Company sold the Millenium Trader
and the Millenium Eagle for an gross aggregate sales price of $9.12 million. The
two transactions also included a deferred note receivable from the respective
buyers amounting to 20% of net sale price of each vessel for a total of
$1,728,000 in notes receivable. Net cash provided by investing activities in the
quarter ended March 31, 2001 were $3.2 million.
FINANCING ACTIVITIES
Net cash used in financing activities during the period ended March 31, 2001
were $2.9 million. This consists of net proceeds from the sale of two vessels
and acquisition of a vessel. This compares with negligible financing activity in
the period ended March 31, 2000 which primarily consisting of interest earnings
on cash in collateral account (formerly Escrow).
The Company believes that based upon the current level of operation, cash flow
from operations, together with other readily available sources of funds, it has
adequate liquidity to fund its working capital requirements, meet capital
10
expenditures for repairs and maintenance and make required payments of interest
on the Company's debt. The Company intends to change the fleet profile through
sale and purchase of vessels and this will be partly assisted by its ability to
raise capital through either borrowing activities or from cash generated from
operations, or both.
FOREIGN EXCHANGE RATE FLUCTUATIONS
All of the Company's revenue, and most of its expenses, are denominated in
United States dollars. For the period ended March 31, 2001, approximately 5% of
the Company's expenses were denominated in foreign currencies, primarily Greek
drachmae. The Company does not hedge its exposure to foreign currency
fluctuations.
INFLATION
The Company does not believe that inflation has had a material impact on its
operations during the periods presented, although certain of the Company's
operating expenses (e.g. crewing, insurance and drydocking costs) are subject to
fluctuations as a result of market forces. Inflationary pressures on bunker
costs are not expected to have a material effect on the Company's results from
operations and cash flows since such costs are paid by the charterers and the
majority of the Company's vessels are on period time charters.
11
PART II
ITEM 1. LEGAL PROCEEDINGS
From time to time the Company has been, and expects to continue to be,
subject to legal proceedings and claims in the ordinary course of its business,
principally personal injury and property claims. Such claims, even if lacking
merit, could result in the expenditure of significant financial and managerial
resources. The Company is not aware of any legal proceedings or claims that it
believes will have, individually or in the aggregate, a material adverse effect
on the Company or on its financial condition or results of operation.
ITEM 2. CHANGES IN SECURITIES
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None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ------- -------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
- ------- -----------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 6-K
- ------- --------------------------------
a. Exhibits
None
b. Reports on Form 6-K
None
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MILLENIUM SEACARRIERS, INC.
By: /s/ Vassilios M. Livanos
----------------------------
Name: Vassilios M. Livanos
Title: Chairman
Dated: May 15, 2001