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 period ended June 30, 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 JUNE 30, 2000
INDEX
PART I PAGE
----
Item 1. Financial
Information.........................................................................................1
Consolidated Balance Sheets as of June 30, 2001(Unaudited)
and December 31, 2000....................................................1
Unaudited Consolidated Statements of Operations
for the six-month period ended June 30, 2001
and 2000.................................................................2
Unaudited Consolidated Statements of Cash Flows
for the six-month period ended June 30, 2001
and 2000.................................................................3
Consolidated Statement of Shareholders' Deficiency
for the year ended December 31, 2000 and six-month
period ended June 30, 2001 (unaudited) ..................................4
Notes to Consolidated Financial Statements........................................5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three-month and six-month period
ended June 30, 2001...............................................................8
PART II Other Information
Item 1. Legal Proceedings..................................................................................12
Item 2. Changes in Securities..............................................................................13
Item 3. Defaults Upon Senior Securities....................................................................13
Item 4. Submission of Matters to a Vote of Security Holders................................................13
Item 5. Other Information..................................................................................13
Item 6. Exhibits and Reports on Form 6-K...................................................................13
Signature...................................................................................................13
PART I
ITEM 1. FINANCIAL INFORMATION
- -----------------------------
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2001 2000
(UNAUDITED)
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents $ 1,107,392 $ 1,616,528
Restricted cash 6,429,343 3,400,167
------------------ ------------------
7,536,735 5,016,695
Receivables :
Voyages 709,407 880,637
Claims and other 1,384,045 715,447
Inventories and prepaid expenses 1,387,377 2,093,513
------------------ ------------------
TOTAL CURRENT ASSETS 11,017,564 8,706,292
------------------ ------------------
FIXED ASSETS
Vessels, net of accumulated depreciation of $11,992,710 and 78,677,858 84,537,841
$11,992,543 at June 30, 2001 and December 2000, respectively
Other, net of accumulated depreciation 104,943 139,455
------------------ ------------------
TOTAL FIXED ASSETS 78,782,801 84,677,296
Other assets 4,412,571 4,690,076
------------------ ------------------
TOTAL ASSETS $ 94,212,936 $ 98,073,664
================== ==================
LIABILITIES AND SHAREHOLDER'S CAPITAL DEFICIENCY
- ------------------------------------------------
CURRENT LIABILITIES
Trade accounts payable $ 6,446,385 $ 6,747,400
Accrued liabilities 9,604,618 7,774,189
Charter revenue received in advance 686,006 799,003
------------------ ------------------
TOTAL CURRENT LIABILITIES 16,737,009 15,320,592
Notes 96,887,246 96,597,348
------------------ ------------------
TOTAL LIABILITIES 113,624,255 111,917,940
------------------ ------------------
Commitments and contingencies - -
SHAREHOLDER'S CAPITAL DEFICIENCY
Common stock and paid in capital 22,900,000 22,900,000
Warrants 1,200,000 1,200,000
Accumulated deficit (43,511,319) (37,944,276)
------------------ ------------------
TOTAL SHAREHOLDER'S CAPITAL DEFICIENCY (19,411,319) (13,844,276)
------------------ ------------------
TOTAL LIABILITIES AND SHAREHOLDER'S CAPITAL DEFICIENCY $ 94,212,936 $ 98,073,664
================== ==================
The accompanying notes are an integral part of these financial statements
1
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTH THREE MONTH SIX MONTH SIX MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30, 2001 JUNE 30, 2000 JUNE 30, 2001 JUNE 30, 2000
REVENUE
Freight and hire from voyages $ 11,756,631 10,065,617 22,413,089 20,587,426
Voyage expenses (1,490,296) (815,655) (3,179,605) (2,584,472)
Commissions (409,950) (364,684) (778,034) (751,056)
----------------------------------------------------------------------
NET REVENUE 9,856,385 8,885,278 18,455,450 17,251,898
----------------------------------------------------------------------
EXPENSES
Vessel operating expenses 5,003,867 5,239,290 9,822,768 9,372,090
Management fees 1,292,226 1,331,768 2,574,278 2,674,597
General and administrative 362,534 236,541 750,549 584,631
Depreciation and amortization 1,540,550 1,650,128 3,025,246 3,187,887
Loss on sale of vessel 959,768 0 1,367,424 0
----------------------------------------------------------------------
9,158,945 8,457,727 17,540,265 15,819,205
----------------------------------------------------------------------
OPERATING INCOME 697,440 427,551 915,185 1,432,693
----------------------------------------------------------------------
OTHER INCOME / (EXPENSE)
Interest expense (3,239,683) (3,210,743) (6,478,357) (6,419,396)
Other income (expense) 9,482 (940) (3,871) 81,659
----------------------------------------------------------------------
(3,230,201) (3,211,683) (6,482,228) (6,337,737)
----------------------------------------------------------------------
LOSS BEFORE INCOME TAXES (2,532,761) (2,784,132) (5,567,043) (4,905,044)
INCOME TAX PROVISION - - - -
----------------------------------------------------------------------
NET LOSS $ (2,532,761) (2,784,132) (5,567,043) (4,905,044)
======================================================================
The accompanying notes are an integral part of these financial statements
2
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX-MONTH SIX-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, 2001 JUNE 30, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,567,043) $ (4,905,044)
Adjustments to reconcile loss to net cash used in operating
activities:
Loss on sale of vessel 1,367,424 -
Depreciation and amortization 3,025,246 3,187,887
Amortization of bond discount and deferred financing costs 629,967 595,606
Changes in operating assets and liabilities
Increase in Receivables 415,632 13,039
Decrease/(increase) in Inventories and prepaid expenses 706,136 (244,938)
Decrease in Trade accounts payable (588,549) (712,257)
Increase in Accrued liabilities 755,429 587,469
Deferred dry-docking and special survey (1,072,237) (1,146,820)
Decrease/(increase) in Charter revenue received in advance (112,997) 99,867
------------------ --------------------
NET CASH USED IN OPERATING ACTIVITIES (440,992) (2,525,191)
------------------ --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of vessel (9,570,000) -
Additions to Escrow account and restricted cash (3,029,176) (57,664)
Additions to vessels (239,213) -
Proceeds from sale of vessels 12,770,245 -
Purchase of other fixed assets - (32,766)
------------------ --------------------
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES (68,144) (90,430)
------------------ --------------------
DECREASE IN CASH AND CASH EQUIVALENTS (509,136) (2,615,621)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,616,528 6,903,645
------------------ --------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,107,392 $ 4,288,024
================== ====================
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 $ 1,075,000 -
Notes receivable for sale of vessels (913,000) -
The accompanying notes are an integral part of these financial statements
3
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S CAPITAL DEFICIENCY
COMMON STOCK
AND PAID-IN
CAPITAL ACCUMULATED
WARRANTS DEFICIT TOTAL
-----------------------------------------------------------------
BALANCE DECEMBER 31, 2000 22,900,000 1,200,000 (37,944,276) (13,844,276)
Net Loss for the six-month period
ended June 30, 2001 (5,567,043) (5,567,043)
(unaudited)
-----------------------------------------------------------------
============== ============= ================ =================
BALANCE JUNE 30, 2001 $ 22,900,000 $ 1,200,000 $(43,511,319) $ (19,411,319)
============== ============= ================ =================
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 June 30, 2001, the Company's fleet consisted of 19
vessels.
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 $43.5 million and a shareholder's deficit of approximately
$19.4 million as of June 30, 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 $7
million 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.
The consolidated interim financial statements of the Company are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim periods. 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 consist of accrued payroll, accrued interest and
other accrued expenses. These liabilities at June 30, 2001 were, $1,609,414,
$5,361,950 and $1,558,254 respectively, and at December 31, 2000 were
$1,459,498, $5,350,840 and $963,851, respectively. Accrued liabilities at June
30, 2001 also includes notes payable of $1,075,000 due towards the purchase
price of the Millenium Scorpio and Millenium Baltic (see Note 4).
3. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations."
SFAS 141 requires the purchase method of accounting for business combinations
initiated after June 30, 2001 and eliminates the pooling-of-interests method.
In addition, the FASB issued Statement of Financial Accounting Standards No. 142
("SFAS 142"), "Goodwill and Other Intangible Assets", which is effective January
1, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill
amortization. In addition, the standard includes provisions for the
reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairments of goodwill. SFAS 142 also requires the Company to complete a
transitional goodwill impairment test six months from the date of adoption. The
Company does not believe that the adoption of SFAS 141 or 142 will have a
significant impact on its financial statements.
5
4. FIXED ASSETS
Fixed assets consists of the Company's fleet of dry bulk carriers and other
assets. During the six month period ended June 30, 2001, the Company sold five
vessels for an aggregate price of $13.7 million. Net cash proceeds are placed in
the Collateral account (formerly Escrow). During the period, the Company also
purchased three vessels for a gross purchase price of $10.6 million which was
partly paid for out of cash in Collateral and by notes payable of $1,075,000.
Vessels owned by the Company are stated at cost, which comprises the vessels'
contract price, capital improvements, direct delivery and acquisition expenses.
5. LONG-TERM DEBT
JUNE 30, DECEMBER 31,
LONG TERM DEBT IS AS FOLLOWS: 2001 2000
-------- ------------
12% First Priority Ship Mortgage Exchange Notes due 2005 (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 (3,112,754) (3,402,652)
----------------------------------------
Notes $ 96,887,246 $ 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 is included in interest expense
amounted to $144,949 and $127,768 in the three- month periods ended June 30,
2001 and June 30 2000, respectively, and $289,897 and $255,536 in the six month
periods ended June 30, 2001 and June 30, 2000, respectively. The deferred
financing costs amortized in connection with the debt issue, included in
interest expense, was $170,035 in each of the three-month periods ended June 30,
2001 and 2000 and $340,070 in each of the six month periods ended June 30, 2001
and 2000.
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 where 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 purchases of assets, and amendments to
security agreements. The Company is currently in compliance with the terms of
the Notes Indenture at June 30, 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
6
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.
The Company records the management fee paid to MMI in operating expenses. During
the six-month periods ended June 30, 2001 and 2000, respectively, the Company
incurred management fees of $2,574,278 and $2,674,597 in connection with the
aforementioned agreement. As of June 30, 2001, there is a payable to MMI which
is reflected in Accrued liabilities, amounting to $432,436.
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.
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, would result in the expenditure of significant financial and managerial
resources. As of June 30, 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 operations.
9. SUBSEQUENT EVENTS
In July, the Company sold the Millenium Harmony for a net sale price of $1.15
million and acquired the Millenium Kimberly for a net purchase price of $2.2
million. In July, the Company also placed a 10% deposit of $420,000 on a vessel
to be acquired.
7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE THREE AND SIX-MONTH PERIOD ENDED JUNE 30, 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 June 30, 2001, the
Company's fleet consisted of 19 vessels totalling 578,142 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 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 $43.5 million and a shareholder's deficit
of approximately $19.4 million as of June 30, 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 $7 million line of credit.
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 Six-month Six-month
Period ended Period ended Period ended period ended
June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000
------------- ------------- ------------- -------------
Net Revenue $9,856,385 $8,885,278 $18,455,450 17,251,898
Vessel Operating Expenses (5,003,867) (5,239,290) (9,822,768) (9,372,090)
Mangement Fees (1,292,226) (1,331,768) (2,574,278) (2,674,597)
General and Administrative (362,534) (236,541) (750,549) (584,631)
-----------------------------------------------------------------
Earnings before Interest, Tax,
Depreciation and Amortization $3,197,758 $2,077,679 $5,307,855 $ 4,620,580
(Adjusted EBITDA)
==================================================================
Average utilization 94.8% 93.7% 96.0% 95.3%
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, nor is it comparable to similarly titled measurements of other
companies.
RESULTS OF OPERATIONS FOR THREE-MONTH PERIOD ENDED JUNE 30, 2001
NET REVENUE
Net revenue for the three-month period ended June 30,2001 was $9.9 million
compared to $8.9 million in the 2000 period. During the period, 79% 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 1,837 ship-operating days. The fleet averaged an utilization
rate of 94.8% during the period.
8
During the three-month period ended June 30, 2001 eight of the vessels in the
fleet remained on their long-term charters - the Millenium Osprey, Millenium
Hawk, Millenium Raptor, Millenium Aleksander, Millenium Mexico, Millenium
Leader, Millenium Amanda, and the Millenium Express. The Millenium Majestic,
Millenium Scorpio, Millenium Falcon, Millenium Eagle, Adamas and the Millenium
Baltic were on period charters. The Millenium Harmony, Millenium Golden Hind,
Millenium Amethyst and the Millenium Condor performed a combination of spot
trading and short-term charters.
VESSEL OPERATING EXPENSES
Vessel operating expenses, excluding management fees and depreciation and
amortization were $5.0 million for the three-month period ended June 30, 2001
compared to $5.2 million in the three-month period ended June 30, 2000. The
quarter ended June 30, 2001 consisted of 1,837 ship-operating days compared to
1,820 ship-operating days during the corresponding period a year ago. The second
quarter average vessel running costs for crewing, insurance, lubricants, repairs
and maintenances, registry and survey costs, and vessel communications, came to
$2,724 per day compared to $2,879 per day during the comparable period a year
ago.
MANAGEMENT FEES
Management fees incurred to MMI for contracted technical and commercial
management services for the three-month period ended June 30, 2001 were $1.3
million compared to $1.3 million in the corresponding period ended June 30,
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 $362,534 for the three-month period ended June 30, 2001
compared to $236,541 for the same period ended June 30, 2000. For the period
ended June 30, 2001, these expenses included, among other things, legal and
professional fees of $274,526 and advisory fees of $75,000.
DEPRECIATION AND AMORTIZATION
Total depreciation for the three-month period ended June 30, 2001 was $1,274,410
compared to $1,388,708 for the same period ended June 30, 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). During the
three-month period ended June 30, 2001, total dry-docking costs incurred by the
Company were $1.1 million. These costs included $119,861 incurred by the
Millenium Majestic, $140,763 incurred by
9
the Millenium Osprey, $431,609 incurred by the Millenium Falcon and $380,000
incurred by the Millenium Eagle. During the three- month period ended June
30,2001 total amortization of deferred vessel charges including deferred dry
docking expenses were $266,139. For the comparable period ended June 30, 2000
total amortization of deferred vessel charges including deferred dry-docking
expenses,were $261,420.
LOSS ON SALE
During the three-month period ended June 30, 2001, the Company sold three
vessels for an aggregate sales price of $5.8 million. The transactions also
includes a deferred note receivable from a buyer amounting to a total of
$913,000. Cash proceeds were deposited in the Collateral account. The sale of
the three vessels resulted in a loss of $959,768.
INTEREST EXPENSE
For the three-month period ended June 30, 2001, the accrued interest expense on
the Company's long-term debt was $2,924,700, compared to $2,912,940 in the
three-month period ended June 30, 2000. During the three-month ended June 30,
2001, interest earned on cash balances was $41,814, compared to $38,581 in the
quarter ended June 30, 2000. Interest expense in the statement of operations for
the quarter ended June 30, 2001 also includes 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 June 30, 2000 were $127,768 and $170,035
respectively.
NET LOSS
Net loss for the three-month period ended June 30, 2001 was $2.5 million
compared to a net loss of $2.8 million for the three-month period ended June 30,
2000. Earnings before interest, taxes, depreciation and amortization, and
provision for impairment (adjusted EBITDA) for the quarter ended June 30, 2001
was $3.2 million compared to $2.1 million in the quarter ended June 30, 2000.
RESULTS OF OPERATIONS FOR SIX-MONTH PERIOD ENDED JUNE 30, 2001 VS. JUNE 30, 2000
NET REVENUE
Net revenue for the six-month period ended June 30, 2001 was $18.5 million
compared to $17.3 million in the 2000 period. During the six-month period ended
June 30, 2001, 76% of the Company's gross revenues were earned from period time
charters compared to 77% in the same 2000 period.
The fleet averaged an utilization rate of 96% during the six-month period ended
June 30, 2001 compared to an utilization rate of 95.3% during the six-month
period ended June 30, 2000.
The six-months ended June 30, 2001, began with the early 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 redelivers the five Laker-type vessels, the Millenium Osprey, Millenium
Condor, Millenium Falcon, Millenium Hawk and Millenium Eagle, for three months
during the Winter when the Great Lakes freeze. These vessels performed a
substantial number of spot market voyages during this period in 2000. Fednav
retook delivery of two of the Laker-type vessels once again in Spring. Fednav's
charters on the other three vessels, Millenium Condor, Millenium Falcon and
Millenium Eagle ended and these vessels were placed on charters with other
charterers. During the six-month period ended June 30, 2001, eight of the
vessels in the fleet remained on their long-term charters - Millenium Osprey,
Millenium Hawk, Millenium Raptor, Millenium Aleksander, Millenium Mexico,
Millenium Leader, Millenium Amanda, and the Millenium Express.
The Millenium Majestic, Millenium Scorpio, Millenium Falcon, Millenium Eagle,
Adamas and the Millenium Baltic were on period charters. The Millenium Harmony,
Millenium Golden Hind, Millenium Amethyst and the Millenium Condor performed a
combination of spot trading and short-term charters.
VESSEL OPERATING EXPENSES
Vessel operating expenses, excluding management fees and depreciation and
amortization were $9.8 million for the six-month period ended June 30, 2001,
compared to $9.4 million in comparable six-month period ended June 30, 2000. The
period ended June 30, 2001 consisted of 3,639 ship-operating days compared to
3,640 ship-operating
10
days during the corresponding period a year ago. The average vessel running
costs for crewing, insurance, lubricants, repairs and maintenances, registry and
survey costs, and vessel communications came to $2,699 per day for the six-month
period ended June 30, 2001 compared to $2,575 per day during the comparable
period a year ago.
MANAGEMENT FEES
Management fees incurred to MMI for contracted technical and commercial
management services for the six-month period ended June 30, 2001 were $2.6
million, compared to $2.7 million in the corresponding period ended June 30,
2000. For a detailed description of the type of services provided under the
management agreement, see the discussion section for the three-month period
ended June 30, 2001.
GENERAL AND ADMINISTRATIVE
These expenses totalled $750,549 for the six-month period ended June 30, 2001
compared to $584,631 in the same period ended June 30, 2000. For the period
ended June 30, 2001, these expenses included, among other things, legal and
professional fees of $568,655 and advisory fees of $150,000.
DEPRECIATION AND AMORTIZATION
Total depreciation for the six-month period ended June 30, 2001 was $2,479,611
compared to $2,720,779 for the same period ended June 30, 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). During the
six-month period ended June 30, 2001, total dry-docking costs incurred by the
Company were $1.1 million. These costs included $119,861 incurred by the
Millenium Majestic, $140,763 incurred by the Millenium Osprey, $431,609 incurred
by the Millenium Falcon and $380,000 incurred during the acquisition of the
Millenium Eagle. For the period ended June 30, 2001, total amortization of
deferred vessel charges, including deferred dry-docking expenses, were $545,636.
For the comparable period ended June 30, 2000, total amortization of deferred
vessel charges, including deferred dry-docking expenses, were $467,108.
LOSS ON SALE
During the six-month period ended June 30, 2001, the Company sold five vessels
for an aggregate sales price of $13.7 million. The transactions also included a
deferred note receivable amounting to a total of $913,000. Cash proceeds were
deposited in the Collateral account. The sale of the five vessels resulted in a
loss of $ 1,367,424
INTEREST EXPENSE
For the six-month period ended June 30, 2001, the interest expense on the
Company's long-term debt was $5,848,390, compared to $5,823,790 in the six-month
period ended June 30, 2000. Interest expense in the statement of operations for
the six-month period ended June 30, 2001 also includes amortization of $289,898
recorded in connection with the bond discount relating to the debt issue, and
the amortization of $340,070 recorded in connection with the deferred financing
costs incurred relating to the debt issue. Comparable amortization charges
recorded in the period ended June 30, 2000 were $255,536 and $340,070
respectively. During the six-month ended June 30, 2001, interest earned on cash
balances was $75,717, compared to $110,185 in the period ended June 30, 2000.
NET LOSS
Net loss for the six-month period ended June 30, 2001 was $5.6 million compared
to $4.9 million in the same six-month period ended June 30, 2000. Earnings
before interest, taxes, depreciation and amortization, and provision for
impairment (adjusted EBITDA) for the six-months ended June 30, 2001 were $5.3
million compared to $4.6 million in the same period ended June 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company is a holding company. As of June 30, 2001, it owns all of the issued
and outstanding shares of 19 Vessel Owning Subsidiaries. As of June 30, 2001,
the Company's cash position consisted of $1.1 million in unrestricted cash
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and cash equivalents. Restricted cash of $6.4 million includes net proceeds in
the collateral account (formerly Escrow) realized from vessel sale and purchase
transactions Restricted cash also includes other deposits made toward
contingencies and vessel upgrades.
OPERATING ACTIVITIES
Net cash flows used in operations for the six-month period ended June 30,
2001were $440,992 compared to cash used in operations for the six-month period
ended June 30, 2000 of $2.5 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 six month period ended June 30, 2001, the Company sold five vessels
for an aggregate price of $13.7 million consisting of cash received of $12.77
million and a note receivable of $913,000. Net cash proceeds are placed in the
Collateral account (formerly Escrow). During the period, the Company also
purchased three vessels for a gross purchase price of $10.6 million which was
partly paid for out of cash in Collateral and by notes payable of $1.1 million.
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
expenditures for repairs and maintenance and make required payments of interest
on the Company's debt. The Company continues 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 June 30, 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.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's outstanding debt bears a fixed interest rate and therefore the
Company is not susceptible to interest rate fluctuations. In addition, all of
the Company's revenues and expenses are denominated in United States dollars,
except for 5% of its expenses which are denominated primarily in Greek drachmae,
and therefore the Company believes it is not susceptible to foreign exchange
fluctuations.
PART II OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
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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.
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ITEM 2. CHANGES IN SECURITIES
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None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
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None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 6-K
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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: August 15, 2001