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 September 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 SEPTEMBER 30, 2001
INDEX
PART I PAGE
----
Item 1. Financial
Information.....................................................................................1
Consolidated Balance Sheets as of September 30, 2001(Unaudited)
and December 31, 2000.........................................................1
Unaudited Consolidated Statements of Operations
for the nine-month period ended September 30, 2001and 2000
and the three-month period ended September 30, 2001and 2000 ..................2
Unaudited Consolidated Statements of Cash Flows
for the nine-month period ended September 30, 2001 and 2000 ..................3
Notes to Consolidated Financial Statements.............................................4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three-month and nine-month period
Ended September 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
SEPTEMBER 30, DECEMBER 31,
ASSETS 2001 2000
- ------
(UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents $ 298,003 $ 1,616,528
Restricted cash 6,081,720 3,400,167
------------------ ------------------
6,379,723 5,016,695
Receivables :
Voyages 749,571 880,637
Claims and other 2,359,043 715,447
Inventories and prepaid expenses 815,135 2,093,513
Deposit for puchase of vessel 420,000 -
------------------ ------------------
TOTAL CURRENT ASSETS 10,723,472 8,706,292
------------------ ------------------
FIXED ASSETS
Vessels, net of accumulated depreciation of $11,700,930 and 69,517,404 84,537,841
$11,992,543 at September 30, 2001 and December 31, 2000, respectively
Other, net of accumulated depreciation 87,622 139,455
------------------ ------------------
TOTAL FIXED ASSETS 69,605,026 84,677,296
Other assets 4,750,333 4,690,076
------------------ ------------------
TOTAL ASSETS $ 85,078,831 $ 98,073,664
================== ==================
LIABILITIES AND SHAREHOLDER'S CAPITAL DEFICIENCY
CURRENT LIABILITIES
Trade accounts payable $ 7,784,548 $ 6,747,400
Accrued liabilities 7,570,677 7,774,189
Charter revenue received in advance 477,200 799,003
------------------ ------------------
TOTAL CURRENT LIABILITIES 15,832,425 15,320,592
Notes 97,041,633 96,597,348
------------------ ------------------
TOTAL LIABILITIES 112,874,058 111,917,940
------------------ ------------------
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 (51,895,227) (37,944,276)
------------------ ------------------
TOTAL SHAREHOLDER'S CAPITAL DEFICIENCY (27,795,227) (13,844,276)
------------------ ------------------
TOTAL LIABILITIES AND SHAREHOLDER'S CAPITAL DEFICIENCY $ 85,078,831 $ 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 NINE-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2001 SEPTEMBER 30,
2001 2000 2000
REVENUE
Freight and hire from voyages $ 9,469,658 10,744,397 31,882,747 31,331,823
Voyage expenses (1,648,765) (1,244,160) (4,828,370) (3,828,632)
Commissions (299,833) (414,456) (1,077,867) (1,165,512)
-----------------------------------------------------------------------
NET REVENUE 7,521,060 9,085,781 25,976,510 26,337,679
-----------------------------------------------------------------------
EXPENSES
Vessel operating expenses 4,310,353 4,891,069 14,133,121 14,263,159
Management fees 1,198,547 1,284,833 3,772,825 3,959,430
General and administrative 177,096 1,028,518 927,645 1,613,149
Depreciation and amortization 1,598,024 1,632,271 4,623,270 4,820,158
Loss on sale of vessel 5,373,284 253,037 6,740,708 253.037
-----------------------------------------------------------------------
12,657,304 9,089,728 30,197,569 24,908,933
-----------------------------------------------------------------------
OPERATING INCOME (5,136,244) (3,947) (4,221,059) 1,428,746
-----------------------------------------------------------------------
OTHER INCOME / (EXPENSE)
Interest expense (3,254,521) (3,223,812) (9,732,878) (9,643,208)
Other income (expense) 6,857 23,219 2,986 104,878
-----------------------------------------------------------------------
(3,247,664) (3,200,593) (9,729,892) (9,538,330)
-----------------------------------------------------------------------
LOSS BEFORE INCOME TAXES (8,383,908) (3,204,540) (13,950,951) (8,109,584)
INCOME TAX PROVISION - - - -
-----------------------------------------------------------------------
NET LOSS $ (8,383,908) (3,204,540) (13,950,951) (8,109,584)
=======================================================================
The accompanying notes are an integral part of these financial statements
2
MILLENIUM SEACARRIERS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (13,950,951) $ (8,109,584)
Adjustments to reconcile loss to net cash used in operating activities:
Loss on sale of vessel 6,740,708 253,037
Depreciation and amortization 4,623,270 4,820,158
Amortization of bond discount and deferred financing costs 954,388 901,728
Changes in operating assets and liabilities
Decrease/(increase) in Receivables 600,470 (248,947)
Decrease/(increase) in Inventories and prepaid expenses 1,278,378 (577)
Increase /(decrease) in Trade accounts payable 632,178 (172,299)
Decrease in Accrued liabilities (2,811,577)
(363,446)
Cash paid for deferred dry-docking and special survey (1,933,527) (1,303,409)
(Decrease)/increase in Charter revenue received in advance (321,803) 532,752
------------------- --------------------
NET CASH USED IN OPERATING ACTIVITIES (1,740,335) (6,138,718)
------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of vessels (12,685,066) -
Deposit for purchase of vessel (420,000) -
Additions to Escrow account and restricted cash (2,681,553) (2,914,148)
Additions to vessels (261,206) -
Proceeds from sale of vessels 16,469,635 2,826,803
Purchase of other fixed assets - (40,821)
------------------- --------------------
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES 421,810 (128,166)
------------------- --------------------
DECREASE IN CASH AND CASH EQUIVALENTS (1,318,525) (6,266,884)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,616,528 6,903,645
------------------- --------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 298,003 $ 636,761
=================== ====================
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid $ 11,686,680 $ 11,641,080
Supplemental schedule of non-cash financing activities :
Notes payable for purchase of vessel $ 159,934 -
Notes receivable for sale of vessels (2,113,000) -
The accompanying notes are an integral part of these financial statements
3
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 September 30, 2001, the Company's fleet consisted of
18 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 has an accumulated deficit of approximately $51.9 million and a
shareholder's deficit of approximately $27.8 million as of September 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 negotiating 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 September 30, 2001 were,
$1,801,090, $2,442,650 and $3,167,003 respectively, and at December 31, 2000
were $1,459,498, $5,350,840 and $963,851, respectively. Accrued liabilities at
September 30, 2001 also includes notes payable of $ 159,934 due towards the
purchase price of the Millenium Scorpio and Millenium Baltic.
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.
In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 establishes accounting standards for recognition and
measurement of a liability for an asset retirement obligation and
4
associated asset retirement cost. The adoption of SFAS No. 143 is not expected
to have a material impact on the Company's consolidated financial statements. In
August 2001, the FASB issued SFAF No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This Statement
supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations
- - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for
the disposal of a business (as previously defined in that Opinion). This
statement also amends ARB No. 51, "Consolidated Financial Statements," to
eliminate the exception to consolidation for a subsidiary for which control is
likely to be temporary. The Company is in the process of evaluating the impact
of SFAS No.144. The adoption of this Statement is not expected to have a
material impact on the Company's consolidated financial statements.
4. FIXED ASSETS
Fixed assets consists of the Company's fleet of dry bulk carriers and other
assets. During the nine month period ended September 30, 2001, the Company sold
seven vessels for an aggregate price of $ 18.6 million, including Notes
Receivable of $2.1 million. Net cash proceeds are placed in the Collateral
account (formerly Escrow). During the period, the Company also purchased four
vessels for a gross purchase price of $12.8 million which was partly paid for
out of cash in Collateral and by notes payable of $159,934. In the same period,
the Company also placed a 10% deposit of $420,000 on a vessel to be acquired.
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
LONG TERM DEBT IS AS FOLLOWS: SEPTEMBER 30, 2001 DECEMBER 31, 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 (2,958,367) (3,402,652)
------------------- -----------------
Notes $97,041,633 $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 $154,387 and $136,087 in the three-month periods ended September 30,
2001 and September 30 2000, respectively, and $444,284 and $391,623 in the nine
month periods ended September 30, 2001 and September 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
September 30, 2001 and 2000 and $510,105 in each of the nine month periods ended
September 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.
5
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 as of September 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 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 nine-month periods ended September 30, 2001 and 2000, respectively, the
Company incurred management fees of $3,772,825 and $3,959,430 in connection with
the aforementioned agreement. As of September 30, 2001, there is a payable to
MMI which is reflected in Accrued liabilities, amounting to $752,598.
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.
7. SUBSEQUENT EVENTS
In October, the Company sold a vessel for a sale price of $4.05 million, net
cash proceeds of which were placed in the Collateral account. The provision for
the loss on sale was recorded in the period ended September 30, 2001 and
amounted to $2.7 million. In November, the Company acquired a vessel for $4.2
million which was paid for from cash in Collateral.
6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS FOR THE THREE AND NINE-MONTH PERIOD ENDED
---------------------------------------------------------------
SEPTEMBER 30, 2001
------------------
GENERAL
- -------
The Company is an international shipping company that owns and operates a fleet
of dry bulk carriers, primarily Handysize (generally classified as being in the
20,000-49,000 dead-weight-ton range) drybulk carriers. As of September 30, 2001,
the Company's fleet consisted of 18 vessels totalling 559,493 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 has an accumulated deficit of approximately $51.9
million and a shareholder's deficit of approximately $27.8 million as of
September 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 which is being currently negotiated.
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 Nine-month Nine-month
----------- ----------- ---------- -----------
Period ended Period ended Period ended Period ended
------------- ------------ ------------ ------------
September 30, September 30, September 30, September 30,
-------------- -------------- -------------- -------------
2001 2000 2001 2000
---- ---- ---- ----
Net Revenue $7,521,060 $9,085,781 $25,976,510 26,337,679
Vessel Operating Expenses (4,310,353) (4,891,069) (14,133,121) (14,263,139)
Mangement Fees (1,198,547) (1,284,833) (3,772,825) (3,959,430)
General and Administrative (177,096) (1,028,518) (927,645) (1,613,149)
---------------- ----------------- --------------- ---------------
Earnings before Interest, Tax,
Depreciation and Amortization $1,835,064 $1,881,361 $7,142,919 $ 6,501,961
(Adjusted EBITDA)
================ ================= =============== ===============
Average utilization 93.0% 93.7% 94.7% 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 the accounting principles generally accepted in the United
States of America, 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 SEPTEMBER 30, 2001
NET REVENUE
Net revenue for the three-month period ended September 30, 2001 was $7.5 million
compared to $9.1 million in the 2000 period. During the period, 91% 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 1,730 ship-operating days. The fleet averaged an utilization
rate of 93% during the period.
7
During the three-month period ended September 30, 2001, seven of the vessels in
the fleet remained on their previously contracted long-term charters. Six other
vessels in the fleet were on period charters extending upto one year. Five other
vessels in the fleet performed a combination of spot trading and short-term
charters. One of the Company's vessels is currently off-hire pending resolution
of engine repairs.
VESSEL OPERATING EXPENSES
Vessel operating expenses, excluding management fees and depreciation and
amortization were $4.3 million for the three-month period ended September 30,
2001 compared to $4.9 million in the three-month period ended September 30,
2000. The quarter ended September 30, 2001 consisted of 1,730 ship-operating
days compared to 1,773 ship-operating days during the corresponding period a
year ago. The third quarter average vessel running costs for crewing, insurance,
lubricants, repairs and maintenances, registry and survey costs, and vessel
communications, came to $2,492 per day compared to $2,759 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 September 30, 2001 were
$1.2 million compared to $1.3 million in the corresponding period ended
September 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
General and Administrative expenses totalled $177,096 for the three-month period
ended September 30, 2001 compared to $1,028,518 for the same period ended
September 30, 2000. For the period ended September 30, 2001, these expenses
included, among other things, legal and professional fees of $84,180 and
advisory fees of $75,000.
DEPRECIATION AND AMORTIZATION
Total depreciation for the three-month period ended September 30, 2001 was
$1,272,601 compared to $1,331,424 for the same period ended September 30, 2000.
Vessel depreciation is calculated using a straight-line method 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 30 months. During the three-month period ended
September 30, 2001, total dry-docking costs incurred by the Company were
$861,287 . These costs include $392,222 incurred by the Millenium Condor and
$428,750 incurred by the Millenium Baltic. During the three- month period ended
September 30,2001 total amortization of deferred vessel
8
charges including deferred dry docking expenses were $325,422. For the
comparable period ended September 30, 2000 total amortization of deferred vessel
charges including deferred dry-docking expenses,were $300,847.
LOSS ON SALE
During the three-month period ended September 30, 2001, the Company sold two
vessels for $5.1 million. The transactions also include a deferred note
receivable from a buyer amounting to a total of $1.2 million. Net cash proceeds
were deposited in the Collateral account. The sale of the two vessels resulted
in a loss of $2.7 million. Subsequent to the period ended September 30, 2001,
the Company sold a vessel incurring a loss of $2.7 million for which a provision
was recorded.
INTEREST EXPENSE
For the three-month period ended September 30, 2001, the interest expense on the
Company's long-term debt was $2,930,100, compared to $2,917,690 in the
three-month period ended September 30, 2000. During the three-month ended
September 30, 2001, interest earned on cash balances was $14,254, compared to
$51,826 in the quarter ended September 30, 2000. Interest expense in the
statement of operations for the quarter ended September 30, 2001 also includes
amortization of $154,387 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 September 30, 2000 were
$136,087 and $170,035 respectively.
NET LOSS
Net loss for the three-month period ended September 30, 2001 was $8.4 million
compared to a net loss of $3.2 million for the three-month period ended
September 30, 2000. Earnings before interest, taxes, depreciation and
amortization, and provision for impairment (adjusted EBITDA) for the quarter
ended September 30, 2001 was $1.8 million compared to $1.9 million in the
quarter ended September 30, 2000.
RESULTS OF OPERATIONS FOR NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2001 VS.
SEPTEMBER 30, 2000
NET REVENUE
Net revenue for the nine-month period ended September 30, 2001 was $26.0 million
compared to $26.3 million in the 2000 period. During the nine-month period ended
September 30, 2001, 81% 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 94.7% during the nine-month period ended September 30, 2001
compared to an utilization rate of 95.3% during the nine-month period ended
September 30, 2000.
The nine-months ended September 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 2001. 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 period charters with
other charterers.
During the nine-month period ended September 30, 2001, seven of the vessels in
the fleet remained on their long-term charters. Six other vessels in the fleet
were on period charters extending upto one year. Five other vessels in the fleet
performed a combination of spot trading and short-term charters. The vessel
Adamas is currently off-hire pending resolution of engine repairs.
VESSEL OPERATING EXPENSES
Vessel operating expenses, excluding management fees and depreciation and
amortization were $14.1 million for the nine-month period ended September 30,
2001, compared to $14.3 million in comparable nine-month period ended September
30, 2000. The period ended September 30, 2001 consisted of 5,369 ship-operating
days compared to 5,413 ship-operating 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
9
came to $2,632 per day for the nine-month period ended September 30, 2001
compared to $2,635 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 nine-month period ended September 30, 2001 were $3.8
million, compared to $4.0 million in the corresponding period ended September
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 September 30, 2001.
GENERAL AND ADMINISTRATIVE
General and Administrative expenses totalled $927,645 for the nine-month period
ended September 30, 2001 compared to $1,613,149 in the same period ended
September 30, 2000. For the period ended September 30, 2001, these expenses
included, among other things, legal and professional fees of $652,836 and
advisory fees of $225,000.
DEPRECIATION AND AMORTIZATION
Total depreciation for the nine-month period ended September 30, 2001 was
$3,752,212 compared to $4,052,203 for the same period ended September 30, 2000.
Vessel depreciation is calculated using a straight-line method 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 30 months. During the nine-month period ended
September 30, 2001, total dry-docking costs incurred by the Company were
$1,933,527 million. These costs included $117,020 incurred by the Millenium
Majestic, $140,763 incurred by the Millenium Osprey, $474,766 incurred by the
Millenium Falcon, $380,000 incurred during the acquisition of the Millenium
Eagle, $392,228 incurred by the Millenium Condor, and $428,750 incurred by the
Millenium Baltic. For the period ended September 30, 2001, total amortization of
deferred vessel charges, including deferred dry-docking expenses, were $871,058.
For the comparable period ended September 30, 2000, total amortization of
deferred vessel charges, including deferred dry-docking expenses, were $767,955.
LOSS ON SALE
During the nine-month period ended September 30, 2001, the Company sold seven
vessels for an aggregate gross sales price of $18.6 million. The transactions
also include deferred notes receivable amounting to a total of $2.1 million. Net
cash proceeds were deposited in the Collateral account. The sale of the seven
vessels resulted in a loss of $4 million. Subsequent to the period ended
September 30, 2001, the Company sold a vessel incuring a loss of $2.7 million
for which a provision was recorded.
INTEREST EXPENSE
For the nine-month period ended September 30, 2001, the interest expense on the
Company's long-term debt was $8,778,490, compared to $8,741,480 in the
nine-month period ended September 30, 2000. Interest expense in the statement of
operations for the nine-month period ended September 30, 2001 also includes
amortization of $444,284 recorded in connection with the bond discount relating
to the debt issue, and the amortization of $510,105 recorded in connection with
the deferred financing costs incurred relating to the debt issue. Comparable
amortization charges recorded in the period ended September 30, 2000 were
$391,623 and $510,105 respectively. During the nine-month ended September 30,
2001, interest earned on cash balances was $89,970, compared to $162,011 in the
period ended September 30, 2000.
NET LOSS
Net loss for the nine-month period ended September 30, 2001 was $13.9 million
compared to $8.1 million in the same nine-month period ended September 30, 2000.
Earnings before interest, taxes, depreciation and amortization, and provision
for impairment (adjusted EBITDA) for the nine-months ended September 30, 2001
were $7.1 million compared to $6.5 million in the same period ended September
30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company is a holding company. As of September 30, 2001, it owns all of the
issued and outstanding shares of its Vessel Owning Subsidiaries. As of September
30, 2001, the Company's cash position consisted of $298,003
10
in unrestricted cash and cash equivalents. Restricted cash of $6.1 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 nine-month period ended September 30,
2001were $1.7 million compared to cash used in operations for the nine-month
period ended September 30, 2000 of $6.1 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 nine month period ended September 30, 2001, the Company sold seven
vessels for an aggregate price of $18.6 million consisting of cash received of
$16.5 million and notes receivable of $2.1 million. Net cash proceeds are placed
in the Collateral account (formerly Escrow). During the period, the Company also
purchased four vessels for a gross purchase price of $12.8 million which was
partly paid for out of cash in Collateral and by notes payable of $159,934. The
Company also placed a deposit of $420,000 on a vessel to be acquired. This
vessel was acquired for $4.2 million subsequent to the period ended September
30, 2001. Subsequent to the period ended September 30, 2001, the Company sold a
vessel for a sale price of $4.05 million.
The Company perceives market conditions for the drybulk shipping sector have
deteriorated and this would negatively impact its revenues. However, 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. The Company is also negotiating a $7 million line of credit
with a potential lender. The Company intends to seek consent from the Note
holder(s) prior to agreement of terms and conditions.
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 September 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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11
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
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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: November 15, 2001