UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
[_] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or 12 (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-10137
EXCEL MARITIME CARRIERS LTD.
(Exact name of Registrant as specified in its charter)
LIBERIA
(Jurisdiction of incorporation or organization)
c/o Excel Maritime Carriers Ltd.
Par La Ville Place
14 Par La Ville Road
Hamilton HM JX Bermuda
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Common shares, par value $0.01
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
Common Shares, par value $.01 11,496,153
Class B Common Shares,
par value $.01 114,946
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes |X| No |_|
Indicate by check mark which financial statement item the Registrant has elected
to follow.
Item 17 |_| Item 18 |X|
TABLE OF CONTENTS
ITEM 1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISORS...................................................1
ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE....................1
ITEM 3 - KEY INFORMATION............................................1
ITEM 4 - INFORMATION ON THE COMPANY.................................5
ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS..............11
ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES................17
ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.........18
ITEM 8 - FINANCIAL INFORMATION.....................................19
ITEM 9 - THE OFFER AND LISTING.....................................19
ITEM 10 - ADDITIONAL INFORMATION....................................20
ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISKS..............................................22
ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES................................................22
ITEM 13 - DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES...........22
ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS AND USE OF PROCEEDS...............................22
ITEM 15 - CONTROLS AND PROCEDURES...................................23
ITEM 16 - RESERVED..................................................23
ITEM 17 - FINANCIAL STATEMENTS......................................23
ITEM 18 - FINANCIAL STATEMENTS......................................23
ITEM 19 - EXHIBITS................................................II-1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Matters discussed in this document may constitute forward-looking statements.
The Private Securities Litigation Reform Act of 1995 provides safe harbor
protections for forward-looking statements in order to encourage companies to
provide prospective information about their business. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance, and underlying assumptions and other statements, which
are other than statements of historical facts.
Excel Maritime Carriers Ltd., or the Company, desires to take advantage of the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995
and is including this cautionary statement in connection with this safe harbor
legislation. This document and any other written or oral statements made by us
or on our behalf may include forward-looking statements, which reflect our
current views with respect to future events and financial performance. The words
"believe", "anticipate", "intends", "estimate", "forecast", "project", "plan",
"potential", "will", "may", "should", "expect" and similar expressions identify
forward-looking statements.
The forward-looking statements in this document are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, managements examination of historical operating
trends, data contained in our records and other data available from third
parties. Although we believe that these assumptions were reasonable when made,
because these assumptions are inherently subject to significant uncertainties
and contingencies which are difficult or impossible to predict and are beyond
our control, we cannot assure you that we will achieve or accomplish these
expectations, beliefs or projections.
In addition to these important factors and matters discussed elsewhere herein
and in the documents incorporated by reference herein, important factors that,
in our view, could cause actual results to differ materially from those
discussed in the forward-looking statements include the strength of world
economies and currencies, general market conditions, including fluctuations in
charter hire rates and vessel values, changes in the Company's operating
expenses, including bunker prices, drydocking and insurance costs, changes in
governmental rules and regulations or actions taken by regulatory authorities,
potential liability from pending or future litigation, general domestic and
international political conditions, potential disruption of shipping routes due
to accidents or political events, and other important factors described from
time to time in the reports filed by the Company with the Securities and
Exchange Commission.
PART I
ITEM 1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable
ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable
ITEM 3 - KEY INFORMATION
Selected Financial Data
The following table sets forth our selected historical consolidated
financial data as of and for the years ended December 31, 1998, 1999, 2000, 2001
and 2002. The following information should be read in conjunction with
"Operating and Financial Review and Prospects" and the audited Consolidated
Financial Statements, including the notes thereto included elsewhere herein.
Selected Historical Financial Data
Excel Maritime Carriers Ltd.
Year Ended December 31, 2002
(All figures in $000, except per share data)
Year Ended December 31
------------------------------------------------------------------
1998 1999 2000 2001 2002
----------- ----------- ------------ ------------ ------------
(All figures in $ 000, except per share data)
Income Statement Data
Revenue from vessels, net....................... $ 7,525 $ 18,617 $ 30,660 $ 25,222 $ 15,129
Equity on earnings of an affiliate.............. 0 0 3,300 11,440 0
Vessel operating and voyage expenses............ 5,949 14,109 19,273 16,505 11,505
Depreciation and amortization................... 1,310 624 932 1,419 1,080
General and administrative expenses............. 979 1,217 1,347 1,880 1,475
Income (Loss) from operations................... (713) 2,667 9,108 5,418 1,069
Gain (Loss) on sale of vessels.................. (11,508) (574) 289 (423) 569
Other income (expenses), net.................... (763) (269) (2,639) (9,502) (549)
Net income (loss) (1)........................... (12,984) 1,824 10,058 6,933 1,089
Per Share Data
Earnings (Loss) per share, basic and diluted.... $ (3.07) $ 0.23 $ 0.87 $ 0.60 $ 0.09
Earnings (Loss) per share, diluted.............. $ (3.07) $ 0.23 $ 0.87 $ 0.60 $ 0.09
Weighted average number of shares, basic........ 4,233,738 7,953,947 11,611,099 11,514,950 11,550,984
Weighted average number of shares, diluted...... 4,233,738 7,953,947 11,611,099 11,514,950 11,550,984
Dividends per share............................. $ 0.00 0.00 0.00 0.00 $ 2.15
Balance Sheet Data
Current assets.................................. $ 7,446 $ 8,801 $ 5,021 $ 41,908 $ 3,157
Total assets.................................... 7,446 27,470 50,826 55,465 21,435
Current liabilities............................. 1,124 11,517 15,241 26,488 5,896
Long-term debt (excluding current portion)...... 0 2,200 11,754 0 10,090
Total stockholders' equity...................... $ 6,322 $ 13,753 $ 23,831 $ 28,977 $ 5,449
(1) In 2001, the Company revised its financial statements previously issued for
the year ended December 31, 2000, to adjust the "Equity on Earnings of an
Affiliate" in order to more accurately reflect such income, as A/S
Dampskilbsselskabet Torm, the affiliated company, prepared, for first time,
financial statements in conformity with accounting principles generally accepted
in the United States during the last quarter of the year ended December 31,
2001. The effect of the revision was (a) to decrease "Equity on Earnings of an
Affiliate" by $ 5,117 and net income for the year ended December 31, 2000 by an
equal amount and (b) to decrease "accumulated other comprehensive income"
included in stockholders' equity as of December 31, 2000 by $ 291.
(2) The effect of the above revision on earnings per share for the year ended
December 31, 2000 was $ (0.44) per share.
Risk Factors
Please note in this section, "we", "us" and "our" all refer to the Company
and its subsidiaries.
The Cyclical Nature of the Shipping Industry, Freight Rates and Vessel Values
May Affect our Profitability
We are an independent shipping company that operates in the drybulk
markets. The supply of and demand for shipping capacity strongly influences
freight rates. Demand for the type of commodities carried and the distance that
those commodities must be moved by sea primarily determine the demand for
shipping capacity. World and regional economic and political conditions
(including developments in international trade, fluctuations in industrial and
agricultural production and armed conflicts), environmental concerns, weather
patterns, changes in seaborne and other transportation costs and, with respect
to crude oil and petroleum products, and competition from alternative energy
sources affect, among other things, demand for commodities. The size of the
existing fleet in a particular market, the number of new building deliveries,
the scrapping of older vessels and the number of vessels out of active service
(i.e. laid-up, dry-docked, awaiting repairs or otherwise not available for
hire), determines the supply of shipping capacity, which is measured by the
amount of suitable tonnage available to carry cargo. In addition to the
prevailing and anticipated freight rates, factors that affect the rate of
newbuilding, scrapping and laying-up include newbuilding prices, second hand
vessel values in relation to scrap prices, costs of bunkers and other operating
costs, costs associated with classification society surveys, normal maintenance
and insurance coverage, the efficiency and age profile of the existing fleet in
the market and government and industry regulation of maritime transportation
practices, particularly environmental protection laws and regulations. These
factors influencing the supply of and demand for shipping capacity are outside
of our control, and we cannot predict the nature, timing and degree of changes
in industry conditions.
We expect the market value of our vessels to fluctuate largely in relation
to existing and anticipated freight rates as well as with changes in general
economic and market conditions. Furthermore, as our vessels grow older we
generally expect their market value to decline.
Risks Associated with the Purchase and Operation of Second Hand Vessels May
Affect Our Results of Operations
We acquired all of our vessels second hand, and we estimate their useful
lives to be 28 years, depending on various market factors and management's
ability to comply with government and industry regulatory requirements. Part of
our business strategy includes the continued acquisition of second hand vessels
when we find attractive opportunities.
In general, expenditures necessary for maintaining a vessel in good
operating condition increase as a vessel ages. Second hand vessels may also
develop unexpected mechanical and operational problems despite adherence to
regular survey schedules and proper maintenance. Cargo insurance rates also tend
to increase with a vessel's age, and older vessels tend to be less
fuel-efficient than newer vessels. While the difference in fuel consumption is
factored into the freight rates that our older vessels earn, if the cost of
bunker fuels were to increase significantly, it could disproportionately affect
our vessels and significantly lower our profits. In addition, changes in
governmental regulations, safety or other equipment standards may require
-- expenditures for alterations to existing equipment;
-- the addition of new equipment, or
-- restrictions on the type of cargo a vessel may transport.
We cannot give assurances that market conditions will justify such
expenditures or enable us to operate our vessels profitably during the remainder
of their economic lives.
We are Dependent on Spot Voyages in the Volatile Shipping Markets
We currently charter most of our vessels on a spot charter basis. Although
dependence on spot charters is not unusual in the shipping industry, the spot
charter market is highly competitive and spot charter rates may fluctuate
significantly based upon available charters and the supply of and demand for sea
borne shipping capacity. While our focus on the spot charter market may enable
us to benefit if industry conditions strengthen, we must consistently procure
spot charter business. Conversely, such dependence makes us vulnerable to
declining market rates for spot charters. We cannot give assurances that future
available spot charter will enable us to operate our vessels profitably.
We Face Strong Competition
We obtain charters for our vessels in highly competitive markets in which
our market share is insufficient to enforce any degree of pricing discipline.
Although we believe that no single competitor has a dominant position in the
markets in which we compete, we are aware that certain competitors may be able
to devote greater financial and other resources to their activities than we can,
resulting in a significant competitive threat to us.
We cannot give assurances that we will continue to compete successfully
with our competitors or that these factors will not erode our competitive
position in the future.
Risk of Loss and Insurance May Affect our Results
Adverse weather conditions, mechanical failures, human error, war,
terrorism, piracy and other circumstances and events create an inherent risk of
catastrophic marine disasters and property loss in the operation of any
ocean-going vessel. In addition, business interruptions due to political
circumstances in foreign countries, hostilities, labor strikes, and boycotts.
Any such event may result in loss of revenues or increased costs.
We carry insurance to protect against most of the accident-related risks
involved in the conduct of our business and we maintain environmental damage and
pollution insurance coverage. We do not carry insurance covering the loss of
revenue resulting from vessel off-hire time. We cannot give assurances that all
covered risks are adequately insured against, that any particular claim will be
paid or that we will be able to procure adequate insurance coverage at
commercially reasonable rates in the future. More stringent environmental
regulations in the past have resulted in increased costs for insurance against
the risk of environmental damage or pollution. In the future, we may be unable
to procure adequate insurance coverage to protect us against environmental
damage or pollution.
A decline in the market value of our vessels could lead to a default under our
loan agreements and the loss of our vessels
If the market value of our fleet declines, we may not be able to refinance
our debt or obtain future financing. Also, declining vessel values could cause
us to breach some of the covenants under our financing agreements. If we are
unable to pledge additional collateral, or obtain waivers from our lenders, our
lenders could accelerate our debt and foreclose on our fleet.
Servicing our debt limits funds available for other purposes and if we cannot
service our debt, we may lose our tankers
We must dedicate a large part of our cash flow from operations to paying
principal and interest on our indebtedness. These payments limit funds available
for working capital, capital expenditures and other purposes.
Terrorist attacks, such as the attacks on the United States on September 11,
2001, and other acts of violence or war may affect the financial markets and our
business, results of operations and financial condition.
Terrorist attacks such as the attacks on the United States on September 11,
2001 and the United States' continuing response to these attacks, as well as the
threat of future terrorist attacks, continues to cause uncertainty in the world
financial markets. The recent conflict in Iraq may lead to additional acts of
terrorism and armed conflict around the world, which may contribute to further
economic instability in the global financial markets, including the energy
markets. These uncertainties could also adversely affect our ability to obtain
additional financing on terms acceptable to us or at all.
Future terrorist attacks, such as the attack on the m.t. Limburg in October
2002, may also negatively affect our operations and financial condition and
directly impact our vessels or our customers. Future terrorist attacks could
result in increased volatility of the financial markets in the United States and
globally and could result in an economic recession in the United States or the
world. Any of these occurrences could have a material adverse impact on our
operating results, revenue, and costs.
Because the market value of our vessels may fluctuate significantly, we may
incur losses when we sell vessels which may adversely affect our earnings
The carrying amount of our vessels on our financial statements does not
necessarily reflect their fair market value, which can fluctuate significantly.
The fair market value of tankers may increase and decrease depending on the
following factors:
o general economic and market conditions affecting the tanker industry;
o competition from other shipping companies;
o types and sizes of vessels;
o other modes of transportation;
o cost of newbuildings;
o governmental or other regulations including required phase-outs of
non-double hull tankers;
o prevailing level of charter rates; and
o technological advances.
If we determine at any time that a vessel's future limited useful life and
earnings requires us to impair its value on our financial statements, that could
result in a charge against our earnings and the reduction of our shareholder's
equity. If for any reason we sell tankers at a time when tanker prices have
fallen, the sale may be less than the vessel's carrying amount on our financial
statements, with the result that we would also incur a loss and a reduction in
earnings.
ITEM 4 - INFORMATION ON THE COMPANY
The Company
We, Excel Maritime Carriers Ltd., are an owner and operator of dry bulk
carrier vessels. We are listed on the American Stock Exchange (ticker: EXM), and
are a provider of worldwide sea borne transportation services for dry bulk
cargo.
We were incorporated on November 2, 1998 under the laws of Liberia. Our
business strategy is to expand and diversify our fleet to achieve economies of
scale and marketing strength in each of the sectors in which we operate. We may
expand our presence in the tanker market and dry bulk market, in particular, and
may also diversify into the container shipping sector. In accordance with this
strategy, we intend to purchase additional vessels in the open market as market
conditions warrant.
During 2002, we owned and operated 6 dry bulk vessels. On December 31,
2002, we owned and operated 5 dry bulk vessels. The vessel, Holy Island, was
sold on 3rd January 2002 and our remaining 5 vessels have the following
characteristics:
NAME TYPE DWT BUILT COUNTRY YARD
Fighting Lady Capesize Bulker 141,103 1983 Korea Hyundai
Almar I Capesize Bulker 107,140 1979 Japan IHI
Petalis Handysize Bulker 35,982 1975 Japan Osaka
Lucky Lady Handysize Bulker 27,422 1975 Japan Hakodate
Lady Handysize Bulker 41,090 1985 Japan Oshima
Total 352,737
In addition to the direct ownership and operation of vessels, we believe
that ownership of shares in other worldwide national exchange listed shipping
companies is a beneficial way to diversify our investment activities.
In line with the above mentioned strategy, we purchased, during 2000 and
2001 a total of 27.78% of the outstanding shares of a Danish shipping company
listed on the Copenhagen Stock Exchange called A/S Dampskibsselskabet Torm, or
Torm. Torm was founded in 1889 and its core business activity currently
comprises two divisions: product tanker and dry bulk.
Torm's product tanker division specialises in the transportation of refined
oil products such as gasoline, jet fuel, naphtha and diesel oil, as well as
other fluid commodities such as vegetable oil and molasses. Torm's dry bulk
division focuses primarily on Panamax and Handysize bulk carriers, wherein the
principal commodities it carries are grain, coal and iron ore.
For the year ended December 31, 2001, Torm recorded a profit of $44.7
million versus a profit of $31.1 million in 2000.
We sold the subsidiary (American Investors Co.), which held the shares in
Torm in February 2002 and paid a special cash dividend to our shareholders with
the proceeds. We continue to seek other opportunities to acquire shares in other
worldwide exchange listed shipping companies.
Regulation
The business of the Company and the operation of its vessels are materially
affected by government regulation in the form of international conventions,
national, state and local laws and regulations in force in the jurisdictions in
which the vessels operate, as well as in the country or countries of their
registration. Because such conventions, laws, and regulations are often revised,
the Company cannot predict the ultimate cost of complying with such conventions,
laws and regulations or the impact thereof on the resale price or useful life of
its vessels. Additional conventions, laws and regulations may be adopted which
could limit the ability of the Company to do business or increase the cost of
its doing business and which may materially adversely affect the Company's
operations. The Company is required by various governmental and
quasi-governmental agencies to obtain certain permits, licenses and certificates
with respect to its operations. Subject to the discussion below and to the fact
that the kinds of permits, licenses and certificates required for the operations
of the vessels owned by the Company will depend upon a number of factors, the
Company believes that it has been and will be able to obtain all permits,
licenses and certificates material to the conduct of its operations.
The Company believes that the heightened environmental and quality concerns
of insurance underwriters, regulators and charterers will impose greater
inspection and safety requirements on all vessels in the tanker market and will
accelerate the scrapping of older vessels throughout the industry.
Environmental Regulation--International Maritime Organization ("IMO").
On March 6, 1992, the IMO adopted regulations, which set forth new and
upgraded requirements for pollution prevention for tankers. These regulations,
which went into effect on July 6, 1995, in many jurisdictions in which the
Company's tanker operates, provide that (i) tankers between 25 and 30 years old
must be of double-hull construction or of a mid-deck design with double side
construction, unless they have wing tanks or double-bottom spaces, not used for
the carriage of oil, which cover at least 30% of the length of the cargo tank
section of the hull, or are capable of hydrostatically balanced loading which
ensures at least the same level of protection against oil spills in the event of
collision or stranding, (ii) tankers 30 years old or older must be of
double-hull construction or mid-deck design with double-side construction, and
(iii) all tankers will be subject to enhanced inspections. Also, under IMO
regulations, a tanker must be of double-hull construction or a mid-deck design
with double side construction or be of another approved design ensuring the same
level of protection against oil pollution in the event that such tanker (i) is
the subject of a contract for a major conversion or original construction on or
after July 6, 1993, (ii) commences a major conversion or has its keel laid on or
after January 6, 1994, or (iii) completes a major conversion or is a newbuilding
delivered on or after July 6, 1996.
The operation of the Company's vessels is also affected by the requirements
set forth in the IMO's International Management Code for the Safe Operation of
Ships and Pollution Prevention (the "ISM Code"). The ISM Code requires
shipowners and bareboat charterers to develop and maintain an extensive "Safety
Management System" that includes the adoption of a safety and environmental
protection policy setting forth instructions and procedures for safe operation
and describing procedures for dealing with emergencies. The failure of a
shipowner or bareboat charterer to comply with the ISM Code may subject such
party to increased liability, may decrease available insurance coverage for the
affected vessels, and may result in a denial of access to, or detention in,
certain ports. Currently, each of the Company's applicable vessels is ISM
code-certified. However, there can be no assurance that such certification will
be maintained indefinitely.
Environmental Regulations--The United States Oil Pollution Act of 1990.
The Unites States Oil Pollution Act of 1990, or OPA, established an
extensive regulatory and liability regime for the protection and cleanup of the
environment from oil spills. OPA affects all owners and operators whose vessels
trade in the United States, its territories and possessions or whose vessels
operate in United States waters, which includes the United States' territorial
sea and its two hundred nautical mile exclusive economic zone.
Under OPA, vessel owners, operators and bareboat charterers are
"responsible parties" and are jointly, severally and strictly liable (unless the
spill results solely from the act or omission of a third party, an act of God or
an act of war) for all containment and clean-up costs and other damages arising
from discharges or threatened discharges of oil from their vessels. OPA defines
these other damages broadly to include:
(i) natural resources damages and the costs of assessment thereof;
(ii) real and personal property damages;
(iii) net loss of taxes, royalties, rents, fees and other lost revenues;
(iv) lost profits or impairment of earning capacity due to property or
natural resources damage;
(v) net cost of public services necessitated by a spill response, such as
protection from fire, safety or health hazards, and loss of
subsistence use of natural resources.
OPA limits the liability of responsible parties to the greater of $1,200
per gross ton or $10 million per tanker that is over 3,000 gross tons (subject
to possible adjustment for inflation). These limits of liability do not apply if
an incident was directly caused by violation of applicable United States federal
safety, construction or operating regulations or by a responsible party's gross
negligence or wilful misconduct, or if the responsible party fails or refuses to
report the incident or to cooperate and assist in connection with oil removal
activities.
We currently maintain for each of our vessel's pollution liability coverage
insurance in the amount of $1 billion per incident. If the damages from a
catastrophic spill exceeded our insurance coverage, it would severely hurt us.
Under OPA, with certain limited exceptions, all newly built or converted
tankers operating in United States waters must be built with double-hulls, and
existing vessels which do not comply with the double-hull requirement must be
phased out over a 25-year period (1990-2015) based on size, age and hull
construction. Notwithstanding the phase-out period, OPA currently permits
existing single-hull tankers to operate until the year 2015 if they limit their
operations within United States waters to discharging at the Louisiana Off-Shore
Oil Port, or off-loading by means of lightering activities within authorized
lightering zones more than 60 miles offshore.
OPA requires owners and operators of vessels to establish and maintain with
the United States Coast Guard evidence of financial responsibility sufficient to
meet their potential liabilities under the OPA. In December 1994, the Coast
Guard implemented regulations requiring evidence of financial responsibility in
the amount of $1,500 per gross ton for tankers, which includes the OPA
limitation on liability of $1,200 per gross ton and the U.S. Comprehensive
Environmental Response, Compensation, and Liability Act liability limit of $300
per gross ton. Under the regulations, vessel owners and operators may evidence
their financial responsibility by showing proof of insurance, surety bond,
self-insurance, or guaranty. Under OPA, an owner or operator of a fleet of
tankers is required only to demonstrate evidence of financial responsibility in
an amount sufficient to cover the tanker in the fleet having the greatest
maximum liability under OPA.
The Coast Guard's regulations concerning certificates of financial
responsibility provide, in accordance with OPA, that claimants may bring suit
directly against an insurer or guarantor that furnishes certificates of
financial responsibility. In the event that such insurer or guarantor is sued
directly, it is prohibited from asserting any contractual defence that it may
have had against the responsible party and is limited to asserting those
defences available to the responsible party and the defence that the incident
was caused by the wilful misconduct of the responsible party. Certain
organizations, which had typically provided certificates of financial
responsibility under pre-OPA 90 laws, including the major protection and
indemnity organizations, have declined to furnish evidence of insurance for
vessel owners and operators if they are subject to direct actions or required to
waive insurance policy defences.
The Coast Guard's financial responsibility regulations may also be
satisfied by evidence of surety bond, guaranty or by self-insurance. Under the
self-insurance provisions, the ship owner or operator must have a net worth and
working capital, measured in assets located in the United States against
liabilities located anywhere in the world, that exceeds the applicable amount of
financial responsibility. The Company has complied with the Coast Guard
regulations by providing a financial guaranty from a related company evidencing
sufficient self-insurance.
OPA specifically permits individual states to impose their own liability
regimes with regard to oil pollution incidents occurring within their
boundaries, and some states have enacted legislation providing for unlimited
liability for oil spills. In some cases, states, which have enacted such
legislation, have not yet issued implementing regulations defining tanker
owners' responsibilities under these laws. The Company intends to comply with
all applicable state regulations in the ports where the Company's vessels call.
Owners or operators of tankers operating in United States waters are
required to file vessel response plans with the Coast Guard, and their tankers
are required to operate in compliance with their Coast Guard approved plans.
Such response plans must, among other things, (i) address a "worst case"
scenario and identify and ensure, through contract or other approved means, the
availability of necessary private response resources to respond to a "worst case
discharge," (ii) describe crew training and drills, and (iii) identify a
qualified individual with full authority to implement removal actions.
Environmental Regulation--Other Environmental Initiatives.
The European Union is considering legislation that will affect the
operation of tankers and the liability of owners for oil pollution. It is
difficult to predict what legislation, if any may be promulgated by the European
Union or any other country or authority.
Although the United States is not a party thereto, many countries have
ratified and follow the liability scheme adopted by the IMO and set out in the
International Convention on Civil Liability for Oil Pollution Damage, 1969, as
amended (the "CLC"), and the Convention for the Establishment of an
International Fund for Oil Pollution of 1971, as amended. Under these
conventions, a vessel's registered owner is strictly liable for pollution damage
caused on the territorial waters of a contracting state by discharge of
persistent oil, subject to certain complete defences. Many of the countries that
have ratified the CLC have increased the liability limits through a 1992
Protocol to the CLC. The liability limits in the countries that have ratified
this Protocol are currently approximately $4.0 million plus approximately $566.0
per gross registered tonne above 5,000 gross tonnes with an approximate maximum
of $80.5 million per vessel, with the exact amount tied to a unit of account
which varies according to a basket of currencies. The right to limit liability
is forfeited under the CLC where the spill is caused by the owner's actual fault
or privity and, under the 1992 Protocol, where the spill is caused by the
owner's intentional or reckless conduct. Vessels trading to contracting states
must provide evidence of insurance covering the limited liability of the owner.
In jurisdictions where the CLC has not been adopted, various legislative schemes
or common law govern, and liability is imposed either on the basis of fault or
in a manner similar to the CLC.
Environmental Regulation--Proposed IMO Regulations.
The IMO, in conjunction with the European Commission, has proposed a
timetable for the accelerated phasing-out of single-hull oil tankers. Under the
proposal, which will be discussed further by the IMO's Marine Environment
Committee in April 2001,oil tankers delivered in 1973 and which do not comply
with the requirements for protectively located segregated ballast tanks will be
phased out by January 1, 2003.
The sinking of the oil tanker Erika off the coast of France on December 12,
1999 polluted more than 250 miles of French coastline with heavy oil. Following
the spill, the European Commission adopted a "communication on the safety of oil
transport by sea," also named the "Erika communication." As a part of this, the
Commission has adopted a proposal for a general ban on single-hull oil tankers.
The timetable for the ban shall be similar to that set by the United States
under OPA in order to prevent oil tankers banned from U.S. waters from shifting
their trades to Europe. The ban plans for a gradual phase-out of tankers
depending on vessel type:
- -- Single-hull oil tankers larger than 20,000 dwt without protective ballast
tanks around the cargo tanks. Under current proposals, vessels in this category
would be phased out progressively between January 1, 2003 and January 1, 2007,
depending on their year of delivery.
- -- Single-hull oil tankers larger than 20,000 dwt in which the cargo tank area
is partly protected by segregated ballast tanks. Under current proposals,
vessels in this category built before 1987 would be phased out after their 25th
year of operation. Vessels built after 1987 would be phased out between January
1, 2012 and January 1, 2017, depending on their year of delivery.
- -- Single-hull oil tankers between 5,000 dwt and 20,000 dwt. Under the current
proposals, vessels in this category built before 1987 would be phased out
between January 1, 2003 and January 1, 2013, depending on their year of
delivery. Vessels built after 1987 would be phased out between January 1, 2013
and January 1, 2017, depending on their year of delivery.
Partly in response to the oil spill caused by the sinking of the tanker
Prestige, a single hulled tanker owned by an entity that is not affiliated with
us, in November 2002, the European Union proposed new regulations in March of
2003 that would, among other things, place a ban on the transportation of heavy
oil grades in all single-hull tankers loading or discharging at European Union
ports. These regulations also accelerate the phase-out schedule of all single
hull tankers. The European Union Parliament is scheduled to meet in July 2003,
to ratify these new regulations. Several European Union nations have already
implemented an absolute ban on single hull tankers carrying fuel oil and heavy
oil grades. Spain has banned single hull tankers over 5,000 dwt and carrying
such cargo from entering her ports as of January 1, 2003. Italy has announced
that similar measures applicable to single hull tankers over 15 years of age
will be implemented during the first half of 2003, and Spain, France and
Portugal have prohibited single hull tankers carrying such cargoes from passing
through their 200-mile economic exclusion zones since December, 2002.
The International Dry Bulk Shipping Market
Conditions in the bulk market both in terms of capacity and demand varied
considerably during 2002. The freight market remained generally depressed during
the first 3 quarters, in particular for Panamax and Capesize vessels. Iron ore
transports increased steadily from the beginning of the year because of China's
strong expansion of steel production. Steam coal shipments were sluggish from
April to the end of August, due to a substantial stock drawing by the major
importers. In the grain trade, low volumes and shorter average sailing distances
caused by reduced Argentinean grain exports had a negative impact on the freight
market in the first 3 quarters. In the final months, a substantial increase in
steam coal shipments, a revival of the grain trade and not least a continued
strong increase in iron ore shipments, resulted in sharply higher freight rates
for all sizes of vessels.
Tripcharter rates, were on average, slightly lower than in 2001. Modern
Capesize vessels obtained $12,800 per day compared to $13,500 in 2001. Panamax
rates fell from $8,650 to $7,950 per day, while for Handymax tonnage, a drop
from $8,400 to $8,000 per day occurred.
Ship market values increased significantly during 2002. For modern tonnage
the rise was about 20-25% on a year-to-year basis. The number of sales in the
marketplace increased 60% compared to 2001 and the aggregate value of total
sales was up 50%. Most of the increase in values took place in the first quarter
2002, but the highest sales activity was registered in the final quarter.
Customers
The Company, through Maryville, has many long-established customer
relationships, and management believes it is well regarded within the
international shipping community. During the past 15 years, vessels managed by
Maryville have been repeatedly chartered by subsidiaries of major oil companies,
oil traders and dry bulk operators. In 2002, we derived approximately 36% of our
gross revenues from three charterers namely, Coeclerici Transport Ltd., ADM
Shipping Co. and Alfred C. Toepfer. Each of the aforementioned charterers
contributed 12% of gross revenue in 2002.
The Company's vessels are currently operated on either the spot market or
the short-term time charter markets. The spot charter and short-term time
charter markets are highly competitive and rates within those markets are
subject to volatile fluctuations while longer-term time charters provide income
at pre-determined rates over more extended periods of time. There can be no
assurance that the Company will be successful in keeping all its vessels fully
employed in these short-term markets or that future spot and short-term charter
rates will be sufficient to enable its vessels to be operated profitably.
Inspection by Classification Society
The hull and machinery of every commercial vessel must be classed by a
classification society authorised by its country of registry. The classification
society certifies that a vessel is safe and seaworthy in accordance with the
applicable rules and regulations of the country of registry of the vessel and
the Safety of Life at Sea Convention. The Company's vessels are currently
enrolled with Bureau Veritas ("BV") and the American Bureau of Shipping ("ABS").
BV has awarded ISM certification to Maryville and the Company's vessels.
A vessel must undergo Annual Surveys, Intermediate Surveys and Special
Surveys. In lieu of a Special Survey, a vessel's machinery may be on a
continuous survey cycle, under which the machinery would be surveyed
periodically over a five-year period. The Company's vessels are on Special
Survey cycles for hull inspection and continuous survey cycles for machinery
inspection. Every vessel is also required to be dry-docked every two to three
years for inspection of the underwater parts of such vessel. Generally, the
Company will make a decision to scrap a vessel or continue operations at the
time of a vessel's fifth Special Survey.
Insurance and Safety
The business of the Company is affected by a number of risks, including
mechanical failure of the vessels, collisions, property loss to the vessels,
cargo loss or damage and business interruption due to political circumstances in
foreign countries, hostilities and labour strikes. In addition, the operation of
any ocean-going vessel is subject to the inherent possibility of catastrophic
marine disaster, including oil spills and other environmental mishaps, and the
liabilities arising from owning and operating vessels in international trade.
OPA, by imposing potentially unlimited liability upon owners, operators and
bareboat charterers for certain oil pollution accidents in the U.S., has made
liability insurance more expensive for ship owners and operators and has also
caused insurers to consider reducing available liability coverage.
The Company maintains hull and machinery and war risks insurance, which
includes the risk of actual or constructive total loss, and protection and
indemnity insurance with mutual assurance associations. The Company does not
carry insurance covering the loss of revenue resulting from vessel off-hire
time. The Company believes that its insurance coverage is adequate to protect it
against most accident-related risks involved in the conduct of its business and
that it maintains appropriate levels of environmental damage and pollution
insurance coverage. Currently, the available amount of coverage for pollution is
$1.0 billion for tankers and dry bulk carriers per vessel per incident. However,
there can be no assurance that all risks are adequately insured against, that
any particular claim will be paid or that the Company will be able to procure
adequate insurance coverage at commercially reasonable rates.
Organizational Structure
We are the parent company (100% owner) of the following wholly owned
subsidiaries:
Subsidiary Place of Incorporation
Maryville Maritime Inc. Liberia (acquired March 31, 2001)
American Investors Co. Liberia (sold February 7, 2002)
Point Holdings Inc. (1) Liberia
(1) Point Holdings Inc. is the parent company (100% owner) of five
Liberian holding companies (each of which owns one vessel).
Description of Property
We have no freehold interest in any real property. During 2001,upon the
purchase of Maryville, Maryville entered into a lease agreement for the rental
of office premises with an unrelated party. Operating lease payments for 2001
and 2002 were $33,000 and $49,000 respectively.
ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Recently Issued Accounting Standards
There have been a number of new accounting announcements in the past year,
which we have reviewed as to their relevancy to our operations and reporting.
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
143, "Accounting for Asset Retirement Obligations". SFAS 143 relates to
financial accounting and reporting requirements associated with the retirement
of tangible long-lived assets and the associated asset retirement costs. The
statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. The management of the Company does not believe
that the adoption of this statement will have a material effect on the Company's
results of operations and financial position.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, Amendment of FASB Statement No. 13, and Technical Corrections", which
is effective for fiscal years beginning after May 15, 2002. This statement
requires most gains and losses from extinguishment of debt to be presented as a
gain or loss from continuing operations rather than as an extraordinary item.
Accounting Principles Board ("APB") Opinion No. 30, "Reporting the Results of
Operations, Reporting Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions" will
now be used to classify those gains and losses. This Statement also amends FASB
No. 13, which requires that certain capital lease modifications be treated as a
sale-leaseback transaction. We do not believe the adoption of SFAS No. 145 will
have a material effect on our consolidated financial statements.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS No. 146 replaces EITF Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to exit an Activity (including Certain Costs Incurred in a
Restructuring", and changes the timing of recognition for certain exit costs
associated with restructuring activities. Under SFAS No. 146 certain exit costs
would be recognized over the period in which the restructuring activities occur.
Currently, exit costs are recognized when the Company commits to a restructuring
plan. SFAS No. 146 is applied prospectively to exit or disposal activities
initiated after December 31, 2002, though early adoption is allowed. The Company
will adopt SFAS No. 146 for exit or disposal activities that are initiated after
December 31, 2002. The management of the Company does not believe that the
adoption of this statement will have a material effect on the Company's results
of operations and financial position.
In November 2002, the FASB issued FIN No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Other". FIN No. 45 requires that upon issuance of a guarantee,
the guarantor must recognize a liability for the fair value of the obligation it
assumes under the guarantee. The disclosure provisions of FIN No. 45 are
effective for financial statements of annual periods that end after December 15,
2002. The provisions for initial recognition and measurement are affective on a
prospective basis for guarantees that are issued or modified after December 31,
2002. Adoption of FIN No. 45 is not expected to have a significant effect on our
consolidated financial statements.
Critical Accounting Policies
Our consolidated financial statements are prepared based on the accounting
policies described in note 2 to our consolidated financial statements, which are
included under "Item 18. Financial Statements" in this Annual Report on Form
20-F. The application of such policies may require management to make
significant estimates and assumptions. We believe that the following are our
more critical accounting estimates used in the preparation of our consolidated
financial statements that involve a higher degree of judgment and could have a
significant impact on our future consolidated results of operations and
financial position:
Impairment.
In applying the accounting policy regarding impairment in the value of
assets, we need to make an estimate with respect to likely future cash flow to
be generated by such assets. Our estimates are based on historical industry
freight rate averages for each category of vessel taking into account the age,
specifications and likely trading pattern of each vessel. Actual freight rates
may be volatile and estimations may differ considerably from actual results. In
the event that impairment in carrying values is required, the carrying value is
written down to the fair market value as opined by independent experts. As
vessel values are also volatile, the actual market value of a vessel may differ
significantly from estimated values within a short period of time.
Accounting for Revenue.
Revenues are generated from freight billings and time charter hires. Time
charter revenues are recorded over the term of the charter as service is
provided. Under a voyage charter, the revenues and associated voyage costs are
recognized rateably over the duration of the voyage. The operating results of
voyages in progress at a reporting date are estimated and recognized pro-rata on
a per day basis. Probable losses on voyages are provided for in full at the time
such losses can be estimated. Vessel operating expenses are accounted for on an
accrual basis.
Accounting for Protection and Indemnity (P&I) Back Calls.
The vessels' P&I Club insurance is subject to additional premiums referred
to as back calls or supplemental calls, and are accounted for on the accrual
basis. P&I Clubs, which provide insurance for accidents, pollution, crew, etc.,
assess their results each year and seek supplementary amounts from their members
to cover any shortfall within the previous three years. Indications of likely
supplementary calls, which are expressed as percentages of the known basic
charge for the year, are notified to P&I Club members at various stages during
the year and provide a reasonable basis for an accrual, although final actual
calls for any given year may differ substantially from what is estimated.
Results of Operations
Revenues from Vessels
Gross revenues from vessels consist primarily of (i) hire earned under time
charter contracts, where charterers pay a fixed daily hire or (ii) amounts
earned under voyage charter contracts, where charterers pay a fixed amount per
ton of cargo carried. Gross revenues are also affected by the proportion between
voyage and time charters, since voyage freights are higher than equivalent time
charter hire, as they include all costs relating to a given voyage, including
port expenses, canal dues and fuel (bunker) costs. Accordingly, year-to-year
comparisons of gross revenues are not necessarily indicative of the Trading
Fleet's performance. The time charter equivalent per vessel ("TCE"), which is
defined as gross revenue per day less commissions and voyage costs provides a
more accurate measure for comparison.
Equity on Earnings of an Affiliate
The Company's equity on earnings of an affiliate represents the Company's
participation interest in Torm (0%, 27.78% and 24.99% at December 31, 2002, 2001
and 2000 respectively), accounted for under the equity method. We sold the
subsidiary (American Investors Co.)which held the shares in Torm in February
2002.
Voyage Expenses
Voyage expenses consist of all costs relating to a given voyage, including
port expenses, canal dues and fuel (bunker) costs. Under voyage charters, the
owner of the vessel pays such expenses whereas under time charters the charterer
pays such expenses. Therefore, voyage expenses can exhibit significant
fluctuations from period to period depending on the type of charter arrangement.
Vessel Operating Expenses
Vessel operating expenses consist primarily of crewing, repairs and
maintenance, lubricants, victualling, stores and spares and insurance expenses.
The Company is responsible for all vessels operating expenses in voyage, time
and period charters.
Depreciation
Vessels' acquisition cost and subsequent improvements are depreciated on a
straight-line method over an estimated economic life of 28 years (from the date
of construction of each vessel). In computing vessels' depreciation the
estimated salvage value is also taken into consideration.
Amortization of Dry-docking and Special Survey Costs
Dry-docking and special surveys are carried out approximately every two and
a half years and five years, respectively. Dry-docking and special surveys costs
are deferred and amortized over the period through the date the next dry-docking
or special survey becomes due.
Management Fees
Management fees consist of fixed management fees per vessel per month
charged by Excel Management Ltd. for managing vessels.
Results of Operations
Fiscal Year ended December 31, 2002 Compared to Fiscal Year ended December 31,
2001
Revenues from Vessels
Gross revenues (before deduction of broker's commissions and voyage
expenses) were US$15.6 million in 2002 compared to US$25.9 million in 2001 a
decrease of US$10.3 million or 39.8%. This decrease was primarily attributable
to a 22.4% decrease in the average fleet TCE rate from US$7,461 in 2001 to
US$5,787 in 2002, which was a direct result of lower freight rates compared to
2001, plus a decrease of 26.0% in the total number of fleet operating days from
2,008 in 2001 to 1,485 in 2002 due to the sale of Alex Stream in July 2001 and
of Holy Island in January 2002, which was partly offset by the purchase of Lady
in October 2002.
Equity on Earnings of an Affiliate
The Company's equity on earnings of an affiliate was $0 in 2002 compared to
$11.4 million in 2001, due to the sale of the Company's participation interest
in Torm (accounted for under the equity method), which was 27.78% at December
31, 2001.
Voyage Expenses
Voyage Expenses were US$6.2 million in 2002, a decrease of US$3.5 million
or 35.4% compared to US$9.7 million in 2001. This decrease was attributable to
the lower realized revenues from spot charters due to lower market rates and a
decrease in fleet operating days under spot charters from 1,624 days in 2001 to
1,001 days in 2002.
Vessel Operating Expenses
Vessel Operating Expenses were US$5.4 million in 2002 compared to US$6.8
million in 2001 a decrease of US$1.4 million or 20.6%, which was a result of the
sale of Alex Stream and Holy Island partially offset by the purchase of Lady. As
a percentage of net revenue, operating expenses increased to 36.3% in 2002
versus 27.8% in 2001. The average daily operating expenses per vessel increased
by 5.7% from US$3,411 in 2001 to US$3,605 in 2002as a result of higher crew
costs and insurance premiums.
Depreciation and Amortization
The Depreciation and amortization charge for 2002 was US$1.1 million
compared to US$1.4 million in 2001. The decrease is primarily due to lower
amortization of dry-docking costs. No depreciation charges were made for the
vessels Lucky Lady or Holy Island as their acquisition cost approximates their
estimated salvage value.
General and Administrative Expenses
General and Administrative expenses for 2002 were US$1.5 million compared
to US$1.9 million in 2001. The decrease of US$0.4 million reflects mainly the
decrease in management fees charged by Excel Management Ltd. (US$ 0.6 million)
partially offset by the additional administrative expenses incurred by Maryville
Maritime Inc. (US$ 0.3 million).
Other Income/Expenses
Other income was US$0.02 million in 2002, a decrease of US$1.50 million
from US$1.52 in 2001. This is a result of a number of factors, the most
significant being that, as a result of the sale of our subsidiary, American
Investors, in early 2002, the 2001 figures include equity earnings on the
affiliate of US$11.4 million and a provision for loss on sale of the subsidiary
of US$9.3 million. Additionally net interest and finance costs have decreased by
US$0.7 million from US$1.4 million on 2001 to US$0.7 million in 2001 as a result
of both reduced borrowings and lower interest rates payable on those borrowings.
The significant foreign currency gain in 2001 related to the re-denomination of
a loan from Danish Kroner to US Dollars. The sale of Holy Island in 2002
resulted in a gain of US$0.6 million compared to the loss on sale of US$0.4
million in 2001 from the sale of Alex Stream.
Fiscal Year ended December 31, 2001 Compared to Fiscal Year ended December 31,
2000
Revenues from Vessels
Gross revenues (before deduction of broker's commissions and voyage
expenses) were US$25.9 million in 2001 compared to US$32.2 million in 2000 a
decrease of US$6.3 million or 19.6%. This decrease was primarily attributable to
a 15.4% decrease in the average fleet TCE rate from US$8,823 in 2000 to US$7,461
in 2001, which was a direct result of lower market rates compared to 2000, plus
a decrease of 13.3% in the total number of fleet operating days from 2,317 in
2000 to 2,008 in 2001 due to the sale of the tanker Alex Stream.
Equity on earnings of an affiliate
The Company's equity on earnings of an affiliate represents the Company's
participation interest in Torm, 27.78% and 24.99% at December 31, 2001 and 2000
respectively accounted for under the equity method.
Voyage Expenses
Voyage Expenses were US$9.7 million in 2001, a decrease of US$0.5 million
or 4.9% compared to US$10.2 million in 2000. This decrease was attributable to
the lower realized revenues due to lower market rates and a decrease in fleet
operating days as a result of the sale of the tanker Alex Stream.
Vessel Operating Expenses
Vessel Operating Expenses were US$6.8 million in 2001 compared to US$9.1
million in 2000 a decrease of US$2.3 million or 25.3%, which was a result of the
sale of the tanker Alex Stream. As a percentage of net revenue, operating
expenses decreased down to 27.8% in 2001 versus 29.5% in 2000. The average daily
operating expenses per vessel decreased by 5.3% from US$3,600 in 2000 to
US$3,411 in 2001 as a result of the sale of the Suezmax tanker Alex Stream
Depreciation and Amortization
The Depreciation and amortization charge for 2001 was US$1.4 million
compared to US$0.9 million in 2000. The increase is primarily due to higher
amortization of dry-docking costs. No depreciation charges were made for the
vessels Lucky Lady or Holy Island as their acquisition cost approximates their
estimated salvage value.
General and Administrative Expenses
General and Administrative expenses for 2001 were US$1.8 million compared
to US$1.3 million in 2000. The increase of US$0.5 million reflects the decrease
in management fees charged by Excel Management Ltd. (US$0.4 million) and the
administrative expenses incurred by Maryville Maritime Inc. in 2001 (US$0.8
million).
Other Income/Expenses
Other Expenses during 2001 totalled US$10.0 million, being the net result
of US$1.4 million interest and finance costs plus the loss of US$0.4 million
from the sale of Alex Stream, US$1.2 million of foreign currency gains and a
provision for the loss on sale of a subsidiary of $9.3 million, compared to a
total of other expenses in 2000 of US$2.4 million including a US$0.3 million
gain from vessel sales and US$2.8 million in interest and financing costs.
Expected Additional Capital Commitments
None.
Liquidity and Capital Resources
The Company operates in a capital-intensive industry, which requires
extensive investment in revenue-producing assets. The liquidity requirements of
the Company relate to servicing its debt, funding investments in vessels,
funding working capital and maintaining cash reserves. Net cash flow generated
by operations has historically been the main source of liquidity and has been
sufficient to cover all requirements. Additional sources of liquidity also
include proceeds from assets sales, bank indebtedness and capital contributions.
The Company believes that based upon current levels of operation, cash flow
operations, together with other sources of funds (principally in the form of
either debt or equity financing), it will have adequate liquidity to make
required payments of principal and interest on the Company's debt and fund
working capital requirements through January 1, 2004.
Operating Activities
The net cash used in operating activities in 2002 totalled US$0.3 million,
a decrease of US$9.8 million on the cash generated from operating activities of
US$9.5 million in 2001. In 2002, the decrease in cash flow from operations was
caused by several factors including a reduction in net income of $5.8 million,
reductions in accounts payable of $1.1 million and $0.5 million for dry-docking
costs, offset against reductions in accounts receivable and inventory of $2.6
million.
Investing Activities
The net cash provided by Investing Activities totalled US$12.7 million in
2002, compared to a negative US$0.2 million used in 2001. The increase of
approximately US$12.9 million consists mainly of the US$5.9 million paid for
vessel acquisitions, plus a net cash inflow of $ 16.5 million from the sale of a
subsidiary and by US$1.1 million from the sale of vessels.
Financing Activities
The net cash used in financing activities in 2002 was $20.8 million
compared to US$0.0 million in 2001. The reasons for the outflow of US$20.8
million were US$14.3 million of payments/repayments of debt, an inflow of $18.3
million from new debt, less US$24.7 million of dividends paid.
Summary of Contractual Obligations
The following table sets out our contractual obligations as of December 31,
2002.
Payments due by period
----------------------
Total 2003 2004 2005 2006 2007 Thereafter
----- ---- ---- ---- ---- ---- ----------
Long-term debt 14,130 4,040 4,220 5,870 0 0 0
Operating leases 300 56 59 60 62 63 0
------ ----- ----- ----- ----- ----- ------
14,430 4,096 4,479 5,930 62 63 0
====== ===== ===== ===== ===== ===== ======
Off Balance Sheet Arrangements
We do not engage in off-balance sheet arrangements.
ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
MANAGEMENT
Executive Officers, Directors and Consultants
The following table sets forth the name, age and position within the
Company of each of its executive Directors and consultants. Consultants are
appointed from time to time, are not executive officers and do not make
decisions for the Company. On 30 December 2002, the Shareholders voted to amend
the Company's Articles of Incorporation to eliminate the classification of the
Company's Directors. Accordingly, all Directors serve for one year terms.
Name Age Position
------ --- --------
Gabriel Panayotides 48 Chairman, President, Chief
Executive Officer and Director
George Agadakis 50 Vice President, Chief
Operating Officer and Director
Christopher J. Thomas 43 Director/Chief Financial Officer
and Treasurer
Trevor J. Williams 60 Director
Georgina E. Sousa 53 Secretary
The Board of Directors currently consists of four persons.
Gabriel Panayotides has been President, Chief Executive Officer and a Director
of the Company since October 1997 and Chairman since February 1998. He has
participated in the ownership and management of ocean going vessels since 1978
and has been head of operations of Maryville since July 1983. He is also a
member of the Greek Committee of Bureau Veritas, an international classification
society. He holds a Bachelors degree from the Piraeus University of Economics.
Mr Panayotides is a member of the Board of Directors of D/S Torm.
George Agadakis has been Vice President and a Director of the Company since
November 1997. He is the Shipping Director of Maryville and was General Manager
of Maryville from January 1992 to January 2001. From 1983 to 1992 he served as
Insurance and Claims Manager for Maryville. He has held positions as Insurance
and Claims Manager and as a consultant with three other shipping companies since
1976. He holds diplomas in shipping from the Business Centre of Athens and the
London School of Foreign Trade Ltd.
Christopher J. Thomas joined the Company in September 1999 as Chief Financial
Officer. Mr. Thomas was elected as director by the Board of directors'. He holds
a Masters degree in Business Administration from Crawley University, England,
and, prior to joining the Company from 1994, he was Financial Manager of Cardiff
Marine Inc.
Trevor J. Williams has been a Director of the Company since November 1988 and
has been principally engaged as President and Director of Consolidated Services
Limited, a Bermuda-based firm providing management services to the shipping
industry since 1985.
Georgina E. Sousa has been Secretary of the Company since February 1998. She
joined the Bermuda law firm of Cos & Wilkinson in 1982 as Senior Company
Secretary and served in that capacity until 1993 when she joined Consolidated
Services Limited as Manager of Corporate Administration, a position she
currently holds. From 1976 to 1982, Ms. Sousa was employed as Company Secretary
by the Bermuda law firm of Appleby, Spurling & Kemp. She acts as Company
Secretary of several private companies and of Chemgas Ltd. and Resource
Financing and Investment Ltd.
Compensation of Directors and Officers
The Company does not pay salaries or provide other direct compensation to
its executive officers including those who serve as Directors of the Company.
For the year ended December 31, 2002, the Company paid aggregate Directors fees
and secretarial fees of US$38,449. The executive officers received aggregate
compensation totalling $214,897 (including pension, taxation, medical and
insurance benefits) from subsidiaries of the Company during the year ended
December 31, 2002.
No family relationships exist among any of the executive officers and
Directors.
Board Practices
All nominee directors that have been elected shall serve until the annual
meeting of Shareholders in 2003 and the due nomination, election and
qualification of their successors.
The term of office for each director shall commence from the date of his
election and expire on the date of the next scheduled Annual General Meeting of
Shareholders. The Board does not currently have committees. Accordingly, the
full Board of Directors performs the function of the Audit Committee.
Employees
As of December 31, 2002, we employed 156 employees, consisting of 24
shore-based personnel based in Athens, Greece, and 132 seagoing employees.
Share Ownership
The beneficial interest of our directors and officers in our Common Shares
as of June 15, 2003, was as follows:
Percentage of
Director or Officer Common Shares Shares Outstanding
- ------------------- ------------- ------------------
George Agadakis * * *
(*) Mr. Agadakis beneficially owns less than one percent of our Common B Shares.
None of our other directors or officers own any Common Shares.
ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS OWNERSHIP OF THE
COMPANY
The following table sets forth, as of June 15, 2003, certain information
regarding the current ownership of the Company's outstanding voting securities,
the Common Shares, by each person known by the Company to be the owner of more
than 5% of such securities and all the Directors and senior management as a
group.
Name Number of Common Shares Percent of Class
- ---- ----------------------- ----------------
Argon S.A. 5,454,620 47.37%
Argon S.A. does not have different voting rights than other holders of
Common Shares.
As a group, the Directors and executive officers of the Company own 18,825
Common Shares or 0.16% of the Common Shares outstanding.
Related party transactions
Excel Management
The Company's management is conducted by and through Excel Management, an
affiliate of the Company. On April 30, 1998, Excel Management and the Company
entered into a management agreement, pursuant to which Excel Management is paid
a fee of US$13,000 per month in respect of each vessel owned by the Company in
addition to an annual fee of US$50,000 for general corporate and clerical
management services. Pursuant to a Sub-management Agreement, between Excel
Management and Maryville, under which Excel Management procures certain
technical and commercial management services for the vessels to Maryville, the
later is currently paid by Excel Management a fee of $9,500 per month, per
vessel under management, plus a commission for advise on chartering and purchase
and sale transactions. The fees charged by Excel Management in 2000, 2001 and
2002 totalled US$1.2, US$0.8 and US$0.2 million respectively as separately
reflected in the accompanying consolidated statements of income.
ITEM 8 - FINANCIAL INFORMATION
Consolidated Statements and Other Financial Information
See Item 18.
Legal Proceedings
There are currently no material legal proceedings, actions or claims
pending against the Company. The nature of the Company's business exposes it to
the risk of lawsuits for damages or penalties relating to, among other things,
personal injury, property casualty and environmental contamination.
ITEM 9 - THE OFFER AND LISTING
The primary trading market for the Common Shares is the American Stock
Exchange ("AMEX"), on which the Common Shares are listed under the symbol "EXM."
The high and low closing prices for the common shares, by year, in 1998,
1999, 2000, 2001 and 2002 were as follows:
For The Year Ended AMEX Low (US$) AMEX High (US$)
- ------------------ -------------- ---------------
December 31, 1998 2.8500 3.1250
December 31, 1999 1.0000 3.0000
December 31, 2000 1.3800 2.4400
December 31, 2001 2.1900 3.5400
December 31, 2002 1.0200 3.5000
The high and low closing prices for the common shares, by quarter, in 2001
and 2002 were as follows:
For The Quarter Ended AMEX Low (US$) AMEX High (US$)
- --------------------- -------------- ---------------
March 31, 2001 2.8500 3.1250
June 30, 2001 2.8000 2.9000
September 30, 2001 2.8000 3.0000
December 31, 2001 2.9500 3.5400
March 31, 2002 3.1900 3.2400
June 30, 2002 1.6400 2.0000
September 30, 2002 1.6100 1.6500
December 31, 2002 1.3100 1.4100
The high and low closing prices for the common shares, by month, over the six
months ended December 31, 2002 were as follows:
For The Six Months
Ended AMEX Low (US$) AMEX High (US$)
- --------------------- -------------- ---------------
July 30, 2002 1.5000 2.0400
August 30, 2002 1.4000 1.7400
September 30, 2002 1.5500 2.0000
October 30, 2002 1.3300 1.6500
November 30, 2002 1.2500 1.5400
December 31, 2002 1.0200 1.4500
On December 31, 2002, the closing price of the Common Shares as quoted on
the AMEX was US$1.41. At that date, there were 11,611,099 Common Shares issued
and outstanding.
ITEM 10 - ADDITIONAL INFORMATION
Articles of Incorporation
The Company's Amended and Restated Articles of Incorporation provide that
the Company is to engage in any lawful act or activity for which companies may
now or hereafter be organised under the Liberian Business Corporation Act, as
specifically but not exclusively outlined in Article THIRD of the Company's
Articles of Incorporation.
Material Contracts
The following is a summary of our material contracts. It is qualified in
its entirety by reference to the full text of the actual documents, which govern
the transactions we describe.
In June 2002 we borrowed $5.7 million for working capital purposes. This
loan is secured by mortgages on the vessels owned by our subsidiaries Becalm
Shipping Co. Ltd and Madlex Shipping Co. Ltd.
In October 2002 we borrowed $5.5 million to partly finance the acquisition
cost of vessel Lady and for working capital purposes. This loan is secured by
mortgages on the vessels owned by our subsidiaries Tortola Shipping Co. Ltd.,
Storler Shipping Co. Ltd. and Centel Shipping Co. Ltd.
In March 2002 we borrowed $4 million for general investment purposes.
Directors
The Board of Directors of the Company consists of four (4) directors and it
is unclassified. According to the amended Article SIXTH (2)(i) of the Company
the Board shall consist of such number of directors, not less than three (3) and
no more than nine (9), as shall be determined from time to time by the Board of
Directors as provided in the By-Laws or by vote of the Shareholders. The Board
may create classes of Directors any time it deems such an act appropriate, amend
the Bylaws to implement the same and any vacancies created by such action may be
filled by way of a majority vote of the then incumbent directors until the next
succeeding Annual General Meeting of the Company's Shareholders. Shareholders
may change the number of directors or the quorum requirements for meeting of the
Board of Directors by the affirmative vote of the holders of Common Shares
representing at least two thirds of the total number of votes which may be cast
at any meeting of shareholders, as calculated pursuant to Article FIFTH of the
Company entitled to vote thereon. At each Annual General Meeting of the
Shareholders of the Corporation, the successors of the directors shall be
elected to hold office for a term expiring as of the next succeeding Annual
general Meeting.
The Company has both common shares and Class B shares. The holders of the
Common Shares are entitled to one vote per share on each matter requiring the
approval of the holders of Common Shares of the Company, whether pursuant to the
Articles of Incorporation of the Company, its Bylaws, the Liberian Business
Corporation Act or otherwise. The holders of Class B shares are entitled to ten
votes per Class B share. The Board of Directors shall have the fullest authority
permitted by law to provide by resolution for any voting powers, designations,
preferences and relative, participating, optional or other rights of and any
qualifications, limitations or restrictions on the preferred stock of the
Company.
The Board of Directors is to fix the date and time of the annual general
meeting or other special meeting of shareholders of the Company, after notice of
such meeting is given to each shareholder of record not less than 15 and not
more than 60 days before the date of such meeting. The presence in person or by
proxy of shareholders entitled to cast one-third of the total number of votes
shall constitute a quorum for the transaction of business at any such meeting.
Exchange Controls
Not applicable.
Taxation
The Company is incorporated in the Republic of Liberia. The Company is not
subject to income taxation under the laws of the Republic of Liberia. There is
no treaty relating to taxation between the Republic of Liberia and the United
States.
U.S. HOLDERS OF NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
TAX CONSEQUENCES TO THEM OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF
SHARES, AS WELL AS ANY APPLICABLE FOREIGN, STATE OR LOCAL TAX LAWS OR ESTATE OR
GIFT TAX CONSIDERATIONS.
Documents on Display
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended. In accordance with these requirements we file reports
and other information with the SEC. These materials, including this annual
report and the accompanying exhibits, may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549. You may obtain information on the operation
of the public reference room by calling 1 (800) SEC-0330, and you may obtain
copies at prescribed rates from the Public Reference Section of the Commission
at its principal office in Washington, D.C. 20549. The SEC maintains a website
(http://www.sec.gov) that contains reports, proxy and information statements and
other information that we and other registrants have filed electronically with
the SEC. In addition, documents referred to in this annual report may be
inspected at our headquarters at Par La Ville Place, 14 Par La Ville Road,
Hamilton HM JX, Bermuda.
ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Foreign Currency Fluctuation
All of the trading fleet's revenues are in U.S. dollars. Approximately 90%
of the Trading Fleet's total expenses are paid in U.S. dollars, with the
remaining 10% being paid in Euros. The Company does not hedge its exposure to
foreign currency fluctuation. For accounting purposes, expenses incurred in
Euros are translated into U.S. dollars at the exchange rate prevailing on the
date of each transaction.
Inflation
Although inflation has had a moderate impact on the Trading Fleet's
operating and voyage expenses in recent years, management does not consider
inflation to be a significant risk to operating or voyage costs in the current
economic environment. However, in the event that inflation becomes a significant
factor in the global economy, inflationary pressures would result in increased
operating, voyage and financing costs.
Interest Rate Fluctuation
The shipping industry is a capital intensive industry, requiring
significant amounts of investment. Much of this investment is provided in the
form of long-term debt. Our debt usually contains interest rates that fluctuate
with the financial markets. Increasing interest rates could adversely impact
future earnings.
Our interest expense is affected by changes in the general level of
interest rates, particularly LIBOR. As an indication of the extent of our
sensitivity to interest rate changes, an increase of 1% would have decreased our
net income and cash flows in the current year by approximately $0.19 million
based upon our debt level at December 31, 2002. The following table sets forth
our sensitivity to a 1% increase in LIBOR over the next five years on the same
basis
Net difference in Earnings and Cash Flows:
Year Amount
- ---- ------
2003 $0.12 million
2004 $0.08 million
2005 $0.03 million
2006 $0.00 million
2007 $0.00 million
ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable
ITEM 13 - DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None
ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
None
ITEM 15 - CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation
of the Company's disclosure controls and procedures pursuant to Exchange
Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective in alerting them timely to material
information relating to the Company required to be included in the
Company's periodic SEC filings.
(b) Changes in Internal Controls
There have been no significant changes in our internal controls or in other
factors that could have significantly affected those controls subsequent to
the date of our most recent evaluation of internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Although we believe our pre-existing disclosure controls and procedures and
internal controls were adequate to enable us to comply with our disclosure
obligations, as a result of such review we intend to implement changes,
primarily to formalize and document procedures already in place. You should
note that the design and operation of any system of controls and procedures
is based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions,
regardless of how remote.
Item 16.
Not applicable.
ITEM 17 - FINANCIAL STATEMENTS
See Item 18
ITEM 18 - FINANCIAL STATEMENTS
See pages F-1 to F-24
EXCEL MARITIME CARRIERS LTD.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL
STATEMENTS
AS OF DECEMBER 31, 2001 AND 2002
EXCEL MARITIME CARRIERS LTD. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Ernst & Young, Independent Auditors (2002)............ F-2
Report of Arthur Andersen, Independent Auditors (2000, 2001).... F-3
Consolidated Balance Sheets as of December 31, 2001 and 2002.... F-4
Consolidated Statements of Income for the years ended
December 31, 2000, 2001 and 2002................................ F-5
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2000, 2001, and 2002................... F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 2001 and 2002................................ F-7
Notes to Consolidated Financial Statements...................... F-8
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
Excel Maritime Carriers Ltd and Subsidiaries
We have audited the accompanying consolidated balance sheet of EXCEL MARITIME
CARRIERS LTD. AND SUBSIDIARIES (the "Company"), a Liberian corporation, as of
December 31, 2002, and the related consolidated statement of income,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The consolidated financial statements of the Company as of December
31, 2001 and 2000 and for the years then ended were audited by other auditors
who have ceased operations as a foreign associated firm of the Securities and
Exchange Commission Practice Section of the American Institute of Certificate
Public Accountants. Those auditors expressed an unqualified opinion on those
financial statements in their report dated March 26, 2002.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of EXCEL MARITIME
CARRIERS LTD. and its subsidiaries at December 31, 2002 and the consolidated
results of their operations and their cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States.
Athens, Greece,
March 31, 2003
The audit report of Arthur Andersen, our former independent public accountants,
which is set forth below, is included in this Annual Report on Form 20-F for
purposes of including the opinion of Arthur Andersen on our financial statements
for the year ended December 31, 2001.
The audit report set forth below is a copy of the audit report dated March 26,
2002, rendered by Arthur Andersen that was included in our Annual Report on Form
20-F for 2002 filed on July 1, 2002. We are including this copy of the March 26,
2002, Arthur Andersen audit report pursuant to Rule 2-02(e) of Regulation S-X
under the Securities Exchange Act of 1934. Your ability to assert claims against
Arthur Andersen based on its report may be limited. This audit report has not
been reissued by Arthur Andersen in connection with this filing of Form 20-F.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO:
EXCEL MARITIME CARRIERS LTD.
We have audited the accompanying consolidated balance sheets of EXCEL MARITIME
CARRIERS LTD. and subsidiaries, (`Company') as of December 31, 2000 and 2001,
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 2001. These
financial statements, as revised for the year ended December 31, 2000 (see Note
2), are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EXCEL MARITIME CARRIERS LTD.
and subsidiaries as of December 31, 2000 and 2001 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with United States generally accepted
accounting principles.
Athens, Greece,
March 26, 2002
EXCEL MARITIME CARRIERS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2002
(Expressed in thousands of U.S. Dollars - except per share data)
ASSETS 2001 2002
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 10,131 $ 1,728
........ ........
........ ........
Restricted cash 853 221
........ ........
Accounts receivable-
Trade 505 490
Loan to related party (Note 3) 300 -
Other 105 63
-------- --------
910 553
........ ........
Investments in affiliates, net of provision (Note 6) 29,598 -
Inventories 306 572
Prepayments and other 110 83
-------- --------
Total current assets 41,908 3,157
........ ........
FIXED ASSETS:
Vessels' cost (Notes 3, 4 and 7) 13,203 18,611
Accumulated depreciation (Note 4) (1,405) (2,023)
-------- --------
Net book value 11,798 16,588
-------- --------
Total fixed assets 11,798 16,588
........ ........
OTHER NON CURRENT ASSETS:
Goodwill (Note 1) 400 400
Deferred charges, net of amortization of $ 2,080 and $ 2,776, at
December 31, 2001 and 2002, respectively (Note 5) 1,359 1,290
........ ........
Total assets $ 55,465 $ 21,435
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 7) 23,217 4,040
........ ........
Accounts payable-
Trade 2,575 1,316
Other 150 104
-------- --------
2,725 1,420
........ ........
Unearned revenue 30 -
Accrued bank interest 29 94
Accrued liabilities 487 342
-------- --------
Total current liabilities 26,488 5,896
........ ........
LONG-TERM DEBT, net of current portion (Note 7) - 10,090
........ ........
CONTINGENCIES (Note 9) - -
........ ........
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.01 par value; 5,000,000 shares authorised, none issued - -
Common Stock, $0.01 par value; 49,000,000 A Class shares and 1,000,000 B
Class shares authorised; 11,496,153 A Class shares and 114,946 B Class shares,
issued and outstanding at December 31, 2001 and 2002, respectively (Notes 8 and 12) 116 116
Additional paid-in capital 12,086 12,087
Accumulated other comprehensive loss (1,502) -
Retained earnings/(accumulated deficit) 18,542 (6,567)
-------- --------
29,242 5,636
........ ........
Less: Treasury stock (128,378 and 77,350 A Class shares and 574 B Class shares at
December 31, 2001 and 2002, respectively (Note 8) (265) (187)
-------- --------
--------
Total stockholders' equity 28,977 5,449
........ ........
Total liabilities and stockholders' equity $ 55,465 $ 21,435
======== ========
The accompanying notes are an integral part of these consolidated balance sheets.
EXCEL MARITIME CARRIERS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
(Expressed in thousands of U.S. Dollars - except per share data)
2000 2001 2002
------------ ------------ -----------
REVENUES:
Revenue from vessels $ 32,204 $ 25,938 $ 15,569
Commissions (1,544) (1,300) (825)
------------ ------------ -----------
Revenue from vessels, net 30,660 24,638 14,744
Revenue from managing vessels (Note 1d) - 584 385
------------ ------------ -----------
Revenue from operations 30,660 25,222 15,129
............ ............ ...........
EXPENSES:
Voyage expenses 10,215 9,656 6,151
Vessel operating expenses (Note 11) 9,058 6,849 5,354
Depreciation and amortization (Notes 4 and 5) 932 1,419 1,080
General and administrative expenses
Management fees (Notes 1 and 3) 1,181 788 225
Management company's administrative expenses (Note 1) - 815 1,146
Other 166 277 104
------------ ------------ -----------
21,552 19,804 14,060
------------ ----------- ------------
Income from operations 9,108 5,418 1,069
............ ............ ...........
OTHER INCOME (EXPENSES):
Equity on earnings of an affiliate (Note 6) 3,300 11,440 -
Provision for loss on sale of subsidiary (Note 6) - (9,300) -
Gain from sale of subsidiary (Notes 1c and 6) - - 108
Interest and finance costs (Notes 5 and 7) (3,315) (1,799) (728)
Interest income 489 377 59
Foreign currency (losses) gains 25 1,165 (44)
Gain (Loss) on sale of vessels (Notes 4 and 10) 289 (423) 569
Other, net 162 55 56
------------ ------------ -----------
Total other income (expenses), net 950 1,515 20
............ ............ ...........
Net Income $ 10,058 $ 6,933 $ 1,089
============ ============ ===========
Earnings per share, basic and diluted (Note 12) $ 0.87 $ 0.60 $ 0.09
============ ============ ===========
Weighted average numbers of shares, basic and diluted 11,611,099 11,514,950 11,550,984
=========== ============ ===========
The accompanying notes are an integral part of these consolidated statements.
EXCEL MARITIME CARRIERS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
(Expressed in thousands of U.S. Dollars - except per share data)
Capital Stock Retained Accumulated
------------- Additional Earnings Other
Comprehensive Class A Class B Paid-in (Accumulated Comprehensive
Income Shares Shares Total Capital Deficit) Income Total
------------- ------- --------- ------- -------- ---------- ------------- ------
BALANCE, December 31, 1999 115 1 116 12,086 1,551 - 13,753
- - 2000 net income 10,058 - - - - 10,058 - 10,058
- - Currency translation adjustments 20 - - - - - 20 20
-------
- - Comprehensive Income 10,078
======= ------- ------- ------- --------- --------- -------- ---------
BALANCE, December 31, 2000 (as revised) 115 1 116 12,086 11,609 20 23,831
- - 2001 net income 6,933 - - - - 6,933 - 6,933
- - Currency translation adjustments (1,522) - - - - - (1,522) (1,522)
-------
- - Comprehensive Income 5,411
======= -------- ------- ------- --------- --------- -------- ----------
BALANCE, December 31, 2001 115 1 116 12,086 18,542 (1,502) 29,242
- - Cumulative translation adjustments relating to (1,502) - - - - (1,502) 1,502 -
subsidiary disposed of
- - Dividends paid ($ 2.15 per share) - - - - - (24,696) - (24,696)
- - Sale of treasury stock - - - - 1 - - 1
- - 2002 net income 1,089 - - - - 1,089 - 1,089
-------
- - Comprehensive Income (413)
======= -------- ------- ------- --------- --------- -------- ---------
BALANCE, December 31, 2002 115 1 116 12,087 (6,567) - 5,636
======== ======= ======= ========= ========= ======== =========
The accompanying notes are an integral part of these consolidated statements.
EXCEL MARITIME CARRIERS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
(Expressed in thousands of U.S. Dollars)
2000 2001 2002
------------ ----------- ------------
Cash Flows from Operating Activities:
Net income 10,058 6,933 1,089
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of an affiliate (3,300) (10,288) 0
Provision for loss on sale of subsidiary 0 9,300 0
Depreciation and amortization 2,020 1,561 1,314
(Gain) Loss on sale of vessels (289) 423 (569)
Interest expense 2,177 1,633 449
Interest income (489) (377) (59)
(Increase) Decrease in:
Accounts receivable (382) 1,962 57
Inventories (32) 478 (266)
Management company (334) 268 0
Prepayments and other (193) 244 25
Increase (Decrease) in:
Accounts payable 545 (223) (1,305)
Accrued liabilities (267) 39 (145)
Unearned revenue 38 (111) (30)
Payments for dry docking and special survey costs (1,773) 0 (497)
Interest paid (1,575) (2,302) (382)
------------ ----------- ------------
Net Cash (used in) provided by Operating Activities 6,204 9,540 (319)
............ ........... ............
Cash Flows from Investing Activities:
Vessel acquisitions and/or improvements 0 0 (5,934)
Proceeds from sale of vessels, net 992 4,068 1,096
Proceeds from sale of subsidiary 0 0 21,200
Disposal of subsidiary, net of cash disposed of 0 0 (4,666)
Payment for investments in affiliates (23,461) (3,351) 0
Goodwill on acquisition of Maryville 0 (400) 0
Loan to a related party 0 (300) 300
Decrease (increase) in restricted cash (203) (650) 632
Interest received 465 401 59
------------ ----------- ------------
Net Cash provided by (used in) Investing Activities (22,207) (232) 12,687
............ ........... ............
Cash Flows from Financing Activities:
Net change in short-term borrowings (84) 0 0
Proceeds from long-term debt 52,505 14,199 18,289
Repayment of sellers loan (2,800) 0 0
Payment of long-term debt 0 (13,242) (4,159)
Payment of sellers credit (1,500) (500) 0
Repayment of long-term debt (35,695) 0 (10,154)
Dividends paid 0 0 (24,696)
Treasury stock 0 (265) 78
Gain on sale of treasury stock 0 0 1
Financing costs (1,305) (185) (130)
------------ ----------- ------------
Net Cash (used in) provided by Financing Activities 11,121 7 (20,771)
............ ........... ............
Net (decrease) increase in cash and cash equivalents (4,882) 9,315 (8,403)
Cash and cash equivalents at beginning of year 5,698 816 10,131
------------ ----------- ------------
Cash and cash equivalents at end of year 816 10,131 1,728
============ =========== ============
The accompanying notes are an integral part of these consolidated statements.
EXCEL MARITIME CARRIERS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2002
(Expressed in thousands of United States Dollars - except per share data, unless
otherwise stated)
1. BASIS OF PRESENTATION AND GENERAL INFORMATION:
The accompanying consolidated financial statements include the accounts of
Excel Maritime Carriers Ltd. (the "Company") and its wholly owned
subsidiaries Maryville Maritime Inc., a Liberian Corporation acquired on
March 31, 2001, American Investors Co. a Liberian Corporation incorporated
on March 2, 2000 (sold in February 2002 - Note 6), and Point Holdings Ltd.,
a Liberian Corporation incorporated on February 17, 1998, owner of the
following ship-owning companies (all registered in Cyprus with the
exception of Fiorela Navigation Ltd. which is registered in Malta):
(a) Ship-owning companies with vessels in operation at December 31, 2002:
Vessel's Vessel
Owning Company Name DWT LWT Acquired on
-------------- ------ --- --- -----------
1. Becalm Shipping Co. Ltd. Fighting Lady 141,103 21,161 May 28, 1999
2. Tortola Shipping Co. Ltd. Lucky Lady 27,422 6,357 May 13, 1999
3. Storler Shipping Co. Ltd. Petalis 35,982 8,400 April 23, 1999
4. Madlex Shipping Co. Ltd Almar I 107,140 18,051 June 4, 1999
5. Centel Shipping Co. Ltd Lady 41,090 7,626 October 31, 2002
------- ------
352,737 61,595
======= ======
(b) Ship-owning companies with vessels sold:
Vessel
-------------------------
Vessel's
Owning Company Name DWT Acquired on Sold on
-------------- -------- --- ----------- -------
6. Arotra Marine Co. Ltd. Holy Island 24,525 June 16, 1999 January 3, 2002
7. Fiorela Navigation Ltd. Alex Stream 140,437 March 11, 1999 July 2, 2001
8. Acon Shipping Co. Ltd. Evan 26,499 April 6, 1999 November 2, 2000
The vessels Fighting Lady and Lucky Lady were acquired through Memoranda of
Agreement concluded between the vessels previous owners and the newly
established 100% subsidiaries of Point Holdings Ltd. (Becalm Shipping Co.
Ltd. and Tortola Shipping Co. Ltd.).
At December 31, 2002 all vessels in operation (bulk carriers) were flying
the Cyprus flag.
(c) American Investors Co.: During 2000 the Company, through its wholly
owned subsidiary American Investors Co., acquired the 24.99% of the
issued shares of A/S Dampshkibsselskabet Torm ("Torm"), a Danish
shipowning and operating company, through the Copenhagen Stock
Exchange, where Torm is listed. During 2001 the company increased its
interest to 27.78%. On February 7, 2002 American Investors was sold to
a Liberian corporation. The purchaser acquired the total of the issued
and outstanding capital stock consisting of 500 shares for a total
consideration of $ 21,200. Such consideration was less than the
American Investors' book value by approximately $ 9,300, for which a
provision was accounted for in the accompanying 2001 consolidated
financial statements.
(d) Maryville Maritime Inc.: On March 31, 2001 the Company acquired the
shares of Maryville Maritime Inc., ("Maryville") a ship management
company established under the laws of Liberia on August 9, 1983. The
Company accounted for the acquisition under the purchase method of
accounting. The consideration totaled $ 630, of which $ 400 was the
net purchase price and $ 230 was the value for the cash, securities
etc., The $ 400 is goodwill arising on the acquisition and is
reflected separately in the accompanying consolidated balance sheets.
In addition, Maryville provides shipping services to non-Company
vessels at a fixed monthly fee per vessel plus a commission of 1.25%
on certain freight and hires collected. Such fees for 2001 and 2002
totaled $ 584 and $ 385 respectively and are separately reflected in
the accompanying consolidated statements of income. The fees charged
by Maryville for the management of the Company's fleet (under a
subcontract with Excel Management Ltd. - Note 3), are eliminated for
consolidation purposes, whereas its general and administrative
expenses are disclosed separately in the accompanying consolidated
statements of income.
Gross revenues for 2000, 2001 and 2002 include revenues deriving from
charter agreements with significant charterers, as follows (in percentages
of total gross revenues):
Charterer 2000 2001 2002
--------- ---- ---- ----
ILVA 14% 14% -
Coeclerici Transport Ltd. - - 12%
ADM Shipping Co. - - 12%
Alfred C. Toepfer - - 12%
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Principles of Consolidation: The accompanying consolidated financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States and include in each of the
three years in the period ended December 31, 2002, the accounts of
Excel Maritime Carriers Ltd. and its wholly-owned subsidiaries
referred to in Note 1 above.
(b) Use of Estimates: The preparation of consolidated financial statements
in conformity with the accounting principles generally accepted in the
United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(c) Foreign Currency Translation - Other Comprehensive income: The
functional currency of the Company is the U.S. Dollar because the
Company's vessels operate in international shipping markets, which
utilize the U.S. Dollar as the functional currency. The Company's
books of accounts are maintained in U.S. Dollars. Transactions
involving other currencies during the year are converted into U.S.
Dollars using the exchange rates in effect at the time of the
transactions. At the balance sheet dates, monetary assets and
liabilities, which are denominated in other currencies, are translated
to reflect the current exchange rates. Resulting gains or losses are
reflected separately in the accompanying consolidated statements of
income.
The functional currency of A/S Dampshkibsselskabet Torm ("Torm") the
affiliate in which the Company had a participation interest of 27.78%
is the Danish Kroner. In applying the equity method of accounting, the
accounts of Torm were translated into U.S. dollars using the current
rate method. Cumulative translation gains and losses are reported as
cumulative translation adjustment in "Accumulated Other Comprehensive
Income", a separate component of shareholders' equity. Transaction
gains or losses are reported in the consolidated statements of
operations.
(d) Cash and Cash Equivalents: The Company considers highly liquid
investments such as time deposits and certificates of deposit with
original maturities of three months or less to be cash equivalents.
Restricted cash relates to deposits with a bank, which are used to pay
the current loan installments. The funds can only be used for the
purposes of loan repayment.
(e) Accounts Receivable - Trade: The amount shown as Accounts Receivable -
Trade at each balance sheet date, includes estimated recoveries from
charterers for hire, freight and demurrage billings, net of a
provision for doubtful accounts, as required.
(f) Insurance Claims: Insurance claims included in Accounts Receivable -
Other, at each balance sheet date, consist of claims submitted and/or
claims being in the process of compilation or submission (claims
pending). They are recorded on the accrual basis and represent the
claimable expenses, net of deductibles, incurred through December 31
of each year, which are expected to be recovered from insurance
companies. Any remaining costs to complete the claims are included in
accrued liabilities. The classification of insurance claims into
current and non-current assets is based on management's expectations
as to their collection dates.
(g) Inventories: Inventories consist mainly of bunkers and lubricants and
are stated at the lower of cost or market value. The cost is
determined by the first-in, first-out method.
(h) Vessels Cost: Vessels are stated at cost, which consists of the
original purchase price and any material expenses incurred upon
acquisition. Subsequent expenditures for conversions and major
improvements are also capitalized when they appreciably extend the
life, increase the earning capacity or improve the efficiency or
safety of the vessel, otherwise these are charged to expenses as
incurred.
(i) Impairment of Long-Lived Assets: Management evaluates the carrying
amounts and periods over which long-lived assets are depreciated to
determine if events have occurred which would require modification to
their carrying values or useful lives. In evaluating the carrying
values of long-lived assets, management reviews valuations performed
by independent marine valuers and compares this to the vessels
carrying value. Should the valuation suggest potential impairment,
management determines undiscounted projected net operating cash flows
for each vessel and compares it to the vessel carrying value. In the
event that impairment occurs, a charge is recorded by comparing the
asset's carrying value to the estimated fair value. The review of the
carrying amount for each of the Company's vessels, as of December 31,
2002 indicated that no impairment loss should be recognized.
(j) Vessels Depreciation: The cost of the Company's vessels is depreciated
on a straight-line basis over their estimated useful lives
(twenty-eight years for bulk vessels and thirty years for tanker
vessels). In computing vessels' depreciation, the estimated salvage
value of the vessel is also taken into consideration.
(k) Accounting for Investments: The Company's investments in
unconsolidated (20% - 50%) companies over which the Company exercises
significant influence are accounted for using the equity method. Under
this method the investment is carried at cost, plus or minus the
Company's equity in all increases and decreases in the investee's net
assets after the date of acquisition.
(l) Accounting for Dry-docking and Special Survey Costs: The Company
follows the deferral method of accounting for dry-docking and special
survey costs whereby actual costs incurred are deferred and are
amortized over the period through the date the next dry-docking or
special survey becomes due. Unamortized costs upon the event of a
vessel sale are included in the gain or loss on sale of that vessel
(Note 10).
(m) Loan Fees: Fees incurred for obtaining new loans or refinancing
existing ones are deferred and amortized over the loans' respective
repayment periods. Fees relating to loans repaid or refinanced are
expensed in the period the repayment or refinancing is made.
(n) Accounting for P&I Back Calls: The vessels' Protection and Indemnity
(P&I) Club insurance is subject to additional premiums referred to as
back calls or supplemental calls, and are accounted for on the
accruals basis.
(o) Pension and Retirement Benefit Obligations - Crew: The ship-owning
companies included in the consolidation, employ the crew on board,
under short-term contracts (usually up to nine months) and
accordingly, they are not liable for any pension or post retirement
benefits.
(p) Accounting for Revenue and Expenses: Revenues are generated from
freight billings and time charters. Time charter revenues are recorded
over the term of the charter as service is provided. Under a voyage
charter the revenues and associated voyage costs are recognized
rateably over the duration of the voyage. The operating results of
voyages in progress at a reporting date are estimated and recognized
pro-rata on a per day basis. Probable losses on voyages are provided
for in full at the time such losses can be estimated. Vessel operating
expenses are accounted for on the accrual basis. Unearned revenue
represents revenue applicable to periods after December 31 of each
year.
(q) Repairs and Maintenance: All repair and maintenance expenses,
including major overhauling and underwater inspection expenses are
charged against income in the year incurred. Such costs, totaled $
2,298, $ 1,390 and $ 1,207, for 2000, 2001 and 2002, respectively and
are included in vessel operating expenses in the accompanying
consolidated statements of income.
(r) Collective Bargaining Agreements: Substantially all ship crewmembers
are subject to collective bargaining agreements. Such agreements
usually expire within one year; however, management believes there
will be a continuation of acceptable labor relationships.
(s) Earnings per Share: Basic earnings per share are computed by dividing
net income by the weighted average number of common shares outstanding
during the year. Diluted earnings per share reflect the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised. There were no dilutive securities
outstanding during the years presented.
(t) Segmental Reporting: The Company reports financial information and
evaluates its operations by charter revenues and not by the length of
ship employment for its customers, i.e., spot or time charters. The
Company does not have discrete financial information to evaluate the
operating results for each such type of charter. Although revenue can
be identified for these types of charters, management cannot and does
not identify expenses, profitability or other financial information
for these charters. As a result, management, including the chief
operating decision maker, review operating results solely by revenue
per day and operating results of the fleet and thus the Company has
determined that it operates under one reportable segment.
(u) Goodwill: Goodwill is the excess of the purchase price over the fair
value of net identifiable assets acquired in business combinations
accounted for as a purchase. With the adoption of SFAS No. 142 for the
financial statements for the year ended December 31, 2001, no
adjustment was required to previously recorded amounts. The Company
does not amortize goodwill and instead tests it for impairment at
least annually. The goodwill impairment test is a two-step process
that requires goodwill to be allocated to reporting units. In the
first step, the fair value of the reporting unit is compared to the
carrying value of the reporting unit, including goodwill. If the fair
value of the reporting unit is less than the carrying value of the
reporting unit, goodwill impairment may exist, and the second step of
the test is performed. In the second step, the implied fair value of
the goodwill is compared to the carrying value of the goodwill and an
impairment loss is recognized to the extent that the carrying value of
the goodwill exceeds its implied fair value. The Company has completed
the first step of the goodwill impairment test. Since the carrying
value of the Company's reporting unit did not exceed its fair value,
no goodwill impairment charges arose upon the adoption of SFAS No.
142. An impairment assessment was also conducted at 31 December 2002,
no impairment was indicated.
(v) Derivative Financial Instruments: SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended establishes
accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value, with changes in the derivatives'
fair value recognized currently in earnings unless specific hedge
accounting criteria are met. SFAS No. 133 as amended by SFAS No. 138,
is effective for fiscal years beginning after June 15, 2000 and cannot
be applied retroactively. During fiscal years 2000, 2001 and 2002, the
Company did not engage in any transaction with derivative instruments
or have any hedging activities.
(w) Recently Issued Accounting Standards:
In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS 143, "Accounting for Asset Retirement Obligations". SFAS 143
relates to financial accounting and reporting requirements associated
with the retirement of tangible long-lived assets and the associated
asset retirement costs. The statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. The
management of the Company does not believe that the adoption of this
statement will have a material effect on the Company's results of
operations and financial position.
SFAS No. 145, In April 2002, the FASB issued SFAS No. 145, "Rescission
of FASB Statements No. 4, 44, Amendment of FASB Statement No. 13, and
Technical Corrections", which is effective for fiscal years beginning
after May 15, 2002. This statement requires most gains and losses from
extinguishment of debt to be presented as a gain or loss from
continuing operations rather than as an extraordinary item. Accounting
Principles Board ("APB") Opinion No. 30, "Reporting the Results of
Operations, Reporting Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" will now be used to classify those gains and losses.
This Statement also amends FASB No. 13, which requires that certain
capital lease modifications be treated as a sale-leaseback
transaction. As of 2002, the Company adopted SFAS No. 145 with respect
to the presentation of gains or losses from continuing operations
rather than as an extraordinary item. The adoption of SFAS No. 145 had
no effect on the Company's consolidated financial statements.
SFAS No. 146, In July 2002, the FASB issued SFAS No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities". SFAS No. 146
replaces EITF Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to exit an Activity
(including Certain Costs Incurred in a Restructuring", and changes the
timing of recognition for certain exit costs associated with
restructuring activities. Under SFAS No. 146 certain exit costs would
be recognized over the period in which the restructuring activities
occur. Currently, exit costs are recognized when the Company commits
to a restructuring plan. SFAS No. 146 is applied prospectively to exit
or disposal activities initiated after December 31, 2002, though early
adoption is allowed. The Company will adopt SFAS No. 146 for exit or
disposal activities that are initiated after December 31, 2002. The
management of the Company does not believe that the adoption of this
statement will have a material effect on the Company's results of
operations and financial position.
FIN 45, In November 2002, the FASB issued FASB interpretation No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others ("FIN 45").
FIN 45 requires that upon issuance of a guarantee, the guarantor must
recognize a liability for the fair value of the obligation it assumes
under the guarantee. The disclosure provisions of FIN 45 are effective
for financial statements of interim and annual periods that end after
December 15, 2002 and, as required by the interpretation, the Company
has adopted the disclosure requirements for the year ended December
31, 2002. The provisions for initial recognition and measurement are
effective on a prospective basis for guarantees that are issued or
modified after December 31, 2002. Adoption of FIN No. 45 is not
expected to have a significant effect on the Company's consolidated
financial statements.
(x) Revision of Previously Issued Financial Statements: The Company
revised the financial statements previously issued for the year ended
December 31, 2000 to adjust the "Equity on Earnings of an Affiliate"
in order to more accurately reflect such income, as the affiliate
(Note 6) prepared, for the first time, financial statements in
conformity with accounting principles generally accepted in the United
States during the last quarter of the year ended December 31, 2001.
The effect of the revision was (a) to decrease "Equity on Earnings of
an Affiliate" by $ 5,117 and net income for the year ended December
31, 2000 by an equal amount and (b) to decrease " accumulated other
comprehensive income" included in stockholders' equity as of December
31, 2000 by $ 291. The effect of the above revision on earnings per
share for the year ended December 31, 2000 was $ (0.44) per share.
(y) Reclassifications of Prior Year Balances: Certain reclassifications
have been made to the 2000 and 2001 consolidated financial statements
to conform to the presentation in the 2002 consolidated financial
statements.
3. TRANSACTIONS WITH RELATED PARTIES:
The operations of the vessels (see Note 1a) are managed by Excel Management
Ltd., an affiliated Liberian corporation formed on January 13, 1998, which
provides the Company vessels with a wide range of shipping services, such
as technical support and maintenance, supervision of new buildings,
insurance consulting, chartering, financial and accounting services all
provided at a fixed monthly fee per vessel. Certain of the services
provided by Excel Management are subcontracted to Maryville. The fees
charged by Excel Management Ltd. (Note 1) in 2000, 2001 and 2002 totaled $
1,181, $ 788 and $ 225 respectively and are separately reflected in the
accompanying consolidated statements of income.
On October 31, 2001 Fiorella Navigation Ltd. (vessel Alex Stream) provided
an unsecured loan facility of $ 300 to Rustica Shipping Ltd. (`Rustica') a
related party holding a vessel under common technical management, for
working capital purposes. On January 22, 2002 Rustica repaid the
outstanding loan in full.
4. VESSELS:
The amounts in the accompanying consolidated financial statements are
analyzed as follows:
Accumulated
Cost Depreciation Net Book Value
------------------ ---------------- ---------------
Vessels' Year Year of
Name Built acquisition 2001 2002 2001 2002 2001 2002
------------------ ----- ------------- --------- -------- ------- ------- ------- -------
Fighting Lady 1983 May 1999 7,526 7,526 1,024 1,420 6,502 6,106
Lucky Lady 1975 May 1999 763 763 - - 763 763
Petalis 1975 April 1999 1,068 1,068 34 47 1,034 1,021
Almar I 1979 June 1999 3,320 3,320 347 481 2,973 2,839
Holy Island 1977 June 1999 526 - - - 526 -
Lady 1985 October 2002 - 5,934 - 75 - 5,859
--------- -------- ------- ------- ------- -------
13,203 18,611 1,405 2,023 11,798 16,588
========= ======== ======= ======= ======= =======
The vessel Evan, which was acquired on April 6, 1999 for $ 703, was sold on
November 2, 2000, at a gain of $ 289 (Note 10).
The vessel Alex Stream, which was acquired on March 11, 1999 for $ 5,000,
was sold on July 2, 2001, at a loss of $ 423 (Note 10).
The vessel Holy Island, which was acquired on June 16, 1999 for $ 526 (at a
cost approximating her estimated salvage value), was sold on January 3,
2002, at a gain of $ 569 (Note 10). The outstanding balance, as of the date
of sale ($ 653), of the loan obtained for the acquisition of the vessel was
repaid in full (Note 7a).
On October 31, 2002 based on the Memorandum of Agreement dated September
27, 2002, the Company acquired the second-hand vessel Lady for
consideration of $ 5,934.
Cost of vessels at December 31, 2001 and 2002 includes capitalized amounts
of $ 161 and $ 191 respectively. There is no capitalized interest.
No depreciation is charged for vessel Lucky Lady as her acquisition cost
approximates her estimated salvage value. Depreciation for 2000, 2001 and
2002 totaled $ 787, $ 667 and $ 618, respectively, and is included in
depreciation and amortization in the accompanying consolidated statements
of income.
5. DEFERRED CHARGES:
The unamortized amounts included in the accompanying consolidated balance
sheets are analyzed as follows:
Dry-docking and Financing
Special Survey Costs Total
------------------ ----------- ------------
Balance, December 31, 2000 1,896 224 2,120
- Additions - 185 185
- Amortization for the year (752) (142) (894)
- Write-offs due to sale of vessel (Note 10) - (52) (52)
------------------ ----------- ------------
Balance, December 31, 2001 1,144 215 1,359
------------------ ----------- ------------
- Additions 735 130 865
- Cost adjustment resulting from discount concluded in (238) - (238)
2002
- Amortization for the year (462) (172) (634)
- Write-offs due to sale of subsidiary (Note 6) - (62) (62)
------------------ ----------- ------------
Balance, December 31, 2002 1,179 111 1,290
================== =========== ============
In 2000 vessels Lucky Lady and Petalis underwent their scheduled survey
works. The final cost of these works was in dispute. During 2002 both the
yard and the ship-owning companies reached a final settlement, resulting in
a discount of $ 238 noted above.
The amortization of financing costs relating to the bank loans discussed in
Note 7 below is included in interest and finance costs in the accompanying
statements of income.
6. INVESTMENTS:
On February 7, 2002 the Company disposed of its subsidiary, American
Investors Co. to a Liberian Corporation (Note 1c). The results of American
Investors Co. until the date of disposal have been included in the
accompanying 2002 consolidated income statement.
Net assets disposed of:
Cash 4,558
Investments, net of provision for loss on sale 29,598
Long term loan (13,064)
-------------
Net assets 21,092
Less Consideration received in cash 21,200
-------------
Gain on sale of subsidiary 108
=============
American Investors Co. incurred a loss of $ 134 for the period from January
1, 2002 to its date of disposal. American Investors Co. paid no income tax
for the period nor is there any tax expense relating to the disposal.
On March 21, 2002 the Company paid cash dividends of $ 24,696 ($ 2.15 per
share), the payment of which was covered by the proceeds of the sale of
American Investors Co. and the balance from Company's cash resources.
From April 25, 2000 up to May 23, 2000, the Company, through its wholly
owned subsidiary American Investors Co. (established under the laws of
Liberia on March 2, 2000), acquired the 24.99% (454,800 shares) of the
issued shares of Torm for a total consideration of $ 23,461 (at an average
price per share of Danish Kroner 405.13) through the Copenhagen Stock
Exchange, where Torm is listed. The Company's investment in Torm
(participation interest of 27.78%) was accounted for under the equity
method. The cash consideration was financed through a mortgaged bank loan
concluded on April 24, 2000 (Note 7), that was fully repaid in November
2000. The Company's president is also one of the seven members of the Board
of Directors of Torm.
At the ordinary General Meeting on April 5, 2001 in Torm, it was decided to
change the denomination of their shares to DKK 10 from DKK 100.
Consequently shareholders were given 10 shares of DKK 10 for each former
share of DKK 100 and 5 shares of DKK 10 for each former share of DKK 50.
During 2001 the Company increased its interest to 27.78% (5,055,300 shares
after the denomination). During 2001 the Company received dividends of DKK
9,7 million ($ 1,152). At December 31, 2001 the quoted market price for
Torm shares was DKK 45.97 per share (DKK 573.20 per share, as of December
31, 2000 prior to the aforementioned denomination). Accordingly, the
aggregate value of the investment in Torm shares based on the quoted market
price per share at December 31, 2000 and 2001 was DKK 260,691,360 ($
32,957) and DKK 232,392,141 ($ 27,633), respectively.
A summary of the Torm's audited balance sheets and statements of income
translated, for convenience purposes, to USD at December 31, 2000 and 2001
and for the years then ended (as reported under Danish GAAP), is set forth
below (in thousand of US Dollars). The exchange rates used to convert the
financial statements from Danish Kroner to US Dollars were 7.91 and 8.41
for 2000 and 2001 respectively.
Balance Sheet 2000 2001
------------- ------------ ---------------
Current Assets 162,893 157,010
Vessels net book/vessels under construction 241,145 228,791
Other fixed assets 6,737 13,571
------------ ---------------
Total assets 410,775 399,372
============ ===============
Share capital and reserves 26,523 29,037
Retained profit 109,891 136,517
------------ ---------------
Shareholders' Equity 136,414 165,554
Provisions 34,587 51,675
Long-term debt 153,658 111,736
Current Liabilities 86,116 70,407`
------------ ---------------
Total liabilities and shareholders' equity 410,775 399,372
============ ===============
Statement of Income 2000 2001
------------------- ------------ ---------------
Net earnings from shipping activities 68,833 85,546
Profit before depreciation 83,307 86,932
Profit before financial items 60,965 73,008
Profit before tax 42,837 63,870
Profit for the year 31,091 44,709
The following reconciliation table summarizes the significant adjustments
to income and shareholders' equity for 2001 and 2000 that were applied to
the financial statements prepared under Danish GAAP in order to comply with
US GAAP (in thousand of US Dollars):
Net Income Shareholders' Equity
------------------------- -----------------------------
2000 2001 2000 2001
----------- --------- ------------- -----------
Profit/shareholders' equity as reported 31,091 44,709 136,414 165,554
under Danish GAAP (restated)
Capital leases (67) 388 (3,319) (2,735)
Sales leaseback transactions (17,240) 2,782 (17,240) (13,433)
Swap transaction of vessels - (1,252) - (1,252)
Provision for repair and capitalization
of docking costs (465) (1,288) (2,232) (3,387)
Treasury Stock - 1,526 - (4,598)
Stock Option/Stock Grant - 83 - -
Dividends - - 4,602 8,656
Unrealized losses on marketable (1,226) 591 - -
securities
Foreign currency translation (4,009) 356 2,097 2,315
Foreign currency contracts (1,591) (4,060) 30 (3,569)
SFAS 133 - continuing impact - (1,672) - (1,672)
SFAS 133 - release from OCI - 918 - -
Tax effect of US GAAP Adjustments 7,380 489 8,643 8,618
----------- --------- ------------- -----------
13,873 43,570 128,995 154,497
----------- --------- ------------- -----------
SFAS 133 - transition adjustment, net of - - - 575
tax effect of 2,072
----------- --------- ------------- -----------
Net income/shareholders' equity in 13,873 43,570 128,995 155,072
accordance with US GAAP =========== ========= ============= ===========
7. LONG - TERM DEBT:
The amounts in the accompanying consolidated balance sheets are analyzed as
follows:
Borrower(s) 2001 2002
----------- ---- ----
(a) Arotra Marine Co. Ltd., Becalm Shipping Co. Ltd., Madlex
Shipping Co. Ltd., Tortola Shipping Co. Ltd., Storler Shipping
Co. Ltd. 10,154 -
(b) American Investors Co. 13,063 -
(c) Becalm Shipping Co. Ltd., Madlex Shipping Co. Ltd. - 5,130
(d) Centel Shipping Co. Ltd., Tortola Shipping Co. Ltd., Storler
Shipping Co. Ltd. - 5,500
(e) Excel Maritime Carriers - 3,500
----------- ----------
Total 23,217 14,130
Less- current portion (23,217) (4,040)
----------- ----------
Long-term portion - 10,090
=========== ==========
(a) In November 2000, the Company obtained a loan of $ 12,410 for working
capital purposes. The loan interest was based on LIBOR plus a spread.
During 2001, the Company paid four installments of $ 564 each, in
compliance with the terms of the loan agreement and the outstanding
balance of the loan at December 31, 2001, totaled $ 10,154. Following
the vessel's sale on January 3, 2002 (Note 4), an additional amount of
$ 653 was paid. In February 2002 the Company paid an installment of $
352 and in March 2002, repaid in full the outstanding loan amount of $
9,149. The interest rate, at December 31, 2001 was 3.92%, whereas the
average interest rates for the year ended December 31, 2001 and for
the period from January 1, 2002 to the repayment date were 6.33% and
3.84% respectively.
(b) On January 18, 2001 the Company obtained a bank loan of Danish Kroner
125 million to refinance the bank loan acquisition of the holding of
454,800 shares in Torm. The loan interest was based on CIBOR plus a
margin. On July 19, 2001 the loan was re-denominated from DKK to USD
at a rate of 8.80305 equating to an equivalent $ 14,199. From the
re-denomination of loan the Company realized an exchange gain of $
1,524, which was included in foreign currency gains (losses) in the
accompanying 2001 consolidated statement of income. In September 2001,
the Company paid $ 1,136 in compliance with the terms of the loan
agreement. As a security, the Company had pledged the shares in favor
of the lending bank. The interest rate at December 31, 2001 was 3.42%.
The average interest rates in DKK and USD for the period from January
18, 2001 to July 19, 2001 and for the period from July 19, 2001 to
year-end were 6.77% and 4.53% respectively. At December 31, 2001 the
outstanding loan amount totaled $ 13,063. On February 7, 2002 the
company holding the investment in Torm was sold (Notes 1 and 6) and
all loan liabilities were transferred to the Purchaser. The average
interest rate for the period from January 1, 2002 and up to the date
of sale was 3.33%.
(c) On June 4, 2002 the Company obtained a bank loan of $ 5,700 for
working capital purposes. During 2002 the Company paid two
installments of $ 285 each, in compliance with the terms of the loan
agreement and the outstanding balance of the loan at December 31, 2002
is repayable in eleven equal consecutive quarterly installments of $
285 each through September 2005 one final installment of $ 295 in
December 2005 and a balloon payment of $ 1,700 payable together with
the last installment. The loan interest is based on LIBOR plus a
spread. The interest rate at December 31, 2002 was 3.44%. The average
interest rate for the period from June 4, 2002 to December 31, 2002
was 3.75%. In March 2003 the Company paid an installment of $ 285 in
compliance with the terms of the loan agreement.
(d) On October 24, 2002 the Company obtained a bank loan of $ 5,500 to
partially finance the acquisition cost of vessel Lady and for working
capital purposes. The balance of the loan is repayable in six
consecutive quarterly installments of $ 330, six consecutive quarterly
installments of $ 250 through October 2005 and a balloon payment of $
2,020 payable together with the last installment. The loan interest is
based on LIBOR plus a spread. The interest rate at December 31, 2002
was 3.42%. The average interest rate for the period from October 24,
2002 to December 31, 2002 was 3.60%. In January 2003 the Company paid
an installment of $ 330 in compliance with the terms of the loan
agreement.
(e) On March 18 and 19, 2002 the Company obtained two unsecured loans of $
7,089 for general investment purposes. During 2002 the Company repaid,
in full, the loan obtained on March 19, 2002 totaling $ 3,070 and an
additional amount of $ 519 relating to the first loan. The outstanding
loan balance at December 31, 2002 is payable in 2003 ($ 1,580) and in
2004 ($ 1,920) according to the loan agreement, as amended. The
interest rate at December 31, 2002 was 3.90%. The average interest
rate for the period from March 18, 2002 to December 31, 2002 was
4.41%.
The loans outstanding at December 31, 2002, are secured as follows:
o First priority mortgage over the Company's vessels.
o Assignments of earnings and insurances of the mortgaged vessels;
o Corporate guarantee.
The loan agreements among others include covenants requiring the borrowers
to obtain the lenders' prior consent in order to incur or issue any
financial indebtedness, additional borrowings, pay dividends, pay
shareholders' loans, sell vessels and assets and change the beneficial
ownership or management of the vessels. Also, the covenants require the
borrowers to maintain a minimum hull value in connection with the vessels'
outstanding loans, insurance coverage of the vessels against all risks and
maintenance of operating bank accounts with minimum balances. The Company
was in compliance with the covenants at December 31, 2002.
The annual principal payments required to be made subsequent to December
31, 2002 are as follows:
Year Amount
---- ------
2003 4,040
2004 4,220
2005 5,870
------
14,130
======
Bank loan interest expense for the years ended December 31, 2000, 2001 and
2002 amounted to $ 2,177, $ 1,633 and $ 449 respectively, and is included
in interest and finance costs in the accompanying consolidated statements
of income.
The range of the average interest rates of the above loans during the three
years ended December 31, 2002 was as follows:
Year ended December 31, 2000 8.09% - 8.75%
Year ended December 31, 2001 4.53% - 6.85%
Year ended December 31, 2002 3.33% - 4.41%
8. CAPITAL STOCK:
At December 31, 2000 and 2001, the Company's issued and outstanding common
stock consisted of 11,496,153, Class A common shares and 114,946, Class B
common shares.
During 2001, the Board of Directors authorized the repurchase of a limited
number of shares by the Company with the primary aim of enhancing share
liquidity and providing guidance to shareholders in valuing their
shareholding. The transactions are based on open market. The Company
repurchased 40,100 Common A shares at a price of $ 3.00 per share through
the market. On March 31, 2001 the Company acquired 88,852 Common A and B
shares with an average price of $ 1.63 per share through the acquisition of
Maryville (Note 1). The aggregate cost of these shares amounting $ 265 is
reflected separately in the accompanying 2001 balance sheet as treasury
stock.
During 2002, the Company sold 51,028 shares through the market. From the
sale of shares the Company realized a gain of $ 1, separately reflected in
the 2002 accompanying consolidated statements of stockholders' equity. The
aggregate cost of the remaining shares amounting to $ 187 is reflected
separately in the accompanying 2002 balance sheet as treasury stock.
9. COMMITMENTS AND CONTINGENCIES:
Various claims, suits, and complaints, including those involving government
regulations and product liability, arise in the ordinary course of the
shipping business. In addition, losses may arise from disputes with
charterers, agents, insurance and other claims with suppliers relating to
the operations of the Company's vessels. Currently, management is not aware
of any such contingent liabilities, which should be disclosed or for which
a provision should be established in the accompanying consolidated
financial statements. The Company accrues for the cost of environmental
liabilities when management becomes aware that a liability is probable and
is able to reasonably estimate the probable exposure. Currently, management
is not aware of any such claims or contingent liabilities, which should be
disclosed or for which a provision should be established in the
accompanying consolidated financial statements. A minimum of up to $ 1
billion of the liabilities associated with the individual vessels actions,
mainly for sea pollution, is covered by the Protection and Indemnity (P+I)
Club insurance.
During 2001, upon the purchase of Maryville (Note 1c), Maryville entered
into a lease agreement for the rental of office premises with an unrelated
party. Operating lease payments for 2001 and 2002 were $ 33 and $ 49
respectively. Future minimum rentals payable under operating leases are as
follows as of 31 December 2002:
Year Amount
---- ------
2003 56
2004 59
2005 60
2006 62
2007 63
-----
Total 300
=====
10. GAIN (LOSS) ON SALE OF VESSELS:
The amounts for gains (losses) on sales of vessels included in the
accompanying 2000, 2001 and 2002 consolidated statements of income are
analyzed as follows:
2000 2001 2002
-------------- ------------- -----------
Sale proceeds, net
-Selling price 1,123 4,503 1,200
-Sale expenses (131) (435) (104)
-------------- ------------- -----------
992 4,068 1,096
-------------- -------------- -----------
Vessels' net book value at the date of sale
-Vessels' acquisition cost (703) (5,000) (527)
-Depreciation up to the date of sale - 561 -
-------------- ------------- -----------
(703) (4,439) (527)
Unamortized financing costs, written-off - (52) -
-------------- ------------- -----------
Net gain (loss) 289 (423) 569
============== ============= ===========
11. INCOME TAXES:
Cyprus and Malta do not impose a tax on international shipping income.
Under the laws of Cyprus and Malta the countries of the companies'
incorporation and vessels' registration, the companies are subject to
registration and tonnage taxes which have been included in vessels'
operating expenses in the accompanying consolidated statements of income.
Pursuant to the Internal Revenue Code of the United States (the "Code"),
U.S. source income from the international operations of ships is generally
exempt from U.S. tax if the company operating the ships meets certain
requirements. Among other things, in order to qualify for this exemption,
the company operating the ships must be incorporated in a country which
grants an equivalent exemption from income taxes to U.S. corporations. All
the company's ship-operating subsidiaries satisfy these initial criteria.
In addition, these companies must be more than 50% owned by individuals who
are residents, as defined, in the countries of incorporation or another
foreign country that grants an equivalent exemption to U.S. corporations.
Subject to proposed regulations becoming finalized in their current form,
the management of the Company believes that by virtue of a special rule
applicable to situations where the ship operating companies are
beneficially owned by a publicly - traded company like the Company, the
second criterion can also be satisfied based on the trading volume and
ownership of the Company's shares, but no assurance can be given that this
will remain so in the future.
Excel is not subject to corporate income taxes on its profits in Liberia
because its income is derived from non-Liberian sources. The Company is not
subject to corporate income tax in other jurisdictions.
12. EARNINGS PER COMMON SHARE
The computation of basic earnings per share is based on the weighted
average number of common shares outstanding during the year. The Company
had no stock options or dilutive securities during the three-year period
ended December 31, 2002.
The components of the denominator for the calculation of basic earnings per
share and diluted earnings per share is as follows:
2000 2001 2002
---- ---- ----
Income (numerator):
Income available to common
shareholders..................... 10,058 6,933 1,089
Shares (denominator):
Weighted average common
shares outstanding - basic..... 11,611,099 11,514,950 11,550,984
Weighted average common
shares outstanding - diluted ... 11,611,099 11,514,950 11,550,984
Basic earnings per common
share............................. $ 0.87 $ 0.60 $0.09
Diluted earnings per common
share............................. $ 0.87 $ 0.60 $0.09
13. FINANCIAL INSTRUMENTS:
The principal financial assets of the Company consist of cash on hand and
at banks and accounts receivable due from charterers. The principal
financial liabilities of the Company consist of long-term bank loans and
accounts payable due to suppliers.
(a) Interest rate risk: The Company's interest rates and long-term loan
repayment terms are described in Note 7.
(b) Concentration of credit risk: Financial instruments, which potentially
subject the Company to significant concentrations of credit risk
consist principally of cash investments and trade accounts receivable.
The Company places its temporary cash investments consisting mostly of
deposits with high credit qualified financial institutions. Credit
risk with respect to trade accounts receivable is generally
diversified due to the large number of entities comprising the
Company's charterer base.
(c) Fair value: The carrying amounts reflected in the accompanying
consolidated balance sheets of financial assets and liabilities
approximate their respective fair values due to the short maturities
of these instruments. The fair values of long-term bank loans
approximate the recorded values, due to their variable interest rates.
ITEM 19 - EXHIBITS
Exhibit
Number Description
------ -----------
99.1 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 of the Chief Executive Officer of the Company.
99.2 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 of the Chief Financial Officer of the Company.
99.3 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 of the Chief Executive Officer of the Company.
99.4 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of the Chief Financial Officer of the Company.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.
Excel Maritime Carriers Ltd.
--------------------------------
(Registrant)
Date June 27, 2003 By /s/ Gabriel Panyotides
---------------- ------------------------------
Gabriel Panayotides
Chief Executive Officer