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, 2003
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.
Class A 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 - 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 harbour
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 harbour provisions of the Private Securities Litigation Reform Act of 1995
and is including this cautionary statement in connection with this safe harbour
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, 1999, 2000, 2001, 2002
and 2003. The following information should be read in conjunction with the
"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, 2003
(All figures in $000, except per share data)
1999 2000 2001 2002 2003
Statement of Income Data:
Revenue from operations $18,617 $30,660 $25,222 $15,129 $25,175
Investment Income (see note below) $0 $3,300 $11,440 $0 $0
Vessel operating & voyage exp $14,109 $19,273 $16,505 $11,505 $12,395
Depreciation and amortisation $624 $932 $1,419 $1,080 $1,548
General and administrative
expenses $1,217 $1,347 $1,880 $1,475 $1,974
Income from operations $2,667 $9,108 $5,418 $1,069 $9,258
Gain (Loss) on sale of vessels -$574 $289 -$423 $569 $0
Other income (expenses). net -$269 -$2,639 -$9,502 -$549 -$613
Net income (1) $1,824 $10,058 $6,933 $1,089 $8,645
Net income per share(2) $0.23 $0.87 $0.60 $0.09 $0.75
Per Share Data
Earnings per share, basic
and diluted $0.23 $0.87 $0.60 $0.09 $0.75
Weighted average number of shares
(thousands) 7,953 11,611 11,515 11,551 11,533
Cash dividends per common share 0.00 0.00 0.00 2.15 0.00
Balance Sheet Data
Current assets $8,801 $5,021 $41,908 $3,157 $5,825
Total assets $27,470 $50,826 $55,465 $21,435 $24,083
Current liabilities $11,517 $15,241 $26,488 $5,896 $4,121
Long-term debt less current
Portion $2,200 $11,754 $0 $10,090 $5,870
Shareholders' equity $13,753 $23,831 $28,977 $5,449 $14,092
(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 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.
(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 dry bulk
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 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 our vessels on a spot charter and time 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, labour 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. 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.
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 and if we cannot
service our debt, we may lose our vessels.
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 may affect our business, results of operations and financial
condition. 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. 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.
Due to the fact that 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 our vessels may increase and decrease depending on the
following factors:
o general economic and market conditions affecting the shipping
industry;
o competition from other shipping companies;
o types and sizes of vessels;
o other modes of transportation;
o cost of newbuildings;
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 our vessels at a time when 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 in 1988 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 drybulk sectors in which we operate. We may
expand our presence in the dry bulk market, as well as the container vessel
market and in accordance with this strategy, we intend to purchase additional
vessels in the open market as market conditions warrant.
Throughout 2003 and as at December 31, 2003, we owned and operated 5 dry
bulk vessels.
NAME TYPE DWT BUILT COUNTRY YARD
Fighting Lady Capesize Bulker 146,313 1983 Korea Hyundai
Almar I Capesize Bulker 107,140 1979 Japan IHI
Lady Handysize Bulker 41,090 1985 Japan Oshima
Petalis Handysize Bulker 35,982 1975 Japan Osaka
Lucky Lady Handysize Bulker 27,422 1975 Japan Hakodate
Total 357,947
In addition to the direct ownership and operation of drybulk vessels, we
believe that ownership of shares in other worldwide national exchange listed
drybulk 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.
Environmental Regulation--International Maritime Organization ("IMO").
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 $600 per
gross ton or $0.5 million per drybulk vessel that is over 300 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.
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, 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.
Environmental Regulation--Other Environmental Initiatives.
The European Union is considering legislation that will affect the
operation of vessels 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.
The International Dry Bulk Shipping Market
Conditions in the bulk market both in terms of capacity and demand remained
positive during 2003. The improvement in the freight market commenced towards
the end of 2002 and continued throughout 2003. Timecharter rates for modern
capesize vessels were $80,600 per day at the end of 2003, $36,900 for panamax
size vessels and $26,200 for handymax size vessels.
On the demand side, China's industrial growth was the main cause for the
strong freight market. In 2003, China's industrial sector grew as much as 16.3%
in contrast to the industrial growth of 1.9% in the OECD countries, 0.2% in the
USA 0.3% in Europe and 2.8% in Japan. China's steel industry increased its
capacity from 219 million tons to 247 million tons, or 13%, which resulted in
its imports of iron ore growing from 112 million tons in 2002 to an estimated
148 million tons in 2003. Although seaborne transportation of grain products
remained stable in 2002 and 2003 the long haul trade from the Atlantic to the
Pacific increased in 2003 due to the drought in Australia, which resulted in
more tonne-miles and increased demand for dry cargo tonnage in 2003. Freight
rates were also affected in 2003 by constant port congestion which impacted
vessel availability. The demand for capesize vessels for coal and iron ore
transports exceeded the supply, which resulted in charterers often forced to use
smaller vessels such as panamax and handymax. Most of the congestion occurred in
the loading ports.
As a whole, seaborne transportation increased by 7% in 2003. This combined
with a lower level of vessel availability caused by congestion and longer
ballast voyages caused an increase in demand for drybulk vessels of
approximately 10% in 2003.
The net supply of new vessels was limited in 2003 with approximately 12.5
million dwt of new tonnage delivered and 4.0 million dwt scrapped. The dry cargo
fleet totaled 292.4 million dwt as at January 1st, 2003. The figure for January
1st 2004 is 300.9 million dwt, equating to a net supply increased of 2.9%.
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 dry bulk
operators. In 2003, we derived approximately 57% of our gross revenues from four
charterers.
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 labor 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 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 Ltd. (1) Liberia
(1) Point Holdings Ltd. 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 estate. 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 2002
and 2003 were $49,000 and $60,000 respectively.
ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Recently Issued Accounting Standards
Recent Statements of Financial Accounting Standards ("SFAS") issued by the
Financial Accounting Standards Board ("FASB") are summarized as follows:
In January 2003, the FASB issued Interpretation No.46 "Consolidation of Variable
Interest Entities, an Interpretation of ARB No.51" (FIN 46). In December 2003,
the FASB modified FIN 46 to make certain technical corrections and address
certain implementation issues that had arisen. FIN 46 addresses when a company
should include in its financial statements the assets, liabilities and
activities of another entity. FIN 46 requires consolidation of a variable
interest entity if the reporting entity is subject to a majority of the risk of
loss from the variable interest entity's activities or entitled to receive a
majority of the variable interest entity's residual returns or both.
FIN 46 was effective immediately for variable interest entities created after
January 31, 2003. The Company will apply FIN 46, as revised, to variable
interest entities created before February 1, 2003 as follows: (i) beginning
January 1, 2004 for structures commonly referred to as special purpose entities
as a cumulative effect of the accounting change as of that date; and (ii) at the
end of the first reporting period in 2004 for other than special purpose
entities.
The adoption of FIN 46 did not have and is not expected to have a material
effect on the Company's results of operations or financial position.
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. If
our estimate of undiscounted future cash flows for any vessel is lower than the
vessel's carrying value, the carrying value is written down to the fair market
value as obtained from 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 ratably 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 vessel operating expenses in voyage and time
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, 2003 Compared to Fiscal Year ended December 31,
2002
Revenues from Vessels
Gross revenues (before deduction of broker's commissions and voyage expenses)
were US$26.1 million in 2003 compared to US$15.6 million in 2002 an increase of
US$10.5 million or 67.3%. This increase was primarily attributable to a 92.5%
increase in the average fleet TCE rate from US$5,787 in 2002 to US$11,140 in
2003, plus an increase of 15.6% in the total number of fleet available days from
1,458 in 2002 to 1,686 in 2003 due to Lady completing a full years trading
(delivered in October 2002) off-set by a total of 139 days for special survey/
dry-dockings.
Voyage Expenses
Voyage Expenses were US$5.9 million in 2003, a decrease of US$0.3 million
or 4.8% compared to US$6.2 million in 2002. This decrease was attributable to
the fleet performing more time charters in 2003 than in 2002.
Vessel Operating Expenses
Vessel Operating Expenses were US$6.5 million in 2003 compared to US$5.4
million in 2002 an increase of US$1.1 million or 20.4%, which was a result of an
increase in the number of operating days from 1,524 in 2002 to 1,825 days in
2003 or a 19.8% increase. As a percentage of net revenue, operating expenses
were 25.8% in 2003 compared to 35.8% in 2002. The decrease was a direct result
of higher revenues from operations which increased to $25.2 million in 2003 from
$15.1 million in 2002 or an increase of 66.9%.
Depreciation and Amortization
The Depreciation and Amortization charge for 2003 was US$1.5 million
compared to US$1.1 million in 2002. The increase is primarily due to the
operation of the vessel Lady for a full year compared to just 61 days in 2002
(the vessel Lady was purchased on October 31, 2002).
General and Administrative Expenses
General and Administrative Expenses for 2003 were $2.0 million compared to $1.5
million in 2002. The increase of $0.5 million reflects mainly the increased cost
of conversion of US$ into Euro to cover Euro administrative expenses within
Maryville Maritime Inc.
Other Income/Expenses
Other Expenses were $0.6 million in 2003 compared to $0 in 2002. This is a
result of a decrease in interest and finance costs of $0.25 million in 2003
offset by no gains in subsidiary or vessel sales amounting to $0.7 million in
2002.
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 1,460 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 2002 as 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.
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 and cash
flows from operations , 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, 2005.
Operating Activities
The net cash from operating activities in 2003 totalled US$8.9 million an
increase of $9.2 million compared to cash used in operations of US$0.3 million
for 2002. In 2003, the increase in cash flow from operations was caused by
several factors including an increase in net income of $7.6 million, decrease in
accounts payable of $0.5 million, $1.0 million for dry-docking costs and US$0.3
million for accounts receivable.
Investing Activities
The net cash used in investing activities in 2003 was $0.6 million compared
to $12.1 million of net cash from investing activities in 2002. The main reasons
for the decrease were due to no acquisition or sales of vessels or disposed
subsidiaries in 2003 and an increase in restricted cash of US$0.6 million in
2003 (US$0 in 2002).
Financing Activities
The net cash used in Financing Activities totalled US$20.8 million in 2002,
compared to a US$6.0 million used in 2003. The decrease of approximately US$14.8
million consists mainly of the US$18.3 proceeds from long term debts less $14.3
million for repayment and $24.7 million for dividends in 2002 while in 2003 only
$6 million was used to repay long term debt.
Summary of Contractual Obligations
The following table sets out our contractual obligations as of December 31,
2003.
Payments due by period
----------------------
Total 2004 2005 2006 2007 2008
& thereafter
----- ---- ---- ---- ---- ----
Long-term debt 8,170 2,300 5,870 0 0 0
Operating leases 350 67 68 70 71 74
------ ----- ----- ----- ----- -----
8,520 2,367 5,938 70 71 74
====== ===== ===== ===== ===== ======
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 49 Chairman, President, Chief
Executive Officer and Director
George Agadakis 51 Vice President, Chief
Operating Officer and Director
Christopher J. Thomas 44 Director/Chief Financial Officer
and Treasurer
Trevor J. Williams 61 Director
Georgina E. Sousa 54 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 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
For the year ended December 31, 2003, the Company paid aggregate Directors
fees and secretarial fees of US$115,988. The executive officers received
aggregate compensation totalling US$239,130 (including pension, taxation,
medical and insurance benefits) from subsidiaries of the Company during the year
ended December 31, 2003. None of the directors or executive officers are
entitled to any termination benefits.
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 2004 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, 2003, we employed 156 employees, consisting of 25
shore-based personnel based in Athens, Greece, and 131 seagoing employees.
Share Ownership
The beneficial interest of our directors and officers in our Common Shares
as of November 17, 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 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 November 17, 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 Common Shares
- ---- ----------------------- ------------------------
Argon S.A. * 5,454,620 46.98%
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 625
Common Shares or 0.01% of the Common Shares outstanding.
As of 11/24/03 there were approximately 240 Holders of EXM shares Class A & B ,
84 Holders of EXM A Class shares only, and 15 holders of EXM B Class shares
only, holding 11,611,099 common shares in total.
(*)Argon S.A. is holding the shares pursuant to a constructive trust in favor of
Starling Trading Co, a corporation, whose sole shareholder is Ms. Ismini
Panayotides, an adult daughter of the Company's Chairman, Mr Panayotides. Ms
Panayotides has no power of voting or disposition of these shares, and disclaims
beneficial ownership of these shares.
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 2001, 2002 and
2003 totalled US$0.8, US$0.2 and US$0.3 million respectively as separately
reflected in the accompanying consolidated statements of income.
ITEM 8 - FINANCIAL INFORMATION
Consolidated Statements and Other Financial Information
See Item 18.
Legal Proceedings
There are currently no material legal proceedings, actions or claims
pending against no brought by the Company. The nature of the Company's business
exposes it to the risk of lawsuits for damages or penalties relating to, among
other things, personal injury, property casualty and environmental
contamination.
ITEM 9 - THE OFFER AND LISTING
The primary trading market for the Common Shares is the American Stock
Exchange ("AMEX"), on which the Common Shares are listed under the symbol "EXM."
The high and low closing prices for the common shares, by year, in 1999,
2000, 2001, 2002 and 2003 were as follows:
For The Year Ended AMEX Low (US$) AMEX High (US$)
- ------------------ -------------- ---------------
December 31, 1999 1.0000 3.0000
December 31, 2000 1.3800 2.4400
December 31, 2001 2.1900 3.5400
December 31, 2002 1.0200 3.5000
December 31, 2003 0.9000 6.8000
The high and low closing prices for the common shares, by quarter, in 2002
and 2003 were as follows:
For The Quarter Ended AMEX Low (US$) AMEX High (US$)
- --------------------- -------------- ---------------
March 31, 2002 3.1900 3.2400
June 30, 2002 1.6400 2.0000
September 30, 2002 1.6100 1.6500
December 31, 2002 1.3100 1.4100
March 31, 2003 1.4000 1.7500
June 30, 2003 1.2600 1.7500
September 30, 2003 0.9000 1.6400
December 31, 2003 1.0900 6.8000
The high and low closing prices for the common shares, by month, over the six
months ended December 31, 2003 were as follows:
For The Six Months
Ended AMEX Low (US$) AMEX High (US$)
- --------------------- -------------- ---------------
July 30, 2003 0.9000 1.6400
August 30, 2003 1.0100 1.2500
September 30, 2003 0.9500 1.2500
October 30, 2003 1.0900 1.5400
November 30, 2003 1.4500 6.8000
December 31, 2003 3.6100 5.6200
On December 31, 2003, the closing price of the Common Shares as quoted on
the AMEX was US$4.84. 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. Such documents are available for inspection at the
offices of the Company upon reasonable request.
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 Class A Shares and Class B shares. The holders of the
Class A 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 one
thousand 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 Risk
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 Risk
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 Risk
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 $0.1 million
based upon our debt level at December 31, 2003. 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
- ---- ------
2004 $0.08 million
2005 $0.03 million
2006 $0.00 million
2007 $0.00 million
2008 $0.00 million
& thereafter
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) Management's Annual Report of Internal Financial Reporting Controls
Not applicable
(c) Attestation Report of E&Y
Not applicable
(d) Changes in Internal Controls
Management is responsible for the establishing and maintaining adequate
internal control over financial reporting.
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.
(a) Audit Committee Financial Expert
In accordance with the rules of the American Stock Exchange, the Company is
not required to have an audit committee until July 31, 2005. The Company
intends to appoint an audit committee in accordance with American Stock
Exchange requirements prior to such deadline.
(b) Code of Ethics
In accordance with the rules of the American Stock Exchange, the Company is
not required to adopt a Code of Ethics until June 1, 2004. The Company
intends to adopt a Code of Ethics in accordance with American Stock
Exchange requirements prior to such deadline.
(c) Principal Accountant Fees and Related Services
During the past two fiscal years, the Company has paid its auditors, Ernst
& Young, the following fees (in Euro):
2003 2002
---- ----
AUDIT FEES Euro 37,800 Euro 18,500
AUDIT RELATED FEES _ _
TAX FEES _ _
ALL OTHER FEES _ _
The above fees included the annual audit review of financial
statements and the work performed by the E & Y Capital Markets Group.
No other extra fee paid for other services neither for taxes.
(d) Exemption from the listing standards for audit committee
Not applicable.
(e) Purchases of Equity Securities by Issuer and Affiliates
Not applicable.
ITEM 17 - FINANCIAL STATEMENTS
See Item 18
ITEM 18 - EXHIBITS
See pages F-1 to F-24
EXCEL MARITIME CARRIERS LTD. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Ernst & Young, Independent Auditors (2002 and 2003)... F-2
Report of Arthur Andersen, Independent Auditors (2001).......... F-3
Consolidated Balance Sheets as of December 31, 2002 and 2003.... F-4
Consolidated Statements of Income for the years ended
December 31, 2001, 2002, and 2003................................ F-5
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2001, 2002, and 2003................... F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2002 and 2003................................ 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 sheets of EXCEL MARITIME
CARRIERS LTD. AND SUBSIDIARIES (the "Company"), a Liberian corporation, as of
December 31, 2003 and 2002, and the related consolidated statements of income,
stockholders' equity and cash flows for the two years 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 audits. The consolidated financial statements of the Company as of December
31, 2001 and for the year 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 audits in accordance with the standards of the Public Company
Accounting Oversight Board (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 audits provide 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, 2003 and 2002 and the
consolidated results of their operations and their cash flows for the two years
then ended, in conformity with U.S. generally accepted accounting principles.
Athens, Greece,
March 26, 2004
The audit report of Arthur Andersen, our former independent auditors, 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
years ended December 31, 2000 and 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 2001 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, 2002 AND 2003
(Expressed in thousands of U.S. Dollars - except per share data)
ASSETS 2002 2003
- ------ ------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 1,949 $ 4,258
............. ............
Accounts receivable-
Trade 490 678
Other 63 236
------------- ------------
553 914
............. ............
Inventories 572 512
Prepayments and other 83 141
------------- ------------
Total current assets 3,157 5,825
............. ............
FIXED ASSETS:
Vessels' cost (Notes 3, 4 and 7) 18,611 18,611
Accumulated depreciation (Note 4) (2,023) (3,016)
------------- ------------
Net book value 16,588 15,595
------------- ------------
Total fixed assets 16,588 15,595
............. ............
OTHER NON CURRENT ASSETS:
Goodwill (Note 1) 400 400
Deferred charges, net (Note 5) 1,290 1,649
Restricted cash - 614
............. ............
Total assets $ 21,435 $ 24,083
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt (Note 7) 4,040 2,300
............. ............
Accounts payable-
Trade 1,316 874
Other 104 60
------------- ------------
1,420 934
............. ............
Accrued liabilities 436 887
------------- ------------
Total current liabilities 5,896 4,121
............. ............
LONG-TERM DEBT, net of current portion (Note 7) 10,090 5,870
............. ............
............. ............
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.01 par value; 5,000,000 shares authorized, none issued - -
Common Stock, $0.01 par value; 49,000,000 A Class shares and 1,000,000 B
Class shares authorized; 11,496,153 A Class shares and 114,946 B Class shares,
issued and outstanding at December 31, 2002 and 2003, respectively (Notes 8 and 12) 116 116
Additional paid-in capital 12,087 12,087
Retained earnings/(accumulated deficit) (6,567) 2,078
------------- ------------
5,636 14,281
............. ............
Less: Treasury stock (77,350 and 78,650 A Class shares and 574 and 588 B Class
shares at December 31, 2002 and2003, respectively (Note 8) (187) (189)
------------- ------------
Total stockholders' equity 5,449 14,092
............. ............
------------- ------------
Total liabilities and stockholders' equity $ 21,435 $ 24,083
============= ============
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, 2001, 2002 AND 2003
(Expressed in thousands of U.S. Dollars - except per share data)
2001 2002 2003
------------- ---------------- --------------
REVENUES:
Revenue from vessels $ 25,938 $ 15,569 $ 26,094
Commissions (1,300) (825) (1,446)
------------- ---------------- --------------
Revenue from vessels, net 24,638 14,744 24,648
Revenue from managing vessels (Note 1d) 584 385 527
------------- ---------------- --------------
Revenue from operations 25,222 15,129 25,175
............. ................ ..............
EXPENSES:
Voyage expenses 9,656 6,151 5,866
Vessel operating expenses (Note 11) 6,849 5,354 6,529
Depreciation (Note 4) 667 618 993
Amortization for dry-docking and special survey (Note 5) 752 462 555
General and administrative expenses 1,880 1,475 1,974
------------- ---------------- --------------
19,804 14,060 15,917
------------- ---------------- --------------
Income from operations 5,418 1,069 9,258
............. ................ ..............
OTHER INCOME (EXPENSES):
Equity on earnings of an affiliate (Note 6) 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) (1,799) (728) (473)
Interest income 377 59 12
Foreign currency (losses) gains 1,165 (44) (58)
Gain (Loss) on sale of vessels (Notes 4 and 10) (423) 569 -
Other, net 55 56 (94)
------------- ---------------- --------------
Total other income (expenses), net 1,515 20 (613)
............. ................ ..............
Net Income $ 6,933 $ 1,089 $ 8,645
============= ================ ==============
Earnings per share, basic and diluted (Note 12) $ 0.60 $ 0.09 $ 0.75
============= ================ ==============
Weighted average numbers of shares, basic and diluted 11,514,950 11,550,984 11,532,725
============= ================ ==============
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, 2001, 2002 AND 2003
(Expressed in thousands of U.S. Dollars - except per share
data)
Capital Stock Retained Accumulated
---------------------------- Additional Earnings/ Other Total
Comprehensive Class A Class B Paid-in Accumulated Comprehensive Stockholders'
Income/(loss) Shares Shares Total Capital Deficit) Income/ (loss) Equity
--------------- ---------- ----------------- ------------ ----------- --------------- -----------
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
- - 2002 net income 1,089 - - - - 1,089 - 1,089
- - Cumulative translation
adjustments relating to
subsidiary dispose (1,502) - - - - (1,502) 1,502 -
- - Dividends paid ($ 2.15
per share) - - - - - (24,696) - (24,696)
- - Issuance of treasury stock - - - - 1 - - 1
--------------
- - Comprehensive Income (413)
============== ------- ------- ----- ------------ ------------ --------------- ------------
BALANCE, December 31, 2002 115 1 116 12,087 (6,567) - 5,636
- - 2003 net income 8,645 - - - - 8,645 - 8,645
--------------
8,645
============== ------- ------- ----- ------------ ------------ --------------- ------------
BALANCE, December 31, 2003 115 1 116 12,087 2,078 - 14,281
======= ======= ===== ============ ============ =============== ============
EXCEL MARITIME CARRIERS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
(Expressed in thousands of U.S. Dollars)
2001 2002 2003
---------- ------------- ------------
Cash Flows from Operating Activities:
Net income 6,933 1,089 8,645
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of an affiliate (10,288) - -
Provision for loss on sale of subsidiary 9,300 - -
Depreciation 667 618 993
Amortization 894 696 594
(Gain) Loss on sale of vessels 423 (569) -
Interest expense, net 1,256 390 383
(Increase) Decrease in:
Accounts receivable 1,962 57 (361)
Inventories 478 (266) 60
Management company 268 - -
Prepayments and other 244 25 (58)
Increase (Decrease) in:
Accounts payable (223) (1,305) (486)
Accrued liabilities 39 (145) 536
Unearned revenue (111) (30) -
Payments for dry docking and special survey costs - (497) (951)
Interest paid (2,302) (382) (480)
---------- ------------- ------------
Net Cash from (used in) Operating Activities 9,540 (319) 8,875
.......... ............. ............
Cash Flows from Investing Activities:
Vessel acquisitions and/or improvements - (5,934) -
Proceeds from sale of vessels, net 4,068 1,096 -
Proceeds from sale of subsidiary - 21,200 -
Disposal of subsidiary, net of cash disposed of - (4,666) -
Payment for investments in affiliates (3,351) - -
Goodwill on acquisition of Maryville (400) - -
Loan to a related party (300) 300 -
Increase in restricted cash - - (614)
Interest received 401 59 12
---------- ------------- ------------
Net Cash from (used in) Investing Activities 418 12,055 (602)
.......... ............. ............
Cash Flows from Financing Activities:
Proceeds from long-term debt 14,199 18,289 -
Repayment of long-term debt (13,242) (14,313) (5,960)
Repayment of sellers credit (500) - -
Cash dividend - (24,696) -
(Purchase) / sale of treasury stock (265) 78 (2)
Issuance of treasury stock - 1 -
Financing costs (185) (130) (2)
---------- ------------- ------------
Net Cash from (used in) Financing Activities 7 (20,771) (5,964)
.......... ............. ............
Net (decrease) increase in cash and cash equivalents 9,965 (9,035) 2,309
Cash and cash equivalents at beginning of year 1,019 10,984 1,949
---------- ------------- ------------
Cash and cash equivalents at end of year 10,984 1,949 4,258
========== ============= ============
The accompanying notes are an integral part of these consolidated statements.
EXCEL MARITIME CARRIERS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
(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, 2003:
Vessel's Date of Country of Year
Owning Company Name DWT Incorporation Incorporation built
-------------- -------- --- ------------- ------------- ------
Becalm Shipping Co. Ltd. Fighting Lady 146,313 July 7, 1998 Cyprus 1983
Tortola Shipping Co. Ltd. Lucky Lady 27,422 July 7, 1998 Cyprus 1975
Storler Shipping Co. Ltd. Petalis 35,982 August 10, 1998 Cyprus 1975
Madlex Shipping Co. Ltd Almar I 107,140 January 11, 1999 Cyprus 1979
Centel Shipping Co. Ltd Lady 41,090 May 10, 2002 Cyprus 1985
-----------
357,947
===========
At December 31, 2003 all vessels in operation (bulk carriers) were flying
the Cyprus flag.
(b) Ship-owning companies with vessels sold:
Vessel's Date of Country of
Owning Company Name Incorporation Incorporation Sold on
-------------- -------- ------------- ------------- -------
Arotra Marine Co. Ltd. Holy Island July 7, 1998 Cyprus January 3, 2002
Fiorela Navigation Ltd. Alex Stream June 11, 1996 Malta July 2, 2001
(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 Co.'s 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 $ 230 was the
value of the net assets. The $ 400 was 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 for the
years ended December 31, 2001 and 2002, of 1.25% on certain freight
and hires collected. Such fees for 2001, 2002 and 2003 totaled $584,
$385 and $527 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 included in the accompanying consolidated statements of
income.
Gross revenues for 2001, 2002 and 2003 include revenues deriving
from charter agreements with significant charterers, as follows (in
percentages of total gross revenues):
Charterer 2001 2002 2003
--------- ---- ---- ----
ILVA 14% - -
Coeclerici Transport Ltd. - 12% -
ADM Shipping Co. - 12% -
Alfred C. Toepfer - 12% -
Malissa SCTT - - 25%
Swissmarine-Geneva - - 11%
Oldendorff Carriers GMBH - - 11%
Noble Shipping Inc.-Hong Kong - - 10%
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 ("US GAAP") and include the
accounts of Excel Maritime Carriers Ltd. and its wholly-owned
subsidiaries referred to in Note 1 above. All significant intercompany
balances and transactions have been eliminated upon consolidation.
(b) Use of Estimates: The preparation of consolidated financial statements
in conformity with US GAAP 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: 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, until February 7, 2002, 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 were reported as a cumulative translation adjustment
in "Accumulated Other Comprehensive Income / (loss)", a separate
component of stockholders' equity.
(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.
Included in cash is an amount of $ 223 ($ 221 in 2002) relating to
deposits with a bank that are used to pay the current loan
installments. The funds can only be used for the purposes of loan
repayment. Restricted cash concerns minimum cash deposits required to
be maintained with a bank for loan compliance purposes, which amounted
to $ 614 at December 31, 2003.
(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. There was no provision
for doubtful accounts in 2001, 2002 or 2003.
(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 accruals 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.
(g) Inventories: Inventories consist mainly of bunkers and lubricants and
are stated at the lower of cost or market value. Inventory 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 expenditures are charged to
expenses as incurred.
(i) Impairment of Long-lived Assets: The Company adopted SFAS 144
"Accounting for the Impairment or Disposal of Long-lived Assets" in
2002, which addresses financial accounting and reporting for the
impairment or disposal of long lived assets. The standard requires
that long-lived assets and certain identifiable intangibles held and
used or disposed of by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
of the assets may not be recoverable. An impairment loss for an asset
held for use should be recognized when the estimate of undiscounted
cash flows, excluding interest charges, expected to be generated by
the use of the asset is less than its carrying amount. Measurement of
the impairment loss is based on the fair value of the asset as
provided by third parties. In this respect, management regularly
reviews the carrying amount of the vessels in connection with the
estimated recoverable amount for each of the Company's vessels. The
review of the carrying amount in connection with the estimated
recoverable amount for each of the Company's vessels, as of December
31, 2003 indicated that no impairment loss is required.
(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 carrier 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 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 amortized
over the period through to the expected date of the next dry-docking
or special survey. Unamortized costs upon the event of a vessel sale
are included in the gain or loss on sale of that vessel (Note 10).
(l) Loan Fees: Fees incurred for obtaining new loans or refinancing
existing ones are included in deferred charges and are 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.
(m) 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.
(n) Pension and Retirement Benefit Obligations - Crew: The ship-owning
companies included in the consolidation employ vessel crew, under
short-term contracts (usually up to nine months) and accordingly, the
Company is not liable for any pension or post retirement benefits.
(o) 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 cash received prior to the year-end and is related to
revenue applicable to periods after December 31 of each year.
(p) 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 $
1,390, $ 1,207 and $ 1,363 for 2001, 2002 and 2003, respectively and
are included in vessel operating expenses in the accompanying
consolidated statements of income.
(q) Collective Bargaining Agreements: Substantially all ship crew members
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.
(r) 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.
(s) 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.
(t) 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 conducted in the fourth quarter of
2002 and 2003 and, no impairment was indicated.
(u) Recent Accounting Pronouncements: Recent Statements of Financial
Accounting Standards ("SFAS") issued by the Financial Accounting
Standards Board ("FASB") are summarized as follows:
In January 2003, the FASB issued Interpretation No. 46 "Consolidation
of Variable Interest Entities, an Interpretation of ARB No. 51"(FIN
46). In December 2003, the FASB modified FIN 46 to make certain
technical corrections and address certain implementation issues that
had arisen. FIN 46 addresses when a company should include in its
financial statements the assets, liabilities and activities of another
entity. FIN 46 requires consolidation of a variable interest entity if
the reporting entity is subject to a majority of the risk of loss from
the variable interest entity's activities or entitled to receive a
majority of the variable interest entity's residual returns or both.
FIN 46 was effective immediately for variable interest entities
created after January 31, 2003. The Company will apply FIN 46, as
revised, to variable interest entities created before February 1, 2003
as follows: (i) beginning January 1, 2004 for structures commonly
referred to as special purpose entities as a cumulative effect of the
accounting change as of that date; and (ii) at the end of the first
reporting period in 2004 for other than special-purpose entities.
The adoption of FIN 46 did not have and is not expected to have a
material effect on the Company's results of operations or financial
position
(v) Reclassifications of Prior Year Balances: Certain reclassifications
have been made to the 2001 and 2002 consolidated financial statements
to conform to the presentation in the 2003 consolidated financial
statements. Accrued bank interest is now included within accrued
liabilities, while it was separately presented on the consolidated
balance sheet in prior years. Furthermore, in the consolidated
statements of income and cash flows, depreciation is now presented
separately from amortization for dry-docking and special survey
whereas in prior years these amounts were combined. Additionally, in
the consolidated statements of income, general and administrative
expenses are presented as a single line item for the consolidated
entity while, in prior years, general and administrative expenses for
Maryville were presented separately from the remainder of the
consolidated entity's general and administrative expenses. Finally, in
the consolidated statements of cash flows, interest expense and
interest income are now combined as a single line item entitled
interest expense, net.
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. The fees charged by Excel
Management Ltd. (Note 1) in 2001, 2002 and 2003 totaled $ 788, $ 225 and $
260 respectively and are included in general and administrative expenses in
the accompanying consolidated statements of income. Certain of the services
provided by Excel Management are now subcontracted to Maryville, a wholly
owned subsidiary. The balance of receivables from and payables to Excel
Management Ltd., as of December 31, 2002 and 2003 were $0.
4. VESSELS:
The amounts in the accompanying consolidated financial statements are
analyzed as follows:
Accumulated
Cost Depreciation Net Book Value
Vessels' Year of
Name acquisition 2002 2003 2002 2003 2002 2003
- ------------------------------------------------------------------------------------------------
Fighting Lady May 1999 7,526 7,526 1,420 1,816 6,106 5,710
Lucky Lady May 1999 763 763 - - 763 763
Petalis April 1999 1,068 1,068 47 60 1,021 1,008
Almar I June 1999 3,320 3,320 481 616 2,839 2,704
Lady October 2002 5,934 5,934 75 524 5,859 5,410
--------- --------- -------- -------- --------- ---------
18,611 18,611 2,023 3,016 16,588 15,595
----------------- --------------- ========= ========= ======== ======== ========= =========
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.
On October 31, 2002 based on the Memorandum of Agreement dated September
27, 2002, the Company acquired the second-hand vessel Lady for a
consideration of $ 5,934.
Cost of vessels at December 31, 2002 and 2003 does not include any
capitalized interest.
No depreciation expense is charged for vessel Lucky Lady as her acquisition
cost approximates her estimated salvage value. As at December 31, 2003
vessel Petalis was held at salvage value and no depreciation charge will be
recorded in future years. Depreciation for 2001, 2002 and 2003 totaled $
667, $ 618 and $ 993, respectively, and is separately reflected 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, 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
- Additions 951 2 953
- Amortization for the year (555) (39) (594)
------------------ ----------- -----------
------------------ ----------- -----------
Balance, December 31, 2003 1,575 74 1,649
================== =========== ===========
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. At
December 31, 2001 the Company's investment in Torm was a participation
interest of 27.78%. The Company's president is also one of the seven
members of the Board of Directors of Torm.
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. The aggregate value of the investment
in Torm shares based on the quoted market price per share at December 31,
2001 was DKK 232,392,141 ($ 27,633), respectively.
A summary of the Torm's audited balance sheet and statement of income
translated, for convenience purposes, to USD at December 31, 2001 and for
the year then ended (as reported under Danish GAAP), is set forth below.
The exchange rate used to convert the financial statements from Danish
Kroner to US Dollars was 8.41.
Balance Sheet 2001
---------------
Current Assets 157,010
Vessels net book/vessels under construction 228,791
Other fixed assets 13,571
---------------
---------------
Total assets 399,372
===============
Share capital and reserves 29,037
Retained profit 136,517
---------------
---------------
Shareholders' Equity 165,554
Provisions 51,675
Long-term debt 111,736
Current Liabilities 70,407`
---------------
---------------
Total liabilities and shareholders' equity 399,372
===============
Statement of Income 2001
---------------
---------------
Net earnings from shipping activities 85,546
Profit before depreciation 86,932
Profit before financial items 73,008
Profit before tax 63,870
Profit for the year 44,709
The following reconciliation table summarizes the significant adjustments
to income and shareholders' equity for 2001 that were applied to the
financial statements prepared under Danish GAAP in order to comply with US
GAAP:
2001
----------------------------
Shareholders'
Income Equity
----------- ----------------
As reported under Danish GAAP (restated) 44,709 165,554
Capital leases 388 (2,735)
Sales leaseback transactions 2,782 (13,433)
Swap transaction of vessels (1,252) (1,252)
Provision for repair and
capitalization of docking costs (1,288) (3,387)
Treasury Stock 1,526 (4,598)
Stock Option/Stock Grant 83 -
Dividends - 8,656
Unrealized losses on marketable securities 591 -
Foreign currency translation 356 2,315
Foreign currency contracts (4,060) (3,569)
SFAS 133 - continuing impact (1,672) (1,672)
SFAS 133 - release from OCI 918 -
Tax effect of US GAAP Adjustments 489 8,618
----------- ----------------
43,570 154,497
----------- ----------------
SFAS 133 - transition adjustment,
net of tax effect of 2,072 - 575
----------- ----------------
As Reported in accordance with US GAAP 43,570 155,072
=========== ================
7. LONG - TERM DEBT:
The amounts in the accompanying consolidated balance sheets are analyzed as
follows:
Borrower(s) 2002 2003
---------- ---------
(a) Becalm Shipping Co. Ltd., Madlex Shipping Co. Ltd. 5,130 3,990
(b) Centel Shipping Co. Ltd., Tortola Shipping Co. Ltd., Storler
Shipping Co. Ltd. 5,500 4,180
(c) Excel Maritime Carriers 3,500 -
---------- ---------
Total 14,130 8,170
Less- current portion 4,040 2,300
---------- ---------
Long-term portion 10,090 5,870
========== =========
(a) On June 4, 2002 the Company obtained a bank loan of $ 5,700 for
working capital purposes. The outstanding balance of the loan at
December 31, 2003 is repayable in seven 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 rates at December 31, 2002 and
2003 were 3.44% and 3.17% respectively.
(b) 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 outstanding balance of the loan at December 31,
2003 is repayable in two 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 rates at December 31, 2002 and 2003 were 3.42% and 3.13%
respectively.
(c) 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. During 2003 the
Company repaid, in full, the loan obtained on March 18, 2002. The
interest rate at December 31, 2002 was 3.90%.
The loans outstanding at December 31, 2003, 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 annual principal payments required to be made subsequent to December
31, 2003 are as follows:
Year Amount
---- ------
2004 2,300
2005 5,870
-----------
8,170
===========
Bank loan interest expense for the years ended December 31, 2001, 2002 and
2003 amounted to $ 1,633, $ 449 and $ 395 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, 2003 was as follows:
Year ended December 31, 2001 4.53% - 6.85%
Year ended December 31, 2002 3.33% - 4.41%
Year ended December 31, 2003 3.13% - 3.23%
8. CAPITAL STOCK:
During 2002, the Company sold 51,028 of own shares. From the sale of shares
the Company realized a gain of $ 1, separately reflected in the 2002
accompanying consolidated statements of stockholders' equity. During 2003,
the Company acquired 1,300 Common A and 14 Common B shares with an average
price of $1.15. The aggregate cost of the all treasury shares, amounting to
$ 189 as of December 31, 2003, is reflected separately in the accompanying
2003 consolidated 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 1d), Maryville entered
into a lease agreement for the rental of office premises with an unrelated
party. Operating lease payments for 2002 and 2003 were $ 49 and $ 60
respectively and are included in general and administrative expenses in the
accompanying consolidated statements of income. Future minimum rentals
payable under operating leases are as follows as of 31 December 2003:
Year Amount
---- ------
2004 67
2005 68
2006 70
2007 71
2008 and thereafter 74
------
------
350
======
10. GAIN (LOSS) ON SALE OF VESSELS:
Gains (loss) on sale of vessels included in the accompanying consolidated
statements of income is analyzed as follows:
2001 2002
------------- -----------
Sale proceeds, net
-Selling price 4,503 1,200
-Sale expenses (435) (104)
------------- ----------
4,068 1,096
------------ -----------
Vessels' net book value at the date
of sale
-Vessels' acquisition cost (5,000) (527)
-Depreciation up to the date of sale 561 -
------------- -----------
(4,439) (527)
Unamortized financing costs, written-off (52) -
------------- -----------
Net gain (loss) (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, 2003.
The components for the calculation of basic and diluted earnings per share
are as follows:
2001 2002 2003
---- ---- ----
Income (numerator):
Income available to common
shareholders..................... 6,933 1,089 8,645
Shares (denominator):
Weighted average common
shares outstanding - basic..... 11,514,950 11,550,984 11,532,725
Weighted average common
shares outstanding - diluted ... 11,514,950 11,550,984 11,532,725
Basic earnings per common
share............................. $ 0.60 $ 0.09 $0.75
Diluted earnings per common
share............................. $ 0.60 $ 0.09 $0.75
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 and trade accounts receivable. The Company
places its temporary cash investments, consisting mostly of deposits,
with high credit qualified financial institutions. The Company
performs periodic evaluations of the relative credit standing of those
financial institutions that are considered in the Company's investment
strategy. The Company does not require collateral on these financial
instruments. Credit risk with respect to trade accounts receivable is
generally diversified due to the large number of entities comprising
the Company's charterer base and their dispersion across many
geographic areas.
(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 May, 27, 2004 By /s/ Gabriel Panayotides
---------------- ------------------------------
Gabriel Panayotides
Chief Executive Officer