Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser
Posted on: Wednesday, June 27, 2001

SEC move hurts cruise line's shares

Advertiser Staff and News Services

Share prices for American Classic Voyages Co., parent company of Hawai'i's two locally based cruise ships — the Independence and the Patriot — fell to their lowest point in a year yesterday as a settlement with the Securities and Exchange Commission added to the company's recent woes.

The Nieuw Amsterdam was renamed the Patriot when American Classic Voyages Co. took ownership of the cruise liner and brought it to Hawai'i to ply Island waters.

Advertiser library photo • Sept. 1, 2000

American Classic agreed Monday to settle charges that it understated losses on its quarterly financial report in 1999.

Shares fell 12 cents, or about 4 percent, to $2.90, a 52-week low. The share price has fallen 86 percent since July.

The company, facing more competition and a slowing economy, said earlier this month that it was cutting prices and eliminating about 15 percent of its onshore jobs.

American Classic plans to add two ships to the Hawai'i market in 2003 and 2004 — 1,900-passenger vessels being constructed at Ingalls Shipbuilding in Mississippi .

Tim Conder, a leisure analyst for A.G. Edwards & Son in Missouri, said it will be hard to know until the early part of next year when American Classic will pull out of its slump.

"We would not be committing money to it at all," said Conder, who gave the company a neutral rating.

The Securities and Exchange Commission alleged that the Chicago-based company improperly changed the way it accounted for advertising costs and failed to inform investors.

American Classic deferred expenses, allowing it to narrow its reported losses for the 1999 first quarter, the SEC contended. American Classic, after learning of the SEC investigation, restated 1999 first-quarter earnings to report a loss of $6.3 million, or 44 cents a share, instead of its earlier reported loss of $4.5 million, or 32 cents a share, the order said.

The company changed its accounting in 1999 out of concern that "its direct marketing costs as they were incurred did not accurately reflect its business,'' the SEC order said. "These expenses generated revenues that were not recognized until later quarters."

American Classic agreed to be subject to stiffer sanctions if it commits other similar violations. It did not pay any penalties for the reporting charges.

The company, which neither admitted nor denied wrongdoing, declined comment about the settlement.

In addition to Hawai'i, American Classic vessels travel along the Eastern seaboard and on U.S. rivers such as the Mississippi.

Chairman Sam Zell, 59, a real estate investor, was ranked the 251st wealthiest individual in the world by Forbes Magazine earlier this month, with $1.9 billion in assets. Zell's Equity Residential Properties Trust, based in Chicago, has grown 10-fold since 1993.