Press Release: Sea Containers Ltd.
August 15, 2000
HAMILTON, Bermuda -- Sea Containers Ltd. (NYSE: SCRA, SCRB; www.seacontainers.com)
successfully completed on August 10, 2000 the initial public offering of its Orient-Express Hotels Ltd. subsidiary
at a price of $19 per Class A common share. Ten million shares were placed by underwriters, of which half were
existing shares sold by Sea Containers and half new shares issued by Orient-Express Hotels. After the offering
Sea Containers retained 20.9 million Class A and B shares which, at the offering price, had a value of approximately
$400 million. Sea Containers has indicated its intention to distribute these shares on a tax free basis to its
Class A and B shareholders not earlier than 6 months after the initial public offering. At June 30, 2000 Sea Containers
had 18.5 million Class A and B shares outstanding.
Mr. James B. Sherwood, President of Sea Containers Ltd., said the Orient- Express Hotels offering was a major step
toward delivering additional value to Sea Containers' shareholders. He indicated that Orient-Express Hotels is
having an excellent year and hoped its earnings outlook would be reflected in its stock price in the period leading
up to spin-off and thereafter. For the second quarter ended June 30, 2000 Orient-Express Hotels (the leisure division
of Sea Containers) had operating profits of $22.3 million, up 21% from $18.4 million in the prior year period.
For the six months ended June 30, 2000 the division had operating profits of $32.3 million, up 16% from $27.7 million
in the first half of 1999.
Sea Containers announced its second quarter and first six months results for the period ended June 30, 2000. For
the quarter net earnings were $13.9 million ($0.75 per common share diluted) on revenue of $351 million. For the
six months net earnings were $6 million ($0.32 per common share diluted) on revenue of $629 million. The company's
passenger transport division's earnings are highly seasonal, with the first quarter in loss and the main earnings
period being the third quarter. While the company's revenue was up 4% for the quarter and 3% for the six months,
net earnings and diluted earnings per common share were down compared with the prior year periods. Mr. Sherwood
said that while these ``headline numbers'' were lower, in his view the underlying trends were encouraging.
``It is important for investors to realize this is the first second quarter period since the second quarter of
1998 where quarterly container division operating profits have risen over the first quarter. In the first quarter
of 2000 we reported divisional operating profits of $12.8 million. In the second quarter those profits had risen
to $13.6 million. This is the first sign of the return to rising profitability of the division after the Asian
financial crisis and consequent slashing of new container prices by the Chinese manufacturers. GE SeaCo, the company's
50/50 joint venture with GE Capital, has placed on lease $62 million of new containers in the first half of 2000
and earnings of that company are rising. Utilization of a number of container types operated by GE SeaCo has increased
and several are in very short supply. Sea Containers' two containerships, laid up in 1999 due to the Asian recession,
are now out on charter at satisfactory rates. The company's specialized container manufacturing facility in Charleston,
South Carolina, continues to have teething problems but should now move into profitability in the second half of
this year,'' Mr. Sherwood said.
Operating profits of the company's passenger transport division in the second quarter were $17.7 million, down
$5.5 million from the prior year period. Mr. Sherwood pointed out that the two quarters were not directly comparable
because in the second quarter of 1999 the company enjoyed duty free sales on the English Channel, Denmark/Sweden,
England/Republic of Ireland and the Gulf of Bothnia route of Silja. The European Union stopped such sales on July
1, 1999. In the second quarter of 1999 these sales were an important contributor to revenue and profit. In addition,
the company had to bear approximately $5 million of higher fuel costs in the second quarter of 2000 compared with
the second quarter of 1999. If you set aside these significant fuel cost increases, these results indicate that
the lost profits from duty free sales have been recovered through higher fares and operating efficiencies. It was
not possible to raise fares all at once to recover both lost profits from duty free sales and the extra fuel costs.
Fares today are still lower than they were a few years ago so considerable improvement is still possible. He said
the operators had assumed fuel prices would decline but this did not occur in the second quarter this year. Only
in recent days has the price of Brent crude declined by 10% from $30 per barrel to $27 and while further declines
are expected, experience proves that oil prices are unpredictable. Silja Oyj, the Baltic ferry operator owned 50%
by Sea Containers, imposed a fuel surcharge on its fares effective July 1, 2000 and it appears to be holding. Mr.
Sherwood said that GNER's earnings in the quarter were down $1.2 million from the prior year period due to rising
costs and reducing subsidy. He said the company's application for a new 20 year GNER rail franchise is still being
processed by the government which has indicated a decision will be made in late September. Some significant last
minute revisions requested by the government were made on August 7th. The Strategic Rail Authority, the government
body responsible for rail franchises, announced on August 11th the extension of two other rail franchises, in both
cases to the incumbent operator.
Mr. Sherwood said that while passenger transport division earnings would be soft this year he felt substantial
improvement could be foreseen for 2001 and beyond. By then the effects of loss of profits from duty free sales
and higher fuel costs should have worked through the system. Rail subsidy would decline very little in 2001, 2002
and 2003 while rail revenue and passenger volumes are expected to continue their strong growth pattern. He said
Nils- Gustav Palmgren took over as the new Managing Director of Silja on August 1, 2000 and plans are being implemented
to strengthen management, increase revenue, freshen ship interiors and address the Finnish labor cost problems.
The new SuperSeaCat service on Helsinki-Tallinn has proved successful with carryings ahead of forecast.
This press release contains, in addition to historical information, forward-looking statements that involve risks
and uncertainties. These include statements regarding earnings growth, investment plans and similar matters that
are not historical facts. These statements are based on management's current expectations and are subject to a
number of uncertainties and risks that could cause actual results to differ materially from those described in
the forward-looking statements. Factors that may cause a difference include, but are not limited to, those mentioned
in the press release, customer demand and competitive considerations, inability to increase prices or reduce costs,
seasonality and adverse weather conditions, variable fuel prices, changes in container prices from manufacturers,
shifting patterns of world trade, the effects of cessation of duty free shopping privileges in the European Union,
uncertainty of achieving a GNER franchise replacement and acceptability of proposed terms, obtaining a favorable
tax opinion for a distribution of Orient-Express Hotels Ltd. shares and necessary Board, shareholder and lender
approvals, interest rate and currency value fluctuations, adequate sources of capital and acceptability of finance
terms, global and regional economic conditions, potentially unstable relations with labor unions, and legislative,
regulatory and political developments. Further information regarding these and other factors is included in the
filings by the company and Orient-Express Hotels Ltd. with the U.S. Securities and Exchange Commission.
SEA CONTAINERS LTD. AND SUBSIDIARIES
SUMMARY OF OPERATING RESULTS (UNAUDITED)
Three months ended June 30,
2000 1999
Revenue:
Passenger transport operations $228,281,000 $223,233,000
Leisure operations 78,804,000 70,441,000
Container operations 40,709,000 40,015,000
Other operations 3,470,000 3,352,000
Total revenue $351,264,000 $337,041,000
Earnings before finance costs
and income taxes:
Passenger transport operations $ 17,733,000 $ 23,263,000
Leisure operations 22,254,000 18,380,000
Container operations 13,630,000 15,497,000
Other operations 139,000 370,000
53,756,000 57,510,000
Corporate costs (4,060,000) (3,798,000)
Net finance costs (34,433,000) (29,514,000)
Earnings before income taxes 15,263,000 24,198,000
Provision for income taxes 1,094,000 753,000
Preferred share dividends (272,000) (272,000)
Net earnings on class A and class B
common shares $ 13,897,000 $ 23,173,000
Net earnings per class A and class B
common share:
Basic $0.75 $1.27
Diluted $0.75 $1.25
Weighted average number of class A and B
common shares:
Basic 18,510,239 18,315,624
Diluted 18,992,662 18,817,842
SEA CONTAINERS LTD. AND SUBSIDIARIES
SUMMARY OF OPERATING RESULTS (UNAUDITED)
Six months ended June 30,
2000 1999
Revenue:
Passenger transport operations $412,560,000 $403,487,000
Leisure operations 132,847,000 120,667,000
Container operations 77,383,000 82,399,000
Other operations 6,309,000 6,420,000
Total revenue $629,099,000 $612,973,000
Earnings before finance costs
and income taxes:
Passenger transport operations $ 17,430,000 $ 28,119,000
Leisure operations 32,313,000 27,749,000
Container operations 26,385,000 32,991,000
Other operations (401,000) 45,000
75,727,000 88,904,000
Corporate costs (7,925,000) (7,661,000)
Net finance costs (65,397,000) (57,393,000)
Earnings before income taxes 2,405,000 23,850,000
Provision for income taxes (4,102,000) (3,447,000)
Preferred share dividends (544,000) (544,000)
Net earnings on class A and class B
common shares before change in
accounting principle 5,963,000 26,753,000
Cumulative effect of change in
accounting principle -- (12,306,000)
Net earnings on class A and
class B common shares $5,963,000 $ 14,447,000
Net earnings per class A and
class B common share:
Basic:
Earnings before change in
accounting principle $0.32 $1.46
Cumulative effect of change in
accounting principle -- (0.67)
Net earnings $0.32 $0.79
Diluted:
Earnings before change in
accounting principle $0.32 $1.45
Cumulative effect of change in
accounting principle -- (0.65)
Net earnings $0.32 $0.80
Weighted average number of common shares:
Basic 18,492,406 18,313,256
Diluted 18,975,936 18.808.877
SEA CONTAINERS LTD. AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED BALANCE SHEETS (UNAUDITED)
June 30, December 31,
2000 1999
Containers and Ships, net
book value $1,037,769,000 $1,002,560,000
Real estate and other fixed assets,
net book value 783,524,000 739,117,000
Assets under capital leases, net
book value 14,320,000 15,458,000
Cash 95,019,000 103,763,000
Receivables 258,773,000 250,716,000
Inventories 52,818,000 53,249,000
Investments 228,425,000 213,641,000
Other assets 153,555,000 136,913,000
$2,624,203,000 $2,515,417,000
Liabilities with respect to Containers
and Ships $733,270,000 $724,256,000
Bank loans with respect to real estate
and other fixed assets 509,092,000 412,545,000
Obligations under capital leases 8,403,000 10,828,000
Other liabilities 350,514,000 329,651,000
Senior notes 428,508,000 428,662,000
Senior subordinated debentures 124,104,000 123,994,000
Redeemable preferred shares 15,000,000 15,000,000
Shareholders' equity 846,573,000 861,742,000
Class B common shares with voting
rights owned by subsidiaries (391,261,000) (391,261,000)
$2,624,203,000 $2,515,417,000
SOURCE: Sea Containers Ltd.