American ClassicAmerican Classic Voyages Co., operator of two interisland cruise ships in Hawaii as well as passenger vessels on the mainland coasts and rivers, has settled a U.S. Security and Exchange Commission accusation of improperly stating a quarterly earnings report.
hit on two fronts
The cruise company settles
an SEC charge while President
Bush targets loan guarantees
By Russ Lynch
The SEC charged that American Classic improperly deferred advertising expenses for early 1999 until later quarters. If they had been treated as expenses when the money was spent, the company would have lost $6.3 million in the first quarter of 1999 instead of the $4.5 million loss it reported, the SEC said.
The claim was settled with a consent decree in which the company neither admitted nor denied guilt but agreed not to do it again.
American Classic said it had decided early in 1999 to report advertising costs in the period in which customers who were attracted by the advertisements took their trips, rather than when the expenses were incurred. In November 1999, it rescinded the change and restated earnings for the first two quarters of 1999. The SEC alleged the actions amounted to misleading reporting.
Meanwhile, President George W. Bush has said he wants to get rid of a federal loan-guarantee program that is backing American Classic's $1 billion construction of two new 1,900-passenger ships for the Hawaii market.
But American Classic appears unworried by the action.
The company already has the federal financing guarantee for the two United States Lines ships. One is for delivery in 2003 and the other is due to be in Hawaii waters in 2004.
"We're not at the point of panicking," Cornel Martin, American Classic vice president for corporate affairs, told The New York Times. He said the ships will be delivered on time and on budget.
The Times said President Bush wants to end the shipbuilding loan guarantees, because they amount to a subsidy for private business, but Senate Minority Leader Trent Lott, whose district includes shipbuilding sites, wants to see shipbuilding loan guarantees triple and has strong bipartisan support.
If American Classic should default, the U.S. government could be left on the hook for as much as $1 billion that American Classic borrowed through the federal guarantee.
American Classic shares closed at $2.90 on the Nasdaq exchange, down 12 cents after falling 48 cents yesterday.