$57,389,000 including a mortgage of $53,948,000, secured only
by the property.
The Company has a 45% equity interest in Sun Line Greece
Special Shipping Company, Inc., the owner of the cruise ship
M.S. Stella Solaris. At its fiscal year-end (December 31,1977),
Sun Line Greece had total assets of $22,377,000 and total liabilities of $15,126,000 including $9,061,000 of debt. The Company
has guaranteed 45% of this debt.
The Company sold an idle ship in October, 1976 at its book
value to a joint venture in which the Company has a 19% interest.
The venture is converting the ship to a hotel which will be managed by the Company. At June 30,1978, the joint venture had total
assets of $20,168,000 and total liabilities of $13,721,000 including
$12,627,000 advanced by the partners, of which $2,399,000 was
the Company's share.
The excess of the Company's investment over the underlying
net assets of minority-owned affiliates is $2,754,000 and is being
amortized over periods of up to 40 years.
A comparative summary of the provision for income taxes
Current- U.S. and state $23,439,000
Investment tax credit (5,060.000)
The deferred tax provision is primarily attributable to excess
tax over book depreciation which amounted to $11,042,000 and
$8,140,000 in 1978 and 1977, respectively.
The Company established a Salaried Employee Stock Ownership Plan in 1978 and as a result recorded an additional 1% investment tax credit. This additional credit of $460,000 in 1978 offsets
a corresponding charge to operating expenses.
Reconciliation of the United States statutory tax rate of 48% and
the Company's consolidated income tax rate follows:
United States income tax rate
State income taxes, net of U.S. tax benefit
Foreign earnings and losses subject to aggregate tax
rate less than 48%
Tax benefit on dispositions of businesses
Other items, net
Effective gross income tax rate
Investment tax credit
Effective net income tax rate
Maturities of debt at July 28,1978
12 Months Ended July,
London Euro-dollar interbank rate. Interest rates on debt range
from 4.25% to 10.25%.
The Company's loan agreements require the Company to meet
certain requirements including, among other things, maintaining
minimum working capital, net worth, and asset-to-debt and debt-to-
equity ratios. The loan agreements also have restrictions on cash
dividends, other payments and the pledging of certain assets. At
July 28,1978, retained earnings of $67,592,000 are unrestricted
and $285,211,000 of property and equipment, at net book value,
is pledged or mortgaged.
Private Debt Placement:
On December 20,1977, the Company issued 8%% Unsecured
Senior Notes for $40,000,000 to a group of lenders, primarily insurance companies. These notes are for 20 years with equal principal
payments beginning in 1983.
Revolving Loan Agreements:
The Company uses revolving loan commitments, short term
loans and commercial paper for interim financing. Such financing
is classified as noncurrent indebtedness to the extent that the
Company has funds available under its revolving loan agreements
maturing beyond one year. The above maturity table reflects the
maturities of such financing on the basis of the maturity schedule
of the revolving credit agreements discussed below plus management's estimation of prepayments.
As of July 28,1978, the Company has commitments of
$90,000,000 under revolving credit agreements which mature
through fiscal 1988. These agreements bear interest based on the
prime rate or the London Euro-dollar interbank rate. At July 28,
1978, an aggregate of $44,000,000 in the form of short term debt
has been borrowed against these revolving credit agreements and
is included in unsecured notes payable (including $39,000,000 of
commercial paper). The average effective interest rate on these
borrowings was 9.0% at July 28,1978. In addition, the Company
has unused bank credit lines aggregating $37,500,000.
Borrowings against all revolving loan agreements averaged
$53,200,000 during 1978 and $71,400,000 during 1977 (at
weighted average interest rates of 8.1% in 1978 and 7.2% in 1977)
with a maximum balance of $76,800,000 in 1978 and $77,900,000
in 1977. A commitment fee of up to a maximum of one-half of one
percent is payable on the unused portion.
All compensating balance agreements are informal and do not
legally restrict withdrawal of funds. Under certain bank agreements the Company maintains average compensating balances
of $5,100,000 after adjustment for an estimated bank float of
$3,200,000. The balances maintained are equal to a percentage
(10%-20%) of the amounts available or borrowed.
In 1978, the Company retroactively changed its method of
accounting for leases in accordance with Statement of Financial
The Company has debt of $47,000,000 as of July 28,1978 at
interest rates which vary based on the prime lending rate or