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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE
For the transition period from _______________ to _____________________
Commission file number
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STATIA TERMINALS INTERNATIONAL N.V.
(Exact name of registrant as specified in its charter)
Netherlands Antilles 52-2003102
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Tumbledown Dick Bay
St. Eustatius, Netherlands Antilles
(011) 5993-82300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
STATIA TERMINALS CANADA, INCORPORATED
(Exact name of registrant as specified in its charter)
Nova Scotia, Canada 98-0164788
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3817 Port Malcolm Road
Port Hawkesbury, Nova Scotia B0E 2V0
(902) 625-1711
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether each of the registrants: (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 requirements for the past 90 days. Yes ___ No _X_ (The registrants became
subject to such filing requirements on February 14, 1997 and this Annual Report
on Form 10-K is the first report required to be filed thereunder.)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].
The equity securities of the registrants have not been, and are not
required to be, registered under either the Securities Act of 1933 or the
Securities Exchange Act of 1934.
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Statia Terminals International N.V.
and
Statia Terminals Canada, Incorporated
Annual Report on Form 10-K
Table of Contents
<TABLE>
<S> <C>
PART I.............................................................................................................1
ITEM 1. BUSINESS.................................................................................................1
ITEM 2. PROPERTIES...............................................................................................8
ITEM 3. LEGAL PROCEEDINGS.......................................................................................11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....................................................11
PART II...........................................................................................................12
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY MATTERS......................................12
ITEM 6. SELECTED FINANCIAL DATA.................................................................................12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND.........................................15
RESULTS OF OPERATIONS.............................................................................................15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............................................................25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS...........................................................25
ON ACCOUNTING AND FINANCIAL DISCLOSURE..................................................................25
PART III..........................................................................................................26
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......................................................26
ITEM 11. EXECUTIVE COMPENSATION..................................................................................28
ITEM 12. SECURITY OWNERSHIP......................................................................................31
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........................................................32
PART IV...........................................................................................................34
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.........................................34
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This Annual Report on Form 10-K (the "Report") contains forward-looking
statements within the meaning of 27A of the Securities Act of 1933. Discussions
containing such forward-looking statements may be found in Items 1, 2, 3 and 7
hereof, as well as within this Report generally. In addition, when used in this
Report, the words "believes," "anticipates," "expects" and similar expressions
are intended to identify forward-looking statements. Such statements are subject
to a number of risks and uncertainties. Actual results in the future could
differ materially from those described in the forward-looking statements as a
result of fluctuations in the supply of and demand for crude oil and other
petroleum products, changes in the liquid terminaling industry, changes in
government regulations affecting the petroleum industry, the financial condition
of the Company's customers, adverse weather conditions, the condition of the
United States economy and other matters set forth in the Report. The Company
does not undertake any obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
PART I.
Item 1. Business
Statia Terminals International N.V., a Netherlands Antilles corporation
("Statia"), and its wholly owned subsidiary, Statia Terminals Canada,
Incorporated, a Nova Scotia, Canada corporation ("Statia Canada"), (together
with Statia and their respective subsidiaries, collectively, the "Company"),
constitute one of the five largest independent marine terminaling companies in
the world, as measured by capacity. The Company primarily provides terminaling
services for crude oil, refined products and other bulk liquids to some of the
world's largest producers of crude oil, integrated oil companies, oil traders,
refiners, and petrochemical companies. The Company's services are utilized by
customers whose products are transshipped through the Company's facilities to
the Americas and Europe. The Company owns, leases and operates three storage and
transshipment facilities located at (i) the island of St. Eustatius, Netherlands
Antilles; (ii) Point Tupper, Nova Scotia, Canada; and (iii) Brownsville, Texas
(which facility is being held for sale). In connection with its terminaling
business, the Company also provides related value-added services, including
bunkering (the supply of fuel to marine vessels for their own propulsion),
petroleum product blending and processing, emergency and spill response, bulk
product sales and other ship services.
The Company began operations in 1982 as Statia Terminals N.V. ("STNV"), a
Netherlands Antilles corporation, operating an oil products terminal located on
the island of St. Eustatius. In 1984, CBI Industries, Inc. ("CBI"), an
industrial gases and contracting services (including storage tank construction)
company, acquired a controlling interest in STNV. STNV purchased Statia
Terminals Southwest, Inc. ("STSW") which has a facility at Brownsville, Texas,
in 1986. In 1993, the Company acquired the remaining shares it did not then own
of Statia Terminals Point Tupper, Incorporated ("STPT") which was amalgamated
into Statia Canada and owns and operates the facility located at Point Tupper,
Nova Scotia. In 1990, CBI became the sole owner of STNV and STSW. In January
1996, CBI was acquired (the "Praxair Acquisition") by Praxair, Inc. ("Praxair"),
which sold the Company to focus on its core businesses. In November 1996, Castle
Harlan Partners II, L.P. ("CHPII"), a private equity investment fund managed by
Castle Harlan, Inc. ("Castle Harlan"), a private merchant bank, management of
the Company and others acquired from Praxair all of the outstanding capital
stock of Statia Terminals, Inc. ("STI"), its subsidiaries and certain of its
affiliates (the "CHPII Acquisition"). Statia, Statia Canada and Statia Terminals
Group N.V., incorporated in the Netherlands Antilles (the "Parent"), were
organized for purposes of facilitating the CHPII Acquisition. As a result of the
CHPII Acquisition (i) the Parent now owns all of the capital stock of Statia;
(ii) CHPII, its affiliates and Castle Harlan employees own 85.4% of the voting
stock of the Parent; (iii) Statia and Statia Canada issued 11 3/4% First
Mortgage Notes due 2003, Series A, which were subsequently exchanged for the 11
3/4% First Mortgage Notes due 2003, Series B (the "Notes"); and (iv) the Company
entered into revolving credit facilities in an aggregate amount of $17.5 million
(collectively, the "Revolving Credit Facility").
Since 1990, the Company has grown substantially, with tank capacity
increasing from 4.4 million barrels in 1990 to 20.4 million barrels in 1996 and
revenues increasing from $86.8 million to $156.0 million over the same period.
The Company's management team and employee base have a diverse range of
experience and skills in the
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terminaling industry, including engineering, crude oil and product distribution,
oil trading, terminal operations, shipping, refinery operations, product
blending and finance. This experience allows management to understand the
objectives of each of the Company's customers and to forge alliances with those
customers at each of the Company's terminals to meet those objectives. Thus, the
Company believes that its operations extend beyond the traditional approach to
terminaling not only because the Company is a premier provider of core services
offered by its competitors but also because the Company, unlike most of its
competition, provides ancillary, value-added services tailored to support the
particular needs of its customers.
The day-to-day operations of the Company are managed at the respective
terminal locations. For the years ended December 31, 1994, 1995 and 1996, the
Company derived 87%, 90%, and 90% of its revenues, respectively, from its St.
Eustatius facility, approximately 9%, 8%, and 8% of its revenues, respectively,
from its Point Tupper facility and approximately 4%, 2%, and 2% of its revenues,
respectively, from its Brownsville facility. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 17 of the
Notes to Consolidated Financial Statements of Statia for further details
regarding revenues.
Products and Services
The Company provides storage services in insulated and/or interior coated
tanks and a full range of storage related services, including product blending,
heating, mixing, separation, and removal of water and other impurities. The
Company's facilities are capable of handling a variety of liquid products,
including light, medium and heavy crude oils, residual fuel oil, gasoline,
gasoline blending components, diesel, marine gas and diesel oil, aviation fuel,
bunker fuel, petroleum diluents, lubricating oils, vegetable oils, latex rubber,
paraffins, caustic soda, butane, asphalt and various chemicals.
The Company specializes in "in-tank" or "in-line" blending with
computer-assisted blending technology that assures specified product integrity
and homogeneity. At St. Eustatius and Point Tupper, the Company has facilities
capable of blending and mixing a full range of refined products from gasoline
through residual fuel oils, including bunker fuel. The Company carries an
inventory of certain blendstocks to provide customers with the option of
customized blending. The Company believes that its blending capability has
attracted certain customers who have leased capacity primarily for blending
purposes and who have contributed to its bunker fuel volume and product sales.
Management has worked closely with residual fuel oil market participants to
assist them with their blending operations.
The Company owns spheres for the storage of liquefied petroleum gas ("LPG")
at its St. Eustatius and Point Tupper facilities that enhance the Company's
blending capabilities and an atmospheric distillation unit for refining at its
St. Eustatius facility. The gas storage spheres and the atmospheric distillation
unit can be utilized to improve product quality and value of the Company's
customers' products.
As part of its product sales, the Company supplies bunker fuel in the
Caribbean and in Nova Scotia, Canada. In the Caribbean, fueling may take place
at St. Eustatius and on the waters off St. Kitts, St. Maarten, the U.S. Virgin
Islands and Puerto Rico. In the Caribbean, the Company's bunkering business has
evolved from offering bunker fuel to ships at the terminal berths to a delivery
system utilizing specially modified barges which provide fuel to vessels at
anchor. The Company initiated bunker fuel service operations at Point Tupper in
the first quarter of 1996 with bunker fuel delivered ex-pipeline at the terminal
and by truck in the surrounding Strait of Canso area.
The Company purchases petroleum products primarily to cover its product
sales requirements and to maintain an inventory of certain blendstocks. Product
purchases and sales may also be made to accommodate customers who wish to
dispose of odd lots or to assist customers' sales activities and occasionally to
take advantage of an attractive buying opportunity.
Netherlands Antilles and Canadian environmental laws and regulations
require ship owners, charterers, refineries and terminals to have access to
spill response capabilities. The emergency and spill response capability at St.
Eustatius is supported by the Statia Alert, a barge that is capable of
recovering 200 gallons per minute of oil/water mixture, and two response boats
that can deploy booms and release dispersants. The St. Eustatius facility
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also has two tugs on time charter, a line handling vessel, and owns two mooring
launches, all of which are available for safe berthing of vessels calling at the
terminal and emergency and spill response. The Company's customers benefit by
ready access to this equipment, and the Company charges each vessel that calls
at its St. Eustatius facility a fee for this capability. At St. Eustatius, the
Company owns and operates the M/V Megan D. Gambarella, an emergency and spill
response vessel with a book value of approximately $10 million, which is being
held for sale. Upon disposition of the M/V Megan D. Gambarella, the Company
plans to invest up to $1.5 million for marine equipment to replace certain
capabilities of this vessel. Statia Canada, through its wholly-owned subsidiary,
Point Tupper Marine Services Limited ("PTMS"), operates two fully-equipped spill
response vessels in Canada, one of which is located at the Point Tupper terminal
and, in the event of an oil spill, can deploy containment and clean-up equipment
including skimmers, booms and absorbents. The Company believes that the presence
of fully-equipped spill response vessels in port is important in attracting
major integrated oil companies to its facilities.
For the years ended December 31, 1994, 1995, and 1996, the Company derived
approximately 32%, 40% and 32%, respectively, of its revenues from storage,
throughput and ancillary services revenues, and 68%, 60% and 68%, respectively,
of its revenues from bunker fuel and bulk product sales activities.
Pricing
Storage and throughput pricing in the terminaling industry is subject to a
number of factors, including general increases or decreases in petroleum product
production and consumption, political developments, seasonality in demand for
certain products and the geographic sector of the world being serviced. At the
customer level, terminal selection focuses primarily on (i) location (the
shortest shipping route being the least expensive route), (ii) quality of
service and (iii) range of services offered. Price differentials among competing
terminals are generally less important to the customer because terminaling costs
represent only a small portion of the customer's total distribution costs. The
Company's pricing strategy is based primarily on petroleum market conditions.
The Company also takes into consideration the quality and range of its services
compared to those of competing terminals, prices prevailing at the time in the
terminaling market in which it competes, and cost savings from shipping to the
Company's terminal locations. In situations requiring special accommodations for
the customer (e.g. unique tank modification), the Company may price on a
rate-of-return basis.
The Company enters into written storage and throughput contracts with
customers. In 1996, approximately half of the Company's storage and throughput
revenues (excluding related ancillary services) were attributable to long-term
(one year or more) storage and throughput agreements. The Company's long-term
storage and throughput agreements are individually negotiated with users of each
of the terminal facilities. The typical agreement specifies tank storage volume
(the "specified volume"), the commodities to be stored, a minimum monthly
charge, an excess throughput charge and a price escalator. In addition, there
are charges for certain additional services such as the transfer, mixing or
heating of stored commodities. The minimum monthly charge is due and payable
without regard to the volume of storage capacity, if any, actually utilized. For
the minimum monthly charge, the user is allowed to deliver, store for one month
and remove the specified volume of commodities. In addition to the minimum
monthly charge, there is an additional charge for excess throughput (i.e., if
more than the specified volume is delivered during the month. The excess
throughput charge is typically at a lower rate per barrel than the rate per
barrel utilized in establishing the minimum monthly charge. Year-to-year
escalation of charges is typical in long-term contracts.
Competition and Business Considerations
Terminaling
The independent terminaling industry is fragmented and includes both large,
well-financed companies that own many terminal locations and small companies
that may own a single terminal location. The Company is a member of the
Independent Liquid Terminals Association ("ILTA"), which among other functions,
publishes a directory of terminal locations of its members throughout the world.
Customers with specific location and facility demands may use the ILTA directory
to identify the terminals in the region available for specific needs and to
select
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the preferred providers on the basis of service, specific terminal capabilities
and environmental compliance. Customers may then seek competitive proposals to
aid in finalizing their terminal selection.
In addition to the terminals owned by independent terminal operators, many
state-owned oil producers and major energy and chemical companies also own
extensive terminal facilities, and these terminals often have the same
capabilities as terminals owned by independent operators. While the purpose of
such terminals is to serve the operations of their owners, and they do not
normally offer terminaling services to third parties, these terminals
occasionally are made available to the market when they have unused capacity on
a short-term and irregular basis. Such terminals lack certain competitive
advantages of independent operators, the most important of which is
confidentiality.
In many instances, major energy and chemical companies that own storage and
terminaling facilities are also significant customers of independent terminal
operators. Such companies typically have strong demand for terminals owned by
independent operators when independent terminals have more cost-effective
locations near key transportation links such as deep water ports. Major energy
and chemical companies also need independent terminal storage when their captive
storage facilities are inadequate, either because of size constraints, the
nature of the stored material or specialized handling requirements.
Independent terminal owners compete based on the location and versatility
of terminals, service and price. A favorably located terminal will have access
to cost-effective transportation both to and from the terminal. Possible
transportation modes include waterways, railroads, roadways and pipelines.
Terminal versatility is a function of the operator's ability to offer safe
handling for a diverse group of products with potentially complex handling
requirements. The primary service function provided by the terminal is the safe
storage and return of all of the customer's product while maintaining product
integrity. Terminals may also provide additional services, such as heating,
blending, water removal, processing, assurance of the proper environmental
handling procedures or vapor control to reduce evaporation.
Bunker Sales
The term "bunkering" refers to the sale and delivery of fuels to be
consumed by marine vessels for their own propulsion. The customer base and
suppliers of bunker fuel are located worldwide. Sales of bunker fuel (diesel
oil, gas oil, and fuel oil) are primarily driven by the proximity of the
terminal location to major shipping routes, the amount of cargo carried by
marine vessels and the price, quantity and quality of bunker fuel.
Bunker fuel is sold under international standards of quality that are
recognized by both fuel suppliers and ship operators. As the raw materials for
the blended marine fuels are purchased in bulk lots, each supplier is
responsible for the quality control/merchantability aspects of the fuel that
they sell.
Traditionally, the bunker business was concentrated in those ports where
either high volume of ship traffic occurred or where primary sources of refined
marine fuels were located. In many cases, the two overlapped. In recent years, a
reduction in the number of refiner/suppliers in many ports together with changes
in environmental laws in the U.S. and Europe has increased the supply of, and
delivery of, bunker fuel at offshore locations. As an alternative to in-port
supply at either the vessel cargo loading or discharging location, the offshore
supplier must provide reliability of supply, speed of delivery, consistent
quality and overall safety standards to attract ship operators.
Seasonal and Opportunity Storage
Storage facilities allow refiners and traders to take advantage of seasonal
movements and anomalies in the crude oil and refined products markets. When
petroleum products markets are in backwardation (i.e., spot prices exceed
forward prices) for any length of time, the traditional users of terminal
storage facilities are less likely to store products, thereby reducing storage
utilization levels. When petroleum product markets are in contango (i.e., spot
prices are below forward prices) by an amount exceeding storage costs, time
value of money, cost of a second
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vessel and the cost of loading and unloading at the terminal, the demand for
storage capacity at terminals usually increases. Historically, heating oil has
been in contango during the summer months and gasoline has been in contango
during the winter months. As a result, demand for heating oil storage is
typically strongest during the summer, fall and winter months and demand for
gasoline storage is typically strongest in the winter, spring and summer months.
There can be no assurance, however, that the petroleum products markets will
follow these patterns in the future.
The Company's operations at St. Eustatius have been marginally impacted in
recent years by a downturn in demand for its fuel oil storage during the spring
and summer months due in part to the seasonal nature of demand for fuel oil. The
spot market for heating oil generally parallels the fuel oil spot market;
however, there is not an active futures market for fuel oil.
Since mid-1995, all segments of the petroleum products markets have been in
backwardation. As a result, the Company believes that utilization of its
facilities has been adversely impacted. Several factors have contributed to the
present extended backwardation in the crude oil and petroleum products markets,
including anticipation of incremental crude oil supplies entering the market, a
shift to "just in time inventory" positions by many oil companies, strong demand
for petroleum products, and the closing of a major oil refinery in the northeast
U.S. The result has been a continued industry-wide erosion of tank capacity
leased as well as in the rates paid for that tank capacity.
The Company's revenues from storage, throughput and ancillary services for
clean products (i.e., gasoline, gasoline blend components, diesel, and aviation
fuels), which have been generally depressed in 1995 and 1996 because of the
recent backwardation in the petroleum products markets, have not been
significantly impacted by seasonal market fluctuations since the Company's clean
product customers have generally leased clean storage capacity on a multi-year
basis as part of their strategic distribution systems.
Customers
The Company's customers include state-owned oil producers, integrated oil
companies, refiners and traders. The Company presently has one significant
long-term contract at St. Eustatius, which is a five-year contract (with a
five-year renewal option at the customer's discretion) with a state-owned oil
producer which became effective in early 1995. This throughput and storage
contract commits all the St. Eustatius facility's current crude oil storage to
such customer, which represents approximately 44% of the terminal's total
capacity and 7.9% of the 1996 revenues of the Company, with an additional 8.5%
of the 1996 revenues of the Company being derived from parties unaffiliated with
such customer but generated by the movement of such customer's products through
the St. Eustatius terminal.
STPT, a predecessor company to Statia Canada, has signed a five-year
contract with two five-year renewal options (at the customer's discretion) with
a major refiner. This contract, which became effective in August 1994 and
commits approximately 48% of the present tank capacity at Point Tupper,
represented approximately 4.6% of the 1996 revenues of the Company, with an
additional 1.7% of 1996 revenues of the Company being derived from parties
unaffiliated with such customer but generated by the movement of such customer's
products through the Point Tupper terminal.
No other customer accounted for more than 5% of the 1996 revenues of the
Company.
Suppliers
The Company presently has a supply contract at St. Eustatius, which became
effective in 1992 and expires December 31, 1997, with a major state-owned oil
producer. This contract provides the Company with the majority of the fuel oil
necessary to support its product sales requirements. The Company obtains the
balance of its fuel oil from various sources. Fuel oil and other supplies
necessary for its operations are obtained from various sources and are readily
available.
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Environmental, Health and Safety Matters
St. Eustatius
In the past, the St. Eustatius terminal has not been subject to significant
environmental, health and safety regulations ("Environmental Laws"), and health,
safety and environmental audits have not been required by law. To date, only
water emissions monitoring has been undertaken when treated water is released
into the ocean. There are no environmental or health and safety permits required
for the St. Eustatius terminal except under the St. Eustatius Nuisance
Ordinance. In February 1996, the Company submitted an application for a license
to the Executive Council of St. Eustatius pursuant to the St. Eustatius Nuisance
Ordinance. The license will establish certain environmental standards for
operation of the facility, including limits on and monitoring of air emissions
and waste-water discharges, establishment of a waste-water treatment system,
standards for above-ground storage tanks and tank pits, as well as reporting and
clean-up of any soil pollution and site security measures. The draft license
submitted with the application has been subject to public review and comment.
The Company was issued its final license in February 1997 subject to compliance
with certain requirements. The Company believes it will be able to comply with
the final license requirements and that compliance should not require
significant additional capital costs.
On and offsite disposal and storage of hazardous waste materials have been
executed under the supervision of the terminal management. STNV has had twelve
recorded spills in the last three years, two of which were on land and ten at
sea, and the largest of which was approximately 20 tons of diesel fuel at sea.
All of these spills were reported to the appropriate environmental authorities
and have not resulted in any citations for violations of law by such
authorities. All such spills have been remediated by the Company. Three
government safety inspections have been performed in the last year with no
citations issued. In connection with the CHPII Acquisition, in June 1996 a Phase
I and a limited Phase II environmental site assessment were conducted on the St.
Eustatius terminal. The scope of the limited Phase II assessment included soil
sampling and testing in certain selected areas. In none of the areas tested were
contaminants found at levels that would require remediation under regulations
presently in effect in St. Eustatius.
Point Tupper
The Point Tupper terminal is subject to a variety of Environmental Laws
administered by the Canadian federal government and Nova Scotia Department of
Environment (the "NSDOE"). While air emission monitoring is not required by the
NSDOE, surface water discharge outfall and groundwater monitoring are required
and are performed on a routine basis in accordance with current requirements of
the NSDOE with records available on site for the NSDOE to review. All of the
requisite environmental permits are in place. The principal permit is the
Industrial Waste Treatment Works Permit issued by the NSDOE in 1992. No health
and safety permits are required. Statia Canada has had six land and eleven
marine oil spills in the last three years, the largest of which was
approximately 250 tons of crude oil spilled on land, all of which have been
reported and remediated to the satisfaction of the applicable agencies. Past
uses of the facility by others, including its past operation by others as an oil
refinery, have resulted in certain on-site areas of known and potential
contamination, as described below. Under the Environmental Laws, the Company as
the owner and operator of the facility can be held liable for remediation of,
and damages arising from these conditions. In connection with the CHPII
Acquisition, in June 1996, a Phase I and a limited Phase II environmental site
assessment were conducted on the Point Tupper terminal. The scope of the limited
Phase II assessment included surface water and groundwater sampling and testing
in certain selected areas of the terminal property and a field investigation on
the property involving the excavation of 21 test pits. These activities included
the collection of soil and groundwater samples and the analysis of those samples
for hydrocarbons and other potential contaminants. Based on available
information there is evidence of environmental contamination associated with
certain areas of the property (some of which result from the past operation of
the facility by others as a refinery) including a former sludge and waste
disposal area, an interceptor settling pond, a pump station, former lead
blending tanks, and a portion of the South Tank Farm. Certain terminal
operations also have been identified as requiring upgrading or remediation to
meet existing environmental laws, including, among
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other matters, an oil-water separator required to process facility run-off,
underground storage tanks that must be removed, possible upgrading of
containment areas for above-ground storage tanks, additional spill containment
and emergency response equipment, capacity to treat ballast water, as required,
and the presence of friable asbestos that must be removed from certain areas of
the terminal. The Company plans to undertake in accordance with Environmental
Laws the necessary investigations, remediation and upgrading to address these
matters. With respect to environmental liabilities and compliance costs at Point
Tupper, Praxair, in connection with the CHPII Acquisition, has agreed to pay up
to approximately U.S. $3.1 million.
The Company has also identified and accrued additional environmental costs
of approximately U.S. $1.5 million which are not covered by the Praxair
agreement. These costs represent pre-emptive capital improvements designed to
mitigate or prevent future environmental exposures and improve the overall
safety of the Company's facilities. The Company believes that the agreement with
Praxair to pay certain costs includes most of the significant and immediate
known environmental liabilities associated with the Point Tupper facility, and
that the amounts agreed to be paid by Praxair for specific items are reasonable.
However, there can be no assurance that environmental liabilities under existing
or future environmental laws beyond the scope of the Praxair agreement will not
be material. In addition, there can be no assurances that the Company will not
be required to incur expenses before Praxair pays amounts for which it
ultimately would be responsible.
Brownsville
The Brownsville terminal (which is being held for sale) is subject to
Environmental Laws and the Company is in material compliance with and not
subject to any material liability under any such Environmental Laws. Since 1993,
internal environmental compliance audits have been performed annually by the
Company with the assistance of safety and environmental consultants. Disposal of
hazardous materials on and offsite has been executed with the approval of the
Texas Natural Resource Conservation Commission. The Brownsville terminal has had
two land and one marine oil spills in the last three years, all of which were
reported and remediated to the satisfaction of the appropriate agency. The
largest spill at Brownsville in the last three years was approximately 150 tons
of lube oil on land. No governmental health or safety citations for violations
of Environmental Laws have been issued in the last three years. In connection
with the CHPII Acquisition, in June 1996 an Environmental Site Assessment,
including limited soil, surface water and groundwater sampling and testing, was
undertaken at the Brownsville terminal. The purpose of the assessment was to
review and assess terminal operations and environmental conditions at the
terminal property that could constitute noncompliance with or result in
remediation costs under Environmental Laws. The assessment concluded that
limited areas of soil contamination exist on the property but that no
significant environmental noncompliance or liability issues were associated with
the facility. Nevertheless, the Company has undertaken to remediate the areas of
limited soil contamination and remedy the noncompliance matters. Based on the
information available to the Company, the cost of these items is not expected to
be material.
Employees
As of December 31, 1996, excluding contract labor, the Company employed 227
people. Sixty-eight employees are located in the U.S., 103 on St. Eustatius, 55
at Point Tupper and one in Mexico. The local unions at both the St. Eustatius
and Point Tupper facilities have been in existence since 1994. The Company
believes that its relationships with its employees are good.
At STNV, the majority of the hourly workers are represented by the Windward
Islands Federation of Labor ("WIFOL"). Due to the failure of STNV and WIFOL to
conclude discussions regarding proposed changes to the agreement with WIFOL that
expired on May 31, 1996, the terms of such agreement have been extended through
May 31, 1997, with discussions continuing. There are separate ongoing
discussions between STNV management and a select group of supervisory and office
personnel at STNV regarding their organization into a collective bargaining
group. The parties are presently engaged in mediation.
The Communications, Energy and Paperworkers Union ("CEPU") represents a
portion of Point Tupper's hourly work force. During 1995, STPT and CEPU signed a
new three-year agreement that will expire on September
Page 7
<PAGE>
30, 1998. STPT has experienced two minor work stoppages in the last three years.
In April 1994, employees stopped working for approximately one-half of a day to
protest safety conditions at the facility. The following April, electricians
picketed for approximately two hours to protest the employment of non-union
workers on one project. Most of the workers at the facility were unaffected by
the activity.
Item 2. Properties
Statia Terminals N.V. - St. Eustatius, Netherlands Antilles
The St. Eustatius facility is located on the Netherlands Antilles island of
St. Eustatius, which is 1,939 miles from Houston, 1,514 miles from Philadelphia,
552 miles from Amuay Bay, Venezuela and 1,909 miles from the Panama Canal. This
facility is capable of handling a wide range of petroleum products, including
crude oil and refined products. A two berth jetty, a monopile with platform, a
floating hose station and an offshore single point mooring buoy ("SPM") serve
the terminal's customers' vessels. This facility has 28 tanks with a combined
capacity of 5.2 million barrels dedicated to fuel oil storage, 11 tanks with
total capacity of 1.1 million barrels dedicated to clean products storage and 8
tanks totaling 5.0 million barrels dedicated to multigrade crude oil storage.
The fuel oil and clean product facilities have in-tank and in-line blending
capability. The crude storage is the newest portion of the facility, having been
constructed in early 1995 by Chicago Bridge & Iron Company, a subsidiary of CBI.
The storage tanks comply with construction standards that meet or exceed API,
National Fire Prevention Association and other material industry standards.
Crude oil movements at the terminal are fully-automated. In addition to the
storage and blending services at St. Eustatius, this facility has the
flexibility to utilize certain storage capacity for both feedstock and refined
products to support its atmospheric distillation unit, which is capable of
processing up to 15,000 barrels per day of feedstock ranging from condensates to
heavy crude oil.
The St. Eustatius facility can accommodate the world's largest vessels for
loading and discharging crude oil. The SPM can handle a single fully-laden
vessel of up to 520,000 dead weight tons ("DWT") with a draft of up to 120 feet.
The SPM can discharge or load at rates in excess of 100,000 barrels per hour of
crude oil. There are six pumps connected to the SPM, each of which can pump up
to 18,000 barrels per hour from the SPM to the storage tanks. The jetty at St.
Eustatius can accommodate three vessels simultaneously. The south berth of the
jetty can handle vessels of up to 150,000 DWT with a draft of up to 55 feet. The
north berth of the jetty can handle vessels of up to 80,000 DWT with a draft of
up to 55 feet. There is also a barge loading station on the jetty. At the south
and north berths of the jetty, 25,000 barrels per hour of fuel oil can be
discharged or loaded. To accommodate the needs of its gasoline blending
customers, the Company has a monopile with platform that can handle vessels of
up to 40,000 DWT with a draft of up to 46 feet. The monopile can handle two
vessels simultaneously and can discharge or load 12,000 barrels per hour of
refined products. In addition, there is a floating hose station that the Company
uses to load bunker fuels onto its barges for delivery to customers.
Notwithstanding periods of unusually adverse market conditions, including
the backwardation that has persisted since the first quarter of 1995, the
average percentage capacity leased at the St. Eustatius facility for each of the
years ended 1994, 1995, and 1996 was 87%, 90%, and 80% respectively. The Company
believes that this demand has been driven primarily by cost advantages
associated with the location of the facility, shipping economies of scale,
product blending capabilities and the availability of a full range of ancillary
services at the facility. Storage capacity at the St. Eustatius facility has
grown from 2.0 million barrels of fuel oil storage in 1982 to a present capacity
of 11.3 million barrels.
The ability to blend a comprehensive range of refined products from
gasoline through residual fuel oils has contributed to the Company's success in
leasing the facility's tankage. The refined product tanks have generally been
leased at or near full capacity on a continuous basis. Management has worked
closely with residual fuel oil market participants to assist them with their
blending operations by offering the brokering of product blending components and
computerized blending services. STNV has a five-year (subject to renewal at the
customer's discretion) contract with a major state-owned oil producer for 5.0
million barrels of dedicated crude oil storage. This storage is being used by
the producer to service a number of its customers in the western hemisphere.
Utilization of the terminal enables the producer to transport various grades of
crude oil to markets at competitive transportation rates.
Page 8
<PAGE>
Recognizing the strategic advantage of its location in the Caribbean, the
Company delivers bunker fuel to vessels at its St. Eustatius facility. The
bunkering business has evolved from offering fuels to ships at the berth to a
delivery system utilizing specially modified barges which provide fuel to
vessels at anchorage. The location of the terminal on the leeward side of the
island, which provides natural protection for ships, generally favorable
year-round weather conditions and deep navigable water at an anchorage
relatively close to shore, attracts ships to the Company for their bunker fuel
requirements. The bunker fuel sales operation is supported by three barges owned
by the Company. These barges are used to relieve congestion at the jetty
facility and also to expedite delivery of bunker fuel to vessels that are
refueling and not discharging or loading cargo at the terminal and to deliver
bunker fuel at adjacent islands.
The Company recently commissioned its atmospheric distillation unit at St.
Eustatius. The unit is capable of processing up to 15,000 barrels per day of
feedstock ranging from condensates to heavy crude oil. This distillation unit
can produce naphtha, distillate (heating oil) and residual fuel oil. The Company
believes that the capability to process for third parties may create
opportunities for the Company in its bunkering operations.
The Company owns and operates all of the dock facilities at St. Eustatius
and charges separately for the use of these facilities as well as associated
services such as pilotage, tug assistance, line handling, launch service, spill
response capabilities and ship service.
Statia Terminals Canada, Incorporated - Point Tupper, Nova Scotia
The Point Tupper terminal is located in the Strait of Canso, near Port
Hawkesbury, Nova Scotia, Canada, which is 722 miles from New York City, 869
miles from Philadelphia and 2,522 miles from Mongstad Terminal in Norway. This
facility operates the deepest independent ice-free marine terminal on the North
American Atlantic coast, with access to the U.S. East coast, Canada and the
Midwestern U.S. via the St. Lawrence Seaway and the Great Lakes system. The
Point Tupper facility can accommodate substantially all of the largest
fully-laden very large crude carriers ("VLCCs") and ultra large crude carriers
("ULCCs") for loading and discharging.
At Point Tupper, the facilities were renovated and a former oil refinery
site was converted into an independent storage terminal. This work, performed
primarily by a subsidiary of Chicago Bridge & Iron Company, was begun in 1992
and completed in 1994. The tanks were renovated to comply with construction
standards that met or exceeded API, National Fire Prevention Association and
other material industry standards.
The Company believes that its dock at Point Tupper is one of the premier
dock facilities in North America. The south berth of Point Tupper facility's
dock, Berth One, can handle fully-laden vessels of up to 400,000 DWT with a
draft of up to 85 feet. At Berth One, approximately 75,000 barrels per hour of
crude, approximately 40,000 barrels per hour of diesel or gasoline, or 12,000
barrels per hour of fuel oil can be discharged or loaded. Berth Two can
accommodate vessels of up to 80,000 DWT with drafts of up to 60 feet. At Berth
Two, approximately 25,000 barrels per hour of crude, approximately 25,000
barrels per hour of diesel or gasoline, or approximately 25,000 barrels per hour
of fuel oil can be discharged or loaded. Terminal liquid movement is fully
automated. The Point Tupper facility can dock two vessels simultaneously. The
dock facility is owned and operated by Statia Canada, which charges separately
for the use of the dock facility as well as associated services, including
pilotage, tug assistance, line handling, launch service, spill response
capabilities and ship services.
The berths at the jetty at the Point Tupper facility connect to a 7.4
million barrel tank farm. The terminal has the capability of receiving and
loading crude oil, refined petroleum products and certain petrochemicals. This
facility has 8 tanks with a combined capacity of 3.6 million barrels dedicated
to multigrade crude oil storage, 2 tanks with a combined capacity of .5 million
barrels dedicated to fuel oil storage and 24 tanks with a combined capacity of
3.3 million barrels presently dedicated to clean, refined products (including
gasoline, gasoline blend components, diesel and distillates) storage. A portion
of the clean, refined products storage tanks may be converted to residual fuel
oil or crude oil storage. During 1996, this facility completed construction of a
55,000 barrel sphere for the storage of liquefied petroleum gas. This sphere is
one of the largest of its kind in North America and is
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<PAGE>
expected to enhance the Company's gasoline blending operation. The average
capacity leased at the Point Tupper facility over each of the last three years
ended 1994, 1995, and 1996 was 86%, 61%, and 55% respectively.
In compliance with Statia Canada's safe handling procedures and Canadian
laws regarding the environment, the Company owns two fully-equipped spill
response vessels based in Nova Scotia one of which is located at Point Tupper.
In addition to these vessels, the Company has the full capability to respond to
spills on land or water with a combined spill response capability of over 2,500
metric tons at this terminal location. An additional 7,500 metric ton spill
response capability is immediately available at Point Tupper by agreement
through a response organization. The Company's customers benefit by ready access
to the equipment. In 1995, PTMS was granted Canadian Coast Guard certification
as a response organization with emergency and spill response capabilities.
Consequently, vessels calling in the Strait of Canso are now required to pay to
PTMS a membership subscription fee for access to the services provided by the
emergency and spill response organization, even if they do not dock at the
Company's terminal.
There are two truck racks at the Point Tupper facility. The north truck
rack has the capability to load 550 barrels per hour of fuel oil and the south
truck rack has the capability to load 550 barrels per hour of fuel oil or up to
550 barrels per hour of diesel.
In 1994, STPT, a predecessor to Statia Canada, entered into a long-term
storage contract (with two five-year renewal options at the customer's
discretion) with a large oil refiner. This contract commits all of the 3.6
million barrels of current crude oil storage at the Point Tupper facility,
representing approximately 48% of the terminal's total capacity. In early 1996,
a three-year contract was signed with an international oil company to store fuel
oil at Point Tupper. This company will use the storage as a base for the
distribution of fuel oil to be sold into the local market via tank truck. As
part of the storage agreement, Statia Canada has secured a supply of fuel oil
from the international oil company for the development of a product sales
business at Point Tupper. The remaining tanks at the Point Tupper facility, all
presently designed for the storage of gasoline, distillates, aviation fuel and
other petroleum products, are currently unleased. This unused capacity
represents approximately 45% of the total terminal capacity. The severe
backwardation in the petroleum products market since mid-1995 has adversely
impacted the utilization of the facility.
In the first quarter of 1996, Statia Canada initiated the offering of
bunkering services at Point Tupper. Delivery of bunker fuel at Point Tupper is
initially being made via pipeline to vessels at the berths.
Statia Canada is in the process of finalizing a land exchange agreement
with the Province of Nova Scotia involving the conveyance of certain land
(principally the approximately 1,296 acres comprising Lake Landrie and certain
adjacent watershed lands) at the Point Tupper terminal site to the Province of
Nova Scotia in exchange for the conveyance by the Province of Nova Scotia of
certain unused road rights-of-way on the Company's remaining property at Point
Tupper.
Statia Terminals Southwest, Inc., - Brownsville, Texas
The Company's terminal near Brownsville, which is being held for sale, is
located on a deep water port serving northeast Mexico. STSW is situated near the
U.S./Mexico border, 8 miles from Matamoros, Mexico and 17 miles inland from the
Gulf of Mexico, within the Port of Brownsville. The terminal handles refined
petroleum products, asphalt, vegetable and fish oils, lube oils, wax and
chemicals. The terminal consists of 41 tanks with an aggregate storage capacity
totaling over 1.6 million barrels. Tank sizes range from 1,500 barrels to nearly
200,000 barrels. The tanks and associated common facilities are located on
several parcels of land that are leased from the Brownsville Navigation
District. Four docks, owned and operated by the Brownsville Navigation District,
accommodate marine vessel traffic at STSW's facility. The Brownsville facility
can handle fully-laden vessels of up to 50,000 DWT. STSW uses five railroad spur
lines with a total of 32 railcar spots to accommodate railroad tank cars. Most
of the commodities transshipped through the Company's Brownsville facility
arrive inbound by marine vessel and are subsequently loaded outbound into
railcars or tank trucks primarily for shipment into Mexico.
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<PAGE>
Item 3. Legal Proceedings
Global Petroleum Corp. ("Global") brought an action against the Company in
December of 1993 in the Supreme Court of Nova Scotia seeking the release of
certain petroleum products owned by Global that the Company was holding to
secure the payment of certain invoices. Global secured the release of the
products by posting a $2.0 million bond. Global claims damages of $1.2 million
for breach of contract and the Company counterclaimed for breach of contract and
payment of the approximately $2.0 million of unpaid invoices for product storage
and other services. In April 1996, Global, Scotia Synfuels Limited and their
related companies brought suit against CBI Industries, Inc. and the Company in
the Supreme Court of Nova Scotia alleging damages in the amount of $100 million
resulting from misrepresentation, fraud and breach of fiduciary duty associated
with the reactivation of the Point Tupper facility and the sale of their shares
in Point Tupper Terminals Company, a predecessor to Statia Canada, to an
affiliate of the Company and CBI.
In May 1994, the U.S. Department of Justice brought an action in the U.S.
District Court for the District of Virgin Islands against Statia Terminals, Inc.
and STNV for $3.6 million of pollution clean up costs in connection with the
discharge of oil into the territorial waters of the U.S. Virgin Islands and
Puerto Rico by a barge (not owned or leased by the Company or any of its
affiliates) that had been loaded at St. Eustatius. The Company is presently
disputing the U.S. District Court's jurisdiction over STNV.
The Company believes the allegations made in these proceedings are without
merit; therefore, the Company intends to vigorously contest these claims. In
connection with the CHPII Acquisition, Praxair agreed to indemnify the Company
against damages relating to the foregoing proceedings. While no estimate can
reasonably be made of any ultimate liability at this time, the Company believes
the final outcome of these proceedings will not have a material adverse effect
on the Company's business, financial condition or results of operations.
The Company is involved in various other claims and litigation arising from
the ordinary conduct of its business. Based upon analysis of legal matters and
discussions with legal counsel, the Company believes that the ultimate outcome
of these matters will not have a material adverse impact on the Company's
business, financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
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PART II.
Item 5. Market for Registrant's Common Equity and Related Security Matters
Not applicable.
Item 6. Selected Financial Data
The following table sets forth selected financial data for the periods and
as of the dates indicated. The statement of income data for each of the three
years ended December 31, 1995 and the period January 1, 1996 through November
27, 1996 ("Post-Praxair Acquisition") and the period November 27, 1996 through
December 31, 1996 ("Post-CHPII Acquisition") and the balance sheet data as of
December 31, 1993, 1994, 1995, and 1996 have been derived from and are qualified
by reference to, the audited Consolidated Financial Statements of the Company.
The statement of income data for the year ended December 31, 1992 and the
balance sheet data as of December 31, 1992 have been derived from the Company's
unaudited combined financial statements. The selected financial data set forth
below should be read in conjunction with, and are qualified by reference to,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company and
accompanying notes thereto and other financial information included elsewhere in
this filing.
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<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(Dollars in thousands)
<TABLE>
<CAPTION>
Post-CHPII
Pre-CHPII Acquisition Acquisition
------------------------------------------------------------------ -----------
Pre-Praxair Acquisition
---------------------------------------------------
Year ended December 31,
--------------------------------------------------- 1/1/96 - 11/27/96 -
1992 1993 1994 1995 11/27/96(1) 12/31/96(1)
--------- --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenues $ 99,122 $ 112,076 $ 132,666 $ 135,541 $ 140,998 $ 14,956
Cost of services and products sold 82,893 94,850 111,194 117,482 129,498 13,010
Gross profit 16,229 17,226 21,472 18,059 11,500 1,946
Administrative expenses (2) 3,307 4,388 5,339 6,900 8,251 413
Interest expense (3) -- 726 3,114 4,478 4,187 1,525
Net income (loss) available to
common stockholders 13,060 10,046 10,944 4,569 (2,682) (95)
Balance Sheet Data:
Total assets (4) $ 88,128 $ 186,420 $ 197,357 $ 230,283 N/A $ 260,155
Total debt (5) -- 60,126 64,450 66,400 N/A 135,000
Stockholders' equity subject to
reduction (6) -- -- -- -- N/A 20,000
Preferred stock 12,000 11,212 18,057 18,589 N/A --
Total stockholders' equity (7) 73,482 95,404 86,965 91,001 N/A 75,405
Other Financial Data and Ratios:(8)
Adjusted EBIT (9) $ 13,712 $ 12,755 $ 17,241 $ 16,602 $ 11,526 $ 1,562
Depreciation and amortization 4,401 6,683 10,680 12,118 9,296 1,011
Adjusted EBITDA (10) 18,113 19,438 27,921 28,720 20,822 2,573
Gross profit as a % of revenues 16.4% 15.4% 16.2% 13.3% 8.2% 13.0%
Effective tax rates (11) 4.8% 15.6% 8.6% 6.1% N/A N/A
Capital expenditures (12) 19,223 17,147 25,440 37,138 103,001 1,203
Net Cash Flow From:
Operating activities $ 23,759 $ (3,371) $ 25,706 $ 11,476 $ 9,108 $ 2,225
Investing activities (24,225) (23,355) (25,353) (36,908) (102,890) (177,033)
Financing activities -- 28,404 (1,679) 26,477 92,998 184,072
Adjusted EBITDA/interest
expense (13) N/M 26.77% 8.97% 2.81% 2.13% 1.69
Total debt/Adjusted EBITDA N/M 3.09% 2.31% 2.31% N/A N/A
Consolidated fixed charge
coverage ratio (14) -- -- -- -- -- 1.69
Capacity (in thousands of barrels) 7,459 11,590 15,387 20,387 20,387 20,387
Percentage capacity leased (15) 86% 79% 87% 76% 68% 74%
Throughput (in in thousands of
barrels) (16) 27,109 37,591 60,630 109,805 81,994 13,223
Vessel calls (17) 829 967 1,063 973 922 108
N/M - not meaningful
N/A - not applicable
</TABLE>
(1) Prior to January 12, 1996, the Company was a wholly-owned subsidiary of CBI
Industries, Inc. On January 12, 1996, pursuant to the merger agreement
dated December 22, 1995, CBI became a wholly-owned subsidiary of Praxair,
Inc. This Praxair purchase transaction was reflected in the consolidated
financial statements of the Company as a purchase, effective January 1,
1996. On November 27, 1996, Castle Harlan Partners II, L.P., management and
others acquired the Company from Praxair. This purchase transaction is
reflected in the financial statements effective November 27, 1996 as a
purchase. The application of purchase accounting resulted in changes to the
historical cost basis of accounting for certain assets. Accordingly, the
information provided for periods before and after each of these
transactions is not comparable.
(2) Administrative expenses include $3.0 million of non-cash, stock-based
compensation recognized on November 27, 1996 immediately prior to
consummation of the CHPII Acquisition.
(3) Interest expense subsequent to November 27, 1996 reflects the debt incurred
in connection with the CHPII Acquisition at the interest rate of 11.75% per
annum.
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<PAGE>
(4) The change in total assets from December 31, 1995 to December 31, 1996
resulted primarily from the application of purchase accounting at January
1, 1996 and November 27, 1996 resulting in a net reduction of $77,344
largely offset by the acquisition of the First Salute Leasing, L.P. assets
which had previously been leased for a total of $88,512 and capital
expenditures during 1996 totaling $15,692.
(5) Prior to the CHPII Acquisition, the Company was financed through a
combination of third-party debt and, effective with the Praxair
Acquisition, $10.0 million of pushed-down debt from the application of
purchase accounting. Advances from Praxair and CBI were non-interest
bearing. Pre-CHPII Acquisition, third-party debt was retired as part of the
acquisition prior to November 27, 1996. Total debt at December 31, 1996
consists entirely of the $135 million First Mortgage Notes.
(6) Certain of the Parent's preferred stock contain features which may require
the Parent to cause the Company to dividend or otherwise remit the proceeds
of the sale of certain assets. See Note 8 to Consolidated Financial
Statements of Statia.
(7) The reduction of total common stockholders' equity between December 31,
1995 and December 31, 1996 resulted from the application of purchase
accounting on January 1, 1996 and November 27, 1996.
(8) Adjusted EBIT, Adjusted EBITDA, Adjusted EBITDA/interest expense and Total
Debt/Adjusted EBITDA are not measures prepared in accordance with GAAP, but
rather to provide additional information related to the debt servicing
ability of the Company.
(9) Adjusted EBIT is defined as the sum of income before income tax provision
(benefit), interest expense, certain non-cash charges for 1996 and the
portion of the First Salute Leasing, L.P. lease payment that represents
interest expense for the periods prior to the November 27, 1996 purchase
transaction. The amount of the First Salute Leasing, L.P. related interest
expense included in the calculation was $5,741 for the year ended December
31, 1995, and $5,600 for the period ended November 27, 1996. For financial
statement purposes, such amounts are shown in Cost of services and products
sold.
(10) Adjusted EBITDA is defined as the sum of (i) income before income tax
provision (benefit), (ii) interest expense, (iii) depreciation and
amortization, (iv) certain non-cash charges for 1996, and (v) the portion
of the First Salute Leasing, L.P. lease payments that represents interest
expense for the periods prior to the November 27, 1996 purchase
transaction. The amount of the First Salute Leasing, L.P. related interest
expense included in the calculation was $5,741 for the year ended December
31, 1995 and $5,600 for the period ended November 27, 1996. Adjusted EBITDA
is presented not as an alternative measure of operating results or cash
flow from operations (as determined in accordance with generally accepted
accounting principles), but rather to provide additional information
related to the debt servicing ability of the Company.
(11) The effective tax rate of the Company is based upon the level of pre-tax
income, or loss, incurred in each tax jurisdiction. Certain locations
include separate legal entities that restrict the ability of the Company to
offset pre-tax income against pre-tax losses from other entities. Further,
certain entities, including STNV, are subject to minimum tax computations
which, depending on the level of pre-tax income, may have a significant
impact on the effective tax rate of the Company. See Note 12 to
Consolidated Financial Statements of Statia.
(12) Excludes capital spending of $400; $86,595; and $1,518 during 1993, 1994
and 1995, respectively, financed through an operating lease arrangement
with First Salute Leasing, L.P. and capital spending at Point Tupper prior
to its acquisition in October, 1993. Includes purchase of First Salute
Leasing, L.P. assets in conjunction with the CHPII Acquisition.
(13) For purposes of this ratio, interest expense includes the First Salute
Leasing, L.P. lease payments.
(14) The consolidated fixed charge coverage ratio is the ratio of adjusted
EBITDA to fixed charges as defined in the Indenture relating to the 11-3/4%
First Mortgage Notes.
Page 14
<PAGE>
(15) Represents the storage capacity leased to third parties weighted for the
number of days leased divided by the capacity available for lease.
(16) Represents the total number of inbound barrels discharged from a vessel,
tank, rail car or tanker truck, not including across-the-dock or
tank-to-tank transfers.
(17) A vessel call occurs when a vessel docks or anchors at one of the Company's
terminal locations in order to load and/or discharge cargo and/or to take
on bunker fuel. Such dockage or anchorage is counted as one vessel call
regardless of the number of activities carried on by the vessel. A vessel
call also occurs when the Company sells and delivers bunker fuel to a
vessel not calling at its terminals for the above purposes.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
For purposes of the discussion below, reference is made to the Consolidated
Financial Statements of Statia Terminals International N.V. and its Subsidiaries
as of December 31, 1995 and 1996 and for the years ended December 31, 1994 and
1995; the Post-Praxair Acquisition income and cashflow statements for the period
January 1, 1996 through November 27, 1996; and the Post-CHPII Acquisition income
and cash flows statements for the period November 27, 1996 through December 31,
1996. The Company prepares its financial statements in accordance with U.S.
generally accepted accounting principles. To facilitate a meaningful discussion
of the Company's comparative operating performance for the years ended December
31, 1994, 1995 and 1996, the financial information in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations" is
presented on a traditional comparative basis for all periods unless otherwise
indicated. Consequently, the information presented below for the year ended
December 31, 1996 does not necessarily comply with the accounting requirements
for companies subject to major acquisitions. Generally accepted accounting
principals in the U.S. call for separate reporting for the new company
(Post-CHPII Acquisition) and the predecessor companies (Pre- and Post-Praxair
Acquisitions). A solid black line has been inserted in tables where financial
information may not be comparable across periods. Substantially all of the
Company's transactions are denominated in U.S. dollars. All figures are in U.S.
dollars unless otherwise indicated.
Overview
Primarily as a result of increased storage capacity from 11.6 million
barrels as of December 31, 1993 to 20.4 million barrels as of December 31, 1995
and 1996, and additional product sales, total revenues increased from $132.7
million for the year ended 1994 to $156.0 million for the year ended 1996. The
Company expanded to its third location, Point Tupper, Nova Scotia, during 1992
and completed refurbishment of this 7.4 million barrel facility during 1994 (a
total capital investment of $74.1 million). At St. Eustatius during the fourth
quarter of 1993, the Company commenced construction of five million barrels of
crude oil storage and a SPM system (the "St. Eustatius Crude Project"), which
was completed and leased during the first quarter of 1995 (total capital
investment of $107.5 million). Over the three year period from 1993 to 1995, the
Company added crude oil storage and related services to its established fuel
oil, clean products, consumable oils and chemicals storage and related services.
In addition to blending and other ancillary services, the Company added marine
emergency response services at both St. Eustatius and Point Tupper and limited
refining capability through its atmospheric distillation unit at St. Eustatius
during 1995. Finally, during the fourth quarter of 1995 and the first quarter of
1996, investments were made in a heating system and LPG sphere at Point Tupper.
These additions to capacity have led to more throughput and, therefore, higher
revenues from storage, throughput and ancillary services. Revenues from storage,
throughput and ancillary services (consisting of storage, throughput, wharfage,
emergency and spill responses and other terminal services) grew from $43.1
million to $54.7 million for the years ended December 31, 1994 and 1995,
respectively, but fell to $49.8 million for the year ended December 31, 1996 due
to reduced utilization of storage capacity.
Page 15
<PAGE>
Capacity, Capacity Leased, Throughput and Vessel Calls by Location
(Capacity and throughput in thousands of barrels)
<TABLE>
<CAPTION>
For the year ended December 31,
--------------------------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Netherland Antilles and
the Caribbean
Total capacity 6,334 11,334 11,334
Capacity leased 87% 90% 80%
Throughput 34,223 72,420 69,395
Vessel calls 866 825 880
Canada
Total capacity 7,404 7,404 7,404
Capacity leased 86% 61% 55%
Throughput 19,507 34,117 23,350
Vessel calls 76 95 62
Texas
Total capacity 1,649 1,649 1,649
Capacity leased 88% 46% 52%
Throughput 6,900 3,268 2,472
Vessel calls 121 53 88
All locations
Total capacity 15,387 20,387 20,387
Capacity leased 87% 76% 69%
Throughput 60,630 109,805 95,217
Vessel calls 1,063 973 1,030
</TABLE>
Page 16
<PAGE>
Primarily as a result of backwardation in the petroleum markets, which
creates a disincentive to store oil, storage, throughput and ancillary services
revenues and operating net income have decreased recently. Storage, throughput
and ancillary services revenues fell 8.9% for the 1996 year versus the
comparable period for 1995. Last year, the operations at St. Eustatius suffered
damages from Hurricanes Iris, Luis and Marilyn (the "1995 Hurricanes") causing
closure of the terminal during the third quarter of 1995. Repair of damages
caused by the 1995 Hurricanes and installation of certain improvements were
substantially completed by the end of the third quarter of 1996 at an estimated
cost of $19.4 million, of which $12.6 million was recovered from insurance
carriers (the remaining $6.8 million having been principally expended on
improvements). Except for inflationary cost increases, cost increases due to
additional storage capacity and costs of providing additional ancillary
services, the operating costs of the Company are relatively fixed and generally
do not change significantly with changes in capacity leased. Additions or
reductions in storage, throughput and ancillary service revenues directly impact
operating income. The following tables set forth, for the periods indicated, the
total revenues and total operating income (loss) after allocation of
administrative expenses at each of the Company's operating locations and the
percentage such revenue and operating income (loss) bear to the total revenue
and operating income of the Company.
Revenues by Location
(Dollars in thousands)
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------------------------------------------------------
1994 1995 1996
------------------------ ------------------------ -------------------------
$ % of Total $ % of Total $ % of Total
- ---------- - ---------- - ----------
<S> <C> <C> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean 114,991 86.7% 121,899 89.9% 139,403 89.39%
Canada 12,024 9.1% 11,143 8.2% 13,462 8.63%
U.S. 9,460 7.1% 8,641 6.4% 9,060 5.81%
Eliminations (3,809) -2.9% (6,142) -4.5% (5,971) -3.83%
------- ----- ------- ----- ------- ------
Total 132,666 100.0% 135,541 100.0% 155,954 100.00%
======= ===== ======= ===== ======= ======
</TABLE>
Operating Income (Loss) by Location
(Dollars in thousands)
<TABLE>
<CAPTION>
For the year ended December 31,
----------------------------------------------------------------------------------
1994 (1) 1995 (1) 1996
------------------------- ------------------------ ----------------------
$ % of Total $ % of Total $ % of Total
- ---------- - ---------- - ----------
<S> <C> <C> <C> <C> <C> <C>
Netherlands Antilles and
the Caribbean 14,422 83.6% 12,561 115.7% 6,785 151.2%
Canada 1,505 8.7% (412) -3.8% (1,223) -27.3%
U.S. 1,315 7.6% (1,288) -11.8% (1,074) -23.9%
------ ----- ------ ----- ----- -----
Total 17,242 100.0% 10,861 100.0% 4,488 100.0%
====== ===== ====== ===== ===== =====
</TABLE>
(1) Operating income (loss) includes other income (expenses).
The following table sets forth, for the periods indicated, the percentage
of revenues represented by certain items in the combined statements of income of
the Company. The table and subsequent discussion should be read in conjunction
with the Consolidated Financial Statements appearing at Page F-1 of this Annual
Report on Form 10-
Page 17
<PAGE>
K. The historical operating results are not necessarily indicative of the future
operating results or business and financial condition of the Company.
(Dollars in thousands)
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------------------------------------------------
1994 (1) 1995 (1) 1996
---------------------- -------------------- ---------------------
% of % of % of
$ Revenues $ Revenues $ Revenues
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Storage, throughput and ancillary
services $ 43,096 32.48% $ 54,701 40.36% $ 49,812 31.94%
Bunker and bulk product sales 89,570 67.52% 80,840 59.64% 106,142 68.06%
--------- ------ --------- ------ --------- ------
Total revenues 132,666 100.00% 135,541 100.00% 155,954 100.00%
Cost of services and products sold 110,086 82.98% 117,780 86.90% 142,801 91.57%
--------- ------ --------- ------ --------- ------
Gross profit 22,580 17.02% 17,761 13.10% 13,153 8.43%
Administrative expenses 5,339 4.02% 6,900 5.09% 8,664 5.56%
--------- ------ --------- ------ --------- ------
Income from operations 17,241 13.00% 10,861 8.01% 4,489 2.88%
Interest expense 3,114 2.35% 4,478 3.30% 5,712 3.66%
--------- ------ --------- ------ --------- ------
Income (loss) before income taxes and
preferred stock dividends 14,127 10.65% 6,383 4.71% (1,223) -0.78%
Provision for income taxes 1,219 0.92% 390 0.29% 761 0.49%
Preferred stock dividends 1,964 1.48% 1,424 1.05% 792 0.51%
--------- ------ --------- ------ --------- ------
</TABLE>
Comparison of Twelve Months Ended December 31, 1995 and 1996
Revenues aggregated $156.0 million for the twelve months ended December 31,
1996, an increase of $20.5 million, or 15.1%, from the twelve-month results for
1995 of $135.5 million. The revenue increase was primarily due to strong demand
for bunker fuels at St. Eustatius partially offset by reduced storage,
throughput and ancillary services revenues at the St. Eustatius and Point Tupper
locations. Storage, throughput and ancillary services generally produce higher
gross margins than bunker fuel and bulk product sales activities. Gross profit,
operating income and net income (loss) for the years ended December 31, 1995 and
1996 are not comparable due to the effects of purchase accounting applied as a
result of the Praxair Acquisition and the CHPII Acquisition. Depreciation,
amortization and other operating expenses, which are components of gross profit,
changed because of the revaluation of various assets to their fair values at the
acquisition dates. Changes in components of the Company's debt and equity
accounts resulted in changes to interest expense and costs of services and
products sold. The year-to-year change in the mix of revenues and increases in
operating and administrative expenses, primarily from non-recurring, stock-based
compensation earned upon Praxair's divestiture of the Company, contributed to
the 58.7% decrease in operating income from $10.9 million for 1995 to $4.5
million for 1996.
Storage, throughput and ancillary revenues were $49.8 million for the
twelve months ended December 31, 1996 compared to $54.7 million, down $4.9
million, or 8.9% from the same period for 1995. At St. Eustatius, storage,
throughput and ancillary services revenues were down $1.8 million, or 4.4% due
primarily to a reduction in tankage leased for fuel oil and a reduction in
associated throughput volume. At Point Tupper, these revenues were down $3.5
million, or 31.0% due primarily to a reduction in tankage leased for refined
products and a reduction in crude oil throughput volume. The decreases at each
location are primarily due to non-renewal of storage leases by some customers as
a result of backwardation in the petroleum markets, reduced throughput from
existing customers, and uncertainty as to the Company's future ownership due to
Praxair's announced plan to dispose of the business.
Revenues from the sale of bunker fuel and bulk oil products were $106.1
million for the twelve months ended December 31, 1996 compared to $80.8 million
for 1995, an increase of $25.3 million, or 31.3%. The change is due primarily to
an increase in bunker fuel volume delivered at higher average selling prices
partially offset by a reduction in bulk product volume sold at St. Eustatius.
Bunker fuel volume delivered rose 35.8% and average selling prices rose 9.4%
when comparing the twelve month periods ended December 31, 1995 and 1996. Gross
margins on bunker fuel and bulk product sales, both in dollar terms and as a
percentage of revenues, are little
Page 18
<PAGE>
changed when comparing similar figures for the twelve month periods of 1995 and
1996. While volumes of bulk product sales were down (41.6% when comparing twelve
month periods), gross margins have improved slightly. At Point Tupper, the
Company commenced the delivery of bunker fuel during the first quarter of 1996
generating revenues of $4.4 million for the 1996 year.
At the Brownsville, Texas terminal (which is being held for sale) improved
storage and throughput revenue primarily from vegetable oils and asphalt lead to
total revenues (prior to elimination of intercompany revenue) of $3.3 million
for 1996, up $0.8 million, or 32.0%, from 1995 total revenues of $2.5 million.
After elimination of intercompany revenues, and consideration of additional
operating expenses for 1996, the changes in the operating loss from the 1995
year to the 1996 year are not significant. The Brownsville operation leased
52.0% of its available capacity for 1996 compared to 46.1% for 1995, however
throughput decreased from 3.3 million barrels for 1995 to 2.5 million barrels
for 1996.
Operating expenses including depreciation and amortization (which are
included in the line item cost of services and products sold) were $39.5 million
for the twelve months ended December 31, 1996 compared to $36.6 million for the
same period in 1995, an increase of $2.9 million, or 7.9%. With the inception of
operations for the St. Eustatius Crude Project during the first quarter of 1995,
personnel costs and related fringe benefits, marine charter costs and other
expenses gradually increased. The St. Eustatius facility incurred a full year of
such costs for 1996 while only incurring approximately nine months of such costs
during 1995. The Company has also incurred higher insurance costs and fees for
professional services (which do not include fees for the CHPII Acquisition) for
the twelve months of 1996 as compared to the same period for 1995. The Company
expects that while certain expenses for professional fees will not recur,
insurance costs will increase further in connection with increasing coverage for
the collateral securing the Notes and as a result of the Company's inability to
reduce risk management costs by pooling such costs with CBI and Praxair.
Administrative expenses increased from $6.9 million for 1995 to $8.7
million for 1996, an increase of $1.2 million, or 17.4%. This increase was
primarily due to non-recurring, stock-based compensation of $3.0 million awarded
to management earned upon Praxair's divestiture of the Company offset by a
reduction in parent company administration fees of $1.2 million.
Interest expense related to third party debt was $4.5 million and $5.7
million for the years ended December 31, 1995 and 1996, respectively, net of
interest capitalized to capital projects and the effects of an interest rate
swap. In the first quarter of 1996, due to the Praxair Acquisition, the
Company's term and revolving debt was refinanced resulting in changes to
interest rates. In conjunction with the CHPII Acquisition, all previously
existing bank debt was fully satisfied and the 11-3/4% First Mortgage Notes were
issued.
Tax rates in the jurisdictions in which the Company operates did not change
significantly between 1995 and 1996. Certain income tax liabilities incurred
prior to November 27, 1996 were assumed by Praxair and the Company retained net
operating loss carryforwards of U.S. $7.5 million in Canada.
As a result of the Praxair Acquisition of CBI on January 12, 1996, the
Company, following the push-down accounting rules, recognized a $85.5 million
reduction of its property and equipment as of January 1, 1996. The Company wrote
off approximately $9.9 million of goodwill and other intangible assets resulting
from prior acquisitions and transactions. As a result of this reduction and
write off, 1996 depreciation and amortization expenses of the Company decreased
by $4.7 million on an annualized basis.
Comparison of Twelve Months Ended December 31, 1994 and 1995
For the year ended December 31, 1995, revenues were $135.5 million, an
increase of $2.9 million, or 2.2%, over annual revenues for 1994 of $132.7
million. The Company experienced gains in bunker fuel sales and storage and
throughput services revenues and decreases in bulk product sales. Due primarily
to a 24.7% increase in operating expenses and a 29.2% increase in selling and
administrative expenses, income from operations fell from $17.2 million in 1994
to $10.9 million in 1995, a decrease of $6.3 million, or 36.6%. The Company
incurred additional expenses in anticipation of significant growth, including
higher terminal throughput, particularly at Point
Page 19
<PAGE>
Tupper and Brownsville. The Company's management believes that third and fourth
quarter operating income in 1995 was lower than the results would have been had
the St. Eustatius facility not been impacted by the 1995 Hurricanes primarily
due to lost business from temporary shut down of the St. Eustatius facility.
Primarily as a result of the completion and subsequent lease of the St.
Eustatius Crude Project in the first quarter of 1995 and additional bunker
sales, revenues at St. Eustatius increased to $121.9 million from $115.0 million
for 1994, an increase of $6.9 million, or 6.0%. Partially offsetting the growth
in revenues was a reduction in bulk product sales and the detrimental impact of
the 1995 Hurricanes.
At St. Eustatius, revenues from storage and throughput services, amounted
to $41.0 million for 1995, an increase of $15.6 million, or 61.4%, above the
1994 results of $25.4 million. The increase is due to higher utilization and
throughput volumes, particularly from the St. Eustatius Crude Project, resulting
in higher revenues from storage leases, throughput charges, dock charges,
emergency response fees and other charges. The percentage of capacity leased for
1995 was 90.4% compared to 87.3% for 1994. Throughput volumes increased from
34.2 million barrels to 72.4 million barrels, an increase of 38.2 million
barrels, or 111.7%, primarily as a result of 50.1 million barrels of crude oil
transshipped through the St. Eustatius Crude Project during the year.
Revenues from delivery of bunker fuel amounted to $64.9 million for 1995,
an increase of $10.4 million, or 18.9%, from 1994 revenues of $54.5 million.
This increase is primarily due to an 8.5% increase in volumes delivered. The
Company experienced larger quantities delivered to fewer vessels in 1995 versus
1994 which allowed the Company to benefit from economies of scale for large
deliveries, including the more efficient use of equipment. Bunker sales were
also affected by an increase in average selling prices of approximately 9.6%.
The Company experienced general market price increases and a slight change in
the mix of bunker fuel sold (a movement toward higher quality fuel oil sales
which command a higher price).
Bulk product sales generated revenues of $16.0 million for 1995 compared to
$35.1 million for 1994. During 1995, as a result of shifting its primary
customer base to utilities and commercial interests in the Caribbean, the
Company realized smaller volume but higher margin sales. In previous years, the
Company bought cargo size lots of petroleum products from a key supplier for
resale to utilities in the U.S.
Revenues from storage and throughput services at Point Tupper aggregated
$11.2 million for 1995 compared to $12.2 million for 1994, a 8.2% decrease. Due
in part to the backwardation in the oil markets, most of the clean product tanks
(approximately 52% of the Point Tupper facility) remained vacant during 1995.
During 1995, 61.4% of the total available tankage was leased compared to 86.0%
for 1994. However, total throughput amounted to 34.1 million barrels for 1995,
an increase of 14.6 million barrels, or 74.9%, over 1994 throughput of 19.5
million barrels. The throughput increase is due primarily to full utilization of
the terminal's crude oil capacity for 1995 compared to only partial utilization
for 1994 as reactivation of the crude portion of the facility was completed and
leased during the third quarter of 1994.
The terminal in Brownsville, Texas (which is being held for sale) generated
revenues of $2.5 million for 1995, down 54.5%, or $3.0 million, from 1994
revenues of $5.5 million. The primary cause of the decrease was the devaluation
of the Mexican peso in December 1994 and the corresponding negative effect on
the Mexican economy during 1995. Mexican economic conditions caused several
customers who had stored petroleum and vegetable oils during 1994 not to renew
their leases or return to tanks previously utilized during their seasonal
periods. Brownsville leased 46.1% of its available capacity during 1995 compared
to 87.8% during 1994. Total throughput barrels amounted to 3.3 million for 1995
versus 6.9 million barrels for 1994. Additionally, reduced utilization of
tankage led to lower revenues from ancillary services.
Operating expenses, included in cost of services and products sold, for the
1995 year were $36.6 million, an increase of $7.3 million, or 24.9%, over 1994
expenses of $29.3 million, primarily due to additional depreciation and
personnel expenses related to the St. Eustatius Crude Project (which commenced
operations during the first quarter of 1995) and completion of the renovation
and subsequent lease of the crude facility at Point Tupper (which commenced
operations during the third quarter of 1994). The Company also experienced an
increase in its marine charter and crew costs at St. Eustatius due to the need
for additional tug and emergency response capabilities.
Page 20
<PAGE>
Offsetting the year-to-year increase was a change in the depreciable lives of
certain assets in order to conform more closely with industry standards. The
Company had been depreciating its tanks and jetties over 20 and 15 years,
respectively, but changed its estimated useful life to 40 and 25 years,
respectively, reducing depreciation expenses by $3.4 million for 1995.
Administrative expenses increased from $5.3 million for 1994 to $6.9
million for 1995, an increase of $1.6 million, or 30.2%. This increase was due
to a higher allocation of administrative charges from CBI, the addition of
personnel, salary increases consisting primarily of cost of living adjustments
and moving expenses. The Company relocated its administrative office, at which
supervisory and policy decisions are made, from Miami, Florida to Deerfield
Beach, Florida during the summer of 1995.
Interest expense related to third party debt was $3.1 million and $4.5
million for the year ended December 31, 1994 and 1995, respectively, net of
interest capitalized to capital projects and the effects of an interest rate
swap. The higher interest expense was due to higher average interest rates
charged on the Company's floating rate loans and higher average borrowings
outstanding.
Tax rates in the jurisdictions in which the Company operates did not change
significantly between 1994 and 1995. The provision for income taxes fell from
$1.2 million for 1994 to $0.4 million for 1995, primarily because of the
reduction of earnings at the Brownsville terminal. For 1994, Brownsville had
pretax income of $1.2 million resulting in a tax provision of $0.8 million, and
for 1995 this operation had a pretax loss of $1.6 million. Secondly, the Company
incurred the minimum profit tax payable under its Free Zone and Profit Tax
Agreement in the Netherlands Antilles of $0.3 million for 1994 and 1995, and
paid its share of Large Corporation Tax in Canada for 1994 and 1995.
Consequently, the effective tax rate of the Company was 8.6% for 1994 versus
6.1% for 1995. As of December 31, 1995, the Point Tupper terminal had net
operating loss carryforwards of $8.0 million plus investment tax credits
available to offset future taxable income.
Liquidity and Capital Resources
As part of the CHPII Acquisition, the Company received a capital
contribution of $98.5 million from its Parent, consisting of $55.5 million of
cash and $43.0 million of equity in certain of Statia's subsidiaries, and issued
$135.0 million of First Mortgage Notes, Series A (which were subsequently
exchanged for the Notes). A portion of the contributed capital and proceeds from
the issuance to the First Mortgage Notes, Series A, was used by the Company (i)
to pay approximately $174.1 million in cash to Praxair (of which $169.0 million
was paid at closing and $5.1 million paid in February 1997) to satisfy the cash
portion of the purchase price, and (ii) to pay $16.0 million of commissions,
fees and expenses. In connection with the CHPII Acquisition, prior to November
27, 1996, existing indebtedness of the Company, including an off-balance sheet
lease obligation, bank debts, preferred stock from a former affiliate and
advances from Praxair, was repaid. In addition, on November 27, 1996, the
Company, through its subsidiaries, entered into a new $17.5 million Revolving
Credit Facility secured by the Company's accounts receivable and oil inventory.
No draws on the Revolving Credit Facility have occurred through May 13, 1997.
The facility bares interest at the prime rate plus .50% per annum (8.75% at
December 31, 1996) and will expire on November 27, 1999.
The debt service costs associated with the borrowings under the Notes and
the Revolving Credit Facility will significantly increase liquidity
requirements. The Notes accrue interest at 11-3/4% per annum payable
semi-annually commencing May 15, 1997. The Notes will mature on November 15,
2003. The Indenture relating to the Notes limits the incurrence of additional
debt by the Company, limits the ability of the Company to pay any dividends or
redeem any capital stock, and limits the Company's ability to sell its assets.
The Company may incur additional indebtedness as long as its Consolidated Fixed
Charge Coverage Ratio is greater than certain minimum levels. Under the
Indenture and the Revolving Credit Facility, so long as no event of default has
occurred, there are no restrictions on the distribution by subsidiaries of funds
to Statia or Statia Canada in the form of cash dividends, loans or advances.
Except for cash of the Company's Canadian subsidiaries, prior to the CHPII
Acquisition the Company had been a participant in Praxair/CBI's cash management
system whereby all cash receipts were swept into its former
Page 21
<PAGE>
parent's investment program. Cash for operations and capital expansion has been
funded by the operations of the Company, its former parent and debt facilities
available to the Company (guaranteed by its former parent). During 1994, cash
from operations provided $25.7 million, advances from the Company's parent
provided $8.3 million and sales of preferred stock to an affiliate provided $7.5
million. The major uses of cash for 1994 were for capital expenditures of $25.4
million (exclusive of $86.6 million financed off-balance sheet through First
Salute Leasing, L.P.) and dividends to the Company's former parent and
affiliates in the amount of $21.8 million. During 1995, the major sources of
cash were $25.9 million from the Company's former parent and $11.5 million from
operations; the major use of cash was $37.1 million for capital to expand or
sustain operations. During 1996 prior to the CHPII Acquisition, cash provided by
operations of $9.2 million, proceeds from insurance claims related to the 1995
Hurricanes of $12.6 million and net advances from Praxair of approximately $19.3
million (exclusive of advances related to repayment of existing indebtedness)
were used to finance the purchase of property and equipment of $14.6 million and
pay dividends to Praxair and its affiliates of $25.8 million. Since November 27,
1996, the Company has paid an adjustment to the purchase price relating to the
CHPII Acquisition of $5.1 million, incurred relatively few capital expenditures
($1.9 million for the period November 27, 1996 to March 31, 1997) and steadily
accumulated cash generated by operations.
The Company believes that cash flow generated by its operations and amounts
available under its Revolving Credit Facility will be sufficient, until the
maturity of the Notes, to fund its working capital needs, fund its capital
expenditures and other operating requirements (including any expenditures
required by applicable environmental laws and regulations) and service its debt.
The Company's operating performance and ability to service or refinance the
Notes and to extend or refinance the Revolving Credit Facility will be subject
to future economic conditions and to financial, business and other factors, many
of which are beyond the Company's control. There can be no assurance that the
Company's future operating performance will be sufficient to service its
indebtedness or that the Company will be able to repay at maturity or refinance
its indebtedness in whole or in part.
Capital Expenditures
The Company spent $25.4 million, $37.1 million, and $15.7 million during
1994, 1995, and 1996, respectively, on capital expenditures, of which $18.6
million, $27.2 million, and $1.6 million, respectively, was spent to enhance the
Company's ability to generate incremental revenues. These figures exclude $88.5
million of off balance sheet financing incurred during 1993, 1994 and 1995 for
the St. Eustatius Crude Project. During 1994, the Company purchased and
retrofitted an emergency response vessel for operation at St. Eustatius and
completed reactivation of the crude tankage at Point Tupper among other
projects. During 1995 at Point Tupper, the Company initiated construction of a
55,000 barrel LPG sphere and a fuel oil heating system, and purchased spill
response vessels and equipment. Capital expenditures for 1996 were primarily for
improvements made in connection with the 1995 Hurricanes. Future capital
expenditures are expected to be lower than those in recent years as no
significant expansion projects are currently planned. Capital expenditures for
1997 are projected at approximately $7.5 million, consisting primarily of
maintenance related expenditures and replacement of certain equipment which is
being held for sale.
The following table sets forth capital expenditures by location and
separates such expenditures into those which produce, or have the potential to
produce, incremental revenue, and those which sustain existing operations.
Page 22
<PAGE>
Summary of Capital Expenditures by Location
(Dollars in thousands)
<TABLE>
<CAPTION>
Produce Sustain
Incremental Existing
Revenues Operations Total % of Total
----------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1994
Netherlands Antilles and the Caribbean $ 11,384 $ 3,405 $ 14,789 58.1%
Canada 6,913 2,584 9,497 37.3%
U.S 276 878 1,154 4.6%
-------- -------- -------- -----
Total $ 18,573 $ 6,867 $ 25,440 100.0%
======== ======== ======== =====
Year Ended December 31, 1995
Netherlands Antilles and the Caribbean $ 18,926 $ 6,342 $ 25,268 (1) 68.0%
Canada 7,912 1,755 9,667 26.0%
U.S 325 1,878 2,203 6.0%
-------- -------- -------- -----
Total $ 27,163 $ 9,975 $ 37,138 100.0%
======== ======== ======== =====
Year Ended December 31, 1996
Netherlands Antilles and the Caribbean $ 89,344 $ 11,969 $101,313 (2)(3) 97.2%
Canada 751 451 1,202 1.2%
U.S 19 1,670 1,689 1.5%
-------- -------- -------- -----
Total $ 90,114 $ 14,090 $104,204 100.0%
======== ======== ======== =====
</TABLE>
(1) Excludes repairs and improvements of $8.1 million spent in 1995.
(2) Includes purchase of First Salute Leasing L.P. assets.
(3) Includes $6.9 million of capitalized hurricane related enhancements.
The Company financed the St. Eustatius Crude Project through a leveraged
lease arrangement, effectively removing $88.5 million of assets and liabilities
from its balance sheet. The Company leased land to a special purpose financing
entity, First Salute Leasing, L. P., upon which the crude tanks were
constructed. The facilities of the St. Eustatius Crude Project were leased back
to the Company. During the life of the lease, the Company accounted for monthly
lease payments, consisting primarily of interest on the underlying financing,
and recognized an accrual towards the residual guarantee value within the line
item cost of services and products sold. During 1995 and 1996, the Company paid
$5.7 million and $5.6 million, respectively, to First Salute Leasing, L.P. which
consisted primarily of interest costs on the underlying debt. All obligations
under the lease were satisfied prior to the CHPII Acquisition and the related
assets were included on the balance sheet at that time.
Assets Held for Sale
STSW, which owns the Company's terminal near Brownsville, Texas and its
parent, Statia Delaware Holdco II, Inc. (incorporated in Delaware) are being
held for sale. The following table sets forth, for the periods indicated,
consolidated income from operations with adjustments to reflect operating income
less such income (loss) from the Brownsville terminal adjusted for certain
ongoing administrative expenses and expenses related to assets to be retained.
Page 23
<PAGE>
Operating Income from On-going Operations
(Dollars in thousands)
<TABLE>
<CAPTION>
For the year ended December 31,
---------------------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Consolidated income from operations $ 17,241 $ 10,861 $ 4,488
Less: Operating income (loss) from Statia Delaware
Holdco II, Inc. and Statia Terminals Southwest, Inc. 1,208 (1,574) (1,379)
Add: Estimated adjustment for on-going expenses (981) (1,145) (1,697)
-------- -------- --------
Consolidated income from on-going operations $ 15,052 $ 11,290 $ 4,169
======== ======== ========
</TABLE>
In addition, the Company's emergency and spill response vessel, M/V Megan
D. Gambarella, is being held for sale. Upon disposition of this vessel, the
Company anticipates capital expenditures of up to $1.5 million to replace
certain equipment sold with the vessel and necessary for the efficient operation
of the terminal at St. Eustatius.
Management of the Company has estimated that the proceeds of the sales of
these assets will aggregate $20.0 million and has reclassified this amount from
property and equipment to assets held for sale on the balance sheet. The actual
proceeds from these sales may not equal these estimates. As these assets held
for sale are expected to remain in operation until disposition, the revenues
from, and costs associated with, operating these assets are included in the
Company's Consolidated Financial Statements. None of the Company's debt nor
interest thereon has been allocated to these assets.
Environmental Matters
The Company's subsidiaries are subject to comprehensive and periodically
changing foreign, federal, state and local environmental laws and regulations,
including those governing oil spills, emissions of air pollutants, discharges of
wastewater and storm waters, and the disposal of non-hazardous and hazardous
waste. In 1994, 1995, and 1996, the capital expenditures of the Company for
compliance with environmental laws and regulations were approximately $1.4
million, $3.4 million, and $1.3 million respectively. Expenditures during 1994
and 1995 consisted primarily of the purchase of spill response vessels and
equipment at Point Tupper to comply with new Canadian legislation. These figures
do not include routine operational compliance costs, such as the costs for the
disposal of hazardous and non-hazardous solid waste, which were approximately
$0.3 million, $0.6 million, and $0.4 million in 1994, 1995, and 1996,
respectively. The Company believes it is presently in substantial compliance
with applicable laws and regulations governing environmental matters.
In connection with the CHPII Acquisition, studies were undertaken by and
for Praxair to identify potential environmental, health and safety matters.
Certain matters involving potential environmental costs were identified at the
Point Tupper facility. Praxair has agreed to pay for certain of these costs
currently estimated at approximately $3.1 million representing certain
investigation, remediation, compliance and capital costs. To the extent that
certain of these matters exceed this estimate, Praxair has agreed to reimburse
the Company for these future expenditures. Additionally, the Company has
identified additional environmental costs at Point Tupper of approximately $1.5
million. These future costs will be expensed as incurred or capitalized as
property and equipment. The Company believes that these environmental costs
subject to the foregoing reimbursements will not have a material adverse effect
on the Company's financial position or results of operations.
The Company anticipates that it will incur additional capital and operating
costs in the future to comply with currently existing laws and regulations, new
regulatory requirements arising from recently enacted statutes, and
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<PAGE>
possibly new statutory enactments. As U.S. and foreign government regulatory
agencies have not yet promulgated the final standards for proposed environmental
programs, the Company cannot at this time reasonably estimate the cost for
compliance with these additional requirements (some of which will not take
effect for several years) or the timing of any such costs. However, management
believes any such costs will not have a material adverse effect on the Company's
business and financial condition or results of operations.
See "Item 1. Business - Environmental, Health and Safety Matters" for
further discussion.
Other Matters
The Company periodically evaluates the political stability and economic
environment in the countries in which it operates. As a result of these
evaluations, the Company is not presently aware of any matters which may
adversely impact its business, results of operations or financial condition. The
general rate of inflation in the countries where the Company operates has been
relatively low in recent years causing a modest impact on operating costs.
Typically, inflationary cost increases result in adjustments to storage and
throughput charges because long-term contracts contain price escalation
provisions. Bunker fuel and bulk product sales prices are based on active
markets, and the Company is generally able to pass any cost increases to
customers. Except for minor local operating expenses in Canadian dollars and
Netherlands Antilles guilders, all of the Company's transactions are in U.S.
dollars. Therefore, the Company believes it has no significant exposure to
exchange rate fluctuation.
The Company maintains insurance policies on insurable risks at levels it
considers appropriate. At the present time, the Company does not carry business
interruption insurance due to what the Company believes are excessive premium
costs for the coverage provided. While the Company believes it is adequately
insured, future losses could exceed insurance policy limits or, under adverse
policy interpretations, be excluded from coverage. Future liability or costs, if
any, incurred under such circumstances could adversely impact cash flow.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data are included herein
beginning on Page F-1.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
None.
Page 25
<PAGE>
PART III.
Item 10. Directors and Executive Officers of the Registrant
Managing Directors and Directors, as the case may be, of the Company are
elected annually by their shareholders to serve during the ensuing year or are
elected to serve until a successor is duly elected and qualified. Executive
officers of the Company are duly elected by their respective Boards of Managing
Directors/Directors to serve until their respective successors are elected and
qualified.
The following table sets forth certain information with respect to the
managing directors and executive officers of Statia.
Name Age Position
---- --- --------
James G. Cameron 51 Managing Director (Chief Executive Officer)
John K. Castle 56 Managing Director
David B. Pittaway 45 Managing Director
Justin B. Wender 28 Managing Director
James F. Brenner 38 Vice President and Treasurer
Jack R. Pine 57 Secretary
The following table sets forth certain information with respect to the
directors and executive officers of Statia Canada.
Name Age Position
---- --- --------
Paul R. Crissman 41 Director and President
James G. Cameron 51 Director
Clarence W. Brown 47 Director
James F. Brenner 38 Vice President-Finance
Jack R. Pine 57 Secretary
The following table sets forth certain information with respect to certain
directors and executive officers of STI, an indirect subsidiary of Statia:
Name Age Position
---- --- --------
Thomas M. Thompson, Jr. 52 Director and Executive Vice President
Robert R. Russo 41 Director and Senior Vice President
John D. Franklin 39 Vice President - Marine Fuels
James G. Cameron. Mr. Cameron has been with Statia Terminals, Inc., a
subsidiary of the Company since 1981. From 1981 to 1984, Mr. Cameron served as
Vice President, Engineering & Operations, during which time he served as the
Project Manager spearheading the design and construction of the St. Eustatius
terminal facility. Mr. Cameron was promoted in 1984 to Executive Vice President
and Chief Operating Officer. Since being named President and Chief Executive
Officer of STI in 1993, Mr. Cameron has served on the Boards of Directors of
Tankstore, a joint venture company among Chicago Bridge & Iron Company, GATX
Corporation and Paktank International B.V., and Petroterminal de Panama,
representing CBI's ownership in the pipeline traversing the isthmus of Panama.
His prior experience in the petroleum industry dates back to 1969 when he joined
Cities Service Company as a marine engineer. Mr. Cameron subsequently joined
Pakhoed USA, Inc., where he served in a variety of positions including Project
Engineer, Manager of Engineering & Construction, Maintenance Manager and
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<PAGE>
Terminal Manager, including the management of Paktank's largest facility in Deer
Park, Texas. Mr. Cameron holds a B.S. degree in Marine Engineering.
John K. Castle. Mr. Castle has been a Managing Director/Director of Statia
since September 1996. Mr. Castle is Chairman and Chief Executive Officer of
Branford Castle, Inc., an investment company formed in 1986. Since 1987, Mr.
Castle has been Chairman of Castle Harlan, Inc., a private merchant bank in New
York City, and General Partner of Legend Capital Group, L.P., a private buyout
fund. Mr. Castle is Chief Executive Officer of Castle Harlan Partners II, G.P.
Inc., the general partner of the general partner of Castle Harlan Partners II,
L.P., the Company's controlling stockholder. Immediately prior to forming
Branford Castle, Inc. in 1986, Mr. Castle was President and Chief Executive
Officer and a director of Donaldson Lufkin & Jenrette, Inc., which he joined in
1965. Mr. Castle is a director of UNC, Inc., Sealed Air Corporation,
Commemorative Brands, Inc., and Morton's Restaurant Group, Inc. He is a trustee
of the New York Medical College (for 11 years he was Chairman of the Board), a
member of The New York and Presbyterian Hospitals, Inc.'s Board of Trustees, a
member of the Board of the Whitehead Institute for Biomedical Research, a member
of the Corporation of the Massachusetts Institute of Technology and has served
as a director of The Equitable Life Assurance Society of the United States.
David B. Pittaway. Mr. Pittaway has been a Managing Director/Director of
Statia since September 1996. Mr. Pittaway has been Vice President and Secretary
of Castle Harlan, Inc. a private merchant bank in New York City, since February
1987 and Managing Director since February 1992. Mr. Pittaway is an executive
officer of Castle Harlan Partners II, G.P. Inc., the general partner of the
general partner of Castle Harlan Partners II, L.P., the Company's controlling
shareholder. Mr. Pittaway has been Vice President and Secretary of Branford
Castle, Inc., an investment company, since October 1986; Vice President, Chief
Financial Officer and a director of Branford Chain, Inc., a marine wholesale
company, since June 1987; and a director of Morton's Restaurant Group, Inc.
(formerly known as Quantum Restaurant Group, Inc.), a public restaurant company,
and Commemorative Brands, Inc. Prior to 1987, Mr. Pittaway was Vice President of
Strategic Planning and Assistant to the President of Donaldson Lufkin &
Jenrette, Inc.
Justin B. Wender. Mr. Wender has been a Managing Director/Director of
Statia since September 1996. Since 1993, he has been employed by Castle Harlan,
Inc. He currently serves as Vice President. From 1991 to 1993, Mr. Wender worked
in the Investment Banking Group of Merrill Lynch & Co. He is a board member of
MAG Aerospace Industries, Inc. and US Synthetic Corporation.
James F. Brenner. Mr. Brenner joined STI in December 1992 as its
Controller, and was promoted to his present position in July, 1993. Immediately
prior to joining STI, he served three years as Vice President, Finance and Chief
Financial Officer of Margo Nursery Farms, Inc. a publicly traded agribusiness
firm with European and Latin American operations. From 1986 to 1990, Mr. Brenner
was Treasurer of Latin American Agribusiness Development Corp., a company
providing debt and equity financing to agribusinesses throughout Latin America.
His duties included serving as Managing Director for several of its corporate
investments. From 1981 to 1986, Mr. Brenner held various positions with the
international accounting firm of Price Waterhouse LLP. Mr. Brenner is a licensed
Certified Public Accountant in Florida. He holds an M.S. degree in Accounting.
Jack R. Pine. Mr. Pine has been involved with the legal affairs of the
Company and its affiliates since their inception and was formally transferred to
STI from CBI Industries, Inc. on May 1, 1996. He has over 26 years of combined
experience with Liquid Carbonic Industries Corporation and CBI. Mr. Pine joined
the legal staff of CBI in 1974 as Assistant Counsel and was appointed Associate
General Counsel in 1984. Prior to joining CBI, Mr. Pine was engaged in the
private practice of law. Mr. Pine holds a B.S. degree in Physics and a J.D.
degree.
Paul R. Crissman. Mr. Crissman joined STNV in 1984 and has held safety,
environmental, and operational management positions at the Company's terminal
facilities. Mr. Crissman became Terminal Manager of Statia Canada's facility
near Port Hawkesbury, Nova Scotia, in 1992. Prior to joining STNV, Mr. Crissman
was employed for approximately four years in various positions with Paktank, a
terminalling company with a facility in the Houston, Texas, area. In December,
1996, Mr. Crissman was appointed to his present positions as a Director and
President of Statia Canada and as a Managing Director of STNV.
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<PAGE>
Clarence W. Brown. Mr. Brown joined STNV in 1993 as Administrative Manager
and was appointed Terminal Manager of STNV's facility at St. Eustatius,
Netherlands Antilles, in early 1996. In December, 1996, Mr. Brown was elected to
his present positions as a Director of Statia Canada and a Managing Director of
STNV. Prior to joining STNV, he held various management positions at the Amerada
Hess Corporation facility on St. Lucia, including General Manager of the
facility, and has more than 16 years of experience in the marine terminal
industry. Mr. Brown holds a B.S. degree in Accounting.
Thomas M. Thompson, Jr. Mr. Thompson has been with STI since 1985 when he
joined as Vice President, Sales & Marketing. He has also held the position of
Senior Vice President with full responsibility for the Company's Houston, Texas,
sales and operations; and President of JASTATIA, Inc., a marine vessel operating
joint venture between the Company and Jahre Ship Services A/S. Mr. Thompson
became Executive Vice President in June, 1994. His prior experience in the
petroleum and chemical industry dates back to 1968 when he joined GATX
Corporation as a Sales Representative. He subsequently worked as both a sales
manager and General Manager with Pakhoed USA, Inc. Mr. Thompson holds a B.A.
degree in Economics.
Robert R. Russo. Mr. Russo joined STI in 1990 as its Manager, Sales. Since
then he has held the positions of Vice President, Sales and his present
position. His prior experience in the petroleum industry dates back to 1979 when
he joined Belcher Oil Co. Inc., a subsidiary of The Coastal Corporation. Mr.
Russo was Coastal's Vice President, Heavy Products Trading from 1987 until his
departure to join the Company in 1990. He holds a B.S. degree in Geology and an
M.B.A.
John D. Franklin. Mr. Franklin joined STI in March, 1992 as its Manager,
Marine Sales. Immediately prior to joining STI he was employed for 14 years with
The Coastal Corporation, and its one time subsidiary, Belcher Oil Co. Inc. His
duties with Coastal included division management of the company's marine sales;
Manager, Direct Accounts, National; Terminal Manager at Coastal's New Orleans
facility; and extensive experience in marketing, terminal operations, and
technical sales support. He holds a B.A. degree in Political Science.
Item 11. Executive Compensation
The following table sets forth information concerning the compensation paid
or accrued for the three years ended December 31, 1996 for the Chief Executive
Officer and each of the four most highly compensated executive officers of the
Company.
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<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
and
STATIA TERMINALS CANADA, INCORPORATED
<TABLE>
<CAPTION>
Long Term Compensation Awards
--------------------------------------------
Securities
Annual Compensation Restricted Underlying All Other
---------------------------- Stock Awards Options SARs Compensations
Name and Principal Position (1) Year Salary Bonus (2) $ (3) (4) (#Shares)(5) ($)(6)
- ------------------------------- ---- ------ --------- --------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
James G. Cameron 1996 $ 215,000 $ -- $ -- -- $ 73,861
1995 200,000 20,000 83,520 13,000 103,375
1994 185,000 90,781 28,700 10,000 94,979
Thomas M. Thompson, Jr. 1996 169,260 -- -- -- 8,867
1995 161,200 20,150 37,584 5,200 70,408
1994 149,345 37,820 12,915 4,500 30,866
Robert R. Russo 1996 150,936 -- -- -- 8,971
1995 143,749 17,500 37,584 5,200 33,133
1994 125,004 30,500 12,915 4,500 24,478
Jack R. Pine 1996 115,190 11,500 -- -- 1,555
1995 111,080 21,144 23,653 -- 23,032
1994 108,440 5,000 9,609 -- 18,449
John D. Franklin 1996 94,967 -- -- -- 4,053
1995 88,441 4,500 14,159 -- 7,091
1994 75,466 9,056 4,305 -- 149
</TABLE>
(1) James G. Cameron became President and Chairman of the Board of Statia
Terminals, Inc. on July 27, 1993; he became Managing Director of Statia
Terminals International N.V. on November 12, 1996 and Director of Statia
Terminals Canada, Incorporated on December 23, 1996. Mr. Cameron has held
various positions with the Statia Terminals group of companies since 1982.
Thomas M. Thompson, Jr. joined the Company in 1985 and became Executive
Vice President and Director of Statia Terminals, Inc. on May 6, 1996.
Robert R. Russo joined the Company in 1990 and became Senior Vice President
of Statia Terminals, Inc. on May 6, 1996. Jack R. Pine became Senior Vice
President, General Counsel and Secretary of Statia Terminals, Inc. on May
6, 1996; he became Secretary of Statia Terminals International N.V. and of
Statia Terminals Canada, Incorporated on December 23, 1996. Mr. Pine joined
the Company in 1996 after holding various positions with CBI since 1974.
Mr. Franklin joined the Company in 1992 and became Vice President - Marine
Fuel Sales on May 6, 1996.
(2) This column contains the amounts that were earned in the stated year and
paid in the following year pursuant to annual incentive bonus
opportunities. Mr. Cameron received his 1995 bonus at the end of 1995.
(3) Amounts earned in 1994 and 1995 were pursuant to the CBI 1994 Restricted
Stock Award Plan of which 50% of the target restricted stock shares were
awarded and subsequently adjusted pursuant to the achievement of
performance based targets measured at the end of each respective year. The
remaining restricted stock was to be earned in the subsequent two years
(25% of the initial award each year).
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<PAGE>
Restrictions on these shares were scheduled to expire January 1, 1999 or
2000, or with a change in control (such change in control took place in
December 1995). On January 12, 1996, restrictions lapsed on all shares of
restricted stock previously awarded and the shares were subsequently
redeemed for cash.
(4) Restricted shares earned for 1994 represent 50% of the 1994 target share
award adjusted for achievement of the CBI performance target for that year.
Shares earned for 1995 represent 50% of the 1995 target share award plus
25% of the 1994 award both adjusted for achievement of the 1995 CBI
performance target. Restricted shares earned were valued at the closing
price on the date of grant ($25.625 for 1994 and $32.625 for 1995).
Participants received dividends on the restricted stock reported in this
column. The number and value of the aggregate restricted stock holdings
(including shares awarded in previous years and shares whose restrictions
lapsed as a result of the change in control or otherwise) on January 12,
1996 for each named executive officer are: James G. Cameron 8,770 shares,
$289,410; Thomas M. Thompson, Jr. 3,479 shares, $114,807; Robert R. Russo
2,504 shares, $82,632; Jack R. Pine 5,305 shares, $175,065; and John D.
Franklin 660 shares, $21,780. These shares were paid out in the first
quarter of 1996 at the redemption value of $33.00 per share (the Praxair
purchase price per share of CBI common stock). The table does not include
restricted stock of STNV awarded immediately prior to, and in conjunction
with, the CHPII Acquisition and subsequently exchanged for restricted units
of preferred and common stock of the Parent. In addition, loans to
executive officers by Parent secured by restricted units of preferred and
common stock of Parent are excluded. (See Restricted Stock Awards below.)
(5) Represents options to purchase CBI common stock awarded under the CBI Stock
Option Plan. Such options were purchased from Messrs. Cameron, Thompson and
Russo in the first quarter of 1996 in connection with the purchase of CBI
by Praxair for a net price of approximately $166,250 to Mr. Cameron;
$57,788 to Mr. Thompson; and $57,788 to Mr. Russo.
(6) The compensation reported for 1996 represents: (a) the dollar value of
split dollar life insurance benefits paid by the Company, (b) cost
associated with a Company provided vehicle, and (c) other benefits. These
three benefits expressed in the same order as listed in the preceding
sentence, amounted to $50,789, $8,075, and $15,003 for Mr. Cameron; $0,
$7,256 and $1,611 for Mr. Thompson; $0, $8,509 and $462 for Mr. Russo; $0,
$0 and $1555 for Mr. Pine; and $0, $3,762 and $291 for Mr. Franklin.
Restricted Stock Awards
Upon the Company's divestiture, Praxair awarded an aggregate of $3.0
million in STNV restricted preferred stock to James G. Cameron, Thomas M.
Thompson, Jr., Robert R. Russo, Jack R. Pine and John D. Franklin and another
officer of the Company (each hereinafter a "recipient"), subject to a specified
restriction period which commenced on the date of the award, and other
conditions set forth in the restricted stock award agreement between STNV and
the recipient of such stock. Each such recipient has surrendered and in
consideration for such surrender received a unit consisting of shares of Parent
common stock and Series E Preferred Stock for each of his shares of such STNV
preferred stock, with an aggregate value equal to the share of STNV preferred
stock surrendered therefor, and subject to substantially similar restrictions
and conditions, which have been set forth in a restricted unit award agreement
between the Parent and such recipient. Prior to the expiration of the
restriction period, recipients may not sell, transfer, pledge, assign, encumber
or otherwise dispose of their units; however, during the restriction period, the
recipient of a unit shall have all voting and dividend rights, if any, with
respect to the stock comprising such restricted unit. In general, the
restriction period shall lapse on the earliest of November 27, 1998 or the
recipient's death, disability or retirement (after attaining both a specified
period of time of continuous service with the Company and a specified age), or a
"change in control" (as defined in the award agreement; for purposes of this
paragraph, a "change in control") of the Parent or the Company. A recipient's
restricted units shall generally be forfeited upon the recipient's termination
of employment with the Company for any reason other than his death, disability,
or retirement or under certain other circumstances, subject to the Parent's
discretion to waive all or part of such forfeiture or permit another recipient
to purchase all or a portion of the terminating recipient's units at their
then-current fair market value (which transferred units shall thereafter be
subject to the restrictions and conditions set forth in the transferee's
restricted unit award agreement). Upon expiration or lapse of the restriction
period, shares of Parent stock represented by the unit will be delivered to the
recipient free of the above-mentioned
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<PAGE>
restrictions. At any time within a specified period of time following the award
of restricted units to a recipient, the recipient may instruct the Parent to
defer irrevocably delivery of all or a portion of the shares of stock comprising
such unit, in accordance with his restricted unit award agreement. Upon such an
election, the recipient shall have a right to receive the stock with respect to
which such election is made (together with dividend equivalents thereon),
following expiration of the restriction period, upon the earlier to occur of
termination, if applicable, of his employment with the Company and a change in
control.
On November 27, 1997, Messrs. Cameron, Thompson, Russo, Pine, Franklin, and
certain other officers and managers of the Company were granted non-recourse
loans by the Parent aggregating $1.5 million and secured by pledges of
restricted stock with terms substantially similar to those described in the
preceding paragraph. The loans bear interest at 6.49% annually and are due on
the earlier of (i) November 26, 2003 and (ii) a "change in control" (as defined
in the loan agreement).
Employment Agreements
The Parent and STI have entered into employment agreements with James G.
Cameron, Thomas M. Thompson, Jr., Robert R. Russo, Jack R. Pine and John D.
Franklin and another officer of the Company. These agreements provide for an
annual base salary which is subject to review at least annually by the Board of
Directors or a committee thereof. Messrs. Cameron, Thompson, Russo, Pine and
Franklin are entitled to an annual base salary for 1997 of $250,000, $210,000,
$180,000, $130,000 and $130,000, respectively. These agreements also provide for
an annual cash incentive bonus to be awarded based on the difference between a
target EBITDA and actual EBITDA. The employment agreements with Messrs. Cameron,
Thompson and Russo continue until December 31, 2001 and are renewable for
successive three-year periods thereafter. The employment agreements with Messrs.
Pine and Franklin continue until December 31, 1999 and are renewable for
successive two-year periods thereafter. Additional benefits include
participation in an executive life insurance plan as well as various employee
benefit plans. In the event that Statia Terminals, Inc. terminates any such
employment agreement without substantial cause or the employee terminates for
good reason (as such terms are defined in each such employment agreement), the
employee shall be entitled to his current medical and dental benefits and his
current compensation for the greater of twelve months and the remaining portion
of the term of such employment agreement payable in monthly installments for
such period plus a pro rated portion of such employee's bonus compensation for
the year of termination only payable as and when ordinarily determined for such
year.
Item 12. Security Ownership
All of the common stock of Statia Canada is indirectly owned by Statia, and
all of the common stock of Statia is owned by the Parent. The following table
sets forth certain information with respect to the beneficial ownership of the
common stock of the Parent as of May 13, 1997 by (i) each person known to the
Company to be a beneficial owner of more than 5% of the outstanding shares of
such common stock, (ii) each managing director/director and executive officer of
the Company, and (iii) all managing directors/directors and executive officers
of the Company as a group. The address of each owner is the principal office of
the Company unless otherwise indicated.
Page 31
<PAGE>
<TABLE>
<CAPTION>
Managing Directors/Directors, Executive Officers Number of
and 5% Beneficial Owners Shares Percentage
- ------------------------ ------ ----------
<S> <C> <C>
James G. Cameron ................................................................................. 1,179 2.9%
Thomas M. Thompson, Jr ........................................................................... 900 2.2%
Robert R. Russo .................................................................................. 808 2.0%
Jack R. Pine ..................................................................................... 451 1.1%
John D. Franklin ................................................................................. 353 .9%
John K. Castle(1) ................................................................................ 35,000 85.4%
c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
David B. Pittaway ................................................................................ 200 .5%
Justin B Wender .................................................................................. 10 .02%
All Officers and Directors (1) ................................................................... 39,000 95.1%
Castle Harlan Partners II L.P., affiliates and Castle Harlan employees (1) ...................... 35,000 85.4%
c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
</TABLE>
- ---------------
(1) John K. Castle is the controlling shareholder of the general partner of the
general partner of CHPII and may therefore be deemed to be the beneficial
owner of shares beneficially owned by CHPII, its affiliates and Castle
Harlan employees. Mr. Castle disclaims beneficial ownership of the shares
owned by CHPII, its affiliates and Castle Harlan employees other than such
shares that represent his pro rata partnership interests in CHPII and its
affiliates.
Item 13. Certain Relationships and Related Transactions
As part of the CHPII Acquisition, the Parent entered into a management
agreement with Castle Harlan providing for the payment to Castle Harlan, subject
to certain conditions, of an annual management fee of $1,350,000 plus expenses
for investment banking, advisory and strategic planning services. In the event
the net proceeds from the sale of the Brownsville facility and a certain asset
of the Parent exceed a specified threshold, Castle Harlan may be entitled to an
additional payment of up to $1 million. Under the Indenture relating to the
Notes, dividends from the Company to the Parent permitting the Parent to pay
Castle Harlan's annual management fee and a dividend of the net proceeds of the
sale of the Brownsville facility are excepted from the limitation on Restricted
Payments so long as no Default or Event of Default exists. On January 2, 1997,
the Company declared and subsequently paid a dividend of $1,350,000 on its
common stock to the Parent to enable Parent to pay management fees to Castle
Harlan, Inc. See Note 11 to the Consolidated Financial Statements of Statia
Terminals International N.V. for information on preferred and common dividends
paid prior to the CHPII Acquisition.
Pursuant to an agreement between CHPII and a consultant retained for
assistance with the structuring of the CHPII Acquisition, the consultant
received from the Company upon completion of the CHPII Acquisition an advisory
fee (payable to the consultant who in turn paid a portion of such fee to certain
entities/persons which provided services to the consultant) of $2,500,000 in
cash and 1,500 shares of Series E Preferred Stock and 1,500 shares of common
stock of the Parent. The consultant is also a party to an agreement with Statia
Terminals N.V. dated as of January 1, 1993 pursuant to which the consultant
renders certain advisory and consulting services to the Company and is
compensated therefor.
The stockholders of the Parent have entered into a stockholders' agreement
which governs certain relationships among, and contains certain rights and
obligations of, the stockholders of the Parent. The stockholders' agreement,
among other things, (i) limits the ability of the stockholders to transfer their
shares in the Parent except
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<PAGE>
in certain permitted transfers as defined therein; (ii) provides for a right of
first refusal; (iii) provides for certain tag-along obligations and certain
bring-along rights; (iv) provides for put and call rights relating to stock held
by certain management stockholders; (v) provides for certain registration
rights; and (vi) provides for certain pre-emptive rights.
The stockholders' agreement provides that the parties thereto must vote
their shares to elect a Board of Managing Directors of the Parent who will be
nominated by CHPII and one of whom will be nominated by the management
stockholders.
Pursuant to the stockholders' agreement, the stockholders granted each
other "tag-along" rights under which all stockholders have the option of
participating in certain sales of common stock and Series E Preferred Stock by a
selling stockholder (other than sales to affiliates of each stockholder and
distributions by CHPII to its partners) at the same price and other terms as the
selling stockholder. In addition, all stockholders have granted to the majority
holders the right, in certain circumstances, to sell their common stock and
Series E Preferred Stock in a sale of all common stock and Series E Preferred
Stock to a third party. Any such sale shall be in an arms' length transaction
with an unaffiliated bona fide third party purchaser in which all consideration
payable to holders of common stock and Series E Preferred Stock will be
distributed pro rata on the basis of each holder's stock ownership.
Pursuant to the stockholders' agreement, the holders of the shares are
entitled to certain rights with respect to registration under the Securities Act
of certain shares held by them including, in the case of CHPII, certain demand
registration rights. The stockholders' agreement also provides for certain
preemptive rights as well as certain put and call rights. Subject to certain
conditions, the preemptive rights grant the right to purchase shares in a share
issuance of the Parent and the put and call rights will enable certain
management stockholders in certain circumstances following termination of their
employment and subject to certain limitations to cause the Parent to purchase
their shares at a certain price or for the Company to require management
stockholders to sell their shares to the Company in certain circumstances
following termination of their employment. Under the Indenture relating to the
Notes, dividends from the Company to the Parent to permit the Parent to pay the
purchase price of shares purchased from management stockholders are excepted
from the limitation on Restricted Payments up to a specified amount so long as
no Default or Event of Default exists.
The stockholders' agreement provides that it shall terminate upon certain
events, including sale of the Parent pursuant to the "bring-along" rights as
described above. If not terminated earlier, the stockholders' agreement shall
terminate on its tenth anniversary. Unless the stockholders' agreement has been
terminated, any transferee of common stock or Series E Preferred Stock shall be
bound by its terms and shall become a party thereto.
In addition to the foregoing, the Parent and the stockholders of the Parent
have entered into certain preferred stock agreements which govern certain
relationships among, and contain certain rights and obligations of stockholders
of the Parent as well as certain obligations of the Parent and certain remedies
related thereto. The Preferred Stock Agreements, among other things, (i) limit
the rights of certain stockholders to receive dividends; (ii) limit the stated
capital of the Parent; (iii) limit the business, assets and liabilities of the
Parent; (iv) limit the Parent's ability to merge, consolidate or transfer all or
substantially all of its assets; (v) limit certain restricted payments of the
Parent; (vi) limit, under certain circumstances, the right of Castle Harlan to
receive its management fee in cash; (vii) limit transactions with affiliates;
(viii) limit the right of the Parent to issue certain equity securities; (ix)
limit the right of the Parent and the Company to take certain actions which
affect the ability of the Parent to redeem, repurchase or make payments with
respect to the Parent preferred stock; (x) limit the right of the Company to
amend or modify the Indenture (other than an amendment or modification that can
be effected without the consent of the Holders of the Notes) and certain other
documents; (xi) limit, under certain circumstances, the ability of the Parent to
purchase, redeem, defease or retire the Notes; (xii) require the Parent to take
reasonable efforts to redeem the Series B Preferred Stock; (xiii) require the
Parent to provide certain information to the holders of the preferred stock; and
(xiv) limit certain modifications of the Preferred Stock Agreements.
Page 33
<PAGE>
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a.) 1. Financial Statements Index
The following consolidated financial statements of Statia Terminals
International N.V. and its Subsidiaries are filed in response to Item
8 of this 1996 Annual Report on Form 10-K.:
Statia Terminals International N.V. (and its Predecessor Statia
Terminals, Inc.)
Report of Independent Public Accountants
Consolidated Balance Sheets
as of December 31, 1995 (Predecessor - Pre-Praxair Acquisition)
as of December 31, 1996
Consolidated Statements of Income and Retained Earnings
for the years ended December 31, 1994 and 1995 (Predecessor -Pre-
Praxair Acquisition)
for the period January 1, 1996 through November 27, 1996
(Predecessor - Post-Praxair Acquisition)
for the period November 27, 1996 through December 31, 1996
Consolidated Statements of Cash Flows
for the years ended December 31, 1994 and 1995 (Predecessor -
Pre-Praxair Acquisition)
for the period January 1, 1996 through November 27, 1996
(Predecessor Post-Praxair Acquisition)
for the period November 27, 1996 through December 31, 1996
Notes to the Consolidated Financial Statements
Statia Terminals Canada, Incorporated (and its Predecessor
Statia Terminals Point Tupper, Inc.)
Report of Independent Accountants
Consolidated Balance Sheets
as of December 31, 1995 (Predecessor - Pre-Praxair Acquisition)
as of December 31, 1996
Consolidated Statements of Income and Retained Earnings
for the years ended December 31, 1994 and 1995 (Predecessor -
Pre-Praxair Acquisition)
for the period January 1, 1996 through November 27, 1996
(Predecessor - Post-Praxair Acquisition)
for the period November 27, 1996 through December 31, 1996
Consolidated Statements of Cash Flows
for the years ended December 31, 1994 and 1995 (Predecessor -
Pre-Praxair Acquisition)
for the period January 1, 1996 through November 27, 1996
(Predecessor - Post-Praxair Acquisition)
for the period November 27, 1996 through December 31, 1996
Notes to the Consolidated Financial Statements
Page 34
<PAGE>
Statia Terminals N.V.
Report of Independent Public Accountants
Consolidated Balance Sheets
as of December 31, 1995 (Predecessor - Pre-Praxair Acquisition)
as of December 31, 1996
Consolidated Statements of Income and Retained Earnings
for the years ended December 31, 1994 and 1995 (Predecessor -
Pre-Praxair Acquisition)
for the period January 1, 1996 through November 27, 1996
(Predecessor - Post-Praxair Acquisition
for the period November 27, 1996 through December 31, 1996
Consolidated Statements of Cash Flows
for the years ended December 31, 1994 and 1995 (Predecessor -
Pre-Praxair Acquisition)
for the period January 1, 1996 through November 27, 1996
(Predecessor - Post-Praxair Acquisition)
for the period November 27, 1996 through December 31, 1996
Post-Praxair Acquisition)
for the period November 27, 1996 through December 31, 1996
Notes to the Consolidated Financial Statements
2. Financial Statement Schedules
See Notes 12 and 17 to the Consolidated Financial Statements of Statia
and the related Report of Independent Accountants attached thereto for
required financial statement schedules.
3. Exhibits Index
See the Exhibits Index on pages E-1 and E-2 following the signature
pages.
Page 35
<PAGE>
Statia Terminals International N.V.
and Subsidiaries
Consolidated Financial Statements
as of December 31, 1996
Together With Auditor's Report
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Managing Directors of
Statia Terminals International N.V. and Subsidiaries:
We have audited the accompanying consolidated balance sheet of STATIA TERMINALS
INTERNATIONAL N.V. (a Netherlands Antilles corporation) AND SUBSIDIARIES as of
December 31, 1996, and the related consolidated statements of income and
retained earnings (deficit) and cash flows for the period from inception through
December 31, 1996. We have also audited the accompanying, combined balance sheet
of Statia Terminals, Inc. and subsidiaries and affiliates (the "Predecessor") as
of December 31, 1995, and the related combined statements of income and retained
earnings and cash flows of the Predecessor from January 1, 1996 through November
27, 1996, and for the years ended December 31, 1995 and 1994. 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our 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 Statia Terminals
International N.V. and Subsidiaries as of December 31, 1996, and the results of
its operations and its cash flows for the period from inception through December
31, 1996, and the combined financial position of the Predecessor as of December
31, 1995, and the results of its operations and its cash flows from January 1,
1996 through November 27, 1996, and for the years ended December 31, 1995 and
1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 19, 1997
F-2
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
The financial statements of the Company and the Predecessor Company
are not comparable in certain respects (see Note 1)
<TABLE>
<CAPTION>
December 31
--------------------------
1995 1996
------------- --------
Predecessor
Company
------------
Pre-Praxair The
ASSETS Acquisition Company
- --------------------------------------------------------- ------------- --------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 1,469 $ 9,264
Accounts receivable-
Trade, less allowance for doubtful accounts of $645 in
1995 and $769 in 1996 9,675 12,165
Other 6,707 3,096
Inventory 1,886 4,969
Prepaid expenses 163 1,036
Assets held for sale -- 20,000
-------- --------
Total current assets 19,900 50,530
PROPERTY AND EQUIPMENT, net 196,327 203,187
INTANGIBLE ASSETS, net 9,925 --
OTHER NONCURRENT ASSETS, net 4,131 6,438
-------- --------
$230,283 $260,155
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Continued)
December 31
-----------------------
1995 1996
----------- ---------
Predecessor
Company
-----------
Pre-Praxair The
Acquisition Company
----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 6,073 $ 9,926
Accrued expenses 4,158 16,824
Current portion of long-term debt 14,800 --
Payable to affiliates 1,276 --
--------- ---------
Total current liabilities 26,307 26,750
LONG-TERM DEBT, net of current maturities 51,600 135,000
ADVANCES FROM PARENT COMPANY 42,786 --
--------- ---------
Total liabilities 120,693 161,750
--------- ---------
STOCKHOLDERS' EQUITY SUBJECT TO REDUCTION -- 20,000
STOCKHOLDERS' EQUITY:
Preferred stock 18,589 --
Common stock 19,425 6
Additional paid-in capital 36,566 78,494
Retained earnings (deficit) 35,010 (95)
--------- ---------
Total stockholders' equity 109,590 78,405
--------- ---------
$ 230,283 $ 260,155
========= =========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS (DEFICIT)
(Dollars in thousands)
The financial statements of the Company and the Predecessor Company are not
comparable in certain respects (see Note 1).
<TABLE>
<CAPTION>
Predecessor Company The Company
------------------------------------- -------------
Pre-Praxair Post-Praxair
Acquisition Acquisition
---------------------- -------------
Year Ended Period from
December 31 Jan. 1, 1996 Inception
---------------------- through through
1994 1995 Nov. 27, 1996 Dec. 31, 1996
--------- --------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES $ 132,666 $ 135,541 $ 140,998 $ 14,956
COST OF SERVICES AND PRODUCTS SOLD 111,194 117,482 129,498 13,010
--------- --------- --------- ---------
Gross profit 21,472 18,059 11,500 1,946
ADMINISTRATIVE EXPENSES 5,339 6,900 8,251 413
--------- --------- --------- ---------
Income from operations 16,133 11,159 3,249 1,533
INTEREST EXPENSE 3,114 4,478 4,187 1,525
OTHER INCOME (EXPENSE) 1,108 (298) (323) 29
--------- --------- --------- ---------
Income (loss) before income taxes 14,127 6,383 (1,261) 37
PROVISION FOR INCOME TAXES 1,219 390 629 132
--------- --------- --------- ---------
Net income (loss) 12,908 5,993 (1,890) (95)
PREFERRED STOCK DIVIDENDS 1,964 1,424 792 --
--------- --------- --------- ---------
Net income (loss) available to common stockholders 10,944 4,569 (2,682) (95)
RETAINED EARNINGS, beginning of period 39,537 30,441 -- --
COMMON STOCK DIVIDENDS (20,040) -- (25,000) --
--------- --------- --------- ---------
RETAINED EARNINGS (DEFICIT), end of period $ 30,441 $ 35,010 $ (27,682) $ (95)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
The financial statements of the Company and the Predecessor Company are not
comparable in certain respects (See Note 1).
<TABLE>
<CAPTION>
Predecessor Company The Company
------------------------------------- -------------
Pre-Praxair Post-Praxair
Acquisition Acquisition
---------------------- -------------
Year Ended Period from
December 31 Jan. 1, 1996 Inception
---------------------- through through
1994 1995 Nov. 27, 1996 Dec. 31, 1996
--------- --------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 12,908 $ 5,993 $ (1,890) $ (95)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities-
Depreciation, amortization and non-cash charges 10,680 12,118 12,296 1,011
Provision for bad debts 236 339 133 --
Loss (gain) on disposition of property and equipment (34) 59 (68) --
(Increase) decrease in accounts receivable-trade 129 (3,309) (1,312) (1,311)
(Increase) decrease in other receivables (2,316) (2,676) 3,237 (1,530)
(Increase) decrease in inventory 5,144 (3,094) (5,033) 1,950
(Increase) decrease in prepaid expense 306 (92) (64) --
(Increase) decrease in intangible and other noncurrent assets (965) 1,675 319 (801)
(Increase) decrease in accounts payable (485) (678) 3,577 277
Decrease in accrued expenses (10) (115) (811) 2,724
Increase (decrease) in payable to CBI affiliates 113 1,256 (1,276) --
--------- --------- --------- ---------
Net cash provided by operating activities 25,706 11,476 9,108 2,225
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 87 230 111 --
Purchase of property, plant and equipment (25,440) (37,138) (14,490) (1,203)
Buyout of First Salute Leasing, L.P. assets -- -- (88,511) --
Acquisition of Statia Operations, net of $185 cash acquired -- -- -- (173,961)
Transaction costs -- -- -- (9,572)
Accrued transaction costs and purchase price -- -- -- 7,703
--------- --------- --------- ---------
Net cash used in investing activities $ (25,353) $ (36,908) $(102,890) $(177,033)
--------- --------- --------- ---------
</TABLE>
F-6
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
The financial statements of the Company and the Predecessor Company are not
comparable in certain respects (See Note 1).
(Continued)
<TABLE>
<CAPTION>
Predecessor Company The Company
------------------------------------- -------------
Pre-Praxair Post-Praxair
Acquisition Acquisition
---------------------- -------------
Year Ended Period from
December 31 Jan. 1, 1996 Inception
---------------------- through through
1994 1995 Nov. 27, 1996 Dec. 31, 1996
--------- --------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of preferred stock $ 7,501 $ -- $ -- $ --
Increase in advances from parent 8,335 25,898 203,767 --
Retirement of preferred stock -- -- (18,577) --
Bank borrowings 10,468 5,532 66,000 --
Bank repayments (6,144) (3,600) (132,400) --
Dividends paid to affiliates (21,839) (1,353) (25,792) --
Issuance of 11-3/4% first mortgage notes -- -- -- 135,000
Issuance of common stock -- -- -- 55,500
Debt costs paid -- -- -- (6,428)
--------- --------- --------- ---------
Net cash provided by (used in) financing activities (1,679) 26,477 92,998 184,072
--------- --------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,326) 1,045 (784) 9,264
CASH AND CASH EQUIVALENTS, beginning balance 1,750 424 1,469 --
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, ending balance $ 424 $ 1,469 $ 685 $ 9,264
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands, except share information)
1. BASIS OF PRESENTATION
The consolidated balance sheet as of December 31, 1996, and the
consolidated statements of income and retained earnings and cash flows for
the period from inception through December 31, 1996, include the accounts
of Statia Terminals International N.V. and its wholly owned subsidiaries
(the "Company"). The Company was formed during 1996 to acquire the capital
stock of Statia Terminals, Inc. and its subsidiaries and affiliates (the
"Predecessor Company") from Praxair, Inc. ("Praxair"). The combined balance
sheet as of December 31, 1995, and the combined statements of income and
retained earnings and cash flows from January 1, 1996, through November 27,
1996 ("the period ended November 27, 1996"), and for the years ended
December 31, 1995 and 1994, include the accounts of the Predecessor
Company.
The Predecessor Company
The Predecessor Company includes primarily the combination of the following
commonly owned companies: Statia Terminals, Inc. (incorporated in
Delaware); Statia Terminals N.V. (incorporated in the Netherlands
Antilles); Statia Terminals Point Tupper, Inc. (incorporated in Nova
Scotia, Canada); and Statia Terminals Southwest, Inc. (incorporated in
Texas). Significant intercompany balances and transactions have been
eliminated.
Prior to January 12, 1996, the Predecessor Company was a wholly owned
subsidiary of CBI Industries, Inc. ("CBI"). On January 12, 1996, pursuant
to the Merger Agreement dated December 22, 1995 (the "Merger"), CBI became
a wholly owned subsidiary of Praxair. This Merger transaction was reflected
in the Predecessor Company's combined financial statements as a purchase
effective January 1, 1996 (see Note 4). Accordingly, the historical
financial information provided herein, for periods prior to January 1,
1996, ("Pre-Praxair Acquisition") will not be comparable to subsequent
Predecessor Company financial information or financial information of the
Company.
F-8
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
The Company
The Company includes the following primary entities (collectively, the
"Statia Operations"): Statia Terminals International N.V. (incorporated in
the Netherlands Antilles); Statia Terminals N.V. (incorporated in the
Netherlands Antilles); Statia Terminals Canada, Incorporated (incorporated
in Nova Scotia , Canada, and formerly Statia Terminals Point Tupper, Inc.);
Statia Terminals Southwest, Inc. (incorporated in Texas) and Statia
Terminals, Inc. (incorporated in Delaware). Significant intercompany
balances and transactions have been eliminated.
On November 27, 1996, the Company acquired from Praxair all of the
outstanding capital stock of the Predecessor Company and certain of its
subsidiaries and affiliates (the "Acquisition"). The Company is wholly
owned by Statia Terminals Group N.V. (the "Parent") and was formed on
September 4, 1996 by Castle Harlan Partners II, L.P., a private equity
investment fund managed by Castle Harlan, Inc., a private merchant bank,
management and others. The adjusted purchase price paid to Praxair for the
capital stock described above was $217,146. The Acquisition was paid, in
part, by funds received by the Company from the issuance of $135,000 of
11-3/4% First Mortgage Notes (the "Notes") described in Note 9 and from the
sale of the Company's stock. The Acquisition has been accounted for under
the purchase method of accounting. The preliminary estimates of purchase
price have been allocated to the assets and liabilities of the Company
based on their fair values as of the date of the Acquisition.
The Acquisition and the related application of purchase accounting (Note 5)
resulted in changes to the capital structure of the Predecessor Company and
the historical cost basis of various assets and liabilities. The effect of
such changes significantly impairs comparability of the financial position
and results of operations of the Company and the Predecessor Company
between periods.
2. NATURE OF THE BUSINESS
The Company and the Predecessor Company own, lease and operate petroleum
and other bulk liquid blending, transshipment and storage facilities
located on the Island of St. Eustatius, Netherlands Antilles; near Port
Hawkesbury, Nova Scotia, Canada; and in Brownsville, Texas. The Company's
terminaling services are furnished to some of the world's largest producers
of crude oil, integrated oil companies, oil refiners, traders and
petrochemical companies. In addition, the Company and the Predecessor
Company provide a variety of related terminal services including the
supplying of bunker fuels for vessels, emergency and spill response,
brokering of product trades and ship services. Statia Terminals, Inc.
provides
F-9
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
administrative services for its subsidiaries and affiliates from its office
in Deerfield Beach, Florida.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
These consolidated financial statements have been prepared in conformity
with generally accepted accounting principles as promulgated in the United
States which require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities. Management is also
required to make judgments regarding disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
Revenue Recognition
Revenues from storage and throughput operations are recognized ratably as
the services are provided. Revenues and commissions from bunkering
services, vessel services and product sales are recognized at the time of
delivery of the service or product.
Significant Customers
The Company's revenues from a state-owned oil producer and a refiner
constituted approximately 6.4% and 4.8% of the Predecessor's total 1995
revenues and approximately 7.9% and 4.7%, of the Predecessor's total
revenues for the period ended November 27, 1996, and approximately 8.1% and
4.0% of the Company's total revenues for the period November 28, 1996 to
December 31, 1996, respectively. In addition, approximately 10.1% of the
Predecessor's revenue for each of the periods ended December 31, 1995, and
November 27, 1996, and 10.2% of the Company's revenues for the period ended
December 31, 1996, were derived from parties unaffiliated with such
state-owned oil producer and refiner, but were generated by the movement of
such products through the terminals. No other customer accounted for more
than 5% of the Predecessor or the Company's 1995 or 1996 revenues directly
or indirectly. Although the Company has long-standing relationships and
long-term contracts with two customers, if such long-term contracts were
not renewed at the end of their terms, 2000 and 1999, respectively, or if
the Company otherwise lost any significant portion of its revenues from
these customers, such loss could have a material adverse effect on the
business and financial condition of the Company. The Company also has
long-term contracts with certain other key customers and there can be no
assurance that these contracts will be renewed at the end of their terms.
F-10
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
Foreign Currency Translation and Exchange
The consolidated financial statements include the financial statements of
foreign subsidiaries and affiliates translated in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency
Translation." Substantially all of the Company's and its Predecessor's
transactions are denominated in U.S. dollars.
Cash and Cash Equivalents
The Predecessor Company--The Predecessor's excess cash was either swept by
CBI/ Praxair to fund or cover current advances or invested in short-term,
highly liquid investments with maturities of three months or less. Such
short-term investments were carried at cost, which approximates market, and
are classified as cash and cash equivalents.
The Company--The Company's excess cash is invested in short-term, highly
liquid investments with maturities of three months or less. Such short-term
investments are carried at cost, which approximates market, and are
classified as cash and cash equivalents.
Financial Instruments
The Company uses various methods and assumptions to estimate the fair value
of each class of financial instrument. Due to their nature, the carrying
value of cash and cash equivalents, accounts receivable and accounts
payable approximates fair value. Due to the recent issuance of the Notes,
the carrying value approximates fair value. The Company's other financial
instruments are not significant.
Inventory
Inventory of oil products is valued at the lower of weighted average cost
or estimated market value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation expense is computed using the straight-line method over the
estimated useful lives of the respective assets. Additions to property and
equipment, replacements, betterments and major renewals are capitalized.
Repair and maintenance expenditures which do not materially increase asset
values or extend useful lives are expensed.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," requires that long-lived assets and
certain identifiable intangibles
F-11
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. SFAS No. 121 also requires that
long-lived assets and certain identifiable long-lived assets to be
disposed of be reported at the lower of carrying amount or fair value
less cost to sell. The Company continually evaluates factors, events and
circumstances which include, but are not limited to, its historical and
projected operating performance, specific industry trends and general
economic conditions to assess whether the remaining estimated useful
lives of long-lived assets may warrant revision or that the remaining
balance of long-lived assets may not be recoverable. When such factors,
events or circumstances indicate that long-lived assets should be
evaluated for possible impairment, the Company uses an estimate of
undiscounted cash flows over the remaining lives of the long-lived assets
in measuring their recoverability.
Intangible Assets
Intangible assets include goodwill, organizational costs and preoperating
expenditures. The excess of cost over the fair value of tangible net assets
acquired has been capitalized as goodwill and is being amortized on a
straight-line basis over the periods of expected benefit, which do not
exceed 40 years. Organizational costs and preoperating expenditures are
amortized evenly over five-year periods. Amortization expense was $929 in
1994 and $1,540 in 1995 and $956 for the period ended November 27, 1996,
related to these intangible assets. Accumulated amortization was $2,693 at
December 31, 1995.
Other Noncurrent Assets
Other noncurrent assets consist primarily of deferred financing costs. The
Company's costs related to establishing debt obligations are amortized
ratably over the life of the underlying obligations. Amortization expense
was $88 for the period from inception to December 31, 1996 ("the period
ended December 31, 1996").
Accrued Expenses
Accrued expenses as of December 31, 1996, consist primarily of purchase
price adjustments related to the Acquisition, environmental reserves and
accrued interest in the amount of $5,146, $1,500 and $1,521, respectively.
Income Taxes
The Company and its Predecessor determine their tax provisions and deferred
tax balances in compliance with SFAS No. 109, "Accounting for Income
Taxes." Under this approach, the provision for income taxes represents
income taxes paid or payable for the current year adjusted for the change
in deferred taxes during the year. Deferred income taxes reflect the
F-12
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
net tax effects of temporary differences between the financial statement
bases and the tax bases of assets and liabilities and are adjusted for
changes in tax rates and tax laws when changes are enacted.
Other Income (Expense)
Other income (expense) includes miscellaneous, nonoperating items. In 1994,
other income (expense) included nonrecurring gains realized upon final
settlements with insurance carriers and other parties, none of which were
individually significant.
4. PRAXAIR PURCHASE ACCOUNTING
As discussed in Note 1, prior to January 12, 1996, the Predecessor Company
was a wholly owned subsidiary of CBI. On January 12, 1996, pursuant to the
Merger Agreement dated December 22, 1995, CBI became a wholly owned
subsidiary of Praxair. This Merger transaction was reflected in the
Predecessor Company's combined financial statements as a purchase effective
January 1, 1996. The fair value assigned to the Predecessor Company as of
the Merger date was $210 million, excluding bank borrowings, Praxair and
CBI intercompany and advance accounts and the buyout of certain
off-balance-sheet financing ("Merger Value").
The allocation of the Merger Value to the assets and liabilities acquired,
based on the estimated fair value assigned, is as follows:
Merger value $ 210,000
Less-
Debt acquired (66,000)
Intercompany/advance accounts (44,000)
Off balance sheet obligation (89,000)
---------
$ 11,000
=========
Allocation of merger value-
Total current assets $ 17,000
Property and equipment 111,000
Other noncurrent assets 4,000
Liabilities assumed (121,000)
---------
$ 11,000
=========
In addition, $10,000 of Praxair debt was pushed down to the Predecessor's
books effective January 1, 1996. This debt was eliminated in connection
with the Acquisition.
F-13
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
5. ACQUISITION
As discussed in Note 1, on November 27, 1996, the Company acquired from
Praxair all of the outstanding capital stock of the Predecessor Company.
The Acquisition has been accounted for under the purchase method of
accounting. Accordingly, the purchase price of $217,146 has been allocated
on a preliminary basis to the assets and liabilities of the Company based
on their respective fair values as of the date of the Acquisition. The
preliminary estimates of fair value may be revised at a later date.
The preliminary allocation of the total purchase price to the assets and
liabilities acquired is as follows:
PURCHASE PRICE:
Cash paid $ 174,146
Stock issued 43,000
Commissions, fees and expenses 16,000
---------
Total purchase price $ 233,146
=========
PRELIMINARY ALLOCATION OF PURCHASE PRICE:
Current assets $ 19,570
Assets held for sale 20,000
Property and equipment 202,907
Other long-term assets 6,539
Liabilities assumed (15,870)
---------
Total purchase price $ 233,146
=========
Summarized below are the unaudited results of operations of the Company on
a pro forma basis assuming the Acquisition and related financing
transactions had occurred on January 1, 1995 and 1996. These results
include certain adjustments, primarily for amortization, depreciation,
interest and other expenses related to the Acquisition. The pro forma
results below exclude revenues and net losses from the assets held for
sale, the Brownsville Terminal and the M/V Megan D. Gambarella. These pro
forma results are not necessarily indicative of what the results would have
been had the transactions actually occurred on such dates.
Year ended December 31
-----------------------
1995 1996
-------- --------
Revenues $133,156 $153,768
Net income (loss) 5,008 (3,548)
F-14
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
6. HURRICANE INSURANCE CLAIMS
During the third and fourth quarters of 1995, the Predecessor Company's
Caribbean location was adversely impacted by three hurricanes. Operations
at the facility ceased for varying lengths of time from August 28, 1995, to
October 3, 1995. Certain terminal assets sustained extensive damage and
were repaired. A few marine items and shoreline installations were damaged
or destroyed and replaced.
The Predecessor Company and the Company have certain property and liability
insurance policies with various insurance carriers. As of December 31,
1995, the Predecessor Company had incurred $8,121 of expenditures subject
to hurricane insurance coverage and had received advances from its
insurance carriers amounting to $3,110. The insurance claim receivable of
$4,611 is included in other receivables as of December 31, 1995. The claims
process related to the hurricane damages was settled in the third quarter
of 1996 for $12,615. Through December 31, 1996, the Company expended
$19,367 relating to hurricane repairs and betterments, of which $6,752 was
capitalized as property and equipment.
7. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31:
<TABLE>
<CAPTION>
Predecessor Company
(Pre-Praxair Acquisition) The Company
------------------------- ------------------------
Useful Useful
1995 Life 1996 Life
--------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Land $ 1,314 -- $ 1,314 --
Land improvements 2,260 5-20 years 8,134 5-20 years
Buildings and improvements 3,971 20-40 years 2,360 20-40 years
Plant machinery and terminals 251,119 4-40 years 189,371 4-40 years
Field and office equipment 4,269 3-15 years 2,931 3-15 years
--------- ---------
Total property and equipment, at cost 262,933 204,110
Less- Accumulated depreciation (66,606) (923)
--------- ---------
Property and equipment, net $ 196,327 $ 203,187
========= =========
</TABLE>
F-15
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
Effective January 1, 1995, the Predecessor Company extended the depreciable
lives of certain marine installations and tanks from 15 and 20 years to 25
and 40 years, respectively. This change resulted in a corresponding
reduction of depreciation expense of approximately $4,300 for 1995.
During construction of their facilities, the Company and its Predecessor
allocate interest to the cost of the constructed facility. Interest
capitalized to constructed facilities amounted to $716 and $914 for 1994
and 1995, respectively, and $327 and $0 for the period ended November 27,
1996, and for the period ended December 31, 1996, respectively.
8. ASSETS HELD FOR SALE
Assets held for sale represent management's estimate of the proceeds from
the anticipated sale of Statia Terminals Southwest, Inc. (the "Brownsville
Terminal") and the M/V Megan D. Gambarella, a marine vessel. The Company
has estimated the proceeds of these sales will aggregate $20,000 although
the actual proceeds of such sales may not equal such estimates. The
estimated fair value of these assets have been reclassified from plant and
equipment to assets held for sale. These assets are still in operation, and
the revenues and costs associated with operating the assets are included in
the accompanying financial statements.
Certain of the Parent's preferred stock agreements contain features which
may require the Parent to cause the Company to dividend or otherwise remit
the proceeds of these assets. Accordingly, $20,000 of the Company's common
stock has been classified outside the equity section as stockholders'
equity subject to reduction.
9. DEBT
The Predecessor Company
At December 31, 1995, the Predecessor Company had $56,400 outstanding on a
long-term debt agreement secured by property and equipment at the Company's
Point Tupper, Canada, facility of which $4,800 was currently payable. A
guarantee was provided by CBI. This obligation bore interest at one-, two-,
three- or six-month U.S. prime rates, London Interbank Offer Rates (LIBOR)
or Canadian bankers acceptance rates, plus 75 basis points, at the option
of the Predecessor Company. The weighted average interest rate for 1995 was
6.7% and 5.8% for the period ended November 27, 1996. This debt guarantee
was assumed by Praxair subsequent to the Merger and paid in full by Praxair
just prior to the Acquisition.
F-16
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
The Predecessor Company had three short-term and unsecured revolving credit
lines aggregating $12,500 used to cover working capital needs and letters
of credit, of which $10,000 was outstanding at December 31, 1995. These
credit lines, guaranteed by CBI, bore interest quarterly at one-, two- or
three-month LIBOR plus 50 basis points, 6.3% at December 31, 1995.
Subsequent to the Merger, Praxair assumed the guarantee for the credit
lines and just prior to the Acquisition, paid and terminated these credit
lines.
In 1993, the Predecessor Company entered into an interest rate swap
agreement, guaranteed by CBI, based on a notional amount of $20,000 whereby
the Predecessor Company made semiannual interest payments at an annual rate
of 5.91% through October 21, 1996, in exchange for the right to receive
interest payments at floating rates (5.8750% at December 31, 1995)
semiannually through October 21, 1996. The swap agreement was extendible
for two additional years at the option of the Predecessor Company. The
interest rate swap agreement was intended to qualify as a hedge against
variable debt borrowings. The fair market value of the interest rate swap
and related option agreement was $1 as of December 31, 1995, which was
estimated based upon the net amount that would be paid to terminate the
agreement, utilizing quoted prices for comparable contracts and
discounted cash flows. Subsequent to the Merger, Praxair assumed the
interest rate swap agreement.
Cash payments for interest to third parties were $2,951, $4,494 and $4,455
for 1994, 1995 and the period ended November 27, 1996, respectively.
The Company
The 11-3/4% First Mortgage Notes due 2003 were issued by the Company and
one of its subsidiaries (the "Issuers") on November 27, 1996, in connection
with the Acquisition and pay interest on May 15 and November 15 of each
year, commencing May 15, 1997. The Notes are redeemable, in whole or in
part, at the option of the Issuers at any time on or after November 15,
2000, at the following redemption prices (expressed as percentages of
principal amount), together with accrued and unpaid interest, if any,
thereon to the redemption date, if redeemed during the 12-month period
beginning November 15, in the year indicated:
Year Optional Redemption Price
---- -------------------------
2000 105.875%
2001 102.938%
2002 100.000%
Notwithstanding the foregoing, at any time on or prior to November 15,
1999, the Issuers may redeem up to 35% aggregate principal amount of the
Notes with the proceeds of one or more equity offerings (as defined in the
indenture) at a redemption price equal to 111.75% of the
F-17
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
principal amount thereof, plus accrued and unpaid interest, if any, to
the date of redemption, provided that after giving effect to such
redemption, at least 65% aggregate principal amount of the Notes remain
outstanding.
The Notes are guaranteed on a full, unconditional, joint and several basis
by each of the indirect and direct active subsidiaries of the Company other
than Statia Terminals Canada, Incorporated, which is a co-obligor on the
Notes (see Note 17). The Notes are also subject to certain financial
covenants as set forth in the indenture, the most restrictive of which
requires that the Company meet a consolidated fixed charge ratio of 2:1,
which, if met, will permit the Company to make additional borrowings over
and above the Company's revolving credit facility discussed below.
The Notes place certain restrictions on the Company to pay dividends to its
Parent, other than distributions from the proceeds of assets held for sale
as discussed in Note 8 above. Except with the occurrence of an event of
default, subsidiaries of the Company have no restrictions upon transfers of
funds in the form of dividends, loans or cash advances.
As of December 31, 1996, the Company had no principal payments maturing
within the next five years under the Notes. Principal outstanding under the
Notes is due in full on November 15, 2003.
The Company has a revolving credit facility (the "Credit Facility") which
allows the Company to borrow up to $17,500 or the limit of the borrowing
base as defined in the Credit Facility. The Credit Facility calls for a
commitment fee of three eighths percent (0.375%) per annum on a portion of
the unused funds. The Credit Facility bears interest at a rate of prime
plus 0.5% (8.75% at December 31, 1996). The Credit Facility constitutes
senior indebtedness of the Company and is secured by a first priority lien
on certain of the Company's accounts receivable and inventory. The Credit
Facility is subject to certain restrictive covenants; however, it is not
subject to financial covenants. The Credit Facility does not restrict the
Company's subsidiaries from transferring funds to the Company in the form
of dividends, loans, or cash advances; however, the failure to pay interest
when due constitutes an event of default under the Credit Facility and such
event of default, until cured, prohibits upstream dividend payments to be
made to the Company. The Credit Facility expires on November 27, 1999. At
December 31, 1996, the Company has $11,900 available for borrowing under
the Credit Facility as limited by the borrowing base computation and had no
outstanding balance.
Cash payments for interest for the period ended December 31, 1996 was $0.
F-18
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
10. LEASES
The Company and the Predecessor Company rent certain facilities, land and
marine equipment under cancelable and noncancelable operating leases. Rent
expense on operating leases was $3,435 in 1994, $13,760 in 1995 (of which
$8,823 including $3,082 for recognition of lease residual value guarantee,
relates to the lease described below), $13,854 for the period ended
November 27, 1996 (of which $9,870 including $4,270 for recognition of
lease residual value guarantee, relates to the lease described below), and
$491 for the period ended December 31, 1996. Future rental commitments
during the years ending 1997 through 2001 are $3,932, $2,033, $910, $263
and $271, respectively.
The Predecessor Company
On November 17, 1993, Statia Terminals N.V. and a subsidiary entered into
an agreement with a third-party financier (First Salute Leasing, L.P.)
pursuant to which a portion of its land on St Eustatius was leased to this
third party for the purpose of construction and operation of five million
barrels of crude oil storage tanks and a single point mooring system.
Statia Terminals N.V. acted as agent for the third party with regard to the
construction of the facilities. Statia Terminals N.V. leased the facility
from the third party for a minimum period of five years beginning February
1, 1995. The aggregate construction cost incurred for these leased assets
totaled $88,513. The facility became operational in the first quarter of
1995 and the applicable portion of the required rentals are included in
rent expense above. At the completion of the initial five year term, Statia
Terminals N.V. had the option to extend the lease, purchase the facility
from the lessor, or arrange for the leased properties to be sold to a third
party. In the event of purchase or sale of these properties, Statia
Terminals N.V. is obligated to the lessor for any shortfall between the
purchase or sales price and the lease residual value guarantee. At December
31, 1995, the maximum amount of the residual value guarantee related to
assets under this lease totaled $78,777. In connection with the
Acquisition, Praxair terminated the above First Salute Leasing, L.P.
off-balance-sheet financing arrangement and paid in full all obligations
related to this lease, just prior to the Acquisition.
11. SHAREHOLDERS' EQUITY
The Predecessor Company
On January 18, 1991, Statia Terminals N.V. issued 12,000 shares of
preferred stock with a par value of $1.00 per share to an affiliate of CBI
in consideration for an investment of $12,000. Each share of this preferred
stock entitled the holder to one vote on matters put forth for shareholder
approval. Preferred share dividends were not recorded until declared by
Statia
F-19
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
Terminals N.V. The preferred shares were noncumulative and
nonparticipating and dividends were paid at a rate of 8% per annum when
declared. Preferred shareholders had preference upon liquidation over
common shareholders.
On January 10, 1996, Statia Terminals N.V. declared dividends of $25,000,
payable on January 11, 1996, to shareholders of record on January 10, 1996.
All dividends were paid to affiliates of CBI.
On October 22, 1993, and March 15, 1994, Statia Terminals Point Tupper,
Inc. issued 14,689 shares and 10,311 shares, respectively, of first
preferred stock to a Canadian affiliate of CBI in exchange for an aggregate
contribution of Cdn $25,000 (U.S.$18,577). The first preferred stock is
nonvoting, cumulative and redeemable at the option of either the issuer or
the holder. The preferred dividends were accrued and paid quarterly at a
rate of .25% above the preferred shareholder's borrowing rate as
established by the shareholder's lending institution. During 1994, 1995 and
the period ended November 27, 1996, Statia Terminals Point Tupper, Inc.
paid dividends of $1,004, $1,424, and $792, respectively. First preferred
shareholders had preference upon liquidation over all other classes of
preferred shareholders as well as common shareholders. This preferred stock
was retired in conjunction with the Acquisition.
The components of shareholders' equity at December 31, 1995, are as
follows:
<TABLE>
<CAPTION>
Stock Additional
---------------------- Retained Paid-in
Common Preferred Earnings Capital Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Statia Terminals, Inc. $ 1 $ -- $ 329 $ 112 $ 442
Statia Terminals N.V 19,395 12 46,547 34,364 100,318
Statia Terminals Point Tupper, Inc. 2 25,196 (10,028) 11,324 26,494
Statia Terminals Southwest, Inc. 10 -- (1,485) 989 (486)
All others 33 -- 304 2,378 2,715
Eliminations (16) (6,619) (657) (12,601) (19,893)
--------- --------- --------- --------- ---------
$ 19,425 $ 18,589 $ 35,010 $ 36,566 $ 109,590
========= ========= ========= ========= =========
</TABLE>
The Company
The Company's equity structure consists of 30,000 shares authorized and
6,000 shares issued and outstanding of $1 par value common stock. All
common stock is owned by the Parent.
F-20
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
12. INCOME TAXES
U.S. federal income taxes and certain state taxes were settled quarterly
with CBI. In Canada and the Netherlands Antilles, estimated current-year
taxes payable are paid monthly. Total cash payments for income taxes were
$823 for the period ended November 27, 1996, $23 for the period ended
December 31, 1996, $694 in 1995 and $1,515 in 1994.
The sources of income (loss) before the provision for income taxes and
preferred stock dividends are:
Predecessor Company
-------------------------------------
Pre-Praxair Post-Praxair
Acquisition Acquisition The Company
------------------- ------------- -------------
Year Ended
December 31 Jan. 1, 1996 Period from
------------------- through Inception through
1994 1995 Nov. 27, 1996 Dec. 31, 1996
---- ---- ------------- -------------
U.S. $ 45 $(1,387) $ 134 $ (298)
Non-U.S 14,082 7,770 (1,395) 335
------- ------- ------- -------
$14,127 $ 6,383 $(1,261) $ 37
======= ======= ======= =======
F-21
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
The benefit from (provision for) income taxes consisted of:
Predecessor Company
----------------------------------
Pre-Praxair Post-Praxair
Acquisition Acquisition The Company
------------------- ------------- -------------
Year Ended
December 31 Jan. 1, 1996 Period from
------------------- through Inception through
1994 1995 Nov. 27, 1996 Dec. 31, 1996
---- ---- ------------- -------------
Taxes payable:
U.S $ (30) $ 818 $ 215 $ --
State (8) (19) (25) --
Non-U.S (785) (775) (487) (132)
------- ------- ------- -------
(823) 24 (297) (132)
------- ------- ------- -------
Deferred income taxes:
U.S (35) (52) (332) --
Non-U.S (361) (362) -- --
------- ------- ------- -------
(396) (414) (332) --
------- ------- ------- -------
$(1,219) $ (390) $ (629) $ (132)
======= ======= ======= =======
The components of the deferred income taxes benefit (provision) above are:
Predecessor Company
----------------------------------
Pre-Praxair Post-Praxair
Acquisition Acquisition The Company
------------------- ------------- -------------
Year Ended
December 31 Jan. 1, 1996 Period from
------------------- through Inception through
1994 1995 Nov. 27, 1996 Dec. 31, 1996
---- ---- ------------- -------------
Depreciation expense $(432) $(515) $(332) $--
Employee and retiree
benefits 36 58 -- --
Other, net -- 43 -- --
----- ----- ----- ----
$(396) $(414) $(332) $--
===== ===== ===== ====
F-22
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
A reconciliation of income taxes at the U.S. statutory rate of 35% to the
Company's provision for income taxes follows:
<TABLE>
<CAPTION>
Predecessor Company
----------------------------------
Pre-Praxair Post-Praxair
Acquisition Acquisition The Company
------------------- ------------- -------------
Year Ended
December 31 Jan. 1, 1996 Period from
------------------- through Inception through
1994 1995 Nov. 27, 1996 Dec. 31, 1996
---- ---- ------------- -------------
<S> <C> <C> <C> <C>
Income (loss) before income
taxes and preferred stock
dividends $ 14,127 $ 6,383 $ (1,261) $ 37
======== ======== ======== ========
Tax provision at U.S. statutory
rate $ (4,944) $ (2,234) 440 (13)
State income taxes (8) (19) --
Non-U.S. tax rate differential
and losses without tax
benefit 3,737 1,909 (1,069) (119)
Other, net (4) (46)
-------- -------- -------- --------
Provision for income taxes $ (1,219) $ (390) $ (629) $ (132)
======== ======== ======== ========
</TABLE>
The Company's high effective tax rates for the periods ended November 27,
1996 and December 31, 1996, are the result of large corporation tax and
minimum tax in Canada and the Netherlands Antilles, respectively, as
discussed below, and losses incurred in certain subsidiaries for which no
tax benefit has been recognized.
F-23
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
The principal temporary differences included in deferred income taxes
reported on the balance sheets is:
<TABLE>
<CAPTION>
Predecessor Company
----------------------------------
Pre-Praxair Post-Praxair
Acquisition Acquisition The Company
------------------- ------------- -------------
Year Ended
December 31 Jan. 1, 1996 Period from
------------------- through Inception through
1994 1995 Nov. 27, 1996 Dec. 31, 1996
---- ---- ------------- -------------
<S> <C> <C> <C> <C>
Depreciation expense $ 1,794 $ 1,508 $ 1,169 $ 1,169
Acquisition of partnership
shares and other activity (660) (660) (653) (653)
Employee and retiree benefits (20) (44) (44) (44)
Net operating loss carryforwards 4,730 8,521 3,435 3,524
Valuation allowance (4,730) (8,521) (3,435) (3,967)
Other, net 729 (22) (29) (29)
------- ------- ------- -------
$ 1,843 $ 782 $ 443 $ --
======= ======= ======= =======
</TABLE>
At December 31, 1995, undistributed earnings equaled approximately $46,500.
If such earnings were distributed, additional U.S. tax of approximately
$15,000 would be incurred. In January, 1996, the Predecessor company
distributed approximately $25,000 from a non-U.S. subsidiary. A portion of
this distribution, the amount in excess of 1996 earnings, will be
aggregated with the $46,500 undistributed earnings at December 31, 1995. In
connection with the Acquisition, all remaining undistributed earnings as of
November 27, 1996 were assumed by Praxair.
The Company and the Predecessor's Canadian subsidiaries are subject to
large corporation tax based on 0.225% of the Company's total equity and
have incurred certain costs which are accounted for differently for
financial reporting and Canadian taxation purposes. Timing differences in
the recognition of expenses occur primarily as a result of differing
provisions for depreciating property and equipment and amortization of
goodwill, deferred financing costs, organizational costs and preoperating
expenditures. Certain expenditures are not deductible for taxation
purposes. In addition, Canadian subsidiaries of the Company have incurred
taxable losses which will be available for utilization over a seven-year
period to offset future taxable income. Net operating loss carryforwards
available to offset future Canadian taxable
income were $4,205, $7,967 and $7,482 as of December 31, 1994, 1995 and
1996, respectively, and expire in varying amounts after seven year periods
through 2003.
F-24
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
On June 1, 1989, the governments of the Netherlands Antilles and St.
Eustatius approved a 12-year Free Zone Agreement (the "Agreement")
retroactive to January 1, 1989, and concluding on December 31, 2000. The
Agreement requires the Company and the Predecessor Company to pay a 2% rate
on taxable income instead of profit tax, or a minimum payment of 500,000
Netherlands Antilles guilders (U.S. $282). The Agreement further provides
that any amounts paid in order to meet the minimum annual payment will be
available to offset future tax liabilities under the Agreement to the
extent that the minimum annual payment is greater than 2% of taxable
income. At December 31, 1995 and 1996, the amounts available to offset
future tax liability under the Agreement were approximately $554 and $843,
respectively.
Certain of the Company's Netherlands Antilles subsidiaries are not part of
the Agreement and, accordingly, pay Netherlands Antilles federal income tax
at an effective tax rate of 38%. Approximately $89 of nonfree zone tax is
included in the Netherlands Antilles tax provision for the period ended
December 31, 1996.
The Company's net deferred tax asset in the amount of $3,967 primarily
relates to depreciation and net operating loss carryforwards. For all years
presented, the Company has provided a valuation allowance against this tax
asset, as management believes it is not likely the net deferred tax asset
will be utilized in the future.
13. RELATED-PARTY TRANSACTIONS
The Predecessor Company
Prior to November 27, 1996, the Company engaged in various related-party
transactions with Praxair, CBI and their affiliates. The unpaid portion of
these transactions is included in payable to affiliates. Advances consist
principally of funds loaned by Praxair/CBI for disbursements, debt service
and dividends offset by the transfer of the Predecessor Company's excess
cash. The advances were non-interest-bearing and did not have a specified
maturity date.
The Predecessor Company regularly contracted with affiliates of CBI for the
construction and expansion of its facilities and for certain repair and
maintenance work. During 1994, 1995, and for the period ended November 27,
1996, $7,406, $19,032 and $4,828, respectively, was paid to Praxair or CBI
affiliates for these activities related to its property and equipment. It
is not possible to determine whether the results of operations and
financial position of the Predecessor Company would be significantly
different had the Predecessor Company contracted with independent third
parties for its construction, expansion, repair and maintenance needs.
F-25
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
Praxair and CBI directly and indirectly allocated certain corporate
administrative services to the Predecessor Company including certain legal
services, risk management, tax advice and return preparation, employee
benefit administration, cash management and other services. During 1994,
1995, and the period ended November 27, 1996, $578, $1,592 and $138,
respectively, was paid for these direct and indirect administrative
services. All intercompany balances owed to Praxair, CBI and their
affiliates were fully paid in connection with the Acquisition.
The Company
The Parent entered into a ten-year management agreement with Castle Harlan,
Inc. subject to certain conditions, to pay an annual management fee of
$1,350 plus out of pocket expenses, for investment banking, advisory and
strategic planning services. Management fees may include additional amounts
related to the disposition of certain assets or capital stock of
subsidiaries of the Company.
Subsequent to December 31, 1996, the Company declared a dividend to the
Parent in the amount of $1,350 to cover the management fee for the period
from November 27, 1996, to November 27, 1997. Payment of future dividends
by the Company is subject to and restricted by the Notes.
14. COMMITMENTS AND CONTINGENCIES
The Predecessor Company
The Predecessor Company, CBI and others were defendants in a suit brought
during January, 1994, before the District Court of Harris County, Texas,
334th Judicial District, in which plaintiffs claim damages, primarily for
lost profits, as a result of the Predecessor Company's alleged failure to
lease certain property and tankage to the plaintiffs for a proposed vacuum
tower project on the island of St. Eustatius. This case was settled by CBI
and Praxair during 1996.
The Company
In connection with the Acquisition, studies were undertaken by and for
Praxair to identify potential environmental, health, and safety matters.
Certain matters involving potential environmental costs were identified at
the Point Tupper facility. Praxair has agreed to pay for certain of these
costs currently estimated at approximately $3,100 representing certain
investigations, remediation, compliance and capital costs. To the extent
that certain of these matters exceed this estimate, Praxair has agreed to
reimburse the Company for these future expenditures. Additionally, the
Company has identified additional environmental costs at
F-26
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
Point Tupper of approximately $1,500. These costs represent preemptive
capital improvements designed to mitigate or prevent future environmental
exposures and improve the overall safety of the Company's facilities. The
Company believes that these environmental costs, subject to the foregoing
reimbursements, will not have a material adverse effect on the Company's
financial position, cash flows or results of operations.
The Company is involved in various other claims and litigation arising from
the conduct of its business. Based upon analysis of legal matters and
discussions with legal counsel, the Company believes that the ultimate
outcome of these matters will not have a material adverse effect on the
Company's financial position, cash flows and results of operations.
15. RETIREMENT PLANS
For United States citizens, the Predecessor Company participated in a
defined benefit plan, certain contributory plans, an employee stock
ownership plan and other plans sponsored by CBI / Praxair. The Predecessor
Company paid CBI its proportionate share of the contributions to these
plans amounting to $340 in 1994, $396 in 1995 and $246 for the period ended
November 27, 1996. As a result of the Acquisition, the Company's
participation in these plans ceased. In addition, for certain foreign
nationals residing in the Netherlands Antilles, the Company and the
Predecessor Company sponsors a government guaranteed pension plan.
16. VALUATION AND QUALIFYING ACCOUNTS
The table below summarizes the activity in the accounts receivable
valuation account for the periods indicated below:
F-27
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance,
Beginning Charges Deductions, Balance,
of Period to Expense Write-offs, Net End of Period
--------- ---------- --------------- -------------
<S> <C> <C> <C> <C>
Trade Accounts Receivable-
For the year ended December 31, 1994 $ 394 $ 244 $(332) $ 306
For the year ended December 31, 1995 306 339 -- 645
For the period ended November 27, 1996 645 406 (273) 778
For the period ended December 31, 1996 778 1 (10) 769
===== ===== ===== =====
</TABLE>
17. CONDENSED COMBINING FINANCIAL STATEMENTS BY JURISDICTION
The Notes are guaranteed on a full, unconditional, joint and several basis
by each of the indirect and direct active subsidiaries of the Company,
other than Statia Terminals Canada, Incorporated, which is a co-obligor on
the Notes. Each of the subsidiary guarantors are wholly owned. The Company
has several inactive nonguaranteeing subsidiaries which are inconsequential
individually and in the aggregate, and which have no assets, liabilities or
operations and are in process of being dissolved by the Company. The
following condensed combining financial data illustrates the composition of
the Company's subsidiary guarantors and as applicable, the Statia Terminals
International N.V. (unconsolidated), combined by jurisdiction as the
enforceability of the guarantees may be affected differently under the laws
of the foreign and domestic jurisdictions. Separate financial statements of
the subsidiaries, other than Statia Terminals Canada, Incorporated and
Statia Terminals N.V., are not presented because management of the Company
has determined that they are not material to investors.
F-28
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
CONDENSED COMBINING BALANCE SHEETS
December 31, 1995
<TABLE>
<CAPTION>
Reclass- Consol-
United ifications & idated
ASSETS Canada Antilles States Eliminations Total
- ---------------------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,207 $ 301 $ (39) $ -- $ 1,469
Accounts receivable, net 2,437 13,785 183 (23) 16,382
Inventory 575 1,311 -- -- 1,886
Other current assets 62 66 37 (2) 163
-------- -------- -------- -------- --------
Total current assets 4,281 15,463 181 (25) 19,900
PROPERTY AND EQUIPMENT, net 79,156 103,130 14,225 (184) 196,327
INVESTMENT IN SUBSIDIARIES -- -- 17,574 (17,574) --
INTANGIBLE ASSETS, net 11,105 -- (933) (247) 9,925
OTHER NONCURRENT ASSETS, net 1,713 1,605 813 -- 4,131
-------- -------- -------- -------- --------
Total assets $ 96,255 $120,198 $ 31,860 $(18,030) $230,283
======== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 2,657 $ 5,529 $ 2,046 $ (1) $ 10,231
Current portion of long-term debt 14,800 -- -- -- 14,800
Payable to (receivable from) CBI affiliates 704 13,433 (12,861) -- 1,276
-------- -------- -------- -------- --------
Total current liabilities 18,161 18,962 (10,815) (1) 26,307
LONG-TERM DEBT, net of current maturities 51,600 -- -- -- 51,600
ADVANCES FROM CBI INDUSTRIES, INC -- -- 42,786 -- 42,786
-------- -------- -------- -------- --------
Total liabilities 69,761 18,962 31,971 (1) 120,693
-------- -------- -------- -------- --------
STOCKHOLDERS' EQUITY:
Preferred stock 25,196 12 -- (6,619) 18,589
Common stock 2 19,420 12 (9) 19,425
Additional paid-in capital 11,324 35,542 1,101 (11,401) 36,566
Retained earnings (deficit) (10,028) 46,262 (1,224) -- 35,010
-------- -------- -------- -------- --------
Total stockholders' equity 26,494 101,236 (111) (18,029) 109,590
-------- -------- -------- -------- --------
Total liabilities and stockholders' equity $ 96,255 $120,198 $ 31,860 $(18,030) $230,283
======== ======== ======== ======== ========
</TABLE>
F-29
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
CONDENSED COMBINING BALANCE SHEETS
December 31, 1996
<TABLE>
<CAPTION>
Statia Canada
(which
Statia Terminals includes all Reclassifi-
International N.V. Canadian Netherlands United cations & Consolidated
ASSETS (Unconsolidated) Entities) Antilles States Eliminations Total
------ ---------------- --------- -------- ------ ------------ -----
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,065 $ 854 $ 1,345 $ -- $ -- $ 9,264
Accounts receivable, net 54 1,502 13,242 917 (454) 15,261
Inventory -- 1,157 3,812 -- -- 4,969
Other current assets -- 67 27 942 -- 1,036
Assets held for sale -- 10,000 10,000 -- 20,000
Receivable from (to) affiliates (11,020) 1,598 13,939 (4,517) -- --
--------- --------- --------- --------- --------- ---------
Total current assets (3,901) 5,178 42,365 7,342 (454) 50,530
PROPERTY AND EQUIPMENT, net -- 29,036 173,707 444 -- 203,187
INVESTMENT IN SUBSIDIARIES 103,040 -- 5,265 213 (108,518)
OTHER NONCURRENT ASSETS -- 1,367 5,038 33 -- 6,438
--------- --------- --------- --------- --------- ---------
Total assets $ 99,139 $ 35,581 $ 226,375 $ 8,032 $(108,972) $ 260,155
========= ========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 734 $ 5,617 $ 15,523 $ 5,330 $ (454) $ 26,750
LONG-TERM DEBT, net of current maturities -- 28,060 106,940 -- -- 135,000
--------- --------- --------- --------- --------- ---------
Total liabilities 734 33,677 122,463 5,330 (454) 161,750
STOCKHOLDERS' EQUITY SUBJECT TO REDUCTION 20,000 -- -- -- -- 20,000
STOCKHOLDERS' EQUITY:
Common stock 6 -- 6 3,000 (3,006) 6
Additional paid-in capital 78,494 2,266 103,291 -- (105,557) 78,494
Retained earnings (deficit) (95) (362) 615 (298) 45 (95)
--------- --------- --------- --------- --------- ---------
Total stockholders' equity 78,405 1,904 103,912 2,702 (108,518) 78,405
--------- --------- --------- --------- --------- ---------
Total liabilities and stockholders' equity $ 99,139 $ 35,581 $ 226,375 $ 8,032 $(108,972) $ 260,155
========= ========= ========= ========= ========= =========
</TABLE>
F-30
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
CONDENSED COMBINING INCOME STATEMENT
For the Year Ended December 31, 1994
<TABLE>
<CAPTION>
Reclassifi-
Netherlands United cations & Consolidated
Canada Antilles States Eliminations Total
------ -------- ------ ------------ -----
<S> <C> <C> <C> <C> <C>
REVENUES $ 12,024 $114,991 $ 9,460 $ (3,809) $132,666
COST OF SERVICES AND PRODUCTS SOLD 9,079 98,635 3,480 -- 111,194
-------- -------- -------- -------- --------
Gross profit 2,945 16,356 5,980 (3,809) 21,472
ADMINISTRATIVE EXPENSES 1,700 2,502 4,649 (3,512) 5,339
-------- -------- -------- -------- --------
Income from operations 1,245 13,854 1,331 (297) 16,133
INTEREST EXPENSE 3,112 2 -- -- 3,114
OTHER INCOME (EXPENSE) 260 568 (16) 296 1,108
-------- -------- -------- -------- --------
Income (loss) before income taxes (1,607) 14,420 1,315 (1) 14,127
PROVISION FOR INCOME TAXES 156 301 762 -- 1,219
-------- -------- -------- -------- --------
Net income (loss) (1,763) 14,119 553 (1) 12,908
PREFERRED STOCK DIVIDENDS 1,004 960 -- -- 1,964
-------- -------- -------- -------- --------
Net income (loss) available to common stockholders $ (2,767) $ 13,159 $ 553 $ (1) $ 10,944
======== ======== ======== ======== ========
</TABLE>
F-31
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
CONDENSED COMBINING INCOME STATEMENT
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Reclassifi-
Netherlands United cations & Consolidated
Canada Antilles States Eliminations Total
------ -------- ------ ------------ -----
<S> <C> <C> <C> <C> <C>
REVENUES $ 11,143 $ 121,899 $ 8,641 $ (6,142) $ 135,541
COST OF SERVICES AND PRODUCTS SOLD 9,370 105,109 3,003 -- 117,482
--------- --------- --------- --------- ---------
Gross profit 1,773 16,790 5,638 (6,142) 18,059
ADMINISTRATIVE EXPENSES 2,382 3,753 6,907 (6,142) 6,900
--------- --------- --------- --------- ---------
Income (loss) from operations (609) 13,037 (1,269) -- 11,159
INTEREST EXPENSE 4,548 (70) -- -- 4,478
OTHER INCOME (EXPENSE) 197 (477) (18) -- (298)
--------- --------- --------- --------- ---------
Income (loss) before income taxes (4,960) 12,630 (1,287) -- 6,383
PROVISION FOR INCOME TAXES 155 292 (57) -- 390
--------- --------- --------- --------- ---------
Net income (loss) (5,115) 12,338 (1,230) -- 5,993
PREFERRED STOCK DIVIDENDS 1,424 -- -- -- 1,424
--------- --------- --------- --------- ---------
Net income (loss) available to common stockholders $ (6,539) $ 12,338 $ (1,230) $ -- $ 4,569
========= ========= ========= ===== =========
</TABLE>
F-32
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
CONDENSED COMBINING INCOME STATEMENT
For the Period January 1, 1996, to November 27, 1996
<TABLE>
<CAPTION>
Reclassifi-
Netherlands United cations & Consolidated
Canada Antilles States Eliminations Total
------ -------- ------ ------------ -----
<S> <C> <C> <C> <C> <C>
REVENUES $ 11,831 $ 126,209 $ 8,220 $ (5,262) $ 140,998
COST OF SERVICES AND PRODUCTS SOLD 10,131 116,992 2,840 (465) 129,498
--------- --------- --------- --------- ---------
Gross profit 1,700 9,217 5,380 (4,797) 11,500
ADMINISTRATIVE EXPENSES 2,489 4,425 6,134 (4,797) 8,251
--------- --------- --------- --------- ---------
Income (loss) from operations (789) 4,792 (754) -- 3,249
INTEREST EXPENSE 3,667 520 -- -- 4,187
OTHER INCOME (EXPENSE) (408) 106 (21) -- (323)
--------- --------- --------- --------- ---------
Income (loss) before income taxes (4,864) 4,378 (775) -- (1,261)
PROVISION FOR INCOME TAXES 332 156 141 -- 629
--------- --------- --------- --------- ---------
Net income (loss) (5,196) 4,222 (916) -- (1,890)
PREFERRED STOCK DIVIDENDS 792 -- -- -- 792
--------- --------- --------- --------- ---------
Net income (loss) available to common stockholders $ (5,988) $ 4,222 $ (916) $ -- $ (2,682)
========= ========= ========= ========= =========
</TABLE>
F-33
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
CONDENSED COMBINING INCOME STATEMENT
For the Period November 27, 1996, to December 31, 1996
<TABLE>
<CAPTION>
Statia Canada
(which includes
Statia Terminals all Reclassifi-
International N.V. Canadian Netherlands United cations & Consolidated
(Unconsolidated) Entities) Antilles States Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
REVENUES $ -- $ 1,631 $ 13,194 $ 840 $ (709) $ 14,956
COST OF SERVICES AND PRODUCTS SOLD 50 1,519 11,037 454 (50) 13,010
-------- -------- -------- -------- -------- --------
Gross profit (50) 112 2,157 386 (659) 1,946
ADMINISTRATIVE EXPENSES -- 146 240 686 (659) 413
-------- -------- -------- -------- -------- --------
Income (loss) from operations (50) (34) 1,917 (300) -- 1,533
INTEREST EXPENSE -- 318 1,207 -- -- 1,525
OTHER INCOME (EXPENSE) -- 8 19 2 -- 29
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes (50) (344) 729 (298) -- 37
PROVISION FOR INCOME TAXES -- 18 114 -- -- 132
-------- -------- -------- -------- -------- --------
Net income (loss) (50) (362) 615 (298) -- (95)
EQUITY INCOME (LOSS) (45) -- -- -- 45 --
-------- -------- -------- -------- -------- --------
Net income (loss) available to common stockholders $ (95) $ (362) $ 615 $ (298) $ 45 $ (95)
======== ======== ======== ======== ======== ========
</TABLE>
F-34
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1994
<TABLE>
<CAPTION>
Reclassifi-
Netherlands United cations & Consolidated
Canada Antilles States Eliminations Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in) operating activities $ (3,349) $ 25,013 $ 4,042 $ -- $ 25,706
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment -- -- 87 -- 87
Purchases of property and equipment (9,497) (14,435) (1,508) -- (25,440)
Investment in subsidiaries -- 206 (1,407) 1,201 --
-------- -------- -------- -------- --------
Net cash provided by (used in) investing activities (9,497) (14,229) (2,828) 1,201 (25,353)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in advances from affiliates -- 10,029 (1,694) -- 8,335
Sale of common stock 1,201 -- -- (1,201) --
Sale of preferred stock 7,501 -- -- -- 7,501
Bank borrowings 10,468 -- -- -- 10,468
Repayment of bank borrowings (6,144) -- -- -- (6,144)
Dividends paid to affiliates (1,004) (21,000) 165 -- (21,839)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities 12,022 (10,971) (1,529) (1,201) (1,679)
-------- -------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (824) (187) (315) -- (1,326)
CASH AND CASH EQUIVALENTS, beginning balance 1,169 282 299 -- 1,750
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, ending balance $ 345 $ 95 $ (16) $ -- $ 424
======== ======== ======== ======== ========
</TABLE>
F-35
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Reclassifi-
Netherlands United cations & Consolidated
Canada Antilles States Eliminations Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in) operating activities $ 3 $ 10,883 $ 590 $ -- $ 11,476
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment -- -- 230 -- 230
Purchases of property and equipment (9,667) (24,422) (3,049) -- (37,138)
Investment in subsidiaries -- -- (10,000) 10,000 --
-------- -------- -------- -------- --------
Net cash provided by (used in) investing activities (9,667) (24,422) (12,819) 10,000 (36,908)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in advances from affiliates -- 13,745 12,153 -- 25,898
Sale of common stock 10,000 -- -- (10,000) --
Bank borrowings 1,950 -- (18) -- 1,932
Dividends paid to affiliates (1,424) -- 71 -- (1,353)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities 10,526 13,745 12,206 (10,000) 26,477
-------- -------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 862 206 (23) -- 1,045
CASH AND CASH EQUIVALENTS, beginning balance 345 95 (16) -- 424
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, ending balance $ 1,207 $ 301 $ (39) $ -- $ 1,469
======== ======== ======== ======== ========
</TABLE>
F-36
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the Period January 1, 1996 to November 27, 1996
<TABLE>
<CAPTION>
Reclassifi-
Netherlands United cations & Consolidated
Canada Antilles States Eliminations Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in) operating activities $ (7,625) $ 16,111 $ (728) $ 1,350 $ 9,108
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of property, plant and equipment -- 111 -- -- 111
Purchase of property, plant and equipment (819) (11,819) (1,425) (427) (14,490)
Buyout of First Salute Leasing L.P. assets -- (88,511) -- -- (88,511)
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing activities (819) (100,219) (1,425) (427) (102,890)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common and preferred stock -- 181 1 (182) --
Retirement of preferred stock (25,196) -- -- 6,619 (18,577)
Increase (decrease) in advances from CBI 99,823 108,695 2,609 (7,360) 203,767
Bank borrowings 66,000 -- -- -- 66,000
Repayments of bank borrowings (132,400) -- -- -- (132,400)
Dividends paid to affiliates (792) (25,000) -- -- (25,792)
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities 7,435 83,876 2,610 (923) 92,998
--------- --------- --------- --------- ---------
INCREASE (DECREASE) IN CASH (1,009) (232) 457 -- (784)
CASH AND CASH EQUIVALENTS, beginning balance 1,207 301 (39) -- 1,469
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, ending balance $ 198 $ 69 $ 418 $ -- $ 685
========= ========= ========= ========= =========
</TABLE>
F-37
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the Period November 27, 1996, to December 31, 1996
<TABLE>
<CAPTION>
Statia Canada
Statia Terminals (which includes
International N.V. all Canadian Netherlands
(Unconsolidated) Entities) Antilles
---------------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in) operating activities $ (149) $ 2,078 $ 674
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment -- (306) (882)
Acquisition of Statia operations (143,233) (27,655) --
Transaction costs (7,582) (1,990) --
Accrued transaction costs and purchase price 5,142 2,488 --
--------- --------- ---------
Net cash used in investing activities (145,673) (27,463) (882)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of 11-3/4% first mortgage notes 106,940 28,060 --
Debt costs paid (5,093) (1,335) --
Issuance of common stock 55,500 -- --
Advance from (to) affiliates (4,460) (486) 1,553
--------- --------- ---------
Net cash provided by (used in) financing activities 152,887 26,239 1,553
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,065 854 1,345
CASH AND CASH EQUIVALENTS, beginning balance -- -- --
--------- ---------- ---------
CASH AND CASH EQUIVALENTS, ending balance $ 7,065 854 1,345
========= ========== =========
<CAPTION>
United Reclassifications & Consolidated
States Eliminations Total
--------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in) operating activities $ (378) $ -- $ 2,225
--------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (15) -- (1,203)
Acquisition of Statia operations (3,073) -- (173,961)
Transaction costs -- -- (9,572)
Accrued transaction costs and purchase price 73 -- 7,703
--------- ---------- ---------
Net cash used in investing activities (3,015) -- (177,033)
--------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of 11-3/4% first mortgage notes -- -- 135,000
Debt costs paid -- -- (6,428)
Issuance of common stock -- -- 55,500
Advance from (to) affiliates 3,393 -- --
--------- ---------- ---------
Net cash provided by (used in) financing activities 3,393 -- 184,072
--------- ---------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS -- -- 9,264
CASH AND CASH EQUIVALENTS, beginning balance -- -- --
--------- ---------- ---------
CASH AND CASH EQUIVALENTS, ending balance $ -- $ -- $ 9,264
========= ========== =========
</TABLE>
F-38
<PAGE>
Statia Terminals N.V. and Subsidiaries
Consolidated Financial Statements
as of December 31, 1996
Together With Auditors' Report
F-39
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Statia Terminals N.V. and Subsidiaries:
We have audited the accompanying consolidated balance sheet of STATIA TERMINALS
N.V. (a Netherlands Antilles corporation) AND SUBSIDIARIES as of December 31,
1996, and the related consolidated statements of income and retained earnings
and cash flows for the period from inception through December 31, 1996. We have
also audited the accompanying consolidated balance sheet of Statia Terminals
N.V. ("Old Statia Terminals N.V. or The Predecessor") as of December 31, 1995
and the related consolidated statements of income and retained earnings and cash
flows of the Predecessor from January 1, 1996 through November 27, 1996, and for
the years ended December 31, 1995 and 1994. 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.
We conducted our audits in accordance with 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Statia Terminals
N.V. as of December 31, 1996, and the results of its operations and its cash
flows for the period from inception through December 31, 1996, and the financial
position of the Predecessor as of December 31, 1995 and the results of its
operations and its cash flows from January 1, 1996 through November 27, 1996,
and for the years ended December 31, 1995 and 1994, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 19, 1997
F-40
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
The financial statements of the Company and the Predecessor Company
are not comparable in certain respects (See Note 1).
<TABLE>
<CAPTION>
December 31
---------------------------
1995 1996
------------ ---------
Predecessor
Company
------------
Pre-Praxair The
ASSETS Acquisition Company
- ------------------------------------------------------------------------------ ----------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 185 $ 1,304
Accounts receivable--trade, less allowance for doubtful
accounts of $286 in 1995 and $386 in 1996 9,246 10,876
Other receivables 4,467 2,421
Inventory 1,311 3,812
Prepaid expenses 66 26
Assets held for sale -- 10,000
-------- --------
Total current assets 15,275 28,439
PROPERTY AND EQUIPMENT, net 101,905 172,316
OTHER NONCURRENT ASSETS, net 1,605 5,038
-------- --------
$118,785 $205,793
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 3,586 $ 5,453
Accrued expenses 1,788 10,055
Payable to Statia affiliates -- 6,619
-------- --------
Total current liabilities 5,374 22,127
LONG-TERM DEBT -- 106,940
ADVANCES FROM PARENT COMPANY 13,093 --
-------- --------
Total liabilities 18,467 129,067
-------- --------
STOCKHOLDERS' EQUITY SUBJECT TO REDUCTION -- 10,000
STOCKHOLDERS' EQUITY:
Preferred stock 12 --
Common stock 19,395 9,395
Additional paid-in capital 34,364 56,847
Retained earnings 46,547 484
-------- --------
Total stockholders' equity 100,318 66,726
-------- --------
$118,785 $205,793
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (DEFICIT)
(Dollars in thousands)
The financial statements of the Company and the Predecessor Company are not
comparable in certain respects (See Note 1).
<TABLE>
<CAPTION>
Predecessor Company
-------------------------------------- The
Post-Praxair Company
Pre-Praxair Acquisition Acquisition -----------
----------------------- -----------
Period from
Year Ended December 31 Jan. 1,1996 Inception
---------------------- Through Through
1994 1995 Nov. 27,1996 Dec. 31,1996
------- ------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 114,455 $ 121,160 $ 125,978 $ 12,936
COST OF SERVICES AND PRODUCTS SOLD 98,269 104,643 116,640 10,964
--------- --------- --------- ---------
Gross profit 16,186 16,517 9,338 1,972
ADMINISTRATIVE EXPENSES 2,389 3,536 4,346 257
--------- --------- --------- ---------
Income from operations 13,797 12,981 4,992 1,715
INTEREST INCOME (EXPENSE) (2) 70 (520) (1,205)
OTHER INCOME (EXPENSE) 568 (477) 106 --
--------- --------- --------- ---------
Income before income taxes 14,363 12,574 4,578 510
PROVISION FOR INCOME TAXES 281 281 257 26
--------- --------- --------- ---------
Net income 14,082 12,293 4,321 484
PREFERRED STOCK DIVIDENDS 960 -- -- --
--------- --------- --------- ---------
Net income available to common stockholders 13,122 12,293 4,321 484
RETAINED EARNINGS, beginning of period 41,172 34,254 -- --
COMMON STOCK DIVIDENDS 20,040 -- 25,000 --
--------- --------- --------- ---------
RETAINED EARNINGS (DEFICIT), end of period $ 34,254 $ 46,547 $ (20,679) $ 484
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
The financial statements of the Company and the Predecessor Company are not
comparable in certain respects (See Note 1).
<TABLE>
<CAPTION>
Predecessor Company
-------------------------------------- The
Post-Praxair Company
Pre-Praxair Acquisition Acquisition -----------
----------------------- -----------
Period from
Year ended December 31 Jan. 1,1996 Inception
---------------------- Through Through
1994 1995 Nov. 27,1996 Dec. 31,1996
--------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income before preferred stock dividends $ 14,082 $ 12,293 $ 4,321 $ 484
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization expense 5,526 7,827 7,870 724
Provision for bad debts (467) 128 100 --
(Gain) loss on disposition of property -- 6 (80) --
Increase in accounts receivable, trade (1,025) (4,181) (375) (1,355)
(Increase) decrease in other receivables 434 (3,857) 3,670 (1,260)
(Increase) decrease in inventory 5,054 648 (3,731) 1,230
(Increase) decrease in prepaid expense 56 (60) 32 8
Increase in other noncurrent assets (2) (1,875) -- --
Increase in accounts payable 900 147 3,049 (1,181)
Increase (decrease) in accrued expenses 583 (303) 224 1,029
--------- --------- --------- ---------
Net cash provided by operating activities 25,141 10,773 15,080 (321)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash from sale of property and equipment -- -- 111 --
Purchase of property and equipment (14,435) (24,422) (12,163) (882)
Buyout of First Salute Leasing, L.P. assets -- -- (88,511) --
Investment in subsidiary 206 -- -- --
Acquisition of the Company, net of $185 cash acquired -- -- -- (163,233)
Transaction costs -- -- -- (7,582)
Accrued transaction costs and purchase price -- -- -- 5,142
--------- --------- --------- ---------
Net cash used in investing activities (14,229) (24,422) (100,563) (166,555)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock and preferred stock -- -- 1 55,500
Increase (decrease) in advances from CBI affiliates (1,318) -- 110,364 --
Dividends paid to affiliates (21,000) -- (25,000) --
Issuance of 11-3/4% first mortgage notes -- -- -- 106,940
Debt costs paid -- -- -- (5,093)
Advances from affiliate -- -- -- 10,833
Increase in payable to CBI affiliates 11,347 13,745 -- --
--------- --------- --------- ---------
Net cash provided by (used in) financing activities (10,971) 13,745 85,365 168,180
--------- --------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (59) 96 (118) 1,304
CASH AND CASH EQUIVALENTS, beginning balance 148 89 185 --
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, ending balance $ 89 $ 185 $ 67 $ 1,304
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-43
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995 and 1996
(Dollars in thousands, except share information)
1. BASIS OF PRESENTATION
The consolidated balance sheet as of December 31, 1996, and the
consolidated statements of income and retained earnings and cash flows for
the period from inception through December 31, 1996, include the accounts
of Statia Terminals N.V. and its wholly owned subsidiaries (the "Company").
The consolidated balance sheet as of December 31, 1995 and the consolidated
statements of income and retained earnings and cash flows from January 1,
1996 through November 27, 1996, and for the years ended December 31, 1995
and 1994, include the accounts of Statia Terminals N.V. and its wholly
owned subsidiaries ("Old Statia Terminals N.V. or the Predecessor
Company").
The Company and the Predecessor Company uses a fixed exchange rate to
convert Netherlands Antilles guilders to United States dollars at Nafl 1.78
to U.S.$1.00. These consolidated financial statements are presented in
United States dollars.
The Predecessor Company
The Predecessor Company's financial statements include the following
primary entities, all incorporated in the Netherlands Antilles: Statia
Terminals N.V. and its wholly owned subsidiaries, Statia Laboratory
Services N.V.; Statia Tugs N.V. and Statia Shipping N.V. Statia Tugs N.V.
and Statia Shipping N.V. are dormant. Significant intercompany balances and
transactions have been eliminated.
Prior to January 12, 1996, the Predecessor Company was a wholly owned
subsidiary of CBI Industries, Inc. ("CBI"). On January 12, 1996, pursuant
to the Merger Agreement dated December 22, 1995 (the "Merger"), CBI became
a wholly owned subsidiary of Praxair, Inc. ("Praxair"). This Merger
transaction was reflected in the Predecessor Company's consolidated
financial statements as a purchase effective January 1, 1996 (see Note 4).
Accordingly, the historical financial information provided herein, for
periods prior to January 1, 1996, ("Pre-Praxair Acquisition") will not be
comparable to subsequent Predecessor Company financial information or
financial information of the Company.
The Company
The Company is an indirect wholly owned subsidiary of Statia Terminals
International N.V. (the "Parent"), incorporated in the Netherlands
Antilles. The Company includes Statia Laboratory Services N.V., Statia Tugs
N.V. and Statia Shipping N.V., all of which are dormant. Significant
intercompany balances and transactions have been eliminated.
F-44
<PAGE>
On November 27, 1996, the Parent acquired from Praxair all of the
outstanding capital stock of the Predecessor Company and certain of its
subsidiaries and affiliates (the "Acquisition"). The Parent is a newly
organized company owned primarily by Castle Harlan Partners II, L.P., a
private equity investment fund managed by Castle Harlan, Inc., a private
merchant bank, management of the Parent and others. The portion of the
adjusted purchase price paid to Praxair for the capital stock of the
Company was $174,921. The Acquisition was paid, in part, by funds received
by the Parent from the issuance of the $135,000 of 11-3/4% first mortgage
notes (the "Notes") described in Note 9 and from the sale of the Parent's
stock. The assets of the Company are pledged as collateral to secure these
Notes. The Acquisition has been accounted for under the purchase method of
accounting. The preliminary estimates of purchase price have been allocated
to the assets and liabilities of the Company based on their fair values at
the date of Acquisition.
The Acquisition and the related application of purchase accounting (Note 5)
resulted in changes to the capital structure of the Predecessor Company and
the historical basis of various assets and liabilities. The effect of such
changes significantly impairs comparability of the financial position and
results of operations of the Company and the Predecessor Company between
periods.
2. NATURE OF THE BUSINESS
The Company and the Predecessor Company own, lease and operate petroleum
and other bulk liquid blending, transshipment and storage facilities
located on the Island of St. Eustatius, Netherlands Antilles. The Company's
terminaling services are furnished to some of the world's largest producers
of crude oil, integrated oil companies, oil refiners, traders and
petrochemical companies. In addition, the Company and the Predecessor
Company provide a variety of related terminal services including the
supplying of bunker fuels for vessels, emergency and spill response,
brokering of product trades and ship services. Statia Terminals, Inc.
provides administrative services for its subsidiaries and affiliates from
its office in Deerfield Beach, Florida.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
These consolidated financial statements have been prepared in conformity
with generally accepted accounting principles as promulgated in the United
States, which require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities. Management is also
required to make judgments regarding disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
F-45
<PAGE>
Revenue Recognition
Revenues from storage and throughput operations are recognized ratably as
the services are provided. Revenues and commissions from bunkering
services, vessel services and product sales are recognized at the time of
delivery of the service or product.
Significant Customers
The Company's revenues from a state-owned oil producer constituted
approximately 7.1% of the Company's total 1995 revenues, approximately 8.8%
of the Predecessor's total revenues for the period from January 1, 1996
through November 27, 1996 ("period ended November 27, 1996"), and
approximately 9.3% of the Company's total revenues for the period from
November 27, 1996 through December 31, 1996 ("period ended December 31,
1996"). In addition, approximately 9.9% of the Predecessor's revenues for
the period ended November 27, 1996 and 6.4% of the Company's revenues for
the period ended December 31, 1996 were derived from parties unaffiliated
with such state-owned oil producer, but were generated by the movement of
such products through the terminals. In addition, no other customer
accounted for more than 5% of the Predecessor or the Company's 1995 or 1996
revenues directly or indirectly. Although the Company has a long-standing
relationship and a long-term contract with one customer, if the long-term
contract were not renewed at the end of the term, in the year 1999, or if
the Company otherwise lost any significant portion of its revenues from
this customer, such loss could have a material adverse effect on the
business and financial condition of the Company. The Company also has
long-term contracts with certain other key customers and there can be no
assurance that these contracts will be renewed at the end of their terms.
Foreign Currency Translation and Exchange
The consolidated financial statements include the financial statements of
foreign subsidiaries and affiliates translated in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 52 "Foreign Currency
Translation." Substantially all of the Company's transactions are
denominated in U.S. dollars.
Cash and Cash Equivalents
The Predecessor Company--The Predecessor's excess cash was either swept by
CBI/Praxair to fund or cover current advances or invested in short-term,
highly liquid investments with maturities of three months or less. Such
short-term investments were carried at cost, which approximates market, and
are classified as cash and cash equivalents.
The Company--The Company's excess cash is invested in short-term, highly
liquid investments with maturities of three months or less. Such short-term
investments are carried at cost which approximates market and are
classified as cash and cash equivalents.
Financial Instruments
The Company uses various methods and assumptions to estimate the fair value
of each class of financial instrument. Due to their nature, the carrying
value of cash and cash equivalents,
F-46
<PAGE>
accounts receivable and accounts payable approximates fair value. Due to
the recent issuance of the Notes, the carrying value approximates fair
value. The Company's other financial instruments are not significant.
Inventory
Inventory of oil products is valued at the lower of weighted average cost
or estimated market value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the respective assets. Additions to property and equipment
and facility improvements are capitalized. Repair and maintenance
expenditures which do not materially increase asset values or extend useful
lives are expensed.
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. SFAS No. 121 also requires that
long-lived assets and certain identifiable long-lived assets to be disposed
of be reported at the lower or carrying amount or fair value less cost to
sell. The Company continually evaluates factors, events and circumstances
which include, but are not limited to, the historical and projected
operating performance of the Company, specific industry trends and general
economic conditions to assess whether the remaining estimated useful life
of long-lived assets may warrant revision or that the remaining balance of
long-lived assets may not be recoverable. When such factors, events or
circumstances indicate that long-lived assets should be evaluated for
possible impairment, the Company uses an estimate of undiscounted cash flow
over the remaining lives of the long-lived assets in measuring their
recoverability.
Other Noncurrent Assets
Other noncurrent assets consist primarily of deferred financing costs. The
Company's costs related to establishing debt obligations are amortized
ratably over the life of the underlying obligations. Amortization expenses
were $343 and $71 for the period ended November 27, 1996 and for the period
ended December 31, 1996, respectively.
Accrued Expenses
Accrued expenses as of December 31, 1996, consist primarily of purchase
price adjustments related to the Acquisition and accrued interest in the
amount of $4,408 and $1,205, respectively.
F-47
<PAGE>
Income Taxes
The Company and its Predecessor determine their tax provisions and deferred
tax balances in compliance with SFAS No. 109, "Accounting for Income
Taxes." Under this approach, the provision for income taxes represents
income taxes paid or payable for the current year adjusted for the change
in deferred taxes during the year. Deferred income taxes reflect the net
tax effects of temporary differences between the financial statement bases
and the tax bases of assets and liabilities and are adjusted for changes in
tax rates and tax laws when changes are enacted.
On June 1, 1989, the governments of the Netherlands Antilles and St.
Eustatius approved a 12-year Free Zone Agreement (the "Agreement")
retroactive to January 1, 1989, and concluding December 31, 2000. The
Agreement requires the Company to pay a 2% rate on taxable income instead
of profit tax, or a minimum annual payment of 500,000 Netherlands Antilles
guilders (U.S. $282). The Agreement further provides that any amounts paid
in order to meet the minimum annual payment will be available to offset
future tax liabilities under the Agreement to the extent that the minimum
annual payment is greater than 2% of taxable income. At December 31, 1995
and 1996, the amount available to offset future tax liability under the
Agreement is approximately $554 and $843.
4. PRAXAIR PURCHASE ACCOUNTING
As discussed in Note 1, prior to January 12, 1996, the Predecessor Company
was a wholly owned subsidiary of CBI. On January 12, 1996, pursuant to the
Merger Agreement dated December 22, 1995, CBI became a wholly owned
subsidiary of Praxair. This Merger transaction was reflected in the
Predecessor Company's consolidated financial statements as a purchase
effective January 1, 1996. The portion of the fair value assigned to the
Predecessor Company as of the Merger date was $179,000, excluding Praxair
and CBI intercompany and advance accounts and the buyout of certain
off-balance-sheet financing ("Merger Value").
The allocation of the Merger Value to the assets and liabilities acquired,
based on the estimated fair value assigned, is as follows:
Merger value $ 179,000
Less-
Intercompany/advance accounts (13,000)
Off balance sheet obligation (89,000)
---------
$ 77,000
=========
Allocation of merger value-
Total current assets $ 15,000
Property and equipment 79,000
Other non-current assets 2,000
Liabilities assumed (19,000)
---------
$ 77,000
=========
F-48
<PAGE>
In addition, $10,000 of Praxair debt was pushed down to the Company's books
effective January 1, 1996. This debt was eliminated as part of the
Acquisition.
5. ACQUISITION
As discussed in Note 1, on November 27, 1996, the Company acquired from
Praxair all of the outstanding capital stock of the Predecessor Company.
The Acquisition has been accounted for under the purchase method of
accounting. Accordingly, portion of the purchase price of $174,921 has been
allocated on a preliminary basis to the assets and liabilities of the
Company based on their respective fair values as of the date of the
Acquisition. The preliminary estimates of fair value may be revised at a
later date.
The preliminary allocation of the total purchase price to the assets and
liabilities acquired is as follows:
Purchase price-
Purchase price of common stock and assets $ 174,921
Commissions, fees and expenses 12,673
---------
Total purchase price $ 187,594
=========
Preliminary allocation of purchase price-
Current assets $ 15,825
Assets held for sale 10,000
Property and equipment 169,839
Other long-term assets 5,091
Liabilities assumed (13,161)
---------
Total purchase price $ 187,594
=========
6. HURRICANE INSURANCE CLAIMS
During the third and fourth quarters of 1995, the Predecessor Company's
Caribbean location was adversely impacted by three hurricanes. Operations
at the facility were ceased for varying lengths of time from August 28,
1995, to October 3, 1995. Certain terminal assets sustained extensive
damage and were repaired. A few marine items and shoreline installations
were damaged or destroyed and replaced.
The Predecessor Company and the Company have certain property and liability
insurance policies with various insurance carriers. As of December 31,
1995, the Predecessor Company had incurred $8,121 of expenditures subject
to hurricane insurance coverage and had received advances from its
insurance carriers amounting to $3,110. The insurance claim receivable of
$4,611 is included in other receivables as of December 31, 1995. The claims
process related to the hurricane damages was settled in the third quarter
of 1996 for $12,615. Through December 31, 1996, the Company incurred
$19,367 of expenditures relating to hurricane repairs and betterments, of
which $6,752 was capitalized as property and equipment.
F-49
<PAGE>
7. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
Predecessor Company
(Pre-Praxair Acquisition) The Company
--------------------------- ----------------------------
Estimated Estimated
Dec. 31,1995 Useful Life Dec. 31,1996 Useful Life
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Land $ 396 $ 396
Land improvements 1,331 5-20 years 7,350 5-20 years
Buildings and improvements 1,933 20-40 years 719 20-40 years
Plant machinery and terminals 154,329 4-40 years 164,316 4-40 years
Field and office equipment 853 3-15 years 188 3-15 years
--------- --------
Total property and equipment, at cost 158,842 172,969
Less- Accumulated depreciation (56,937) (653)
--------- ---------
Property and equipment, net $ 101,905 $ 172,316
========= =========
</TABLE>
During the first quarter of 1995, the Predecessor completed the
construction of, and began leasing and operating a 5.0 million barrel crude
oil terminal with a single point mooring system. In connection with the
Acquisition, Praxair terminated this off-balance sheet financing
arrangement and paid in full all obligations related to this lease.
Effective January 1, 1995, the Predecessor Company extended the depreciable
lives of its tanks and jetty from 20 and 15 years to 40 and 25 years,
respectively. This change resulted in a corresponding reduction of
depreciation expense of $2,681 for 1995.
During construction of their facilities, the Company and its Predecessor
allocate interest to the cost of the constructed facility. Interest
capitalized to constructed facilities amounted to $0 and $71 for 1994 and
1995, respectively, and $162 and $0 for the period ended November 27, 1996,
and for the period ended December 31, 1996, respectively.
8. ASSETS HELD FOR SALE
Assets held for sale represent management's estimate of the proceeds from
the anticipated sale of the M/V Megan D. Gambarella, a marine vessel. The
Company has estimated the proceeds of this sale to be $10 million although
the actual proceeds of such sale may not equal such estimates. The
estimated fair value of this asset has been reclassified from property and
equipment to assets held for sale. This asset is still in operation, and
the revenues and costs associated with operating the asset are included in
the accompanying financial statements.
Certain of the ultimate parent's preferred stock agreements contain
features which may require the Parent to cause the Company to dividend or
otherwise remit the proceeds of these assets. Accordingly, $10,000 of the
Company's common stock has been classified outside the equity section as
stockholders' equity subject to reduction.
F-50
<PAGE>
9. DEBT
The Predecessor Company
The Predecessor had a short-term and unsecured revolving credit line of
$2,500 used to cover letters of credit, of which $0 was outstanding at
December 31, 1995. This credit line, guaranteed by Praxair/CBI, bore
interest quarterly at one-, two- or three-month London Interbank Offer
Rates (LIBOR) plus 50 basis points. Subsequent to the Merger, Praxair
assumed the guarantee for the credit line and just prior to the
Acquisition, paid and terminated this credit line. Cash payments for
interest to third parties were not significant for any of the periods
presented.
The Company
The 11-3/4% First Mortgage Notes due 2003 were issued by the Parent on
November 27, 1996 in connection with the Acquisition and pay interest on
May 15 and November 15 of each year, commencing May 15, 1997. The Notes are
redeemable, in whole or in part, at the option of the Issuers at any time
on or after November 15, 2000, at the following redemption prices
(expressed as percentages of principal amount), together with accrued and
unpaid interest, if any, thereon to the redemption date, if redeemed during
the 12-month period beginning November 15, in the year indicated:
Optional
Year Redemption Price
---- ----------------
2000 105.875%
2001 102.938%
2002 100.000%
Notwithstanding the foregoing, at any time on or prior to November 15,
1999, the Issuers may redeem up to 35% aggregate principal amount of the
Notes with the proceeds of one or more equity offerings (as defined in the
indenture) at a redemption price equal to 111.75% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of
redemption, provided that after giving effect to such redemption, at least
65% aggregate principal amount of the Notes remains outstanding.
The Notes are guaranteed on a full, unconditional, joint and several basis
by each of the indirect and direct active subsidiaries of the Parent other
than Statia Terminals Canada Incorporated, which is a co-obligor on the
Notes. The Notes are also subject to certain financial covenants as set
forth in the indenture, the most restrictive being that the Parent meet a
consolidated fixed charge ratio of 2:1, which if met, will permit the
Parent to make additional borrowings over and above the Parent's revolving
credit facility discussed below.
The Notes place certain restrictions on the Parent on paying dividends
other than distributions from the proceeds of assets held for sale by the
subsidiaries of the Parent as discussed in Note 8. Except with the
occurrence of an event of default, subsidiaries of the Parent have no
restrictions upon transfers of funds in the form of dividends, loans or
cash advances.
F-51
<PAGE>
As of December 31, 1996, the Company had no principal payments maturing
within the next five years under the Notes. Principal outstanding under the
Notes is due in full on November 15, 2003.
The Company had no cash payments for interest for the period ended December
31, 1996.
The Company has a revolving credit facility (the "Credit Facility") which
allows the Company to borrow up to $12,500 or the limit of the borrowing
base as defined in the Credit Facility. The Credit Facility calls for a
commitment fee of three eighths percent (0.375%) per annum on a portion of
the unused funds. The Credit Facility bears interest at a rate of prime
plus 0.5% (8.75% at December 31, 1996). The Credit Facility constitutes
senior indebtedness of the Company and is secured by a first priority lien
on certain of the Company's accounts receivable and inventory. The Credit
Facility is subject to certain restrictive covenants; however, it is not
subject to financial covenants. The Credit Facility does not restrict the
Company from transferring funds to the Parent in the form of dividends,
loans or cash advances; however, the failure to pay interest when due
constitutes an event of default under the Credit Facility and such event of
default, until cured, prohibits upstream dividend payments to be made to
the Parent. The Credit Facility expires on November 27, 1999. As of
December 31, 1996, the Company had approximately $10,481 available for
borrowing under the Credit Facility as limited by the borrowing base
computation and had no outstanding balance.
10. SHAREHOLDERS' EQUITY
Predecessor
On January 18, 1991, the Predecessor issued 12,000 shares of preferred
stock with a par value of $1.00 per share to an affiliate of CBI in
consideration for an investment of $12.0 million. Each share of this
preferred stock entitles the holder to one vote on matters put forth for
shareholder approval. Preferred share dividends were not accrued until
declared by Statia Terminals N.V. The preferred shares were non-cumulative
and non-participating and dividends were paid at a rate of 8% per annum
when declared. Preferred shareholders had preference upon liquidation over
common shareholders. In conjunction with the Acquisition, this preferred
stock was retired.
On January 10, 1996, the Company declared dividends of $25,000 payable on
January 11, 1996, to shareholders of record on January 10, 1996. All
dividends were paid to affiliates of CBI.
The Company
The Company's equity structure consists of 19,395,000 shares issued and
outstanding of $1 par value common stock. All common stock is indirectly
owned by the Parent.
F-52
<PAGE>
11. RELATED-PARTY TRANSACTIONS
Predecessor
CBI, the ultimate sole stockholder of the Company's common stock,
periodically advanced working capital funds to the Company through an
affiliate, Statia Terminals, Inc.
The Predecessor Company had regularly contracted with affiliates of CBI for
the construction and expansion of its facilities and for certain repair and
maintenance work. During 1994, 1995 and the period ended November 27, 1996,
$1,173, $16,569 and $4,828, respectively, were paid to CBI affiliates for
these activities related to its property and equipment. It is not possible
to determine whether the results of operations and financial position of
the Company would be significantly different had the Company contracted
with independent third parties for its construction, expansion, repair and
maintenance needs.
Statia Terminals, Inc. directly and indirectly allocates certain corporate,
operating and administrative services to the Company, including certain
legal services, risk management, tax advice and return preparation,
employee benefit administration, cash management and other services, some
of which are ultimately provided by CBI. During 1995 and for the period
ended November 27, 1996, $3,536 and $2,831, respectively, was paid to
Statia Terminals, Inc. for these direct and indirect administrative
services.
The Company
As a wholly owned subsidiary, the Company engages in various related-party
transactions with its Parent and its subsidiaries. The unpaid portion of
these transactions is included in the intercompany balance. All
intercompany balances owed to Praxair or its affiliates were settled as a
result of the Acquisition.
The Parent and its subsidiaries directly and indirectly allocates certain
corporate, operating and administrative services to the Company, including
certain legal services, risk management, tax advice and return preparation,
employee benefit administration, cash management and other services. For
the period ended December 31, 1996, $1,805 was paid for the direct and
indirect services.
12. COMMITMENTS AND CONTINGENCIES
Predecessor
The Predecessor Company, CBI and others were defendants in a suit brought
during January 1994, before the District Court of Harris County, Texas,
334th Judicial District, in which plaintiffs claim damages, primarily for
lost profits, as a result of the Predecessor Company's alleged failure to
lease certain Company owned property and tankage to the plaintiffs for a
proposed vacuum tower project on the island of St. Eustatius. This case was
settled by CBI and Praxair during 1996.
F-53
<PAGE>
The Company
The Company is involved in various other claims and litigation arising from
the conduct of its business. Based upon analysis of these legal matters and
discussions with legal counsel, the Company believes that the ultimate
outcome of these matters will not have a material adverse impact on the
Company's financial position, results of operations or net cash flows.
The Company complies with environmental regulations in the locations where
it operates and is not aware of any environmental contingent liabilities
which may have a material effect on its financial position and results of
operations. Any environmental expenditures related to cleanup or
remediation efforts are expensed when amounts can be reasonably estimated.
13. LEASES
The Company and the Predecessor Company lease marine equipment under
cancelable and noncancelable operating leases. Minimum future rentals on
operating leases for the next five years are as follows:
Year ending December 31-
1997 $3,406
1998 1,690
1999 651
2000 --
2001 --
$5,747
------
Rent expense on operating leases (other than the lease described below)
amounted to approximately $3,040 and $4,405 for the years ended December
31, 1994 and 1995, respectively, and $3,551 and $363 for the period ended
November 27, 1996 and for the period ended December 31, 1996.
The Predecessor Company
On November 17, 1993, the Company, through a subsidiary, entered into an
agreement with a third party financier (First Salute Leasing, L.P.)
pursuant to which a portion of its land on St. Eustatius was leased to this
third party for the purpose of construction and operation of five million
barrels of crude oil storage tanks and a single point mooring system. The
Company acted as agent for the third party with regard to the construction
of the facilities. The Company leased the facility from the third party for
a period of five years beginning February 1, 1995. The aggregate
construction cost incurred for these leased assets totaled $88,513. The
facility became operational in the first quarter of 1995. Rent expense
relating to this lease was $8,823, including $3,082 for recognition of
lease residual value guarantee and $9,870, including $4,270 for recognition
of lease residual value guarantee for 1995 and for the period ended
November 27, 1996, respectively.
At the completion of the initial five-year term, the Company had the option
to extend the lease, purchase the facility from the lessor, or arrange for
the leased properties to be sold to a
F-54
<PAGE>
third party. In the event of purchase or sale of these properties, the
Company was obligated to the lessor for any shortfall between the purchase
or sales price and the lease residual value guarantee. At December 31,
1995, the maximum amount of the residual value guarantee related to assets
under this lease totaled $78,777. In connection with the Acquisition,
Praxair terminated the above First Salute Leasing, L.P. off-balance-sheet
financing arrangement and paid in full all obligations related to this
lease.
F-55
<PAGE>
Statia Terminals Canada, Incorporated
and Subsidiary
Consolidated Financial Statements
as of December 31, 1996
Together With Auditors' Report
F-56
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Statia Terminals Canada, Incorporated and Subsidiary:
We have audited the accompanying consolidated balance sheet of STATIA TERMINALS
CANADA, INCORPORATED (a Nova Scotia, Canada corporation) AND SUBSIDIARY
(formerly Statia Terminals Point Tupper, Inc.) as of December 31, 1996, and the
related consolidated statements of income and retained earnings and cash flows
for the period from inception through December 31, 1996. We have also audited
the accompanying consolidated balance sheet of Statia Terminals Point Tupper,
Inc. (the "Predecessor") as of December 31, 1995 and the related consolidated
statements of income and retained earnings and cash flows of the Predecessor
from January 1, 1996 through November 27, 1996, and for the years ended December
31, 1995 and 1994. 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.
We conducted our audits in accordance with 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 consolidated financial position of Statia Terminals
Canada, Incorporated and Subsidiary as of December 31, 1996, and the results of
its operations and its cash flows for the period from inception through December
31, 1996, and the consolidated financial position of the Predecessor as of
December 31, 1995, and the results of its operations and its cash flows from
January 1, 1996 through November 27, 1996, and for the years ended December 31,
1995 and 1994 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 19, 1997
F-57
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
The financial statements of the Company and the Predecessor Company
are not comparable in certain respects (See Note 1).
<TABLE>
<CAPTION>
December 31
-----------------------
1995 1996
-------- --------
Predecessor
Company
(Pre-Praxair The
ASSETS Acquisition) Company
- ------------------------------------------------------------- ------------ ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,207 $ 854
-------- --------
Accounts receivable-
Trade, less allowance for doubtful accounts of $42 in
1995 and $94 in 1996 196 873
Other 2,241 629
Inventory 575 1,157
Prepaid expenses 62 67
Receivable from affiliates -- 1,598
-------- --------
Total current assets 4,281 5,178
PROPERTY AND EQUIPMENT, net 79,156 29,036
OTHER NONCURRENT ASSETS, net 12,818 1,367
-------- --------
$ 96,255 $ 35,581
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 698 $ 688
Accrued expenses and other current liabilities 1,959 4,929
Current portion of long-term debt 14,800 --
Payable to affiliates 704 --
-------- --------
Total current liabilities 18,161 5,617
LONG-TERM DEBT, net of current maturities 51,600 28,060
-------- --------
Total liabilities 69,761 33,677
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock 25,196 --
Common stock 2 --
Additional paid-in capital 11,324 2,266
Retained deficit (10,028) (362)
-------- --------
Total stockholders' equity 26,494 1,904
-------- --------
$ 96,255 $ 35,581
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-58
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED DEFICIT
(Dollars in thousands)
The financial statements of the Company and the Predecessor Company
are not comparable in certain respects (See Note 1).
<TABLE>
<CAPTION>
Predecessor Company The Company
----------------------------------------- --------------
Pre-Praxair Post-Praxair
Acquisition Acquisition
----------------------- ---------------
Year ended Period
December 31 Jan. 1, 1996 from Inception
---------------------- through through
1994 1995 Nov. 27, 1996 Dec. 31, 1996
-------- -------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES $ 12,024 $ 11,143 $ 11,831 $ 1,631
-------- -------- -------- --------
COST OF SERVICES AND PRODUCTS SOLD 9,079 9,370 10,131 1,519
-------- -------- -------- --------
Gross profit 2,945 1,773 1,700 112
ADMINISTRATIVE EXPENSES 1,700 2,382 2,489 146
-------- -------- -------- --------
Income (loss) from operations 1,245 (609) (789) (34)
INTEREST EXPENSE 3,112 4,548 3,667 318
OTHER INCOME (EXPENSE) 260 197 (408) 8
-------- -------- -------- --------
Loss before income taxes (1,607) (4,960) (4,864) (344)
PROVISION FOR INCOME TAXES 156 155 332 18
-------- -------- -------- --------
Net loss (1,763) (5,115) (5,196) (362)
PREFERRED STOCK DIVIDENDS 1,004 1,424 792 --
-------- -------- -------- --------
Net loss to common stockholders (2,767) (6,539) (5,988) (362)
RETAINED DEFICIT, beginning of period (722) (3,489) -- --
-------- -------- -------- --------
RETAINED DEFICIT, end of period $ (3,489) $(10,028) $ (5,988) $ (362)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-59
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
The financial statements of the Company and the Predecessor Company
are not comparable in certain respects (See Note 1).
<TABLE>
<CAPTION>
Predecessor Company The Company
----------------------------------------- --------------
Pre-Praxair Post-Praxair
Acquisition Acquisition
----------------------- -------------
Year ended Period
December 31 Jan. 1, 1996 from Inception
----------------------- through through
1994 1995 Nov. 27, 1996 Dec. 31, 1996
-------- -------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,763) $ (5,115) $ (5,196) $ (362)
-------- -------- --------- --------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities-
Depreciation, amortization and non-cash charges 4,217 3,328 1,743 189
Provision for bad debts 7 34 52 --
(Increase) decrease in accounts receivable-trade (145) 516 (824) 947
(Increase) decrease in other receivables (1,204) 689 (512) (629)
Increase (decrease) in inventory (25) (550) (1,302) 721
(Increase) decrease in prepaid expense 221 (45) (31) 26
(Increase) decrease in intangible and other noncurrent assets (1,002) 9 (74) --
(Decrease) increase in accounts payable (3,060) (277) (199) 189
Increase (decrease) in accrued expenses (606) 477 (578) 997
Increase (decrease) in payable to affiliates 11 937 (704) --
-------- -------- --------- --------
Net cash provided by (used in) operating activities (3,349) 3 (7,625) 2,078
-------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (9,497) (9,667) (819) (306)
Acquisition of the Company -- -- -- (27,655)
Transaction costs -- -- -- (1,990)
Accrued transaction costs and purchase price -- -- -- 2,488
-------- -------- --------- --------
Net cash used in investing activities (9,497) (9,667) (819) (27,463)
-------- -------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in advances from affiliates -- -- 99,823 (486)
Sale of common stock 1,201 10,000 -- --
Sale of preferred stock 7,501 -- -- --
Redemption of preferred stock -- -- (25,196) --
Bank borrowings 10,468 1,950 66,000 --
Repayment of bank borrowings (6,144) -- (132,400) --
Dividends paid to affiliates (1,004) (1,424) (792) --
Issuance of 11-3/4% first mortgage notes -- -- -- 28,060
Debt costs paid -- -- -- (1,335)
-------- -------- --------- --------
Net cash provided by financing activities 12,022 10,526 7,435 26,239
-------- -------- --------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (824) 862 (1,009) 854
CASH AND CASH EQUIVALENTS, beginning balance 1,169 345 1,207 --
-------- -------- --------- --------
CASH AND CASH EQUIVALENTS, ending balance $ 345 $ 1,207 $ 198 $ 854
======== ======== ========- ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-60
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1995, and 1996
(Dollars in thousands, except share information)
1. BASIS OF PRESENTATION
The consolidated balance sheet as of December 31, 1996, and the
consolidated statements of income and retained earnings and cash flows for
the period from inception through December 31, 1996 (the "period ended
December 31, 1996"), include the accounts of Statia Terminals Canada,
Incorporated and its Subsidiary (the "Company"). The consolidated balance
sheet as of December 31, 1995 and the consolidated statements of income and
retained earnings and cash flows from January 1, 1996 through November 27,
1996 (the "period ended November 27, 1996"), and for the years ended
December 31, 1995 and 1994 include the accounts of Statia Terminals Point
Tupper, Inc. and Subsidiary (the "Predecessor Company").
These consolidated financial statements are presented in United States
dollars.
The Predecessor Company
The Predecessor Company includes the Statia Terminals Point Tupper, Inc.
(incorporated in Nova Scotia, Canada) and its commonly owned affiliate,
Point Tupper Marine Services Limited (incorporated in Nova Scotia, Canada).
Significant intercompany balances and transactions have been eliminated.
Prior to January 12, 1996, the Predecessor company was a wholly owned
subsidiary of Statia Terminals, Inc. ("STI"), which was wholly owned by CBI
Industries, Inc. ("CBI"). On January 12, 1996, pursuant to the Merger
Agreement dated December 22, 1995 (the "Merger"), CBI became a wholly owned
subsidiary of Praxair, Inc. ("Praxair"). This Merger transaction was
reflected in the Predecessor Company's consolidated financial statements as
a purchase effective January 1, 1996. Accordingly, the historical financial
information provided herein, for periods prior to January 1, 1996,
("Pre-Praxair Acquisition") will not be comparable to subsequent
Predecessor Company financial information or financial information of the
Company.
The Company
The Company is an indirect wholly owned subsidiary of Statia Terminals
International N.V. (the "Parent"), (incorporated in the Netherlands
Antilles). The Company includes Statia Terminals Canada, Incorporated
(incorporated in Nova Scotia, Canada) and Point Tupper Marine Services
Limited (incorporated in Nova Scotia, Canada). Significant intercompany
balances and transactions have been eliminated.
F-61
<PAGE>
On November 27, 1996, the Parent acquired from Praxair all of the
outstanding capital stock of the Predecessor Company and certain of its
affiliates (the "Acquisition"). The Parent is a newly organized company
formed by Castle Harlan Partners II, L.P., a private equity investment fund
managed by Castle Harlan, Inc., a private merchant bank, management of the
Parent and others. In connection with the Acquisition on November 27, 1996,
the Predecessor Company amalgamated with the Company. The portion of the
adjusted purchase price paid to Praxair for the capital stock of the
Company was $27,665. The Acquisition was paid primarily by funds received
by the Company from the issuance of the 11-3/4% first mortgage notes
described in Note 7. The assets of the Company are pledged as collateral to
secure these notes. The Acquisition has been accounted for under the
purchase method of accounting.
The Acquisition and the related application of purchase accounting (Note 5)
resulted in changes to the capital structure of the Predecessor company and
the historical basis of various assets and liabilities. The effect of such
changes significantly impairs comparability of the financial position and
results of operations of the Company and the Predecessor Company between
periods.
2. NATURE OF THE BUSINESS
The Company and the Predecessor Company own and operate petroleum and other
bulk liquid blending, transshipment and storage facilities located near
Port Hawkesbury, Nova Scotia, Canada. The Company's terminaling services
are furnished to some of the world's largest producers of crude oil,
integrated oil companies, oil refiners, traders and petrochemical
companies. In addition, the Company and the Predecessor company provide a
variety of related terminal services including the supplying of bunker
fuels for vessels, spill response, brokering of product trades and ship
services. Statia Terminals, Inc. ("STI") provides administrative services
for its subsidiaries and affiliates from its office in Deerfield Beach,
Florida.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
These consolidated financial statements have been prepared in conformity
with generally accepted accounting principles as promulgated in the United
States which require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities. Management is also
required to make judgments regarding disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
F-62
<PAGE>
Revenue Recognition
Revenues from storage and throughput operations are recognized ratably as
the services are provided. Revenues and commissions from bunkering
services, vessel services and product sales are recognized at the time of
delivery of the service or product.
Significant Customers
The Company's revenues from a refiner constituted approximately 56.4% of
the Predecessor's total revenues for the period ended November 27, 1996,
and 36.9% of the Company's total revenues for the period from November 27,
1996 to December 31, 1996. In addition, approximately 16.2% of the
Predecessor's revenues for the period ended November 27, 1996 and 42.5% of
the Company's revenues for the period ended December 31, 1996, were derived
from parties unaffiliated with the above mentioned customer but were
generated by the movement of such products through the terminals. In
addition, the Company's revenues from a refiner and two petroleum product
brokers constituted approximately 61.6%, 14.6% and 6.2%, respectively, of
the Company's total 1995 revenues. In addition, approximately 7.6% of the
Company's 1995 revenues were derived from parties unaffiliated with the
above mentioned customers and were generated by the movement of such
products through the terminals. No other customer accounted for more than
5% of the Predecessor's or the Company's 1995 or 1996 revenues directly or
indirectly. Although the Company has a long-standing relationship and a
long-term contract with one customer, if the long-term contract were not
renewed at the end of the term, in the year 2000, or if the Company
otherwise lost any significant portion of its revenues from this customer,
such loss could have a material adverse effect on the business and
financial condition of the Company. The Company also has long-term
contracts with certain other key customers and there can be no assurance
that these contracts will be renewed at the end of their terms.
Foreign Currency Translation and Exchange
The financial statements include foreign currency transactions and foreign
currency financial statement amounts translated in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 52 "Foreign
Currency Translation." Substantially all of the Company's and its
Predecessor's transactions are denominated in U.S. dollars.
Cash and Cash Equivalents
The Company's and Predecessor's excess cash is invested in short-term,
highly liquid investments with maturities of three months or less. Such
short-term investments are carried at cost, which approximates market, and
are classified as cash and cash equivalents.
Financial Instruments
The Company uses various methods and assumptions to estimate the fair value
of each class of financial instrument. Due to their nature, the carrying
value of cash and cash equivalents, accounts receivable and accounts
payable approximate fair value. Due to the recent issuance of the Notes,
the carrying value approximates fair value. The Company's other financial
instruments are not significant.
F-63
<PAGE>
Inventory
Inventory of oil products is valued at the lower of weighted average cost
or estimated market value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation expense is computed using the straight-line method over the
estimated useful lives of the respective assets. Additions to property and
equipment and facility improvements are capitalized. Repair and maintenance
expenditures which do not materially increase asset values or extend useful
lives are expensed.
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. SFAS
No. 121 also requires that long-lived assets and certain identifiable
long-lived assets to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. The Company and its Predecessor
continually evaluate factors, events and circumstances which include, but
are not limited to its historical and projected operating performance,
specific industry trends and general economic conditions to assess whether
the remaining estimated useful lives of long-lived assets may warrant
revision or that the remaining balance of long-lived assets may not be
recoverable. When such factors, events or circumstances indicate that
long-lived assets should be evaluated for possible impairment, the Company
and its Predecessor use an estimate of undiscounted cash flows over the
remaining lives of the long-lived assets in measuring their recoverability.
Intangible Assets
Intangible assets include goodwill, organizational costs and preoperating
expenditures. The excess of cost over the fair value of tangible net assets
acquired has been capitalized as goodwill and is being amortized on a
straight-line basis over the periods of expected benefit, which do not
exceed 40 years. Organizational costs and preoperating expenditures are
amortized evenly over five-year periods. Amortization expense was $929 and
$1,311, in 1994 and 1995, respectively, and $664 for the period from
January 1, 1996 through November 27, 1996, related to these intangible
assets. Accumulated amortization was $2,693 at December 31, 1995.
Other Noncurrent Assets
Other noncurrent assets consist primarily of deferred financing costs. The
Company's costs related to establishing debt obligations are amortized
ratably over the life of the underlying obligations. Amortization expense
was $18 for the period ended December 31, 1996.
F-64
<PAGE>
Accrued Expenses
Accrued expenses as of December 31, 1996, consist primarily of purchase
price adjustments related to the Acquisition, environmental reserves and
accrued interest in the amount of $665, $1,500 and $316, respectively.
Income Taxes
The Company and its Predecessor determine the tax provision and deferred
tax balances in compliance with SFAS No. 109, "Accounting for Income
Taxes." Under this approach, the provision for income taxes represents
income taxes paid or payable for the current year adjusted for the change
in deferred taxes during the year. Deferred income taxes reflect the net
tax effects of temporary differences between the financial statement bases
and the tax bases of assets and liabilities and are adjusted for changes in
tax rates and tax laws when changes are enacted.
4. PRAXAIR PURCHASE ACCOUNTING
As discussed in Note 1, prior to January 12, 1996, the Predecessor Company
was a wholly owned subsidiary of CBI. On January 12, pursuant to the Merger
Agreement dated December 22, 1995, CBI became a wholly owned subsidiary of
Praxair. This Merger transaction was reflected in the Predecessor Company's
consolidated financial statements as a purchase effective January 1, 1996.
The portion of the fair value assigned to the Predecessor company as of the
merger date was approximately $27,000, excluding bank borrowings and
Praxair and CBI intercompany and advance accounts ("Merger Value").
The allocation of the Merger Value to the assets and liabilities acquired,
based on the estimated fair value assigned, is as follows:
Merger Value $ 27,000
Less:
Bank borrowings (66,000)
Intercompany/advance accounts (1,000)
--------
$(40,000)
========
Allocation of Merger Value-
Total current assets $ 3,000
Property and equipment 27,000
Other noncurrent assets 2,000
Liabilities assumed (72,000)
--------
$(40,000)
========
F-65
<PAGE>
5. ACQUISITION
As discussed in Note 1, on November 27, 1996, the Company acquired from
Praxair all of the outstanding capital stock of the Predecessor Company.
The Acquisition has been accounted for under the purchase method of
accounting. Accordingly, the portion of the purchase price of approximately
$27,665 has been allocated on a preliminary basis to the assets and
liabilities of the Company based on their respective fair values as of the
date of the Acquisition. The preliminary estimates of fair value may be
revised at a later date.
The preliminary allocation of the total purchase price to the assets and
liabilities acquired is as follows:
Purchase price $27,665
Commissions, fees and expenses 3,326
-------
Total purchase price $30,991
=======
Preliminary allocation of purchase price-
Current assets $ 3,989
Property and equipment 28,901
Other long-term assets 1,448
Liabilities assumed (3,347)
-------
Total purchase price $30,991
=======
6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
Predecessor Company The Company
-------------------------------- ------------------------------
Pre-Praxair Acquisition
--------------------------------
Useful Useful
1995 Life 1996 Life
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Land $ 273 -- $ 273 --
Land improvements 2 5-20 years 20 5-20 years
Buildings and improvements 569 20-40 years 366 20-40 years
Plant machinery and terminals 81,820 4-40 years 26,587 4-40 years
Field and office equipment 2,117 3-15 years 1,961 3-15 years
----------- -----------
Total property and equipment,
at cost 84,781 29,207
Less- Accumulated depreciation (5,625) (171)
----------- -----------
Property and equipment, net $79,156 $29,036
=========== ===========
</TABLE>
F-66
<PAGE>
Effective January 1, 1995, the Predecessor Company extended the depreciable
lives of certain marine installations and tanks from 15 and 20 years to 25
and 40 years, respectively. This change resulted in a corresponding
reduction of depreciation expense of $1,662 for 1995.
During construction of their facilities, the Company and its Predecessor
allocate interest to the cost of the constructed facility. Interest
capitalized to constructed facilities amounted to $716 and $843 for 1994
and 1995, respectively, $165 for the period ended November 27, 1996 and $0
for the period ended December 31, 1996.
7. DEBT
Predecessor
At December 31, 1995, the Predecessor Company had $56,400 outstanding on a
long-term debt agreement secured by property and equipment at the facility
of which $4,800 was currently payable. A guarantee was provided by CBI.
This obligation bore interest at one-, two-, or six-month U.S. prime rates,
London Interbank Offer Rates (LIBOR) or Canadian bankers acceptance rates,
plus 75 basis points, at the option of the Company. The weighted average
interest rate for 1995 was 6.7% and 5.8% for the period ended November 27,
1996. The debt agreement required the Company and CBI to maintain various
debt covenants. This debt guarantee was assumed by Praxair subsequent to
the Merger and paid in full by Praxair just prior to the Acquisition.
The Predecessor had two short-term and unsecured revolving credit lines
aggregating $10,000 used to cover working capital needs and letters of
credit, of which $10,000 was outstanding at December 31, 1995. These credit
lines, guaranteed by CBI, bore interest quarterly at one-, two- or
three-month LIBOR plus 50 basis points (6.3% at December 31, 1995).
Subsequent to the Merger, Praxair assumed the guarantee for the credit
lines and just prior to the Acquisition, paid and terminated these credit
lines.
In 1993, the Predecessor Company entered into an interest rate swap
agreement, guaranteed by CBI, based on a notional amount of $20,000 whereby
the Predecessor Company made semiannual interest payments at an annual rate
of 5.91% through October 21, 1996, in exchange for the right to receive
interest payments at floating rates (5.8750% at December 31, 1995)
semiannually through October 21, 1996. The swap agreement was extendible
for two additional years at the option of the Predecessor Company. The
interest rate swap agreement was intended to qualify as a hedge against
variable debt borrowings. The fair market value of the interest rate swap
and related option agreement was $1 as of December 31, 1995, which was
estimated based upon the net amount that would be paid to terminate the
agreement, utilizing quoted prices for comparable contracts and discounted
cash flows. Subsequent to the Merger, Praxair assumed the interest rate
swap agreement.
Cash payments for interest were $2,951 and $4,494 for 1994 and 1995,
respectively, and $4,455 for the period ended November 27, 1996.
F-67
<PAGE>
The Company
The 11-3/4% First Mortgage Notes due 2003 (the "Notes") were issued by the
Company on November 27, 1996 in connection with the Acquisition and pay
interest on May 15 and November 15 of each year, commencing May 15, 1997.
The Notes are redeemable, in whole or in part, at the option of the Issuers
at any time on or after November 15, 2000, at the following redemption
prices (expressed as percentages of principal amount), together with
accrued and unpaid interest, if any, thereon to the redemption date, if
redeemed during the 12-month period beginning November 15, in the year
indicated:
Optional
Year Redemption Price
---- ----------------
2000 105.875%
2001 102.938%
2002 100.000%
Notwithstanding the foregoing, at any time on or prior to November 15,
1999, the Issuers may redeem up to 35% aggregate principal amount of the
Notes with the proceeds of one or more equity offerings (as defined in the
debt indentures) at a redemption price equal to 111.75% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
redemption, provided that after giving effect to such redemption, at least
65% aggregate principal amount of the Notes remains outstanding.
The Notes are guaranteed on a full, unconditional, joint and several basis
by each of the indirect and direct active subsidiaries of the Parent other
than the Company which is a co-obligor of the Notes. The Notes are also
subject to certain financial covenants as set forth in the Indenture, the
most restrictive of which requires that the Parent meet a consolidated
fixed charge ratio of 2:1, which if met, will permit the Parent to make
additional borrowings over and above the Company's revolving credit
facility discussed below.
The Notes place certain restrictions on the Parent on paying dividends
other than distributions from the proceeds of the assets held for sale by
the subsidiaries of the Parent. Except with the occurrence of an event of
default, subsidiaries of the Parent have no restrictions upon transfers of
funds in the form of dividends, loans or cash advances.
As of December 31, 1996, the Company had no principal payments maturing
within the next five years under the Notes. Principal outstanding under the
Notes is due in full on November 15, 2003.
The Company has a revolving credit facility (the "Credit Facility") which
allows the Company to borrow up to $5,000 or the limit of the borrowing
base as defined in the Credit Facility. The Credit Facility calls for a
commitment fee of three eighths percent (0.375%) per annum on a portion of
the unused funds. The Credit Facility bears interest at a rate of prime
plus 0.5% (8.75% at December 31, 1996). The Credit Facility constitutes
senior indebtedness of the Company and is secured by a first priority lien
on certain of the Company's accounts receivable and inventory. The Credit
Facility is subject to certain restrictive covenants; however, it is not
subject to financial covenants. The Credit Facility does not restrict the
F-68
<PAGE>
Company from transferring funds to the Parent or its subsidiaries in the
form of dividends, loans or cash advances; however, the failure to pay
interest when due constitutes an event of default under the Credit Facility
and such event of default, until cured, prohibits upstream dividend
payments to be made to the Parent. The Credit Facility expires on November
27, 1999. As of December 31, 1996, the Company had approximately $1,465
available for borrowing under the Credit Facility as limited by the
borrowing base computation and had no balance outstanding.
The Company had no cash payments for interest for the period ended December
31, 1996.
8. SHAREHOLDERS' EQUITY
Predecessor
On October 22, 1993, and March 15, 1994, Statia Terminals Point Tupper,
Inc. issued 14,689 shares and 10,311 shares, respectively, of first
preferred stock to a Canadian affiliate of CBI in exchange for an aggregate
contribution of Cdn $25,000 (U.S.$18,577). The first preferred stock was
non-voting, cumulative and redeemable at the option of either the issuer or
the holder. Preferred dividends were accrued and paid quarterly at a rate
of .25% above the preferred shareholder's borrowing rate as established by
the shareholder's lending institution. During 1994, 1995 and the period
ended November 27, 1996, Statia Terminals Point Tupper paid dividends of
$1,004, $1,424 and $792, respectively. First preferred shareholders had
preference upon liquidation over all other classes of preferred
shareholders as well as common shareholders. This preferred stock was
retired in conjunction with the Acquisition.
The Company
The Company's equity structure consists of 1,000,000 shares of authorized
no par common stock with one share outstanding. All common stock is
indirectly owned by the Parent.
9. INCOME TAXES
The Company and the Predecessor are subject to large corporation tax based
on 0.225% of the Company's total equity and have incurred certain costs
which are accounted for differently for financial reporting and Canadian
taxation purposes. Timing differences in the recognition of expenses occur
primarily as a result of differing provisions for depreciating property and
equipment and amortization of goodwill, deferred financing costs,
organizational costs and preoperating expenditures. Certain expenditures
are not deductible for taxation purposes. In addition, the Predecessor has
incurred taxable losses which will be available for utilization over a
seven year period to offset future taxable income. Net operating loss
carryforwards available to offset future Canadian taxable income were U.S.,
$7,967 and U.S. $7,482 as of December 31 1995, for the Predecessor, and
December 31, 1996 for the Company, respectively, and expire in varying
amounts after seven year periods through 2003.
F-69
<PAGE>
10. RELATED-PARTY TRANSACTIONS
Predecessor
As a wholly owned subsidiary of STI, the Predecessor engaged in various
related-party transactions with STI and its affiliates. The unpaid portion
of these transactions is included in intercompany balances.
STI allocated certain corporate, operating and administrative services to
the Predecessor including certain legal services, risk management, tax
advice and return preparation, employee benefit administration, cash
management and other services. During 1994 and 1995, and for the period
ended November 27, 1996, $1,700, $2,382, and $1,610, respectively, was paid
for these direct and indirect services.
The Company
As a wholly owned subsidiary, the Company engages in various related-party
transactions with the Parent and its subsidiaries. The unpaid portion of
these transactions is included in the intercompany balance. All
intercompany balances owed to Praxair or its affiliates were settled as a
result of the Acquisition.
The Parent and its subsidiaries allocates certain corporate, operating and
administrative services to the Company including certain legal services,
risk management, tax advice and return preparation, employee benefit
administration, cash management and other services. For the period ended
December 31, 1996, $1,026 was paid for these direct and indirect services.
11. COMMITMENTS AND CONTINGENCIES
In connection with the Acquisition, studies were undertaken by and for
Praxair to identify potential environmental, health and safety matters.
Certain matters involving potential environmental costs were identified at
the Point Tupper facility. Praxair has agreed to pay for certain of these
costs currently estimated at approximately $3,100 representing certain
investigation, remediation, compliance and capital costs. To the extent
that certain of these matters exceed this estimate, Praxair has agreed to
reimburse the Company for these future expenditures. Additionally, the
Company has identified additional environmental costs at Point Tupper of
approximately $1,500. These costs represent pre-emptive capital
improvements designed to mitigate or prevent future environmental exposures
and improve the overall safety of the Company's facilities. The Company
believes that these environmental costs subject to the foregoing
reimbursements will not have a material adverse effect on the Company's
financial position, results of operations or net cash flows.
The Company is involved in various other claims and litigation arising from
the conduct of its business. Based upon analysis of legal matters and
discussions with legal counsel, the Company believes that the ultimate
outcome of these matters will not have a material adverse impact on the
Company's financial position, net cash flows or results of operations.
F-70
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Statia Terminals International N.V.
Date: May 13, 1997 (Registrant)
By: /s/ James G. Cameron
---------------------------------
James G. Cameron
Managing Director
By: /s/ James F. Brenner
---------------------------------
James F. Brenner
Vice President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
1996 Annual Report on Form 10-K has been signed below by the following persons
on behalf of the registrant in the capacities and on the dates indicated.
/s/ James G. Cameron
- --------------------------
James G. Cameron Managing Director May 13, 1997
(Principal Executive Officer)
/s/ John K. Castle
- --------------------------
John K. Castle Managing Director May 13, 1997
/s/ David B. Pittaway
- --------------------------
David B. Pittaway Managing Director May 13, 1997
/s/ Justin B. Wender
- --------------------------
Justin B. Wender Managing Director May 13, 1997
/s/ James F. Brenner
- --------------------------
James F. Brenner Vice President and May 13, 1997
Treasurer (Principal
Financial and Accounting
Officer)
Page S-1
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Statia Terminals Canada, Incorporated
Date: May 13, 1997 (Registrant)
By: /s/ Paul R. Crissman
---------------------------------
Paul R. Crissman
Director and President
By: /s/ James F. Brenner
---------------------------------
James F. Brenner
Vice President-Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
1996 Annual Report on Form 10-K has been signed below by the following persons
on behalf of the registrant in the capacities and on the dates indicated.
/s/ Paul R. Crissman
- --------------------------
Paul R. Crissman Director and President May 13, 1997
(Principal Executive Officer)
/s/ Clarence W. Brown
- --------------------------
Clarence W. Brown Director May 13, 1997
/s/ James G. Cameron
- --------------------------
James G. Cameron Director May 13, 1997
/s/ James F. Brenner
- --------------------------
James F. Brenner Vice President - Finance May 13, 1997
(Principal Financial and
Accounting Officer)
Page S-2
<PAGE>
Exhibits Index
--------------
<TABLE>
<CAPTION>
Exhibit Page
Number Description of Exhibit Number
- ------ ---------------------- ------
<S> <C>
3.1* Articles of Incorporation Statia Terminals International N.V.
3.2* Memorandum and Articles of Association of Statia Terminals Canada,
Incorporated
3.3* Order of the Supreme Court of Nova Scotia approving the Amalgamation
Agreement between Statia Terminals Canada, Incorporated and Statia
Terminals Point Tupper, Inc. filed at the Registry of Joint Stock
Companies at Halifax, Nova Scotia
4.1* Indenture, dated as of November 27, 1996, among and Statia Terminals
International N.V., Statia Terminals Canada, Incorporated, as
Issuers, and Statia Terminals Corporation N.V., Statia Terminals
Delaware, Inc., Statia Terminals, Inc., Statia Terminals N.V.,
Statia Delaware Holdco II, Inc., Saba Trustcompany N.V., Bicen
Development Corporation N.V., Statia Terminals Southwest, Inc.,
W.P. Company, Inc., Seven Seas Steamship Company, Inc., Seven Seas
Steamship Company (Sint Eustatius) N.V., Point Tupper Marine
Services Limited, Statia Laboratory Services N.V., Statia Tugs
N.V. (collectively, the "Subsidiary Guarantors") and Marine
Midland Bank.
4.2* Specimen Certificate of 11 3/4% Series A First Mortgage Note due 2003
(included in Exhibit 4.1 hereto).
4.3* Specimen Certificate of 11 3/4% Series B First Mortgage Note due 2003
(included in Exhibit 4.1 hereto).
4.4* Form of Guarantee of securities issued pursuant to the Indenture
(included in Exhibit 4.1 hereto).
4.5* Registration Rights Agreement, dated as of November 27, 1996, by and
among Statia Terminals International N.V., Statia Terminals
Canada, Incorporated, the Subsidiary Guarantors and Dillon, Read &
Co. Inc.
4.6* Share Pledge Agreement, dated as of November 27, 1996, by and between
Statia Terminals International N.V. and Marine Midland Bank.
4.7* Share Pledge Agreement, dated as of November 27, 1996, by and between
Statia Terminals N.V. and Marine Midland Bank.
4.8* Share Pledge Agreement, dated as of November 27, 1996, by and between
Statia Terminals Corporation N.V. and Marine Midland Bank.
4.9* Share Pledge Agreement, dated as of November 27, 1996, by and between
Seven Seas Steamship Company, Inc. and Marine Midland Bank.
4.10* Fiduciary Transfer of Tangible Assets Agreement, dated as of November
27, 1996, by and between Statia Terminals N.V., Saba Trustcompany
N.V., Bicen Development Corporation N.V., Statia Laboratory
Services N.V., Statia Tugs N.V., Seven Seas Steamship Company
(Sint Eustatius) N.V. and Marine Midland Bank.
4.11* Fiduciary Assignment of Intangible Assets Agreement, dated as of
November 27, 1996, by and between Statia Terminals International
N.V., Statia Terminals Corporation N.V., Statia Terminals N.V.,
Saba Trustcompany N.V., Bicen Development Corporation N.V., Statia
Laboratory Services N.V., Seven Seas Steamship Company (Sint
Eustatius) N.V., Statia Tugs N.V. and Marine Midland Bank.
4.12* Deed of Mortgage, dated as of November 27, 1996, by and among Statia
Terminals N.V., Statia Laboratory Services N.V., Saba Trustcompany
N.V. and Bicen Development Corporation N.V. as mortgagors and
Marine Midland Bank as mortgagee.
4.13* Fixed and Floating Charge Debenture, made as of November 27, 1996,
between Statia Terminals Canada, Incorporated and Marine Midland
Bank.
4.14* Debenture Delivery Agreement, dated as of November 27, 1996, between
Statia
</TABLE>
Page E-1
<PAGE>
<TABLE>
<S> <C>
Terminals Canada, Incorporated and Marine Midland Bank.
4.15* Securities Pledge Agreement, made as of November 27, 1996, between
Statia Terminals Canada, Incorporated and Marine Midland Bank.
4.16* Securities Pledge Agreement, dated as of November 27, 1996, between
Statia Terminals Corporation N.V. and Marine Midland Bank.
4.17* Debt Allocation Agreement, dated as of November 27, 1996, between
Statia Terminals International N.V. and Statia Terminals Canada,
Incorporated.
4.18* United States Securities Pledge and Security Agreement, dated as of
November 27, 1996, by and among Statia Terminals International
N.V., Statia Delaware Holdco II, Statia Terminals Delaware, Inc.,
Statia Terminals, Inc., W.P. Company, Inc. and Marine Midland
Bank.
10.1* Storage and Throughput Agreement, dated as of May 6, 1993 ("Storage
and Throughput Agreement").
10.2* Marine Fuel Agreement, dated as of May 6, 1993 ("Marine Fuel
Agreement").
10.3* Amendment, dated as of January 1, 1996 to (i) the Storage and
Throughput Agreement and (ii) the Marine Fuel Agreement.
10.4* Storage and Throughput Agreement, dated as of August 20, 1993.
10.5* Storage and Throughput Agreement, dated as of August 1, 1994.
10.6* Employment Agreement, dated as of November 27, 1996, between Statia
Terminals Group N.V., Statia Terminals, Inc. and James G. Cameron.
10.7 Employment Agreement, dated as of November 27, 1996, between Statia
Terminals Group N.V., Statia Terminals, Inc. and Thomas M.
Thompson, Jr.
10.8 Employment Agreement, dated as of November 27, 1996, between Statia
Terminals Group N.V., Statia Terminals, Inc. and Robert R. Russo.
10.9 Employment Agreement, dated as of November 27, 1996, between Statia
Terminals Group N.V., Statia Terminals, Inc. and John D. Franklin.
10.10* Employment Agreement, dated as of November 27, 1996, between Statia
Terminals Group N.V., Statia Terminals, Inc. and James F. Brenner.
10.11* Employment Agreement, dated as of November 27, 1996, between Statia
Terminals Group N.V., Statia Terminals, Inc. and Jack R. Pine.
10.12* Loan and Security Agreement, dated as of November 27, 1996 between
Congress Financial Corporation (Florida) and Statia Terminals N.V.
10.13* Loan Agreement, dated as of November 27, 1996, by and among Congress
Financial Corporation (Canada), Statia Terminals Canada,
Incorporated and Point Tupper Marine Services Limited.
10.14* Brownsville Navigation District Contracts No. 2790, dated as of May
17, 1993, between the Brownsville Navigation District and Statia
Terminals Southwest, Inc.
10.15* Brownsville Navigation District Contracts No. 2826, dated as of
January 14, 1994, between the Brownsville Navigation District and
Statia Terminals Southwest, Inc.
21.1 Subsidiaries of the Registrants.
27.1 Financial Data Schedule for Statia Terminals International N.V.
27.2 Financial Data Schedule for Statia Terminals Canada, Incorporated.
</TABLE>
* Incorporated by reference to the Registration Statement of Statia and
Statia Canada on Form S-4, dated December 20, 1996, and amendments thereto
filed with the U.S. Securities and Exchange Commission (Registration
Statement No. 333-18455), which became effective on February 14, 1997.
(b) Reports of Form 8-K
None.
Page E-2
<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Agreement is made as of the 27th day of November, 1996 between Statia
Terminals Group N. V., a Netherlands Antilles corporation, having a registered
office at L.B. Smithplein 3, Curacao, Netherlands Antilles (the "Company");
Statia Terminals, Inc., a Delaware corporation, with offices at 800 Fairway
Drive, Suite 295, Deerfield Beach, Florida 33441 (the "Subsidiary"); and Thomas
M. Thompson, Jr., an individual with an address of 638 Middle River Dr., Ft.
Lauderdale, FL 33304 (the "Employee").
R E C I T A L S
WHEREAS, the Company has entered into a certain Amended and Restated Stock
Purchase and Sale Agreement dated as of November 4, 1996, among the Company and
certain other corporations (the "Purchase and Sale Agreement") pursuant to which
the Company shall, directly or indirectly, acquire all of the issued and
outstanding shares of the common stock of the Subsidiary;
WHEREAS, the Employee has been and is presently in the employ of the
Subsidiary and is presently serving as Executive Vice President of the
Subsidiary;
WHEREAS, the Employee possesses an intimate knowledge of the business and
affairs of the Subsidiary and its policies, procedures, methods and personnel;
WHEREAS, the Company desires to secure the continued services and
employment of the Employee on behalf of the Subsidiary, and the Employee desires
to be employed by the Subsidiary, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby agrees to cause the Subsidiary to employ
and continue to employ the Employee as Executive Vice President of the
Subsidiary and the Subsidiary hereby agrees to employ and continue to employ
<PAGE>
EXHIBIT 10.7
Page 2
the Employee as Executive Vice President, and the Employee accepts such
employment for the term of the employment specified in Section 3 hereof (the
"Employment Term"). During the Employment Term, the Employee shall serve as the
Executive Vice President of the Subsidiary, performing such duties and having
such authority as shall be reasonably required of an executive-level employee of
the Subsidiary, reporting only to the President and Chief Executive Officer and
the Board of Directors of the Subsidiary (the "Board"), and shall have such
other powers and perform such other additional executive duties as may from time
to time be assigned to him by the President and Chief Executive Officer or the
Board. Such duties being performed and such authority being exercised shall be
at least commensurate with the duties being performed and authority being
exercised by the Employee immediately prior to the date of this Agreement.
2. Performance. The Employee will serve the Subsidiary faithfully and to
the best of his ability and will devote substantially all of his time, energy,
experience and talents during regular business hours and as otherwise reasonably
necessary to such employment, to the exclusion of all other business activities;
provided however, that such exclusion shall not prohibit the Employee from
attending to the Employee's personal matters and/or financial and investment
affairs (which financial or investment affairs shall not conflict with the
business of the Subsidiary or the Company and is subject to the provisions of
Section 12 hereof) during regular business hours as may from time-to-time be
reasonably necessary so long as attendance to such matters and affairs does not
interfere with the performance of the Employee's duties hereunder.
3. Employment Term. Subject to earlier termination pursuant to Section 7
hereof the Employment Term shall (i) begin on the date of this Agreement and
continue until December 31, 2001 and (ii) be automatically renewed for
successive three-year periods thereafter, unless, at least 90 days before the
end of the initial term or any subsequent three-year period, either party gives
notice to the other of his or its desire to terminate this Agreement, in which
case it shall terminate as of the end of such term or period. Notwithstanding
the foregoing, if after December 31, 1998, there is a Change in Control (as
hereinafter defined) which occurs during the Employment Term, the Employment
Term shall be extended automatically for a period of three years from and after
the date of such Change in Control and shall not be automatically renewed
thereafter.
2
<PAGE>
EXHIBIT 10.7
Page 3
4. Compensation.
(a) Salary. During the Employment Term, the Company shall cause the
Subsidiary to pay the Employee a base salary, payable in equal bi-weekly
installments, subject to withholding and other applicable taxes, at an
annual rate of not less than One Hundred Sixty-Nine Thousand Two Hundred
Sixty U.S. Dollars ($169,260). Such base salary shall be reviewed in
January, 1997, and at least annually thereafter.
(b) Cash Incentive Bonus. For the calendar year 1997 and for each
subsequent calendar year, or portion thereof, during the Employment Term, a
reasonable target EBITDA (as defined below) for each calendar year and a
target bonus for the Employee for such calendar year shall be established
by the Board in its discretion after receiving the recommendation of the
management of the Subsidiary, and as soon as practicable after the end of
each such calendar year as the actual EBITDA achieved for such calendar
year has been determined, the Company shall cause the Subsidiary to pay to
the Employee a lump sum bonus determined as follows:
- -------------------------------------------------------------------------
% of Target EBITDA Achieved
% of Target Bonus to be Paid
- ---------------------------
At Least But Less Than
- -------------------------------------------------------------------------
- 85 None
- -------------------------------------------------------------------------
85 90 85
- -------------------------------------------------------------------------
90 95 90
- -------------------------------------------------------------------------
95 100 95
- -------------------------------------------------------------------------
100 105 100
- -------------------------------------------------------------------------
105 110 105
- -------------------------------------------------------------------------
3
<PAGE>
EXHIBIT 10.7
Page 4
- -------------------------------------------------------------------------
% of Target EBITDA Achieved
% of Target Bonus to be Paid
- ---------------------------
At Least But Less Than
- -------------------------------------------------------------------------
110 115 110
- -------------------------------------------------------------------------
115 120 115
- -------------------------------------------------------------------------
120 125 120
- -------------------------------------------------------------------------
125 and above -- 125
- -------------------------------------------------------------------------
If during the course of any calendar year, the Company shall sell or
otherwise dispose of five percent (5%) or more of the total assets of the
Company and its subsidiaries, the Board shall establish a revised EBITDA
target for such calendar year after receiving management's recommendation.
"EBITDA" shall mean for any period, the (a) net income (or net loss)
of the Company and its subsidiaries plus (b) the sum of (i) interest
expense, (ii) income tax expense, (iii) depreciation expense, (iv)
amortization expense, and (v) extraordinary or unusual losses deducted in
calculating net income (or net loss) less (c) extraordinary or unusual
gains added in calculating net income (or net loss), in each case
determined in accordance with generally accepted accounting principles at
the end of each such calendar year for the Company and its subsidiaries on
a consolidated basis, and plus (d) any fees paid to or expenses incurred by
the Company pursuant to the Management Agreement between the Company and an
Affiliate (as hereinafter defined) of a stockholder of the Company dated
November __, 1996.
(c) Employee Benefits. The Employee shall be entitled to and shall
receive employee benefits or participate in plans and programs maintained
by or on behalf of the Subsidiary which are otherwise made available to
employees of the Subsidiary, including but not limited to, medical, health,
accident and disability plan, cafeteria plan and 401(k) plan.
(d) Additional Benefits. In addition to the other compensation payable
to the Employee hereunder, during the Employment Term, the Company shall
cause the Subsidiary to furnish at its expense an automobile, or a
reasonable allowance
4
<PAGE>
EXHIBIT 10.7
Page 5
in lieu thereof at the option of the Subsidiary, office, reasonable
secretarial services, a club membership, and such other supplies,
equipment, facilities, services and emoluments appropriate to such
Employee's position.
(e) Paid Time Off. Employee shall be entitled to paid vacation,
holidays, and sick leave during each calendar year of employment in
accordance with policies of the Subsidiary. Vacation may only be taken at
times mutually convenient for the Subsidiary and the Employee. The
Subsidiary may elect to pay out all accrued and unused vacation time as of
December 31 of any calendar year in January of the following calendar year.
Such pay out will be at the then prevailing rate of annual compensation. No
more than four weeks vacation time may be accrued at any time.
5. Expenses. The Employee shall be entitled to be reimbursed by the
Subsidiary for all reasonable expenses incurred by him in connection with the
performance of his duties hereunder in accordance with policies established by
the Board from time to time and upon receipt of appropriate documentation.
6. Secret Processes and Confidential Information. For the
Employment Term and thereafter (a) the Employee will not divulge, transmit or
otherwise disclose (except as legally compelled by court order, and then only to
the extent required, after prompt notice to both the Company and the Subsidiary
of any such order), directly or indirectly, other than in the regular and proper
course of business of the Company and/or the Subsidiary, any confidential
knowledge or information with respect to the operations or finances of the
Subsidiary or the Company or any of their subsidiaries or Affiliates, or with
respect to confidential or secret processes, services, techniques, customers or
plans with respect to the Company and/or the Subsidiary, and (b) the Employee
will not use, directly or indirectly, any confidential information for the
benefit of anyone other than the Company and/or the Subsidiary; provided,
however, that the Employee has no obligation, express or implied, to refrain
from using or disclosing to others any such knowledge or information which is or
hereafter shall become available to the public other than through disclosure by
the Employee.
To the greatest extent possible, any Work Product (as hereinafter defined)
shall be deemed to be "work made for hire" (as defined in the Copyright Act, 17
U.S.C.A. ss. 101 et seq., as amended) and owned exclusively by the Subsidiary.
The
5
<PAGE>
EXHIBIT 10.7
Page 6
Employee hereby unconditionally and irrevocably transfers and assigns to the
Subsidiary all right, title and interest the Employee may currently have or in
the future may have by operation of law or otherwise in or to any Work Product,
including, without limitation, all patents, copyrights, trademarks, service
marks and other intellectual property rights. The Employee agrees to execute and
deliver to the Subsidiary any transfers, assignments, documents or other
instruments which the Company may deem necessary or appropriate to vest complete
title and ownership of any Work Product, and all rights therein, exclusively in
the Subsidiary.
During the term of this Agreement and thereafter, Employee shall not take
any action to disparage or criticize to any third parties any of the services of
the Company and/or the Subsidiary or to commit any other action that injures or
hinders the business relationships of the Company and/or the Subsidiary.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company and/or the Subsidiary, whether prepared by
Employee or otherwise coming into his possession in the course of the
performance of his services under this Agreement, shall be the exclusive
property of Company and shall be delivered to Company and not retained by
Employee upon termination of this Agreement for any reason whatsoever.
7. Termination.
(a) Mutual Agreement. The employment of the Employee hereunder may be
terminated at any time by the mutual agreement of the parties hereto.
(b) Termination for Substantial Cause. The Subsidiary may at any time
upon thirty (30) days prior written notice to the Employee, terminate the
employment of the Employee for Substantial Cause (as hereinafter defined).
(c) Termination by the Employee. The Employee shall be entitled to
terminate his employment without being in violation of any provision of
this Agreement upon 30 days prior written notice to the Subsidiary (i) for
Good Reason; (ii) upon retirement pursuant to the CBI Pension Plan, as
amended effective August 1, 1996, or pursuant to any other plan or policy
of the Subsidiary; or (iii) at any time and for any reason after the
Employee has attained the age of sixty-five (65) years.
6
<PAGE>
EXHIBIT 10.7
Page 7
(d) Termination by Death or Disability. The employment of the Employee
shall terminate upon the death of the Employee or the inability of the
Employee to perform his duties as a result of physical or mental disability
for an aggregate of 90 days in any 180 day period, as determined in good
faith by the Board ("Disability").
8. Definitions. For purposes of this Agreement:
(a) "Business" shall mean the business of owning, leasing or operating
petroleum and other bulk liquid blending, trans-shipment, storage or
processing facilities or providing related terminaling services such as
supply of bunker fuel for vessels, emergency and spill response services;
brokering of product trades and vessel representation.
(b) "Substantial Cause" shall mean:
(i) Conviction of the Employee of a crime constituting a felony
in the jurisdiction in which committed, or for any other criminal act
against the Subsidiary or the Company involving dishonesty or willful
misconduct intended to injure the Subsidiary or the Company or any
Affiliate of either of them in any substantial way (whether or not a
felony and whether or not criminal proceedings are initiated);
(ii) Failure or refusal of the Employee in any material respect
to perform his obligations under this Agreement or the duties of his
employment or to follow the lawful and proper directives of the Board,
other than by reason of a Disability provided such duties or
directives are consistent with this Agreement, and such failure or
refusal continues uncured for a period of sixty (60) days after
written notice thereof from the Subsidiary to the Employee which
specifies (i) the nature of such failure or refusal, and (ii) the
reasonable action of the Employee necessary for cure;
(iii) Any willful or intentional misconduct of the Employee
committed for the purpose, or having the reasonably foreseeable
effect, of injuring in a substantial way the Company, the Subsidiary,
or any Affiliate of either of them, or their respective businesses or
reputations; or
7
<PAGE>
EXHIBIT 10.7
Page 8
(iv) Any conduct by Employee that causes the Subsidiary or any of
its Affiliates to violate any state or federal law relating to the
workplace environment or any violation of any written policy of the
Subsidiary providing for termination in the event of violation of such
policy.
(a) "Good Reason" shall mean:
(i) a significant reduction in the authorities, duties, or
responsibilities of Employee other than as a result of sales of assets
as contemplated by the Purchase and Sale Agreement;
(ii) assignment to an office location which is more than 100
miles from the office location of the Employee as of the date of this
Agreement; or
(iii) material breach of this Agreement by the Subsidiary or the
Company which is not cured within thirty (30) days after written
notice of such breach is given by the Employee to the Company and the
Subsidiary.
(b) "Change in Control" shall mean the occurrence of any of the
following events with respect to the Company or with respect to the
Subsidiary:
(i) a merger, consolidation, combination, reorganization or other
transaction resulting in less than fifty percent (50%) of the combined
voting power of the surviving or resulting entity being owned by the
former shareholders of the Company or the Subsidiary, as applicable;
(ii) the sale or other disposition of all or substantially all of
the assets or business of the Company or the Subsidiary, as applicable
other than to an Affiliate of the Company or the Subsidiary, as
applicable; or
(iii) during any period of two (2) consecutive years, individuals
who at the beginning of such period constituted the Board of
8
<PAGE>
EXHIBIT 10.7
Page 9
Directors of the Company or of the Subsidiary, as applicable, cease
for any reason to constitute at least a majority of such board, unless
the election, or nomination for the election by the shareholders of
the Company or the Subsidiary, respectively, of each new director was
approved by at least two-thirds of the directors then still in office
who were directors at the beginning of the period;
provided, however, that, the foregoing to the contrary notwithstanding, in
no event shall any Change in Control be deemed to occur, for purposes of
this Agreement, as the direct or indirect result of the occurrence of any
of the transactions contemplated under the Purchase and Sale Agreement.
(c) "Affiliate" shall mean, with respect to any Person, any entity
that directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with such Person.
(d) "Person" shall mean any corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or other entity or organization.
(e) "Work Product" shall mean work product, property, data
documentation or information of any kind relating to the Business,
prepared, conceived, discovered, developed or created by the Employee for
the Subsidiary or any of the Subsidiary's Affiliates, clients or customers
while the Employee is employed by the Subsidiary.
(f) "Disability" shall have the meaning specified in Section 7(d)
hereof.
9. Directors and Officers Insurance and Indemnification. The Subsidiary
shall provide directors and officers insurance covering the Employee for events
occurring during the Employment Term on terms at least as favorable as coverage
for Directors of the Company, and the Subsidiary shall provide indemnification
to the Employee to the full extent allowed by the law of its jurisdiction of
incorporation.
9
<PAGE>
EXHIBIT 10.7
Page 10
10. Severance.
(a) If the Employee's employment is terminated by the Subsidiary
without Substantial Cause or by the Employee for Good Reason, then without
further liability of the Subsidiary or the Company the Employee shall be
entitled to (i) medical and dental benefits as provided immediately prior
to the date of termination which shall continue for the Severance Period
(as hereinafter defined) (which shall be terminated sooner to the extent
provided by another employer) and (ii) severance compensation for the
Severance Period following any such termination, payable in equal monthly
installments, subject to withholding and other applicable taxes, at an
annual rate equal to the Employees base rate of pay for the year of
termination. In addition, the Employee will be entitled to a pro rata
portion of the bonus compensation referred to in Section 4(b) hereof for
the year of termination only as and when ordinarily determined for such
year. For the purposes of this Agreement, "Severance Period" shall mean a
period commencing on the date of any such termination and ending on the
expiration of the Employment Term (determined as of the date of such
termination without giving effect to such termination); provided, however,
that the Severance Period shall not be less than one year.
(b) If the Employee's employment is terminated for any other reason,
then without further liability of the Subsidiary or the Company, the
Employee shall be entitled to the salary, expenses and benefits accrued to
the termination date (excluding the bonus referred to in Section 4(b)
hereof).
11. Notice. Any notices required or permitted hereunder shall be in
writing, signed and shall be deemed to have been given when personally delivered
or when mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
Thomas M. Thompson, Jr.
638 Middle River Dr.
Ft. Lauderdale, FL 33304
If to the Subsidiary:
Statia Terminals, Inc.
10
<PAGE>
EXHIBIT 10.7
Page 11
800 Fairway Drive
Suite 295
Deerfield Beach, Florida 33441
Attention: Board of Directors
With a copy to:
Castle Harlan Partners II, L.P.
150 East 58th Street
37th Floor
New York, New York 10015
Attention: David B. Pittaway
and a copy to:
Kaye, Scholer, Fierman,
Hays & Handler, LLP
425 Park Avenue
New York, NY 10022
Attention: Brian Christaldi, Esq.
If to the Company:
Statia Terminals Group N. V.
c/o Statia Terminals Inc.
800 Fairway Drive
Suite 295
Deerfield Beach, Florida 33441
Attention: Board of Directors
With a copy to:
Castle Harlan Partners II, L.P.
150 East 58th Street
37th Floor
New York, New York 10015
Attention: David B. Pittaway
11
<PAGE>
EXHIBIT 10.7
Page 12
and a copy to:
Kaye, Scholer, Fierman,
Hays & Handler, LLP
425 Park Avenue
New York, NY 10022
Attention: Brian Christaldi, Esq.
Each of the Employee, the Subsidiary and the Company may change its address
for purposes of this Section by sending notice to the other parties.
12. Non-Competition. The Employee shall not, at any time during the
Employment Term and for a period of eighteen months thereafter, directly or
indirectly, except where specifically contemplated by the terms of his
employment or this Agreement, (a) be employed by, engage in or participate in
the ownership, management, operation or control of, or act in any advisory or
other capacity for, any Competing Entity which conducts its business within the
Territory (as the terms Competing Entity and Territory are hereinafter defined);
provided, however, that notwithstanding the foregoing, the Employee may make
solely passive investments in any Competing Entity the common stock of which is
publicly held and of which the Employee shall not own or control, directly or
indirectly, in the aggregate securities which constitute 5% or more of the
voting rights or equity ownership of such Competing Entity; or (b) solicit or
divert any business or any customer from the Subsidiary or any Affiliate of the
Subsidiary or assist any person, firm or corporation in doing so or attempting
to do so; or (c) cause or seek to cause any person, firm or corporation to
refrain from dealing or doing business with the Subsidiary or any Affiliate of
the Subsidiary or assist any person, firm or corporation in doing so.
For purposes of this Section 12, (i) the term "Competing Entity" shall mean
any Person which presently or hereafter during the term hereof engages in the
Business; and (ii) the term Territory shall mean the Caribbean and the area
within a three hundred mile radius of (a) the terminal facility operated by an
Affiliate of the Subsidiary at Point Tupper, Nova Scotia and (b) any terminal
hereafter operated by the Subsidiary or any Affiliate of the Subsidiary.
13. General.
12
<PAGE>
EXHIBIT 10.7
Page 13
(a) Governing Law; Captions. The terms of this Agreement shall be
governed by and construed under the laws of the State of Florida. Paragraph
and Section captions used herein are for convenience of reference only, and
shall not in any way affect the meaning or interpretation of this
Agreement.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in
this Agreement to the contrary, the Subsidiary may assign this Agreement
and all rights hereunder shall inure to the benefit of the assignee or any
person, firm or corporation succeeding to all or substantially all of the
business or assets of the Subsidiary by purchase, merger or consolidation.
(c) Dispute Resolution. With the exception of the Company's or the
Subsidiary's right to elect to seek injunctive relief pursuant to paragraph
(g) of this Section 13, in the event of any dispute between either the
Company or the Subsidiary and the Employee arising out of or relating to
this Agreement or its termination or any other aspect of Employee's
employment, the parties hereby agree to submit such dispute to a
non-binding mediation under the American Arbitration Association's National
Rules for the Resolution of Employment Disputes; Arbitration and Mediation
Rules (the "Rules") within sixty (60) days of notice from any one of the
parties to another. Unless the parties can agree on a mediator within
thirty (30) days of such notice, mediation shall proceed pursuant to the
Rules. In the event any such dispute is not resolved by mediation, any
party hereto may initiate an action or claim to enforce any provision or
term of this Agreement. Each party shall bear its or his own costs and
expenses (including attorney's fees) associated with any mediation, action,
or claim.
(d) Binding Effect. This Agreement is for the employment of Employee,
personally, and the services to be rendered by him must be rendered by him
and no other person. This Agreement shall be binding upon and inure to the
benefit of the Company, the Subsidiary, and the Employee and, as the case
may be, their respective successors and assigns, personal representatives,
heirs and legatees.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter
hereof and may not be modified or amended in any way except in writing by
the parties.
13
<PAGE>
EXHIBIT 10.7
Page 14
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement hereto, including without limitation any obligations of the
Company or the Subsidiary under Sections 9, 10 or 13 of this Agreement.
(g) Survival. The covenants set forth in Sections 6 and 12 of this
Agreement shall survive and shall continue to be binding upon Employee
notwithstanding the termination of this Agreement for any reason
whatsoever. The covenants set forth in Section 6 and Section 12 of this
Agreement shall be deemed and construed as separate agreements independent
of any other provision of this Agreement. The existence of any claim or
cause of action by Employee against Company and/or Subsidiary, whether
predicated on this Agreement or otherwise, shall not constitute a defense
to the enforcement by Company or Subsidiary of any or all covenants. It is
expressly agreed that the remedy at law for the breach of any such covenant
is inadequate and that injunctive relief shall be available to prevent the
breach or any threatened breach thereof.
(h) Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby and the parties shall in good faith agree on a
modification of the invalid, illegal or unenforceable provision which
renders it valid, legal or enforceable (as the case may be) and which as
closely as possible reflects the original intent of the parties.
(i) Guaranty of Company. The Company hereby unconditionally guarantees
to Employee the full and timely performance by Subsidiary of its
obligations under this Agreement.
14
<PAGE>
EXHIBIT 10.7
Page 15
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto executed this Agreement the day and year first written above.
Statia Terminals, Inc.
By: /s/ James G. Cameron
-------------------------------
Name: James G. Cameron
Title: President
Statia Terminals Group N. V.
By: /s/ David B. Pittaway
-------------------------------
Name: David B. Pittaway
Title: Attorney-in-Fact
EMPLOYEE
/s/ Thomas M. Thompson
-------------------------------
Thomas M. Thompson, Jr.
15
<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Agreement is made as of the 27th day of November, 1996 between Statia
Terminals Group N. V., a Netherlands Antilles corporation, having a registered
office at L.B. Smithplein 3, Curacao, Netherlands Antilles (the "Company");
Statia Terminals, Inc., a Delaware corporation, with offices at 800 Fairway
Drive, Suite 295, Deerfield Beach, Florida 33441 (the "Subsidiary"); and Robert
R. Russo, an individual with an address of 13205 S.W. 71st Avenue, South Miami,
FL 33156 (the "Employee").
R E C I T A L S
WHEREAS, the Company has entered into a certain Amended and Restated Stock
Purchase and Sale Agreement dated as of November 4, 1996, among the Company and
certain other corporations (the "Purchase and Sale Agreement") pursuant to which
the Company shall, directly or indirectly, acquire all of the issued and
outstanding shares of the common stock of the Subsidiary;
WHEREAS, the Employee has been and is presently in the employ of the
Subsidiary and is presently serving as Senior Vice President of the Subsidiary;
WHEREAS, the Employee possesses an intimate knowledge of the business and
affairs of the Subsidiary and its policies, procedures, methods and personnel;
WHEREAS, the Company desires to secure the continued services and
employment of the Employee on behalf of the Subsidiary, and the Employee desires
to be employed by the Subsidiary, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby agrees to cause the Subsidiary to employ
and continue to employ the Employee as Senior Vice President of the Subsidiary
and the Subsidiary hereby agrees to employ and continue to employ the Employee
as Senior Vice President, and the Employee accepts such employment for
<PAGE>
EXHIBIT 10.8
Page 2
the term of the employment specified in Section 3 hereof (the "Employment
Term"). During the Employment Term, the Employee shall serve as the Senior Vice
President of the Subsidiary, performing such duties and having such authority as
shall be reasonably required of an executive-level employee of the Subsidiary,
reporting only to the President and Chief Executive Officer and the Board of
Directors of the Subsidiary (the "Board"), and shall have such other powers and
perform such other additional executive duties as may from time to time be
assigned to him by the President and Chief Executive Officer or the Board. Such
duties being performed and such authority being exercised shall be at least
commensurate with the duties being performed and authority being exercised by
the Employee immediately prior to the date of this Agreement.
2. Performance. The Employee will serve the Subsidiary faithfully and to
the best of his ability and will devote substantially all of his time, energy,
experience and talents during regular business hours and as otherwise reasonably
necessary to such employment, to the exclusion of all other business activities;
provided however, that such exclusion shall not prohibit the Employee from
attending to the Employee's personal matters and/or financial and investment
affairs (which financial or investment affairs shall not conflict with the
business of the Subsidiary or the Company and is subject to the provisions of
Section 12 hereof) during regular business hours as may from time-to-time be
reasonably necessary so long as attendance to such matters and affairs does not
interfere with the performance of the Employee's duties hereunder.
3. Employment Term. Subject to earlier termination pursuant to Section 7
hereof the Employment Term shall (i) begin on the date of this Agreement and
continue until December 31, 2001 and (ii) be automatically renewed for
successive three-year periods thereafter, unless, at least 90 days before the
end of the initial term or any subsequent three-year period, either party gives
notice to the other of his or its desire to terminate this Agreement, in which
case it shall terminate as of the end of such term or period. Notwithstanding
the foregoing, if after December 31, 1998, there is a Change in Control (as
hereinafter defined) which occurs during the Employment Term, the Employment
Term shall be extended automatically for a period of three years from and after
the date of such Change in Control and shall not be automatically renewed
thereafter.
4. Compensation.
2
<PAGE>
EXHIBIT 10.8
Page 3
(a) Salary. During the Employment Term, the Company shall cause the
Subsidiary to pay the Employee a base salary, payable in equal bi-weekly
installments, subject to withholding and other applicable taxes, at an
annual rate of not less than One Hundred Fifty Thousand Nine Hundred
Thirty-Six U.S. Dollars ($150,936). Such base salary shall be reviewed in
January, 1997, and at least annually thereafter.
(b) Cash Incentive Bonus. For the calendar year 1997 and for each
subsequent calendar year, or portion thereof, during the Employment Term, a
reasonable target EBITDA (as defined below) for each calendar year and a
target bonus for the Employee for such calendar year shall be established
by the Board in its discretion after receiving the recommendation of the
management of the Subsidiary, and as soon as practicable after the end of
each such calendar year as the actual EBITDA achieved for such calendar
year has been determined, the Company shall cause the Subsidiary to pay to
the Employee a lump sum bonus determined as follows:
- ------------------------------------------------------------------------
% of Target EBITDA Achieved
% of Target Bonus to be Paid
- --------------------------------------
At Least But Less Than
- ------------------------------------------------------------------------
- 85 None
- ------------------------------------------------------------------------
85 90 85
- ------------------------------------------------------------------------
90 95 90
- ------------------------------------------------------------------------
95 100 95
- ------------------------------------------------------------------------
100 105 100
- ------------------------------------------------------------------------
105 110 105
- ------------------------------------------------------------------------
110 115 110
- ------------------------------------------------------------------------
3
<PAGE>
EXHIBIT 10.8
Page 4
- ------------------------------------------------------------------------
115 120 115
- ------------------------------------------------------------------------
120 125 120
- ------------------------------------------------------------------------
125 and above - 125
- ------------------------------------------------------------------------
If during the course of any calendar year, the Company shall sell or
otherwise dispose of five percent (5%) or more of the total assets of the
Company and its subsidiaries, the Board shall establish a revised EBITDA
target for such calendar year after receiving management's recommendation.
"EBITDA" shall mean for any period, the (a) net income (or net loss)
of the Company and its subsidiaries plus (b) the sum of (i) interest
expense, (ii) income tax expense, (iii) depreciation expense, (iv)
amortization expense, and (v) extraordinary or unusual losses deducted in
calculating net income (or net loss) less (c) extraordinary or unusual
gains added in calculating net income (or net loss), in each case
determined in accordance with generally accepted accounting principles at
the end of each such calendar year for the Company and its subsidiaries on
a consolidated basis, and plus (d) any fees paid to or expenses incurred by
the Company pursuant to the Management Agreement between the Company and an
Affiliate (as hereinafter defined) of a stockholder of the Company dated
November __, 1996.
(c) Employee Benefits. The Employee shall be entitled to and shall
receive employee benefits or participate in plans and programs maintained
by or on behalf of the Subsidiary which are otherwise made available to
employees of the Subsidiary, including but not limited to, medical, health,
accident and disability plan, cafeteria plan and 401(k) plan.
(d) Additional Benefits. In addition to the other compensation payable
to the Employee hereunder, during the Employment Term, the Company shall
cause the Subsidiary to furnish at its expense an automobile, or a
reasonable allowance in lieu thereof at the option of the Subsidiary,
office, reasonable secretarial services,
4
<PAGE>
EXHIBIT 10.8
Page 5
and such other supplies, equipment, facilities, services and emoluments
appropriate to such Employee's position.
(e) Paid Time Off. Employee shall be entitled to paid vacation,
holidays, and sick leave during each calendar year of employment in
accordance with policies of the Subsidiary. Vacation may only be taken at
times mutually convenient for the Subsidiary and the Employee. The
Subsidiary may elect to pay out all accrued and unused vacation time as of
December 31 of any calendar year in January of the following calendar year.
Such pay out will be at the then prevailing rate of annual compensation. No
more than four weeks vacation time may be accrued at any time.
5. Expenses. The Employee shall be entitled to be reimbursed by the
Subsidiary for all reasonable expenses incurred by him in connection with the
performance of his duties hereunder in accordance with policies established by
the Board from time to time and upon receipt of appropriate documentation.
6. Secret Processes and Confidential Information. For the Employment Term
and thereafter (a) the Employee will not divulge, transmit or otherwise disclose
(except as legally compelled by court order, and then only to the extent
required, after prompt notice to both the Company and the Subsidiary of any such
order), directly or indirectly, other than in the regular and proper course of
business of the Company and/or the Subsidiary, any confidential knowledge or
information with respect to the operations or finances of the Subsidiary or the
Company or any of their subsidiaries or Affiliates, or with respect to
confidential or secret processes, services, techniques, customers or plans with
respect to the Company and/or the Subsidiary, and (b) the Employee will not use,
directly or indirectly, any confidential information for the benefit of anyone
other than the Company and/or the Subsidiary; provided, however, that the
Employee has no obligation, express or implied, to refrain from using or
disclosing to others any such knowledge or information which is or hereafter
shall become available to the public other than through disclosure by the
Employee.
To the greatest extent possible, any Work Product (as hereinafter defined)
shall be deemed to be "work made for hire" (as defined in the Copyright Act, 17
U.S.C.A. ss. 101 et seq., as amended) and owned exclusively by the Subsidiary.
The Employee hereby unconditionally and irrevocably transfers and assigns to the
Subsidiary
5
<PAGE>
EXHIBIT 10.8
Page 6
all right, title and interest the Employee may currently have or in the future
may have by operation of law or otherwise in or to any Work Product, including,
without limitation, all patents, copyrights, trademarks, service marks and other
intellectual property rights. The Employee agrees to execute and deliver to the
Subsidiary any transfers, assignments, documents or other instruments which the
Company may deem necessary or appropriate to vest complete title and ownership
of any Work Product, and all rights therein, exclusively in the Subsidiary.
During the term of this Agreement and thereafter, Employee shall not take
any action to disparage or criticize to any third parties any of the services of
the Company and/or the Subsidiary or to commit any other action that injures or
hinders the business relationships of the Company and/or the Subsidiary.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company and/or the Subsidiary, whether prepared by
Employee or otherwise coming into his possession in the course of the
performance of his services under this Agreement, shall be the exclusive
property of Company and shall be delivered to Company and not retained by
Employee upon termination of this Agreement for any reason whatsoever.
7. Termination.
(a) Mutual Agreement. The employment of the Employee hereunder may be
terminated at any time by the mutual agreement of the parties hereto.
(b) Termination for Substantial Cause. The Subsidiary may at any time
upon thirty (30) days prior written notice to the Employee, terminate the
employment of the Employee for Substantial Cause (as hereinafter defined).
(c) Termination by the Employee. The Employee shall be entitled to
terminate his employment without being in violation of any provision of
this Agreement upon 30 days prior written notice to the Subsidiary (i) for
Good Reason; (ii) upon retirement pursuant to the CBI Pension Plan, as
amended effective August 1, 1996, or pursuant to any other plan or policy
of the Subsidiary; or (iii) at any time and for any reason after the
Employee has attained the age of sixty-five (65) years.
6
<PAGE>
EXHIBIT 10.8
Page 7
(d) Termination by Death or Disability. The employment of the Employee
shall terminate upon the death of the Employee or the inability of the
Employee to perform his duties as a result of physical or mental disability
for an aggregate of 90 days in any 180 day period, as determined in good
faith by the Board ("Disability").
8. Definitions. For purposes of this Agreement:
(a) "Business" shall mean the business of owning, leasing or operating
petroleum and other bulk liquid blending, trans-shipment, storage or
processing facilities or providing related terminaling services such as
supply of bunker fuel for vessels, emergency and spill response services;
brokering of product trades and vessel representation.
(b) "Substantial Cause" shall mean:
(i) Conviction of the Employee of a crime constituting a felony
in the jurisdiction in which committed, or for any other criminal act
against the Subsidiary or the Company involving dishonesty or willful
misconduct intended to injure the Subsidiary or the Company or any
Affiliate of either of them in any substantial way (whether or not a
felony and whether or not criminal proceedings are initiated);
(ii) Failure or refusal of the Employee in any material respect
to perform his obligations under this Agreement or the duties of his
employment or to follow the lawful and proper directives of the Board,
other than by reason of a Disability provided such duties or
directives are consistent with this Agreement, and such failure or
refusal continues uncured for a period of sixty (60) days after
written notice thereof from the Subsidiary to the Employee which
specifies (i) the nature of such failure or refusal, and (ii) the
reasonable action of the Employee necessary for cure;
(iii) Any willful or intentional misconduct of the Employee
committed for the purpose, or having the reasonably foreseeable
effect, of injuring in a substantial way the Company, the Subsidiary,
or any Affiliate of either of them, or their respective businesses or
reputations; or
7
<PAGE>
EXHIBIT 10.8
Page 8
(iv) Any conduct by Employee that causes the Subsidiary or any of
its Affiliates to violate any state or federal law relating to the
workplace environment or any violation of any written policy of the
Subsidiary providing for termination in the event of violation of such
policy.
(a) "Good Reason" shall mean:
(i) a significant reduction in the authorities, duties, or
responsibilities of Employee other than as a result of sales of assets
as contemplated by the Purchase and Sale Agreement;
(ii) assignment to an office location which is more than 100
miles from the office location of the Employee as of the date of this
Agreement; or
(iii) material breach of this Agreement by the Subsidiary or the
Company which is not cured within thirty (30) days after written
notice of such breach is given by the Employee to the Company and the
Subsidiary.
(b) "Change in Control" shall mean the occurrence of any of the
following events with respect to the Company or with respect to the
Subsidiary:
(i) a merger, consolidation, combination, reorganization or other
transaction resulting in less than fifty percent (50%) of the combined
voting power of the surviving or resulting entity being owned by the
former shareholders of the Company or the Subsidiary, as applicable;
(ii) the sale or other disposition of all or substantially all of
the assets or business of the Company or the Subsidiary, as applicable
other than to an Affiliate of the Company or the Subsidiary, as
applicable; or
(iii) during any period of two (2) consecutive years, individuals
who at the beginning of such period constituted the Board of
8
<PAGE>
EXHIBIT 10.8
Page 9
Directors of the Company or of the Subsidiary, as applicable, cease
for any reason to constitute at least a majority of such board, unless
the election, or nomination for the election by the shareholders of
the Company or the Subsidiary, respectively, of each new director was
approved by at least two-thirds of the directors then still in office
who were directors at the beginning of the period;
provided, however, that, the foregoing to the contrary notwithstanding, in no
event shall any Change in Control be deemed to occur, for purposes of this
Agreement, as the direct or indirect result of the occurrence of any of the
transactions contemplated under the Purchase and Sale Agreement.
(c) "Affiliate" shall mean, with respect to any Person, any entity
that directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with such Person.
(d) "Person" shall mean any corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or other entity or organization.
(e) "Work Product" shall mean work product, property, data
documentation or information of any kind relating to the Business,
prepared, conceived, discovered, developed or created by the Employee for
the Subsidiary or any of the Subsidiary's Affiliates, clients or customers
while the Employee is employed by the Subsidiary.
(f) "Disability" shall have the meaning specified in Section 7(d)
hereof.
9. Directors and Officers Insurance and Indemnification. The Subsidiary
shall provide directors and officers insurance covering the Employee for events
occurring during the Employment Term on terms at least as favorable as coverage
for Directors of the Company, and the Subsidiary shall provide indemnification
to the Employee to the full extent allowed by the law of its jurisdiction of
incorporation.
9
<PAGE>
EXHIBIT 10.8
Page 10
10. Severance.
(a) If the Employee's employment is terminated by the Subsidiary
without Substantial Cause or by the Employee for Good Reason, then without
further liability of the Subsidiary or the Company the Employee shall be
entitled to (i) medical and dental benefits as provided immediately prior
to the date of termination which shall continue for the Severance Period
(as hereinafter defined) (which shall be terminated sooner to the extent
provided by another employer) and (ii) severance compensation for the
Severance Period following any such termination, payable in equal monthly
installments, subject to withholding and other applicable taxes, at an
annual rate equal to the Employees base rate of pay for the year of
termination. In addition, the Employee will be entitled to a pro rata
portion of the bonus compensation referred to in Section 4(b) hereof for
the year of termination only as and when ordinarily determined for such
year. For the purposes of this Agreement, "Severance Period" shall mean a
period commencing on the date of any such termination and ending on the
expiration of the Employment Term (determined as of the date of such
termination without giving effect to such termination); provided, however,
that the Severance Period shall not be less than one year.
(b) If the Employee's employment is terminated for any other reason,
then without further liability of the Subsidiary or the Company, the
Employee shall be entitled to the salary, expenses and benefits accrued to
the termination date (excluding the bonus referred to in Section 4(b)
hereof).
11. Notice. Any notices required or permitted hereunder shall be in
writing, signed and shall be deemed to have been given when personally delivered
or when mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
Robert R. Russo
13205 S.W. 71st Avenue
South Miami, FL 33156
If to the Subsidiary:
Statia Terminals, Inc.
10
<PAGE>
EXHIBIT 10.8
Page 11
800 Fairway Drive
Suite 295
Deerfield Beach, Florida 33441
Attention: Board of Directors
With a copy to:
Castle Harlan Partners II, L.P.
150 East 58th Street
37th Floor
New York, New York 10015
Attention: David B. Pittaway
and a copy to:
Kaye, Scholer, Fierman,
Hays & Handler, LLP
425 Park Avenue
New York, NY 10022
Attention: Brian Christaldi, Esq.
If to the Company:
Statia Terminals Group N. V.
c/o Statia Terminals Inc.
800 Fairway Drive
Suite 295
Deerfield Beach, Florida 33441
Attention: Board of Directors
With a copy to:
Castle Harlan Partners II, L.P.
150 East 58th Street
37th Floor
New York, New York 10015
Attention: David B. Pittaway
11
<PAGE>
EXHIBIT 10.8
Page 12
and a copy to:
Kaye, Scholer, Fierman,
Hays & Handler, LLP
425 Park Avenue
New York, NY 10022
Attention: Brian Christaldi, Esq.
Each of the Employee, the Subsidiary and the Company may change its address
for purposes of this Section by sending notice to the other parties.
12. Non-Competition. The Employee shall not, at any time during the
Employment Term and for a period of eighteen months thereafter, directly or
indirectly, except where specifically contemplated by the terms of his
employment or this Agreement, (a) be employed by, engage in or participate in
the ownership, management, operation or control of, or act in any advisory or
other capacity for, any Competing Entity which conducts its business within the
Territory (as the terms Competing Entity and Territory are hereinafter defined);
provided, however, that notwithstanding the foregoing, the Employee may make
solely passive investments in any Competing Entity the common stock of which is
publicly held and of which the Employee shall not own or control, directly or
indirectly, in the aggregate securities which constitute 5% or more of the
voting rights or equity ownership of such Competing Entity; or (b) solicit or
divert any business or any customer from the Subsidiary or any Affiliate of the
Subsidiary or assist any person, firm or corporation in doing so or attempting
to do so; or (c) cause or seek to cause any person, firm or corporation to
refrain from dealing or doing business with the Subsidiary or any Affiliate of
the Subsidiary or assist any person, firm or corporation in doing so.
For purposes of this Section 12, (i) the term "Competing Entity" shall mean
any Person which presently or hereafter during the term hereof engages in the
Business; and (ii) the term Territory shall mean the Caribbean and the area
within a three hundred mile radius of (a) the terminal facility operated by an
Affiliate of the Subsidiary at Point Tupper, Nova Scotia and (b) any terminal
hereafter operated by the Subsidiary or any Affiliate of the Subsidiary.
13. General.
12
<PAGE>
EXHIBIT 10.8
Page 13
(a) Governing Law; Captions. The terms of this Agreement shall be
governed by and construed under the laws of the State of Florida. Paragraph
and Section captions used herein are for convenience of reference only, and
shall not in any way affect the meaning or interpretation of this
Agreement.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in
this Agreement to the contrary, the Subsidiary may assign this Agreement
and all rights hereunder shall inure to the benefit of the assignee or any
person, firm or corporation succeeding to all or substantially all of the
business or assets of the Subsidiary by purchase, merger or consolidation.
(c) Dispute Resolution. With the exception of the Company's or the
Subsidiary's right to elect to seek injunctive relief pursuant to paragraph
(g) of this Section 13, in the event of any dispute between either the
Company or the Subsidiary and the Employee arising out of or relating to
this Agreement or its termination or any other aspect of Employee's
employment, the parties hereby agree to submit such dispute to a
non-binding mediation under the American Arbitration Association's National
Rules for the Resolution of Employment Disputes; Arbitration and Mediation
Rules (the "Rules") within sixty (60) days of notice from any one of the
parties to another. Unless the parties can agree on a mediator within
thirty (30) days of such notice, mediation shall proceed pursuant to the
Rules. In the event any such dispute is not resolved by mediation, any
party hereto may initiate an action or claim to enforce any provision or
term of this Agreement. Each party shall bear its or his own costs and
expenses (including attorney's fees) associated with any mediation, action,
or claim.
(d) Binding Effect. This Agreement is for the employment of Employee,
personally, and the services to be rendered by him must be rendered by him
and no other person. This Agreement shall be binding upon and inure to the
benefit of the Company, the Subsidiary, and the Employee and, as the case
may be, their respective successors and assigns, personal representatives,
heirs and legatees.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter
hereof and may not be modified or amended in any way except in writing by
the parties.
13
<PAGE>
EXHIBIT 10.8
Page 14
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement hereto, including without limitation any obligations of the
Company or the Subsidiary under Sections 9, 10 or 13 of this Agreement.
(g) Survival. The covenants set forth in Sections 6 and 12 of this
Agreement shall survive and shall continue to be binding upon Employee
notwithstanding the termination of this Agreement for any reason
whatsoever. The covenants set forth in Section 6 and Section 12 of this
Agreement shall be deemed and construed as separate agreements independent
of any other provision of this Agreement. The existence of any claim or
cause of action by Employee against Company and/or Subsidiary, whether
predicated on this Agreement or otherwise, shall not constitute a defense
to the enforcement by Company or Subsidiary of any or all covenants. It is
expressly agreed that the remedy at law for the breach of any such covenant
is inadequate and that injunctive relief shall be available to prevent the
breach or any threatened breach thereof.
(h) Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby and the parties shall in good faith agree on a
modification of the invalid, illegal or unenforceable provision which
renders it valid, legal or enforceable (as the case may be) and which as
closely as possible reflects the original intent of the parties.
(i) Guaranty of Company. The Company hereby unconditionally guarantees
to Employee the full and timely performance by Subsidiary of its
obligations under this Agreement.
14
<PAGE>
EXHIBIT 10.8
Page 15
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto executed this Agreement the day and year first written above.
Statia Terminals, Inc.
By: /s/ James G. Cameron
-----------------------------
Name: James G. Cameron
Title: President
Statia Terminals Group N. V.
By: /s/ David B. Pittaway
-----------------------------
Name: David B. Pittaway
Title: Attorney-in-Fact
EMPLOYEE
/s/ Robert R. Russo
--------------------------------
Robert R. Russo
15
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Agreement is made as of the 27th day of November, 1996 between Statia
Terminals Group N. V., a Netherlands Antilles corporation, having a registered
office at L.B. Smithplein 3, Curacao, Netherlands Antilles (the "Company");
Statia Terminals, Inc., a Delaware corporation, with offices at 800 Fairway
Drive, Suite 295, Deerfield Beach, Florida 33441 (the "Subsidiary"); and John D.
Franklin, an individual with an address of 9601 Orange Dr., Ft. Lauderdale, FL
33328 (the "Employee").
R E C I T A L S
WHEREAS, the Company has entered into a certain Amended and Restated Stock
Purchase and Sale Agreement dated as of November 4, 1996, among the Company and
certain other corporations (the "Purchase and Sale Agreement") pursuant to which
the Company shall, directly or indirectly, acquire all of the issued and
outstanding shares of the common stock of the Subsidiary;
WHEREAS, the Employee has been and is presently in the employ of the
Subsidiary and is presently serving as Vice President, Marine Fuels of the
Subsidiary;
WHEREAS, the Employee possesses an intimate knowledge of the business and
affairs of the Subsidiary and its policies, procedures, methods and personnel;
WHEREAS, the Company desires to secure the continued services and
employment of the Employee on behalf of the Subsidiary, and the Employee desires
to be employed by the Subsidiary, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby agrees to cause the Subsidiary to employ
and continue to employ the Employee as Vice President, Marine
<PAGE>
EXHIBIT 10.9
Page 2
Fuels of the Subsidiary and the Subsidiary hereby agrees to employ and continue
to employ the Employee as Vice President, Marine Fuels, and the Employee accepts
such employment for the term of the employment specified in Section 3 hereof
(the "Employment Term"). During the Employment Term, the Employee shall serve as
the Vice President, Marine Fuels of the Subsidiary, performing such duties and
having such authority as shall be reasonably required of an executive-level
employee of the Subsidiary, reporting only to the President and Chief Executive
Officer and the Board of Directors of the Subsidiary (the "Board"), and shall
have such other powers and perform such other additional executive duties as may
from time to time be assigned to him by the President and Chief Executive
Officer or the Board. Such duties being performed and such authority being
exercised shall be at least commensurate with the duties being performed and
authority being exercised by the Employee immediately prior to the date of this
Agreement.
2. Performance. The Employee will serve the Subsidiary faithfully and to
the best of his ability and will devote substantially all of his time, energy,
experience and talents during regular business hours and as otherwise reasonably
necessary to such employment, to the exclusion of all other business activities;
provided however, that such exclusion shall not prohibit the Employee from
attending to the Employee's personal matters and/or financial and investment
affairs (which financial or investment affairs shall not conflict with the
business of the Subsidiary or the Company and is subject to the provisions of
Section 12 hereof) during regular business hours as may from time-to-time be
reasonably necessary so long as attendance to such matters and affairs does not
interfere with the performance of the Employee's duties hereunder.
3. Employment Term. Subject to earlier termination pursuant to Section 7
hereof the Employment Term shall (i) begin on the date of this Agreement and
continue until December 31, 1999 and (ii) be automatically renewed for
successive two-year periods thereafter, unless, at least 90 days before the end
of the initial term or any subsequent two-year period, either party gives notice
to the other of his or its desire to terminate this Agreement, in which case it
shall terminate as of the end of such term or period. Notwithstanding the
foregoing, if after December 31, 1997, there is a Change in Control (as
hereinafter defined) which occurs during the Employment Term, the Employment
Term shall be extended automatically for a period of two years from and after
the date of such Change in Control and shall not be automatically renewed
thereafter.
2
<PAGE>
EXHIBIT 10.9
Page 3
4. Compensation.
(a) Salary. During the Employment Term, the Company shall cause the
Subsidiary to pay the Employee a base salary, payable in equal bi-weekly
installments, subject to withholding and other applicable taxes, at an
annual rate of not less than Ninety-Four Thousand Nine Hundred Sixty-Seven
U.S. Dollars ($94,967). Such base salary shall be reviewed in January,
1997, and at least annually thereafter.
(b) Cash Incentive Bonus. For the calendar year 1997 and for each
subsequent calendar year, or portion thereof, during the Employment Term, a
reasonable target EBITDA (as defined below) for each calendar year and a
target bonus for the Employee for such calendar year shall be established
by the Board in its discretion after receiving the recommendation of the
management of the Subsidiary, and as soon as practicable after the end of
each such calendar year as the actual EBITDA achieved for such calendar
year has been determined, the Company shall cause the Subsidiary to pay to
the Employee a lump sum bonus determined as follows:
- -------------------------------------------------------------------------
% of Target EBITDA Achieved
% of Target Bonus to be Paid
- --------------------------------------------
At Least But Less Than
- -------------------------------------------------------------------------
- 85 None
- -------------------------------------------------------------------------
85 90 85
- -------------------------------------------------------------------------
90 95 90
- -------------------------------------------------------------------------
95 100 95
- -------------------------------------------------------------------------
100 105 100
- -------------------------------------------------------------------------
105 110 105
- -------------------------------------------------------------------------
110 115 110
- -------------------------------------------------------------------------
115 120 115
- -------------------------------------------------------------------------
120 125 120
- -------------------------------------------------------------------------
125 and above - 125
- -------------------------------------------------------------------------
3
<PAGE>
EXHIBIT 10.9
Page 4
If during the course of any calendar year, the Company shall sell or
otherwise dispose of five percent (5%) or more of the total assets of the
Company and its subsidiaries, the Board shall establish a revised EBITDA
target for such calendar year after receiving management's recommendation.
"EBITDA" shall mean for any period, the (a) net income (or net loss)
of the Company and its subsidiaries plus (b) the sum of (i) interest
expense, (ii) income tax expense, (iii) depreciation expense, (iv)
amortization expense, and (v) extraordinary or unusual losses deducted in
calculating net income (or net loss) less (c) extraordinary or unusual
gains added in calculating net income (or net loss), in each case
determined in accordance with generally accepted accounting principles at
the end of each such calendar year for the Company and its subsidiaries on
a consolidated basis, and plus (d) any fees paid to or expenses incurred by
the Company pursuant to the Management Agreement between the Company and an
Affiliate (as hereinafter defined) of a stockholder of the Company dated
November __, 1996.
(c) Employee Benefits. The Employee shall be entitled to and shall
receive employee benefits or participate in plans and programs maintained
by or on behalf of the Subsidiary which are otherwise made available to
employees of the Subsidiary, including but not limited to, medical, health,
accident and disability plan, cafeteria plan and 401(k) plan.
(d) Additional Benefits. In addition to the other compensation payable
to the Employee hereunder, during the Employment Term, the Company shall
cause the Subsidiary to furnish at its expense an automobile, or a
reasonable allowance in lieu thereof at the option of the Subsidiary,
office, reasonable secretarial services, and such other supplies,
equipment, facilities, services and emoluments appropriate to such
Employee's position.
(e) Paid Time Off. Employee shall be entitled to paid vacation,
holidays, and sick leave during each calendar year of employment in
accordance with policies of the Subsidiary. Vacation may only be taken at
times mutually convenient for the Subsidiary and the Employee. The
Subsidiary may elect to pay out all accrued and unused vacation time as of
December 31 of any calendar year in January of the following calendar year.
Such pay out will be at the then prevailing rate of annual compensation. No
more than four weeks vacation time may be accrued at any time.
<PAGE>
EXHIBIT 10.9
Page 5
5. Expenses. The Employee shall be entitled to be reimbursed by the
Subsidiary for all reasonable expenses incurred by him in connection with the
performance of his duties hereunder in accordance with policies established by
the Board from time to time and upon receipt of appropriate documentation.
6. Secret Processes and Confidential Information. For the Employment Term
and thereafter (a) the Employee will not divulge, transmit or otherwise disclose
(except as legally compelled by court order, and then only to the extent
required, after prompt notice to both the Company and the Subsidiary of any such
order), directly or indirectly, other than in the regular and proper course of
business of the Company and/or the Subsidiary, any confidential knowledge or
information with respect to the operations or finances of the Subsidiary or the
Company or any of their subsidiaries or Affiliates, or with respect to
confidential or secret processes, services, techniques, customers or plans with
respect to the Company and/or the Subsidiary, and (b) the Employee will not use,
directly or indirectly, any confidential information for the benefit of anyone
other than the Company and/or the Subsidiary; provided, however, that the
Employee has no obligation, express or implied, to refrain from using or
disclosing to others any such knowledge or information which is or hereafter
shall become available to the public other than through disclosure by the
Employee.
To the greatest extent possible, any Work Product (as hereinafter defined)
shall be deemed to be "work made for hire" (as defined in the Copyright Act, 17
U.S.C.A. ss. 101 et seq., as amended) and owned exclusively by the Subsidiary.
The Employee hereby unconditionally and irrevocably transfers and assigns to the
Subsidiary all right, title and interest the Employee may currently have or in
the future may have by operation of law or otherwise in or to any Work Product,
including, without limitation, all patents, copyrights, trademarks, service
marks and other intellectual property rights. The Employee agrees to execute and
deliver to the Subsidiary any transfers, assignments, documents or other
instruments which the Company may deem necessary or appropriate to vest complete
title and ownership of any Work Product, and all rights therein, exclusively in
the Subsidiary.
During the term of this Agreement and thereafter, Employee shall not take
any action to disparage or criticize to any third parties any of the services of
the Company and/or the Subsidiary or to commit any other action that injures or
hinders the business relationships of the Company and/or the Subsidiary.
5
<PAGE>
EXHIBIT 10.9
Page 6
All files, records, documents, memorandums, notes or other documents
relating to the business of Company and/or the Subsidiary, whether prepared by
Employee or otherwise coming into his possession in the course of the
performance of his services under this Agreement, shall be the exclusive
property of Company and shall be delivered to Company and not retained by
Employee upon termination of this Agreement for any reason whatsoever.
7. Termination.
(a) Mutual Agreement. The employment of the Employee hereunder may be
terminated at any time by the mutual agreement of the parties hereto.
(b) Termination for Substantial Cause. The Subsidiary may at any time
upon thirty (30) days prior written notice to the Employee, terminate the
employment of the Employee for Substantial Cause (as hereinafter defined).
(c) Termination by the Employee. The Employee shall be entitled to
terminate his employment without being in violation of any provision of
this Agreement upon 30 days prior written notice to the Subsidiary (i) for
Good Reason; (ii) upon retirement pursuant to the CBI Pension Plan, as
amended effective August 1, 1996, or pursuant to any other plan or policy
of the Subsidiary; or (iii) at any time and for any reason after the
Employee has attained the age of sixty-five (65) years.
(d) Termination by Death or Disability. The employment of the Employee
shall terminate upon the death of the Employee or the inability of the
Employee to perform his duties as a result of physical or mental disability
for an aggregate of 90 days in any 180 day period, as determined in good
faith by the Board ("Disability").
8. Definitions. For purposes of this Agreement:
(a) "Business" shall mean the business of owning, leasing or operating
petroleum and other bulk liquid blending, trans-shipment, storage or
processing facilities or providing related terminaling services such as
supply of bunker fuel for vessels, emergency and spill response services;
brokering of product trades and vessel representation.
6
<PAGE>
EXHIBIT 10.9
Page 7
(b) "Substantial Cause" shall mean:
(i) Conviction of the Employee of a crime constituting a felony
in the jurisdiction in which committed, or for any other criminal act
against the Subsidiary or the Company involving dishonesty or willful
misconduct intended to injure the Subsidiary or the Company or any
Affiliate of either of them in any substantial way (whether or not a
felony and whether or not criminal proceedings are initiated);
(ii) Failure or refusal of the Employee in any material respect
to perform his obligations under this Agreement or the duties of his
employment or to follow the lawful and proper directives of the Board,
other than by reason of a Disability provided such duties or
directives are consistent with this Agreement, and such failure or
refusal continues uncured for a period of sixty (60) days after
written notice thereof from the Subsidiary to the Employee which
specifies (i) the nature of such failure or refusal, and (ii) the
reasonable action of the Employee necessary for cure;
(iii) Any willful or intentional misconduct of the Employee
committed for the purpose, or having the reasonably foreseeable
effect, of injuring in a substantial way the Company, the Subsidiary,
or any Affiliate of either of them, or their respective businesses or
reputations; or
(iv) Any conduct by Employee that causes the Subsidiary or any of
its Affiliates to violate any state or federal law relating to the
workplace environment or any violation of any written policy of the
Subsidiary providing for termination in the event of violation of such
policy.
(a) "Good Reason" shall mean:
(i) a significant reduction in the authorities, duties, or
responsibilities of Employee other than as a result of sales of assets
as contemplated by the Purchase and Sale Agreement;
7
<PAGE>
EXHIBIT 10.9
Page 8
(ii) assignment to an office location which is more than 100
miles from the office location of the Employee as of the date of this
Agreement; or
(iii) material breach of this Agreement by the Subsidiary or the
Company which is not cured within thirty (30) days after written
notice of such breach is given by the Employee to the Company and the
Subsidiary.
(b) "Change in Control" shall mean the occurrence of any of the
following events with respect to the Company or with respect to the
Subsidiary:
(i) a merger, consolidation, combination, reorganization or other
transaction resulting in less than fifty percent (50%) of the combined
voting power of the surviving or resulting entity being owned by the
former shareholders of the Company or the Subsidiary, as applicable;
(ii) the sale or other disposition of all or substantially all of
the assets or business of the Company or the Subsidiary, as applicable
other than to an Affiliate of the Company or the Subsidiary, as
applicable; or
(iii) during any period of two (2) consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
of the Company or of the Subsidiary, as applicable, cease for any
reason to constitute at least a majority of such board, unless the
election, or nomination for the election by the shareholders of the
Company or the Subsidiary, respectively, of each new director was
approved by at least two-thirds of the directors then still in office
who were directors at the beginning of the period;
provided, however, that, the foregoing to the contrary notwithstanding, in no
event shall any Change in Control be deemed to occur, for purposes of this
Agreement, as the direct or indirect result of the occurrence of any of the
transactions contemplated under the Purchase and Sale Agreement.
8
<PAGE>
EXHIBIT 10.9
Page 9
(c) "Affiliate" shall mean, with respect to any Person, any entity
that directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with such Person.
(d) "Person" shall mean any corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or other entity or organization.
(e) "Work Product" shall mean work product, property, data
documentation or information of any kind relating to the Business,
prepared, conceived, discovered, developed or created by the Employee for
the Subsidiary or any of the Subsidiary's Affiliates, clients or customers
while the Employee is employed by the Subsidiary.
(f) "Disability" shall have the meaning specified in Section 7(d)
hereof.
9. Directors and Officers Insurance and Indemnification. The Subsidiary
shall provide directors and officers insurance covering the Employee for events
occurring during the Employment Term on terms at least as favorable as coverage
for Directors of the Company, and the Subsidiary shall provide indemnification
to the Employee to the full extent allowed by the law of its jurisdiction of
incorporation.
10. Severance.
(a) If the Employee's employment is terminated by the Subsidiary
without Substantial Cause or by the Employee for Good Reason, then without
further liability of the Subsidiary or the Company the Employee shall be
entitled to (i) medical and dental benefits as provided immediately prior
to the date of termination which shall continue for the Severance Period
(as hereinafter defined) (which shall be terminated sooner to the extent
provided by another employer) and (ii) severance compensation for the
Severance Period following any such termination, payable in equal monthly
installments, subject to withholding and other applicable taxes, at an
annual rate equal to the Employees base rate of pay for the year of
termination. In addition, the Employee will be entitled to a pro rata
portion of the bonus compensation referred to in Section 4(b) hereof for
the year of termination only
9
<PAGE>
EXHIBIT 10.9
Page 10
as and when ordinarily determined for such year. For the purposes of this
Agreement, "Severance Period" shall mean a period commencing on the date of
any such termination and ending on the expiration of the Employment Term
(determined as of the date of such termination without giving effect to
such termination); provided, however, that the Severance Period shall not
be less than one year.
(b) If the Employee's employment is terminated for any other reason,
then without further liability of the Subsidiary or the Company, the
Employee shall be entitled to the salary, expenses and benefits accrued to
the termination date (excluding the bonus referred to in Section 4(b)
hereof).
11. Notice. Any notices required or permitted hereunder shall be in
writing, signed and shall be deemed to have been given when personally delivered
or when mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
John D. Franklin
9601 Orange Dr.
Ft. Lauderdale, FL 33328
If to the Subsidiary:
Statia Terminals, Inc.
800 Fairway Drive
Suite 295
Deerfield Beach, Florida 33441
Attention: Board of Directors
With a copy to:
Castle Harlan Partners II, L.P.
150 East 58th Street
37th Floor
New York, New York 10015
Attention: David B. Pittaway
10
<PAGE>
EXHIBIT 10.9
Page 11
and a copy to:
Kaye, Scholer, Fierman,
Hays & Handler, LLP
425 Park Avenue
New York, NY 10022
Attention: Brian Christaldi, Esq.
If to the Company:
Statia Terminals Group N. V.
c/o Statia Terminals Inc.
800 Fairway Drive
Suite 295
Deerfield Beach, Florida 33441
Attention: Board of Directors
With a copy to:
Castle Harlan Partners II, L.P.
150 East 58th Street
37th Floor
New York, New York 10015
Attention: David B. Pittaway
and a copy to:
Kaye, Scholer, Fierman,
Hays & Handler, LLP
425 Park Avenue
New York, NY 10022
Attention: Brian Christaldi, Esq.
Each of the Employee, the Subsidiary and the Company may change its address
for purposes of this Section by sending notice to the other parties.
11
<PAGE>
EXHIBIT 10.9
Page 12
12. Non-Competition. The Employee shall not, at any time during the
Employment Term and for a period of eighteen months thereafter, directly or
indirectly, except where specifically contemplated by the terms of his
employment or this Agreement, (a) be employed by, engage in or participate in
the ownership, management, operation or control of, or act in any advisory or
other capacity for, any Competing Entity which conducts its business within the
Territory (as the terms Competing Entity and Territory are hereinafter defined);
provided, however, that notwithstanding the foregoing, the Employee may make
solely passive investments in any Competing Entity the common stock of which is
publicly held and of which the Employee shall not own or control, directly or
indirectly, in the aggregate securities which constitute 5% or more of the
voting rights or equity ownership of such Competing Entity; or (b) solicit or
divert any business or any customer from the Subsidiary or any Affiliate of the
Subsidiary or assist any person, firm or corporation in doing so or attempting
to do so; or (c) cause or seek to cause any person, firm or corporation to
refrain from dealing or doing business with the Subsidiary or any Affiliate of
the Subsidiary or assist any person, firm or corporation in doing so.
For purposes of this Section 12, (i) the term "Competing Entity" shall mean
any Person which presently or hereafter during the term hereof engages in the
Business; and (ii) the term Territory shall mean the Caribbean and the area
within a three hundred mile radius of (a) the terminal facility operated by an
Affiliate of the Subsidiary at Point Tupper, Nova Scotia and (b) any terminal
hereafter operated by the Subsidiary or any Affiliate of the Subsidiary.
13. General.
(a) Governing Law; Captions. The terms of this Agreement shall be
governed by and construed under the laws of the State of Florida. Paragraph
and Section captions used herein are for convenience of reference only, and
shall not in any way affect the meaning or interpretation of this
Agreement.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in
this Agreement to the contrary, the Subsidiary may assign this Agreement
and all rights hereunder shall inure to the benefit of the assignee or any
person, firm or corporation succeeding to all or substantially all of the
business or assets of the Subsidiary by purchase, merger or consolidation.
12
<PAGE>
EXHIBIT 10.9
Page 13
(c) Dispute Resolution. With the exception of the Company's or the
Subsidiary's right to elect to seek injunctive relief pursuant to paragraph
(g) of this Section 13, in the event of any dispute between either the
Company or the Subsidiary and the Employee arising out of or relating to
this Agreement or its termination or any other aspect of Employee's
employment, the parties hereby agree to submit such dispute to a
non-binding mediation under the American Arbitration Association's National
Rules for the Resolution of Employment Disputes; Arbitration and Mediation
Rules (the "Rules") within sixty (60) days of notice from any one of the
parties to another. Unless the parties can agree on a mediator within
thirty (30) days of such notice, mediation shall proceed pursuant to the
Rules. In the event any such dispute is not resolved by mediation, any
party hereto may initiate an action or claim to enforce any provision or
term of this Agreement. Each party shall bear its or his own costs and
expenses (including attorney's fees) associated with any mediation, action,
or claim.
(d) Binding Effect. This Agreement is for the employment of Employee,
personally, and the services to be rendered by him must be rendered by him
and no other person. This Agreement shall be binding upon and inure to the
benefit of the Company, the Subsidiary, and the Employee and, as the case
may be, their respective successors and assigns, personal representatives,
heirs and legatees.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter
hereof and may not be modified or amended in any way except in writing by
the parties.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement hereto, including without limitation any obligations of the
Company or the Subsidiary under Sections 9, 10 or 13 of this Agreement.
(g) Survival. The covenants set forth in Sections 6 and 12 of this
Agreement shall survive and shall continue to be binding upon Employee
notwithstanding the termination of this Agreement for any reason
whatsoever. The covenants set forth in Section 6 and Section 12 of this
Agreement shall be deemed and construed as separate agreements independent
of any other provision of this Agreement. The existence of any claim or
cause of action by Employee against Company and/or
13
<PAGE>
EXHIBIT 10.9
Page 14
Subsidiary, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company or Subsidiary of any or
all covenants. It is expressly agreed that the remedy at law for the breach
of any such covenant is inadequate and that injunctive relief shall be
available to prevent the breach or any threatened breach thereof.
(h) Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby and the parties shall in good faith agree on a
modification of the invalid, illegal or unenforceable provision which
renders it valid, legal or enforceable (as the case may be) and which as
closely as possible reflects the original intent of the parties.
(i) Guaranty of Company. The Company hereby unconditionally guarantees
to Employee the full and timely performance by Subsidiary of its
obligations under this Agreement.
14
<PAGE>
EXHIBIT 10.9
Page 15
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto executed this Agreement the day and year first written above.
Statia Terminals, Inc.
By: /s/ James G. Cameron
-----------------------------
Name: James G. Cameron
Title: President
Statia Terminals Group N. V.
By: /s/ David B. Pittaway
-----------------------------
Name: David B. Pittaway
Title: Atorney-in-Fact
EMPLOYEE
/s/ John D. Franklin
------------------------------
John D. Franklin
15
<PAGE>
Subsidiaries of the Registrants
Subsidiary Jursidiction
---------- ------------
Statia Terminals International N. V.
and Subsidiaries
Statia Terminals International N.V. * Netherland Antilles
Statia Delaware Holdco II * Delaware
Statia Terminals Southwest, Inc. * Texas
Statia Terminals Delaware, Inc. * Delaware
Statia Terminals, Inc. * Delaware
Statia Terminals Puerto Rico Corporation ** Puerto Rico
Statia Steamship Agency, Inc. ** Florida
W. P. Company, Inc. * Delaware
Statia Terminals Virgin Island Corporation ** U. S. Virgin Islands
Seven Seas Steamship Company, Inc. * Florida
Seven Seas Steamship Company (St. Eustatius) N.V. * Netherland Antilles
Seven Seas Steamship Company N.V. ** Netherland Antilles
Statia Terminals Corporation N.V. * Netherland Antilles
Statia Terminals Canada, Incorporated Nova Scotia
Point Tupper Marine Services Limited * Nova Scotia
Sabatrust Company N.V. * Netherland Antilles
Bicen Development Corporation N.V. * Netherland Antilles
Statia Terminals N.V. * Netherland Antilles
Statia Laboratory Services N.V. * Netherland Antilles
Statia Tugs N.V. * Netherland Antilles
Statia Shipping N.V. ** Netherland Antilles
Statia Terminals Canada, Incorporated
and Subsidiary
Point Tupper Marine Services Limited * Nova Scotia
* Subsidiary Guarantor of the $135.0 million, 11-3/4% First Mortgage Notes.
** Non-operating subsidiary to be dissolved.
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