SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
[X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________________________________ to
COMMISSION FILE NUMBERS 333-18455 AND 333-18455-01
--------------------
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)
--------------------
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 X No ______
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
QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 30, 1998
TABLE OF CONTENTS
PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 1
Consolidated Condensed Statements of Income (Loss)
and Accumulated Deficit 2
Consolidated Condensed Statements of Cash Flows 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
</TABLE>
THIS QUARTERLY REPORT ON FORM 10-Q (THIS "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 AND 3 OF PART I 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, THE Y2K PROBLEM, AND
OTHER MATTERS SET FORTH IN THIS 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.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,083 $ 17,508
Accounts receivable-
Trade, net 10,092 5,778
Other 2,347 1,549
Inventory, net 1,247 1,138
Prepaid expenses 269 1,091
Assets held for sale, net 20,000 10,000
------------- --------------
Total current assets 40,038 37,064
PROPERTY AND EQUIPMENT, net 198,529 199,395
OTHER NONCURRENT ASSETS, net 5,661 4,965
------------- --------------
Total assets $ 244,228 $ 241,424
============= ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,788 $ 5,437
Accrued interest payable 2,027 5,993
Other accrued expenses 7,587 10,528
------------- --------------
Total current liabilities 17,402 21,958
LONG-TERM DEBT 135,000 135,000
------------- --------------
Total liabilities 152,402 156,958
------------- --------------
STOCKHOLDER'S EQUITY SUBJECT TO REDUCTION 20,000 10,000
STOCKHOLDER'S EQUITY:
Common stock 6 6
Additional paid-in capital 78,494 82,344
Accumulated deficit (6,674) (7,884)
------------- --------------
Total stockholder's equity 71,826 74,466
------------- --------------
Total liabilities and stockholder's equity $ 244,228 $ 241,424
============= ==============
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
Page 1
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<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS) AND ACCUMULATED DEFICIT
(UNAUDITED)
(DOLLARS IN THOUSANDS)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ----------------------------
1997 1998 1997 1998
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 35,333 $ 32,699 $ 101,190 $ 99,535
COSTS OF SERVICES AND PRODUCTS SOLD 30,964 24,720 88,017 78,652
------------- ------------ ------------ ------------
Gross profit 4,369 7,979 13,173 20,883
VALUATION ALLOWANCE - - - 4,000
ADMINISTRATIVE EXPENSES 1,478 1,766 4,698 5,575
------------- ------------ ------------ ------------
Income from operations 2,891 6,213 8,475 11,308
INTEREST EXPENSE 4,220 4,206 12,650 12,651
INTEREST INCOME 111 187 337 401
------------- ------------ ------------ ------------
Income (loss) before provision for
income taxes (1,218) 2,194 (3,838) (942)
PROVISION FOR INCOME TAXES 243 49 476 268
------------- ------------ ------------ ------------
Net income (loss) (1,461) 2,145 (4,314) (1,210)
ACCUMULATED DEFICIT, beginning of period (4,298) (10,029) (95) (6,674)
COMMON STOCK DIVIDENDS - - (1,350) -
------------- ------------ ------------ ------------
ACCUMULATED DEFICIT, end of period $ (5,759) $ (7,884) $ (5,759) $ (7,884)
============= ============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
Page 2
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<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1998
------------ ------------
Net loss $ (4,314) $ (1,210)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 8,136 9,186
Valuation allowance - 4,000
Gain on disposition of property (105) -
(Increase) decrease in accounts receivable-trade, net (108) 4,618
Decrease in other receivables 1,382 766
Decrease in inventory 2,667 226
(Increase) decrease in prepaid expenses 73 (822)
(Increase) decrease in other non-current assets (253) 13
Increase (decrease) in accounts payable 1,103 (2,351)
Increase (decrease) in accrued expenses (2,369) 4,138
------------ ------------
Net cash provided by operating activities 6,212 18,564
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,284) (7,489)
Proceeds from sale of Statia Terminals Southwest, Inc. - 6,500
Proceeds from sale of property and equipment 104 -
------------ ------------
Net cash used in investing activities (4,180) (989)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment to Parent - (6,150)
Dividends paid (1,350) -
------------ ------------
Net cash used in financing activities (1,350) (6,150)
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 682 11,425
CASH AND CASH EQUIVALENTS, beginning of period 9,264 6,083
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 9,946 $ 17,508
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 307 $ 285
Cash paid for interest $ 7,403 $ 8,002
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
Page 3
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated condensed financial statements of Statia
Terminals International N.V. ("Statia") and its subsidiaries (together with
Statia, the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. Significant accounting
policies followed by the Company were disclosed in the Notes to the Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997. In the opinion of the Company's management,
the accompanying consolidated condensed financial statements contain
adjustments, consisting of normal recurring accruals, necessary to present
fairly the financial position of the Company at September 30, 1998 and the
results of operations and cash flows for the three and nine months ended
September 30, 1998 and 1997. Operating results for the three and nine months
ended September 30, 1998 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1998. Statia is a wholly-owned
subsidiary of Statia Terminals Group N.V. (the "Parent").
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130 -- "Reporting Comprehensive Income." SFAS No. 130 establishes
standards for the reporting and display of comprehensive income and its
components. For the three and nine months ended September 30, 1997 and 1998,
there were no material differences between net income and comprehensive income.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133 -- "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes certain standards of accounting for derivative instruments
including specific hedge accounting criteria. SFAS No. 133 is effective for
fiscal years beginning after June 15, 1999 although earlier adoption is allowed.
Management has not yet quantified the impacts of adopting SFAS No. 133 and has
not determined when the Company will adopt SFAS No. 133. However, as the Company
does not presently have derivative instruments, management expects that the
impact of SFAS No. 133 will not be material.
2. RECLASSIFICATIONS
Certain amounts in the prior year consolidated condensed financial
statements have been reclassified to conform to the current year presentation.
Interest expense for the three and nine months ended September 30, 1998
includes $227 and $683, respectively, of amortization expense related to
deferred financing costs. The same amounts were reclassified from Costs of
Services and Products Sold for the three months and nine months ended September
30, 1997 for comparative purposes.
Page 4
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STATIA TERMINALS INTERNATIONAL N.V. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
3. VALUATION ALLOWANCE AND SALE OF FACILITY
On July 29, 1998, the Company sold a subsidiary, Statia Terminals
Southwest, Inc. ("Southwest"), which owns storage and transshipment facilities
located in Brownsville, Texas, for $6,500 in cash resulting in net proceeds of
approximately $6,150. The Company retained certain of the pre-closing assets and
liabilities of Southwest consisting primarily of accounts receivable and accrued
expenses and agreed to indemnify the purchaser for certain contingent legal and
environmental matters up to a maximum of $500. No provision has been made in the
Company's financial statements for these contingent matters as management
believes it is not probable the Company will ever be required to provide such
indemnification.
During the quarter ended June 30, 1998, the Company recognized a
valuation allowance of $4,000 representing the difference between the
anticipated net proceeds from the sale of Southwest and the carrying amount of
the related assets. The proceeds from the sale of Southwest exceeded the related
carrying value of the assets and liabilities sold by $2,348. The recognition of
the gain has been deferred pending the disposition of other assets held for
sale. The valuation allowance had no effect on the provision for income taxes,
as the tax loss cannot be utilized.
During August 1998, Statia paid $6,150 to its Parent representing the
net proceeds from the sale of Southwest and reclassified $3,850 to additional
paid-in capital thereby reducing stockholder's equity subject to reduction. The
Parent utilized these funds to repurchase certain of its outstanding preferred
stock.
The following unaudited pro forma consolidated results of operations for
the nine-month periods ended September 30, 1997 and 1998 were prepared to
illustrate the estimated effects of the sale of Southwest as if it had occurred
at the beginning of each of these respective nine-month periods. The figures
below exclude operating results of Southwest and that portion of the valuation
allowance related to the sale of Southwest for the nine months ended September
30, 1998.
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1997 1998
----------- ------------
Revenues $ 99,866 $ 97,922
Income from operations $ 9,432 $ 13,021
Net income (loss) $ (3,332) $ 510
This pro forma information is provided for informational purposes only
and does not purport to be indicative of the results of operations which would
have been obtained had the sale of Southwest been completed on the dates
indicated or the results of operations for any future period.
Page 5
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STATIA TERMINALS INTERNATIONAL N.V. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
4. HURRICANE GEORGES
During September 1998, Hurricane Georges damaged the Company's St.
Eustatius facility. Although operations were not significantly impacted by the
hurricane and returned to normal within days of the storm, the preliminary
estimate of the damage to the facility caused by Hurricane Georges is $5,800. As
of September 30, 1998, the Company recorded a charge of $800 representing an
insurance deductible of $500 related to the hurricane damage and certain other
costs resulting from the hurricane which the Company anticipates will not be
recovered through its insurance policies.
5. CONTINGENCIES
In connection with the Stock Purchase and Sale Agreement dated November
4, 1996, as amended, the Company's former parent, Praxair Inc. ("Praxair"),
undertook certain studies to identify potential environmental, health and safety
issues which may impact the Company. These studies identified certain issues
involving potential environmental costs at the Company's Canadian facility.
During the quarter ended September 30, 1998, certain additional environmental
studies performed at the Canadian facility on the Company's behalf by an
independent consulting firm were completed. These additional studies by the
independent consulting firm estimate the potential cost of remediation and
compliance related to the identified environmental issues to be as much as
$10,000. Praxair has previously agreed to indemnify the Company for certain
environmental costs which may include these estimates. The Company is currently
reviewing the consultant's report and evaluating the potential effect of these
matters, if any, on the Company's financial position, cash flows and results of
operations.
6. FINANCIAL STATEMENTS BY JURISDICTION
In connection with certain transactions, the Company issued 11-3/4%
First Mortgage Notes (the "Notes") in 1996. The Notes are guaranteed on a full,
unconditional, joint and several basis by each of the indirect and direct active
subsidiaries of Statia, other than Statia Terminals Canada, Incorporated
("Statia Canada") which is a co-obligor on the Notes. Each of the subsidiary
guarantors is, directly or indirectly, wholly-owned by Statia. The Company has
certain inactive, non-guaranteeing 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
combining condensed financial data illustrates the composition of the Company's
subsidiary guarantors combined by jurisdiction. The enforceability of the
guarantees may be affected differently under the laws of the applicable
jurisdictions. Separate financial statements of the subsidiaries are not
presented because management of the Company has determined that they are not
material to investors.
During the quarter ended September 30, 1998 and as a result of the sale
of Southwest, the Company liquidated its subsidiary Statia Delaware Holdco II,
Inc. ("Holdco") which was the parent company of Southwest and Statia Terminals
New Jersey, Inc. ("New Jersey"). The Company's investment in New Jersey was
transferred to another subsidiary, Statia Terminals Delaware, Inc. The remaining
balances of Holdco were transferred to its parent company, Statia. Holdco had
been included in the consolidation of United States entities.
Page 6
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<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED BALANCE SHEET
DECEMBER 31, 1997
GUARANTEEING SUBSIDIARIES
-------------------------------------------------------
STATIA
TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED
ASSETS (UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES
------ ------------------ ------------- ------------ -------------- ------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1 $ 1,241 $ 4,593 $ 21 $ 227
Accounts receivable, net - 1,961 10,148 1 329
Inventory - 533 714 - -
Prepaid expenses - 57 78 1 133
Assets held for sale - - 10,000 - 10,000
-------- ------- -------- -------- -------
Total current assets 1 3,792 25,533 23 10,689
PROPERTY AND EQUIPMENT, net - 28,651 168,788 1,215 (125)
INVESTMENT IN SUBSIDIARIES 78,915 - - 76,606 205
OTHER NONCURRENT ASSETS - 1,174 4,321 1 165
-------- ------- -------- -------- -------
Total assets $ 78,916 $33,617 $198,642 $ 77,845 $10,934
======== ======= ======== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 172 $ 3,121 $ 11,730 $ 71 $ 2,250
Payable to (receivable from) affiliates (13,082) 288 5,514 (664) (1,998)
-------- ------- -------- -------- -------
Total current liabilities (12,910) 3,409 17,244 (593) 252
LONG-TERM DEBT - 28,060 106,940 - -
-------- ------- -------- -------- -------
Total liabilities (12,910) 31,469 124,184 (593) 252
-------- ------- -------- -------- -------
EQUITY SUBJECT TO REDUCTION 20,000 - 10,000 - 10,000
STOCKHOLDERS' EQUITY:
Common stock 6 - 19,395 12 1
Additional paid-in capital 78,494 2,266 46,847 79,876 3,000
Retained earnings (deficit) (6,674) (118) (1,784) (1,450) (2,319)
-------- ------- -------- -------- -------
Total stockholders' equity 71,826 2,148 64,458 78,438 682
-------- ------- -------- -------- -------
Total liabilities and stockholders' equity $ 78,916 $33,617 $198,642 $ 77,845 $10,934
======== ======= ======== ======== =======
<CAPTION>
RECLASSIFICATIONS
AND CONSOLIDATED
ASSETS ELIMINATIONS TOTAL
------ ----------------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ - $ 6,083
Accounts receivable, net - 12,439
Inventory - 1,247
Prepaid expenses - 269
Assets held for sale - 20,000
--------- --------
Total current assets - 40,038
PROPERTY AND EQUIPMENT, net - 198,529
INVESTMENT IN SUBSIDIARIES (155,726) -
OTHER NONCURRENT ASSETS - 5,661
--------- --------
Total assets $(155,726) $244,228
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ - $ 17,344
Payable to (receivable from) affiliates 10,000 58
--------- --------
Total current liabilities 10,000 17,402
LONG-TERM DEBT - 135,000
--------- --------
Total liabilities 10,000 152,402
--------- --------
EQUITY SUBJECT TO REDUCTION (20,000) 20,000
STOCKHOLDERS' EQUITY:
Common stock (19,408) 6
Additional paid-in capital (131,989) 78,494
Retained earnings (deficit) 5,671 (6,674)
-------- --------
Total stockholders' equity (145,726) 71,826
-------- --------
Total liabilities and stockholders' equity $(155,726) $244,228
======== =========
</TABLE>
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<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED INCOME STATEMENT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
GUARANTEEING SUBSIDIARIES
-------------------------------------------------------
STATIA
TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED
(UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES
------------------ ------------- ------------ -------------- ------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ 6,309 $28,552 $ 146 $2,029
COST OF SERVICES AND PRODUCTS SOLD - 3,695 26,348 212 1,133
------- ------- ------- ------ ------
Gross profit - 2,614 2,204 (66) 896
ADMINISTRATIVE EXPENSES 77 504 775 - 1,401
------- ------- ------- ------ ------
Income (loss) from operations (77) 2,110 1,429 (66) (505)
INTEREST EXPENSE - 877 3,340 - 3
INTEREST INCOME (9) 2 114 - 4
-------- ------- ------- ------ ------
Income (loss) before provision
for income taxes (86) 1,235 (1,797) (66) (504)
PROVISION FOR INCOME TAXES - 103 71 (25) 94
------- ------- ------- ------ ------
Net income (loss) (86) 1,132 (1,868) (41) (598)
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS (1,375) - - (736) 2
------- ------- ------- ------ ------
Net income (loss) available to
common stockholders $(1,461) $ 1,132 $(1,868) $ (777) $ (596)
======= ======= ======== ====== ======
DEPRECIATION AND
AMORTIZATION EXPENSE $ - $ 165 $ 2,018 $ 115 $ 454
======= ======= ======= ====== ======
<CAPTION>
RECLASSIFICATIONS
AND CONSOLIDATED
ELIMINATIONS TOTAL
----------------- ------------
<S> <C> <C>
REVENUES $(1,703) $35,333
COST OF SERVICES AND PRODUCTS SOLD (424) 30,964
------- -------
Gross profit (1,279) 4,369
ADMINISTRATIVE EXPENSES (1,279) 1,478
------- -------
Income (loss) from operations - 2,891
INTEREST EXPENSE - 4,220
INTEREST INCOME - 111
------- -------
Income (loss) before provision
for income taxes - (1,218)
PROVISION FOR INCOME TAXES - 243
------- -------
Net income (loss) - (1,461)
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS 2,109 -
------- -------
Net income (loss) available to
common stockholders $ 2,109 $(1,461)
======= =======
DEPRECIATION AND
AMORTIZATION EXPENSE $ - $ 2,752
======= =======
</TABLE>
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<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
GUARANTEEING SUBSIDIARIES
-------------------------------------------------------
STATIA
TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED
(UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES
------------------ ------------- ------------ -------------- ------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $13,672 $87,185 $ 365 $ 6,285
COST OF SERVICES AND PRODUCTS SOLD - 9,721 77,171 428 3,063
------- ------- ------- ------- -------
Gross profit - 3,951 10,014 (63) 3,222
ADMINISTRATIVE EXPENSES 214 1,523 2,427 - 4,485
------- ------- ------- ------- -------
Income (loss) from operations (214) 2,428 7,587 (63) (1,263)
INTEREST EXPENSE - 2,630 10,012 - 8
INTEREST INCOME 50 16 257 - 14
------- ------- ------- ------- -------
Income (loss) before provision
for income taxes (164) (186) (2,168) (63) (1,257)
PROVISION FOR INCOME TAXES - 142 211 (16) 139
------- ------- ------- -------- -------
Net income (loss) (164) (328) (2,379) (47) (1,396)
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS (4,150) - - (2,707) (9)
------- ------- ------- ------- -------
Net income (loss) available to
common stockholders $(4,314) $ (328) $(2,379) $(2,754) $(1,405)
======= ======= ======= ======= =======
DEPRECIATION AND
AMORTIZATION EXPENSE $ - $ 1,135 $ 5,910 $ 134 $ 957
======= ======= ======= ======= =======
<CAPTION>
RECLASSIFICATIONS
AND CONSOLIDATED
ELIMINATIONS TOTAL
----------------- ------------
<S> <C> <C>
REVENUES $(6,317) $101,190
COST OF SERVICES AND PRODUCTS SOLD (2,366) 88,017
------- --------
Gross profit (3,951) 13,173
ADMINISTRATIVE EXPENSES (3,951) 4,698
------- --------
Income (loss) from operations - 8,475
INTEREST EXPENSE - 12,650
INTEREST INCOME - 337
------- --------
Income (loss) before provision
for income taxes - (3,838)
PROVISION FOR INCOME TAXES - 476
------- --------
Net income (loss) - (4,314)
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS 6,866 -
------- --------
Net income (loss) available to
common stockholders $ 6,866 $ (4,314)
======= ========
DEPRECIATION AND
AMORTIZATION EXPENSE $ - $ 8,136
======= ========
</TABLE>
Page 9
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
GUARANTEEING SUBSIDIARIES
-------------------------------------------------------
STATIA
TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED
(UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES
------------------ ------------- ------------ -------------- ------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $(5,714) $ 522 $11,177 $ 505 $ 776
------- ------ ------- ------ -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - (576) (3,121) - (687)
Proceeds from sale property and equipment - - - - 204
------- ------ ------- ------ -----
Net cash used in investing activities - (576) (3,121) - (483)
------- ------ ------- ------ -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,350) - (527) (527) -
------- ------ ------- ------ -----
Net cash used in financing activities (1,350) - (527) (527) -
------- ------ ------- ------ -----
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (7,064) (54) 7,529 (22) 293
CASH AND CASH EQUIVALENTS,
beginning of period 7,065 854 1,304 41 -
------- ------ ------- ------ -----
CASH AND CASH EQUIVALENTS,
end of period $ 1 $ 800 $ 8,833 $ 19 $ 293
======= ====== ======= ====== =====
<CAPTION>
RECLASSIFICATIONS
AND CONSOLIDATED
ELIMINATIONS TOTAL
----------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $(1,054) $ 6,212
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment 100 (4,284)
Proceeds from sale property and equipment (100) 104
------- -------
Net cash used in investing activities - (4,180)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid 1,054 (1,350)
------- -------
Net cash used in financing activities 1,054 (1,350)
------- -------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS - 682
CASH AND CASH EQUIVALENTS,
beginning of period - 9,264
------- -------
CASH AND CASH EQUIVALENTS,
end of period $ - $ 9,946
======= =======
</TABLE>
Page 10
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL, N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED BALANCE SHEET
SEPTEMBER 30, 1998
GUARANTEEING SUBSIDIARIES
-------------------------------------------------------
STATIA
TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED
ASSETS (UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES
------ ------------------ ------------- ------------ -------------- ------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 38 $ 3,422 $ 13,768 $ 16 $ 264
Accounts receivable, net - 1,641 5,594 - 92
Inventory - 387 751 - -
Prepaid expenses - 43 29 - 1,019
Assets held for sale, net - - 10,000 - -
------- ------- -------- -------- ------
Total current assets 38 5,493 30,142 16 1,375
PROPERTY AND EQUIPMENT, net - 27,824 167,423 1,114 3,034
INVESTMENT IN SUBSIDIARIES 77,728 - - 80,208 344
OTHER NONCURRENT ASSETS - 1,026 3,780 1 158
------- ------- -------- -------- ------
Total assets $77,766 $34,343 $201,345 $ 81,339 $4,911
======= ======= ======== ======== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 2,922 $ 3,908 $ 13,543 $ 82 $1,552
Payable to (receivable from) affiliates (9,622) (1,945) 4,974 (747) 7,292
------- ------- -------- -------- ------
Total current liabilities (6,700) 1,963 18,517 (665) 8,844
LONG-TERM DEBT - 28,060 106,940 - -
------- ------- -------- -------- ------
Total liabilities (6,700) 30,023 125,457 (665) 8,844
------- ------- -------- -------- ------
EQUITY SUBJECT TO REDUCTION 10,000 - 10,000 - -
STOCKHOLDERS' EQUITY:
Common stock 6 - 19,395 12 -
Additional paid-in capital 82,344 2,266 46,914 80,352 300
Retained earnings (deficit) (7,884) 2,054 (421) 1,640 (4,233)
------- ------- -------- -------- ------
Total stockholders' equity 74,466 4,320 65,888 82,004 (3,933)
------- ------- -------- -------- ------
Total liabilities and stockholders' equity $77,766 $34,343 $201,345 $ 81,339 $4,911
======= ======= ======== ======== ======
<CAPTION>
RECLASSIFICATIONS
AND CONSOLIDATED
ELIMINATIONS TOTAL
----------------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ - $ 17,508
Accounts receivable, net - 7,327
Inventory - 1,138
Prepaid expenses - 1,091
Assets held for sale, net - 10,000
--------- --------
Total current assets - 37,064
PROPERTY AND EQUIPMENT, net - 199,395
INVESTMENT IN SUBSIDIARIES (158,280) -
OTHER NONCURRENT ASSETS - 4,965
--------- --------
Total assets $(158,280) $241,424
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ (1) $ 22,006
Payable to (receivable from) affiliates - (48)
--------- --------
Total current liabilities (1) 21,958
LONG-TERM DEBT - 135,000
--------- --------
Total liabilities (1) 156,958
--------- --------
EQUITY SUBJECT TO REDUCTION (10,000) 10,000
STOCKHOLDERS' EQUITY:
Common stock (19,407) 6
Additional paid-in capital (129,832) 82,344
Retained earnings (deficit) 960 (7,884)
--------- --------
Total stockholders' equity (148,279) 74,466
--------- --------
Total liabilities and stockholders' equity $(158,280) $241,424
========= ========
</TABLE>
Page 11
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED INCOME STATEMENT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
GUARANTEEING SUBSIDIARIES
-------------------------------------------------------
STATIA
TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED
(UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES
------------------ ------------- ------------ -------------- ------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ 5,753 $26,820 $ 152 $ 2,128
COST OF SERVICES AND PRODUCTS SOLD - 3,043 21,582 144 412
------- ------- ------- ------ -------
Gross profit - 2,710 5,238 8 1,716
ADMINISTRATIVE EXPENSES 90 740 954 8 1,667
------- ------- ------- ------ -------
Income (loss) from operations (90) 1,970 4,284 - 49
INTEREST EXPENSE - 876 3,330 - -
INTEREST INCOME - 37 149 - 1
------- ------- ------- ------ -------
Income (loss) before provision
for income taxes (90) 1,131 1,103 - 50
PROVISION FOR INCOME TAXES 7 (32) 70 3 1
------- ------- ------- ------ -------
Net income (loss) (97) 1,163 1,033 (3) 49
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS 2,242 - - 2,196 16
------- ------- ------- ------ -------
Net income (loss) available to
common stockholders $ 2,145 $ 1,163 $ 1,033 $2,193 $ 65
======= ======= ======= ====== =======
DEPRECIATION AND
AMORTIZATION EXPENSE $ - $ 465 $ 2,286 $ 34 $ 199
======= ======= ======= ====== =======
<CAPTION>
RECLASSIFICATIONS
AND CONSOLIDATED
ELIMINATIONS TOTAL
----------------- ------------
<S> <C> <C>
REVENUES $(2,154) $32,699
COST OF SERVICES AND PRODUCTS SOLD (461) 24,720
------- -------
Gross profit (1,693) 7,979
ADMINISTRATIVE EXPENSES (1,693) 1,766
------- -------
Income (loss) from operations - 6,213
INTEREST EXPENSE - 4,206
INTEREST INCOME - 187
------- -------
Income (loss) before provision
for income taxes - 2,194
PROVISION FOR INCOME TAXES - 49
------- -------
Net income (loss) - 2,145
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS (4,454) -
------- -------
Net income (loss) available to
common stockholders $(4,454) $ 2,145
======= =======
DEPRECIATION AND
AMORTIZATION EXPENSE $ - $ 2,984
======= =======
</TABLE>
Page 12
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
GUARANTEEING SUBSIDIARIES
-------------------------------------------------------
STATIA
TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED
(UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES
------------------ ------------- ------------ -------------- ------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $15,381 $82,242 $ 409 $ 7,622
COST OF SERVICES AND PRODUCTS SOLD - 8,740 67,896 430 2,795
------- ------- ------- ------ -------
Gross profit - 6,641 14,346 (21) 4,827
VALUATION ALLOWANCE - - - - 4,000
ADMINISTRATIVE EXPENSES 285 1,898 3,078 8 5,216
------- ------- ------- ------ -------
Income (loss) from operations (285) 4,743 11,268 (29) (4,389)
INTEREST EXPENSE - 2,632 10,016 - 9
INTEREST INCOME - 60 344 - 3
------- ------- ------- ------ -------
Income (loss) before provision
for income taxes (285) 2,171 1,596 (29) (4,395)
PROVISION FOR INCOME TAXES 21 - 234 7 6
------- ------- ------- ------ -------
Net income (loss) (306) 2,171 1,362 (36) (4,401)
EARNINGS (LOSS) FROM EQUITY INVESTMENTS (904) - - 3,533 8
------- ------- ------- ------ -------
Net income (loss) available to
common stockholders $(1,210) $ 2,171 $ 1,362 $3,497 $(4,393)
======= ======= ======= ====== ========
DEPRECIATION AND AMORTIZATION EXPENSE $ - $ 1,427 $ 6,733 $ 102 $ 924
======= ======= ======= ====== =======
<CAPTION>
RECLASSIFICATIONS
AND CONSOLIDATED
ELIMINATIONS TOTAL
----------------- ------------
<S> <C> <C>
REVENUES $(6,119) $99,535
COST OF SERVICES AND PRODUCTS SOLD (1,209) 78,652
------- -------
Gross profit (4,910) 20,883
VALUATION ALLOWANCE - 4,000
ADMINISTRATIVE EXPENSES (4,910) 5,575
------- -------
Income (loss) from operations - 11,308
INTEREST EXPENSE (6) 12,651
INTEREST INCOME (6) 401
------- -------
Income (loss) before provision
for income taxes - (942)
PROVISION FOR INCOME TAXES - 268
------- -------
Net income (loss) - (1,210)
EARNINGS (LOSS) FROM EQUITY INVESTMENTS (2,637) -
------- -------
Net income (loss) available to
common stockholders $(2,637) $(1,210)
======= =======
DEPRECIATION AND AMORTIZATION EXPENSE $ - $ 9,186
======= =======
</TABLE>
Page 13
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
GUARANTEEING SUBSIDIARIES
-------------------------------------------------------
STATIA
TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED
(UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES
------------------ ------------- ------------ -------------- ------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $ (313) $2,755 $13,997 $ (5) $ 2,130
------- ------ ------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - (574) (4,822) - (2,093)
Proceeds from sale of Statia Terminals
Southwest, Inc. 6,500 - - - -
------- ------ ------- ------ -------
Net cash provided by (used in)
investing activities 6,500 (574) (4,822) - (2,093)
------- ------ ------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment to Parent (6,150) - - - -
------- ------ ------- ------ -------
Net cash used in financing activities (6,150) - - - -
------- ------ ------- ------ -------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 37 2,181 9,175 (5) 37
CASH AND CASH EQUIVALENTS,
beginning of period 1 1,241 4,593 21 227
------- ------ ------- ------ -------
CASH AND CASH EQUIVALENTS,
end of period $ 38 $3,422 $13,768 $ 16 $ 264
======= ====== ======= ====== =======
<CAPTION>
CONSOLIDATED
TOTAL
------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $18,564
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (7,489)
Proceeds from sale of Statia Terminals
Southwest, Inc. 6,500
-------
Net cash provided by (used in)
investing activities (989)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment to Parent (6,150)
-------
Net cash used in financing activities (6,150)
-------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 11,425
CASH AND CASH EQUIVALENTS,
beginning of period 6,083
-------
CASH AND CASH EQUIVALENTS,
end of period $17,508
=======
</TABLE>
Page 14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For purposes of the discussion below, reference is made to the unaudited
Consolidated Condensed Financial Statements and Notes thereto of Statia
Terminals International N.V. and its Subsidiaries as of September 30, 1998 and
the three month and nine month periods ended September 30, 1998 and 1997
included herein. Reference should also be made to the Company's Annual Report on
Form 10-K as of and for the year ended December 31, 1997 including the
Consolidated Financial Statements of the Company, Statia Canada and Statia
Terminals N.V. ("STNV").
RESULTS OF OPERATIONS
Total revenues for the three months ended September 30, 1998 were $32.7
million compared to $35.3 million for the same period in 1997, a decrease of
$2.6 million, or 7.4%. Total revenues for the nine months ended September 30,
1998 were $99.5 million compared to $101.2 million for the same period in 1997,
a decrease of $1.7 million, or 1.6%. The revenue decreases resulted primarily
from reduced bunker and bulk product sales revenues at the Company's St.
Eustatius, Netherlands Antilles and Point Tupper, Canada, facilities partially
offset by increased terminaling services revenue (consisting of storage,
throughput, docking charges, emergency response fees and other terminal charges)
at St. Eustatius and Point Tupper. The decrease in bunker and bulk product sales
primarily resulted from lower oil market prices during the first nine months of
1998 as compared to the same period in 1997, partially offset by higher volumes
delivered. The improvement in terminaling service revenue for the first nine
months of 1998 compared to 1997 was principally due to (i) the Company's ability
to attract additional customers who use the Company's facilities as part of
their strategic distribution networks, (ii) the recent contango conditions in
the international petroleum market, and (iii) additional vessel calls at St.
Eustatius resulting in higher dock charges and emergency response fees.
<TABLE>
<CAPTION>
REVENUES AND OPERATING INCOME (LOSS) BY LOCATION
(Dollars in thousands)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------------
1997 1998 1997 1998
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
REVENUES
Netherlands Antilles and the
Caribbean
Terminaling services $ 8,535 $ 12,106 $ 25,428 $ 32,101
Bunker and bulk product sales 20,121 14,988 61,996 50,424
------------- ------------- ------------- ------------
28,656 27,094 87,424 82,525
------------- ------------- ------------- ------------
Canada
Terminaling services 5,056 5,074 10,847 14,504
Bunker and bulk product sales 1,253 679 2,825 877
------------- ------------- ------------- ------------
6,309 5,753 13,672 15,381
------------- ------------- ------------- ------------
United States
Brownsville, Texas
terminaling services* 534 - 1,704 1,613
All other terminaling
services 217 479 632 1,143
Corporate services 1,278 1,649 3,949 4,866
------------- ------------- ------------- ------------
2,029 2,128 6,285 7,622
------------- ------------- ------------- ------------
Eliminations (1,661) (2,276) (6,191) (5,993)
------------- ------------- ------------- ------------
Total revenues $ 35,333 $ 32,699 $ 101,190 $ 99,535
============= ============= ============= ============
OPERATING INCOME (LOSS)
- -----------------------
Netherlands Antilles and the
Caribbean $ 1,286 $ 4,194 $ 7,310 $ 10,954
Canada 2,110 1,970 2,428 4,743
Brownsville, Texas facility* (309) - (835) (4,061)
All other United States (196) 49 (428) (328)
------------- ------------- ------------- ------------
Total operating income $ 2,891 $ 6,213 $ 8,475 $ 11,308
============= ============= ============= ============
<FN>
* As more fully discussed in Note 3 of Notes to Consolidated Condensed Financial
Statements and elsewhere in this Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations, the Company sold its Brownsville,
Texas, facility on July 29, 1998.
</FN>
</TABLE>
Page 15
<PAGE>
During September 1998, Hurricane Georges damaged the Company's St.
Eustatius facility. Although operations were not significantly impacted by the
hurricane and returned to normal within days of the storm, the preliminary
estimate of the damage to the facility caused by Hurricane Georges is $5,800.
Damage was sustained to insulation on certain storage tanks, electrical
transmission systems and roofs of several buildings. In advance of the storm, on
September 19, 1998, the facility ceased terminal operations and instituted its
hurricane preparation and damage prevention plan. The terminal returned to full
operations by September 29, 1998. As of September 30, 1998, the Company recorded
a charge of $800 representing an insurance deductible of $500 related to the
hurricane damage and certain other costs resulting from the hurricane which the
Company anticipates will not be recovered through its insurance policies.
Revenues from terminaling services at St. Eustatius increased
approximately $3.6 million and $6.7 million in the third quarter and first nine
months of 1998, respectively, as compared to the same periods of 1997. Total
throughput increased from 11.7 million barrels during the third quarter of 1997
to 21.5 million barrels during the third quarter of 1998 due primarily to higher
throughput of crude oil and fuel oil. Total throughput increased from 44.9
million barrels during the first nine months of 1997 to 53.0 million barrels
during the same period of 1998 due primarily to higher throughput of fuel oil
and clean products partially offset by reduced throughput of crude oil.
Thirty-one and thirty-eight more vessels called at the St. Eustatius facility
during the third quarter and first nine months of 1998, respectively, than
during the same periods of 1997 resulting in higher revenues from docking
charges and stand-by emergency response fees. For the third quarter and first
nine months of 1998, the overall percentage of capacity leased at this facility
was 95% and 91% compared to 69% and 75% for the same periods of 1997,
respectively, reflecting increases in the percentage of capacity leased for
clean products and fuel oil tankage.
Caribbean bunker and bulk product sales decreased $5.1 million, or
25.5%, and $11.6 million, or 18.7%, in the third quarter and first nine months
of 1998, respectively, as compared to the same periods of 1997, primarily as a
result of lower comparative selling prices for bunker fuels reflecting current
market conditions. Average selling prices decreased 34.2% and 29.8% when
comparing the third quarter and first nine months of 1998 with the same periods
of 1997. However, metric tons of bunkers and bulk product sold increased 6.0%
and 15.8% during the third quarter and first nine months of 1998, respectively,
as compared to the same periods of 1997.
The percentage of tank capacity leased at Point Tupper increased from
77% and 66% for the third quarter and first nine months of 1997 to 98% and 91%
for the same periods of 1998, respectively. These increases were primarily the
result of additional crude oil and clean products tankage leased during the
third quarter and first nine months of 1998 as compared to the same periods of
1997. Fewer vessel calls led to lower port charge revenues at this facility
during the first nine months of 1998 as compared to the same period of 1997.
Gross profit for the third quarter and first nine months of 1998 was
$8.0 million and $20.9 million compared to $4.4 million and $13.2 million for
the same periods of 1997 representing increases of $3.6 million, or 82.6%, and
$7.7 million, or 58.5%, respectively. The increase in gross profit is primarily
the result of the increased terminaling services revenue produced at a small
incremental cost. Additionally, the Company realized higher gross margins on
bunker sales during the first nine months of 1998 as compared to the same period
of 1997 due to higher volumes of bunker fuels delivered. Gross margin
percentages on bunker sales at St. Eustatius may vary widely depending upon
relative market selling prices and due to the relatively fixed nature of
delivery costs.
As more fully discussed in Note 3 of Notes to Consolidated Condensed
Financial Statements, the Company recognized a valuation allowance of $4.0
million during the second quarter of 1998. The proceeds from the sale of
Southwest exceeded the carrying value of the assets and liabilities sold by $2.3
million. The recognition of the gain has been deferred pending the disposition
of other assets held for sale. The valuation allowance had no effect on the
provision for income taxes, as the tax loss cannot be utilized.
Administrative expenses were $1.8 million and $5.6 million for the three
and nine months ended September 30, 1998 as compared to $1.5 million and $4.7
million for the same periods of 1997 representing increases of $0.3 million, or
19.5%, and $0.9 million, or 18.7%, respectively. The increases during the third
quarter and first nine months of 1998 as compared to the same periods of 1997
are primarily the result of higher personnel costs.
Page 16
<PAGE>
During the first nine months of 1997 and 1998, the Company incurred
$12.7 million of interest expense from interest accrued on its 11-3/4% First
Mortgage Notes due 2003, amortization expense related to deferred financing
costs and certain bank charges.
The following table sets forth for the periods indicated certain key
statistics for the Company's operating locations in the Caribbean and Canada.
<TABLE>
<CAPTION>
CAPACITY, CAPACITY LEASED, THROUGHPUT AND VESSEL CALLS BY LOCATION
(Capacity and throughput in thousands of barrels)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ---------------------------
1997 1998 1997 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Netherlands Antilles and
the Caribbean
Total capacity 11,334 11,334 11,334 11,334
Capacity leased 69% 95% 75% 91%
Throughput 11,660 21,516 44,897 53,042
Vessel calls 178 209 591 629
Canada
Total capacity 7,404 7,404 7,404 7,404
Capacity leased 77% 98% 66% 91%
Throughput 20,148 8,456 38,814 35,654
Vessel calls 29 22 90 85
Combined Netherlands Antilles and
the Caribbean and Canada
Total capacity 18,738 18,738 18,738 18,738
Capacity leased 72% 96% 71% 91%
Throughput 31,808 29,972 83,711 88,696
Vessel calls 207 231 681 714
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations has been the Company's primary source of
liquidity during the period ended September 30, 1998. Cash provided by
operations has been used to purchase property and equipment. Despite net losses
of $1.2 million and $4.3 million for the nine months ended September 30, 1998
and 1997, respectively, the Company had positive cash flow from operations of
$18.6 million and $6.2 million for the respective periods. Differences between
net losses and positive operating cash flow have resulted primarily from
depreciation and amortization burdens and changes in various asset and liability
accounts. Additionally, during the second quarter ended June 30, 1998, the
Company recognized a $4.0 million non-cash valuation allowance (see Note 3 of
Notes to Consolidated Condensed Financial Statements for more information). At
December 31, 1997, the Company had cash and cash equivalents on hand of $6.1
million compared to $17.5 million at September 30, 1998 (which included $8.0
million invested in time deposits maturing in November of 1998).
As more fully discussed in Note 3 of Notes to Consolidated Condensed
Financial Statements, on July 29, 1998, the Company received net proceeds of
$6.15 million from the sale of its Brownsville, Texas facility. Statia
subsequently paid the net proceeds from the sale to its Parent and adjusted
stockholder's equity subject to reduction.
Page 17
<PAGE>
In January 1997, Statia declared a common stock dividend in the amount
of $1.35 million to enable its Parent to pay a management fee to Castle Harlan,
Inc. for the period from November 1996 to November 1997. A similar dividend of
$1.35 million was declared in November 1997 for management fees related to the
year ended November 1998.
During the first nine months of 1998, no significant changes occurred in
the Company's debt and equity financing arrangements. As of September 30, 1998,
the Company had not borrowed under its $17.5 million revolving credit facility.
This facility permits the Company to borrow in accordance with its available
borrowing base which was estimated at $5.0 million ($4.6 million for STNV and
$0.4 million for Statia Canada) as of September 30, 1998 and bears interest at
the prime rate plus 50 basis points (8.75% at September 30, 1998). This facility
is available for working capital needs and letter of credit financing.
The Company's capital expenditure budget for 1998 has been increased to
$9.5 million and includes funds for expanding and sustaining its existing
operations. During the first nine months of 1998, a majority of capital
expenditures were related to sustaining the Company's existing operations
including its terminal and marine equipment maintenance programs. Additional
spending is contingent upon the disposition of those assets that the Company
continues to hold for sale and the addition of incremental terminaling business.
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES BY LOCATION
(Dollars in thousands)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1997 1998 1997 1998
------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Netherlands Antilles and the
Caribbean $ 1,364 $ 1,673 $ 3,121 $ 4,822
Canada 197 388 576 574
Brownsville, Texas facility* 117 - 177 312
All other United States 403 259 510 1,781
Eliminations (100) - (100) -
------------- ----------- ------------ ------------
$ 1,981 $ 2,320 $ 4,284 $ 7,489
============= =========== ============ ============
<FN>
* As more fully discussed in Note 3 of Notes to Consolidated Condensed Financial
Statements and elsewhere in this Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations, the Company sold its Brownsville,
Texas facility on July 29, 1998.
</FN>
</TABLE>
Page 18
<PAGE>
INFORMATION TECHNOLOGY AND THE YEAR 2000
Certain computer software and hardware applications and embedded
microprocessor, microcontroller or other processing technology applications and
systems use only two digits to refer to a year rather than four digits. As a
result, these applications could fail or create erroneous results in dealing
with certain dates and especially if the applications recognize "00" as the year
1900 rather than the year 2000 (the "Y2K" problem). During 1997, the Company
developed a master plan (the "Plan") to upgrade its key information systems and
simultaneously address the potential disruption to both operating and accounting
systems that might be caused by the Y2K problem. The Plan also provides for the
evaluations of the systems of customers, vendors, and other third-party service
providers and evaluations of the Company's non-information technology systems,
which include embedded technologies such as microcontrollers (also referred to
as non-traditional information technology).
The assessment phase of the Plan as it relates to both traditional and
non-traditional information technology applications and systems has been
substantially completed. The Company is currently in the process of testing new
Y2K-compliant terminal operations at its facilities. It is anticipated that the
Y2K-compliant terminal operations systems will be fully implemented in the first
quarter of 1999. The Company recently selected a fully integrated Y2K-compliant
finance, accounting, and human resources system and expects to have the new
system fully operational by the third quarter of 1999.
The Company has identified certain of its significant existing
non-traditional information technology systems as not being Y2K compliant. The
Company is currently evaluating the best means to mitigate the possible adverse
effects resulting from the potential failure of these systems including repair
or replacement. However, the Company believes that in a worst case scenario,
existing manual overrides would prevent the failure of these systems from having
a material adverse effect on the Company's operations.
In accordance with the Plan, the Company has initiated a formal
communications process with other companies with which the Company's systems
interface or rely on to determine the extent to which those companies are
addressing their Y2K compliance. In connection with this process, the Company
has sent numerous letters and questionnaires to third parties and is evaluating
those responses as they are received. Where necessary, the Company will be
working with those companies to mitigate any material adverse effect on the
Company. Based upon information it has received and a review of its existing
relationships with third parties, the Company does not currently anticipate that
any third-party non-compliance would have a material adverse effect on the
Company's business, results of operations, or financial condition.
The 1998 capital expenditure budget includes $0.7 million for the
purchase and implementation of its new operations and accounting systems. In
addition, certain non-recurring expenses currently estimated at $0.1 million
will be incurred during 1998 for consultants. As of September 30, 1998, the
Company has capitalized $0.5 million related to its Y2K remediation efforts and
expensed an additional $0.05 million. In 1999, the Company anticipates spending
an additional $0.8 million to complete these efforts of which it anticipates
capitalizing $0.7 million and expensing $0.1 million. These costs have not had,
nor are they expected to have, a material effect on the Company's financial
position, results of operations or cash flows in any of the years in which
spending has or will occur. However, there can be no guarantee that these
estimates will be met and actual results could differ materially from these
estimates.
Based upon information currently available to it, the Company believes
its efforts will be successful in preventing the Y2K issue from having a
material adverse effect on the Company. However, the pervasive nature of the Y2K
issue may prevent the Company from fully assessing and rectifying all systems
that could have an effect on the Company's business, results of operations, or
financial condition.
Page 19
<PAGE>
ASSETS HELD FOR SALE
As of December 31, 1997, the Company's Brownsville, Texas facility,
owned by Statia Terminals Southwest, Inc., and the Company's emergency response
vessel, M/V STATIA RESPONDER (formerly known as M/V MEGAN D. GAMBARELLA), were
being held for sale. As more fully discussed in Note 3 of Notes to Consolidated
Condensed Financial Statements, on July 29, 1998, the Company sold Southwest for
$6.5 million in cash resulting in net proceeds of approximately $6.15 million.
Certain pro forma financial information related to the sale of Southwest is
provided in Note 3 of Notes to Consolidated Condensed Financial Statements.
The Company continues to actively seek potential buyers for its
emergency response vessel, the M/V STATIA RESPONDER, and has, therefore,
classified this vessel as an asset held for sale at September 30, 1998. In
addition, the Company is presently considering other alternatives, which include
retaining the vessel for emergency response service in the Caribbean. Should the
Company decide to retain the vessel, the vessel's value would be reclassified on
the Company's balance sheet from an asset held for sale to property and
equipment. At the present time, the Company does not anticipate recognizing any
adjustment to the vessel's carrying value. Similar levels of revenues are
anticipated to be earned and similar expenses incurred following any disposition
of the M/V STATIA RESPONDER.
Certain of the Parent's preferred stock agreements contain features
which may require the Parent to cause the Company to issue a dividend or
otherwise remit the net proceeds from the sale of the M/V STATIA RESPONDER.
Accordingly, $10 million of the Company's common stockholder's equity has been
classified outside the equity section as stockholder's equity subject to
reduction at September 30, 1998.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company periodically purchases refined petroleum products from its
customers and others for resale as bunker fuel, for small volume sales to
commercial interests, and to maintain an inventory of blend stocks for its
customers. Petroleum inventories are held for short time periods, generally not
exceeding ninety days. The Company does not presently have any derivative
positions to hedge its inventory of petroleum products. The following table
indicates the Company's aggregate carrying value of its petroleum products on
hand at September 30, 1998 at average cost, net of any lower of cost or market
valuation provisions, and the estimated fair value of such products.
ON BALANCE SHEET COMMODITY POSITION
(Dollars in thousands)
CARRYING FAIR
AMOUNT VALUE
----------- -----------
Petroleum Inventory
STNV $ 751 $ 826
Statia Canada 387 440
----------- -----------
$ 1,138 $ 1,266
=========== ===========
As substantially all of the Company's transactions are in U.S. dollars,
and as all of the Company's present debt obligations carry a fixed rate of
interest (except for the undrawn revolving credit facilities which vary with
changes in the lender's prime lending rate), management believes the Company's
exposure to foreign currency exchange rate fluctuation and interest rate
fluctuation are minimal.
Page 20
<PAGE>
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Reference is made to Part I, Item 3. Legal Proceedings, in the Company's
1997 Annual Report on Form 10-K and to Part II, Other Information, Item 1. Legal
Proceedings, in the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1998, for complete discussion. There have been no material
developments in the Company's legal proceedings since June 30, 1998.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27.1 Financial Data Schedule for Statia Terminals International N.V.
(for electronic filing only)
27.2 Financial Data Schedule for Statia Terminals Canada,
Incorporated. (for electronic filing only)
(b) Reports on Form 8-K.
None.
Page 21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this Report to be signed on their behalf by the
undersigned thereunto duly authorized.
STATIA TERMINALS INTERNATIONAL N.V.
(Registrant)
Date: November 16, 1998
By: /s/ JAMES F. BRENNER
-------------------------------------
James F. Brenner
Vice President - Finance
(As Authorized Officer)
STATIA TERMINALS CANADA, INCORPORATED
(Registrant)
Date: November 16, 1998
By: /s/ JAMES F. BRENNER
-------------------------------------
James F. Brenner
Vice President and Treasurer
(As Authorized Officer)
Page S-1
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27.1 Financial Data Schedule for Statia Terminals International N.V. (for
electronic filing only)
27.2 Financial Data Schedule for Statia Terminals Canada, Incorporated.
(for electronic filing only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATIA
TERMINALS INTERNATIONAL N.V.'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001029101
<NAME> STATIA TERMINALS INTERNATIONAL N.V.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 17,508
<SECURITIES> 0
<RECEIVABLES> 8,100
<ALLOWANCES> 773
<INVENTORY> 1,138
<CURRENT-ASSETS> 37,064
<PP&E> 216,633
<DEPRECIATION> 17,238
<TOTAL-ASSETS> 241,424
<CURRENT-LIABILITIES> 21,958
<BONDS> 135,000
0
0
<COMMON> 6
<OTHER-SE> 92,344
<TOTAL-LIABILITY-AND-EQUITY> 241,424
<SALES> 51,301
<TOTAL-REVENUES> 99,535
<CGS> 44,830
<TOTAL-COSTS> 78,652
<OTHER-EXPENSES> 5,575
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,651
<INCOME-PRETAX> (942)
<INCOME-TAX> 268
<INCOME-CONTINUING> (1,210)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,210)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATIA
TERMINALS CANADA INCORPORATED'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001029102
<NAME> STATIA TERMINALS CANADA INCORPORATED
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,422
<SECURITIES> 0
<RECEIVABLES> 1,703
<ALLOWANCES> 62
<INVENTORY> 387
<CURRENT-ASSETS> 5,493
<PP&E> 30,390
<DEPRECIATION> 2,566
<TOTAL-ASSETS> 34,343
<CURRENT-LIABILITIES> 1,963
<BONDS> 28,060
0
0
<COMMON> 0
<OTHER-SE> 2,266
<TOTAL-LIABILITY-AND-EQUITY> 34,343
<SALES> 877
<TOTAL-REVENUES> 15,381
<CGS> 758
<TOTAL-COSTS> 8,740
<OTHER-EXPENSES> 1,898
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,632
<INCOME-PRETAX> 2,171
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,171
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,171
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
