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
For the fiscal year ended DECEMBER 31, 1997
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)
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
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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[ ]
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
PART I.......................................................................1
ITEM 1. BUSINESS............................................................1
ITEM 2. PROPERTIES..........................................................9
ITEM 3. LEGAL PROCEEDINGS..................................................12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................13
PART II.....................................................................14
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY MATTERS.14
ITEM 6. SELECTED FINANCIAL DATA............................................14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..............................................17
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.............................29
PART III....................................................................30
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................30
ITEM 11. EXECUTIVE COMPENSATION.............................................33
ITEM 12. SECURITY OWNERSHIP.................................................36
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................37
PART IV.....................................................................40
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K...40
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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, AS AMENDED.
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"),
believes the Company is one of the five largest independent marine terminaling
companies in the world as measured in terms of storage 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. The facility located at
Brownsville is being held for sale. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Assets 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.
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, members of the Company's management and others acquired
from Praxair, Inc. ("Praxair") all of the outstanding capital stock of Statia
Terminals N.V. ("STNV"), Statia Terminal, Inc. ("STI"), their subsidiaries and
certain of their 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.
The day-to-day operations of the Company are managed at the respective
terminal locations. The Company's management team and employee base have a
diverse range of experience and skills in the terminaling industry, including
engineering, crude oil and liquid products distribution, oil trading, terminal
operations, shipping, refinery operations, product blending and finance. This
experience has permitted management to better understand the objectives of the
Company's customers and to forge alliances with those customers at 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 many of its competitors,
provides ancillary, value-added services tailored to support the particular
needs of its customers.
Since 1990, the Company has grown substantially, with storage tank
capacity increasing from 4.4 million barrels in 1990 to 20.4 million barrels in
1995 (should the disposition of Brownsville be completed, the Company will have
18.7 million barrels of capacity). Revenues have increased from $86.8 million
for 1990 to $156.0 million for 1996. Revenues for 1997 fell to $142.5 million
primarily as a result of fewer bunker and bulk product sales. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
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For the years ended December 31, 1995, 1996 and 1997, the Company
derived 90%, 90%, and 85% of its revenues, respectively, from its St. Eustatius
facility, approximately 8%, 8%, and 13% of its revenues, respectively, from its
Point Tupper facility and approximately 2%, 2%, and 2% of its revenues,
respectively, from its Brownsville facility. After elimination entries for
intercompany transactions and with administrative expenses allocated to each
location, approximately 118%, 124% and 95% of the Company's 1995, 1996 and 1997
income from operations, respectively, was attributable to the St. Eustatius
facility; -4%, -12% and 26% of income from operations, respectively, is
attributable to the Point Tupper facility; and -14%, -12% and -21% of income
from operations, respectively, is attributable to the Brownsville facility.
However, due to two acquisitions during 1996 and the resultant application of
purchase accounting, income from operations may not be comparable across
periods. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 18 of the Notes to Consolidated Financial
Statements of Statia for further details regarding revenues and income (loss)
from operations by jurisdiction.
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 oil and marine diesel
oil, aviation fuel, bunker fuel, petroleum diluents, lubricating oils, asphalt,
butane, vegetable oils, latex rubber, paraffins, caustic soda, glycol and
various other petroleum products and chemicals.
At its St. Eustatius and Point Tupper locations, the Company owns seven
and two berthing locations for ships, respectively. The uniquely designed
mooring facilities and piping configurations allow the Company to handle oil
tankers in sizes from relatively small to some of the largest in the world and
to provide services such as simultaneous discharging and loading of vessels and
"across the dock" transfers. The Company owns and charters tugboats and other
marine equipment to assist with docking operations and providing port services.
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) and crude oil. 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 and bulk product sales.
Management has worked closely with residual fuel oil market participants
(including utilities, oil traders and petroleum wholesalers) 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 LPG storage spheres and the
atmospheric distillation unit can be utilized to improve product quality and add
value to the Company's customers' products.
The Company's operation in the Port of Brownsville, Texas on the Gulf
of Mexico provides storage, value added and throughput services for refined
petroleum products and other bulk liquids. This facility is accessible by
waterborne vessel, railroad car and tank truck. Certain areas within the
Company's Brownsville facility may, from time-to-time as necessary, be
designated as Foreign Trade Zones to enable this facility to serve customers'
needs in the emerging markets of Mexico and in the U.S. Rio Grande Valley.
As part of its petroleum product sales, the Company supplies bunker
fuel in the Caribbean and in Nova Scotia, Canada. In the Caribbean, bunker
deliveries take place at St. Eustatius and on the waters off St. Kitts and St.
Maarten. The Company has in the past, and may upon special order, make bunker
deliveries in the U.S. Virgin Islands, Puerto Rico and elsewhere in the
Caribbean. At and around St. Eustatius, 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 deliveries via pipeline at the terminal berths
and by truck in the surrounding Strait of Canso area. Few sales were made,
however, during 1996 and 1997.
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
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customers who wish to dispose of odd lots or to assist customers' sales
activities and occasionally to take advantage of attractive buying
opportunities.
Netherlands Antilles and Canadian environmental laws and regulations
require ship owners, vessel 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 absorbent materials. The St. Eustatius
facility also has three tugs on time charter, and owns a line handling vessel
and 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 STATIA RESPONDER
(formerly known as the M/V MEGAN D. GAMBARELLA), an emergency and spill response
vessel, which is being held for sale. Upon disposition of the M/V STATIA
RESPONDER, 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, 1995, 1996, and 1997, the Company
derived approximately 40%, 32% and 37%, respectively, of its revenues from
storage, throughput and ancillary services, and 60%, 68% and 63%, respectively,
of its revenues from bunker and bulk product sales activities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". Gross margins on storage, throughput and ancillary services are
typically higher than gross margins on bunker and bulk product sales.
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 of
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. Although price is always
an issue, price differentials among competing terminals are frequently 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 and oil price trends.
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. During 1997, approximately two-thirds 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,
blending, mixing, heating, decanting and other processing 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 generally 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.
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COMPETITION AND BUSINESS CONSIDERATIONS
TERMINALING
The independent terminaling industry is fragmented and includes both
large, well-financed companies that own many terminal locations, and smaller
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 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
customarily 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 their 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 and processing with assurance of proper environmental
handling procedures or vapor control to reduce evaporation.
BULK OIL CARGO MOVEMENT
Companies seeking to obtain economic advantage through freight savings
on long hauls will ship crude oil or refined products in either very large crude
carriers ("VLCCs") or ultra large crude carriers ("ULCCs") to a transshipment
point such as one of the Company's terminals, where they will discharge, store
and then load their cargoes onto smaller ships for movement to market. Shippers
may alternatively transport crude oil or refined products as near to the market
as possible in a VLCC or ULCC and then transfer the cargo, while at sea,
directly to one or more smaller ships that will meet the specifications of the
port of discharge, an operation known as "lightering." Transshipment or
lightering is generally required for shipment to the eastern U.S. because only
one port in the eastern coast of the U.S. can accommodate fully laden VLCCs and
ULCCs. These large ships may enter into otherwise restricted ports after their
cargo has been sufficiently reduced to enable entry.
The Company's St. Eustatius facility has the capability to receive the
largest fully laden VLCCs and ULCCs, and its Point Tupper facility can receive
substantially all of such tankers.
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The Company believes that terminaling offers several advantages over
lightering. Terminaling generally provides more flexibility in the scheduling of
deliveries and the ability to deliver to multiple points or customers.
Terminaling is also generally safer and more environmentally sound than
lightering which is often conducted while at sea and may be impacted by vessel
movement or shifting and adverse weather and sea conditions. Lightering in U.S.
and Canadian territorial waters also creates a risk of liability for owners and
shippers of oil that is mitigated by terminaling, since under the U.S. Oil
Pollution Act of 1990 ("OPA 90")and other state and federal legislation,
significant carrier liability is imposed for spills in U.S. territorial waters.
Similar carrier liability provisions exist under Canadian law pursuant to the
CANADIAN SHIPPING ACT. Discharging by lightering generally takes significantly
longer than discharging at a terminal (for example, a fully laden ULCC requires
six to seven days to fully discharge by lightering, but only 24 to 48 hours to
fully discharge at the St. Eustatius or the Point Tupper terminals). In
addition, terminaling offers oil producers the ability to store oil or benefit
from value-added services, and in the Company's case, from its close proximity
to the U.S. However, under current market conditions, lightering has, in most
instances, some cost advantages over terminaling (primarily by allowing the VLCC
or ULCC to cover a larger portion of the total journey). The relative importance
of these advantages depend on the relative charter costs of VLCCs and ULCCs, on
the one hand, and of the smaller tankers used for lightering and shuttling from
terminals to the ultimate destination ports, on the other hand.
BLENDING
Increasingly stringent environmental regulations for refined petroleum
products throughout the world have created additional demand for facilities that
can mix a variety of blendstocks into finished products that meet such
regulations and customers' specific requirements. Providing this service
requires specialized equipment (including tankage, pumps, piping, mixers and jet
nozzles) and expertise. The Company regularly blends components to make finished
gasolines and various bunker fuel grades. Fuel oils are also blended for
utilities and other commercial uses and crude oils are blended for refiners.
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. Raw materials for marine
bunker fuels are purchased in bulk lots of various grades then blended to meet
customer specifications. Each supplier is responsible for quality control and
other merchantability aspects of the fuel 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, primarily in the U.S. and Europe, have
resulted in additional supply and delivery of bunker fuel at locations other
than at U.S. and European ports. As an alternative to in-port supply at either
the vessel cargo loading or discharging location, foreign ports and offshore
suppliers must provide reliability of supply, speed of delivery, consistent
quality and overall safety standards to attract ship operators.
As many vessels have large bunker fuel tanks that allow long distance
travel between refueling stops, the Company competes with bunker delivery
locations around the world. In the Caribbean, significant alternative bunker
locations include various locations in the U.S. in the Gulf of Mexico, Panama,
Puerto Rico, Aruba and Curacao. Alternative bunker ports to the Company's
facility in eastern Canada include Halifax, Rotterdam and various North Sea and
New York harbor locations.
During the 1995, 1996 and 1997 years, 533, 615 and 575 vessels,
respectively, received bunker fuels from the Company in the Caribbean. In
Canada during the 1995, 1996 and 1997 years, 0, 19, and 10 vessels,
respectively, received bunker fuels from the Company.
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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 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 capacity 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.
From mid-1995 to late 1997, all segments of the petroleum products
markets were in backwardation. As a result, the Company believes that
utilization of its facilities has been adversely impacted. Several factors
contributed to the unusually long backwardation period in the crude oil and
petroleum products markets, including anticipation of incremental crude oil
supplies entering the market from Iraq and elsewhere, 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 an industry-wide erosion of leased tank capacity as well as in
the rates paid for that tank capacity. However, due to the recent shift toward
contango, available storage tank capacity has begun to diminish and storage tank
lease rates have begun to rise. The shift toward contango is due in part to the
current worldwide excess supply of crude oil, which has resulted in a sharp
decrease in spot prices for most petroleum products.
BUSINESS--SEASONAL AND OPPORTUNITY STORAGE
During the first quarter 1998, members of the Organization of
Petroleum Exporting Countries ("OPEC") in conjunction with certain non-OPEC
members have attempted to reduce worldwide crude oil production with the intent
of supporting oil market prices for petroleum products. Although the Company
continues to monitor and evaluate developments at OPEC meetings, the Company is
not aware of any matters from such recent meetings that may adversely impact
its current storage business.
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
company, Bolanter Corporation N.V., a subsidiary of Saudi Aramco, which became
effective in early 1995. This storage and throughput contract commits all of the
St. Eustatius facility's current crude oil storage capacity to such customer,
which represents approximately 44% of the terminal's total capacity and 11.6% of
the 1997 revenues of the Company, with an additional 4.2% of the 1997 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.
Statia Terminals Point Tupper, Incorporated ("STPT"), a predecessor
company to Statia Canada, signed a five-year contract with two five-year renewal
options (at the customer's discretion) with a major refiner, Bayway Refining
Company, a subsidiary of Tosco Corporation. This contract, which became
effective in August 1994 and commits approximately 48% of the present tank
capacity at Point Tupper, represented approximately 8.3% of the Company's 1997
revenues, with an additional 2.6% of 1997 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.
Revenues from an owner and operator of vessels which received bunker
fuels at the Company's St. Eustatius Facility accounted for 8.2% of the
Company's total 1997 revenues. No other customer accounted for more than 5% of
the 1997 total revenues of the Company.
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SUPPLIERS
The Company presently has a bunker fuel supply contract at St.
Eustatius with a major state-owned oil producer, which became effective in 1992
and expires on December 31, 1998. This contract provides the Company with the
majority of the fuel oil necessary to support its bunker and bulk product sales
requirements. The Company procures the balance of its fuel oil and other
supplies necessary for its operations from various sources. The Company believes
that suitable alternate sources of supply are readily available from which it
can procure fuel oil should deliveries under its current contract be interrupted
or not be renewed. However, such alternative sources of supply are subject to
changing oil market conditions and prices.
At Point Tupper, the Company is attempting to secure an adequate source
of supply for its bunker fuel sales business to enable significant increases in
volumes for delivery to vessels calling at this facility.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
ST. EUSTATIUS
Until recently, 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 Sint Eustatius Nuisance Ordinance of 1993. The
draft license submitted with the application was subject to public review and
comment. The license was issued to the Company in February 1997 subject to
compliance with certain requirements. The requirements established by the
license set forth certain environmental standards for operation of the
facility, including monitoring of air emissions, limits on and monitoring of
waste-water discharges, establishment of a waste-water treatment system,
standards for above-ground storage tanks and tank pits, reporting and clean-up
of any soil or water pollution and certain site security measures. The Company
has been able to comply with the license requirements to date and further
compliance is not expected to have a material effect on the Company's financial
condition or results of operations. Future improvements to the facility that may
be necessary to comply with new environmental regulations, if any, will be
addressed by the Company as they arise.
On and off -site disposal and storage of hazardous waste materials have
been, and continue to be, executed under the supervision of the St. Eustatius
terminal management and consultants. The St. Eustatius terminal recorded
twenty-three spills over the last three years. Eleven of these spills were less
than one barrel, and six were greater than one barrel, the largest of which was
approximately 20 tons of diesel fuel at sea, and six were the responsibility of
parties other than the Company. 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.
Two government inspections were performed during 1997 with no citations
issued. In connection with the CHPII Acquisition, Phase I and limited Phase II
environmental site assessments were conducted on the St. Eustatius terminal in
June 1996. The scope of the limited Phase II assessment included soil sampling
and testing in certain selected areas. No contaminants were found in the areas
tested 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 the 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
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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. The Company
has all of the requisite environmental permits 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 nine spills over
the last three years, eight marine spills and one land spill, the largest of
which was approximately five barrels of crude oil which spilled into the marine
environment. All spills were 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 Canadian 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, Phase I and limited Phase II environmental site
assessments were conducted at the Point Tupper terminal in June 1996. 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 (with respect to which site clean-up is
underway), an interceptor settling pond (with respect to which only continued
monitoring is planned and required), two pump stations (with respect to which
survey work and development of a remediation plan are underway), and former
leaded gasoline blending station (with respect to which the Company will review
its options in the future). Certain terminal facilities were identified as
requiring upgrading or remediation to meet existing Environmental Laws,
including, among other matters, (i) an oil-water separator to process facility
run-off and ballast water (with respect to which separator is being rebuilt),
(ii) capacity to treat ballast water, as required with respect to which a
(ballast reception line is presently being installed), (iii) upgrading of
containment areas for above-ground storage tanks (with respect to which survey
work was completed during 1997 and civil work was scheduled to commence during
1998), (iv) removal of underground storage tanks (with respect to which work was
completed during 1997), and (v) the presence of friable asbestos that must be
removed from certain areas of the terminal (which is nearly complete). 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 of which U.S. $1.7 million has been spent by Statia Canada
through February 28, 1998 and was pending reimbursement from Praxair.
The Company has also identified additional environmental costs that are
not covered by the Praxair agreement and accrued approximately U.S. $1.2 million
during 1996, very little of which has been spent to date. There can be no
assurance that such accrual is sufficient to cover all such environmental costs.
Many of these costs represent pre-emptive improvements designed to mitigate or
prevent future environmental exposures and improve the overall safety of the
Company's facility. 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 material expenses before Praxair pays amounts for which
Praxair ultimately would be responsible.
BROWNSVILLE
The Brownsville terminal (which is being held for sale) is subject to
U.S. and Texas Environmental Laws and the Company believes the facility 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 off-site has
been executed with the approval of the Texas Natural Resource Conservation
Commission. The Brownsville terminal has had three land and one marine 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, an
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Environmental Site Assessment, including limited soil, surface water and
groundwater sampling and testing, was undertaken at the Brownsville terminal in
June 1996. 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, 1997, excluding contract labor, the Company employed
238 people. Sixty-six employees were located in the U.S., 102 on St. Eustatius,
and 70 at Point Tupper. 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 St. Eustatius, the majority of the hourly workers are represented by
the Windward Islands Federation of Labor ("WIFOL"). Since STNV and WIFOL had not
concluded discussions regarding proposed changes to their collective bargaining
agreement, which expired on May 31, 1997, the terms of such agreement were
extended through May 31, 1998 and the parties have pledged to continue
discussions. There have been separate discussions between STNV management and a
select group of supervisory and office personnel at the Company's St. Eustatius
facility regarding the organization of such personnel into a collective
bargaining group. The most recent of these discussions occurred in January 1997.
While the ultimate outcome of these discussions is presently unknown, the
Company believes that final settlement, if any, will not have any material
impact on its business, financial condition or results of operations.
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 30, 1998. Statia Canada
has experienced two minor work stoppages in the last four years. In April 1994,
employees stopped working for approximately one-half of a day to protest alleged
inadequate 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 eight 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 Industries, Inc. ("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.
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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 is currently completing installation of a monopile with
platform that can handle vessels of up to 40,000 DWT with a draft of up to 46
feet. The monopile with platform will be able to handle two vessels
simultaneously and can discharge or load 12,000 barrels per hour of refined
products. The monopile will replace a floating docking station that previously
performed the same functions. In addition, this facility has 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 which persisted from the first quarter of 1995 to
the fourth quarter of 1997, the average percentage capacity leased at the St.
Eustatius facility for each of the years ended 1995, 1996, and 1997 was 90%,
80%, and 76% 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 its present capacity of 11.3 million barrels for crude oil and petroleum
products.
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. The Company has a five-year contract (subject to
renewal for an additional term of 5 years at the customer's discretion) with a
subsidiary of a major state-owned oil producer, Bolanter Corporation N.V., a
subsidiary of Saudi Aramco, 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 market, at competitive
transportation rates.
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 that 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 this facility 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, 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 feedstock for third parties may create
opportunities for the Company.
The Company owns and operates all of the berthing facilities at St.
Eustatius for which it charges wharfage fees. Vessel owners or charterers may
incur separate charges for facilities use and associated services such as
pilotage, tug assistance, line handling, launch service, emergency and spill
response and ship services.
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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 VLCCs and 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 the 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 40 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 and its subsidiary, which
charge separately for the use of the dock facility as well as associated
services, including pilotage, tug assistance, line handling, launch service,
spill response 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 eight tanks with a combined capacity of 3.6 million barrels
dedicated to multigrade crude oil storage, two tanks with a combined capacity of
0.5 million barrels dedicated to fuel oil storage and 24 tanks with a combined
capacity of 3.3 million barrels dedicated to clean, refined products (including
gasoline, gasoline blend components, diesel and distillates) storage. During
1997, a portion of the clean, refined products storage tanks were converted to
crude oil storage. The facility also has 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 expected to enhance the Company's gasoline and refined
products blending operations. The average capacity leased at the Point Tupper
facility over each of the last three years ended 1995, 1996, and 1997 was 61%,
55%, and 70%, respectively.
In order to comply with Statia Canada's safe handling procedures and
Canadian Environmental Laws, the Company owns two fully equipped spill response
vessels based on Cape Breton Island, Nova Scotia. 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 spill response capabilities. Consequently, vessels calling in
the Strait of Canso are required to pay to PTMS a subscription fee for access to
the services provided by the 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, Bayway Refining Company, a subsidiary of
Tosco Corporation. 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. A portion of the
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remaining tanks at the Point Tupper facility, initially designed for the storage
of gasoline, distillates, aviation fuel and other petroleum products, were
converted during 1997 to crude oil storage and leased on a short-term basis.
Currently, 71% of this facility's tankage is dedicated to crude oil, 23% to
clean, refined products and 6% to residual fuel oil.
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
currently 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. ("STSW") - 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 oils, lube oils, latex, 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 and with a draft up to 42
feet. 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.
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 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 The Virgin Islands against STI 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 (which was 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.
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In November 1996, a former executive officer of the Company brought
suit against the Company and others for breach of contract and related actions.
In December 1997, the Company settled the claim on behalf of itself and others
in consideration for a lump sum payment of $167,000.
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. In January 1996, CBI was acquired (the "Praxair
Acquisition") by Praxair. The statement of income data for each of (i) the three
years ended December 31, 1995, (ii) the period from January 1, 1996 through
November 27, 1996 ("Post-Praxair Acquisition"), (iii) the period from November
27, 1996 through December 31, 1996 ("Post-CHPII Acquisition"), and (iv) the year
ended December 31, 1997 and the balance sheet data as of December 31, 1993,
1994, 1995, 1996 and 1997 have been derived from and are qualified by reference
to, the audited Consolidated Financial Statements of the Company. 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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<TABLE>
<CAPTION>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
PRE-CHPII ACQUISITION POST-CHPII ACQUISITION
---------------------------------------------------- -----------------------
PRE-PRAXAIR ACQUISITION
-------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------- 1/1/96- 11/27/96-
1993 1994 1995 11/27/96(1) (12/31/96(1) 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 112,076 $ 132,666 $ 135,541 $ 140,998 $ 14,956 $ 142,499
Cost of services and products sold 94,850 111,194 117,482 129,498 13,010 123,913
Gross profit 17,226 21,472 18,059 11,500 1,946 18,586
Administrative expenses (2) 4,388 5,339 6,900 8,251 413 6,348
Interest expense (3) 726 3,114 4,478 4,187 1,525 15,963
Net income (loss) available to
common stockholders 10,046 10,944 4,569 (2,682) (95) (3,879)
BALANCE SHEET DATA:
Total assets (4) $ 186,420 $ 197,357 $ 230,283 N/A $ 260,155 $ 244,228
Total debt (5) 60,126 64,450 66,400 N/A 135,000 135,000
Stockholders' equity subject to
reduction (6) -- -- -- N/A 20,000 20,000
Preferred stock 11,212 18,057 18,589 N/A -- --
Total stockholders' equity (7) 95,404 86,965 91,001 N/A 75,405 71,826
OTHER FINANCIAL DATA AND RATIOS:(8)
Adjusted EBIT (9) $ 12,755 $ 17,241 $ 16,602 $ 11,526 $ 1,562 $ 12,864
Depreciation and amortization 6,683 10,680 12,118 9,296 1,011 10,911
Adjusted EBITDA (10) 19,438 27,921 28,720 20,822 2,573 23,774
Gross profit as a % of revenue 15.4% 16.2% 13.3% 8.2% 13.0% 13.0%
Effective tax rates (11) 15.6% 8.6% 6.1% N/M N/M N/M
Capital expenditures (12) 17,147 25,440 37,138 103,001 1,203 $ 5,342
NET CASH FLOW FROM:
Operating activities $ (3,371) $ 25,706 $ 11,476 $ 9,108 2,225 $ 12,452
Investing activities (23,355) (25,353) (36,908) (102,890) (177,033) (12,933)
Financing activities 28,404 (1,679) 26,477 92,998 184,072 (2,700)
RATIOS AND KEY STATISTICS (8):
Adjusted EBITDA/interest
expense (13) 26.77x 8.97x 2.81x 2.13x 1.69x 1.49x
Total debt/Adjusted EBITDA 3.09x 2.31x 2.31x N/A N/A 5.68x
Consolidated fixed charge
coverage ratio (14) -- -- -- -- 1.69x 1.45x
Capacity (in thousands of barrels) 11,590 15,387 20,387 20,387 20,387 20,387
Percentage capacity leased (15) 79% 87% 76% 68% 74% 70%
Throughput (in thousands of
barrels) (16) 37,591 60,630 109,805 81,994 13,223 118,275
Vessel calls (17) 967 1,063 973 922 108 1,030
N/M - not meaningful
N/A - not applicable
</TABLE>
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(1) Prior to January 12, 1996, the 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 Praxair
purchase transaction was reflected in the consolidated financial
statements of the Company as a purchase, effective January 1, 1996. On
November 27, 1996, CHPII, management and others acquired the Company from
Praxair. This purchase transaction is reflected in the consolidated
financial statements effective November 27, 1996 as a purchase. The
application of purchase accounting at each acquisition date 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. Prior to January 1, 1996,
Administrative expenses include $361, $578, and $1,592 of corporate cost
allocated from CBI for the years ended December 31, 1993, 1994 and 1995,
respectively.
(3) Interest expense subsequent to November 27, 1996 reflects the debt
incurred in connection with the CHPII Acquisition at an interest rate of
11-3/4% per annum on the First Mortgage Notes. Prior to November 27, 1996,
Company's average borrowing rate was 4.3%, 6.7%, 6.7% and 5.8% for the
years ended December 31, 1993, 1994 and 1995, and the period ended
November 27, 1996, respectively. Interest expense excludes interest
related to the First Salute Leasing, L.P. ("FSL") obligation of $5,741 and
$5,600 for 1995 and the period ended November 27, 1996, respectively. For
financial statement purposes, FSL related expenses are shown in Cost of
services and products sold.
(4) The change in total assets from December 31, 1995 to December 31, 1996
resulted primarily from the acquisition in 1996 of the FSL assets which
had previously been leased for a total of $88,512 and capital expenditures
during 1996 totaling $15,692, largely offset by the application of
purchase accounting at January 1, 1996 and November 27, 1996 resulting in
a net reduction of $77,344.
(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. Third-party debt was retired as part of the CHPII Acquisition
prior to November 27, 1996. Total debt at December 31, 1996 and 1997
consists entirely of the $135 million First Mortgage Notes.
(6) Certain series of the Parent's preferred stock contain features which may
require the Parent to cause the Company to dividend or otherwise remit to
the Parent the proceeds from 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
generally accepted accounting principles but rather to provide additional
information related to the debt servicing ability of the Company.
(9) Adjusted EBIT is defined as the sum of (i) income before income tax
provision (benefit), (ii) interest expense, (iii) certain non-cash charges
for 1996, and (iv) the portion of the FSL lease payment that represents
interest expense for the periods prior to the November 27, 1996 purchase
transaction. The amount of the FSL related interest expense included in
the calculation of Adjusted EBIT was $5,741 for the year ended December
31, 1995, and $5,600 for the period ended November 27, 1996. For financial
statement purposes, FSL related expenses are shown in Cost of services and
products sold.
Page 16
<PAGE>
(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 FSL lease payments that represents interest expense for the periods
prior to the November 27, 1996 purchase transaction. The amount of the FSL
related interest expense included in Adjusted EBITDA 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 FSL, and capital spending at Point Tupper prior to its acquisition in
October, 1993. Includes purchase of FSL assets in conjunction with the
CHPII Acquisition.
(13) For purposes of this ratio, interest expense includes the FSL lease
payments which are primarily interest.
(14) The Consolidated fixed charge coverage ratio is the ratio of Adjusted
EBITDA to Fixed Charges both computed as set forth in the Indenture
relating to the 11 3/4% First Mortgage Notes.
(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, 1996 and 1997 and for the year ended
December 31, 1995; the Post-Praxair Acquisition income and cash flow 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, and the year ended December 31, 1997. 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, 1995, 1996
and 1997, 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.
Page 17
<PAGE>
OVERVIEW OF OPERATIONS
The Company began operations in 1982 as STNV, a Netherlands Antilles
corporation, operating an oil products terminal located on the island of St.
Eustatius. In 1984, CBI, an industrial gases and contracting services (including
storage tank construction) company, acquired a controlling interest in STNV.
STNV purchased STSW, which has a facility at Brownsville, Texas, in 1986. In
1990, CBI became the sole owner of STNV and STSW. In 1993, the Company acquired
the remaining shares it did not then own of STPT, which was amalgamated into
Statia Canada and owns and operates the facility located at Point Tupper, Nova
Scotia. In January 1996, CBI was acquired by Praxair, which sold certain assets
including those now owned by the Company to focus on its core businesses. In
November 1996, CHPII, certain members of the Company's management and others
acquired from Praxair all of the outstanding capital stock of STNV, STI, their
subsidiaries and certain of their affiliates. Statia, Statia Canada and 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").
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 added 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.
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. Claims related to the 1995 Hurricanes were filed with
insurance carriers and ultimately settled for $12.6 million. Through December
31, 1997, $20.6 million was spent on repairs and improvements of which $6.8
million was capitalized as property and equipment.
The following table sets forth for the periods indicated certain key
statistics for each of the Company's operating locations.
Page 18
<PAGE>
CAPACITY, CAPACITY LEASED, THROUGHPUT AND VESSEL CALLS BY LOCATION
(Capacity and throughput in thousands of barrels)
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1996 1997
------- ------ -------
Netherland Antilles and
the Caribbean
Total capacity 11,334 11,334 11,334
Capacity leased 90% 80% 76%
Throughput 72,420 69,395 62,944
Vessel calls 825 880 792
Canada
Total capacity 7,404 7,404 7,404
Capacity leased 61% 55% 70%
Throughput 34,117 23,350 53,011
Vessel calls 95 62 125
Texas
Total capacity 1,649 1,649 1,649
Capacity leased 46% 52% 31%
Throughput 3,268 2,472 2,320
Vessel calls 53 88 113
All locations
Total capacity 20,387 20,387 20,387
Capacity leased 76% 69% 70%
Throughput 109,805 95,217 118,275
Vessel calls 973 1,030 1,030
Except for inflationary cost increases, cost increases due to
additional storage capacity and costs of providing additional ancillary
services, the Company's operating costs for terminal services 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. Costs for the delivery of bunker fuels and for
the consummation of bulk product sales are impacted by market supply conditions,
types of products sold and volumes delivered.
COMPARISON OF TWELVE MONTHS ENDED DECEMBER 31, 1997 AND 1996
For the year ended December 31, 1997, total revenues were $142.5 million
compared to $156.0 million for the previous year, a decrease of $13.5 million,
or 8.7%. The decrease is primarily due to fewer bunker and bulk product sales
partially offset by higher revenues from storage, throughput and ancillary
services (also referred to as terminaling services). Gross profit, operating
income and net income (loss) for the years ended December 31, 1997 and 1996 are
not comparable due to the effects of purchase accounting applied as a result of
the CHPII Acquisition. Depreciation, amortization and other operating expenses,
which are components of gross profit, changed due to revaluation of various
assets to their fair values at the acquisition date. Changes in components of
the Company's debt and equity accounts resulted in changes to interest expense,
dividends and costs of services and products sold. Operating income was $12.2
million for the twelve months of 1997 versus $4.8 million for the same period in
1996. During the period from January 1, 1996 to November 27, 1996, lease
expenses related to FSL amounting to $5.6
Page 19
<PAGE>
million consisting primarily of interest were included in cost of services and
products sold. This lease was fully satisfied in connection with the CHPII
Acquisition. In addition, the Company incurred a non-recurring, stock based
compensation charge of $3.0 million immediately prior to the CHPII Acquisition
in 1996.
During 1997, improved utilization, higher throughput volumes and higher
fees from ancillary terminal services primarily from crude throughput at Point
Tupper, produced a $3.4 million, or 6.7%, increase in revenues from storage,
throughput and ancillary services. Such revenues were $53.2 million for the year
ended December 31, 1997 compared to $49.8 million for the year ended December
31, 1996. The Canadian facility saw its terminaling services revenues increase
from $9.0 million for the year ended December 31, 1996 to $15.6 million for the
year ended December 31, 1997, an increase of $6.6 million or 73.1%. Incremental
spot storage leases for crude oil from the Company's primary Canadian tenant,
Bayway Refining Company, crude oil and clean petroleum products leases from
several new customers, plus 30 million barrels, or 127%, of increased throughput
from 1996 and additional ancillary services, contributed to the higher revenues
from terminaling services. Certain tankage was converted from clean product
storage to crude oil storage to meet customer demand. At St. Eustatius, lower
crude oil throughput and reductions in the percentage of capacity leased for
refined petroleum products resulted in lower 1997 revenues from storage,
throughput and ancillary services. A customer occupied all of the clean products
storage for three-quarters of the 1996 year while the clean products tankage
went essentially unleased for the 1997 year. The Caribbean facilities'
terminaling services revenues fell $1.9 million, or 5.1%, to $36.0 million for
the year ended December 31, 1997 from $37.9 million the previous year.
Revenues from bunker and bulk product sales fell $16.8 million, or 15.8%,
to $89.3 million for the year ended December 31, 1997 from $106.1 million for
the same period in 1996. The drop is primarily attributable to increased
competition from elsewhere in the Caribbean, the U.S. Gulf Coast and other ports
resulting in lower volumes of bunker fuel delivered and fewer bulk product
sales. At St. Eustatius, the volume of bunker fuels delivered fell 12.9%.
Comparative average selling prices year-to-year were virtually unchanged. In
total dollar terms, direct gross profits (without allocation of operating costs)
from bunker and bulk product sales were down 19.5% from the 1996 results. At
Point Tupper, the Company was unable to expand its bunker sales business started
in 1996 due its inability to find an adequate source of supply.
The Company's facility at Brownsville (which is being held for sale) on
the eastern side of the Texas-Mexico border experienced a reduction in total
revenues due to the loss of storage business for gasoline and diesel fuels and
vegetable oils primarily to competing facilities in the region. STSW's revenues
were $2.4 million for the year ended December 31, 1997, down $0.9 million or
28.3%, from $3.3 million (prior to elimination of intercompany revenues) for the
same period in 1996.
Operating expenses including depreciation and amortization (which are
included in the line item cost of services and products sold) were $40.0 million
for the year ended December 31, 1997 compared to $39.5 million for the same
period in 1996, an increase of $0.5 million, or 1.4%. Increases in depreciation
charges and insurance costs, which were partially offset by lower marine vessel
charter costs, were principally responsible for the change. Due to the Praxair
and CHPII Acquisitions, such comparisons may not however, be possible.
Selling and administrative expenses were $6.3 million for the year ended
December 31, 1997 versus $8.7 million for the 1996 year. For the year ended
December 31, 1996, administrative expenses included $3.0 million of stock based
compensation paid to certain managers of the Company in connection with the
Praxair and CHPII Acquisitions. Exclusive of the non-recurring stock based
compensation, selling and administrative expenses increased from year-to-year
primarily due to higher personnel costs.
Since the CHPII Acquisition in November 1996, the Company's interest
expenses have related to the 11 3/4% First Mortgage Notes. For the year ended
December 31, 1997, interest expenses amounted to $16.0 million. For the year
ended December 31, 1996, interest expenses related to the Notes, third party
debt and the FSL obligation, net of amounts charged to capital projects and the
effects of an interest rate swap, were $11.3 million.
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<PAGE>
The Company invests its excess cash in short-term, highly liquid
financial instruments generally with commercial banks outside of the United
States. Other income and expense for the year ended December 31, 1997 includes
$0.6 million of interest income earned from such investments.
During 1997, a subsidiary of the Company paid approximately $0.3 million
due under its Free Zone and Profit Tax Agreement in the Netherlands Antilles,
the same amount as in the prior year. In addition, the Company and certain of
its Antillean subsidiaries accrued and/or paid amounts related to new tax
arrangements obtained in conjunction with the CHPII Acquisition. In the U.S. and
Canada, certain subsidiaries accrued and/or paid income taxes (including
Canadian large corporation tax) during 1997 calculated under different
assumptions from those used prior to the CHPII Acquisition. Certain subsidiaries
of the Company continue to accumulate tax benefits, net operating loss
carryforwards and investment tax credits which they may use to offset future
taxable income or taxes payable. However, deferred tax assets derived from
benefits related to the Free Zone and Profit Tax Agreement in the Netherlands
Antilles, Canadian net operating loss carryforwards and Canadian investment tax
credits have not been recorded on the balance sheet because the Company may
never utilize them.
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)
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1995 1996 1997
---------------------- --------------------- ------------------
$ % OF TOTAL $ % OF TOTAL $ % OF TOTAL
------- ---------- ------- ---------- ----- ----------
Netherlands
Antilles
and the
Caribbean 121,899 89.9% 139,403 89.4% 122,945 86.3%
Canada 11,143 8.2% 13,462 8.6% 18,892 13.3%
U.S. (1) 8,641 6.4% 9,060 5.8% 8,523 6.0%
Eliminations (1) (6,142) -4.5% (5,971) -3.8% (7,861) -5.6%
------- ----- ------- ----- ------- -----
Total 135,541 100.0% 155,954 100.0% 142,499 100.0%
======= ===== ======= ===== ======= =====
(1) Includes $7,226, $6,089 and $6,418 for the years ended December 31, 1995,
1996 and 1997, respectively, representing 105% of STI's expenses which were
allocated to operating subsidiaries and affiliates.
OPERATING INCOME (LOSS) BY LOCATION
(Dollars in thousands)
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1995 1996 1997
------------------ ------------------- ------------------
$ % OF TOTAL $ % OF TOTAL $ % OF TOTAL
------ --------- ----- ---------- ------ ----------
Netherlands
Antilles
and the
Caribbean 13,037 116.8 6,659 139.3% 10,455 85.4%
Canada (609) -5.5% (823) -17.2% 3,768 30.8%
U.S. (1,269) -11.3% (1,054) -22.1% (1,985) -16.2%
------ ----- ----- ----- ------ -----
Total 11,159 100.0% 4,782 100.0% 12,238 100.0%
====== ===== ===== ===== ====== =====
Page 21
<PAGE>
COMPARISON OF TWELVE MONTHS ENDED DECEMBER 31, 1995 AND 1996
Revenues for the twelve months ended December 31, 1996 aggregated $156.0
million, an increase of $20.5 million, or 15.1%, from the twelve months ended
December 31, 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 due to 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 announcement 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 the same period in 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 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 led 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% of its available capacity for 1996 compared to 46% 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
Page 22
<PAGE>
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.
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 and 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 were 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. The
Company also has certain investment tax credits in the Netherlands Antilles and
Canada, which it may use to offset future taxes payable. However, deferred tax
assets from net operating loss carryforwards and investment tax credits have not
been recorded on the balance sheet because the Company may never utilize them.
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.
The following table sets forth, for the periods indicated, the
percentage of revenues represented by certain items in the consolidated
statements of income of the Company.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
(Dollars in thousands)
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- --------------------
DOLLARS % OF SALES DOLLARS % OF SALES DOLLARS % OF SALES
------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Storage, throughput and
ancillary services $ 54,701 40.36% $ 49,812 31.94% $ 53,165 37.31%
Bunker and bulk product sales 80,840 59.64% 106,142 68.06% 89,334 62.69%
--------- ------ --------- ----- --------- ------
Total revenues 135,541 100.00% 155,954 100.00% 142,499 100.00%
Costs of services and products sold 117,482 86.68% 142,508 91.38% 123,913 86.96%
--------- ------ --------- ----- --------- ------
Gross profit 18,059 13.32% 13,446 8.62% 18,586 13.04%
Administrative expenses 6,900 5.09% 8,664 5.56% 6,348 4.45%
--------- ------ --------- ----- --------- ------
Income from Operations 11,159 8.23% 4,782 3.07% 12,238 8.59%
Other Expense (Income) 298 0.22% 294 0.19% (626) -0.44%
Interest expense 4,478 3.30% 5,712 3.66% 15,963 11.20%
--------- ------ --------- ----- --------- ------
Income (loss) before income
taxes and preferred tax
dividends 6,383 4.71% (1,224) -0.78% (3,099) -2.17%
Provision for income taxes 390 0.29% 761 0.49% 780 0.55%
Preferred stock dividends 1,424 1.05% 792 0.51% -- 0.00%
--------- ------ --------- ----- --------- ------
Net income (loss) $ 4,569 3.37% $ (2,777) -1.78% $ (3,879) -2.72%
========= ====== ========= ===== ========= ======
</TABLE>
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<PAGE>
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 of 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 March 31, 1998.
The Revolving Credit Facility bears interest at the prime rate plus .50% per
annum (9.0% at December 31, 1997) and will expire on November 27, 1999.
The debt service costs associated with the borrowings under the Notes and
the Revolving Credit Facility have significantly increased liquidity
requirements. The Notes accrue interest at 11 3/4% per annum payable
semi-annually on May 15 and November 15. The Notes will mature on November 15,
2003. The Notes are redeemable in whole or in part at the option of the Company
at any time on or after November 15, 2000 at redemption prices set forth in the
Indenture relating to the Notes. The Notes may be redeemed or purchased prior to
November 15, 2000 in certain circumstances as defined in the Indenture. The
Indenture 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
(as defined in the Indenture) 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 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 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 capital
expenditures generally as planned and steadily accumulated cash generated by
operations. During 1997, the Company incurred capital expenditures of $5.3
million, made payments of accrued purchase transaction costs of $7.7 million,
and paid dividends to the Company's parent of $2.7 million funded primarily with
cash flows from operations of $12.5 million.
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.
Page 24
<PAGE>
CAPITAL EXPENDITURES
The Company spent $37.1 million, $15.7 million and $5.3 million during
1995, 1996 and 1997, respectively, on capital expenditures, of which $27.2
million, $1.6 million and $1.0 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 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. During 1997, capital expenditures were made primarily for various
piping and tank enhancements at each location and a new warehouse at St.
Eustatius. Capital expenditures for 1998 are projected at approximately $7.5
million, consisting primarily of maintenance-related expenditures and
replacement of certain equipment that is being held for sale.
Because certain of the Company's computer systems may not adequately
handle changes brought about by the new millennium, the Company has developed a
master plan for dealing with potential Year 2000 issues, including upgrading
existing software applications during 1998. The 1998 capital expenditure budget
includes $0.7 million for such upgrades and certain non-recurring expenses will
be incurred during 1998 for consultants. The cost of addressing the Year 2000
issue is not expected to significantly impact the Company's interaction with
customers and suppliers, or future financial condition or results of operations.
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.
SUMMARY OF CAPITAL EXPENDITURES BY LOCATION
(Dollars in thousands)
PRODUCE SUSTAIN
INCREMENTAL EXISTING
REVENUES OPERATIONS TOTAL % OF TOTAL
------- ------- -------- -----
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 5.9%
------- ------- -------- -----
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 1.6%
------- ------- -------- -----
Total $90,114 $14,090 $104,204 100.0%
======= ======= ======== =====
YEAR ENDED DECEMBER 31, 1997
Netherlands Antilles and
the Caribbean $ 696 $ 2,858 $ 3,554 66.5%
Canada 120 834 954 17.9%
U.S. 125 709 834 15.6%
------- ------- -------- -----
Total $ 941 $ 4,401 $ 5,342 100.0%
======= ======= ======== =====
(1) Excludes repairs and improvements of $8.1 million spent in 1995 related to
the 1995 Hurricanes.
(2) Includes purchase of First Salute Leasing L.P. assets.
(3) Includes $6.8 million of capitalized enhancement related to the 1995
Hurricanes.
Page 25
<PAGE>
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, FSL, 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 FSL 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
In connection with the CHPII Acquisition, the Brownsville facility was
identified as an asset held for sale, the net proceeds of which would be used to
mandatorily redeem certain preferred stock of the Parent as permitted by the
Indenture to the First Mortgage Notes. During 1997, the Company retained a
financial advisor to assist with the marketing and disposition of the
Brownsville facility. During the last half of 1997, prospective buyers were
contacted and asked to submit offers by early March 1998. The Company is
presently evaluating the offers and considering its alternatives, which include
retaining the facility. Despite improved results at this facility during the
first quarter of 1998, there can be no assurances that the Company will not
incur a loss upon disposition or that future cash flow generated from operations
at Brownsville will be sufficient to justify the current carrying value of the
related property and equipment in the financial records. If future cash flows
are not sufficient to justify the recorded value of property and equipment on
the balance sheet, the Company may be required to reduce the carrying value of
this property and equipment (See Note 3 - Property and Equipment - to the
Consolidated Financial Statements of Statia).
In addition, the Company's emergency and spill response vessel, M/V
STATIA RESPONDER (formerly known as 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 from 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 offset
by equity subject to reduction. The actual proceeds from these sales may not
equal these estimates. Should the assets not be sold, or be sold but yield net
proceeds less than $20.0 million, all or a portion of the equity subject to
reduction may be converted to additional paid in capital. 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 or
interest thereon has been allocated to these assets.
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 26
<PAGE>
OPERATING INCOME FROM ON-GOING OPERATIONS
(Dollars in thousands)
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1996 1997
-------- ------- --------
Consolidated income from operations $ 11,159 $ 4,782 $ 12,238
Add: Estimated adjustment for
ongoing expenses (1,145) (1,697) (1,047)
Less: Operating income (loss)
from Statia Terminals
Holdco II, Inc. and Statia
Terminals Southwest, Inc. (1,574) (1,379) (1,980)
-------- ------- --------
Consolidated income from
on-going operations $ 11,588 $ 3,869 $ 13,171
======== ======= ========
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 1995, 1996, and 1997, the capital expenditures of the Company for
compliance with environmental laws and regulations were approximately $3.4
million, $1.3 million, and $1.3 million, respectively. Expenditures during 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 $0.6
million, $0.4 million and $0.2 million in 1995, 1996, and 1997, 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 of which the Company
has incurred $1.7 million through February 28, 1998. To the extent that certain
of these matters exceed their respective estimates, Praxair has agreed to
reimburse the Company for these future expenditures. Additionally, the Company
has identified additional environmental costs at Point Tupper and St. Eustatius
of approximately $1.5 million, none of which has been spent to date. 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. See "Item 1. Business -
Environmental, Health and Safety Matters" for further discussion.
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 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.
Page 27
<PAGE>
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 that 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.
Certain subsidiaries of the Company are in the process of negotiating a
new Free Zone and Profit Tax Agreement with the governments of St. Eustatius and
the Netherlands Antilles to follow certain provisions of new free zone
legislation that expires in 2015. The current agreement expires on December 31,
2000. The Company believes that additional amounts, if any, due under any new
agreement will not have a material adverse impact on the financial position,
results of operations or cash flow of the Company. Should the current agreement
expire without renewal, the Company and its business may be adversely impacted.
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.
Statement of Financial Accounting Standards ("SFAS") No. 130 --
"Reporting Comprehensive Income" and SFAS No. 131 -- "Disclosures about Segments
of an Enterprise and Related Information" were issued by the Financial
Accounting Standards Board ("FASB") in June 1997. These two standards are
effective for the Company's year-end December 31, 1998. SFAS No. 130 establishes
standards for the reporting and display of comprehensive income and its
components. SFAS No. 131 establishes standards for annual and interim
disclosures related to business operating segments. The Company is in the
process of determining the disclosure requirements related to these standards.
The adoption of these standards will have no impact on the consolidated
financial position, results of operations or cash flow of the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK YEAR 2000
NEW ACCOUNTING PRONOUNCEMENTS
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 December 31, 1997 computed 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)
AS OF DECEMBER 31, 1997
-----------------------
CARRYING FAIR
AMOUNT VALUE
------ ------
Petroleum Inventory:
STNV $ 714 $ 691
Statia Canada 533 563
------ ------
$1,247 $1,254
====== ======
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 Facility which varies with
changes in the lender's prime lending rate), management believes the Company's
exposures to foreign currency exchange fluctuation and interest rate fluctuation
are minimal.
Page 28
<PAGE>
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 29
<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 52 Managing Director (Chief Executive Officer)
John K. Castle 57 Managing Director
David B. Pittaway 46 Managing Director
Justin B. Wender 28 Managing Director
James F. Brenner 39 Vice President and Treasurer
Jack R. Pine 58 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 42 Director and President
James G. Cameron 52 Director
Clarence W. Brown 48 Director
James F. Brenner 39 Vice President-Finance
Jack R. Pine 58 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
- - ---- --- --------
James G. Cameron 52 Chairman of the Board and President
Thomas M. Thompson, Jr. 53 Director and Executive Vice President
Robert R. Russo 42 Director and Senior Vice President
Jack R. Pine 58 Senior Vice President, General Counsel
and Secretary
John D. Franklin 41 Vice President - Marine Fuels
James F. Brenner 39 Vice President - Finance and Treasurer
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
Terminal Manager, including the management of Paktank's largest facility in Deer
Park, Texas.
Page 30
<PAGE>
JOHN K. CASTLE. Mr. Castle has been a Managing Director of Statia since
September 1996. 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 Castle Harlan, Inc., Mr. Castle was President and Chief Executive
Officer and a director of Donaldson Lufkin & Jenrette, Inc., one of the nation's
leading investment banking firms. Mr. Castle is a director of Sealed Air
Corporation, Morton's Restaurant Group, Inc., Dearborn Risk Management, Inc.,
Commemorative Brands, Inc., Universal Compression, Inc. and is a member of the
corporation of the Massachusetts Institute of Technology. Mr. Castle is also a
trustee of The New York and Presbyterian Hospitals, Inc., the Whitehead
Institute for Biomedical Research and New York Medical College (for 11 years
serving as Chairman of the Board). Formerly, Mr. Castle was a director of The
Equitable Life Assurance Society of the United States.
DAVID B. PITTAWAY. Mr. Pittaway has been a Managing 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. 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 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 Charlie
Brown's Acquisition Corporation 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.
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 (inactive status).
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 in May 1996 as Senior Vice President General Counsel and Secretary.
Mr. Pine also serves as a director of Petroterminal de Panama. 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.
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
terminaling 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.
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.
Page 31
<PAGE>
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.
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.
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 former subsidiary, Belcher Oil Co.
Inc. His duties with Coastal included division management of the company's
marine sales division; Manager, National Accounts, Terminal Manager at Coastal's
New Orleans facility. He has extensive experience in marketing, terminal
operations, and technical sales support.
DIRECTORS OF THE PARENT
The shareholders of the Parent may elect Directors at any General Meeting
of the Board of Directors to serve until their respective successors are elected
and qualified. The Board of Directors may create Committees of the Board of
Directors and each such Committee shall have the authority and power as may from
time to time be delegated by the Board of Directors. The following table sets
forth certain information with respect to the directors of the Parent and the
Committees on which they serve.
<TABLE>
<CAPTION>
YEAR
NAME AGE ELECTED COMMITTEES
- - ---- --- ------- ----------
<S> <C> <C> <C>
John K. Castle (Chairman) 57 1997 Compensation (Chairman), Executive
James G. Cameron 52 1997 Executive (Chairman)
Admiral James L. Holloway, III 74 1997 Audit (Chairman)
Francis Jungers 70 1997 Compensation
David B. Pittaway 46 1996 Audit, Compensation, Executive
Jonathan R. Spicehandler 49 1997 Audit
Justin B. Wender 28 1996 Audit
Ernest "Jackie" Voges 68 1997
</TABLE>
The following sets forth certain information with respect to the outside
directors of the Parent.
ADMIRAL JAMES L. HOLLOWAY III, U.S.N. (RET.). Adm. Holloway is a
retired Naval Officer who served as Chief of Naval Operations and a member of
the Joint Chiefs of Staff from 1974 to 1978. After his retirement, from 1981 to
1989, he was President of the Council of American Flag Ship Operators, a
national trade association representing the owners and operators of U.S. flag
vessels in foreign trade. From 1985 to 1989 he was a member of the
President's Blue Ribbon Commission on Merchant Marine and Defense, and the
Commission for a Long Term Integrated Defense Strategy. In 1986, Admiral
Holloway was appointed Special Envoy of the Vice President to the Middle East
and from 1990 to 1992 he served in a presidential appointment as U.S.
Representative to the South Pacific Commission. Admiral Holloway is currently
Chairman of the Naval Historical Foundation, Chairman of the Naval Academy
Foundation, a Governor of St. Johns College and President of the Board of
Trustees of Saint James School.
Page 32
<PAGE>
FRANCIS JUNGERS. Mr. Jungers is a private investor and business
consultant. From 1973 to 1978, he was Chairman and Chief Executive Officer of
Arabian American Oil Company which is the largest producer of crude and
liquefied gas in the world and holds the concession for all of Saudi Arabia's
oil production. Mr. Jungers is a director of Georgia Pacific Corporation, Thermo
Ecotek Corporation, Thermo Electron Corporation, ThermoQuest Corporation,
Donaldson, Lufkin & Jenrette, Inc., The AES Corporation and ESCO Corporation.
Mr. Jungers is also Chairman of the Advisory Board of Common Sense Partners,
L.P., a hedge fund. Mr. Jungers is Chairman of the College of Engineering
Development Committee and member of the Visiting Committee, The University of
Washington. Mr. Jungers is Advisory Trustee of the Board of Trustees, The
American University in Cairo.
JONATHAN R. SPICEHANDLER, M.D. Since 1993, Dr. Spicehandler has been
President of Schering-Plough Research Institute, the pharmaceutical research arm
of Schering-Plough Corporation, a research based company engaged in the
discovery, development, manufacturing and marketing of pharmaceutical and health
care products worldwide. Dr. Spicehandler is a diplomate of the American Board
of Internal Medicine, a member of the American College of Physicians and
American Society for Clinical Pharmacology and Therapeutics. He was also elected
to the Alpha Omega Alpha Honor Society. He serves as president emeritus, board
of managers, of the New Jersey division of Cancer Care, Inc. He is a member of
the boards of trustees of the Kessler Institute for Rehabilitation, Inc. and
Montclair State University. He also serves on the board of directors of the
National Foundation of Infectious Diseases and on the Science Policy Board of
the Liberty Science Center. He is a member of the board of associates of the
Whitehead Institute for Biomedical Research and a commissioner of the New Jersey
Commission of Science and Technology.
ERNEST "JACKIE" VOGES. From 1982 to 1996, Mr. Voges was General
Managing Director of the Curacao Ports Authority. From 1977 to 1982, Mr. Voges
held various positions including Dean of the Law School of the University of the
Netherlands Antilles, permanent lecturer for the history of law and a member of
the International Advisory Council of Florida International University. From
1973 to 1977, he served in various positions within the government for Land
Territory of the Netherlands Antilles including Vice Prime Minister, Minister of
Justice, Minister of Transport and Communications and from 1967 to 1969 he was
Minister of Public Health. From 1959 to 1967, he was a member of the Island
Council of the Island Territory of Curacao and from 1966 to 1967 he was
Commissioner of the Island Territory of Curacao. Mr. Voges is Managing Director
of Leeward News Holding N.V., Chairman of the Foundation Stichting
Monumentenzorg Curacao, Supervisory Director of Stadsherstel Corporation, N.V.,
Chairman of the Foundation Stichting JEKA, Supervisory Director of Smit
International Corporation, N.V., and Managing Director of Voges Inc. N.V.
Corporation. In 1979, he was Knighted in the Order of the Dutch Lion.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
paid or accrued for the three years ended December 31, 1997 for the Chief
Executive Officer and each of the four most highly compensated executive
officers of the Company.
Page 33
<PAGE>
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
------------------------------------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL --------------------- STOCK AWARDS OPTIONS SARS COMPENSATIONS
POSITION(1) YEAR SALARY BONUS(2) $(3)(4) #SHARES(5)(6) $(7)
- - ------------------ ---- ------ -------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
James G. Cameron 1997 $248,655 $97,050 $ -- 630 $61,141
1996 215,000 -- 550,572 -- 60,304
1995 200,000 20,000 78,594 13,000 77,125
Thomas M. Thompson, Jr. 1997 208,434 79,000 -- 500 9,744
1996 169,260 -- 215,379 -- 8,696
1995 162,200 20,150 35,366 5,200 15,205
Robert R. Russo 1997 178,883 68,400 -- 430 9,156
1996 150,936 -- 183,570 -- 9,019
1995 143,749 17,500 35,366 5,200 14,572
Jack R. Pine 1997 129,450 51,550 -- 190 8,907
1996 115,190 11,500 200,862 -- 450
1995 111,080 21,144 -- -- 2,546
John D. Franklin 1997 128,653 49,250 -- 190 6,243
1996 94,967 4,500 21,730 -- 4,241
1995 88,441 9,056 -- -- 307
</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 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 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). 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) 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
Page 34
<PAGE>
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 the Parent secured by restricted units of preferred and
common stock of the Parent are excluded. (See Restricted Stock Awards
below.)
(5) For 1995, 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) For 1997, represents options to purchase Parent common stock awarded
under the 1997 Stock Option Plan. The fair value at the date of grant,
November 21, 1997, was determined by the Compensation Committee of the
Parent's Board of Directors to be $0.10 per share. The award agreement
specifies that after two years of employment after the date of grant and
after each of the following three years, 25% of the option shall become
exercisable unless a Liquidation Event occurs (as defined in the award
agreement), at which time the option shall become fully exercisable. The
option shall terminate upon termination of employment except in the event
of death, permanent disability or Company termination other than for
substantial cause. Each option shall expire ten years after the date of
grant.
(7) The compensation reported for 1997 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, $7,760, and $2,592 for Mr. Cameron; $0,
$7,382 and $2,362 for Mr. Thompson; $0, $8,381 and $775 for Mr. Russo;
$0, $8,187 and $720 for Mr. Pine; and $0, $6,080 and $163 for Mr.
Franklin.
STOCK OPTION PLAN
During 1997, the shareholders of the Parent approved the 1997 Stock
Option Plan (the "Plan") which allows up to 7,235.294 shares of common stock,
par value $0.10 per share, of the Parent to be delivered pursuant to incentive
stock option award agreements or non-qualified stock option award agreements.
The Plan is administered by the Compensation Committee of the Parent's Board of
Directors. Key employees, directors and consultants of the Parent and its
subsidiaries are eligible to become participants and receive awards of stock
options under the Plan. The Plan provides that for any changes in the capital of
the Parent, a corresponding adjustment, as determined to be appropriate by the
Compensation Committee, be made to the options awarded under the Plan.
RESTRICTED STOCK AWARDS
Upon the Company's divestiture on November 27, 1996, 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;
Page 35
<PAGE>
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 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. 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 for Mr. Cameron. 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 or 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 March 31, 1998 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 36
<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. In January 1997 and
November 1997, the Company declared and subsequently paid on each declaration
date 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 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 four outside directors of the Board of Directors of Parent have
entered into consulting agreements with Statia for advisory and consulting
services related to investment and strategic planning, financial and other
matters. In consideration of services provided to Statia, each director receives
a fee of $6,250 per quarter plus reimbursement of out-of-pocket expenses. The
Parent pays each outside director $1,000 per meeting of the Board of Directors
attended.
Page 37
<PAGE>
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 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 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
Page 38
<PAGE>
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 39
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<S> <C>
(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
1997 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, 1996 and 1997
Consolidated Statements of Income and Retained
Earnings for the year ended December 31,
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
for the year ended December 31, 1997
Consolidated Statements of Cash Flows
for the year ended December 31, 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
for the year ended December 31, 1997
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, 1996 and 1997
Consolidated Statements of Income and Retained
Earnings for the year ended December 31,
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
for the year December 31, 1997
Consolidated Statements of Cash Flows
for the year ended December 31, 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
for the year ended December 31, 1997
Notes to the Consolidated Financial Statements
Page 40
<PAGE>
STATIA TERMINALS N.V.
Report of Independent Public Accountants
Consolidated Balance Sheets
as of December 31, 1996 and 1997
Consolidated Statements of Income and Retained
Earnings for the year ended December 31,
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
for the year ended December 31, 1997
Consolidated Statements of Cash Flows
for the year ended December 31, 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
for the year ended December 31, 1997
Notes to the Consolidated Financial Statements
2. Financial Statement Schedules
See Notes 12 and 18 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 through E - 3
following the Signature Pages.
(b.) Reports on Form 8-K
None.
</TABLE>
Page 41
<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: March 31, 1998 (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
1997 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 Managing Director
- - ------------------------ (Principal Executive Officer) March 31, 1998
James G. Cameron
/S/ JOHN K. CASTLE Managing Director
- - ------------------------ March 31, 1998
John K. Castle
/S/ DAVID B. PITTAWAY Managing Director
- - ------------------------ March 31, 1998
David B. Pittaway
/S/ JUSTIN B. WENDER Managing Director
- - ------------------------ March 31, 1998
Justin B. Wender
/S/ JAMES F. BRENNER Vice President and
- - ------------------------ Treasurer (Principal March 31, 1998
James F. Brenner 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: March 31, 1998 (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
1997 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 Director and President
- - ------------------------ (Principal Executive Officer) March 31, 1998
Paul R. Crissman
/S/ CLARENCE W. BROWN Director
- - ------------------------ March 31, 1998
Clarence W. Brown
/S/ JAMES G. CAMERON Director
- - ------------------------ March 31, 1998
James G. Cameron
/S/ JAMES F. BRENNER Vice President-Finance
- - ------------------------ (Principal Financial and March 31, 1998
James F. Brenner Accounting Officer)
Page E-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Managing Directors of
Statia Terminals International N.V. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Statia Terminals
International N.V. (a Netherlands Antilles corporation) and Subsidiaries as of
December 31, 1996 and 1997, and the related consolidated statements of income
(loss) and retained earnings (deficit) and cash flows for the period from
Inception through December 31, 1996 and for the year ended December 31, 1997. We
have also audited the related combined statements of income (loss) and retained
earnings (deficit) and cash flows of Statia Terminals, Inc. and subsidiaries and
affiliates (the "Predecessor Company") for the year ended December 31, 1995 and
from January 1, 1996 through November 27, 1996. 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 1997, and the
results of the Predecessor and its cash flows for the period from Inception
through December 31, 1996 and for the year ended December 31, 1997, and the
results of its operations and its cash flows for the year ended December 31,
1995 and from January 1, 1996 through November 27, 1996, in conformity with
generally accepted accounting principles.
West Palm Beach, Florida,
February 20, 1998.
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31,
---------------------------
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,264 $ 6,083
Accounts receivable-
Trade, less allowance for doubtful accounts of
$830 in 1997 and $769 in 1996 12,165 10,092
Other 3,096 2,347
Inventory, net 4,969 1,247
Prepaid expenses 1,036 269
Assets held for sale 20,000 20,000
---------- ----------
Total current assets 50,530 40,038
PROPERTY AND EQUIPMENT, net 203,187 198,529
OTHER NONCURRENT ASSETS, net 6,438 5,661
---------- ----------
Total assets $ 260,155 $ 244,228
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,926 $ 7,730
Accrued expenses 16,824 9,614
Payable to affiliates - 58
---------- ----------
Total current liabilities 26,750 17,402
LONG-TERM DEBT 135,000 135,000
---------- ----------
Total liabilities 161,750 152,402
---------- ----------
STOCKHOLDERS' EQUITY SUBJECT TO REDUCTION 20,000 20,000
STOCKHOLDERS' EQUITY:
Common stock 6 6
Additional paid-in capital 78,494 78,494
Accumulated deficit (95) (6,674)
---------- ----------
Total stockholders' equity 78,405 71,826
---------- ----------
Total liabilities and stockholders' equity $ 260,155 $ 244,228
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
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).
PREDECESSOR COMPANY THE COMPANY
---------------------------------------- -------------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
----------------- ----------------- PERIOD FROM
JANUARY 1, 1996 INCEPTION
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1995 NOVEMBER 27, 1996 DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUES $ 135,541 $ 140,998 $ 14,956 $ 142,499
COST OF SERVICES AND PRODUCTS SOLD 117,482 129,498 13,010 123,913
---------- ----------- --------- ----------
Gross profit 18,059 11,500 1,946 18,586
ADMINISTRATIVE EXPENSES 6,900 8,251 413 6,348
---------- ----------- --------- ----------
Income from operations 11,159 3,249 1,533 12,238
INTEREST EXPENSE 4,478 4,187 1,525 15,963
OTHER INCOME (EXPENSE) (298) (323) 29 626
---------- ----------- --------- ----------
Income (loss) before
provision for income taxes 6,383 (1,261) 37 (3,099)
PROVISION FOR INCOME TAXES 390 629 132 780
---------- ----------- --------- ----------
Income (loss) before preferred
stock dividends 5,993 (1,890) (95) (3,879)
PREFERRED STOCK DIVIDENDS 1,424 792 - -
---------- ----------- --------- ------
Net income (loss) available
to common stockholders 4,569 (2,682) (95) (3,879)
RETAINED EARNINGS (DEFICIT), beginning of period 30,441 - - (95)
COMMON STOCK DIVIDENDS - (25,000) - (2,700)
---------- ----------- --------- ----------
RETAINED EARNINGS (DEFICIT), end of period $ 35,010 $ (27,682) $ (95) $ (6,674)
========== =========== ========= ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
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).
PREDECESSOR COMPANY THE COMPANY
-------------------------------------- -------------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
-------------------------------------- PERIOD FROM
JANUARY 1, 1996 INCEPTION
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1995 NOVEMBER 27, 1996 DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) before
preferred stock dividends $ 5,993 $ (1,890) $ (95) $ (3,879)
Adjustments to reconcile net income
(loss) to net cash provided
by operating activities-
Depreciation, amortization and
non-cash charges 12,118 12,296 1,011 10,911
Provision for bad debts 339 406 - 11
Loss (gain) on disposition of
property and equipment 59 (68) - (109)
(Increase) decrease in accounts
receivable - trade (3,309) (1,585) (1,311) 2,060
(Increase) decrease in other receivables (2,676) 3,237 (1,530) 747
(Increase) decrease in inventory (3,094) (5,033) 1,950 3,722
(Increase) decrease in prepaid expense (92) (64) - 769
(Increase) decrease in other
noncurrent assets 1,675 319 (801) (134)
Increase (decrease) in accounts payable (678) 3,577 277 (2,195)
Increase (decrease) in accrued expenses (115) (811) 2,724 491
Increase (decrease) in payable to affiliates 1,256 (1,276) - 58
---------- ----------- ---------- ----------
Net cash provided by
operating activities 11,476 9,108 2,225 12,452
---------- ----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 230 111 - 112
Purchase of property and equipment (37,138) (14,490) (1,203) (5,342)
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 (7,703)
---------- ----------- ---------- ----------
Net cash used in investing activities (36,908) (102,890) (177,033) (12,933)
---------- ----------- ---------- ----------
</TABLE>
(CONTINUED)
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(DOLLARS IN THOUSANDS)
THE FINANCIAL STATEMENTS OF THE COMPANY AND THE PREDECESSOR COMPANY ARE NOT
COMPARABLE IN CERTAIN RESPECTS (SEE NOTE 1).
PREDECESSOR COMPANY THE COMPANY
---------------------------------------- ---------------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
----------------- ----------------- PERIOD FROM
JANUARY 1, 1996 INCEPTION
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1995 NOVEMBER 27, 1996 DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in advances from Parent $ 25,898 $ 203,767 $ - $ -
Retirement of preferred stock - (18,577) - -
Bank borrowings 5,532 66,000 - -
Bank repayments (3,600) (132,400) - -
Dividends paid to Parent (1,353) (25,792) - (2,700)
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 26,477 92,998 184,072 (2,700)
---------- ----------- ---------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,045 (784) 9,264 (3,181)
CASH AND CASH EQUIVALENTS,
balance at beginning 424 1,469 - 9,264
---------- ----------- ---------- ---------
CASH AND CASH EQUIVALENTS,
balance at end $ 1,469 $ 685 $ 9,264 $ 6,083
========== =========== ========== =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The consolidated balance sheets as of December 31, 1996 and 1997, and the
consolidated statements of income (loss) and retained earnings (deficit) and
cash flows for the period from Inception through December 31, 1996 and for the
year ended December 31, 1997, 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 statements of income (loss) and retained
earnings (deficit) and cash flows for the year ended December 31, 1995 and from
January 1, 1996 through November 27, 1996 ("the period ended November 27,
1996"), 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.
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.
-1-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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 ("Inception") 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
purchase price was 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 between periods of the financial
position and results of operations of the Company and the Predecessor Company.
Accordingly, the historical financial information provided herein for the period
ended November 27, 1996 will not be comparable to other periods in the
accompanying financial statements.
2. NATURE OF 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 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
-2-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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 Predecessor Company's revenues from a state-owned oil producer and a refiner
constituted approximately 6.4% and 4.8% of the total 1995 revenues and
approximately 7.9% and 4.7%, of the total revenues for the period ended November
27, 1996, respectively. In addition, approximately 10.1% of the Predecessor
Company's revenue for each of the periods ended December 31, 1995, and November
27, 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. The Company's revenues from a state-owned oil producer
and a refiner constituted approximately 9.1% and 4.0% of the Company's total
revenues for the period November 27, 1996 to December 31, 1996, and 11.6% and
8.3% for the year ended December 31, 1997, respectively. In addition, 10.2% and
6.8% of the Company's revenues for the period ended December 31, 1996 and for
the year ended December 31, 1997, respectively 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. Revenues from an owner
operator of vessels which received bunkers at the Company's facilities accounted
for 8.2% of the Company's 1997 total revenues. No other customer accounted for
more than 5% of the Predecessor Company's or the Company's 1995, 1996 or 1997
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.
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
-3-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
Standards ("SFAS") No. 52, "Foreign Currency Translation." Substantially all of
the Company's and its Predecessor's transactions are denominated in U.S.
dollars.
STOCK BASED COMPENSATION PLANS
SFAS No. 123, "ACCOUNTING FOR STOCK BASED COMPENSATION", allows for either the
adoption of a fair value method for accounting for stock-based compensation
plans or for the continuation of accounting under Accounting Principles Board
("APB") Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES", and related
interpretations with supplemental disclosures.
The Company has chosen to account for its stock options using the intrinsic
value based method prescribed in APB Opinion No. 25 and, accordingly, does not
recognize compensation expense for stock option grants made at an exercise price
equal to or in excess of the fair market value of the stock at the date of
grant. The adoption of SFAS No. 123 does not impact the Company's results of
operations, financial position or cash flows.
CASH AND CASH EQUIVALENTS
THE PREDECESSOR COMPANY -- The Predecessor Company'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. The Company believes the historical carrying value of the Notes is
reasonable since the Notes have been priced above par since issuance. 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.
-4-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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 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 of the Predecessor Company included goodwill, organizational
costs and preoperating expenditures. The excess of cost over the fair value of
tangible net assets acquired had been capitalized as goodwill and was being
amortized on a straight-line basis over the periods of expected benefit, which
do not exceed 40 years. Organizational costs and preoperating expenditures were
amortized evenly over five-year periods. Amortization expense was $1,540 in 1995
and $956 for the period ended November 27, 1996.
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 and
$911 for the period from inception to December 31, 1996 and for the year ended
December 31, 1997.
-5-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
ACCRUED EXPENSES
Accrued expenses as of December 31, 1996, consist primarily of purchase price
adjustments related to the Acquisition, environmental reserves and interest in
the amounts of $5,146, $1,500 and $1,521, respectively. Accrued expenses as of
December 31, 1997 consist primarily of interest, environmental expenses and
personnel-related expenses of $2,027, $1,500 and $997, respectively.
INCOME TAXES
The Company and the Predecessor Company 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.
OTHER INCOME (EXPENSE)
Other income (expense) includes interest income and non-operating items.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 130 -- "Reporting
Comprehensive Income" and SFAS No. 131 -- "Disclosures about Segments of an
Enterprise and Related Information" were issued by the Financial Accounting
Standards Board ("FASB") in June 1997. These standards are effective for the
Company's year-end December 31, 1998. SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components. SFAS No. 131
establishes standards for annual and interim disclosures related to business
operating segments. The Company is in the process of determining the disclosure
requirements to these standards. The adoption of these standards will have no
impact on the consolidated financial position, results of operations or cash
flow of the Company.
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").
-6-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
The allocation of the Merger Value to the assets and liabilities acquired, based
on the estimated fair value assigned, was 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
Company's books effective January 1, 1996. This debt was eliminated in
connection with 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, the
purchase price of $217,146 was allocated to the assets and liabilities of the
Company based on their respective fair values as of the date of the Acquisition.
No adjustments were made to the allocated fair values during 1997.
The allocation of the total purchase price to the assets and liabilities
acquired was as follows:
Purchase Price-
Cash paid $ 174,146
Stock issued 43,000
Commissions, fees and expenses 16,000
-----------
Total purchase price $ 233,146
===========
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
===========
-7-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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, Statia Terminals Southwest, Inc. (the
"Brownsville Terminal") and the M/V STATIA RESPONDER (formerly known as 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.
YEARS ENDED
DECEMBER 31,
------------------------
1995 1996
-------- --------
Revenues $133,156 $153,768
Net income (loss) 5,008 (3,548)
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. The claims process related
to the hurricane damages was settled in the third quarter of 1996 for $12,615.
Through December 31, 1997, the Company expended $20,621 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:
USEFUL LIFE
1996 1997 IN YEARS
----------- ----------- -----------
Land $ 1,314 $ 2,622 -
Land improvements 8,134 6,633 5 - 20
Buildings and improvements 2,360 2,178 20 - 40
Plant machinery and terminals 189,371 195,935 4 - 40
Field and office equipment 2,931 1,677 3 - 15
----------- -----------
204,110 209,045
Less- Accumulated depreciation 923 (10,516)
----------- -----------
Property and equipment, net $ 203,187 $ 198,529
=========== ===========
-8-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
8. ASSETS HELD FOR SALE
Assets held for sale represent the value allocated in connection with purchase
accounting (see Note 5) and represents management's current estimate of the
proceeds from the anticipated sale of the Brownsville Terminal and the M/V
STATIA RESPONDER (formerly known as 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 issue a dividend or otherwise remit
the net proceeds of these assets. Accordingly, $20,000 of the Company's common
stockholders' equity has been classified outside the equity section as
stockholders' equity subject to reduction.
9. DEBT
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. 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%
-9-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
Notwithstanding the foregoing, at any time on or prior to November 15, 1999, the
Issuers may redeem up to 35% of the 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% of the 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 18). The Notes are also subject to certain financial covenants as set forth
in the Indenture, the most restrictive of which, include, but are not limited
to: (i) a consolidated fixed charge ratio of 2:1, which, if met, will permit the
Company to make additional borrowings above the Company's revolving credit
facility discussed below, (ii) other limitations on indebtedness and (iii)
restrictions on certain payments. In addition, 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 and certain management fees as discussed in Note 14 below. 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, 1997, the Company had no principal payments maturing within
the next four 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% (9.0% at
December 31, 1997). 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, 1997, the Company has $8,058 available for
borrowing under the Credit Facility as limited by the borrowing base computation
and had no outstanding balance.
-10-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
Cash payments for interest to third parties were $4,494 and $4,455 for the year
ended December 31, 1995 and the period ended November 27, 1996, respectively.
Cash payments for interest for the period ended December 31, 1996 and the year
ended December 31, 1997 were $0 and $15,334, respectively.
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 $13,760 in 1995, $13,854 for the period ended November 27,
1996, and $491 and $3,763 for the periods ended December 31, 1996 and the year
ended December 31, 1997, respectively. Future rental commitments during the
years ending 1998 through 2002 are $2,926, $2,647, $2,599, $2,600 and $2,635,
respectively.
11. SHAREHOLDERS' EQUITY
THE PREDECESSOR COMPANY
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 were paid quarterly at a rate of .25% above the
preferred shareholder's borrowing rate as established by the shareholder's
lending institution. During 1995 and the period ended November 27, 1996, Statia
Terminals Point Tupper, Inc. paid dividends of $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 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.
-11-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
12. INCOME TAXES
In Canada and the Netherlands Antilles, estimated current year taxes payable are
paid monthly. Total cash payments for income taxes were $694 for the year ended
December 31, 1995, $823 for the period ended November 27, 1996, $23 and $513 for
the periods ended December 31, 1996 and the year ended December 31, 1997,
respectively.
The sources of income (loss) before the provision for income taxes and preferred
stock dividends are:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY THE COMPANY
------------------------------- --------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
-------------------------------
JANUARY 1, PERIOD FROM
1996 INCEPTION
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, NOVEMBER 27, DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. $ (1,387) $ 134 $ (298) $ (1,823)
Non-U.S. 7,770 (1,395) 335 (1,276)
-------- --------- ------ --------
$ 6,383 $ (1,261) $ 37 $ (3,099)
======== ========= ====== ========
</TABLE>
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY THE COMPANY
------------------------------- --------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
-------------------------------
JANUARY 1, PERIOD FROM ------------
1996 INCEPTION
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, NOVEMBER 27, DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. $ 818 $ 215 $ - $ (128)
State (19) (25) - (42)
Non-U.S. (775) (487) (132) (610)
------ -------- ------ --------
24 (297) (132) (780)
------ ------- ------ --------
Deferred income taxes:
U.S. (52) (332) - -
Non-U.S. (362) - - -
------ ------- ------ --------
(414) (332) - -
------ ------- ------ --------
$ (390) $ (629) $ (132) $ (780)
====== ======= ====== ========
</TABLE>
-12-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
The components of the deferred income tax provision above are:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
------------ ------------
JANUARY 1,
1996
YEAR ENDED THROUGH
DECEMBER 31, NOVEMBER 27,
1995 1996
------------ ------------
<S> <C> <C>
Depreciation expense $ (515) $ (332)
Employee and retiree
benefits 58 -
Other, net 43 -
------ -------
$ (414) $ (332)
====== =======
</TABLE>
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 THE COMPANY
------------------------------- --------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
------------ ------------
JANUARY 1, PERIOD FROM
1996 INCEPTION
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, NOVEMBER 27, DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income (loss) before income
taxes and preferred
stock dividends $ 6,383 $ (1,261) $ 37 $ (3,099)
======== ========= ====== ========
Tax provision at U.S.
statutory rate $ (2,234) $ 440 $ (13) 1,085
State income taxes (19) - - (14)
Non-U.S. tax rate
differential and losses
without tax benefit 1,909 (1,069) (119) (1,723)
Other, net (46) - - (128)
-------- --------- ------ --------
Provision for
income taxes $ (390) $ (629) $ (132) $ (780)
======== ========= ====== ========
</TABLE>
-13-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
The Company's effective tax rates for the periods ended November 27, 1996,
December 31, 1996 and the year ended December 31, 1997, 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.
The principal temporary differences included in deferred income taxes reported
on the balance sheets is:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY THE COMPANY
------------------------------- ---------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
------------- ------------
JANUARY 1, PERIOD FROM
1996 INCEPTION
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, NOVEMBER 27, DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Depreciation expense $ 1,508 $ 1,169 $ 1,169 $ 1,552
Acquisition of partnership
shares and other activity (660) (653) - -
Employee and retiree
benefits (44) (44) - -
Net operating loss-and ITC Credit
carryforwards 8,521 3,435 5,685 5,663
Valuation allowance (8,521) (3,435) (6,825) (7,215)
Other, net (22) (29) (29) -
------- -------- -------- --------
$ 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's Canadian subsidiaries are subject to large corporation tax based
on 0.225% of the subsidiaries' total equity and have incurred certain costs
which are accounted for differently for financial reporting and Canadian
taxation purposes.
-14-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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 loss
carryforwards 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 $7,967, $7,482 and $6,792 as of
December 31, 1995, 1996 and 1997, respectively, and expire in varying amounts
after seven year periods through 2004. The Company has generated approximately
$6.3 million and $6.2 million of investment tax credits ("ITC") as of December
31, 1997 and 1996, that may be carried forward through 2007.
On June 1, 1989, the governments of the Netherlands Antilles and St. Eustatius
approved a Free Zone and Profit Tax 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, or a
minimum payment of 500,000 Netherlands Antilles guilders (U.S. $281). 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, 1996 and 1997, the amounts available to offset
future tax liability under the Agreement were approximately $1,308 and $1,412,
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 up to 45%. Approximately $89 and $67 of profit tax is
included in the Netherlands Antilles tax provision for the period ended December
31, 1996 and the year ended December 31, 1997, respectively.
The Company's net deferred tax asset in the amount of $7,215 primarily relates
to depreciation and net operating loss and ITC 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. EMPLOYEE STOCK OPTIONS
During 1997, the shareholders of the Parent approved the 1997 Stock Option Plan
(the "Plan") which allows up to 7,235.294 shares of common stock of the Parent
to be delivered pursuant to incentive stock option award agreements or
nonqualified stock option award
-15-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
agreements. During 1997, 2,895 shares of common stock of the Parent were granted
to certain employees of the Company at an exercise price of $.10, which equals
the fair market value of the Parent's common stock.
The award agreement specifies that after two years of employment since the date
of grant and after each of the following three years, 25% of the option shall
become exercisable unless a Liquidation Event occurs (as defined in the award
agreement) at which time the option shall become fully exercisable. The option
shall terminate upon termination of employment, except in the event of death,
permanent disability or Company termination other than for substantial cause.
Each option shall expire ten years after the date of grant.
The Company applies APB Opinion No. 25 and related interpretations in accounting
for options granted to employees and directors. Accordingly, no compensation
costs have been recognized related to such grants.
The fair value of each option granted is estimated on the date of grant using
the minimum value method using the following assumptions: Risk-free interest
rate - 6.30%, dividend yield - 0%, and expected life of the option - 7 years.
The minimum value method does not utilize volatility in the calculation of fair
value. The effect of this calculation resulted in an immaterial compensation
charge on a pro forma basis; accordingly, net income using; the intrinsic method
equals net income using the fair value method.
14. 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. Amounts due to or due from
these affiliates were settled in conjunction with the Acquisition.
Praxair and CBI directly and indirectly allocated certain corporate
administrative services to the Predecessor Company including certain legal
services, risk management, tax services and return preparation, employee benefit
administration, cash management and other services. During 1995, and the period
ended November 27, 1996, $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.
-16-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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. Castle Harlan, Inc. may receive 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 (see Note 9). In the event of the sale of
the Brownsville facility, the Company, in certain circumstances, may be required
to redeem the Series D Preferred Stock with the net proceeds thereof. In the
event the net proceeds from the sale of the Brownsville facility and the M/V
STATIA RESPONDER (formerly known as M/V MEGAN D. GAMBARELLA) exceeds a specified
threshold, Castle Harlan, Inc. may be entitled to a payment of up to $1 million.
The indenture permits the sale of the Brownsville facility and permits a
restricted payment from Statia to the Company equal to the net proceeds from
such sale.
15. COMMITMENT 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 Canadian
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 of which $1,739 was paid by the
Company through February 1998 pending reimbursement from Praxair. 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 the Canadian and Netherland
Antilles facilities of up to $1,500 ($5 of which has been expended through
February 1998). 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.
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 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
reactiviation of the Point Tupper facility and the sale of their shares in Point
Tupper Terminals Company, a predecessor to Statis 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 The Virgin Islands against STI 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 (which was 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
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.
-17-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
16. RETIREMENT PLANS
THE PREDECESSOR COMPANY
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 $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 Predecessor
Company sponsored a government guaranteed pension plan.
THE COMPANY
The Company maintains an employee savings plan in accordance with Section 401(k)
of the Internal Revenue Code. This plan covers all of the Company's full-time
U.S. employees and allows employees to contribute up to the lesser of 15% of
eligible compensation or $9,500 for the 1997 calendar year. The Company
currently matches at a 50% rate up to 8% of an employee's base salary, and the
employer may contribute, on a discretionary basis, up to 1% of an employee's
base salary per quarter. Amounts charged to expense for matching and
discretionary contributions for the year ended December 31, 1997 was $114,767
and $186,007, respectively. In addition, for certain foreign nationals residing
in the Netherland Antilles, the Company sponsors a government guaranteed pension
plan.
17. VALUATION AND QUALIFYING ACCOUNTS
The table below summarizes the activity in the accounts receivable valuation
account for the periods indicated below:
<TABLE>
<CAPTION>
BALANCE, CHARGES DEDUCTIONS, BALANCE,
BEGINNING TO WRITE-OFFS, END OF
OF PERIOD EXPENSE NET AND OTHER PERIOD
--------- ------- ------------- --------
<S> <C> <C> <C> <C>
Trade Accounts Receivable-
For the period ended
November 27, 1996 $ 645 $ 406 $ (273) $ 778
For the period ended
December 31, 1996 778 1 (10) 769
For the year ended
December 31, 1997 769 11 50 830
</TABLE>
-18-
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
18. 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, 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 (Statis Terminals Canada, Incorporated and Statia
Terminals N.V., should be read in conjunction with the condensed combining
financial statements by jurisdiction).
-19-
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
CONDENSED COMBINING BALANCE SHEET
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
STATIA CANADA
STATIA TERMINALS (INCLUDES RECLASSIFICATIONS
INTERNATIONAL N.V. ALL CANADIAN NETHERLANDS AND CONSOLIDATED
ASSETS (UNCONSOLIDATED) ENTITIES) ANTILLES UNITED 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>
-20-
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
CONDENSED COMBINING BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
Guaranteeing Subsidiaries
---------------------------------------------------------------
Statia Terminals Netherlands
Canada, Inc. Statia Antilles
Statia Terminals (Includes Terminals Other Than
International N.V. All 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 - -
Other current assets - 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 67,296 - - 181,609 205
OTHER NONCURRENT ASSETS - 1,174 4,321 1 165
------- -------- --------- --------- --------
Total assets $67,297 $ 33,617 $ 198,642 $ 182,848 $ 10,934
======= ======== ========= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 172 $ 3,121 $ 11,731 $ 70 $ 2,250
Payable to (receivable from) affiliates (24,701) 288 17,133 (664) 8,002
------- -------- --------- --------- --------
Total current liabilities (24,529) 3,409 28,864 (594) 10,252
LONG-TERM DEBT, net of current maturities - 28,060 106,940 - -
------- -------- --------- --------- --------
Total liabilities (24,529) 31,469 135,804 (594) 10,252
------- -------- --------- --------- --------
EQUITY SUBJECT TO REDUCTION 20,000 - - - -
------- -------- --------- --------- --------
STOCKHOLDERS' EQUITY:
Common stock 6 - 19,395 12 1
Additional paid-in capital 78,494 2,266 56,847 184,880 3,000
Retained earnings (deficit) (6,674) (118) (13,404) (1,450) (2,319)
------- -------- --------- --------- --------
Total stockholders' equity 71,826 2,148 62,838 183,442 682
------- -------- --------- --------- --------
Total liabilities and
stockholders' equity $67,297 $ 33,617 $ 198,642 $ 182,848 $ 10,934
======= ======== ========= ========= ========
<PAGE>
<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
Other current assets - 269
Assets held for sale - 20,000
---------
Total current assets - 40,038
PROPERTY AND EQUIPMENT, net - 198,529
INVESTMENT IN SUBSIDIARIES (249,110) -
OTHER NONCURRENT ASSETS - 5,661
--------- ---------
Total assets $(249,110) $ 244,228
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ - $ 17,344
Payable to (receivable from) affiliates - 58
--------- ---------
Total current liabilities - 17,402
LONG-TERM DEBT, net of current maturities - 135,000
--------- ---------
Total liabilities - 152,402
--------- ---------
EQUITY SUBJECT TO REDUCTION - 20,000
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock (19,408) 6
Additional paid-in capital (246,993) 78,494
Retained earnings (deficit) 17,291 (6,674)
--------- ---------
Total stockholders' equity (249,110) 71,826
--------- ---------
Total liabilities and
stockholders' equity $(249,110) $ 244,228
========= =========
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
RECLASSIFICATIONS
NETHERLANDS AND CONSOLIDATED
CANADA ANTILLES UNITED 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 provision
for 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>
-22-
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING INCOME STATEMENT
FOR THE PERIOD JANUARY 1, 1996 TO NOVEMBER 27, 1996
RECLASSIFICATIONS
NETHERLANDS AND CONSOLIDATED
CANADA ANTILLES UNITED 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
provision for 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>
-23-
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING INCOME STATEMENT
FOR THE PERIOD NOVEMBER 27, 1996 TO DECEMBER 31, 1996
STATIA CANADA
STATIA TERMINALS (INCLUDES
INTERNATIONAL N.V. ALL CANADIAN NETHERLANDS
(UNCONSOLIDATED) ENTITIES) ANTILLES UNITED STATES
------------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
REVENUES $ - $ 1,631 $ 13,194 $ 840
COST OF SERVICES AND PRODUCTS SOLD 50 1,519 11,037 454
------ --------- -------- ------
Gross profit (50) 112 2,157 386
ADMINISTRATIVE EXPENSES - 146 240 686
------ --------- -------- ------
Income (loss) from operations (50) (34) 1,917 (300)
INTEREST EXPENSE - 318 1,207 -
OTHER INCOME (EXPENSE) - 8 19 2
------ --------- -------- ------
Income (loss) before provision
for income taxes (50) (344) 729 (298)
PROVISION FOR INCOME TAXES - 18 114 -
------ --------- -------- ------
Net income (loss) (50) (362) 615 (298)
PREFERRED STOCK DIVIDENDS 45 - - -
------ --------- -------- ------
Net income (loss) available to
common stockholders $ (95) $ (362) $ 615 $ (298)
====== ========= ======== ======
<CAPTION>
RECLASSIFICATIONS
AND CONSOLIDATED
ELIMINATIONS TOTAL
---------------- ------------
<S> <C> <C>
REVENUES $ (709) $ 14,956
COST OF SERVICES AND PRODUCTS SOLD (50) 13,010
------- ---------
Gross profit (659) 1,946
ADMINISTRATIVE EXPENSES (659) 413
------ ---------
Income (loss) from operations - 1,533
INTEREST EXPENSE - 1,525
OTHER INCOME (EXPENSE) - 29
------ ---------
Income (loss) before provision
for income taxes
PROVISION FOR INCOME TAXES - 132
------ ---------
Net income (loss) - (95)
PREFERRED STOCK DIVIDENDS (45) -
------ ------
Net income (loss) available to
common stockholders $ 45 $ (95)
====== =========
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
Guaranteeing Subsidiaries
-------------------------------------------------------------
Statia Terminals Netherlands
Canada, Inc. Antilles
Statia Terminals (Includes Statia Other Than
International N.V. All Canadian Terminals Statia United
(Unconsolidated) Entities N.V. Terminals N.V. States
----------------- ---------------- ---------- -------------- -------
<S> <C> <C> <C> <C> <C>
REVENUES $ 12,147 $ 18,892 $ 122,624 $12,635 $ 8,523
COST OF SERVICES AND PRODUCTS SOLD - 13,070 108,540 566 4,440
--------- --------- --------- ------- --------
Gross profit 12,147 5,822 14,084 12,069 4,083
ADMINISTRATIVE EXPENSES 278 2,054 3,273 2 6,068
--------- --------- --------- ------- --------
Income (loss) from operations 11,869 3,768 10,811 12,067 (1,985)
INTEREST EXPENSE - 3,316 12,636 - 11
OTHER (INCOME) EXPENSE (49) (39) (365) - (173)
--------- --------- --------- ------- --------
Income (loss) before provision
for income taxes 11,918 491 (1,460) 12,067 (1,823)
PROVISION FOR INCOME TAXES 55 246 281 11 187
--------- --------- --------- ------- --------
Net income (loss) 11,863 245 (1,741) 12,056 (2,010)
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS (15,742) - - (1,494) (9)
--------- --------- --------- ------- --------
Net income (loss) available to
common stockholders $ (3,879) $ 245 $ (1,741) $10,562 $ (2,019)
========= ========= ========= ======= ========
<PAGE>
<CAPTION>
Reclassifications
And Consolidated
Eliminations Total
----------------- ------------
<S> <C> <C>
REVENUES $(32,322) $ 142,499
COST OF SERVICES AND PRODUCTS SOLD (2,703) 123,913
-------- ----------
Gross profit (29,619) 18,586
ADMINISTRATIVE EXPENSES (5,327) 6,348
-------- ----------
Income (loss) from operations (24,292) 12,238
INTEREST EXPENSE - 15,963
OTHER (INCOME) EXPENSE - (626)
-------- ----------
Income (loss) before provision
for income taxes (24,292) (3,099)
PROVISION FOR INCOME TAXES - 780
-------- ----------
Net income (loss) (24,292) (3,879)
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS 17,245 -
-------- ----------
Net income (loss) available to
common stockholders $ (7,047) $ (3,879)
======== ==========
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
Reclassifications
Netherlands And Consolidated
Canada Antilles United States Eliminations Total
------ ----------- ------------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by 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 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>
-26-
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1996 TO NOVEMBER 27, 1996
Reclassifications
Netherlands And Consolidated
Canada Antilles United 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 sale of property, plant and equipment - 111 - - 111
Purchases 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 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 AND CASH EQUIVALENTS (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>
-27-
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
FOR THE PERIOD NOVEMBER 27, 1996 TO DECEMBER 31, 1996
STATIA CANADA
STATIA TERMINALS (INCLUDES
INTERNATIONAL N.V. ALL CANADIAN NETHERLANDS
(UNCONSOLIDATED) ENTITIES) ANTILLES UNITED STATES
------------------ --------------- ----------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $ (149) $ 2,078 $ 674 $ (378)
------------ ---------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment - (306) (882) (15)
Acquisition of Statia operations (143,233) (27,655) - (3,073)
Transaction costs (7,582) (1,990) - -
Accrued transaction costs and purchase price 5,142 2,488 - 73
----------- ---------- -------- --------
Net cash used in investing activities (145,673) (27,463) (882) (3,015)
----------- ----------- -------- --------
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 3,393
----------- ---------- -------- --------
Net cash provided by financing activities 152,887 26,239 1,553 3,393
----------- -------------- -------- ------------
INCREASE 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 $ -
=========== ========== ======== ========
<PAGE>
<CAPTION>
RECLASSIFICATIONS
AND CONSOLIDATED
ELIMINATIONS TOTAL
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $ - $ 2,225
----- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment - (1,203)
Acquisition of Statia operations - (173,961)
Transaction costs - (9,572)
Accrued transaction costs and purchase price - 7,703
----- ----------
Net cash used in investing activities - (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 - -
----- ------
Net cash provided by financing activities - 184,072
----- ----------
INCREASE IN CASH AND
CASH EQUIVALENTS - 9,264
CASH AND CASH EQUIVALENTS,
beginning balance - -
----- ------
CASH AND CASH EQUIVALENTS,
ending balance $ - $ 9,264
===== ===========
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
Guaranteeing Subsidiaries
------------------------------------------------------------
Statia Terminals Netherlands
Canada, Inc. Antilles
Statia Terminals (Includes Statia Other Than
International N.V. All Canadian Terminals Statia United
(Unconsolidated) Entities) N.V. Terminals N.V. States
------------------ ---------------- --------- -------------- ------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $ (20,106) $ 2,232 $ 30,851 $ 10,633 $ 913
--------- ------- --------- -------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets - - - - 212
Purchase of property and equipment - (954) (3,654) - (834)
Equity investment 15,742 - - 1,494 9
Accrued transaction costs and purchase price - (2,488) (5,142) - (73)
--------- ------- --------- -------- ------
Net cash provided by (used in) 15,742 (3,442) (8,796) 1,494 (686)
investing activities
--------- ------- --------- -------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from (to) affiliates - 1,597 (6,619) - -
Dividends paid (2,700) - (12,147) (12,147) -
--------- ------- --------- -------- ------
Net cash provided by (used in)
financing activities (2,700) 1,597 (18,766) (12,147) -
--------- ------- --------- -------- ------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (7,064) 387 3,289 (20) 227
CASH AND CASH EQUIVALENTS,
beginning balance 7,065 854 1,304 41 -
--------- ------- --------- -------- ------
CASH AND CASH EQUIVALENTS,
ending balance $ 1 $ 1,241 $ 4,593 $ 21 $ 227
========= ======= ========= ======== ======
<CAPTION>
----------------- ------------
Reclassifications
And Consolidated
Eliminations Total
----------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $(12,071) $12,452
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets (100) 112
Purchase of property and equipment 100 (5,342)
Equity investment (17,245) -
Accrued transaction costs and purchase price - (7,703)
-------- -------
Net cash provided by (used in) (17,245) (12,933)
investing activities
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from (to) affiliates 5,022 -
Dividends paid 24,294 (2,700)
-------- -------
Net cash provided by (used in)
financing activities 29,316 (2,700)
-------- -------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS - (3,181)
CASH AND CASH EQUIVALENTS,
beginning balance - 9,264
-------- -------
CASH AND CASH EQUIVALENTS,
ending balance $ - $ 6,083
======== =======
</TABLE>
-29-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Statia Terminals N.V. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Statia Terminals
N.V. (a Netherlands Antilles corporation) and Subsidiaries as of December 31,
1996 and 1997, and the related consolidated statements of income (loss) and
retained earnings (deficit) and cash flows for the period from Inception through
December 31, 1996 and for the year ended December 31, 1997. We have also audited
the related consolidated statements of income and retained earnings (deficit)
and cash flows for the year ended December 31, 1995 and from January 1, 1996
through November 27, 1996, of Statia Terminals N.V. ("Old Statia Terminals N.V."
or the "Predecessor Company"). 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
N.V. as of December 31, 1996 and 1997, and the results of its operations and its
cash flows and for the period from Inception through December 31, 1996 and for
the year ended December 31, 1997 and the results of the Predecessor's operations
and its cash flows for the year ended December 31, 1995 and from January 1,
1996 through November 27, 1996, in conformity with generally accepted accounting
principles.
West Palm Beach, Florida,
February 20, 1998.
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31,
---------------------------
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,304 $ 4,593
Accounts receivable- trade, less allowance for doubtful
accounts of $386 in 1996 and $506 in 1997 10,876 9,104
Other receivables 2,421 1,044
Inventory 3,812 714
Prepaid expenses 26 78
Assets held for sale 10,000 10,000
---------- ----------
Total current assets 28,439 25,533
PROPERTY AND EQUIPMENT, net 172,316 168,788
OTHER NONCURRENT ASSETS, net 5,038 4,321
---------- ----------
Total assets $ 205,793 $ 198,642
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,453 $ 6,293
Accrued expenses 10,055 5,438
Payable to affiliates 6,619 17,133
---------- -------------
Total current liabilities 22,127 28,864
LONG-TERM DEBT 106,940 106,940
---------- ----------
Total liabilities 129,067 135,804
---------- ----------
STOCKHOLDERS' EQUITY SUBJECT TO REDUCTION 10,000 10,000
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock 19,395 19,395
Additional paid-in capital 46,847 46,847
Retained earnings (deficit) 484 (13,404)
---------- ----------
Total stockholders' equity 66,726 52,838
---------- ----------
Total liabilities and stockholders' equity $ 205,793 $ 198,642
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS 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).
PREDECESSOR COMPANY THE COMPANY
---------------------------------------- ----------------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
----------------- ----------------- PERIOD FROM
JANUARY 1, 1996 INCEPTION
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1995 NOVEMBER 27, 1996 DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUES $ 121,160 $ 125,978 $ 12,936 $ 122,624
COST OF SERVICES AND PRODUCTS SOLD 104,643 116,640 10,964 108,540
---------- --------- --------- ----------
Gross profit 16,517 9,338 1,972 14,084
ADMINISTRATIVE EXPENSES 3,536 4,346 257 3,273
---------- --------- --------- ----------
Income from operations 12,981 4,992 1,715 10,811
INTEREST EXPENSE (70) 520 1,205 12,636
OTHER INCOME (EXPENSE) (477) 106 - 365
---------- --------- --------- ----------
Income (loss) before provision for
income taxes 12,574 4,578 510 (1,460)
PROVISION FOR INCOME TAXES 281 257 26 281
---------- --------- --------- ----------
Net income (loss) available to common
stockholders 12,293 4,321 484 (1,741)
---------- --------- --------- ----------
RETAINED EARNINGS, beginning of period 34,254 - - 484
COMMON STOCK DIVIDENDS - 25,000 - (12,147)
---------- --------- --------- ----------
RETAINED EARNINGS (DEFICIT), end of period $ 46,547 $ (20,679) $ 484 $ (13,404)
========== ========= ========= ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
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).
PREDECESSOR COMPANY THE COMPANY
------------------------------------ ------------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
------------------------------------ PERIOD FROM
JANUARY 1, 1996 INCEPTION
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1995 NOVEMBER 27, 1996 DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 12,293 $ 4,321 $ 484 $ (1,741)
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization expense 7,827 7,870 724 7,904
Provision for bad debts 128 100 - -
(Gain) loss on disposition of property 6 (80) - -
(Increase) decrease in accounts receivable -
trade (4,181) (375) (1,355) 1,771
(Increase) decrease in other receivables (3,857) 3,670 (1,260) 1,376
(Increase) decrease in inventory 648 (3,731) 1,230 3,098
(Increase) decrease in prepaid expense (60) 32 8 (51)
Decrease in other noncurrent assets (1,875) - - (2)
Increase (decrease) in accounts payable 147 3,049 (1,181) 841
Increase (decrease) in accrued expenses (303) 224 1,029 559
Increase (decrease) in payable to affiliates - - - 17,096
---------- ----------- ---------- -----------
Net cash provided by (used in) operating
activities 10,773 15,080 (321) 30,851
---------- ----------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash from sale of property and equipment - 111 - -
Purchase of property and equipment (24,422) (12,163) (882) (3,654)
Buyout of First Salute Leasing, L.P. assets - (88,511) - -
Acquisition of the Company, net of $185 cash acquired - - (163,233) -
Transaction costs - - (7,582) -
Accrued transaction costs and purchase price - - 5,142 (5,142)
---------- ----------- ---------- -----------
Net cash used in investing activities (24,422) (100,563) (166,555) (8,796)
---------- ----------- ---------- -----------
</TABLE>
(CONTINUED)
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(DOLLARS IN THOUSANDS)
THE FINANCIAL STATEMENTS OF THE COMPANY AND THE PREDECESSOR COMPANY ARE NOT
COMPARABLE IN CERTAIN RESPECTS (SEE NOTE 1).
PREDECESSOR COMPANY THE COMPANY
------------------------------------ ------------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
----------------- ----------------- PERIOD FROM
JANUARY 1, 1996 INCEPTION
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1995 NOVEMBER 27, 1996 DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock and preferred stock $ - $ 1 $ 55,500 $ -
Increase (decrease) in advances from CBI affiliates - 110,364 - -
Dividends paid to affiliates - (25,000) - (12,147)
Issuance of 11-3/4% first mortgage notes - - 106,940 -
Debt costs paid - - (5,093) -
Advances from (to) affiliate - - 10,833 (6,619)
Increase in payable to CBI affiliates 13,745 - - -
---------- --------- ---------- ----------
Net cash provided by (used in) financing
activities 13,745 85,365 168,180 (18,766)
---------- --------- ---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 96 (118) 1,304 3,289
CASH AND CASH EQUIVALENTS, balance at beginning 89 185 - 1,304
---------- --------- ---------- ----------
CASH AND CASH EQUIVALENTS, balance at end $ 185 $ 67 $ 1,304 $ 4,593
========== ========= ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The consolidated balance sheets as of December 31, 1996 and 1997, and the
consolidated statements of income and retained earnings and cash flows for the
period ended December 31, 1997 and 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 statements of income
(deficit) and retained earnings and cash flows from January 1, 1996, through
November 27, 1996 ("the period ended November 27, 1996"), and for the year ended
December 31, 1995, include the accounts of Statia Terminals N.V. and its wholly
owned subsidiaries ("Old Statia Terminals N.V." or the "Predecessor Company").
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 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.
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.
-1-
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
On November 27, 1996 ("Inception"), 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 formed by Castle Harlan Partners II, L.P., a private equity investment
fund managed by Castle Harlan, Inc., a private merchant bank, members of
management and others. The adjusted purchase price paid to Praxair for the
capital stock described above was $174,921. 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 purchase price was 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. Accordingly, the historical information provided herein for the period
ended November 27, 1996 will not be comparable to other periods in the
accompanying financial statements.
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
-2-
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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 Predecessor Company's revenues from a state-owned oil producer and a refiner
constituted approximately 7.1% of the Company's total 1995 revenues;
approximately 8.8% of total revenues for the period from January 1, 1996 through
November 27, 1996, approximately 9.3% of the Company's total revenues for the
period November 27, 1996 to December 31, 1996 ("period ended December 31,
1996"); and 13.5% for the year ended December 31, 1997. In addition,
approximately 9.9% of the Predecessor's revenues for the period ended November
27, 1996, 6.4% of the Company's revenues for the period ended December 31, 1996
and 4.9% for the year ended December 31, 1997, were derived from parties
unaffiliated with such state-owned oil producer, but were generated by the
movement of such products through the terminals. Revenues from an owner and
operator of vessels which received bunkers at the Company's facilities accounted
for 9.5% of the Company's 1997 total revenues. No other customer accounted for
more than 5% of the Predecessor or the Company's 1995, 1996 or 1997 revenues
directly or indirectly. Although the Company has a long-standing relationship
and long-term contracts with one customer, 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 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.
-3-
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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. 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 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
-4-
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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.
OTHER NONCURRENT ASSETS
Other noncurrent assets consist primarily of deferred financing costs. The
Predecessor Company's and the Company's costs related to establishing debt
obligations are amortized ratably over the life of the underlying obligations.
Amortization expenses were $343, $67 and $720 for the period ended November 27,
1996, and for the periods ended December 31, 1996 and the year ended December
31, 1997, 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. Accrued expenses as of December 31, 1997
consist primarily of accrued interest and personnel-related expenses in the
amount of $1,606 and $997, 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 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
-5-
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
Antilles guilders (U.S. $281). 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, 1996 and 1997, the
amounts available to offset future tax liability under the Agreement were
approximately $1,308 and $1,412, respectively. The Company has not recognized
this amount on its balance sheet because such benefit may never be realized.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 130 - "Reporting
Comprehensive Income" and SFAS No. 131 - "Disclosures about Segments of an
Enterprise and Related Information" were issued by the Financial Accounting
Standards Board ("FASB") in June 1997. These standards are effective for the
Company's year-end December 31, 1998. SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components. SFAS No. 131
establishes standards for annual and interim disclosure related to business
operating segments. The Company is in the process of determining the disclosure
requirements to these standards. The adoption of these standards will have no
impact on the consolidated financial position, results of operations or cash
flow of the Company.
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 $179
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 $ 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 noncurrent assets 2,000
Liabilities assumed (19,000)
----------
$ 77,000
==========
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.
-6-
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(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 $174,921 has been allocated to the assets and liabilities of
the Company based on their respective fair values as of the date of the
Acquisition. No adjustments were made to the allocated fair values during 1997.
The allocation of the total purchase price to the assets and liabilities
acquired is as follows:
Purchase Price-
Common stock and assets $ 174,921
Commissions, fees and expenses 12,673
-----------
Total purchase price $ 187,594
===========
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 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 has certain property and liability insurance policies
with various insurance carriers. The claims process related to the hurricane
damages was settled in the third quarter of 1996 for $12,615. Through December
31, 1997, the Company expended $20,621 relating to hurricane repairs and
betterments, of which $6,752 was capitalized as property and equipment.
-7-
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
7. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
DECEMBER 31,
------------------------- USEFUL LIFE
1996 1997 IN YEARS
----------- ---------- -----------
Land $ 396 $ 396 -
Land improvements 7,350 7,368 5 - 20
Buildings and improvements 719 1,332 20 - 40
Plant machinery and terminals 164,316 167,151 4 - 40
Field and office equipment 188 378 3 - 15
----------- ----------
172,969 176,625
Less- Accumulated depreciation 653 7,837
----------- ----------
Property and equipment, net $ 172,316 $ 168,788
=========== ==========
During the first quarter of 1995, the Predecessor Company 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.
8. ASSETS HELD FOR SALE
Assets held for sale represent management's estimate of the proceeds from the
anticipated sale of the M/V STATIA RESPONDER (formerly known as M/V MEGAN D.
GAMBARELLA), a marine vessel. The Company has estimated the proceeds of this
sale will aggregate $10 million although the actual proceeds of such sales 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.
-8-
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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 this asset. Accordingly, $10,000 of the Company's common
stockholders' equity has been classified outside the equity section as
stockholders' equity subject to reduction.
9. DEBT
The 11-3/4% First Mortgage Notes due 2003 were issued by the Parent 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. 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 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 and affiliates 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 of which include, but are not limited to the
following: (i) a consolidated fixed charge ratio of 2:1, which, if met,
-9-
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
will permit the Company to make additional borrowings over and above the
Company's revolving credit facility discussed below, (ii) other limitations on
indebtedness and (iii) restrictions on certain payments. In addition, the Notes
place certain restrictions on its Parent to pay dividends other than
distributions from the proceeds of assets held for sale as discussed in Note 8
above and in other circumstances as defined in the Indenture. 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, 1997, 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 $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% (9.0% at
December 31, 1997). 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 its 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 its Parent. The Credit Facility expires on
November 27, 1999. At December 31, 1997, the Company has $7,599 available for
borrowing under the Credit Facility as limited by the borrowing base computation
and had no outstanding balance.
The Company had no cash payments for interest for the period ended December 31,
1996, and paid $12,147 for interest for the year ended December 31, 1997.
-10-
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
10. SHAREHOLDERS' EQUITY
THE PREDECESSOR COMPANY
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.
THE COMPANY
The Company's equity structure consists of 19,395,001 shares authorized, issued
and outstanding of $1 par value common stock. All common stock is owned by the
Parent.
11. RELATED-PARTY TRANSACTIONS
THE PREDECESSOR COMPANY
Prior to November 27, 1996, the Predecessor Company engaged in various
related-party transactions with Praxair, CBI and their affiliates. Amounts due
to or due from this affiliate was settled in conjunction with the Acquisition.
Statia Terminals, Inc. directly and indirectly allocated certain corporate,
operating and 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, some of
which are ultimately provided by CBI. During 1995 and 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.
-11-
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
THE COMPANY
As a wholly owned subsidiary, the Company engages in various related-party
transactions with its Parent and the Company's subsidiaries and affiliates. 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 allocate certain
corporate, operating and administrative services to the Company, including
certain legal services, risk management, tax services and return preparation,
employee benefit administration, cash management and other services. For the
period ended December 31, 1996 and 1997, $1,805 and $3,273, respectively, was
paid for these direct and indirect services.
12. COMMITMENT AND CONTINGENCIES
In May 1994, the U.S. Department of Justice brought an action in the U.S.
District Court for the District of The Virgin Islands against STI 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 (which was 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 this proceeding is without
merit; therefore, the Company intends to vigorously contest this claim. In
connection with the CHPII Acquisition, Praxair agreed to indemnify the Company
against damages relating to the foregoing proceeding. While no estimate can
reasonably be made of any ultimate liability at this time, the Company believes
the final outcome of this proceeding 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
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, results of operations or net cash flows.
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,
1998 $ 1,686
1999 2,117
2000 2,152
2001 2,195
2002 2,239
---------
$ 10,389
=========
Rent expense on operating leases amounted to approximately $4,405 for the year
ended December 31, 1995, $3,551, $363 and $3,763 for the periods ended November
27, 1996, December 31, 1996 and the year ended December 31, 1997, respectively.
14. RETIREMENT PLAN
The Company sponsors a government guaranteed pension plan for certain foreign
nationals residing in the Netherlands Antilles.
-12-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Statia Terminals Canada, Incorporated and Subsidiary:
We have audited the accompanying consolidated balance sheets of Statia Terminals
Canada, Incorporated (a Nova Scotia, Canada corporation) and Subsidiary as of
December 31, 1996 and 1997, and the related consolidated statements of income
(loss) and retained earnings (deficit) and cash flows for the period from
Inception through December 31, 1996 and for the year ended December 31, 1997. We
have also audited the related consolidated statements of income (loss) and
retained earnings and cash flows for the year ended December 31, 1995 and from
January 1, 1996 through November 27, 1996, of Statia Terminals Point Tupper,
Inc. and affiliate (the "Predecessor Company"). 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
Canada, Incorporated and Subsidiary as of December 31, 1996 and 1997, and the
results of its operations and its cash flows for the period from Inception
through December 31, 1996, and for the year ended December 31, 1997, and the
results of the Predecessor's operations and its cash flows for the year ended
December 31, 1995 and from January 1, 1996 through November 27, 1996, in
conformity with generally accepted accounting principles.
West Palm Beach, Florida,
February 20, 1998.
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31,
---------------------
1996 1997
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 854 $ 1,241
Accounts receivable-
Trade, less allowance for doubtful accounts of
$94 in 1996 and $62 in 1997 873 872
Other 629 1,089
Inventory, net 1,157 533
Prepaid expenses 67 57
Receivable from affiliates 1,598 -
--------- ---------
Total current assets 5,178 3,792
PROPERTY AND EQUIPMENT, net 29,036 28,651
OTHER NONCURRENT ASSETS, net 1,367 1,174
--------- ---------
Total assets $ 35,581 $ 33,617
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 688 $ 778
Accrued expenses 4,929 2,343
Payable to affiliates - 288
--------- ---------
Total current liabilities 5,617 3,409
LONG-TERM DEBT 28,060 28,060
--------- ---------
Total liabilities 33,677 31,469
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock - -
Additional paid-in capital 2,266 2,266
Accumulated deficit (362) (118)
Total stockholders' equity 1,904 2,148
--------- ---------
Total liabilities and stockholders' equity $ 35,581 $ 33,617
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND ACCUMULATED DEFICIT
(DOLLARS IN THOUSANDS)
THE FINANCIAL STATEMENTS OF THE COMPANY AND THE PREDECESSOR COMPANY ARE NOT
COMPARABLE IN CERTAIN RESPECTS (SEE NOTE 1).
PREDECESSOR COMPANY THE COMPANY
------------------------------------ ------------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
----------------- ----------------- PERIOD FROM
JANUARY 1, 1996 INCEPTION
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1995 NOVEMBER 27, 1996 DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUES $ 11,143 $ 11,831 $ 1,631 $ 18,892
COST OF SERVICES AND PRODUCTS SOLD 9,370 10,131 1,519 13,070
---------- --------- ------- ---------
Gross profit 1,773 1,700 112 5,822
ADMINISTRATIVE EXPENSES 2,382 2,489 146 2,054
---------- --------- ------- ---------
Income (loss) from operations (609) (789) (34) 3,768
INTEREST EXPENSE 4,548 3,667 318 3,316
OTHER INCOME (EXPENSE) 197 (408) 8 39
---------- --------- ------- ---------
Income (loss) before provision for income
taxes (4,960) (4,864) (344) 491
PROVISION FOR INCOME TAXES 155 332 18 247
---------- --------- ------- ---------
Income (loss) before preferred stock
dividends (5,115) (5,196) (362) 244
PREFERRED STOCK DIVIDENDS 1,424 792 - -
---------- --------- ------- ---------
Net income (loss) to common stockholders (6,539) (5,988) (362) 244
ACCUMULATED DEFICIT, beginning of period (3,489) - - (362)
---------- --------- ------- ---------
ACCUMULATED DEFICIT, end of period $ (10,028) $ (5,988) $ (362) $ (118)
========== ========= ======= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
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).
PREDECESSOR COMPANY THE COMPANY
------------------------------------ ------------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
----------------- ----------------- PERIOD FROM
JANUARY 1, 1996 INCEPTION
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1995 NOVEMBER 27, 1996 DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (5,115) $ (5,196) $ (362) $ 244
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities-
Depreciation, amortization and non-cash charges 3,328 1,743 189 1,533
Provision for bad debts 34 52 - -
(Increase) decrease in accounts receivable - trade 516 (824) 947 -
(Increase) decrease in other receivables 689 (512) (629) (459)
(Increase) decrease in inventory (550) (1,302) 721 624
(Increase) decrease in prepaid expense (45) (31) 26 10
(Increase) decrease in intangible and other
noncurrent assets 9 (74) - 1
Increase (decrease) in accounts payable (277) (199) 189 90
Increase (decrease) in accrued expenses 477 (578) 997 (99)
Increase (decrease) in payable to affiliates 937 (704) - 288
--------- --------- ---------- ---------
Net cash provided by (used in) operating
activities 3 (7,625) 2,078 2,232
--------- ---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (9,667) (819) (306) (954)
Acquisition of the Company - - (27,655) -
Transaction costs - - (1,990) -
Accrued transaction costs and purchase price - - 2,488 (2,488)
--------- --------- ---------- ---------
Net cash used in investing activities (9,667) (819) (27,463) (3,442)
--------- --------- ---------- ---------
</TABLE>
(CONTINUED)
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(DOLLARS IN THOUSANDS)
THE FINANCIAL STATEMENTS OF THE COMPANY AND THE PREDECESSOR COMPANY ARE NOT
COMPARABLE IN CERTAIN RESPECTS (SEE NOTE 1).
PREDECESSOR COMPANY THE COMPANY
------------------------------------ ------------------------------------
PRE-PRAXAIR POST-PRAXAIR
ACQUISITION ACQUISITION
----------------- ----------------- PERIOD FROM
JANUARY 1, 1996 INCEPTION
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1995 NOVEMBER 27, 1996 DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in advances from affiliates $ - $ 99,823 $ (486) $ 1,597
Sale of common stock 10,000 - - -
Redemption of preferred stock - (25,196) - -
Bank borrowings 1,950 66,000 - -
Repayment of bank borrowings - (132,400) - -
Dividends paid to affiliates (1,424) (792) - -
Issuance of 11-3/4% first mortgage notes - - 28,060 -
Debt costs paid - - (1,335) -
--------- ---------- -------- ---------
Net cash provided by financing
activities 10,526 7,435 26,239 1,597
--------- ---------- -------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 862 (1,009) 854 387
CASH AND CASH EQUIVALENTS, balance at beginning 345 1,207 - 854
--------- ---------- -------- ---------
CASH AND CASH EQUIVALENTS, balance at end $ 1,207 $ 198 $ 854 $ 1,241
========= ========== ======== =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The consolidated balance sheets as of December 31, 1996 and 1997, and the
consolidated statements of income and accumulated deficit and cash flows for the
year ended December 31, 1997 and for the period from Inception through December
31, 1996, include the accounts of Statia Terminals Canada, Incorporated and its
Subsidiary (the "Company"). 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 year ended December 31, 1995,
include the accounts of Statia Terminals Point Tupper, Inc. and affiliates (the
"Predecessor Company").
These consolidated financial statements are presented in United States dollars.
THE PREDECESSOR COMPANY
The Predecessor Company includes 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 combined 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.
On November 27, 1996 ("Inception"), the Parent acquired from Praxair all of the
outstanding capital stock of the Predecessor Company and certain of its
affiliate (the "Acquisition"). The Parent is a newly organized company formed by
Castle Harlan Partners II, L.P., a private equity
-1-
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
investment fund managed by Castle Harlan, Inc., a private merchant bank, members
of 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 purchase price was allocated to assets and liabilities of the
Company based on their fair value 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 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.
-2-
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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. The Company's revenues from a refiner and a ship agent constituted
approximately 62.4% and 10.4%, respectively, of the Company's total 1997
revenues. In addition, approximately 16.2% of the Predecessor's revenues for the
period ended November 27, 1996, 42.5% of the Company's revenues for the period
ended December 31, 1996 and 19.5% of the Company's revenues for the year ended
December 31, 1997 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 Predecessor Company's revenues from a refiner
and two petroleum product brokers constituted approximately 61.6%, 14.6% and
6.2%, respectively, of the Predecessor 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, 1996 or 1997
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 was not renewed at the end of the term, in the year 2000, or if the
Company otherwise lost any significant portion of its revenue 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 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.
-3-
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
CASH AND CASH EQUIVALENTS
The Company's and the Predecessor 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. The Company believes the historical carrying value of the Notes is
reasonable since the Notes have been priced above par since issuance. 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 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
-4-
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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.
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 and
$191 for the years ended December 31, 1996 and 1997, respectively.
ACCRUED EXPENSES
Accrued expenses as of December 31, 1996, consisted primarily of purchase price
adjustments related to the Acquisition, environmental reserves and accrued
interest in the amount of $665, $1,250 and $316, respectively. Accrued expenses
as of December 31, 1997 consists primarily of environmental expenses and accrued
interest of $1,250 and $421, 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 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.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 130 -- "Reporting
Comprehensive Income" and SFAS No. 131 -- "Disclosures about Segments of an
Enterprise and Related Information" were issued by the Financial Accounting
Standards Board ("FASB") in June 1997. These standards are effective for the
Company's year-end December 31, 1998. SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components. SFAS No. 131
establishes standards for annual and interim disclosures related to business
operating segments. The Company is in the process of determining the disclosure
requirements to these standards. The adoption of these standards will have no
impact on the consolidated financial position, results of operations or cash
flow of the Company.
-5-
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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 $27,000,
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 $ 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)
==========
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 to the
assets and liabilities of the Company based on their respective fair values as
of the date of the Acquisition. No adjustments were made to the allocated fair
values during 1997.
-6-
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
The 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
=========
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 as of December 31:
USEFUL LIFE
1996 1997 IN YEARS
-------- -------- -----------
Land $ 273 $ 273 -
Land improvements 20 4 5 - 20
Buildings and improvements 366 89 20 - 40
Plant machinery and terminals 26,587 29,412 4 - 40
Field and office equipment 1,961 386 3 - 15
-------- --------
29,207 30,164
Less- Accumulated depreciation (171) (1,513)
-------- --------
Property and equipment, net $ 29,036 $ 28,651
======== ========
-7-
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
7. DEBT
The 11-3/4% First Mortgage Notes (the "Notes") due 2003 were issued by the
Parent and 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. 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 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 and affiliates of the Parent
other than the Company, 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 of which include, but are not limited to the following: (i)
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, (ii) other limitations on indebtedness and (iii)
restrictions on certain payments. In addition, the Notes place certain
restrictions on its Parent to pay dividends, other than in certain circumstances
as defined in the Indenture. Except with the occurrence of an event of default,
the Company has no restrictions upon transfers of funds in the form of
dividends, loans or cash advances.
-8-
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
As of December 31, 1997, 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% (9% at December 31, 1997).
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 its 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 its Parent. The Credit Facility expires on November 27, 1999. At
December 31, 1997, the Company had approximately $459 available for borrowing
under the Credit Facility as limited by the borrowing base computation and had
no outstanding balance.
Cash payments for interest were $4,494 for the year ended December 31, 1995 and
$4,455 for the period ended November 27, 1996 and $3,187 for the year ended
December 31, 1997. The Company had no cash payments for interest for the period
ended December 31, 1996.
8. SHAREHOLDERS' EQUITY
THE PREDECESSOR COMPANY
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 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 1995 and the period ended November 27, 1996, Statia
Terminals Point Tupper, Inc. paid dividends of $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.
-9-
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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, organization 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 US$7,482 and US$6,792 as of December 31, 1996 and 1997,
respectively, for the Company and expire in varying amounts after seven-year
periods through 2004. The Company has generated approximately $6.2 million and
$6.3 million of investment tax credits (ITC) as of December 31, 1996 and 1997,
expiring through 2001 through 2007. The Company has not recognized the benefit
from the ITC or loss carryforwards on its balance sheet because such benefit may
never be realized.
10. RELATED-PARTY TRANSACTIONS
THE PREDECESSOR COMPANY
As a wholly owned subsidiary of STI, the Predecessor Company 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 services and
return preparation, employee benefit administration, cash management and other
services. During 1995 and for the period ended November 27, 1996, $2,382 and
$1,610, respectively, was paid for these direct and indirect services.
-10-
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
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 directly and indirectly allocate 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 and the year ended December 31, 1997 $1,026 and
$2,054, respectively, was paid for these direct and indirect services.
11. COMMITMENT 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 investigations,
remediation, compliance and capital costs of which $1,739 was paid by the
Company through February 1998 pending reimbursement from Praxair. 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
$1,250 ($5 of which has been expended through February 1998). 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, results of operations or cash flows.
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 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
reactiviation of the Point Tupper facility and the sale of their shares in Point
Tupper Terminals Company, a predecessor to Statis Canada, to an affiliate of the
Company and CBI.
The Company believes the allegations made in this proceeding is without
merit; therefore, the Company intends to vigorously contest this claim. In
connection with the CHPII Acquisition, Praxair agreed to indemnify the Company
against damages relating to the foregoing proceeding. While no estimate can
reasonably be made of any ultimate liability at this time, the Company believes
the final outcome of this proceeding 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
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, results of operations or cash flows.
-11-
<PAGE>
EXHIBITS INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- - ------- ----------------------
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.
4.1a*** First Amendment, dated as of August 14, 1997, to the
Indenture, dated as of November 27, 1996, among Statia
Terminals International N.V., a Netherlands Antilles
corporation, Statia Terminals Canada, Incorporated, a
corporation organized under the laws of Nova Scotia, Canada,
the Subsidiary Guarantors named therein and Marine Midland
Bank.
4.1b Second Amendment, dated as of February 25, 1998, to the
Indenture, dated as of November 27, 1996, among Statia
Terminals International N.V., a Netherlands Antilles
corporation, Statia Terminals Canada, Incorporated, a
corporation organized under the laws of Nova Scotia, Canada,
the Subsidiary Guarantors named therein 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.
Page 1
<PAGE>
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 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.
10.3a Amendment, dated as of December 27, 1996 to (i) the
Storage and Throughput Agreement and (ii) the Marine Fuel
Agreement for the year ended December 31, 1997.
10.3b Amendment, dated as of December 28, 1997 to (i) the
Storage and Throughput Agreement and (ii) the Marine Fuel
Agreement for the year ended December 31, 1998.
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.
Page 2
<PAGE>
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.
10.14a Amendment, dated as of February 2, 1998 to the Brownsville
Navigation District Contracts No. 2790.
10.15* Brownsville Navigation District Contracts No. 2826, dated as
of January 14, 1994, between the Brownsville Navigation
District and Statia Terminals Southwest, Inc.
10.16*** 1997 Stock Option Plan with Award Agreements.
21.1 Subsidiaries of the Registrants.
27.1 Financial Data Schedules (for electronic filing only).
* 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.
** Incorporated by reference to the December 31, 1996 Form 10-K, dated May
13, 1997.
*** Incorporated by reference to the September 30, 1997 Form 10-Q, dated
November 14, 1997.
Page 3
EXHIBIT 4.1b
SECOND AMENDMENT TO INDENTURE
SECOND AMENDMENT (the "Amendment"), dated as of February 25,
1998, to the Indenture (the "Indenture"), dated as of November 27, 1996, among
Statia Terminals International N.V., a Netherlands Antilles corporation
("Statia"), Statia Terminals Canada, Incorporated, a corporation organized under
the laws of Nova Scotia ("Statia Canada; and together with Statia, the
"Issuers"), the Subsidiary Guarantors named therein (the "Subsidiary
Guarantors") and Marine Midland Bank (the "Trustee"). All capitalized terms used
herein and not otherwise defined shall have the respective meanings provided
such terms in the Indenture.
W I T N E S S E T H :
WHEREAS the Indenture as currently drafted is ambiguous as to
whether the Issuers have the right to obtain a release of the Capital Stock of
Statia Terminals Southwest, Inc. and/or Statia Delaware Holdco II, Inc.
(collectively, the "Brownsville Stock") from the Lien of the applicable
Securities Pledge Agreement in the event of the sale of such Capital Stock;
WHEREAS the Indenture clearly contemplates a possible sale of
the Brownsville Stock by reason of the fact that the Indenture (i) excludes the
sale of the Brownsville Stock and the assets of the Brownsville Facility from
the definition of an Asset Sale and therewith from the limitations applicable to
Asset Sales under Section 4.15 of the Indenture; (ii) excludes the sale of the
Capital Stock of Statia Terminals Southwest, Inc. from the limitations
applicable to sales of the Capital Stock of any Restricted Subsidiary under
Section 4.16 of the Indenture; (iii) excludes the net proceeds resulting from
the sale of the Brownsville Facility from the limitations applicable to
Restricted Payments under Section 4.03 of the Indenture and (iv) excludes Statia
Terminals Southwest, Inc. from the restriction on mergers of Significant
Subsidiary Guarantors under Section 5.01(b) of the Indenture;
WHEREAS (i) the Brownsville Stock is pledged to the Trustee
pursuant to a Securities Pledge Agreement and (ii) there is no provision in
either the Securities Pledge Agreement or the Indenture to permit the Trustee to
release the Lien of the Securities Pledge Agreement in the event of a sale of
the Brownsville Facility pursuant to the sale of the Brownville Stock;
WHEREAS the Issuers believe that the failure to provide such a
provision for a release of such Lien was an oversight and thus creates an
ambiguity in the Indenture;
WHEREAS, the parties desire to amend the Indenture pursuant to
Section 9.01 of the Indenture to cure this ambiguity.
NOW, THEREFORE, the parties hereto agree as follows for the
benefit of each other party and for the equal and ratable benefit of the Holders
of the Securities:
<PAGE>
1. AMENDMENT. Section 11.04 of the Indenture is hereby amended
by adding the following clause (2) at the end thereof:
(2) In addition to their rights under Section 11.03,
in the event of a sale of the Capital Stock of Statia Terminals
Southwest, Inc. or Statia Delaware Holdco II, Inc. (collectively, the
"Brownsville Stock"), the Issuers shall have the right to obtain a
release of, and the Trustee shall release, the Brownsville Stock so
sold from the Lien of the applicable Securities Pledge Agreement, upon
compliance with the condition that the appropriate Pledgor deliver to
the Trustee the following:
(a) RELEASE NOTICE. A notice from the
appropriate Pledgor requesting the release of the
Brownsville Stock (i) confirming the sale of, or an
agreement to sell, such in a bona fide sale to a
Person that is not an Affiliate of any of the
Issuers or Subsidiary Guarantors, (ii) certifying
that such sale complies with the terms and
conditions of this Indenture with respect thereto,
and (iii) accompanied by a counterpart of the
instruments proposed to give effect to the release
fully executed and acknowledged (if applicable) by
all parties thereto other than the Trustee;
(b) OFFICERS' CERTIFICATE. An Officers'
Certificate of the appropriate Pledgor stating that
(i) there is no Default or Event of Default in
effect or continuing on the date thereof or the date
of such sale, (ii) the release of the Brownsville
Stock will not result in a Default or Event of
Default under this Indenture and (iii) all
conditions precedent in this Indenture and in the
Security Documents relating to the release of the
Brownsville Stock have been complied with;
(c) OPINION OF COUNSEL. An Opinion of
Counsel substantially to the effect that all
conditions precedent in this Indenture and in the
Security Documents relating to the release of the
Brownsville Stock have been complied with; and
(d) OTHER DOCUMENTS. All documentation
required by the Trust Indenture Act, if any, prior
to the release of the Brownsville Stock by the
Trustee.
In connection with any release, the Issuers shall
execute, deliver and record or file and obtain such instruments as the
Trustee may reasonably require, including, without limitation,
amendments to the Security Documents.
-2-
<PAGE>
2. TIA CONTROLS. If any provision of this Amendment limits or
conflicts with another provision which is required to be included in this
Amendment by the TIA, the required provision shall control.
3. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
4. COUNTERPARTS. This Amendment may be executed and agreed in
any number of counterparts and by the parties hereto on separate counterparts,
each of which counterparts when executed and delivered shall be an original, but
all of which shall together constitute one and the same agreement. A complete
set of counterparts shall be lodged with the signatories hereto.
5. INDENTURE NOT OTHERWISE AMENDED. The terms and provisions
of the Indenture not amended hereby shall continue to remain in full force and
effect.
6. REFERENCES. From and after the date hereof, all references
in the Indenture shall be deemed to be references to the Indenture as amended
hereby.
7. THE TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Amendment or for or in respect of the recitals contained herein, all of which
recitals are made solely by Issuers and the Subsidiary Guarantors.
* * *
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of this 25th day of February, 1998.
STATIA TERMINALS INTERNATIONAL N.V.
By: /S/ JAMES F. BRENNER
----------------------------------------
Title: Vice President
By: /S/ JAMES G. CAMERON
----------------------------------------
Title: Director
STATIA TERMINALS CANADA, INCORPORATED
By: /S/ JAMES F. BRENNER
----------------------------------------
Title: Vice President
MARINE MIDLAND BANK,
as Trustee
By: /S/ FRANK J. GODINO
----------------------------------------
Title: Vice President
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Subsidiary
Guarantors has caused this Amendment to be duly executed as of this 25th day of
February, 1998.
STATIA TERMINALS CORPORATION N.V.
By: /S/ JAMES F. BRENNER
----------------------------------------
Title: Vice President
By: /S/ JAMES G. CAMERON
----------------------------------------
Title: Director
STATIA TERMINALS DELAWARE, INC.
By: /S/ JAMES F. BRENNER
----------------------------------------
Title: Vice President
STATIA TERMINALS, INC.
By: /S/ JAMES F. BRENNER
----------------------------------------
Title: Vice President
STATIA TERMINALS N.V.
By: /S/ JAMES F. BRENNER
----------------------------------------
Title: Vice President
<PAGE>
STATIA DELAWARE HOLDCO II, INC.
By: /S/ JAMES F. BRENNER
----------------------------------------
Title: Vice President
SABA TRUST COMPANY N.V.
By: /S/ JAMES F. BRENNER
----------------------------------------
Title: Vice President
BICEN DEVELOPMENT CORPORATION N.V.
By: /S/ JAMES F. BRENNER
----------------------------------------
Title: Vice President
STATIA TERMINALS SOUTHWEST, INC.
By: /S/ JAMES F. BRENNER
----------------------------------------
Title: Vice President
W.P. COMPANY, INC.
By: /S/ JAMES F. BRENNER
----------------------------------------
Title: Vice President
SEVEN SEAS STEAMSHIP COMPANY, INC.
By: /S/ VICTOR M.LOPEZ, JR.
----------------------------------------
Title: Treasurer and Assistant Secretary
<PAGE>
STATIA TUGS N.V.
By: /S/ JAMES G. CAMERON
----------------------------------------
Title: Director
SEVEN SEAS STEAMSHIP COMPANY
(SINT EUSTATIUS) N.V.
By: /S/ VICTOR M.LOPEZ, JR.
----------------------------------------
Title: Treasurer and Assistant Secretary
POINT TUPPER MARINE SERVICES LIMITED
By: /S/ JAMES F. BRENNER
----------------------------------------
Title: Vice President
STATIA LABORATORY SERVICES, N.V.
By: /S/ JAMES F. BRENNER
----------------------------------------
Title: Vice President
EXHIBIT 10.3a
EXTENSION TO THE MARINE FUEL AGREEMENT
Reference is hereby made to the Marine Fuel Agreement dated December
28th, 1990 and amended on January lst, 1996, between *******************
and STATIA TERMINALS N.V. ("STATIA") with respect to the purchase of
certain petroleum products.
The Marine Fuel Agreement provides in its Section 1, that it "...shall
have a commence on January 1, 1996 (the "Term") and shall end at
midnight on December 31, 1996," and provides further that "... if either
Party hereto is interested in extending this Agreement, such Party shall
so notify the other Party in writing no less than forty five (45) days
in advance of the date of termination hereof; in such case, the Parties
shall consult promptly with each other to consider the possibility of
extending this Agreement".
This letter hereby confirms the intention of *********** and STATIA to
extend the term of the Agreement from January 1st, 1997 to December
31st, 1997.
As extended hereby, all other terms and conditions of the Marine Fuel
Agreement shall remain in full force and effect.
STATIA TERMINALS N.V.
BY: /S/ CLARENCE W. BROWN
TITLE: TERMINAL MANAGER
***************
BY: ***************
TITLE: ***********
Date: December 27th, 1996
<PAGE>
EXHIBIT 10.3a
EXTENSION TO THE STORAGE AND THROUGHPUT AGREEMENT
Reference is hereby made to the Storage and Throughput Agreement dated
December 25th, 1990 and amended on January lst, 1996, between
************************ and STATIA TERMINALS N.V.( STATIA") with
respect to certain services and facilities in connection with the
storage and transshipment of commodities at the Statia's terminal
located on Saint-Eustatius Island, Netherlands Antilles.
The Storage and Throughput Agreement provides in its Article 4.1, that
it"... shall commence on January 1,1996 and, subject to the provisions
of Article VI of this Agreement, shall end at midnight on December
31,1996".
This letter hereby confirms the intention of ********** and STATIA to
extend the term of the Agreement from January 1st, 1997 to December
31st, 1997.
As extended hereby, all other terms and conditions of the Storage and
Throughput Agreement shall remain in full force and effect.
STATIA TERMINALS N.V.
BY: /S/ CLARENCE W. BROWN
TITLE: TERMINAL MANAGER
****************
BY: ************
TITLE: *******
Date: December 27th, 1996
EXHIBIT 10.3b
EXTENSION TO THE MARINE FUEL AGREEMENT
Reference is hereby made to the Marine Fuel Agreement dated
December 28th, 1990 and amended on December 27th, 1996, between
**************** and STATIA TERMINALS N.V. ("STATIA"), with
respect to the purchase of certain petroleum products.
The Marine Fuel agreement provides in its Section 1 that it "...
shall have a commence on January 1, 1997 (the "Term") and shall
end at midnight on December 31, 1997 and provides further that
"... if either Party hereto is interested in extending this
Agreement, such Party shall so notify the other Party in writing
no less than forty five (45) days in advance of the date of
termination hereof, in such case, the Parties shall consult
promptly with each other to consider the possibility of
extending this agreement."
This letter hereby confirms the intention of ************ and
STATIA to extend the term of the Agreement from January 1st,
1998 to December 31, 1998.
As extended hereby, all other terms and conditions of the
Marine Fuel Agreement shall remain in full force and effect.
STATIA TERMINALS N.V.
BY: /S/ CLARENCE W. BROWN
TITLE: MANAGING DIRECTOR
********************
BY: ***********
TITLE: **********
DATE: 28/12/97
<PAGE>
EXHIBIT 10.3b
EXTENSION TO THE STORAGE AND THROUGHPUT AGREEMENT
Reference is hereby made to the Storage and Throughput Agreement dated
December 28th, 1990 and amended on December 27th, 1996, between
********************** and STATIA TERMINALS N.V. ("STATIA"), with
respect to certain services and facilities, in connection with the
storage and transshipment of commodities at the Statia terminal located
on Saint-Eustatuis Island, Netherlands, Antilles.
The Storage and Throughput Agreement provides in this Article 4.1, that
it "... shall commence on January 1, 1997 and subject to the provisions
of Article VI of this Agreement, shall end at midnight on December 31,
1997".
This letter hereby confirms the intention of ************* and STATIA to
extend the term of the Agreement from January 1st, 1998 to December 31,
1998.
As extended hereby, all other terms and conditions of the Storage and
Throughput Agreement shall remain in full force and effect.
STATIA TERMINALS, N.V.
BY: /S/ CLARENCE W. BROWN
TITLE: MANAGING DIRECTOR
******************
BY: ************
TITLE: **********
DATE: 28/12/97
EXHIBIT 10.14a
PORT OF BROWNSVILLE
HOME PORT TO NAFTA
FebruarY 2, 1998
Mr. James G. Cameron
President
Statia Terminals Southwest, Inc.
Two Datran Center
9130 S. Dadeland Blvd.
Suite 1508
Miami, FL 33156
Re: BND Contract 2790
Dear Mr. Cameron:
The present term of your above reference lease contract with the
Brownsville Navigation District will expire on March 31, 1998.
Under the provisions of this contract, you can extend and renew this lease
for an additional five year term on the same terms and conditions and for
the same rental effective April 1, 1998.
If it is your desire to extend and renew this lease for an additional five
year term, please sign and return one copy of this letter for our file.
Regards,
BROWNSVILLE NAVIGATION DISTRICT
/s/ Beatrice G. Rosenbaum
Beatrice G. Rosenbaum
Director, Industrial Development
Encl.
pc: Paul Besteiro
Bill Challenger
STATIA TERMINALS SOUTHWEST, INC.
/s/ James G. Cameron
By; James G. Cameron
1R2790R028
1000 Foust Road, Brownsvtlle, TX 78521. (956) 831-4592/FAX: (996) 831-5006
Toll free 1(800) 378-5395, Fax on demand 1(888)737-5672
FAX BY DEPARTMENTS: Marked ng/FTZ/Purchasing (956)831-5353,
Engineering (956)831-6153,Finance (956)831-5106
<PAGE>
STATE OF TEXAS ) BROWNSVILLE NAVIGATION DISTRICT
COUNTY OF CAMERON) CONTRACT NO. 2790
----
THIS CONTRACT between the BROWNSVILLE NAVIGATION DISTRICT OF CAMERON
COUNTY, TEXAS, a navigation district organized, created and existing under and
by virtue of the laws of the State of Texas, with its domicile in Brownsville,
Cameron County, Texas, hereinafter styled District, and STATIA TERMINALS
SOUTHWEST, INC. hereinafter styled Lessee;
W I T N E S S E T H:
The said BROWNSVILLE NAVIGATION DISTRICT OF CAMERON COUNTY, TEXAS, does by these
presents lease and demise unto the said STATIA TERMINALS SOUTHWEST, INC. the
property described on Exhibit A, attached hereto and made a part hereof for all
purposes, for a term of five (5) years, commencing the 1st day of April, 1993,
for and upon the following terms and conditions:
I.
As a consideration for this lease and as rental for said leased premises, the
Lessee agrees to pay a rental of TWO HUNDRED-FORTY THREE THOUSAND SIX HUNDRED
NINETY AND 00/100 ($243,690.00) DOLLARS, payable in advance in monthly
installments of $20,307.50. The first installment of TWENTY THOUSAND THREE
HUNDRED SEVEN AND 50/100 (20,307.50) shall be due on April 1, 1993 and a similar
installment shall be due on the first day of each month thereafter.
All rentals shall be paid not later than Ten (10) days from the date
when due; they shall thereafter bear interest at the rate of fifteen percent
(15%) per annum from the date due until paid. In the event such fifteen percent
(15%) rate at any time shall be illegal or usurious under applicable law, it
shall be automatically reduced to the highest lawful rate.
BND/MAIN HARBOR LEASE Page 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANTS
SUBSIDIARY JURISDICTION
- - ---------- ------------
Statia Terminals International N.V.
and Subsidiaries
Statia Terminals International N.V. * Netherlands Antilles
Statia Delaware HoldCo II, Inc. * Delaware
Statia Terminals Southwest, Inc. * Texas
Statia Terminals New Jersey, Inc. * Delaware
Statia Terminals Delaware, Inc. * Delaware
Statia Terminals, Inc. * Delaware
Statia Terminals Puerto Rico Corporation ** Puerto Rico
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. * Netherlands Antilles
Statia Terminals Corporation N.V. * Netherlands Antilles
Statia Terminals Canada, Incorporated Nova Scotia
Point Tupper Marine Services Limited * Nova Scotia
Saba Trustcompany N.V. Company N.V. * Netherlands Antilles
Bicen Development Corporation N.V. * Netherlands Antilles
Statia Terminals N.V. * Netherlands Antilles
Statia Laboratory Services N.V. * Netherlands Antilles
Statia Tugs N.V. * Netherlands 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.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001029101
<NAME> STATIA TERMINALS INTERNATIONAL N.V.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> DEC-31-1997
<CASH> 6,083
<SECURITIES> 0
<RECEIVABLES> 13,269
<ALLOWANCES> 830
<INVENTORY> 1,247
<CURRENT-ASSETS> 40,038
<PP&E> 209,045
<DEPRECIATION> 10,518
<TOTAL-ASSETS> 244,228
<CURRENT-LIABILITIES> 17,402
<BONDS> 135,000
0
0
<COMMON> 6
<OTHER-SE> 98,494
<TOTAL-LIABILITY-AND-EQUITY> 244,228
<SALES> 89,334
<TOTAL-REVENUES> 142,499
<CGS> 113,162
<TOTAL-COSTS> 113,162
<OTHER-EXPENSES> 32,436
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,963
<INCOME-PRETAX> 3,099
<INCOME-TAX> 780
<INCOME-CONTINUING> 3,879
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,879
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001029102
<NAME> STATIA TERMINALS CANADA INCORPORATED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> DEC-31-1997
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<SECURITIES> 0
<RECEIVABLES> 2,023
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<PP&E> 30,164
<DEPRECIATION> 1,513
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<CURRENT-LIABILITIES> 3,409
<BONDS> 28,000
0
0
<COMMON> 0
<OTHER-SE> 2,266
<TOTAL-LIABILITY-AND-EQUITY> 33,617
<SALES> 3,321
<TOTAL-REVENUES> 18,892
<CGS> 13,442
<TOTAL-COSTS> 13,442
<OTHER-EXPENSES> 8,865
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,316
<INCOME-PRETAX> 491
<INCOME-TAX> 246
<INCOME-CONTINUING> 245
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 245
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
