SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBERS 333-18455 AND 333-18455-01
--------------------
STATIA TERMINALS INTERNATIONAL N.V.
(Exact name of registrant as specified in its charter)
NETHERLANDS ANTILLES 52-2003102
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
TUMBLEDOWN DICK BAY
ST. EUSTATIUS, NETHERLANDS ANTILLES
(011) 5993-82300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
STATIA TERMINALS CANADA, INCORPORATED
(Exact name of registrant as specified in its charter)
NOVA SCOTIA, CANADA 98-0164788
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3817 PORT MALCOLM ROAD
PORT HAWKESBURY, NOVA SCOTIA B0E 2V0
(902) 625-1711
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------
Indicate by check mark whether each of the registrants: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
The equity securities of the registrants have not been, and are not
required to be, registered under either the Securities Act of 1933 or the
Securities Exchange Act of 1934.
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND
STATIA TERMINALS CANADA, INCORPORATED
QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 30, 1999
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 1
Consolidated Condensed Statements of Income (Loss) 2
Consolidated Condensed Statements of Cash Flows 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
THIS QUARTERLY REPORT ON FORM 10-Q (THIS "REPORT") CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF 27A OF THE SECURITIES ACT OF
1933. DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND IN
ITEMS 1, 2 AND 3 OF PART I HEREOF, AS WELL AS WITHIN THIS REPORT GENERALLY. IN
ADDITION, WHEN USED IN THIS REPORT, THE WORDS "MAY", "WILL", "BELIEVE,"
"ANTICIPATE," "EXPECT", "ESTIMATE" 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 PETROLEUM TERMINALING INDUSTRY, ADDED COSTS DUE TO
CHANGES IN GOVERNMENT REGULATIONS AFFECTING THE PETROLEUM INDUSTRY, THE LOSS OF
A MAJOR CUSTOMER, THE FINANCIAL CONDITION OF THE COMPANY'S CUSTOMERS,
INTERRUPTION OF OUR OPERATIONS CAUSED BY ADVERSE WEATHER CONDITIONS, THE
CONDITION OF THE UNITED STATES ECONOMY, RISKS ASSOCIATED WITH OUR EFFORTS TO
COMPLY WITH THE Y2K REQUIREMENT, AND OTHER FACTORS INCLUDED IN THIS REPORT AND
THE COMPANY'S ANNUAL REPORT ON FORM 10-K. 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.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 13,873 $ 13,385
Accounts receivable-
Trade, net 7,562 13,317
Other 2,328 4,231
Inventory, net 4,528 1,964
Prepaid expenses 172 1,269
---------------- ----------------
Total current assets 28,463 34,166
PROPERTY AND EQUIPMENT, net 209,970 208,086
OTHER NONCURRENT ASSETS, net 4,745 3,120
---------------- ----------------
Total assets $ 243,178 $ 245,372
================ ================
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,012 $ 15,894
Accrued interest payable 2,027 4,475
Other accrued expenses 8,439 7,403
---------------- ----------------
Total current liabilities 19,478 27,772
LONG-TERM DEBT- 11 3/4% FIRST MORTGAGE NOTES 135,000 101,000
---------------- ----------------
Total liabilities 154,478 128,772
STOCKHOLDER'S EQUITY:
Common stock 6 6
Additional paid-in capital 92,344 126,090
Accumulated deficit (3,650) (9,496)
---------------- ----------------
Total stockholder's equity 88,700 116,600
---------------- ----------------
Total liabilities and stockholder's equity $ 243,178 $ 245,372
================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
Page 1
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- ------------------------------------
1998 1999 1998 1999
--------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
REVENUES $ 32,699 $ 43,310 $ 99,535 $ 122,992
COSTS OF SERVICES AND PRODUCTS SOLD 24,720 36,928 78,652 99,327
--------------- -------------- ---------------- ----------------
Gross profit 7,979 6,382 20,883 23,665
ADMINISTRATIVE EXPENSES 1,766 2,172 5,575 5,957
SPECIAL COMPENSATION EXPENSE - - - 4,099
--------------- -------------- ---------------- ----------------
Operating income 6,213 4,210 15,308 13,609
LOSS ON DISPOSITION OF PROPERTY
AND EQUIPMENT - - 4,000 -
INTEREST EXPENSE 4,206 3,176 12,651 11,113
INTEREST INCOME 187 105 401 627
--------------- -------------- ---------------- ----------------
Income (loss) before provision for income
taxes and extraordinary charge 2,194 1,139 (942) 3,123
PROVISION FOR INCOME TAXES 49 55 268 548
--------------- -------------- ---------------- ----------------
Income (loss) before extraordinary charge 2,145 1,084 (1,210) 2,575
EXTRAORDINARY CHARGE RELATED TO
EARLY EXTINGUISHMENT OF DEBT - - - 4,743
--------------- -------------- ---------------- ----------------
Net income (loss) available to common
stockholder $ 2,145 $ 1,084 $ (1,210) $ (2,168)
=============== ============== ================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
Page 2
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------------
1998 1999
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss available to common stockholder $ (1,210) $ (2,168)
Adjustments to reconcile net loss available to common stockholder
to net cash provided by operating activities:
Extraordinary charge related to early extinguishment of debt - 4,743
Non-cash special compensation expense - 2,152
Depreciation, amortization and non-cash charges 9,186 8,814
Loss on disposition of property and equipment 4,000 -
(Increase) decrease in accounts receivable-trade 4,618 (5,774)
(Increase) decrease in other receivables 766 (1,903)
Decrease in inventory 226 2,564
Increase in prepaid expenses (822) (1,097)
(Increase) decrease in other non-current assets 13 (34)
Increase (decrease) in accounts payable (2,351) 4,730
Increase in accrued expenses 4,138 1,414
-------------- ---------------
Net cash provided by operating activities 18,564 13,441
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (7,489) (6,331)
Proceeds from sales of Statia Terminals Southwest, Inc. 6,500 -
Proceeds from sale of property and equipment - 15
-------------- ---------------
Net cash used in investing activities (989) (6,316)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment to Parent (6,150) -
Net proceeds from issuance of common stock to Parent - 33,746
Repurchase of First Mortgage Notes - (37,681)
Dividend paid to Parent - (3,678)
-------------- ---------------
Net cash used in financing activities (6,150) (7,613)
-------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,425 (488)
CASH AND CASH EQUIVALENTS, beginning of period 6,083 13,873
-------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 17,508 $ 13,385
============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 285 $ 521
============== ===============
Cash paid for interest $ 8,002 $ 8,665
============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
Page 3
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated condensed financial statements of Statia
Terminals International N.V. ("Statia") and its subsidiaries (together with
Statia, the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. Significant accounting
policies followed by the Company were disclosed in the Notes to the Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998. In the opinion of the Company's management,
the accompanying consolidated condensed financial statements contain all
adjustments and accruals necessary to present fairly the financial position of
the Company at September 30, 1999 and the results of operations and cash flows
for the nine months ended September 30, 1998 and 1999. Statia is a wholly-owned
subsidiary of Statia Terminals Group N.V. (the "Parent"). Operating results for
the nine months ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999.
Additionally, the transactions discussed in note 4 below impacted the Company's
results of operations and financial condition, and affects comparability across
periods.
2. RECLASSIFICATIONS AND COMPREHENSIVE INCOME
Certain amounts in the prior year consolidated condensed financial
statements have been reclassified to conform to the current year presentation.
For all periods presented herein, there were no differences between net
income and comprehensive income.
3. SEGMENT INFORMATION
The Company is organized around several different factors, the two most
significant of which are services and products and geographic location. The
Company's primary services and products are terminaling services (resulting in
revenue from storage, throughput, dock usage, emergency response and other
terminal services) and bunker and bulk product sales.
The primary measures of profit and loss utilized by the Company's
management to make decisions about resources to be allocated to each segment are
earnings before interest expense, interest income, income taxes, depreciation,
amortization, and certain unallocated income and expenses ("Internal EBITDA")
and earnings before interest expense, interest income, income taxes, and certain
unallocated income and expenses ("Internal EBIT").
Page 4
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
3. SEGMENT INFORMATION - (CONTINUED)
The following information is provided for the Company's terminaling
services and bunker and bulk products sales segments:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
1998 1999 1998 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Terminaling services $ 17,005 $ 14,292 $ 48,161 $ 48,328
Bunker and bulk product sales 15,694 29,018 51,374 74,664
-------------- -------------- -------------- --------------
Total $ 32,699 $ 43,310 $ 99,535 $122,992
============== ============== ============== ==============
INTERNAL EBITDA:
Terminaling services $ 9,042 $ 5,802 $ 22,121 $ 21,982
Bunker and bulk product sales 252 1,017 1,918 3,549
-------------- -------------- -------------- --------------
Total $ 9,294 $ 6,819 $ 24,039 $ 25,531
============== ============== ============== ==============
DEPRECIATION AND AMORTIZATION
EXPENSE:
Terminaling services $ 2,641 $ 2,624 $ 8,238 $ 8,198
Bunker and bulk product sales 124 134 376 423
-------------- -------------- -------------- --------------
Total $ 2,765 $ 2,758 $ 8,614 $ 8,621
============== ============== ============== ==============
INTERNAL EBIT:
Terminaling services $ 6,401 $ 3,178 $ 13,883 $ 13,784
Bunker and bulk product sales 128 883 1,542 3,126
-------------- -------------- -------------- --------------
Total $ 6,529 $ 4,061 $ 15,425 $ 16,910
============== ============== ============== ==============
</TABLE>
A reconciliation of Internal EBIT to the Company's income (loss) before
provision for income taxes and extraordinary charge is as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
1998 1999 1998 1999
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Internal EBIT $ 6,529 $ 4,061 $ 15,425 $ 16,910
Unallocated operating and administrative
income (expenses) (543) (21) (800) 202
Special compensation expense - - - (4,099)
Interest expense excluding debt
amortization expense (3,979) (3,006) (11,968) (10,517)
Interest income 187 105 401 627
Loss on sale of Statia Terminals
Southwest, Inc. - - (4,000) -
------------- -------------- -------------- --------------
Income (loss) before provision for income
taxes and extraordinary charge $ 2,194 $ 1,139 $ (942) $ 3,123
============= ============== ============== ==============
</TABLE>
Page 5
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
4. PARENT'S INITIAL PUBLIC OFFERING OF EQUITY
On April 28, 1999, the Parent completed its initial public equity
offering of 7.6 million common shares (the "Offering"). The Offering price was
$20 per share raising gross proceeds to the Parent of $152,000. A portion of the
Offering proceeds was used by the Parent to purchase additional capital stock of
Statia totaling $33,746. During May, 1999, the Company used the proceeds from
the sale of Statia's capital stock and existing cash to repurchase in the open
market a principal amount of $34,000 of the Company's 11 3/4% First Mortgage
Notes (the "Notes") for $39,522, including acquisition costs and accrued
interest of $3,681 and $1,841, respectively. During the second quarter of 1999,
the acquisition costs and the unamortized deferred financing costs related to
the repurchased Notes ($1,062) were recorded as an extraordinary charge. There
was no income tax effect associated with this extraordinary charge.
During the three months ended March 31, 1999, the Company recorded as
special compensation expense a bonus in the amount of $1,947 for particular
members of the Company's management. The purpose of this special management
bonus was to partially reimburse these individuals with respect to adverse tax
consequences that resulted from the Offering and other past compensation
arrangements.
In connection with the Offering, certain options previously granted to
some of the Company's employees to purchase the Parent's common stock became
fully vested, were exercised and became subordinated shares of the Parent. The
Parent was amortizing the difference between the estimated fair value of the
options at the date of grant and the exercise price over the vesting period of
five years and charging such amounts to the Company as compensation expense. On
April 28, 1999, the remaining unamortized compensation expense associated with
these options of $2,152 was recorded as a non-cash special compensation expense.
5. STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
The Notes are guaranteed on a full, unconditional, joint and several
basis by each of the indirect and direct active subsidiaries of Statia, other
than Statia Terminals Canada, Incorporated which is a co-obligor on the Notes.
The enforceability of the guarantees may be affected differently under the laws
of the applicable jurisdictions. Each of the subsidiary guarantors is, directly
or indirectly, wholly-owned by Statia. The following consolidated condensed
financial data are presented for Statia Terminals Canada, Incorporated and
Subsidiary.
Page 6
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
5. STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY - (CONTINUED)
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,409 $ 446
Accounts receivable-
Trade, net 903 480
Other 1,340 1,601
Inventory, net 323 259
Prepaid expenses 54 155
Receivables from affiliates 2,305 6,474
---------------- ----------------
Total current assets 9,334 9,415
PROPERTY AND EQUIPMENT, net 28,192 28,502
OTHER NONCURRENT ASSETS, net 979 863
---------------- ----------------
Total assets $ 38,505 $ 38,780
================ ================
LIABILITIES AND STOCKHOLDER'S EQUITY
ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES $ 4,984 $ 5,190
LONG-TERM DEBT- 11 3/4% FIRST MORTGAGE NOTES 28,060 28,060
---------------- ----------------
Total liabilities 33,044 33,250
STOCKHOLDER'S EQUITY:
Common stock and additional paid-in capital 2,266 2,266
Retained earnings 3,195 3,264
---------------- ----------------
Total stockholder's equity 5,461 5,530
---------------- ----------------
Total liabilities and stockholder's equity $ 38,505 $ 38,780
================ ================
</TABLE>
Page 7
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
5. STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY - (CONTINUED)
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- ---------------------------------
1998 1999 1998 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES $ 5,753 $ 3,675 $ 15,381 $ 14,908
COSTS OF SERVICES AND PRODUCTS SOLD 3,043 2,647 8,740 8,107
-------------- -------------- -------------- --------------
Gross profit 2,710 1,028 6,641 6,801
ADMINISTRATIVE EXPENSES 740 827 1,898 2,650
SPECIAL COMPENSATION EXPENSE - - - 1,515
-------------- -------------- -------------- --------------
Operating income 1,970 201 4,743 2,636
INTEREST EXPENSE 876 884 2,632 2,656
INTEREST INCOME 37 10 60 146
-------------- -------------- -------------- --------------
Income (loss) before provision for
income taxes 1,131 (673) 2,171 126
PROVISION (BENEFIT) FOR INCOME TAXES (32) (24) - 57
-------------- -------------- -------------- --------------
Net income (loss) available to common
stockholder $ 1,163 $ (649) $ 2,171 $ 69
============== ============== ============== ==============
</TABLE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1998 1999
-------------- -------------
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 2,755 $(2,591)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (574) (1,372)
-------------- -------------
Net cash used in investing activities (574) (1,372)
-------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,181 (3,963)
CASH AND CASH EQUIVALENTS, beginning of period 1,241 4,409
-------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 3,422 $ 446
============== =============
</TABLE>
Page 8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For purposes of the discussion below, reference is made to the
unaudited Consolidated Condensed Financial Statements and Notes thereto of
Statia Terminals International N.V. and Subsidiaries as of September 30, 1999
and the three and nine month periods ended September 30, 1998 and 1999 included
herein. Reference should also be made to the Company's Annual Report on Form
10-K that includes the Company's Consolidated Financial Statements as of and for
the year ended December 31, 1998. You should note that we sold our Brownsville,
Texas, facility on July 29, 1998, and the figures below and our consolidated
condensed financial statements for the three and nine months ended September 30,
1998 include the operations of the Brownsville facility prior to its sale.
RESULTS OF OPERATIONS
The following tables set forth, for the periods indicated, the
percentage of revenues represented by certain items in our consolidated
condensed income statements.
RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------
1998 1999
------------------ ------------------
% OF % OF
DOLLARS REVENUES DOLLARS REVENUES
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Terminaling services $ 17,005 52.0% $ 14,292 33.0%
Bunker and bulk product sales 15,694 48.0% 29,018 67.0%
-------- ------ -------- -------
Total revenues 32,699 100.0% 43,310 100.0%
Cost of services and products sold 24,720 75.6% 36,928 85.3%
-------- ------ -------- -------
Gross profit 7,979 24.4% 6,382 14.7%
Administrative expenses 1,766 5.4% 2,172 5.0%
-------- ------ -------- -------
Operating income 6,213 19.0% 4,210 9.7%
Interest expense 4,206 12.9% 3,176 7.3%
Interest income 187 0.6% 105 0.2%
-------- ------ -------- -------
Income before income taxes and extraordinary charge 2,194 6.7% 1,139 2.6%
Provision for income taxes 49 0.1% 55 0.1%
-------- ------ -------- -------
Net income available to common stockholder $ 2,145 6.6% $ 1,084 2.5%
======== ====== ======== =======
</TABLE>
Page 9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------
1998 1999
------------------ ------------------
% OF % OF
DOLLARS REVENUES DOLLARS REVENUES
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Terminaling services $ 48,161 48.4% $ 48,328 39.3%
Bunker and bulk product sales 51,374 51.6% 74,664 60.7%
--------- ------ -------- -------
Total revenues 99,535 100.0% 122,992 100.0%
Cost of services and products sold 78,652 79.0% 99,327 80.8%
--------- ------ -------- -------
Gross profit 20,883 21.0% 23,665 19.2%
Administrative expenses 5,575 5.6% 5,957 4.8%
Special compensation expense - - 4,099 3.3%
-------- -------- -------- -------
Operating income 15,308 15.4% 13,609 11.1%
Loss on disposition of property and equipment 4,000 4.0% - -
Interest expense 12,651 12.7% 11,113 9.1%
Interest income 401 0.4% 627 0.5%
-------- ------ -------- -------
Income (loss) before income taxes and extraordinary charge (942) (0.9)% 3,123 2.5%
Provision for income taxes 268 0.3% 548 0.4%
Extraordinary charge related to early extinguishment of debt - - 4,743 3.9%
-------- -------- -------- -------
Net loss available to common stockholder $ (1,210) (1.2)% $ (2,168) (1.8)%
========= ======= ========= ========
</TABLE>
The following tables set forth, for the periods indicated (a) the total
revenues and total operating income (loss), after allocation of administrative
expenses, at each of our operating locations and (b) the percentage of revenue
and operating income (loss) relative to our total revenue and operating income.
REVENUES BY LOCATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------
1998 1999
------------------ ------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $ 27,059 82.8% $ 39,647 91.5%
Canada 5,640 17.2% 3,663 8.5%
-------- ----- --------- -----
Total $ 32,699 100.0% $ 43,310 100.0%
======== ===== ========= =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------
1998 1999
------------------ ------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $ 82,880 83.3% $ 108,129 87.9%
Canada 15,042 15.1% 14,863 12.1%
Brownsville, Texas facility 1,613 1.6% - -
--------- ----- --------- -----
Total $ 99,535 100.0% $ 122,992 100.0%
========= ===== ========= =====
</TABLE>
Page 10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
OPERATING INCOME (LOSS) BY LOCATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------
1998 1999
------------------ ------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $ 4,315 69.4% $ 3,950 93.8%
Canada 1,898 30.6% 260 6.2%
------- ----- ------- -----
Total $ 6,213 100.0% $ 4,210 100.0%
======= ===== ======= =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------
1998 1999
------------------ ------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $11,153 72.9% $10,943 80.4%
Canada 4,559 29.8% 2,666 19.6%
Brownsville, Texas facility (404) (2.7)% - -
------- ----- ------- -----
Total $15,308 100.0% $13,609 100.0%
======= ===== ======= =====
</TABLE>
The following table sets forth for the periods indicated total
capacity, capacity leased, throughput, and vessel calls for each of our
operating locations. "Total capacity" represents the average storage capacity
available for lease for a period. "Capacity leased" represents the storage
capacity leased to third parties weighted for the number of days leased in the
month divided by the capacity available for lease. "Throughput" volume is the
total number of inbound barrels discharged into our facilities from a vessel,
tank, rail car or tanker truck, not including across-the-dock or tank-to-tank
transfers. A "vessel call" occurs when a vessel docks or anchors at one of our
terminal locations in order to load and/or discharge cargo and/or to take 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 we
sell and deliver bunker fuel to a vessel not calling at our terminals for the
above purposes. Each of these statistics is a measure of the utilization of our
facilities and equipment.
Page 11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
CAPACITY, CAPACITY LEASED, THROUGHPUT AND VESSEL CALLS BY LOCATION
(CAPACITY AND THROUGHPUT IN THOUSANDS OF BARRELS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- ---------------------------------
1998 1999 1998 1999
-------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
Netherlands Antilles and
the Caribbean
Total capacity 11,334 11,334 11,334 11,334
Capacity leased 95% 89% 91% 91%
Throughput 21,516 15,011 53,042 48,687
Vessel calls 209 219 629 739
Canada
Total capacity 7,404 7,404 7,404 7,404
Capacity leased 98% 65% 91% 85%
Throughput 8,456 8,880 35,654 31,214
Vessel calls 22 19 85 78
All locations (1)
Total capacity 18,738 18,738 18,738 18,738
Capacity leased 96% 79% 91% 89%
Throughput 29,972 23,891 88,696 79,901
Vessel calls 231 238 714 817
</TABLE>
- ------------
(1) The Brownsville, Texas, facility was sold on July 29, 1998. The
statistics above for the nine months ended September 30, 1998 exclude
the operations of the Brownsville facility.
COMPARABILITY
On July 29, 1998, we sold Statia Terminals Southwest to an unrelated
third-party. Our consolidated condensed financial statements for the nine months
ended September 30, 1998 include the operations of Statia Terminals Southwest
prior to its sale. The operating results of Statia Terminals Southwest for the
nine months ended September 30, 1998 were not significant. Additionally, our
Parent's initial public offering of equity, which closed on April 28, 1999,
impacted our results of operations and financial condition.
REVENUES
Total revenues for the three and nine months ended September 30, 1999
were $43.3 million and $123.0 million, compared to $32.7 million and $99.5
million for the same periods of 1998, representing increases of $10.6 million,
or 32.5% and $23.5 million, or 23.6%, respectively.
Page 12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
Revenues from terminaling services (resulting in revenue from storage,
throughput, dock usage, emergency response and other terminal services), for the
three and nine months ended September 30, 1999 were $14.3 million and $48.3
million, compared to $17.0 million and $48.2 million for the same periods of
1998, representing a decrease of $2.7 million, or 15.9% and an increase of $0.2
million, or 0.3%, respectively. The decrease in terminaling services revenue for
the three months ended September 30, 1999 compared to the same period in 1998
was principally due to the effects of the OPEC/OPEC Plus Accord which was
reached in March 1999. The Accord was established between many of the oil
producing nations, some of whom we do business with, to raise crude oil prices
by reducing supply. Members of the Accord have reduced their production of crude
oil which, in turn, has reduced the worldwide quantity of crude oil and
petroleum products in storage.
For the nine months ended September 30, 1999, approximately 57.2% of
our tank capacity and approximately 61.8% of our storage and throughput
revenues, excluding related ancillary services, were derived from long term
contracts.
Revenues from terminaling services at St. Eustatius decreased
approximately $1.4 million, or 12.0%, during the three months ended September
30, 1999 as compared to the third quarter of 1998, due to decreased throughput
and a lower percentage capacity leased. Revenues from terminaling services at
this facility increased $1.1 million, or 3.4%, during the nine months ended
September 30, 1999 as compared to the same period of 1998, due primarily to
increased vessel calls. Total throughput decreased from 21.5 million and 53.0
million barrels during the three and nine months ended September 30, 1998 to
15.0 million and 48.7 million barrels during the same periods of 1999 due
primarily to decreased throughput of crude and fuel oil which was partially
offset by increased throughput of petroleum products.
For the nine months ended September 30, 1998 and 1999, the overall
percentage of capacity leased at St. Eustatius was 91% each period. This
facility experienced increases in the percentage of capacity leased for
petroleum product tankage offset by decreases in the percentage of capacity
leased for fuel oil tankage. For the three months ended September 30, 1999, the
overall percentage of capacity leased at this facility was 89% compared to 95%
for the same period of 1998, primarily reflecting a decrease in the percentage
of capacity leased for fuel oil tankage. The percentage of capacity leased for
fuel oil tankage decreased during the three and nine months ended September 30,
1999 as compared to the same periods of 1998 primarily as a result of the
OPEC/OPEC Plus Accord and backwardation. Ten fewer cargo vessels called at the
St. Eustatius facility during the three months ended September 30, 1999 than
during the same period of 1998, resulting in lower revenues from port charges,
which consist of dock charges, emergency response fees and other terminal
charges. Thirty more cargo vessels called at this facility during the nine
months ended September 30, 1999 than during the same period of 1998, resulting
in higher revenues from port charges.
Revenues from terminaling services at Point Tupper decreased
approximately $1.4 million, or 27.6% and $0.3 million, or 2.4%, during the three
and nine months ended September 30, 1999, as compared to the same periods of
1998. The decrease is due to a lower percentage capacity leased and fewer vessel
calls during the three and nine months ended September 30, 1999, and due to
lower throughput during the nine months ended September 30, 1999. The percentage
of tank capacity leased at Point Tupper decreased from 98% and 91% for the three
and nine months ended September 30, 1998 to 65% and 85% for the same periods of
1999. These decreases are primarily the result of the decision by a customer of
this facility, which is a participant in the Accord, not to renew its crude oil
storage contract at the end of the second quarter of 1999. Fewer vessels called
during the three and nine months ended September 30, 1999 as compared to the
same periods of 1998 which led to lower revenues from port charges at this
facility.
Page 13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
Revenues from bunker and bulk product sales were $29.0 million and
$74.7 million for the three and nine months ended September 30, 1999 compared to
$15.7 million and $51.4 million for the same periods of 1998, an increase of
$13.3 million, or 84.9% and $23.3 million, or 45.3%. These increases were due to
increases in the volume of bunkers and bulk product delivered and increases in
average selling prices. Metric tons of bunkers and bulk product delivered
increased 23.9% and 29.7% during the three and nine months ended September 30,
1999 as compared to the same periods of 1998. Average selling prices increased
49.5% and 12.1% when comparing the three and nine months ended September 30,
1999 with the same periods of 1998. These changes in average selling prices were
primarily the result of changes in the world oil markets which have been
significantly influenced by the Accord.
GROSS PROFIT
Gross profit for the three months ended September 30, 1998 and 1999 was
$8.0 million and $6.4 million, representing a decrease of $1.6 million, or
20.0%. Gross profit for the nine months ended September 30, 1998 and 1999 was
$20.9 million and $23.7 million, representing an increase of $2.8 million, or
13.3%. The decrease and the increase in gross profit for these periods are
primarily the result of the changes in our terminaling services revenue
discussed above. Additionally, we realized higher dollar gross margins on bunker
sales during the three and nine months ended September 30, 1999 as compared to
the same periods of 1998 due to higher volumes of bunker fuels delivered.
Gross profits from terminaling services are generally higher than gross
profits from bunker and bulk product sales. Our operating costs for terminaling
services are relatively fixed and generally do not change significantly with
changes in capacity leased. Additions or reductions in storage, throughput and
ancillary revenues directly impact our gross profit. Costs for the procurement
of bunker fuels and bulk petroleum products are variable and linked to global
oil prices. Our bunker and bulk product costs are also impacted by market supply
conditions, types of products sold and volumes delivered.
ADMINISTRATIVE EXPENSES
Administrative expenses were $2.2 million and $6.0 million for the
three and nine months ended September 30, 1999 as compared to $1.8 million and
$5.6 million for the same periods of 1998, representing increases of $0.4
million, or 23.0% and $0.4 million, or 6.9%. The increases during the three and
nine months ended September 30, 1999 are primarily the result of higher
personnel and related costs.
SPECIAL COMPENSATION EXPENSE
As more fully discussed in note 4 of notes to the consolidated
condensed financial statements included in Part I, Item 1 of this Report, we
recorded special compensation expense during the nine months ended September 30,
1999 of $4.1 million of which $2.2 million was a non-cash charge.
INTEREST EXPENSE
During the three and nine months ended September 30, 1999, we incurred
$3.2 million and $11.1 million of interest expense compared to $4.2 million and
$12.7 million for the same periods of 1998. Interest expense includes interest
accrued on our mortgage notes due in 2003, amortization expense related to
deferred financing costs, other interest expenses and bank charges. In May,
1999, we repurchased $34.0 million of the mortgage notes which resulted in lower
interest expense on this debt.
Page 14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
PROVISION FOR INCOME TAXES
Provision for income taxes was $0.06 million and $0.5 million for the
three and nine months ended September 30, 1999 as compared to $0.05 million and
$0.3 million for the same periods of 1998. The provision for income taxes has
been increased in 1999 in contemplation of a new tax agreement with the
governments of the Netherlands Antilles and island of St. Eustatius (see further
discussions regarding the tax agreement and taxation matters in our Form 10-K).
EXTRAORDINARY CHARGE RELATED TO EARLY EXTINGUISHMENT OF DEBT
As more fully discussed in note 4 of notes to the consolidated
condensed financial statements included in Part I, Item 1 of this Report, we
recognized an extraordinary charge of $4.7 million during the nine months ended
September 30, 1999 in connection with the repurchase of $34.0 million of our 11
3/4% mortgage notes. There was no income tax effect associated with this
extraordinary charge.
NET INCOME (LOSS)
Net income available to common stockholder was $1.1 million for the
three months ended September 30, 1999 and we have incurred a net loss of $2.2
million for the nine months ended September 30, 1999, as compared to net income
of $2.1 million and a net loss of $1.2 million for the same periods of 1998. The
changes in net income and net loss are attributable to the net effect of the
factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
As more fully discussed in note 4 of notes to the consolidated
condensed financial statements included in Part I, Item 1 of this Report, in
May, 1999 we repurchased in the open market a principal amount of $34.0 million
of our mortgage notes, leaving $101.0 million of mortgage notes outstanding. It
is anticipated that the repurchase of the mortgage notes will result in annual
reductions in interest payments of $4.0 million.
We have extended, in accordance with the provisions of the original
agreement with the lender, our $17.5 million revolving credit facility secured
by our accounts receivable and oil inventory. No draws have been made on this
facility. The revolving credit facility is available for working capital needs
and letter of credit financing, and it permits us to borrow in accordance with
our available borrowing base, which was estimated at $11.8 million at September
30, 1999. The revolving credit facility bears interest at the prime rate plus
0.50% per annum (8.75% at November 15, 1999) and will expire on November 27,
2000.
At September 30, 1999, we had cash and cash equivalents on hand of
$13.4 million compared to $13.9 million at December 31, 1998. We currently
believe that cash on hand, cash flow generated by operations, and amounts
available under the revolving credit facility will be sufficient to fund working
capital needs, to service debt, to make capital expenditures and to meet other
operating requirements, including any expenditures required by applicable
environmental laws and regulations. Our operating performance and ability to
service or refinance the mortgage notes will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond our control. We can give no assurances that our future operating
performance will be sufficient to service our indebtedness or that we will be
able to repay at maturity or refinance our indebtedness in whole or in part.
Page 15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
During October 1999, the Parent's Board of Directors declared a
distribution of $0.45 per share to the Parent's Class A common shareholders and
Class B subordinated shareholders meeting the target quarterly distribution. The
distribution was payable to shareholders of record as of the close of business
on October 29, 1999 and was paid on November 12, 1999 only to Class A common
shareholders. We paid a dividend to the Parent of $3.4 million on November 10,
1999 to enable the Parent to pay this distribution.
CASH FLOW FROM OPERATING ACTIVITIES
Net cash provided by operating activities was $18.6 million and $13.4
million for the nine months ended September 30, 1998 and 1999, respectively.
Cash flow from operations has been our primary source of liquidity during these
periods. Differences between net losses and positive operating cash flow have
resulted primarily from depreciation and amortization burdens, non-cash charges
and changes in various asset and liability accounts.
Accounts receivable and accounts payable were $17.5 million and $15.9
million, respectively, at September 30, 1999 as compared to $9.9 million and
$9.0 million, respectively, at December 31, 1998. The increase in accounts
receivable and accounts payable is primarily due to changes in the world oil
markets which have increased both our selling prices and related costs of bunker
and bulk product sales.
CASH FLOW FROM INVESTING ACTIVITIES
Net cash used in investing activities was $1.0 million and $6.3 million
for the nine months ended September 30, 1998 and 1999, respectively. Investing
activities during the nine months ended September 30, 1998 and 1999 included
purchases of property and equipment of $7.5 million and $6.3 million,
respectively. During the nine months ended September 30, 1998, we received gross
proceeds of $6.5 million from the sale of Statia Terminals Southwest.
CASH FLOW FROM FINANCING ACTIVITIES
Our cash flows from financing activities for the nine months ended
September 30, 1999 were impacted by our Parent's initial public offering of
equity which is more fully discussed in note 4 of notes to the consolidated
condensed financial statements included in Part I, Item I of this Report.
On August 12, 1999, we paid a dividend of $2.4 million to the Parent to
enable the Parent to pay a $2.4 million distribution to its common shareholders
on August 13, 1999.
During the nine months ended September 30, 1998, we utilized the net
proceeds from the sale of the Brownsville, Texas, Facility to pay $6.15 million
to our Parent which was subsequently used by our Parent to retire $6.15 million
of its Series D Preferred Stock.
CAPITAL EXPENDITURES
Our projected capital expenditure spending for 1999 is $7.8 million for
maintenance capital expenditures and $1.1 million for producing incremental
revenues. Additional spending is contingent upon the addition of incremental
terminaling business.
The following table sets forth capital expenditures and separates such
expenditures into those which produce, or have the potential to produce,
incremental revenue, and those which represent maintenance capital expenditures.
Page 16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
SUMMARY OF CAPITAL EXPENDITURES BY TYPE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------
1998 1999
------------------ --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Produce incremental revenues $ 491 21.2% $ 355 15.6%
Maintenance capital expenditures 1,829 78.8% 1,919 84.4%
------- ----- ------- -----
Total $ 2,320 100.0% $ 2,274 100.0%
======= ===== ======= =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------
1998 1999
------------------ --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Produce incremental revenues $ 711 9.5% $ 651 10.3%
Maintenance capital expenditures 6,778 90.5% 5,680 89.7%
------- ----- ------- -----
Total $ 7,489 100.0% $ 6,331 100.0%
======= ===== ======= =====
</TABLE>
INFORMATION TECHNOLOGY AND THE YEAR 2000
Some computer software and hardware applications and embedded
microprocessor, microcontroller or other processing technology applications and
systems use only two digits to refer to a year rather than four digits. As a
result, these applications could fail or create erroneous results in dealing
with certain dates and especially if the applications recognize "00" as the year
1900 rather than the year 2000. During 1997, we developed a Year 2000 plan to
upgrade our key information systems and simultaneously address the potential
disruption to both operating and accounting systems that might be caused by the
Year 2000 problem. The Year 2000 plan also provides for evaluations of the
systems of customers, vendors, and other third-party service providers and
evaluations of our non-information technology systems.
We have substantially completed the assessment phase of the Year 2000
plan. We have tested new Year 2000 compliant terminal operations software at our
facilities and are implementing corrective actions for deficiencies. We
anticipate that the Year 2000 compliant terminal operations systems will be
fully implemented during the fourth quarter of 1999. We have implemented a fully
integrated Year 2000 compliant finance, accounting, and human resources system.
In addition to being Year 2000 compliant, it is anticipated that this system and
the terminal operations software will significantly enhance systems
functionality.
Page 17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
We previously identified some components of our control systems at our
two terminals as not being Year 2000 compliant. We have installed, tested, and
continue to test, replacements of non-compliant components. These systems
measure, regulate, control, and maintain crude oil and petroleum product flow
and fire protection equipment at the terminals. We have evaluated the best means
to mitigate the possible adverse effects resulting from the potential failure of
these systems. We believe that in a worst case scenario, existing manual
overrides would prevent the failure of these systems from having a material
adverse effect on our operations.
In accordance with our Year 2000 plan, we have initiated a formal
communications process with other companies with which our systems interface or
rely on to determine the extent to which those companies are addressing their
Year 2000 compliance. In connection with this process, we have sent numerous
letters and questionnaires to third parties and are evaluating those responses
as they are received. Based upon information we have received and our review of
existing relationships with third parties, we do not currently anticipate that
any third-party non-compliance would have a material adverse effect on our
business, results of operations, or financial condition.
We have developed, tested, and continue to test, our company-wide
contingency plans for use in the event any of our systems or those of third
parties should fail.
Through September 30, 1999, we have spent $2.0 million in connection
with our Year 2000 remediation efforts and related enhancements of systems
functionality. Of this total, we have capitalized $1.8 million and expensed $0.2
million. During the remainder of 1999, we anticipate spending an additional $0.2
million to complete these efforts of which we anticipate capitalizing
substantially all $0.2 million. However, we cannot guarantee that these
estimates will be met and actual expenditures could differ materially from these
estimates.
Based upon information currently available to us, we believe our
efforts will succeed in preventing the Year 2000 issue from having a material
adverse effect on us. However, the pervasive nature of the Year 2000 issue may
prevent us from fully assessing and rectifying all systems that could have an
effect on our business, results of operations, or financial condition.
Page 18
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We periodically purchase refined petroleum products from our customers
and others for resale as bunker fuel, for small volume sales to commercial
interests and to maintain an inventory of blend stocks for our customers.
Petroleum product inventories are held for short periods, generally not
exceeding ninety days. We do not presently have any derivative positions to
hedge our inventory of petroleum products. The following table indicates the
aggregate carrying value of our petroleum products, which are sensitive to
changes in commodity prices, on hand at September 30, 1999 computed at average
costs, 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)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
---------------------------------
CARRYING AMOUNT FAIR VALUE
--------------- ----------
<S> <C> <C>
Petroleum Inventory:
Statia Terminals N.V. $ 1,705 $ 1,984
Statia Terminals Canada 259 331
--------- --------
Total $ 1,964 $ 2,315
========= ========
</TABLE>
Except for certain local operating expenses in Canadian dollars and
Netherlands Antilles guilders, all of our transactions are in U.S. dollars.
Therefore, we believe we are not significantly exposed to exchange rate
fluctuations. As all of our 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, we believe our exposure to interest
rate fluctuations is minimal.
Page 19
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Reference is made to Part I, Item 3. Legal Proceedings, in the
Company's 1998 Annual Report on Form 10-K. There have been no material
developments in the Company's legal proceedings since the Form 10-K was filed.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
Our web site is located at http://www.statiaterm.com.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27.1 Financial Data Schedule for Statia Terminals International N.V.
(for electronic filing only)
27.2 Financial Data Schedule for Statia Terminals Canada, Incorporated.
(for electronic filing only)
(b) Reports on Form 8-K.
None.
Page 20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrants have duly caused this Report to be signed on their behalf by the
undersigned thereunto duly authorized.
STATIA TERMINALS INTERNATIONAL N.V.
(Registrant)
Date: November 15, 1999
By: /S/ JAMES G. CAMERON
------------------------------------------
James G. Cameron
Managing Director
(As Authorized Officer)
By: /S/ JAMES F. BRENNER
------------------------------------------
James F. Brenner
Vice President and Treasurer
(As Authorized Officer and Principal
Finance and Accounting Officer)
STATIA TERMINALS CANADA, INCORPORATED
(Registrant)
Date: November 15, 1999
By: /S/ JAMES F. BRENNER
------------------------------------------
James F. Brenner
Vice President-Finance
(As Authorized Officer and
Principal Finance and
Accounting Officer)
Page S-1
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27.1 Financial Data Schedule for Statia Terminals International N.V.
(for electronic filing only)
27.2 Financial Data Schedule for Statia Terminals Canada, Incorporated.
(for electronic filing only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATIA
TERMINALS INTERNATIONAL N.V.'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001029101
<NAME> STATIA TERMINALS INTERNATIONAL N.V.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 13,385
<SECURITIES> 0
<RECEIVABLES> 18,352
<ALLOWANCES> (804)
<INVENTORY> 1,964
<CURRENT-ASSETS> 34,166
<PP&E> 235,922
<DEPRECIATION> (27,836)
<TOTAL-ASSETS> 245,372
<CURRENT-LIABILITIES> 27,772
<BONDS> 101,000
0
0
<COMMON> 6
<OTHER-SE> 116,594
<TOTAL-LIABILITY-AND-EQUITY> 245,372
<SALES> 74,664
<TOTAL-REVENUES> 122,992
<CGS> 66,336
<TOTAL-COSTS> 99,327
<OTHER-EXPENSES> 10,056
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,113
<INCOME-PRETAX> 3,123
<INCOME-TAX> 548
<INCOME-CONTINUING> 2,575
<DISCONTINUED> 0
<EXTRAORDINARY> (4,743)
<CHANGES> 0
<NET-INCOME> (2,168)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATIA
TERMINALS CANADA, INCORPORATED'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001029102
<NAME> STATIA TERMINALS CANADA INCORPORATED
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 446
<SECURITIES> 0
<RECEIVABLES> 2,158
<ALLOWANCES> (77)
<INVENTORY> 259
<CURRENT-ASSETS> 9,415
<PP&E> 32,491
<DEPRECIATION> (3,989)
<TOTAL-ASSETS> 38,780
<CURRENT-LIABILITIES> 5,190
<BONDS> 28,060
0
0
<COMMON> 0
<OTHER-SE> 5,530
<TOTAL-LIABILITY-AND-EQUITY> 38,780
<SALES> 60
<TOTAL-REVENUES> 14,908
<CGS> 51
<TOTAL-COSTS> 8,107
<OTHER-EXPENSES> 4,165
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,656
<INCOME-PRETAX> 126
<INCOME-TAX> 57
<INCOME-CONTINUING> 69
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
