SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
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, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission file numbers
333-18455 and 333-18455-01
STATIA TERMINALS INTERNATIONAL N.V.
(Exact name of registrant as specified in its charter)
Netherlands Antilles 52-2003102
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
Tumbledown Dick Bay
St. Eustatius, Netherlands Antilles
(011) 5993-82300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
STATIA TERMINALS CANADA, INCORPORATED
(Exact name of registrant as specified in its charter)
Nova Scotia, Canada 98-0164788
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
3817 Port Malcolm Road
Port Hawkesbury, Nova Scotia B0E 2V0
(902) 625-1711
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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. [Not Applicable].
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...........................................................12
ITEM 3. LEGAL PROCEEDINGS....................................................15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................16
PART II.......................................................................16
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY MATTERS ..16
ITEM 6. SELECTED FINANCIAL DATA..............................................17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND........
RESULTS OF OPERATIONS................................................19
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........38
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS..........................
ON ACCOUNTING AND FINANCIAL DISCLOSURE...............................39
PART III......................................................................40
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................40
ITEM 11. EXECUTIVE COMPENSATION...............................................45
ITEM 12. SECURITY OWNERSHIP...................................................49
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................50
PART IV.......................................................................52
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K......52
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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 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 our customers, interruption
of our operations caused by adverse weather conditions, the condition of the
U.S. economy, risks associated with our efforts to comply with year 2000
requirements, and other matters included in this Report. We do 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.
Frequently in this Report, especially when discussing our operations,
we refer to ourselves, Statia Terminals International N.V. and Statia Terminals
Canada, Incorporated, as "we" or "us". As the context requires, references to
"we" and "us" include all of our subsidiaries. References to the "Parent" are to
Statia Terminals Group N.V. which owns, directly or indirectly, all of our
common stock.
PART I.
ITEM 1. BUSINESS
INTRODUCTION AND HISTORY
We believe we are one of the five largest independent marine
terminaling companies in the world as measured in terms of storage capacity. At
the end of 1998, our tank capacity was 18.7 million barrels. We believe we are
the largest independent marine terminal operator handling crude oil imported
into the Eastern United States and Canada. Our two terminals are strategically
located at points of minimal deviation from major shipping routes. We provide
terminaling services for crude oil and refined products to many of the world's
largest producers of crude oil, integrated oil companies, oil traders, refiners,
petrochemical companies and ship owners. Our customers include Saudi Aramco and
Tosco. These customers transship their products through our facilities to the
Americas and Europe. We own and operate one storage and transshipment facility
located at the island of St. Eustatius, Netherlands Antilles, and one located in
Point Tupper, Nova Scotia, Canada. In connection with our terminaling business,
we also provide related value-added services, including:
o bunkering which is the supply of fuel to marine vessels for their own
engines;
o crude oil and petroleum product blending and processing; and
o bulk product sales.
Our operations began in 1982 as Statia Terminals N.V., with an oil
products terminal located on the island of St. Eustatius. In 1984, CBI
Industries, Inc., an industrial gases and contracting services company, acquired
a controlling interest in Statia Terminals N.V. We purchased Statia Terminals
Southwest, Inc. with its facility at Brownsville, Texas, in 1986. In 1990, CBI
Industries became the sole owner of Statia Terminals N.V. and Statia Terminals
Southwest. In 1993, we acquired the remaining shares not then owned by us of
Statia Terminals Point Tupper, Incorporated, located at Point Tupper. In 1996,
Praxair, Inc. acquired CBI Industries. In November 1996, Castle Harlan Partners
II L.P., members of our management and others acquired from Praxair all of the
outstanding capital stock of Statia Terminals N.V., Statia Terminals, Inc.,
their subsidiaries and certain of their affiliates. Castle Harlan Partners II
L.P. is a private equity investment fund managed by Castle Harlan, Inc., a
private merchant bank. At the same time, Statia Terminals Point Tupper,
Incorporated was amalgamated into Statia Terminals Canada, Incorporated. The
Parent, Statia Terminals International N.V. and Statia Terminals Canada,
Incorporated were organized for purposes of facilitating the acquisition by
Castle Harlan and our management. Statia Terminals International N.V. indirectly
owns all of the common stock of Statia Terminals Canada, and the Parent owns all
of the common stock of Statia Terminals International N.V. In July 1998, we sold
Statia
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Terminals Southwest to an unaffiliated third party purchaser.
Our day-to-day operations are managed at the respective terminal
locations. Our management team and employee base possess a diverse range of
experience and skills in the terminaling industry. This experience has permitted
us to better understand the objectives of our customers and to forge alliances
with those customers at our terminals to meet those objectives. Thus, we believe
that our operations extend beyond the traditional approach to terminaling. We
are a premier provider of the core services offered by other terminal operators.
In addition, unlike many of our competitors, we refrain from competing with our
customers and provide ancillary, value-added services tailored to support the
particular needs of our customers.
On February 12, 1999, the Parent filed documents with the Securities
and Exchange Commission to sell 7.6 million of its common shares (exclusive of
an over allotment option available to underwriters for an additional 760,000
shares of the Parent) in its initial equity public offering. The offering price
is expected to be between $19.50 and $20.50 per share, raising gross proceeds of
approximately $152 million (approximately $167 million if the over allotment
option is fully exercised). A portion of the proceeds of the offering will be
used to redeem approximately 25% (approximately 35% if the over allotment option
is fully exercised) of the 11-3/4% First Mortgage Notes co-issued by Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated.
INDUSTRY
Terminaling
The petroleum terminaling industry consists of two market segments. One
segment is characterized by the ownership and management of terminals inland
along major crude oil or petroleum product pipelines. This segment is primarily
engaged in the distribution of crude oil to inland refineries or of petroleum
products via pipeline, rail or truck. The second segment of the industry is
marine terminaling. This segment is primarily engaged in bulk storage and
transshipment of crude oil and petroleum products of domestic and overseas
producers, integrated oil companies, traders, refiners and distributors.
"Transshipment" is the process whereby customers transfer their products either
from a vessel to storage tanks for subsequent transfer to other vessels for
delivery to other destinations or from one ship to another ship across the dock.
We are engaged only in marine terminaling.
A substantial portion of crude oil and petroleum products storage
terminals are "captive," i.e.,
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they are owned by producers, refiners and pipeline operators and used almost
exclusively for their own operations. The independent terminaling operator
segment of the marine terminaling industry which is described in this prospectus
excludes these captive terminals. Captive terminal storage is only occasionally
made available to the general market and lacks certain competitive advantages of
independent operations, the most important of which is confidentiality.
Companies generally use marine liquids terminals for various reasons
including:
o to take advantage of economies of scale by transporting crude oil
or petroleum products in bulk to a terminal as near to the ultimate
destination as possible;
o to blend crude oil or petroleum products to meet market
specifications;
o to process products stored by their customers to add value for a
specific downstream market;
o to store crude oil or petroleum product temporarily; and
o to access fuel, in a process known as "bunkering", and supplies for
consumption by marine vessels.
Bulk Cargo Movement
Due to significant economies of scale, petroleum companies ship crude
oil from the Middle East, North Sea and West Africa in very-large or ultra-large
crude carriers to a transshipment point such as one of our terminals. These
very-large and ultra-large crude carriers, however, are too large to deliver
their cargo directly to many ports, including virtually all U.S. ports.
Therefore, most petroleum companies are forced to either partially or completely
"lighter" their cargo, which is the process by which liquid cargo is transferred
to smaller vessels, usually while at sea, or transship their cargo through a
terminal to other smaller vessels that can enter U.S., Canadian and Caribbean
ports. Both of our facilities can handle substantially all of the world's
largest fully-laden very-large and ultra-large crude carriers.
We believe that terminaling offers several advantages over lightering.
Terminaling generally provides more flexibility in the scheduling of deliveries
and allows our customers to deliver their products to multiple locations.
Terminaling is also generally safer and more environmentally sound than
lightering which is conducted at sea and may be impacted by vessel movement,
adverse weather and sea conditions. Lightering in U.S. territorial waters also
creates a risk of liability for owners and shippers of oil. Under the U.S. Oil
Pollution Act of 1990 and other state and federal legislation, significant
liability is imposed for spills in U.S. territorial waters. In Canada, similar
liability exists under the Canadian Shipping Act. Terminaling also provides
customers with the ability to access value added terminal services.
Lightering generally takes significantly longer than discharging at a
terminal. For example, a fully laden ultra-large crude carrier may require up to
seven days to fully discharge by lightering, but only 24 to 48 hours to fully
discharge at our terminals. In addition, terminals allow oil producers to store
oil and benefit from value-added services. The advantages of terminaling may be
offset in market conditions where the direct costs of terminaling are higher
than those of lightering. The direct cost differential of lightering versus
terminaling changes as charter rates change for ships of various sizes. Under
current market conditions, lightering in most instances costs less than
terminaling, primarily by
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allowing very-large and ultra-large crude carriers to cover the larger portion
of the total journey.
Blending
Increasingly stringent environmental regulations in the U.S., Canadian
and European marketplaces create additional demand for facilities that can blend
a variety of components into finished products that meet such regulations as
well as customers' specific requirements. Blending requires specialized
equipment and expertise. In addition, blenders must have a full range of
blendstocks available. The evolving reformulated gasoline market in the U.S.,
resulting primarily from emission-reduction regulations, including the U.S.
Clean Air Act, as amended, tightening specifications for distillates and the
increasing need for blended residual fuel are expected to enhance the growth of
the product blending segment of the terminaling industry. We regularly blend
components to make finished gasolines and various grades of residual fuel. Fuel
oils are also blended for utilities and other commercial uses and crude oils are
blended for refiners.
Processing
Atmospheric distillation is a process that applies heat to separate the
hydrocarbons in crude oil into certain petroleum products. Most simple
distillation units, including ours, produce at least three product streams:
naphtha, distillate (heating oil) and residual fuel. The profitability of
atmospheric distillation is dependent on feedstock, operating and other costs
compared to the value of the resulting products.
Seasonal and Opportunity Storage
Refiners and traders use storage facilities to take advantage of
seasonal movements and anomalies in the crude oil and petroleum products
markets. When crude oil and petroleum product markets are in contango by an
amount exceeding storage costs, the time value of money, the cost of a second
vessel plus the cost of loading and unloading at a terminal, the demand for
storage capacity at terminals usually increases. When crude oil and petroleum
products markets are in backwardation for any length of time, the traditional
users of terminal storage facilities are less likely to store product, thereby
reducing storage utilization levels. 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. We can
give no assurances, however, that the crude oil and petroleum products markets
will follow these patterns in the future.
Since late 1997, all segments of the crude oil and petroleum products
markets have generally been in contango. As a result, previously available
storage tank capacity began to diminish and storage tank lease rates began to
rise during 1998. 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. This contango condition followed an
unusually long period of backwardation for all segments of the crude oil and
petroleum products markets which stretched from the beginning of 1995 to late
1997. We believe that our business was adversely impacted during the
backwardation period. Several factors contributed to this unusually long
backwardation period, 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, and strong demand for petroleum products.
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During 1998 and 1999, members of the Organization of Petroleum
Exporting Countries in conjunction with certain non-OPEC members attempted to
reduce worldwide crude oil production with the intent of supporting oil market
prices for petroleum products. An agreement to reduce production was signed in
March 1999. Although we continue to monitor and evaluate oil market
developments, we are not aware of any matters emanating from the recent meetings
and agreement that may adversely impact our current terminaling business.
Bunker Sales
"Bunkering" means the sale and delivery of fuels to marine vessels to
be used for their own engines. The customer base and suppliers of bunker fuel
are located worldwide. Sales of bunker fuel, which includes diesel oil, gas oil
and intermediate fuel oil, are driven primarily by the proximity of the supply
location to major shipping routes and ports of call, 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 bunker
fuels are purchased in bulk lots of various grades and 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 fuel business was concentrated in those ports
with high ship traffic and near primary sources of refined marine fuels. In
recent years, the number of refiner/suppliers in many ports has diminished and
stricter environmental laws have been enacted, primarily in the U.S., Canada and
Europe. As a result, the sale of bunker fuel has increased at locations outside
the U.S., Canada and Europe.
As many vessels have large bunker fuel tanks that allow them to travel
long distances between refueling stops, we compete with bunker delivery
locations around the world. In the Western Hemisphere, there are significant
alternative bunker locations, including on the U.S. East coast and Gulf coast
and in Panama, Puerto Rico, Aruba, Curacao, Halifax, Rotterdam and various North
Sea locations.
SERVICES AND PRODUCTS
We provide storage services in tanks which are designed to meet our
customers specifications and a full range of terminaling-related services,
including product blending, heating, mixing, separation, and removal of water
and other impurities. Our facilities can handle a variety of petroleum
materials, including light, medium and heavy crude oils, residual fuel oil,
gasoline, gasoline blending components, diesel, marine gas oil, marine diesel
oil, aviation fuel, bunker fuel, and butane. Residual fuel oil is comprised of
the residue from the distillation of crude oil after the light oils, gasoline,
naphtha, kerosene and distillate oils are extracted. We also handle petroleum
diluents, lubricating oils, butane and various other petroleum products.
We own seven berthing locations where vessels may load and discharge
crude oil and petroleum products at our St. Eustatius facility and two berthing
locations at our Point Tupper facility. With these berthing locations and our
uniquely designed mooring facilities and piping configurations, we can handle
oil tankers of various sizes, from relatively small to some of the largest in
the world and provide services such as simultaneous discharging and loading of
vessels and "across the dock" transfers. We charter tugboats and own other
marine equipment to assist with docking operations and provide port services.
We specialize in "in-tank" or "in-line" blending with computer-assisted
blending technology that assures product integrity and homogeneity. Our
facilities can blend and mix a full range of petroleum products including
gasoline, residual fuel oils, including bunker fuel, and crude oil. We believe
our blending capability has attracted certain customers who have leased capacity
primarily for blending purposes and who have contributed to our bunker fuel and
bulk product sales. We have worked closely with residual fuel oil market
participants, to assist them with their blending operations.
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We own storage spheres for butane at both of our facilities that
enhance our gasoline blending capabilities. We also own an atmospheric
distillation unit for refining at St. Eustatius. We use the storage spheres and
the distillation unit to improve product quality and add value to our customers'
products.
As part of our petroleum product sales, we supply bunker fuel in the
Caribbean and in Nova Scotia, Canada. At and around St. Eustatius, our 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. In the first quarter of 1996, we initiated bunker fuel
service operations at Point Tupper with deliveries via pipeline at the terminal
berths and by truck in the surrounding Strait of Canso area. During 1996, 1997
and 1998, 615, 575 and 582 vessels, respectively, received bunker fuels from us
in the Caribbean. During this period, we have concentrated our sales and
marketing efforts in the Caribbean to sell larger volumes of fuel per vessel
call. During this period the average volume of bunker fuel delivered per vessel
has increased as has the total volume delivered, while the number of vessels
bunkering at our facility has varied from year to year. In Canada during the
1996, 1997 and 1998, 19, 10 and 3 vessels, respectively, received bunker fuels
from us. During this period we were generally unable to secure an adequate
source of supply and, therefore, we leased storage capacity that we had
previously allocated to storage of bunker fuel.
We purchase small quantities of petroleum products primarily to
maintain an inventory of certain blendstocks and bunker fuel. From time to time
we purchase and sell product to accommodate customers who wish to dispose of
small quantities of product or 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, refiners and terminals to have access to
spill response capabilities. At St. Eustatius, we own and operate the M/V Statia
Responder (formerly known as the M/V Megan D. Gambarella), a 194 foot
multi-function emergency response and maintenance vessel with spill response and
firefighting capabilities and underwater diving support. 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 to contain a spill within a certain
area and release absorbent materials, support our emergency and spill response
capability at St. Eustatius. 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 for
emergency and spill response.
Statia Terminals Canada owns and operates two fully-equipped spill
response vessels on Cape Breton Island in Canada, one located at Point Tupper
and the other located in Sydney, Nova Scotia. In the event of an oil spill,
these vessels can deploy containment and clean-up equipment including skimmers
to retrieve product from the surface of the water, booms to contain spills, and
absorbents to absorb spilled product. Statia Terminals Canada charters tugs,
mooring launches and other vessels to assist with the movement of vessels
through the Straight of Canso, the safe berthing of vessels at Point Tupper and
other services to vessels. We believe that the presence of fully equipped spill
response vessels in port is important in attracting customers to our facilities.
Our customers benefit by ready access to this equipment, and we charge each
vessel that calls at our St. Eustatius facility a fee for this capability.
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PRICING
Storage and throughput pricing in the petroleum terminaling industry is
subject to a number of factors, including variations in petroleum product
production and consumption, economic conditions, 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:
o the location;
o the quality of service; and
o the 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.
In developing our pricing strategy, we consider petroleum market
conditions and oil price trends. We also take into consideration the quality and
range of our services compared to those of competing terminals, prices
prevailing at the time in the terminaling market in which we operate, and cost
savings from shipping to our terminal locations. In situations requiring special
accommodations for the customer (e.g. unique tank modification or construction
of new tanks), we may price on a rate-of-return basis.
We enter into written storage and throughput contracts with customers.
During 1998, approximately 64% of our storage and throughput revenues, excluding
related ancillary services, were attributable to long term storage and
throughput agreements of one year or more. Our long term storage and throughput
agreements are individually negotiated with each customer. The typical agreement
specifies tank storage volume, the commodities to be stored, a minimum monthly
charge, an excess throughput charge for throughput volume in excess of the
volume specified in the storage contract and a price escalator. In addition,
there may be 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 tank storage volume of commodities. As an incentive for the user to
throughput additional barrels, the excess throughput charge is typically a lower
rate per barrel than the rate per barrel utilized in establishing the minimum
monthly charge. Year-to-year escalation of charges is typical in long term
contracts.
COMPETITION
The main competition to crude oil storage at our facilities is from
lightering. Under current market conditions, lightering in most instances costs
less than terminaling. The price differential between lightering and terminaling
is primarily driven by the charter rates for vessels of various sizes because
terminaling generally occupies a very-large or ultra-large crude carrier for a
shorter period of time than lightering. A very-large crude carrier can be
lightered in approximately four days if lightering vessels are available for
continuous back-to-back operations and the weather is good. However, if fewer
lightering vessels are available or bad weather interrupts, it can take longer
to load or discharge product. Depending on charter rates, the longer charter
period associated with lightering is generally offset by various costs
associated with terminaling including storage costs, dock charges and spill
response fees. In addition,
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terminaling reduces the risk of environmental damage associated with lightering.
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. We are 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 geographic and other logistical requirements 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.
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.
In our bunkering business, we compete with ports offering bunker fuels
to which, or from which, each vessel travels or bypasses.
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CUSTOMERS
Our customers include many of the world's largest producers of crude
oil, integrated oil companies, oil traders, refiners, petrochemical companies
and ship owners.
We presently have several significant long term contracts at St.
Eustatius, including a five-year contract with a five-year renewal option at the
customer's discretion with Bolanter Corporation, N.V., which became effective in
early 1995. Bolanter Corporation is a subsidiary of Saudi Aramco. This storage
and throughput contract commits all of the St. Eustatius facility's current
crude oil storage capacity to Bolanter, which represents approximately 44% of
the terminal's total capacity and 7.4% of our 1998 revenues. An additional 7.7%
of our 1998 revenues were derived from parties unaffiliated with Bolanter but
generated by the movement of Bolanter's products through the St. Eustatius
terminal. In addition, revenues from another affiliate of Saudi Aramco which
received bunker fuels at our St. Eustatius facility accounted for 1.5% of our
total 1998 revenues.
In addition, we presently have several significant long term contracts
at Point Tupper, including a five-year contract with two five-year renewal
options at the customer's discretion, with a major refiner, a subsidiary of
Tosco Corporation. This contract became effective in August 1994 and commits
approximately 49% of the present tank capacity at Point Tupper. It represented
approximately 7.1% of our 1998 revenues, with an additional 1.9% of our 1998
revenues being derived from parties unaffiliated with Tosco but generated by the
movement of Tosco's products through the Point Tupper terminal. Tosco recently
exercised its option to extend the contract through 2004.
In addition, we have another terminaling services customer which
represented 5.2% of our 1998 revenues. We also supply bunker fuel to a customer
which represented 8.5% of our 1998 revenues. No other customer accounted for
more than 5% of our total 1998 revenues.
SUPPLIERS
We presently have a bunker fuel supply contract at St. Eustatius with a
major state-owned oil producer, which became effective in 1992 and was recently
renewed until February 28, 2000. This contract presently provides us with the
majority of the fuel oil necessary to support our bunker and bulk product sales
requirements. We procure the balance of our fuel oil and other supplies
necessary for our operations from various sources. We believe that suitable
alternate sources of supply are readily available from which we can procure fuel
oil should deliveries under our current contract be interrupted or are not
renewed. However, such alternative sources of supply are subject to changing oil
market conditions and prices.
At Point Tupper, we are attempting to secure an adequate source of
supply for our bunker fuel sales business to enable significant increases in
volumes for delivery to vessels calling at this facility.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
Our subsidiaries are subject to comprehensive and periodically changing
environmental, health and safety laws and regulations within the jurisdictions
of our operations, including those governing oil spills, emissions of air
pollutants, discharges of wastewater and storm waters, and the disposal of
non-hazardous and hazardous waste. We believe we are presently in substantial
compliance with applicable laws and regulations governing environmental, health
and safety matters. We have taken measures to
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mitigate our exposure to environmental risks including automation and
monitoring equipment, employee training, maintaining our own emergency and spill
response equipment at each terminal and maintaining liability insurance for
certain accidental spills. The following table shows our capital expenditures in
millions of dollars for compliance with environmental laws and regulations and
routine operational compliance costs for the periods indicated.
Capital Routine Operational
Period Expenditures Costs
------ ------------ -------------------
1996 $1.3 $0.4
1997 1.3 0.2
1998 2.7 0.9
St. Eustatius
Until recently, the St. Eustatius terminal has not been subject to
significant environmental, health and safety regulations, and health, safety and
environmental audits have not been required by law. No environmental or health
and safety permits are required for the St. Eustatius terminal except under the
St. Eustatius Nuisance Ordinance. A license under the St. Eustatius Nuisance
Ordinance was issued to us 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. To date, we have complied with the license requirements
and do not expect further compliance to have a material adverse effect on our
business and financial condition, results of operations or our ability to make
distributions. We will address future improvements to the facility that may be
necessary to comply with new environmental, health and safety laws and
regulations, if any, as they arise.
The St. Eustatius terminal management and consultants supervise the on
and off-site disposal and storage of hazardous waste materials. The nature of
our business is such that spills of crude oil or petroleum products may occur at
the terminal periodically. Over the past three years, all spills at the St.
Eustatius terminal were reported to the appropriate environmental authorities
and have not resulted in any citations by such authorities for violations of
law. We have remediated all such spills.
Two government inspections were performed during each of 1997 and 1998
with no citations issued.
Point Tupper
The Point Tupper terminal is subject to a variety of environmental,
health and safety regulations administered by the Canadian federal government
and the Nova Scotia Department of Environment ("NSDOE"). While air emission
monitoring is not required by the NSDOE, surface water discharge outfall and
groundwater monitoring are required and are performed on a routine basis in
accordance with current requirements of the permit issued by NSDOE. We believe
we have all requisite environmental permits in place. The principal permit is
the Industrial Waste Treatment Works Permit last issued by the NSDOE on March 8,
1999, and expiring December 31, 2008. The nature of our business is such that
spills of crude oil or refined products may occur at the terminal periodically.
Over the past three years, all spills at the Point Tupper terminal were reported
and remediated to the satisfaction of the
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applicable agencies and have not resulted in any citations by such authorities.
Statia Terminals Canada has recently discovered a leak in one tank, has emptied
the tank and is in the process of repairing it and remediating the spillage.
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 under Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Environmental, Health
and Safety Matters."
EMPLOYEES
As of February 28, 1999, excluding contract labor, we employed 203
people. Forty employees were located in the U.S., 98 on St. Eustatius, and 65 at
Point Tupper. A majority of our employees at both the St. Eustatius and Point
Tupper facilities are unionized. We believe that our relationships with our
employees are good. We have never experienced a material labor related business
disruption.
St. Eustatius
The Windward Islands Federation of Labor ("WIFOL") represents the
majority of hourly workers at St. Eustatius. We entered into an agreement with
WIFOL on June 1, 1993, which extended to May 31, 1996. The agreement provided
for automatic one year extensions if neither party requested an amendment. We
have not requested or received any requests for an extension. We believe that
the agreement no longer binds us, but we continue to provide pay and benefits to
the hourly workers as if the agreement were still in effect. In early 1997,
management and a select group of supervisory and office personnel at St.
Eustatius discussed organizing into a collective bargaining group. We believe
these matters will not materially impact our business and financial condition
or results of operations.
Pt. Tupper
The Communications, Energy and Paperworkers Union ("CEPU") represents a
majority of Point Tupper's hourly work force. During 1995, we signed a
three-year agreement with CEPU that expired on September 30, 1998. We are
currently negotiating with CEPU and continuing our operations without an
agreement. We believe these matters will not materially impact our business and
financial condition or results of operations.
We have 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.
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ITEM 2. PROPERTIES
ST. EUSTATIUS, NETHERLANDS ANTILLES
We own a terminaling facility located on the Netherlands Antilles
island of St. Eustatius which is located at a point of minimum deviation from
major shipping routes. St. Eustatius is approximately 1,900 miles from Houston,
1,500 miles from Philadelphia, 550 miles from Amuay Bay, Venezuela, and 1,100
miles from the Panama Canal. This facility is capable of handling a wide range
of petroleum products, including crude oil and refined products. A three-berth
jetty, a two-berth monopile with platform and buoy systems, a floating hose
station and an offshore single point mooring buoy with loading and unloading
capabilities serve the terminal's customers' vessels.
This facility has 27 tanks with a total capacity of 5.2 million barrels
dedicated to fuel oil storage, 15 tanks with total capacity of 1.1 million
barrels dedicated to petroleum products storage, a 15,000 barrel butane sphere,
and eight tanks totaling 5.0 million barrels dedicated to multigrade crude oil
storage. The fuel oil and petroleum product facilities have in-tank and in-line
blending capability. The crude storage is the newest portion of the facility,
construction of which was completed in early 1995 by a subsidiary of Chicago
Bridge & Iron Company. The storage tanks comply with construction standards that
meet or exceed American Petroleum Institute, National Fire Prevention
Association and other material industry standards. Crude oil movements at the
terminal are fully-automated. In addition to the storage and blending services
at St. Eustatius, this facility has the flexibility to utilize certain storage
capacity for both feedstock and refined products to support its atmospheric
distillation unit, which is capable of processing up to 15,000 barrels per day
of feedstock, ranging from condensates to heavy crude oil.
The St. Eustatius facility can accommodate the world's largest vessels
for loading and discharging crude oil. The single point mooring system can
handle a single fully-laden vessel of up to 520,000 dead weight tons, which is a
marine vessel's cargo carrying capacity, with a draft of up to 120 feet. The
single point mooring system can discharge or load at rates in excess of 100,000
barrels of crude oil per hour. There are six pumps connected to the single point
mooring system, each of which can pump up to 18,000 barrels per hour from the
single point mooring system 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 dead weight tons with a draft of up to 55 feet.
The north berth of the jetty can handle vessels of up to 80,000 dead weight tons
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 our gasoline
blending customers, we have recently completed installation of a monopile with
platform that can handle vessels of up to 40,000 dead weight tons with a draft
of up to 46 feet. The monopile with platform can handle two vessels
simultaneously and can discharge or load 12,000 barrels per hour of refined
products. In addition, this facility has a floating hose station that we use to
load bunker fuels onto our barges for delivery to customers. We believe that the
speed at which our facility at St. Eustatuis can load crude oil and petroleum
products off of or onto vessels gives us a competitive advantage due to
reductions in the time ships spend idle in ports.
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 of our available capacity
that we leased at the St. Eustatius facility for each of the years ended 1996,
1997, and 1998 was 80%, 76% and 92% respectively. We believe that cost
advantages associated with the location of our facility, shipping economies of
scale, product blending capabilities and the availability of a full range of
ancillary services at the facility has driven the demand for our storage
services. Storage capacity at the St. Eustatius facility has grown from 2.0
million barrels of fuel oil storage in 1982 to its present
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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 our success in leasing
the facility's tankage. We have generally leased our refined product tanks at or
near full capacity on a continuous basis. We have worked closely with residual
fuel oil market participants to assist them with their blending operations by
offering a selection of product blending components and computerized blending
services. We have a five-year contract, which is subject to renewal for an
additional term of 5 years at the customer's discretion, with Bolanter
Corporation, a subsidiary of Saudi Aramco, for 5.0 million barrels of dedicated
crude oil storage. Bolanter uses this storage to service a number of its
customers in the Western Hemisphere. The terminal enables Bolanter to transport
various grades of crude oil closer to market, at competitive transportation
rates.
Recognizing the strategic advantage of its location in the Caribbean
near major shipping lanes, we deliver bunker fuel to vessels at our 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. Four of our barges support the bunker fuel sales
operation.
During 1998, we commissioned an 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. We believe
that the capability to process feedstock for third parties may create
opportunities for us.
We own and operate all of the berthing facilities at our St. Eustatius
terminal for which we charge vessels a dock charge. 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.
POINT TUPPER, NOVA SCOTIA, CANADA
We own a terminaling facility located at Point Tupper in the Strait of
Canso, near Port Hawkesbury, Nova Scotia, Canada which is located at a point of
minimal deviation from major shipping routes. Point Tupper is approximately 700
miles from New York City, 850 miles from Philadelphia and 2,500 miles from
Mongstad Terminal in Norway. This facility operates the deepest independent
ice-free marine terminal on the North American Atlantic coast, with access to
the U.S. East coast, Canada and the Midwestern U.S. via the St. Lawrence Seaway
and the Great Lakes system. The Point Tupper facility can accommodate
substantially all of the largest fully laden very-large and ultra-large crude
carriers for loading and discharging.
We renovated our facilities at Point Tupper and converted a former oil
refinery site into an independent storage terminal. This work, performed
primarily by a subsidiary of Chicago Bridge & Iron Company, began in 1992 and
was completed in 1994. The tanks were renovated to comply with construction
standards that meet or exceed American Petroleum Institute, National Fire
Prevention Association and other material industry standards.
We believe that our dock at Point Tupper is one of the premier dock
facilities in North America. The outer berth of the Point Tupper facility's
dock, Berth One, can handle fully laden vessels of up to
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400,000 dead weight tons with a draft of up to 84 feet. At Berth One,
approximately 75,000 barrels per hour of crude oil, 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 dead
weight tons with drafts of up to 40 feet. At Berth Two, approximately 25,000
barrels per hour of crude oil, 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. Liquid movement at the terminal is fully automated. The
Point Tupper facility can accommodate two vessels simultaneously. We 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 dock 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, 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 petroleum products, including gasoline,
gasoline blend components, diesel and distillates. During 1997, approximately
two-thirds of the storage tanks dedicated to petroleum products were converted
to crude oil storage. The facility also has a 55,000 barrel butane storage
sphere. This sphere is one of the largest of its kind in North America, and we
expect it to enhance our petroleum products blending operations. The average
capacity leased at the Point Tupper facility over each of the last three years
ended 1996, 1997, and 1998 was 55%, 70% and 93%, respectively.
In order to comply with our safe handling procedures and Canadian
environmental laws, we own and operate two fully equipped spill response vessels
on Cape Breton Island, one located at Point Tupper and the other located in
Sydney. In addition to these vessels, we have the 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 with
another response organization. Our customers benefit by ready access to the
equipment. In 1995, one of our subsidiaries 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 us a
subscription fee for access to the services provided by the spill response
organization, even if they do not dock at our 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, a predecessor to one of our subsidiaries entered into a long
term storage contract with a large oil refiner, Tosco Corporation. The contract
contains two five-year renewal options at the customer's discretion. The
contract commits 3.6 million barrels of crude oil storage at the Point Tupper
facility, representing approximately 49% of the terminal's total capacity. Tosco
recently exercised its option to extend the contract through 2004.
A portion of the remaining tanks at the Point Tupper facility,
initially designed for the storage of gasoline, distillates, aviation fuel and
other petroleum products, was converted during 1997 to crude oil storage and
leased. Currently, 71% of this facility's tankage is dedicated to crude oil, 23%
to clean, refined products and 6% to residual fuel oil.
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In the first quarter of 1996, we initiated the offering of bunkering
services at Point Tupper. Delivery of bunker fuel at Point Tupper is currently
being made via pipeline to vessels transferring cargo at the berths and via
truck to vessels in the surrounding area.
In 1998, we entered into a 25 year land lease on a portion of our land
at Point Tupper and a 12 year product storage agreement with Sable Offshore
Energy, Inc. The lease provides Sable options to extend for two additional 25
year periods. Sable is leasing the land, building a natural gas liquids
fractionation plant, storage and rail handling facilities on the land, and
leasing over 500,000 barrels of our existing storage capacity. The fractionation
plant will process an average of 20,000 barrels per day of natural gas liquids
extracted from the Sable Island region of Nova Scotia, Canada, and delivered via
pipeline for the fractionation plant from Sable's Goldboro Gas Processing Plant
in Guysborough County, Nova Scotia. While the natural gas liquid volumes will
vary according to field source and production rates, the fractionation plant is
expected to produce about 10,300 barrels per day of condensate (light oil),
6,250 barrels a day of propane, and about 3,250 barrels per day of butane. The
fractionation plant is currently under construction and is expected to be
completed by November 1999.
We are finalizing a land exchange agreement with the Province of Nova
Scotia conveying certain land we own 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 our remaining property at Point
Tupper. The land being transferred to the Province is principally the
approximately 1,296 acres comprising Lake Landrie and adjacent watershed land.
ITEM 3. LEGAL PROCEEDINGS
Global Petroleum Corp. and one of its affiliates sued us in December of
1993 seeking the release of certain petroleum products we were holding to secure
the payment of invoices. The Supreme Court of Nova Scotia ordered the release of
the products once Global posted a $2.0 million bond. Global claimed damages of
$1.2 million for breach of contract, and we counterclaimed for breach of
contract and payment of approximately $2.0 million of overdue invoices. In April
1996, Global, Scotia Synfuels Limited and their related companies sued CBI
Industries and us in the Supreme Court of Nova Scotia alleging $100 million in
damages resulting from misrepresentation, fraud and breach of fiduciary duty.
The plaintiffs allege these claims arose out of the level of costs and expenses
paid to subsidiaries of CBI Industries and others for the reactivation of the
Point Tupper facility and the subsequent sale of the plaintiff's diluted shares
in the entity owning the Point Tupper facility to one of our affiliates, which
was at that time a subsidiary of CBI Industries. These proceedings are currently
in the discovery phase.
In May 1994, the U.S. Department of Justice sued two of our
subsidiaries 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 that had been loaded by one of our subsidiaries at St.
Eustatius but was not affiliated with us. On April 16, 1998, the U.S. District
Court ruled that it lacked jurisdiction over such subsidiary and dismissed it
from the case.
We believe the allegations made in these proceedings are factually
inaccurate and intend to vigorously contest these claims. In connection with
the Castle Harlan acquisition, Praxair agreed to indemnify us against damages
relating to the proceedings described above. While we can not estimate any
ultimate liability or guaranty that Praxair will pay all of the indemnified
damages without dispute or delay, we believe these proceedings will not
materially affect our business and financial condition or results of
operations.
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We are involved in various other claims and litigation related to the
ordinary conduct of our business. Based upon our analysis of legal matters and
our discussions with legal counsel, we believe that these matters will not
materially impact our business and financial condition, results of operations or
ability to make distributions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY MATTERS
Not applicable.
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ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands)
The following table sets forth selected financial data for the periods
and as of the dates indicated. In January 1996, our former parent, CBI
Industries, was acquired by Praxair. The statement of operations data for each
of:
othe period from January 1, 1996 through November 27, 1996
othe period from November 27, 1996 through December 31, 1996, and
othe years ended December 31, 1997 and 1998
have been derived from and are qualified by reference to our audited
consolidated financial statements included elsewhere in this filing. The
statement of operations data for the years ended December 31, 1994 and 1995 have
been derived from the audited combined financial statements of Statia Terminals,
Inc. and its subsidiaries and affiliates not included in this filing. The
summary historical consolidated financial data set forth below should be read in
conjunction with, and is qualified by reference to, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements and accompanying notes thereto and other financial
information included elsewhere in this filing.
<TABLE>
<CAPTION>
Pre-Castle Harlan Acquisition Post-Castle Harlan Acquisition
----------------------------------------------------------------------
January 1, November 27,
----------------------- 1996 1996
Pre-Praxair Acquisition Through Through
November 27, December 31,
Year Ended December 31, Year Ended December 31,
----------------------- -----------------------
1994 1995 (5) 1996 1996 1997 1998(6)
---- -------- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues $132,666 $135,541 $140,998 $ 14,956 $142,499 $136,762
Cost of services and products sold 110,185 117,722 129,915 12,924 122,944 106,688
Gross profit 22,481 17,819 11,083 2,032 19,555 30,074
Administrative expenses 5,345 6,957 8,282 413 6,348 7,315
Operating income 17,136 10,862 2,801 1,619 13,207 22,759
Loss (gain) on disposition of property and
equipment (34) 59 (68) - (109) 1,652
Interest expense 3,114 4,478 4,187 1,613 16,874 16,851
Provision for income taxes 1,219 390 629 132 780 320
Net income (loss) available to common
stockholder 10,944 4,569 (2,682) (95) (3,879) 4,524
Balance Sheet Data:
Total assets (1) 197,357 230,283 N/A 260,155 244,228 243,178
Long-term debt 56,400 51,600 N/A 135,000 135,000 135,000
Stockholder's equity subject to reduction (2) - - N/A 20,000 20,000 -
Preferred stock 18,057 18,589 N/A - - -
Total stockholder's equity 86,965 91,001 N/A 75,405 71,826 88,700
Net cash flow from (used in):
Operating activities 25,706 11,476 9,108 2,225 12,452 19,532
Investing activities (25,353) (36,908) (102,890) (177,033) (12,933) (4,092)
Financing activities (1,679) 26,477 92,998 184,072 (2,700) (7,650)
Operating data:
Adjusted EBITDA (3) 27,921 28,720 20,822 2,573 23,774 33,857
Consolidated fixed charge coverage ratio
under the indenture (4) - - - 1.69x 1.45x 2.0x
Maintenance capital expenditures 6,867 9,975 12,887 1,203 4,401 9,000
Capacity (in thousands of barrels) 15,387 20,387 20,387 20,387 20,387 19,566
Percentage capacity leased 87% 76% 68% 74% 70% 91%
Throughput (in thousands of barrels) 60,630 109,805 81,994 13,223 118,275 119,502
Vessel calls 1,063 973 922 108 1,030 1,027
</TABLE>
(1) The decrease in total assets between December 31, 1996 and 1997 is
primarily the result of lower cash, accounts receivable, inventory and
net property and equipment balances.
(2) On July 29, 1998 a subsidiary of Statia Terminals International sold
the Brownsville facility and an allowed restricted payment of $6,150
was made from Statia Terminals International to the Parent for the
redemption of a portion of the Parent's Series D Preferred Stock.
During 1998, we reclassified our emergency spill response vessel M/V
Statia Responder from its original asset held for sale classification
to property and equipment as we are no longer actively seeking buyers
for the vessel. Certain of the Parent's preferred stock agreements
required it to utilize any net proceeds from the sale of the vessel
to redeem certain of the Parent's preferred stock. Accordingly,
stockholder's equity subject for reduction has been reduced for these
two items.
(3) Adjusted EBITDA is defined under the indenture as the sum of (a)
income (loss) before provision for income taxes, (b) interest expense
(c) depreciation and amortization of certain intangible assets, (d)
certain non-cash charges, and (e) the portion of the First Salute
lease payments that represents interest
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Notes to Selected Consolidated Financial Data-(Continued)
- - ---------------------------------------------
expense for the periods prior to the November 27, 1996 purchase
transaction. The amount of the First Salute related interest expense
excluded from Adjusted EBITDA was $5,741 for the year ended December
31, 1995 and $5,600 for the period ended November 27, 1996. Adjusted
EBITDA excludes $3.0 million of non-cash, stock-based compensation
recognized on November 27, 1996 immediately prior to consummation of
the Castle Harlan acquisition. 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
our debt servicing ability.
(4) The Consolidated Fixed charge coverage ratio is the ratio of Adjusted
EBITDA to Fixed Charges both computed as set forth in the indenture to
the mortgage notes.
(5) Prior to January 12, 1996, we were a wholly owned subsidiary of CBI
Industries. On January 12, 1996, pursuant to the merger agreement
dated December 22, 1995, CBI Industries became a wholly owned
subsidiary of Praxair. This transaction was reflected in our
consolidated financial statements as a purchase, effective January 1,
1996. On November 27, 1996, Castle Harlan, members of our management
and others acquired us from Praxair. This transaction is reflected in
our 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.
(6) Includes the operations of Statia Terminals Southwest through June 30,
1998.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
For purposes of the discussion below, reference is made to our
consolidated balance sheets as of December 31, 1997 and 1998, and our
consolidated income and cash flow statements for the period January 1, 1996
through November 27, 1996, after our acquisition by Praxair. Reference is also
made to our consolidated income and cash flow statements for the period November
27, 1996 through December 31, 1996, after the acquisition by Castle Harlan, our
management and others, and the years ended December 31, 1997 and 1998. We
prepare our financial statements in accordance with U.S. generally accepted
accounting principles.
To facilitate a meaningful discussion of our comparative operating
performance for the years ended December 31, 1996, 1997 and 1998, this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" presents financial information 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 principles in the U.S. call for the separate
reporting of our new company, after the Castle Harlan acquisition, and our
predecessor company, both before and after the Praxair acquisition. A solid
black line in certain tables separates financial information that may not be
comparable across periods.
Substantially all of our transactions are denominated in U.S. dollars.
All figures are in U.S. dollars unless otherwise indicated.
Overview of Operations
We began our operations in 1982 as Statia Terminals N.V., a Netherlands
Antilles corporation, operating an oil products terminal located on the island
of St. Eustatius. In 1984, CBI Industries, an industrial gases and contracting
services company, acquired a controlling interest in Statia Terminals N.V. In
1986, Statia Terminals N.V. purchased Statia Terminals Southwest, with its
facility at Brownsville, Texas. In 1990, CBI Industries became the sole owner of
Statia Terminals N.V. and Statia Terminals Southwest. In 1993, we acquired full
control of Statia Terminals Point Tupper, Incorporated, located at Point Tupper,
Nova Scotia.
In January 1996, Praxair acquired CBI Industries. In November 1996,
Castle Harlan, our management and others acquired from Praxair all of the
outstanding capital stock of Statia Terminals N.V., Statia Terminals, Inc.,
their subsidiaries and certain of their affiliates. Castle Harlan is a private
equity investment fund managed by Castle Harlan, Inc., a private merchant bank.
At the same time, Statia Terminals Point Tupper was amalgamated into Statia
Terminals Canada. Statia Terminals Canada and Statia Terminals International
were organized for purposes of facilitating the Castle Harlan acquisition. In
July 1998, we sold Statia Terminals Southwest to an unaffiliated third party
purchaser.
During 1992, we invested in additional terminal facilities located at
Point Tupper, Nova Scotia. We completed refurbishment of this 7.4 million barrel
facility during 1994. The total capital investment was $74.1 million. At St.
Eustatius during the fourth quarter of 1993, we commenced construction of five
million barrels of crude oil storage and a single point mooring buoy, which was
completed and leased during the first quarter of 1995, with a total capital
investment of $107.5 million. Over the three-year period from 1993 to 1995, we
added crude oil storage and related services to our established fuel oil,
petroleum products, and other services. In addition to blending and other
ancillary services, we added
Page 19
<PAGE>
marine emergency response services at each of our facilities and added limited
refining capability through our atmospheric distillation unit at St. Eustatius
during 1995. Finally, during the fourth quarter of 1995 and the first quarter of
1996, we made investments in a heating system and butane sphere at Point Tupper.
These additions to capacity have led to more throughput and, therefore, higher
revenues from storage, throughput and ancillary services. We did not make
significant investments to expand our operating capacity during 1997 and 1998.
The operations at St. Eustatius suffered damages from Hurricanes Iris,
Luis and Marilyn, causing closure of the terminal for approximately three weeks
at the end of the third quarter of 1995. Repair of damages caused by these
hurricanes and installation of certain improvements were substantially completed
by the end of the third quarter of 1996. We spent $20.6 million on repairs and
improvements related to the hurricanes, $6.8 million of which was capitalized as
property and equipment. Claims related to the hurricanes were filed with
insurance carriers and ultimately settled for $12.6 million.
During September 1998, Hurricane Georges damaged the St. Eustatius
facility. Hurricane Georges did not significantly impact operations of the
facility which returned to normal within days of the storm. The preliminary
estimate of the damage to the facility is $5.8 million. Insulation on certain
storage tanks, electrical transmission systems and roofs of several buildings
sustained damage. In advance of the storm, on September 19, 1998, the facility
ceased terminal operations and instituted its hurricane preparation and damage
prevention plan. The terminal returned to full operations by September 29, 1998.
During the third quarter of 1998, we recorded a charge of $0.8 million
representing an insurance deductible of $0.5 million related to the hurricane
damage and certain other costs resulting from the hurricane which we anticipate
will not be recovered through our insurance policies.
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 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 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 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.
Page 20
<PAGE>
Capacity, Capacity Leased, Throughput and Vessel Calls by Location
(Capacity and throughput in thousands of barrels)
<TABLE>
<CAPTION>
For the year ended
December 31,
-------------------------------------------------
1996 1997 1998
----------- ----------- --------
<S> <C> <C> <C>
Netherlands Antilles and the
Caribbean
Total capacity 11,334 11,334 11,334
Capacity leased 80% 76% 92%
Throughput 69,395 62,944 74,158
Vessel calls 880 792 864
Canada
Total capacity 7,404 7,404 7,404
Capacity leased 55% 70% 93%
Throughput 23,350 53,011 43,468
Vessel calls 62 125 104
Texas (1)
Total capacity 1,649 1,649 N/M
Capacity leased 52% 31% N/M
Throughput 2,472 2,320 N/M
Vessel calls 88 113 N/M
All locations
Total capacity 20,387 20,387 19,556
Capacity leased 69% 70% 91%
Throughput 95,217 118,275 119,502
Vessel calls 1,030 1,030 1,027
</TABLE>
(1) The Brownsville, Texas facility was sold on July 29, 1998. The statistics
above include the operations of the Brownsville facility through June 30,
1998.
N/M: Not meaningful
Page 21
<PAGE>
A majority of our revenues are generated by bunker and bulk product
sales which fluctuate with global oil prices. As a result, we experience
volatility in our revenue stream, which is not necessarily indicative of our
profitability.
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 service revenues directly impact our operating income. 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.
In addition, our operating costs are impacted by inflationary cost
increases, changes in storage capacity and changes in certain ancillary services
offered by us.
Results of Operations
The following table sets forth, for the periods indicated, the
percentage of revenues represented by certain items in our consolidated income
statements.
Results of Operations
(Dollars in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1997 1998
------------------------------------------------------------------
% of % of % of
Dollars Revenues Dollars Revenues Dollars Revenues
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Terminaling services $ 49,812 31.9% $ 53,165 37.3% $ 66,625 48.7%
Bunker and bulk product sales 106,142 68.1% 89,334 62.7% 70,137 51.3%
-------- ------ -------- ------- -------- -------
Total revenues 155,954 100.0% 142,499 100.0% 136,762 100.0%
Cost of services and products sold 142,839 91.6% 122,944 86.3% 106,688 78.0%
-------- ------ -------- ------- -------- -------
Gross profit 13,115 8.4% 19,555 13.7% 30,074 22.0%
Administrative expenses 8,695 5.6% 6,348 4.5% 7,315 5.3%
-------- ------- -------- ------- -------- -------
Operating income 4,420 2.8% 13,207 9.2% 22,759 16.6%
Loss (gain) on disposition of property and equipment (68) - (109) (0.1)% 1,652 1.2%
Interest expense 5,800 3.7% 16,874 11.8% 16,851 12.3%
Interest income 88 0.1% 459 0.3% 588 0.4%
-------- ------ -------- ------- -------- -------
Income (loss) before income taxes (1,224) (0.8)% (3,099) (2.2)% 4,844 3.5%
Provision for income taxes 761 0.5% 780 0.5% 320 0.2%
Preferred stock dividends 792 0.5% - - - -
-------- ------ -------- ------- -------- --------
Net income (loss) available to common stockholder $ (2,777) (1.8)% $ (3,879) (2.7)% $ 4,524 3.3%
========= ======= ======== ======== ======== =======
</TABLE>
Page 22
<PAGE>
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 such revenue
and operating income (loss) relate to our total revenue and operating income.
You should note that we sold our Brownsville, Texas facility on July 29, 1998,
and the figures above and below and our consolidated financial statements
include the Brownsville facility through June 30, 1998.
Revenues by Location
(Dollars in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------------------------------
1996 1997 1998
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
% of % of % of
Dollars Total Dollars Total Dollars Total
------- ----- ------- ----- ------- -----
Netherlands Antilles and the Caribbean $ 139,751 89.6% $ 122,042 85.6% $ 114,091 83.4%
Canada 13,355 8.6% 18,586 13.0% 21,058 15.4%
Brownsville, Texas facility 2,848 1.8% 1,871 1.4% 1,613 1.2%
--------- ------- --------- ------- --------- -------
Total $ 155,954 100.0% $ 142,499 100.0% $ 136,762 100.0%
========= ======= ========= ======= ========= =======
</TABLE>
Operating Income (Loss) by Location
(Dollars in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------------------------------
1996 1997 1998
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
% of % of % of
Dollars Total Dollars Total Dollars Total
------- ----- ------- ----- ------- -----
Netherlands Antilles and the Caribbean $ 6,899 156.1% $11,198 84.8% $ 15,908 69.9%
Canada (1,140) (25.8)% 3,981 30.1% 7,268 31.9%
Brownsville, Texas facility (1,339) (30.3)% (1,972) (14.9)% (417) (1.8)%
------- -------- ------- -------- -------- -------
Total $ 4,420 100.0% $13,207 100.0% $ 22,759 100.0%
======= ======= ======= ======= ======== =======
</TABLE>
Page 23
<PAGE>
Year Ended December 31, 1998 Compared with
Year Ended December 31, 1997
Comparability
On July 29, 1998, we sold Statia Terminals Southwest to an unrelated
third-party. Our consolidated financial statements include the operations of
Statia Terminals Southwest through June 30, 1998. Therefore, the year ended
December 31, 1997 includes the operations of Statia Terminals Southwest for six
months more than the same period in 1998.
Revenues
Total revenues for the year ended December 31, 1998 were $136.8 million
compared to $142.5 million for the year ended December 31, 1997, a decrease of
$5.7 million, or 4.0%.
Revenues from terminaling services, which consist of storage,
throughput, dock charges, emergency response fees and other terminal charges,
for the year ended December 31, 1998 were $66.6 million compared to $53.2
million for the previous year, an increase of $13.4 million, or 25.3%. The
improvement in terminaling services revenue for the year ended December 31, 1998
compared to the previous year was principally due to:
o our ability to attract additional long term customers who use our
facilities as part of their strategic distribution networks;
o additional vessel calls at St. Eustatius resulting in higher dock
charges and emergency response fees; and
o the recent contango conditions in the international petroleum
markets.
Revenues from terminaling services at St. Eustatius increased
approximately $8.7 million, or 24.2%, during the year ended December 31, 1998 as
compared to the year ended December 31, 1997. Total throughput increased from
62.9 million barrels during the year ended December 31, 1997 to 74.2 million
barrels during the same period of 1998 due primarily to higher throughput of
fuel oil and petroleum products, and was partially offset by reduced throughput
of crude oil. Seventy-two more vessels called at the St. Eustatius facility
during the year ended December 31, 1998 than during the same period of 1997,
resulting in higher revenues from dock charges and stand-by emergency response
fees. For the year ended December 31, 1998, the overall percentage of capacity
leased at this facility was 92% compared to 76% for the same period of 1997,
reflecting increases in the percentage of capacity leased for fuel oil tankage
and petroleum products.
Revenues from terminaling services at Point Tupper increased $5.1
million, or 32.6% during the year ended December 31, 1998 as compared to the
year ended December 31, 1997. The percentage of tank capacity leased at Point
Tupper increased from 70% for the year ended December 31, 1997 to 93% for the
same period of 1998. This increase was primarily the result of additional crude
oil and clean petroleum products tankage leased during the year ended December
31, 1998 as compared to the same period of 1997. Fewer vessel calls led to lower
port charge revenues at this facility during the year ended December 31, 1998 as
compared to the same period of 1997.
Page 24
<PAGE>
Revenues from bunker and bulk product sales were $70.1 million for the
year ended December 31, 1998 compared to $89.3 million for the same period in
1997, a decrease of $19.2 million, or 21.5%. The decrease was primarily due to
lower comparative selling prices for bunker fuels reflecting current market
conditions. Average selling prices decreased 30.2% when comparing the year ended
December 31, 1998 with the same period of 1997. However, metric tons of bunkers
and bulk product sold increased 13.6% during the year ended December 31, 1998 as
compared to the same period of 1997.
Gross Profit
Gross profit for the year ended December 31, 1998 was $30.1 million
compared to $19.6 million for the same period of 1997, representing an increase
of $10.5 million, or 53.8%. The increase in gross profit is primarily the result
of the increased terminaling services revenue produced at a small incremental
cost. Additionally, we realized higher gross margins on bunker sales during the
year ended December 31, 1998 as compared to the same period of 1997 due to
higher volumes of bunker fuels delivered.
Administrative Expenses
Administrative expenses were $7.3 million for the year ended December
31, 1998 as compared to $6.4 million for the same period of 1997, representing
an increase of $0.9 million, or 15.1%. The increase during the year ended
December 31, 1998 as compared to the same period of 1997, is primarily the
result of higher personnel costs and certain professional fees.
Loss on Sale of Assets
As more fully discussed in note 14 of notes to the consolidated
financial statements, we recognized a loss on the sale of Statia Terminals
Southwest during the year ended December 31, 1998 of $1.7 million.
Interest Expense
During the years ended December 31, 1997 and 1998, we incurred $16.9
million of interest expense from interest accrued on our mortgage notes due in
2003, amortization expense related to deferred financing costs and certain bank
charges.
Net Loss
Net income available to common stockholders was $4.5 million for the
year ended December 31, 1998 as compared to a net loss of $3.9 million for the
same period of 1997, an improvement of $8.4 million. The increase in net income
is attributable to the net effect of the factors discussed above.
Page 25
<PAGE>
Year Ended December 31, 1997 Compared with
Year Ended December 31, 1996
Comparability
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 Castle Harlan acquisition and the
effects of the acquisition of the First Salute assets, discussed in note 7 of
notes to the consolidated financial statements. 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 date of such
acquisition. Changes in components of our debt and equity accounts resulted in
changes to interest expense, dividends and costs of services and products sold.
Revenues
Total revenues for the year ended December 31, 1997 were $142.5 million
compared to $156.0 million for the year ended December 31, 1996, a decrease of
$13.5 million, or 8.6%.
Revenues from terminaling services for the year ended December 31, 1997
were $53.2 million compared to $49.8 million for the previous year, an increase
of $3.4 million, or 6.7%. Increased revenues from terminaling services at Point
Tupper were partially offset by lower revenues from terminaling services at St.
Eustatius.
Revenues from terminaling services at St. Eustatius decreased $1.9
million, or 5.1%, during the year ended December 31, 1997 as compared to the
year ended December 31, 1996. Lower crude oil throughput and reductions in the
percentage of capacity leased for clean petroleum products resulted in lower
1997 revenues from storage, throughput and ancillary services. A customer
occupied all of the petroleum products storage for three-quarters of the 1996
year while the petroleum products tankage went essentially unleased for the 1997
year.
Revenues from terminaling services at Point Tupper increased $6.6
million, or 73.1% during the year ended December 31, 1997 as compared to the
year ended December 31, 1996. Incremental spot storage leases for crude oil from
our primary Canadian customer, Tosco, crude oil and 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. Additionally, certain unleased
tankage was converted from petroleum product storage to crude oil storage to
meet customer demand.
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. At
Point Tupper, we were unable to expand our bunker sales business initiated in
1996 due to our inability to find an adequate source of supply.
Page 26
<PAGE>
Our Brownsville, Texas facility, which we sold on July 29, 1998,
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. Statia Terminal Southwest's revenues were $1.9 million
for the year ended December 31, 1997, down $0.9 million or 28.3%, from $2.8
million for the same period in 1996.
Gross Profit
Gross profit for the year ended December 31, 1997 was $19.6 million
compared to $13.2 million for the year ended December 31, 1996 representing an
increase of $6.4 million, or 48.5%. During the period from January 1, 1996
through November 27, 1996, lease expenses related to First Salute of $5.6
million consisting primarily of interest were included in cost of services and
products sold. This lease was fully satisfied in connection with the Castle
Harlan acquisition. Additionally, the increased terminaling services revenue
positively impacted our gross profit.
Administrative Expenses
Administrative expenses were $6.3 million for the year ended December
31, 1997 as compared to $8.7 million for the year ended December 31, 1996,
representing a decrease of $2.4 million, or 27.0%. For the year ended December
31, 1996, administrative expenses included $3.0 million of non-cash stock based
compensation awarded to certain of our managers in connection with the Praxair
and Castle Harlan acquisitions. Exclusive of the non-recurring stock based
compensation, selling and administrative expenses increased from year-to- year
primarily due to higher personnel costs.
Interest Expense
Since the Castle Harlan acquisition in November 1996, our interest
expenses have related to interest accrued on our mortgage notes due 2003,
amortization expense related to deferred financing costs and certain bank
charges. For the year ended December 31, 1997, interest expenses amounted to
$16.9 million. For the year ended December 31, 1996, interest expenses related
to (a) the mortgage notes due 2003 (b) third party debt obligations net of
amounts charged to capital projects (c) the effects of an interest rate swap,
(d) amortization expense related to deferred financing costs and (e) certain
bank charges, were $5.8 million.
Net Loss
Net loss available to common stockholders was $3.9 million for the year
ended December 31, 1997 as compared to $2.8 million for the year ended December
31, 1996, representing an increase of $1.1 million. The increase in the net loss
is attributable to the net effect of the factors discussed above.
Selected Quarterly Financial Information
Our 1998 operating income and Adjusted EBITDA increased quarter over
quarter in 1998 and for each quarter of 1998 compared to the same quarters in
1997. This trend is a result of our entering into additional long term contracts
over the two-year period resulting in higher capacity leased, increased volumes
of bunker fuel delivered due, in part, to reduced competition, and additional
revenues from ancillary services due to higher terminal activity.
Page 27
<PAGE>
The following table sets forth certain selected unaudited quarterly
operating results for each of our last eight quarters. This information was
prepared by us on a basis consistent with our audited financial statements and
includes all adjustments, consisting of normal and recurring adjustments, that
we consider necessary for a fair presentation of the data. These quarterly
results are not necessarily indicative of future results of operations. This
information should be read in conjunction with our consolidated financial
statements and notes thereto included elsewhere this Report and our Forms 10-Q.
<TABLE>
<CAPTION>
Quarters Ended Total
------------------------------------------------------------------ --------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1997
----
Total revenues $32,709 $33,148 $35,333 $41,309 $142,499
Operating income 2,734 2,850 2,782 4,841 13,207
Adjusted EBITDA 5,320 5,417 5,218 7,819 23,774
1998
----
Total revenues $30,364 $36,472 $32,699 $37,227 $136,762
Operating income 3,428 5,667 6,213 7,451 22,759
Adjusted EBITDA 6,217 8,486 8,937 10,217 33,857
</TABLE>
Liquidity and Capital Resources --- Subsequent to
the Castle Harlan Acquisition
Cash Flow from Operating Activities
Net cash provided by operating activities was $19.5 million and $12.5
million for the years ended December 31, 1998 and 1997 and $2.2 million for the
period from November 27, 1996 through December 31, 1996, respectively. Cash flow
from operations has been our primary source of liquidity during the periods
subsequent to the Castle Harlan acquisition. Differences between net losses and
positive operating cash flow have resulted primarily from depreciation and
amortization burdens and changes in various asset and liability accounts.
Additionally, during the year ended December 31, 1998, we recognized a $1.7
million non-cash loss on the sale of Statia Terminals Southwest. See note 14 of
notes to consolidated financial statements for more information on the sale of
Statia Terminals Southwest.
At December 31, 1997, we had cash and cash equivalents on hand of
$6.1 million compared to $13.9 million at December 31, 1998.
Cash Flow from Investing Activities
Net cash used in investing activities was $4.1 million and $12.9
million for the years ended December 31, 1998 and 1997 and $177.0 million for
the period from November 27, 1996 through December 31, 1996, respectively.
Investing activities during 1998 and 1997 and the period ended December 31, 1996
included purchases of property and equipment of $10.7 million, $5.3 million and
$1.2 million, respectively. Additionally, as more fully discussed in note 14 of
notes to consolidated financial statements, on July 29, 1998, we received $6.5
million of cash proceeds from the sale of our Brownsville, Texas facility.
Page 28
<PAGE>
During the year ended December 31, 1997 and the period ended December
31, 1996, we spent $7.7 million and $175.8 million, respectively, related to the
Castle Harlan acquisition. These amounts include:
o approximately $174.1 million in cash paid to Praxair, of which
$169.0 million was paid at closing and $5.1 million was paid in
February 1997, to satisfy the cash portion of the purchase price,
and
o $9.4 million of commissions, fees and expenses.
Cash Flow from Financing Activities
During the year ended December 31, 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 the
its Series D Preferred Stock.
As part of the Castle Harlan acquisition, we issued $135.0 million of
mortgage notes, received proceeds of $55.5 million from the issuance of
preferred and common stock and paid $6.4 million of debt costs. The net cash
proceeds from these transactions were substantially used as described above in
"--Cash Flow from Investing Activities".
In connection with the Castle Harlan acquisition prior to November 27,
1996 all of our third-party indebtedness, 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, we entered into a
new $17.5 million revolving credit facility secured by our accounts receivable
and oil inventory. 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 $8.0 million
as of December 31, 1998. No draws on the revolving credit facility have
occurred. The revolving credit facility bears interest at the prime rate plus
0.50% per annum (8.25% at December 31, 1998) and will expire on November 27,
1999.
The debt service costs associated with the borrowings under the
mortgage notes have significantly increased liquidity requirements. The mortgage
notes accrue interest at 11 3/4% per annum payable semi-annually on May 15 and
November 15. The mortgage notes will mature on November 15, 2003. The mortgage
notes are redeemable in whole or in part at our option at any time on or after
November 15, 2000 at redemption prices set forth in the indenture relating to
the mortgage notes. The mortgage notes may be redeemed or purchased prior to
November 15, 2000 in certain circumstances as defined in the indenture relating
to the mortgage notes.
The indenture generally limits the incurrence of additional debt by us,
limits our ability to pay the Parent dividends or make any other distribution to
the Parent, and limits our ability to sell assets. We may incur additional
indebtedness as long as our fixed charge coverage ratio (as defined in the
indenture) is greater than 2.0 to 1. Under the terms of the indenture, we may
not pay our Parent any dividend if at the time of declaration:
o a default or event of default under the indenture shall have
occurred and be continuing or shall occur as a consequence
thereof;
o our consolidated fixed charge coverage ratio (as defined in the
indenture) for the prior four full quarters is less than 2.0 to
1; or
Page 29
<PAGE>
o the amount of such dividend, when added to the aggregate amount
of all other dividends and certain other restricted payments made
by us after November 27, 1996 and not covered by other exceptions
in the indenture, exceeds a certain sum.
Such sum is:
o 50% of our consolidated net income (as defined in the indenture)
(taken as one accounting period) from November 27, 1996 to the
end of our most recently ended fiscal quarter for which internal
financial statements are available at the time of such dividend
(or, if such aggregate consolidated net income is a deficit,
minus 100% of such aggregate deficit),
plus
o the net cash proceeds from the issuance and sale after November
27, 1996 of our capital stock.
o excluding any issuance or sale to a subsidiary of Statia Terminals
International.
Certain other dividends, generally unrelated to operating cash flow,
are permitted notwithstanding the second and third items above.
We believe that cash flow generated by operations and amounts available
under the revolving credit facility will be sufficient, until the maturity of
the mortgage notes, to fund working capital needs, capital expenditures and
other operating requirements, including any expenditures required by applicable
environmental laws and regulations, and to service debt. Our operating
performance and ability to service or refinance the mortgage 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 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.
Liquidity and Capital Resources--Prior to the Castle Harlan Acquisition
Except for cash of our Canadian subsidiaries, prior to the Castle
Harlan acquisition we were a participant in Praxair/CBI Industries' cash
management system, which swept all cash receipts into our predecessor company's
investment program. Cash for operations and capital expansion was funded by our
operations, our predecessor company's operations and debt facilities available
to us, which were guaranteed by our predecessor company. During 1996, prior to
the Castle Harlan acquisition, cash provided by operations of $9.1 million,
proceeds from insurance claims related to hurricane damage incurred in 1995 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 $14.5 million and pay
dividends to Praxair and its affiliates of $25.8 million.
Capital Expenditures
We spent $15.7 million, $5.3 million and $10.7 million during the years
ended December 31, 1996, 1997 and 1998, respectively. These amounts include $1.6
million, $0.9 million and $1.7 million, respectively, which was spent to enhance
our ability to generate incremental revenues. Capital
Page 30
<PAGE>
expenditures for 1996 were primarily for improvements made in connection with
hurricane damage incurred in 1995. During 1997, capital expenditures were made
primarily for various piping and tank enhancements at each location and a new
warehouse at St. Eustatius. During 1998, a majority of capital expenditures were
related to maintenance capital expenditures including our terminal and marine
maintenance programs.
Our preliminary capital expenditure budget for 1999 is $7.0 million for
maintenance capital expenditures and $2.1 million for producing incremental
revenues. Spending for producing incremental revenues is contingent upon the
addition of incremental terminaling business.
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 represent maintenance capital
expenditures.
<TABLE>
<CAPTION>
Summary of Capital Expenditures by Location
(Dollars in thousands)
Produce Maintenance
Incremental Capital
Revenues Expenditures Total % of Total
----------- ------------ ----- ----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996
Netherlands Antilles $ 89,344 (1) $ 11,969 (2) $ 101,313(1)(2) 97.2%
Canada 751 451 1,202 1.2%
Brownsville, Texas facility (3) 19 1,226 1,245 1.2%
All other United States - 444 (4) 444 0.4%
-------- ---------- ---------- --------
Total $ 90,114 $ 14,090 $ 104,204 100.0%
======== ========== ========== ========
Year Ended December 31, 1997
Netherlands Antilles $ 696 $ 2,858 $ 3,554 66.5%
Canada 120 834 954 17.9%
Brownsville, Texas facility (3) 125 100 225 4.2%
All other United States - 609 (4) 609 11.4%
-------- ---------- ---------- --------
Total $ 941 $ 4,401 $ 5,342 100.0%
======== ========== ========== ========
Year Ended December 31, 1998
Netherlands Antilles $ 667 $ 5,990 $ 6,657 62.1%
Canada 829 476 1,305 12.2%
Brownsville, Texas facility (3) 218 94 312 2.9%
All other United States - 2,440 (4) 2,440 22.8%
-------- ---------- ---------- --------
Total $ 1,714 $ 9,000 $ 10,714 100.0%
======== ========== ========== ========
</TABLE>
- - -------------------
(1) Includes purchase of First Salute assets.
(2) Includes $6.8 million of capitalized enhancements related to the hurricanes
of 1995.
(3) We sold our Brownsville, Texas facility on July 29, 1998.
(4) Includes expenditures for U.S. flagged marine equipment utilized primarily
in the Netherlands Antilles.
Page 31
<PAGE>
Prior to 1996, we financed the construction of certain crude oil
terminaling assets at St. Eustatius through a leveraged lease arrangement,
effectively removing $88.5 million of assets and liabilities from our balance
sheet. For a discussion of the leveraged lease arrangement, see note 7 to the
consolidated financial statements. We leased land to a special purpose financing
entity, First Salute, upon which the crude tanks were constructed. These crude
oil facilities at St. Eustatius were leased back to us. During the life of the
lease, we 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
1996, we paid $5.6 million to First Salute which consisted primarily of interest
costs on the underlying debt. All obligations under the lease were satisfied
prior to the Castle Harlan acquisition and the related assets were included on
the balance sheet at that time.
Environmental, Health and Safety Matters
We are subject to comprehensive and periodically changing
environmental, health and safety laws and regulations within the jurisdictions
of our operations, 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 1996, 1997, and 1998, our capital
expenditures for compliance with environmental, health and safety laws and
regulations were approximately $1.3 million, $1.3 million and $2.7 million,
respectively. 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 $0.4 million, $0.2 million and $0.9 million in 1996,
1997 and 1998, respectively. We believe we are presently in substantial
compliance with applicable laws and regulations governing environmental, health
and safety matters. The Praxair agreement includes a covenant by Praxair to pay
certain environmental investigation, remediation and upgrade costs. With respect
to seven identified items of environmental investigation and remediation, this
covenant is subject to dollar limitations aggregating $4.2 million. With respect
to all other costs covered by the Praxair covenant there are no dollar
limitations. However, we cannot guarantee that Praxair will pay all of the
indemnified amounts without dispute or delay.
Past uses of the Point Tupper facility, 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,
health and safety laws, we, as the owner and operator of the facility, can be
held liable for mitigation or remediation of, and damages arising from, these or
other as yet unknown environmental, health and safety conditions at the
facility.
In connection with the Castle Harlan acquisition in 1996, phase I and
limited phase II environmental site assessments were conducted at the Point
Tupper terminal to identify potential environmental, health and safety matters.
Certain environmental matters and conditions that were likely to require the
incurrence of costs were identified and Praxair agreed to pay the costs of
addressing certain of such matters, subject in some cases to monetary
limitations. Since then we have been undertaking, in accordance with
environmental, health and safety laws, investigations, remediation and upgrading
to address these and other more recently identified matters.
Page 32
<PAGE>
Certain of such matters involve 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. These include a former sludge and waste
disposal area, with respect to which a remediation plan is being developed, two
pump stations, with respect to which further delineation and remediation of
contaminated soil are underway. Another contaminated area includes the area
surrounding an above-ground crude oil storage tank, the investigation and
delineation of which is at an early stage, although the contamination appears to
be contained within a fairly limited area.
Certain terminal facilities have also been identified as requiring
upgrading or remediation to meet the requirements of existing environmental,
health and safety laws. These include, among other matters, an oil-water
separator required to process facility run-off and to treat ballast water, with
respect to which the rebuilding of the separator is expected to be completed in
1999, a ballast reception line has been installed, and petroleum contamination
discovered beneath the separator is being addressed, and the upgrading of
containment areas for above-ground storage tanks, with respect to which survey
work has been completed and civil work is expected to commence during 1999.
Upgrading and remediation work also includes the removal of underground storage
tanks, with respect to which the removal has been completed and the remediation
of associated contaminated soil is underway, and the removal of friable asbestos
from certain areas of the terminal, the removal and disposal of substantially
all of which has been completed and we are awaiting final inspection and the
issuance of a certificate of compliance.
With respect to the foregoing environmental liabilities and costs,
Praxair, in connection with the Castle Harlan acquisition, to date has paid
approximately $2.3 million. We anticipate incurring additional costs of $0.7
million which are not likely to be reimbursable from Praxair. Based on the
investigation conducted and information available to date, the potential cost of
additional remediation and compliance related to the foregoing matters is
currently estimated to be approximately $10 million. Praxair is required under
the Praxair agreement to pay the costs of this additional remediation and
compliance, and has not disputed this obligation. However, Praxair has
questioned whether some of the methods included in the $10 million estimate are
the most cost effective and whether some of the remediation included in such
estimate is necessary.
We have also identified environmental, health and safety costs that are
not covered by the Praxair agreement, including the $0.7 million discussed
above, for which we accrued $1.5 million during 1996, $10,000 of which has been
spent through the end of 1998. We can give no assurances that such accrual is
sufficient to cover all such environmental, health and safety costs.
We can give no assurances that additional liabilities, either presently
known or discovered in the future, under existing or future environmental,
health and safety laws and outside the scope of the Praxair agreement will not
be material. In addition, we can give no assurances that we will not have to
incur material expenses before Praxair pays amounts for which Praxair ultimately
would be responsible.
We anticipate that we will incur additional capital and operating costs
in the future to comply with currently existing laws and regulations, amendments
to such laws and regulations, new regulatory requirements arising from recently
enacted statutes, and possibly new statutory enactments. As government
regulatory agencies have not yet promulgated the final standards for proposed
environmental, health and safety programs, we 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, we believe any such costs will not have a material adverse effect on
our business and financial condition or results of operations.
Page 33
<PAGE>
Information Technology and the Year 2000
Certain computer software and hardware applications and embedded
microprocessor, microcontroller or other processing technology applications and
systems use only two digits to refer to a year rather than four digits. As a
result, these applications could fail or create erroneous results in dealing
with certain dates and especially if the applications recognize "00" as the year
1900 rather than the year 2000. 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 the evaluations of the
systems of customers, vendors, and other third-party service providers and
evaluations of our non-information technology systems, which include embedded
technologies such as microcontrollers and is also referred to as non-traditional
information technology.
We have substantially completed the assessment phase of the Year 2000
plan as it relates to both traditional and non-traditional technology
applications and systems. We are currently in the process of testing new Year
2000 compliant terminal operations software at our facilities. We anticipate
that the Year 2000 compliant terminal operations systems will be fully
implemented in the first quarter of 1999. We recently selected a fully
integrated Year 2000 compliant finance, accounting, and human resources system
and expect to have the new system fully operational by the third quarter of
1999.
We have identified some components of our control systems at our two
terminals as not being Year 2000 compliant. These systems measure, regulate,
control and maintain crude oil and petroleum product flow and fire protection
equipment at the terminals. We are currently evaluating the best means to
mitigate the possible adverse effects resulting from the potential failure of
these systems including repair or replacement and, in some cases, have already
initiated replacement of non-compliant components. However, 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. Where necessary, we will be working with those companies
that are not yet Year 2000 compliant to mitigate any material adverse effect
such non-compliance may have on us. Based upon information we have received and
reviewed of our possible 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.
In 1998, we spent $1.1 million related to our Year 2000 remediation
efforts of which we have capitalized $1.0 million and expensed $0.1 million. In
1999, we anticipate spending an additional $0.8 million to complete these
efforts of which we anticipate capitalizing $0.7 million and expensing $0.1
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.
Political, Inflation, Currency and Interest Rate Risks
Page 34
<PAGE>
We periodically evaluate the political stability and economic
environment in the countries in which we operate. As a result of these
evaluations, we are not presently aware of any matters that may adversely impact
our business, results of operations or financial condition. The general rate of
inflation in the countries where we operate 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 generally contain price escalation provisions. Bunker fuel and
bulk product sales prices are based on active markets, and we are generally able
to pass any cost increases to customers. Except for minor 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.
Tax Matters
Our St. Eustatius facility has qualified for designation as a free
trade zone and our Point Tupper facility has qualified for designation as a
customs bonded warehouse. Such status allows customers and us to transship
commodities to other destinations with minimal Netherlands Antilles or Canadian
tax effects.
Pursuant to a Free Zone and Profit Tax Agreement with the island
government of St. Eustatius which is scheduled to expire on December 31, 2000,
we are subject to a minimum annual tax of 500,000 Netherlands Antilles guilders
or approximately $282,000. This agreement further provides that any amounts paid
to meet the minimum annual payment will be available to offset future tax
liabilities under such agreement to the extent that the minimum annual payment
is greater than 2% of taxable income. Discussions regarding modification and
extension of this agreement are in progress, and we believe that, although
certain terms and conditions could be modified and that the amounts payable to
these governments may be increased, extension of this agreement is likely.
However, it is possible that such amounts may be increased more than anticipated
and that government authorities may impose additional fees if this agreement is
not extended or is otherwise amended.
Tax rates in the jurisdictions in which we operate did not change
significantly between 1996 and 1998, other than the enactment of a Nova Scotia
provincial capital tax effective April 1, 1997.
Certain income tax liabilities incurred prior to November 27, 1996 were
assumed by Praxair, and we retained net operating loss carryforwards of $7.5
million in Canada. We also retained certain investment tax credits in the
Netherlands Antilles and Canada, which may be used to offset future taxes
payable. As a result of the Castle Harlan acquisition, certain Canadian assets
were revalued for tax purposes resulting in a loss of $77.2 million during 1996.
The net operating tax loss carryforwards available to offset Canadian
taxable income at December 31, 1998 were $55.1 million and expire in various
amounts through 2005. The investment tax credit carryforward available to reduce
Canadian income taxes was $7.3 million at December 31, 1998 and expires in
various amounts through 2003.
We have provided a full valuation allowance against these deferred tax
assets because it is not certain that any deferred tax assets will be utilized
in the future.
Page 35
<PAGE>
Insurance
We maintain insurance policies on insurable risks at levels we consider
appropriate. At the present time, we do not carry business interruption
insurance due to, what we believe, are excessive premium costs for the coverage
provided. However, we do carry business interruption insurance for our offshore
single point mooring system. While we believe we are adequately insured, future
losses could exceed insurance policy limits, or under adverse interpretations,
be excluded from coverage. Future liability or costs, if any, incurred under
such circumstances could adversely impact cash flow.
Page 36
<PAGE>
Our property insurance covers damage to the real and personal property
located at our two terminals and administrative offices. The property loss limit
is $150 million with a $0.1 million deductible, except for a $0.5 million
deductible for certain losses (wind, flood, earthquake, etc.) at St. Eustatius.
We carry various layers of liability coverage of up to $200 million with a
deductible of approximately $0.3 million (including coverage for liabilities
associated with certain accidental spills). We carry $30 million of coverage on
the offshore single point mooring system at St. Eustatius with a deductible of
approximately $0.3 million. We have coverage up to scheduled values for damage
to our marine vessels with a $50,000 deductible. We also carry other insurance
customary in the industry.
Our current insurance program commenced December 31, 1998 and generally
extends 15 months.
Accounting Standards and Policies
In 1998, we adopted Statement of Financial Accounting Standards
("SFAS") No. 130--"Reporting Comprehensive Income" which establishes standards
for the reporting and display of comprehensive income and its components. There
were no material differences between net income and comprehensive income.
In 1998, we adopted SFAS No. 131--"Disclosures about Segments of an
Enterprise and Related Information" which establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
product and service, geographic areas, and major customers. The adoption of SFAS
No. 131 had no impact on results of operations, financial position or cash flow.
In June 1998, the FASB issued SFAS No. 133--"Accounting for Derivative
Instruments and Hedging Activities" which establishes certain standards of
accounting for derivative instruments including specific hedge accounting
criteria. SFAS No. 133 is effective for fiscal years beginning after June 15,
1999 although earlier adoption is allowed. We have not yet quantified the
impacts of adopting SFAS No. 133 and have not determined when we will adopt SFAS
No. 133. However, as we do not presently have derivative instruments, we do not
expect SFAS No. 133 to have a material impact on us.
Other Matters
We have reclassified our emergency spill response vessel M/V Statia
Responder (formerly known as the M/V Megan D. Gambarella) from its original
asset held for sale classification to property and equipment as we are no longer
actively seeking buyers for the vessel. Certain of the Parent's preferred stock
agreements contain features which may require the Parent to cause us to dividend
or otherwise remit the proceeds from any future sale of the M/V Statia Responder
to the Parent.
Page 37
<PAGE>
ITEM 7A. 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 on hand at December 31, 1998
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)
As of December 31, 1998
---------------------------------
Carrying Amount Fair Value
--------------- ----------
Petroleum Inventory:
Statia Terminals N.V. $ 4,205 $ 4,205
Statia Terminals Canada 323 338
--------- --------
Total $ 4,528 $ 4,543
========= ========
Page 38
<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 39
<PAGE>
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Managing Directors and Directors, as the case may be, are elected
annually by their respective shareholders to serve during the ensuing year or
are elected to serve until a successor is duly elected and qualified. Executive
officers 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 Terminals International:
Name Age Position
---- --- --------
James G. Cameron 53 Managing Director
John K. Castle 58 Managing Director
David B. Pittaway 47 Managing Director
Justin B. Wender 29 Managing Director
James F. Brenner 40 Vice President and Treasurer
Jack R. Pine 59 Secretary
The following table sets forth certain information with respect to the
directors and executive officers of Statia Terminals Canada:
Name Age Position
---- --- --------
Paul R. Crissman 43 Director and President
James G. Cameron 53 Director
Clarence W. Brown 49 Director
James F. Brenner 40 Vice President-Finance
Jack R. Pine 59 Secretary
Page 40
<PAGE>
The following table sets forth certain information with respect to
certain directors and executive officers of Statia Terminals, Inc., an indirect
subsidiary of Statia Terminals International:
Name Age Position
---- --- --------
James G. Cameron 53 Director, Chairman of the Board
and President
Thomas M. Thompson, Jr. 54 Director and Executive Vice
President
Robert R. Russo 43 Director and Senior Vice
President
Jack R. Pine 59 Senior Vice President, General
Counsel and Secretary
John D. Franklin 42 Vice President--Marine Fuel
Sales
James F. Brenner 40 Vice President--Finance,
Treasurer and Assistant
Secretary
James F. Brenner. Mr. Brenner joined us in 1992, as our Controller, and
was promoted to his present position in July 1993. Immediately prior to joining
us, he served three years as Vice President, Finance and Chief Financial Officer
of Margo Nursery Farms Inc., a publicly traded agribusiness firm with European
and Latin American operations. From 1986 to 1990, Mr. Brenner was Treasurer of
Latin American Agribusiness Development Corp., a company providing debt and
equity financing to agribusinesses throughout Latin America. His duties included
serving as director for several of its corporate investments. From 1981 to 1986,
Mr. Brenner held various positions with the international accounting firm of
PricewaterhouseCoopers (formerly Price Waterhouse LLP). Mr. Brenner is a
licensed Certified Public Accountant in Florida (inactive status).
Clarence W. Brown. Mr. Brown joined us in 1993 as Administrative
Manager and was appointed Terminal Manager of our St. Eustatius facility in
early 1996. In December 1996, Mr. Brown was elected to his present positions as
a director of Statia Terminals Canada and a managing director of Statia
Terminals N.V. Prior to joining us, he held various management positions at the
Amerada Hess Corporation facility on St. Lucia, including general manager of the
facility, and has more than 17 years of experience in the marine terminaling
industry.
James G. Cameron. Mr. Cameron has been with us since 1981. From 1981
to 1984, Mr. Cameron 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 of Statia Terminals, Inc. Since being
named President and Chairman of the Board of Statia Terminals, Inc. in 1993,
Mr. Cameron has served on the board of directors of Tankstore (a joint venture
company of CBI Industries, GATX Corporation and Paktank International B.V.).
Mr. Cameron has also served on the board of directors of Petroterminal de
Panama, where he represented CBI Industries' 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, which included the
management of Paktank's largest facility in Deer Park, Texas.
Page 41
<PAGE>
John K. Castle. Mr. Castle has been a managing director of Statia
Terminals International since September 1996. Mr. Castle is Chairman and Chief
Executive Officer of Branford Castle, Inc., an investment company formed in
1986. Since 1987, Mr. Castle has been Chairman of Castle Harlan, Inc., a
private merchant bank in New York City. 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., which is the controlling stockholder
of our Parent. Immediately prior to forming Branford Castle, Inc. in 1986, Mr.
Castle was President and Chief Executive Officer and a director of Donaldson
Lufkin & Jenrette, Inc., which he joined in 1965. Mr. Castle is a director of
Sealed Air Corporation, Morton's Restaurant Group, Inc., Commemorative Brands,
Inc. and Universal Compression, Inc. He is a trustee of the New York Medical
College (for 11 years he was Chairman of the Board), a member of The New York
Presbyterian Hospital's Board of Trustees, a member of the board of the
Whitehead Institute for Biomedical Research and is a member of the Corporation
of the Massachusetts Institute of Technology. Mr. Castle has also served as a
director of The Equitable Life Assurance Society of the United States.
Paul R. Crissman. Mr. Crissman joined us in 1984 and has held safety,
environmental, and operational management positions at our facilities. Mr.
Crissman became terminal manager of our Canadian facility in 1992. Prior to
joining us, 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 director and president of Statia Terminals Canada and as a managing
director of Statia Terminals N.V.
John D. Franklin. Mr. Franklin joined us in March 1992 as Manager,
Marine Sales and has been the Vice President--Marine Fuel Sales since 1996. He
also serves as a director of Petroterminal de Panama. Immediately prior to
joining us, he was employed for 14 years with The Coastal Corporation, and its
former subsidiary, Belcher Oil Co. Inc. His duties with Coastal included
management of the company's marine sales division; Manager, National Accounts,
and Terminal Manager at Coastal's New Orleans facility. He has extensive
experience in marketing, terminal operations, and technical sales support.
Jack R. Pine. Mr. Pine has been our Senior Vice President, General
Counsel and Secretary since May 1996. Mr. Pine also serves as a director of
Petroterminal de Panama. He has over 30 years of combined experience with Liquid
Carbonic Industries Corporation, CBI Industries, and us. Mr. Pine joined the
legal staff of CBI Industries, in 1974 as Assistant Counsel and was appointed
Associate General Counsel in 1984. Prior to joining CBI Industries, Mr. Pine
practiced law in the private sector.
David B. Pittaway. Mr. Pittaway has been a managing director of Statia
Terminals International since September 1996. Mr. Pittaway is Senior Managing
Director and has been Vice President and Secretary of Castle Harlan, Inc. a
private merchant bank in New York City, since February 1987. 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., our controlling
stockholder of our Parent. Mr. Pittaway has been Vice President and Secretary of
Branford Castle, Inc., an investment company, since October 1986. From 1987 to
1998 he was Vice President and Chief Financial Officer and a director of
Branford Chain, Inc., a marine wholesale company where he is now a director
and Vice Chairman. Mr. Pittaway is also a director of Morton's Restaurant Group,
Inc., Charlie Brown's Holdings, 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.
Robert R. Russo. Mr. Russo has been a Vice President since December 23,
1996. Mr. Russo joined us in 1990 as Manager, Sales, and was promoted to
his present position in May, 1996. 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 us
in 1990.
Thomas M. Thompson, Jr. Mr. Thompson has been a Vice President since
December 23, 1996. Mr. Thompson has been with us since 1985 when he joined as
Vice President, Sales & Marketing. He has also held the position of Senior
Vice President, with full responsibility for our Houston, Texas, sales and
operations and President of JASTATIA, Inc., a marine vessel operating joint
venture between Jahre Ship Services A/S and us. Mr. Thompson became
Executive Vice President in May, 1996. His prior
Page 42
<PAGE>
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.
Justin B. Wender. Mr. Wender has been a director since September 3,
1996. Since 1993, he has been employed by Castle Harlan, Inc. He currently
serves as Director. 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
Holdings, Inc. and Land 'N' Sea Holdings, Inc.
Directors of the Parent
Admiral James L. Holloway III, U.S.N. (Ret.). Adm. Holloway has been
a director of the Parent since April 29, 1997. 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 chairman of the Board of Trustees of Saint James School.
Francis Jungers. Mr. Jungers has been a director of the Parent since
April 29, 1997. Mr. Jungers is a private investor and business consultant in
Portland, Oregon. Mr. Jungers has been a consultant since January 1, 1978.
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,
ONIX Systems Corporation, Donaldson, Lufkin & Jenrette, Inc., The AES
Corporation and ESCO Corporation. Mr. Jungers is Chairman of the Advisory Board
of Common Sense Partners, L.P., a hedge fund. Mr. Jungers is a member of the
Visiting Committee, The University of Washington. Mr. Jungers is Advisory
Trustee of the Board of Trustees, The American University in Cairo and
Trustee of the Oregon Health Sciences University Foundation.
Jonathan R. Spicehandler, M.D. Dr. Spicehandler has been a director
of the Parent since April 29, 1997. 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 diplomat of the
American Board of Internal Medicine. 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. Dr. Spicehandler 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. Dr. Spicehandler is a member
of the board of associates of the Whitehead Institute for Biomedical Research.
Page 43
<PAGE>
Ernest "Jackie" Voges. Mr. Voges has been a director of the Parent
since February 2, 1998. 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 and Minister of Transport and Communications. From 1967 to 1969 Mr.
Voges served as 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 and Supervisory Director of Stadsherstel Corporation N.V.
He is also Chairman of the Foundation Stichting JEKA, Supervisory Director of
Smit International Corporation N.V., and Managing Director of Voges Inc.
Corporation N.V. In 1979, Mr. Voges was Knighted in the Order of the Dutch Lion.
Page 44
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
paid or accrued for the year ended December 31, 1998 for our chief executive
officer and each of our five other most highly compensated executive officers
(the "named executive officers")
<TABLE>
<CAPTION>
Long Term Compensation Awards
-------------------------------------------------
Shares Long-term
Annual Restricted Underlying Incentive
Name and Compensation Other Annual Stock Options/SARs Plan All Other
---------------------
Principal POSITION (1) Year Salary ($) Bonus ($) Compensation($)(2) Awards($)(3)(4) (#Shares)(5) Payouts($) Compensation($)(6)
- - --------------------- ---- --------- --------- ------------------ -------------- ------------ --------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James G. Cameron 1998 $275,482 $211,875 $ - $ - 615 - $69,525
1997 248,655 97,050 - - 630 - 68,077
1996 215,000 - - 919,000 - - 52,229
Thomas M. Thompson, JR. 1998 241,549 173,750 - - 490 - 16,677
1997 208,434 79,000 - - 500 - 15,449
1996 169,260 - - 695,000 - - 1,440
Robert R. Russo 1998 199,232 145,000 - - 425 - 13,816
1997 178,883 68,400 - - 430 - 12,680
1996 150,936 - - 625,000 - - 510
Jack R. Pine 1998 161,929 97,500 - - 185 - 11,410
1997 129,450 51,550 - - 190 - 10,648
1996 115,190 11,500 - 311,000 - - 450
John D. Franklin 1998 139,616 97,500 - - 185 - 10,784
1997 128,653 49,250 - - 190 - 10,059
1996 94,967 4,500 - 238,000 - - 479
James F. Brenner 1998 130,289 91,250 57,587 - 175 - 10,941
1997 108,895 43,400 - - 165 - 9,033
1996 81,252 - - 212,000 - - 43
</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 1981.
Thomas M. Thompson joined us in 1985 and became Executive Vice President and
Director of Statia Terminals, Inc. on May 6, 1996. Robert R. Russo joined us
in 1990 and became 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. Mr. Pine joined us in
1996 after holding various positions with CBI since 1974. Mr. Franklin
joined us in 1992 and became Vice President - Marine Fuel Sales on May 6,
1996. James F. Brenner joined us in 1992 and became Vice President Finance,
Treasurer and Assistant Secretary of Statia Terminals, Inc. on May 6, 1996.
(2) The compensation reported for 1998 represents $35,923 of relocation
expenses and $21,664 of tax reimbursements paid to Mr. Brenner.
(3) In November 1996, Statia Terminals N.V. awarded a total of $3.0 million
of its preferred stock to James G. Cameron (919 shares), Thomas M.
Thompson, Jr. (695 shares), Robert R. Russo (625 shares), Jack R. Pine (311
shares), John D. Franklin (238 shares) and James F. Brenner (212 shares).
This award of Statia Terminals N.V. preferred stock was 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
Statia Terminals N.V. and the recipient of such stock. Each recipient
surrendered each of his shares of Statia Terminals N.V. preferred stock in
exchange for a unit consisting of one share of the Parent's common stock
and one share of its Series E
Page 45
<PAGE>
Preferred Stock. The units were also subject to substantially similar
restrictions and conditions as the Statia Terminals N.V. preferred stock,
as set forth in a restricted unit award agreement between the Parent and
each such recipient. Prior to the expiration of the restriction period,
recipients could not sell, transfer, pledge, assign, encumber or otherwise
dispose of their units. Such restriction periods applicable to the Parent's
stock comprising such units lapsed, pursuant to the award agreements, in
November 1998.
(4) The table does not include loans to executive officers by the Parent
secured by restricted units of its preferred and common stock. (See
"Stockholder Loans" below.)
(5) Represents options to purchase Parent common stock awarded under the
1997 Stock Option Plan. The fair values at the dates of grant, November 21,
1997 and December 3, 1998, were determined by the compensation committee of
the Parent's board of directors to be $0.10 per share and $0.10 per share
for the 1997 and 1998 grants. 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). If a
liquidation event occurs, the option shall become fully exercisable. The
option will terminate upon the employee's termination of employment except
in the event of death, permanent disability or termination by us other than
for substantial cause. Each option shall expire ten years after the date of
grant.
(6) The compensation reported for 1998 represents: (a) the dollar value of
split dollar life insurance benefits paid by us, (b) matching and
discretionary contributions made to our 401(k) plan and (c) the cost of
life insurance in excess of limits prescribed by the Internal Revenue Code.
These benefits, expressed in the same order as listed in the preceding
sentence, amounted to $50,789, $16,000 and $2,736 for Mr. Cameron; $0,
$14,200 and $2,477 for Mr. Thompson; $0, $13,000 and $816 for Mr. Russo;
$0, $10,600 and $810 for Mr. Pine; $0, $10,600 and $184 for Mr. Franklin;
and $0, $10,400 and $541 for Mr. Brenner.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1998
The following table sets forth certain information regarding options granted to
the named executive officers by the Parent during 1998. The Parent has not
granted any stock appreciation rights.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Appreciation For Option Term
-------------------------------------------------------- -----------------------------------------
Number of % of Total
Shares Options
Underlying Granted to
Options Employees Exercise Market Expiration
Name Granted In 1998 Price Price(1) Date 0% 5% 10%
- - ------------------------- --------- ---------- -------- -------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James G. Cameron 615 21.2% $0.10 $810.00 12/3/08 $498,088.50 $811,372.36 $1,292,011.31
Thomas M. Thompson, Jr. 490 16.9% 0.10 810.00 12/3/08 396,851.00 646,459.28 1,029,407.38
Robert R. Russo 425 14.7% 0.10 810.00 12/3/08 344,207.50 560,704.48 892,853.34
Jack R. Pine 185 6.4% 0.10 810.00 12/3/08 149,831.50 244,071.36 388,653.81
John D. Franklin 185 6.4% 0.10 810.00 12/3/08 149,831.50 244,071.36 388,653.81
James F. Brenner 175 6.0% 0.10 810.00 12/3/08 141,732.50 230,878.31 367,645.49
</TABLE>
- - ---------------------------
(1) The market price on the date of grant, December 3, 1998, was determined
based on a valuation performed at our request by an independent consulting
firm which specializes in these matters.
Page 46
<PAGE>
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information concerning options
to purchase common stock of the Parent exercised by the named executive officers
during 1998 and the number and value of unexercised options of the Parent held
by each of the named executive officers at December 31, 1998.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1998
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Acquired December 31, 1998 December 31, 1998 (1)
On Value ------------------------------ ------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- - ------------------------- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James G. Cameron 0 0 0 1,245 0 $ 983,425.50
Thomas M. Thompson, Jr. 0 0 0 990 0 782,001.00
Robert R. Russo 0 0 0 855 0 675,364.50
Jack R. Pine 0 0 0 375 0 296,212.50
John D. Franklin 0 0 0 375 0 296,212.50
James F. Brenner 0 0 0 340 0 268,212.50
</TABLE>
- - ---------------
(1) There was no public trading market for the Parent's common stock as of
December 31, 1998. The market price of the common stock on December 31,
1998 was determined based on a valuation performed as of December 3, 1998
at our request by an independent consulting firm. The indicated market
price as of December 3, 1998 of $810 per share was reduced to $790 per
share as of December 31, 1998 primarily due to additional dividends
accrued on the Parent's preferred stock during this period. Preferred
stock dividends reduce the equity value of common stockholders.
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 Compensation Committee of the Parent's Board of Directors administers the
Plan. 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.
STOCKHOLDER LOANS
On November 27, 1996, Messrs. Cameron, Thompson, Russo, Pine, Franklin,
Brenner and certain other of our officers and managers were granted loans by the
Parent to purchase shares of its common stock and Series E Preferred Stock. The
loans totaled $1.5 million and were secured by pledges of such stock. The loans
bear interest at 6.49% annually and are due on the earlier of (1) November 26,
2003, (2) the sale of the pledged stock and (3) a "change in control," as
defined in the loan agreement.
Page 47
<PAGE>
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with James G. Cameron,
Thomas M. Thompson, Jr., Robert R. Russo, Jack R. Pine, John D. Franklin and
James F. Brenner. 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. The respective annual base salaries currently in effect are $290,000
for Mr. Cameron; $245,000 for Mr. Thompson; $230,000 for Mr. Russo; $150,000 for
Mr. Pine; $150,000 for Mr. Franklin; and $150,000 for Mr. Brenner. 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 Mr. Cameron, Thompson and Russo continue until December 31, 2001
and are renewable for successive three-year periods thereafter. The employment
agreements with Messrs. Pine, Franklin and Brenner 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 we terminate any of these employment agreements
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. Such entitlements will last to the later of twelve months or the
remaining portion of the term of the relevant employment agreement. Such
entitlements will be payable in monthly installments for such period with the
addition of a pro rated portion of the employee's bonus compensation for the
year of termination. The bonus is only payable as and when ordinarily determined
for such year.
Page 48
<PAGE>
ITEM 12. SECURITY OWNERSHIP
Statia Terminals International indirectly owns all of the common stock
of Statia Terminals Canada, Incorporated and the Parent owns all of the common
stock of Statia. The following table sets forth the number and percentage of
shares of currently outstanding common stock of the Parent beneficially owned as
of March 30, 1999 by (1) each person known to us to be a beneficial owner of
more than 5% of any class of the Parent's common stock, (2) each managing
director/director and executive officers, and (3) all of our managing
directors/directors and executive officers as a group. The address of each owner
is our principal office unless otherwise indicated.
Number of
Name Shares Percentages
- - ------------------------------------------ ---------- -----------
James G. Cameron 4,474 (2) 10.91%
Thomas M. Thompson, Jr. 900 2.20%
Robert R. Russo 807 1.97%
Jack R. Pine 451 1.10%
John D. Franklin 353 0.86%
James F. Brenner 310 0.76%
John K. Castle (1) 33,750 82.32%
c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
David B. Pittaway 200 0.49%
Justin B. Wender 10 0.02%
Admiral James L. Holloway III 50 0.12%
Francis Jungers 100 0.24%
Dr. Jonathan R. Spicehandler 100 0.24%
All Officers and Directors (1) 38,000 92.68%
Castle Harlan Partners II L.P.,
affiliates and Castle
Harlan employees (1) 33,750 82.32%
c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
- - --------------
(1) Mr. Castle is the controlling shareholder of the general partner of the
general partner of Castle Harlan Partners II L.P. He may therefore be
deemed to be the beneficial owner of shares beneficially owned by Castle
Harlan Partners II L.P., its affiliates and Castle Harlan employees. Mr.
Castle disclaims beneficial ownership of the shares owned by Castle
Harlan Partners II L.P., its affiliates and Castle Harlan employees other
than such shares that represent his pro rata partnership interests in
Castle Harlan Partners II L.P. and its affiliates.
(2) Includes 3,295 shares owned by certain of our employees who have granted
to Mr. Cameron a proxy to vote such shares. Mr. Cameron disclaims
beneficial ownership of these shares.
Page 49
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SALE OF BROWNSVILLE TERMINAL
In July 1998, we sold our terminal in Brownsville, Texas. We used the
net proceeds from such sale to pay the Parent $6.15 million which the Parent
used to redeem 6,150 shares of its Series D Preferred Stock owned by Castle
Harlan.
MANAGEMENT AGREEMENT
As part of the Castle Harlan 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 $1.35
million plus expenses for investment banking, advisory and strategic planning
services. In the event the net proceeds from the sale of the M/V Statia
Responder exceed a specified threshold, Castle Harlan may be entitled to an
additional payment of up to $1 million. Under the indenture relating to the
mortgage notes, dividends from Statia Terminals International 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 $1.35 million on
its common stock to the Parent to enable the Parent to pay management fees to
Castle Harlan, Inc. See Note 8 to the Consolidated Financial Statements of
Statia for information on preferred and common dividends paid prior to the
Castle Harlan Acquisition.
CONSULTING AGREEMENT
A consultant owns 1,500 shares of the Parent's common stock. 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.
Four of the Parent's directors, Admiral James L. Holloway III, Francis
Jungers, Jonathan R. Spicehandler, M.D. and Ernest Voges, have entered into
consulting agreements with Statia Terminals International for advisory and
consulting services related to investment and strategic planning, financial and
other matters. In consideration of services provided to Statia Terminals
International, each consultant receives a consulting fee of $6,250 per quarter
plus reimbursement of out-of-pocket expenses. The Parent pays each of the
foregoing directors $1,000 per meeting of the board of directors attended.
Page 50
<PAGE>
LOANS TO MANAGEMENT
On November 27, 1996, Messrs. Cameron, Thompson, Russo, Pine, Franklin,
Brenner and certain other of our officers and managers were granted loans by the
Parent to purchase shares of its common stock and Series E Preferred Stock. The
loans totaled $1.5 million and were secured by pledges of such stock. The loans
bear interest at 6.49% annually and are due on the earlier of (1) November 26,
2003, (2) the sale of the pledged stock and (3) a "change in control," as
defined in the loan agreement.
BOARD OF DIRECTORS
Castle Harlan or its affiliates hold 13,850 shares of the Parent's
Series D Preferred Stock, 33,750 shares of its Series E Preferred Stock and
33,750 shares of the Parent's currently outstanding common stock. Certain
directors and members of our management hold 4,724 shares of the Parent's Series
E Preferred Stock and 4,724 shares of its currently outstanding common stock and
options to acquire an additional 6,145 shares of common stock.
Page 51
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a.) 1. Financial Statements Index
The following consolidated financial statements of
Statia Terminals International N.V. and its
Subsidiaries are filed in response to Item 8 of this
1998 Annual Report on Form 10-K:
Statia Terminals International N.V. (and its Predecessor Statia Terminals, Inc.)
Report of Independent Certified Public Accountants
Consolidated Balance Sheets
as of December 31, 1997 and 1998
Consolidated Statements of Income (Loss)
for the period January 1, 1996 through November 27, 1996
(Predecessor)
for the period November 27, 1996 through December 31,
1996
for the years ended December 31, 1997 and 1998
Consolidated Statements Stockholder's Equity
for the period November 27, 1996 through
December 31, 1996
for the years ended December 31, 1997 and 1998
Consolidated Statements of Cash Flows
for the period January 1, 1996 through November 27,
1996 (Predecessor)
for the period November 27, 1996 through December 31,
1996
for the years ended December 31, 1997 and 1998
Notes to the Consolidated Financial Statements
Statia Terminals Canada, Incorporated (and its Predecessor Statia Terminals
Point Tupper, Inc.)
Report of Independent Certified Public Accountants
Consolidated Balance Sheets
as of December 31, 1997 and 1998
Consolidated Statements of Income (Loss) and Retained
Earnings (Deficit) for the period January 1,
1996 through November 27, 1996 (Predecessor)
for the period November 27, 1996 through
December 31, 1996
for the years ended December 31, 1997 and 1998
Consolidated Statements of Cash Flows
for the period January 1, 1996 through November 27,
1996 (Predecessor)
for the period November 27, 1996 through December 31,
1996
for the years ended December 31, 1997 and 1998
Notes to the Consolidated Financial Statements
Page 52
<PAGE>
Statia Terminals N.V.
Report of Independent Certified Public Accountants
Consolidated Balance Sheets
as of December 31, 1997 and 1998
Consolidated Statements of Income (Loss) and Retained
Earnings (Deficit) for the period January 1,
1996 through November 27, 1996 (Predecessor)
for the period November 27, 1996 through
December 31, 1996
for the years ended December 31, 1997 and 1998
Consolidated Statements of Cash Flows
for the period January 1, 1996 through
November 27, 1996 (Predecessor)
for the period November 27, 1996 through December
31, 1996
for the years ended December 31, 1997 and 1998
Notes to the Consolidated Financial Statements
2. Financial Statement Schedules
See Notes 15 and 17 to the Consolidated Financial
Statements of Statia Terminals International N.V. for
required financial statement schedules.
3. Exhibits Index
See the Exhibits Index on Pages E - 1 through E - 4
following the Signature Pages.
(b.) Reports on Form 8-K
None.
Page 53
<PAGE>
Statia Terminals International N.V.
and Subsidiaries
Consolidated Financial Statements
as of December 31, 1997 and 1998
Together With Auditor's Report
F-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, 1997 and 1998, and the related consolidated
statements of income (loss), stockholder's equity and cash flows for the period
from Inception through December 31, 1996 and for the years ended December 31,
1997 and 1998. We have also audited the related combined statements of income
(loss), stockholder's equity and cash flows of Statia Terminals, Inc. and
subsidiaries and affiliates (the "Predecessor Company") for the period 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, 1997 and 1998, and the
results of its operations and its cash flows for the period from Inception
through December 31, 1996 and for the years ended December 31, 1997 and 1998,
and the results of operations and cash flows of the Predecessor Company for the
period from January 1, 1996 through November 27, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
February 1, 1999.
F-2
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share amounts)
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1998
---------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,083 $ 13,873
Accounts receivable-
Trade, less allowance for doubtful accounts of
$830 in 1997 and $785 in 1998 10,092 7,562
Other 2,347 2,328
Inventory, net 1,247 4,528
Prepaid expenses 269 172
---------- ----------
Total current assets 20,038 28,463
PROPERTY AND EQUIPMENT, net 218,529 209,970
OTHER NONCURRENT ASSETS, net 5,661 4,745
---------- ----------
Total assets $ 244,228 $ 243,178
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,788 $ 9,012
Accrued interest payable 2,027 2,027
Other accrued expenses 7,587 8,439
---------- ----------
Total current liabilities 17,402 19,478
LONG-TERM DEBT 135,000 135,000
---------- ----------
Total liabilities 152,402 154,478
---------- ----------
STOCKHOLDER'S EQUITY SUBJECT TO REDUCTION 20,000 -
STOCKHOLDER'S EQUITY:
Common stock, $1 par value, 30,000 shares authorized,
6,000 shares issued and outstanding 6 6
Additional paid-in capital 78,494 92,344
Accumulated deficit (6,674) (3,650)
---------- ----------
Total stockholder's equity 71,826 88,700
---------- ----------
Total liabilities and stockholder's equity $ 244,228 $ 243,178
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Dollars in thousands)
The financial statements of the Company and the Predecessor Company
are not comparable in certain respects (see Note 1).
<TABLE>
<CAPTION>
Predecessor
Company The Company
------------------ ------------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, -----------------------------
1996 1996 1997 1998
---------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
REVENUES $ 140,998 $ 14,956 $ 142,499 $ 136,762
COST OF SERVICES AND PRODUCTS SOLD 129,915 12,924 122,944 106,688
----------- --------- ---------- ----------
Gross profit 11,083 2,032 19,555 30,074
ADMINISTRATIVE EXPENSES 8,282 413 6,348 7,315
----------- --------- ---------- ----------
Operating income 2,801 1,619 13,207 22,759
LOSS (GAIN) ON DISPOSITION OF
PROPERTY AND EQUIPMENT (68) - (109) 1,652
INTEREST EXPENSE 4,187 1,613 16,874 16,851
INTEREST INCOME 57 31 459 588
----------- --------- ---------- ----------
Income (loss) before provision
for income taxes and preferred
stock dividends (1,261) 37 (3,099) 4,844
PROVISION FOR INCOME TAXES 629 132 780 320
----------- --------- ---------- ----------
Income (loss) before preferred
stock dividends (1,890) (95) (3,879) 4,524
PREFERRED STOCK DIVIDENDS 792 - - -
----------- --------- ---------- ----------
Net income (loss) available to
common stockholder $ (2,682) $ (95) $ (3,879) $ 4,524
=========== ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(Dollars in thousands except share amounts)
<TABLE>
<CAPTION>
Common Stock Additional
-------------------- Paid-in Accumulated
Shares Common Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Issuance of common stock,
November 27, 1996 6,000 $ 6 $ 78,494 $ - $ 78,500
Net income (loss) available to
common stockholder - - - (95) (95)
------- ------ --------- ---------- ---------
BALANCE, December 31, 1996 6,000 6 78,494 (95) 78,405
Net income (loss) available to
common stockholder - - - (3,879) (3,879)
Common stock dividend - - - (2,700) (2,700)
------- ------ --------- ---------- ---------
BALANCE, December 31, 1997 6,000 6 78,494 (6,674) 71,826
Net income (loss) available to
common stockholder - - - 4,524 4,524
Common stock dividend - - - (1,500) (1,500)
Reclassification of stockholder's
equity subject to reduction - - 20,000 - 20,000
Payment to Parent - - (6,150) - (6,150)
------- ------ --------- ---------- ---------
BALANCE, December 31, 1998 6,000 $ 6 $ 92,344 $ (3,650) $ 88,700
======= ====== ========= ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
The financial statements of the Company and the Predecessor Company
are not comparable in certain respects (see Note 1).
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- ----------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, ---------------------------
1996 1996 1997 1998
--------------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) before preferred stock dividends $ (1,890) $ (95) $ (3,879) $ 4,524
Adjustments to reconcile net income (loss) before
preferred stock dividends to net cash
provided by operating activities-
Depreciation, amortization and non-cash
charges 12,296 1,011 10,911 12,060
Provision for bad debts 406 - 11 72
Loss (gain) on disposition of property and
equipment (68) - (109) 1,652
(Increase) decrease in accounts receivable -
trade (1,585) (1,311) 2,060 2,458
(Increase) decrease in other receivables 3,237 (1,530) 747 19
(Increase) decrease in inventory (5,033) 1,950 3,722 (3,281)
(Increase) decrease in prepaid expense (64) - 769 97
(Increase) decrease in other noncurrent
assets 319 (801) (134) 4
Increase (decrease) in accounts payable 3,577 277 (2,195) 1,555
Increase (decrease) in accrued expenses (811) 2,724 491 703
Increase (decrease) in payable to affiliates (1,276) - 58 (331)
-------- -------- --------- --------
Net cash provided by operating
activities 9,108 2,225 12,452 19,532
-------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (14,490) (1,203) (5,342) (10,714)
Proceeds from sale of property and equipment 111 - 112 122
Proceeds from sale of Statia Terminals - - - 6,500
Southwest, Inc.
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 (102,890) (177,033) (12,933) (4,092)
-------- -------- --------- --------
</TABLE>
(Continued)
F-6
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Continued)
The financial statements of the Company and the Predecessor Company
are not comparable in certain respects (see Note 1).
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- ---------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, -----------------------------
1996 1996 1997 1998
--------------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in advances from Parent 203,767 - - -
Retirement of preferred stock (18,577) - - -
Bank borrowings 66,000 - - -
Bank repayments (132,400) - - -
Payment to Parent - - - (6,150)
Dividends paid to Parent (25,792) - (2,700) (1,500)
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 92,998 184,072 (2,700) (7,650)
-------- -------- --------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (784) 9,264 (3,181) 7,790
CASH AND CASH EQUIVALENTS,
balance at beginning of period 1,469 - 9,264 6,083
-------- -------- --------- --------
CASH AND CASH EQUIVALENTS,
balance at end of period $ 685 $ 9,264 $ 6,083 $ 13,873
======== ======== ========= ========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid for taxes $ 823 $ 9 $ 513 $ 369
======== ======== ========= ========
Cash paid for interest $ 4,455 $ - $ 15,334 $ 15,940
======== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except share amounts)
1. ORGANIZATION AND OPERATIONS
Statia Terminals International N.V. is wholly owned by Statia Terminals
Group N.V. (the "Parent") and was formed on September 4, 1996 by Castle Harlan
Partners II, L.P. ("Castle Harlan"), a private equity investment fund managed
by Castle Harlan, Inc., a private merchant bank, certain members of management
and others and commenced operations on November 27, 1996 ("Inception"). Statia
Terminals International N.V. and Subsidiaries (the "Company") own and operate
petroleum blending, transshipment and storage facilities located on the island
of St. Eustatius, Netherlands Antilles and at Point Tupper, Nova Scotia,
Canada. The Company's terminaling services are furnished to many of the world's
largest producers of crude oil, integrated oil companies, oil traders,
refiners, petrochemical companies and ship owners. In addition to storage, the
Company provides a variety of related terminal services including bunkering,
crude oil and petroleum product blending and processing, and emergency and
spill response. A subsidiary of the Company provides administrative services
for the Company from its office in Deerfield Beach, Florida.
The Company includes the following primary entities (collectively, the
"Statia Operations"): Statia Terminals International N.V. ("Statia"), Statia
Terminals N.V. (each incorporated in the Netherlands Antilles), Statia
Terminals Canada, Inc. (incorporated in Nova Scotia, Canada) and Statia
Terminals Southwest, Inc. (incorporated in Texas--the "Brownsville Facility")
which was sold in July 1998 (see Note 13). Significant intercompany balances
and transactions have been eliminated.
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
cash flows from January 1, 1996 through November 27, 1996 ("the period ended
November 27, 1996"), included the accounts of 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.; Statia Terminals Point Tupper, Inc. (incorporated in
Nova Scotia, Canada); and Statia Terminals Southwest, Inc. 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 3).
On November 27, 1996, Castle Harlan, members of our management and others
acquired from Praxair all of the outstanding capital stock of Statia Terminals
N.V., Statia Terminals, Inc., their subsidiaries and certain of their
affiliates (the "Castle Harlan Acquisition"). The adjusted purchase price of
the Castle Harlan Acquisition totaled approximately $217,146. The Castle Harlan
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 6 and from the sale of the Company's stock. The Castle Harlan Acquisition
has been accounted for under the purchase method of accounting. The purchase
price has been allocated to the assets and liabilities of the Company based on
their fair values as of the date of the Castle Harlan Acquisition.
F-8
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
These consolidated financial statements have been prepared in conformity
with generally accepted accounting principles as promulgated in the United
States which require management to make estimates and assumptions that affect
the reported amounts of assets and liabilities. Management is also required to
make judgments regarding disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
Revenue Recognition
Revenues from terminaling operations are recognized ratably as the
services are provided. Revenues and commissions from bunkering services,
terminaling-related services and bulk product sales are recognized at the time
of delivery of the service or product.
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."
The assets and liabilities are translated into U.S. dollars at year end
exchange rates. Income and expense items are converted into U.S. dollars at
average rates of exchange prevailing during the year. Substantially all of the
Company's transactions are denominated in U.S. dollars.
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.
F-9
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
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 approximates fair value since the Notes have been priced near par
value 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 any 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 flow over the remaining lives of the
long-lived assets in measuring their recoverability.
Other Noncurrent Assets
Other noncurrent assets primarily consist of deferred financing costs of
$5,432 and $4,521 as of December 31, 1997 and 1998, respectively. The deferred
financing costs related to establishing debt obligations are amortized ratably
over the life of the underlying obligation. Debt cost amortization expense was
$911 for the years ended December 31, 1997 and 1998.
F-10
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Income Taxes
The Company and the Predecessor Company determine their tax provision and
deferred tax balances in compliance with SFAS No. 109, "Accounting for Income
Taxes." Under this approach, the provision for income taxes represents income
taxes paid or payable for the current year adjusted for the change in deferred
taxes during the year. Deferred income tax assets and liabilities 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.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in the financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements
provided for earlier periods for comparative purposes is required. The
following types of items are to be considered in computing comprehensive
income: foreign currency translation adjustments, pension liability
adjustments, and unrealized gain/loss on securities available for sale. For all
periods presented herein, there were no differences between net income and
comprehensive income.
Segment Information
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about product and services, geographic areas, and major customers.
The adoption of SFAS No. 131 had no impact on consolidated results of
operations, financial position or cash flow.
Reclassifications
Certain reclassifications were made to the 1996 and 1997 financial
statements in order to conform to the 1998 presentation.
A statement of stockholder's equity for the Predecessor Company is not
presented because the information would not be comparable to that of the
Company.
F-11
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
3. 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 $210,000,
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, was as follows:
Merger Value................................................ $ 210,000
Less-
Debt acquired............................................. 66,000
Intercompany/advance accounts............................. 44,000
Off-balance sheet obligations............................. 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 Castle Harlan Acquisition.
4. ACQUISITION
As discussed in Note 1, on November 27, 1996, the Company acquired from
Praxair all of the outstanding capital stock of Statia Terminals N.V., Statia
Terminals, Inc., their subsidiaries and certain affiliates. The Castle Harlan
Acquisition has been accounted for under the purchase method of accounting.
Accordingly, the purchase price was allocated to the assets and liabilities of
the Company based on their respective fair values as of the date of the Castle
Harlan Acquisition. The assets of the Company as of the date of the
Castle Harlan Acquisition included certain property and equipment acquired from
a third-party Financier by Praxiar (see Note 7.) No portion of the purchase
price of the Company was allocated to intangible assets since the fair value of
the tangible assets exceeded the purchase price. No adjustments were made to
the allocated fair values during 1997 or 1998.
F-12
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
4. ACQUISITION - (CONTINUED)
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
Property and equipment...................................... 222,907
Other noncurrent assets..................................... 6,539
Liabilities assumed......................................... (15,870)
-----------
Total purchase price................................... $ 233,146
===========
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31:
<TABLE>
<CAPTION>
Useful Live
1997 1998 in Years
---- ---- --------
<S> <C> <C> <C>
Land...................................................... $ 1,291 $ 1,291
Land improvements......................................... 7,964 7,679 5-20
Buildings and improvements................................ 2,178 3,303 20-40
Plant machinery .......................................... 168,468 164,564 4-40
Mooring facilities and marine equipment................... 47,854 50,453 4-40
Field and office equipment................................ 1,677 2,497 3-15
------------ ------------
Total property and equipment, at cost....... 229,432 229,787
Less- accumulated depreciation............................ 10,903 19,817
------------ ------------
Property and equipment, net....................... $ 218,529 $ 209,970
============ ============
</TABLE>
Pursuant to the Castle Harlan Acquisition, the Company agreed with
stockholders to sell the Brownsville Facility and the M/V Statia Responder. The
Company has reclassified the vessel from its original asset held for sale
classification to property and equipment as management is no longer actively
seeking buyers for the vessel. The M/V Statia Responder is still in operation
and the revenues and costs, including depreciation, associated with operating
this asset are included in the accompanying financial statements. Certain of
the Parent's preferred stock agreements contain features which may require the
F-13
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
5. PROPERTY AND EQUIPMENT - (CONTINUED)
Parent to cause the Company to pay a dividend or otherwise remit the net
proceeds from any future sale of the M/V Statia Responder to the Parent. On
July 29, 1998, the Company sold the Brownsville Facility. In accordance with
management's decision not to actively seek buyers for the vessel, $10,000
representing the vessel's estimated fair value was reclassified from
stockholder's equity subject to reduction to additional paid-in capital.
6. DEBT
The 11-3/4% Notes due November 15, 2003 were issued by Statia and one of
its subsidiaries (the "Issuers") on November 27, 1996 in connection with the
Castle Harlan 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:
Optional
Year Redemption Price
---- ----------------
2000 105.875%
2001 102.938%
2002 100.000%
Notwithstanding the foregoing, 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
to the Notes) 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 remains outstanding (see Note 16).
The Notes are guaranteed on a full, unconditional, joint and several basis
by each of the indirect and direct active subsidiaries of Statia. 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 coverage ratio for the prior four full fiscal
quarters of at least 2.0:1, 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 restrictions on the Company's ability to
pay dividends other than distributions from the proceeds of assets held for
sale as discussed above and certain management fees as discussed in Note 10
below. Except with the occurrence of an event of default, subsidiaries of
Statia have no restrictions upon transfers of funds in the form of dividends,
loans or cash advances. The Issuers have been in compliance with the financial
covenants set forth in the Indenture.
F-14
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
6. DEBT - (CONTINUED)
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 0.375% per annum on a portion of the unused funds. The Credit Facility
bears interest at a rate of prime plus 0.5% (8.25% at December 31, 1998). 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 Statia's subsidiaries from transferring funds to Statia 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
Statia. The Credit Facility expires on November 27, 1999. At December 31, 1997
and 1998, the Company had approximately $8,058 and $7,982, respectively,
available for borrowing under the Credit Facility as limited by the borrowing
base computation and had no outstanding balance.
7. LEASES
The Company and the Predecessor Company rent certain facilities, land and
marine equipment under cancelable and noncancelable operating leases. Rental
expense on operating leases was $13,854 (of which $9,870 including $4,270 for
recognition of lease residual value guarantee, relates to the lease described
below), $491, $3,763 and $3,409 for the period ended November 27, 1996, the
period ended December 31, 1996, the year ended December 31, 1997 and the year
ended December 31, 1998, respectively. Future rental commitments during the
years ending 1999 through 2003 are $3,619, $2,569, $2,504, $2,518 and $837,
respectively.
On November 17, 1993, Statia Terminals N.V. and a subsidiary entered into
an agreement with a third-party financier (First Salute Leasing, L.P.) pursuant
to which a portion of its land on St. Eustatius was leased to this third party
for the purpose of construction and operation of five million barrels of crude
oil storage tanks and a single point mooring system. Statia Terminals N.V.
acted as agent for the third party with regard to the construction of the
facilities. Statia Terminals N.V. leased the facility from the third party for
a minimum period of five years beginning February 1, 1995. The aggregate
construction cost incurred for these leased assets totaled $88,513. At the
completion of the initial five year term, Statia Terminals N.V. had the option
to extend the lease, purchase the facility from the lessor, or arrange for the
leased properties to be sold to a third party. In the event of purchase or sale
of these properties, Statia Terminals N.V. was obligated to the lessor for any
shortfall between the purchase or sales price and the lease residual value
guarantee. In connection with the Castle Harlan Acquisition, Praxair terminated
the above First Salute Leasing, L.P. off-balance-sheet financing arrangement
and paid in full all obligations related to this lease.
F-15
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
8. SHAREHOLDER'S EQUITY
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 ($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 0.25% above the
preferred shareholder's borrowing rate as established by the shareholder's
lending institution. During the period ended November 27, 1996, Statia
Terminals Point Tupper, Inc. accrued and paid dividends of $792. 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 Castle Harlan Acquisition.
The Company
During the years ended December 31, 1997 and 1998 the Company paid
dividends to the Parent of $2,700 and $1,500, respectively. The proceeds from
these dividends were used by the Parent to pay certain management fees
discussed in Note 11.
9. INCOME TAXES
The sources of income (loss) by jurisdiction before the provision for
income taxes and preferred stock dividends are:
<TABLE>
<CAPTION>
Predecessor
Company The Company
----------------- ------------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, -------------------------------
1996 1996 1997 1998
--------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
U.S........................... $ 134 $ (300) $ (1,823) $ (362)
Non-U.S....................... (1,395) 337 (1,276) 5,206
-------- -------- --------- --------
$ (1,261) $ 37 $ (3,099) $ 4,844
======== ======== ========= ========
</TABLE>
F-16
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
9. INCOME TAXES - (CONTINUED)
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
Predecessor
Company The Company
---------------- --------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, ------------------------
1996 1996 1997 1998
---------------- -------------- -------- -------
<S> <C> <C> <C> <C>
Current:
U.S........................ $ 215 $ - $ (128) $ -
State...................... (25) - (42) -
Non-U.S.................... (487) (132) (610) (320)
------ ------- ------ -------
(297) (132) (780) (320)
------ ------ ------ -------
Deferred:
U.S........................ (332) - - -
------ ------ ------ -------
Total provision $ (629) $ (132) $ (780) $ (320)
====== ====== ====== =======
</TABLE>
The components of the deferred income tax provision relate primarily to
book versus tax differences in computing depreciation expense.
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
--------------- ---------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, ----------------------------
1996 1996 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income (loss) before income taxes and
preferred stock dividends.................... $(1,261) $ 37 $(3,099) $ 4,844
------- ------ ------- -------
Tax (provision) benefit at U.S. statutory rate.. 440 (13) 1,085 (1,695)
State income taxes.............................. - - (14) -
Non-U.S. tax rate differential and losses
without tax benefit.......................... (1,069) (77) (1,851) 1,375
Other, net...................................... - (42) - -
------ ------ ------ ------
$ (629) $ (132) $ (780) $ (320)
====== ====== ====== =======
</TABLE>
F-17
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
9. INCOME TAXES - (CONTINUED)
For 1996, the Company's effective tax rate exceeds the foreign tax
statutory rates as a result of Canadian large corporation tax and losses
incurred by certain subsidiaries for which the Company has not recognized any
benefit.
The principal temporary differences included on the balance sheets net of
effective tax rates are:
The Company
---------------------------
December 31, December 31,
1997 1998
---- ----
Net operating loss and ITC carryforwards...... $ 30,054 $ 28,080
Valuation allowance........................... (30,054) (28,080)
---------- ----------
$ - $ -
========== ==========
The Company's net deferred tax assets primarily relate to Canadian
investment tax credits and net operating loss carryforwards. The Company has
provided a full valuation allowance against these tax assets, because it is not
certain that the deferred tax assets will be utilized in the future.
The Company's Canadian subsidiaries are subject to a federal large
corporation tax based on 0.225% of the subsidiaries' total equity. As of April
1, 1997, Nova Scotia enacted a provincial capital tax based on 0.25% of the
subsidiaries' total equity (prorated to 0.1888% for the 1997 calendar year).
The Company's Canadian subsidiaries have benefited from net operating tax loss
and investment tax credit carryforwards which expire in various amounts through
2005 and 2003, respectively. The net operating tax loss carryforwards available
to offset Canadian taxable income at December 31, 1997 and 1998 were $59,483
and $55,097, respectively. The investment tax credit carryforward available to
reduce Canadian income taxes was $7,302 at December 31, 1997 and 1998.
On June 1, 1989, the governments of the Netherlands Antilles and St.
Eustatius approved a Free Zone and Profit Tax Agreement retroactive to January
1, 1989 and concluding on December 31, 2000. This agreement requires a
subsidiary of the Company to pay a 2% rate on taxable income, as defined, or a
minimum payment of 500 Netherlands Antilles guilders ($282). This 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, 1998, the amount available to offset future tax
liability under the agreement was approximately $1,412. Currently, the
subsidiary is negotiating a new agreement with the governments of the
Netherlands Antilles and St. Eustatius that will be effective from January 1,
1998, through December 31, 2010, with extension provisions to 2015.
Certain of the Company's Netherlands Antilles subsidiaries are not part of
the Free Zone and Profit Tax Agreement and, accordingly, pay Netherlands
Antilles federal income tax at an effective tax rate of up to 45%.
Approximately $67 and $28 of profit tax is included in the Netherlands Antilles
tax provision for the periods ended December 31, 1997 and December 31, 1998,
respectively.
F-18
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
10. RELATED PARTY TRANSACTIONS
Prior to November 27, 1996, the Predecessor Company engaged in various
related-party transactions with Praxair, CBI and their affiliates. Advances
consisted principally of funds loaned by Praxair/CBI for disbursements, debt
service and dividends offset by the transfer of the Predecessor Company's
excess cash. The advances were non-interest-bearing and did not have a
specified maturity date.
F-19
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
10. RELATED PARTY TRANSACTIONS - (CONTINUED)
The Predecessor Company regularly contracted with affiliates of CBI for
the construction and expansion of its facilities and for certain repair and
maintenance work. During the period ended November 27, 1996, $4,828 was paid to
Praxair or CBI affiliates for these activities related to its property and
equipment. It is not possible to determine whether the results of operations
and financial position of the Predecessor Company would be significantly
different had the Predecessor Company contracted with independent third parties
for its construction, expansion, repair and maintenance needs.
Praxair and CBI directly allocated certain corporate administrative
services to the Predecessor Company including certain legal services, risk
management, tax advice and return preparation, employee benefit administration,
cash management and other services. During the period ended November 27, 1996,
$138 was paid for these direct and indirect administrative services. All
intercompany balances owed to Praxair, CBI and their affiliates were fully paid
in connection with the Acquisition.
The Parent entered into a ten-year management agreement with Castle
Harlan, Inc., to pay an annual management fee of $1,350, plus out-of-pocket
expenses, for advisory and strategic planning services subject to certain
conditions. In the event the net proceeds from the sale of the M/V Statia
Responder exceed a specified threshold, Castle Harlan, Inc. may be entitled to
a payment of up to $1,000. This agreement terminates upon a change in control.
During 1997 and 1998, Statia declared and paid dividends to the Parent of
$2,700 and $1,500, respectively, to cover the management fee and related
expenses for the periods from November 27, 1996 to November 27, 1998 and from
November 27, 1998 to November 27, 1999, respectively.
11. COMMITMENTS AND CONTINGENCIES
Environmental, Health and Safety Matters
In connection with the Castle Harlan 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, Nova Scotia, Canada facility. Praxair has
agreed to pay for certain of these environmental costs subject to certain
limitations. Praxair has paid approximately $2,300 during the period from
November 27, 1996 to December 31, 1998 related to such costs. Based on
investigations conducted and information available to date, the potential cost
of additional remediation and compliance is estimated at $10,000, substantially
all of which the Company believes is the responsibility of Praxair per the
Castle Harlan Acquisition agreement. The Company has also identified certain
other environmental, health and safety costs not covered by the agreement with
Praxair for which $1,500 was accrued in 1996 ($10 of which has been expended
through December 31, 1998). The Company believes that these environmental,
health and safety costs, subject to reimbursements from Praxair, will not have
a material adverse effect on the Company's financial position, cash flows or
results of operations.
F-20
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
11. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
Litigation
Global Petroleum Corp. ("Global") brought an action against the Company in
December 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 $2,000 bond. Global claims damages of $1,200 for breach
of contract and the Company counter-claimed for breach of contract and payment
of approximately $2,000 of unpaid invoices for product storage and other
service. 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 $100,000 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 Statia Terminals,
Inc. and Statia Terminals, N.V. for $3,600 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 that had been loaded by Statia
Terminals, N.V. at St. Eustatius but was not affiliated with the Company. On
April 16, 1998, the U.S. District Court ruled that it lacked jurisdiction over
Statia Terminals, N.V. and dismissed it from the case.
The Company believes the allegations made in these proceedings are
factually inaccurate and intends to vigorously contest these claims. In
connection with the Castle Harlan Acquisition, Praxair agreed to indemnify the
Company against damages relating to the foregoing proceedings. While no
estimates can reasonably be made of any ultimate liability at this time, the
Company believes the ultimate 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 in
the normal course 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 or results of operations.
Other Accrued Expenses
A summary of other accrued expenses consists of the following as of
December 31:
1997 1998
---- ----
Personnel and related costs............... $ 2,296 $ 2,835
Professional fees......................... 1,079 1,175
Environmental expenses.................... 1,500 1,490
Other..................................... 2,712 2,939
-------- ---------
$ 7,587 $ 8,439
======== =========
F-21
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
12. SEGMENT INFORMATION
The Company is organized around several different factors the most
significant of which are products and services and geographic location. The
Company's primary products and services are bunker and bulk product sales and
terminaling services (consisting of storage, throughput, dock charges,
emergency response fees and other terminal charges).
The primary measures of profit and loss utilized by the Company's
management to make decisions about resources to be allocated to each division
are earnings before interest, taxes, depreciation, amortization and certain
unallocated profits and losses ("Internal EBITDA") and earnings before interest,
taxes and certain unallocated profits and losses ("Internal EBIT").
The following information is provided for the Company's bunker and bulk
products sales and terminaling services segments:
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- ------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, --------------------------
1996 1996 1997 1998
--------------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
REVENUES:
Terminaling services.............................. $ 44,119 $ 5,693 $ 53,165 $ 66,625
Bunker and bulk product sales..................... 96,879 9,263 89,334 70,137
-------- ------- --------- ---------
Total....................................... $140,998 $14,956 $ 142,499 $ 136,762
======== ======= ========= =========
INTERNAL EBITDA:
Terminaling services.............................. $ 15,037 $ 2,351 $ 20,450 $ 31,209
Bunker and bulk product sales..................... 3,277 14 2,699 2,965
-------- ------- --------- ---------
Total....................................... $ 18,314 $ 2,365 $ 23,149 $ 34,174
======== ======= ========= =========
DEPRECIATION AND AMORTIZATION EXPENSE:
Terminaling services.............................. $ 8,832 $ 868 $ 10,093 $ 10,923
Bunker and bulk product sales..................... 541 66 818 498
-------- ------- --------- ---------
Total....................................... $ 9,373 $ 934 $ 10,911 $ 11,421
======== ======= ========= =========
INTERNAL EBIT:
Terminaling services.............................. $ 6,205 $ 1,483 $ 10,357 $ 20,286
Bunker and bulk product sales..................... 2,736 (52) 1,881 2,467
-------- ------- --------- ---------
Total....................................... $ 8,941 $ 1,431 $ 12,238 $ 22,753
======== ======= ========= =========
CAPITAL EXPENDITURES:
Terminaling services.............................. $ 12,868 $ 1,147 $ 4,735 $ 8,274
Bunker and bulk product sales..................... 1,234 - 58 1,212
Other unallocated................................. 388 56 549 1,228
-------- ------- --------- ---------
Total....................................... $ 14,490 $ 1,203 $ 5,342 $ 10,714
======== ======= ========= =========
</TABLE>
F-22
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
12. SEGMENT INFORMATION - (CONTINUED)
December 31,
------------------------
1997 1998
---- ----
ASSETS:
Terminaling services.......................... $ 220,591 $ 208,642
Bunker and bulk product sales................. 8,964 12,058
Unallocated assets............................ 14,673 22,478
--------- ---------
$ 244,228 $ 243,178
========= =========
A reconciliation of Internal EBIT to the Company's income (loss) before
provision for income taxes and preferred stock dividends is as follows:
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- ----------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, --------------------------
1996 1996 1997 1998
--------------- ------------ -------- ---------
<S> <C> <C> <C> <C>
Internal EBIT.............................. $8,941 $1,431 $ 12,238 $22,753
Unallocated operating and administrative
expenses................................ (472) 100 167 (905)
Interest expense excluding debt cost
amortization expense.................... (9,787) (1,525) (15,963) (15,940)
Interest income............................ 57 31 459 588
Loss on sale of Statia Terminals Southwest,
Inc..................................... - - - (1,652)
------- ------ -------- -------
Income (loss) before provision for income
taxes and preferred stock dividends........ $(1,261) $ 37 $ (3,099) $ 4,844
======= ====== ======== =======
</TABLE>
The following information is provided with respect to the geographic
operations of the Company:
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- ----------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, --------------------------
1996 1996 1997 1998
--------------- ------------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Caribbean................................ $126,557 $13,194 $ 122,042 $ 114,091
Canada 11,724 1,631 18,586 21,058
United States............................ 2,717 131 1,871 1,613
-------- ------- --------- ---------
Total revenue...................... $140,998 $14,956 $ 142,499 $ 136,762
======== ======= ========= =========
</TABLE>
F-23
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
12. SEGMENT INFORMATION - (CONTINUED)
December 31,
-------------------------
1997 1998
---- ----
LONG-TERM ASSETS:
Caribbean...................................... $185,702 $ 183,873
Canada......................................... 29,826 29,170
United States.................................. 8,662 1,672
-------- ---------
$224,190 $ 214,715
======== =========
Significant Customers
The Company presently has long term storage and throughput contracts with
Bolanter Corporation N.V. (an affiliate of Saudi Aramco) and a subsidiary of
Tosco Corporation which expire in 2000 and 1999, respectively. The Company also
derives revenues from parties unaffiliated with either Saudi Aramco or Tosco,
because of the movement of Saudi Aramco and Tosco products through the
Company's terminals. Additionally, the Company sells bunker fuels to another
affiliate of Saudi Aramco at its St. Eustatius facility.
The following table sets forth such revenues as a percentage of our total
revenue:
<TABLE>
<CAPTION>
Predecessor
Company The Company
------------- ---------------------------------------------
January 1, Period from
1996 Inception
Through Through Year Ended December 31,
November 27, December 31, ------------------------
1996 1996 1997 1998
------------ ------------ ------ ------
<S> <C> <C> <C> <C>
Saudi Aramco-related revenues:
Storage and throughput contract........... 6.2% 5.9% 7.0% 7.4%
Unaffiliated third parties................ 11.7 7.7 6.4 7.7
Bunker sales.............................. 1.7 2.2 2.1 1.5
---- ----- ---- ----
Total............................... 19.6% 15.8% 15.5% 16.6%
==== ===== ==== ====
Tosco-related revenues:
Storage and throughput contract........... 4.1% 3.2% 6.9% 7.1%
Unaffiliated third parties................ 1.3 4.7 3.9 1.9
Bunker sales.............................. 0.6 0.8 0.1 0.0
---- ----- ---- ----
Total............................... 6.0% 8.7% 10.9% 9.0%
==== ===== ==== ====
</TABLE>
Although the Company has long-standing relationships and long-term
contracts with these customers, if such long-term contracts were not renewed or
replaced at the end of their terms, or if the Company otherwise lost any
significant portion of its revenues from these two customers, such
non-renewal/replacement or loss could have a material adverse effect on the
Company's business, financial condition and ability to pay dividends. The
Company also has long-term contracts with other key
F-24
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
12. SEGMENT INFORMATION - (CONTINUED)
customers, and there can be no assurance that these contracts will be renewed
at the end of their terms or that the Company will be able to enter into other
long-term contracts on terms favorable to it, or at all.
No other customer accounted for more than 10% of the Predecessor Company's
or the Company's total revenues in 1996, 1997 or 1998.
13. LOSS ON SALE OF STATIA TERMINALS SOUTHWEST, INC.
On July 29, 1998, the Company sold Statia Terminals Southwest, Inc.
("Southwest") for $6,500 in cash resulting in net proceeds of approximately
$6,150. The Company retained certain of the pre-closing assets and liabilities
of Southwest consisting primarily of accounts receivable and accrued expenses
and agreed to indemnify the purchaser for certain contingent legal and
environmental matters up to a maximum of $500 through July 29, 1999. No
provision has been made in the Company's financial statements for these
contingent matters as management believes it is not probable the Company will
ever be required to provide such indemnification. The net book value of the
assets and liabilities sold on July 29, 1998, was $7,802. The loss on the
disposition of Southwest of $1,652 is included in gain (loss) on sale of
property and equipment since substantially all of the value of Southwest was
originally recorded in this account when the Company was acquired.
In conjunction with the sale of Southwest, $10,000 representing the
original estimated fair value of the facility was reclassified from
stockholder's equity subject to reduction to additional paid-in capital. A
restricted payment of $6,150 representing the net proceeds from the sale of
Southwest was made to the Parent and used by the Parent to redeem a portion of
its Series D Preferred Stock.
14. 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 $246
for the period ended November 27, 1996. As a result of the Castle Harlan
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 1998 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
F-25
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
14. RETIREMENT PLANS - (CONTINUED)
to expense for matching and discretionary contributions for the year ended
December 31, 1998 were $136 and $178, respectively. In addition, for certain
employees residing in the Netherlands Antilles and Canada, the Company sponsors
certain pension plans. Amounts charged to expense for these plans are not
significant.
15. 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 - (9) 769
For the year ended
December 31, 1997 769 11 50 830
For the year ended
December 31, 1998 830 72 (117) 785
</TABLE>
16. SUBSEQUENT EVENT (UNAUDITED)
On February 12, 1999, the Parent filed documents with the Securities and
Exchange Commission to sell 7.6 million of its common shares (exclusive of an
over allotment option available to underwriters for an additional 760,000
shares) in its initial equity public offering. The offering price is expected to
be between $19.50 and $20.50 per share, raising gross proceeds of approximately
$152,000 (approximately $167,000 if the over allotment option is fully
exercised). A portion of the proceeds of the offering will be used to redeem
approximately 25% (approximately 35% if the over allotment option is fully
exercised) of the 11-3/4% Notes co-issued by Statia and Statia Terminals Canada,
Incorporated.
F-26
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
(Dollars in thousands except share amounts)
17. CONDENSED COMBINING FINANCIAL STATEMENTS BY JURISDICTION
The Notes are guaranteed on a full, unconditional, joint and several basis
by each of the indirect and direct active subsidiaries of Statia, other than
Statia Terminals Canada, Incorporated, which is a co-obligor on the Notes. Each
of the subsidiary guarantors is, directly or indirectly, wholly owned by
Statia. The Company has certain inactive, non-guaranteeing subsidiaries which
are inconsequential, individually and in the aggregate, and which have no
assets, liabilities or operations and are in process of being dissolved by the
Company. The following condensed combining financial data illustrates the
composition of the Company's subsidiary guarantors, combined by jurisdiction.
The enforceability of the guarantees may be affected differently under the laws
of the applicable jurisdictions. Separate financial statements of the
subsidiaries, 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.
During the quarter ended September 30, 1998 and as a result of the sale of
Southwest, the Company liquidated its subsidiary Statia Delaware Holdco II,
Inc. ("Holdco") which was the parent company of Southwest and Statia Terminals
New Jersey, Inc. ("New Jersey"). The Company's investment in New Jersey was
transferred to another subsidiary , Statia Terminals Delaware, Inc. The
remaining balances of Holdco were transferred to its parent company, Statia.
Holdco had been included in the consolidation of United States entities.
F-27
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1998
CONDENSED COMBINING BALANCE SHEET
December 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Guaranteeing Subsidiaries
--------------------------------------------------
Statia Terminals Netherlands
Canada, Inc. Statia Antilles
Statia Terminals (Includes All Terminals Other Than
International N.V. Canadian N.V. Statia
ASSETS (Unconsolidated) Entities) Consolidated Terminals N.V.
---------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1 $ 1,241 $ 4,593 $ 21
Accounts receivable, net - 1,961 10,148 1
Inventory, net - 533 714 -
Other current assets - 57 78 1
------- -------- --------- ---------
Total current assets 1 3,792 15,533 23
PROPERTY AND EQUIPMENT, net - 28,651 178,788 1,215
INVESTMENT IN SUBSIDIARIES 78,915 - - 76,606
OTHER NONCURRENT ASSETS, net - 1,174 4,321 1
------- -------- --------- ---------
Total assets $78,916 $ 33,617 $ 198,642 $ 77,845
======= ======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 172 $ 3,121 $ 11,730 $ 71
Payable to (receivable from) affiliates (13,082) 288 5,514 (664)
------- -------- --------- ---------
Total current liabilities (12,910) 3,409 17,244 (593)
LONG-TERM DEBT - 28,060 106,940 -
------- -------- --------- ---------
Total liabilities (12,910) 31,469 124,184 (593)
------- -------- --------- ---------
STOCKHOLDERS' EQUITY SUBJECT TO 20,000 - 10,000 -
REDUCTION
STOCKHOLDERS' EQUITY:
Common stock 6 - 19,395 12
Additional paid-in capital 78,494 2,266 46,847 79,876
Retained earnings (deficit) (6,674) (118) (1,784) (1,450)
------- -------- --------- ---------
Total stockholders' equity 71,826 2,148 64,458 78,438
------- -------- --------- ---------
Total liabilities and stockholders' equity $78,916 $ 33,617 $ 198,642 $ 77,845
======= ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Reclassifications
United and Consolidated
ASSETS States Eliminations Total
------ ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 227 $ - $ 6,083
Accounts receivable, net 329 - 12,439
Inventory, net - - 1,247
Other current assets 133 - 269
-------- --------- ---------
Total current assets 689 - 20,038
PROPERTY AND EQUIPMENT, net 9,875 - 218,529
INVESTMENT IN SUBSIDIARIES 205 (155,726) -
OTHER NONCURRENT ASSETS, net 165 - 5,661
-------- --------- ---------
Total assets $ 10,934 $(155,726) $ 244,228
======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 2,250 $ - $ 17,344
Payable to (receivable from) affiliates (1,998) 10,000 58
-------- --------- ---------
Total current liabilities 252 10,000 17,402
LONG-TERM DEBT - - 135,000
-------- --------- ---------
Total liabilities 252 10,000 152,402
-------- --------- ---------
STOCKHOLDERS' EQUITY SUBJECT TO 10,000 (20,000) 20,000
REDUCTION
STOCKHOLDERS' EQUITY:
Common stock 1 (19,408) 6
Additional paid-in capital 3,000 (131,989) 78,494
Retained earnings (deficit) (2,319) 5,671 (6,674)
-------- --------- ---------
Total stockholders' equity 682 (145,726) 71,826
-------- --------- ---------
Total liabilities and stockholders' equity $ 10,934 $(155,726) $ 244,228
======== ========= =========
</TABLE>
F-28
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1998
CONDENSED COMBINING BALANCE SHEET
December 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Guaranteeing Subsidiaries
---------------------------------------------------
Statia Terminals Netherlands
Canada, Inc. Statia Antilles
Statia Terminals (Includes All Terminals Other Than
International N.V. Canadian N.V. Statia
ASSETS (Unconsolidated) Entities) Consolidated Terminals N.V.
---------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 44 $ 4,409 $ 9,037 $ 39
Accounts receivable, net - 2,243 7,640 1
Inventory, net - 323 4,205 -
Other current assets - 54 31 -
------- -------- --------- ---------
Total current assets 44 7,029 20,913 40
PROPERTY AND EQUIPMENT, net - 28,192 177,241 1,080
INVESTMENT IN SUBSIDIARIES 81,947 - - 82,084
OTHER NONCURRENT ASSETS, net - 979 3,597 1
------- -------- --------- ---------
Total assets $81,991 $ 36,200 $ 201,751 $ 83,205
======= ======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 439 $ 4,984 $ 12,934 $ 122
Payable to (receivable from) affiliates (7,148) (2,305) 5,256 (762)
------- -------- --------- ---------
Total current liabilities (6,709) 2,679 18,190 (640)
LONG-TERM DEBT - 28,060 106,940 -
------- -------- --------- ---------
Total liabilities (6,709) 30,739 125,130 (640)
------- -------- --------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock - - - 7
Common stock 6 - 19,395 12
Additional paid-in capital 92,344 2,266 56,914 80,352
Retained earnings (deficit) (3,650) 3,195 312 3,474
------- -------- --------- ---------
Total stockholders' equity 88,700 5,461 76,621 83,845
------- -------- --------- ---------
Total liabilities and stockholders' equity $81,991 $ 36,200 $ 201,751 $ 83,205
======= ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Reclassifications
United and Consolidated
ASSETS States Eliminations Total
------ ----------------- ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 344 $ - $ 13,873
Accounts receivable, net 6 - 9,890
Inventory, net - - 4,528
Other current assets 87 - 172
-------- --------- ---------
Total current assets 437 - 28,463
PROPERTY AND EQUIPMENT, net 3,457 - 209,970
INVESTMENT IN SUBSIDIARIES 318 (164,349) -
OTHER NONCURRENT ASSETS, net 168 - 4,745
-------- --------- ---------
Total assets $ 4,380 $(164,349) $ 243,178
======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 1,274 $ (2) $ 19,751
Payable to (receivable from) affiliates 4,686 - (273)
-------- --------- ---------
Total current liabilities 5,960 (2) 19,478
LONG-TERM DEBT - - 135,000
-------- --------- ---------
Total liabilities 5,960 (2) 154,478
-------- --------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock - (7) -
Common stock - (19,407) 6
Additional paid-in capital 300 (139,832) 92,344
Retained earnings (deficit) (1,880) (5,101) (3,650)
-------- --------- ---------
Total stockholders' equity (1,580) (164,347) 88,700
-------- --------- ---------
Total liabilities and stockholders' equity $ 4,380 $(164,349) $ 243,178
======== ========= =========
</TABLE>
F-29
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Dollars in thousands)
CONDENSED COMBINING INCOME STATEMENT
For the Period January 1, 1996 to November 27, 1996
<TABLE>
<CAPTION>
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 10,557 116,992 2,831 (465) 129,915
-------- ---------- -------- -------- ----------
Gross profit 1,274 9,217 5,389 (4,797) 11,083
ADMINISTRATIVE EXPENSES 2,489 4,425 6,165 (4,797) 8,282
-------- ---------- -------- -------- ----------
Operating income (1,215) 4,792 (776) - 2,801
GAIN ON DISPOSITION OF PROPERTY AND
EQUIPMENT - (68) - - (68)
INTEREST EXPENSE 3,667 520 - - 4,187
INTEREST INCOME 18 38 1 - 57
-------- ---------- -------- -------- ----------
Income (loss) before provision for income taxes
and preferred stock dividends (4,864) 4,378 (775) - (1,261)
PROVISION FOR INCOME TAXES 332 156 141 - 629
-------- ---------- -------- -------- ----------
Income (loss) before preferred stock dividends (5,196) 4,222 (916) - (1,890)
PREFERRED STOCK DIVIDENDS 792 - - - 792
-------- ---------- -------- -------- ----------
Net income (loss) available to
common stockholder $ (5,988) $ 4,222 $ (916) $ - $ (2,682)
======== ========== ======== ======== ==========
</TABLE>
F-30
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Dollars in thousands)
CONDENSED COMBINING INCOME STATEMENT
For the Period November 27, 1996 to December 31, 1996
<TABLE>
<CAPTION>
Statia Canada
Statia Terminals (Includes All Reclassifications
International N.V. Canadian Netherlands And Consolidated
(Unconsolidated) Entities) Antilles United States Eliminations Total
---------------- --------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $ - $ 1,631 $ 13,194 $ 840 $ (709) $ 14,956
COST OF SERVICES AND PRODUCTS SOLD 50 1,495 10,977 452 (50) 12,924
------ --------- -------- ------ ------- ---------
Gross profit (50) 136 2,217 388 (659) 2,032
ADMINISTRATIVE EXPENSES - 146 240 686 (659) 413
------ --------- -------- ------ ------ ---------
Operating income (50) (10) 1,977 (298) - 1,619
INTEREST EXPENSE - 336 1,277 - - 1,613
INTEREST INCOME - 2 29 - - 31
------ --------- -------- ------ ------ ---------
Income (loss) before provision
for income taxes and preferred
stock dividends (50) (344) 729 (298) - 37
PROVISION FOR INCOME TAXES - 18 114 - - 132
------ --------- -------- ------ ------ ---------
Income (loss) before preferred
stock dividends (50) (362) 615 (298) - (95)
PREFERRED STOCK DIVIDENDS 45 - - - (45) -
------ --------- -------- ------ ------ ---------
Net income (loss) available to
common stockholder $ (95) $ (362) $ 615 $ (298) $ 45 $ (95)
====== ========= ======== ====== ====== =========
</TABLE>
F-31
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Dollars in thousands)
CONDENSED COMBINING INCOME STATEMENT
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Guaranteeing Subsidiaries
------------------------------------------------------------
Statia Terminals Netherlands
Canada, Inc. Antilles
Statia Terminals (Includes All Statia Other Than
International N.V. Canadian Terminals Statia United
(Unconsolidated) Entities) N.V. Terminals N.V. States
---------------- ---------------- --------- -------------- ------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ 18,892 $ 122,624 $ 490 $ 8,523
COST OF SERVICES AND PRODUCTS SOLD - 12,868 107,820 566 4,393
--------- --------- --------- ------- --------
Gross profit - 6,024 14,804 (76) 4,130
ADMINISTRATIVE EXPENSES 278 2,054 3,273 2 6,068
--------- --------- --------- ------- --------
Operating income (278) 3,970 11,531 (78) (1,938)
GAIN ON DISPOSITION OF PROPERTY
AND EQUIPMENT - - - - (109)
INTEREST EXPENSE - 3,507 13,356 - 11
INTEREST INCOME 49 28 365 - 17
--------- --------- --------- ------- --------
Income (loss) before provision
for income taxes (229) 491 (1,460) (78) (1,823)
PROVISION FOR INCOME TAXES 55 247 281 10 187
--------- --------- --------- ------- --------
Net income (loss) (284) 244 (1,741) (88) (2,010)
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS (3,595) - - (1,488) (9)
--------- --------- --------- ------- --------
Net income (loss) available to
common stockholder $ (3,879) $ 244 $ (1,741) $(1,576) $ (2,019)
========= ========= ========= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Reclassifications
And Consolidated
Eliminations Total
------------ ------------
<S> <C> <C>
REVENUES $ (8,030) $ 142,499
COST OF SERVICES AND PRODUCTS SOLD (2,703) 122,944
-------- ----------
Gross profit (5,327) 19,555
ADMINISTRATIVE EXPENSES (5,327) 6,348
-------- ----------
Operating income - 13,207
GAIN ON DISPOSITION OF PROPERTY
AND EQUIPMENT - (109)
INTEREST EXPENSE - 16,874
INTEREST INCOME - 459
-------- ----------
Income (loss) before provision
for income taxes - (3,099)
PROVISION FOR INCOME TAXES - 780
-------- ----------
Net income (loss) - (3,879)
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS 5,092 -
-------- ----------
Net income (loss) available to
common stockholder $ 5,092 $ (3,879)
======== ==========
</TABLE>
F-32
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Dollars in thousands)
CONDENSED COMBINING INCOME STATEMENT
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Guaranteeing Subsidiaries
------------------------------------------------------------
Statia Terminals Netherlands
Canada, Inc. Antilles
Statia Terminals (Includes All Statia Other Than
International N.V. Canadian Terminals Statia United
(Unconsolidated) Entities) N.V. Terminals N.V. States
------------------ ----------------- --------- -------------- -------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ 21,521 $ 113,275 $ 548 $ 9,953
COST OF SERVICES AND PRODUCTS SOLD - 12,031 92,445 610 3,332
--------- --------- --------- ------- --------
Gross profit - 9,490 20,830 (62) 6,621
ADMINISTRATIVE EXPENSES 263 2,775 4,096 8 6,978
--------- --------- --------- ------- --------
Operating income (263) 6,715 16,734 (70) (357)
LOSS ON DISPOSITION OF PROPERTY
AND EQUIPMENT - - - - 1,652
INTEREST EXPENSE - 3,506 13,342 - 9
INTEREST INCOME - 104 485 - 5
--------- --------- --------- ------- --------
Income (loss) before provision
for income taxes (263) 3,313 3,877 (70) (2,013)
PROVISION FOR INCOME TAXES 28 - 281 8 3
--------- --------- --------- ------- --------
Net income (loss) (291) 3,313 3,596 (78) (2,016)
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS 4,815 - - 6,909 (24)
--------- --------- --------- ------- --------
Net income (loss) available to
common stockholder $ 4,524 $ 3,313 $ 3,596 $ 6,831 $ (2,040)
========= ========= ========= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Reclassifications
And Consolidated
Eliminations Total
----------------- ------------
<S> <C> <C>
REVENUES $ (8,535) $ 136,762
COST OF SERVICES AND PRODUCTS SOLD (1,730) 106,688
-------- ----------
Gross profit (6,805) 30,074
ADMINISTRATIVE EXPENSES (6,805) 7,315
-------- ----------
Operating income - 22,759
LOSS ON DISPOSITION OF PROPERTY
AND EQUIPMENT - 1,652
INTEREST EXPENSE (6) 16,851
INTEREST INCOME (6) 588
-------- ----------
Income (loss) before provision
for income taxes - 4,844
PROVISION FOR INCOME TAXES - 320
-------- ----------
Net income (loss) - 4,524
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS (11,700) -
-------- ----------
Net income (loss) available to
common stockholder $(11,700) $ 4,524
======== ==========
</TABLE>
F-33
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Dollars in thousands)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the Period From January 1, 1996 to November 27, 1996
<TABLE>
<CAPTION>
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 and equipment - 111 - - 111
Purchase of property 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>
F-34
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Dollars in thousands)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the Period November 27, 1996 to December 31, 1996
<TABLE>
<CAPTION>
Statia Canada
Statia Terminals (Includes All
International N.V. Canadian Netherlands Consolidated
(Unconsolidated) Entities) Antilles United States Total
---------------- ---------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $ (149) $ 2,078 $ 674 $ (378) $ 2,225
------------ ---------- -------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment - (306) (882) (15) (1,203)
Acquisition of Statia operations (143,233) (27,655) - (3,073) (173,961)
Transaction costs (7,582) (1,990) - - (9,572)
Accrued transaction costs and purchase price 5,142 2,488 - 73 7,703
----------- ---------- -------- -------- ----------
Net cash used in investing activities (145,673) (27,463) (882) (3,015) (177,033)
----------- ----------- -------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of 11-3/4% First Mortgage Notes 106,940 28,060 - - 135,000
Debt costs paid (5,093) (1,335) - - (6,428)
Issuance of common stock 55,500 - - - 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 3,393 184,072
----------- ---------- -------- -------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS 7,065 854 1,345 - 9,264
CASH AND CASH EQUIVALENTS,
beginning balance - - - - -
----------- ---------- -------- -------- -----------
CASH AND CASH EQUIVALENTS,
ending balance $ 7,065 $ 854 $ 1,345 $ - $ 9,264
=========== ========== ======== ======== ===========
</TABLE>
F-35
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Dollars in thousands)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Guaranteeing Subsidiaries
------------------------------------------------------------
Statia Terminals Netherlands
Canada, Inc. Antilles
Statia Terminals (Includes All Statia Other Than
International N.V. 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 $ (4,364) $ 2,232 $ 19,231 $ 507 $ 922
--------- ------- --------- -------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment - - - - 212
Purchase of property and equipment - (954) (3,654) - (834)
Accrued transaction costs and purchase price - (2,488) (5,142) - (73)
--------- ------- --------- -------- ------
Net cash used in investing activities - (3,442) (8,796) - (695)
--------- ------- --------- -------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (2,700) - (527) (527) -
Advances from (to) affiliates - 1,597 (6,619) - -
--------- ------- --------- -------- ------
Net cash provided by (used in)
financing activities (2,700) 1,597 (7,146) (527) -
--------- ------- --------- -------- ------
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
========= ======= ========= ======== ======
</TABLE>
<TABLE>
<CAPTION>
Reclassifications
And Consolidated
Eliminations Total
----------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $ (6,076) $12,452
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment (100) 112
Purchase of property and equipment 100 (5,342)
Accrued transaction costs and purchase price - (7,703)
-------- -------
Net cash used in investing activities - (12,933)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid 1,054 (2,700)
Advances from (to) affiliates 5,022 -
-------- -------
Net cash provided by (used in)
financing activities 6,076 (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>
F-36
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Dollars in thousands)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Guaranteeing Subsidiaries
------------------------------------------------------------
Statia Terminals Netherlands
Canada, Inc. Antilles
Statia Terminals (Includes All Statia Other Than
International N.V. 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 $ (307) $ 5,952 $ 10,962 $ 56 $ 2,869
--------- ------- --------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - (1,305) (6,619) (38) (2,752)
Proceeds from sale of property and equipment - 118 4 - -
Proceeds from sale of Statia Terminals
Southwest, Inc. 6,500 - - - -
Dividends received 1,500 - - 1,500 -
--------- ------- --------- -------- --------
Net cash provided by (used in)
investing activities 8,000 (1,187) (6,615) 1,462 (2,752)
--------- ------- --------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment to Parent (6,150) - - - -
Dividends paid (1,500) - (1,500) (1,500) -
Advances from (to) affiliates - (1,597) 1,597 - -
--------- ------- --------- -------- --------
Net cash provided by (used in)
financing activities (7,650) (1,597) 97 (1,500) -
--------- ------- --------- -------- --------
INCREASE IN CASH AND
CASH EQUIVALENTS 43 3,168 4,444 18 117
CASH AND CASH EQUIVALENTS,
beginning balance 1 1,241 4,593 21 227
--------- ------- --------- -------- --------
CASH AND CASH EQUIVALENTS,
ending balance $ 44 $ 4,409 $ 9,037 $ 39 $ 344
========= ======= ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Reclassifications
And Consolidated
Eliminations Total
----------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $ - $19,532
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - (10,714)
Proceeds from sale of property and equipment - 122
Proceeds from sale of Statia Terminals
Southwest, Inc. - 6,500
Dividends received (3,000) -
-------- -------
Net cash provided by (used in)
investing activities (3,000) (4,092)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment to Parent - (6,150)
Dividends paid 3,000 (1,500)
Advances from (to) affiliates - -
-------- -------
Net cash provided by (used in)
financing activities 3,000 (7,650)
-------- -------
INCREASE IN CASH AND
CASH EQUIVALENTS - 7,790
CASH AND CASH EQUIVALENTS,
beginning balance - 6,083
-------- -------
CASH AND CASH EQUIVALENTS,
ending balance $ - $13,873
======== =======
</TABLE>
F-37
<PAGE>
Statia Terminals N.V. and Subsidiaries
Consolidated Financial Statements
as of December 31, 1997 and 1998
Together With Auditors' Report
F-38
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Managing 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,
1997 and 1998, 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 years ended December 31, 1997 and 1998. We have
also audited the related consolidated statements of income and retained earnings
(deficit) and cash flows for the period 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, 1997 and 1998, and the results of its operations and its
cash flows for the period from Inception through December 31, 1996 and for the
years ended December 31, 1997 and 1998 and the results of the Predecessor
Company's operations and its cash flows for the period from January 1, 1996
through November 27, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
February 1, 1999.
F-39
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share amounts)
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1998
---------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,593 $ 9,037
Accounts receivable-
Trade, less allowance for doubtful accounts of
$506 in 1997 and $503 in 1998 9,104 6,668
Other 1,044 972
Inventory, net 714 4,205
Prepaid expenses 78 31
---------- ----------
Total current assets 15,533 20,913
PROPERTY AND EQUIPMENT, net 178,788 177,241
OTHER NONCURRENT ASSETS, net 4,321 3,597
---------- ----------
Total assets $ 198,642 $ 201,751
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,056 $ 6,634
Accrued interest payable 1,606 1,606
Other accrued expenses 3,068 4,761
Payable to affiliates 5,514 5,256
---------- ----------
Total current liabilities 17,244 18,257
LONG-TERM DEBT 106,940 106,940
---------- ----------
Total liabilities 124,184 125,197
---------- ----------
STOCKHOLDER'S EQUITY SUBJECT TO REDUCTION 10,000 -
STOCKHOLDER'S EQUITY:
Common stock, $1 par value, 19,395,001 shares
authorized, issued and outstanding 19,395 19,395
Additional paid-in capital 46,847 56,847
Retained earnings (deficit) (1,784) 312
---------- ----------
Total stockholder's equity 64,458 76,554
---------- ----------
Total liabilities and stockholder's equity $ 198,642 $ 201,751
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE>
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).
<TABLE>
<CAPTION>
Predecessor
Company The Company
----------------- -----------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, ----------------------------
1996 1996 1997 1998
---------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $ 125,978 $ 12,936 $ 122,624 $ 113,275
COST OF SERVICES AND PRODUCTS SOLD 116,640 10,905 107,820 92,445
----------- --------- ---------- ----------
Gross profit 9,338 2,031 14,804 20,830
ADMINISTRATIVE EXPENSES 4,346 257 3,273 4,096
----------- --------- ---------- ----------
Operating income 4,992 1,774 11,531 16,734
GAIN ON DISPOSITION OF
PROPERTY AND EQUIPMENT (68) - - -
INTEREST EXPENSE 520 1,275 13,356 13,342
INTEREST INCOME 38 11 365 485
----------- --------- ---------- ----------
Income (loss) before provision
for income taxes 4,578 510 (1,460) 3,877
PROVISION FOR INCOME TAXES 257 26 281 281
----------- --------- ---------- ----------
Net income (loss)
4,321 484 (1,741) 3,596
RETAINED EARNINGS (DEFICIT),
beginning of period - - 484 (1,784)
DIVIDENDS 25,000 - 527 1,500
----------- --------- ---------- ----------
RETAINED EARNINGS (DEFICIT),
end of period $ (20,679) $ 484 $ (1,784) $ 312
=========== ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
The Financial Statements of the Company and the Predecessor Company
are not comparable in certain respects (See Note 1).
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- --------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, -------------------------
1996 1996 1997 1998
--------------- -------------- -------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,321 $ 484 $(1,741) $ 3,596
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities-
Depreciation and amortization expense 7,870 724 7,904 8,883
Provision for bad debts 100 - - 72
Gain on disposition of property
and equipment (68) - - -
(Increase) decrease in accounts
receivable - trade (375) (1,355) 1,771 2,364
(Increase) decrease in other receivables 3,670 (1,260) 1,376 72
(Increase) decrease in inventory (3,731) 1,230 3,098 (3,491)
(Increase) decrease in prepaid expense 32 8 (51) 47
(Increase) decrease in other noncurrent
assets - - (2) 3
Increase (decrease) in accounts payable 3,049 (1,181) 841 (422)
Increase in accrued expenses 212 1,029 559 1,693
Increase (decrease) in payable to
affiliates - - 5,476 (1,855)
-------- ------- ------- ---------
Net cash provided by (used in)
operating activities 15,080 (321) 19,231 10,962
-------- ------- ------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and equipment (12,163) (882) (3,654) (6,619)
Proceeds from sale of property and
equipment 111 - - 4
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 (100,563) (166,555) (8,796) (6,615)
-------- -------- ------- ---------
</TABLE>
(Continued)
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Continued)
The Financial Statements of the Company and the Predecessor Company
are not comparable in certain respects (See Note 1).
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- --------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, ---------------------------
1996 1996 1997 1998
--------------- ------------- ---------- ---------
<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) - (527) (1,500)
Issuance of 11-3/4% First Mortgage Notes - 106,940 - -
Debt costs paid - (5,093) - -
Advances from (to) affiliate - 10,833 (6,619) 1,597
-------- ------- --------- ---------
Net cash provided by (used in)
financing activities 85,365 168,180 (7,146) 97
-------- ------- --------- ---------
Increase (decrease) in cash and cash
equivalents (118) 1,304 3,289 4,444
CASH AND CASH EQUIVALENTS, balance at
beginning 185 - 1,304 4,593
-------- ------- --------- ---------
CASH AND CASH EQUIVALENTS, balance at
end $ 67 $ 1,304 $ 4,593 $ 9,037
======== ======= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid for taxes $ 257 $ 24 $ 281 $ 281
======== ======= ========= =========
Cash paid for interest $ - $ - $ 12,147 $ 12,621
======== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-43
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except share amounts)
1. ORGANIZATION AND OPERATIONS
The consolidated balance sheets as of December 31, 1997 and 1998, and the
consolidated statements of income (loss) and retained earnings (deficit) and
cash flows for the years ended December 31, 1997 and 1998 and for the period
from Inception through December 31, 1996, include the accounts of Statia
Terminals N.V. (incorporated in the Netherlands Antilles) and its wholly owned
subsidiaries Statia Laboratory Services N.V. and Statia Tugs N.V. (each
incorporated in the Netherlands Antilles) (collectively the "Company"). The
Company is an indirect wholly owned subsidiary of Statia Terminals
International N.V. (the "Parent"), (incorporated in the Netherlands Antilles).
The consolidated statements of income (loss) and retained earnings (deficit)
and cash flows for the period from January 1, 1996 through November 27, 1996
(the "period ended November 27, 1996"), include the accounts of Statia
Terminals N.V. (incorporated in the Netherlands Antilles) and its wholly owned
subsidiaries, Statia Laboratory Services N.V., Statia Tugs N.V. and Statia
Shipping N.V. (each incorporated in the Netherlands Antilles) (collectively the
"Predecessor Company"). Statia Tugs N.V. and Statia Shipping N.V. are dormant.
Significant intercompany balances and transactions have been eliminated.
These consolidated financial statements are presented in United States
dollars.
The Company and the Predecessor Company own and operate petroleum
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, spill response,
brokering of product trades and ship services. An affiliate of the Company
provides administrative services for the Company from its office in Deerfield
Beach, Florida.
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.
F-44
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
1. ORGANIZATION AND OPERATIONS - Continued
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 of the Parent and others. The portion of the adjusted
purchase price paid to Praxair for the capital stock of the Company was
$174,921. The Acquisition was paid primarily by funds received by the Company
from the issuance of the 11-3/4% First Mortgage Notes (the "Notes") described
in Note 6. 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
4) 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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
These consolidated financial statements have been prepared in conformity
with generally accepted accounting principles as promulgated in the United
States which require management to make estimates and assumptions that affect
the reported amounts of assets and liabilities. Management is also required to
make judgments regarding disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
Revenue Recognition
Revenues from terminaling operations are recognized ratably as the
services are provided. Revenues and commissions from bunkering services,
terminaling-related services and bulk product sales are recognized at the time
of delivery of the service or product.
F-45
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Foreign Currency Translation and Exchange
The consolidated financial statements include the financial statements of
non-U.S. entities translated into U.S. dollars in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 52 "Foreign Currency Translation."
The assets and liabilities are translated into U.S. dollars at year end
exchange rates. Income and expense items are converted into U.S. dollars at
average rates of exchange prevailing during the year. Substantially all of the
Company's transactions are denominated in U.S. dollars.
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 approximates fair value since the Notes have been priced near par
value 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.
F-46
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
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 any 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 flow over the remaining lives of the
long-lived assets in measuring their recoverability.
Other Noncurrent Assets
Other noncurrent assets primarily consist of deferred financing costs of
$4,304 and $3,583 as of December 31, 1997 and 1998, respectively. The deferred
financing costs related to establishing debt obligations are amortized ratably
over the life of the underlying obligation. Debt cost amortization expense,
included in interest expense in the accompanying consolidated statements of
income (loss), was $720 for the years ended December 31, 1997 and 1998.
Income Taxes
The Company and the Predecessor Company determine their tax provision and
deferred tax balances in compliance with SFAS No. 109, "Accounting for Income
Taxes." Under this approach, the provision for income taxes represents income
taxes paid or payable for the current year adjusted for the change in deferred
taxes during the year. Deferred income tax assets and liabilities 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.
F-47
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in the financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements
provided for earlier periods for comparative purposes is required. The
following types of items are to be considered in computing comprehensive
income: foreign currency translation adjustments, pension liability
adjustments, and unrealized gain/loss on securities available for sale. For all
periods presented herein, there were no differences between net income and
comprehensive income.
Segment Information
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The adoption of SFAS No. 131 had no impact on consolidated results of
operations, financial position or cash flow.
Reclassifications
Certain reclassifications were made to the 1996 and 1997 financial
statements in order to conform to the 1998 presentation.
3. 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 $179,000,
excluding bank borrowings, Praxair and CBI intercompany and advance accounts
and the buyout of certain off-balance-sheet financing ("Merger Value").
F-48
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
3. PRAXAIR PURCHASE ACCOUNTING - Continued
The allocation of the Merger Value to the assets and liabilities acquired,
based on the estimated fair value assigned, was as follows:
Merger Value $ 179,000
Less-
Intercompany/advance accounts 13,000
Off-balance sheet obligations 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
Company's books effective January 1, 1996. This debt was eliminated in
connection with the Castle Harlan Acquisition.
4. ACQUISITION
As discussed in Note 1, on November 27, 1996, the Company acquired from
Praxair all of the outstanding capital stock of the Company. The Castle Harlan
Acquisition has been accounted for under the purchase method of accounting.
Accordingly, the purchase price was allocated to the assets and liabilities of
the Company based on their respective fair values as of the date of the Castle
Harlan Acquisition. The assets of the Company as of the date of the
Castle Harlan Acquisition included certain property and equipment acquired from
a third-party Financier by Praxiar (see Note 7.) No portion of the purchase
price of the Company was allocated to intangible assets since the fair value
of the tangible assets exceeded the purchase price. No subsequent adjustments
were made to the allocated fair values.
F-49
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
4. ACQUISITION - Continued
The allocation of the total purchase price to the assets and liabilities
acquired was 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
Property and equipment 179,839
Other noncurrent assets 5,091
Liabilities assumed (13,161)
-----------
Total purchase price $ 187,594
===========
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31:
<TABLE>
<CAPTION>
Useful Live
1997 1998 in Years
------------ ------------- -----------
<S> <C> <C> <C>
Land $ 396 $ 396
Land improvements 7,368 7,627 5-20
Buildings and improvements 1,332 2,672 20-40
Plant machinery 137,130 140,094 4-40
Mooring facilities and marine equipment 40,021 41,353 4-40
Field and office equipment 378 465 3-15
------------ ------------
Total property and equipment, at cost 186,625 192,607
Less- accumulated depreciation 7,837 15,366
------------ ------------
Property and equipment, net $ 178,788 $ 177,241
============ ============
</TABLE>
F-50
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
5. PROPERTY AND EQUIPMENT - Continued
Pursuant to the Castle Harlan Acquisition, the Company agreed with
stockholders to sell its emergency spill response vessel the M/V Statia
Responder. The Company has reclassified the vessel from its original asset held
for sale classification to property and equipment as management is no longer
actively seeking buyers for the vessel. The M/V Statia Responder is still in
operation and the revenues and costs, including depreciation, associated with
operating this asset are included in the accompanying financial statements.
Certain of Statia Terminals Group N.V.'s preferred stock agreements contain
features which may require the Parent to cause the Company to pay a dividend or
otherwise remit the net proceeds from any future sale of the M/V Statia
Responder to the Parent. In accordance with management's decision not to
actively seek buyers for the vessel, $10,000 representing the vessel's
estimated fair value was reclassified from stockholder's equity subject to
reduction to additional paid-in capital.
6. DEBT
The 11-3/4% Notes due November 15, 2003 were issued by the Parent and one
of its subsidiaries (the "Issuers") on November 27, 1996 in connection with the
Castle Harlan 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:
Optional
Year Redemption Price
---- ----------------
2000 105.875%
2001 102.938%
2002 100.000%
Notwithstanding the foregoing, 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
to the Notes) 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 remains outstanding (see Note 14).
F-51
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
6. DEBT - Continued
The Notes are guaranteed on a full, unconditional, joint and several basis
by each of the indirect and direct active subsidiaries of the Parent. 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 coverage ratio for the prior four full fiscal
quarters of at least 2.0:1, 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 restrictions on the Parent's ability to
pay dividends other than distributions from the proceeds of assets held for
sale as discussed above and certain management fees. 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. The Issuers
have been in compliance with the financial covenants set forth in the Indenture.
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 0.375% per annum on a portion of the unused funds. The Credit Facility
bears interest at a rate of prime plus 0.5% (8.25% at December 31, 1998). 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 Company's subsidiaries from transferring funds to the Parent in the
form of dividends, loans or cash advances; however, the failure to pay interest
when due constitutes an event of default under the Credit Facility and such
event of default, until cured, prohibits upstream dividend payments to be made
to the Parent. The Credit Facility expires on November 27, 1999. At December
31, 1997 and 1998, the Company had approximately $7,599 and $7,006,
respectively, available for borrowing under the Credit Facility as limited by
the borrowing base computation and had no outstanding balance.
7. LEASES
The Company and the Predecessor Company rent certain facilities, land and
marine equipment under cancelable and noncancelable operating leases. Rental
expense on operating leases was $13,421 (of which $9,870 including $4,270 for
recognition of lease residual value guarantee, relates to the lease described
below), $363, $3,763 and $2,918 for the period ended November 27, 1996, the
period ended December 31, 1996, the year ended December 31, 1997 and the year
ended December 31, 1998, respectively. Future rental commitments during the
years ending 1999 through 2003 are $3,268, $2,226, $2,195, $2,239 and $558,
respectively.
F-52
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
7. LEASES - Continued
On November 17, 1993, the Company entered into an agreement with a
third-party financier (First Salute Leasing, L.P.) pursuant to which a portion
of its land on St. Eustatius was leased to this third party for the purpose of
construction and operation of five million barrels of crude oil storage tanks
and a single point mooring system. The Company acted as agent for the third
party with regard to the construction of the facilities. The Company leased the
facility from the third party for a minimum period of five years beginning
February 1, 1995. The aggregate construction cost incurred for these leased
assets totaled $88,513. At the completion of the initial five year term, the
Company had the option to extend the lease, purchase the facility from the
lessor, or arrange for the leased properties to be sold to a third party. In
the event of purchase or sale of these properties, the Company was obligated to
the lessor for any shortfall between the purchase or sales price and the lease
residual value guarantee. In connection with the Castle Harlan Acquisition,
Praxair terminated the above First Salute Leasing, L.P. off-balance-sheet
financing arrangement and paid in full all obligations related to this lease.
8. SHAREHOLDER'S 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
During the years ended December 31, 1997 and 1998 the Company paid
dividends to its parent, Statia Terminals Corporation N.V., of $527 and $1,500,
respectively.
9. INCOME TAXES
On June 1, 1989, the governments of the Netherlands Antilles and St.
Eustatius approved a Free Zone and Profit Tax Agreement retroactive to January
1, 1989 and concluding on December 31, 2000. This agreement requires the
Company to pay a 2% rate on taxable income, as defined, or a minimum payment of
500 Netherlands Antilles guilders ($282). This 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,
1998, the amount available to offset future tax liability under the agreement
was approximately $1,412. Currently, the Company is negotiating a new agreement
with the governments of the Netherlands Antilles and St. Eustatius that will be
effective from January 1, 1998, through December 31, 2010, with extension
provisions to 2015.
F-53
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
10. RELATED-PARTY TRANSACTIONS
The Predecessor Company
The Predecessor Company engaged in various related-party transactions with
STI and its affiliates. STI allocated certain corporate, operating and
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. For the period
ended November 27, 1996, $2,831 was paid for these direct and indirect
services. All intercompany balances owed to Praxair or its affiliates were
settled as a result of the Castle Harlan Acquisition.
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.
The Parent and its subsidiaries directly and indirectly allocate certain
corporate, operating and administrative expenses and services to the Company,
including certain legal services, risk management, tax services, employee
benefit administration, cash management and other services and certain
depreciation and amortization expenses. For the period ended December 31, 1996,
and the years ended December 31, 1997 and 1998, $1,805, $3,273 and $4,096,
respectively, was paid for these services.
11. COMMITMENTS AND CONTINGENCIES
Litigation
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 the
Company for $3,600 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 that had been loaded by the Company at St. Eustatius but was not
affiliated with the Company. On April 16, 1998, the U.S. District Court ruled
that it lacked jurisdiction over the Company and dismissed it from the case.
F-54
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
11. COMMITMENTS AND CONTINGENCIES - Continued
The Company believes the allegations made in these proceedings are
factually inaccurate and intends to vigorously contest these claims. In
connection with the Castle Harlan Acquisition, Praxair agreed to indemnify the
Company against damages relating to the foregoing proceedings. While no
estimates can reasonably be made of any ultimate liability at this time, the
Company believes the ultimate outcome of these proceedings will not have a
material adverse effect on the Company's financial position or results of
operations.
The Company is involved in various other claims and litigation arising in
the normal course 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 or results of operations.
Other Accrued Expenses
A summary of other accrued expenses consists of the following as of
December 31:
1997 1998
---- ----
Personnel and related costs $ 1,522 $ 1,156
Professional fees 515 633
Other 1,031 2,972
-------- ---------
$ 3,068 $ 4,761
======== =========
12. SEGMENT INFORMATION
The Company is organized around several different factors the most
significant of which are products and services and geographic location. The
Company's primary products and services are bunker and bulk product sales and
terminaling services (consisting of storage, throughput, dock charges,
emergency response fees and other terminal charges).
F-55
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
12. SEGMENT INFORMATION - Continued
The primary measures of profit and loss utilized by the Company's
management to make decisions about resources to be allocated to each division
are earnings before interest, taxes, depreciation, amortization and certain
unallocated profits and losses ("Internal EBITDA") and earnings before interest
taxes and certain unallocated profits and losses ("Internal EBIT").
Depreciation and amortization expenses included in Internal EBIT include
certain amounts allocated from entities related to the Company.
The following information is provided for the Company's bunker and bulk
products sales and terminaling services segments:
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- ----------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, --------------------------
1996 1996 1997 1998
--------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Terminaling services $ 32,751 $ 4,514 $ 36,616 $ 44,019
Bunker and bulk product sales 93,227 8,422 86,008 69,256
--------- ------- --------- ---------
Total $ 125,978 $12,936 $ 122,624 $ 113,275
========= ======= ========= =========
INTERNAL EBITDA:
Terminaling services $ 15,487 $ 2,280 $ 16,688 $ 22,595
Bunker and bulk product sales 3,208 (81) 2,092 2,120
--------- ------- --------- ---------
Total $ 18,695 $ 2,199 $ 18,780 $ 24,715
========= ======= ========= =========
DEPRECIATION AND AMORTIZATION
EXPENSE:
Terminaling services $ 6,262 $ 643 $ 7,428 $ 7,770
Bunker and bulk product sales 119 12 502 478
--------- ------- --------- ---------
Total $ 6,381 $ 655 $ 7,930 $ 8,248
========= ======= ========= =========
INTERNAL EBIT:
Terminaling services $ 9,225 $ 1,637 $ 9,260 $ 14,825
Bunker and bulk product sales 3,089 (93) 1,590 1,642
--------- ------- --------- ---------
Total $ 12,314 $ 1,544 $ 10,850 $ 16,467
========= ======= ========= =========
CAPITAL EXPENDITURES:
Terminaling services $ 10,929 $ 882 $ 3,596 $ 5,407
Bunker and bulk product sales 1,234 - 58 1,212
--------- ------- --------- ---------
Total $ 12,163 $ 882 $ 3,654 $ 6,619
========= ======= ========= =========
</TABLE>
F-56
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
12. SEGMENT INFORMATION - Continued
December 31,
----------------------------
1997 1998
----------- -----------
ASSETS:
Terminaling services $ 180,175 $ 176,525
Bunker and bulk product sales 8,431 11,589
Unallocated assets 10,036 13,637
----------- -----------
$ 198,642 $ 201,751
=========== ===========
A reconciliation of Internal EBIT to the Company's income (loss) before
provision for income taxes and preferred stock dividends is as follows:
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- ---------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, --------------------------
1996 1996 1997 1998
--------------- ------------- -------- -------
<S> <C> <C> <C> <C>
Internal EBIT $12,314 $1,544 $ 10,850 $16,467
Unallocated operating and admini-
strative expenses, depreciation and
amortization expenses allocated from
related parties, and other (7,322) 160 (40) (454)
Gain on disposition of property and
equipment 68 - - -
Interest expense excluding debt cost
amortization expense (520) (1,205) (12,635) (12,621)
Interest income 38 11 365 485
------ ------ -------- -------
Income (loss) before provision for income
taxes $4,578 $ 510 $ (1,460) $ 3,877
====== ====== ======== =======
</TABLE>
Significant Customers
The Company presently has a long term storage and throughput contract with
Bolanter Corporation N.V. (an affiliate of Saudi Aramco) which expires in 2000.
The Company also derives terminaling services revenues from parties
unaffiliated with Saudi Aramco because of the movement of Saudi Aramco products
through the Company's terminal. Additionally, the Company sells bunker fuels to
another affiliate of Saudi Aramco at the Company's facility.
F-57
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
12. SEGMENT INFORMATION - Continued
The following table sets forth such revenues as a percentage of our total
revenue:
<TABLE>
<CAPTION>
Predecessor
Company The Company
----------------- ---------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, ----------------------------
1996 1996 1997 1998
---------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Storage and throughput contract 7.2% 6.8% 8.6% 9.1%
Unaffiliated third parties 13.1 8.9 7.4 9.3
Bunker sales 1.6 2.5 2.0 1.6
---- ----- ---- ----
Total 21.9% 18.2% 18.0% 20.0%
==== ===== ==== ====
</TABLE>
Although the Company has a long-standing relationship and long-term
contract with Bolanter Corporation N.V., if such long-term contract is not
renewed or replaced at the end of its term, or if the Company otherwise lost any
significant portion of its revenues from this customer, such
non-renewal/replacement or loss could have a material adverse effect on the
Company's business, financial condition and ability to pay dividends. The
Company also has long-term contracts with other key customers, and there can be
no assurance that these contracts will be renewed at the end of their terms or
that the Company will be able to enter into other long-term contracts on terms
favorable to it, or at all.
13. RETIREMENT PLAN
The Company sponsors a government guaranteed pension plan for certain
employees residing in the Netherlands Antilles. Amounts charged to expense for
this plan are not significant.
F-58
<PAGE>
STATIA TERMINALS N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
14. SUBSEQUENT EVENT (UNAUDITED)
On February 12, 1999, Statia Terminals Group N.V. (the sole stockholder of
the Parent) filed documents with the Securities and Exchange Commission to sell
7.6 million of its common shares (exclusive of an over allotment option
available to underwriters for an additional 760,000 shares) in its initial
equity public offering. The offering price is expected to be between $19.50 and
$20.50 per share, raising gross proceeds of approximately $152,000
(approximately $167,000 if the over allotment option is fully exercised). A
portion of the proceeds of the offering will be used to redeem approximately 25%
(approximately 35% if the over allotment option is fully exercised) of the
11-3/4% Notes co-issued by the Parent and Statia Terminals Canada, Incorporated.
F-59
<PAGE>
Statia Terminals Canada, Incorporated
and Subsidiary
Consolidated Financial Statements
as of December 31, 1997 and 1998
Together With Auditors' Report
F-60
<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, 1997 and 1998, 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 years ended December 31, 1997
and 1998. We have also audited the related combined statements of income (loss)
and retained earnings (deficit) and cash flows for the period 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, 1997 and 1998, and the
results of its operations and its cash flows for the period from Inception
through December 31, 1996, and for the years ended December 31, 1997 and 1998,
and the results of the Predecessor's operations and its cash flows for the
period from January 1, 1996 through November 27, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
February 1, 1999.
F-61
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1998
----------- ---------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,241 $ 4,409
Accounts receivable-
Trade, less allowance for doubtful accounts of
$62 in 1997 and 1998 872 903
Other 1,089 1,340
Inventory, net 533 323
Prepaid expenses 57 54
Receivable from affiliates - 2,305
----------- ---------
Total current assets 3,792 9,334
PROPERTY AND EQUIPMENT, net 28,651 28,192
OTHER NONCURRENT ASSETS, net 1,174 979
----------- ---------
Total assets $ 33,617 $ 38,505
=========== =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 778 $ 2,141
Accrued interest payable 421 421
Other accrued expenses 1,922 2,422
Payable to affiliates 288 -
----------- ---------
Total current liabilities 3,409 4,984
LONG-TERM DEBT 28,060 28,060
----------- ---------
Total liabilities 31,469 33,044
----------- ---------
STOCKHOLDER'S EQUITY:
Common stock, no par value, 1,000,000 shares authorized,
1 share outstanding - -
Additional paid-in capital 2,266 2,266
Retained earnings (deficit) (118) 3,195
----------- ---------
Total stockholder's equity 2,148 5,461
----------- ---------
Total liabilities and stockholder's equity $ 33,617 $ 38,505
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-62
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS (DEFICIT)
(Dollars in thousands)
The Financial Statements of the Company and the Predecessor Company
are not comparable in certain respects (See Note 1).
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- --------------------------------------------
Period from
January 1, 1996 Inception
Through through Year Ended December 31,
November 27, December 31, -------------------------
1996 1996 1997 1998
--------------- ------------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 11,831 $ 1,631 $ 18,892 $ 21,521
COST OF SERVICES AND PRODUCTS SOLD 10,557 1,495 12,868 12,031
-------- ------- --------- ---------
Gross profit 1,274 136 6,024 9,490
ADMINISTRATIVE EXPENSES 2,489 146 2,054 2,775
-------- ------- --------- ---------
Operating income (loss) (1,215) (10) 3,970 6,715
INTEREST EXPENSE 3,667 336 3,507 3,506
INTEREST INCOME 18 2 28 104
-------- ------- --------- ---------
Income (loss) before provision for
income taxes and preferred stock
dividends (4,864) (344) 491 3,313
PROVISION FOR INCOME TAXES 332 18 247 -
-------- ------- --------- ---------
Income (loss) before preferred stock
dividends (5,196) (362) 244 3,313
PREFERRED STOCK DIVIDENDS 792 - - -
-------- ------- --------- ---------
Net income (loss) available to
common stockholder (5,988) (362) 244 3,313
RETAINED EARNINGS (DEFICIT),
beginning of period - - (362) (118)
-------- ------- --------- ---------
RETAINED EARNINGS (DEFICIT),
end of period $ (5,988) $ (362) $ (118) $ 3,195
======== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-63
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
The Financial Statements of the Company and the Predecessor Company
are not comparable in certain respects (See Note 1).
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- -------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, -----------------------
1996 1996 1997 1998
--------------- ------------- ------ --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) before preferred stock dividends $ (5,196) $ (362) $ 244 $ 3,313
Adjustments to reconcile net income (loss) before
preferred stock dividends to net cash provided
by (used in) operating activities-
Depreciation, amortization and
non-cash charges 1,743 189 1,533 1,837
Provision for bad debts 52 - - -
(Increase) decrease in accounts receivable -
trade (824) 947 - (31)
Increase in other accounts receivables (512) (629) (459) (251)
(Increase) decrease in inventory (1,302) 721 624 210
(Increase) decrease in prepaid expense (31) 26 10 3
(Increase) decrease in other noncurrent assets (74) - 1 4
Increase (decrease) in accounts payable (199) 189 90 1,363
Increase (decrease) in accrued expenses (578) 997 (99) 500
Increase (decrease) in payable to affiliates (704) - 288 (996)
-------- ------- ------- ---------
Net cash provided by (used in)
operating activities (7,625) 2,078 2,232 5,952
--------- ------- ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (819) (306) (954) (1,305)
Proceeds from sale of property and equipment - - - 118
Acquisition of the Company - (27,655) - -
Transaction costs - (1,990) - -
Accrued transaction costs and purchase price
adjustments - 2,488 (2,488) -
-------- ------- ------- -----
Net cash used in investing activities (819) (27,463) (3,442) (1,187)
-------- ------- ------- ---------
</TABLE>
(Continued)
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
The Financial Statements of the Company and the Predecessor Company
are not comparable in certain respects (See Note 1).
(Continued)
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- ---------------------------------------------
Period from
January 1, 1996 Inception
Through Through Year Ended December 31,
November 27, December 31, ---------------------------
1996 1996 1997 1998
--------------- ------------- --------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in advances from affiliates $ 99,823 $ (486) $ 1,597 $ (1,597)
Redemption of preferred stock (25,196) - - -
Bank borrowings 66,000 - - -
Bank repayments (132,400) - - -
Dividends paid to affiliates (792) - - -
Issuance of 11 3/4% First Mortgage Notes - 28,060 - -
Debt costs paid - (1,335) - -
-------- ------- --------- ---------
Net cash provided by (used in) financing
activities 7,435 26,239 1,597 (1,597)
-------- ------- --------- ---------
Increase (decrease) in cash and cash
equivalents (1,009) 854 387 3,168
CASH AND CASH EQUIVALENTS, at beginning
of period 1,207 - 854 1,241
-------- ------- --------- ---------
CASH AND CASH EQUIVALENTS, at end
of period $ 198 $ 854 $ 1,241 $ 4,409
======== ======= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for taxes $ 188 $ - $ 124 $ 65
======== ======= ========= =========
Cash paid for interest $ 4,455 $ - $ 3,187 $ 3,315
======== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-65
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except share amounts)
1. Organization and Operations
The consolidated balance sheets as of December 31, 1997 and 1998, and the
consolidated statements of income (loss) and retained earnings (deficit) and
cash flows for the years ended December 31, 1997 and 1998 and for the period
from Inception through December 31, 1996, include the accounts of Statia
Terminals Canada, Incorporated (incorporated in Nova Scotia, Canada) and Point
Tupper Marine Services Limited (incorporated in Nova Scotia, Canada)
(collectively the "Company"). The Company is an indirect wholly owned subsidiary
of Statia Terminals International N.V. (the "Parent"), (incorporated in the
Netherlands Antilles). The combined statements of income (loss) and retained
earnings (deficit) and cash flows for the period from January 1, 1996 through
November 27, 1996 (the "period ended November 27, 1996"), include the accounts
of 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) (collectively the "Predecessor Company"). Significant
intercompany balances and transactions have been eliminated.
These financial statements are presented in United States dollars.
The Company and the Predecessor Company own and operate petroleum 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. An affiliate of the Company provides administrative services for
the Company from its office in Deerfield Beach, Florida.
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.
F-66
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
1. Organization and Operations - Continued
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 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 (the "Notes") described in Note 6.
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 4)
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. Summary of Significant Accounting Policies
Use of Estimates
These consolidated financial statements have been prepared in conformity
with generally accepted accounting principles as promulgated in the United
States which require management to make estimates and assumptions that affect
the reported amounts of assets and liabilities. Management is also required to
make judgments regarding disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
Revenue Recognition
Revenues from terminaling operations are recognized ratably as the services
are provided. Revenues and commissions from bunkering services, terminaling
related services and bulk product sales are recognized at the time of delivery
of the service or product.
F-67
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
2. Summary of Significant Accounting Policies - Continued
Foreign Currency Translation and Exchange
The consolidated financial statements include the financial statements of
two Canadian entities translated into U.S. dollars in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency
Translation." The assets and liabilities are translated into U.S. dollars at
year end exchange rates. Income and expense items are converted into U.S.
dollars at average rates of exchange prevailing during the year. Substantially
all of the Company's and its Predecessor's transactions are denominated in U.S.
dollars.
Cash and Cash Equivalents
The Company's and 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 values
of cash and cash equivalents, accounts receivable and accounts payable
approximate fair value. The Company believes the historical carrying value of
the Notes approximates fair value since the Notes have been priced near par
value 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.
F-68
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
2. Summary of Significant Accounting Policies - Continued
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 any 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.
Other Noncurrent Assets
Other noncurrent assets primarily consist of deferred financing costs of
$1,128 and $937 as of December 31, 1997 and 1998, respectively. The deferred
financing costs related to establishing debt obligations are amortized ratably
over the life of the underlying obligation. Debt cost amortization expense was
$191 for the years ended December 31, 1997 and 1998.
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.
F-69
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
2. Summary of Significant Accounting Policies - Continued
Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components in the
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The following types of items are
to be considered in computing comprehensive income: foreign currency translation
adjustments, pension liability adjustments, and unrealized gain/loss on
securities available for sale. For all periods presented herein, there were no
differences between net income and comprehensive income.
Segment Information
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about product and services, geographic areas, and major customers.
The adoption of SFAS No. 131 had no impact on consolidated results of
operations, financial position or cash flow.
Reclassifications
Certain reclassifications were made to the 1996 and 1997 financial
statements in order to conform to the 1998
presentation.
3. 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").
F-70
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
3. PRAXAIR PURCHASE ACCOUNTING - Continued)
The allocation of the Merger Value to the assets and liabilities acquired,
based on the estimated fair value assigned, was as follows:
Merger value $ 27,000
Less-
Debt acquired 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)
==========
4. 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, a portion of the purchase price of approximately $27,665 was
allocated to the assets and liabilities of the Company based on their
respective fair values as of the date of the Acquisition. No portion of the
purchase price of the Company was allocated to intangible assets since the fair
value of the tangible assets exceeded the purchase price. No adjustments were
made to the allocated fair values during 1997 or 1998.
The allocation of the total purchase price to the assets and liabilities
acquired was 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
=========
F-71
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
5. Property and Equipment
Property and equipment consisted of the following as of December 31:
<TABLE>
<CAPTION>
Useful Lives
1997 1998 In Years
---- ---- --------
<S> <C> <C>
Land $ 273 $ 273
Land improvements 4 26 5 - 20
Buildings and improvements 89 89 20 - 40
Plant machinery 22,988 23,853 4 - 40
Mooring facilities and marine equipment 6,424 6,434 4 - 40
Field and office equipment 386 445 3 - 15
-------- --------
Total property and equipment,
at cost 30,164 31,120
Less- Accumulated depreciation 1,513 2,928
-------- --------
Property and equipment, net $ 28,651 $ 28,192
======== ========
</TABLE>
6. Debt
The 11-3/4% Notes due November 15, 2003 were issued by the Parent and the
Company (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:
Optional
Year Redemption Price
---- ----------------
2000 105.875%
2001 102.938%
2002 100.000%
F-72
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
6. Debt - Continued
Notwithstanding the foregoing, 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 to
the Notes) 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 remains outstanding (see Note 12).
The Notes are guaranteed on a full, unconditional, joint and several basis
by each of the indirect and direct active subsidiaries of the Parent other than
the Company, which is a co-obligor 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 for the prior four full fiscal quarters of at least 2.0:1,
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 restrictions on the Parent's ability 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. The Issuers have been in
compliance with the financial covenants set forth in the Indenture.
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 0.375% per annum on a portion of the unused funds. The Credit Facility bears
interest at a rate of prime plus 0.5% (8.25% at December 31, 1998). 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 subsidiary in
the form of dividends, loans or cash advances; however, the failure to pay
interest when due constitutes an event of default under the Credit Facility and
such event of default, until cured, prohibits upstream dividend payments to be
made to the Parent. The Credit Facility expires on November 27, 1999. At
December 31, 1997 and 1998, the Company had approximately $459 and $976,
respectively, available for borrowing under the Credit Facility as limited by
the borrowing base computation and had no outstanding balance.
F-73
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
7. Income Taxes
The Company is subject to a federal large corporation tax based on 0.225%
of the Company's total equity. As of April 1, 1997, Nova Scotia enacted a
provincial capital tax based on 0.25% of the Company's total equity (prorated
to 0.1888% for the 1997 calendar year). The Company has benefited from net
operating tax losses and investment tax credit carryforwards, which expire in
various amounts through 2005 and 2003, respectively. The net operating tax loss
carryforwards available to offset Canadian taxable income at December 31,1997
and 1998 were $59,483 and $55,097, respectively. The investment tax credit
carryforward available to reduce Canadian income taxes was $7,302 at December
31, 1997 and 1998. The Company has provided a full valuation allowance against
the tax assets resulting from these net operating tax loss and investment tax
credit carryforwards because it is not certain that the deferred tax assets
will be utilized in the future.
8. 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. STI allocated
certain corporate, operating and 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. For the period ended November 27, 1996, $1,610 was paid for these
direct and indirect services.
The Company
As a wholly owned subsidiary, the Company engages in various related-party
transactions with the Parent and its subsidiaries. The unpaid portion of these
transactions is included in the intercompany balance. All intercompany balances
owed to Praxair or its affiliates were settled as a result of the Acquisition.
The Parent and its subsidiaries directly and indirectly allocate certain
corporate, operating and administrative expenses and services to the Company,
including certain legal services, risk management, tax services, employee
benefit administration, cash management and other services and certain
depreciation and amortization expenses. For the period ended December 31, 1996
and the years ended December 31, 1997 and 1998 $1,026, $2,054 and $2,775,
respectively, were paid for these services.
F-74
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
9. Commitment and Contingencies
Environmental, Health and Safety Matters
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, Nova Scotia, Canada facility. Praxair has agreed to pay for
certain of these environmental costs subject to certain limitations. Praxair
has paid approximately $2,300 during the period from November 27, 1996 to
December 31, 1998 related to such costs. Based on investigations conducted and
information available to date, the potential cost of additional remediation and
compliance is estimated at $10,000, substantially all of which the Company
believes is the responsibility of Praxair per the Acquisition agreement. The
Company has also identified certain other environmental, health and safety
costs not covered by the agreement with Praxair for which $1,250 was accrued in
1996 ($10 of which has been expended through December 31, 1998). The Company
believes that these environmental, health and safety costs, subject to
reimbursement from Praxair, will not have a material adverse effect on the
Company's financial position, cash flows or results of operations.
Litigation
Global Petroleum Corp. ("Global") brought an action against the Company in
December 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 $2,000 bond. Global claims damages of $1,200 for breach
of contract and the Company counter-claimed for breach of contract and payment
of the approximately $2,000 of unpaid invoices for product storage and other
service. 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 $100,000 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.
The Company believes the allegations made in this proceeding are factually
inaccurate and intends to vigorously contest this claim. In connection with the
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 ultimate outcome of
this proceeding will not have a material effect on the Company's business,
financial condition or results of operations.
F-75
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
9. Commitment and Contingencies - Continued
The Company is involved in various other claims and litigation arising in
the normal course 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.
Other Accrued Expenses
A summary of other accrued expenses consists of the following as of
December 31:
1997 1998
--------- ---------
Personnel and related costs $ 185 $ 258
Professional fees 241 264
Environmental expenses 1,250 1,240
Other 246 660
--------- ---------
$ 1,922 $ 2,422
========= =========
10. Segment Information
The Company is organized around several different factors, the most
significant of which are products and services. The company's primary products
and services are bunker and bulk product sales and terminaling services
(consisting of storage, throughput, dock charges, emergency response fee and
other terminal charges).
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, taxes, depreciation, amortization and certain
unallocated profits and losses ("Internal EBITDA") and earnings (loss) before
interest taxes and certain unallocated profits and losses ("Internal EBIT").
Depreciation and amortization expenses included in Internal EBIT include
certain amounts allocated from entities related to the Company.
F-76
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
10. Segment Information - Continued
The following information is provided for the Company's bunker and bulk
products sales and terminaling services segments:
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- --------------------------------------------
Period from
January 1, 1996 Inception
Through through Year Ended December 31,
November 27, December 31, -------------------------
1996 1996 1997 1998
--------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Terminaling services $ 8,179 $ 790 $ 15,566 $ 20,640
Bunker and bulk product sales 3,652 841 3,326 881
-------- ------- --------- ---------
Total $11,831 $ 1,631 $ 18,892 $ 21,521
======== ======= ========= =========
INTERNAL EBITDA:
Terminaling services $ 85 $ 58 $ 5,221 $ 8,478
Bunker and bulk product sales 121 75 145 37
-------- ------- --------- ---------
Total $ 206 $ 133 $ 5,366 $ 8,515
======== ======= ========= =========
DEPRECIATION AND AMORTIZATION
EXPENSES:
Terminaling services $ 868 $ 1,604 $ 1,784 $ 2,130
Bunker and bulk product sales 17 - 19 18
-------- ------- --------- ---------
Total $ 885 $ 1,604 $ 1,803 $ 2,148
======== ======= ========= =========
INTERNAL EBIT:
Terminaling services $ (783) $(1,546) $ 3,437 $ 6,348
Bunker and bulk product sales 104 75 126 19
-------- ------- --------- ---------
Total $ (679) $(1,471) $ 3,563 $ 6,367
======== ======= ========= =========
CAPITAL EXPENDITURES:
Terminaling services $ 819 $ 306 $ 954 $ 1,305
Bunker and bulk product sales - - - -
-------- ------- --------- ---------
Total $ 819 $ 306 $ 954 $ 1,305
======== ======= ========= =========
</TABLE>
F-77
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
10. Segment Information - Continued
December 31,
--------------------------
1997 1998
---- ----
ASSETS:
Terminaling services $ 29,523 $ 29,095
Bunker and bulk product sales 533 323
Unallocated assets 3,561 9,087
--------- ---------
$ 33,617 $ 38,505
========= =========
A reconciliation of Internal EBIT to the Company's income (loss) before
provision for income taxes and preferred stock dividends is as follows:
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- --------------------------------------------
Period from
January 1, 1996 Inception
Through through Year Ended December 31,
November 27, December 31, --------------------------
1996 1996 1997 1998
--------------- ------------- --------- ----------
<S> <C> <C> <C> <C>
Internal EBIT $ (679) $(1,471) $ 3,563 $ 6,367
Unallocated operating and administrative
expenses, depreciation and amortization
expenses allocated from related parties,
and other (536) 1,443 216 157
Interest expense excluding debt cost
amortization expense (3,667) (318) (3,316) (3,315)
Interest income 18 2 28 104
-------- ------- --------- ---------
Income (loss) before provision for
income taxes and preferred stock
dividends $ (4,864) $ (344) $ 491 $ 3,313
======== ======= ========= =========
</TABLE>
Significant Customers
The Company presently has a long-term storage and throughput contract with
a subsidiary of Tosco Corporation which expires in 1999. The Company also
derives terminaling services revenues and bunker sales from parties
unaffiliated with Tosco, primarily because of the movement of Tosco products
through the Company's terminal.
F-78
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Dollars in thousands except share amounts)
10. Segment Information - Continued
The following table sets forth such revenues as a percentage of the
Company's total revenue:
<TABLE>
<CAPTION>
Predecessor
Company The Company
--------------- -------------------------------------------
Period from
January 1, 1996 Inception
Through through Year Ended December 31,
November 27, December 31, -----------------------
1996 1996 1997 1998
--------------- ------------ ------ -------
<S> <C> <C> <C> <C>
Storage and throughput contract 48.9% 29.3% 52.1% 45.2%
Unaffiliated third parties 16.0% 42.7% 29.3% 12.0%
Bunker sales 7.0% 7.7% 0.6% -
----- ----- ---- ----
Total 71.9% 79.7% 82.0% 57.2%
==== ==== ==== ====
</TABLE>
Although the Company has a long standing relationship and long-term
contract with Tosco, if such long-term contract were not renewed or replaced at
the end of its term, or if the Company otherwise lost any significant portion
of its revenues from this customer, such nonrenewal/replacement or loss could
have a material adverse effect on the Company's business, financial condition
and ability to pay dividends. The Company also has long-term contracts with
other key customers, and there can be no assurance that these contracts will be
renewed at the end of their terms or that the Company will be able to enter
into long-term contracts on terms favorable to it, or at all.
11. Retirement Plan
The Company sponsors a retirement savings plan for certain employees
residing in Canada. Amounts charged to expense for this plan are not
significant.
12. Subsequent Event (Unaudited)
On February 12, 1999, Statia Terminals Group N.V. (the sole stockholder of
the Parent) filed documents with the Securities and Exchange Commission to sell
7.6 million of its common shares (exclusive of an over allotment option
available to underwriters for an additional 760,000 shares) in its initial
equity public offering. The offering price is expected to be between $19.50 and
$20.50 per share, raising gross proceeds of approximately $152,000
(approximately $167,000 if the over allotment option is fully exercised). A
portion of the proceeds of the offering will be used to redeem approximately 25%
(approximately 35% if the over allotment options is fully exercised) of the
11-3/4% Notes co-issued by the Parent and the Company.
F-79
<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, 1999 (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
1998 Annual Report on Form 10-K has been signed below by the following persons
on behalf of the registrant in the capacities and on the dates indicated.
/s/ James G. Cameron
- - -----------------------
James G. Cameron Managing Director March 31, 1999
(Principal Executive Officer)
/s/ John K. Castle
- - -----------------------
John K. Castle Managing Director March 31, 1999
/s/ David B. Pittaway
- - -----------------------
David B. Pittaway Managing Director March 31, 1999
/s/ Justin B. Wender
- - -----------------------
Justin B. Wender Managing Director March 31, 1999
/s/ James F. Brenner
- - -----------------------
James F. Brenner Vice President and March 31, 1999
Treasurer (Principal
Financial and Accounting
Officer)
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, 1999 (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
1998 Annual Report on Form 10-K has been signed below by the following persons
on behalf of the registrant in the capacities and on the dates indicated.
/s/ Paul R. Crissman
- - --------------------
Paul R. Crissman Director and President March 31, 1999
(Principal Executive Officer)
/s/ Clarence W. Brown
- - ---------------------
Clarence W. Brown Director March 31, 1999
/s/ James G. Cameron
- - --------------------
James G. Cameron Director March 31, 1999
/s/ James F. Brenner
- - --------------------
James F. Brenner Vice President, Finance March 31, 1999
(Principal Financial and
Accounting Officer)
S-2
<PAGE>
EXHIBITS INDEX
Exhibit
Number Description
- - ------- -----------
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.
4.1c***** Third Amendment, dated as of July 29, 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).
E-1
<PAGE>
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***** Amendment, dated as of December 18, 1998, by and among Statia
Terminals Delaware N.V., Marine Midland Bank and Statia Terminals
Delaware Inc. to Share Pledge Agreement , dated as of November 27,
1996 by and between Statia Terminals International N.V. and Marine
Midland Bank.
4.8* Share Pledge Agreement, dated as of November 27, 1996, by and
between Statia Terminals N.V. and Marine Midland Bank.
4.9* Share Pledge Agreement, dated as of November 27, 1996, by and
between Statia Terminals Corporation N.V. and Marine Midland Bank.
4.10* Share Pledge Agreement, dated as of November 27, 1996, by and
between Seven Seas Steamship Company, Inc. and Marine Midland
Bank.
4.11* Fiduciary Transfer of Tangible Assets Agreement, dated as
of November 27, 1996, by and between Statia Terminals
N.V., Saba Trustcompany N.V., Bicen Development
Corporation N.V., Statia Laboratory Services N.V., Statia
Tugs N.V., Seven Seas Steamship Company (Sint Eustatius)
N.V. and Marine Midland Bank.
4.12* 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.
4.13* 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.
4.14* Fixed and Floating Charge Debenture, made as of November
27, 1996, between Statia Terminals Canada, Incorporated
and Marine Midland Bank.
4.15* Debenture Delivery Agreement, dated as of November 27,
1996, between Statia Terminals Canada, Incorporated and
Marine Midland Bank.
4.16* Shares Pledge Agreement, made as of November 27, 1996,
between Statia Terminals Canada, Incorporated and Marine
Midland Bank.
4.17* Shares Pledge Agreement, dated as of November 27, 1996,
between Statia Terminals Corporation N.V. and Marine Midland
Bank.
E-2
<PAGE>
4.18* Debt Allocation Agreement, dated as of November 27, 1996,
between Statia Terminals International N.V. and Statia Terminals
Canada, Incorporated.
4.19* United States Shares 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
10.3c****** Amendment, dated February 26, 1999 to (i) the Storage
and Throughput Agreement and (ii) the Marine Fuel Agreement
for the years ended December 31, 2000
10.4* Storage and Throughput Agreement, dated as of August 20, 1993.
10.5* Storage and Throughput Agreement, dated as of August 1, 1994.
10.5a Amendment, dated as of March 23, 1999, to the Storage and
Throughput Agreement, dated as of August 1, 1994.
10.6* Employment Agreement, dated as of November 27, 1996,
between Statia Terminals Group N.V., Statia Terminals, Inc. and
James G. Cameron.
10.7** Employment Agreement, dated as of November 27, 1996,
between Statia Terminals Group N.V., Statia Terminals, Inc. and
Thomas M. Thompson, Jr.
10.8** Employment Agreement, dated as of November 27, 1996,
between Statia Terminals Group N.V., Statia Terminals, Inc. and
Robert R. Russo.
10.9** Employment Agreement, dated as of November 27, 1996,
between Statia Terminals Group N.V., Statia Terminals, Inc. and
John D. Franklin.
10.10* Employment Agreement, dated as of November 27, 1996,
between Statia Terminals Group N.V., Statia Terminals, Inc. and
James F. Brenner.
10.11* Employment Agreement, dated as of November 27, 1996,
between Statia Terminals Group N.V., Statia Terminals, Inc. and
Jack R. Pine.
10.12* Loan and Share 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,
E-3
<PAGE>
Incorporated and Point Tupper Marine Services Limited.
10.14**** 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.
**** Incorporated by reference to the December 31, 1997 Form 10-K, dated
March 31, 1998.
***** Incorporated by reference to the Registration Statement of the Parent on
Form S-1, dated February 12, 1999, filed with the U.S. Securities and
Exchange Commission (Registration Statement No. 333-72317).
****** Incorporated by reference to Amendment No. 1 to the Registration
Statement of the Parent on Form s-1, dated March 22, 1999, filed with
the U.S. Securities and Exchange Commission (Registration Statement No.
333-72317).
E-4
<PAGE>
TOSCO [Logo]
Tosco Refining Company
1500 N. Priest Drive
Tempe, Arizona 85281
Telephone: 602-728-7900
Facsimile: 602-728-7990
March 23, 1999
Statia Terminals Point Tupper, Inc.
3817 Port Malcolm Road
Point Hawksbury, Nova Scotia BOE 2VO
Canada
Mr. Tom Thompson
Statia Terminals, Inc.
800 Fairway Drive, Suite 295
Deerfield Beach, FL 33441
Re: Tosco Corporation Notice of Renewal of Storage Agreement Beginning
August 1, 1999
------------------------------------------------------------------
Dear Tom,
Tosco hereby exercises its right for an additional term of five years at Point
Tupper per section 4.2 of the existing storage contract with Statia Terminals.
The term of the additional period shall be five years beginning at the
completion of the initial term, August 1, 1999, as set forth in Schedule I,
Variable Information Schedule.
Tosco looks forward to continuing to do business with Statia Terminals over the
next five years and potentially beyond. If you have any questions concerning
this matter, please call me at (602)-728-7941.
Sincerely,
/s/ William Scott Erni
- - ------------------------
William Scott Erni
Crude Trader
cc: Neil West
Pete Sutton
<PAGE>
Subsidiary
Point Tupper Marine Services Limited Nova Scotia
(Incorporated under the laws of Nova Scotia)
<PAGE>
Subsidiaries
Statia Terminals Delaware, Inc., a Delaware corporation
Statia Terminals New Jersey, Inc., a Delaware corporation
Statia Terminals, Inc., a Delaware corporation
Statia Terminals Puerto Rico (incorporated under the laws of Puerto Rico)
W.P. Company, Inc., a Delaware corporation
Statia Terminals Virgin Islands Corporation (incorporated under the laws of
the U.S. Virgin Islands)
Seven Seas Steamship Company, Inc., a Florida corporation
Seven Seas Steamship Company (Sint Eustatius) N.V., a Netherlands Antilles
company
Statia Terminals Corporation N.V., a Netherlands Antilles company
Statia Terminals Canada, Incorporated (Incorporated under the laws of Nova
Scotia)
Saba Trustcompany N.V., a Netherlands Antilles Company
Bicen Development Corporation N.V., a Netherlands Antilles company
Statia Terminals N.V., a Netherlands Antilles company
Point Tupper Marine Services Limited Nova Scotia (Incorporated under the laws
of Nova Scotia)
Statia Laboratory Services N.V., a Netherlands Antilles company
Statia Tugs N.V., a Netherlands Antilles company
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATIA
TERMINALS INTERNATIONAL N.V.'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001029101
<NAME> STATIA TERMINALS INTERNATIONAL N.V.
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 13,873
<SECURITIES> 0
<RECEIVABLES> 10,675
<ALLOWANCES> 785
<INVENTORY> 4,528
<CURRENT-ASSETS> 28,463
<PP&E> 229,787
<DEPRECIATION> 19,817
<TOTAL-ASSETS> 243,178
<CURRENT-LIABILITIES> 19,478
<BONDS> 135,000
0
0
<COMMON> 6
<OTHER-SE> 92,344
<TOTAL-LIABILITY-AND-EQUITY> 243,178
<SALES> 70,137
<TOTAL-REVENUES> 136,762
<CGS> 61,309
<TOTAL-COSTS> 106,688
<OTHER-EXPENSES> 7,315
<LOSS-PROVISION> 72
<INTEREST-EXPENSE> 16,851
<INCOME-PRETAX> 4,844
<INCOME-TAX> 320
<INCOME-CONTINUING> 4,524
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,524
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATIA
TERMINALS CANADA, INCORPORATED'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001029102
<NAME> STATIA TERMINALS CANADA INCORPORATED
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 4,409
<SECURITIES> 0
<RECEIVABLES> 2,305
<ALLOWANCES> 62
<INVENTORY> 323
<CURRENT-ASSETS> 9,334
<PP&E> 31,120
<DEPRECIATION> 2,928
<TOTAL-ASSETS> 38,505
<CURRENT-LIABILITIES> 4,984
<BONDS> 28,060
0
0
<COMMON> 0
<OTHER-SE> 2,266
<TOTAL-LIABILITY-AND-EQUITY> 38,505
<SALES> 877
<TOTAL-REVENUES> 21,521
<CGS> 758
<TOTAL-COSTS> 12,031
<OTHER-EXPENSES> 2,775
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,506
<INCOME-PRETAX> 3,313
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,313
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,313
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
