SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ________________
COMMISSION FILE NUMBERS
333-18455 AND 333-18455-01
STATIA TERMINALS INTERNATIONAL N.V.
(Exact name of registrant as specified in its charter)
NETHERLANDS ANTILLES 52-2003102
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
C/O COVENANT MANAGERS
L.B. SMITHPLEIN 3
CURACAO, 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 CLASS NAME OF EXCHANGE ON WHICH REGISTERED
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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.............15
PART II. ................................................................16
Item 5. Market For Registrant's Common Equity and Related
Security Matters.............................................16
Item 6. Selected Financial Data.........................................16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................19
Item 7A. Quantitative and Qualitative Disclosures About Market Risk......36
Item 8. Financial Statements and Supplementary Data.....................36
Item 9. Changes In and Disagreements With Accountants
On Accounting and Financial Disclosure.......................37
PART III. ................................................................38
Item 10. Directors and Executive Officers of the Registrants.............38
Item 11. Executive Compensation..........................................43
Item 12. Security Ownership of Certain Beneficial Owners and Management..47
Item 13. Certain Relationships and Related Transactions..................48
PART IV. ................................................................50
Item 14. Exhibits, Financial Statement Schedules and Reports On Form 8-K.50
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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 OR CUSTOMERS, THE FINANCIAL CONDITION OF OUR CUSTOMERS,
INTERRUPTION OF OUR OPERATIONS CAUSED BY ADVERSE WEATHER CONDITIONS, THE
CONDITION OF THE U.S. AND CERTAIN FOREIGN ECONOMIES, 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., STATIA TERMINALS
CANADA, INCORPORATED AND OUR SUBSIDIARIES, AS "WE" OR "US". 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 1999, 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. Our customers transship their products through our facilities to the
Americas and Europe. We own and operate one storage and transshipment facility
located on the island of St. Eustatius, Netherlands Antilles, and one located at
Point Tupper, Nova Scotia, Canada. In connection with our terminaling business,
we provide related value-added services, including crude oil and petroleum
product blending and processing, berthing of vessels at our marine facilities,
and emergency and spill response. In addition to our terminaling services, we
sell bunkers, which is the fuel marine vessels consume, and bulk product to
various commercial interests.
Our operations began in 1982 as Statia Terminals N.V., with an oil
products terminal located on the island of St. Eustatius, Netherlands Antilles.
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, Nova Scotia, Canada. 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
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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. Statia Terminals Group N.V., Statia
Terminals International N.V. and certain of their subsidiaries were organized
for purposes of facilitating the acquisition. In July 1998, we sold Statia
Terminals Southwest to an unaffiliated third party purchaser.
On April 28, 1999, the Parent completed its initial public equity
offering of 7.6 million Class A common shares. The offering price was $20 per
share raising gross proceeds of $152 million. A portion of the proceeds was used
by the Parent to purchase additional capital stock of Statia Terminals
International N.V. amounting to $33.7 million, net of expenses. During May 1999,
we used the proceeds from the sale of our capital stock, along with existing
cash, to repurchase in the open market a principal amount of $34 million of the
11 3/4% First Mortgage Notes. In connection with the repurchase of the mortgage
notes, we incurred a $4.7 million loss on the early extinguishment of debt.
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.
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 primarily engaged in marine terminaling.
A substantial portion of crude oil and petroleum products storage
terminals are "captive," in other words, 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 Report excludes these captive terminals. Captive
terminal storage is only occasionally made available to the general market and
lacks some of the competitive advantages of independent operations, the most
important of which is confidentiality.
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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 economically 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 temporarily store crude oil or petroleum product; 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 locations such as 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 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 four
or more 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 allowing very-large and ultra-large crude carriers to
cover the longest portion of the total journey.
BLENDING
Increasingly stringent environmental regulations create additional
demand for facilities that can blend a variety of components into finished
products that meet such regulations as well as meet customer specific
requirements. Precise blending requires specialized equipment, expertise, and
availability of a full range of blendstocks. The evolving reformulated gasoline
market in the U.S., resulting primarily
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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 users, and crude oils are blended for
refiners.
STRATEGIC STORAGE
Some crude oil producers, integrated oil companies, refiners and others
have a continuing need to store crude oil and petroleum products to supply a
specific downstream demand, such as to supply feedstock to a refinery. The need
for strategic storage is generally not as sensitive to changes in market
conditions as is seasonal and opportunity storage and usually results in our
being able to negotiate longer term contracts. We have several customers who use
our facilities for strategic purposes. In Canada, a large independent U.S.
refiner leases and utilizes eight tanks aggregating 3.6 million barrels for
gathering crude oil from various locations to feed two of its refineries on the
U.S. East coast. A second customer, consisting of a consortium of major oil
companies, sends natural gas liquids via pipeline to certain processing
facilities on land leased from us. After processing, certain products are stored
with us under a long-term contract. At St. Eustatius, an oil producer leases 5.0
million barrels of storage from us and uses these tanks to supply its customers.
Contracts with our most significant strategic storage customers are discussed
below under the heading "CUSTOMERS."
SEASONAL AND OPPORTUNITY STORAGE
Refiners, traders and others use storage facilities to take advantage
of seasonal movements and anomalies in the crude oil and petroleum products
markets. When the forward prices for crude oil and petroleum products that we
store fall below spot prices for any length of time, this market condition is
called "backwardation." When forward prices exceed spot prices for any length of
time the market is said to be in "contango." 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. However, during the summer of 1999 and winter of
1999/2000, the heating oil and gasoline markets have not followed this
historical pattern, and we can give no assurance that the crude oil and
petroleum products markets will follow these patterns in the future.
From the beginning of 1995 to late 1997, all segments of the crude oil
and petroleum products markets were in a period of backwardation which we
believe adversely impacted our business. Several factors contributed to this
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.
Beginning in late 1997 and until the current period of backwardation
started during the spring of 1999, all segments of the crude oil and petroleum
products markets were generally in contango. As a result, previously available
storage tank capacity began to diminish, and storage tank lease rates began to
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rise during 1998. The shift toward contango was due in part to the worldwide
excess supply of crude oil which existed at that time, which resulted in a sharp
decrease in spot prices for most petroleum products.
Members of the Organization of Petroleum Exporting Countries ("OPEC"),
in conjunction with certain non-OPEC members, signed an agreement in March 1999
to reduce worldwide crude oil production with the intent of supporting market
prices for crude oil and petroleum products. In accordance with the one year
agreement which became effective April 1, 1999, the signatories significantly
reduced their production of crude oil which resulted in a significant increase
in spot prices and a reduction of crude oil and petroleum products inventories.
The signatories began meeting on March 27, 2000 to discuss the status of the
agreement and on March 28, 2000 announced increases in production. However, it
is still too early to determine how this announcement and subsequent increases
in production will affect the markets for crude oil and petroleum products.
Since shortly after the agreement was reached in March 1999, generally all
segments of the crude oil and petroleum products markets have been in
particularly severe backwardation. We believe that our business has been
adversely impacted during the current backwardation period.
BUNKER SALES
"Bunkering" is 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.
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. From time to time, we process
petroleum products with our atmospheric distillation unit.
SERVICES AND PRODUCTS
We provide storage services 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,
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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, 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, 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.
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.
Notwithstanding periods of unusually adverse market conditions,
including the current period of backwardation and the backwardation period 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 1997, 1998, and 1999 was 76%, 92% and 90%,
respectively. The average capacity leased at the Point Tupper facility over each
of the last three years ended 1997, 1998, and 1999 was 70%, 93% and 79%,
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 have
driven the demand for our storage services.
As part of our petroleum product marketing, 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. During this period, we concentrated our
marketing efforts on finding additional customers, particularly those with
regular routes through the Caribbean, and on customers requiring larger volumes
of fuel per vessel call. As a result, the total number of vessels bunkering at
our St. Eustatius facility has increased, as well as the average volume of
bunker fuel delivered per vessel, producing an increased total volume delivered.
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 this period, we
were generally unable to secure an adequate source of supply; therefore, we
periodically leased the storage capacity that we had previously allocated to
storage of bunker fuel.
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We purchase small quantities of petroleum products primarily to
maintain an inventory of certain blendstocks and bunker fuel. The blendstocks
allow us to assist our customers with meeting their quality requirements. From
time to time we purchase and sell products to accommodate customers who wish to
source or dispose of small quantities of product, and to assist customers' sales
activities. Further, we sell to a customer that utilizes the product to supply
its distribution network in the northeastern Caribbean. Other relatively small
product sales are made to Caribbean wholesalers.
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, the Parent indirectly owns and we
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, firefighting, and underwater diving support capabilities.
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 two mooring launches, all
of which are available for safe berthing of vessels calling at the terminal and
for emergency and spill response.
In Canada, 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, 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. We charter tugs, mooring launches and other vessels to assist
with the movement of vessels through the Strait of Canso and the safe berthing
of vessels at Point Tupper and to provide 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 facilities a fee for this capability.
In 1998, we entered into a 25 year agreement to lease approximately 65
acres of our land at Point Tupper and a 12 year product storage agreement for
over 500,000 barrels of our existing storage tank capacity with Sable Offshore
Energy, Inc. The land lease provides Sable options to extend for two additional
25 year periods. Sable has built a natural gas liquids fractionation plant,
storage, and rail handling facilities on the land. The fractionation plant has
the ability to 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 to the fractionation plant from Sable's Goldboro Gas
Processing Plant in Guysborough County, Nova Scotia.
PRICING
Storage and throughput pricing in the marine 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 location;
o quality of service; and
o range of services offered.
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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, cost
savings from shipping to our terminal locations, and the cost of other options
available to the customer. 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 1999, approximately 60% 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.
The pricing of bunker fuels is subject to a number of factors,
including general economic conditions and the geographic sector of the world
being serviced. Substantially all bunker sales are negotiated on an individual
vessel basis as the vessel has a specific requirement for fuel. As many vessels
have sufficient fuel capacity that allows them to travel long distances between
refueling stops, worldwide market conditions and the specific ports along the
vessel's intended route dictate individual sale prices. Factors such as cost of
supply, type and quality of fuel, quantity, method and location of delivery, and
other factors determine our pricing.
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.
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. If not, a longer
period is required. 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.
However, 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
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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.
Terminal owners and operators 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 complicated
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 are along the route of travel of
the vessel. We also compete with bunker delivery locations around the world. In
the Western Hemisphere, there are significant alternative bunker locations,
including ports on the U.S. East coast and Gulf coast and in Panama, Puerto
Rico, the Bahamas, Aruba, Curacao and Halifax. In addition, we compete with
Rotterdam and various North Sea locations.
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 and operators.
We presently have significant long-term contracts at St. Eustatius,
including a storage and throughput agreement with Bolanter Corporation N.V., a
subsidiary of Saudi Aramco, for an initial five-year term which was recently
renewed and amended to extend the agreement, among other changes, for a
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three-year term beginning January 31, 2000. The terminal enables Bolanter to
transport various grades of crude oil closer to market at competitive
transportation rates. This 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 6.1% of our 1999 revenues, including
revenues derived from affiliates of Bolanter as an indirect result of this
contract. An additional 6.4% of our 1999 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 an affiliate of
Saudi Aramco, which received bunker fuels at our St. Eustatius facility,
accounted for 2.3% of our total 1999 revenues.
We presently have significant long-term contracts at Point Tupper,
including an agreement with a large independent refiner, a subsidiary of Tosco
Corporation, for an initial five-year term which was renewed in March 1999 for
an additional five-year term through July 31, 2004. At the end of this current
five-year term, the contract may be renewed for another five-year term at the
customer's discretion. This contract became effective in August 1994 and commits
approximately 49% of the present tank capacity at Point Tupper. It represented
approximately 5.1% of our 1999 revenues, including revenues derived from an
affiliate of Tosco as an indirect result of this contract. An additional 0.9% of
our 1999 revenues were derived from parties unaffiliated with Tosco, but
generated by the movement of Tosco's products through the Point Tupper terminal.
In addition, we have another customer which represented 9.0% of our
1999 revenues. We also supply bunker fuel to a customer which represented 7.0%
of our 1999 revenues. No other customer accounted for more than 5% of our total
1999 revenues.
SUPPLIERS
At St. Eustatius, we are currently purchasing a majority of the fuel
oil necessary to support our bunker sales requirements pursuant to a contract
with a major state-owned oil company. This contract became effective in 1993,
and has been renewed annually thereafter through February 29, 2000. We are
currently operating under a short-term oral extension to the contract pending
completion of discussions with the oil company. We anticipate renewal of the
supply contract in the near future under terms and conditions comparable to the
prior agreement. We believe that suitable alternate sources of supply are
available from which we can procure fuel oil should our current contract be
interrupted or not be renewed.
At Point Tupper, we are attempting to secure a source of supply of
bunker fuel sufficient to support increased bunker fuel marketing to vessels
calling at this facility or operating in the Strait of Canso area.
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 mitigate our exposure to
environmental risks including acquiring automated and monitoring equipment,
training employees, maintaining our own emergency and spill response equipment
at each terminal, and maintaining liability insurance for certain accidental
spills. Additional information regarding our
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environmental, health and safety matters is presented under Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Environmental, Health and Safety Matters."
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
environmental standards for operation of the facility, including monitoring of
air emissions, limits on and monitoring of waste-water discharges, establishment
of a wastewater 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 or results of operations. 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.
At St. Eustatius, terminal management, with the advice of certain
consultants, supervises 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 ending December 31, 1999, there were no significant spills. 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 to the satisfaction of the
applicable authorities. In addition, 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 and groundwater
monitoring are required and are performed on a routine basis in accordance with
the requirements of Industrial Approval permit #92-IAE 013 which was issued by
NSDOE, in March 1999 and expires March 8, 2008. We believe we have all requisite
environmental permits. The nature of our business is such that spills of crude
oil or refined products may occur at the terminal periodically. The Point Tupper
facility, pursuant to the Canadian Shipping Act, has been designated as an Oil
Handling Facility. The facility is compliant with regulations respecting the
procedures, equipment and resources, including an arrangement with a certified
response organization, to mitigate any incidents with respect to oil pollution
which may occur out of the loading or unloading of crude oil and petroleum
products to or from a ship at the facility. Over the past three years ended
December 31, 1999, there were no significant spills. All spills at the Point
Tupper terminal were reported and remediated to the satisfaction of the
applicable agencies and have not resulted in any citations by such authorities.
Past use 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."
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EMPLOYEES
As of February 29, 2000, excluding contract labor, we employed 203
people. Forty-one employees were located in the U.S., 104 on St. Eustatius, and
58 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 our 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.
POINT TUPPER
The Communications, Energy and Paperworkers Union ("CEPU") represents a
majority of Point Tupper's hourly work force. During 1999, we signed a new
agreement with the union which expires on September 30, 2003. We have
experienced no operational work stoppages in the last five years.
ITEM 2. PROPERTIES
ST. EUSTATIUS, NETHERLANDS ANTILLES
We own an 11.3 million barrel petroleum 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 24 tanks with a total capacity of 5.1 million barrels
dedicated to fuel oil storage, 18 tanks with a total capacity of 1.2 million
barrels dedicated to petroleum products storage, and eight tanks totaling 5.0
million barrels dedicated to multigrade crude oil storage. The facility also has
a 15,000 barrel butane sphere. 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.
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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 deadweight 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 deadweight tons with a draft of up to 55 feet.
The north berth of the jetty can handle vessels of up to 80,000 deadweight 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
and diesel oil customers, in July 1998, we completed installation of a monopile
with platform that can handle vessels of up to 40,000 deadweight 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. Eustatius 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 in port.
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 berthing facilities use and associated services
such as pilotage, tug assistance, line handling, launch service, emergency and
spill response and ship services.
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. We own four barges and charter one barge, which
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.
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, 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.
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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 400,000 deadweight tons
with a draft of up to 84 feet. At Berth One, approximately 75,000 barrels per
hour of crude oil, approximately 17,000 barrels per hour of diesel or gasoline,
or 50,000 barrels per hour of fuel oil can be discharged or loaded. Berth Two
can accommodate vessels of up to 99,000 deadweight tons with drafts of up to 40
feet. At Berth Two, approximately 25,000 barrels per hour of crude oil,
approximately 12,000 barrels per hour of diesel or gasoline, or approximately
12,000 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 of 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 22 tanks with a combined capacity of 5.7 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 10 tanks with a combined capacity of
1.2 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.
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 up to 550 barrels per hour of fuel oil and the
south truck rack has the capability to load up to 550 barrels per hour of fuel
oil or diesel.
We are continuing to negotiate 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 rights-of-way on our remaining
property at Point Tupper. We presently own approximately 3,000 acres of land at
this location. However, we are prohibited by law from using the approximately
1,296 acres comprising
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Landrie Lake and adjacent watershed land. The land anticipated to be transferred
to the Province is principally the Landrie Lake and adjacent watershed lands.
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 alleged 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. During the fourth quarter of
1999, the parties settled these proceedings by Global making payment of an
agreed amount, all of which will go to Praxair, Inc. pursuant to the indemnity
agreement discussed below.
In May 1994, the U.S. Department of Justice sued two of our
subsidiaries for pollution clean-up costs of $3.6 million in connection with the
discharge of oil into the territorial waters of the U.S. Virgin Islands and
Puerto Rico by a third party barge that had been loaded at our St. Eustatius
facility but was not affiliated with us. On April 16, 1998, the U.S. District
Court ruled that it lacked jurisdiction over the St. Eustatius subsidiary and
dismissed it from the case. On March 16, 2000, the U.S. Department of Justice
signed and filed with the court a stipulation and agreement that this action be
dismissed with prejudice. Therefore, this case is now closed.
In connection with the Castle Harlan acquisition, Praxair agreed to
indemnify us against damages relating to the legal proceedings described above.
As part of the Castle Harlan acquisition agreement, all recovery from Global or
the other parties bringing the actions is to be retained by Praxair.
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 or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED SECURITY MATTERS
Not applicable.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the periods
and as of the dates indicated for Statia Terminals International N.V. In January
1996, our former parent, CBI Industries, was acquired by Praxair. The statement
of operations data for each of:
o the period from January 1, 1996 through November 27, 1996; and
o the period from November 27, 1996 through December 31, 1996
have been derived from, and are qualified by reference to, our audited
consolidated financial statements not included in this Report. The statement of
operations data for the year ended December 31, 1995 have been derived from the
audited combined financial statements of Statia Terminals, Inc. and its
subsidiaries and affiliates not included in this Report. The summary of
historical consolidated financial data set forth below for each of the years
ended December 31, 1997, 1998 and 1999 should be read in conjunction with, and
is qualified by reference to, Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of this Report and our audited
consolidated financial statements and accompanying notes thereto and other
financial information beginning on page F-1 of this Report.
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<TABLE>
<CAPTION>
(Dollars in thousands except share amounts)
-------------------------------------------------------------------------------
Pre-Castle Harlan Acquisition Post-Castle Harlan Acquisition
----------------------------- -----------------------------------------------
Pre-Praxair
Acquisition
-----------
January 1, November 27,
1996 1996
Year Ended Through Through Years Ended December 31,
December 31, November 27, December 31, ---------------------------------
1995 (6) 1996 (6) 1996 (6) 1997 1998 (7) 1999
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 135,541 $ 140,998 $ 14,956 $142,499 $136,762 $168,343
Cost of services and products sold 117,722 129,915 12,924 122,944 105,888 137,665
Gross profit 17,819 11,083 2,032 19,555 30,874 30,678
Administrative expenses 6,957 8,282 413 6,348 7,315 8,039
Operating income 10,862 2,801 1,619 13,207 22,759 16,790
Loss (gain) on disposition of property and equipment 59 (68) - (109) 1,652 -
Interest expense 4,478 4,187 1,613 16,874 16,851 14,286
Provision for income taxes 390 629 132 780 320 780
Net income (loss) available to common stockholder (2) 4,569 (2,682) (95) (3,879) 4,524 (2,260)
BALANCE SHEET DATA:
Total assets (1) 230,283 N/M 260,155 244,228 243,178 234,271
Long-term debt (2) 51,600 N/M 135,000 135,000 135,000 101,000
Stockholder's equity subject to reduction (3) - N/M 20,000 20,000 - -
Preferred stock 18,589 N/M - - - -
Total stockholder's equity (2)(3) 91,001 N/M 75,405 71,826 88,700 107,688
NET CASH FLOW FROM (USED IN):
Operating activities 11,476 9,108 2,225 12,454 19,532 11,020
Investing activities (36,908) (102,890) (177,033) (12,935) (4,092) (8,578)
Financing activities (2) 26,477 92,998 184,072 (2,700) (7,650) (12,683)
OPERATING DATA:
Adjusted Indenture EBITDA (4) 28,720 20,822 2,573 23,774 33,857 28,480
Consolidated fixed charge coverage ratio under the
the indenture (5) - - 1.69x 1.45x 2.0x 2.0x
Operations sustaining capital expenditures 9,975 12,887 1,203 4,401 9,000 7,591
Total capital expenditures 37,138 103,001 1,203 5,344 10,714 8,593
Capacity (in thousands of barrels) 20,387 20,387 20,387 20,387 19,566 18,738
Percentage capacity leased 76% 68% 74% 70% 91% 86%
Throughput (in thousands of barrels) 109,805 81,994 13,223 118,275 119,502 99,230
Vessel calls 973 922 108 1,030 1,027 1,028
</TABLE>
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NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
N/M Not meaningful--various transactions occurred prior to and in
contemplation of the Castle Harlan acquisition which cause the balance
sheet data as of November 27, 1996 to be not meaningful in comparison
to the other period end dates presented. Therefore, the information is
not presented.
(1) On November 17, 1993, Statia Terminals N.V. and a subsidiary entered
into an agreement with a third-party financier (First Salute) 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. 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. In connection with the Castle Harlan acquisition, Praxair
terminated the First Salute, off-balance-sheet financing arrangement
and paid in full all obligations related to this lease. The fair
market value of these leased assets was recorded as property and
equipment.
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 April 28, 1999, the Parent completed its initial public equity
offering of 7.6 million Class A common shares. The offering price was
$20 per share raising gross proceeds of $152,000. A portion of the
proceeds was used by the Parent to purchase additional capital stock
of Statia Terminals International N.V. amounting to $33,746, net of
expenses. During May 1999, we used the proceeds from the sale of our
capital stock, along with existing cash, to repurchase in the open
market a principal amount of $34,000 of the 11 3/4% First Mortgage
Notes for $39,522, including acquisition costs and accrued interest of
$3,681 and $1,841, respectively. The acquisition costs and the
unamortized deferred financing costs related to the repurchased debt
($1,062) were recorded as an extraordinary charge.
(3) On July 29, 1998, a subsidiary of Statia Terminals International sold
the Brownsville, Texas, facility, and an allowed restricted payment of
$6,150 was made from Statia Terminals International to the Parent.
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. Certain of the Parent's preferred stock
agreements required it to utilize any net proceeds from the sale of
the Brownsville facility and the vessel to redeem certain of the
Parent's preferred stock. Accordingly, stockholder's equity subject to
reduction has been reduced for these two items.
In conjunction with the Parent's initial public offering of equity in
April 1999, all of our Parent's preferred stock was redeemed.
(4) Adjusted Indenture EBITDA is defined under the indenture as the sum of
(a) net income (loss) available to common stockholder, (b) provision
for income taxes, (c) interest expense, (d) depreciation and
amortization of certain intangible assets, (e) certain non-cash
charges, and (f) the portion of the First Salute lease payments that
represents interest expense for the periods prior to the Castle Harlan
acquisition. The amount of the First Salute related interest expense
excluded from Adjusted Indenture EBITDA was $5,741 for the year ended
December 31, 1995 and $5,600 for the period ended November 27, 1996.
Adjusted Indenture EBITDA excludes $3,000 of non-cash, stock-based
compensation recognized on November 27, 1996 immediately prior to
consummation of the Castle Harlan acquisition. 1998 Adjusted Indenture
EBITDA excludes the loss recognized on the sale of Statia Terminals
Southwest, Inc. of $1,652. 1999 Adjusted Indenture EBITDA includes the
cash portion of the extraordinary charge related to early
extinguishment of debt of $3,681 and excludes the non-cash portion of
special compensation expense and hurricane charge of $2,152 and
$1,500, respectively. Adjusted Indenture 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.
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(5) The consolidated fixed charge coverage ratio is the ratio of Adjusted
Indenture EBITDA to fixed charges, both computed as set forth in the
indenture to the mortgage notes. Under the indenture to the mortgage
notes, we are permitted to pay dividends only if the consolidated
fixed charge coverage ratio is at least 2.0 to 1. The indenture to the
first mortgage notes contains certain other restrictions on the
payment of dividends. A fixed charge coverage ratio of less than 2.0
to 1 also limits the amount of indebtedness we may incur.
(6) 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.
(7) Includes the operations of Statia Terminals Southwest, Inc. through
June 30, 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For purposes of the discussion below, reference is made to the
consolidated balance sheets as of December 31, 1998 and 1999 for Statia
Terminals International N.V. Reference is also made to our consolidated
statements of income (loss), stockholder's equity and cash flows for the years
ended December 31, 1997, 1998 and 1999. Substantially all of our transactions
are denominated in U.S. dollars and all figures are in U.S. dollars unless
otherwise indicated. We prepare our financial statements in accordance with U.S.
generally accepted accounting principles.
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 Partners II L.P., 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 was
amalgamated into Statia Terminals Canada, Inc. Statia Terminals Canada, Statia
Terminals International N.V. and Statia Terminals Group N.V. were organized for
purposes of facilitating the Castle Harlan acquisition. To assist with the
financing of the Castle Harlan acquisition, we sold $135 million of 11 3/4%
First Mortgage Notes. In July 1998, we sold Statia Terminals Southwest to an
unaffiliated third party purchaser.
19
<PAGE>
During September 1998, Hurricane Georges caused $8.5 million in damage
to components of the St. Eustatius facility. Insulation on certain storage
tanks, electrical transmission systems and roofs of several buildings sustained
damage. During the third quarter of 1998, we recorded a charge of $0.8 million
consisting of an insurance deductible of $0.5 million related to the hurricane
damage and other expenses. Insurance proceeds related to this storm are expected
to total $7.7 million, of which $3.1 million was collected through December 31,
1999, and the remaining $4.6 million is anticipated to be collected in April
2000. Hurricane Georges did not significantly impact operations of the facility
which returned to normal within days of the storm.
As a result of damages sustained to our St. Eustatius facility from
Hurricane Lenny in late November 1999, we incurred a one-time non-cash charge of
$1.5 million to partially reduce the carrying value of our shoreline protection
system and a one-time cash charge of $0.3 million to cover other hurricane
related expenses. The damaged shoreline protection system was not covered by
insurance and, together with other civil work, is expected to be replaced during
the first half of 2000 at a cost of $2.8 million.
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 and equipment.
20
<PAGE>
CAPACITY, CAPACITY LEASED, THROUGHPUT AND VESSEL CALLS BY LOCATION
(Capacity and throughput in thousands of barrels)
<TABLE>
<CAPTION>
For the years ended
December 31,
------------------------------------
1997 1998 1999
----------- ----------- --------
<S> <C> <C> <C>
Netherlands Antilles and the Caribbean
Total capacity 11,334 11,334 11,334
Capacity leased 76% 92% 90%
Throughput 62,944 74,158 61,737
Vessel calls 792 864 936
Canada
Total capacity 7,404 7,404 7,404
Capacity leased 70% 93% 79%
Throughput 53,011 43,468 37,493
Vessel calls 125 104 92
All locations (1)
Total capacity 18,738 18,738 18,738
Capacity leased 74% 92% 86%
Throughput 115,955 117,626 99,230
Vessel calls 917 968 1,028
</TABLE>
(1) The Brownsville, Texas, facility was sold on July 29, 1998. The
statistics above exclude the operations of the Brownsville facility.
A majority of our revenues are generated by 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 product sales. Our operating costs for terminaling services are
relatively fixed and generally do not change significantly with changes in
storage capacity leased. In addition, our operating costs are impacted by
inflationary cost increases, changes in storage capacity and changes in
ancillary services offered by us. Additions or reductions in storage, throughput
and ancillary service revenues directly impact our gross profit. Costs for the
procurement of petroleum products for sale are variable and linked to global oil
prices. Our product costs are also impacted by market supply conditions, types
of products sold and volumes delivered.
21
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentage of revenues represented by some items in our consolidated income
statements.
RESULTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------------------------------------------
1997 1998 1999
---------------------- -------------------- --------------------
% of % of % of
Dollars Revenues Dollars Revenues Dollars Revenues
--------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Terminaling services $ 53,165 37.3% $ 66,625 48.7% $ 61,665 36.6%
Product sales 89,334 62.7% 70,137 51.3% 106,678 63.4%
-------- ------- -------- ------- -------- -------
Total revenues 142,499 100.0% 136,762 100.0% 168,343 100.0%
Cost of services and products sold 122,944 86.3% 105,888 77.4% 137,665 81.8%
-------- ------- -------- ------- -------- -------
Gross profit 19,555 13.7% 30,874 22.6% 30,678 18.2%
Administrative expenses 6,348 4.5% 7,315 5.4% 8,039 4.8%
Special compensation expense - - - - 4,099 2.4%
Hurricane charges - - 800 0.6% 1,750 1.0%
-------- ------- -------- ------- -------- -------
Operating income 13,207 9.2% 22,759 16.6% 16,790 10.0%
Loss (gain) on disposition of property and equipment (109) (0.1)% 1,652 1.2% - -
Interest expense 16,874 11.8% 16,851 12.3% 14,286 8.5%
Interest income 459 0.3% 588 0.4% 759 0.5%
-------- ------- -------- ------- -------- -------
Income (loss) before provision for income taxes and
extraordinary charge (3,099) (2.2)% 4,844 3.5% 3,263 2.0%
Provision for income taxes 780 0.5% 320 0.2% 780 0.5%
Extraordinary charge related to early extinguishment
of debt - - - - 4,743 2.8%
-------- ------- -------- ------- -------- -------
Net income (loss) available to common stockholder $ (3,879) (2.7%) $ 4,524 3.3% $ (2,260) (1.3%)
========= ======== ======== ======= ========= ========
</TABLE>
The following tables set forth, for the periods indicated (a) the total
revenues and total operating income (loss), after allocation of administrative
expenses and elimination of intercompany transactions, 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,
----------------------------------------------------------------------
1997 1998 1999
---------------------- ---------------------- ----------------------
% of % of % of
Dollars Total Dollars Total Dollars Total
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $ 122,042 85.6% $ 114,091 83.4% $ 149,852 89.0%
Canada 18,586 13.0% 21,058 15.4% 18,491 11.0%
Brownsville, Texas, facility 1,871 1.4% 1,613 1.2% - -
--------- ------- --------- ------- --------- ------
Total $ 142,499 100.0% $ 136,762 100.0% $ 168,343 100.0%
========= ======= ========= ======= ========= =======
</TABLE>
22
<PAGE>
OPERATING INCOME (LOSS) BY LOCATION
(Dollars in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
----------------------------------------------------------------------
1997 1998 1999
---------------------- ---------------------- ----------------------
% of % of % of
Dollars Total Dollars Total Dollars Total
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $11,198 84.8% $ 15,908 69.9% $ 13,405 79.8%
Canada 3,981 30.1% 7,268 31.9% 3,385 20.2%
Brownsville, Texas, facility (1,972) (14.9)% (417) (1.8)% - -
------- -------- -------- -------- --------- ------
Total $13,207 100.0% $ 22,759 100.0% $ 16,790 100.0%
======= ======= ======== ======= ======== =======
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998
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, 1998 includes the operations of Statia Terminals Southwest for six
months, and the year ended December 31, 1999 includes no operations of Statia
Terminals Southwest. Additionally, as discussed in more detail below, during May
1999, we repurchased in the open market a principal amount of $34 million of the
11 3/4% First Mortgage Notes with proceeds from the sale of our common stock.
These transactions have impacted our 1999 financial condition and results of
operations and, therefore, comparability to prior years.
REVENUES
Total revenues for the year ended December 31, 1999 were $168.3 million
compared to $136.8 million for the year ended December 31, 1998, an increase of
$31.5 million, or 23.1%. Revenues from terminaling services (resulting from
revenue from storage, throughput, dock usage, emergency response and other
terminal services), for the year ended December 31, 1999 were $61.7 million
compared to $66.6 million for the previous year, a decrease of $4.9 million, or
7.4%.
The decrease in terminaling services revenue for the year ended
December 31, 1999 compared to the previous year was principally due to the
adverse effects of the accord established between many of the oil producing
nations, some of whom we do business with, to raise crude oil prices by reducing
supply. Members of the accord have reduced their production of crude oil which,
in turn, has reduced the worldwide quantity of crude oil and petroleum products
in storage. The accord was signed in March 1999 and became effective April 1,
1999 for a one-year term. The accord has primarily impacted our terminaling
services revenues beginning with the second half of 1999 and continuing to date
as certain customers chose not to renew their storage contracts.
For the year ended December 31, 1999, approximately 69% of our tank
capacity was leased pursuant to long-term contracts at our St. Eustatius and
Point Tupper locations together. Approximately 60% of our storage and throughput
revenues, excluding related ancillary services, were derived from long-term
contracts during the same period.
23
<PAGE>
Revenues from terminaling services at St. Eustatius decreased
approximately $1.4 million, or 3.2%, during the year ended December 31, 1999 as
compared to the year ended December 31, 1998, due to decreased throughput and a
lower percentage of capacity leased. Total throughput decreased from 74.2
million barrels during the year ended December 31, 1998 to 61.7 million barrels
during 1999 due primarily to decreased throughput of crude oil and petroleum
products. Twelve fewer cargo vessels called at the St. Eustatius facility during
the year ended December 31, 1999 than during the same period of 1998, resulting
in lower revenues from port charges, which consist of dock charges, emergency
response fees and other terminal charges. For the year ended December 31, 1999,
the overall percentage of capacity leased at this facility was 90% compared to
92% for the same period of 1998, reflecting a decrease in the percentage of
capacity leased for residual fuel oil tankage, which was partially offset by an
increase in the percentage of capacity leased for clean products.
Revenues from terminaling services at Point Tupper decreased $2.3
million, or 11.3% during the year ended December 31, 1999 as compared to the
year ended December 31, 1998. The decrease is due to a lower percentage capacity
leased and fewer vessel calls during the year ended December 31, 1999. The
percentage of tank capacity leased at Point Tupper decreased from 93% for the
year ended December 31, 1998 to 79% for the same period of 1999. This decrease
is primarily the result of the decision by a customer of this facility, which is
a participant in the accord, not to renew its crude oil storage contract at the
end of the second quarter of 1999. Fewer vessels called during the year ended
December 31, 1999 as compared to the same period of 1998 which led to lower
revenues from port charges at this facility.
Revenues from product sales were $106.7 million for the year ended
December 31, 1999 compared to $70.1 million for the same period in 1998, an
increase of $36.6 million, or 52.1%. This increase was primarily due to
increases in the volume of products delivered and increases in average selling
prices. Metric tons of product sold increased 19.2% during the year ended
December 31, 1999 as compared to the same period of 1998. Average selling prices
increased 27.7% when comparing the year ended December 31, 1999 with the same
period of 1998. These changes in average selling prices were primarily the
result of changes in the world oil markets which have been significantly
influenced by the accord.
GROSS PROFIT
Gross profit for the year ended December 31, 1999 was $30.7 million
compared to $30.9 million for the same period of 1998, representing a decrease
of $0.2 million, or 0.6%. The decrease in gross profit is primarily the result
of lower gross profits realized on terminaling services, which were partially
offset by higher dollar gross margins realized on product sales.
ADMINISTRATIVE EXPENSES
Administrative expenses were $8.0 million for the year ended December
31, 1999 as compared to $7.3 million for the same period of 1998, representing
an increase of $0.7 million, or 9.9%. The increase during the year ended
December 31, 1999, as compared to the same period of 1998, is primarily the
result of higher personnel and related costs.
24
<PAGE>
SPECIAL COMPENSATION EXPENSES
As more fully discussed in note 3 of the notes to the consolidated
financial statements, we recorded special compensation expense during the year
ended December 31, 1999 of $4.1 million of which $2.2 million was a non-cash
charge.
HURRICANE CHARGES
As a result of damages sustained to our St. Eustatius facility from
Hurricane Lenny in late November 1999, we incurred a one-time non-cash charge of
$1.5 million to partially reduce the carrying value of our shoreline protection
system and a one-time cash charge of $0.25 million to cover other hurricane
related expenses. The damaged shoreline protection system was not covered by
insurance and, together with certain other civil work, is expected to be
replaced during the first half of 2000 at a cost of $2.8 million.
During September 1998, Hurricane Georges damaged components of our St.
Eustatius facility. However, operations were not significantly impacted by the
hurricane and returned to normal within days of the storm. During 1998, we
recorded a charge of $800 representing an insurance deductible of $500 related
to the hurricane damage and certain other costs resulting from the hurricane
which will not be recovered through our insurance policies.
LOSS ON SALE OF ASSETS
As more fully discussed in note 12 of the notes to the consolidated
financial statements, we recognized a loss on the sale of Statia Terminals
Southwest, Inc. during the year ended December 31, 1998 of $1.7 million.
INTEREST EXPENSE
During the years ended December 31, 1998 and 1999, we incurred $16.9
million and $14.3 million, respectively, of interest expense from interest
accrued on our mortgage notes due in 2003, interest expense and commitment fees
on our revolving credit facility, amortization expense related to deferred
financing costs and bank charges. In May 1999, we repurchased $34.0 million of
the mortgage notes which resulted in lower interest and amortization expense
related to this debt. Interest expense and commitment fees on our revolving
credit facility were not significant for 1999 and 1998.
PROVISION FOR INCOME TAXES
Provision for income taxes was $0.8 million for the year ended December
31, 1999, as compared to $0.3 million for the same period of 1998. The provision
for income taxes has been increased in 1999 in contemplation of potential
additional income tax assessments from jurisdictions in which we operate.
EXTRAORDINARY CHARGE RELATED TO EARLY EXTINGUISHMENT OF DEBT
As more fully discussed in note 3 of notes to the consolidated
financial statements, we recognized an extraordinary charge of $4.7 million
during the year ended December 31, 1999 in connection with the repurchase of
$34.0 million of our 11 3/4% mortgage notes. There was no income tax effect
associated with this extraordinary charge.
25
<PAGE>
NET LOSS
Net loss to common stockholder was $2.3 million for the year ended
December 31, 1999, as compared to net income of $4.5 million for the same period
of 1998, a decrease of $6.8 million. The decrease in the net income is
attributable to the net effect of the factors discussed above.
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
COMPARABILITY
On July 29, 1998, we sold Statia Terminals Southwest, Inc. 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, 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 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.
26
<PAGE>
Revenues from 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 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 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 $30.9 million
compared to $19.6 million for the same period of 1997, representing an increase
of $11.3 million, or 57.8%. 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 dollar 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 $6.3 million for the same period of 1997, representing
an increase of $1.0 million, or 15.2%. 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 some professional fees.
HURRICANE CHARGES
During September 1998, Hurricane Georges damaged components of our St.
Eustatius facility. However, operations were not significantly impacted by the
hurricane and returned to normal within days of the storm. During 1998, we
recorded a charge of $800 representing an insurance deductible of $500 related
to the hurricane damage and certain other costs resulting from the hurricane
which will not be recovered through our insurance policies.
LOSS ON SALE OF ASSETS
As more fully discussed in note 12 of the notes to the consolidated
financial statements, we recognized a loss on the sale of Statia Terminals
Southwest, Inc. 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 bank charges.
NET LOSS
Net income available to common stockholder 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 improvement is
attributable to the net effect of the factors discussed above.
27
<PAGE>
SELECTED QUARTERLY FINANCIAL INFORMATION
The following table sets forth 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 in this Report and our quarterly reports on Form
10-Q.
<TABLE>
<CAPTION>
Quarters Ended
-----------------------------------------------------------
March 31 June 30 September 30 December 31 Total
-------- ------- ------------ ----------- -----
<S> <C> <C> <C> <C> <C>
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(1) 6,217 8,486 9,737 10,217 34,657
1999
----
Total revenues $ 37,415 $ 42,267 $ 43,310 $ 45,351 $ 168,343
Operating income 4,743 4,656 4,210 3,181 16,790
Adjusted EBITDA(1) 9,594 9,863 6,902 7,838 34,197
- -----------------------
(1) Adjusted EBITDA is defined as EBITDA adjusted for the effects of
certain non-recurring transactions and represents the primary measure
of profit and loss utilized by our management to make decisions about
resources to be allocated to our operating segments.
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW FROM OPERATING ACTIVITIES
Net cash provided by operating activities was $12.5 million, $19.5
million and $11.0 million for the years ended December 31, 1997, 1998 and 1999,
respectively. Cash flow from operations has been our primary source of liquidity
during these periods. Differences between net losses and positive operating cash
flow have resulted primarily from depreciation and amortization burdens,
non-cash charges and changes in various asset and liability accounts.
At December 31, 1999, we had cash and cash equivalents on hand of $3.6
million, compared to $13.9 million at December 31, 1998. Accounts receivable and
accounts payable were $16.7 million and $14.1 million, respectively, at December
31, 1999, as compared to $9.9 million and $9.0 million, respectively, at
December 31, 1998. The increase in accounts receivable and accounts payable is
primarily due to changes in the world oil markets which have increased both our
selling prices and related costs of product sales.
We periodically purchase refined petroleum products for resale as
product sales, and our inventory balances change based on these activities. As
of December 31, 1999 and 1998, our inventory balances were $3.2 million and $4.5
million, respectively.
28
<PAGE>
CASH FLOW FROM INVESTING ACTIVITIES
Net cash used in investing activities was $12.9 million, $4.1 million
and $8.6 million for the years ended December 31, 1997, 1998 and 1999,
respectively. Investing activities during 1997, 1998 and 1999 included purchases
of property and equipment of $5.3 million, $10.7 million and $8.6 million,
respectively. See "Capital Expenditures" below. Additionally, as more fully
discussed in note 12 of the notes to the consolidated financial statements, on
July 29, 1998, we received $6.5 million of cash proceeds from the sale of our
Brownsville, Texas, facility.
During the year ended December 31, 1997, we spent $7.7 million related
to the Castle Harlan acquisition. This amount includes:
o $5.1 million paid in February 1997 to satisfy the remaining
cash portion of the purchase price, and
o $2.6 million of commissions, fees and expenses.
CASH FLOW FROM FINANCING ACTIVITIES
On April 28, 1999, the Parent completed its initial public equity
offering of 7.6 million shares. The offering price was $20 per share raising
gross proceeds to the Parent of $152 million. A portion of the offering proceeds
was used by the Parent to purchase additional capital stock of Statia Terminals
International amounting to $33.7 million, net of certain expenses of the
offering allocated to us. During May 1999, we used the proceeds from the sale of
Statia Terminals International's capital stock, along with existing cash, to
repurchase in the open market a principal amount of $34 million of the 11 3/4%
First Mortgage Notes for $39.5 million, including acquisition costs of $3.7
million.
During the year ended December 31, 1999, we declared dividends to the
Parent totaling $12.5 million of which $3.8 million remained payable at December
31, 1999 and was subsequently paid. During the years ended December 31, 1997 and
1998, we paid dividends to the Parent of $2.7 million and $1.5 million,
respectively. The Parent used the proceeds from these dividends to pay certain
management fees discussed in note 10 of the notes to the consolidated financial
statements, among other things. Additionally, 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.
We have a $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 $10.6 million at December 31, 1999. The revolving credit facility
bears interest at the prime rate plus 0.5% per annum (9.0% at December 31, 1999)
and will expire on November 27, 2000. During December 1999, we borrowed $3.4
million on this facility, all of which was repaid by December 31, 1999.
The debt service costs associated with the borrowings under the
mortgage notes impose a significant burden on our liquidity. 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. As further
discussed in note 5 of the notes to the consolidated financial statements, 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. Under the terms of the indenture, we may
29
<PAGE>
also forego the redemption process and repurchase the mortgage notes in the open
market after November 15, 2000. Any time on or prior to November 15, 1999, we
were allowed to redeem or repurchase up to 35% of the aggregate principal amount
of the mortgage notes with the proceeds of one or more equity offerings. As
further discussed above and in note 3 of the notes to the consolidated financial
statements, during May 1999, and in connection with our Parent's initial public
offering of equity, we repurchased in the open market a principal amount of $34
million of the mortgage notes.
The indenture generally limits the incurrence of additional debt by us,
limits our ability to pay dividends to our Parent 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 is at least 2.0 to 1.
The fixed charge coverage ratio is the ratio of adjusted EBITDA to fixed
charges, each computed as set forth in the indenture with respect to the
mortgage notes. The indenture requires our EBITDA to be adjusted for specified
non-cash income and expense items to compute adjusted EBITDA. 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
o the amount of such dividend, when added to the aggregate
amount of all other dividends and specific other restricted
payments made by us after November 27, 1996 and not covered by
other exceptions in the indenture, exceeds the sum specified
below.
Such sum is:
50% of our net income, as defined in the indenture and 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
the net cash proceeds from the issuance and sale after November 27,
1996 of our capital stock to our Parent and/or third parties.
Some other dividends, generally unrelated to operating cash flow, are
permitted notwithstanding the second and third items above.
As of March 30, 2000, no event of default existed and was continuing.
The consolidated fixed charge coverage ratio as defined in the indenture was 2.0
to 1 at December 31, 1999. Additionally, at December 31, 1999, the sum of our
dividends, restricted payments, consolidated net income (deficit) and capital
stock proceeds was approximately $19.5 million.
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
30
<PAGE>
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.
CAPITAL EXPENDITURES
We spent $5.3 million, $10.7 million and $8.6 million during the years
ended December 31, 1997, 1998 and 1999, respectively. These amounts include $0.9
million, $1.7 million and $1.0 million, respectively, which was spent to enhance
our ability to generate incremental revenues. 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 and 1999, a majority of
capital expenditures were related to sustaining our existing operations,
including our terminal and marine maintenance programs.
Our initial capital expenditure budget for 2000 was $12.0 million
primarily for items to sustain our existing operations. We subsequently revised
our capital expenditure budget to $8.0 million by deferring certain previously
anticipated expenditures. Our capital expenditure forecast includes
approximately $2.8 million to repair damage caused by Hurricane Lenny, most of
which will be spent to replace damage to the shoreline protection systems and
other civil infrastructure at St. Eustatius. Spending for producing incremental
revenues is contingent upon the securing of additional business. Our 2000
capital expenditure forecast includes certain expenditures originally budgeted
for prior periods but which were not completed in those prior periods.
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<PAGE>
The following table sets forth capital expenditures by location and
separates such expenditures into those which produce, or have the potential to
produce, incremental revenue, and those which sustain existing operations.
SUMMARY OF CAPITAL EXPENDITURES BY LOCATION
(Dollars in thousands)
<TABLE>
<CAPTION>
PRODUCE SUSTAIN
INCREMENTAL EXISTING
REVENUES OPERATIONS TOTAL % OF TOTAL
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Netherlands Antilles $ 696 $ 2,860 $ 3,556 66.5%
Canada 120 834 954 17.9%
Brownsville, Texas, facility (1) 125 100 225 4.2%
All other United States (2) - 609 609 11.4%
-------- --------- ---------- --------
Total $ 941 $ 4,403 $ 5,344 100.0%
======== ========= ========== ========
YEAR ENDED DECEMBER 31, 1998
Netherlands Antilles $ 667 $ 5,990 $ 6,657 62.1%
Canada 829 476 1,305 12.2%
Brownsville, Texas, facility (1) 218 94 312 2.9%
All other United States (2) - 2,440 2,440 22.8%
-------- --------- ---------- --------
Total $ 1,714 $ 9,000 $ 10,714 100.0%
======== ========= ========== ========
YEAR ENDED DECEMBER 31, 1999
Netherlands Antilles $ 586 $ 4,613 $ 5,199 60.5%
Canada 416 1,602 2,018 23.5%
United States (2) - 1,376 1,376 16.0%
-------- --------- ---------- --------
Total $ 1,002 $ 7,591 $ 8,593 100.0%
======== ========= ========== ========
</TABLE>
(1) We sold our Brownsville, Texas, facility on July 29, 1998.
(2) Includes expenditures for U.S. flagged marine equipment utilized
primarily in the Netherlands Antilles.
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 1997, 1998 and 1999, our capital
expenditures for compliance with environmental, health and safety laws and
regulations were approximately $1.3 million, $2.7 million and $2.5 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 $0.2 million, $0.9 million and $1.2 million in 1997,
1998 and 1999, respectively. We believe we are presently in substantial
compliance with applicable laws and regulations governing environmental, health
and safety matters.
The Castle Harlan acquisition agreement includes a covenant whereby
Praxair shall assume financial responsibility for some environmental
investigation, remediation and upgrade costs at Point Tupper. 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
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<PAGE>
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 use of the Point Tupper facility, including its past operation by
others as an oil refinery, have resulted in particular 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.
Particular environmental matters and conditions that were likely to require the
incurrence of costs were identified, and Praxair agreed to pay the costs of
addressing some of these matters, subject in some cases to monetary limitations
as discussed above. Since then we have undertaken, in accordance with
environmental, health and safety laws, investigation, remediation and upgrade
actions to address these and other more recently identified matters.
With respect to the foregoing environmental liabilities and costs,
Praxair, in connection with the Castle Harlan acquisition, has paid
approximately $3.9 million through December 31, 1999. We anticipate incurring
additional costs of $0.5 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 $13 million.
Praxair is required under the Castle Harlan acquisition agreement to pay the
costs of this additional remediation and compliance, and has not disputed this
obligation.
We accrued a total of $1.5 million during 1996 to cover environmental,
health and safety costs we have identified as not being covered by the Praxair
agreement as well as the $0.5 million identified above. Through December 31,
1999, $32,000 of this amount had been expended. We periodically review the
adequacy of this accrual and during 1999 determined $0.25 million originally
provided for environmental contingencies at our St. Eustatius facility were no
longer necessary. Accordingly, this portion of the accrual was eliminated and
credited to costs of services and products sold. We believe that environmental,
health and safety costs will not have a material adverse effect on our financial
position, cash flows or results of operations, subject to reimbursements from
Praxair.
We can give no assurance that additional liabilities 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 assurance 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.
33
<PAGE>
INFORMATION TECHNOLOGY AND THE YEAR 2000
Some computer software and hardware applications and embedded
microprocessor, microcontroller or other processing technology applications and
systems have historically used 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 particular 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
provided for the evaluations of the systems of customers, vendors, and other
third-party service providers and evaluations of our non-information technology
systems.
We have implemented new Year 2000 compliant terminal operations
software at our facilities and have implemented a fully integrated Year 2000
compliant finance, accounting, and human resources system. In addition to being
Year 2000 compliant, it is anticipated that this system and the terminal
operations software will significantly enhance systems functionality.
We previously identified some components of our control systems at our
two terminals as not being Year 2000 compliant. We have installed and tested
replacements of non-compliant components. These systems measure, regulate,
control, and maintain crude oil and petroleum product flow and fire protection
equipment at the terminals.
Through December 31, 1999, we spent $2.1 million in connection with our
Year 2000 remediation efforts and related enhancements of systems functionality.
Of this total, we have capitalized $1.9 million and expensed $0.2 million. In
2000, we anticipate spending an additional $0.25 million to complete
enhancements to systems functionality which is unrelated to the Year 2000
problem. We anticipate capitalizing substantially all of this $0.25 million.
Such amounts are included in our revised 2000 capital expenditure forecast.
However, we cannot guarantee that these estimates will be met, and actual
expenditures could differ materially from these estimates.
We suffered no adverse effects from the Year 2000 problem either as a
result of our own systems or those of any third party. However, due to the
pervasive nature of the Year 2000 problem, we can give no assurance that third
parties did not experience problems not currently known to us which could impact
our business, financial condition or results of operations in the future.
POLITICAL, INFLATION, CURRENCY AND INTEREST RATE RISKS
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. 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.
34
<PAGE>
As all of our present debt obligations carry a fixed rate of interest,
except for the 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 some
terms and conditions could be modified and that the amounts payable to these
governments may increase or decrease, extension of this agreement is likely.
However, it is possible that such amounts may change more than anticipated.
Tax rates in the jurisdictions in which we operate did not change
significantly between 1997 and 1999, other than the enactment of a Nova Scotia
provincial capital tax effective April 1, 1997.
The net operating tax loss carryforwards available to offset Canadian
taxable income at December 31, 1999 were $50.9 million and expire in various
amounts through 2005. The investment tax credit carryforward available to reduce
Canadian income taxes was $7.2 million at December 31, 1999 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.
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.
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.
35
<PAGE>
Our current insurance program commenced December 31, 1998 and generally
extends 15 months. We expect to renew our existing insurance program for one
year beginning April 1, 2000 with substantially similar coverage, policy limits
and deductibles at a modest premium increase.
ACCOUNTING STANDARDS AND POLICIES
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133--"Accounting for Derivative
Instruments and Hedging Activities" which establishes standards of accounting
for derivative instruments including specific hedge accounting criteria. SFAS
No. 133, as amended by SFAS No. 137, is effective for fiscal years beginning
after June 15, 2000 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.
In December 1999, the U.S. Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin 101, "Revenue Recognition" ("SAB 101"), which
provides guidance on the recognition, presentation, and disclosure of revenue in
financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provides guidance for disclosure
related to revenue recognition policies. We believe our revenue recognition
practices are in conformity with the guidelines prescribed in SAB 101.
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 90 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, 1999, computed
at average costs, net of any lower of cost or market valuation provisions, and
the estimated fair value of such products.
ON BALANCE SHEET COMMODITY POSITION
(Dollars in thousands)
As of December 31, 1999
---------------------------------
CARRYING AMOUNT FAIR VALUE
--------------- ----------
Petroleum Inventory:
Statia Terminals N.V. $ 3,158 $ 3,531
Statia Terminals Canada 81 170
--------- --------
Total $ 3,239 $ 3,701
========= ========
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are included herein
beginning on Page F-1.
36
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
37
<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 N.V.
as of March 30, 2000:
NAME AGE POSITION
---- --- --------
James G. Cameron 54 Managing Director
John K. Castle 59 Managing Director
David B. Pittaway 48 Managing Director
Justin B. Wender 30 Managing Director
James F. Brenner 41 Vice President and Treasurer
Jack R. Pine 60 Secretary
The following table sets forth certain information with respect to the
directors and executive officers of Statia Terminals Canada, Incorporated as of
March 30, 2000:
NAME AGE POSITION
---- --- --------
Paul R. Crissman 44 Director and President
James G. Cameron 54 Director
Clarence W. Brown 50 Director
James F. Brenner 41 Vice President-Finance
Jack R. Pine 60 Secretary
The directors of Statia Terminals, Inc., an indirect subsidiary of
Statia Terminals International N.V., are currently elected annually by its
shareholder to serve during the ensuing year or until their successors are duly
elected and qualified. The board of directors of Statia Terminals, Inc. duly
elects the executive officers to serve until their respective successors are
elected and qualified.
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<PAGE>
The following table sets forth certain information with respect to the
directors and executive officers of Statia Terminals, Inc. as of March 30, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James G. Cameron 54 Director, Chairman of the Board and President
Thomas M. Thompson, Jr. 55 Director and Executive Vice President
Robert R. Russo 44 Director and Senior Vice President
Jack R. Pine 60 Senior Vice President, General Counsel and Secretary
John D. Franklin 43 Vice President--Marine Fuel Marketing
James F. Brenner 41 Vice President--Finance, Treasurer and Assistant Secretary
</TABLE>
The following table sets forth certain information with respect to the
directors of the Parent as of March 30, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James G. Cameron 54 Director
John K. Castle 59 Director
Admiral James L. Holloway, III 78 Director
Francis Jungers 73 Director
David B. Pittaway 48 Director
Jonathan R. Spicehandler, M.D. 51 Director
Ernest "Jackie" Voges 68 Director
Justin B. Wender 30 Director
</TABLE>
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. From 1981 to 1986,
Mr. Brenner held various positions with the international accounting firm of
PricewaterhouseCoopers (formerly Price Waterhouse LLP).
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,
39
<PAGE>
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.
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 the
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 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 became the Vice President-Marine Fuel Sales in 1996 and Vice
President-Marine Fuel Marketing in March 2000. 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 involved with our legal affairs since
1978 and was formally transferred to Statia Terminals, Inc. from CBI Industries
in May 1996 as Senior Vice President, General Counsel and Secretary. Mr. Pine
also serves as a director of Petroterminal de Panama. He has over 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., the Parent's
controlling stockholder. Mr. Pittaway has been Vice President and Secretary of
Branford Castle, Inc., an investment company, since October 1986.
40
<PAGE>
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., Equipment Support
Services, 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 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 Managing 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.
ADDITIONAL 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, Adm. 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.
Adm. Holloway is currently Chairman of the Naval Historical Foundation, Chairman
of the Naval Academy Foundation, and chairman emeritus 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 Thermo Electron 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
41
<PAGE>
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., Montclair State University, and
the Liberty Science Center. He also serves on the board of directors of the
National Foundation of Infectious Diseases. Dr. Spicehandler is a member of the
board of associates of the Whitehead Institute for Biomedical Research.
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.
42
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
paid or accrued for the three years ended December 31, 1999 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
-----------
Annual Shares
Compensation Underlying
Name and -------------------- Other Annual Options/SARs All Other
Principal Position (1) Year Salary ($) Bonus ($) Compensation($)(2) (#Shares)(3) Compensation($)(4)
- -------------------------- ---- ---------- -------- ------------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
James G. Cameron 1999 $292,596 $187,514 $ 576,959 - $ 69,476
1998 275,482 211,875 - 615 69,525
1997 248,655 97,050 - 630 68,077
Thomas M. Thompson, Jr. 1999 253,269 158,417 449,857 - 16,696
1998 241,549 173,750 - 490 16,677
1997 208,434 79,000 - 500 15,449
Robert R. Russo 1999 228,846 148,718 395,589 - 14,897
1998 199,232 145,000 - 425 13,816
1997 178,883 68,400 - 430 12,680
Jack R. Pine 1999 163,010 77,592 196,604 - 12,098
1998 161,929 97,500 - 185 11,410
1997 129,450 51,550 - 190 10,648
John D. Franklin 1999 149,616 77,592 173,278 - 11,162
1998 139,616 97,500 - 185 10,784
1997 128,653 49,250 - 190 10,059
James F. Brenner 1999 154,731 77,592 154,713 - 11,462
1998 130,289 91,250 57,587 175 10,941
1997 108,895 43,400 - 165 9,033
</TABLE>
(1) James G. Cameron became President and Chairman of the Board of Statia
Terminals, Inc. on July 27, 1993. Mr. Cameron has held various
positions with the Statia Terminals group of companies since 1981.
Thomas M. Thompson, Jr. 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 Senior Vice President and
Director 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. John D. Franklin joined
us in 1992 and became Vice President-Marine Fuel Sales of Statia
Terminals, Inc. on May 6, 1996 and Vice President-Marine Fuel Marketing
on March 10, 2000. 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 1999 represents a bonus of $1,947,000
paid to the named executive officers. The purpose of this special
management bonus was to partially reimburse these individuals with
respect to adverse tax consequences that resulted from the Parent's
initial public offering of equity and other past compensation
arrangements. The compensation reported for 1998 represents $35,923 of
relocation expenses and $21,664 of related tax reimbursements paid to
Mr. Brenner.
43
<PAGE>
(3) Represents options to purchase the Parent's 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 for each of the 1997 and 1998 grants. The award agreement
specified that after two years of employment after the date of grant
and after each of the following three years, 25% of the option would
become exercisable unless a liquidation event occurred (as defined in
the award agreement). If a liquidation event occurred, the option would
become fully exercisable. The option would 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 would expire ten years after the date of grant.
The Parent's initial public offering of equity, which was completed on
April 28, 1999, qualified as a liquidation event under the award
agreement. Each outstanding option on April 28, 1999 was exercised and
converted to approximately 80.6469 of the Parent's Class B subordinated
shares and approximately 0.806469 of the Parent's Class C incentive
rights. The holders then transferred all of the Class B subordinated
shares and Class C incentive rights to Statia Terminals Holdings in
exchange for common shares of Statia Terminals Holdings. Statia
Terminals Holdings now owns all of the Parent's outstanding Class B
subordinated shares and Class C incentive rights. These transactions
are further discussed in the Parent's Registration Statement on Form
S-1 (File No. 333-72317) related to its initial public offering of
equity.
(4) The compensation reported for 1999 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, $16,600 and $2,087 for Mr.
Cameron; $0, $14,800 and $1,896 for Mr. Thompson; $0, $14,200 and $697
for Mr. Russo; $0, $11,000 and $1,098 for Mr. Pine; $0, $11,000 and
$162 for Mr. Franklin; and $0, $11,000 and $462 for Mr. Brenner.
We are committed to pay the premiums of a split dollar life insurance
policy for Mr. Cameron until the earlier of Mr. Cameron reaching age 65
or the termination of Mr. Cameron's employment at which time either Mr.
Cameron or his designated beneficiaries will receive the cash surrender
value of the policy. Assuming premium payments are made until age 65,
the full cost to us of remaining payments as of December 31, 1999 is
$609,468.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1999
The Parent did not grant any stock options during 1999, nor has it
granted stock appreciation rights.
44
<PAGE>
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1999
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, 1999 December 31, 1999
On Value ----------------------------- ----------------------------
Name Exercise(1) Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James G. Cameron 1,245 $1,104,315 0 0 0 0
Thomas M. Thompson, Jr. 990 878,130 0 0 0 0
Robert R. Russo 855 758,385 0 0 0 0
Jack R. Pine 375 332,625 0 0 0 0
John D. Franklin 375 332,625 0 0 0 0
James F. Brenner 340 301,580 0 0 0 0
</TABLE>
(1) Represents options to purchase the Parent's common stock awarded under
the 1997 Stock Option Plan. The Parent's initial public offering of
equity, which was completed on April 28, 1999, qualified as a liquidation
event under the option award agreement. Each outstanding option on April
28, 1999 was exercised and converted to approximately 80.6469 of the
Parent's Class B subordinated shares and approximately 0.806469 of the
Parent's Class C incentive rights. Each option also received an
incremental distribution of the Parent's ownership interest in
Petroterminal de Panama ("PTP") upon exercise of the option. The holders
then transferred all of the Class B subordinated shares and Class C
incentive rights to Statia Terminals Holdings in exchange for common
shares of Statia Terminals Holdings. The holders also transferred all of
the ownership interest in PTP to Statia Terminals Cayman in exchange for
ownership interest in Statia Terminals Cayman. Statia Terminals Holdings
now owns all of the Parent's outstanding Class B subordinated shares and
Class C incentive rights, and Statia Terminals Cayman owns all of the
ownership interest in PTP. These transactions are further discussed in
the Parent's Registration Statement on Form S-1 (File No. 333-72317)
related to its initial public offering of equity.
On April 28, 1999, there was no public trading market for the Parent's
Class B subordinated shares, Class C incentive rights or the ownership
interest in PTP. The value realized for each option was determined based
on valuations performed as of April 28, 1999 at the Parent's request by
an independent consulting firm which determined the underlying value of
each option to be approximately $887.
SHARE OPTION PLAN
In April 1999, the Parent adopted its 1999 Share Option Plan. The
option plan is intended to further our success by increasing the proprietary
interest of our key employees, directors and consultants and to enhance our
ability to attract and retain employees, directors and consultants of
outstanding ability. Under the option plan, which is administered by the
compensation committee of the Parent's board of directors, the Parent may
deliver up to 1,140,000 of its Class A common shares, subject to adjustment
under certain conditions. To date, no options have been granted under this plan.
The entire text of this option plan has been incorporated by reference as an
exhibit to this Report.
45
<PAGE>
STOCKHOLDER LOANS
On November 27, 1996, Messrs. Cameron, Thompson, Russo, Pine, Franklin,
Brenner, Brown, Crissman 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 bore interest at 6.49% annually and were due on the
earlier of (1) November 26, 2003, (2) the sale of the pledged stock, or (3) a
"change in control," as defined in the loan agreement. In April 1999 and in
conjunction with the Parent's initial public offering of equity, these loans
were replaced with new loans aggregating $1.5 million and bearing interest at
5.17%. The maturity of the new loans is the earlier of (1) April 28, 2009, or
(2) the sale of the pledged stock.
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, increasing at least at the growth rate of the consumer price index. The
respective annual base salaries in effect for 2000 are $300,000 for Mr. Cameron;
$255,000 for Mr. Thompson; $240,000 for Mr. Russo; $157,000 for Mr. Pine;
$157,000 for Mr. Franklin; and $157,000 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 continue to
March 31, 2002 and automatically renew for an additional year on March 31 of
every year unless either party gives notice of non-renewal. 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.
46
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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 Terminals International. The following table sets forth, as of
February 29, 2000, the ownership of the Parent's presently issued and
outstanding Class A common shares, Class B subordinated shares and Class C
incentive rights by (1) each person known by us to be a beneficial owner of more
than 5% of any class of the Parent's voting securities, (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.
<TABLE>
<CAPTION>
Common Shares Subordinated Shares(1) Incentive Rigths(1)
-------------------------- --------------------------- ---------------------------
Name & Address of Percent of Percent of Percent of
Beneficial Owner(2)(3) # of Shares Outstanding # of Shares Outstanding # of Shares Outstanding
---------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
James G. Cameron -- -- 195,488 5.1 1,954.88 5.1
Thomas M. Thompson, Jr. 110 * 152,424 4.0 1,542.24 4.0
Robert R. Russo -- -- 134,035 3.5 1,340.35 3.5
Jack R. Pine -- -- 66,615 1.8 666.15 1.8
John D. Franklin -- -- 58,711 1.5 587.11 1.5
James F. Brenner -- -- 52,420 1.4 524.20 1.4
Clarence W. Brown -- -- 10,080 * 100.80 *
Paul R. Crissman -- -- 9,597 * 95.97 *
John K. Castle(4)
c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155 -- -- 3,800,000 100.0 38,000 100.0
David B. Pittaway -- -- 16,129 * 161.29 *
Justin B. Wender -- -- 806 * 8.06 *
James L. Holloway III -- -- 12,097 * 120.97 *
Francis Jungers 21,050 * 16,129 * 161.29 *
Jonathan R. Spicehandler -- -- 16,129 * 161.29 *
Ernest Voges -- -- 8,065 * 80.65 *
All directors and executive
officers as a group (4) 21,160 * 3,800,000 100.0 38,000 100.0
Castle Harlan Partners II L.P.,
affiliates and Castle Harlan
employees(4)
c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155 -- -- 3,800,000 100.0 38,000 100.0
Statia Terminals Holdings N.V.(4) -- -- 3,800,000 100.0 38,000 100.0
</TABLE>
* Beneficially owns less than one percent of such class of stock.
- ------------------------
(1) Share amounts for managing directors/directors and named executive officers
and all managing directors/directors and officers as a group are
beneficially held as shareholders of Statia Terminals Holdings N.V., which
holds 3,800,000 Subordinated Shares and 38,000 Incentive Rights.
(2) Share amounts for managing directors/directors and named executive officers
and all managing directors/directors and officers as a group include shares
held by immediate family members.
(3) The following is a list of directors and officers of Statia Terminals
Group N.V. ("STGNV") and Statia Terminals, Inc. ("STI"). Mr. Cameron is
a director of STGNV and a director and Chairman of the Board and
President of STI. Messrs. Castle, Holloway, Jungers, Pittaway,
Spicehandler, Voges, and Wender are each directors of STGNV. Mr.
Thompson is the Vice President of STGNV and a director and Executive
Vice President of STI. Mr. Russo is the Vice President of STGNV and a
director and Senior Vice President of STI. Mr. Brenner is the Vice
President and Treasurer of STGNV and the Vice President--Finance,
Treasurer and Assistant Secretary of STI. Mr.
47
<PAGE>
Pine is the Secretary of
STGNV and Senior Vice President, General Counsel and Secretary of STI.
Mr. Franklin is the Vice President--Marine Fuel Marketing of STI.
(4) A majority of the voting securities of Statia Terminals Holdings N.V.
is owned by Castle Harlan Partners II L.P. and certain of its
affiliates. Mr. Castle is the controlling stockholder 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. or 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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AGREEMENT
As part of the acquisition by Castle Harlan Partners II L.P., the
Parent entered into a management agreement with Castle Harlan, Inc. providing
for the payment to Castle Harlan, Inc., subject to certain conditions, of an
annual management fee of $1.35 million, plus expenses, for advisory and
strategic planning services. In the event the net proceeds from any sale of the
M/V STATIA RESPONDER exceeded a specified threshold, Castle Harlan, Inc. would
have been 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 expenses are excepted from the limitation on restricted
payments so long as no default or event of default exists. During the years
ended December 31, 1997 and 1998, Statia Terminals International paid dividends
to the Parent of $2.7 million and $1.5 million, respectively, related to this
agreement. No such dividend was paid in 1999. This management agreement was
amended and restated at the closing of the Parent's initial public offering of
equity to eliminate the $1.35 million management fee, but continues to provide
for reimbursement of ordinary and necessary expenses and a continuing indemnity
for the period up to the termination date of November 27, 2006 and any extension
thereto.
CONSULTING AGREEMENT
Four of the Parent's directors, Adm. 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.
BOARD OF DIRECTORS
Some employees of Castle Harlan and a member of our management are
directors of the Parent. Our managing directors/directors, executive officers
and certain of our employees control all of the Parent's outstanding Class B
subordinated shares and Class incentive rights through their ownership of Statia
Terminals Holdings N.V.
48
<PAGE>
LOANS TO MANAGEMENT
On November 27, 1996, Messrs. Cameron, Thompson, Russo, Pine, Franklin,
Brenner, Brown, Crissman 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 bore interest at 6.49% annually and were due on the
earlier of (1) November 26, 2003, (2) the sale of the pledged stock, or (3) a
"change in control," as defined in the loan agreement. In April 1999 and in
conjunction with the Parent's initial public offering of equity, these loans
were replaced with new loans aggregating $1.5 million and bearing interest at
5.17%. The maturity of the new loans is the earlier of (1) April 28, 2009, or
(2) the sale of the pledged stock.
49
<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 and Statia
Terminals Canada, Incorporated and its subsidiary are filed in
response to Item 8 of this Report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
STATIA TERMINALS INTERNATIONAL N.V.
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets
as of December 31, 1998 and 1999 F-3
Consolidated Statements of Income (Loss)
for the years ended December 31, 1997, 1998 and 1999 F-4
Consolidated Statements of Stockholder's Equity
for the years ended December 31, 1997, 1998 and 1999 F-5
Consolidated Statements of Cash Flows
for the years ended December 31, 1997, 1998 and 1999 F-6
Notes to the consolidated financial statements F-7
STATIA TERMINALS CANADA, INCORPORATED
Report of Independent Certified Public Accountants F-24
Consolidated Balance Sheets
as of December 31, 1998 and 1999 F-25
Consolidated Statements of Income (Loss) and Retained Earnings (Deficit)
for the years ended December 31, 1997, 1998 and 1999 F-26
Consolidated Statements of Cash Flows
for the years ended December 31, 1997, 1998 and 1999 F-27
Notes to the consolidated financial statements F-28
</TABLE>
2. Financial Statement Schedules
See note 15 to the consolidated financial statements of Statia
Terminals International N.V. for the 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
During the quarter ended December 31, 1999, the Parent filed a
Form 8-K dated December 10, 1999. Such Form 8-K contained two
of the Parent's previously issued press releases entitled
STATIA TERMINALS PROVIDES ADDITIONAL INFORMATION ON EFFECTS OF
HURRICANE LENNY and STATIA TERMINALS ANNOUNCES STOCK PURCHASE
PROGRAM AND COMMENTS ON ANTICIPATED FOURTH QUARTER AVAILABLE
CASH AND FUTURE DISTRIBUTIONS.
50
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
TOGETHER WITH
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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 (the "Company") as of December 31, 1998 and 1999, and the related
consolidated statements of income (loss), stockholder's equity and cash flows
for the years ended December 31, 1997, 1998 and 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 1998 and 1999, and the results of its consolidated
operations and its cash flows for the years ended December 31, 1997, 1998 and
1999, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
West Palm Beach, Florida
January 26, 2000.
F-2
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31,
----------------------------
1998 1999
ASSETS ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 13,873 $ 3,632
Accounts receivable-
Trade, less allowance for doubtful accounts of
$785 and $804 in 1998 and 1999, respectively 7,562 12,957
Other 2,328 3,704
Inventory, net 4,528 3,239
Prepaid expenses 172 1,723
----------- -----------
Total current assets 28,463 25,255
PROPERTY AND EQUIPMENT, net 209,970 206,031
OTHER NONCURRENT ASSETS, net 4,745 2,985
----------- -----------
Total assets $ 243,178 $ 234,271
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,012 $ 14,098
Dividend payable to Parent - 3,750
Accrued interest payable 2,027 1,516
Other accrued expenses 8,439 6,219
----------- -----------
Total current liabilities 19,478 25,583
LONG-TERM DEBT- 11-3/4% FIRST MORTGAGE NOTES 135,000 101,000
----------- -----------
Total liabilities 154,478 126,583
STOCKHOLDER'S EQUITY:
Common stock, $1 par value, 30,000 shares authorized, 6,000 and 6,100 shares
issued and outstanding at December 31, 1998 and
1999, respectively 6 6
Additional paid-in capital 92,344 126,090
Accumulated deficit (3,650) (18,408)
----------- -----------
Total stockholder's equity 88,700 107,688
----------- -----------
Total liabilities and stockholder's equity $ 243,178 $ 234,271
=========== ===========
</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)
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $ 142,499 $ 136,762 $ 168,343
COST OF SERVICES AND PRODUCTS SOLD 122,944 105,888 137,665
----------- ----------- -----------
Gross profit 19,555 30,874 30,678
ADMINISTRATIVE EXPENSES 6,348 7,315 8,039
SPECIAL COMPENSATION EXPENSE - - 4,099
HURRICANE CHARGES - 800 1,750
----------- ----------- -----------
Operating income 13,207 22,759 16,790
LOSS (GAIN) ON DISPOSITION OF PROPERTY AND
EQUIPMENT (109) 1,652 -
INTEREST EXPENSE 16,874 16,851 14,286
INTEREST INCOME 459 588 759
----------- ----------- -----------
Income (loss) before provision for income taxes and
extraordinary charge (3,099) 4,844 3,263
PROVISION FOR INCOME TAXES 780 320 780
----------- ----------- -----------
Income (loss) before extraordinary charge (3,879) 4,524 2,483
EXTRAORDINARY CHARGE RELATED TO EARLY
EXTINGUISHMENT OF DEBT - - 4,743
----------- ----------- -----------
Net income (loss) available to common stockholder $ (3,879) $ 4,524 $ (2,260)
============ =========== ============
</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>
BALANCE, December 31, 1996 6,000 $ 6 $ 78,494 $ (95) $ 78,405
Net loss to common stockholder - - - (3,879) (3,879)
Common stock dividends - - - (2,700) (2,700)
-------- ------ --------- ----------- ------------
BALANCE, December 31, 1997 6,000 6 78,494 (6,674) 71,826
Net income 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
Net loss to common stockholder - - - (2,260) (2,260)
Issuance of common stock to Parent 100 - 33,746 - 33,746
Common stock dividends - - - (12,498) (12,498)
-------- ------ --------- ----------- ------------
BALANCE, December 31, 1999 6,100 $ 6 $ 126,090 $ (18,408) $ 107,688
======= ====== =========== =========== ===========
</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)
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1997 1998 1999
--------- --------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) available to common stockholder $ (3,879) $ 4,524 $ (2,260)
Adjustments to reconcile net income (loss) available to common
stockholder to net cash provided by operating activities:
Depreciation, amortization, and certain non-cash charges 10,911 12,060 11,532
Provision for bad debts 11 72 20
Extraordinary charge on early extinguishment of debt - - 4,743
Hurricane charges - 800 1,750
Non-cash special compensation expense - - 2,152
Loss (gain) on disposition of property and equipment (109) 1,652 -
(Increase) decrease in accounts receivable - trade 2,060 2,458 (5,415)
(Increase) decrease in other accounts receivables 747 19 (1,376)
(Increase) decrease in inventory 3,722 (3,281) 1,289
(Increase) decrease in prepaid expense 769 97 (1,551)
(Increase) decrease in other noncurrent assets (134) 4 (70)
Increase (decrease) in accounts payable (2,195) 1,555 2,683
Increase (decrease) in accrued expenses 493 (97) (2,729)
Increase (decrease) in payable to affiliates 58 (331) 252
--------- --------- ----------
Net cash provided by operating activities 12,454 19,532 11,020
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,344) (10,714) (8,593)
Proceeds from sale of property and equipment 112 122 15
Proceeds from sale of Statia Terminals Southwest, Inc. - 6,500 -
Accrued transaction costs and purchase price adjustments (7,703) - -
--------- --------- ----------
Net cash used in investing activities (12,935) (4,092) (8,578)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock to Parent - - 33,746
Repurchase of First Mortgage Notes - - (37,681)
Dividends paid to Parent (2,700) (1,500) (8,748)
Payment to Parent - (6,150) -
Borrowings under revolving credit facility - - 3,403
Repayments of revolving credit facility - - (3,403)
--------- --------- ----------
Net cash used in financing activities (2,700) (7,650) (12,683)
--------- --------- ----------
Increase (decrease) in cash and cash equivalents (3,181) 7,790 (10,241)
CASH AND CASH EQUIVALENTS, at beginning of year 9,264 6,083 13,873
--------- --------- ----------
CASH AND CASH EQUIVALENTS, at end of year $ 6,083 $ 13,873 $ 3,632
========= ========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for taxes $ 513 $ 369 $ 677
========= ========= ==========
Cash paid for interest $ 15,334 $ 15,940 $ 14,012
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
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 near 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 the supplying of
bunkering, crude oil and petroleum product blending and processing, emergency
and spill response, brokering of product trades and ship services. 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: 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, "Statia Canada") and Statia Terminals Southwest, Inc.
(incorporated in Texas, the "Brownsville Facility") which was sold in July 1998
(see Note 12). 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"). 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"). 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 5 and from the sale
of the Company's common stock.
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. 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.
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, CBI became a wholly owned subsidiary
of Praxair.
As further discussed in Note 3, on April 28, 1999, the Parent completed
its initial public offering of equity.
F-7
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
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.
In December 1999, the U.S. Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin 101, "Revenue Recognition" ("SAB 101"), which
provides guidance on the recognition, presentation, and disclosure of revenue in
financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provides guidance for disclosure
related to revenue recognition policies. The Company believes its revenue
recognition practices are in conformity with the guidelines prescribed in SAB
101.
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 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-8
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(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'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. The Company measures an asset impairment loss as
the amount by which the carrying amount exceeds the fair market value of the
asset.
OTHER NONCURRENT ASSETS
Other noncurrent assets primarily consist of deferred financing costs
in the amounts of $4,521 and $2,701 as of December 31, 1998 and 1999,
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, $911 and $767 for the years ended
December 31, 1997, 1998 and 1999, respectively.
F-9
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
INCOME TAXES
The Company determines its 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"). SFAS No. 130
establishes standards for the reporting and display of comprehensive income and
its components in the financial statements. 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
The Company discloses information regarding its operating segments
pursuant to SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS No. 131"). 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.
RECLASSIFICATIONS
Certain reclassifications were made to the 1997 and 1998 financial
statements in order to conform to the 1999 presentation.
3. SALE OF COMMON STOCK TO PARENT AND RELATED TRANSACTIONS
On April 28, 1999, the Parent completed its initial public equity
offering of 7.6 million Class A common shares. The offering price was $20 per
share raising gross proceeds of $152,000. A portion of the proceeds was used by
the Parent to purchase additional capital stock of Statia amounting to $33,746,
net of expenses. During May 1999, the Company used the proceeds from the sale of
Statia's capital stock, along with existing cash, to repurchase in the open
market a principal amount of $34,000 of the Notes for $39,522, including
acquisition costs and accrued interest of $3,681 and $1,841, respectively.
During the second quarter of 1999, the acquisition costs and the unamortized
deferred financing costs related to the repurchased Notes ($1,062) were recorded
as an extraordinary charge. There was no income tax effect associated with this
extraordinary charge.
F-10
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
During the three months ended March 31, 1999, the Company recorded as
special compensation expense a bonus in the amount of $1,947 for particular
members of the Company's management. The purpose of this special management
bonus was to partially reimburse these individuals with respect to adverse tax
consequences that resulted from the offering and other past compensation
arrangements.
In connection with the Parent's initial public offering of equity,
certain options previously granted to some of the Company's employees to
purchase the Parent's common stock became fully vested, were exercised and
became subordinated shares of the Parent. The Parent was amortizing the
difference between the estimated fair value of the options at the date of grant
and the exercise price over the vesting period of five years and charging such
amounts to the Company as compensation expense. On April 28, 1999, the remaining
unamortized compensation expense associated with these options of $2,152 was
recorded as a non-cash special compensation expense.
The following unaudited pro forma consolidated results of operations
for the years December 31, 1997, 1998 and 1999 were prepared to illustrate the
estimated effects of:
o the disposition of Statia Terminals Southwest, Inc. discussed
in Note 12, and
o the use of the net proceeds from the Parent's initial public
offering of equity and the restructuring as described in the
Parent's Registration Statement on Form S-1,
(collectively, the "pro forma transactions") as if the pro forma transactions
had occurred at the beginning of each of these respective periods. This pro
forma financial information is provided for informational purposes only and does
not purport to be indicative of the results of operations which would have been
obtained had the pro forma transactions been completed on the dates indicated or
results of operations for any future date or period.
<TABLE>
<CAPTION>
Unaudited Selected Pro forma
Consolidated Results
For the Years Ended December 31,
------------------------------------------
1997 1998 1999
------------- ------------- --------------
<S> <C> <C> <C>
Revenues $ 140,628 $ 135,149 $ 168,343
============= ============= ==============
Operating income $ 14,512 $ 22,820 $ 20,889
============= ============= ==============
Net income available to common stockholder $ 1,676 $ 10,468 $ 8,049
============= ============= ==============
</TABLE>
F-11
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31:
<TABLE>
<CAPTION>
Useful
Lives
1998 1999 In Years
---------- ---------- --------
<S> <C> <C> <C>
Land $ 1,291 $ 1,291
Land improvements 7,679 6,872 5 - 20
Buildings and improvements 3,303 3,446 20 - 40
Plant machinery and terminals 156,261 159,822 4 - 40
Mooring facilities and marine equipment 50,453 51,701 4 - 40
Field and office equipment 2,497 4,068 3 - 15
Spare parts and hoses 2,908 2,687
Capital projects in process 5,395 6,501
---------- ----------
Total property and equipment, at cost $ 229,787 $ 236,388
Less accumulated depreciation 19,817 30,357
---------- -----------
Property and equipment, net $ 209,970 $ 206,031
========== ==========
</TABLE>
5. DEBT
The 11 3/4% First Mortgage Notes due November 15, 2003 (the "Notes")
were issued by Statia and one of its subsidiaries, Statia Canada, (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 redemption prices listed below (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. The Company may also forego the
redemption process and repurchase Notes in the open market on or after November
15, 2000.
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 were allowed to redeem or repurchase up to 35% of the
aggregate principal amount of the Notes with the proceeds of one or more equity
offerings, plus accrued and unpaid interest, if any, to the date of redemption
or repurchase, provided that after giving effect to such redemption or
repurchase, at least 65% of the aggregate principal amount of the Notes would
remain outstanding. As further discussed in
F-12
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
Note 3, during May 1999 and in connection with the Parent's initial public
offering of equity, the Company repurchased in the open market a principal
amount of $34,000 of the Notes.
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 to 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 and certain management fees as discussed in
Note 12 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 Company is in compliance with the financial
covenants set forth in the Indenture. The Company has not met the minimum
consolidated fixed charge coverage ratio for certain periods which would have
prevented the Company from making additional borrowings above the revolving
credit facility discussed below.
The Company has a revolving credit facility (the "Credit Facility")
which allows certain of the Company's subsidiaries 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%
(9.0% at December 31, 1999). 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, 2000. At December 31, 1998 and 1999, the Company had approximately
$7,982 and $10,603, respectively, available for borrowing under the Credit
Facility as limited by the borrowing base computation and had no outstanding
balance.
6. LEASES
The Company charters certain marine equipment and rents facilities
under cancelable and noncancelable operating leases. Rental expense on operating
leases was $3,763, $3,409 and $3,619 for the years ended December 31, 1997, 1998
and 1999, respectively. Future rental commitments during the years ending 2000
through 2004 are $2,351, $3,225, $3,211, $2,473 and $829, respectively.
F-13
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
7. STOCKHOLDER'S EQUITY
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 10, among other things. During the year ended December 31, 1999, the
Company declared dividends to the Parent of $12,498 of which $3,750 remained
payable at December 31, 1999 and was subsequently paid.
8. INCOME TAXES
The sources of income (loss) by jurisdiction before the provision for
income taxes and extraordinary charge are:
For the Years Ended December 31,
-----------------------------------------
1997 1998 1999
------------- ------------- -------------
U.S. $ (1,823) $ (362) $ 41
Non-U.S. (1,276) 5,206 3,222
------------- ------------- -------------
$ (3,099) $ 4,844 $ 3,263
============= ============= =============
The provision for income taxes consisted of:
For the Years Ended December 31,
-----------------------------------------
1997 1998 1999
------------- ------------- -------------
Current:
U.S. $ (128) $ - $ 123
State (42) - -
Non-U.S. (610) (320) (903)
-------------- ------------- -------------
Total provision $ (780) $ (320) $ (780)
============== ============= =============
A reconciliation of income taxes at the U.S. statutory rate of 35% to
the Company's provision for income taxes is as follows:
For the Years Ended December 31,
------------------------------------------
1997 1998 1999
-------------- ------------- -------------
Income (loss) before income
taxes and extraordinary charge $ (3,099) $ 4,844 $ 3,263
-------------- ------------- -------------
Tax (provision) benefit at
U.S. statutory rate 1,085 (1,695) (1,142)
State income taxes (14) - -
Non-U.S. tax rate differential
and losses without tax benefit (1,851) 1,375 362
-------------- ------------- -------------
$ (780) $ (320) $ (780)
============== ============= =============
F-14
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
The principal temporary differences included on the balance sheets, as
of December 31, are:
1998 1999
------------- -------------
Net operating loss and ITC carryforwards $ 28,080 $ 26,146
Valuation allowance (28,080) (26,146)
------------- -------------
$ - $ -
============= =============
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 has benefited from investment tax credit carryforwards and net operating
tax losses which expire in various amounts through 2003 and 2005, respectively.
The net operating tax loss carryforwards available to offset Canadian taxable
income at December 31, 1998 and 1999 were $55,097 and $50,891, respectively. The
investment tax credit carryforward available to reduce Canadian income taxes was
$7,302 and $7,211 at December 31, 1998 and 1999, respectively.
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. Currently, the subsidiary is renegotiating a new agreement with the
governments of the Netherlands Antilles and St. Eustatius that is expected to be
effective retroactively 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, $28 and $48 of profit tax is included in the Netherlands Antilles tax
provision for the years ended December 31, 1997, 1998 and 1999, respectively.
F-15
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
9. 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 $3,906 during the period from November 27, 1996 to December
31, 1999 related to such costs. Based on investigations conducted and
information available to date, the potential cost of additional remediation and
compliance is estimated at $13,000, substantially all of which the Company
believes is the responsibility of Praxair per the Castle Harlan Acquisition
agreement. The Company believes that environmental, health and safety costs will
not have a material adverse effect on the Company's financial position, cash
flows or results of operations, subject to reimbursements from Praxair.
The Company has also identified certain other environmental, health and
safety costs not covered by the agreement with Praxair for which $1,500 were
accrued in 1996 in conjunction with the Castle Harlan Acquisition. Through
December 31, 1999, $32 of this amount had been expended. Management periodically
reviews the adequacy of this accrual and during 1999 determined $250 originally
provided for environmental contingencies at the Company's St. Eustatius facility
were no longer necessary. Accordingly, this portion of the accrual was
eliminated and credited to costs of services and products sold.
LITIGATION
The Company is involved in various 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
business, financial condition or results of operations.
ACCRUED EXPENSES
A summary of accrued expenses consists of the following as of December 31:
1998 1999
--------- ----------
Personnel and related costs $ 2,835 $ 2,061
Professional fees 1,175 792
Environmental expenses 1,490 1,208
Accrued taxes 1,412 1,493
Other 1,527 665
--------- ----------
$ 8,439 $ 6,219
========= =========
F-16
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
10. CASTLE HARLAN MANAGEMENT FEE
In November 1996, 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 services. This management fee
agreement was amended and restated at the closing of the Parent's initial public
offering of equity to eliminate the $1,350 management fee, but continues to
provide for reimbursement of ordinary and necessary expenses and a continuing
indemnity for the period up to the termination date of November 27, 2006 and any
extension thereto.
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. SEGMENT INFORMATION
The Company is organized around several different factors, the two most
significant of which are services and products and geographic location. The
Company's primary services and products are terminaling services (resulting in
revenue from storage, throughput, dock usage, emergency response and other
terminal services) and product sales.
The primary measures of profit and loss utilized by the Company's
management to make decisions about resources to be allocated to each segment are
earnings before interest expense, interest income, income taxes, depreciation,
amortization, and certain non-recurring income and expenses ("Adjusted EBITDA")
and earnings before interest expense, interest income, income taxes and certain
non-recurring income and expenses ("Adjusted EBIT").
F-17
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
The following information is provided for the Company's terminaling
services and product sales segments:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Terminaling services $ 53,165 $ 66,625 $ 61,665
Product sales 89,334 70,137 106,678
------------- ------------- -------------
Total $ 142,499 $ 136,762 $ 168,343
============= ============= =============
ADJUSTED EBITDA:
Terminaling services $ 21,076 $ 31,692 $ 29,131
Product sales 2,699 2,965 5,066
------------- ------------- -------------
Total $ 23,775 $ 34,657 $ 34,197
============= ============= =============
DEPRECIATION AND AMORTIZATION EXPENSE:
Terminaling services $ 10,093 $ 10,923 $ 10,995
Product sales 818 498 572
------------- ------------- -------------
Total $ 10,911 $ 11,421 $ 11,567
============= ============= =============
ADJUSTED EBIT:
Terminaling services $ 10,983 $ 20,769 $ 18,136
Product sales 1,881 2,467 4,494
------------- ------------- -------------
Total $ 12,864 $ 23,236 $ 22,630
============= ============= =============
CAPITAL EXPENDITURES:
Terminaling services $ 4,735 $ 8,274 $ 7,572
Product sales 58 1,212 161
Other unallocated 551 1,228 860
------------- ------------- -------------
Total $ 5,344 $ 10,714 $ 8,593
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
ASSETS:
Terminaling services $ 208,642 $ 203,781
Product sales 12,058 16,618
Unallocated assets 22,478 13,872
----------- -----------
Total assets $ 243,178 $ 234,271
=========== ===========
</TABLE>
F-18
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
A reconciliation of Adjusted EBIT to the Company's income (loss) before
provision for income taxes and extraordinary charge is as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31.
-----------------------------------------
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Adjusted EBIT $ 12,864 $ 23,236 $ 22,630
Interest expense excluding debt cost amortization expense (15,963) (15,940) (13,518)
Special compensation expense - - (4,099)
Hurricane charges - (800) (1,750)
Loss on sale of Statia Terminals Southwest, Inc. - (1,652) -
------------- ------------- -------------
Income (loss) before provision for income taxes and
extraordinary charge $ (3,099) $ 4,844 $ 3,263
============= ============= =============
</TABLE>
The following information is provided with respect to the geographic
operations of the Company:
<TABLE>
<CAPTION>
For the Years Ended December 31.
------------------------------------------
1997 1998 1999
-------------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Caribbean $ 122,042 $ 114,091 $ 149,852
Canada 18,586 21,058 18,491
United States 1,871 1,613 -
------------- -------------- -------------
Total revenues $ 142,499 $ 136,762 $ 168,343
============= ============== =============
</TABLE>
<TABLE>
<CAPTION>
December 31,
----------------------------
1998 1999
-------------- -------------
<S> <C> <C>
LONG-TERM ASSETS:
Caribbean $ 183,873 $ 176,895
Canada 29,170 29,522
United States 1,672 2,599
-------------- -------------
$ 214,715 $ 209,016
============== =============
</TABLE>
F-19
<PAGE>
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 2003 and 2004, respectively. The Company
also derives revenues from affiliates of Bolanter and Tosco as an indirect
result of these storage and throughput agreements. The Company 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 an 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>
For the Years Ended December 31,
------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Saudi Aramco related revenues:
Storage and throughput contract and related indirect revenues 7.0% 7.4% 6.1%
Unaffiliated third parties 6.4% 7.7% 6.4%
Bunker sales 2.1% 1.5% 2.3%
----------- ----------- ------------
Total 15.5% 16.6% 14.8%
=========== =========== ============
Tosco related revenues:
Storage and throughput contract and related indirect revenues 6.9% 7.1% 5.1%
Unaffiliated third parties 3.9% 1.9% 0.9%
Bunker sales 0.1% 0.0% 0.0%
----------- ----------- ------------
Total 10.9% 9.0% 6.0%
=========== =========== ============
</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 and financial condition. 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.
No other customer accounted for more than 10% of the Company's total
revenues in 1997, 1998 or 1999.
F-20
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
12. 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. The
indemnification period lapsed with no liability to the Company. The net book
value of the assets and liabilities sold on July 29, 1998, was $7,802. The loss
on the sale 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. During 1998,
a restricted payment of $6,150 representing the net proceeds from the sale of
Southwest was made to the Parent.
13. RETIREMENT PLANS
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 $10 for the 1999 calendar year. The
Company currently matches at a 50% rate up to 8% of an employee's base salary,
and the employer may contribute, on a discretionary basis, up to 1% of an
employee's base salary per quarter. Amounts charged to expense for matching and
discretionary contributions for the year ended December 31, 1998 were $136 and
$178, respectively. Amounts charged to expense for matching and discretionary
contributions for the year ended December 31, 1999 were $141 and $173,
respectively. In addition, the Company sponsors certain pension plans for
certain employees residing in the Netherlands Antilles and Canada.
14. HURRICANE CHARGES
As a result of damages sustained to the Company's St. Eustatius
facility from Hurricane Lenny in late November 1999, the Company incurred a
one-time, non-cash charge of $1,500 to partially reduce the carrying value of
its shoreline protection system and a one-time cash charge of $250 to cover
other hurricane related expenses. The damaged shoreline protection system was
not covered by insurance and, together with certain other civil work, is
expected to be replaced during the first half of 2000.
During September 1998, Hurricane Georges damaged components of the
Company's St. Eustatius facility. However, operations were not significantly
impacted by the hurricane and returned to normal within days of the storm.
During 1998, the Company recorded a charge of $800 representing an insurance
deductible of $500 related to the hurricane damage and certain other costs
resulting from the hurricane which will not be recovered through the Company's
insurance policies.
F-21
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
15. VALUATION AND QUALIFYING ACCOUNTS
The table below summarizes the activity in the valuation account,
allowance for possible uncollectible accounts receivable and the deferred tax
asset valuation allowance for the periods indicated.
<TABLE>
<CAPTION>
Balance, Charges Deductions, Balance,
Beginning to Write-offs, End of
Of Period Expense Net Period
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Trade Accounts Receivable Valuation Account:
For the year ended December 31, 1997 $ 769 $ 11 $ 50 $ 830
For the year ended December 31, 1998 830 72 (117) 785
For the year ended December 31, 1999 785 20 (1) 804
Deferred Tax Asset Valuation Allowance:
For the year ended December 31, 1997 $ 31,548 $ - $ (1,866) $ 29,682
For the year ended December 31, 1998 29,682 371 (1,973) 28,080
For the year ended December 31, 1999 28,080 - (1,934) 26,146
</TABLE>
F-22
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
TOGETHER WITH
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
F-23
<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, 1998 and 1999, and the related consolidated
statements of income (loss) and retained earnings (deficit) and cash flows for
the years ended December 31, 1997, 1998 and 1999. 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, 1998 and 1999,
and the results of its consolidated operations and its cash flows for the years
ended December 31, 1997, 1998 and 1999 in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
West Palm Beach, Florida
January 26, 2000.
F-24
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1999
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,409 $ 209
Accounts receivable-
Trade, less allowance for doubtful accounts of $62 and $78
in 1998 and 1999, respectively 903 1,496
Other 1,340 1,960
Inventory, net 323 81
Prepaid expenses 54 255
Receivable from affiliates 2,305 2,986
--------- ---------
Total current assets 9,334 6,987
PROPERTY AND EQUIPMENT, net 28,192 28,705
OTHER NONCURRENT ASSETS, net 979 817
--------- ---------
Total assets $ 38,505 $ 36,509
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,141 $ 1,166
Accrued interest payable 421 421
Other accrued expenses 2,422 1,577
--------- ---------
Total current liabilities 4,984 3,164
LONG-TERM DEBT 28,060 28,060
--------- ---------
Total liabilities 33,044 31,224
STOCKHOLDER'S EQUITY:
Common stock, no par value, 1,000,000 shares authorized,
1 share issued and outstanding - -
Additional paid-in capital 2,266 2,266
Retained earnings 3,195 3,019
--------- ---------
Total stockholder's equity 5,461 5,285
--------- ---------
Total liabilities and stockholder's equity $ 38,505 $ 36,509
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
------------------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
REVENUES $ 18,892 $ 21,521 $ 18,547
COST OF SERVICES AND PRODUCTS SOLD 12,868 12,031 10,106
--------- --------- ---------
Gross profit 6,024 9,490 8,441
ADMINISTRATIVE EXPENSES 2,054 2,775 5,102
--------- --------- ---------
Operating income 3,970 6,715 3,339
INTEREST EXPENSE 3,507 3,506 3,536
INTEREST INCOME 28 104 118
--------- --------- ---------
Income (loss) before provision for income taxes 491 3,313 (79)
PROVISION FOR INCOME TAXES 247 - 97
--------- --------- ---------
Net income (loss) available to common stockholder 244 3,313 (176)
RETAINED EARNINGS (DEFICIT),
beginning of year (362) (118) 3,195
--------- --------- ---------
RETAINED EARNINGS (DEFICIT),
end of year $ (118) $ 3,195 $ 3,019
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1997 1998 1999
-------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) available to common stockholder $ 244 $ 3,313 $ (176)
Adjustments to reconcile net income (loss) available to
common stockholder to net cash provided by (used
in) operating activities-
Depreciation and amortization 1,533 1,837 1,698
Provision for bad debts - - 15
Increase in accounts receivable - trade - (31) (608)
Increase in other accounts receivables (459) (251) (620)
Decrease in inventory 624 210 243
(Increase) decrease in prepaid expense 10 3 (201)
(Increase) decrease in other noncurrent assets 1 4 (29)
Increase (decrease) in accounts payable 90 1,363 (975)
Increase (decrease) in accrued expenses (99) 500 (848)
Increase (decrease) in payable to affiliates 288 (996) (681)
------- --------- ---------
Net cash provided by (used in) operating activities 2,232 5,952 (2,182)
------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (954) (1,305) (2,018)
Proceeds from sale of property and equipment - 118 -
Accrued transaction costs and purchase price adjustments (2,488) - -
------- --------- ---------
Net cash used in investing activities (3,442) (1,187) (2,018)
------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in advances from affiliates 1,597 (1,597) -
--------- --------- ---------
Net cash provided by (used in) financing activities 1,597 (1,597) -
--------- --------- ---------
Increase (decrease) in cash and cash equivalents 387 3,168 (4,200)
CASH AND CASH EQUIVALENTS, at beginning of year 854 1,241 4,409
--------- --------- ---------
CASH AND CASH EQUIVALENTS, at end of year $ 1,241 $ 4,409 $ 209
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for taxes $ 124 $ 65 $ 162
========= ========= =========
Cash paid for interest $ 3,187 $ 3,315 $ 3,345
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND OPERATIONS
The consolidated financial statements are presented in United States
dollars and include the accounts of Statia Terminals Canada, Incorporated
(incorporated in Nova Scotia, Canada, "Statia 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., (incorporated in the Netherlands Antilles, the
"Parent"). The Parent is a wholly owned subsidiary of Statia Terminals Group
N.V. (incorporated in the Netherlands Antilles, "Group"). Significant
intercompany balances and transactions have been eliminated.
The Company owns and operates 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 provides 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, 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") were subsidiaries 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.
On November 27, 1996 ("Inception"), the Parent acquired from Praxair
all of the outstanding capital stock of the Predecessor Company and certain of
its affiliates (the "Castle Harlan Acquisition"). The Parent was 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 to facilitate the Castle Harlan Acquisition. In connection
with the Castle Harlan Acquisition on November 27, 1996, Statia Terminals Point
Tupper, Inc. amalgamated with Statia Canada. The portion of the adjusted
purchase price paid to Praxair for the capital stock of the Company was $27,665.
The Castle Harlan Acquisition was paid for primarily with funds received by
Statia Canada from the issuance of the 11-3/4% First Mortgage Notes (the
"Notes") described in Note 4. The assets of Statia Canada are pledged as
collateral to secure these Notes. The Castle Harlan 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 Castle Harlan 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.
F-28
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
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.
In December 1999, the U.S. Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin 101, "Revenue Recognition" ("SAB 101"), which
provides guidance on the recognition, presentation, and disclosure of revenue in
financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provides guidance for disclosure
related to revenue recognition policies. The Company believes its revenue
recognition practices are in conformity with the guidelines prescribed in SAB
101.
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 transactions are denominated in U.S. dollars.
CASH AND CASH EQUIVALENTS
The Company's excess cash is invested in short-term, highly liquid
investments with maturities of three months or less. Such short-term investments
are carried at cost, which approximates market, and are classified as cash and
cash equivalents.
F-29
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(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'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. The Company measures an asset impairment loss as
the amount by which the carrying amount exceeds the fair market value of the
asset.
OTHER NONCURRENT ASSETS
Other noncurrent assets primarily consist of deferred financing costs
in the amounts of $937 and $746 as of December 31, 1998 and 1999, 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, 1998 and
1999, respectively.
F-30
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
INCOME TAXES
The Company determines its 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"). SFAS No. 130
establishes standards for the reporting and display of comprehensive income and
its components in the financial statements. 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
The Company discloses information regarding its operating segments
pursuant to SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS No. 131"). 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.
RECLASSIFICATIONS
Certain reclassifications were made to the 1997 and 1998 financial
statements in order to conform to the 1999 presentation.
F-31
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31:
<TABLE>
<CAPTION>
Useful Lives
1998 1999 In Years
-------- -------- ------------
<S> <C> <C> <C>
Land $ 247 $ 247
Land improvements 52 52 5 - 20
Buildings and improvements 89 120 20 - 40
Plant machinery and terminals 22,661 23,161 4 - 40
Mooring facilities and marine equipment 6,434 6,809 4 - 40
Field and office equipment 445 499 3 - 15
Spare parts 54 56
Capital projects in process 1,138 2,196
-------- --------
Total property and equipment, at cost 31,120 33,140
Less accumulated depreciation 2,928 4,435
-------- --------
Property and equipment, net $ 28,192 $ 28,705
======== ========
</TABLE>
4. DEBT
The 11 3/4% First Mortgage Notes (the "Notes") due November 15, 2003
were issued by the Parent and Statia Canada (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. Statia Canada may also forego the redemption process and repurchase
Notes in the open market on or after November 15, 2000.
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 were allowed to redeem or repurchase up to 35% of the
aggregate principal amount of the Notes with the proceeds of one or more equity
offerings, plus accrued and unpaid interest, if any, to the date of redemption
or repurchase, provided that after giving effect to such redemption or
repurchase, at least 65% of the aggregate principal amount of the Notes would
remain outstanding.
F-32
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(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 other
than Statia Canada, 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 to 1, which, if met, will permit Statia Canada 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, Statia Canada has no restrictions upon
transfers of funds in the form of dividends, loans or cash advances. The Issuers
are in compliance with the financial covenants set forth in the Indenture. The
Issuers have not met the minimum consolidated fixed charge coverage ratio for
certain periods which would have prevented the Company from making additional
borrowings above the revolving credit facility discussed below.
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% (9.0% at December 31,
1999). 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 the Parent's
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, 2000. At December 31, 1998 and 1999, the Company had approximately
$976 and $832, respectively, available for borrowing under the Credit Facility
as limited by the borrowing base computation and had no outstanding balance.
5. 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 investment
tax credit carryforwards and net operating tax losses which expire in various
amounts through 2003 and 2005, respectively. The net operating tax loss
carryforwards available to offset Canadian taxable income at December 31, 1998
and 1999 were $55,097 and $50,891, respectively. The investment tax credit
carryforward available to reduce Canadian income taxes was $7,302 and $7,211 at
December 31, 1998 and 1999, respectively. 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.
F-33
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
6. RELATED PARTY TRANSACTIONS
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 years ended December 31, 1997,
1998 and 1999, $2,054, $2,775 and $3,587, respectively, were incurred for these
services.
On April 28, 1999, Group completed its initial public equity offering
of 7.6 million Class A common shares. In connection with this transaction, the
Company was allocated $1,515 of administrative expenses.
7. COMMITMENT 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 $3,906 during the period from November 27, 1996
to December 31, 1999 related to such costs. Based on investigations conducted
and information available to date, the potential cost of additional remediation
and compliance is estimated at $13,000, substantially all of which the Company
believes is the responsibility of Praxair per the Castle Harlan Acquisition
agreement. The Company believes that environmental, health and safety costs will
not have a material adverse effect on the Company's financial position, cash
flows or results of operations, subject to reimbursements from Praxair.
The Company has also identified certain other environmental, health and
safety costs not covered by the agreement with Praxair for which $1,250 were
accrued in 1996 in conjunction with the Castle Harlan Acquisition. Through
December 31, 1999, $32 of this amount had been expended.
LITIGATION
The Company is involved in various 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.
F-34
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
OTHER ACCRUED EXPENSES
A summary of other accrued expenses consists of the following as of
December 31:
1998 1999
--------- ---------
Personnel and related costs $ 258 $ 79
Professional fees 264 104
Environmental expenses 1,240 1,208
Other 660 186
--------- ---------
$ 2,422 $ 1,577
========= =========
10. SEGMENT INFORMATION
The Company is organized around several different factors, the most
significant of which is services and products. The Company's primary services
and products are terminaling services (resulting in revenue from storage,
throughput, dock usage, emergency response and other terminal services) and
product sales.
The primary measures of profit and loss utilized by the Company's
management to make decisions about resources to be allocated to each segment are
earnings before interest expense, interest income, income taxes, depreciation,
amortization, and certain non-recurring income and expenses ("Adjusted EBITDA")
and earnings before interest expense, interest income, income taxes and certain
non-recurring income and expenses ("Adjusted EBIT").
F-35
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
The following information is provided for the Company's terminaling
services and product sales segments:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Terminaling services $ 15,566 $ 20,640 $ 18,300
Product sales 3,326 881 247
------------- ------------- -------------
Total $ 18,892 $ 21,521 $ 18,547
============= ============= =============
ADJUSTED EBITDA:
Terminaling services $ 5,195 $ 8,428 $ 6,564
Product sales 145 37 (85)
------------- ------------- -------------
Total $ 5,340 $ 8,465 $ 6,479
============= ============= =============
DEPRECIATION AND AMORTIZATION EXPENSE:
Terminaling services $ 1,514 $ 1,819 $ 1,678
Product sales 19 18 20
------------- ------------- -------------
Total $ 1,533 $ 1,837 $ 1,698
============= ============= =============
ADJUSTED EBIT:
Terminaling services $ 3,681 $ 6,609 $ 4,886
Product sales 126 19 (105)
------------- ------------- -------------
Total $ 3,807 $ 6,628 $ 4,781
============= ============= =============
CAPITAL EXPENDITURES:
Terminaling services $ 954 $ 1,305 $ 2,018
Product sales - - -
------------- ------------- -------------
Total $ 954 $ 1,305 $ 2,018
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
ASSETS:
Terminaling services $ 29,095 $ 30,201
Product sales 323 81
Unallocated assets 9,087 6,227
----------- -----------
Total assets $ 38,505 $ 36,509
=========== ===========
</TABLE>
A reconciliation of Adjusted EBIT to the Company's income (loss) before
provision for income taxes is as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Adjusted EBIT $ 3,807 $ 6,628 $ 4,781
Interest expense excluding debt cost amortization expense (3,316) (3,315) (3,345)
Unallocated administrative expense - - (1,515)
------------- ------------- -------------
Income (loss) before provision for income taxes $ 491 $ 3,313 $ (79)
============= ============= =============
</TABLE>
F-36
<PAGE>
STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(CONTINUED)
SIGNIFICANT CUSTOMERS
The Company presently has a long-term storage and throughput contract
with a subsidiary of Tosco Corporation which expires in 2004. The Company also
derives revenues from an affiliate of Tosco as an indirect result of this
storage and throughput agreement. The Company derives revenues from parties
unaffiliated with Tosco, because of the movement of Tosco products through the
Company's terminal.
The following table sets forth such revenues as a percentage of our
total revenue.
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Storage and throughput contract and related indirect revenues 52.1% 45.2% 46.0%
Unaffiliated third parties 29.3% 12.0% 8.5%
Bunker sales 0.6% 0.0% 0.0%
----------- ----------- ------------
Total 82.0% 57.2% 54.5%
=========== =========== ============
</TABLE>
During the year ended December 31, 1999, two other customers accounted
for 15.2% and 13.0% of the Company's total revenues, respectively. No other
customer accounted for more than 10% of the Company's total revenues in 1997,
1998 or 1999.
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 non-renewal/replacement or loss could have
a material adverse effect on the Company's business or financial condition. 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.
F-37
<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.
By: /S/ JAMES G. CAMERON
--------------------
James G. Cameron
Managing Director
March 31, 2000
By: /S/ JAMES F. BRENNER
--------------------
James F. Brenner
Vice President and Treasurer
March 31, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /S/ JAMES G. CAMERON
--------------------
James G. Cameron
Managing Director
(Principal Executive Officer)
March 31, 2000
By: /S/ JOHN K. CASTLE
------------------
John K. Castle
Managing Director
March 31, 2000
By: /S/ DAVID B. PITTAWAY
---------------------
David B. Pittaway
Managing Director
March 31, 2000
By: /S/ JUSTIN B. WENDER
--------------------
Justin B. Wender
Managing Director
March 31, 2000
By: /S/ JAMES F. BRENNER
--------------------
James F. Brenner
Vice President and Treasurer
(Principal Financial and Accounting Officer)
March 31, 2000
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
By: /S/ PAUL R. CRISSMAN
--------------------
Paul R. Crissman
Director and President
March 31, 2000
By: /S/ JAMES F. BRENNER
--------------------
James F. Brenner
Vice President-Finance
March 31, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /S/ PAUL R. CRISSMAN
--------------------
Paul R. Crissman
Director and President
(Principal Executive Officer)
March 31, 2000
By: /S/ CLARENCE W. BROWN
---------------------
Clarence W. Brown
Director
March 31, 2000
By: /S/ JAMES G. CAMERON
--------------------
James G. Cameron
Director
March 31, 2000
By: /S/ JAMES F. BRENNER
--------------------
James F. Brenner
Vice President-Finance
(Principal Financial and Accounting Officer)
March 31, 2000
S-2
<PAGE>
EXHIBITS INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.1** Articles of incorporation of 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 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.
4.1d******* Fourth Amendment of Indenture and Consent Under Securities Pledge Agreement, dated April 26, 1999.
4.2** Form of Guarantee of shares issued pursuant to the Indenture (included in Exhibit 4.1 hereto).
4.3******** Guarantee issued pursuant to the Indenture, dated as of June 28, 1999, made by Statia
Terminals Antilles N.V.
4.4** Share Pledge Agreement, dated as of November 27, 1996, by and between Statia Terminals
International N.V. and Marine Midland Bank.
4.5* 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.
4.6** Share Pledge Agreement, dated as of November 27, 1996, by and between Statia Terminals
N.V. and Marine Midland Bank.
</TABLE>
E-1
<PAGE>
<TABLE>
<S> <C>
4.7** Share Pledge Agreement, dated as of November 27, 1996, by and between Statia Terminals
Corporation N.V. and Marine Midland Bank.
4.8** Share Pledge Agreement, dated as of November 27, 1996, by and between Seven Seas Steamship
Company, Inc. and Marine Midland Bank.
4.9******** Share Pledge Agreement, dated as of June 28, 1999, by and among Statia Terminals Antilles
N.V., Statia Terminals Delaware, Inc. and HSBC Bank USA (formerly known as Marine Midland
Bank).
4.10******** Amendment to Share Pledge Agreement, dated as of June 28, 1999, by and between Statia
Terminals International N.V. and HSBC Bank USA (formerly known as 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.
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.
4.20* Form of Registration Rights Agreement between Statia Terminals Group N.V. and Statia
Terminals Holdings N.V.
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.
</TABLE>
E-2
<PAGE>
<TABLE>
<S> <C>
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.
10.4** Storage and Throughput Agreement, dated as of August 20, 1993.Amendment, dated as of
October 1999 to the Storage and Throughput Agreement.
10.4a+ Amendment, dated as of October 1999 to the Storage and Throughput Agreement.
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.
10.6******* Amended and restated Employment Agreement, effective April 28, 1999, between Statia
Terminals Group N.V., Statia Terminals, Inc. and James G. Cameron.
10.7******* Amended and restated Employment Agreement, effective April 28, 1999, between Statia
Terminals Group N.V., Statia Terminals, Inc. and Thomas M. Thompson, Jr.
10.8******* Amended and restated Employment Agreement, effective April 28, 1999, between Statia
Terminals Group N.V., Statia Terminals, Inc. and Robert R. Russo.
10.9******* Amended and restated Employment Agreement, effective April 28, 1999, between Statia
Terminals Group N.V., Statia Terminals, Inc. and John D. Franklin.
10.10******* Amended and restated Employment Agreement, effective April 28, 1999, between Statia
Terminals Group N.V., Statia Terminals, Inc. and James F. Brenner.
10.11******* Amended and restated Employment Agreement, effective April 28, 1999, 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, Incorporated and Point Tupper Marine
Services Limited.
10.14**** 1997 Stock Option Plan with Award Agreements.
10.15* Form of 1999 Share Option Plan. Subsidiaries of the Registrant.
21.1 Subsidiaries of the Registrants (for electronic filing only).
27.1 Financial Data Schedule for Statia Terminals International N.V. (for electronic filing
only).
27.1 Financial Data Schedule for Statia Terminals Canada, Incorporated (for electronic filing
only).
</TABLE>
* Incorporated by reference to our Registration Statement on Form S-1,
dated February 12, 1999, and amendments thereto filed with the U.S.
Securities and Exchange Commission (Registration Statement No.
333-72317), which became effective on April 26, 1999.
** Incorporated by reference to the Registration Statement of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated
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 of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated,
dated May 13, 1997.
E-3
<PAGE>
**** Incorporated by reference to the December 31, 1997 Form 10-K of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated,
dated March 31, 1998.
***** Incorporated by reference to the December 31, 1998 10-K of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated,
dated March 31, 1999.
****** Incorporated by reference to the September 30, 1997 Form 10-Q of Statia
Terminals International N.V. and Statia Terminals Canada, Incorporated,
dated November 14, 1997.
******* Incorporated by reference to our March 31, 1999 Form 10-Q, dated May
13, 1999.
******** Incorporated by reference to our June 30, 1999 Form 10-Q, dated August
12, 1999.
********* Incorporated by reference to our September 30, 1999 Form 10-Q, dated
November 15, 1999.
+ Incorporated by reference to the December 31, 1999 form 10-K of Statia
Terminals Group N.V., dated March 17, 2000.
E-4
EXHIBIT 21.1
Statia Terminals Corporation N.V., a Netherlands company
Statia Terminals Canada, Incorporated, incorporated under the laws of
Nova Scotia
Point Tupper Marine Services Limited, incorporated under the laws of
Nova Scotia *
Statia Terminals Antilles N.V., a Netherlands Antilles company
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
Statia Laboratory Services N.V., a Netherlands Antilles company
Statia Tugs N.V., a Netherlands Antilles company
Statia Terminals Delaware, Inc., a Delaware corporation
Statia Terminals, Inc., a Delaware corporation
Statia Terminals New Jersey, Inc., a Delaware corporation
Seven Seas Steamship Company, Inc., a Florida corporation
Seven Seas Steamship Company (Sint Eustatius) N.V., a Netherlands Antilles
company
* Point Tupper Marine Services Limited is the sole subsidiary of Statia
Terminals Canada, Incorporated.
<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 TWELVE MONTHS ENDED
DECEMBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001029101
<NAME> STATIA TERMINALS INTERNATIONAL N.V.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,632
<SECURITIES> 0
<RECEIVABLES> 17,465
<ALLOWANCES> (804)
<INVENTORY> 3,239
<CURRENT-ASSETS> 25,255
<PP&E> 236,388
<DEPRECIATION> (30,357)
<TOTAL-ASSETS> 234,271
<CURRENT-LIABILITIES> 25,583
<BONDS> 101,000
0
0
<COMMON> 6
<OTHER-SE> 107,682
<TOTAL-LIABILITY-AND-EQUITY> 234,271
<SALES> 106,678
<TOTAL-REVENUES> 168,343
<CGS> 95,390
<TOTAL-COSTS> 137,665
<OTHER-EXPENSES> 13,888
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,286
<INCOME-PRETAX> 3,263
<INCOME-TAX> 780
<INCOME-CONTINUING> 2,483
<DISCONTINUED> 0
<EXTRAORDINARY> (4,743)
<CHANGES> 0
<NET-INCOME> (2,260)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
STATIA TERMINALS CANADA, INCORPORATED'S FORM 10-K FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001029102
<NAME> STATIA TERMINALS CANADA INCORPORATED
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 209
<SECURITIES> 0
<RECEIVABLES> 3,534
<ALLOWANCES> (78)
<INVENTORY> 81
<CURRENT-ASSETS> 6,987
<PP&E> 33,140
<DEPRECIATION> (4,435)
<TOTAL-ASSETS> 36,509
<CURRENT-LIABILITIES> 3,164
<BONDS> 28,060
0
0
<COMMON> 0
<OTHER-SE> 5,285
<TOTAL-LIABILITY-AND-EQUITY> 36,509
<SALES> 247
<TOTAL-REVENUES> 18,547
<CGS> 217
<TOTAL-COSTS> 10,106
<OTHER-EXPENSES> 5,102
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,536
<INCOME-PRETAX> (79)
<INCOME-TAX> 97
<INCOME-CONTINUING> (176)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (176)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
