<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2000
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 NUMBER
0-25821
STATIA TERMINALS GROUP N.V.
(Exact name of registrant as specified in its charter)
NETHERLANDS ANTILLES 52-2003016
(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) (599-9) 4623700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Indicate by check mark whether the registrant: (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
------ -----
As of November 8, 2000, 6,544,053 class A common shares of the
registrant were outstanding.
<PAGE> 2
STATIA TERMINALS GROUP N.V.
QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 30, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 1
Consolidated Condensed Statements of Income (Loss) 2
Consolidated Condensed Statements of Cash Flows 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
</TABLE>
This Quarterly Report on Form 10-Q (this "Report") contains
forward-looking statements within the meaning of 27A of the Securities Act of
1933, as amended. Discussions containing such forward-looking statements may be
found in Items 1, 2, and 3 of Part I hereof, as well as within this Report
generally. In addition, when used in this Report, the words "may," "will,"
"believe," "anticipate," "expect," "estimate," and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
a number of risks and uncertainties. Actual results in the future could differ
materially from those described in the forward-looking statements as a result of
fluctuations in the supply of and demand for crude oil and other petroleum
products, changes in the petroleum terminaling industry, added costs due to
changes in government regulations affecting the petroleum industry, the loss of
a major customer 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 and the Company's Annual Report on Form 10-K/A. 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.
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,658 $ 8,248
Accounts receivable-
Trade, net 12,957 15,499
Other 3,704 979
Inventory, net 3,239 1,925
Prepaid expenses 1,723 2,961
---------- ----------
Total current assets 27,281 29,612
PROPERTY AND EQUIPMENT, net 206,031 203,262
OTHER NONCURRENT ASSETS, net 2,985 2,899
---------- ----------
Total assets $ 236,297 $ 235,773
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 14,086 $ 14,071
Accrued interest payable 1,516 4,483
Other accrued expenses 7,084 7,626
---------- ----------
Total current liabilities 22,686 26,180
DISTRIBUTIONS PAYABLE 2,913 2,913
LONG TERM DEBT - 11-3/4% FIRST MORTGAGE NOTES 101,000 101,000
---------- ----------
Total liabilities 126,599 130,093
SHAREHOLDERS' EQUITY:
Class A common shares 76 76
Class B subordinated shares 38 38
Class C incentive shares -- --
Additional paid-in capital 129,834 129,834
Notes receivable from shareholders (1,474) (1,474)
Accumulated deficit (16,522) (16,297)
Class A common shares in treasury (2,254) (6,497)
---------- ----------
Total shareholders' equity 109,698 105,680
---------- ----------
Total liabilities and shareholders' equity $ 236,297 $ 235,773
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
Page 1
<PAGE> 4
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ----------------------------
1999 2000 1999 2000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Terminaling services $ 14,292 $ 17,929 $ 48,328 $ 44,670
Product sales 29,018 39,613 74,664 109,404
--------- --------- --------- ---------
Total revenues 43,310 57,542 122,992 154,074
--------- --------- --------- ---------
COSTS OF REVENUES:
Terminaling services 9,437 10,178 29,757 30,373
Product sales 27,491 38,136 69,570 104,310
--------- --------- --------- ---------
Total costs of revenues 36,928 48,314 99,327 134,683
--------- --------- --------- ---------
Gross profit 6,382 9,228 23,665 19,391
ADMINISTRATIVE EXPENSES 2,269 2,369 6,751 7,059
SPECIAL COMPENSATION EXPENSE -- -- 4,099 --
--------- --------- --------- ---------
Operating income 4,113 6,859 12,815 12,332
INTEREST EXPENSE 3,176 3,191 11,113 9,551
INTEREST INCOME 117 99 684 252
--------- --------- --------- ---------
Income before provision for income taxes,
preferred stock dividends and extraordinary charge 1,054 3,767 2,386 3,033
PROVISION FOR INCOME TAXES 55 195 548 716
--------- --------- --------- ---------
Income before preferred stock dividends and
extraordinary charge 999 3,572 1,838 2,317
PREFERRED STOCK DIVIDENDS -- -- 2,257 --
--------- --------- --------- ---------
Income (loss) before extraordinary charge 999 3,572 (419) 2,317
EXTRAORDINARY CHARGE RELATED TO EARLY
EXTINGUISHMENT OF DEBT -- -- 4,743 --
--------- --------- --------- ---------
Net income (loss) available to common stockholders $ 999 $ 3,572 $ (5,162) $ 2,317
========= ========= ========= =========
BASIC EARNINGS PER COMMON SHARE:
Income (loss) before extraordinary charge $ 0.13 $ 0.53 $ 0.79 $ 0.34
Extraordinary charge -- -- --
(1.10) --
--------- --------- --------- ---------
Net income (loss) available to common stockholders $ 0.13 $ 0.53 $ (0.31) $ 0.34
========= ========= ========= =========
DILUTED EARNINGS PER COMMON SHARE:
Income (loss) before extraordinary charge $ 0.09 $ 0.34 $ 0.52 $ 0.22
Extraordinary charge -- -- (0.73) --
--------- --------- --------- ---------
Net income (loss) available to common stockholders $ 0.09 $ 0.34 $ (0.21) $ 0.22
========= ========= ========= =========
BASIC AND DILUTED EARNINGS PER
SUBORDINATED SHARE:
Income (loss) before extraordinary charge $ -- $ -- $ (1.06) $ --
Extraordinary charge -- -- -- --
--------- --------- --------- ---------
Net income (loss) available to common stockholders $ -- $ -- $ (1.06) $ --
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
Page 2
<PAGE> 5
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1999 2000
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) available to common stockholders $ (5,162) $ 2,317
Adjustments to reconcile net income (loss) to common stockholders
to net cash provided by operating activities:
Extraordinary charge related to early extinguishment of debt 4,743 --
Non-cash special compensation expense 2,152 --
Depreciation, amortization and non-cash charges 8,949 10,081
Preferred stock dividends accrued 2,257 --
Provision for bad debts 19 555
Increase in accounts receivable-trade (5,774) (3,097)
(Increase) decrease in accounts receivable-other (1,903) 2,725
Decrease in inventory 2,564 1,314
Increase in prepaid expenses (633) (1,238)
(Increase) decrease in other noncurrent assets (34) 75
Increase (decrease) in accounts payable 4,575 (15)
Increase in accrued interest payable and other accrued expenses 1,718 3,478
--------- --------
Net cash provided by operating activities 13,471 16,195
--------- --------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchases of property and equipment (6,331) (6,801)
Investment in joint venture -- (500)
Proceeds from sale of property and equipment 15 --
--------- --------
Net cash used in investing activities (6,316) (7,301)
--------- --------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net proceeds from initial public offering of class A common shares 136,757 --
Redemption of preferred stock (94,824) --
Repurchase of First Mortgage Notes (37,681) --
Payment of preferred stock dividends (9,697) --
Payment of class A common share distribution (2,405) (2,092)
Issuance of additional class B subordinated shares and class C incentive shares 34 --
Purchase of class A common shares as treasury stock -- (4,212)
--------- --------
Net cash used in financing activities (7,816) (6,304)
--------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (661) 2,590
CASH AND CASH EQUIVALENTS, beginning of period 14,061 5,658
--------- --------
CASH AND CASH EQUIVALENTS, end of period $ 13,400 $ 8,248
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 521 $ 300
========= ========
Cash paid for interest $ 8,665 $ 6,073
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
Page 3
<PAGE> 6
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated condensed financial statements of Statia
Terminals Group N.V. ("Group") and Subsidiaries (together with Group, the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. Significant accounting policies followed by
the Company were disclosed in the Notes to Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1999 (the "Form 10-K/A"). In the opinion of the Company's
management, the accompanying consolidated condensed financial statements contain
all adjustments and accruals necessary to present fairly the financial position
of the Company at September 30, 2000, and the results of its operations and cash
flows for the nine months ended September 30, 1999 and 2000. Operating results
for the nine months ended September 30, 2000, are not necessarily indicative of
the results that may be expected for the year ending December 31, 2000.
Certain reclassifications were made to the 1999 financial statements
and notes thereto in order to conform to the 2000 presentation. Additionally,
the Company's initial public offering of equity, which closed on April 28, 1999,
impacted the Company's results of operations and financial condition and affects
comparability across periods. These financial statements should be read in
conjunction with the Form 10-K/A.
For all periods presented herein, there were no significant differences
between net income and comprehensive income.
2. 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
revenues from storage, throughput, dock usage, emergency response, and other
terminal services) and product sales (such as sales of bunker fuels to ships and
other bulk petroleum 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, income taxes, and depreciation and
amortization adjusted for non-recurring transactions ("Adjusted EBITDA") and
earnings before interest expense and income taxes adjusted for non-recurring
transactions ("Adjusted EBIT").
Page 4
<PAGE> 7
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
2. SEGMENT INFORMATION- (CONTINUED)
The following information is provided for the Company's terminaling
services and product sales segments:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1999 2000 1999 2000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
ADJUSTED EBITDA:
Terminaling services $ 5,346 $ 9,084 $ 20,796 $ 17,710
Product sales 1,471 856 4,826 4,342
--------- --------- --------- ---------
Total $ 6,817 $ 9,940 $ 25,622 $ 22,052
========= ========= ========= =========
DEPRECIATION AND AMORTIZATION
EXPENSE:
Terminaling services $ 2,671 $ 2,996 $ 8,346 $ 9,470
Product sales 86 156 274 509
--------- --------- --------- ---------
Total $ 2,757 $ 3,152 $ 8,620 $ 9,979
========= ========= ========= =========
ADJUSTED EBIT:
Terminaling services $ 2,675 $ 6,088 $ 12,450 $ 8,240
Product sales 1,385 700 4,552 3,833
--------- --------- --------- ---------
Total $ 4,060 $ 6,788 $ 17,002 $ 12,073
========= ========= ========= =========
</TABLE>
A reconciliation of Adjusted EBIT to the Company's income before
provision for income taxes, preferred stock dividends and extraordinary charge
is as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1999 2000 1999 2000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Adjusted EBIT $ 4,060 $ 6,788 $ 17,002 $ 12,073
Special compensation expense -- -- (4,099) --
Interest expense excluding debt
amortization expense (3,006) (3,021) (10,517) (9,040)
--------- --------- --------- ---------
Income before provision for income
taxes, preferred stock dividends and
extraordinary charge $ 1,054 $ 3,767 $ 2,386 $ 3,033
========= ========= ========= =========
</TABLE>
Page 5
<PAGE> 8
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
3. EARNINGS PER SHARE
In connection with its initial public offering of equity discussed
below, the Company adopted Statement of Financial Accounting Standards No. 128
"Earnings per Share" ("SFAS No. 128"). Earnings per share are computed based
upon the "Participating Securities and Two-Class Common Stock" methodology as
required by SFAS No. 128. Earnings and losses have been allocated to each class
of shares based upon changes in the historical basis liquidation values of the
classes of shares during the periods presented as determined in accordance with
the Company's articles of incorporation. Under this methodology, all of the
earnings and losses prior to the closing of the Company's initial public
offering of equity on April 28, 1999, have been allocated to the class B
subordinated shares. All of the earnings and losses subsequent to April 28,
1999, have been allocated to the class A common shares.
Basic earnings (loss) per share is computed by dividing the earnings
and losses allocated to each class of equity by the weighted average number of
shares outstanding for each class during the period. Diluted earnings (loss) per
share is computed the same as basic earnings (loss) per share except the
denominator is adjusted for the effect of class A common share and class B
subordinated share equivalents outstanding. For periods prior to April 28, 1999,
class B subordinated share equivalents include, where appropriate, the assumed
exercise of previously outstanding stock options and the conversion of the
Company's previously outstanding Series B preferred stock.
Diluted earnings per common share include the dilutive effect of the
subordinated shares and, for the three and nine months ended September 30, 2000,
outstanding stock options granted in May 2000. The Company's previously
outstanding preferred stock with conversion features was antidilutive for all
1999 periods presented. All 1999 earnings per share amounts presented have been
adjusted to give retroactive effect, as of the beginning of 1999, to the
reclassification and issuance of additional class B subordinated shares and
class C incentive shares that occurred in connection with the initial public
offering of equity.
The following additional information is presented with respect to the
Company's earnings per share amounts:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ------------------------------
1999 2000 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE:
Earnings and losses allocated to common shares:
Income (loss) before extraordinary charge $ 999 $ 3,572 $ 3,384 $ 2,317
Extraordinary charge -- -- (4,743) --
----------- ----------- ----------- -----------
Net income (loss) available to common stockholders $ 999 $ 3,572 $ (1,359) $ 2,317
=========== =========== =========== ===========
Weighted average common shares outstanding 7,600,000 6,700,326 4,315,018 6,892,260
Dilutive effect of weighted average subordinated
shares outstanding 3,800,000 3,800,000 2,157,509 3,800,000
Dilutive effect of stock options outstanding -- 47,015 -- 20,065
----------- ----------- ----------- -----------
Diluted common shares outstanding 11,400,000 10,547,341 6,472,527 10,712,325
=========== =========== =========== ===========
EARNINGS PER SUBORDINATED SHARE:
Earnings and losses allocated to subordinated shares:
Loss before extraordinary charge $ -- $ -- $ (3,803) $ --
Extraordinary charge -- -- -- --
----------- ----------- ----------- -----------
Net loss to common stockholders $ -- $ -- $ (3,803) $ --
=========== =========== =========== ===========
Weighted average subordinated shares outstanding 3,800,000 3,800,000 3,587,611 3,800,000
=========== =========== =========== ===========
</TABLE>
Page 6
<PAGE> 9
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
4. INITIAL PUBLIC OFFERING OF EQUITY AND RELATED TRANSACTIONS
As more fully discussed in the Form 10-K/A, on April 28, 1999, Group
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. The gross proceeds of the offering were used primarily to redeem all
of the Company's outstanding Series A, B, C, D and E preferred stock and pay
accrued dividends, pay underwriters' discounts and fees, and pay certain other
costs directly associated with the offering. The remaining proceeds were
invested and used during May 1999, along with existing cash, to repurchase in
the open market a principal amount of $34,000 of the 11-3/4% First Mortgage
Notes (the "Notes") for $39,522, including acquisition costs and accrued
interest of $3,681 and $1,841, respectively. During the second quarter of 1999,
the acquisition costs and the unamortized deferred financing costs related to
the repurchased Notes ($1,062) were recorded as an extraordinary charge. There
was no income tax effect associated with this extraordinary charge.
During the nine months ended September 30, 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 initial public offering of equity, certain
previously granted stock options became fully vested, were exercised and became
class B subordinated shares. 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 credited to additional paid-in capital.
In conjunction with the transactions surrounding the initial public
offering of equity, the Company authorized (i) 20,000,000 class A common shares
of which 7,600,000 shares are issued and 6,598,853 shares were outstanding as of
September 30, 2000; (ii) 7,800,000 class B subordinated shares of which
3,800,000 shares are currently issued and outstanding; and (iii) 2,200,000 class
C incentive shares of which 38,000 shares are currently issued and outstanding.
Page 7
<PAGE> 10
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
4. INITIAL PUBLIC OFFERING OF EQUITY AND RELATED TRANSACTIONS- (CONTINUED)
The following unaudited pro forma consolidated results of operations
for the three and nine month periods ended September 30, 1999, were prepared to
illustrate the estimated effects of:
- the elimination of the Castle Harlan management fee, and
- the use of the net proceeds from the initial public offering of equity
and the restructuring as described in the Registration Statement
(collectively, the "pro forma transactions") as if the pro forma transactions
had occurred at the beginning of each of these respective periods. The unaudited
pro forma consolidated condensed results of operations should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Company's financial statements and the notes
thereto, the other financial information included in the Company's Registration
Statement on Form S-1 (File No. 333-72317), and its Form 10-K/A for the year
ended December 31, 1999. 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 THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
REVENUES $ 43,310 $ 122,992
OPERATING INCOME 4,113 17,357
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS 999 7,847
DILUTED EARNINGS PER COMMON SHARE 0.09 0.69
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: 7,600,000 7,600,000
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: 11,400,000 11,400,000
</TABLE>
5. REPLACEMENT OF SINGLE POINT MOORING SYSTEM HOSES
During the three months ended March 31, 2000, the Company replaced
certain large hoses attached to its single point mooring system (the "SPM"). In
connection with this hose change-out, the Company adopted the component
depreciation method for the SPM and its hoses as of January 1, 2000, which
resulted in a change in the estimated useful lives for depreciation purposes
for these hoses. As a result, in addition to recurring depreciation charges,
the Company incurred a non-cash charge to depreciation expense of $832 during
the first quarter of 2000 which is included in Costs of Revenues.
Page 8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For purposes of the discussion below, reference is made to the
unaudited Consolidated Condensed Financial Statements and Notes thereto of
Statia Terminals Group N.V. and Subsidiaries (the "Company") as of September
30, 2000, and for the three and nine month periods ended September 30, 1999 and
2000, included herein. Reference should also be made to the Company's Annual
Report on Form 10-K/A that includes the Company's Consolidated Financial
Statements as of and for the year ended December 31, 1999.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentage of revenues represented by some items in our consolidated condensed
income statements.
RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------
1999 2000
------------------------------------------------------
% OF % OF
DOLLARS REVENUES DOLLARS REVENUES
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Terminaling services $14,292 33.0% $17,929 31.2%
Product sales 29,018 67.0% 39,613 68.8%
------- ------- ------- -------
Total revenues 43,310 100.0% 57,542 100.0%
------- ------- ------- -------
Costs of revenues:
Terminaling services 9,437 21.8% 10,178 17.7%
Product sales 27,491 63.5% 38,136 66.3%
------- ------- ------- -------
Total costs of revenues 36,928 85.3% 48,314 84.0%
------- ------- ------- -------
Gross profit 6,382 14.7% 9,228 16.0%
Administrative expenses 2,269 5.2% 2,369 4.1%
------- ------- ------- -------
Operating income 4,113 9.5% 6,859 11.9%
Interest expense 3,176 7.3% 3,191 5.6%
Interest income 117 0.2% 99 0.2%
------- ------- ------- -------
Income before provision for income taxes 1,054 2.4% 3,767 6.5%
Provision for income taxes 55 0.1% 195 0.3%
------- ------- ------- -------
Net income available to common stockholders $ 999 2.3% $ 3,572 6.2%
======= ======= ======= =======
</TABLE>
Page 9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------
1999 2000
----------------------------------------------------------
% OF % OF
DOLLARS REVENUES DOLLARS REVENUES
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Terminaling services $ 48,328 39.3% $ 44,670 29.0%
Product sales 74,664 60.7% 109,404 71.0%
---------- --------- --------- ---------
Total revenues 122,992 100.0% 154,074 100.0%
---------- --------- --------- ---------
Costs of revenues:
Terminaling services 29,757 24.2% 30,373 19.7%
Product sales 69,570 56.6% 104,310 67.7%
---------- --------- --------- ---------
Total costs of revenues 99,327 80.8% 134,683 87.4%
---------- --------- --------- ---------
Gross profit 23,665 19.2% 19,391 12.6%
Administrative expenses 6,751 5.5% 7,059 4.6%
Special compensation expense 4,099 3.3% -- --
---------- --------- --------- ---------
Operating income 12,815 10.4% 12,332 8.0%
Interest expense 11,113 9.0% 9,551 6.2%
Interest income 684 0.5% 252 0.2%
---------- --------- --------- ---------
Income before provision for income taxes, preferred
stock dividends and extraordinary charge 2,386 1.9% 3,033 2.0%
Provision for income taxes 548 0.4% 716 0.5%
Preferred stock dividends 2,257 1.8% -- --
Extraordinary charge related to early extinguishment of debt 4,743 3.9% -- --
---------- --------- --------- ---------
Net income (loss) available to common stockholders $ (5,162) (4.2)% $ 2,317 1.5%
========== ========= ========= =========
</TABLE>
Gross profit from terminaling services is generally higher than gross
profit from product sales. Our operating costs for terminaling services are
relatively fixed and generally do not change significantly with changes in
capacity leased. Additions or reductions in storage, throughput, and ancillary
revenues directly impact our gross profit. Costs for the procurement of bunker
fuels and bulk petroleum products are variable and linked to global oil prices.
Our product costs are also impacted by market supply conditions, types of
products sold, and volumes delivered.
On October 10, 2000, we executed an amendment to our contract with a
major state-owned oil company under which we are currently purchasing a majority
of the fuel oil necessary to support our bunker sales requirements at St.
Eustatius. The amendment extends the expiration of the contract to June 30,
2001, and contains terms and conditions which are comparable to prior agreements
with the supplier. 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.
The following tables set forth, for the periods indicated, (a) the
total revenues and total operating income, after allocation of administrative
expenses and elimination of certain intercompany transactions, at each of our
operating locations and (b) the percentage of such revenues and operating
income relative to our total revenues and operating income.
Page 10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
REVENUES BY LOCATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------
1999 2000
------------------------------------------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
------- ------- ------- -------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $39,647 91.5% $51,945 90.3%
Canada 3,663 8.5% 5,597 9.7%
------- ------- ------- -------
Total $43,310 100.0% $57,542 100.0%
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------
1999 2000
------------------------------------------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $108,129 87.9% $140,676 91.3%
Canada 14,863 12.1% 13,398 8.7%
-------- ------- -------- -------
Total $122,992 100.0% $154,074 100.0%
======== ======= ======== =======
</TABLE>
OPERATING INCOME BY LOCATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------
1999 2000
------------------------------------------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
------- ------- ------- -------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $ 3,892 94.6% $ 5,521 80.5%
Canada 221 5.4% 1,338 19.5%
------- ------- ------- -------
Total $ 4,113 100.0% $ 6,859 100.0%
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------
1999 2000
------------------------------------------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
------- ------- ------- -------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $10,467 81.7% $10,157 82.4%
Canada 2,348 18.3% 2,175 17.6%
------- ------- ------- -------
Total $12,815 100.0% $12,332 100.0%
======= ======= ======= =======
</TABLE>
Page 11
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
The following table sets forth, for the periods indicated, capacity
leased, throughput, and vessel calls for each of our operating locations.
"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.
CAPACITY LEASED, THROUGHPUT AND VESSEL CALLS BY LOCATION
(THROUGHPUT IN THOUSANDS OF BARRELS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- ------------------------
1999 2000 1999 2000
------ ------ ------ ------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean:
Capacity leased 89% 94% 91% 86%
Throughput 15,011 27,276 48,687 58,236
Vessel calls 219 213 739 654
Canada:
Capacity leased 65% 76% 85% 67%
Throughput 8,880 16,535 31,214 40,747
Vessel calls 19 44 78 101
All locations:
Capacity leased 79% 87% 89% 78%
Throughput 23,891 43,811 79,901 98,983
Vessel calls 238 257 817 755
</TABLE>
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000, VERSUS THE SAME PERIODS OF 1999
Comparability
Our initial public offering of equity, which closed on April 28, 1999,
impacted our results of operations and financial condition. Therefore, our
results of operations and financial condition may not be comparable across
periods presented herein.
Revenues
Total revenues for the three and nine months ended September 30, 2000,
were $57.5 million and $154.1 million, compared to $43.3 million and $123.0
million for the same periods of 1999, representing increases of $14.2 million
or 32.9% and $31.1 million or 25.3%, respectively. The increases in total
revenues are primarily due to increases in average selling prices in our
product sales segment. See further discussion below.
Page 12
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
Revenues from terminaling services (revenues from storage, throughput,
dock usage, emergency response, and other terminal services) for the three and
nine months ended September 30, 2000, were $17.9 million and $44.7 million,
compared to $14.3 million and $48.3 million for the same periods of 1999,
representing an increase of $3.6 million, or 25.4%, and a decrease of $3.7
million, or 7.6%, respectively. The increase in terminaling services revenues
for the three months ended September 30, 2000, compared to the same period in
1999, was primarily the result of increased throughput of crude oil and new
short-term product storage contracts. We believe the decrease in terminaling
services revenues for the nine months ended September 30, 2000, compared to the
same period in 1999, was principally due to the adverse effects of the accord
established between many of the oil exporting nations, some of whom are our
customers, to raise crude oil prices by reducing supply. Members of the accord
reduced their production of crude oil during the period from April 1999,
through late March 2000, which reduced the worldwide quantity of crude oil and
petroleum products in storage. The accord primarily impacted our terminaling
services revenues beginning with the second half of 1999.
For the nine months ended September 30, 2000, approximately 74.3% of
our tank capacity was leased pursuant to long term contracts at our St.
Eustatius and Point Tupper locations together. Approximately 67.3% of our
storage and throughput revenues, excluding related ancillary services, were
derived from long term contracts during the same period.
Revenues from terminaling services at St. Eustatius increased
approximately $1.7 million or 16.7% during the three months ended September 30,
2000 as compared to the same period of 1999. The increase in revenues from
terminaling services was due primarily to increased cargo vessel calls and a
higher percentage capacity leased. Nine additional cargo vessels called at the
St. Eustatius facility during the three months ended September 30, 2000, than
during the same period of 1999, resulting in higher revenues from port charges,
which consist of dock charges, emergency response fees, and other terminal
charges. For the three months ended September 30, 2000, the overall percentage
of capacity leased at St. Eustatius was 94% as compared to 89% for the same
period of 1999, reflecting increases in the percentage of capacity leased for
fuel oil tankage. The increase in the percentage of capacity leased for fuel
oil tankage was primarily the result of new short-term product storage
contracts. Certain short-term product storage contracts did not renew for the
fourth quarter of 2000.
Revenues from terminaling services at St. Eustatius decreased
approximately $2.3 million or 6.9% during the nine months ended September 30,
2000 as compared to the same period of 1999. The decrease in revenues from
terminaling services was due primarily to a lower percentage capacity leased.
Although thirty fewer cargo vessels called at the St. Eustatius facility during
the nine months ended September 30, 2000, than during the same period of 1999,
revenues from port charges were higher primarily due to increases in the size
of cargo vessels calling at this facility. For the nine months ended September
30, 2000, the overall percentage of capacity leased at St. Eustatius was 86% as
compared to 91% for the same period of 1999, reflecting decreases in the
percentage of capacity leased for fuel oil tankage. The decrease in the
percentage of capacity leased for fuel oil tankage was primarily the result of
the effects of the accord, backwardation in this market, and the relative lower
pricing, during certain months, of products which compete with fuel oil.
Revenues from terminaling services at Point Tupper increased
approximately $1.9 million or 52.7% during the three months ended September 30,
2000 as compared to the same period of 1999. The increase in revenues from
terminaling services was due primarily to a higher percentage of tank capacity
leased resulting from new short-term storage contracts and from increased
throughput of crude oil. Twenty-five additional cargo vessels called during the
three months ended September 30, 2000, as compared to the same period of 1999,
which led to higher revenues from port charges at this facility. The percentage
of tank capacity leased at Point Tupper was 76% for the three months ended
September 30, 2000 as compared to 65% for the same period of 1999. Certain
short-term storage contracts at Point Tupper did not renew for the fourth
quarter of 2000.
Page 13
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
Revenues from terminaling services at Point Tupper decreased
approximately $1.4 million or 9.5% during the nine months ended September 30,
2000, as compared to the same period of 1999. The decrease was due primarily to
a lower percentage of tank capacity leased primarily resulting from the
decision by a customer of this facility, who is a participant in the accord,
not to renew its crude oil storage contract at the end of the second quarter of
1999. The percentage of tank capacity leased at Point Tupper was 67% for the
nine months ended September 30, 2000, as compared to 85% for the same period of
2000. Partially offsetting reduced storage revenues were revenues from a higher
number of barrels throughput by this facility's primary crude oil customer for
the nine months ended September 30, 2000. Twenty-three additional cargo vessels
called during the nine months ended September 30, 2000, as compared to the same
period of 1999, which led to higher revenues from port charges at this
facility.
Revenues from product sales were $39.6 million and $109.4 million for
the three and nine months ended September 30, 2000, compared to $29.0 million
and $74.7 million for the same periods of 1999, an increase of $10.6 million or
36.5% and $34.7 million or 46.5%, respectively. These increases were due to
increases in average selling prices partially offset by lower volumes
delivered. Average selling prices increased 39.0% and 69.9% when comparing the
three and nine months ended September 30, 2000, with the same periods of 1999.
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.
Metric tons of bunkers and bulk product delivered decreased 1.8% and 13.7%
during the three and nine months ended September 30, 2000, respectively, as
compared to the same periods of 1999.
Gross Profit
Gross profit for the three months ended September 30, 2000 and 1999,
was $9.2 million and $6.4 million, representing an increase of $2.8 million or
44.6%. Gross profit for the nine months ended September 30, 2000 and 1999, was
$19.4 million and $23.7 million, representing a decrease of $4.3 million or
18.1%. The increase in gross profit for the three months ended September 30,
2000, is primarily the result of increased throughput of crude oil and new
short-term product storage contracts. The decrease in gross profit for the nine
months ended September 30, 2000, is the result of lower gross profit realized
on terminaling services. Gross profit from terminaling services decreased
primarily as a result of certain customers choosing not to renew their storage
and throughput contracts due, in part, to reduced supply resulting from the
accord established among many of the oil exporting nations. Additionally,
during the nine months ended September 30, 2000, we replaced certain hoses
attached to our single point mooring system. As a result, we incurred a
non-cash charge of $0.8 million during the first quarter of 2000 to
depreciation expense which is included in Costs of Revenues.
Administrative Expenses
Administrative expenses were $2.4 million and $7.1 million for the
three and nine months ended September 30, 2000, as compared to $2.3 million and
$6.8 million for the same periods of 1999, representing increases of $0.1
million or 4.4% and $0.3 million or 4.6%, respectively. The increases during
the three and nine months ended September 30, 2000, as compared to the same
periods of 1999, were primarily the result of higher depreciation and personnel
costs. The increase during the nine months ended September 30, 2000, was
partially offset by the termination of the Castle Harlan management fee
effective as of our initial public offering of equity.
Page 14
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
Special Compensation Expense
As more fully discussed in note 4 of the notes to consolidated
condensed financial statements included in Part I, Item 1, of this Report, we
recorded special compensation expense during the nine months ended September
30, 1999, of $4.1 million.
Interest Expense
During the three and nine months ended September 30, 2000, we incurred
$3.2 million and $9.6 million of interest expense compared to $3.2 million and
$11.1 million for the same periods of 1999. Interest expense includes interest
accrued on our mortgage notes due in 2003, amortization expense related to
deferred financing costs, other interest expense, and bank charges. In May
1999, we repurchased $34.0 million of the mortgage notes which resulted in
lower interest expense on this debt.
Provision for Income Taxes
Provision for income taxes were $0.2 million and $0.7 million for the
three and nine months ended September 30, 2000, and $0.1 million and $0.5
million for the three and nine months ended September 30, 1999.
Preferred Stock Dividends
Preferred stock dividends were $2.3 million for the nine months ended
September 30, 1999. There were no preferred stock dividends for the three
months ended September 30, 2000 and 1999, and for the nine months ended
September 30, 2000, as a result of the redemption of all outstanding preferred
stock in connection with our initial public offering of equity.
Extraordinary Charge Related to Early Extinguishment of Debt
As more fully discussed in note 4 of the notes to consolidated
condensed financial statements included in Part I, Item 1, of this Report, we
recognized an extraordinary charge of $4.7 million during the nine months ended
September 30, 1999, in connection with the repurchase of $34.0 million of our
mortgage notes. There was no income tax effect associated with this
extraordinary charge.
Net Income (Loss)
The Company produced net income available to common stockholders of
$3.6 million and $2.3 million for the three and nine months ended September 30,
2000, as compared to net income available to common stockholders of $1.0
million and a net loss to common stockholders of $5.2 million for the same
periods of 1999, respectively, representing an improvement of $2.6 million and
$7.5 million. This improvement was primarily attributable to reduced debt
service costs and the net effect of other factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow from Operating Activities
Net cash provided by operating activities was $16.2 million and $13.5
million for the nine months ended September 30, 2000, 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.
Page 15
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
At September 30, 2000, we had cash and cash equivalents on hand of
$8.2 million compared to $5.7 million at December 31, 1999. Accounts receivable
and accounts payable, primarily related to the purchases and sales of petroleum
products, were $16.5 million and $14.1 million, respectively, at September 30,
2000, as compared to $16.7 million and $14.1 million, respectively, at December
31, 1999. The aggregate net changes of the accounts receivable and accounts
payable balances are included in net cash provided by operating activities.
Cash Flow from Investing Activities
Net cash used in investing activities consisting primarily of
purchases of property and equipment was $7.3 million and $6.3 million for the
nine months ended September 30, 2000 and 1999, respectively. During the three
months ended September 30, 2000, we acquired an interest for $0.5 million in a
joint venture which holds an investment in a company providing on-line trading
of certain petroleum products. See the Summary of Capital Expenditures by Type
table which follows.
Cash Flow from Financing Activities
In July 2000, our board of directors approved an increase in the
number of shares authorized under the previously announced stock purchase
program to 2,000,000 of our class A common shares. As of September 30, 2000,
and November 8, 2000, we had acquired 1,001,147 and 1,055,947 class A common
shares, respectively, at an aggregate cost of $6.5 million and $6.9 million,
respectively. As conditions warrant, we intend to continue periodic open market
purchases of our class A common shares under the stock purchase program.
As more fully discussed in the Registration Statement and Form 10-K/A,
under our articles of incorporation we are required to distribute to our
shareholders all of our "available cash" (as defined therein) generated from
operations. "Available cash" as defined generally includes cash from various
sources after deducting such reserves as our board of directors may deem
necessary or appropriate to provide for the proper conduct of our business,
including future capital expenditures, anticipated operational needs, and to
comply with debt obligations.
On February 14, 2000, we paid $1.1 million to holders of our class A
common shares representing $0.15 per share. The $0.30 per share difference
between the declared distribution and the target quarterly distribution of
$0.45 per share represents an arrearage which must be paid from future
available cash.
On August 14, 2000, we paid $1.0 million to holders of our class A
common shares representing $0.15 per share. The $0.30 per share difference
between the declared distribution and the target quarterly distribution of
$0.45 per share represents an arrearage that must be paid from future available
cash.
On October 24, 2000, our board of directors declared a distribution of
$0.15 per share on our class A common shares payable November 14, 2000, to
shareholders of record on October 31, 2000. The $0.30 per share difference
between the declared distribution and the target quarterly distribution of
$0.45 per share represents an arrearage that must be paid from future available
cash. The aggregate arrearage per class A common share after the distribution
is paid on November 14, 2000 will be $1.35.
On May 2, 2000, we granted to certain of our employees and directors
options to purchase 228,000 of our class A common shares at an exercise price
of $5.59 per share representing the fair value on the date of grant. These
options were granted pursuant to our 1999 share option plan and generally vest
in proportion to the conversion of our class B subordinated shares to class A
common shares over the subordination period, as defined in our articles of
incorporation.
Page 16
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
As more fully discussed in note 4 of the notes to consolidated
condensed financial statements included in Part I, Item 1, of this Report, our
initial public offering of equity closed on April 28, 1999. The net proceeds of
the offering were used primarily to redeem all of our outstanding preferred
stock and pay accrued dividends and repurchase in the open market a principal
amount of $34.0 million of our mortgage notes, leaving $101.0 million of our
mortgage notes outstanding. The repurchase of the mortgage notes will result in
annual reductions in interest payments of approximately $4.0 million.
As of November 14, 2000, no event of default under the indenture to
the mortgage notes existed and was continuing. The fixed charge coverage ratio
as defined in the indenture was at least 2.0 to 1 at September 30, 2000. Statia
Terminals International N.V., a wholly-owned subsidiary of Statia Terminals
Group N.V., is not restricted by this provision of the indenture from borrowing
on the revolving credit facility discussed below. Additionally, at September
30, 2000, the sum of Statia Terminals International's dividends, restricted
payments, aggregate consolidated net income (deficit), and capital stock
proceeds was approximately $15.7 million. Such sum must be positive in order
for Statia Terminals International to make certain restricted payments,
including dividends to Statia Terminals Group N.V.
We have a $17.5 million revolving credit facility secured by our
accounts receivable and oil inventory, which renews annually under the original
terms of the agreement unless otherwise canceled by either party. The revolving
credit facility is available for working capital needs and letter of credit
financing, and it permits us to borrow in accordance with a defined available
borrowing base, which was approximately $13.1 million at September 30, 2000.
The revolving credit facility bears interest at the prime rate plus 0.50% per
annum (10.0% at November 14, 2000). The revolving credit facility was extended
during the three months ended September 30, 2000, and will now expire on
November 27, 2001. During the first and second quarters of 2000, we borrowed
against the revolving credit facility, and all of such borrowings were repaid
by May 2000. There was no outstanding balance at September 30, 2000.
In March, 2000, the ownership of the M/V Statia Responder, an
emergency response and maintenance vessel, was transferred from one of our
existing subsidiaries to a newly created subsidiary. We are currently in
discussions with a lender to provide asset-based financing utilizing the vessel
as collateral. The proceeds from any such financing are expected to be used for
general business purposes.
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.
It is unlikely that we will be able to repay the mortgage notes at maturity
through projected operating cash flow, and it will be necessary to refinance
all or a portion of the mortgage notes, or redeem the mortgage notes from
additional equity funds, on or after November 15, 2000, and before their
maturity on November 15, 2003. We continuously monitor financial market
conditions and our financial position to determine when and whether we will
refinance or redeem all or a portion of the mortgage notes prior to their
maturity. Although we intend to refinance and believe that we will be able to
refinance the mortgage notes during the November 15, 2000, to November 15,
2003, time period, 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 commercial,
financial, and other factors, many of which are beyond our control. There can
be no assurances that we will be able to repay at maturity or refinance this
indebtedness in whole or in part, or at all, on terms acceptable to us. If we
are unable to repay or refinance the mortgage notes at or prior to maturity, we
will be forced to adopt alternative strategies that may include seeking
additional equity capital.
It is anticipated that any common share arrearages will not adversely
impact our ability to repay or refinance the mortgage notes since the mortgage
notes are obligations of two of our subsidiaries, not of Statia Terminals
Group. Depending on the terms and conditions of any refinancing of the mortgage
notes, our ability to pay the target quarterly distributions and common share
arrearages may be impacted.
Page 17
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
CAPITAL EXPENDITURES
Our projected capital spending for 2000 is $8.2 million for operations
sustaining capital expenditures and $0.3 million to produce incremental
revenues. Additional spending is contingent upon the addition of incremental
terminaling business.
The following table sets forth capital expenditures and separates such
expenditures into those which produce, or have the potential to produce,
incremental revenues and those which sustain our operations.
SUMMARY OF CAPITAL EXPENDITURES BY TYPE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------
1999 2000
---------------------- -----------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
---------------------- -----------------------
<S> <C> <C> <C> <C>
Produce incremental revenues $ 355 15.6% $ 50 1.9%
Operations sustaining capital expenditures 1,919 84.4% 2,609 98.1%
------- ------- ------- -------
Total $ 2,274 100.0% $ 2,659 100.0%
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------
1999 2000
------------------- ------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
------- ------- ------- -------
<S> <C> <C> <C> <C>
Produce incremental revenues $ 651 10.3% $ 196 2.9%
Operations sustaining capital expenditures 5,680 89.7% 6,605 97.1%
------- ------- ------- -------
Total $ 6,331 100.0% $ 6,801 100.0%
======= ======= ======= =======
</TABLE>
ACCOUNTING STANDARD
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.
Page 18
<PAGE> 21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We periodically purchase refined petroleum products from our customers
and others for resale as bunker fuel, for small volume sales to commercial
interests, and to maintain an inventory of blend stocks for our customers.
Petroleum product inventories are held for short periods, generally not
exceeding 90 days. We do not presently hedge our inventory of petroleum
products. The following table indicates the aggregate carrying value of our
petroleum products on hand at September 30, 2000, computed at average costs, net
of any lower of cost or market valuation provisions, and the estimated fair
value of such products.
ON BALANCE SHEET COMMODITY POSITION
(Dollars in thousands)
<TABLE>
<CAPTION>
As of September 30, 2000
---------------------------------
Carrying Value Fair Value
--------------- --------
<S> <C> <C>
Petroleum Inventory:
Statia Terminals N.V. $ 1,855 $ 1,827
Statia Terminals Canada, Inc. 70 211
--------- --------
Total $ 1,925 $ 2,038
========= ========
</TABLE>
Except for minor local operating expenses in Canadian dollars and
Netherlands Antilles guilders, all of our transactions are in U.S. dollars.
Therefore, we believe we are not significantly exposed to exchange rate
fluctuations. As all of our present debt obligations carry a fixed rate of
interest, except for the revolving credit facility which varies with changes in
the lender's prime lending rate, we believe our exposure to interest rate
fluctuations is minimal.
Page 19
<PAGE> 22
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Reference is made to Item 3. Legal Proceedings included in the
Company's 1999 Annual Report on Form 10-K/A. There have been no material
developments in the Company's legal proceedings since the Form 10-K/A was
filed.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
The Company's web site is located at http://www.statiaterm.com or
http://www.statia.cc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27.1 Financial Data Schedule for Statia Terminals
Group N.V. (for electronic filing only)
(b) Reports on Form 8-K.
None.
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SIGNATURES
Pursuant to the requirements 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 GROUP N.V.
(Registrant)
Date: November 14, 2000
By: /s/ James G. Cameron
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James G. Cameron
Director
(As Authorized Officer)
By: /s/ James F. Brenner
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James F. Brenner
Vice President and Treasurer
(As Authorized Officer and Principal
Financial Officer)
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