<PAGE>
UNITED STATES
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 January 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission
File No. 1-11763
TRANSMONTAIGNE OIL COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 06-1052062
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
370 SEVENTEENTH STREET, SUITE 2750
DENVER, COLORADO 80202
(Address, including zip code, of principal executive offices)
(303) 626-8200
(Telephone number, including area code)
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 report), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of March 11, 1997, there were 25,783,974 shares of the Registrant's Common
Stock outstanding.
<PAGE>
TRANSMONTAIGNE OIL COMPANY
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
Item 1. Consolidated Financial Statements
<S> <C>
Consolidated Balance Sheets
January 31, 1997 and April 30, 1996............... 3
Consolidated Statements of Operations
Three months ended January 31, 1997 and 1996...... 5
Consolidated Statements of Operations
Nine months ended January 31, 1997 and 1996....... 6
Consolidated Statements of Stockholders' Equity
Nine months ended January 31, 1997 and
Year ended April 30, 1996......................... 7
Consolidated Statements of Cash Flows
Nine months ended January 31, 1997 and 1996....... 8
Notes to Consolidated Financial Statements........ 10
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..... 13
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.................. 23
Signatures....................................... 24
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
- ------- ---------------------
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
January 31, 1997 and April 30, 1996 (Unaudited)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
January 31, April 30,
1997 1996
------------ -----------
Assets
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 28,168,373 38,403,234
Trade accounts receivable 41,567,846 20,905,812
Notes receivable - current 191,107 -
Inventories 49,296,802 23,609,136
Prepaid expenses and other 1,310,266 1,475,612
------------ -----------
120,534,394 84,393,794
------------ -----------
Property, plant and equipment:
Land 1,222,195 1,072,798
Plant and equipment 112,472,130 24,926,309
Accumulated depreciation (8,151,832) (6,461,244)
------------ -----------
105,542,493 19,537,863
------------ -----------
Investments and other assets:
Investments 15,890,462 15,830,006
Note receivable - non-current 1,185,769 -
Other assets, net 5,048,661 1,201,313
------------ -----------
22,124,892 17,031,319
------------ -----------
$248,201,779 120,962,976
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
January 31, 1997 and April 30, 1996 (Unaudited)
______________________________________________________________________________
<TABLE>
<CAPTION>
January 31, April 30,
1997 1996
---- ----
Liabilities and Stockholders' Equity
- ------------------------------------
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 26,933,131 10,698,199
Inventory due under exchange agreements 6,286,161 8,874,645
Taxes payable 7,097,664 6,483,756
Other accrued liabilities 4,134,719 2,685,355
------------ -----------
44,451,675 28,741,955
------------ -----------
Long-term debt 124,906,667 28,948,867
Minority interests 5,559,826 5,452,963
Stockholders' equity:
Preferred stock, par value $.01 per share, authorized,
2,000,000 shares, none issued - -
Common stock, par value $.01 per share, authorized
40,000,000 shares, issued and outstanding 21,074,146
shares at January 31, 1997; par value $.10 per share,
authorized 27,000,000 shares, issued and outstanding
19,331,171 shares at April 30, 1996 210,742 1,933,117
Capital in excess of par value 72,468,731 61,187,476
Retained earnings (accumulated deficit) 604,138 (5,301,402)
------------ -----------
73,283,611 57,819,191
------------ -----------
$248,201,779 120,962,976
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended January 31, 1997 and 1996 (Unaudited)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Revenue:
Product sales, pipeline tariffs, terminaling fees
and natural gas gathering and processing fees $340,653,668 105,959,679
Costs and expenses:
Product costs and direct operating expenses 335,357,040 104,574,116
General and administrative 1,856,742 1,251,189
Depreciation and amortization 995,983 292,967
------------ -----------
338,209,765 106,118,272
------------ -----------
Operating income (loss) 2,443,903 (158,593)
Other income (expenses):
Interest income 398,856 121,851
Equity in (loss) of affiliates (105,674) (75,943)
Minority interests 42,186 22,255
Interest expense and other financing costs (1,438,007) (744,649)
Other, net 264,613 -
------------ -----------
(838,026) (676,486)
------------- -----------
Earnings (loss) before income taxes 1,605,877 (835,079)
Income taxes - current 180,000 31,500
------------ -----------
Net earnings (loss) $ 1,425,877 (866,579)
============ ===========
Weighted average common shares outstanding 21,826,756 14,713,980
============ ===========
Earnings (loss) per common share $ .07 (.06)
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Operations
Nine Months Ended January 31, 1997 and 1996 (Unaudited)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Revenue:
Product sales, pipeline tariffs, terminating fees
and natural gas gathering and processing fees $811,476,612 347,974,850
Costs and expenses:
Product costs and direct operating expenses 797,453,937 340,346,282
General and administrative 5,015,047 3,507,967
Depreciation and amortization 1,951,011 853,315
------------ -----------
804,419,995 344,707,564
------------ -----------
Operating income 7,056,617 3,267,286
Other income (expenses):
Interest income 1,291,907 380,544
Equity in earnings of affiliates 317,477 316,241
Minority interests (106,863) (108,845)
Interest expense and other financing costs (2,808,287) (2,148,587)
Other, net 604,689 -
------------ -----------
(701,077) (1,560,647)
------------ -----------
Earnings before income taxes 6,355,540 1,706,639
Income taxes - current 450,000 104,502
------------ -----------
Net earnings $ 5,905,540 1,602,137
============ ===========
Weighted average common shares outstanding 21,469,120 14,713,980
============ ===========
Earnings per common share $ .28 .11
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Nine Months Ended January 31, 1997 and Year Ended April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Retained
Capital in earnings
Common excess of (accumulated
stock par value deficit) Total
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Balance at April 30, 1995 $ 1,478,071 36,912,002 (9,919,371) 28,470,702
Common stock issued for cash 455,046 24,558,462 - 25,013,508
Costs related to issuance of common stock - (282,988) - (282,988)
Net earnings - - 4,617,969 4,617,969
------------------------------------------------------
Balance at April 30, 1996 1,933,117 61,187,476 (5,301,402) 57,819,191
------------------------------------------------------
Change in the par value of common stock from
$.10 to $.01 in connection with merger (Note 2) (1,739,805) 1,739,805 - -
Common stock issued in merger (Note 2) 14,744 8,093,735 - 8,108,479
Common stock issued for options exercised 1,834 673,567 - 675,401
Common stock issued for minority interest
in subsidiary 1,000 974,000 - 975,000
Common stock repurchased and retired (148) (199,852) - (200,000)
Net earnings - - 5,905,540 5,905,540
------------------------------------------------------
Balance at January 31, 1997 $ 210,742 72,468,731 604,138 73,283,611
======================================================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine Months Ended January 31, 1997 and 1996 (Unaudited)
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 5,905,540 1,602,137
Adjustments to reconcile net earnings to net
cash used by operating activities:
Depreciation and amortization 1,951,011 853,315
Equity in earnings of affiliates (317,477) (316,241)
Minority interests 106,863 108,845
(Gain) on disposition of assets (76,872) (4,403)
Changes in operating assets and liabilities,
net of effect of acquisitions:
Trade accounts receivable (20,447,555) 2,166,766
Inventories (25,687,666) (3,639,775)
Prepaid expenses and other 346,133 (52,487)
Trade accounts payable 16,188,334 (12,793,266)
Inventory due under exchange agreements (2,588,484) (236,258)
Accrued liabilities 2,246,303 (65,289)
------------ -----------
Net cash used by operating activities. (22,373,870) (12,376,656)
------------ -----------
Cash flows from investing activities:
Purchases of property, plant and equipment (85,421,308) (2,895,371)
Proceeds from sale of assets 15,123 295,387
Cash received in connection with acquisition 2,315,527
Costs related to acquisition (399,284)
Merger related costs (263,452)
Cash balance in subsidiary sold (111,341)
Decrease (increase) in other assets, net (892,909) 65,770
------------ -----------
Net cash used by investinga activities (84,494,192) (2,797,666)
------------ -----------
Cash flows from financing activities:
Borrowings (repayments) of long-term debt, net 95,957,800 (5,647,169)
Common stock issued for cash 675,401 -
Stock subscription received in cash - 30,000,002
Costs relating to conversion of preferred stock and
issuance of common stock and debt - (250,938)
------------ ----------
Net cash provided by financing activities 96,633,201 24,101,895
------------ ----------
Increase (decrease) in cash and cash equivalents (10,234,861) 8,927,573
Cash and cash equivalents at beginning of period 38,403,234 1,801,828
------------ ---------
Cash and cash equivalents at end of period $ 28,168,373 10,729,401
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
Nine Months Ended January 31, 1997 and 1996 (Unaudited)
- -------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Supplemental disclosures of cash flow information:
Acquisition of Sheffield Exploration Company (Note 2)
Fair value of assets acquired $8,739,247 -
Fair value of liabilities assumed 231,484 -
---------- -----
8,507,763 -
Costs related to acquisition 399,284
---------- -----
Fair value of stock issued 8,108,479 -
========== =====
Cash received in connection with acquisition
included in assets acquired $2,315,527 -
========== =====
Sale of Sheffield Operating Company (Note 3)
Fair value of assets sold $1,991,403 -
Fair value of liabilities assumed by purchaser 245,451 -
----------- -----
Fair value of consideration received $2,236,854 -
=========== =====
Cash distributed in connection with sale
included in assets sold $ 111,341 -
========== =====
</TABLE>
Acquisition of minority interest in Bear Paw Energy, Inc.
The Company acquired the remaining 10% interest in Bear Paw Energy, Inc. in
exchange for 100,000 shares of the Company's common stock valued at the market
value of the common stock at the date of issuance, October 31, 1996.
See accompanying notes to consolidated financial statements.
9
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 31, 1997
- --------------------------------------------------------------------------------
(1) Basis of Presentation
The TransMontaigne Oil Company ("TransMontaigne") consolidated balance
sheets at January 31, 1997 and April 30, 1996, the consolidated statements
of operations for the three months and nine months ended January 31, 1997
and 1996, the consolidated statement of stockholders' equity for the nine
months ended January 31, 1997 and the year ended April 30, 1996 and the
consolidated statements of cash flows for the nine months ended January 31,
1997 and 1996 are unaudited and reflect all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the financial position and operating
results for the interim periods presented. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's discussion and
analysis of financial condition and results of operations, contained in
TransMontaigne's Annual Report on Form 10-K for the fiscal year ended April
30, 1996. The results of operations for the three months and the nine
months ended January 31, 1997 are not necessarily indicative of the results
for the entire fiscal year ending April 30, 1997.
(2) Merger
TransMontaigne is the surviving corporation of a merger (the "Merger")
between TransMontaigne Oil Company and Sheffield Exploration Company, Inc.
("Sheffield") effective June 4, 1996. The Merger constituted a reverse
acquisition of Sheffield, in that Sheffield survived the Merger, but is
owned approximately 93% by the former stockholders of TransMontaigne Oil
Company. The par value of the common stock of the company surviving the
Merger is $.01 per share. As a result of the Merger, (i) the name of
Sheffield was changed to TransMontaigne Oil Company; (ii) the number of
shares of authorized common stock was increased to 40,000,000; and (iii) the
stock options which Sheffield had outstanding prior to the Merger became
options to purchase 79,338 shares of TransMontaigne's common stock at $3.65
per share. These options were exercised prior to their September 2, 1996
expiration date.
(3) Sale of Subsidiary
On October 31, 1996 TransMontaigne sold a wholly owned subsidiary for
approximately $2,237,000. TransMontaigne received as consideration a note
receivable for approximately $2,067,000 payable over five years, a
receivable for $100,000 and shares of common stock representing an
approximate 18% interest in the acquiring company's
10
<PAGE>
common stock. On November 4, 1996 TransMontaigne received a $700,000 cash
payment on the note and the $100,000 receivable was collected. On January 3,
1997, 14,815 shares of TransMontaigne's stock were received as a $200,000
payment on the note receivable. These shares were valued at the January 2,
1997 closing price of $13.50 and were retired.
(4) Acquisition of Grasslands Facilities
On December 20, 1996, TransMontaigne's wholly owned subsidiary, Bear Paw
Energy Inc., acquired for approximately $71,000,000 cash the Grasslands
natural gas gathering, processing, treating and fractionating system located
in western North Dakota and northeastern Montana. The Grasslands gas
processing plant, located in McKenzie County, North Dakota, was built in
1980. Natural gas is gathered from over 1,200 active leases through
approximately 2,500 miles of gathering lines. The plant is designed for
approximately 65 million cubic fees per day inlet capacity and has operated
at approximately 75 million cubic feet per day for extended periods.
Designed product recoveries are 88% propane, 99% butane and 100% gasoline.
The cost of the Grasslands facilities has been allocated to the assets
acquired based on their estimated fair market value as determined by
TransMontaigne.
The following summarized unaudited proforma historical results of operations
assumes that the acquisition of the Grasslands facilities occurred as of May
1, 1995 and combines the historical results of TransMontaigne for the three
months ended January 31, 1997 and 1996 and the nine months ended January 31,
1997 and 1996 with the historical results of operations of the Grasslands
facilities for the three months ended December 31, 1996 and 1995 and the
nine months ended December 31, 1996 and 1995, respectively.
The unaudited proforma results of operations are not necessarily indicative
of the results of operations that would actually have occurred if the
Grasslands facilities had been acquired as of the date indicated or which
will be attained in the future.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31 January 31
---------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
(IN 000'S)
<S> <C> <C> <C> <C>
Revenues $348,466 117,865 842,937 381,434
======== ======= ======= =======
Net Earnings $ 2,385 (511) 7,914 1,343
======== ======= ======= =======
Earnings (Loss)
Per Share $ .11 (.03) .37 .09
======== ======= ======= =======
</TABLE>
11
<PAGE>
(5) Subsequent Event
On February 13, 1997, TransMontaigne closed a public offering of 4,357,000
shares of its common stock of which 4,035,000 shares were issued and sold by
TransMontaigne and 322,000 shares were sold by certain selling stockholders.
The net proceeds to TransMontaigne, based on the public offering price of
$14.25 per share, were approximately $53,440,000, after deducting
underwriting discounts and commissions and estimated offering expenses, of
which $45,000,000 was used to repay a portion of the debt incurred under its
bank credit facility. The balance will be used for general corporate
purposes. On March 11, 1997 the underwriters' overallotment to purchase an
additional 557,543 shares and the Merrill Lynch Growth Fund antidilution
right to purchase an additional 98,390 shares were both exercised and
TransMontaigne received additional net proceeds of $8,809,000 which will be
used for general corporate purposes.
TransMontaigne's bank credit facility at January 31, 1997 consisted of a
five year $45,000,000 working capital revolving credit facility and an
$85,000,000 acquisition revolving credit facility. Approximately
$71,000,000 of the acquisition revolving credit facility was used to finance
the acquisition of the Grasslands facilities. The first $45,000,000 of net
proceeds from the public offering was required to repay amounts outstanding
under the acquisition revolving credit facility. After the repayment of
$45,000,000 on February 13, 1997, and since TransMontaigne then had
consolidated tangible net worth in excess of $100,000,000, as defined in the
bank credit agreement, TransMontaigne converted the balance of the bank
credit facility into a single $85,000,000 successor bank credit facility due
December 31, 2001. The amount available under the successor bank credit
facility is to be reduced by $3,125,000 each calendar quarter beginning
March 31, 2000. Borrowings under the prior and successor bank credit
facilities generally bear interest at an annual rate equal to the lender's
announced Base Rate, subject to a Eurodollar pricing option at
TransMontaigne's election.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
TransMontaigne provides a broad range of integrated transportation, terminaling,
supply, distribution, gathering, processing and marketing services to producers,
refiners, distributors, marketers and end-users of petroleum products, natural
gas and crude oil in the downstream sector of the petroleum industry.
TransMontaigne is a holding company which conducts operations through its
subsidiaries primarily in the mid-continent and Rocky Mountain regions of the
United States. TransMontaigne does not explore for, or produce, crude oil or
natural gas, and it owns no crude oil or natural gas reserves.
TransMontaigne owns and operates refined product, crude oil and natural gas
assets. TransMontaigne's refined petroleum product and crude oil assets consist
primarily of 747 miles of pipeline and ten storage and terminal facilities in
seven states with a combined tank storage capacity of approximately 4,820,000
barrels. Its natural gas gathering and processing assets consist of four
gathering and processing systems in two states with combined throughput capacity
of approximately 85 million cubic feet per day and over 2,700 miles of
pipelines. The use of these facilities and an extensive network of additional
common carrier pipelines and terminal facilities owned by others allows
TransMontaigne to significantly expand its geographic service area and the types
of services it provides. TransMontaigne also manages 15 small natural gas
gathering systems for a major interstate pipeline company. In addition, a 65%
owned subsidiary of TransMontaigne owns 27.75% of the stock of Lion Oil Company
("Lion") which owns and operates a modern oil refinery in El Dorado, Arkansas
and associated pipeline systems and terminal facilities.
In December 1996, TransMontaigne acquired the Grasslands natural gas gathering
and processing facilities for approximately $71,000,000 in cash. The
acquisition has been accounted for as a purchase. The Grasslands facilities,
which are located in western North Dakota and northeastern Montana, complement
TransMontaigne's existing natural gas gathering and processing facilities in the
Williston Basin of the Rocky Mountain region, and enable TransMontaigne to
improve service to oil and gas producers as well as to end-users of natural gas
liquids ("NGLs") and residue natural gas. The Grasslands facilities are one of
the largest natural gas gathering and processing systems in the Williston Basin
which is currently among the most active areas of domestic oil and gas drilling.
With the acquisition of these assets, natural gas gathering and processing
represents a significant and integral component of TransMontaigne's business.
Effective January 1, 1997, TransMontaigne reorganized its corporate structure in
order for its business activities to be conducted by operating subsidiary
corporations while management, administrative, financial, in-house legal,
accounting, business development and environmental services are provided by the
parent holding company.
13
<PAGE>
TransMontaigne Transportation Services Inc. provides refined petroleum product
and crude oil pipeline transportation, storage and terminaling services to the
downstream sector of the petroleum industry through its subsidiaries,
TransMontaigne Pipeline Inc. and TransMontaigne Terminaling Inc.
TransMontaigne Product Services Inc. provides refined petroleum products, crude
oil and natural gas liquids supply, distribution and marketing services to the
downstream sector of the petroleum industry.
Bear Paw Energy Inc. provides natural gas gathering and processing services to
oil and gas producers as well as to end-users of NGLs and residue natural gas.
Results of Operations
<TABLE>
<CAPTION>
Three Nine
Months Ended Months Ended
January 31 January 31
---------- ----------
1997 1996 1997 1996
-------- ------- --------- -------
(in thousands, except margin per gallon data)
<S> <C> <C> <C> <C>
Pipeline Operations
Volume(1) 4,506 4,355 14,271 14,399
Revenues $ 2,866 2,778 8,927 6,943
Net Operating Margins(2) $ 1,505 1,864 4,885 3,905
Margin per Gallon $ 0.0080 0.0102 0.0082 0.0065
Terminal Operations
Volume(1) 178,000 149,000 530,000 433,600
Revenues $ 1,305 845 3,680 2,462
Net Operating Margins(2) $ 740 631 2,488 1,840
Margin per Gallon $ 0.0042 0.0042 0.0047 0.0042
Products Supply and Distribution Operations
Volume(1) 491,000 205,000 1,237,000 650,000
Revenues $328,188 102,337 790,575 338,570
Net Operating Margins(2) $ 580 (1,109) 4,178 1,884
Margin per Gallon $ 0.0012 (0.0054) 0.0034 0.0029
Natural Gas Gathering and Processing Operations (3)
Inlet Volume (4) 1,609 - 1,609,200 -
NGL Production (4) 9,253 - 9,253 -
Residue Production (4) 1,452 - 1,452 -
Revenues $ 8,295 - 8,295 -
Net Operating Margins(2) $ 2,472 - 2,472 -
Margin per Production Unit (5) - - - -
Total Operations
Revenues $340,654 105,960 811,477 347,975
Net Operating Margins(2) $ 5,297 1,386 14,023 7,629
</TABLE>
14
<PAGE>
(1) Pipeline volumes are expressed in barrels (42 gallons per barrel);
terminal and products supply and distribution volumes are expressed in gallons.
(2) Net operating margin represents revenues less direct operating expenses
for pipeline and terminal operations; revenues less cost of refined petroleum
products sold for products supply and distribution operations; and revenues less
cost of natural gas gathered, processed and sold and direct operating expenses
for natural gas gathering and processing operations.
(3) Natural gas gathering and processing volumes, production and revenues
for the three months and nine months ended January 31, 1997 include those items
only for the period from December 20, 1996, the closing date of the Grasslands
facilities acquisition, through January 31, 1997.
(4) Natural gas inlet volumes are expressed in thousand cubic feet; NGL
production is expressed in gallons; and residue natural gas production is
expressed in million British Thermal Units.
(5) Margin per production unit information for NGLs and residue natural gas
produced is not presently available.
Prior to the acquisition of the Grasslands facilities, TransMontaigne's revenues
were derived primarily from three activities: transporting refined petroleum
products and crude oil in pipelines; storing and terminaling refined petroleum
products; and refined petroleum products supply, distribution and marketing.
The acquisition of the Grasslands natural gas gathering and processing
facilities will have a significant impact on TransMontaigne's future results of
operations.
Pipeline revenues are based on the volume of refined petroleum products or crude
oil transported and the distance from the origin point to the delivery point.
TransMontaigne's interstate pipeline systems transport refined petroleum
products and their tariffs are regulated by the Federal Energy Regulatory
Commission (the "FERC"). TransMontaigne's intrastate pipeline transports crude
oil and its tariffs are not regulated by the FERC but are regulated by the Texas
Railroad Commission.
Terminal revenues are based on the volume of refined petroleum products handled,
generally at a standard per gallon rate. Terminal fees are not regulated.
Storage fees are generally based on a per gallon rate, which varies with the
duration of the storage arrangement, the refined petroleum product stored and
special handling requirements.
The operating costs of the pipeline and terminal businesses include wages and
employee benefits, utilities, communications, maintenance and repairs, property
taxes, rent, insurance, vehicle expenses, environmental protection costs,
materials and supplies.
The products supply and distribution business includes bulk purchases and sales
of refined petroleum products and the wholesale distribution of refined
petroleum products from terminals. Bulk purchase and sale transactions in
quantities of 25,000 barrels to 50,000 barrels are common and are generally made
at small margins. Wholesale distribution of refined petroleum products from
proprietary and nonproprietary terminal truck loading rack locations is
primarily represented by truck load sales of 8,000 gallons.
Natural gas gathering and processing revenues are based upon the volume of
natural gas purchased from producers which is then gathered and processed with
the resulting products marketed by TransMontaigne. Residue natural gas is
delivered to and marketed through connections with interstate pipelines. NGLs
are transported from the processing plants by truck or pipeline to storage
facilities from which they are further transported to market by truck or rail.
15
<PAGE>
The operating expenses of the natural gas gathering and processing business
includes wages and employee benefits, utilities, maintenance and repairs,
property taxes, insurance, vehicle expenses, environmental protection costs,
materials and supplies.
Three Months Ended January 31, 1997 Compared to Three Months Ended January 31,
1996
The net operating margin from pipeline operations of $1,505,000 decreased 19%,
or $359,000, in the current year quarter. This decrease resulted primarily from
a net increase in operating costs, partially offset by a net increase in the
volumes of higher tariff long haul pipeline shipments together with increases in
joint tariff participations and tankage rental income all of which resulted in a
3% increase in revenues of $88,000 in the current year quarter. The net
increase in operating costs of $447,000, or 49%, was primarily due to
incremental power costs from the additional long haul shipment volumes as well
as increases in field personnel costs and repairs and maintenance over the prior
year quarter.
The net operating margin from terminal operations of $740,000 increased 17%, or
$109,000, in the current year quarter. This increase resulted from a 19%
increase in volumes handled, primarily at the Rogers, Arkansas, Indianapolis,
Indiana, and East Chicago, Indiana facilities, partially offset by a 164%
increase in terminal operating costs primarily due to a revision of the lease
terms at the Rogers terminal and additional transportation charges as well as
increases in field personnel expenses, repairs and maintenance and property tax
assessments over the prior year quarter.
The net operating margin from product sales of $580,000 increased $1,689,000 in
the current year quarter from a negative net operating margin of $1,109,000 in
the prior year quarter, on additional revenues of $225,851,000 and an increase
of 286,000,000 gallons sold. The $.0012 net operating margin per gallon
realized in the current year quarter increased $.0066 over the negative $.0054
per gallon realized during the prior year quarter which negative product margin
was caused by weak market conditions during that quarter.
The net operating margin from natural gas gathering and processing operations of
$2,472,000 during the current year quarter is primarily attributable to the
business activities of the Grasslands facilities for the period from the
December 20, 1996 acquisition closing date through January 31, 1997.
The unaudited proforma results of operations reflected in Note (4) to the
Consolidated Financial Statements on page 11 include the historical operating
performance of the Grasslands facilities under prior ownership and are presented
for comparative purposes. Included in this proforma information are Grasslands
facilities revenues of $15,812,000 for the three months ended December 31, 1996
representing an increase of $3,907,000, or 33%, over revenues of $11,905,000 for
the three months ended December 31, 1995. This revenue increase was primarily
due to improved product prices for NGLs and residue natural gas resulting from
strong wholesale demand during December 1996 and January 1997 together with a
small increase in product volumes sold. The proforma net operating margin from
the Grasslands facilities operations was $5,211,000, an 80% increase of
$2,320,000, for the three months ended December 31, 1996 over the three months
ended December 31, 1995 proforma net operating margin of $2,891,000. This
increase resulted primarily from an improvement in product prices,
16
<PAGE>
decreased operating expenses and the conversion of a natural gas gathering
agreement from a fee based to a percentage of proceeds arrangement.
During the current year quarter, general and administrative expenses increased
$606,000, a 48% increase over the prior year quarter, primarily due to
additional personnel costs and increased office lease expense, including
expenses attributable to TransMontaigne's expanded natural gas gathering and
processing business activities, as well as increases in employee relocation,
insurance, information systems and communication expenses over the prior year
quarter.
Other income includes equity in earnings of affiliates and interest income.
Equity in earnings of affiliates is essentially represented by TransMontaigne's
share of Lion's net loss incurred during the current year quarter (net of
related minority interests) of approximately $63,000 compared to a net loss of
$54,000 for the prior year quarter. This loss was primarily due to Lion
realizing slightly lower refinery "crack spreads" (the price difference between
product output and crude oil costs).
Interest income during the current year quarter increased to $399,000 from
$122,000 primarily due to an approximate $18,000,000 increase in average
interest bearing cash balances held for future investments.
Interest expense represents interest on TransMontaigne's revolving bank line of
credit which was used to finance the Grasslands facilities acquisition and other
property and equipment additions as well as increase in inventory and accounts
receivable, and also includes interest on the outstanding senior subordinated
debentures. Interest expense during the current year quarter increased
$693,000, or 93%, from the prior year quarter as a result of an approximate
$37,000,000 increase in the weighted average loan balances outstanding,
reduced by lower interest rates. Interest expense also includes other financing
costs, including fees paid for letters of credit issued to product suppliers and
loan commitment fees.
Net earnings before income taxes for the current year quarter were $1,606,000,
an increase of $2,441,000 over the $835,000 loss before income taxes incurred in
the prior year quarter. This improvement was primarily the result of increases
in the products supply and distribution and terminal net operating margins, the
additional net operating margin from natural gas gathering and processing
operations attributable essentially to the Grasslands facilities and additional
interest income, which increases were partially offset by the lower pipelines
net operating margin, the loss from Lion and increased general and
administrative, depreciation and interest expenses. The provision for income
taxes of $180,000 for the current year quarter primarily represents the accrual
of estimated state income taxes. Net after tax earnings for the current year
quarter were $1,426,000, an increase of $2,293,000 over the $867,000 loss
reported for the prior year quarter.
Nine Months Ended January 31, 1997 Compared to Nine Months Ended January 31,
1996
The net operating margin from pipeline operations of $4,885,000 increased 25%,
or $980,000, in the current year nine month period. This increase resulted
primarily from a net increase in the volumes of higher tariff long haul
pipeline shipments (notwithstanding a 1% decrease in total volumes shipped)
together with increases in joint tariff participations and tankage rental
income, all of which resulted in a 29% increase in revenues of $1,984,000 in the
current year nine month
17
<PAGE>
period. The net increase in operating costs of $1,004,000, or 33%, was primarily
due to incremental power costs from the additional long haul shipment volumes as
well as increases in field personnel costs, repairs and maintenance over the
prior year nine month period.
The net operating margin from terminal operations of $2,488,000 increased 35%,
or $648,000, in the current year nine month period. This increase resulted from
a 22% increase in volumes handled, primarily at the Little Rock, Arkansas and
Indianapolis, Indiana and East Chicago, Indiana terminals, partially offset by a
92% increase in terminal operating costs primarily due to a revision of the
lease terms at the Rogers, Arkansas terminal and additional transportation
charges as well as increases in field personnel expenses, repairs and
maintenance, and property tax assessments over the prior year nine month period.
The net operating margin from product sales of $4,178,000 increased 122%, or
$2,294,000, in the current year nine month period, while revenues increased
$452,005,000 on additional volume of 587,000,000 gallons sold. The $.0034 net
operating margin per gallon realized in the current year nine month period
increased $.0005 over the $.0029 per gallon realized during the prior year nine
month period, which higher product margin was caused by stronger market
conditions during the current period.
The net operating margin from natural gas gathering and processing operations of
$2,472,000 during the current year nine month period is primarily attributable
to the business activities of the Grasslands facilities for the period from the
December 20, 1996 acquisition closing date through January 31, 1997.
The unaudited proforma results of operations reflected in Note (4) to the
Consolidated Financial Statements on page 11 include the historical operating
performance of the Grasslands facilities under prior ownership and are presented
for comparative purposes. Included in this proforma information are Grasslands
facilities revenues of $39,461,000 for the nine months ended December 31, 1996
representing an increase of $6,002,000, or 18%, over revenues of $33,459,000 for
the nine months ended December 31, 1995. This revenue increase was primarily
due to improved product prices for NGLs and residue natural gas resulting from
strong wholesale demand during December 1996 and January 1997 together with a
small increase in product volumes sold. The proforma net operating margin from
the Grasslands facilities operations was $11,501,000, a 57% increase of
$4,155,000, during the nine months ended December 31, 1996 over the nine months
ended December 31, 1995 proforma net operating margin of $7,346,000. This
increase resulted primarily from an improvement in product prices, decreased
operating expenses and the conversion of a natural gas gathering agreement from
a fee based to a percentage of proceeds arrangement.
During the current year nine month period, general and administrative expenses
increased $1,507,000, a 43% increase over the prior year nine month period,
primarily due to additional personnel costs and increased office lease expense,
including expenses attributable to TransMontaigne's expanded natural gas
gathering and processing business activities, as well as increases in employee
relocation, insurance, information systems and communication expenses over the
prior year nine month period.
18
<PAGE>
Other income includes equity in earnings of affiliates and interest income.
Equity in earnings of affiliates is essentially represented by TransMontaigne's
share of Lion's earnings. During the current year nine month period
TransMontaigne's share of Lion's net earnings (net of related minority
interests) was approximately $211,000 compared to net earnings of $207,000 for
the prior year nine month period, primarily due to Lion realizing slightly
higher refinery "crack spreads" (the price difference between product output and
crude oil costs).
Interest income during the current year nine month period increased to
$1,292,000 from $381,000 primarily due to an approximate $24,000,000 increase in
average interest bearing cash balances held for future investments.
Interest expense represents interest on TransMontaigne's revolving bank line of
credit which was used to finance the Grasslands facilities acquisition and
other property and equipment additions as well as increases in inventory and
accounts receivable, and includes interest on the outstanding senior
subordinated debentures. Interest expense during the current year nine month
period increased $660,000, or 31%, from the prior year nine month period as a
result of an approximate $15,000,000 increase in the weighted average loan
balances outstanding, reduced by lower interest rates. Interest expense also
includes other financing costs, including fees paid for letters of credit issued
to product suppliers and loan commitment fees.
Net earnings before income taxes for the current year nine month period were
$6,356,000, a 272% increase of $4,649,000 over the $1,707,000 net earnings for
the prior year nine month period. This improvement was primarily the result of
increased product supply and distribution net operating margin, the additional
net operating margin from natural gas gathering and processing operations
attributable essentially to the Grasslands facilities and additional interest
income, which increases were partially offset by the increased general and
administrative, depreciation and interest expenses. The provision for income
taxes of $450,000 for the current year nine month period primarily represents
the accrual of estimated state income taxes. Net after tax earnings for the
current year nine month period were $5,906,000, a 269% increase of $4,304,000
over the $1,602,000 net after tax earnings reported for the prior year nine
month period.
Liquidity and Capital Resources
The following summary reflects TransMontaigne's comparative net cash flows for
the nine month periods ended January 31, 1997 and 1996.
<TABLE>
<CAPTION>
Nine
Months Ended
January 31
-------------------------
1997 1996
------------ ----------
<S> <C> <C>
Net cash used by operating activities $22,373,870 12,376,656
Net cash used by investing activities 84,494,192 2,797,666
Net cash provided by financing activities 96,633,201 24,101,895
</TABLE>
Net cash used by operating activities during the nine month period ended January
31, 1997 increased $9,997,214 over the prior year nine month period. This
increase was primarily a result of increased petroleum product inventory levels
required to meet expanded levels of pipeline,
19
<PAGE>
terminaling and products supply and distribution operations, partially offset by
increased trade payables to suppliers of inventory, and increased trade
receivables resulting from increased petroleum products sales and residue
natural gas and NGLs sales following the Grasslands facilities acquisition in
December 1996.
Net cash used by investing activities during the nine month period ended January
31, 1997 increased $81,696,526 over the prior year nine month period. This
increase was primarily a result of capital expenditures relating to the
acquisition and construction of property, plant and equipment, including the
Grasslands facilities, the East Chicago storage facilities and the South Bend
terminal.
Net cash provided by financing activities during the nine month period ended
January 31, 1997 increased $72,531,306 over the prior year period. This
increase was primarily a result of additional borrowings under TransMontaigne's
credit facility. Net cash provided by financing activities during the nine
month period ended January 31, 1996 was primarily a result of proceeds received
from a $30,000,000 private placement of TransMontaigne common stock in May 1995
less net repayments of borrowings under the credit facility.
TransMontaigne made capital expenditures of $85,421,000 and $2,895,000
during the nine month periods ended January 31, 1997 and 1996, respectively, for
additions and improvements to its terminal and pipeline facilities as well as
approximately $71,000,000 for the Grasslands facilities acquisition. Capital
expenditures anticipated during the last quarter of the fiscal year ending April
30, 1997 are estimated to be $13,500,000. Future capital expenditures will
depend on numerous factors, including the availability and cost of appropriate
acquisitions; the demand for the services TransMontaigne provides; local, state
and federal governmental regulations; environmental compliance requirements;
fuel conservation efforts; and the availability of financing on acceptable
terms.
TransMontaigne's long-term debt provided under its credit facility increased
$87,223,000 during the current year quarter, and increased $95,958,000 during
the nine months ended January 31, 1997. Long-term debt increased $5,393,000
during the prior year quarter and decreased $5,647,000 during the nine months
ended January 31, 1996. Outstanding long-term debt was $124,907,000 at January
31, 1997. The increase in long-term debt provided funds to finance additional
product inventory and accounts receivable, purchase the Grasslands facilities
and acquire other capital assets.
On February 13, 1997, TransMontaigne closed a public offering of 4,357,000
shares of its common stock of which 4,035,000 shares were issued and sold by
TransMontaigne and 322,000 shares were sold by certain selling stockholders. The
net proceeds to TransMontaigne, based on the public offering price of $14.25 per
share, were approximately $53,440,000, after deducting underwriting discounts
and commissions and estimated offering expenses, of which $45,000,000 was used
to repay a portion of the long-term debt incurred under its bank credit
facility. The balance will be used for general corporate purposes. On March 11,
1997 the underwriters' overallotment option to purchase an additional 557,543
shares and the Merrill Lynch Growth Fund antidilution right to purchase an
additional 98,390 shares were both exercised and TransMontaigne received
additional net proceeds of $8,809,000 which will be used for general corporate
purposes.
20
<PAGE>
TransMontaigne's bank credit facility at January 31, 1997 consisted of a five
year $45,000,000 working capital revolving credit facility and an $85,000,000
acquisition revolving credit facility. Approximately $71,000,000 of the
acquisition revolving credit facility was used to finance the acquisition of the
Grasslands facilities. The first $45,000,000 of net proceeds from the public
offering was required to repay amounts outstanding under the acquisition
revolving credit facility. After the repayment of $45,000,000 on February 13,
1997, and since TransMontaigne then had consolidated tangible net worth in
excess of $100,000,000, as defined in the bank credit agreement, TransMontaigne
converted the balance of the bank credit facility into a single $85,000,000
successor bank credit facility due December 31, 2001. The amount available under
the successor bank credit facility is to be reduced by $3,125,000 each calendar
quarter beginning March 31, 2000. Borrowings under the prior and successor bank
credit facilities generally bear interest at an annual rate equal to the
lender's announced Base Rate, subject to a Eurodollar pricing option at
TransMontaigne's election. The weighted average interest rate on amount
outstanding under the credit facility as of January 31, 1997 was 7.3%. The
$130,000,000 prior credit facility at January 31, 1997 and the $85,000,000
successor facility are secured by a pledge of the capital stock of all of
TransMontaigne's subsidiaries, contain restrictive covenants and include
provisions which could inhibit a change in control of TransMontaigne.
TransMontaigne had working capital of $76,083,000 at January 31, 1997.
Management believes TransMontaigne's current working capital position; future
cash provided by operating activities; net proceeds received in February and
March, 1997 from its public offering; available borrowing capacity under the
bank credit facility; other borrowing permitted under the bank credit facility;
and its relationship with institutional lenders and equity investors should
enable it to meet its future capital requirements. There can be no assurance,
however, that TransMontaigne will be able to obtain additional capital when
needed on acceptable terms.
As of April 30, 1996, TransMontaigne had approximately $14,900,000 of net
operating loss carryforwards for federal income tax purposes which are available
to offset taxable income through 2009. Due to changes in ownership which
occurred through April 30, 1996, the use of these net operating loss
carryforwards to offset taxable income is limited to approximately $4,300,000
annually. As a result of a merger in June 1996, TransMontaigne has additional
net operating loss carryforwards which were estimated to be approximately
$6,600,000 as of January 31, 1997. These net operating loss carryforwards are
available to offset taxable income through 2010, limited to approximately
$1,300,000 annually. The tax benefit of the utilization of such carryforwards
was recorded as a reduction of goodwill and other intangible assets acquired in
the merger.
Accounting Standards
Statement of Financial Accounting Standards No. 121, "Accounting for Impairment
of Long-Lived Assets to be Disposed Of" ("SFAS 121") was issued in March 1995,
by the Financial Accounting Standards Board. It requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. SFAS 121 is
required by be adopted for fiscal years beginning after December 15, 1995. The
adoption of this statement by TransMontaigne in the first quarter of the fiscal
year ending April 30, 1997 had no effect on TransMontaigne's financial
statements.
21
<PAGE>
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") was issued by the Financial Accounting Standards
Board in October 1995. This standard addresses the timing and measurement of
stock-based compensation expense. Entities electing to continue to follow
Accounting Principles Board Opinion No. 25 ("APB 25") must make proforma
disclosures of net income and earnings per share, as if the fair value based
method of accounting defined by SFAS 123 had been applied. SFAS 123 is
applicable to fiscal years beginning after December 15, 1995. TransMontaigne
has elected to retain the approach of APB 25 (the intrinsic value method) for
recognizing stock-based compensation in its consolidated financial statements.
TransMontaigne will include the disclosures required by SFAS 123 in future
annual consolidated financial statements.
Risk Factors and Cautionary Statements
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 such as the words or phrases
"believes," "is to be," "will depend," "will become" and "plans to" or similar
expressions. TransMontaigne wishes to advise readers that the forward-looking
statements in this report are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed in or implied by
the statements including, but not limited to, the following:
. TransMontaigne's margins on high volumes of products and/or
volatility in the price of TransMontaigne's products purchased and
sold
. the risk that, to the extent TransMontaigne attempts to selectively
hedge its inventory positions, those hedges are not effective
. the risk that TransMontaigne could be required to recognize a
financial statement loss through a lower of cost or market write-down
of inventories
. TransMontaigne's compliance with current and possibly future
environmental regulations
22
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule. FILED HEREWITH
The following reports on Form 8-K were filed during the quarter ended January
31, 1997 and are included in this Form 10Q by reference.
December 11, 1996, reporting Item 5 (change in AMEX trading symbol from SHE
to TMG) of Form 8-K.
January 3, 1997, reporting Item 2 (acquisition of Grasslands natural gas
gathering and processing facilities); Item 5 ($130,000,000 Credit
Agreement); and Item 7 (historical and proforma financial statements for
the Grasslands facilities acquisition) of Form 8-K.
23
<PAGE>
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.
Dated: March 14, 1997 TRANSMONTAIGNE OIL COMPANY
(Registrant)
/s/ CORTLANDT S. DIETLER
------------------------
Cortlandt S. Dietler
Chairman and Chief Executive Officer
/s/ RODNEY S. PLESS
-------------------
Rodney S. Pless
Vice President and Controller
(Principal Accounting Officer)
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
TransMontaigne's financial statements for the nine months ended January 31, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 28,168,373
<SECURITIES> 0
<RECEIVABLES> 41,758,953
<ALLOWANCES> 0
<INVENTORY> 49,296,802
<CURRENT-ASSETS> 120,534,394
<PP&E> 113,694,325
<DEPRECIATION> (8,151,832)
<TOTAL-ASSETS> 248,201,779
<CURRENT-LIABILITIES> 44,451,675
<BONDS> 124,906,667
0
0
<COMMON> 210,742
<OTHER-SE> 73,072,869
<TOTAL-LIABILITY-AND-EQUITY> 248,201,779
<SALES> 0
<TOTAL-REVENUES> 811,476,612
<CGS> 0
<TOTAL-COSTS> 797,453,937
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,808,287
<INCOME-PRETAX> 6,355,540
<INCOME-TAX> 450,000
<INCOME-CONTINUING> 5,905,540
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,905,540
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
