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 MARCH 31, 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 May 11, 2000, 6,884,000 Class A common shares of the registrant
were outstanding.
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STATIA TERMINALS GROUP N.V.
QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 2000
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 1
Consolidated Condensed Statements of Income (Loss) 2
Consolidated Condensed Statements of Cash Flows 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
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. 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.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
December 31, March 31,
1999 2000
------------ ----------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,658 $ 4,930
Accounts receivable-
Trade, net 12,957 13,232
Other 3,704 4,115
Inventory, net 3,239 2,823
Prepaid expenses 1,723 1,055
--------- ---------
Total current assets 27,281 26,155
PROPERTY AND EQUIPMENT, net 206,031 205,256
OTHER NONCURRENT ASSETS, net 2,985 2,778
--------- ---------
Total assets $ 236,297 $ 234,189
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 14,086 $ 14,375
Accrued interest payable 1,516 4,483
Other accrued expenses 7,084 6,338
--------- ---------
Total current liabilities 22,686 25,196
DISTRIBUTIONS PAYABLE 2,913 2,913
LONG-TERM DEBT- 11-3/4% FIRST MORTGAGE NOTES 101,000 101,000
--------- ---------
Total liabilities 126,599 129,109
SHAREHOLDERS' EQUITY:
Class A common shares 76 76
Class B subordinated shares 38 38
Class C incentive shares -- --
Additional paid-in capital 129,834 128,757
Notes receivable from shareholders (1,474) (1,474)
Accumulated deficit (16,522) (18,060)
Class A common shares in treasury (2,254) (4,257)
--------- ---------
Total shareholders' equity 109,698 105,080
--------- ---------
Total liabilities and shareholders' equity $ 236,297 $ 234,189
========= =========
The accompanying notes are an integral part of these consolidated
condensed financial statements.
Page 1
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STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
For the Three Months Ended
March 31,
-------------------------
1999 2000
-------- --------
REVENUES $ 37,415 $ 42,305
COSTS OF SERVICES AND PRODUCTS SOLD 28,600 38,232
-------- --------
Gross profit 8,815 4,073
ADMINISTRATIVE EXPENSES 2,535 2,260
SPECIAL COMPENSATION EXPENSE 1,947 --
-------- --------
Operating income 4,333 1,813
INTEREST EXPENSE 4,202 3,168
INTEREST INCOME 189 81
-------- --------
Income (loss) before provision for income
taxes and preferred stock dividends 320 (1,274)
PROVISION FOR INCOME TAXES 254 264
-------- --------
Income (loss) before preferred stock dividends 66 (1,538)
PREFERRED STOCK DIVIDENDS 1,721 --
-------- --------
Net loss to common stockholders $ (1,655) $ (1,538)
======== ========
BASIC AND DILUTED LOSS PER CLASS A COMMON SHARE: $ -- $ (0.22)
======== ========
BASIC AND DILUTED LOSS PER CLASS B SUBORDINATED SHARE: $ (0.50) $ --
======== ========
The accompanying notes are an integral part of these consolidated
condensed financial statements.
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STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
For the Three Months Ended
March 31,
-------------------------
1999 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss to common stockholders $ (1,655) $ (1,538)
Adjustments to reconcile net loss to common stockholders
to net cash provided by operating activities:
Depreciation, amortization and non-cash charges 3,106 3,704
Preferred stock dividends accrued 1,721 --
Increase in accounts receivable-trade (1,335) (275)
(Increase) decrease in other receivables 717 (411)
Decrease in inventory 3,079 416
(Increase) decrease in prepaid expenses (228) 668
(Increase) decrease in other non-current assets (44) 37
Increase (decrease) in accounts payable (408) 289
Increase in accrued expenses 4,019 2,042
-------- --------
Net cash provided by operating activities 8,972 4,932
-------- --------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchases of property and equipment (2,008) (2,759)
Proceeds from sale of property and equipment 15 --
-------- --------
Net cash used in investing activities (1,993) (2,759)
-------- --------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Purchase of Class A common shares as treasury stock -- (1,824)
Payment of Class A common share distribution -- (1,077)
Payment of initial public offering of equity direct costs (566) --
-------- --------
Net cash used in financing activities (566) (2,901)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,413 (728)
CASH AND CASH EQUIVALENTS, beginning of period 14,061 5,658
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 20,474 $ 4,930
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 188 $ 94
======== ========
Cash paid for interest $ 18 $ 31
======== ========
The accompanying notes are an integral part of these consolidated
condensed financial statements.
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STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2000
(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 the Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999 (the "Form 10-K"). 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 March 31, 2000, and the results of its operations and cash flows for the
three months ended March 31, 1999, and 2000. Operating results for the three
months ended March 31, 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.
For all periods presented herein, there were no 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
revenue 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, interest income, income taxes, depreciation,
amortization, and certain non-recurring income and expenses ("Adjusted EBITDA")
and earnings before interest expense, interest income, income taxes, and certain
non-recurring income and expenses ("Adjusted EBIT").
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STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2000
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
2. SEGMENT INFORMATION- (CONTINUED)
The following information is provided for the Company's terminaling
services and product sales segments:
For the Three Months Ended
March 31,
-------------------------
1999 2000
------- -------
REVENUES:
Terminaling services $16,628 $12,430
Product sales 20,787 29,875
======= =======
Total $37,415 $42,305
======= =======
ADJUSTED EBITDA:
Terminaling services $ 8,126 $ 4,020
Product sales 1,072 1,408
======= =======
Total $ 9,198 $ 5,428
======= =======
DEPRECIATION AND AMORTIZATION
EXPENSE:
Terminaling services $ 2,586 $ 3,385
Product sales 370 319
======= =======
Total $ 2,956 $ 3,704
======= =======
ADJUSTED EBIT:
Terminaling services $ 5,540 $ 635
Product sales 702 1,089
======= =======
Total $ 6,242 $ 1,724
======= =======
A reconciliation of Adjusted EBIT to the Company's income (loss) before
provision for income taxes and preferred stock dividends is as follows:
For the Three Months Ended
March 31,
-------------------------
1999 2000
------- -------
Adjusted EBIT $ 6,242 $ 1,724
Special compensation expense (1,947) --
Interest expense excluding debt
amortization expense (3,975) (2,998)
------- -------
Income (loss) before provision for income
taxes and preferred stock dividends $ 320 $(1,274)
======= =======
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STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2000
(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.
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 Company's previously outstanding preferred stock with conversion features
was antidilutive for all 1999 periods presented.
The following additional information is presented with respect to the
Company's earnings per share amounts:
For the Three Months Ended
March 31,
----------------------------
1999 2000
--------- ---------
EARNINGS PER CLASS A COMMON SHARE
Earnings and losses allocated to Class A common shares:
Net loss to common stockholders $ -- $ (1,538)
========= ===========
Weighted average Class A common shares outstanding -- 7,109,000
Dilutive effect of weighted average Class B
subordinated shares outstanding -- --
========= ===========
Diluted Class A common shares outstanding -- 7,109,000
========= ===========
EARNINGS PER CLASS B SUBORDINATED SHARE
Earnings and losses allocated to Class B subordinated
shares:
Net loss to common stockholders $ (1,655) $ --
========= ===========
Weighted average Class B subordinated shares
outstanding 3,304,000 3,800,000
Dilutive effect of stock options and preferred
stock with conversion features -- --
--------- -----------
Diluted Class B subordinated shares outstanding 3,304,000 3,800,000
========= ===========
Page 6
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STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2000
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
4. INITIAL PUBLIC OFFERING OF EQUITY AND RELATED TRANSACTIONS
As more fully discussed in the Form 10-K, on April 28, 1999, Group
completed its initial public equity offering of 7.6 million Class A common
shares. During the three months ended March 31, 1999, the Company recorded as
special compensation expense a bonus in the amount of $1,947 for particular
members of the Company's management. The purpose of this special management
bonus was to partially reimburse these individuals with respect to adverse tax
consequences that resulted from the offering and other past compensation
arrangements.
In conjunction with the transactions surrounding the initial public
offering of equity, the Company authorized (i) 20,000,000 shares of Class A
common shares of which 7,600,000 shares are issued and 6,916,500 shares are
outstanding as of March 31, 2000; (ii) 7,800,000 shares of Class B subordinated
shares of which 3,800,000 shares are currently issued and outstanding; and (iii)
2,200,000 shares of Class C incentive shares of which 38,000 shares are
currently issued and outstanding.
The following unaudited pro forma consolidated results of operations
for the three-month period ended March 31, 1999, were prepared to illustrate the
estimated effects of:
o the elimination of the Castle Harlan management fee, and
o 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 this period. 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, and the
other financial information included in the Company's Registration Statement on
Form S-1 (File No. 333-72317) and its Form 10-K 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.
Unaudited Selected Pro forma Consolidated Results
For the Three Months Ended March 31, 1999
REVENUES $37,415
OPERATING INCOME 6,618
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS 3,407
DILUTED EARNINGS PER CLASS A COMMON SHARE 0.30
WEIGHTED AVERAGE CLASS A COMMON SHARES
OUTSTANDING 7,600,000
DILUTED CLASS A COMMON SHARES OUTSTANDING 11,400,000
Page 7
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STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2000
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
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, the Company incurred a non-cash charge of $832
(equivalent to $0.12 per Class A common share) to depreciation expense which is
included in Costs of Services and Products Sold.
Page 8
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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 March 31,
2000, and the three month periods ended March 31, 1999, and 2000 included
herein. Reference should also be made to the Company's Annual Report on Form
10-K that includes the Company's Consolidated Financial Statements as of and for
the year ended December 31, 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)
For the Three Months Ended March 31,
-----------------------------------------------------
1999 2000
------------------------ -----------------------
% of % of
Dollars Revenues Dollars Revenues
-------- -------- -------- --------
Revenues:
Terminaling services $ 16,628 44.4% $ 12,430 29.4%
Product sales 20,787 55.6% 29,875 70.6%
-------- ----- -------- -----
Total revenues 37,415 100.0% 42,305 100.0%
Cost of services and products sold 28,600 76.4% 38,232 90.4%
-------- ----- -------- -----
Gross profit 8,815 23.6% 4,073 9.6%
Administrative expenses 2,535 6.8% 2,260 5.3%
Special compensation expense 1,947 5.2% -- --
-------- ----- -------- -----
Operating income 4,333 11.6% 1,813 4.3%
Interest expense 4,202 11.2% 3,168 7.5%
Interest income 189 0.5% 81 0.2%
-------- ----- -------- -----
Income (loss) before provision for income taxes
and preferred stock dividends 320 0.9% (1,274) (3.0)%
Provision for income taxes 254 0.7% 264 0.6%
Preferred stock dividends 1,721 4.6% -- --
-------- ----- -------- -----
Net loss to common stockholders $ (1,655) (4.4)% $ (1,538) (3.6)%
======== ===== ======== =====
Page 9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
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 revenue and operating income
relative to our total revenue and operating income.
REVENUES BY LOCATION
(DOLLARS IN THOUSANDS)
For the Three Months Ended March 31,
-----------------------------------------------------
1999 2000
------------------------ -----------------------
% of % of
Dollars Total Dollars Total
-------- -------- -------- --------
Netherlands Antilles and the Caribbean $32,298 86.3% $38,876 91.9%
Canada 5,117 13.7% 3,429 8.1%
------- ----- ------- -----
Total $37,415 100.0% $42,305 100.0%
======= ===== ======= =====
OPERATING INCOME BY LOCATION
(DOLLARS IN THOUSANDS)
For the Three Months Ended March 31,
-----------------------------------------------------
1999 2000
------------------------ -----------------------
% of % of
Dollars Total Dollars Total
-------- -------- -------- --------
Netherlands Antilles and the Caribbean $ 3,559 82.1% $ 1,632 90.0%
Canada 774 17.9% 181 10.0%
--------- ----- -------- ------
Total $ 4,333 100.0% $ 1,813 100.0%
========= ===== ======== ======
The following table sets forth, for the periods indicated, total
capacity, capacity leased, throughput, and vessel calls for each of our
operating locations. "Total capacity" represents the average storage capacity
available for lease for a period. "Capacity leased" represents the storage
capacity leased to third parties weighted for the number of days leased in the
month divided by the capacity available for lease. "Throughput" volume is the
total number of inbound barrels discharged from a vessel, tank, rail car or
tanker truck, not including across-the-dock or tank-to-tank transfers. A "vessel
call" occurs when a vessel docks or anchors at one of our terminal locations in
order to load and/or discharge cargo and/or to take on bunker fuel. Such dockage
or anchorage is counted as one vessel call regardless of the number of
activities carried on by the vessel. A vessel call also occurs when we sell and
deliver bunker fuel to a vessel not calling at our terminals for the above
purposes. Each of these statistics is a measure of the utilization of our
facilities and equipment.
Page 10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
CAPACITY, CAPACITY LEASED, THROUGHPUT AND VESSEL CALLS BY LOCATION
(CAPACITY AND THROUGHPUT IN THOUSANDS OF BARRELS)
For the Three Months Ended
March 31,
------------------------
1999 2000
------ -------
Netherlands Antilles and the Caribbean
Total capacity 11,334 11,334
Capacity leased 95% 76%
Throughput 16,208 12,280
Vessel calls 262 216
Canada
Total capacity 7,404 7,404
Capacity leased 96% 59%
Throughput 6,924 8,937
Vessel calls 17 21
All locations
Total capacity 18,738 18,738
Capacity leased 95% 69%
Throughput 23,132 21,217
Vessel calls 279 237
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 months ended March 31, 2000, were $42.3
million, compared to $37.4 million for the same period of 1999, representing an
increase of $4.9 million, or 13.1%.
Revenues from terminaling services (resulting from revenue from
storage, throughput, dock usage, emergency response and other terminal services)
for the three months ended March 31, 2000, were $12.4 million, compared to $16.6
million for the same period of 1999, representing a decrease of $4.2 million, or
25.2%. The decrease in terminaling services revenue for the three months ended
March 31, 2000, compared to the same period in 1999, we believe, was principally
due to the adverse effects of the accord established between many of the oil
producing nations, some of whom are our customers, to raise crude oil prices by
reducing supply. Members of the accord significantly reduced their production of
crude oil during the period from April 1, 1999, through late March 2000 which,
in turn, has reduced the worldwide quantity of crude oil and petroleum products
in storage. The accord has primarily impacted our terminaling services revenues
beginning with the second half of 1999. Despite recent announced increases in
crude oil production, substantially all segments of the crude oil and petroleum
products markets remain in backwardation.
Page 11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
For the three months ended March 31, 2000, approximately 83.2% of our
tank capacity was leased pursuant to long-term contracts at our St. Eustatius
and Point Tupper locations together. Approximately 79.2% 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 decreased
approximately $2.6 million, or 22.4%, during the three months ended March 31,
2000, as compared to the first quarter of 1999, due to decreased throughput and
a lower percentage capacity leased. Total throughput decreased from 16.2 million
barrels during the three months ended March 31, 1999, to 12.3 million barrels
during the same period of 2000 due primarily to decreased throughput of crude
and fuel oil. Total throughput of crude oil decreased, in part, due to the
replacement of large hoses connected to our single point mooring system, a
maintenance job which took three weeks to complete.
For the three months ended March 31, 1999, and 2000, the overall
percentage of capacity leased at St. Eustatius was 95% and 76%, respectively.
This facility primarily experienced decreases in the percentage of capacity
leased for fuel oil tankage. The percentage of capacity leased for fuel oil
tankage decreased during the three months ended March 31, 2000, as compared to
the same period of 1999 primarily as a result of the effects of the accord,
backwardation in this market, and the relative lower pricing of products which
compete with fuel oil. Thirty-two fewer cargo vessels called at the St.
Eustatius facility during the three months ended March 31, 2000, than during the
same period of 1999, resulting in lower revenues from port charges, which
consist of dock charges, emergency response fees, and other terminal charges.
Revenues from terminaling services at Point Tupper decreased
approximately $1.6 million, or 31.9%, during the three months ended March 31,
2000, as compared to the same periods of 1999. The decrease is due primarily to
a lower percentage capacity leased during the three months ended March 31, 2000.
The percentage of tank capacity leased at Point Tupper decreased from 96% for
the three months ended March 31, 1999, to 59% for the same period of 2000. These
decreases are primarily the result of the decision by a customer of this
facility, which is a participant in the accord, not to renew its crude oil
storage contract at the end of the second quarter of 1999. Partially offsetting
reduced storage revenues was revenue from a higher number of barrels throughput
by this facility's primary crude oil customer. Four additional cargo vessels
called during the three months ended March 31, 2000, as compared to the same
period of 1999, which led to a higher number of barrels throughput and revenues
from port charges at this facility.
Revenues from product sales were $29.9 million for the three months
ended March 31, 2000, compared to $20.8 million for the same period of 1999, an
increase of $9.1 million, or 43.7%. These increases were due to increases in
average selling prices partially offset by lower volumes delivered. Average
selling prices increased 117.1% when comparing the three months ended March 31,
2000, with the same period 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 33.8% during the three months ended March 31, 2000, as
compared to the same period of 1999.
GROSS PROFIT
Gross profit for the three months ended March 31, 2000, was $4.1
million compared to $8.8 million for the same period of 1999, representing a
decrease of $4.7 million, or 53.8%. The decrease in gross profit is primarily
the result of lower gross profits realized on terminaling services, which were
partially offset by higher dollar gross margins realized on product sales.
Additionally, during the three months ended March 31, 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 to depreciation expense which is included in
Costs of Services and Products Sold.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
Gross profits from terminaling services are generally higher than gross
profits from product sales. Our operating costs for terminaling services are
relatively fixed and generally do not change significantly with changes in
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.
At St. Eustatius, we are currently purchasing a majority of the fuel
oil necessary to support our bunker sales requirements pursuant to a contract
with a major state-owned oil company. This contract became effective in 1993. We
are currently operating under a short-term extension to the contract pending
completion of discussions with the oil company. The extension expires on June
30, 2000. We anticipate renewal of the supply contract in the near future under
terms and conditions comparable to the prior agreement. We believe that suitable
alternate sources of supply are available from which we can procure fuel oil
should our current contract be interrupted or not be renewed.
ADMINISTRATIVE EXPENSES
Administrative expenses were $2.3 million for the three months ended
March 31, 2000, as compared to $2.5 million for the same period of 1999,
representing a decrease of $0.2 million or 10.8%. The decrease during the three
months ended March 31, 2000, as compared to the same period of 1999, is
primarily the result of the termination of the Castle Harlan management fee
effective as of our initial public offering of equity partially offset by higher
personnel costs and professional fees.
SPECIAL COMPENSATION EXPENSE
As more fully discussed in note 4 of notes to the consolidated
condensed financial statements included in Part I, Item 1 of this Report, we
recorded special compensation expense during the three months ended March 31,
1999, of $1.9 million.
INTEREST EXPENSE
During the three months ended March 31, 2000, we incurred $3.2 million
of interest expense compared to $4.2 million for the same period of 1999.
Interest expense includes interest accrued on our first mortgage notes due in
2003, amortization expense related to deferred financing costs, other interest
expenses, and bank charges. In May 1999, we repurchased $34.0 million of the
first mortgage notes which resulted in lower interest expense on this debt.
PROVISION FOR INCOME TAXES
Provision for income taxes was $0.3 million for the three months ended
March 31, 2000, and 1999.
PREFERRED STOCK DIVIDENDS
Preferred stock dividends were $1.7 million for the three months ended
March 31, 1999. There were no preferred stock dividends for the three months
ended March 31, 2000, as a result of the redemption of all outstanding preferred
stock in connection with our initial public offering of equity.
Page 13
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
NET LOSS
Net loss to common stockholders was $1.5 million for the three months
ended March 31, 2000, as compared to a net loss of $1.7 million for the same
period of 1999, representing an improvement of $0.2 million. This improvement is
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 $4.9 million and $9.0
million for the three months ended March 31, 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.
At March 31, 2000, we had cash and cash equivalents on hand of $4.9
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 $17.3 million and $14.4 million, respectively, at March 31, 2000,
as compared to $16.7 million and $14.1 million, respectively, at December 31,
1999.
CASH FLOW FROM INVESTING ACTIVITIES
Net cash used in investing activities consisting primarily of purchases
of property and equipment was $2.8 million and $2.0 million for the three months
ended March 31, 2000, and 1999, respectively.
CASH FLOW FROM FINANCING ACTIVITIES
In December 1999, our board of directors authorized the open market
purchase of up to one million shares of our Class A common shares. As of March
31, 2000, and May 11, 2000, we had acquired 683,500 and 716,000 Class A common
shares, respectively, at an aggregate cost of $4.3 million and $4.5 million,
respectively. As conditions warrant, we intend to continue periodic open market
purchases of our Class A common shares under the stock purchase program.
On January 19, 2000, our board of directors declared a distribution of
$0.15 per share on the Class A common shares, payable on February 14, 2000, for
the benefit of shareholders of record at the close of business on January 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 which
must be paid as specified in our articles of incorporation. These distributions
are recorded as a reduction in additional paid-in capital. No distribution was
declared on the Class B subordinated shares.
After considering our first quarter 2000 results, available cash and
future cash requirements, our board of directors voted to make no first quarter
2000 distribution to shareholders. The unpaid target quarterly distribution of
$0.45 per share for each Class A common share represents an arrearage that must
be paid as specified in our articles of incorporation. To date, the total of all
such arrearages on our Class A common shares is $0.75 per share.
Page 14
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
As more fully discussed in note 4 of notes to the 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 million of our first mortgage notes, leaving $101.0 million of our
first mortgage notes outstanding. It is anticipated that the repurchase of the
first mortgage notes will result in annual reductions in interest payments of
$4.0 million.
As of May 11, 2000, no event of default under the indenture to the
first mortgage notes existed and was continuing. The fixed charge coverage ratio
as defined in the indenture was less than 2.0 to 1 at March 31, 2000. As a
result, Statia Terminals International is prevented from making certain
restricted payments and incurring certain indebtedness, among other things,
until such ratio is at least 2.0 to 1. Statia Terminals International is not
restricted by this provision of the indenture from borrowing on the revolving
credit facility discussed below. Additionally, at March 31, 2000, the sum of
Statia Terminals International's dividends, restricted payments, consolidated
net income (deficit), and capital stock proceeds was approximately $13.4
million.
We have a $17.5 million revolving credit facility secured by our
accounts receivable and oil inventory. The revolving credit facility is
available for working capital needs and letter of credit financing, and it
permits us to borrow in accordance with a defined available borrowing base,
which was approximately $11.8 million at March 31, 2000. The revolving credit
facility bears interest at the prime rate plus 0.50% per annum (9.5% at May 11,
2000) and will expire on November 27, 2000. From time to time during the three
months ended March 31, 2000, we borrowed against the revolving credit facility,
and all of such borrowings were repaid by March 31, 2000.
During the three months ended March 31, 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 lenders 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.
As more fully discussed in the Registration Statement and Form 10-K,
under our articles of incorporation we are required to distribute all of our
"available cash" (as defined therein) generated from operations to our
shareholders. "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.
We currently believe that cash flow generated by operations and amounts
available under the revolving credit facility will be sufficient, until the
maturity of the first mortgage notes, to fund working capital needs, capital
expenditures, other operating requirements (including any expenditures required
by applicable environmental laws and regulations), and service debt. Our
operating performance and ability to service or refinance the first mortgage
notes and to extend or refinance the revolving credit facility will be subject
to future economic conditions and to financial, business, and other factors many
of which are beyond our control. We can give no assurances that our future
operating performance will be sufficient to service our indebtedness or that we
will be able to repay at maturity or refinance our indebtedness in whole or in
part.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
CAPITAL EXPENDITURES
Our projected capital spending for 2000 is $7.7 million for maintenance
capital expenditures and $0.3 million for producing incremental revenues.
Additional spending is contingent upon the addition of incremental terminaling
business.
The following table sets forth capital expenditures and separates such
expenditures into those which produce, or have the potential to produce,
incremental revenue and those which sustain our operations.
SUMMARY OF CAPITAL EXPENDITURES BY TYPE
(DOLLARS IN THOUSANDS)
For the Three Months Ended March 31,
------------------------------------------
1999 2000
------------------ ------------------
% of % of
Dollars Total Dollars Total
------- ------ ------- -------
Produce incremental revenues $ 121 6.0% $ 84 3.0%
Operations sustaining capital expenditures 1,887 94.0% 2,675 97.0%
------- ------- ------- -----
Total $ 2,008 100.0% $ 2,759 100.0%
======= ======= ======= =====
ENVIRONMENTAL MATTERS
As more fully discussed in the Form 10-K, the Castle Harlan acquisition
agreement includes a covenant whereby Praxair shall assume financial
responsibility for some environmental investigation, remediation, and upgrade
costs at Point Tupper. Praxair has recently indicated that they are interested
in reaching a monetary settlement of their remaining obligations under the
covenant. Negotiations concerning such matters are in their preliminary stages.
Page 16
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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 have any derivative positions to hedge
our inventory of petroleum products. The following table indicates the aggregate
carrying value of our petroleum products on hand at March 31, 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)
As of March 31, 2000
--------------------------------
Carrying Value Fair Value
-------------- ----------
Petroleum Inventory:
Statia Terminals N.V. $ 2,756 $ 2,887
Statia Terminals Canada, Inc. 67 173
--------- --------
Total $ 2,823 $ 3,060
========= ========
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.
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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. There have been no material
developments in the Company's legal proceedings since the Form 10-K 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.
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: May 15, 2000
By: /s/ James G. Cameron
--------------------------------
James G. Cameron
Director
(As Authorized Officer)
By: /s/ James F. Brenner
--------------------------------
James F. Brenner
Vice President and Treasurer
(As Authorized Officer and
Principal Financial
Officer)
Page S-1