SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to ______________________
COMMISSION FILE 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.)
TUMBLEDOWN DICK BAY
ST. EUSTATIUS, NETHERLANDS ANTILLES
(011) 5993-82300
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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 ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. As of November 15,
1999, 7,600,000 common shares of the issuer were outstanding.
STATIA TERMINALS GROUP N.V.
QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 30, 1999
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 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
THIS QUARTERLY REPORT ON FORM 10-Q (THIS "REPORT") CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF 27A OF THE SECURITIES ACT OF
1933. 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, THE FINANCIAL CONDITION OF THE COMPANY'S CUSTOMERS,
INTERRUPTION OF OUR OPERATIONS CAUSED BY ADVERSE WEATHER CONDITIONS, THE
CONDITION OF THE UNITED STATES ECONOMY, RISKS ASSOCIATED WITH OUR EFFORTS TO
COMPLY WITH THE Y2K REQUIREMENT, AND OTHER FACTORS INCLUDED IN THIS REPORT AND
THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-72317). THE
COMPANY DOES 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.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31, SEPTEMBER 30,
1998 1999
---------------- ----------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 14,061 $ 13,400
Accounts receivable-
Trade, net 7,562 13,317
Other 2,328 4,231
Inventory, net 4,528 1,964
Prepaid expenses 1,417 1,272
---------------- ----------------
Total current assets 29,896 34,184
PROPERTY AND EQUIPMENT, net 209,970 208,086
OTHER NONCURRENT ASSETS, net 5,744 3,120
---------------- ----------------
Total assets $ 245,610 $ 245,390
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,306 $ 13,881
Accrued interest payable 2,027 4,475
Preferred stock dividends payable 7,440 -
Other accrued expenses 8,506 7,775
---------------- ----------------
Total current liabilities 27,279 26,131
SUBORDINATED DISTRIBUTIONS PAYABLE - 1,203
LONG-TERM DEBT- 11-3/4% FIRST MORTGAGE NOTES 135,000 101,000
---------------- ----------------
Total liabilities 162,279 128,334
REDEEMABLE PREFERRED STOCK - SERIES A, B and C 40,000 -
STOCKHOLDERS' EQUITY:
Preferred stock - Series D and E 54,824 -
Common stock 4 -
Class A common shares - 76
Class B subordinated shares - 38
Class C incentive rights - -
Additional paid-in-capital 363 138,572
Notes receivable from stockholders (1,474) (1,474)
Accumulated deficit (10,386) (20,156)
---------------- ----------------
Total stockholders' equity 43,331 117,056
---------------- ----------------
Total liabilities and stockholders' equity $ 245,610 $ 245,390
================ ================
The accompanying notes are an integral part of these consolidated
condensed financial statements.
Page 1
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 FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- -----------------------------------
1998 1999 1998 1999
---------------- -------------- --------------- ----------------
REVENUES $ 32,699 $ 43,310 $ 99,535 $ 122,992
COSTS OF SERVICES AND PRODUCTS SOLD 24,720 36,928 78,652 99,327
---------------- -------------- --------------- ----------------
Gross profit 7,979 6,382 20,883 23,665
ADMINISTRATIVE EXPENSES 2,344 2,269 7,018 6,751
SPECIAL COMPENSATION EXPENSE - - - 4,099
---------------- -------------- --------------- ----------------
Operating income 5,635 4,113 13,865 12,815
LOSS ON DISPOSITION OF PROPERTY
AND EQUIPMENT - - 4,000 -
INTEREST EXPENSE 4,206 3,176 12,651 11,113
INTEREST INCOME 202 117 464 684
---------------- -------------- --------------- ----------------
Income (loss) before provision for income
taxes, preferred stock dividends and
extraordinary charge 1,631 1,054 (2,322) 2,386
PROVISION FOR INCOME TAXES 49 55 268 548
---------------- -------------- --------------- ----------------
Income (loss) before preferred stock
dividends and extraordinary charge 1,582 999 (2,590) 1,838
PREFERRED STOCK DIVIDENDS 897 - 2,733 2,257
---------------- -------------- --------------- ----------------
Income (loss) before extraordinary charge 685 999 (5,323) (419)
EXTRAORDINARY CHARGE RELATED TO
EARLY EXTINGUISHMENT OF DEBT - - - 4,743
---------------- -------------- --------------- ----------------
Net income (loss) available to common
stockholders $ 685 $ 999 $ (5,323) $ (5,162)
================ ============== =============== ================
BASIC EARNINGS PER COMMON SHARE:
Income before extraordinary charge $ - $ 0.13 $ - $ 0.79
Extraordinary charge - - - (1.10)
---------------- -------------- --------------- ----------------
Net income (loss) available to common
stockholders $ - $ 0.13 $ - $ (0.31)
================ ============== =============== ================
DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary charge $ - $ 0.09 $ - $ 0.52
Extraordinary charge - - - (0.73)
---------------- -------------- --------------- ----------------
Net income (loss) available to common
stockholders $ - $ 0.09 $ - $ (0.21)
================ ============== =============== ================
BASIC EARNINGS PER SUBORDINATED SHARE:
Income (loss) before extraordinary charge $ 0.21 $ - $ (1.61) $ (1.06)
Extraordinary charge - - - -
---------------- -------------- --------------- ----------------
Net income (loss) available to common
stockholders $ 0.21 $ - $ (1.61) $ (1.06)
================ ============== =============== ================
DILUTED EARNINGS PER SUBORDINATED
SHARE:
Income (loss) before extraordinary charge $ 0.19 $ - $ (1.61) $ (1.06)
Extraordinary charge - - - -
---------------- -------------- --------------- ----------------
Net income (loss) available to common
stockholders $ 0.19 $ - $ (1.61) $ (1.06)
================ ============== =============== ================
The accompanying notes are an integral part of these consolidated
condensed financial statements.
Page 2
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------------
1998 1999
-------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss available to common stockholders $ (5,323) $ (5,162)
Adjustments to reconcile net loss available to common stockholders
to net cash provided by operating activities:
Extraordinary charge related to early extinguishment of debt - 4,743
Non-cash special compensation expense - 2,152
Depreciation, amortization and non-cash charges 9,186 8,968
Loss on disposition of property and equipment 4,000 -
Preferred stock dividends accrued 2,733 2,257
(Increase) decrease in accounts receivable-trade 4,428 (5,774)
(Increase) decrease in other receivables 1,149 (1,903)
Decrease in inventory 226 2,564
(Increase) decrease in prepaid expenses 190 (633)
(Increase) decrease in other non-current assets 11 (34)
Increase (decrease) in accounts payable (2,272) 4,575
Increase in accrued expenses 4,093 1,718
-------------- ---------------
Net cash provided by operating activities 18,421 13,471
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (7,489) (6,331)
Proceeds from sale of Statia Terminals Southwest, Inc. 6,500 -
Proceeds from sale of property and equipment - 15
-------------- ---------------
Net cash used in investing activities (989) (6,316)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from initial public offering of common shares - 136,757
Redemption of preferred stock (6,150) (94,824)
Repurchase of First Mortgage Notes - (37,681)
Payment of preferred stock dividends - (9,697)
Payment of Class A common share distributions - (2,405)
Issuance of additional subordinated shares and incentive rights - 34
-------------- ---------------
Net cash used in financing activities (6,150) (7,816)
-------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,282 (661)
CASH AND CASH EQUIVALENTS, beginning of period 6,113 14,061
-------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 17,395 $ 13,400
============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 285 $ 521
============== ===============
Cash paid for interest $ 8,002 $ 8,665
============== ===============
The accompanying notes are an integral part of these consolidated
condensed financial statements.
Page 3
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated condensed financial statements of Statia
Terminals Group N.V. ("Group") and its 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
for the year ended December 31, 1998 included in the Company's Registration
Statement on Form S-1 (File No. 333-72317) related to its initial public
offering of equity (the "Registration Statement"). In the opinion of the
Company's management, the accompanying consolidated condensed financial
statements contain all adjustments and accruals necessary to present fairly the
financial position of the Company at September 30, 1999 and the results of
operations and cash flows for the nine months ended September 30, 1998 and 1999.
Operating results for the nine months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. 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 Registration
Statement.
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 bunker and bulk 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 unallocated income and expenses ("Internal EBITDA")
and earnings before interest expense, interest income, income taxes, and certain
unallocated income and expenses ("Internal EBIT").
Page 4
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
2. SEGMENT INFORMATION- (CONTINUED)
The following information is provided for the Company's terminaling
services and bunker and bulk products sales segments:
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------ ------------------------------------
1998 1999 1998 1999
--------------- ---------------- --------------- ----------------
REVENUES:
Terminaling services $ 17,005 $ 14,292 $ 48,161 $ 48,328
Bunker and bulk product sales 15,694 29,018 51,374 74,664
--------------- ---------------- --------------- ----------------
Total $ 32,699 $ 43,310 $ 99,535 $ 122,992
=============== ================ =============== ================
INTERNAL EBITDA:
Terminaling services $ 8,945 $ 5,705 $ 21,834 $ 21,631
Bunker and bulk product sales 252 1,017 1,918 3,549
--------------- ---------------- --------------- ----------------
Total $ 9,197 $ 6,722 $ 23,752 $ 25,180
=============== ================ =============== ================
DEPRECIATION AND AMORTIZATION
EXPENSE:
Terminaling services $ 2,641 $ 2,624 $ 8,238 $ 8,198
Bunker and bulk product sales 124 134 376 423
--------------- ---------------- --------------- ----------------
Total $ 2,765 $ 2,758 $ 8,614 $ 8,621
=============== ================ =============== ================
INTERNAL EBIT:
Terminaling services $ 6,304 $ 3,081 $ 13,596 $ 13,433
Bunker and bulk product sales 128 883 1,542 3,126
--------------- ---------------- --------------- ----------------
Total $ 6,432 $ 3,964 $ 15,138 $ 16,559
=============== ================ =============== ================
A reconciliation of Internal EBIT to the Company's income (loss) before
provision for income taxes, preferred stock dividends and extraordinary charge
is as follows:
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------ ------------------------------------
1998 1999 1998 1999
--------------- ---------------- ---------------- ---------------
Internal EBIT $ 6,432 $ 3,964 $ 15,138 $ 16,559
Unallocated operating and administrative
expenses (1,024) (21) (1,956) (241)
Special compensation expense - - - (4,099)
Interest expense excluding debt
amortization expense (3,979) (3,006) (11,968) (10,517)
Interest income 202 117 464 684
Loss on sale of Statia Terminals
Southwest, Inc. - - (4,000) -
--------------- ---------------- ---------------- ---------------
Income (loss) before provision for income
taxes, preferred stock dividends and
extraordinary charge $ 1,631 $ 1,054 $ (2,322) $ 2,386
=============== ================ ================ ===============
Page 5
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(IN THOUSANDS EXCEPT PER 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 common equity based upon changes in the historical basis liquidation values
of the classes of common equity 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 shareholders. All of the earnings and losses subsequent to April
28, 1999 have been allocated to the Class A common shareholders.
Basic earnings (loss) per share is computed by dividing the earnings
and losses allocated to each class of common 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,
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 earnings per share amounts presented have been adjusted to give
retroactive effect, as of the beginning of each period presented, to the
reclassification and issuance of additional Class B subordinated shares and
Class C incentive rights 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 periods presented.
The following additional information is presented with respect to the
Company's earnings per share amounts:
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
1998 1999 1998 1999
-------------- -------------- -------------- --------------
EARNINGS PER COMMON SHARE
Earnings and losses allocated to Class A
common shares:
Income before extraordinary charge $ - $ 999 $ - $ 3,384
Extraordinary charge - - - (4,743)
-------------- -------------- -------------- --------------
Net income (loss) available to common
stockholders $ - $ 999 $ - $ (1,359)
============== ============== ============== ==============
Weighted average Class A common shares
outstanding - 7,600 - 4,315
Dilutive effect of weighted average Class B
subordinated shares outstanding - 3,800 - 2,158
-------------- -------------- -------------- --------------
Diluted common shares outstanding - 11,400 - 6,473
============== ============== ============== ==============
EARNINGS PER SUBORDINATED SHARE
Earnings and losses allocated to Class B
subordinated shares:
Income (loss) before extraordinary charge $ 685 $ - $ (5,323) $ (3,803)
Extraordinary charge - - - -
-------------- -------------- -------------- --------------
Net income (loss) available to common
stockholders $ 685 $ - $ (5,323) $ (3,803)
============== ============== ============== ==============
Weighted average Class B subordinated shares
outstanding 3,304 3,800 3,305 3,588
Dilutive effect of stock options and preferred
stock with conversion features 230 - - -
-------------- -------------- -------------- --------------
Diluted subordinated shares outstanding 3,534 3,800 3,305 3,588
============== ============== ============== ==============
Page 6
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
4. INITIAL PUBLIC OFFERING OF EQUITY
On April 28, 1999, Group completed its initial public equity offering
of 7.6 million Class A common shares. The offering price was $20 per share
raising gross proceeds of $152,000. The gross proceeds of the offering were used
primarily to redeem all of Group's outstanding Series A-E preferred stock and
pay accrued dividends, pay underwriters' discounts and fees, and pay certain
other costs directly associated with the offering. The remaining proceeds were
invested and used during May, 1999, along with existing cash, to repurchase in
the open market a principal amount of $34,000 of the Company's 11 3/4% First
Mortgage Notes (the "Notes") for $39,522, including acquisition costs and
accrued interest of $3,681 and $1,841, respectively. During the second quarter
of 1999, the acquisition costs and the unamortized deferred financing costs
related to the repurchased Notes ($1,062) were recorded as an extraordinary
charge. There was no income tax effect associated with this extraordinary
charge.
During the 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.
As more fully discussed in the Registration Statement, in connection
with the offering, certain previously granted stock options became fully vested,
were exercised and became subordinated shares. In accordance with APB 25, the
Company was amortizing as compensation expense the difference between the
estimated fair value of the options at the date of grant and the exercise price
over the vesting period of five years. During the period from January 1, 1999 to
April 28, 1999, $154 was amortized as compensation expense and credited to
additional paid in capital. On April 28, 1999, the remaining unamortized
compensation expense associated with these options of $2,152 was recorded as a
non-cash special compensation expense and credited to additional paid-in
capital.
The following additional information for the nine months ended
September 30, 1999 is presented with respect to the Company's equity accounts.
PREFERRED STOCK - NOTES
SERIES D AND E RECEIVABLE COMMON STOCK ADDITIONAL
----------------- FROM -------------- PAID-IN ACCUMULATED
SHARES AMOUNT STOCKHOLDERS SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ------ ------------ ------ ------ ------- ------- -----
BALANCE, December 31, 1998 55 $54,824 $ (1,474) 41 $ 4 $ 363 $ (10,386) $ 43,331
Net proceeds from initial public
offering of common shares - - - 7,600 76 136,681 - 136,757
Exercise of stock options,
reclassification of
subordinated shares and
issuance of additional
subordinated shares and
incentive rights - - - 3,797 34 - - 34
Vesting of stock options - - - - - 2,152 - 2,152
Amortization expense related
to issuance of options - - - - - 154 - 154
Write-off of prepaid Castle
Harlan management fee - - - - - (778) - (778)
Redemption of preferred stock (55) (54,824) - - - - - (54,824)
Dividend of Petroterminal de
Panama shares - - - - - - (1,000) (1,000)
Class A common shares and Class B
subordinated shares
distributions declared - - - - - - (3,608) (3,608)
Net loss available to
common stockholders - - - - - - (5,162) (5,162)
------ ------ -------- ------- ------ ------- --------- --------
BALANCE, September 30, 1999 - $ - $ (1,474) 11,438 $ 114 $138,572 $ (20,156) $117,056
====== ====== ======== ======= ====== ======== ========= ========
Page 7
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
4. INITIAL PUBLIC OFFERING OF EQUITY- (CONTINUED)
In conjunction with the transactions surrounding the initial public
offering of equity, the Company authorized 30.0 million shares of Class A common
shares of which 7.6 million shares are currently issued and outstanding;
authorized 7.8 million shares of Class B subordinated shares of which 3.8
million shares are currently issued and outstanding; and authorized 2.2 million
shares of Class C incentive rights of which 0.38 million shares are currently
issued and outstanding.
The following unaudited pro forma consolidated results of operations
for the three-month and nine-month periods ended September 30, 1998 and 1999
were prepared to illustrate the estimated effects of:
o the disposition of Statia Terminals Southwest, Inc.,
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 each of these respective periods. The unaudited
pro forma consolidated condensed results of operations should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Company's financial statements and the notes
thereto, and the other financial information included in the Registration
Statement. 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 FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
1998 1999 1998 1999
------------- ------------- ------------- -------------
REVENUES $32,699 $43,310 $97,922 $122,992
============= ============= ============= =============
OPERATING INCOME $ 5,973 $ 4,113 $14,939 $ 17,357
============= ============= ============= =============
NET INCOME AVAILABLE
TO COMMON STOCKHOLDERS $ 2,976 $ 999 $ 5,658 $ 7,847
============= ============= ============= =============
DEPRECIATION $ 2,537 $ 2,587 $ 7,634 $ 8,024
============= ============= ============= =============
EBITDA $ 8,712 $ 6,817 $23,037 $ 25,970
============= ============= ============= =============
BASIC EARNINGS PER COMMON SHARE $ 0.39 $ 0.13 $ 0.74 $ 1.03
============= ============= ============= =============
DILUTED EARNINGS PER COMMON SHARE $ 0.26 $ 0.09 $ 0.50 $ 0.69
============= ============= ============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 7,600 7,600 7,600 7,600
============= ============= ============= =============
DILUTED COMMON SHARES OUTSTANDING 11,400 11,400 11,400 11,400
============= ============= ============= =============
Page 8
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 as of September 30, 1999 and the
three and nine month periods ended September 30, 1998 and 1999 included herein.
Reference should also be made to the Company's Registration Statement that
includes the Company's Consolidated Financial Statements as of and for the year
ended December 31, 1998. You should note that we sold our Brownsville, Texas,
facility on July 29, 1998, and the figures below and our consolidated condensed
financial statements for the nine months ended September 30, 1998 include the
operations of the Brownsville facility prior to its sale.
RESULTS OF OPERATIONS
The following tables set forth, for the periods indicated, the
percentage of revenues represented by certain items in our consolidated
condensed income statements.
RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------
1998 1999
------------------------------------------
% OF % OF
DOLLARS REVENUES DOLLARS REVENUES
--------- -------- --------- --------
Revenues:
Terminaling services $ 17,005 52.0% $ 14,292 33.0%
Bunker and bulk product sales 15,694 48.0% 29,018 67.0%
--------- -------- --------- --------
Total revenues 32,699 100.0% 43,310 100.0%
Cost of services and products sold 24,720 75.6% 36,928 85.3%
--------- -------- --------- --------
Gross profit 7,979 24.4% 6,382 14.7%
Administrative expenses 2,344 7.2% 2,269 5.2%
--------- -------- --------- --------
Operating income 5,635 17.2% 4,113 9.5%
Interest expense 4,206 12.9% 3,176 7.3%
Interest income 202 0.6% 117 0.2%
-------- ------ --------- --------
Income before income taxes, preferred stock dividends and
extraordinary charge 1,631 4.9% 1,054 2.4%
Provision for income taxes 49 0.1% 55 0.1%
Preferred stock dividends 897 2.7% - -
-------- ------ -------- -------
Net income available to common stockholders $ 685 2.1% $ 999 2.3%
======== ====== ======== =======
Page 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------
1998 1999
-------------------- -------------------
% OF % OF
DOLLARS REVENUES DOLLARS REVENUES
--------- -------- --------- --------
Revenues:
Terminaling services $ 48,161 48.4% $ 48,328 39.3%
Bunker and bulk product sales 51,374 51.6% 74,664 60.7%
--------- ------ --------- --------
Total revenues 99,535 100.0% 122,992 100.0%
Cost of services and products sold 78,652 79.0% 99,327 80.8%
--------- ------ --------- --------
Gross profit 20,883 21.0% 23,665 19.2%
Administrative expenses 7,018 7.1% 6,751 5.5%
Special compensation expense - - 4,099 3.3%
-------- -------- --------- --------
Operating income 13,865 13.9% 12,815 10.4%
Loss on disposition of property and equipment 4,000 4.0% - -
Interest expense 12,651 12.7% 11,113 9.0%
Interest income 464 0.5% 684 0.6%
-------- ------ --------- --------
Income (loss) before income taxes, preferred stock dividends
and extraordinary charge (2,322) (2.3)% 2,386 2.0%
Provision for income taxes 268 0.3% 548 0.5%
Preferred stock dividends 2,733 2.7% 2,257 1.8%
Extraordinary charge related to early extinguishment of debt - - 4,743 3.9%
-------- -------- -------- -------
Net loss available to common stockholders $ (5,323) (5.3)% $ (5,162) (4.2)%
========== ======= ========== ========
The following tables set forth, for the periods indicated (a) the total
revenues and total operating income (loss), after allocation of administrative
expenses, at each of our operating locations and (b) the percentage of revenue
and operating income (loss) relative to our total revenue and operating income.
REVENUES BY LOCATION
(DOLLARS IN THOUSANDS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1999
-------------------- --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- ------- --------- -------
Netherlands Antilles and the Caribbean $ 27,059 82.8% $ 39,647 91.5%
Canada 5,640 17.2% 3,663 8.5%
-------- ------- --------- -------
Total $ 32,699 100.0% $ 43,310 100.0%
======== ======= ========= =======
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1999
-------------------- --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- ------- --------- -------
Netherlands Antilles and the Caribbean $ 82,880 83.3% $ 108,129 87.9%
Canada 15,042 15.1% 14,863 12.1%
Brownsville, Texas facility 1,613 1.6% - -
-------- ------- --------- -------
Total $ 99,535 100.0% $ 122,992 100.0%
======== ======= ========= =======
Page 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
OPERATING INCOME (LOSS) BY LOCATION
(DOLLARS IN THOUSANDS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1999
-------------------- --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
--------- ------- --------- -------
Netherlands Antilles and the Caribbean $ 3,967 70.4% $ 3,892 94.6%
Canada 1,668 29.6% 221 5.4%
--------- ------- -------- -------
Total $ 5,635 100.0% $ 4,113 100.0%
========= ======= ======== =======
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1999
-------------------- --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- ------- --------- -------
Netherlands Antilles and the Caribbean $ 10,341 74.6% $ 10,467 81.7%
Canada 4,006 28.9% 2,348 18.3%
Brownsville, Texas facility (482) (3.5)% - -
-------- -------- -------- -------
Total $ 13,865 100.0% $ 12,815 100.0%
======== ======= ======== =======
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 into our facilities 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 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 11
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 FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- ---------------------------------
1998 1999 1998 1999
-------------- ---------------- --------------- --------------
Netherlands Antilles and
the Caribbean
Total capacity 11,334 11,334 11,334 11,334
Capacity leased 95% 89% 91% 91%
Throughput 21,516 15,011 53,042 48,687
Vessel calls 209 219 629 739
Canada
Total capacity 7,404 7,404 7,404 7,404
Capacity leased 98% 65% 91% 85%
Throughput 8,456 8,880 35,654 31,214
Vessel calls 22 19 85 78
All locations (1)
Total capacity 18,738 18,738 18,738 18,738
Capacity leased 96% 79% 91% 89%
Throughput 29,972 23,891 88,696 79,901
Vessel calls 231 238 714 817
<FN>
(1) The Brownsville, Texas, facility was sold on July 29, 1998. The
statistics above for the nine months ended September 30, 1998 exclude
the operations of the Brownsville facility.
</FN>
COMPARABILITY
On July 29, 1998, we sold Statia Terminals Southwest to an unrelated
third-party. Our consolidated condensed financial statements for the nine months
ended September 30, 1998 include the operations of Statia Terminals Southwest
prior to its sale. The operating results of Statia Terminals Southwest for the
nine months ended September 30, 1998 were not significant. Additionally, our
initial public offering of equity, which closed on April 28, 1999, impacted our
results of operations and financial condition.
REVENUES
Total revenues for the three and nine months ended September 30, 1999
were $43.3 million and $123.0 million, compared to $32.7 million and $99.5
million for the same periods of 1998, representing increases of $10.6 million,
or 32.5% and $23.5 million, or 23.6%, respectively.
Revenues from terminaling services (resulting in revenue from storage,
throughout, dock usage, emergency response and other terminal services), for the
three and nine months ended September 30, 1999 were $14.3 million and $48.3
million, compared to $17.0 million and $48.2 million for the same periods of
1998, representing a decrease of $2.7 million, or 15.9% and an increase of $0.2
million, or 0.3%, respectively. The decrease in terminaling services revenue for
the three months ended September 30, 1999 compared to the same period in 1998
was principally due to the effects of the OPEC/OPEC Plus Accord which was
reached in March 1999. The Accord was established between many of the oil
producing nations, some of whom we do business with, to raise crude oil prices
by reducing supply. Members of the Accord have reduced their production of crude
oil which, in turn, has reduced the worldwide quantity of crude oil and
petroleum products in storage.
Page 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
For the nine months ended September 30, 1999, approximately 57.2% of
our tank capacity and approximately 61.8% of our storage and throughput
revenues, excluding related ancillary services, were derived from long term
contracts.
Revenues from terminaling services at St. Eustatius decreased
approximately $1.4 million, or 12.0%, during the three months ended September
30, 1999 as compared to the third quarter of 1998, due to decreased throughput
and a lower percentage capacity leased. Revenues from terminaling services at
this facility increased $1.1 million, or 3.4%, during the nine months ended
September 30, 1999 as compared to the same period of 1998, due primarily to
increased vessel calls. Total throughput decreased from 21.5 million and 53.0
million barrels during the three and nine months ended September 30, 1998 to
15.0 million and 48.7 million barrels during the same periods of 1999 due
primarily to decreased throughput of crude and fuel oil which was partially
offset by increased throughput of petroleum products.
For the nine months ended September 30, 1998 and 1999, the overall
percentage of capacity leased at St. Eustatius was 91% each period. This
facility experienced increases in the percentage of capacity leased for
petroleum product tankage offset by decreases in the percentage of capacity
leased for fuel oil tankage. For the three months ended September 30, 1999, the
overall percentage of capacity leased at this facility was 89% compared to 95%
for the same period of 1998, primarily reflecting a decrease in the percentage
of capacity leased for fuel oil tankage. The percentage of capacity leased for
fuel oil tankage decreased during the three and nine months ended September 30,
1999 as compared to the same periods of 1998 primarily as a result of the
OPEC/OPEC Plus Accord and backwardation. Ten fewer cargo vessels called at the
St. Eustatius facility during the three months ended September 30, 1999 than
during the same period of 1998, resulting in lower revenues from port charges,
which consist of dock charges, emergency response fees and other terminal
charges. Thirty more cargo vessels called at this facility during the nine
months ended September 30, 1999 than during the same period of 1998, resulting
in higher revenues from port charges.
Revenues from terminaling services at Point Tupper decreased
approximately $1.4 million, or 27.6%, and $0.3 million, or 2.4%, during the
three and nine months ended September 30, 1999, as compared to the same periods
of 1998. The decrease is due to a lower percentage capacity leased and fewer
vessel calls during the three and nine months ended September 30, 1999, and due
to lower throughput during the nine months ended September 30, 1999. The
percentage of tank capacity leased at Point Tupper decreased from 98% and 91%
for the three and nine months ended September 30, 1998 to 65% and 85% for the
same periods of 1999. 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.
Fewer vessels called during the three and nine months ended September 30, 1999
as compared to the same periods of 1998 which led to lower revenues from port
charges at this facility.
Revenues from bunker and bulk product sales were $29.0 million and
$74.7 million for the three and nine months ended September 30, 1999 compared to
$15.7 million and $51.4 million for the same periods of 1998, an increase of
$13.3 million, or 84.9% and $23.3 million, or 45.3%. These increases were due to
increases in the volume of bunkers and bulk product delivered and increases in
average selling prices. Metric tons of bunkers and bulk product delivered
increased 23.9% and 29.7% during the three and nine months ended September 30,
1999 as compared to the same periods of 1998. Average selling prices increased
49.5% and 12.1% when comparing the three and nine months ended September 30,
1999 with the same periods of 1998. These changes in average selling prices were
primarily the result of changes in the world oil markets which have been
significantly influenced by the Accord.
Page 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
GROSS PROFIT
Gross profit for the three months ended September 30, 1998 and 1999 was
$8.0 million and $6.4 million, representing a decrease of $1.6 million, or
20.0%. Gross profit for the nine months ended September 30, 1998 and 1999 was
$20.9 million and $23.7 million, representing an increase of $2.8 million, or
13.3%. The decrease and the increase in gross profit for these periods are
primarily the result of the changes in our terminaling services revenue
discussed above. Additionally, we realized higher dollar gross margins on bunker
sales during the three and nine months ended September 30, 1999 as compared to
the same periods of 1998 due to higher volumes of bunker fuels delivered.
Gross profits from terminaling services are generally higher than gross
profits from bunker and bulk product sales. Our operating costs for terminaling
services are relatively fixed and generally do not change significantly with
changes in capacity leased. Additions or reductions in storage, throughput and
ancillary 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 bunker and bulk product costs are also impacted by market supply
conditions, types of products sold and volumes delivered.
ADMINISTRATIVE EXPENSES
Administrative expenses were $2.3 million and $6.8 million for the
three and nine months ended September 30, 1999 as compared to $2.3 million and
$7.0 million for the same periods of 1998, representing no change for the three
months ended September 30, 1999 and a decrease of $0.3 million, or 3.8% for the
nine months ended September 30, 1999. The decrease during the nine months ended
September 30, 1999, as compared to the same period of 1998, is primarily the
result of the termination of the Castle Harlan management fee subsequent to our
initial public offering of equity which was partly offset by higher personnel
and related costs.
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 nine months ended September 30,
1999 of $4.1 million of which $2.2 million was a non-cash charge.
INTEREST EXPENSE
During the three and nine months ended September 30, 1999, we incurred
$3.2 million and $11.1 million of interest expense compared to $4.2 million and
$12.7 million for the same periods of 1998. Interest expense includes interest
accrued on our 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 mortgage notes which resulted in lower
interest expense on this debt.
PROVISION FOR INCOME TAXES
Provision for income taxes was $0.06 million and $0.5 million for the
three and nine months ended September 30, 1999 as compared to $0.05 million and
$0.3 million for the same periods of 1998. The provision for income taxes has
been increased in 1999 in contemplation of a new tax agreement with the
governments of the Netherlands Antilles and island of St. Eustatius (see further
discussions regarding the tax agreement and taxation matters in the Registration
Statement).
Page 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
PREFERRED STOCK DIVIDENDS
Preferred stock dividends were $2.3 million for the nine months ended
September 30, 1999. Preferred stock dividends were $0.9 million and $2.7 million
for the three and nine months ended September 30, 1998. The decrease during 1999
is the result of the redemption of all outstanding preferred stock in connection
with our initial public offering of equity.
EXTRAORDINARY CHARGE RELATED TO EARLY EXTINGUISHMENT OF DEBT
As more fully discussed in note 4 of notes to the consolidated
condensed financial statements included in Part I, Item 1 of this Report, we
recognized an extraordinary charge of $4.7 million during the nine months ended
September 30, 1999 in connection with the repurchase of $34.0 million of our 11
3/4% mortgage notes. There was no income tax effect associated with this
extraordinary charge.
NET INCOME (LOSS)
Net income available to common stockholders was $1.0 million for the
three months ended September 30, 1999 and we have incurred a net loss of $5.2
million for the nine months ended September 30, 1999, as compared to net income
of $0.7 million and a net loss of $5.3 million for the same periods of 1998,
representing improvements of $0.3 million and $0.2 million, respectively. These
improvements are attributable to the net effect of the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
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 $34.0 million of our mortgage notes, leaving $101.0 million of
mortgage notes outstanding. It is anticipated that the repurchase of the
mortgage notes will result in annual reductions in interest payments of $4.0
million.
We have extended, in accordance with the provisions of the original
agreement with the lender, our $17.5 million revolving credit facility secured
by our accounts receivable and oil inventory. No draws have been made on this
facility. The revolving credit facility is available for working capital needs
and letter of credit financing, and it permits us to borrow in accordance with
our available borrowing base, which was estimated at $11.8 million at September
30, 1999. The revolving credit facility bears interest at the prime rate plus
0.50% per annum (8.75% at November 15, 1999) and will expire on November 27,
2000.
At September 30, 1999, we had cash and cash equivalents on hand of
$13.4 million compared to $14.1 million at December 31, 1998. We currently
believe that cash on hand, cash flow generated by operations, and amounts
available under the revolving credit facility will be sufficient to fund working
capital needs, to service debt, to make capital expenditures and to meet other
operating requirements, including any expenditures required by applicable
environmental laws and regulations. Our operating performance and ability to
service or refinance the mortgage notes 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.
Page 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
As more fully discussed in the Registration Statement, 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.
During October 1999, our Board of Directors declared a distribution of
$0.45 per share on the Class A common shares and Class B subordinated
shareholders meeting our target quarterly distribution. The distribution was
payable to shareholders of record as of the close of business on October 29,
1999 and was paid on November 12, 1999 only to Class A common shareholders. We
retained, and will continue to retain, distributions on Class B subordinated
shares of up to $6.8 million, until the end of the deferral period which lasts
until at least June 30, 2001.
CASH FLOW FROM OPERATING ACTIVITIES
Net cash provided by operating activities was $18.4 million and $13.5
million for the nine months ended September 30, 1998 and 1999, respectively.
Cash flow from operations has been our primary source of liquidity during these
periods. Differences between net losses and positive operating cash flow have
resulted primarily from depreciation and amortization burdens, non-cash charges
and changes in various asset and liability accounts.
Accounts receivable and accounts payable were $17.5 million and $13.9
million, respectively, at September 30, 1999 as compared to $9.9 million and
$9.3 million, respectively, at December 31, 1998. The increase in accounts
receivable and accounts payable is primarily due to changes in the world oil
markets which have increased both our selling prices and related costs of bunker
and bulk product sales.
CASH FLOW FROM INVESTING ACTIVITIES
Net cash used in investing activities was $1.0 million and $6.3 million
for the nine months ended September 30, 1998 and 1999, respectively. Investing
activities during the nine months ended September 30, 1998 and 1999 included
purchases of property and equipment of $7.5 million and $6.3 million,
respectively. During the nine months ended September 30, 1998, we received gross
proceeds of $6.5 million from the sale of Statia Terminals Southwest.
CASH FLOW FROM FINANCING ACTIVITIES
Our cash flows from financing activities for the nine months ended
September 30, 1999 were impacted by our initial public offering of equity which
is more fully discussed in note 4 of notes to the consolidated condensed
financial statements included in Part I, Item 1 of this Report. Additionally, on
August 13, 1999 we paid $2.4 million to holders of our Class A common shares
representing our target quarterly distribution of $0.45 per share prorated for
the period from the date of closing of our initial public offering of equity on
April 28, 1999 through June 30, 1999.
During the nine months ended September 30, 1998 we utilized the net
proceeds from the sale of the Brownsville, Texas, facility to retire $6.15
million of our Series D Preferred Stock.
Page 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
CAPITAL EXPENDITURES
Our projected capital spending for 1999 is $7.8 million for maintenance
capital expenditures and $1.1 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 represent maintenance capital expenditures.
SUMMARY OF CAPITAL EXPENDITURES BY TYPE
(DOLLARS IN THOUSANDS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1999
-------------------- --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
--------- ------- --------- -------
Produce incremental revenues $ 491 21.2% $ 355 15.6%
Maintenance capital expenditures 1,829 78.8% 1,919 84.4%
--------- ------- ------- -------
Total $ 2,320 100.0% $ 2,274 100.0%
========= ======= ======= =======
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1999
-------------------- --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- ------- --------- -------
Produce incremental revenues $ 711 9.5% $ 651 10.3%
Maintenance capital expenditures 6,778 90.5% 5,680 89.7%
------- ------- ------- -------
Total $ 7,489 100.0% $ 6,331 100.0%
======= ======= ======= =======
INFORMATION TECHNOLOGY AND THE YEAR 2000
Some computer software and hardware applications and embedded
microprocessor, microcontroller or other processing technology applications and
systems use only two digits to refer to a year rather than four digits. As a
result, these applications could fail or create erroneous results in dealing
with certain dates and especially if the applications recognize "00" as the year
1900 rather than the year 2000. During 1997, we developed a Year 2000 plan to
upgrade our key information systems and simultaneously address the potential
disruption to both operating and accounting systems that might be caused by the
Year 2000 problem. The Year 2000 plan also provides for evaluations of the
systems of customers, vendors, and other third-party service providers and
evaluations of our non-information technology systems.
Page 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
We have substantially completed the assessment phase of the Year 2000
plan. We have tested new Year 2000 compliant terminal operations software at our
facilities and are implementing corrective actions for deficiencies. We
anticipate that the Year 2000 compliant terminal operations systems will be
fully implemented during the fourth quarter of 1999. We have implemented a fully
integrated Year 2000 compliant finance, accounting, and human resources system.
In addition to being Year 2000 compliant, it is anticipated that this system and
the terminal operations software will significantly enhance systems
functionality.
We previously identified some components of our control systems at our
two terminals as not being Year 2000 compliant. We have installed, tested, and
continue to test, replacements of non-compliant components. These systems
measure, regulate, control, and maintain crude oil and petroleum product flow
and fire protection equipment at the terminals. We have evaluated the best means
to mitigate the possible adverse effects resulting from the potential failure of
these systems. We believe that in a worst case scenario, existing manual
overrides would prevent the failure of these systems from having a material
adverse effect on our operations.
In accordance with our Year 2000 plan, we have initiated a formal
communications process with other companies with which our systems interface or
rely on to determine the extent to which those companies are addressing their
Year 2000 compliance. In connection with this process, we have sent numerous
letters and questionnaires to third parties and are evaluating those responses
as they are received. Based upon information we have received and our review of
existing relationships with third parties, we do not currently anticipate that
any third-party non-compliance would have a material adverse effect on our
business, results of operations, or financial condition.
We have developed, tested, and continue to test, our company-wide
contingency plans for use in the event any of our systems or those of third
parties should fail.
Through September 30, 1999, we have spent $2.0 million in connection
with our Year 2000 remediation efforts and related enhancements of systems
functionality. Of this total, we have capitalized $1.8 million and expensed $0.2
million. During the remainder of 1999, we anticipate spending an additional $0.2
million to complete these efforts of which we anticipate capitalizing
substantially all $0.2 million. However, we cannot guarantee that these
estimates will be met and actual expenditures could differ materially from these
estimates.
Based upon information currently available to us, we believe our
efforts will succeed in preventing the Year 2000 issue from having a material
adverse effect on us. However, the pervasive nature of the Year 2000 issue may
prevent us from fully assessing and rectifying all systems that could have an
effect on our business, results of operations, or financial condition.
Page 18
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 ninety days. We do not presently have any derivative positions to
hedge our inventory of petroleum products. The following table indicates the
aggregate carrying value of our petroleum products, which are sensitive to
changes in commodity prices, on hand at September 30, 1999 computed at average
costs, net of any lower of cost or market valuation provisions, and the
estimated fair value of such products.
ON BALANCE SHEET COMMODITY POSITION
(Dollars in thousands)
AS OF SEPTEMBER 30, 1999
---------------------------------
CARRYING AMOUNT FAIR VALUE
--------------- ----------
Petroleum Inventory:
Statia Terminals N.V. $ 1,705 $ 1,984
Statia Terminals Canada, Inc. 259 331
--------- --------
Total $ 1,964 $ 2,315
========= ========
Except for certain local operating expenses in Canadian dollars and
Netherlands Antilles guilders, all of our transactions are in U.S. dollars.
Therefore, we believe we are not significantly exposed to exchange rate
fluctuations. As all of our present debt obligations carry a fixed rate of
interest, except for the undrawn revolving credit facility which varies with
changes in the lender's prime lending rate, we believe our exposure to interest
rate fluctuations is minimal.
Page 19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Reference is made to the Legal Proceedings section of Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's amended Registration Statement on Form S-1 (File No.
333-72317). There have been no material developments in the Company's legal
proceedings since the amended Registration Statement 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.
3.1 Articles of Incorporation of Statia Terminals Group N.V. (for
electronic filing only)
27.1 Financial Data Schedule for Statia Terminals Group N.V. (for
electronic filing only)
(b) Reports on Form 8-K.
None.
Page 20
Page S-1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
STATIA TERMINALS GROUP N.V.
(Registrant)
Date: November 15, 1999
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
Finance and Accounting Officer)
Page S-1
EXHIBIT INDEX
EXHIBIT DESCRIPTION
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3.1 Articles of Incorporation of Statia Terminals Group N.V. (for
electronic filing only)
27.1 Financial Data Schedule for Statia Terminals Group N.V. (for
electronic filing only)