10-Q 1 e10-q.txt STATIA TEMINALS INTERNATIONAL/ CANADA 10-Q 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 JUNE 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _________________ COMMISSION FILE NUMBER 333-18455 AND 333-18455-01 STATIA TERMINALS INTERNATIONAL N.V. (Exact name of registrant as specified in its charter) NETHERLANDS ANTILLES 52-2003102 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) C/O COVENANT MANAGERS L.B. SMITHPLEIN 3 CURACAO, NETHERLANDS ANTILLES (011) (599-9) 4623700 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) STATIA TERMINALS CANADA, INCORPORATED (Exact name of registrant as specified in its charter) NOVA SCOTIA, CANADA 98-0164788 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3817 PORT MALCOLM ROAD PORT HAWKESBURY, NOVA SCOTIA B0E 2V0 (902) 625-1711 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Indicate by check mark whether each of the registrants: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The equity securities of the registrants have not been, and are not required to be, registered under either the Securities Act of 1933 or the Securities Exchange Act of 1934. 2 STATIA TERMINALS INTERNATIONAL N.V. AND STATIA TERMINALS CANADA, INCORPORATED QUARTERLY REPORT ON FORM 10-Q JUNE 30, 2000 TABLE OF CONTENTS

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. 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of these consolidated condensed financial statements. Page 1 4 STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS) (UNAUDITED) (DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of these consolidated condensed financial statements. Page 2 5 STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of these consolidated condensed financial statements. Page 3 6 STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) (DOLLARS IN THOUSANDS) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The unaudited consolidated condensed financial statements of Statia Terminals International N.V. ("Statia") and Subsidiaries (together with Statia, the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Significant accounting policies followed by the Company were disclosed in the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K 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 June 30, 2000, and the results of its operations and cash flows for the six months ended June 30, 1999 and 2000. Operating results for the six months ended June 30, 2000, are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. Reclassifications were made to certain 1999 information in the notes to consolidated condensed financial statements in order to conform to the 2000 presentation. Additionally, the transactions discussed in note 3 below impacted the Company's results of operations and financial condition and affect comparability across periods. These financial statements should be read in conjunction with the Form 10-K. For all periods presented herein, there were no significant differences between net income and comprehensive income. 2. SEGMENT INFORMATION The Company is organized around several different factors, the two most significant of which are services and products, and geographic location. The Company's primary services and products are terminaling services (resulting in revenues from storage, throughput, dock usage, emergency response and other terminal services) and product sales (such as sales of bunker fuels to ships and other bulk petroleum product sales). The primary measures of profit and loss utilized by the Company's management to make decisions about resources to be allocated to each segment are earnings before interest expense, income taxes, and depreciation and amortization adjusted for non-recurring transactions ("Adjusted EBITDA") and earnings before interest expense and income taxes adjusted for non-recurring transactions ("Adjusted EBIT"). Page 4 7 STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) (DOLLARS IN THOUSANDS) 2. SEGMENT INFORMATION- (CONTINUED) The following information is provided for the Company's terminaling services and product sales segments:

A reconciliation of Adjusted EBIT to the Company's income (loss) before provision for income taxes and extraordinary charge is as follows:

Page 5 8 STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) (DOLLARS IN THOUSANDS) 3. SALE OF COMMON STOCK TO PARENT AND RELATED TRANSACTIONS As more fully discussed in the Form 10-K, on April 28, 1999, Statia's parent, Statia Terminals Group N.V. (the "Parent"), completed its initial public equity offering of 7.6 million class A common shares. The offering price was $20 per share raising gross proceeds of $152,000. A portion of the proceeds was used by the Parent to purchase additional capital stock of Statia amounting to $33,746, net of expenses. During May 1999, the Company used the proceeds from the sale of Statia's capital stock, along with existing cash, to repurchase in the open market a principal amount of $34,000 of the 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 six months ended June 30, 1999, the Company recorded as special compensation expense a bonus in the amount of $1,947 for particular members of the Company's management. The purpose of this special management bonus was to partially reimburse these individuals with respect to adverse tax consequences that resulted from the offering and other past compensation arrangements. In connection with the Parent's initial public offering of equity, certain options previously granted to some of the Company's employees to purchase the Parent's common stock became fully vested, were exercised and became subordinated shares of the Parent. The Parent was amortizing the difference between the estimated fair value of the options at the date of grant and the exercise price over the vesting period of five years and charging such amounts to the Company as compensation expense. On April 28, 1999, the remaining unamortized compensation expense associated with these options of $2,152 was recorded as a non-cash special compensation expense. The following unaudited pro forma consolidated results of operations for the three and six month periods ended June 30, 1999, were prepared to illustrate the estimated effects of the use of the net proceeds from the Parent's initial public offering of equity and the restructuring as described in the Parent's Registration Statement on Form S-1 (collectively, the "pro forma transactions") as if the pro forma transactions had occurred at the beginning of these respective periods. The unaudited pro forma consolidated condensed results of operations should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Company's financial statements and the notes thereto, the other financial information included in the Parent's Registration Statement on Form S-1 (File No. 333-72317), and the Company's 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 For the Six Months Ended Months Ended June 30, 1999 June 30, 1999 --------------- --------------- REVENUES $42,267 $ 79,682 OPERATING INCOME $ 6,808 $ 13,498 NET INCOME AVAILABLE TO COMMON STOCKHOLDER $ 3,592 $ 7,057 Page 6 9 STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) (DOLLARS IN THOUSANDS) 4. REPLACEMENT OF SINGLE POINT MOORING SYSTEM HOSES During the six months ended June 30, 2000, the Company replaced certain large hoses attached to its single point mooring system (the "SPM"). In connection with this hose change-out, the Company adopted the component depreciation method for the SPM and its hoses as of January 1, 2000, which resulted in a change in the estimated useful lives for depreciation purposes for these hoses. As a result, in addition to recurring depreciation charges, the Company incurred a non-cash charge to depreciation expense of $832 during the first quarter of 2000 which is included in Costs of Services and Products Sold. 5. DIVIDEND OF M/V STATIA RESPONDER TO PARENT During the six months ended June 30, 2000, the ownership of the M/V STATIA RESPONDER, an emergency response and maintenance vessel, was transferred to a subsidiary of the Parent as the result of a dividend in the amount of $4,707 representing the net book value of the vessel. On April 1, 2000, the Company entered into a three month bareboat agreement with monthly renewals to charter the vessel from a subsidiary of the Parent for $150 per month. 6. STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY The Notes are guaranteed on a full, unconditional, joint and several basis by each of the indirect and direct active subsidiaries of Statia, other than Statia Terminals Canada, Incorporated which is a co-obligor on the Notes. The enforceability of the guarantees may be affected differently under the laws of the applicable jurisdictions. Each of the subsidiary guarantors is, directly or indirectly, wholly-owned by Statia. The following consolidated condensed financial data are presented for Statia Terminals Canada, Incorporated and Subsidiary. Page 7 10 STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) (DOLLARS IN THOUSANDS) 6. STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY - (CONTINUED) STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY CONSOLIDATED CONDENSED BALANCE SHEETS

Page 8 11 STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) (DOLLARS IN THOUSANDS) 6. STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY - (CONTINUED) STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

STATIA TERMINALS CANADA, INCORPORATED AND SUBSIDIARY CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

Page 9 12 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 International N.V. and Subsidiaries (the "Company") as of June 30, 2000, and the three and six month periods ended June 30, 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)

Page 10 13 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. We have orally agreed to the terms of a contract with a major state-owned oil company under which we are currently purchasing a majority of the fuel oil necessary to support our bunker sales requirements at St. Eustatius. Although not yet signed by the supplier, the contract expires June 30, 2001, and contains terms and conditions which are comparable to prior agreements with the supplier. We believe that suitable alternate sources of supply are available from which we can procure fuel oil should our current contract be interrupted or not be renewed. The following tables set forth, for the periods indicated, (a) the total revenues and total operating income, after allocation of administrative expenses and elimination of certain intercompany transactions, at each of our operating locations and (b) the percentage of such revenues and operating income relative to our total revenues and operating income. REVENUES BY LOCATION (DOLLARS IN THOUSANDS)

Page 11 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

OPERATING INCOME BY LOCATION (DOLLARS IN THOUSANDS)

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 12 15 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)

SELECTED RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2000, VERSUS THE THREE MONTHS ENDED MARCH 31, 2000 Total revenues for the three months ended June 30, 2000, were $54.2 million, compared to $42.3 million for the three months ended March 31, 2000, representing an increase of $11.9 million, or 28.2%. This increase is due to increased revenues from both our terminaling services and product sales segments. The improvement over the first quarter 2000 in terminaling services revenues is due primarily to additional short-term storage and throughput contracts, while the increase in product sales revenues is due primarily to an increase in the volume of products sold. Operating income for the three months ended June 30, 2000, was $3.4 million compared to first quarter 2000 operating income of $1.9 million. First quarter 2000 operating income included a non-cash charge of $0.8 million to depreciation expense resulting from a change in estimated useful lives of certain large hoses attached to our single point mooring system at St. Eustatius. For the three months ended June 30, 2000, net income available to common stockholder was $0.01 million compared to a net loss to common stockholder of $1.5 million for the three months ended March 31, 2000. THREE AND SIX MONTHS ENDED JUNE 30, 2000, VERSUS THE SAME PERIODS OF 1999 COMPARABILITY Our Parent's initial public offering of equity, which closed on April 28, 1999, and the Parent's resultant equity contribution to the Company impacted our results of operations and financial condition. Therefore, our results of operations and financial condition may not be comparable across periods presented herein. Page 13 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) REVENUES Total revenues for the three and six months ended June 30, 2000, were $54.2 million and $96.5 million, compared to $42.3 million and $79.7 million for the same periods of 1999, representing increases of $11.9 million, or 28.3% and $16.8 million, or 21.1%, respectively. Revenues from terminaling services (resulting from revenues from storage, throughput, dock usage, emergency response, and other terminal services) for the three and six months ended June 30, 2000, were $14.3 million and $26.7 million, compared to $17.4 million and $34.0 million for the same periods of 1999, representing decreases of $3.1 million, or 17.8% and $7.3 million, or 21.4%, respectively. We believe the decreases in terminaling services revenues for the three and six months ended June 30, 2000, compared to the same periods in 1999, were principally due to the adverse effects of the accord established between many of the oil exporting nations, some of whom are our customers, to raise crude oil prices by reducing supply. Members of the accord reduced their production of crude oil during the period from April 1, 1999, through late March 2000, which 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 recently announced increases in crude oil production, crude oil and certain petroleum products markets remain in backwardation. For the six months ended June 30, 2000, approximately 78.3% of our tank capacity was leased pursuant to long term contracts at our St. Eustatius and Point Tupper locations together. Approximately 72.8% 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 $1.0 million or 8.5% and $3.6 million or 15.5% during the three and six months ended June 30, 2000, respectively, as compared to the same periods of 1999, due to fewer vessel calls and a lower percentage capacity leased. For the three and six months ended June 30, 2000, the overall percentage of capacity leased at St. Eustatius was 87% and 82% as compared to 91% and 93% for the same periods of 1999, 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 six months ended June 30, 2000, as compared to the same periods 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. Twenty-three and 55 fewer cargo vessels called at the St. Eustatius facility during the three and six months ended June 30, 2000, than during the same periods 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 $1.7 million or 28.0% and $3.3 million or 29.7% during the three and six months ended June 30, 2000, as compared to the same periods of 1999. The decreases were due primarily to a lower percentage of tank capacity leased during the three and six months ended June 30, 2000. The percentage of tank capacity leased at Point Tupper decreased from 94% and 95% for the three and six months ended June 30, 1999, to 65% and 62% for the same periods of 2000. These decreases were primarily the result of the decision by a customer of this facility, who is a participant in the accord, not to renew its crude oil storage contract at the end of the second quarter of 1999. Partially offsetting reduced storage revenues were revenues from a higher number of barrels throughput by this facility's primary crude oil customer for the six months ended June 30, 2000. Six and two fewer cargo vessels called during the three and six months ended June 30, 2000, as compared to the same periods of 1999, which led to lower revenues from port charges at this facility. Page 14 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) Revenues from product sales were $39.9 million and $69.8 million for the three and six months ended June 30, 2000, compared to $24.9 million and $45.6 million for the same periods of 1999, an increase of $15.1 million or 60.6% and $24.1 million or 52.9%, respectively. These increases were due to increases in average selling prices partially offset by lower volumes delivered. Average selling prices increased 66.1% and 88.9% when comparing the three and six months ended June 30, 2000, with the same periods of 1999. These changes in average selling prices were primarily the result of changes in the world oil markets which have been significantly influenced by the accord. Metric tons of bunkers and bulk product delivered decreased 3.3% and 19.1% during the three and six months ended June 30, 2000, as compared to the same periods of 1999. GROSS PROFIT Gross profit for the three and six months ended June 30, 2000, was $5.9 million and $9.9 million compared to $8.5 million and $17.3 million for the same periods of 1999, representing decreases of $2.6 million or 30.7% and $7.4 million or 42.5%. The decreases in gross profit were primarily the result of lower gross profits realized on terminaling services, which were partially offset by higher dollar gross margins realized on product sales. Gross profit from terminaling services decreased primarily as a result of certain customers choosing not to renew their storage and throughput contracts due, in part, to the accord established among many of the oil exporting nations. Additionally, during the six months ended June 30, 2000, we replaced certain hoses attached to our single point mooring system. As a result, we incurred a non-cash charge of $0.8 million during the first quarter of 2000 to depreciation expense which is included in Costs of Services and Products Sold. ADMINISTRATIVE EXPENSES Administrative expenses were $2.4 million and $4.6 million for the three and six months ended June 30, 2000, as compared to $1.7 million and $3.8 million for the same periods of 1999, representing increases of $0.7 million, or 46.9% and $0.8 million or 21.5%. The increases during the three and six months ended June 30, 2000, as compared to the same periods of 1999, were primarily the result of higher depreciation and personnel costs. SPECIAL COMPENSATION EXPENSE As more fully discussed in note 3 of notes to consolidated condensed financial statements included in Part I, Item 1, of this Report, we recorded special compensation expense during the three and six months ended June 30, 1999, of $2.2 million and $4.1 million. INTEREST EXPENSE During the three and six months ended June 30, 2000, we incurred $3.2 million and $6.4 million of interest expense compared to $3.7 million and $7.9 million for the same periods 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 and $0.2 million for the three months ended June 30, 2000 and 1999, respectively, and $0.5 million for the six months ended June 30, 2000 and 1999. Page 15 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) EXTRAORDINARY CHARGE RELATED TO EARLY EXTINGUISHMENT OF DEBT As more fully discussed in note 3 of notes to consolidated condensed financial statements included in Part I, Item 1, of this Report, we recognized an extraordinary charge of $4.7 million during the six months ended June 30, 1999, in connection with the repurchase of $34.0 million of our first mortgage notes. There was no income tax effect associated with this extraordinary charge. NET INCOME (LOSS) The Company produced net income available to common stockholder of $0.01 million and incurred a net loss to common stockholder of $1.5 million for the three and six months ended June 30, 2000, as compared to a net loss to common stockholder of $3.7 million and $3.3 million for the same periods of 1999. This improvement was primarily attributable to reduced debt service costs and the net effect of the factors discussed above. LIQUIDITY AND CAPITAL RESOURCES CASH FLOW FROM OPERATING ACTIVITIES Net cash provided by operating activities was $8.8 million and $12.8 million for the six months ended June 30, 2000, and 1999, respectively. Cash flow from operations has been our primary source of liquidity during these periods. Differences between net losses and positive operating cash flow have resulted primarily from depreciation and amortization burdens, non-cash charges, and changes in various asset and liability accounts. At June 30, 2000, we had cash and cash equivalents on hand of $4.5 million compared to $3.6 million at December 31, 1999. Accounts receivable and accounts payable, primarily related to the purchases and sales of petroleum products, were $10.6 million and $12.1 million, respectively, at June 30, 2000, as compared to $16.7 million and $14.1 million, respectively, at December 31, 1999. The aggregate net changes of the accounts receivable and accounts payable balances are included in net cash provided by operating activities. CASH FLOW FROM INVESTING ACTIVITIES Net cash used in investing activities, consisting primarily of purchases of property and equipment, was $4.1 million and $4.0 million for the six months ended June 30, 2000 and 1999, respectively. See the Summary of Capital Expenditures by Type table which follows. CASH FLOW FROM FINANCING ACTIVITIES During the six months ended June 30, 2000, we paid $3.8 million to the Parent representing the remaining portion of a dividend declared in December 1999. During the six months ended June 30, 1999, we paid a dividend of $1.3 million to the Parent. During the six months ended June 30, 2000, the ownership of the M/V STATIA RESPONDER, an emergency response and maintenance vessel, was transferred to a subsidiary of the Parent as the result of a dividend to the Parent in the amount of $4.7 million representing the net book value of the vessel. The Company has entered into a charter agreement with the subsidiary of the Parent for use of the vessel. Page 16 19 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) On April 28, 1999, the Parent completed its initial public equity offering of 7.6 million shares. The offering price was $20 per share raising gross proceeds to the Parent of $152.0 million. A portion of the offering proceeds was used by the Parent to purchase additional capital stock of Statia Terminals International amounting to $33.7 million, net of expenses. During May 1999, we used the proceeds from the sale of Statia Terminals International's capital stock, along with existing cash, to repurchase in the open market a principal amount of $34.0 million of the first mortgage notes for $39.5 million, including acquisition costs and accrued interest of $3.7 million and $1.8 million, respectively. As of August 14, 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 at least 2.0 to 1 at June 30, 2000. We are not restricted by this provision of the indenture from borrowing on the revolving credit facility discussed below. Additionally, at June 30, 2000, the sum of our dividends, restricted payments, consolidated net income (deficit), and capital stock proceeds was approximately $13.3 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 $9.1 million at June 30, 2000. The revolving credit facility bears interest at the prime rate plus 0.50% per annum (10.0% at August 14, 2000) and will expire on November 27, 2000. From time to time during the six months ended June 30, 2000, we borrowed against the revolving credit facility, and all of such borrowings were repaid by June 30, 2000. We 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 on November 15, 2003, to fund working capital needs, capital expenditures, other operating requirements (including any expenditures required by applicable environmental laws and regulations), and service debt. In accordance with the indenture, we may redeem all or a portion of the first mortgage notes at any time after November 15, 2000. It is unlikely that we will be able to repay the first mortgage notes at maturity through projected operating cash flow, and it will be necessary to refinance all or a portion of the first mortgage notes, or redeem the first mortgage notes from additional equity funds, on or after November 15, 2000, and before their maturity on November 15, 2003. We continuously monitor financial market conditions and our financial position to determine when and whether we will refinance or redeem, all or a portion of the first mortgage notes prior to their maturity. Although we intend to refinance and believe that we will be able to refinance the first mortgage notes during the November 15, 2000, to November 15, 2003, time period, 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. There can be no assurances that we will be able to repay at maturity or refinance this indebtedness in whole or in part, or at all, on terms acceptable to us. If we are unable to repay or refinance the first mortgage notes at or prior to maturity, we will be forced to adopt alternative strategies that may include seeking additional equity capital. Page 17 20 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) CAPITAL EXPENDITURES Our projected capital spending for 2000 is $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 revenues and those which sustain our operations. SUMMARY OF CAPITAL EXPENDITURES BY TYPE (DOLLARS IN THOUSANDS)

Page 18 21 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We periodically purchase refined petroleum products from our customers and others for resale as bunker fuel, for small volume sales to commercial interests, and to maintain an inventory of blend stocks for our customers. Petroleum product inventories are held for short periods, generally not exceeding 90 days. We do not presently 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 June 30, 2000, computed at average costs, net of any lower of cost or market valuation provisions, and the estimated fair value of such products. ON BALANCE SHEET COMMODITY POSITION (Dollars in thousands) As of June 30, 2000 --------------------------------- Carrying Value Fair Value -------------- ----------- Petroleum Inventory: Statia Terminals N.V. $ 4,840 $ 5,210 Statia Terminals Canada, Inc. 70 195 --------- -------- Total $ 4,910 $ 5,405 ========= ======== Except for minor local operating expenses in Canadian dollars and Netherlands Antilles guilders, all of our transactions are in U.S. dollars. Therefore, we believe we are not significantly exposed to exchange rate fluctuations. As all of our present debt obligations carry a fixed rate of interest, except for the revolving credit facility which varies with changes in the lender's prime lending rate, we believe our exposure to interest rate fluctuations is minimal. Page 19 22 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Reference is made to Item 3. Legal Proceedings included in the Company's 1999 Annual Report on Form 10-K. 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 or http://www.statia.cc. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 27.1 Financial Data Schedule for Statia Terminals International N.V. (for electronic filing only) 27.2 Financial Data Schedule for Statia Terminals Canada, Incorporated (for electronic filing only) (b) Reports on Form 8-K. None. Page 20 23 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 INTERNATIONAL N.V. (Registrant) Date: August 14, 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) STATIA TERMINALS CANADA, INCORPORATED (Registrant) Date: August 14, 2000 By: /s/ James F. Brenner -------------------------------------- Vice President-Finance (As Authorized Officer and Principal Financial Officer) Page 21

STATIA TERMINALS INTERNATIONAL NV 10-Q