item 14 exhibits financial statement schedules reports form 8k signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized statia terminals international nv date march 31 1998 registrant james g cameron james g cameron managing director james f brenner james f brenner vice president treasurer pursuant requirements securities exchange act 1934 1997 annual report form 10k signed following persons behalf registrant capacities dates indicated james g cameron managing director principal executive officer march 31 1998 james g cameron john k castle managing director march 31 1998 john k castle david b pittaway managing director march 31 1998 david b pittaway justin b wender managing director march 31 1998 justin b wender james f brenner vice president treasurer principal march 31 1998 james f brenner financial accounting officer page s1 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized statia terminals canada incorporated date march 31 1998 registrant paul r crissman paul r crissman director president james f brenner james f brenner vice presidentfinance pursuant requirements securities exchange act 1934 1997 annual report form 10k signed following persons behalf registrant capacities dates indicated paul r crissman director president principal executive officer march 31 1998 paul r crissman clarence w brown director march 31 1998 clarence w brown james g cameron director march 31 1998 james g cameron james f brenner vice presidentfinance principal financial march 31 1998 james f brenner accounting officer page e1 report independent certified public accountants board managing directors statia terminals international nv subsidiaries audited accompanying consolidated balance sheets statia terminals international nv netherlands antilles corporation subsidiaries december 31 1996 1997 related consolidated statements income loss retained earnings deficit cash flows period inception december 31 1996 year ended december 31 1997 also audited related combined statements income loss retained earnings deficit cash flows statia terminals inc subsidiaries affiliates predecessor company year ended december 31 1995 january 1 1996 november 27 1996 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position statia terminals international nv subsidiaries december 31 1996 1997 results predecessor cash flows period inception december 31 1996 year ended december 31 1997 results operations cash flows year ended december 31 1995 january 1 1996 november 27 1996 conformity generally accepted accounting principles west palm beach florida february 20 1998 accompanying notes integral part financial statements accompanying notes integral part financial statements continued accompanying notes integral part financial statements statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands 1 basis presentation consolidated balance sheets december 31 1996 1997 consolidated statements income loss retained earnings deficit cash flows period inception december 31 1996 year ended december 31 1997 include accounts statia terminals international nv wholly owned subsidiaries company formed 1996 acquire capital stock statia terminals inc subsidiaries affiliates predecessor company praxair inc praxair combined statements income loss retained earnings deficit cash flows year ended december 31 1995 january 1 1996 november 27 1996 period ended november 27 1996 include accounts predecessor company predecessor company predecessor company includes primarily combination following commonly owned companies statia terminals inc incorporated delaware statia terminals nv incorporated netherlands antilles statia terminals point tupper inc incorporated nova scotia canada statia terminals southwest inc incorporated texas significant intercompany balances transactions eliminated prior january 12 1996 predecessor company wholly owned subsidiary cbi industries inc cbi january 12 1996 pursuant merger agreement dated december 22 1995 merger cbi became wholly owned subsidiary praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 see note 4 accordingly historical financial information provided herein periods prior january 1 1996 prepraxair acquisition comparable subsequent predecessor company financial information financial information company includes following primary entities collectively statia operations statia terminals international nv incorporated netherlands antilles statia terminals nv incorporated netherlands antilles statia terminals canada incorporated nova scotia canada formerly statia terminals point tupper inc statia terminals southwest inc incorporated texas statia terminals inc incorporated delaware significant intercompany balances transactions eliminated statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands november 27 1996 company acquired praxair outstanding capital stock predecessor company certain subsidiaries affiliates acquisition company wholly owned statia terminals group nv parent formed september 4 1996 inception castle harlan partners ii lp private equity investment fund managed castle harlan inc private merchant bank management others adjusted purchase price paid praxair capital stock described 217146 acquisition paid part funds received company issuance 135000 1134 first mortgage notes described note 9 sale companys stock acquisition accounted purchase method accounting purchase price allocated assets liabilities company based fair values date acquisition related application purchase accounting note 5 resulted changes capital structure predecessor company historical cost basis various assets liabilities effect changes significantly impairs comparability periods financial position results operations company predecessor company accordingly historical financial information provided herein period ended november 27 1996 comparable periods accompanying financial statements 2 nature business company predecessor company lease operate petroleum bulk liquid blending transshipment storage facilities located island st eustatius netherlands antilles near port hawkesbury nova scotia canada brownsville texas companys terminaling services furnished worlds largest producers crude oil integrated oil companies oil refiners traders petrochemical companies addition company predecessor company provide variety related terminal services including supplying bunker fuels vessels emergency spill response brokering product trades ship services statia terminals inc provides administrative services subsidiaries affiliates office deerfield beach florida 3 summary significant accounting policies use estimates consolidated financial statements prepared conformity generally accepted accounting principles promulgated united states require management make estimates assumptions affect reported amounts assets statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands liabilities management also required make judgments regarding disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods actual results could differ estimates revenue recognition revenues storage throughput operations recognized ratably services provided revenues commissions bunkering services vessel services product sales recognized time delivery service product significant customers predecessor companys revenues stateowned oil producer refiner constituted approximately 64 48 total 1995 revenues approximately 79 47 total revenues period ended november 27 1996 respectively addition approximately 101 predecessor companys revenue periods ended december 31 1995 november 27 1996 derived parties unaffiliated stateowned oil producer refiner generated movement products terminals companys revenues stateowned oil producer refiner constituted approximately 91 40 companys total revenues period november 27 1996 december 31 1996 116 83 year ended december 31 1997 respectively addition 102 68 companys revenues period ended december 31 1996 year ended december 31 1997 respectively derived parties unaffiliated stateowned oil producer refiner generated movement products terminals revenues owner operator vessels received bunkers companys facilities accounted 82 companys 1997 total revenues customer accounted 5 predecessor companys 1995 1996 1997 revenues directly indirectly although company longstanding relationships longterm contracts two customers longterm contracts renewed end terms 2000 1999 respectively company otherwise lost significant portion revenues customers loss could material adverse effect business financial condition company also longterm contracts certain key customers assurance contracts renewed end terms foreign currency translation exchange consolidated financial statements include financial statements foreign subsidiaries affiliates translated accordance statement financial accounting statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands standards sfas 52 foreign currency translation substantially companys predecessors transactions denominated us dollars stock based compensation plans sfas 123 accounting stock based compensation allows either adoption fair value method accounting stockbased compensation plans continuation accounting principles board apb opinion 25 accounting stock issued employees related interpretations supplemental disclosures company chosen account stock options using intrinsic value based method prescribed apb opinion 25 accordingly recognize compensation expense stock option grants made exercise price equal excess fair market value stock date grant adoption sfas 123 impact companys results operations financial position cash flows cash equivalents predecessor company predecessor companys excess cash either swept cbi praxair fund cover current advances invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents company companys excess cash invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents financial instruments company uses various methods assumptions estimate fair value class financial instrument due nature carrying value cash equivalents accounts receivable accounts payable approximates fair value company believes historical carrying value notes reasonable since notes priced par since issuance companys financial instruments significant inventory oil products valued lower weighted average cost estimated market value statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands property equipment property equipment stated cost less accumulated depreciation expense computed using straightline method estimated useful lives respective assets additions property equipment replacements betterments major renewals capitalized repair maintenance expenditures materially increase asset values extend useful lives expensed sfas 121 accounting impairment longlived assets longlived assets disposed requires longlived assets certain identifiable intangibles held used entity reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable sfas 121 also requires longlived assets certain identifiable longlived assets disposed reported lower carrying amount fair value less cost sell company continually evaluates factors events circumstances include limited historical projected operating performance specific industry trends general economic conditions assess whether remaining estimated useful lives longlived assets may warrant revision remaining balance longlived assets may recoverable factors events circumstances indicate longlived assets evaluated possible impairment company uses estimate undiscounted cash flows remaining lives longlived assets measuring recoverability intangible assets intangible assets predecessor company included goodwill organizational costs preoperating expenditures excess cost fair value tangible net assets acquired capitalized goodwill amortized straightline basis periods expected benefit exceed 40 years organizational costs preoperating expenditures amortized evenly fiveyear periods amortization expense 1540 1995 956 period ended november 27 1996 noncurrent assets noncurrent assets consist primarily deferred financing costs companys costs related establishing debt obligations amortized ratably life underlying obligations amortization expense 88 911 period inception december 31 1996 year ended december 31 1997 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands accrued expenses accrued expenses december 31 1996 consist primarily purchase price adjustments related acquisition environmental reserves interest amounts 5146 1500 1521 respectively accrued expenses december 31 1997 consist primarily interest environmental expenses personnelrelated expenses 2027 1500 997 respectively income taxes company predecessor company determine tax provisions deferred tax balances compliance sfas 109 accounting income taxes approach provision income taxes represents income taxes paid payable current year adjusted change deferred taxes year deferred income taxes reflect net tax effects temporary differences financial statement bases tax bases assets liabilities adjusted changes tax rates tax laws changes enacted income expense income expense includes interest income nonoperating items new accounting pronouncements statement financial accounting standards sfas 130 reporting comprehensive income sfas 131 disclosures segments enterprise related information issued financial accounting standards board fasb june 1997 standards effective companys yearend december 31 1998 sfas 130 establishes standards reporting display comprehensive income components sfas 131 establishes standards annual interim disclosures related business operating segments company process determining disclosure requirements standards adoption standards impact consolidated financial position results operations cash flow company 4 praxair purchase accounting discussed note 1 prior january 12 1996 predecessor company wholly owned subsidiary cbi january 12 1996 pursuant merger agreement dated december 22 1995 cbi became wholly owned subsidiary praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 fair value assigned predecessor company merger date 210 million excluding bank borrowings praxair cbi intercompany advance accounts buyout certain offbalancesheet financing merger value statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands allocation merger value assets liabilities acquired based estimated fair value assigned follows merger value 210000 less debt acquired 66000 intercompanyadvance accounts 44000 offbalance sheet obligation 89000 11000 allocation merger value total current assets 17000 property equipment 111000 noncurrent assets 4000 liabilities assumed 121000 11000 addition 10000 praxair debt pushed predecessor companys books effective january 1 1996 debt eliminated connection acquisition 5 acquisition discussed note 1 november 27 1996 company acquired praxair outstanding capital stock predecessor company acquisition accounted purchase method accounting accordingly purchase price 217146 allocated assets liabilities company based respective fair values date acquisition adjustments made allocated fair values 1997 allocation total purchase price assets liabilities acquired follows purchase price cash paid 174146 stock issued 43000 commissions fees expenses 16000 total purchase price 233146 allocation purchase price current assets 19570 assets held sale 20000 property equipment 202907 longterm assets 6539 liabilities assumed 15870 total purchase price 233146 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands summarized unaudited results operations company pro forma basis assuming acquisition related financing transactions occurred january 1 1995 1996 results include certain adjustments primarily amortization depreciation interest expenses related acquisition pro forma results exclude revenues net losses assets held sale statia terminals southwest inc brownsville terminal mv statia responder formerly known mv megan gambarella pro forma results necessarily indicative results would transactions actually occurred dates years ended december 31 1995 1996 revenues 133156 153768 net income loss 5008 3548 6 hurricane insurance claims third fourth quarters 1995 predecessor companys caribbean location adversely impacted three hurricanes operations facility ceased varying lengths time august 28 1995 october 3 1995 certain terminal assets sustained extensive damage repaired marine items shoreline installations damaged destroyed replaced predecessor company certain property liability insurance policies various insurance carriers claims process related hurricane damages settled third quarter 1996 12615 december 31 1997 company expended 20621 relating hurricane repairs betterments 6752 capitalized property equipment 7 property equipment property equipment consisted following december 31 useful life 1996 1997 years land 1314 2622 land improvements 8134 6633 5 20 buildings improvements 2360 2178 20 40 plant machinery terminals 189371 195935 4 40 field office equipment 2931 1677 3 15 204110 209045 less accumulated depreciation 923 10516 property equipment net 203187 198529 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands 8 assets held sale assets held sale represent value allocated connection purchase accounting see note 5 represents managements current estimate proceeds anticipated sale brownsville terminal mv statia responder formerly known mv megan gambarella marine vessel company estimated proceeds sales aggregate 20000 although actual proceeds sales may equal estimates estimated fair value assets reclassified plant equipment assets held sale assets still operation revenues costs associated operating assets included accompanying financial statements certain parents preferred stock agreements contain features may require parent cause company issue dividend otherwise remit net proceeds assets accordingly 20000 companys common stockholders equity classified outside equity section stockholders equity subject reduction 9 debt 1134 first mortgage notes due 2003 issued company one subsidiaries issuers november 27 1996 connection acquisition pay interest may 15 november 15 year notes redeemable whole part option issuers time november 15 2000 following redemption prices expressed percentages principal amount together accrued unpaid interest thereon redemption date redeemed 12month period beginning november 15 year indicated year optional redemption price 2000 105875 2001 102938 2002 100000 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands notwithstanding foregoing time prior november 15 1999 issuers may redeem 35 aggregate principal amount notes proceeds one equity offerings defined indenture redemption price equal 11175 principal amount thereof plus accrued unpaid interest date redemption provided giving effect redemption least 65 aggregate principal amount notes remain outstanding notes guaranteed full unconditional joint several basis indirect direct active subsidiaries company statia terminals canada incorporated coobligor notes see note 18 notes also subject certain financial covenants set forth indenture restrictive include limited consolidated fixed charge ratio 21 met permit company make additional borrowings companys revolving credit facility discussed ii limitations indebtedness iii restrictions certain payments addition notes place certain restrictions company pay dividends parent distributions proceeds assets held sale discussed note 8 certain management fees discussed note 14 except occurrence event default subsidiaries company restrictions upon transfers funds form dividends loans cash advances december 31 1997 company principal payments maturing within next four years notes principal outstanding notes due full november 15 2003 company revolving credit facility credit facility allows company borrow 17500 limit borrowing base defined credit facility credit facility calls commitment fee three eighths percent 0375 per annum portion unused funds credit facility bears interest rate prime plus 05 90 december 31 1997 credit facility constitutes senior indebtedness company secured first priority lien certain companys accounts receivable inventory credit facility subject certain restrictive covenants however subject financial covenants credit facility restrict companys subsidiaries transferring funds company form dividends loans cash advances however failure pay interest due constitutes event default credit facility event default cured prohibits upstream dividend payments made company credit facility expires november 27 1999 december 31 1997 company 8058 available borrowing credit facility limited borrowing base computation outstanding balance statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands cash payments interest third parties 4494 4455 year ended december 31 1995 period ended november 27 1996 respectively cash payments interest period ended december 31 1996 year ended december 31 1997 0 15334 respectively 10 leases company predecessor company rent certain facilities land marine equipment cancelable noncancelable operating leases rent expense operating leases 13760 1995 13854 period ended november 27 1996 491 3763 periods ended december 31 1996 year ended december 31 1997 respectively future rental commitments years ending 1998 2002 2926 2647 2599 2600 2635 respectively 11 shareholders equity predecessor company january 10 1996 statia terminals nv declared dividends 25000 payable january 11 1996 shareholders record january 10 1996 dividends paid affiliates cbi october 22 1993 march 15 1994 statia terminals point tupper inc issued 14689 shares 10311 shares respectively first preferred stock canadian affiliate cbi exchange aggregate contribution cdn 25000 us18577 first preferred stock nonvoting cumulative redeemable option either issuer holder preferred dividends accrued paid quarterly rate 25 preferred shareholders borrowing rate established shareholders lending institution 1995 period ended november 27 1996 statia terminals point tupper inc paid dividends 1424 792 respectively first preferred shareholders preference upon liquidation classes preferred shareholders well common shareholders preferred stock retired conjunction acquisition company companys equity structure consists 30000 shares authorized 6000 shares issued outstanding 1 par value common stock common stock owned parent statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands 12 income taxes canada netherlands antilles estimated current year taxes payable paid monthly total cash payments income taxes 694 year ended december 31 1995 823 period ended november 27 1996 23 513 periods ended december 31 1996 year ended december 31 1997 respectively sources income loss provision income taxes preferred stock dividends provision income taxes consisted statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands components deferred income tax provision reconciliation income taxes us statutory rate 35 companys provision income taxes follows statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands companys effective tax rates periods ended november 27 1996 december 31 1996 year ended december 31 1997 result large corporation tax minimum tax canada netherlands antilles respectively discussed losses incurred certain subsidiaries tax benefit recognized principal temporary differences included deferred income taxes reported balance sheets december 31 1995 undistributed earnings equaled approximately 46500 earnings distributed additional us tax approximately 15000 would incurred january 1996 predecessor company distributed approximately 25000 nonus subsidiary portion distribution amount excess 1996 earnings aggregated 46500 undistributed earnings december 31 1995 connection acquisition remaining undistributed earnings november 27 1996 assumed praxair companys canadian subsidiaries subject large corporation tax based 0225 subsidiaries total equity incurred certain costs accounted differently financial reporting canadian taxation purposes statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands timing differences recognition expenses occur primarily result differing provisions depreciating property equipment amortization goodwill deferred financing costs organizational costs preoperating expenditures certain expenditures deductible taxation purposes addition canadian subsidiaries company incurred taxable loss carryforwards available utilization sevenyear period offset future taxable income net operating loss carryforwards available offset future canadian taxable income 7967 7482 6792 december 31 1995 1996 1997 respectively expire varying amounts seven year periods 2004 company generated approximately 63 million 62 million investment tax credits itc december 31 1997 1996 may carried forward 2007 june 1 1989 governments netherlands antilles st eustatius approved free zone profit tax agreement retroactive january 1 1989 concluding december 31 2000 agreement requires company predecessor company pay 2 rate taxable income minimum payment 500000 netherlands antilles guilders us 281 agreement provides amounts paid order meet minimum annual payment available offset future tax liabilities agreement extent minimum annual payment greater 2 taxable income december 31 1996 1997 amounts available offset future tax liability agreement approximately 1308 1412 respectively certain companys netherlands antilles subsidiaries part agreement accordingly pay netherlands antilles federal income tax effective tax rate 45 approximately 89 67 profit tax included netherlands antilles tax provision period ended december 31 1996 year ended december 31 1997 respectively companys net deferred tax asset amount 7215 primarily relates depreciation net operating loss itc carryforwards years presented company provided valuation allowance tax asset management believes likely net deferred tax asset utilized future 13 employee stock options 1997 shareholders parent approved 1997 stock option plan allows 7235294 shares common stock parent delivered pursuant incentive stock option award agreements nonqualified stock option award statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands agreements 1997 2895 shares common stock parent granted certain employees company exercise price 10 equals fair market value parents common stock award agreement specifies two years employment since date grant following three years 25 option shall become exercisable unless liquidation event occurs defined award agreement time option shall become fully exercisable option shall terminate upon termination employment except event death permanent disability company termination substantial cause option shall expire ten years date grant company applies apb opinion 25 related interpretations accounting options granted employees directors accordingly compensation costs recognized related grants fair value option granted estimated date grant using minimum value method using following assumptions riskfree interest rate 630 dividend yield 0 expected life option 7 years minimum value method utilize volatility calculation fair value effect calculation resulted immaterial compensation charge pro forma basis accordingly net income using intrinsic method equals net income using fair value method 14 relatedparty transactions predecessor company prior november 27 1996 company engaged various relatedparty transactions praxair cbi affiliates amounts due affiliates settled conjunction acquisition praxair cbi directly indirectly allocated certain corporate administrative services predecessor company including certain legal services risk management tax services return preparation employee benefit administration cash management services 1995 period ended november 27 1996 1592 138 respectively paid direct indirect administrative services intercompany balances owed praxair cbi affiliates fully paid connection acquisition statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands company parent entered tenyear management agreement castle harlan inc subject certain conditions pay annual management fee 1350 plus pocket expenses investment banking advisory strategic planning services castle harlan inc may receive additional amounts related disposition certain assets capital stock subsidiaries company subsequent december 31 1996 company declared dividend parent amount 1350 cover management fee period november 27 1996 november 27 1997 payment future dividends company subject restricted notes see note 9 event sale brownsville facility company certain circumstances may required redeem series preferred stock net proceeds thereof event net proceeds sale brownsville facility mv statia responder formerly known mv megan gambarella exceeds specified threshold castle harlan inc may entitled payment 1 million indenture permits sale brownsville facility permits restricted payment statia company equal net proceeds sale 15 commitment contingencies connection acquisition studies undertaken praxair identify potential environmental health safety matters certain matters involving potential environmental costs identified canadian facility praxair agreed pay certain costs currently estimated approximately 3100 representing certain investigations remediation compliance capital costs 1739 paid company february 1998 pending reimbursement praxair extent certain matters exceed estimate praxair agreed reimburse company future expenditures additionally company identified additional environmental costs canadian netherland antilles facilities 1500 5 expended february 1998 costs represent preemptive capital improvements designed mitigate prevent future environmental exposures improve overall safety companys facilities company believes environmental costs subject foregoing reimbursements material adverse effect companys financial position cash flows results operations global petroleum corp global brought action company december 1993 supreme court nova scotia seeking release certain petroleum products owned global company holding secure payment certain invoices global secured release products posting 20 million bond global claims damages 12 million breach contract company counterclaimed breach contract payment approximately 20 million unpaid invoices product storage services april 1996 global scotia synfuels limited related companies brought suit cbi company supreme court nova scotia alleging damages amount 100 million resulting misrepresentation fraud breach fiduciary duty associated reactiviation point tupper facility sale shares point tupper terminals company predecessor statis canada affiliate company cbi may 1994 us department justice brought action us district court district virgin islands sti stnv 36 million pollution cleanup costs connection discharge oil territorial waters us virgin islands puerto rico barge owned leased company affiliates loaded st eustatius company presently disputing us district courts jurisdiction stnv company believes allegations made proceedings without merit therefore company intends vigorously contest claims connection chpii acquisition praxair agreed indemnify company damages relating foregoing proceedings estimate reasonably made ultimate liability time company believes final outcome proceedings material adverse effect companys business financial condition results operations company involved various claims litigation arising conduct business based upon analysis legal matters discussions legal counsel company believes ultimate outcome matters material adverse effect companys financial position cash flows results operations statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands 16 retirement plans predecessor company united states citizens predecessor company participated defined benefit plan certain contributory plans employee stock ownership plan plans sponsored cbipraxair predecessor company paid cbi proportionate share contributions plans amounting 396 1995 246 period ended november 27 1996 result acquisition companys participation plans ceased addition certain foreign nationals residing netherlands antilles predecessor company sponsored government guaranteed pension plan company maintains employee savings plan accordance section 401k internal revenue code plan covers companys fulltime us employees allows employees contribute lesser 15 eligible compensation 9500 1997 calendar year company currently matches 50 rate 8 employees base salary employer may contribute discretionary basis 1 employees base salary per quarter amounts charged expense matching discretionary contributions year ended december 31 1997 114767 186007 respectively addition certain foreign nationals residing netherland antilles company sponsors government guaranteed pension plan 17 valuation qualifying accounts table summarizes activity accounts receivable valuation account periods indicated statia terminals international nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands 18 condensed combining financial statements jurisdiction notes guaranteed full unconditional joint several basis indirect direct active subsidiaries company statia terminals canada incorporated coobligor notes subsidiary guarantors wholly owned company several inactive nonguaranteeing subsidiaries inconsequential individually aggregate assets liabilities operations process dissolved company following condensed combining financial data illustrates composition companys subsidiary guarantors applicable statia terminals international nv unconsolidated combined jurisdiction enforceability guarantees may affected differently laws foreign domestic jurisdictions separate financial statements subsidiaries statia terminals canada incorporated statia terminals nv presented management company determined material investors statis terminals canada incorporated statia terminals nv read conjunction condensed combining financial statements jurisdiction report independent certified public accountants board directors statia terminals nv subsidiaries audited accompanying consolidated balance sheets statia terminals nv netherlands antilles corporation subsidiaries december 31 1996 1997 related consolidated statements income loss retained earnings deficit cash flows period inception december 31 1996 year ended december 31 1997 also audited related consolidated statements income retained earnings deficit cash flows year ended december 31 1995 january 1 1996 november 27 1996 statia terminals nv old statia terminals nv predecessor company financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position statia terminals nv december 31 1996 1997 results operations cash flows period inception december 31 1996 year ended december 31 1997 results predecessors operations cash flows year ended december 31 1995 january 1 1996 november 27 1996 conformity generally accepted accounting principles west palm beach florida february 20 1998 accompanying notes integral part financial statements accompanying notes integral part financial statements continued accompanying notes integral part financial statements statia terminals nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands 1 basis presentation consolidated balance sheets december 31 1996 1997 consolidated statements income retained earnings cash flows period ended december 31 1997 period inception december 31 1996 include accounts statia terminals nv wholly owned subsidiaries company consolidated statements income deficit retained earnings cash flows january 1 1996 november 27 1996 period ended november 27 1996 year ended december 31 1995 include accounts statia terminals nv wholly owned subsidiaries old statia terminals nv predecessor company predecessor company predecessor companys financial statements include following primary entities incorporated netherlands antilles statia terminals nv wholly owned subsidiaries statia laboratory services nv statia tugs nv statia shipping nv statia tugs nv statia shipping nv dormant significant intercompany balances transactions eliminated prior january 12 1996 predecessor company wholly owned subsidiary cbi industries inc cbi january 12 1996 pursuant merger agreement dated december 22 1995 merger cbi became wholly owned subsidiary praxair inc praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 see note 4 accordingly historical financial information provided herein periods prior january 1 1996 prepraxair acquisition comparable subsequent predecessor company financial information financial information company indirect wholly owned subsidiary statia terminals international nv parent incorporated netherlands antilles company includes statia laboratory services nv statia tugs nv statia shipping nv dormant significant intercompany balances transactions eliminated statia terminals nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands november 27 1996 inception parent acquired praxair outstanding capital stock predecessor company certain subsidiaries affiliates acquisition parent newly organized company formed castle harlan partners ii lp private equity investment fund managed castle harlan inc private merchant bank members management others adjusted purchase price paid praxair capital stock described 174921 acquisition paid part funds received company issuance 135000 1134 first mortgage notes described note 9 sale companys stock acquisition accounted purchase method accounting purchase price allocated assets liabilities company based fair values date acquisition related application purchase accounting note 5 resulted changes capital structure predecessor company historical cost basis various assets liabilities effect changes significantly impairs comparability financial position results operations company predecessor company periods accordingly historical information provided herein period ended november 27 1996 comparable periods accompanying financial statements 2 nature business company predecessor company lease operate petroleum bulk liquid blending transshipment storage facilities located island st eustatius netherlands antilles companys terminaling services furnished worlds largest producers crude oil integrated oil companies oil refiners traders petrochemical companies addition company predecessor company provide variety related terminal services including supplying bunker fuels vessels emergency spill response brokering product trades ship services statia terminals inc provides administrative services subsidiaries affiliates office deerfield beach florida 3 summary significant accounting policies use estimates consolidated financial statements prepared conformity generally accepted accounting principles promulgated united states require management make estimates assumptions affect reported amounts assets statia terminals nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands liabilities management also required make judgments regarding disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods actual results could differ estimates revenue recognition revenues storage throughput operations recognized ratably services provided revenues commissions bunkering services vessel services product sales recognized time delivery service product significant customers predecessor companys revenues stateowned oil producer refiner constituted approximately 71 companys total 1995 revenues approximately 88 total revenues period january 1 1996 november 27 1996 approximately 93 companys total revenues period november 27 1996 december 31 1996 period ended december 31 1996 135 year ended december 31 1997 addition approximately 99 predecessors revenues period ended november 27 1996 64 companys revenues period ended december 31 1996 49 year ended december 31 1997 derived parties unaffiliated stateowned oil producer generated movement products terminals revenues owner operator vessels received bunkers companys facilities accounted 95 companys 1997 total revenues customer accounted 5 predecessor companys 1995 1996 1997 revenues directly indirectly although company longstanding relationship longterm contracts one customer longterm contracts renewed end terms 2000 1999 respectively company otherwise lost significant portion revenues customer loss could material adverse effect business financial condition company also longterm contracts certain key customers assurance contracts renewed end terms foreign currency translation exchange consolidated financial statements include financial statements foreign subsidiaries affiliates translated accordance statement financial accounting standards sfas 52 foreign currency translation substantially companys transactions denominated us dollars statia terminals nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands cash equivalents predecessor company predecessors excess cash either swept cbi praxair fund cover current advances invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents company companys excess cash invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents financial instruments company uses various methods assumptions estimate fair value class financial instrument due nature carrying value cash equivalents accounts receivable accounts payable approximates fair value companys financial instruments significant inventory oil products valued lower weighted average cost estimated market value property equipment property equipment stated cost less accumulated depreciation expense computed using straightline method estimated useful lives respective assets additions property equipment replacements betterments major renewals capitalized repair maintenance expenditures materially increase asset values extend useful lives expensed sfas 121 accounting impairment longlived assets longlived assets disposed requires longlived assets certain identifiable intangibles held used entity reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable sfas 121 also requires longlived assets certain identifiable longlived assets disposed reported lower carrying amount fair value less cost sell company continually evaluates factors events circumstances statia terminals nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands include limited historical projected operating performance specific industry trends general economic conditions assess whether remaining estimated useful lives longlived assets may warrant revision remaining balance longlived assets may recoverable factors events circumstances indicate longlived assets evaluated possible impairment company uses estimate undiscounted cash flows remaining lives longlived assets measuring recoverability noncurrent assets noncurrent assets consist primarily deferred financing costs predecessor companys costs related establishing debt obligations amortized ratably life underlying obligations amortization expenses 343 67 720 period ended november 27 1996 periods ended december 31 1996 year ended december 31 1997 respectively accrued expenses accrued expenses december 31 1996 consist primarily purchase price adjustments related acquisition accrued interest amount 4408 1205 respectively accrued expenses december 31 1997 consist primarily accrued interest personnelrelated expenses amount 1606 997 respectively income taxes company predecessor determine tax provisions deferred tax balances compliance sfas 109 accounting income taxes approach provision income taxes represents income taxes paid payable current year adjusted change deferred taxes year deferred income taxes reflect net tax effects temporary differences financial statement bases tax bases assets liabilities adjusted changes tax rates tax laws changes enacted june 1 1989 governments netherlands antilles st eustatius approved 12year free zone agreement retroactive january 1 1989 concluding december 31 2000 agreement requires company pay 2 rate taxable income instead profit tax minimum annual payment 500000 netherlands statia terminals nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands antilles guilders us 281 agreement provides amounts paid order meet minimum annual payment available offset future tax liabilities agreement extent minimum annual payment greater 2 taxable income december 31 1996 1997 amounts available offset future tax liability agreement approximately 1308 1412 respectively company recognized amount balance sheet benefit may never realized new accounting pronouncements statement financial accounting standards sfas 130 reporting comprehensive income sfas 131 disclosures segments enterprise related information issued financial accounting standards board fasb june 1997 standards effective companys yearend december 31 1998 sfas 130 establishes standards reporting display comprehensive income components sfas 131 establishes standards annual interim disclosure related business operating segments company process determining disclosure requirements standards adoption standards impact consolidated financial position results operations cash flow company 4 praxair purchase accounting discussed note 1 prior january 12 1996 predecessor company wholly owned subsidiary cbi january 12 1996 pursuant merger agreement dated december 22 1995 cbi became wholly owned subsidiary praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 fair value assigned predecessor company merger date 179 million excluding bank borrowings praxair cbi intercompany advance accounts buyout certain offbalancesheet financing merger value allocation merger value assets liabilities acquired based estimated fair value assigned follows merger value 179000 less intercompanyadvance accounts 13000 offbalance sheet obligation 89000 77000 allocation merger value total current assets 15000 property equipment 79000 noncurrent assets 2000 liabilities assumed 19000 77000 addition 10000 praxair debt pushed predecessors books effective january 1 1996 debt eliminated connection acquisition statia terminals nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands 5 acquisition discussed note 1 november 27 1996 company acquired praxair outstanding capital stock predecessor company acquisition accounted purchase method accounting accordingly purchase price 174921 allocated assets liabilities company based respective fair values date acquisition adjustments made allocated fair values 1997 allocation total purchase price assets liabilities acquired follows purchase price common stock assets 174921 commissions fees expenses 12673 total purchase price 187594 allocation purchase price current assets 15825 assets held sale 10000 property equipment 169839 longterm assets 5091 liabilities assumed 13161 total purchase price 187594 6 hurricane insurance claims third fourth quarters 1995 predecessor companys caribbean location adversely impacted three hurricanes operations facility ceased varying lengths time august 28 1995 october 3 1995 certain terminal assets sustained extensive damage repaired marine items shoreline installations damaged destroyed replaced predecessor company certain property liability insurance policies various insurance carriers claims process related hurricane damages settled third quarter 1996 12615 december 31 1997 company expended 20621 relating hurricane repairs betterments 6752 capitalized property equipment statia terminals nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands 7 property equipment property equipment consisted following december 31 useful life 1996 1997 years land 396 land improvements 7350 7368 5 20 buildings improvements 719 1332 20 40 plant machinery terminals 164316 167151 4 40 field office equipment 188 378 3 15 172969 176625 less accumulated depreciation 653 7837 property equipment net 172316 168788 first quarter 1995 predecessor company completed construction began leasing operating 50 million barrel crude oil terminal single point mooring system connection acquisition praxair terminated offbalance sheet financing arrangement paid full obligations related lease 8 assets held sale assets held sale represent managements estimate proceeds anticipated sale mv statia responder formerly known mv megan gambarella marine vessel company estimated proceeds sale aggregate 10 million although actual proceeds sales may equal estimates estimated fair value asset reclassified property equipment assets held sale asset still operation revenues costs associated operating asset included accompanying financial statements statia terminals nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands certain parents preferred stock agreements contain features may require parent cause company dividend otherwise remit proceeds asset accordingly 10000 companys common stockholders equity classified outside equity section stockholders equity subject reduction 9 debt 1134 first mortgage notes due 2003 issued parent one subsidiaries issuers november 27 1996 connection acquisition pay interest may 15 november 15 year notes redeemable whole part option issuers time november 15 2000 following redemption prices expressed percentages principal amount together accrued unpaid interest thereon redemption date redeemed 12month period beginning november 15 year indicated year optional redemption price 2000 105875 2001 102938 2002 100000 notwithstanding foregoing time prior november 15 1999 issuers may redeem 35 aggregate principal amount notes proceeds one equity offerings defined indenture redemption price equal 11175 principal amount thereof plus accrued unpaid interest date redemption provided giving effect redemption least 65 aggregate principal amount notes remain outstanding notes guaranteed full unconditional joint several basis indirect direct active subsidiaries affiliates parent statia terminals canada incorporated coobligor notes also subject certain financial covenants set forth indenture restrictive include limited following consolidated fixed charge ratio 21 met statia terminals nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands permit company make additional borrowings companys revolving credit facility discussed ii limitations indebtedness iii restrictions certain payments addition notes place certain restrictions parent pay dividends distributions proceeds assets held sale discussed note 8 circumstances defined indenture except occurrence event default subsidiaries company restrictions upon transfers funds form dividends loans cash advances december 31 1997 company principal payments maturing within next five years notes principal outstanding notes due full november 15 2003 company revolving credit facility credit facility allows company borrow 12500 limit borrowing base defined credit facility credit facility calls commitment fee three eighths percent 0375 per annum portion unused funds credit facility bears interest rate prime plus 05 90 december 31 1997 credit facility constitutes senior indebtedness company secured first priority lien certain companys accounts receivable inventory credit facility subject certain restrictive covenants however subject financial covenants credit facility restrict companys subsidiaries transferring funds parent form dividends loans cash advances however failure pay interest due constitutes event default credit facility event default cured prohibits upstream dividend payments made parent credit facility expires november 27 1999 december 31 1997 company 7599 available borrowing credit facility limited borrowing base computation outstanding balance company cash payments interest period ended december 31 1996 paid 12147 interest year ended december 31 1997 statia terminals nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands 10 shareholders equity predecessor company january 10 1996 statia terminals nv declared dividends 25000 payable january 11 1996 shareholders record january 10 1996 dividends paid affiliates cbi company companys equity structure consists 19395001 shares authorized issued outstanding 1 par value common stock common stock owned parent 11 relatedparty transactions predecessor company prior november 27 1996 predecessor company engaged various relatedparty transactions praxair cbi affiliates amounts due affiliate settled conjunction acquisition statia terminals inc directly indirectly allocated certain corporate operating administrative services predecessor company including certain legal services risk management tax advice return preparation employee benefit administration cash management services ultimately provided cbi 1995 period ended november 27 1996 3536 2831 respectively paid statia terminals inc direct indirect administrative services statia terminals nv subsidiaries notes consolidated financial statements december 31 1996 1997 dollars thousands company wholly owned subsidiary company engages various relatedparty transactions parent companys subsidiaries affiliates unpaid portion transactions included intercompany balance intercompany balances owed praxair affiliates settled result acquisition parent subsidiaries directly indirectly allocate certain corporate operating administrative services company including certain legal services risk management tax services return preparation employee benefit administration cash management services period ended december 31 1996 1997 1805 3273 respectively paid direct indirect services 12 commitment contingencies may 1994 us department justice brought action us district court district virgin islands sti stnv 36 million pollution cleanup costs connection discharge oil territorial waters us virgin islands puerto rico barge owned leased company affiliates loaded st eustatius company presently disputing us district courts jurisdiction stnv company believes allegations made proceeding without merit therefore company intends vigorously contest claim connection chpii acquisition praxair agreed indemnify company damages relating foregoing proceeding estimate reasonably made ultimate liability time company believes final outcome proceeding material adverse effect companys business financial condition results operations company involved various claims litigation arising conduct business based upon analysis legal matters discussions legal counsel company believes ultimate outcome matters material adverse effect companys financial position results operations net cash flows 13 leases company predecessor company lease marine equipment cancelable noncancelable operating leases minimum future rentals operating leases next five years follows year ending december 31 1998 1686 1999 2117 2000 2152 2001 2195 2002 2239 10389 rent expense operating leases amounted approximately 4405 year ended december 31 1995 3551 363 3763 periods ended november 27 1996 december 31 1996 year ended december 31 1997 respectively 14 retirement plan company sponsors government guaranteed pension plan certain foreign nationals residing netherlands antilles report independent certified public accountants board directors statia terminals canada incorporated subsidiary audited accompanying consolidated balance sheets statia terminals canada incorporated nova scotia canada corporation subsidiary december 31 1996 1997 related consolidated statements income loss retained earnings deficit cash flows period inception december 31 1996 year ended december 31 1997 also audited related consolidated statements income loss retained earnings cash flows year ended december 31 1995 january 1 1996 november 27 1996 statia terminals point tupper inc affiliate predecessor company financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position statia terminals canada incorporated subsidiary december 31 1996 1997 results operations cash flows period inception december 31 1996 year ended december 31 1997 results predecessors operations cash flows year ended december 31 1995 january 1 1996 november 27 1996 conformity generally accepted accounting principles west palm beach florida february 20 1998 statia terminals canada incorporated subsidiary consolidated balance sheets dollars thousands december 31 1996 1997 assets current assets cash equivalents 854 1241 accounts receivable trade less allowance doubtful accounts 94 1996 62 1997 873 872 629 1089 inventory net 1157 533 prepaid expenses 67 57 receivable affiliates 1598 total current assets 5178 3792 property equipment net 29036 28651 noncurrent assets net 1367 1174 total assets 35581 33617 liabilities stockholders equity current liabilities accounts payable 688 778 accrued expenses 4929 2343 payable affiliates 288 total current liabilities 5617 3409 longterm debt 28060 total liabilities 33677 31469 stockholders equity common stock additional paidin capital 2266 accumulated deficit 362 118 total stockholders equity 1904 2148 total liabilities stockholders equity 35581 33617 accompanying notes integral part financial statements accompanying notes integral part financial statements continued accompanying notes integral part financial statements statia terminals canada incorporated subsidiary notes consolidated financial statements december 31 1996 1997 dollars thousands 1 basis presentation consolidated balance sheets december 31 1996 1997 consolidated statements income accumulated deficit cash flows year ended december 31 1997 period inception december 31 1996 include accounts statia terminals canada incorporated subsidiary company consolidated statements income retained earnings cash flows january 1 1996 november 27 1996 period ended november 27 1996 year ended december 31 1995 include accounts statia terminals point tupper inc affiliates predecessor company consolidated financial statements presented united states dollars predecessor company predecessor company includes statia terminals point tupper inc incorporated nova scotia canada commonly owned affiliate point tupper marine services limited incorporated nova scotia canada significant intercompany balances transactions eliminated prior january 12 1996 predecessor company wholly owned subsidiary statia terminals inc sti wholly owned cbi industries inc cbi january 12 1996 pursuant merger agreement dated december 22 1995 merger cbi became wholly owned subsidiary praxair inc praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 accordingly historical financial information provided herein periods prior january 1 1996 prepraxair acquisition comparable subsequent predecessor company financial information financial information company indirect wholly owned subsidiary statia terminals international nv parent incorporated netherlands antilles company includes statia terminals canada incorporated nova scotia canada point tupper marine services limited incorporated nova scotia canada significant intercompany balances transactions eliminated november 27 1996 inception parent acquired praxair outstanding capital stock predecessor company certain affiliate acquisition parent newly organized company formed castle harlan partners ii lp private equity statia terminals canada incorporated subsidiary notes consolidated financial statements december 31 1996 1997 dollars thousands investment fund managed castle harlan inc private merchant bank members management parent others connection acquisition november 27 1996 predecessor company amalgamated company portion adjusted purchase price paid praxair capital stock company 27665 acquisition paid primarily funds received company issuance 1134 first mortgage notes described note 7 assets company pledged collateral secure notes acquisition accounted purchase method accounting purchase price allocated assets liabilities company based fair value date acquisition related application purchase accounting note 5 resulted changes capital structure predecessor company historical cost basis various assets liabilities effect changes significantly impairs comparability financial position results operations company predecessor company periods 2 nature business company predecessor company operate petroleum bulk liquid blending transshipment storage facilities located near port hawkesbury nova scotia canada companys terminaling services furnished worlds largest producers crude oil integrated oil companies oil refiners traders petrochemical companies addition company predecessor company provide variety related terminal services including supplying bunker fuels vessels spill response brokering product trades ship services statia terminals inc sti provides administrative services subsidiaries affiliates office deerfield beach florida 3 summary significant accounting policies use estimates consolidated financial statements prepared conformity generally accepted accounting principles promulgated united states require management make estimates assumptions affect reported amounts assets liabilities management also required make judgments regarding disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods actual results could differ estimates statia terminals canada incorporated subsidiary notes consolidated financial statements december 31 1996 1997 dollars thousands revenue recognition revenues storage throughput operations recognized ratably services provided revenues commissions bunkering services vessel services product sales recognized time delivery service product significant customers companys revenues refiner constituted approximately 564 predecessors total revenues period ended november 27 1996 369 companys total revenues period november 27 1996 december 31 1996 companys revenues refiner ship agent constituted approximately 624 104 respectively companys total 1997 revenues addition approximately 162 predecessors revenues period ended november 27 1996 425 companys revenues period ended december 31 1996 195 companys revenues year ended december 31 1997 derived parties unaffiliated mentioned customer generated movement products terminals addition predecessor companys revenues refiner two petroleum product brokers constituted approximately 616 146 62 respectively predecessor companys total 1995 revenues addition approximately 76 companys 1995 revenues derived parties unaffiliated mentioned customers generated movement products terminals customer accounted 5 predecessors companys 1995 1996 1997 revenues directly indirectly although company longstanding relationship longterm contract one customer longterm contract renewed end term year 2000 company otherwise lost significant portion revenue customer loss could material adverse effect business financial condition company also longterm contracts certain key customers assurance contracts renewed end terms foreign currency translation exchange consolidated financial statements include foreign currency transactions foreign currency financial statement amounts translated accordance statement financial accounting standards sfas 52 foreign currency translation substantially companys predecessors transactions denominated us dollars statia terminals canada incorporated subsidiary notes consolidated financial statements december 31 1996 1997 dollars thousands cash equivalents companys predecessor companys excess cash invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents financial instruments company uses various methods assumptions estimate fair value class financial instrument due nature carrying value cash equivalents accounts receivable accounts payable approximates fair value company believes historical carrying value notes reasonable since notes priced par since issuance companys financial instruments significant inventory oil products valued lower weighted average cost estimated market value property equipment property equipment stated cost less accumulated depreciation expense computed using straightline method estimated useful lives respective assets additions property equipment replacements betterments major renewals capitalized repair maintenance expenditures materially increase asset values extend useful lives expensed sfas 121 accounting impairment longlived assets longlived assets disposed requires longlived assets certain identifiable intangibles held used entity reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable sfas 121 also requires longlived assets certain identifiable longlived assets disposed reported lower carrying amount fair value less cost sell company continually evaluates factors events circumstances include limited historical projected operating performance specific industry trends general economic conditions assess whether remaining estimated useful lives long lived assets may warrant revision remaining balance longlived assets may statia terminals canada incorporated subsidiary notes consolidated financial statements december 31 1996 1997 dollars thousands recoverable factors events circumstances indicate longlived assets evaluated possible impairment company uses estimate undiscounted cash flows remaining lives longlived assets measuring recoverability noncurrent assets noncurrent assets consist primarily deferred financing costs companys costs related establishing debt obligations amortized ratably life underlying obligations amortization expense 18 191 years ended december 31 1996 1997 respectively accrued expenses accrued expenses december 31 1996 consisted primarily purchase price adjustments related acquisition environmental reserves accrued interest amount 665 1250 316 respectively accrued expenses december 31 1997 consists primarily environmental expenses accrued interest 1250 421 respectively income taxes company predecessor determine tax provisions deferred tax balances compliance sfas 109 accounting income taxes approach provision income taxes represents income taxes paid payable current year adjusted change deferred taxes year deferred income taxes reflect net tax effects temporary differences financial statement bases tax bases assets liabilities adjusted changes tax rates tax laws changes enacted new accounting pronouncements statement financial accounting standards sfas 130 reporting comprehensive income sfas 131 disclosures segments enterprise related information issued financial accounting standards board fasb june 1997 standards effective companys yearend december 31 1998 sfas 130 establishes standards reporting display comprehensive income components sfas 131 establishes standards annual interim disclosures related business operating segments company process determining disclosure requirements standards adoption standards impact consolidated financial position results operations cash flow company statia terminals canada incorporated subsidiary notes consolidated financial statements december 31 1996 1997 dollars thousands 4 praxair purchase accounting discussed note 1 prior january 12 1996 predecessor company wholly owned subsidiary cbi january 12 1996 pursuant merger agreement dated december 22 1995 cbi became wholly owned subsidiary praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 fair value assigned predecessor company merger date 27000 excluding bank borrowings praxair cbi intercompany advance accounts buyout certain offbalancesheet financing merger value allocation merger value assets liabilities acquired based estimated fair value assigned follows merger value 27000 less bank borrowings 66000 intercompanyadvance accounts 1000 40000 allocation merger value total current assets 3000 property equipment 27000 noncurrent assets 2000 liabilities assumed 72000 40000 5 acquisition discussed note 1 november 27 1996 company acquired praxair outstanding capital stock predecessor company acquisition accounted purchase method accounting accordingly portion purchase price approximately 27665 allocated assets liabilities company based respective fair values date acquisition adjustments made allocated fair values 1997 statia terminals canada incorporated subsidiary notes consolidated financial statements december 31 1996 1997 dollars thousands allocation total purchase price assets liabilities acquired follows purchase price 27665 commissions fees expenses 3326 total purchase price 30991 allocation purchase price current assets 3989 property equipment 28901 longterm assets 1448 liabilities assumed 3347 total purchase price 30991 6 property equipment property equipment consisted following december 31 useful life 1996 1997 years land 273 land improvements 20 4 5 20 buildings improvements 366 89 20 40 plant machinery terminals 26587 29412 4 40 field office equipment 1961 386 3 15 29207 30164 less accumulated depreciation 171 1513 property equipment net 29036 28651 statia terminals canada incorporated subsidiary notes consolidated financial statements december 31 1996 1997 dollars thousands 7 debt 1134 first mortgage notes due 2003 issued parent company one subsidiaries issuers november 27 1996 connection acquisition pay interest may 15 november 15 year notes redeemable whole part option issuers time november 15 2000 following redemption prices expressed percentages principal amount together accrued unpaid interest thereon redemption date redeemed 12month period beginning november 15 year indicated year optional redemption price 2000 105875 2001 102938 2002 100000 notwithstanding foregoing time prior november 15 1999 issuers may redeem 35 aggregate principal amount notes proceeds one equity offerings defined indenture redemption price equal 11175 principal amount thereof plus accrued unpaid interest date redemption provided giving effect redemption least 65 aggregate principal amount notes remain outstanding notes guaranteed full unconditional joint several basis indirect direct active subsidiaries affiliates parent company coobligor notes also subject certain financial covenants set forth indenture restrictive include limited following consolidated fixed charge ratio 21 met permit company make additional borrowings companys revolving credit facility discussed ii limitations indebtedness iii restrictions certain payments addition notes place certain restrictions parent pay dividends certain circumstances defined indenture except occurrence event default company restrictions upon transfers funds form dividends loans cash advances statia terminals canada incorporated subsidiary notes consolidated financial statements december 31 1996 1997 dollars thousands december 31 1997 company principal payments maturing within next five years notes principal outstanding notes due full november 15 2003 company revolving credit facility credit facility allows company borrow 5000 limit borrowing base defined credit facility credit facility calls commitment fee three eighths percent 0375 per annum portion unused funds credit facility bears interest rate prime plus 05 9 december 31 1997 credit facility constitutes senior indebtedness company secured first priority lien certain companys accounts receivable inventory credit facility subject certain restrictive covenants however subject financial covenants credit facility restrict company transferring funds parent subsidiaries form dividends loans cash advances however failure pay interest due constitutes event default credit facility event default cured prohibits upstream dividend payments made parent credit facility expires november 27 1999 december 31 1997 company approximately 459 available borrowing credit facility limited borrowing base computation outstanding balance cash payments interest 4494 year ended december 31 1995 4455 period ended november 27 1996 3187 year ended december 31 1997 company cash payments interest period ended december 31 1996 8 shareholders equity predecessor company october 22 1993 march 15 1994 statia terminals point tupper inc issued 14689 shares 10311 shares respectively first preferred stock canadian affiliate cbi exchange aggregate contribution cdn 25000 us18577 first preferred stock nonvoting cumulative redeemable option either issuer holder preferred dividends accrued paid quarterly rate 25 preferred shareholders borrowing rate established shareholders lending institution 1995 period ended november 27 1996 statia terminals point tupper inc paid dividends 1424 792 respectively first preferred shareholders preference upon liquidation classes preferred shareholders well common shareholders preferred stock retired conjunction acquisition statia terminals canada incorporated subsidiary notes consolidated financial statements december 31 1996 1997 dollars thousands company companys equity structure consists 1000000 shares authorized par common stock one share outstanding common stock indirectly owned parent 9 income taxes company predecessor subject large corporation tax based 0225 companys total equity incurred certain costs accounted differently financial reporting canadian taxation purposes timing differences recognition expenses occur primarily result differing provisions depreciating property equipment amortization goodwill deferred financing costs organization costs preoperating expenditures certain expenditures deductible taxation purposes addition predecessor incurred taxable losses available utilization sevenyear period offset future taxable income net operating loss carryforwards available offset future canadian taxable income us7482 us6792 december 31 1996 1997 respectively company expire varying amounts sevenyear periods 2004 company generated approximately 62 million 63 million investment tax credits itc december 31 1996 1997 expiring 2001 2007 company recognized benefit itc loss carryforwards balance sheet benefit may never realized 10 relatedparty transactions predecessor company wholly owned subsidiary sti predecessor company engaged various relatedparty transactions sti affiliates unpaid portion transactions included intercompany balances sti allocated certain corporate operating administrative services predecessor including certain legal services risk management tax services return preparation employee benefit administration cash management services 1995 period ended november 27 1996 2382 1610 respectively paid direct indirect services statia terminals canada incorporated subsidiary notes consolidated financial statements december 31 1996 1997 dollars thousands company wholly owned subsidiary company engages various relatedparty transactions parent subsidiaries unpaid portion transactions included intercompany balance intercompany balances owed praxair affiliates settled result acquisition parent subsidiaries directly indirectly allocate certain corporate operating administrative services company including certain legal services risk management tax advice return preparation employee benefit administration cash management services period ended december 31 1996 year ended december 31 1997 1026 2054 respectively paid direct indirect services 11 commitment contingencies connection acquisition studies undertaken praxair identify potential environmental health safety matters certain matters involving potential environmental costs identified point tupper facility praxair agreed pay certain costs currently estimated approximately 3100 representing certain investigations remediation compliance capital costs 1739 paid company february 1998 pending reimbursement praxair extent certain matters exceed estimate praxair agreed reimburse company future expenditures additionally company identified additional environmental costs point tupper approximately 1250 5 expended february 1998 costs represent preemptive capital improvements designed mitigate prevent future environmental exposures improve overall safety companys facilities company believes environmental costs subject foregoing reimbursements material adverse effect companys financial position results operations cash flows global petroleum corp global brought action company december 1993 supreme court nova scotia seeking release certain petroleum products owned global company holding secure payment certain invoices global secured release products posting 20 million bond global claims damages 12 million breach contract company counterclaimed breach contract payment approximately 20 million unpaid invoices product storage services april 1996 global scotia synfuels limited related companies brought suit cbi company supreme court nova scotia alleging damages amount 100 million resulting misrepresentation fraud breach fiduciary duty associated reactiviation point tupper facility sale shares point tupper terminals company predecessor statis canada affiliate company cbi company believes allegations made proceeding without merit therefore company intends vigorously contest claim connection chpii acquisition praxair agreed indemnify company damages relating foregoing proceeding estimate reasonably made ultimate liability time company believes final outcome proceeding material adverse effect companys business financial condition results operations company involved various claims litigation arising conduct business based upon analysis legal matters discussions legal counsel company believes ultimate outcome matters material adverse effect companys financial position results operations cash flows exhibits index exhibit number description exhibit 31 articles incorporation statia terminals international nv 32 memorandum articles association statia terminals canada incorporated 33 order supreme court nova scotia approving amalgamation agreement statia terminals canada incorporated statia terminals point tupper inc filed registry joint stock companies halifax nova scotia 41 indenture dated november 27 1996 among statia terminals international nv statia terminals canada incorporated issuers statia terminals corporation nv statia terminals delaware inc statia terminals inc statia terminals nv statia delaware holdco ii inc saba trustcompany nv bicen development corporation nv statia terminals southwest inc wp company inc seven seas steamship company inc seven seas steamship company sint eustatius nv point tupper marine services limited statia laboratory services nv statia tugs nv collectively subsidiary guarantors marine midland bank 41a first amendment dated august 14 1997 indenture dated november 27 1996 among statia terminals international nv netherlands antilles corporation statia terminals canada incorporated corporation organized laws nova scotia canada subsidiary guarantors named therein marine midland bank 41b second amendment dated february 25 1998 indenture dated november 27 1996 among statia terminals international nv netherlands antilles corporation statia terminals canada incorporated corporation organized laws nova scotia canada subsidiary guarantors named therein marine midland bank 42 specimen certificate 11 34 series first mortgage note due 2003 included exhibit 41 hereto 43 specimen certificate 11 34 series b first mortgage note due 2003 included exhibit 41 hereto 44 form guarantee securities issued pursuant indenture included exhibit 41 hereto 45 registration rights agreement dated november 27 1996 among statia terminals international nv statia terminals canada incorporated subsidiary guarantors dillon read co inc 46 share pledge agreement dated november 27 1996 statia terminals international nv marine midland bank 47 share pledge agreement dated november 27 1996 statia terminals nv marine midland bank 48 share pledge agreement dated november 27 1996 statia terminals corporation nv marine midland bank 49 share pledge agreement dated november 27 1996 seven seas steamship company inc marine midland bank 410 fiduciary transfer tangible assets agreement dated november 27 1996 statia terminals nv saba trustcompany nv bicen development corporation nv statia laboratory services nv statia tugs nv seven seas steamship company sint eustatius nv marine midland bank 411 fiduciary assignment intangible assets agreement dated november 27 1996 statia terminals international nv statia terminals corporation nv statia terminals nv saba trustcompany nv bicen development corporation nv statia laboratory services nv seven seas steamship company sint eustatius nv statia tugs nv marine midland bank 412 deed mortgage dated november 27 1996 among statia terminals nv statia laboratory services nv saba trustcompany nv bicen development corporation nv mortgagors marine midland bank mortgagee 413 fixed floating charge debenture made november 27 1996 statia terminals canada incorporated marine midland bank 414 debenture delivery agreement dated november 27 1996 statia terminals canada incorporated marine midland bank 415 securities pledge agreement made november 27 1996 statia terminals canada incorporated marine midland bank 416 securities pledge agreement dated november 27 1996 statia terminals corporation nv marine midland bank 417 debt allocation agreement dated november 27 1996 statia terminals international nv statia terminals canada incorporated 418 united states securities pledge security agreement dated november 27 1996 among statia terminals international nv statia delaware holdco ii statia terminals delaware inc statia terminals inc wp company inc marine midland bank 101 storage throughput agreement dated may 6 1993 storage throughput agreement 102 marine fuel agreement dated may 6 1993 marine fuel agreement 103 amendment dated january 1 1996 storage throughput agreement ii marine fuel agreement 103a amendment dated december 27 1996 storage throughput agreement ii marine fuel agreement year ended december 31 1997 103b amendment dated december 28 1997 storage throughput agreement ii marine fuel agreement year ended december 31 1998 104 storage throughput agreement dated august 20 1993 105 storage throughput agreement dated august 1 1994 106 employment agreement dated november 27 1996 statia terminals group nv statia terminals inc james g cameron 107 employment agreement dated november 27 1996 statia terminals group nv statia terminals inc thomas thompson jr 108 employment agreement dated november 27 1996 statia terminals group nv statia terminals inc robert r russo 109 employment agreement dated november 27 1996 statia terminals group nv statia terminals inc john franklin 1010 employment agreement dated november 27 1996 statia terminals group nv statia terminals inc james f brenner 1011 employment agreement dated november 27 1996 statia terminals group nv statia terminals inc jack r pine 1012 loan security agreement dated november 27 1996 congress financial corporation florida statia terminals nv 1013 loan agreement dated november 27 1996 among congress financial corporation canada statia terminals canada incorporated point tupper marine services limited 1014 brownsville navigation district contracts 2790 dated may 17 1993 brownsville navigation district statia terminals southwest inc 1014a amendment dated february 2 1998 brownsville navigation district contracts 2790 1015 brownsville navigation district contracts 2826 dated january 14 1994 brownsville navigation district statia terminals southwest inc 1016 1997 stock option plan award agreements 211 subsidiaries registrants 271 financial data schedules electronic filing incorporated reference registration statement statia canada form s4 dated december 20 1996 amendments thereto filed us securities exchange commission registration statement 33318455 became effective february 14 1997 incorporated reference december 31 1996 form 10k dated may 13 1997 incorporated reference september 30 1997 form 10q dated november 14 1997 item 14 exhibits financial statement schedules reports form 8k 1 financial statements index following consolidated financial statements statia terminals international nv subsidiaries statia terminals canada incorporated subsidiary filed response item 8 report page statia terminals international nv report independent certified public accountants consolidated balance sheets december 31 1999 2000 consolidated statements operations years ended december 31 1998 1999 2000 consolidated statements stockholders equity years ended december 31 1998 1999 2000 consolidated statements cash flows years ended december 31 1998 1999 2000 notes consolidated financial statements statia terminals canada incorporated report independent certified public accountants consolidated balance sheets december 31 1999 2000 consolidated statements operations retained earnings deficit years ended december 31 1998 1999 2000 consolidated statements cash flows years ended december 31 1998 1999 2000 notes consolidated financial statements 2 financial statement schedules see note 14 consolidated financial statements statia terminals international nv required financial statement schedules 3 exhibits index see exhibits index pages e1 e4 following signature pages b reports form 8k filed reports form 8k quarter ended december 31 2000 report independent certified public accountants board managing directors statia terminals international nv audited accompanying consolidated balance sheets statia terminals international nv netherlands antilles corporation wholly owned subsidiary statia terminals group nv subsidiaries december 31 1999 2000 related consolidated statements operations stockholders equity cash flows three years period ended december 31 2000 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance auditing standards generally accepted united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects financial position statia terminals international nv subsidiaries december 31 1999 2000 results operations cash flows three years period ended december 31 2000 conformity accounting principles generally accepted united states arthur andersen llp west palm beach florida january 24 2001 statia terminals international nv subsidiaries consolidated balance sheets dollars thousands except share amounts see accompanying notes consolidated financial statements statia terminals international nv subsidiaries consolidated statements operations dollars thousands see accompanying notes consolidated financial statements statia terminals international nv subsidiaries consolidated statements stockholders equity dollars thousands see accompanying notes consolidated financial statements statia terminals international nv subsidiaries consolidated statements cash flows dollars thousands see accompanying notes consolidated financial statements statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts 1 organization operations statia terminals international nv wholly owned statia terminals group nv parent formed september 4 1996 castle harlan partners ii lp castle harlan private equity investment fund managed castle harlan inc private merchant bank certain members management others commenced operations november 27 1996 inception statia terminals international nv subsidiaries company operate petroleum blending transshipment storage facilities located island st eustatius netherlands antilles near point tupper nova scotia canada companys terminaling services furnished many worlds largest producers crude oil integrated oil companies oil traders refiners petrochemical companies ship owners addition storage company provides variety related terminal services including supply bunkers crude oil petroleum product blending processing emergency spill response brokering product trades ship services subsidiary company provides administrative services company office deerfield beach florida company includes following primary entities collectively statia operations statia terminals international nv statia terminals nv incorporated netherlands antilles statia terminals canada incorporated nova scotia canada statia terminals inc incorporated delaware statia terminals southwest inc incorporated texas brownsville facility sold july 1998 see note 12 significant intercompany balances transactions eliminated discussed note 3 april 28 1999 parent completed initial public offering equity 2 summary significant accounting policies use estimates consolidated financial statements prepared conformity generally accepted accounting principles promulgated united states require management make estimates assumptions affect reported amounts assets liabilities significant estimates primarily include accrual environmental expenses accruals legal personnel related expenses allowance doubtful accounts inventory reserves estimated useful lives depreciable assets valuation allowances related deferred tax assets management also required make judgments regarding disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods actual results could differ estimates revenue recognition revenues storage throughput operations recognized ratably services provided revenues commissions terminaling services sales bunker fuels bulk oil sales recognized upon completion delivery service product 2000 company adopted us securities exchange commissions sec staff accounting bulletin 101 revenue recognition sab 101 provides guidance statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued recognition presentation disclosure revenue financial statements filed sec adoption sab 101 material effect companys business financial condition results operations cash flows foreign currency translation exchange except certain operating expenses denominated netherlands antilles guilders canadian dollars certain canadian dollardenominated revenues companys transactions us dollars therefore us dollar determined functional currency company accordance provisions statement financial accounting standards sfas 52 foreign currency translation transaction gains losses arise exchange rate fluctuations included results operations incurred transaction gains losses significant impairment longlived assets sfas 121 accounting impairment longlived assets longlived assets disposed requires longlived assets certain identifiable intangibles held used entity reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable sfas 121 also requires longlived assets certain identifiable longlived assets disposed reported lower carrying amount fair value less cost sell company continually evaluates factors events circumstances include limited historical projected operating performance specific industry trends general economic conditions assess whether remaining estimated useful lives longlived assets may warrant revision remaining balance longlived assets may recoverable factors events circumstances indicate longlived assets evaluated possible impairment company uses estimate undiscounted cash flow remaining lives longlived assets measuring whether impairment exists company measures asset impairment loss amount carrying amount exceeds fair value asset cash equivalents companys cash equivalents consist shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market value classified cash equivalents financial instruments company uses various methods assumptions estimate fair value class financial instrument due nature carrying value cash equivalents including restricted cash accounts receivable accounts payable approximates fair value fair value companys fixed rate debt estimated based market bid prices approximates carrying value december 31 1999 2000 companys financial instruments significant statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued concentrations credit risk financial instruments potentially subject company concentration credit risk primarily consist cash equivalents including restricted cash accounts receivabletrade company maintains cash equivalents various major financial institutions company performs periodic evaluations relative credit standing financial institutions additionally financial institutions financial instruments must meet qualifications specified certain companys debt agreements reduce credit risk related trade accounts receivable company performs periodic credit evaluations customers certain maritime lien rights ships sold bunker fuel additionally virtually customers companys terminaling services segment required pay advance services rendered substantially companys revenues derived customers global petroleum industry december 31 1999 2000 11440 11885 companys accounts receivabletrade respectively customers companys product sales segment receivables typically collected within thirty days product sale substantial portion customers represent shipping concerns providing services global petroleum industry inventory consists oil products provision made reduce excess obsolete inventory lower weighted average cost estimated market value property equipment property equipment stated cost less accumulated depreciation expense computed using straightline method estimated useful lives respective assets additions property equipment replacements betterments major renewals capitalized company capitalizes certain costs associated software developed obtained internal use accordance american institute certified public accountants aicpa statement position 981 accounting costs computer software developed obtained internal use capitalized costs amortized using straightline method estimated useful lives respective assets development costs including costs geological studies related projects whose completion determined management probable capitalized development costs amortized using straightline method estimated useful lives respective assets upon completion project development costs related projects longer probable completion expensed determination probability made development costs exploratory nature expensed incurred repair maintenance expenditures materially increase asset values extend useful lives expensed statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued noncurrent assets noncurrent assets primarily consist deferred financing costs amounts 2701 2019 net accumulated amortization 2108 2790 december 31 1999 2000 respectively deferred financing costs related establishing debt obligations amortized ratably life underlying obligation deferred financing cost amortization expense included interest expense accompanying statements operations 911 767 682 years ended december 31 1998 1999 2000 respectively noncurrent assets december 31 2000 also include cash 620 restricted terms indenture 11 34 first mortgage notes due november 15 2003 notes company may seek release restriction replacing certain fixed assets environmental health safety matters company subject comprehensive periodically changing environmental health safety laws regulations within jurisdictions operations including governing oil spills emissions air pollutants discharges wastewater storm water disposal nonhazardous hazardous waste expenditures environmental health safety matters benefit future periods qualify property equipment capitalized depreciated respective lives assets company accrues costs associated environmental remediation becomes probable liability incurred amount reasonably estimated company recognizes amounts recoverable third parties collection amounts probable recoverable amounts accrued costs included accounts receivable accrued expenses respectively see note 8 discussion matters income taxes company determines tax provision deferred tax balances accordance standalone method sfas 109 accounting income taxes approach provision income taxes represents income taxes paid payable current year adjusted change deferred taxes year deferred income tax assets liabilities reflect net tax effects temporary differences financial statement bases tax bases assets liabilities adjusted changes tax rates tax laws changes enacted company provides valuation allowance deferred tax assets determines likely deferred tax asset utilized future statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued comprehensive income sfas 130 reporting comprehensive income establishes standards reporting display comprehensive income components financial statements following types items among others considered computing comprehensive income foreign currency translation adjustments pension liability adjustments unrealized gainloss securities available sale periods presented herein differences net income loss comprehensive income loss reclassifications certain reclassifications made 1998 1999 financial statements notes thereto order conform 2000 presentation recent accounting pronouncements effective january 1 2001 adopted sfas 133 accounting derivative instruments hedging activities amended sfas nos 137 138 establishes standards accounting derivative instruments including specific hedge accounting criteria adoption sfas 133 material impact company accounting standards executive committee acsec aicpa currently formulating new accounting standard expected modify accounting rules major repairs maintenance expenditures among things acsec yet released draft proposed standard public comment expected shortly therefore company cannot determine present time whether ultimate implementation final standard company material effect companys business financial condition results operations cash flows 3 sale common stock parent related transactions april 28 1999 parent completed initial public equity offering 76 million class common shares offering price 20 per share raising gross proceeds 152000 portion proceeds used parent purchase additional capital stock statia amounting 33746 net expenses may 1999 company used proceeds sale statias capital stock along existing cash repurchase open market principal amount 34000 notes 39522 including acquisition costs accrued interest 3681 1841 respectively second quarter 1999 acquisition costs unamortized deferred financing costs related repurchased notes 1062 recorded extraordinary charge income tax effect associated extraordinary charge statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued three months ended march 31 1999 company recorded special compensation expense bonus amount 1947 particular members companys management purpose special management bonus partially reimburse individuals respect adverse tax consequences resulted offering past compensation arrangements connection parents initial public offering equity certain options previously granted companys employees purchase parents common stock became fully vested exercised became class b subordinated shares parent amortizing difference estimated fair value options date grant exercise price vesting period five years charging amounts company compensation expense april 28 1999 remaining unamortized compensation expense associated options 2152 recorded noncash special compensation expense 4 property equipment property equipment consisted following december 31 december 31 1999 2000 capital projects process included 378 605 development costs respectively including costs geological studies related salt cavern storage project nova scotia canada three months ended march 31 2000 company replaced certain large hoses attached single point mooring system spm connection hose changeout company adopted component depreciation method spm hoses january 1 2000 resulted change estimated useful lives depreciation purposes hoses result addition recurring depreciation charges company incurred noncash charge depreciation expense 832 first quarter 2000 included costs terminaling services revenues represents full year effect change statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued company reviewing certain commercially available software determine software perform extend functions companys terminal operations software date developed internally company concluded commercially available software perform functions companys internally developed terminal operations software without substantial modification therefore company determined continue internal development enhancement current terminal operations software december 31 2000 capitalized costs related internally developed software approximately 896 5 debt 135000 notes issued statia one subsidiaries statia terminals canada incorporated collectively issuers november 27 1996 connection acquisition certain companies praxair inc castle harlan partners ii lp castle harlan acquisition pay interest may 15 november 15 year notes redeemable whole part option issuers time november 15 2000 redemption prices listed expressed percentages principal amount together accrued unpaid interest thereon redemption date redeemed 12month period beginning november 15 year indicated company may also forego redemption process repurchase notes open market november 15 2000 notwithstanding foregoing time prior november 15 1999 issuers allowed redeem repurchase 35 aggregate principal amount notes proceeds one equity offerings plus accrued unpaid interest date redemption repurchase provided giving effect redemption repurchase least 65 aggregate principal amount notes would remain outstanding discussed note 3 company repurchased open market principal amount 34000 notes financial reporting purposes based upon debt allocation agreement among parties 72940 outstanding notes recorded books statia terminals nv remaining 28060 recorded books statia terminals canada incorporated combined amount included accompanying consolidated balance sheets notes guaranteed full unconditional joint several basis indirect direct subsidiaries statia notes also subject certain financial covenants set forth indenture related security documents notes restrictive include limited following consolidated fixed charge coverage ratio prior four full fiscal quarters least 20 1 met permit company make additional borrowings companys revolving credit facility discussed ii limitations indebtedness iii restrictions certain payments addition notes place restrictions statias ability pay dividends distributions proceeds assets held sale certain management fees discussed note 9 except occurrence event default subsidiaries statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued restrictions upon transfers funds form dividends loans cash advances company compliance financial covenants set forth indenture company revolving credit facility credit facility allows certain statias subsidiaries borrow 17500 limit borrowing base defined credit facility credit facility calls commitment fee 0375 per annum portion unused funds credit facility bears interest rate prime plus 05 credit facility constitutes senior indebtedness company secured first priority lien certain companys accounts receivable inventory credit facility subject certain restrictive covenants however subject financial covenants credit facility restrict companys subsidiaries transferring funds company form dividends loans cash advances however failure pay interest due constitutes event default credit facility event default cured prohibits upstream dividend payments made company credit facility expires november 27 2001 december 31 1999 2000 company approximately 10603 11047 respectively available borrowing credit facility limited borrowing base computation outstanding borrowings 6 leases company rents certain facilities marine equipment unrelated third parties cancelable noncancelable operating leases rental expense operating leases 5431 5518 6307 years ended december 31 1998 1999 2000 respectively future rental commitments noncancelable third party operating leases years ending 2001 2004 5341 5368 4257 1761 respectively commitments exist 2004 discussed note 9 company entered bareboat charter agreement affiliate 7 income taxes sources income loss jurisdiction provision income taxes extraordinary charge statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued provision income taxes consisted reconciliation income taxes us statutory rate 35 companys provision income taxes follows principal temporary differences included accompanying balance sheets december 31 companys net deferred tax assets primarily relate canadian investment tax credits net operating loss carryforwards us consolidated net operating loss carryforwards company provided full valuation allowance tax assets cannot determine likely deferred tax assets utilized future statias canadian subsidiaries subject federal large corporation tax based 0225 subsidiaries total equity april 1 1997 nova scotia enacted provincial capital tax based 025 subsidiaries total equity net operating tax loss carryforwards available offset canadian taxable income december 31 2000 48670 majority expire 2001 investment tax credit carryforwards available reduce canadian income taxes 1761 december 31 2000 majority expire 2002 net operating tax loss carryforwards available offset us taxable income december 31 2000 4118 expire various amounts 2019 statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued june 1 1989 governments netherlands antilles st eustatius approved free zone profit tax agreement retroactive january 1 1989 expired december 31 2000 company adhering terms agreement since expiration agreement requires subsidiary statia pay 2 rate taxable income defined minimum payment 500000 netherlands antilles guilders 282 agreement provides amounts paid order meet minimum annual payment available offset future tax liabilities agreement extent minimum annual payment greater 2 taxable income currently certain statias subsidiaries renegotiating new agreement governments netherlands antilles st eustatius expected generally effective retroactively january 1 1998 december 31 2010 extension provisions 2015 however beneficial tax status companys facilities terminated significant adverse modifications made tax agreement companys business financial condition results operations cash flows may adversely affected certain statias netherlands antilles subsidiaries part free zone profit tax agreement accordingly pay netherlands antilles federal income taxes effective tax rate 45 approximately 28 48 28 netherlands antilles profit tax included nonus tax provision years ended december 31 1998 1999 2000 respectively 8 commitments contingencies environmental health safety matters connection castle harlan acquisition studies undertaken praxair inc identify potential environmental health safety matters certain matters involving potential environmental costs identified point tupper nova scotia canada facility praxair inc agreed pay certain environmental costs subject certain limitations praxair inc paid approximately 5193 period november 27 1996 december 31 2000 related costs based investigations conducted information available date potential cost additional remediation compliance estimated approximately 13000 substantially company believes responsibility praxair inc per castle harlan acquisition agreement company believes environmental health safety costs material adverse effect companys financial position cash flows results operations subject reimbursements praxair inc company also identified certain environmental health safety costs covered agreement praxair inc 1500 accrued 1996 conjunction castle harlan acquisition december 31 2000 182 amount expended company periodically reviews adequacy accrual 1999 2000 determined 250 180 respectively originally provided environmental contingencies longer necessary accordingly portion accrual eliminated credited costs terminaling revenues accompanying statements operations 2000 company identified certain environmental health safety costs covered agreement praxair inc accrued 180 related costs statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued litigation company involved various claims litigation arising normal course business based upon analysis legal matters discussions legal counsel company believes ultimate outcome matters material adverse effect companys business financial condition results operations cash flows accrued expenses accrued expenses consist following december 31 9 related party transactions november 1996 parent entered tenyear management agreement castle harlan inc pay annual management fee 1350 plus outofpocket expenses advisory strategic planning services relation daytoday affairs parent services performed discretion castle harlan inc management agreement also entitled castle harlan inc additional compensation perform services parent related certain financing activities including initial public offerings parent compensated castle harlan inc 778 services performed relation parents initial public offering equity management agreement amended restated closing parents initial public offering equity april 28 1999 eliminate 1350 management fee require services provided request parent requested services subsequent april 28 1999 castle harlan inc provided services amended restated management agreement continues provide reimbursement ordinary necessary expenses continuing indemnity period termination date november 27 2006 extension thereto year ended december 31 2000 statia declared cash dividends parent totaling 2004 year ended december 31 1999 statia declared cash dividends parent totaling 12498 3750 remained payable december 31 1999 paid 2000 year ended december 31 1998 statia paid dividends parent 1500 statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued march 2000 companys ownership mv statia responder emergency response maintenance support vessel transferred subsidiary parent result dividend parent amount 4707 representing net book value vessel april 1 2000 company entered threemonth bareboat agreement renewed monthly december 31 2000 charter vessel subsidiary parent 150 per month december 20 2000 company entered seventythree month bareboat agreement effective january 1 2001 charter vessel subsidiary parent 154 per month december 31 2001 145 per month thereafter bareboat agreement accounted operating lease bareboat agreement assigned subsidiary parent equipment financing company pursuant 7000 loan made subsidiary parent company provides receives services various related parties value services significant individually aggregate 10 segment information company organized around several different factors two significant services products geographic location companys primary services products terminaling services resulting revenue storage throughput dock usage emergency response terminal services product sales including bunker fuels bulk oil sales primary measures profit loss utilized companys management make decisions resources allocated segment earnings interest expense interest income taxes depreciation amortization certain nonrecurring income expenses adjusted indenture ebitda earnings interest expense interest income taxes certain nonrecurring income expenses adjusted ebit statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued following information provided companys terminaling services product sales segments statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued reconciliation adjusted ebit companys income provision income taxes extraordinary charge follows following information provided respect geographic operations company based upon location service provided product delivered longlived assets consist net property equipment significant customer company presently longterm storage throughput contract bolanter corporation nv subsidiary saudi aramco companys st eustatius facility expires 2005 company also derives revenues affiliate bolanter indirect result storage throughput contract company derives revenues parties unaffiliated bolanter movement bolanters crude oil crude oil sold bolanter companys st eustatius facility additionally company sells bunker fuels affiliate bolanter st eustatius facility statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued following table sets forth saudi aramcorelated revenues percentage total revenues although company longstanding relationship longterm contract customer longterm contract renewed replaced end term company otherwise lost significant portion revenues customer nonrenewalreplacement loss could material adverse effect companys business financial condition results operations cash flows company also longterm contracts key customers assurance contracts renewed end terms company able enter longterm contracts terms favorable customer accounted 10 companys total revenues 1998 1999 2000 11 retirement plans company maintains employee savings plan accordance section 401k us internal revenue code plan covers companys fulltime us employees allows employees contribute lesser 15 eligible compensation 105 2000 calendar year company currently matches 50 rate 8 employees base salary addition employer may contribute discretionary basis 1 employees base salary per quarter amounts charged expense matching discretionary contributions years ended december 31 1998 1999 2000 314 337 respectively addition company sponsors certain retirement plans certain employees residing netherlands antilles canada amounts charged expense nonus plans years ended december 31 1998 1999 2000 43 73 875 respectively statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued 12 loss sale brownsville facility july 29 1998 company sold brownsville facility 6500 cash resulting net proceeds approximately 6150 company retained certain preclosing assets liabilities brownsville facility consisting primarily accounts receivable accrued expenses agreed indemnify purchaser certain contingent legal environmental matters maximum 500 july 29 1999 indemnification period lapsed liability company net book value assets liabilities sold july 29 1998 7802 loss sale brownsville facility 1652 included loss disposition property equipment accompanying statements operations since substantially value brownsville facility originally recorded account company acquired 13 hurricane charges result damages sustained companys st eustatius facility hurricane lenny late november 1999 company incurred onetime noncash charge 1500 partially reduce carrying value shoreline protection system onetime cash charge 250 cover hurricane related expenses damaged shoreline protection system covered insurance together certain civil work replaced 2000 september 1998 hurricane georges damaged components companys st eustatius facility however operations significantly impacted hurricane returned normal within days storm 1998 company recorded charge 800 representing insurance deductible 500 related hurricane damage certain costs resulting hurricane recovered companys insurance policies repair work related damage caused hurricane georges substantially complete statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued 14 valuation qualifying accounts table summarizes activity valuation account allowance possible uncollectible trade accounts receivable deferred tax asset valuation allowance periods indicated 15 condensed combining financial information notes guaranteed full unconditional joint several basis indirect direct subsidiaries statia terminals canada incorporated coobligor notes statia directly indirectly wholly owns subsidiary guarantors following condensed combining financial information illustrates composition companys subsidiary guarantors enforceability guarantees may affected differently laws applicable jurisdictions guarantors incorporated statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued condensed combining balance sheet december 31 1999 statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued condensed combining balance sheet december 31 2000 statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued condensed combining statement operations year ended december 31 1998 statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued condensed combining statement operations year ended december 31 1999 statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued condensed combining statement operations year ended december 31 2000 statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued condensed combining statement cash flows year ended december 31 1998 statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued condensed combining statement cash flows year ended december 31 1999 statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts continued condensed combining statement cash flows year ended december 31 2000 statia terminals canada incorporated subsidiary consolidated financial statements december 31 1999 2000 together report independent certified public accountants report independent certified public accountants board directors statia terminals canada incorporated audited accompanying consolidated balance sheets statia terminals canada incorporated nova scotia canada corporation indirect wholly owned subsidiary statia terminals international nv subsidiary december 31 1999 2000 related consolidated statements operations retained earnings deficit cash flows three years period ended december 31 2000 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance auditing standards generally accepted united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects financial position statia terminals canada incorporated subsidiary december 31 1999 2000 results operations cash flows three years period ended december 31 2000 conformity accounting principles generally accepted united states arthur andersen llp west palm beach florida january 24 2001 statia terminals canada incorporated subsidiary consolidated balance sheets dollars thousands see accompanying notes consolidated financial statements statia terminals canada incorporated subsidiary consolidated statements operations retained earnings deficit dollars thousands see accompanying notes consolidated financial statements statia terminals canada incorporated subsidiary consolidated statements cash flows dollars thousands see accompanying notes consolidated financial statements statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands 1 organization operations consolidated financial statements presented united states dollars include accounts statia terminals canada incorporated nova scotia canada wholly owned subsidiary point tupper marine services limited incorporated nova scotia canada collectively statia canada statia terminals canada incorporated indirect wholly owned subsidiary statia terminals international nv incorporated netherlands antilles parent wholly owned subsidiary statia terminals group nv incorporated netherlands antilles group significant intercompany balances transactions eliminated statia canada owns operates petroleum blending transshipment storage facilities located near point tupper nova scotia canada statia canadas terminaling services consisting storage throughput dock usage emergency response terminal services furnished worlds largest producers crude oil integrated oil companies oil traders refiners petrochemical companies addition terminaling services time statia canada provides variety related services including supplying bunkering brokering product trades ship services affiliate statia canada provides administrative services statia canada office deerfield beach florida 2 summary significant accounting policies use estimates consolidated financial statements prepared conformity generally accepted accounting principles promulgated united states require management make estimates assumptions affect reported amounts assets liabilities significant estimates primarily include accrual environmental expenses accruals legal personnel related expenses allowance doubtful accounts inventory reserve estimated useful lives depreciable assets valuation allowances related deferred tax assets management also required make judgments regarding disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods actual results could differ estimates revenue recognition revenues storage throughput operations recognized ratably services provided revenues commissions terminaling services sales bunker fuels bulk oil sales recognized upon completion delivery service product statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued 2000 statia canada adopted us securities exchange commissions sec staff accounting bulletin 101 revenue recognition sab 101 provides guidance recognition presentation disclosure revenue financial statements filed sec adoption sab 101 material effect statia canadas business financial condition results operations cash flows foreign currency translation exchange except certain operating expenses denominated canadian dollars certain canadian dollardenominated revenues statia canadas transactions us dollars therefore us dollar determined functional currency statia canada accordance provisions statement financial accounting standards sfas 52 foreign currency translation transaction gains losses arise exchange rate fluctuations included results operations incurred transaction gains losses significant impairment longlived assets sfas 121 accounting impairment longlived assets longlived assets disposed requires longlived assets certain identifiable intangibles held used entity reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable sfas 121 also requires longlived assets certain identifiable longlived assets disposed reported lower carrying amount fair value less cost sell statia canada continually evaluates factors events circumstances include limited historical projected operating performance specific industry trends general economic conditions assess whether remaining estimated useful lives longlived assets may warrant revision remaining balance longlived assets may recoverable factors events circumstances indicate longlived assets evaluated possible impairment statia canada uses estimate undiscounted cash flow remaining lives longlived assets measuring whether impairment exists statia canada measures asset impairment loss amount carrying amount exceeds fair value asset cash equivalents statia canadas cash equivalents consist shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market value classified cash equivalents statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued financial instruments statia canada uses various methods assumptions estimate fair value class financial instrument due nature carrying value cash equivalents accounts receivable accounts payable approximates fair value fair value statia canadas fixed rate debt estimated based market bid prices approximates carrying value december 31 1999 2000 statia canadas financial instruments significant concentrations credit risk financial instruments potentially subject statia canada concentration credit risk primarily consist cash equivalents accounts receivable trade statia canada maintains cash equivalents various major financial institutions statia canada performs periodic evaluations relative credit standing financial institutions additionally financial institutions financial instruments must meet qualifications specified certain statia canadas debt agreements reduce credit risk related trade accounts receivable statia canada performs periodic credit evaluations customers inventory consists oil products provision made reduce excess obsolete inventory lower weighted average cost estimated market value property equipment property equipment stated cost less accumulated depreciation expense computed using straightline method estimated useful lives respective assets additions property equipment replacements betterments major renewals capitalized development costs including costs geological studies related projects whose completion determined management probable capitalized development costs amortized using straightline method estimated useful lives respective assets upon completion project development costs related projects longer probable completion expensed determination probability made development costs exploratory nature expensed incurred repair maintenance expenditures materially increase asset values extend useful lives expensed statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued noncurrent assets noncurrent assets primarily consist deferred financing costs amount 1336 net accumulated amortization 590 781 december 31 1999 2000 respectively deferred financing costs related establishing debt obligations amortized ratably life underlying obligation deferred financing cost amortization expense included interest expense accompanying statements operations 191 years ended december 31 1998 1999 2000 environmental health safety matters statia canada subject comprehensive periodically changing environmental health safety laws regulations within jurisdictions operations including governing oil spills emissions air pollutants discharges wastewater storm water disposal nonhazardous hazardous waste expenditures environmental health safety matters benefit future periods qualify property equipment capitalized depreciated respective lives assets statia canada accrues costs associated environmental remediation becomes probable liability incurred amount reasonably estimated statia canada recognizes amounts recoverable third parties collection amounts probable recoverable amounts accrued costs included accounts receivable accrued expenses respectively see note 8 discussion matters income taxes statia canada determines tax provision deferred tax balances accordance sfas 109 accounting income taxes approach provision income taxes represents income taxes paid payable current year adjusted change deferred taxes year deferred income tax assets liabilities reflect net tax effects temporary differences financial statement bases tax bases assets liabilities adjusted changes tax rates tax laws changes enacted statia canada provides valuation allowance deferred tax assets determines likely deferred tax asset utilized future comprehensive income sfas 130 reporting comprehensive income establishes standards reporting display comprehensive income components financial statements following types items among others considered computing comprehensive income foreign currency translation adjustments pension liability adjustments unrealized gainloss securities available sale periods presented herein differences net income loss comprehensive income loss statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued recent accounting pronouncements effective january 1 2001 statia canada adopted sfas 133 accounting derivative instruments hedging activities amended sfas nos 137 138 establishes standards accounting derivative instruments including specific hedge accounting criteria adoption sfas 133 material impact statia canada accounting standards executive committee acsec american institute certified public accountants currently formulating new accounting standard expected modify accounting rules major repairs maintenance expenditures among things acsec yet released draft proposed standard public comment expected shortly therefore statia canada cannot determine present time whether ultimate implementation final standard statia canada material effect statia canadas business financial condition results operations cash flows 3 property equipment property equipment consisted following december 31 december 31 1999 2000 capital projects process included 378 605 development costs respectively including costs geological studies related salt cavern storage project nova scotia canada 4 debt 135000 11 34 first mortgage notes due november 15 2003 notes issued parent statia terminals canada incorporated issuers november 27 1996 connection acquisition certain companies praxair inc castle harlan partners ii lp castle harlan acquisition pay interest may 15 november 15 year statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued based upon debt allocation agreement 28060 notes recorded books statia terminals canada incorporated notes redeemable whole part option issuers time november 15 2000 redemption prices listed expressed percentages principal amount together accrued unpaid interest thereon redemption date redeemed 12month period beginning november 15 year indicated statia canada may also forego redemption process repurchase notes open market november 15 2000 notes guaranteed full unconditional joint several basis indirect direct subsidiaries parent statia terminals canada incorporated coobligor notes also subject certain financial covenants set forth indenture related security documents notes restrictive include limited following consolidated fixed charge ratio prior four full fiscal quarters least 20 1 met permit statia canada make additional borrowings statia canadas revolving credit facility discussed ii limitations indebtedness iii restrictions certain payments addition notes place restrictions parents ability pay dividends certain circumstances defined indenture except occurrence event default statia canada restrictions upon transfers funds form dividends loans cash advances issuers compliance financial covenants set forth indenture statia canada revolving credit facility credit facility allows statia canada borrow 5000 limit borrowing base defined credit facility credit facility calls commitment fee 0375 per annum portion unused funds credit facility bears interest rate prime plus 05 credit facility constitutes senior indebtedness statia canada secured first priority lien certain statia canadas accounts receivable inventory credit facility subject certain restrictive covenants however subject financial covenants credit facility restrict statia canada transferring funds parent parents subsidiary form dividends loans cash advances however failure pay interest due constitutes event default credit facility event default cured prohibits upstream dividend payments made parent credit facility expires november 27 2001 december 31 1999 2000 statia canada approximately 832 1097 respectively available borrowing credit facility limited borrowing base computation outstanding borrowings statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued 5 income taxes statia canada subject federal large corporation tax based 0225 statia canadas total equity april 1 1997 nova scotia enacted provincial capital tax based 025 statia canadas total equity provision income taxes year presented accompanying statements operations represents federal large corporation tax provincial capital tax currently payable net operating tax loss carryforwards available offset canadian taxable income december 31 2000 48670 majority expire 2001 investment tax credit carryforwards available reduce canadian income taxes 1761 december 31 2000 majority expire 2002 statia canada provided full valuation allowance deferred tax assets cannot determine likely deferred tax assets utilized future 6 leases 1999 statia canada began chartering certain marine equipment noncancelable operating lease rental expense operating lease 450 2114 years ended december 31 1999 2000 respectively future rental commitments years ending 2001 2004 1800 1050 respectively commitments exist 2004 7 related party transactions wholly owned subsidiary statia canada engages various related party transactions parent subsidiaries unpaid portion transactions included receivable affiliates balance parent subsidiaries directly indirectly allocate certain corporate operating administrative expenses services statia canada including certain legal services risk management tax services employee benefit administration cash management services certain depreciation amortization expenses years ended december 31 1998 1999 2000 2775 3587 3182 respectively incurred services april 28 1999 group completed initial public equity offering 76 million class common shares connection transaction statia canada allocated 1515 administrative expenses 8 commitment contingencies environmental health safety matters connection castle harlan acquisition studies undertaken praxair inc identify potential environmental health safety matters certain matters involving potential environmental costs identified point tupper nova scotia canada facility praxair inc agreed pay certain environmental costs subject certain limitations praxair inc paid approximately 5193 period november 27 1996 december 31 2000 related statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued costs based investigations conducted information available date potential cost additional remediation compliance estimated approximately 13000 substantially statia canada believes responsibility praxair inc per castle harlan acquisition agreement statia canada believes environmental health safety costs material adverse effect statia canadas financial position cash flows results operations subject reimbursements praxair inc statia canada also identified certain environmental health safety costs covered agreement praxair inc 1250 accrued 1996 conjunction castle harlan acquisition december 31 2000 182 amount expended statia canada periodically reviews adequacy accrual 2000 determined 180 originally provided environmental contingencies longer necessary accordingly portion accrual eliminated credited costs revenues accompanying statements operations 2000 statia canada identified certain environmental health safety costs covered agreement praxair inc accrued 180 related costs litigation statia canada involved various claims litigation arising normal course business based upon analysis legal matters discussions legal counsel statia canada believes ultimate outcome matters material adverse effect statia canadas business financial condition results operations cash flows accrued expenses accrued expenses consist following december 31 9 segment information statia canada organized around several different factors significant services products statia canadas primary services products terminaling services resulting revenue storage throughput dock usage emergency response terminal services product sales including bunker fuels bulk oil sales primary measures profit loss utilized statia canadas management make decisions resources allocated segment earnings interest expense interest statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued income taxes depreciation amortization certain nonrecurring income expenses adjusted ebitda earnings interest expense interest income taxes certain nonrecurring income expenses adjusted ebit following information provided statia canadas terminaling services product sales segments statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued reconciliation adjusted ebit statia canadas income loss provision income taxes follows significant customers statia canada presently longterm storage throughput contract subsidiary tosco corporation expires 2004 statia canada also derives revenues affiliate tosco indirect result storage throughput contract statia canada derives revenues parties unaffiliated tosco movement tosco products statia canadas terminal december 31 1999 2000 594 1240 statia canadas accounts receivable trade respectively tosco affiliates amounts collected within thirty days december 31 1999 2000 respectively following table sets forth toscorelated revenues percentage total revenues year ended december 31 2000 one customer accounted 190 statia canadas total revenues respectively two customers accounted 152 130 statia canadas total revenues respectively year ended december 31 1999 customer accounted 10 statia canadas total revenues 1998 although statia canada longstanding relationship longterm contract tosco longterm contract renewed replaced end term statia canada otherwise lost significant portion revenues customer nonrenewalreplacement loss could material adverse effect statia canadas business financial condition results operations cash flows statia canada also longterm contracts key customers assurance contracts renewed end terms statia canada able enter longterm contracts terms favorable signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized statia terminals international nv james g cameron james g cameron managing director april 2 2001 james f brenner james f brenner vice president treasurer april 2 2001 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated james g cameron james g cameron managing director principal executive officer april 2 2001 john k castle john k castle managing director april 2 2001 david b pittaway david b pittaway managing director april 2 2001 justin b wender justin b wender managing director april 2 2001 james f brenner james f brenner vice president treasurer principal financial accounting officer april 2 2001 s1 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized statia terminals canada incorporated paul r crissman paul r crissman director president april 2 2001 james f brenner james f brenner vice presidentfinance april 2 2001 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated paul r crissman paul r crissman director president principal executive officer april 2 2001 clarence w brown clarence w brown director april 2 2001 james g cameron james g cameron director april 2 2001 james f brenner james f brenner vice presidentfinance principal financial accounting officer april 2 2001 s2 exhibits index e1 e2 incorporated reference registration statement form s1 statia terminals group nv dated february 12 1999 amendments thereto filed us securities exchange commission registration statement 33372317 became effective april 26 1999 incorporated reference registration statement statia terminals international nv statia terminals canada incorporated form s4 dated december 20 1996 amendments thereto filed us securities exchange commission registration statement 33318455 became effective february 14 1997 incorporated reference december 31 1996 form 10k statia terminals international nv statia terminals canada incorporated dated may 13 1997 e3 incorporated reference december 31 1997 form 10k statia terminals international nv statia terminals canada incorporated dated march 31 1998 incorporated reference december 31 1998 10k statia terminals international nv statia terminals canada incorporated dated march 31 1999 incorporated reference september 30 1997 form 10q statia terminals international nv statia terminals canada incorporated dated november 14 1997 incorporated reference march 31 1999 form 10q statia terminals group nv dated may 13 1999 incorporated reference june 30 1999 form 10q statia terminals group nv dated august 12 1999 incorporated reference september 30 1999 form 10q statia terminals group nv dated november 15 1999 incorporated reference december 31 1999 form 10k statia terminals group nv dated march 17 2000 incorporated reference december 31 2000 form 10k statia terminals group nv dated march 9 2001 incorporated reference december 31 1999 form 10k statia terminals international nv dated march 31 2000 e4 item 14 exhibits financial statement schedules reports form 8k 1 financial statements index following consolidated financial statements statia terminals international nv subsidiaries filed response item 8 1996 annual report form 10k statia terminals international nv predecessor statia terminals inc report independent public accountants consolidated balance sheets december 31 1995 predecessor prepraxair acquisition december 31 1996 consolidated statements income retained earnings years ended december 31 1994 1995 predecessor pre praxair acquisition period january 1 1996 november 27 1996 predecessor postpraxair acquisition period november 27 1996 december 31 1996 consolidated statements cash flows years ended december 31 1994 1995 predecessor prepraxair acquisition period january 1 1996 november 27 1996 predecessor postpraxair acquisition period november 27 1996 december 31 1996 notes consolidated financial statements statia terminals canada incorporated predecessor statia terminals point tupper inc report independent accountants consolidated balance sheets december 31 1995 predecessor prepraxair acquisition december 31 1996 consolidated statements income retained earnings years ended december 31 1994 1995 predecessor prepraxair acquisition period january 1 1996 november 27 1996 predecessor postpraxair acquisition period november 27 1996 december 31 1996 consolidated statements cash flows years ended december 31 1994 1995 predecessor prepraxair acquisition period january 1 1996 november 27 1996 predecessor postpraxair acquisition period november 27 1996 december 31 1996 notes consolidated financial statements statia terminals nv report independent public accountants consolidated balance sheets december 31 1995 predecessor prepraxair acquisition december 31 1996 consolidated statements income retained earnings years ended december 31 1994 1995 predecessor prepraxair acquisition period january 1 1996 november 27 1996 predecessor postpraxair acquisition period november 27 1996 december 31 1996 consolidated statements cash flows years ended december 31 1994 1995 predecessor prepraxair acquisition period january 1 1996 november 27 1996 predecessor postpraxair acquisition period november 27 1996 december 31 1996 postpraxair acquisition period november 27 1996 december 31 1996 notes consolidated financial statements 2 financial statement schedules see notes 12 17 consolidated financial statements statia related report independent accountants attached thereto required financial statement schedules 3 exhibits index see exhibits index pages e1 e2 following signature pages statia terminals international nv subsidiaries consolidated financial statements december 31 1996 together auditors report independent public accountants board managing directors statia terminals international nv subsidiaries audited accompanying consolidated balance sheet statia terminals international nv netherlands antilles corporation subsidiaries december 31 1996 related consolidated statements income retained earnings deficit cash flows period inception december 31 1996 also audited accompanying combined balance sheet statia terminals inc subsidiaries affiliates predecessor december 31 1995 related combined statements income retained earnings cash flows predecessor january 1 1996 november 27 1996 years ended december 31 1995 1994 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position statia terminals international nv subsidiaries december 31 1996 results operations cash flows period inception december 31 1996 combined financial position predecessor december 31 1995 results operations cash flows january 1 1996 november 27 1996 years ended december 31 1995 1994 conformity generally accepted accounting principles arthur andersen llp chicago illinois march 19 1997 statia terminals international nv subsidiaries consolidated balance sheets dollars thousands financial statements company predecessor company comparable certain respects see note 1 accompanying notes integral part financial statements statia terminals international nv subsidiaries consolidated balance sheets dollars thousands continued december 31 1995 1996 predecessor company prepraxair acquisition company liabilities stockholders equity current liabilities accounts payable 6073 9926 accrued expenses 4158 16824 current portion longterm debt 14800 payable affiliates 1276 total current liabilities 26307 26750 longterm debt net current maturities 51600 135000 advances parent company 42786 total liabilities 120693 161750 stockholders equity subject reduction 20000 stockholders equity preferred stock 18589 common stock 19425 6 additional paidin capital 36566 78494 retained earnings deficit 35010 95 total stockholders equity 109590 78405 230283 260155 accompanying notes integral part financial statements statia terminals international nv subsidiaries consolidated statements income loss retained earnings deficit dollars thousands financial statements company predecessor company comparable certain respects see note 1 accompanying notes integral part financial statements statia terminals international nv subsidiaries consolidated statements cash flows dollars thousands financial statements company predecessor company comparable certain respects see note 1 statia terminals international nv subsidiaries consolidated statements cash flows dollars thousands financial statements company predecessor company comparable certain respects see note 1 continued accompanying notes integral part financial statements statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands except share information 1 basis presentation consolidated balance sheet december 31 1996 consolidated statements income retained earnings cash flows period inception december 31 1996 include accounts statia terminals international nv wholly owned subsidiaries company formed 1996 acquire capital stock statia terminals inc subsidiaries affiliates predecessor company praxair inc praxair combined balance sheet december 31 1995 combined statements income retained earnings cash flows january 1 1996 november 27 1996 period ended november 27 1996 years ended december 31 1995 1994 include accounts predecessor company predecessor company predecessor company includes primarily combination following commonly owned companies statia terminals inc incorporated delaware statia terminals nv incorporated netherlands antilles statia terminals point tupper inc incorporated nova scotia canada statia terminals southwest inc incorporated texas significant intercompany balances transactions eliminated prior january 12 1996 predecessor company wholly owned subsidiary cbi industries inc cbi january 12 1996 pursuant merger agreement dated december 22 1995 merger cbi became wholly owned subsidiary praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 see note 4 accordingly historical financial information provided herein periods prior january 1 1996 prepraxair acquisition comparable subsequent predecessor company financial information financial information company statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands company includes following primary entities collectively statia operations statia terminals international nv incorporated netherlands antilles statia terminals nv incorporated netherlands antilles statia terminals canada incorporated nova scotia canada formerly statia terminals point tupper inc statia terminals southwest inc incorporated texas statia terminals inc incorporated delaware significant intercompany balances transactions eliminated november 27 1996 company acquired praxair outstanding capital stock predecessor company certain subsidiaries affiliates acquisition company wholly owned statia terminals group nv parent formed september 4 1996 castle harlan partners ii lp private equity investment fund managed castle harlan inc private merchant bank management others adjusted purchase price paid praxair capital stock described 217146 acquisition paid part funds received company issuance 135000 1134 first mortgage notes described note 9 sale companys stock acquisition accounted purchase method accounting preliminary estimates purchase price allocated assets liabilities company based fair values date acquisition related application purchase accounting note 5 resulted changes capital structure predecessor company historical cost basis various assets liabilities effect changes significantly impairs comparability financial position results operations company predecessor company periods 2 nature business company predecessor company lease operate petroleum bulk liquid blending transshipment storage facilities located island st eustatius netherlands antilles near port hawkesbury nova scotia canada brownsville texas companys terminaling services furnished worlds largest producers crude oil integrated oil companies oil refiners traders petrochemical companies addition company predecessor company provide variety related terminal services including supplying bunker fuels vessels emergency spill response brokering product trades ship services statia terminals inc provides statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands administrative services subsidiaries affiliates office deerfield beach florida 3 summary significant accounting policies use estimates consolidated financial statements prepared conformity generally accepted accounting principles promulgated united states require management make estimates assumptions affect reported amounts assets liabilities management also required make judgments regarding disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods actual results could differ estimates revenue recognition revenues storage throughput operations recognized ratably services provided revenues commissions bunkering services vessel services product sales recognized time delivery service product significant customers companys revenues stateowned oil producer refiner constituted approximately 64 48 predecessors total 1995 revenues approximately 79 47 predecessors total revenues period ended november 27 1996 approximately 81 40 companys total revenues period november 28 1996 december 31 1996 respectively addition approximately 101 predecessors revenue periods ended december 31 1995 november 27 1996 102 companys revenues period ended december 31 1996 derived parties unaffiliated stateowned oil producer refiner generated movement products terminals customer accounted 5 predecessor companys 1995 1996 revenues directly indirectly although company longstanding relationships longterm contracts two customers longterm contracts renewed end terms 2000 1999 respectively company otherwise lost significant portion revenues customers loss could material adverse effect business financial condition company also longterm contracts certain key customers assurance contracts renewed end terms statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands foreign currency translation exchange consolidated financial statements include financial statements foreign subsidiaries affiliates translated accordance statement financial accounting standards sfas 52 foreign currency translation substantially companys predecessors transactions denominated us dollars cash equivalents predecessor companythe predecessors excess cash either swept cbi praxair fund cover current advances invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents companythe companys excess cash invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents financial instruments company uses various methods assumptions estimate fair value class financial instrument due nature carrying value cash equivalents accounts receivable accounts payable approximates fair value due recent issuance notes carrying value approximates fair value companys financial instruments significant inventory oil products valued lower weighted average cost estimated market value property equipment property equipment stated cost less accumulated depreciation expense computed using straightline method estimated useful lives respective assets additions property equipment replacements betterments major renewals capitalized repair maintenance expenditures materially increase asset values extend useful lives expensed sfas 121 accounting impairment longlived assets longlived assets disposed requires longlived assets certain identifiable intangibles statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands held used entity reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable sfas 121 also requires longlived assets certain identifiable longlived assets disposed reported lower carrying amount fair value less cost sell company continually evaluates factors events circumstances include limited historical projected operating performance specific industry trends general economic conditions assess whether remaining estimated useful lives longlived assets may warrant revision remaining balance longlived assets may recoverable factors events circumstances indicate longlived assets evaluated possible impairment company uses estimate undiscounted cash flows remaining lives longlived assets measuring recoverability intangible assets intangible assets include goodwill organizational costs preoperating expenditures excess cost fair value tangible net assets acquired capitalized goodwill amortized straightline basis periods expected benefit exceed 40 years organizational costs preoperating expenditures amortized evenly fiveyear periods amortization expense 929 1994 1540 1995 956 period ended november 27 1996 related intangible assets accumulated amortization 2693 december 31 1995 noncurrent assets noncurrent assets consist primarily deferred financing costs companys costs related establishing debt obligations amortized ratably life underlying obligations amortization expense 88 period inception december 31 1996 period ended december 31 1996 accrued expenses accrued expenses december 31 1996 consist primarily purchase price adjustments related acquisition environmental reserves accrued interest amount 5146 1500 1521 respectively income taxes company predecessor determine tax provisions deferred tax balances compliance sfas 109 accounting income taxes approach provision income taxes represents income taxes paid payable current year adjusted change deferred taxes year deferred income taxes reflect statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands net tax effects temporary differences financial statement bases tax bases assets liabilities adjusted changes tax rates tax laws changes enacted income expense income expense includes miscellaneous nonoperating items 1994 income expense included nonrecurring gains realized upon final settlements insurance carriers parties none individually significant 4 praxair purchase accounting discussed note 1 prior january 12 1996 predecessor company wholly owned subsidiary cbi january 12 1996 pursuant merger agreement dated december 22 1995 cbi became wholly owned subsidiary praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 fair value assigned predecessor company merger date 210 million excluding bank borrowings praxair cbi intercompany advance accounts buyout certain offbalancesheet financing merger value allocation merger value assets liabilities acquired based estimated fair value assigned follows merger value 210000 less debt acquired 66000 intercompanyadvance accounts 44000 balance sheet obligation 89000 11000 allocation merger value total current assets 17000 property equipment 111000 noncurrent assets 4000 liabilities assumed 121000 11000 addition 10000 praxair debt pushed predecessors books effective january 1 1996 debt eliminated connection acquisition statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands 5 acquisition discussed note 1 november 27 1996 company acquired praxair outstanding capital stock predecessor company acquisition accounted purchase method accounting accordingly purchase price 217146 allocated preliminary basis assets liabilities company based respective fair values date acquisition preliminary estimates fair value may revised later date preliminary allocation total purchase price assets liabilities acquired follows purchase price cash paid 174146 stock issued 43000 commissions fees expenses 16000 total purchase price 233146 preliminary allocation purchase price current assets 19570 assets held sale 20000 property equipment 202907 longterm assets 6539 liabilities assumed 15870 total purchase price 233146 summarized unaudited results operations company pro forma basis assuming acquisition related financing transactions occurred january 1 1995 1996 results include certain adjustments primarily amortization depreciation interest expenses related acquisition pro forma results exclude revenues net losses assets held sale brownsville terminal mv megan gambarella pro forma results necessarily indicative results would transactions actually occurred dates year ended december 31 1995 1996 revenues 133156 153768 net income loss 5008 3548 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands 6 hurricane insurance claims third fourth quarters 1995 predecessor companys caribbean location adversely impacted three hurricanes operations facility ceased varying lengths time august 28 1995 october 3 1995 certain terminal assets sustained extensive damage repaired marine items shoreline installations damaged destroyed replaced predecessor company certain property liability insurance policies various insurance carriers december 31 1995 predecessor company incurred 8121 expenditures subject hurricane insurance coverage received advances insurance carriers amounting 3110 insurance claim receivable 4611 included receivables december 31 1995 claims process related hurricane damages settled third quarter 1996 12615 december 31 1996 company expended 19367 relating hurricane repairs betterments 6752 capitalized property equipment 7 property equipment property equipment consisted following december 31 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands effective january 1 1995 predecessor company extended depreciable lives certain marine installations tanks 15 20 years 25 40 years respectively change resulted corresponding reduction depreciation expense approximately 4300 1995 construction facilities company predecessor allocate interest cost constructed facility interest capitalized constructed facilities amounted 716 914 1994 1995 respectively 327 0 period ended november 27 1996 period ended december 31 1996 respectively 8 assets held sale assets held sale represent managements estimate proceeds anticipated sale statia terminals southwest inc brownsville terminal mv megan gambarella marine vessel company estimated proceeds sales aggregate 20000 although actual proceeds sales may equal estimates estimated fair value assets reclassified plant equipment assets held sale assets still operation revenues costs associated operating assets included accompanying financial statements certain parents preferred stock agreements contain features may require parent cause company dividend otherwise remit proceeds assets accordingly 20000 companys common stock classified outside equity section stockholders equity subject reduction 9 debt predecessor company december 31 1995 predecessor company 56400 outstanding longterm debt agreement secured property equipment companys point tupper canada facility 4800 currently payable guarantee provided cbi obligation bore interest one two three sixmonth us prime rates london interbank offer rates libor canadian bankers acceptance rates plus 75 basis points option predecessor company weighted average interest rate 1995 67 58 period ended november 27 1996 debt guarantee assumed praxair subsequent merger paid full praxair prior acquisition statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands predecessor company three shortterm unsecured revolving credit lines aggregating 12500 used cover working capital needs letters credit 10000 outstanding december 31 1995 credit lines guaranteed cbi bore interest quarterly one two threemonth libor plus 50 basis points 63 december 31 1995 subsequent merger praxair assumed guarantee credit lines prior acquisition paid terminated credit lines 1993 predecessor company entered interest rate swap agreement guaranteed cbi based notional amount 20000 whereby predecessor company made semiannual interest payments annual rate 591 october 21 1996 exchange right receive interest payments floating rates 58750 december 31 1995 semiannually october 21 1996 swap agreement extendible two additional years option predecessor company interest rate swap agreement intended qualify hedge variable debt borrowings fair market value interest rate swap related option agreement 1 december 31 1995 estimated based upon net amount would paid terminate agreement utilizing quoted prices comparable contracts discounted cash flows subsequent merger praxair assumed interest rate swap agreement cash payments interest third parties 2951 4494 4455 1994 1995 period ended november 27 1996 respectively company 1134 first mortgage notes due 2003 issued company one subsidiaries issuers november 27 1996 connection acquisition pay interest may 15 november 15 year commencing may 15 1997 notes redeemable whole part option issuers time november 15 2000 following redemption prices expressed percentages principal amount together accrued unpaid interest thereon redemption date redeemed 12month period beginning november 15 year indicated year optional redemption price 2000 105875 2001 102938 2002 100000 notwithstanding foregoing time prior november 15 1999 issuers may redeem 35 aggregate principal amount notes proceeds one equity offerings defined indenture redemption price equal 11175 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands principal amount thereof plus accrued unpaid interest date redemption provided giving effect redemption least 65 aggregate principal amount notes remain outstanding notes guaranteed full unconditional joint several basis indirect direct active subsidiaries company statia terminals canada incorporated coobligor notes see note 17 notes also subject certain financial covenants set forth indenture restrictive requires company meet consolidated fixed charge ratio 21 met permit company make additional borrowings companys revolving credit facility discussed notes place certain restrictions company pay dividends parent distributions proceeds assets held sale discussed note 8 except occurrence event default subsidiaries company restrictions upon transfers funds form dividends loans cash advances december 31 1996 company principal payments maturing within next five years notes principal outstanding notes due full november 15 2003 company revolving credit facility credit facility allows company borrow 17500 limit borrowing base defined credit facility credit facility calls commitment fee three eighths percent 0375 per annum portion unused funds credit facility bears interest rate prime plus 05 875 december 31 1996 credit facility constitutes senior indebtedness company secured first priority lien certain companys accounts receivable inventory credit facility subject certain restrictive covenants however subject financial covenants credit facility restrict companys subsidiaries transferring funds company form dividends loans cash advances however failure pay interest due constitutes event default credit facility event default cured prohibits upstream dividend payments made company credit facility expires november 27 1999 december 31 1996 company 11900 available borrowing credit facility limited borrowing base computation outstanding balance cash payments interest period ended december 31 1996 0 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands 10 leases company predecessor company rent certain facilities land marine equipment cancelable noncancelable operating leases rent expense operating leases 3435 1994 13760 1995 8823 including 3082 recognition lease residual value guarantee relates lease described 13854 period ended november 27 1996 9870 including 4270 recognition lease residual value guarantee relates lease described 491 period ended december 31 1996 future rental commitments years ending 1997 2001 3932 2033 910 263 271 respectively predecessor company november 17 1993 statia terminals nv subsidiary entered agreement thirdparty financier first salute leasing lp pursuant portion land st eustatius leased third party purpose construction operation five million barrels crude oil storage tanks single point mooring system statia terminals nv acted agent third party regard construction facilities statia terminals nv leased facility third party minimum period five years beginning february 1 1995 aggregate construction cost incurred leased assets totaled 88513 facility became operational first quarter 1995 applicable portion required rentals included rent expense completion initial five year term statia terminals nv option extend lease purchase facility lessor arrange leased properties sold third party event purchase sale properties statia terminals nv obligated lessor shortfall purchase sales price lease residual value guarantee december 31 1995 maximum amount residual value guarantee related assets lease totaled 78777 connection acquisition praxair terminated first salute leasing lp offbalancesheet financing arrangement paid full obligations related lease prior acquisition 11 shareholders equity predecessor company january 18 1991 statia terminals nv issued 12000 shares preferred stock par value 100 per share affiliate cbi consideration investment 12000 share preferred stock entitled holder one vote matters put forth shareholder approval preferred share dividends recorded declared statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands terminals nv preferred shares noncumulative nonparticipating dividends paid rate 8 per annum declared preferred shareholders preference upon liquidation common shareholders january 10 1996 statia terminals nv declared dividends 25000 payable january 11 1996 shareholders record january 10 1996 dividends paid affiliates cbi october 22 1993 march 15 1994 statia terminals point tupper inc issued 14689 shares 10311 shares respectively first preferred stock canadian affiliate cbi exchange aggregate contribution cdn 25000 us18577 first preferred stock nonvoting cumulative redeemable option either issuer holder preferred dividends accrued paid quarterly rate 25 preferred shareholders borrowing rate established shareholders lending institution 1994 1995 period ended november 27 1996 statia terminals point tupper inc paid dividends 1004 1424 792 respectively first preferred shareholders preference upon liquidation classes preferred shareholders well common shareholders preferred stock retired conjunction acquisition components shareholders equity december 31 1995 follows company companys equity structure consists 30000 shares authorized 6000 shares issued outstanding 1 par value common stock common stock owned parent statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands 12 income taxes us federal income taxes certain state taxes settled quarterly cbi canada netherlands antilles estimated currentyear taxes payable paid monthly total cash payments income taxes 823 period ended november 27 1996 23 period ended december 31 1996 694 1995 1515 1994 sources income loss provision income taxes preferred stock dividends predecessor company prepraxair postpraxair acquisition company year ended december 31 jan 1 1996 period inception 1994 1995 nov 27 1996 dec 31 1996 us 45 1387 134 298 nonus 14082 7770 1395 335 14127 6383 1261 37 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands benefit provision income taxes consisted predecessor company prepraxair postpraxair acquisition company year ended december 31 jan 1 1996 period inception 1994 1995 nov 27 1996 dec 31 1996 taxes payable us 30 818 215 state 8 19 25 nonus 785 775 487 132 823 24 297 132 deferred income taxes us 35 52 332 nonus 361 362 396 414 332 1219 390 629 132 components deferred income taxes benefit provision predecessor company prepraxair postpraxair acquisition company year ended december 31 jan 1 1996 period inception 1994 1995 nov 27 1996 dec 31 1996 depreciation expense 432 515 332 employee retiree benefits 36 58 net 43 396 414 332 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands reconciliation income taxes us statutory rate 35 companys provision income taxes follows companys high effective tax rates periods ended november 27 1996 december 31 1996 result large corporation tax minimum tax canada netherlands antilles respectively discussed losses incurred certain subsidiaries tax benefit recognized statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands principal temporary differences included deferred income taxes reported balance sheets december 31 1995 undistributed earnings equaled approximately 46500 earnings distributed additional us tax approximately 15000 would incurred january 1996 predecessor company distributed approximately 25000 nonus subsidiary portion distribution amount excess 1996 earnings aggregated 46500 undistributed earnings december 31 1995 connection acquisition remaining undistributed earnings november 27 1996 assumed praxair company predecessors canadian subsidiaries subject large corporation tax based 0225 companys total equity incurred certain costs accounted differently financial reporting canadian taxation purposes timing differences recognition expenses occur primarily result differing provisions depreciating property equipment amortization goodwill deferred financing costs organizational costs preoperating expenditures certain expenditures deductible taxation purposes addition canadian subsidiaries company incurred taxable losses available utilization sevenyear period offset future taxable income net operating loss carryforwards available offset future canadian taxable income 4205 7967 7482 december 31 1994 1995 1996 respectively expire varying amounts seven year periods 2003 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands june 1 1989 governments netherlands antilles st eustatius approved 12year free zone agreement retroactive january 1 1989 concluding december 31 2000 agreement requires company predecessor company pay 2 rate taxable income instead profit tax minimum payment 500000 netherlands antilles guilders us 282 agreement provides amounts paid order meet minimum annual payment available offset future tax liabilities agreement extent minimum annual payment greater 2 taxable income december 31 1995 1996 amounts available offset future tax liability agreement approximately 554 843 respectively certain companys netherlands antilles subsidiaries part agreement accordingly pay netherlands antilles federal income tax effective tax rate 38 approximately 89 nonfree zone tax included netherlands antilles tax provision period ended december 31 1996 companys net deferred tax asset amount 3967 primarily relates depreciation net operating loss carryforwards years presented company provided valuation allowance tax asset management believes likely net deferred tax asset utilized future 13 relatedparty transactions predecessor company prior november 27 1996 company engaged various relatedparty transactions praxair cbi affiliates unpaid portion transactions included payable affiliates advances consist principally funds loaned praxaircbi disbursements debt service dividends offset transfer predecessor companys excess cash advances noninterestbearing specified maturity date predecessor company regularly contracted affiliates cbi construction expansion facilities certain repair maintenance work 1994 1995 period ended november 27 1996 7406 19032 4828 respectively paid praxair cbi affiliates activities related property equipment possible determine whether results operations financial position predecessor company would significantly different predecessor company contracted independent third parties construction expansion repair maintenance needs statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands praxair cbi directly indirectly allocated certain corporate administrative services predecessor company including certain legal services risk management tax advice return preparation employee benefit administration cash management services 1994 1995 period ended november 27 1996 578 1592 138 respectively paid direct indirect administrative services intercompany balances owed praxair cbi affiliates fully paid connection acquisition company parent entered tenyear management agreement castle harlan inc subject certain conditions pay annual management fee 1350 plus pocket expenses investment banking advisory strategic planning services management fees may include additional amounts related disposition certain assets capital stock subsidiaries company subsequent december 31 1996 company declared dividend parent amount 1350 cover management fee period november 27 1996 november 27 1997 payment future dividends company subject restricted notes 14 commitments contingencies predecessor company predecessor company cbi others defendants suit brought january 1994 district court harris county texas 334th judicial district plaintiffs claim damages primarily lost profits result predecessor companys alleged failure lease certain property tankage plaintiffs proposed vacuum tower project island st eustatius case settled cbi praxair 1996 company connection acquisition studies undertaken praxair identify potential environmental health safety matters certain matters involving potential environmental costs identified point tupper facility praxair agreed pay certain costs currently estimated approximately 3100 representing certain investigations remediation compliance capital costs extent certain matters exceed estimate praxair agreed reimburse company future expenditures additionally company identified additional environmental costs statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands point tupper approximately 1500 costs represent preemptive capital improvements designed mitigate prevent future environmental exposures improve overall safety companys facilities company believes environmental costs subject foregoing reimbursements material adverse effect companys financial position cash flows results operations company involved various claims litigation arising conduct business based upon analysis legal matters discussions legal counsel company believes ultimate outcome matters material adverse effect companys financial position cash flows results operations 15 retirement plans united states citizens predecessor company participated defined benefit plan certain contributory plans employee stock ownership plan plans sponsored cbi praxair predecessor company paid cbi proportionate share contributions plans amounting 340 1994 396 1995 246 period ended november 27 1996 result acquisition companys participation plans ceased addition certain foreign nationals residing netherlands antilles company predecessor company sponsors government guaranteed pension plan 16 valuation qualifying accounts table summarizes activity accounts receivable valuation account periods indicated statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands 17 condensed combining financial statements jurisdiction notes guaranteed full unconditional joint several basis indirect direct active subsidiaries company statia terminals canada incorporated coobligor notes subsidiary guarantors wholly owned company several inactive nonguaranteeing subsidiaries inconsequential individually aggregate assets liabilities operations process dissolved company following condensed combining financial data illustrates composition companys subsidiary guarantors applicable statia terminals international nv unconsolidated combined jurisdiction enforceability guarantees may affected differently laws foreign domestic jurisdictions separate financial statements subsidiaries statia terminals canada incorporated statia terminals nv presented management company determined material investors statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands condensed combining balance sheets december 31 1995 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands condensed combining balance sheets december 31 1996 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands condensed combining income statement year ended december 31 1994 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands condensed combining income statement year ended december 31 1995 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands condensed combining income statement period january 1 1996 november 27 1996 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands condensed combining income statement period november 27 1996 december 31 1996 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands condensed combining statement cash flows year ended december 31 1994 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands condensed combining statement cash flows year ended december 31 1995 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands condensed combining statement cash flows period january 1 1996 november 27 1996 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands condensed combining statement cash flows period november 27 1996 december 31 1996 statia terminals nv subsidiaries consolidated financial statements december 31 1996 together auditors report independent public accountants board directors statia terminals nv subsidiaries audited accompanying consolidated balance sheet statia terminals nv netherlands antilles corporation subsidiaries december 31 1996 related consolidated statements income retained earnings cash flows period inception december 31 1996 also audited accompanying consolidated balance sheet statia terminals nv old statia terminals nv predecessor december 31 1995 related consolidated statements income retained earnings cash flows predecessor january 1 1996 november 27 1996 years ended december 31 1995 1994 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects financial position statia terminals nv december 31 1996 results operations cash flows period inception december 31 1996 financial position predecessor december 31 1995 results operations cash flows january 1 1996 november 27 1996 years ended december 31 1995 1994 conformity generally accepted accounting principles arthur andersen llp chicago illinois march 19 1997 statia terminals nv subsidiaries consolidated balance sheets dollars thousands financial statements company predecessor company comparable certain respects see note 1 accompanying notes integral part financial statements statia terminals nv subsidiaries consolidated statements income retained earnings deficit dollars thousands financial statements company predecessor company comparable certain respects see note 1 accompanying notes integral part financial statements statia terminals nv subsidiaries consolidated statements cash flows dollars thousands financial statements company predecessor company comparable certain respects see note 1 accompanying notes integral part financial statements statia terminals nv subsidiaries notes consolidated financial statements december 31 1994 1995 1996 dollars thousands except share information 1 basis presentation consolidated balance sheet december 31 1996 consolidated statements income retained earnings cash flows period inception december 31 1996 include accounts statia terminals nv wholly owned subsidiaries company consolidated balance sheet december 31 1995 consolidated statements income retained earnings cash flows january 1 1996 november 27 1996 years ended december 31 1995 1994 include accounts statia terminals nv wholly owned subsidiaries old statia terminals nv predecessor company predecessor company uses fixed exchange rate convert netherlands antilles guilders united states dollars nafl 178 us100 consolidated financial statements presented united states dollars predecessor company predecessor companys financial statements include following primary entities incorporated netherlands antilles statia terminals nv wholly owned subsidiaries statia laboratory services nv statia tugs nv statia shipping nv statia tugs nv statia shipping nv dormant significant intercompany balances transactions eliminated prior january 12 1996 predecessor company wholly owned subsidiary cbi industries inc cbi january 12 1996 pursuant merger agreement dated december 22 1995 merger cbi became wholly owned subsidiary praxair inc praxair merger transaction reflected predecessor companys consolidated financial statements purchase effective january 1 1996 see note 4 accordingly historical financial information provided herein periods prior january 1 1996 prepraxair acquisition comparable subsequent predecessor company financial information financial information company indirect wholly owned subsidiary statia terminals international nv parent incorporated netherlands antilles company includes statia laboratory services nv statia tugs nv statia shipping nv dormant significant intercompany balances transactions eliminated november 27 1996 parent acquired praxair outstanding capital stock predecessor company certain subsidiaries affiliates acquisition parent newly organized company owned primarily castle harlan partners ii lp private equity investment fund managed castle harlan inc private merchant bank management parent others portion adjusted purchase price paid praxair capital stock company 174921 acquisition paid part funds received parent issuance 135000 1134 first mortgage notes described note 9 sale parents stock assets company pledged collateral secure notes acquisition accounted purchase method accounting preliminary estimates purchase price allocated assets liabilities company based fair values date acquisition related application purchase accounting note 5 resulted changes capital structure predecessor company historical basis various assets liabilities effect changes significantly impairs comparability financial position results operations company predecessor company periods 2 nature business company predecessor company lease operate petroleum bulk liquid blending transshipment storage facilities located island st eustatius netherlands antilles companys terminaling services furnished worlds largest producers crude oil integrated oil companies oil refiners traders petrochemical companies addition company predecessor company provide variety related terminal services including supplying bunker fuels vessels emergency spill response brokering product trades ship services statia terminals inc provides administrative services subsidiaries affiliates office deerfield beach florida 3 summary significant accounting policies use estimates consolidated financial statements prepared conformity generally accepted accounting principles promulgated united states require management make estimates assumptions affect reported amounts assets liabilities management also required make judgments regarding disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods actual results could differ estimates revenue recognition revenues storage throughput operations recognized ratably services provided revenues commissions bunkering services vessel services product sales recognized time delivery service product significant customers companys revenues stateowned oil producer constituted approximately 71 companys total 1995 revenues approximately 88 predecessors total revenues period january 1 1996 november 27 1996 period ended november 27 1996 approximately 93 companys total revenues period november 27 1996 december 31 1996 period ended december 31 1996 addition approximately 99 predecessors revenues period ended november 27 1996 64 companys revenues period ended december 31 1996 derived parties unaffiliated stateowned oil producer generated movement products terminals addition customer accounted 5 predecessor companys 1995 1996 revenues directly indirectly although company longstanding relationship longterm contract one customer longterm contract renewed end term year 1999 company otherwise lost significant portion revenues customer loss could material adverse effect business financial condition company also longterm contracts certain key customers assurance contracts renewed end terms foreign currency translation exchange consolidated financial statements include financial statements foreign subsidiaries affiliates translated accordance statement financial accounting standards sfas 52 foreign currency translation substantially companys transactions denominated us dollars cash equivalents predecessor companythe predecessors excess cash either swept cbipraxair fund cover current advances invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents companythe companys excess cash invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents financial instruments company uses various methods assumptions estimate fair value class financial instrument due nature carrying value cash equivalents accounts receivable accounts payable approximates fair value due recent issuance notes carrying value approximates fair value companys financial instruments significant inventory oil products valued lower weighted average cost estimated market value property equipment property equipment stated cost less accumulated depreciation computed using straightline method estimated useful lives respective assets additions property equipment facility improvements capitalized repair maintenance expenditures materially increase asset values extend useful lives expensed statement financial accounting standards sfas 121 accounting impairment longlived assets longlived assets disposed requires longlived assets certain identifiable intangibles held used entity reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable sfas 121 also requires longlived assets certain identifiable longlived assets disposed reported lower carrying amount fair value less cost sell company continually evaluates factors events circumstances include limited historical projected operating performance company specific industry trends general economic conditions assess whether remaining estimated useful life longlived assets may warrant revision remaining balance longlived assets may recoverable factors events circumstances indicate longlived assets evaluated possible impairment company uses estimate undiscounted cash flow remaining lives longlived assets measuring recoverability noncurrent assets noncurrent assets consist primarily deferred financing costs companys costs related establishing debt obligations amortized ratably life underlying obligations amortization expenses 343 71 period ended november 27 1996 period ended december 31 1996 respectively accrued expenses accrued expenses december 31 1996 consist primarily purchase price adjustments related acquisition accrued interest amount 4408 1205 respectively income taxes company predecessor determine tax provisions deferred tax balances compliance sfas 109 accounting income taxes approach provision income taxes represents income taxes paid payable current year adjusted change deferred taxes year deferred income taxes reflect net tax effects temporary differences financial statement bases tax bases assets liabilities adjusted changes tax rates tax laws changes enacted june 1 1989 governments netherlands antilles st eustatius approved 12year free zone agreement retroactive january 1 1989 concluding december 31 2000 agreement requires company pay 2 rate taxable income instead profit tax minimum annual payment 500000 netherlands antilles guilders us 282 agreement provides amounts paid order meet minimum annual payment available offset future tax liabilities agreement extent minimum annual payment greater 2 taxable income december 31 1995 1996 amount available offset future tax liability agreement approximately 554 843 4 praxair purchase accounting discussed note 1 prior january 12 1996 predecessor company wholly owned subsidiary cbi january 12 1996 pursuant merger agreement dated december 22 1995 cbi became wholly owned subsidiary praxair merger transaction reflected predecessor companys consolidated financial statements purchase effective january 1 1996 portion fair value assigned predecessor company merger date 179000 excluding praxair cbi intercompany advance accounts buyout certain offbalancesheet financing merger value allocation merger value assets liabilities acquired based estimated fair value assigned follows merger value 179000 less intercompanyadvance accounts 13000 balance sheet obligation 89000 77000 allocation merger value total current assets 15000 property equipment 79000 noncurrent assets 2000 liabilities assumed 19000 77000 addition 10000 praxair debt pushed companys books effective january 1 1996 debt eliminated part acquisition 5 acquisition discussed note 1 november 27 1996 company acquired praxair outstanding capital stock predecessor company acquisition accounted purchase method accounting accordingly portion purchase price 174921 allocated preliminary basis assets liabilities company based respective fair values date acquisition preliminary estimates fair value may revised later date preliminary allocation total purchase price assets liabilities acquired follows purchase price purchase price common stock assets 174921 commissions fees expenses 12673 total purchase price 187594 preliminary allocation purchase price current assets 15825 assets held sale 10000 property equipment 169839 longterm assets 5091 liabilities assumed 13161 total purchase price 187594 6 hurricane insurance claims third fourth quarters 1995 predecessor companys caribbean location adversely impacted three hurricanes operations facility ceased varying lengths time august 28 1995 october 3 1995 certain terminal assets sustained extensive damage repaired marine items shoreline installations damaged destroyed replaced predecessor company certain property liability insurance policies various insurance carriers december 31 1995 predecessor company incurred 8121 expenditures subject hurricane insurance coverage received advances insurance carriers amounting 3110 insurance claim receivable 4611 included receivables december 31 1995 claims process related hurricane damages settled third quarter 1996 12615 december 31 1996 company incurred 19367 expenditures relating hurricane repairs betterments 6752 capitalized property equipment 7 property equipment property equipment consisted following first quarter 1995 predecessor completed construction began leasing operating 50 million barrel crude oil terminal single point mooring system connection acquisition praxair terminated offbalance sheet financing arrangement paid full obligations related lease effective january 1 1995 predecessor company extended depreciable lives tanks jetty 20 15 years 40 25 years respectively change resulted corresponding reduction depreciation expense 2681 1995 construction facilities company predecessor allocate interest cost constructed facility interest capitalized constructed facilities amounted 0 71 1994 1995 respectively 162 0 period ended november 27 1996 period ended december 31 1996 respectively 8 assets held sale assets held sale represent managements estimate proceeds anticipated sale mv megan gambarella marine vessel company estimated proceeds sale 10 million although actual proceeds sale may equal estimates estimated fair value asset reclassified property equipment assets held sale asset still operation revenues costs associated operating asset included accompanying financial statements certain ultimate parents preferred stock agreements contain features may require parent cause company dividend otherwise remit proceeds assets accordingly 10000 companys common stock classified outside equity section stockholders equity subject reduction 9 debt predecessor company predecessor shortterm unsecured revolving credit line 2500 used cover letters credit 0 outstanding december 31 1995 credit line guaranteed praxaircbi bore interest quarterly one two threemonth london interbank offer rates libor plus 50 basis points subsequent merger praxair assumed guarantee credit line prior acquisition paid terminated credit line cash payments interest third parties significant periods presented company 1134 first mortgage notes due 2003 issued parent november 27 1996 connection acquisition pay interest may 15 november 15 year commencing may 15 1997 notes redeemable whole part option issuers time november 15 2000 following redemption prices expressed percentages principal amount together accrued unpaid interest thereon redemption date redeemed 12month period beginning november 15 year indicated optional year redemption price 2000 105875 2001 102938 2002 100000 notwithstanding foregoing time prior november 15 1999 issuers may redeem 35 aggregate principal amount notes proceeds one equity offerings defined indenture redemption price equal 11175 principal amount thereof plus accrued unpaid interest date redemption provided giving effect redemption least 65 aggregate principal amount notes remains outstanding notes guaranteed full unconditional joint several basis indirect direct active subsidiaries parent statia terminals canada incorporated coobligor notes also subject certain financial covenants set forth indenture restrictive parent meet consolidated fixed charge ratio 21 met permit parent make additional borrowings parents revolving credit facility discussed notes place certain restrictions parent paying dividends distributions proceeds assets held sale subsidiaries parent discussed note 8 except occurrence event default subsidiaries parent restrictions upon transfers funds form dividends loans cash advances december 31 1996 company principal payments maturing within next five years notes principal outstanding notes due full november 15 2003 company cash payments interest period ended december 31 1996 company revolving credit facility credit facility allows company borrow 12500 limit borrowing base defined credit facility credit facility calls commitment fee three eighths percent 0375 per annum portion unused funds credit facility bears interest rate prime plus 05 875 december 31 1996 credit facility constitutes senior indebtedness company secured first priority lien certain companys accounts receivable inventory credit facility subject certain restrictive covenants however subject financial covenants credit facility restrict company transferring funds parent form dividends loans cash advances however failure pay interest due constitutes event default credit facility event default cured prohibits upstream dividend payments made parent credit facility expires november 27 1999 december 31 1996 company approximately 10481 available borrowing credit facility limited borrowing base computation outstanding balance 10 shareholders equity predecessor january 18 1991 predecessor issued 12000 shares preferred stock par value 100 per share affiliate cbi consideration investment 120 million share preferred stock entitles holder one vote matters put forth shareholder approval preferred share dividends accrued declared statia terminals nv preferred shares noncumulative nonparticipating dividends paid rate 8 per annum declared preferred shareholders preference upon liquidation common shareholders conjunction acquisition preferred stock retired january 10 1996 company declared dividends 25000 payable january 11 1996 shareholders record january 10 1996 dividends paid affiliates cbi company companys equity structure consists 19395000 shares issued outstanding 1 par value common stock common stock indirectly owned parent 11 relatedparty transactions predecessor cbi ultimate sole stockholder companys common stock periodically advanced working capital funds company affiliate statia terminals inc predecessor company regularly contracted affiliates cbi construction expansion facilities certain repair maintenance work 1994 1995 period ended november 27 1996 1173 16569 4828 respectively paid cbi affiliates activities related property equipment possible determine whether results operations financial position company would significantly different company contracted independent third parties construction expansion repair maintenance needs statia terminals inc directly indirectly allocates certain corporate operating administrative services company including certain legal services risk management tax advice return preparation employee benefit administration cash management services ultimately provided cbi 1995 period ended november 27 1996 3536 2831 respectively paid statia terminals inc direct indirect administrative services company wholly owned subsidiary company engages various relatedparty transactions parent subsidiaries unpaid portion transactions included intercompany balance intercompany balances owed praxair affiliates settled result acquisition parent subsidiaries directly indirectly allocates certain corporate operating administrative services company including certain legal services risk management tax advice return preparation employee benefit administration cash management services period ended december 31 1996 1805 paid direct indirect services 12 commitments contingencies predecessor company cbi others defendants suit brought january 1994 district court harris county texas 334th judicial district plaintiffs claim damages primarily lost profits result predecessor companys alleged failure lease certain company owned property tankage plaintiffs proposed vacuum tower project island st eustatius case settled cbi praxair 1996 company involved various claims litigation arising conduct business based upon analysis legal matters discussions legal counsel company believes ultimate outcome matters material adverse impact companys financial position results operations net cash flows company complies environmental regulations locations operates aware environmental contingent liabilities may material effect financial position results operations environmental expenditures related cleanup remediation efforts expensed amounts reasonably estimated 13 leases company predecessor company lease marine equipment cancelable noncancelable operating leases minimum future rentals operating leases next five years follows year ending december 31 1997 3406 1998 1690 1999 651 2000 2001 5747 rent expense operating leases lease described amounted approximately 3040 4405 years ended december 31 1994 1995 respectively 3551 363 period ended november 27 1996 period ended december 31 1996 predecessor company november 17 1993 company subsidiary entered agreement third party financier first salute leasing lp pursuant portion land st eustatius leased third party purpose construction operation five million barrels crude oil storage tanks single point mooring system company acted agent third party regard construction facilities company leased facility third party period five years beginning february 1 1995 aggregate construction cost incurred leased assets totaled 88513 facility became operational first quarter 1995 rent expense relating lease 8823 including 3082 recognition lease residual value guarantee 9870 including 4270 recognition lease residual value guarantee 1995 period ended november 27 1996 respectively completion initial fiveyear term company option extend lease purchase facility lessor arrange leased properties sold third party event purchase sale properties company obligated lessor shortfall purchase sales price lease residual value guarantee december 31 1995 maximum amount residual value guarantee related assets lease totaled 78777 connection acquisition praxair terminated first salute leasing lp offbalancesheet financing arrangement paid full obligations related lease statia terminals canada incorporated subsidiary consolidated financial statements december 31 1996 together auditors report independent public accountants board directors statia terminals canada incorporated subsidiary audited accompanying consolidated balance sheet statia terminals canada incorporated nova scotia canada corporation subsidiary formerly statia terminals point tupper inc december 31 1996 related consolidated statements income retained earnings cash flows period inception december 31 1996 also audited accompanying consolidated balance sheet statia terminals point tupper inc predecessor december 31 1995 related consolidated statements income retained earnings cash flows predecessor january 1 1996 november 27 1996 years ended december 31 1995 1994 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position statia terminals canada incorporated subsidiary december 31 1996 results operations cash flows period inception december 31 1996 consolidated financial position predecessor december 31 1995 results operations cash flows january 1 1996 november 27 1996 years ended december 31 1995 1994 conformity generally accepted accounting principles arthur andersen llp chicago illinois march 19 1997 statia terminals canada incorporated subsidiary consolidated balance sheets dollars thousands financial statements company predecessor company comparable certain respects see note 1 accompanying notes integral part financial statements statia terminals canada incorporated subsidiary consolidated statements income loss retained deficit dollars thousands financial statements company predecessor company comparable certain respects see note 1 accompanying notes integral part financial statements statia terminals canada incorporated subsidiary consolidated statements cash flows dollars thousands financial statements company predecessor company comparable certain respects see note 1 accompanying notes integral part financial statements statia terminals canada incorporated subsidiary notes consolidated financial statements december 31 1994 1995 1996 dollars thousands except share information 1 basis presentation consolidated balance sheet december 31 1996 consolidated statements income retained earnings cash flows period inception december 31 1996 period ended december 31 1996 include accounts statia terminals canada incorporated subsidiary company consolidated balance sheet december 31 1995 consolidated statements income retained earnings cash flows january 1 1996 november 27 1996 period ended november 27 1996 years ended december 31 1995 1994 include accounts statia terminals point tupper inc subsidiary predecessor company consolidated financial statements presented united states dollars predecessor company predecessor company includes statia terminals point tupper inc incorporated nova scotia canada commonly owned affiliate point tupper marine services limited incorporated nova scotia canada significant intercompany balances transactions eliminated prior january 12 1996 predecessor company wholly owned subsidiary statia terminals inc sti wholly owned cbi industries inc cbi january 12 1996 pursuant merger agreement dated december 22 1995 merger cbi became wholly owned subsidiary praxair inc praxair merger transaction reflected predecessor companys consolidated financial statements purchase effective january 1 1996 accordingly historical financial information provided herein periods prior january 1 1996 prepraxair acquisition comparable subsequent predecessor company financial information financial information company indirect wholly owned subsidiary statia terminals international nv parent incorporated netherlands antilles company includes statia terminals canada incorporated nova scotia canada point tupper marine services limited incorporated nova scotia canada significant intercompany balances transactions eliminated november 27 1996 parent acquired praxair outstanding capital stock predecessor company certain affiliates acquisition parent newly organized company formed castle harlan partners ii lp private equity investment fund managed castle harlan inc private merchant bank management parent others connection acquisition november 27 1996 predecessor company amalgamated company portion adjusted purchase price paid praxair capital stock company 27665 acquisition paid primarily funds received company issuance 1134 first mortgage notes described note 7 assets company pledged collateral secure notes acquisition accounted purchase method accounting acquisition related application purchase accounting note 5 resulted changes capital structure predecessor company historical basis various assets liabilities effect changes significantly impairs comparability financial position results operations company predecessor company periods 2 nature business company predecessor company operate petroleum bulk liquid blending transshipment storage facilities located near port hawkesbury nova scotia canada companys terminaling services furnished worlds largest producers crude oil integrated oil companies oil refiners traders petrochemical companies addition company predecessor company provide variety related terminal services including supplying bunker fuels vessels spill response brokering product trades ship services statia terminals inc sti provides administrative services subsidiaries affiliates office deerfield beach florida 3 summary significant accounting policies use estimates consolidated financial statements prepared conformity generally accepted accounting principles promulgated united states require management make estimates assumptions affect reported amounts assets liabilities management also required make judgments regarding disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods actual results could differ estimates revenue recognition revenues storage throughput operations recognized ratably services provided revenues commissions bunkering services vessel services product sales recognized time delivery service product significant customers companys revenues refiner constituted approximately 564 predecessors total revenues period ended november 27 1996 369 companys total revenues period november 27 1996 december 31 1996 addition approximately 162 predecessors revenues period ended november 27 1996 425 companys revenues period ended december 31 1996 derived parties unaffiliated mentioned customer generated movement products terminals addition companys revenues refiner two petroleum product brokers constituted approximately 616 146 62 respectively companys total 1995 revenues addition approximately 76 companys 1995 revenues derived parties unaffiliated mentioned customers generated movement products terminals customer accounted 5 predecessors companys 1995 1996 revenues directly indirectly although company longstanding relationship longterm contract one customer longterm contract renewed end term year 2000 company otherwise lost significant portion revenues customer loss could material adverse effect business financial condition company also longterm contracts certain key customers assurance contracts renewed end terms foreign currency translation exchange financial statements include foreign currency transactions foreign currency financial statement amounts translated accordance statement financial accounting standards sfas 52 foreign currency translation substantially companys predecessors transactions denominated us dollars cash equivalents companys predecessors excess cash invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents financial instruments company uses various methods assumptions estimate fair value class financial instrument due nature carrying value cash equivalents accounts receivable accounts payable approximate fair value due recent issuance notes carrying value approximates fair value companys financial instruments significant inventory oil products valued lower weighted average cost estimated market value property equipment property equipment stated cost less accumulated depreciation expense computed using straightline method estimated useful lives respective assets additions property equipment facility improvements capitalized repair maintenance expenditures materially increase asset values extend useful lives expensed sfas 121 accounting impairment longlived assets longlived assets disposed requires longlived assets certain identifiable intangibles held used entity reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable sfas 121 also requires longlived assets certain identifiable longlived assets disposed reported lower carrying amount fair value less cost sell company predecessor continually evaluate factors events circumstances include limited historical projected operating performance specific industry trends general economic conditions assess whether remaining estimated useful lives longlived assets may warrant revision remaining balance longlived assets may recoverable factors events circumstances indicate longlived assets evaluated possible impairment company predecessor use estimate undiscounted cash flows remaining lives longlived assets measuring recoverability intangible assets intangible assets include goodwill organizational costs preoperating expenditures excess cost fair value tangible net assets acquired capitalized goodwill amortized straightline basis periods expected benefit exceed 40 years organizational costs preoperating expenditures amortized evenly fiveyear periods amortization expense 929 1311 1994 1995 respectively 664 period january 1 1996 november 27 1996 related intangible assets accumulated amortization 2693 december 31 1995 noncurrent assets noncurrent assets consist primarily deferred financing costs companys costs related establishing debt obligations amortized ratably life underlying obligations amortization expense 18 period ended december 31 1996 accrued expenses accrued expenses december 31 1996 consist primarily purchase price adjustments related acquisition environmental reserves accrued interest amount 665 1500 316 respectively income taxes company predecessor determine tax provision deferred tax balances compliance sfas 109 accounting income taxes approach provision income taxes represents income taxes paid payable current year adjusted change deferred taxes year deferred income taxes reflect net tax effects temporary differences financial statement bases tax bases assets liabilities adjusted changes tax rates tax laws changes enacted 4 praxair purchase accounting discussed note 1 prior january 12 1996 predecessor company wholly owned subsidiary cbi january 12 pursuant merger agreement dated december 22 1995 cbi became wholly owned subsidiary praxair merger transaction reflected predecessor companys consolidated financial statements purchase effective january 1 1996 portion fair value assigned predecessor company merger date approximately 27000 excluding bank borrowings praxair cbi intercompany advance accounts merger value allocation merger value assets liabilities acquired based estimated fair value assigned follows merger value 27000 less bank borrowings 66000 intercompanyadvance accounts 1000 40000 allocation merger value total current assets 3000 property equipment 27000 noncurrent assets 2000 liabilities assumed 72000 40000 5 acquisition discussed note 1 november 27 1996 company acquired praxair outstanding capital stock predecessor company acquisition accounted purchase method accounting accordingly portion purchase price approximately 27665 allocated preliminary basis assets liabilities company based respective fair values date acquisition preliminary estimates fair value may revised later date preliminary allocation total purchase price assets liabilities acquired follows purchase price 27665 commissions fees expenses 3326 total purchase price 30991 preliminary allocation purchase price current assets 3989 property equipment 28901 longterm assets 1448 liabilities assumed 3347 total purchase price 30991 6 property equipment property equipment consisted following december 31 effective january 1 1995 predecessor company extended depreciable lives certain marine installations tanks 15 20 years 25 40 years respectively change resulted corresponding reduction depreciation expense 1662 1995 construction facilities company predecessor allocate interest cost constructed facility interest capitalized constructed facilities amounted 716 843 1994 1995 respectively 165 period ended november 27 1996 0 period ended december 31 1996 7 debt predecessor december 31 1995 predecessor company 56400 outstanding longterm debt agreement secured property equipment facility 4800 currently payable guarantee provided cbi obligation bore interest one two sixmonth us prime rates london interbank offer rates libor canadian bankers acceptance rates plus 75 basis points option company weighted average interest rate 1995 67 58 period ended november 27 1996 debt agreement required company cbi maintain various debt covenants debt guarantee assumed praxair subsequent merger paid full praxair prior acquisition predecessor two shortterm unsecured revolving credit lines aggregating 10000 used cover working capital needs letters credit 10000 outstanding december 31 1995 credit lines guaranteed cbi bore interest quarterly one two threemonth libor plus 50 basis points 63 december 31 1995 subsequent merger praxair assumed guarantee credit lines prior acquisition paid terminated credit lines 1993 predecessor company entered interest rate swap agreement guaranteed cbi based notional amount 20000 whereby predecessor company made semiannual interest payments annual rate 591 october 21 1996 exchange right receive interest payments floating rates 58750 december 31 1995 semiannually october 21 1996 swap agreement extendible two additional years option predecessor company interest rate swap agreement intended qualify hedge variable debt borrowings fair market value interest rate swap related option agreement 1 december 31 1995 estimated based upon net amount would paid terminate agreement utilizing quoted prices comparable contracts discounted cash flows subsequent merger praxair assumed interest rate swap agreement cash payments interest 2951 4494 1994 1995 respectively 4455 period ended november 27 1996 company 1134 first mortgage notes due 2003 notes issued company november 27 1996 connection acquisition pay interest may 15 november 15 year commencing may 15 1997 notes redeemable whole part option issuers time november 15 2000 following redemption prices expressed percentages principal amount together accrued unpaid interest thereon redemption date redeemed 12month period beginning november 15 year indicated optional year redemption price 2000 105875 2001 102938 2002 100000 notwithstanding foregoing time prior november 15 1999 issuers may redeem 35 aggregate principal amount notes proceeds one equity offerings defined debt indentures redemption price equal 11175 principal amount thereof plus accrued unpaid interest date redemption provided giving effect redemption least 65 aggregate principal amount notes remains outstanding notes guaranteed full unconditional joint several basis indirect direct active subsidiaries parent company coobligor notes also subject certain financial covenants set forth indenture restrictive requires parent meet consolidated fixed charge ratio 21 met permit parent make additional borrowings companys revolving credit facility discussed notes place certain restrictions parent paying dividends distributions proceeds assets held sale subsidiaries parent except occurrence event default subsidiaries parent restrictions upon transfers funds form dividends loans cash advances december 31 1996 company principal payments maturing within next five years notes principal outstanding notes due full november 15 2003 company revolving credit facility credit facility allows company borrow 5000 limit borrowing base defined credit facility credit facility calls commitment fee three eighths percent 0375 per annum portion unused funds credit facility bears interest rate prime plus 05 875 december 31 1996 credit facility constitutes senior indebtedness company secured first priority lien certain companys accounts receivable inventory credit facility subject certain restrictive covenants however subject financial covenants credit facility restrict company transferring funds parent subsidiaries form dividends loans cash advances however failure pay interest due constitutes event default credit facility event default cured prohibits upstream dividend payments made parent credit facility expires november 27 1999 december 31 1996 company approximately 1465 available borrowing credit facility limited borrowing base computation balance outstanding company cash payments interest period ended december 31 1996 8 shareholders equity predecessor october 22 1993 march 15 1994 statia terminals point tupper inc issued 14689 shares 10311 shares respectively first preferred stock canadian affiliate cbi exchange aggregate contribution cdn 25000 us18577 first preferred stock nonvoting cumulative redeemable option either issuer holder preferred dividends accrued paid quarterly rate 25 preferred shareholders borrowing rate established shareholders lending institution 1994 1995 period ended november 27 1996 statia terminals point tupper paid dividends 1004 1424 792 respectively first preferred shareholders preference upon liquidation classes preferred shareholders well common shareholders preferred stock retired conjunction acquisition company companys equity structure consists 1000000 shares authorized par common stock one share outstanding common stock indirectly owned parent 9 income taxes company predecessor subject large corporation tax based 0225 companys total equity incurred certain costs accounted differently financial reporting canadian taxation purposes timing differences recognition expenses occur primarily result differing provisions depreciating property equipment amortization goodwill deferred financing costs organizational costs preoperating expenditures certain expenditures deductible taxation purposes addition predecessor incurred taxable losses available utilization seven year period offset future taxable income net operating loss carryforwards available offset future canadian taxable income us 7967 us 7482 december 31 1995 predecessor december 31 1996 company respectively expire varying amounts seven year periods 2003 10 relatedparty transactions predecessor wholly owned subsidiary sti predecessor engaged various relatedparty transactions sti affiliates unpaid portion transactions included intercompany balances sti allocated certain corporate operating administrative services predecessor including certain legal services risk management tax advice return preparation employee benefit administration cash management services 1994 1995 period ended november 27 1996 1700 2382 1610 respectively paid direct indirect services company wholly owned subsidiary company engages various relatedparty transactions parent subsidiaries unpaid portion transactions included intercompany balance intercompany balances owed praxair affiliates settled result acquisition parent subsidiaries allocates certain corporate operating administrative services company including certain legal services risk management tax advice return preparation employee benefit administration cash management services period ended december 31 1996 1026 paid direct indirect services 11 commitments contingencies connection acquisition studies undertaken praxair identify potential environmental health safety matters certain matters involving potential environmental costs identified point tupper facility praxair agreed pay certain costs currently estimated approximately 3100 representing certain investigation remediation compliance capital costs extent certain matters exceed estimate praxair agreed reimburse company future expenditures additionally company identified additional environmental costs point tupper approximately 1500 costs represent preemptive capital improvements designed mitigate prevent future environmental exposures improve overall safety companys facilities company believes environmental costs subject foregoing reimbursements material adverse effect companys financial position results operations net cash flows company involved various claims litigation arising conduct business based upon analysis legal matters discussions legal counsel company believes ultimate outcome matters material adverse impact companys financial position net cash flows results operations signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized statia terminals international nv date may 13 1997 registrant james g cameron james g cameron managing director james f brenner james f brenner vice president treasurer pursuant requirements securities exchange act 1934 1996 annual report form 10k signed following persons behalf registrant capacities dates indicated james g cameron james g cameron managing director may 13 1997 principal executive officer john k castle john k castle managing director may 13 1997 david b pittaway david b pittaway managing director may 13 1997 justin b wender justin b wender managing director may 13 1997 james f brenner james f brenner vice president may 13 1997 treasurer principal financial accounting officer page s1 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized statia terminals canada incorporated date may 13 1997 registrant paul r crissman paul r crissman director president james f brenner james f brenner vice presidentfinance pursuant requirements securities exchange act 1934 1996 annual report form 10k signed following persons behalf registrant capacities dates indicated paul r crissman paul r crissman director president may 13 1997 principal executive officer clarence w brown clarence w brown director may 13 1997 james g cameron james g cameron director may 13 1997 james f brenner james f brenner vice president finance may 13 1997 principal financial accounting officer page s2 exhibits index page e1 incorporated reference registration statement statia canada form s4 dated december 20 1996 amendments thereto filed us securities exchange commission registration statement 33318455 became effective february 14 1997 b reports form 8k none page e2 item 14 exhibits financial statement schedules reports form 8k 1 financial statements index following consolidated financial statements statia terminals international nv subsidiaries statia terminals canada incorporated subsidiary filed response item 8 report 2 financial statement schedules see note 15 consolidated financial statements statia terminals international nv required financial statement schedules 3 exhibits index see exhibits index pages e 1 e 4 following signature pages b reports form 8k quarter ended december 31 1999 parent filed form 8k dated december 10 1999 form 8k contained two parents previously issued press releases entitled statia terminals provides additional information effects hurricane lenny statia terminals announces stock purchase program comments anticipated fourth quarter available cash future distributions statia terminals international nv subsidiaries consolidated financial statements december 31 1998 1999 together report independent certified public accountants report independent certified public accountants board managing directors statia terminals international nv subsidiaries audited accompanying consolidated balance sheets statia terminals international nv netherlands antilles corporation subsidiaries company december 31 1998 1999 related consolidated statements income loss stockholders equity cash flows years ended december 31 1997 1998 1999 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position company december 31 1998 1999 results consolidated operations cash flows years ended december 31 1997 1998 1999 conformity generally accepted accounting principles arthur andersen llp west palm beach florida january 26 2000 statia terminals international nv subsidiaries consolidated balance sheets dollars thousands except share amounts accompanying notes integral part financial statements statia terminals international nv subsidiaries consolidated statements income loss dollars thousands accompanying notes integral part financial statements statia terminals international nv subsidiaries consolidated statements stockholders equity dollars thousands except share amounts accompanying notes integral part financial statements statia terminals international nv subsidiaries consolidated statements cash flows dollars thousands accompanying notes integral part financial statements statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands 1 organization operations statia terminals international nv wholly owned statia terminals group nv parent formed september 4 1996 castle harlan partners ii lp castle harlan private equity investment fund managed castle harlan inc private merchant bank certain members management others commenced operations november 27 1996 inception statia terminals international nv subsidiaries company operate petroleum blending transshipment storage facilities located island st eustatius netherlands antilles near point tupper nova scotia canada companys terminaling services furnished many worlds largest producers crude oil integrated oil companies oil traders refiners petrochemical companies ship owners addition storage company provides variety related terminal services including supplying bunkering crude oil petroleum product blending processing emergency spill response brokering product trades ship services subsidiary company provides administrative services company office deerfield beach florida company includes following primary entities statia terminals international nv statia terminals nv incorporated netherlands antilles statia terminals canada inc incorporated nova scotia canada statia canada statia terminals southwest inc incorporated texas brownsville facility sold july 1998 see note 12 significant intercompany balances transactions eliminated company formed 1996 acquire capital stock statia terminals inc subsidiaries affiliates predecessor company praxair inc praxair november 27 1996 company acquired praxair outstanding capital stock statia terminals nv statia terminals inc subsidiaries certain affiliates castle harlan acquisition adjusted purchase price castle harlan acquisition totaled approximately 217146 castle harlan acquisition paid part funds received company issuance 135000 11 34 first mortgage notes described note 5 sale companys common stock castle harlan acquisition accounted purchase method accounting accordingly purchase price allocated assets liabilities company based respective fair values date castle harlan acquisition portion purchase price company allocated intangible assets since fair value tangible assets exceeded purchase price prior january 12 1996 predecessor company wholly owned subsidiary cbi industries inc cbi january 12 1996 pursuant merger agreement dated december 22 1995 cbi became wholly owned subsidiary praxair discussed note 3 april 28 1999 parent completed initial public offering equity statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued 2 summary significant accounting policies use estimates consolidated financial statements prepared conformity generally accepted accounting principles promulgated united states require management make estimates assumptions affect reported amounts assets liabilities management also required make judgments regarding disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods actual results could differ estimates revenue recognition revenues terminaling operations recognized ratably services provided revenues commissions bunkering services terminalingrelated services bulk product sales recognized time delivery service product december 1999 us securities exchange commission sec issued staff accounting bulletin 101 revenue recognition sab 101 provides guidance recognition presentation disclosure revenue financial statements filed sec sab 101 outlines basic criteria must met recognize revenue provides guidance disclosure related revenue recognition policies company believes revenue recognition practices conformity guidelines prescribed sab 101 foreign currency translation exchange consolidated financial statements include financial statements foreign subsidiaries affiliates translated accordance statement financial accounting standards sfas 52 foreign currency translation assets liabilities translated us dollars year end exchange rates income expense items converted us dollars average rates exchange prevailing year substantially companys transactions denominated us dollars cash equivalents companys excess cash invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued financial instruments company uses various methods assumptions estimate fair value class financial instrument due nature carrying value cash equivalents accounts receivable accounts payable approximates fair value companys financial instruments significant inventory oil products valued lower weighted average cost estimated market value property equipment property equipment stated cost less accumulated depreciation expense computed using straightline method estimated useful lives respective assets additions property equipment replacements betterments major renewals capitalized repair maintenance expenditures materially increase asset values extend useful lives expensed sfas 121 accounting impairment longlived assets longlived assets disposed requires longlived assets certain identifiable intangibles held used entity reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable sfas 121 also requires longlived assets certain identifiable longlived assets disposed reported lower carrying amount fair value less cost sell company continually evaluates factors events circumstances include limited historical projected operating performance specific industry trends general economic conditions assess whether remaining estimated useful lives longlived assets may warrant revision remaining balance longlived assets may recoverable factors events circumstances indicate longlived assets evaluated possible impairment company uses estimate undiscounted cash flow remaining lives longlived assets measuring recoverability company measures asset impairment loss amount carrying amount exceeds fair market value asset noncurrent assets noncurrent assets primarily consist deferred financing costs amounts 4521 2701 december 31 1998 1999 respectively deferred financing costs related establishing debt obligations amortized ratably life underlying obligation debt cost amortization expense 911 767 years ended december 31 1997 1998 1999 respectively statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued income taxes company determines tax provision deferred tax balances compliance sfas 109 accounting income taxes approach provision income taxes represents income taxes paid payable current year adjusted change deferred taxes year deferred income tax assets liabilities reflect net tax effects temporary differences financial statement bases tax bases assets liabilities adjusted changes tax rates tax laws changes enacted comprehensive income june 1997 financial accounting standards board fasb issued sfas 130 reporting comprehensive income sfas 130 sfas 130 establishes standards reporting display comprehensive income components financial statements following types items considered computing comprehensive income foreign currency translation adjustments pension liability adjustments unrealized gainloss securities available sale periods presented herein differences net income comprehensive income segment information company discloses information regarding operating segments pursuant sfas 131 disclosures segments enterprise related information sfas 131 sfas 131 establishes standards way public business enterprises report information operating segments annual financial statements requires enterprises report selected information operating segments interim financial reports issued shareholders also establishes standards related disclosures product services geographic areas major customers reclassifications certain reclassifications made 1997 1998 financial statements order conform 1999 presentation 3 sale common stock parent related transactions april 28 1999 parent completed initial public equity offering 76 million class common shares offering price 20 per share raising gross proceeds 152000 portion proceeds used parent purchase additional capital stock statia amounting 33746 net expenses may 1999 company used proceeds sale statias capital stock along existing cash repurchase open market principal amount 34000 notes 39522 including acquisition costs accrued interest 3681 1841 respectively second quarter 1999 acquisition costs unamortized deferred financing costs related repurchased notes 1062 recorded extraordinary charge income tax effect associated extraordinary charge statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued three months ended march 31 1999 company recorded special compensation expense bonus amount 1947 particular members companys management purpose special management bonus partially reimburse individuals respect adverse tax consequences resulted offering past compensation arrangements connection parents initial public offering equity certain options previously granted companys employees purchase parents common stock became fully vested exercised became subordinated shares parent amortizing difference estimated fair value options date grant exercise price vesting period five years charging amounts company compensation expense april 28 1999 remaining unamortized compensation expense associated options 2152 recorded noncash special compensation expense following unaudited pro forma consolidated results operations years december 31 1997 1998 1999 prepared illustrate estimated effects disposition statia terminals southwest inc discussed note 12 use net proceeds parents initial public offering equity restructuring described parents registration statement form s1 collectively pro forma transactions pro forma transactions occurred beginning respective periods pro forma financial information provided informational purposes purport indicative results operations would obtained pro forma transactions completed dates indicated results operations future date period statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued 4 property equipment property equipment consisted following december 31 5 debt 11 34 first mortgage notes due november 15 2003 notes issued statia one subsidiaries statia canada issuers november 27 1996 connection castle harlan acquisition pay interest may 15 november 15 year notes redeemable whole part option issuers time november 15 2000 redemption prices listed expressed percentages principal amount together accrued unpaid interest thereon redemption date redeemed 12month period beginning november 15 year indicated company may also forego redemption process repurchase notes open market november 15 2000 optional year redemption price 2000 105875 2001 102938 2002 100000 notwithstanding foregoing time prior november 15 1999 issuers allowed redeem repurchase 35 aggregate principal amount notes proceeds one equity offerings plus accrued unpaid interest date redemption repurchase provided giving effect redemption repurchase least 65 aggregate principal amount notes would remain outstanding discussed statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued note 3 may 1999 connection parents initial public offering equity company repurchased open market principal amount 34000 notes guaranteed full unconditional joint several basis indirect direct active subsidiaries statia notes also subject certain financial covenants set forth indenture restrictive include limited following consolidated fixed charge coverage ratio prior four full fiscal quarters least 20 1 met permit company make additional borrowings companys revolving credit facility discussed ii limitations indebtedness iii restrictions certain payments addition notes place restrictions companys ability pay dividends distributions proceeds assets held sale certain management fees discussed note 12 except occurrence event default subsidiaries statia restrictions upon transfers funds form dividends loans cash advances company compliance financial covenants set forth indenture company met minimum consolidated fixed charge coverage ratio certain periods would prevented company making additional borrowings revolving credit facility discussed company revolving credit facility credit facility allows certain companys subsidiaries borrow 17500 limit borrowing base defined credit facility credit facility calls commitment fee 0375 per annum portion unused funds credit facility bears interest rate prime plus 05 90 december 31 1999 credit facility constitutes senior indebtedness company secured first priority lien certain companys accounts receivable inventory credit facility subject certain restrictive covenants however subject financial covenants credit facility restrict statias subsidiaries transferring funds statia form dividends loans cash advances however failure pay interest due constitutes event default credit facility event default cured prohibits upstream dividend payments made statia credit facility expires november 27 2000 december 31 1998 1999 company approximately 7982 10603 respectively available borrowing credit facility limited borrowing base computation outstanding balance 6 leases company charters certain marine equipment rents facilities cancelable noncancelable operating leases rental expense operating leases 3763 3409 3619 years ended december 31 1997 1998 1999 respectively future rental commitments years ending 2000 2004 2351 3225 3211 2473 829 respectively statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued 7 stockholders equity years ended december 31 1997 1998 company paid dividends parent 2700 1500 respectively proceeds dividends used parent pay certain management fees discussed note 10 among things year ended december 31 1999 company declared dividends parent 12498 3750 remained payable december 31 1999 subsequently paid 8 income taxes sources income loss jurisdiction provision income taxes extraordinary charge years ended december 31 1997 1998 1999 us 1823 362 41 nonus 1276 5206 3222 3099 4844 3263 provision income taxes consisted years ended december 31 1997 1998 1999 current us 128 123 state 42 nonus 610 320 903 total provision 780 320 780 reconciliation income taxes us statutory rate 35 companys provision income taxes follows years ended december 31 1997 1998 1999 income loss income taxes extraordinary charge 3099 4844 3263 tax provision benefit us statutory rate 1085 1695 1142 state income taxes 14 nonus tax rate differential losses without tax benefit 1851 1375 362 780 320 780 statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued principal temporary differences included balance sheets december 31 1998 1999 net operating loss itc carryforwards 28080 26146 valuation allowance 28080 26146 companys net deferred tax assets primarily relate canadian investment tax credits net operating loss carryforwards company provided full valuation allowance tax assets certain deferred tax assets utilized future companys canadian subsidiaries subject federal large corporation tax based 0225 subsidiaries total equity april 1 1997 nova scotia enacted provincial capital tax based 025 subsidiaries total equity prorated 01888 1997 calendar year company benefited investment tax credit carryforwards net operating tax losses expire various amounts 2003 2005 respectively net operating tax loss carryforwards available offset canadian taxable income december 31 1998 1999 55097 50891 respectively investment tax credit carryforward available reduce canadian income taxes 7302 7211 december 31 1998 1999 respectively june 1 1989 governments netherlands antilles st eustatius approved free zone profit tax agreement retroactive january 1 1989 concluding december 31 2000 agreement requires subsidiary company pay 2 rate taxable income defined minimum payment 500 netherlands antilles guilders 282 agreement provides amounts paid order meet minimum annual payment available offset future tax liabilities agreement extent minimum annual payment greater 2 taxable income currently subsidiary renegotiating new agreement governments netherlands antilles st eustatius expected effective retroactively january 1 1998 december 31 2010 extension provisions 2015 certain companys netherlands antilles subsidiaries part free zone profit tax agreement accordingly pay netherlands antilles federal income tax effective tax rate 45 approximately 67 28 48 profit tax included netherlands antilles tax provision years ended december 31 1997 1998 1999 respectively statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued 9 commitments contingencies environmental health safety matters connection castle harlan acquisition studies undertaken praxair identify potential environmental health safety matters certain matters involving potential environmental costs identified point tupper nova scotia canada facility praxair agreed pay certain environmental costs subject certain limitations praxair paid approximately 3906 period november 27 1996 december 31 1999 related costs based investigations conducted information available date potential cost additional remediation compliance estimated 13000 substantially company believes responsibility praxair per castle harlan acquisition agreement company believes environmental health safety costs material adverse effect companys financial position cash flows results operations subject reimbursements praxair company also identified certain environmental health safety costs covered agreement praxair 1500 accrued 1996 conjunction castle harlan acquisition december 31 1999 32 amount expended management periodically reviews adequacy accrual 1999 determined 250 originally provided environmental contingencies companys st eustatius facility longer necessary accordingly portion accrual eliminated credited costs services products sold litigation company involved various claims litigation arising normal course business based upon analysis legal matters discussions legal counsel company believes ultimate outcome matters material adverse effect companys business financial condition results operations accrued expenses summary accrued expenses consists following december 31 1998 1999 personnel related costs 2835 2061 professional fees 1175 792 environmental expenses 1490 1208 accrued taxes 1412 1493 1527 665 8439 6219 statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued 10 castle harlan management fee november 1996 parent entered tenyear management agreement castle harlan inc pay annual management fee 1350 plus outofpocket expenses advisory services management fee agreement amended restated closing parents initial public offering equity eliminate 1350 management fee continues provide reimbursement ordinary necessary expenses continuing indemnity period termination date november 27 2006 extension thereto 1997 1998 statia declared paid dividends parent 2700 1500 respectively cover management fee related expenses periods november 27 1996 november 27 1998 november 27 1998 november 27 1999 respectively 11 segment information company organized around several different factors two significant services products geographic location companys primary services products terminaling services resulting revenue storage throughput dock usage emergency response terminal services product sales primary measures profit loss utilized companys management make decisions resources allocated segment earnings interest expense interest income taxes depreciation amortization certain nonrecurring income expenses adjusted ebitda earnings interest expense interest income taxes certain nonrecurring income expenses adjusted ebit statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued following information provided companys terminaling services product sales segments statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued reconciliation adjusted ebit companys income loss provision income taxes extraordinary charge follows following information provided respect geographic operations company significant customers company presently longterm storage throughput contracts bolanter corporation nv affiliate saudi aramco subsidiary tosco corporation expire 2003 2004 respectively company also derives revenues affiliates bolanter tosco indirect result storage throughput agreements company derives revenues parties unaffiliated either saudi aramco tosco movement saudi aramco tosco products companys terminals additionally company sells bunker fuels affiliate saudi aramco st eustatius facility following table sets forth revenues percentage total revenue although company longstanding relationships longterm contracts customers longterm contracts renewed replaced end terms company otherwise lost significant portion revenues two customers nonrenewalreplacement loss could material adverse effect companys business financial condition company also longterm contracts key customers assurance contracts renewed end terms company able enter longterm contracts terms favorable customer accounted 10 companys total revenues 1997 1998 1999 statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued 12 loss sale statia terminals southwest inc july 29 1998 company sold statia terminals southwest inc southwest 6500 cash resulting net proceeds approximately 6150 company retained certain preclosing assets liabilities southwest consisting primarily accounts receivable accrued expenses agreed indemnify purchaser certain contingent legal environmental matters maximum 500 july 29 1999 indemnification period lapsed liability company net book value assets liabilities sold july 29 1998 7802 loss sale southwest 1652 included gain loss sale property equipment since substantially value southwest originally recorded account company acquired 1998 restricted payment 6150 representing net proceeds sale southwest made parent 13 retirement plans company maintains employee savings plan accordance section 401k internal revenue code plan covers companys fulltime us employees allows employees contribute lesser 15 eligible compensation 10 1999 calendar year company currently matches 50 rate 8 employees base salary employer may contribute discretionary basis 1 employees base salary per quarter amounts charged expense matching discretionary contributions year ended december 31 1998 136 178 respectively amounts charged expense matching discretionary contributions year ended december 31 1999 141 173 respectively addition company sponsors certain pension plans certain employees residing netherlands antilles canada 14 hurricane charges result damages sustained companys st eustatius facility hurricane lenny late november 1999 company incurred onetime noncash charge 1500 partially reduce carrying value shoreline protection system onetime cash charge 250 cover hurricane related expenses damaged shoreline protection system covered insurance together certain civil work expected replaced first half 2000 september 1998 hurricane georges damaged components companys st eustatius facility however operations significantly impacted hurricane returned normal within days storm 1998 company recorded charge 800 representing insurance deductible 500 related hurricane damage certain costs resulting hurricane recovered companys insurance policies statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands continued 15 valuation qualifying accounts table summarizes activity valuation account allowance possible uncollectible accounts receivable deferred tax asset valuation allowance periods indicated statia terminals canada incorporated subsidiary consolidated financial statements december 31 1998 1999 together report independent certified public accountants report independent certified public accountants board directors statia terminals canada incorporated subsidiary audited accompanying consolidated balance sheets statia terminals canada incorporated nova scotia canada corporation subsidiary december 31 1998 1999 related consolidated statements income loss retained earnings deficit cash flows years ended december 31 1997 1998 1999 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position statia terminals canada incorporated subsidiary december 31 1998 1999 results consolidated operations cash flows years ended december 31 1997 1998 1999 conformity generally accepted accounting principles arthur andersen llp west palm beach florida january 26 2000 statia terminals canada incorporated subsidiary consolidated balance sheets dollars thousands except share amounts accompanying notes integral part financial statements statia terminals canada incorporated subsidiary consolidated statements income loss retained earnings deficit dollars thousands accompanying notes integral part financial statements statia terminals canada incorporated subsidiary consolidated statements cash flows dollars thousands accompanying notes integral part financial statements statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands 1 organization operations consolidated financial statements presented united states dollars include accounts statia terminals canada incorporated nova scotia canada statia canada point tupper marine services limited incorporated nova scotia canada collectively company indirect wholly owned subsidiary statia terminals international nv incorporated netherlands antilles parent wholly owned subsidiary statia terminals group nv incorporated netherlands antilles group significant intercompany balances transactions eliminated company owns operates petroleum blending transshipment storage facilities located near port hawkesbury nova scotia canada companys terminaling services furnished worlds largest producers crude oil integrated oil companies oil refiners traders petrochemical companies addition company provides variety related terminal services including supplying bunker fuels vessels spill response brokering product trades ship services affiliate company provides administrative services company office deerfield beach florida prior january 12 1996 statia terminals point tupper inc incorporated nova scotia canada commonly owned affiliate point tupper marine services limited incorporated nova scotia canada collectively predecessor company subsidiaries statia terminals inc sti wholly owned cbi industries inc cbi january 12 1996 pursuant merger agreement dated december 22 1995 merger cbi became wholly owned subsidiary praxair inc praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 november 27 1996 inception parent acquired praxair outstanding capital stock predecessor company certain affiliates castle harlan acquisition parent formed castle harlan partners ii lp private equity investment fund managed castle harlan inc private merchant bank members management parent others facilitate castle harlan acquisition connection castle harlan acquisition november 27 1996 statia terminals point tupper inc amalgamated statia canada portion adjusted purchase price paid praxair capital stock company 27665 castle harlan acquisition paid primarily funds received statia canada issuance 1134 first mortgage notes described note 4 assets statia canada pledged collateral secure notes castle harlan acquisition accounted purchase method accounting purchase price allocated assets liabilities company based fair value date castle harlan acquisition portion purchase price company allocated intangible assets since fair value tangible assets exceeded purchase price statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued 2 summary significant accounting policies use estimates consolidated financial statements prepared conformity generally accepted accounting principles promulgated united states require management make estimates assumptions affect reported amounts assets liabilities management also required make judgments regarding disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods actual results could differ estimates revenue recognition revenues terminaling operations recognized ratably services provided revenues commissions bunkering services terminalingrelated services bulk product sales recognized time delivery service product december 1999 us securities exchange commission sec issued staff accounting bulletin 101 revenue recognition sab 101 provides guidance recognition presentation disclosure revenue financial statements filed sec sab 101 outlines basic criteria must met recognize revenue provides guidance disclosure related revenue recognition policies company believes revenue recognition practices conformity guidelines prescribed sab 101 foreign currency translation exchange consolidated financial statements include financial statements two canadian entities translated us dollars accordance statement financial accounting standards sfas 52 foreign currency translation assets liabilities translated us dollars year end exchange rates income expense items converted us dollars average rates exchange prevailing year substantially companys transactions denominated us dollars cash equivalents companys excess cash invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued financial instruments company uses various methods assumptions estimate fair value class financial instrument due nature carrying value cash equivalents accounts receivable accounts payable approximates fair value companys financial instruments significant inventory oil products valued lower weighted average cost estimated market value property equipment property equipment stated cost less accumulated depreciation expense computed using straightline method estimated useful lives respective assets additions property equipment replacements betterments major renewals capitalized repair maintenance expenditures materially increase asset values extend useful lives expensed sfas 121 accounting impairment longlived assets longlived assets disposed requires longlived assets certain identifiable intangibles held used entity reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable sfas 121 also requires longlived assets certain identifiable longlived assets disposed reported lower carrying amount fair value less cost sell company continually evaluates factors events circumstances include limited historical projected operating performance specific industry trends general economic conditions assess whether remaining estimated useful lives longlived assets may warrant revision remaining balance longlived assets may recoverable factors events circumstances indicate longlived assets evaluated possible impairment company uses estimate undiscounted cash flow remaining lives longlived assets measuring recoverability company measures asset impairment loss amount carrying amount exceeds fair market value asset noncurrent assets noncurrent assets primarily consist deferred financing costs amounts 937 746 december 31 1998 1999 respectively deferred financing costs related establishing debt obligations amortized ratably life underlying obligation debt cost amortization expense 191 years ended december 31 1997 1998 1999 respectively statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued income taxes company determines tax provision deferred tax balances compliance sfas 109 accounting income taxes approach provision income taxes represents income taxes paid payable current year adjusted change deferred taxes year deferred income tax assets liabilities reflect net tax effects temporary differences financial statement bases tax bases assets liabilities adjusted changes tax rates tax laws changes enacted comprehensive income june 1997 financial accounting standards board fasb issued sfas 130 reporting comprehensive income sfas 130 sfas 130 establishes standards reporting display comprehensive income components financial statements following types items considered computing comprehensive income foreign currency translation adjustments pension liability adjustments unrealized gainloss securities available sale periods presented herein differences net income comprehensive income segment information company discloses information regarding operating segments pursuant sfas 131 disclosures segments enterprise related information sfas 131 sfas 131 establishes standards way public business enterprises report information operating segments annual financial statements requires enterprises report selected information operating segments interim financial reports issued shareholders also establishes standards related disclosures product services geographic areas major customers reclassifications certain reclassifications made 1997 1998 financial statements order conform 1999 presentation statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued 3 property equipment property equipment consisted following december 31 4 debt 11 34 first mortgage notes due november 15 2003 issued parent statia canada issuers november 27 1996 connection castle harlan acquisition pay interest may 15 november 15 year notes redeemable whole part option issuers time november 15 2000 following redemption prices expressed percentages principal amount together accrued unpaid interest thereon redemption date redeemed 12month period beginning november 15 year indicated statia canada may also forego redemption process repurchase notes open market november 15 2000 optional year redemption price 2000 105875 2001 102938 2002 100000 notwithstanding foregoing time prior november 15 1999 issuers allowed redeem repurchase 35 aggregate principal amount notes proceeds one equity offerings plus accrued unpaid interest date redemption repurchase provided giving effect redemption repurchase least 65 aggregate principal amount notes would remain outstanding statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued notes guaranteed full unconditional joint several basis indirect direct active subsidiaries parent statia canada coobligor notes also subject certain financial covenants set forth indenture restrictive include limited following consolidated fixed charge ratio prior four full fiscal quarters least 20 1 met permit statia canada make additional borrowings companys revolving credit facility discussed ii limitations indebtedness iii restrictions certain payments addition notes place restrictions parents ability pay dividends certain circumstances defined indenture except occurrence event default statia canada restrictions upon transfers funds form dividends loans cash advances issuers compliance financial covenants set forth indenture issuers met minimum consolidated fixed charge coverage ratio certain periods would prevented company making additional borrowings revolving credit facility discussed company revolving credit facility credit facility allows company borrow 5000 limit borrowing base defined credit facility credit facility calls commitment fee 0375 per annum portion unused funds credit facility bears interest rate prime plus 05 90 december 31 1999 credit facility constitutes senior indebtedness company secured first priority lien certain companys accounts receivable inventory credit facility subject certain restrictive covenants however subject financial covenants credit facility restrict company transferring funds parent parents subsidiary form dividends loans cash advances however failure pay interest due constitutes event default credit facility event default cured prohibits upstream dividend payments made parent credit facility expires november 27 2000 december 31 1998 1999 company approximately 976 832 respectively available borrowing credit facility limited borrowing base computation outstanding balance 5 income taxes company subject federal large corporation tax based 0225 companys total equity april 1 1997 nova scotia enacted provincial capital tax based 025 companys total equity prorated 01888 1997 calendar year company benefited investment tax credit carryforwards net operating tax losses expire various amounts 2003 2005 respectively net operating tax loss carryforwards available offset canadian taxable income december 31 1998 1999 55097 50891 respectively investment tax credit carryforward available reduce canadian income taxes 7302 7211 december 31 1998 1999 respectively company provided full valuation allowance tax assets resulting net operating tax loss investment tax credit carryforwards certain deferred tax assets utilized future statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued 6 related party transactions wholly owned subsidiary company engages various related party transactions parent subsidiaries unpaid portion transactions included intercompany balance parent subsidiaries directly indirectly allocate certain corporate operating administrative expenses services company including certain legal services risk management tax services employee benefit administration cash management services certain depreciation amortization expenses years ended december 31 1997 1998 1999 2054 2775 3587 respectively incurred services april 28 1999 group completed initial public equity offering 76 million class common shares connection transaction company allocated 1515 administrative expenses 7 commitment contingencies environmental health safety matters connection castle harlan acquisition studies undertaken praxair identify potential environmental health safety matters certain matters involving potential environmental costs identified point tupper nova scotia canada facility praxair agreed pay certain environmental costs subject certain limitations praxair paid approximately 3906 period november 27 1996 december 31 1999 related costs based investigations conducted information available date potential cost additional remediation compliance estimated 13000 substantially company believes responsibility praxair per castle harlan acquisition agreement company believes environmental health safety costs material adverse effect companys financial position cash flows results operations subject reimbursements praxair company also identified certain environmental health safety costs covered agreement praxair 1250 accrued 1996 conjunction castle harlan acquisition december 31 1999 32 amount expended litigation company involved various claims litigation arising normal course business based upon analysis legal matters discussions legal counsel company believes ultimate outcome matters material adverse effect companys financial position cash flows results operations statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued accrued expenses summary accrued expenses consists following december 31 1998 1999 personnel related costs 258 79 professional fees 264 104 environmental expenses 1240 1208 660 186 2422 1577 10 segment information company organized around several different factors significant services products companys primary services products terminaling services resulting revenue storage throughput dock usage emergency response terminal services product sales primary measures profit loss utilized companys management make decisions resources allocated segment earnings interest expense interest income taxes depreciation amortization certain nonrecurring income expenses adjusted ebitda earnings interest expense interest income taxes certain nonrecurring income expenses adjusted ebit statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued following information provided companys terminaling services product sales segments reconciliation adjusted ebit companys income loss provision income taxes follows statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands continued significant customers company presently longterm storage throughput contract subsidiary tosco corporation expires 2004 company also derives revenues affiliate tosco indirect result storage throughput agreement company derives revenues parties unaffiliated tosco movement tosco products companys terminal following table sets forth revenues percentage total revenue year ended december 31 1999 two customers accounted 152 130 companys total revenues respectively customer accounted 10 companys total revenues 1997 1998 1999 although company longstanding relationship longterm contract tosco longterm contract renewed replaced end term company otherwise lost significant portion revenues customer nonrenewalreplacement loss could material adverse effect companys business financial condition company also longterm contracts key customers assurance contracts renewed end terms company able enter longterm contracts terms favorable signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized statia terminals international nv james g cameron james g cameron managing director march 31 2000 james f brenner james f brenner vice president treasurer march 31 2000 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated james g cameron james g cameron managing director principal executive officer march 31 2000 john k castle john k castle managing director march 31 2000 david b pittaway david b pittaway managing director march 31 2000 justin b wender justin b wender managing director march 31 2000 james f brenner james f brenner vice president treasurer principal financial accounting officer march 31 2000 s1 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized statia terminals canada incorporated paul r crissman paul r crissman director president march 31 2000 james f brenner james f brenner vice presidentfinance march 31 2000 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated paul r crissman paul r crissman director president principal executive officer march 31 2000 clarence w brown clarence w brown director march 31 2000 james g cameron james g cameron director march 31 2000 james f brenner james f brenner vice presidentfinance principal financial accounting officer march 31 2000 s2 exhibits index e1 e2 incorporated reference registration statement form s1 dated february 12 1999 amendments thereto filed us securities exchange commission registration statement 33372317 became effective april 26 1999 incorporated reference registration statement statia terminals international nv statia terminals canada incorporated form s4 dated december 20 1996 amendments thereto filed us securities exchange commission registration statement 33318455 became effective february 14 1997 incorporated reference december 31 1996 form 10k statia terminals international nv statia terminals canada incorporated dated may 13 1997 e3 incorporated reference december 31 1997 form 10k statia terminals international nv statia terminals canada incorporated dated march 31 1998 incorporated reference december 31 1998 10k statia terminals international nv statia terminals canada incorporated dated march 31 1999 incorporated reference september 30 1997 form 10q statia terminals international nv statia terminals canada incorporated dated november 14 1997 incorporated reference march 31 1999 form 10q dated may 13 1999 incorporated reference june 30 1999 form 10q dated august 12 1999 incorporated reference september 30 1999 form 10q dated november 15 1999 incorporated reference december 31 1999 form 10k statia terminals group nv dated march 17 2000 e4 item 14 exhibits financial statement schedules reports form 8k 1 financial statements index following consolidated financial statements statia terminals international nv subsidiaries filed response item 8 1998 annual report form 10k statia terminals international nv predecessor statia terminals inc report independent certified public accountants consolidated balance sheets december 31 1997 1998 consolidated statements income loss period january 1 1996 november 27 1996 predecessor period november 27 1996 december 31 years ended december 31 1997 1998 consolidated statements stockholders equity period november 27 1996 december 31 1996 years ended december 31 1997 1998 consolidated statements cash flows period january 1 1996 november 27 1996 predecessor period november 27 1996 december 31 years ended december 31 1997 1998 notes consolidated financial statements statia terminals canada incorporated predecessor statia terminals point tupper inc report independent certified public accountants consolidated balance sheets december 31 1997 1998 consolidated statements income loss retained earnings deficit period january 1 1996 november 27 1996 predecessor period november 27 1996 december 31 1996 years ended december 31 1997 1998 consolidated statements cash flows period january 1 1996 november 27 1996 predecessor period november 27 1996 december 31 years ended december 31 1997 1998 notes consolidated financial statements statia terminals nv report independent certified public accountants consolidated balance sheets december 31 1997 1998 consolidated statements income loss retained earnings deficit period january 1 1996 november 27 1996 predecessor period november 27 1996 december 31 1996 years ended december 31 1997 1998 consolidated statements cash flows period january 1 1996 november 27 1996 predecessor period november 27 1996 december 31 1996 years ended december 31 1997 1998 notes consolidated financial statements 2 financial statement schedules see notes 15 17 consolidated financial statements statia terminals international nv required financial statement schedules 3 exhibits index see exhibits index pages e 1 e 4 following signature pages b reports form 8k none statia terminals international nv subsidiaries consolidated financial statements december 31 1997 1998 together auditors report independent certified public accountants board managing directors statia terminals international nv subsidiaries audited accompanying consolidated balance sheets statia terminals international nv netherlands antilles corporation subsidiaries december 31 1997 1998 related consolidated statements income loss stockholders equity cash flows period inception december 31 1996 years ended december 31 1997 1998 also audited related combined statements income loss stockholders equity cash flows statia terminals inc subsidiaries affiliates predecessor company period january 1 1996 november 27 1996 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position statia terminals international nv subsidiaries december 31 1997 1998 results operations cash flows period inception december 31 1996 years ended december 31 1997 1998 results operations cash flows predecessor company period january 1 1996 november 27 1996 conformity generally accepted accounting principles arthur andersen llp west palm beach florida february 1 1999 statia terminals international nv subsidiaries consolidated balance sheets dollars thousands except share amounts accompanying notes integral part financial statements statia terminals international nv subsidiaries consolidated statements income loss dollars thousands financial statements company predecessor company comparable certain respects see note 1 accompanying notes integral part financial statements statia terminals international nv subsidiaries consolidated statements stockholders equity dollars thousands except share amounts accompanying notes integral part financial statements statia terminals international nv subsidiaries consolidated statements cash flows dollars thousands financial statements company predecessor company comparable certain respects see note 1 continued statia terminals international nv subsidiaries consolidated statements cash flows dollars thousands continued financial statements company predecessor company comparable certain respects see note 1 accompanying notes integral part financial statements statia terminals international nv subsidiaries notes consolidated financial statements dollars thousands except share amounts 1 organization operations statia terminals international nv wholly owned statia terminals group nv parent formed september 4 1996 castle harlan partners ii lp castle harlan private equity investment fund managed castle harlan inc private merchant bank certain members management others commenced operations november 27 1996 inception statia terminals international nv subsidiaries company operate petroleum blending transshipment storage facilities located island st eustatius netherlands antilles point tupper nova scotia canada companys terminaling services furnished many worlds largest producers crude oil integrated oil companies oil traders refiners petrochemical companies ship owners addition storage company provides variety related terminal services including bunkering crude oil petroleum product blending processing emergency spill response subsidiary company provides administrative services company office deerfield beach florida company includes following primary entities collectively statia operations statia terminals international nv statia terminals nv incorporated netherlands antilles statia terminals canada inc incorporated nova scotia canada statia terminals southwest inc incorporated texasthe brownsville facility sold july 1998 see note 13 significant intercompany balances transactions eliminated company formed 1996 acquire capital stock statia terminals inc subsidiaries affiliates predecessor company praxair inc praxair combined statements income loss cash flows january 1 1996 november 27 1996 period ended november 27 1996 included accounts predecessor company predecessor company includes primarily combination following commonly owned companies statia terminals inc incorporated delaware statia terminals nv statia terminals point tupper inc incorporated nova scotia canada statia terminals southwest inc significant intercompany balances transactions eliminated prior january 12 1996 predecessor company wholly owned subsidiary cbi industries inc cbi january 12 1996 pursuant merger agreement dated december 22 1995 merger cbi became wholly owned subsidiary praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 see note 3 november 27 1996 castle harlan members management others acquired praxair outstanding capital stock statia terminals nv statia terminals inc subsidiaries certain affiliates castle harlan acquisition adjusted purchase price castle harlan acquisition totaled approximately 217146 castle harlan acquisition paid part funds received company issuance 135000 11 34 first mortgage notes described note 6 sale companys stock castle harlan acquisition accounted purchase method accounting purchase price allocated assets liabilities company based fair values date castle harlan acquisition statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 2 summary significant accounting policies use estimates consolidated financial statements prepared conformity generally accepted accounting principles promulgated united states require management make estimates assumptions affect reported amounts assets liabilities management also required make judgments regarding disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods actual results could differ estimates revenue recognition revenues terminaling operations recognized ratably services provided revenues commissions bunkering services terminalingrelated services bulk product sales recognized time delivery service product foreign currency translation exchange consolidated financial statements include financial statements foreign subsidiaries affiliates translated accordance statement financial accounting standards sfas 52 foreign currency translation assets liabilities translated us dollars year end exchange rates income expense items converted us dollars average rates exchange prevailing year substantially companys transactions denominated us dollars cash equivalents companys predecessor companys excess cash invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 2 summary significant accounting policies continued financial instruments company uses various methods assumptions estimate fair value class financial instrument due nature carrying value cash equivalents accounts receivable accounts payable approximates fair value company believes historical carrying value notes approximates fair value since notes priced near par value since issuance companys financial instruments significant inventory oil products valued lower weighted average cost estimated market value property equipment property equipment stated cost less accumulated depreciation expense computed using straightline method estimated useful lives respective assets additions property equipment replacements betterments major renewals capitalized repair maintenance expenditures materially increase asset values extend useful lives expensed sfas 121 accounting impairment longlived assets longlived assets disposed requires longlived assets certain identifiable intangibles held used entity reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable sfas 121 also requires longlived assets certain identifiable longlived assets disposed reported lower carrying amount fair value less cost sell company continually evaluates factors events circumstances include limited historical projected operating performance specific industry trends general economic conditions assess whether remaining estimated useful lives longlived assets may warrant revision remaining balance longlived assets may recoverable factors events circumstances indicate longlived assets evaluated possible impairment company uses estimate undiscounted cash flow remaining lives longlived assets measuring recoverability noncurrent assets noncurrent assets primarily consist deferred financing costs 5432 4521 december 31 1997 1998 respectively deferred financing costs related establishing debt obligations amortized ratably life underlying obligation debt cost amortization expense 911 years ended december 31 1997 1998 statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 2 summary significant accounting policies continued income taxes company predecessor company determine tax provision deferred tax balances compliance sfas 109 accounting income taxes approach provision income taxes represents income taxes paid payable current year adjusted change deferred taxes year deferred income tax assets liabilities reflect net tax effects temporary differences financial statement bases tax bases assets liabilities adjusted changes tax rates tax laws changes enacted comprehensive income june 1997 financial accounting standards board fasb issued sfas 130 reporting comprehensive income sfas 130 establishes standards reporting display comprehensive income components financial statements sfas 130 effective fiscal years beginning december 15 1997 reclassification financial statements provided earlier periods comparative purposes required following types items considered computing comprehensive income foreign currency translation adjustments pension liability adjustments unrealized gainloss securities available sale periods presented herein differences net income comprehensive income segment information june 1997 fasb issued sfas 131 disclosures segments enterprise related information sfas 131 establishes standards way public business enterprises report information operating segments annual financial statements requires enterprises report selected information operating segments interim financial reports issued shareholders also establishes standards related disclosures product services geographic areas major customers adoption sfas 131 impact consolidated results operations financial position cash flow reclassifications certain reclassifications made 1996 1997 financial statements order conform 1998 presentation statement stockholders equity predecessor company presented information would comparable company statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 3 praxair purchase accounting discussed note 1 prior january 12 1996 predecessor company wholly owned subsidiary cbi january 12 1996 pursuant merger agreement dated december 22 1995 cbi became wholly owned subsidiary praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 fair value assigned predecessor company merger date 210000 excluding bank borrowings praxair cbi intercompany advance accounts buyout certain offbalancesheet financing merger value allocation merger value assets liabilities acquired based estimated fair value assigned follows merger value 210000 less debt acquired 66000 intercompanyadvance accounts 44000 offbalance sheet obligations 89000 11000 allocation merger value total current assets 17000 property equipment 111000 noncurrent assets 4000 liabilities assumed 121000 11000 addition 10000 praxair debt pushed predecessor companys books effective january 1 1996 debt eliminated connection castle harlan acquisition 4 acquisition discussed note 1 november 27 1996 company acquired praxair outstanding capital stock statia terminals nv statia terminals inc subsidiaries certain affiliates castle harlan acquisition accounted purchase method accounting accordingly purchase price allocated assets liabilities company based respective fair values date castle harlan acquisition assets company date castle harlan acquisition included certain property equipment acquired thirdparty financier praxiar see note 7 portion purchase price company allocated intangible assets since fair value tangible assets exceeded purchase price adjustments made allocated fair values 1997 1998 statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 4 acquisition continued allocation total purchase price assets liabilities acquired follows purchase price cash paid 174146 stock issued 43000 commissions fees expenses 16000 total purchase price 233146 allocation purchase price current assets 19570 property equipment 222907 noncurrent assets 6539 liabilities assumed 15870 total purchase price 233146 5 property equipment property equipment consisted following december 31 pursuant castle harlan acquisition company agreed stockholders sell brownsville facility mv statia responder company reclassified vessel original asset held sale classification property equipment management longer actively seeking buyers vessel mv statia responder still operation revenues costs including depreciation associated operating asset included accompanying financial statements certain parents preferred stock agreements contain features may require statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 5 property equipment continued parent cause company pay dividend otherwise remit net proceeds future sale mv statia responder parent july 29 1998 company sold brownsville facility accordance managements decision actively seek buyers vessel 10000 representing vessels estimated fair value reclassified stockholders equity subject reduction additional paidin capital 6 debt 1134 notes due november 15 2003 issued statia one subsidiaries issuers november 27 1996 connection castle harlan acquisition pay interest may 15 november 15 year notes redeemable whole part option issuers time november 15 2000 following redemption prices expressed percentages principal amount together accrued unpaid interest thereon redemption date redeemed 12month period beginning november 15 year indicated optional year redemption price 2000 105875 2001 102938 2002 100000 notwithstanding foregoing time prior november 15 1999 issuers may redeem 35 aggregate principal amount notes proceeds one equity offerings defined indenture notes redemption price equal 11175 principal amount thereof plus accrued unpaid interest date redemption provided giving effect redemption least 65 aggregate principal amount notes remains outstanding see note 16 notes guaranteed full unconditional joint several basis indirect direct active subsidiaries statia notes also subject certain financial covenants set forth indenture restrictive include limited following consolidated fixed charge coverage ratio prior four full fiscal quarters least 201 met permit company make additional borrowings companys revolving credit facility discussed ii limitations indebtedness iii restrictions certain payments addition notes place restrictions companys ability pay dividends distributions proceeds assets held sale discussed certain management fees discussed note 10 except occurrence event default subsidiaries statia restrictions upon transfers funds form dividends loans cash advances issuers compliance financial covenants set forth indenture statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 6 debt continued company revolving credit facility credit facility allows company borrow 17500 limit borrowing base defined credit facility credit facility calls commitment fee 0375 per annum portion unused funds credit facility bears interest rate prime plus 05 825 december 31 1998 credit facility constitutes senior indebtedness company secured first priority lien certain companys accounts receivable inventory credit facility subject certain restrictive covenants however subject financial covenants credit facility restrict statias subsidiaries transferring funds statia form dividends loans cash advances however failure pay interest due constitutes event default credit facility event default cured prohibits upstream dividend payments made statia credit facility expires november 27 1999 december 31 1997 1998 company approximately 8058 7982 respectively available borrowing credit facility limited borrowing base computation outstanding balance 7 leases company predecessor company rent certain facilities land marine equipment cancelable noncancelable operating leases rental expense operating leases 13854 9870 including 4270 recognition lease residual value guarantee relates lease described 491 3763 3409 period ended november 27 1996 period ended december 31 1996 year ended december 31 1997 year ended december 31 1998 respectively future rental commitments years ending 1999 2003 3619 2569 2504 2518 837 respectively november 17 1993 statia terminals nv subsidiary entered agreement thirdparty financier first salute leasing lp pursuant portion land st eustatius leased third party purpose construction operation five million barrels crude oil storage tanks single point mooring system statia terminals nv acted agent third party regard construction facilities statia terminals nv leased facility third party minimum period five years beginning february 1 1995 aggregate construction cost incurred leased assets totaled 88513 completion initial five year term statia terminals nv option extend lease purchase facility lessor arrange leased properties sold third party event purchase sale properties statia terminals nv obligated lessor shortfall purchase sales price lease residual value guarantee connection castle harlan acquisition praxair terminated first salute leasing lp offbalancesheet financing arrangement paid full obligations related lease statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 8 shareholders equity predecessor company january 10 1996 statia terminals nv declared dividends 25000 payable january 11 1996 shareholders record january 10 1996 dividends paid affiliates cbi october 22 1993 march 15 1994 statia terminals point tupper inc issued 14689 shares 10311 shares respectively first preferred stock canadian affiliate cbi exchange aggregate contribution cdn 25000 18577 first preferred stock nonvoting cumulative redeemable option either issuer holder preferred dividends accrued paid quarterly rate 025 preferred shareholders borrowing rate established shareholders lending institution period ended november 27 1996 statia terminals point tupper inc accrued paid dividends 792 first preferred shareholders preference upon liquidation classes preferred shareholders well common shareholders preferred stock retired conjunction castle harlan acquisition company years ended december 31 1997 1998 company paid dividends parent 2700 1500 respectively proceeds dividends used parent pay certain management fees discussed note 11 9 income taxes sources income loss jurisdiction provision income taxes preferred stock dividends statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 9 income taxes continued provision income taxes consisted components deferred income tax provision relate primarily book versus tax differences computing depreciation expense reconciliation income taxes us statutory rate 35 companys provision income taxes follows statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 9 income taxes continued 1996 companys effective tax rate exceeds foreign tax statutory rates result canadian large corporation tax losses incurred certain subsidiaries company recognized benefit principal temporary differences included balance sheets net effective tax rates company december 31 december 31 1997 1998 net operating loss itc carryforwards 30054 28080 valuation allowance 30054 28080 companys net deferred tax assets primarily relate canadian investment tax credits net operating loss carryforwards company provided full valuation allowance tax assets certain deferred tax assets utilized future companys canadian subsidiaries subject federal large corporation tax based 0225 subsidiaries total equity april 1 1997 nova scotia enacted provincial capital tax based 025 subsidiaries total equity prorated 01888 1997 calendar year companys canadian subsidiaries benefited net operating tax loss investment tax credit carryforwards expire various amounts 2005 2003 respectively net operating tax loss carryforwards available offset canadian taxable income december 31 1997 1998 59483 55097 respectively investment tax credit carryforward available reduce canadian income taxes 7302 december 31 1997 1998 june 1 1989 governments netherlands antilles st eustatius approved free zone profit tax agreement retroactive january 1 1989 concluding december 31 2000 agreement requires subsidiary company pay 2 rate taxable income defined minimum payment 500 netherlands antilles guilders 282 agreement provides amounts paid order meet minimum annual payment available offset future tax liabilities agreement extent minimum annual payment greater 2 taxable income december 31 1998 amount available offset future tax liability agreement approximately 1412 currently subsidiary negotiating new agreement governments netherlands antilles st eustatius effective january 1 1998 december 31 2010 extension provisions 2015 certain companys netherlands antilles subsidiaries part free zone profit tax agreement accordingly pay netherlands antilles federal income tax effective tax rate 45 approximately 67 28 profit tax included netherlands antilles tax provision periods ended december 31 1997 december 31 1998 respectively statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 10 related party transactions prior november 27 1996 predecessor company engaged various relatedparty transactions praxair cbi affiliates advances consisted principally funds loaned praxaircbi disbursements debt service dividends offset transfer predecessor companys excess cash advances noninterestbearing specified maturity date statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 10 related party transactions continued predecessor company regularly contracted affiliates cbi construction expansion facilities certain repair maintenance work period ended november 27 1996 4828 paid praxair cbi affiliates activities related property equipment possible determine whether results operations financial position predecessor company would significantly different predecessor company contracted independent third parties construction expansion repair maintenance needs praxair cbi directly allocated certain corporate administrative services predecessor company including certain legal services risk management tax advice return preparation employee benefit administration cash management services period ended november 27 1996 138 paid direct indirect administrative services intercompany balances owed praxair cbi affiliates fully paid connection acquisition parent entered tenyear management agreement castle harlan inc pay annual management fee 1350 plus outofpocket expenses advisory strategic planning services subject certain conditions event net proceeds sale mv statia responder exceed specified threshold castle harlan inc may entitled payment 1000 agreement terminates upon change control 1997 1998 statia declared paid dividends parent 2700 1500 respectively cover management fee related expenses periods november 27 1996 november 27 1998 november 27 1998 november 27 1999 respectively 11 commitments contingencies environmental health safety matters connection castle harlan acquisition studies undertaken praxair identify potential environmental health safety matters certain matters involving potential environmental costs identified point tupper nova scotia canada facility praxair agreed pay certain environmental costs subject certain limitations praxair paid approximately 2300 period november 27 1996 december 31 1998 related costs based investigations conducted information available date potential cost additional remediation compliance estimated 10000 substantially company believes responsibility praxair per castle harlan acquisition agreement company also identified certain environmental health safety costs covered agreement praxair 1500 accrued 1996 10 expended december 31 1998 company believes environmental health safety costs subject reimbursements praxair material adverse effect companys financial position cash flows results operations statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 11 commitments contingencies continued litigation global petroleum corp global brought action company december 1993 supreme court nova scotia seeking release certain petroleum products owned global company holding secure payment certain invoices global secured release products posting 2000 bond global claims damages 1200 breach contract company counterclaimed breach contract payment approximately 2000 unpaid invoices product storage service april 1996 global scotia synfuels limited related companies brought suit cbi company supreme court nova scotia alleging damages amount 100000 resulting misrepresentation fraud breach fiduciary duty associated reactivation point tupper facility sale shares point tupper terminals company predecessor statia canada affiliate company cbi may 1994 us department justice brought action us district court district virgin islands statia terminals inc statia terminals nv 3600 pollution cleanup costs connection discharge oil territorial waters us virgin islands puerto rico barge loaded statia terminals nv st eustatius affiliated company april 16 1998 us district court ruled lacked jurisdiction statia terminals nv dismissed case company believes allegations made proceedings factually inaccurate intends vigorously contest claims connection castle harlan acquisition praxair agreed indemnify company damages relating foregoing proceedings estimates reasonably made ultimate liability time company believes ultimate outcome proceedings material adverse effect companys business financial condition results operations company involved various claims litigation arising normal course business based upon analysis legal matters discussions legal counsel company believes ultimate outcome matters material adverse effect companys financial position cash flows results operations accrued expenses summary accrued expenses consists following december 31 1997 1998 personnel related costs 2296 2835 professional fees 1079 1175 environmental expenses 1500 1490 2712 2939 7587 8439 statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 12 segment information company organized around several different factors significant products services geographic location companys primary products services bunker bulk product sales terminaling services consisting storage throughput dock charges emergency response fees terminal charges primary measures profit loss utilized companys management make decisions resources allocated division earnings interest taxes depreciation amortization certain unallocated profits losses internal ebitda earnings interest taxes certain unallocated profits losses internal ebit following information provided companys bunker bulk products sales terminaling services segments statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 12 segment information continued december 31 1997 1998 assets terminaling services 220591 208642 bunker bulk product sales 8964 12058 unallocated assets 14673 22478 244228 243178 reconciliation internal ebit companys income loss provision income taxes preferred stock dividends follows following information provided respect geographic operations company statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 12 segment information continued december 31 1997 1998 longterm assets caribbean 185702 183873 canada 29826 29170 united states 8662 1672 224190 214715 significant customers company presently long term storage throughput contracts bolanter corporation nv affiliate saudi aramco subsidiary tosco corporation expire 2000 1999 respectively company also derives revenues parties unaffiliated either saudi aramco tosco movement saudi aramco tosco products companys terminals additionally company sells bunker fuels another affiliate saudi aramco st eustatius facility following table sets forth revenues percentage total revenue although company longstanding relationships longterm contracts customers longterm contracts renewed replaced end terms company otherwise lost significant portion revenues two customers nonrenewalreplacement loss could material adverse effect companys business financial condition ability pay dividends company also longterm contracts key statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 12 segment information continued customers assurance contracts renewed end terms company able enter longterm contracts terms favorable customer accounted 10 predecessor companys total revenues 1996 1997 1998 13 loss sale statia terminals southwest inc july 29 1998 company sold statia terminals southwest inc southwest 6500 cash resulting net proceeds approximately 6150 company retained certain preclosing assets liabilities southwest consisting primarily accounts receivable accrued expenses agreed indemnify purchaser certain contingent legal environmental matters maximum 500 july 29 1999 provision made companys financial statements contingent matters management believes probable company ever required provide indemnification net book value assets liabilities sold july 29 1998 7802 loss disposition southwest 1652 included gain loss sale property equipment since substantially value southwest originally recorded account company acquired conjunction sale southwest 10000 representing original estimated fair value facility reclassified stockholders equity subject reduction additional paidin capital restricted payment 6150 representing net proceeds sale southwest made parent used parent redeem portion series preferred stock 14 retirement plans predecessor company united states citizens predecessor company participated defined benefit plan certain contributory plans employee stock ownership plan plans sponsored cbipraxair predecessor company paid cbi proportionate share contributions plans amounting 246 period ended november 27 1996 result castle harlan acquisition companys participation plans ceased addition certain foreign nationals residing netherlands antilles predecessor company sponsored government guaranteed pension plan company maintains employee savings plan accordance section 401k internal revenue code plan covers companys fulltime us employees allows employees contribute lesser 15 eligible compensation 9500 1998 calendar year company currently matches 50 rate 8 employees base salary employer may contribute discretionary basis 1 employees base salary per quarter amounts charged statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 14 retirement plans continued expense matching discretionary contributions year ended december 31 1998 136 178 respectively addition certain employees residing netherlands antilles canada company sponsors certain pension plans amounts charged expense plans significant 15 valuation qualifying accounts table summarizes activity accounts receivable valuation account periods indicated 16 subsequent event unaudited february 12 1999 parent filed documents securities exchange commission sell 76 million common shares exclusive allotment option available underwriters additional 760000 shares initial equity public offering price expected 1950 2050 per share raising gross proceeds approximately 152000 approximately 167000 allotment option fully exercised portion proceeds offering used redeem approximately 25 approximately 35 allotment option fully exercised 1134 notes coissued statia terminals canada incorporated statia terminals international nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 17 condensed combining financial statements jurisdiction notes guaranteed full unconditional joint several basis indirect direct active subsidiaries statia terminals canada incorporated coobligor notes subsidiary guarantors directly indirectly wholly owned statia company certain inactive nonguaranteeing subsidiaries inconsequential individually aggregate assets liabilities operations process dissolved company following condensed combining financial data illustrates composition companys subsidiary guarantors combined jurisdiction enforceability guarantees may affected differently laws applicable jurisdictions separate financial statements subsidiaries statia terminals canada incorporated statia terminals nv presented management company determined material investors quarter ended september 30 1998 result sale southwest company liquidated subsidiary statia delaware holdco ii inc holdco parent company southwest statia terminals new jersey inc new jersey companys investment new jersey transferred another subsidiary statia terminals delaware inc remaining balances holdco transferred parent company statia holdco included consolidation united states entities statia terminals international nv subsidiaries notes consolidated financial statements december 31 1997 1998 condensed combining balance sheet december 31 1997 dollars thousands statia terminals international nv subsidiaries notes consolidated financial statements december 31 1997 1998 condensed combining balance sheet december 31 1998 dollars thousands statia terminals international nv subsidiaries notes consolidated financial statements december 31 1997 1998 dollars thousands condensed combining income statement period january 1 1996 november 27 1996 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1997 1998 dollars thousands condensed combining income statement period november 27 1996 december 31 1996 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1997 1998 dollars thousands condensed combining income statement year ended december 31 1997 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1997 1998 dollars thousands condensed combining income statement year ended december 31 1998 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1997 1998 dollars thousands condensed combining statement cash flows period january 1 1996 november 27 1996 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1997 1998 dollars thousands condensed combining statement cash flows period november 27 1996 december 31 1996 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1997 1998 dollars thousands condensed combining statement cash flows year ended december 31 1997 statia terminals international nv subsidiaries notes consolidated financial statements december 31 1997 1998 dollars thousands condensed combining statement cash flows year ended december 31 1998 statia terminals nv subsidiaries consolidated financial statements december 31 1997 1998 together auditors report independent certified public accountants board managing directors statia terminals nv subsidiaries audited accompanying consolidated balance sheets statia terminals nv netherlands antilles corporation subsidiaries december 31 1997 1998 related consolidated statements income loss retained earnings deficit cash flows period inception december 31 1996 years ended december 31 1997 1998 also audited related consolidated statements income retained earnings deficit cash flows period january 1 1996 november 27 1996 statia terminals nv old statia terminals nv predecessor company financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position statia terminals nv december 31 1997 1998 results operations cash flows period inception december 31 1996 years ended december 31 1997 1998 results predecessor companys operations cash flows period january 1 1996 november 27 1996 conformity generally accepted accounting principles arthur andersen llp west palm beach florida february 1 1999 statia terminals nv subsidiaries consolidated balance sheets dollars thousands except share amounts accompanying notes integral part financial statements statia terminals nv subsidiaries consolidated statements income loss retained earnings deficit dollars thousands financial statements company predecessor company comparable certain respects see note 1 accompanying notes integral part financial statements statia terminals nv subsidiaries consolidated statements cash flows dollars thousands financial statements company predecessor company comparable certain respects see note 1 continued accompanying notes integral part financial statements statia terminals nv subsidiaries consolidated statements cash flows dollars thousands continued financial statements company predecessor company comparable certain respects see note 1 accompanying notes integral part financial statements statia terminals nv subsidiaries notes consolidated financial statements dollars thousands except share amounts 1 organization operations consolidated balance sheets december 31 1997 1998 consolidated statements income loss retained earnings deficit cash flows years ended december 31 1997 1998 period inception december 31 1996 include accounts statia terminals nv incorporated netherlands antilles wholly owned subsidiaries statia laboratory services nv statia tugs nv incorporated netherlands antilles collectively company indirect wholly owned subsidiary statia terminals international nv parent incorporated netherlands antilles consolidated statements income loss retained earnings deficit cash flows period january 1 1996 november 27 1996 period ended november 27 1996 include accounts statia terminals nv incorporated netherlands antilles wholly owned subsidiaries statia laboratory services nv statia tugs nv statia shipping nv incorporated netherlands antilles collectively predecessor company statia tugs nv statia shipping nv dormant significant intercompany balances transactions eliminated consolidated financial statements presented united states dollars company predecessor company operate petroleum blending transshipment storage facilities located island st eustatius netherlands antilles companys terminaling services furnished worlds largest producers crude oil integrated oil companies oil refiners traders petrochemical companies addition company predecessor company provide variety related terminal services including supplying bunker fuels vessels spill response brokering product trades ship services affiliate company provides administrative services company office deerfield beach florida prior january 12 1996 predecessor company wholly owned subsidiary cbi industries inc cbi january 12 1996 pursuant merger agreement dated december 22 1995 merger cbi became wholly owned subsidiary praxair inc praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 1 organization operations continued november 27 1996 inception parent acquired praxair outstanding capital stock predecessor company certain subsidiaries affiliates acquisition parent newly organized company formed castle harlan partners ii lp private equity investment fund managed castle harlan inc private merchant bank members management parent others portion adjusted purchase price paid praxair capital stock company 174921 acquisition paid primarily funds received company issuance 1134 first mortgage notes described note 6 assets company pledged collateral secure notes acquisition accounted purchase method accounting purchase price allocated assets liabilities company based fair value date acquisition related application purchase accounting note 4 resulted changes capital structure predecessor company historical cost basis various assets liabilities effect changes significantly impairs comparability financial position results operations company predecessor company periods 2 summary significant accounting policies use estimates consolidated financial statements prepared conformity generally accepted accounting principles promulgated united states require management make estimates assumptions affect reported amounts assets liabilities management also required make judgments regarding disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods actual results could differ estimates revenue recognition revenues terminaling operations recognized ratably services provided revenues commissions bunkering services terminalingrelated services bulk product sales recognized time delivery service product statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 2 summary significant accounting policies continued foreign currency translation exchange consolidated financial statements include financial statements nonus entities translated us dollars accordance statement financial accounting standards sfas 52 foreign currency translation assets liabilities translated us dollars year end exchange rates income expense items converted us dollars average rates exchange prevailing year substantially companys transactions denominated us dollars cash equivalents companys predecessor companys excess cash invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents financial instruments company uses various methods assumptions estimate fair value class financial instrument due nature carrying value cash equivalents accounts receivable accounts payable approximates fair value company believes historical carrying value notes approximates fair value since notes priced near par value since issuance companys financial instruments significant inventory oil products valued lower weighted average cost estimated market value property equipment property equipment stated cost less accumulated depreciation expense computed using straightline method estimated useful lives respective assets additions property equipment replacements betterments major renewals capitalized repair maintenance expenditures materially increase asset values extend useful lives expensed statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 2 summary significant accounting policies continued sfas 121 accounting impairment longlived assets longlived assets disposed requires longlived assets certain identifiable intangibles held used entity reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable sfas 121 also requires longlived assets certain identifiable longlived assets disposed reported lower carrying amount fair value less cost sell company continually evaluates factors events circumstances include limited historical projected operating performance specific industry trends general economic conditions assess whether remaining estimated useful lives longlived assets may warrant revision remaining balance longlived assets may recoverable factors events circumstances indicate longlived assets evaluated possible impairment company uses estimate undiscounted cash flow remaining lives longlived assets measuring recoverability noncurrent assets noncurrent assets primarily consist deferred financing costs 4304 3583 december 31 1997 1998 respectively deferred financing costs related establishing debt obligations amortized ratably life underlying obligation debt cost amortization expense included interest expense accompanying consolidated statements income loss 720 years ended december 31 1997 1998 income taxes company predecessor company determine tax provision deferred tax balances compliance sfas 109 accounting income taxes approach provision income taxes represents income taxes paid payable current year adjusted change deferred taxes year deferred income tax assets liabilities reflect net tax effects temporary differences financial statement bases tax bases assets liabilities adjusted changes tax rates tax laws changes enacted statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 2 summary significant accounting policies continued comprehensive income june 1997 financial accounting standards board fasb issued sfas 130 reporting comprehensive income sfas 130 establishes standards reporting display comprehensive income components financial statements sfas 130 effective fiscal years beginning december 15 1997 reclassification financial statements provided earlier periods comparative purposes required following types items considered computing comprehensive income foreign currency translation adjustments pension liability adjustments unrealized gainloss securities available sale periods presented herein differences net income comprehensive income segment information june 1997 fasb issued sfas 131 disclosures segments enterprise related information sfas 131 establishes standards way public business enterprises report information operating segments annual financial statements requires enterprises report selected information operating segments interim financial reports issued shareholders also establishes standards related disclosures products services geographic areas major customers adoption sfas 131 impact consolidated results operations financial position cash flow reclassifications certain reclassifications made 1996 1997 financial statements order conform 1998 presentation 3 praxair purchase accounting discussed note 1 prior january 12 1996 predecessor company wholly owned subsidiary cbi january 12 1996 pursuant merger agreement dated december 22 1995 cbi became wholly owned subsidiary praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 fair value assigned predecessor company merger date 179000 excluding bank borrowings praxair cbi intercompany advance accounts buyout certain offbalancesheet financing merger value statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 3 praxair purchase accounting continued allocation merger value assets liabilities acquired based estimated fair value assigned follows merger value 179000 less intercompanyadvance accounts 13000 offbalance sheet obligations 89000 77000 allocation merger value total current assets 15000 property equipment 79000 noncurrent assets 2000 liabilities assumed 19000 77000 addition 10000 praxair debt pushed predecessor companys books effective january 1 1996 debt eliminated connection castle harlan acquisition 4 acquisition discussed note 1 november 27 1996 company acquired praxair outstanding capital stock company castle harlan acquisition accounted purchase method accounting accordingly purchase price allocated assets liabilities company based respective fair values date castle harlan acquisition assets company date castle harlan acquisition included certain property equipment acquired thirdparty financier praxiar see note 7 portion purchase price company allocated intangible assets since fair value tangible assets exceeded purchase price subsequent adjustments made allocated fair values statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 4 acquisition continued allocation total purchase price assets liabilities acquired follows purchase price common stock assets 174921 commissions fees expenses 12673 total purchase price 187594 allocation purchase price current assets 15825 property equipment 179839 noncurrent assets 5091 liabilities assumed 13161 total purchase price 187594 5 property equipment property equipment consisted following december 31 statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 5 property equipment continued pursuant castle harlan acquisition company agreed stockholders sell emergency spill response vessel mv statia responder company reclassified vessel original asset held sale classification property equipment management longer actively seeking buyers vessel mv statia responder still operation revenues costs including depreciation associated operating asset included accompanying financial statements certain statia terminals group nvs preferred stock agreements contain features may require parent cause company pay dividend otherwise remit net proceeds future sale mv statia responder parent accordance managements decision actively seek buyers vessel 10000 representing vessels estimated fair value reclassified stockholders equity subject reduction additional paidin capital 6 debt 1134 notes due november 15 2003 issued parent one subsidiaries issuers november 27 1996 connection castle harlan acquisition pay interest may 15 november 15 year notes redeemable whole part option issuers time november 15 2000 following redemption prices expressed percentages principal amount together accrued unpaid interest thereon redemption date redeemed 12month period beginning november 15 year indicated optional year redemption price 2000 105875 2001 102938 2002 100000 notwithstanding foregoing time prior november 15 1999 issuers may redeem 35 aggregate principal amount notes proceeds one equity offerings defined indenture notes redemption price equal 11175 principal amount thereof plus accrued unpaid interest date redemption provided giving effect redemption least 65 aggregate principal amount notes remains outstanding see note 14 statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 6 debt continued notes guaranteed full unconditional joint several basis indirect direct active subsidiaries parent notes also subject certain financial covenants set forth indenture restrictive include limited following consolidated fixed charge coverage ratio prior four full fiscal quarters least 201 met permit company make additional borrowings companys revolving credit facility discussed ii limitations indebtedness iii restrictions certain payments addition notes place restrictions parents ability pay dividends distributions proceeds assets held sale discussed certain management fees except occurrence event default subsidiaries company restrictions upon transfers funds form dividends loans cash advances issuers compliance financial covenants set forth indenture company revolving credit facility credit facility allows company borrow 12500 limit borrowing base defined credit facility credit facility calls commitment fee 0375 per annum portion unused funds credit facility bears interest rate prime plus 05 825 december 31 1998 credit facility constitutes senior indebtedness company secured first priority lien certain companys accounts receivable inventory credit facility subject certain restrictive covenants however subject financial covenants credit facility restrict companys subsidiaries transferring funds parent form dividends loans cash advances however failure pay interest due constitutes event default credit facility event default cured prohibits upstream dividend payments made parent credit facility expires november 27 1999 december 31 1997 1998 company approximately 7599 7006 respectively available borrowing credit facility limited borrowing base computation outstanding balance 7 leases company predecessor company rent certain facilities land marine equipment cancelable noncancelable operating leases rental expense operating leases 13421 9870 including 4270 recognition lease residual value guarantee relates lease described 363 3763 2918 period ended november 27 1996 period ended december 31 1996 year ended december 31 1997 year ended december 31 1998 respectively future rental commitments years ending 1999 2003 3268 2226 2195 2239 558 respectively statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 7 leases continued november 17 1993 company entered agreement thirdparty financier first salute leasing lp pursuant portion land st eustatius leased third party purpose construction operation five million barrels crude oil storage tanks single point mooring system company acted agent third party regard construction facilities company leased facility third party minimum period five years beginning february 1 1995 aggregate construction cost incurred leased assets totaled 88513 completion initial five year term company option extend lease purchase facility lessor arrange leased properties sold third party event purchase sale properties company obligated lessor shortfall purchase sales price lease residual value guarantee connection castle harlan acquisition praxair terminated first salute leasing lp offbalancesheet financing arrangement paid full obligations related lease 8 shareholders equity predecessor company january 10 1996 statia terminals nv declared dividends 25000 payable january 11 1996 shareholders record january 10 1996 dividends paid affiliates cbi company years ended december 31 1997 1998 company paid dividends parent statia terminals corporation nv 527 1500 respectively 9 income taxes june 1 1989 governments netherlands antilles st eustatius approved free zone profit tax agreement retroactive january 1 1989 concluding december 31 2000 agreement requires company pay 2 rate taxable income defined minimum payment 500 netherlands antilles guilders 282 agreement provides amounts paid order meet minimum annual payment available offset future tax liabilities agreement extent minimum annual payment greater 2 taxable income december 31 1998 amount available offset future tax liability agreement approximately 1412 currently company negotiating new agreement governments netherlands antilles st eustatius effective january 1 1998 december 31 2010 extension provisions 2015 statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 10 relatedparty transactions predecessor company predecessor company engaged various relatedparty transactions sti affiliates sti allocated certain corporate operating administrative services predecessor company including certain legal services risk management tax services return preparation employee benefit administration cash management services period ended november 27 1996 2831 paid direct indirect services intercompany balances owed praxair affiliates settled result castle harlan acquisition company wholly owned subsidiary company engages various relatedparty transactions parent subsidiaries unpaid portion transactions included intercompany balance parent subsidiaries directly indirectly allocate certain corporate operating administrative expenses services company including certain legal services risk management tax services employee benefit administration cash management services certain depreciation amortization expenses period ended december 31 1996 years ended december 31 1997 1998 1805 3273 4096 respectively paid services 11 commitments contingencies litigation may 1994 us department justice brought action us district court district virgin islands sti company 3600 pollution cleanup costs connection discharge oil territorial waters us virgin islands puerto rico barge loaded company st eustatius affiliated company april 16 1998 us district court ruled lacked jurisdiction company dismissed case statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 11 commitments contingencies continued company believes allegations made proceedings factually inaccurate intends vigorously contest claims connection castle harlan acquisition praxair agreed indemnify company damages relating foregoing proceedings estimates reasonably made ultimate liability time company believes ultimate outcome proceedings material adverse effect companys financial position results operations company involved various claims litigation arising normal course business based upon analysis legal matters discussions legal counsel company believes ultimate outcome matters material adverse effect companys financial position cash flows results operations accrued expenses summary accrued expenses consists following december 31 1997 1998 personnel related costs 1522 1156 professional fees 515 633 1031 2972 3068 4761 12 segment information company organized around several different factors significant products services geographic location companys primary products services bunker bulk product sales terminaling services consisting storage throughput dock charges emergency response fees terminal charges statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 12 segment information continued primary measures profit loss utilized companys management make decisions resources allocated division earnings interest taxes depreciation amortization certain unallocated profits losses internal ebitda earnings interest taxes certain unallocated profits losses internal ebit depreciation amortization expenses included internal ebit include certain amounts allocated entities related company following information provided companys bunker bulk products sales terminaling services segments statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 12 segment information continued december 31 1997 1998 assets terminaling services 180175 176525 bunker bulk product sales 8431 11589 unallocated assets 10036 13637 198642 201751 reconciliation internal ebit companys income loss provision income taxes preferred stock dividends follows significant customers company presently long term storage throughput contract bolanter corporation nv affiliate saudi aramco expires 2000 company also derives terminaling services revenues parties unaffiliated saudi aramco movement saudi aramco products companys terminal additionally company sells bunker fuels another affiliate saudi aramco companys facility statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 12 segment information continued following table sets forth revenues percentage total revenue although company longstanding relationship longterm contract bolanter corporation nv longterm contract renewed replaced end term company otherwise lost significant portion revenues customer nonrenewalreplacement loss could material adverse effect companys business financial condition ability pay dividends company also longterm contracts key customers assurance contracts renewed end terms company able enter longterm contracts terms favorable 13 retirement plan company sponsors government guaranteed pension plan certain employees residing netherlands antilles amounts charged expense plan significant statia terminals nv subsidiaries notes consolidated financial statements continued dollars thousands except share amounts 14 subsequent event unaudited february 12 1999 statia terminals group nv sole stockholder parent filed documents securities exchange commission sell 76 million common shares exclusive allotment option available underwriters additional 760000 shares initial equity public offering price expected 1950 2050 per share raising gross proceeds approximately 152000 approximately 167000 allotment option fully exercised portion proceeds offering used redeem approximately 25 approximately 35 allotment option fully exercised 1134 notes coissued parent statia terminals canada incorporated statia terminals canada incorporated subsidiary consolidated financial statements december 31 1997 1998 together auditors report independent certified public accountants board directors statia terminals canada incorporated subsidiary audited accompanying consolidated balance sheets statia terminals canada incorporated nova scotia canada corporation subsidiary december 31 1997 1998 related consolidated statements income loss retained earnings deficit cash flows period inception december 31 1996 years ended december 31 1997 1998 also audited related combined statements income loss retained earnings deficit cash flows period january 1 1996 november 27 1996 statia terminals point tupper inc affiliate predecessor company financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position statia terminals canada incorporated subsidiary december 31 1997 1998 results operations cash flows period inception december 31 1996 years ended december 31 1997 1998 results predecessors operations cash flows period january 1 1996 november 27 1996 conformity generally accepted accounting principles arthur andersen llp west palm beach florida february 1 1999 statia terminals canada incorporated subsidiary consolidated balance sheets dollars thousands accompanying notes integral part financial statements statia terminals canada incorporated subsidiary consolidated statements income loss retained earnings deficit dollars thousands financial statements company predecessor company comparable certain respects see note 1 accompanying notes integral part financial statements statia terminals canada incorporated subsidiary consolidated statements cash flows dollars thousands financial statements company predecessor company comparable certain respects see note 1 continued accompanying notes integral part financial statements statia terminals canada incorporated subsidiary consolidated statements cash flows dollars thousands financial statements company predecessor company comparable certain respects see note 1 continued accompanying notes integral part financial statements statia terminals canada incorporated subsidiary notes consolidated financial statements dollars thousands except share amounts 1 organization operations consolidated balance sheets december 31 1997 1998 consolidated statements income loss retained earnings deficit cash flows years ended december 31 1997 1998 period inception december 31 1996 include accounts statia terminals canada incorporated nova scotia canada point tupper marine services limited incorporated nova scotia canada collectively company indirect wholly owned subsidiary statia terminals international nv parent incorporated netherlands antilles combined statements income loss retained earnings deficit cash flows period january 1 1996 november 27 1996 period ended november 27 1996 include accounts statia terminals point tupper inc incorporated nova scotia canada commonly owned affiliate point tupper marine services limited incorporated nova scotia canada collectively predecessor company significant intercompany balances transactions eliminated financial statements presented united states dollars company predecessor company operate petroleum blending transshipment storage facilities located near port hawkesbury nova scotia canada companys terminaling services furnished worlds largest producers crude oil integrated oil companies oil refiners traders petrochemical companies addition company predecessor company provide variety related terminal services including supplying bunker fuels vessels spill response brokering product trades ship services affiliate company provides administrative services company office deerfield beach florida prior january 12 1996 predecessor company wholly owned subsidiary statia terminals inc sti wholly owned cbi industries inc cbi january 12 1996 pursuant merger agreement dated december 22 1995 merger cbi became wholly owned subsidiary praxair inc praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 statia terminals canada incorporated subsidiary notes consolidated financial statements continued dollars thousands except share amounts 1 organization operations continued november 27 1996 inception parent acquired praxair outstanding capital stock predecessor company certain affiliate acquisition parent newly organized company formed castle harlan partners ii lp private equity investment fund managed castle harlan inc private merchant bank members management parent others connection acquisition november 27 1996 predecessor company amalgamated company portion adjusted purchase price paid praxair capital stock company 27665 acquisition paid primarily funds received company issuance 1134 first mortgage notes described note 6 assets company pledged collateral secure notes acquisition accounted purchase method accounting purchase price allocated assets liabilities company based fair value date acquisition related application purchase accounting note 4 resulted changes capital structure predecessor company historical cost basis various assets liabilities effect changes significantly impairs comparability financial position results operations company predecessor company periods 2 summary significant accounting policies use estimates consolidated financial statements prepared conformity generally accepted accounting principles promulgated united states require management make estimates assumptions affect reported amounts assets liabilities management also required make judgments regarding disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods actual results could differ estimates revenue recognition revenues terminaling operations recognized ratably services provided revenues commissions bunkering services terminaling related services bulk product sales recognized time delivery service product statia terminals canada incorporated subsidiary notes consolidated financial statements continued dollars thousands except share amounts 2 summary significant accounting policies continued foreign currency translation exchange consolidated financial statements include financial statements two canadian entities translated us dollars accordance statement financial accounting standards sfas 52 foreign currency translation assets liabilities translated us dollars year end exchange rates income expense items converted us dollars average rates exchange prevailing year substantially companys predecessors transactions denominated us dollars cash equivalents companys predecessor companys excess cash invested shortterm highly liquid investments maturities three months less shortterm investments carried cost approximates market classified cash equivalents financial instruments company uses various methods assumptions estimate fair value class financial instrument due nature carrying values cash equivalents accounts receivable accounts payable approximate fair value company believes historical carrying value notes approximates fair value since notes priced near par value since issuance companys financial instruments significant inventory oil products valued lower weighted average cost estimated market value property equipment property equipment stated cost less accumulated depreciation expense computed using straightline method estimated useful lives respective assets additions property equipment replacements betterments major renewals capitalized repair maintenance expenditures materially increase asset values extend useful lives expensed statia terminals canada incorporated subsidiary notes consolidated financial statements continued dollars thousands except share amounts 2 summary significant accounting policies continued sfas 121 accounting impairment longlived assets longlived assets disposed requires longlived assets certain identifiable intangibles held used entity reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable sfas 121 also requires longlived assets certain identifiable longlived assets disposed reported lower carrying amount fair value less cost sell company continually evaluates factors events circumstances include limited historical projected operating performance specific industry trends general economic conditions assess whether remaining estimated useful lives long lived assets may warrant revision remaining balance longlived assets may recoverable factors events circumstances indicate longlived assets evaluated possible impairment company uses estimate undiscounted cash flows remaining lives longlived assets measuring recoverability noncurrent assets noncurrent assets primarily consist deferred financing costs 1128 937 december 31 1997 1998 respectively deferred financing costs related establishing debt obligations amortized ratably life underlying obligation debt cost amortization expense 191 years ended december 31 1997 1998 income taxes company predecessor determine tax provisions deferred tax balances compliance sfas 109 accounting income taxes approach provision income taxes represents income taxes paid payable current year adjusted change deferred taxes year deferred income taxes reflect net tax effects temporary differences financial statement bases tax bases assets liabilities adjusted changes tax rates tax laws changes enacted statia terminals canada incorporated subsidiary notes consolidated financial statements continued dollars thousands except share amounts 2 summary significant accounting policies continued comprehensive income june 1997 financial accounting standards board fasb issued sfas 130 reporting comprehensive income sfas 130 establishes standards reporting display comprehensive income components financial statements sfas 130 effective fiscal years beginning december 15 1997 reclassification financial statements earlier periods provided comparative purposes required following types items considered computing comprehensive income foreign currency translation adjustments pension liability adjustments unrealized gainloss securities available sale periods presented herein differences net income comprehensive income segment information june 1997 fasb issued sfas 131 disclosures segments enterprise related information sfas 131 establishes standards way public business enterprises report information operating segments annual financial statements requires enterprises report selected information operating segments interim financial reports issued shareholders also establishes standards related disclosures product services geographic areas major customers adoption sfas 131 impact consolidated results operations financial position cash flow reclassifications certain reclassifications made 1996 1997 financial statements order conform 1998 presentation 3 praxair purchase accounting discussed note 1 prior january 12 1996 predecessor company wholly owned subsidiary cbi january 12 1996 pursuant merger agreement dated december 22 1995 cbi became wholly owned subsidiary praxair merger transaction reflected predecessor companys combined financial statements purchase effective january 1 1996 fair value assigned predecessor company merger date 27000 excluding bank borrowings praxair cbi intercompany advance accounts buyout certain offbalancesheet financing merger value statia terminals canada incorporated subsidiary notes consolidated financial statements continued dollars thousands except share amounts 3 praxair purchase accounting continued allocation merger value assets liabilities acquired based estimated fair value assigned follows merger value 27000 less debt acquired 66000 intercompanyadvance accounts 1000 40000 allocation merger value total current assets 3000 property equipment 27000 noncurrent assets 2000 liabilities assumed 72000 40000 4 acquisition discussed note 1 november 27 1996 company acquired praxair outstanding capital stock predecessor company acquisition accounted purchase method accounting accordingly portion purchase price approximately 27665 allocated assets liabilities company based respective fair values date acquisition portion purchase price company allocated intangible assets since fair value tangible assets exceeded purchase price adjustments made allocated fair values 1997 1998 allocation total purchase price assets liabilities acquired follows purchase price 27665 commissions fees expenses 3326 total purchase price 30991 allocation purchase price current assets 3989 property equipment 28901 longterm assets 1448 liabilities assumed 3347 total purchase price 30991 statia terminals canada incorporated subsidiary notes consolidated financial statements continued dollars thousands except share amounts 5 property equipment property equipment consisted following december 31 6 debt 1134 notes due november 15 2003 issued parent company issuers november 27 1996 connection acquisition pay interest may 15 november 15 year notes redeemable whole part option issuers time november 15 2000 following redemption prices expressed percentages principal amount together accrued unpaid interest thereon redemption date redeemed 12month period beginning november 15 year indicated optional year redemption price 2000 105875 2001 102938 2002 100000 statia terminals canada incorporated subsidiary notes consolidated financial statements continued dollars thousands except share amounts 6 debt continued notwithstanding foregoing time prior november 15 1999 issuers may redeem 35 aggregate principal amount notes proceeds one equity offerings defined indenture notes redemption price equal 11175 principal amount thereof plus accrued unpaid interest date redemption provided giving effect redemption least 65 aggregate principal amount notes remains outstanding see note 12 notes guaranteed full unconditional joint several basis indirect direct active subsidiaries parent company coobligor notes also subject certain financial covenants set forth indenture restrictive include limited following consolidated fixed charge ratio prior four full fiscal quarters least 201 met permit company make additional borrowings companys revolving credit facility discussed ii limitations indebtedness iii restrictions certain payments addition notes place restrictions parents ability pay dividends certain circumstances defined indenture except occurrence event default company restrictions upon transfers funds form dividends loans cash advances issuers compliance financial covenants set forth indenture company revolving credit facility credit facility allows company borrow 5000 limit borrowing base defined credit facility credit facility calls commitment fee 0375 per annum portion unused funds credit facility bears interest rate prime plus 05 825 december 31 1998 credit facility constitutes senior indebtedness company secured first priority lien certain companys accounts receivable inventory credit facility subject certain restrictive covenants however subject financial covenants credit facility restrict company transferring funds parent subsidiary form dividends loans cash advances however failure pay interest due constitutes event default credit facility event default cured prohibits upstream dividend payments made parent credit facility expires november 27 1999 december 31 1997 1998 company approximately 459 976 respectively available borrowing credit facility limited borrowing base computation outstanding balance statia terminals canada incorporated subsidiary notes consolidated financial statements continued dollars thousands except share amounts 7 income taxes company subject federal large corporation tax based 0225 companys total equity april 1 1997 nova scotia enacted provincial capital tax based 025 companys total equity prorated 01888 1997 calendar year company benefited net operating tax losses investment tax credit carryforwards expire various amounts 2005 2003 respectively net operating tax loss carryforwards available offset canadian taxable income december 311997 1998 59483 55097 respectively investment tax credit carryforward available reduce canadian income taxes 7302 december 31 1997 1998 company provided full valuation allowance tax assets resulting net operating tax loss investment tax credit carryforwards certain deferred tax assets utilized future 8 relatedparty transactions predecessor company wholly owned subsidiary sti predecessor company engaged various relatedparty transactions sti affiliates sti allocated certain corporate operating administrative services predecessor company including certain legal services risk management tax services return preparation employee benefit administration cash management services period ended november 27 1996 1610 paid direct indirect services company wholly owned subsidiary company engages various relatedparty transactions parent subsidiaries unpaid portion transactions included intercompany balance intercompany balances owed praxair affiliates settled result acquisition parent subsidiaries directly indirectly allocate certain corporate operating administrative expenses services company including certain legal services risk management tax services employee benefit administration cash management services certain depreciation amortization expenses period ended december 31 1996 years ended december 31 1997 1998 1026 2054 2775 respectively paid services statia terminals canada incorporated subsidiary notes consolidated financial statements continued dollars thousands except share amounts 9 commitment contingencies environmental health safety matters connection acquisition studies undertaken praxair identify potential environmental health safety matters certain matters involving potential environmental costs identified point tupper nova scotia canada facility praxair agreed pay certain environmental costs subject certain limitations praxair paid approximately 2300 period november 27 1996 december 31 1998 related costs based investigations conducted information available date potential cost additional remediation compliance estimated 10000 substantially company believes responsibility praxair per acquisition agreement company also identified certain environmental health safety costs covered agreement praxair 1250 accrued 1996 10 expended december 31 1998 company believes environmental health safety costs subject reimbursement praxair material adverse effect companys financial position cash flows results operations litigation global petroleum corp global brought action company december 1993 supreme court nova scotia seeking release certain petroleum products owned global company holding secure payment certain invoices global secured release products posting 2000 bond global claims damages 1200 breach contract company counterclaimed breach contract payment approximately 2000 unpaid invoices product storage service april 1996 global scotia synfuels limited related companies brought suit cbi company supreme court nova scotia alleging damages amount 100000 resulting misrepresentation fraud breach fiduciary duty associated reactivation point tupper facility sale shares point tupper terminals company predecessor statia canada affiliate company cbi company believes allegations made proceeding factually inaccurate intends vigorously contest claim connection acquisition praxair agreed indemnify company damages relating foregoing proceeding estimate reasonably made ultimate liability time company believes ultimate outcome proceeding material effect companys business financial condition results operations statia terminals canada incorporated subsidiary notes consolidated financial statements continued dollars thousands except share amounts 9 commitment contingencies continued company involved various claims litigation arising normal course business based upon analysis legal matters discussions legal counsel company believes ultimate outcome matters material adverse effect companys financial position cash flows results operations accrued expenses summary accrued expenses consists following december 31 1997 1998 personnel related costs 185 258 professional fees 241 264 environmental expenses 1250 1240 246 660 1922 2422 10 segment information company organized around several different factors significant products services companys primary products services bunker bulk product sales terminaling services consisting storage throughput dock charges emergency response fee terminal charges primary measures profit loss utilized companys management make decisions resources allocated segment earnings interest taxes depreciation amortization certain unallocated profits losses internal ebitda earnings loss interest taxes certain unallocated profits losses internal ebit depreciation amortization expenses included internal ebit include certain amounts allocated entities related company statia terminals canada incorporated subsidiary notes consolidated financial statements continued dollars thousands except share amounts 10 segment information continued following information provided companys bunker bulk products sales terminaling services segments statia terminals canada incorporated subsidiary notes consolidated financial statements continued dollars thousands except share amounts 10 segment information continued december 31 1997 1998 assets terminaling services 29523 29095 bunker bulk product sales 533 323 unallocated assets 3561 9087 33617 38505 reconciliation internal ebit companys income loss provision income taxes preferred stock dividends follows significant customers company presently longterm storage throughput contract subsidiary tosco corporation expires 1999 company also derives terminaling services revenues bunker sales parties unaffiliated tosco primarily movement tosco products companys terminal statia terminals canada incorporated subsidiary notes consolidated financial statements continued dollars thousands except share amounts 10 segment information continued following table sets forth revenues percentage companys total revenue although company long standing relationship longterm contract tosco longterm contract renewed replaced end term company otherwise lost significant portion revenues customer nonrenewalreplacement loss could material adverse effect companys business financial condition ability pay dividends company also longterm contracts key customers assurance contracts renewed end terms company able enter longterm contracts terms favorable 11 retirement plan company sponsors retirement savings plan certain employees residing canada amounts charged expense plan significant 12 subsequent event unaudited february 12 1999 statia terminals group nv sole stockholder parent filed documents securities exchange commission sell 76 million common shares exclusive allotment option available underwriters additional 760000 shares initial equity public offering price expected 1950 2050 per share raising gross proceeds approximately 152000 approximately 167000 allotment option fully exercised portion proceeds offering used redeem approximately 25 approximately 35 allotment options fully exercised 1134 notes coissued parent company signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized statia terminals international nv date march 31 1999 registrant james g cameron james g cameron managing director james f brenner james f brenner vice president treasurer pursuant requirements securities exchange act 1934 1998 annual report form 10k signed following persons behalf registrant capacities dates indicated james g cameron james g cameron managing director march 31 1999 principal executive officer john k castle john k castle managing director march 31 1999 david b pittaway david b pittaway managing director march 31 1999 justin b wender justin b wender managing director march 31 1999 james f brenner james f brenner vice president march 31 1999 treasurer principal financial accounting officer s1 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized statia terminals canada incorporated date march 31 1999 registrant paul r crissman paul r crissman director president james f brenner james f brenner vice president finance pursuant requirements securities exchange act 1934 1998 annual report form 10k signed following persons behalf registrant capacities dates indicated paul r crissman paul r crissman director president march 31 1999 principal executive officer clarence w brown clarence w brown director march 31 1999 james g cameron james g cameron director march 31 1999 james f brenner james f brenner vice president finance march 31 1999 principal financial accounting officer s2 exhibits index exhibit number description 31 articles incorporation statia terminals international nv 32 memorandum articles association statia terminals canada incorporated 33 order supreme court nova scotia approving amalgamation agreement statia terminals canada incorporated statia terminals point tupper inc filed registry joint stock companies halifax nova scotia 41 indenture dated november 27 1996 among statia terminals international nv statia terminals canada incorporated issuers statia terminals corporation nv statia terminals delaware inc statia terminals inc statia terminals nv statia delaware holdco ii inc saba trustcompany nv bicen development corporation nv statia terminals southwest inc wp company inc seven seas steamship company inc seven seas steamship company sint eustatius nv point tupper marine services limited statia laboratory services nv statia tugs nv collectively subsidiary guarantors marine midland bank 41a first amendment dated august 14 1997 indenture dated november 27 1996 among statia terminals international nv netherlands antilles corporation statia terminals canada incorporated corporation organized laws nova scotia canada subsidiary guarantors named therein marine midland bank 41b second amendment dated february 25 1998 indenture dated november 27 1996 among statia terminals international nv netherlands antilles corporation statia terminals canada incorporated corporation organized laws nova scotia canada subsidiary guarantors named therein marine midland bank 41c third amendment dated july 29 1998 indenture dated november 27 1996 among statia terminals international nv netherlands antilles corporation statia terminals canada incorporated corporation organized laws nova scotia canada subsidiary guarantors named therein marine midland bank 42 specimen certificate 11 34 series first mortgage note due 2003 included exhibit 41 hereto e1 43 specimen certificate 11 34 series b first mortgage note due 2003 included exhibit 41 hereto 44 form guarantee securities issued pursuant indenture included exhibit 41 hereto 45 registration rights agreement dated november 27 1996 among statia terminals international nv statia terminals canada incorporated subsidiary guarantors dillon read co inc 46 share pledge agreement dated november 27 1996 statia terminals international nv marine midland bank 47 amendment dated december 18 1998 among statia terminals delaware nv marine midland bank statia terminals delaware inc share pledge agreement dated november 27 1996 statia terminals international nv marine midland bank 48 share pledge agreement dated november 27 1996 statia terminals nv marine midland bank 49 share pledge agreement dated november 27 1996 statia terminals corporation nv marine midland bank 410 share pledge agreement dated november 27 1996 seven seas steamship company inc marine midland bank 411 fiduciary transfer tangible assets agreement dated november 27 1996 statia terminals nv saba trustcompany nv bicen development corporation nv statia laboratory services nv statia tugs nv seven seas steamship company sint eustatius nv marine midland bank 412 fiduciary assignment intangible assets agreement dated november 27 1996 statia terminals international nv statia terminals corporation nv statia terminals nv saba trustcompany nv bicen development corporation nv statia laboratory services nv seven seas steamship company sint eustatius nv statia tugs nv marine midland bank 413 deed mortgage dated november 27 1996 among statia terminals nv statia laboratory services nv saba trustcompany nv bicen development corporation nv mortgagors marine midland bank mortgagee 414 fixed floating charge debenture made november 27 1996 statia terminals canada incorporated marine midland bank 415 debenture delivery agreement dated november 27 1996 statia terminals canada incorporated marine midland bank 416 shares pledge agreement made november 27 1996 statia terminals canada incorporated marine midland bank 417 shares pledge agreement dated november 27 1996 statia terminals corporation nv marine midland bank e2 418 debt allocation agreement dated november 27 1996 statia terminals international nv statia terminals canada incorporated 419 united states shares pledge security agreement dated november 27 1996 among statia terminals international nv statia delaware holdco ii statia terminals delaware inc statia terminals inc wp company inc marine midland bank 101 storage throughput agreement dated may 6 1993 storage throughput agreement 102 marine fuel agreement dated may 6 1993 marine fuel agreement 103 amendment dated january 1 1996 storage throughput agreement ii marine fuel agreement 103a amendment dated december 27 1996 storage throughput agreement ii marine fuel agreement year ended december 31 1997 103b amendment dated december 28 1997 storage throughput agreement ii marine fuel agreement year ended december 31 1998 103c amendment dated february 26 1999 storage throughput agreement ii marine fuel agreement years ended december 31 2000 104 storage throughput agreement dated august 20 1993 105 storage throughput agreement dated august 1 1994 105a amendment dated march 23 1999 storage throughput agreement dated august 1 1994 106 employment agreement dated november 27 1996 statia terminals group nv statia terminals inc james g cameron 107 employment agreement dated november 27 1996 statia terminals group nv statia terminals inc thomas thompson jr 108 employment agreement dated november 27 1996 statia terminals group nv statia terminals inc robert r russo 109 employment agreement dated november 27 1996 statia terminals group nv statia terminals inc john franklin 1010 employment agreement dated november 27 1996 statia terminals group nv statia terminals inc james f brenner 1011 employment agreement dated november 27 1996 statia terminals group nv statia terminals inc jack r pine 1012 loan share agreement dated november 27 1996 congress financial corporation florida statia terminals nv 1013 loan agreement dated november 27 1996 among congress financial corporation canada statia terminals canada e3 incorporated point tupper marine services limited 1014 1997 stock option plan award agreements 211 subsidiaries registrants 271 financial data schedules electronic filing incorporated reference registration statement statia canada form s4 dated december 20 1996 amendments thereto filed us securities exchange commission registration statement 33318455 became effective february 14 1997 incorporated reference december 31 1996 form 10k dated may 13 1997 incorporated reference september 30 1997 form 10q dated november 14 1997 incorporated reference december 31 1997 form 10k dated march 31 1998 incorporated reference registration statement parent form s1 dated february 12 1999 filed us securities exchange commission registration statement 33372317 incorporated reference amendment 1 registration statement parent form s1 dated march 22 1999 filed us securities exchange commission registration statement 33372317 e4 item 7 managements discussion analysis financial condition results operations purposes discussion reference made consolidated financial statements statia terminals international nv subsidiaries december 31 1995 1996 1997 year ended december 31 1995 postpraxair acquisition income cash flow statements period january 1 1996 november 27 1996 postchpii acquisition income cash flows statements period november 27 1996 december 31 1996 year ended december 31 1997 company prepares financial statements accordance us generally accepted accounting principles facilitate meaningful discussion companys comparative operating performance years ended december 31 1995 1996 1997 financial information managements discussion analysis financial condition results operations presented traditional comparative basis periods unless otherwise indicated consequently information presented year ended december 31 1996 necessarily comply accounting requirements companies subject major acquisitions generally accepted accounting principals us call separate reporting new company postchpii acquisition predecessor companies pre postpraxair acquisitions solid black line inserted tables financial information may comparable across periods substantially companys transactions denominated us dollars figures us dollars unless otherwise indicated overview operations company began operations 1982 stnv netherlands antilles corporation operating oil products terminal located island st eustatius 1984 cbi industrial gases contracting services including storage tank construction company acquired controlling interest stnv purchased stsw facility brownsville texas 1986 1990 cbi became sole owner stnv stsw 1993 company acquired remaining shares stpt amalgamated statia canada owns operates facility located point tupper nova scotia january 1996 cbi acquired praxair sold certain assets including owned company focus core businesses november 1996 chpii certain members companys management others acquired praxair outstanding capital stock stnv sti subsidiaries certain affiliates statia canada parent organized purposes facilitating chpii acquisition result chpii acquisition parent owns capital stock statia ii chpii affiliates castle harlan employees 854 voting stock parent iii statia canada issued 11 34 first mortgage notes due 2003 series subsequently exchanged 11 34 first mortgage notes due 2003 series b notes iv company entered revolving credit facilities aggregate amount 175 million collectively revolving credit facility company expanded third location point tupper nova scotia 1992 completed refurbishment 74 million barrel facility 1994 total capital investment 741 million st eustatius fourth quarter 1993 company commenced construction five million barrels crude oil storage spm system st eustatius crude project completed leased first quarter 1995 total capital investment 1075 million threeyear period 1993 1995 company added crude oil storage related services established fuel oil clean products consumable oils chemicals storage related services addition blending ancillary services company added marine emergency response services st eustatius point tupper added limited refining capability atmospheric distillation unit st eustatius 1995 finally fourth quarter 1995 first quarter 1996 investments made heating system lpg sphere point tupper additions capacity led throughput therefore higher revenues storage throughput ancillary services operations st eustatius suffered damages hurricanes iris luis marilyn 1995 hurricanes causing closure terminal third quarter 1995 repair damages caused 1995 hurricanes installation certain improvements substantially completed end third quarter 1996 claims related 1995 hurricanes filed insurance carriers ultimately settled 126 million december 31 1997 206 million spent repairs improvements 68 million capitalized property equipment following table sets forth periods indicated certain key statistics companys operating locations capacity leased throughput vessel calls location capacity throughput thousands barrels year ended december 31 1995 1996 1997 netherland antilles caribbean total capacity 11334 capacity leased 90 80 76 throughput 72420 69395 62944 vessel calls 825 880 792 canada total capacity 7404 capacity leased 61 55 70 throughput 34117 23350 53011 vessel calls 95 62 125 texas total capacity 1649 capacity leased 46 52 31 throughput 3268 2472 2320 vessel calls 53 88 113 locations total capacity 20387 capacity leased 76 69 70 throughput 109805 95217 118275 vessel calls 973 1030 except inflationary cost increases cost increases due additional storage capacity costs providing additional ancillary services companys operating costs terminal services relatively fixed generally change significantly changes capacity leased additions reductions storage throughput ancillary service revenues directly impact operating income costs delivery bunker fuels consummation bulk product sales impacted market supply conditions types products sold volumes delivered comparison twelve months ended december 31 1997 1996 year ended december 31 1997 total revenues 1425 million compared 1560 million previous year decrease 135 million 87 decrease primarily due fewer bunker bulk product sales partially offset higher revenues storage throughput ancillary services also referred terminaling services gross profit operating income net income loss years ended december 31 1997 1996 comparable due effects purchase accounting applied result chpii acquisition depreciation amortization operating expenses components gross profit changed due revaluation various assets fair values acquisition date changes components companys debt equity accounts resulted changes interest expense dividends costs services products sold operating income 122 million twelve months 1997 versus 48 million period 1996 period january 1 1996 november 27 1996 lease expenses related fsl amounting 56 million consisting primarily interest included cost services products sold lease fully satisfied connection chpii acquisition addition company incurred nonrecurring stock based compensation charge 30 million immediately prior chpii acquisition 1996 1997 improved utilization higher throughput volumes higher fees ancillary terminal services primarily crude throughput point tupper produced 34 million 67 increase revenues storage throughput ancillary services revenues 532 million year ended december 31 1997 compared 498 million year ended december 31 1996 canadian facility saw terminaling services revenues increase 90 million year ended december 31 1996 156 million year ended december 31 1997 increase 66 million 731 incremental spot storage leases crude oil companys primary canadian tenant bayway refining company crude oil clean petroleum products leases several new customers plus 30 million barrels 127 increased throughput 1996 additional ancillary services contributed higher revenues terminaling services certain tankage converted clean product storage crude oil storage meet customer demand st eustatius lower crude oil throughput reductions percentage capacity leased refined petroleum products resulted lower 1997 revenues storage throughput ancillary services customer occupied clean products storage threequarters 1996 year clean products tankage went essentially unleased 1997 year caribbean facilities terminaling services revenues fell 19 million 51 360 million year ended december 31 1997 379 million previous year revenues bunker bulk product sales fell 168 million 158 893 million year ended december 31 1997 1061 million period 1996 drop primarily attributable increased competition elsewhere caribbean us gulf coast ports resulting lower volumes bunker fuel delivered fewer bulk product sales st eustatius volume bunker fuels delivered fell 129 comparative average selling prices yeartoyear virtually unchanged total dollar terms direct gross profits without allocation operating costs bunker bulk product sales 195 1996 results point tupper company unable expand bunker sales business started 1996 due inability find adequate source supply companys facility brownsville held sale eastern side texasmexico border experienced reduction total revenues due loss storage business gasoline diesel fuels vegetable oils primarily competing facilities region stsws revenues 24 million year ended december 31 1997 09 million 283 33 million prior elimination intercompany revenues period 1996 operating expenses including depreciation amortization included line item cost services products sold 400 million year ended december 31 1997 compared 395 million period 1996 increase 05 million 14 increases depreciation charges insurance costs partially offset lower marine vessel charter costs principally responsible change due praxair chpii acquisitions comparisons may however possible selling administrative expenses 63 million year ended december 31 1997 versus 87 million 1996 year ended december 31 1996 administrative expenses included 30 million stock based compensation paid certain managers company connection praxair chpii acquisitions exclusive nonrecurring stock based compensation selling administrative expenses increased yeartoyear primarily due higher personnel costs since chpii acquisition november 1996 companys interest expenses related 11 34 first mortgage notes year ended december 31 1997 interest expenses amounted 160 million year ended december 31 1996 interest expenses related notes third party debt fsl obligation net amounts charged capital projects effects interest rate swap 113 million company invests excess cash shortterm highly liquid financial instruments generally commercial banks outside united states income expense year ended december 31 1997 includes 06 million interest income earned investments 1997 subsidiary company paid approximately 03 million due free zone profit tax agreement netherlands antilles amount prior year addition company certain antillean subsidiaries accrued andor paid amounts related new tax arrangements obtained conjunction chpii acquisition us canada certain subsidiaries accrued andor paid income taxes including canadian large corporation tax 1997 calculated different assumptions used prior chpii acquisition certain subsidiaries company continue accumulate tax benefits net operating loss carryforwards investment tax credits may use offset future taxable income taxes payable however deferred tax assets derived benefits related free zone profit tax agreement netherlands antilles canadian net operating loss carryforwards canadian investment tax credits recorded balance sheet company may never utilize following tables set forth periods indicated total revenues total operating income loss allocation administrative expenses companys operating locations percentage revenue operating income loss bear total revenue operating income company revenues location dollars thousands year ended december 31 1995 1996 1997 total netherlands antilles caribbean 121899 899 139403 894 122945 863 canada 11143 82 13462 86 18892 133 us 1 8641 64 9060 58 8523 60 eliminations 1 6142 45 5971 38 7861 56 total 135541 1000 155954 1000 142499 1000 1 includes 7226 6089 6418 years ended december 31 1995 1996 1997 respectively representing 105 stis expenses allocated operating subsidiaries affiliates operating income loss location dollars thousands year ended december 31 1995 1996 1997 total netherlands antilles caribbean 13037 1168 6659 1393 10455 854 canada 609 55 823 172 3768 308 us 1269 113 1054 221 1985 162 total 11159 1000 4782 1000 12238 1000 comparison twelve months ended december 31 1995 1996 revenues twelve months ended december 31 1996 aggregated 1560 million increase 205 million 151 twelve months ended december 31 1995 1355 million revenue increase primarily due strong demand bunker fuels st eustatius partially offset reduced storage throughput ancillary services revenues st eustatius point tupper locations storage throughput ancillary services generally produce higher gross margins bunker fuel bulk product sales activities gross profit operating income net income loss years ended december 31 1995 1996 comparable due effects purchase accounting applied result praxair acquisition chpii acquisition depreciation amortization operating expenses components gross profit changed due revaluation various assets fair values acquisition dates changes components companys debt equity accounts resulted changes interest expense costs services products sold yeartoyear change mix revenues increases operating administrative expenses primarily nonrecurring stockbased compensation earned upon praxairs divestiture company contributed 587 decrease operating income 109 million 1995 45 million 1996 storage throughput ancillary revenues 498 million twelve months ended december 31 1996 compared 547 million 49 million 89 period 1995 st eustatius storage throughput ancillary services revenues 18 million 44 due primarily reduction tankage leased fuel oil reduction associated throughput volume point tupper revenues 35 million 310 due primarily reduction tankage leased refined products reduction crude oil throughput volume decreases location primarily due nonrenewal storage leases customers result backwardation petroleum markets reduced throughput existing customers uncertainty companys future ownership due praxairs announcement dispose business revenues sale bunker fuel bulk oil products 1061 million twelve months ended december 31 1996 compared 808 million period 1995 increase 253 million 313 change due primarily increase bunker fuel volume delivered higher average selling prices partially offset reduction bulk product volume sold st eustatius bunker fuel volume delivered rose 358 average selling prices rose 94 comparing twelvemonth periods ended december 31 1995 1996 gross margins bunker fuel bulk product sales dollar terms percentage revenues little changed comparing similar figures twelve month periods 1995 1996 volumes bulk product sales 416 comparing twelve month periods gross margins improved slightly point tupper company commenced delivery bunker fuel first quarter 1996 generating revenues 44 million 1996 year brownsville texas terminal held sale improved storage throughput revenue primarily vegetable oils asphalt led total revenues prior elimination intercompany revenue 33 million 1996 08 million 320 1995 total revenues 25 million elimination intercompany revenues consideration additional operating expenses 1996 changes operating loss 1995 year 1996 year significant brownsville operation leased 52 available capacity 1996 compared 46 1995 however throughput decreased 33 million barrels 1995 25 million barrels 1996 operating expenses including depreciation amortization included line item cost services products sold 395 million twelve months ended december 31 1996 compared 366 million period 1995 increase 29 million 79 inception operations st eustatius crude project first quarter 1995 personnel costs related fringe benefits marine charter costs expenses gradually increased st eustatius facility incurred full year costs 1996 incurring approximately nine months costs 1995 company also incurred higher insurance costs fees professional services include fees chpii acquisition twelve months 1996 compared period 1995 administrative expenses increased 69 million 1995 87 million 1996 increase 12 million 174 increase primarily due nonrecurring stockbased compensation 30 million awarded management earned upon praxairs divestiture company offset reduction parent company administration fees 12 million interest expense related third party debt 45 million 57 million years ended december 31 1995 1996 respectively net interest capitalized capital projects effects interest rate swap first quarter 1996 due praxair acquisition companys term revolving debt refinanced resulting changes interest rates conjunction chpii acquisition previously existing bank debt fully satisfied 11 34 first mortgage notes issued tax rates jurisdictions company operates change significantly 1995 1996 certain income tax liabilities incurred prior november 27 1996 assumed praxair company retained net operating loss carryforwards us 75 million canada company also certain investment tax credits netherlands antilles canada may use offset future taxes payable however deferred tax assets net operating loss carryforwards investment tax credits recorded balance sheet company may never utilize result praxair acquisition cbi january 12 1996 company following pushdown accounting rules recognized 855 million reduction property equipment january 1 1996 company wrote approximately 99 million goodwill intangible assets resulting prior acquisitions transactions result reduction write 1996 depreciation amortization expenses company decreased 47 million annualized basis following table sets forth periods indicated percentage revenues represented certain items consolidated statements income company liquidity capital resources part chpii acquisition company received capital contribution 985 million parent consisting 555 million cash 430 million equity certain statias subsidiaries issued 1350 million first mortgage notes series subsequently exchanged notes portion contributed capital proceeds issuance first mortgage notes series used company pay approximately 1741 million cash praxair 1690 million paid closing 51 million paid february 1997 satisfy cash portion purchase price ii pay 160 million commissions fees expenses connection chpii acquisition prior november 27 1996 existing indebtedness company including offbalance sheet lease obligation bank debts preferred stock former affiliate advances praxair repaid addition november 27 1996 company subsidiaries entered new 175 million revolving credit facility secured companys accounts receivable oil inventory draws revolving credit facility occurred march 31 1998 revolving credit facility bears interest prime rate plus 50 per annum 90 december 31 1997 expire november 27 1999 debt service costs associated borrowings notes revolving credit facility significantly increased liquidity requirements notes accrue interest 11 34 per annum payable semiannually may 15 november 15 notes mature november 15 2003 notes redeemable whole part option company time november 15 2000 redemption prices set forth indenture relating notes may redeemed purchased prior november 15 2000 certain circumstances defined indenture limits incurrence additional debt company limits ability company pay dividends redeem capital stock limits companys ability sell assets company may incur additional indebtedness long consolidated fixed charge coverage ratio defined indenture greater certain minimum levels indenture revolving credit facility long event default occurred restrictions distribution subsidiaries funds statia canada form cash dividends loans advances except cash companys canadian subsidiaries prior chpii acquisition company participant praxaircbis cash management system whereby cash receipts swept former parents investment program cash operations capital expansion funded operations company former parent debt facilities available company guaranteed former parent 1995 major sources cash 259 million companys former parent 115 million operations major use cash 371 million capital expand sustain operations 1996 prior chpii acquisition cash provided operations 92 million proceeds insurance claims related 1995 hurricanes 126 million net advances praxair approximately 193 million exclusive advances related repayment existing indebtedness used finance purchase property equipment 146 million pay dividends praxair affiliates 258 million since november 27 1996 company paid adjustment purchase price relating chpii acquisition 51 million incurred capital expenditures generally planned steadily accumulated cash generated operations 1997 company incurred capital expenditures 53 million made payments accrued purchase transaction costs 77 million paid dividends companys parent 27 million funded primarily cash flows operations 125 million company believes cash flow generated operations amounts available revolving credit facility sufficient maturity notes fund working capital needs fund capital expenditures operating requirements including expenditures required applicable environmental laws regulations service debt companys operating performance ability service refinance notes extend refinance revolving credit facility subject future economic conditions financial business factors many beyond companys control assurance companys future operating performance sufficient service indebtedness company able repay maturity refinance indebtedness whole part capital expenditures company spent 371 million 157 million 53 million 1995 1996 1997 respectively capital expenditures 272 million 16 million 10 million respectively spent enhance companys ability generate incremental revenues figures exclude 885 million balance sheet financing incurred 1993 1994 1995 st eustatius crude project 1995 point tupper company initiated construction 55000 barrel lpg sphere fuel oil heating system purchased spill response vessels equipment capital expenditures 1996 primarily improvements made connection 1995 hurricanes 1997 capital expenditures made primarily various piping tank enhancements location new warehouse st eustatius capital expenditures 1998 projected approximately 75 million consisting primarily maintenancerelated expenditures replacement certain equipment held sale certain companys computer systems may adequately handle changes brought new millennium company developed master plan dealing potential year 2000 issues including upgrading existing software applications 1998 capital expenditure budget includes 07 million upgrades certain nonrecurring expenses incurred 1998 consultants cost addressing year 2000 issue expected significantly impact companys interaction customers suppliers future financial condition results operations following table sets forth capital expenditures location separates expenditures produce potential produce incremental revenue sustain existing operations summary capital expenditures location dollars thousands produce sustain incremental existing revenues operations total year ended december 31 1995 netherlands antilles caribbean 18926 6342 252681 680 canada 7912 1755 9667 260 us 325 1878 2203 59 total 27163 9975 37138 1000 year ended december 31 1996 netherlands antilles caribbean 89344 11969 10131323 972 canada 751 451 1202 12 us 19 1670 1689 16 total 90114 14090 104204 1000 year ended december 31 1997 netherlands antilles caribbean 696 2858 3554 665 canada 120 834 954 179 us 125 709 834 156 total 941 4401 5342 1000 1 excludes repairs improvements 81 million spent 1995 related 1995 hurricanes 2 includes purchase first salute leasing lp assets 3 includes 68 million capitalized enhancement related 1995 hurricanes company financed st eustatius crude project leveraged lease arrangement effectively removing 885 million assets liabilities balance sheet company leased land special purpose financing entity fsl upon crude tanks constructed facilities st eustatius crude project leased back company life lease company accounted monthly lease payments consisting primarily interest underlying financing recognized accrual towards residual guarantee value within line item cost services products sold 1995 1996 company paid 57 million 56 million respectively fsl consisted primarily interest costs underlying debt obligations lease satisfied prior chpii acquisition related assets included balance sheet time assets held sale connection chpii acquisition brownsville facility identified asset held sale net proceeds would used mandatorily redeem certain preferred stock parent permitted indenture first mortgage notes 1997 company retained financial advisor assist marketing disposition brownsville facility last half 1997 prospective buyers contacted asked submit offers early march 1998 company presently evaluating offers considering alternatives include retaining facility despite improved results facility first quarter 1998 assurances company incur loss upon disposition future cash flow generated operations brownsville sufficient justify current carrying value related property equipment financial records future cash flows sufficient justify recorded value property equipment balance sheet company may required reduce carrying value property equipment see note 3 property equipment consolidated financial statements statia addition companys emergency spill response vessel mv statia responder formerly known mv megan gambarella held sale upon disposition vessel company anticipates capital expenditures 15 million replace certain equipment sold vessel necessary efficient operation terminal st eustatius management company estimated proceeds sales assets aggregate 200 million reclassified amount property equipment assets held sale balance sheet offset equity subject reduction actual proceeds sales may equal estimates assets sold yield net proceeds less 200 million portion equity subject reduction may converted additional paid capital assets held sale expected remain operation disposition revenues costs associated operating assets included companys consolidated financial statements none companys debt interest thereon allocated assets following table sets forth periods indicated consolidated income operations adjustments reflect operating income less income loss brownsville terminal adjusted certain ongoing administrative expenses related assets retained operating income ongoing operations dollars thousands year ended december 31 1995 1996 1997 consolidated income operations 11159 4782 12238 add estimated adjustment ongoing expenses 1145 1697 1047 less operating income loss statia terminals holdco ii inc statia terminals southwest inc 1574 1379 1980 consolidated income ongoing operations 11588 3869 13171 environmental matters companys subsidiaries subject comprehensive periodically changing foreign federal state local environmental laws regulations including governing oil spills emissions air pollutants discharges wastewater storm waters disposal nonhazardous hazardous waste 1995 1996 1997 capital expenditures company compliance environmental laws regulations approximately 34 million 13 million 13 million respectively expenditures 1995 consisted primarily purchase spill response vessels equipment point tupper comply new canadian legislation figures include routine operational compliance costs disposal hazardous nonhazardous solid waste approximately 06 million 04 million 02 million 1995 1996 1997 respectively company believes presently substantial compliance applicable laws regulations governing environmental matters connection chpii acquisition studies undertaken praxair identify potential environmental health safety matters certain matters involving potential environmental costs identified point tupper facility praxair agreed pay certain costs currently estimated approximately 31 million representing certain investigation remediation compliance capital costs company incurred 17 million february 28 1998 extent certain matters exceed respective estimates praxair agreed reimburse company future expenditures additionally company identified additional environmental costs point tupper st eustatius approximately 15 million none spent date future costs expensed incurred capitalized property equipment company believes environmental costs subject foregoing reimbursements material adverse effect companys financial position results operations see item 1 business environmental health safety matters discussion company anticipates incur additional capital operating costs future comply currently existing laws regulations new regulatory requirements arising recently enacted statutes possibly new statutory enactments us foreign government regulatory agencies yet promulgated final standards proposed environmental programs company cannot time reasonably estimate cost compliance additional requirements take effect several years timing costs however management believes costs material adverse effect companys business financial condition results operations matters company periodically evaluates political stability economic environment countries operates result evaluations company presently aware matters may adversely impact business results operations financial condition general rate inflation countries company operates relatively low recent years causing modest impact operating costs typically inflationary cost increases result adjustments storage throughput charges longterm contracts contain price escalation provisions bunker fuel bulk product sales prices based active markets company generally able pass cost increases customers except minor local operating expenses canadian dollars netherlands antilles guilders companys transactions us dollars therefore company believes significant exposure exchange rate fluctuation certain subsidiaries company process negotiating new free zone profit tax agreement governments st eustatius netherlands antilles follow certain provisions new free zone legislation expires 2015 current agreement expires december 31 2000 company believes additional amounts due new agreement material adverse impact financial position results operations cash flow company current agreement expire without renewal company business may adversely impacted company maintains insurance policies insurable risks levels considers appropriate present time company carry business interruption insurance due company believes excessive premium costs coverage provided company believes adequately insured future losses could exceed insurance policy limits adverse policy interpretations excluded coverage future liability costs incurred circumstances could adversely impact cash flow statement financial accounting standards sfas 130 reporting comprehensive income sfas 131 disclosures segments enterprise related information issued financial accounting standards board fasb june 1997 two standards effective companys yearend december 31 1998 sfas 130 establishes standards reporting display comprehensive income components sfas 131 establishes standards annual interim disclosures related business operating segments company process determining disclosure requirements related standards adoption standards impact consolidated financial position results operations cash flow company item 7a item 7 managements discussion analysis financial condition results operations purposes discussion reference made consolidated balance sheets december 31 1999 2000 reference also made consolidated statements operations stockholders equity cash flows years ended december 31 1998 1999 2000 substantially transactions denominated us dollars figures us dollars unless otherwise indicated prepare financial statements accordance us generally accepted accounting principles overview operations began operations 1982 statia terminals nv netherlands antilles corporation operating oil products terminal located island st eustatius 1984 cbi industries industrial gases contracting services company acquired controlling interest statia terminals nv 1986 statia terminals nv purchased statia terminals southwest facility brownsville texas 1990 cbi industries became sole owner statia terminals nv statia terminals southwest 1993 acquired full control statia terminals point tupper incorporated located point tupper nova scotia january 1996 praxair acquired cbi industries november 1996 castle harlan partners ii lp member management others acquired praxair outstanding capital stock statia terminals nv statia terminals inc subsidiaries certain affiliates castle harlan partners ii lp private equity investment fund managed castle harlan inc private merchant bank time statia terminals point tupper amalgamated statia terminals canada incorporated statia terminals canada statia terminals international nv statia terminals group nv organized purposes facilitating castle harlan acquisition assist financing castle harlan acquisition sold 135 million 11 34 first mortgage notes july 1998 sold statia terminals southwest unaffiliated third party purchaser operations organized around several different factors two significant services products geographic location primary services products terminaling services resulting revenue storage throughput dock usage emergency response terminal services product sales including bunker fuels bulk oil sales majority revenues generated product sales fluctuate global oil prices result experience volatility revenue stream necessarily indicative profitability gross profit terminaling services generally higher gross profit product sales operating costs terminaling services relatively fixed generally change significantly changes storage capacity leased addition operating costs impacted inflationary cost increases changes storage capacity changes ancillary services offered us additions reductions storage throughput ancillary service revenues directly impact gross profit costs procurement petroleum products sale variable linked global oil prices product costs also impacted market supply conditions types products sold volumes delivered following table sets forth periods indicated total capacity leased throughput vessel calls operating locations total capacity represents average storage capacity available lease period capacity leased represents storage capacity leased third parties weighted number days leased month divided capacity available lease throughput total volume inbound barrels discharged vessel tank rail car tanker truck including acrossthedock tanktotank transfers vessel call occurs vessel docks anchors one terminal locations order load andor discharge cargo andor take bunker fuel dockage anchorage counted one vessel call regardless number activities carried vessel call also occurs sell deliver bunker fuel vessel calling terminals purposes statistics measure utilization facilities equipment total capacity leased throughput vessel calls location total capacity throughput thousands barrels 1 brownsville texas facility sold july 29 1998 statistics exclude operations brownsville facility results operations following table sets forth periods indicated percentage revenues represented items consolidated statements operations results operations dollars thousands september 1998 hurricane georges caused 85 million damage components st eustatius facility insulation certain storage tanks electrical transmission systems roofs several buildings sustained damage third quarter 1998 recorded charge 08 million consisting insurance deductible 05 million related hurricane damage expenses insurance proceeds related storm aggregated 77 million 31 million collected december 31 1999 remaining 46 million collected 2000 hurricane georges significantly impact operations facility returned normal within days storm repair work related damage caused hurricane georges substantially complete result damages sustained st eustatius facility hurricane lenny late november 1999 incurred onetime noncash charge 15 million partially reduce carrying value shoreline protection system onetime cash charge 025 million cover hurricane related expenses damaged shoreline protection system covered insurance together civil work substantially replaced 2000 cost 28 million operations significantly impacted adverse weather conditions 2000 following tables set forth periods indicated total revenues total operating income loss allocation administrative expenses operating locations b percentage revenue operating income loss relate total revenue operating income sold brownsville texas facility july 29 1998 figures consolidated financial statements include brownsville facility june 30 1998 revenues location dollars thousands operating income loss location dollars thousands year ended december 31 2000 compared year ended december 31 1999 comparability transactions related parents initial public offering equity completed april 28 1999 impacted financial condition results operations therefore comparability years revenues total revenues year ended december 31 2000 2105 million compared 1683 million year ended december 31 1999 increase 422 million 250 total revenue increase primarily due increases average selling prices within product sales segment revenues terminaling services resulting revenue storage throughput dock usage emergency response terminal services year ended december 31 2000 615 million small decrease 617 million previous year believe small decrease terminaling services revenues year ended december 31 2000 compared 1999 principally due adverse effects accord established many oil exporting nations customers raise crude oil prices reducing supply members accord reduced production crude oil period april 1999 late march 2000 reduced worldwide quantity crude oil petroleum products storage accord primarily impacted terminaling services revenues beginning second half 1999 continuing first half 2000 impact accord first half 2000 partially offset uncertain conditions crude oil petroleum products markets second half 2000 created trading opportunities several customers resulted customers leasing storage capacity us additionally second half 2000 increased throughput crude oil favorably impacted revenues year ended december 31 2000 approximately 73 tank capacity leased pursuant longterm contracts st eustatius point tupper locations together approximately 65 storage throughput revenues excluding related ancillary services derived longterm contracts period revenues terminaling services st eustatius decreased approximately 02 million 04 year ended december 31 2000 compared year ended december 31 1999 lower storage revenues resulting lower percentage capacity leased partially offset increased revenues port charges port charges consist dock charges emergency response fees terminal charges year ended december 31 2000 overall percentage capacity leased facility 88 compared 90 period 1999 reflecting decrease percentage storage capacity leased residual fuel oil clean products total throughput increased 617 million barrels year ended december 31 1999 816 million barrels 2000 due primarily increased throughput crude oil although 18 fewer cargo vessels called st eustatius facility year ended december 31 2000 period 1999 average size vessels increased net result two factors increased revenues port charges revenues terminaling services point tupper virtually unchanged year ended december 31 2000 compared year ended december 31 1999 lower storage revenues resulting lower percentage capacity leased offset higher revenues port charges percentage tank capacity leased point tupper decreased 79 year ended december 31 1999 68 period 2000 decrease primarily result decision customer facility participant accord renew crude oil storage contract end second quarter 1999 another customer significantly increased throughput crude oil 2000 fortyone vessels called year ended december 31 2000 compared period 1999 led higher revenues port charges facility revenues product sales including bunker fuels bulk oil sales 1489 million year ended december 31 2000 compared 1067 million period 1999 increase 422 million 396 increase primarily due increases average selling prices partially offset decreases volume products delivered metric tons product sold decreased 120 year ended december 31 2000 compared period 1999 average selling prices increased 561 comparing year ended december 31 2000 period 1999 increases average selling prices primarily result significantly higher oil market prices gross profit gross profit year ended december 31 2000 284 million compared 307 million period 1999 representing decrease 23 million 75 decrease gross profit primarily result lower gross profits realized terminaling services partially offset higher dollar gross margins realized product sales gross profit terminaling services decreased primarily result lower percentage capacity leased increases operating costs associated providing terminaling services operating locations costs terminaling services revenue st eustatius facility includes 08 million net depreciation savings year ended december 31 2000 representing incremental operating costs resulting lease mv statia responder discussed note 9 notes consolidated financial statements additionally three months ended march 31 2000 replaced certain hoses attached single point mooring system result changed estimated useful lives certain hoses incurred noncash charge 08 million depreciation expense first quarter 2000 included costs terminaling services revenues administrative expenses administrative expenses 94 million year ended december 31 2000 compared 80 million period 1999 representing increase 14 million 166 increase year ended december 31 2000 compared period 1999 primarily result higher personnel related costs higher depreciation costs primarily related computer software administrative expenses primarily relate costs incurred us administrative offices special compensation expense fully discussed note 3 notes consolidated financial statements recorded special compensation expense year ended december 31 1999 41 million 22 million noncash charge related vesting certain stock options hurricane charges result damages sustained st eustatius facility hurricane lenny late november 1999 incurred onetime noncash charge 15 million partially reduce carrying value shoreline protection system onetime cash charge 025 million cover hurricane related expenses damaged shoreline protection system covered insurance together certain civil work substantially replaced 2000 cost 28 million interest expense years ended december 31 2000 1999 incurred 127 million 143 million respectively debt service costs consisting interest accrued longterm debt interest expense commitment fees revolving credit facility amortization expense related deferred financing costs bank charges may 1999 repurchased 340 million mortgage notes resulted lower interest amortization expense related debt provision income taxes provision income taxes 09 million year ended december 31 2000 compared 08 million period 1999 provision income taxes increased compared previous year contemplation potential additional income tax assessments jurisdictions operate offset effect certain tax benefits discussion income taxes please see note 7 notes consolidated financial statements tax matters section extraordinary charge related early extinguishment debt fully discussed note 3 notes consolidated financial statements recognized extraordinary charge 47 million year ended december 31 1999 connection repurchase 340 million mortgage notes charge represented premium paid acquire mortgage notes open market acquisition costs income tax effect associated extraordinary charge net income loss net income 56 million year ended december 31 2000 compared net loss 23 million year ended december 31 1999 improvement results attributable elimination extraordinary charge reduction interest expense net effect operating factors discussed year ended december 31 1999 compared year ended december 31 1998 comparability july 29 1998 sold statia terminals southwest unrelated third party consolidated financial statements include operations statia terminals southwest june 30 1998 therefore year ended december 31 1998 includes operations statia terminals southwest six months year ended december 31 1999 includes operations statia terminals southwest additionally discussed detail may 1999 repurchased open market principal amount 34 million 11 34 first mortgage notes proceeds sale common stock transactions impacted financial condition results operations therefore comparability years revenues total revenues year ended december 31 1999 1683 million compared 1368 million year ended december 31 1998 increase 315 million 231 revenues terminaling services resulting revenue storage throughput dock usage emergency response terminal services year ended december 31 1999 617 million compared 666 million previous year decrease 49 million 74 decrease terminaling services revenue year ended december 31 1999 compared previous year principally due adverse effects accord established many oil producing nations business raise crude oil prices reducing supply members accord reduced production crude oil turn reduced worldwide quantity crude oil petroleum products storage accord signed march 1999 became effective april 1 1999 oneyear term accord primarily impacted terminaling services revenues beginning second half 1999 year ended december 31 1999 approximately 69 tank capacity leased pursuant longterm contracts st eustatius point tupper locations together approximately 60 storage throughput revenues excluding related ancillary services derived longterm contracts period revenues terminaling services st eustatius decreased approximately 14 million 32 year ended december 31 1999 compared year ended december 31 1998 due decreased throughput lower percentage capacity leased total throughput decreased 742 million barrels year ended december 31 1998 617 million barrels 1999 due primarily decreased throughput crude oil petroleum products twelve fewer cargo vessels called st eustatius facility year ended december 31 1999 period 1998 resulting lower revenues port charges year ended december 31 1999 overall percentage capacity leased facility 90 compared 92 period 1998 reflecting decrease percentage storage capacity leased residual fuel oil partially offset increase percentage capacity leased clean products revenues terminaling services point tupper decreased 23 million 113 year ended december 31 1999 compared year ended december 31 1998 decrease due lower percentage capacity leased fewer vessel calls year ended december 31 1999 percentage tank capacity leased point tupper decreased 93 year ended december 31 1998 79 period 1999 decrease primarily result decision customer facility participant accord renew crude oil storage contract end second quarter 1999 fewer vessels called year ended december 31 1999 compared period 1998 led lower revenues port charges facility revenues product sales 1067 million year ended december 31 1999 compared 701 million period 1998 increase 366 million 521 increase primarily due increases volume products delivered increases average selling prices metric tons product sold increased 192 year ended december 31 1999 compared period 1998 average selling prices increased 277 comparing year ended december 31 1999 period 1998 changes average selling prices primarily result changes world oil markets significantly influenced accord gross profit gross profit year ended december 31 1999 307 million compared 309 million period 1998 representing decrease 02 million 06 decrease gross profit primarily result lower gross profits realized terminaling services partially offset higher dollar gross margins realized product sales gross profit terminaling services decreased primarily result certain customers choosing renew storage throughput contracts due part reduced supply resulting accord established among many oil exporting nations administrative expenses administrative expenses 80 million year ended december 31 1999 compared 73 million period 1998 representing increase 07 million 99 increase year ended december 31 1999 compared period 1998 primarily result higher personnel related costs special compensation expenses fully discussed note 3 notes consolidated financial statements recorded special compensation expense year ended december 31 1999 41 million 22 million noncash charge hurricane charges result damages sustained st eustatius facility hurricane lenny late november 1999 incurred onetime noncash charge 15 million partially reduce carrying value shoreline protection system onetime cash charge 025 million cover hurricane related expenses damaged shoreline protection system covered insurance together certain civil work substantially replaced 2000 cost 28 million september 1998 hurricane georges damaged components st eustatius facility however operations significantly impacted hurricane returned normal within days storm 1998 recorded charge 08 million representing insurance deductible 05 million related hurricane damage certain costs resulting hurricane recovered insurance policies loss sale assets fully discussed note 12 notes consolidated financial statements recognized loss sale statia terminals southwest inc year ended december 31 1998 17 million interest expense years ended december 31 1999 1998 incurred 143 million 169 million respectively interest expense interest accrued mortgage notes due 2003 interest expense commitment fees revolving credit facility amortization expense related deferred financing costs bank charges may 1999 repurchased 340 million mortgage notes resulted lower interest amortization expense related debt interest expense commitment fees revolving credit facility significant 1999 1998 provision income taxes provision income taxes 08 million year ended december 31 1999 compared 03 million period 1998 provision income taxes increased 1999 contemplation potential additional income tax assessments jurisdictions operate extraordinary charge related early extinguishment debt fully discussed note 3 notes consolidated financial statements recognized extraordinary charge 47 million year ended december 31 1999 connection repurchase 340 million mortgage notes income tax effect associated extraordinary charge net income loss net loss 23 million year ended december 31 1999 compared net income 45 million period 1998 decrease 68 million decrease net income attributable net effect factors discussed selected quarterly financial information following table sets forth selected unaudited quarterly operating results last eight quarters information prepared us basis consistent audited financial statements includes adjustments consisting normal recurring adjustments consider necessary fair presentation data quarterly results necessarily indicative future results operations information read conjunction consolidated financial statements notes thereto included elsewhere report quarterly reports form 10q liquidity capital resources cash flow operating activities net cash provided operating activities 195 million 110 million 225 million years ended december 31 1998 1999 2000 respectively cash flow operations primary source liquidity periods differences net losses positive operating cash flow resulted primarily depreciation amortization burdens noncash charges changes various working capital accounts periodically purchase refined petroleum products resale product sales inventory balances change based activities december 31 1999 2000 inventory balances 32 million 16 million respectively cash flow investing activities net cash used investing activities 41 million 86 million 86 million years ended december 31 1998 1999 2000 respectively investing activities 1998 1999 2000 included purchases property equipment 107 million 86 million 86 million respectively see capital expenditures additionally fully discussed note 12 notes consolidated financial statements july 29 1998 received 65 million cash proceeds sale brownsville texas facility cash flow financing activities april 28 1999 parent completed initial public equity offering 76 million class common shares offering price 20 per share raising gross proceeds parent 152 million portion offering proceeds used parent purchase additional capital stock statia terminals international amounting 337 million net certain expenses offering allocated us may 1999 used proceeds sale statia terminals internationals capital stock along existing cash repurchase open market principal amount 34 million 11 34 first mortgage notes 395 million including acquisition costs 37 million discussed note 9 notes consolidated financial statements march 2000 ownership mv statia responder one emergency response maintenance support vessels transferred subsidiary parent result dividend us amount 47 million representing net book value vessel february 2001 declared paid dividend parent totaling 12 million year ended december 31 2000 declared dividends parent totaling 67 million year ended december 31 1999 declared dividends parent totaling 125 million 38 million remained payable december 31 1999 paid 2000 year ended december 31 1998 paid dividend parent 15 million additionally year ended december 31 1998 utilized net proceeds sale brownsville texas facility pay 615 million parent 175 million revolving credit facility secured accounts receivable oil inventory revolving credit facility available working capital needs letter credit financing permits us borrow accordance available borrowing base estimated 110 million december 31 2000 revolving credit facility bears interest prime rate plus 05 per annum 85 march 30 2001 expire november 27 2001 december 1999 first second quarters 2000 borrowed revolving credit facility borrowings repaid may 2000 outstanding balance december 31 2000 debt service costs associated borrowings mortgage notes impose significant burden liquidity mortgage notes accrue interest 11 34 per annum payable semiannually may 15 november 15 mortgage notes mature november 15 2003 discussed note 5 notes consolidated financial statements mortgage notes redeemable whole part option redemption prices set forth indenture relating mortgage notes terms indenture may also forego redemption process repurchase mortgage notes open market time prior november 15 1999 allowed redeem repurchase 35 aggregate principal amount mortgage notes proceeds one equity offerings discussed note 3 notes consolidated financial statements may 1999 connection parents initial public offering equity repurchased open market principal amount 34 million mortgage notes indenture generally limits incurrence additional debt us limits ability pay dividends parent make distribution parent limits ability sell assets may incur additional indebtedness long consolidated fixed charge coverage ratio least 20 1 fixed charge coverage ratio indenture ebitda fixed charges computed set forth indenture respect mortgage notes indenture requires ebitda adjusted specified noncash income expense items compute indenture ebitda terms indenture may pay parent dividend time declaration default event default indenture shall occurred continuing shall occur consequence thereof consolidated fixed charge coverage ratio defined indenture prior four full quarters less 20 1 amount dividend added aggregate amount dividends specific restricted payments made us november 27 1996 covered exceptions indenture exceeds sum specified sum 50 consolidated net income defined indenture taken one accounting period november 27 1996 end recently ended fiscal quarter internal financial statements available time dividend aggregate consolidated net income deficit minus 100 aggregate deficit plus net cash proceeds issuance sale november 27 1996 capital stock parent andor third parties dividends generally unrelated operating cash flow permitted notwithstanding second third items march 30 2001 event default existed continuing consolidated fixed charge coverage ratio defined indenture 24 1 december 31 2000 additionally december 31 2000 sum dividends restricted payments aggregate consolidated net income deficit capital stock proceeds approximately 165 million believe cash flow generated operations amounts available revolving credit facility sufficient maturity mortgage notes fund working capital needs capital expenditures operating requirements including expenditures required applicable environmental laws regulations service debt unlikely able repay mortgage notes maturity projected operating cash flow necessary refinance portion mortgage notes redeem mortgage notes additional equity funds maturity november 15 2003 continuously monitor financial market conditions financial position determine whether refinance redeem portion mortgage notes prior maturity although intend refinance believe able refinance mortgage notes prior november 15 2003 operating performance ability service refinance mortgage notes extend refinance revolving credit facility subject future economic conditions commercial financial factors many beyond control assurances able repay maturity refinance indebtedness whole part terms acceptable us unable repay refinance mortgage notes prior maturity forced adopt alternative strategies may include seeking additional equity capital expenditures spent 107 million 86 million 86 million years ended december 31 1998 1999 2000 respectively amounts include 17 million 10 million 04 million respectively spent enhance ability generate incremental revenues 1998 1999 2000 majority capital expenditures related sustaining existing operations including terminal marine maintenance programs amount spent 2000 also includes 28 million related repairs shoreline protection system st eustatius damaged hurricane lenny 1999 salt deposit identified parcel land near point tupper facility frequently salt caverns developed deposits salt caverns used around world storing hydrocarbon products investigating salt deposit approximately three years plan continue investigate 2001 date obtained license governmental authorities work done analyze usefulness property deposit storage natural gas hydrocarbons point time established sufficient information determine whether project ever produce income however anticipated project prove successful would produce revenues least three years project like project may become involved require adequate prospective returns order developed february 2001 capitalized 09 million related project abandoned may incur immediate charge writeoff amounts capitalized reviewing certain commercially available software determine software perform extend functions terminal operations software date developed internally concluded commercially available software perform functions internally developed terminal operations software without substantial modification therefore determined continue internal development enhancement current terminal operations software december 31 2000 capitalized costs related internally developed software approximately 09 million capital expenditure budget 2001 120 million primarily items sustain existing operations spending producing incremental revenues estimated 20 million contingent upon securing additional business continuation certain development projects 2001 maintenancerelated capital expenditure forecast 100 million includes certain expenditures originally budgeted prior periods completed prior periods following table sets forth capital expenditures location separates expenditures produce potential produce incremental revenue sustain existing operations summary capital expenditures location dollars thousands 1 sold brownsville texas facility july 29 1998 2 includes expenditures us flagged marine equipment utilized primarily netherlands antilles environmental health safety matters subject comprehensive periodically changing environmental health safety laws regulations within jurisdictions operations including governing oil spills emissions air pollutants discharges wastewater storm water disposal nonhazardous hazardous waste 1998 1999 2000 capital expenditures compliance environmental health safety laws regulations approximately 27 million 25 million 18 million respectively figures include routine operational compliance costs disposal hazardous nonhazardous solid waste approximately 09 million 12 million 03 million 1998 1999 2000 respectively believe presently substantial compliance applicable laws regulations governing environmental health safety matters castle harlan acquisition agreement includes covenant whereby praxair shall assume financial responsibility environmental investigation remediation upgrade costs point tupper respect seven identified items environmental investigation remediation covenant subject dollar limitations aggregating 42 million respect costs covered praxair covenant dollar limitations however cannot guarantee praxair pay indemnified amounts without dispute delay past use point tupper facility including past operation others oil refinery resulted particular onsite areas known potential contamination described canadian environmental health safety laws owner operator facility held liable mitigation remediation damages arising yet unknown environmental health safety conditions facility connection castle harlan acquisition 1996 phase limited phase ii environmental site assessments conducted point tupper terminal identify potential environmental health safety matters particular environmental matters conditions likely require incurrence costs identified praxair agreed pay costs addressing matters subject cases monetary limitations discussed since undertaken accordance environmental health safety laws investigation remediation upgrade actions address recently identified matters respect foregoing environmental liabilities costs praxair connection castle harlan acquisition paid approximately 52 million december 31 2000 based investigation conducted information available date potential cost additional remediation compliance related foregoing matters currently estimated approximately 13 million praxair required castle harlan acquisition agreement pay costs additional remediation compliance generally meeting obligations accrued total 15 million 1996 cover environmental health safety costs identified covered agreement praxair december 31 2000 02 million amount expended periodically review adequacy accrual 1999 2000 determined 025 million 02 million originally provided environmental contingencies respectively longer necessary accordingly portion accrual eliminated credited costs terminaling revenues 2000 identified certain environmental health safety costs covered agreement praxair accrued 02 million related costs believe environmental health safety costs material adverse effect companys financial position cash flows results operations subject reimbursements praxair give assurance additional liabilities discovered future existing future environmental health safety laws outside scope praxair agreement material addition give assurance incur material expenses praxair pays amounts praxair ultimately would responsible anticipate incur additional capital operating costs future comply currently existing laws regulations amendments laws regulations new regulatory requirements arising recently enacted statutes possibly new statutory enactments government regulatory agencies yet promulgated final standards proposed environmental health safety programs cannot time reasonably estimate cost compliance additional requirements take effect several years timing costs however believe costs material adverse effect business financial condition results operations political inflation currency interest rate risks periodically evaluate political stability economic environment countries operate result evaluations presently aware matters may adversely impact business results operations financial condition general rate inflation countries operate relatively low recent years causing modest impact operating costs typically inflationary cost increases result adjustments storage throughput charges longterm contracts generally contain price escalation provisions product sales prices based active markets generally able pass cost increases customers except minor local operating expenses canadian dollars netherlands antilles guilders certain canadian dollardenominated revenues transactions us dollars therefore believe significantly exposed exchange rate fluctuations present debt obligations carry fixed rate interest revolving credit facility varies changes lenders prime lending rate loan collateralized mv statia responder indexed three month london interbank offered rates therefore believe exposure interest rate fluctuations minimal tax matters st eustatius facility qualified designation free trade zone point tupper facility qualified designation customs bonded warehouse status allows customers us transship commodities destinations minimal netherlands antilles canadian tax effects free zone profit tax agreement island government st eustatius expired december 31 2000 agreement required payment minimum annual tax 500000 netherlands antilles guilders approximately 282000 agreement provided amounts paid meet minimum annual payment would available offset future tax liabilities agreement extent minimum annual payment greater 2 taxable income adhering terms agreement since expiration discussions regarding modification extension agreement progress believe although terms conditions could modified amounts payable may increase decrease extension agreement likely however beneficial tax status facilities terminated significant adverse modifications made tax agreement business financial condition results operations cash flows may adversely affected tax rates jurisdictions operate change significantly 1998 2000 net operating tax loss carryforwards available offset canadian taxable income december 31 2000 487 million majority expire 2001 investment tax credit carryforwards available reduce canadian income taxes 18 million december 31 2000 majority expire 2002 net operating tax loss carryforwards available offset us taxable income december 31 2000 41 million expire various amounts 2019 provided full valuation allowance deferred tax assets certain deferred tax assets utilized future insurance maintain insurance policies insurable risks levels consider appropriate present time carry business interruption insurance due believe excessive premium costs coverage provided however carry business interruption insurance offshore single point mooring system believe adequately insured future losses could exceed insurance policy limits adverse interpretations excluded coverage future liability costs incurred circumstances could adversely impact business financial condition results operations cash flows current insurance program commenced march 31 2001 generally extends 12 months property insurance covers damage real personal property located two terminals administrative offices property loss limit 150 million 025 million deductible except 125 million property loss limit certain losses wind flood earthquake etc st eustatius certain property losses deductible 10 million 25 loss whichever greater carry various layers liability coverage 200 million deductible 025 million including coverage liabilities associated certain accidental spills carry 30 million property coverage offshore single point mooring system st eustatius deductible 025 million coverage scheduled values damage marine vessels 50000 deductible also carry insurance customary industry accounting standards policies effective january 1 2001 adopted statement financial accounting standards sfas 133 accounting derivative instruments hedging activities amended sfas nos 137 138 establishes standards accounting derivative instruments including specific hedge accounting criteria adoption sfas 133 material impact us accounting standards executive committee acsec american institute certified public accountants currently formulating new accounting standard expected modify accounting rules major repairs maintenance expenditures among things acsec yet released draft proposed standard public comment expected shortly therefore cannot determine present time whether ultimate implementation final standard us material effect business financial condition results operations cash flows item 7a item 7 managements discussion analysis financial condition results operations purposes discussion reference made consolidated financial statements statia terminals international nv subsidiaries december 31 1995 1996 years ended december 31 1994 1995 postpraxair acquisition income cashflow statements period january 1 1996 november 27 1996 postchpii acquisition income cash flows statements period november 27 1996 december 31 1996 company prepares financial statements accordance us generally accepted accounting principles facilitate meaningful discussion companys comparative operating performance years ended december 31 1994 1995 1996 financial information managements discussion analysis financial condition results operations presented traditional comparative basis periods unless otherwise indicated consequently information presented year ended december 31 1996 necessarily comply accounting requirements companies subject major acquisitions generally accepted accounting principals us call separate reporting new company postchpii acquisition predecessor companies pre postpraxair acquisitions solid black line inserted tables financial information may comparable across periods substantially companys transactions denominated us dollars figures us dollars unless otherwise indicated overview primarily result increased storage capacity 116 million barrels december 31 1993 204 million barrels december 31 1995 1996 additional product sales total revenues increased 1327 million year ended 1994 1560 million year ended 1996 company expanded third location point tupper nova scotia 1992 completed refurbishment 74 million barrel facility 1994 total capital investment 741 million st eustatius fourth quarter 1993 company commenced construction five million barrels crude oil storage spm system st eustatius crude project completed leased first quarter 1995 total capital investment 1075 million three year period 1993 1995 company added crude oil storage related services established fuel oil clean products consumable oils chemicals storage related services addition blending ancillary services company added marine emergency response services st eustatius point tupper limited refining capability atmospheric distillation unit st eustatius 1995 finally fourth quarter 1995 first quarter 1996 investments made heating system lpg sphere point tupper additions capacity led throughput therefore higher revenues storage throughput ancillary services revenues storage throughput ancillary services consisting storage throughput wharfage emergency spill responses terminal services grew 431 million 547 million years ended december 31 1994 1995 respectively fell 498 million year ended december 31 1996 due reduced utilization storage capacity leased throughput vessel calls location capacity throughput thousands barrels primarily result backwardation petroleum markets creates disincentive store oil storage throughput ancillary services revenues operating net income decreased recently storage throughput ancillary services revenues fell 89 1996 year versus comparable period 1995 last year operations st eustatius suffered damages hurricanes iris luis marilyn 1995 hurricanes causing closure terminal third quarter 1995 repair damages caused 1995 hurricanes installation certain improvements substantially completed end third quarter 1996 estimated cost 194 million 126 million recovered insurance carriers remaining 68 million principally expended improvements except inflationary cost increases cost increases due additional storage capacity costs providing additional ancillary services operating costs company relatively fixed generally change significantly changes capacity leased additions reductions storage throughput ancillary service revenues directly impact operating income following tables set forth periods indicated total revenues total operating income loss allocation administrative expenses companys operating locations percentage revenue operating income loss bear total revenue operating income company revenues location dollars thousands operating income loss location dollars thousands 1 operating income loss includes income expenses following table sets forth periods indicated percentage revenues represented certain items combined statements income company table subsequent discussion read conjunction consolidated financial statements appearing page annual report form 10 k historical operating results necessarily indicative future operating results business financial condition company dollars thousands comparison twelve months ended december 31 1995 1996 revenues aggregated 1560 million twelve months ended december 31 1996 increase 205 million 151 twelvemonth results 1995 1355 million revenue increase primarily due strong demand bunker fuels st eustatius partially offset reduced storage throughput ancillary services revenues st eustatius point tupper locations storage throughput ancillary services generally produce higher gross margins bunker fuel bulk product sales activities gross profit operating income net income loss years ended december 31 1995 1996 comparable due effects purchase accounting applied result praxair acquisition chpii acquisition depreciation amortization operating expenses components gross profit changed revaluation various assets fair values acquisition dates changes components companys debt equity accounts resulted changes interest expense costs services products sold yeartoyear change mix revenues increases operating administrative expenses primarily nonrecurring stockbased compensation earned upon praxairs divestiture company contributed 587 decrease operating income 109 million 1995 45 million 1996 storage throughput ancillary revenues 498 million twelve months ended december 31 1996 compared 547 million 49 million 89 period 1995 st eustatius storage throughput ancillary services revenues 18 million 44 due primarily reduction tankage leased fuel oil reduction associated throughput volume point tupper revenues 35 million 310 due primarily reduction tankage leased refined products reduction crude oil throughput volume decreases location primarily due nonrenewal storage leases customers result backwardation petroleum markets reduced throughput existing customers uncertainty companys future ownership due praxairs announced plan dispose business revenues sale bunker fuel bulk oil products 1061 million twelve months ended december 31 1996 compared 808 million 1995 increase 253 million 313 change due primarily increase bunker fuel volume delivered higher average selling prices partially offset reduction bulk product volume sold st eustatius bunker fuel volume delivered rose 358 average selling prices rose 94 comparing twelve month periods ended december 31 1995 1996 gross margins bunker fuel bulk product sales dollar terms percentage revenues little changed comparing similar figures twelve month periods 1995 1996 volumes bulk product sales 416 comparing twelve month periods gross margins improved slightly point tupper company commenced delivery bunker fuel first quarter 1996 generating revenues 44 million 1996 year brownsville texas terminal held sale improved storage throughput revenue primarily vegetable oils asphalt lead total revenues prior elimination intercompany revenue 33 million 1996 08 million 320 1995 total revenues 25 million elimination intercompany revenues consideration additional operating expenses 1996 changes operating loss 1995 year 1996 year significant brownsville operation leased 520 available capacity 1996 compared 461 1995 however throughput decreased 33 million barrels 1995 25 million barrels 1996 operating expenses including depreciation amortization included line item cost services products sold 395 million twelve months ended december 31 1996 compared 366 million period 1995 increase 29 million 79 inception operations st eustatius crude project first quarter 1995 personnel costs related fringe benefits marine charter costs expenses gradually increased st eustatius facility incurred full year costs 1996 incurring approximately nine months costs 1995 company also incurred higher insurance costs fees professional services include fees chpii acquisition twelve months 1996 compared period 1995 company expects certain expenses professional fees recur insurance costs increase connection increasing coverage collateral securing notes result companys inability reduce risk management costs pooling costs cbi praxair administrative expenses increased 69 million 1995 87 million 1996 increase 12 million 174 increase primarily due nonrecurring stockbased compensation 30 million awarded management earned upon praxairs divestiture company offset reduction parent company administration fees 12 million interest expense related third party debt 45 million 57 million years ended december 31 1995 1996 respectively net interest capitalized capital projects effects interest rate swap first quarter 1996 due praxair acquisition companys term revolving debt refinanced resulting changes interest rates conjunction chpii acquisition previously existing bank debt fully satisfied 1134 first mortgage notes issued tax rates jurisdictions company operates change significantly 1995 1996 certain income tax liabilities incurred prior november 27 1996 assumed praxair company retained net operating loss carryforwards us 75 million canada result praxair acquisition cbi january 12 1996 company following pushdown accounting rules recognized 855 million reduction property equipment january 1 1996 company wrote approximately 99 million goodwill intangible assets resulting prior acquisitions transactions result reduction write 1996 depreciation amortization expenses company decreased 47 million annualized basis comparison twelve months ended december 31 1994 1995 year ended december 31 1995 revenues 1355 million increase 29 million 22 annual revenues 1994 1327 million company experienced gains bunker fuel sales storage throughput services revenues decreases bulk product sales due primarily 247 increase operating expenses 292 increase selling administrative expenses income operations fell 172 million 1994 109 million 1995 decrease 63 million 366 company incurred additional expenses anticipation significant growth including higher terminal throughput particularly point tupper brownsville companys management believes third fourth quarter operating income 1995 lower results would st eustatius facility impacted 1995 hurricanes primarily due lost business temporary shut st eustatius facility primarily result completion subsequent lease st eustatius crude project first quarter 1995 additional bunker sales revenues st eustatius increased 1219 million 1150 million 1994 increase 69 million 60 partially offsetting growth revenues reduction bulk product sales detrimental impact 1995 hurricanes st eustatius revenues storage throughput services amounted 410 million 1995 increase 156 million 614 1994 results 254 million increase due higher utilization throughput volumes particularly st eustatius crude project resulting higher revenues storage leases throughput charges dock charges emergency response fees charges percentage capacity leased 1995 904 compared 873 1994 throughput volumes increased 342 million barrels 724 million barrels increase 382 million barrels 1117 primarily result 501 million barrels crude oil transshipped st eustatius crude project year revenues delivery bunker fuel amounted 649 million 1995 increase 104 million 189 1994 revenues 545 million increase primarily due 85 increase volumes delivered company experienced larger quantities delivered fewer vessels 1995 versus 1994 allowed company benefit economies scale large deliveries including efficient use equipment bunker sales also affected increase average selling prices approximately 96 company experienced general market price increases slight change mix bunker fuel sold movement toward higher quality fuel oil sales command higher price bulk product sales generated revenues 160 million 1995 compared 351 million 1994 1995 result shifting primary customer base utilities commercial interests caribbean company realized smaller volume higher margin sales previous years company bought cargo size lots petroleum products key supplier resale utilities us revenues storage throughput services point tupper aggregated 112 million 1995 compared 122 million 1994 82 decrease due part backwardation oil markets clean product tanks approximately 52 point tupper facility remained vacant 1995 614 total available tankage leased compared 860 1994 however total throughput amounted 341 million barrels 1995 increase 146 million barrels 749 1994 throughput 195 million barrels throughput increase due primarily full utilization terminals crude oil capacity 1995 compared partial utilization 1994 reactivation crude portion facility completed leased third quarter 1994 terminal brownsville texas held sale generated revenues 25 million 1995 545 30 million 1994 revenues 55 million primary cause decrease devaluation mexican peso december 1994 corresponding negative effect mexican economy 1995 mexican economic conditions caused several customers stored petroleum vegetable oils 1994 renew leases return tanks previously utilized seasonal periods brownsville leased 461 available capacity 1995 compared 878 1994 total throughput barrels amounted 33 million 1995 versus 69 million barrels 1994 additionally reduced utilization tankage led lower revenues ancillary services operating expenses included cost services products sold 1995 year 366 million increase 73 million 249 1994 expenses 293 million primarily due additional depreciation personnel expenses related st eustatius crude project commenced operations first quarter 1995 completion renovation subsequent lease crude facility point tupper commenced operations third quarter 1994 company also experienced increase marine charter crew costs st eustatius due need additional tug emergency response capabilities offsetting yeartoyear increase change depreciable lives certain assets order conform closely industry standards company depreciating tanks jetties 20 15 years respectively changed estimated useful life 40 25 years respectively reducing depreciation expenses 34 million 1995 administrative expenses increased 53 million 1994 69 million 1995 increase 16 million 302 increase due higher allocation administrative charges cbi addition personnel salary increases consisting primarily cost living adjustments moving expenses company relocated administrative office supervisory policy decisions made miami florida deerfield beach florida summer 1995 interest expense related third party debt 31 million 45 million year ended december 31 1994 1995 respectively net interest capitalized capital projects effects interest rate swap higher interest expense due higher average interest rates charged companys floating rate loans higher average borrowings outstanding tax rates jurisdictions company operates change significantly 1994 1995 provision income taxes fell 12 million 1994 04 million 1995 primarily reduction earnings brownsville terminal 1994 brownsville pretax income 12 million resulting tax provision 08 million 1995 operation pretax loss 16 million secondly company incurred minimum profit tax payable free zone profit tax agreement netherlands antilles 03 million 1994 1995 paid share large corporation tax canada 1994 1995 consequently effective tax rate company 86 1994 versus 61 1995 december 31 1995 point tupper terminal net operating loss carryforwards 80 million plus investment tax credits available offset future taxable income liquidity capital resources part chpii acquisition company received capital contribution 985 million parent consisting 555 million cash 430 million equity certain statias subsidiaries issued 1350 million first mortgage notes series subsequently exchanged notes portion contributed capital proceeds issuance first mortgage notes series used company pay approximately 1741 million cash praxair 1690 million paid closing 51 million paid february 1997 satisfy cash portion purchase price ii pay 160 million commissions fees expenses connection chpii acquisition prior november 27 1996 existing indebtedness company including offbalance sheet lease obligation bank debts preferred stock former affiliate advances praxair repaid addition november 27 1996 company subsidiaries entered new 175 million revolving credit facility secured companys accounts receivable oil inventory draws revolving credit facility occurred may 13 1997 facility bares interest prime rate plus 50 per annum 875 december 31 1996 expire november 27 1999 debt service costs associated borrowings notes revolving credit facility significantly increase liquidity requirements notes accrue interest 1134 per annum payable semiannually commencing may 15 1997 notes mature november 15 2003 indenture relating notes limits incurrence additional debt company limits ability company pay dividends redeem capital stock limits companys ability sell assets company may incur additional indebtedness long consolidated fixed charge coverage ratio greater certain minimum levels indenture revolving credit facility long event default occurred restrictions distribution subsidiaries funds statia canada form cash dividends loans advances except cash companys canadian subsidiaries prior chpii acquisition company participant praxaircbis cash management system whereby cash receipts swept former parents investment program cash operations capital expansion funded operations company former parent debt facilities available company guaranteed former parent 1994 cash operations provided 257 million advances companys parent provided 83 million sales preferred stock affiliate provided 75 million major uses cash 1994 capital expenditures 254 million exclusive 866 million financed offbalance sheet first salute leasing lp dividends companys former parent affiliates amount 218 million 1995 major sources cash 259 million companys former parent 115 million operations major use cash 371 million capital expand sustain operations 1996 prior chpii acquisition cash provided operations 92 million proceeds insurance claims related 1995 hurricanes 126 million net advances praxair approximately 193 million exclusive advances related repayment existing indebtedness used finance purchase property equipment 146 million pay dividends praxair affiliates 258 million since november 27 1996 company paid adjustment purchase price relating chpii acquisition 51 million incurred relatively capital expenditures 19 million period november 27 1996 march 31 1997 steadily accumulated cash generated operations company believes cash flow generated operations amounts available revolving credit facility sufficient maturity notes fund working capital needs fund capital expenditures operating requirements including expenditures required applicable environmental laws regulations service debt companys operating performance ability service refinance notes extend refinance revolving credit facility subject future economic conditions financial business factors many beyond companys control assurance companys future operating performance sufficient service indebtedness company able repay maturity refinance indebtedness whole part capital expenditures company spent 254 million 371 million 157 million 1994 1995 1996 respectively capital expenditures 186 million 272 million 16 million respectively spent enhance companys ability generate incremental revenues figures exclude 885 million balance sheet financing incurred 1993 1994 1995 st eustatius crude project 1994 company purchased retrofitted emergency response vessel operation st eustatius completed reactivation crude tankage point tupper among projects 1995 point tupper company initiated construction 55000 barrel lpg sphere fuel oil heating system purchased spill response vessels equipment capital expenditures 1996 primarily improvements made connection 1995 hurricanes future capital expenditures expected lower recent years significant expansion projects currently planned capital expenditures 1997 projected approximately 75 million consisting primarily maintenance related expenditures replacement certain equipment held sale following table sets forth capital expenditures location separates expenditures produce potential produce incremental revenue sustain existing operations summary capital expenditures location dollars thousands 1 excludes repairs improvements 81 million spent 1995 2 includes purchase first salute leasing lp assets 3 includes 69 million capitalized hurricane related enhancements company financed st eustatius crude project leveraged lease arrangement effectively removing 885 million assets liabilities balance sheet company leased land special purpose financing entity first salute leasing l p upon crude tanks constructed facilities st eustatius crude project leased back company life lease company accounted monthly lease payments consisting primarily interest underlying financing recognized accrual towards residual guarantee value within line item cost services products sold 1995 1996 company paid 57 million 56 million respectively first salute leasing lp consisted primarily interest costs underlying debt obligations lease satisfied prior chpii acquisition related assets included balance sheet time assets held sale stsw owns companys terminal near brownsville texas parent statia delaware holdco ii inc incorporated delaware held sale following table sets forth periods indicated consolidated income operations adjustments reflect operating income less income loss brownsville terminal adjusted certain ongoing administrative expenses related assets retained operating income ongoing operations dollars thousands addition companys emergency spill response vessel mv megan gambarella held sale upon disposition vessel company anticipates capital expenditures 15 million replace certain equipment sold vessel necessary efficient operation terminal st eustatius management company estimated proceeds sales assets aggregate 200 million reclassified amount property equipment assets held sale balance sheet actual proceeds sales may equal estimates assets held sale expected remain operation disposition revenues costs associated operating assets included companys consolidated financial statements none companys debt interest thereon allocated assets environmental matters companys subsidiaries subject comprehensive periodically changing foreign federal state local environmental laws regulations including governing oil spills emissions air pollutants discharges wastewater storm waters disposal nonhazardous hazardous waste 1994 1995 1996 capital expenditures company compliance environmental laws regulations approximately 14 million 34 million 13 million respectively expenditures 1994 1995 consisted primarily purchase spill response vessels equipment point tupper comply new canadian legislation figures include routine operational compliance costs disposal hazardous nonhazardous solid waste approximately 03 million 06 million 04 million 1994 1995 1996 respectively company believes presently substantial compliance applicable laws regulations governing environmental matters connection chpii acquisition studies undertaken praxair identify potential environmental health safety matters certain matters involving potential environmental costs identified point tupper facility praxair agreed pay certain costs currently estimated approximately 31 million representing certain investigation remediation compliance capital costs extent certain matters exceed estimate praxair agreed reimburse company future expenditures additionally company identified additional environmental costs point tupper approximately 15 million future costs expensed incurred capitalized property equipment company believes environmental costs subject foregoing reimbursements material adverse effect companys financial position results operations company anticipates incur additional capital operating costs future comply currently existing laws regulations new regulatory requirements arising recently enacted statutes possibly new statutory enactments us foreign government regulatory agencies yet promulgated final standards proposed environmental programs company cannot time reasonably estimate cost compliance additional requirements take effect several years timing costs however management believes costs material adverse effect companys business financial condition results operations see item 1 business environmental health safety matters discussion matters company periodically evaluates political stability economic environment countries operates result evaluations company presently aware matters may adversely impact business results operations financial condition general rate inflation countries company operates relatively low recent years causing modest impact operating costs typically inflationary cost increases result adjustments storage throughput charges longterm contracts contain price escalation provisions bunker fuel bulk product sales prices based active markets company generally able pass cost increases customers except minor local operating expenses canadian dollars netherlands antilles guilders companys transactions us dollars therefore company believes significant exposure exchange rate fluctuation company maintains insurance policies insurable risks levels considers appropriate present time company carry business interruption insurance due company believes excessive premium costs coverage provided company believes adequately insured future losses could exceed insurance policy limits adverse policy interpretations excluded coverage future liability costs incurred circumstances could adversely impact cash flow item 8 item 7 managements discussion analysis financial condition results operations purposes discussion reference made consolidated balance sheets december 31 1998 1999 statia terminals international nv reference also made consolidated statements income loss stockholders equity cash flows years ended december 31 1997 1998 1999 substantially transactions denominated us dollars figures us dollars unless otherwise indicated prepare financial statements accordance us generally accepted accounting principles overview operations began operations 1982 statia terminals nv netherlands antilles corporation operating oil products terminal located island st eustatius 1984 cbi industries industrial gases contracting services company acquired controlling interest statia terminals nv 1986 statia terminals nv purchased statia terminals southwest facility brownsville texas 1990 cbi industries became sole owner statia terminals nv statia terminals southwest 1993 acquired full control statia terminals point tupper incorporated located point tupper nova scotia january 1996 praxair acquired cbi industries november 1996 castle harlan partners ii lp management others acquired praxair outstanding capital stock statia terminals nv statia terminals inc subsidiaries certain affiliates castle harlan partners ii lp private equity investment fund managed castle harlan inc private merchant bank time statia terminals point tupper amalgamated statia terminals canada inc statia terminals canada statia terminals international nv statia terminals group nv organized purposes facilitating castle harlan acquisition assist financing castle harlan acquisition sold 135 million 11 34 first mortgage notes july 1998 sold statia terminals southwest unaffiliated third party purchaser september 1998 hurricane georges caused 85 million damage components st eustatius facility insulation certain storage tanks electrical transmission systems roofs several buildings sustained damage third quarter 1998 recorded charge 08 million consisting insurance deductible 05 million related hurricane damage expenses insurance proceeds related storm expected total 77 million 31 million collected december 31 1999 remaining 46 million anticipated collected april 2000 hurricane georges significantly impact operations facility returned normal within days storm result damages sustained st eustatius facility hurricane lenny late november 1999 incurred onetime noncash charge 15 million partially reduce carrying value shoreline protection system onetime cash charge 03 million cover hurricane related expenses damaged shoreline protection system covered insurance together civil work expected replaced first half 2000 cost 28 million following table sets forth periods indicated total capacity leased throughput vessel calls operating locations total capacity represents average storage capacity available lease period capacity leased represents storage capacity leased third parties weighted number days leased month divided capacity available lease throughput volume total number inbound barrels discharged vessel tank rail car tanker truck including acrossthedock tanktotank transfers vessel call occurs vessel docks anchors one terminal locations order load andor discharge cargo andor take bunker fuel dockage anchorage counted one vessel call regardless number activities carried vessel call also occurs sell deliver bunker fuel vessel calling terminals purposes statistics measure utilization facilities equipment capacity leased throughput vessel calls location capacity throughput thousands barrels 1 brownsville texas facility sold july 29 1998 statistics exclude operations brownsville facility majority revenues generated product sales fluctuate global oil prices result experience volatility revenue stream necessarily indicative profitability gross profits terminaling services generally higher gross profits product sales operating costs terminaling services relatively fixed generally change significantly changes storage capacity leased addition operating costs impacted inflationary cost increases changes storage capacity changes ancillary services offered us additions reductions storage throughput ancillary service revenues directly impact gross profit costs procurement petroleum products sale variable linked global oil prices product costs also impacted market supply conditions types products sold volumes delivered results operations following table sets forth periods indicated percentage revenues represented items consolidated income statements results operations dollars thousands following tables set forth periods indicated total revenues total operating income loss allocation administrative expenses elimination intercompany transactions operating locations b percentage revenue operating income loss relate total revenue operating income note sold brownsville texas facility july 29 1998 figures consolidated financial statements include brownsville facility june 30 1998 revenues location dollars thousands operating income loss location dollars thousands year ended december 31 1999 compared year ended december 31 1998 comparability july 29 1998 sold statia terminals southwest unrelated third party consolidated financial statements include operations statia terminals southwest june 30 1998 therefore year ended december 31 1998 includes operations statia terminals southwest six months year ended december 31 1999 includes operations statia terminals southwest additionally discussed detail may 1999 repurchased open market principal amount 34 million 11 34 first mortgage notes proceeds sale common stock transactions impacted 1999 financial condition results operations therefore comparability prior years revenues total revenues year ended december 31 1999 1683 million compared 1368 million year ended december 31 1998 increase 315 million 231 revenues terminaling services resulting revenue storage throughput dock usage emergency response terminal services year ended december 31 1999 617 million compared 666 million previous year decrease 49 million 74 decrease terminaling services revenue year ended december 31 1999 compared previous year principally due adverse effects accord established many oil producing nations business raise crude oil prices reducing supply members accord reduced production crude oil turn reduced worldwide quantity crude oil petroleum products storage accord signed march 1999 became effective april 1 1999 oneyear term accord primarily impacted terminaling services revenues beginning second half 1999 continuing date certain customers chose renew storage contracts year ended december 31 1999 approximately 69 tank capacity leased pursuant longterm contracts st eustatius point tupper locations together approximately 60 storage throughput revenues excluding related ancillary services derived longterm contracts period revenues terminaling services st eustatius decreased approximately 14 million 32 year ended december 31 1999 compared year ended december 31 1998 due decreased throughput lower percentage capacity leased total throughput decreased 742 million barrels year ended december 31 1998 617 million barrels 1999 due primarily decreased throughput crude oil petroleum products twelve fewer cargo vessels called st eustatius facility year ended december 31 1999 period 1998 resulting lower revenues port charges consist dock charges emergency response fees terminal charges year ended december 31 1999 overall percentage capacity leased facility 90 compared 92 period 1998 reflecting decrease percentage capacity leased residual fuel oil tankage partially offset increase percentage capacity leased clean products revenues terminaling services point tupper decreased 23 million 113 year ended december 31 1999 compared year ended december 31 1998 decrease due lower percentage capacity leased fewer vessel calls year ended december 31 1999 percentage tank capacity leased point tupper decreased 93 year ended december 31 1998 79 period 1999 decrease primarily result decision customer facility participant accord renew crude oil storage contract end second quarter 1999 fewer vessels called year ended december 31 1999 compared period 1998 led lower revenues port charges facility revenues product sales 1067 million year ended december 31 1999 compared 701 million period 1998 increase 366 million 521 increase primarily due increases volume products delivered increases average selling prices metric tons product sold increased 192 year ended december 31 1999 compared period 1998 average selling prices increased 277 comparing year ended december 31 1999 period 1998 changes average selling prices primarily result changes world oil markets significantly influenced accord gross profit gross profit year ended december 31 1999 307 million compared 309 million period 1998 representing decrease 02 million 06 decrease gross profit primarily result lower gross profits realized terminaling services partially offset higher dollar gross margins realized product sales administrative expenses administrative expenses 80 million year ended december 31 1999 compared 73 million period 1998 representing increase 07 million 99 increase year ended december 31 1999 compared period 1998 primarily result higher personnel related costs special compensation expenses fully discussed note 3 notes consolidated financial statements recorded special compensation expense year ended december 31 1999 41 million 22 million noncash charge hurricane charges result damages sustained st eustatius facility hurricane lenny late november 1999 incurred onetime noncash charge 15 million partially reduce carrying value shoreline protection system onetime cash charge 025 million cover hurricane related expenses damaged shoreline protection system covered insurance together certain civil work expected replaced first half 2000 cost 28 million september 1998 hurricane georges damaged components st eustatius facility however operations significantly impacted hurricane returned normal within days storm 1998 recorded charge 800 representing insurance deductible 500 related hurricane damage certain costs resulting hurricane recovered insurance policies loss sale assets fully discussed note 12 notes consolidated financial statements recognized loss sale statia terminals southwest inc year ended december 31 1998 17 million interest expense years ended december 31 1998 1999 incurred 169 million 143 million respectively interest expense interest accrued mortgage notes due 2003 interest expense commitment fees revolving credit facility amortization expense related deferred financing costs bank charges may 1999 repurchased 340 million mortgage notes resulted lower interest amortization expense related debt interest expense commitment fees revolving credit facility significant 1999 1998 provision income taxes provision income taxes 08 million year ended december 31 1999 compared 03 million period 1998 provision income taxes increased 1999 contemplation potential additional income tax assessments jurisdictions operate extraordinary charge related early extinguishment debt fully discussed note 3 notes consolidated financial statements recognized extraordinary charge 47 million year ended december 31 1999 connection repurchase 340 million 11 34 mortgage notes income tax effect associated extraordinary charge net loss net loss common stockholder 23 million year ended december 31 1999 compared net income 45 million period 1998 decrease 68 million decrease net income attributable net effect factors discussed year ended december 31 1998 compared year ended december 31 1997 comparability july 29 1998 sold statia terminals southwest inc unrelated thirdparty consolidated financial statements include operations statia terminals southwest june 30 1998 therefore year ended december 31 1997 includes operations statia terminals southwest six months period 1998 revenues total revenues year ended december 31 1998 1368 million compared 1425 million year ended december 31 1997 decrease 57 million 40 revenues terminaling services year ended december 31 1998 666 million compared 532 million previous year increase 134 million 253 improvement terminaling services revenue year ended december 31 1998 compared previous year principally due ability attract additional longterm customers use facilities part strategic distribution networks additional vessel calls st eustatius resulting higher dock charges emergency response fees contango conditions international petroleum markets revenues terminaling services st eustatius increased approximately 87 million 242 year ended december 31 1998 compared year ended december 31 1997 total throughput increased 629 million barrels year ended december 31 1997 742 million barrels period 1998 due primarily higher throughput fuel oil petroleum products partially offset reduced throughput crude oil seventytwo vessels called st eustatius facility year ended december 31 1998 period 1997 resulting higher revenues dock charges standby emergency response fees year ended december 31 1998 overall percentage capacity leased facility 92 compared 76 period 1997 reflecting increases percentage capacity leased fuel oil tankage petroleum products revenues terminaling services point tupper increased 51 million 326 year ended december 31 1998 compared year ended december 31 1997 percentage tank capacity leased point tupper increased 70 year ended december 31 1997 93 period 1998 increase primarily result additional crude oil clean petroleum products tankage leased year ended december 31 1998 compared period 1997 fewer vessel calls led lower port charge revenues facility year ended december 31 1998 compared period 1997 revenues product sales 701 million year ended december 31 1998 compared 893 million period 1997 decrease 192 million 215 decrease primarily due lower comparative selling prices bunker fuels reflecting market conditions average selling prices decreased 302 comparing year ended december 31 1998 period 1997 however metric tons product sold increased 136 year ended december 31 1998 compared period 1997 gross profit gross profit year ended december 31 1998 309 million compared 196 million period 1997 representing increase 113 million 578 increase gross profit primarily result increased terminaling services revenue produced small incremental cost additionally realized higher dollar gross margins bunker sales year ended december 31 1998 compared period 1997 due higher volumes bunker fuels delivered administrative expenses administrative expenses 73 million year ended december 31 1998 compared 63 million period 1997 representing increase 10 million 152 increase year ended december 31 1998 compared period 1997 primarily result higher personnel costs professional fees hurricane charges september 1998 hurricane georges damaged components st eustatius facility however operations significantly impacted hurricane returned normal within days storm 1998 recorded charge 800 representing insurance deductible 500 related hurricane damage certain costs resulting hurricane recovered insurance policies loss sale assets fully discussed note 12 notes consolidated financial statements recognized loss sale statia terminals southwest inc year ended december 31 1998 17 million interest expense years ended december 31 1997 1998 incurred 169 million interest expense interest accrued mortgage notes due 2003 amortization expense related deferred financing costs bank charges net loss net income available common stockholder 45 million year ended december 31 1998 compared net loss 39 million period 1997 improvement 84 million improvement attributable net effect factors discussed selected quarterly financial information following table sets forth selected unaudited quarterly operating results last eight quarters information prepared us basis consistent audited financial statements includes adjustments consisting normal recurring adjustments consider necessary fair presentation data quarterly results necessarily indicative future results operations information read conjunction consolidated financial statements notes thereto included elsewhere report quarterly reports form 10q liquidity capital resources cash flow operating activities net cash provided operating activities 125 million 195 million 110 million years ended december 31 1997 1998 1999 respectively cash flow operations primary source liquidity periods differences net losses positive operating cash flow resulted primarily depreciation amortization burdens noncash charges changes various asset liability accounts december 31 1999 cash equivalents hand 36 million compared 139 million december 31 1998 accounts receivable accounts payable 167 million 141 million respectively december 31 1999 compared 99 million 90 million respectively december 31 1998 increase accounts receivable accounts payable primarily due changes world oil markets increased selling prices related costs product sales periodically purchase refined petroleum products resale product sales inventory balances change based activities december 31 1999 1998 inventory balances 32 million 45 million respectively cash flow investing activities net cash used investing activities 129 million 41 million 86 million years ended december 31 1997 1998 1999 respectively investing activities 1997 1998 1999 included purchases property equipment 53 million 107 million 86 million respectively see capital expenditures additionally fully discussed note 12 notes consolidated financial statements july 29 1998 received 65 million cash proceeds sale brownsville texas facility year ended december 31 1997 spent 77 million related castle harlan acquisition amount includes 51 million paid february 1997 satisfy remaining cash portion purchase price 26 million commissions fees expenses cash flow financing activities april 28 1999 parent completed initial public equity offering 76 million shares offering price 20 per share raising gross proceeds parent 152 million portion offering proceeds used parent purchase additional capital stock statia terminals international amounting 337 million net certain expenses offering allocated us may 1999 used proceeds sale statia terminals internationals capital stock along existing cash repurchase open market principal amount 34 million 11 34 first mortgage notes 395 million including acquisition costs 37 million year ended december 31 1999 declared dividends parent totaling 125 million 38 million remained payable december 31 1999 subsequently paid years ended december 31 1997 1998 paid dividends parent 27 million 15 million respectively parent used proceeds dividends pay certain management fees discussed note 10 notes consolidated financial statements among things additionally year ended december 31 1998 utilized net proceeds sale brownsville texas facility pay 615 million parent 175 million revolving credit facility secured accounts receivable oil inventory revolving credit facility available working capital needs letter credit financing permits us borrow accordance available borrowing base estimated 106 million december 31 1999 revolving credit facility bears interest prime rate plus 05 per annum 90 december 31 1999 expire november 27 2000 december 1999 borrowed 34 million facility repaid december 31 1999 debt service costs associated borrowings mortgage notes impose significant burden liquidity mortgage notes accrue interest 11 34 per annum payable semiannually may 15 november 15 mortgage notes mature november 15 2003 discussed note 5 notes consolidated financial statements mortgage notes redeemable whole part option time november 15 2000 redemption prices set forth indenture relating mortgage notes terms indenture may also forego redemption process repurchase mortgage notes open market november 15 2000 time prior november 15 1999 allowed redeem repurchase 35 aggregate principal amount mortgage notes proceeds one equity offerings discussed note 3 notes consolidated financial statements may 1999 connection parents initial public offering equity repurchased open market principal amount 34 million mortgage notes indenture generally limits incurrence additional debt us limits ability pay dividends parent make distribution parent limits ability sell assets may incur additional indebtedness long fixed charge coverage ratio least 20 1 fixed charge coverage ratio adjusted ebitda fixed charges computed set forth indenture respect mortgage notes indenture requires ebitda adjusted specified noncash income expense items compute adjusted ebitda terms indenture may pay parent dividend time declaration default event default indenture shall occurred continuing shall occur consequence thereof consolidated fixed charge coverage ratio defined indenture prior four full quarters less 20 1 amount dividend added aggregate amount dividends specific restricted payments made us november 27 1996 covered exceptions indenture exceeds sum specified sum 50 net income defined indenture taken one accounting period november 27 1996 end recently ended fiscal quarter internal financial statements available time dividend aggregate consolidated net income deficit minus 100 aggregate deficit plus net cash proceeds issuance sale november 27 1996 capital stock parent andor third parties dividends generally unrelated operating cash flow permitted notwithstanding second third items march 30 2000 event default existed continuing consolidated fixed charge coverage ratio defined indenture 20 1 december 31 1999 additionally december 31 1999 sum dividends restricted payments consolidated net income deficit capital stock proceeds approximately 195 million believe cash flow generated operations amounts available revolving credit facility sufficient maturity mortgage notes fund working capital needs capital expenditures operating requirements including expenditures required applicable environmental laws regulations service debt operating performance ability service refinance mortgage notes extend refinance revolving credit facility subject future economic conditions financial business factors many beyond control give assurances future operating performance sufficient service indebtedness able repay maturity refinance indebtedness whole part capital expenditures spent 53 million 107 million 86 million years ended december 31 1997 1998 1999 respectively amounts include 09 million 17 million 10 million respectively spent enhance ability generate incremental revenues 1997 capital expenditures made primarily various piping tank enhancements location new warehouse st eustatius 1998 1999 majority capital expenditures related sustaining existing operations including terminal marine maintenance programs initial capital expenditure budget 2000 120 million primarily items sustain existing operations subsequently revised capital expenditure budget 80 million deferring certain previously anticipated expenditures capital expenditure forecast includes approximately 28 million repair damage caused hurricane lenny spent replace damage shoreline protection systems civil infrastructure st eustatius spending producing incremental revenues contingent upon securing additional business 2000 capital expenditure forecast includes certain expenditures originally budgeted prior periods completed prior periods following table sets forth capital expenditures location separates expenditures produce potential produce incremental revenue sustain existing operations summary capital expenditures location dollars thousands 1 sold brownsville texas facility july 29 1998 2 includes expenditures us flagged marine equipment utilized primarily netherlands antilles environmental health safety matters subject comprehensive periodically changing environmental health safety laws regulations within jurisdictions operations including governing oil spills emissions air pollutants discharges wastewater storm waters disposal nonhazardous hazardous waste 1997 1998 1999 capital expenditures compliance environmental health safety laws regulations approximately 13 million 27 million 25 million respectively figures include routine operational compliance costs disposal hazardous nonhazardous solid waste approximately 02 million 09 million 12 million 1997 1998 1999 respectively believe presently substantial compliance applicable laws regulations governing environmental health safety matters castle harlan acquisition agreement includes covenant whereby praxair shall assume financial responsibility environmental investigation remediation upgrade costs point tupper respect seven identified items environmental investigation remediation covenant subject dollar limitations aggregating 42 million respect costs covered praxair covenant dollar limitations however cannot guarantee praxair pay indemnified amounts without dispute delay past use point tupper facility including past operation others oil refinery resulted particular onsite areas known potential contamination described canadian environmental health safety laws owner operator facility held liable mitigation remediation damages arising yet unknown environmental health safety conditions facility connection castle harlan acquisition 1996 phase limited phase ii environmental site assessments conducted point tupper terminal identify potential environmental health safety matters particular environmental matters conditions likely require incurrence costs identified praxair agreed pay costs addressing matters subject cases monetary limitations discussed since undertaken accordance environmental health safety laws investigation remediation upgrade actions address recently identified matters respect foregoing environmental liabilities costs praxair connection castle harlan acquisition paid approximately 39 million december 31 1999 anticipate incurring additional costs 05 million likely reimbursable praxair based investigation conducted information available date potential cost additional remediation compliance related foregoing matters currently estimated approximately 13 million praxair required castle harlan acquisition agreement pay costs additional remediation compliance disputed obligation accrued total 15 million 1996 cover environmental health safety costs identified covered praxair agreement well 05 million identified december 31 1999 32000 amount expended periodically review adequacy accrual 1999 determined 025 million originally provided environmental contingencies st eustatius facility longer necessary accordingly portion accrual eliminated credited costs services products sold believe environmental health safety costs material adverse effect financial position cash flows results operations subject reimbursements praxair give assurance additional liabilities discovered future existing future environmental health safety laws outside scope praxair agreement material addition give assurance incur material expenses praxair pays amounts praxair ultimately would responsible anticipate incur additional capital operating costs future comply currently existing laws regulations amendments laws regulations new regulatory requirements arising recently enacted statutes possibly new statutory enactments government regulatory agencies yet promulgated final standards proposed environmental health safety programs cannot time reasonably estimate cost compliance additional requirements take effect several years timing costs however believe costs material adverse effect business financial condition results operations information technology year 2000 computer software hardware applications embedded microprocessor microcontroller processing technology applications systems historically used two digits refer year rather four digits result applications could fail create erroneous results dealing particular dates especially applications recognize 00 year 1900 rather year 2000 1997 developed year 2000 plan upgrade key information systems simultaneously address potential disruption operating accounting systems might caused year 2000 problem year 2000 plan also provided evaluations systems customers vendors thirdparty service providers evaluations noninformation technology systems implemented new year 2000 compliant terminal operations software facilities implemented fully integrated year 2000 compliant finance accounting human resources system addition year 2000 compliant anticipated system terminal operations software significantly enhance systems functionality previously identified components control systems two terminals year 2000 compliant installed tested replacements noncompliant components systems measure regulate control maintain crude oil petroleum product flow fire protection equipment terminals december 31 1999 spent 21 million connection year 2000 remediation efforts related enhancements systems functionality total capitalized 19 million expensed 02 million 2000 anticipate spending additional 025 million complete enhancements systems functionality unrelated year 2000 problem anticipate capitalizing substantially 025 million amounts included revised 2000 capital expenditure forecast however cannot guarantee estimates met actual expenditures could differ materially estimates suffered adverse effects year 2000 problem either result systems third party however due pervasive nature year 2000 problem give assurance third parties experience problems currently known us could impact business financial condition results operations future political inflation currency interest rate risks periodically evaluate political stability economic environment countries operate result evaluations presently aware matters may adversely impact business results operations financial condition general rate inflation countries operate relatively low recent years causing modest impact operating costs typically inflationary cost increases result adjustments storage throughput charges longterm contracts generally contain price escalation provisions product sales prices based active markets generally able pass cost increases customers except minor local operating expenses canadian dollars netherlands antilles guilders transactions us dollars therefore believe significantly exposed exchange rate fluctuations present debt obligations carry fixed rate interest except revolving credit facility varies changes lenders prime lending rate believe exposure interest rate fluctuations minimal tax matters st eustatius facility qualified designation free trade zone point tupper facility qualified designation customs bonded warehouse status allows customers us transship commodities destinations minimal netherlands antilles canadian tax effects pursuant free zone profit tax agreement island government st eustatius scheduled expire december 31 2000 subject minimum annual tax 500000 netherlands antilles guilders approximately 282000 agreement provides amounts paid meet minimum annual payment available offset future tax liabilities agreement extent minimum annual payment greater 2 taxable income discussions regarding modification extension agreement progress believe although terms conditions could modified amounts payable governments may increase decrease extension agreement likely however possible amounts may change anticipated tax rates jurisdictions operate change significantly 1997 1999 enactment nova scotia provincial capital tax effective april 1 1997 net operating tax loss carryforwards available offset canadian taxable income december 31 1999 509 million expire various amounts 2005 investment tax credit carryforward available reduce canadian income taxes 72 million december 31 1999 expires various amounts 2003 provided full valuation allowance deferred tax assets certain deferred tax assets utilized future insurance maintain insurance policies insurable risks levels consider appropriate present time carry business interruption insurance due believe excessive premium costs coverage provided however carry business interruption insurance offshore single point mooring system believe adequately insured future losses could exceed insurance policy limits adverse interpretations excluded coverage future liability costs incurred circumstances could adversely impact cash flow property insurance covers damage real personal property located two terminals administrative offices property loss limit 150 million 01 million deductible except 05 million deductible certain losses wind flood earthquake etc st eustatius carry various layers liability coverage 200 million deductible approximately 03 million including coverage liabilities associated certain accidental spills carry 30 million coverage offshore single point mooring system st eustatius deductible approximately 03 million coverage scheduled values damage marine vessels 50000 deductible also carry insurance customary industry current insurance program commenced december 31 1998 generally extends 15 months expect renew existing insurance program one year beginning april 1 2000 substantially similar coverage policy limits deductibles modest premium increase accounting standards policies june 1998 financial accounting standards board issued statement financial accounting standards sfas 133accounting derivative instruments hedging activities establishes standards accounting derivative instruments including specific hedge accounting criteria sfas 133 amended sfas 137 effective fiscal years beginning june 15 2000 although earlier adoption allowed yet quantified impacts adopting sfas 133 determined adopt sfas 133 however presently derivative instruments expect sfas 133 material impact us december 1999 us securities exchange commission sec issued staff accounting bulletin 101 revenue recognition sab 101 provides guidance recognition presentation disclosure revenue financial statements filed sec sab 101 outlines basic criteria must met recognize revenue provides guidance disclosure related revenue recognition policies believe revenue recognition practices conformity guidelines prescribed sab 101 item 7a item 7 managements discussion analysis financial condition results operations purposes discussion reference made consolidated balance sheets december 31 1997 1998 consolidated income cash flow statements period january 1 1996 november 27 1996 acquisition praxair reference also made consolidated income cash flow statements period november 27 1996 december 31 1996 acquisition castle harlan management others years ended december 31 1997 1998 prepare financial statements accordance us generally accepted accounting principles facilitate meaningful discussion comparative operating performance years ended december 31 1996 1997 1998 managements discussion analysis financial condition results operations presents financial information traditional comparative basis periods unless otherwise indicated consequently information presented year ended december 31 1996 necessarily comply accounting requirements companies subject major acquisitions generally accepted accounting principles us call separate reporting new company castle harlan acquisition predecessor company praxair acquisition solid black line certain tables separates financial information may comparable across periods substantially transactions denominated us dollars figures us dollars unless otherwise indicated overview operations began operations 1982 statia terminals nv netherlands antilles corporation operating oil products terminal located island st eustatius 1984 cbi industries industrial gases contracting services company acquired controlling interest statia terminals nv 1986 statia terminals nv purchased statia terminals southwest facility brownsville texas 1990 cbi industries became sole owner statia terminals nv statia terminals southwest 1993 acquired full control statia terminals point tupper incorporated located point tupper nova scotia january 1996 praxair acquired cbi industries november 1996 castle harlan management others acquired praxair outstanding capital stock statia terminals nv statia terminals inc subsidiaries certain affiliates castle harlan private equity investment fund managed castle harlan inc private merchant bank time statia terminals point tupper amalgamated statia terminals canada statia terminals canada statia terminals international organized purposes facilitating castle harlan acquisition july 1998 sold statia terminals southwest unaffiliated third party purchaser 1992 invested additional terminal facilities located point tupper nova scotia completed refurbishment 74 million barrel facility 1994 total capital investment 741 million st eustatius fourth quarter 1993 commenced construction five million barrels crude oil storage single point mooring buoy completed leased first quarter 1995 total capital investment 1075 million threeyear period 1993 1995 added crude oil storage related services established fuel oil petroleum products services addition blending ancillary services added marine emergency response services facilities added limited refining capability atmospheric distillation unit st eustatius 1995 finally fourth quarter 1995 first quarter 1996 made investments heating system butane sphere point tupper additions capacity led throughput therefore higher revenues storage throughput ancillary services make significant investments expand operating capacity 1997 1998 operations st eustatius suffered damages hurricanes iris luis marilyn causing closure terminal approximately three weeks end third quarter 1995 repair damages caused hurricanes installation certain improvements substantially completed end third quarter 1996 spent 206 million repairs improvements related hurricanes 68 million capitalized property equipment claims related hurricanes filed insurance carriers ultimately settled 126 million september 1998 hurricane georges damaged st eustatius facility hurricane georges significantly impact operations facility returned normal within days storm preliminary estimate damage facility 58 million insulation certain storage tanks electrical transmission systems roofs several buildings sustained damage advance storm september 19 1998 facility ceased terminal operations instituted hurricane preparation damage prevention plan terminal returned full operations september 29 1998 third quarter 1998 recorded charge 08 million representing insurance deductible 05 million related hurricane damage certain costs resulting hurricane anticipate recovered insurance policies following table sets forth periods indicated total capacity leased throughput vessel calls operating locations total capacity represents average storage capacity available lease period capacity leased represents storage capacity leased third parties weighted number days leased month divided capacity available lease throughput volume total number inbound barrels discharged vessel tank rail car tanker truck including acrossthedock tanktotank transfers vessel call occurs vessel docks anchors one terminal locations order load andor discharge cargo andor take bunker fuel dockage anchorage counted one vessel call regardless number activities carried vessel call also occurs sell deliver bunker fuel vessel calling terminals purposes statistics measure utilization facilities capacity leased throughput vessel calls location capacity throughput thousands barrels 1 brownsville texas facility sold july 29 1998 statistics include operations brownsville facility june 30 1998 nm meaningful majority revenues generated bunker bulk product sales fluctuate global oil prices result experience volatility revenue stream necessarily indicative profitability gross profits terminaling services generally higher gross profits bunker bulk product sales operating costs terminaling services relatively fixed generally change significantly changes capacity leased additions reductions storage throughput ancillary service revenues directly impact operating income costs procurement bunker fuels bulk petroleum products variable linked global oil prices bunker bulk product costs also impacted market supply conditions types products sold volumes delivered addition operating costs impacted inflationary cost increases changes storage capacity changes certain ancillary services offered us results operations following table sets forth periods indicated percentage revenues represented certain items consolidated income statements results operations dollars thousands following tables set forth periods indicated total revenues total operating income loss allocation administrative expenses operating locations b percentage revenue operating income loss relate total revenue operating income note sold brownsville texas facility july 29 1998 figures consolidated financial statements include brownsville facility june 30 1998 revenues location dollars thousands operating income loss location dollars thousands year ended december 31 1998 compared year ended december 31 1997 comparability july 29 1998 sold statia terminals southwest unrelated thirdparty consolidated financial statements include operations statia terminals southwest june 30 1998 therefore year ended december 31 1997 includes operations statia terminals southwest six months period 1998 revenues total revenues year ended december 31 1998 1368 million compared 1425 million year ended december 31 1997 decrease 57 million 40 revenues terminaling services consist storage throughput dock charges emergency response fees terminal charges year ended december 31 1998 666 million compared 532 million previous year increase 134 million 253 improvement terminaling services revenue year ended december 31 1998 compared previous year principally due ability attract additional long term customers use facilities part strategic distribution networks additional vessel calls st eustatius resulting higher dock charges emergency response fees recent contango conditions international petroleum markets revenues terminaling services st eustatius increased approximately 87 million 242 year ended december 31 1998 compared year ended december 31 1997 total throughput increased 629 million barrels year ended december 31 1997 742 million barrels period 1998 due primarily higher throughput fuel oil petroleum products partially offset reduced throughput crude oil seventytwo vessels called st eustatius facility year ended december 31 1998 period 1997 resulting higher revenues dock charges standby emergency response fees year ended december 31 1998 overall percentage capacity leased facility 92 compared 76 period 1997 reflecting increases percentage capacity leased fuel oil tankage petroleum products revenues terminaling services point tupper increased 51 million 326 year ended december 31 1998 compared year ended december 31 1997 percentage tank capacity leased point tupper increased 70 year ended december 31 1997 93 period 1998 increase primarily result additional crude oil clean petroleum products tankage leased year ended december 31 1998 compared period 1997 fewer vessel calls led lower port charge revenues facility year ended december 31 1998 compared period 1997 revenues bunker bulk product sales 701 million year ended december 31 1998 compared 893 million period 1997 decrease 192 million 215 decrease primarily due lower comparative selling prices bunker fuels reflecting current market conditions average selling prices decreased 302 comparing year ended december 31 1998 period 1997 however metric tons bunkers bulk product sold increased 136 year ended december 31 1998 compared period 1997 gross profit gross profit year ended december 31 1998 301 million compared 196 million period 1997 representing increase 105 million 538 increase gross profit primarily result increased terminaling services revenue produced small incremental cost additionally realized higher gross margins bunker sales year ended december 31 1998 compared period 1997 due higher volumes bunker fuels delivered administrative expenses administrative expenses 73 million year ended december 31 1998 compared 64 million period 1997 representing increase 09 million 151 increase year ended december 31 1998 compared period 1997 primarily result higher personnel costs certain professional fees loss sale assets fully discussed note 14 notes consolidated financial statements recognized loss sale statia terminals southwest year ended december 31 1998 17 million interest expense years ended december 31 1997 1998 incurred 169 million interest expense interest accrued mortgage notes due 2003 amortization expense related deferred financing costs certain bank charges net loss net income available common stockholders 45 million year ended december 31 1998 compared net loss 39 million period 1997 improvement 84 million increase net income attributable net effect factors discussed year ended december 31 1997 compared year ended december 31 1996 comparability gross profit operating income net income loss years ended december 31 1997 1996 comparable due effects purchase accounting applied result castle harlan acquisition effects acquisition first salute assets discussed note 7 notes consolidated financial statements depreciation amortization operating expenses components gross profit changed due revaluation various assets fair values date acquisition changes components debt equity accounts resulted changes interest expense dividends costs services products sold revenues total revenues year ended december 31 1997 1425 million compared 1560 million year ended december 31 1996 decrease 135 million 86 revenues terminaling services year ended december 31 1997 532 million compared 498 million previous year increase 34 million 67 increased revenues terminaling services point tupper partially offset lower revenues terminaling services st eustatius revenues terminaling services st eustatius decreased 19 million 51 year ended december 31 1997 compared year ended december 31 1996 lower crude oil throughput reductions percentage capacity leased clean petroleum products resulted lower 1997 revenues storage throughput ancillary services customer occupied petroleum products storage threequarters 1996 year petroleum products tankage went essentially unleased 1997 year revenues terminaling services point tupper increased 66 million 731 year ended december 31 1997 compared year ended december 31 1996 incremental spot storage leases crude oil primary canadian customer tosco crude oil petroleum products leases several new customers plus 30 million barrels 127 increased throughput 1996 additional ancillary services contributed higher revenues terminaling services additionally certain unleased tankage converted petroleum product storage crude oil storage meet customer demand revenues bunker bulk product sales fell 168 million 158 893 million year ended december 31 1997 1061 million period 1996 drop primarily attributable increased competition elsewhere caribbean us gulf coast ports resulting lower volumes bunker fuel delivered fewer bulk product sales st eustatius volume bunker fuels delivered fell 129 comparative average selling prices yeartoyear virtually unchanged point tupper unable expand bunker sales business initiated 1996 due inability find adequate source supply brownsville texas facility sold july 29 1998 experienced reduction total revenues due loss storage business gasoline diesel fuels vegetable oils primarily competing facilities region statia terminal southwests revenues 19 million year ended december 31 1997 09 million 283 28 million period 1996 gross profit gross profit year ended december 31 1997 196 million compared 132 million year ended december 31 1996 representing increase 64 million 485 period january 1 1996 november 27 1996 lease expenses related first salute 56 million consisting primarily interest included cost services products sold lease fully satisfied connection castle harlan acquisition additionally increased terminaling services revenue positively impacted gross profit administrative expenses administrative expenses 63 million year ended december 31 1997 compared 87 million year ended december 31 1996 representing decrease 24 million 270 year ended december 31 1996 administrative expenses included 30 million noncash stock based compensation awarded certain managers connection praxair castle harlan acquisitions exclusive nonrecurring stock based compensation selling administrative expenses increased yearto year primarily due higher personnel costs interest expense since castle harlan acquisition november 1996 interest expenses related interest accrued mortgage notes due 2003 amortization expense related deferred financing costs certain bank charges year ended december 31 1997 interest expenses amounted 169 million year ended december 31 1996 interest expenses related mortgage notes due 2003 b third party debt obligations net amounts charged capital projects c effects interest rate swap amortization expense related deferred financing costs e certain bank charges 58 million net loss net loss available common stockholders 39 million year ended december 31 1997 compared 28 million year ended december 31 1996 representing increase 11 million increase net loss attributable net effect factors discussed selected quarterly financial information 1998 operating income adjusted ebitda increased quarter 1998 quarter 1998 compared quarters 1997 trend result entering additional long term contracts twoyear period resulting higher capacity leased increased volumes bunker fuel delivered due part reduced competition additional revenues ancillary services due higher terminal activity following table sets forth certain selected unaudited quarterly operating results last eight quarters information prepared us basis consistent audited financial statements includes adjustments consisting normal recurring adjustments consider necessary fair presentation data quarterly results necessarily indicative future results operations information read conjunction consolidated financial statements notes thereto included elsewhere report forms 10q liquidity capital resources subsequent castle harlan acquisition cash flow operating activities net cash provided operating activities 195 million 125 million years ended december 31 1998 1997 22 million period november 27 1996 december 31 1996 respectively cash flow operations primary source liquidity periods subsequent castle harlan acquisition differences net losses positive operating cash flow resulted primarily depreciation amortization burdens changes various asset liability accounts additionally year ended december 31 1998 recognized 17 million noncash loss sale statia terminals southwest see note 14 notes consolidated financial statements information sale statia terminals southwest december 31 1997 cash equivalents hand 61 million compared 139 million december 31 1998 cash flow investing activities net cash used investing activities 41 million 129 million years ended december 31 1998 1997 1770 million period november 27 1996 december 31 1996 respectively investing activities 1998 1997 period ended december 31 1996 included purchases property equipment 107 million 53 million 12 million respectively additionally fully discussed note 14 notes consolidated financial statements july 29 1998 received 65 million cash proceeds sale brownsville texas facility year ended december 31 1997 period ended december 31 1996 spent 77 million 1758 million respectively related castle harlan acquisition amounts include approximately 1741 million cash paid praxair 1690 million paid closing 51 million paid february 1997 satisfy cash portion purchase price 94 million commissions fees expenses cash flow financing activities year ended december 31 1998 utilized net proceeds sale brownsville texas facility pay 615 million parent subsequently used parent retire 615 million series preferred stock part castle harlan acquisition issued 1350 million mortgage notes received proceeds 555 million issuance preferred common stock paid 64 million debt costs net cash proceeds transactions substantially used described cash flow investing activities connection castle harlan acquisition prior november 27 1996 thirdparty indebtedness including offbalance sheet lease obligation bank debts preferred stock former affiliate advances praxair repaid addition november 27 1996 entered new 175 million revolving credit facility secured accounts receivable oil inventory revolving credit facility available working capital needs letter credit financing permits us borrow accordance available borrowing base estimated 80 million december 31 1998 draws revolving credit facility occurred revolving credit facility bears interest prime rate plus 050 per annum 825 december 31 1998 expire november 27 1999 debt service costs associated borrowings mortgage notes significantly increased liquidity requirements mortgage notes accrue interest 11 34 per annum payable semiannually may 15 november 15 mortgage notes mature november 15 2003 mortgage notes redeemable whole part option time november 15 2000 redemption prices set forth indenture relating mortgage notes mortgage notes may redeemed purchased prior november 15 2000 certain circumstances defined indenture relating mortgage notes indenture generally limits incurrence additional debt us limits ability pay parent dividends make distribution parent limits ability sell assets may incur additional indebtedness long fixed charge coverage ratio defined indenture greater 20 1 terms indenture may pay parent dividend time declaration default event default indenture shall occurred continuing shall occur consequence thereof consolidated fixed charge coverage ratio defined indenture prior four full quarters less 20 1 amount dividend added aggregate amount dividends certain restricted payments made us november 27 1996 covered exceptions indenture exceeds certain sum 50 consolidated net income defined indenture taken one accounting period november 27 1996 end recently ended fiscal quarter internal financial statements available time dividend aggregate consolidated net income deficit minus 100 aggregate deficit plus net cash proceeds issuance sale november 27 1996 capital stock excluding issuance sale subsidiary statia terminals international certain dividends generally unrelated operating cash flow permitted notwithstanding second third items believe cash flow generated operations amounts available revolving credit facility sufficient maturity mortgage notes fund working capital needs capital expenditures operating requirements including expenditures required applicable environmental laws regulations service debt operating performance ability service refinance mortgage notes extend refinance revolving credit facility subject future economic conditions financial business factors many beyond control give assurances future operating performance sufficient service indebtedness able repay maturity refinance indebtedness whole part liquidity capital resourcesprior castle harlan acquisition except cash canadian subsidiaries prior castle harlan acquisition participant praxaircbi industries cash management system swept cash receipts predecessor companys investment program cash operations capital expansion funded operations predecessor companys operations debt facilities available us guaranteed predecessor company 1996 prior castle harlan acquisition cash provided operations 91 million proceeds insurance claims related hurricane damage incurred 1995 126 million net advances praxair approximately 193 million exclusive advances related repayment existing indebtedness used finance purchase property equipment 145 million pay dividends praxair affiliates 258 million capital expenditures spent 157 million 53 million 107 million years ended december 31 1996 1997 1998 respectively amounts include 16 million 09 million 17 million respectively spent enhance ability generate incremental revenues capital expenditures 1996 primarily improvements made connection hurricane damage incurred 1995 1997 capital expenditures made primarily various piping tank enhancements location new warehouse st eustatius 1998 majority capital expenditures related maintenance capital expenditures including terminal marine maintenance programs preliminary capital expenditure budget 1999 70 million maintenance capital expenditures 21 million producing incremental revenues spending producing incremental revenues contingent upon addition incremental terminaling business following table sets forth capital expenditures location separates expenditures produce potential produce incremental revenue represent maintenance capital expenditures 1 includes purchase first salute assets 2 includes 68 million capitalized enhancements related hurricanes 1995 3 sold brownsville texas facility july 29 1998 4 includes expenditures us flagged marine equipment utilized primarily netherlands antilles prior 1996 financed construction certain crude oil terminaling assets st eustatius leveraged lease arrangement effectively removing 885 million assets liabilities balance sheet discussion leveraged lease arrangement see note 7 consolidated financial statements leased land special purpose financing entity first salute upon crude tanks constructed crude oil facilities st eustatius leased back us life lease accounted monthly lease payments consisting primarily interest underlying financing recognized accrual towards residual guarantee value within line item cost services products sold 1996 paid 56 million first salute consisted primarily interest costs underlying debt obligations lease satisfied prior castle harlan acquisition related assets included balance sheet time environmental health safety matters subject comprehensive periodically changing environmental health safety laws regulations within jurisdictions operations including governing oil spills emissions air pollutants discharges wastewater storm waters disposal nonhazardous hazardous waste 1996 1997 1998 capital expenditures compliance environmental health safety laws regulations approximately 13 million 13 million 27 million respectively figures include routine operational compliance costs disposal hazardous nonhazardous solid waste approximately 04 million 02 million 09 million 1996 1997 1998 respectively believe presently substantial compliance applicable laws regulations governing environmental health safety matters praxair agreement includes covenant praxair pay certain environmental investigation remediation upgrade costs respect seven identified items environmental investigation remediation covenant subject dollar limitations aggregating 42 million respect costs covered praxair covenant dollar limitations however cannot guarantee praxair pay indemnified amounts without dispute delay past uses point tupper facility including past operation others oil refinery resulted certain onsite areas known potential contamination described canadian environmental health safety laws owner operator facility held liable mitigation remediation damages arising yet unknown environmental health safety conditions facility connection castle harlan acquisition 1996 phase limited phase ii environmental site assessments conducted point tupper terminal identify potential environmental health safety matters certain environmental matters conditions likely require incurrence costs identified praxair agreed pay costs addressing certain matters subject cases monetary limitations since undertaking accordance environmental health safety laws investigations remediation upgrading address recently identified matters certain matters involve environmental contamination associated certain areas property result past operation facility others refinery include former sludge waste disposal area respect remediation plan developed two pump stations respect delineation remediation contaminated soil underway another contaminated area includes area surrounding aboveground crude oil storage tank investigation delineation early stage although contamination appears contained within fairly limited area certain terminal facilities also identified requiring upgrading remediation meet requirements existing environmental health safety laws include among matters oilwater separator required process facility runoff treat ballast water respect rebuilding separator expected completed 1999 ballast reception line installed petroleum contamination discovered beneath separator addressed upgrading containment areas aboveground storage tanks respect survey work completed civil work expected commence 1999 upgrading remediation work also includes removal underground storage tanks respect removal completed remediation associated contaminated soil underway removal friable asbestos certain areas terminal removal disposal substantially completed awaiting final inspection issuance certificate compliance respect foregoing environmental liabilities costs praxair connection castle harlan acquisition date paid approximately 23 million anticipate incurring additional costs 07 million likely reimbursable praxair based investigation conducted information available date potential cost additional remediation compliance related foregoing matters currently estimated approximately 10 million praxair required praxair agreement pay costs additional remediation compliance disputed obligation however praxair questioned whether methods included 10 million estimate cost effective whether remediation included estimate necessary also identified environmental health safety costs covered praxair agreement including 07 million discussed accrued 15 million 1996 10000 spent end 1998 give assurances accrual sufficient cover environmental health safety costs give assurances additional liabilities either presently known discovered future existing future environmental health safety laws outside scope praxair agreement material addition give assurances incur material expenses praxair pays amounts praxair ultimately would responsible anticipate incur additional capital operating costs future comply currently existing laws regulations amendments laws regulations new regulatory requirements arising recently enacted statutes possibly new statutory enactments government regulatory agencies yet promulgated final standards proposed environmental health safety programs cannot time reasonably estimate cost compliance additional requirements take effect several years timing costs however believe costs material adverse effect business financial condition results operations information technology year 2000 certain computer software hardware applications embedded microprocessor microcontroller processing technology applications systems use two digits refer year rather four digits result applications could fail create erroneous results dealing certain dates especially applications recognize 00 year 1900 rather year 2000 1997 developed year 2000 plan upgrade key information systems simultaneously address potential disruption operating accounting systems might caused year 2000 problem year 2000 plan also provides evaluations systems customers vendors thirdparty service providers evaluations noninformation technology systems include embedded technologies microcontrollers also referred nontraditional information technology substantially completed assessment phase year 2000 plan relates traditional nontraditional technology applications systems currently process testing new year 2000 compliant terminal operations software facilities anticipate year 2000 compliant terminal operations systems fully implemented first quarter 1999 recently selected fully integrated year 2000 compliant finance accounting human resources system expect new system fully operational third quarter 1999 identified components control systems two terminals year 2000 compliant systems measure regulate control maintain crude oil petroleum product flow fire protection equipment terminals currently evaluating best means mitigate possible adverse effects resulting potential failure systems including repair replacement cases already initiated replacement noncompliant components however believe worst case scenario existing manual overrides would prevent failure systems material adverse effect operations accordance year 2000 plan initiated formal communications process companies systems interface rely determine extent companies addressing year 2000 compliance connection process sent numerous letters questionnaires third parties evaluating responses received necessary working companies yet year 2000 compliant mitigate material adverse effect noncompliance may us based upon information received reviewed possible existing relationships third parties currently anticipate thirdparty noncompliance would material adverse effect business results operations financial condition 1998 spent 11 million related year 2000 remediation efforts capitalized 10 million expensed 01 million 1999 anticipate spending additional 08 million complete efforts anticipate capitalizing 07 million expensing 01 million however cannot guarantee estimates met actual expenditures could differ materially estimates based upon information currently available us believe efforts succeed preventing year 2000 issue material adverse effect us however pervasive nature year 2000 issue may prevent us fully assessing rectifying systems could effect business results operations financial condition political inflation currency interest rate risks periodically evaluate political stability economic environment countries operate result evaluations presently aware matters may adversely impact business results operations financial condition general rate inflation countries operate relatively low recent years causing modest impact operating costs typically inflationary cost increases result adjustments storage throughput charges long term contracts generally contain price escalation provisions bunker fuel bulk product sales prices based active markets generally able pass cost increases customers except minor local operating expenses canadian dollars netherlands antilles guilders transactions us dollars therefore believe significantly exposed exchange rate fluctuations present debt obligations carry fixed rate interest except undrawn revolving credit facility varies changes lenders prime lending rate believe exposure interest rate fluctuations minimal tax matters st eustatius facility qualified designation free trade zone point tupper facility qualified designation customs bonded warehouse status allows customers us transship commodities destinations minimal netherlands antilles canadian tax effects pursuant free zone profit tax agreement island government st eustatius scheduled expire december 31 2000 subject minimum annual tax 500000 netherlands antilles guilders approximately 282000 agreement provides amounts paid meet minimum annual payment available offset future tax liabilities agreement extent minimum annual payment greater 2 taxable income discussions regarding modification extension agreement progress believe although certain terms conditions could modified amounts payable governments may increased extension agreement likely however possible amounts may increased anticipated government authorities may impose additional fees agreement extended otherwise amended tax rates jurisdictions operate change significantly 1996 1998 enactment nova scotia provincial capital tax effective april 1 1997 certain income tax liabilities incurred prior november 27 1996 assumed praxair retained net operating loss carryforwards 75 million canada also retained certain investment tax credits netherlands antilles canada may used offset future taxes payable result castle harlan acquisition certain canadian assets revalued tax purposes resulting loss 772 million 1996 net operating tax loss carryforwards available offset canadian taxable income december 31 1998 551 million expire various amounts 2005 investment tax credit carryforward available reduce canadian income taxes 73 million december 31 1998 expires various amounts 2003 provided full valuation allowance deferred tax assets certain deferred tax assets utilized future insurance maintain insurance policies insurable risks levels consider appropriate present time carry business interruption insurance due believe excessive premium costs coverage provided however carry business interruption insurance offshore single point mooring system believe adequately insured future losses could exceed insurance policy limits adverse interpretations excluded coverage future liability costs incurred circumstances could adversely impact cash flow property insurance covers damage real personal property located two terminals administrative offices property loss limit 150 million 01 million deductible except 05 million deductible certain losses wind flood earthquake etc st eustatius carry various layers liability coverage 200 million deductible approximately 03 million including coverage liabilities associated certain accidental spills carry 30 million coverage offshore single point mooring system st eustatius deductible approximately 03 million coverage scheduled values damage marine vessels 50000 deductible also carry insurance customary industry current insurance program commenced december 31 1998 generally extends 15 months accounting standards policies 1998 adopted statement financial accounting standards sfas 130reporting comprehensive income establishes standards reporting display comprehensive income components material differences net income comprehensive income 1998 adopted sfas 131disclosures segments enterprise related information establishes standards way public business enterprises report information operating segments annual financial statements requires enterprises report selected information operating segments interim financial reports issued stockholders also establishes standards related disclosures product service geographic areas major customers adoption sfas 131 impact results operations financial position cash flow june 1998 fasb issued sfas 133accounting derivative instruments hedging activities establishes certain standards accounting derivative instruments including specific hedge accounting criteria sfas 133 effective fiscal years beginning june 15 1999 although earlier adoption allowed yet quantified impacts adopting sfas 133 determined adopt sfas 133 however presently derivative instruments expect sfas 133 material impact us matters reclassified emergency spill response vessel mv statia responder formerly known mv megan gambarella original asset held sale classification property equipment longer actively seeking buyers vessel certain parents preferred stock agreements contain features may require parent cause us dividend otherwise remit proceeds future sale mv statia responder parent item 7a item 7a quantitative qualitative disclosures market risk year 2000 new accounting pronouncements company periodically purchases refined petroleum products customers others resale bunker fuel small volume sales commercial interests maintain inventory blend stocks customers petroleum inventories held short time periods generally exceeding ninety days company presently derivative positions hedge inventory petroleum products following table indicates companys aggregate carrying value petroleum products hand december 31 1997 computed average cost net lower cost market valuation provisions estimated fair value products balance sheet commodity position dollars thousands december 31 1997 carrying fair amount value petroleum inventory stnv 714 691 statia canada 533 563 1247 1254 substantially companys transactions us dollars companys present debt obligations carry fixed rate interest except undrawn revolving credit facility varies changes lenders prime lending rate management believes companys exposures foreign currency exchange fluctuation interest rate fluctuation minimal item 8 item 7a quantitative qualitative disclosures market risk periodically purchase refined petroleum products customers others resale bunker fuel small volume sales commercial interests maintain inventory blend stocks customers petroleum product inventories held short periods generally exceeding 90 days presently derivative positions hedge inventory petroleum products following table indicates aggregate carrying value petroleum products hand december 31 2000 computed average costs net lower cost market valuation provisions estimated fair value products balance sheet commodity position dollars thousands item 8 item 7a quantitative qualitative disclosures market risk periodically purchase refined petroleum products customers others resale bunker fuel small volume sales commercial interests maintain inventory blend stocks customers petroleum product inventories held short periods generally exceeding 90 days presently derivative positions hedge inventory petroleum products following table indicates aggregate carrying value petroleum products hand december 31 1999 computed average costs net lower cost market valuation provisions estimated fair value products balance sheet commodity position dollars thousands december 31 1999 carrying amount fair value petroleum inventory statia terminals nv 3158 3531 statia terminals canada 81 170 total 3239 3701 item 8 item 7a quantitative qualitative disclosures market risk periodically purchase refined petroleum products customers others resale bunker fuel small volume sales commercial interests maintain inventory blend stocks customers petroleum product inventories held short periods generally exceeding ninety days presently derivative positions hedge inventory petroleum products following table indicates aggregate carrying value petroleum products hand december 31 1998 computed average costs net lower cost market valuation provisions estimated fair value products balance sheet commodity position dollars thousands december 31 1998 carrying amount fair value petroleum inventory statia terminals nv 4205 statia terminals canada 323 338 total 4528 4543 item 8 item 8 financial statements supplementary data financial statements supplementary data included herein beginning page item 9 item 8 financial statements supplementary data financial statements supplementary data included herein beginning page item 9 item 8 financial statements supplementary data financial statements supplementary data included herein beginning page item 9 item 8 financial statements supplementary data financial statements supplementary data included herein beginning page item 9 item 8 financial statements supplementary data financial statements supplementary data included herein beginning page item 9 