10-Q 1 g65473q3e10-q.txt STATIA TERMINALS GROUP N.V. FORM 10-Q 09/30/00 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ------------- COMMISSION FILE NUMBER 0-25821 STATIA TERMINALS GROUP N.V. (Exact name of registrant as specified in its charter) NETHERLANDS ANTILLES 52-2003016 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) C/O COVENANT MANAGERS L.B. SMITHPLEIN 3 CURACAO, NETHERLANDS ANTILLES (011) (599-9) 4623700 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ----- As of November 8, 2000, 6,544,053 class A common shares of the registrant were outstanding. 2 STATIA TERMINALS GROUP N.V. QUARTERLY REPORT ON FORM 10-Q SEPTEMBER 30, 2000 TABLE OF CONTENTS

This Quarterly Report on Form 10-Q (this "Report") contains forward-looking statements within the meaning of 27A of the Securities Act of 1933, as amended. Discussions containing such forward-looking statements may be found in Items 1, 2, and 3 of Part I hereof, as well as within this Report generally. In addition, when used in this Report, the words "may," "will," "believe," "anticipate," "expect," "estimate," and similar expressions are intended to identify forward-looking statements. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially from those described in the forward-looking statements as a result of fluctuations in the supply of and demand for crude oil and other petroleum products, changes in the petroleum terminaling industry, added costs due to changes in government regulations affecting the petroleum industry, the loss of a major customer or customers, the financial condition of our customers, interruption of our operations caused by adverse weather conditions, the condition of the U.S. and certain foreign economies, and other matters included in this Report and the Company's Annual Report on Form 10-K/A. We do not undertake any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (DOLLARS IN THOUSANDS)

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

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

The accompanying notes are an integral part of these consolidated condensed financial statements. Page 3 6 STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (UNAUDITED) (IN THOUSANDS EXCEPT SHARE AMOUNTS) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The unaudited consolidated condensed financial statements of Statia Terminals Group N.V. ("Group") and Subsidiaries (together with Group, the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Significant accounting policies followed by the Company were disclosed in the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 1999 (the "Form 10-K/A"). In the opinion of the Company's management, the accompanying consolidated condensed financial statements contain all adjustments and accruals necessary to present fairly the financial position of the Company at September 30, 2000, and the results of its operations and cash flows for the nine months ended September 30, 1999 and 2000. Operating results for the nine months ended September 30, 2000, are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. Certain reclassifications were made to the 1999 financial statements and notes thereto in order to conform to the 2000 presentation. Additionally, the Company's initial public offering of equity, which closed on April 28, 1999, impacted the Company's results of operations and financial condition and affects comparability across periods. These financial statements should be read in conjunction with the Form 10-K/A. For all periods presented herein, there were no significant differences between net income and comprehensive income. 2. SEGMENT INFORMATION The Company is organized around several different factors, the two most significant of which are services and products and geographic location. The Company's primary services and products are terminaling services (resulting in revenues from storage, throughput, dock usage, emergency response, and other terminal services) and product sales (such as sales of bunker fuels to ships and other bulk petroleum product sales). The primary measures of profit and loss utilized by the Company's management to make decisions about resources to be allocated to each segment are earnings before interest expense, income taxes, and depreciation and amortization adjusted for non-recurring transactions ("Adjusted EBITDA") and earnings before interest expense and income taxes adjusted for non-recurring transactions ("Adjusted EBIT"). Page 4 7 STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (UNAUDITED) (IN THOUSANDS EXCEPT SHARE AMOUNTS) 2. SEGMENT INFORMATION- (CONTINUED) The following information is provided for the Company's terminaling services and product sales segments:

A reconciliation of Adjusted EBIT to the Company's income before provision for income taxes, preferred stock dividends and extraordinary charge is as follows:

Page 5 8 STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (UNAUDITED) (IN THOUSANDS EXCEPT SHARE AMOUNTS) 3. EARNINGS PER SHARE In connection with its initial public offering of equity discussed below, the Company adopted Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS No. 128"). Earnings per share are computed based upon the "Participating Securities and Two-Class Common Stock" methodology as required by SFAS No. 128. Earnings and losses have been allocated to each class of shares based upon changes in the historical basis liquidation values of the classes of shares during the periods presented as determined in accordance with the Company's articles of incorporation. Under this methodology, all of the earnings and losses prior to the closing of the Company's initial public offering of equity on April 28, 1999, have been allocated to the class B subordinated shares. All of the earnings and losses subsequent to April 28, 1999, have been allocated to the class A common shares. Basic earnings (loss) per share is computed by dividing the earnings and losses allocated to each class of equity by the weighted average number of shares outstanding for each class during the period. Diluted earnings (loss) per share is computed the same as basic earnings (loss) per share except the denominator is adjusted for the effect of class A common share and class B subordinated share equivalents outstanding. For periods prior to April 28, 1999, class B subordinated share equivalents include, where appropriate, the assumed exercise of previously outstanding stock options and the conversion of the Company's previously outstanding Series B preferred stock. Diluted earnings per common share include the dilutive effect of the subordinated shares and, for the three and nine months ended September 30, 2000, outstanding stock options granted in May 2000. The Company's previously outstanding preferred stock with conversion features was antidilutive for all 1999 periods presented. All 1999 earnings per share amounts presented have been adjusted to give retroactive effect, as of the beginning of 1999, to the reclassification and issuance of additional class B subordinated shares and class C incentive shares that occurred in connection with the initial public offering of equity. The following additional information is presented with respect to the Company's earnings per share amounts:

Page 6 9 STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (UNAUDITED) (IN THOUSANDS EXCEPT SHARE AMOUNTS) 4. INITIAL PUBLIC OFFERING OF EQUITY AND RELATED TRANSACTIONS As more fully discussed in the Form 10-K/A, on April 28, 1999, Group completed its initial public equity offering of 7.6 million class A common shares. The offering price was $20 per share, raising gross proceeds of $152,000. The gross proceeds of the offering were used primarily to redeem all of the Company's outstanding Series A, B, C, D and E preferred stock and pay accrued dividends, pay underwriters' discounts and fees, and pay certain other costs directly associated with the offering. The remaining proceeds were invested and used during May 1999, along with existing cash, to repurchase in the open market a principal amount of $34,000 of the 11-3/4% First Mortgage Notes (the "Notes") for $39,522, including acquisition costs and accrued interest of $3,681 and $1,841, respectively. During the second quarter of 1999, the acquisition costs and the unamortized deferred financing costs related to the repurchased Notes ($1,062) were recorded as an extraordinary charge. There was no income tax effect associated with this extraordinary charge. During the nine months ended September 30, 1999, the Company recorded as special compensation expense a bonus in the amount of $1,947 for particular members of the Company's management. The purpose of this special management bonus was to partially reimburse these individuals with respect to adverse tax consequences that resulted from the offering and other past compensation arrangements. In connection with the initial public offering of equity, certain previously granted stock options became fully vested, were exercised and became class B subordinated shares. On April 28, 1999, the remaining unamortized compensation expense associated with these options of $2,152 was recorded as a non-cash special compensation expense credited to additional paid-in capital. In conjunction with the transactions surrounding the initial public offering of equity, the Company authorized (i) 20,000,000 class A common shares of which 7,600,000 shares are issued and 6,598,853 shares were outstanding as of September 30, 2000; (ii) 7,800,000 class B subordinated shares of which 3,800,000 shares are currently issued and outstanding; and (iii) 2,200,000 class C incentive shares of which 38,000 shares are currently issued and outstanding. Page 7 10 STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (UNAUDITED) (IN THOUSANDS EXCEPT SHARE AMOUNTS) 4. INITIAL PUBLIC OFFERING OF EQUITY AND RELATED TRANSACTIONS- (CONTINUED) The following unaudited pro forma consolidated results of operations for the three and nine month periods ended September 30, 1999, were prepared to illustrate the estimated effects of: - the elimination of the Castle Harlan management fee, and - the use of the net proceeds from the initial public offering of equity and the restructuring as described in the Registration Statement (collectively, the "pro forma transactions") as if the pro forma transactions had occurred at the beginning of each of these respective periods. The unaudited pro forma consolidated condensed results of operations should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Company's financial statements and the notes thereto, the other financial information included in the Company's Registration Statement on Form S-1 (File No. 333-72317), and its Form 10-K/A for the year ended December 31, 1999. This pro forma financial information is provided for informational purposes only and does not purport to be indicative of the results of operations which would have been obtained had the pro forma transactions been completed on the dates indicated or results of operations for any future date or period.

5. REPLACEMENT OF SINGLE POINT MOORING SYSTEM HOSES During the three months ended March 31, 2000, the Company replaced certain large hoses attached to its single point mooring system (the "SPM"). In connection with this hose change-out, the Company adopted the component depreciation method for the SPM and its hoses as of January 1, 2000, which resulted in a change in the estimated useful lives for depreciation purposes for these hoses. As a result, in addition to recurring depreciation charges, the Company incurred a non-cash charge to depreciation expense of $832 during the first quarter of 2000 which is included in Costs of Revenues. Page 8 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For purposes of the discussion below, reference is made to the unaudited Consolidated Condensed Financial Statements and Notes thereto of Statia Terminals Group N.V. and Subsidiaries (the "Company") as of September 30, 2000, and for the three and nine month periods ended September 30, 1999 and 2000, included herein. Reference should also be made to the Company's Annual Report on Form 10-K/A that includes the Company's Consolidated Financial Statements as of and for the year ended December 31, 1999. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the percentage of revenues represented by some items in our consolidated condensed income statements. RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS)

Page 9 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

Gross profit from terminaling services is generally higher than gross profit from product sales. Our operating costs for terminaling services are relatively fixed and generally do not change significantly with changes in capacity leased. Additions or reductions in storage, throughput, and ancillary revenues directly impact our gross profit. Costs for the procurement of bunker fuels and bulk petroleum products are variable and linked to global oil prices. Our product costs are also impacted by market supply conditions, types of products sold, and volumes delivered. On October 10, 2000, we executed an amendment to our contract with a major state-owned oil company under which we are currently purchasing a majority of the fuel oil necessary to support our bunker sales requirements at St. Eustatius. The amendment extends the expiration of the contract to June 30, 2001, and contains terms and conditions which are comparable to prior agreements with the supplier. We believe that suitable alternate sources of supply are available from which we can procure fuel oil should our current contract be interrupted or not be renewed. The following tables set forth, for the periods indicated, (a) the total revenues and total operating income, after allocation of administrative expenses and elimination of certain intercompany transactions, at each of our operating locations and (b) the percentage of such revenues and operating income relative to our total revenues and operating income. Page 10 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) REVENUES BY LOCATION (DOLLARS IN THOUSANDS)

OPERATING INCOME BY LOCATION (DOLLARS IN THOUSANDS)

Page 11 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) The following table sets forth, for the periods indicated, capacity leased, throughput, and vessel calls for each of our operating locations. "Capacity leased" represents the storage capacity leased to third parties weighted for the number of days leased in the month divided by the capacity available for lease. "Throughput" volume is the total number of inbound barrels discharged from a vessel, tank, rail car, or tanker truck, not including across-the-dock or tank-to-tank transfers. A "vessel call" occurs when a vessel docks or anchors at one of our terminal locations in order to load and/or discharge cargo and/or to take on bunker fuel. Such dockage or anchorage is counted as one vessel call regardless of the number of activities carried on by the vessel. A vessel call also occurs when we sell and deliver bunker fuel to a vessel not calling at our terminals for the above purposes. Each of these statistics is a measure of the utilization of our facilities and equipment. CAPACITY LEASED, THROUGHPUT AND VESSEL CALLS BY LOCATION (THROUGHPUT IN THOUSANDS OF BARRELS)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000, VERSUS THE SAME PERIODS OF 1999 Comparability Our initial public offering of equity, which closed on April 28, 1999, impacted our results of operations and financial condition. Therefore, our results of operations and financial condition may not be comparable across periods presented herein. Revenues Total revenues for the three and nine months ended September 30, 2000, were $57.5 million and $154.1 million, compared to $43.3 million and $123.0 million for the same periods of 1999, representing increases of $14.2 million or 32.9% and $31.1 million or 25.3%, respectively. The increases in total revenues are primarily due to increases in average selling prices in our product sales segment. See further discussion below. Page 12 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) Revenues from terminaling services (revenues from storage, throughput, dock usage, emergency response, and other terminal services) for the three and nine months ended September 30, 2000, were $17.9 million and $44.7 million, compared to $14.3 million and $48.3 million for the same periods of 1999, representing an increase of $3.6 million, or 25.4%, and a decrease of $3.7 million, or 7.6%, respectively. The increase in terminaling services revenues for the three months ended September 30, 2000, compared to the same period in 1999, was primarily the result of increased throughput of crude oil and new short-term product storage contracts. We believe the decrease in terminaling services revenues for the nine months ended September 30, 2000, compared to the same period in 1999, was principally due to the adverse effects of the accord established between many of the oil exporting nations, some of whom are our customers, to raise crude oil prices by reducing supply. Members of the accord reduced their production of crude oil during the period from April 1999, through late March 2000, which reduced the worldwide quantity of crude oil and petroleum products in storage. The accord primarily impacted our terminaling services revenues beginning with the second half of 1999. For the nine months ended September 30, 2000, approximately 74.3% of our tank capacity was leased pursuant to long term contracts at our St. Eustatius and Point Tupper locations together. Approximately 67.3% of our storage and throughput revenues, excluding related ancillary services, were derived from long term contracts during the same period. Revenues from terminaling services at St. Eustatius increased approximately $1.7 million or 16.7% during the three months ended September 30, 2000 as compared to the same period of 1999. The increase in revenues from terminaling services was due primarily to increased cargo vessel calls and a higher percentage capacity leased. Nine additional cargo vessels called at the St. Eustatius facility during the three months ended September 30, 2000, than during the same period of 1999, resulting in higher revenues from port charges, which consist of dock charges, emergency response fees, and other terminal charges. For the three months ended September 30, 2000, the overall percentage of capacity leased at St. Eustatius was 94% as compared to 89% for the same period of 1999, reflecting increases in the percentage of capacity leased for fuel oil tankage. The increase in the percentage of capacity leased for fuel oil tankage was primarily the result of new short-term product storage contracts. Certain short-term product storage contracts did not renew for the fourth quarter of 2000. Revenues from terminaling services at St. Eustatius decreased approximately $2.3 million or 6.9% during the nine months ended September 30, 2000 as compared to the same period of 1999. The decrease in revenues from terminaling services was due primarily to a lower percentage capacity leased. Although thirty fewer cargo vessels called at the St. Eustatius facility during the nine months ended September 30, 2000, than during the same period of 1999, revenues from port charges were higher primarily due to increases in the size of cargo vessels calling at this facility. For the nine months ended September 30, 2000, the overall percentage of capacity leased at St. Eustatius was 86% as compared to 91% for the same period of 1999, reflecting decreases in the percentage of capacity leased for fuel oil tankage. The decrease in the percentage of capacity leased for fuel oil tankage was primarily the result of the effects of the accord, backwardation in this market, and the relative lower pricing, during certain months, of products which compete with fuel oil. Revenues from terminaling services at Point Tupper increased approximately $1.9 million or 52.7% during the three months ended September 30, 2000 as compared to the same period of 1999. The increase in revenues from terminaling services was due primarily to a higher percentage of tank capacity leased resulting from new short-term storage contracts and from increased throughput of crude oil. Twenty-five additional cargo vessels called during the three months ended September 30, 2000, as compared to the same period of 1999, which led to higher revenues from port charges at this facility. The percentage of tank capacity leased at Point Tupper was 76% for the three months ended September 30, 2000 as compared to 65% for the same period of 1999. Certain short-term storage contracts at Point Tupper did not renew for the fourth quarter of 2000. Page 13 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) Revenues from terminaling services at Point Tupper decreased approximately $1.4 million or 9.5% during the nine months ended September 30, 2000, as compared to the same period of 1999. The decrease was due primarily to a lower percentage of tank capacity leased primarily resulting from the decision by a customer of this facility, who is a participant in the accord, not to renew its crude oil storage contract at the end of the second quarter of 1999. The percentage of tank capacity leased at Point Tupper was 67% for the nine months ended September 30, 2000, as compared to 85% for the same period of 2000. Partially offsetting reduced storage revenues were revenues from a higher number of barrels throughput by this facility's primary crude oil customer for the nine months ended September 30, 2000. Twenty-three additional cargo vessels called during the nine months ended September 30, 2000, as compared to the same period of 1999, which led to higher revenues from port charges at this facility. Revenues from product sales were $39.6 million and $109.4 million for the three and nine months ended September 30, 2000, compared to $29.0 million and $74.7 million for the same periods of 1999, an increase of $10.6 million or 36.5% and $34.7 million or 46.5%, respectively. These increases were due to increases in average selling prices partially offset by lower volumes delivered. Average selling prices increased 39.0% and 69.9% when comparing the three and nine months ended September 30, 2000, with the same periods of 1999. These changes in average selling prices were primarily the result of changes in the world oil markets which have been significantly influenced by the accord. Metric tons of bunkers and bulk product delivered decreased 1.8% and 13.7% during the three and nine months ended September 30, 2000, respectively, as compared to the same periods of 1999. Gross Profit Gross profit for the three months ended September 30, 2000 and 1999, was $9.2 million and $6.4 million, representing an increase of $2.8 million or 44.6%. Gross profit for the nine months ended September 30, 2000 and 1999, was $19.4 million and $23.7 million, representing a decrease of $4.3 million or 18.1%. The increase in gross profit for the three months ended September 30, 2000, is primarily the result of increased throughput of crude oil and new short-term product storage contracts. The decrease in gross profit for the nine months ended September 30, 2000, is the result of lower gross profit realized on terminaling services. Gross profit from terminaling services decreased primarily as a result of certain customers choosing not to renew their storage and throughput contracts due, in part, to reduced supply resulting from the accord established among many of the oil exporting nations. Additionally, during the nine months ended September 30, 2000, we replaced certain hoses attached to our single point mooring system. As a result, we incurred a non-cash charge of $0.8 million during the first quarter of 2000 to depreciation expense which is included in Costs of Revenues. Administrative Expenses Administrative expenses were $2.4 million and $7.1 million for the three and nine months ended September 30, 2000, as compared to $2.3 million and $6.8 million for the same periods of 1999, representing increases of $0.1 million or 4.4% and $0.3 million or 4.6%, respectively. The increases during the three and nine months ended September 30, 2000, as compared to the same periods of 1999, were primarily the result of higher depreciation and personnel costs. The increase during the nine months ended September 30, 2000, was partially offset by the termination of the Castle Harlan management fee effective as of our initial public offering of equity. Page 14 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) Special Compensation Expense As more fully discussed in note 4 of the notes to consolidated condensed financial statements included in Part I, Item 1, of this Report, we recorded special compensation expense during the nine months ended September 30, 1999, of $4.1 million. Interest Expense During the three and nine months ended September 30, 2000, we incurred $3.2 million and $9.6 million of interest expense compared to $3.2 million and $11.1 million for the same periods of 1999. Interest expense includes interest accrued on our mortgage notes due in 2003, amortization expense related to deferred financing costs, other interest expense, and bank charges. In May 1999, we repurchased $34.0 million of the mortgage notes which resulted in lower interest expense on this debt. Provision for Income Taxes Provision for income taxes were $0.2 million and $0.7 million for the three and nine months ended September 30, 2000, and $0.1 million and $0.5 million for the three and nine months ended September 30, 1999. Preferred Stock Dividends Preferred stock dividends were $2.3 million for the nine months ended September 30, 1999. There were no preferred stock dividends for the three months ended September 30, 2000 and 1999, and for the nine months ended September 30, 2000, as a result of the redemption of all outstanding preferred stock in connection with our initial public offering of equity. Extraordinary Charge Related to Early Extinguishment of Debt As more fully discussed in note 4 of the notes to consolidated condensed financial statements included in Part I, Item 1, of this Report, we recognized an extraordinary charge of $4.7 million during the nine months ended September 30, 1999, in connection with the repurchase of $34.0 million of our mortgage notes. There was no income tax effect associated with this extraordinary charge. Net Income (Loss) The Company produced net income available to common stockholders of $3.6 million and $2.3 million for the three and nine months ended September 30, 2000, as compared to net income available to common stockholders of $1.0 million and a net loss to common stockholders of $5.2 million for the same periods of 1999, respectively, representing an improvement of $2.6 million and $7.5 million. This improvement was primarily attributable to reduced debt service costs and the net effect of other factors discussed above. LIQUIDITY AND CAPITAL RESOURCES Cash Flow from Operating Activities Net cash provided by operating activities was $16.2 million and $13.5 million for the nine months ended September 30, 2000, and 1999, respectively. Cash flow from operations has been our primary source of liquidity during these periods. Differences between net losses and positive operating cash flow have resulted primarily from depreciation and amortization burdens, non-cash charges, and changes in various asset and liability accounts. Page 15 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) At September 30, 2000, we had cash and cash equivalents on hand of $8.2 million compared to $5.7 million at December 31, 1999. Accounts receivable and accounts payable, primarily related to the purchases and sales of petroleum products, were $16.5 million and $14.1 million, respectively, at September 30, 2000, as compared to $16.7 million and $14.1 million, respectively, at December 31, 1999. The aggregate net changes of the accounts receivable and accounts payable balances are included in net cash provided by operating activities. Cash Flow from Investing Activities Net cash used in investing activities consisting primarily of purchases of property and equipment was $7.3 million and $6.3 million for the nine months ended September 30, 2000 and 1999, respectively. During the three months ended September 30, 2000, we acquired an interest for $0.5 million in a joint venture which holds an investment in a company providing on-line trading of certain petroleum products. See the Summary of Capital Expenditures by Type table which follows. Cash Flow from Financing Activities In July 2000, our board of directors approved an increase in the number of shares authorized under the previously announced stock purchase program to 2,000,000 of our class A common shares. As of September 30, 2000, and November 8, 2000, we had acquired 1,001,147 and 1,055,947 class A common shares, respectively, at an aggregate cost of $6.5 million and $6.9 million, respectively. As conditions warrant, we intend to continue periodic open market purchases of our class A common shares under the stock purchase program. As more fully discussed in the Registration Statement and Form 10-K/A, under our articles of incorporation we are required to distribute to our shareholders all of our "available cash" (as defined therein) generated from operations. "Available cash" as defined generally includes cash from various sources after deducting such reserves as our board of directors may deem necessary or appropriate to provide for the proper conduct of our business, including future capital expenditures, anticipated operational needs, and to comply with debt obligations. On February 14, 2000, we paid $1.1 million to holders of our class A common shares representing $0.15 per share. The $0.30 per share difference between the declared distribution and the target quarterly distribution of $0.45 per share represents an arrearage which must be paid from future available cash. On August 14, 2000, we paid $1.0 million to holders of our class A common shares representing $0.15 per share. The $0.30 per share difference between the declared distribution and the target quarterly distribution of $0.45 per share represents an arrearage that must be paid from future available cash. On October 24, 2000, our board of directors declared a distribution of $0.15 per share on our class A common shares payable November 14, 2000, to shareholders of record on October 31, 2000. The $0.30 per share difference between the declared distribution and the target quarterly distribution of $0.45 per share represents an arrearage that must be paid from future available cash. The aggregate arrearage per class A common share after the distribution is paid on November 14, 2000 will be $1.35. On May 2, 2000, we granted to certain of our employees and directors options to purchase 228,000 of our class A common shares at an exercise price of $5.59 per share representing the fair value on the date of grant. These options were granted pursuant to our 1999 share option plan and generally vest in proportion to the conversion of our class B subordinated shares to class A common shares over the subordination period, as defined in our articles of incorporation. Page 16 19 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) As more fully discussed in note 4 of the notes to consolidated condensed financial statements included in Part I, Item 1, of this Report, our initial public offering of equity closed on April 28, 1999. The net proceeds of the offering were used primarily to redeem all of our outstanding preferred stock and pay accrued dividends and repurchase in the open market a principal amount of $34.0 million of our mortgage notes, leaving $101.0 million of our mortgage notes outstanding. The repurchase of the mortgage notes will result in annual reductions in interest payments of approximately $4.0 million. As of November 14, 2000, no event of default under the indenture to the mortgage notes existed and was continuing. The fixed charge coverage ratio as defined in the indenture was at least 2.0 to 1 at September 30, 2000. Statia Terminals International N.V., a wholly-owned subsidiary of Statia Terminals Group N.V., is not restricted by this provision of the indenture from borrowing on the revolving credit facility discussed below. Additionally, at September 30, 2000, the sum of Statia Terminals International's dividends, restricted payments, aggregate consolidated net income (deficit), and capital stock proceeds was approximately $15.7 million. Such sum must be positive in order for Statia Terminals International to make certain restricted payments, including dividends to Statia Terminals Group N.V. We have a $17.5 million revolving credit facility secured by our accounts receivable and oil inventory, which renews annually under the original terms of the agreement unless otherwise canceled by either party. The revolving credit facility is available for working capital needs and letter of credit financing, and it permits us to borrow in accordance with a defined available borrowing base, which was approximately $13.1 million at September 30, 2000. The revolving credit facility bears interest at the prime rate plus 0.50% per annum (10.0% at November 14, 2000). The revolving credit facility was extended during the three months ended September 30, 2000, and will now expire on November 27, 2001. During the first and second quarters of 2000, we borrowed against the revolving credit facility, and all of such borrowings were repaid by May 2000. There was no outstanding balance at September 30, 2000. In March, 2000, the ownership of the M/V Statia Responder, an emergency response and maintenance vessel, was transferred from one of our existing subsidiaries to a newly created subsidiary. We are currently in discussions with a lender to provide asset-based financing utilizing the vessel as collateral. The proceeds from any such financing are expected to be used for general business purposes. We believe that cash flow generated by operations and amounts available under the revolving credit facility will be sufficient, until the maturity of the mortgage notes, to fund working capital needs, capital expenditures, and other operating requirements, including any expenditures required by applicable environmental laws and regulations, and to service debt. It is unlikely that we will be able to repay the mortgage notes at maturity through projected operating cash flow, and it will be necessary to refinance all or a portion of the mortgage notes, or redeem the mortgage notes from additional equity funds, on or after November 15, 2000, and before their maturity on November 15, 2003. We continuously monitor financial market conditions and our financial position to determine when and whether we will refinance or redeem all or a portion of the mortgage notes prior to their maturity. Although we intend to refinance and believe that we will be able to refinance the mortgage notes during the November 15, 2000, to November 15, 2003, time period, our operating performance and ability to service or refinance the mortgage notes and to extend or refinance the revolving credit facility will be subject to future economic conditions and to commercial, financial, and other factors, many of which are beyond our control. There can be no assurances that we will be able to repay at maturity or refinance this indebtedness in whole or in part, or at all, on terms acceptable to us. If we are unable to repay or refinance the mortgage notes at or prior to maturity, we will be forced to adopt alternative strategies that may include seeking additional equity capital. It is anticipated that any common share arrearages will not adversely impact our ability to repay or refinance the mortgage notes since the mortgage notes are obligations of two of our subsidiaries, not of Statia Terminals Group. Depending on the terms and conditions of any refinancing of the mortgage notes, our ability to pay the target quarterly distributions and common share arrearages may be impacted. Page 17 20 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) CAPITAL EXPENDITURES Our projected capital spending for 2000 is $8.2 million for operations sustaining capital expenditures and $0.3 million to produce incremental revenues. Additional spending is contingent upon the addition of incremental terminaling business. The following table sets forth capital expenditures and separates such expenditures into those which produce, or have the potential to produce, incremental revenues and those which sustain our operations. SUMMARY OF CAPITAL EXPENDITURES BY TYPE (DOLLARS IN THOUSANDS)

ACCOUNTING STANDARD In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133-"Accounting for Derivative Instruments and Hedging Activities" which establishes standards of accounting for derivative instruments including specific hedge accounting criteria. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years beginning after June 15, 2000 although earlier adoption is allowed. We have not yet quantified the impacts of adopting SFAS No. 133. Page 18 21 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We periodically purchase refined petroleum products from our customers and others for resale as bunker fuel, for small volume sales to commercial interests, and to maintain an inventory of blend stocks for our customers. Petroleum product inventories are held for short periods, generally not exceeding 90 days. We do not presently hedge our inventory of petroleum products. The following table indicates the aggregate carrying value of our petroleum products on hand at September 30, 2000, computed at average costs, net of any lower of cost or market valuation provisions, and the estimated fair value of such products. ON BALANCE SHEET COMMODITY POSITION (Dollars in thousands)

Except for minor local operating expenses in Canadian dollars and Netherlands Antilles guilders, all of our transactions are in U.S. dollars. Therefore, we believe we are not significantly exposed to exchange rate fluctuations. As all of our present debt obligations carry a fixed rate of interest, except for the revolving credit facility which varies with changes in the lender's prime lending rate, we believe our exposure to interest rate fluctuations is minimal. Page 19 22 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Reference is made to Item 3. Legal Proceedings included in the Company's 1999 Annual Report on Form 10-K/A. There have been no material developments in the Company's legal proceedings since the Form 10-K/A was filed. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. The Company's web site is located at http://www.statiaterm.com or http://www.statia.cc. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 27.1 Financial Data Schedule for Statia Terminals Group N.V. (for electronic filing only) (b) Reports on Form 8-K. None. Page 20 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. STATIA TERMINALS GROUP N.V. (Registrant) Date: November 14, 2000 By: /s/ James G. Cameron -------------------------------------------- James G. Cameron Director (As Authorized Officer) By: /s/ James F. Brenner ---------------------------------------- James F. Brenner Vice President and Treasurer (As Authorized Officer and Principal Financial Officer) Page S-1

STATIA TERMINALS GROUP NV 10-Q