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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
- ----- Act of 1934 For the fiscal year ended June 30, 2000
OR
___ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period __________ to ___________
Commission File Number 001-11763
TRANSMONTAIGNE INC.
Delaware 06-1052062
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2750 Republic Plaza, 370 Seventeenth Street
Denver, Colorado 80202
(Address, including zip code, of principal executive offices)
(303) 626-8200
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Common Stock; $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 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 report), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. The aggregate market value is computed by reference to the last
sale price of the Registrant's Common Stock on the American Stock Exchange on
September 1, 2000.
$90,350,000
The number of shares of the registrant's Common Stock outstanding on
September 1, 2000 was
30,980,524
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement relating to the 2000 Annual Meeting
of Shareholders of the registrant are incorporated by reference into Part III.
TABLE OF CONTENTS
Item Page No.
Part I 1. Business 3
2. Properties 6
3. Legal Proceedings 8
4. Vote of Security Holders 8
Part II 5. Market for Common Stock 8
6. Selected Financial Data 8
Information Regarding Forward Looking Statements 10
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
7A. Qualitative and Quantitative Disclosures About
Market Risk 25
8. Financial Statements and Supplementary Data 26
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures 53
Part III
10. Directors and Executive Officers 53
11. Executive Compensation 53
12. Security Ownership of Certain Beneficial
Owners and Management 53
13. Certain Relationships and Related Transactions 53
Part IV 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 55
2
PART I
ITEM 1. BUSINESS
General
TransMontaigne Inc., a Delaware corporation, ("the Company") provides a
broad range of integrated supply, distribution, marketing, terminaling, storage
and transportation services to producers, refiners, distributors, marketers and
industrial end-users of petroleum products, chemicals, crude oil and other bulk
liquids in the downstream sector of the petroleum and chemical industries. The
Company is a holding company that conducts the majority of its operations
through wholly owned subsidiaries primarily in the Mid-Continent, Gulf Coast,
Southeast, Mid-Atlantic and Northeast regions of the United States. Through its
wholly owned subsidiary, TransMontaigne Product Services Inc. ("TPSI"), the
Company provides product services consisting of the bulk purchase and sale of
refined petroleum products and the wholesale marketing of products at terminal
truck loading rack locations, both of which are high volume, low margin
activities. Through its wholly owned subsidiaries, TransMontaigne Terminaling
Inc. ("TTI") and TransMontaigne Pipeline Inc. ("TPI"), the Company provides
refined petroleum product and crude oil transportation, terminal and storage
services to over 600 customers, including most major oil companies and
independent refiners in the United States. The Company owns approximately 850
miles of petroleum products and crude oil pipeline and 75 terminal, storage and
delivery facilities in 19 states with a combined tank storage capacity of
approximately 22 million barrels. The Company also extensively utilizes refined
petroleum products common carrier pipelines and terminals owned by third parties
in order to increase product volumes shipped, marketed and exchanged with
customers in other locations. Management believes that the use of all these
facilities should allow the Company to significantly expand its geographic
service area and the integrated services it provides. The Company's commercial
operations are divided into supply, distribution and marketing of refined
petroleum products; terminals, which includes terminaling and storage services;
and pipelines. The Company, through a wholly owned subsidiary, historically
provided selected natural gas services including the gathering, processing,
fractionating and marketing of natural gas liquids ("NGL") and natural gas. This
subsidiary was divested as of December 31, 1999. Segment information is
presented in the notes to the financial statements. The Company does not explore
for, or produce, crude oil or natural gas; and does not own crude oil or natural
gas reserves.
Commercial Operations
Products Supply, Distribution and Marketing
TPSI's supply, distribution and marketing efforts are enhanced by TPI and
TTI's ownership and operation of products pipelines and terminals; and by its
inventory positions in third-party common carrier pipeline systems. TPSI
utilizes these assets to arbitrage location product price differentials and
transportation costs; to purchase substantial bulk volumes of products for
resale in the spot market or over truck loading racks; to take advantage of
opportunities presented by anticipated product price volatility arising from
changing economic conditions, seasonal variations and market supply and demand
considerations; and to generate revenues from regional and national industrial
end-user and commercial wholesale storage and forward sales marketing contracts
of refined petroleum products.
TPSI enters into product exchange transactions in order to enhance
operating margins in connection with its supply and distribution activities.
Exchanges are arranged through agreements under which TPSI agrees to buy and
sell products that differ in terms of geographic location, type of product or
delivery schedule. Through such exchanges, which are continuously monitored by
TPSI's real-time management information and risk management systems, TPSI seeks
to increase its overall operating margins by maximizing transportation,
terminaling and product sales revenues from each barrel of product sold while
also minimizing related storage, shipping and product costs.
TPSI's refined petroleum products inventory consists primarily of gasoline
and distillates. Inventory is divided into inventory held for sale or exchange
in the ordinary course of business and minimum inventory which represents
working stocks (pipeline in-transit and minimum terminal inventory), pipeline
line fill and terminal tank bottoms. Minimum inventory is required to be held
for operating balances in the conduct of TPSI's daily supply, distribution and
marketing activities and is maintained both in tanks and pipelines owned by TTI
and TPI and pipelines owned by third parties.
3
TPSI selectively hedges quantities of its inventory by entering into future
physical delivery obligations with third parties or purchasing futures contracts
on the New York Mercantile Exchange ("NYMEX") in order to reduce risk exposure
to inventory that would be subject to price volatility.
Terminals
TTI (an independent operator) owns and operates an extensive terminal
infrastructure that handles petroleum products, chemicals and other bulk liquids
with transportation connections via pipeline, barges, rail cars and trucks to
TPI facilities or to third party facilities with an emphasis on transportation
connections primarily through the Colonial, Plantation and Texas Eastern
pipeline systems.
Products terminal revenues are based on volumes handled, generally at a
standard industry fee. Terminal fees are not regulated. The terminals receive
petroleum products in bulk quantities from connecting pipeline systems and barge
dock facilities. Products are stored in bulk at the terminals and made available
to wholesale, shipment and exchange customers who transport the products by
truck to commercial and retail destinations and then to the end-user. TPSI
markets refined petroleum products over truck loading racks at TTI owned
terminals, as well as through exchanges with numerous companies at other non-
owned terminals located throughout the Company's distribution area.
Chemicals and other bulk liquids terminal revenues are based upon the type
and volume of the liquids handled, including any special temperature
maintenance, labor-intensive loading/off-loading requirements or other handling
services. These terminal fees are not regulated; are generally negotiated on an
individual contract basis with a term of one year or less; and typically are at
rates which exceed those for handling petroleum products due to the particular
nature of the products handled.
Storage of refined petroleum products, chemicals and other bulk liquids at
TTI-owned facilities pending delivery is an integral service function. Storage
fees are generally based on a per gallon rate or on tankage capacity committed
and will vary with the duration of the storage arrangement, the product stored
and special handling requirements. Storage fees are not regulated.
Major and independent petroleum companies own terminal and storage
facilities which often have similar capabilities to those owned by independent
operators such as TTI, but generally do not provide terminaling and storage
services to third parties. In many instances, these companies are also
significant customers of the Company and frequently provide strong demand for
its terminals, particularly when TTI's terminals and storage facilities have
more cost effective locations near key transportation connections and
distribution points. These companies also utilize TTI for terminaling and
storage services when their proprietary facilities are inadequate, either
because of size constraints, the nature of the products, chemicals and other
bulk liquids stored or the need for specialized handling requirements
particularly when certain types of chemicals and other bulk liquids are
involved.
Ancillary services, including injection of shipper-furnished or TTI-
furnished additives, are also available for a fee at TTI terminals.
Pipelines
TPI owns and operates an approximate 480-mile refined petroleum products
pipeline from Ft. Madison, Iowa through Chicago, Illinois to Toledo, Ohio (the
"NORCO Pipeline") together with associated storage facilities located at
Hartsdale and East Chicago, Indiana and Toledo, Ohio; product distribution
facilities located at South Bend, Indiana; Peoria, Illinois; and Bryan, Ohio;
and delivery facilities located at Elkhart, Indiana and Chillicothe and
Galesburg, Illinois. The NORCO Pipeline system is interconnected to all major
mid-continent common carriers. TPI also owns a 60% interest in a 67-mile refined
petroleum products pipeline operating from Mt. Vernon, Missouri to Rogers,
Arkansas (the "Razorback Pipeline") together with associated product
distribution facilities at Mt. Vernon and Rogers. The Razorback Pipeline is the
only refined petroleum products pipeline providing transportation services to
northwest Arkansas. TPI also owns and operates an approximate 220-mile crude oil
gathering pipeline system, with approximately 627,500 barrels of tank storage
capacity, located in east Texas (the "CETEX Pipeline").
4
TPI owns a 20.38% common stock interest in West Shore Pipe Line Company
("West Shore"). West Shore owns an approximate 600-mile common carrier petroleum
products pipeline system which operates between the Chicago refining corridor
locations of East Chicago, Indiana; Blue Island, Joliet and Lemont, Illinois;
north through metropolitan Chicago, Illinois; along the western edge of Lake
Michigan to Milwaukee and Green Bay, Wisconsin; and west to Rockford and Peru,
Illinois, and Madison, Wisconsin. The pipeline serves approximately 55
locations, including 4 refineries, the Chicago-O'Hare and Milwaukee airports,
and 49 refined petroleum products terminals in the Chicago, Illinois area and
the upper Mid-West region of the United States.
In general, a shipper owns the refined petroleum products or crude oil and
transfers custody of the products to the NORCO or Razorback pipelines, or the
crude oil to the CETEX pipeline, for shipment to a delivery location at which
point custody again transfers. Tariffs for the transportation service are
regulated and are charged by TPI to shippers based upon the origination point on
the pipelines to the point of product delivery. These tariffs do not include
fees for the storage of products at the NORCO and Razorback pipeline storage
facilities or crude oil at the CETEX pipeline storage facilities. Fees for the
terminaling and storage of products at TTI terminals are separately charged when
those facilities are utilized.
TPI's pipeline business depends in large part on the level of demand for
refined petroleum products in the markets served by the pipelines, together with
the ability and willingness of refiners and marketers having access to the
pipelines to supply that demand by shipments through these pipelines.
Competition is based primarily on pipeline operational dependability, quality of
customer service provided and proximity to end-users, although product pricing
at either the origin or terminal destination on a pipeline may outweigh
transportation cost considerations. The Company believes that high capital
costs, tariff regulation, environmental considerations, problems in acquiring
rights-of-way and TPI's existing available capacity make it unlikely that
additional competing pipeline systems comparable in size to the NORCO and
Razorback pipelines will be built in the near term.
Natural Gas Services
The Company divested its wholly owned subsidiary, Bear Paw Energy Inc.,
effective December 31, 1999.
Growth
The Company continues to seek growth opportunities in its terminal,
pipeline and marketing businesses. The Company expects to grow by continuing to
acquire strategically located downstream assets, as well as other value-added
business opportunities that are expected to contribute additional cash flow and
enhance net earnings. Growth by acquisition is expected to be complemented by
construction of new projects and expansion of existing facilities in specific
locations which are intended to develop and increase the Company's present
operating capabilities and business presence in the markets served.
5
Environmental and Tariff Regulations
The operations of the Company are subject to federal, state and local laws
and regulations relating to protection of the environment. Future regulation may
impose additional requirements. Although the Company believes that its
operations are in material compliance with applicable environmental laws and
regulations, and the Company has not accrued any material amounts for
environmental compliance as of June 30, 2000, risks of substantial costs and
liabilities are inherent in pipeline, terminal and processing operations, and
there can be no assurance that significant costs and liabilities will not be
incurred in the future.
The interstate petroleum products pipeline operations of TPI are subject to
regulation by the Federal Energy Regulatory Commission (the "FERC") under the
Interstate Commerce Act (the "ICA"), which requires, among other things, that
the rates set by the pipeline transportation tariffs be just and reasonable and
not unduly discriminatory. New and changed tariffs must be filed with the FERC,
which may investigate their legality on shipper protest or its own motion. The
FERC may suspend the effectiveness of such tariffs and require the pipeline to
refund to shippers, with interest, any difference between the level the FERC
determines to be lawful and the filed tariffs under investigation; the tariffs
may also be challenged by litigation.
The intrastate crude oil pipeline operations of TPI are subject to
regulation by the Texas Railroad Commission. Like interstate regulation, the
Texas regulation requires that intrastate tariffs be filed with the Texas
Railroad Commission and allows shippers to challenge such tariffs.
Employees
The Company had 508 employees at September 1, 2000. No employees are
subject to representation by unions for collective bargaining purposes.
ITEM 2. PROPERTIES
For additional information regarding the Company properties, see "General"
and "Commercial Operations" sections under Item 1.
The executive offices of the Company are located at 2750 Republic Plaza,
370 Seventeenth Street, Denver, CO 80202; telephone number (303) 626-8200 and
facsimile number (303) 626-8228. In addition, the Company has offices located at
200 Mansell Court East, Suite 600, Roswell, GA 30076; telephone number (770)
518-3500 and facsimile number (770) 518-3567 and 2 North College, Fayetteville,
AR 72701; telephone number (501) 521-5565 and facsimile number (501) 442-4650.
TPI's major pipelines, approximate miles of pipeline and geographical
locations are as follows:
Approximate
Miles of
Pipeline Name Pipeline Geographical Location
- ---------------- ----------- ----------------------------------------------
NORCO 480 Fort Madison, Iowa east to Toledo, Ohio
Razorback 67 Mt. Vernon, Missouri south to Rogers, Arkansas
CETEX 220 East Texas area - north of Tyler, Texas
6
TTI's terminal locations, number of tanks, and approximate shell storage
capacity is as follows:
Approximate
Shell Storage
Storage Capacity
Locations Tanks (in barrels)
- ---------------------------------------------- ---------- ----------------
Pipeline Terminals:
Albany, GA 7 131,000
Americus, GA 5 31,000
Athens, GA 4 77,000
Atlanta, GA 4 116,000
Bainbridge, GA 5 66,000
Belton, SC 13 430,000
Birmingham, AL 10 360,000
Bryan, OH 7 79,000
Charlotte, NC 11 548,000
Collins, MS 5 138,000
Collins, MS (Pipeline Injection Facility) 8 1,468,000
Doraville, GA 14 436,000
East Chicago, IN 19 1,493,000
Greensboro, NC 17 619,000
Griffin, GA 2 51,000
Hartsdale, IN 13 1,143,000
Indianapolis, IN 5 197,000
Knoxville, TN 4 152,000
Little Rock, AR Complex 19 453,000
Lookout Mountain, GA 6 109,000
Macon, GA 4 100,000
Meridian, MS 4 82,000
Montgomery, AL 7 59,000
Montvale, VA 6 489,000
Mount Vernon, MO 5 215,000
Norfolk, VA 6 391,000
Peoria, IL 7 186,000
Philadelphia, PA 10 923,000
Purvis, MS 31 1,663,000
Richmond, VA 7 459,000
Rogers, AR 5 171,000
Rome, GA 4 59,000
Selma, NC 11 507,000
South Bend, IN 5 201,000
Spartanburg, SC 9 393,000
Toledo, OH 9 587,000
Chippewa Falls, WI 5 125,000
----------------
14,707,000
Marine Terminals:
Baton Rouge, LA 11 536,000
Brownsville, TX Complex 82 2,083,000
Evansville, IN 20 238,000
Greater Cincinnati, KY (Covington) 15 192,000
Greenville, MS Complex 29 547,000
Henderson, KY 18 275,000
Kentuckiana (New Albany, IN) 16 221,000
Louisville, KY 12 182,000
Midsouth (Arkansas City, AR) 12 773,000
Missouri (Cape Girardeau, MO) 7 140,000
Ohio (East Liverpool, OH) 11 219,000
Owensboro, KY 7 152,000
Paducah, KY Complex 18 303,000
Pensacola, FL 7 272,000
Port Everglades, FL 10 248,000
Rensselaer, NY 13 530,000
Tampa, FL 7 475,000
---------------
7,386,000
---------------
Total Terminal Shell Capacity 22,093,000
===============
7
ITEM 3. LEGAL PROCEEDINGS
Not Applicable
ITEM 4. VOTE OF SECURITY HOLDERS
Not Applicable
PART II
ITEM 5. MARKET FOR COMMON STOCK
The Common Stock is traded on the American Stock Exchange under the symbol
"TMG". The following table sets forth, for the periods indicated, the range of
high and low per share sale prices for Common Stock as reported on the American
Stock Exchange.
Low High
------ ------
July 1, 1998 through September 30, 1998 $ 9.88 $15.63
October 1, 1998 through December 31, 1998 $11.00 $16.00
January 1, 1999 through March 31, 1999 $10.38 $15.25
April 1, 1999 through June 30, 1999 $11.13 $14.75
July 1, 1999 through September 30, 1999 $10.06 $16.25
October 1, 1999 through December 31, 1999 $ 4.50 $15.00
January 1, 2000 through March 31, 2000 $ 4.75 $ 7.13
April 1, 2000 through June 30, 2000 $ 5.38 $ 8.75
On September 1, 2000, the last reported sale price for the Common Stock on
the American Stock Exchange was $4.75. As of September 1, 2000, there were
approximately 381 stockholders of record of the Common Stock.
No dividends were declared or paid on the Common Stock during the periods
reported in the table above. The Company intends to retain future cash flow for
use in its business and has no current intention of paying dividends to its
common stockholders in the foreseeable future. Any payment of future dividends
to its common stockholders and the amounts thereof will depend upon the
Company's earnings, financial condition, capital requirements and other factors
deemed relevant by the Company's Board of Directors. The Company's Bank Credit
Facility and Master Shelf Agreement, as well as instruments governing certain of
its other indebtedness, contain certain restrictions on the payment of
dividends. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the fiscal years ended June 30,
2000 and 1999; two months ended June 30, 1998; and the fiscal years ended April
30, 1998, 1997, 1996 and 1995, is derived from applicable audited consolidated
financial statements. This selected financial data should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations, Item 7, and the consolidated financial statements and notes thereto
included in Item 8, "Financial Statements and Supplementary Data."
8
TRANSMONTAIGNE INC.
Selected Financial Data
(thousands of dollars, except for per share amounts)
Fiscal years Two months Fiscal years
ended ended ended
June 30, June 30, April 30,
--------------------------- ------------ -------------------------------------------------
2000 1999 1998 1998 1997 1996 1995
------------ ------------ ------------ ------------ ---------- ---------- ---------
STATEMENT OF
OPERATIONS DATA:
Revenues $5,071,354 3,047,061 315,533 1,967,506 1,166,665 533,107 324,591
Operating income (loss) (40,563) 30,179 (2,586) 19,234 9,901 6,549 406
Net earnings (loss) (37,937) 1,939 (2,663) 7,638 9,171 4,618 (3,218)
Preferred stock dividends (8,506) (2,274) - - - - -
Net earnings (loss)
attributable to
common stockholders (46,443) (335) (2,663) 7,638 9,171 4,618 (3,218)
Earnings (loss)
per common share
Basic (1.52) (0.01) (0.10) 0.30 0.42 0.31 (1.32)
Diluted (1.52) (0.01) (0.10) 0.29 0.41 0.30 (1.32)
Weighted average common
shares outstanding:
Basic 30,599 28,972 25,949 25,887 21,743 14,972 2,860
Diluted 30,599 28,972 25,949 26,680 22,544 15,154 2,860
STATEMENT OF
CASH FLOWS DATA:
Net Cash Provided
By (Used In):
Operating activities $ 269,086 (68,861) 3,673 (4,570) (9,586) (3,864) (237)
Investing activities 76,342 (467,040) (6,277) (66,131) (89,920) (4,181) (234)
Financing activities (305,417) 522,613 12 64,124 97,487 44,647 62
OTHER FINANCIAL
DATA:
EBITDA (1) 37,486 50,623 (524) 29,510 15,355 8,844 1,561
Capital expenditures 61,264 137,556 6,455 66,634 92,294 4,124 748
June 30, April 30,
------------------------------------------- -------------------------------------------------
2000 1999 1998 1998 1997 1996 1995
------------ ------------ ------------ ------------ ---------- ---------- ---------
BALANCE SHEET
DATA:
Working capital $ 134,807 356,602 86,467 94,393 78,423 55,652 37,989
Total assets 834,572 1,106,009 318,215 323,305 261,724 120,963 104,220
Long-term debt,
Excluding current
Maturities 202,625 495,672 128,971 128,970 64,774 28,949 36,946
Stockholders' equity 332,098 376,051 145,266 147,804 138,972 57,819 28,471
(1) EBITDA is earnings (loss) before income tax plus interest expense, other
financing costs, depreciation and amortization, impairment of long lived assets
and less gain on disposition of assets. The Company believes that, in addition
to cash flow from operations and net earnings (loss), EBITDA is a useful
financial performance measurement for assessing operating performance since it
provides an additional basis to evaluate the ability of the Company to incur and
service debt and to fund capital expenditures. In evaluating EBITDA, the Company
believes that consideration should be given, among other things, to the amount
by which EBITDA exceeds interest costs for the period; how EBITDA compares to
principal repayments on debt for the period; and how EBITDA compares to capital
expenditures for the period. To evaluate EBITDA, the components of EBITDA such
as revenue and operating expenses and the variability of such components over
time, should also be considered. EBITDA should not be construed, however, as an
alternative to operating income (loss) (as determined in accordance with
generally accepted accounting principles ("GAAP")) as an indicator of the
Company's operating performance or to cash flows from operating activities (as
determined in accordance with GAAP) as a measure of liquidity. The Company's
method of calculating EBITDA may differ from methods used by other companies,
and as a result, EBITDA measures disclosed herein might not be comparable to
other similarly titled measures used by other companies.
9
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K includes forward looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that
its goals will be achieved. Important factors which could cause actual results
to differ materially from those in the forward looking statements include:
. that the Company will expand its business
. that the Company will generate net operating margins from high sales
volumes
. that the Company will generate net operating margins affected by price
volatility of products purchased and sold
. that the Company will enter into transactions with counterparties having
the ability to meet their financial commitments to the Company
. that the Company will incur unanticipated costs in complying with
current and future environmental regulations
. that the Company will capitalize on the trend by other companies in the
oil and gas industry to divest assets and outsource certain services
. that the Company will acquire strategically located operating facilities
from third parties
. that the Company will generate working capital internally, or have the
ability to access debt and equity resources, to meet its capital
requirements.
10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
TransMontaigne Inc., a Delaware corporation, ("the Company") provides a
broad range of integrated supply, distribution, marketing, terminaling, storage
and transportation services to producers, refiners, distributors, marketers and
industrial end-users of petroleum products, chemicals, crude oil and other bulk
liquids in the downstream sector of the petroleum and chemical industries. The
Company is a holding company that conducts its operations through wholly owned
subsidiaries primarily in the Mid-Continent, Gulf Coast, Southeast, Mid-Atlantic
and Northeast regions of the United States. Through its wholly owned
subsidiary, TransMontaigne Product Services Inc. ("TPSI"), the Company provides
product services consisting of the bulk purchase and sale of refined petroleum
products and the wholesale marketing of products at terminal truck loading rack
locations, both of which are high volume, low margin activities. Through its
wholly owned subsidiaries, TransMontaigne Terminaling Inc.("TTI") and
TransMontaigne Pipeline Inc.("TPI"), the Company provides refined petroleum
product and crude oil transportation, terminal and storage services to over 600
customers, including most major oil companies and independent refiners in the
United States. The Company owns approximately 850 miles of petroleum products
and crude oil pipeline and 75 terminal, storage and delivery facilities in 19
states with a combined tank storage capacity of approximately 22 million
barrels. The Company also extensively utilizes refined petroleum products
common carrier pipelines and terminals owned by third parties in order to
increase product volumes shipped, marketed and exchanged with customers in other
locations. Management believes that the use of all these facilities should
allow the Company to significantly expand its geographic service area and the
integrated services it provides. The Company's commercial operations are
divided into supply, distribution and marketing of refined petroleum products;
terminals, which includes terminaling and storage services; and pipelines. The
Company, through a wholly owned subsidiary, historically provided selected
natural gas services including the gathering, processing, fractionating and
marketing of natural gas liquids ("NGL") and natural gas. This subsidiary was
divested as of December 31, 1999. Segment information is presented in the notes
to the financial statements. The Company does not explore for, or produce, crude
oil or natural gas; and does not own crude oil or natural gas reserves.
DISPOSITION
Effective December 31, 1999, the Company sold its natural gas gathering
subsidiary, Bear Paw Energy Inc., ("BPEI"), to BPE Acquisition LLC ("BPE"), a
special purpose entity formed by Bear Paw's management in association with
Thomas J. Edelman and Chase Capital Partners. The sale of BPEI was for cash
consideration of $107.5 million, plus $23.7 million of retroactive reimbursement
for all of the capital expenditures made by the Company on BPEI's newly
constructed Powder River coal seam gathering system from July 1, 1999 to
December 31, 1999. This disposition generated an approximate $16.6 million net
gain to the Company. The $131.2 million total sale proceeds were used to reduce
long term debt and for general corporate purposes.
11
ACQUISITIONS
On May 31, 2000, the Company acquired from Chevron U.S.A. Inc. two
petroleum products terminals located in Richmond and Montvale, Virginia for
approximately $3.2 million cash. These facilities that are interconnected to the
Colonial and Plantation pipeline systems include approximately 500,000 barrels
of tankage.
On June 30, 1999, the Company acquired from Amerada Hess Corporation the
Hess Terminals for approximately $66.2 million cash and related refined products
inventory for approximately $32.5 million cash. The Hess Terminals, which are
interconnected to the Colonial and Plantation pipeline systems, include
approximately 5.3 million barrels of tankage at 11 storage and terminal
facilities and 36 miles of proprietary pipelines.
On December 3, 1998, the Company acquired from SUNOCO, Inc. a petroleum
products terminal located on the Hudson River at Rensselaer, near Albany, New
York for approximately $5.2 million cash. The Rensselaer terminal facility
includes 510,000 barrels of storage capacity, 3 truck loading racks and a dock
capable of handling both barges and ocean going tankers.
On October 30, 1998, the Company acquired all of the common stock of LDEC
for approximately $161.0 million, including $100.6 million cash and 4.5 million
shares of the Company common stock valued at $60.4 million. In addition, the
Company acquired LDEC's working capital for $192.5 million cash. The LDEC
acquisition included 24 refined petroleum products terminal and storage
facilities, of which 7 are wholly owned and 17 are owned jointly with BP Oil
Company, together with its supply, distribution and marketing business. These
facilities are located in 9 states in the Southern and Eastern regions of the
United States; have approximately 4.2 million barrels of Company owned storage
capacity; and are supplied primarily by the Colonial and Plantation pipeline
systems.
On September 18, 1998, the Company acquired for $29.2 million cash the
15.38% common stock interest in West Shore Pipe Line Company ("West Shore")owned
by Atlantic Richfield Company. Effective December 31, 1998, the Company acquired
for $5.5 million cash an additional 4.11% common stock interest in West Shore
owned by Equilon Pipeline Company, LLC and for $1.2 million cash an additional
.89% common stock interest in West Shore owned by Texaco Transportation and
Trading Inc., both of which transactions closed in January 1999.
On July 28, 1998, the Company acquired from Statia Terminals Southwest,
Inc. the Southwest Terminal for $6.5 million cash. The acquisition included
terminaling, storage and loading facilities for petroleum products, chemicals
and other bulk liquids at the Port of Brownsville, Texas with over 1.65 million
barrels of tank storage, 12 truck rack loading bays, connections to barge and
tanker loading facilities and the exclusive use of 5 railroad spur lines with a
total of 32 railroad car loading spots.
On November 25, 1997, the Company acquired the common stock of the 17
ITAPCO Terminal Corporations and certain related property and property interests
for approximately $32.0 million cash. The acquisition included 17 bulk liquid
storage and distribution terminals located in 8 states having total tankage
capacity in excess of 3.3 million barrels, handling primarily refined petroleum
products, chemicals and other bulk liquids together with the related operations
of the terminals; and certain other assets.
12
RESULTS OF OPERATIONS
Selected annual financial data from the Company's operations are summarized
below (in thousands):
Years Ended Year Ended
June 30, April 30,
------------------------------ ------------
2000 1999 1998
------------ ------------ ------------
Net operating margins (1):
Product Supply, Distribution and Marketing:
Sales, exchanges and product arbitrage $ 6,371 24,108 7,849
Gains related to minimum inventory (2) 803 - -
------------ ------------ ------------
7,174 24,108 7,849
Terminals 33,420 22,387 8,118
Pipelines 6,230 7,224 7,206
Natural Gas Services (3) 10,490 11,225 12,716
------------ ------------ ------------
Total net operating margins 57,314 64,944 35,889
Impairment to long lived assets 50,136 - -
General and administrative expenses 25,397 17,990 8,438
Depreciation and amortization expenses 22,344 16,775 8,217
------------ ------------ ------------
Operating income (loss) (40,563) 30,179 19,234
Interest expense and related financing costs (36,040) (30,454) (8,163)
Dividend and interest income 4,009 3,669 2,059
Gain on disposition of assets, net 13,930 - -
Gain on interest rate swap 1,560 - -
Income tax (expense) benefit 19,167 (1,455) (5,492)
------------ ------------ ------------
Net earnings (loss) (37,937) 1,939 7,638
Preferred stock dividends (8,506) (2,274) -
------------ ------------ ------------
Net earnings (loss) attributable to common
stockholders $ (46,443) (335) 7,638
============ ============ ============
13
Selected quarterly financial data from the Company's operations are summarized
below (in thousands):
Year
Three Months Ended Ended
---------------------------------------------------- -----------
9/30/99 12/31/99 3/31/00 6/30/00 6/30/00
----------- ---------- ----------- ----------- -----------
Net operating margins (1):
Product Supply, Distribution and Marketing:
Sales, exchanges and product arbitrage $ 3,322 (12,780) 15,133 696 6,371
Gains (losses) related to minimum inventory (2) (5,113) (5,313) (2,429) 13,658 803
----------- ---------- ----------- ----------- -----------
(1,791) (18,093) 12,704 14,354 7,174
Terminals 8,042 8,135 8,788 8,455 33,420
Pipelines 2,158 1,639 1,307 1,126 6,230
Natural Gas Services (3) 4,419 6,071 - - 10,490
----------- ---------- ----------- ----------- -----------
Total net operating margins $ 12,828 (2,248) 22,799 23,935 57,314
=========== ========== =========== =========== ===========
EBITDA (4) $ 8,331 (8,524) 17,222 20,457 37,486
=========== ========== =========== =========== ===========
Year
Three Months Ended Ended
---------------------------------------------------- -----------
9/30/98 12/31/98 3/31/99 6/30/99 6/30/99
----------- ---------- ----------- ----------- -----------
Net operating margins (1):
Product Supply, Distribution and Marketing:
Sales, exchanges and product arbitrage $ 2,328 6,449 14,312 1,019 24,108
Gains (losses) related to minimum inventory (2) - - - - -
----------- ---------- ----------- ----------- -----------
2,328 6,449 14,312 1,019 24,108
Terminals 3,523 5,310 6,686 6,868 22,387
Pipelines 2,718 1,662 1,280 1,564 7,224
Natural Gas Services (3) 2,829 3,155 2,368 2,873 11,225
----------- ---------- ----------- ----------- -----------
Total net operating margins $ 11,398 16,576 24,646 12,324 64,944
=========== ========== =========== =========== ===========
EBITDA (4) $ 8,741 12,115 20,339 9,428 50,623
=========== ========== =========== =========== ===========
(1) Net operating margins represent revenues less product costs and operating
expenses for the product and natural gas services operations and revenues
less operating expenses for terminal and pipeline operations.
(2) The Company did not measure the gains or losses related to minimum inventory
in the prior periods as it did not separately account for its minimum
inventory. Therefore, there are not comparable amounts for prior periods.
(3) The Company's natural gas services operations were divested as of December
31, 1999.
(4) EBITDA is earnings (loss) before income tax plus interest expense, other
financing costs, depreciation and amortization, impairment of long lived
assets and less gain on disposition of assets. The Company believes that,
in addition to cash flow from operations and net earnings (loss), EBITDA is
a useful financial performance measurement for assessing operating
performance since it provides an additional basis to evaluate the ability of
the Company to incur and service debt and to fund capital expenditures. In
evaluating EBITDA, the Company believes that consideration should be given,
among other things, to the amount by which EBITDA exceeds interest costs for
the period; how EBITDA compares to principal repayments on debt for the
period; and how EBITDA compares to capital expenditures for the period. To
evaluate EBITDA, the components of EBITDA such as revenue and operating
expenses and the variability of such components over time, should also be
considered. EBITDA should not be construed, however, as an alternative to
operating income (loss) (as determined in accordance with generally accepted
accounting principles ("GAAP")) as an indicator of the Company's operating
performance or to cash flows from operating activities (as determined in
accordance with GAAP) as a measure of liquidity. The Company's method of
calculating EBITDA may differ from methods used by other companies, and as a
result, EBITDA measures disclosed herein might not be comparable to other
similarly titled measures used by other companies.
14
TPSI's products supply, distribution and marketing services revenues and
fees are generated from bulk sales and exchanges of refined petroleum products
to major and large independent energy companies; wholesale distribution and
sales of refined petroleum products to jobbers and retailers; regional and
national industrial end-user and commercial wholesale storage and forward sales
marketing contracts of refined petroleum products; and tailored short and long-
term fuel and risk management logistical services arrangements to wholesale,
retail and industrial end-users. Refined petroleum products storage and forward
sales transactions enable TPSI to purchase refined petroleum products inventory;
utilize proprietary and leased tankage as well as line space controlled by TPSI
in major common carrier pipelines; arbitrage location product prices
differentials and transportation costs; store inventory; and, depending upon
market conditions, lock-in margins through sales in the futures cash market or
NYMEX contracts. All energy related contracts are marked to market with changes
recognized in operations. Fuel and risk management logistical services provide
both TPSI's large and small volume customers an assured, ratable and cost
effective delivered source of refined petroleum product supply through
proprietary pipelines and terminals as well as non-proprietary pipeline,
terminal, truck, rail and barge distribution channels. Bulk purchase and sale
transactions in quantities of 25,000 barrels to 50,000 barrels or more are
common. Wholesale distribution of refined petroleum products is conducted from
proprietary and non-proprietary truck loading terminal, storage and delivery
locations.
Product costs of products supply, distribution and marketing operations are
primarily the cost of products purchased and also include transportation,
storage, terminaling and sales commission expenses. In addition, product costs
include the market valuation change of the refined petroleum products minimum
inventory.
Operating expenses of products supply, distribution and marketing
operations are primarily wages and employee benefits, property taxes, travel and
entertainment expenses.
Terminal revenues are based on the volume of refined petroleum products
handled at TTI loading racks, generally at a standard per gallon rate. Terminal
fees are not regulated. Storage fees are generally based on a per barrel rate or
tankage capacity committed and will vary with the duration of the arrangement,
the product stored and special handling requirements, particularly when certain
types of chemicals and other bulk liquids are involved. Storage fees are not
regulated.
Pipeline revenues are based on the volume of refined petroleum products or
crude oil transported and the distance from the origin point to the delivery
point. TPI's interstate pipeline systems transport refined petroleum products
and their tariffs are regulated by the FERC. TPI's intrastate pipeline
transports crude oil and its tariffs are not regulated by the FERC, but are
regulated by the Texas Railroad Commission.
Operating expenses of pipeline and terminal operations include wages and
employee benefits, utilities, communications, maintenance and repairs, property
taxes, rent, insurance, vehicle expenses, environmental compliance costs,
materials and supplies.
Natural gas gathering and processing revenues are based on the inlet volume
of natural gas purchased from producers under both percentage of proceeds and
fee based arrangements. Natural gas is gathered and processed into NGL products,
principally propane, butane and natural gasoline. These products are transported
by truck or pipeline to storage facilities from which they are further
transported and marketed to wholesalers and end-users. Residue natural gas is
delivered to and marketed through connections with third-party interstate
natural gas pipelines.
Operating expenses of natural gas gathering and processing operations
include wages and employee benefits, utilities, maintenance and repairs,
property taxes, rent, insurance, vehicle expenses, environmental compliance
costs, materials and supplies.
15
YEAR ENDED JUNE 30, 2000 COMPARED TO YEAR ENDED JUNE 30, 1999
The Company reported a net loss of $37.9 million for the year ended June
30, 2000, compared to net earnings of $1.9 million for the year ended June 30,
1999. After preferred stock dividends, the net loss attributable to common
stockholders was $46.4 million and $.3 million for the year ended June 30, 2000
and 1999, respectively. Loss per common share for the year ended June 30, 2000
was $1.52 basic and diluted based on 30.6 million weighted average basic and
average diluted shares outstanding compared to $.01 basic and diluted for the
year ended June 30, 1999.
The net loss resulted primarily from the $50.1 million impairment charge;
increased general and administrative expenses, which included non-cash stock
compensation costs, additional personnel costs related to separation and release
agreements, and accrued personnel related costs to the corporate staff reduction
and relocation plan; additional depreciation and amortization expenses
attributable to the acquisitions and facilities expansion projects; increased
interest expense, primarily attributable to the increase in average interest
rates; and an approximate $3.8 million charge to other financing costs for
deferred debt issuance costs due to the amended debt agreements. The net loss
was partially offset by the increased net operating margin contribution from
terminal operations, approximately $16.6 million gain on the sale of BPEI, and
the $19.2 million net deferred tax benefit.
Product Supply, Distribution and Marketing
The net operating margin from product supply, distribution and marketing
for the year ended June 30, 2000 was $7.2 million as compared to $24.1 million
for the year ended June 30, 1999, a decrease of $16.9 million. This decline in
net operating margin was primarily attributable to the significant cash cost
incurred by the Company to roll the hedges on its minimum inventory forward from
month to month in an inverse market. The Company continued this strategy for the
first, second and third quarters of the fiscal year ended June 30, 2000
recognizing some $12.9 million of cash losses directly related to this minimum
inventory hedging strategy. The Company also recognized an additional $1.75
million loss as a result of increasing its bad debt reserves.
During the fourth quarter of 2000, the Company changed its strategy and
unhedged its minimum (of 2 million barrels) inventory thereby eliminating any
future cash costs associated with rolling forward the hedges from month to
month. Accordingly, the valuation of the minimum inventories started floating
with the market and any increase or decrease in valuation was marked to market
on a daily basis with the resulting non-cash gains and losses recognized in
operating income. The Company recorded some $13.7 million of such non-cash gains
during the fourth quarter due to this changed strategy.
The Company enjoys margin opportunities by utilizing its storage capacity
and inventory position when the market environment is in contango or a carry
position (where nearby futures prices are lower than succeeding periods). Margin
opportunities are not as great when the market environment is in backwardation
or an inverse position (where nearby futures prices are higher than succeeding
periods). During the previous fiscal year ended June 30, 1999, the Company
enjoyed the benefit from both gasoline and heating oil markets being in
contango. However, during this current fiscal year ended June 30, 2000, the
market environment changed when crude oil and other energy related products
escalated, creating a backwardated market price structure, eliminating many of
the previous year's opportunities.
Terminals
The net operating margin from terminal operations for the year ended June
30, 2000 was $33.4 million compared to $22.4 million for the year ended June 30,
1999, an increase of $11.0 million. The increase in net operating margin
resulted from a $22.6 million increase in revenues that was partially offset by
an $11.6 million increase in operating costs. These increases were primarily the
result of terminal acquisitions during the past year and the related additional
58.0 million barrels handled. The margin per barrel for the year ended June 30,
2000 of $.19 was unchanged compared to the year ended June 30, 1999.
16
Pipelines
The net operating margin from pipeline operations for the year ended June
30, 2000 was $6.2 million compared to $7.2 million for the year ended June 30,
1999, a decrease of $1.0 million. The margin per barrel for the year ended June
30, 2000 of $.24 decreased $.05 compared to the year ended June 30, 1999.
Pipeline volumes per day increased 3,220 barrels, primarily due to increased
short haul movements in the East Chicago area. The decreases in the net
operating margin and the margin per barrel resulted from a decrease in higher
tariff movements, an increase in operating costs, and the transfer of non-
carrier assets and their associated margins to terminal operations.
Natural Gas Services
The Company's natural gas services operation was divested effective
December 31, 1999.
Corporate and Other
General and administrative expenses for the year ended June 30, 2000 were
$25.4 million compared to $18.0 million for the year ended June 30, 1999, an
increase of $7.4 million. The increase was due to additional personnel costs,
related employee benefits, increased office lease rentals, increased
communication expenses directly attributable to the continued expansion of the
Company's integrated logistical petroleum services, and the LDEC, SUNOCO and
Hess Terminals acquisitions. In addition, the Company incurred lease contract
cancellation costs, additional personnel costs related to separation and release
agreements, non-cash stock compensation costs, and accrued personnel costs
related to the corporate staff reduction and relocation plan, all of which
amounted to approximately $5.0 million during the year ended June 30, 2000.
Depreciation and amortization expenses for the year ended June 30, 2000
were $22.3 million compared to $16.8 million for the year ended June 30, 1999.
The increase was due primarily to terminal related assets being acquired and
constructed during the year and past year partially offset by the disposition of
natural gas services assets of BPEI and impairment charge recorded at December
31, 1999.
Dividend income for the year ended June 30, 2000 was $1.6 million compared
to $1.7 million for the year ended June 30, 1999, a decrease of $.1 million.
Dividend income is solely from West Shore compared to the prior year that
included dividends from Lion Oil Company and West Shore. Interest income for the
year ended June 30, 2000 was $2.4 million compared to $1.9 million for the year
ended June 30, 1999, an increase of $.5 million. The increase in interest income
was due primarily to the increase in interest bearing cash balances.
Interest expense and other financing costs during the year ended June 30,
2000 were $36.0 million compared to $30.5 million during the year ended June 30,
1999, an increase of $5.5 million. The increase in interest expense of $2.0
million was primarily due to increased average interest rates from 7.1% to 8.7%
reduced by proceeds from interest rate swaps, with a minimal decrease in the
average outstanding debt and $875,000 in expense related to prepayment of
outstanding long-term debt. Other financing costs increased $3.6 million
primarily due to the write off of approximately $3.8 million deferred debt costs
in connection with amended debt agreements.
Impairment on long lived assets charge for the year ended June 30, 2000 was
non-cash impairment charges totaling $50.1 million, before income taxes. These
charges include $31.9 million relating to certain of the Company's refined
petroleum product terminals added in the 1998 acquisition of LDEC and $18.2
million relating to certain intangible assets recorded as a result of the same
acquisition. The impairment charge resulted from the change in the planned use
of certain terminals and the abandonment of a pipeline that supplied one
terminal, thereby significantly impacting the economic viability of such
terminals. Each of these factors reduced or eliminated future cash flows. The
$31.9 million impairment charge for the terminals reduces the book value of
these assets to their estimated fair value as determined in the Company's
impairment analysis. The additional $18.2 million impairment charge for the
intangible assets represents the unamortized balance of these assets.
Management's review of the market location differentials associated with these
assets showed that the Company received little or no value from these assets in
the last twelve months. In addition, management does not anticipate any material
future value utilizing these assets.
17
Gain on the disposition of assets was $13.9 million for the year ended June
30, 2000 and was primarily due to the sale of BPEI partially offset by losses on
the disposition and retirement of other assets no longer used or required.
Income tax benefit was $19.2 million for the year ended June 30, 2000,
which represents an effective combined federal and state income tax rate of
33.6%. Income tax expense was $1.5 million for the year ended June 30, 1999,
which represents an effective combined federal and state income tax rate of
42.9%. The decrease in the effective combined tax rate was due to the adjustment
in cumulative temporary book tax differences.
Preferred stock dividends on the Series A Convertible Preferred Stock were
$8.6 million and $2.3 million for the year ended June 30, 2000 and 1999,
respectively.
18
YEAR ENDED JUNE 30, 1999 COMPARED TO YEAR ENDED APRIL 30, 1998
In August 1998, the Company elected to change its fiscal year end to June
30. The management discussion that follows compares the year ended June 30, 1999
to the year ended April 30, 1998. The Company did not recast historical
financial information to present the year ended June 30, 1998 because the
financial reporting systems in place at that time included certain procedures
that were completed only on an annual basis. Accordingly, it is impractical to
recast this financial information.
Net earnings were $1.9 million for the year ended June 30, 1999, compared
to $7.6 million for the year ended April 30, 1998, a decrease of 75%, or $5.7
million. After preferred stock dividends, net earnings (loss) attributable to
common stockholders were $(.3) million and $7.6 million for the years ended June
30, 1999 and April 30, 1998, respectively. Loss per common share for the year
ended June 30, 1999 was $(.01) basic and $(.01) diluted based on 29.0 million
weighted average basic and diluted shares outstanding compared to earnings per
share of $.30 basic and $.29 diluted for the year ended April 30, 1998.
Earnings before income taxes for the year ended June 30, 1999 were $3.4
million, compared to $13.1 million for the year ended April 30, 1998, a decrease
of 74%, or $9.7 million. The decrease in earnings before income taxes resulted
from increased general and administrative expenses; additional depreciation
attributable to the acquisitions of LDEC and the ITAPCO Terminal Corporations
and expansion of natural gas services facilities; and interest expense,
primarily attributable to the financing of the LDEC, West Shore, Southwest
Terminal, Rensselaer Terminal and ITAPCO Terminal Corporations acquisitions and
increased working capital requirements; offset by increased net operating margin
contributions from products supply, distribution and marketing operations
primarily from the LDEC acquisition; and from terminal operations primarily from
the LDEC and ITAPCO Terminal Corporations acquisitions.
Product Supply, Distribution and Marketing
The net operating margin from products supply, distribution and marketing
operations for the year ended June 30, 1999 was $24.1 million compared to $7.8
million for the year ended April 30, 1998, an increase of 207%, or $16.3
million. Revenues were $2.9 billion for the year ended June 30, 1999 compared
to $1.9 billion for the year ended April 30, 1998, an increase of 56%, or $1.0
billion. These increases were primarily due to the inclusion of LDEC operations
for the eight months ended June 30, 1999.
Terminals
The net operating margin from terminal operations for the current year was
$22.4 million compared to $8.1 million for the year ended April 30, 1998, an
increase of 176%, or $14.3 million. The margin per gallon for the year ended
June 30, 1999 of $.0046 decreased 15%, or $.0008. The increase in net operating
margin resulted from a significant increase in refined petroleum products
volumes handled and revenues attributable to the addition of the ITAPCO Terminal
Corporations, Southwest, LDEC and Rensselaer terminals acquired in November
1997, July 1998, October 1998 and December 1998, respectively. These revenue
increases were partially offset by a 224% increase in terminal operating costs
primarily attributable to the LDEC terminals, Southwest Terminal, Rensselaer
Terminal, the ITAPCO Terminal Corporations terminals and expanded East Chicago
and Mt. Vernon terminal operations.
Pipelines
The net operating margin from pipeline operations for the current year and
for the year ended April 30, 1998 was $7.2 million. The margin per gallon for
the year ended June 30, 1999 of $.0070 decreased 20%, or $.0018. Pipeline
volumes increased 25% and revenues increased 16% primarily due to increased
joint tariff participation and short haul movements in the East Chicago area
which were offset by a 34% increase in operating costs primarily due to
increased payroll, major maintenance projects and right of way clearing costs.
19
Natural Gas Services
The net operating margin from natural gas services operations for the year
ended June 30, 1999 was $11.2 million compared to $12.7 million for the year
ended April 30, 1998, a decrease of 12%, or $1.5 million. Revenues for the year
ended June 30, 1999 were $53.6 million compared to $60.5 million for the year
ended April 30, 1998, a decrease of 11%, or $6.9 million. The net operating
margin and revenues were attributable primarily to the business activities of
the Grasslands Facilities. Net operating margin and revenues during the year
ended June 30, 1999 were negatively impacted by low NGL prices during the last
six months of 1998 and first five months of 1999, notwithstanding an approximate
8% increase in NGL production.
Corporate and Other
General and administrative expenses for the year ended June 30, 1999 were
$18.0 million compared to $8.4 million for the year ended April 30, 1998, an
increase of 113%, or $9.6 million. The increase was due primarily to additional
personnel costs, related employee benefits, increased office lease rentals,
increased communication expenses and expenses related to the relocation of
certain Company employees to the Atlanta, Georgia office. These increases were
directly attributable to the continued expansion of the Company's integrated
logistical petroleum services and to the acquisition and operations of LDEC and
the ITAPCO Terminal Corporations. In addition, the increase includes
amortization of unearned compensation of $.8 million.
Other income for the year ended June 30, 1999 included dividend income from
West Shore of $1.4 million and Lion Oil Company ("Lion") of $.4 million.
Interest income for the year ended June 30, 1999 was $1.9 million compared to
$2.0 million for the year ended April 30, 1998, a decrease of 7%, or $.1
million. The decrease in interest income was due primarily to the decrease in
interest bearing cash balances held for future investments.
Interest expense represents interest on the Company's bank credit facility
borrowings and senior promissory notes which were used primarily to finance the
acquisitions of LDEC, West Shore, the Southwest Terminal, the Rensselaer
Terminal, the ITAPCO Terminal Corporations and the Grasslands Facilities, other
continuing capital expenditures and working capital to carry inventory and
accounts receivable. Also included is interest on the Company's senior
subordinated debentures. Other financing costs include amortization of deferred
debt issuance costs paid in connection with the bank credit facility and Master
Shelf Agreement and include commitment fees paid in connection with the credit
facility. Interest expense and other financing costs during the year ended June
30, 1999 were $30.5 million compared to $8.2 million during the year ended April
30, 1998, an increase of 273%, or $22.3 million. The increase in interest
expense of $17.9 million was due to an increase in average outstanding debt,
primarily to fund acquisitions and increased working capital requirements. Other
financing costs increased $4.4 million largely due to amortization of costs
incurred in securing a restructured BankBoston, N.A. credit facility and
additional costs associated with amending the Master Shelf Agreement.
Income tax expense was $1.5 million for the year ended June 30, 1999 that
represents an effective combined federal and state income tax rate of 42.9%.
Income tax expense was $5.5 million for the year ended April 30, 1998 that
represents an effective combined federal and state income tax rate of 41.8%.
Preferred stock dividends on the Series A Convertible Preferred Stock were
$2.3 million for the short period from the issuance dates of March 25, 1999 and
March 30, 1999 to June 30, 1999. The preferred stock dividends were paid June
30, 1999.
20
TWO MONTHS ENDED JUNE 30, 1998
In August 1998, the Company elected to change its fiscal year end to June
30. The following addresses results of operations for the two months ended June
30, 1998.
Loss before income taxes for the two months ended June 30, 1998 was $4.1
million. The loss was primarily a result of depressed product prices which
caused negative product sales operating margins; increased general and
administrative expenses; additional depreciation attributable to the expansion
of natural gas services facilities and the acquisition of the ITAPCO Terminal
Corporations; and interest expense, primarily attributable to the financing of
the ITAPCO Terminal Corporations acquisition. Partially offsetting these factors
were the operating margin contribution from the ITAPCO Terminal Corporations
acquisition; the net operating margin contribution from the natural gas services
business segment attributable essentially to the Grasslands facilities; and the
increased net operating margin contribution from the pipeline operations
business segment.
The net operating margin (loss) from pipeline; terminal and storage;
products supply and distribution; and natural gas services operations was $1.6
million, $2.1 million, $(4.5) million and $1.9 million, respectively, for the
two months ended June 30, 1998. The aggregate net operating margin was $1.1
million. Included in the Company's net operating margin was a non-cash lower of
cost or market write down adjustment to inventory of $1.9 million.
General and administrative expenses for the two months ended June 30, 1998
were $1.9 million and included additional personnel related costs and increased
office lease, regulatory reporting, travel, information systems and
communication expenses attributable to the Company's overall expansion of its
expanded integrated logistical petroleum services.
21
LIQUIDITY AND CAPITAL RESOURCES
The following summary reflects the Company's comparative net cash flows for
the years ended June 30, 2000 and 1999 and April 30, 1998 (in thousands).
Years Ended Year Ended
June 30, April 30,
-------------------------------------------------- ----------------------
2000 1999 1998
----------------------- ------------------- ----------------------
Net cash provided (used) by operating activities $ 269,086 (68,861) (4,570)
Net cash provided (used) by investing activities $ 76,342 (467,040) (66,131)
Net cash provided (used) by financing activities $ (305,417) 522,613 64,124
Net cash provided by operating activities of $269.1 million for the year
ended June 30, 2000 was attributable primarily to decreased inventories, trade
accounts receivable, increased inventory due under exchange agreements,
amortization of deferred debt issuance costs, and depreciation and amortization
and reduced by decreased trade accounts payable and the net loss before income
tax benefit. The Company's current ratio (current assets divided by current
liabilities) was 1.45 to 1.0 at June 30, 2000 compared to 2.53 to 1.0 at June
30, 1999.
Net cash provided by investing activities was $76.3 million during the year
ended June 30, 2000 as the Company disposed of its natural gas services segment
which partially offset its growth through construction and improvements to
existing operating facilities and acquisitions. Net cash used by investing
activities was $467.0 million during the year ended June 30, 1999 as the Company
continued its growth through construction and improvements to existing operating
facilities and the acquisitions of LDEC ($293.1 million), Hess facilities ($66.2
million), a 20.38% common stock interest in West Shore ($35.9 million),
Southwest Terminal ($6.5 million) and Rensselaer Terminal ($5.2 million).
Net cash used by financing activities for the year ended June 30, 2000 of
$305.4 million primarily represented repayments of borrowings of $291.0 million
under the Company's bank credit facility and master shelf facility, and payment
of preferred stock dividends and deferred debt costs. Net cash provided by
financing activities for the year ended June 30, 1999 of $522.6 million
primarily represented borrowings of $368.7 million under the Company's bank
credit facility and proceeds of $170.1 million from the issuance of the Series A
Convertible Preferred Stock which were used to fund the LDEC, Hess facilities,
West Shore, Southwest, and Rensselaer acquisitions, as well as to finance
capital expenditures.
In February 2000, the Company amended its bank credit facility led by Fleet
National Bank (formerly BankBoston, N.A). The amended bank credit facility
includes a $300 million revolving component due December 31, 2003 and a $95
million term component due June 30, 2006. The term component has quarterly
principal payments beginning in September 2000. Borrowings under the bank credit
facility bear interest at an annual rate equal to the lender's Alternate Base
Rate plus margins subject to a Eurodollar Rate pricing option. The bank credit
facility includes a $20 million same day revolving swing line under which
advances may be drawn at an interest rate comparable to the Eurodollar Rate.
At June 30, 2000, the Company had advances of $155 million outstanding
under the bank credit facility utilizing the Eurodollar Rate loan pricing
option. The average interest rate at June 30, 2000 was 9.78%.
At June 30, 2000, the Company had outstanding under the Master Shelf
Agreement, $25 million of 7.85% Senior Notes due April 17, 2003 and $25 million
of 7.22% Senior Notes due October 17, 2004. The Master Shelf Agreement was
amended as of December 31, 1999 in connection with the amendment of the bank
credit facility. During the current year, the Company paid off $25 million of
the 7.85% Senior Notes with proceeds from the sale of BPEI.
Each of the bank credit facility and Master Shelf Agreement is secured by
certain current assets and fixed assets, and each also includes financial tests
relating to fixed charge coverage, current ratio, maximum leverage ratio,
consolidated tangible net worth, cash distributions and open inventory
positions. As of June 30, 2000, the Company was in compliance with all such
tests.
22
At June 30, 2000, the Company had working capital of $133.2 million;
availability under its bank credit facility of approximately $41 million for
cash advances and letters of credit, plus an additional $45 million for letters
of credit; and additional borrowing capacity of $25 million under the Master
Shelf Agreement.
The Company believes that its current working capital position; future cash
provided by operating activities; proceeds from the private placement or public
offering of debt and common stock; available borrowing capacity under the bank
credit facility and the Master Shelf Agreement; additional borrowing allowed
under those agreements; and its relationship with institutional lenders and
equity investors should enable the Company to meet its current capital
requirements.
Capital expenditures anticipated for the year ending June 30, 2001 are
estimated to be $15 million for terminal and pipeline facilities, and assets to
support these facilities and could exceed that amount if additional facilities
enhancement projects and possible acquisitions being considered by the Company
materialize. Future capital expenditures will depend on numerous factors,
including the availability, economics and cost of appropriate acquisitions which
the Company identifies and evaluates; the economics, cost and required
regulatory approvals with respect to the expansion and enhancement of existing
systems and facilities; the customer demand for the services the Company
provides; local, state and federal governmental regulations; environmental
compliance requirements; and the availability of debt financing and equity
capital on acceptable terms.
YEAR 2000 MATTERS
Historically, certain computer software and computer based management
information systems ("Information Technology"), as well as certain hardware
containing embedded microcontrollers and microprocessors ("Embedded
Technology"), were designed to utilize a two-digit rather than a four-digit date
field and consequently may cause computers, computer controlled systems and
equipment with embedded technology to malfunction or incorrectly process data in
the Year 2000, resulting in significant system failures. The Company relies on
Information Technology, as well as Embedded Technology, to operate instruments
and equipment in conducting its normal business activities. Certain of the
Information Technology and Embedded Technology may not have been designed to
function properly with respect to the application of dating systems relating to
the Year 2000.
In response, the Company developed and executed a "Year 2000" Plan. While
achieving Year 2000 readiness does not mean correcting every Year 2000
limitation, critical systems, as well as relationships with third-party
customers, vendors and local, state and federal government agencies have been,
and continue to be, evaluated and are expected to be suitable for continued use
into and beyond the Year 2000.
Through June 30, 2000, the Company had incurred third party costs of
approximately $1.4 million related to Year 2000 compliance matters. These costs
have been funded through operating cash flows and do not include internal costs.
The Company does not separately record internal costs incurred with respect to
implementation of the Year 2000 Plan. Such costs are principally the related
payroll costs for the information systems and field operations personnel,
including senior management, involved in carrying out the Year 2000 Plan, as
well as related travel and other out-of-pocket expenses. The Company has had
minimal business disruptions as the result of Year 2000 issues during the six
months ended June 30, 2000.
While the Company does not anticipate that Year 2000 issues will have a
material adverse effect on the business, results of operations or financial
condition of the Company, if the Company Information Technology or Embedded
Technology, or those of business partners, fail to maintain Year 2000 readiness
it could have a material adverse impact on the business, results of operations
or financial condition of the Company.
23
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"), was issued in June
1998 by the Financial Accounting Standards Board. SFAS 133 establishes new
accounting and reporting standards for derivative instruments and for hedging
activities. This statement requires an entity to establish at the inception of a
hedge, the method it will use for assessing the effectiveness of the hedging
derivative and the measurement approach for determining the ineffective aspect
of the hedge. Those methods must be consistent with the entity's approach to
managing risk. Certain provisions of SFAS 133 were amended by SFAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities -
an amendment of Statement 133". SFAS 133, as amended, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. SFAS 133 will not
have a material effect on the Company's consolidated financial statements.
24
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Risk Policies
The Company is exposed to market risks associated with commodity prices and
interest rates. Risk management policies have been established by the Risk
Management Committee ("RMC") to monitor and control these market risks. The RMC
is comprised primarily of senior executives. The RMC has responsibility for
oversight with respect to all product risk management and the Audit Committee
approves the financial exposure limits.
Commodity Risk
The Company's earnings, cash flow and liquidity may be significantly
affected by a variety of factors beyond its control, including the supply of,
and demand for, commodities such as refined products and crude oil. The demand
for these refined products, as well as crude oil, depends on, among other
factors, changes in domestic and foreign economies, weather conditions, domestic
and foreign political affairs, production levels, the availability of imports,
the marketing of competitive fuels and the extent of government regulation. As a
result, refined products and crude oil experience price volatility, which
directly impacts the Company's revenues, product costs and operating income.
The Company has developed risk management strategies to mitigate the risk
associated with petroleum price volatility on its product inventories. The
Company believes these strategies are integral to its risk policies since
product inventories are required to effectively operate the Company's logistical
services business and such inventories are expected to be purchased, sold and
carried over extended periods of time in the ordinary course of business.
The Company's strategies are intended to minimize the impact of refined
product prices volatility on profitability and generally involve the purchase
and sale of exchange-traded, energy-related futures and options. In addition,
the Company to a lesser extent enters into energy swap agreements similar to
those traded on the exchanges, such as crack spreads, which better match
specific price movements in the Company's markets. These strategies are designed
to minimize, on a short-term basis, the Company's exposure to the risk of
fluctuations in refined product margins. The number of barrels of crude oil and
refined products covered by such contracts varies and are closely managed and
subject to internally established risk standards.
A sensitivity analysis prepared by the Company estimates exposure to market
risk associated with derivative commodity positions. This analysis may differ
from actual results. The fair value of each derivative commodity position was
based on quoted futures prices. Market risk was estimated based on a 10% change
in prices. As of June 30, 2000 and 1999, the Company's sensitivity to market
risk associated with commodity instruments, excluding unhedged minimum
inventory, was immaterial.
Interest Rate Risk
The Company is exposed to risk resulting from changes in interest rates as
a result of its variable-rate debt. The Company manages its interest rate
exposure by monitoring the effects of market changes in interest rates. In
August 1999, the Company entered into two swap agreements with money center
banks to offset the exposure of an increase in interest rates. These swap
agreements are marked to market and recognized in operations at June 30, 2000.
In August 2000, the Company bought back one of the swap agreements for
approximately $1.2 million.
If market interest rates had averaged 1% higher (lower) in fiscal year 2000
than in fiscal year 1999, interest expense would have increased (decreased), and
earnings before income taxes would have decreased (increased) by approximately
$2.6 million excluding any impact from interest rate swap agreements.
Comparatively, if market interest rates had averaged 1% higher (lower) in fiscal
year 1999 than in fiscal year 1998, interest expense would have increased
(decreased), and earnings before income taxes would have decreased (increased)
by approximately $2.9 million. These amounts were determined by considering the
impact of the hypothetical interest rates on the variable-rate borrowings
outstanding as of June 30, 2000 and 1999. In the event of a significant change
in interest rates, management would likely take actions to manage exposure to
the change. However, due to the uncertainty of the specific actions that would
be taken and their possible effects, the interest sensitivity analysis assumed
no changes in the Company's financial structure.
25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are included herein
beginning on the following pages.
26
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders
TransMontaigne Inc.:
We have audited the accompanying consolidated balance sheets of TransMontaigne
Inc. and subsidiaries as of June 30, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
ended June 30, 2000 and 1999, the two months ended June 30, 1998, and the year
ended April 30, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TransMontaigne Inc.
and subsidiaries as of June 30, 2000 and 1999, and the results of their
operations and their cash flows for the years ended June 30, 2000 and 1999, the
two months ended June 30, 1998, and the year ended April 30, 1998 in conformity
with generally accepted accounting principles.
KPMG LLP
Atlanta, Georgia
August 25, 2000
27
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 2000 and 1999
(In thousands, except share amounts)
Assets June 30, 2000 June 30, 1999
- ------ --------------- -------------
Current assets:
Cash and cash equivalents $ 53,938 13,927
Trade accounts receivable, net 117,739 174,122
Inventories 240,867 368,758
Unrealized gains on energy related contracts 16,038 28,946
Prepaid expenses and other 6,074 4,355
--------------- -------------
434,656 590,108
--------------- -------------
Property, plant and equipment:
Land 15,885 15,165
Plant and equipment 345,052 458,749
Accumulated depreciation (38,710) (37,572)
--------------- -------------
322,227 436,342
--------------- -------------
Investments and other assets:
Investments in petroleum related assets 46,152 46,141
Deferred tax assets, net 19,168 -
Deferred debt issuance costs, net 10,274 11,529
Other assets, net 2,095 21,889
--------------- -------------
77,689 79,559
--------------- -------------
$ 834,572 1,106,009
=============== =============
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Trade accounts payable $ 106,677 164,162
Inventory due under exchange agreements 125,258 25,791
Unrealized losses on energy related contracts 30,376 10,501
Excise taxes payable 27,582 25,681
Other accrued liabilities 5,586 5,371
Current portion of long-term debt 4,370 2,000
--------------- -------------
299,849 233,506
--------------- -------------
Long-term debt 202,625 495,672
Deferred tax liabilities, net - 780
Stockholders' equity:
Preferred stock, par value $.01 per share, authorized
2,000,000 shares, issued and outstanding 170,115
shares Series A Convertible at June 30, 2000 and 1999,
liquidation preference of $170,115,000 170,115 170,115
Common stock, par value $.01 per share,
authorized 80,000,000 shares at June 30, 2000 and 1999
issued and outstanding 30,730,524 shares at June 30, 2000
and 30,479,024 shares at June 30, 1999 307 305
Capital in excess of par value 201,075 197,122
Unearned compensation (1,465) -
Retained earnings (accumulated deficit) (37,934) 8,509
--------------- -------------
332,098 376,051
--------------- -------------
$ 834,572 1,106,009
=============== =============
See accompanying notes to consolidated financial statements.
28
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended June 30, 2000 and 1999, Two Months Ended June 30, 1998 and Year
Ended April 30, 1998
(In thousands, except per share amounts)
June 30, 2000 June 30, 1999 June 30, 1998 April 30, 1998
--------------- ------------- ------------- --------------
Revenues: $ 5,071,354 3,047,061 315,533 1,967,506
Costs and expenses:
Product costs 4,956,223 2,942,187 308,559 1,904,916
Operating expenses 57,817 39,930 5,849 26,701
Impairment of long lived assets 50,136 - - -
General and administrative 25,397 17,990 1,938 8,438
Depreciation and amortization 22,344 16,775 1,773 8,217
--------------- ---------- --------- ------------
5,111,917 3,016,882 318,119 1,948,272
--------------- ---------- --------- ------------
Operating income (loss) (40,563) 30,179 (2,586) 19,234
Other income (expenses):
Interest and dividend income 4,009 3,669 289 2,059
Gain on disposition of assets, net 13,930 - - -
Gain on interest rate swap 1,560 - - -
Interest expense (27,472) (25,495) (1,616) (7,591)
Other financing costs (8,568) (4,959) (153) (572)
--------------- ---------- --------- ------------
(16,541) (26,785) (1,480) (6,104)
--------------- ---------- --------- ------------
Earnings (loss) before income taxes (57,104) 3,394 (4,066) 13,130
Income tax (expense) benefit 19,167 (1,455) 1,403 (5,492)
--------------- ---------- --------- ------------
Net earnings (loss) (37,937) 1,939 (2,663) 7,638
Preferred stock dividends (8,506) (2,274) - -
--------------- ---------- --------- ------------
Net earnings (loss) attributable to
common stockholders $ (46,443) (335) (2,663) 7,638
=============== ========= ======== ===========
Weighted average common
shares outstanding:
Basic 30,599 28,972 25,949 25,887
=============== ========= ======== ===========
Diluted 30,599 28,972 25,949 26,680
=============== ========= ======== ===========
Earnings (loss) per common share
Basic $ (1.52) (0.01) (0.10) 0.30
=============== ========= ======== ===========
Diluted $ (1.52) (0.01) (0.10) 0.29
=============== ========= ======== ===========
See accompanying notes to consolidated financial statements.
29
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years Ended June 30, 2000 and 1999, Two Months Ended June 30, 1998, and Year
Ended April 30, 1998
(In thousands)
Capital in Retained
Preferred Common excess of Unearned earnings
stock stock par value compensation (accumulated Total
deficit)
----------- ------------ ------------ -------------- ------------- ----------
Balance at April 30, 1997 $ - 258 134,844 - 3,869 138,971
Common stock issued for
options exercised - 1 406 - - 407
Tax benefit arising from
options exercised - - 584 - - 584
Costs related to issuance of
common stock - - (54) - - (54)
Unearned compensation
related to restricted
stock awards - 1 938 (939) - -
Amortization of unearned
compensation - - - 258 - 258
Net earnings - - - - 7,638 7,638
----------- ------------ ------------ -------------- ------------- ----------
Balance at April 30, 1998 - 260 136,718 (681) 11,507 147,804
Common stock issued for
options exercised - - 37 - - 37
Common stock issued for
services - - 25 - - 25
Amortization of unearned
compensation - - - 63 - 63
Net (loss) - - - - (2,663) (2,663)
----------- ------------ ------------ -------------- ------------- ----------
Balance at June 30, 1998 - 260 136,780 (618) 8,844 145,266
Preferred stock issued in
connection with stock
purchase agreements 170,115 - - - - 170,115
Costs related to issuance of
preferred stock - - (327) - - (327)
Common stock issued for
options exercised - - 84 - - 84
Common stock issued for
services - - 93 - - 93
Tax benefit arising from
options exercised - - 63 - - 63
Unearned compensation related
to restricted stock awards - - 162 (162) - -
Amortization of unearned
compensation - - - 780 - 780
Common stock issued in
acquisition of Louis
Dreyfus Energy Corp. - 45 60,390 - - 60,435
Common stock repurchased
and retired - - (123) - - (123)
Preferred stock dividends - - - - (2,274) (2,274)
Net earnings - - - - 1,939 1,939
----------- ------------ ------------ -------------- ------------- ----------
Balance at June 30, 1999 170,115 305 197,122 - 8,509 376,051
Common stock issued for
options exercised - - 136 - - 136
Tax expense from vesting of
restricted stock - - (68) - - (68)
Unearned compensation related
to restricted stock awards - 2 1,863 (1,865) - -
Amortization of unearned
compensation - - - 400 - 400
Compensation expense related to
extension of exercise period
on options - - 2,022 - - 2,022
Preferred stock dividends - - - - (8,506) (8,506)
Net loss - - - - (37,937) (37,937)
----------- ------------ ------------ -------------- ------------- ----------
Balance at June 30, 2000 $ 170,115 307 201,075 (1,465) (37,934) 332,098
=========== ============ ============ ============== ============= ==========
See accompanying notes to consolidated financial statements.
30
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended June 30, 2000 and 1999, Two Months Ended June 30, 1998 and Year
Ended April 30, 1998
(In thousands)
June 30, 2000 June 30, 1999 June 30, 1998 April 30, 1998
------------- ------------- ------------- --------------
Cash flows from operating activities:
Net earnings (loss) $ (37,937) 1,939 (2,663) 7,638
Adjustments to reconcile net earnings (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 22,344 16,775 1,773 8,217
Deferred tax expense (benefit) (20,016) 1,416 (1,487) 5,173
Gain on disposition of assets, net (13,930) - - -
Impairment of long lived assets 50,136 - - -
Amortization of unearned compensation 400 780 63 258
Amortization of deferred debt issuance costs 7,625 3,641 80 402
Compensation expense related to extension
period on options 2,022 - - -
Other 316 92 (1) (35)
Changes in operating assets and liabilities,
net of non-cash activities:
Trade accounts receivable 56,383 (12,711) 37,727 (27,248)
Inventories 160,674 (152,686) (30,149) 8,937
Prepaid expenses and other (1,719) (1,636) (32) (1,026)
Trade accounts payable (58,795) 56,393 (193) (8,059)
Inventory due under exchange
agreements 99,467 23,060 (1,838) (413)
Excise taxes payable and other
accrued liabilities 2,116 (5,924) 393 1,586
------------- ------------- ------------- --------------
Net cash provided (used)
by operating activities 269,086 (68,861) 3,673 (4,570)
------------- ------------- ------------- --------------
Cash flows from investing activities:
Purchases of property, plant and equipment (61,264) (137,556) (6,455) (66,634)
Proceeds from sale of assets 137,357 6 - 84
Acquisition of Louis Dreyfus Energy Corp. - (293,057) - -
Investment in West Shore Pipe Line Company - (35,961) - -
Costs related to acquisitions - (699) - (131)
Cash received in connection with acquisitions - - - 1,222
Decrease (increase) in other assets, net 249 227 178 (672)
------------- ------------- ------------- --------------
Net cash provided (used)
by investing activities 76,342 (467,040) (6,277) (66,131)
------------- ------------- ------------- --------------
Cash flows from financing activities:
Borrowings (repayments) of long-term debt, net (290,677) 368,700 1 64,195
Deferred debt issuance costs (6,370) (13,562) (26) (424)
Preferred stock issued for cash - 170,115 - -
Costs related to issuance of preferred stock - (327) - -
Common stock issued for cash 136 84 37 407
Costs related to issuance of common stock - - - (54)
Common stock repurchased and retired - (123) - -
Preferred stock dividends paid (8,506) (2,274) - -
------------- ------------- ------------- --------------
Net cash provided (used)
by financing activities (305,417) 522,613 12 64,124
------------- ------------- ------------- --------------
Increase (decrease) in
cash and cash equivalents 40,011 (13,288) (2,592) (6,577)
Cash and cash equivalents at beginning of year 13,927 27,215 29,807 36,384
------------- ------------- ------------- --------------
Cash and cash equivalents at end of year $ 53,938 13,927 27,215 29,807
============= ============= ============= ==============
(Continued)
See accompanying notes to consolidated financial statements.
31
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
Years Ended June 30, 2000 and 1999, Two Months Ended June 30, 1998, and Year
Ended April 30, 1998
(In thousands)
June 30, 2000 June 30, 1999 June 30, 1998 April 30, 1998
--------------- --------------- --------------- ----------------
Supplemental disclosures of cash flow information:
Acquisition of Louis Dreyfus Energy Corp. ("LDEC")
Fair value of assets acquired $ - 456,990 - -
Fair value of liabilities assumed - (103,498) - -
--------------- --------------- --------------- ----------------
- 353,492 - -
Fair value of common stock issued - (60,435) - -
--------------- --------------- --------------- ----------------
Cash paid in acquisition $ - 293,057 - -
=============== =============== =============== ================
See accompanying notes to consolidated financial statements.
32
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(1) Summary of Significant Accounting Policies
Nature of Business and Basis of Presentation
TransMontaigne Inc. ("the Company") provides a broad range of integrated
supply, distribution, marketing, terminaling, storage, transportation,
gathering, and processing services to producers, refiners, distributors,
marketers and industrial end-users of petroleum products, chemicals,
natural gas, crude oil and other bulk liquids in the downstream sector of
the petroleum and chemical industries. The Company is a holding company
that conducts its operations through wholly owned subsidiaries primarily in
the Mid-Continent, Gulf Coast, Southeast, Mid-Atlantic, Northeast and Rocky
Mountain regions of the United States. The Company's commercial operations
are divided into supply, distribution and marketing of refined petroleum
products; terminals, which includes terminaling and storage services;
pipelines; and natural gas services which includes gathering, processing,
fractionating and marketing of natural gas liquids ("NGL") and natural gas
which was divested December 31, 1999. Segment information is presented in
the notes to the consolidated financial statements. The Company does not
explore for, or produce, crude oil or natural gas; and does not own crude
oil or natural gas reserves.
In August 1998, the Board of Directors of the Company voted to change the
Company's fiscal year end from April 30 to June 30, to be effective June
30, 1998. This new fiscal year end allows the Company to conform to
calendar quarterly reporting periods generally used in its industry. The
Company did not recast historical financial information.
Principles of Consolidation and Use of Estimates
The accounting and financial reporting policies of the Company and its
subsidiaries conform to generally accepted accounting principles and
prevailing industry practices. The consolidated financial statements
include all the majority owned subsidiaries of the Company. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Changes in
these estimates and assumptions will occur as a result of the passage of
time and the occurrence of future events, and actual results will differ
from the estimates.
"TransMontaigne" and "the Company" are used as collective references to
TransMontaigne Inc. and its subsidiaries and affiliates. The businesses of
the Company are conducted by the subsidiaries and affiliates whose
operations are managed by their respective officers.
Cash and Cash Equivalents
The Company considers all short-term investments with a maturity of three
months or less to be cash equivalents.
33
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(1) Summary of Significant Accounting Policies (continued)
Inventories
Inventories consist primarily of refined products stated at market.
Refined products due from third parties under exchange agreements are
included in inventory and recorded at current replacement cost. Refined
products due to third parties under exchange agreements are recorded at
current replacement cost. Adjustments resulting from changes in current
replacement cost for refined products due to or from third parties under
exchange agreements are reflected in product costs. The exchange agreements
are typically for a term of 30 days and are generally settled by delivering
product to or receiving product from the party to the exchange.
Property, Plant and Equipment
Depreciation is computed using the straight-line and double-declining
balance methods. Estimated useful lives are 20 to 25 years for plant, which
includes buildings, storage tanks, and pipelines and 3 to 20 years for
equipment. All items of property, plant and equipment are carried at cost.
Expenditures that increase values, change capacities, or extend useful
lives are capitalized. Routine repairs and maintenance are expensed.
Computer software costs are capitalized and amortized over their useful
lives, generally not to exceed 5 years. Certain enterprise wide information
systems are amortized over periods not exceeding 10 years. The Company
capitalizes interest on major projects during construction.
Investment in Lion Oil Company
Effective May 1, 1997, TransMontaigne Holding Inc., a 65% owned subsidiary
of the Company, issued to its 35% minority shareholders irrevocable proxies
to vote their 35% share of the 27.75% interest in Lion Oil Company ("Lion")
owned by TransMontaigne Holding Inc. Since the issuance of the irrevocable
proxies reduced the Company's voting interest in Lion from 27.75% to
18.04%, the Company changed its method of accounting for the investment in
Lion from the equity method, under which the investment originally recorded
at cost is adjusted to recognize the Company's share of Lion net earnings
or losses as incurred, to the historical cost method, under which the
investment is recorded at cost and dividends or other distributions are
recognized as received. As of May 1, 1997, the investment in Lion by
TransMontaigne Holding Inc. representing its original cost plus accumulated
net earnings was $15.6 million and the related minority interest was $5.5
million.
Deferred Debt Issuance Costs
Deferred debt issuance costs related to the long-term credit agreements and
senior subordinated debentures are amortized on the interest method over
the term of the underlying debt instrument. Accumulated amortization was
$12.1 million and $4.5 million at June 30, 2000 and 1999, respectively.
34
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(1) Summary of Significant Accounting Policies (continued)
Income Taxes
The Company utilizes the asset and liability method of accounting for
income taxes, as prescribed by Statement of Financial Accounting Standards
No. 109 ("SFAS 109"). Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply in
the years in which these temporary differences are expected to be recovered
or settled. Changes in tax rates are recognized in income in the period
that includes the enactment date.
Environmental Expenditures
Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future revenue
generation are expensed. Expenditures relating to current or future
revenues are expensed or capitalized as appropriate. Liabilities are
recorded when environmental assessment and/or clean-ups are probable and
the costs can be reasonably estimated.
Inventory Risk Management
The Company utilizes derivative financial instruments to manage market
risks associated with certain energy commodities.
In connection with its products supply, distribution and marketing
business, the Company engages in trading activities. Trading activities are
accounted for using the mark-to-market method of accounting. During the
fiscal year ended June 30, 1999, the Company adopted the provisions of
Emerging Issues Task Force Issue No. 98-10, Accounting for Contracts
Involved in Energy Trading and Risk Management Activities ("EITF 98-10"),
which requires energy trading contracts to be recorded at fair value on the
balance sheet, with the changes in fair value included in earnings.
Trading activities are conducted through a variety of financial
instruments, including forward contracts involving cash settlement or
physical delivery of energy commodities; swap contracts which require
payments to (or receipts from) counterparties based on the differential
between a fixed and variable price for the commodities; exchange-trade
options; over-the-counter options; and other contractual arrangements.
Under mark-to-market accounting, commodity and energy related contracts are
reflected at fair value with resulting gains and losses recorded in
operating income. The net gains and losses recognized in the current period
result primarily from transactions originating within the period and the
impact of current period price movements on transactions originating in
prior periods. Unrealized gains and losses from energy trading activities
are recorded as current assets and current liabilities.
The market value of these energy contracts is based upon management's
estimate, considering various factors including closing exchange and over-
the-counter quotations, time value and volatility factors underlying the
commitments.
35
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(1) Summary of Significant Accounting Policies (continued)
The Company's Risk Management Committee reviews the total inventory and
risk position on a regular basis in order to ensure compliance with the
Company's inventory management policies, including hedging and trading
activities. The Company has adopted policies under which its net inventory
position subject to price risk requires the prior approval of the Audit
Committee.
Earnings Per Common Share
Basic earnings per common share has been calculated based on the weighted
average number of common shares outstanding during the period. Diluted
earnings per share assumes conversion of dilutive convertible preferred
stocks and exercise of all stock options and warrants having exercise
prices less than the average market price of the common stock using the
treasury stock method.
Recently Issued Accounting Pronouncement
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on
the balance sheet as either an asset or liability measured at its fair
value. The statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting
criteria are met. Certain provisions of SFAS 133 were amended by SFAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities- an amendment of Statement 133". SFAS 133 is effective for
fiscal quarters of fiscal years beginning after June 15, 2000 as amended by
SFAS 137. SFAS 133 will not have a material impact on the Company's
accounting for price risk management activities.
Reclassifications
Certain amounts in the accompanying consolidated financial statements for
prior periods have been reclassified to conform to the classifications used
in 2000.
36
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(2) Disposition
Effective December 31, 1999, the Company sold its natural gas gathering
subsidiary, Bear Paw Energy Inc., ("BPEI"), to BPE Acquisition LLC ("BPE"),
a special purpose entity formed by Bear Paw's management in association
with Thomas J. Edelman and Chase Capital Partners. The sale of BPEI was for
cash consideration of $107.5 million, plus $23.7 million of retroactive
reimbursement for all of the capital expenditures made by the Company on
BPEI's newly constructed Powder River coal seam gathering system from July
1, 1999 to December 31, 1999. This disposition generated an approximate
$16.6 million net gain to the Company. The $131.2 million total sale
proceeds were used to reduce long term debt and for general corporate
purposes.
(3) Acquisitions
On May 31, 2000, the Company acquired from Chevron U.S.A. Inc. two
petroleum products terminals located in Richmond and Montvale, Virginia for
approximately $3.2 million cash. These facilities that are interconnected
to the Colonial pipeline system include approximately 500 thousand barrels
of tankage.
On June 30, 1999, the Company, through wholly owned subsidiaries
TransMontaigne Terminaling Inc. ("TTI") and TransMontaigne Product Services
Inc. ("TPSI"), acquired from Amerada Hess Corporation the Hess Southeastern
Pipeline Network ("Hess Terminals") of refined petroleum product facilities
for approximately $66.2 million cash, and related refined products
inventory for $32.5 million cash. The Hess Terminals, which are
interconnected to the Colonial and Plantation pipeline systems, include
approximately 5.3 million barrels of tankage at 11 storage and terminal
facilities and 36 miles of proprietary pipelines.
On December 3, 1998, the Company, through a wholly owned subsidiary, TTI,
acquired from SUNOCO, Inc. a petroleum products terminal located on the
Hudson River at Rensselaer, near Albany, New York for approximately $5.2
million cash. The Rensselaer terminal facility includes 510,000 barrels of
storage capacity, 3 truck loading racks and a dock capable of handling
barges and ocean going tankers.
On October 30, 1998, the Company, through a wholly owned subsidiary, TPSI,
acquired all of the common stock of LDEC for approximately $161.0 million,
including $100.6 million cash and 4.5 million shares of the Company common
stock valued at $60.4 million. In addition, the Company acquired LDEC's
working capital for $192.5 million cash. The LDEC acquisition included 24
refined petroleum products terminal and storage facilities, of which 7 are
wholly owned and 17 are owned jointly with BP Oil Company, together with
its supply, distribution and marketing business. These facilities are
located in 9 states in the Southern and Eastern regions of the United
States; have approximately 4.2 million barrels of the Company owned storage
capacity; and are supplied primarily by the Colonial and Plantation
pipeline systems. Subsequent to closing the acquisition, the name of LDEC
was changed to TransMontaigne Product Services East Inc. ("TPSI-East") and
effective April 1, 1999 TPSI-East was merged into its parent,
TransMontaigne Product Services Inc.
On July 29, 1998, the Company, through a wholly owned subsidiary, TTI,
acquired all of the common stock of Statia Terminals Southwest, Inc.
("Southwest Terminal") for $6.5 million cash. The acquisition included
terminal, storage and loading facilities for petroleum products, chemicals
and other bulk liquids at the Port of Brownsville, Texas with over 1.6
million barrels of tank storage, 12 truck rack loading bays, connections to
barge and tanker loading facilities and the exclusive use of 5 railroad
spur lines with a total of 32 railroad car loading spots. Southwest
Terminal was merged into TTI effective September 30, 1998.
37
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
(3) Acquisitions (continued)
The Company accounted for these acquisitions using purchase method
accounting as of the effective date of each transaction. Accordingly, the
purchase price of each transaction was allocated to the assets and
liabilities acquired based upon the estimated fair value of those assets
and liabilities as of the acquisition date. The Company received a third
party appraisal in connection with the LDEC allocation. The cash used to
purchase the above acquisitions was funded by advances from the Company's
bank credit facility.
The following summary presents unaudited actual and pro forma results of
operations. The pro forma information assumes that the acquisition of LDEC
and the sale of BPEI occurred as of May 1, 1997, and combines the
historical results of operations of the Company, excluding BPEI, for the
years ended June 30, 2000 and 1999 and April 30, 1998, with the historical
results of operations of LDEC for the years ended June 30, 1999 and April
30, 1998. The unaudited pro forma results of operations are not necessarily
indicative of the results of operations that would actually have occurred
if LDEC had been acquired and BPEI had been sold as of the beginning of the
pro forma period, or which will be attained in the future.
(In thousands, except per share amounts)
Years Ended
----------------------------------------------------------------------------------
June 30, 2000 June 30, 1999 April 30, 1998
------------------------ ----------------------- -----------------------
(Pro forma) (Pro forma) (Pro forma)
------------------------ ----------------------- -----------------------
Revenues $ 5,031,734 3,843,634 4,107,107
======================== ======================= =======================
Net earnings (loss) $ (39,080) 6,175 13,501
Dividend requirement for
preferred stock (8,506) (2,274) -
------------------------ ----------------------- -----------------------
Net earnings (loss) attributable
to common stockholders $ (47,586) 3,901 13,501
======================== ======================= =======================
Earnings (loss) per common share:
Basic $ (1.56) 0.13 0.44
======================== ======================= =======================
Diluted $ (1.56) 0.13 0.43
======================== ======================= =======================
38
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(4) Inventories (in thousands)
June 30, 2000 June 30, 1999
----------------------- -------------------------
Refined petroleum products $ 115,609 342,967
Refined petroleum products due
under exchange agreements, net 125,258 25,791
----------------------- -------------------------
$ 240,867 368,758
======================= =========================
The Company manages inventory to maximize value and minimize risk by
utilizing risk and portfolio management disciplines including certain
hedging strategies, forward purchases and sales, swaps and other financial
instruments to manage market exposure. In managing inventory balances and
related financial instruments, management evaluates the market exposure
from an overall portfolio basis that considers both continuous movement of
inventory balances and related open positions in commodity trading
instruments.
The Company's overall inventory position, including open positions in
commodity instruments at June 30, 2000 and 1999, is as follows (in
thousands):
June 30, 2000 June 30, 1999
----------------------- -------------------------
Fair value at end of year $ 240,867 368,758
Average fair value for the year 230,835 293,000
Net gains and losses arising from transactions during the period and
changes in fair value were recorded within operating income for the years
ended June 30, 2000 and 1999. Unrealized gains and losses from energy
related contracts are recorded as current assets and current liabilities,
respectively.
The Company's refined petroleum products inventory consists primarily of
gasoline and distillates, the majority of which is held for sale or
exchange in the ordinary course of business. A portion of this inventory
representing line fill and tank bottoms is required to be held for
operating balances in the conduct of the Company's daily supply,
distribution and marketing activities; and is maintained both in tanks and
pipelines owned by the Company and pipelines owned by third parties.
Contractual commitments are subject to risks including market value
fluctuations as well as counterparty credit and liquidity risk. The Company
has established procedures to continually monitor these contracts in order
to minimize credit risk, including the establishment and review of credit
limits, margin requirements, master netting arrangements, letters of credit
and other guarantees.
39
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(5) Property, Plant and Equipment
Property, plant and equipment at June 30, 2000 and 1999 is as follows (in
thousands):
June 30, 2000 June 30, 1999
------------------------ ----------------------
Land $ 15,885 15,165
Pipelines, rights of way
and equipment 36,369 33,661
Terminals and equipment 291,896 296,544
Natural gas gathering
and processing - 108,533
Other plant and equipment 16,787 20,011
------------------------ ------------------------
360,937 473,914
Less accumulated depreciation 38,710 37,572
------------------------ ------------------------
$ 322,227 436,342
======================== ========================
(6) Investments
The Company, through its 65% ownership of TransMontaigne Holding Inc.,
effectively owns 18.04% of the common stock of Lion. At June 30, 2000 and
1999, the Company's investment in Lion, carried at cost, was approximately
$10.1 million. The Company recorded no dividend income from Lion during the
year ended June 30, 2000 and $.4 million during the year ended June 30,
1999.
On September 18, 1998, the Company, through a wholly owned subsidiary,
TransMontaigne Pipeline Inc. ("TPI"), acquired for $29.2 million cash the
15.38% common stock interest in West Shore Pipe Line Company ("West Shore")
owned by Atlantic Richfield Company. Effective December 31, 1998, the
Company acquired for $5.5 million cash an additional 4.11% common stock
interest in West Shore owned by Equilon Pipeline Company, LLC and for $1.2
million cash an additional .89% common stock interest in West Shore owned
by Texaco Transportation and Trading Inc., both of which transactions
closed on January 7, 1999. The Company owns 20.38% of the common stock of
West Shore at June 30, 2000. West Shore ownership as of June 30, 2000 also
includes Citgo, Marathon, Equilon, Texaco, BP Amoco, Midwest (Union Oil),
Mobil and Exxon. Although the Company owns 20.38%, it does not maintain
effective management control and therefore carries its $35.9 million
investment at cost. The Company recorded dividend income from West Shore of
$1.6 million and $1.4 million for the years ended June 30, 2000 and 1999,
respectively.
40
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(7) Impairment on long lived assets
During the year ended June 30, 2000, the Company recorded non-cash
impairment charges totaling $50.1 million, before income taxes. These
charges include $31.9 million relating to certain of the Company's refined
petroleum product terminals added in the 1998 acquisition of LDEC and $18.2
million relating to certain intangible assets recorded as a result of the
same acquisition. In accordance with generally accepted accounting
principles, the Company is required to review the book values of long lived
assets for impairment. In calculating this impairment charge, the Company
applied SFAS 121 in estimating future cash flows by terminal, discounting
those estimated future cash flows at a 10% rate, which approximates the
Company's cost of capital, and then comparing the discounted future cash
flows to the net book value of each terminal. The impairment charge
resulted from the change in the planned use of certain terminals and the
abandonment of a pipeline that supplied one terminal, thereby significantly
impacting the economic viability of such terminals. Each of these factors
reduced or eliminated future cash flows. The $31.9 million impairment
charge for the terminals reduces the book value of these assets to their
estimated fair value as determined in the Company's impairment analysis.
The additional $18.2 million impairment charge for the intangible assets
represents the unamortized balance of these assets. Management's review of
the market location differentials associated with these assets showed that
the Company received little or no value from these assets in the last
twelve months. In addition, management does not anticipate any material
future value utilizing these assets.
(8) Long-term Debt
Long-term debt at June 30, 2000 and 1999 is as follows (in thousands):
June 30, 2000 June 30, 1999
------------------------ ----------------------
Line of credit $ 155,000 418,690
Senior promissory notes 50,000 75,000
12 3/4% senior subordinated debentures, net
of discount 1,995 3,982
---------------------- ----------------------
206,995 497,672
Less current maturity 4,370 2,000
---------------------- ----------------------
$ 202,625 495,672
====================== ======================
The Company amended its bank credit facility and Master Shelf Agreement
effective December 31, 1999. The amended bank credit facility was reduced
to a $395 million credit facility consisting of a $300 million revolving
component due December 31, 2003 and a $95 million term component due June
30, 2006. The term component has quarterly principal payments required
beginning in September 2000. Borrowings under this credit facility bear
interest at an annual rate equal to the lender's Alternate Base Rate plus
margins, subject to a Eurodollar Rate pricing option at the Company's
election. The average interest rate was 9.8% and 8.1% at June 30, 2000 and
1999, respectively.
In August 1999, the Company entered into two swap agreements with money
center banks to offset the exposure of an increase in interest rates. These
swap agreements are marked to market and recognized in operations at June
30, 2000. Proceeds from the swap agreements are recorded as a reduction to
interest expense.
41
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(8) Long-term Debt (continued)
In April 1997, the Company entered into a Master Shelf Agreement with an
institutional lender which provides that the lender will agree to quote,
from time to time, an interest rate at which the lender would be willing to
purchase, on an uncommitted basis, up to $100 million of the Company's
senior promissory notes which will mature in no more than 12 years, with an
average life not in excess of 10 years. On April 17, 1997 and December 16,
1997, the Company sold $50 million of 7.85% and $25 million of 7.22% Senior
Notes due April 17, 2003 and October 17, 2004, respectively. Under the
amended Master Shelf Agreement, the commitment was reduced to $75 million.
On January 20, 2000, the Company paid down $25 million of the $50 million
of 7.85% senior notes with a portion of the proceeds from the sale of BPEI.
Each of the bank credit facility and Master Shelf Agreement is secured by
certain current assets and fixed assets, and each also includes financial
tests relating to fixed charge coverage, current ratio, maximum leverage
ratio, consolidated tangible net worth, cash distributions and open
inventory positions. As of June 30, 2000, the Company was in compliance
with all such tests contained in the amended agreements.
At June 30, 2000, the Company had an outstanding balance of $2 million of
the originally issued $4 million of 12.75% senior subordinated debentures
that are guaranteed by certain subsidiaries. The outstanding debentures are
subject to a required redemption on December 15, 2000. The debentures may
be prepaid prior to maturity at a premium, under certain circumstances. In
conjunction with the issuance of these debentures, the Company issued
warrants to purchase 248,686 shares of its common stock at $3.60 per share.
Maturities of long-term debt for fiscal years subsequent to 2001 are as
follows (in thousands):
2002 $ 2,375
2003 27,375
2004 62,375
2005 53,500
2006 57,000
---------
$ 202,625
=========
Cash payments for interest were approximately $26.2 million, $25.2 million,
$1.6 million and $7.0 million for the years ended June 30, 2000 and 1999,
the two months ended June 30, 1998 and the year ended April 30, 1998,
respectively.
42
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(9) Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of on and off-balance sheet financial instruments at June 30, 2000 and
1999.
Cash and Cash Equivalents, Trade Receivables and Trade Accounts Payable
The carrying amount approximates fair value because of the short term
maturity of these instruments.
Long-term Debt
The carrying value of the line of credit approximates fair value since it
bears interest at current market interest rates.
The carrying values of the senior promissory notes approximate fair value
since the interest rates approximate the current market rates for similar
debt instruments.
The estimated fair value of the senior subordinated debentures approximates
their carrying values since they mature in December 2000.
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
(10) Stockholders' Equity
On March 25, 1999 and March 30, 1999, the Company closed a private
placement of $170.1 million of $1,000 Series A Convertible Preferred Stock
Units (the "Units"). Each Unit consists of one share of 5% convertible
preferred stock (the "Preferred Stock"), convertible into common stock at
$15 per share, and 66.67 warrants, each warrant exercisable to purchase
six-tenths of a share of common stock at $14 per share. Dividends are
cumulative and payable quarterly. The Company may redeem the Preferred
Stock on December 31, 2003 at the liquidation value of $1,000 per share
plus any accrued but unpaid dividends. If the Preferred Stock remains
outstanding after December 31, 2003, the dividend rate will increase to an
annual rate of 16%. The Preferred Stock is convertible any time and may be
called for redemption by the Company after the second year if the market
price of the common stock is greater than 175% of the conversion price at
the date of the call. Proceeds were used to reduce bank debt incurred in
connection with the LDEC acquisition and for general corporate purposes.
43
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(11) Restricted Stock
The Company has a restricted stock plan that provides for awards of common
stock to certain key employees, subject to forfeiture if employment
terminates prior to the vesting dates. The market value of shares awarded
under the plan is recorded in stockholders' equity as unearned
compensation. During the fiscal year ended April 30, 1998, the Company's
Board of Directors awarded 56,000 shares to certain key employees and
during the year ended June 30, 1999, an additional 12,000 shares were
awarded. At March 25, 1999, the vesting of the 62,400 shares not then
vested was accelerated due to an ownership change resulting from the
private placement of the Series A Convertible Preferred Stock and the
unamortized balance of the unearned compensation was fully amortized.
During the fiscal year ended June 30, 2000, the Company's Board of
Directors awarded 227,500 shares to certain key employees. Amortization of
unearned compensation of $400,000, $780,000 and $258,000 is included in
general and administrative expense for the years ended June 30, 2000 and
1999 and April 30, 1998, respectively.
(12) Stock Options
The Company has adopted three stock option plans, (the "1991 Plan", the
"1995 Plan" and the "1997 Plan") under which stock options may be granted
to employees. No additional options are available to be granted under
either the 1991 Plan or the 1995 Plan. Options granted under the 1991 Plan
and 1997 Plan expire no later than ten years from the date of grant and
under the 1995 Plan expire no later than seven years from the date of
grant. At June 30, 2000, options granted under the 1991 Plan and 1995 Plan
and those granted through July 1998 under the 1997 Plan have vested.
Options granted subsequent to March 25, 1999 under the 1997 Plan vest 10%
end of first year, 20% end of second year, 30% end of third year, and 40%
end of fourth year.
The following table summarizes information about stock options outstanding
for the years ended June 30, 2000 and June 30, 1999, two months ended June
30, 1998, and the year ended April 30, 1998:
1991 Plan 1995 Plan 1997 Plan
------------------------------ ----------------------------- -----------------------------
Weighted average Weighted average Weighted average
Shares exercise price Shares exercise price Shares exercise price
--------- ---------------- -------- ---------------- -------- ----------------
Outstanding at April 30, 1997 78,254 $4.90 781,000 $3.98 - $ -
Granted - - - - 711,000 16.65
Cancelled - - - - (17,500) 17.25
Exercised (50,000) 4.46 (42,150) 4.37 - -
--------- ---------------- -------- ---------------- --------- ----------------
Outstanding at April 30, 1998 28,254 5.66 738,850 3.96 693,500 16.63
Granted - - - - - -
Cancelled - - - - (29,500) 15.34
Exercised (6,254) 4.12 (2,500) 4.38 - -
--------- ---------------- -------- ---------------- --------- ----------------
Outstanding at June 30, 1998 22,000 6.10 736,350 3.70 664,000 16.69
Granted - - - - 2,097,300 11.46
Cancelled - - - - (17,900) 14.11
Exercised (11,000) 6.10 (4,400) 3.91 - -
--------- ---------------- -------- ---------------- --------- ----------------
Outstanding at June 30, 1999 11,000 6.10 731,950 3.96 2,743,400 12.71
Granted - - - - 733,000 7.91
Cancelled - - (1,000) 5.50 (577,160) 13.06
Exercised (8,000) 6.10 (14,000) 4.30 (2,000) 13.50
--------- ---------------- -------- ---------------- --------- ----------------
Outstanding at June 30, 2000 3,000 $6.10 716,950 $3.95 2,897,240 $11.42
========= ================ ======== ================ ========= ================
Exercisable at June 30, 2000 3,000 $6.10 716,950 $3.95 1,227,760 $13.77
========= ================ ======== ================ ========= ================
44
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(12) Stock Options (continued)
The following table summarizes information about options outstanding at
June 30, 2000:
Options Outstanding Options Exercisable
----------------------------------------------------------- --------------------------------
Weighted Weighted Weighted
Range of Number average remaining average Number average
exercise prices outstanding life in years exercise prices exercisable exercise prices
----------------- ------------ ------------------ ---------------- ----------- ----------------
1991 Plan $ 6.10 3,000 .7 $ 6.10 3,000 $ 6.10
1995 Plan 2.70 - 5.50 716,950 1.4 3.95 716,950 3.95
1997 Plan 5.125 - 7.25 408,000 9.1 5.43 15,000 5.125
11.00 - 13.50 1,985,740 6.7 11.34 709,260 11.94
15.00 - 17.25 503,500 5.4 16.60 503,500 16.60
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related Interpretations in accounting
for its plans. Accordingly, no compensation cost has been recognized for
its stock option plans. If compensation cost for the Company's three
stock-based compensation plans had been determined on the fair value at
the grant dates for awards under those plans consistent with SFAS 123,
Accounting for Stock-Based Compensation, the Company's net earnings and
earnings per common share would have been reduced to the pro forma amounts
indicated below (in thousands, except for per share amounts):
June 30, 2000 June 30, 1999 April 30, 1998
--------------- --------------- ----------------
Net earnings (loss)
attributable to common
stockholders:
As reported $ (46,443) $ (335) $ 7,638
Pro forma $ (47,721) $ (2,256) $ 5,943
Earnings (loss) per common share
As reported
Basic $ (1.52) $ (.01) $ .30
Diluted $ (1.52) $ (.01) $ .29
Pro forma
Basic $ (1.56) $ (.08) $ .23
Diluted $ (1.56) $ (.08) $ .22
The weighted average fair value at grant dates for options granted during the
years ended June 30, 2000 and 1999 was $3.16 and $3.75, respectively. The
primary assumptions used to estimate the fair value of options granted on the
date of grant using the Black-Scholes option-pricing model during the years
ended June 30, 2000 and 1999 were as follows: no dividend yield, expected
volatility of 36% and 34%, risk-free rate of 5.6% and 5.4%, and expected life
of 7 years.
45
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(13) Employee Benefit Plan
The Company has established a 401(k) retirement savings plan for all
employees. The plan allows participants to contribute up to 15% of their
compensation, with the Company making a discretionary percentage matching
contribution as determined by management based upon its financial
performance. Employees vest 25% per year in the Company's contribution.
The total amount of the Company's discretionary percentage matching
contributions for the year ended June 30, 2000 and 1999 was approximately
$848,000 and $486,000, respectively.
(14) Income Taxes
Income tax expense (benefit) for the following dates consist of the
following (in thousands):
June 30, 2000 June 30, 1999 June 30, 1998 April 30, 1998
----------------- ----------------- --------------- ----------------
Current state income taxes $ 272 38 84 319
Deferred federal income taxes (17,393) 1,267 (1,330) 4,630
Deferred state income taxes (2,046) 150 (157) 543
----------------- ----------------- --------------- ----------------
Income tax expense (benefit) $ (19,167) 1,455 (1,403) 5,492
================= ================= =============== ================
Income tax expense (benefit) differs from the amount computed by applying
the federal corporate income tax rate of 34% to pretax earnings as a
result of the following (in thousands):
June 30, 2000 June 30, 1999 June 30, 1998 April 30, 1998
----------------- --------------- -------------------- ----------------
Computed "expected"
tax expense (benefit) $ (19,415) 1,154 (1,382) 4,464
Increase (reduction) in income
taxes resulting from:
Adjustment of prior year's
cumulative temporary
differences 1,858 - - -
State income taxes, net of
federal income tax
benefit (1,171) 124 (46) 723
Other, net (439) 177 25 305
---------------- --------------- -------------------- ----------------
Income tax expense (benefit) $ (19,167) 1,455 (1,403) 5,492
================ =============== ==================== ================
46
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(14) Income Taxes (continued)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June
30, 2000 and 1999 are as follows (in thousands):
June 30, 2000 June 30, 1999
----------------------- -----------------------
Deferred tax assets:
Net operating loss carryforwards $ 39,500 25,898
Asset impairment allowance 19,052 -
Reserve for bad debts 684 -
Accrual for staff reduction and relocation plan 456 -
Amortization of debt costs, principally due to
differences in amortization methods 351 -
Unearned compensation 532 384
Alternative minimum tax credit carryforwards 643 67
----------------------- -----------------------
Gross deferred tax assets 61,218 26,349
Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation methods (41,561) (26,633)
Investments in affiliated company,
principally due to undistributed earnings (489) (496)
----------------------- -----------------------
Deferred tax assets (liabilities), net $ 19,168 (780)
======================= =======================
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies
in making this assessment.
47
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(14) Income Taxes (continued)
Based upon projections for future taxable income over the periods which
the deferred tax assets are deductible, management believes the "more
likely than not" criteria has been satisfied as of June 30, 2000 and 1999,
and that the benefits of future deductible differences will be realized.
At June 30, 2000, the Company has aggregate net operating loss
carryforwards for federal income tax purposes of approximately $104
million which were available to offset future federal taxable income, if
any, through 2019. In addition, the Company has alternative minimum tax
credit carryforwards of approximately $643,000 available to reduce future
federal regular income taxes, if any, which can be carried forward
indefinitely.
Under SFAS 109, the Company provides for deferred income taxes on the
undistributed net earnings of Lion. Under the transition rules in SFAS
109, the Company is not required to recognize a deferred tax liability of
approximately $6.1 million for the undistributed net earnings of Lion
which arose prior to the adoption of SFAS 109 because the Company
currently does not expect those undistributed earnings to become taxable
to it in the foreseeable future. A deferred tax liability will be
recognized on these undistributed earnings when the Company expects that
it will recover those undistributed earnings in a taxable manner, such as
through the receipt of dividends or the sale of the investment.
The Company paid (was refunded) cash federal income taxes of approximately
($500,000), $459,000 and $500,000 for the years ended June 30, 2000 and
1999 and April 30, 1998, respectively, and state income taxes of
approximately $175,000, $375,000, $110,000 and $575,000 for the years
ended June 30, 2000 and 1999, the two months ended June 30, 1998, and the
year ended April 30, 1998, respectively.
(15) Commitments
The Company leases office space, real property, and storage facilities
under various operating leases. The future annual minimum lease payments
range from $550,000 to $2,200,000 over the next five years.
(16) Litigation
The Company is a party to various claims and litigation in its normal
course of business. Although no assurances can be given, the Company
management believes that the ultimate resolution of such claims and
litigation, individually or in the aggregate, will not have a materially
adverse impact on the Company's financial position or its results of
operations.
48
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(17) Earnings Per Share
Earnings per share are calculated in accordance with SFAS 128. The
following tables reconcile the computation of basic EPS and diluted EPS
for the year ended June 30, 2000 and 1999, two months ended June 30, 1998
and the year ended April 30, 1998 (in thousands, except per share
amounts).
June 30, 2000 June 30, 1999 June 30, 1998 April 30, 1998
------------- ------------- ------------- --------------
Net earnings (loss) $ (37,937) 1,939 (2,663) 7,638
Preferred stock dividends (8,506) (2,274) - -
------------- ------------- ------------- --------------
Net earnings (loss) attributable to common
stockholders for basic EPS (46,443) (335) (2,663) 7,638
Effect of dilutive securities - - - -
------------- ------------- ------------- --------------
Net earnings (loss) attributable to common
stockholders for diluted EPS $ (46,443) (335) (2,663) 7,638
============= ============= ============= ==============
Basic weighted-average shares 30,599 28,972 25,949 25,887
Effect of dilutive securities:
Stock options - - - 601
Stock warrants - - - 192
------------- ------------- ------------- --------------
Diluted weighted-average shares 30,599 28,972 25,949 26,680
============= ============= ============= ==============
Earnings (loss) per shares:
Basic $ (1.52) (.01) (.10) .30
============= ============= ============= ==============
Diluted $ (1.52) (.01) (.10) .29
============= ============= ============= ==============
49
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(18) Concentration of Credit Risk
Substantially all of the Company's trade accounts receivable at June 30,
2000 and 1999 result from sales of refined petroleum products to numerous
companies in the oil and gas industry. This concentration could impact the
Company's overall credit risk since these companies could be affected by
industry-wide changes in economics or other conditions. Since the Company
provides short-term credit to its customers, which are generally either
major and large independent oil companies or wholesale distributors of
these products, it may require collateral, such as letters of credit,
liens on products and guarantees as determined on a customer by customer
basis. The Company maintains allowances for potential uncollectible
accounts receivable, which historically have been minimal.
(19) Business Segments
The Company provided a broad range of integrated transportation,
terminaling, supply, distribution, gathering, processing and marketing
services to producers, refiners, distributors, marketers and industrial
end-users of petroleum products, chemicals, other bulk liquids, natural
gas and crude oil in the downstream sector of the petroleum and chemical
industries. The Company conducted its business through five segments:
. Products - consisted of services for the supply and distribution of
refined petroleum products through product exchanges, and bulk
purchases and sales in the physical, futures cash and New York
Mercantile Exchange ("NYMEX") markets, and the marketing of refined
petroleum products and NGL to retail, wholesale and industrial
customers at truck terminal rack locations, and providing related
value-added fuel procurement and management services.
. Terminals - consisted of services provided through the ownership
and/or operation of terminaling and storage facilities handling
petroleum products, chemicals and other bulk liquids with receipt and
delivery connections via pipelines, barges, tankers, rail cars and
trucks.
. Pipelines - consisted of services provided through the ownership and
operation of refined petroleum product pipelines, and a crude oil
gathering pipeline system, and related delivery and storage
facilities with interconnections to other pipelines and to
terminaling, storage delivery facilities.
. Natural gas - consisted of services provided through the ownership
and operation of natural gas pipeline gathering systems, processing
plants and related facilities for the gathering, processing,
fractionating and reselling of natural gas and NGL. This segment was
divested effective December 31, 1999.
. Corporate - consisted of assets and corporate income and expense not
specifically included in other business segments.
Eliminations represent intercompany transactions between the Company's
business segments, primarily relating to services performed by the
terminals and pipelines segments for and sales of NGL by the natural gas
segment to the product segment.
For the year ended June 30, 2000, revenues; depreciation and amortization;
operating income; and capital expenditure amounts for the natural gas
segment reflect the activities prior to the sale of this subsidiary
effective December 31, 1999 (see Note 2). Accordingly, no identifiable
assets are shown for this segment at June 30, 2000. Also, operating income
for the products segment does not include the $18.2 million expense and
the terminals segment does not include the $31.9 million expense related
to the impairment of long lived assets for the year ended June 30, 2000.
50
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(19) Business Segments (continued)
Information about the Company's business segments for the years ended June
30, 2000, 1999 and April 30, 1998 is summarized below (in thousands):
June 30, 2000 June 30, 1999 April 30, 1998
--------------- --------------- --------------
Revenues:
Products $ 5,014,257 2,985,618 1,911,944
Terminals 63,619 41,046 13,882
Pipelines 14,905 15,328 13,252
Natural gas 39,620 53,559 60,465
Corporate 953 1,578 557
Eliminations (62,000) (50,068) (32,594)
--------------- --------------- --------------
Total consolidated $ 5,071,354 3,047,061 1,967,506
=============== =============== ==============
Depreciation and amortization:
Products $ 519 660 -
Terminals 14,682 7,903 1,516
Pipelines 1,457 1,122 999
Natural gas 3,141 5,962 5,115
Corporate 2,545 1,128 587
--------------- --------------- --------------
Total consolidated $ 22,344 16,775 8,217
=============== =============== ==============
Operating income (loss):
Products $ (4,113) 17,020 5,357
Terminals 12,582 11,417 5,487
Pipelines 2,090 4,058 4,359
Natural gas 5,262 1,435 5,231
Corporate (6,248) (3,751) (1,200)
--------------- --------------- --------------
Total consolidated $ 9,573 30,179 19,234
=============== =============== ==============
Identifiable assets:
Products $ 370,568 581,713 103,402
Terminals 287,526 304,567 54,251
Pipelines 66,001 65,605 22,082
Natural gas - 96,247 94,431
Corporate 115,942 68,108 55,594
Eliminations (5,465) (10,231) (6,455)
--------------- --------------- --------------
Total consolidated $ 834,572 1,106,009 323,305
=============== =============== ==============
Capital expenditures:
Products $ - - -
Terminals 30,037 110,049 41,384
Pipelines 2,917 9,500 6,204
Natural gas 24,264 7,959 15,562
Corporate 4,046 10,048 3,484
--------------- --------------- --------------
Total consolidated $ 61,264 137,556 66,634
=============== =============== ==============
51
TRANSMONTAIGNE INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
- --------------------------------------------------------------------------------
(20) Financial Results by Quarter (Unaudited)
(in thousands, except per share amounts)
----------------------------------------------------------- -----------
Three Months Ended Year Ended
----------------------------------------------------------- -----------
September 30 December 31 March 31 June 30 June 30
1999 1999 (1) 2000 (1) 2000 2000
------------ ----------- ----------- ----------- -----------
Revenues $ 1,148,867 1,323,165 1,209,470 1,389,852 5,071,354
Total costs and expenses 1,148,160 1,388,798 1,197,837 1,377,122 5,111,917
------------ ----------- ----------- ----------- -----------
Operating income (loss) $ 707 (65,633) 11,633 12,730 (40,563)
============ =========== =========== =========== ===========
Net earnings (loss)
attributable to common
stockholders $ (7,202) (39,900) 969 (310) (46,443)
============ =========== =========== =========== ===========
Earnings (loss) per
common share
Basic $ (.24) (1.30) .03 (.01) (1.52)
Diluted $ (.24) (1.30) .03 (.01) (1.52)
----------------------------------------------------------- -----------
Three Months Ended Year Ended
----------------------------------------------------------- -----------
September 30 December 31 March 31 June 30 June 30
1998 1998 1999 1999 1999
------------ ----------- ----------- ----------- -----------
Revenues $ 463,121 741,300 769,369 1,073,271 3,047,061
Total costs and expenses 457,551 734,034 754,832 1,070,465 3,016,882
------------ ----------- ----------- ----------- -----------
Operating income $ 5,570 7,266 14,537 2,806 30,179
============ =========== =========== =========== ===========
Net earnings (loss)
attributable to common
stockholders $ 2,024 (291) 2,325 (4,393) (335)
============ =========== =========== =========== ===========
Earnings (loss) per
common share
Basic $ .08 (.01) .08 (.14) (.01)
Diluted $ .08 (.01) .07 (.14) (.01)
----------------------------------------------------------- -----------
Three Months Ended Year Ended
----------------------------------------------------------- -----------
July 31 October 31 January 31 April 30 April 30
1997 1997 1998 1998 1998
------------ ----------- ----------- ----------- -----------
Revenues $ 462,149 545,100 470,732 489,525 1,967,506
Total costs and expenses 456,462 540,105 466,108 485,597 1,948,272
------------ ----------- ----------- ----------- -----------
Operating income $ 5,687 4,995 4,624 3,928 19,234
============ =========== =========== =========== ===========
Net earnings $ 3,010 2,397 1,718 513 7,638
============ =========== =========== =========== ===========
Earnings per
Common share
Basic $ .12 .09 .07 .02 .30
Diluted $ .12 .09 .06 .02 .29
(1) The quarterly numbers below do not agree with those previously filed as
they have been restated to reflect certain adjustments related to stock
compensation costs.
52
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not Applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information required by Item 10 concerning executive officers of
the registrant is included under the caption "Executive Officers of
the Registrant" on the following page of this report.
ITEM 11. EXECUTIVE COMPENSATION
*
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
*
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
*
* Incorporated by reference from the Proxy Statement dated October 13,
2000 for the Annual Meeting of Stockholders to be held on November 14,
2000.
53
EXECUTIVE OFFICERS OF THE REGISTRANT
Current Positions and Principal
Name Age Occupations During Last Five Years
---- --- ----------------------------------
Cortlandt S. Dietler 79 Chairman and a Director since April 1995; Chief Executive Officer of Associated
Natural Gas Corporation prior to its 1994 merger with Panhandle Eastern Corporation
(now Duke Energy Corporation) from 1985 to 1994
Donald H. Anderson 52 Vice Chairman, Chief Executive Officer and a Director since September 1999, and
President since January 2000; Executive Director and Principal of Western Growth
Capital LLC from 1997 to 1999; Chairman, President and Chief Executive Officer of
PanEnergy Services from 1994 to 1997; and President, Chief Operating Officer and
Director of Associated Natural Gas Corporation from 1989 to 1994
William S. Dickey 42 Executive Vice President since May 2000; Vice President of TEPPCO from January 1999
to May 2000; and Vice President and Chief Financial Officer of Duke Energy Field
Services from 1994 to 1998
Harold R. Logan, Jr. 55 Executive Vice President/Finance, Treasurer and a Director since April 1995; Senior
Vice President/Finance of Associated Natural Gas Corporation from 1985 to 1994
Frederick W. Boutin 45 Senior Vice President since April 1995; Vice President of Associated Natural Gas
Corporation from 1985 to 1994
Erik B. Carlson 53 Senior Vice President, General Counsel, and Secretary since January 1998; Senior
Vice President, General Counsel and Secretary for Duke Energy Field Services, Inc.
(formerly known as Pan Energy Field Services, Inc. and Associated Natural Gas,
Inc.) from 1983 until December 1997
Rodney S. Pless 39 Vice President, Controller and Chief Accounting Officer since December 1996; Vice
President, Controller and other accounting positions of a subsidiary of
TransMontaigne from 1987 to December 1996
Larry F. Clynch 55 Executive Vice President of TransMontaigne Transportation Services Inc. since
September 13, 1999; President of TransMontaigne Transportation Services Inc. from
January 1, 1997 to September 13, 1999; President of TransMontaigne Terminaling Inc.
and President of TransMontaigne Pipeline Inc. since January 1, 1997; Senior Vice
President of a subsidiary of TransMontaigne from January 1996 to January 1997;
prior to January 1996 employed for 28 years by Conoco Pipe Line Company, the last 3
years as President
54
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) The following documents are filed as a part of this report.
(1) Consolidated Financial Statements:
TransMontaigne Inc.
Independent Auditors' Report
Consolidated Balance Sheets as of June 30, 2000 and June 30, 1999
Consolidated Statements of Operations for the
years ended June 30, 2000 and 1999,
two months ended June 30, 1998 and
year ended April 30, 1998
Consolidated Statements of Stockholders' Equity for the
years ended June 30, 2000 and 1999,
two months ended June 30, 1998 and
year ended April 30, 1998
Consolidated Statements of Cash Flows for the
years ended June 30, 2000 and 1999,
two months ended June 30, 1998 and
year ended April 30, 1998
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules: Not Applicable
55
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K (continued)
(3) Exhibits:
A list of the exhibits required by Item 601 of Regulation S-K to
be filed as part of this report:
Exhibit No. Description
----------- -----------
3.1A Restated Articles of Incorporation and Certificate of
Merger. Incorporated by reference to TransMontaigne Oil
Company Form 10-K (Securities and Exchange Commission
File No. 001-11763) for the year ended April 30, 1996.
3.1B Certificate of Amendment of Restated Certificate of
Incorporation of TransMontaigne Oil Company dated
August 26, 1998. Incorporated by reference to
TransMontaigne Inc. Form 10-Q (Securities and Exchange
Commission File No. 001-11763) for the quarter ended
September 30, 1998.
3.1C Certificate of Amendment of Restated Certificate of
Incorporation of TransMontaigne Inc. dated December 18,
1998. Incorporated by reference to TransMontaigne Inc.
Form 10-Q (Securities and Exchange Commission File No.
001-11763) for the quarter ended December 31, 1998.
3.1D Certificate of Designations of Series A Convertible
Preferred Stock. Incorporated by reference to
TransMontaigne Inc. Current Report on Form 8-K
(Securities and Exchange Commission File No. 001-11763)
filed on April 1, 1999.
3.2A Amended and Restated By-Laws. Incorporated by reference
to TransMontaigne Oil Company Form S-2 (Securities and
Exchange Commission File No. 333-18795).
3.2B Amendment to By-Laws dated August 14, 1998.
Incorporated by reference to TransMontaigne Inc. Form
10-Q (Securities and Exchange Commission File No. 001-
11763) for the quarter ended September 30, 1999.
3.2C Amendment to By-Laws dated October 30, 1998.
Incorporated by reference to TransMontaigne Inc. Form
10-Q (Securities and Exchange Commission File No. 001-
11763) for the quarter ended September 30, 1999.
3.2D Amendment to By-Laws dated December 2, 1998.
Incorporated by reference to TransMontaigne Inc. Form
10-Q (Securities and Exchange Commission File No. 001-
11763) for the quarter ended September 30, 1999.
3.2E Amendment to By-Laws dated September 29, 1999.
Incorporated by reference to TransMontaigne Inc. Form
10-Q (Securities and Exchange Commission File No. 001-
11763) for the quarter ended September 30, 1999.
4.1 Warrant Agreement between TransMontaigne and
BankBoston, N.A., as the Warrant Agent, dated March 25,
1999. Incorporated by reference to TransMontaigne Inc.
Current Report on Form 8-K (Securities and Exchange
Commission File No. 001-11763) filed on April 1, 1999.
10.1 The TransMontaigne Oil Company Amended and Restated
1995 Stock Option Plan. Incorporated by reference to
TransMontaigne Oil Company Form 10-K (Securities and
Exchange Commission File No. 001-11763) for the year
ended April 30, 1996.
10.2 TransMontaigne Oil Company Equity Incentive Plan.
Incorporated by reference to TransMontaigne Oil
Company's Definitive Proxy Statement (Securities and
Exchange Commission File No. 001-11763) filed in
connection with the August 28, 1997 Annual Meeting of
Shareholders.
10.3 Stock Purchase Agreement effective April 17, 1996
between TransMontaigne Oil Company and the investors
named therein. Incorporated by reference to
TransMontaigne Oil Company Form 10-K (Securities and
Exchange Commission File No. 001-11763) for the year
ended April 30, 1996.
56
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K (continued)
10.4 Anti-dilution Rights Agreement dated as of April 17,
1996 between TransMontaigne Oil Company and Waterwagon
& Co., nominee for Merrill Lynch Growth Fund.
Incorporated by reference to TransMontaigne Oil Company
Form 10-K (Securities and Exchange Commission File No.
001-11763) for the year ended April 30, 1996.
10.5 Agreement to Elect Directors dated as of April 17, 1996
between TransMontaigne Oil Company and the First
Reserve Investors named therein. Incorporated by
reference to TransMontaigne Oil Company Form 10-K
(Securities and Exchange Commission File No. 001-11763)
for the year ended April 30, 1996.
10.6 Registration Rights Agreement dated as of April 17,
1996 between TransMontaigne Oil Company and the
entities named therein. Incorporated by reference to
TransMontaigne Oil Company Form 10-K (Securities and
Exchange Commission File No. 001-11763) for the year
ended April 30, 1996.
10.7 Amendment and Waiver to the April 17, 1996 Registration
Rights Agreement dated as of October 30, 1998 between
TransMontaigne Inc. and the entities listed on the
signature pages hereof (the "Institutional Investors").
Incorporated by reference to TransMontaigne Inc. Form
10-K (Securities and Exchange Commission File No. 001-
11763) for the year ended June 30, 1999.
10.8 Second Amendment and Waiver by and among the Company
and certain institutional investors signatories thereto
dated March 25, 1999. Incorporated by reference to
TransMontaigne Inc. Current Report on Form 8-K
(Securities and Exchange Commission File No. 001-11763)
filed on April 1, 1999.
10.9 Registration Rights Agreement dated as of October 30,
1998 between TransMontaigne Inc. and Louis Dreyfus
Corporation. Incorporated by reference to
TransMontaigne Inc. Form 10-K (Securities and Exchange
Commission File No. 001-11763) for the year ended June
30, 1999.
10.10 Amendment and Waiver between the Company and Louis
Dreyfus Corporation dated March 25, 1999. Incorporated
by reference to TransMontaigne Inc. Current Report on
Form 8-K (Securities and Exchange Commission File No.
001-11763) filed on April 1, 1999.
10.11 Registration Rights Agreement between the Company and
the Series A Convertible Preferred Stock purchasers'
signatories thereto dated March 25, 1999 (without
exhibits). Incorporated by reference to TransMontaigne
Inc. Current Report on Form 8-K (Securities and
Exchange Commission File No. 001-11763) filed on April
1, 1999.
10.12 Form of Preferred Stock and Warrant Purchase Agreement
(without exhibits). Incorporated by reference to
TransMontaigne Inc. Current Report on Form 8-K
(Securities and Exchange Commission File No. 001-11763)
filed on April 1, 1999.
10.13 Stockholders' Agreement among the Company and certain
institutional purchasers signatories thereto dated
March 25, 1999. Incorporated by reference to
TransMontaigne Inc. Current Report on Form 8-K
(Securities and Exchange Commission File No. 001-11763)
filed on April 1, 1999.
10.14 Fourth Amended and Restated Credit Agreement between
TransMontaigne Inc. and BankBoston, N.A., as Agent,
dated as of February 11, 2000. Incorporated by
reference to TransMontaigne Inc. Form 10-Q (Securities
and Exchange Commission File No. 001-11763) for the
quarter ended March 31, 2000.
10.15 Amended and Restated Master Shelf Agreement among
TransMontaigne Inc., The Prudential Insurance Company
of America and U.S. Private Placement Fund dated as of
February 14, 2000. Incorporated by reference to
TransMontaigne Inc. Form 10-Q (Securities and Exchange
Commission File No. 001-11763) for the quarter ended
March 31, 2000.
10.16 Stock Purchase Agreement dated as of September 13,
1998, between Louis Dreyfus Corporation and
TransMontaigne Inc. Incorporated by reference to
TransMontaigne Inc. Current Report on Form 8-K
(Securities and Exchange Commission File No. 001-11763)
filed on November 13, 1998.
57
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K (continued)
10.17 Amendment No. 1 to Stock Purchase Agreement dated as of
October 30, 1998, between Louis Dreyfus Corporation and
TransMontaigne Inc. Incorporated by reference to
TransMontaigne Inc. Current Report on Form 8-K
(Securities and Exchange Commission File No. 001-11763)
filed on November 13, 1998.
10.18 Sale of Assets Agreement dated as of May 3, 1999
between Amerada Hess Corporation and TransMontaigne
Terminaling Inc. Incorporated by reference to
TransMontaigne Inc. Current Report on Form 8-K
(Securities and Exchange Commission File No. 001-11763)
filed on July 15, 1999.
10.19 Amendment No. 1 to Sale of Assets Agreement dated as of
June 30, 1999, between Amerada Hess Corporation and
TransMontaigne Terminaling Inc. Incorporated by
reference to TransMontaigne Inc. Current Report on Form
8-K (Securities and Exchange Commission File No. 001-
11763) filed on July 15, 1999.
10.20 Letter Agreement dated as of June 30, 1999 between
Amerada Hess Corporation and TransMontaigne Terminaling
Inc. Incorporated by reference to TransMontaigne Inc.
Current Report on Form 8-K (Securities and Exchange
Commission File No. 001-11763) filed on July 15, 1999.
10.21 Agreement and Plan of Merger dated December 27, 1999,
by and between Bear Paw Energy Inc., TransMontaigne
Inc. and BPE Acquisition, LLC. Incorporated by
reference to TransMontaigne Inc. Current Report on Form
8-K (Securities and Exchange Commission File No. 001-
11763) filed on January 18, 2000.
21 Schedule of TransMontaigne Inc. Subsidiaries. FILED
HEREWITH.
23.1 Consent of KPMG LLP. FILED HEREWITH.
27 Financial Data Schedule for the Fiscal Year Ended June
30, 2000. FILED HEREWITH.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter ended June 30,
2000.
58
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRANSMONTAIGNE INC.
By /s/CORTLANDT S. DIETLER
-----------------------
Cortlandt S. Dietler
Chairman
Date: September 21, 2000
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report is signed below by the following persons on behalf of the Registrant and
in the capacities indicated on September 21, 2000.
Name and Signature Title
------------------ -----
/s/ CORTLANDT S. DIETLER Chairman and Director
- -------------------------
Cortlandt S. Dietler
/s/ DONALD H. ANDERSON President, Chief Executive Officer, Chief Operating
- ------------------------- Officer, Vice Chairman and Director
Donald H. Anderson
/s/ HAROLD R. LOGAN, JR. Executive Vice President/Finance,
- ------------------------- Treasurer and Director
Harold R. Logan, Jr.
/s/ RODNEY S. PLESS Vice President, Controller and Chief Accounting
- ------------------------- Officer
Rodney S. Pless
/s/ PETER B. GRIFFIN Director
- -------------------------
Peter B. Griffin
/s/ JOHN A. HILL Director
- -------------------------
John A. Hill
/s/ BRYAN H. LAWRENCE Director
- -------------------------
Bryan H. Lawrence
/s/ WILLIAM E. MACAULAY Director
- -------------------------
William E. Macaulay
/s/EDWIN H. MORGENS Director
- -------------------------
Edwin H. Morgens
59