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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 April 30, 1997
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 1-11763
TRANSMONTAIGNE OIL COMPANY
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. [x]
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
July 23, 1997.
$173,934,000
The number of shares of the registrant's Common Stock outstanding on July 23,
1997 was
25,809,720
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement relating to the 1997 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 9
3. Legal Proceedings 9
4. Vote of Security Holders 9
Part II 5. Market for Common Stock 10
6. Selected Financial Data 11
7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13
8. Financial Statements and Supplementary Data 23
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures 51
Part III 10. Directors and Executive Officers 51
11. Executive Compensation 51
12. Security Ownership of Certain Beneficial
Owners and Management 51
13. Certain Relationships and Related Transactions 51
Part IV 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 53
2
PART I
ITEM 1. BUSINESS
GENERAL
TransMontaigne Oil Company ("TransMontaigne") provides a broad range
of integrated logistical services related to transportation, terminaling,
supply, distribution, gathering, processing and marketing to producers,
refiners, distributors, marketers and end-users of petroleum products, natural
gas and crude oil in the downstream sector of the petroleum industry.
TransMontaigne is a holding company which operates through its subsidiaries
primarily in the mid-continent and Rocky Mountain regions of the United States.
TransMontaigne does not explore for, or produce, crude oil or natural gas, and
it owns no crude oil or natural gas reserves.
TransMontaigne owns and operates refined petroleum product, crude oil
and natural gas facilities. TransMontaigne's refined petroleum product and crude
oil facilities consist primarily of 747 miles of pipeline and ten storage and
terminal facilities in seven states with a combined tank storage capacity of
approximately 4,820,000 barrels. Its natural gas gathering and processing
facilities consist of four distinct gathering and processing systems in two
states with combined throughput capacity of approximately 85 million cubic feet
per day of natural gas and over 2,700 miles of pipelines. The use of its
facilities and an extensive network of additional common carrier pipelines and
terminal facilities owned by others allows TransMontaigne to significantly
expand its geographic service area and the types of services it provides.
TransMontaigne operations are conducted through its logistical
petroleum services business segment which primarily includes pipelining,
terminaling, storing and marketing of refined petroleum products and through its
gas gathering and processing services business segment. Operating information
relating to these business segments is presented in note 17 to the financial
statements.
TransMontaigne believes that fundamental structural changes and the
trend toward outsourcing in the petroleum industry are creating opportunities
for its continued growth. Major oil companies and independents are undertaking
reorganization, rationalization and cost-saving measures in an effort to improve
operating and financial performance. In many instances this results in the
disposition of domestic non-strategic, non-core businesses and downstream assets
and facilities, and in the outsourcing of procurement, maintenance,
transportation, supply, distribution, gathering, processing, marketing and
administrative functions.
TransMontaigne believes that this disposition of downstream assets and
facilities provides opportunities for it to purchase pipeline, storage,
terminaling, gathering and processing assets, and to apply focused management
and more cost effective utilization of these facilities while providing value-
added service at competitive prices to its customers, often including the former
owners of the assets. TransMontaigne has acquired, designed and developed its
physical assets and its operating, risk management and information systems in
order to take advantage of these opportunities.
The principal predecessor of TransMontaigne was formed in 1977 under
the name of Continental Ozark Corporation. In April 1995, present management and
certain institutional stockholders of TransMontaigne acquired control of
Continental Ozark Corporation through a merger in which the name of the
corporation was changed to TransMontaigne Oil Company. In June 1996,
TransMontaigne and a publicly held corporation merged, with the stockholders of
TransMontaigne receiving approximately 93% of the stock of the merged
corporation.
3
In December 1996 TransMontaigne acquired the Grasslands natural gas
gathering, processing, treating and fractionation system (the "Grasslands
Facilities") for approximately $71,000,000 in cash. The Grasslands system is one
of the largest natural gas facilities in the Williston Basin which is currently
among the most active areas of onshore domestic drilling activity. The
acquisition of the Grasslands Facilities is an example of the opportunities
available to TransMontaigne to enhance its earnings performance by capitalizing
on the industry's divestiture trend and applying its management expertise in the
downstream sector of the petroleum industry. The facilities complement
TransMontaigne's existing natural gas gathering and processing facilities in the
Williston Basin of the Rocky Mountain region, and enable TransMontaigne to
improve service to oil and gas producers as well as to end-users of natural gas
liquids ("NGLs") and natural gas.
The executive offices of TransMontaigne, a Delaware corporation, are
located at 2750 Republic Plaza, 370 Seventeenth Street, Denver, CO 80202, and
its telephone number is (303) 626-8200.
LOGISTICAL PETROLEUM SERVICES
Through its wholly owned subsidiary TransMontaigne Transportation
Services Inc., TransMontaigne provides refined petroleum product and crude oil
transportation, storage and terminaling services to over 500 customers,
including most major oil companies and independent refiners in the United
States. TransMontaigne employs its 747 miles of pipeline and ten storage and
terminal facilities in seven states with a combined tank storage capacity of
approximately 4,820,000 barrels in conjunction with the major mid-continent
pipeline and terminal systems owned by others to transport products to market
destinations and to conduct exchange transactions with major and independent
petroleum companies. The combined utilization of TransMontaigne-owned and non-
owned assets allows it to significantly expand its geographic service area and
the types of services it provides.
TransMontaigne owns and operates a 460-mile refined petroleum products
pipeline from Ft. Madison, Iowa through Chicago to Toledo, Ohio (the "NORCO
pipeline") and associated storage facilities located at Hartsdale, Indiana and
Toledo, Ohio. The NORCO pipeline system is interconnected to all major mid-
continent common carriers. TransMontaigne also owns a 60% interest in a 67-mile
refined petroleum products pipeline operating from Mt. Vernon, Missouri to
Rogers, Arkansas (the "Razorback pipeline") and an associated storage facility
at Mt. Vernon. The Razorback pipeline is the only refined petroleum products
pipeline providing transportation services to northwest Arkansas. TransMontaigne
also owns and operates a 220-mile crude oil gathering pipeline system, with
807,500 barrels of tank storage capacity, located in east Texas (the "CETEX
pipeline").
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 TransMontaigne 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, or for the terminaling and storage of products at TransMontaigne
terminals, the fees for which are separately charged if those facilities are
utilized.
4
TransMontaigne'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. TransMontaigne believes that high
capital costs, tariff regulation, environmental considerations, problems in
acquiring rights-of-way and TransMontaigne's 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.
The TransMontaigne-owned and operated terminals connect with product
transportation systems, storage facilities and product distribution locations.
These terminals are located in Rogers, Arkansas; Little Rock, Arkansas; East
Chicago, Indiana; Indianapolis, Indiana; South Bend, Indiana; and Bryan, Ohio.
The East Chicago, Indiana facility, purchased in January 1997, has
approximately 1,186,000 barrels of storage capacity, including specialized
storage for aviation and jet fuel, and strategic connections to additional
pipelines and facilities in the Chicago, Illinois and Whiting, Indiana areas.
The original South Bend terminal, inactive since its purchase in 1992, was
demolished and rebuilt during 1996. This modern facility which opened in
January 1997 has storage capacity of 210,000 barrels and is capable of
delivering volumes in excess of 15,000 barrels per day. These terminal and
storage facilities are expected to enhance terminaling revenue and improve
utilization and pipeline revenues on the NORCO pipeline system.
Terminal revenues are based on the volume of products handled,
generally at a standard industry fee. Terminal fees are not regulated. The
terminals receive petroleum products in bulk quantities from connecting pipeline
systems. Products are stored in bulk at the terminals and made available to
wholesale, shipment and exchange customers which transport the products by truck
to commercial and retail destinations and then to the end-user. TransMontaigne
markets refined petroleum products over truck loading racks at owned terminals,
as well as through exchanges with numerous companies at other non-owned
terminals located throughout the TransMontaigne distribution area.
TransMontaigne believes that based on location, pipeline connections and quality
of service, its terminals offer advantages over competing terminals.
Major and independent petroleum companies own terminal and storage
facilities which often have similar capabilities to those owned by independent
operators such as TransMontaigne, but generally do not provide terminaling and
storage services to third parties. In many instances, these companies are also
significant customers of TransMontaigne and frequently provide strong demand for
its terminals, particularly when TransMontaigne's terminals and storage
facilities have more cost effective locations near key transportation
connections. These companies also utilize TransMontaigne for terminaling and
storage services when their proprietary facilities are inadequate, either
because of size constraints, the nature of the products stored or specialized
handling requirements.
5
Storage of refined petroleum products at TransMontaigne-owned
terminals pending delivery is an integral service function. Storage fees are
generally based on a per gallon rate, which varies with the duration of the
storage arrangement, the product stored and special handling requirements.
Ancillary services, including injection of shipper-furnished or TransMontaigne-
furnished additives, are also available for a fee at the TransMontaigne
terminals.
TransMontaigne provides products services through its wholly owned
subsidiary TransMontaigne Product Services Inc. Product services consist of the
bulk purchase and sale of substantial volumes 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. These product supply and
distribution efforts are enhanced by TransMontaigne's ownership and operation of
product pipelines and terminals, a constant supply of NGLs from its gathering
and processing operations, and by its inventory positions in third-party common
carrier pipeline systems. TransMontaigne employs these assets to arbitrage
regional product price differentials and transportation costs; to buy bulk
volumes of products at the wholesale level and remarket them over truck loading
racks; and to take advantage of opportunities presented by changing market
conditions and seasonal variations.
TransMontaigne enters into product exchange transactions in order to
enhance operating margins in connection with its marketing activities. Exchanges
are arranged through agreements under which TransMontaigne 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
TransMontaigne's management information and risk management systems,
TransMontaigne seeks to increase its operating margins by maximizing
transportation, terminaling and product sales revenues from each barrel of
product sold while also minimizing related storage and shipping costs.
TransMontaigne may selectively hedge a portion of its inventory by
entering into a future physical delivery obligation to a third party or
purchasing a futures contract on the NYMEX in order to maintain a substantially
balanced position between product purchases and future product sales or delivery
obligations and to minimize exposure to the risk of price volatility of refined
petroleum products. TransMontaigne generally does not hedge the price risk on
the portion of its inventory consisting of pipeline fill, tank bottoms and a
minimum product supply required to satisfy exchange obligations, which inventory
is generally not available for sale. However, hedging positions may be
considered and strategically placed on this inventory when management believes
it is appropriate based upon an assessment of market conditions and the related
impact on operating income.
6
GAS GATHERING AND PROCESSING SERVICES
TransMontaigne provides natural gas gathering and processing services
business through its wholly owned subsidiary Bear Paw Energy Inc. In December
1996 TransMontaigne acquired the Grasslands Facilities. The Grasslands
Facilities complement TransMontaigne's existing natural gas gathering and
processing facilities in the Williston Basin of the Rocky Mountain region, and
enable TransMontaigne to improve service to oil and gas producers as well as to
end-users of NGLs and natural gas. The Grasslands system is one of the largest
natural gas gathering and processing facilities in the Williston Basin which is
currently among the most active areas of domestic oil and gas drilling. With the
acquisition of the Grasslands Facilities, natural gas gathering and processing
becomes a significant and integral component of TransMontaigne's business.
The Grasslands natural gas processing plant, located in McKenzie
County, North Dakota, was built in 1980. Although the plant is designed for
approximately 65 million cubic feet per day inlet capacity, it has operated at
approximately 75 million cubic feet per day for extended periods. In addition,
it has approximately 180 long tons per day capacity for sulfur recovery. The
designed product recoveries are 88% propane, 99% butane and 100% gasoline.
Current throughput is approximately 45 million cubic feet per day from over
1,200 active leases, which is gathered through approximately 2,500 miles of low
and high pressure gathering lines. The majority of the wells connected to the
Grasslands Facilities primarily produce crude oil. They also produce small
volumes of natural gas that are generally high in NGL content. The natural gas
gathering lines cover the Williston Basin areas of western North Dakota and
eastern Montana. A 20 mile high pressure pipeline with a designed capacity in
excess of 25 million cubic feet per day has been recently completed into an area
of active drilling in the Lodgepole geologic formation near Dickinson, North
Dakota. Additional oil and gas wells can be connected to this entire system if
successful drilling continues.
The Grasslands Facilities are strategically located between
TransMontaigne's Marmarth facility in southwestern North Dakota, its Baker
facility in eastern Montana and its 50% owned Lignite facility in northern North
Dakota. With the Grasslands Facilities, TransMontaigne has natural gas gathering
facilities covering the eastern corridor of Montana and the western quarter of
North Dakota, from the Canadian border to the South Dakota border, which
significantly enhance TransMontaigne's ability to provide complete service to
North Dakota and Montana producers as well as to end-users of NGLs and natural
gas.
The Marmarth system is an approximately 4 million cubic feet per day
capacity natural gas gathering, processing, and treating facility which gathers
natural gas at low pressure in southwestern North Dakota through approximately
15 miles of gathering pipelines. NGLs are currently sold locally by truck after
being fractionated at the Baker facility. The Baker system located in eastern
Montana is an approximately 4 million cubic feet per day capacity natural gas
processing plant connected to a 15 mile gathering pipeline presently under
construction. Baker also fractionates the Marmarth system NGLs and provides
processing for a major oil company. The Lignite system is an approximately 12
million cubic feet per day capacity natural gas processing and treating facility
located in northern North Dakota connected to approximately 250 miles of
gathering pipelines.
7
TransMontaigne continually seeks additional dedicated natural gas
supplies to maintain or increase throughput levels to offset natural production
declines in dedicated volumes. Such natural gas supplies are obtained by
purchasing existing systems from third parties or by connecting additional
wells. The opportunity to connect new wells to existing facilities is primarily
affected by levels of drilling activity near TransMontaigne's natural gas
gathering systems.
The gathering, processing and marketing sector of the natural gas
industry is currently in a consolidation phase. As this consolidation takes
place, it may become more difficult for many companies to earn acceptable
returns on smaller systems. Many oil and gas producers that have previously
operated their own natural gas gathering and processing facilities may realize
they lack the operational and management skills necessary to maximize the return
on these investments and choose to sell these assets. TransMontaigne intends to
take advantage of the opportunities presented by this consolidation.
In addition to the ownership of its four natural gas systems,
TransMontaigne manages 15 small natural gas gathering systems for a major
interstate pipeline company. TransMontaigne earns a fee for the management of
these systems and is compensated for any additional volumes which it connects to
them.
LION OIL COMPANY INVESTMENT
In 1985, a 65% owned subsidiary of TransMontaigne purchased 27.75% of
the stock of Lion Oil Company ("Lion"), which owns a modern 65,000 barrel per
day refinery in El Dorado, Arkansas; a 188-mile crude oil transportation
pipeline in east Texas; a 1,100-mile crude oil gathering system in south
Arkansas and north Louisiana; and two refined petroleum products terminals in
Tennessee. Lion is operated under a management contract with a company which
owns 48.6% of Lion. The remaining 23.65% of Lion is owned by various south
Arkansas oil and gas producers. TransMontaigne has two representatives on the
board of directors of Lion. Through April 30, 1997 TransMontaigne's interest in
Lion is reported for financial statement purposes using the equity method of
accounting.
ENVIRONMENTAL AND TARIFF REGULATIONS
The operations of TransMontaigne are subject to federal, state and
local laws and regulations relating to protection of the environment. Future
regulation may impose additional requirements. Although TransMontaigne believes
that its operations are in material compliance with applicable environmental
laws and regulations, and TransMontaigne has not accrued any material amounts
for environmental compliance as of April 30, 1997, 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 product pipeline operations of TransMontaigne
are subject to regulation by 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
lawfulness 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.
8
The intrastate petroleum pipeline operations of TransMontaigne are
subject to regulation by the Texas Railroad Commission. Like interstate
regulation, the Texas regulation requires that intrastate tariffs be filed with
the Railroad Commission and allows shippers to challenge such tariffs.
Employees
The Company had 236 employees at July 23, 1997. No employees are
subject to representation by unions for collective bargaining purposes.
ITEM 2. PROPERTIES
For information regarding TransMontaigne properties, see "General",
"Transportation Services" and "Natural Gas Gathering and Processing" sections
under Item 1. For information regarding Lion properties, see "Lion Oil Company
Investment" section under Item 1.
ITEM 3. LEGAL PROCEEDINGS
Not Applicable
ITEM 4. VOTE OF SECURITY HOLDERS
Not Applicable
9
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, adjusted for a 2.432599 to 1 reverse stock split that
occurred in June 1996. The common stock of a much smaller predecessor of
TransMontaigne was traded on the American Stock Exchange (Emerging Company
Marketplace) from December 14, 1993 until June 3, 1996. On June 5, 1996,
following the merger of TransMontaigne and the predecessor, the Common Stock
began to trade on the American Stock Exchange (Primary List).
LOW HIGH
------ ------
First Calendar Quarter 1995 $ 2.74 $ 3.95
Second Calendar Quarter 1995 $ 2.74 $ 4.26
Third Calendar Quarter 1995 $ 3.35 $ 4.26
Fourth Calendar Quarter 1995 $ 3.35 $ 4.56
First Calendar Quarter 1996 $ 3.35 $10.80
Second Calendar Quarter 1996 (through
June 3, 1996) $10.03 $17.94
June 5, 1996 through July 31, 1996 (1) $ 9.75 $15.13
August 1, 1996 through October 31, 1996 $ 9.69 $10.88
November 1, 1996 through January 31, 1997 $ 9.81 $14.75
February 1, 1997 through April 30, 1997 $13.50 $17.75
_________
(1) In June 1996, TransMontaigne adopted a fiscal year end of April 30.
On July 23, 1997, the last reported sale price for the Common Stock on
the American Stock Exchange was $18.875. As of July 23, 1997, there were
approximately 460 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. TransMontaigne intends to retain future
cash flow for use in its business and has no current intention of paying
dividends in the foreseeable future. Any payment of future dividends and the
amounts thereof will depend upon TransMontaigne's earnings, financial condition,
capital requirements and other factors deemed relevant by TransMontaigne's Board
of Directors. TransMontaigne's 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."
10
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the fiscal years ended April
30, 1997, 1996 and 1995, the seven months ended April 30, 1994, and the fiscal
years ended September 30, 1993 and 1992, have been 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."
SEVEN
MONTHS
FISCAL YEARS ENDED ENDED FISCAL YEARS ENDED
APRIL 30, APRIL 30, SEPTEMBER 30,
----------------------------------------------- ------------ --------------------------
1997 1996 1995 1994 1993 1992
------------- -------------- ------------ ------------ ------------ ------------
STATEMENT OF
OPERATIONS DATA:
Revenue $1,166,664,621 533,106,747 324,591,409 296,086,981 507,936,810 515,547,695
Operating Income
(Loss) 9,900,568 6,548,953 406,042 (1,509,581) (1,710,242) (1,930,614)
Net Earnings
(Loss) 9,171,312 4,617,969 (3,217,635) (2,853,609) (4,490,468) (4,200,922)
Earnings (Loss)
Per Share 0.41 0.31 (1.32) (1.15) (1.85) (1.73)
STATEMENT OF CASH FLOWS
DATA:
Net Cash Provided By
(Used In):
Operating Activities $ (9,769,244) (3,919,753) (236,580) (2,187,251) 5,004,187 (8,153,054)
Investing Activities (89,920,465) (4,181,377) (233,562) (1,041,069) (4,614,892) (2,327,191)
Financing Activities 97,670,800 44,702,536 61,543 3,691,885 (1,315,700) (9,581,869)
OTHER FINANCIAL
DATA:
EBITDA (1) $ 15,354,682 8,844,357 1,561,251 (364,156) (669,698) (959,277)
Capital Expenditures(2) 92,294,394 4,124,264 747,774 461,888 4,730,726 2,247,052
APRIL 30, SEPTEMBER 30,
--------------------------------------------------------- --------------------------
1997 1996 1995 1994 1993 1992
------------- -------------- ------------ ----------- ------------- ------------
BALANCE SHEET
DATA:
Working Capital $ 78,423,038 55,651,839 37,989,205 11,554,715 11,470,225 20,685,446
Total Assets 261,724,320 120,962,976 104,220,346 75,470,266 86,334,703 76,336,971
Long-Term Debt,
excluding current
maturities 64,774,267 28,948,867 36,945,610 37,671,329 33,953,590 35,256,698
Stockholders'
Equity(3) 138,971,741 57,819,191 28,470,702 2,480,835 5,334,500 9,825,000
11
(1) EBITDA is earnings (loss) before income taxes plus interest
expense and other financing costs and depreciation and amortization.
TransMontaigne believes that, in addition to cash flow from operations and net
earnings (loss), EBITDA is a useful financial performance measurement for
assessing operating performance as it provides an additional basis to evaluate
the ability of TransMontaigne to incur and service debt and to fund capital
expenditures. In evaluating EBITDA, TransMontaigne 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 TransMontaigne's operating
performance or to cash flows from operating activities (as determined in
accordance with GAAP) as a measure of liquidity. See TransMontaigne's
consolidated financial statements incorporated by reference and included herein.
TransMontaigne's method of calculating EBITDA may differ from methods used by
other companies, and as a result, EBITDA measures disclosed herein may not be
comparable to other similarly titled measures used by other companies.
(2) Includes approximately $71,000,000 relating to the Grasslands
acquisition.
(3) No dividends were declared or paid on the Common Stock during the
periods reported.
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
TransMontaigne provides a broad range of integrated transportation,
terminaling, supply, distribution, gathering, processing and marketing services
to producers, refiners, distributors, marketers and end-users of petroleum
products, natural gas and crude oil in the downstream sector of the petroleum
industry. TransMontaigne is a holding company which conducts its operations
through subsidiaries primarily in the mid-continent and Rocky Mountain regions
of the United States. TransMontaigne does not explore for, or produce, crude oil
or natural gas, and owns no crude oil or natural gas reserves.
TransMontaigne owns and operates refined petroleum product, crude oil and
natural gas assets. TransMontaigne refined petroleum product and crude oil
assets consist primarily of 747 miles of pipeline and ten storage and terminal
facilities in seven states with a combined tank storage capacity of
approximately 4,820,000 barrels. Its natural gas gathering and processing
assets consist of four gathering and processing systems in two states with
combined throughput capacity of approximately 85 million cubic feet per day and
over 2,700 miles of pipelines. The use of these facilities and an extensive
network of additional common carrier pipelines and terminal facilities owned by
others allows TransMontaigne to significantly expand its geographic service area
and the types of services it provides.
The principal predecessor of TransMontaigne was formed in 1977 under the
name of Continental Ozark Corporation. In April 1995, present management and
certain institutional stockholders of TransMontaigne acquired control of
Continental Ozark Corporation through a merger in which the name of the
corporation was changed to TransMontaigne Oil Company. In June 1996,
TransMontaigne and a publicly held corporation merged, with the stockholders of
TransMontaigne receiving approximately 93% of the stock of the merged
corporation.
Since TransMontaigne present management assumed control in April 1995,
TransMontaigne has raised approximately $117,000,000 in equity capital
($30,000,000 private placement in May 1995; $25,000,000 private placement in
March 1996; and $62,000,000 public offering in February 1997); established a
$130,000,000 working capital and acquisition revolving bank credit facility (in
December 1996) which converted to the present $85,000,000 successor bank credit
facility due December 31, 2001 (in February 1997); and issued $50,000,000 of
7.85% Senior Notes due 2003 to an institutional lender under a $100,000,000
Master Shelf Agreement (in April 1997).
Management also has increased net operating margins to $21,344,000 and
$12,717,000 for the fiscal years ended April 30, 1997 and 1996 by improving the
performance of its facilities through selective capital improvements,
restructured operating and administrative functions and expanded marketing of
services and by implementing an operating plan together with financial
management
13
systems which provide the foundation for its current operations and future
growth. In addition, new information systems, policies, procedures and
operating controls have been established; experienced managerial personnel have
been added to improve operational efficiencies in all service areas and to
expand the products supply and distribution and marketing functions; more
effective management of inventory price risk and quantities has been
implemented; and inventory carrying costs have been reduced.
In December 1996 TransMontaigne acquired the Grasslands natural gas
gathering, processing, treating and fractionation system (the "Grasslands
Facilities") for approximately $71,000,000 in cash and through April 30, 1997
has invested an additional $1,391,000 in improvements and enhancements. The
Grasslands system is one of the largest natural gas facilities in the Williston
Basin which is currently among the most active areas of onshore domestic
drilling activity. The acquisition of the Grasslands Facilities is an example
of the opportunities available to TransMontaigne to enhance its earnings
performance by capitalizing on an industry divestiture trend and applying its
management capabilities in the downstream sector of the petroleum industry. The
Grasslands Facilities complement TransMontaigne's other natural gas gathering
and processing facilities in the Williston Basin of the Rocky Mountain region,
and enable TransMontaigne to improve service to oil and gas producers as well as
to end-users of natural gas liquids and natural gas. The Grasslands Facilities
contributed a net operating margin of $5,988,000 to TransMontaigne during the
year ended April 30, 1997.
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This report contains "forward-looking statements" within the meaning of the
federal securities laws and may include the words or phrases "believes," "will
depend," "will become" and "plans to" or similar expressions as well as other
statements of expectations, beliefs, future strategies and comments concerning
matters which are not historical facts. These forward-looking statements are
subject to risks and uncertainties which could cause actual results to differ
materially from those expressed in or implied by the statements including, but
not limited to, the following:
. that TransMontaigne will generate net margins from high sales volumes
. that TransMontaigne net margins are affected by price volatility of
products purchased and sold
. that, to the extent TransMontaigne selectively hedges its inventory
positions, those hedges are not effective
. that TransMontaigne could be required to recognize a financial
statement loss through a lower of cost or market write-down of
inventories
. that TransMontaigne will incur unanticipated costs in complying with
current and possibly future environmental regulations
. that TransMontaigne will capitalize on the trend by companies in the
oil and gas industry to divest assets and outsource certain services
. that TransMontaigne will replace the supply of dedicated natural gas
reserves gathered and processed by its facilities.
14
RESULTS OF OPERATIONS
YEARS ENDED APRIL 30,
------------------------------
1997 1996 1995
-------- -------- --------
(in thousands, except margin per gallon data)
PIPELINE OPERATIONS
Volume (1) 19,580 18,902 13,721
Revenues $ 12,196 9,577 5,827
Net Operating Margins (2) $ 6,848 4,454 2,678
Margin per Gallon $ 0.0083 0.0056 0.0046
TERMINAL OPERATIONS
Volume (1) 774,000 587,000 547,000
Revenues $ 5,387 3,346 3,145
Net Operating Margins (2) $ 3,524 2,434 2,340
Margin per Gallon $ 0.0046 0.0041 0.0043
PRODUCTS SUPPLY AND
DISTRIBUTION OPERATIONS
Volume (1) 1,774,000 958,000 620,000
Revenues $ 1,125,941 520,184 315,619
Net Operating Margins (2) $ 3,984 5,829 761
Margin per Gallon $ 0.0022 0.0061 0.0012
GAS GATHERING AND
PROCESSING OPERATIONS (3)
Inlet Volume (4) 5,332 - -
NGL Production (4) 27,219 - -
Residue Production (4) 4,533 - -
Revenue $ 23,141 - -
Net Operating Margins (2) $ 6,988 - -
TOTAL OPERATIONS
Revenues $ 1,166,665 533,107 324,591
Net Operating Margins (2) $ 21,344 12,717 5,779
Net Income (Loss) $ 9,171 4,618 (3,218)
15
(1) Pipeline volumes are expressed in barrels (42 gallons per barrel), and
terminal and products supply and distribution sales volumes are expressed in
gallons.
(2) Net operating margin represents revenues less direct operating expenses for
pipeline and terminal operations; revenues less cost of refined petroleum
products purchased for products supply and distribution operations, and revenues
less cost of natural gas gathered, processed and sold and direct operating
expenses for natural gas gathering and processing operations.
(3) Natural gas gathering and processing volumes, production and revenues for
the year ended April 30, 1997 include those items only for the period from
December 20, 1996, the closing date of the Grasslands facilities acquisition,
through April 30, 1997.
(4) Natural gas inlet volumes are expressed in thousand cubic feet; natural gas
liquids (NGLs) production is expressed in gallons; and residue natural gas
production is expressed in million British Thermal Units.
Prior to the acquisition of the Grasslands Facilities, TransMontaigne's
revenues were derived from the logistical petroleum services business segment
consisting primarily of transporting refined petroleum products (and to a lesser
extent crude oil) in pipelines; storing and terminaling refined petroleum
products; and refined petroleum products supply, distribution and marketing.
Gas gathering and processing services became an important business segment with
the acquisition of the Grasslands Facilities and will have a significant impact
on TransMontaigne's future results of operations.
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. TransMontaigne interstate pipeline systems transport refined petroleum
products and their tariffs are regulated by the Federal Energy Regulatory
Commission (the "FERC"). TransMontaigne intrastate pipeline transports crude oil
and its tariffs are not regulated by the FERC but are regulated by the Texas
Railroad Commission.
Terminal revenues are based on the volume of refined petroleum products
handled, generally at a standard per gallon rate. Terminal fees are not
regulated. Storage fees are generally based on a per gallon rate, which varies
with the duration of the storage arrangement, the refined petroleum product
stored and special handling requirements.
Direct operating expenses of pipelines and terminals include wages and
employee benefits, utilities, communications, maintenance and repairs, property
taxes, rent, insurance, vehicle expenses, environmental protection costs,
materials and supplies.
Products supply and distribution revenues are based on the volume of bulk
sales of refined petroleum products and the wholesale distribution of refined
petroleum products from terminals. Bulk purchase and sale transactions in
quantities of 25,000 barrels to 50,000 barrels are common and are generally made
at small margins. Wholesale distribution of refined petroleum products from
proprietary and nonproprietary terminal truck loading rack locations is
primarily represented by truck load sales of 8,000 gallons.
16
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. The 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 by TransMontaigne to wholesalers and end-users.
Residue natural gas is delivered to and marketed through connections with
interstate pipelines.
Direct operating expenses of natural gas gathering and processing include
wages and employee benefits, utilities, maintenance and repairs, property taxes,
insurance, vehicle expenses, environmental protection costs, material and
supplies.
YEAR ENDED APRIL 30, 1997 COMPARED TO YEAR ENDED APRIL 30, 1996
The net operating margin from pipeline operations of $6,848,000 increased
54%, or $2,394,000, in the current year. This increase resulted primarily from a
net increase in the volumes of higher tariff long haul pipeline shipments, based
on a 4% increase in total volumes shipped, together with increases in joint
tariff participation and tankage rental income all of which resulted in a 27%
increase in revenues of $2,619,000 in the current year. This increase in
revenues was partially offset by a 4% increase in operating costs of $225,000,
primarily due to incremental power costs from additional long haul shipment
volumes and increased field personnel costs, repairs and maintenance and
property tax assessments.
The net operating margin from terminal operations of $3,524,000 increased
45%, or $1,090,000, in the current year. This increase resulted from an overall
32% increase in volumes handled, primarily due to a 22% increase at the Little
Rock, Arkansas terminal and additional volumes at the East Chicago terminal
facility acquired in December 1996; offset in part by a 104% increase in
terminal operating costs attributable to the East Chicago terminal, a new
terminal lease, additional freight charges on products, field personnel expenses
and property tax assessments.
The net operating margin from product sales in the current year of
$3,983,000 decreased 32%, or $1,846,000. Net revenues increased $605,757,000
or 117%, on additional volume of 816,000,000 gallons of products sold. The
$.0022 net operating margin per gallon realized in the current year decreased
$.0039, or 64%, from the higher than normal $.0061 per gallon realized during
the prior year, primarily due to substantially reduced product margins realized
during the second half of the current year, notwithstanding the significant
increase in sales volume attributable to an expanded supply, distribution and
marketing program. The lower net operating margin was affected by generally
weak market conditions. The net operating margin was also negatively impacted
during certain periods in the latter part of the current year by bulk sales of
products shipped to locations on TransMontaigne pipelines which resulted in
minimal or negative margins. However, these product shipments increased
pipeline and terminal throughput volumes, and maximized related tariff and
handling revenues. By providing an integrated logistical service to customers
through the effective utilization of both its transportation and product supply,
distribution and marketing capabilities, the TransMontaigne aggregate net
operating margin from the logistical petroleum services business segment
increased $1,638,000, or 13%, over the prior year.
17
The net operating margin from natural gas gathering and processing
operations of $6,988,000 in the current year is primarily attributable to the
business activities of the Grasslands facilities for the period from the
December 20, 1996 acquisition closing date through April 30, 1997 and also
includes net operating margin contributions from the Marmarth and Baker
facilities as well as fees for the management of fifteen small natural gas
gathering systems. These were not previously sources of net operating margins
since TransMontaigne natural gas gathering and processing operations commenced
in June 1996.
The unaudited pro forma results of operations reflected in Note 3 to the
Consolidated Financial Statements include the historical operating performance
of the Grasslands facilities under prior ownership and are presented for
comparative purposes. Included in the pro forma information are Grasslands
Facilities revenues of $52,848,000 for the year ended April 30, 1997
representing an increase of $7,381,000, or 16%, over revenues of $45,467,000 for
the year ended April 30, 1996. This revenue increase was primarily due to
improved product prices for NGLs and residue natural gas resulting from strong
wholesale demand during December 1996 and January 1997 together with a small
increase in product volumes sold. The pro forma net operating margin from
Grasslands Facilities operations was $14,907,000, a 45% increase of $4,640,000,
for the year ended April 30, 1997 over the pro forma net operating margin of
$10,267,000 for the year ended April 30, 1996. This increase resulted primarily
from improved product prices, decreased operating expenses and the conversion of
a natural gas gathering agreement from a fee based to a percentage of proceeds
arrangement.
General and administrative expenses increased $2,988,000, a 60% increase in
the current year, primarily due to additional personnel costs and increased
office lease expense together with increases in employee relocation, insurance,
information systems and communication expenses, a significant portion of which
expenses was attributable to TransMontaigne's expanded natural gas gathering and
processing business activities.
Other income includes equity in earnings of affiliates and interest income.
Equity in earnings of affiliates in the current year is represented by
TransMontaigne's share of Lion's earnings, net of related minority interests, of
approximately $70,000 compared to $605,000 for the prior year. The decrease was
primarily due to both planned and unanticipated turnaround costs (major
maintenance expenditures) which adversely impacted earnings.
Interest income in the current year increased to $1,777,000 from $521,000
primarily due to an increase in interest bearing cash balances held for future
investments.
Interest expense represents interest on the revolving and successor bank
lines of credit which were used primarily to finance the Grasslands Facilities
acquisition, other capital expenditures, inventory and accounts receivable and
also includes interest on TransMontaigne's senior subordinated debentures.
Other financing costs include fees paid for letters of credit issued to product
suppliers, loan commitment fees and debt acquisition costs paid in connection
with credit facilities. Interest expense and financing costs during the current
year increased $1,552,000, or 54%, over the prior year. Lower interest rates in
the current year were offset by the effect of a $25,000,000 increase in average
outstanding debt.
18
Earnings before income taxes of TransMontaigne for the current year were
$7,483,000, a 56% increase of $2,672,000 over the $4,811,000 for the prior year.
This improvement was primarily a result of the aggregate increase in the
logistical petroleum services business segment net operating margin; the
positive impact of the net operating margin contribution from the gas gathering
and processing business segment attributable essentially to the inclusion of
over four months operations of the Grasslands Facilities; and additional
interest income. These increases were partially offset by increased general and
administrative, depreciation and interest expenses, primarily attributable to
the Grasslands Facilities acquisition.
As of April 30, 1997 management assessed the realizability of
TransMontaigne's deferred tax assets. Realization of the net deferred tax
assets is dependent upon the generation of future taxable income in periods when
temporary differences between financial statement carrying amounts and tax bases
of assets become deductible. Projected future taxable income and tax planning
strategies are considered in making the assessment. As a result of the
Grasslands acquisition in December 1996 and the public offering of common stock
in February 1997, management believes it is more likely than not that the
benefits of future deductible differences will be realized and, as a result, the
valuation allowance of $4,474,000 was reversed and recorded as an income tax
benefit in the year ended April 30, 1997. The current year income tax benefit of
$1,689,000 includes state tax expense of $586,000.
Net earnings of TransMontaigne for the current year were $9,171,000, a 99%
increase of $4,618,000 over the prior year.
YEAR ENDED APRIL 30, 1996 COMPARED TO YEAR ENDED APRIL 30, 1995
The net operating margin from pipeline operations of $4,454,000 increased
66%, or $1,776,000, in the year ended April 30, 1996. This increase resulted
primarily from a 38% increase in volumes shipped and increased utilization.
These increases resulted in a 64% increase in revenues of $3,750,000 during the
period. The increase in revenues was partially offset by a 63% increase in
operating costs of $1,974,000, primarily due to incremental power costs due to
increased volumes, additional personnel costs and reductions in the
reimbursement of certain costs previously paid by third parties.
The net operating margin from terminal operations of $2,434,000 increased
4%, or $94,000, in the year ended April 30, 1996. This increase resulted from a
7% increase in volumes, primarily at the Little Rock, Arkansas terminal, offset
in part by an increase in terminal operating costs of 13%.
The net operating margin from product sales of $5,829,000 increased 666%,
or $5,068,000, in the year ended April 30, 1996. Net revenues increased
$204,565,000 on additional volume of 338,000,000 gallons sold. The improved net
margin was primarily due to increased bulk and rack product sales volumes, and
higher market prices for products sold in the peak seasonal period of gasoline
demand occurring in TransMontaigne's fiscal quarter ended April 30, 1996, during
which period gasoline prices reached a five year high of over $.70 per gallon.
The $.0061 net operating margin per gallon realized in the year ended April 30,
1996 increased $.0049 from the $.0012 per gallon realized during the prior year,
primarily due to higher than normal product margins realized during the 1996
year and significantly lower margins realized during the prior year.
19
General and administrative expenses increased approximately 18% in the
year ended April 30, 1996 primarily due to increases in salaries and related
employee benefits costs associated with the hiring of additional personnel.
Other income includes equity in earnings of affiliates and interest income.
In the year ended April 30, 1996, equity in earnings of affiliates net of the
related minority interests increased to approximately $605,000 from
approximately $295,000 for the prior year, primarily due to improved crack
spreads at Lion.
Interest income of $521,000 in the year ended April 30, 1996, was
attributable to the investment in interest bearing securities held for future
investments during the period.
Interest expense in the year ended April 30, 1996 represents interest on
the revolving bank line of credit used to finance inventory and accounts
receivable and also includes interest on TransMontaigne's senior subordinated
debentures. Financing costs include fees paid for letters of credit issued to
product suppliers, loan commitment fees and debt acquisition costs paid in
connection with the revolving loan facility. Interest expense and financing
costs decreased $648,000, or 18%, primarily as a result of lower average debt
outstanding under the line of credit.
As a result of the increases in pipeline, terminal and products supply and
distribution net operating margins, reduction in interest expense and increase
in interest income, TransMontaigne net earnings for the year ended April 30,
1996 increased $7,836,000 to $4,618,000 from a loss of $3,218,000 in the prior
year.
LIQUIDITY AND CAPITAL RESOURCES
The following summary reflects TransMontaigne's comparative net cash flows
for the years ended April 30, 1997, 1996 and 1995.
Years Ended April 30,
---------------------------------
1997 1996 1995
---- ---- ----
Net cash used by operating activities $ 9,769,000 3,920,000 237,000
Net cash used by investing activities $ 89,920,000 4,181,000 234,000
Net cash provided by financing activities $ 97,671,000 44,703,000 62,000
Net cash used by operating activities in the year ended April 30, 1997
increased $5,849,000 over the prior year. This increase was primarily a result
of increased petroleum product inventory levels required to meet expanded levels
of pipeline, terminaling and products supply and distribution operations,
partially offset by increased trade payable to suppliers of inventory; and also
increased trade receivables resulting from increased petroleum products sales
during the year and from residue natural gas and NGLs sales following the
Grasslands facilities acquisition in December 1996.
20
Net cash used by investing activities in the year ended April 30, 1997
increased $85,739,000 over the prior year. This increase was primarily the
result of capital expenditures of $92,294,000 for additions and improvements to
its terminals and pipeline facilities, including approximately $71,000,000 for
the Grasslands Facilities acquisition. Capital expenditures in the year ended
April 30, 1996 were $4,124,000.
Net cash provided by financing activities in the year ended April 30, 1997
increased $52,968,000 over the prior year period. This increase was primarily a
result of $62,315,000 in net proceeds received from the public offering of
common stock and the $50,000,000 issuance of Senior Notes, reduced by decreased
borrowings under TransMontaigne's credit facilities.
EBITDA represents earnings before income taxes plus interest expense and
other financing costs and depreciation and amortization. Management uses EBITDA
as part of its overall assessment of TransMontaigne performance by analyzing and
comparing EBITDA between reporting periods. Management believes that, in
addition to cash flow from operations and net earnings as indicators of
operating performance, EBITDA is used increasingly by the financial community to
measure operating effectiveness and as a method to evaluate the market value of
companies like TransMontaigne. EBITDA is also used to evaluate TransMontaigne's
ability to incur and service debt and to fund capital expenditures, although it
is not considered in isolation or a substitute for the other measurements of
performance and liquidity.
Capital expenditures anticipated in the year ending April 30, 1998 are
estimated to be approximately $50,000,000 for pipeline, terminal and natural gas
gathering and processing facilities, including assets to support these
facilities. Future capital expenditures will depend on numerous factors,
including the availability, economics and cost of appropriate asset
acquisitions; the economics, cost and required regulatory approvals of expanding
and enhancing existing systems and facilities; the demand for the services
TransMontaigne provides; local, state and federal governmental regulations;
environmental compliance requirements; fuel conservation efforts; and the
availability, to the extent required, of financing on acceptable terms.
On February 13, 1997, TransMontaigne closed a public offering of 4,357,000
shares of its common stock of which 4,035,000 shares were issued and sold by
TransMontaigne and 322,000 shares were sold by certain selling stockholders.
The net proceeds to TransMontaigne, based on the public offering price of $14.25
per share, were $53,506,000 after deducting underwriting discounts and
commissions and offering costs, of which $45,000,000 was used to repay a portion
of the long-term debt incurred under its bank credit facility. The balance was
added to working capital. On March 11, 1997 the underwriters' overallotment
option to purchase an additional 557,543 shares and the Merrill Lynch Growth
Fund antidilution right to purchase an additional 98,390 shares were both
exercised and TransMontaigne received additional net proceeds of $8,809,000
which was added to working capital.
21
The TransMontaigne bank credit facility at April 30, 1997 is an $85,000,000
revolving credit facility with a money center bank due December 31, 2001. The
amount available under the bank credit facility is to be reduced by $3,125,000
each calendar quarter beginning March 31, 2000. Borrowings under the bank
credit facility generally bear interest at an annual rate equal to the lender's
announced Base Rate, subject to a Eurodollar pricing option at TransMontaigne's
election. The interest rate at April 30, 1997 was 6.94%.
As of April 30, 1997, TransMontaigne had advances of $10,815,000
outstanding under the bank credit facility and $2,600,000 of the facility was
used to support a standby letter of credit to a bank to assist Lion in obtaining
financing.
In April 1997 TransMontaigne 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 $100,000,000 of TransMontaigne'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, TransMontaigne issued to the lender, under the Master
Shelf Agreement, $50,000,000 of 7.85% Senior Notes due 2003.
The bank credit facility agreement and the Master Shelf Agreement contain a
negative pledge covenant by TransMontaigne and its subsidiaries and are secured
by the stock of the subsidiaries. These agreements also include financial tests
relating to fixed charges coverage, leverage ratio, consolidated tangible net
worth, distributions and inventory positions. As of April 30, 1997,
TransMontaigne was in compliance with all of such tests.
As of April 30, 1997, TransMontaigne had approximately $18,339,000 of net
operating loss carryforwards for federal income tax purposes which are available
to offset taxable income through 2010. Due to changes in ownership which
occurred through April 30, 1997, the use of these net operating loss
carryforwards to offset taxable income is limited to approximately $4,300,000
annually. As a result of the merger in June 1996, TransMontaigne acquired
additional net operating loss carryforwards of approximately $7,892,000 as of
June 4, 1996, which are included in the aggregate net operating loss
carryforwards, and are limited to approximately $1,300,000 annually. A portion
of the tax benefit of such carryforwards has been recognized as a net reduction
of goodwill recorded in the acquisition.
TransMontaigne had working capital of $78,423,000 at April 30, 1997.
Management believes TransMontaigne's current working capital position; future
cash provided by operating activities; proceeds from the private placement or
public offering of common stock; available borrowing capacity under the bank
credit facility agreement and the Master Shelf Agreement; other borrowing
permitted under those agreements; and its relationship with institutional
lenders and equity investors should enable it to meet its future capital
requirements.
22
ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128") was issued in February 1997 by the Financial Accounting Standards
Board. It establishes standards for computing and presenting earnings per share
("EPS"), including simplifying the standards for computing earnings per share
and making them comparable to international EPS standards. SFAS 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods, and will not have a material effect on
TransMontaigne's financial statements since TransMontaigne does not have a
complex capital structure.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TransMontaigne consolidated financial statements are included herein
beginning on the following pages.
23
INDEPENDENT AUDITORS' REPORT
----------------------------
THE BOARD OF DIRECTORS AND STOCKHOLDERS
TRANSMONTAIGNE OIL COMPANY:
We have audited the accompanying consolidated balance sheets of TransMontaigne
Oil Company and subsidiaries as of April 30, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended April 30, 1997. 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 Oil
Company and subsidiaries as of April 30, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended April 30, 1997 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
June 19, 1997
24
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
ASSETS 1997 1996
- - ------ ---- ----
Current assets:
Cash and cash equivalents $ 36,384,325 38,403,234
Trade accounts receivable 46,871,207 20,905,812
Inventories 42,346,451 23,609,136
Deferred tax assets, net 3,676,000 -
Prepaid expenses and other 1,647,990 1,475,612
------------- ------------
130,925,973 84,393,794
------------- ------------
Property, plant and equipment:
Land 1,222,195 1,072,798
Plant and equipment 120,010,811 24,926,309
Accumulated depreciation (10,704,252) (6,461,244)
------------- ------------
110,528,754 19,537,863
------------- ------------
Investments and other assets:
Investments 15,656,097 15,830,006
Deferred debt issuance costs, net 1,638,909 386,600
Other assets 2,974,587 814,713
------------- ------------
20,269,593 17,031,319
------------- ------------
$ 261,724,320 120,962,976
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Trade accounts payable $ 36,893,399 10,698,199
Inventory due under exchange agreements 4,982,179 8,874,645
Excise taxes payable 6,437,829 6,483,756
Other accrued liabilities 4,189,528 2,685,355
------------- ------------
52,502,935 28,741,955
------------- ------------
Long-term debt 64,774,267 28,948,867
Minority interests 5,475,377 5,452,963
Stockholders' equity:
Preferred stock, par value $.01 per share, authorized
2,000,000 shares, none issued - -
Common stock, par value $.01 per share, authorized
40,000,000 shares, issued and outstanding 25,794,720
shares at April 30, 1997; and par value $.10 per share,
authorized 27,000,000 shares, issued and outstanding
19,331,171 shares at April 30, 1996 257,947 1,933,117
Capital in excess of par value 134,843,884 61,187,476
Retained earnings (accumulated deficit) 3,869,910 (5,301,402)
------------- ------------
138,971,741 57,819,191
------------- ------------
$ 261,724,320 120,962,976
============= ============
See accompanying notes to consolidated financial statements.
25
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED APRIL 30, 1997, 1996 AND 1995
________________________________________________________________________________
1997 1996 1995
---- ---- ----
Revenue:
Product sales, pipeline tariffs
terminaling fees and natural gas
gathering and processing fees $ 1,166,664,621 533,106,747 324,591,409
Costs and expenses:
Product costs and direct
operating expenses 1,145,320,892 520,389,482 318,811,953
General and administrative 7,987,162 4,998,771 4,226,123
Depreciation and amortization 3,455,999 1,169,541 1,147,291
--------------- ------------ ------------
1,156,764,053 526,557,794 324,185,367
--------------- ------------ ------------
Operating income 9,900,568 6,548,953 406,042
Other income (expenses):
Interest income 1,777,441 520,900 -
Equity in earnings of affiliates 92,280 942,216 407,208
Minority interests (22,414) (337,253) (112,555)
Interest expense (4,042,616) (2,530,945) (3,119,019)
Other financing costs (373,533) (333,155) (393,031)
Cancellation of aircraft lease - - (286,735)
Other, net 150,808 - -
--------------- ------------ ------------
(2,418,034) (1,738,237) (3,504,132)
--------------- ------------ ------------
Earnings (loss) before
income taxes 7,482,534 4,810,716 (3,098,090)
Income tax benefit (expense) 1,688,778 (192,747) (119,545)
--------------- ------------ ------------
Net earnings (loss) $ 9,171,312 4,617,969 (3,217,635)
=============== ============ ============
Weighted average common
shares outstanding 22,500,984 15,129,637 2,860,390
=============== ============ ============
Earnings (loss) per common share $0.41 0.31 (1.32)
=============== ============ ============
See accompanying notes to consolidated financial statements.
26
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED APRIL 30, 1997, 1996 AND 1995
_______________________________________________________________________________
Retained
Redeemable Capital in earnings
preferred Common excess of (accumulated
stock stock par value deficit) Total
--------------- ---------- -------------- ---------------- -------------
BALANCE AT APRIL 30, 1994 $ 7,426,692 269,483 941,095 (6,156,435) 2,480,835
Preferred stock dividends (78,515 shares) 545,195 - - (545,301) (106)
Common stock issued in connection with
conversion of preferred stock (7,971,887) 295,255 7,676,632 - -
Common stock issued in connection
with stock purchase agreements - 833,333 29,166,669 - 30,000,002
Common stock issued in connection
with a merger - 80,000 120,000 - 200,000
Costs related to conversion of preferred
stock and issuance of common stock - - (992,394) - (992,394)
Net loss - - - (3,217,635) (3,217,635)
--------------- ---------- -------------- ---------------- ------------
BALANCE AT APRIL 30, 1995 - 1,478,071 36,912,002 (9,919,371) 28,470,702
Common stock issued for cash - 455,046 24,558,462 - 25,013,508
Costs related to issuance of common stock - - (282,988) - (282,988)
Net earnings - - - 4,617,969 4,617,969
--------------- ---------- -------------- ---------------- ------------
BALANCE AT APRIL 30, 1996 - 1,933,117 61,187,476 (5,301,402) 57,819,191
Change in the par value of common stock
from $.10 to $.01 in connection
with merger - (1,739,805) 1,739,805 - -
Common stock issued in merger - 14,744 8,093,785 - 8,108,529
Common stock issued for minority interest
in subsidiary - 1,000 974,000 - 975,000
Common stock repurchased and retired - (148) (199,852) - (200,000)
Common stock issued for options exercised - 2,130 780,822 - 782,952
Common stock issued for cash in public
offering - 46,909 62,952,321 - 62,999,230
Costs related to issuance of common stock - - (684,473) - (684,473)
Net earnings - - - 9,171,312 9,171,312
--------------- ---------- -------------- ---------------- ------------
BALANCE AT APRIL 30, 1997 $ - 257,947 134,843,884 3,869,910 138,971,741
=============== ========== ============== ================ ============
See accompanying notes to consolidated financial statements.
27
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 1997, 1996 AND 1995
- - --------------------------------------------------------------------------------
1997 1996 1995
----- ---- ----
Cash flows from operating activities:
Net earnings (loss) $ 9,171,312 4,617,969 (3,217,635)
Adjustments to reconcile net earnings (loss) to net
cash used by operating activities:
Depreciation and amortization 3,455,999 1,169,541 1,147,291
Equity in earnings of affiliates (92,280) (942,216) (407,208)
Minority interests 22,414 337,253 112,555
Deferred tax benefit (2,274,600) - -
Loss (gain) on disposition of assets (70,489) 167,459 (127,645)
Dividends received from affiliates - - 125,000
Loss on cancellation of aircraft lease - - 286,735
Write-off of noncurrent receivable - - 190,000
Changes in operating assets and liabilities,
net of noncash activities:
Trade accounts receivable (25,750,916) (3,297,248) 1,283,422
Inventories (18,737,315) (2,247,795) (1,591,906)
Prepaid expenses and other 199,516 (569,818) 169,196
Trade accounts payable 26,656,549 (10,979,599) (641,400)
Inventory due under exchange
agreements (3,892,466) 4,978,815 2,726,995
Excise taxes payable and other
accrued liabilities 1,543,032 2,845,886 (291,980)
----------- --------- ----------
Net cash used by
operating activities (9,769,244) (3,919,753) (236,580)
----------- ---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment (92,294,394) (4,124,264) (747,774)
Proceeds from sale of assets 18,318 320,210 260,585
Cash received in connection with acquisition 2,315,527 - -
Cost related to acquisition (399,284) - -
Cash balance in subsidiary sold (111,341) - -
Decrease (increase) in other assets, net 550,709 (377,323) 253,627
----------- ---------- ----------
Net cash used by
investing activities (89,920,465) (4,181,377) (233,562)
----------- ---------- ----------
Cash flows from financing activities:
Borrowings (repayments) of long-term debt, net 35,825,400 (9,100,568) 166,397
Deferred debt issuance costs (1,252,309) (239,772) -
Cash dividends paid on preferred stock - - (106)
Cash received in connection with merger - - 200,000
Common stock issued for cash 63,782,182 25,013,508 -
Stock subscription received in cash - 30,000,002 -
Costs paid relating to issuance of common stock
and conversion of preferred stock (684,473) (970,634) (304,748)
----------- ---------- ----------
Net cash provided by
financing activities 97,670,800 44,702,536 61,543
----------- ---------- ----------
Increase (decrease) in cash
and cash equivalents (2,018,909) 36,601,406 (408,599)
Cash and cash equivalents at beginning of year 38,403,234 1,801,828 2,210,427
----------- ---------- ----------
Cash and cash equivalents at end of year $ 36,384,325 38,403,234 1,801,828
============== ========== =========
(continued)
28
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED APRIL 30, 1997, 1996 AND 1995
________________________________________________________________________________
1997 1996 1995
---- ----- ----
Supplemental disclosures of cash flow information:
Acquisition of Sheffield Exploration Company
Fair value of assets acquired $ 8,739,247 - -
Fair value of liabilities assumed 231,484 - -
---------------- ---------------- ----------------
8,507,763 - -
Costs related to acquisition 399,284 - -
---------------- ---------------- ----------------
Fair value of stock issued $ 8,108,479 - -
================ ================ ================
Cash received in connection with acquisition
included in assets acquired $ 2,315,527 - -
================ ================ ================
Sale of Sheffield Operating Company
Fair value of assets sold $ 1,991,403 - -
Fair value of liabilities assumed by purchaser 245,451 - -
---------------- ---------------- ----------------
Fair value of consideration received $ 2,236,854 - -
================ ================ ================
Cash distributed in connection with sale
included in assets sold $ 111,341 - -
================ ================ ================
Costs accrued relating to issuance
of common stock and conversion
of preferred stock $ - - 687,646
================ ================ ================
See accompanying notes to consolidated financial statements.
29
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
______________________________________________________________________________
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) NATURE OF BUSINESS AND BASIS OF PRESENTATION
TransMontaigne Oil Company (the Company) is a holding company which
pursues, through its subsidiaries, business opportunities in the downstream
sector of the petroleum industry. The Company's principal operating
subsidiaries are engaged in pipelining, terminaling, storing and marketing
refined petroleum products principally in the Mid-Continent region of the
United States and in natural gas gathering and processing in the Rocky
Mountain region of the United States.
Management makes various estimates and assumptions in determining the
reported amounts of assets, liabilities, revenues and expenses for each
period presented, and in the disclosures of commitments and contingencies.
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 those estimates.
(B) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include, collectively,
the Company and its wholly owned subsidiaries, TransMontaigne
Transportation Services Inc. which provides refined petroleum product and
crude oil pipeline transportation, storage and terminaling services to the
downstream sector of the petroleum industry through its subsidiaries,
TransMontaigne Pipeline Inc. and TransMontaigne Terminaling Inc.;
TransMontaigne Product Services Inc. which provides refined petroleum
products, crude oil and natural gas liquids supply, distribution and
marketing services to the downstream sector of the petroleum industry; Bear
Paw Energy Inc. which provides natural gas gathering and processing
services to oil and gas producers as well as to end-users of natural gas
liquids and residue natural gas; and the Company's 65% owned subsidiary,
TransMontaigne Holding Inc. which owns a minority interest in a refinery.
All significant intercompany accounts and transactions have been eliminated
in consolidation.
30
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
______________________________________________________________________________
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(C) CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with a maturity of three
months or less when acquired to be cash equivalents.
(D) INVENTORIES
Inventories of refined products are stated at the lower of last-in,
first-out (LIFO) cost or 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 cost of
products sold. The exchange agreements are generally for a term of 30 days
and are generally settled by delivering product to or receiving product
from the party to the exchange.
(E) PROPERTY, PLANT AND EQUIPMENT
Depreciation of equipment is provided by the straight-line and double-
declining balance methods. Depreciation of all other assets is provided by
the straight-line method. Estimated useful lives are 25 years for plant,
which includes buildings, storage tanks, pipelines and 3 to 20 years for
equipment. All items of property, plant and equipment are carried at cost.
(F) INVESTMENT IN LION OIL COMPANY
The Company's investment in Lion Oil Company (Lion) is accounted for using
the equity method. Under this method, the investment, originally recorded
at cost, is adjusted to recognize the Company's share of the net earnings
or losses of Lion as incurred rather than as dividends or other
distributions are received.
31
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
___________________________________________________________________________
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(G) RECOGNITION OF REVENUE
Revenue from the sale of refined petroleum products, natural gas liquids
and residue natural gas are recorded at the time title and risk of
ownership pass. Transfers of products to or from third parties under
exchange agreements do not culminate the earnings process and are recorded
as inventory and liability transactions with no effect on income.
(H) DEFERRED DEBT ISSUANCE COSTS
Deferred debt issuance costs related to senior subordinated debentures and
the long-term credit agreements are amortized on the interest method over
the term of the underlying debt instrument. Accumulated amortization was
$340,511 and $156,920 at April 30, 1997 and 1996, respectively.
(I) 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.
(J) MINORITY INTERESTS
Minority interests consist of ownership interests in TransMontaigne Holding
Inc. attributable to shareholders other than the Company.
32
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
_____________________________________________________________________________
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(K) INVENTORY MANAGEMENT
The Company manages the risk associated with fluctuations in the price of
refined petroleum products inventory and purchase and sales commitments,
and may selectively enter into futures contracts which are designated as
hedges of the products purchased or sold. Hedging gains and losses are
recorded in inventory and are recognized when the inventory is sold. Since
February 1996, the Company has also engaged in the trading of futures
contracts. Gains and losses from these trading activities are recognized as
they occur.
The Company's Risk and Product Management Committee reviews the total
inventory position on a weekly basis in order to ensure compliance with the
Company's inventory management policies, including all hedging and trading
activities. The Company has adopted policies whereby its net inventory
position subject to price risk requires the prior approval of the Risk and
Product Management Committee.
At April 30, 1997, the Company had no net open futures contracts designated
as hedges, and there were no deferred hedging gains or losses.
In connection with its trading activities, the Company had outstanding
contracts to sell 1,300,000 barrels of product and contracts to purchase
1,300,000 barrels of product at April 30, 1997 and outstanding contracts to
sell 50,000 barrels of product and contracts to purchase 50,000 barrels of
product at April 30, 1996. The unrealized losses relating to such contracts
of approximately $148,000 in 1997 and $267,000 in 1996 have been charged to
operations. The net trading gains on futures contracts of approximately
$161,000 for the year ended April 30, 1997 and the net trading losses of
approximately $40,000 for the year ended April 30, 1996 have been included
in product sales and product costs and direct operating expenses in the
accompanying consolidated statements of operations.
Product futures contracts are traded on the New York Mercantile Exchange
(NYMEX). The change in market value of NYMEX-traded futures contracts
requires daily cash settlements in margin accounts with brokers. NYMEX
future contracts are guaranteed by the NYMEX and have nominal credit risk.
The Company is exposed to credit risk in the event the counterparties to
other third party agreements are not able to perform their contractual
obligations.
33
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(L) EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share has been calculated based on the weighted
average number of common shares outstanding during the period.
(M) RECLASSIFICATIONS
Certain amounts in the accompanying consolidated financial statements for
prior periods have been reclassified to conform to the classifications used
in 1997.
(2) MERGER
The Company is the surviving corporation of a merger between TransMontaigne
Oil Company and Sheffield Exploration Company, Inc. (Sheffield) effective
June 4, 1996. The merger constituted a reverse acquisition, in that
Sheffield survived the merger, but was then owned approximately 93% by the
former stockholders of TransMontaigne Oil Company. Consequently, the
transaction was accounted for as a purchase of Sheffield by the Company. As
a result of the merger, (i) Sheffield's name was changed to TransMontaigne
Oil Company; (ii) the number of shares of authorized common stock was
increased to 40,000,000; and (iii) stock options which Sheffield had
outstanding prior to the merger became options to purchase 79,338 shares of
the Company's common stock at $3.65 per share. These options were exercised
prior to their September 2, 1996 expiration date.
(3) ACQUISITION
On December 20, 1996, the Company's wholly owned subsidiary, Bear Paw
Energy Inc., acquired for approximately $71,000,000 cash the Grasslands
natural gas gathering, processing, treating and fractionating facilities
located in western North Dakota and northeastern Montana. The Grasslands
gas processing plant, located in McKenzie County, North Dakota, was built
in 1980.
The cost of the Grasslands facilities has been allocated to the assets
acquired based on their estimated fair market value as determined by the
Company.
34
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(3) ACQUISITION (CONTINUED)
The following summarized unaudited pro forma results of operations assumes
that the acquisition of the Grasslands facilities occurred as of May 1,
1995 and combines the historical results of the Company for the years ended
April 30, 1997 and 1996 with the historical results of operations of the
Grasslands facilities for the years ended April 30, 1997 and 1996.
The unaudited pro forma results of operations are not necessarily
indicative of the results of operations that would actually have occurred
if the Grasslands facilities had been acquired by the Company as of the
date indicated or which will be attained in the future.
1997 1996
---- ----
Revenues $1,198,125,000 578,574,000
============== ===========
Net Earnings $ 11,179,000 4,745,000
============== ===========
Earnings Per Common Share $ 0.50 0.31
============== ===========
(4) INVENTORIES
1997 1996
---- ----
Refined petroleum products $ 35,758,217 12,387,371
Refined petroleum products due from
third parties under exchange
agreements 6,148,220 11,208,859
Other 440,014 12,906
-------------- ----------
$42,346,451 23,609,136
============== ==========
If the lower of average or replacement cost method of accounting had been
used instead of the LIFO method for valuing refined petroleum products,
inventories would have been $5,563,000 and $5,779,000 greater than reported
at April 30, 1997 and 1996, respectively.
During the year ended April 30, 1995 inventory quantities were reduced,
which resulted in a liquidation of LIFO inventory layers carried at costs
which prevailed in prior years. The effect of the liquidation was to
decrease product costs and decrease the net loss for the year ended April
30, 1995 by approximately $863,000.
35
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(4) INVENTORIES (CONTINUED)
The Company's refined petroleum products inventory consists primarily of
gasoline and distillates. A portion of this inventory represents line fill
and tank bottoms. This portion of the inventory is required for operating
balances in the conduct of the Company's daily distribution activities and
is maintained both in tanks and pipelines owned by the Company and
pipelines owned by third parties. The Company's natural gas liquids and
residual natural gas inventory is not significant.
(5) PROPERTY, PLANT AND EQUIPMENT
1997 1996
---- ----
Land 1,222,195 1,072,798
Natural gas gathering and processing 83,209,767 -
Terminals and equipment 14,726,237 6,230,696
Pipelines, rights of way and equipment 19,088,562 17,182,135
Other plant and equipment 2,986,245 1,513,478
------------ ----------
121,233,006 25,999,107
Less accumulated depreciation 10,704,252 6,461,244
------------ ----------
$110,528,754 19,537,863
============ ==========
36
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(6) INVESTMENT IN LION
The Company, through its 65% ownership of TransMontaigne Holding Inc.,
effectively owns 18% of the common stock of Lion. At April 30, 1997 and
1996, respectively, the Company's investment in Lion was approximately
$15,586,000 and $15,494,000 and the minority interests were approximately
$5,475,000 and $5,453,000.
Summarized balance sheet information for Lion as of April 30, 1997 and 1996
is as follows:
1997 1996
------------- -----------
Assets:
Current assets $ 94,860,000 94,403,000
Property, plant and equipment,
net 65,687,000 68,436,000
Other assets 12,203,000 4,948,000
------------- -----------
$172,750,000 167,787,000
============= ===========
Liabilities and stockholders' equity:
Current liabilities $ 39,614,000 40,454,000
Long-term debt 66,275,000 62,140,000
Deferred income taxes 10,689,000 9,353,000
Stockholders' equity 56,172,000 55,840,000
------------- -----------
$172,750,000 167,787,000
============= ===========
37
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
_______________________________________________________________________________
(6) INVESTMENT IN LION (CONTINUED)
Summarized statement of operations information for Lion for the years ended
April 30, 1997, 1996 and 1995 is as follows:
1997 1996 1995
------------- ----------- -----------
Net sales $643,884,000 566,812,000 525,037,000
Cost of sales 632,005,000 549,210,000 511,655,000
------------- ----------- -----------
Gross profit 11,879,000 17,602,000 13,382,000
Selling, general and
administrative expenses 5,132,000 5,996,000 5,763,000
Management fees 189,000 1,467,000 532,000
------------- ----------- -----------
Operating income 6,558,000 10,139,000 7,087,000
Interest expense and other
(income), net 5,790,000 4,260,000 4,939,000
------------- ----------- -----------
Earnings before
income tax 768,000 5,879,000 2,148,000
Income tax expense 436,000 2,288,000 892,000
------------- ----------- -----------
Net earnings $ 332,000 3,591,000 1,256,000
============= =========== ===========
The Company has a $2,600,000 standby letter of credit outstanding to a bank
to assist Lion in obtaining financing. No outstanding obligations exist
under this letter of credit as of April 30, 1997.
38
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(7) LONG-TERM DEBT
Long-term debt at April 30, 1997 and 1996 is as follows:
1997 1996
------------ ----------
Line of credit with a bank $10,815,000 25,000,000
Senior notes 50,000,000 -
12 3/4% senior subordinated debentures,
net of discount (face amount
$4,000,000) 3,959,267 3,948,867
------------ ----------
$64,774,267 28,948,867
============ ==========
The Company's bank credit facility at April 30, 1997 is an $85,000,000
working capital revolving credit facility with a money center bank due
December 31, 2001. The amount available under the bank credit facility is
to be reduced by $3,125,000 each calendar quarter beginning March 31, 2000.
Borrowings under the bank credit facility generally bear interest at an
annual rate equal to the lender's announced Base Rate, subject to a
Eurodollar pricing option at the Company's election. The interest rate at
April 30, 1997 was 6.94% and at April 30, 1996 was 6.875%.
As of April 30, 1997, the Company had advances of $10,815,000 outstanding
under the bank credit facility and $2,600,000 of the facility was used to
support in a standby letter of credit to a bank (see Note 6).
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, the Company sold to the lender, under the Master Shelf
Agreement, $50,000,000 of 7.85% Senior Notes due 2003.
39
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(7) LONG-TERM DEBT (CONTINUED)
The bank credit facility agreement and the Master Self Agreement each
contain similar negative pledge covenants by the Company and its
subsidiaries and both are secured by the stock of the subsidiaries. These
agreements also include financial tests relating to fixed charges coverage,
leverage ratio, consolidated tangible net worth, distributions and open
inventory positions. As of April 30, 1997, the Company was in compliance
with all such tests.
In March 1991, the Company issued 12 3/4% senior subordinated debentures
which are guaranteed by certain subsidiaries and are due December 15, 2000,
with interest payable semi-annually on June 15 and December 15. The
debentures are subject to a required redemption of $2,000,000 on
December 15, 1999 and 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 the Company's common stock. The
warrant exercise price was reduced effective April 26, 1995 from $6.10 per
share to $3.60 per share, through December 15, 2000.
Maturities of long-term debt for fiscal years subsequent to 1997 are as
follows:
1998 $ -
1999 -
2000 5,125,000
2001 9,649,267
2002 -
2003 50,000,000
------------
$ 64,774,267
============
Cash payments for interest were approximately $4,404,000, $2,994,000 and
$2,478,000 for the years ended April 30, 1997, 1996 and 1995, respectively.
40
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(8) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each of on and off-balance sheet financial instruments, along with the
methods and assumptions used to estimate such fair values at April 30, 1997
and 1996:
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 its fair value since
the line bears interest at a variable rate.
The carrying value of the 12 3/4% senior subordinated debentures
approximates the estimated fair value of the debentures since the effective
interest rate of the debentures approximates the current market rate for
similar debt instruments.
FUTURES CONTRACTS
The carrying value and fair value of the futures contracts entered into for
trading purposes was a liability of approximately $148,000 at April 30,
1997 and $267,000 at April 30, 1996 based on the quoted market price of the
related futures contracts.
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.
41
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(9) SALE OF SUBSIDIARY
On October 31, 1996 the Company sold a wholly owned subsidiary for
approximately $2,237,000 and received as consideration a note receivable
for approximately $2,067,000 payable over five years, a receivable for
$100,000 and shares of common stock representing an approximate 18%
interest in the acquiring company's common stock. On November 4, 1996 the
Company received a $700,000 cash payment on the note and the $100,000
receivable was collected. On January 3, 1997, 14,815 shares of the
Company's stock were received as a $200,000 payment on the note receivable.
These shares were valued at the January 2, 1997 closing price of $13.50 and
were retired.
(10) SHAREHOLDERS' EQUITY
Effective as of April 17, 1996 the Company completed a private placement of
4,545,456 shares of common stock at $5.50 per share for proceeds of
$25,000,008.
On February 13, 1997, the Company closed a public offering of 4,357,000
shares of its common stock of which 4,035,000 shares were issued and sold
by the Company and 322,000 shares were sold by certain selling
stockholders. The net proceeds to the Company, based on the public offering
price of $14.25 per share, were approximately $53,506,000, after deducting
underwriting discounts and commissions and offering costs, of which
$45,000,000 was used to repay a portion of the debt incurred under its bank
credit facility. On March 11, 1997 the underwriters' overallotment option
to purchase an additional 557,543 shares and the Merrill Lynch Growth Fund
antidilution right to purchase an additional 98,390 shares were both
exercised and the Company received additional net proceeds of $8,809,000.
(11) STOCK OPTIONS
The Company has adopted two stock option plans, (the "1991 Plan" and the
"1995 Plan") under which stock options may be granted to key employees of
the Company. No additional options are available to be granted under either
the 1991 Plan or the 1995 Plan. Options granted under the 1991 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.
42
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(11) STOCK OPTIONS (CONTINUED)
Changes in stock options outstanding for the years ended April 30, 1997,
1996 and 1995, are as follows:
1991 Plan 1995 Plan
------------------------- -----------------------
Option price Option price
Shares per share Shares per share
----------- ------------- ------- -------------
Outstanding at April 30, 1994 95,754 $3.50 - 6.10 124,500 $ 2.70
Granted - - 358,000 2.70
Exercised - - - -
----------- ------------- ------- -------------
Outstanding at April 30, 1995 95,754 3.50 - 6.10 482,500 2.70
Granted - - 421,746 3.60 - 5.50
Exercised - - (5,000) 2.70
----------- ------------- ------- -------------
Outstanding at April 30, 1996 95,754 3.50 - 6.10 899,246 2.70 - 5.50
Granted - - - -
Exercised (17,500) 6.10 (118,246) 2.70 - 5.50
----------- ------------- ------- -------------
Outstanding at April 30, 1997 78,254 $3.50 - 6.10 781,000 $2.70 - 5.50
=========== ============= ======= =============
Exercisable at April 30, 1997 78,254 $3.50 - 6.10 781,000 $2.70 - 5.50
=========== ============= ======= =============
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 two stock-
based compensation plans had been determined on the fair value at the
grant dates for awards under those plans consistent with Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, the Company's net earnings and earnings per common share
would have been reduced in 1996 to the pro forma amounts indicated below:
1997 1996
----------- -----------
Net earnings:
As reported $9,171,312 $4,617,969
Pro forma $8,724,685 $4,268,159
Earnings per common share
As reported $ .41 $ .31
Pro forma $ .39 $ .28
43
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(11) STOCK OPTIONS (CONTINUED)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for options granted during the year ended April 30, 1996:
no dividend yield; expected volatility of 0%; risk-free rate of 6.27%; and
expected life of 6.37 years. The weighted average fair value at grant date
for options granted during the year ended April 30, 1996 was $5.23.
(12) 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 the Company's financial
performance. Employees vest 25% per year in the Company's contribution.
The total amount of the Company's discretionary percentage matching
contribution during the year ended April 30, 1997 was $31,410. The Company
did not make a contribution to a predecessor employee profit sharing plan
for the year ended April 30, 1996; a contribution to the predecessor
employee profit-sharing plan was $46,700 for the year ended April 30, 1995.
44
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(13) INCOME TAXES
Income tax (benefit) expense for years ending April 30 consists of the
following:
1997 1996 1995
------------ ---------- ---------
Current state income taxes $ 585,822 192,747 119,545
Deferred federal income taxes (1,975,300) - -
Deferred state income taxes (299,300) - -
------------ ---------- ---------
Income tax (benefit) expense $(1,688,778) 192,747 119,545
============ ========== =========
Income tax expense differs from the amount computed by applying the U.S.
federal corporate income tax rate of 34% to pretax earnings (loss) as a
result of the following:
1997 1996 1995
------------ ---------- ---------
Computed "expected" tax expense $2,544,000 1,636,000 (1,053,000)
Increase (reduction) in income
taxes resulting from:
Increase (decrease) in the
valuation allowance for
deferred tax assets
allocated to income tax
expense (4,474,000) (1,785,000) 1,174,000
Recognition of tax benefit of net
operating loss carryforwards
of acquired entity (1,021,600) - -
Adjustment of prior year's
cumulative temporary differences
offset by a change in the
valuation allowance 497,000 - -
State income taxes, net of
federal income tax benefit 387,000 127,000 79,000
Other, net 378,822 214,747 (80,455)
------------ ---------- ---------
Income tax (benefit) expense $(1,688,778) 192,747 119,545
============ ========== =========
45
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(13) INCOME TAXES (CONTINUED)
The tax effects of temporary differences which give rise to significant
portions of the deferred tax assets and deferred tax liabilities at April
30, 1997 and 1996 are as follows:
1997 1996
------------- -----------
Deferred tax assets:
Inventories, principally due to difference in
costing method used for tax purposes $ 2,196,000 2,196,000
Unrealized commodity futures contract losses
(gains) (122,000) 102,000
Net operating loss carryforwards 6,969,000 5,670,000
Alternative minimum tax credit carryforwards 24,000 24,000
------------ -----------
Gross deferred tax assets 9,067,000 7,992,000
Less valuation allowance - (4,474,000)
Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation methods (4,895,000) (2,994,000)
Investments in affiliated company,
principally due to undistributed earnings (496,000) (524,000)
------------ -----------
Net deferred tax assets $ 3,676,000 -
============ ===========
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.
As of April 30, 1996, management believed that the benefits of future
deductible differences might not be realized due to losses incurred in
recent years and uncertainty about future earnings. Accordingly, a
valuation allowance was provided for net deferred tax assets at that date.
46
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(13) INCOME TAXES (CONTINUED)
As a result of the Grasslands acquisition in December 1996 and the public
offering of common stock in February 1997, and 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 April 30, 1997, and that the benefits of future
deductible differences will be realized. Accordingly, the remaining
valuation allowance was reversed to income for the year ended April 30,
1997.
At April 30, 1997, the Company has aggregate net operating loss
carryforwards for federal income tax purposes of approximately $18,339,000
which are available to offset future federal taxable income, if any,
through 2010. In addition, the Company has alternative minimum tax credit
carryforwards of approximately $24,000 available to reduce future federal
regular income taxes, if any, which can be carried forward indefinitely.
Due to changes in ownership which occurred through April 30, 1996, the use
of these net operating loss carryforwards to offset taxable income is
limited to approximately $4,300,000 annually. As a result of the merger in
June 1996, the Company acquired additional net operating loss carryforwards
of approximately $7,892,000 as of June 4, 1996, which are included in the
aggregate net operating loss carryforwards, and are limited to
approximately $1,300,000 annually. A portion of the tax benefit of the
utilization of such carryforwards has been recognized as a reduction of
goodwill recorded in the acquisition.
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 $6,100,000 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 the Company 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 state income taxes of approximately $214,000, $106,000 and
$138,000 for the years ended April 30, 1997, 1996 and 1995, respectively,
and federal income taxes of approximately $126,000 for the year ended April
30, 1997.
47
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(14) RELATED PARTY TRANSACTIONS
The Company had sales of $10,900,000 and $3,380,000 and purchases of
$49,700,000 and $33,879,000 for the years ended April 30, 1997 and 1996,
respectively, to Lion.
Related party balances at April 30, 1997 and 1996:
1997 1996
---- ----
Accounts receivable 2,694,913 90,498
Accounts payable 228,462 84,034
(15) NEW ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 121, Accounting for
Impairment of Long-Lived Assets to be Disposed of (SFAS 121) was issued in
March, 1995, by the Financial Accounting Standards Board. It requires that
long-lived assets and certain identifiable intangibles to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of this statement by the Company as of May 1,
1996 had no effect on the Company's consolidated financial statements.
(16) CONCENTRATION OF CREDIT RISK
Substantially all of the Company's trade accounts receivable at April 30,
1997 and 1996 result from sales of refined petroleum products to 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.
48
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(17) BUSINESS SEGMENTS
Prior to the year ended April 30, 1997 the Company's principal operating
business segment was logistical petroleum services related to pipelining,
terminaling, storing and marketing refined petroleum products. During the
year ended April 30, 1997 the Company acquired natural gas gathering and
processing assets and commenced service operations in that business
segment.
Information about the Company's business segments for the year ended April
30, 1997 is summarized below:
Revenues
Logistical petroleum services $ 1,143,524,074
Gas gathering and processing services 23,140,547
---------------
$ 1,166,664,621
===============
Operating income
Logistical petroleum services $ 6,747,996
Gas gathering and processing services 4,189,122
Corporate (1,036,550)
---------------
$ 9,900,568
===============
Identifiable assets at year end (net of
depreciation)
Logistical petroleum services $ 112,178,478
Gas gathering and processing services 86,730,296
Corporate 62,815,546
---------------
$ 261,724,320
===============
Depreciation and amortization
Logistical petroleum services $ 1,338,768
Gas gathering and processing services 1,735,034
Corporate 382,197
---------------
$ 3,455,999
===============
Capital expenditures
Logistical petroleum services $ 11,118,556
Gas gathering and processing services 80,059,318
Corporate 1,116,520
---------------
$ 92,294,394
===============
The Corporate business segment represents all of the Company's activities
and assets not specifically identified with the primary business segments,
including cash and cash equivalents, investments and other assets.
49
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(18) FINANCIAL RESULTS BY QUARTER (UNAUDITED)
Three Months Ended
-----------------------------------------------------
July 31 October 31 January 31 April 30
1996 1996 1997 1997
------------- ----------- ----------- -----------
Revenues $ 194,052,000 276,771,000 340,654,000 355,188,000
Total costs
and expenses 191,816,000 274,298,000 338,210,000 352,440,000
------------- ----------- ----------- -----------
Operating income $ 2,236,000 2,473,000 2,444,000 2,748,000
============= =========== =========== ===========
Net earnings $ 1,807,000 2,673,000 1,426,000 3,265,000
============= =========== =========== ===========
Earnings
per common share $ .09 .12 .07 .13
============= =========== =========== ===========
Three Months Ended
-----------------------------------------------------
July 31 October 31 January 31 April 30
1995 1995 1996 1996
------------- ----------- ----------- -----------
Revenues $ 107,691,000 134,324,000 105,960,000 185,132,000
Total costs
and expenses 105,128,000 133,461,000 106,118,000 181,851,000
------------- ----------- ----------- -----------
Operating income (loss) $ 2,563,000 863,000 (158,000) 3,281,000
============= =========== =========== ===========
Net earnings (loss) $ 2,031,000 438,000 (867,000) 3,016,000
============= =========== =========== ===========
Earnings (loss)
per common share $ .14 .03 (.06) .20
============= =========== =========== ===========
50
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 page 52 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 August 8,
1997 for the Annual Meeting of Stockholders to be held on August 28,
1997.
51
EXECUTIVE OFFICERS OF THE REGISTRANT
CURRENT POSITIONS AND PRINCIPAL
NAME AGE OCCUPATIONS DURING LAST FIVE YEARS
---- --- ----------------------------------
Cortlandt S. Dietler 75 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
Richard E. Gathright 43 President and Chief Operating Officer since
September 1996; Director since April 1995;
Executive Vice President from April 1995 to
September 1996; President of a subsidiary of
TransMontaigne from December 1993 to April
1995; President and Director of North
American Operations for Aberdeen Petroleum
PLC from 1988 to 1993
Harold R. Logan, Jr. 52 Executive Vice President/Finance, Treasurer
and a Director since April 1995; Senior Vice
President/Finance of Associated Natural Gas
Corporation from 1985 to 1994
W. A. Sikora 60 Executive Vice President since September
1996; Senior Vice President and Chief
Financial Officer of a subsidiary of
TransMontaigne from May 1995 to September
1996; business consultant from 1982 to April
1995
Frederick W. Boutin 42 Senior Vice President since April 1995; Vice
President of Associated Natural Gas
Corporation from 1985 to 1994
Rodney S. Pless 36 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
Robert W. Bradberry 43 President of TransMontaigne Product Services
Inc. since January 1, 1997; other senior
management positions of a subsidiary of
TransMontaigne from 1979 to January 1997
Robert J. Clark 52 President of Bear Paw Energy Inc. since June
1996; President of a predecessor of Bear Paw
Energy Inc. from March 1995 to June 1996;
Senior Vice President of Snyder Oil
Corporation from 1988 to March 1995
Larry F. Clynch 52 President of TransMontaigne Transportation
Services Inc. since January 1, 1997; Senior
Vice President of a subsidiary of
TransMontaigne from January 1996 to January
1997; prior to January 1996 employed 28 years
by Conoco Pipe Line Company, the last 3 years
as President
52
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 Oil Company
Independent Auditors' Report
Consolidated Balance Sheets as of April 30, 1997 and 1996
Consolidated Statements of Operations for the years ended
April 30, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the years
ended April 30, 1997, 1996, and 1995
Consolidated Statements of Cash Flows for the years ended
April 30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules: Not Applicable
(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
----------- -----------
3.1 Restated Articles of Incorporation and Certificate of Merger.
Incorporated by reference to TransMontaigne Oil Company Form
10-K (Securities and Exchange Commission File No. 1-11763)
for the year ended April 30, 1996
3.2 Amended and Restated By-Laws. Incorporated by reference to
TransMontaigne Oil Company Form S-2 (Securities and Exchange
Commission File No. 333-18795)
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. 1-11763) for the year ended
April 30, 1996
53
10.2 Partnership agreement between TransMontaigne's wholly-owned
subsidiary, Sheffield Gas Processors, Inc., and Interenergy.
Incorporated by reference to Sheffield Exploration Company,
Inc. Form 8-K (Securities and Exchange Commission File No.
0-13201) dated September 26, 1991
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. 1-11763)
for the year ended April 30, 1996
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. 1-11763) 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. 1-11763) 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. 1-11763) for the year ended April 30, 1996
10.7 Agreement for Sale of McKenzie Gas Processing Plant and
Grasslands Gas Gathering System dated as of October 31, 1996
between Bear Paw Energy, Inc. and Koch Hydrocarbon Company.
Incorporated by reference to TransMontaigne Oil Company Form
S-2 (Securities and Exchange Commission File No. 333-18795)
10.8 Credit Agreement between TransMontaigne Oil Company and The
First National Bank of Boston, Agent, dated December 18,
1996. Incorporated by reference to TransMontaigne Oil Company
Form S-2 (Securities and Exchange Commission File No. 333-
18795)
10.9 Amendment No. 2 to Credit Agreement between TransMontaigne
Oil Company and The First National Bank of Boston, Agent,
dated April 17, 1997. FILED HEREWITH
54
10.10 Master Shelf Agreement among TransMontaigne Oil Company, The
Prudential Insurance Company and U.S. Private Placement Fund,
dated April 17, 1997. FILED HEREWITH
21 Schedule of TransMontaigne's Subsidiaries. Incorporated by
reference to TransMontaigne Oil Company Form S-2 (Securities
and Exchange Commission File No. 333-18795)
23.1 Consent of KPMG Peat Marwick LLP. FILED HEREWITH
27 Financial Data Schedule. FILED HEREWITH
(b) Reports on Form 8-K.
None
55
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 OIL COMPANY
By /s/CORTLANDT S. DIETLER
-----------------------
Cortlandt S. Dietler
Chairman and Chief Executive Officer
Date: July 28, 1997
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 July 24, 1997.
Name and Signature Title
------------------ -----
(i) Principal executive officer:
/s/CORTLANDT S. DIETLER Chairman, Chief Executive Officer and
- - ------------------------------
Cortlandt S. Dietler Director
(ii) Principal operating officer:
/s/RICHARD E. GATHRIGHT President, Chief Operating Officer and
- - ------------------------------
Richard E. Gathright Director
(iii) Principal financial officer:
/s/HAROLD R. LOGAN, JR. Executive Vice President/Finance,
- - ------------------------------
Harold R. Logan, Jr. Treasurer and Director
(iv) Principal accounting officer:
/s/RODNEY S. PLESS Vice President, Controller and Chief
- - ------------------------------
Rodney S. Pless Accounting Officer
(v) Non Employee Directors:
/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
56