d1044399_6-k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
6-K
REPORT
OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE
13A-16 OR 15D-16 UNDER THE SECURITIES
EXCHANGE
ACT OF 1934
For the
month of November 2009
Commission
File Number: 001-33179
AEGEAN
MARINE PETROLEUM NETWORK INC.
(Translation
of registrant's name into English)
42
Hatzikyriakou Avenue
Piraeus,
Athens 185 38
Greece
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F.
Form 20-F
[ X ] Form 40-F [
]
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(1): ________.
Note: Regulation S-T Rule
101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely
to provide an attached annual report to security holders.
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(7): ________.
Note: Regulation S-T Rule
101(b)(7) only permits the submission in paper of a Form 6-K if submitted to
furnish a report or other document that the registrant foreign private issuer
must furnish and make public under the laws of the jurisdiction in which the
registrant is incorporated, domiciled or legally organized (the registrant's
"home country"), or under the rules of the home country exchange on which the
registrant's securities are traded, as long as the report or other document is
not a press release, is not required to be and has not been distributed to the
registrant's security holders, and, if discussing a material event, has already
been the subject of a Form 6-K submission or other Commission filing on
EDGAR.
INFORMATION
CONTAINED IN THIS FORM 6-K REPORT
Attached
hereto as Exhibit 1 is the Management's Discussion and Analysis of Financial
Condition and Results of Operations and the unaudited interim condensed
consolidated financial statements and related information and data of Aegean
Marine Petroleum Network Inc. as of and for the six month period ended June 30,
2009.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
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AEGEAN
MARINE PETROLEUM NETWORK INC.
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(registrant)
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Dated: November
5, 2009
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By:
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/s/
E. Nikolas Tavlarios
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Name:
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E.
Nikolas Tavlarios
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Title:
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President
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SK 23250 0002
1044399
Exhibit
1
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MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
|
|
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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The
following is a discussion of our financial condition and results of operations
for the six month periods ended June 30, 2009 and 2008. Unless otherwise
specified herein, references to the "Company" or "we" shall include Aegean
Marine Petroleum Network Inc. and its applicable subsidiaries. The
following management's discussion and analysis of financial condition and
results of operations should be read in conjunction with the financial
statements and the notes to those statements included elsewhere in this report.
This discussion includes forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of many factors, such as those
set forth in the section entitled "Risk Factors" included in the Company's
Annual Report on Form 20-F for the fiscal year ended December 31, 2008, filed
with the Securities and Exchange Commission, or the Commission, on April 22,
2009.
Operating
Results
General
We are a
marine fuel logistics company that physically supplies and markets refined
marine fuel and lubricants to ships in port and at sea. As a physical supplier,
we purchase marine fuel from refineries, major oil producers and other sources
and resell and deliver these fuels using our bunkering tankers to a broad base
of end users.
We sell
marine petroleum products to customers primarily at a margin over PLATTS prices
(benchmark market prices). PLATTS prices are quoted daily by region and by terms
of delivery. We have not had a significant number of long-term written
agreements with customers. Under a typical sales contract, a customer requests
that we quote a fixed price per metric ton for the sale and delivery of a
specified volume and classification of marine fuel on a given date. The customer
requests a quotation several days prior to the delivery date. We, generally, do
not quote prices for periods in excess of one week. Once an agreement has been
made with a customer, we are deemed to be bound to deliver the specified
quantity and classification of marine fuel at the quoted fixed price on the
specified delivery date to an identified vessel at a named location. We remain
responsible for securing the supply of marine fuel from the supplier and for
delivering the marine fuel to the customer's vessel.
We
purchase marine petroleum products from reputable suppliers under either
long-term supply contracts or on the spot markets at a margin over PLATTS
prices. Except for our service centers in Gibraltar, Ghana and the United Arab
Emirates, we generally take deliveries of the products on the day of, or few
days prior to, the delivery of the products to the customer's vessel. In
Gibraltar, Ghana and the United Arab Emirates, utilizing our storage facilities,
we take deliveries of the products generally more than one but less than two
weeks prior to delivery of the products to our customers. The cost of our marine
fuel purchases is generally fixed at the date of loading from the supplier's
premises. Generally, under our long-term supply contracts, the supplier
undertakes to supply us with a minimum quantity of marine fuel per month subject
to a maximum. Price calculations vary from supplier to supplier in terms of the
supplier's margins, the referenced PLATTS prices and the calculation of the
average PLATTS price. Depending on the agreement with each supplier, the
referenced PLATTS price could be the spot price or an average price over a
specified period.
We
deliver marine petroleum products to our customers mainly through our bunkering
tankers. We are responsible for paying our tankers' operating expenses,
including the cost of crewing, insuring, repairing and maintaining the vessel,
spares and consumable stores, tonnage taxes and other vessel-related expenses.
Our bunkering tankers are not used for the transportation of petroleum products
across oceans. Accordingly, a significant portion of our vessel operating
expenses are fixed or semi-variable (e.g., a bunkering tanker's insurance costs,
crew wages and certain other costs are incurred irrespective of the number of
sales deliveries it makes during a period) and, as a group, represent the most
significant operating expense for us other than the cost of marine petroleum
products sold.
We incur
overhead costs to support our operations. In general, the logistics of
purchasing, selling and delivering marine fuel to customers are managed and
coordinated by employees at our marketing and operating office in Greece,
employees at our local service centers and the crew of our bunkering
tankers.
Factors
Affecting Our Results of Operations
We
believe that the important measures for analyzing trends in our results of
operations consist of the following:
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·
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Sales
volume of marine fuel. We define the sales
volume of marine fuel as the volume of sales of various classifications of
marine fuel oil, or MFO, marine diesel oil, or MDO, and marine gas oil, or
MGO, for the relevant period, measured in metric tons. The sales volume of
marine fuel is an indicator of the size of our operations as it affects
both the sales and the cost of marine petroleum products recorded during a
given period. Sales volume of marine fuel does not include the sales
volume of lubricants due to insignificant volumes for all periods
presented.
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|
·
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Gross
spread on marine petroleum products and gross spread per metric ton of
marine fuel sold. Gross spread on marine petroleum
products represents the margin that we generate on sales of marine fuel
and lubricants. Gross spread on marine fuel represents the
margin that we generate on sales of various classifications of MFO or MGO.
Gross spread on lubricants represents the margin that we generate on sales
of lubricants. We calculate the gross spreads by subtracting
from the sales of the respective marine petroleum product the cost of the
marine petroleum product sold and cargo transportation
costs. For arrangements in which we physically supply marine
petroleum products using our bunkering tankers, costs of marine petroleum
products sold represents amounts paid by us for marine petroleum products
sold in the relevant reporting period. For arrangements in which marine
petroleum products are purchased from our related company, Aegean Oil,
cost of marine petroleum products sold represents the total amount paid by
us to the physical supplier for marine petroleum products and their
delivery to our customers. For arrangements in which we
purchase cargos for our floating storage facilities, cargo transportation
costs are either included in the purchase price of marine fuels that we
paid to the supplier or paid separately by us to a third-party
transportation provider.
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Gross
spread per metric ton of marine fuel sold represents the margins we generate per
metric ton of marine fuel sold. We calculate gross spread per metric ton of
marine fuel sold by dividing the gross spread on marine fuel by the sales volume
of marine fuel. Marine fuel sales do not include sales of lubricants. The
following table reflects the calculation of gross spread per metric ton of
marine fuel sold for the periods presented:
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Six
months ended June 30,
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|
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2008
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|
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2009
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(in
thousands of U.S. dollars, unless otherwise stated)
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Sales
of marine petroleum products
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1,269,001 |
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899,166 |
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Less:
Cost of marine petroleum products sold
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(1,192,281 |
) |
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(818,714 |
) |
Less:
Cargo transportation costs
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|
(5,765 |
) |
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|
(2,043 |
) |
Gross
spread on marine petroleum products
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|
70,955 |
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|
78,409 |
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Less:
Gross spread on lubricants
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(437 |
) |
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|
(1,315 |
) |
Gross
spread on marine fuel
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|
70,518 |
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77,094 |
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Sales
volume of marine fuel (metric tons)
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2,292,572 |
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2,808,974 |
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Gross
spread per metric ton of marine fuel sold (U.S. dollars)
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30.8 |
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27.4 |
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The
following table reconciles our gross spread on marine petroleum products sold to
the most directly comparable GAAP measure, operating income, for the periods
presented:
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Six
months ended June 30,
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2008
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2009
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(in
thousands of U.S. dollars)
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Gross
spread on marine petroleum products
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70,955 |
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78,409 |
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Add:
Voyage revenues
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- |
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5,540 |
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Add:
Other revenues
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4,047 |
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3,279 |
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Add:
Gain on sale of vessel
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- |
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4,185 |
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Add:
Cargo transportation costs
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5,765 |
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2,043 |
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Less:
Salaries, wages and related costs
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(18,790 |
) |
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(22,493 |
) |
Less:
Depreciation
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(5,681 |
) |
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(7,807 |
) |
Less:
Amortization
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(1,811 |
) |
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(2,270 |
) |
Less:
Other operating expenses
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(33,565 |
) |
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(34,970 |
) |
Operating
income
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20,920 |
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25,916 |
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The
amount that we have to pay for marine petroleum products to fulfill a customer
order has been the primary variable in determining the prices quoted to
customers. Therefore, we evaluate gross spread per metric ton of marine fuel
sold and gross spread on marine petroleum products in pricing individual
transactions and in long-term strategic pricing decisions. We actively monitor
our pricing and sourcing strategies in order to optimize our gross spread on
marine petroleum products. We believe that this measure is important to
investors because it is an effective intermediate performance measure of the
strength of our operations.
Gross
spread on marine petroleum products (including gross spread on marine fuel and
gross spread on lubricants) and gross spread per metric ton of marine fuel sold
should not be considered as alternatives to operating income, net income or
other GAAP measures and may not be comparable to similarly titled measures of
other companies. Gross spread on marine petroleum products and gross spread per
metric ton of marine fuel sold do not reflect certain direct and indirect costs
of delivering marine petroleum products to our customers (such as crew salaries,
vessel depreciation, storage costs, other vessel operating expenses and overhead
costs) or other costs of doing business.
For the
periods presented, we purchased marine petroleum products in Greece from our
related company, Aegean Oil, which is a physical supplier in Greece. The cost of
these marine petroleum products was contractually calculated based on Aegean
Oil's actual cost of these products plus a margin.
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·
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Number of
markets served. The number
of markets served includes our operations at our service centers in the
United Arab Emirates, Gibraltar, Jamaica, Singapore, Northern Europe, West
Africa, Vancouver, Portland (U.K.) and Greece, where we conduct operations
through our related company, Aegean Oil, as well as our trading operations
in Montreal and Mexico. The number of markets served is an indicator of
the geographical distribution of our operations and affects both the
amount of revenues and expenses that we record during a given
period. We commenced physical supply operations in Singapore on
June 2, 2006, in Northern Europe on October 9, 2007, in Ghana on
January 15, 2008, in Portland (U.K.) on April 1, 2008, and in Trinidad on
April 1, 2009. On July 1, 2008, we acquired ICS Petroleum, a
Canadian based marketer and supplier of marine petroleum products in
Vancouver, Montreal and Mexico.
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·
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Average
number of operating bunkering vessels. Average
number of operating bunkering vessels is the number of operating bunkering
vessels in our fleet for the relevant period, as measured by the sum of
the number of days each bunkering vessel was used as a part of
our
|
fleet
during the period divided by the cumulative number of calendar days in the
period multiplied by the number of operating bunkering vessels at the end of the
period. This figure does not take into account non-operating days due
to either scheduled or unscheduled maintenance. The average number of operating
bunkering vessels is an indicator of the size of our fleet and operations and
affects both the amount of revenues and expenses that we record during a given
period.
The
following table reflects our sales volume of marine fuel, gross spread on marine
petroleum products, gross spread per metric ton of marine fuel sold, number of
service centers and average number of operating bunkering vessels for the
periods indicated.
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Six
months ended June 30,
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2008
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2009
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(in
thousands of U.S. dollars,
unless
otherwise stated)
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Sales
volume of marine fuel (metric tons)
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|
2,292,572 |
|
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|
2,808,974 |
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Gross
spread on marine petroleum products
|
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|
70,955 |
|
|
|
78,409 |
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Gross
spread per metric ton of marine fuel sold (U.S. dollars)
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|
30.8 |
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|
27.4 |
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Number
of markets served, end of period
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|
8 |
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12 |
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Average
number of operating bunkering vessels
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20.3 |
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31.4 |
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Sales
of Marine Petroleum Products and Gross Spread on Marine Petroleum
Products
Our sales
of marine petroleum products and gross spread on marine petroleum products
consist of the sales revenue and gross spread that we generate on sales of
marine fuel and lubricants.
Our sales
of marine petroleum products are driven primarily by the number of our service
centers, the number of operating bunkering tankers in our fleet, our sales
prices and our credit terms and credit control process. The cost of marine
petroleum products sold is driven primarily by availability of marine petroleum
products, our purchasing methods, supplier cost prices and credit terms and our
internal quality control processes. These drivers, in turn, are affected by a
number of factors, including:
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·
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our
entrance into new markets;
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|
·
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our
purchasing methods of marine petroleum
products;
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|
·
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our
marketing strategy;
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·
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our
vessel acquisitions and disposals;
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·
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conditions
in the international shipping and the marine fuel supply
industries;
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|
·
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regulation
of the marine fuel supply industry;
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·
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regulation
of the tanker industry;
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·
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levels
of supply of and demand for marine petroleum
products;
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|
·
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levels
of competition; and
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·
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other
factors affecting our industry.
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Six
months ended June 30,
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2008
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2009
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(in
thousands of U.S. dollars)
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|
|
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Europe
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|
526,235 |
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|
336,623 |
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America
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|
157,522 |
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|
142,811 |
|
Africa
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|
48,087 |
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|
29,052 |
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Asia
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|
537,157 |
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|
390,680 |
|
Total
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|
1,269,001 |
|
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|
899,166 |
|
We sell
and deliver marine petroleum products to a broad and diversified customer base,
including international commercial shipping companies, governments, and marine
fuel traders and brokers. For the six month periods ended June 30, 2008 and
2009, none of our customers accounted for more than 10% of our total
revenues.
The
commercial shipping industry generally purchases marine fuel on a spot basis and
historically we have not had any long-term sales volume contracts with
customers. As we expand our global network and increase our geographical
coverage, we expect some of our customers to enter into long-term sales volume
contracts.
In
addition to our physical supply operations, from time to time we conduct limited
marine fuel trading activities, generally in locations where we do not have
service centers. This business involves activities whereby we contract with
third-party physical suppliers to sell us marine fuel and to deliver the marine
fuel to a customer in the relevant location. Accordingly, our trading activities
do not involve our physical possession of marine fuel and require less complex
logistical operations, and infrastructure. As such, we typically earn a
significantly lower gross spread from our trading activities than from our
physical supply activities.
We
purchase and take delivery of marine petroleum products from various suppliers
under long-term volume contracts or on the spot market. Long-term supply
contracts from third parties allow us to minimize our exposure to supply
shortages. In general, at each of our service centers except for Gibraltar, the
United Arab Emirates and West Africa, we purchase from local supply
sources.
Our cost
of marine petroleum products includes purchases from related companies. In
Greece, we purchase marine petroleum products under a ten-year supply contract
that commenced on April 1, 2005, from our related company, Aegean Oil, which
charges us its actual cost of the marine petroleum products plus a margin. We
believe the amounts we paid to our related company are comparable to amounts
that we would have negotiated in arm's-length transactions with unaffiliated
third parties.
The
following table reflects our cost of marine petroleum products sold incurred
from third-party suppliers and from our related company suppliers for the
periods indicated.
|
|
Six
months ended June 30,
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|
|
2008
|
|
|
2009
|
|
|
|
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(in
thousands of U.S. dollars)
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|
|
|
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Third-party
suppliers
|
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|
1,043,261 |
|
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|
709,884 |
|
Related
company suppliers
|
|
|
149,020 |
|
|
|
108,830 |
|
Total
|
|
|
1,192,281 |
|
|
|
818,714 |
|
We seek
to increase our sales of marine petroleum products and our gross spread on
marine petroleum products on an integrated basis, through expansion into new
markets, acquisitions of double hull bunkering tankers and the diversification
and further optimization of purchasing methods. Our gross spread on marine
petroleum products differs for each of our service centers, reflecting the
different competitive conditions that exist in the markets served by them.
Factors affecting competitive conditions in a market that we service include
customer demand, availability of supplies and the strength and number of
competitors that operate in the market. We believe that for any new service
centers that we may establish, gross spread on marine petroleum products may be
lower than from our existing service centers. We also believe that the
competitive conditions in the markets served by our existing service centers may
generally be more favorable to us than those in other markets that we may
consider for future expansion.
Voyage
Revenues
Our
voyage revenues are primarily derived from employment of our specialty tankers
which are double hull petroleum tankers with roll-on roll-off facilities and
refueling capabilities for fuel trucks. In 2008, we have employed our
specialty tanker, Maistros, under a contract of affreightment with Aegean Oil
for the distribution of gasoline and other refined petroleum products in the
Greek islands. During the six month period ended June 30, 2009, we recognized
$2.1 million revenue from Aegean Oil under this contract of
affreightment. This contract was terminated on June 10, 2009, when we
sold the two specialty tankers Maistros and Ostria to an unaffiliated
third-party purchaser.
In the
past, our voyage revenues were primarily derived from time and voyage charters
of our only non-bunkering tanker, Aegean Hellas, which is a single hull Aframax
tanker with a cargo-carrying capacity of approximately 92,000 dwt. We purchased
this tanker with the initial intention of strategically positioning it as a
floating storage facility at one of the ports that we serve. As of
December 31, 2006, we were deploying this vessel for hire in the
international spot market. Voyage revenues of Aegean Hellas were driven
primarily by the number of operating days and the amount of daily charter hire
rates, which, in turn, were affected by a number of factors, including the
duration of the charter, the age, condition and specification of the vessel and
the levels of supply and demand in the tanker shipping industry. On
April 17, 2007, we sold Aegean Hellas to an unrelated third
party.
Salaries,
Wages and Related Costs
We employ
salaried employees at our offices in Greece, New York City, and at each of our
service centers. Furthermore, we employ crews for our bunkering tankers under
short-term contracts. The majority of our salaries, wages and related costs are
for our salaried employees and vessel crews. Costs relating to our salaried
employees are mainly incurred at our office in Greece where most of our sales
and marketing, operations, technical, accounting and finance departments are
located and our
administrative office in New York City from where we oversee our financial and
other reporting functions. We maintain a minimal number of salaried employees at
our service centers where we typically employ a local operations manager and
staff to support the logistical aspects of our operations.
The
following table reflects salaries, wages and costs related to our crews and
salaried employees.
|
|
Six
months ended June 30,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
Shipboard
personnel
|
|
|
9,685 |
|
|
|
11,265 |
|
Shoreside
personnel
|
|
|
9,105 |
|
|
|
11,228 |
|
Total
|
|
|
18,790 |
|
|
|
22,493 |
|
Depreciation
The cost
of our vessels is depreciated on a straight-line basis over the expected useful
life of each vessel. We expect that these charges will continue to increase
primarily as a result of our planned acquisitions of additional bunkering
tankers and floating storage facilities.
Other
Operating Expenses
Other
operating expenses primarily include the operating expenses of our vessels,
including the cost of insurance, expenses relating to repairs and maintenance
(which does not include amortization of drydocking costs), the cost of spares
and consumable stores, consumption of marine petroleum products and other
miscellaneous expenses. Our bunkering vessel operating expenses,
which generally represent fixed costs, have historically increased as a result
of the enlargement of our fleet. We expect these expenses to increase further as
a result of our acquisition of additional bunkering vessels and floating storage
facilities.
Other
operating expenses also include expenses relating to rent, communal charges,
advertising, travel, public relations and auditing and legal fees. We expect
these expenses to increase further as we enter new markets and as a result of
our transformation from a privately-held business to a publicly-traded
company.
Other
operating expenses include a provision for doubtful accounts. We believe that
our provision for doubtful accounts has been relatively low in the past several
years due to our effective credit control process. As we expand our operations
across the globe, we expect our provision for doubtful accounts to increase
concurrently with our revenues.
Finally,
other operating expenses include amounts relating to the storage of marine
petroleum products resulting from acquisitions and use of floating storage
facilities such as our tankers, Ouranos, Fos, Leader and Aegean IX. We believe
that the ownership of floating storage facilities will allow us to mitigate the
risk of supply shortages. Generally, the costs of storage have been included in
the price per metric ton quoted by local suppliers of refined marine fuel.
Accordingly, we expect that the ownership of floating storage facilities will
allow us to convert the variable costs of this storage fee markup per metric ton
quoted by suppliers into fixed costs of operating our storage facilities,
allowing us to spread larger sales volumes over a fixed cost base and to
decrease our refined marine fuel costs.
Management
Fees
We have
historically paid Aegean Shipping Management S.A., or Aegean Shipping, our
former fleet manager and a related company, owned and controlled by members of
Mr. Melisanidis' family, a fixed management fee per month for each vessel in our
operating fleet in exchange for providing our bunkering tankers and Aframax
tankers with strategic, technical and commercial
management
services in connection with the deployment of our fleet. On April 17, 2007, we
sold the last vessel managed by Aegean Shipping, Aegean Hellas. We believe the
amounts we paid to our related company manager were comparable to amounts that
we would have negotiated in arm's-length transactions with unaffiliated third
parties.
Interest
and Finance Costs
We have
historically incurred interest expense and financing costs in connection with
long-term debt to partially finance the acquisitions of our vessels and in
connection with short-term bank borrowings obtained for working capital
purposes. In connection with our initial public offering, we repaid and
terminated a portion of our outstanding indebtedness. Subsequently, we have
incurred and expect to continue incurring interest expense and financing costs
under our existing credit facilities to finance the construction of our new
bunkering tankers and our senior secured credit facility. We intend to limit the
amount of these expenses and costs by repaying our outstanding indebtedness from
time to time from our cash flows from operations.
We
believe that, in the short-term, a majority of the interest and financing costs
relating to our credit facilities to finance vessel construction, will be
capitalized as part of the acquisition costs of our vessels and not be incurred
as interest expense in our statements of income.
Income
Taxes
Our
principal operating subsidiary, AMP, is incorporated in the Republic of Liberia.
Under regulations promulgated by the Liberian Ministry of Finance, because AMP
is considered a non-resident domestic corporation, it is not required to pay any
tax or file any report or return with the Republic of Liberia in respect of
income derived from its operations outside of the Republic of Liberia. The
Liberian Ministry of Justice has issued an opinion that these regulations are
valid. If AMP were subject to Liberian tax, it would be subject to tax at a rate
of 35% on its worldwide income, and dividends it pays to us would be subject to
a withholding tax at rates ranging from 15% to 20%.
AMP has
established an office in Greece which provides services to AMP and AMP's office
in Cyprus. Under the laws of Greece, and in particular under Greek Law 3427/2005
which amended, replaced and supplemented provisions of Law 89/1967, which
expired on December 31, 2005, the income of AMP's Greek office is
calculated on a cost plus basis on expenses incurred by that office. The Greek
Ministry of Economy and Finance has determined that the profit margin applicable
to AMP is 5%. This determination is subject to periodic review. AMP's income, as
calculated by applying the 5% profit margin, is subject to Greek corporate
income tax at the rate of 29% for fiscal year 2006 and 25% for fiscal years 2007
and later. All expenses to which the profit percentage applies are deducted from
gross income for Greek corporate income tax purposes. Accordingly, under Greek
Law 3427/2005, as currently applied to us, we expect that AMP will continue to
have no liability for any material amount of Greek income tax.
Under the
laws of the countries of incorporation of our vessel-owning subsidiaries and our
subsidiaries that operate service centers and the laws of the countries of our
vessels' registration, our vessel-owning companies are generally not subject to
tax on our income that is characterized as shipping income.
Our
corporate income tax exposure is in taxable jurisdictions such as Gibraltar,
Jamaica, Singapore, Belgium, the United Kingdom and Canada.
Our
business is affected by taxes imposed on the purchase and sale of marine
petroleum products in various jurisdictions in which we operate from time to
time. These taxes include sales, excise, goods and services taxes, value-added
taxes, and other taxes. Other than in Canada, we do not pay a
material amount of tax in any jurisdiction in which we operate. For
the six month periods ended June 30, 2008 and 2009, our income tax amounted to
$0 and $0.5 million, respectively. The increase in our income tax
amount was mainly attributable to our Canadian operations. We are
currently in the process of restructuring our Canadian operations and expect to
decrease our future income tax liability in Canada.
Results
of Operations
Six
months ended June 30, 2009 compared to six months ended June 30,
2008
Selected
financial data
|
|
Six
months ended June 30,
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Change
$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
of marine petroleum products
|
|
|
1,269,001 |
|
|
|
899,166 |
|
|
|
(369,835 |
) |
|
|
(29.1 |
%) |
Voyage
and other revenues
|
|
|
4,047 |
|
|
|
8,819 |
|
|
|
4,772 |
|
|
|
117.9 |
% |
Total
revenues
|
|
|
1,273,048 |
|
|
|
907,985 |
|
|
|
(365,063 |
) |
|
|
(28.7 |
%) |
Cost
of marine petroleum products sold
|
|
|
1,192,281 |
|
|
|
818,714 |
|
|
|
(373,567 |
) |
|
|
(31.3 |
%) |
Salaries,
wages and related costs
|
|
|
18,790 |
|
|
|
22,493 |
|
|
|
3,703 |
|
|
|
19.7 |
% |
Depreciation
and amortization
|
|
|
7,492 |
|
|
|
10,077 |
|
|
|
2,585 |
|
|
|
34.5 |
% |
All
other operating expenses
|
|
|
33,565 |
|
|
|
30,785 |
|
|
|
(2,780 |
) |
|
|
(8.3 |
%) |
Operating
income
|
|
|
20,920 |
|
|
|
25,916 |
|
|
|
4,996 |
|
|
|
23.9 |
% |
Net
financing costs
|
|
|
4,829 |
|
|
|
4,458 |
|
|
|
(371 |
) |
|
|
(7.7 |
%) |
Other
non-operating expenses (income)
|
|
|
(1,297 |
) |
|
|
739 |
|
|
|
2,036 |
|
|
|
(157.0 |
%) |
Net
income
|
|
|
17,388 |
|
|
|
20,719 |
|
|
|
3,331 |
|
|
|
19.2 |
% |
Sales of Marine Petroleum
Products. Sales of marine petroleum products decreased by
$369.8 million, or 29.1%, to $899.2 million for the six month period ended June
30, 2009 compared to $1,269.0 million for the six month period ended June 30,
2008. Of the total decrease in sales of marine petroleum products, $540.2
million was attributable to a 42.8% decrease in the average price of marine fuel
(using sales volumes for the six month period ended June 30, 2008), while an
increase in sales volume of marine fuel (using average prices for the six month
period ended June 30, 2009) and an increase in the sales of lubricants increased
sales of marine petroleum products by $162.7 and $7.7 million respectively.
Sales volume of marine fuel increased by 516,402 metric tons, or 22.5%, to
2,808,974 metric tons for the six month period ended June 30, 2009,
compared to 2,292,572 metric tons for the six month period ended June 30, 2008
due to additional volume of sales of marine fuel in Singapore, Greece and
Northern Europe and due to sales in our new markets: Portland (U.K.), Vancouver,
Montreal and Mexico.
Gross Spread on Marine Petroleum
Products. Gross spread on marine petroleum products increased
by $7.4 million, or 10.4%, to $78.4 million for the six month period ended June
30, 2009, compared to $71.0 million for the six month period ended June 30,
2008. The increase in our gross spread on marine petroleum products mainly
resulted from the increased sales volume of marine fuel. Our gross spread per
metric ton of marine fuel sold during the six month period ended June 30, 2009
decreased by $3.4, or 11.0%, to $27.4 compared to $30.8 for the six month period
ended June 30, 2008. Gross spreads per metric ton do not generally
increase or decrease proportionately with the price of marine fuel. Accordingly,
gross spread on marine petroleum products, as a percentage of total revenues,
increased from 5.6% for the six month period ended June 30, 2008 to 8.6% for the
six month period ended June 30, 2009. Gross spread on marine
petroleum products and gross spread per metric ton of marine fuel sold are
non-GAAP measures and should not be considered as alternatives to operating
income, net income or other GAAP measures and may not be comparable to similarly
titled measures of other companies. Please refer to section entitled "Factors
Affecting Our Results of Operations" for a reconciliation of gross spread on
marine petroleum products to the most directly comparable GAAP
measure.
Voyage
Revenues. Voyage revenues were $5.5 million for the six month
period ended June 30, 2009, compared to $0 million for the six month period
ended June 30, 2008. Voyage revenues for the six month period ended June 30,
2009 were attributable to the employment of our specialty tanker, Maistros,
under the contract of affreightment with Aegean Oil, which commenced on October
1, 2008 and to the employment of our vessels Aegean III, Aegean VIII, Aegean
XII, Aegean Daisy, Aegean Rose, Aegean Breeze and Aegean Tiffany to serve an
unaffiliated third-party.
Salaries, Wages and Related
Costs. Salaries, wages and related costs increased by
$3.7 million, or 19.7%, to $22.5 million for the six month period
ended June 30, 2009, compared to $18.8 million for the six month period ended
June 30, 2008. This increase was mainly due to increased full-time employees as
we hired new employees to manage our expanded fleet and service center network.
Furthermore, crew costs increased as the average number of operating bunkering
vessels increased to 31.4 for the six month period ended June 30, 2009, compared
to 20.3 for the six month period ended June 30, 2008.
Depreciation.
Depreciation increased by $2.1 million, or 36.8%, to $7.8 million for the six
month period ended June 30, 2009, compared to $5.7 million for the six month
period ended June 30, 2008. This increase is in line with the 54.7% increase in
the average number of operating bunkering vessels.
Other Operating
Expenses. Other operating expenses decreased by
$2.8 million, or 8.3%, to $30.8 million for the six month period ended
June 30, 2009, compared to $33.6 million for the six month period ended
June 30, 2008. This decrease in other operating expenses was primarily
attributable to the following factors: gain on sale of the Roro vessels,
increased bunker vessel expenses due to our expanded fleet.
Interest and Finance
Costs. Interest and finance costs decreased by $0.6 million to
$4.5 million for the six month period ended June 30, 2009, compared to $5.1
million for the six month period ended June 30, 2008. The decrease in interest
and finance costs was mainly attributable to the lower interest rates despite
the higher debt outstanding relating to the financing of our
newbuildings.
Inflation
Inflation
has had only a moderate effect on our expenses given recent economic conditions.
In the event that significant global inflationary pressures appear, these
pressures would increase our operating costs.
Liquidity and capital resources
Our
treasury activities are controlled centrally by our treasury department, which
is located at our offices in Greece. Our treasury department administers our
working capital resources including our current accounts, time deposits,
overdrafts and bank loans. Our liquidity objective is to maintain an optimum
daily net cash position which takes into consideration immediate working capital
and operational requirements, as well as short- to medium-term capital
expenditure requirements, but which would not result in an unnecessary net cash
surplus. In this way we seek to maximize available cash to reinvest in our
business. Our policy is to minimize the use of time deposits, financial
instruments or other forms of investments which we believe generate lower levels
of return than the return on our invested capital.
Our cash
is primarily denominated in U.S. dollars because our sales of marine petroleum
products are fully denominated in U.S. dollars. Our service centers pay their
operating expenses in various currencies—primarily the Euro, the UAE dirham, the
Gibraltar pound, the British pound, the Canadian dollar, the Jamaican dollar,
and the Singapore dollar. Our treasury department transfers cash to our service
centers monthly on an as-needed basis and accordingly, we maintain low levels of
foreign currency at our service centers.
Under the
laws of jurisdictions where our subsidiaries are located, there are currently no
restrictions on the export or import of capital, including foreign exchange
controls or restrictions that materially affect the remittance of dividends,
loans, interest or other payments. Most of our vessel-owning subsidiaries have
long-term bank loans outstanding that were obtained to partially finance the
acquisition cost of their vessels. Most of these vessel-owning companies are not
permitted to pay any dividends without the lender's prior consent. However,
these vessel-owning companies generally do not generate third-party revenues and
do not possess material amounts of excess cash. Therefore, these restrictions on
our vessel-owning companies' ability to pay dividends to us should not
materially impact our ability to meet our cash obligations. Accordingly, there
are no significant restrictions on our ability to access and mobilize our
capital resources located around the world.
We have
funded our business primarily through: (i) cash generated from operations,
(ii) equity capital, (iii) short-term borrowings, and
(iv) long-term bank debt. We have a revolving credit facility that provides
for borrowings up to certain amounts for working capital purposes as well as a
sublimit for the issuance of standby letters of credit. Furthermore, we have
long-term debt facilities with several banks in order to partially finance the
acquisition costs of several of our vessels. The credit agreements for the
long-term debt facilities are secured with first priority mortgages over certain
of our vessels. As of June 30, 2009, we believe that we were in compliance in
all material respects with all covenants of our credit facilities. We also
believe that our working capital resources are sufficient for our present
requirements
Cash
Flow
Net
Cash Provided By Operating Activities
Net cash
used in operating activities was $79.8 million for the six month period
ended June 30, 2009 as compared to net cash provided by operating
activities of $21.5 million for the same period in 2008. This decrease
was primarily attributable to an increase in working capital. Working
capital excluding cash and debt increased by $12.8 million, to a surplus of
$204.0 million as of June 30, 2009 compared to a surplus of
$191.2 million as of June 30, 2008.
Net
Cash Used In Investing Activities
Net cash
used in investing activities was $35.2 million for the six month period ended
June 30, 2009. During the period, we paid $52.4 million as milestone payments
under our newbuilding and engineering contracts and we paid $22.2 million mainly
to acquire the secondhand vessels, Aegean Star, Aegean Champion and Aegean Ace.
During the six month period ended June 30, 2009, we received net cash
consideration of $34.1 million for the sale of our specialty tankers.
Furthermore, our restricted cash balances decreased by $5.5 million which
increased our cash flows by the same amount.
Net cash
used in investing activities was $52.1 million for the six month period
ended June 30, 2008. During the period, we paid $64.6 million as milestone
payments under our newbuilding and engineering contracts and we paid
$1.0 million to acquire the secondhand tanker Orion. During the six month
period ended June 30, 2008, our restricted cash balance decreased by $13.8
million which increased our cash flows by the same amount.
Net
Cash Provided by Financing Activities
Net cash
provided by financing activities was $95.4 million for the six month period
ended June 30, 2009 mainly due to additional drawdowns of $181.9 million under
our term loan facilities to finance a portion of the construction costs of our
new vessels. Part of this increase in funding was offset by
repayments of long-term debt of $23.8 million and $60.8 million in payments to
reduce short-term borrowings. Furthermore, during the six month
period ended June 30, 2009, we paid for financing costs $1.0 and declared and
paid dividends of $0.9 million to our shareholders.
Net cash
provided by financing activities was $44.7 million for the six month period
ended June 30, 2008 mainly due to additional drawdowns of $43.4 million
under our term loan facilities to finance a portion of the construction costs of
our new vessels, and we drew down $4.0 million under our senior secured credit
facility primarily to finance working capital requirements. Furthermore, during
the six month period ended June 30, 2008, we performed repayments of our
long-term debt of $1.2 and we declared and paid dividends of $0.9 million
to our shareholders.
Trend
information.
During
the six month period ended June 30, 2009, our sales volume of marine fuel
increased by 22.5% as compared to the prior year, which was mainly due to sales
in our new markets: Portland (U.K.), Vancouver, Montreal and
Mexico. We have also expanded our bunkering fleet by taking delivery
of one double-hull bunkering tanker newbuilding and one specialty tanker
newbuilding and by acquiring three secondhand double-hull bunkering tankers
during the period . We expect our growth to continue
in 2009
as we expand our business and marine fuel delivery capabilities in existing
markets and enter new markets. We have commenced operations in
Tangiers, Morocco and Trinidad and Tobago in the second quarter of 2009 and we
expect to expand our fleet by at least 9 new double hull bunkering tankers, for
which we have firm orders, during the next two years, and may purchase
additional secondhand vessels in the future.
In
addition to our bunkering operations, we market and distribute marine lubricants
under the Alfa Marine Lubricants brand. In February 2009, we entered into an
agreement to join the Sealub Alliance Network, a group recently formed by Gulf
Oil Marine Ltd. to collaborate in the marketing and distribution of marine
lubricants. We expect the sales volumes of lubricants to increase in
2009.
In 2008,
we have employed our specialty tanker, Maistros, under a contract of
affreightment with Aegean Oil for the distribution of gasoline and other refined
petroleum products in the Greek islands. However, due to the sale of our Roro
tankers, voyage revenues are expected to decrease in the third and forth quarter
of 2009.
Our
success in attracting business has been due, in part, to our willingness to
extend trade credit on an unsecured basis to our customers after suitable credit
analysis of them. The recent adverse changes in world credit markets
may adversely affect our ability to do business with customers whose
creditworthiness may no longer meet our criteria. Volatility in the
price of marine fuel and lubricants may also affect our working capital
requirements.
Off-balance sheet
arrangements.
We do not
have any off-balance sheet arrangements.
Tabular
disclosure of contractual obligations.
Contractual
Obligations and Commercial Commitments
The
following table sets forth our contractual obligations and commercial
commitments as of December 31, 2008:
|
|
Within
One
Year
|
|
|
One
to
Three
Years
|
|
|
Three
to
Five
Years
|
|
|
More
than Five Years
|
|
|
Total
|
|
|
|
(in
millions of U.S. dollars)
|
|
Long-term
bank debt (excluding interest)
|
|
|
9.4 |
|
|
|
24.9 |
|
|
|
29.3 |
|
|
|
100.0 |
|
|
|
163.6 |
|
Interest
on long-term bank debt (1)
|
|
|
7.0 |
|
|
|
13.0 |
|
|
|
11.1 |
|
|
|
19.7 |
|
|
|
50.8 |
|
Minimum
purchase commitments (2)
|
|
|
23.2 |
|
|
|
46.4 |
|
|
|
46.4 |
|
|
|
29.0 |
|
|
|
145.0 |
|
Newbuilding
contracts—bunkering tankers
|
|
|
99.0 |
|
|
|
25.3 |
|
|
|
- |
|
|
|
- |
|
|
|
124.3 |
|
Secondhand–bunkering
tankers
|
|
|
2.3 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
2.3 |
|
Newbuilding
contracts—specialty tankers
|
|
|
6.4 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6.4 |
|
Total
|
|
|
147.3 |
|
|
|
109.6 |
|
|
|
86.8 |
|
|
|
148.7 |
|
|
|
492.4 |
|
(1)
|
Our long-term bank debt
outstanding as of December 31, 2008 bears variable interest at margin over
LIBOR. The calculation of variable rate interest payments is based on an
actual weighted average rate of 4.35% for the year ended December 31,
2008, adjusted upward by 10 basis points for each year
thereafter.
|
(2)
|
In the normal course of business,
we have entered into long-term contracts with reputable suppliers such as
government refineries or major oil producers. The contractual commitments
set forth in the above table include the minimum purchase requirements in
our contract with Aegean Oil. The minimum purchase requirements provided
for in our contract with Aegean Oil have been calculated by multiplying
the minimum monthly volumes of marine fuel specified in the contract by an
indicative market price based on quoted PLATTS prices as of December 31,
2008.
|
Critical
Accounting Policies
The
discussion and analysis of our financial condition and results of operations is
based upon our consolidated financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of such financial statements requires
us to make estimates and judgments that affect the reported amounts of assets
and liabilities, revenues and expenses and related disclosure of contingent
assets and liabilities at the date of our financial statements. Actual results
may differ from these estimates under different assumptions and
conditions.
Critical
accounting policies are those that reflect significant judgments of
uncertainties and potentially result in materially different results under
different assumptions and conditions. We have described below what we believe to
be our most critical accounting policies, because they generally involve a
comparatively higher degree of judgment in their application. For a description
of our significant accounting policies, see the Company's Annual Report on Form
20-F for the fiscal year ended December 31, 2008, filed with the Commission on
April 22, 2009.
Trade
Receivables and Allowance for Doubtful Accounts
We extend
credit on an unsecured basis to many of our customers. There is uncertainty over
the level of uncollectibility of customer accounts. Our management is
responsible for approving credit limits above certain amounts, setting and
maintaining credit standards, and managing the overall quality of our credit
portfolio. We perform ongoing credit evaluations of our customers and adjust
credit limits based upon payment history and the customer's current credit
worthiness. Accounts receivable are deemed past due based on contractual terms
agreed with our customers.
We
continuously monitor collections and payments from our customers and maintain a
provision for estimated credit losses based upon our historical experience with
our customers, current market and industry conditions of our customers, and any
specific customer collection issues that we have identified. Accounts and notes
receivable are reduced by an allowance for amounts that may become uncollectible
in the future. At the end of each reporting period, we calculate an allowance
for doubtful accounts based on an aging schedule where we apply set percentages
to categories of overdue trade receivables. These set percentages are based on
historical experience and currently available management information on customer
accounts. Furthermore, we provide appropriate allowances for any specific
customer collection issue we identify which allowance is calculated on a
case-by-case basis. Trade receivables are written off when it becomes apparent
based upon age or customer circumstances that such amounts will not be
collected.
We
believe the level of our allowance for doubtful accounts is reasonable based on
our experience and our analysis of the net realizable value of our trade
receivables during each reporting period. The estimates driving the calculation
of our allowance for doubtful accounts have not changed in the past periods and
we do not expect these estimates to change in the foreseeable future because
they have resulted and we believe that they will continue to result in accurate
calculations of our allowance for doubtful accounts. We cannot guarantee that we
will continue to experience the same credit loss rates that we have experienced
in the past, since adverse changes in the marine industry or changes in the
liquidity or financial position of our customers could have a material adverse
effect on the collectability of our trade receivables and our future operating
results. If credit losses exceed established allowances, our results of
operations and financial condition may be adversely affected.
Depreciation
We record
the value of our vessels at their cost (which includes acquisition costs
directly attributable to the vessel and expenditures made to prepare the vessel
for its initial voyage) less accumulated depreciation. We depreciate our vessels
on a straight-line basis over their estimated useful lives. Depreciation is
based on cost less the estimated residual scrap value.
We
estimate the useful lives for our bunkering tankers to be 30 years from
date of initial delivery from the shipyard. Furthermore, we estimate
the useful life of our floating storage facilities to be 30 years from the date
of acquisition. We estimate the residual scrap values of our vessels to be $175
per light-weight ton. We form these estimates based on our experience and the
prevailing practices of other companies in the bunkering and shipping
industries.
An
increase in the estimated useful life of a tanker or in its estimated residual
value would have the effect of decreasing the annual depreciation charge and
extending it into later periods. A decrease in the estimated useful life of a
tanker or in its estimated residual value would have the effect of increasing
the annual depreciation charge. A 20% decrease in the remaining estimated useful
lives of our vessels would increase our depreciation charge for the six month
period ended June 30, 2009 by $1.9 million.
Estimates
may need to be changed if new regulations place limitations over the ability of
a vessel to trade on a worldwide basis. This would cause us to adjust the
vessel's useful life to end at the date such regulations become
effective.
Our
estimates of the useful lives of our vessels and of the residual scrap values of
our vessels have not changed in the past periods. We do not expect these
estimates to change in the foreseeable future because we believe they will
continue to accurately represent the useful lives of tanker vessels and the
long-term scrap values of steel.
Impairment
of Long-lived Assets
We
evaluate the carrying amounts of our long-lived assets to determine if events
have occurred which would require modification to their carrying values. In
evaluating useful lives and carrying values of long-lived assets, we review
certain indicators of potential impairment, such as vessel sale and purchase
prices in the marketplace, business plans and overall market conditions. If an
indicator of impairment exists, we determine undiscounted projected net
operating cash flow for each vessel or group of vessels and compare it to the
relevant carrying value. In the event that undiscounted projected net operating
cash flows were less than carrying value, we would estimate the fair value of
the related asset and record a charge to operations calculated by comparing the
asset's carrying value to the estimated fair value. When performing impairment
assessments, management would generally consider vessel valuation reports
obtained from third-party valuation specialists.
Our
vessels are generally required to be drydocked approximately every 30 to
60 months for major repairs and maintenance that cannot be performed while
the vessels are operating. We capitalize the costs associated with drydockings
as they occur and amortize these costs on a straight-line basis over the period
between drydockings. Costs capitalized as part of the drydocking include actual
costs incurred at the drydock yard and parts used in making such repairs that
are reasonably made in anticipation of reducing the duration or cost of the
drydocking; cost of travel, lodging and subsistence of our personnel sent to the
drydocking site to supervise; and the cost of hiring a third party to oversee a
drydocking. We believe that these types of capitalized costs are consistent with
practice among other companies in our industry that apply this method of
accounting and that our policy of capitalization reflects the economics and
market values of the vessels.
Although
many companies in our industry apply this method of accounting for deferred
drydock costs, some companies apply other methods of accounting, such as
expensing drydock costs as incurred. If we were to adopt that method of
accounting as our accounting policy, our drydock costs would have been as
disclosed under the heading "As Incurred" in the table below, for the periods
presented therein.
|
|
Average
Number of Vessels
|
|
|
Drydock
Costs
|
|
Six
months Ended
June 30,
|
|
Bunkering
|
|
|
Non-bunkering
|
|
|
As
Reported
|
|
|
As
Incurred
|
|
|
|
|
|
|
|
|
|
(in
thousands of U.S. dollars)
|
|
2008
|
|
|
20.29 |
|
|
|
3.00 |
|
|
|
1,656 |
|
|
|
3,770 |
|
2009
|
|
|
31.36 |
|
|
|
5.92 |
|
|
|
2,115 |
|
|
|
1,857 |
|
The table
above discloses the average number of vessels that we have owned in each of the
periods presented and the drydock costs that we have reported. In the future,
depending on the date a newly-purchased secondhand vessel is drydocked prior to
its delivery to us, we may pay drydocking costs and incur subsequent
amortization expense of these costs sooner after delivery than if the vessel had
been owned by us throughout its life. This would increase our average drydocking
expenses in periods immediately following the acquisition.
Following
acquisition of vessels under newbuilding contracts, we would expect to first pay
drydocking costs and incur subsequent amortization expense of these costs
approximately 30 months after the delivery of the vessel from the shipyard.
This would decrease our average drydocking expenses
in periods immediately following the acquisition since we would have no such
costs to amortize in respect of these vessels until they were first
drydocked.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Matters contained in
this discussion of our financial condition and results of operations, or
this report, may constitute forward-looking statements. The
Private Securities Litigation Reform Act of 1995 provides safe harbor
protections for forward-looking statements in order to encourage companies to
provide prospective information about their business. Forward-looking
statements include statements concerning plans, objectives, goals, strategies,
future events or performance, and underlying assumptions and other statements,
which are other than statements of historical facts.
We desire to take
advantage of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and are including this cautionary statement in connection
with this safe harbor legislation. This report and any other written
or oral statements made by us or on our behalf may include forward-looking
statements, which reflect our current views with respect to future events and
financial performance. When used in this report, the words
"anticipate," "believe," "expect," "intend," "estimate," "forecast," "project,"
"plan," "potential," "may," "should," and similar expressions identify
forward-looking statements.
The forward-looking statements in this
report are based upon various assumptions, many of which are based, in turn,
upon further assumptions, including without limitation, management’s examination
of historical operating trends, data contained in our records and other data
available from third parties. Important assumptions relating to the
forward-looking statements include, among other things, assumptions regarding
demand for our products, the cost and availability of refined marine fuel from
suppliers, pricing levels, the timing and cost of capital expenditures,
competitive conditions, and general economic conditions. These
assumptions could prove inaccurate. Although we believe that these
assumptions were reasonable when made, because these assumptions are inherently
subject to significant uncertainties and contingencies which are difficult or
impossible to predict and are beyond our control, we cannot assure you that we
will achieve or accomplish these expectations, beliefs or
projections.
In addition to these assumptions and
matters discussed elsewhere herein, important factors that, in our view, could
cause actual results to differ materially from those discussed in the
forward-looking statements include:
|
·
|
our
future operating or financial
results;
|
|
·
|
our
future payment of dividends and the availability of cash for payment of
dividends;
|
|
·
|
our
ability to retain and attract senior management and other key
employees;
|
|
·
|
our
ability to manage growth;
|
|
·
|
our
ability to maintain our business in light of our proposed business and
location expansion;
|
|
·
|
our
ability to obtain double hull bunkering tankers given the scarcity of such
vessels in general;
|
|
·
|
the
outcome of legal, tax or regulatory proceedings to which we may become a
party;
|
|
·
|
adverse
conditions in the shipping or the marine fuel supply
industries;
|
|
·
|
our
ability to retain our key suppliers and key
customers;
|
|
·
|
our
contracts and licenses with governmental entities remaining in full force
and effect;
|
|
·
|
material
disruptions in the availability or supply of crude oil or refined
petroleum products;
|
|
·
|
changes
in the market price of petroleum, including the volatility of spot
pricing;
|
|
·
|
increased
levels of competition;
|
|
·
|
compliance
or lack of compliance with various environmental and other applicable laws
and regulations;
|
|
·
|
our
ability to collect accounts
receivable;
|
|
·
|
changes
in the political, economic or regulatory conditions in the markets in
which we operate, and the world in
general;
|
|
·
|
our
future, pending or recent acquisitions, business strategy, areas of
possible expansion, and expected capital spending or operating
expenses;
|
|
·
|
our
failure to hedge certain financial risks associated with our
business;
|
|
·
|
our
ability to maintain our current tax
treatment;
|
|
·
|
our
failure to comply with restrictions in our credit
agreements;
|
|
·
|
increases
in interest rates; and
|
|
·
|
other
important factors described from time to time in our filings with the
Commission.
|
AEGEAN MARINE PETROLEUM NETWORK
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF DECEMBER 31, 2008 AND JUNE 30, 2009
(UNAUDITED)
(Expressed
in thousands of U.S. dollars – except for share and per share
data)
|
|
December
31, 2008
|
|
|
June
30,
2009
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
46,927 |
|
|
$ |
27,316 |
|
Trade
receivables, net of allowance for doubtful accounts of $1,323 and $1,282,
as
of December 31, 2008 and June 30, 2009, respectively
|
|
|
131,266 |
|
|
|
231,302 |
|
Due
from related companies
|
|
|
2,501 |
|
|
|
5,949 |
|
Inventories
|
|
|
55,330 |
|
|
|
103,828 |
|
Prepayments
and other current assets
|
|
|
13,731 |
|
|
|
16,359 |
|
Restricted
cash
|
|
|
1,632 |
|
|
|
- |
|
Total
current assets
|
|
|
251,387 |
|
|
|
384,754 |
|
|
|
|
|
|
|
|
|
|
FIXED
ASSETS:
|
|
|
|
|
|
|
|
|
Advances
for vessels under construction and acquisitions
|
|
|
113,564 |
|
|
|
139,032 |
|
Vessels,
cost
|
|
|
260,741 |
|
|
|
284,910 |
|
Vessels,
accumulated depreciation
|
|
|
(26,606 |
) |
|
|
(33,824 |
) |
Vessels'
net book value
|
|
|
234,135 |
|
|
|
251,086 |
|
Other
fixed assets, net
|
|
|
1,681 |
|
|
|
1,770 |
|
Total
fixed assets
|
|
|
349,380 |
|
|
|
391,888 |
|
|
|
|
|
|
|
|
|
|
OTHER
NON-CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
3,838 |
|
|
|
- |
|
Deferred
charges, net
|
|
|
12,440 |
|
|
|
13,188 |
|
Concession
Agreement
|
|
|
7,407 |
|
|
|
7,253 |
|
Goodwill
|
|
|
17,431 |
|
|
|
17,431 |
|
Other
non-current assets
|
|
|
24 |
|
|
|
333 |
|
Total
assets
|
|
$ |
641,907 |
|
|
$ |
814,847 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$ |
90,000 |
|
|
$ |
29,234 |
|
Current
portion of long-term debt
|
|
|
9,352 |
|
|
|
10,242 |
|
Trade
payables to third parties
|
|
|
67,817 |
|
|
|
111,198 |
|
Trade
payables to related companies
|
|
|
22,462 |
|
|
|
29,252 |
|
Other
payables to related companies
|
|
|
187 |
|
|
|
831 |
|
Accrued
and other current liabilities
|
|
|
12,204 |
|
|
|
12,197 |
|
Total
current liabilities
|
|
|
202,022 |
|
|
|
192,954 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM
DEBT, net of current portion
|
|
|
154,269 |
|
|
|
311,395 |
|
|
|
|
|
|
|
|
|
|
OTHER
NON-CURRENT LIABILITIES
|
|
|
613 |
|
|
|
4,226 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.01 par value; 25,000,000 shares authorized, none
issued
|
|
|
- |
|
|
|
- |
|
Common
stock, $0.01 par value; 100,000,000 shares authorized;
42,543,608
and 42,586,505 shares, issued and outstanding at December 31, 2008 and
June 30, 2009, respectively
|
|
|
425 |
|
|
|
426 |
|
Additional
paid-in capital
|
|
|
190,658 |
|
|
|
192,276 |
|
Accumulated
other comprehensive income
|
|
|
211 |
|
|
|
- |
|
Retained
earnings
|
|
|
93,709 |
|
|
|
113,570 |
|
Total
stockholders' equity
|
|
|
285,003 |
|
|
|
306,272 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$ |
641,907 |
|
|
$ |
814,847 |
|
The
accompanying condensed notes are an integral part of these consolidated
financial statements
AEGEAN
MARINE PETROLEUM NETWORK INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
FOR
THE SIX MONTHS PERIODS ENDED JUNE 30, 2008 AND 2009
(UNAUDITED)
(Expressed
in thousands of U.S. dollars – except for share and per share data)
|
|
Six
Months Ended June 30,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
REVENUES:
|
|
|
|
|
|
|
Sales
of marine petroleum products – third parties
|
|
$ |
1,261,679 |
|
|
$ |
896,349 |
|
Sales
of marine petroleum products – related companies
|
|
|
7,322 |
|
|
|
2,817 |
|
Voyage
revenues
|
|
|
- |
|
|
|
5,540 |
|
Other
revenues
|
|
|
4,047 |
|
|
|
3,279 |
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
|
1,273,048 |
|
|
|
907,985 |
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
Cost
of marine petroleum products sold – third parties
|
|
|
1,043,261 |
|
|
|
709,884 |
|
Cost
of marine petroleum products sold – related companies
|
|
|
149,020 |
|
|
|
108,830 |
|
Salaries,
wages and related costs
|
|
|
18,790 |
|
|
|
22,493 |
|
Depreciation
|
|
|
5,681 |
|
|
|
7,807 |
|
Amortization
of drydocking costs
|
|
|
1,656 |
|
|
|
2,115 |
|
Amortization
of concession agreement
|
|
|
155 |
|
|
|
155 |
|
Gain
on sale of vessels
|
|
|
- |
|
|
|
(4,185 |
) |
Other
operating expenses
|
|
|
33,565 |
|
|
|
34,970 |
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
1,252,128 |
|
|
|
882,069 |
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
20,920 |
|
|
|
25,916 |
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME/(EXPENSE):
|
|
|
|
|
|
|
|
|
Interest
and finance costs
|
|
|
(5,053 |
) |
|
|
(4,482 |
) |
Interest
income
|
|
|
224 |
|
|
|
24 |
|
Foreign
exchange gains(losses), net
|
|
|
1,304 |
|
|
|
(216 |
) |
|
|
|
(3,525 |
) |
|
|
(4,674 |
) |
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
17,395 |
|
|
|
21,242 |
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
(7 |
) |
|
|
(523 |
) |
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
17,388 |
|
|
$ |
20,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share
|
|
$ |
0.41 |
|
|
$ |
0.49 |
|
Diluted
earnings per common share
|
|
$ |
0.41 |
|
|
$ |
0.49 |
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares, basic
|
|
|
42,483,292 |
|
|
|
42,565,254 |
|
Weighted
average number of shares, diluted
|
|
|
42,629,293 |
|
|
|
42,565,254 |
|
The accompanying condensed notes are an
integral part of these consolidated financial statements
AEGEAN
MARINE PETROLEUM NETWORK INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE SIX MONTHS PERIODS ENDED JUNE 30, 2008 AND 2009
(UNAUDITED)
(Expressed
in thousands of U.S. dollars)
|
|
Six
Months Ended June 30,
|
|
|
|
2008
|
|
|
2009
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
17,388 |
|
|
$ |
20,719 |
|
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
5,681 |
|
|
|
7,807 |
|
Provision
for (release of) doubtful accounts
|
|
|
45 |
|
|
|
(41 |
) |
Share-based
compensation
|
|
|
897 |
|
|
|
1,618 |
|
Amortization
|
|
|
2,264 |
|
|
|
2,626 |
|
Provision
for income taxes
|
|
|
- |
|
|
|
523 |
|
Gain
on sale of vessels
|
|
|
- |
|
|
|
(4,185 |
) |
(Increase)
Decrease in:
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
(101,717 |
) |
|
|
(99,995 |
) |
Due
from related companies
|
|
|
(1,805 |
) |
|
|
(3,448 |
) |
Inventories
|
|
|
(18,835 |
) |
|
|
(48,498 |
) |
Prepayments
and other current assets
|
|
|
(8,680 |
) |
|
|
(2,628 |
) |
Increase
(Decrease) in:
|
|
|
|
|
|
|
|
|
Trade
payables
|
|
|
129,612 |
|
|
|
49,129 |
|
Other
payables to related companies
|
|
|
(144 |
) |
|
|
644 |
|
Accrued
and other current liabilities
|
|
|
510 |
|
|
|
(1,899 |
) |
Decrease
(Increase) in other non-current assets
|
|
|
(1 |
) |
|
|
(309 |
) |
Increase
in other non-current liabilities
|
|
|
44 |
|
|
|
17 |
|
Payments
for dry-docking
|
|
|
(3,770 |
) |
|
|
(1,857 |
) |
Net
cash provided by (used in) operating activities
|
|
|
21,489 |
|
|
|
(79,777 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Advances
for vessels under construction
|
|
|
(64,573 |
) |
|
|
(52,406 |
) |
Advances
for vessels acquisitions
|
|
|
(959 |
) |
|
|
(22,160 |
) |
Net
proceeds from sales of vessels
|
|
|
- |
|
|
|
34,149 |
|
Purchase
of other fixed assets
|
|
|
(372 |
) |
|
|
(264 |
) |
Decrease
in restricted cash
|
|
|
13,797 |
|
|
|
5,470 |
|
Net
cash used in investing activities
|
|
|
(52,107 |
) |
|
|
(35,211 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from long-term debt
|
|
|
43,439 |
|
|
|
181,858 |
|
Repayment
of long-term debt
|
|
|
(1,180 |
) |
|
|
(23,842 |
) |
Net
change in short-term borrowings
|
|
|
3,993 |
|
|
|
(60,766 |
) |
Financing
costs paid
|
|
|
(691 |
) |
|
|
(1,015 |
) |
Dividends
paid
|
|
|
(854 |
) |
|
|
(858 |
) |
Net
cash provided by financing activities
|
|
|
44,707 |
|
|
|
95,377 |
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
14,089 |
|
|
|
(19,611 |
) |
Cash
and cash equivalents at beginning of period
|
|
|
1,967 |
|
|
|
46,927 |
|
Cash
and cash equivalents at end of period
|
|
$ |
16,056 |
|
|
$ |
27,316 |
|
The
accompanying condensed notes are an integral part of these consolidated
financial statements
AEGEAN
MARINE PETROLEUM NETWORK INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. dollars –
except
share and per share data, unless otherwise
stated)
1. Basis
of Presentation and General Information:
The
accompanying unaudited condensed consolidated financial statements include the
accounts of Aegean Marine Petroleum Network Inc. ("Aegean") and its subsidiaries
(Aegean and its subsidiaries are hereinafter collectively referred to as the
"Company") and have been prepared in accordance with U.S. generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all the information and notes required by U.S. generally accepted
accounting principles for complete financial statements.
These
unaudited condensed consolidated financial statements have been prepared on the
same basis as the annual financial statements and, in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments,
considered necessary for a fair presentation of the Company's financial
position, results of operations and cash flows for the periods presented.
Operating results for the six months ended June 30, 2009 are not necessarily
indicative of the results that might be expected for the fiscal year ending
December 31, 2009.
These
unaudited condensed consolidated financial statements presented in this report
should be read in conjunction with the audited consolidated financial statements
included in the Company's Annual Report on form 20-F for the year ended December
31, 2008. In addition to the accounting policies disclosed therein, the
following policy was adopted in the six months ended June 30, 2009:
Leases:
The Company records vessels under capital leases as fixed assets at the lower of
the present value of the minimum lease payments at inception of the lease or the
fair value of the vessel. Vessels under capital leases are amortized over the
estimated remaining useful life of the vessel for capital leases which provide
for transfer of title of the vessel, similar to that used for other vessels of
the Company. Assets held under capital leases are presented as
"Advances for vessels under construction and acquisitions" in the balance sheet
until the vessel is deemed ready for its intend use and the balance is
reclassified to "Vessels, cost". The current portion of capitalized
lease obligations are reflected in the balance sheet are presented in "Accrued
and other current liabilities" and remaining long-term capitalized lease
obligations are presented as "Other non-current liabilities".
2. Adoption
of New Accounting Standards:
The
Company adopted Financial Accounting Standards Board (FASB) Staff Position No.
157-2, "Effective Date of FASB Statement No. 157" (FSP 157-2) on January 1,
2009, which delayed the effective date of Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" (SFAS 157) for all non-financial
assets and non-financial liabilities, except for items that are recognized or
disclosed at fair value on a recurring basis (at least annually). This standard
did not have a material impact on the Company's financial condition and results
of operations.
The
Company adopted FASB Staff Position 142-3, "Determination of the Useful Life of
Intangible Assets", (FSP 142-3). FSP 142-3 amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, "Goodwill and Other Intangible Assets".
This
standard did not have a material impact on the Company's financial condition and
results of operations.
The
Company adopted FASB No. 161, "Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133" (SFAS 161). SFAS 161
requires entities to provide greater transparency through additional disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) and
its related interpretations, and (c) how derivative instruments and related
hedged items affect an
AEGEAN
MARINE PETROLEUM NETWORK INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. dollars –
except
share and per share data, unless otherwise
stated)
2. Adoption
of New Accounting Standards: (Continued)
entity's
financial position, results of operations and cash flows. This standard did not
have a material impact on the Company's disclosure.
The
Company adopted FASB Staff Position No. EITF 03-6-1, "Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities" (FSP 03-6-1). In FSP 03-6-1, unvested share-based payment awards
that contain rights to receive nonforfeitable dividends or dividend equivalents
(whether paid or unpaid) are participating securities, and thus, should be
included in the two-class method of computing earnings per share (EPS). This
standard did not have a material impact on the Company's disclosure of
EPS.
The
Company adopted FASB No. 160, "Accounting and Reporting of Noncontrolling
Interests in consolidated financial statements, an amendment of ARB No. 51"
(SFAS 160).
This
standard did not have any impact on the Company's disclosure as there are no
Noncontrolling Interests.
The
Company adopted FASB No. 141(R), "Business Combinations" (SFAS 141(R)) which
significantly changed the accounting for and reporting of business combination
transactions. This standard was effective for the Company for business
combination transactions for which the acquisition date was on or after January
1, 2009. No business combination transactions occurred during the six months
ended June 30, 2009.
The
Company adopted SFAS No. 165 "Subsequent Events"("SFAS No. 165"), which provides
guidance on management's assessment of subsequent events. SFAS 165 clarifies
that management must evaluate, as of each reporting period (i.e. interim and
annual), events or transactions that occur after the balance sheet date "through
the date that the financial statements are issued or are available to be
issued." Does not change the recognition and disclosure requirements in AICPA
Professional Standards, AU Section 560, "Subsequent Events" ("AU Section 560")
for Type I and Type II subsequent events; however, Statement 165 refers to them
as recognized (Type I) and nonrecognized subsequent events (Type II). Requires
management to disclose, in addition to the disclosures in AU Section 560, the
date through which subsequent events have been evaluated and whether that is the
date on which the financial statements were issued or were available to be
issued. SFAS 165 also indicates that management should consider supplementing
historical financial statements with the pro forma impact of nonrecognized
subsequent events if the event is so significant that disclosure of the event
could be best made through the use of pro forma financial data. SFAS 165 is
effective prospectively for interim or annual financial periods ending after
June 15, 2009. The Company adopted SFAS No. 165 in the second quarter of 2009
and the adoption did not have significant impact on the Company's financial
statements.
On June
29, 2009 the FASB issued statement No. 168, FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles — a
replacement of FASB Statement No. 162 (SFAS No. 168), which became the single
source of authoritative U.S. GAAP recognized by the FASB to be applied by
nongovernmental entities. Once effective, the Codification's content will carry
the same level of authority, effectively superseding Statement 162. In other
words, the GAAP hierarchy will be modified to include only two levels of GAAP:
authoritative and nonauthoritative." Statement 168 is effective for financial
statements issued for interim and annual periods ending after September 15,
2009. The Company will adopt SFAS No. 168 in the third quarter of 2009 and does
not expect this standard will have an impact on the Company's financial
statements.
AEGEAN
MARINE PETROLEUM NETWORK INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. dollars –
except
share and per share data, unless otherwise
stated)
3. Inventories:
The
amounts shown in the accompanying condensed consolidated balance sheets are
analyzed as follows:
|
|
December
31, 2008
|
|
|
June
30,
2009
|
|
Held
for sale:
|
|
|
|
|
|
|
Marine
Fuel Oil
|
|
|
44,564 |
|
|
|
90,933 |
|
Marine
Gas Oil
|
|
|
9,151 |
|
|
|
11,597 |
|
|
|
|
53,715 |
|
|
|
102,530 |
|
Held
for consumption:
|
|
|
|
|
|
|
|
|
Marine
fuel
|
|
|
517 |
|
|
|
238 |
|
Lubricants
|
|
|
920 |
|
|
|
927 |
|
Stores
|
|
|
33 |
|
|
|
26 |
|
Victuals
|
|
|
145 |
|
|
|
107 |
|
|
|
|
1,615 |
|
|
|
1,298 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
55,330 |
|
|
|
103,828 |
|
4. Advances
for Vessels under Construction and Acquisitions:
During
the six months ended June 30, 2009, the movement of the account, advances for
vessels under construction and acquisitions, was as follows:
Balance,
January 1, 2009
|
|
|
113,564 |
|
Advances
for vessels under construction and related costs
|
|
|
53,470 |
|
Payments
for secondhand vessel acquisitions
|
|
|
26,527 |
|
Vessels
delivered
|
|
|
(54,529 |
) |
Balance
June 30, 2009
|
|
|
139,032 |
|
On
February 9, 2009, and in connection with the call option agreement with the
Fujian Southeast Shipyard ("Fujian"), which was signed on May 25, 2007, as
amended, the Company signed five separate contracts with an engineering firm for
the design, building supervision, representation, procurement of machineries and
supplies, and turn-key delivery of the five 4,600 dwt product oil tankers (hull
numbers DN-3800-11 to 15). The price of each such contract is $1,150, of which
15% is payable upon keel-laying, 40% is payable upon launching and 45% is
payable upon delivery and acceptance.
On
February 9, 2009, and in connection with the call option agreement with the
Qingdao Hyundai Shipbuilding Co. Ltd. ("Qingdao Hyundai"), which had signed on
February 28, 2008, the Company signed four separate contracts with an
engineering firm for the design, building supervision, representation,
procurement of machineries and supplies, and turn-key delivery of the four 5,500
dwt, product oil tankers (hull numbers QHS-225 to 228). The price of each such
contract is $1,600, of which 15% is payable upon keel-laying, 40% is payable
upon launching and 45% is payable upon delivery and acceptance.
On March
19, 2009, the Company signed a Memorandum of Agreement with a third-party seller
for the purchase of a Norwegian-flagged 11,520 dwt (built in 1980) double hull
bunkering tanker, M/T Linnea (renamed "Aegean Star"). The purchase price of the
vessel was $4,200, which was fully paid on the delivery of the vessel on April
8, 2009.
On March
27, 2009, the Company signed a Memorandum of Agreement with a third-party seller
for the purchase of a Marshall Islands-flagged 23,400 dwt (built in 1991) double
hull bunkering tanker, M/T Sichem Arctic (renamed "Aegean Champion"). The
purchase price of the vessel was $12,300, which was fully paid on the delivery
of the vessel on April 30, 2009.
AEGEAN
MARINE PETROLEUM NETWORK INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. dollars –
except
share and per share data, unless otherwise
stated)
4. Advances
for Vessels under Construction and Acquisitions: (Continued)
On April
30, 2009, the Company signed a Bareboat Charter Agreement with a third-party
owner for the charter of a Canadian – flagged 2,315dwt (built in 2001) double
hull Oil Tank Barge, ITB Provider (renamed "PT 22"). The charter period is sixty
months. At expiration of the charter and upon the fulfillment of the Company's
obligations, which are separately described in Note 10 ("Capital Leases"), the
title of PT 22 will transfer to the Company.
The
amounts shown in the accompanying condensed consolidated balance sheets include
advance and milestone payments relating to the shipbuilding contracts with
shipyards, advance and milestone payments relating to the contracts with the
engineering firm, advance payments for the acquisition of assets, and any
material related expenses incurred during the construction periods which were
capitalized.
As of
June 30, 2009 advances for vessels under construction and acquisitions, is
analyzed as follows:
|
|
|
|
|
|
June
30, 2009
|
|
Vessel
Name
|
|
Year
of
Expected
Delivery
|
|
Contract
Amount
|
|
|
Contract
Payments
|
|
|
Capitalized
Costs
|
|
|
Total
|
|
Fujian
Shipyard
|
|
DN-3800-11
|
2009
|
|
|
10,740 |
|
|
|
4,893 |
|
|
|
177 |
|
|
|
5,070 |
|
DN-3800-12
|
2009
|
|
|
10,740 |
|
|
|
4,893 |
|
|
|
95 |
|
|
|
4,988 |
|
DN-3800-13
|
2009
|
|
|
10,740 |
|
|
|
4,893 |
|
|
|
79 |
|
|
|
4,972 |
|
DN-3800-14
|
2009
|
|
|
10,740 |
|
|
|
2,888 |
|
|
|
75 |
|
|
|
2,963 |
|
DN-3800-15
|
2009
|
|
|
10,740 |
|
|
|
2,888 |
|
|
|
69 |
|
|
|
2,957 |
|
Qingdao
Hyundai Shipyard
|
|
QHS-207
|
2009
|
|
|
11,600 |
|
|
|
8,880 |
|
|
|
326 |
|
|
|
9,206 |
|
QHS-208
|
2009
|
|
|
11,600 |
|
|
|
8,880 |
|
|
|
297 |
|
|
|
9,177 |
|
QHS-209
|
2009
|
|
|
11,600 |
|
|
|
8,880 |
|
|
|
281 |
|
|
|
9,161 |
|
QHS-210
|
2009
|
|
|
11,600 |
|
|
|
8,880 |
|
|
|
277 |
|
|
|
9,157 |
|
QHS-215
|
2009
|
|
|
11,600 |
|
|
|
8,880 |
|
|
|
259 |
|
|
|
9,139 |
|
QHS-216
|
2009
|
|
|
11,600 |
|
|
|
8,880 |
|
|
|
245 |
|
|
|
9,125 |
|
QHS-217
|
2009
|
|
|
11,600 |
|
|
|
6,240 |
|
|
|
241 |
|
|
|
6,481 |
|
QHS-222
|
2009
|
|
|
11,000 |
|
|
|
4,940 |
|
|
|
165 |
|
|
|
5,105 |
|
QHS-223
|
2009
|
|
|
11,000 |
|
|
|
4,940 |
|
|
|
158 |
|
|
|
5,098 |
|
QHS-224
|
2009
|
|
|
11,000 |
|
|
|
4,940 |
|
|
|
199 |
|
|
|
5,139 |
|
QHS-225
|
2009
|
|
|
12,200 |
|
|
|
7,660
|
|
|
|
165
|
|
|
|
7,825 |
|
QHS-226
|
2010
|
|
|
12,200 |
|
|
|
7,660
|
|
|
|
157
|
|
|
|
7,817
|
|
QHS-227
|
2010
|
|
|
12,200 |
|
|
|
7,660
|
|
|
|
146
|
|
|
|
7,806
|
|
QHS-228
|
2010
|
|
|
12,200 |
|
|
|
7,660
|
|
|
|
125
|
|
|
|
7,785
|
|
Acquired
Assets
|
|
Aegean
Star*
|
2009
|
|
|
4,274 |
|
|
|
4,274
|
|
|
|
922 |
|
|
|
5,196 |
|
Launch*
|
2009
|
|
|
375 |
|
|
|
375 |
|
|
|
- |
|
|
|
375 |
|
PT22*
|
2009
|
|
|
4,490 |
|
|
|
4,490 |
|
|
|
- |
|
|
|
4,490 |
|
|
Total
|
|
|
225,839 |
|
|
|
134,574 |
|
|
|
4,458 |
|
|
|
139,032 |
|
_____________________
* Vessels
delivered but as of June 30, 2009, were not positioned and
operational.
As of
June 30, 2009 the remaining obligations under these contracts are payable as
follows:
|
|
Amount
|
|
July
1 to December 31, 2009
|
|
|
55,060 |
|
2010
|
|
|
36,205 |
|
|
|
|
91,265 |
|
AEGEAN
MARINE PETROLEUM NETWORK INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. dollars –
except
share and per share data, unless otherwise
stated)
5. Vessels:
During
the six months ended June 30, 2009, the movement of the account, vessels, was as
follows:
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net
Book Value
|
|
Balance,
January 1, 2009
|
|
|
260,741 |
|
|
|
(26,606 |
) |
|
|
234,135 |
|
-
Vessels additions
|
|
|
54,529 |
|
|
|
- |
|
|
|
54,529 |
|
-
Disposals
|
|
|
(30,360 |
) |
|
|
396 |
|
|
|
(29,964 |
) |
-
Depreciation
|
|
|
- |
|
|
|
(7,614 |
) |
|
|
(7,614 |
) |
Balance,
June 30, 2009
|
|
|
284,910 |
|
|
|
33,824 |
|
|
|
251,086 |
|
On June
10, 2009, the Company sold the vessels, Maistros and Ostria to an unaffiliated
third-party purchaser for an aggregate price of $34,149. The resulting gain on
sale of $4,185 is separately reflected in the consolidated statement of income
for the six months ended June 30, 2009.
6. Deferred
Charges:
During
the six months ended June 30, 2009, the movement of the account, deferred
charges was as follows:
|
|
Drydocking
|
|
|
Financing
Costs
|
|
|
Total
|
|
Balance,
January 1, 2009
|
|
|
11,485 |
|
|
|
955 |
|
|
|
12,440 |
|
-
Additions
|
|
|
2,204 |
|
|
|
1,015 |
|
|
|
3,219 |
|
-
Amortization
|
|
|
(2,115 |
) |
|
|
(356 |
) |
|
|
(2,471 |
) |
Balance,
June 30, 2009
|
|
|
11,574 |
|
|
|
1,614 |
|
|
|
13,188 |
|
The
amortization for drydocking costs is separately reflected in the accompanying
condensed consolidated statements of income. The amortization of financing costs
is included in interest and finance costs in the accompanying condensed
consolidated statements of income.
AEGEAN
MARINE PETROLEUM NETWORK INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. dollars –
except
share and per share data, unless otherwise
stated)
7. Total
Debt:
The
amounts comprising total debt are presented in the accompanying condensed
consolidated balance sheet as follows:
Loan Facility
|
|
December
31,
2008
|
|
|
June
30,
2009
|
|
Short-term
borrowings:
|
|
|
|
|
|
|
Overdraft
facility under senior secured
credit
facility dated 09/30/2008 (1)
|
|
|
90,000 |
|
|
|
- |
|
Revolving
overdraft facility dated 03/11/2008
|
|
|
- |
|
|
|
19,232 |
|
Revolving
overdraft facility dated 06/24/2009 (2)
|
|
|
|
|
|
|
10,002 |
|
Total
short-term borrowings
|
|
|
90,000 |
|
|
|
29,234 |
|
Long-term
debt:
|
|
|
|
|
|
|
|
|
Secured
syndicated term loan dated 10/26/2005
|
|
|
15,971 |
|
|
|
- |
|
Secured
syndicated term loan dated 8/30/2005
|
|
|
30,312 |
|
|
|
33,340 |
|
Secured
term loan facility under
senior
secured credit facility dated 12/19/2006
|
|
|
31,020 |
|
|
|
29,620 |
|
Secured
term loan dated 10/25/2006
|
|
|
14,172 |
|
|
|
13,928 |
|
Secured
term loan dated 10/27/2006
|
|
|
7,896 |
|
|
|
12,239 |
|
Secured
syndicated term loan dated 10/30/2006
|
|
|
28,000 |
|
|
|
40,000 |
|
Secured
term loan dated 7/5/2007 as amended on 09/12/2008
|
|
|
6,650 |
|
|
|
16,410 |
|
Secured
syndicated term loan dated 04/24/2008
|
|
|
15,100 |
|
|
|
23,600 |
|
Secured
syndicated term loan dated 07/08/2008
|
|
|
14,500 |
|
|
|
13,500 |
|
Overdraft
facility under senior secured
credit
facility dated 03/16/2009 (1)
|
|
|
- |
|
|
|
139,000 |
|
Total
|
|
|
163,621 |
|
|
|
321,637 |
|
Less: Current
portion of long-term debt
|
|
|
(9,352 |
) |
|
|
(10,242 |
) |
Long-term
debt, net of current portion
|
|
|
154,269 |
|
|
|
311,395 |
|
__________________________
(1) On
March 16, 2009, the Company renewed retroactively from February 1, 2009, for a
period of two years, until January 30, 2011, the senior secured syndicated
revolver, guarantee and letter of credit facility that was signed on September
30, 2008. The participant banks are the same group of international commercial
lenders. The amount of the facility is up to $1,000,000, for working capital and
general corporate purposes. The renewed facility had a committed amount of up to
$250,000 consisting of a guarantee and/or letter of credit line in an amount of
up to $147,500 and a cash advance limit in an amount of up to $208,000 on March
31, 2009. The facility bears interest at LIBOR plus 2.50%, while documentary and
standby letters of credit are subject to commissions of 0.75% and 1.50%,
respectively. As of June 30, 2009, the outstanding balance under this facility
was $139,000.
(2) On
June 24, 2009, the Company entered into a three month revolving overdraft
facility with a Greek bank for an amount of $20,000. The facility is secured
with the guarantee of the ship owning companies of the vessels, Aegean Ace,
Aegean Champion and Aegean Star and bears interest at LIBOR plus 3.50%. As of
June 30, 2009, the outstanding balance under this facility was
$10,002.
As of
June 30, 2009, the Company had an available unutilized overdraft line of $17,510
under its senior secured credit facility, and had an available unutilized
aggregate amount of $83,599 under its secured term loan facilities.
AEGEAN
MARINE PETROLEUM NETWORK INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. dollars –
except
share and per share data, unless otherwise
stated)
7. Total
Debt: (Continued)
As of
June 30, 2009, the Company was in compliance with the financial covenants under
its facility agreements.
The
annual principal payments of long-term debt required to be made after June 30,
2009, are as follows:
|
|
Amount
|
|
July
1 to December 31, 2009
|
|
|
4,389 |
|
2010
|
|
|
12,768 |
|
2011
|
|
|
152,995 |
|
2012
|
|
|
13,995 |
|
2013
|
|
|
18,494 |
|
2014
and thereafter
|
|
|
118,996 |
|
|
|
|
321,637 |
|
8. Other
Operating Expenses:
The
amounts in the accompanying condensed consolidated statements of income are
analyzed as follows:
|
|
Six
Months Ended June 30,
|
|
|
|
2008
|
|
|
2009
|
|
Bunkering
tanker voyage expenses
|
|
|
427 |
|
|
|
1,229 |
|
Bunkering
tanker insurance
|
|
|
859 |
|
|
|
1,178 |
|
Bunkering
tanker repairs and maintenance
|
|
|
1,992 |
|
|
|
1,764 |
|
Bunkering
tanker spares and consumable stores
|
|
|
1,342 |
|
|
|
1,939 |
|
Bunkering
tanker consumption of
marine petroleum products
|
|
|
8,594 |
|
|
|
5,600 |
|
Bunkering
tanker other operating expenses
|
|
|
666 |
|
|
|
8,118 |
|
Cargo
transportation
|
|
|
5,765 |
|
|
|
2,043 |
|
Provision
for doubtful accounts
|
|
|
45 |
|
|
|
(41 |
) |
Operating
costs of storage facilities
|
|
|
2,063 |
|
|
|
1,436 |
|
Port
and related expenses
|
|
|
2,135 |
|
|
|
2,043 |
|
General
and administrative
|
|
|
6,927 |
|
|
|
7,788 |
|
Broker
commissions
|
|
|
974 |
|
|
|
1,149 |
|
Other
|
|
|
1,776 |
|
|
|
724 |
|
Total
|
|
|
33,565 |
|
|
|
34,970 |
|
AEGEAN
MARINE PETROLEUM NETWORK INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. dollars –
except
share and per share data, unless otherwise
stated)
On
November 30, 2005, an unrelated third party filed a declaratory action against
the Company before the First Instance Court of Piraeus. The plaintiff asserts
that he was instrumental in the negotiation of the Company's Fuel Purchase
Agreement with a government refinery in Jamaica, and seeks a judicial
affirmation of his alleged contractual right to receive a commission of $1 per
metric ton sold over the life of that contract, which as per the plaintiff's
calculation, amounts to $10,080 over a period of 12 years. In 2007, the Court of
First Instance ruled that the claim is maritime-related and not within its
jurisdiction. Accordingly, the claim was referred to the Maritime Disputes
Division of the Court of First Instance in Piraeus. The case was re-scheduled to
be heard on May 13, 2008. The case was duly heard on May 13, 2008, before the
Maritime Division of the Multi-Member First Instance Court of Piraeus. Judgment
No.5493 was rendered by the Court on December 3, 2008, dismissing plaintiff's
lawsuit having found same to be vague and therefore inadmissible for further
examination on the merits. Also the Court has condemned the plaintiff to pay
Euro 10,000 to AMP in reimbursement of its legal costs. The Judgment is open to
appeal by the claimant. On February 26, 2009, the claimant who was seeking a
commission under the Company's eight-year Fuel Purchase Agreement with a
government refinery in Jamaica commenced a new civil law suit against AMP and
Mr. Melisanidis in the Commercial Court of Paris, France, seeking a payment of
approximately $180 of alleged commissions and $400 of compensatory
damages. After an initial hearing that was held on March 31, 2009,
the court had a hearing in the case on May 5, 2009 and a Decision in the
Company's favour was issued by the Paris Court of First Instance on June 9, 2009
dismissing the plaintiff's case. Following the issuance of the latter Decision,
the plaintiff commenced summary (emergency) proceedings seeking to receive a
provisional payment of Euro 600 the initial hearing of which was scheduled for
July 29, 2009 and then adjourned for October 2, 2009. Additionally the plaintiff
filed an appeal against the Decision issued by the Paris Court of First Instance
the hearing of which will be fixed by the Appeal Court in the future. The
Company believes that this claim is unwarranted and lacking in merit and
management believes that the Company will not incur a material loss in
connection with this lawsuit.
Various
claims, suits, and complaints, including those involving government regulations
and product liability, arise in the ordinary course of business. In addition,
losses may arise from disputes with charterers and agents and insurance and
other claims with suppliers relating to the operations of the Company's
vessels. Currently, management is not aware of any such claims or
contingent liabilities for which a provision should be established in these
condensed consolidated financial statements.
The
Company accrues for the cost of environmental liabilities when management
becomes aware that a liability is probable and is able to reasonably estimate
the Company's exposure. Currently, management is not aware of any such claims or
contingent liabilities for which a provision should be established in these
condensed consolidated financial statements. The Company's Protection and
Indemnity ("P&I") insurance policies cover third-party liability and other
expenses related to injury or death of crew, passengers and other third parties,
loss or damage of cargo, claims arising from collisions with other vessels,
damage to other third-party property, and pollution arising from oil or other
substances. The Company's coverage under the P&I insurance
policies, except for pollution, are unlimited. Coverage for pollution is $1
billion per vessel per incident.
AEGEAN
MARINE PETROLEUM NETWORK INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. dollars –
except
share and per share data, unless otherwise
stated)
10. Capital
Leases:
As
discussed in Note 4, the Company leases Barge PT 22 under a capital
lease. The annual future minimum lease payments under the capital
lease, of Barge PT 22, together with the present value of the net minimum lease
payments required to be made after June 30, 2009, are as follows:
|
|
Amount
|
|
July
1 to December 31, 2009
|
|
$ |
546 |
|
2010
|
|
|
1,092 |
|
2011
|
|
|
1,092 |
|
2012
|
|
|
1,092 |
|
2013
|
|
|
1,092 |
|
Thereafter
|
|
|
365 |
|
Total
minimum lease payments
|
|
|
5,279 |
|
Less:
imputed interest
|
|
|
(912 |
) |
Present
value of minimum lease payments
|
|
|
4,367 |
|
Current
portion of capitalized lease obligations
|
|
|
771 |
|
Long-term
capitalized lease obligations
|
|
$ |
3,596 |
|
11. Equity
Incentive Plan:
On March
17, 2009, the Company made grants of restricted common stock aggregating 160,500
shares to certain officers and directors of the Company. With respect to 30,000
shares, the restrictions lapse in 20% lots over five years from the grant date.
With respect to 75,000 shares, the restrictions lapse in five years from the
grant date. With respect to 55,500 shares, the restrictions lapse in 25% lots
over four years from the grant date.
On June
16, 2009, the Company granted 12,000 shares of restricted common stock to four
non-executive members of the Board of Directors. The restricted shares vest and
the restrictions lapse on the date of the 2010 Annual Meeting of
Shareholders.
The
following table summarizes the status of the Company's unvested restricted stock
outstanding for the six months ended June 30, 2009:
|
|
Unvested
Restricted Stock
|
|
|
Weighted
Average Grant Date Fair Value
|
|
January
1, 2009
|
|
|
297,695 |
|
|
|
27.12 |
|
Granted
|
|
|
172,500 |
|
|
|
17.82 |
|
Vested
|
|
|
(42,897 |
) |
|
|
20.11 |
|
June
30, 2009
|
|
|
427,298 |
|
|
|
24.07 |
|
The
grant-date fair values of the restricted stock are determined by the closing
price of the Company's common stock traded on the NYSE on the grant date. Total
compensation cost of $1,618 was recognized and included under salaries, wages
and related costs in the accompanying condensed consolidated statement of income
for the six months ended June 30, 2009.
AEGEAN
MARINE PETROLEUM NETWORK INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. dollars –
except
share and per share data, unless otherwise
stated)
11. Equity
Incentive Plan: (Continued)
As of
June 30, 2009, there was $6,971 of total unrecognized compensation cost related
to non-vested restricted stock awards, which is expected to be recognized as
compensation expense over a weighted average period of 3.0 years as
follows:
|
|
Amount
|
|
July
1 to December 31, 2009
|
|
|
1,681 |
|
2010
|
|
|
2,274 |
|
2011
|
|
|
1,548 |
|
2012
|
|
|
1,140 |
|
2013
|
|
|
306 |
|
2014
|
|
|
22 |
|
|
|
|
6,971 |
|
12.
|
Common
Stock and Additional Paid-In
Capital:
|
Aegean
was formed on June 6, 2005, under the laws of Marshall Islands. The Company's
authorized common and preferred stock since inception consisted of 100,000,000
common shares (all in registered form), par value $0.01 per share and 25,000,000
preferred shares (all in registered form), par value $0.01 per
share.
As of
June 30, 2009, the Company had no shares of preferred stock issued and
outstanding and had 42,586,505 shares of common stock, with a par value of
$0.01, issued and outstanding.
During
the six months ended June 30, 2009, the Company declared and paid dividends
of $0.01 per share totaling to $858.
13.
|
Business
Segments and Geographical
Information:
|
The
Company is primarily a physical supplier in the downstream marine petroleum
products industry. Marine petroleum products mainly consist of different
classifications of marine fuel oil, marine gas oil and lubricants.
The
Company cannot and does not identify expenses, profitability or other financial
performance measures by type of marine petroleum product supplied, geographical
area served, nature of services performed or on anything other than on a
consolidated basis (although the Company is able to segregate revenues on these
various bases). As a result, management, including the chief operating decision
maker, reviews operating results on a consolidated basis only. Therefore, the
Company has determined that it has only one operating segment.
AEGEAN
MARINE PETROLEUM NETWORK INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. dollars –
except
share and per share data, unless otherwise
stated)
13.
|
Business
Segments and Geographical Information:
(Continued)
|
Information
concerning the Company's total sales of marine petroleum products is presented
as follows, attributed based on the point-of-delivery geographical locations of
customer vessels:
|
|
Six
Months Ended June 30,
|
|
|
|
2008
|
|
|
2009
|
|
Europe
|
|
|
526,235 |
|
|
|
336,623 |
|
America
|
|
|
157,522 |
|
|
|
142,811 |
|
Africa
|
|
|
48,087 |
|
|
|
29,052 |
|
Asia
|
|
|
537,157 |
|
|
|
390,680 |
|
Total
|
|
|
1,269,001 |
|
|
|
899,166 |
|
The
Company's long-lived assets mainly consist of bunkering tankers which are
positioned across the Company's existing territories and which management,
including the chief operating decision maker, review on a periodic basis and
reposition among the Company's existing or new territories to optimize the
vessel per geographical territory ratio.
The
Company's vessels operate within or outside the territorial waters of each
geographical location and, under international law; shipping vessels usually
fall under the jurisdiction of the country of the flag they sail. The Company's
vessels are not permanently located within particular territorial waters and the
Company is free to mobilize all its vessels worldwide at its own
discretion.
The
following disclosure of the locations of long-lived assets is based on the
physical locations of the assets, which are not necessarily indicative of the
territories that have jurisdiction over such assets:
|
|
December
31, 2008
|
|
|
June
30, 2009
|
|
Europe
|
|
|
127,827 |
|
|
|
114,594 |
|
America
|
|
|
10,470 |
|
|
|
20,619 |
|
Africa
|
|
|
12,663 |
|
|
|
12,379 |
|
Asia
|
|
|
84,856 |
|
|
|
105,264 |
|
Total
|
|
|
235,816 |
|
|
|
252,856 |
|
14.
Subsequent Events:
The
Company has evaluated subsequent events through August 13, 2009, and no
significant subsequent events have occurred.