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 January 2010
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. (the "Company"), as of and for the nine month
period ended September 30, 2009.
This
Report on Form 6-K and the exhibits hereto are hereby incorporated by reference
into the Company's Registration Statement on Form F-3 (Registration No.
333-162935), filed with the U.S. Securities and Exchange Commission on November
6, 2009, as amended on December 4, 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.
|
AEGEAN
MARINE PETROLEUM NETWORK INC. |
|
(registrant) |
|
|
|
Dated: January
19, 2010
|
By:
|
/s/
E. Nikolas Tavlarios
|
|
Name:
|
E.
Nikolas Tavlarios
|
|
Title:
|
President
|
|
|
|
Exhibit
1
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
following is a discussion of our financial condition and results of operations
for the nine month periods ended September 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 U.S.
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, the United Arab Emirates and Jamaica, 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 quantity. 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 is 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, represents 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:
·
|
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.
|
·
|
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
S.A., or 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.
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:
|
|
|
Nine
months ended September
30,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(in
thousands of U.S. dollars, unless otherwise stated)
|
|
|
|
|
|
|
|
|
Sales
of marine petroleum products
|
|
|
2,217,570 |
|
|
|
1,630,968 |
|
Less:
Cost of marine petroleum products sold
|
|
|
(2,092,669 |
) |
|
|
(1,501,179 |
) |
Less:
Cargo transportation costs
|
|
|
(9,569 |
) |
|
|
(3,470 |
) |
Gross
spread on marine petroleum products
|
|
|
115,332 |
|
|
|
126,319 |
|
Less:
Gross spread on lubricants
|
|
|
(964 |
) |
|
|
(1,985 |
) |
Gross
spread on marine fuel
|
|
|
114,368 |
|
|
|
124,334 |
|
|
|
|
|
|
|
|
|
|
Sales
volume of marine fuel (metric tons)
|
|
|
3,631,486 |
|
|
|
4,444,447 |
|
|
|
|
|
|
|
|
|
|
Gross
spread per metric ton of marine fuel sold (U.S. dollars)
|
|
|
31.5 |
|
|
|
28.0 |
|
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:
|
|
Nine
months ended September
30,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(in
thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
Gross
spread on marine petroleum products
|
|
|
115,332 |
|
|
|
126,319 |
|
Add:
Voyage revenues
|
|
|
- |
|
|
|
7,390 |
|
Add:
Other revenues
|
|
|
6,054 |
|
|
|
5,705 |
|
Add:
Gain on sale of vessels
|
|
|
- |
|
|
|
4,185 |
|
Add:
Cargo transportation costs
|
|
|
9,569 |
|
|
|
3,470 |
|
Less:
Salaries, wages and related costs
|
|
|
(29,384 |
) |
|
|
(34,341 |
) |
Less:
Depreciation
|
|
|
(8,998 |
) |
|
|
(12,077 |
) |
Less:
Amortization
|
|
|
(2,860 |
) |
|
|
(3,503 |
) |
Less:
Other operating expenses
|
|
|
(53,736 |
) |
|
|
(54,055 |
) |
Operating
income
|
|
|
35,977 |
|
|
|
43,093 |
|
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.
·
|
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.), Trinidad and Tobago, Tanger-Med in
Morocco 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, in Trinidad on April 1, 2009, and in the port of
Tanger-Med, Morocco on August 25, 2009. On July 1, 2008, we
acquired ICS Petroleum Ltd., or ICS Petroleum, a Canadian based marketer
and supplier of marine petroleum products in Vancouver, Montreal and
Mexico.
|
·
|
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.
|
|
Nine
months ended September
30,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(in
thousands of U.S. dollars)
unless otherwise stated)
|
|
|
|
|
|
|
|
|
Sales volume of marine fuel (metric tons)
|
|
|
3,631,486 |
|
|
|
4,444,447 |
|
Gross
spread on marine petroleum products
|
|
|
115,332 |
|
|
|
126,319 |
|
Gross
spread per metric ton of marine fuel sold (U.S. dollars)
|
|
|
31.5 |
|
|
|
28.0 |
|
Number
of markets served, end of period
|
|
|
11 |
|
|
|
14 |
|
Average
number of operating bunkering vessels
|
|
|
22.2 |
|
|
|
32.4 |
|
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 processes. The cost of marine
petroleum products sold is driven primarily by the 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:
·
|
our
entrance into new markets;
|
·
|
our
purchasing methods of marine petroleum
products;
|
·
|
our
marketing strategy;
|
·
|
our
vessel acquisitions and disposals;
|
·
|
conditions
in the international shipping and the marine fuel supply
industries;
|
·
|
regulation
of the marine fuel supply industry;
|
·
|
regulation
of the tanker industry;
|
·
|
levels
of supply of and demand for marine petroleum
products;
|
·
|
levels
of competition; and
|
·
|
other
factors affecting our industry.
|
The following table reflects our
sales of marine petroleum products in each of the continents our service centers
are located based on the point-of-delivery geographical location of the customer
vessels for the periods indicated.
|
|
Nine
months ended September
30,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
Europe
|
|
|
919,924 |
|
|
|
638,125 |
|
America
|
|
|
351,398 |
|
|
|
239,457 |
|
Africa
|
|
|
80,073 |
|
|
|
57,709 |
|
Asia
|
|
|
866,175 |
|
|
|
695,677 |
|
Total
|
|
|
2,217,570 |
|
|
|
1,630,968 |
|
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 nine month periods ended September 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 our
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.
|
|
Nine
months ended September
30,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
Third-party
suppliers
|
|
|
1,815,755 |
|
|
|
1,295,026 |
|
Related
company suppliers
|
|
|
276,914 |
|
|
|
206,153 |
|
Total
|
|
|
2,092,669 |
|
|
|
1,501,179 |
|
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
center 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 derived from the employment of our specialty tanker with
roll-on roll-off facilities and refueling capabilities for fuel trucks and from
the employment of our bunkering tankers based in Greece. In 2008, we
have employed our double hull 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 nine month period ended
September 30, 2009, we recognized $2.1 million in 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, where we oversee our
financial and other reporting functions. We maintain a minimal number of
salaried employees at our service centers and 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.
|
|
Nine
months ended September
30,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
Shipboard
personnel
|
|
|
15,004 |
|
|
|
17,054 |
|
Shoreside
personnel
|
|
|
14,380 |
|
|
|
17,287 |
|
Total
|
|
|
29,384 |
|
|
|
34,341 |
|
Our
salaries, wages and related costs have grown over the past several years mainly
due to our expansion and the increase in crew wages as we have added bunkering
vessels to our fleet. We expect that the amount of salaries, wages and related
costs will continue to increase as a result of our further expansion into new
markets and acquisitions of additional double hull bunkering tankers and
floating storage facilities.
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 acquisition 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.
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 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,
thereby 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 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, Aegean Marine Petroleum S.A., or AMP, is
incorporated in the Republic of Liberia. Under regulations promulgated by the
Liberian Ministry of Finance, AMP is considered a non-resident domestic
corporation, and is therefore 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 nine month periods ended September 30, 2008 and 2009, our income tax
amounted to $0.9 and $0.7 million, respectively. 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
Nine
months ended September 30, 2009 compared to nine months ended September 30,
2008
Selected
financial data
|
|
Nine
months ended September
30,
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Change
$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
of marine petroleum products
|
|
|
2,217,570 |
|
|
|
1,630,968 |
|
|
|
(586,602 |
) |
|
|
(26.5 |
%) |
Voyage
and other revenues
|
|
|
6,054 |
|
|
|
13,095 |
|
|
|
7,041 |
|
|
|
116.3 |
% |
Total
revenues
|
|
|
2,223,624 |
|
|
|
1,644,063 |
|
|
|
(579,561 |
) |
|
|
(26.1 |
%) |
Cost
of marine petroleum products sold
|
|
|
2,092,669 |
|
|
|
1,501,179 |
|
|
|
(591,490 |
) |
|
|
(28.3 |
%) |
Salaries,
wages and related costs
|
|
|
29,384 |
|
|
|
34,341 |
|
|
|
4,957 |
|
|
|
16.9 |
% |
Depreciation
and amortization
|
|
|
11,858 |
|
|
|
15,580 |
|
|
|
3,722 |
|
|
|
31.4 |
% |
All
other operating expenses
|
|
|
53,736 |
|
|
|
49,870 |
|
|
|
(3,866 |
) |
|
|
(7.2 |
%) |
Operating
income
|
|
|
35,977 |
|
|
|
43,093 |
|
|
|
7,116 |
|
|
|
19.8 |
% |
Net
financing costs
|
|
|
7,919 |
|
|
|
7,195 |
|
|
|
(724 |
) |
|
|
(9.1 |
%) |
Other
non-operating expenses (income)
|
|
|
1,215 |
|
|
|
1,072 |
|
|
|
(143 |
) |
|
|
(11.8 |
%) |
Net
income
|
|
|
26,843 |
|
|
|
34,826 |
|
|
|
7,983 |
|
|
|
29.7 |
% |
Sales of Marine Petroleum
Products. Sales of marine petroleum products decreased by
$586.6 million, or 26.5%, to $1,631.0 million for the nine month period ended
September 30, 2009 compared to $2,217.6 million for the nine month period ended
September 30, 2008. Of the total decrease in sales of marine petroleum products,
$891.6 million was attributable to a 40.4% decrease in the average price of
marine fuel (using sales volumes for the nine month period ended September 30,
2008), while an increase in sales volume of marine fuel (using average prices
for the nine month period ended September 30, 2009) and an increase in the sales
of lubricants increased sales of marine petroleum products by $294.2 and $10.8
million, respectively. Sales volume of marine fuel increased by 812,961 metric
tons, or 22.4%, to 4,444,447 metric tons for the nine month period ended
September 30, 2009, compared to 3,631,486 metric tons for the nine month period
ended September 30, 2008 due to additional volume of sales of marine fuel in
Singapore, Greece and the U.A.E. and due to sales in our new markets: Canada,
Mexico, Trinidad and Tobago and Tanger-Med, Morocco.
Gross Spread on Marine Petroleum
Products. Gross spread on marine petroleum products increased
by $11.0 million, or 9.5%, to $126.3 million for the nine month period ended
September 30, 2009, compared to $115.3 million for the nine month period ended
September 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 nine month period
ended September 30, 2009 decreased by $3.5, or 11.1%, to $28.0 compared to $31.5
for the nine month period ended September 30, 2008. Gross spreads per
metric ton do not generally
increase
or decrease proportionately with the price of marine fuel. Gross spread on
marine petroleum products, as a percentage of total revenues, increased from
5.2% for the nine month period ended September 30, 2008 to 7.7% for the nine
month period ended September 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 $7.4 million for the nine month
period ended September 30, 2009, compared to $0 million for the nine month
period ended September 30, 2008. Voyage revenues for the nine month period ended
September 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, Aegean Tiffany to serve an
unaffiliated third-party.
Salaries, Wages and Related
Costs. Salaries, wages and related costs increased by $4.9
million, or 16.7%, to $34.3 million for the nine month period ended September
30, 2009, compared to $29.4 million for the nine month period ended September
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 32.4 for the nine month period ended September 30, 2009,
compared to 22.2 for the nine month period ended September 30,
2008.
Depreciation. Depreciation
increased by $3.1 million, or 34.4%, to $12.1 million for the nine month period
ended September 30, 2009, compared to $9.0 million for the nine month period
ended September 30, 2008. This increase is in line with the 45.7% increase in
the average number of operating bunkering vessels.
Other Operating
Expenses. Other operating expenses decreased by $3.8 million, or
7.1%, to $49.9 million for the nine month period ended September 30, 2009,
compared to $53.7 million for the nine month period ended September 30, 2008.
This decrease in other operating expenses was primarily attributable to the gain
on sale of the Roro vessels.
Interest and Finance
Costs. Interest and finance costs decreased by $1.1 million,
or 13.3%, to $7.2 million for the nine month period ended September 30, 2009,
compared to $8.3 million for the nine month period ended September 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 the 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.
On
September 17, 2009, our subsidiary, AMP, entered into an annually renewable
senior secured revolving credit facility with a Greek bank for an amount of
$50.0 million. The credit facility is secured by, among other things,
our assigned receivables and corporate guarantee, and bears interest at LIBOR
plus 2.50%. The credit facility contains certain covenants and undertakings that
require, among other things:
·
|
that
we maintain our listing on the New York Stock Exchange (the
"NYSE");
|
·
|
that
our net equity base will not be less than $175.0
million;
|
·
|
that
our interest coverage ratio (i.e., EBIT over interest expenses) will not
be less than 1.3:1;
|
·
|
that
our total liabilities to total assets will not exceed
65%;
|
·
|
that
we maintain additional free liquidity of $25.0 million at the end of each
calendar month and an average minimum daily free liquidity of $10.0
million; and
|
·
|
that
Mr. Melisanidis directly or indirectly controls 26% of our total issued
and outstanding common shares.
|
As of
September 30, 2009, the outstanding balance under this credit facility was $50.0
million.
As of
September 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 $70.2 million for the nine month period ended
September 30, 2009 as compared to net cash provided by operating activities of
$48.9 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 $41.6 million, to a surplus of $213.4
million as of September 30, 2009 compared to a surplus of $171.8 million as of
September 30, 2008.
Net
Cash Used In Investing Activities
Net cash
used in investing activities was $55.7 million for the nine month period ended
September 30, 2009. During the period, we paid $70.8 million as milestone
payments under our newbuilding and engineering contracts and we paid $24.3
million mainly to acquire the secondhand vessels, Aegean Star, Aegean Champion and Aegean Ace. During the nine
month period ended September 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 $109.0 million for the nine month period ended
September 30, 2008. During the period, we paid $98.5 million as milestone
payments under our newbuilding and engineering contracts and we paid $13.4
million to acquire the secondhand tankers Orion, Aegean III, Aegean VIII, PT25 and PT36. During the nine month
period ended September 30, 2008, our restricted cash balance decreased by $12.5
million which increased our cash flows by the same amount. Furthermore, cash
payments for the ICS Petroleum acquisition during the nine month period ended
September 30, 2008 amounted to $9.1 million.
Net
Cash Provided by Financing Activities
Net cash
provided by financing activities was $129.4 million for the nine month period
ended September 30, 2009 mainly due to additional drawdowns of $194.6 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 $25.9 million and $36.9 million in payments to
reduce short-term borrowings. Furthermore, during the nine month
period ended September 30, 2009, we paid for financing costs $1.1 million and
declared and paid dividends of $1.3 million to our shareholders.
Net cash
provided by financing activities was $88.2 million for the nine month period
ended September 30, 2008 mainly due to additional drawdowns of $75.7 million
under our term loan facilities to finance a portion of the construction costs of
our new vessels, and we drew down $16.6 million under our senior secured credit
facility primarily to finance working capital requirements. Furthermore, during
the nine month period ended September 30, 2008, we performed repayments of our
long-term debt of $2.4 million and we declared and paid dividends of $1.3
million to our shareholders.
Trend
information
During
the nine month period ended September 30, 2009, our sales volume of marine fuel
increased by 22.4% as compared to the prior year, which was mainly due to
additional volume of sales of marine fuel in Singapore, Greece and U.A.E. and
due to sales in our new markets: Canada, Mexico, Trinidad and Tobago and
Tanger-Med, Morocco. We have also expanded our bunkering fleet by
taking delivery of three 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 Tanger-Med, Morocco and Trinidad and Tobago in the second quarter
of 2009 and we expect to expand our fleet by at least 17 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.
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.
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 nine month
period ended September 30, 2009 by $2.9 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
|
|
Nine
Months Ended September 30,
|
|
Bunkering
|
|
|
Non-Bunkering
|
|
|
As
Reported
|
|
|
As
Incurred
|
|
|
|
|
|
|
|
|
|
(in
thousands of U.S. dollars)
|
|
2008
|
|
|
22.24 |
|
|
|
3.22 |
|
|
|
2,626 |
|
|
|
5,846 |
|
2009
|
|
|
32.40 |
|
|
|
5.61 |
|
|
|
3,270 |
|
|
|
3,099 |
|
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.
Acquisition of
Verbeke Bunkering Business. We have entered into a binding
heads of agreement to acquire the bunkering business of Verbeke Shipping N.V.,
or the Verbeke Bunkering Business, including Verbeke Bunkering N.V., or Verbeke
Bunkering. Verbeke Bunkering is a leading physical supplier of marine
fuel in the Antwerp-Rotterdam-Amsterdam (ARA) region, including surrounding
ports of Ghent, Zeebruges, Flushing, Terneuzen, and Sluiskil. Verbeke
Bunkering operates a fleet of 18 bunkering barges, of which nine are double
hull, and provides marine fuel delivery services in port to a diverse group of
ship operators as well as marine fuel traders, brokers and other
users.
As a
result of the transaction, we expect to acquire seven bunkering barges, of which
one is double hull; a minority ownership interest in one double hull bunkering
barge; and a 10% and a 50% ownership interest in a double hull bunkering barge
and a newbuilding double hull bunkering barge to be delivered,
respectively. We plan to use one single hull bunkering barge as a
floating storage facility and the remaining vessels in the delivery of marine
petroleum products. We also expect to assume the charters for nine
vessels currently chartered-in by Verbeke Bunkering.
The
aggregate purchase price for the Verbeke Bunkering Business will
be calculated based on a formula of a basic purchase price of between Euro
30.0 and 35.0 million, to be agreed, adjusted for, among other things, the
level of marine fuel inventory and provisions, accounts receivable and accounts
payable as of December 31, 2009.
The
acquisition the Verbeke Bunkering Business is subject to the completion of
detailed documentation and satisfaction of certain conditions,
including:
·
|
our
satisfaction of results of legal, accounting, financial and operational
due diligence;
|
·
|
the
agreement on the basic purchase
amount;
|
·
|
the
receipt of required consents and
approvals;
|
·
|
the
absence of any event reasonably likely to have a material adverse effect
on the Verbeke Bunkering Business;
and
|
·
|
the
retention of existing trade and business
financing.
|
In
addition, the sellers have the right to rescind the transaction if the purchase
price is determined to be lower than Euro 40.0 million, including all
adjustments for the level of marine fuel inventory and provisions, accounts
receivable and accounts payable. Assuming all the conditions are met,
we expect the Verbeke Bunkering Business acquisition to close by the end of the
first quarter of 2010.
New Trade Credit
Facility. On November 19,
2009, our subsidiary, AMP, entered into an uncommitted trade credit facility, or
our New Trade Credit Facility with an international commercial
lender. Our New Trade Credit Facility is in an amount of $100.0
million, with a sub-limit in an amount of $20.0 million for short-term transit
and storage financing. Our New Trade Credit Facility has a one-year
term. The availability of any letters of credit, overdrafts or cash
advances under our New Trade Credit Facility is subject to the lender's
discretion. The borrowings under our New Trade Credit Facility will
bear interest at a rate of the lender's cost of funds plus 2.0% for short term
advances and at a rate of the lender's overnight rate for U.S. Dollars plus 2.0%
for overdrafts. Our New
Trade Credit Facility is guaranteed by us and is secured by, among other
things:
·
|
AMP's
assigned receivables; and
|
·
|
fuel
oil and gas oil stored or to be stored in a storage facility acceptable to
the lender and pledged in its
favor.
|
Under the
terms of our New Trade Credit Facility:
·
|
the
maximum credit terms given to any individual counterparty will be 45 days
from the delivery of the products;
|
·
|
inventories
will only be financed up to 30 days from the date such inventories are
delivered to the storage facility;
and
|
·
|
the
product to be stored and in transit will be financed up to 10 calendar
days from the date of the bill of
lading.
|
Our New
Trade Credit Facility contains covenants requiring, among other things,
that:
·
|
AMP's
minimum total net equity is at least $80.0
million;
|
·
|
we
maintain our listing on the NYSE;
|
·
|
our
total net equity will not be less than $180.0 million;
and
|
·
|
our
minimum current ratio will be 1.15 with a minimum working capital need of
$50.0 million.
|
Purchase of a
Floating Storage Facility. On October 14,
2009, our subsidiary, Aegean Ostria Maritime Company, entered into a memorandum
of agreement with Aegean Gas Maritime Company, a company owned and
controlled by members of the family of Dimitris Melisanidis, our founder and
Head of Corporate Development, for the purchase of a 20,000 dwt double hull
bunkering barge, the Mediterranean, used as a
floating storage facility. The purchase price of the vessel was $17.0
million. The purchase price of the Mediterranean was determined
by disinterested members of our board of directors to be no greater than it
would have been with a third party on an arm's length basis at the time we
entered into the memorandum of agreement. We expect to take delivery
of the vessel before January 29, 2010.
Purchase of
Jamaican Property. On January 14, 2010, we entered into an
agreement with companies owned and controlled by members of Mr. Melisanidis'
family, for the purchase of property in Jamaica, to be used as a land-based
storage facility. The purchase price for the property was $9.8
million. The purchase price of the property was determined by
disinterested members of our board of directors to be no greater than it would
have been with a third party on an arm's length basis at the time we entered
into the purchase agreement. The closing of the acquisition is subject to
a number of conditions precendent, including that we shall have secured the
necessary financing. We expect that the Jamaican property will require
capital expenditures in the next few years between $15.0 and $20.0
million.
Vessel Employment
Agreements. On October 26, 2009, we entered into agreements
with an unaffiliated third party for the employment of our vessels, the Aegean III, Aegean VIII, Aegean XII, Aegean Daisy, Aegean Rose, Aegean Breeze and Aegean Tiffany.
Delivery of the
Newbuildings. On October 15, 2009, we took delivery of the
Kefalonia, a 6,272 dwt
double hull bunkering tanker newbuilding from the Qingdao Hyundai Shipyard in
China, or Qingdao Hyundai. The Kefalonia is deployed in our
new service center in Trinidad and Tobago. On November 20, 2009, we
took delivery of the Paxoi, a 5,500 dwt double
hull bunkering tanker newbuilding from Qingdao Hyundai. We deployed
the Paxoi to our United
Kingdom service center.
Memorandum of
Agreement. On November 18, 2009, we signed a memorandum of
agreement with a third-party purchaser for the sale of the Aegean IX, a vessel we used
as a floating storage facility in Jamaica. The purchase price of the
vessel was $400,000. The vessel was delivered on December 8,
2009.
Expected Fourth
Quarter Earnings. For the three months ended December 31,
2009, we sold approximately 1.76 million metric tons of marine fuel. As
our gross spread on marine petroleum products has not yet been
determined, we expect that our earnings per share for the three months
ended December 31, 2009, will be between $0.33 and $0.36, adjusted for a
one-time non-recurring expense relating to previously capitalized professional
fees, or between $0.31 and $0.34, unadjusted.
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 SEPTEMBER 30, 2009
(UNAUDITED)
(Expressed
in thousands of U.S. dollars – except for share and per share data)
|
|
December
31, 2008
|
|
|
September
30,
2009
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
$46,927 |
|
|
|
$50,337 |
|
Trade
receivables, net of allowance for doubtful accounts of $1,323 and $ 1,641,
as of December 31, 2008 and September 30, 2009,
respectively
|
|
|
131,266 |
|
|
|
277,899 |
|
Due
from related companies
|
|
|
2,501 |
|
|
|
9,019 |
|
Inventories
|
|
|
55,330 |
|
|
|
105,785 |
|
Prepayments
and other current assets
|
|
|
13,731 |
|
|
|
18,418 |
|
Restricted
cash
|
|
|
1,632 |
|
|
|
- |
|
Total
current assets
|
|
|
251,387 |
|
|
|
461,458 |
|
|
|
|
|
|
|
|
|
|
FIXED
ASSETS:
|
|
|
|
|
|
|
|
|
Advances
for vessels under construction and acquisitions
|
|
|
113,564 |
|
|
|
155,046 |
|
Vessels,
cost
|
|
|
260,741 |
|
|
|
289,688 |
|
Vessels,
accumulated depreciation
|
|
|
(26,606 |
) |
|
|
(37,956 |
) |
Vessels'
net book value
|
|
|
234,135 |
|
|
|
251,732 |
|
Other
fixed assets, net
|
|
|
1,681 |
|
|
|
1,700 |
|
Total
fixed assets
|
|
|
349,380 |
|
|
|
408,478 |
|
|
|
|
|
|
|
|
|
|
OTHER
NON-CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
3,838 |
|
|
|
- |
|
Deferred
charges, net
|
|
|
12,440 |
|
|
|
13,117 |
|
Concession
Agreement
|
|
|
7,407 |
|
|
|
7,174 |
|
Goodwill
|
|
|
17,431 |
|
|
|
17,431 |
|
Other
non-current assets
|
|
|
24 |
|
|
|
818 |
|
Total
assets
|
|
|
$641,907 |
|
|
|
$908,476 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
$90,000 |
|
|
|
$53,100 |
|
Current
portion of long-term debt
|
|
|
9,352 |
|
|
|
12,140 |
|
Trade
payables to third parties
|
|
|
67,817 |
|
|
|
152,165 |
|
Trade
payables to related companies
|
|
|
22,462 |
|
|
|
29,024 |
|
Other
payables to related companies
|
|
|
187 |
|
|
|
2,964 |
|
Accrued
and other current liabilities
|
|
|
12,204 |
|
|
|
13,528 |
|
Total
current liabilities
|
|
|
202,022 |
|
|
|
262,921 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM
DEBT, net of current portion
|
|
|
154,269 |
|
|
|
320,142 |
|
|
|
|
|
|
|
|
|
|
OTHER
NON-CURRENT LIABILITIES
|
|
|
613 |
|
|
|
4,530 |
|
|
|
|
|
|
|
|
|
|
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 42,588,505 shares, issued and outstanding at December 31, 2008 and
September 30, 2009, respectively
|
|
|
425 |
|
|
|
426 |
|
Additional
paid-in capital
|
|
|
190,658 |
|
|
|
193,210 |
|
Accumulated
other comprehensive income
|
|
|
211 |
|
|
|
- |
|
Retained
earnings
|
|
|
93,709 |
|
|
|
127,247 |
|
Total
stockholders' equity
|
|
|
285,003 |
|
|
|
320,883 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
|
$641,907 |
|
|
|
$908,476 |
|
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 NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2009
(UNAUDITED)
(Expressed
in thousands of U.S. dollars – except for share and per share
data)
|
|
Nine
Months Ended
September
30,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
REVENUES:
|
|
|
|
|
|
|
Sales
of marine petroleum products – third parties
|
|
|
$2,207,615 |
|
|
|
$1,611,084 |
|
Sales
of marine petroleum products – related companies
|
|
|
9,955 |
|
|
|
19,884 |
|
Voyage
revenues
|
|
|
- |
|
|
|
7,390 |
|
Other
revenues
|
|
|
6,054 |
|
|
|
5,705 |
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
|
2,223,624 |
|
|
|
1,644,063 |
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
Cost
of marine petroleum products sold – third parties
|
|
|
1,815,755 |
|
|
|
1,295,026 |
|
Cost
of marine petroleum products sold – related companies
|
|
|
276,914 |
|
|
|
206,153 |
|
Salaries,
wages and related costs
|
|
|
29,384 |
|
|
|
34,341 |
|
Depreciation
|
|
|
8,998 |
|
|
|
12,077 |
|
Amortization
of drydocking costs
|
|
|
2,626 |
|
|
|
3,270 |
|
Amortization
of concession agreement
|
|
|
234 |
|
|
|
233 |
|
Gain
on sale of vessels
|
|
|
- |
|
|
|
(4,185 |
) |
Other
operating expenses
|
|
|
53,736 |
|
|
|
54,055 |
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
2,187,647 |
|
|
|
1,600,970 |
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
35,977 |
|
|
|
43,093 |
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME/(EXPENSE):
|
|
|
|
|
|
|
|
|
Interest
and finance costs
|
|
|
(8,261 |
) |
|
|
(7,225 |
) |
Interest
income
|
|
|
342 |
|
|
|
30 |
|
Foreign
exchange gains(losses), net
|
|
|
(325 |
) |
|
|
(339 |
) |
|
|
|
(8,244 |
) |
|
|
(7,534 |
) |
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
27,733 |
|
|
|
35,559 |
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
(890 |
) |
|
|
(733 |
) |
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
$26,843 |
|
|
|
$34,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share
|
|
|
$0.63 |
|
|
|
$0.82 |
|
Diluted
earnings per common share
|
|
|
$0.63 |
|
|
|
$0.82 |
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares, basic
|
|
|
42,490,780 |
|
|
|
42,573,082 |
|
Weighted
average number of shares, diluted
|
|
|
42,643,124 |
|
|
|
42,601,423 |
|
The
accompanying condensed notes are an integral part of these consolidated
financial statements
AEGEAN
MARINE PETROLEUM NETWORK INC.
CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2009
(UNAUDITED)
(Expressed
in thousands of U.S. dollars)
|
|
Common
Stock
|
|
|
Additional
Paid-in Capital
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other Comprehensive Income
|
|
|
Total
|
|
|
|
#
of Shares
|
|
|
Par
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
December 31, 2007
|
|
|
42,461,428 |
|
|
|
$425 |
|
|
|
$187,795 |
|
|
|
$55,505 |
|
|
|
- |
|
|
|
$243,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Net income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
26,843 |
|
|
|
- |
|
|
|
26,843 |
|
-
Dividends declared and paid
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,282 |
) |
|
|
- |
|
|
|
(1,282 |
) |
-
Share-based compensation
|
|
|
49,992 |
|
|
|
- |
|
|
|
1,945 |
|
|
|
- |
|
|
|
- |
|
|
|
1,945 |
|
-
Other
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
443 |
|
|
|
443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
September 30, 2008
|
|
|
42,511,420 |
|
|
|
$425 |
|
|
|
$189,740 |
|
|
|
$81,066 |
|
|
|
$443 |
|
|
|
$271,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
December 31, 2008
|
|
|
42,543,608 |
|
|
|
$425 |
|
|
|
$190,658 |
|
|
|
$93,709 |
|
|
|
$211 |
|
|
|
$285,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Net income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
34,826 |
|
|
|
- |
|
|
|
34,826 |
|
-
Dividends declared and paid
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,288 |
) |
|
|
- |
|
|
|
(1,288 |
) |
-
Share-based compensation
|
|
|
44,897 |
|
|
|
1 |
|
|
|
2,552 |
|
|
|
- |
|
|
|
- |
|
|
|
2,553 |
|
-
Other
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(211 |
) |
|
|
(211 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
September 30, 2009
|
|
|
42,588,505 |
|
|
|
$426 |
|
|
|
$193,210 |
|
|
|
$127,247 |
|
|
$ |
- |
|
|
|
$320,883 |
|
AEGEAN
MARINE PETROLEUM NETWORK INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2009
(UNAUDITED)
(Expressed
in thousands of U.S. dollars)
|
|
Nine
Months Ended September 30,
|
|
|
|
2008
|
|
|
2009
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
|
$26,843 |
|
|
|
$34,826 |
|
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
8,998 |
|
|
|
12,077 |
|
Provision
for doubtful accounts
|
|
|
79 |
|
|
|
318 |
|
Share-based
compensation
|
|
|
1,945 |
|
|
|
2,552 |
|
Amortization
|
|
|
3,213 |
|
|
|
4,002 |
|
Provision
for income taxes
|
|
|
- |
|
|
|
733 |
|
Gain
on sale of vessels
|
|
|
- |
|
|
|
(4,185 |
) |
(Increase)
Decrease in:
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
(85,832 |
) |
|
|
(146,951 |
) |
Due
from related companies
|
|
|
1,021 |
|
|
|
(6,518 |
) |
Inventories
|
|
|
10,113 |
|
|
|
(50,455 |
) |
Prepayments
and other current assets
|
|
|
(7,175 |
) |
|
|
(4,687 |
) |
Other
non-current assets
|
|
|
89 |
|
|
|
(794 |
) |
Increase
(Decrease) in:
|
|
|
|
|
|
|
|
|
Trade
payables
|
|
|
97,547 |
|
|
|
89,728 |
|
Other
payables to related companies
|
|
|
(97 |
) |
|
|
2,777 |
|
Accrued
and other current liabilities
|
|
|
(2,300 |
) |
|
|
(844 |
) |
Other
non-current liabilities
|
|
|
294 |
|
|
|
306 |
|
Payments
for dry-docking
|
|
|
(5,846 |
) |
|
|
(3,099 |
) |
Net
cash provided by (used in) operating activities
|
|
|
48,892 |
|
|
|
(70,214 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Payments
for vessels under construction
|
|
|
(98,454 |
) |
|
|
(70,755 |
) |
Payments
for vessels acquisitions
|
|
|
(13,377 |
) |
|
|
(24,313 |
) |
Net
proceeds from sales of vessels
|
|
|
- |
|
|
|
34,149 |
|
Corporate
acquisitions, net of cash acquired
|
|
|
(9,108 |
) |
|
|
- |
|
Purchase
of other fixed assets
|
|
|
(506 |
) |
|
|
(300 |
) |
Decrease
in restricted cash
|
|
|
12,472 |
|
|
|
5,470 |
|
Net
cash used in investing activities
|
|
|
(108,973 |
) |
|
|
(55,749 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from long-term debt
|
|
|
75,719 |
|
|
|
194,576 |
|
Repayment
of long-term debt
|
|
|
(2,356 |
) |
|
|
(25,915 |
) |
Net
change in short-term borrowings
|
|
|
16,593 |
|
|
|
(36,900 |
) |
Financing
costs paid
|
|
|
(450 |
) |
|
|
(1,100 |
) |
Dividends
paid
|
|
|
(1,282 |
) |
|
|
(1,288 |
) |
Net
cash provided by financing activities
|
|
|
88,224 |
|
|
|
129,373 |
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
28,143 |
|
|
|
3,410 |
|
Cash
and cash equivalents at beginning of period
|
|
|
1,967 |
|
|
|
46,927 |
|
Cash
and cash equivalents at end of period
|
|
|
$30,110 |
|
|
|
$50,337 |
|
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 nine months ended September 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 nine months ended September 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".
Financial
Instruments: The carrying amounts of cash and cash
equivalents, trade accounts receivable, and trade accounts payable reported in
the unaudited interim condensed consolidated balance sheets approximate their
respective fair values because of the short term nature of these accounts. The
fair value of revolving credit facilities is estimated based on current rates
offered to the Company for similar debt of the same remaining maturities.
Additionally, the Company considers its creditworthiness in determining the fair
value of the revolving credit facilities. The carrying value
approximates the fair market value for the floating rate loans.
2. Adoption of
New Accounting Standards:
In
December 2007, new guidance established accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the
amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parent's ownership interest, and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. The new guidance also establishes disclosure requirements that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. The above-mentioned guidance was
effective for fiscal years beginning after December 15, 2008, and was adopted by
the Company in the first quarter of 2009. The adoption of the new guidance did
not have a material impact on the Company's consolidated financial statements.
The new guidance was retrospectively applied to the interim condensed
consolidated statement of stockholders equity for the nine-month in period ended
September 30, 2008.
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)
In March
2008, new guidance was issued with the intent to provide users of financial
statements with enhanced understanding of derivative instruments and hedging
activities. The new guidance requires qualitative disclosures about objectives
and strategies for using derivatives, quantitative disclosures about fair value
amounts of and gains and losses on instruments, and disclosures about
credit-risk-related contingent features in derivative agreements. This guidance
was effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008. This standard did not have a material
impact on the Company's financial condition and results of
operations.
In
January 2009 the Company adopted guidance that 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 previously-issued
guidance. This guidance did not have a material impact on the
Company's financial condition and results of operations.
In June
2008, new guidance clarified that all outstanding unvested share-based payment
awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are
considered participating securities, and the two-class method of computing basic
and diluted earnings per share must be applied. The Company determined that
restricted shares granted under its equity incentive plan are participating
securities because the restricted shares participate in dividends. The guidance
was effective for fiscal years beginning after December 15, 2008. This standard
did not have a material impact on the Company's disclosure of EPS.
In
January 2009 the Company adopted guidance which significantly changed the
accounting for and reporting of business combination transactions. This guidance
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 nine months ended September 30, 2009.
In April
2009, new guidance was issued for interim disclosures about fair value of
financial instruments, which amends previous guidance for disclosures about fair
value of financial instruments to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. The guidance also require
those disclosures in summarized financial information at interim reporting
periods. The new guidance is effective for interim reporting periods
ending after June 15, 2009, with early adoption permitted for periods ending
after March 15, 2009. The adoption of the above mentioned guidance in
the second quarter of 2009 did not have an impact on the Company's consolidated
financial statements.
In May
2009, new guidance was issued relating to management's assessment of subsequent
events. The new guidance (i) 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", (ii) does not change the recognition and
disclosure requirements in AICPA Professional Standards, for Type I and Type II
subsequent events; however, the guidance refers to them as recognized (Type I)
and non recognized subsequent events (Type II), (iii) requires management to
disclose, in addition to other disclosures, 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 and (iv) 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. The new guidance is effective prospectively for
interim or annual financial periods ending after June 15, 2009. Adoption of the
above mentioned guidance in the third quarter of 2009 did not have significant
impact on the Company's financial statements.
In June
2009, the Financial Accounting Standards Board ("FASB") issued Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles, which became the single
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)
source of
authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental
entities. The Codification's content carries the same level of authority,
effectively superseding previous guidance. In other words, the GAAP hierarchy
was modified to include only two levels of GAAP: authoritative and
nonauthoritative. The guidance is effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The Company adopted
the new guidance in the third quarter of 2009 which did not have an impact on
the Company's consolidated financial statements.
In June
2009,
new guidance was issued with
regards to the consolidation of variable interest entities ("VIE").
This guidance responds to concerns
about the application of certain key provisions of the FASB Interpretation,
including those regarding the transparency of the involvement with VIEs. The new
guidance revises the approach to determining the primary beneficiary of a VIE to
be more qualitative in nature and requires companies to more frequently reassess
whether they must consolidate a VIE. Specifically,
the new guidance requires a qualitative
approach to identifying a controlling financial interest in a VIE and requires
ongoing assessment of whether an entity is a VIE and whether an interest in a
VIE makes the holder the primary beneficiary of the VIE. In addition, the
standard requires additional disclosures about the involvement with a VIE and
any significant changes in risk exposure due to that involvement. The guidance
is effective as of the beginning of the first fiscal year that begins after
November 15, 2009 and early adoption is prohibited. The company is evaluating
the impact of this guidance on the Company's 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)
3. Inventories:
The
amounts shown in the accompanying condensed consolidated balance sheets are
analyzed as follows:
|
|
December
31, 2008
|
|
|
September
30,
2009
|
|
Held
for sale:
|
|
|
|
|
|
|
Marine
Fuel Oil
|
|
|
44,564 |
|
|
|
93,571 |
|
Marine
Gas Oil
|
|
|
9,151 |
|
|
|
10,708 |
|
|
|
|
53,715 |
|
|
|
104,279 |
|
Held
for consumption:
|
|
|
|
|
|
|
|
|
Marine
fuel
|
|
|
517 |
|
|
|
294 |
|
Lubricants
|
|
|
920 |
|
|
|
996 |
|
Stores
|
|
|
33 |
|
|
|
39 |
|
Victuals
|
|
|
145 |
|
|
|
177 |
|
|
|
|
1,615 |
|
|
|
1,506 |
|
Total
|
|
|
55,330 |
|
|
|
105,785 |
|
4.
Advances for Vessels under Construction and Acquisitions:
During
the nine months ended September 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
|
|
|
72,027 |
|
Additions
of secondhand vessel acquisitions
|
|
|
28,762 |
|
Vessels delivered
|
|
|
(59,307 |
) |
Balance
September 30, 2009
|
|
|
155,046 |
|
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.
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
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.
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 amount of $4,449 which represents the future payments under the
Capital Lease is a non- cash transaction for the purposes of the statement of
cash flows.
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.
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)
As
of September 30, 2009 advances for vessels under construction and acquisitions,
is analyzed as follows:
|
|
|
|
|
|
September
30, 2009
|
|
Vessel
Name
|
Year
of Expected Delivery
|
|
Contract
Amount
|
|
|
Contract
Payments
|
|
|
Capitalized
Costs
|
|
|
Total
|
|
Fujian
Shipyard
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DN-3800-11
|
2009
|
|
|
10,740 |
|
|
|
6,485 |
|
|
|
196 |
|
|
|
6,681 |
|
DN-3800-12
|
2009
|
|
|
10,740 |
|
|
|
4,893 |
|
|
|
111 |
|
|
|
5,004 |
|
DN-3800-13
|
2009
|
|
|
10,740 |
|
|
|
4,893 |
|
|
|
95 |
|
|
|
4,988 |
|
DN-3800-14
|
2009
|
|
|
10,740 |
|
|
|
4,893 |
|
|
|
87 |
|
|
|
4,980 |
|
DN-3800-15
|
2009
|
|
|
10,740 |
|
|
|
2,888 |
|
|
|
80 |
|
|
|
2,968 |
|
Qingdao
Hyundai Shipyard
|
|
QHS-207*
|
2009
|
|
|
11,382 |
|
|
|
11,382 |
|
|
|
1,028 |
|
|
|
12,410 |
|
QHS-208*
|
2009
|
|
|
11,382 |
|
|
|
11,382 |
|
|
|
535 |
|
|
|
11,917 |
|
QHS-209
|
2009
|
|
|
11,600 |
|
|
|
8,880 |
|
|
|
312 |
|
|
|
9,192 |
|
QHS-210
|
2009
|
|
|
11,600 |
|
|
|
8,880 |
|
|
|
306 |
|
|
|
9,186 |
|
QHS-215
|
2009
|
|
|
11,600 |
|
|
|
8,880 |
|
|
|
289 |
|
|
|
9,169 |
|
QHS-216
|
2009
|
|
|
11,600 |
|
|
|
8,880 |
|
|
|
272 |
|
|
|
9,152 |
|
QHS-217
|
2009
|
|
|
11,600 |
|
|
|
8,880 |
|
|
|
267 |
|
|
|
9,147 |
|
QHS-222
|
2009
|
|
|
11,000 |
|
|
|
7,930 |
|
|
|
183 |
|
|
|
8,113 |
|
QHS-223
|
2009
|
|
|
11,000 |
|
|
|
7,930 |
|
|
|
172 |
|
|
|
8,102 |
|
QHS-224
|
2009
|
|
|
11,000 |
|
|
|
4,940 |
|
|
|
213 |
|
|
|
5,153 |
|
QHS-225
|
2009
|
|
|
12,200 |
|
|
|
7,660 |
|
|
|
199 |
|
|
|
7,859 |
|
QHS-226
|
2010
|
|
|
12,200 |
|
|
|
7,660 |
|
|
|
191 |
|
|
|
7,851 |
|
QHS-227
|
2010
|
|
|
12,200 |
|
|
|
7,660 |
|
|
|
180 |
|
|
|
7,840 |
|
QHS-228
|
2010
|
|
|
12,200 |
|
|
|
7,660 |
|
|
|
158 |
|
|
|
7,818 |
|
Acquired
Assets
|
|
Aegean
Star*
|
2009
|
|
|
4,274 |
|
|
|
4,274
|
|
|
|
2,867 |
|
|
|
7,141 |
|
Launch*
|
2009
|
|
|
375 |
|
|
|
375 |
|
|
|
- |
|
|
|
375 |
|
|
Total
|
|
|
220,913 |
|
|
|
147,305 |
|
|
|
7,741 |
|
|
|
155,046 |
|
* Vessels
delivered but as of September 30, 2009, were not positioned and
operational.
As of
September 30, 2009 the remaining obligations under these contracts are payable
as follows:
|
|
Amount
|
|
October
1 to December 31, 2009
|
|
|
37,401 |
|
2010
|
|
|
36,207 |
|
|
|
|
73,608 |
|
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 nine months ended September
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
|
|
|
59,307 |
|
|
|
- |
|
|
|
59,307 |
|
-
Disposals
|
|
|
(30,360 |
) |
|
|
414 |
|
|
|
(29,946 |
) |
-
Depreciation
|
|
|
- |
|
|
|
(11,764 |
) |
|
|
(11,764 |
) |
Balance,
September 30, 2009
|
|
|
289,688 |
|
|
|
(37,956 |
) |
|
|
251,732 |
|
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 nine months ended September 30, 2009.
As of
September 30, 2009, the Company was a party, as lessee to one capital lease on a
PT barge. The gross value of the capital lease is
$4,778. The Company also had recorded accumulated depreciation
relating to the capital lease of $24.
6. Deferred
Charges:
During
the nine months ended September 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
|
|
|
3,346 |
|
|
|
1,100 |
|
|
|
4,446 |
|
-
Amortization
|
|
|
(3,270 |
) |
|
|
(499 |
) |
|
|
(3,769 |
) |
Balance,
September 30, 2009
|
|
|
11,561 |
|
|
|
1,556 |
|
|
|
13,117 |
|
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
|
|
|
September
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
|
|
|
- |
|
|
|
3,100 |
|
Revolving
credit facility dated 09/17/2009 (2)
|
|
|
|
|
|
|
50,000 |
|
Total
short-term borrowings
|
|
|
90,000 |
|
|
|
53,100 |
|
Long-term
debt:
|
|
|
|
|
|
|
|
|
Secured
syndicated term loan dated 10/26/2005
|
|
|
15,971 |
|
|
|
- |
|
Secured
syndicated term loan dated 8/30/2005
|
|
|
30,312 |
|
|
|
32,740 |
|
Secured
term loan facility under
senior
secured credit facility dated 12/19/2006
|
|
|
31,020 |
|
|
|
28,920 |
|
Secured
term loan dated 10/25/2006
|
|
|
14,172 |
|
|
|
18,506 |
|
Secured
term loan dated 10/27/2006
|
|
|
7,896 |
|
|
|
12,088 |
|
Secured
syndicated term loan dated 10/30/2006
|
|
|
28,000 |
|
|
|
45,564 |
|
Secured
term loan dated 7/5/2007 as amended on 09/12/2008
|
|
|
6,650 |
|
|
|
18,864 |
|
Secured
syndicated term loan dated 04/24/2008
|
|
|
15,100 |
|
|
|
23,600 |
|
Secured
syndicated term loan dated 07/08/2008
|
|
|
14,500 |
|
|
|
13,000 |
|
Overdraft
facility under senior secured
credit
facility dated 03/16/2009 (1)
|
|
|
- |
|
|
|
139,000 |
|
Total
|
|
|
163,621 |
|
|
|
332,282 |
|
Less: Current
portion of long-term debt
|
|
|
(9,352 |
) |
|
|
(12,140 |
) |
Long-term
debt, net of current portion
|
|
|
154,269 |
|
|
|
320,142 |
|
(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 September 30, 2009, the outstanding balance under this
facility was $139,000.
(2) On
September 17, 2009, the Company entered into an annual revolving credit facility
with a Greek bank for an amount of $50,000. The facility is secured
against Company's receivables and bears interest at LIBOR plus 2.50%. As of
September 30, 2009, the outstanding balance under this facility was
$50,000.
As of
September 30, 2009, the Company had an available unutilized overdraft line of
$35,510 under its senior secured credit facility, and had an available
unutilized aggregate amount of $70,445 under its secured term loan
facilities.
As of
September 30, 2009 and December 31, 2008, the Company was in compliance with the
financial covenants under its facility agreements.
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)
The
annual principal payments of long-term debt required to be made after September
30, 2009, are as follows:
|
|
Amount
|
|
October
1 to December 31, 2009
|
|
|
2,365 |
|
2010
|
|
|
13,478 |
|
2011
|
|
|
153,809 |
|
2012
|
|
|
14,809 |
|
2013
|
|
|
19,309 |
|
2014
and thereafter
|
|
|
128,512 |
|
|
|
|
332,282 |
|
8. Other
Operating Expenses:
The
amounts in the accompanying condensed consolidated statements of income are
analyzed as follows:
|
|
Nine
Months Ended
September
30,
|
|
|
|
2008
|
|
|
2009
|
|
Bunkering
tanker voyage expenses
|
|
|
1,356 |
|
|
|
1,872 |
|
Bunkering
tanker insurance
|
|
|
1,369 |
|
|
|
1,782 |
|
Bunkering
tanker repairs and maintenance
|
|
|
2,947 |
|
|
|
2,330 |
|
Bunkering
tanker spares and consumable stores
|
|
|
2,116 |
|
|
|
3,034 |
|
Bunkering
tanker consumption
of
marine petroleum products
|
|
|
14,339 |
|
|
|
8,990 |
|
Bunkering
tanker other operating expenses
|
|
|
2,220 |
|
|
|
14,188 |
|
Cargo
transportation
|
|
|
9,569 |
|
|
|
3,470 |
|
Provision
for doubtful accounts
|
|
|
79 |
|
|
|
335 |
|
Operating
costs of storage facilities
|
|
|
2,844 |
|
|
|
2,106 |
|
Port
and related expenses
|
|
|
2,700 |
|
|
|
3,076 |
|
General
and administrative
|
|
|
10,114 |
|
|
|
10,182 |
|
Broker
commissions
|
|
|
1,744 |
|
|
|
1,721 |
|
Other
|
|
|
2,339 |
|
|
|
969 |
|
Total
|
|
|
53,736 |
|
|
|
54,055 |
|
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. This request
was rejected by the Commercial Court of Paris. Additionally the plaintiff filed
an appeal against the Decision issued by the Paris Court of First Instance the
hearing of which has now been fixed by the Appeal Court to take place on
December 8, 2009. 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 September 30, 2009, are as
follows:
|
|
Amount
|
|
October
1 to December 31, 2009
|
|
$ |
291 |
|
2010
|
|
|
1,163 |
|
2011
|
|
|
1,163 |
|
2012
|
|
|
1,163 |
|
2013
|
|
|
1,163 |
|
Thereafter
|
|
|
385 |
|
Total
minimum lease payments
|
|
|
5,328 |
|
Less:
imputed interest
|
|
|
(880 |
) |
Present
value of minimum lease payments
|
|
|
4,448 |
|
Current
portion of capitalized lease obligations
|
|
|
837 |
|
Long-term
capitalized lease obligations
|
|
$ |
3,611 |
|
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 nine months ended September 30, 2009:
|
|
Unvested
Restricted Stock
|
|
|
Weighted
Average Grant Date Fair Value
|
|
January
1, 2009
|
|
|
297,695 |
|
|
|
27.12 |
|
Granted
|
|
|
172,500 |
|
|
|
17.82 |
|
Vested
|
|
|
(44,897 |
) |
|
|
20.82 |
|
Forfeited
|
|
|
(10,500 |
) |
|
|
21.54 |
|
September
30, 2009
|
|
|
414,798 |
|
|
|
24.08 |
|
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 $2,552
was recognized and included under salaries, wages and related costs in the
accompanying condensed consolidated statement of income for the nine months
ended September 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
September 30, 2009, there was $6,038 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 2.9 years
as follows:
|
|
Amount
|
|
October
1 to December 31, 2009
|
|
|
814 |
|
2010
|
|
|
2,230 |
|
2011
|
|
|
1,530 |
|
2012
|
|
|
1,136 |
|
2013
|
|
|
306 |
|
2014
|
|
|
22 |
|
|
|
|
6,038 |
|
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
September 30, 2009, the Company had no shares of preferred stock issued and
outstanding and had 42,588,505 shares of common stock, with a par value of
$0.01, issued and outstanding.
During
the nine months ended September 30, 2009, the Company declared and paid
dividends of $0.01 per share totaling to $1,288.
In August
2009, the Company authorized and declared a dividend distribution of one
preferred share purchase right (a "Right") on each outstanding share of its
common stock. The dividend distribution was made to shareholders of
record as of August 14, 2009. The rights will become exercisable and
trade separately from the common stock upon the earlier of (i) 10 days following
the public announcement or disclosure that a person or group (an "Acquiring
Person") has acquired beneficial ownership, or obtained the right to acquire, 15
percent or more of the outstanding common stock or (ii) ten business
days following the commencement of, or the announcement of an intention to make,
a tender offer or exchange offer, the consummation of which would result in such
a group or person becoming an Acquiring Person. In such
circumstances, each right entitles shareholders to buy one one-thousandth of a
share of a new series of junior participating preferred stock at a purchase
price of $100.00. In the event that the rights are triggered,
shareholders of record will be able to exercise each right to receive, upon
payment of the exercise price, shares of common stock having a market value
equal to twice the exercise price. An Acquiring Person will not be
entitled to exercise any rights. As of September 30, 2009, no such
events had occurred, and no rights have been exercised.
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:
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.
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:
|
|
Nine
Months Ended
September
30,
|
|
|
|
2008
|
|
|
2009
|
|
Europe
|
|
|
919,924 |
|
|
|
638,125 |
|
America
|
|
|
351,398 |
|
|
|
239,457 |
|
Africa
|
|
|
80,073 |
|
|
|
57,709 |
|
Asia
|
|
|
866,175 |
|
|
|
695,677 |
|
Total
|
|
|
2,217,570 |
|
|
|
1,630,968 |
|
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
|
|
|
September
30, 2009
|
|
Europe
|
|
|
127,827 |
|
|
|
111,890 |
|
America
|
|
|
10,470 |
|
|
|
24,287 |
|
Africa
|
|
|
12,663 |
|
|
|
12,235 |
|
Asia
|
|
|
84,856 |
|
|
|
105,020 |
|
Total
|
|
|
235,816 |
|
|
|
253,432 |
|
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)
14.
Subsequent Events:
The Company has evaluated all
subsequent events through January 19, 2010, the date the financial statements
were issued.
Acquisition of
Verbeke Bunkering Business. The Company has entered into
a binding heads of agreement to acquire the bunkering business of Verbeke
Shipping N.V. (the "Verbeke Bunkering Business"), including Verbeke Bunkering
N.V ("Verbeke Bunkering"). Verbeke Bunkering is a leading physical
supplier of marine fuel in the Antwerp-Rotterdam-Amsterdam (ARA) region,
including surrounding ports of Ghent, Zeebruges, Flushing, Terneuzen, and
Sluiskil. Verbeke Bunkering operates a fleet of 18 bunkering barges,
of which nine are double hull, and provides marine fuel delivery services in
port to a diverse group of ship operators as well as marine fuel traders,
brokers and other users.
As a
result of the transaction, the Company expects to acquire seven bunkering
barges, of which one is double hull; a minority ownership interest in one double
hull bunkering barge; and a 10% and a 50% ownership interest in a double hull
bunkering barge and a newbuilding double hull bunkering barge to be delivered,
respectively. The Company plans to use one single hull bunkering
barge as a floating storage facility and the remaining vessels in the delivery
of marine petroleum products. The Company also expects to assume the
charters for nine vessels currently chartered-in by Verbeke
Bunkering.
The
aggregate purchase price for the Verbeke Bunkering Business will
be calculated based on a formula of a basic purchase price of between Euro
30.0 and 35.0 million, to be agreed, adjusted for, among other things, the
level of marine fuel inventory and provisions, accounts receivable and accounts
payable as of December 31, 2009.
The
acquisition the Verbeke Bunkering Business is subject to the completion of
detailed documentation and satisfaction of certain conditions,
including:
|
·
|
the
Company's satisfaction of results of legal, accounting, financial and
operational due diligence;
|
|
·
|
the
agreement on the basic purchase
amount;
|
|
·
|
the
receipt of required consents and
approvals;
|
|
·
|
the
absence of any event reasonably likely to have a material adverse effect
on the Verbeke Bunkering Business;
and
|
|
·
|
the
retention of existing trade and business
financing.
|
In
addition, the sellers have the right to rescind the transaction if the purchase
price is determined to be lower than Euro 40.0 million, including all
adjustments for the level of marine fuel inventory and provisions, accounts
receivable and accounts payable. Assuming all the conditions are met,
the Company expects the Verbeke Bunkering Business acquisition to close by the
end of the first quarter of 2010.
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)
14.
Subsequent Events: (Continued)
New Trade Credit
Facility. On November 19,
2009, the Company's subsidiary, Aegean Marine Petroleum S.A. ("AMP"), entered
into an uncommitted trade credit facility (the "New Trade Credit Facility") with
an international commercial lender. The New Trade Credit Facility is
in an amount of $100.0 million, with a sub-limit in an amount of $20.0 million
for short-term transit and storage financing. The New Trade Credit
Facility has a one-year term. The availability of any letters of
credit, overdrafts or cash advances under the New Trade Credit Facility is
subject to the lender's discretion. The borrowings under the New
Trade Credit Facility will bear interest at a rate of the lender's cost of funds
plus 2.0% for short term advances and at a rate of the lender's overnight rate
for U.S. Dollars plus 2.0% for overdrafts.
The New
Trade Credit Facility is guaranteed by the Company and is secured by, among
other things:
|
·
|
AMP's
assigned receivables; and
|
|
·
|
the
fuel oil and gas oil stored or to be stored in a storage facility
acceptable to the lender and pledged in its
favor.
|
Under the
terms of the New Trade Credit Facility:
|
·
|
the
maximum credit terms given to any individual counterparty will be 45 days
from the delivery of the products;
|
|
·
|
inventories
will only be financed up to 30 days from the date such inventories are
delivered to the storage facility;
and
|
|
·
|
the
product to be stored and in transit will be financed up to 10 calendar
days from the date of the bill of
lading.
|
The New
Trade Credit Facility contains covenants requiring, among other things,
that:
|
·
|
AMP's
minimum total net equity is at least $80.0
million;
|
|
·
|
the
Company maintain its listing on the
NYSE;
|
|
·
|
the
Company's total net equity will not be less than $180.0 million;
and
|
|
·
|
the
Company's minimum current ratio will be 1.15 with a minimum working
capital need of $50.0 million.
|
Purchase of a
Floating Storage Facility. On October 14,
2009, the Company's subsidiary, Aegean Ostria Maritime Company, entered into a
memorandum of agreement with Aegean Gas Maritime Company, a company owned and
controlled by members of the family of Dimitris Melisanidis, the Company's
founder and Head of Corporate Development, for the purchase of a 20,000 dwt
double hull bunkering barge, the Mediterranean, used as a
floating storage facility. The purchase price of the vessel was $17.0
million. The purchase price of the Mediterranean was determined
by disinterested members of the Company's board of directors to be no greater
than it would have been with a third party on an arm's length basis at the time
it entered into the memorandum of agreement. The Company expects to
take delivery of the vessel before January 29, 2010.
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)
14.
Subsequent Events: (Continued)
Purchase of
Jamaican Property. On January 14, 2010, the Company entered
into an agreement with related companies owned and controlled by members of Mr.
Melisanidis' family, for the purchase of property in Jamaica, to be used as a
land-based storage facility. The purchase price for the property was
$9.8 million. The purchase price of the property was determined by
disinterested members of the Company's board of directors to be no greater than
it would have been with a third party on an arm's length basis at the time the
Company entered into the purchase agreement. The closing of the
acquisition is subject to a number of conditions precedent, including that the
Company shall have secured the necessary financing.
Vessel Employment
Agreements. On October 26, 2009, the Company entered into
agreements with an unaffiliated third party for the employment of its vessels,
the Aegean III, Aegean VIII, Aegean XII, Aegean Daisy, Aegean Rose, Aegean Breeze and Aegean Tiffany.
Delivery of the
Newbuildings. On October 15, 2009, the Company took delivery
of the Kefalonia, a
6,272 dwt double hull bunkering tanker newbuilding from the Qingdao Hyundai
Shipyard in China ("Qingdao Hyundai"). The Kefalonia is deployed in the
Company's new service center in Trinidad and Tobago. On November 20,
2009, the Company took delivery of the Paxoi, a 5,500 dwt double
hull bunkering tanker newbuilding from Qingdao Hyundai. The Company
deployed the Paxoi to
its United Kingdom service center.
Memorandum of
Agreement. On November 18, 2009, the Company signed a
memorandum of agreement with a third-party purchaser for the sale of the Aegean IX, a vessel the
Company used as a floating storage facility in Jamaica. The purchase
price of the vessel was $400. The vessel was delivered on December 8,
2009.
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