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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 26, 2001 --------------------------------------------------------------------------------------------------------------------------------------------------------------UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------
FORM 20-F/A
AMENDMENT NO. 1 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2000 COMMISSION FILE NUMBER 0-16977 -----------------------STOLT-NIELSEN S.A. (Exact name of Registrant as specified in its charter) LUXEMBOURG (Jurisdiction of incorporation or organization) C/O STOLT-NIELSEN LIMITED ALDWYCH HOUSE 71-91 ALDWYCH LONDON WC2B 4HN, ENGLAND (Address of principal executive offices) -----------------------SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Shares, no par value Class B Shares, no par value * SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(D) OF THE ACT: None
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-----------------------Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:
**
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 / / Item 18 /X/
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The Registrant hereby amends its Annual Report on Form 20-F for its fiscal year ended November 30, 2000 (the "Form 20-F") pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, by setting forth herein the complete text of Item 4 (Information on the Company), as well as the complete text of Exhibit 10.1 (Consent of Arthur Andersen LLP), Exhibit 10.3 (Company's 2000 Annual Report, pages 13 through 43) and Exhibit 10.4 (Financial Data Schedule).
Additionally, all references in Item 3 (Key Information), Item 5 (Operating and Financial Review and Prospects), Item 8 (Financial Information) and Item 18 (Financial Statements) of the Form 20-F to the Registrant's Report on Form 6-K filed on April 12, 2001 shall be deemed to refer to the Registrant's Report on Form 6-K filed on October 26, 2001, which Form 6-K is incorporated herein by reference.
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ITEM 4. INFORMATION ON THE COMPANY.
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HISTORY AND DEVELOPMENT OF THE COMPANY Stolt-Nielsen S.A. was incorporated in Luxembourg in 1974 as the holding company for all of the Group's activities. Stolt's registered office is located at 23, avenue Monterey, L-2086 Luxembourg and it is registered at the Companies' Register of the Luxembourg District Court under the designation "R.C. Luxembourg B.12.179". Stolt's principal executive offices are c/o Stolt-Nielsen Limited, Aldwych House, 71-91 Aldwych, London WC2B 4HN, England; telephone number 44-207-611-8960; internet address www.stolt-nielsen.com. The Company's agent for U.S. federal securities law purposes is Stolt-Nielsen Inc., 8 Sound Shore Drive, P.O. Box 2300, Greenwich, Connecticut, U.S. 06836. The Company has 76 offices and facilities and employs approximately 10,000 persons worldwide as of November 30, 2000. RECENT SIGNIFICANT DEVELOPMENTS SNTG is in the final stages of construction of a fourth tank storage terminal in the U.S., to be located in Braithwaite, Louisiana. The facility is projected to have a storage capacity of approximately 0.8 million barrels of liquid storage and associated ship, rail and trading facilities, and have a total cost in excess of US $40 million. The Braithwaite terminal is expected to become operational in early June 2001. In 2000, SNTG purchased the land and made progress payments on the terminal in Braithwaite, Louisiana. During 2000, SNTG also made progress payments on newbuildings under construction, and final payments on the delivery of six newbuildings. On December 7, 1999, Stolt Offshore completed a transaction to form a joint venture entity, NKT Flexibles I/S ("NKT"), a manufacturer of flexible flowlines and dynamic risers for the offshore oil and gas industry. NKT is owned 51% by NKT Holdings A/S, and 49% by Stolt Offshore. This transaction was effected by the acquisition of Danco A/S, a wholly-owned Norwegian company, which holds the investment in the joint venture entity. The total purchase price was $36 million. On December 16, 1999, Stolt Offshore acquired approximately 55% of the French offshore construction and engineering company ETPM S.A. ("ETPM"), a wholly owned subsidiary of Groupe (GTM S.A. ("GTM"), the construction affiliate of Suez Lyonnaise des Eaux S.A). The remaining 45% was acquired on February 4, 2000. The total purchase price was $350 million. In connection with the ETPM acquisition, Stolt Offshore also entered into a hire purchase arrangement for two ships owned by GTM, the SEAWAY POLARIS and the DLB 801, with an early purchase option after two years. The net present value of this arrangement at acquisition date was approximately $32 million and as at April 30, 2001 stood at approximately $24 million. In early 2000, the Company decided to commercialize its expertise in logistics and procurement. Optimum Logistics Ltd. ("OLL") was established to provide internet-based logistics software for the chemical and other bulk material industries. PrimeSupplier Ltd. ("PSL") was established to provide an internet-based total marine procurement system which will make available all products and services needed for marine operations. In June 2000, SSF purchased the remaining 49% of Ocean Horizons SA that it did not own. Ocean Horizons was a producer of Atlantic salmon in Chile. In September 2000, SSF purchased Rokerji La Couronne NV, a smoker and processor of salmon and other seafood products.
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Also, in September 2000, SSF purchased the remaining 49% of Pacific Aqua Salmon Farmers Ltd. ("PASFL") that it did not own. PASFL is a producer of Atlantic salmon in British Columbia. 3
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In addition, the cash costs of acquisition of subsidiaries, net of cash acquired, amounted to $120 million, $22 million and $218 million in 2000, 1999 and 1998, respectively. These amounts exclude non-cash costs for acquisitions of $265 million in 2000 and $9 million in 1999. ASSET DISPOSITIONS In 2000, proceeds from the sale of assets were $72 million including $50 million for tank containers that were leased back and $19 million for Stolt Offshore. In 1999, proceeds from the sale of assets 4
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SNTG has been a pioneer in the parcel tanker industry, an industry which derives its name from the Group's first operating company, Parcel Tankers Inc. ("PTI"), which was incorporated in 1959. PTI subsequently changed its name to Stolt- Nielsen Transportation Group Ltd. SNTG is one of the largest operators of parcel tankers in the world. As of March 31, 2001, SNTG marketed a fleet of 142 parcel tankers, product tankers, and river tankers ranging in size from approximately 1,200 to 46,000 deadweight tons ("dwt") (of which 79 were over 10,000 dwt), and totaling approximately 2.5 million dwt. The parcel tanker industry occupies a market niche in the worldwide tanker trade and represents only about 5% of the dwt of the international tanker fleet. Unlike crude oil tankers which generally load a full cargo at one port for one customer and discharge at one destination, parcel tankers, as the name implies, carry many cargoes (as many as 58 parcels) for many customers on the same voyage and load and discharge cargo at many ports. A parcel tanker may carry a wide range of bulk liquids shipped in parcels of several hundred to several thousand tons each. 5
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Management believes that SNTG's ships operating in the STJS derive higher utilization, revenues, and profitability than competitors operating outside a similar pooling arrangement. SNTG also operates tankers in six regional markets, three of which are in conjunction with joint venture partners. The Stolt NYK Asia Pacific Services Inc. ("SNAPS") joint venture operates between East Asia, Southeast Asia, and Australia. The Stolt NYK Australia Pty. Ltd. ("SNAPL") joint venture operates within the Australian coastal and trans-Tasman markets. Both the SNAPS and SNAPL tankers are marketed by SNTG's offices in these areas. The Stolt-Nielsen Inter-Europe Service ("SNIES") operates small tankers in European coastal waters. The Stolt-Nielsen Inland Tanker Service ("SNITS") currently operates 37 inland tankers on the River Rhine and the adjacent Rotterdam Antwerp waterways. SNTG manages all of its owned ships and employs its own seafarers. For its shipowning activities SNTG has secured International Ship Management Association ("ISMA") Quality Assurance System certification, which includes International Standards Organization ("ISO") 9002 and International Safety Management ("ISM") certifications. SNTG has also secured ISO 9002 certification for its chartering and operations activities worldwide. SNTG personnel coordinate most of the marketing and sales efforts directly with SNTG's parcel tanker customers. In some markets third-party brokers support this effort. SNTG's top ten tanker 6
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Asia. The slowing economy in the U.S. has reduced shipments from both Europe and Asia to the United States. As of April 30, 2001, SNTG controls a fleet of approximately 15,350 tank containers of which approximately 9,300 are owned and 6,050 are tank containers that are leased in or managed for customers. SNTG specializes in offering door-to-door tank container transportation services, making all transportation arrangements from origin to destination on behalf of the shipper. SNTG is one of the largest operators in the door-to-door business, deploying approximately 13,150 tank containers in all major worldwide markets. In addition, approximately 2,200 tank containers are managed on behalf of customers. Until February 1999, SNTG also operated a leasing division, which leased tank containers to shippers who wish to operate their own containers. On February 12, 1999, the 2,830 tank containers in the leasing division were sold to TransAmerica Leasing Inc. Since 1999, SNTG has had a net addition of 1,200 tank containers to its fleet, in addition to the remaining commitment for the purchase of 400 new tanks. All of SNTG's tank containers are built and maintained to the standards of the International Maritime Organization ("IMO"), the ISO, the U.S. Department of Transportation and other governmental and private organizations. SNTG requires that all of its tank containers be constructed according to, and have valid certificates in accordance with, the International Convention for Safe Containers ("CSC"). SNTG conducts periodic inspections in conformity with CSC and IMO testing requirements. SNTG's tank container operations requires its own infrastructure for tank cleaning and repair. In Europe and the U.S., third-party contractors primarily perform this work. In Rotterdam, Houston, and 7
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in Jeong II Tank Terminal which has a terminal facility in Ulsan, South Korea. SNTG also has an arrangement with subsidiaries of Vopak pursuant to which it has preferential berthing rights to two terminals located in Rotterdam, which is SNTG's parcel tanker operations' most frequently called port. The following table contains information on SNTG's terminals:
40% 10% 26% 26% 50%
1998 1999 1998-2000 1998-2000 1999
224,900 237,800 641,200 417,100 2,252,300 --------3,773,300 --------8,853,700 =========
SNTG obtained ISO 9002 certification for its terminal business systems in Houston, Chicago, Perth Amboy, and Santos. SNTG implemented a Terminal Automation System for tracking customer contracts and tank inventory, as well as for producing customer bills and reports. 8
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develops and applies innovative and cost-efficient offshore techniques that address the evolving technical needs of oil and gas companies that are increasingly developing oil and gas fields in deeper and more demanding offshore environments. Stolt Offshore has operated in more than 60 countries worldwide and currently operates in over 20 countries. Stolt Offshore's business backlog at April 30, 2001 stands at $1,250 million, of which $683 million is for 2001. This compares to a backlog at April 30, 2000 of $1,100 million, of which $574 million was for 2000. The services offered by Stolt Offshore cover all phases of offshore oil and gas operations from exploration to decommissioning. During the exploration phase, Stolt Offshore provides seabed survey and drilling support services. During the development phase, Stolt Offshore provides, with partners when appropriate, engineering design, component procurement, and installation of offshore equipment, well control umbilicals, flowlines, trunklines and production risers. During the production phase, which may continue for many years, Stolt Offshore inspects, maintains, and repairs platforms, pipelines, flowlines, and subsea equipment. Following the production phase, Stolt Offshore provides field decommissioning services including the removal of offshore structures and subsea equipment. Stolt Offshore conducts four principal activities within its regional business segments: Pipelay and Engineering, Procurement, Installation and Commission ("EPIC"), Subsea Construction, Special Projects and Regional Services. Pipelay and EPIC refers to projects involving offshore fields where platforms are part of the infrastructure or where there is a trunkline or a major offshore element of pipeline work. It can also include platform design and fabrication or can include tieback projects where there is a large element of pipelaying or pipeline procurement. Subsea Construction refers to projects where there may be umbilical laying, trenching, flexible flowline laying, jumper installation and hyperbaric welding. Tieback projects which use most of these specific elements but which may include a small element of steel flowline laying are included in the Subsea Construction category. Special Projects are large or complex offshore projects where Stolt Offshore has some influence over the field architecture and could include design, engineering, offshore structures, floating production storage and offloading ships and very deep water. These projects may include complex commercial and contracting strategies. Regional Services tend to be local business projects which can be supported by Regional departments. They can include engineering studies; drill support; or inspection, repair and maintenance operations, shallow water pipelay, for example. In addition to its main product lines, Stolt Offshore offers heavy lift services through a joint venture company, Seaway Heavy Lifting Limited ("SHL"), which operates the heavy lift ship, STANISLAV 9
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Investments in the fleet since 1993 include the acquisition and completion of the SEAWAY EAGLE, a multi-purpose flowline lay and subsea construction ship, the conversion of the SEAWAY OSPREY to lay flexible flowlines and flowline bundles, the acquisition of the SEAWAY FALCON and its conversion to a rigid and flexible flowline lay ship, the conversion of the SEAWAY CONDOR to a flexible flowline and umbilical lay ship, the acquisition of the SEAWAY HAWK, a subsea construction ship, and continuous investment in new ROV technology and construction equipment. Stolt Offshore also took over the long-term lease on the DISCOVERY, a multipurpose subsea construction ship, as part of an asset swap with SubSea Offshore Limited in 1997. During 1999, Stolt Offshore entered into a long-term charter for the NTL 900 a derrick/lay barge. In addition, the SEAWAY KINGFISHER, a diverless inspection, repair and maintenance ship, was introduced into the North Sea market at the end of August 1998. On December 7, 1999, Stolt Offshore completed a transaction to form a joint venture entity, NKT Flexibles I/S ("NKT"), a manufacturer of flexible flowlines and dynamic flexible risers for the offshore oil and gas industry. NKT is owned 51% by NKT Holdings A/S, and 49% by Stolt Offshore. This transaction was effected by the acquisition of Danco A/S, a wholly-owned Norwegian company, which holds the investment in the joint venture entity. Stolt Offshore issued 1.8 million Stolt Offshore Class A shares with an average guaranteed value of $14.475 per share and paid $10.5 million in cash for its 49% interest in NKT, for a total consideration of $36 million. On December 16, 1999, Stolt Offshore acquired approximately 55% of the French offshore construction and engineering company ETPM S.A. ("ETPM"), a wholly-owned subsidiary of Groupe GTM S.A. ("GTM"), the construction affiliate of Suez Lyonnaise des Eaux S.A. The remaining 45% was acquired on February 4, 2000. The purchase price was comprised of $111.6 million in cash; the issuance of 6.1 million Stolt Offshore Class A shares at a maximum guaranteed price of $18.50 per share, giving a value of $113.6 million; and acquisition costs of $3.4 million. Stolt Offshore also entered into a hire purchase arrangement for two ships owned by GTM, the SEAWAY POLARIS and the DLB 801, with an early purchase option after two years. The net present value by of this arrangement at the date of acquisition was $32.0 million. In addition, Stolt Offshore assumed debt of $18.4 million that was due from ETPM to GTM and assumed debt of $71.0 million that was due to third parties. The total purchase price was $350.0 million.
On August 18, 1998, Stolt Offshore acquired the Ceanic Corporation for a cash purchase price of approximately $218.9 million, including transaction costs. The transaction has been accounted for under the purchase method of accounting. The purchase price generated goodwill of approximately $114.8 million at November 30, 1998. This was adjusted during 1999 to $122.1 million. The adjustment reflects a reassessment of the value of certain intangible assets within Ceanic and their related deferred tax liabilities. The goodwill is being amortized on a straight-line basis over 25 years.
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STOLT SEA FARM
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Stolt Sea Farm Holdings plc. ("SSF"), wholly-owned by Stolt, produces, processes, and markets high quality seafood products, including Atlantic salmon, salmon trout, turbot, halibut, sturgeon, caviar, tilapia and tuna. The predecessor of SSF was founded by Jacob Stolt-Nielsen in 1972 and acquired by the Company in late 1991. SSF produces, processes, and markets high quality seafood with salmon production sites in Norway, North America, Chile and Scotland; salmon trout production sites in Norway; tilapia production sites in Canada; turbot production sites in Spain, Portugal, Norway, and France; halibut production sites in Norway; a tuna production site in Australia; and sturgeon and caviar production sites in the U.S. SSF has worldwide marketing operations with sales organizations covering North America, Europe, and Asia Pacific. The aquaculture industry is the fastest growing segment of the food industry with an average annual growth rate of 12% between 1984 and 2000, and overall growth of 39% over the last 3 years. As the world population grows and individuals increasingly seek healthier products like fish, and the supply of wild catch seems to have reached its peak level, the demand for farmed fish is expected to increase. Approximately 85% of SSF's revenue is derived from the sale of Atlantic salmon. The remaining 15% of SSF's revenue is from the other species mentioned above and other seafood products. The world's main seafood markets are Asia, North America and Europe. Traditionally, there have been several middle-men between producers and consumers of fresh seafood. The majority of fish farmers are not set up with their own world wide sales and marketing organizations, and these companies will typically sell their fish to an exporter or a domestic wholesaler, which in turn will sell to importers, wholesalers and distributors, which in turn will sell to food service operators and retailers (restaurants and supermarkets). The overall trend in Europe, North America and Asia seems, with a varying degree of speed and concentration, to move towards a consolidation into fewer and larger vertically integrated fish farming companies selling their products more directly to food service operators, restaurant chains and supermarket chains, which in turn, to an increasing degree, are demanding a higher degree of value added and consumer convenient products. Of the main competitors in the industry, SSF is one of three currently with a presence in all the four major farming regions- Norway, Chile, Canada and the U.K allowing SSF to supply customers in all major market at competitive prices year round. SSF is the only producer with an in-market sales organization in all major markets. SSF's position in the industry is strengthened by the fact that SSF is one of the main salmon producing companies that has further diversified into farming various new species which offer product cross selling advantages and further earnings opportunities. In August 1999, SSF acquired International Aqua Foods Ltd. ("IAF"), a publicly listed company, for approximately $11.0 million and the assumption of $9.2 million in debt. IAF was involved in salmon and tilapia hatchery operations in Canada and the U.S., and salmon and trout farming in Chile. In June 2000, SSF purchased the remaining 49% of Ocean Horizons SA that it did not own. Ocean Horizons is a producer of Atlantic salmon in Chile, and SSF acquired its initial 51% interest in the company when it acquired IAF in 1999. In September 2000, SSF purchased Rokerij La Couronne NV, a smoker and processor of salmon and other seafood products. 11
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salmon in British Columbia, and SSF acquired its initial 51% interest in the company when it acquired IAF in 1999. The seller of the 49% interest in PASFL was EWOS Canada Ltd., a subsidiary of Statkorn Holdings A/S. The agreement involved SSF acquiring the remaining 49% of the company, while Statkorn acquired the assets and inventory owned by SSF at the Tofino, British Columbia sites. The total consideration for the three aforementioned SSF acquisitions in 2000 was approximately $9 million. In December 2000, SSF purchased Australian Bluefin Pty Ltd., a company involved in the ranching of Southern Bluefin tuna, for a total consideration of approximately $30 million. OPTIMUM LOGISTICS Optimum Logistics Ltd. ("OLL") was established in Bermuda on December 30, 1999. OLL offers an internet-based logistics system for global supply chain management for companies engaged in the bulk materials industries. OLL connects all participants in a producer's supply chain, such as carriers, terminal operators, receivers, surveyors, and freight forwarders, to a single communication and value added services system. This system, TransLink-TM-("TransLink"), enables OLL's customers to improve the efficiency of their entire supply chains. OLL has focused its initial technological development and marketing efforts on the bulk marine segment of the chemicals industry. During 2000, efforts were directed toward the development of logistics products and pilot testing of these products with various chemical producers. During 2000, OLL did not generate revenues and incurred operating losses and negative operating cash flow. OLL relied on equity and debt financing from SNTG to fund its operations. On February 28, 2001, SNTG sold a minority interest in OLL to Aspen Technology, Inc., a global provider of intelligent decision-support and e-business solutions for process industries. PRIME SUPPLIER In early 2000, the Company established Prime Supplier Ltd. ("PSL"), which offers an Internet-based total marine procurement system which will make available products and services needed for marine operations. The system enables ship operators to electronically select, purchase and arrange delivery for all the ship's needs for consumables, spare parts and other services. PSL employs a proprietary supplier and price database to intelligently manage the procurement process, including transportation. During 2000, PSL did not generate revenues and incurred operating losses and negative operating cash flow. PSL relied on equity and debt financing from SNTG to fund its operations. In May 2001, PSL entered into an agreement with OneSea.com Inc. to merge their respective businesses. The Company will hold a controlling interest in PSL, which will be renamed SeaSupplier Ltd., and which will have offices in London, Oslo, Houston, Singapore, Piraeus, and Bermuda. 12
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STRATEGY The Company pursues a strategy of seeking to provide sophisticated industrial services to customers in niche markets which demand complex technology. The Company aims to operate in global markets where it is, or believes it can become, the market leader. The Company's investment philosophy is to generate value over the long term. STOLT-NIELSEN TRANSPORTATION GROUP SNTG's strategy is to become the total transportation logistics supplier for the majority of its client base providing an integrated package of services including global transportation and storage, tracking of 14
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The demand for chemical transportation services varies with patterns of industrial growth and world trade. Historically, such demand has grown at a greater rate than world trade, which itself has grown faster than industrial production. In 1994, SNTG embarked on a new building program to construct 25 new parcel tankers (of which one ship was cancelled) designed to meet increasing demand for its transportation services and to replace the first generation of purpose-built parcel tankers built in the early to mid-1970s. The ships in the newbuilding program have greater capacity than the units they have replaced and introduce a series of features to increase operational efficiency, reduce operating costs, and be environmentally safer than previous generations of parcel tankers. SNTG's tank container operations provide transportation services for many of the same type of bulk liquids that are carried in parcel tankers, although tank containers transport smaller lots. Generally, parcel tankers are more economical for lots greater than 150 metric tons, whereas tank containers are more economical for smaller lots. A major trend in the tank container market is the conversion from transportation of liquids in drums to tank containers. The transportation of liquids in tank containers provides a cleaner, safer, and more economical means of transportation than by drums. It is SNTG's intention to continue to expand its presence in this market in response to the needs of its customers, and to continue to provide an important link in SNTG's transportation service chain. By using tank containers, SNTG is able to offer door-to-door, just-in-time deliveries. In developing countries in the Asia Pacific region where there is little supporting infrastructure for tank containers, SNTG has been a pioneer in developing cleaning and maintenance facilities. SNTG's terminal operations support its parcel tanker operations by enabling quicker turnaround of the tankers when in port. They also provide hubs for servicing SNTG's customers by integrating storage with sea and land transportation by parcel tanker, rail, and road. It is SNTG's strategy to take advantage of existing infrastructure and to make selective investments to increase the capacity of its existing terminal facilities, as well as to look for new opportunities on a worldwide basis which will support the strategic objectives of expanding its network of services and improving operational efficiency through faster parcel tanker turnaround and the integration of transportation services. STOLT OFFSHORE Stolt Offshore's strategy is to enhance its position as a full-service offshore contractor providing technologically advanced and cost effective life-of-field offshore services to its customers. With the recent merger activities among the major oil companies it is clear that they are now looking for contractors with a greater range of assets and technologies and who are able to offer them a worldwide service for both new construction and field maintenance services. Stolt Offshore's December 1999 acquisition of ETPM enables Stolt Offshore to offer a much wider range of engineering and pipelay services and also to provide fixed or floating production platforms. Stolt Offshore is therefore able to supply a complete field development solution for the first time. This increased capability and capacity has given Stolt Offshore a much stronger presence in West Africa as it can now undertake larger pipelay and EPIC projects. Different operators require differing scopes of service in the various regions of the world. Stolt Offshore now has the ability to offer a complete EPIC contracting service, from wellhead to production platform or to undertake any part of the engineering and installation package that may be required by individual operators. 15
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SSF's mission is to position itself as a world leading seafood company; by capitalizing on the potential of aquaculture world-wide, through the long term development of new species and new farming technologies; by adding value to its products through further processing into convenient "ready-to-eat" products; and by building its own global sales network, close to its customers, making STERLING and PRODEMAR branded seafood products conveniently available to the consumer. In its strategy, Stolt Sea Farm emphasizes scale as well as decentralized farming operations, the importance of being fully integrated along the value chain, and the importance of having both a strong local presence in all the major markets and a production platform in all the four major production regions. Stolt Sea Farm focuses on spearheading research and development and taking a position with branded seafood products in several new species. REGULATION The Company's businesses are subject to international conventions and U.S. and other governmental regulations which strictly regulate various aspects of the Company's operations. In addition, the Company is required by various governmental and other regulatory agencies to obtain certain permits, licenses, and certificates with respect to its equipment and operations. The kinds of permits, licenses and certificates required in the operations of the Company depend upon a number of factors. The Company believes that it has or can readily obtain all permits, licenses, and certificates necessary to conduct its operations. Some countries require that the Company enter into a joint venture or similar business arrangement with local individuals or businesses in order to conduct business. The Company has entered into such arrangements where necessary. STOLT-NIELSEN TRANSPORTATION GROUP SNTG is subject to the international and national conventions and regulations which cover ocean shipping generally and the transport of chemicals and oil in bulk specifically. The major international conventions applicable to SNTG's operations include the International Convention on the Safety of Life at Sea; the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978, as amended; the International Convention on the Standards of Training, Certification and Watchkeeping of Seafarers; and the Convention on Civil Liability for Oil Pollution Damage. Applicable national regulations for SNTG's operations in U.S. waters include the Port and Tanker Safety Act, the Hazardous Materials Transportation Act, the Clean Air Act, the Clean Water Act, the U.S. Oil Pollution Act of 1990 ("OPA '90"), and the U.S. Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") (see specific discussion on OPA '90 and CERCLA below). In addition, specifically to protect the purity of fats and vegetable oils, SNTG complies with the latest cargo rules established by the National Institute of Oilseed Products in the U.S. and the Federation of Oils, Seeds, and Fats Associations in Europe. SNTG's Dedicated Vegetable Oil Service has been developed as a direct result of these rules. SNTG's river parcel tanker activities are governed by the European Agreement on Regulations for the Carriage of Dangerous Substances on the Rhine and other applicable standards for service on the Rhine River in Europe and by the U.S. Coast Guard safety and pollution prevention regulations. As a foreign-owned corporation, SNTG is prohibited by U.S. Federal law from owning more than a 25% interest in ships operating in the U.S. coastal market and in the U.S. inland waterway system. In addition to many of the regulations governing the parcel tanker
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operations, SNTG's tank container operations are subject to the International Convention for Safe Containers which establishes guidelines for the construction of tank containers; the International Maritime Dangerous Goods Code 16
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CERCLA. Some of the chemicals carried on SNTG's ships are covered by the provisions of CERCLA. SNTG's ships frequently carry some parcel cargoes of lubricating oils and additives and the ships' engines are powered by fuel oil. In addition, cargoes of "clean petroleum products," which are generally covered by the provisions of OPA '90, are occasionally carried on SNTG's ships. Animal fat and vegetable oils as well as other non-petroleum oils are included within the OPA '90 definition of "oil". 17
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countries require that Stolt Offshore enter into a joint venture or similar business arrangement with local individuals or businesses in order to conduct business in such countries. Stolt Offshore's operations are affected from time-to-time and to varying degrees by political developments and federal and local laws and regulations. In particular, oil and gas production, operations, and economics are affected by price control, tax, and other laws relating to the petroleum industry, by changes in such laws and by constantly changing administrative regulations. Such developments directly or indirectly may affect Stolt Offshore's operations and those of its customers. 18