6-K 1 d1334454_6-k.htm d1334454_6-k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13A-16 OR 15D-16 UNDER THE SECURITIES
EXCHANGE ACT OF 1934

For the month of November 2012

Commission File Number:  001-33179

AEGEAN MARINE PETROLEUM NETWORK INC.
(Translation of registrant's name into English)

10, Akti Kondili
185 45, Piraeus
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 as Exhibit 1 to this Report on Form 6-K is a copy of the press release of Aegean Marine Petroleum Network Inc. (the "Company"), dated November 14, 2012, announcing the Company's financial and operating results for the third quarter ended September 30, 2012.

Attached as Exhibit 2 is a copy of the Company's unaudited consolidated financial statements and related notes.




 
 

 


 
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:  November 14, 2012
By:  /s/ E. Nikolas Tavlarios
 
 
Name: E. Nikolas Tavlarios
Title:   President
 
     


 
 

 

Exhibit 1


 
logo


 
 


CONTACTS:
Aegean Marine Petroleum Network Inc.
 
Investor Relations:
(212) 763-5665
investor@ampni.com
The IGB Group
Leon Berman, Principal
(212) 477-8438


Aegean Marine Petroleum Network Inc.
Announces Third Quarter 2012 Financial Results



PIRAEUS, Greece, November, 14, 2012 – Aegean Marine Petroleum Network Inc. (NYSE: ANW) ("Aegean" or the "Company") today announced financial and operating results for the third quarter ended September 30, 2012.

Third Quarter Highlights

 
·
Recorded sales volumes of 2,716,388 metric tons.million.
·
Recorded gross profit of $74.4 million.
·
Recorded operating income of $15.1 million.
·
Recorded net income of $8.0 million attributable to AMPNI shareholders or $0.17 basic and diluted earnings per share.
·
Recorded EBITDA (as defined in Note 1) of $24.6 million.
·
Expanded global marine fuel logistics chain.
o
Commenced physical supply operations in Hong Kong.
o
Commenced utilization of Tanger Med storage facility.

The Company recorded net income attributable to AMPNI shareholders for the three months ended September 30, 2012 of $8.0 million, or $0.17 basic and diluted earnings per share.  For the three months ended September 30, 2011 the Company recorded a net loss of $3.3 million, or $0.07 basic and diluted loss per share. Excluding a non-cash loss of $8.6 million from the sale of a retired floating storage vessel, net income on an adjusted basis for the third quarter of 2011 was $5.3 million, or $0.11 basic and diluted earnings per share. The weighted average basic and diluted shares outstanding for the three months ended September 30, 2012 were 45,487,844. The weighted average basic and diluted shares outstanding for the three months ended September 30, 2011 were 45,992,860.

Total revenues for the three months ended September 30, 2012, decreased 0.7% to $1,825.3 million compared to $1,838.3 million for the same period in 2011. For the three months ended September, 30 2012, sales of marine petroleum products decreased by 0.8% to $1,810.5 million compared to $1,824.9 million for the same period in 2011. Gross profit, which equals total revenue less directly attributable cost of revenue increased by 3.8% to $74.4 million in the third quarter of 2012 compared to $71.7 million in the same period in 2011.

 
1

 

For the three months ended September 30, 2012, the volume of marine fuel sold increased to 2,716,388 metric tons as compared to 2,715,439 metric tons in the same period in 2011.

Operating income for the third quarter 2012 increased by 190.4% to $15.1 million as compared to $5.2 million for the same period in 2011. Operating expenses excluding net book gain or loss on sale of vessels increased by $1.4 million, or 2.4%, to $59.3 million for the three months ended September 30, 2012, as compared to $57.9 million for the same period in 2011.

E. Nikolas Tavlarios, President, commented, "Our results for the third quarter reflect management's unrelenting focus on steadily enhancing profitability under challenging market conditions as adjusted net income increased more than 50% compared to the year-earlier period. During the third quarter, we commenced physical supply operations in Hong Kong, increasing Aegean's current global scale to 20 markets covering approximately 60 ports. We also announced plans to launch operations in Barcelona, Spain, further enhancing our ability to leverage Aegean's high-quality logistics infrastructure. Consistent with our objective to expand Aegean's worldwide marine fuel logistics chain, we commenced utilization of the onshore storage facility in Tanger Med during the third quarter. This new facility provides important strategic benefits that will enable Aegean to ensure the availability of product for credit quality customers, enhance its purchasing power for marine fuel and generate third-party leasing income. With an expanding global full-service platform we remain well positioned to strengthen Aegean's global brand recognition and drive future performance."

Liquidity and Capital Resources

As of September 30, 2012, the Company had cash and cash equivalents of $77.1 million and working capital of $74.5 million. Non-cash working capital, or working capital excluding cash and debt, was $465.8 million as of September 30, 2012.

Net cash provided by operating activities was $22.2 million for the three months ended September 30, 2012. Net income, as adjusted for non-cash items (as defined in Note 9) was $19.9 million for the period.

Net cash used in investing activities was $10.6 million for the three months ended September 30, 2012, mainly due to the advances for other fixed assets under construction.

Net cash used in financing activities was $20.7 million for the three months ended September 30, 2012, primarily driven by the pay down of net borrowings.

As of September 30, 2012, the Company had $207.1 million in available liquidity, which includes unrestricted cash and cash equivalents of $77.1 million and available undrawn amounts under the Company's working capital facilities of $130.0 million, to finance working capital requirements.

Spyros Gianniotis, Chief Financial Officer, stated, "During the third quarter, we continued to increase fleet utilization while growing sales volumes in a number of our core markets.  We also maintained our focus on executing transactions in a disciplined manner with creditworthy counterparties and improving our overall cost structure. While we continue to operate in a difficult macro environment, we believe our integrated services and financial strength bode well for management to further enhance Aegean's long-term earnings potential as we continue to leverage our global marine fuel platform."
 

 
2

 

Summary Consolidated Financial and Other Data (Unaudited)
   
For the Three Months Ended September 30,
   
For the Nine Months Ended September 30,
 
   
2011
   
2012
   
2011
   
2012
 
   
(in thousands of U.S. dollars, unless otherwise stated)
 
Income Statement Data:
                       
Revenues - third parties
  $ 1,828,105     $ 1,814,147     $ 5,181,554     $ 5,478,829  
Revenues - related companies
    10,194       11,124       43,563       45,417  
Total revenues
    1,838,299       1,825,271       5,225,117       5,524,246  
Cost of revenues  - third parties
    1,643,151       1,637,705       4,710,651       4,937,503  
Cost of revenuesrelated companies
    123,446       113,177       313,616       355,943  
Total cost of revenues
    1,766,597       1,750,882       5,024,267       5,293,446  
Gross profit
    71,702       74,389       200,850       230,800  
Operating expenses:
                               
Selling and distribution
    49,425       51,162       143,453       159,502  
General and administrative
    8,071       7,774       21,768       22,194  
Amortization of intangible assets
    360       379       1,069       1,130  
Loss on sale of vessels, net
    8,631       -       8,682       4,218  
Operating income
    5,215       15,074       25,878       43,756  
Net financing cost
    7,493       7,927       20,234       24,981  
Foreign exchange (gains) losses, net
    (1,791 )     (2,103 )     (2,556 )     (2,804 )
Income taxes
    1,884       510       3,303       2,783  
Net (loss) income
    (2,371 )     8,740       4,897       18,796  
Less income attributable to non-controlling interest
    962       722       962       2,063  
Net (loss) income/ attributable to AMPNI shareholders
  $ (3,333 )   $ 8,018     $ 3,935     $ 16,733  
Basic earnings/ per share (U.S. dollars)
  $ (0.07 )   $ 0.17     $ 0.08     $ 0.36  
Diluted earnings/ per share (U.S. dollars)
  $ (0.07 )   $ 0.17     $ 0.08     $ 0.36  
                                 
EBITDA(1)
  $ 13,743     $ 24,574     $ 49,935     $ 68,114  
                                 
Other Financial Data:
                               
Gross spread on marine petroleum products(2)
  $ 63,888     $ 63,933     $ 186,915     $ 204,141  
Gross spread on lubricants(2) 
    424       858       1,435       2,149  
Gross spread on marine fuel(2) 
    63,464       63,075       185,480       201,992  
Gross spread per metric ton of marine
fuel sold (U.S. dollars) (2) 
    23.4       23.2       23.0       25.6  
Net cash provided by (used in) operating activities
  $ (32,565 )   $ 22,213     $ (90,319 )   $ 79,856  
Net cash used in investing activities
    (5,594 )     (10,599 )     (27,038 )     (29,238 )
Net cash provided by (used in) financing activities
    34,165       (20,739 )     67,988       (42,008 )
                                 
Sales Volume Data (Marine Fuel Metric Tons): (3)
                               
Total sales volumes
    2,715,439       2,716,388       8,077,557       7,891,794  
                                 
Other Operating Data:
                               
Number of owned bunkering tankers, end of period(4)
    58.0       57.0       58.0       57.0  
Average number of owned bunkering tankers(4)(5)
    56.0       57.0       55.5       57.5  
Special Purpose Vessels, end of period(6)……………
    1.0       1.0       1.0       1.0  
Number of owned storage facilities, end of period(7)
    8.0       7.0       8.0       7.0  


 
3

 

Summary Consolidated Financial and Other Data (Unaudited)
   
As of
December 31, 2011
   
As of
September 30, 2012
 
             
   
(in thousands of U.S. dollars,
unless otherwise stated)
 
Balance Sheet Data:
     
Cash and cash equivalents
    68,582       77,081  
Gross trade receivables
    526,450       554,145  
Allowance for doubtful accounts
    (1,354 )     (3,760 )
Inventories
    204,057       199,918  
Current assets
    851,991       886,105  
Total assets
    1,472,438       1,509,398  
Trade payables
    250,810       305,111  
Current liabilities (including current portion of long-term debt)
    650,810       811,589  
Total debt
    706,916       667,318  
Total liabilities
    992,896       1,009,183  
Total stockholder's equity
    479,542       500,215  
                 
Working Capital Data:
               
Working capital(8) 
    201,181       74,516  
Working capital excluding cash and debt(8)
    497,925       465,766  
 
Notes:
 
1.
EBITDA represents net income before interest, taxes, depreciation and amortization. EBITDA do not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by United States generally accepted accounting principles, or U.S. GAAP, and our calculation of EBITDA may not be comparable to that recorded by other companies. EBITDA is included herein because it is a basis upon which the Company assesses its operating performance and because the Company believes that it presents useful information to investors regarding a company's ability to service and/or incur indebtedness. The following table reconciles net income to EBITDA for the periods presented:
 
   
For the Three Months Ended
September 30,
   
For the Nine Months Ended
September 30,
 
   
2011
   
2012
   
2011
   
2012
 
                         
Net (loss) income attributable to AMPNI shareholders
    (3,333 )     8,018       3,935       16,733  
                                 
Add: Net financing cost including amortization of financing costs
    7,493       7,927       20,234       24,981  
  Add: Income tax expense
    1,884       510       3,303       2,783  
  Add: Depreciation and amortization excluding amortization of financing costs
    7,699       8,119       22,463       23,617  
                                 
EBITDA
    13,743       24,574       49,935       68,114  


 
 

 
4

 


 
 
2.
Gross spread on marine petroleum products represents the margin the Company generates on sales of marine fuel and lubricants.  Gross spread on marine fuel represents the margin that the Company generates on sales of various classifications of marine fuel oil ("MFO") or marine gas oil ("MGO"). Gross spread on lubricants represents the margin that the Company generates on sales of lubricants. The Company calculates the above-mentioned gross spreads by subtracting from the sales of the respective marine petroleum product the cost of the respective marine petroleum product sold and cargo transportation costs. For arrangements in which the Company physically supplies the respective marine petroleum product using its bunkering tankers, costs of the respective marine petroleum products sold represents amounts paid by the Company for the respective marine petroleum product sold in the relevant reporting period. For arrangements in which the respective marine petroleum product is purchased from the Company's related company, Aegean Oil S.A., or Aegean Oil, cost of the respective marine petroleum products sold represents the total amount paid by the Company to the physical supplier for the respective marine petroleum product and its delivery to the custom arrangements in which the Company purchases cargos of marine fuel for its floating storage facilities, transportation costs may be included in the purchase price of marine fuels from the supplier or may be incurred separately from a transportation provider. Gross spread per metric ton of marine fuel sold represents the margin the Company generates per metric ton of marine fuel sold. The Company calculates 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:
 
 
                                 
     
For the Three Months Ended
September 30,
     
For the Nine Months Ended
September 30,
 
      2011        2012        2011        2012   
                                 
Sales of marine petroleum products
    1,824,941       1,810,525       5,196,577       5,484,406  
Less: Cost of marine petroleum products sold
    (1,761,053 )     (1,746,592 )     (5,009,662 )     (5,280,265 )
Gross spread on marine petroleum products
    63,888       63,933       186,915       204,141  
Less: Gross spread on lubricants
    (424 )     (858 )     (1,435 )     (2,149 )
Gross spread on marine fuel
    63,464       63,075       185,480       201,992  
                                 
Sales volume of marine fuel (metric tons)
    2,715,439       2,716,388       8,077,557       7,891,794  
                                 
Gross spread per metric ton of marine
fuel sold (U.S. dollars)
    23.4       23.2       23.0       25.6  

 
 
3.
Sales volume of marine fuel is the volume of sales of various classifications of MFO and MGO for the relevant period and is denominated in metric tons. The Company does not use the sales volume of lubricants as an indicator.
 
The Company's markets include its physical supply operations in the United Arab Emirates, Gibraltar, Jamaica, Singapore, Northern Europe, Ghana, Vancouver, Montreal, Mexico, Portland (U.K.), Trinidad and Tobago (Southern Caribbean), Tangiers (Morocco), Las Palmas, Tenerife, Panama, Hong Kong and Greece, where the Company conducts operations through its related company, Aegean Oil.
 
 
4.
Bunkering fleet comprises both bunkering vessels and barges.
 
 
5.
Figure represents average bunkering fleet number for the relevant period, as measured by the sum of the number of days each bunkering tanker or barge was used as part of the fleet during the period divided by the cumulative number of calendar days in the period multiplied by the number of bunkering tankers at the end of the period.   This figure does not take into account non-operating days due to either scheduled or unscheduled maintenance.
 
 
6.
Special Purpose Vessels consists of the Orion, a 550 dwt tanker which is based in our Greek market.
 

 
5

 


 
 
7.
As of September 30, 2012 the Company owned one Panamax tanker, the Aeolos, and one Aframax tanker, the Leader as floating storage facilities in Gibraltar and United Arab Emirates. Additionally, the Company operates a barge, the Mediterranean, as a floating storage facility in Greece and a small tanker, the Tapuit, as a floating storage facility in Northern Europe.  The Company also has on-land storage facilities in Portland, Las Palmas and Panama.
 
The ownership of storage facilities allows the Company to mitigate its risk of supply shortages. Generally, storage costs are included in the price of refined marine fuel quoted by local suppliers. The Company expects that the ownership of storage facilities will allow it to convert the variable costs of this storage fee mark-up per metric ton quoted by suppliers into fixed costs of operating its owned storage facilities, thus enabling the Company to spread larger sales volumes over a fixed cost base and to decrease its refined fuel costs.
 
 
8.
Working capital is defined as current assets minus current liabilities. Working capital excluding cash and debt is defined as current assets minus cash and cash equivalents minus restricted cash minus current liabilities plus short-term borrowings plus current portion of long-term debt.
 
 
9.
Net income as adjusted for non-cash items, such as depreciation, provision for doubtful accounts, restricted stock, amortization, deferred income taxes, loss on sale of vessels, net, unrealized loss/(gain) on derivatives and unrealized foreign exchange loss/(gain), net, is a quantitative standard used to assist in evaluating a company's ability to make quarterly cash distributions. Net income as adjusted for non-cash items is not required by accounting principles generally accepted in the United States and should not be considered as an alternative to net income or any other indicator of the Company's performance required by accounting principles generally accepted in the United States.
 
 
Third Quarter 2012 Dividend Announcement
On November 14, 2012, the Company's Board of Directors declared a third quarter 2012 dividend of $0.01 per share payable on December 12, 2012 to shareholders of record as of November 28, 2012. The dividend amount was determined in accordance with the Company's dividend policy of paying cash dividends on a quarterly basis subject to factors including the requirements of Marshall Islands law, future earnings, capital requirements, financial condition, future prospects and such other factors as are determined by the Company's Board of Directors. The Company anticipates retaining most of its future earnings, if any, for use in operations and business expansion.

Conference Call and Webcast Information
Aegean Marine Petroleum Network Inc. will conduct a conference call and simultaneous Internet webcast on  Thursday, November 15, 2012 at 8:30 a.m. Eastern Time, to discuss its third quarter results.  Investors may access the webcast and related slide presentation, by visiting the Company's website at www.ampni.com, and clicking on the webcast link.  The conference call also may be accessed via telephone by dialing (866) 431-5320 (for U.S.-based callers) or (719) 325-2414 (for international callers) and enter the passcode: 8476067.

A replay of the webcast will be available soon after the completion of the call and will be accessible on www.ampni.com.  A telephone replay will be available through November 29, 2012 by dialing (888) 203-1112 or (for U.S.-based callers) or (719) 457-0820 (for international callers) and enter the passcode: 8476067.

About Aegean Marine Petroleum Network Inc.
Aegean Marine Petroleum Network Inc. is an international marine fuel logistics company that markets and physically supplies refined marine fuel and lubricants to ships in port and at sea. The Company procures product from various sources (such as refineries, oil producers, and traders) and resells it to a diverse group of customers across all major commercial shipping sectors and leading cruise lines. Currently, Aegean has a global presence in 20 markets, including Vancouver, Montreal, Mexico, Jamaica, Trinidad and Tobago, West Africa, Gibraltar, U.K., Northern Europe, Piraeus, Patras, the United Arab Emirates, Singapore, Morocco, the Antwerp-Rotterdam-Amsterdam (ARA) region, Las Palmas, Tenerife, Cape Verde, Panama and Hong Kong, and plans to commence operations in Barcelona, Spain during the first quarter of 2013. The Company has also entered into a strategic alliance to extend its global reach to China. To learn more about Aegean, visit http://www.ampni.com.

Cautionary Statement Regarding Forward-Looking Statements
Matters discussed in this press release 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.

The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words "believe," "intend," "anticipate," "estimate," "project," "forecast," "plan," "potential," "may," "should," "expect" and similar expressions identify forward-looking statements. The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management's examination of historical operating trends, data contained in our records and other data available from third parties. 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 important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include 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 secondhand bunkering tankers, 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, 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 failure to hedge certain financial risks associated with our business, our ability to maintain our current tax treatments and our failure to comply with restrictions in our credit agreements and other factors.  Please see our filings with the Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.

 
 
6

 

Exhibit 2


 
 
AEGEAN MARINE PETROLEUM NETWORK INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2011 AND SEPTEMBER 30, 2012
(UNAUDITED)
 
(Expressed in thousands of U.S. dollars – except for share and per share data)
 
   
December 31, 2011
   
September 30, 2012
 
ASSETS
           
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 68,582     $ 77,081  
Trade receivables, net of allowance for doubtful accounts of $1,354 and $3,760, as of December 31, 2011 and September 30, 2012 respectively
    525,096       550,385  
Due from related companies
    16,128       16,597  
Derivative asset
    1,219       1,063  
Inventories
    204,057       199,918  
Prepayments and other current assets, net of allowance for doubtful accounts of $0 and $770, as of December 31, 2011 and September 30, 2012 respectively
    31,573       34,196  
Restricted cash
    5,336       6,865  
Total current assets
    851,991       886,105  
                 
FIXED ASSETS:
               
Advances for vessels under construction and acquisitions
    11,553       -  
Advances for other fixed assets under construction
    40,746       72,964  
Vessels, cost
    545,684       540,315  
Vessels, accumulated depreciation
    (71,244 )     (78,651 )
Other fixed assets, net
    13,166       13,044  
Total fixed assets
    539,905       547,672  
                 
OTHER NON-CURRENT ASSETS:
               
Deferred charges, net
    19,602       15,949  
Intangible assets
    20,023       18,893  
Goodwill
    37,946       37,946  
Deferred tax asset
    2,813       2,669  
Other non-current assets
    158       164  
Total assets
    1,472,438       1,509,398  
LIABILITIES AND EQUITY
               
CURRENT LIABILITIES:
               
Short-term borrowings
    349,234       325,968  
Current portion of long-term debt
    21,428       149,228  
Trade payables to third parties
    222,263       273,666  
Trade payables to related companies
    28,547       31,445  
Other payables to related companies
    2,131       950  
Accrued and other current liabilities
    27,207       30,332  
Total current liabilities
    650,810       811,589  
                 
NON-CURRENT LIABILITIES:
               
Long-term debt, net of current portion
    336,254       192,122  
Deferred tax liability
    2,906       3,011  
Derivative liability
    385       593  
Other non-current liabilities
    2,541       1,868  
Total non-current liabilities
    342,086       197,594  
                 
COMMITMENTS AND CONTINGENCIES
    -       -  
                 
AMPNI 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 at December 31, 2011 and September 30, 2012;
48,196,870 and 48,553,038 shares issued and 46,229,231 and 46,585,399 shares outstanding at December 31, 2011 and September 30, 2012, respectively
    482       486  
Treasury stock $0.01 par value; 1,967,639 shares, repurchased at December 31, 2011 and  September 30, 2012
    (29,308 )     (29,308 )
Additional paid-in capital
    341,154       344,421  
Retained earnings
    165,734       181,073  
Total  AMPNI stockholders' equity
    478,062       496,672  
                 
Non-controlling interest
    1,480       3,543  
Total  equity
    479,542       500,215  
Total liabilities and equity
    1,472,438       1,509,398  
 
The accompanying notes are an integral part of these condensed consolidated financial statements
 

 
1

 

                          AEGEAN MARINE PETROLEUM NETWORK INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2012
(UNAUDITED)
 
(Expressed in thousands of U.S. dollars – except for share and per share data)
 
 

 
   
Nine Months Ended
September 30,
 
   
2011
   
2012
 
             
Revenues
           
Revenues – third parties
    5,181,554       5,478,829  
Revenues – related companies
    43,563       45,417  
                 
Total Revenues
    5,225,117       5,524,246  
                 
Cost of  Revenues
               
Cost of revenues– third parties
    4,710,651       4,937,503  
Cost of revenues – related companies
    313,616       355,943  
                 
Total Cost of Revenues
    5,024,267       5,293,446  
                 
Gross Profit
    200,850       230,800  
                 
OPERATING EXPENSES:
               
Selling and Distribution
    143,453       159,502  
General and Administrative
    21,768       22,194  
Amortization of intangible assets
    1,069       1,130  
Loss on sale of vessels, net
    8,682       4,218  
                 
Total operating expenses
    174,972       187,044  
                 
Operating income
    25,878       43,756  
                 
OTHER INCOME/(EXPENSE):
               
Interest and finance costs
    (20,269 )     (25,044 )
Interest income
    35       63  
Foreign exchange gains, net
    2,556       2,804  
      (17,678 )     (22,177 )
                 
Income before provision for income taxes
    8,200       21,579  
                 
Income taxes
    (3,303 )     (2,783 )
                 
Net  income
  $ 4,897     $ 18,796  
Net income attributable to non-controlling interest
    962       2,063  
Net  income attributable to AMPNI shareholders
  $ 3,935     $ 16,733  
                 
Basic earnings per common share
  $ 0.08     $ 0.36  
Diluted earnings per common share
  $ 0.08     $ 0.36  
                 
Weighted average number of shares, basic
    46,184,387       45,464,001  
Weighted average number of shares, diluted
    46,184,387       45,464,001  
 
The accompanying notes are an integral part of these condensed consolidated financial statements




AEGEAN MARINE PETROLEUM NETWORK INC.

 
2

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 AS OF SEPTEMBER 30, 2011 AND 2012
 
(UNAUDITED)
 
(Expressed in thousands of U.S. dollars – except for share and per share data)
 

 

   
Common Stock
   
Treasury Stock
   
Additional Paid-in Capital
   
Retained Earnings
   
Non-Controlling Interest
   
Total
 
 
 
 
                                     
 
 
 
                                     
   
Number of Shares
   
Par Value
   
Number of Shares
   
Par Value
   
 
   
 
   
 
   
 
 
                                                 
BALANCE, December 31, 2010
    47,709,420       477       (1,000,000 )     (10 )     312,526       157,370    
 
    $ 470,363  
                                                               
- Net income
    -       -       -       -       -       3,935       962       4,897  
- Dividends declared and paid ($0.3 per share)
    -       -       -       -       -       (1,401 )     -       (1,401 )
                                                                 
- Share-based compensation
    487,450       5       -       -       2,779       -       -       2,784  
- Repurchases of common stock
    -       -       (967,639 )     (10 )     (4,618 )     -       -       (4,628 )
                                                                 
BALANCE, September 30, 2011
    48,196,870       482       (1,967,639 )     (20 )     310,687       159,904       962       472,015  
                                                                 


   
Common Stock
   
Treasury Stock
   
Additional Paid-in Capital
   
Retained Earningss
   
Non-Controlling Interest
   
Total
 
 
 
 
                                     
 
 
 
                                     
   
Number of Shares
   
Par Value
   
Number of Shares
   
Par Value
   
 
   
 
   
 
   
 
 
                                                 
                                                 
BALANCE, December 31, 2011
    48,196,870       482       (1,967,639 )     (20 )     311,866       165,734       1,480     $ 479,542  
                                                                 
- Net income
    -       -       -       -       -       16,733       2,063       18,796  
- Dividends declared and paid ($0.3 per share)
    -       -       -       -       -       (1,394 )     -       (1,394 )
                                                                 
- Share-based compensation
    356,168       4       -       -       3,267       -       -       3,271  
                                                                 
BALANCE, September 30, 2012
    48,553,038       486       (1,967,639 )     (20 )     315,133       181,073       3,543       500,215  
                                                                 
                                                                 
                                                                 

The accompanying notes are an integral part of these consolidated financial statements


 

 
3

 


AEGEAN MARINE PETROLEUM NETWORK INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2012
(UNAUDITED)

(Expressed in thousands of U.S. dollars)
 
   
Nine Months Ended September 30,
 
   
2011
   
2012
 
Cash flows from operating activities:
           
Net income
  $ 4,897     $ 18,796  
Adjustments to reconcile net income to net cash used in operating activities:
               
Depreciation
    16,147       16,833  
Provision of doubtful accounts
    342       3,176  
Share-based compensation
    2,784       3,271  
Amortization
    7,060       7,637  
Deferred income taxes
    (525 )     249  
Unrealized loss (gain) on derivatives
    (892 )     364  
Loss on sale of vessels, net
    8,682       4,218  
Unrealized foreign exchange gain
    -       (317 )
 (Increase) Decrease in:
               
Trade receivables
    (144,542 )     (27,584 )
Due from related companies
    1,243       (469 )
Inventories
    (15,197 )     4,139  
Prepayments and other current assets
    (8,230 )     (3,393 )
Increase (Decrease) in:
               
Trade payables
    34,111       54,554  
Other payables to related companies
    2,766       (1,181 )
Accrued and other current liabilities
    8,600       3,267  
Other non-current assets
    (53 )     (6 )
Other non-current liabilities
    336       148  
Payments for dry-docking
    (7,848 )     (3,846 )
Net cash (used in) provided by operating activities
    (90,319 )     79,856  
                 
Cash flows from investing activities:
               
Advances for vessels under construction
    (22,040 )     (2,303 )
Advances for other fixed assets under construction
    (11,790 )     (32,218 )
Net proceeds from sale of vessels
    8,474       7,150  
Purchase of other fixed assets
    (170 )     (338 )
Purchase of intangible assets
    (1,500 )     -  
Decrease/ (increase) in restricted cash
    (12 )     (1,529 )
Net cash used in investing activities
    (27,038 )     (29,238 )
                 
Cash flows from financing activities:
               
Proceeds from long-term debt
    17,273       -  
Repayment of long-term debt
    (71,493 )     (16,015 )
Repayment of capital lease obligation
    (917 )     (963 )
Net change in short-term borrowings
    130,122       (23,266 )
Financing costs paid
    (968 )     (370 )
Repurchases of common stock
    (4,628 )     -  
Dividends paid
    (1,401 )     (1,394 )
Net cash provided by (used in) financing activities
    67,988       (42,008 )
                 
Effect of exchange rate changes on cash and cash equivalents
    435       (111 )
                 
Net change in cash and cash equivalents
    (48,934 )     8,499  
Cash and cash equivalents at beginning of period
    86,499       68,582  
Cash and cash equivalents at  end of period
  $ 37,565     $ 77,081  
                 
                 
                 
                 
 
The accompanying notes are an integral part of these condensed consolidated financial statements

 
4

 
AEGEAN MARINE PETROLEUM NETWORK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

 (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" or "AMPNI") 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 ("US GAAP") for interim financial information. Accordingly, they do not include all the information and notes required by US GAAP 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, 2012 are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2012.

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, 2011.

The carrying amounts of cash and cash equivalents, trade accounts receivable, and trade accounts payable reported in the 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 because interest rates are based on the market rates.
 
2. 
Significant accounting policies:

    A discussion of the Company's significant accounting policies can be found in the Company's consolidated financial statements included in the Annual Report on Form 20-F for the year ended December 31, 2011. There have been no material changes to these policies in the nine-month period ended September 30, 2012.

 
5

 
AEGEAN MARINE PETROLEUM NETWORK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

 (Expressed in thousands of U.S. dollars –
except share and per share data, unless otherwise stated)



3.   
Trade Accounts Receivables Factoring Agreement

In connection with the factoring agreement, renewed on November 14, 2012 and valid until October 17, 2013, the Company transfers ownership of eligible trade accounts receivable to a third party purchaser without recourse in exchange of cash. Proceeds from the transfer reflect the face value of the account less a discount. The receivables sold pursuant to this factoring agreement are excluded from trade receivables on the consolidated balance sheets and are reflected as cash provided by operating activities on the consolidated statements of cash flows.

The third party purchaser has no recourse to our assets for failure of debtors to pay when due. We sold $583,721 of trade accounts receivable during the period ended September 30, 2012, which is net of servicing fees of $1,333.
 
4. 
Inventories:

The amounts shown in the accompanying condensed consolidated balance sheets are analyzed as follows:
 
   
December 31, 2011
   
September 30,
 2012
 
Held for sale:
           
   Marine Fuel Oil
    146,770       149,959  
   Marine Gas Oil
    53,635       44,645  
      200,405       194,604  
Held for consumption:
               
   Marine fuel
    2,355       4,217  
   Lubricants
    1,063       957  
   Stores
    31       23  
   Victuals
    203       117  
      3,652       5,314  
                 
Total
    204,057       199,918  


5. 
Advances for Vessels under Construction and Acquisitions:

 
During the nine months ended September 30, 2012, the movement of the account, advances for vessels under construction and acquisitions, was as follows:

Balance, January 1, 2012
    11,553  
Advances for vessels under construction and related costs
    2,302  
Vessels Delivered
    (13,855 )
Balance September 30, 2012
    -  

The amounts shown in the accompanying condensed consolidated balance sheets include advance and milestone payments relating to the remaining 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 period which were capitalized.


 
6

 
AEGEAN MARINE PETROLEUM NETWORK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

 (Expressed in thousands of U.S. dollars –
except share and per share data, unless otherwise stated)




6.
Advances for Other Fixed Assets under Construction:

Fujairah in-land storage facility: In July 2010, the Company assumed a 25-year terminal lease agreement from a related party, which will be automatically renewed for an additional 25 years, with the Municipality of Fujairah, and to build an in-land storage facility in the United Arab Emirates with total estimated costs of $105,000. The Company is expected to complete the construction of the new facility until the end of year 2013 and the payment of the contractual amounts will be made with the progress of the construction.  As of September 30, 2012, the Company has paid advances for construction and related costs of the in-land storage facility amounting to $72,964. The contractual obligations arising from signed contracts relating to this project after September 30, 2012 are estimated as $8,000 for the fourth quarter of 2012 and $25,000 for 2013.

7. 
Vessels:

During the nine months ended September 30, 2012, the movement of the account vessels was as follows:
   
Vessel Cost
   
Accumulated Depreciation
   
Net Book Value
 
Balance, January 1, 2012
    545,684       (71,244 )     474,440  
- Vessels additions
    13,855       -       13,855  
- Depreciation
    -       (16,375 )     (16,375 )
- Vessels sold
    (19,224 )     8,968       (10,256 )
Balance, September 30, 2012
    540,315       (78,651 )     461,664  

On April 10, 2012, the Company sold the vessel Vera to an unaffiliated third-party purchaser for an aggregate price of $605. The loss on sale of $697 was calculated as the sale price less the carrying value of the vessel of $952 and the carrying value of unamortized dry-docking costs of $350. This loss is included under the loss on sale of vessels, net in the consolidated statements of income.

On April 19, 2012, the Company sold the floating storage facility Fos to an unaffiliated third-party purchaser for an aggregate price of $5,103. The loss on sale of $4,030 was calculated as the sale price less the carrying value of the vessel of $8,762 and the carrying value of unamortized dry-docking costs of $371. This loss is included under the loss on sale of vessels, net in the consolidated statements of income.

On May 23, 2012, the newly-constructed bunkering tanker, Symi (ex-QHS-228), with a total cost of $13,855, became operational in the Company's service center in Ghana.

On June 14, 2012, the Company sold the vessel Hope to an unaffiliated third-party purchaser for an aggregate price of $1,442. The gain on sale of $509 was calculated as the sale price less the carrying value of the vessel of $541 and the carrying value of unamortized dry-docking costs of $392. This loss is included under the loss on sale of vessels, net in the consolidated statements of income.





 
7

 
AEGEAN MARINE PETROLEUM NETWORK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

 (Expressed in thousands of U.S. dollars –
except share and per share data, unless otherwise stated)




8. 
Other Fixed Assets:

The amounts in the accompanying condensed consolidated balance sheets are analyzed as follows:

   
Land
   
Buildings
   
Other
   
Total
 
Cost, December 31, 2011
    9,036       3,459       2,639       15,134  
- Additions
    -       -       338       338  
- Disposals
    -       -       (53 )     (53 )
Cost, September 30, 2012
    9,036       3,459       2,924       15,419  
                                 
Accumulated depreciation, December 31, 2011
    -       (412 )     (1,556 )     (1,968 )
- Depreciation expense
    -       (28 )     (432 )     (460 )
- Disposals
            -       53       53  
Accumulated depreciation, September 30, 2012
    -       (440 )     (1,935 )     (2,375 )
                                 
Net book value, December 31, 2011
    9,036       3,047       1,083       13,166  
Net book value, September 30, 2012
    9,036       3,019       989       13,044  


9. 
Deferred Charges:

During the nine months ended September 30, 2012, the movement of the account, deferred charges was as follows:
   
Dry-docking
   
Financing Costs
   
Total
 
Balance, January 1, 2012
    18,257       1,345       19,602  
- Additions
    3,596       370       3,966  
- Disposals
    (1,112 )     -       (1,112 )
- Amortization
    (5,654 )     (853 )     (6,507 )
Balance, September 30, 2012
    15,087       862       15,949  

The amortization for dry-docking costs is included in cost of revenue and in selling and distribution cost in the accompanying condensed consolidated statements of income, according to their function. The amortization of financing costs is included in interest and finance costs in the accompanying condensed consolidated statements of income.


10. 
 Goodwill and intangible assets:

Goodwill: Goodwill identified represents the purchase price in excess of the fair value of the identifiable net assets of the acquired business at the date of acquisition. The Company tests for impairment at least annually (as of December 31), or more frequently if impairment indicators arise, using a two step process. The first step identifies potential impairment by comparing the estimated fair value of a reporting unit with its book value including goodwill. If the fair value exceeds the carrying amount, goodwill is not impaired and the second step is not necessary. If the carrying value exceeds the fair value, the second step calculates the possible impairment loss by comparing the implied fair value of goodwill with the carrying amount. If the implied fair value of goodwill is less than the carrying amount, a write-down is recorded.

 
8

 
AEGEAN MARINE PETROLEUM NETWORK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

 (Expressed in thousands of U.S. dollars –
except share and per share data, unless otherwise stated)



The decline in our stock price such that the market capitalization was lower than the consolidated net book value as of September 30, 2012 indicated the need for an interim impairment assessment. The Company calculated the fair value of the reporting unit using the discounted cash flow method, and determined that the implied fair value of goodwill exceeded the book value. The discounted cash flows calculation is subject to management judgment related to revenue growth, capacity utilization, the weighted average cost of capital (WACC), of approximately 7%, and the future price of marine fuel products. No impairment loss was recorded at September 30, 2012.


Intangible assets: The Company has identified finite-lived intangible assets associated with concession agreements acquired with the purchase of the Portland subsidiary, the Las Palmas and Panama sites and a non-compete covenant acquired with the Verbeke business. The values recorded have been recognized at the date of the acquisition and are amortized on a straight line basis over their useful life.

The amounts in the accompanying condensed consolidated balance sheets are analyzed as follows:
 
   
Concession
agreements
 
Non-compete
covenant
Total
Cost as per
December  31, 2011
 
19,797
3,365
23,162
September 30, 2012
 
19,797
3,365
23,162
Accumulated Amortization as per
December  31, 2011
 
(2,234)
(905)
(3,139)
September 30, 2012
 
(2,975)
(1,294)
(4,269)
NBV as per
December  31, 2011
 
17,563
2,460
20,023
September 30, 2012
 
16,822
2,071
18,893
Amortization Schedule
Oct 1, to December 31, 2012
 
247
128
375
2013
 
988
517
1,505
 
2014
 
988
517
1,505
 
2015
 
988
517
1,505
 
2016
 
988
392
1,380
 
Thereafter
 
12,623
-
12,623








 
9

 
AEGEAN MARINE PETROLEUM NETWORK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

 (Expressed in thousands of U.S. dollars –
except share and per share data, unless otherwise stated)



11. 
Total Debt:
 
The amounts comprising total debt are presented in the accompanying condensed consolidated balance sheet as follows:
 
 
Loan Facility
 
December 31,
2011
   
September 30,
2012
 
Short-term borrowings:
           
Revolving credit facility dated 12/01/2011
    -       50,000  
Revolving overdraft facility 3/30/2012
    9,915       7,993  
Trade credit facility 7/30/2012
    102,915       99,762  
Revolving credit facility 4/20/2012
    58,000       61,840  
Revolving credit facility 9/1/2012
    51,500       23,941  
Revolving credit facility 6/21/2012
    123,109       82,432  
Receivables credit facility amendment dated 11/15/2011
    3,795       -  
Total short-term borrowings
    349,234       325,968  
 
Long-term debt:
               
Secured syndicated term loan 8/30/2005
    27,340       25,540  
Secured term loan facility under
senior secured credit facility 12/19/2006
    22,620       20,520  
Secured term loan 10/25/2006
    22,473       21,357  
Secured term loan 10/27/2006
    14,824       13,906  
Secured syndicated term loan 10/30/2006
    56,230       53,659  
Secured term loan 9/12/2008
    38,223       35,017  
Secured syndicated term loan 4/24/2008
    32,698       31,225  
Secured syndicated term loan 7/8/2008
    8,500       6,813  
Secured term loan 4/1/2010
    2,455       2,197  
Secured term loan 4/1/2010
    2,331       1,543  
Roll over agreement 4/1/2010
    6,988       6,573  
Overdraft facility under senior secured
credit facility 3/3/2011
    123,000       123,000  
Total
    357,682       341,350  
Less:  Current portion of long-term debt
    (21,428 )     (149,228 )
Long-term debt, net of current portion
    336,254       192,122  

 
The above dates show the later of the date of the facility, the date of the most recent renewal or the date the loan was assumed by the Company.
 
As at September 30, 2012, the Company was marginally not in compliance with the current ratio covenant contained in two of its short-term borrowings (required to maintain a minimum of 1.10-to-one and maintained 1.09-to-one) and with the working capital covenant contained  in one of its short-term borrowings (required to maintain a minimum of $75.0 million  and maintained $74.5 million). On November 5, 2012, the Company obtained waivers for these covenant breaches. Management has the intention and the ability to cure these breaches in the event that the Company is still not in compliance with these covenants upon the expiry of the existing waivers in February 2013, and has not renegotiated the waivers.
 
The annual principal payments of long-term debt required to be made after September 30, 2012 is as follows:
 
   
Amount
 
October 1 to December 31, 2012
    5,340  
2013
    148,741  
2014
    18,643  
2015
    18,346  
2016
    18,246  
2017 and thereafter
    132,034  
      341,350  


 
10

 
AEGEAN MARINE PETROLEUM NETWORK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

 (Expressed in thousands of U.S. dollars –
except share and per share data, unless otherwise stated)





12. 
Derivatives and fair value measurements:
   
    The Company uses derivative instruments in accordance with its overall risk management strategy.  The change in the fair value of these instruments measured at the mark-to-market prices is recognized immediately through earnings.

    The following describes the Company's derivative classifications:

    The Company enters into interest rate swap contracts to economically hedge its exposure to variability in its floating rate long-term debt.  Under the terms of the interest rate swaps, the Company and the bank agreed to exchange at specified intervals the difference between paying fixed rate and floating rate interest amount calculated by reference to the agreed principal amount and maturity.  Interest rate swaps allow the Company to convert long-term borrowings issued at floating rates to equivalent fixed rates.

    As of September 30, 2012, the Company was committed to the following 15 year interest rate swap arrangement with a call option for the bank to terminate it after 5 years duration, on March 31, 2016:
 
 
Interest Rate Index
 
Principal Amount
   
Fair Value/Carrying Amount of Liability
   
Weighted-average remaining term
   
Fixed Interest Rate
 
                           
U.S. Dollar-denominated Interest Rate Swap
Euribor
  $ 6,573     $ 593       13.51       2.35 %

The Company is exposed to credit loss in the event of non-performance by the counterparty to the interest rate swap agreement.  In order to minimize counterparty risk, the Company only enters into derivative transactions with counterparties that are rated A or better by AAA at the time of the transactions.

The following table presents information about our derivative instruments measured at fair value and their locations on the condensed consolidated balance sheets:

 
     
As of
 
 
Balance Sheet Location
 
December 31, 2011
   
September 30, 2012
 
Fuel pricing contracts
Current derivative assets
    1,219       1,063  
Interest rates contracts
Non- current derivative liabilities
    385       593  

 
11

 
AEGEAN MARINE PETROLEUM NETWORK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

 (Expressed in thousands of U.S. dollars –
except share and per share data, unless otherwise stated)



The Company has the right of offset with the counterparty of the fuel pricing contracts, and settles outstanding balances on a quarterly basis.  Therefore, these amounts are presented on a net basis in the condensed consolidated balance sheets (on a gross basis: an asset of $1,617 and a liability of $554).
 
The following table presents the effect and financial statement location of our derivative instruments on our condensed consolidated statements of income for the nine months ended September 30, 2011 and 2012:
 
     
Nine months ended September 30,
 
 
Statements of Income Location
 
2011
   
2012
 
               
Fuel pricing contracts
Cost of  revenue - third parties
    1,135       (12,738 )
Interest rate contracts
Interest and finance cost
    (243 )     (264 )
Total
      892       (13,002 )

The following table sets forth by level our assets/liabilities that are measured at fair value on a recurring basis.  As required by the fair value guidance, assets/liabilities are categorized in their entirety based on the lowest level of input that is significant to the fair value measurement.

         
Fair value measurements at September 30, 2012
 
Assets/ (Liabilities)
 
Total
   
Quoted prices in active markets
(Level 1)
   
Significant other observable inputs
(Level 2)
   
Significant unobservable inputs
(Level 3)
 
Interest Rate Swap
    (593 )     -       (593 )     -  
Fuel pricing contracts
    1,063       -       1,063       -  
                                 
Total
    470       -       470       -  


         
Fair value measurements at December 31, 2011
 
Assets/ (Liabilities)
 
Total
   
Quoted prices in active markets
(Level 1)
   
Significant other observable inputs
(Level 2)
   
Significant unobservable inputs
(Level 3)
 
Interest Rate Swap
    (385 )     -       (385 )     -  
Fuel pricing contracts
    1,219       -       1,219       -  
                                 
Total
    834       -       834       -  

Interest rate swaps are valued using pricing models and the Company generally uses similar models to value similar instruments.  Where possible, the Company verifies the values produced by its pricing models to market prices.  The fair value of the interest rate swaps is determined using the discounted cash flow method based on market-based Euribor rates swap yield curves, taking into account current interest rates and the credit worthiness of both the financial institution counterparty and the company. Valuation models require a variety of  inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility, and correlations of such inputs.  Fuel pricing contracts are valued using quoted market prices of the underlying commodity.

 
12

 
AEGEAN MARINE PETROLEUM NETWORK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

 (Expressed in thousands of U.S. dollars –
except share and per share data, unless otherwise stated)



 
The Company evaluates the prices provided through the forward curves to calculate the mark-to-market valuation of the fuel pricing derivatives. During the period ended September 30, 2012, the Company entered into fuel pricing contracts for 2,233,968 metric tons.

The Company's derivatives trade in liquid markets, and as such, model inputs can generally be verified and do not require significant management judgment.  Such instruments are classified within Level 2 of the fair value hierarchy.


13. 
Revenues and Cost of Revenues:

The amounts in the accompanying condensed consolidated statements of income are analyzed as follows:
 
 
 
Nine Months Ended September 30,
 
   
2011
   
2012
 
 
       
 
 
Sales of marine petroleum products
    5,196,577       5,484,406  
Voyage revenues
    16,977       18,605  
Other revenues
    11,563       21,235  
Revenues
    5,225,117       5,524,246  
 
               
Cost of marine petroleum products
    5,009,662       5,280,265  
Cost of voyage revenues
    13,841       12,050  
Cost of other revenues
    764       1,131  
Cost of Revenues
    5,024,267       5,293,446  


14. 
Selling and Distribution:

The amounts in the accompanying condensed consolidated statements of income are analyzed as follows:
 
   
Nine Months Ended September 30,
 
   
2011
   
2012
 
 
       
 
 
Salaries
    47,370       48,988  
Depreciation
    13,386       14,320  
Vessel hire charges
    9,623       12,491  
Amortization of dry-docking costs
    5,247       5,269  
Vessel operating expenses
    30,482       29,535  
Bunkers consumption
    23,260       27,747  
Storage costs
    5,407       3,931  
Broker commissions
    3,052       3,749  
Provision for doubtful accounts
    320       3,176  
Other
    5,306       10,296  
Selling and Distribution expenses
    143,453       159,502  

15. 
General and Administrative:

The amounts in the accompanying condensed consolidated statements of income are analyzed as follows:
 
 
 
Nine Months Ended September 30,
 
 
   
2011
   
2012
 
 
           
Salaries
    10,940       10,199  
Depreciation
    459       435  
Office expenses
    10,369       11,560  
General and Administrative expenses
    21,768       22,194  

 

 
16.
Commitments and Contingencies:

Lease Commitments: The Company leases certain property under operating leases, which require the Company to pay maintenance, insurance and other expenses in addition to annual rentals. The minimum annual payments under all non-cancelable operating leases at September 30, 2012 are as follows:
 

October 1 to December 31, 2012
    3,292  
2013
    12,918  
2014
    12,797  
2015
    12,831  
2016
    12,782  
Thereafter
    233,342  
         
Total minimum annual payments under all non-cancelable operating leases
    287,962  

Rent expense under operating leases was $2,999 and $3,335 for the nine months period ended September 30, 2011 and 2012, respectively.

Legal Matters:  In November, 2005 an unrelated party filed a declaratory action against one of the Company's subsidiaries before the First Instance Court of Piraeus, Greece. The plaintiff asserted that he was instrumental in the negotiation of the Company's eight-year Fuel Purchase Agreement with a government refinery in Jamaica and sought a judicial affirmation of his alleged contractual right to receive a commission of $1.00 per metric ton over the term of the contract. In December 2008, the First Instance Court of Piraeus dismissed the plaintiff's action. While the plaintiff's action was pending in Greece, the plaintiff commenced a new action involving the same cause of action before the Commercial Court of Paris, France, which dismissed that action in June 2009.  Plaintiff's appeal of the dismissal was denied by the Paris Court of Appeal in February 2010. In January, 2012, the unrelated party issued new proceedings before the Paris Commercial Court. These proceedings, after further adjournments, were heard on May 7, 2012. Judgment was issued on June 27, 2012 and the Paris Commercial Court dismissed Mr Varouxis' claims holding in favour of the competence and jurisdiction of the Greek Courts. In July 2012 Mr Varouxis filed a "contredit", a procedure under the French Law where a party appeals to the Court of Appeal seeking leave to refer certain well-defined questions to the European Court of Justice. The Company's position is that this matter remains pending before the Greek Courts and that this new action falls for lack of jurisdiction both actual and territorial of the Paris Court, is unwarranted and lacking in merit. The outcome of this lawsuit, according to the Company, will not have a material effect on its operations and financial position.

 
13

 
AEGEAN MARINE PETROLEUM NETWORK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

 (Expressed in thousands of U.S. dollars –
except share and per share data, unless otherwise stated)



In January 2010, a former director of the Company's Ghanaian subsidiary and a company controlled by him, commenced an action in Ghana against two of the Company's subsidiaries for alleged wrongful termination of such director's directorship and deprivation of an opportunity to hold 70% shares in an oil trading company and 30% shares in a shipping agency allegedly agreed to be formed by the parties. The plaintiffs are seeking a payment of approximately 17 months and damages for breach of trust, extreme mental anguish, pain and suffering, and loss of earnings.  Subsequently the Plaintiff filed a modified claim seeking to join the Company as a 3rd Defendant. In November 2011, the High Court of Justice of Commercial Division in Accra, Ghana, issued its Plaintiff's motion and dismissed same. The Company believes that the plaintiffs' claims are unwarranted and that the outcome of this litigation will have no material effect on the Company. Various claims, suits, and complains, 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 the accompanying consolidated financial statements.

Environmental and Other Liabilities: 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.
 
17. 
Capital Leases:

The Company leases Barge PT 22 under a capital lease, with a gross amount capitalized of $4,778 and accumulated depreciation of $666 as at September 30, 2012.
 
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, 2012, are as follows:
 
   
Amount
 
October 1 to December 31, 2012
    321  
2013
    1,284  
2014
    428  
Total minimum lease payments
    2,033  
Less: imputed interest
    129