---

---

---

		For the Three Months Ended June 30,								For the Six Months Ended June 30,
		2014				2015				2014				2015
		(in thousands of U.S. dollars, unless otherwise stated)
Income Statement Data:
Revenues - third parties		$	1,711,953			$	1,203,100			$	3,402,137			$	2,214,056
Revenues - related companies			8,261				4,607				12,441				8,754
Total revenues			1,720,214				1,207,707				3,414,578				2,222,810
Cost of revenues  - third parties			1,534,520				1,078,112				3,059,244				1,970,384
Cost of revenues– related companies			101,229				51,114				187,958				93,323
Total cost of revenues			1,635,749				1,129,226				3,247,202				2,063,707
Gross profit			84,465				78,481				167,376				159,103
Operating expenses:
Selling and distribution			55,798				52,744				110,766				102,561
General and administrative			8,338				10,602				16,463				20,908
Amortization of intangible assets			1,033				375				2,055				749
Loss / (gain) on sale of vessels, net			-				-				(493	)			130
Vessel impairment charge			-				-				4,062				-
Operating income			19,296				14,760				34,523				34,755
Net financing cost			(8,530	)			(8,813	)			(16,990	)			(18,139	)
Gain on sale of subsidiary, net			-				-				-				-
Foreign exchange (losses) / gain, net			(152	)			658				97				692
Income taxes (expense) / Benefit			(1,269	)			543				(3,165	)			2,064
Net income			9,345				7,148				14,465				19,372
Less income attributable to non-controlling interest			22				-				46				-
Net income attributable to AMPNI shareholders		$	9,323			$	7,148			$	14,419			$	19,372
Basic earnings per share (U.S. dollars)		$	0.20			$	0.15			$	0.30			$	0.40
Diluted earnings per share (U.S. dollars)		$	0.20			$	0.15			$	0.30			$	0.40
EBITDA(1)		$	26,740			$	24,052			$	50,196			$	51,859
Other Financial Data:
Gross spread on marine petroleum products(2)		$	78,066			$	71,773			$	151,334			$	143,383
Gross spread on lubricants(2)			585				949				1,487				2,188
Gross spread on marine fuel(2)			77,481				70,824				149,847				141,195
Gross spread per metric ton of marine fuel sold (U.S. dollars) (2)			29.1				22.5				27.9				23.3
Net cash used in operating activities		$	(34,341	)		$	(59,301	)		$	(66,833	)		$	(83,052	)
Net cash used in investing activities			(32,593	)			(4,784	)			(46,768	)			(7,628	)
Net cash provided by financing activities			59,096				11,822				158,151				6,671
Sales Volume Data (Metric Tons): (3)
Total sales volumes			2,659,620				3,150,950				5,365,443				6,066,400
Other Operating Data:
Number of owned bunkering tankers, end of period(4)			51.0				49.0				51.0				49.0
Average number of owned bunkering tankers(4)(5)			51.0				49.0				51.5				48.5
Special Purpose Vessels, end of period(6)……………			1.0				1.0				1.0				1.0
Number of operating storage facilities, end of period(7)			14.0				15.0				14.0				15.0

		As of December 31, 2014				As of June 30, 2015
		(in thousands of U.S. dollars, unless otherwise stated)
Balance Sheet Data:
Cash and cash equivalents			129,551				42,210
Gross trade receivables			360,074				432,395
Allowance for doubtful accounts			(5,851	)			(7,260	)
Inventories			156,990				206,190
Current assets			736,888				750,691
Total assets			1,484,725				1,494,196
Trade payables			120,451				122,505
Current liabilities (including current portion of long-term debt)			531,540				482,952
Total debt			740,880				740,590
Total liabilities			917,309				892,279
Total stockholder's equity			567,416				601,917
Working Capital Data:
Working capital(8)			205,348				267,739
Working capital excluding cash and debt(8)			431,081				558,110

		For the Three Months Ended Jun 30,
		2014				2015
		(in thousands of U.S. dollars, unless otherwise stated)
Net income attributable to AMPNI shareholders			9,323				7,148
Add: Net financing cost including amortization of financing costs			8,530				8,813
Add: Income tax expense/ (benefit)			1,269				(543	)
Add: Depreciation and amortization excluding amortization of financing costs			7,618				8,634
EBITDA			26,740				24,052

		For the Three Months Ended June 30,
		2014				2015
Sales of marine petroleum products			1,705,188				1,189,488
Less: Cost of marine petroleum products sold			(1,627,122	)			(1,117,715	)
Gross spread on marine petroleum products			78,066				71,773
Less: Gross spread on lubricants			(585	)			(979	)
Gross spread on marine fuel			77,481				70,824
Sales volume of marine fuel (metric tons)			2,659,620				3,150,950
Gross spread per metric ton of marine fuel sold (U.S. dollars)			29.1				22.5

 

 

 

 

 

 

 

AEGEAN MARINE PETROLEUM NETWORK INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2014 AND JUNE 30, 2015

(UNAUDITED)

(Expressed in thousands of U.S. dollars – except for share and per share data)

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

AEGEAN MARINE PETROLEUM NETWORK INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2015

(UNAUDITED)

(Expressed in thousands of U.S. dollars – except for share and per share data)

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

AEGEAN MARINE PETROLEUM NETWORK INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2015

(UNAUDITED)

(Expressed in thousands of U.S. dollars – except for share and per share data)

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

AEGEAN MARINE PETROLEUM NETWORK INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2015

(UNAUDITED)

(Expressed in thousands of U.S. dollars)

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

 

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 six months ended June 30, 2015 are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2015.

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, 2014.

The carrying amounts of cash and cash equivalents, trade accounts receivable, and trade accounts payable reported in the condensed consolidated balance sheets approximate their respective fair values because of the short term nature of these accounts. The fair value of revolving credit facilities is estimated based on current rates offered to the Company for similar debt of the same remaining maturities. The carrying value approximates the fair market value for the floating rate loans due to their variable interest rate, being EURIBOR or LIBOR. LIBOR and EURIBOR rates are observable at commonly quoted intervals for the full terms of the loans and hence floating rate loans are considered Level 2 items in accordance with the fair value hierarchy.

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, 2014. There have been no material changes to these policies in the six-month period ended June 30, 2015.

3.	Trade Receivables Factoring Agreement:

In connection with the factoring agreement, renewed on November 13, 2014 and valid until November 14, 2015, the Company sold $275,783 and $91,714 of trade accounts receivable during the periods ended June 30, 2014 and 2015, respectively, net of servicing fees of $708 and $345, included in the condensed consolidated statements of income.

4.	Inventories:

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

5.	Advances for Vessels under Construction and Acquisitions:

During the six months ended June 30, 2015, the movement of the account, advances for vessels under construction and acquisitions, was as follows:

The amounts shown in the accompanying condensed consolidated balance sheets as at December 31, 2014, included 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. The vessel was delivered prior to June 30, 2015 and there are no such amounts as at June 30, 2015.

 

 

6.

Vessels:

During the six months ended June 30, 2015, the movement of the account vessels was as follows:

On March 16, 2015, the Company completed the sale and delivered the single hull bunkering tanker Tapuit to an unaffiliated third-party purchaser for an aggregate price of $49. The loss on the disposal of $130 was calculated as the net sales price less the carrying value of the vessel of $179. This loss is included under the (gain) / loss on sale of vessels in the condensed consolidated statements of income.

On May 1, 2015, the newly-constructed non self-propelled barge, PT40, with a total cost of $7,294, became operational in the Company's service center in Vancouver.

7.	Other Fixed Assets:

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

 

 

8.	Deferred Charges:

During the six months ended June 30, 2015, the movement of the account deferred charges was as follows:

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.

9.	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 calculated the fair value of the reporting unit using the discounted cash flow method, and determined that the fair value of the reporting unit exceeded its book value including the goodwill. The discounted cash flows calculation is subject to management judgment related to revenue growth, capacity utilization, the weighted average cost of capital (WACC), of 7.9%, and the future price of marine fuel products. No impairment loss was recorded at June 30, 2015.

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 Aegean NWE. 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:

 

 

10.	Total Debt:

 

The amounts comprising total debt are presented in the accompanying condensed consolidated balance sheet as follows:

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.

On January 16, 2015 the Company issued $48,300 aggregate principal amount of 4% Convertible Unsecured Senior Notes ("Notes"), which are due November 1, 2018. The Notes bear the same conversion terms with the 4% Convertible Unsecured Senior Notes issued on October 23, 2013.

Since the Notes contain a cash settlement option upon conversion at the option of the issuer, the Company has bifurcated, at the issuance date, the $48,300 principal amount of the Notes and the premium received of $5,313 into liability and equity components of $41,076 and $12,537, respectively, by first determining the carrying amount of the liability component of the Notes by measuring the fair value of a similar liability that does not have an associated equity component. The equity component was calculated by deducting the fair value of the liability component from the total proceeds received at issuance. Net proceeds from the Notes amounted to $51,802 after the underwriters commissions.

As at June 30, 2015, the Company was in compliance with all of its financial covenants contained in its credit facilities. The annual principal payments of long-term debt required to be made after June 30, 2015 are as follows:

11.	Derivatives and fair value measurements:

The Company uses derivatives in accordance with its overall risk management strategy.  The changes in the fair value of these derivatives are 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 December 31, 2014 and June 30, 2015, the Company was committed to the following 15 year interest rate swap arrangement with a call option for the bank to terminate it on March 31, 2016:

 

 

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 enters into derivative transactions with counterparties that are rated AAA or at least A at the time of the transactions.

The Company uses fuel pricing contracts to hedge exposure to changes in the net cost of marine fuel purchases. The Company has the right of offset with the counterparty of the fuel pricing contracts, and settles outstanding balances on a monthly basis.  Therefore, these amounts are presented on a net basis in the condensed consolidated balance sheets (on a gross basis: an asset of $43,499 and a liability of $24,558, as of December 31, 2014 and an asset of $5,415 and a liability of $3,860 as of June 30, 2015).

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

 

The following table presents the effect and financial statement location of our derivative instruments on our condensed consolidated statements of income for the six months ended June 30, 2014 and 2015:

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.

 

 

 

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. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility, and correlations of such inputs.

The Company uses observable inputs to calculate the mark-to-market valuation of the fuel pricing derivatives. Fuel pricing contracts are valued using quoted market prices of the underlying commodity. During the periods ended June 30, 2014 and 2015, the Company entered into fuel pricing contracts for 1,666,000 metric tons and 8,720,373 metric tons, respectively.

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

12.	Revenues and Cost of Revenues:

The amounts in the accompanying condensed consolidated statements of income are analyzed as follows:

Included in the cost of revenues is depreciation of $1,224 and $1,380 for the six months ended June 30, 2014 and 2015, respectively.

 

13.	Selling and Distribution:

The amounts in the accompanying condensed consolidated statements of income are analyzed as follows:

14.	General and Administrative:

The amounts in the accompanying condensed consolidated statements of income are analyzed as follows:

15.	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 June 30, 2015 are as follows:

Rent expense under operating leases was $15,926 and $16,806 for the six months period ended June 30, 2014 and 2015, 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 $0.01 per metric ton of marine fuel over the term of the contract. In December 2008, the First Instance Court of Piraeus dismissed the plaintiff's action as vague and inadmissible, however the Company appealed that decision on the grounds that there was no contract between the Company and the plaintiff and that the court lacked jurisdiction. While the 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. The plaintiff's appeal of the dismissal was denied by the Paris Court of Appeal in February 2010. In January 2012, the plaintiff commenced a new action relating to the same allegations before the Commercial Court of Paris, which was dismissed on June 27, 2012 in favor of the competence and jurisdiction of the Greek courts. In July 2012, the plaintiff filed a "contredit," an appeal procedure under French law. In November 2013, the Court held that there is no matter pending in Greece that would allow the French courts to decline jurisdiction to the benefit of the Greek proceedings. As a result, the case is to return to the Commercial Court of Paris which should have to examine the admissibility of Mr. Varouxis' claim in France with the relevant pleadings procedurally scheduled to be filed by the parties on September 18, 2015. The Company believes that this matter fails for lack of jurisdiction and is unwarranted and lacking in merit. The Company believes that the outcome of this lawsuit will not have a material effect on its operations and financial position.

In May 2013, on the order of STX Corporation ("STX Corp."), the Company supplied bunkers to the vessel UNICO SIENNA in the Port of Singapore. The invoice for those bunkers totaled approximately $323. STX Corp. has filed for reorganization in Korea and for protection under Chapter 15 of the U.S. Bankruptcy Code. The Company believes that has a maritime lien against this vessel, and it has arrested the UNICO SIENNA in Panama to enforce its maritime lien against it. The Company intends to exercise its remedies for recovery of the unpaid amounts and believes that it will recover the full amount due.  The hearing on the merits of the case took place on June 2, 2015 before the Maritime Court of Panama.

On December 18, 2014, the Company and Aegean Bunkering (USA) LLC, or the Aegean Parties, filed a one-count complaint for breach of contract against Hess Corporation, or Hess, in New York Supreme Court, New York County (653887/2014). In the complaint, the Aegean Parties allege that Hess breached certain express representations and warranties in representing its financial condition in an agreement pursuant to which Hess sold its bunker oil business to Aegean Bunkering (USA) LLC. The Aegean Parties claim approximately $28 million in compensatory damages, exclusive of interest and costs. On February 9, 2015, Hess filed an answer to the complaint. The Company is not in a position to comment further on this matter at this time.

The Company has supplied bunkers through agreements with various entities of the O.W. Bunker Group, which filed for bankruptcy in November 2014. The Company issued notice to members of the O.W. Bunker Group for the request of payment for the value of the bunkers supplied. The Company's exposure for these supplies amounts to $5,366, of which $3,129 has been recorded as a provision for doubtful accounts.  The Company believes that the respective members of the O.W. Bunker Group were never the rightful owners of the bunkers and is currently trying to work out escrow or other practical solutions with the end users.  The Company expects to recover the amount of at least $2,259.

 

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)

 

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 $1,000,000 per vessel per incident.

16.	Equity Incentive Plan:

In March 2015, the Company adopted a new equity incentive plan which replaced in full the 2006 Equity Incentive Plan.  The Company has reserved a total of 5,091,402 shares of common stock for issuance under the 2015 Equity Incentive Plan, consisting of 91,402 common shares that remained unissued under the 2006 Equity Incentive Plan plus an additional 5,000,000 common shares.  Under the terms of the 2015 Equity Incentive Plan, the compensation committee may grant new options exercisable at a price per common share to be determined by our board of directors but in no event less than fair market value as of the date of grant. The 2015 Equity Incentive Plan also permits the Company's compensation committee to award restricted stock, restricted stock units, non-qualified stock options, stock appreciation rights, dividend equivalent rights, unrestricted stock, and performance shares. The 2015 Equity Incentive Plan expires in March 2025, or ten years from its adoption.

The Company measures stock-based compensation cost at grant date, based on the estimated fair value of the award which is determined by the closing price of the Company's common stock traded on the NYSE on the grant date, and recognizes the cost as expense on a straight-line basis (net of estimated forfeitures) over the requisite service period. The expense is recorded in the general and administrative expenses in the accompanying condensed consolidated statements of income. Aegean is incorporated in a non-taxable jurisdiction and accordingly, no deferred tax assets are recognized for these stock-based incentive awards.

All grants of non-vested stock issued under the 2015 Plan are subject to accelerated vesting upon certain circumstances set forth in the 2015 Plan.

 

 

AEGEAN MARINE PETROLEUM NETWORK INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the status of the Company's non-vested shares outstanding for the six months ended June 30, 2015:

Total compensation cost of $4,965 was recognized and included in the general and administrative expenses under accompanying condensed consolidated statements of income for the six months ended June 30, 2015.

As of June 30, 2015, there was $13,658 of total unrecognized compensation cost related to non-vested share-based compensation awards. This unrecognized compensation at June 30, 2015, is expected to be recognized as compensation expense over a weighted average period of 2.1 years as follows:

17.	Earnings per Common Share:

The computation of basic earnings per share is based on the weighted average number of common shares outstanding during the period using the two class method. The computation of diluted earnings per share assumes the granting of non-vested share-based compensation awards (refer to Note 16), for which the assumed proceeds upon grant are deemed to be the amount of compensation cost attributable to future services and not yet recognized using the treasury stock method, to the extent dilutive.

As of June 30, 2014 and 2015, the Company excluded 1,929,083 and 1,768,983 non-vested shares, respectively, as anti-dilutive. Non-vested share-based payment awards that contain rights to receive non forfeitable dividends or dividend equivalents (whether paid or unpaid) and participate equally in undistributed earnings are participating securities, and thus, are included in the two-class method of computing earnings per share.

The treasury stock method is used in calculating diluted earnings per share for the Notes as the Company expects to settle the principal in cash.

 

 

The components of the calculation of basic earnings per common share and diluted earnings per common share are as follows:

18.	Income Taxes: