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   INDEPENDENT AUDITORS' REPORT  

To
the shareholders of Stolt-Nielsen S.A.: 

        We
have audited the accompanying consolidated balance sheet of Stolt-Nielsen S.A. (a Luxembourg company) and subsidiaries as of November 30, 2002, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on the 2002 financial statements based on our audit. The financial statements as of November 30, 2001 and for each of the two years in the period then ended, before the
reclassifications and inclusion of the disclosures discussed in Note 2 to the financial statements, were audited by other auditors who have ceased operations. Those auditors expressed an
unqualified opinion on those financial statements in their report dated January 30, 2002. 

        We
conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion. 

        In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Stolt-Nielsen S.A. and subsidiaries as of November 30,
2002, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. 

        As
discussed above, the consolidated financial statements of the Company as of November 30, 2001 and for each of the two years in the period ended November 30, 2001, were
audited by other auditors who ceased operations. As described in Note 2, these consolidated financial statements have been revised to reflect reclassifications and disclosures to conform with
the 2002 presentation. Our audit procedures with respect to the reclassifications included agreeing the previously reported line items or disclosure amounts to Company analyses, comparing
reclassification amounts in the analyses to supporting documentation and testing the mathematical accuracy of the analyses. Our audit procedures with respect to the disclosures included agreeing the
additional disclosures to the Company's underlying records obtained from management. In our opinion, such reclassifications and disclosures are appropriate and have been properly applied. However, we
were not engaged to audit, review or apply any procedures to the 2001 or 2000 consolidated financial statements of the Company other than with respect to such reclassifications and disclosures and,
accordingly, we do not express an opinion or any other form of assurance on the 2001 or 2000 consolidated financial statements taken as a whole. 

Deloitte &
Touche LLP

New York, New York

April 1, 2003 

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS  

To
the shareholders of Stolt-Nielsen S.A.: 

        We
have audited the accompanying consolidated balance sheets of Stolt-Nielsen S.A. (a Luxembourg company) and subsidiaries (the "Company") as of November 30, 2001 and 2000 and the
related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended November 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 

        We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion. 

        In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stolt-Nielsen S.A. and subsidiaries as of
November 30, 2001 and 2000 and the results of their operations and their cash flows for each of the three years in the period ended November 30, 2001, in conformity with accounting
principles generally accepted in the United States. 

Arthur
Andersen LLP*

New York, New York

January 30, 2002 

	*
	This
audit report is a copy of the previously issued report of Arthur Andersen LLP covering 2001, 2000 and 1999. The predecessor auditors, Arthur Andersen LLP, have not reissued their
report. 

1

   CONSOLIDATED STATEMENTS OF OPERATIONS  

	 
	 	For the years ended November 30,
	 
	 
	 	2002
	 	2001
	 	2000
	 
	 
	 	(in thousands, except per share data)
 
	 
	Net Operating Revenue:	 	 	 	 	 	 	 	 	 	 
	Stolt-Nielsen Transportation Group:	 	 	 	 	 	 	 	 	 	 
	 	Tankers	 	$	691,785	 	$	754,867	 	$	691,775	 
	 	Tank Containers	 	 	227,600	 	 	214,368	 	 	223,708	 
	 	Terminals	 	 	58,549	 	 	78,447	 	 	59,298	 
	 	 	
	 	
	 	
	 
	 	 	 	977,934	 	 	1,047,682	 	 	974,781	 
	 	 	
	 	
	 	
	 
	Stolt Offshore	 	 	1,437,488	 	 	1,255,938	 	 	983,420	 
	Stolt Sea Farm	 	 	435,706	 	 	374,378	 	 	325,952	 
	Corporate and other	 	 	1,581	 	 	418	 	 	—	 
	 	 	
	 	
	 	
	 
	 	 	 	2,852,709	 	 	2,678,416	 	 	2,284,153	 
	 	 	
	 	
	 	
	 
	Operating Expenses:	 	 	 	 	 	 	 	 	 	 
	Stolt-Nielsen Transportation Group:	 	 	 	 	 	 	 	 	 	 
	 	Tankers	 	 	540,581	 	 	592,183	 	 	581,874	 
	 	Tank Containers	 	 	183,816	 	 	173,583	 	 	179,586	 
	 	Terminals	 	 	37,576	 	 	48,298	 	 	35,328	 
	 	 	
	 	
	 	
	 
	 	 	 	761,973	 	 	814,064	 	 	796,788	 
	 	 	
	 	
	 	
	 
	Stolt Offshore	 	 	1,395,007	 	 	1,161,553	 	 	930,046	 
	Stolt Sea Farm	 	 	427,704	 	 	350,963	 	 	273,425	 
	 	 	
	 	
	 	
	 
	 	 	 	2,584,684	 	 	2,326,580	 	 	2,000,259	 
	 	 	
	 	
	 	
	 
	 	Gross Profit	 	 	268,025	 	 	351,836	 	 	283,894	 
	 	 	
	 	
	 	
	 
	Equity in net income (loss) of non-consolidated joint ventures	 	 	13,981	 	 	13,014	 	 	(3,127	)
	Administrative and general expenses	 	 	(210,636	)	 	(209,499	)	 	(186,125	)
	Write-off of goodwill	 	 	(118,045	)	 	—	 	 	—	 
	Write-off of Comex trade name	 	 	—	 	 	(7,932	)	 	—	 
	Restructuring charges	 	 	(9,601	)	 	—	 	 	(3,320	)
	Gain on disposal of assets	 	 	10,262	 	 	14,275	 	 	2,172	 
	Other operating income (expense), net	 	 	(3,110	)	 	1,219	 	 	744	 
	 	 	
	 	
	 	
	 
	 	Income (Loss) from Operations	 	 	(49,124	)	 	162,913	 	 	94,238	 
	 	 	
	 	
	 	
	 
	Non-Operating (Expense) Income:	 	 	 	 	 	 	 	 	 	 
	Interest expense	 	 	(95,612	)	 	(119,155	)	 	(111,681	)
	Interest income	 	 	2,549	 	 	5,297	 	 	6,147	 
	Foreign currency exchange gain (loss), net	 	 	1,155	 	 	(2,056	)	 	(2,039	)
	 	 	
	 	
	 	
	 
	 	 	 	(91,908	)	 	(115,914	)	 	(107,573	)
	 	 	
	 	
	 	
	 
	 	Income (Loss) before Income Tax Provision and Minority Interest	 	 	(141,032	)	 	46,999	 	 	(13,335	)
	Income tax provision	 	 	(17,969	)	 	(27,561	)	 	(15,374	)
	 	 	
	 	
	 	
	 
	 	Income (Loss) before Minority Interest	 	 	(159,001	)	 	19,438	 	 	(28,709	)
	Minority interest	 	 	56,196	 	 	4,254	 	 	16,314	 
	 	 	
	 	
	 	
	 
	 	Net Income (Loss)	 	$	(102,805	)	$	23,692	 	$	(12,395	)
	 	 	
	 	
	 	
	 
	Earnings (Loss) per Common Share and Equivalents:	 	 	 	 	 	 	 	 	 	 
	 	Basic	 	$	(1.87	)	$	0.43	 	$	(0.23	)
	 	Diluted	 	$	(1.87	)	$	0.43	 	$	(0.23	)
	 	 	
	 	
	 	
	 
	Weighted Average Number of Common Shares and Equivalents Outstanding:	 	 	 	 	 	 	 	 	 	 
	 	Basic	 	 	54,930	 	 	54,870	 	 	54,684	 
	 	Diluted	 	 	54,930	 	 	55,303	 	 	54,684	 

See
notes to consolidated financial statements. 

2

   CONSOLIDATED BALANCE SHEETS  

	 
	 	As of November 30,
	 
	 
	 	2002
	 	2001
	 
	 
	 	(in thousands, except share data)
 
	 
	ASSETS	 	 	 	 	 	 	 
	Current Assets:	 	 	 	 	 	 	 
	Cash and cash equivalents	 	$	22,873	 	$	24,865	 
	Trade receivables	 	 	573,041	 	 	566,628	 
	Inventories	 	 	231,498	 	 	186,695	 
	Receivables from related parties	 	 	74,936	 	 	67,594	 
	Restricted cash deposits	 	 	2,100	 	 	1,574	 
	Prepaid expenses	 	 	113,971	 	 	89,727	 
	Other current assets	 	 	11,095	 	 	17,733	 
	 	 	
	 	
	 
	 	Total Current Assets	 	 	1,029,514	 	 	954,816	 
	 	 	
	 	
	 
	
Fixed Assets, at Cost:	
 	
 	

 	
 	
 	

 	
 
	Tankers	 	 	1,748,672	 	 	2,044,722	 
	Tank containers	 	 	102,154	 	 	135,661	 
	Terminal facilities	 	 	260,642	 	 	240,970	 
	Subsea ships and facilities	 	 	1,188,607	 	 	1,096,329	 
	Seafood facilities	 	 	225,841	 	 	195,186	 
	Other	 	 	59,360	 	 	59,032	 
	 	 	
	 	
	 
	 	 	 	3,585,276	 	 	3,771,900	 
	Less—accumulated depreciation and amortization	 	 	(1,190,151	)	 	(1,260,187	)
	 	 	
	 	
	 
	 	 	 	2,395,125	 	 	2,511,713	 
	 	 	
	 	
	 
	Investments in and advances to non-consolidated joint ventures	 	 	130,853	 	 	130,025	 
	Deferred income tax asset	 	 	28,726	 	 	36,126	 
	Goodwill and other intangible assets, net	 	 	85,957	 	 	222,651	 
	Other non-current assets	 	 	116,900	 	 	116,543	 
	 	 	
	 	
	 
	 	Total Assets	 	$	3,787,075	 	$	3,971,874	 
	 	 	
	 	
	 
	LIABILITIES AND SHAREHOLDERS' EQUITY	 	 	 	 	 	 	 
	Current Liabilities:	 	 	 	 	 	 	 
	Short-term bank loans	 	$	331,985	 	$	284,083	 
	Current maturities of long-term debt and capital lease obligations	 	 	165,067	 	 	133,016	 
	Accounts payable	 	 	434,993	 	 	383,272	 
	Accrued voyage expenses	 	 	49,314	 	 	55,520	 
	Accrued expenses	 	 	252,449	 	 	188,533	 
	Other current liabilities	 	 	30,596	 	 	61,390	 
	 	 	
	 	
	 
	 	Total Current Liabilities	 	 	1,264,404	 	 	1,105,814	 
	 	 	
	 	
	 
	Long-term debt and capital lease obligations	 	 	1,155,010	 	 	1,275,755	 
	Deferred income tax liability	 	 	20,737	 	 	36,104	 
	Other non-current liabilities	 	 	153,965	 	 	131,995	 
	Commitments and contingencies	 	 	 	 	 	 	 
	Minority interest	 	 	203,140	 	 	321,584	 
	Shareholders' Equity:	 	 	 	 	 	 	 
	Founder's shares: no par value—30,000,000 shares authorized, 15,659,549 shares issued and outstanding in 2002 and 15,651,639 shares issued and outstanding in 2001 at stated value	 	 	—	 	 	—	 
	Common shares: no par value—120,000,000 shares authorized, 62,638,197 shares issued in 2002 and 62,606,559 shares issued in 2001 at stated value	 	 	62,639	 	 	62,607	 
	Paid-in surplus	 	 	340,893	 	 	384,199	 
	Retained earnings	 	 	778,290	 	 	894,897	 
	Accumulated other comprehensive loss	 	 	(57,979	)	 	(107,057	)
	 	 	
	 	
	 
	 	 	 	1,123,843	 	 	1,234,646	 
	 	 	
	 	
	 
	Less—Treasury stock-at cost, 7,688,810 Common shares in 2002 and 2001	 	 	(134,024	)	 	(134,024	)
	 	 	
	 	
	 
	 	Total Shareholders' Equity	 	 	989,819	 	 	1,100,622	 
	 	 	
	 	
	 
	 	Total Liabilities and Shareholders' Equity	 	$	3,787,075	 	$	3,971,874	 
	 	 	
	 	
	 

See
notes to consolidated financial statements. 

3

   CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY  

	 
	 	Capital

Stock
	 	Paid-in

Surplus
	 	Treasury

Stock
	 	Retained

Earnings
	 	Accumulated

Other

Comprehensive

Income (Loss)
	 	Comprehensive

Income (Loss)
	 
	 
	 	(in thousands, except per share data)
 
	 
	Balance, November 30, 1999	 	$	62,255	 	$	347,654	 	$	(134,024	)	$	911,040	 	$	(45,299	)	 	 	 
	Exercise of stock options for 172,512 Common shares and 104,226 Class B shares	 	 	278	 	 	3,190	 	 	—	 	 	—	 	 	—	 	 	 	 
	Issuance of 150,755 Founder's shares	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	 	 
	Cash dividends paid—$0.25 per Common share	 	 	—	 	 	—	 	 	—	 	 	(13,647	)	 	—	 	 	 	 
	Cash dividends paid—$0.005 per Founder's share	 	 	—	 	 	—	 	 	—	 	 	(39	)	 	—	 	 	 	 
	Dilution of interest in Stolt Offshore	 	 	—	 	 	32,509	 	 	—	 	 	—	 	 	—	 	 	 	 
	Net loss	 	 	—	 	 	—	 	 	—	 	 	(12,395	)	 	—	 	$	(12,395	)
	Other comprehensive income (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Translation adjustments, net	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(48,611	)	 	(48,611	)
	 	Unrealized loss on securities	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(7,079	)	 	(7,079	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 
	Other comprehensive loss	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(55,690	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 
	Comprehensive loss	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	(68,085	)
	 	 	
	 	
	 	
	 	
	 	
	 	
	 
	Balance, November 30, 2000	 	$	62,533	 	$	383,353	 	$	(134,024	)	$	884,959	 	$	(100,989	)	 	 	 
	Exercise of stock options for 74,413 Common shares	 	 	74	 	 	846	 	 	—	 	 	—	 	 	—	 	 	 	 
	Issuance of 7,680,775 Founder's shares	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	 	 
	Cash dividends paid—$0.25 per Common share	 	 	—	 	 	—	 	 	—	 	 	(13,714	)	 	—	 	 	 	 
	Cash dividends paid—$0.005 per Founder's share	 	 	—	 	 	—	 	 	—	 	 	(40	)	 	—	 	 	 	 
	Net income	 	 	—	 	 	—	 	 	—	 	 	23,692	 	 	—	 	$	23,692	 
	Other comprehensive income (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Translation adjustments, net	 	 	—	 	 	—	 	 	—	 	 	—	 	 	8,554	 	 	8,554	 
	 	Unrealized loss on securities	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(8,761	)	 	(8,761	)
	 	Minimum pension liability adjustment, net of tax of $2,840	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(4,260	)	 	(4,260	)
	 	Transition adjustment upon adoption of SFAS No. 133	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(5,083	)	 	(5,083	)
	 	Net gains on cash flow hedges reclassified into earnings	 	 	—	 	 	—	 	 	—	 	 	—	 	 	3,482	 	 	3,482	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 
	Other comprehensive loss	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(6,068	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 
	Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	17,624	 
	 	 	
	 	
	 	
	 	
	 	
	 	
	 
	Balance, November 30, 2001	 	$	62,607	 	$	384,199	 	$	(134,024	)	$	894,897	 	$	(107,057	)	 	 	 
	Exercise of stock options for 31,638 Common shares	 	 	32	 	 	312	 	 	—	 	 	—	 	 	—	 	 	 	 
	Issuance of 4,910 Founder's shares	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	 	 
	Cash dividends paid—$0.25 per Common share	 	 	—	 	 	—	 	 	—	 	 	(13,733	)	 	—	 	 	 	 
	Cash dividends paid—$0.005 per Founder's share	 	 	—	 	 	—	 	 	—	 	 	(69	)	 	—	 	 	 	 
	Settlement of share price guarantees by Stolt Offshore	 	 	—	 	 	(29,372	)	 	—	 	 	—	 	 	—	 	 	 	 
	Impact of debt to equity conversions with Stolt Offshore	 	 	—	 	 	(14,246	)	 	—	 	 	—	 	 	—	 	 	 	 
	Net loss	 	 	—	 	 	—	 	 	—	 	 	(102,805	)	 	—	 	$	(102,805	)
	Other comprehensive income (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Translation adjustments, net	 	 	—	 	 	—	 	 	—	 	 	—	 	 	37,896	 	 	37,896	 
	 	Unrealized loss on securities	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(3,427	)	 	(3,427	)
	 	Minimum pension liability adjustment, net of tax of $3,111	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(5,081	)	 	(5,081	)
	 	Net gains on cash flow hedges reclassified into earnings	 	 	—	 	 	—	 	 	—	 	 	—	 	 	19,690	 	 	19,690	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 
	Other comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	49,078	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 
	Comprehensive loss	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	(53,727	)
	 	 	
	 	
	 	
	 	
	 	
	 	
	 
	Balance, November 30, 2002	 	$	62,639	 	$	340,893	 	$	(134,024	)	$	778,290	 	$	(57,979	)	 	 	 
	 	 	
	 	
	 	
	 	
	 	
	 	 	 	 

See notes to consolidated financial statements. 

4

  

 
 

CONSOLIDATED STATEMENTS OF CASH FLOWS    
    

	 
	 	For the years ended November 30,
	 
	 
	 	2002
	 	2001
	 	2000
	 
	 
	 	(in thousands, except per share data)
 
	 
	Cash Flows from Operating Activities:	 	 	 	 	 	 	 	 	 	 
	Net Income (Loss)	 	$	(102,805	)	$	23,692	 	$	(12,395	)
	Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:	 	 	 	 	 	 	 	 	 	 
	 	Depreciation of fixed assets	 	 	197,837	 	 	201,568	 	 	184,224	 
	 	Amortization of intangible assets	 	 	11,294	 	 	9,859	 	 	8,658	 
	 	Write-off of goodwill	 	 	118,045	 	 	—	 	 	—	 
	 	Write-off of Comex trade name	 	 	—	 	 	7,932	 	 	—	 
	 	Amortization of drydock costs	 	 	27,458	 	 	20,141	 	 	16,161	 
	 	Provisions for reserves and taxes	 	 	(16,871	)	 	(13,048	)	 	4,013	 
	 	Equity in net (income) loss of non-consolidated joint ventures	 	 	(13,981	)	 	(13,014	)	 	3,127	 
	 	Minority interest	 	 	(56,196	)	 	(4,254	)	 	(16,314	)
	 	Gain on disposal of assets	 	 	(10,262	)	 	(14,275	)	 	(2,172	)
	Changes in Assets and Liabilities, Net of Effect of Acquisitions and Divestitures:	 	 	 	 	 	 	 	 	 	 
	 	Decrease (increase) in trade receivables	 	 	44,091	 	 	(146,350	)	 	21,106	 
	 	(Increase) decrease in inventories	 	 	(41,053	)	 	16,695	 	 	(33,716	)
	 	(Increase) decrease in prepaid expenses and other current assets	 	 	(24,176	)	 	17,740	 	 	(32,075	)
	 	Increase (decrease) in accounts payable and accrued liabilities	 	 	16,671	 	 	36,147	 	 	20,342	 
	Payments of drydock costs	 	 	(38,405	)	 	(31,644	)	 	(12,048	)
	Dividends from non-consolidated joint ventures	 	 	20,829	 	 	12,710	 	 	2,691	 
	Other, net	 	 	4,157	 	 	(830	)	 	(8,110	)
	 	 	
	 	
	 	
	 
	 	Net Cash Provided by Operating Activities	 	 	136,633	 	 	123,069	 	 	143,492	 
	 	 	
	 	
	 	
	 
	Cash Flows from Investing Activities:	 	 	 	 	 	 	 	 	 	 
	 	Capital expenditures	 	 	(122,588	)	 	(202,880	)	 	(285,787	)
	 	Proceeds from sales of ships and other assets	 	 	158,029	 	 	77,001	 	 	71,975	 
	 	Acquisition of subsidiaries, net of cash acquired	 	 	(2,234	)	 	(80,658	)	 	(120,374	)
	 	Settlement of share price guarantees by Stolt Offshore	 	 	(60,557	)	 	—	 	 	—	 
	 	Investment in and advances to affiliates and others, net	 	 	1,543	 	 	(31,156	)	 	(12,380	)
	 	Decrease (increase) in restricted cash deposits	 	 	(179	)	 	2,546	 	 	(2,583	)
	 	Other, net	 	 	(2,178	)	 	(9,214	)	 	(9,110	)
	 	 	
	 	
	 	
	 
	 	Net Cash Used in Investing Activities	 	 	(28,164	)	 	(244,361	)	 	(358,259	)
	 	 	
	 	
	 	
	 
	Cash Flows from Financing Activities:	 	 	 	 	 	 	 	 	 	 
	 	Increase in loans payable to banks, net	 	 	45,234	 	 	144,167	 	 	14,266	 
	 	Repayment of long-term debt	 	 	(109,920	)	 	(82,157	)	 	(243,240	)
	 	Principal payments under capital lease obligations	 	 	(24,066	)	 	(9,510	)	 	(11,478	)
	 	Proceeds from issuance of long-term debt—ship financing/other	 	 	50,242	 	 	77,546	 	 	473,496	 
	 	Repurchase of shares by Stolt Offshore	 	 	(56,493	)	 	—	 	 	—	 
	 	Proceeds from exercise of stock options in the Company and Stolt Offshore	 	 	449	 	 	1,308	 	 	5,464	 
	 	Dividends paid to SNSA shareholders	 	 	(13,802	)	 	(13,754	)	 	(13,686	)
	 	Dividends paid to minority interests	 	 	(2,352	)	 	—	 	 	—	 
	 	 	
	 	
	 	
	 
	 	Net Cash (Used In) Provided by Financing Activities	 	 	(110,708	)	 	117,600	 	 	224,822	 
	 	 	
	 	
	 	
	 
	Effect of exchange rate changes on cash	 	 	247	 	 	(213	)	 	(1,657	)
	 	 	
	 	
	 	
	 
	 	Net Increase (Decrease) in Cash and Cash Equivalents	 	 	(1,992	)	 	(3,905	)	 	8,398	 
	Cash and cash equivalents at beginning of year	 	 	24,865	 	 	28,770	 	 	20,372	 
	 	 	
	 	
	 	
	 
	 	Cash and Cash Equivalents at End of Year	 	$	22,873	 	$	24,865	 	$	28,770	 
	 	 	
	 	
	 	
	 

See
notes to consolidated financial statements. 

5

  

 
 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    
    

1.    THE COMPANY  

        Stolt-Nielsen S.A. ("SNSA"), a Luxembourg company, and subsidiaries (together, the "Company") are primarily engaged in three businesses: Transportation, Offshore
Construction, and Seafood. 

        The
Transportation business, which is carried out through Stolt-Nielsen Transportation Group Ltd. ("SNTG"), is engaged in the worldwide transportation, storage, and distribution
of bulk liquid chemicals, edible oils, acids, and other specialty liquids providing its customers with integrated logistics solutions. 

        The
Offshore Construction business is carried out through Stolt Offshore S.A. ("SOSA" or "Stolt Offshore"), a subsidiary in which the Company held a 63% economic interest and a 69%
voting interest as of November 30, 2002. SOSA is a leading offshore contractor to the oil and gas industry, specializing in technologically sophisticated offshore and subsea engineering,
flowline and pipeline lay, construction, inspection and maintenance services. 

        The
Seafood business, wholly-owned by the Company and carried out through Stolt Sea Farm Holdings plc ("SSF"), produces, processes, and markets high quality seafood products, including
Atlantic salmon, salmon trout, turbot, halibut, sturgeon, caviar, bluefin tuna, sole and tilapia. 

        In
addition, in early 2000, the Company decided to commercialize its expertise in logistics and procurement. Optimum Logistics Ltd. ("OLL") was established to
provide software and professional services for supply chain management in the bulk process industries. SeaSupplier Ltd. ("SSL") was established to provide software and
professional services for the procurement process in the marine industry. Both OLL and SSL are included under the caption "Corporate and Other" throughout the financial statements and notes. 

2.    SIGNIFICANT ACCOUNTING POLICIES  

Principles of Consolidation  

        The consolidated financial statements include the financial statements of all majority-owned companies, unless the Company is unable to control the operations,
after the elimination of all significant intercompany transactions and balances. 

        SNTG
operates the Stolt Tankers Joint Service (the "Joint Service"), an arrangement for the coordinated marketing, operation, and administration of tankers owned or chartered by the
Joint Service, participants in the deep-sea intercontinental market. Net revenue available for distribution to the participants is defined in the Joint Service Agreement as the combined
operating revenue of the ships which participate in the Joint Service, less combined voyage expenses, overhead costs, and commission to outside brokers. The net revenue is distributed proportionately
to each participant according to a formula which takes into account each ship's cargo
capacity, its number of operating days during the period, and an earnings factor assigned. For the years ended November 30, 2002, 2001, and 2000, SNTG received approximately 80%, 74% and 70%,
respectively, of the net revenues of the Joint Service. The financial statements of the Joint Service have been consolidated in the accompanying consolidated financial statements, with a provision
included in tanker operating expenses for the amount of profit distributed to the minority participants. These provisions were approximately $71.9 million, $100.3 million, and
$102.6 million for the years ended November 30, 2002, 2001, and 2000, respectively, and include amounts distributed to non-consolidated joint ventures of SNTG of
$40.5 million, $42.0 million, and $37.1 million. The amounts distributed are net of commissions to SNTG of $2.2 million in 2002, $2.0 million for 2001, and
$2.3 million for 2000. As of November 30, 2002 and 2001, the net amounts payable to participants in which SNTG holds an equity interest for amounts to be distributed by the Joint Service
were $2.7 million and $3.4 million, respectively. Total amounts payable to minority Joint Service participants, other than those in which SNTG holds an equity interest, were
$2.0 million and $0.5 million as of November 30, 2002 and 2001, respectively. These amounts are included in "Other current liabilities" in the accompaying consolidated balance
sheets as of November 30, 2002 and 2001. 

Revenue Recognition  

        SNTG—Tankers    Revenues from tanker operations are shown in the consolidated statements of
operations net of commissions, sublet costs, transshipment, and barging expenses of $55 million, $63 million and $53 million for the years ended November 30, 2002, 2001 and
2000, respectively. 

        The
operating results of voyages in progress at the end of each reporting period are estimated and pro-rated on a per day basis for inclusion in the consolidated statements
of operations. The consolidated balance sheets reflect the deferred portion of revenues and expenses on voyages in progress at the end of each reporting period as applicable to the subsequent period.
As of November 30, 2002 and 2001, deferred revenues of $25.2 million and $29.9 million, respectively, are included in "Accrued expenses" in the accompanying consolidated balance
sheets. 

        SNTG—Tank Containers    Revenues for tank containers relate primarily to short-term shipments, with the
freight revenue and estimated expenses recognized when the tanks are shipped, based upon contract rates. Additional miscellaneous revenues earned from other sources are recognized after completion of
the shipment. 

        SNTG—Terminals    Revenues for terminal operations consist of rental income for the utilization of storage tanks by
its customers, with the majority of rental income earned under long-term contracts. These contracts provide for fixed rates for the use of the storage tanks and/or the throughput of
commodities pumped through the facility. Revenues can also be earned under short-term agreements contracted at spot rates. Revenue is recognized over the time period of usage, or upon
completion of specific throughput measures, as specified in the contracts. 

        SOSA    Long-term contracts of SOSA are accounted for using the percentage-of-completion
method. SOSA applies Statement of Position 81-1 "Accounting for Performance of Construction-Type and Certain Construction-Type Contracts." Revenue and gross profit
are recognized each period based upon the advancement of the work-in-progress unless the stage of completion is insufficient to enable a reasonably certain forecast of gross
profit to be established. In such cases, no gross profit is recognized during the period. The percentage-of-completion is calculated based on the ratio of costs incurred to
date to total estimated costs. Provisions for anticipated losses are made in the period in which they become known. A major portion of SOSA's revenue is billed under fixed-price contracts. However,
due to the nature of the services performed, variation orders and claims are commonly billed to the customers in the normal course of business and are recognized as contract revenue when realization
is probable and can be reasonably estimated. In addition, some contracts contain incentive provisions based upon performance in relation to established targets, which are recognized in the contract
estimates when deemed realizable. The financial reporting of SOSA's contracts depends on estimates, which are assessed continually during the term of these contracts. Recognized revenues and profits
are subject to revisions as the contract progresses to completion and revisions in profit estimates are reflected in the period in which the facts that give rise to the revision become known. 

6

 

        SSF    SSF recognizes revenue either on dispatch of product to customers, in the case of sales that are made on FOB processing
plant terms, or on delivery of product to customers, where the terms of the sale are CIF (Cost, Insurance and Freight) and DDP (Delivered Duty Paid) customer. The amount recorded as revenue includes
all amounts invoiced according to the terms of the sale, including shipping and handling costs billed to customers, and is after deductions for claims or returns of goods, rebates and allowances
against the price of the goods, and bad or doubtful debt provisions and write-offs. 

        Corporate and Other    OLL and SSL have various types of fee income, including non-refundable subscription fees and
transaction fees. Subscription fees that are billed in advance are recorded as revenue over the subscription period. Transaction fees that are based upon the number or value of transactions are
recorded as earned as the related service transactions are performed. 

Concentration of Credit Risk  

        The Company's trade receivables are from customers across all lines of its business. The Company extends credit to its customers in the normal course of business.
The Company regularly reviews its accounts and estimates the amount of uncollectible receivables each period and establishes an allowance for uncollectible amounts. The amount of the allowance is
based on the age of unpaid amounts, information about the current financial strength of customers, and other relevant information. Management does not believe significant risk exists in connection
with the Company's concentrations of credit at November 30, 2002. 

Use of Estimates  

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the financial statements and reported
amounts of revenues and expenses during the year. On an on-going basis, management evaluates the estimates and judgements, including those related to the percentage of completion
accounting for construction contracts, tanker voyage accounting and container move cost estimates, bad debts, inventories and fish mortality, investments in non-consolidated joint
ventures, intangible assets, income taxes, impairment charges, restructuring costs, pension benefits, and contingencies and litigation. Management bases its estimates and judgements on historical
experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. 

Legal and Environmental Matters  

        Accruals for legal and environmental matters are recorded when it is probable that a liability has been incurred or an asset impaired and the amount of the loss
can be reasonably estimated. Liabilities accrued for legal matters require judgments regarding projected outcomes and range of loss based on historical experience and recommendations of legal counsel.
Liabilities for environmental matters require evaluations of relevant environmental regulations and estimates of future remediation alternatives and costs. See Notes 17 and 18. 

Foreign Currency Translation  

        SNSA, incorporated in Luxembourg, has U.S. Dollar share capital and dividends are expected to be paid in U.S. Dollars. SNSA's reporting currency and functional
currency is the U.S. Dollar. 

        The
Company translates the financial statements of its non-U.S. subsidiaries into U.S. dollars from their functional currencies (usually local currencies) in accordance with
the provisions of the Financial Accounting Standards Board ("FASB"), Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation". Under SFAS No. 52,
assets and liabilities denominated in foreign currencies are translated at the exchange rates in effect at the balance sheet date. Revenues and expenses are translated at exchange rates which
approximate the average rate prevailing during the period. The resulting translation adjustments are recorded in a separate component of "Accumulated other comprehensive income (loss)" as "Translation
adjustments, net" in the accompanying consolidated statements of shareholders' equity. Exchange gains and losses resulting from transactions denominated in a currency other than the functional
currency are included in "Foreign currency exchange gain (loss), net" in the accompanying consolidated statements of operations. 

Capitalized Interest  

        Interest costs incurred during the construction period of significant assets are capitalized and charged to expense over the lives of the related assets. The
Company capitalized $0.2 million, $4.1 million, and $8.0 million of interest in fiscal years 2002, 2001, and 2000, respectively. 

Income Taxes  

        The Company accounts for income taxes under the provisions of SFAS No. 109, "Accounting For Income Taxes". SFAS No. 109 requires recognition of
deferred tax assets and liabilities for the estimated future tax consequences of events attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which the differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statement of operations in the period in which the enactment
date changes. Deferred tax assets are reduced through the establishment of a valuation allowance at such time as, based on available evidence, it is more likely than not that the deferred tax assets
will not be realized. 

        Provision
for income taxes on unremitted earnings is made only for those amounts that are not considered to be permanently reinvested. 

Earnings per Share  

        Basic earnings per share ("EPS") is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period. Diluted EPS is
computed by adjusting the weighted average number of shares outstanding during the period for all potentially dilutive shares and equivalents outstanding during the period using the treasury stock
method. As further discussed in Note 21, Founder's shares, which provide the holder thereof with certain control features, only participate in earnings to the extent of $0.005 per share for
years in which dividends are declared, and are limited to $0.05 per share upon liquidation. For purposes of computing EPS, dividends paid on Founder's shares are deducted from earnings to arrive at
earnings available to Common shareholders. 

        All
share data, per share data and other references throughout these financial statements have been restated to reflect the share reclassification on March 7, 2001 whereby
Class B Shares were reclassified to Common Shares on a one-for-one basis. 

7

 

        The
outstanding stock options under the Company's 1987 Stock Option Plan and 1997 Stock Option Plan are included in the diluted EPS calculation to the extent they are dilutive. The
following is a reconciliation of the numerator and denominator of the basic and diluted EPS computations. 

	 
	 	For the years ended November 30,
	 
	 
	 	2002
	 	2001
	 	2000
	 
	 
	 	(in thousands, except per share data)
 
	 
	Net Income (Loss)	 	$	(102,805	)	$	23,692	 	$	(12,395	)
	Less: Dividends on Founder's shares	 	 	(69	)	 	(40	)	 	(39	)
	 	 	
	 	
	 	
	 
	Net income (loss) attributable to Common shareholders	 	$	(102,874	)	$	23,652	 	$	(12,434	)
	 	 	
	 	
	 	
	 
	Basic weighted average shares outstanding	 	 	54,930	 	 	54,870	 	 	54,684	 
	Dilutive effect of options issued to executives (Note 22)	 	 	—	 	 	433	 	 	—	 
	 	 	
	 	
	 	
	 
	Diluted weighted average shares outstanding	 	 	54,930	 	 	55,303	 	 	54,684	 
	 	 	
	 	
	 	
	 
	Basic Earnings (loss) per share	 	$	(1.87	)	$	0.43	 	$	(0.23	)
	Diluted Earnings (loss) per share	 	 	(1.87	)	 	0.43	 	 	(0.23	)

        Outstanding
options to purchase 2,630,003 shares were not included in the computation of diluted earnings per share at November 30, 2001 because to do so would have been
antidilutive. The diluted loss per share for the years ended November 30, 2002 and 2000 do not include common share equivalents in respect to share options of 181,561 and 571,825, respectively,
as their effect would be antidilutive. All outstanding options to purchase 3,423,080 and 2,501,144 shares were excluded from the calculation of diluted EPS in 2002 and 2000, respectively, as the
Company incurred net losses in these years. Refer to Note 22, "Stock Option Plan" for further discussion. 

Cash and Cash Equivalents  

        Cash and cash equivalents include time deposits and certificates of deposit with an original maturity of three months or less. 

Inventory  

        SOSA inventories and work in progress are stated at the lower of cost or market value. Costs are determined in accordance with the weighted-average cost method.
Costs of fitting out and preparing equipment for specific contracts are included in work-in-progress. Such costs, principally labor and materials, are amortized over the
shorter of the expected duration of the contracts or the estimated useful life of the asset. Mobilizations relate to costs incurred to prepare and mobilize vessels for new contracts. These costs are
recognized as operating expenses over the estimated primary term of the contract. 

        SSF's
raw materials, biomass, and finished goods are valued at average production cost or market price, whichever is lower. Finished goods consist of frozen and processed fish products.
SSF capitalizes all direct and indirect costs of producing fish into inventory. This includes depreciation of production assets, and farming overheads up to a site or farming regional management
level. Normal mortalities (mortalities that are natural and expected as part of the life cycle of growing fish) are accounted for by removing the biomass from the records, so that the accumulated
capitalized costs are spread over the lower remaining biomass. Abnormal mortalities (higher than natural or expected mortalities due to disease, accident or any other abnormal cause) are accounted for
by removing the biomass from the records and writing off the accumulated costs associated with that biomass at the time of the mortality. 

        Costs
are released to the profit and loss account as the fish are harvested and sold, based on the accumulated costs capitalized into inventory at the start of the month of harvesting,
and in proportion to the number of fish or biomass of fish harvested as a proportion of the total at the start of the period. Harvesting, processing, packaging and freight costs, which comprise most
of the remaining operating expenses, are expensed in the period in which they are incurred. 

Depreciation of Fixed Assets  

        Fixed assets are recorded at cost. Assets acquired pursuant to capital leases are capitalized at the present value of the underlying lease obligations and
amortized on the same basis as fixed assets described below unless the term of the lease is shorter. 

        Depreciation
of fixed assets is recorded on a straight-line basis over the useful lives of the assets as follows: 

	SNTG	 	 
	Parcel Tankers and Barges	 	20 to 25 years
	Tank Containers	 	20 years
	Terminal Facilities:	 	 
	 	Tanks and structures	 	35 to 40 years
	 	Other support equipment	 	10 to 35 years
	Other Assets	 	3 to 10 years
	
SOSA	
 	

 
	Construction Support Ships:	 	 
	 	Deepwater heavy construction ships	 	9 to 25 years
	 	Light construction and survey ships	 	10 years
	 	Trunkline barges and anchor ships	 	7 to 20 years
	Operating Equipment	 	7 to 10 years
	Buildings	 	20 to 33 years
	Other assets	 	5 to 10 years
	
SSF	
 	

 
	Transportation equipment	 	4 to 7 years
	Operating equipment	 	4 to 10 years
	Buildings	 	20 years
	Other Assets	 	4 to 10 years

        Ships
are depreciated to a residual value of approximately 10% of acquisition cost, which reflects management's estimate of salvage or otherwise recoverable value. No residual value is
assumed with respect to other fixed assets. 

        Depreciation
expense, which excludes amortization of capitalized drydock costs, for the years ended November 30, 2002, 2001, and 2000, was $197.8 million,
$201.6 million, and $184.2 million, respectively. 

        Drydock
costs are capitalized under the deferral method, whereby the Company capitalizes its drydock costs and amortizes them over the period until the next drydock. Amortization of
capitalized drydock costs was $27.5 million, $20.1 million, and $16.2 million for the years ended November 30, 2002, 2001, and 2000, respectively. The unamortized portion
of capitalized drydock costs of $62.1 million and $51.0 million is included in "Other non-current assets" in the accompanying consolidated balance sheets at
November 30, 2002 and 2001, respectively. 

8

 

        Maintenance
and repair costs, which exclude amortization of the costs of ship surveys, drydock, and renewals of tank coatings, for the years ended November 30, 2002, 2001, and
2000, were $83.2 million, $79.9 million, and $76.2 million, respectively, and are included in "Operating Expenses" in the accompanying consolidated statements of operations. 

Research and Development Costs  

        The costs for research and development are expensed as incurred. 

Software and Website Development Costs  

        The Company accounts for costs of developing internal use software and its websites in accordance with AICPA Statement of Position 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use," and Emerging Issues Task Force Issue No. 00-2, "Accounting for Website Development Costs." Accordingly,
the Company expenses all costs incurred that relate to the planning and post implementation phases of development. Costs incurred in the development phase are capitalized and amortized over the
expected useful life of the software, generally between three and five years. Such costs capitalized amounted to $2.2 million and $6.8 million in 2001 and 2000, respectively. No such
costs were capitalized in 2002. Costs associated with the repair or maintenance of the existing website or the development of website content are expensed as incurred. 

Financial Instruments  

        The Company enters into forward exchange and options contracts to hedge foreign currency transactions on a continuing basis for periods consistent with its
committed and forecasted exposures. This hedging minimizes the impact of foreign exchange rate movement on the Company's U.S. dollar results. The Company's foreign exchange contracts do not subject
the Company's results of operations to risk due to exchange rate movements because gains and losses on these contracts offset gains and losses on the assets and liabilities being hedged. Generally,
currency contracts designated as hedges of commercial commitments mature within two years. 

        For
each derivative contract the relationship between the hedging instrument and hedged item, as well as its risk-management objective and strategy for undertaking the hedge
is formally documented. This process includes linking all derivatives that are designated as fair-value, cash-flow, or foreign-currency hedges to specific assets and
liabilities on the balance sheet or to specific firm commitments or forecasted transactions. Contracts are held to their maturity date matching the hedge with the asset or liability hedged. The
derivative instrument terms (currency, maturity, amount) are matched against the underlying asset or liability resulting in hedge effectiveness. Hedges are never transacted for trading purposes or
speculation. 

        Unrealized
gains and losses on foreign exchange contracts designated as a cash flow hedge are recorded in "Other comprehensive income (loss)" and as an asset or liability on the balance
sheet. On maturity, the hedge contract gains or losses are included in the underlying commercial transaction. For hedge contracts designated as a fair value hedge, all realized and unrealized gains or
losses are recorded in income. 

        The
Company also uses interest rate swaps to hedge certain underlying debt obligations. For qualifying hedges, the interest rate differential between the debt rate and the swap rate is
reflected as an adjustment to interest expense over the life of the swap. Interest rate swap contracts match the maturity of the underlying debt. 

        The
Company uses bunker fuel hedge contracts to lock in the price of future forecasted bunker requirements. The hedge contracts are matched against the type of bunker fuel being
purchased resulting in effectiveness between the hedge contract and the bunker fuel purchases. Bunker fuel contracts are designated as cash flow hedges and all unrealized gains or losses are recorded
in "Other comprehensive income (loss)" and as an asset or liability on the balance sheet. On maturity, the hedge contract gains or losses are included in the underlying cost of the bunker fuel costs. 

        Refer
to Note 24, "Financial Instruments" for further discussion. 

Consolidated Statements of Cash Flows  

        Cash paid for interest and income taxes was as follows: 

	 
	 	For the years ended November 30,

	 
	 	2002
	 	2001
	 	2000

	 
	 	(in thousands)
 

	Interest, net of amounts capitalized	 	$	90,346	 	$	117,043	 	$	102,279
	Income taxes	 	 	17,640	 	 	20,718	 	 	35,165

        SOSA
Class A shares issued in connection with the acquisitions of ETPM S.A. and Danco A/S in 2000 amounted to $139.1 million. Debt assumed in the SOSA acquisition of ETPM
S.A. amounted to $89.4 million in 2000, and capital lease obligations assumed in 2000 amounted to $32.0 million. 

        Debt
assumed in SSF acquisitions in 2001 and 2000 amounted to $9.4 million and $4.2 million, respectively. 

Investment Securities  

        The Company determines the appropriate classification of equity securities at the time of purchase. Equity securities classified as available for sale are measured
at fair value. Material unrealized gains and losses, net of tax, if applicable, are recorded as a separate component of "Other comprehensive income (loss)" until realized. As of November 30,
2002 and 2001, available-for-sale investments of $17.2 million and $18.1 million are included in "Other non-current assets" in the accompanying
consolidated balance sheets. 

Investments in Non-consolidated Joint Ventures  

        The Company has equity investments of 50% or less in various affiliated companies which are accounted for using the equity method. Equity investments in
non-consolidated joint ventures are recorded net of dividends received. In circumstances where the Company owns more than 50% of the voting interest, but the Company's ability to control
the operation of the investee is restricted by the significant participating interest held by another party, the investment is accounted for under the equity method of accounting. 

        The
Company accrues losses in excess of the investment value when the Company is committed to provide ongoing financial support to the joint venture. 

Impairment of Investments in Non-consolidated Joint Ventures  

        The Company reviews its investments in non-consolidated joint ventures periodically to assess whether there is an "other than temporary" decline in the
carrying value of the investment. The Company considers whether there is an absence of an ability to recover the carrying value of the investment by reference to projected undiscounted cash flows for
the joint venture. If the projected undiscounted future cash flow is less than the carrying amount of the asset, the asset is deemed impaired. The amount of the impairment is measured as the
difference between the carrying value and the fair value of the asset. 

9

 

Goodwill and Other Intangible Assets  

        Goodwill represents the excess of the purchase price over the fair value of certain assets acquired. Goodwill and other intangible assets, which include patents
and trademarks, for all acquisitions completed prior to July 1, 2001, were amortized on a straight-line basis, over periods of five to 40 years. The Company continuously
monitors the realizable value of goodwill and other intangible assets using expected related future undiscounted cash flows. Total amortization of goodwill and other intangible assets was
$11.3 million, $9.9 million, and $8.7 million in 2002, 2001 and 2000, respectively. 

Impairment of Tangible Fixed Assets, Goodwill and Other Intangibles  

        In accordance with SFAS No. 121, "Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of," long-lived
assets, certain identifiable intangibles and goodwill related to these assets to be held and used are required to be reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. In performing the review for recoverability, the Company determines a current market value for the asset or estimates the future cash flows
expected to result from the use of the asset and its eventual disposition. If the projected undiscounted future cash flow is less than the carrying amount of the asset, the asset is deemed impaired.
The amount of the impairment is measured as the difference between the carrying value and the fair value of the asset. 

Stock-Based Compensation  

        In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation." This statement establishes a fair value method of
accounting for an employee stock option or similar equity instrument but allows companies to continue to measure compensation cost for those plans using the intrinsic value based method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." The Company has elected to continue accounting for its stock-based compensation
awards to employees and directors under the accounting prescribed by APB Opinion No. 25 and to provide the disclosures required by SFAS No. 123 (Note 22). 

Comprehensive Income  

        SFAS No. 130, "Reporting Comprehensive Income", established rules for the reporting of comprehensive income and its components. Comprehensive income
consists of net income, foreign currency translation adjustments, minimum pension liability adjustments, changes in fair value of derivatives and unrealized gains (losses) on securities and is
presented in the consolidated statements of shareholders' equity. 

        Accumulated
other comprehensive loss, as of November 30, 2002 and 2001, consisted of the following; 

	 
	 	2002
	 	2001
	 
	 
	 	(in thousands)
 
	 
	Cumulative translation adjustments, net	 	$	(51,362	)	$	(89,258	)
	Unrealized loss on securities	 	 	(15,365	)	 	(11,938	)
	Minimum pension liability, net of tax	 	 	(9,341	)	 	(4,260	)
	Net unrealized gain (loss) on cash flow hedges	 	 	18,089	 	 	(1,601	)
	 	 	
	 	
	 
	 	 	$	(57,979	)	$	(107,057	)
	 	 	
	 	
	 

Future Adoption of New Accounting Standards  

        In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 changes the method by which companies may
recognize intangible assets in business combinations and generally requires identifiable intangible assets to be recognized separately from goodwill. Amortization of all existing and newly acquired
goodwill on a prospective basis will cease as of December 1, 2002, and thereafter all goodwill and intangibles with indefinite lives must be tested for impairment at least annually, based on
the fair value of the reporting unit associated with the respective intangible asset. The effect of the non-amortization provisions on 2003 income cannot be forecasted at this time because
acquisitions may occur in 2003. If these statements had been applied to goodwill in prior years, management believes full year net income would have increased by approximately $11.3 million,
$9.9 million and $8.7 million or $0.21, $0.18 and $0.16 per share for 2002, 2001 and 2000, respectively. 

        Also
in June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement requires entities to record a legal obligation associated
with the retirement of a tangible long-lived asset in the period in which it is incurred. The fair value of a liability for an asset retirement obligation must be recognized in the period
in which it is acquired if a reasonable estimate of fair value can be made. Additionally, the associated asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The Company plans to adopt this standard effective December 1, 2002. 

        In
August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment or Disposal of Long-lived Assets." This Statement addresses the financial accounting
and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," but retains SFAS No. 121's fundamental provisions for (a) recognition/measurement of impairment of long-lived assets to
be held and used and (b) measurement of long-lived assets to be disposed of by sale. SFAS No. 144 also supercedes the accounting/reporting provisions of APB Opinion
No. 30, "Reporting the Results of Operations—Reporting the Effects of a Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" for segments of a business to be disposed of, but retains APB Opinion No. 30's requirement to report discontinued operations separately from continuing operations and extends that
reporting to a component of an entity that either has been disposed of or is classified as held for sale. The statement is effective for fiscal years beginning after December 15, 2001, and
interim periods within those fiscal years, with earlier application encouraged. The Company plans to adopt this standard effective December 1, 2002. 

        In
April 2002, the FASB issued SFAS No. 145, "Rescission of SFAS Nos. 4, 44 and 64, Amendment of SFAS No.13, and Technical Corrections as of "April 2002" ("SFAS
No.145"). SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers," and SFAS
No. 64, "Extinguishments of Debt made to satisfy Sinking-Fund requirements." As a result, gains and losses from extinguishment of debt will no longer be classified as extraordinary
items unless they meet the criteria of unusual or infrequent as described in Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and 

10

 

Infrequently
Occurring Events and Transactions." In addition, SFAS No.145 amends SFAS No.13, "Accounting for Leases," to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS
No. 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. SFAS No.145 is
effective for fiscal years beginning after May 15, 2002. The Company is currently evaluating the impact that the adoption of SFAS No. 145 will have on its results of operations and
financial position. However, the Company does not believe that the adoption of SFAS No. 145 will have a material impact on its results of operations or financial position. 

        In
June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies Emerging Issue Task Force ("EITF") Issue No. 94-3, "Liabilities Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". SFAS No. 146 requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. This statement also established that fair value is the objective for initial measurement of the liability. The provisions of SFAS
No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The Company plans to adopt this standard effective December 1, 2002, and does not
anticipate that there will be a material impact on its results of operations or its financial position. 

        In
November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others" ("FIN 45"). This interpretation requires certain disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it
has issued. It also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure
requirements of FIN 45 are effective for periods ending after December 15, 2002. The initial recognition and initial measurement requirements of FIN 45 are effective prospectively for
guarantees issued or modified after December 31, 2002. We are currently assessing the impact of FIN 45, but at this point do not believe the adoption of the recognition and initial measurement
requirements of FIN 45 will have a material impact on our financial position or results of operations. 

        In
January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities ("VIE")" ("FIN 46"). The objective of the interpretation is to provide
guidance for identifying controlling financial interest established by means other than voting interest. It requires consolidation of a VIE by an enterprise that holds such a controlling financial
interest (the primary beneficiary). It is intended to require consolidation of VIEs only if those VIEs do not effectively disperse the risk and benefits among the various parties involved. The Company
will apply the interpretation to pre-existing VIEs as of the beginning of the Company's fourth quarter of 2003. If existing arrangements are not modified, FIN 46 will require certain
leases of the Company to be recorded on the balance sheet, as disclosed further in Note 16. 

        In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-based Compensation—Transition and Disclosure, an amendment of FASB Statement
No. 123." This statement amends SFAS No.123, "Accounting for Stock-based Compensation", to provide alternative methods of transition for an entity that voluntarily changes to the fair value
based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of that Statement to require prominent disclosure about the effects on reported net income of
an entity's accounting policy decisions with respect to stock-based employee compensation. Since the Company is continuing to account for stock-based compensation according to APB No. 25, the
adoption of SFAS No. 148 will require the Company to provide prominent disclosure about the effects of SFAS No. 123 on reported income. SFAS No. 148 shall be effective for fiscal
years ending after December 15, 2002. 

Presentation of Financial Statements  

        The 2000 and 2001 consolidated financial statements have been revised to reflect reclassifications and disclosures to conform with the 2002 presentation as
follows: 

	•
	Reclassification
of gain on disposals of assets of $14.3 million and $2.2 million in 2001 and 2000, respectively, from "Non-operating (expense)
income" to "Gain on disposal of assets", within "Income (loss) from operations" in the consolidated statement of operations.

	•
	Reclassification
of other income (loss) of $1.2 million and $0.7 million in 2001 and 2000, respectively, from "Non-operating (expense) income" to
"Other operating income (expense), net" within "Income (loss) from operations" in the consolidated statement of operations.

	•
	Reclassification
of "Dividends from non-consolidated joint ventures" of $12.7 million and $2.7 million in 2001 and 2000, respectively, from "Net
cash used in investing activities" to "Net cash provided by operating activities" in the consolidated statements of cash flows

	•
	Disclosures
in Note 8, "Trade Receivables" to present unbilled receivables of $215.1 million in 2001 and unbilled receivables due in respect of disputed
variation orders and claims of SOSA of $4.4 million in 2001.

	•
	Reclassifications
within the table reconciling the Company's effective tax rate to the statutory tax rate in Note 7, "Income taxes".

	•
	Reclassification
of "Investments in and advances to non-consolidated joint ventures" of $130.0 million and "Other non-current assets" of
$116.5 million from "Investments in non-consolidated joint ventures and other assets" in the consolidated balance sheet for 2001.

	•
	Reclassification
of "Accrued expenses" of $188.5 million and "Other current liabilities" of $61.4 million from "Other accrued and current liabilities" in the
consolidated balance sheet for 2001.

	•
	Reclassification
of "Prepaid expenses" of $89.7 million and "Other current assets" of $17.7 million from"Prepaid expenses and other current assets" in the
consolidated balance sheet for 2001. 

11

  

3.    BUSINESS ACQUISITIONS  

SOSA-NKT Acquisition  

        On December 7, 1999, SOSA completed a transaction to form a joint venture entity, NKT Flexibles I/S ("NKT"), a manufacturer of flexible flowlines and
dynamic flexible risers for the offshore oil and gas industry. The transaction was effected through the acquisition of Danco A/S, a wholly-owned Norwegian company, which holds the investment in NKT.
NKT is owned 51% by NKT Holdings A/S, and 49% by SOSA through Danco A/S. The total consideration for the acquisition was $36.0 million: $10.5 million cash and the issue of 1,758,242 SOSA
Class A Shares, with an average guaranteed value of $14.475 per share for a value of $25.5 million. The Class A Shares have subsequently been converted to SOSA Common Shares on a
one-for-one basis. 

        The
acquisition of Danco A/S has been accounted for by the purchase method of accounting and, accordingly, the operating results have been included in the Company's consolidated results
of operations from the date of acquisition. The excess of cash paid over the fair value of net assets acquired was recorded as goodwill of $2.1 million at the date of acquisition. The Company
accounts for the investment in NKT as a non-consolidated joint venture under the equity method. 

        On
February 20, 2002, SOSA paid cash of $3.4 million to repurchase 249,621 of its Common Shares previously issued to NKT Holdings A/S at a guaranteed price of $13.65 per
share, as shown in the below table. $1.6 million related to the settlement of the minimum share price guarantee, being the difference between the guarantee price and the market price of SOSA
Common Shares on February 20, 2002. The remaining $1.8 million represented the market value of the shares repurchased. These shares were subsequently sold to SNSA, SOSA's majority
shareholder, on November 19, 2002. 

        As
of November 30, 2002, SOSA continued to have an obligation for an average guaranteed value of $15.30 per share over 879,121 Common Shares. NKT Holdings A/S has advised SOSA of
its intention to sell all of these shares as permitted by the NKT acquisition agreement. SOSA in turn has notified NKT Holdings A/S that it will organize the sale and it is SOSA's intention to buy the
shares back in the second quarter of 2003. The transaction will be funded through the use of existing credit facilities of SOSA. 

SOSA-ETPM Acquisition  

        On December 16, 1999, SOSA acquired approximately 55% of the French offshore construction and engineering company ETPM S.A. ("ETPM"), a wholly-owned
subsidiary of Groupe GTM S.A. ("GTM"). GTM was subsequently acquired by Groupe Vinci S.A. ("Vinci"). The remaining 45% of ETPM was acquired by SOSA on February 4, 2000. 

        The
total consideration for the acquisition was $350.0 million and was comprised of the following items: (i) $111.6 million in cash; (ii) the issue of
6,142,857 SOSA Class A Shares, which have subsequently been converted to SOSA Common Shares on a one-for-one basis, with a minimum guarantee price of $18.50 per share
for a total value of $113.6 million; (iii) the assumption of debt of $18.4 million due from ETPM to GTM and debt of $71.0 million due to third parties; (iv) acquisition
costs
of $3.4 million; and (v) $32.0 million being the net present value at acquisition of a hire purchase arrangement for two ships owned by GTM, the Seaway
Polaris and the DLB 801, with an early purchase option after two years. 

        The
acquisition has been accounted for by the purchase method of accounting and, accordingly, the operating results have been included in the Company's consolidated results of operations
from the date of acquisition. There was no goodwill associated with this transaction. As a result of the share price guarantee, the Company recorded an addition to Paid in Surplus. 

        On
May 3, 2002, SOSA paid cash of $113.6 million to repurchase the 6,142,857 of its Common Shares previously issued to Vinci, as shown in the below table.
$58.9 million related to the settlement of the minimum share price guarantee. The remaining $54.7 million paid represented the market value of the shares repurchased. These shares were
subsequently sold to SNSA during 2002. 

        The
impact of SOSA's share repurchases on the financial statements of SNSA is summarized in the following table. 

	 
	 	Guaranteed

price
	 	Market price

on date of

repurchase
	 	Number of

SOSA Shares

purchased
	 	Repurchase of

shares by

Stolt Offshore
	 	Settlement of

share price

guarantees by

Stolt Offshore
	 	Total Paid

	 
	 	 
	 	 
	 	 
	 	(in thousands)
 
	 	(in thousands)
 
	 	(in thousands)
 

	NKT Holdings A/S	 	$	13.65	 	$	7.05	 	249,621	 	$	1,760	 	$	1,647	 	$	3,407
	Groupe Vinci S.A.	 	$	18.50	 	$	8.91	 	6,142,857	 	 	54,733	 	 	58,910	 	$	113,643
	 	 	
	 	
	 	
	 	
	 	
	 	

	 	Total	 	 	 	 	 	 	 	6,392,478	 	$	56,493	 	$	60,557	 	$	117,050
	 	 	 	 	 	 	 	 	
	 	
	 	
	 	

12

 

        Any future settlement due to the minimum share price guarantee will be made in cash. Cash payments made in connection with the share price
guarantee, if warranted, will reduce the Company's Paid in Surplus. As a result of the settlement of the share price guarantees in 2002 by Stolt Offshore, the Company recorded a reduction to SNSA's
Paid-in Surplus of $29,372. 

        During
2002, as part of the transactions to settle the share price guarantees in respect of the acquisitions of ETPM and NKT, as described above, SOSA repurchased 6,392,478 SOSA Common
Shares which were subsequently issued to the Company as a partial repayment of $38.4 million of a total intercompany loan of $64.0 million. In November 2002, SOSA issued 6,019,287 SOSA
Common Shares to SNSA for proceeds of $25.6 million to repay the remaining outstanding portion of the $64.0 million loan provided by SNSA to assist in funding the settlement of these
guarantees. SNSA holds a 63% economic interest in SOSA after the above transactions. 

        During
2000, the Company converted $200 million of an intercompany loan with SOSA for 19,775,223 Common Shares. 

SOSA-Paragon and Litwin Acquisitions  

        In 2001, SOSA paid $16.7 million to acquire two engineering services companies, Paragon Engineering Services, Inc. and Ingerop Litwin. These
acquisitions generated $10.5 million of goodwill and intangible assets. Total assets acquired and liabilities assumed in the 2001 acquisitions of SOSA amounted to $45.0 million and
$28.3 million, respectively. 

SSF Acquisitions  

        In 2001 SSF paid $80.6 million for several acquisitions, mainly including Australian Bluefin Pty Ltd., a company involved in the ranching of southern
bluefin tuna in Australia, and Sociedad Pesquera Eicosal SA, a producer of Atlantic salmon, salmon trout and coho in Chile. These acquisitions generated $58.5 million of goodwill and intangible
assets.Total assets acquired and liabilities assumed in the 2001 acquisitions of SSF amounted to $104.9 million and $24.3 million, respectively. Debt assumed in the SSF acquisitions
amounted to $9.4 million. 

4.    GOODWILL AND OTHER INTANGIBLE ASSETS  

        Goodwill and other intangible assets, net of accumulated amortization, is as follows: 

	 
	 	As of November 30,
	 
	 
	 	2002
	 	2001
	 
	 
	 	(in millions)
 
	 
	Goodwill and other intangible assets	 	$	101.0	 	$	255.1	 
	Accumulated amortization	 	 	(15.0	)	 	(32.4	)
	 	 	
	 	
	 
	Total	 	$	86.0	 	$	222.7	 
	 	 	
	 	
	 

Impairment of Goodwill  

        The Company incurred goodwill write-offs of $118.0 million in 2002, including $106.4 million for SOSA, $7.8 million for SSF,
$3.1 million for SNTG, and $0.7 million relating to other corporate investments in SSF. 

SOSA  

        During the year ended November 30, 2002, the continuing poor returns obtained on certain investments made in 1998 and 1999 led SOSA to perform an impairment
review of all goodwill on acquisition. As a result, impairment charges totalling $106.4 million were recorded against goodwill, of which $103.0 million related to the entire remaining
goodwill on the acquisition of Ceanic Inc. ("Ceanic"). The remainder of the impairment related to the write-off of goodwill arising on the acquisition of NKT and PT Komaritim
Indonesia ("PT Komaritim"). 

        Several
factors were taken into account in the decision to record an impairment charge of $103.0 million to eliminate the entire remaining goodwill on acquisition of Ceanic. The
acquisition was made in 1998 as part of a strategy to establish a presence in one of the world's most important offshore markets, at a price that reflected rising oil prices and favorable investment
conditions. Since then, the Gulf of Mexico offshore market has experienced an unprecedented downturn. As a result, the North America Region was loss-making for the 3 years ended
November 30, 2001, and again performed below management's expectations and incurred losses in 2002. Recent market analysts' reports indicate that the major oil companies are directing their
development funds away from U.S. waters and towards overseas targets, particularly West Africa, where the per-barrel recovery costs are lower. SOSA foresees no significant upturn in demand
in the Gulf of Mexico market in 2003, and has therefore revised earlier assumptions of long term market growth. SOSA performed an impairment test based on the discounted cash flow projections, and
determined that the goodwill was fully impaired. SOSA's strategy is still to maintain a strong competitive presence in the Gulf of Mexico, and is planning to expand its service offering to the
ultra-deepwater market in this and other regions, including ship-board Radial Friction Welding. This goodwill was previously amortized over 25 years on a straight-line
basis. 

13

 

        The
NKT joint venture has been loss-making since SOSA acquired its 49% share in 2000, and the market for flexible pipes has not grown as quickly as expected, with the result
that the joint venture has suffered from excess production capacity and has not met its performance targets. During 2002, NKT management revised its strategy to focus on efficiency on the basis of
slower growth in the next few years than initially forecast. SOSA performed an impairment test based on the discounted cash flow projections, and determined that the goodwill was fully impaired. An
impairment adjustment of $1.8 million was recorded in November 2002. This goodwill was previously amortized over 10 years on a straight-line basis. 

        SOSA's
PT Komaritim subsidiary in Indonesia has been loss-making for several years, and in 2002 once again under-performed management's expectations. The Indonesian market is
still characterized by high competition in the shallow water sector, an environment in which SOSA is unable to fully leverage its technology and core expertise. SOSA determined, on the basis of
discounted cash flows, that the goodwill was fully impaired, and a charge of $1.6 million was recorded in the year ended November 30, 2002. This goodwill was previously amortized over
20 years on a straight-line basis. 

SSF  

        During the year ended November 30, 2002, the continuing poor results obtained in salmon aquaculture activities led SSF to perform an impairment review of
all goodwill on acquisition of such activities. As a result, impairment charges totalling $7.8 million were recorded against goodwill, of which $6.3 million related to the entire
remaining goodwill on acquisitions in Scotland. The remaining $1.5 million of the impairment charge related to the write-off of goodwill arising on the acquisition of DE Salmon in the
state of Maine, U.S. ("DE Salmon"). 

        Gaelic
Seafoods Limited and Harlosh Salmon Limited were acquired in December 1997 and February 2001, respectively. SSF has performed an impairment test based on the
discounted cash flow projections and determined that the goodwill associated with these acquisitions in Scotland was fully impaired. An impairment adjustment of $6.3 million was recorded in
November 2002. This goodwill was previously amortized over 20 years on a straight-line basis. 

        DE
Salmon was acquired in September 1999. SSF determined, on the basis of discounted cash flows, that the goodwill associated with this acquisition was fully impaired, and a
charge of $1.5 million was recorded in November 2002. This goodwill was previously amortized over 20 years on a straight-line basis. 

SNTG  

        In early 1997, SNTG acquired the tank container operations of Challenge International S.A., a company based in France. During the year ended November 30,
2002, management of Stolt-Nielsen Transportation Group SAS, the French subsidiary operating these tank container assets, agreed to dispose of the primary asset of the company being its fleet of tank
containers. On the basis of this early disposal of the assets by the French subsidiary, an impairment review of the goodwill was undertaken on this acquisition and an impairment charge of
$3.1 million was recorded. 

Impairment of Other Intangible Assets  

        During the year ended November 30, 2001, in light of the increased worldwide recognition of the Stolt Offshore name and the discontinuation of the use of
the Comex name, SOSA reviewed the carrying value of its former trade name Comex for possible impairment. SOSA determined that the value of the trade name had been impaired and recorded a charge of
$7.9 million in its results of operations for the write-off of the trade name, in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." Prior to the write-off, this asset was being amortized over 30 years on a straight-line basis. 

5.    GAIN ON DISPOSAL OF ASSETS  

        Gain on disposal of assets is comprised of the following: 

	 
	 	For the years ended November 30,

	 
	 	2002
	 	2001
	 	2000

	 
	 	(in thousands)
 

	Sale of SNTG ships	 	$	141	 	$	430	 	$	438
	Sale of SNTG tank containers	 	 	374	 	 	323	 	 	—
	Sale of SNTG terminals	 	 	655	 	 	12,204	 	 	—
	Sale of SOSA assets	 	 	8,003	 	 	1,234	 	 	572
	Sale of other assets	 	 	1,089	 	 	84	 	 	1,162
	 	 	
	 	
	 	

	 	 	$	10,262	 	$	14,275	 	$	2,172
	 	 	
	 	
	 	

        During 2002 the Company recorded a gain on sale of other assets on SNTG of approximately $1.1 million primarily associated with the sale of a Company apartment in
Singapore. 

        In
addition, SOSA recorded a gain of $8.0 million relating to the sale of assets of Big Inch Marine Systems, Inc. 

14

 

        In
2001, the Company sold SNTG's tank storage terminals in Perth Amboy, NJ and Chicago, IL for a pretax gain of $12.2 million, $7.3 million after tax. The Company also
recorded a gain of $1.2 million on the sale of assets of Hard Suits Inc., a specialized diving company of SOSA. In 2000, SNTG sold tank containers for $49.6 million, which
approximated their carrying value, and such tank containers were subsequently leased back. 

        In
February 2001, the Company sold approximately 19% of its interest in OLL to Aspen Technology Inc. ("AspenTech"). Under certain conditions, the purchase price is
refundable to AspenTech in 2006 by OLL. As such, no gain has been recognized in connection with the sale. Additionally, due to the Company's obligation to fund OLL and the potential refund by OLL to
AspenTech of the purchase price, the Company has recognized 100% of OLL's losses each year, without a reduction for minority interest. The deferred gain on the original transaction,
which amounted to $9.5 million, is included in "Other non-current liabilities" in the accompanying consolidated balance sheets as of November 30, 2002 and 2001. 

6.    RESTRUCTURING CHARGES  

        In early 2001, SNTG embarked upon a major strategic initiative to improve the utilization of assets, divest non-core assets and reduce costs. One
aspect of this initiative was an overhead reduction effort, announced in January, 2002. A total of $9.6 million has been incurred for severance, relocation and other costs through
November 30, 2002. Substantially all of these charges were expensed and paid in 2002. The SNTG restructuring program in 2002 included the termination of 108 employees and the relocation of 27
employees. 

        In
2000, SOSA recorded restructuring charges of $3.3 million related to the integration of ETPM. The reorganization program removed duplicate capacity in the U.K. and SEAME
regions. SOSA recorded redundancy costs of $0.9 million to eliminate duplicate functions in the U.K., and $1.7 million to close SOSA's Marseilles, France office, while transferring all
operational and administrative functions for the SEAME region to Paris, France, which was the ETPM administrative headquarters. Additionally, integration costs of $0.7 million were incurred in the
introduction of common information and reporting systems and standardization of processes across the enlarged SOSA organization. Substantially all of the charges were expensed and paid in the year
ended November 30, 2000. 

7.    INCOME TAXES  

        The following tables present the United States and foreign components of the income tax provision for the fiscal years ended 2002, 2001 and 2000 by business
segment: 

	 
	 	For the year ended November 30, 2002
	 
	 
	 	SNTG
	 	SOSA
	 	SSF
	 	Total
	 
	 
	 	(in thousands)
 
	 
	Current:	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	U.S.	 	$	6,081	 	$	1,340	 	$	—	 	$	7,421	 
	 	Non-U.S.	 	 	3,060	 	 	12,724	 	 	5,041	 	 	20,825	 
	Deferred:	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	U.S.	 	 	—	 	 	10,781	 	 	1,107	 	 	11,888	 
	 	Non-U.S.	 	 	—	 	 	(16,687	)	 	(5,478	)	 	(22,165	)
	 	 	
	 	
	 	
	 	
	 
	Income tax provision	 	$	9,141	 	$	8,158	 	$	670	 	$	17,969	 
	 	 	
	 	
	 	
	 	
	 

	 
	 	For the year ended November 30, 2001
	 
	 
	 	SNTG
	 	SOSA
	 	SSF
	 	Total
	 
	 
	 	(in thousands)
 
	 
	Current:	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	U.S.	 	$	4,582	 	$	—	 	$	135	 	$	4,717	 
	 	Non-U.S.	 	 	978	 	 	25,052	 	 	6,699	 	 	32,729	 
	Deferred:	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	U.S.	 	 	—	 	 	—	 	 	(4,021	)	 	(4,021	)
	 	Non-U.S.	 	 	—	 	 	(4,433	)	 	(1,431	)	 	(5,864	)
	 	 	
	 	
	 	
	 	
	 
	Income tax provision	 	$	5,560	 	$	20,619	 	$	1,382	 	$	27,561	 
	 	 	
	 	
	 	
	 	
	 

	 
	 	For the year ended November 30, 2000
	 
	 
	 	SNTG
	 	SOSA
	 	SSF
	 	Total
	 
	 
	 	(in thousands)
 
	 
	Current:	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	U.S.	 	$	6,036	 	$	13	 	$	303	 	$	6,352	 
	 	Non-U.S.	 	 	1,227	 	 	12,940	 	 	4,748	 	 	18,915	 
	Deferred:	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	U.S.	 	 	—	 	 	(5,953	)	 	—	 	 	(5,953	)
	 	Non-U.S.	 	 	4,500	 	 	(10,778	)	 	2,338	 	 	(3,940	)
	 	 	
	 	
	 	
	 	
	 
	Income tax provision (benefit)	 	$	11,763	 	$	(3,778	)	$	7,389	 	$	15,374	 
	 	 	
	 	
	 	
	 	
	 

15

  

        The
following presents the reconciliation of the provision for income taxes to United States federal income taxes computed at the statutory rate: 

	 
	 	2002
	 	2001
	 	2000
	 
	 
	 	(in thousands)
 
	 
	Income (loss) before income tax provision and minority interest	 	$	(141,032	)	$	46,999	 	$	(13,335	)
	 	 	
	 	
	 	
	 
	Tax at U.S. federal rate (35%)	 	$	(49,361	)	$	16,450	 	$	(4,667	)
	 	 	
	 	
	 	
	 
	Differences between U.S. and non-U.S. tax rates	 	 	3,444	 	 	2,279	 	 	4,322	 
	U.S./Non-U.S. source shipping and other income not subject to income tax	 	 	(14,054	)	 	(35,987	)	 	(15,592	)
	Losses not benefited and increase in valuation allowance	 	 	50,727	 	 	39,031	 	 	22,320	 
	Change to U.K. tonnage tax regime	 	 	(21,307	)	 	(15,200	)	 	—	 
	Imputed interest deduction	 	 	—	 	 	(5,381	)	 	(5,142	)
	Withholding and other taxes	 	 	8,805	 	 	10,434	 	 	9,150	 
	Non-deductible amortization and impairment of goodwill and other intangibles	 	 	38,909	 	 	4,986	 	 	3,424	 
	Adjustments to estimates relative to prior years	 	 	—	 	 	11,219	 	 	2,286	 
	Other, net	 	 	806	 	 	(270	)	 	(727	)
	 	 	
	 	
	 	
	 
	Income tax provision	 	$	17,969	 	$	27,561	 	$	15,374	 
	 	 	
	 	
	 	
	 

        Substantially
all of SNTG's shipowning and ship operating subsidiaries are incorporated in countries which do not impose an income tax on shipping operations. Pursuant to the U.S.
Internal Revenue Code of 1986, as amended, effective for the Company's fiscal years beginning on or after December 1, 1987, U.S. source income from the international operation of ships is
generally exempt from U.S. tax if the company operating the ships meets certain requirements. Among other things, in order to qualify for this exemption, the company
operating the ships must be incorporated in a country which grants an equivalent exemption to U.S. citizens and corporations and whose shareholders meet certain residency requirements. 

        The
Company believes that substantially all of SNTG's shipowning and ship operating subsidiaries meet the requirements to qualify for this exemption from U.S. taxation. The Internal
Revenue Service has examined those requirements through fiscal 1992 and have not proposed any adjustments. For these reasons, no provision for U.S. income taxes has been made with respect to SNTG's
U.S. source shipping income. 

        The
Company and its subsidiaries' income tax returns are routinely examined by various tax authorities. In management's opinion, adequate provision for income taxes have been made for
all open years. 

        The
components of the Company's deferred tax assets and liabilities as of November 30, 2002 and 2001 are as follows: 

	 
	 	As of November 30, 2002
	 
	 
	 	SNTG
	 	SOSA
	 	SSF
	 	Total
	 
	 
	 	(in thousands)
 
	 
	Deferred Tax Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net operating loss carryforwards	 	$	6,221	 	$	62,979	 	$	16,275	 	$	85,475	 
	Other timing differences	 	 	11,628	 	 	33,036	 	 	3,272	 	 	47,936	 
	 	 	
	 	
	 	
	 	
	 
	 	Gross deferred tax assets	 	 	17,849	 	 	96,015	 	 	19,547	 	 	133,411	 
	Valuation allowances	 	 	(6,200	)	 	(74,275	)	 	(330	)	 	(80,805	)
	 	 	
	 	
	 	
	 	
	 
	 	Deferred tax assets—net	 	 	11,649	 	 	21,740	 	 	19,217	 	 	52,606	 
	 	 	
	 	
	 	
	 	
	 
	Deferred Tax Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 
	Differences between book and tax depreciation	 	 	(19,093	)	 	(25,828	)	 	(6,936	)	 	(51,857	)
	U.S. State deferred taxes	 	 	(3,580	)	 	—	 	 	—	 	 	(3,580	)
	 	 	
	 	
	 	
	 	
	 
	 	Deferred tax liabilities	 	 	(22,673	)	 	(25,828	)	 	(6,936	)	 	(55,437	)
	 	 	
	 	
	 	
	 	
	 
	Net deferred tax (liability)/asset	 	$	(11,024	)	$	(4,088	)	$	12,281	 	$	(2,831	)
	 	 	
	 	
	 	
	 	
	 
	Current deferred tax asset	 	$	531	 	$	—	 	$	2,137	 	$	2,668	 
	Non-current deferred tax asset	 	 	1,993	 	 	3,101	 	 	23,632	 	 	28,726	 
	Current deferred tax liability	 	 	—	 	 	—	 	 	(13,488	)	 	(13,488	)
	Non-current deferred tax liability	 	 	(13,548	)	 	(7,189	)	 	—	 	 	(20,737	)
	 	 	
	 	
	 	
	 	
	 
	 	 	$	(11,024	)	$	(4,088	)	$	12,281	 	$	(2,831	)
	 	 	
	 	
	 	
	 	
	 

        In
fiscal 2001, the Company's U.K. shipping subsidiaries elected to join the U.K. tonnage tax regime, under which taxable income is computed by reference to vessel tonnage rather than by
reference to profits. As a result, the Company released $15.2 million of the deferred tax liability associated with the U.K. shipping subsidiaries electing into the regime. In fiscal 2002, the
Company released an additional $21.3 million of deferred tax liability as such liability was determined to no longer be necessary pursuant to the tonnage tax regime. 

        The
U.K. tonnage tax regime includes a provision whereby a proportion of tax depreciation previously claimed by the Company may be subject to tax in the event that a significant number
of vessels are sold and are not replaced. At November 30, 2002, the contingent liability associated with the related vessels was $46.2 million, of which $8.0 million is recognized
in the financial statements as the deferred tax liability in respect of anticipated non tonnage tax use of those ships. The contingent liability related to the tonnage tax regime decreases over the
first seven years following entry into the tonnage tax regime, to nil. As management has no current intention to dispose of the vessels, no provision has been made for this contingent liability. 

16

 

	 
	 	As of November 30, 2001
	 
	 
	 	SNTG
	 	SOSA
	 	SSF
	 	Total
	 
	 
	 	(in thousands)
 
	 
	Deferred Tax Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net operating loss carryforwards	 	$	3,575	 	$	77,128	 	$	21,736	 	$	102,439	 
	Differences between book and tax depreciation	 	 	—	 	 	—	 	 	12,868	 	 	12,868	 
	Other timing differences—net	 	 	4,068	 	 	38,118	 	 	—	 	 	42,186	 
	 	 	
	 	
	 	
	 	
	 
	 	Gross deferred tax assets	 	 	7,643	 	 	115,246	 	 	34,604	 	 	157,493	 
	Valuation allowances	 	 	(3,575	)	 	(57,142	)	 	(3,323	)	 	(64,040	)
	 	 	
	 	
	 	
	 	
	 
	 	Deferred tax assets—net	 	 	4,068	 	 	58,104	 	 	31,281	 	 	93,453	 
	 	 	
	 	
	 	
	 	
	 
	Deferred Tax Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 
	Differences between book and tax depreciation	 	 	(17,143	)	 	(63,290	)	 	—	 	 	(80,433	)
	U.S. State deferred taxes	 	 	(3,696	)	 	—	 	 	—	 	 	(3,696	)
	Other timing differences	 	 	—	 	 	—	 	 	(24,302	)	 	(24,302	)
	 	 	
	 	
	 	
	 	
	 
	 	Deferred tax liabilities	 	 	(20,839	)	 	(63,290	)	 	(24,302	)	 	(108,431	)
	 	 	
	 	
	 	
	 	
	 
	Net deferred tax (liability)/asset	 	$	(16,771	)	$	(5,186	)	$	6,979	 	$	(14,978	)
	 	 	
	 	
	 	
	 	
	 
	Current deferred tax asset	 	$	199	 	$	2,622	 	$	1,138	 	$	3,959	 
	Non-current deferred tax asset	 	 	940	 	 	10,386	 	 	24,800	 	 	36,126	 
	Current deferred tax liability	 	 	—	 	 	—	 	 	(18,959	)	 	(18,959	)
	Non-current deferred tax liability	 	 	(17,910	)	 	(18,194	)	 	—	 	 	(36,104	)
	 	 	
	 	
	 	
	 	
	 
	 	 	$	(16,771	)	$	(5,186	)	$	6,979	 	$	(14,978	)
	 	 	
	 	
	 	
	 	
	 

        Withholding
and remittance taxes are not recorded on the undistributed earnings of SNSA's subsidiaries since under the current tax laws of Luxembourg and the countries in which
substantially all of SNSA's subsidiaries are incorporated, no taxes would be assessed upon the payment or receipt of dividends. 

        As
of November 30, 2002, SNTG, SOSA and SSF had approximately $18.3 million, $186.0 million and $60.0 million, respectively, of net operating loss
carryforwards for tax purposes, which, if they remain unused will expire as follows: 

	 
	 	SNTG
	 	SOSA
	 	SSF
	 	Total

	 
	 	(in thousands)
 

	2003	 	$	3	 	$	809	 	$	8,753	 	$	9,565
	2004	 	 	3	 	 	12,677	 	 	5,139	 	 	17,819
	2005	 	 	3	 	 	15,248	 	 	7,718	 	 	22,969
	2006	 	 	3	 	 	187	 	 	1,478	 	 	1,668
	2007	 	 	3	 	 	7,645	 	 	12,719	 	 	20,367
	Thereafter	 	 	6	 	 	103,753	 	 	12,543	 	 	116,302
	Indefinite carryforward	 	 	18,242	 	 	45,671	 	 	11,663	 	 	75,576
	 	 	
	 	
	 	
	 	

	Total	 	$	18,263	 	$	185,990	 	$	60,013	 	$	264,266
	 	 	
	 	
	 	
	 	

        As
of November 30, 2002, the $18.2 million of NOLs related to SNTG's operations in Brazil have been fully reserved. 

        The
Company has recorded a valuation allowance to reflect the estimated amount of deferred tax assets that may not be realized. The valuation allowance increased to $80,805 in fiscal
2002 from $64,040 in fiscal 2001. The increase in the valuation allowance results from an increase in the net operating loss and other deferred tax assets that may not be realized. 

        As
of November 30, 2002, the current deferred tax asset of $2.7 million is included within "Other current assets." The current deferred tax liability of
$13.5 million is included within "Other current liabilities." 

8.    TRADE RECEIVABLES  

        Trade receivables at November 30, 2002 and 2001 of $573.0 million and $566.6 million, respectively, are net of allowances for doubtful
accounts of $13.5 million and $15.2 million, respectively. Included in trade receivables at November 30, 2002 and 2001 was $261.9 million and $215.1 million,
respectively, of unbilled receivables. Included within the unbilled trade receivables at November 30, 2002 and 2001, was $46.2 million and $4.4 million relating to unbilled
receivables due in respect of disputed variation orders and claims of SOSA. SOSA has obtained an independent party's report to corroborate management assertions on the amount of variation orders and
claims for which recovery is both probable and could be reliably estimated. 

9.    INVENTORIES  

        Inventories at November 30, 2002 and 2001 consisted of the following: 

	 
	 	2002

	 
	 	SNTG
	 	SOSA
	 	SSF
	 	Total

	 
	 	(in thousands)
 

	Raw materials	 	$	114	 	$	—	 	$	6,471	 	$	6,585
	Consumables	 	 	129	 	 	16,817	 	 	1,392	 	 	18,338
	Work-in-progress	 	 	54	 	 	708	 	 	—	 	 	762
	Seafood biomass	 	 	—	 	 	—	 	 	138,362	 	 	138,362
	Finished goods	 	 	—	 	 	—	 	 	67,451	 	 	67,451
	 	 	
	 	
	 	
	 	

	 	 	$	297	 	$	17,525	 	$	213,676	 	$	231,498
	 	 	
	 	
	 	
	 	

	 
	 	2001

	 
	 	SNTG
	 	SOSA
	 	SSF
	 	Total

	 
	 	(in thousands)
 

	Raw materials	 	$	77	 	$	—	 	$	6,023	 	$	6,100
	Consumables	 	 	248	 	 	21,197	 	 	735	 	 	22,180
	Work-in-progress	 	 	21	 	 	4,227	 	 	—	 	 	4,248
	Seafood biomass	 	 	—	 	 	—	 	 	126,206	 	 	126,206
	Finished goods	 	 	—	 	 	—	 	 	27,961	 	 	27,961
	 	 	
	 	
	 	
	 	

	 	 	$	346	 	$	25,424	 	$	160,925	 	$	186,695
	 	 	
	 	
	 	
	 	

10.    RESTRICTED CASH DEPOSITS  

        Restricted cash deposits comprise both funds held in a separate Company bank account, which will be used to settle accrued taxation liabilities, and deposits made
by the Company as security for certain third-party obligations. There are no other significant conditions on the restricted cash balances. 

17

 

11.    INVESTMENTS IN AND ADVANCES TO NON-CONSOLIDATED JOINT VENTURES  

        Investments in and advances to non-consolidated joint ventures include the following: 

	 
	 	As of November 30,
	 
	 
	 	Geographic

Location
	 	Ownership

%
	 	2002
	 	2001
	 
	 
	 	(in thousands)
 
	 
	

Tankers	
 	

 	
 	

 	
 	
 	

 	
 	
 	

 	
 
	 	Stolt-Nielsen Asia Pacific Inc.	 	Singapore	 	50	%	$	7,792	 	$	9,985	 
	 	NYK Stolt Tankers S.A.	 	Japan	 	50	%	 	24,988	 	 	18,649	 
	 	Chemical Transporter Ltd.	 	Sweden	 	25	%	 	1,365	 	 	1,365	 
	 	Stolt Neva River Tanker Ltd.	 	Bermuda	 	60	%	 	179	 	 	179	 
	 	Edgewater Park Associates Inc.	 	United States	 	50	%	 	2,013	 	 	2,139	 
	 	SIA LAPA Ltd.	 	Latavia	 	49	%	 	1,223	 	 	791	 
	 	Seabulk International Inc.	 	United States	 	33	%	 	1,599	 	 	1,149	 
	 	Stolt Marine Tankers LLC	 	United States	 	25	%	 	5,584	 	 	6,313	 
	 	 	 	 	 	 	
	 	
	 
	 	 	 	 	 	 	 	44,743	 	 	40,570	 
	Tank Containers	 	 	 	 	 	 	 	 	 	 	 
	 	N.C. Stolt Transportation Services Co., Ltd.	 	Japan	 	50	%	 	487	 	 	436	 
	 	N.C. Stolt Chuyko Transportation Services Co., Ltd.	 	Japan	 	35	%	 	601	 	 	526	 
	 	Hyop Woon Stolt Transportation Services Co., Ltd.	 	South Korea	 	50	%	 	225	 	 	263	 
	 	 	 	 	 	 	
	 	
	 
	 	 	 	 	 	 	 	1,313	 	 	1,225	 
	Terminals	 	 	 	 	 	 	 	 	 	 	 
	 	Dovechem Stolthaven Ltd.	 	Singapore/China	 	37	%	 	33,564	 	 	31,989	 
	 	Jeong-IL Stolthaven Ulsan Co. Ltd.	 	South Korea	 	50	%	 	16,937	 	 	15,287	 
	 	Stolthaven Westport Sdn. Bhd.	 	Malaysia	 	40	%	 	2,539	 	 	2,282	 
	 	 	 	 	 	 	
	 	
	 
	 	 	 	 	 	 	 	53,040	 	 	49,558	 
	

SOSA	
 	

 	
 	

 	
 	
 	

 	
 	
 	

 	
 
	 	NKT Flexible I/S	 	Denmark, Corporate	 	49	%	 	5,827	 	 	18,379	 
	 	Mar Profundo Girassol	 	West Africa, SEAME	 	50	%	 	8,618	 	 	9,580	 
	 	Sonamet	 	West Africa, SEAME	 	55	%	 	(501	)	 	(7,458	)
	 	Sonastolt	 	West Africa, SEAME	 	55	%	 	6,331	 	 	6,150	 
	 	Seaway Heavy Lifting Limited	 	Cyprus, Corporate	 	30	%	 	2,600	 	 	3,191	 
	 	Stolt/Subsea 7	 	Norway	 	50	%	 	1,551	 	 	2,597	 
	 	Kingfisher D.A.	 	Norway	 	50	%	 	4,346	 	 	3,130	 
	 	Other	 	SEAME, Norway	 	—	 	 	2	 	 	(40	)
	 	 	 	 	 	 	
	 	
	 
	 	 	 	 	 	 	 	28,774	 	 	35,529	 
	

SSF	
 	

 	
 	

 	
 	
 	

 	
 	
 	

 	
 
	 	Engelwood Packing Co. Ltd.	 	Canada	 	50	%	 	1,039	 	 	833	 
	 	Landcatch Chile Ltda.	 	Chile	 	50	%	 	1,109	 	 	1,348	 
	 	Midt-Finnmark Smolt AS	 	Norway	 	37	%	 	800	 	 	866	 
	 	 	 	 	 	 	
	 	
	 
	 	 	 	 	 	 	 	2,948	 	 	3,047	 
	Other	 	 	 	 	 	 	35	 	 	96	 
	 	 	 	 	 	 	
	 	
	 
	 	Total	 	 	 	 	 	$	130,853	 	$	130,025	 
	 	 	 	 	 	 	
	 	
	 

        In
circumstances where the Company owns more than 50% of the voting interest, but the Company's ability to control the operation of the investee is restricted by the significant
participating interest held by another party, the investment is accounted for under the equity method of accounting. 

        The
Company accrues losses in excess of the investment value when the Company is committed to provide ongoing financial support to the joint venture. 

        The
Company's share of equity in the net loss of NKT Flexibiles I/S includes $8.1 million, before minority interest in Stolt Offshore, in respect of fixed asset impairment charges
recorded by the joint venture. This is in addition to the impairment charge of $1.8 million on the NKT investment as discussed in Note 4. 

18

 

        Summarized
financial information for the Company's non-consolidated joint ventures, representing 100% of the respective amounts included in the non-consolidated
joint ventures' financial statements, is as follows: 

        Income
statement data: 

	 
	 	For the years ended November 30,

	 
	 	2002
	 	2001
	 	2000

	 
	 	(in millions)
 

	Net operating revenue	 	$	545	 	$	506	 	$	552
	Gross profit	 	 	107	 	 	71	 	 	50
	Net income	 	 	21	 	 	39	 	 	10

        Balance
sheet data: 

	 
	 	As of November 30,

	 
	 	2002
	 	2001

	 
	 	(in millions)
 

	Current assets	 	$	241	 	$	271
	Non-current assets	 	 	562	 	 	304
	Current liabilities	 	 	295	 	 	298
	Non-current liabilities	 	 	376	 	 	210

        The
income statement data for the non-consolidated joint ventures presented above includes the following items related to transactions with the Company: 

	 
	 	For the years ended November 30,

	 
	 	2002
	 	2001
	 	2000

	 
	 	(in millions)
 

	Charter hire revenue	 	$	29.5	 	$	39.5	 	$	72.0
	Tank container cleaning station revenue	 	 	3.6	 	 	3.4	 	 	2.0
	Rental income (from office building leased to the Company)	 	 	2.4	 	 	2.4	 	 	2.3
	Charter hire expense	 	 	79.8	 	 	60.6	 	 	56.3
	Management and other fees	 	 	40.5	 	 	63.0	 	 	41.1
	Freight and Joint Service Commission	 	 	1.4	 	 	3.2	 	 	3.8
	Interest expense	 	 	0.4	 	 	0.2	 	 	1.3

        The
balance sheet data for the non-consolidated joint ventures presented above includes the following items related to transactions with the Company: 

	 
	 	As of November 30,

	 
	 	2002
	 	2001

	 
	 	(in millions)
 

	Amounts due from the Company	 	$	2.3	 	$	14.3
	Amounts due to the Company	 	 	104.4	 	 	91.7

        Included
within "Amounts due to the Company" is $74.9 million and $67.6 million at November 30, 2002 and 2001, respectively, for trade receivables from joint
ventures. These amounts are reflected in the consolidated balance sheets as "Receivables from related parties." The remaining amounts due to the Company are included in "Investments in and advances to
non-consolidated joint ventures". 

12.    EMPLOYEE AND OFFICER LOANS  

        Included in "Other current assets" are loans to employees of $2.5 million and $4.7 million as of November 30, 2002 and 2001, respectively. In
addition, included in "Other non-current assets" are loans to employees of $1.3 million and $0.9 million as of November 30, 2002 and 2001, respectively. 

13.    SHORT-TERM BANK LOANS AND LINES OF CREDIT  

        Loans payable to banks, which amounted to $332.0 million, and $284.1 million at November 30, 2002 and 2001, respectively, consist principally
of drawdowns under bid facilities, lines of credit and bank overdraft facilities. Amounts borrowed pursuant to these facilities bear interest at rates ranging from 1.0% to 12% for 2002, and from 1.4%
to 7.8% for 2001. The weighted average interest rate was 2.5% and 4.7% for the years ended November 30, 2002 and 2001, respectively. 

        As
of November 30, 2002, the Company had various credit lines, including committed lines, ranging through 2005 totaling $1,075.2 million, of which $408.1 million was
available for future use. Commitment fees for unused lines of credit were $1.9 million, $1.5 million and $2.0 million for the years 2002, 2001 and 2000, respectively. 

        Of
the $1,075.2 million of credit lines available at November 30, 2002, $705 million are committed beyond one year. The remainder consists of: a $180 million
SNTG revolving credit line maturing on November 26, 2003 which the Company plans to renew; a $55 million reduction of a $385 million SOSA revolving credit line effective
August 31, 2003; and $135.2 million of various credit facilities subject to renewal periodically. 

        Several
of the credit facilities contain various financial covenants, which, if not complied with, could limit the ability to draw funds from time to time. Of the amounts drawn down
under these facilities, $335 million has been classified as long-term debt in connection with a revolving credit agreement expiring in 2005. The Company has the ability and the
intent to classify the amount drawn under this agreement as long-term debt. 

19

  

14.    LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS  

        Long-term debt and capital lease obligations, as of November 30, 2002 and 2001, consisted of the following: 

	 
	 	2002
	 	2001
	 
	 
	 	(in thousands)
 
	 
	Senior unsecured notes	 	 	 	 	 	 	 
	 	On 11/30/02 interest rates ranged from 7.46% to 8.98%, maturities vary through 2013	 	$	466,600	 	$	504,000	 
	Revolving credit agreement	 	 	 	 	 	 	 
	 	On 11/30/02, the weighted average interest rate was 2.97%	 	 	335,000	 	 	335,000	 
	Preferred ship fixed rate mortgages	 	 	 	 	 	 	 
	 	On 11/30/02 fixed interest rates ranged from 4.5% to 8.52%, maturities vary through 2013	 	 	223,882	 	 	263,384	 
	Preferred ship variable rate mortgages	 	 	 	 	 	 	 
	 	On 11/30/02 interest rates ranged from 2.29% to 4.5%, maturities vary through 2013	 	 	211,795	 	 	172,095	 
	Marine Terminal Revenue Bond	 	 	 	 	 	 	 
	 	On 11/30/02 interest rate was 1.15%, maturing in 2014	 	 	9,600	 	 	9,600	 
	Bank and other notes payable	 	 	 	 	 	 	 
	 	On 11/30/02 interest rates ranged from 2.45% to 8.5%, maturities vary through 2026	 	 	72,508	 	 	99,740	 
	Capital lease obligations	 	 	 	 	 	 	 
	 	On 11/30/02 maturities vary through 2005	 	 	692	 	 	24,952	 
	 	 	
	 	
	 
	 	 	 	1,320,077	 	 	1,408,771	 
	Less—current maturities	 	 	(165,067	)	 	(133,016	)
	 	 	
	 	
	 
	 	 	$	1,155,010	 	$	1,275,755	 
	 	 	
	 	
	 

        On November 30, 2001, the Company's senior unsecured notes carried fixed interest rates ranging from 7.46% to 8.98%, preferred ship fixed rate mortgages had
interest rates ranging from 4.5% to 8.74%, preferred ship variable rate mortgages had interest rates ranging from 2.40% to 2.88%, the economic development and other bonds had an interest rate of 1.5%,
and the bank and other notes payable had interest rates ranging from 2.65% to 10.4%. 

        Long-term
debt is denominated primarily in U.S. dollars, with $30.9 million and $38.1 million denominated in other currencies as of November 30, 2002 and
2001, respectively. The Company has hedged a significant portion of the foreign currency denominated debt exposure with interest rate and foreign exchange swaps. 

        Annual
principal repayments of long-term debt for the five years subsequent to November 30, 2002 and thereafter are as follows: 

	 
	 	(in thousands)
 

	2003	 	$	164,852
	2004	 	 	140,455
	2005	 	 	527,029
	2006	 	 	147,580
	2007	 	 	103,046
	Thereafter	 	 	236,423
	 	 	

	 	 	$	1,319,385
	 	 	

        Agreements executed in connection with certain debt obligations require that the Company maintains defined financial ratios and also impose certain restrictions relating,
among other things, to payment of cash dividends (see Note 23), and purchases and redemptions, of capital. The Company, through its subsidiaries, has debt agreements which include various
financial covenants. Most of the Company's debt agreements provide for a cross default in the event of a material default in another agreement, including those facilities maintained by SOSA. In the
event of a default that extends beyond the applicable remedy or cure period, lenders may accelerate repayment of amounts due to them. Certain of the debt is secured by mortgages on vessels, tank
containers, terminals, and seafood facilities with a net book value of $1,599.3 million as of November 30, 2002. 

        The
Secured Credit Facilities of SOSA contain various financial covenants, including but not limited to, minimum consolidated tangible net worth, maximum consolidated debt to tangible
net worth and maximum consolidated debt to EBITDA. 

        The
SOSA debt covenants were renegotiated with the banks in January 2003 in order to permit higher multiples of EBITDA to be used in 2003. SOSA's most recent covenant calculations
and projections, which include a number of investments for disposal, indicate that there is a narrow margin of compliance with the Debt to EBITDA ratio covenant at the first and second quarters of
2003, and with the tangible net worth covenant throughout 2003. Non-compliance would lead to the facilities potentially being repayable on demand. These covenant projections are subject to
the risk factors inherent in forecasting income and cash flows in the offshore contracting industry. Examples of these uncertainties include, but are not limited to, the timing and quantum of
agreement of variation
orders and claims with customers; changes in estimates of costs to complete projects; the timing of receipt of trade receivables; recoverability issues on outstanding invoices; changes in estimates of
the probable outcome of legal disputes and tax matters; fixed asset impairments; and results from joint ventures. SOSA takes the view that, despite these uncertainties, it has the possibility to take
timely corrective action to prevent breach of its covenants, and on that basis it has obtained a commitment from SNSA to provide a subordinated credit line of $50 million, which is currently
available until November 28, 2003 and which is excluded in the calculation of covenants. In addition, SNSA has agreed to provide to SOSA support for bonding lines and performance guarantees to
enable tendering to continue. 

        Furthermore,
SOSA has made contingency plans in the event that the operational results for the year fall below the latest updated estimates. SOSA's management is continuously
investigating ways to strengthen the capitalization of SOSA. 

20

 

        As
of November 30, 2002, the most restrictive covenant within the Company's loan agreements provides for cumulative limitations on certain payments including dividend payments,
share repurchases, and investments and advances to non-consolidated joint ventures and other entities if any. At November 30, 2002 the Company is in compliance with such covenants. 

        At
November 30, 2002, property under capital leases, comprising operating and other equipment, amounts to $2.3 million at cost. Accumulated amortization of these leases is
$1.3 million. 

        Minimum
payments under capital lease obligations at November 30, 2002, which are due primarily in U.S. dollars, are as follows: 

	 
	 	(in thousands)
 

	2003	 	$	215
	2004-2005	 	 	477
	 	 	

	Present value of net minimum lease payments	 	$	692
	 	 	

15.    LEASES

Operating Leases

        As
of November 30, 2002, the Company was obligated to make payments under long-term operating lease agreements for tankers, land, terminal facilities, tank containers,
barges, construction support, diving support, survey and inspection ships, equipment and offices. Certain of the leases contain clauses requiring payments in excess of the base amounts to cover
operating expenses related to the leased assets. 

        In
the second quarter of 2002, SNTG sold tank containers for $29.8 million, which approximated their carrying value, and such tank containers were subsequently leased back. SNTG
also sold 12 chemical parcel tankers, with a net book value of $56.4 million, for $97.7 million in cash less $2.1 million of transaction costs. Such tankers were also leased back,
and the resulting deferred gain of $39.2 million on the sale/leaseback transaction is being amortized over the maximum lease term of 4.5 years. The amortization of the deferred gain is
included in "Operating Expenses," in the accompanying consolidated statements of operations. These two lease arrangements are being treated as operating leases for accounting purposes. 

        In
the third quarter of 2002, SNTG entered into agreements with various Japanese shipowners for the charter hire of seven parcel tankers with anticipated deliveries in 2003 through 2005.
These new buildings are expected to replace tankers in the SNTG fleet that the Company plans to scrap over the next several years. In connection with these agreements, which are for an initial minimum
period of approximately 5 years and include extension and purchase options, the Company has time charter commitments, that have been included in the below table, for these operating leases of
approximately $176.1 million for the period of 2003 through 2010. 

        Minimum
annual lease commitments and sub-lease income under agreements which expire at various dates through 2010, and which are payable in various currencies are as follows: 

	 
	 	(in thousands)
 
	 
	2003	 	$	129,601	 
	2004	 	 	110,766	 
	2005	 	 	111,999	 
	2006	 	 	100,695	 
	2007	 	 	70,328	 
	Thereafter	 	 	71,983	 
	 	 	
	 
	 	 	 	595,372	 
	Less—sub-lease income	 	 	(10,047	)
	 	 	
	 
	 	 	$	585,325	 
	 	 	
	 

        Rental and charter hire expenses under operating lease agreements for the years ended November 30, 2002, 2001, and 2000 were $129.1 million,
$139.5 million, and $117.9 million, respectively, net of sub-lease income of $2.4 million, $1.7 million, and $2.9 million, respectively. 

16.    VARIABLE INTEREST ENTITIES  

        In addition to the Company's on-balance sheet borrowings and available credit facilities, and as part of the overall financing and liquidity strategy,
the Company has sold twelve parcel tankers to a variable interest entity with 3% of contributed outside equity, which was established for the sole purpose of owning the ships. The ships are mortgaged
by the variable interest entity as collateral for the related financing arrangement. The holders of the financing arrangement retain the risk and reward, in accordance with their respective ownership
percentage. 

        The
ships were leased by the variable interest entity to Stolt Tankers Leasing BV, a subsidiary of the Company, for a maximum term of four and a half years. As of November 30,
2002, the remaining payments under the lease agreement were $89.3 million, and are reflected as operating lease commitments in Note 15. Under the requirements of FIN 46, the Company
believes that this entity would be classified as a variable interest entity and, as such, the Company will be required to consolidate the entity in the Company's financial statements as of the
beginning of the fourth quarter of fiscal 2003. 

17.    COMMITMENTS AND CONTINGENCIES  

        As of November 30, 2002, the Company had total capital expenditure purchase commitments outstanding of approximately $36.1 million for 2003 and
future years. 

        Additionally,
the Company has directly and indirectly guaranteed approximately $14 million of obligations of related and third parties. 

        SOSA
has issued performance bonds amounting to $349.5 million at November 30, 2002. In the normal course of business, SOSA provides project guarantees to guarantee the
project performance of subsidiaries and joint ventures to third parties. 

        The
Company's operations involve the use, storage and disposal of chemicals and other hazardous materials and wastes. The Company is subject to applicable federal, state, local and
foreign health, safety and environmental laws relating to the protection of the environment, including those governing discharges of pollutants to air and water, the generation, management and
disposal of hazardous materials and 

21

 

wastes
and the cleanup of contaminated sites. In addition, some environmental laws, such as the U.S. Superfund law, similar state statues and common laws, can impose liability for the entire cleanup
of contaminated sites or for third-party claims for property damage and personal injury, regardless of whether the current owner or operator owned or operated the site at the time of the release of
contaminants or the legality of the original disposal activities. 

        In
November 2001, the Company sold SNTG's tank storage terminals in Perth Amboy, NJ and Chicago, IL. Under the terms of the sale agreement the Company has retained responsibility
for certain environmental contingencies, should they arise during the covered period which generally ends two years after the closing date, in connection with these two sites. As of
November 30, 2002, the Company has not been notified of any such contingencies having been incurred and neither does it anticipate any such contingencies being incurred in the future. The
Chicago, IL terminal property has been leased under a long term agreement with the Illinois International Port District. In addition, as part of the Chicago, IL sale, the Company assigned its rights
to the terminal property to a third party. 

18.    LEGAL PROCEEDINGS  

SOSA  

        Coflexip S.A. ("CSO") commenced legal proceedings through the U.K. High Court against three subsidiaries of SOSA claiming infringement of a certain patent held by
CSO relating to flexible flowline laying technology in the U.K. Judgement was given on January 22, 1999 and January 29, 1999. The disputed patent was held valid. SOSA appealed and the
Appeal Court maintained in July 2000 the validity of the patent and potentially broadened its application compared to the High Court decision. SOSA applied for leave to appeal the Appeal Court
decision to the House of Lords, which was denied. 

        During
2001 after the Appeal Court decision became final, CSO submitted an amended claim to damages claiming lost profit on a total of 15 projects. In addition, there is a claim for
alleged price depreciation on certain other projects. The total claim for lost profits was for approximately $89 million, up from approximately $14 million claimed after the High Court
decision confirming the patent's validity, plus interest, legal costs and a royalty for each time that the flexible lay system tower on the Seaway Falcon
was brought into U.K. waters. The increase came because several more projects potentially became relevant. The amount of the claim has not yet been considered by the Court and has thus so far not been
upheld. SOSA estimates that the total claim as submitted is in the order of $130 million at November 30, 2002, increasing at 8% simple interest per annum. 

        In
the alternative, CSO claims a reasonable royalty for each act of infringement, interest and legal costs. CSO has not quantified this claim, but it will be considerably less than the
claim to lost profits. 

        In
July and October 2002 the High Court has held that CSO's case for lost profit has to be repleaded. CSO has appealed this decision. On March 13, 2003, the Court of Appeal
held that CSO's case for lost profit has to be repleaded. The repleading is being considered by SOSA and will require to be reconsidered by the Court before it is accepted. 

        SOSA,
in consultation with its advisers, has assessed that the range of possible outcomes for the resolution of damages is $1.5 million to $130 million and has determined
that there is no amount within the range that is a better estimate than any other amount. Consequently, in accordance with SFAS No. 5, "Accounting for Contingencies," as interpreted by FASB
Interpretation No. 14, "Reasonable Estimation of the Amount of a Loss", SOSA has provided $1.5 million in the financial statements, being the lower amount of the range. SOSA's provision
of $1.5 million is based on a royalty calculation. The amount of damages is nevertheless uncertain and no assurance can be given that the provided amount is sufficient. 

SNTG  

        In 2002, the Company became aware of information that caused it to undertake an internal investigation regarding potential improper collusive behavior in the
Company's parcel tanker and intra-Europe inland barge operations. As a consequence of the internal investigation, the Company determined to voluntarily report certain conduct to the Antitrust Division
of the U.S. Department of Justice (the "DOJ") and the Competition Directorate of the European Commission (the "EC"). On February 25, 2003, the Company announced that it had been conditionally
accepted into the DOJ's Corporate Leniency Program in connection with possible collusion in the parcel tanker industry. Pursuant to such program, the Company and its directors and employees will
receive amnesty from criminal antitrust prosecution and fines in the United States for anti-competitive conduct in the parcel tanker business, provided the stated conditions, including
continued cooperation, are met. The Company also announced that the EC had admitted the Company into its Immunity Program with respect to deep-sea parcel tanker and intra-Europe inland
barge operations. Acceptance into the EC program affords the Company immunity from EC fines with respect to anti-competitive behavior, subject to the Company fulfilling the conditions of
the program, including continued cooperation. The Company is cooperating fully with the DOJ and the EC with respect to such programs. In light of the Company's admission into the government antitrust
programs, no provision for any fines related to the DOJ or EC investigations has been made in the Company's consolidated financial statements. 

        The
U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC") has initiated an investigation of certain payments by the Company of incidental port expenses to entities
in Iran and Sudan as possible violations of the International Economic Emergency Powers Act, 50 U.S.C. § 1701 ("IEEPA"), the Iranian Transactions Regulations, 31 C.F.R. Part 560,
and the Sudanese Sanctions Regulations, 31 C.F.R. Part 538. The Company is cooperating fully with OFAC and has implemented Company policies and procedures to monitor compliance with these
provisions. With respect to OFAC's Iran investigation, on April 3, 2002 OFAC issued a Cease and Desist Order to the Company covering payments by the Company for incidental port expenses
involving unlicensed shipments to, from or involving Iran. OFAC's investigation of Iran is currently pending and OFAC has not made any determination of whether a violation has occurred as a result of
SNTG's payments of incidental port expenses to entities in Iran. With respect to OFAC's Sudan investigation, on March 20, 2003 SNTG settled the matter with OFAC for a payment of US
$95 thousand and without any determination by OFAC that SNTG's payments of incidental port expenses to entities in the Sudan violated U.S. sanctions regulations. The Company will seek to
negotiate a settlement of the issues related to OFAC's Iran investigation, although the Company cannot give any assurance that it will be able to negotiate a settlement. 

        In
June 2002 a former general counsel of SNTG, Paul E. O'Brien, filed an action in Superior Court in Connecticut alleging that he had been constructively discharged.
Mr. O'Brien had resigned in March 2002 and his complaint seeks, among other things, compensatory damages for lost future income as well as punitive damages (although the amount of such
compensatory damages and punitive damages is not specified). The 

22

 

Company
has formally moved to strike each count of the complaint. The Company intends to vigorously defend itself against this lawsuit and has not made any provision for any liability related to the
action in the consolidated financial statements. 

        In
March 2003 a former customer of SNTG, JLM Industries, Inc. ("JLM"), filed a putative civil class action against the Company and several other parcel tanker companies in
the U.S. District Court for the District of Connecticut. The suit alleges violations of the Sherman Antitrust Act and state antitrust and unfair trade practices acts. The Company has formally moved to
seek dismissal of the action based on its agreement with JLM to arbitrate disputes. It is also possible that additional claimants might seek to bring similar claims. At this time, the Company cannot
evaluate its potential financial exposure, if any, in connection with any such actions. The Company intends to vigorously defend itself against the JLM action and has not made any provision for any
liability related to the JLM action or such unasserted possible claims in the consolidated financial statements. 

        In
March 2003 an individual claiming to have purchased Stolt-Nielsen S.A. American Depositary Receipts, Joel Menkes, filed a putative civil securities class action in the U.S.
District Court for the District of Connecticut against the Company and certain officers. The complaint claims that the Company's failure to disclose such alleged collusive behavior, coupled with
allegedly "false and misleading" statements, caused plaintiff to pay inflated prices for the Company's securities. The Company intends to vigorously defend itself against this lawsuit and has not made
any provision for any liability related to the action in the consolidated financial statements. 

        The
ultimate outcome of governmental and third party legal proceedings are inherently difficult to predict. It is reasonably possible that actual expenses and liabilities could be
incurred in connection with both asserted and unasserted claims in a range of amounts that cannot reasonably be estimated. It is possible that such expenses and liabilities could have a material
adverse affect on the Company's financial condition, cash flows or results of operations in a particular reporting period. 

        The
Company is a party to various other legal proceedings arising in the ordinary course of business. The Company believes that none of the matters covered by such legal proceedings will
have a material adverse effect on the Company's business or financial condition. 

        The
Company's operations are affected by U.S. and foreign environmental protection laws and regulations. Compliance with such laws and regulations entails considerable expense, including
ship modifications and changes in operating procedures. 

19.    MINORITY INTEREST  

        The minority interest in the consolidated balance sheets and statements of income of the Company primarily reflects the minority interest in SOSA. The Company's
economic ownership in SOSA increased from 53% to 63% in the year ended November 30, 2002, and was 53% in the years ended November 30, 2001 and 2000. Minority interest in SOSA amounted to
$191.7 million and $309.9 million as of November 30, 2002 and 2001, respectively. 

20.    PENSION AND BENEFIT PLANS  

        Certain of the U.S. and non-U.S. subsidiaries of the Company have non-contributory pension plans covering substantially all of their
shore-based employees. The most significant plans are defined benefit plans. Benefits are based on each participant's length of service and compensation. 

        SNTG
provides pension benefits to ship officers employed by SNTG. Group single premium retirement contracts were purchased whereby all accrued pension liability through June 30,
1986 was fully funded. It is SNTG's intention to fund its liability under this plan and it is considering various investment alternatives to do this. 

        Net
periodic benefit costs for the Company's defined benefit retirement plans (including a retirement arrangement for one of the Company's directors) and other
post-retirement benefit plans for the years ended November 30, 2002, 2001, and 2000, consist of the following: 

	 
	 	Pension Benefits
	 	Other Post-retirement Benefits
	 
	 
	 	For the years ended November 30,
	 
	 
	 	2002
	 	2001
	 	2000
	 	2002
	 	2001
	 	2000
	 
	 
	 	(in thousands)
 
	 
	Components of Net Periodic Benefit Cost:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Service cost	 	$	4,957	 	$	4,759	 	$	6,500	 	$	223	 	$	249	 	$	272	 
	Interest cost	 	 	8,675	 	 	7,758	 	 	7,301	 	 	626	 	 	488	 	 	513	 
	Expected return on plan assets	 	 	(7,186	)	 	(5,593	)	 	(5,824	)	 	—	 	 	—	 	 	—	 
	Amortization of unrecognized net transition liability	 	 	563	 	 	695	 	 	101	 	 	127	 	 	178	 	 	178	 
	Amortization of prior service cost	 	 	(209	)	 	452	 	 	300	 	 	10	 	 	14	 	 	14	 
	Recognized net actuarial loss (gain)	 	 	132	 	 	237	 	 	65	 	 	—	 	 	(98	)	 	(24	)
	Gain recognized due to curtailment	 	 	10	 	 	(156	)	 	(160	)	 	—	 	 	—	 	 	—	 
	 	 	
	 	
	 	
	 	
	 	
	 	
	 
	Net periodic benefit cost	 	$	6,942	 	$	8,152	 	$	8,283	 	$	986	 	$	831	 	$	953	 
	 	 	
	 	
	 	
	 	
	 	
	 	
	 

        U.S. based employees retiring from SNTG after attaining age 55 with at least ten years of service with SNTG are eligible to receive post-retirement health care
coverage for themselves and their eligible dependents. These benefits are subject to deductibles, co-payment provisions, and other limitations. SNTG reserves the right to change or
terminate the benefits at any time. 

23

 

        The
following tables set forth the change in benefit obligations for the Company's defined benefit retirement plans and other post-retirement plans and the change in plan
assets for the defined benefit retirement plans. There are no plan assets associated with the other post-retirement plans. 

	 
	 	Pension Benefits
	 	Other Post-retirement Benefits
	 
	 
	 	For the years ended November 30,
	 
	 
	 	2002
	 	2001
	 	2002
	 	2001
	 
	 
	 	(in thousands)
 
	 
	Change in Benefit Obligation:	 	 	 	 	 	 	 	 	 	 	 	 	 
	Benefit obligations at beginning of year	 	$	122,219	 	$	108,531	 	$	7,110	 	$	7,346	 
	Service cost	 	 	4,957	 	 	4,759	 	 	223	 	 	249	 
	Interest cost	 	 	8,675	 	 	7,758	 	 	626	 	 	488	 
	Benefits paid	 	 	(5,015	)	 	(3,218	)	 	(605	)	 	(178	)
	Plan participant contributions	 	 	66	 	 	189	 	 	—	 	 	—	 
	Acquisitions/divestitures	 	 	(1,198	)	 	—	 	 	(508	)	 	—	 
	Foreign exchange rate changes	 	 	4,164	 	 	(582	)	 	—	 	 	—	 
	Plan amendments	 	 	63	 	 	(243	)	 	—	 	 	—	 
	Curtailments and settlements	 	 	784	 	 	554	 	 	—	 	 	—	 
	Actuarial (gains) and losses	 	 	2,590	 	 	4,471	 	 	4,408	 	 	(795	)
	 	 	
	 	
	 	
	 	
	 
	Benefits obligation at end of year	 	$	137,305	 	$	122,219	 	$	11,254	 	$	7,110	 
	 	 	
	 	
	 	
	 	
	 

	 
	 	 
	 	 
	 	Pension Benefits
	 
	 
	 	 
	 	 
	 	For the years ended November 30,
	 
	 
	 	 
	 	 
	 	2002
	 	2001
	 
	 
	 	 
	 	 
	 	(in thousands)
 
	 
	Change in Plan Assets:	 	 	 	 	 	 	 	 	 	 	 
	Fair value of plan assets at beginning of year	 	 	 	 	 	$	75,898	 	$	68,780	 
	Actual return on plan assets	 	 	 	 	 	 	(1,492	)	 	(9,878	)
	Company contributions	 	 	 	 	 	 	11,287	 	 	19,524	 
	Plan participant contributions	 	 	 	 	 	 	496	 	 	419	 
	Foreign exchange rate changes	 	 	 	 	 	 	3,546	 	 	601	 
	Curtailments and settlements	 	 	 	 	 	 	264	 	 	(421	)
	Benefits paid	 	 	 	 	 	 	(4,902	)	 	(3,127	)
	Acquisitions/divestitures	 	 	 	 	 	 	182	 	 	—	 
	Plan amendments	 	 	 	 	 	 	52	 	 	—	 
	 	 	 	 	 	 	
	 	
	 
	Fair value of plan assets at end of year	 	 	 	 	 	$	85,331	 	$	75,898	 
	 	 	 	 	 	 	
	 	
	 

        Amounts recognized in the Company's consolidated balance sheet consist of the following: 

	 
	 	Pension Benefits
	 	Other Post-retirement Benefits
	 
	 
	 	As of November 30,
	 
	 
	 	2002
	 	2001
	 	2002
	 	2001
	 
	 
	 	(in thousands)
 
	 
	Funded status of the plan	 	$	(51,974	)	$	(46,321	)	$	(11,254	)	$	(7,110	)
	Unrecognized net actuarial loss (gain)	 	 	30,812	 	 	21,875	 	 	2,019	 	 	(1,839	)
	Unrecognized prior service cost	 	 	1,566	 	 	2,280	 	 	19	 	 	42	 
	Unrecognized net transition liability	 	 	20	 	 	(35	)	 	1,220	 	 	1,954	 
	Measurement date to year-end	 	 	20	 	 	—	 	 	81	 	 	39	 
	 	 	
	 	
	 	
	 	
	 
	Net amount recognized	 	$	(19,556	)	$	(22,201	)	$	(7,915	)	$	(6,914	)
	 	 	
	 	
	 	
	 	
	 
	Prepaid benefit cost	 	$	1,191	 	$	—	 	$	—	 	$	—	 
	Accrued benefit liability	 	 	(39,657	)	 	(33,513	)	 	(7,915	)	 	(6,914	)
	Intangible asset	 	 	5,476	 	 	4,246	 	 	—	 	 	—	 
	Accumulated other comprehensive income	 	 	13,434	 	 	7,066	 	 	—	 	 	—	 
	 	 	
	 	
	 	
	 	
	 
	Net amount recognized	 	$	(19,556	)	$	(22,201	)	$	(7,915	)	$	(6,914	)
	 	 	
	 	
	 	
	 	
	 

24

 

        The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets of pension plans with accumulated benefit obligations in excess of plan
assets were $118.2 million, $107.5 million, and $66.8 million, respectively, as of November 30, 2002 and $103.4 million, $86.8 million, and
$58.6 million respectively, as of November 30, 2001. 

	 
	 	Pension Benefits
	 	Other Post-retirement Benefits
	 
	 
	 	As of November 30,
	 
	 
	 	2002
	 	2001
	 	2000
	 	2002
	 	2001
	 	2000
	 
	 
	 	(in thousands)
 
	 
	Weighted-Average Assumptions	 	 	 	 	 	 	 	 	 	 	 	 	 
	Discount rate	 	6.50	%	7.06	%	7.22	%	6.75	%	7.50	%	7.75	%
	Expected long-term rate of return on assets	 	7.54	%	8.89	%	8.95	%	—	 	—	%	—	 
	Rate of increase in compensation levels	 	3.85	%	4.08	%	4.18	%	4.50	%	5.00	%	5.00	%

        Health care cost trends assume an 11.0% annual rate of increase in the per capita cost of covered health care benefits for 2003, grading down
gradually each year, reaching an ultimate rate of 5.0% in 2015 and remaining at that level thereafter. The effect of a 1% change in these assumed cost trends on the accumulated
post-retirement benefit obligation at the end of 2002 would be an approximate $1.0 million increase or an approximate $0.9 million decrease and the effect on the aggregate of
the service cost and interest cost of the net periodic benefit cost for 2002 would be an approximate $0.1 million increase or an approximate $0.1 million decrease. 

21.    CAPITAL STOCK, FOUNDER'S SHARES AND DIVIDENDS DECLARED

        The
Company's authorized share capital consists of 120,000,000 Common shares, no par value, and 30,000,000 Founder's shares, no par value. Under the Luxembourg Company Law, Founder's
shares are not considered as representing capital of the Company. 

        In
addition to the authorized Common shares and Founder's shares of the Company set forth above, an additional 1,500,000 Class B shares, no par value, have been authorized for the
sole purpose of the issuance of options granted under the Company's existing stock option plans, and may not be used for any other purpose. The rights, preferences and priorities of such
Class B shares are set forth in the Articles of Incorporation. All such Class B shares convert to Common shares immediately upon issuance. Such authorized Class B shares and all
of the rights relating thereto shall expire, without further action, on December 31, 2009. 

        Except
for matters where applicable law requires the approval of both classes of shares voting as separate classes, Common shares and Founder's shares vote as a single class on all
matters submitted to a vote of the shareholders, with each share entitled to one vote. 

        Under
the Articles of Incorporation, holders of Common shares and Founder's shares participate in annual dividends, if any are declared by the Company, in the following order of
priority: (i) $0.005 per share to Founder's shares and Common shares equally; and (ii) thereafter, all further amounts are payable to Common shares only. Furthermore, the Articles also
set forth the priorities to be applied to each of the Common and Founder's shares in the event of a liquidation. 

        Under
the Articles, in the event of a liquidation, all debts and obligations of the Company must first be paid and thereafter all remaining assets of the Company are paid to the holders
of Common shares and Founder's shares in the following order of priority: (i) Common shares ratably to the extent of the stated value thereof (i.e. $1.00 per share); (ii) Common shares
and Founder's shares participate equally up to $0.05 per share; and (iii) thereafter, Common shares are entitled to all remaining assets. 

        The
Company's share reclassification was approved at an extraordinary general meeting of shareholders on March 6, 2001 and became effective on March 7, 2001. The objective
of the reclassification was to create a simplified and more transparent share capital structure that gives all shareholders a vote on all matters, and results in only one class of publicly traded
shares. The reclassification converted the Company's outstanding non-voting Class B shares to Common shares on a one-for-one basis. The existing class of
Founder's shares remain outstanding and continue to constitute 20% of the issued voting shares (Common and Founder's shares) of the Company. The holders of the Founder's shares agreed to relinquish
certain special voting rights formerly enjoyed by the Founder's shares including, for example, a separate class vote for merger transactions. The Founder's shares have only nominal economic rights and
are not considered part of the share capital of the Company. 

        The
Common shares are listed in Norway on the Oslo Stock Exchange and trade as ADRs in the United States on NASDAQ. 

        After
shareholders' approval of the reclassification, SNSA had 54.9 million outstanding Common shares (which exclude 7.7 million Treasury Common shares). SNSA also had
13.7 million outstanding Founder's shares (which exclude 1.9 million Treasury Founder's shares). The share reclassification did not change the underlying economic interests of existing
shareholders. The accompanying financial statements and all information in the notes thereto have been restated to give retroactive impact to the share reclassification. 

        As
of November 30, 2002, 13,737,346 Founder's shares had been issued to Mr. Jacob Stolt-Nielsen. Additional Founder's shares are issuable to holders of outstanding
Founder's shares without consideration, in quantities sufficient to maintain a ratio of Common shares to Founder's shares of 4 to 1. Pursuant to Luxembourg law, Founder's shares are not considered to
represent capital of SNSA. Accordingly, no stated values for these shares are included in the accompanying consolidated balance sheets. 

        On
November 14, 2002, the Board of Directors approved an interim dividend of $0.125 per Common share and $0.005 per Founder's share which was paid on December 18, 2002 to
all shareholders of record as of December 4, 2002. 

        The
Company anticipates, subject to approval at the Annual General Meeting, that a final dividend for 2002 of $0.125 per share will be paid in May 2003. 

        Dividends
are recognized in the accompanying financial statements upon final approval from the Company's shareholders or, in the case of interim dividends, as paid. The interim dividend
declared on November 14, 2002 will be recognized in fiscal 2003. 

        Luxembourg
law requires that 5% of the Company's unconsolidated net profits each year be allocated to a legal reserve before declaration of dividends. This requirement continues until
the reserve is 10% of 

25

 

the
stated capital of the Company, as represented by Common Shares, after which no further allocations are required until further issuance of shares. 

        The
legal reserve may also be satisfied by allocation of the required amount at the issuance of shares or by a transfer from paid-in surplus. The legal reserve is not
available for dividends. The legal reserve for all outstanding Common Shares has been satisfied and appropriate allocations are made to the legal reserve account at the time of each issuance of new
shares. 

22.    STOCK OPTION PLAN  

        The Company has a 1987 Stock Option Plan (the "1987 Plan") covering 2,660,000 Common shares and a 1997 Stock Option Plan (the "1997 Plan") covering 5,180,000
Common shares. No further grants will be issued under the 1987 Plan. Options granted under the 1987 Plan, and those which have been or may be granted under the 1997 Plan are exercisable for periods of
up to ten years. The 1987 Plan and the 1997 Plan are administered by a Compensation Committee appointed by the Company's Board of Directors. The Compensation Committee awards options based on the
grantee's position in the Company, degree of responsibility, seniority, contribution to the Company and such other factors as it deems relevant under the circumstances. 

        On
March 6, 2001, at an extraordinary general meeting of shareholders, the Company's share reclassification was approved, effective as of the beginning of the trading day,
March 7, 2001. Under the reclassification, the outstanding non-voting Class B shares were reclassified as Common shares on a one-for-one basis. All
Class B shares issued in connection with the exercise of options will immediately convert to Common shares upon issuance. 

        Options
granted under both Plans may be exercisable for periods of up to ten years at an exercise price not less than the fair market value per share at the date of the grant. Options
vest 25% on the first anniversary of the grant date, with an additional 25% vesting on each subsequent anniversary. The Company accounts for the Plans under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for all stock option grants between 1998 and 2002, including the Plans of the Company and the stock options of SOSA, been determined
consistent with SFAS No. 123, the Company's net income (loss) and earnings (loss) per share would be reduced to the following pro forma amounts: 

	 
	 	For the years ended

November 30,
	 
	 
	 	2002
	 	2001
	 	2000
	 
	 
	 	(in thousands, except

for per share data)
 
	 
	Net Income (Loss)	 	 	 	 	 	 	 	 	 	 
	 	As Reported	 	$	(102,805	)	$	23,692	 	$	(12,395	)
	 	Pro Forma	 	 	(107,658	)	 	19,332	 	 	(16,653	)
	Basic Earnings (Loss) per share:	 	 	 	 	 	 	 	 	 	 
	 	As Reported	 	$	(1.87	)	$	0.43	 	$	(0.23	)
	 	Pro Forma	 	 	(1.96	)	 	0.35	 	 	(0.30	)
	Diluted Earnings (Loss) per share:	 	 	 	 	 	 	 	 	 	 
	 	As Reported	 	$	(1.87	)	$	0.43	 	$	(0.23	)
	 	Pro Forma	 	 	(1.96	)	 	0.35	 	 	(0.30	)

        The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. SFAS No. 123 does not apply to awards prior to fiscal
year 1996, and additional awards in future years are anticipated. The following table reflects activity under the Plans for the years ended November 30, 2002, 2001 and 2000: 

	 
	 	For the years ended November 30,

	 
	 	2002
	 	2001
	 	2000

	Common Share options
 
	 	Shares
	 	Weighted

average

exercise

price
	 	Shares
	 	Weighted

average

exercise

price
	 	Shares
	 	Weighted

average

exercise

price

	Outstanding at beginning of year	 	1,128,438	 	$	16.72	 	1,189,663	 	$	16.63	 	1,393,825	 	$	16.15
	Granted	 	605,400	 	 	13.10	 	—	 	 	—	 	—	 	 	—
	Exercised	 	(6,475	)	 	9.29	 	(41,425	)	 	13.32	 	(172,512	)	 	12.57
	Canceled	 	(35,525	)	 	16.19	 	(19,800	)	 	18.88	 	(31,650	)	 	17.60
	 	 	
	 	
	 	
	 	
	 	
	 	

	Outstanding at end of year	 	1,691,838	 	$	15.46	 	1,128,438	 	$	16.72	 	1,189,663	 	$	16.63
	 	 	
	 	
	 	
	 	
	 	
	 	

	Exercisable at end of year	 	1,102,488	 	$	16.72	 	1,034,288	 	$	16.41	 	952,518	 	$	15.90
	 	 	
	 	
	 	
	 	
	 	
	 	

	Weighted average fair value of options granted	 	 	 	$	5.76	 	 	 	$	—	 	 	 	$	—
	 	 	 	 	
	 	 	 	
	 	 	 	

	 
	 	For the years ended November 30,

	 
	 	2002
	 	2001
	 	2000

	Class B options
 
	 	Shares
	 	Weighted

average

exercise

price
	 	Shares
	 	Weighted

average

exercise

price
	 	Shares
	 	Weighted

average

exercise

price

	Outstanding at beginning of year	 	1,798,093	 	$	13.89	 	1,311,481	 	$	13.48	 	992,507	 	$	12.87
	Granted	 	—	 	 	—	 	533,600	 	 	14.78	 	451,100	 	 	14.65
	Exercised	 	(25,163	)	 	11.25	 	(32,988	)	 	11.73	 	(104,226	)	 	12.27
	Canceled	 	(41,688	)	 	14.68	 	(14,000	)	 	14.04	 	(27,900	)	 	13.04
	 	 	
	 	
	 	
	 	
	 	
	 	

	Outstanding at end of year	 	1,731,242	 	$	13.91	 	1,798,093	 	$	13.89	 	1,311,481	 	$	13.48
	 	 	
	 	
	 	
	 	
	 	
	 	

	Exercisable at end of year	 	1,039,242	 	$	13.80	 	736,393	 	$	13.97	 	523,686	 	$	14.24
	 	 	
	 	
	 	
	 	
	 	
	 	

	Weighted average fair value of options granted	 	 	 	$	—	 	 	 	$	6.40	 	 	 	$	6.05
	 	 	 	 	
	 	 	 	
	 	 	 	

26

  

        The
fair value of each stock option grant is estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: 

	 
	 	2002
	 	2001
	 	2000
	 
	 
	 	Common
	 	Class B
	 	Common
	 	Class B
	 	Common
	 	Class B
	 
	Risk-free interest rates	 	5.4	%	—	 	—	 	5.0	%	—	 	6.2	%
	Expected lives (years)	 	6.5	 	—	 	—	 	6.5	 	—	 	6.5	 
	Expected volatility	 	43.0	%	—	 	—	 	41.8	%	—	 	39.2	%
	Expected dividend yields	 	1.6	%	—	 	—	 	1.4	%	—	 	1.9	%

        The
following table summarizes information about stock options outstanding as of November 30, 2002: 

	 
	 	Options outstanding
	 	 
	 	Options exercisable

	Range of exercise prices
 
	 	Number

outstanding
	 	Weighted

average

remaining

contractual

life (years)
	 	Weighted

average

exercise

price
	 	Number

exercisable
	 	Weighted

average

exercise

price

	Common Shares option:	 	 	 	 	 	 	 	 	 	 	 	 
	 	$20.125-22.500	 	364,050	 	5.06	 	$	20.14	 	364,050	 	$	20.14
	 	$16.875-19.083	 	388,613	 	3.43	 	 	18.28	 	388,613	 	 	18.28
	 	$8.500-13.167	 	939,175	 	6.16	 	 	12.48	 	349,825	 	 	11.44
	 	 	
	 	
	 	
	 	
	 	

	 	 	1,691,838	 	5.29	 	$	15.46	 	1,102,488	 	$	16.72
	 	 	
	 	
	 	
	 	
	 	

	
Class B options:	
 	

 	
 	

 	
 	
 	

 	
 	

 	
 	
 	

 
	 	$17.125-22.500	 	275,701	 	3.71	 	$	18.03	 	269,901	 	$	18.02
	 	$10.500-16.917	 	1,072,404	 	6.76	 	 	14.33	 	481,229	 	 	13.86
	 	$8.500-9.875	 	383,137	 	5.61	 	 	9.77	 	288,112	 	 	9.74
	 	 	
	 	
	 	
	 	
	 	

	 	 	1,731,242	 	6.02	 	$	13.91	 	1,039,242	 	$	13.80
	 	 	
	 	
	 	
	 	
	 	

23.    RESTRICTIONS ON PAYMENT OF DIVIDENDS  

        On an annual basis, Luxembourg law requires an appropriation of an amount equal to at least 5% of SNSA's unconsolidated net profits, if any, to a "legal reserve"
within shareholders' equity, until such reserve equals 10% of the issued share capital of SNSA. This reserve is not available for dividend distribution. SNSA's Capital stock and Founder's shares have
no par value. Accordingly, SNSA has assigned a stated value per Common share of $1.00. At November 30, 2002, this legal reserve amounted to approximately $6.3 million based on Common
shares issued on that date. Advance dividends can be declared, up to three times in any fiscal year (at the end of the second, third and fourth quarters), by the Board of Directors; however, they can
only be paid after the prior year's financial statements have been approved by SNSA's shareholders, and after a determination as to the adequacy of amounts available to pay such dividends has been
made by its independent statutory auditors in Luxembourg. Final dividends are declared by the shareholders once per year at the annual general meeting; both advance and final dividends can be paid out
of any SNSA earnings, retained or current, as well as paid-in surplus, subject to shareholder approval. Luxembourg law also limits the payment of stock dividends to the extent sufficient
surplus exists to provide for the related increase in stated capital. 

24.    FINANCIAL INSTRUMENTS  

        The Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, as of December 1, 2000, and has
identified and designated all derivatives within the scope of SFAS No. 133. Changes in the fair value of the contracts within the scope of SFAS No. 133 on December 1, 2000
increased liabilities and assets by approximately $8.0 million and $2.9 million respectively, with an offsetting amount recorded in accumulated comprehensive income. 

        This
Statement established accounting and reporting standards in the U.S. requiring that every derivative instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the
statement of operations, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. 

        All
of the Company's derivative activities are over the counter instruments entered into with major financial institutions for hedging the Company's committed exposures or firm
commitments with major financial credit institutions. The Company holds foreign exchange forward contracts, and commodity and interest rate swaps, which subject the Company to a minimum level of risk.
The Company does not con- 

27

 

consider
that it has a material exposure to credit risk from third parties failing to perform according to the terms of hedge instruments. 

        The
following foreign exchange contracts, maturing through November 2004, were outstanding as of November 30, 2002: 

	 
	 	Purchase
	 	Sale

	 
	 	(in local currency, thousands)
 

	Japanese yen	 	—	 	2,273,628
	Euro	 	418,222	 	2,758
	Norwegian kroner	 	358,423	 	—
	Canadian dollars	 	60,800	 	—
	Danish kroner	 	18,876	 	—
	British pounds sterling	 	11,275	 	818
	Swedish krona	 	10,683	 	—
	Singapore dollars	 	17,937	 	6,275
	Hong Kong dollars	 	—	 	1,059
	Australian dollars	 	1,000	 	—

        The
U.S. dollar equivalent of the currencies which the Company had contracted to purchase was $502.5 million, and to sell was $26.3 million, as of November 30, 2002. 

        The
Company utilizes foreign currency derivatives to hedge committed and forecasted cash flow exposures. The majority of these contracts have been designated as cash flow hedges. In all
cases, the terms of the commercial transaction and derivative are matched so
that there is no assumed hedge ineffectiveness. Forecasted cash flow hedge gains and losses are not recognized in income until maturity of the contract. Gains and losses of hedges of committed
commercial transactions are recorded as a foreign exchange gain or loss. 

        The
Company utilizes foreign currency swap contracts to hedge foreign currency debt into U.S. dollars. The Company also entered into oil futures contracts to hedge a portion of its
future bunker purchases. These derivatives have been designated as cash flow hedges in accordance with SFAS No. 133. 

        The
Company estimates that during the next twelve months $419.2 million of net unrealized cash flow hedges from future commercial operating commitments will mature. 

        The
following estimated fair value amounts of the Company's financial instruments have been determined by the Company, using appropriate market information and valuation methodologies.
Considerable judgement is required to develop these estimates of fair value, thus the estimates provided herein are not necessarily indicative of the amounts that could be realized in a current market
exchange: 

	 
	 	As of November 30,
	 
	 
	 	2002
	 	2001
	 
	 
	 	Carrying

amount
	 	Fair

value
	 	Carrying

amount
	 	Fair

value
	 
	 
	 	(in millions)
 
	 
	Financial Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Cash and cash equivalents	 	$	22.9	 	$	22.9	 	$	24.9	 	$	24.9	 
	Financial Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Loans payable to banks and related currency swaps	 	 	332.0	 	 	332.0	 	 	284.1	 	 	284.1	 
	 	Long-term debt and related currency and interest rate swaps	 	 	1,326.0	 	 	1,299.7	 	 	1,395.6	 	 	1,370.9	 
	Financial Instruments:	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Foreign exchange forward contracts	 	 	28.1	 	 	28.1	 	 	(1.3	)	 	(1.3	)
	 	Bunker hedge contracts	 	 	—	 	 	—	 	 	(0.6	)	 	(0.6	)

        The
carrying amount of cash and cash equivalents and loans payable to banks are a reasonable estimate of their fair value. The estimated value of the Company's long-term debt
is based on interest rates as of November 30, 2002 and 2001, using debt instruments of similar risk. The fair values of the Company's foreign exchange and bunker contracts are based on their
estimated market values as of November 30, 2002 and 2001. 

25.    BUSINESS AND GEOGRAPHIC SEGMENT INFORMATION  

        The Company has three reportable segments from which it derives its revenues: SNTG, SOSA, and SSF. The revenues of OLL and SSL are included in the "Corporate and
Other" category, as more fully described below. The reportable segments reflect the internal organization of the Company and are strategic businesses that offer different products and services. The
SNTG business provides worldwide logistic solutions for the transportation, storage, and distribution of bulk liquid chemicals, edible oils, acids, and other specialty liquids. Additional information
is provided below that may contribute to a greater understanding of the SNTG business. SOSA provides engineering, flowline lay, construction, inspection, and maintenance services to the offshore oil
and gas industry. SSF produces and markets seafood products. The "Corporate and Other" category includes corporate-related items, the minority interest in SOSA, and the results of OLL, SSL and all
other operations not reportable under the other segments. 

        The
basis of measurement and accounting policies of the reportable segments are the same as those described in Note 2. The Company measures segment performance based on net
income. Inter-segment sales and transfers are not significant and have been eliminated and are not included in the following table. Indirect costs and assets have been apportioned within SNTG on the
basis of corresponding direct costs and assets. Interest and income taxes are not allocated. 

28

 

        Summarized
financial information concerning each of the Company's reportable segments is as follows: 

	 
	 	For the year ended November 30, 2002
	 
	 
	 	Stolt-Nielsen Transportation Group
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	Tankers
	 	Tank

Containers
	 	Terminals
	 	Total
	 	Stolt

Offshore
	 	Stolt

Sea Farm
	 	Corporate

and Other
	 	Total
	 
	 
	 	(in millions)
 
	 
	Net operating revenue	 	$	692	 	$	228	 	$	58	 	$	978	 	$	1,437	 	$	436	 	$	2	 	$	2,853	 
	Depreciation and amortization including drydocking and write-off of goodwill	 	 	(84	)	 	(9	)	 	(10	)	 	(103	)	 	(218	)	 	(25	)	 	(9	)	 	(355	)
	Equity in net (loss) income of non-consolidated joint ventures	 	 	4	 	 	—	 	 	5	 	 	9	 	 	5	 	 	—	 	 	—	 	 	14	 
	Restructuring charges	 	 	(10	)	 	—	 	 	—	 	 	(10	)	 	—	 	 	—	 	 	—	 	 	(10	)
	Impairment of goodwill	 	 	—	 	 	(3	)	 	—	 	 	(3	)	 	(106	)	 	(8	)	 	(1	)	 	(118	)
	Income (Loss) from operations	 	 	83	 	 	19	 	 	19	 	 	121	 	 	(124	)	 	(28	)	 	(18	)	 	(49	)
	Interest expense	 	 	—	 	 	—	 	 	—	 	 	(58	)	 	(19	)	 	(19	)	 	—	 	 	(96	)
	Interest income	 	 	—	 	 	—	 	 	—	 	 	1	 	 	1	 	 	1	 	 	—	 	 	3	 
	Income tax expense	 	 	—	 	 	—	 	 	—	 	 	(9	)	 	(8	)	 	(1	)	 	—	 	 	(18	)
	Net income (loss)	 	 	—	 	 	—	 	 	—	 	 	56	 	 	(152	)	 	(45	)	 	38	 	 	(103	)
	Capital expenditures	 	 	17	 	 	3	 	 	19	 	 	39	 	 	55	 	 	29	 	 	—	 	 	123	 
	Investments in and advances to non-consolidated joint ventures	 	 	45	 	 	1	 	 	53	 	 	99	 	 	29	 	 	3	 	 	—	 	 	131	 
	Goodwill and other intangible assets, net	 	 	—	 	 	1	 	 	—	 	 	1	 	 	11	 	 	65	 	 	9	 	 	86	 
	Segment assets	 	 	1,436	 	 	118	 	 	274	 	 	1,828	 	 	1,459	 	 	495	 	 	5	 	 	3,787	 

	 
	 	For the year ended November 30, 2001
	 
	 
	 	Stolt-Nielsen Transportation Group
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	Tankers
	 	Tank

Containers
	 	Terminals
	 	Total
	 	Stolt

Offshore
	 	Stolt

Sea Farm
	 	Corporate

and Other
	 	Total
	 
	 
	 	(in millions)
 
	 
	Net operating revenue	 	$	755	 	$	214	 	$	79	 	$	1,048	 	$	1,256	 	$	374	 	$	—	 	$	2,678	 
	Depreciation and amortization including drydocking	 	 	(96	)	 	(7	)	 	(11	)	 	(114	)	 	(108	)	 	(13	)	 	(4	)	 	(239	)
	Equity in net (loss) income of non-consolidated joint ventures	 	 	(2	)	 	—	 	 	2	 	 	—	 	 	12	 	 	1	 	 	—	 	 	13	 
	Impairment of other intangible assets	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(8	)	 	—	 	 	—	 	 	(8	)
	Income from operations	 	 	97	 	 	18	 	 	36	 	 	151	 	 	36	 	 	—	 	 	(24	)	 	163	 
	Interest expense	 	 	—	 	 	—	 	 	—	 	 	(77	)	 	(29	)	 	(13	)	 	—	 	 	(119	)
	Interest income	 	 	—	 	 	—	 	 	—	 	 	2	 	 	2	 	 	1	 	 	—	 	 	5	 
	Income tax expense	 	 	—	 	 	—	 	 	—	 	 	(6	)	 	(21	)	 	(1	)	 	—	 	 	(28	)
	Net income (loss)	 	 	—	 	 	—	 	 	—	 	 	70	 	 	(14	)	 	(14	)	 	(18	)	 	24	 
	Capital expenditures	 	 	43	 	 	9	 	 	58	 	 	110	 	 	63	 	 	26	 	 	4	 	 	203	 
	Investments in and advances to non-consolidated joint ventures	 	 	40	 	 	1	 	 	50	 	 	91	 	 	36	 	 	3	 	 	—	 	 	130	 
	Goodwill and other intangible assets, net	 	 	—	 	 	1	 	 	—	 	 	1	 	 	122	 	 	70	 	 	29	 	 	222	 
	Segment assets	 	 	1,574	 	 	151	 	 	264	 	 	1,989	 	 	1,560	 	 	414	 	 	9	 	 	3,972	 

	 
	 	For the year ended November 30, 2000
	 
	 
	 	Stolt-Nielsen Transportation Group
	 	 
	 	 
	 	 
	 	 
	 
	 
	 	Tankers
	 	Tank

Containers
	 	Terminals
	 	Total
	 	Stolt

Offshore
	 	Stolt

Sea Farm
	 	Corporate

and Other
	 	Total
	 
	 
	 	(in millions)
 
	 
	Net operating revenue	 	$	692	 	$	224	 	$	59	 	$	975	 	$	983	 	$	326	 	$	—	 	$	2,284	 
	Depreciation and amortization including drydocking	 	 	(94	)	 	(9	)	 	(10	)	 	(113	)	 	(86	)	 	(10	)	 	—	 	 	(209	)
	Equity in net (loss) income of non-consolidated joint ventures	 	 	(13	)	 	—	 	 	3	 	 	(10	)	 	6	 	 	1	 	 	—	 	 	(3	)
	Restructuring charges	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(3	)	 	—	 	 	—	 	 	(3	)
	Income (loss) from operations	 	 	40	 	 	20	 	 	19	 	 	79	 	 	(5	)	 	34	 	 	(14	)	 	94	 
	Interest expense	 	 	—	 	 	—	 	 	—	 	 	(72	)	 	(32	)	 	(8	)	 	—	 	 	(112	)
	Interest income	 	 	—	 	 	—	 	 	—	 	 	3	 	 	2	 	 	1	 	 	—	 	 	6	 
	Income tax (expense) benefit	 	 	—	 	 	—	 	 	—	 	 	(12	)	 	4	 	 	(7	)	 	—	 	 	(15	)
	Net income (loss)	 	 	—	 	 	—	 	 	—	 	 	1	 	 	(34	)	 	18	 	 	3	 	 	(12	)
	Capital expenditures	 	 	150	 	 	27	 	 	29	 	 	206	 	 	62	 	 	12	 	 	6	 	 	286	 
	Investments in and advances to non-consolidated joint ventures	 	 	32	 	 	2	 	 	46	 	 	80	 	 	37	 	 	4	 	 	—	 	 	121	 
	Goodwill and other intangible assets, net	 	 	—	 	 	1	 	 	2	 	 	3	 	 	127	 	 	17	 	 	28	 	 	175	 
	Segment assets	 	 	1,612	 	 	157	 	 	262	 	 	2,031	 	 	1,403	 	 	284	 	 	9	 	 	3,727	 

29

 

        The
following table sets out net operating revenue by country for the Company's reportable segments. SNTG net operating revenue is allocated on the basis of the country in which the
cargo is loaded. Tankers and Tank Containers operate in a significant number of countries. Revenues from specific foreign countries which contribute over 10% of total net operating revenue are
disclosed separately. SSF net operating revenue is primarily allocated on the basis of the country in which the sale is generated. SOSA net operating revenue is primarily allocated based on the
geographic distribution of its activities. SEAME represents Southern Europe, Africa and the Middle East. 

	 
	 	For the years ended November 30,
	 
	 
	 	2002
	 	2001
	 	2000
	 
	 
	 	(in millions)
 
	 
	Net Operating Revenue:	 	 	 	 	 	 	 	 	 	 
	Stolt-Nielsen Transportation Group—	 	 	 	 	 	 	 	 	 	 
	 	Tankers:	 	 	 	 	 	 	 	 	 	 
	 	 	United States	 	$	248	 	$	245	 	$	278	 
	 	 	South America	 	 	70	 	 	74	 	 	58	 
	 	 	Netherlands	 	 	39	 	 	48	 	 	47	 
	 	 	Other Europe	 	 	116	 	 	135	 	 	105	 
	 	 	Malaysia	 	 	68	 	 	68	 	 	54	 
	 	 	Other Asia	 	 	109	 	 	148	 	 	118	 
	 	 	Other	 	 	97	 	 	100	 	 	85	 
	 	Less commissions, sublet costs, transshipment and barging expenses	 	 	(55	)	 	(63	)	 	(53	)
	 	 	
	 	
	 	
	 
	 	 	$	692	 	$	755	 	$	692	 
	 	 	
	 	
	 	
	 
	Stolt-Nielsen Transportation Group—	 	 	 	 	 	 	 	 	 	 
	 	Tank Containers:	 	 	 	 	 	 	 	 	 	 
	 	 	United States	 	$	72	 	$	68	 	$	80	 
	 	 	South America	 	 	9	 	 	9	 	 	9	 
	 	 	France	 	 	22	 	 	22	 	 	23	 
	 	 	Other Europe	 	 	63	 	 	54	 	 	55	 
	 	 	Japan	 	 	14	 	 	12	 	 	16	 
	 	 	Other Asia	 	 	39	 	 	38	 	 	39	 
	 	 	Other	 	 	9	 	 	11	 	 	2	 
	 	 	
	 	
	 	
	 
	 	 	$	228	 	$	214	 	$	224	 
	 	 	
	 	
	 	
	 
	Stolt-Nielsen Transportation Group—	 	 	 	 	 	 	 	 	 	 
	 	Terminals:	 	 	 	 	 	 	 	 	 	 
	 	 	United States	 	$	49	 	$	71	 	$	52	 
	 	 	Brazil	 	 	9	 	 	8	 	 	7	 
	 	 	
	 	
	 	
	 
	 	 	$	58	 	$	79	 	$	59	 
	 	 	
	 	
	 	
	 
	Stolt Offshore:	 	 	 	 	 	 	 	 	 	 
	 	Asia Pacific	 	$	26	 	$	39	 	$	40	 
	 	North America	 	 	190	 	 	277	 	 	122	 
	 	Norway	 	 	106	 	 	111	 	 	199	 
	 	SEAME	 	 	703	 	 	520	 	 	445	 
	 	South America	 	 	52	 	 	50	 	 	53	 
	 	United Kingdom	 	 	230	 	 	215	 	 	124	 
	 	Corporate	 	 	130	 	 	44	 	 	—	 
	 	 	
	 	
	 	
	 
	 	 	$	1,437	 	$	1,256	 	$	983	 
	 	 	
	 	
	 	
	 
	Stolt Sea Farm:	 	 	 	 	 	 	 	 	 	 
	 	United States	 	$	97	 	$	99	 	$	123	 
	 	Canada	 	 	12	 	 	18	 	 	17	 
	 	Chile	 	 	8	 	 	7	 	 	1	 
	 	United Kingdom	 	 	17	 	 	19	 	 	21	 
	 	Norway	 	 	14	 	 	19	 	 	8	 
	 	Spain	 	 	15	 	 	14	 	 	11	 
	 	Japan	 	 	184	 	 	138	 	 	70	 
	 	Others, net	 	 	89	 	 	60	 	 	75	 
	 	 	
	 	
	 	
	 
	 	 	$	436	 	$	374	 	$	326	 
	 	 	
	 	
	 	
	 

        During the year ended November 30, 2002, one customer of SOSA accounted for more than 10% of the Company's revenue. The revenue from SOSA's
largest customer was $285.8 million and was attributable to the Norway, SEAME, U.K. and North America regions (2001: $269.2 million attributable to the SEAME region). 

        The
following table sets out long-lived assets by country for the Company's reportable segments. For SNTG, long-lived assets by country are only reportable for
the Terminals operations. SNTG's Tanker and Tank Container operations operate on a worldwide basis and are not restricted to specific locations. Accordingly, it is not possible to allocate the assets
of these operations to specific countries. The total net book value of long-lived assets for tankers amounted to $1,249 million and $1,426 million, and for tank containers
amounted to $56 million and $90 million, at November 30, 2002 and 2001, respectively. A large proportion of SOSA long-term assets are mobile assets that are utilized
globally, and therefore cannot be directly attributed to any one geographical region. These long-term assets are represented as Corporate in the SOSA table below. 

	 
	 	As of November 30,

	 
	 	2002
	 	2001

	 
	 	(in millions)
 

	Long-Lived Assets:	 	 	 	 	 	 
	Stolt-Nielsen Transportation Group—	 	 	 	 	 	 
	 	Terminals:	 	 	 	 	 	 
	 	 	United States	 	$	158	 	$	154
	 	 	Brazil	 	 	37	 	 	33
	 	 	Singapore/China	 	 	34	 	 	34
	 	 	Korea	 	 	17	 	 	16
	 	 	Others	 	 	4	 	 	3
	 	 	
	 	

	 	 	$	250	 	$	240
	 	 	
	 	

	Stolt Offshore:	 	 	 	 	 	 
	 	 	United Kingdom	 	$	16	 	$	13
	 	 	Norway	 	 	12	 	 	13
	 	 	Asia Pacific	 	 	11	 	 	14
	 	 	SEAME	 	 	88	 	 	65
	 	 	South America	 	 	70	 	 	62
	 	 	North America	 	 	53	 	 	70
	 	 	Corporate	 	 	600	 	 	614
	 	 	
	 	

	 	 	$	850	 	$	851
	 	 	
	 	

30

 

	 
	 	As of November 30,

	 
	 	2002
	 	2001

	 
	 	(in millions)
 

	Stolt Sea Farm:	 	 	 	 	 	 
	 	United States	 	$	10	 	$	11
	 	Canada	 	 	26	 	 	24
	 	Chile	 	 	20	 	 	22
	 	United Kingdom	 	 	7	 	 	6
	 	Norway	 	 	28	 	 	18
	 	Spain	 	 	10	 	 	8
	 	Others	 	 	6	 	 	5
	 	 	
	 	

	 	 	$	107	 	$	94
	 	 	
	 	

        Long-lived
assets include fixed assets, investments in non-consolidated joint ventures and certain other non-current assets, mainly the unamortized
portion of capitalized drydock costs. Long-lived assets exclude long-term restricted cash deposits, long-term deferred tax assets, long-term pension
assets, goodwill, and intangibles. 

26.    SUBSEQUENT EVENT  

        In March 2003, the Company announced that Elemica has signed a definitive agreement to acquire substantially all of the assets of OLL. Under the terms of
the agreement, Elemica will acquire the full technology platform and the ongoing business operations of OLL. Closing is subject to standard conditions and the transaction is expected to be closed in
April 2003. 

Events subsequent to the issue of the 2002 Annual Report and Accounts (Unaudited)  

Major Project Downgrades and other adverse cost effects  

        Subsequent to the distribution of the Company's 2002 Annual Report and Accounts to its shareholders, the following events have occurred. Stolt Offshore's new
senior management team began a review of its major projects and identified substantially poorer than anticipated performance and cost overruns on three major projects and several smaller projects. In
addition, it is expected that activity levels will be slightly lower than previously anticipated. As a result of these factors, Stolt Offshore expects to incur a significant loss in the 2003 fiscal
year. A substantial portion of this loss will be incurred in the second quarter of 2003. The specific reasons for the increased losses include: 

	•
	Burullus
Scarab Saffron, the first deepwater project of its type in offshore Egypt which is now completed, where a further downgrade has been identified to provide for
additional ship utilization days, poor performance of nominated sub-contractors and delays in claim resolution.

	•
	OGGS,
in the harsh operating environment of Nigeria and which is 80% completed, where forecasted costs have increased mainly due to additional ship utilization days and
higher than estimated local support costs in West Africa.

	•
	Bonga,
also offshore Nigeria, where the project is 50% complete, forecasted costs have increased due to higher project management and engineering, procurement and
sub-contractor, and transport and logistics costs.

	•
	On
smaller projects, where provisions are likely to be made in respect of risk on collection of receivables, lower activity levels and lower ship utilization. 

Revised banking arrangements  

        In light of the revised earnings expectations described above, the Company is working closely with Stolt Offshore's main banks in seeking to amend Stolt Offshore's
primary credit facilities to reflect Stolt Offshore's current financial position, including obtaining a waiver of certain financial covenant tests through November 30, 2003. Additionally, a
default under Stolt Offshore's credit facilities could, in turn, result in a default under one of the Company's bank credit or other financing agreements, as a majority of the Company's credit
facilities contain cross default provisions. 

        Additionally,
a default under Stolt Offshore's credit facilities could, in turn, result in a default under our bank credit or other financial agreements as a majority of our credit
facilities contain cross-default provisions. 

Legal Proceedings (Unaudited)  

Stolt-Nielsen Transportation Group Civil Antitrust Actions  

        In April 2003 a former customer of SNTG, Nizhnekamskneftekhim USA, Inc. ("Nizh"), filed a putative civil class action against SNTG and several other parcel tanker
companies in the U.S. District Court for the Southern District of Texas. The suit alleges violations of Section 1 of the Sherman Antitrust Act and Section 4 of the Clayton Antitrust Act
and seeks treble damages in an unspecified amount. SNTG has agreements with Nizh to arbitrate disputes. The Company intends to vigorously defend ourselves against the Nizh action and has not made any
provision for any liability related to the Nizh action or such unasserted possible claims in the consolidated financial statements. 

Stolt Sea Farm  

        In April 2003 two lawsuits were filed against SSF pertaining to its operations in the Broughton Archipelago, British Columbia. Both are brought in the name of
aboriginal organizations. The one filed in the Federal Court of Canada seeks to set aside the decision of the Minister of Fisheries and Oceans to permit the relocation of an aquaculture site from Eden
Island to Humphrey Rock. The other, filed in the Supreme Court of British Columbia, seeks damages, and other relief arising from the stocking of aquaculture facilities in territory claim to be subject
to aboriginal title of the plaintiffs. In this action the Plaintiffs have given notice of an intention to apply for an interlocutory injunction to restrain the continuance of aquaculture operations
pending resolution of the dispute. The federal and provincial governments and Heritage Salmon Ltd. are co-defendants in the suit along with SSF. Both actions are being vigorously defended and the
Company has not made any provision for any liability related to these actions in the consolidated financial statements. 

Stolt Offshore  

        CSO commenced legal proceedings through the U.K. High Court against three subsidiaries of SOSA claiming infringement of a certain patent held by CSO relating to
flexible flowline laying technology in the U.K. Judgement was given on January 22, 1999 and January 29, 1999. The disputed patent was held valid. SOSA appealed and the Appeal Court
maintained in July 2000 the validity of the patent and potentially broadened its application compared to the High Court decision. SOSA applied for leave to appeal the Appeal Court decision to
the House of Lords, which was denied. 

        During
2001 after the Appeal Court decision became final, CSO submitted an amended claim to damages claiming lost profit on a total of 15 projects. In addition, there is a claim for
alleged price depreciation on certain other projects.The total claim for lost profits was for approximately $89 million, up from approximately $14.0 million claimed after the High Court
decision confirming the patent's validity, plus interest, legal costs and a royalty for each time that the flexible lay system tower on the Seaway Falcon
was brought into U.K. waters. The increase came because several more projects potentially became relevant. The amount of the claim has not yet been considered by the Court and has thus so far not been
upheld. SOSA estimates that the total claim as submitted is in the order of $130 million at November 30, 2002, increasing at 8% simple interest per annum. 

        In
the alternative, CSO claims a reasonable royalty for each act of infringement, interest and legal costs. CSO has not quantified this claim, but it will be considerably less than the
claim to lost profits. 

        SOSA,
in consultation with its advisers, has assessed that the range of possible outcomes for the resolution of damages is $1.5 million to $130 million and has determined
that there is no amount within the range that is a better estimate than any other amount. Consequently, in accordance with SFAS No. 5, "Accounting for Contingencies," as interpreted by FASB
Interpretation No. 14, 

31

 

"Reasonable
Estimation of the Amount of a Loss", SOSA has provided $1.5 million in the financial statements, being the lower amount of the range. The amount of damages is nevertheless uncertain
and no assurance can be given that the provided amount is sufficient. 

        On
April 15, 2003, the U.K. High Court, in an action between Rockwater Ltd. (part of the Halliburton Group) and CSO, held that the same patent, the subject of the
proceedings against SOSA, was invalid. SOSA is considering its position in the light of this recent judgement. 

        On
December 6, 2002, SOSA settled a long-standing dispute with the owners of the Toisa Puma vessel for
$7.3 million, including interest of $1.0 million. The nature of the dispute was the cancellation of a charter of the vessel in 1999. SOSA had expected that the settlement would be made
in the range of $2 million to $8 million. The cost of the final settlement was included in SOSA's 2002 results. 

32

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CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSQuickLinks
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Exhibit 10.5    
    

ARTICLE 5

Legend
  This schedule contains summary financial information extracted from Stolt-Nielsen S.A. Consolidated Financial Statement and is qualified in its entirety by reference to such
financial statements.
 Legend

Multiplier 1,000  

	PERIOD-TYPE	 	12 MOS
	FISCAL-YEAR-END	 	NOV-30-2002
	PERIOD-START	 	DEC-01-2001
	PERIOD-END	 	NOV-30-2002
	CASH	 	22,873
	SECURITIES	 	0
	RECEIVABLES	 	573,041
	ALLOWANCES	 	13,506
	INVENTORY	 	231,498
	CURRENT-ASSETS	 	1,029,514
	PP&E	 	3,585,276
	DEPRECIATION	 	1,190,151
	TOTAL-ASSETS	 	3,787,075
	CURRENT-LIABILITIES	 	1,264,404
	BONDS	 	1,155,010
	PREFERRED-MANDATORY	 	0
	PREFERRED	 	0
	COMMON	 	62,639
	OTHER-SE	 	927,180
	TOTAL-LIABILITY-AND-EQUITY	 	3,787,075
	SALES	 	0
	TOTAL-REVENUES	 	2,852,709
	CGS	 	0
	TOTAL-COSTS	 	2,584,684
	OTHER-EXPENSES	 	0
	LOSS-PROVISION	 	0
	INTEREST-EXPENSE	 	95,612
	SS-PRETAX	 	(84,836)
	INCOME-TAX	 	17,969
	SS-CONTINUING	 	(102,805)
	DISCONTINUED	 	0
	EXTRAORDINARY	 	0
	CHANGES	 	0
	NET-LOSS	 	(102,805)
	EPS-BASIC	 	(1.87)
	EPS-DILUTED	 	(1.87)

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Exhibit 10.5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}]]