California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Six months ended June 30, 2002
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Six Months Ended June 30, 2002 Commission File Number 33-79220
33-56377
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
(exact name of Registrant as specified in its charter)
Delaware 04-3232976
(State of incorporation) (I.R.S. Employer
Identification No.)
Suite 569, One International Place, Boston, Massachusetts 02110-2624
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (617) 951-7727
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Number of shares outstanding of each class of Registrant's Common Stock as of
August 31, 2002
Common, $1.00 par value ..........................................1,000 shares
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Six months ended June 30, 2002
Index
Part I Financial Information
Item 1 Financial Statements
Review Report of Independent Accountants
Unaudited Condensed Income Statements - Three and six months ended
June 30, 2002 and 2001
Unaudited Condensed Balance Sheets - June 30, 2002 and December 31,
2001
Unaudited Condensed Statement of Cash Flows - Six months ended June
30, 2002 and 2001
Unaudited Condensed Statements of Changes in Stockholders' Equity -
Six months ended June 30, 2002 and 2001
Notes to Unaudited Condensed Financial statements
Item 2 Management's Discussion and analysis of Financial Condition and
Results of Operations
Item 3 Quantitative and Qualitative Disclosures about Market Risk
Item 4 Controls and Procedures
Part II Other Information
Item 1 Legal Proceedings
Signatures
Omitted items are not applicable
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Six months ended June 30, 2002
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Review Report of Independent Accountants
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF CALIFORNIA PETROLEUM TRANSPORT
CORPORATION
We have reviewed the accompanying condensed balance sheet of California
Petroleum Transport Corporation as of June 30, 2002 and the related condensed
statements of income for the three and six month periods ended June 30, 2002
and 2001 and the condensed statement of cash flows for the six-month periods
ended June 30, 2002 and 2001. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with United States generally accepted auditing
standards, which will be performed for the full year with the objective of
expressing an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with United States generally accepted accounting principles.
We have previously audited, in accordance with United States generally
accepted auditing standards, the balance sheet of California Petroleum
Transport Corporation as at December 31, 2001, and the related statements of
income and cash flows for the year then ended, not presented herein, and in
our report dated March 27, 2002, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying condensed balance sheet as of December 31, 2001, is fairly
stated, in all material respects, in relation to balance sheet from which it
has been derived.
Ernst & Young
Chartered Accountants
Douglas, Isle of Man
XXXXX, 2002
California Petroleum Transport Corporation
Condensed Income Statements for the three and six months ended June 30, 2002
and 2001 (Unaudited)
(in thousands of US$)
3 months ended 6 months ended
June 30 June 30
2002 2001 2002 2001
Operating revenues
Interest income 3,305 3,691 6,890 7,727
Recovery of
administrative expenses 3 - 19 15
- --------------------------------------------------------------------------------
Net operating revenues 3,308 3,691 6,909 7,742
- --------------------------------------------------------------------------------
Operating expenses
Administrative expenses 3 - 19 15
- --------------------------------------------------------------------------------
Total operating expenses 3 - 19 15
- --------------------------------------------------------------------------------
Net operating income
before amortisation 3,305 3,691 6,890 7,727
- --------------------------------------------------------------------------------
Amortisation of
deferred charges 64 64 128 128
- --------------------------------------------------------------------------------
Other expenses
Interest expense 3,241 3,627 6,762 7,599
- --------------------------------------------------------------------------------
Net other expenses 3,241 3,627 6,762 7,599
- --------------------------------------------------------------------------------
Net income - - - -
================================================================================
See notes to the condensed financial statements.
California Petroleum Transport Corporation
Condensed Balance Sheets as of June 30, 2002 and December 31, 2001
(Unaudited)
(in thousands of US$)
2002 2001
(Audited)
ASSETS
Current assets
Cash and cash equivalents 1 1
Current maturities of serial loans receivable 18,160 18,160
(maturity date April 1, 2003)
Interest income receivable 3,285 3,664
Other accounts receivable 12 10
- --------------------------------------------------------------------------------
Total current assets 21,458 21,835
Serial loans receivable 22,798 40,874
Term loans receivable 116,774 116,730
Deferred charges 1,548 1,676
- --------------------------------------------------------------------------------
Total assets 162,578 181,115
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of serial mortgage notes 18,160 18,160
(maturity date April 1, 2003)
Accrued interest expense 3,285 3,664
Other accounts payable 12 10
- --------------------------------------------------------------------------------
Total current liabilities 21,457 21,834
Long-term liabilities
Serial mortgage notes 23,220 41,380
Term mortgage notes 117,900 117,900
- --------------------------------------------------------------------------------
Total liabilities 162,577 181,114
Commitments and contingencies - -
Stockholders' equity
Share capital (1,000 shares of $1 authorised,
issued and outstanding) 1 1
Retained earnings - -
- --------------------------------------------------------------------------------
Total stockholders' equity 1 1
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity 162,578 181,115
================================================================================
See notes to the condensed financial statements.
California Petroleum Transport Corporation
Condensed Statements of Cash Flows for the six months ended June 30, 2002 and
2001
(Unaudited)
(in thousands of US$)
2002 2001
Operating activities`
Net income - -
Adjustments to reconcile net income
to net cash provided by operating activities
Amortisation of deferred charges 128 128
Amortisation of issue discount on loans receivable (128) (128)
Changes in operating assets and liabilities:
Interest income receivable 379 348
Other accounts receivable (2) (16)
Accrued interest expense (379) (348)
Other accounts payable 2 16
- --------------------------------------------------------------------------------
Net cash provided by operating activities - -
- --------------------------------------------------------------------------------
Investing activities
Maturity of serial loans receivable 18,160 18,160
- --------------------------------------------------------------------------------
Net cash provided by investing activities 18,160 18,160
- --------------------------------------------------------------------------------
Financing activities
Redemption of serial mortgage notes (18,160) (18,160)
- --------------------------------------------------------------------------------
Net cash used in financing activities (18,160) (18,160)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net increase in cash and cash equivalents - -
Cash and cash equivalents at beginning of period 1 1
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of period 1 1
================================================================================
Supplemental disclosure of cash flow information:
Interest paid 7,269 7,945
================================================================================
See notes to the condensed financial statements.
California Petroleum Transport Corporation
Condensed Statements of Changes in Stockholders' Equity for the six months
ended June 30, 2002 and 2001
(Unaudited)
(in thousands of US$, except number of shares)
2002 2001
Number of Shares Outstanding
Balance at beginning of period 1,000 1,000
Shares issued - -
- --------------------------------------------------------------------------------
Balance at end of period 1,000 1,000
- --------------------------------------------------------------------------------
Share Capital
Balance at beginning of period 1 1
Shares issued - -
- --------------------------------------------------------------------------------
Balance at end of period 1 1
- --------------------------------------------------------------------------------
Retained Earnings
Balance at beginning of period - -
Net income - -
- --------------------------------------------------------------------------------
Balance at end of period - -
- --------------------------------------------------------------------------------
Total Stockholders' Equity 1 1
================================================================================
See notes to the condensed financial statements.
California Petroleum Transport Corporation
Notes to the Condensed Financial Statements (Unaudited)
1. GENERAL
Organization and history
California Petroleum Transport Corporation was incorporated under the
laws of the state of Delaware on May 18, 1994. The company is a special
purpose corporation that has been organized solely for the purpose of
issuing as agent Serial Mortgage Notes and Term Mortgage Notes as full
recourse obligations of the company and loaning the proceeds of the sale
of the Notes to four vessel-owning companies. The Serial Mortgage Notes
and the Term Mortgage Notes were issued on April 5, 1995.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with United States generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. The principal accounting policies used in the
preparation of these financial statements are set out below.
The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accountancy
principles for complete financial statements.
2. ACCOUNTING POLICIES
Basis of accounting
The financial statements have been prepared in accordance with generally
accepted accounting principles in the United States. The preparation of
financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates. The following are the
significant accounting policies adopted by the Company:
Cash and cash equivalents
For the purposes of the consolidated statements of cash flows, all demand
and time deposits and highly liquid, low risk investments with original
maturities of three months or less are considered equivalent to cash.
Revenue and expense recognition
Interest receivable on the Serial Loans and on the Term Loans is accrued
on a daily basis. Interest payable on the Serial Mortgage Notes and on
the Term Mortgage Notes is accrued on a daily basis. General and
administrative expenses incurred by the company are reimbursed by the
vessel-owning companies.
Deferred charges
Deferred charges represent the capitalisation of debt issue costs. These
costs are amortised over the term of the Notes to which they relate.
3. SERIAL LOANS
The principal balances of the Serial Loans earn interest at rates ranging
from 7.55% to 7.62% and mature over a four-year period beginning April 1,
2003. The loans are reported net of the related discounts, which are
amortised over the term of the loans.
4. TERM LOANS
The principal balances of the Term Loans earn interest at a rate of 8.52%
per annum and are to be repaid over a twelve-year period beginning April
1, 2004. The loans are reported net of the related discounts, which are
amortised over the term of the loans.
5. SERIAL MORTGAGE NOTES
The Serial Mortgage Notes bear interest at rates ranging from 7.55% to
7.62% through maturity. The Notes mature over a four-year period
beginning April 1, 2003. Interest is payable semi-annually.
6. TERM MORTGAGE NOTES
The Term Mortgages Notes bear interest at a rate of 8.52% per annum.
Principal is repayable on the Term Mortgage Notes in accordance with a
twelve-year sinking fund schedule commencing April 1, 2004. Interest is
payable semi-annually.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
N/A
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(a) Quantitative information about market risk
Quantitative information about market risk instruments at June 30, 2002
is as follows: -
i) Serial Loans
The principal balances of the Serial Loans earn interest at rates ranging
from 7.55% to 7.62% and mature over a four-year period beginning April 1,
2003. The loans are reported net of the related discounts, which are
amortised over the term of the loans.
The outstanding serial loans have the following characteristics:
Maturity date Interest rate Principal amount
($ 000's)
April 1, 2003 7.55% 18,160
April 1, 2004 7.57% 12,950
April 1, 2005 7.60% 7,740
April 1, 2006 7.62% 2,530
- --------------------------------------------------------------------------------
Total loans 41,380
- --------------------------------------------------------------------------------
ii) Term Loans
The principal balances of the Term Loans earn interest at a rate of 8.52%
per annum and are to be repaid over a twelve-year period beginning April
1, 2004. The loans are reported net of the related discounts, which are
amortized over the term of the loans.
The table below provides the final principal payments on the Term Loans
if none of the Initial Charters is terminated and if all of the Initial
Charters are terminated on the earliest termination dates.
Scheduled payment date No initial
charters
terminated terminated
($000's) ($000's)
April 1, 2004 3,355 1,700
April 1, 2005 6,542 3,480
April 1, 2006 9,526 5,320
April 1, 2007 10,942 6,340
April 1, 2008 10,942 6,880
April 1, 2009 10,942 7,470
April 1, 2010 10,942 8,110
April 1, 2011 10,942 8,800
April 1, 2012 10,942 9,540
April 1, 2013 10,942 10,360
April 1, 2014 10,942 11,240
April 1, 2015 10,941 38,660
- --------------------------------------------------------------------------------
117,900 117,900
- --------------------------------------------------------------------------------
iii) Serial Mortgage Notes
The Serial Mortgage Notes bear interest at rates ranging from 7.55% to
7.62% through maturity. The Notes mature over a four-year period
beginning April 1, 2003. Interest is payable semi-annually. The
outstanding serial loans have the following characteristics:
Maturity date Interest rate Principal amount
($ 000's)
April 1, 2003 7.55% 18,160
April 1, 2004 7.57% 12,950
April 1, 2005 7.60% 7,740
April 1, 2006 7.62% 2,530
- --------------------------------------------------------------------------------
Total loans 41,380
- --------------------------------------------------------------------------------
iv) Term Mortgage Notes
The Term Mortgage Notes bear interest at a rate of 8.52% per annum.
Principal is repayable on the Term Mortgage Notes in accordance with a
twelve-year sinking fund schedule commencing April 1, 2004. Interest is
payable semi-annually.
The table below provides the scheduled sinking fund redemption amounts
and final principal payments on the Term Mortgage Notes if none of the
Initial Charters is terminated and if all of the Initial Charters are
terminated on the earliest termination dates.
Scheduled payment date No initial
charters
terminated terminated
($000's) ($000's)
April 1, 2004 3,355 1,700
April 1, 2005 6,542 3,480
April 1, 2006 9,526 5,320
April 1, 2007 10,942 6,340
April 1, 2008 10,942 6,880
April 1, 2009 10,942 7,470
April 1, 2010 10,942 8,110
April 1, 2011 10,942 8,800
April 1, 2012 10,942 9,540
April 1, 2013 10,942 10,360
April 1, 2014 10,942 11,240
April 1, 2015 10,941 38,660
- --------------------------------------------------------------------------------
117,900 117,900
- --------------------------------------------------------------------------------
(b) Qualitative information about market risk
The Corporation was organized solely for the purpose of issuing, as agent
on behalf of certain ship Owners, the Term Mortgage in Notes and Serial
Mortgage Notes as obligations of California Petroleum and loaning the
proceeds of the sale of the Notes to the Owners to facilitate the funding
of the acquisition of four Vessels from Chevron Transport Corporation.
ITEM 4 - CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of
the Company's manager Frontline Ltd, including the Company's President
and Treasurer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act
Rule 13a-14. Based upon that evaluation, the President and Treasurer
concluded that the Company's disclosure controls and procedures are
effective in alerting them timely to material information relating to the
Company required to be included in the Company's periodic SEC filings.
(b) Changes in internal controls
There have been no significant changes in our internal controls or in
other factors that could have significantly affected those controls
subsequent to the date of our most recent evaluation of internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The company is not party to any legal proceedings the results of which
could, in the opinion of management, have a material adverse effect upon
the company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CALIFORNIA PETROLEUM
TRANSPORT CORPORATION
Registrant
\R. Douglas Donaldson\
October 31, 2002
R. Douglas Donaldson
CERTIFICATIONS UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the
undersigned certifies that this periodic report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
and that information contained in this periodic report fairly represents, in
all material respects, the financial condition and results of operations of
California Petroleum Transport Corporation.
/s/ Nancy D. Smith
-----------------------
Nancy D. Smith
President (Chief Executive Officer)
/s/ R. Douglas Donaldson
-----------------------
R. Douglas Donaldson
Treasurer (Chief Financial Officer)
CERTIFICATION OF THE PRESIDENT
- ------------------------------
I, Nancy D Smith, certify that:
1. I have reviewed this quarterly report on Form 10-Q of California Petroleum
Transport Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date:10/31/02
/s/ Nancy D. Smith
- -----------------
Nancy D. Smith
President (Chief Executive Officer)
CERTIFICATION OF TREASURER
- --------------------------
I, R Douglas Donaldson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of California Petroleum
Transport Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: 10/31/02
/s/ R. Douglas Donaldson
- -----------------------
R. Douglas Donaldson
Treasurer (Chief Financial Officer)
02089.0009 #364037