California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Nine month period ended September 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 the Quarterly Period Ended Commission File Number 33-79220
September 30, 2002 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, 02110-2624
Boston, Massachusetts (Zip code)
(Address of principal executive offices)
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
November 8, 2002
Common, $1.00 par value ...................................1,000 shares
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Nine month period ended September 30, 2002
Index
Part I Financial Information
Item 1 Financial Statements
Review Report of Independent Accountants
Condensed Income Statements - Three and nine month periods ended
September 30, 2002 and 2001
Condensed Balance Sheets - September 30, 2002 and December 31,
2001
Condensed Statements of Cash Flows - Nine month periods ended
September 30, 2002 and 2001
Notes to 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
Item 6 Exhibits and Reports on Form 8-K
Signatures
Certifications pursuant to Section 302 of the Sarbanes Oxley Act of 2002
Omitted items are not applicable
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 September 30, 2002, and the related
condensed statements of income for the three and nine month periods ended
September 30, 2002 and 2001, and the condensed statements of cash flows for the
nine-month periods ended September 30, 2002 and 2001. These financial statements
are the responsibility of the Company's management.
We conducted our reviews 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 auditing standards generally accepted in the United States,
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 reviews, we are not aware of any material modifications that should
be made to the accompanying condensed financial statements referred to above for
them to be in conformity with accounting principles generally accepted in the
United States.
We have previously audited, in accordance with accounting principles generally
accepted in the United States, the balance sheet of California Petroleum
Transport Corporation as at December 31, 2001, and the related statements of
operations and retained earnings 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
November 26, 2002
California Petroleum Transport Corporation
Condensed Income Statements
(Unaudited)
(in thousands of US$)
3 month period ended 9 month period ended
September 30 September 30
2002 2001 2002 2001
Operating revenues
Interest income 3,322 3,725 10,212 11,452
Recovery of administrative expenses 4 25 23 40
- -------------------------------------------------------------------------------------------------
3,326 3,750 10,235 11,492
Cost of operating revenue
Interest expense (3,258) (3,661) (10,020) (11,260)
Other expenses
Administrative expenses (4) (25) (23) (40)
- -------------------------------------------------------------------------------------------------
Net operating income before amortisation 64 64 192 192
Amortisation of deferred charges (64) (64) (192) (192)
- -------------------------------------------------------------------------------------------------
Net income - - - -
=================================================================================================
See notes to the condensed financial statements.
California Petroleum Transport Corporation
Condensed Balance Sheets
(Unaudited)
(in thousands of US$)
30 September 2002 31 December 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 6,607 3,664
Other accounts receivable 12 10
- -------------------------------------------------------------------------------------------------
Total current assets 24,780 21,835
Serial loans receivable 22,840 40,874
Term loans receivable 116,796 116,730
Deferred charges 1,484 1,676
- -------------------------------------------------------------------------------------------------
Total assets 165,900 181,115
=================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Current maturities of serial mortgage notes 18,160 18,160
(maturity date April 1, 2003)
Accrued interest expense 6,607 3,664
Other accounts payable 12 10
- -------------------------------------------------------------------------------------------------
Total current liabilities 24,779 21,834
Long-term liabilities
Serial mortgage notes 23,220 41,380
Term mortgage notes 117,900 117,900
- -------------------------------------------------------------------------------------------------
Total liabilities 165,899 181,114
Stockholder's equity
Share capital (1,000 shares of $1 authorised, 1 1
issued and outstanding)
- -------------------------------------------------------------------------------------------------
Total stockholder's equity 1 1
- -------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity 165,900 181,115
=================================================================================================
See notes to the condensed financial statements.
California Petroleum Transport Corporation
Condensed Statements of Cash Flows
(Unaudited)
(in thousands of US$)
9 month 9 month period
period ended ended 30 September
30 September 2002 2001
Operating activities
Net income - -
Adjustments to reconcile net income to net cash
provided by operating activities
Amortisation of deferred charges 192 192
Amortisation of issue discount on loans (192) (192)
receivable
Changes in operating assets and liabilities:
Interest income receivable (2,943) (3,316)
Other accounts receivable 2 (3)
Accrued interest expense 2,943 3,316
Other accounts payable (2) 3
- ------------------------------------------------------------------------------------------------------
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
Quarterly Report on Form 10-Q
Nine month period ended September 30, 2002
1. GENERAL
The Company
California Petroleum Transport Corporation, ("California Petroleum" or "the
Company"), was incorporated in Delaware in 1995. California Petroleum is a
special purpose corporation that was organized solely for the purpose of
issuing, as agent on behalf of the Owners (see below), the Term Mortgage
Notes and Serial Mortgage Notes (together the "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 the four vessels
(the "Vessels") described below from Chevron Transport Corporation (the
"Initial Charterer"). All the shares of California Petroleum are held by
The California Trust, a Massachusetts charitable lead trust formed by JH
Holdings, a Massachusetts corporation, for the benefit of certain
charitable institutions in Massachusetts.
California Petroleum's only business segment is that of issuing loans.
California Petroleum has no employees.
The Owners
Each of CalPetro Tankers (Bahamas I) Limited ("CalPetro Bahamas I"),
CalPetro Tankers (Bahamas II) Limited ("Calpetro Bahamas II") and CalPetro
Tankers (Bahamas III) Limited ("CalPetro Bahamas III"), was organized as a
special purpose company under the laws of the Bahamas for the purpose of
acquiring and chartering one of the Vessels. Similarly, CalPetro Tankers
(IOM) Limited ("CalPetro IOM") has been organized as a special purpose
company under the laws of the Isle of Man for the purpose of acquiring and
chartering one of the Vessels. Each of the foregoing companies also is
referred to in this document as an "Owner". Each Owner, either pursuant to
the terms of its Memorandum of Association and/or pursuant to the terms of
the related Mortgage, will engage in no business other than the ownership
and chartering of its Vessel and activities resulting from or incidental to
such ownership and chartering. Each Owner is wholly-owned by California
Tankers Investments Limited, a company organized under the laws of the
Bahamas, which is a wholly-owned subsidiary of CalPetro Holdings Limited,
an Isle of Man company. None of the Owners is owned by or is an affiliate
of California Petroleum and neither of California Petroleum nor any Owner
is owned by or is an affiliate of the Initial Charterer.
The Charters/Vessels
Each of the Vessels is currently chartered to the Initial Charterer
pursuant to a charter dated as of the date of the original issuance of the
notes (collectively, the "Charters") and which is due to expire on April 1,
2015. Upon payment of a termination amount, the Initial Charterer has the
right to terminate the charters on any four (in the case of the
double-hulled Vessels) or three (in the case of the single-hulled Vessel),
termination dates, which, for each Vessel, occur at two-year intervals
beginning in 2003, 2004, 2005 or 2006, as the case may be.
Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States 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 accounting
principles for complete financial statements.
These financial statements should be read in conjunction with the audited
financial statements and accompanying notes included in the Company 's
Annual Report on Form 10-K for the year ended December 31,2001.
2. ACCOUNTING POLICIES
Use of estimates
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States 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.
Cash and cash equivalents
For the purposes of the 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. The vessel-owning
companies reimburse general and administrative expenses incurred by the
company.
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
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.
Critical Accounting Policies
The U.S. Securities and Exchange Commission ("SEC") has defined a company
's critical accounting policies as the ones that are most important to the
portrayal of the company 's financial condition and results of operations,
and which require the company to make its most difficult and subjective
judgments, often as a result of the need to make estimates of matters that
are inherently uncertain. The Company reviewed its accounting policies and
determined that none meet the definition, as stated above, of a critical
accounting policy.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(a) Quantitative information about market risk
Quantitative information about market risk instruments at September 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 All initial
charters 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
15d-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.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 99.1 Certification Pursuant to 18 USC Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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.
November 19, 2002
CALIFORNIA PETROLEUM
TRANSPORT CORPORATION
Registrant
/s/ R. Douglas Donaldson
------------------------
R. Douglas Donaldson
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: November 19, 2002
/s/ Nancy D. Smith
- ----------------------------
Nancy D. Smith
President
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: November 19, 2002
/s/ R. Douglas Donaldson
- -----------------------
R. Douglas Donaldson
Treasurer
Exhibit 99.1 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
/s/ R. Douglas Donaldson
-----------------------
Treasurer
Date: November 19, 2002
02089.0006 #367384