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 Quarterly Period Ended March 31, 2003 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 4350, One International Place, Boston, Massachusetts 02110-2624
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (617) 951-7690
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
May 11, 2003 Common, $1.00 par value...............................1,000 shares
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Three month period ended March 31, 2003
Index
Part I Financial Information
Item 1 Financial Statements
Review Report of Independent Accountants
Condensed Statements of Operations and Retained Earnings - Three month
period ended March 31, 2003 and 2002
Condensed Balance Sheets - March 31, 2003 and December 31, 2002
Condensed Statements of Cash Flows - Three month period ended March
31, 2003 and 2002
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
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Three month period ended March 31, 2003
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Review Report of Independent Accountants
TO THE BOARD OF DIRECTORS AND STOCKHOLDER OF CALIFORNIA PETROLEUM TRANSPORT
CORPORATION
We have reviewed the accompanying condensed balance sheet of California
Petroleum Transport Corporation as of March 31, 2003, and the related condensed
statements of operations and retained earnings, and cash flows for the three
month periods ended March 31, 2003 and 2002. 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 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 review, 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, 2002, 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 28, 2003, 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, 2002, is fairly stated, in all material respects, in relation to balance
sheet from which it has been derived.
/s/ Ernst & Young
Ernst & Young
Chartered Accountants
Douglas, Isle of Man
May 16, 2003
California Petroleum Transport Corporation
Condensed Statements of Operations and Retained Earnings
(Unaudited)
(in thousands of US$)
3 month period 3 month period
ended March 31, ended March 31,
2003 2002
Revenue
Interest income 3,177 3,585
Fees reimbursed by related parties 5 16
-------------------------------------
Net operating revenues 3,182 3,601
Expenses
General and administrative expenses (5) (16)
Amortisation of debt issue costs (64) (64)
Interest expense (3,113) (3,521)
-------------------------------------
(3,182) (3,601)
- -------------------------------------------------------------------------------
Net income - -
Retained earnings, beginning of period - -
- -------------------------------------------------------------------------------
Retained earnings, end of period - -
===============================================================================
See notes to the condensed financial statements.
California Petroleum Transport Corporation
Condensed Balance Sheets
(in thousands of US$)
March 31, 2003 December 31, 2002
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents 1 1
Current portion of serial loans receivable 18,160 18,160
Interest receivable 6,499 3,322
Other current assets 10 15
- -------------------------------------------------------------------------------
Total current assets 24,670 21,498
Serial loans receivable, less current portion 22,924 22,882
Term loans receivable 116,840 116,818
Deferred charges and other long-term assets 1,356 1,420
- -------------------------------------------------------------------------------
Total assets 165,790 162,618
===============================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accrued interest 6,499 3,322
Current portion of serial mortgage notes 18,160 18,160
Other current liabilities 10 15
- -------------------------------------------------------------------------------
Total current liabilities 24,669 21,497
Serial mortgage notes 23,220 23,220
Term mortgage notes 117,900 117,900
- -------------------------------------------------------------------------------
Total liabilities 165,789 162,617
Stockholder's equity
Share capital (1,000 shares of $1 authorised, 1 1
issued and outstanding)
- -------------------------------------------------------------------------------
Total liabilities and stockholder's equity 165,790 162,618
===============================================================================
See notes to the condensed financial statements.
California Petroleum Transport Corporation
Condensed Statements of Cash Flows
(Unaudited)
(in thousands of US$)
3 month period 3 month period
ended March 31, ended March 31,
2003 2002
Cash flows from operating activities
Net income - -
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortisation of deferred debt issue costs 64 64
Amortisation of issue discount on loan (64) (64)
receivable
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (3,112) (3,573)
(Decrease) increase in accounts payable 3,112 3,573
- -------------------------------------------------------------------------------
Net cash provided by operating activities
- -------------------------------------------------------------------------------
Cash at beginning of period 1 1
- -------------------------------------------------------------------------------
Cash at end of period 1 1
===============================================================================
Supplemental disclosure of cash flow information
Interest paid - -
=============================================================================
See notes to the condensed financial statements.
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Three month period ended March 31, 2003
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
California Petroleum Transport Corporation (the Company or California
Petroleum), which is incorporated in Delaware, is a special purpose
corporation that has been organized solely for the purpose of issuing, as
agent on behalf of CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers
(Bahamas II) Limited, CalPetro Tankers (Bahamas III) Limited and CalPetro
Tankers (IOM) Limited (each an "Owner" and, together the "Owners"), the
Serial Mortgage Notes and the Term Mortgage Notes (together, "the Notes")
as obligations of the Company and loaning the proceeds of the sale of the
Notes to the Owners to facilitate the funding of the acquisition of four
vessels (the "Vessels") 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 have chartered the Vessels to the Initial Charterer under
bareboat charters that are expected to provide sufficient payments to cover
the Owners' obligations under the loans from the Company. The Initial
Charterer can terminate a charter at specified dates prior to the
expiration of the charter, provided it notify the Owner at least 12 months
prior to such termination and make a Termination Payment. The Owners' only
source of funds with respect to the loans from the Company is payments from
the Initial Charterer, including Termination Payments. The Owners do not
have any other source of capital for payment of the loans.
The Company's only source of funds with respect to the Notes are payments
of principal and interest on the loans to the Owners. The Company does not
have any other source of capital for payment of the Notes.
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP). These
statements reflect the net proceeds from the sale of the Term Mortgage
Notes together with the net proceeds from sale of the Serial Mortgage Notes
having been applied by way of long-term loans to the Owners to fund the
acquisition of the Vessels from the Initial Charterer.
Basis of Presentation
The accompanying unaudited condensed consolidated 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
accounting principles generally accepted in the United States 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, 2002 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by accountancy principles generally
accepted in the United States 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, 2002.
2. PRINCIPAL ACCOUNTING POLICIES
(a) 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 Owners reimburse the
Company for general and administrative expenses incurred on their behalf.
(b) Deferred charges
Deferred charges represent the capitalization of debt issue costs. These
costs are amortized over the term of the Notes to which they relate.
(c) Reporting currency
The reporting and functional currency is United States dollars.
(d) Cash and cash equivalents
For the purpose of the statement 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.
(e) Use of estimates
The preparation of financial statements in accordance with GAAP requires
the Company to make estimates and assumptions in determining the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities on the dates of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
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.
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Three month period ended March 31, 2003
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.
Liquidity and Capital Resources
California Petroleum is a passive entity, and its activities are limited to
collecting cash from the Owners and making repayments on the Notes.
California Petroleum has no source of liquidity and no capital resources
other than the cash receipts attributable to the Loans.
Critical Accounting Policies
California Petroleum's principal accounting policies are described in Note
2 to the financial statements included in Item 1 of this Form 10-Q. The
most critical accounting policies include:
o revenue and expense recognition
o accounting for deferred charges
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(a) Quantitative information about market risk
Quantitative information about market risk instruments at March 31, 2003 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 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
--------------------------------------------------------------------------
(b) Qualitative information about market risk
The Company 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.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 99.1 Certification of Chief Executive Officer
Exhibit 99.2 Certification of Chief Financial Officer
Exhibit 99.3 Certification Pursuant to 18 USC Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
b. Reports on Form 8-K
The Company has not filed any current reports on Form 8-K with the SEC
during the current quarter of the fiscal period covered by this report.
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
/s/ Nancy D Smith
Nancy D Smith
May 15, 2003
Nancy D Smith
02089.0006 #405425