SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
______________________
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended
June 30, 1995
Commission File No. 1-9874
CALIFORNIA ENERGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware
94-2213782 (State or other jurisdiction of
(I.R.S. Employer incorporation or organization)
Identification No.)
302 South 36th Street, Suite 400, Omaha, NE
68131 (Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (402) 341-4500
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 (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Former name, former address and former fiscal year, if changed
since last report. N/A
49,971,545 shares of Common Stock, $0.0675 par value were
outstanding as of June 30, 1995.
CALIFORNIA ENERGY COMPANY, INC.
Form 10-Q
June 30, 1995
_____________
C O N T E N T S
PART I: FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Report of Independent Accountants
3
Consolidated Balance Sheets, June 30, 1995
and December 31, 1994
4
Consolidated Statements of Operations for the
Three Months and Six Months Ended June 30,
1995 and 1994
5
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1995 and 1994
6
Notes to Consolidated Financial Statements
7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
14
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
29 Item 2. Changes in Securities
29 Item 3. Defaults on Senior Securities
29 Item 4. Submission of Matters to a Vote of
Security Holders
29 Item 5. Other Information
29 Item 6. Exhibits and Reports on Form 8-K
30
Signatures
31
Exhibit Index
32
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders
California Energy Company, Inc.
Omaha, Nebraska
We have reviewed the accompanying consolidated balance sheet of
California Energy Company, Inc. and subsidiaries as of June 30,
1995, and the related consolidated statements of operations for the
three month and six month periods ended June 30, 1995 and 1994 and
the related consolidated statements of cash flows for the six month
periods ended June 30, 1995 and 1994. 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 of making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which
is the expression of 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 such consolidated financial statements for
them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of California
Energy Company, Inc. and subsidiaries as of December 31, 1994, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for the year then ended (not presented
herein), and in our report dated February 3, 1995, we expressed an
unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1994 is fairly
stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
July 27, 1995
CALIFORNIA ENERGY COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
________________________________
June 30
December 31
1995 1994
(unaudited)
ASSETS
Cash and investments $ 152,461
$ 254,004 Joint venture cash and investments
17,697 54,087 Restricted cash and investments
124,292 131,775 Short-term investments
31,800 50,000 Accounts
receivable 75,916
28,272 Due from joint ventures
1,796 - Properties and plants, net (Note 3)
1,562,034 556,992 Equipment, net of depreciation
4,436 4,651 Notes receivable -
joint ventures 13,416 12,627
Excess of cost over fair
value of net assets acquired, net 303,198
- Other investments
2,045 7,688 Deferred charges and other assets
73,771 31,049
Total assets $2,362,862
$1,131,145
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 646
$ 1,679 Other accrued liabilities
58,711 42,658 Project loans
367,201 233,080 Construction loans
88,870 31,503 Due to
Joint Ventures -
269 Senior Discount Notes (Note 4)
454,054 431,946 Merger loan (Note 8)
492,000 - Convertible debt (Note 5)
64,850 - Convertible
subordinated debentures 100,000 100,000
Deferred income taxes 217,131
26,568
Total liabilities 1,843,463
867,703
Deferred income 19,801
19,851
Redeemable preferred stock (Note 5) -
63,600
Commitments and contingencies
Stockholders' equity:
Preferred stock - authorized 2,000 shares,
none issued, no par value -
- Common stock - authorized 80,000 shares,
par value $0.0675 per share, issued and
outstanding 49,971 and 31,849 shares at
June 30, 1995 and December 31, 1994,
respectively (Note 9) 3,381
2,407 Additional paid-in capital
332,659 100,421 Retained earnings
165,148 142,937 Treasury stock - 102 and
3,800 common
shares at June 30, 1995 and
December 31, 1994, respectively, at cost (1,590)
(65,774)
Total stockholders' equity 499,598
179,991
Total liabilities and
stockholders' equity $2,362,862
$1,131,145
The accompanying notes are an integral part of these
financial statements.
CALIFORNIA ENERGY COMPANY, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
________________________________
Three Months Ended
Six Months Ended
June 30 June 30
1995 1994 1995 1994
(unaudited)
(unaudited)
Revenues:
Sales of electricity and steam $ 81,756 $36,850
$154,734 $67,669 Royalties
4,912 - 8,829 - Interest and other
income 10,428 8,404 20,218 12,995
Total revenues 97,096 45,254
183,781 80,664
Costs and expenses:
Plant operations 20,447 7,892
38,873 14,041 General and administration
4,851 2,941 11,277 6,320 Royalties
5,922 2,397 10,336 4,394
Depreciation and amortization 15,641 5,002
29,824 9,800 Interest expense
35,733 17,594 65,295 26,827 Less interest
capitalized (5,637) (2,628) (10,121)
(5,431)
Total costs and expenses 76,957 33,198
145,484 55,951
Income before income taxes 20,139 12,056
38,297 24,713
Provision for income taxes 6,248 3,677
11,788 7,727
Income before minority interest
and extraordinary item 13,891 8,379
26,509 16,986
Minority interest - -
3,005 -
Income before extraordinary item 13,891 8,379
23,504 16,986
Extraordinary item (less applicable
income taxes of $945) (Note 7) - -
- (2,007)
Net income 13,891 8,379
23,504 14,979
Preferred dividends
(paid in kind)* (Note 5) - 1,236
1,080 2,436
Net income available for
common shareholders $ 13,891 $ 7,143
$ 22,424 $12,543
Income per share before extraordinary
item $ .27 $ .20
$ .48 $ .40
Extraordinary item (Note 7) - -
- (.06)
Net income per share $ 0.27 $ 0.20
$ 0.48 $ 0.34
Average number of common and
common equivalent shares
outstanding 52,156 35,883
46,736 36,827
The accompanying notes are an integral part of these
financial statements.
* Reflects dividends on the Company's Series C Redeemable
Convertible Preferred Stock, which were payable in kind. The
Series C Stock was exchanged in whole into the Company's
Convertible Debt on March 15, 1995 (see Note 5).
CALIFORNIA ENERGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
----------------------
Six Months Ended
June 30
1995 1994
(unaudited)
Cash flows from operating activities: Net
income $ 23,504
$ 14,979 Adjustments to reconcile net cash flow from
operating activities:
Depreciation and amortization
29,824 9,800 Amortization of original issue discount
22,108 10,850 Amortization of deferred
financing costs 5,377 957
Provision for deferred income taxes
4,594 2,451 Changes in other items:
Accounts receivable
(17,794) (8,787) Accounts payable and accrued liabilities
(15,041) 396 Deferred income
(50) (439)
Income tax payable
- (3,770)
Net cash flows from operating activities
52,522 26,437
Cash flows from investing activities:
Capital expenditures relating to power plants
and development for existing projects
(6,823) (13,903) Acquisition of equipment
(98) (271) Purchase
of Magma, net of cash acquired (906,226)
- Upper Mahiao construction
(62,736) (12,484) Mahanagdong construction
(16,873) (743) Malitbog
construction (28,412)
- Other international development
(2,812) (179) Salton Sea expansion construction
(27,684) - Yuma construction
- (5,903)
Pacific Northwest, Nevada and Utah
(1,081) (4,722) Decrease in short-term investment
82,955 - Decrease (increase) in
restricted cash 7,483 (50,371)
Decrease in other investments and assets
5,648 7,072
Net cash flows from investing activities
(956,659) (81,504)
Cash flows from financing activities:
Proceeds and net benefits from sale of common
and treasury stock and exercise of options
298,987 319 Repayment of project finance loans
(54,924) (13,800) Construction loan
57,367 5,811
Proceeds from merger loan
500,000 - Repayment of merger loan
(8,000) - Deferred financing costs
- Merger loan (22,782) -
Deferred financing costs - Senior Discount Notes
- (11,201) Proceeds from issue of Senior Discount Notes
- 400,000 Defeasance of Senior Notes
- (35,730) Increase
in amounts due from joint ventures (2,854)
(300) Purchase of treasury stock
(1,590) (49,909)
Net cash flows from financing activities
766,204 295,190
Net increase (decrease) in cash and
cash equivalents
(137,933) 240,123 Cash and cash equivalents at beginning of
period 308,091 142,699
Cash and cash equivalents at end of period $
170,158 $382,822
Supplemental disclosures:
Interest paid, net of amount capitalized $
34,886 $ 12,531
Income taxes paid $
6,380 $ 3,100
The accompanying notes are an integral part of these
financial statements.
CALIFORNIA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts and per kWh
amounts)
________________________________
1. General:
In the opinion of management of California Energy Company, Inc.
(the "Company"), the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial
position as of June 30, 1995 and the results of operations for the
three and six months ended June 30, 1995 and 1994, and cash flows
for the six months ended June 30, 1995 and 1994.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, and its proportionate
share of the accounts of the partnerships and joint ventures in
which it has invested. The June 30, 1995 financial statements
reflect the acquisition of Magma Power Company (See Note 8).
The results of operations for the three and six months ended June
30, 1995 and 1994 are not necessarily indicative of the results to
be expected for the full year.
Certain amounts in the 1994 financial statements and supporting
footnote disclosures have been reclassified to conform to the 1995
presentation. Such reclassification did not impact previously
reported net income or retained earnings.
2. Other Footnote Information:
Reference is made to the Company's most recently issued annual
report that included information necessary or useful to the
understanding of the Company's business and financial statement
presentations. In particular, the Company's significant accounting
policies and practices were presented as Note 2 to the consolidated
financial statements included in that report.
On January 1, 1996, the Company intends to adopt Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of". Management anticipates that the adoption of SFAS No.
121 will not have a material effect on the Company's financial
statements.
CALIFORNIA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts and per kWh
amounts) -----------------------------
3. Properties and Plants:
Properties and plants comprise the following:
June 30
December 31
1995* 1994
(unaudited)
Project costs:
Power plants and gathering systems $ 953,502
$ 314,027 Wells and resource development
268,065 174,651
1,221,567
488,678 Less accumulated depreciation
and amortization (116,797)
(90,457)
Net facilities 1,104,770
398,221
Wells and resource construction
in progress 434
434
Total project costs 1,105,204
398,655
Upper Mahiao construction 111,290
48,554 Mahanagdong construction
38,316 21,443 Malitbog construction
102,201 - Other international development
5,257 2,445 Salton Sea expansion
construction 112,790 - Pacific
Northwest 47,737
46,620 Nevada and Utah properties costs
39,239 39,275
Total $1,562,034
$ 556,992
* Property and plant costs include allocated purchase price of the
Magma Power Company acquisition.
4. Senior Discount Notes:
In March 1994, the Company issued $400,000 of 10 1/4% Senior
Discount Notes which accrete to an aggregate principal amount of
$529,640 at maturity in 2004. The original issue discount (the
difference between $400,000 and $529,640) is being amortized from
issue date through January 15, 1997, during which time no cash
interest will be paid on the Senior Discount Notes. be SCE's
Avoided Cost of Energy. For the year ended December 31, 1994,
SCE's
averaglized, increased to $30,096 in the second quarterr ended June
30, 1995, the Company filed the following:
(i) Form 8-K dated May 16, 1995 reporting the
audited consolidated balance sheets of Magma
Power Company as of December 31, 1994 and 1993,
and the related audited consolidated statements
of income and cash flows for each of the three
years in the period ended December 31, 1994.
The Form 8-K also included the unaudited
consolidated balance sheets of Magma Power
Company for the quarter ended March 31, 1995
and 1994, and the related unaudited
consolidated statements of income and cash flows
for each of the quarterly periods ended March 31,
1995 and 1994.
(ii) Form 8-K dated June 23, 1995, releasing the
Independent Engineer's Report which was prepared
by Stone and Webster Engineering Corporation
and furnished to prospective investors in
connection with the proposed issuance of
$475,000,000 Senior Secured Notes and Bonds by
Salton Sea Funding Corporation.
(iii) Form 8-K dated June 26, 1995 announcing a
planned offering of $200,000,000 of its Limited
Recourse Senior Secured Notes due 2003 as part
of a refinancing of certain indebtedness
incurred in connection with the Company's
acquisition of Magma Power Company in February
1995.
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 ENERGY COMPANY, INC.
Date: August 15, 1995 /s/ John G. Sylvia
John G. Sylvia
Senior Vice President and
Chief Financial Officer
/s/ Gregory E. Abel
Gregory E. Abel
Vice President, Controller
and Chief Accounting
Officer
EXHIBIT INDEX
Exhibit
Page No.
No.
11 Calculation of Earnings Per Share
33
15 Awareness Letter of Independent Accountants
34
27 Financial Data Schedule
35