UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2005
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Or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission File Number: 033-79220
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California Petroleum Transport Corporation
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(Exact name of registrant as specified in its charter)
Delaware 04-3232976
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(State or other jurisdiction (I.R.S.Employer Identification No.)
of incorporation or organization)
Suite 3218, One International Place, Boston, Massachusetts 02110-2624
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(Address of principal executive offices) (Zip Code)
(617) 951-7690
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(Registrant's telephone number, including area code)
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(Former name, former address and
former fiscal year, if changed since last report)
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. [X] Yes [_] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2) of the Exchange Act) [_] Yes [X] No
Number of shares outstanding of each class of Registrant's Common Stock as of
May 13, 2005
Common, $1.00 par value ............................................1,000 shares
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Three month period ended March 31, 2005
Index
Part I Financial Information
Item 1 Financial Statements
Unaudited Statements of Operations and Retained Earnings - Three
Month Periods Ended March 31, 2005 and 2004
Unaudited Balance Sheets - March 31, 2005 and December 31, 2004
Unaudited Statements of Cash Flows - Three Month Periods Ended
March 31, 2005 and 2004
Unaudited Notes to the Financial Statements
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3 Quantitative and Qualitative Disclosures about Market Risk
Item 4 Controls and Procedures
Part II Other Information
Item 6 Exhibits
Signatures
Omitted items are not applicable
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
California Petroleum Transport Corporation
Statements of Operations and Retained Earnings
(Unaudited)
(in thousands of US$)
3 month period ended
March 31
2005 2004
Revenue
Interest income 2,635 2,944
Fees reimbursed by related parties 8 4
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Net operating revenues 2,643 2,948
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Expenses
General and administrative expenses (8) (4)
Amortization of debt issue costs (64) (64)
Interest expense (2,571) (2,880)
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(2,643) (2,948)
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Net income -- --
Retained earnings, beginning of period -- --
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Retained earnings, end of period -- --
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See notes to the financial statements (unaudited)
California Petroleum Transport Corporation
Balance Sheets (Unaudited)
(in thousands of US$)
March 31, December 31,
2005 2004
ASSETS
Current assets:
Cash and cash equivalents 1 1
Current portion of serial loans receivable 7,740 7,740
Current portion of term loans receivable 6,542 6,542
Interest receivable 5,270 2,635
Other current assets 8 32
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Total current assets 19,561 16,950
Serial loans receivable, less current portion 2,570 2,528
Term loans receivable, less current portion 107,119 107,097
Deferred charges and other long-term assets 844 908
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Total assets 130,094 127,483
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LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accrued interest 5,270 2,635
Current portion of serial mortgage notes 7,740 7,740
Current portion of term mortgage notes 6,542 6,542
Other current liabilities 8 32
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Total current liabilities 19,560 16,949
Serial mortgage notes, less current portion 2,530 2,530
Term mortgage notes, less current portion 108,003 108,003
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Total liabilities 130,093 127,482
Stockholder's equity
Common stock, $1 par value; 1,000
shares authorized, issued and
outstanding 1 1
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Total liabilities and stockholder's equity 130,094 127,483
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See notes to the financial statements (unaudited)
California Petroleum Transport Corporation
Statements of Cash Flows
(Unaudited)
(in thousands of US$)
3 month period ended
March 31,
2005 2004
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 receivable (64) (64)
Changes in operating assets and liabilities:
Increase in interest receivable (2,635) (2,943)
Increase on other current assets (23) (3)
Increase in accrued interest 2,635 2,943
Decrease in other current liabilities 23 3
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Net cash provided by operating activities -- --
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Cash flows from investing activities
Collections on loans receivable -- --
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Net cash provided by investing activities -- --
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Cash flows from financing activities
Repayments of mortgage notes -- --
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Net cash used in financing activities -- --
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Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period 1 1
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Cash and cash equivalents at end of period 1 1
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Supplemental disclosure of cash flow information:
Interest paid -- --
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See notes to the financial statements (unaudited)
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Three month period ended March 31, 2005
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 full recourse 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") by the Owners 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.
The Owners have chartered the Vessels to Chevron Transport Corporation
under bareboat charters that are expected to provide sufficient payments to
cover the Owners' obligations under the loans from the Company. Chevron
Transport Corporation 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. Refer to
Note 8. for subsequent events. The Owners' only source of funds with
respect to the loans from the Company is payments from Chevron Transport
Corporation, 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 the
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 Chevron Transport Corporation.
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 GAAP 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, 2004 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by GAAP 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, 2004.
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 the United States dollar.
(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 7.60% to 7.62% and mature over a remaining two-year period beginning
April 1, 2005. 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 remaining eleven-year period
beginning April 1, 2005. The loans are reported net of the related
discounts, which are amortised over the term of the loans.
5. SERIAL LOANS AND TERM LOANS COLLATERAL
The Serial and Term Loans are collateralised by first preferred mortgages
on the Vessels to the Company. The earnings and insurance relating to the
Vessels have been collaterally assigned pursuant to an assignment of
earnings and insurance to the Company, which in turn has assigned such
assignment of earnings and insurance to JP Morgan Chase (formerly Chemical
Trust Company of California) as the collateral trustee. The Charters and
Chevron Guarantees (where the obligations of Chevron are guaranteed by
ChevronTexaco Corporation) relating to the Vessels have been collaterally
assigned pursuant to the assignment of initial charter and assignment of
initial charter guarantee to the Company, which in turn has assigned such
assignments to the collateral trustee. The Capital stock of each of the
Owners has been pledged to the Company pursuant to stock pledge agreements.
6. 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. The
deferred charges are comprised of the following amounts:
(in thousands of $) March 31, 2005 December 31, 2004
Debt arrangement fees 3,400 3,400
Accumulated amortisation (2,556) (2,492)
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844 908
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7. NEW ACCOUNTING STANDARDS
In December 2004, the FASB issued Statement of Financial Accounting
Standards No. 123 - Revised, Share-Based Payment ("SFAS 123R"). SFAS 123R
revises SFAS 123 Accounting for Stock-Based Compensation ("SFAS 123") and
supersedes Accounting Principles Board Opinion No. 25 Accounting for Stock
issued to Employees ("APB 25") and requires companies to expense the fair
value of employee stock options and other forms of stock-based
compensation. SFAS 123R adopts a similar approach to SFAS 123 and sets
forth criteria that must be met in order for an award to fall under the
scope of the Standard. SFAS 123R requires companies to fair value its stock
based compensation awards and cease using the intrinsic value method off
accounting allowed under APB 25. SFAS 123R is effective for public
companies for interim or annual reporting periods ending after June 15,
2005 and applies to awards that are granted, modified or settled after the
effective date. As discussed in more detail in Note 22, the Company did not
grant any options in 2004 and 2003 and all option plans expired in 2004..
In December 2004, the FASB issued Statement of Financial Accounting
Standards 153 Exchanges of Nonmonetary Assets, an amendment of APB Opinion
No. 29 ("SFAS 153"). APB Opinion No. 29 Accounting for Nonmonetary
Transactions ("APB 29") provides that accounting for nonmonetary
transactions should be measured based on the fair value of the assets
exchanged but allows certain exceptions to this principle. SFAS 153 amends
APB 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that don't have commercial substance. A nonmonetary
exchange has commercial substance if the future cash flows of the entity
are expected to change significantly as a result of the exchange. SFAS 153
is effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005 and shall be applied prospectively. As such,
adoption of SFAS 153 will not have an effect on the Company's results.
8. SUBSEQUENT EVENTS
On March 28, 2005, CalPetro Bahamas III received non-binding notice of Chevron's
intention to exercise its first termination option on the single hull vessel
Virgo Voyager. Subsequently, on April 21, 2005 Bahamas III received irrevocable
notice from Chevron to terminate the bareboat charter for Virgo Voyager on April
1, 2006. On April 28, 2005 a Form 8-K Current Report was filed stating this
change. Frontline Ltd, as the appointed manager to the Owner, will attempt to
arrange for an acceptable replacement charter.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Organization and History
California Petroleum Transport Corporation (the "Company") 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 on behalf of the Owners, Serial Mortgage Notes and Term
Mortgage Notes (the "Notes") as full recourse obligations of the Company and
loaning the proceeds of the sale of the Notes to the Owners (the "Loans"). The
Notes were issued on April 5, 1995.
Results of Operations
The net change in interest income and interest expense over the three month
period ended March 31, 2005 and March 31, 2004 decreased by the same amount
representing interest received on Term and Serial Loans and interest paid on
Term and Serial Notes. There were no other changes on the statements of
operations and retained earnings.
Financial Condition
Interest payable and interest receivable over the period ended March 31, 2005
increased and decreased by the same amount due interest accrued on Term and
Serial Loans and Term and Serial Notes for the three months. Other current
liabilities and other current assets decreased by the same amounts representing
the payment and reimbursement by the Owners of administrative expenses during
the quarter. As detailed in Note 6., deferred charges were amortised for the
three month period. There were no other changes on the balance sheet for the
three month period ended March 31, 2005.
Liquidity and Capital Resources
The Company is a passive entity, and its activities are limited to collecting
cash from the Owners and making repayments on the Notes. The Company has no
source of liquidity and no capital resources other than the cash receipts
attributable to the Loans.
Off-balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have, or are reasonably
likely to have, a material current effect or that are reasonably likely to have
a material future effect on our financial condition, revenues or expenses,
liquidity, capital expenditures or capital reserves.
Critical Accounting Policies
There have been no material changes to our critical accounting policies and
estimates from the information provided in Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations included in our 2004
Form 10-K.
New Accounting Standards
New accounting standards are disclosed in Note 7 to the financial statements
included in Item 1 of this Form 10-Q.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(a) Quantitative information about market risk
Quantitative information about market risk instruments at March 31, 2005 is
as follows:
(in thousands of $)
Serial Mortgage Notes (7.60% to 7.62%) maturing through 2006 10,270
8.52% Term Mortgage Notes due 2015 114,545
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Total debt 124,815
Less: short-term portion (14,282)
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110,533
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The outstanding debt as of March 31, 2005 is repayable as follows:
(in thousands of $)
Year ending December 31,
2005 14,282
2006 12,056
2007 10,942
2008 10,942
2009 10,942
2010 and later 65,651
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Total debt 124,815
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The serial mortgage notes bear interest at rates ranging from 7.60% to
7.62% through maturity. The serial mortgage notes mature over a remaining
two-year period beginning April 1, 2005. Interest is payable semi-annually.
The serial mortgage notes include certain covenants such as restriction on
the payment of dividends and making additional loans or advances to
affiliates. At March 31, 2005 the Company was in compliance with these
covenants.
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
remaining eleven-year sinking fund schedule beginning April 1, 2005.
Interest is payable semi-annually. The term mortgage notes include certain
covenants such as restriction on the payment of dividends and making
additional loans or advances to affiliates. At March 31, 2005, the Company
was in compliance with these covenants.
As of March 31, 2005, the effective interest rate for the Notes of the
Company was 8.44%.
The term mortgage notes are subject to redemption through operation of the
mandatory sinking fund on April 1 of each year, commencing on April 1,
2004, to and including April 1, 2014, according to the applicable schedule
of sinking fund payments set forth herein. The sinking fund redemption
price is 100% of the principal amount of term mortgage notes being
redeemed, together with interest accrued to the date fixed for redemption.
If a Charter is terminated, the scheduled mandatory sinking fund payments
on the term mortgage notes will be revised so that the allocated principal
amount of the term mortgage notes for the related Vessel will be redeemed
on the remaining sinking fund redemption dates on a schedule that
approximates level debt service with an additional principal payment on the
maturity date of $7,000,000, for any of the double-hulled Vessels, or
$5,500,000 for the single hulled Vessel.
The table below provides the revised scheduled sinking fund redemption
amounts and final principal payments on the term mortgage notes following
termination of the related charters on each of the optional termination
dates.
(in thousands of $)
Scheduled Charter Charter Charter Charter Charter Charter Charter Charter
payment not terminated terminated terminated terminated terminated terminated terminated
date terminated 2005 2006 2007 2008 2009 2010 2011
2005 6,542 3,355 3,187 3,355 3,187 3,355 3,187 --
2006 9,526 3,330 3,187 6,339 3,187 6,339 3,187 2,984
2007 10,942 3,610 2,270 6,339 4,603 6,339 4,603 2,984
2008 10,942 3,920 2,460 3,390 4,603 6,339 4,603 2,984
2009 10,942 4,260 2,670 3,680 2,180 6,339 4,603 2,984
2010 and later 65,651 48,274 34,022 43,646 30,036 38,038 27,613 17,906
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114,545 66,749 47,796 66,749 47,796 66,749 47,796 29,842
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(b) Qualitative information about market risk
The Company was organized solely for the purpose of issuing, as agent on
behalf of the Owners, the Term Mortgage Notes and Serial Mortgage 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 the
Vessels from Chevron Transport Corporation.
ITEM 4 - CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
The Company's management, with the participation of the Company's manager
Frontline Ltd, including the Company's President and Treasurer, has
evaluated the effectiveness of the Company's disclosure controls and
procedures as of March 31, 2005. Based on that evaluation, the Company's
President and Treasurer concluded that the Company's disclosure controls
and procedures were effective as of March 31, 2005.
(b) Changes in internal controls
There were no material changes in the Company's internal control over
financial reporting during the first quarter of 2005.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS
Exhibit 31.1* Certification of Principal Executive Officer
pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act, as amended
Exhibit 31.2* Certification of Principal Financial Officer
pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act, as amended
Exhibit 32.1** Certification of Principal Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
Exhibit 32.2** Certification of Principal Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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* Filed herewith.
**Furnished herewith.
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
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(Registrant)
Date May 16, 2005 By /s/ Nancy I. DePasquale
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Nancy I. DePasquale
Director and President
Date May 16, 2005 By /s/ Nancy I. DePasquale
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R. Douglas Donaldson
Treasurer and Principal
Financial Officer
02089.0006 #570417