CALIFORNIA PETROLEUM TRANSPORT CORPORATION
THIRD QUARTER
REPORT
1998
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 Quarter Ended Commission File Number 33-79220
September 30, 1998 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.)
Room 6/9, 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
November 2, 1998.
Common, $1.00 par value..............................1,000 shares
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Review Report of Independent Accountants 2
Unaudited Condensed Balance Sheet - September 30,
1998 and December 31, 1997. 4
Unaudited Condensed Income Statement
Nine Months Ended September 30, 1998 and 1997 6
Unaudited Condensed Statement of Cash Flows -
Nine Months Ended September 30, 1998 and 1997 7
Notes to Unaudited Condensed Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative disclosures about
Market Risk 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
SIGNATURES 15
Omitted items are not applicable
1
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of California Petroleum Transport Corporation
We have reviewed the accompanying condensed balance sheet of
California Petroleum Transport Corporation as of September 30,
1998, and the related condensed statements of income and the
condensed statement of cash flows for the nine-month periods
ended September 30, 1998 and 1997. 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,
1997, and the related statements of income and cash flows for the
year then ended, not presented herein, and in our report dated
March 18, 1998, 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,
1997, is fairly stated, in all material respects, in relation to
balance sheet from which it has been extracted.
2
Ernst & Young
Chartered Accountants
Douglas, Isle of Man
November 2, 1998
3
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
UNAUDITED CONDENSED BALANCE SHEET
(US Dollars in thousands) Sept 30, Dec 31,
1998 1997
Assets
Current assets:
Cash and cash equivalents 1 1
Current portion of serial loan (note 2)
(Maturity date April 1, 1999) 18,160 18,160
Interest receivable 9,274 4,962
Other assets 45 28
_______ _______
Total current assets 27,480 23,151
Serial loans receivable less current
portion (note 2) 94,808 112,842
Terms loans receivable (note 3) 116,444 116,378
Deferred charges and other assets 2,508 2,700
________ ________
Total assets 241,240 255,071
======== ========
Liabilities and stockholders' equity
Current liabilities:
Interest accrued 9,274 4,962
Current portion of serial mortgage
notes (note 4)
(due April 1, 1999) 18,160 18,160
Other liabilities 45 28
_______ _______
Total current liabilities 27,479 23,150
Serial mortgage notes (note 4) 95,860 114,020
Term mortgage notes (note 5) 117,900 117,900
________ ________
4
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
UNAUDITED CONDENSED BALANCE SHEET
(CONTINUED)
Total liabilities 241,239 255,070
________ ________
Stockholders' equity:
Common stock: 1,000 shares authorized,
issued and outstanding 1 1
____ ____
________ ________
Total liabilities and stockholders'
equity 241,240 255,071
======== ========
The accompanying notes are an integral part of this statement
5
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
UNAUDITED CONDENSED INCOME STATEMENT
(US Dollars in thousands) Three months Nine months
ended Sept 30, ended Sept 30,
1998 1997 1998 1997
Income
Interest income 4,701 5,026 14,428 15,395
Recovery of overheads 15 15 45 45
_____ _____ ______ ______
4,716 5,041 14,473 15,440
Deduct:
Expenses
Interest payable 4,637 4,962 14,236 15,203
Overheads 15 15 45 45
Amortization of debt issue costs 64 64 192 192
_____ _____ _____ _____
Net result for the period NIL NIL NIL NIL
_____ _____ _____ _____
The accompanying notes are an integral part of this statement
6
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
(US Dollars in thousands) Nine months Nine months
ended Sept 30, ended Sept 30,
1998 1997
Cash Flows from Operating Activities:
Net income - -
Adjustments to reconcile net income to
net cash provided by operating activities:
Recognition of deferred expenses (192) (192)
Recognition of unearned income 192 192
Changes in assets and liabilities
Accounts receivable 4,293 4,684
Accounts payable (4,293) (4,684)
______ ______
Net cash provided by
operating activities NIL NIL
______ ______
Cash Flows from Investing Activities:
Term and Serial loans 18,160 18,160
_______ _______
Cash Flows from Financing Activities
Serial Notes redeemed (18,160) (18,160)
_______ ______
Net increase in cash and cash equivalents NIL NIL
==== ====
7
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
(CONTINUED)
Supplementary disclosure of cash flow information
Three months Nine months
ended Sept 30, ended Sept 30,
1998 1997 1998 1997
$000 $000 $000 $000
Interest paid NIL NIL 9,924 10,558
==== ==== ====== ======
The accompanying notes are an integral part of this statement
8
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1- Business and Summary of Accounting Policies
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.
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 capitalization of debt
issue costs. These costs are amortized over the term of the
Notes to which they relate.
9
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
Note 2- Serial Loans
The principal balances of the Serial Loans earn interest
at rates ranging from 7.30% to 7.62% and mature over an eight
year period beginning April 1, 1999. The loans are reported net
of the related discounts which are amortized over the term of the
loans.
Note 3- 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 nine years from
April 1, 1995. The loans are reported net of the related
discounts which are amortized over the term of the loans.
Note 4- Serial Mortgage Notes
The Serial Mortgage Notes bear interest at rates ranging
from 7.30% to 7.62% through maturity. The Notes mature over a
eight year period beginning April 1, 1999. Interest is payable
semi-annually.
Note 5- 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 nine years from April 1, 1995. Interest is payable
semi-annually.
10
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 December 31, 1997 is as follows:-
i) Serial Loans
The principal balances of the Serial Loans earn
interest at rates ranging from 7.15% to 7.62% and
mature over a nine year period beginning April 1,
1998. The loans are reported net of the related
disscounts which are amoritzed over the term of the
loans.
The outstanding serial loans have the following
characteristics:
Principal Interest Maturity
due rate date
$ 000
18,160 7.15% April 1, 1998
18,160 7.30% April 1, 1999
18,160 7.35% April 1, 2000
18,160 7.44% April 1, 2001
18,160 7.49% April 1, 2002
18,160 7.55% April 1, 2003
12,950 7.57% April 1, 2004
7,740 7.60% April 1, 2005
2,530 7.62% April 1, 2006
_______
132,180
_______
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 nine
years from April 1, 1995. The loans are reported
net of the related discounts which are amoritzed
over the term of the loans.
11
Item 3. Quantitative and Qualitative disclosures about Market
Risk (Continued)
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 No Initial All Initial
Payment date Charters Charters
Terminated Terminated
$ 000 $ 000
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 7.15% to 7.62% through maturity. The
Notes mature over an eleven year period beginning
one year from April 1, 1995. Interest is payable
semi-annually.
12
Item 3. Quantitative and Qualitative disclosures about Market
Risk (Continued)
The outstanding serial loans have the following
characteristics:
Principal dueInterest Rate Maturity Date
on maturity
$ 000
18,160 7.15% April 1, 1998
18,160 7.30% April 1, 1999
18,160 7.35% April 1, 2000
18,160 7.44% April 1, 2001
18,160 7.49% April 1, 2002
18,160 7.55% April 1, 2003
12,950 7.57% April 1, 2004
7,740 7.60% April 1, 2005
2,530 7.62% April 1, 2006
________
132,180
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 nine years from April 1, 1995.
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.
13
Item 3. Quantitative and Qualitative disclosures about Market
Risk (Continued)
Scheduled No Initial All Initial
Payment Date Charters Charters
Terminated Terminated
$000 $000
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.
The Term and Serial Loans are collateralized by first
preference 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
the Collateral Trustee. The Initial Charters and
Chevron Guarantees 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 Collaterial Trustee. The
Capital Stock of each of the Owners has been pledged to
the Company pursuant to the Stock Pledge Agreements.
14
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
1998 R. Douglas Donaldson
Treasurer
15
02089006.AA2