Calpine Provides Update on Financial Audits; Company to Modify Treatment of Two Leases.
Calpine Corporation today announced that it has determined in consultation with its independent auditor Independent Auditor
An external auditor with a certified public accounting designation that qualifies him or her to provide an auditor's report.
These auditors aren't affiliated with the company being audited. Deloitte & Touche LLP LLP - Lower Layer Protocol (D&T) that two sale-leaseback transactions, previously accounted for as operating leases, will be recorded as financing transactions. The lease reclassifications will affect the company's financial results for the years ended December 31, 2000, 2001 and 2002. The company does not expect any adverse impact on the cash flow or liquidity position of the company or its outlook for 2003. The reclassifications will not cause Calpine to be in default of any covenants under the company's indentures or credit agreements.
In connection with the ongoing re-audits of the 2000 and 2001 financial statements, it has been determined that the power contracts in place at two power plants (Pasadena and Broad River), for which the company has utilized sale-leaseback transactions, have characteristics that prevent the use of operating lease Operating Lease
A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset.
An operating lease is not capitalized it is accounted for as a rental expense. treatment. As a result, these two transactions will now be recorded as financings in Calpine's consolidated financial statements. The company noted that its former independent auditor, Arthur Andersen LLP, had previously concurred that the leases met the criteria for operating lease accounting under generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records.
Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting .
"Sale-leaseback accounting represents a very complex, technical and highly judgmental area of accounting," stated Bob Kelly, executive vice president and chief financial officer. "Calpine is currently evaluating amendments that could be made to the power contracts for these two projects, which would allow us to account for these transactions as operating leases going forward."
Sale-leaseback transactions are a common form of financing in many industries, including the power industry. Calpine provides details on its lease obligations in its notes to its financial statements.
Impact on Financial Statements
The reclassification Reclassification
The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of the two sale-leasebacks to financing transactions will require Calpine to restate its financial statements for the years ended December 31, 2000 and 2001 and adjust its previously announced unaudited financial results for the year ended December 31, 2002. All results remain subject to the completion by the company of its Annual Report on Form 10-K and the 2002 audit and the re-audits of 2000 and 2001 by D&T. These changes are summarized in the table below:
2000 2001 2002 Reported Restated Reported Restated Announced Adjusted Income Statement ($ in millions, except per share data) GAAP Earnings (A) Net Income $ 373 $ 369 $ 648 $ 623 $ 142 $ 119 Diluted Earnings per Share $1.19 $1.18 $1.87 $1.80 $0.39 $0.33 Balance Sheet ($ in billions, except ratio data) Debt Total Debt $ 4.8 $ 5.1 $12.7 $13.4 $13.4 $14.1 Total Debt to Capitalization 0.57 0.59 0.75 0.76 0.72 0.73
(A) The impact on the recurring earnings for 2002 and 2001 discussed in the company's February 13, 2002 news release would be comparable to the impact on GAAP GAAP
See: Generally Accepted Accounting Principles
See generally accepted accounting principles (GAAP). earnings as noted above. The news release is available on Calpine's website at http://www.calpine.com/.
In connection with the completion of the audit and re-audits, Calpine is seeking the review and concurrence by the Staff of the Securities and Exchange Commission (SEC) for the appropriate accounting treatment for two other power sales contracts, which were entered into in 2001. Both D&T and the company's former independent auditor concurred that the company's accounting treatment for the revenue from these contracts is acceptable.
If the SEC were to disagree with this determination, the timing of the recorded revenue for these contracts would shift such that net income would decrease by approximately $36 million in 2001; net income would increase by the same amount in the aggregate from 2002 through 2009. The company does not expect any adverse impact on the cash flow or liquidity position of the company or its outlook for 2003. This change will not cause Calpine to be in default of any covenants under the company's indentures or credit agreements.
Taking into account the impact of the lease reclassifications, the company is confirming its guidance for 2003 diluted earnings per share diluted earnings per share
An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of for the year ending December 31, 2003 of approximately $0.40 to $0.50 per share.
Conference Call Information
Calpine will host a brief conference call at 8:30 a.m. PST PST Paroxysmal supraventricular tachycardia, see there this morning to discuss these issues. To participate in the teleconference, in a listen-only mode, dial 888-603-6685 at least five minutes before the start of the conference call. In addition, Calpine will simulcast the conference call live via the Internet. The web cast can be accessed and will be available for 30 days on the Investor Relations Investor relations
The process by which the corporation communicates with its investors. page of Calpine's website at http://www.calpine.com/.
Based in San Jose, Calif., Calpine Corporation is a leading independent power company that is dedicated to providing wholesale and industrial customers with clean, efficient, natural gas-fired power generation. It generates and markets power from plants it develops, owns, leases and operates in 23 states in the United States, three provinces in Canada and in the United Kingdom. Calpine is also the world's largest producer of renewable geothermal energy, and it owns approximately one trillion cubic feet equivalent of proved natural gas reserves in Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. . The company was founded in 1984 and is publicly traded on the New York Stock Exchange New York Stock Exchange (NYSE)
World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol CPN CPN Communist Party of Nepal
CPN Commercial Property News
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CPN Connaitre et Proteger la Nature . For more information about Calpine, visit its website at http://www.calpine.com/.
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements such as those concerning Calpine Corporation's ("the Company") expected financial performance and its strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements, such as, but not limited to risks identified from time-to-time in our reports and registration statements filed with the SEC, including the risk factors identified in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 and in our Annual Report on Form 10-K for the year ended December 31, 2001, which can be found on the Company's web site at http://www.calpine.com/. All information set forth in this news release is as of today's date, and the Company undertakes no duty to update this information.
CONTACT: media, Katherine Potter, +1-408-995-5115, ext. 1168, or investors, Rick Barraza, +1-408-995-5115, ext. 1125, both of Calpine Corp.
Web site: http://www.calpine.com/