SHAWCOR LTD.
(TSX: SCL.SV.A, SCL.MV.B)
TORONTO, May 5 /CNW/ -
<<
Financial Summary
(In thousands of Canadian dollars except Three Months Ended Mar. 31
per share amounts) 2005 2004
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Operating Results
Revenue $ 284,097 $ 183,899
EBITDA (note 1) 42,959 22,893
Income from operations 29,583 7,829
Net income 17,758 3,585
Net income per share (Class A and B)
Basic 0.24 0.05
Diluted 0.24 0.05
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Cash Flow
Cash from (used in) operating activities (13,235) 10,785
Additions to capital assets 5,240 7,939
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Financial Position
Working capital 169,087 154,421
Total assets 777,699 877,339
Shareholders' equity per share (Class A and B) $ 6.10 $ 7.45
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Note 1: EBITDA is a non-GAAP measure calculated by adding back to net
income, interest, taxes and depreciation/amortization.
Consolidated revenue for the quarter climbed to $284.1 million, a 54%
increase over the corresponding quarter of last year. The strong sales for the
quarter were supported by growth in activity levels at Bredero Shaw's North
Sea large-diameter and North American small-diameter pipe-coating plants.
Increased pipe-coating project activity contributed to the strong result, as
did project-based sales growth at Canusa - CPS. Guardian and OMSCO also both
enjoyed strong volumes of business during the quarter, driven by high levels
of drilling in Canada and internationally.
Income from operations was $29.6 million for the quarter compared to
$7.8 million in the first quarter of last year, a result of the increased
activity at the pipe-coating divisions and the OMSCO and Guardian drill pipe
manufacturing and inspection businesses. Operating income for the quarter
includes on-going costs related to the closure of the Mobile facility of
$3.2 million. EBITDA generated in the quarter was $43.0 million, almost double
first quarter 2004 levels.
The closure of the Mobile facility, announced in the fourth quarter of
last year, is on schedule. Plant operations are winding down as projects under
contract are completed. As a result, losses at the plant were significantly
reduced from the levels in prior quarters. It is expected that work at the
plant will cease by the end of the second quarter, except for load-out of
remaining coated pipe, which is expected to extend into the third quarter of
the year.
Net income for the quarter was $17.8 million ($0.24 per share) compared
to $3.6 million ($0.05 per share) in the first quarter of 2004 and a net loss
of $78.1 million ($1.05 per share) in the prior quarter. Excluding the results
from Mobile, revenue of $268.8 million was $97.3 million higher than the first
quarter of 2004 and $21.3 million above fourth quarter 2004 levels. Excluding
the impact of the Mobile operating and closure costs of $3.2 million in the
quarter, net income for the quarter was $20.9 million, or $0.28 per share,
compared to $9.8 million, or $0.13 per share, for the corresponding quarter of
last year, and $15.6 million, or $0.21 per share, for the fourth quarter of
last year. The previous quarter included a higher than normal tax rate on
certain international operations.
On March 31, ShawCor announced the retirement, after 37 years of service
to the Company, of Geoff Hyland, President and Chief Executive Officer. In
keeping with the succession planning process in place, Mr. Bill Buckley,
currently Executive Vice President and Chief Operating Officer, has been
appointed President and C.E.O., effective July 1, 2005.
MANAGEMENT DISCUSSION AND ANALYSIS
The following is management's interim discussion and analysis of
operations and financial position and should be read in conjunction with the
Consolidated Financial Statements and Management's Discussion and Analysis
included in the Company's 2004 Annual Report.
Revenue and Income from Operations
ShawCor classifies its revenue and income from operations in three
industry segments: Pipeline, Exploration and Production and Petrochemical and
Industrial.
Consolidated revenue for the quarter was $284.1 million, an increase of
6% over the prior quarter and 54% over the first quarter of 2004. Net income
for the quarter was $17.8 million ($0.24 per share) compared to net income of
$3.6 million ($0.05 per share) in the corresponding quarter of last year and a
net loss of $78.1 million ($1.05 per share) in the prior quarter. The prior
quarter net loss included losses from the Mobile, Alabama plant totaling
$93.7 million, inclusive of an asset impairment charge of $50.4 million.
In the Pipeline segment, revenue for the quarter of $218.4 million
compares to $137.8 million in the corresponding quarter of last year and
$211.5 million in the prior quarter. Revenue at Bredero Shaw increased during
the quarter on the strength of higher activity levels at the North Sea plants
and at the North American small-diameter operations along with the
commencement of pipe-coating projects in Africa and Trinidad. Canusa - CPS and
Shaw Pipeline Services also experienced good levels of business activity in
the quarter, supported by strong project activity. Income from operations for
the pipeline segment totaled $24.8 million in the quarter compared to
$8.5 million in the corresponding quarter of last year. Excluding the impact
of the Mobile results, operating earnings were $28.0 million, an increase of
6% over the prior quarter on a comparable basis.
In the Exploration and Production segment, revenue for the quarter
totaled $34.9 million representing increases over the first quarter of last
year and the prior quarter of 122% and 13%, respectively. Activity levels
remained high at Guardian during the quarter and OMSCO experienced sales
growth of 24% over the previous quarter as the growing global rig count
continued to translate into new orders for OMSCO's products. Income from
operations for the segment totaled $5.6 million in the quarter compared to
$224 thousand in the first quarter of last year and $5.8 million in the fourth
quarter of 2004.
In the Petrochemical and Industrial segment, revenue in the quarter of
$31.2 million was only slightly higher than the first quarter of the previous
year but 17% over the prior quarter as both DSG-Canusa and ShawFlex continued
to enjoy strengthening demand for their products. Income from operations for
the segment increased to $3.8 million in the quarter from $3.5 million in the
first quarter of last year on the strength of revenue growth together with
improved margins in the wire and cable business.
Finance
Financial and corporate costs consist of corporate office costs not
charged to the operating divisions and other non-operating items including
foreign exchange gains and losses on cash balances. Financial and corporate
costs before foreign exchange losses of $576 thousand, totaled $4.1 million in
the quarter compared to $4.3 million in the prior quarter, before foreign
exchange gains of $242 thousand.
Net interest expense totaled $1.1 million in the quarter, compared to
$1.1 million in the prior quarter and $1.3 million in the first quarter of
2004 and reflected the impact of a more favourable exchange rate on the
translation of interest on the Company's U.S. Dollar-denominated Senior Notes.
Income tax expense was $11.0 million in the quarter compared to
$14.5 million in the prior quarter and $3.1 million in the corresponding
quarter of last year. The reduction of losses at the Company's Mobile plant,
losses which are not being tax-effected, has resulted in a tax rate closer to
the average expected rate of 35% to 38% than in past quarters.
Cash Flow
Cash flow generated from operating activities, before investments in
working capital and other, totaled $31.2 million in the quarter compared to
$6.1 million in the first quarter of last year with the improvement due to the
increased profitability in the period. $44.4 million was invested in working
capital during the quarter, mainly in receivables and inventories to support
higher business levels, while working capital and other was reduced by
$4.7 million in the first quarter of last year.
Capital expenditures for the quarter totaled $5.2 million compared to
$7.9 million in the corresponding quarter of last year and included continuing
development work on new pipe-coating plants in Indonesia, Nigeria and Ghana.
Cash flow generated from financing activities on the exercise of stock
options totaled $71 thousand in the quarter compared to $356 thousand in the
first quarter of 2004.
Liquidity and Capitalization
At March 31, 2005, the Company recorded a working capital ratio of 1.85
to 1 compared to 1.69 to 1 at December 31, 2004. Operating working capital,
excluding cash and cash equivalents, increased $43.3 million in the quarter to
$115.8 million with the increase primarily representing investments in
receivables and inventories to support higher activity levels in the quarter.
As a result, cash and cash equivalents decreased $18.7 million in the quarter
to $53.3 million.
Financial Instruments
The Company manages interest rate risk and foreign exchange risk through
the use of derivative financial instruments including foreign exchange option
contracts and forward exchange contracts. These instruments are used to hedge
exposures related to commercial activities only. The Company does not use them
for speculative purposes. Short-term movements on financial instruments
acquired as a hedge of a specific foreign currency purchase obligation or
revenue source are deferred and matched with the specific transaction.
At March 31, 2005, the Company had notional amounts of $81.8 million of
forward contracts outstanding (December 31, 2004 - $67.2 million) with a fair
value of $261 thousand (December 31, 2004 - $214 thousand). These amounts are
used to express the volume of transactions and are not recognized in the
consolidated financial statements.
Critical Accounting Estimates
The preparation of the consolidated financial statements in conformity
with Canadian Generally Accepted Accounting Principles ("GAAP") requires
management to make estimates and assumptions that affect the amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the period. These estimates and assumptions are made with
management's best judgment given the information available at the time,
however, actual results could differ from the estimates. Critical estimates
used in preparing the consolidated financial statements were materially
unchanged during the quarter.
Risks and Uncertainties
Operating in an international environment, servicing predominantly the
oil and gas industry, ShawCor faces a number of business risks and
uncertainties that could materially adversely affect the Company's
projections, business, results of operations and financial condition. There
were no material changes in the nature or magnitude of such business risks
during the quarter.
Contractual Obligations
There were no material changes to the Company's contractual obligation
during the quarter, other than those that would be expected in the ordinary
course of business.
Summary of Quarterly Results
The following is selected financial information for the nine most
recently completed quarters:
-------------------------------------------------------------------------
(In thousands of First Second Third Fourth Full Year
Canadian dollars except
per share amounts)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Revenue
2005 $ 284,097 $ - $ - $ - $ -
2004 183,899 201,947 208,862 268,722 863,430
2003 235,664 215,456 178,323 194,954 824,397
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Income (loss) from
operations
2005 29,583 - - - -
2004 7,829 1,166 (5,386) (11,754) (8,145)
2003 20,224 17,192 2,889 12,308 52,613
-------------------------------------------------------------------------
Asset impairment charges
2005 - - - - -
2004 - - - (50,390) (50,390)
2003 - - - - -
-------------------------------------------------------------------------
Net income (loss)
2005 17,758 - - - -
2004 3,585 (3,489) (8,658) (78,099) (86,661)
2003 10,622 8,596 97 5,036 24,351
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Basic earnings (loss) per
share (Classes A and B)
2005 0.24
2004 0.05 (0.05) (0.11) (1.05) (1.16)
2003 0.15 0.13 0.00 0.07 0.35
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Fully diluted earnings
(loss) per share
(Classes A and B)
2005 0.24 - - - -
2004 0.05 (0.05) (0.11) (1.05) (1.16)
2003 0.15 0.12 0.00 0.07 0.34
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The following are key factors affecting the comparability of quarterly
financial results.
The Company's business is heavily leveraged toward major oil and gas
pipeline projects, the timing of which can have significant impacts on any
given quarter. Due to the Company's large foreign operations, fluctuations in
foreign exchange rates can also impact quarterly results.
In November 2004, the Company announced the closure of its Mobile,
Alabama facility. This event had a significant impact on the financial results
for the fourth quarter of 2004.
Outstanding Share Capital
As at April 21, 2005, the Company had 61,362,008 Class A Subordinate
Voting Shares ("Class A") outstanding and 13,730,165 Class B Multiple Voting
Shares ("Class B") outstanding. Each Class B share is convertible into a Class
A share at the option of the holder. In addition, as at April 21, 2005, the
Company had stock options outstanding to purchase up to 2,877,624 Class A
shares.
Outlook
The outlook for the markets served by ShawCor remains favourable as
evidenced by the backlog of orders which stood at $482 million on March 31,
some $8 million higher than last quarter. While small-diameter pipeline
activity remains strong in North America, the large diameter transmission
segment is flat. This contrasts with our international markets where project
pipeline activity continues at a good pace. Market trends supported by surging
energy demand point to improvement in the North American pipeline outlook,
however, we do not expect any upturn in the large-diameter segment until 2006
at the earliest.
This document contains forward-looking statements, which are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in such statements.
Other information relating to the Company, including its Annual
Information Form, is available on SEDAR at www.sedar.com.
ShawCor will be hosting a Shareholder and Analyst Conference Call and
Webcast on Friday, May 6, 2005 at 10:00 a.m. EDT to discuss the Company's
First Quarter 2005 Financial Results. Please visit our website at
www.shawcor.com under "Investor Relations" for further details.
SHAWCOR LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands of Canadian dollars except per share data)
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31
---------------------
2005 2004
---------- ----------
Revenue $ 284,097 $ 183,899
---------- ----------
Operating expenses 240,004 160,714
Amortization 13,154 14,861
Research and development 1,812 1,512
---------- ----------
254,970 177,087
---------- ----------
Share of earnings in associated company 456 1,017
---------- ----------
Income from operations 29,583 7,829
Interest expense (note 4) 1,068 1,345
---------- ----------
Income before income taxes and
non-controlling interest 28,515 6,484
Income taxes 10,979 3,102
---------- ----------
Income before non-controlling interest 17,536 3,382
Non-controlling interest 222 203
---------- ----------
Net income $ 17,758 $ 3,585
---------- ----------
---------- ----------
Earnings per share Class A and B - Basic $ 0.24 $ 0.05
---------- ----------
---------- ----------
Earnings per share Class A and B - Diluted $ 0.24 $ 0.05
---------- ----------
---------- ----------
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SEGMENTED INFORMATION Three Months Ended
March 31
---------------------
Revenue 2005 2004
---------- ----------
Pipeline $ 218,416 $ 137,841
Exploration and Production 34,927 15,708
Petrochemical and Industrial 31,180 30,757
Intersegment Eliminations (426) (407)
---------- ----------
$ 284,097 $ 183,899
---------- ----------
---------- ----------
Income (loss) from operations
Pipeline $ 24,848 $ 8,538
Exploration and Production 5,606 224
Petrochemical and Industrial 3,811 3,514
Financial and Corporate (4,682) (4,447)
---------- ----------
$ 29,583 $ 7,829
---------- ----------
---------- ----------
SHAWCOR LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands of Canadian dollars)
CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months Ended
March 31
---------------------
2005 2004
---------- ----------
Operating activities:
Net income $ 17,758 $ 3,585
Items not requiring an outlay of cash:
Amortization 13,154 14,861
Gain on disposal of investment in shares - (185)
Change in deferred project costs 1,172 (9,085)
Future income taxes (246) (3,647)
Non-controlling interest in earnings of
subsidiaries (222) (203)
Share of earnings of associated company (456) 802
Change in non-cash working capital and other (44,395) 4,657
---------- ----------
Cash provided by (used in) operating activities (13,235) 10,785
---------- ----------
Investing activities:
Additions to property, plant and equipment (5,240) (7,939)
Proceeds on disposal of property, plant and
equipment 16 186
Proceeds on disposal of investment in shares - 285
---------- ----------
Cash used in by investing activities (5,224) (7,468)
---------- ----------
Financing activities:
Issue of shares 71 363
Dividends paid to non-controlling shareholders
of subsidiaries - (7)
---------- ----------
Cash provided by financing activities 71 356
---------- ----------
Foreign exchange on foreign cash and
cash equivalents (278) 1,819
---------- ----------
Net increase (decrease) in cash position during
the period (18,666) 5,492
Cash and cash equivalents at beginning of period 72,002 80,260
---------- ----------
Cash and cash equivalents at end of period $ 53,336 $ 85,752
---------- ----------
---------- ----------
SHAWCOR LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands of Canadian dollars)
CONSOLIDATED BALANCE SHEETS
Mar. 31 Dec. 31 Mar. 31
2005 2004 2004
---------- ---------- ----------
Assets
Current assets
Cash and cash equivalents $ 53,336 $ 72,002 $ 85,752
Accounts receivable 196,034 172,801 175,074
Inventories 103,710 94,444 66,424
Prepaid expenses 9,632 10,889 16,332
Future income taxes 5,028 5,010 310
---------- ---------- ----------
367,740 355,146 343,892
Property, plant and equipment, net 213,705 222,765 305,620
Goodwill 175,408 176,393 189,776
Investment in associated company 4,694 4,226 3,353
Other assets (note 5) 16,152 17,549 34,698
---------- ---------- ----------
$ 777,699 $ 776,079 $ 877,339
---------- ---------- ----------
---------- ---------- ----------
Liabilities
Current liabilities
Accounts payable and accrued
liabilities 170,820 188,591 164,754
Taxes payable 27,833 22,142 24,717
---------- ---------- ----------
198,653 210,733 189,471
Long-term debt 90,683 90,360 100,035
Future income taxes 27,878 28,262 25,387
Non-controlling interest in subsidiaries 3,105 3,318 3,751
---------- ---------- ----------
320,319 332,673 318,644
---------- ---------- ----------
Shareholders' Equity
Capital stock (note 8) 207,576 206,904 206,874
Contributed surplus (note 9) 7,196 7,196 5,803
Retained earnings 318,573 300,815 397,421
Cumulative translation account (75,965) (71,509) (51,403)
---------- ---------- ----------
457,380 443,406 558,695
---------- ---------- ----------
$ 777,699 $ 776,079 $ 877,339
---------- ---------- ----------
---------- ---------- ----------
SHAWCOR LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands of Canadian dollars)
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Three Months Ended
March 31
---------------------
2005 2004
---------- ----------
Balance at beginning of period $ 300,815 $ 396,037
Adjustment for stock based compensation - (2,201)
---------- ----------
Balance at beginning of period, adjusted $ 300,815 $ 393,836
Net income 17,758 3,585
---------- ----------
Balance at end of period $ 318,573 $ 397,421
---------- ----------
---------- ----------
ShawCor Ltd.
Notes to the Consolidated Financial Statements (Unaudited)
1. Accounting policies
The accompanying unaudited interim consolidated financial statements of
ShawCor Ltd. (the "Company") have been prepared in accordance with
Canadian generally accepted accounting principles ("GAAP") for the
preparation of interim financial statements. They do not include all of
the information and disclosures required by GAAP for annual consolidated
financial statements. These unaudited interim financial statements have
been prepared in accordance with accounting policies outlined in the
Company's audited financial statements for the year ended
December 31, 2004. Accordingly, these interim financial statements should
be read in conjunction with the Company's annual consolidated financial
statements.
2. Stock-based compensation
On March 1, 2005, the Board of Directors approved the granting of
504,400 stock options under the 2001 Employee Plan and 32,500 stock
options under the 2001 Director Plan. The average fair value of the stock
options, calculated using the Black-Scholes pricing model, was
$3.0 million. The options granted under the 2001 Director Plan vest
immediately and as a result, the fair value of the options are charged to
compensation cost immediately. The fair value of options granted under
the 2001 Employee Plan will be amortized to compensation expense over the
5 year vesting period of the options. The assumptions used in calculating
the fair value of the options are as follows: expected life of options
from 3.25 years to 8.25 years, expected stock price volatility ranges
from 25% to 34%, expected dividend yield 0.46%, and risk free interest
rate ranging from 3.48% to 4.04% over the life of the options. The
compensation cost recognized in the accounts for the three months ended
March 31, 2005 is $601 thousand (March 31, 2004 - $576 thousand).
3. Foreign exchange gains and losses
Included in income from operations for the three months ended March 31,
2005 are foreign exchange losses totaling $576 thousand (March 31, 2004 -
$380 thousand gain).
4. Interest expense (income)
Three Months Ended
Mar. 31
(in thousands of Canadian dollars) 2005 2004
-------------------------------------------------------------------------
Interest income on short-term deposits $ (486) $ (277)
Interest on bank indebtedness 147 189
Interest on long-term debt 1,407 1,433
----------------------------
$ 1,068 $ 1,345
----------------------------
----------------------------
Net interest paid during the three months ended March 31, 2005 totaled
$984 thousand (March 31, 2004 - $1.1 million).
5. Other assets
(in thousands of Mar. 31, Dec. 31, Mar. 31,
Canadian dollars) 2005 2004 2004
-------------------------------------------------------------------------
Long-term investment $ 2,875 $ 2,875 $ 1,917
Deferred financing costs 2,517 2,627 3,136
Deferred project costs 6,129 7,260 21,054
Future income taxes 4,631 4,787 8,591
------------------------------------------
Total $ 16,152 $ 17,549 $ 34,698
------------------------------------------
------------------------------------------
Other assets include a long-term investment in Garneau Inc., a Canadian-
based, publicly traded pipecoating company with a market value of
$2.5 million at March 31, 2005.
6. Derivative Financial Instruments
Foreign exchange options and forward exchange contracts are used to hedge
foreign exchange exposures related to commercial activities. They are not
used by the Company for speculative purposes. At March 31, 2005, the
Company had notional amounts of $81.8 million of forward contracts
outstanding (December 31, 2004 - $67.2 million) with a fair value of
$261 thousand (December 31, 2004 - $214 thousand). These amounts are used
to express the volume of transactions and are not recognized in the
consolidated financial statements.
The Company entered into a series of forward contracts during the quarter
to hedge expected foreign currency cash flows related to the Langeled
project in Norway, with maturities between September, 2005 and June,
2006. These financial instruments are contracted with a major, chartered
bank; as a result, credit and liquidity risks related to these
instruments are considered to be low.
7. Bank indebtedness
As at March 31, 2005, the Company had unused operating lines of credit of
$184.8 million, net of $11.4 million in bank indebtedness and
$63.7 million for various types of standby letters of credit for
performance and bid bonds.
8. Capital stock
(in thousands except Mar. 31, Dec. 31, Mar. 31,
share information) 2005 2004 2004
-------------------------------------------------------------------------
Number of shares: Class A
Balance, beginning of the
period 61,224,968 61,206,202 61,206,202
Issued - stock options 121,240 44,736 36,775
Conversion Class B to A 15,800 24,030 4,800
Share issuance - - -
Purchases under Normal Course
Issuer Bid - (50,000) -
------------------------------------------
Balance, end of the period 61,362,008 61,224,968 61,247,777
------------------------------------------
Number of shares: Class B 13,730,165 13,745,965 13,765,195
------------------------------------------
Total number of shares Class A
and Class B 75,092,173 74,970,933 75,012,972
------------------------------------------
------------------------------------------
Stated Value: Class A
Balance, beginning of the
period $ 205,849 $ 205,454 $ 205,454
Issued - stock options 672 561 363
Conversion Class B to A 1 2 1
Share issuance - - -
Purchases under Normal Course
Issuer Bid - (168) -
------------------------------------------
Balance, end of the period $ 206,522 $ 205,849 $ 205,818
------------------------------------------
Stated Value: Class B 1,054 1,055 1,056
------------------------------------------
Total stated value Class A
and Class B $ 207,576 $ 206,904 $ 206,874
------------------------------------------
------------------------------------------
9. Contributed surplus
Three Months Ended
Mar. 31
(in thousands of Canadian dollars) 2005 2004
-------------------------------------------------------------------------
Balance, beginning of period $ 7,196 $ 3,027
Adjustment for stock-based compensation - 2,201
Stock compensation expense 601 575
Fair value of stock options exercised (601) -
----------------------------
Balance, end of period $ 7,196 $ 5,803
----------------------------
----------------------------
10. Segmented information
Three Months Ended
(in thousands of Canadian dollars) Mar. 31
------------------------------------ ---------------------------
Revenue 2005 2004
------------- -------------
Pipeline $ 218,416 $ 137,841
Exploration and Production 34,927 15,708
Petrochemical and Industrial 31,180 30,757
Intersegment Eliminations (426) (407)
------------- -------------
$ 284,097 $ 183,899
------------- -------------
------------- -------------
Income (loss) from operations
Pipeline $ 24,848 $ 8,538
Exploration and Production 5,606 224
Petrochemical and Industrial 3,811 3,514
Financial and Corporate (4,682) (4,447)
------------- -------------
$ 29,583 $ 7,829
------------- -------------
------------- -------------
Goodwill
Pipeline $ 156,722 $ 170,351
Petrochemical and Industrial 18,686 19,425
------------- -------------
$ 175,408 $ 189,776
------------- -------------
------------- -------------
Total assets
Pipeline $ 854,922 $ 931,456
Exploration and Production 81,756 61,471
Petrochemical and Industrial 75,853 80,825
Financial and Corporate 789,320 832,972
Elimination (1,024,152) (1,029,388)
------------- -------------
$ 777,699 $ 877,336
------------- -------------
------------- -------------
11. Employee future benefits
The Company's cost under both defined benefit and defined contribution
arrangements for the three months ended March 31, 2005 is $2.0 million
(March 31, 2004 - $1.9 million).
12. Closure of Mobile, Alabama facility
On November 2, 2004, the Company announced its decision to close the
Mobile, Alabama pipe-coating facility. The closure is on schedule and
plant operations are winding down as projects under contract are
completed. It is expected that work at the plant will cease by the end of
the second quarter, except for load-out of remaining coated pipe, which
is expected to extend into the third quarter of the year. In addition to
overhead costs associated with the completion of the remaining contracts,
fixed costs of approximately $1.5 million per annum will continue to be
incurred until the site is vacated. The Mobile facility is a component of
the pipeline market segment.
The following table summarizes the financial results of the Mobile
facility for the past nine quarters:
-------------------------------------------------------------------------
(In thousands of
Canadian dollars) First Second Third Fourth Full Year
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Revenue
2005 $ 15,319 $ - $ - $ - $ -
2004 12,384 12,717 17,688 21,174 63,963
2003 29,870 18,558 13,931 16,852 79,211
-------------------------------------------------------------------------
Loss from operations
2005 (3,175) - - - -
2004 (6,226) (12,894) (14,932) (43,336) (77,388)
2003 (2,100) (8,196) (5,582) (4,626) (20,504)
-------------------------------------------------------------------------
Asset impairment charges
2005 - - - - -
2004 - - - (50,390) (50,390)
2003 - - - - -
-------------------------------------------------------------------------
Loss from operations after
asset impairment charges
2005 (3,175) - - - -
2004 (6,226) (12,894) (14,932) (93,726) (127,778)
2003 (2,100) (8,196) (5,582) (4,626) (20,504)
-------------------------------------------------------------------------
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13. Income taxes
Net income taxes paid during the three months ended March 31, 2005
totaled $5.5 million (March 31, 2004 - net refund of $661 thousand).
14. Comparative figures
Comparative figures have been reclassified where necessary to correspond
with the current year's presentation.
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