TORONTO, Aug. 4 /CNW/ -
SHAWCOR LTD.
(TSX: SCL.A, SCL.B)
<<
Financial Summary
(In thousands of Canadian Three Months Ended Six Months Ended
dollars except per share June 30 June 30
amounts) 2005 2004 2005 2004
-------------------------------------------------------------------------
Operating Results
Revenue $ 269,490 $ 201,947 $ 553,587 $ 385,846
EBITDA (note 1) 28,687 16,470 71,646 39,363
Income from operations 16,854 1,166 46,437 8,995
Net income 9,740 (3,489) 27,498 96
Net income per share
(Class A and B)
Basic 0.13 (0.05) 0.37 0.00
Diluted 0.13 (0.05) 0.37 0.00
-------------------------------------------------------------------------
Cash Flow
Cash from operating activities 39,170 5,669 25,935 16,454
Additions to capital assets 12,121 9,961 17,361 17,900
-------------------------------------------------------------------------
Financial Position
Working capital 170,452 168,011
Total assets 834,398 873,687
Shareholders' equity per share
(Class A and B) $ 6.16 $ 7.43
-------------------------------------------------------------------------
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 ended June 30, 2005 totaled
$269.5 million, representing an increase of 33% over the second quarter of
last year. On a year-to-date basis, revenue for the six months ended June 30,
2005 of $553.6 million was 43% higher than for the same period in 2004, with
both the Pipeline and the Exploration and Production segments reporting much
stronger activity levels. Second quarter revenue was $14.6 million below the
first quarter as increased drill pipe manufacturing revenue was more than
offset by the extended seasonal slow-down in Western Canada, reduced revenue
from the Mobile, Alabama facility and pipe-coating project delays in the
Western United States.
Consolidated income from operations for the quarter of $16.9 million
increased significantly over the $1.2 million recorded during the same quarter
of 2004 in line with the increased revenue and the reduced losses at Mobile.
Compared to the first quarter of 2005, the lower operating income is a result
of the lower revenues and higher than expected unrecovered operating costs in
the pipe-coating operations. For the six months ended June 30, 2005,
consolidated income from operations totaled $46.4 million compared to
$9.0 million in the same period last year. Losses relating to the cessation of
operations at the Mobile, Alabama pipe-coating facility were $1.4 million for
the quarter and $4.6 million for the year-to-date compared to $12.9 million
and $19.1 million for the comparative periods last year.
Net income for the quarter was $9.7 million ($0.13 per share) compared to
a net loss of $3.5 million ($0.05 per share) in the same quarter of last year.
On a year-to-date basis, net income for the six months ended June 30, 2005
totaled $27.5 million ($0.37 per share) compared to $96 thousand ($0.00 per
share) in the corresponding period of 2004.
Business activity in the Pipeline segment continued at high levels during
the quarter, particularly at Bredero Shaw's Farsund, Norway facility,
currently working on the Langeled project, and at the division's Malaysian and
African coating plants. Seasonal softness at the Canadian small-diameter
plants, the result of spring break-up in Western Canada and decreasing revenue
at the Mobile, Alabama facility as the wind-down of that facility continued
according to plan, partially offset some of the strength in Africa, the Far
East and Mexico. Canusa-CPS and Shaw Pipelines Services continued to be very
active. Profitability in the North Sea was below expectations as efforts to
meet production schedules and unplanned additional initial load-out costs
resulted in increased production costs. The switch to coating the 42" diameter
pipe on the Langeled project, which took place during quarter, also reduced
operating efficiencies temporarily. While activity has increased in Nigeria,
delays in getting approval for several significant change orders to offset
material cost increases has depressed operating results for the quarter.
OMSCO and Guardian continued to experience favourable business conditions
in the Exploration and Production segment with revenue in the quarter almost
double last year's levels. At OMSCO, revenue increased substantially over the
prior quarter while revenue at Guardian decreased seasonally due to
spring-break up.
Business activity at both ShawFlex and DSG-Canusa continued to increase
steadily and revenue for the quarter for the Petrochemical and Industrial
segment increased 3% over the prior quarter.
On June 30, Geoff Hyland retired from his position as President and Chief
Executive Officer. He was succeeded by Bill Buckley, previously Executive Vice
President and Chief Operating Officer, in accordance with the Company's
succession plan. Mr. Hyland will continue to serve the Company in an advisory
role and will remain on the Board of Directors.
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 increased 33% over the second
quarter of last year to $269.5 million reflecting the increased activity
levels in both the Pipeline and the Exploration and Production market
segments. Compared to the first quarter of the year, revenue was 5% lower
(2% lower excluding the Mobile results) due to pipe-coating project
scheduling, the previously announced closure of the Mobile facility and
seasonal factors, including spring break-up in Western Canada. On a
year-to-date basis, consolidated revenue totaled $553.6 million for the six
months ended June 30, 2005 compared to $385.8 million for the same period last
year.
Consolidated operating income for the quarter, before taking into account
the losses at Mobile, was $18.3 million compared to $14.1 million in the
second quarter of last year and $32.8 million in the prior quarter of 2005
with the decrease from last quarter the result of lower revenue together with
higher than expected manufacturing and load-out costs in the North Sea and
Africa. Consolidated net income for the quarter was $9.7 million or $0.13 per
share compared to a loss of $3.5 million or $0.05 per share in the second
quarter of last year. Net income for the six months ended June 30, 2005
totaled $27.5 million ($0.37 per share) compared to $96 thousand ($0.00 per
share) in the same period last year.
A significant portion of the Company's business is conducted in U.S.
dollars. Changes in exchange rates can result in variability in the Canadian
equivalent of U.S. dollar-based revenue, expenses, earnings and cash flow
which are included in the Company's consolidated financial results. For the
six months ended June 30, 2005, the average rate of exchange between the U.S
dollar and the Canadian dollar was approximately 8% lower than in the same
period of 2004, which adversely impacted revenue and net income for the period
by $23 million and $4 million ($0.05 per share), respectively.
In the Pipeline segment, revenue for the quarter was $196.3 million, 34%
higher than in the second quarter of last year. Compared to last year, revenue
at Bredero Shaw was positively impacted by the Langeled project in Norway and
increased project activity in West Africa and Mexico; however, this was
partially offset by the reduced activity in Mobile and a temporary softness in
the Middle East and Americas regions resulting from project scheduling.
Business activity remained high during the quarter at Canusa - CPS and Shaw
Pipeline Services and both divisions experienced revenue growth over the
corresponding quarter of last year. Compared to the first quarter, segment
revenue decreased $22.1 million as a result of expected seasonal factors in
Western Canada, pipe-coating project scheduling and the impact of the Mobile
wind-down. Income from operations for the segment for the quarter totaled
$10.2 million compared to a loss of $5.3 million in the second quarter of last
year with the improvement attributable to the increased revenue for the
segment and the curtailment of losses at the Mobile plant. Salt contamination
on bare pipe received for coating and production throughput and rework issues
in the North Sea sector negatively impacted operating earnings and higher than
anticipated input costs related to the EGGS project in Africa had an adverse
impact on the quarter's result. While requests for reimbursement of these
higher costs have been made, these claims have not been included in revenue as
no formal approval has yet been received. On a year-to-date basis, revenue in
the Pipeline segment totaled $414.7 million for the six months ended June 30,
2005, compared to $284.4 million for the corresponding period of 2004 with
increases achieved at all three divisions within the segment. Income from
operations for the segment for the period was $35.0 million compared to
$3.3 million last year. Excluding the Mobile-related costs, operating income
for the Pipeline segment would have been $11.6 million in the quarter compared
to $7.6 million in the second quarter of last year and $28.0 million in the
first quarter of this year.
In the Exploration and Production segment, revenue for the quarter of
$41.4 million increased 18% over the prior quarter and 93% over the second
quarter of last year as OMSCO and Guardian continued to experience improving
business conditions. Income from operations for the segment totaled
$7.3 million for the quarter and increased over the previous quarter and the
second quarter of last year by $1.7 million and $6.4 million, respectively.
For the six months ended June 30, 2005, revenue for the segment was
$76.3 million, representing a 105% increase over the first six months of 2004,
with growth achieved at both OMSCO and Guardian. Income from operations for
the period was $12.9 million compared to $1.1 million in the corresponding
period last year. Continued high levels of drilling activity have eliminated
the industry's inventory of drill pipe and OMSCO's backlog of drill pipe
orders is at record levels.
In the Petrochemical and Industrial segment, revenue for the quarter was
$32.2 million compared to $31.2 million last quarter and $34.4 million in the
second quarter of last year. ShawFlex experienced increased activity in the
quarter while at DSG-Canusa, business activity in North America increased over
the prior quarter but remained flat in Europe. Income from operations for the
segment totaled $3.5 million compared to $3.8 million last quarter and
$5.0 million in second quarter of 2004. On a year-to-date basis, segment
revenue totaled $63.3 million, marginally lower than in the same period last
year. Income from operations for the period was $7.3 million compared to
$8.5 million in the first six months of 2004.
Financial and Corporate
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 for the quarter totaled $4.1 million compared to $4.7 million, including
foreign exchange losses of $575 thousand, in the prior quarter.
Net interest expense in the quarter totaled $1.6 million, in line with
the second quarter of 2004 but was $531 thousand higher than in the prior
quarter reflecting higher levels of bank indebtedness as a result of
investment in facilities and working capital during the period.
Income tax expense was $5.1 million in the quarter compared to
$11.0 million last quarter and $3.3 million in the second quarter of 2004.
Improvements in profitability over the prior year have resulted in a return to
more normal levels of income tax than in the recent past; the effective tax
rate in the quarter was 34% while on a year-to-date basis it is 37%.
Cash Flow
Cash flow generated from operating activities totaled $39.2 million for
the quarter compared to $5.7 million in the second quarter of last year with
the improvement the result of higher profitability in the period together with
significant reductions in working capital balances.
Capital expenditures for the quarter totaled $12.1 million compared to
$10.0 million in the same period last year and included continuing investment
in new pipe-coating plants in Indonesia, Nigeria and Ghana.
Cash flow used in financing activities totaled $9.8 million in the
quarter compared to $2.9 million in the second quarter of 2004 and consisted
mainly of repayments of bank indebtedness and dividends paid to shareholders
of $6.8 million and $3.3 million, respectively. Dividends paid in the same
quarter of last year totaled $3.0 million.
Liquidity and Capitalization
As at June 30, 2005, the Company had a working capital ratio of 1.74 to 1
compared to 1.85 to 1 at the beginning of the quarter. Operating working
capital, excluding cash, cash equivalents and bank indebtedness, decreased
$23.1 million in the quarter to $92.6 million due in part to prepayments
received on an upcoming African project.
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 June 30, 2005, the Company had notional amounts of $86.2 million of
forward contracts outstanding (December 31, 2004 - $67.2 million) with a fair
value of $1.3 million (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 ten most recently
completed quarters:
-------------------------------------------------------------------------
(In thousands of
Canadian dollars
except per share
amounts) First Second Third Fourth Full Year
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Revenue
2005 $ 284,097 $ 269,490 $ - $ - $ -
2004 183,899 201,947 208,862 268,722 863,430
2003 235,664 215,456 178,323 194,954 824,397
-------------------------------------------------------------------------
Income (loss)
from operations
2005 29,583 16,854 - - -
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 9,740 - - -
2004 3,585 (3,489) (8,658) (78,099) (86,661)
2003 10,622 8,596 97 5,036 24,351
-------------------------------------------------------------------------
Basic earnings
(loss) per share
(Classes A and B)
2005 0.24 0.13
2004 0.05 (0.05) (0.11) (1.05) (1.16)
2003 0.15 0.13 0.00 0.07 0.35
-------------------------------------------------------------------------
Fully diluted
earnings (loss)
per share
(Classes A and B)
2005 0.24 0.13 - - -
2004 0.05 (0.05) (0.11) (1.05) (1.16)
2003 0.15 0.12 0.00 0.07 0.34
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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 July 22, 2005, the Company had 61,421,291 Class A Subordinate
Voting Shares ("Class A") outstanding and 13,727,565 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 July 26, 2005,
the Company had stock options outstanding to purchase up to 2,693,899 Class A
shares.
Outlook
The outlook for the markets served by ShawCor remains favourable as
evidenced by the 12 month backlog of orders which stood at $450 million on
June 30, a 7% decrease from first quarter levels, reflecting the continuing
production on the Langeled project Major additions to the backlog in the
quarter included, among others, the recently announced U.S. $33 million Ca Mau
project in Vietnam. Pipe-coating bid activity remains strong and OMSCO's drill
pipe order backlog at the end of June was more than double last year's level.
The Bredero Shaw integration program launched a year ago is on track to
achieve its objectives, including a more focused marketing thrust, better
controls and improved operating results. The two-year program, including
strengthening operating and financial management throughout the Bredero Shaw
organization, is now beginning to show positive results.
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, August 5, 2005 at 10:00 a.m. EDT to discuss the Company's
Second Quarter 2005 financial results. Please visit the Investor Relations
section of our website at www.shawcor.com for further details.
SHAWCOR LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands of Canadian dollars except per share data)
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenue $ 269,490 $ 201,947 $ 553,587 $ 385,846
---------- ---------- ---------- ----------
Operating expenses 238,302 185,316 478,306 346,030
Amortization 12,221 15,185 25,375 30,046
Research and development 2,158 1,210 3,970 2,722
---------- ---------- ---------- ----------
252,681 201,711 507,651 378,798
---------- ---------- ---------- ----------
Share of earnings in
associated company 45 930 501 1,947
---------- ---------- ---------- ----------
Income from operations 16,854 1,166 46,437 8,995
Interest expense (note 4) 1,599 1,503 2,667 2,848
---------- ---------- ---------- ----------
Income (loss) before income
taxes and non-controlling
interest 15,255 (337) 43,770 6,147
Income taxes 5,127 3,271 16,106 6,373
---------- ---------- ---------- ----------
Income (loss) before
non-controlling interest 10,128 (3,608) 27,664 (226)
Non-controlling interest (388) 119 (166) 322
---------- ---------- ---------- ----------
Net income (loss) $ 9,740 $ (3,489) $ 27,498 $ 96
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings (loss) per share
Class A and B - Basic $ 0.13 $ (0.05) $ 0.37 $ -
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings (loss) per share
Class A and B - Diluted $ 0.13 $ (0.05) $ 0.37 $ -
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
-------------------------------------------------------------------------
SEGMENTED INFORMATION
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenue
Pipeline $ 196,260 $ 146,521 $ 414,677 $ 284,362
Exploration and Production 41,387 21,443 76,314 37,151
Petrochemical and
Industrial 32,168 34,420 63,348 65,177
Intersegment Eliminations (325) (437) (752) (844)
---------- ---------- ---------- ----------
$ 269,490 $ 201,947 $ 553,587 $ 385,846
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income (loss) from operations
Pipeline $ 10,187 $ (5,265) $ 35,035 $ 3,273
Exploration and Production 7,267 880 12,873 1,104
Petrochemical and Industrial 3,538 5,029 7,349 8,543
Financial and Corporate (4,138) 522 (8,820) (3,925)
---------- ---------- ---------- ----------
$ 16,854 $ 1,166 $ 46,437 $ 8,995
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SHAWCOR LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands of Canadian dollars)
CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Operating activities:
Net income (loss) $ 9,740 $ (3,489) $ 27,498 $ 96
Items not requiring an
outlay of cash:
Amortization 12,221 15,185 25,375 30,046
Gain on disposal of
investment in shares - 185 - -
Change in deferred
project costs (4,954) 14,210 (3,782) 5,125
Future income taxes 2,254 (154) 2,008 (3,801)
Non-controlling interest
in earnings of
subsidiaries 388 (119) 166 (322)
Share of earnings of
associated company (45) (930) (501) (128)
Change in non-cash
working capital and
other 19,566 (19,219) (24,829) (14,562)
---------- ---------- ---------- ----------
Cash provided by operating
activities 39,170 5,669 25,935 16,454
---------- ---------- ---------- ----------
Investing activities:
Additions to property,
plant and equipment (12,121) (9,961) (17,361) (17,900)
Proceeds on disposal of
property, plant and
equipment 64 80 80 266
Proceeds on disposal of
investment in shares - 6,444 - 6,729
Investment in shares - (2,874) - (2,874)
---------- ---------- ---------- ----------
Cash used in investing
activities (12,057) (6,311) (17,281) (13,779)
---------- ---------- ---------- ----------
Financing activities:
Increase (decrease) in
bank indebtedness (6,788) 105 111 (7,246)
Issue of shares 262 - 333 363
Dividends paid to
non-controlling
shareholders of
subsidiaries - - - (7)
Dividends paid to
shareholders (3,323) (2,980) (3,323) (2,980)
---------- ---------- ---------- ----------
Cash used in financing
activities (9,849) (2,875) (2,879) (9,870)
---------- ---------- ---------- ----------
Foreign exchange on foreign
cash and cash equivalents 456 236 177 2,055
---------- ---------- ---------- ----------
Net increase (decrease) in
cash position during the
period 17,720 (3,281) 5,952 (5,140)
Cash and cash equivalents at
beginning of period 64,729 85,867 76,497 87,726
---------- ---------- ---------- ----------
Cash and cash equivalents at
end of period $ 82,449 $ 82,586 $ 82,449 $ 82,586
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SHAWCOR LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands of Canadian dollars)
CONSOLIDATED BALANCE SHEETS
June 30 Dec. 31 June 30
2005 2004 2004
---------- ---------- ----------
Assets
Current assets
Cash and cash equivalents $ 82,449 $ 76,497 $ 82,586
Accounts receivable and prepaid
expenses 206,992 183,690 188,611
Inventories 108,798 94,444 71,805
Future income taxes 2,354 5,010 3,180
---------- ---------- ----------
400,593 359,641 346,182
Property, plant and equipment, net 214,225 222,765 305,061
Goodwill 175,350 176,393 191,989
Investment in associated company 4,341 4,226 4,345
Other assets (note 5) 39,889 32,637 26,110
---------- ---------- ----------
$ 834,398 $ 795,662 $ 873,687
---------- ---------- ----------
---------- ---------- ----------
Liabilities
Current liabilities
Bank indebtedness (note 7) $ 4,606 $ 4,495 $ 223
Accounts payable and accrued
liabilities 199,903 188,591 153,871
Taxes payable 25,632 22,142 24,077
---------- ---------- ----------
230,141 215,228 178,171
Long-term debt 92,415 90,360 101,903
Future income taxes 46,280 43,350 32,753
Non-controlling interest in
subsidiaries 3,542 3,318 3,702
---------- ---------- ----------
372,378 352,256 316,529
---------- ---------- ----------
Shareholders' Equity
Capital stock (note 8) 207,941 206,904 206,874
Contributed surplus (note 9) 7,694 7,196 6,335
Retained earnings 324,990 300,815 390,952
Cumulative translation account (78,605) (71,509) (47,003)
---------- ---------- ----------
462,020 443,406 557,158
---------- ---------- ----------
$ 834,398 $ 795,662 $ 873,687
---------- ---------- ----------
---------- ---------- ----------
SHAWCOR LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands of Canadian dollars)
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Balance at beginning of
period $ 318,573 $ 397,421 $ 300,815 $ 396,037
Adjustment for stock based
compensation (note 2) - - - (2,201)
---------- ---------- ---------- ----------
Balance at beginning of
period, adjusted 318,573 397,421 300,815 393,836
Net income (loss) 9,740 (3,489) 27,498 96
---------- ---------- ---------- ----------
328,313 393,932 328,313 393,932
Dividends paid 3,323 2,980 3,323 2,980
---------- ---------- ---------- ----------
Balance at end of period $ 324,990 $ 390,952 $ 324,990 $ 390,952
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
ShawCor Ltd.
Notes to the Interim 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 consolidated financial
statements have been prepared in accordance with accounting policies
outlined in the Company's audited consolidated financial statements for
the year ended December 31, 2004. Accordingly, these unaudited interim
consolidated financial statements should be read in conjunction with the
Company's annual consolidated financial statements.
2. Stock-based compensation
On May 10, 2005, the Board of Directors approved the granting of 6,000
stock options under the 2001 Employee Plan and 4,000 stock options under
the 2001 Director Plan. The average fair value of the stock options,
calculated using the Black-Scholes pricing model, was $47 thousand. 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 0.54%, and risk free interest rate ranging from
3.42% to 3.92% over the life of the options. The compensation cost
recognized in the accounts for the three months and six months ended
June 30, 2005 is $601 thousand and $1.2 million, respectively (June 30,
2004 - $532 thousand and $1.1 million, respectively).
3. Foreign exchange gains and losses
Included in income from operations for the three months and six months
ended June 30, 2005 are foreign exchange losses totaling $225 thousand
and $801 thousand, respectively (June 30, 2004 - $1.9 million gain and
$2.3 million gain, respectively).
4. Interest expense (income)
Three Months Ended Six Months Ended
(in thousands of Canadian June 30 June 30
dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
Interest on short-term
deposits $ (95) (229) $ (580) (506)
Interest on bank indebtedness 218 266 364 455
Interest on long-term debt 1,476 1,466 2,883 2,899
-------------------------------------------
$ 1,599 1,503 $ 2,667 2,848
-------------------------------------------
-------------------------------------------
Net interest paid during the three months and six months ended June 30,
2005 totaled $2.0 million and $3.0 million, respectively (June 30, 2004 -
$1.9 million and $3.0 million, respectively).
5. Other assets
(in thousands of Canadian Jun. 30, Dec. 31, Jun. 30,
dollars) 2005 2004 2004
-------------------------------------------------------------------------
Long-term investment $ 2,875 $ 2,875 $ 2,874
Deferred financing costs 2,355 2,627 3,004
Deferred project costs 11,206 7,260 6,991
Future income taxes 23,453 19,875 13,241
--------------------------------
Total $ 39,889 $ 32,637 $ 26,110
--------------------------------
--------------------------------
Other assets include a long-term investment in Garneau Inc., a
Canadian-based, publicly traded pipe-coating company with a market value
of $1.9 million at June 30, 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 June 30, 2005, the
Company had notional amounts of $86.2 million of forward contracts
outstanding (December 31, 2004 - $67.2 million) with a fair value of
$1.3 million (December 31, 2004 - $214 thousand). These amounts are used
to express the volume of transactions and are not recognized in the
consolidated financial statements.
7. Bank indebtedness
As at June 30, 2005, the Company had unused operating lines of credit of
$185.1 million, net of $4.6 million in bank indebtedness and
$75.2 million for various types of standby letters of credit for
performance and bid bonds.
8. Capital stock
Jun. 30, Dec. 31, Jun. 30,
(in thousands except 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 177,923 44,736 37,768
Conversion Class B to A 18,400 24,030 8,000
Share issuance - - -
Purchases under Normal Course Issuer
Bid - (50,000) -
-----------------------------------
Balance, end of the period 61,421,291 61,224,968 61,251,970
-----------------------------------
Number of shares: Class B 13,727,565 13,745,965 13,761,995
-----------------------------------
Total number of shares Class A and
Class B 75,148,856 74,970,933 75,013,965
-----------------------------------
-----------------------------------
Stated Value: Class A
Balance, beginning of the period $ 205,849 $ 205,454 $ 205,454
Issued - stock options 1,036 561 363
Conversion Class B to A 1 2 1
Share issuance - - -
Purchases under Normal Course Issuer
Bid - (168) -
-----------------------------------
Balance, end of the period $ 206,887 $ 205,849 $ 205,818
-----------------------------------
Stated Value: Class B 1,055 1,055 1,056
-----------------------------------
Total stated value Class A and
Class B $ 207,941 $ 206,904 $ 206,874
-----------------------------------
-----------------------------------
9. Contributed surplus
Three Months Ended Six Months Ended
(in thousands of Canadian Jun. 30 Jun. 30
dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
Balance, beginning of period $ 7,242 5,803 $ 7,196 3,027
Adjustment for stock-based
compensation - - - 2,201
Stock compensation expense
(note 2) 601 532 1,202 1,107
Fair value of stock options
exercised (149) - (704) -
-------------------------------------------
Balance, end of period $ 7,694 6,335 $ 7,694 6,335
-------------------------------------------
-------------------------------------------
10. Segmented information
Three Months Ended Six Months Ended
(in thousands of Canadian Jun. 30 Jun. 30
dollars) 2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenue
Pipeline $ 196,260 $ 146,521 $ 414,677 $ 284,362
Exploration and Production 41,387 21,443 76,314 37,151
Petrochemical and
Industrial 32,168 34,420 63,348 65,177
Intersegment Eliminations (325) (437) (751) (844)
---------- ---------- ---------- ----------
$ 269,490 $ 201,947 $ 553,587 $ 385,846
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income (loss) from operations
Pipeline $ 10,187 $ (5,265) $ 35,035 $ 3,273
Exploration and Production 7,267 880 12,873 1,104
Petrochemical and
Industrial 3,538 5,029 7,349 8,543
Financial and Corporate (4,138) 522 (8,820) (3,925)
---------- ---------- ---------- ----------
$ 16,854 $ 1,166 $ 46,437 $ 8,995
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Goodwill
Pipeline $ 157,829 $ 172,573
Petrochemical and
Industrial 17,521 19,416
---------- ----------
$ 175,350 $ 191,989
---------- ----------
---------- ----------
Total assets
Pipeline $ 860,665 $ 684,658
Exploration and Production 96,244 58,482
Petrochemical and Industrial 75,490 83,141
Financial and Corporate 803,090 588,365
Elimination (1,001,091) (540,959)
---------- ----------
$ 834,398 $ 873,687
---------- ----------
---------- ----------
11. Employee future benefits
The Company's cost under both defined benefit and defined contribution
arrangements for the three months and six months ended June 30, 2005 is
$2.0 million and $4.0 million, respectively (June 30, 2004 - $1.8 million
and $3.7 million, respectively).
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. Production at the plant has been largely completed and load-
out of remaining coated pipe is expected to be completed in the third
quarter of the year. In addition to overhead costs associated with the
completion of the remaining contracts, fixed costs of approximately
U.S.$2.0 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 ten quarters:
-------------------------------------------------------------------------
(In thousands of
Canadian dollars) First Second Third Fourth Full Year
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Revenue
2005 $ 15,319 $ 4,938 $ - $ - $ -
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) (1,428) - - -
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) (1,428) - - -
2004 (6,226) (12,894) (14,932) (93,726) (127,778)
2003 (2,100) (8,196) (5,582) (4,626) (20,504)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
13. Income taxes
Net income taxes paid during the three months and six months ended
June 30, 2005 totaled $1.1 million and $6.6 million, respectively
(June 30, 2004 - $4.1 million and $3.4 million, respectively).
14. Comparative figures
Comparative figures have been reclassified where necessary to correspond
with the current period's presentation.
>>
Mogelijk gemaakt door 
Translate
Translate