SHAWCOR LTD.
(TSX: SCL.A, SCL.B)
TORONTO, Feb. 23 /CNW/ -
<<
Financial Summary
(In thousands of
Canadian dollars Three Months Twelve Months
except per share Ended Dec. 31 Ended Dec. 31
amounts) 2005 2004 2005 2004
-------------------------------------------------------------------------
Operating Results Restated Restated
Revenue $ 291,685 $ 227,681 $ 1,004,119 $ 737,784
EBITDA (note 1) 42,519 39,993 140,009 107,807
Operating income
from continuing
operations 31,719 28,231 95,413 67,178
Income from continuing
operations 21,782 12,297 82,790 39,127
Income (loss)
from discontinued
operations (1,190) (90,396) 56,050 (125,788)
Net income (loss) 20,592 (78,099) 138,840 (86,661)
Net income (loss)
per share (Class A
and B) - Basic
Continuing operations 0.30 0.16 1.10 0.52
Discontinued operations (0.02) (1.21) 0.75 (1.68)
Total 0.28 (1.05) 1.85 (1.16)
Net income (loss)
per share (Class A
and B) - Diluted
Continuing operations 0.30 0.16 1.10 0.52
Discontinued operations (0.02) (1.21) 0.75 (1.68)
Total 0.28 (1.05) 1.85 (1.16)
-------------------------------------------------------------------------
Cash Flow
Cash from (used in)
continuing operating
activities (4,170) 28,136 79,577 70,173
Additions to property,
plant and equipment 5,523 8,908 36,199 30,599
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Financial Position
Working capital 264,019 151,866
Total assets 915,683 804,219
Shareholders' equity per share
(Class A and B) $ 7.22 $ 5.91
-------------------------------------------------------------------------
Note 1: EBITDA is a non-GAAP measure calculated by adding back to net
income from continuing operations, interest, taxes, and
amortization of property, plant and equipment.
Fourth Quarter 2005 Results
The fourth quarter of 2005 represents a milestone for ShawCor as
quarterly revenue reached its highest level ever for the company and operating
income reached its highest level since the second quarter of 1998. On a full
year basis, revenue and net income from continuing operations reached record
levels for the company.
The final closure of the Mobile, Alabama pipe coating facility was
completed during the fourth quarter and as a result, the company has adopted
discontinued operations accounting treatment including restating current and
prior year financial results, financial position and cash flows. All
discussions in this report reflect this accounting treatment.
Consolidated revenue for the quarter of $291.7 million grew 21% over the
prior quarter and 28% over the fourth quarter of 2004. Bredero Shaw was the
main driver behind the growth with increased offshore project activity at the
division's plants in West Africa, Scotland and Malaysia together with stronger
onshore pipecoating volumes at the division's North American plants. Revenue
also improved at ShawCor's pipe inspection and specialty cable businesses but
revenue decreased slightly at the Company's other businesses as a result of
seasonal factors and market conditions. On a full year basis, consolidated
revenue in 2005 of $1,004.1 million increased 36% over levels in 2004
primarily as a result of a full year's pipecoating production on the Langeled
project in the North Sea and significant large diameter coating activity in
West Africa.
Consolidated income from continuing operations before interest, income
taxes and minority interest totaled $31.7 million in the quarter, representing
a 48% improvement over the third quarter of 2005 and a 12% improvement over
the fourth quarter of 2004. Operating margin improvements at Bredero Shaw in
the quarter, resulting from increased production throughput in North America
and the Far East together with improved plant efficiency in Norway and Africa,
were partially offset by reduced margins in the joint protection business, the
temporary cessation of production in Indonesia to complete the move to the new
facility, unfavourable product mix in the Petrochemical and Industrial
segment, unfavorable foreign exchange costs and increased corporate expenses.
Profitability at Bredero Shaw continued its upward trend and operating margins
reached their highest levels since ShawCor acquired full ownership of the
division in the fourth quarter of 2002, as profitability improvement programs
implemented at the division since 2003 continued to favourably impact the
division's results. Consolidated operating income from continuing operations
for full year 2005 totaled $95.4 million compared to $67.2 million in 2004.
Consolidated income from continuing operations in the fourth quarter
totaled $21.8 million ($0.30 per share) compared to $34.4 million ($0.46 per
share) in the prior quarter, which included a reduction in income tax expense
resulting from previously unrecognized tax losses of $18.4 million ($0.25 per
share). Consolidated income from continuing operations in the fourth quarter
of 2004 totaled $12.3 million ($0.16 per share). On a full year basis,
consolidated income from continuing operations totaled $82.8 million ($1.10
per share), including the $18.4 million ($0.25 per share) reduction in income
taxes in the third quarter, from the utilization of prior years' tax losses,
compared to $39.1 million ($0.52 per share) in 2004. The weakening of the U.S.
dollar against the Canadian dollar over the year negatively impacted revenues
and income from continuing operations by $32.8 million and $7.9 million,
respectively, compared to 2004.
Income from discontinued operations includes the operating income and
after-tax gain on the sale of the OMSCO drill pipe manufacturing business in
September, 2005 as well as the losses and shut-down costs incurred at the
Mobile plant facility for the year.
Net income for the fourth quarter of 2005 totaled $20.6 million ($0.30
per share) compared to $90.8 million ($1.20 per share) in the third quarter
which included an after-tax gain on the sale of OMSCO of $48.4 million ($0.65
per share) and the $18.4 million ($0.25 per share) reduction of income tax
expense from utilization of prior year losses, and a net loss of $78.1 million
($1.05 per share) in the fourth quarter of 2004 including a provision for
asset impairment of $50.4 million ($0.67 per share) related to the
announcement of the closure of the Mobile facility. Net income for the full
year 2005 totaled $138.8 million ($1.85 per share) compared to a net loss of
$86.7 million ($1.16) per share in 2004.
Cash Flows
Cash flow from continuing operations before working capital requirements
in the quarter totaled $35.4 million compared to $24.3 million in the fourth
quarter of last year, with the improvement mainly due to the increased
profitability in 2005. Increased investments in working capital to support
increased business levels totaled $39.5 million in the quarter compared to a
reduction in working capital of $3.6 million in the fourth quarter of last
year. On a full year basis, cash flow generated from operating activities
totaled $79.6 million compared to $70.2 million in 2004, the difference due to
the increased profitability in the year, partially offset by substantial
increases in working capital associated with the 36% increase in sales.
Cash flow used in continuing investing activities in the quarter totaled
$11.4 million, comprised of capital expenditures, net of proceeds on disposal
of property, plant and equipment, together with the payment of the final
working capital adjustment related to the OMSCO sale. Significant expenditures
in the quarter included completion of the moving and upgrading of the
Indonesian pipe coating plant. In the fourth quarter of last year, cash used
in investing activities totaled $8.6 million as capital expenditures of
$8.9 million were partially offset by proceeds on disposal of property, plant
and equipment of $307 thousand. Cash flow generated from investing activities
for the full year included $35.6 million of net capital expenditures and
proceeds on the disposal of the OMSCO division of $129.6 million, compared to
$26.2 million used in investing activities in 2004.
Cash flow used in continuing financing activities totaled $18.4 million
in the quarter, including $15.1 million for the repurchase of Class A shares
under a Normal Course Issuer Bid and cash dividends paid to shareholders of
$3.3 million. In the fourth quarter of 2004, cash used in financing activities
totaled $4.0 million, comprised of cash dividends paid of $3.0 million,
repayment of bank indebtedness of $483 thousand and $568 thousand paid to
repurchase Class A shares. For the full year 2005, cash used in financing
activities totaled $23.9 million compared to $9.0 million in the prior year,
including dividends of $6.6 million (2004 - $6.0 million).
Overall, cash and short-term deposits decreased $27.4 million during the
quarter to $200.3 million compared to a decrease of $3.5 million during the
fourth quarter of 2004. On a full year basis cash increased $123.8 million
during 2005, while in 2004, cash decreased $11.1 million during the year.
Outlook
The key determinant of the demand for the products and services of the
company's largest market segment, the Pipeline and Pipe Services segment, is
the level of pipeline infrastructure investment which in turn is driven by
several factors, chiefly energy demand and energy supply. Energy demand is
mainly the result of economic growth while supply is impacted by declining
production at existing reservoirs and by the development of new producing
areas. Demand for the products and services of the Petrochemical and
Industrial segment are driven by the general levels of economic activity in
the regions where the segment operates, primarily North America and Western
Europe.
Global economic activity is expected to remain robust in the medium term,
driven mainly by dynamic economic growth in China and India. In North America,
economic growth over the first half of 2006 is expected to remain at current
levels; however, some softening is expected towards the latter half of the
year. As economic activity translates into demand for energy, prices are
expected to remain buoyant in the medium term and additional production is
expected to be added. Pipeline investment will be required to carry this
additional production to market.
In 2006, ShawCor's revenues are expected to decline slightly from levels
in 2005 as pipecoating project work in the North Sea slows down with the
completion of several large projects including Langeled; however, this
reduction in North Sea activity will be largely offset by increases, initially
in the Middle and Far East, followed by North American large diameter
activity. Profitability levels are expected to be maintained in 2006, despite
lower revenues, as improved operational execution leads to improved
profitability at Bredero Shaw. Current bid activity levels suggest further
growth in 2007 and beyond. ShawCor conducts coating operations in two
locations in Nigeria. Recent political unrest has resulted in some disruption
of operations in its Warri facility.
Consolidated order backlog, representing customer orders expected to be
completed within one year, remains strong at $357 million, a decrease of
$16 million from the backlog at the beginning of the fourth quarter, primarily
due to the substantial completion of the Langeled project.
With the proceeds from the sale of OMSCO, ShawCor has a very strong
balance sheet with the financial capacity to fund significant internal and
external growth opportunities as they arise. This opportunity to fund
expansion, together with the strong market fundamentals enjoyed by the
company, provide the potential for strong growth for ShawCor in 2007 and
beyond.
This document includes certain statements that reflect management's
expectations and objectives for ShawCor's future performance, opportunities
and growth. Such statements, except to the extent that they contain historical
facts, are forward-looking and accordingly involve estimates, assumptions,
judgments and uncertainties. These statements may be identified by the use of
forward-looking terminology such as "may," "will," "should", "anticipate,"
"estimate," "continue," "intend," "plan," and variations of these words or
other similar expressions. Although ShawCor believes that the expectations
reflected in these forward-looking statements are based on reasonable
assumptions in light of currently available information, ShawCor can give no
assurance that such expectations will be achieved.
Forward-looking statements involve risk and uncertainty, as outlined
above under "Risk Factors", that could cause actual results to differ
materially from those projected.
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 February 24th at 10:00 a.m. EST to discuss the company's fourth
quarter 2005 financial results. Please visit 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 Twelve Months
Ended Dec. 31 Ended Dec. 31
------------------------- -------------------------
2005 2004 2005 2004
Restated Restated
------------------------- -------------------------
Revenue $ 291,685 $ 227,681 $ 1,004,119 $ 737,784
------------ ------------ ------------ ------------
Operating expenses 247,989 186,776 858,380 628,091
Amortization 9,848 12,056 43,731 40,373
Research and development 2,273 1,805 8,090 5,623
------------ ------------ ------------ ------------
260,110 200,637 910,201 674,087
------------ ------------ ------------ ------------
Share of earnings in
associated company 144 1,187 1,495 3,481
------------ ------------ ------------ ------------
Operating income from
continuing operations 31,719 28,231 95,413 67,178
Interest expense
(income) (note 4) (300) 1,094 3,379 5,182
------------ ------------ ------------ ------------
Income before income
taxes and non-
controlling interest 32,019 27,137 92,034 61,996
Income taxes 11,189 14,546 10,109 23,125
------------ ------------ ------------ ------------
Income before non-
controlling interest 20,830 12,591 81,925 38,871
Non-controlling interest 952 (294) 865 256
------------ ------------ ------------ ------------
Income from
continuing operations 21,782 12,297 82,790 39,127
Income (loss) from
discontinued
operation (note 11) (1,190) (90,396) 56,050 (125,788)
------------ ------------ ------------ ------------
Net income (loss) $ 20,592 $ (78,099) $ 138,840 $ (86,661)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings (loss) per
share Class A and B
- Basic
Continuing
operations $ 0.30 $ 0.16 $ 1.10 $ 0.52
Discontinued
operations (0.02) (1.21) 0.75 (1.68)
------------ ------------ ------------ ------------
Total $ 0.28 $ (1.05) $ 1.85 $ (1.16)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings (loss) per
share Class A and B
- Diluted
Continuing
operations $ 0.30 $ 0.16 $ 1.10 $ 0.52
Discontinued
operations (0.02) (1.21) 0.75 (1.68)
------------ ------------ ------------ ------------
Total $ 0.28 $ (1.05) $ 1.85 $ (1.16)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
-----------------------------------------------------
Three Months Twelve Months
SEGMENTED INFORMATION Ended Dec. 31 Ended Dec. 31
------------------------- -------------------------
Revenue
Pipeline and
Pipe Services $ 263,953 $ 201,356 $ 884,221 $ 616,778
Petrochemical
and Industrial 28,214 26,757 121,482 122,663
Intersegment
Eliminations (482) (432) (1,584) (1,657)
------------ ------------ ------------ ------------
$ 291,685 $ 227,681 $ 1,004,119 $ 737,784
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Income (loss)
from operations
Pipeline and
Pipe Services $ 34,839 $ 28,643 $ 100,366 $ 61,137
Petrochemical
and Industrial 1,546 3,074 11,918 15,751
Financial
and Corporate (4,666) (3,486) (16,871) (9,710)
------------ ------------ ------------ ------------
$ 31,719 $ 28,231 $ 95,413 $ 67,178
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SHAWCOR LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands of Canadian dollars)
CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months Twelve Months
Ended Dec. 31 Ended Dec. 31
------------------------- -------------------------
2005 2004 2005 2004
Restated Restated
------------------------- -------------------------
Operating activities:
Net income from
continuing
operations $ 21,782 $ 12,297 $ 82,790 $ 39,127
Items not requiring
an outlay of cash:
Amortization 9,848 12,056 43,731 40,373
Gain on disposal
of investment
in shares - - - (4,710)
Future income taxes 4,841 1,938 4,230 (1,668)
Non-controlling
interest in
earnings of
subsidiaries (952) 294 (865) (256)
Share of earnings
of associated
company (144) (1,187) (1,495) (3,481)
Change in non-
cash working
capital and other (39,545) 2,513 (48,814) 788
------------ ------------ ------------ ------------
Cash provided by
(used in) operating
activities (4,170) 27,911 79,577 70,173
------------ ------------ ------------ ------------
Investing activities:
Additions to property,
plant and equipment (5,523) (8,908) (36,199) (30,599)
Proceeds on disposal
property, plant and
equipment 173 307 575 575
Proceeds on disposal
of discontinued
operations (6,046) - 129,558 -
Proceeds on disposal
of investment
in shares - - - 6,728
Investment in shares - - - (2,875)
------------ ------------ ------------ ------------
Cash provided by
(used in) investing
activities (11,396) (8,601) 93,934 (26,171)
------------ ------------ ------------ ------------
Financing activities:
Decrease in bank
indebtedness (23) (483) (2,780) (2,817)
Issue of shares 21 (4) 634 359
Purchase of shares
for cancellation (15,139) (568) (15,139) (568)
Dividends paid to
non-controlling
shareholders of
subsidiaries - - - (7)
Dividends paid
to shareholders (3,289) (2,980) (6,612) (5,960)
------------ ------------ ------------ ------------
Cash used in
financing activities (18,430) (4,035) (23,897) (8,993)
------------ ------------ ------------ ------------
Foreign exchange on
foreign cash and
cash equivalent (937) (2,853) (3,909) (3,105)
------------ ------------ ------------ ------------
Net cash provided by
(used in) continuing
operations (34,933) 12,422 145,705 31,904
Net cash provided by
(used in) discontinued
operations 7,489 (15,933) (21,898) (42,979)
Cash and cash
equivalents at
beginning of period 227,748 80,008 76,497 87,572
------------ ------------ ------------ ------------
Cash and cash equivalents
at end of period $ 200,304 $ 76,497 $ 200,304 $ 76,497
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SHAWCOR LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands of Canadian dollars)
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Three Months Twelve Months
Ended Dec. 31 Ended Dec. 31
------------------------- -------------------------
2005 2004 2005 2004
------------------------- -------------------------
Balance at
beginning of period $ 415,741 $ 382,294 $ 300,815 $ 393,836
Net income (loss) 20,592 (78,099) 138,840 (86,661)
------------ ------------ ------------ ------------
436,333 304,195 439,655 307,175
Excess of purchase
price paid over
stated value
of shares (11,496) (400) (11,496) (400)
Dividends paid (3,289) (2,980) (6,612) (5,960)
------------ ------------ ------------ ------------
Balance at
end of period $ 421,547 $ 300,815 $ 421,547 $ 300,815
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SHAWCOR LTD.
INTERIM FINANCIAL INFORMATION (Unaudited)
(in thousands of Canadian dollars)
CONSOLIDATED BALANCE SHEETS
Dec. 31 Dec. 31
2005 2004
Restated
------------ ------------
Assets
Current assets
Cash and cash equivalents $ 200,304 $ 76,497
Accounts receivable and prepaid expenses 227,809 150,787
Inventories 81,012 70,913
Future income taxes - 5,010
Taxes receivable 5,711 5,687
Current assets of discontinued operation 799 55,645
------------ ------------
515,635 364,539
Property, plant and equipment, net 177,317 187,054
Goodwill 167,172 176,393
Investment in associated company 5,061 4,226
Other assets (note 5) 42,524 36,296
Non-current assets of
discontinued operations (note 11) 7,974 35,711
------------ ------------
$ 915,683 $ 804,219
------------ ------------
------------ ------------
Liabilities
Current liabilities
Bank indebtedness (note 7) $ 1,715 $ 4,495
Accounts payable and accrued liabilities 167,473 137,747
Deferred revenues 23,975 5,494
Taxes payable 46,203 40,793
Current liabilities of discontinued operation 12,250 24,144
------------ ------------
251,616 212,673
Long-term debt 87,210 90,360
Other non-current liabilities (note 8) 41,619 38,700
Non-current liabilities of
discontinued operation (note 11) - 19,080
------------ ------------
380,445 360,813
------------ ------------
Shareholders' Equity
Capital stock (note 9) 204,720 206,904
Contributed surplus (note 10) 9,231 7,196
Retained earnings 421,547 300,815
Cumulative translation account (100,260) (71,509)
------------ ------------
535,238 443,406
------------ ------------
$ 915,683 $ 804,219
------------ ------------
------------ ------------
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 November 7, 2005, the Board of Directors approved the granting of
12,000 stock options, with a total fair value of $58 thousand, under the
2001 Employee Plan. On December 2, 2005, the Board approved the granting
of 4,000 stock options under the 2001 Director Plan with a total fair
value of $13 thousand. Fair value of the stock options is calculated
using the Black-Scholes pricing model. 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, while 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 3.25 years to 8.25 years, expected
stock price volatility 26% to 33%, expected dividend yield 0.59% to .61%,
and risk free interest rate 3.88% to 4.07%. The compensation cost
recognized in the accounts for the three months and twelve months ended
December 31, 2005 is $1.5 million and $2.9 million, respectively
(December 31, 2004 - $532 thousand and $2.2 million, respectively).
3. Foreign Exchange Gains and Losses
Included in income from continuing operations for the three months and
twelve months ended December 31, 2005 are foreign exchange losses
totaling $6 thousand and $874 thousand, respectively (December 31, 2004 -
$374 thousand loss and $1.6 million gain, respectively).
4. Interest Expense (Income)
Three Months Twelve Months
Ended Dec. 31 Ended Dec. 31
(in thousands) 2005 2004 2005 2004
-------------------------------------------------------------------------
Interest on
short-term deposits $ (1,872) $ (298) $ (2,965) $ (1,100)
Interest on bank
indebtedness 160 17 618 580
Interest on
long-term debt 1,412 1,375 5,726 5,702
---------------------------------------------------
$ (300) $ 1,094 $ 3,379 $ 5,182
---------------------------------------------------
---------------------------------------------------
Net interest paid during the three and twelve months ended December 31,
2005 totaled nil and $3.9 million, respectively (December 31, 2004 -
$1.2 million and $5.7 million, respectively).
5. Other Assets
(in thousands) 2005 2004
-------------------------------------------------------------------------
Long-term investment........................... $ 2,875 $ 2,875
Deferred project costs......................... 8,637 7,260
Deferred financing costs....................... 2,031 2,627
Accrued future employee benefit asset.......... 4,384 3,658
Future income taxes............................ 24,597 19,876
------------ ------------
$ 42,524 $ 36,296
------------ ------------
------------ ------------
Other assets include a long-term investment in Garneau Inc., a
Canadian-based, publicly traded pipecoating company, with a market value
of $3.2 million at December 31, 2005. Deferred project costs are shown
net of associated deferred revenues. Operating expenses includes
amortization of deferred costs of $4.1 million in the quarter (2004 -
$4.6 million) and $21.0 million for the year (2004 - $5.9 million).
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 December 31, 2005, the
Company had notional amounts of $104.5 million of forward contracts
outstanding (December 31, 2004 - $67.2 million) with a fair value of
$1.9 million (December 31, 2004 - $1.2 million). These amounts are used
to express the volume of transactions and are not recognized in the
consolidated financial statements. These contacts are accounted for as
hedges of the related cash flows and short-term movements in the fair
value of these financial instruments are deferred and matched with the
hedged cash flows. The Company monitors the effectiveness of the hedges
on an on-going basis and if the hedges are no longer considered
effective, hedge accounting is discontinued.
7. Bank Indebtedness
As at December 31, 2005, the Company had unused operating lines of credit
of U.S. $165 million, less $1.7 million in bank indebtedness and
$98.0 million for various types of standby letters of credit for
performance and bid bonds.
8. Other Non-current Liabilities
(in thousands) 2005 2004
-------------------------------------------------------------------------
Non-current asset retirement obligations....... $ 2,249 $ 2,806
Accrued employee future benefit obligations.... 1,953 1,942
Future income taxes............................ 34,575 30,634
Non-controlling interest in subsidiaries....... 2,842 3,318
------------ ------------
$ 41,619 $ 38,700
------------ ------------
------------ ------------
9. Capital Stock
Dec. 31, Dec. 31,
(in thousands except share information) 2005 2004
-------------------------------------------------------------------------
Number of shares: Class A
Balance, beginning of the period 61,224,968 61,206,202
Issued on exercise of stock options 206,727 44,736
Conversion Class B to A 657,950 24,030
Purchases under Normal Course Issuer Bid (1,083,600) (50,000)
-------------------------
Balance, end of the period 61,006,045 61,224,968
-------------------------
Number of shares: Class B 13,088,015 13,745,965
-------------------------
Total number of shares Class A and Class B 74,094,060 74,970,933
-------------------------
-------------------------
Stated Value: Class A
Balance, beginning of the period $ 205,849 $ 205,454
Issued on exercise of stock options 1,459 561
Conversion Class B to A 51 2
Purchases under Normal Course Issuer Bid (3,643) (168)
-------------------------
Balance, end of the period $ 203,716 $ 205,849
-------------------------
Stated Value: Class B 1,004 1,055
-------------------------
Total stated value Class A and Class B $ 204,720 $ 206,904
-------------------------
-------------------------
10. Contributed Surplus
(in thousands) 2005 2004
-------------------------------------------------------------------------
Balance at beginning of year................... $ 7,196 $ 3,027
Adjustment for stock-based compensation........ - 2,201
Stock compensation expense..................... 2,860 2,170
Fair value of stock options exercised.......... (825) (202)
------------ ------------
Balance at end of year......................... $ 9,231 $ 7,196
------------ ------------
------------ ------------
11. Discontinued Operations
On September 30, 2005, the Company concluded the sale of its OMSCO drill
pipe manufacturing division ("OMSCO") for net proceeds of $129.6 million.
The transaction was a sale of assets consisting of net working capital of
$37.8 million and property, plant and equipment with a net book value of
$16.7 million. OMSCO was a component of the Exploration and Production
market segment.
On November 2, 2004, the Company announced its decision to close the
Mobile, Alabama pipecoating facility. At December 31, 2005, operations at
the facility had ceased and on December 31, 2005, the Company accrued
$6.3 million of future lease cost obligations for properties where the
Company has ceased using the rights conveyed by the leases. The Mobile
facility was a component of the Pipeline market segment.
The following table summarizes the financial results and cash flows from
discontinued operations for the years ended December 31, 2005 and 2004
and the assets and liabilities of the discontinued operations as at those
dates:
2005 2004
-------------------------------- --------------------------------
(in
thousands
of OMSCO OMSCO
Canadian (nine Mobile (twelve Mobile
dollars) months) Facility Total months) Facility Total
-------------------------------------------------------------------------
Revenue $ 90,572 $ 23,045 $ 113,617 $ 61,682 $ 63,963 $ 125,645
-------------------------------- --------------------------------
Income
(loss)
from
opera-
tions 14,487 (6,858) 7,629 1,990 (77,388) (75,398)
Provision
for
asset
impairment - - - - (50,390) (50,390)
Gain on
sale 75,109 - 75,109 - - -
-------------------------------- --------------------------------
Income
(loss) from
discontinued
operations
before
income
taxes 89,596 (6,858) 82,738 1,990 (127,778) (125,788)
Income tax
expense 26,688 - 26,688 - - -
-------------------------------- --------------------------------
Net income
(loss)
from
discontinued
opera-
tions $ 62,908 $ (6,858) $ 56,050 $ 1,990 $(127,778) $(125,788)
-------------------------------------------------------------------------
Cash flow
from
(used in)
operating
activi-
ties (2,121) (19,546) (21,667) 1,764 (42,034) (40,270)
Cash flow
from
(used in)
investing
activi-
ties (231) - (231) (309) (2,400) (2,709)
Cash flow
from
(used in)
financing
activi-
ties - - - - - -
-----------------------------------------------------------------
Net cash
provided by
(used in)
discontinued
opera-
tions (2,352) (19,546) (21,898) 1,455 (44,434) (42,979)
-------------------------------------------------------------------------
Current
assets - 799 799 2,399 53,246 55,645
Property,
plant
and equipment,
net - 7,974 7,974 19,068 16,643 35,711
Current
liabili-
ties 12,250 12,250 6,981 17,163 24,144
Non-current
liabilities - - - - 19,080 19,080
-------------------------------------------------------------------------
12. Segmented Information
As a result of the sale of the OMSCO division, the Company has realigned
its segmented reporting into two industry segments: Pipeline and Pipe
Services and Petrochemical and Industrial. The former segment includes
the operations of Bredero Shaw, Shaw Pipeline Services, Canusa-CPS and
Guardian while the later segment includes ShawFlex and DSG-Canusa. All
comparative figures have been reclassified to reflect this new structure.
Three Months Twelve Months
(in thousands) Ended Dec. 31 Ended Dec. 31
-------------------------------------------------------------------------
Revenue 2005 2004 2005 2004
------------ ------------ ------------ ------------
Pipeline and Pipe
Services $ 263,953 $ 201,356 $ 884,221 $ 616,778
Petrochemical and
Industrial 28,214 26,757 121,482 122,663
Intersegment
Eliminations (482) (432) (1,584) (1,657)
------------ ------------ ------------ ------------
$ 291,685 $ 227,681 $ 1,004,119 $ 737,784
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Operating income
(loss) from continuing
operations
Pipeline and Pipe
Services $ 34,839 $ 28,643 $ 100,366 $ 61,137
Petrochemical and
Industrial 1,546 3,074 11,918 15,751
Financial and
Corporate (4,666) (3,486) (16,671) (9,710)
------------ ------------ ------------ ------------
$ 31,719 $ 28,231 $ 95,413 $ 67,178
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Goodwill
Pipeline and Pipe
Services $ 150,902 $ 156,984
Petrochemical and
Industrial 16,270 19,409
------------ ------------
$ 167,172 $ 176,393
------------ ------------
------------ ------------
Total assets
Pipeline and Pipe
Services $ 971,411 $ 907,212
Petrochemical and
Industrial 88,019 73,610
Financial and
Corporate 1,146,315 846,309
Elimination (1,290,062) (1,022,912)
------------ ------------
$ 915,683 $ 804,219
------------ ------------
------------ ------------
13. Employee Future Benefits
The Company's cost under both defined benefit and defined contribution
arrangements for the three months and twelve months ended December 31,
2005 is $0.6 million and $7.3 million, respectively (December 31, 2004 -
$0.6 million and $7.2 million, respectively).
14. Income Taxes
Net income taxes paid during the three months and twelve months ended
December 31, 2005 totaled $3.1 million and $21.1 million, respectively
(December 31, 2004 - $11.6 million and $16.6 million, respectively).
Taxes on income from continuing operations includes a reduction in income
taxes expense of $18.4 million from the utilization of prior years' tax
losses not previously recognized in the accounts.
15. Comparative Figures
Comparative figures have been reclassified where necessary to correspond
with the current period's presentation.
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