ShawCor Ltd. Announces Fourth Quarter And Full Year 2008 Results



    (TSX: SCL.A, SCL.B)

    TORONTO, Feb. 19 /CNW/ -

    
    Financial Summary

    (In thousands of                Three Months            Twelve Months
     Canadian dollars except        Ended Dec. 31           Ended Dec. 31
     per share amounts)           2008        2007        2008        2007
    -------------------------------------------------------------------------
    Operating Results
    Revenue                   $  433,853  $  285,438  $1,379,577  $1,048,099
    EBITDA (note 1)               98,616      50,731     265,963     202,808
    Operating income from
     continuing operations        76,564      39,492     201,718     160,001
    Income from continuing
     operations                   56,697      34,053     138,717     117,819
    Income (loss) from
     discontinued operations         609     (30,300)     11,011     (30,462)
    Net income                    57,306       3,753     149,728      87,357

    Net income (loss) per share
     (Class A and B) - Basic
      Continuing operations         0.80        0.48        1.96        1.62
      Discontinued operations       0.01       (0.42)       0.16       (0.42)
      Total                         0.81        0.06        2.12        1.20

    Net income (loss) per share
     (Class A and B) - Diluted
      Continuing operations         0.80        0.47        1.94        1.60
      Discontinued operations       0.01       (0.42)       0.15       (0.41)
      Total                         0.81        0.05        2.09        1.19
    -------------------------------------------------------------------------
    Cash Flow
    Cash from operating
     activities                   82,014       8,820     176,738      97,514
    Additions to property,
     plant and equipment          27,800      28,551      89,799      91,855
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    Financial Position
    Working capital                                      227,312     255,625
    Total assets                                       1,228,466     963,614
    Shareholders' equity per
     share (Class A and B)
     (note 2)                                         $    10.42  $     8.09
    -------------------------------------------------------------------------
    Note 1: EBITDA is a non-GAAP measure calculated by adding back to income
    from continuing operations, the sum of interest (income)/expense, taxes
    and depreciation/amortization of property, plant and equipment. EBITDA
    does not have a standardized meaning prescribed by GAAP and is not
    necessarily comparable to similar measures prescribed by other companies.
    EBITDA is used by many analysts in the oil and gas industry as one of
    several important analytical tools. The following is the calculation of
    EBITDA for the periods presented above:

    Income from continuing
     operations                   56,697      34,053     138,717     117,819
    Add (deduct):
      Income taxes                17,777       6,285      57,590      47,205
      Interest (income)
       expense                     2,154        (743)      5,659      (4,381)
      Amortization of
       property, plant and
       equipment                  21,988      11,136      63,997      42,165
    -------------------------------------------------------------------------
    EBITDA                        98,616      50,731     265,963     202,808
    -------------------------------------------------------------------------
    Note 2: Shareholders' equity per share is a non-GAAP measure calculated
    by dividing shareholders' equity by the number of Class A and Class B
    shares outstanding at the date of the balance sheet.


    FOURTH QUARTER RESULTS
    ----------------------

    REVENUE
    -------

    Consolidated Results

    -------------------------------------------------------------------------
    Three months ended                         Dec. 31   Sept. 30    Dec. 31
    (in thousands of Canadian dollars)            2008       2008       2007
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Pipeline and Pipe Services Segment         401,768    323,346    254,316
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Petrochemical and Industrial Segment        33,001     34,247     28,450
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Intersegment eliminations                     (915)      (344)     2,672
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Consolidated                               433,853    357,249    285,438
    -------------------------------------------------------------------------
    

    Current Quarter vs. Q4 2007
    Consolidated revenue from continuing operations in the fourth quarter of
the year reached a new quarterly record at $433.9 million, compared to $285.4
million in the last quarter of 2007, with the increase reflecting growth in
both of the Company's operating segments together with the impact of a weaker
Canadian dollar in the period. In the fourth quarter 2008, the Canadian dollar
was, on average, 27.6% weaker compared with the U.S. dollar, than in the same
quarter of 2007, which on translating foreign currency revenue, had a
favourable impact on the Company's consolidated revenue of $49.0 million.

    Current Quarter vs. Q3 2008
    Consolidated revenue in the fourth quarter was 21.4% higher than in the
third quarter of the year as stronger revenue growth in the Pipeline and Pipe
Services segment and the impact of a weaker Canadian dollar, was partially
offset by lower revenue in the Petrochemical and Industrial segment. In the
fourth quarter 2008, the Canadian dollar was, on average, 21.1% weaker
compared with the U.S. dollar, than in the prior quarter, which on translating
foreign currency revenue had a favourable impact on consolidated revenue of
$38.6 million.

    Full Year 2008 vs. 2007
    Consolidated revenue for 2008 reached a new annual record for the Company
and totaled $1.38 billion, compared to $1.05 billion in 2007. This 31.6%
increase reflected record activity levels in ShawCor's Pipeline and Pipe
Services market segment with all business units in the segment benefiting from
strong demand for new pipeline infrastructure.

    Pipeline and Pipe Services Segment

    Current Quarter vs. Q4 2007
    Revenue in the quarter for the Pipeline and Pipe Services segment totaled
$401.8 million, 158.0% of the level achieved in the fourth quarter of last
year, reflecting higher revenue at all divisions in the segment together with
the impact of Flexpipe which was acquired at the end of the second quarter of
2008. At Bredero Shaw, revenue increased 53.6% over the level achieved in the
fourth quarter of 2007 with increases achieved in all regions of the division.
In North America, revenue increased 2.8% over the fourth quarter of last year
while in the Europe, Africa and Russia region, revenue increased 155.1%,
mainly as a result of the Gjoa pipe coating project at the division's plant in
Leith, Scotland, and Vega project in Orkanger Norway, which together
contributed revenue of $43 million in the quarter. In the Middle East region,
revenue increased 138.1% from levels in the corresponding quarter of last year
reflecting full operation of the division's plant in Ras Al Khaimah, which was
shut-down in the fourth quarter of 2007 for upgrading and capacity expansion.
In the Asia Pacific region, revenue in the fourth quarter increased 113.3%
over the same quarter of 2007 reflecting increased pipe coating activity in
the region, including the Pluto project performed at the division's pipe
coating plants in Kuantan, Malaysia and Kabil Indonesia. This project
contributed $37 million of revenue in the quarter.
    Revenue at the segment's other divisions also increased over the fourth
quarter of last year reflecting the impact of the weaker Canadian dollar in
the quarter together with increased levels of business activity. Revenue in
the quarter at Shaw Pipeline Services increased 48.1% over the fourth quarter
of 2007, while revenue at Guardian and Canusa-CPS was 42.1% and 33.4% higher,
respectively, than in the last quarter of 2007. Flexpipe contributed revenue
of $31.9 million in the fourth quarter of 2008.

    Current Quarter vs. Q3 2008
    Revenue in the Pipeline and Pipe Services segment in the fourth quarter
increased 24.3% over the prior quarter as revenue growth at Bredero Shaw and
Flexpipe was partially offset by a modest weakening in demand at Canusa-CPS.
At Bredero Shaw, the quarter over quarter revenue growth was broadly based
with all the regions of the division experiencing increased business activity.

    Full Year 2008 vs. 2007
    Revenue in the Pipeline and Pipe Services segment in 2008 totaled $1.24
billion and increased 37.2% over the $903.4 million recorded in the prior
year. Revenue increased at all of the divisions in the segment, underpinned by
the continuing buoyant activity in the global pipeline markets, and also
reflecting the impact of Flexpipe Systems ("Flexpipe") which was acquired on
June 27, 2008.

    Petrochemical and Industrial Segment

    Current Quarter vs. Q4 2007
    Revenue in the quarter in the Petrochemical and Industrial segment
increased 16.0% from the level achieved in the fourth quarter of 2007 as
increased business activity levels at ShawFlex, mainly resulting from orders
for a major oil sands project as well as communications infrastructure
expansions, resulted in a 50.7% increase in revenue.

    Current Quarter vs. Q3 2008
    Revenue in the fourth quarter in the segment decreased by 3.6% from the
level achieved in the third quarter of the year. At DSG-Canusa, revenue in the
quarter decreased 11.7% from the level in the prior quarter in line with
historical seasonal trends and a deterioration in the European automotive
market, while revenue at ShawFlex increased 9.1% from the level in the prior
quarter due to the aforementioned oil sands and communications projects.

    Full Year 2008 vs. 2007
    In the Petrochemical and Industrial segment, revenue decreased 1.2% from
levels in the prior year, reflecting the impact of the slowing of global
economic activity, particularly on the North American industrial markets
served by ShawFlex and the Western European automotive markets served by
DSG-Canusa.

    
    OPERATING INCOME FROM CONTINUING OPERATIONS
    -------------------------------------------

    Consolidated Results

    -------------------------------------------------------------------------
    Three months ended                         Dec. 31   Sept. 30    Dec. 31
    (in thousands of Canadian dollars)            2008       2008       2007
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Revenue from continuing operations         433,853    357,249    285,438
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating income from continuing
     operations                                 76,564     50,486     39,493
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating margin                             17.6%      14.1%      13.8%
    -------------------------------------------------------------------------
    

    Current Quarter vs. Q4 2007
    Consolidated income from continuing operations before interest, income
taxes and non-controlling interest totaled $76.6 million (17.6% of
consolidated revenue from continuing operations) in the fourth quarter of
2008, compared to $39.5 million (13.8% of consolidated revenue from continuing
operations) in the fourth quarter of 2007, with the increase driven by
continuing strong business activity in the Pipeline and Pipe Services segment
together with the $13.9 million favourable impact of the weaker Canadian
dollar, compared to the U.S. dollar, on the translation of U.S. dollar based
revenues and expenses in the quarter, partially offset by a significant
slow-down in the Petrochemical and Industrial segment.

    Current Quarter vs. Q3 2008
    Consolidated income from continuing operations before interest, income
taxes and non-controlling interest in the quarter was 151.7% of the level
achieved in the prior quarter and reflected a continuing improvement trend in
the Pipeline and Pipe Services segment resulting from strong revenue and
improved operating margins, together with the $11.2 million impact from the
translation of U.S. dollar based revenues and expenses of the quarter over
quarter weakening of the Canadian dollar compared to the U.S. dollar.

    Full Year 2008 vs. 2007
    Consolidated income from continuing operations before interest, income
taxes and non-controlling interest totaled $201.7 million (14.6% of
consolidated revenue from continuing operations) compared to $160.0 million
(15.3% of consolidated revenue from continuing operations) in 2007. This 26.1%
increase was a result of the significant increase in revenue over the prior
year partially offset by modestly lower operating margins (operating income
from continuing operations divided by revenue from continuing operations) in
both of the Company's market segments as well as higher Financial and
Corporate costs.

    
    Pipeline and Pipe Services Segment

    -------------------------------------------------------------------------
    Three months ended                         Dec. 31   Sept. 30    Dec. 31
    (in thousands of Canadian dollars)            2008       2008       2007
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Revenue from continuing operations         401,768    323,346    254,316
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating income from continuing
     operations                                 76,612     51,142     40,280
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating margin                             19.1%      15.8%      15.8%
    -------------------------------------------------------------------------
    

    Current Quarter vs. Q4 2007
    In the Pipeline and Pipe Services segment, operating income from
continuing operations of $76.6 million (19.1% of revenue from continuing
operations) in the quarter was 90.2% higher than in the fourth quarter of 2007
and reflected the impact of significantly higher revenue in the period
together with a 3.3 percentage point improvement in operating margins, the
result of increased factory throughput, improved manufacturing efficiency, and
the benefit of enhanced fixed cost absorption. In Bredero Shaw, operating
margins increased 2.8 percentage points over levels in the fourth quarter of
2007, with the improvements achieved across all regions of the division. In
addition, all of the other businesses in this segment achieved margin
improvements as a result of improved efficiencies associated with the higher
sales volumes in the period. Finally, the inclusion of Flexpipe in the fourth
quarter 2008 results further contributed to the increase in the segment's
operating income.

    Current Quarter vs. Q3 2008
    Operating income from continuing operations in the fourth quarter for the
segment increased 49.8% from the third quarter of the year, reflecting the
higher revenue in the period and a 3.3 percentage point improvement in
operating margins. Operating margins improved in the quarter at all divisions
in the segment in line with the increased revenues, with the exception of Shaw
Pipeline Services where they declined slightly due to a temporary shift in
revenue mix towards lower margin radiographic inspection services.

    Full Year 2008 vs. 2007
    In the Pipeline and Pipe Services segment, operating income from
continuing operations totaled $200.7 million (16.2% of revenue from continuing
operations) compared to $153.9 million (17.0% of revenue from continuing
operations) in 2007. At Bredero Shaw, operating margins were adversely
impacted by an increase in depreciation expense of $17.1 million related to
the pipe coating capacity expansions in Western Canada and Ras Al Khaimah and
the remobilization of the Leith facility. This negative impact on operating
margins was partially offset by improvements at the segment's other divisions,
which all achieved higher operating margins as increased revenue led to
improved facility utilization and improved fixed cost absorption.

    
    Petrochemical and Industrial Segment

    -------------------------------------------------------------------------
    Three months ended                         Dec. 31   Sept. 30    Dec. 31
    (in thousands of Canadian dollars)            2008       2008       2007
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Revenue from continuing operations          33,001     34,247     28,450
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating income from continuing
     operations                                  2,527      5,170      3,065
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating margin                              7.7%      15.1%      10.8%
    -------------------------------------------------------------------------
    

    Current Quarter vs. Q4 2007
    In the Petrochemical and Industrial segment, operating income from
continuing operations in the quarter of $2.5 million (7.7% of revenue from
continuing operations) decreased $538 thousand from the level achieved in the
fourth quarter of last year, reflecting a 3.1 percentage point decrease in
operating margins. The decrease in operating margins was experienced at both
DSG-Canusa and ShawFlex and stemmed from reduced factory utilization in the
European operations of DSG-Canusa and increased costs associated with the
slowing economic situation, including increases in bad debt provisions.

    Current Quarter vs. Q3 2008
    Operating income for the segment in the quarter was 48.9% of the level in
the prior quarter and reflected the impact of the 3.6% reduction in sales in
the period together with a 7.4 percentage point decrease in operating margins,
resulting from additional expenses incurred in the quarter including an
increase in bad debts provisions at DSG-Canusa and ShawFlex, the result of the
worsening economic situation in North America and Western Europe.

    Full Year 2008 vs. 2007
    In the Petrochemical and Industrial segment, operating income from
continuing operations totaled $19.1 million (13.4% of revenue from continuing
operations) in 2008 compared to $22.8 million (15.9% of revenue from
continuing operations) in the prior year, reflecting the impact on operating
margins of lower factory utilization stemming from softer market conditions in
the year.

    Financial and Corporate

    Current Quarter vs. Q4 2007
    Financial and corporate costs in the quarter consisted of unallocated
corporate expenses of $2.6 million, net of foreign exchange gains of $5.9
million on the translation of foreign currency denominated cash and working
capital balances, compared to $3.9 million, including foreign exchange gains
of $47 thousand, in the fourth quarter of last year. The increase in corporate
expenses reflected higher management compensation expenses in line with the
Company's improved consolidated financial results, the impact of staff
additions to support the Company's growth, and a $1.8 million write-down in
the quarter of the Company's investment in Garneau Inc.

    Current Quarter vs. Q3 2008
    Financial and corporate costs in the quarter, excluding foreign exchange
gains, were $2.4 million higher in the fourth quarter than in the prior
quarter as a result of the $1.8 million write-down of the Company's investment
in Garneau Inc. Foreign exchange gains in the quarter, due to the impact of
the significant decline in the Canadian dollar on foreign currency cash
balances and working capital, totaled $5.9 million compared to $233 thousand
in the third quarter of 2008.

    Full Year 2008 vs. 2007
    In 2008, unallocated corporate expenses totaled $26.2 million compared to
$17.2 million in the prior year, with the increase reflecting a $2.9 million
write-down of the Company's investment in Garneau Inc. together with $3.4
million of increased Corporate personnel costs to support increasing business
levels, an increase in management incentive compensation of $1.0 million, and
expenses incurred in mergers and acquisitions activity of $1.5 million.
Foreign exchange gains in the year totaled $8.2 million compared to $475
thousand in 2007 and mainly resulted from the impact of the significant
decline in the Canadian dollar in the fourth quarter on the translation of
foreign cash and working capital balances.

    
    NON-OPERATING INCOME AND EXPENSES
    ---------------------------------
    

    Interest Income

    Consolidated net interest expense totaled $2.2 million in the fourth
quarter compared to $2.5 million in the third quarter of 2008 and net interest
income of $743 thousand in the fourth quarter of 2007. The decrease from the
fourth quarter of 2007 was a result of lower average cash balances and
increased bank indebtedness in the period due to the significant cash flows
used in investing activities including capital expenditures and the
acquisition on June 27, 2008 of Flexpipe. On a full year basis, net interest
expense in 2008 totaled $5.7 million compared to income of $4.4 million in
2007, and reflected the impact of lower cash balances and higher levels of
bank indebtedness in the year as a result of the Flexpipe acquisition on June
27, 2008.

    Income Tax Expense

    Income tax expense related to continuing operations totaled $17.8 million
(23.9% of income from continuing operations before income taxes) compared to
$15.2 million (31.7% of income from continuing operations before income taxes)
in the third quarter of 2008 and $6.3 million (15.6% of income from continuing
operations before income taxes) in the fourth quarter of 2007. The income tax
rate in the fourth quarter of 2008 improved 7.8 percentage points from the
prior quarter reflecting a higher proportion of earnings in lower taxed
foreign jurisdictions and the utilization of previously unrecognized tax loss
carry forwards in some subsidiaries. In the fourth quarter of 2007, the tax
rate was favorably impacted by the utilization of previously unrecognized tax
loss carry forwards in certain countries, particularly Nigeria. This benefit
reduced the effective tax rate in that quarter by approximately 15 percentage
points. Also benefiting the reported tax rate in the fourth quarter of 2007
was the impact on Canadian future tax balances of announced reductions in
future statutory income tax rates.
    On a full year basis, income tax expense totaled $57.6 million (29.4% of
income from continuing operations before income taxes and non-controlling
interest) in 2008, compared to $47.2 million (28.7% of income from continuing
operations before income taxes and non-controlling interest) in 2007, with the
increase from the prior year reflecting reduced utilization of previously
unrecognized tax loss carry forwards.

    Income from Continuing Operations

    Consolidated income from continuing operations for the quarter totaled
$56.6 million ($0.80 per share, diluted), compared to $32.7 million ($0.46 per
share, diluted) in the third quarter of 2008 and $34.1 million ($0.47 per
share, diluted) in the fourth quarter of last year.
    Income from continuing operations for the entire year in 2008 totaled
$138.7 million ($1.94 per share, diluted) compared to $117.8 million ($1.60
per share, diluted) in 2007, with the 21.3% increase in diluted earnings per
share reflective of the higher net income from continuing operations in the
year together with a reduction in shares outstanding as a result of share
repurchases during the year under the Company's Normal Course Issuer Bid
("NCIB").

    
    DISCONTINUED OPERATIONS
    -----------------------
    

    Income from discontinued operations for the quarter totaled $608 thousand
($0.01 per share, diluted) compared to a loss of $82 thousand ($0.00 per
share, diluted) in the prior quarter and a loss from discontinued operations
of $30.5 million ($0.42 per share, diluted) in the fourth quarter of 2007. The
loss for the fourth quarter of 2007 resulted from the provision that was
recorded following the adverse verdict in a lawsuit related to the closed pipe
coating plant in Mobile, Alabama.
    Income from discontinued operations totaled $11.0 million ($0.15 per
share, diluted) in the full year 2008 and reflected the impact of a settlement
at an amount less than the provision that had been recorded in 2007 following
an adverse verdict in a lawsuit related to the Company's closed pipe coating
plant in Mobile, Alabama. In 2007, losses from discontinued operations totaled
$30.5 million ($0.41 per share, diluted) as a result of the aforementioned
lawsuit provision.

    
    NET INCOME AND EARNINGS PER SHARE
    ---------------------------------
    

    Consolidated net income for the fourth quarter of the year was $57.3
million ($0.81 per share, diluted) compared to $32.6 million ($0.46 per share,
diluted) in the third quarter of 2008 and $3.8 million ($0.05 per share,
diluted) in the fourth quarter of 2007.
    On a full year basis, consolidated net income totaled $149.7 million
($2.09 per share, diluted) in 2008 compared to $87.4 million ($1.19 per share,
diluted) in the prior year with the increase the result of increased income
from continuing operations and the impact on income from discontinued
operations of the settlement in respect of the lawsuit related to the closed
Mobile, Alabama pipe coating facility.

    
    CASH FLOW
    ---------
    

    Cash flow generated by continuing operating activities in the quarter
totaled $82.0 million compared to $29.9 million last quarter and $8.8 million
in the fourth quarter of 2007, with the improvement reflecting the higher
income from continuing operations in the period together with higher non-cash
amortization expense. On a full year basis, cash flow generated by continuing
operating activities totaled $176.7 million in 2008 compared to $97.5 million
in 2007.
    Cash flow used in continuing investing activities in the quarter totaled
$34.3 million, compared to $29.0 million last quarter and $33.2 million in the
fourth quarter of last year, and was comprised mainly of additions to
property, plant and equipment of $27.8 million and increases in deferred
project costs of $5.3 million. Major additions to property, plant and
equipment in the quarter included capacity expansion programs at Flexpipe and
at Bredero Shaw's facilities in Pearland, Texas, Ras Al Khaimah, U.A.E. and
Regina, Saskatchewan. In the fourth quarter of 2007, cash flow used in
continuing investing activities included additions to property, plant and
equipment of $28.6 million and investments in deferred project costs of $4.7
million. On a full year basis, cash flow used in continuing investing
activities totaled $231.3 million in 2008 compared to $99.4 million in the
prior year.
    Cash flow used in continuing financing activities totaled $50.4 million
in the quarter, compared to $24.4 million last quarter and $17.8 million in
the fourth quarter of 2007, and mainly consisted of repayments of bank
indebtedness of $42.7 million, dividends paid to shareholders of $4.5 million
and $3.2 million paid to repurchase 202,200 Class A shares under the Company's
NCIB. In the fourth quarter of 2007, cash flow used in continuing financing
activities included $14.0 million paid to repurchase 425,300 Class A shares
under the NCIB and dividends paid to shareholders of $4.1 million, partially
offset by $243 thousand received from the issuance of Class A shares on the
exercise of stock options and $31 thousand received on an increase in bank
indebtedness. On a full year basis, cash flow used in continuing financing
activities totaled $31.5 million compared to $107.7 million in 2007.
    Overall, cash and cash equivalents increased $15.0 million during the
quarter to $78.9 million, compared to a decrease of $40.8 million during the
fourth quarter of 2007 to $175.0 million. On a full year basis, cash and cash
equivalents decreased $96.1 million in 2008 compared to a decrease of $134.3
million in 2007.

    
    OUTLOOK
    -------
    

    Demand for the products and services of the Company's largest operating
segment, the Pipeline and Pipe Services segment, is mainly driven by the level
of global pipeline infrastructure investment. This investment, in turn, is
determined by energy supply and demand, which itself is a function of global
economic activity and the availability of energy resources. Demand for the
products and services of the Petrochemical and Industrial segment is driven by
the general level of economic activity in the regions where the segment
operates; North America, Western Europe, and at the segment's new facility
that will commence operations in China in 2009.
    The level of global economic activity declined during the second half of
2008 and this trend is expected to continue during at least the first half of
2009, with this slow-down particularly acute in North America and Western
Europe. This in turn has put downward pressure on energy demand and on energy
prices, and as a result, some producing nations have reduced production. The
production reductions are currently expected to be short term in duration but
may at least temporarily, and possibly in the longer term, reduce the need for
new pipeline infrastructure. Any such reductions could have an impact on the
level of demand for the Company's products and services.
    In the longer term, the Company expects that increasing energy demand,
coupled with accelerating depletion of current sources of oil and gas, will
necessitate increasing investment in global pipeline infrastructure as new
sources of oil and gas are developed and connected to consuming markets. The
continuing industrialization of developing nations, notably India and China,
is expected to increase the global demand for energy as these nations consume
a larger proportion of the world's energy supply, and over time, offset the
stable or declining demand for energy in developed nations.
    In addition to increasing demand, the accelerating depletion of existing
energy reserves will drive the necessity for new oil and gas development. Much
of the new production is expected to be developed from more challenging
sources including oil sands and shale or in more challenging environments such
as deepwater offshore and frontier areas. Liquid Natural Gas development is
also expected to accelerate in order to meet future energy needs, particularly
in the Asia Pacific region. The development of these new energy sources will
require the development of new infrastructure including new pipelines.
Furthermore, the challenging nature and locations of these new developments
will require new higher value product and service solutions. These factors are
expected to translate into favourable business prospects for the Company once
the global economy stabilizes, and energy markets restore a reasonable balance
between supply and demand. At such time, a return to higher levels of pipeline
construction is expected to lead to revenue growth and the shift to higher
value solutions that will be required to meet our customer's more challenging
requirements is expected to create the potential for margin improvement.
    Consolidated order backlog, representing customer orders expected to be
completed within one year, totaled $455.7 million at December 31, 2008,
compared to $528.6 million at the end of the third quarter, and $460.1 million
at the beginning of the year, with the decrease in the quarter reflecting the
impact of the record revenue generated in the fourth quarter of 2008. With the
Company's recent announcement of an increase in the scope of the Trinidad NEO
project and the recent award of a U.S. $40 million contract with Petronas of
Malaysia, the Company's current backlog has strengthened from the level at
December 31, 2008. This backlog is expected to support continued strong
revenue through the first half of 2009.
    The Company continues to enjoy 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 long term market fundamentals enjoyed by the Company provides the
potential for continued growth for ShawCor in the years ahead.

    
    FORWARD-LOOKING INFORMATION
    ---------------------------
    

    This document includes certain statements that reflect management's
expectations and objectives for ShawCor's future performance, opportunities
and growth which constitute forward-looking information under applicable
securities laws. 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," "expect", "believe", "predict", "estimate," "continue,"
"intend," "plan," and variations of these words or other similar expressions.
These statements are based on assumptions, estimates and analysis made by
ShawCor in light of its experience and perception of trends, current
conditions and expected developments as well as other factors believed to be
reasonable and relevant in the circumstances. 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 known and unknown risks and
uncertainties that could cause actual results to differ materially from those
predicted, expressed or implied by the forward-looking statements. Significant
risks facing ShawCor include, but are not limited to: changes in global
economic activity and changes in energy supply and demand which impact on the
level of drilling activity and pipeline construction; political, economic and
other risks arising from ShawCor's international operations; compliance with
environmental, trade and other laws; liability claims; fluctuations in foreign
exchange rates; fluctuations in prices of raw materials, as well as other
risks and uncertainties.

    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 23, 2009 at 10:00 a.m. ET to discuss the Company's fourth
quarter 2008 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

                              Three Months Ended        Twelve Months Ended
                                  December 31               December 31
                           ------------------------  ------------------------
                               2008         2007         2008         2007
                           -----------  -----------  -----------  -----------

    Revenue                $  433,853   $  285,438   $1,379,577   $1,048,099
    Cost of goods sold        268,260      176,740      887,230      624,971
                           -----------  -----------  -----------  -----------
    Gross profit              165,593      108,698      492,347      423,128

    Selling, general and
     administrative
     expenses (notes 2,
     3 and 4)                  60,679       56,454      198,782      210,732
    Amortization of
     property, plant
     and equipment             21,988       11,136       63,997       42,165
    Amortization of
     intangible assets            951            -        1,902            -
    Amortization of
     deferred project
     costs                      3,376            -       18,582        3,464
    Research and
     development expense        2,035        1,616        7,366        6,766
                           -----------  -----------  -----------  -----------
    Operating income from
     continuing operations     76,564       39,492      201,718      160,001
    Interest income
     (expense) (note 5)        (2,154)         743       (5,659)       4,381
                           -----------  -----------  -----------  -----------

    Income before income
     taxes and non-
     controlling interest      74,410       40,235      196,059      164,382
    Income taxes               17,777        6,285       57,590       47,205
                           -----------  -----------  -----------  -----------
    Income before non-
     controlling interest      56,633       33,950      138,469      117,177
    Non-controlling interest       64          103          248          642
                           -----------  -----------  -----------  -----------

    Income from continuing
     operations                56,697       34,053      138,717      117,819
    Income (loss) from
     discontinued
     operations (note 6)          609      (30,300)      11,011      (30,462)
                           -----------  -----------  -----------  -----------

    Net income             $   57,306   $    3,753   $  149,728   $   87,357
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    Earnings (loss) per
     share, Class A and B
     - Basic (note 20)
      Continuing
       operations          $     0.80   $     0.48   $     1.96   $     1.62
      Discontinued
       operations                0.01        (0.42)        0.16        (0.42)
                           -----------  -----------  -----------  -----------
      Total                $     0.81   $     0.06   $     2.12   $     1.20
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    Earnings (loss) per
     share Class A and B
     - Diluted (note 20)
      Continuing
       operations          $     0.80   $     0.47   $     1.94   $     1.60
      Discontinued
       operations                0.01        (0.42)        0.15        (0.41)
                           -----------  -----------  -----------  -----------
      Total                $     0.81   $     0.05   $     2.09   $     1.19
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    -------------------------------------------------------------------------

    SEGMENTED INFORMATION

                              Three Months Ended        Twelve Months Ended
                                  December 31               December 31
                           ------------------------  ------------------------
                               2008         2007         2008         2007
                           -----------  -----------  -----------  -----------

    Revenue
      Pipeline and Pipe
       Services            $  401,768   $  254,316   $1,239,893   $  903,427
      Petrochemical and
       Industrial              33,001       28,450      141,969      143,665
      Intersegment
       Eliminations              (916)       2,672       (2,285)       1,007
                           -----------  -----------  -----------  -----------
                           $  433,853   $  285,438   $1,379,577   $1,048,099
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    Income (loss) from
     operations
      Pipeline and Pipe
       Services            $   76,612   $   40,280   $  200,681   $  153,932
      Petrochemical and
       Industrial               2,527        3,065       19,088       22,822
      Financial and
       Corporate               (2,575)      (3,853)     (18,051)     (16,753)
                           -----------  -----------  -----------  -----------
                           $   76,564   $   39,492   $  201,718   $  160,001
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------



    SHAWCOR LTD.
    INTERIM FINANCIAL INFORMATION (Unaudited)
    (in thousands of Canadian dollars)

    CONSOLIDATED STATEMENTS OF CASH FLOW

                              Three Months Ended        Twelve Months Ended
                                  December 31               December 31
                           ------------------------  ------------------------
                               2008         2007         2008         2007
                           -----------  -----------  -----------  -----------

    Operating activities:
      Income from
       continuing
       operations          $   56,697   $   34,053   $  138,717   $  117,819
      Items not requiring
       an outlay of cash:
        Amortization of
         property, plant
         and equipment         21,988       11,136       63,997       42,165
        Amortization of
         intangible assets        951            -        1,902            -
        Amortization of
         deferred
         project costs          3,376            -       18,582        3,464
        Amortization of
         transaction costs        110          110          440          440
        Asset retirement
         obligation expense     7,475           (3)       9,377        1,147
        Stock-based
         compensation
         (note 2)                 830          697        3,359        2,765
        Future income taxes    11,368        2,194       11,777          681
        Loss (gain) on
         disposal of
         property, plant
         and equipment             46          231          404         (372)
        Impairment of
         available-for-sale
         financial asset
         (note 9)               1,318            -        2,816            -
        Impairment of
         goodwill                 352            -          352            -
        Non-controlling
         interest in
         earnings of
         subsidiaries             (64)        (103)        (248)        (642)
        Gain on disposal
         of subsidiary
         (note 21)                199            -         (864)           -
      Settlement of
       asset retirement
       obligations               (233)         855         (891)      (1,906)
      Change in employee
       future benefits         (3,889)      (2,044)      (1,400)         176
      Change in non-cash
       working capital        (18,510)     (38,306)     (71,582)     (68,223)
                           -----------  -----------  -----------  -----------
    Cash provided by
     continuing operating
     activities                82,014        8,820      176,738       97,514
                           -----------  -----------  -----------  -----------

    Investing activities:
      Purchases of property,
       plant and equipment    (27,800)     (28,551)     (89,799)     (91,855)
      Proceeds on disposal
       of property, plant
       and equipment               13           27           46          732
      Increase in deferred
       project costs           (5,260)      (4,697)     (21,547)      (5,150)
      Acquisition of
       subsidiaries
       (note 21)               (1,347)           -     (125,723)      (2,786)
      Proceeds on disposal
       of subsidiaries             84            -        5,719            -
      Investment in shares          -            -            -         (301)
                           -----------  -----------  -----------  -----------
    Cash used in
     continuing investing
     activities               (34,310)     (33,221)    (231,304)     (99,360)
                           -----------  -----------  -----------  -----------

    Financing activities:
      Increase (decrease)
       in bank indebtedness   (42,654)          31       10,311       (4,275)
      Issue of shares              24          243        1,763        4,955
      Purchase of shares
       for cancellation        (3,226)     (14,026)     (26,022)     (91,950)
      Dividends paid to
       shareholders            (4,512)      (4,056)     (17,597)     (16,469)
                           -----------  -----------  -----------  -----------
    Cash used in
     continuing financing
     activities               (50,368)     (17,808)     (31,545)    (107,739)
                           -----------  -----------  -----------  -----------

    Foreign exchange on
     foreign cash and
     cash equivalents          19,752       (1,182)      25,776      (21,585)
                           -----------  -----------  -----------  -----------

    Net cash provided by
     (used in) continuing
     operations                17,088      (43,391)     (60,335)    (131,170)

    Net cash provided by
     (used in) discontinued
     operations (note 6)       (2,048)       2,707      (35,750)      (3,135)

    Cash and cash
     equivalents at
     beginning of period       63,892      215,811      175,017      309,322
                           -----------  -----------  -----------  -----------

    Cash and cash
     equivalents at end
     of period             $   78,932   $  175,127   $   78,932   $  175,017
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    Supplemental
     information:
      Cash interest paid   $    2,425        1,367   $    7,472   $    5,392
      Cash income
       taxes paid          $   31,464        9,601   $   48,522   $   59,101



    SHAWCOR LTD.
    INTERIM FINANCIAL INFORMATION (Unaudited)
    (in thousands of Canadian dollars)

    CONSOLIDATED BALANCE SHEETS

                                                                  December 31
                                                                      2007
                                                     December 31   Restated -
                                                         2008        Note 1
                                                     -----------  -----------
    Assets
    Current assets
      Cash and cash equivalents (note 7)             $   78,932   $  175,017
      Accounts receivable                               307,933      203,547
      Taxes receivable                                    9,261        3,169
      Inventories                                       150,606      102,486
      Prepaid expenses                                   14,635       11,362
      Derivative financial instruments                      523        1,508
      Current future income taxes                         3,532        2,770
      Current assets of discontinued
       operation (note 6)                                12,256       16,305
                                                     -----------  -----------
                                                        577,678      516,164
    Property, plant and equipment, net                  307,735      242,783
    Goodwill                                            229,549      159,480
    Intangible assets (note 8)                           66,803        1,558
    Future income taxes                                  30,743       27,751
    Other assets (note 9)                                15,958       15,878
                                                     -----------  -----------
                                                     $1,228,466   $  963,614
                                                     -----------  -----------
                                                     -----------  -----------

    Liabilities
    Current liabilities
      Bank indebtedness (note 10)                    $   15,418   $      107
      Accounts payable and accrued liabilities          193,675      153,116
      Taxes payable                                      53,405       32,030
      Derivative financial instruments                    2,049            -
      Deferred revenues                                  54,692       24,021
      Current portion of long-term debt                  30,672            -
      Current liabilities of discontinued
       operation (note 6)                                   455       51,265
                                                     -----------  -----------
                                                        350,366      260,539
    Long-term debt                                       60,554       72,726
    Future income taxes                                  73,993       37,539
    Other non-current liabilities (note 11)               9,978       10,740
                                                     -----------  -----------
                                                        494,891      381,544
                                                     -----------  -----------

    Non-controlling interest in subsidiaries                  -        3,283
                                                     -----------  -----------

    Shareholders' Equity
    Capital stock (note 12)                             202,073      203,252
    Contributed surplus (note 13)                        14,512       11,729
    Retained earnings                                   602,530      489,836
    Accumulated other comprehensive loss (note 14)      (85,540)    (126,030)
                                                     -----------  -----------
                                                        733,575      578,787
                                                     -----------  -----------
                                                     $1,228,466   $  963,614
                                                     -----------  -----------
                                                     -----------  -----------



    SHAWCOR LTD.
    INTERIM FINANCIAL INFORMATION (Unaudited)
    (in thousands of Canadian dollars)

    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

                              Three Months Ended        Twelve Months Ended
                                  December 31               December 31
                           ------------------------  ------------------------
                               2008         2007         2008         2007
                           -----------  -----------  -----------  -----------

    Balance at beginning
     of period             $  552,253   $  502,690   $  489,836   $  498,001
    Transitional
     adjustment (note 1)                                                (585)
    Transitional
     adjustment (note 1)            -            -        3,067        3,288
                           -----------  -----------  -----------  -----------
    Adjusted balance at
     beginning of year        552,253      502,690      492,903      500,704
    Net income                 57,306        3,753      149,728       87,357
                           -----------  -----------  -----------  -----------
                              609,559      506,443      642,631      588,061

    Excess of purchase
     price paid over
     stated value of
     shares (note 12)          (2,517)     (12,551)     (22,504)     (81,756)
    Dividends declared         (4,512)      (4,056)     (17,597)     (16,469)
                           -----------  -----------  -----------  -----------
    Balance at end of
     period                $  602,530   $  489,836   $  602,530   $  489,836
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------


    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                              Three Months Ended        Twelve Months Ended
                                  December 31               December 31
                           ------------------------  ------------------------
                               2008         2007         2008         2007
                           -----------  -----------  -----------  -----------

    Net income             $   57,306   $    3,753   $  149,728   $   87,357
    Other comprehensive
     income (loss), net
     of income taxes:
      Unrealized gain (loss)
       on translating
       financial statements
       of self-sustaining
       foreign operations      38,195       (1,176)      55,627      (49,954)
      Gain (loss) on
       hedges of unrealized
       foreign currency
       translation            (14,085)       1,357      (18,060)      13,830
      Income tax benefit        2,401        2,120        3,079            -
                           -----------  -----------  -----------  -----------
    Unrealized foreign
     currency translation
     gain (loss), net of
     hedging activities        26,511        2,301       40,646      (36,124)
                           -----------  -----------  -----------  -----------
      Unrealized loss on
       available-for-sale
       financial assets
       arising during
       the period                (359)         264       (2,229)      (1,331)
      Unrealized loss on
       available-for-sale
       financial assets
       transferred to net
       income in the
       current period           1,318            -        2,816            -
      Income tax expense
       transferred to
       net income in the
       period                       -         (542)         253            -
                           -----------  -----------  -----------  -----------
    Change in unrealized
     loss on available-
     for-sale financial
     assets                       959         (278)         840       (1,331)
                           -----------  -----------  -----------  -----------
      Gain on derivatives
       designated as cash
       flow hedges                  -          816            -        4,112
      Income tax expense            -         (277)           -       (1,398)
      Loss (gain) on
       derivatives
       designated as cash
       flow hedges in
       prior periods
       transferred to net
       income in the
       current period               -         (609)      (1,508)      (1,679)
      Income tax expenses
       (benefits)
       transferred to net
       income in the
       current period               -          207          512          571
                           -----------  -----------  -----------  -----------
    Change in gain (loss)
     on derivatives
     designated as cash
     flow hedges                    -          137         (996)       1,606
                           -----------  -----------  -----------  -----------

    Other comprehensive
     income (loss)             27,470        2,160       40,490      (35,849)
                           -----------  -----------  -----------  -----------

    Comprehensive income   $   84,776   $    5,913   $  190,218   $   51,508
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------


    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. Except as noted below, 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, 2007. Accordingly,
    these interim consolidated financial statements should be read in
    conjunction with the Company's annual consolidated financial statements.

    a) Intangible Assets

    Intangible assets and intellectual property are recorded at their
    allocated cost at the date of acquisition of the related subsidiary.
    Amortization is recorded for intangible assets and intellectual property
    with limited lives on a straight-line basis over their estimated useful
    lives of up to 15 years.

    b) General Standards of Financial Statements Presentation

    Effective January 1, 2008, the Company adopted changes to the Canadian
    Institute of Chartered Accountants' ("CICA") Handbook Section 1400,
    General Standards of Financial Statement Presentation. Amendments to this
    Handbook section require management to evaluate, as at each balance sheet
    date, the Company's ability to continue as a going concern. If management
    concludes that the Company can no longer operate as a going concern, that
    fact, along with information relevant to that assessment, is required to
    be disclosed in the financial statements. When financial statements are
    not prepared on a going concern basis, this fact is to be disclosed along
    with a description of the basis of preparation. This change had no impact
    on the Company's unaudited interim consolidated financial statements.

    c) Capital Disclosures

    Effective January 1, 2008, the Company adopted CICA Handbook section
    1535, Capital Disclosures. This Handbook section establishes standards
    for disclosing information about the Company's capital and how it is
    managed and includes the requirement for disclosure of information about
    the Company's objectives, policies and processes for managing capital.
    The disclosures related to this Handbook section are included in note 17.

    d) Financial Instruments

    Effective January 1, 2007, the Company adopted the following CICA
    Handbook sections: 3861, Financial Instruments - Disclosure and
    Presentation, the former of which outlines the disclosure requirements
    related to the Company's financial instruments. On adoption, the Company
    recorded a decrease to other assets and a decrease in retained earnings
    of $585 thousand.

    e) Financial Instruments

    Effective January 1, 2008, the Company adopted the following CICA
    Handbook sections: 3862, Financial Instruments - Disclosure; and 3863,
    Financial Instruments - Presentation, the former of which outlines the
    disclosure requirements related to the Company's financial instruments.
    The adoption of the standards did not have any impact on the
    classification and valuation of the Company's financial instruments. The
    disclosures required by these Handbook sections are included in note 16.

    f) Financial Instruments

    Effective August 30, 2008, the Company adopted the following Emerging
    Issues Committee abstract; EIC-172 Financial Instruments - Income
    Statement Representation Of Tax Loss Carryforward Recognized Following An
    Unrealized Gain Recorded In Other Comprehensive Income. As required, this
    accounting standard has been adopted retroactively with restatement of
    prior periods. The following adjustments were made to the Company's
    balance sheet as a result of adopting this accounting standard:

    -------------------------------------------------------------------------
    (in thousands of Canadian dollars)                             January 1,
                                                                        2007
    -------------------------------------------------------------------------
    Increase in assets:
      Future taxes..............................................  $    3,288
                                                                  -----------
    Total increase in assets....................................  $    3,288
                                                                  -----------
                                                                  -----------

    Increase in liabilities:
      Future taxes..............................................  $    4,533
                                                                  -----------
    Total increase in liabilities...............................  $    4,533
                                                                  -----------

    Increase (decrease) in shareholders' equity:
      Retained earnings.........................................       3,288
      Accumulated other comprehensive loss......................      (4,533)
                                                                  -----------
    Total decrease to shareholders' equity......................      (1,245)
                                                                  -----------
    Total increase to liabilities and shareholders' equity......  $    3,288
                                                                  -----------
                                                                  -----------


    g) Inventories

    On January 1, 2008, the Company adopted CICA Handbook Section 3031,
    Inventories. As required, this accounting standard has been adopted
    prospectively with an adjustment to retained earnings. Prior year figures
    have not been restated. The following adjustments were made to the
    Company's balance sheet as a result of adopting this accounting standard:

    -------------------------------------------------------------------------
    (in thousands of Canadian dollars)                             January 1,
                                                                        2008
    -------------------------------------------------------------------------
    Increase in assets:
      Inventories...............................................  $    1,030
      Property, plant and equipment.............................       2,037
                                                                  -----------
    Total increase in assets....................................  $    3,067
                                                                  -----------
                                                                  -----------

    Increase in shareholders' equity:
      Retained earnings.........................................       3,067
                                                                  -----------
    Total increase to shareholders' equity......................       3,067
                                                                  -----------
    Total increase to liabilities and shareholders' equity......  $    3,067
                                                                  -----------
                                                                  -----------


    The following is a description of the accounting policy adopted by the
    Company as a result of implementing this accounting change:

    Inventories are valued at the lower of cost or net realizable value. Cost
    is determined on a first-in, first-out basis, except in certain project
    based pipe coating businesses where the average cost basis is employed,
    and includes direct materials, direct labour and variable and fixed
    manufacturing overheads. Net realizable value for finished goods and
    work-in-process is the amount which would be realized on the sale, less
    the cost of transport, and for raw materials and supplies is replacement
    cost. Ownership of inbound inventories is recognized at the time title
    passes to the Company, which coincides with the invoicing and release of
    such inventories by suppliers.

    2.  Stock-based compensation

    The Board of Directors approved the granting of 30,000 stock options on
    May 26, 2008 and 398,600 on February 22, 2008 under the 2001 Employee
    Plan. The total fair value of the stock options granted during twelve
    months ended December 31, 2008 was $4.1 million and the weighted average
    fair value of the options was $10.54 (2007 - $8.15), calculated using the
    Black-Scholes pricing model with the following assumptions:

    -------------------------------------------------------------------------
                                                           2008         2007
    -------------------------------------------------------------------------
    Expected life of options.......................  6.25 years   6.25 years
    -------------------------------------------------------------------------
    Expected stock price volatility................      29.63%       29.02%
    -------------------------------------------------------------------------
    Expected dividend yield........................       0.75%        0.92%
    -------------------------------------------------------------------------
    Risk-free interest rate........................       3.20%        4.04%
    -------------------------------------------------------------------------

    The fair value of options granted under the 2001 Employee Plan will be
    amortized to compensation expense over the 5 year vesting period of
    options. The compensation cost from the continuing amortization of
    granted stock options for the three months and twelve months ended
    December 31, 2008, included in selling, general and administrative
    expenses, is $830 thousand and $3.4 million, respectively (December 31,
    2007 - $689 thousand and $2.8 million, respectively).

    3.  Foreign exchange gains and losses

    Included in selling, general and administrative expenses for the three
    months and twelve months ended December 31, 2008 are foreign exchange
    gains of $5.9 million and $8.2 million, respectively, (December 31, 2007
    - gains of $47 thousand and $475 thousand, respectively).

    4.  Employee future benefits

    The Company's cost under both defined benefit and defined contribution
    arrangements included in selling, general and administrative expenses for
    the three months and twelve months ended December 31, 2008 is
    $1.7 million and $9.0 million (December 31, 2007 - $3.3 million and
    $10.5 million).

    5.  Interest income (expense)

                              Three Months Ended        Twelve Months Ended
    (in thousands of                Dec. 31                   Dec. 31
     Canadian dollars)         2008         2007         2008         2007
    -------------------------------------------------------------------------
    Interest on short-term
     deposits              $     (391)  $    2,125   $    1,895   $   10,224
    Interest on bank
     indebtedness                (353)        (176)      (2,518)        (707)
    Interest on
     long-term debt            (1,410)      (1,206)      (5,036)      (5,136)
                           --------------------------------------------------
                           $   (2,154)  $      743   $   (5,659)  $    4,381
                           --------------------------------------------------
                           --------------------------------------------------

    6.  Discontinued operations

    On November 2, 2004, the Company announced its decision to close the
    Mobile, Alabama pipe coating facility (the "Mobile Facility") and by
    December 31, 2005, operations at the Mobile Facility had ceased. The
    Company adopted discontinued operation accounting treatment for the
    Mobile Facility in 2005. The Mobile Facility was part of the Pipeline and
    Pipe Services market segment.

    The Company previously announced that it had reached a settlement of the
    Alabama lawsuit brought by Dirt, Inc. against Bredero Price Company,
    Bredero Shaw LLC, ShawCor Ltd. and Halliburton Energy Services, Inc.,
    which resulted in the previously announced verdict of US$100 million in
    compensatory damages and punitive damages of US$2 million against each
    defendant plus interest. The matter was settled, at a mediation ordered
    by the Alabama Supreme Court as part of the appeal proceedings, for a
    total of US$43.5 million against all parties. As a result of this
    settlement, in the second quarter of 2008, the Company has reduced its
    reserves related to this lawsuit to $36.0 million, less anticipated
    income tax recoveries of $12.6 million. During the three months ended
    September 30, 2008, all amounts related to the settlement were paid.

    The following table summarizes the financial results and cash flows from
    discontinued operations for the three months and twelve months ended
    December 31, 2008 and 2007 and the assets and liabilities of the
    discontinued operations as at those dates:

                              Three Months Ended        Twelve Months Ended
    (in thousands of                Dec. 31                   Dec. 31
     Canadian dollars)         2008         2007         2008         2007
    -------------------------------------------------------------------------

    Revenue                $        -   $        -   $        -   $        -
                           --------------------------------------------------

    Income (loss) from
     operations                   908      (46,605)      17,960      (46,767)
    Interest expense                -                         -            -
                           --------------------------------------------------
    Income (loss) from
     discontinued
     operations before
     income taxes                 908      (46,605)      17,960      (46,767)
    Income tax recovery           299      (16,305)       6,949      (16,305)
                           --------------------------------------------------
    Income (loss) from
     discontinued
     operations            $      609   $  (30,300)  $   11,011   $  (30,462)
                           --------------------------------------------------
                           --------------------------------------------------

    Cash flow used in
     operating activities  $   (2,048)  $    2,707   $  (35,750)  $   (3,135)

    Current assets                                   $   12,256   $   16,305
    Property, plant and
     equipment, net                                           -            -
    Current liabilities                              $      455   $   51,265


    7.  Cash and cash equivalents


                                                       Dec. 31      Dec. 31
    (in thousands of Canadian dollars)                   2008         2007
    -------------------------------------------------------------------------
    Cash                                             $   78,932   $  122,655
    Cash equivalents                                          -       52,362
                                                     ------------------------
                                                     $   78,932   $  175,017
                                                     ------------------------
                                                     ------------------------

    8.  Intangible assets

                                                       Dec. 31      Dec. 31
    (in thousands of Canadian dollars)                   2008         2007
                                                     ------------------------

    Cost                                             $   57,927   $      827
      Intellectual property with limited life,
       at cost.....................................
      Intangible assets with limited life..........       8,847          400
      Intangible assets with indefinite life ......       1,931          331
                                                     ------------------------
                                                     ------------------------
                                                         68,705        1,558
                                                     ------------------------
    Accumulated amortization
      Amortization of intellectual property
       with limited life...........................       1,902
                                                     ------------------------
                                                     $   66,803   $    1,558
                                                     ------------------------
                                                     ------------------------

    Intellectual property represents the costs of certain technology and
    know-how obtained in acquisitions. Intangible assets include trademarks,
    brand names and customer relationships obtained in acquisitions.

    9.  Other assets

                                                       Dec. 31      Dec. 31
    (in thousands of Canadian dollars)                   2008         2007
    -------------------------------------------------------------------------

    Long-term investments                            $      360   $    2,589
    Deferred project costs                                8,865        8,492
    Accrued employee future benefit asset                 6,733        4,797
                                                     ------------------------
                                                     $   15,958   $   15,878
                                                     ------------------------
                                                     ------------------------

    Long-term investments at December 31, 2008 represented an investment in
    Garneau Inc., a Canadian-based, publicly traded pipe coating company. The
    Company has reviewed the 2008 financial performance of Garneau, as
    outlined in its public filings, and the protracted decline in its share
    price and has concluded that the decrease in fair value, based on quoted
    market prices, of the investment from original cost is other than
    temporary. The Company has recorded a charge to selling, general and
    administrative expenses, in the financial and corporate segment, during
    the three months and twelve months ended December 31, 2008 of
    $1.3 million and $2.8 million, respectively (December 31, 2007 - nil and
    nil)

    10. Bank indebtedness

    At December 31, 2008, the Company had total operating credit lines of
    $293.5 million (December 31, 2007 - $172.0 million), of which
    $95.5 million has been drawn for various standby letters of credit for
    performance, bid and surety bonds (December 31, 2007 - $107.0 million)
    and bank indebtedness of $14.0 million (December 31, 2007 - nil), to
    yield unutilized credit facilities of $198.0 million (December 31, 2007 -
    $64.7 million), excluding the Company's proportionate share of the bank
    indebtedness of its joint venture, Arabian Pipecoating Company Limited.

    11. Other non-current liabilities

                                                       Sept. 30     Dec. 31
    (in thousands of Canadian dollars)                   2008         2007
    -------------------------------------------------------------------------
    Non-current asset retirement obligations         $    6,680   $    7,977
    Accrued employee future benefit obligations           3,298        2,763
                                                     ------------------------
                                                     $    9,978   $   10,740
                                                     ------------------------
                                                     ------------------------

    12. Capital stock

    As at December 31, the following shares were outstanding:

    -------------------------------------------------------------------------
    (in thousands of Canadian
     dollars except number
     of shares information)
    -------------------------------------------------------------------------
                                                       2008
    -------------------------------------------------------------------------
                                        Class A       Class B        Total
    -------------------------------------------------------------------------
    Number of Shares:
    -------------------------------------------------------------------------
    Balance, beginning of year        58,234,570    13,078,142    71,312,712
    -------------------------------------------------------------------------
    Issued on exercise of
     stock options                       113,234             -       113,234
    -------------------------------------------------------------------------
    Conversions Class B to Class A        17,933       (17,933)            -
    -------------------------------------------------------------------------
    Purchased and cancelled under
     Normal Course Issuer Bid         (1,007,200)            -    (1,007,200)
    -------------------------------------------------------------------------
    Balance, end of year              57,358,537    13,060,209    70,418,746
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Stated Value:
    -------------------------------------------------------------------------
    Balance, beginning of year       $   202,248   $     1,004   $   203,252
    -------------------------------------------------------------------------
    Issued on exercise of
     stock options                         1,763             -         1,763
    -------------------------------------------------------------------------
    Compensation cost on exercised
     options                                 576             -           576
    -------------------------------------------------------------------------
    Conversions Class B to Class A             1            (1)            -
    -------------------------------------------------------------------------
    Purchased and cancelled under
     Normal Course Issuer Bid             (3,518)            -        (3,518)
    -------------------------------------------------------------------------
    Balance, end of year             $   201,070   $     1,003   $   202,073
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    (in thousands of Canadian
     dollars except number
     of shares information)
    -------------------------------------------------------------------------
                                                       2007
    -------------------------------------------------------------------------
                                        Class A       Class B        Total
    -------------------------------------------------------------------------
    Number of Shares:
    -------------------------------------------------------------------------
    Balance, beginning of year        60,914,175    13,078,142    73,992,317
    -------------------------------------------------------------------------
    Issued on exercise of
     stock options                       320,295             -       320,295
    -------------------------------------------------------------------------
    Conversions Class B to Class A             -             -             -
    -------------------------------------------------------------------------
    Purchased and cancelled under
     Normal Course Issuer Bid         (2,999,900)            -    (2,999,900)
    -------------------------------------------------------------------------
    Balance, end of year              58,234,570    13,078,142    71,312,712
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Stated Value:
    -------------------------------------------------------------------------
    Balance, beginning of year       $   205,848   $     1,004   $   206,852
    -------------------------------------------------------------------------
    Issued on exercise of
     stock options                         4,955             -         4,955
    -------------------------------------------------------------------------
    Compensation cost on exercised
     options                               1,639             -         1,639
    -------------------------------------------------------------------------
    Conversions Class B to Class A             -             -             -
    -------------------------------------------------------------------------
    Purchased and cancelled under
     Normal Course Issuer Bid            (10,194)            -       (10,194)
    -------------------------------------------------------------------------
    Balance, end of year             $   202,248   $     1,004   $   203,252
    -------------------------------------------------------------------------

    During the twelve months ended December 31, 2008, the Company repurchased
    and cancelled 1,007,200 Class A Subordinated Voting Shares ("Class A
    shares") (December 31, 2007 - 2,999,900) under the terms of a Normal
    Course Issuer Bid ("NCIB"). The excess of cost over stated capital of the
    acquired shares, which for the twelve months ended December 31, 2008
    totaled $22.5 million (December 31, 2007 - $81.8 million), was charged to
    retained earnings. The repurchase of shares was made on the open market
    at prevailing market prices for a total of $26.0 million.

    13. Contributed surplus

                              Three months ended        Twelve months ended
    (in thousands of                Dec. 31                    Dec.31
     Canadian dollars)         2008         2007         2008         2007
    -------------------------------------------------------------------------
    Balance, beginning
     of period             $   13,686       11,139       11,729       10,603
    Adjustment for stock-
     based compensation
    Stock compensation
     expense (note 2)             830          697        3,359        2,765
    Fair value of stock
     options exercised             (4)        (107)        (576)      (1,639)
    -------------------------------------------------------------------------
    Balance, end of period $   14,512       11,729       14,512       11,729
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    14. Accumulated other comprehensive income (loss)

                                                       Dec. 31      Dec. 31
    (in thousands of Canadian dollars)                   2008         2007
    -------------------------------------------------------------------------

    Unrealized foreign currency translation
     losses, net of hedging activities               $  (85,540)  $ (126,186)
    Unrealized loss on available-for-sale
     financial asset                                          -         (840)
    Gain on derivatives designated as
     cash flow hedges                                         -          996
                                                     ------------------------
    Balance, at end of period                        $  (85,540)  $ (126,030)
                                                     ------------------------
                                                     ------------------------

    15. Stock option plans

    A summary of the status of the Company's stock option plans and changes
    during the period are presented below:

    -------------------------------------------------------------------------
                                 Dec. 31, 2008             Dec. 31, 2007
    -------------------------------------------------------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                                Total     Exercise        Total     Exercise
                               Shares        Price       Shares        Price
    -------------------------------------------------------------------------
    Balance outstanding,
     beginning of year...   2,173,980        17.24    2,269,395       $15.76
    -------------------------------------------------------------------------
    Granted..............     428,600        30.03      371,800       $25.02
    -------------------------------------------------------------------------
    Exercised............    (113,234)       15.56     (320,295)      $15.64
    -------------------------------------------------------------------------
    Forfeited............     (16,880)       19.24     (142,000)      $17.42
    -------------------------------------------------------------------------
    Expired..............      (2,000)       15.94       (4,920)      $17.91
    -------------------------------------------------------------------------
    Balance outstanding,
     end of year.........   2,470,466        19.14    2,173,980       $17.24
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                             Options Outstanding         Options Exercisable
    -------------------------------------------------------------------------
        Range of    Outstanding    Weighted   Weighted Exercisable  Weighted
        exercise             at     average    average          at   average
         prices     December 31,  remaining   exercise December 31, exercise
                           2008 contractual      price        2008     price
                                    life in
                                      years
    -------------------------------------------------------------------------
    $10.00 to $15.00     474,966       4.41     $12.63     444,486    $12.73
    -------------------------------------------------------------------------
    $15.01 to $20.00   1,181,100       5.41     $16.84     791,304    $16.77
    -------------------------------------------------------------------------
    $20.01 to $25.00      40,000       6.50     $20.90      18,400    $21.03
    -------------------------------------------------------------------------
    $25.01 to $30.00     744,400       8.54     $27.62      69,560    $25.02
    -------------------------------------------------------------------------
    $30.01 to $35.00      30,000       9.01     $31.77
    -------------------------------------------------------------------------
                       2,470,466                         1,323,750
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                             Options Outstanding         Options exercisable
    -------------------------------------------------------------------------
        Range of    Outstanding    Weighted   Weighted Exercisable  Weighted
        exercise             at     average    average          at   average
         prices     December 31,  remaining   exercise December 31, exercise
                           2007 contractual      price        2007     price
                                    life in
                                      years
    -------------------------------------------------------------------------
    $10.00 to $15.00     518,620       5.28     $12.69     387,616    $12.80
    -------------------------------------------------------------------------
    $15.01 to $20.00   1,259,760       6.36     $16.81     645,568    $16.71
    -------------------------------------------------------------------------
    $20.01 to $25.00      40,000       7.51     $20.90      11,200    $21.19
    -------------------------------------------------------------------------
    $25.01 to $30.00     355,600       9.01     $25.02           -         -
    -------------------------------------------------------------------------
                       2,173,980          -          -   1,044,384         -
    -------------------------------------------------------------------------

    16. Financial instruments and financial risk management

    a) Categories of Financial Assets and Financial Liabilities

    Under Canadian GAAP, financial instruments are classified into one of the
    following categories: held-for-trading, held-to-maturity investments,
    loans and receivables, available-for-sale financial assets, derivatives
    and other financial liabilities. The Company has classified its financial
    instruments as follows:

    -------------------------------------------------------------------------
                                                       Dec. 31,     Dec. 31,
    (in thousands of Canadian dollars)                   2008         2007
    -------------------------------------------------------------------------
    Financial assets:
    -------------------------------------------------------------------------
      Held for trading, measured at fair value
    -------------------------------------------------------------------------
        Cash                                         $   78,932   $  122,655
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
      Held to maturity, recorded at amortized cost
    -------------------------------------------------------------------------
        Cash equivalents                                      -       52,362
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
      Loans and receivables, recorded at
       amortized cost
    -------------------------------------------------------------------------
        Accounts receivable                             307,933      203,547
    -------------------------------------------------------------------------
        Taxes receivable                                  9,261        3,169
    -------------------------------------------------------------------------
                                                       Dec. 31,     Dec. 31,
    (in thousands of Canadian dollars)                   2008         2007
    -------------------------------------------------------------------------
      Available for sale, measured at fair value
    -------------------------------------------------------------------------
        Long-term investments                               360        2,589
    -------------------------------------------------------------------------
                                                       Dec. 31,     Dec. 31,
    (in thousands of Canadian dollars)                   2008         2007
    -------------------------------------------------------------------------
      Derivatives, measured at fair value
    -------------------------------------------------------------------------
        Derivative financial instruments                 (1,526)       1,508
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Financial liabilities:
    -------------------------------------------------------------------------
      Other liabilities, recorded at amortized cost:
    -------------------------------------------------------------------------
        Bank indebtedness                                15,418          107
    -------------------------------------------------------------------------
        Accounts payable and accrued liabilities        193,675      153,116
    -------------------------------------------------------------------------
        Taxes payable                                    53,405       32,030
    -------------------------------------------------------------------------
        Current portion of long-term debt                30,672            -
    -------------------------------------------------------------------------
        Long-term debt                                   60,554       72,726
    -------------------------------------------------------------------------

    The Company has determined the estimated fair values of its financial
    instruments based on appropriate valuation methodologies; however,
    considerable judgment is required to develop these estimates. The fair
    values of the Company's financial instruments are not materially
    different from their carrying values. The Company's Senior Notes with a
    carrying value of $91.2 million (December 31, 2007 - $72.7 million) has a
    fair value estimated to be $90.9 million (December 31, 2007 -
    $74.9 million), based on current interest rates for debt with similar
    terms and maturities.

    b) Foreign Exchange Forward Contracts and Other Hedging Arrangements

    The Company utilizes financial instruments to manage the risk associated
    with foreign exchange rates. The Company formally documents all
    relationships between hedging instruments and the hedge items, as well as
    its risk management objective and strategy for undertaking various hedge
    transactions.

    The following table sets out the notional amounts outstanding under
    foreign exchange contracts, the average contractual exchange rates and
    the settlement of these contracts as at December 31, 2008:

    -------------------------------------------------------------------------
    (in thousands)                                             Dec. 31, 2008
    -------------------------------------------------------------------------
    U.S. dollars sold for Canadian dollars
    -------------------------------------------------------------------------
      Less than one year.....................................      US$12,000
    -------------------------------------------------------------------------
      Weighted average rate..................................          1.066
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    U.S. dollars sold for Euros
    -------------------------------------------------------------------------
      Less than one year.....................................       US$3,160
    -------------------------------------------------------------------------
      Weighted average rate..................................         1.4698
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (in thousands)                                             Dec. 31, 2008
    -------------------------------------------------------------------------
    Euros sold for U.S. dollars
    -------------------------------------------------------------------------
      Less than one year.....................................      EUR 4,300
    -------------------------------------------------------------------------
      Weighted average rate..................................         1.4517
    -------------------------------------------------------------------------
      One year to two years..................................      EUR 2,200
    -------------------------------------------------------------------------
      Weighted average rate..................................         1.4465
    -------------------------------------------------------------------------

    At December 31, 2008, the Company had notional amounts of $25.5 million
    of forward contracts outstanding (December 31, 2007 - $35.7 million) with
    the fair value of the Company's net obligation from all foreign exchange
    forward contracts totaling $1.5 million (December 31, 2007 -
    $1.5 million, net benefit).

    c) Financial Risk Management

    The Company's operations expose it to a variety of financial risks
    including: market risk (including foreign exchange and interest rate
    risk), credit risk and liquidity risk. The Company's overall risk
    management program focuses on the unpredictability of financial markets
    and seeks to minimize potential adverse effects on the Company's
    financial position and financial performance. Risk management is the
    responsibility of Company management. Material risks are monitored and
    are regularly reported to the Board of Directors.

    Foreign exchange risk

    The majority of the Company's business is transacted outside of Canada
    through subsidiaries operating in several countries. The net investments
    in these subsidiaries as well as their revenue, operating expenses and
    non-operating expenses are based in foreign currencies. As a result, the
    Company's consolidated revenue, expenses and financial position, may be
    impacted by fluctuations in foreign exchange rates as these foreign
    currency items are translated into Canadian dollars. As of December 31,
    2008, fluctuations of +/- 5% in the Canadian dollar, relative to those
    foreign currencies, would impact the Company's consolidated revenue,
    operating income from continuing operations and income from continuing
    operations for the year then ended by approximately $33.8 million,
    $9.8 million and $7.3 million, respectively, prior to hedging activities.
    In addition, such fluctuations would impact the Company's consolidated
    total assets, consolidated total liabilities and consolidated total
    shareholders' equity by $44.8 million, $14.5 million and $30.3 million,
    respectively. The Company utilizes foreign exchange forward contracts to
    manage foreign exchange risk from its underlying customer contracts. The
    Company does not enter into foreign exchange contracts for speculative
    purposes.

    The Company's 5.11% Senior Notes and associated interest expense are
    denominated in U.S. dollars. Fluctuations in the exchange rate between
    the Canadian and U.S. dollar would impact the carrying value of the Notes
    in terms of Canadian dollars as well as the amount of interest expense
    when translated into Canadian dollars. Effective July 3, 2003, the
    Company designated the Senior Notes as a hedge of a portion of its net
    investment in the Company's U.S. dollar based operations. Gains and
    losses from the translation of this debt are not included in the income
    statement, but are shown in accumulated other comprehensive income. As of
    December 31, 2008, fluctuations of +/- 5% in the Canadian dollar,
    relative to the U.S. dollar, would impact the Company's accumulated other
    comprehensive income by $3.8 million for the twelve months then ended.

    The objective of the Company's foreign exchange risk management
    activities is to minimize transaction exposures associated with the
    Company's foreign currency-denominated cash streams and the resulting
    variability of the Company's earnings. The Company utilizes foreign
    exchange forward contracts to manage this foreign exchange risk. The
    Company does not enter into foreign exchange contracts for speculative
    purposes. With the exception of the Company's U.S. dollar based
    operations, the Company does not hedge translation.

    Interest rate risk

    The following table summarizes the Company's exposure to interest rate
    risk at December 31, 2008:

    -------------------------------------------------------------------------
    (in thousands of
     Canadian dollars)              Fixed interest rate maturing in
    -------------------------------------------------------------------------
                          Floating    1 year or         Greater
                            rate         less         than 1 year     Total
    -------------------------------------------------------------------------
    Financial assets
    -------------------------------------------------------------------------
      Cash and cash
       equivalents         $78,932            -                -     $78,932
    -------------------------------------------------------------------------
    Total                  $78,932            -                -     $78,932
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     fixed rate of
     cash equivalents            -            -                -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Financial liabilities
    -------------------------------------------------------------------------
      Bank indebtedness    $15,418            -                -     $15,418
    -------------------------------------------------------------------------
      Current portion
       of long-term debt         -      $30,672                -     $30,672
    -------------------------------------------------------------------------
      Long-term debt             -            -          $60,554     $60,554
    -------------------------------------------------------------------------
    Total                  $15,418      $30,672          $60,554    $106,644
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     fixed rate of debt          -        5.11%            5.11%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Company's interest rate risk arises primarily from its floating rate
    bank indebtedness, and is not currently considered to be material.

    Credit risk

    Credit risk arises from cash and cash equivalents held with banks,
    forward foreign exchange contracts, as well as credit exposure of
    customers, including outstanding accounts receivable. The maximum credit
    risk is equal to the carrying value of the financial instruments.

    The objective of managing counter party credit risk is to prevent losses
    in financial assets. The Company is subject to considerable concentration
    of credit risk since the majority of its customers operate within the
    global energy industry and are therefore affected to a large extent by
    the same macroeconomic conditions and risks. The Company manages this
    credit risk by assessing the credit quality of all counter parties,
    taking into account their financial position, past experience and other
    factors. Management also establishes and regularly reviews credit limits
    of counter parties and monitors utilization of those credit limits on an
    ongoing basis.

    The carrying value of accounts receivable are reduced through the use of
    an allowance for doubtful accounts and the amount of the loss is
    recognized in the income statement with a charge to selling, general and
    administrative expenses. When a receivable balance is considered to be
    uncollectible, it is written off against the allowance for doubtful
    accounts. Subsequent recoveries of amounts previously written off are
    credited against selling, general and administrative expenses.

    The aging of trade accounts receivable and the balance of the allowance
    for doubtful accounts as of December 31, 2008 are as follows:

    (in thousands of Canadian dollars)                         Dec. 31, 2008
    -------------------------------------------------------------------------
    Not past due                                                  $  246,758
    Past due 1 to 30 days                                             41,433
    Past due 31 to 60 days                                            12,177
    Past due 61 to 90 days                                             5,295
    Past due for more than 90 days                                     8,507
                                                                   ----------
    Total trade receivables                                          314,170
    Less: allowance for doubtful accounts                              6,237
                                                                   ----------
    Net receivables                                               $  307,933
                                                                   ----------
                                                                   ----------

    The following is an analysis of the change in the allowance for doubtful
    accounts for the three months ended December 31, 2008:

                                                               Twelve Months
                                                                   Ended
    (in thousands of Canadian dollars)                         Dec. 31, 2008
    -------------------------------------------------------------------------
    Balance, beginning of period                                  $    4,165
    Bad debt expense                                                   2,944
    Write-offs of bad debts                                             (877)
    Impact of change in foreign exchange rates                             5
                                                                   ----------
    Balance, end of period                                        $    6,237
                                                                   ----------
                                                                   ----------

    Liquidity Risk

    The Company's objective in managing liquidity risk is to maintain
    sufficient, readily available cash reserves in order to meet its
    liquidity requirements at any point in time. The Company achieves this by
    maintaining sufficient cash and cash equivalents and through the
    availability of funding from committed credit facilities. As of
    December 31, 2008, the Company has cash and cash equivalents totaling
    $78.9 million and had unutilized lines of credit available to use of
    $198.0 million. The following are the contractual maturities of the
    Company's financial liabilities as of December 31, 2008:

    -------------------------------------------------------------------------
    (in thousands    Less                                  Greater
     of Canadian     than     30 to     90 to      1 to      than
     dollars)      30 days   90 days  365 days   5 years   5 years    Total
    -------------------------------------------------------------------------
    Accounts
     payable and
     accrued
     liabilities   $79,467   $50,761   $47,521         -         -  $177,749
    -------------------------------------------------------------------------
    Asset
     retirement
     obligations         -         -    15,926     1,300     5,380    22,606
    -------------------------------------------------------------------------
    Bank
     indebtedness        -    14,000     1,418         -         -    15,418
    -------------------------------------------------------------------------
    Long-term debt       -         -    30,672    60,554         -    91,226
    -------------------------------------------------------------------------
    Obligations
     under capital
     leases             43        86       387       691         -     1,207
    -------------------------------------------------------------------------
    Interest on
     financial
     instruments       433       867     2,893     3,194         -     7,387
    -------------------------------------------------------------------------
    Derivative
     financial
     instruments       396       420     1,233         -         -     2,049
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total          $80,339   $66,134  $100,050   $65,739    $5,380  $317,642
    -------------------------------------------------------------------------
                  -----------------------------------------------------------

    17. Capital management

    The Company defines capital that it manages as the aggregate of its
    shareholders' equity and interest bearing debt. The Company's objectives
    when managing capital are to ensure that the Company will continue to
    operate as a going concern and continue to provide products and services
    to its customers, preserve its ability to finance expansion opportunities
    as they arise, and provide returns to its shareholders.

    As at December 31, 2008, total managed capital was $840.2 million
    (December 31, 2007 - $651.6 million), comprised of shareholders equity of
    $733.6 million (December 31, 2007 - $578.8 million), long-term debt of
    $60.6 (December 31, 2007 - $72.7 million), current portion of long-term
    debt of $30.7 million (December 31, 2007 - nil) and bank indebtedness of
    $15.4 million (December 31, 2007 - $107 thousand).

    The Company manages its capital structure and makes adjustments to it in
    light of changes in economic conditions, the risk characteristics of the
    underlying assets and business investment opportunities. To maintain or
    adjust the capital structure, the Company may attempt to issue or re-
    acquire shares, acquire or dispose of assets, or adjust the amount of
    cash, cash equivalents, bank indebtedness or long-term debt balances. The
    Company's capital is not subject to any capital requirements imposed by
    any regulators; however, it is limited by the terms of its credit
    facility and long-term debt agreements. Specifically, the Company is
    required to maintain a Fixed Charge Coverage Ratio (Earnings Before
    Interest, Taxes, Depreciation and Amortization ("EBITDA") divided by
    interest expense) of more than 2.5 to 1 and a debt to total
    capitalization ratio of less than 0.45 to one. The Company's capital
    structure at December 31, 2008 was within the parameters established by
    these agreements.

    18. Segmented information

    The Company classifies its operations into two general segments of the
    global energy industry: Pipeline and Pipe Services and Petrochemical and
    Industrial. Revenue and income (loss) from operations for the three
    months and twelve months ended December 31, 2008 and 2007, and goodwill
    and total assets as of those dates by segment are as follows:

                              Three months ended        Twelve months ended
    (in thousands of                Dec. 31                   Dec. 31
     Canadian dollars)         2008         2007         2008         2007
    -------------------------------------------------------------------------
    Revenue
      Pipeline and Pipe
       Services               401,768      254,316    1,239,893      903,427
      Petrochemical and
       Industrial              33,001       28,450      141,969      143,665
      Intersegment
       Eliminations              (916)       2,672       (2,285)       1,007
                           ------------------------  ------------------------
                              433,853      285,438    1,379,577    1,048,099
                           ------------------------  ------------------------
                           ------------------------  ------------------------

    Income (loss) from
     operations
      Pipeline and Pipe
       Services                76,612       40,280      200,681      153,932
      Petrochemical and
       Industrial               2,527        3,065       19,088       22,822
      Financial and
       Corporate               (2,575)      (3,853)     (18,051)     (16,753)
                           ------------------------  ------------------------
                               76,564       39,492      201,718      160,001
                           ------------------------  ------------------------
                           ------------------------  ------------------------

    Goodwill
      Pipeline and Pipe
       Services                                         209,547      142,402
      Petrochemical and
       Industrial                                        20,002       17,078
                                                     ------------------------
                                                        229,549      159,480
                                                     ------------------------
                                                     ------------------------

    Total assets
      Pipeline and Pipe
       Services                                       1,358,514      976,635
      Petrochemical and
       Industrial                                        87,726       74,480
      Financial and
       Corporate                                        814,913      883,669
      Elimination                                    (1,032,687)    (971,170)
                                                     ------------------------
                                                      1,228,466      963,614
                                                     ------------------------
                                                     ------------------------

    19. Joint venture operations

    The Company's joint venture operations have been accounted for through
    proportionate consolidation with the Company's share of each joint
    venture's assets, liabilities, revenue, expenses, net income and cash
    flows consolidated based on the Company's ownership position. The figures
    related to these joint ventures included in the Company's consolidated
    financial statements are summarized as follows:

    (in thousands of          Three Months Ended        Twelve Months Ended
     Canadian dollars)              Dec. 31                   Dec. 31
    -------------------------------------------------------------------------
                               2008         2007         2008         2007
                           -----------  -----------  -----------  -----------
    Revenue                $   38,328   $   20,685   $  121,021   $   65,213
    Operating and other
     expenses                  28,286       16,121       90,363       48,663
    Net income before
     income taxes              10,042        4,564       30,658       16,550
    Provision for taxes         3,360          931        8,753        2,016
                           -----------  -----------  -----------  -----------
    Net income             $    6,682   $    3,633   $   21,905   $   14,534
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    Cash provided by
     (used in):
    Operating activities   $    6,523   $    8,178   $   18,224   $    6,805
    Investing activities          372       (1,047)      (3,913)        (978)
    Financing activities       (8,622)     (11,972)     (15,942)      (7,864)

    Current assets                  -            -       30,892       25,597
    Property, plant and
     equipment, net                 -            -       16,452       11,877
    Goodwill                        -            -        4,251        4,521
    Current liabilities             -            -       18,200       17,103


    20. Earnings per share

    The weighted average number of common shares for the purpose of the
    earnings per share calculations was as follows:

                              Three Months Ended        Twelve Months Ended
                                    Dec. 31                   Dec. 31
                               2008         2007         2008         2007
                           --------------------------------------------------

    Basic
      Class A              57,503,734   58,478,597   57,846,083   59,472,114
      Class B              13,060,209   13,078,142   13,060,209   13,078,142
                           -----------  -----------  -----------  -----------
    Total                  70,563,943   71,556,739   70,906,292   72,550,256
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    Dilutive effect of
     stock options
      Class A                 130,886      968,579      645,897      877,998
      Class B                                                 -            -
                           -----------  -----------  -----------  -----------
    Total                     130,886      968,579      645,897      877,998
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    Diluted
      Class A              57,634,620   59,447,176   58,491,980   60,350,112
      Class B              13,060,209   13,078,142   13,060,209   13,078,142
                           -----------  -----------  -----------  -----------
    Total                  70,694,829   72,525,318   71,552,189   73,428,254
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    21. Acquisitions and divestitures

    On April 14, 2008, the Company acquired 20% of the outstanding shares of
    PT Bredero Shaw Indonesia for $2.5 million and on November 26, 2008, the
    remaining 5% minority interest was acquired for the amount of
    $771 thousand. The excess of the proportionate fair value of the net
    assets of this company over the amount of the disbursement that was made
    to acquire the shares has been allocated as a reduction to the
    proportional fair value of fixed assets acquired. Subsequent to this
    transaction, the Company owns 100% of the outstanding shares of this
    subsidiary.

    On June 27, 2008, the Company announced the acquisition of 100% of the
    outstanding shares of Flexpipe Systems Inc. ("Flexpipe"). Flexpipe is
    based in Canada and is a leading manufacturer of spoolable, composite
    line pipe which is used by oil and gas producers in applications that
    benefit from the product's ease and speed of installation and its
    pressure and corrosion resistance capabilities. This transaction is being
    accounted for using the purchase method with the balance sheet and
    financial results of Flexpipe included in the Company's consolidated
    financial statements from the date of acquisition. The following are the
    details of the acquisition:

    (In thousands of Canadian dollars)
    -------------------------------------------------------------------------
    Net assets acquired at assigned values:
      Current assets                                              $   33,566
      Property, plant and equipment                                   18,578
      Goodwill                                                        50,220
      Other intangible assets                                         67,260
      Current liabilities                                            (25,068)
      Future income taxes                                            (21,435)
      Other long-term liabilities                                       (640)
    -------------------------------------------------------------------------
                                                                  $  122,481
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration given:
      Cash, net of cash acquired of $1,376                        $  122,481
    -------------------------------------------------------------------------
                                                                  $  122,481
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    On June 30, 2008, the Company recorded the sale of its wholly-owned
    subsidiaries Bredero Shaw Nigeria Ltd. ("BSNL") and Bredero Port Harcourt
    Ltd. ("BPHL") for proceeds of $5.7 million and consequently recorded a
    gain of $864 thousand representing the excess of the purchase price over
    the carrying value of the net assets sold.

    The following is the summarized balance sheets of BSNL and BPHL at the
    time of sale:

    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------
    Current assets                                                $    5,635
    Property, plant and equipment, net                                   172
    Current liabilities                                                  953
    -------------------------------------------------------------------------

    On June 6, 2007, the Company purchased 100% of the outstanding shares of
    X-Tek Industrial Limited from X-Tek Systems Limited. The name of the
    company was subsequently changed to Shaw Inspection Systems Limited
    ("SISL"). The following are the finalized details of the acquisition:

    (In thousands of Canadian dollars)
    -------------------------------------------------------------------------
    Net assets acquired at assigned values:
      Current assets                                              $    2,323
      Property, plant and equipment                                      329
      Goodwill                                                           560
      Other intangible assets                                          1,558
      Current liabilities                                             (1,984)
    -------------------------------------------------------------------------
                                                                  $    2,786
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration given:
      Cash                                                             2,786
    -------------------------------------------------------------------------
                                                                  $    2,786
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    22. Upcoming accounting changes

    In February 2008, the CICA issued new Handbook section 3064, Goodwill and
    Intangible Assets, which is effective for fiscal years beginning on or
    after October 1, 2008. The Company is currently evaluating the impact of
    the new accounting standards on its financial position, results of
    operations and disclosures.

    On February 13, 2008, The Accounting Standards Board ("AcSB") confirmed
    that the use of International Financial Reporting Standards ("IFRS") will
    be required in Canada for publicly accountable profit-oriented
    enterprises for fiscal years beginning on or after January 1, 2011 and
    the Company will be required to report using IFRS beginning on this date.
    The Company has begun the process of evaluating the effect of and the
    planning for the transition to IFRS. The impact of the ultimate adoption
    of IFRS on the Company has not yet been finalized.

    In January 2009, the AcSB issued the following new Handbook sections:
    1582 - Business Combinations, 1601 - Consolidations, and 1602 - Non-
    Controlling Interests. These standards are effective January 1, 2011. The
    Company has not yet determined the impact of the adoption of these
    standards on its consolidated financial statements.

    23. Comparative figures

    Comparative figures have been reclassified where necessary to correspond
    with the current year's presentation.
    





For further information:

For further information: Gary Love, Vice President, Finance and CFO,
Telephone: (416) 744-5818, e-mail: glove@shawcor.com, website:
www.shawcor.com

Organization Profile

ShawCor Ltd.

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