ShawCor Ltd. Announces Second Quarter 2009 Results



    (TSX: SCL.A, SCL.B)

    TORONTO, Aug. 5 /CNW/ -

    
    Financial Summary

    (in thousands of                Three Months             Six Months
     Canadian dollars except        Ended June 30,          Ended June 30,
     per share amounts)           2009        2008        2009        2008
                                            Restated                Restated
                                            (note 1)                (note 1)
    -------------------------------------------------------------------------
    Operating Results
    Revenue                    $ 312,791   $ 295,118   $ 620,255   $ 588,475

    EBITDA (note 2)               68,926      40,215     135,597      94,506
    Operating income from
     continuing operations        53,178      27,189     103,612      68,108
    Income from continuing
     operations                   34,343      17,825      65,863      44,746
    Income (loss) from
     discontinued operations         293      10,553         314      10,484
    Net income                    34,636      28,378      66,177      55,230

    Net income (loss) per share
     (Class A and B) - Basic
      Continuing operations         0.49        0.25        0.94        0.63
      Discontinued operations       0.00        0.15        0.00        0.15
      Total                         0.49        0.40        0.94        0.78

    Net income (loss) per share
     (Class A and B) - Diluted
      Continuing operations         0.49        0.25        0.93        0.62
      Discontinued operations       0.00        0.15        0.00        0.15
      Total                         0.49        0.40        0.93        0.77
    -------------------------------------------------------------------------
    Cash Flow
    Cash provided by continuing
     operating activities         58,075      66,040      96,820      54,471
    Additions to property,
     plant and equipment           6,031      26,653      20,174      38,914
    -------------------------------------------------------------------------
    Financial Position
    Working capital                                      239,297     175,524
    Total assets                                       1,145,955   1,140,636
    Shareholders' equity per
     share (Class A and B)
     (note 3)                                          $   10.67   $    9.01
    -------------------------------------------------------------------------

    Note 1: Restated for change in accounting policy. Refer to note 1 to the
    interim consolidated financial statements for the three and six months
    ended June 30, 2009.

    Note 2: 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 and
    intangible assets. 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                $  34,343   $  17,825   $  65,863   $  44,746
    Add (deduct):
      Income taxes                17,263       8,313      34,514      22,653
      Interest expense - net       1,572         895       3,235         982
      Amortization of property,
       plant and equipment        14,653      13,182      29,795      26,125
      Amortization of
       intangible assets           1,095           -       2,190           -
    -------------------------------------------------------------------------
    EBITDA                     $  68,926   $  40,215   $ 135,597   $  94,506
    -------------------------------------------------------------------------

    Note 3: 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.
    

    ShawCor Ltd. ("ShawCor" or the "Company") is a growth-oriented, global
energy services company specializing in technology-based products and services
for the Pipeline and Pipe Services and the Petrochemical and Industrial
markets. The Company operates seven divisions with over seventy manufacturing,
sales and service facilities located around the world.

    Second Quarter 2009 Highlights

    Consolidated revenue from continuing operations for the second quarter of
2009 totaled $312.8 million, 6.0% higher than the second quarter of 2008. The
increase was due to increased revenue in the Pipeline and Pipe Services
segment of the Company, primarily as a result of the impact of the weaker
Canadian dollar on the translation of the Company's U.S. dollar denominated
revenue partially offset by lower revenue from the Company's Petrochemical and
Industrial segment.
    During the second quarter of 2009, the effect of foreign exchange
fluctuations on the translation of foreign currency operating results had a
favourable impact on revenue, operating income from continuing operations and
net income of approximately $25.1 million, $7.2 million and $3.8 million,
respectively compared to the second quarter of 2008.
    Net income in the quarter totaled $34.6 million ($0.49 per share,
diluted) compared to $28.4 million ($0.40 per share, diluted) in the second
quarter of 2008, an increase of $6.2 million or 21.8%. The improvement in
earnings per share was primarily due to the increase in net income together
with the benefit of the reduction in shares outstanding due to the repurchase
of 602 thousand Class A Subordinate Voting shares under the Normal Course
Issuer Bid over the preceding twelve months.

    First Six Months of 2009 Highlights

    Consolidated revenue from continuing operations in the first six months
of 2009 was $620.2 million, compared to $588.5 million in the first six months
of 2008, an increase of $31.7 million or 5.4%. The increase was primarily due
to revenue of $23.6 million in the first six months of 2009 that was not
present in the first six months of 2008 related to the Flexpipe Systems Inc.
("Flexpipe") acquisition on June 27, 2008 and the favourable effect of foreign
exchange fluctuations.
    During the first six months of 2009, the effect of foreign exchange
fluctuations on the translation of foreign currency operating results had a
favourable impact on revenue, operating income from continuing operations and
net income of approximately $56.0 million, $19.1 million and $12.5 million,
respectively compared to the first six months of 2008.
    The Company's backlog at June 30, 2009 of $301.5 million declined 25.1%
from the level at the beginning of the quarter as strong revenue exceeded new
order bookings. While the backlog may decline further in subsequent quarters,
bidding activity remains high and the Company continues to pursue several
large offshore pipe coating projects. These projects, if awarded to the
Company, could generate significant revenues. Overall, consolidated revenue in
2009 is expected to be slightly below the record levels achieved in 2008;
however, the Company expects that operating margins in 2009 will meet or
exceed those achieved in 2008 as a result of several initiatives including
programs to reduce costs and improve efficiencies.

    MANAGEMENT'S DISCUSSION AND ANALYSIS

    The following Management Discussion and Analysis ("MD&A") is intended to
help the reader understand the results of operations and financial condition
of the Company. The MD&A should be read in combination with the Consolidated
Financial Statements and accompanying notes, and the MD&A included in the
Company's 2008 Annual Report. All dollar amounts in the MD&A are in thousands
of Canadian dollars except per share amounts or unless otherwise stated.

    Revenue, Income from Operations and Net Income

    ShawCor classifies its revenue and income from operations into two
industry segments: Pipeline and Pipe Services, and Petrochemical and
Industrial. Discussion of the consolidated operating results and operating
results for each of these segments follows:

    
    Consolidated Results

    -------------------------------------------------------------------------
    Three months ended                     June 30,    March 31,     June 30,
    (in thousands of Canadian dollars)       2009         2009         2008
                                                                  Restated(a)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Revenue from continuing operations    $312,791     $307,464     $295,118
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating income from continuing
     operations                            $53,178      $50,434      $27,189
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating margin                         17.0%        16.4%         9.2%
    -------------------------------------------------------------------------
    (a) Restated for a change in accounting policy - refer to note 1 to the
        interim consolidated financial statements for the period ended
        June 30, 2009.
    

    Second Quarter 2009 versus Second Quarter 2008

    Consolidated revenue from continuing operations for the second quarter of
2009 totaled $312.8 million, an increase of $17.7 million or 6%, compared to
the second quarter of 2008. The increase was primarily a result of higher
revenue in the Pipeline and Pipe Services segment, partially offset by a
decrease in the Petrochemical and Industrial segment.
    During the second quarter of 2009, the effect of foreign exchange
fluctuations on the translation of foreign currency operating results had a
favourable impact on revenue, operating income from continuing operations and
net income of approximately $25.1 million, $7.2 million and $3.8 million,
respectively compared to the second quarter of 2008.
    Operating income from continuing operations totaled $53.2 million (17.0%
of revenue from continuing operations) in the second quarter, representing a
95.6% increase over $27.2 million (9.21% of revenue from continuing
operations) achieved in the second quarter of 2008, with the improvement
reflecting the increased revenue in the period together with improved
operating margins in the Pipeline and Pipe Services segment.
    Net income in the quarter totaled $34.6 million ($0.49 per share,
diluted) compared to $28.4 million ($0.40 per share, diluted) in the second
quarter of 2008, an increase of $6.2 million or 21.8%. The improvement in
earnings per share was primarily due to the increase in net income together
with the benefit of the reduction in shares outstanding due to the repurchase
of 602 thousand Class A Subordinate Voting shares under the Normal Course
Issuer Bid ("NCIB") over the preceding twelve months.

    Second Quarter 2009 versus First Quarter 2009

    Consolidated revenue from continuing operations in the second quarter of
2009 was marginally higher than the results from the first quarter of 2009.
The increase was primarily due to an increase in the Pipeline and Pipe
Services segment, partially offset by the unfavourable impact of foreign
exchange rate fluctuations.
    During the second quarter of 2009, the effect of foreign exchange
fluctuations on the translation of foreign currency operating results had an
unfavourable impact on revenue, operating income from continuing operations
and net income of approximately $14.4 million, $2.8 million and $1.3 million,
respectively, compared to the first quarter of 2009.
    Operating income from continuing operations and net income in the second
quarter of 2009 increased $2.7 million or 5.4% and $3.1 or 9.8%, respectively,
compared to the first quarter of 2009, primarily due to the increase in
consolidated revenue together with improved operating margins. The improvement
in operating margins was as a result of greater manufacturing efficiencies and
reduced manufacturing input costs, while net income was also favourably
impacted by a lower effective income tax rate.

    First six months of 2009 versus First six months of 2008

    Consolidated revenue from continuing operations in the first six months
of 2009 was $620.3 million, compared to $588.5 million in the first six months
of 2008, an increase of $31.8 million or 5.4%. The increase was primarily due
to revenue of $23.6 million in the first six months of 2009 that was not
present in the first six months of 2008 related to the Flexpipe acquisition on
June 27, 2008 and the favourable effect of foreign exchange fluctuations.
    During the first six months of 2009, the effect of foreign exchange
fluctuations on the translation of foreign currency operating results had a
favourable impact on revenue, operating income from continuing operations and
net income of approximately $56.0 million, $19.1 million and $12.5 million,
respectively compared to the first six months of 2008.
    Operating income from continuing operations in the first six months of
2009 increased $35.5 million or 52.1%, compared to the first six months of
2008. The increase was primarily due to the increase in revenue and improved
operating margins, the result of greater manufacturing efficiencies and
reduced manufacturing input costs.
    Net income for the first six months of 2009 increased $10.9 million or
19.8%, compared to the first six months of 2008, primarily due to the higher
operating income, partially offset by higher interest costs and a higher
effective income tax rate.

    
    Pipeline and Pipe Services

    -------------------------------------------------------------------------
    Three months ended                     June 30,    March 31,     June 30,
    (in thousands of Canadian dollars)       2009         2009         2008
                                                                  Restated(a)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Revenue from continuing operations    $283,888     $279,951     $258,984
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating income from continuing
     operations                            $58,853      $56,646      $28,160
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating margin                         20.7%        20.2%        10.9%
    -------------------------------------------------------------------------
    (a) Restated for a change in accounting policy - refer to note 1 to the
        interim consolidated financial statements for the period ended
        June 30, 2009.
    

    Second Quarter 2009 vs. Second Quarter 2008

    In the Pipeline and Pipe Services segment, revenue in the second quarter
of 2009 totaled $283.9 million and was $24.9 million or 9.6% higher than in
the second quarter of 2008, primarily due to an increase in revenue from
Bredero Shaw and the inclusion of revenue from Flexpipe, which was acquired on
June 27, 2008.
    Revenue for Bredero Shaw in the second quarter of 2009 increased compared
to the second quarter of 2008 with the favourable impact of the weaker
Canadian dollar on the translation of the division's mainly U.S. dollar-based
revenue as well as growth in the division's America's region offsetting a
weakening of activity in the division's other regions. In the America's
region, revenue in the second quarter of 2009 increased by 28% from the second
quarter of 2008, mainly due to strong growth in Mexico and the commencement of
the North East Offshore and Tobago pipeline projects in Trinidad, partially
offset by a decrease in small diameter pipe coating activity in Western Canada
and the United States, which declined by 72% and 43%, respectively. In the
Asia Pacific region, revenue in the second quarter of 2009 decreased 24.5%
over the second quarter of the prior year as a result of project delays
experienced at the division's plant in Kabil, Indonesia. In the Europe, Africa
and Russia region, and in the Middle East region, revenue in the quarter was
55% and 41.6% lower, respectively, than in the second quarter of 2008,
reflecting reduced pipe coating project activity in those regions.
    Operating income from continuing operations in the quarter for the
segment totaled $58.8 million (20.7% of revenue from continuing operations)
and increased 109.0% from $28.1 million (10.9% of revenue from continuing
operations) in the second quarter of 2008. The improvement resulted from
higher revenue combined with an operating margin improvement of 9.7 percentage
points reflecting improved manufacturing efficiencies associated with higher
factory utilization, reduced material prices and a $6.3 million reduction in
fixed costs stemming from the reorganization of Bredero Shaw's Europe, Africa
and Russia region.

    Second Quarter 2009 versus First Quarter 2009

    Revenue in the second quarter of 2009 in the Pipeline and Pipe Services
segment was marginally higher than the levels achieved in the first quarter of
2009 as increases at Bredero Shaw and Shaw Pipeline Services of 8% and 33%,
respectively were almost entirely offset by decreases at Flexpipe and
Canusa-CPS.
    Revenue in the quarter at Bredero Shaw increased mainly due to revenue
relating to the Trinidad project, partially offset by lower small diameter
pipe coating volumes in North America and the impact of the winding down of
several large diameter pipe coating projects in the Middle East and Europe,
Africa and Russia regions. Revenue in the quarter at Shaw Pipeline Services
increased primarily due to increased offshore activity, partially offset by
lower levels of U.S. land based activity. Revenue for Flexpipe decreased
mainly as a result of lower demand for the division's small diameter composite
pipe systems due to spring breakup in Western Canada and the build up of
inventories of small diameter steel line pipe throughout North America
following the dramatic decline in well completions. The decrease at Canusa-CPS
was primarily due to a decrease in small diameter pipeline activity in Western
Canada.
    Operating income from continuing operations in the quarter was marginally
higher than the level achieved in the prior quarter, primarily as a result of
the increase in revenue in the second quarter of 2009. Operating margin in the
second quarter of 2009 improved 0.5 percentage points when compared to the
first quarter of 2009, reflecting improved factory utilization and continued
reductions in manufacturing input costs.

    First six months of 2009 versus First six months of 2008

    Revenue in the first six months of 2009 in the Pipeline and Pipe Services
segment was $49.1 million or 9.5% higher than in the first six months of 2008.
The increase was primarily due to the inclusion of revenue from Flexpipe,
which was acquired on June 27, 2008, increased project activity at Bredero
Shaw and the favourable impact of the weaker Canadian dollar on the
translation of foreign currency operating results.
    Operating income from continuing operations in the first six months of
2009 was $115.5 million compared to $66.4 million for the first six months of
2008, an increase of $49.1 million or 74.0%. The increase was primarily due to
the increase in revenue during the period and a 7.3 percentage point increase
in operating margins, the result of improved operational efficiencies and a
decrease in manufacturing input costs.

    
    Petrochemical and Industrial

    -------------------------------------------------------------------------
    Three months ended                     June 30,    March 31,     June 30,
    (in thousands of Canadian dollars)       2009         2009         2008
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Revenue from continuing operations     $30,100      $29,318      $36,585
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating income from continuing
     operations                             $2,208         $325       $5,316
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Operating margin                          7.3%         1.1%        14.5%
    -------------------------------------------------------------------------
    

    Second Quarter 2009 versus Second Quarter 2008

    In the Petrochemical and Industrial segment, revenue in the second
quarter of 2009 totaled $30.1 million compared to $36.6 million in the second
quarter of 2008, a decrease of $6.5 million or 17.7%. The decrease was due to
reduced business activity levels at both DSG-Canusa and ShawFlex as a result
of the significantly weaker demand in industrial and automotive markets in
North America and Western Europe.
    Operating income from continuing operations in the quarter for the
segment totaled $2.2 million (7.3% of revenue from continuing operations)
compared to $5.3 million (14.5% of revenue from continuing operations) in the
second quarter of 2008 and reflected the impact of the lower revenue in the
period.

    Second Quarter 2009 versus First Quarter 2009

    Revenue for the segment in the second quarter of 2009 increased 2.7% over
levels in the first quarter of 2009 and reflected some improvement in business
activity at DSG-Canusa and ShawFlex.
    Operating income in the quarter increased $1.8 million from the prior
quarter reflecting the favourable impact on costs resulting from the
restructuring of DSG-Canusa's European operations.

    First six months of 2009 versus First six months of 2008

    Revenue for the Petrochemical and Industrial segment in the first six
months of 2009 was $59.4 million compared to $74.7 million for the first six
months of 2008, a decrease of $15.3 million or 20.5%. The decrease was mainly
due to declines at both DSG-Canusa and ShawFlex reflecting the current global
economic downturn, especially in the automotive industry. ShawFlex revenue was
negatively impacted during the first six months of 2009 due to lower industry
wire and cable prices as a result of the lower price of copper compared to the
first six months of 2008.
    Operating income in the first six months of 2009 was $2.5 million and in
the first six months of 2008 was $11.4 million, a decrease of $8.9 million or
78.1%. The decrease was primarily as a result of the decrease in revenue
during the period and a 11.0 percentage point decrease in operating margins,
resulting from the impact of lower revenue on factory utilization and an
increase in fixed costs related to restructuring at DSG-Canusa.

    Financial and Corporate

    Financial and corporate costs consist of corporate office costs not
charged to the operating divisions and other non-operating items including
foreign exchange gains and losses on cash balances. Financial and corporate
costs for the second quarter of 2009, before net foreign exchange losses of
$1.5 million, totaled $6.3 million compared to $5.4 million in the second
quarter of 2008, before net foreign exchange losses of $1.1 million. The
increase in corporate costs reflects compensation and other costs associated
with an increase in personnel active in the deployment of the Company's
operational improvement programs.

    Net Interest Expense

    Net interest expense totaled $1.6 million in the second quarter of 2009,
compared to $895 thousand in the second quarter of 2008, an increase of $705
thousand, primarily due to lower cash balances compared to the second quarter
of 2008 as a result of the Flexpipe acquisition on June 27, 2008 and cash
employed to repurchase shares under the NCIB and pay dividends totaling $36.5
million over the twelve month period.

    Income Taxes

    Income tax expense related to continuing operations in the second quarter
of 2009 was $17.2 million, an effective rate of 33.5%, compared to $8.3
million or an effective rate of 31.6% in the second quarter of 2008 and $17.3
million, an effective rate of 35.4%, in the first quarter of 2009. The
effective tax rate in the second quarter of 2009 was higher than the Company's
expected tax rate of 31%, primarily as a result of foreign withholding taxes
on inter-corporate dividends and the impact of certain costs which are not
deductible for income tax purposes.

    Cash Flow

    Cash provided by continuing operating activities in the second quarter of
2009 totaled $58.1 million, compared to $66.0 million in the second quarter of
2008 and $38.7 million in the first quarter of 2009 with the changes
reflecting the changes in income from continuing operations as well as the
movement in net working capital. During the quarter, the change in non-cash
working capital and foreign exchange was a decrease of $5.6 million, with
reduced accounts receivable, inventory, prepaid project expenses and higher
taxes payable, partially offset by lower accounts payable and deferred
revenue.
    Cash used in continuing investing activities in the second quarter of
2009 totaled $10.6 million, compared to $14.0 million in the first quarter of
2009 and $145.4 million in the second quarter of 2008, and was comprised of
capital expenditures on property, plant and equipment of $6 million and a
long-term notes receivable of $4.2 million advanced to an unrelated party to
support the construction of port facilities for the Bredero Shaw plant in
Kabil, Indonesia. The expanded port facilities are necessary to support major
international pipeline projects that are anticipated to occur in the region
over the next few years.
    Cash used in continuing financing activities in the second quarter of
2009 totaled $51.6 million, compared to $18.7 million last quarter and cash
provided by continuing financing activities of $59.4 million in the second
quarter of 2008, and consisted of dividends paid to shareholders of $22.9
million and the repayment of the Senior Notes of $28.7 million.

    Other Comprehensive Loss

    Other comprehensive loss in the quarter totaled $28.8 million and was
comprised of an unrealized foreign currency translation loss, net of hedging
activities, primarily due to the favourable impact of foreign exchange
fluctuations and a gain on foreign exchange related to the $28.7 million
repayment on the Senior Notes transferred to net income in the current
quarter.

    Liquidity and Capitalization

    At June 30, 2009, the Company recorded a working capital ratio (the ratio
of current assets to current liabilities) of 1.85 to 1 compared to 1.65 to 1
at December 31, 2008. Operating working capital, excluding cash and cash
equivalents, bank indebtedness, the current portion of long-term debt, current
future taxes and working capital of discontinued operations, decreased $17.8
million during the quarter to $176.4 million, reflecting lower accounts
receivables and inventory levels.

    Change in Accounting Policies

    The following are changes in the Company's accounting policies which came
into effect in the first quarter of 2009:

    a) Goodwill and Intangible Assets

    On January 1, 2009, the Company adopted CICA Handbook section 3064,
Goodwill and Intangible Assets. Also as of this date, as is required on
adoption of this section, the Company no longer applies Emerging Issues
Committee Abstract EIC-27, Revenues and Expenditures During the Pre-operating
Period. As required, this accounting standard has been adopted retrospectively
with restatement of prior year figures. The following adjustments were made to
the Company's consolidated financial statements as a result of adopting this
accounting standard:

    
    Change in Consolidated Balance Sheets:

                                                       As at         As at
                                                      Dec. 31,      Dec. 31,
    (in thousands of Canadian dollars)                  2008          2007
    -------------------------------------------------------------------------
    Increase in inventories                        $     1,678   $     2,501
    Decrease in other assets                            (3,285)       (5,067)
    Increase in future taxes                               484           770
                                                  ---------------------------
    Decrease in total assets                       $    (1,123)  $    (1,796)
                                                  ---------------------------
                                                  ---------------------------

    Future income taxes                            $         -   $         -
    Decrease in retained earnings                       (1,123)       (1,796)
                                                  ---------------------------
    Decrease in total liabilities and
     shareholders' equity                          $    (1,123)  $    (1,796)
                                                  ---------------------------
                                                  ---------------------------

    Change in Consolidated Statement of Income:

                                                   Three Months   Six Months
                                                       Ended         Ended
                                                      June 30,      June 30,
    (in thousands of Canadian dollars)                  2008          2008
    -------------------------------------------   ------------- -------------
    Increase in cost of goods sold                 $     6,260   $     6,560
    Decrease in income taxes                            (1,878)       (1,968)
                                                  ------------- -------------
    Decrease in income from continuing operations  $     4,382   $     4,592
                                                  ------------- -------------
                                                  ------------- -------------
    Decrease in net income                         $     4,382   $     4,592
                                                  ------------- -------------
                                                  ------------- -------------

    Earnings per share
    Basic
      Continuing operations                        $     (0.06)  $     (0.06)
      Total                                        $     (0.06)  $     (0.06)

    Diluted
      Continuing operations                        $     (0.06)  $     (0.06)
      Total                                        $     (0.06)  $     (0.06)
    

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

    Costs incurred in the mobilization of project-specific plants for fixed
term projects are included in work-in-process inventories and are charged to
costs of goods sold on a percentage-of-completion basis. Such costs are to be
included in inventories only if incurred after the Company is awarded the
project and if directly related to the performance of the contract.

    
      b) Credit Risk and the Fair Value of Financial Assets and Financial
         Liabilities
    

    On January 1, 2009, the Company adopted EIC-173, Credit Risk and the Fair
Value of Financial Assets and Financial Liabilities. The adoption of this
accounting standard had no effect on the Company's consolidated financial
statements.

    International Financial Reporting Standards

    During 2008, the AcSB confirmed that publicly accountable enterprises,
including the Company, will be required to adopt International Financial
Reporting Standards ("IFRS") in place of Canadian Generally Accepted
Accounting Principles ("GAAP") for interim and annual reporting purposes. The
required changeover date is for fiscal years beginning on or after January 1,
2011.
    The Company has commenced the process to transition to IFRS and has
developed a project plan, which was described in the Company's 2008 Annual
Report to Shareholders.
    The Company is currently engaged in the solution development phase of the
project, which involves the training of project team members and the
development of new IFRS accounting policies and implementation guidance. This
phase of the project is expected to be completed by the end of the fourth
quarter of 2009.
    During the implementation phase, the Company will execute the changes to
business processes, financial systems, accounting policies, disclosure
controls and internal controls over financial reporting that will be required
to implement IFRS. This phase of the project is expected to be completed by
the end of the second quarter of 2010.
    At this time, the impact on the Company's consolidated financial
statements is not reasonably determinable.

    Financial Instruments

    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 June 30, 2009:

    
                                                                     June 30,
    (in thousands)                                                     2009
    -------------------------------------------------------        ----------
    U.S. dollars sold for Canadian dollars
      Less than one year                                      US$     12,000
      Weighted-average rate                                           1.1544


    Euros sold for U.S. dollars
      Less than one year                                     Euro      2,150
      Weighted-average rate                                           1.4490

      One year to two years                                  Euro      2,200
      Weighted-average rate                                           1.4465
    

    As of June 30, 2009, the Company had notional amounts of $20.8 million of
forward contracts outstanding ($25.5 million as of December 31, 2008) with the
fair value of the Company's net benefit from all foreign exchange forward
contracts totaling $128 thousand ($1.5 million, net obligation, as of December
31, 2008).

    Critical Accounting Estimates

    The preparation of the consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect
the amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the period. These estimates and assumptions are
made with management's best judgment given the information available at the
time; however, actual results could differ from the estimates. Critical
estimates used in preparing the consolidated financial statements were
materially unchanged during the quarter, as compared to those disclosed in the
Company's last annual MD&A contained in the Company's 2008 Annual Report.

    Risks and Uncertainties

    Operating in an international environment, servicing predominantly the
oil and gas industry, ShawCor faces a number of business risks and
uncertainties that could materially adversely affect its projections,
businesses, results of operations and financial condition. There were no
material changes in the nature or magnitude of such business risks during the
quarter. A more complete outline of the risks and uncertainties facing the
Company are included in the annual MD&A contained in the Company's 2008 Annual
Report.

    Contractual Obligations

    There were no material changes to the Company's contractual obligations
during the quarter, other than those that would be expected in the ordinary
course of business.

    Summary of Quarterly Results

    The following is a summary of selected financial information for the ten
most recently completed quarters:

    
    (in thousands of
     Canadian dollars
     except per share
     amounts)            First     Second      Third     Fourth    Full Year
    -------------------------------------------------------------------------
    Revenue (Restated
     - see note below)
      2009            $ 307,464  $ 312,791  $       -  $       -  $        -
      2008              293,357    295,118    357,249    433,853   1,379,577
      2007              221,329    276,440    264,892    285,438   1,048,099

    Operating income
     from continuing
     operations
     (Restated -
     see note below)
      2009               50,434     53,178          -          -           -
      2008               40,919     27,189     52,315     75,588     196,011
      2007               27,074     39,764     52,149     43,081     162,068

    Income from
     continuing
     operations
     (Restated -
     see note below)
      2009               31,520     34,343          -          -           -
      2008               26,952     17,825     33,962     56,013     134,752
      2007               22,679     25,177     34,845     36,565     119,266

    Income (loss) from
     discontinued
     operations
     (Restated -
     see note below)
      2009                   21        293          -          -           -
      2008                  (69)    10,553        (82)       609      11,011
      2007                  (55)       (48)       (59)   (30,300)    (30,462)

    Net income (Restated
     - see note below)
      2009               31,541     34,636          -          -           -
      2008               26,852     28,378     33,880     56,623     145,733
      2007               22,624     25,129     34,786      6,265      88,804

    Operating income
     from continuing
     operations per
     share (Classes A
     and B) (Restated
     - see note below)
    Basic
      2009                 0.72       0.76          -          -           -
      2008                 0.57       0.38       0.74       1.07        2.76
      2007                 0.37       0.55       0.73       0.60        2.23

    Diluted
      2009                 0.72       0.76          -          -           -
      2008                 0.57       0.38       0.73       1.07        2.74
      2007                 0.36       0.54       0.72       0.59        2.21

    Income from
     continuing
     operations per
     share (Classes A
     and B) (Restated
     - see note below)
    Basic
      2009                 0.45       0.49          -          -           -
      2008                 0.38       0.25       0.48       0.79        1.90
      2007                 0.31       0.35       0.49       0.51        1.64

    Diluted
      2009                 0.45       0.49          -          -           -
      2008                 0.37       0.25       0.47       0.78        1.88
      2007                 0.30       0.34       0.48       0.51        1.62

    Income (loss)
     from discontinued
     operations per
     share (Classes A
     and B) (Restated
     - see note below)
    Basic
      2009                 0.00       0.00          -          -           -
      2008                 0.00       0.15       0.00       0.01        0.16
      2007                 0.00       0.00       0.00      (0.42)      (0.42)

    Diluted
      2009                 0.00       0.00          -          -           -
      2008                 0.00       0.15       0.00       0.01        0.15
      2007                 0.00       0.00       0.00      (0.42)      (0.41)

    Net income per
     share (Classes A
     and B) (Restated
     - see note below)
    Basic
      2009                 0.45       0.49          -          -           -
      2008                 0.38       0.40       0.48       0.80        2.06
      2007                 0.31       0.35       0.49       0.09        1.22

    Diluted
      2009                 0.45       0.49          -          -           -
      2008                 0.37       0.40       0.47       0.79        2.03
      2007                 0.30       0.34       0.48       0.09        1.21

    Note: Quarterly revenue and operating income from continuing operations
          figures have been restated to reflect the change in accounting
          policy for deferred project costs adopted in the first quarter of
          2009. Refer to note 1 to the interim consolidated financial
          statements for the quarter ended June 30, 2009.
    

    The following are key factors affecting the comparability of quarterly
financial results.
    The Company's operations in the Pipeline and Pipe Services segment,
representing more than 90% of the Company's consolidated revenue, are largely
project-based. The nature and timing of projects can result in variability in
the Company's quarterly revenue and profitability. In addition, certain of the
Company's operations are subject to a degree of seasonality, particularly in
the Pipeline and Pipe Services market segment. The comparability of the
quarterly information disclosed above is also impacted by movements in
exchange rates as the majority of the Company's revenue is transacted in
currencies other than Canadian dollars, primarily U.S. dollars. Changes in the
rates of exchange between the Canadian dollar and other currencies could have
a significant effect on the amount of this revenue when it is translated into
Canadian dollars.

    Outstanding Share Capital

    As at July 28, 2009, the Company had 57,389,017 Class A Subordinate
Voting Shares outstanding and 13,060,209 Class B Multiple Voting Shares
outstanding. Each Class B share is convertible into a Class A share at the
option of the holder. In addition, as at July 28, 2009, the Company had stock
options outstanding to purchase up to 2,907,386 Class A shares.

    Management's Health, Safety and Environmental Commitment

    The Company is committed to providing a safe and healthy workplace and
ensuring that all business activities are conducted in a manner that protects
the environment. This commitment includes designing and operating its plants
and individual processes in compliance with applicable government requirements
regulating the discharge of substances into the environment or otherwise
relating to the protection of the environment. The Company's program for
health, safety and environmental management is further described in the
Company's Annual Information Form under Health, Safety, and Environmental
Policy.

    Outlook

    The Company's international business continues to be strong and includes
several major projects that are currently being executed. These include the
Kumang Cluster and Gumusut projects in Asia and the NEO project in Trinidad.
Bidding activity remains high and the Company continues to pursue several
large offshore pipe coating projects. These projects, if awarded to the
Company, could generate significant revenues. The Company's consolidated order
backlog at June 30, 2009, representing the value of firm customer purchase
orders expected to be completed within one year, totaled $301.5 million, 25.1%
lower than at the beginning of the quarter. Due to project timing, the Company
expects that revenue will soften in the fourth quarter.
    On a full year basis, the Company's current outlook is for pipeline
activity to decline marginally from the levels experienced in 2008 with full
year 2009 consolidated revenues for the Company expected to be slightly below
the record levels achieved in the prior year. However, the Company expects
that operating margins in 2009 will meet or exceed those achieved in 2008 as a
result of several initiatives including programs to reduce costs and improve
efficiencies.

    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 August 6, 2009 at 10:00 am ET to discuss the Company's second
quarter 2009 financial results. Please visit our website at www.shawcor.com
for future details.

    
    SHAWCOR LTD.
    INTERIM FINANCIAL INFORMATION (Unaudited)
    (in thousands of Canadian dollars except per share data)

    CONSOLIDATED STATEMENTS OF INCOME

                              Three Months Ended         Six Months Ended
                                    June 30,                  June 30,
                          ------------------------- -------------------------
                               2009         2008         2009         2008
                                          Restated                  Restated
                                          - note 1                  - note 1
                          ------------ ------------ ------------ ------------

    Revenue               $   312,791  $   295,118  $   620,255  $   588,475
    Cost of goods sold        184,039      201,284      367,988      389,238
                          ------------ ------------ ------------ ------------
    Gross profit              128,752       93,834      252,267      199,237

    Selling, general and
     administrative
     expenses (notes 2
     and 3)                    56,174       50,634      111,769      103,642
    Amortization of
     property, plant
     and equipment             14,653       13,182       29,795       26,125
    Amortization of
     intangible assets          1,095            -        2,190            -
    Foreign exchange
     losses (gains)             1,556        1,106          185       (2,039)
    Research and
     development expenses       2,096        1,723        4,716        3,401
                          ------------ ------------ ------------ ------------
    Operating income from
     continuing operations     53,178       27,189      103,612       68,108
    Interest income on
     short-term deposits           81          610          316        2,062
    Interest expense on
     bank indebtedness           (404)        (315)        (975)        (671)
    Interest expense on
     long-term debt            (1,249)      (1,190)      (2,576)      (2,373)
                          ------------ ------------ ------------ ------------
    Income before income
     taxes and non-
     controlling interest      51,606       26,294      100,377       67,126
    Income taxes               17,263        8,313       34,514       22,653
                          ------------ ------------ ------------ ------------
    Income before non-
     controlling interest      34,343       17,981       65,863       44,473
    Non-controlling
     interest                       -         (156)           -          273
                          ------------ ------------ ------------ ------------
    Income from continuing
     operations                34,343       17,825       65,863       44,746
    Income from discontinued
     operations (note 4)          293       10,553          314       10,484
                          ------------ ------------ ------------ ------------
    Net income            $    34,636  $    28,378  $    66,177  $    55,230
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Earnings per shares
     (note 19)
    Basic
      Continuing
       operations         $      0.49  $      0.25  $      0.94  $      0.63
      Discontinued
       operations                   -         0.15            -         0.15
                          ------------ ------------ ------------ ------------
      Total               $      0.49  $      0.40  $      0.94  $      0.78
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Diluted
      Continuing
       operations         $      0.49  $      0.25  $      0.93  $      0.62
      Discontinued
       operations                   -         0.15            -         0.15
                          ------------ ------------ ------------ ------------
      Total               $      0.49  $      0.40  $      0.93  $      0.77
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

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

    SEGMENTED INFORMATION

                              Three Months Ended         Six Months Ended
                                    June 30,                  June 30,
                          ------------------------- -------------------------
                               2009         2008         2009         2008
                                          Restated                  Restated
                                          - note 1                  - note 1
                          ------------ ------------ ------------ ------------
    Revenue
      Pipeline and Pipe
       Services           $   283,888  $   258,984  $   563,839  $   514,778
      Petrochemical and
       Industrial              30,100       36,585       59,418       74,722
      Intersegment
       Eliminations            (1,197)        (451)      (3,002)      (1,025)
                          ------------ ------------ ------------ ------------
                          $   312,791  $   295,118  $   620,255  $   588,475
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Income (loss) from
     operations
      Pipeline and Pipe
       Services           $    58,853  $    28,160  $   115,499  $    66,368
      Petrochemical and
       Industrial               2,208        5,316        2,533       11,391
      Financial and
       Corporate               (7,883)      (6,287)     (14,420)      (9,651)
                          ------------ ------------ ------------ ------------
                          $    53,178  $    27,189  $   103,612  $    68,108
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------



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

    CONSOLIDATED STATEMENTS OF CASH FLOWS

                              Three Months Ended         Six Months Ended
                                    June 30,                  June 30,
                          ------------------------- -------------------------
                               2009         2008         2009         2008
                                          Restated                  Restated
                                          - note 1                  - note 1
                          ------------ ------------ ------------ ------------

    Operating activities:
      Income from
       continuing
       operations         $    34,343  $    17,825  $    65,863  $    44,746
      Items not requiring
       an outlay of cash:
        Amortization of
         property, plant
         and equipment         14,653       13,182       29,795       26,125
        Amortization of
         intangible assets      1,095            -        2,190            -
        Amortization of
         transaction costs        112          110          222          220
        Asset retirement
         obligation expense
         (note 10)                672          666        2,460        1,732
        Stock-based
         compensation
         (note 2)                 774          806        1,622        1,693
        Future income taxes     1,087        3,469        1,650         (265)
        Loss on disposal
         of property, plant
         and equipment            189          112          333          103
        Gain on short-term
         investments           (1,129)           -       (1,129)           -
        Impairment of
         available-for-sale
         financial assets           -            -          336        1,498
        Non-controlling
         interest in
         earnings of
         subsidiaries               -          156            -         (273)
        Gain on disposal
         of subsidiary              -       (1,063)           -       (1,063)
      Settlement of asset
       retirement
       obligations
       (note 10)                  (17)        (415)      (1,964)      (1,374)
      Change in employee
       future benefits            730          866        1,815        1,632
      Change in non-cash
       working capital and
       foreign exchange         5,566       30,326       (6,373)     (20,303)
                          ------------ ------------ ------------ ------------
    Cash provided by
     continuing operating
     activities                58,075       66,040       96,820       54,471
                          ------------ ------------ ------------ ------------

    Investing activities:
      Purchases of
       property, plant
       and equipment           (6,031)     (26,653)     (20,174)     (38,914)
      Proceeds on disposal
       of property, plant
       and equipment                7            -          105           32
      Acquisition of
       subsidiaries
       (note 21)                    -     (124,376)           -     (124,376)
      Increase in
       long-term notes
       receivable              (4,248)           -       (4,248)           -
      Proceeds on disposal
       of subsidiaries              -        5,635            -        5,635
                          ------------ ------------ ------------ ------------
    Cash used in
     continuing investing
     activities               (10,272)    (145,394)     (24,317)    (157,623)
                          ------------ ------------ ------------ ------------

    Financing activities:
      Increase (decrease)
       in bank indebtedness      (482)      62,961      (14,729)      62,970
      Repayment of
       long-term debt         (28,705)           -      (28,705)           -
      Issue of shares
       (note 11)                  456          976          485        1,435
      Purchase of shares
       for cancellation             -            -            -      (12,642)
      Dividends paid to
       shareholders           (22,855)      (4,533)     (27,355)      (8,548)
                          ------------ ------------ ------------ ------------
    Cash provided by
     (used in) continuing
     financing activities     (51,586)      59,404      (70,304)      43,215
                          ------------ ------------ ------------ ------------

    Foreign exchange on
     foreign cash and
     cash equivalents          (4,437)      (1,225)      (3,916)       4,493
                          ------------ ------------ ------------ ------------

    Net cash used in
     continuing operations     (8,220)     (21,175)      (1,717)     (55,444)

    Net cash provided by
     discontinued
     operations (note 4)          789        2,676          677        3,936

    Cash and cash
     equivalents at
     beginning of period       85,323      142,008       78,932      175,017
                          ------------ ------------ ------------ ------------

    Cash and cash
     equivalents at end
     of period            $    77,892  $   123,509  $    77,892  $   123,509
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------



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

    CONSOLIDATED BALANCE SHEETS

                                                                 December 31,
                                                                     2008
                                                     June 30,      Restated
                                                       2009        - Note 1
                                                  ------------- -------------
    Assets
    Current assets
      Cash and cash equivalents (note 5)           $    77,892   $    78,932
      Short-term investments                             1,129             -
      Accounts receivable                              260,489       307,933
      Taxes receivable                                  11,363         9,261
      Inventories                                      138,595       152,284
      Prepaid expenses                                  15,844        14,635
      Derivative financial instruments                     548           523
      Current future income taxes                        2,972         3,532
      Current assets of discontinued operation
       (note 4)                                         11,509        12,256
                                                  ------------- -------------
                                                       520,341       579,356
    Property, plant and equipment, net                 291,840       307,735
    Goodwill                                           223,146       229,549
    Intangible assets (note 6)                          64,962        66,452
    Future income taxes                                 30,702        31,173
    Derivative financial instruments                       105             -
    Other assets (note 7)                               14,859        13,024
                                                  ------------- -------------
                                                   $ 1,145,955   $ 1,227,289
                                                  ------------- -------------
                                                  ------------- -------------

    Liabilities
    Current liabilities
      Bank indebtedness (note 8)                   $       689   $    15,418
      Accounts payable and accrued liabilities         159,032       193,675
      Taxes payable                                     58,502        53,405
      Derivative financial instruments                     524         2,049
      Deferred revenues                                 33,471        54,692
      Current portion of long-term debt                 28,755        30,672
      Current liabilities of discontinued
       operation (note 4)                                   71           455
                                                  ------------- -------------
                                                       281,044       350,366
    Long-term debt                                      28,466        60,554
    Future income taxes                                 74,768        73,939
    Other non-current liabilities (note 9)               9,840         9,978
                                                  ------------- -------------
                                                       394,118       494,837
                                                  ------------- -------------

    Shareholders' Equity
    Capital stock (note 11)                            202,734       202,073
    Contributed surplus (note 12)                       15,958        14,512
    Retained earnings                                  640,229       601,407
    Accumulated other comprehensive loss (note 13)    (107,084)      (85,540)
                                                  ------------- -------------
                                                       751,837       732,452
                                                  ------------- -------------
                                                   $ 1,145,955   $ 1,227,289
                                                  ------------- -------------
                                                  ------------- -------------



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

    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

                              Three Months Ended         Six Months Ended
                                    June 30,                  June 30,
                          ------------------------- -------------------------
                               2009         2008         2009         2008
                                          Restated                  Restated
                                          - note 1                  - note 1
                          ------------ ------------ ------------ ------------
    Balance at beginning
     of period            $   628,448  $   499,642  $   601,407  $   489,836
    Transitional
     adjustment (note 1)            -            -            -       (1,796)
                          ------------ ------------ ------------ ------------
    Adjusted balance at
     beginning of year        628,448      499,642      601,407      488,040
    Net income                 34,636       28,378       66,177       55,230
                          ------------ ------------ ------------ ------------
                              663,084      528,020      667,584      543,270

    Excess of purchase
     price paid over
     stated value of
     shares (note 11)               -            -            -      (11,235)
    Dividends declared        (22,855)      (4,533)     (27,355)      (8,548)
                          ------------ ------------ ------------ ------------
    Balance at end of
     period               $   640,229  $   523,487  $   640,229  $   523,487
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------


                              Three Months Ended         Six Months Ended
                                    June 30,                  June 30,
                          ------------------------- -------------------------
                               2009         2008         2009         2008
                                          Restated                  Restated
                                          - note 1                  - note 1
                          ------------ ------------ ------------ ------------

    Net income            $    34,636  $    28,378  $    66,177  $    55,230
    Other comprehensive
     income (loss), net
     of income taxes:
      Unrealized gain (loss)
       on translating
       financial statements
       of self-sustaining
       foreign operations     (33,438)       1,197      (25,552)      23,300
      Loss on translating
       financial statements
       of self-sustaining
       foreign operations
       transferred to net
       income in the
       current period             678            -          678            -
      Gain (loss) on hedges
       of unrealized foreign
       currency translation     4,215        1,060        3,488       (2,218)
      Income tax benefit
       (expense)                 (282)           -         (158)           -
                          ------------ ------------ ------------ ------------
    Unrealized foreign
     currency translation
     gain, net of hedging
     activities               (28,827)       2,257      (21,544)      21,082
                          ------------ ------------ ------------ ------------
      Unrealized loss on
       available-for-sale
       financial assets
       arising during
       the period                   -            -         (336)        (911)
      Unrealized loss on
       available-for-sale
       financial assets
       transferred to net
       income in the
       current period               -            -          336        1,498
      Income tax expense
       transferred to net
       income in the
       period                       -            -            -          253
                          ------------ ------------ ------------ ------------
    Change in unrealized
     loss on available-for-
     sale financial assets          -            -            -          840
                          ------------ ------------ ------------ ------------
      Gain on derivatives
       designated as cash
       flow hedges                  -            -            -            -
      Income tax expense            -            -            -            -
      Gain on derivatives
       designated as cash
       flow hedges in
       prior periods
       transferred to net
       income in the
       current period               -            -            -       (1,508)
      Income tax expenses
       transferred to net
       income in the
       current period               -            -            -          512
                          ------------ ------------ ------------ ------------
    Change in loss on
     derivatives
     designated as cash
     flow hedges                    -            -            -         (996)
                          ------------ ------------ ------------ ------------

                              (28,827)       2,257      (21,544)      20,926
                          ------------ ------------ ------------ ------------

    Comprehensive income  $     5,809  $    30,635  $    44,633  $    76,156
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------



    ShawCor Ltd.
    Notes to the Consolidated Financial Statements (Unaudited)
    (in thousands of Canadian Dollars, except per share amounts, unless
     otherwise stated)

    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, 2008. Accordingly,
    the unaudited interim consolidated financial statements should be read in
    conjunction with the Company's annual consolidated financial statements.

    a) Goodwill and Intangible Assets

    On January 1, 2009, the Company adopted CICA Handbook section 3064,
    Goodwill and Intangible Assets. Also as of this date, as is required on
    adoption of this section, the Company no longer applies Emerging Issues
    Committee Abstract EIC-27, Revenues and Expenditures During the Pre-
    operating Period. As required, this accounting standard has been adopted
    retrospectively with restatement of prior year figures. The following
    adjustments were made to the Company's consolidated financial statements
    as a result of adopting this accounting standard:

    Change in Consolidated Balance Sheets:

                                                      As at         As at
                                                   December 31,  December 31,
                                                       2008          2007
    -------------------------------------------------------------------------
    Increase in inventories                        $     1,678   $     2,501
    Decrease in other assets                            (3,285)       (5,067)
    Increase in future taxes                               484           770
                                                  ---------------------------
    Decrease in total assets                       $    (1,123)  $    (1,796)
                                                  ---------------------------
                                                  ---------------------------

    Future income taxes                            $         -   $         -
    Decrease in retained earnings                       (1,123)       (1,796)
                                                  ---------------------------
    Decrease in total liabilities and
     shareholders' equity                          $    (1,123)  $    (1,796)
                                                  ---------------------------
                                                  ---------------------------


    Change in Consolidated Statement of Income:

                                                   Three Months   Six Months
                                                       Ended,        Ended,
                                                      June 30,      June 30,
                                                        2008          2008
                                                  ------------- -------------
    Increase in cost of goods sold                 $     6,260   $     6,560
    Decrease in income taxes                            (1,878)       (1,968)
                                                  ------------- -------------
    Decrease in income from continuing operations  $     4,382   $     4,592
                                                  ------------- -------------
                                                  ------------- -------------
    Decrease in net income                         $     4,382   $     4,592
                                                  ------------- -------------
                                                  ------------- -------------

    Earnings per share
    Basic
      Continuing operations                        $     (0.06)  $     (0.06)
      Total                                        $     (0.06)  $     (0.06)

    Diluted
      Continuing operations                        $     (0.06)  $     (0.06)
      Total                                        $     (0.06)  $     (0.06)


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

    Costs incurred in the mobilization of project-specific plants for fixed
    term projects are included in work-in-process inventories and are charged
    to costs of goods sold on a percentage-of-completion basis. Such costs
    are to be included in inventories only if incurred after the Company is
    awarded the project and if directly related to the performance of the
    contract.

    b) Credit Risk and the Fair Value of Financial Assets and Financial
       Liabilities

    On January 1, 2009, the Company adopted EIC-173, Credit Risk and the Fair
    Value of Financial Assets and Financial Liabilities. The adoption of this
    accounting standard had no effect on the Company's consolidated financial
    statements.

    2.  Stock-based compensation

    The Board of Directors approved the granting of 490,200 stock options on
    February 24, 2009 and 20,000 on March 12, 2009 under the 2001 Employee
    Plan. The total fair value of the stock options granted during the six
    months ended June 30, 2009 was $2.6 million (2008 - $4.1 million) and the
    weighted average fair value of the options was $5.58 (2008 - $10.54),
    calculated using the Black-Scholes pricing model with the following
    assumptions:

                                                       2009          2008
                                                  ------------- -------------
    Expected life of options                        6.25 years    6.25 years
    Expected stock price volatility                     34.68%        29.30%
    Expected dividend yield                              1.55%         0.75%
    Risk-free interest rate                              2.38%         3.68%

    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 and six months ended June 30, 2009,
    included in selling, general and administrative ("SG&A") expenses, was
    $774 thousand and $1.6 million, respectively ($806 thousand and
    $1.7 million, for the three and six months ended June 30, 2008,
    respectively).

    3.  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 and six months ended June 30, 2009 was $2.1 million and
    $4.9 million, respectively ($2.4 million and $4.8 million, for the three
    and six months ended June 30, 2008, respectively).

    4.  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 following table summarizes the financial results and cash flows from
    discontinued operations for the three and six months ended June 30, 2009
    and 2008 and the asset and liabilities as of those dates:

                              Three Months Ended         Six Months Ended
                                    June 30,                  June 30,
                          ------------------------- -------------------------
                               2009         2008         2009         2008
                          ------------ ------------ ------------ ------------

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

    Income (loss) from
     operations                   293       17,156          314       17,087
    Interest expense                -            -            -            -
                          ------------ ------------ ------------ ------------
    Income (loss) from
     discontinued
     operations before
     income taxes                 293       17,156          314       17,087
    Income tax recovery
     (expense)                      -       (6,603)           -       (6,603)
                          ------------ ------------ ------------ ------------
    Income (loss) from
     discontinued
     operations           $       293  $    10,553  $       314  $    10,484
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Cash flow used in
     operating activities $       789  $     2,676  $       677  $     3,936
    Cash flow from
     (used in) investing
     activities                     -            -            -            -
                          ------------ ------------ ------------ ------------
    Cash flow used in
     operating activities $       789  $     2,676  $       677  $     3,936
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Current assets                                  $    11,509  $     9,785
    Property, plant and
     equipment, net                                 $         -  $         -
    Current liabilities                             $        71  $    38,198


    5.  Cash and cash equivalents

                                                     June 30,    December 31,
                                                       2009          2008
                                                  ------------- -------------

    Cash                                           $    77,892   $    78,932
    Cash equivalents                                         -             -
                                                  ------------- -------------
                                                   $    77,892   $    78,932
                                                  ------------- -------------
                                                  ------------- -------------

    6.  Intangible assets

                                                                 December 31,
                                                                     2008
                                                     June 30,      Restated
                                                       2009        - note 1
                                                  ------------- -------------

    Cost
    Intellectual property with limited life        $    57,576   $    57,576
    Intangible assets with limited life                  9,547         8,847
    Intangible assets with indefinite life               1,931         1,931
                                                  ------------- -------------
                                                   $    69,054   $    68,354
                                                  ------------- -------------

     Accumulated amortization                            4,092         1,902
                                                  ------------- -------------
                                                   $    64,962   $    66,452
                                                  ------------- -------------
                                                  ------------- -------------

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

    7.  Other assets

                                                                 December 31,
                                                                     2008
                                                     June 30,      Restated
                                                       2009        - note 1
                                                  ------------- -------------

    Long-term investment                           $        24   $       360
    Long-term prepaid expenses                           5,314         5,931
    Long-term notes receivable                           4,248             -
    Accrued employee future benefit asset                5,273         6,733
                                                  ------------- -------------
                                                   $    14,859   $    13,024
                                                  ------------- -------------
                                                  ------------- -------------

    Long-term investment as of June 30, 2009 represents 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 SG&A expense, in the
    financial and corporate segment, during the three and six months ended
    June 30, 2009 of $nil and $336 thousand, respectively ($nil and
    $1.5 million for the three and six months ended June 30, 2008,
    respectively).

    Long-term notes receivable as of June 30, 2009 relates to amount advanced
    by the Company to an external party to support the construction of port
    facilities at a Bredero Shaw plant location in Kabil, Indonesia.

    8.  Bank indebtedness and Long-term debt

    As of June 30, 2009, the Company had total operating credit lines of
    $275.5 million ($293.5 million as of December 31, 2008), of which
    $74.5 million has been drawn for various standby letters of credit for
    performance, bid and surety bonds ($81.5 million as of December 31,
    2008), to yield unutilized credit facilities of $201.0 million
    ($198.0 million as of December 31, 2008), excluding the Company's
    proportionate share of the bank indebtedness of its joint venture,
    Arabian Pipecoating Company Limited of $689 thousand ($15.4 million as of
    December 31, 2008).

    Under the terms of the Company's 5.11% Senior Notes ("Senior Notes"), the
    Company is required to repay the Senior Notes in three equal annual
    installments of USD$25 million. On June 30, 2009, the Company made the
    first repayment of $28.7 million ("Repayment") using the current exchange
    rate. As at June 30, 2009, $57.1 million was outstanding under the Senior
    Notes, of which $28.8 has been reclassified as current portion of long-
    term debt. The Repayment was funded by USD$25.0 million that was
    permanently repatriated from the Company's U.S. dollar based operations
    ("Repatriation"). The Repatriation gave rise to a net foreign exchange
    loss of $678 thousand and was transferred from accumulated other
    comprehensive income to the consolidated statement of income during the
    second quarter of 2009.

    9.  Other non-current liabilities

                                                     June 30,    December 31,
                                                       2009          2008
                                                  ------------- -------------

    Non-current asset retirement obligations
     (note 10)                                     $     6,187   $     6,680
    Accrued employee future benefit obligations          3,653         3,298
                                                  ------------- -------------
                                                   $     9,840   $     9,978
                                                  ------------- -------------
                                                  ------------- -------------

    10. Assets retirement obligations

                                                     June 30,    December 31,
                                                       2009          2008
                                                  ------------- -------------

    Balance, at beginning of year                  $    22,606   $    14,082
    Liabilities settled in year                         (1,964)         (891)
    Liabilities incurred in year                         1,208         8,675
    Revisions to cash flow estimates                       673             -
    Accretion expense                                      579           703
    Translation of self-sustaining foreign
     operations                                            356            37
                                                  ------------- -------------
                                                   $    23,458   $    22,606
                                                  ------------- -------------
                                                  ------------- -------------

    Asset retirement obligations are included in the consolidated balance
    sheets as follows:

                                                     June 30,    December 31,
                                                       2009          2008
                                                  ------------- -------------

    Accounts payable and accrued liabilities       $    17,271   $    15,926
    Other non-current liabilities                        6,187         6,680
                                                  ------------- -------------
                                                   $    23,458   $    22,606
                                                  ------------- -------------
                                                  ------------- -------------

    The total undiscounted cash flows which are estimated to be required to
    settle all asset retirement obligations is $26.4 million ($24.0 million
    as of December 31, 2008) and the credit-adjusted risk-free rates at which
    the estimated cash flows have been discounted range between 5.11% and
    7.0%.

    11. Capital stock

    The following shares were outstanding as of June 30, 2009 and
    December 31, 2008:


    (in thousands of Canadian dollars except         June 30,    December 31,
     number of shares information)                     2009          2008
                                                  ------------- -------------

    Number of shares: Class A
    Balance, beginning of the period                57,358,537    58,234,570
    Issued - stock options                              30,480       113,234
    Conversions Class B to Class A                           -        17,933
    Purchase - normal course issuer bid                      -    (1,007,200)
                                                  ------------- -------------
    Balance, end of the period                      57,389,017    57,358,537
                                                  ------------- -------------
    Number of shares: Class B                       13,060,209    13,060,209
                                                  ------------- -------------
    Total number of shares                          70,449,226    70,418,746
                                                  ------------- -------------
                                                  ------------- -------------

    Stated value:
    Balance, beginning of the period               $   201,070   $   202,248
    Issued - stock options                                 485         1,763
    Conversions Class B to Class A                           -             1
    Purchase - normal course issuer bid                      -        (3,518)
    Compensation cost on exercised options                 176           576
                                                  ------------- -------------
    Balance, end of the period                         201,731       201,070
                                                  ------------- -------------
    Stated value: Class B                                1,003         1,003
                                                  ------------- -------------
    Total stated value                             $   202,734   $   202,073
                                                  ------------- -------------
                                                  ------------- -------------

    During the six months ended June 30, 2009, the Company repurchased and
    cancelled nil Class A Subordinated Voting Shares (405,000 during the six
    months ended June 30, 2008) under the terms of a Normal Course Issuer
    Bid. The excess of cost over stated capital of the acquired shares, which
    for the six months ended June 30, 2009 totaled $nil ($11.2 million for
    the six months ended June 30, 2008), was charged to retained earnings.

    12. Contributed surplus

                              Three Months Ended         Six Months Ended
                                    June 30,                  June 30,
                          ------------------------- -------------------------
                               2009         2008         2009         2008
                          ------------------------- -------------------------

    Balance, beginning
     of period            $    15,351  $    12,415  $    14,512  $    11,729
    Stock compensation
     expense (note 2)             774          806        1,622        1,693
    Fair value of stock
     options exercised           (167)        (297)        (176)        (498)
                          ------------------------- -------------------------
    Balance, end of
     period               $    15,958  $    12,924  $    15,958  $    12,924
                          ------------------------- -------------------------
                          ------------------------- -------------------------

    13. Accumulated other comprehensive loss

                                                     June 30,    December 31,
                                                       2009          2008
                                                  ------------- -------------

    Unrealized foreign currency translation
     losses, net of hedging activities             $  (107,084)  $   (85,540)
    Unrealized loss on available-for-sale
     financial asset                                         -             -
    Gain on derivatives designated as cash
     flow hedges                                             -             -
                                                  ------------- -------------
                                                   $  (107,084)  $   (85,540)
                                                  ------------- -------------
                                                  ------------- -------------

    14. Stock option plans

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

                                   June 30, 2009         December 31, 2008
                              ----------------------- -----------------------
                                            Weighted                Weighted
                                             Average                 Average
                                 Total      Exercise     Total      Exercise
                                 Shares       Price      Shares       Price
                              ----------- ----------- ----------- -----------
    Balance outstanding,
     beginning of period       2,470,466  $    19.14   2,173,980  $    17.24
    Granted                      510,200       15.58     428,600       30.03
    Exercised                    (30,480)      15.93    (113,234)      15.56
    Forfeited                    (42,800)      21.32     (16,880)      19.24
    Expired                            -           -      (2,000)      15.94
                              ----------- ----------- ----------- -----------
    Balance outstanding,
     end of period             2,907,386  $    18.85   2,470,466  $    19.14
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------


                            Options Outstanding          Options Exercisable
    -------------------------------------------------- ----------------------
                                   Weighted
                                   average
                     Outstanding  remaining   Weighted               Weighted
                        as at    contractual   average  Exercisable   average
    Range of           June 30,      life     exercise   at June 30, exercise
    exercise prices      2009      in years     price       2009       price
    ---------------- ----------- ------------ -------- ----------- ----------
    $10.00 to $15.00    470,166      3.91      $12.64     470,166     $12.64
    $15.01 to $20.00  1,642,420      6.18      $16.47     952,844     $16.80
    $20.01 to $25.00     40,000      6.01      $20.90      25,600     $20.96
    $25.01 to $30.00    724,800      7.95      $27.61     212,840     $26.79
    $30.01 to $35.00     30,000      8.51      $31.77       6,000     $31.77
                     -----------                       -----------
                      2,907,386                         1,667,450
                     -----------                       -----------
                     -----------                       -----------


                            Options Outstanding          Options Exercisable
    -------------------------------------------------- ----------------------
                                  Weighted
                                   average
                     Outstanding  remaining   Weighted  Exercisable  Weighted
                          at     contractual   average       at       average
    Range of         December 31,    life     exercise  December 31, exercise
    exercise prices      2008      in years     price       2008       price
    ---------------- ----------- ------------ -------- ----------- ----------
    $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           -      $0.00
                     -----------                       -----------
                      2,470,466                         1,323,750
                     -----------                       -----------
                     -----------                       -----------

    15. Financial instruments and financial risk management

      a) Categories of Financial Assets and Financial Liabilities

    Under 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:

                                                     June 30,    December 31,
                                                       2009          2008
                                                  ------------- -------------

    Financial assets:
      Held for trading, measured at fair value
        Cash                                       $    77,892   $    78,932
        Short-term investments                     $     1,129             -

      Loans and receivables, recorded at
       amortized cost
        Accounts receivable                        $   260,489   $   307,933
        Taxes receivable                           $    11,363   $     9,261
        Long-term notes receivable                 $     4,248   $         -

      Available for sale, measured at fair value
        Long-term investments                      $        24   $       360

      Derivatives, measured at fair value
        Derivative financial instruments           $       653   $       523

    Financial liabilities:
      Other liabilities, recorded at amortized cost
        Bank indebtedness                          $       689   $    15,418
        Accounts payable and accrued liabilities   $   159,032   $   193,675
        Taxes payable                              $    58,502   $    53,405
        Current portion of long-term debt          $    28,755   $    30,672
        Long-term debt                             $    28,466   $    60,554

      Derivatives, measured at fair value
        Derivative financial instruments           $       524   $     2,049


    Short-term investments have been classified as held for trading and
    carried at fair value, based on quoted market prices with changes in
    those fair values recognized in net income.

    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.

      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 of June 30, 2009:

                                                                     June 30,
                                                                       2009
                                                                   ----------
    U.S. dollars sold for Canadian dollars
      Less than one year                                      US$     12,000
      Weighted-average rate                                           1.1544

    Euros sold for U.S. dollars
      Less than one year                                     Euro      2,150
      Weighted-average rate                                           1.4490

      One year to two years                                  Euro      2,200
      Weighted-average rate                                           1.4465


    As of June 30, 2009, the Company had notional amounts of $20.8 million of
    forward contracts outstanding ($25.5 million as of December 31, 2008)
    with the fair value of the Company's net benefit from all foreign
    exchange forward contracts totaling $129 thousand ($1.5 million, net
    obligation, as of December 31, 2008).

      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 June 30, 2009,
    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 three months then ended by approximately $12.8 million,
    $3.4 million and $2.7 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 $56.3 million, $24.0 million and $32.3 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 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
    Senior 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 ("Net
    Investment"). On April 1, 2009, The Company de-designated
    USD$25.0 million of the hedge against the Net Investment. As a result, on
    April 1, 2009 the remaining balance of the Senior Notes of
    USD$50.0 million was hedged against the Net Investment. The de-
    designation gave rise to a $2.1 million foreign exchange gain during the
    second quarter of 2009, which was recognized in the consolidated
    statement of income. Foreign exchange gains and losses from the hedged
    portion of the Senior Notes are not included in the consolidated
    statement of income, but are shown in accumulated other comprehensive
    income. As of June 30, 2009, fluctuations of +/- 5% in the Canadian
    dollar, relative to the U.S. dollar, would impact the Company's
    accumulated other comprehensive income by $2.5 million for the three
    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 exposures.

    Interest rate risk

    The following table summarizes the Company's exposure to interest rate
    risk at June 30, 2009:

                                          Fixed interest rate
                                       -------------------------
                                         Maturing     Maturing
                            Floating   in one year      after
                              rate        or less     one year      Total
                          ------------ ------------ ------------ ------------

    Financial assets
      Cash and cash
       equivalents        $    77,892  $         -  $         -  $    77,892
      Long-term notes
       receivable               4,248            -            -        4,248
                          ------------ ------------ ------------ ------------
    Total                 $    82,140  $         -  $         -  $    82,140
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Financial liabilities
      Bank indebtedness   $       689  $         -  $         -  $       689
      Current portion of
       long-term debt               -       28,755            -       28,755
      Long-term debt                -            -       28,466       28,466
                          ------------ ------------ ------------ ------------
    Total                 $       689  $    28,755  $    28,466  $    57,910
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

                          ------------ ------------ ------------
    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 long-term notes receivable 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. As at
    June 30, 2009, $9.7 million, or 4.0% of trade accounts receivable, were
    more than 90 days overdue, which is consistent with prior period aging
    analysis.

    The following is an analysis of the change in the allowance for doubtful
    accounts for the six months ended June 30, 2009 and 2008:

                                                    Six Months Ended June 30,
                                                  ---------------------------
                                                       2009          2008
                                                  ------------- -------------

    Balance, beginning of period                   $     6,237   $     4,165
    Bad debt expense                                       503           295
    Write-offs of bad debts                               (629)         (251)
    Recovery of previously written-off amounts            (413)            -
    Impact of change in foreign exchange rates              (3)          (58)
                                                  ------------- -------------
    Balance, end of period                         $     5,695   $     4,151
                                                  ------------- -------------
                                                  ------------- -------------

    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 June 30,
    2009, the Company has cash and cash equivalents totaling $77.9 million
    ($78.9 million as of December 31, 2008) and has unutilized lines of
    credit available to use of $201.0 million ($198.0 million as of
    December 31, 2008). The following are the contractual maturities of the
    Company's financial liabilities as of June 30, 2009:

                           Less than    1 - 2     3 - 4
                             1 Year     Years     Years  Thereafter   Total
                           --------------------------------------------------
    Accounts payable and
     accrued liabilities    $136,673    $4,669      $438         -  $141,780
    Asset retirement
     obligations              17,252       943     1,310     6,930    26,435
    Bank indebtedness            689         -         -         -       689
    Long-term debt            28,755    28,466         -         -    57,221
    Obligations under
     capital leases              228       519       146         -       893
    Interest on obligations
     under capital leases         22        42        15         -        79
    Interest on financial
     instruments               2,934     1,467         -         -     4,401
    Derivative financial
     instruments                 524         -         -         -       524
                           --------------------------------------------------
    Total                   $187,077   $36,106    $1,909    $6,930  $232,022
                           --------------------------------------------------
                           --------------------------------------------------

    16. 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 of June 30, 2009, total managed capital was $809.6 million
    ($839.2 million as of December 31, 2008), comprised of shareholders
    equity of $751.8 million ($732.5 million as of December 31, 2008), long-
    term debt of $28.4 million ($60.6 million as of December 31, 2008),
    current portion of long-term debt of $28.7 million ($30.7 million as of
    December 31, 2008) and bank indebtedness of $689 thousand ($15.4 million
    as of December 31, 2008).

    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 June 30, 2009 was within the parameters established by these
    agreements.

    17. 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 six months ended June 30, 2009 and 2008, and goodwill and
    total assets as of those dates by segment are as follows:

                              Three Months Ended         Six Months Ended
                                    June 30,                  June 30,
                          ------------------------- -------------------------
                                            2008                      2008
                                          Restated                  Restated
                               2009       - note 1       2009       - note 1
                          ------------ ------------ ------------ ------------
    Revenue
      Pipeline and Pipe
       Services           $   283,888  $   258,984  $   563,839  $   514,778
      Petrochemical and
       Industrial              30,100       36,585       59,418       74,722
      Intersegment
       Eliminations            (1,197)        (451)      (3,002)      (1,025)
                          ------------ ------------ ------------ ------------
                          $   312,791  $   295,118  $   620,255  $   588,475
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Income (loss) from
     operations
      Pipeline and Pipe
       Services           $    58,853  $    28,160  $   115,499  $    66,368
      Petrochemical and
       Industrial               2,208        5,316        2,533       11,391
      Financial and
       Corporate               (7,883)      (6,287)     (14,420)      (9,651)
                          ------------ ------------ ------------ ------------
                          $    53,178  $    27,189  $   103,612  $    68,108
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Goodwill
      Pipeline and Pipe
       Services                                     $   204,098  $   190,779
      Petrochemical
       and Industrial                                    19,048       18,629
                                                    ------------ ------------
                                                    $   223,146  $   209,408
                                                    ------------ ------------
                                                    ------------ ------------
    Total assets
      Pipeline and Pipe
       Services                                     $ 1,336,802  $ 1,193,716
      Petrochemical and
       Industrial                                        78,863       84,242
      Financial and
       Corporate                                        840,636      945,539
      Elimination                                    (1,110,346)  (1,082,861)
                                                    ------------ ------------
                                                    $ 1,145,955  $ 1,140,636
                                                    ------------ ------------
                                                    ------------ ------------

    18. 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:

                              Three Months Ended         Six Months Ended
                                    June 30,                  June 30,
                          ------------------------- -------------------------
                                            2008                      2008
                                          Restated                  Restated
                               2009       - note 1       2009       - note 1
                          ------------ ------------ ------------ ------------
    Revenue               $    15,998  $    21,277  $    34,577  $    37,965
    Operating and other
     expenses                  12,313       17,180       26,119       31,339
    Net income before
     income taxes               3,685        4,097        8,458        6,626
    Provision for taxes           716          820        1,771        1,221
                          ------------ ------------ ------------ ------------
    Net income            $     2,969  $     3,277  $     6,687  $     5,405
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Cash provided by
     (used in):
      Operating
       activities         $    10,092  $     4,099  $    14,497  $     5,404
      Investing
       activities         $      (651) $    (1,627) $    (1,832) $    (3,799)
      Financing
       activities         $    (6,734) $         -  $    (8,479) $    (2,872)

    Current assets                                  $    28,197  $    26,621
    Property, plant and
     equipment, net                                 $    14,071  $    14,426
    Goodwill                                        $     4,747  $     5,135
    Current liabilities                             $    14,664  $    16,610
    Long-term Liabilities                           $       733  $     7,405


    19. 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         Six Months Ended
                                    June 30,                  June 30,
                          ------------------------- -------------------------
                                            2008                      2008
                                          Restated                  Restated
                               2009       - note 1       2009       - note 1
                          ------------ ------------ ------------ ------------
    Basic
      Class A              57,375,956   57,874,420   57,367,680   57,922,183
      Class B              13,060,209   13,077,909   13,060,209   13,077,909
                          ------------ ------------ ------------ ------------
    Total                  70,436,165   70,952,329   70,427,889   71,000,092
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Dilutive effect of
     stock options
      Class A                 357,549      796,673      175,496      873,513
      Class B                       -            -            -            -
                          ------------ ------------ ------------ ------------
    Total                     357,549      796,673      175,496      873,513
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Diluted
      Class A              57,733,505   58,671,093   57,543,176   58,795,696
      Class B              13,060,209   13,077,909   13,060,209   13,077,909
                          ------------ ------------ ------------ ------------
    Total                  70,793,714   71,749,002   70,603,385   71,873,605
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    20. Recent accounting pronouncements

    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.

    21. Comparative figures

    Comparative figures have been reclassified from statements previously
    stated to conform to the presentation of the current year consolidated
    financial statements, and to show the effects of retrospective
    application of a new accounting policy (see note 1).
    





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

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ShawCor Ltd.

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