Westshore Terminals Income Fund - 2009 first quarter report



    VANCOUVER, May 5 /CNW/ - Westshore Terminals Income Fund (TSX: WTE.UN)
announced today its earnings for the first quarter ending March 31, 2009.
Please see attached Report to Unitholders for details.

    
    Westshore Terminals Income Fund
    First Quarter Report
    For the three months ended March 31, 2009
    -------------------------------------------------------------------------
    

    The earnings and distributable cash of Westshore Terminals Income Fund
(the "Fund") are wholly dependent on the results of Westshore Terminals
Limited Partnership ("Westshore"). Westshore's results are determined largely
by the volume of coal shipped by its coal mine customers for sale in the
export market, the U.S. dollar denominated price received by Westshore's
customers for coal, the Canadian-U.S. dollar exchange rate and Westshore's
costs. Westshore's throughput charges for approximately 50% of the coal it
handles are calculated at present by reference to coal prices. Higher prices
for hard coking coal resulted in Teck Resources Limited ("Teck") which is
Westshore's principal customer, achieving higher average settlement prices for
the 2008/09 coal year (ending March 31, 2009) compared to the 2007/08 coal
year. For the 2009/10 coal year, prices that have been publicly announced to
date are down significantly from prices in the 2008/09 coal year. As Westshore
has some exposure to fluctuations in exchange rates (as a result of pricing
mechanisms under its customer contracts), Westshore engages in periodic
currency hedging arrangements to provide some partial shielding from material
short-term swings in the CDN/US dollar exchange rate.

    Westshore Terminals Income Fund

    
    Management's Discussion and Analysis of Financial Condition
    and Results of Operations
    

    This management's discussion and analysis refers to certain measures
other than those prescribed by Canadian Generally Accepted Accounting
Principles ("GAAP"). These measures do not have standardized meanings and may
not be comparable to similar measures presented by other trusts or
corporations. They are however determined by reference to the Fund's financial
statements. These non-GAAP measures are discussed because the Fund believes
that they provide investors with valuable information in understanding the
results of the Fund's operations and financial position. The unaudited
financial results along with management's discussion and analysis contained in
this report should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Fund's Annual Report
for the year ended December 31, 2008. The date of this management's discussion
and analysis and results of operations is May 5, 2009.
    The following table sets out selected consolidated financial information
for the Fund for the quarter ended March 31, 2009. As at May 5, 2009 the Fund
has 74,250,016 issued and outstanding trust units.

    
    -------------------------------------------------------------------------
    (In thousands of dollars         Three Months Ended   Three Months Ended
     except per unit amounts)          March 31, 2009       March 31, 2008
                                              $                    $
    -------------------------------------------------------------------------
    REVENUE
      Coal loading                               53,647               35,145
      Other                                       1,050                  968
    -------------------------------------------------------------------------
                                                 54,697               36,113
    EXPENSES
      Operating                                  17,624               18,521
      Administrative                              2,324                1,874
    -------------------------------------------------------------------------
                                                 19,948               20,395
    -------------------------------------------------------------------------
    Earnings before the undernoted               34,749               15,718
    Interest income                                 155                  610
    Depreciation                                 (5,401)              (5,572)
    Foreign exchange gain (loss)                 (3,002)                 858
    -------------------------------------------------------------------------
    Earnings before income taxes                 26,501               11,614
    Provision for income taxes                      827                  281
    -------------------------------------------------------------------------
    Net earnings                                 25,674               11,333
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings per unit(1)                      0.346                0.153
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash Distributions declared(2)               17,820               20,790
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash Distributions per unit                   0.240                0.280
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distribution of units in lieu
     of cash                                          -                2,107
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distribution of units in lieu
     of cash per unit                                 -                0.028
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Weighted average units outstanding for the quarter ended March 31,
        2009 were 74,250,016 (March 31, 2008 - 74,250,016)
    (2) Refer to page 6 for a comparison of cash distributions to
        Standardized Distributable Cash.


    The following tables set out selected consolidated financial information
for the Fund on a quarterly basis for the last eight quarters.


    -------------------------------------------------------------------------
    (In thousands of dollars                 Three Months Ended
     except per unit amounts)  ----------------------------------------------
                                  Mar 31,     Dec 31,    Sept 30,    June 30,
                                   2009        2008        2008        2008
                                     $           $           $           $
    -------------------------------------------------------------------------
    Revenue
      Coal loading                53,647      88,425      73,764      62,762
      Other                        1,050       1,946       1,055       1,036
    -------------------------------------------------------------------------
                                  54,697      90,371      74,819      63,798
    Expenses
      Operating                   17,624      18,471      20,470      19,534
      Administration               2,324       8,076       7,228       6,982
    -------------------------------------------------------------------------
                                  19,948      26,547      27,698      26,516
    -------------------------------------------------------------------------
    Earnings before the
     undernoted                   34,749      63,824      47,121      37,282
    Interest income                  155         339         530         434
    Depreciation                  (5,401)     (5,573)     (5,572)     (5,572)
    Foreign exchange gain (loss)  (3,002)    (16,495)     (1,047)        (66)
    -------------------------------------------------------------------------
    Earnings before income
     taxes                        26,501      42,095      41,032      32,078
    Provision for income
     taxes                           827         613         870         190
    -------------------------------------------------------------------------
    Net earnings                  25,674      41,482      40,162      31,888
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings per unit          0.346       0.559       0.541       0.429
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash Distributions
     declared(1)                  17,820      39,353      38,610      34,897
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash Distributions per unit    0.240       0.530       0.520       0.470
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distribution of units in
     lieu of cash                      -       3,988       3,913       3,536
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distribution of units in
     lieu of cash per unit             -       0.054       0.053       0.047
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to page 6 for a comparison of cash distributions to
        Standardized Distributable Cash.



    -------------------------------------------------------------------------
    (In thousands of dollars                 Three Months Ended
     except per unit amounts)  ----------------------------------------------
                                  Mar 31,     Dec 31,    Sept 30,    June 30,
                                   2008        2007        2007        2007
                                     $           $           $           $
    -------------------------------------------------------------------------
    Revenue
      Coal loading                35,145      37,437      36,937      45,790
      Other                          968       2,444         946         995
    -------------------------------------------------------------------------
                                  36,113      39,881      37,883      46,785
    Expenses
      Operating                   18,521      18,660      16,965      18,266
      Administration               1,874       2,982       1,798       1,583
    -------------------------------------------------------------------------
                                  20,395      21,642      18,763      19,849
    -------------------------------------------------------------------------
    Earnings before the
     undernoted                   15,718      18,239      19,120      26,936
    Interest income                  610         697         749         710
    Depreciation                  (5,572)     (5,646)     (5,553)     (5,552)
    Foreign exchange gain            858         540         761       1,025
    -------------------------------------------------------------------------
    Earnings before income
     taxes                        11,614      13,830      15,077      23,119
    Provision for (recovery
     of) income taxes                281        (264)        413       6,589
    -------------------------------------------------------------------------
    Net earnings                  11,333      14,094      14,664      16,530
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings per unit          0.153       0.190       0.197       0.223
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash Distributions
     declared(1)                  20,790      26,730      21,533      18,563
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash Distributions per unit    0.280       0.360       0.290       0.250
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distribution of units in
     lieu of cash                  2,107           -           -           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distribution of units in
     lieu of cash per unit         0.028           -           -           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to page 6 for a comparison of cash distributions to
        Standardized Distributable Cash.
    

    Results of Operations

    In the first quarter of 2009, Westshore shipped 4.4 million tonnes of
coal, compared with 5.2 million tonnes shipped during the same period in 2008.
Lower shipment levels during the first quarter of 2009 were primarily due to
lower shipment levels from Teck, partially offset by increased thermal coal
shipments. In its first quarter report, Teck indicated that its coal volumes
were down 36% in the first quarter, and Westshore suffered a corresponding
reduction in volume shipped by Teck. A significant increase in thermal coal
shipments from both Canada and the United States partially offset this
decrease. Based on information currently available, Westshore is anticipating
coal volumes of approximately 17-18 million tonnes in 2009 as a whole compared
to 21.1 million tonnes in 2008, and at a significantly lower average loading
rate. As indicated by Teck, further decreases in steel production and demand
for hard coking coal would cause its sales volumes to fall short of its
guidance. Reduction in pricing and demand for thermal coal would be expected
to further reduce the volume of thermal coal shipped through Westshore.
    Coal loading revenue increased by 53% to $53.6 million in the first
quarter of 2009 from $35.1 million in the first quarter of 2008. The increase
in revenue was due to an increase in the average loading rate, offset by a 16%
decrease in volumes. The average loading rate in the first quarter of 2009 was
$12.20 per tonne compared to $6.73 per tonne for the same period in 2008.
Higher rates in Q1 2009 reflect the higher coal prices for the 2008/09 coal
contract year, ended March 31, 2009 compared to the 2007/08 coal contract year
ended March 31, 2008.
    Other income was consistent with that of the first quarter of 2008 and
consists mostly of wharfage income. Operating and administrative expenses
decreased from $20.4 million in the first quarter of 2008 to $19.9 million in
the first quarter of 2009, as a result of lower throughputs resulting in lower
lease costs. Interest income for the first quarter of 2009 decreased by $0.5
million due to lower interest rates and because the Fund has spent some of its
cash on the equipment upgrade project.
    Foreign exchange, which includes both realized gains/losses and changes
in the mark-to-market adjustment for unrealized gains/losses, decreased to a
$3.0 million loss for the three months ended March 31, 2009 from a $0.9
million gain in the first quarter of 2008. This decrease was mainly caused by
an increase in the realized losses, offset by the mark-to-market adjustments
on the foreign exchange contracts (see Currency Fluctuations).
    Earnings before depreciation, interest, foreign exchange and income taxes
were higher in the first quarter of 2009, at $29 million as compared to $15.7
million in the first quarter of 2008.

    Contract Rate Review

    In late August 2006, Teck sent notice to Westshore requesting a review of
the charges under the Port Services Contract that governs coal from the
Fording River, Greenhills and Coal Mountain mines. If the parties are unable
to resolve the Port Services Contract matter by negotiation, the matter will
have to be determined by arbitration.

    Equipment Upgrade Project

    Westshore is proceeding with the upgrade to its existing equipment
previously announced. The cost of the upgrade remains on budget at
approximately $49 million. The project consists of new conveyors, an upgrade
to the tandem rotary rail car dumper and a fourth stacker reclaimer. The
conveyors and rail car dumper upgrade have been completed and the stacker
reclaimer is due to be operational by the end of 2009. Funding for the upgrade
has been provided principally through $40 million in equity financing, which
was completed in March 2007. The balance of the funds required will be sourced
from Westshore's cash on hand.

    Taxation on Trusts in Canada

    Distributions declared by the Fund after January 1, 2011 will be taxed at
a rate of 27.5% (2012 - 26%) and the distributions will be treated as taxable
dividends in the hands of unitholders. Unitholders will be entitled to a
dividend tax credit which will give credit for the level of taxation incurred
by the Fund.
    The Fund has not provided for current income taxes in 2009 as the income
of the Fund is distributed to and taxed in the hands of unitholders. The
future taxation of distributions makes relevant for accounting purposes the
timing differences between the recognition of certain assets and liabilities
for tax and accounting purposes. A non-cash expense of $0.8 million has been
recorded in the quarter ended March 31, 2009 to reflect changes in assets and
liabilities and their expected recognition for tax purposes. This future
income tax expense does not affect current distributions.
    In July 2008, the Ministry of Finance published draft legislation which
allows income trusts to convert to corporations on a tax-deferred basis.
Management and its tax advisors are reviewing these rules to determine the
most appropriate course of action for the Fund.

    Distribution Reinvestment Plan

    On April 5, 2007 the Fund announced a distribution reinvestment plan (the
"Plan"). Under the Plan, Canadian resident Unitholders will be able to
designate that all or a portion of the quarterly distributions payable on
their Fund Units be applied towards the purchase of existing Fund Units
through the facilities of The Toronto Stock Exchange at prevailing market
prices. No additional units will be issued from treasury under the Plan.
Unitholders should contact their brokers or Computershare Investor Services
Inc. if they wish to participate in the Plan. Additional information on the
Plan is also available on the Fund's website at www.westshore.com.

    Currency Fluctuations

    Westshore expects that in 2009 the loading rates for approximately 50% of
the coal loaded at Westshore will depend on the Canadian dollar price realized
for coal. Coal sales by Westshore's customers are priced on an annual basis in
U.S. dollars, with the result that the Canadian dollar price received
fluctuates within the year because of exchange rate movements. To mitigate the
resulting risk, Westshore has engaged in periodic hedging activities.
Westshore has adopted a policy under which it expects to hedge by April 30 of
each year a portion of its anticipated US dollar related revenues for that
coal year, based on the annual budget. Westshore will continue to review the
need and opportunity for additional future hedging.
    In the financial statements, the effect of currency fluctuations is shown
as affecting coal loading revenues before taking into account the effect of
hedging activities, the financial effect of which is accounted for as foreign
exchange. As Westshore's hedging transactions do not qualify for "hedge
accounting" treatment, the value of Westshore's forward exchange contracts
must be "marked to market" at each period end. On this basis, realized foreign
exchange losses for the quarter ended March 31, 2009 of $5.7 million were
reduced by a $2.3 million reduction in unrealized losses on forward exchange
contracts, compared to $0.9 million in unrealized gains and no realized gains
for the quarter ended March 31, 2008. Unrealized hedging gains or losses are
non-cash items. The cash effect of the hedging activities is recognized in
foreign exchange gains/losses as the forward exchange contracts mature.

    Liquidity and Capital Resources

    The Fund is obliged to distribute to Unitholders its income (net of
administrative costs of the Fund and any amounts which may be paid in
connection with any cash redemption of units). The Fund has no fixed
distribution requirements, distributions being solely a function of amounts
received by the Fund from Westshore. It is not anticipated that the Fund will
require significant capital resources to maintain its investment in Westshore
on an ongoing basis. Westshore's facility is a mature facility which does not
require significant ongoing replacement of equipment. The cost of ongoing
maintenance and refurbishment of the equipment is well within Westshore's
financial capacity based solely on revenues less expenses without any need for
financing. The current equipment addition and upgrade is being funded
primarily from funds raised from issuing equity, which will assist in avoiding
any liquidity concerns with debt service. As a result, the Fund does not
anticipate any liquidity concerns with the ongoing operations of Westshore.
    During the quarter, Westshore extended the term (to February 11, 2010) of
its $1 million operating facility with a Canadian chartered bank which, if
required, can be utilized to meet working capital requirements. This facility
was not used during the first quarter and remained undrawn at March 31, 2009.
Westshore's distribution policy involves leaving sufficient earnings before
depreciation and unrealized gains or losses on forward exchange contracts to
cover cash requirements such as capital expenditures and special pension
contributions.
    Westshore has obligations under its pension plan and other
post-retirement benefit plans which it is required to fund each year. As a
result of the downturn in financial markets, and assuming no changes in
pension regulations, Westshore is anticipating its funding requirements to
increase by approximately $4.5 million in 2009. Westshore does not anticipate
any problems in meeting these funding obligations as the contributions are
deductible from taxable income and therefore funded by operating cash flows,
although this will result in a reduction of cash distributions to Unitholders.
    Obligations under operating leases for the years ending December 31 are
as follows:

    
    -------------------------------------------------------------------------
    (In thousands of dollars)             Terminal
                                            lease        Other        Total
                                              $            $            $
    -------------------------------------------------------------------------
    2009                                    11,701          457       12,158
    2010                                    11,701          457       12,158
    2011                                    11,701            -       11,665
    2012                                    11,701            -       11,665
    2013                                    11,701            -       11,665
    Thereafter to 2026                     152,113            -      152,113
    -------------------------------------------------------------------------
    

    Westshore has commitments of approximately $13,815,000 with respect to
purchases of equipment associated with the equipment upgrade and approximately
$2,500,000 for purchases associated with equipment automation that are to be
paid in 2009.
    The Fund does not have any long-term debt, material capital lease
obligations, or other long-term obligations.

    Quarterly Distributions

    On April 15, 2009, the Fund distributed $17,820,003 (representing $0.24
per trust unit) in cash for the first quarter of 2009 to Unitholders of record
on March 31, 2009 as compared with $20,790,004 (representing $0.28 per trust
unit) in cash for the first quarter of 2008.

    Standardized Distributable Cash

    References to "Standardized Distributable Cash" are to cash from
operating activities less capital expenditures, both measures recognized under
GAAP. Standardized Distributable Cash is a financial measure that indicates
the Fund's ability to make distributions. It is a measure that has been
recommended by the CICA's Canadian Performance Reporting Board for use by
income funds in Canada as an indicator of financial performance. As one of the
factors that may be considered relevant by investors is the cash available to
be distributed by the Fund relative to the price of the Units, the Fund
believes that Standardized Distributable Cash is a useful supplemental measure
that may assist investors to assess an investment in the Units.
    The Standardized Distributable Cash of the Fund is substantially
comprised of distributions from Westshore which are impacted by the operating
results of Westshore. The following table sets out the Standardized
Distributable Cash calculation for the three month periods ended March 31,
2009 and 2008 respectively.

    
                                         ------------------------------------
                                                   3 months ended March 31
                                                  2009                 2008
                                                    $                    $
                                         ------------------------------------

    Cash flows from operating activities         28,169               16,429
    Less: Capital expenditures                      (32)              (1,914)
                                         ------------------------------------
    Standardized Distributable Cash              28,137               14,515
                                         ------------------------------------
                                         ------------------------------------
    Cash Distributions declared                  17,820               20,790
                                         ------------------------------------
                                         ------------------------------------
    Basic and diluted Standardized
     Distributable Cash per unit                  0.379                0.195
                                         ------------------------------------
                                         ------------------------------------
    Cash Distributions per unit                   0.240                0.280
                                         ------------------------------------
                                         ------------------------------------
    

    The Fund plans its quarterly distributions based on anticipated annual
results for the year in question and budgets for fairly even distributions
over the four quarters of the year. Any particular quarterly distribution may
therefore vary from Standardized Distributable Cash flow for that quarter. For
the three months ended March 31, 2008, the cash distribution was more than
Standardized Distributable Cash for that quarter as a result of the
anticipation (subsequently realized) of higher coal prices for the 2008/09
coal year, whereas for the three months ended March 31, 2009, the cash
distribution was less than Standardized Distributable Cash as a result of
anticipated lower coal prices for the 2009/10 coal year.
    Because the Fund's investments consist of substantially all the limited
partnership units of Westshore Terminals Limited Partnership, virtually all of
the taxable income of Westshore for any year is automatically allocated to the
Fund. While the Fund usually attempts both to estimate its taxable income for
the year and to make distributions for the year as close as possible to that
taxable income, it is normal for there to be some discrepancy between the
taxable income of the Fund and cash distributions by the Fund. In order to
deal with the situation where the taxable income of the Fund exceeds cash
distributions, the Declaration of Trust provides that an amount equal to the
excess will be distributed to unitholders in the form of additional trust
units, which are then consolidated. This results in an increase to the cost
base of the units equal to the amount of any such distributions.

    Change in Accounting Policies

    Inventories

    On January 1, 2008, the Fund adopted the new requirements of CICA
Handbook Section 3031 for inventories. The standard provides more
comprehensive guidance on the determination of costs and the cost formulas
that are used to assign costs to inventories. Inventories are required to be
valued at the lower cost and net realizable value.
    The adoption of this standard did not have a material impact on the
consolidated financial statements of the Fund.

    Financial Instruments

    On January 1, 2008, the Fund adopted the new requirements of the CICA
Handbook Section 3862 and 3863 for financial instruments. The Standard
requires additional disclosure on the Fund's risks with respect to financial
instruments and how the Fund manages these risks. This information is
presented in Note 4 to the accompanying financial statements.

    Capital Disclosures

    On January 1, 2008, the Fund adopted the new requirements of CICA
Handbook Section 1535 for capital disclosures. The standard requires
additional disclosure about the Fund's capital and how it is managed along
with external requirements or restrictions on that capital. This information
is provided in Note 5 to the accompanying consolidated financial statements.

    Goodwill and Intangible Assets

    On January 1, 2009, the Fund adopted the new requirements of CICA
Handbook Section 3064, Goodwill and Other Intangible Assets. Section 3064
expands on the standards for recognition, measurement, and disclosure of
goodwill and intangible assets. The adoption of this new standard did not have
any impact on the consolidated financial statements of the Fund.

    Credit Risk and the Fair Value of Financial Assets and Liabilities

    On January 23, 2009, the CICA Emerging Issues Committee (EIC) issued
EIC-173, Credit Risk and Fair Value of Financial Assets and Liabilities.
EIC-173 is effective for interim and annual financial statements ending on or
after January 20, 2009. EIC-173 provides guidance that an entity's own credit
risk of counterparties should be taken into account in determining the fair
value of financial assets and liabilities. Adoption of this guidance is to be
applied retrospectively without restatement to prior periods. The Fund has
evaluated the impact of this new standard and concluded that it does not have
a material impact on its financial statements.

    International Financial Reporting Standards (IFRS)

    The use of IFRSs for financial reporting in Canada will become applicable
for the year beginning January 1, 2011. The Fund has developed an
implementation strategy which established a timeline for the identification of
significant differences between Canadian GAAP and IFRS and the implementation
of business process changes needed to support IFRS.
    The Fund is currently in the process of identifying material changes to
the financial statements that will occur with the conversion to IFRS including
the identification and selection of significant accounting differences and
financial statement format and disclosures. The implementation of business
process changes needed to support IFRS include infrastructure changes
(development of knowledge and resources and the IT impact of the conversion),
control environment changes and business policy changes. Management has
completed formal course training and impact assessments are being done in
conjunction with the identification of accounting differences and/or choices.
The Fund is unable to quantify the impact of these changes at this time.

    Outlook

    The Fund's cash inflows are entirely dependent on Westshore's operating
results and are significantly influenced by four variables: the volume of coal
shipped through the Terminal; the US dollar denominated price received by
Westshore's customers for that coal; the Canadian-US dollar exchange rate; and
Westshore's operating and administrative costs. In view of a portion of
pricing not yet being settled and differences in loading rates between the
various contracts, Westshore cannot provide a reliable indication of the
effect of changes in pricing, exchange rates and tonnage on distributions,
which will depend in part on which mines ship the tonnage. Accordingly,
Westshore does not intend to provide a discussion of sensitivities.
    Critical to Westshore's ongoing success will be the ability of its
customers, including Teck in particular, to maintain and increase its coal
export volumes while competing with other suppliers for sales worldwide. Based
on information currently available, Westshore anticipates throughput volumes
of approximately 17-18 million tonnes compared to 2008 levels of 21.1 million
tonnes and at a lower average loading rate than in 2008, with the average
loading rates in the last nine months of 2009 being lower than in the first
three months. Ultimate volumes may be lower depending on coal demand. To date,
Westshore has experienced no material impact to throughput volumes from the
equipment upgrade.
    As announced in a Teck news release on April 20, 2009, Teck has achieved
settlements for more than half of its tonnage for the 2009/10 coal year. Teck
has indicated that it has achieved settlement prices of US$128 per tonne for
its highest quality products, and that the average selling price for the
2009/10 coal year will reflect a range of hard coking coal products of various
qualities as well as thermal and PCI coal, which normally comprise about 10%
of its coal sales volumes. The highest price of US$128 per tonne for the
2009/10 coal year can be compared to the average price of US$204 realized by
Teck in the first quarter of 2009.
    For 2009 and based on current tonnage estimates as of the date of this
report, tonnages shipped at fixed rates are expected to account for
approximately 30% of the Terminal's throughput; tonnages shipped at variable
rates but subject to a cap, in effect for this year, are expected to account
for approximately 20% of throughput; and finally, tonnages shipped at full
variable rates are expected to account for approximately 50% of throughput at
the Terminal.
    The first quarter distribution was $0.24 per unit compared to $0.28 per
unit for the first quarter of 2008. Results in subsequent quarters will
determine the level of distributions, either positively or negatively. If
distributions for the calendar year 2008 exceed $1.035 per unit, incentive
fees will be payable by Westshore to the Manager under the Management
Agreement, as was the case in 2008. Those fees are computed on the following
basis: 15% of Fund distributable cash between $1.035 - $1.125 per unit; 25% of
Fund distributable cash between $1.125 - $1.260 per unit; and 35% of Fund
distributable cash above $1.260 per unit.

    Forward-looking Statements

    The foregoing statements concerning tonnages, coal prices, exchange
rates, loading rates and variability of distributions are forward-looking
statements but reflect the current expectations of the Fund and Westshore with
respect to future events and performance. Wherever used, the words "may,"
"will," "anticipate," "intend," "expect," "plan," "believe," and similar
expressions identify forward-looking statements. Forward-looking statements
should not be read as guarantees of future performance or results, and will
not necessarily be accurate indications of whether, or the times at which,
such performance or results will be achieved.
    Forward-looking statements are based on information available at the time
they are made, assumptions made by management, and management's good faith
belief with respect to future events, and are subject to the risks and
uncertainties outlined in the Fund's Annual Information Form that could cause
actual performance or results to differ materially from those reflected in the
forward-looking statements, historical results or current expectations.
    All forward-looking statements will be impacted by and are subject to the
risks set out under Risk Factors in the Fund's Annual Information Form.

    Additional Information

    Additional information relating to the Fund, including the Fund's latest
Annual Report and Annual Information Form, are available on SEDAR at
www.sedar.com and on Westshore's website at www.westshore.com.

    
    On behalf of the Trustees,

    (signed)

    William W. Stinson,
    Chairman
    May 5, 2009

    The enclosed financial statements have not been reviewed by the Fund's
    auditors.


    Consolidated Statements of Earnings, Comprehensive Earnings and
    Cumulative Earnings

    (in thousands of dollars,                         Three months ended
     except per unit amounts)                              March 31
                                                              $
                                                  2009                 2008
    -------------------------------------------------------------------------
                                             (Unaudited)          (Unaudited)
    REVENUE
    Coal loading                                 53,647               35,145
    Other                                         1,050                  968
    -------------------------------------------------------------------------
                                                 54,697               36,113

    EXPENSES
    Operating                                    17,624               18,521
    Administrative                                2,324                1,874
    -------------------------------------------------------------------------
                                                 19,948               20,395
    -------------------------------------------------------------------------
    Earnings before the undernoted               34,749               15,718
    Interest income                                 155                  610
    Depreciation                                 (5,401)              (5,572)
    Foreign exchange gain (loss)                 (3,002)                 858
    -------------------------------------------------------------------------

    Earnings before income taxes                 26,501               11,614
    Provision for income taxes                      827                  281
    -------------------------------------------------------------------------
    Net earnings and comprehensive
     earnings for the period                     25,674               11,333
    -------------------------------------------------------------------------
    Cumulative earnings - Beginning of period   619,251              494,385
    -------------------------------------------------------------------------
    Cumulative earnings - End of period         644,925              505,718
    -------------------------------------------------------------------------
    Basic and diluted earnings per trust unit     0.346                0.153
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average number of
     trust units outstanding                 74,250,016           74,250,016
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows

    (in thousands of dollars)                         Three months ended
                                                           March 31
                                                              $
                                                  2009                 2008
    -------------------------------------------------------------------------
                                             (Unaudited)          (Unaudited)
    Cash flows from operating activities
    Net earnings for the period                  25,674               11,333
      Items not affecting cash
        Movements in unrealized gain on
         forward exchange contracts              (2,280)                (858)
        Depreciation                              5,401                5,572
        Future income tax provision                 827                  281
        Increase (decrease) in deferred
         employee future benefits costs          (1,652)                 184
    -------------------------------------------------------------------------
                                                 27,970               16,512

    Decrease (increase) in non-cash
     working capital                                199                  (83)
    -------------------------------------------------------------------------
                                                 28,169               16,429
    -------------------------------------------------------------------------
    Cash flows from financing activities
    Distributions paid to unitholders           (39,353)             (26,730)
    -------------------------------------------------------------------------
                                                (39,353)             (26,730)
    -------------------------------------------------------------------------

    Cash flows from investing activities
    Additions to plant and equipment                (32)              (1,914)
    -------------------------------------------------------------------------
                                                    (32)              (1,914)
    -------------------------------------------------------------------------

    Decrease in cash and cash equivalents       (11,216)             (12,215)

    Cash and cash equivalents - Beginning
     of period                                   75,034               72,742
    -------------------------------------------------------------------------

    Cash and cash equivalents - End of
     period                                      63,818               60,527
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow information
    Cash received for interest                      155                  610
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Balance Sheet

    (in thousands of dollars)                  March 31,         December 31,
                                                 2009                2008
                                                   $                   $
    -------------------------------------------------------------------------
                                             (Unaudited)            (Audited)
    ASSETS
    Current assets
    Cash and cash equivalents                    63,818               75,034
    Accounts receivable                          26,532               29,313
    Inventories                                   6,461                6,478
    Prepaid expenses                              2,972                  672
    -------------------------------------------------------------------------
                                                 99,783              111,497
    -------------------------------------------------------------------------

    Plant and equipment
    At cost                                     500,913              500,881
    Accumulated depreciation                   (391,730)            (386,329)
    -------------------------------------------------------------------------
                                                109,183              114,552
    -------------------------------------------------------------------------

    Employee future benefits                     23,885               23,303
    Goodwill                                    365,541              365,541
    -------------------------------------------------------------------------

                                                598,392              614,893
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES & UNITHOLDERS' EQUITY

    Current liabilities
    Accounts payable and accrued liabilities     16,000               16,293
    Distribution payable to unitholders          17,820               39,353
    Other liabilities                            10,309               12,590
    -------------------------------------------------------------------------
                                                 44,129               68,236

    Employee future benefits                     20,038               21,108
    Future income taxes                           9,519                8,692
    -------------------------------------------------------------------------
                                                 73,686               98,036
    -------------------------------------------------------------------------

    Unitholders' equity
    Capital contributions                       704,032              704,032
    Cumulative earnings                         644,925              619,250
    Cumulative distributions declared          (824,251)            (806,425)
    -------------------------------------------------------------------------
                                                524,706              516,857
    -------------------------------------------------------------------------

                                                598,392              614,893
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Notes to Financial Statements

    1.  Basis of presentation

        These interim financial statements do not contain all the information
        required for annual financial statements and should be read in
        conjunction with the financial statements and notes included in the
        Fund's Annual Report for the year ended December 31, 2008. These
        interim financial statements have not been audited or reviewed by
        external auditors.

    2.  Significant accounting policies

        These interim financial statements have been prepared in accordance
        with Canadian generally accepted accounting principles and follow the
        same accounting principles and methods of application as set out in
        Note 2 of the Fund's annual financial statements for the year ended
        December 31, 2008.

    3.  New accounting pronouncements

        On January 1, 2008, the Fund adopted the new requirements of CICA
        Handbook Section 3031 for inventories. The adoption of this standard
        did not have a material impact on the consolidated financial
        statements of the Fund.

        On January 1, 2009, the Fund adopted the new requirements of CICA
        Handbook Section 3064, Goodwill and Other Intangible Assets.
        Section 3064 expands on the standards for recognition, measurement,
        and disclosure of goodwill and intangible assets. The adoption of
        this new standard did not have any impact on the consolidated
        financial statements of the Fund.

    4.  Financial Instruments

        The Fund's financial instruments include cash and cash equivalents,
        accounts receivable, accounts payable and distributions payable to
        unitholders. The carrying amounts of these financial instruments
        recorded on the consolidated balance sheet are reasonable estimates
        of their fair values due to the relatively short periods to maturity
        and commercial terms of these instruments.

        Cash and cash equivalents are classified as financial assets held for
        trading and are recorded at fair value on the consolidated balance
        sheet. Accounts receivable are classified as loans and receivables
        and are recorded at amortized cost. Accounts payable and
        distributions payable to unitholders are classified as other
        financial liabilities and are recorded at amortized cost.

        The Fund's financial instruments also include foreign exchange
        forward contracts, which are derivative financial instruments that
        are classified as held-for-trading and are recorded at fair value.
        Fair value is measured using the quoted market rate for forward
        contracts of a similar maturity date.

        Financial risk management and exposure

        The Fund is exposed to various risks associated with its financial
        instruments, which include credit risk, liquidity risk and market
        risk.

        Credit Risk

        Credit risk is the risk of financial loss to the Company if a
        customer or counterparty to a financial instrument fails to meet its
        contractual obligations. Credit risk arises primarily from accounts
        receivable and cash and cash equivalents.

        The Company's exposure to credit risk is influenced by the
        profitability of coal mining companies, which is heavily impacted by
        the price of the coal. The accounts receivable are concentrated with
        one customer, Teck, as this customer represented approximately 90% of
        Westshore's revenues in 2008. Westshore does not have any collateral
        or security for its receivables. Westshore monitors the financial
        health of its customers and regularly reviews its accounts receivable
        for impairment. As at March 31, 2009, there were no trade accounts
        receivable past due which were considered uncollectible and no
        reserve in respect of doubtful accounts was set up.

        The Fund limits its exposure to credit risk arising from cash
        equivalents by only investing in money market funds with a major
        Canadian financial institution. The Fund does not expect any credit
        losses in the event of non-performance by counter parties to its
        foreign exchange forward contracts as the counter parties are major
        Canadian financial institutions.

        The carrying amount of financial assets represents the maximum credit
        exposure. The maximum exposure to credit risk is:

                                                                        2009

        Cash and cash equivalents                                     63,818
        Accounts receivable                                           26,532
        ---------------------------------------------------------------------
                                                                      90,350
        ---------------------------------------------------------------------

        Liquidity Risk

        Liquidity risk is the risk that the Fund will not be able to meet its
        obligations as they fall due. The Fund continually monitors its
        financial position to ensure that it has sufficient liquidity to
        discharge its obligations when due. The Fund's distribution
        obligation to unitholders is funded from operating income and the
        current equipment upgrade has been funded with additional equity and
        from cash reserves, which will avoid liquidity concerns with debt
        service.

        The financial liabilities of the Fund, which include accounts payable
        and accrued liabilities, have a contractual maturity of less than
        1 year.

        Westshore also maintains a $1 million operating facility that can be
        drawn down to meet short term financing needs. No amounts were
        outstanding on this facility at March 31, 2009.

        Market Risk

        The significant market risk exposures affecting the financial
        instruments held by the Fund are those related to foreign currency
        exchange rates and interest rates.

        Foreign currency exchange rates

        The Fund is exposed to foreign currency exchange rate risk on its
        foreign currency forward contracts. The value of these financial
        instruments fluctuates with changes in the CDN/US dollar exchange
        rate and the CDN/Euro exchange rate. A $0.01 increase in the
        US/Canadian exchange rate at March 31, 2009, would have reduced the
        value of the US dollar foreign exchange contracts by approximately
        $374,000 and a $0.01 increase in the Euro/Canadian exchange rate at
        March 31, 2009 would have increased the value of the Euro foreign
        exchange contracts by approximately $10,000. The net impact would
        have resulted in a reduction in net earnings and comprehensive
        earnings of $364,000. From the beginning of the year to March 31,
        2009, the Euro has weakened by approximately 2.0% against the
        Canadian dollar and the US dollar has strengthened by approximately
        2.9% against the Canadian dollar. The fair market value of the Fund's
        foreign currency forward contracts has decreased by $2.3 million.

        Interest rates

        The Fund has limited exposure to interest rate risk on the cash
        equivalents (short-term investments). Money market fund returns are
        correlated with Canadian T-bills and Bankers' Acceptances of major
        Canadian financial institutions. Based on the cash balance at
        March 31, 2009, a 1% change in interest rates would have impacted net
        earnings and comprehensive earnings by approximately $160,000.

    5.  Capital Disclosures

        The capital of the Fund consists solely of unitholders' equity which
        includes issued trust units and cumulative earnings less cumulative
        distributions.

        The objective of the Fund is to maintain a stable capital base and
        ensure that the capital structure does not interfere with the Fund's
        ability to meet its distribution requirements on the trust units. In
        2009, the Fund expects that its quarterly distributions to
        unitholders will be funded by earnings and operating cash flows.

        The trust units are governed by the Second Amended and Restated
        Declaration of Trust dated September 29, 2005, which provides that
        non-residents of Canada may not own more than 49% of the trust units
        at any time. The Fund continually monitors the non-resident ownership
        levels to the best of its ability given the practical limitations
        regarding beneficial ownership interest. The Fund believes that it
        has always had substantially less than 49% non-Canadian ownership.

        The Fund's trust units are not subject to externally imposed capital
        requirements. There have been no changes in how the Fund manages its
        capital during the period ended March 31, 2009.

    6.  Employee future benefits

        The total benefit cost of the Company's defined benefit and other
        retirement and post employment benefit plans was a recovery of
        $1,652,000 for the three months ended March 31, 2009 (cost of
        $184,000 for the three months ended March 31, 2008).

                               Corporate Office
                       Westshore Terminals Income Fund
                       1800 - 1067 West Cordova Street
                     Vancouver, British Columbia V6C 1C7
               Telephone: 604.488.5295 Facsimile: 604.687.2601
                              www.westshore.com
    





For further information:

For further information: Nick Desmarais, Secretary, (604) 488-5214


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