ShawCor Ltd. announces second quarter results



    (TSX: SCL.A, SCL.B)

    TORONTO, Aug. 2 /CNW/ -

    
    Financial Summary

    (In thousands of
     Canadian dollars           Three Months Ended          Six Months Ended
     except per share                      Jun. 30                   Jun. 30
     amounts)                    2007         2006         2007         2006
    -------------------------------------------------------------------------
    Operating Results                     Restated                  Restated
    Revenue               $   276,440  $   269,433  $   497,769  $   531,980
    EBITDA (note 1)            57,050       44,513       95,457       92,157
    Operating income from
     continuing operations     47,036       35,835       75,008       73,313
    Income from continuing
     operations                30,267       24,898       53,575       49,653
    Income (loss) from
     discontinued
     operations                   (48)        (192)        (103)        (227)
    Net income (loss)          30,219       24,706       53,472       49,426

    Net income (loss)
     per share (Class A
     and B) - Basic
      Continuing
       operations                0.41         0.34         0.73         0.67
      Discontinued
       operations                0.00         0.00         0.00         0.00
      Total                      0.41         0.34         0.73         0.67

    Net income (loss)
     per share (Class A
     and B) - Diluted
      Continuing
       operations                0.41         0.34         0.72         0.67
      Discontinued
       operations                0.00         0.00         0.00         0.00
      Total                      0.41         0.34         0.72         0.67
    -------------------------------------------------------------------------
    Cash Flow
    Cash from continuing
     operating activities      30,828       29,599       54,107       78,151
    Purchases of property,
     plant and equipment       23,868       13,008       39,361       19,881
    -------------------------------------------------------------------------
    Financial Position
    Working capital                                     284,231      300,979
    Total assets                                        921,442      959,116
    Shareholders' equity
     per share (Class A
     and B)                                         $      8.08  $      6.16
    -------------------------------------------------------------------------

    Note 1: EBITDA is a non-GAAP measure calculated by adding back to income
    from continuing operations, the sum of interest (income)/expense, taxes
    and depreciation/amortization. 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.
    Note 2: Shareholders' equity per share is a non-GAAP measure calculated
    by dividing shareholders' equity by the number of Class A and Class B
    shares outstanding at the date of the balance sheet.
    Note 3: During the fourth quarter of 2006, ShawCor Ltd. adopted the
    proportionate consolidation method of accounting for its 30% investment
    in the Arabian Pipecoating Company Limited ("APCO"). The Company
    previously accounted for this investment using the equity method. This
    change in accounting policy has been applied retroactively and as a
    result, revenue, operating expenses and certain balance sheet accounts
    for previous periods have been restated. Refer to note 2 of the 2006
    annual financial statements.
    

    Consolidated revenue for the quarter totaled $276.4 million compared to
$221.3 million during the first quarter of 2007 and $269.4 million in the
second quarter of 2006. The 25% improvement over the first quarter was mainly
the result of increased pipe coating activity at Bredero Shaw's Far East and
North Sea regions and in the United States. Compared with the second quarter
of last year, revenue at Bredero Shaw was essentially unchanged with growth in
the Americas region offsetting reductions in the Far East. The Company's other
divisions reported modest year over year revenue growth despite the impact of
the strengthening Canadian dollar. On a year-to-date basis, revenue totaled
$497.8 million compared to $532.0 in the first six months of 2006.
    Consolidated income from continuing operations totaled $30.3 million
($0.41 per share) in the quarter compared to $23.3 million ($0.31 per share)
in the prior quarter and $24.9 million ($0.34 per share) in the second quarter
of last year, with the improvement reflecting the higher revenue in the
quarter together with improved pipe coating project performance and improved
efficiencies. On a year-to-date basis, consolidated income from continuing
operations totaled $53.6 million ($0.72 per share) compared to $49.7 million
($0.67 per share) for the six months ended June 30, 2006.
    The Company's backlog at June 30 remained strong at $377.1 million,
although decreased 6% during the quarter reflecting the quarter's high level
of business activity during the period. This strong backlog together with
continuing high levels of bidding activity should result in full year revenue
similar to levels achieved in 2006.

    MANAGEMENT DISCUSSION AND ANALYSIS

    The following is management's interim discussion and analysis of
operations and financial position and should be read in conjunction with the
Consolidated Financial Statements and Management's Discussion and Analysis
included in the Company's 2006 Annual Report.

    Revenue and Income from Operations

    ShawCor classifies its revenue and income from operations in two industry
segments: Pipeline and Pipe Services, and Petrochemical and Industrial.
    Consolidated revenue from continuing operations totaled $276.4 million in
the quarter, an increase of 25% over the prior quarter with the improvement
mainly driven by higher levels of business activity at Bredero Shaw, the
Company's pipe coating division. Consolidated second quarter revenue increased
3% over the second quarter of last year with business activity improved in
both of the Company's market segments. Consolidated income from continuing
operations totaled $30.3 million ($0.41 per share) in the quarter compared to
$23.3 million ($0.31 per share) last quarter and $24.9 million ($0.34 per
share) in the second quarter of last year, with the improvement reflecting the
higher revenue in the quarter together with improved operating margin
performance in both market segments. On a year-to-date basis, consolidated
revenue from continuing operations totaled $497.8 million compared to
$532.0 million in the same period of last year, while consolidated income from
continuing operations totaled $53.6 million ($0.72 per share) compared to
$49.7 million ($0.67 per share) in the first six months of 2006.
    In the Pipeline and Pipe Services segment, revenue from continuing
operations totaled $239.0 million in the quarter, 31% higher than in the prior
quarter. The growth in revenue compared with the prior quarter was
attributable to the Bredero Shaw division where the Far East, North Sea and
United States operations saw increased project activity. Revenue in the Far
East region was buoyed by the Bunga Orkid, Medgas and Angels projects, while
the North Sea benefited from the Tyrihans deep water insulation project at the
region's pipe coating facility at Orkanger, Norway. In the United States, pipe
coating activity was favorably impacted by several projects including the
Shenzi project which was executed at the division's Pearland, Texas plant.
Lower revenue at the division's Middle East region, the result of the
temporary shut-down and upgrade of the division's plant in Ras al Khaimah,
partially offset the increased revenue in other regions of Bredero Shaw. An
upgrade to the Ras al Khaimah facility is presently under construction and is
expected to be completed, and the plant on-line, in the fourth quarter of this
year.
    Compared with the second quarter of 2006, revenue in the Pipeline and
Pipe Services segment increased by 2%. At Bredero Shaw, revenue was slightly
higher year over year on a significant increase in North American large
diameter pipe coating project activity. This growth was partially offset by a
reduction in activity in the Far East where volumes in the second quarter 2006
had reached record levels. Revenue in the quarter at the Pipeline and Pipe
Services segment's other divisions all improved over the second quarter of
2006.
    Operating income from continuing operations for the Pipeline and Pipe
Services segment totaled $46.4 million (19.4% of revenue from continuing
operations) compared to $24.5 million (13.5%) last quarter and $36.3 million
(15.5%) in the second quarter of last year. The improvement in operating
margins in the quarter reflected improved capacity utilization from the higher
revenue together with a favourable project mix, particularly in the Far East
region, and continued gains in pipe coating project execution. On a
year-to-date basis, revenue for the Pipeline and Pipe Services segment totaled
$421.3 million compared to $461.5 million in the first six months of 2006.
Operating income from continuing operations for the segment totaled
$70.9 million for the first six months of the year compared to $73.6 million
in the corresponding period of last year.
    In the Petrochemical and Industrial segment, revenue totaled
$38.2 million in the quarter, compared to $39.5 million last quarter and
$36.2 million in the second quarter of 2006. The decrease from the prior
quarter reflected lower business activity at DSG-Canusa where revenue declined
modestly to more typical levels after a particularly strong first quarter.
Compared with the second quarter of 2006, both DSG-Canusa and ShawFlex
reported higher revenue from underlying market growth. Operating income from
continuing operations for the segment totaled $6.5 million (17.0% of revenue)
in the quarter, compared to $7.0 million (17.7% of revenue) last quarter and
$3.9 million (10.8% of revenue) in the second quarter of last year. On a
year-to-date basis, revenue for the segment totaled $77.7 million compared to
$71.2 million in the same period of 2006 while operating income from
continuing operations totaled $13.5 million compared to $8.6 million in the
first six months of last year.

    Finance

    Financial and corporate costs consist of corporate office costs not
charged to the operating divisions and other non-operating items including
foreign exchange gains and losses on cash balances. Financial and corporate
costs for the quarter, before net foreign exchange losses of $1.8 million,
totaled $4.1 million compared to $4.3 million in the prior quarter, before net
foreign exchange gains of $721 thousand. In the second quarter of last year,
financial and corporate costs totaled $4.3 million, before foreign exchange
gains of $54 thousand.
    Net interest income totaled $1.2 million in the quarter, compared to
$1.6 million in the prior quarter and $395 thousand in the second quarter of
2006, with the improvement over the second quarter of last year reflecting the
improved cash position of the Company.
    Income tax expense in the quarter was $18.3 million compared to
$6.7 million last quarter and $10.4 million in the second quarter of last
year. The effective tax rate (income taxes as a percentage of income from
continuing operations before income taxes and non-controlling interest) was
37.8% in the quarter and was adversely impacted by losses at the Company's
Nigerian operations for which tax benefits were not recognized. In addition,
the Company's tax losses carried forward in the United States, which had
favourably impacted effective tax rates in the past several quarters, were
fully utilized in the second quarter.

    Cash Flow

    Cash flow generated from continuing operating activities in the quarter
totaled $30.8 million compared to $23.3 million last quarter and $29.6 million
in the second quarter of 2006, with the improvement mainly reflecting the
improved earnings in the period. On a year-to-date basis, cash flow from
continuing operating activities totaled $54.1 million compared to
$78.2 million in the first six months of 2006.
    Cash flow used in continuing investing activities in the quarter totaled
$26.6 million, compared to $15.4 million last quarter and $13.0 million in the
second quarter of last year, and was comprised of capital expenditures of
$23.9 million, $2.6 million paid on the acquisition of a new subsidiary and
$301 thousand paid to purchase shares in a company accounted for as a
portfolio investment, partially offset by $101 thousand of proceeds received
on the disposal of property, plant and equipment. Major capital expenditures
in the quarter included the ongoing capacity expansions at the Company's pipe
coating plants in Camrose, Alberta and Ras al Khaimah, U.A.E. Cash flow used
in continuing investing activities for the first six months of the year
totaled $42.0 million compared to $19.8 million in the corresponding period of
2006.
    Cash flow used in continuing financing activities in the quarter totaled
$70.6 million, compared to $14.5 million last quarter and $6.8 million in the
second quarter of last year, and was comprised of $66.1 million used to
purchase 2,155,100 Class A Subordinate Voting Shares ("Class A Shares") under
the terms of the Company's Normal Course Issue Bid, dividends paid to
shareholders of $4.2 million and $2.7 million paid to reduce bank
indebtedness, partially offset by $2.4 million received on the issuance of
153,040 Class A Shares on the exercise of stock options. On a year-to-date
basis, cash flow used in continuing financing activities totaled $85.1 million
compared to $7.7 million in the same period of 2006.

    Liquidity and Capitalization

    At June 30, 2007, the Company recorded a working capital ratio of 2.30 to
1 compared to 2.49 to 1 at the beginning of the quarter and 2.39 to 1 at
December 31, 2006. Operating working capital, excluding cash and cash
equivalents, increased $15.1 million in the quarter to $64.9 million with the
change mainly the result of increased accounts receivable and inventory
balances consistent with the increased level of business activity in the
quarter.

    Change in Accounting Policies

    On January 1, 2007, the Company adopted the Canadian Institute of
Chartered Accountants' Handbook Section 1530, Comprehensive Income; Section
3855, Financial Instruments - Recognition and Measurement; Section 3861,
Financial Instruments - Disclosure and Presentation; and Section 3865, Hedges.
These changes require the Company to classify all financial assets as
held-for-trading, designated at fair value, available-for-sale,
held-to-maturity, or loans and receivables. The new accounting standards also
require the Company to measure all financial assets, including derivatives and
excluding loans and receivables, debt securities classified as
held-to-maturity and available-for-sale equities that do not have quoted
market values in an active market, at fair values. Changes in the fair values
of financial assets classified as held-for-trading and of derivatives that are
not considered effective hedges are charged to net income. Changes in the fair
values of financial assets classified as available-for-sale and derivatives
that are considered effective hedges are charged to other comprehensive
income. As required, these new accounting standards have been applied as an
adjustment to opening retained earnings and accumulated other comprehensive
income. Prior period figures have not been restated. Refer to note 1 to the
second quarter 2007 interim financial statements for further information.

    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, 2007:

    
    (in thousands)
    -------------------------------------------------------------------------
                          Maturity
    -------------------------------------------------------------------------
    U.S. dollars sold for Canadian dollars
    -------------------------------------------------------------------------
      Less than one year                                           US$22,500
    -------------------------------------------------------------------------
      Weighted average rate                                           1.1261
    -------------------------------------------------------------------------
    Canadian dollars sold for U.S. dollars
    -------------------------------------------------------------------------
      Less than one year                                           CAD$1,150
    -------------------------------------------------------------------------
      Weighted average rate                                           0.8697
    -------------------------------------------------------------------------
    

    At June 30, 2007, the Company had notional amounts of $23.0 million of
forward contracts outstanding (December 31, 2006 - $38.7 million) with the
fair value of the Company's net benefit of all foreign exchange forward
contracts totaling $1.3 million (December 31, 2006 - $3.1 million liability).

    Critical Accounting Estimates

    The preparation of the consolidated financial statements in conformity
with Canadian Generally Accepted Accounting Principles ("GAAP") requires
management to make estimates and assumptions that affect the amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the period. These estimates and assumptions are made with
management's best judgment given the information available at the time;
however, actual results could differ from the estimates. Critical estimates
used in preparing the consolidated financial statements were materially
unchanged during the quarter.

    Risks and Uncertainties

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

    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)
      2007   $   221,329  $   276,440  $            $            $
      2006       262,547      269,433      251,324      276,315    1,059,619
      2005       244,952      231,995      241,639      293,867    1,012,453

    Operating
     income
     from
     continuing
     operations
     (Restated
     - see note
     below)
      2007        27,972       47,036
      2006        37,478       35,835       23,677       41,790      138,780
      2005        29,326       12,509       21,882       31,737       95,454

    Income from
     continuing
     operations
      2007        23,308       30,267
      2006        24,755       24,898       16,549       26,722       92,924
      2005        18,688        7,516       34,806       21,780       82,790

    Income
     (loss) from
     discontinued
     operations
      2007           (55)         (48)
      2006           (35)        (192)           7          (69)        (289)
      2005          (930)       2,224       55,946       (1,190)      56,050

    Net income
     (loss)
      2007        23,253       30,219
      2006        24,720       24,706       16,556       26,653       92,635
      2005        17,758        9,740       90,752       20,590      138,840

    Operating
     income from
     continuing
     operations
     per share
     (Classes
     A and B)
    Basic
      2007          0.38         0.64
      2006          0.51         0.48         0.32         0.56         1.87
      2005          0.39         0.17         0.29         0.42         1.27

    Diluted
      2007          0.37         0.63
      2006          0.51         0.48         0.32         0.56         1.87
      2005          0.39         0.17         0.29         0.42         1.27

    Income from
     continuing
     operations
     per share
     (Classes
     A and B)
    Basic
      2007          0.31         0.41
      2006          0.33         0.34         0.22         0.36         1.25
      2005          0.25         0.10         0.45         0.30         1.10

    Diluted
      2007          0.31         0.41
      2006          0.33         0.34         0.22         0.36         1.25
      2005          0.25         0.10         0.45         0.30         1.10

    Income
     (loss) from
     discontinued
     operations
     per share
     (Classes
     A and B)
    Basic and
     Diluted
      2007          0.00        0.00
      2006          0.00        0.00          0.00         0.00         0.00
      2005         (0.01)       0.03          0.75        (0.02)        0.75

    Net income
     (loss)
     per share
     (Classes
     A and B)
    Basic
      2007          0.31        0.41
      2006          0.33        0.34          0.22         0.36         1.25
      2005          0.24        0.13          1.20         0.28         1.85

    Diluted
      2007          0.31        0.41
      2006          0.33        0.34          0.22         0.36         1.25
      2005          0.24        0.13          1.20         0.28         1.85
    -------------------------------------------------------------------------

    Note: Quarterly revenue and operating income from continuing operations
    figures have been restated to reflect the change in accounting treatment
    for the Company's investment in the Arabian Pipecoating Company Limited
    adopted in the fourth quarter of 2006. Please refer to note 2 to the 2006
    annual Consolidated Financial Statements.
    

    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 80% 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 following are additional
key factors impacting the comparability of the quarterly information disclosed
above:

    The majority of the Company's revenue is transacted in currencies other
    than Canadian dollars, with a majority transacted in 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.

    On November 3, 2004, the Company announced the closure of its Mobile,
    Alabama facility. This event had a significant impact on the financial
    results for the fourth quarter of 2004. Operations at the facility ceased
    in the fourth quarter of 2005 and discontinued operations accounting
    treatment was adopted in that quarter with prior quarters restated on a
    comparable basis.

    On September 30, 2005, the Company completed the sale of its OMSCO drill
    pipe manufacturing division. The division has been accounted for as a
    discontinued operation.

    Outstanding Share Capital

    As at July 25, 2007, the Company had 58,906,890 Class A Subordinate
Voting Shares ("Class A") outstanding and 13,078,142 Class B Multiple Voting
Shares ("Class B") outstanding. Each Class B share is convertible into a Class
A share at the option of the holder. In addition, as at July 25, 2007, the
Company had stock options outstanding to purchase up to 2,304,760 Class A
shares.

    Outlook

    The Company's consolidated order backlog, representing the value of firm
customer purchase orders expected to be completed within one year, totaled
$377.1 million at June 30, 2007 compared to $402.7 million at the beginning of
the quarter, with the decrease reflecting the high level of pipe coating
activity in the quarter. Although somewhat lower than at the beginning of the
quarter, the current backlog remains very strong.
    The Company's current outlook is for pipe coating activity to continue to
be strong during the remainder of the year with the result that full year 2007
revenue should be similar to the level achieved in 2006. The Company continues
to pursue significant business opportunities globally, and is currently
preparing to bid major offshore pipeline projects in Northern Europe. Success
in securing these projects, together with the buoyant market outlook in North
America, the Middle East and the Far East could result in significant revenue
growth during the next few years.

    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 3, 2007 at 10:00 a.m. EDT to discuss the Company's second
quarter 2007 financial results. Please visit our website at www.shawcor.com
for further details.


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



    CONSOLIDATED STATEMENTS OF INCOME

                             Three Months Ended        Six Months Ended
                                   June 30                  June 30
                          ------------------------- -------------------------
                               2007        2006         2007         2006
                                         Restated                  Restated
                                         (note 1)                  (note 1)
                          ------------ ------------ ------------ ------------

    Revenue               $   276,440  $   269,433  $   497,769  $   531,980
                          ------------ ------------ ------------ ------------
    Operating expenses
     (notes 2, 3 and 4)       217,934      222,516      399,789      435,952
    Amortization                9,751        9,633       19,733       19,818
    Research and
     development                1,719        1,448        3,239        2,897
                          ------------ ------------ ------------ ------------
                              229,404      233,597      422,761      458,667
                          ------------ ------------ ------------ ------------
    Operating income from
     continuing operations     47,036       35,835       75,008       73,313
    Interest income (note 5)    1,229          395        2,828          483
                          ------------ ------------ ------------ ------------
    Income before income
     taxes and non-
     controlling interest      48,265       36,230       77,836       73,796
    Income taxes (note 6)      18,261       10,377       24,977       23,169
                          ------------ ------------ ------------ ------------
    Income before non-
     controlling interest      30,004       25,853       52,859       50,627
    Non-controlling
     interest                     263         (955)         716         (974)
                          ------------ ------------ ------------ ------------
    Income from continuing
     operations                30,267       24,898       53,575       49,653
    Loss from discontinued
     operations (note 7)          (48)        (192)        (103)        (227)
                          ------------ ------------ ------------ ------------
    Net income            $    30,219  $    24,706  $    53,472  $    49,426
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Earnings per share,
     Class A and B - Basic
      Continuing
       operations         $      0.41  $      0.34  $      0.73  $      0.67
      Discontinued
       operations                   -            -            -            -
                          ------------ ------------ ------------ ------------
      Total               $      0.41  $      0.34  $      0.73  $      0.67
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Earnings per share
     Class A and B - Diluted
      Continuing
       operations         $      0.41  $      0.34  $      0.72  $      0.67
      Discontinued
       operations                   -            -            -            -
                          ------------ ------------ ------------ ------------
      Total               $      0.41  $      0.34  $      0.72  $      0.67
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    -------------------------------------------------------------------------

    SEGMENTED INFORMATION
                             Three Months Ended        Six Months Ended
                                   June 30                  June 30
                          ------------------------- -------------------------
                               2007        2006         2007         2006
                                         Restated                  Restated
                                         (note 1)                  (note 1)
                          ------------ ------------ ------------ ------------
    Revenue
      Pipeline and Pipe
       Services           $   238,964  $   233,563  $   421,332  $   461,488
      Petrochemical and
       Industrial              38,179       36,207       77,698       71,233
      Intersegment
       Eliminations              (703)        (337)      (1,261)        (741)
                          ------------ ------------ ------------ ------------
                          $   276,440  $   269,433  $   497,769  $   531,980
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Income (loss) from
     operations
      Pipeline and Pipe
       Services           $    46,378  $    36,305  $    70,914  $    73,592
      Petrochemical and
       Industrial               6,500        3,928       13,483        8,564
      Financial and
       Corporate               (5,842)      (4,398)      (9,389)      (8,843)
                          ------------ ------------ ------------ ------------
                          $    47,036  $    35,835  $    75,008  $    73,313
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

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

    CONSOLIDATED STATEMENTS OF CASH FLOW

                             Three Months Ended        Six Months Ended
                                   June 30                  June 30
                          ------------------------- -------------------------
                               2007        2006         2007         2006
                                         Restated                  Restated
                                         (note 1)                  (note 1)
                          ------------ ------------ ------------ ------------

    Operating activities:
      Income from con-
       tinuing operations $    30,267  $    24,898  $    53,575  $    49,653
      Items not requiring
       an outlay of cash:
        Amortization            9,751        9,633       19,733       19,818
        Stock-based
         compensation
         (note 2)                 697          819        1,372        1,401
        Future income
         taxes                    792       (2,281)         635       (2,887)
        Non-controlling
         interest in
         earnings of
         subsidiaries            (263)         955         (716)         974
        Change in non-
         cash working
         capital and
         other                (10,416)      (4,425)     (20,492)       9,191
                          ------------ ------------ ------------ ------------
    Cash provided by
     operating activities      30,828       29,599       54,107       78,150
                          ------------ ------------ ------------ ------------

    Investing activities:
      Purchases of
       property, plant and
       equipment              (23,868)     (13,008)     (39,361)     (19,881)
      Proceeds on disposal
       of property, plant
       and equipment              101            -          202           41
      Acquisition of
       subsidiary (note 18)    (2,579)           -       (2,579)           -
      Investment in shares       (301)           -         (301)           -
                          ------------ ------------ ------------ ------------
    Cash used in continuing
     investing activities     (26,647)     (13,008)     (42,039)     (19,840)
                          ------------ ------------ ------------ ------------

    Financing activities:
      Increase (decrease)
       in bank indebted-
       ness                    (2,700)         237       (3,667)        (766)
      Issue of shares           2,359          478        3,684          578
      Purchase of shares
       for cancellation       (66,104)      (4,188)     (76,762)      (4,188)
      Dividends paid to
       shareholders            (4,171)      (3,282)      (8,359)      (3,282)
                          ------------ ------------ ------------ ------------
    Cash used in continuing
     financing activities     (70,616)      (6,755)     (85,104)      (7,658)
                          ------------ ------------ ------------ ------------

    Foreign exchange on
     foreign cash and
     cash equivalents         (11,921)      (7,585)     (11,766)      (5,721)
                          ------------ ------------ ------------ ------------

    Net cash provided by
     (used in) continuing
     operations               (78,356)       2,251      (84,802)      44,931

    Net cash provided by
     (used in) discontinued
     operations (note 7)       (1,267)        (548)      (1,946)         262

    Cash and cash equi-
     valents at beginning
     of period                302,197      243,825      309,322      200,335
                          ------------ ------------ ------------ ------------

    Cash and cash equi-
     valents at end of
     period               $   222,574  $   245,528  $   222,574  $   245,528
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

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

    CONSOLIDATED BALANCE SHEETS

                                                       June. 30    Dec. 31
                                                         2007        2006
                                                    ------------ ------------
    Assets
    Current assets
      Cash and cash equivalents                     $   222,574  $   309,322
      Accounts receivable                               181,709      188,865
      Inventories                                        82,785       79,662
      Taxes receivable                                    4,802        4,293
      Prepaid expenses                                   14,451       12,897
      Derivative financial instruments                    1,235            -
      Future income taxes                                   807            -
      Current assets of discontinued operation
       (note 7)                                               2          156
                                                    ------------ ------------
                                                        508,365      595,195
    Property, plant and equipment, net                  216,771      202,078
    Goodwill                                            167,121      175,813
    Investment in associated company                          -            -
    Other assets (note 8)                                29,653       34,940
                                                    ------------ ------------
                                                    $   921,910  $ 1,008,026
                                                    ------------ ------------
                                                    ------------ ------------

    Liabilities
    Current liabilities
      Bank indebtedness (note 9)                    $       427  $     4,094
      Accounts payable and accrued liabilities          152,528      169,387
      Deferred revenues                                  16,338       10,907
      Taxes payable                                      46,185       57,010
      Current liabilities of discontinued operation
       (note 7)                                           5,792        7,789
                                                    ------------ ------------
                                                        221,270      249,187
    Long-term debt                                       78,853       87,480
    Non-controlling interest in subsidiaries              3,536        5,013
    Other non-current liabilities (note 10)              37,630       36,419
                                                    ------------ ------------
                                                        341,289      378,099
                                                    ------------ ------------

    Shareholders' Equity
    Capital stock (note 11)                             203,091      206,852
    Contributed surplus (note 12)                        10,823       10,603
    Retained earnings                                   474,950      498,001
    Accumulated other comprehensive loss
     (note 13)                                         (108,243)     (85,529)
                                                    ------------ ------------
                                                        580,621      629,927
                                                    ------------ ------------
                                                    $   921,910  $ 1,008,026
                                                    ------------ ------------
                                                    ------------ ------------


    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
                               2007         2006         2007         2006
                          ------------ ------------ ------------ ------------
    Balance at beginning
     of period            $   507,715  $   446,267  $   498,001  $   421,547
    Net income                 30,219       24,706       53,472       49,426
                          ------------ ------------ ------------ ------------
                              537,934      470,973      551,473      470,973
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------


    Excess of purchase
     price paid over
     stated value of
     shares                   (58,813)      (3,399)     (68,164)      (3,399)
    Dividends paid             (4,171)      (3,282)      (8,359)      (3,282)
                          ------------ ------------ ------------ ------------
    Balance at end of
     period               $   474,950  $   464,292  $   474,950   $  464,292
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------


    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                              Three Months Ended        Six Months Ended
                          ------------------------- -------------------------
                                    June 30                   June 30
                               2007         2006         2007         2006
                          ------------ ------------ ------------ ------------
    Net income            $    30,219  $    24,706  $    53,472  $    49,426
    Other comprehensive
     income (loss), net
     of income taxes:
      Unrealized gain
       (loss) on trans-
       lating financial
       statements of self-
       sustaining foreign
       operations             (28,133)      (7,558)     (29,225)      (4,275)
      Gain on hedges of
       unrealized foreign
       currency translation     6,893            -        7,275            -
      Income tax expense       (1,237)           -       (1,237)           -
                          ------------ ------------ ------------ ------------
    Unrealized foreign
     currency translation
     gain (loss), net of
     hedging activites        (22,477)      (7,558)     (23,187)      (4,275)
                          ------------ ------------ ------------ ------------
      Unrealized loss on
       available-for-sale
       financial assets
       arising during
       the period                (643)           -       (1,283)           -
      Income tax benefit          218            -          436            -
                          ------------ ------------ ------------ ------------
    Change in unrealized
     loss on available-
     for-sale financial
     assets                      (425)           -         (847)           -
                          ------------ ------------ ------------ ------------
      Gain on derivatives
       designated as cash
       flow hedges              2,028            -        2,145            -
      Income tax expense         (688)           -         (728)           -
      Loss (gain) on
       derivatives
       designated as
       cash flow hedges
       in prior periods
       transferred to net
       income in the
       current period            (104)           -           34            -
      Income tax expense           35            -          (12)           -
                          ------------ ------------ ------------ ------------
    Change in gain on
     derivatives desig-
     nated as cash flow
     hedges                     1,271            -        1,439            -
                          ------------ ------------ ------------ ------------
    Other comprehensive
     loss                     (21,631)      (7,558)     (22,595)      (4,275)
                          ------------ ------------ ------------ ------------

    Comprehensive income  $     8,588  $    17,148  $    30,877  $    45,151
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------



    ShawCor  Ltd.

    Notes to the Consolidated Financial Statements (Unaudited)

    1.  Accounting policies

    The accompanying unaudited interim consolidated financial statements of
    ShawCor Ltd. (the "Company") have been prepared in accordance with
    Canadian generally accepted accounting principles ("GAAP") for the
    preparation of interim financial statements. They do not include all of
    the information and disclosures required by GAAP for annual consolidated
    financial statements. Except for the exception noted below, these
    unaudited interim financial statements have been prepared in accordance
    with accounting policies outlined in the Company's audited financial
    statements for the year ended December 31, 2006. Accordingly, these
    interim financial statements should be read in conjunction with the
    Company's annual consolidated financial statements.

    In the fourth quarter of 2006, the Company adopted the proportionate
    consolidation method of accounting for its 30% investment in the Arabian
    Pipecoating Company. This change in accounting policy was applied
    retroactively with comparative figures restated. The Company previously
    accounted for this investment using the equity method.

    On January 1, 2007, the Company adopted the Canadian Institute of
    Chartered Accountants' Handbook Section 1530, Comprehensive Income;
    Section 3251, Equity, Section 3855, Financial Instruments - Recognition
    and Measurement; Section 3861, Financial Instruments - Disclosure and
    Presentation; and Section 3865, Hedges. As required, these new accounting
    standards have been adopted prospectively with an adjustment to
    accumulated other comprehensive income. Prior period figures have not
    been restated. The following adjustments were made to the Company's
    balance sheet as a result of these changes:

    (in thousands of Canadian dollars)             Jan. 1, 2007
    ------------------------------------------------------------
    Increase (decrease) in assets
      Other assets                                  $       193
                                                    ------------
    Total increase (decrease) in assets             $       193
                                                    ------------
                                                    ------------
    Increase (decrease) in liabilities
      Derivative financial instruments liability    $       925
      Current future taxes payable                         (315)
      Future taxes                                          253
      Long-term debt                                     (1,504)
                                                    ------------
    Total increase (decrease) in liabilities               (641)
                                                    ------------
    Increase (decrease) in shareholders' equity
      Accumulated other comprehensive income related
       to available-for-sale financial assets               491
      Accumulated other comprehensive income related
       to cash flow hedges                                 (611)
                                                    ------------
    Total increase (decrease) in shareholders' equity      (119)
                                                    ------------
    Total increase (decrease) in liabilities and
     shareholders' equity                           $      (760)
                                                    ------------
                                                    ------------

    The following is a description of the accounting policies adopted by the
    Company as a result of implementing these accounting changes:

    a)  Comprehensive income

    The Company's comprehensive income is comprised of net income and other
    comprehensive income, which is made up of unrealized foreign currency
    gains or losses on the translation of the financial statements of
    self-sustaining foreign operations, gains or losses on available-for-sale
    financial assets and changes in unrealized gains or losses on derivatives
    designated as effective cash flow hedges.

    b)  Accumulated other comprehensive income

    Accumulated other comprehensive income is included on the consolidated
    balance sheet as a separate component of shareholders' equity and
    includes accumulated unrealized foreign currency gains or losses on the
    translation of the financial statements of self-sustaining foreign
    operations, accumulated gains or losses on available-for-sale financial
    assets and accumulated changes in unrealized gains or losses on
    derivatives designated as effective cash flow hedges.

    c) Financial instruments

    Held-for-trading financial assets are financial assets which are acquired
    for resale prior to maturity. Held-for trading financial assets are
    reflected in the consolidated balance sheet at fair value with changes in
    fair value during a period charged to operating expenses. Held-to-
    maturity financial assets are non-derivative financial assets with a
    fixed maturity which the Company intends to hold until maturity. Such
    assets are measured at amortized cost. Available-for-sale financial
    assets are those non-derivative financial assets which are so designated
    by the Company or that do not fall into another category. Available-for-
    sale financial assets are carried on the consolidated balance sheet at
    fair value with gains or losses from changes in fair value in a period
    included in other comprehensive income. Derivative financial instruments
    designated as effective cash flow hedges are reflected in the
    consolidated balance sheet at fair value with any gains or losses
    resulting from fair value changes included in other comprehensive income.
    Derivatives with positive exposures are classified as assets while those
    with negative exposures are classified as liabilities. Derivative
    financial instruments not designated as effective cash flow hedges are
    carried at fair value in the consolidated balance sheet with gains or
    losses resulting from changes in fair value in a period charged to
    operating expenses. Loans and receivables are accounted for at amortized
    cost.

    The following is a summary of the classes of financial instruments
    included in the Company's consolidated balance sheet as well as their
    designation by the Company under the new accounting standards:

       -------------------------------------------------------------------
           Balance sheet item                         Designation
       -------------------------------------------------------------------
        Cash and cash equivalents                  Held-for-trading
       -------------------------------------------------------------------
        Accounts receivable                        Loans and receivables
       -------------------------------------------------------------------
        Long-term investments                      Available-for-sale
       -------------------------------------------------------------------
        Accounts payable and accrued liabilities   Other liabilities
       -------------------------------------------------------------------
        Long-term debt                             Other liabilities
       -------------------------------------------------------------------

    d)  Transaction costs

    Transaction costs related to the acquisition or issue of held-for-trading
    financial instruments are charged to net income as incurred. Transaction
    costs related to financial instruments not designated as held-for-trading
    are included in the financial instrument's initial recognition amount.

    2.  Stock-based compensation

    The compensation cost from the continuing amortization of granted stock
    options for the three months and six months ended June 30, 2007, included
    in operating expenses, is $697 thousand and $1.4 million, respectively
    (June 30, 2006 - $819 thousand and $1.4 million, respectively).

    3.  Foreign exchange gains and losses

    Included in operating expenses for the three months ended June 30, 2007
    are foreign exchange losses totaling $1.8 million, while foreign exchange
    losses for the six months ended June 30, 2007 totaled $1.0 million
    (June 30, 2006 - $54 thousand and $496 thousand, respectively). These
    losses arise from foreign currency transactions and from the translation
    of the financial statements of foreign integrated subsidiaries.

    4.  Employee future benefits

    The Company's cost under both defined benefit and defined contribution
    arrangements included in operating expenses for the three months and six
    months ended June 30, 2007 is $2.5 million and $4.9 million, respectively
    (June 30, 2006 - $2.8 million and $5.2 million, respectively)

    5.  Interest income (expense)

    (in thousands of    Three Months Ended June 30  Six Months Ended June 30
    Canadian dollars)         2007         2006         2007         2006
    -------------------------------------------------------------------------
    Interest on short-
     term deposits        $     2,625  $     2,295  $     5,808  $     4,038
    Interest on bank
     indebtedness                (109)        (598)        (306)        (858)
    Interest on long-
     term debt                 (1,288)      (1,302)      (2,675)      (2,697)
                         ----------------------------------------------------
                          $     1,229  $       395  $     2,828  $       483
                         ----------------------------------------------------
                         ----------------------------------------------------

    Net interest received during the three months and six months ended
    June 30, 2007 totaled $1.4 million and $2.5 million, respectively
    (June 30, 2006 - $16 thousand and $409 thousand, respectively).

    6.  Income taxes

    Net income taxes paid during the three months and six months ended
    June 30, 2007 totaled $13.8 million and $38.0 million, respectively
    (June 30, 2006 - $18.6 million and $23.0 million, respectively).

    7.  Discontinued operations

    On November 2, 2004, the Company announced its decision to close the
    Mobile, Alabama pipe-coating facility and operations at the facility
    ceased in the fourth quarter of 2005. The Company adopted discontinued
    operations accounting treatment for the Mobile facility in the fourth
    quarter of 2005.

    The following table summarizes the financial results and cash flows from
    discontinued operations for the three months and six months ended
    June 30, 2007 and 2006 and the assets and liabilities of the discontinued
    operations as at those dates, respectively:

    (in thousands of    Three Months Ended June 30  Six Months Ended June 30
    Canadian dollars)         2007         2006         2007         2006
    -------------------------------------------------------------------------
    Revenue               $         -  $        42  $         -  $        60
                         ----------------------------------------------------

    Loss from operations          (48)        (192)        (103)        (227)

                         ----------------------------------------------------
    Interest expenses                                         -            -
    Loss from discontinued
     operations before
     income taxes                 (48)        (192)        (103)        (227)
    Income tax expense              -            -            -            -
                         ----------------------------------------------------
    Loss from discontinued
     operations           $       (48) $      (192) $      (103) $      (227)
                         ----------------------------------------------------
                         ----------------------------------------------------

                         ----------------------------------------------------
    Cash flow from (used
     in) operating
     activities           $    (1,267) $      (548) $    (1,946) $       262
                         ----------------------------------------------------
                         ----------------------------------------------------
    Current assets                                  $         2  $         -
    Property, plant and
     equipment, net                                           -        4,830
    Current liabilities                             $     5,792  $     8,797

    8.  Other assets

                                                        June 30     Dec. 31
    (in thousands of Canadian dollars)                   2007         2006
    -------------------------------------------------------------------------

    Long-term investment                            $     2,637  $     2,875
    Deferred financing costs                                517        2,089
    Accrued employee future benefit asset                 4,026        4,572
    Future income taxes                                  22,473       25,404
                                                    -------------------------
    Total                                           $    29,653  $    34,940
                                                    -------------------------
                                                    -------------------------

    Other assets include a long-term investment in Garneau Inc., a
    Canadian-based, publicly traded pipe-coating company. This investment is
    classified as available-for-sale under the new accounting standards
    related to financial instruments and accordingly, subsequent to
    January 1, 2007, is carried at fair value with changes in fair value
    charged to other comprehensive income.

    9.  Bank indebtedness

    At June 30, 2007, the Company had operating credit lines of
    $187.0 million (December 31, 2006 - $204.1 million), net of $69.8 million
    of various standby letters of credit for performance and bid bonds
    (December 31, 2006 - $74.1 million) and bank indebtedness of nil
    (December 31, 2006 - $3.0 million), excluding the Company's proportionate
    share of the bank indebtedness of its joint venture, Arabian Pipecoating
    Company Limited.

    10. Other non-current liabilities

                                                      Jun. 30      Dec. 31
    (in thousands of Canadian dollars)                  2007         2006
    -------------------------------------------------------------------------
    Non-current asset retirement obligations        $     4,616  $     3,561
    Accrued employee future benefit obligations           3,578        2,362
    Future income taxes                                  29,436       30,496
                                                    ------------ ------------
    Total                                           $    37,630  $    36,419
                                                    ------------ ------------
                                                    ------------ ------------

    11. Capital stock

    (in thousands of Canadian dollars                  June 30,    Dec. 31,
     except share information)                           2007         2006
    -------------------------------------------------------------------------
    Number of shares: Class A
    Balance, beginning of the period                 60,914,175   61,006,045
    Issued - stock options                              239,915      331,157
    Conversions Class B to Class A                            -        9,873
    Purchase and cancelled under Normal Course
     Issuer Bid                                      (2,540,100)    (432,900)
                                                    -------------------------
    Balance, end of the period                       58,613,990   60,914,175
                                                    -------------------------
    Number of shares: Class B                        13,078,142   13,078,142
                                                    -------------------------
    Total number of shares                           71,692,132   73,992,317
                                                    -------------------------
                                                    -------------------------
    Stated value: Class A
    Balance, beginning of the period                $   205,848  $   203,716
    Issued - stock options                                4,837        3,573
    Conversion Class B to Class A                             -            -
    Purchased and cancelled under Normal Course
     Issuer Bid                                          (8,598)      (1,441)
    Compensation cost on exercised options
                                                    -------------------------
    Balance, end of the period                          202,087      205,848
                                                    -------------------------
    Stated Value: Class B                                 1,004        1,004
                                                    -------------------------
    Total stated value Class A and Class B          $   203,091  $   206,852
                                                    -------------------------
                                                    -------------------------

    During the three months and six months ending June 30, 2007, the Company
    repurchased and cancelled 2,155,100 and 2,540,100 Class A Subordinated
    Voting Shares ("Class A shares"), respectively (2006 - 235,900 for the
    three and six months ended June 30) under the terms of a Normal Course
    Issuer Bid ("NCIB"). The excess of cost over stated capital of the
    acquired shares, which for the three and six months ended June 30, 2007
    totaled $58.8 million and $68.2 million, respectively (2006 - $3.4
    million for the three and six months ended June 30), was charged to
    retained earnings. Under the terms of the NCIB, which expires on
    November 30, 2007, the Company is entitled to repurchase up to 2,709,900
    more Class A shares.

    12. Contributed surplus

                              Three Months Ended         Six Months Ended
    (in thousands of                June 30                   June 30
     Canadian dollars)         2007         2006         2007         2006
    -------------------------------------------------------------------------
    Balance, beginning of
     period               $    10,830  $     9,719  $    10,603  $     9,231
    Adjustment for stock-
     based compensation             -            -            -            -
    Stock compensation
     expense (note 2)             697          819        1,373        1,401
    Fair value of stock
     options exercised           (704)        (187)      (1,153)        (281)
                         ----------------------------------------------------
    Balance, end of
     period               $    10,823  $    10,351  $    10,823  $    10,351
                         ----------------------------------------------------
                         ----------------------------------------------------

    13. Accumulated other comprehensive loss


    (in thousands of    Three Months Ended June 30  Six Months Ended June 30
     Canadian dollars)         2007         2006         2007         2006
    -------------------------------------------------------------------------
    Balance, beginning
     of period            $   (86,612) $   (96,977) $   (85,529) $  (100,260)
    Transitional adjust-
     ment on adoption of
     new accounting
     policies (note 1)              -            -         (119)           -
    Unrealized foreign
     currency translation
     gains (losses), net
     of hedging activities    (22,477)      (7,558)     (23,187)      (4,275)
    Unrealized loss on
     available-for-sale
     financial assets            (425)           -         (847)           -
    Gain on derivatives
     designated as cash
     flow hedges                1,271            -        1,439            -
                         ----------------------------------------------------
    Balance, end of
     period               $  (108,243) $  (104,535) $  (108,243) $  (104,535)
                         ----------------------------------------------------
                         ----------------------------------------------------

    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, 2007                 Dec. 31, 2006
    -------------------------------------------------------------------------
                                                  Weighted          Weighted
                                                   Average           Average
                     Market                         Exer-              Exer-
                     Growth    Other     Total      cise    Total      cise
                     Plan(1)   Plans     Shares     Price   Shares     Price
    -------------------------------------------------------------------------
    Balance
     outstanding,
     beginning of
     year             7,875  2,261,520  2,269,395  $15.76  2,578,165  $15.76
    -------------------------------------------------------------------------
    Granted               -    371,800    371,800   25.02    457,700   17.27
    -------------------------------------------------------------------------
    Exercised        (2,955)  (236,960)  (239,915)  15.58   (331,157)  16.43
    -------------------------------------------------------------------------
    Forfeited             -          -          -       -    (66,890)  15.75
    -------------------------------------------------------------------------
    Expired          (4,920)   (91,600)   (96,520)  16.62   (368,423)  17.31
    -------------------------------------------------------------------------
    Balance
     outstanding,
     end of period        -  2,304,760  2,304,760   17.23  2,269,395  $15.76
    -------------------------------------------------------------------------
    (1) This maximum number is achieved only when the market value of the
        shares at the time of exercise is equal to no less than four times
        the value at the date of the grant.

    -------------------------------------------------------------------------
                             Options Outstanding          Options Exercisable
    -------------------------------------------------------------------------
                                       Weighted
                                Out-    average             Exercis-
                             standing  remaining  Weighted    able   Weighted
                                 at   contractual  average     at     average
       Range of               June 30,  life in   exercise  June 30, exercise
    exercise prices             2007     years      price     2007     price
    -------------------------------------------------------------------------
    $10.00 to $15.00           542,640    5.73     $12.71    401,792  $12.81
    -------------------------------------------------------------------------
    $15.01 to $20.00         1,352,320    6.94     $16.81    645,108  $16.68
    -------------------------------------------------------------------------
    $20.01 to $25.00            40,000    8.01     $20.90          -       -
    -------------------------------------------------------------------------
    $25.01 to $30.00           369,800    9.51     $25.02          -       -
    -------------------------------------------------------------------------
                             2,304,760                     1,046,900
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                             Options Outstanding          Options Exercisable
    -------------------------------------------------------------------------
                                       Weighted
                                Out-    average             Exercis-
                             standing  remaining  Weighted    able   Weighted
                                 at   contractual  average     at     average
       Range of               Dec. 31,  life in   exercise  Dec. 31, exercise
    exercise prices             2006     years      price     2006     price
    -------------------------------------------------------------------------
    $10.00 to $15.00           626,920    6.13     $12.78    626,920  $12.78
    -------------------------------------------------------------------------
    $15.01 to $20.00         1,600,475    7.26     $16.79  1,237,275  $16.75
    -------------------------------------------------------------------------
    $20.01 to $25.00            42,000    8.53     $20.90      4,000  $21.90
    -------------------------------------------------------------------------
                             2,269,395                     1,868,195
    -------------------------------------------------------------------------

    15. Financial instruments

    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.
    Accordingly, these estimated fair values are not necessarily indicative
    of the amounts the Company could realize in a current market exchange.
    The estimated fair value amounts can be materially affected by the use of
    different assumptions or methodologies. The methods and assumptions used
    to estimate the fair value of financial instruments as well as related
    interest rate credit and foreign exchange risk are described below:

    a) Cash and cash equivalents, accounts receivable, bank indebtedness,
       accounts payable and accrued liabilities, and income taxes

    Due to the short period to maturity of the financial instruments, the
    carrying values as presented in the consolidated balance sheet are
    reasonable estimates of fair values.

    b) Long-term debt

    The fair value of the Company's long-term debt is based on current rates
    for debt with similar terms and maturities and is not materially
    different from its carrying values.

    The following are key risks associated with the Company's financial
    instruments:

    a) Interest rate risk

    The following table summarizes the Company's exposure to interest rate
    risk at June 30, 2007:

    -------------------------------------------------------------------------
    (in thousands of
     Canadian dollars)                    Fixed interest rate maturing in
    -------------------------------------------------------------------------
                                           1 year     Greater than
                        Floating rate     or less        1 year       Total
    -------------------------------------------------------------------------
    Financial assets
    -------------------------------------------------------------------------
      Cash and cash
       equivalents        $   222,574  $         -  $         -  $   222,574
    -------------------------------------------------------------------------
    Total                 $   222,574  $         -  $         -  $   222,574
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Financial liabilities
    -------------------------------------------------------------------------
      Bank indebtedness   $       427  $         -  $         -  $       427
    -------------------------------------------------------------------------
      Long-term debt                -            -       78,853       78,853
    -------------------------------------------------------------------------
    Total                 $       427  $         -  $    78,853  $    79,280
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average fixed
     rates of debt                  -            -        5.11%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    b) Credit risk

    Certain of the Company's financial assets are exposed to credit risk.

    Cash and cash equivalents consist of deposits with major commercial banks
    and short-term investments which are readily convertible into cash.

    The Company, in the normal course of business, is exposed to credit risk
    from its customers, substantially all of which are in the energy
    industry. These accounts receivable are subject to normal industry credit
    risks.

    The Company is also exposed to credit risk from the potential default by
    any of its counterparties on its foreign exchange forward contracts. The
    Company mitigates this credit risk by dealing with counterparties who are
    major financial institutions and which the Company anticipates will
    satisfy their obligations under the contracts.

    c) Foreign exchange risk

    The Company operates in several countries, which gives rise to a risk
    that its earnings and cash flows may be adversely impacted by
    fluctuations in foreign exchange. The Company utilizes foreign exchange
    forward contracts to manage foreign exchange risk from its underlying
    customer contracts. In particular, the Company uses foreign exchange
    forward contracts for the sole purpose of hedging a portion of its
    projected foreign currency inflows, consisting primarily of foreign
    currency sales to the Company's customers. Gains or losses on these
    hedging instruments are recognized in the same period as, and as part of,
    the hedged transactions. The Company does not enter into foreign exchange
    contracts for speculative purposes. The Company does not generally
    attempt to hedge the net investment and equity of self-sustaining foreign
    operations, except that the U.S. dollar long-term note payable is
    designated as a hedge of a portion of its net investment in Bredero
    Shaw's U.S. dollar-based operations. 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, 2007:

    (in thousands)
    -------------------------------------------------------------------------
                      Maturity
    -------------------------------------------------------------------------
    U.S. dollars sold for Canadian dollars
    -------------------------------------------------------------------------
      Less than one year                                           US$22,500
    -------------------------------------------------------------------------
      Weighted average rate                                           1.1261
    -------------------------------------------------------------------------
    Canadian dollars sold for U.S. dollars
    -------------------------------------------------------------------------
      Less than one year                                           CAD$1,150
    -------------------------------------------------------------------------
      Weighted average rate                                           0.8697
    -------------------------------------------------------------------------

    Foreign exchange options and forward exchange contracts are used to hedge
    foreign exchange exposures related to commercial activities. They are not
    used by the Company for speculative purposes. At June 30, 2007, the
    Company had notional amounts of $23.0 million of forward contracts
    outstanding (December 31, 2006 - $38.7 million). These amounts are used
    to express the volume of transactions and are not recognized in the
    consolidated financial statements. These financial instruments are
    contracted with major, chartered banks; as a result, credit and liquidity
    risks related to these instruments are considered to be low.

    The fair values of foreign exchange forward contracts represent an
    approximation of the amounts the Company would have paid to or received
    from counterparties to unwind its positions at June 30, 2007. The fair
    value of the Company's net benefit for all foreign exchange forward
    contracts at June 30, 2007 was $1.3 million (December 31, 2006 -
    $3.1 million net liability) and has been recognized on the consolidated
    balance sheet through a charge to other comprehensive income. If these
    contracts ceased to be effective as hedges, unrecognized gains or losses
    pertaining to the portion of the hedging transactions in excess of
    projected foreign-denominated cash flows would be transferred from
    accumulated other comprehensive income and recognized in net income at
    the time this condition was identified.

    16. Segmented information

    (in thousands of              Three Months Ended         Six Months Ended
     Canadian dollars)                  June 30                   June 30
    ----------------------------------------------- -------------------------
    Revenue                    2007         2006         2007         2006
                          ------------ ------------ ------------ ------------
      Pipeline and Pipe
       Services           $   238,964  $   233,563  $   421,332  $   461,488
      Petrochemical and
       Industrial              38,178       36,207       77,698       71,233
      Intersegment
       Eliminations              (702)        (337)      (1,261)        (741)
                          ------------ ------------ ------------ ------------
                          $   276,440  $   269,433  $   497,769  $   531,980
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Income (loss) from
     operations
      Pipeline and Pipe
       Services           $    46,378  $    36,305  $    70,914  $    73,592
      Petrochemical and
       Industrial               6,500        3,928       13,483        8,564
      Financial and
       Corporate               (5,842)      (4,398)      (9,389)      (8,843)
                          ------------ ------------ ------------ ------------
                          $    47,036  $    35,835  $    75,008  $    73,313
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Goodwill
      Pipeline and Pipe
       Services                                     $   150,122  $   148,908
      Petrochemical and
       Industrial                                        16,999       16,595
                                                    ------------ ------------
                                                    $   167,121  $   165,503
                                                    ------------ ------------
                                                    ------------ ------------

    Total assets                                    $            $
      Pipeline and Pipe
       Services                                         911,997      962,119
      Petrochemical and
       Industrial                                        80,400       79,612
      Financial and Corporate                         1,143,581    1,170,083
      Elimination                                    (1,214,068)  (1,252,698)
                                                    ------------ ------------

                                                    $   921,910  $   959,116
                                                    ------------ ------------
                                                    ------------ ------------

    17. Joint venture operations

    The Company's joint venture operations consist of its 50% interests in
    Bredero Shaw Revestimentos de Tubos Ltda. and Thermotite Brasil Ltda. and
    its 30% interest in the jointly controlled Arabian Pipecoating Company
    Limited. These investments have been accounted for through proportionate
    consolidation with the Company's share of each joint venture's assets,
    liabilities, revenue, expenses, net income and cash flows consolidated
    based on the Company's ownership position. The figures related to these
    joint ventures included in the Company's consolidated financial
    statements are summarized as follows:

    (in thousands of           Three Months Ended         Six Months Ended
     Canadian dollars)               June 30                   June 30
    ----------------------------------------------- -------------------------
                               2007         2006         2007         2006
                          ------------ ------------ ------------ ------------
    Revenue               $    12,203  $    11,321  $    25,743  $    16,138
    Operating and other
     expenses                   8,715        8,326       19,002       11,848
                          ------------ ------------ ------------ ------------
    Net income before
     income taxes               3,488        2,995        6,741        4,290
    Provision for taxes           312          230          710          334
                          ------------ ------------ ------------ ------------
    Net income            $     3,175  $     2,765  $     6,030  $     3,956
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Cash provided by
     (used in):
    Operating activities  $    (1,170) $      (199) $    (2,335) $      (587)
    Investing activities            -         (773)           -       (1,120)
    Financing activities            -          949            -        1,661

    Current assets                                  $    19,238  $    10,399
    Property, plant and
     equipment, net                                      10,695        4,135
    Goodwill                                              5,013            -
    Current liabilities                                  13,463        7,023

    18. Acquisition

    On June 6, 2007, the Company purchased all of the outstanding shares of
    X-Tek Industrial Limited from X-Tek Systems Limited. The name of the
    company was subsequently changed to Shaw Inspection Systems Limited
    ("SISL"). SISL provides specialized, real-time/digital non-destructive
    weld testing services to the onshore and offshore pipeline industry and
    is based in the United Kingdom. The allocation of the purchase price has
    not yet been finalized pending the completion of an appraisal of the
    acquired assets and liabilities. This is expected to be completed in the
    third quarter of the year. The following are the preliminary details of
    the acquisition. These details may be adjusted pending the finalization
    of the purchase equation:

    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------
    Net assets acquired at assigned values:
      Current assets                                                   1,708
      Property, plant and equipment                                    1,059
      Goodwill                                                         1,335
      Current liabilities                                             (1,523)
    -------------------------------------------------------------------------
                                                                       2,579
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration given:
      Cash                                                             2,579
    -------------------------------------------------------------------------
                                                                       2,579
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    19. Comparative figures

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





For further information:

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

Organization Profile

ShawCor Ltd.

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